Removing Estate Trustees - Hull on Estates # 242
Listen to: Removing Estate Trustees
This week on Hull on Estates, David M. Smith and Nadia Harasymowycz discuss the removal of an Estate Trustee. Specifically, they refer to the case Johnston v. Lanka.
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Removing Estate Trustees - Hull on Estates- Episode #242
Posted on March 15, 2011 by Hull & Hull LLP
David Smith: Hello and welcome to Hull on Estates. You’re listening to episode #242 on Tuesday, March 15, 2011.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Nadia Harasymowycz: Hi and welcome to another episode of Hull on Estates. I’m Nadia Harasymowycz.
David Smith: And I’m David Smith.
Nadia Harasymowycz: If you want to be heard on Hull on Estates, you can participate by leaving us a comment. Email us at hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.
David Smith: Good afternoon, Nadia.
Nadia Harasymowycz: Good afternoon, David. How are you?
David Smith: I’m good. Nadia, we talked about podcasting today on an issue that comes up periodically in our practice of estate litigation, and there’s a recent case on point we’ll discuss. And, of course, that issue is, the whole idea of removing trustees when and where you can do it and under what circumstances.
Nadia Harasymowycz: Absolutely. And certainly an interesting topic and one that I think we’re probably seeing slightly more recently, as is probably evident by the fact that a case has recently been reported in the OR’s.
David Smith: Right, and certainly it’s been somewhat top of mind in the mainstream media. I know the Globe recently reported on the Penna Estate which got a lot of press and that was an issue where the actions of executors tend to be top of mind for people out there who don’t routinely run into estates and trusts issues but can see how the Courts view conduct of trustees that offends the principles of justice.
Nadia Harasymowycz: On that point, I suppose we should all make a general note that when you’re preparing your Wills and any sort of direction on this point, that you should really consider who it is that you’re picking and why it is that you’re picking them.
David Smith: That’s right. And from a planning perspective, the choice of an estate trustee…and of course we use that term interchangeably with executor in Ontario…is really pivotal and revolves around this whole idea of trust and what it means to be a trustee. Now certainly the general sense I’ve had with respect to removal of executors is that it’s not always as easy as one might think to remove an executor. And why would that be, do you think, Nadia?
Nadia Harasymowycz: Well from the case law and the general statutes, it seems that there’s a lot of deference to a testator and their decision-making as to who it is that they’ve chosen. We don’t necessarily always know why but it’s implied, based on the nature of the document, that the choice is one that the testator specifically turn their mind to.
David Smith: Right. And , you know, we know throughout the practice of estate litigation that there’s this recurring theme of respecting the intentions of the testator. And the Courts seem to give a fair bit of latitude to the actions of an executor. And I think from the outset, it’s important to point out especially when an executor is a layperson appointed by a testator as opposed to a professional trustee, that the Court’s primary concern is whether or not the property of the trust has been endangered by the management of the trustee. And as a sort of general comment, and we’ll talk about professional trustees in a minute, but as a general comment dealing with lay trustees, that is, non-professional persons appointed by a testator to look after their estate, it seems that the Courts look at the trust property and say was the trust property ever in peril? Was there risk that it was going to be dissipated or taken out of the jurisdiction or a fraud being committed? And if not, it sometimes can be an uphill battle trying to remove the executor.
Nadia Harasymowycz: Absolutely. You know, the beneficiaries are generally the ones bringing such an application and the Court’s gonna take a close look at whether or not the welfare of those beneficiaries has been compromised and whether or not the trustee has administered the estate in a manner that pays attention to all of the beneficiaries. It’s not necessarily just the one whose bringing the application that’s going to be considered.
David Smith: That’s right. And certainly, if an application is brought, we should say that it’s under Section 37 of the Trustee Act. If an application is brought for the removal of a trustee, all persons with a financial interest in the estate would be given notice of that application.
Nadia Harasymowycz: Absolutely, which I suppose leads us to a good segue into the case that was recently reported in the OR’s, which is the case of, or the matter of the Estate of Elmars Lanka. And the specific situation that happened here was that a testator made a Will which benefited his daughter predominantly of the estate, about 60%; 20% to an individual who may or may not be a common-law spouse but who was the mother of his daughter, and to his 4 siblings the remainder of the estate was divided equally. And 3 of his siblings were named as estate trustees and on an application by the mother to the estate for dependent’s support and a variety of directions being sought from the Court including the removal of the 3 trustees, these issues were specifically looked at. And if you’re interested and want to take a look at the case, it does break down the law on this point fairly succinctly and points to several other cases in the field that deal with these same issues. But the removal was at the heart of the decision. The application was eventually dismissed and the reasons provided by…
David Smith: I think it was Justice Pattillo right?
