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When Trustees Wear Other Hats: Removal in a Conflict of Interest

Durand v Durand et al, 2020 MBQB 70 (CanLII): http://canlii.ca/t/j6x4w

In Ontario, s. 37 of the Trustee Act[1] allows a court to remove an estate trustee “upon any ground upon which the court may remove any other trustee,” and to replace them with another person. A court may exercise this power if it finds that the removal is “clearly necessary to ensure the proper management of the trust,”[2] which can mean, among other things, that the trustee is endangering the assets of the trust, is dishonest, or is incapable of acting.

S. 9 of Manitoba’s Trustee Act[3] also contains a provision for the removal and replacement of a trustee. The Manitoba statute, more explicitly lists the situations in which this provision can be applied, some of which include:

    • the case of a personal representative desiring to be relieved from the duties of his office, or guilty of any misconduct in his office, or who refuses, or is unfit to act therein, or incapable of acting therein, or who remains out of the province for more than 12 months.

Durand v Durand et al,[4] is a recent Manitoba decision in which a co-estate trustee was removed and replaced due to a conflict of interest.


The trustee in question (“Romeo”) was one of six children of Maurice Durand (the “Deceased”). His sister (“Leona”) was his co-trustee, and one of his brothers (“Bertrand”) was an alternate. Romeo was also the sole director and officer of a business that had belonged to the Deceased, (“Durand Farms”), and was its only shareholder apart from the estate.

While the precise meaning of certain provisions in the Deceased’s will is still being litigated, it is clear that Durand Farms is “the major asset of the estate,” and that the Deceased’s widow (“Suzanne”) is intended to be the beneficiary of a trust that involves the Deceased’s corporate assets. At the time of the hearing in this application, Durand Farms owed a debt of approximately $460,000 to the estate.

Under Romeo’s management, Durand Farms made minimal effort to pay its debt to the estate. Suzanne argued that Romeo’s duty as an estate trustee to maximize the value of the estate conflicted with his obligations to Durand Farms, and that he was favouring the interests of Durand Farms in choosing to avoid paying the debt.

The Court’s Analysis

McCawley J., gave no weight to Romeo’s argument that the estate had never demanded repayment, noting that the estate trustees would have needed to make this demand jointly, and that Romeo did not communicate with Leona. It was further noted that Romeo had never applied for advice and directions, and while it was true that Leona had not done so either, “one can easily infer from the evidence before the court, that Romeo is a controlling force in the family, not just the business.”

McCawley J., also rejected Romeo’s argument that he was protecting Suzanne from her inability to “manage her affairs responsibly,” finding that repayment of the debt would not prevent such protection. It was also found that Romeo’s various settlement offers throughout the proceedings “raise[d] the question of whether he really was trying to protect his mother against herself or whether he wished to rewrite his father’s will as he thought it should have been.”

On Romeo’s argument that Suzanne could not explain how she was adversely affected by the non-payment, McCawley J., simply noted that a trustee’s lack of knowledge or sophistication does not diminish a trustee’s fiduciary duties.

McCawley J., acknowledged that a court might choose not to remove an estate trustee if a testator “contemplated or appreciated” that the trustee would be placed in a situation that could be considered a conflict of interest. Romeo tried to argue that the Deceased had contemplated Romeo’s full control of Durand Farms, but McCawley J., found no evidence to support this claim. Other family members had been involved in the business at times.

After finding that Romeo was in a conflict of interest and should be removed, McCawley J., turned her attention to the question of his replacement. Suzanne and the other beneficiaries of the estate agreed that Bertrand should become a co-trustee, but Romeo argued for a corporate trustee instead. McCawley J., appointed Bertrand, briefly explaining he was capable of acting, he had been named in the will as an alternate trustee, a corporate trustee would be costly, and that a family member would be the better actor to make decisions on Suzanne’s care.


It is clear that a trustee must always be mindful of their fiduciary duty to act in the best interests of the beneficiaries, and not to allow this duty to conflict with other obligations. Estate trustees in particular, must be aware of such hazards, since it is common for an estate trustee to also be a beneficiary of an estate, or for the administration of an estate to be complicated by a family business. An estate trustee should be alert to any possible conflict of interest, and be prepared to step aside if one emerges. To not do so could invite unnecessary litigation, and while a court might be reluctant to remove a testator’s chosen trustee, it will exercise this power if the trust cannot be properly administered otherwise.

[1] RSO 1990, c T.23

[2] Di Michele v Di Michele, 2014 ONCA 261 (CanLII)

[3] CCSM c T160

[4] 2020 MBQB 70 (CanLII)

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

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