In Larmon v Munro,[1] the Beneficiaries of the deceased’s Estate commenced an application to remove the acting Estate Trustee, which the deceased explicitly named in his Will, for alleged mismanagement of the administration of the Estate. In dismissing the application, the Superior Court of Justice reminded us that, while courts may scrutinize the actions or inactions of an estate trustee, they will not interfere lightly with a deceased’s intentions and will only remove a named estate trustee in the clearest of cases.

Facts and issue

The deceased passed away on December 23, 2018. At the time, he had a common law spouse, Ms. Cole, and two sons, Steven, and Darren Munro. His sons (the respondents) were Beneficiaries under their dad’s Last Will and Testament dated July 31, 2013 (the “Will”). At the time of his death, the deceased had assets totaling $208, 098.18, the main asset being a house located in Hanmer, Ontario (the “Hanmer House”).

On July 13, 2019, a Certificate of Appointment of Estate Trustee with a Will was issued by the Court appointing the moving party, Ms. Larmon, the deceased’s sister, as Estate Trustee. In this role, she would be responsible for administering the deceased’s Estate, according to his wishes in the Will, to maximize the Beneficiaries’ interests.

A dispute arose between the Estate Trustee and Beneficiaries over the management of the Estate. The Estate Trustee sought the Court’s assistance in completing the administration of the Estate claiming that the Beneficiaries had been uncooperative. In response, the Beneficiaries claimed the Estate Trustee had mismanaged the administration of the estate and called for the Court to remove her.

The Court was asked to consider whether, in this case, it was appropriate to order for the removal of a named personal representative.

Analysis

Section 37 of the Trustee Act[2] governs the removal of personal representatives, including estate trustees. It reads as follows:

Removal of personal representatives

37 (1) The Superior Court of Justice may remove a personal representative upon any ground upon which the court may remove any other trustee, and may appoint some other proper person or persons to act in the place of the executor or administrator so removed. R.S.O. 1990, c. T.23, s. 37 (1); 2000, c. 26, Sched. A, s. 15 (2).

Removing an estate trustee named in a testamentary document is a heavy-handed claim for relief which courts are reluctant to grant. In essence, it is asking a court to ignore or circumvent the express dying wishes of a testator[3] regarding who they want to administer and manage their estate, to favor another trustee which the deceased did not intend to benefit. Courts will not interfere with clear testamentary instruction without good reason or the “clearest of evidence”.[4] Consequently, the test for this extreme measure is one of high threshold.

The Beneficiaries in this case argued they had met that threshold. In sum, they alleged that the Estate Trustee mismanaged the estate, failed to file tax returns, and partook in improper accounting, and failed to disclose adequate information, all of which significantly delayed the distribution of the Estate. Particularly, they alleged:

1. Unreasonable fees: The Estate Trustee incurred unreasonable and excessive legal fees managing the Estate – she should have been more vigilant in monitoring and contesting lawyer bills;
2. Failure to renew insurance: The Hanmer House insurance lapsed, and she did not renew it as was her alleged duty;
3. Lack of disclosure: She did not provide the Beneficiaries with information regarding the deceased’s Terminal Income Tax Return;
4. Improper distribution of estate assets: She distributed assets to Ms. Cole that should have gone to them;
5. Lack of accounting: She did not account for several missing tools and hunting equipment which had disappeared; and,
6. Errors: She has made many arithmetic errors regarding lawyer fees, estate taxes, and tax liabilities.

For all these reasons, the Beneficiaries claimed they had no confidence in the Estate Trustee and called for her removal.

