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.
Enjoy your day,
Chris M. Graham – Click here for more information on Chris Graham.
We have blogged previously on section 35 of Ontario’s Trustee Act, which relieves a trustee who has committed a technical breach of trust but has otherwise acted honestly and reasonably. This provision may not be available to a trustee who, confronted with an ambiguous situation, fails to seek the advice and direction of the court, as is the trustee’s right under section 60(1) of the Trustee Act. Section 60(1) states:
60. (1) A trustee, guardian or personal representative may, without the institution of an action, apply to the Superior Court of Justice for the opinion, advice or direction of the court on any question respecting the management or administration of the trust property or the assets of a ward or a testator or intestate.
Justice Cullity describes the applicable principles in Merry Estate v. Plaxton, 2002 CanLII 32496 (ON S.C.) at paragraph 35:
" On the question of costs, I am satisfied that no criticism can properly be directed at Mr. Meredith for bringing this application. Section 60 of the Act entitles trustees to seek the opinion, advice and direction of the court with respect to the administration of a trust and, in cases where significant doubt exists as to the scope of their powers and responsibilities, they may not be protected under section 35 if they fail to do this. Although such applications must not be made frivolously – and not merely to relieve applicants from making decisions that are part of their responsibilities under the terms of the trust – they are entitled to have their costs paid out of the trust property if, in the opinion of the court, the application was properly brought. I believe this is such a case."
Merry Estate v. Plaxton also contains a discussion of a trustee’s right of indemnity with respect to costs properly incurred, and the relationship between this right of indemnity and litigation cost awards for trustees from trusts. In that application for the court’s advice, the trustee Mr. Meredith was awarded full indemnity for his legal expenses in bringing the application.
Have a great day,
Chris M. Graham – Click here for more information on Chris Graham.
Listen to The Investment Accounts.
This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.
Listen to Accounting Under the Powers of Attorney
This week on Hull on Estates, Diane and Paul discuss accounting under the powers or attorney, the duty to account after the guarantor has passed away and the De Zorzi Estate v. Read case (2008, O.J. No. 944).
In Re Cogan, the Ontario Superior Court of Justice addressed the issue of contingency legal fees. The lawsuit involved the claim of a minor suffering from cerebral palsy, with the plaintiffs alleging that the obstetrician and nurses attending at the child’s birth were negligent.
The case settled for the sum of $12,543,750. The lawyers for the plaintiffs wanted to be paid $4,174,928.45, or roughly 33.33%, on the basis of a contingency fee agreement between them and the minor’s litigation guardian. A contingency fee agreement is an arrangement whereby a lawyer agrees to be paid a percentage of recovery in the lawsuit. Where there is no recovery, the lawyer works for free. Where there is a substantial recovery, the lawyer benefits accordingly.
The Court was asked to rule on whether the contingency fee agreement should be allowed. In its lengthy weighing of both sides, the Court found, among other things, that: The agreement was obtained in a fair way; 2. The agreement was reasonable; 3. The risk to the lawyer of not getting paid and not getting reimbursed for disbursements was high; 4. The case was complex and required significant time commitment and delayed payment; and 5. The result achieved by the lawyer was exceptional.
The Court also commented on the importance of access to justice for vulnerable plaintiffs like the minor and the role contingency agreements can play in fostering that goal.
Therefore, the Court upheld the agreement.
Thanks for reading.
This week on Hull on Estates, Rick and David discuss procedure under the Substitution Decisions Act and review executor and attorney obligations as well as specific procedures permitting someone to compel an accounting.
listen to The Ontario Civil Justice Reform Project
This week on Hull on Estates, Chris and Justin discuss the Ontario Civil Justice Reform Project and the steps being taken by Mr. Justice Colter Osbourne and Attorney General Michael Bryant.
Listen to The Core Issues Concerning Estate Taxes