Successful Application for Removal of Estate Trustee in Kasanda v. Sartarelli
In the recent decision of Kasanda v. Sartarelli, the courts reinstate that an application for the removal of an estate co-trustee will likely be successful if its purpose is to “protect the assets of the trust and interests of the beneficiaries”.[1] This decision underscores that courts will not permit an estate trustee to override its responsibilities due to challenges with other estate trustees, particularly, when such tension leads the estate to accrue fines and debts.
This case involved the estate of Alfonso, who was the father of one daughter and one son. Both children were appointed as estate trustees and beneficiaries. Alfonso’s lawyer, Murray, was also named as an estate trustee. Shortly after the death of Alfonso in 2018, the distribution of the assets in his estate in the first year ran without difficulty. Alfonso and his son had shared money in a joint account for the last 30 years of Alfonso’s life, which was transferred to his son as per his will. His daughter directed a rental property in Ottawa. His will stated that his “trustees were to pay all debts, including income taxes, and to sell any assets for this purpose”.[2] Soon after, a statement of appointment was issued, since neither child had any concerns with the statement of assets. In 2019, a tax return was filed, and all estate trustees agreed that the estate owed a total of $7,224 which was to be paid out of the Trust Account.[3]
Soon after, issues started to arise since the daughter was unhappy with the allocation of the estate’s liabilities. Murray calculated that the daughter was apportioned 89.76% of the estate, while the son was given 10.25%. On this basis, the daughter was due to reimburse the estate its expenses for $26,000, while the son owed $2,971. This caused a serious rift between the estate trustees, and after a series of events later, the daughter prevented the estate from paying this CRA debt for 4 years. In 2022, the CRA slapped the estate with an interest charge of $4,258 to which the estate trustees could be held personally liable. The daughter launched an application to have both her brother and Murray removed as estate trustees for mismanagement of the estate’s financial affairs, thus, making the tax implications solely their responsibility. In her application, the daughter asserts that her brother did not act in a fiduciary to the estate by favoring his own interests. This argument was quashed by Justice Sally Gomery.
Soon after, the son brought an application to have his sister removed as estate trustee, which was granted by the court.
In Johnston v. Lanka[4], the principles on an application to remove an estate trustee were summarized:
(1) the court will not lightly interfere with the testator’s choice of estate trustee;
(2) clear evidence is required that removal of the trustee is necessary;
(3) the court’s main consideration is the welfare of the beneficiaries; and
(4) the estate trustee’s acts, or omissions must be of such a nature as to endanger the administration of the trust.
The applicant’s sister was not able to act in the best interest of the estate. She was not able to prove a legitimate reason to refuse CRA payments by the estate, thus causing unnecessary interest, potential personal liability for the estate trustees and an increase in legal costs for all parties.[5]
Justice Sally Gomery asserted that, “dissension and animosity amongst co-trustees has been held to justify removal, even without any finding of misconduct”.[6] Moreover, that “past misconduct may justify removal if it is likely to continue in the future. The court must assess “whether the trust estate is likely to be administered properly in accordance with the fiduciary duties of the trustee and with due regard to the interests and welfare of the beneficiaries”.[7]
This case reinstates that misbehavior between estate trustees that causes the trustee to act against the best interests of the beneficiaries of an estate can amount to grounds for their removal.
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[1] Kasanda v. Sartarelli, 2023 ONSC 4400 at para 28 (“Sartarelli”).
[2] Ibid at para 13.
[3] Ibid at para 17.
[4] Johnston v. Lanka, 2010 ONSC 4124, at para 15.
[5] Sartarelli at Para 69.
[6] Kaptyn Estate (Re), 2009 ONSC 19933 at para 9.
[7] St Joseph’s Health Centre v. Dzwiekowski, 2007 ONSC 51347 at para 8.
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Written by: Gabriella Banhara
Posted on: September 29, 2023
Categories: Commentary, WEL Newsletter
In the recent decision of Kasanda v. Sartarelli, the courts reinstate that an application for the removal of an estate co-trustee will likely be successful if its purpose is to “protect the assets of the trust and interests of the beneficiaries”.[1] This decision underscores that courts will not permit an estate trustee to override its responsibilities due to challenges with other estate trustees, particularly, when such tension leads the estate to accrue fines and debts.
This case involved the estate of Alfonso, who was the father of one daughter and one son. Both children were appointed as estate trustees and beneficiaries. Alfonso’s lawyer, Murray, was also named as an estate trustee. Shortly after the death of Alfonso in 2018, the distribution of the assets in his estate in the first year ran without difficulty. Alfonso and his son had shared money in a joint account for the last 30 years of Alfonso’s life, which was transferred to his son as per his will. His daughter directed a rental property in Ottawa. His will stated that his “trustees were to pay all debts, including income taxes, and to sell any assets for this purpose”.[2] Soon after, a statement of appointment was issued, since neither child had any concerns with the statement of assets. In 2019, a tax return was filed, and all estate trustees agreed that the estate owed a total of $7,224 which was to be paid out of the Trust Account.[3]
Soon after, issues started to arise since the daughter was unhappy with the allocation of the estate’s liabilities. Murray calculated that the daughter was apportioned 89.76% of the estate, while the son was given 10.25%. On this basis, the daughter was due to reimburse the estate its expenses for $26,000, while the son owed $2,971. This caused a serious rift between the estate trustees, and after a series of events later, the daughter prevented the estate from paying this CRA debt for 4 years. In 2022, the CRA slapped the estate with an interest charge of $4,258 to which the estate trustees could be held personally liable. The daughter launched an application to have both her brother and Murray removed as estate trustees for mismanagement of the estate’s financial affairs, thus, making the tax implications solely their responsibility. In her application, the daughter asserts that her brother did not act in a fiduciary to the estate by favoring his own interests. This argument was quashed by Justice Sally Gomery.
Soon after, the son brought an application to have his sister removed as estate trustee, which was granted by the court.
In Johnston v. Lanka[4], the principles on an application to remove an estate trustee were summarized:
(1) the court will not lightly interfere with the testator’s choice of estate trustee;
(2) clear evidence is required that removal of the trustee is necessary;
(3) the court’s main consideration is the welfare of the beneficiaries; and
(4) the estate trustee’s acts, or omissions must be of such a nature as to endanger the administration of the trust.
The applicant’s sister was not able to act in the best interest of the estate. She was not able to prove a legitimate reason to refuse CRA payments by the estate, thus causing unnecessary interest, potential personal liability for the estate trustees and an increase in legal costs for all parties.[5]
Justice Sally Gomery asserted that, “dissension and animosity amongst co-trustees has been held to justify removal, even without any finding of misconduct”.[6] Moreover, that “past misconduct may justify removal if it is likely to continue in the future. The court must assess “whether the trust estate is likely to be administered properly in accordance with the fiduciary duties of the trustee and with due regard to the interests and welfare of the beneficiaries”.[7]
This case reinstates that misbehavior between estate trustees that causes the trustee to act against the best interests of the beneficiaries of an estate can amount to grounds for their removal.
—
[1] Kasanda v. Sartarelli, 2023 ONSC 4400 at para 28 (“Sartarelli”).
[2] Ibid at para 13.
[3] Ibid at para 17.
[4] Johnston v. Lanka, 2010 ONSC 4124, at para 15.
[5] Sartarelli at Para 69.
[6] Kaptyn Estate (Re), 2009 ONSC 19933 at para 9.
[7] St Joseph’s Health Centre v. Dzwiekowski, 2007 ONSC 51347 at para 8.
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