Nadia Harasymowycz: Yeah, His Honour, go in detail as to why the removal application was dismissed. And he looks at conflicts of interest that the estate trustees may have had, the potential hostility or the alleged hostility between the estate trustees and the beneficiaries…sorry the other beneficiaries because they were all beneficiaries of the estate…and the alleged failure to fulfill the duties of an estate trustee. And what he found was that the estate trustees acted in accordance with the terms of the Will and that the estate was administered appropriately, given the circumstances. Now there are a variety of details here that I would direct you to read the case if you’re looking at something on point because it is quite interesting and the specific details are very pertinent to the reasons in the decision. But I think it’s also important to note here that the costs issue, which has been coming up recently in a lot of estates matters, is again addressed. And the standard civil litigation practice is applied in this case where the costs are awarded on a substantial indemnity basis against the applicants because they were unsuccessful. And it was quite a substantial amount. It was approximately $65,000 that was awarded against them to be taken out of their portion of the estate proportionately.
David Smith: And that was for the executor’s costs.
Nadia Harasymowycz: It was for the executor’s costs. And there’s a specific note that one of the claims on the application was against one of the executors in both her personal capacity and in her capacity as an estate trustee and she was therefore forced to retain counsel in both capacities. And therefore the costs were increased so unfortunately the applicants were awarded costs on both sides.
David Smith: Well and the other thing that’s interesting and we don’t know how it will unfold in this particular case, but if an executor is forced to defend his or her actions against beneficiaries and succeeds in defending his or her actions when those actions are being criticized by beneficiaries, it’s interesting to question how that’s going to translate into an increased compensation figure which is another way in which the Courts might further send a signal to beneficiaries that applications to remove executors ought not to be lightly brought because not only would there potentially be a cost penalty, but the executors could presumably claim additional compensation for having to prepare for and attend at a trial and give evidence respecting the administration of the estate.
Nadia Harasymowycz: It’s certainly an issue. And clearly not brought up on this Superior Court of Justice decision at this point but we may see it in the future.
David Smith: And, you know, it’s funny. This whole issue of removal applications goes against the sort of grain, if you will, of estate litigation in the sense that it’s trite to say that executors have a duty to the beneficiaries. And it’s tempting to think that that duty will always override any actions on the part of the beneficiaries. But this case and other cases, you know, send the important point that the beneficiaries, while their rights are important and ought to be protected, they can’t allow disputes with the executors to cloud their judgment if the executors are in fact doing a satisfactory job of administering and distributing the estate to the beneficiaries.
Nadia Harasymowycz: Absolutely. The particular issues on this case really lend themselves to that kind of comment and review of this specific case, you know, will bring forward Shareholders’ Agreement issues, corporate assets, Primary and Secondary Will considerations. So it really is a good overview of how a removal of estate trustee application may play out in our Courts.
David Smith: Right. And, you know, again any time there’s…I just want to finish off by dealing with this issue of animosity between the beneficiaries and the executors. I’ve seen more than once beneficiaries allege that there’s animosity such that it prevents the executors from fulfilling their duty to the beneficiaries. But Courts, I think, will be very scrupulous in reviewing the circumstances. And if they see that the alleged animosity between beneficiaries and executors is sort of akin to a family spat, and doesn’t really have any substantive merit, I think Courts are gonna be very reluctant to wade into a dispute which they see as simply a waste of the Court’s time if they think that it doesn’t involve issues that substantively impact the administration of the estate.
Nadia Harasymowycz: Well and I think that brings us to the end of this week’s discussion. It’s certainly a topic that is interesting at the moment and one to watch. And thanks for listening, and thanks for joining me today, David.
David Smith: Yeah, thanks a lot, Nadia. It was a pleasure. I look forward to podcasting with you again soon.
Nadia Harasymowycz: We look forward to hearing from our listeners. You can send us an email at hull.lawyers@gmail.com. Be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information and discussion on today’s practice of estates law. We hope that you enjoyed the show. I’m Nadia Harasymowycz.
David Smith: And I’m David Smith. Until next week, take care.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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