Tag: estate trustee
Are you an estate trustee? Is the estate being sued? Are there no, or insufficient, assets left in the estate to satisfy any judgment that may be obtained? Then plene administravit (or plene administravit praeter) is the doctrine for you!
Plene administravit is Latin for “fully administered”. It is pleaded where there are no assets remaining in the estate to satisfy any judgment and costs award that may be obtained. Plene administravit praetor means “fully administered except”, and is pleaded when there are some but insufficient assets in the estate to satisfy any judgment and costs.
Failure to plead plene administravit could lead to personal liability on the part of the estate trustee for the claim. As stated in Commander Leasing Corp. Ltd. v. Aiyede (1983) CanLII 1649 (ON CA):
It has long been established that if an executor or administrator has no assets to satisfy the debt upon which an action is brought, in the absence of a plea of no assets or plene administravit, he will be taken to have conclusively admitted that he has assets to satisfy the judgment and will be personally liable for the debt and costs if they cannot be levied on the assets of the deceased. If the executor has some, but insufficient, assets to satisfy the judgment and costs, a plea of plene administravit praetor will render him liable only to the amount of assets proved to be in his hands as executor”.
Where the doctrine is pleaded, the burden of proof falls on the plaintiff to show that assets existed or ought to have existed in the hands of the estate trustee at the time the action was commenced.
In Commander Leasing, the estate trustee distributed the proceeds of the estate to the beneficiary (herself), with knowledge of the claim. The Court had no difficulty in finding that as the doctrine was not pleaded, the estate trustee was personally liable for the judgment.
In Commander Leasing, the Court of Appeal also discussed the companion doctrine of devistavit. Devistavit, or a wasting of assets, is defined to be “mismanagement of the estate and effects of the deceased, in squandering or misapplying the assets contrary to the duty imposed on them, for which the executors or administrators must answer out of their own pockets, as far as they had, or might have had, assets of the deceased.” In Commander Leasing, the court found that in distributing the estate the estate trustee breached her duty as estate trustee, rendering her personally liable.
However, all is not lost if the estate trustee fails to plead plene administravit. In Brummund v. Baumeister Estate, 2000 CanLii 16988 (ON CA), the Court of Appeal upheld a trial judge’s decision to allow the defendant to amend the defence at trial to plead the doctrine. The Court of Appeal held that the plaintiff was not prejudiced by the amendment, as the facts underlying the application of the doctrine were fully canvassed at trial.
Have a great, plenus weekend.
What do you do as a lawyer when you represent someone who is waiting to receive money from an estate, but the Estate Trustee will not pay? An interim distribution can commonly be made. The Estate Trustee can hold back some of the funds for potential liabilities and distribute some of the money immediately. Potential liabilities can involve delayed tax filings related to Canada Revenue Agency (CRA) procedures being slow, or other estate liabilities. Final distribution can be delayed for a matter of 2-3 years, or even longer. As an example, on a $1,000,000 estate, the hold back might be $200,000 on $50,000 of estate liabilities that are known or can be knowledgeably estimated. This safely leaves $800,000 for immediate interim distribution, without waiting years until concluding administration of the estate. However, the practice of the Office of Public Guardian and Trustee (OPGT) in Ontario is not to do interim distributions. They take the position that even if there is the remotest potential for liability they will not take the risk. As a government entity there is certainly no incentive to take any risk. The following rhetorical question illustrates the problem – What civil servant in a bureaucratic government agency is going to move quickly to take on liability and risk?
A recent decision clearly directs the Office of Public Guardian and Trustee (OPGT) of Ontario to make an immediate interim distribution as Estate Trustee.
It is unfortunate, in my view, that anyone would have to take steps to seek an Order in these circumstances. This is what happened in Foundation for Human Development and Jack Benson v The Estate of Keith Irwin-Reekie, 2020 ONSC 299, with the decision released on January 15, 2020. The court directed an interim distribution by the OPGT, to distribute the inheritance to which the moving parties were entitled. The court found that it was appropriate to exercise discretion under rule 74.15 (1) (i) “Orders for Assistance” of the Rules of Civil Procedure, Courts of Justice Act. The reasoning was that it was usual practice for estate trustees to make interim distributions out of estates, “once the Estate Trustee has a good understanding of the taxes and other liabilities of the estate, holding back sufficient funds in the estate to satisfy those expenses / liabilities”.
