The Ontario Court of Appeal recently released a decision that upheld the exercise of judicial discretion to decline a motion for the removal of an Estate Trustee.
In Heston-Cook v. Schneider, 20151 the deceased had two daughters. One acted as her Attorney for Property and Personal Care and then as her Estate Trustee after her death (the “Attorney/Estate Trustee”). The deceased’s will bequeathed her residence and its contents to the Attorney/Estate Trustee daughter and $100,000 to her other daughter (the “Plaintiff”) with the remainder of her Estate to be split evenly between the two.
When the mother died, her residence was transferred to the Attorney/Estate Trustee in accordance with the will. The Plaintiff did not object to the transfer and accepted her $100,000 share of the estate. However, subsequently, she claimed that while reviewing medical reports produced during the Attorney/Estate Trustee’s passing of accounts application, she discovered that the Attorney/Estate Trustee breached certain duties as Attorney for Personal Care for their mother.
The Plaintiff brought an action against the Attorney/Estate Trustee alleging that she put her own interests ahead of their mother’s and breached her duty by maintaining their mother in the house rather than having her cared for in a nursing home or other assisted living institution. The Plaintiff sought the disgorgement of the benefit obtained by the Attorney/Estate Trustee daughter or damages in the alternative.
The Attorney/Estate Trustee brought a Rule 21 motion to strike the Plaintiff’s Statement of Claim as disclosing no cause of action.
The first motion judge found that any breach of fiduciary duty owed to the deceased belonged to the Estate and that the Plaintiff had no standing to assert the claim. He adjourned the Rule 21 motion to allow the Plaintiff to bring a cross-motion to remove the Estate Trustee. That decision was not appealed.
The Plaintiff brought her cross-motion, arguing that she (or her friend) should be appointed to replace the Attorney/Estate Trustee. The second motion judge found that if the Plaintiff became the new Estate Trustee she would be just as conflicted as her sister and dismissed the motion. The Plaintiff appealed this decision.
On appeal the Plaintiff/Appellant argued that she should be appointed as Estate Trustee During Litigation for the purpose of pursuing the action against her sister for breach of fiduciary duties. She argued that the second motion judge erred in principle by not exercising his discretion to appoint her.
The Court of Appeal disagreed that the motion judge erred in principle:
It has been determined that the claim is that of the estate and whoever has carriage of the claim on behalf of the estate needs to be able to make an objective assessment of the overall interests of the estate and whether it is in the best interests of the estate to take this proceeding. Replacing the respondent with the appellant would not accomplish this. Furthermore, as the motion judge recognized, the appellant is also appealing the passing of accounts and would be in a position of conflict vis-à-vis the estate in that situation. While the motion judge considered whether an order could nonetheless be made, in the end he declined to do so. We see no error in principle in the motion judge’s refusal to exercise his discretion to appoint the appellant.2
The Plaintiff also appealed the costs order of the motion judge of $12,000.00 full indemnity costs against her, personally. The Court agreed that the motion judge erred in principle in ordering a full indemnity cost award. Instead, the Court concluded that a blended costs award (in which partial indemnity costs are awarded against the unsuccessful party and the remainder of the costs are to be paid by the estate, as per Sawdon Estate v. Watch Tower 2014 ONCA 101) would “strike the appropriate balance”.
Had the Plaintiff in the above case suggested an independent individual to act as Estate Trustee, or ETDL, the motion judge may have been more open to removing the current Attorney/Estate Trustee.
The importance of the neutrality of a proposed ETDL is especially important given the context of this proceeding. The Plaintiff in Heston-Cook was the Respondent in a passing of accounts proceeding commenced by the Attorney/Estate Trustee. That decision is also published: Aber Estate, 20133. In Aber, the only adjustment made by the Court to the accounts was the reduction of the reported value of the property from $890,000 to $820,000. The Court found that all other objections raised were without merit.
The Respondent has appealed the accounting decision, and she commenced her claim for breach of fiduciary duty after the release of the accounting decision.
With respect to the issue of who has standing to commence a claim for breach of fiduciary, the Court of Appeal’s comments in obiter should not be misconstrued as suggesting that only a Trustee has standing. The Court merely repeats the reasons of the second motion judge, which are not published, but appear to have included a recital of the reasons of the first motion judge on the issue of standing. It is important to note that the decision of the first motion judge was not appealed by the Plaintiff, so the issue of who has standing to commence a claim for breach of fiduciary duty was not before the Court.
A beneficiary of an estate or trust does indeed have a derivative right to seek remedies for losses flowing to the estate or trust. One can easily imagine why a trustee may not elect to pursue such a claim if the trustee was responsible for the alleged breach. The standing of beneficiaries to pursue such claims is therefore important, and we do not see that the Court’s reasons in Heston-Cook alter this longstanding principle.
1. Heston-Cook v. Schneider, 2015 ONCA 10 (CanLII)
2. Ibid., paras 10 and 11.
3. Aber Estate, 2013 ONSC 6363 (CanLII)