Tag: estate trustee
A recent decision of the Ontario Court of Appeal considered whether s. 7 of the Limitations Act, 2002 applies to extend the time within which an estate trustee can bring a claim that arose prior to a deceased person’s death.
Section 7 of the Limitations Act, 2002 provides as follows:
7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. 2002, c. 24, Sched. B, s. 7 (2).
(3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends.
In Lee v Ponte, 2018 ONCA 1021, the estate trustee of the deceased person commenced a claim more than 2 years after the date on which the limitation period began to run, as determined by the trial judge. As a result, the action was statute barred.
The estate trustee appealed, taking the position that section 7 of the Limitations Act, 2002 should be “liberally construed”. The estate trustee argued that a deceased person is incapable of commencing a proceeding because of “his or her physical, mental or psychological condition”. He also argued that policy reasons support allowing additional time for an estate trustee or litigation guardian to be appointed and take over the management of the affairs of the incapable/deceased person.
The Court of Appeal disagreed and did not allow the appeal. In its view, the “grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.”
Although the outcome is not surprising, it does serve as a reminder that limitation periods can be unforgiving. Estate trustees would be well-advised to act swiftly in reviewing the affairs of a deceased person in order to determine whether any claims may have arisen prior to death, and whether the expiry of any limitation periods are looming.
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Applications to pass accounts are unique as civil proceedings go. The nature of the inquiries being made by the Court, the relief that a judge is empowered to grant, and the procedural considerations that apply are all features that distinguish applications to pass accounts from other civil applications. Procedural considerations in particular have garnered some notoriety recently as a result of several notable decisions released in the past few years. The recent decision of the Court of Appeal for Ontario (then sitting as the Divisional Court) in Wall v Shaw, 2018 ONCA 929, provides some clarity to a few of the loose ends.
In Wall, the Deceased died leaving a Will naming the appellant as estate trustee and which created two testamentary trusts for the benefit of her two children. The Deceased’s nieces and nephews were also named as contingent beneficiaries in the event that both children died before vesting in the trust property.
The estate trustee acted for more than 10 years, but never formally passed his accounts. Instead, the estate trustee held frequent informal meetings with the Deceased’s children to review the administration of the estate and to discuss the estate trustee’s compensation.
A dispute between the Deceased’s daughter and the estate trustee relating to the latter’s compensation eventually led the daughter to bring an application seeking an order compelling the estate trustee to pass his accounts.
The estate trustee subsequently commenced an application to pass accounts in March 2015. In June 2015, the Deceased’s daughter filed a notice of objection to the accounts, followed in January 2016 by a notice of objection delivered by two of the Deceased’s nieces.
In response, the estate trustee brought a motion seeking to strike out the objections of the daughter on several grounds. Notably, the estate trustee took the position that the daughter’s approval of the accounts at the informal meetings constituted acquiescence of the estate trustee’s conduct. In the alternative, the estate trustee argued that the daughter’s objections were now statute-barred pursuant to sections 4 and 5 of Ontario’s Limitations Act or barred by the doctrine of laches.
The estate trustee was unsuccessful at first instance on all three grounds, but only chose to appeal the first ground. Specifically, the estate trustee argued on appeal that the judge at first instance had erred in refusing to apply the two-year limitation period under section 4 of the Limitations Act. The appeal was dismissed, and the reasons on appeal provide some procedural clarity in respect of the interplay between limitation periods and passings of accounts.
Section 4 of the Limitations Act generally provides that a “proceeding” cannot be commenced in respect of a “claim” if more than two years have elapsed since the date the claim was discovered. The Court of Appeal took issue with each of the quoted terms.
Notably, the held that a notice of objection does not commence a “proceeding” for the purposes of section 4 of the Limitations Act. Rather, a notice of objection ought to be viewed as a response to a proceeding that has already been commenced, being the application to pass accounts. The Court also pointed to its prior ruling in Armitage v The Salvation Army, in which it was held that an application to pass accounts was not a “claim” pursuant to section 4 of the Limitations Act. Accordingly, it followed that a responding objection raised in that application could also not constitute a claim.
Finally, the Court highlighted an important distinction between applications to pass accounts and other civil applications. Unlike a traditional civil claim, the Court in an application to pass accounts is not tasked with awarding judgment in favour of one party or the other. The purpose of an application to pass accounts to is initiate a “judicial inquiry” into the management of an estate and, if appropriate, provide redress to the estate, rather than to the beneficiaries personally.
