Tag: estate trustee during litigation

07 Jan

The Court Appoints an Estate Trustee During Litigation (ETDL)

James Jacuta Litigation Tags: , 0 Comments

The Ontario Superior Court of Justice decision released on December 8, 2020, in the Estate of Klaczkowski, deals with a number of issues including when the court should remove an Estate Trustee and appoint a litigation Trustee. Two brothers disagreed on matters related to their mother’s estate, including division of proceeds of a TD Trading Account, a commercial property, and a safety deposit box (with $32,000 in $1,000 dollar bills). They were named in the will as Estate Trustees and beneficiaries. Justice Leiper reviewed the following points in regard to the court appointment of an Estate Trustee During Litigation:

  • Ordering the removal of an estate trustee is a decision not to be taken lightly and only where it is clearly necessary: Re Weil, 1961 CanLII 157 (ON CA), [1961] O.R. 888 at 889 (C.A.)
  • Friction between co-estate trustees may be a basis for a removal of both estate trustees where it impacts the decision-making process: Radford v. Wilkins (2008), 43 ETR (3d) 74, 2008 CanLII 45548 (S.C.J.) at paras 111-113;
  • A failure to properly keep records resulting in the need to make corrective disclosure is an aggravating factor in considering whether a trustee ought to be removed. Similarly, failure to consult with co-trustees is significant. Graham v. Benton, 2020 ONSC 6985 at paras. 156-157;
  • A testator’s choice of estate trustee should not be lightly interfered with, but the appointment of an ETDL is a “much less intrusive” remedy that exists where “parties’ duties as fiduciaries can be inconsistent with their ongoing litigation interests.” A court should consider the balance of convenience and, since the appointment of an ETDL is not an extraordinary remedy, “the court will favour appointment in the vast majority of cases unless the administration of the estate involved is particularly straightforward or simple”: Mayer v. Rubin, 2017 ONSC 3498 at paras. 24-36.

The Court ordered that –

  1.        An Estate Trustee During Litigation will be appointed for the estate, and
  2.        If the parties are unable to agree to the naming of the Estate Trustee During Litigation by February 1, 2021, they are to appear before March 1, 2021, to make submissions on an appropriate Estate Trustee During Litigation.

For more on Estate Trustees During Litigation please see the blog by Sydney Osmar: Appointing an Estate Trustee During Litigation.

Thanks for reading!

James Jacuta

03 Mar

Appointing an Estate Trustee During Litigation

Sydney Osmar Estate Litigation, Trustees, Wills Tags: 0 Comments

In its recent decision, Baran v Cranston, the Divisional Court provides a helpful summary of the principles applied by the court when determining if the appointment of an Estate Trustee During Litigation (“ETDL”) is appropriate.

As a starting point, the court outlines the Superior Court of Justice’s statutory authority to appoint an ETDL. Section 28 of the Estates Act provides that an ETDL may be appointed “pending an action touching the validity of the will of a deceased person, or for obtaining, recalling or revoking any probate or grant of administration…” Additionally, Rule 75.06(3)(f) of the Rules of Civil Procedure expressly authorizes the court to appoint an ETDL on an application or motion for directions.

The court then looked to the jurisprudence for further support that an ETDL may be appointed even where the validity of a will is not in issue. In McColl v McColl, an ETDL was appointed, notwithstanding the fact that the validity of the will was not in issue. In McColl, the court ultimately appointed an ETDL “based on the conflict and the trustee’s lack of experience in managing a business.”

In Mayer v Rubin, the court set out that the appointment of an ETDL may be required (even where the validity of the will is not in issue) where the parties’ duties as fiduciaries are inconsistent with their ongoing litigation interests. The appointment of an ETDL will also be necessary where there is a trustee who is in an adversarial position towards a co-trustee or beneficiary, and who therefore, should not be left in charge of trust property.