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Acting as an estate trustee can be complicated. Complications are multiplied where the estate includes property that is or has been used in a manner contrary to the Cannabis Control Act.
Under the Cannabis Control Act, S.O. 2017, Chapter 26, as amended, various offences are created involving the production, sale or other distribution of cannabis. Vis-à-vis landlords, section 13 of the Act makes it an offence to “knowingly permit a premise of which he or she is a landlord to be used in relation to activity prohibited by section 6”. Section 6 provides that no person shall sell cannabis, other than an authorized cannabis retailer.
The Act provides for penalties for landlords of at least $10,000 and not more than $250,000 or imprisonment for a term of not more than two years less a day, or both. Fines are subject to an additional 25% Victim Fine Surcharge.
Additionally, the court may, upon conviction, order that a premise be closed to any use for a period not exceeding two years. Prior to conviction, the police may cause the premises to be closed immediately. The premises are to be closed until the final disposition of the charge, subject to an order of the court lifting the closure.
A defense to a charge against a landlord under the Act is the fact that the landlord took reasonable measures to prevent the prohibited activity.
Additionally, forfeiture could be sought by the Crown under the Civil Remedies Act.
An estate trustee holding real property should take steps to ensure that he or she knows what is happening at the property, and to ensure that the property is not being used for illegal activity. In addition, the estate trustee should document the steps that are taken to prevent illegal activity. Leases should be reviewed in order to ensure that they prohibit illegal activity.
For further information, see “The Ontario Cannabis Control Act and Implications for Commercial Landlords” by David Reiter and Brian Chung.
For a blog on Cannabis and Estate Law, see my prior blog, here.
Have a great weekend.
We all know how long an Estate Trustee typically has to wait for a Certificate of Appointment of Estate Trustee With or Without a Will, if filed in Toronto. Sometimes a Certificate of Appointment is not granted for six to eight months from the filing date.
The Court recently expressed its frustration with the frequency of motions being commenced by Estate Trustees seeking to expedite the granting of the Certificate of Appointment. The option of obtaining the Certificate of Appointment on a more urgent basis appears to no longer be available as a result. Apparently, it was not unusual for Estate Trustees to seek to expedite the process when real property of an Estate needed to be sold. The Court does not always agree that the sale of real property cannot wait until the Certificate of Appointment is granted.
Despite the Court’s stance on expediting the granting of Certificates of Appointment, there are special circumstances that would arguably warrant the Court’s intervention. What if an Estate Trustee’s authority is required to manage a certain asset of an Estate such that, if it is not obtained within a reasonable amount of time, the Estate could suffer significant expense?
An option that is available which should be carefully considered (particularly given the Court’s position on expediting the process overall) is seeking a limited grant from the Court for a particular purpose. Historically, this was known as a grant ad colligenda bona, and was limited to particular purposes as well as limited until such time as a general grant could be made (see Charles H. Widdifield, Surrogate Court Practice and Procedure, 2nd ed. (Toronto: Carswell, 1930) at 190).
Today, where the conditions for an appointment of an Estate Trustee During Litigation are not met, and there is a delay in the appointment of an Estate Trustee, a limited grant for the purpose of gathering in and protecting the assets may be sought by way of a motion or application for directions under Rule 75.06 of the Rules of Civil Procedure (see Ian M. Hull & Suzana Popovic-Montag, Macdonell, Sheard and Hull on Probate Practice, 5th ed. (Toronto: Carswell, 2016) at 384).
This option should be carefully considered where the circumstances are truly special such that the Court’s intervention is required on an urgent basis and the Estate Trustee cannot wait until the Certificate of Appointment is granted.
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Yesterday I blogged about the Notice of Contestation of Claim, which is a process that in essence provides the Estate Trustee with the ability to require individuals with a potential claim against the estate to commence such a claim within 30 days of being served with the Notice of Contestation of Claim failing which they are deemed to have abandoned the claim such that they can no longer pursue it before the court.
The power given to an Estate Trustee by the Notice of Contestation of Claim coupled with the relatively short timeframe by which the claimant must respond could appear attractive to an Estate Trustee, potentially enticing the Estate Trustee to use such a process to flush out all potential claims at the early stages of the administration of the estate. This is turn raises questions about the kinds of claims that the Notice of Contestation of Claim can be used for, and whether it can be used for all potential claims against an estate or whether the claims against which it can be used are more limited. Could you, for example, serve a possible dependant with a Notice of Contestation of Claim, and in doing so require the alleged dependant to bring their claim for support forward within 30 days failing which they are deemed to have abandoned their claim?