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This week on Hull on Estates, Noah Weisberg and Garrett Horrocks review the decision in Steele v Smith, 2018 ONSC 4601, and discuss Benjamin Orders as a remedy for the estate trustee in the event that a beneficiary cannot be located.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
A recent decision of the Human Rights Tribunal reiterates the necessity of obtaining a Certificate of Appointment of Estate Trustee, with or without a Will, in order to be allowed to continue with a human rights compliant before the Ontario Human Rights Tribunal.
In Pollard v. York Condominium Corporation, 2018 HRTO 1149 (CanLII), the Applicant alleged discrimination on the basis of disability. The Applicant was fired from his employment as a superintendent, allegedly on the basis that he was absent from work due to a disability. The Applicant later died, and the Respondent applied for an Order dismissing the Application because no Certificate of Appointment of Estate Trustee had been obtained. The deceased Applicant’s wife sought to continue the Application.
The Human Rights Tribunal reviewed case law to the effect that an application under the Human Rights Code cannot proceed without the formal appointment of an Estate Trustee.
Rather than dismiss the Application, the Human Rights Tribunal allowed the Applicant’s wife six months to obtain a Certificate of Appointment. If no Certificate was obtained within that time, the Application was to be dismissed.
The requirement of a Certificate of Appointment can cause significant hardship for an applicant. They must incur the costs of applying for the Certificate. In many cases, the estate has no assets: either because it is impecunious or because the assets pass outside of the estate. In other cases, the estate would have to pay Estate Administration Tax that might not otherwise be payable.
There is a similar requirement to obtain a Certificate of Appointment in order to continue other civil litigation: see David Smith’s blog, here.
Have a great long weekend.
For all that is known about chef Anthony Bourdain’s colourful lifestyle, the estate plan he left behind is surprisingly comprehensive.
Bourdain’s Will leaves the residue of his estate to his minor daughter, Ariane. The residue has been valued at approximately $1.2 million, and consists of savings, cash, brokerage accounts, personal property, and intangible property including royalties and residuals. In the event that Bourdain survived his daughter, the residue was to pass to his daughter’s nanny.
Bourdain appointed his estranged wife as estate trustee. This makes sense given that Ariane is the daughter of the marriage and that the mother will likely have her daughter’s best interests in mind while the estate is administered. Bourdain was also mindful to include in his Will other assets – personal and household effects, including frequent flyer miles. Given the amount of travelling Bourdain did, it was shrewd of him to specifically include this in his Will.
A separate trust was also settled, apparently containing most of his wealth. Again, his estranged wife is named as trustee, with Ariane as beneficiary receiving money from the trust when she turns 25, 30, and 35. Presumably, Bourdain settled a trust to avoid the payment of taxes and the publicity associated with probate – another sign of a well thought out estate plan.
While so many celebrities succumb to poor estate planning, it is refreshing that in addition to teaching us about cooking, travelling, eating, and so much more, Bourdain also taught us about the importance of a thorough estate plan.
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The notes and records of the lawyer who assisted the deceased with their estate planning can play an important role in any estate litigation. As a result, it is not uncommon for a drafting lawyer to receive a request from individuals involved in estate litigation to provide them with a copy of their notes and files relating to the deceased’s estate planning. But can the lawyer comply with such a request?
The central concern involved for the lawyer is the duty of confidentiality which they owe to the deceased. This duty of confidentiality is codified by rule 3.3-1 of the Law Society of Ontario’s Rules of Professional Conduct, which provides:
“A lawyer at all times shall hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship and shall not divulge any such information unless expressly or impliedly authorized by the client or required by law to do so.”
The duty of confidentiality and privilege which is owed to the deceased by the lawyer survives the deceased’s death. This was confirmed by the court in Hicks Estate v. Hicks,  O.J. No. 1426, where, in citing the English authority of Bullivant v. A.G. Victoria,  A.C. 196, it was confirmed that privilege and the duty of confidentiality survive death, and continues to be owed from the lawyer to the deceased. With respect to the question of who may waive privilege on behalf of the deceased following their death, Hicks Estate v. Hicks confirmed that such a power falls to the Estate Trustee under normal circumstances, stating:
“It is clear, therefore, that privilege reposes in the personal representative of the deceased client who in this case is the plaintiff, the administrator of the estate of Mildred Hicks. The plaintiff can waive the privilege and call for disclosure of any material that the client, if living, would have been entitled to from the two solicitors.”
Simply put, the Estate Trustee may step into the shoes of the deceased individual and compel the release of the lawyer’s file to the same extent that the deceased individual could have during their lifetime.
