Tag: estate trustee removal
If an estate trustee is not fulfilling their duties and is not acting in the best interests of the estate, it is possible to commence an application for removal.
When seeking to remove an estate trustee in Ontario, anyone with a financial interest in an estate can apply to have an executor passed over or removed, pursuant to s. 37(3) of the Trustee Act. Rule 14.05(3)(c) of the Rules of Civil Procedure, allow an application to be commenced for the purpose of “the removal or replacement of one or more executors, administrators or trustees, or the fixing of their compensation.” The applicable principles for the removal of an executor have been established in Letterstedt v Boers (1884), 9 App Cas 271 (South Africa PC) and have been summarized in Johnston v Lanka Estate, 2010 ONSC 4124:
- The court will not lightly interfere with the testator’s choice of estate trustee;
- Clear evidence of necessity for removal is required;
- The court’s main consideration is the welfare of the beneficiaries; and
- The estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the estate/trust.
A recent British Columbia Court of Appeal decision, Al-Sabah v Al-Sabah, 2016 BCCA 365, upheld the removal of an estate trustee of an estate on the basis that she did not comply with the notice provisions of the Wills, Estates and Succession Act, and was not acting in the best interests of the estate.
In this case, the deceased died in 2003, intestate, and left 15 beneficiaries, including his two sons, two wives, and seven daughters. One of his daughters was the appellant and the estate trustee of the estate. The respondents on the appeal comprised 79% of the beneficiaries to the estate.
Upon the death of Mr. Al-Sabah, estate litigation was commenced across several countries, as he had held property in many different locations. The appointment of the estate trustee by British Columbia was successful, however, the appellant had also applied to be the estate trustee of the estate in London, and had her position revoked, and she commenced at least 4 actions in Kuwait against other beneficiaries, all of which were unsuccessful.
In chambers, the estate trustee was removed, and appealed that ruling. On appeal, it was upheld that the estate trustee did not exercise reasonable diligence in providing notice to the other beneficiaries of her intention to apply for the position, and that she failed to disclose relevant information to the beneficiaries.
The British Columbia Wills, Estates and Succession Act section 121, and the British Columbia Supreme Court Rules establish the requirements for notice of the beneficiaries. It was established that the estate trustee did not provide notice to the proper addresses required by the rules, as the addresses to which she forwarded notices were almost all incorrect. The judge also noted that the application was made amidst “hotly contested” and “acrimonious” estate litigation, and that when she applied for her grant of administration, she did not disclose that there was significant litigation surrounding the estate in other countries.
If this case were to have taken place in Ontario, it is likely that the Ontario courts may have come to the same decision as the British Columbia court, in applying the principles as established in Letterstedt v Boers. The court would not have been interfering with the testator’s choice of estate trustee as he died intestate, and it is clear that the removal was required due to her dishonesty and her lack of consideration of the welfare of the beneficiaries, thereby endangering the administration of the estate.
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Section 37 of the Trustee Act provides the Ontario Superior Court of Justice with the power to remove and replace an Estate Trustee “upon any ground upon which the court may remove any other trustee.”
However, as we have previously blogged, the Court is generally not inclined to interfere with a testator’s wishes. In Chambers Estate v Chambers, 2013 ONCA 511, Justice Gillese confirmed that the removal of an Estate Trustee should only be granted on the clearest of evidence, with the welfare of the beneficiaries as the fundamental guide for the Court’s exercise of its discretion.
The Honourable Justice Fairburn’s recent decision in Ricci v Ricci Estate, 2016 ONSC 6614, reaffirms the high threshold that must be met before the Court will take the extraordinary step of removing an Estate Trustee.
In Ricci, the Deceased died leaving her husband (“Livio”) as the Estate Trustee of her Estate. The Deceased’s Will provided Livio with a life interest in her property, with their children as the residuary beneficiaries upon Livio’s death.
However, in 2015, Livio took personal possession of the home and obtained a new mortgage without notifying the residuary beneficiaries. Michael, one of the sons and the alternate Estate Trustee under the Deceased’s Will, brought an Application for Livio’s removal as Estate Trustee.
On the Application, Michael asserted that the transfer of title and the new mortgage resulted in a breach of Livio’s duties and obligations as Estate Trustee. Michael argued that Livio’s actions had put him in an untenable conflict of interest.
Given that the property was in Livio’s name, Michael also cited a letter from Livio’s lawyer that suggested that Livio would consider disinheriting Michael to demonstrate that his interest in the Deceased’s Estate was at risk.
Conversely, Livio argued that he had only acted to increase the value of the Estate by entering into a more favourable mortgage. It was Livio’s evidence that he had transferred title to the property into his name so that the mortgage on the property could be renegotiated on more favourable terms, allowing him to start paying down some of the principal amount of the mortgage. Livio also executed a declaration of trust after receiving enquiries from Michael’s counsel, confirming that he was holding the property in trust for his children in accordance with the Deceased’s Will.
Ultimately, Justice Fairburn held that while Livio should not have transferred the property into his personal name or remortgaged the property without notice to the beneficiaries, his actions were not “fatal” to his position as the Deceased’s Estate Trustee. Placing Livio’s actions in context, the Court found that the beneficiaries had benefited from the remortgaging of the property. The Court also held that the declaration of trust showed that Livio intended to abide by the Deceased’s testamentary intentions.
In the result, Michael’s Application was dismissed. Instead of ordering Livio’s removal, the Court ordered that the declaration of trust be amended and registered on title to the property.
Justice Fairburn’s decision once again reiterates the high bar for the removal and replacement of an Estate Trustee. The Court may be reluctant to exercise its discretion in the absence of clear evidence, even if there may have been a technical breach of the Estate Trustee’s duties.
Thank you for reading,
Umair Abdul Qadir
The recent decision in Bunn v. Gordon demonstrates how a breakdown in the relationship between an estate trustee and beneficiary may lead to the removal of the estate trustee.
The Testator made a Will naming his girlfriend of three and a half years as estate trustee. The Will, amongst other things, leaves real property and a portion of the residue to his two children to be held in trust by the estate trustee until attaining the age of 21. As a result of the age of the children, the estate trustee’s office will last until at least the year 2021.
From the outset, the administration of the estate was contentious, such that the children commenced an application under s 37(1) of the Trustee Act for the removal and replacement of the estate trustee. The law with respect to estate trustee removal has remained relatively consistent with the governing principle being the welfare of the beneficiaries and whether the continuance in office of an estate trustee will likely prevent the estate from being administered. From this the courts do not take lightly the wishes of the deceased as expressed in the Will.
The children raised four examples in support of their application to remove the estate trustee:
- failing to provide the children with a copy of the death certificate, despite multiple requests;
- failing to account for a Kodiak trailer demonstrating a lack of care with the estate assets;
- selling a desk and cupboard which was of sentimental value to the children, showing a disregard for the interests and wellbeing of the beneficiaries; and
- failing to report on the sale of real property.
Individually, the evidence in and of itself was not sufficient to call for the removal of the estate trustee. However, the court held that collectively the relationship between the estate trustee and children had broken down and that the antipathy towards the beneficiaries precluded the dutiful administration of the estate. Although the behaviour was not solely the fault of the estate trustee, the court indicated that it is the estate trustee who owes the fiduciary obligation. Therefore, the estate trustee was removed.