The issue of whether a Notice of Contestation of Claim can be used against a potential dependant of the estate was dealt with by the Ontario Court of Appeal in Omiciuolo v. Pasco, 2008 ONCA 241, wherein the court confirmed that the Notice of Contestation of Claim could not be used in relation to a potential claim for support by a dependant under Part V of the Succession Law Reform Act. In coming to such a decision the Court of Appeal notes that historically the “claim or demand” referenced in sections 44 and 45 of the Estates Act had been interpreted to mean a “claim or demand against the estate by a ‘creditor’ for payment of money on demand“, and that it could not be used for claims such as declaratory relief or a claim for judicial sale or foreclosure.
From the Court of Appeal’s rationale in Omiciuolo v. Pasco it would appear that the “claims” against which a Notice of Contestation of Claim can be used are likely limited to claims of potential creditors of the estate (i.e. claims that the deceased owed an individual money), and that it cannot be used against other more nuanced or equitable claims such as a potential claim from a dependant for support or declaratory relief.
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What’s an Estate Trustee to do when faced with a situation in which an individual has threatened to bring a claim against the estate but has not yet actually taken any formal steps to advance the claim. As Estate Trustee you have certain obligations to the beneficiaries of the estate, including seeing to the administration in a timely manner. An Estate Trustee also has obligations to the creditors of the estate however, and needs to ensure to that all debts of the estate are paid prior to distributing the estate to the beneficiaries. If they fail to do so, the Estate Trustee could face potential personal liability to the creditors of the estate.
An active claim being commenced against the estate can significantly delay the amount of time it takes for an estate to be administered, as the Estate Trustee cannot see to the final administration of the estate while the claim remains active as they must ensure that there are requisite funds in the estate to satisfy any damages award should the estate ultimately not be successful in the claim. The same is also true for a claim that has been threatened against the estate, as the Estate Trustee may be apprehensive to distribute the estate in the face of a claim possibly being commenced for the same reason. When faced with a such a threatened claim the Estate Trustee could be put in a difficult dilemma, for on the one hand they wish to administer the estate in a timely fashion to the beneficiaries and there is no active claim that has been commenced that would otherwise stop them from doing so, yet because of the threatened claim they may be reluctant to do so for fear of their own potential liability should the claim later be commenced after the funds have been distributed. When faced with such a situation the “Notice of Contestation of Claim” could become the Estate Trustee’s new best friend.
At its most basic the Notice of Contestation of Claim provides a mechanism by which a Estate Trustee can require the potential claimant to formally advance their claim against the estate failing which they are deemed to have abandoned the claim. The “Notice of Contestation of Claim” process is governed by sections 44 and 45 of the Estates Act. If a potential claimant is served with a Notice of Contestation of Claim they are provided with 30 days to issue a “claim” pursuant to the Notice of Contestation of Claim, failing which they are deemed to have abandoned the claim. The 30 day deadline may be extended up to a maximum of three months by the court if the claimant should seek such an extension.
The process by which a Notice of Contestation of Claim is issued is governed by rule 75.08 of the Rules of Civil Procedure, providing the form (Form 75.13) that the Notice of Contestation of Claim must be in, as well as the steps that the claimant must follow to bring their claim before the court upon being served with the Notice of Contestation of Claim should they intend to pursue the matter.
Through the Notice of Contestation of Claim an Estate Trustee can force a potential claimant to make a decision regarding whether they intend to bring a claim against the estate. If the potential claimant does not take the appropriate steps following being served with the Notice of Contestation of Claim their potential claim is deemed to be abandoned and can no longer be pursued before the court, with the Estate Trustee being theoretically free to proceed with the administration of the estate.
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In Baca v. Tiberi, the court awarded substantial costs as against an attorney for property/estate trustee for maladministration of her mother’s property while she was alive, and of her estate following her death.
The litigation was settled prior to a court determination. However, under the settlement, the parties submitted the question of costs to the court.
In Baca, the court found that there was serious misappropriation by the attorney and estate trustee. The attorney added her name to her mother’s bank accounts and took out money for her own expenses. She caused her mother to incur tens of thousands of dollars of debt for the benefit of the attorney, her husband and sister. She moved into her mother’s home with her family and did not pay rent. She transferred title to the home to herself and her mother jointly. After the mother’s death, she transferred the home to herself and her husband. She mortgaged the home to pay her own debts.
