Muscat V. Muscat Estate, 2025 Onca 518 (Canlii)
In the Court of Appeal for Ontario’s (the “Court”) recent decision, Muscat v. Muscat Estate, the Court dismissed the appeal brought by the Appellants Ilinka Armstrong (“Ms. Armstrong”) and Dean Tully (“Mr. Tully”, collectively, the “Appellants”) in respect of the Honourable Madam Justice ten Cate’s (the “Application Judge”) Judgement and related costs Order wherein they were removed as Estate Trustees of Dan Muscat’s (the “Deceased”) Estate (the “Estate”), and were ordered to pay the Respondent, Alexander Muscat’s (the “Respondent”) costs personally, on a partial indemnity basis in the amount of $56,693.01.[1]
Background
The Respondent (the son of the Deceased), was 16 years old at the time of his father’s passing, and the sole residual beneficiary of the Estate. [2]
The terms of the Deceased’s Last Will and Testament appointed the Appellants as Estate Trustees and required that the Respondent’s share of the Estate be held in trust until he reached the age of 25.[3]
The Estate consisted primarily of a jewelry business, the building in which it was located (collectively, the “Business”), and a property located in Haliburton, Ontario which was not at issue in the underlying litigation.[4]
The Appellants had sought and obtained valuations of the Business which was valued at $515,000. In or around February of 2023, Ms. Armstrong’s romantic partner, Steve Malizia (“Mr. Malizia”), offered to purchase the Business for $400,000.[5] Concerns were raised by the Respondent’s legal counsel regarding Ms. Armstrong’s apparent conflict of interest, and they requested that she resign as Estate Trustee.[6]
Through counsel for the Estate, Ms. Armstrong refused to do so, citing that whether she and Mr. Malizia were in a relationship was irrelevant. The Respondent was given 10-days to accept Mr. Malizia’s “final offer” to purchase the Business, and counsel to the Estate recommended that he accept the offer.[7]
While the Respondent, through his counsel, requested additional time to consider the above, this request was denied. The Respondent then commenced an application seeking the removal of the Appellants as Estate Trustees.[8]
Notably, when the Respondent sought and obtained his own valuations of the Business, it was estimated that it could be worth as much as $911,550.[9]
The Application Judge’s Findings
Citing that the test to remove Estate Trustees is high, and that the courts do not lightly interfere with a testator’s choice in this regard,[10] the Application Judge found that it was necessary to remove the Appellants as Estate Trustees to ensure the proper management of the trust, and to protect the Respondent’s interests.[11]
In finding that the Appellants had breached their fiduciary duty to the Estate and the Respondent, the Application Judge noted the following:
- Armstrong was in a conflict of interest because she “stood to benefit from the sale of the Business to her romantic partner;”
- Neither she, nor Mr. Tully disclosed or acknowledged the conflict of interest; and
- The Appellants “failed to undertake any due diligence on Mr. Malizia’s offer,” or make any “effort to ascertain the then fair market value of the Business.”[12]
The Court’s Reasons for Decision
In dismissing the appeal, the Court determined that the Application Judge had correctly found that Ms. Armstrong was in a conflict of interest, and had incorrectly maintained
that any romantic relationship she might have with Mr. Malizia was irrelevant to her position as Estate trustee. Ms. Armstrong’s claim that she was not in a conflict because the respondent was aware of her relationship with Mr. Malizia is unfounded. Regardless of the respondent’s knowledge of the relationship between Ms. Armstrong and Mr. Malizia, the trustees never disclosed the existence of the relationship to the respondent. A fiduciary’s breach of duty cannot be excused by the beneficiary becoming aware of the breach from other sources and as occurred here, requesting the trustee’s resignation as a result.[13]
The Court rejected the Appellants’ claim that they had no duty to
assess the reasonableness of Mr. Malizia’s offer and were entitled to merely convey it to the respondent for his approval. A trustee’s duty of loyalty requires that they manage trust assets with honesty and integrity and in the best interests of the beneficiaries. A trustee cannot abdicate that duty and responsibility by purporting to require the beneficiary to approve an offer that places the trustee’s interests ahead of those of the beneficiary. It is also telling that the appellants did not merely passively convey the offer to the respondent for his consideration, but recommended acceptance as the “best available option for purposes of the greatest return for the Estate”, knowing there had been significantly higher valuations, and that time did not permit the respondent to obtain other valuations.[14]
