There are a variety of reasons for the removal and replacement of a trustee, some voluntary on the part of the departing trustee, others involuntary. A trustee might decide to retire or resign from his or her position. On the other hand, a trustee may need to be changed as a result of, amongst other reasons, the trustee’s death, incapacity, bankruptcy, the conduct of the trustee or the relationship of the trustee and the beneficiaries of the trust. Depending on the circumstances, the removal and replacement of the trustee may be done by way of deed or by way of court order.
In this episode, Craig Vander Zee and Paul Trudelle discuss various issues relating to the removal of trustees, including the considerations when negotiating the removal of trustees and their replacement. They discuss Craig’s recent presentation at an Ontario Bar Association continuing legal education program.
Unfortunately, the following quote applies to many of the cases that we deal with on a daily basis:
“To say that brother and sister do not get along in this case is an understatement. There is plenty of mistrust, suspicion and bitterness to go around. The applicant blames her brother for high-handed and unilateral conduct. He claims he has acted improperly. On the other hand, [brother] blames his sister for being non-communicative and hard to get along with. He was compelled to take the steps that he did because his sister which not deal with him.”
The quote is from Hill v. McLoughlin, 2007 CanLII 1334 (Ont. S.C.). There, brother and sister were co-estate trustees and residual beneficiaries of their mother’s estate. As a result of the above-noted mistrust, sister brought an application to have brother removed as an estate trustee.
The court found that while there was friction and hostility between brother and sister which hindered the administration of the estate, it was not satisfied that brother committed a breach of trust as alleged, or was in a conflict of interest.
The court stated that where the deceased has expressly appointed trustees, a court should be loath to interfere with the testator’s expressed intention except on the clearest of evidence that there was no other course to follow. The expressed wishes of the testator should be respected and not interfered with lightly. It is only where a court determines that the welfare of the beneficiaries requires removal and replacement of trustees that the court should undertake such action. It is not any mistake or neglect of duty on the part of the trustees which would lead to their removal. It must be shown that the non-removal of the trustee will likely prevent the trust from being properly executed.
While the court did not order removal of the brother, it did not condone his actions. The court required that the brother undertake certain steps, such as provide specific information to the sister.
On the issue of costs, judge ordered that each party should bear their own costs.
It is often hard for siblings or others to get along and cooperate in the administration of an estate. Further, actions taken by trustees, out of spite or otherwise, can serve to exacerbate the mistrust that already exists. Knowing that the courts will not automatically step in and remove an estate trustee in the circumstances should encourage the parties to an estate to act reasonably and simply get the job done.