Tag: Application to Pass Accounts
Canada is currently in the midst of a postal strike. Although the strike is currently “rotating” in nature, with different communities being subject to the strike on different days, it is possible that the strike could become country wide should negotiations remain unsuccessful. Although concern may immediately turn to the potential impact of a full strike upon online holiday shopping, a full national strike could also have an impact upon the legal world in relation to the service of documents.
Canada Post remains a vital service to the legal community, amongst other things remaining one of the official means of service upon a lawyer of record pursuant to rule 16.05 of the Rules of Civil Procedure. Although there are alternate service mechanisms available to serve documents upon a lawyer of record should the strike become national, such as potentially using a courier, there are certain documents which the Rules of Civil Procedure provide may only be served by mail.
Rule 74.18(3) of the Rules of Civil Procedure contemplates that an Application to Pass Accounts is to be served by regular lettermail, providing:
“The applicant shall serve the notice of application and a copy of a draft of the judgment sought on each person who has a contingent or vested interest in the estate by regular lettermail.” [emphasis added]
Although such a rule typically assists the Applicant in serving the Application to Pass Accounts in a streamlined and cost effective manner, as otherwise personal service of the Application to Pass Accounts would be required pursuant to rule 16.01 as an “originating process”, the rule does not contemplate what is to occur in the circumstance that service by regular lettermail is not possible (i.e. in a full work stoppage). In such circumstances, how can the Applicant ensure that the Application to Pass Accounts is properly served as required by the Rules of Civil Procedure?
From a common sense standpoint there are likely alternatives readily available to serve the Application materials other than by regular lettermail, including potentially by courier or by personal service. From a strict reading of rule 74.18(3) however, service of the Application to Pass Accounts by any means other than “regular lettermail” is not proper service, such that it is possible that a beneficiary may argue that they have not been properly served should you serve them by any other means. Should this occur, it is possible that an Order validating service and/or substituting service for alternative means under rule 16.04 may be required.
Thankfully at present the strike is only “rotating” in nature, such that we can continue to mail out documents such as Applications to Pass Accounts to be served in accordance with the Rules of Civil Procedure (subject to any potential daily interruptions should your community be striking on a particular day). Should circumstances change however, and there is a full work stoppage, it is possible Orders may have to be sought validating and/or substituting service for service in a manner other than by regular lettermail for those items such as Applications to Pass Accounts which the Rules provide may only be served by mail.
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When concerns are raised about the conduct of an Attorney for Property, those raising the concerns often seek an Order compelling the Attorney for Property to commence an Application to Pass Accounts pursuant to section 42 of the Substitute Decisions Act. Should such an Application to Pass Accounts be commenced, the objecting party will often make allegations against the Attorney for Property that the incapable person and/or estate has suffered damages as a result of the Attorney for Property’s conduct, often seeking monetary damages against the Attorney for Property in relation to such objections.
An interesting question was recently posed to me in the context of such an Application to Pass Accounts for an Attorney for Property. Can the objecting party pursue damages against the Attorney for Property within the actual Application to Pass Accounts itself, or do they need to commence a separate claim against the Attorney for Property for the recovery of such damages?
The ability to pursue damages against an Estate Trustee within the Application to Pass Accounts process is well established by statute, with section 49(3) of the Estates Act providing:
“The judge, on passing any accounts under this section, has power to inquire into any complaint or claim by any person interested in the taking of the accounts of misconduct, neglect, or default on the part of the executor, administrator or trustee occasioning financial loss to the estate or trust fund, and the judge, on proof of such claim, may order the executor, administrator or trustee, to pay such sum by way of damages or otherwise as the judge considers proper and just to the estate or trust fund, but any order made under this subsection is subject to appeal.” [emphasis added]
Section 49(3) of the Estates Act makes it clear that a separate claim against an Estate Trustee is not necessary to pursue damages for breach of trust when an Application to Pass Accounts has been commenced, and that the Judge may order damages against the Estate Trustee within the actual Application to Pass Accounts itself. Perhaps importantly however, the Estates Act appears to suggest that section 49 only applies to a passing of accounts for an “executor, administrator or trustee under a will“, making no reference to an Attorney for Property. Sections 42(7) and 42(8) of the Substitute Decisions Act also set out the “powers of the court” in an Application to Pass Accounts for an Attorney for Property, with such provisions notably containing no reference to the ability to order damages against the Attorney for Property for any wrongdoing.
