A testator appointed you as Estate Trustee of an Estate and a beneficiary filed a Notice of Objection to your appointment. What to do?
Typically, a Notice of Objection to an appointment of an Estate Trustee means that their authority is challenged such that before the administration of the Estate can be addressed, the Notice of Objection must be resolved, first and foremost.
Whereas in the case of a Notice of Objection, the party having filed it, is likely to commence a court proceeding to substantiate his or her claims, that is not always the case. As such, there are a couple of things that an Estate Trustee can do to force the Objector to move forward, in order to ultimately address the resolution of the objection.
- File a Notice to Objector
In accordance with Rule 75.03(4), an Estate Trustee can serve a Notice to Objector and file it with proof of service with the Court.
If the Objector does not serve and file a Notice of Appearance within 20 days of being served with a Notice to Objector, the Estate Trustee’s Application for a Certificate of Appointment is to proceed as if the Notice of Objection had not been filed.
If a Notice of Appearance is served on the Estate Trustee, they have 30 days to bring a motion for directions before the Court and if they do not do so, the Objector may seek directions, as well.
Essentially, the effect of a Notice to Objector is forcing the Objector to commence a claim or else abandon his or her objections.
- Commence an Application or Motion to propound the testator’s Will
Another option that exists for an Estate Trustee is simply skipping the steps that would follow the service of a Notice to Objector and seeking the directions of the Court, in accordance with Rules 14.05 and 75.06 of the Rules of Civil Procedure.
In this case, the Estate Trustee becomes the party commencing a court proceeding such that the costs associated with such a step ought to be considered, before proceeding. It is important to note, however, that proceeding with the first option will not necessarily save on legal costs to be incurred, if the Objector ultimately proceeds with a claim.
The option that is selected by an Estate Trustee will depend on the circumstances of each individual case such that it is important to consult with a lawyer as to which option is best.
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In the recent case of Re Estate of Assunta Marino, 2010 ONSC 5237 (CanLII), the court granted an order to set aside an unopposed judgment passing accounts obtained by the estate trustee, on a Rule 38.11(1) motion brought by a beneficiary who had failed to file a notice of objection to accounts within the prescribed time. Justice Brown, presiding, applied the test in HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., 2008 ONCA 894 (CanLII), 2008 ONCA 894, which has three elements:
(i) whether the motion was brought without delay after the defendant (i.e., the moving beneficiary) learned of the default judgment;
(ii) whether the circumstances giving rise to the default were adequately explained; and
(iii) whether the defendant has an arguable defence on the merits – in order to determine whether the interests of justice favour granting the order. To that end, the court should consider the potential prejudice to the moving party if the motion were dismissed, the potential prejudice to the respondent if the motion were allowed, and the effect of any order on the overall integrity of the administration of justice.
The first element was met: time elapsing between the beneficiary learning of the default judgment and the motion was the result of attempted negotiations rather than inactivity, so it was not "delay". The second element was met by the beneficiary’s lawyer filing an affidavit explaining the default. With respect to the the third element, the beneficiary had raised valid arguable objections, which is analogous to a defence. The prejudice resulting from a delay in the estate’s distribution combined with the fact that the estate trustee had properly engaged the court’s legal process to account for his administration was not enough to save the unopposed judgment. Justice Brown wrote that while the case was close, "significant weight should be given to the need to ensure that fiduciaries fully account for their management of property", and so the order setting aside the default judgment was granted. Mediation was ordered before further steps in the passing of accounts, and the beneficiary was ordered to pay all of the mediator’s costs.
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Chris M. Graham – Click here for more information on Chris Graham.