After having reviewed the relevant statutory provisions and jurisprudence, the Divisional Court went on to note some of the factors that will be considered by the court in determining whether or not it should exercise its discretion to appoint an ETDL:

  • whether a trustee may be a witness in the litigation;
  • potential for conflict of interest;
  • conflict between the interests of the trustees and/or beneficiaries;
  • hostility between the trustees and/or beneficiaries;
  • lack of communication between the parties; and
  • evidence of settlement discussions that exclude some of the parties.

The Divisional Court also approved the lower court’s summary of the legal principles factored into its decision to appoint an ETDL, which included, among others:

  • the court has broad and inherent powers to supervise the management of estates, and can draw upon its inherent jurisdiction (where appropriate) to protect parties so that justice can be done in the proceeding;
  • the court must ensure that there is a level playing field between the parties, and the assets of the estate must be immunized from the tactics employed by litigating parties; and
  • the appointment of an ETDL is not an extraordinary measure and the court should refuse the appointment only in the clearest of cases. The appointment of an ETDL will be “favoured by the court in the majority of cases of conflict between the trustee and beneficiaries unless the administration of the estate is particularly simple or straightforward.”

Thanks for reading!

Sydney Osmar

03 Jun

Disclosure Requirements of a Corporate Estate Trustee

Laura Betts Estate Planning, Executors and Trustees, Litigation, Trustees Tags: , , , , 0 Comments

A testator may decide to appoint a corporate estate trustee were:

  • an estate is complex and he or she feels a trustee with special expertise or competence in financial matters is required to administer the estate;
  • he or she is concerned there might be conflicts or disputes between the beneficiaries of his or her estate; or
  • he or she simply does not want to burden family members with the responsibility of having to administer his or her estate.

A corporate trustee may also be appointed by the court to act as an Estate Trustee During Litigation where there is a dispute or litigation between the appointed Estate Trustees, or between the appointed Estate Trustees and other interested parties, such as the beneficiaries of an estate.

A recent decision of the Supreme Court of Nova Scotia, Re Creighton Estate, 2016 NSSC 136, highlights the obligation of a corporate trustee to provide co-trustees with copies of their internal notes, emails and working papers.

In this case, the deceased died leaving a Last Will and Testament (the “Will”) appointing three Estate Trustees, namely, two of the deceased’s children (the “Creightons”), and a private trust company (the “Trust Company”).

The terms of the Will stated that the Trust Company was to “assume the burden of the administration” of the Estate. However, following the deceased’s death, the Creightons advised the Trust Company that they wanted to participate in the administration of the Estate.

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During the course of its administration of the Estate, the Trust Company sought a legal opinion from the Estate’s solicitor. The Creightons were not allowed input as to the facts that would form the basis of the opinion nor were they provided a copy of the opinion once obtained. The Creightons subsequently requested document disclosure, namely production of the Trust Company’s complete file.

While the Trust Company produced some documents, it claimed that its notes, working papers, internal emails, both in paper form or created electronically, which had been created in the furtherance of decision making of the Trust Company, were not subject to disclosure to the Creightons as co-trustees.

Justice Arnold disagreed, and held that the Corporate Trustee was required to provide the Creightons with copies of its notes, working papers and internal emails.  At paragraphs 15 and 16 of his decision Justice Arnold states:

“It would be impossible for the Creightons to fulfill their obligations as co trustees without being fully informed by the Trust Company. Clearly, in relation to all aspects of the administration of the estate, the Creightons have a right to know how and why the Trust Company did what it did.  Only full and complete disclosure by the Trust Company would allow this to occur.  Co-executors … have a duty to oversee and correct each other’s conduct. This duty cannot be abdicated by a natural trustee in favour of a professional corporate trust company. Therefore, it is necessary for co-trustees to have all information that relates to the administration of the estate. This may include internal correspondence and memoranda, emails and other electronically stored information.”

Thank you for reading.

Laura Betts

 

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