The appellants had no basis for making the claim that this was “the best available option”, since they had failed to undertake any due diligence on Mr. Malizia’s offer, much less investigate any alternative options available to the Estate. They were simply doing so to attempt to insulate themselves from future consequences.[15]
In denying the Appellants’ application for leave to appeal costs, the Court noted that
[a]n estate trustee may be ordered to pay costs personally where they have acted unreasonably or in substance for their own benefit, rather than for the benefit of the estate: Westover Estate v. Jolicouer, 2024 ONCA 81, at para. 14. The application was made necessary because of the appellants’ steadfast denial of any conflict, and their unjustified refusal to resign in the face of a clear and unequivocal request that they do so. The application judge’s costs order was thus consistent with the modern approach to fixing costs in estate litigation, one that seeks to ensure estates are not depleted through the costs of unnecessary litigation and the assets of an estate are not treated “as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation”: Salter v. Salter Estate (2009), 2009 CanLII 28403 (ON SC), 50 E.T.R. (3d) 227 (Ont. S.C.), at para. 6; Johnson v. Johnson, 2022 ONCA 682, 81 E.T.R. (4th) 7, at para. 21, leave to appeal refused, [2022] S.C.C.A. No. 444.[16]
The Appellants were ordered to pay the Respondent’s costs of the appeal on a partial indemnity basis in the all-inclusive amount of $22,703.44.[17]
—
[1] Muscat v. Muscat Estate, 2025 ONCA 518 (CanLII) [“Muscat v. Muscat Estate”], at paras. 1, 11-12.
[2] Ibid., at para. 2.
[3] Ibid., at para. 3.
[4] Ibid., at para. 2.
[5] Ibid., at para. 4.
[6] Ibid., at para. 5.
[7] Ibid., at paras. 6-7
[8] Ibid., at para. 8.
[9] Ibid.
[10] Chambers Estate v. Chambers, 2013 ONCA 511, 367 D.L.R. (4th) 151, at paras. 95-96
[11] Muscat v. Muscat Estate, supra., at para. 9.
[12] Ibid., at para. 10.
[13] Ibid., at para. 15, and para. 20.
[14] Ibid., at para. 16.
[15] Ibid., at para. 17.
[16] Ibid., at paras. 19–20
[17] Ibid., at para. 20.
Written by: Joanna Weiss
Posted on: August 25, 2025
Categories: Commentary, WEL Newsletter
Muscat V. Muscat Estate, 2025 Onca 518 (Canlii)
In the Court of Appeal for Ontario’s (the “Court”) recent decision, Muscat v. Muscat Estate, the Court dismissed the appeal brought by the Appellants Ilinka Armstrong (“Ms. Armstrong”) and Dean Tully (“Mr. Tully”, collectively, the “Appellants”) in respect of the Honourable Madam Justice ten Cate’s (the “Application Judge”) Judgement and related costs Order wherein they were removed as Estate Trustees of Dan Muscat’s (the “Deceased”) Estate (the “Estate”), and were ordered to pay the Respondent, Alexander Muscat’s (the “Respondent”) costs personally, on a partial indemnity basis in the amount of $56,693.01.[1]
Background
The Respondent (the son of the Deceased), was 16 years old at the time of his father’s passing, and the sole residual beneficiary of the Estate. [2]
The terms of the Deceased’s Last Will and Testament appointed the Appellants as Estate Trustees and required that the Respondent’s share of the Estate be held in trust until he reached the age of 25.[3]
The Estate consisted primarily of a jewelry business, the building in which it was located (collectively, the “Business”), and a property located in Haliburton, Ontario which was not at issue in the underlying litigation.[4]
The Appellants had sought and obtained valuations of the Business which was valued at $515,000. In or around February of 2023, Ms. Armstrong’s romantic partner, Steve Malizia (“Mr. Malizia”), offered to purchase the Business for $400,000.[5] Concerns were raised by the Respondent’s legal counsel regarding Ms. Armstrong’s apparent conflict of interest, and they requested that she resign as Estate Trustee.[6]
Through counsel for the Estate, Ms. Armstrong refused to do so, citing that whether she and Mr. Malizia were in a relationship was irrelevant. The Respondent was given 10-days to accept Mr. Malizia’s “final offer” to purchase the Business, and counsel to the Estate recommended that he accept the offer.[7]
While the Respondent, through his counsel, requested additional time to consider the above, this request was denied. The Respondent then commenced an application seeking the removal of the Appellants as Estate Trustees.[8]