In circumstances in which the validity of the Will has been challenged, the authority of the Estate Trustee is also being challenged by implication, as their authority to act as Estate Trustee is derived from the Will itself. In such circumstances, the named Estate Trustee may arguably no longer waive privilege and/or the duty of confidentiality on behalf of the deceased individual. Should the notes and/or records of the drafting lawyer still be required, a court order is often required waiving privilege and/or the duty of confidentiality before they may be produced.
Whether or not a lawyer can release their file following the death of a client will depend on the nature of the dispute in which such a request is being made, and who is making the request. If there is a challenge to the validity of the Will or the Estate Trustee’s authority, it is likely that a court Order will be required before the lawyer may produce their file regardless of who is requesting the file. If the dispute does not question the Estate Trustee’s authority, such as an Application for support under Part V of the Succession Law Reform Act, the lawyer should comply with the request to release their file so long as the requesting party is the Estate Trustee. If the requesting party is not the Estate Trustee, and the Estate Trustee should refuse to provide the lawyer with their authorization to release the file, matters become more complicated, and may require a court Order before the lawyer may release their file.
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While digital assets constitute “property” in the sense appearing within provincial legislation, the rights of fiduciaries in respect of these assets are less clear than those relating to tangible assets. For example, in Ontario, the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of property and estate trustees, respectively, are authorized to manage the property of an incapable person or estate, but these pieces of legislation do not explicitly refer to digital assets.
As we have previously reported, although the Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act in August 2016, the uniform legislation has yet to be adopted by the provinces of Canada. However, recent legislative amendment in one of Ontario’s neighbours to the west has recently enhanced the ability of estate trustees to access and administer digital assets.
In Alberta, legislation has been updated to clarify that the authority of an estate trustee extends to digital assets. Alberta’s Estate Administration Act makes specific reference to “online accounts” within the context of an estate trustee’s duty to identify estate assets and liabilities, providing clarification that digital assets are intended to be included within the scope of estate assets that a trustee is authorized to administer.
In other Canadian provinces, fiduciaries continue to face barriers in attempting to access digital assets. Until the law is updated to reflect the prevalence of technology and value, whether financial or sentimental, of information stored electronically, it may be prudent for drafting solicitors whose clients possess such assets to include specific provisions within Powers of Attorney for Property and Wills to clarify the authority of fiduciaries to deal with digital assets.
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In Ontario, if there is a claim to be made or continued by a deceased person or their estate, any such claim must be brought by the executor or administrator of his or her estate. If there is no executor or administrator, under Rule 9.02 of the Rules of Civil Procedure, RRO 1990, Reg 194, the court may appoint a litigation administrator, who will represent the estate for the purpose of the proceeding. A beneficiary or other person may also represent the interests of an estate, under Rule 10.02, where it appears that an estate has an interest in a matter in question in a proceeding.
In British Columbia, section 151 of the Wills, Estates and Succession Act, SBC 2009, c. 13 (“WESA”) provides an alternative way of pursuing a claim by an estate. Section 151 states that a beneficiary of an estate may, with leave of the court, commence proceedings in the name and on behalf of the personal representative of a deceased person, either to recover property or enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or to obtain damages for breach of a right, duty or obligation owed to the deceased person. Section 151(3) outlines the circumstances in which the court may grant leave in this regard:
(3) The court may grant leave under this section if
(a) the court determines the beneficiary or intestate successor seeking leave
(i) has made reasonable efforts to cause the personal representative to commence or defend the proceeding,
(ii) has given notice of the application for leave to
(A) the personal representative,
(B) any other beneficiaries or intestate successors, and
(C) any additional person the court directs that notice is to be given, and
(iii) is acting in good faith, and
(b) it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceeding to be brought or defended
In a document produced by the Government of British Columbia entitled “The Wills, Estates and Succession Act Explained” (“WESA Explained”), section 151 is described as overcoming a gap in the law. Previously, if a beneficiary wished for an action to be brought on behalf of an estate, and the personal representative refused to do so, the beneficiary’s sole recourse would be to apply for removal of the personal representative.
However, removal may not always be necessary or convenient. As described in WESA Explained, such a situation could arise in the event that the personal representative’s main concern (as is often the case with executors, generally) is to preserve and distribute the estate. The personal representative is therefore likely more risk adverse and conservative in assessing the potential success of pursuing an action. The beneficiary may have differing views on the merits of the claim, and in his or her assessment of the risk and return.
Section 151 of WESA differs from the process for litigation administrators and representation orders in Ontario in that s. 151 allows the executor and beneficiary appointed to bring a claim on behalf of the estate to co-exist simultaneously.
The concept of s. 151 is similar to a derivative action, in which a shareholder or other person is permitted to bring an action on behalf of a corporation, where the corporation refuses to do so.