As there appears to be no statutory equivalent to section 49(3) of the Estates Act which specifically contemplates that it applies to Attorneys for Property, and the ability to pursue damages within the Application to Pass Accounts itself in other circumstances appears to be derived from statute, the question of whether there is a “legislative gap” as it relates to the ability to pursue damages against an Attorney for Property within an Application to Pass Accounts can at least appear to be raised. If such a “legislative gap” does exist, would this mean that a separate claim would have to be commenced by the objector to pursue such damages even when an Application to Pass Accounts was currently before the court?
When I have raised the question to other estate practitioners, some have suggested that while there may be no statutory authority to order such damages against the Attorney for Property within the Application to Pass Accounts, the court may have inherent jurisdiction to order such damages by way of a “surcharge order” in the Application to Pass Accounts. Some have also suggested that as section 42(6) of the Substitute Decisions Act contemplates that the procedure to be utilized on passing an Attorney’s accounts is to be the same as that as an executor’s accounts, that this should be read as evidence to show that section 49(3) of the Estates Act would apply to the passing of an Attorney for Property’s accounts. In response to this, I would suggest that it is at least questionable if section 49(3) of the Estates Act is “procedural” in nature, and, even if it is found to be procedural, whether the “powers of the court” provisions of sections 42(7) and 42(8) of the Substitute Decisions Act, which notably does not include the power to award damages against the Attorney for Property for wrongdoing, would trump section 49(3) of the Estates Act in any event.
I am aware of no decision which specifically addresses the issue of whether there is a “legislative gap” when it comes to whether damages can be sought against an Attorney for Property within the Application to Pass Accounts itself. While the issue may simply be academic at this time, it is not unforeseeable that someone could attempt to argue that an objector cannot seek damages against the Attorney for Property within the Application to Pass Accounts itself, and that a separate claim is required. If such an argument is successfully raised, and the length of time between the alleged wrong and the separate claim being commenced was such that the limitation period may have expired, it is not unforeseeable that the Attorney for Property may attempt to argue that the separate claim must now be dismissed as a result of the expiry of the limitation period.
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You are the Estate Trustee of an estate in which the testator left a substantial portion of the residue to certain specifically named charities. The charities who are named as beneficiaries are well established large charitable organizations whom you have corresponded with directly. Such charities have retained counsel to represent them concerning their interests in the estate, and such counsel have in turn requested that you commence an Application to Pass Accounts regarding your administration of the estate.
In preparing the Application to Pass Accounts you turn your mind to who you should serve with the Application. Rule 74.18(3) of the Rules of Civil Procedure provides that an Application to Pass Accounts shall be served on “each person who has a contingent or vested interest in the estate“.
Although you are aware of the general supervisory role that the Office of the Public Guardian and Trustee (the “PGT”) has over charities in the Province of Ontario, as the charities in this instance are well established and represented by counsel, you question whether you need to serve the PGT in addition to the charities with the Application to Pass Accounts. It is, after all, the charities themselves who have a “contingent or vested interest in the estate“, and as the PGT and the charities would be representing the same financial interest you question whether it is necessary.
The requirement to serve the PGT with any Application to Pass Accounts where a charitable bequest is involved is established by section 49(8) of the Estates Act, which provides:
“Where by the terms of a will or other instrument in writing under which such an executor, administrator or trustee acts, real or personal property or any right or interest therein, or proceeds therefrom have heretofore been given, or are hereafter to be vested in any person, executor, administrator or trustee for any religious, educational, charitable or other purpose, or are to be applied by them to or for any such purpose, notice of taking the accounts shall be served upon the Public Guardian and Trustee.” [emphasis added]
The requirement to serve the PGT with any Application to Pass Accounts when a charitable bequest is involved as established by section 49(8) of the Estates Act exists in addition to the general requirement to serve all individuals with a “contingent or vested interest” as established by rule 74.18(3). To this respect, when a Will leaves a bequest to a specifically named charity, the Application to Pass Accounts must be served upon the specifically named charity as well as the PGT. Although from a practical standpoint the PGT’s active participation in an Application to Pass Accounts where a charity is representing itself is unlikely, with the PGT deferring to the charity to protect their own interest, the service requirements remain nonetheless, and both entities could in theory participate in the Application to Pass Accounts, and both could in theory file separate Notices of Objection to Accounts.