Notably, when the Respondent sought and obtained his own valuations of the Business, it was estimated that it could be worth as much as $911,550.[9]
The Application Judge’s Findings
Citing that the test to remove Estate Trustees is high, and that the courts do not lightly interfere with a testator’s choice in this regard,[10] the Application Judge found that it was necessary to remove the Appellants as Estate Trustees to ensure the proper management of the trust, and to protect the Respondent’s interests.[11]
In finding that the Appellants had breached their fiduciary duty to the Estate and the Respondent, the Application Judge noted the following:
The Court’s Reasons for Decision
In dismissing the appeal, the Court determined that the Application Judge had correctly found that Ms. Armstrong was in a conflict of interest, and had incorrectly maintained
that any romantic relationship she might have with Mr. Malizia was irrelevant to her position as Estate trustee. Ms. Armstrong’s claim that she was not in a conflict because the respondent was aware of her relationship with Mr. Malizia is unfounded. Regardless of the respondent’s knowledge of the relationship between Ms. Armstrong and Mr. Malizia, the trustees never disclosed the existence of the relationship to the respondent. A fiduciary’s breach of duty cannot be excused by the beneficiary becoming aware of the breach from other sources and as occurred here, requesting the trustee’s resignation as a result.[13]
The Court rejected the Appellants’ claim that they had no duty to
assess the reasonableness of Mr. Malizia’s offer and were entitled to merely convey it to the respondent for his approval. A trustee’s duty of loyalty requires that they manage trust assets with honesty and integrity and in the best interests of the beneficiaries. A trustee cannot abdicate that duty and responsibility by purporting to require the beneficiary to approve an offer that places the trustee’s interests ahead of those of the beneficiary. It is also telling that the appellants did not merely passively convey the offer to the respondent for his consideration, but recommended acceptance as the “best available option for purposes of the greatest return for the Estate”, knowing there had been significantly higher valuations, and that time did not permit the respondent to obtain other valuations.[14]
The appellants had no basis for making the claim that this was “the best available option”, since they had failed to undertake any due diligence on Mr. Malizia’s offer, much less investigate any alternative options available to the Estate. They were simply doing so to attempt to insulate themselves from future consequences.[15]
In denying the Appellants’ application for leave to appeal costs, the Court noted that
[a]n estate trustee may be ordered to pay costs personally where they have acted unreasonably or in substance for their own benefit, rather than for the benefit of the estate: Westover Estate v. Jolicouer, 2024 ONCA 81, at para. 14. The application was made necessary because of the appellants’ steadfast denial of any conflict, and their unjustified refusal to resign in the face of a clear and unequivocal request that they do so. The application judge’s costs order was thus consistent with the modern approach to fixing costs in estate litigation, one that seeks to ensure estates are not depleted through the costs of unnecessary litigation and the assets of an estate are not treated “as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation”: Salter v. Salter Estate (2009), 2009 CanLII 28403 (ON SC), 50 E.T.R. (3d) 227 (Ont. S.C.), at para. 6; Johnson v. Johnson, 2022 ONCA 682, 81 E.T.R. (4th) 7, at para. 21, leave to appeal refused, [2022] S.C.C.A. No. 444.[16]
The Appellants were ordered to pay the Respondent’s costs of the appeal on a partial indemnity basis in the all-inclusive amount of $22,703.44.[17]
—
[1] Muscat v. Muscat Estate, 2025 ONCA 518 (CanLII) [“Muscat v. Muscat Estate”], at paras. 1, 11-12.
[2] Ibid., at para. 2.
[3] Ibid., at para. 3.
[4] Ibid., at para. 2.
[5] Ibid., at para. 4.
[6] Ibid., at para. 5.
[7] Ibid., at paras. 6-7
[8] Ibid., at para. 8.
[9] Ibid.
[10] Chambers Estate v. Chambers, 2013 ONCA 511, 367 D.L.R. (4th) 151, at paras. 95-96
[11] Muscat v. Muscat Estate, supra., at para. 9.
[12] Ibid., at para. 10.
[13] Ibid., at para. 15, and para. 20.
[14] Ibid., at para. 16.
[15] Ibid., at para. 17.
[16] Ibid., at paras. 19–20
[17] Ibid., at para. 20.
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