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An Ontario Court of Appeal decision released yesterday provides clarity regarding the situations in which beneficiaries of legacies will be entitled to interest on the sum payable to them under a Last Will and Testament.
In Rivard v Morris, the testator had held farmland of significant value. A prior Will left a farm of comparable value to each of his daughters (as the testator had previously gifted a farm property to his son), and divided the residue of the estate equally between the three children. In the months preceding his death, however, the deceased amended his estate plan to provide for a greater benefit to his son, leaving him the residue of his estate (inclusive of the farm properties) after distributions to each daughter in the amount of $530,000.00.
After the testator died, the daughters challenged his Last Will on the basis of alleged undue influence. The will challenge was unsuccessful. The daughters subsequently commenced another proceeding after their brother (the sole remaining estate trustee after their previous resignations) refused to pay to the sisters interest with respect to the legacies of $530,000.00. They argued that they were entitled to interest commencing one year after the date of their father’s death, notwithstanding that the payment had been delayed in part because of the will challenge initiated by the daughters. Any interest would have been payable out of the assets to which their brother was otherwise entitled as sole residuary beneficiary of the estate.
The daughters were unsuccessful at the hearing of their application and appealed. The Court of Appeal found in their favour. Justice Paciocco ordered the payment to each daughter interest in the amount of $53,000.00 out of the residue of the estate. In doing so, Justice Paciocco relied upon the “executor’s year” and the “rule of convenience”. In describing the rule of convenience, Justice Paciocco stated as follows (at paragraphs 24, 25):
The “rule of convenience” can be easily explained, in my view. One of the maxims of equity is that it presumes as being done that which ought to be done. Since the beneficiaries should be enjoying the earning power of their legacies by at least the anniversary date of the testator’s death, where that enjoyment is postponed and the testator has not provided an alternative date for payment of the legacy, interest is to be paid…This general rule has been adopted in Ontario.
The rule of convenience was considered by the Court of Appeal to promote certainty and predictability, and the lower court’s decision to deny the daughters’ interest on the basis that they had commenced litigation against the estate was said to be contrary to principle, as this would have the impact of discouraging “even meritorious litigation”. While the Court of Appeal did neither confirmed nor denied whether judges are able to exercise discretion to deny interest to beneficiaries of legacies, it found that it had been inappropriate for the application judge to do so in this case.
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If someone asks you to act as their Estate Trustee, or you learn to your surprise that you are named as an Estate Trustee after the person’s passing, there are a number of things that you should consider before accepting such a responsibility. Given the significant duties involved in such a role, it is important to be aware of the potential for personal liability.
An Estate Trustee’s Legal Duties
An Estate Trustee is a fiduciary and, as such, s/he owes a duty to exercise the care, diligence and skill that a person of ordinary prudence would exercise in dealing with the property of the Deceased.
Furthermore, an Estate Trustee owes a “duty of loyalty”, which has been described as the duty to act honestly and in good faith, and to use powers solely for the purposes for which they were granted (see Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed.). The “duty of loyalty” means that:
(a) An Estate Trustee must exercise powers and perform duties solely in the interest of the Estate.
(b) An Estate Trustee must not knowingly permit a situation to arise where:
(i) The Estate Trustee’s personal interest conflicts in any way with the exercise of powers or performance of duties; or
(ii) The Estate Trustee derives a personal benefit or a benefit to a third party, except as far as the law or the Will expressly permit.
Additional legal duties of an Estate Trustee are:
- The “prudent investor” rule which ensures that the Estate Trustee properly invests the Estate assets;
- The “even-hand” rule which ensures that the Estate Trustee acts impartially among all the beneficiaries;
- The “duty of transparency” which ensures that the Estate Trustee provides information to the beneficiaries; and
- The “duty to account”.
Some Practical Considerations
From a practical stand point it is also prudent to consider the overall complexity of the Estate and what type and quantity of work will be expected from you in your role as an Estate Trustee. Certainly, some Estate Trustees can be compensated for the work they perform; however, there is a limit to what one may claim and it largely depends on the circumstances.
There are certain tasks that an Estate Trustee may want to delegate to third parties; however, there is a limit as to what type of work may be delegated and what is considered reasonable.
You should consider whether the Will properly sets out the powers as well as the responsibilities of the Estate Trustee which will aid you in the future, should any of your decisions be challenged. Another useful consideration is whether there are any third parties, or specifically, any beneficiaries who may be difficult to deal with in your role as an Estate Trustee, or may want to challenge your authority in the future.
In making the decision whether or not to act as an Estate Trustee, it may also be a good idea to speak to a lawyer regarding whether taking on this role may present an unacceptable legal risk for you in the future.
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