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Although beneficiaries have a right to compel an accounting from an Estate Trustee, it is not always advisable to do so. The decision of Pochopsky Estate provides an example of such a situation.
Here, practically all of the deceased’s assets passed outside of the estate. Although, there was some concern as to whether a joint account held between the deceased and his sister was an estate asset, subsequent evidence was given to the Estate Trustee, including an affidavit from the bank, indicating that the account was not an estate asset. Accordingly, the Estate Trustee, a friend of the deceased, concluded that there was no money that passed through the estate.
The residuary beneficiaries nevertheless requested that the Estate Trustee proceed against the sister for the joint account and obtain a Certificate of Appointment. In addition, a formal passing of accounts was sought.
The Estate Trustee thought none of these steps were appropriate given the size of the Estate, and indicated that if forced to formally pass his accounts, he would seek his costs from the residuary beneficiaries.
The residuary beneficiaries obtained an ex-parte Order for the Estate Trustee to pass his accounts. Although not mentioned in the decision, for an interesting read on the appropriateness of ex-parte motions, Justice Brown’s decision in Ignagni Estate (Re), is a good one.
On the passing, the Court found that the objections raised by the residuary beneficiaries were ‘ill-founded’, and that they fell into a pattern of aggressively criticizing the Estate Trustee no matter what he did. Given the size of the estate, the Court ordered that the residuary beneficiaries personally pay the costs of the Estate Trustee in the amount of $17,445.60, and that no costs would be payable to these beneficiaries.
Please consider these other interesting Passing of Accounts related blogs:
Today on Hull on Estates, David M. Smith and Stuart Clark discuss limitation periods and Applications to Pass Accounts, and whether there could be a scenario whereby certain objections raised within an Application to Pass Accounts could be statute barred as a result of the expiry of any limitation period.
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The Application to Pass Accounts often serves an important function in the administration of an estate, allowing for an open and honest accounting to the beneficiaries of what has transpired, and providing a mechanism by which the Estate Trustee may be paid compensation. In the event that any of the beneficiaries should have any issue with the accounts, or generally with the administration of the estate, they may file a Notice of Objection to Accounts in accordance with rule 74.18(7) of the Rules of Civil Procedure, and the matter may proceed before the court on a contested basis, ultimately allowing the court to determine the validity of the objections should the parties be unable to resolve them personally.
In the past, parties could often find themselves at a stalemate following the service of a Notice of Objection to Accounts, as the Rules of Civil Procedure did not require the Applicant to provide the Objector with any formal response to the objections which had been raised. In order to get around such a potential issue, counsel would often attempt to create a system outside of the Rules, whereby the Applicant would provide the Objector with a reply to the objections which had been raised, with such a reply typically taking the form of a letter to the Objector’s counsel addressing each objection numerically in the order in which they were raised. Such a letter informally came to be known as a “Reply to Notice of Objection to Accounts”, and the timeframe for it being provided to the Objector was often set out in any Order Giving Directions dictating how the Application to Pass Accounts was to proceed.
Although the informal “Reply to Notice of Objection to Accounts” served an important function, it continued to have limitations, for as it was not a formal court document which was to be before the court its impact could be limited. Such a limitation no longer appears to be a concern however, for with the recent changes to the Rules of Civil Procedure which took effect on January 1, 2016, the “Reply to Notice of Objection to Accounts” has become formalized within the Rules of Civil Procedure in the form of the new Form 74.49.4.
Rule 74.18(11.5) of the revised Rules of Civil Procedure provides that at least 10 days prior to the hearing date of the Application to Pass Accounts, the Applicant shall serve upon all people listed under rule 74.18(11.6) a consolidation of all remaining objections in the Notice of Objection to Accounts, as well as a Reply to Notice of Objection to Accounts in the form of Form 74.49.4.
Although rule 74.18(11.5) provides little guidance with respect to what is to be contained in the “Reply to Notice of Objection to Accounts”, and the revised Rules have yet to be fully explored before the court, from a review of the draft Form 74.49.4 which has been provided with the Rules, it appears that such a reply will not be too dissimilar from what was previously informally provided. While the Reply to Notice of Objection to Accounts will no longer take the form of a letter to counsel as it did previously, the content of the Reply to Notice of Objection to Accounts appears to remain substantially unchanged, insofar as it will continue to have the Applicant answer each objection numerically in the order in which they were provided for in the Notice of Objection to Accounts.