Generally speaking an Estate Trustee has the ability to “step into the shoes” of the deceased individual as if they were the deceased individual. I have previously blogged, for example, about the Estate Trustee’s general ability to waive any duty of confidentiality owed to the deceased individual after death. This ability to represent the deceased individual generally extends to any legal proceedings commenced against the deceased individual’s estate, with it typically falling to the Estate Trustee to represent the deceased individual or their estate in the claim. But what happens when there is no Estate Trustee? Can a legal proceeding be commenced against a deceased individual when there is no Estate Trustee, and, if so, who represents the estate in such a claim?
Rule 9.02 of the Rules of Civil Procedure provides the general framework by which a claim can be commenced against the estate a deceased individual where there is no Estate Trustee, providing for the appointment of a “litigation administrator”. Specifically, rule 9.02(1) provides:
“Where it is sought to commence or continue a proceeding against the estate of a deceased person who has no executor or administrator, the court on motion may appoint a litigation administrator to represent the estate for the purposes of the proceeding”
The “litigation administrator” is typically a neutral third party whose sole role is to represent the estate in the proceeding. The authority of the litigation administrator does not extend beyond the representation of the estate in the legal proceeding, with the litigation administrator, for example, not having the authority to make distributions to the beneficiaries or otherwise administer the estate (i.e. pay debts or liabilities). To the extent it is desired to complete such tasks someone will need to be appointed as Estate Trustee or otherwise be provided with the authority by way of court order through something like a limited grant under section 29(3) of the Estates Act.
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The use of a “discretionary trust” that grants the trustee with the absolute discretion to determine when and if a distribution is made to a beneficiary, and in what amount, is a fairly common estate planning tool. If you are a beneficiary of a trust which provides the trustee with such broad discretion you may question whether there is anything that you can do prior to the final distribution to question the discretionary decisions that have been made by a trustee, and whether there are circumstances in which the court will intervene to overturn a trustee’s discretionary decision. The short answer is that while the court is generally reluctant to interfere with a trustee’s discretionary decisions, there are certain limited circumstances in which they will intervene and overturn a trustee’s decision.
The leading decision in Ontario concerning when the court will interfere with a trustee’s discretion is Fox v. Fox Estate. In considering when the court may interfere with a trustee’s discretion, the Court of Appeal provides the following commentary:
“The entire question of the degree of control which the courts can and should exercise over a trustee who holds an absolute discretion is filled with difficulty. The leading case, or at least the case to which reference is almost always made, is Gisborne v. Gisborne (1877), 2 App. Cas. 300 (H.L.). It stands for the proposition that so long as there is no ‘mala fides’ on the part of a trustee the exercise of an absolute discretion is to be without any check or control by the courts.” [emphasis added]
Fox v. Fox Estate cites to the English authority of Gisborne v. Gisborne for the proposition that, so long as there is no “mala fides” on the part of the trustees in exercising their discretion, the court will not interfere with a trustee’s discretion. In Gisborne v. Gisborne, Lord Cairns provides the following commentary with respect to when the court may interfere with any discretionary decision undertaken by a trustee:
“My Lords, larger words than those, it appears to me, it would be impossible to introduce into a will. The trustees are not merely to have discretion, but they are to have “uncontrollable”, that is, uncontrolled, “authority”. Their discretion and authority, always supposing that there is not mala fides with regard to its exercise, is to be without any check or control from any superior tribunal.” [emphasis added]
Simply put, the court will generally not interfere with a trustee’s discretionary decisions unless they were exercised with “mala fides“. “Mala fides” roughly translates as “bad faith”, such that the principle from Gisborne v. Gisborne can be summarized as providing that so long as there is no “bad faith” on the part of the trustee in making a discretionary decision the court will not interfere with such a decision.
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