The Estate Trustee did not agree with these allegations of wrongdoing. In a detailed affidavit, she adopted the following positions:

1. Unreasonable fees: The legal fees were justified as compared to what she was required to do to fulfil her duties as an Estate Trustee. Namely, the Estate was complex, she was required to defend its administration against the threat of litigation by Ms. Cole (the Beneficiaries’ mother), she was required to apply to the Court for a Certificate of Estate Trustee with a Will as well as file the Estate Information Return, and she had to retain new counsel when counsel retired;
2. Failure to renew insurance: She communicated to the Beneficiaries that the house insurance was in arrears and needed to be paid;
3. Lack of disclosure: She filed the appropriate Terminal Income Tax Return and received a Notice of Assessment from the CRA;
4. Improper distribution of estate assets: Ms. Cole advised her that the items in dispute (tools, hunting equipment) were already in her possession when the deceased moved in, that they were purchased jointly, or that they belonged to her son, Peter Cole. As such, these assets did not form part of the deceased’s Estate and the Estate Trustee was not in a place to distribute them to anyone else. The Estate Trustee also could not find much of the hunting equipment after making the appropriate inquiries, and she challenged the Beneficiaries’ claims to them; and,
5. Lack of accounting/errors: While she did admit to making some mathematical and tax-related errors, she corrected these errors and communicated the corrections to the Beneficiaries – there was no malfeasance on her part.

The Court agreed with the Estate Trustee. In the court’s view, the respondent Beneficiaries’ evidence was insufficient to meet the high threshold of removal. The Estate Trustee made appropriate inquiries and appropriately dealt with assets of the Estate. With respect to the Hanmer House, Steven resided in this home and refused to vacate. As such, the house was entirely within his control, was not endangered in any way by the Estate Trustee’s conduct and made him partly responsible for the failure to pay its insurance or debts. The Beneficiaries’ meddling and uncooperativeness caused part of the delay they complained about.

The evidence did not support the conclusion that removal was necessary. In fact, the Court found the Estate Trustee to be serious and diligent in her administration of the Estate. She even paid out of her own funds to keep the administration moving, despite the conflict present. The Court found this to be a “true testament of her commitment to fulfilling her brother’s wishes to administer his Estate”.[5]

Discussion

This case is a reminder that being an estate trustee is a serious engagement which comes with many responsibilities, some of which can bind the estate trustee with personal liability. Although mistakes will not always incur reprehension, especially those made with no ill intention, this role is not to be taken lightly. The role requires due diligence, good faith, and the upholding one’s fiduciary duty to those entitled to benefit under the testamentary document (including preserving the estate to maximize their interests, keeping them informed, and accounting to them as is their right to inquire). The courts can scrutinize an estate trustee’s actions or inactions in managing an estate and find them liable for loss to the Estate or beneficiaries.

Despite this, however, this case also reminds us that courts are reluctant to interfere with the last wishes of a testator, including who they choose to manage their estate once they pass. Removal of an estate trustee to whom a court of competent jurisdiction has issued probate is a heavy-handed measure and will require strong evidence before the court such as:

• Trustee misconduct;
• Trustee incapability or incompetence;
• Inability or unwillingness of trustee to carry out the terms of the trust;
• Trustee acting to the detriment of the Beneficiaries;
• Trustee being in prison or having criminal involvement;
• Trustee bankruptcy;
• Dishonesty in the administration of the estate; or,
• Conflict of interest more than mere animosity: either between the trustees, the trustee(s) and Beneficiaries, or between estates.[6]

Ultimately, the party seeking removal must establish that the estate trustee’s acts or omissions have endangered the trust property, or that there was a want of honesty, capacity, or fidelity.[7] Otherwise, absent the clearest of evidence, the court will be reluctant to interfere with a testator’s wishes.

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[1] 2021 ONSC 1921.

[2] RSO 1990, c T.23.

[3] Person who has made a will (male). Testatrix is the female equivalent.

[4] Larmon v Munro, at para 31 citing Chambers Estate v Chambers, 2013 ONCA 511 at para 95.

[5] Larmon v Munro, at para 37.

[6] See: Rose v Rose, (2006), 24 ETR (3d) 217 (Ont SCJ), at para 70, recently affirmed in Weidenfeld v Widenfeld Estate, 2016 ONSC 733, Collie v Eryomin, 2013 ONSC 3159. This list is non-exhaustive.

[7] Letterstedt v Borers (1884), (1883-84) LR 9 App Cas 371, recently affirmed in Graham v Benton, 2020 ONSC 6985.

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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.