At the costs hearing, the court asked the parties whether the attorney’s lawyer might have personal liability for costs. The attorney waived solicitor-client privilege and the lawyer was subjected to examination and made submissions.
The court awarded costs against the attorney and the lawyer on a “full indemnity” basis, after a reduction of $50,000 for excessive time spent, in the amount of $301,941.41, plus HST and disbursements. (The estate had a total value of approximately $1m.) The attorney and the lawyer were jointly and severally liable for costs. As between themselves, the attorney was to be liable for 75% of the costs, and the lawyer was liable for 25%.
In its ruling, the court was critical of the lawyer’s conduct. The court found that the lawyer pursued a goal that was unattainable. Further, the lawyer misrepresented facts to the court. In pleadings, the lawyer (not the client, per the court) denied assertions that were, to her knowledge, true. Further, the pleadings contained assertions that were known to be false. The lawyer allowed a misleading affidavit to be sworn by her client. The lawyer also failed to ensure that certain funds were held in trust in accordance with a court order. At a later hearing, the lawyer advised the court that the funds were held in trust when they were not.
The court found the lawyer liable, partially, on the basis that she knew of her client’s misconduct yet advised or acted on instructions to take untenable legal positions. She also took legal steps that costed her client and the other side hundreds of thousands of dollars, yet the steps did nothing to avoid “the only inevitable conclusion possible”: that her client would have to make the estate whole. There was no evidence that the client was ever advised of the situation.
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Were you recently appointed as Estate Trustee and needed to obtain a Certificate of Appointment of Estate Trustee (otherwise known as “probate”)? In that case, you need to know that an Estate Information Return must be filed with the Ministry of Finance within 90 days of the date of the appointment, setting out the assets in the Estate and their corresponding date of death values.
Typically when an Application for Certificate of Appointment is filed with the Court, a trustee may not have access to every asset of the Estate such that that the value of the Estate may not necessarily be accurate.
As a result, when an Estate Information Return is filed following the Certificate of Appointment being granted, all of the assets of the Estate must be listed. Depending on the values of the assets as confirmed by the trustee following the Certificate of Appointment being granted, a refund may be issued in the event that Estate Administration Tax was overpaid or additional tax may be payable in the event that the value of the assets as listed on the Application is lower than what was listed on the Estate Information Return.
The Estate Information Return may be audited by the Ministry of Finance for up to four years after it is filed. As such, it is important to retain all relevant records in the event of such an eventuality. Another important consideration is that the Ministry of Finance will not typically provide confirmation of receipt of an Estate Information Return so it is prudent to send it via means that would provide you with confirmation of delivery such as fax.
Finally, if a trustee finds out any additional information regarding the value of the assets of the Estate that has any bearing on the Estate Administration Tax payable, an amended Estate Information Return must be filed within 30 days of the new information being uncovered.
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It is not uncommon for the lawyer who drafted a testator’s will or codicil to subsequently be retained by the Estate Trustees after the testator’s death to assist with the administration of the estate. The rationale behind the drafting lawyer being retained to assist with the administration of the estate appears fairly self-evident, for as the drafting lawyer likely has an intimate knowledge of the testator’s estate plan and assets they may be in a better position than most to assist with the administration of the estate.
While retaining the drafting lawyer to assist with the administration of the estate is fairly uncontroversial in most situations, circumstances could become more complicated if there has been a challenge to the validity of the testamentary document prepared by the drafting lawyer. If a proceeding has been commenced challenging the validity of the testamentary document, there is an extremely high likelihood that the drafting lawyer’s notes and records will be produced as evidence, and that the drafting lawyer will be called as a non-party witness as part of the discovery process. If the matter should proceed all the way to trial, there is also an extremely high likelihood that the drafting lawyer would be called as a witness at trial. As the drafting lawyer would personally have a role to play in any court process challenging the validity of the will, questions emerge regarding whether it would be proper for the drafting lawyer to continue to represent any party in the will challenge, or would doing so place the drafting lawyer in a conflict of interest?
Rule 3.4-1 of the Law Society of Ontario’s Rules of Professional Conduct provides that a lawyer shall not act or continue to act where there is a conflict of interest. In the case of a drafting lawyer representing a party in a will challenge for a will that they prepared, an argument could be raised that the drafting lawyer is in an inherent position of conflict, as the drafting lawyer may be unable to look out for the best interests of their client while at the same time looking out for their own interests when being called as a witness or producing their file. There is also the potentially awkward situation of the drafting lawyer having to call themselves as a witness, and the associated logistical quagmire of how the lawyer would put questions to themselves.
The issue of whether a drafting lawyer would be in a conflict of interest in representing a party in a will challenge was dealt with in Dale v. Prentice, 2015 ONSC 1611. In such a decision, the party challenging the validity of the will brought a motion to remove the drafting lawyer as the lawyer of record for the propounder of the will, alleging they were in a conflict of interest. The court ultimately agreed that the drafting lawyer was in a conflict of interest, and ordered that the drafting lawyer be removed as the lawyer of record. In coming to such a conclusion, the court states:
“There is a significant likelihood of a real conflict arising. Counsel for the estate is propounding a Will prepared by his office. The preparation and execution of Wills are legal services, reserved to those who are properly licensed to practise law. Counsel’s ability to objectively and independently assess the evidence will necessarily be affected by his interest in having his firm’s legal services found to have been properly provided.” [emphasis added]
Decisions such as Dale v. Prentice suggest that a lawyer may be unable to represent any party in a will challenge for a will that was prepared by their office as they may be in a conflict of interest. Should the circumstance arise where the drafting lawyer is retained to assist with the administration of the estate, and subsequent to being retained someone challenges the validity of the Will, it may be in the best interest of all parties for the drafting lawyer to indicate that they are no longer able to act in the matter due to the potential conflict, and suggest to their clients that they retain a new lawyer to represent them in the will challenge.
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Estate litigation can be costly both financially and emotionally. As a result, there is often a strong incentive for parties to try to reach a negotiated settlement. Although entering into a settlement which resolves the estate litigation may appear straightforward from the outside, it may become more complicated if all potential financially interested parties are not signatories to the settlement. It is not uncommon in estate litigation for all beneficiaries of the estate to not actively participate in the litigation, leaving it to people such as the Estate Trustee or the other beneficiaries to defend a claim. As a settlement is in effect a contract between parties, if a settlement is reached which affects the interests of a non-signatory to the settlement can such a settlement bind the interests of the non-signatory?
I have previously blogged about section 48(2) of the Trustee Act, and an Estate Trustee’s ability to settle claims on behalf of the estate which can bind the interests of the beneficiaries. While section 48(2) would allow the Estate Trustee to bind the interests of all beneficiaries to the settlement, the Estate Trustee does so at their own potential liability, as it is possible that one or more of the beneficiaries may later challenge the decision of the Estate Trustee to enter into the settlement, potentially seeking damages against the Estate Trustee if they are of the position that the settlement was not reasonable or in the best interest of the estate. As a result of such a risk, it is not uncommon for an Estate Trustee to be hesitant to enter into a settlement on behalf of the estate in contentious situations, not wanting to potentially expose themselves to personal liability if one or more of the beneficiaries should later object to the terms of the settlement. If an Estate Trustee is hesitant to enter into a settlement on behalf of all beneficiaries, but all actively participating parties are otherwise in agreement with the settlement, is there a way to bind the interests of non-participating parties to the settlement?
The Rules of Civil Procedure provide the court with the ability to “approve” a settlement on behalf of parties who are not signatories under certain limited circumstances. This is done in accordance with rule 7.08 of the Rules of Civil Procedure, which allows the court to approve a settlement on behalf of a party who themselves cannot consent to the settlement on account of being under a legal disability (i.e. a minor). Perhaps importantly however, the court only has the authority under rule 7.08 to “approve” a settlement on behalf of a party under a legal disability, and rule 7.08 is not available in circumstances where the non-signatory is fully capable.
The Rules of Civil Procedure do not otherwise appear to provide any mechanism by which a settlement can be approved on behalf of a party who is not under a legal disability. As a result, if the non-signatory who you are you attempting to bind to the settlement is not under a legal disability, the court likely does not have the authority to “approve” the settlement on their behalf under the Rules of Civil Procedure.
Although the court likely does not have the ability to “approve” a settlement on behalf of an individual who is not under a legal disability in accordance with the Rules of Civil Procedure, this does not necessarily mean that there are no other ways to potentially bind the individual to a settlement. One potential solution may be to seek an Order “in accordance” with the terms of the settlement on notice to all interested parties. Should the court issue such an Order, which in effect repeats the terms of the settlement but as an Order of the court, the non-signatories would arguably then be bound to the terms of the settlement as it would now be in the form of an Order of the court.
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