While estate trustees can be criticized by courts for their conduct, and in some instances, made to compensate the estate for their inappropriate behaviour, sometimes, that just isn’t enough. On December 13, 2012, Saman Jaffery blogged about the Alberta Court of Queen’s Bench decision in Bizon Estate, 2012 ABQB 605, wherein the court ordered one executor to pay the costs, personally, of another executor.

However, cost consequences were not enough in a recent decision of the Ontario Superior Court of Justice. In this case, a father died leaving the entirety of his modest estate to his two sons, to be paid out upon the youngest son reaching the age of 21. In the interim, the deceased’s brother (and uncle to the beneficiaries) was named the sole estate trustee. Eight years into the administration of the estate (and shortly before the youngest son reached the age of 21), the two boys began requesting an accounting from the uncle. They were provided a cursory accounting and were advised of the modest value of the estate.  The uncle refused to give a better accounting and no distribution was ever made from the estate.

The court noted that the uncle refused to give the sons many of their father’s personal items. The only mementos which the sons received were a watch and a camping lantern. To make matters worse, the uncle did not invite the sons to the spreading of their father’s ashes ceremony. This upset the sons to such a degree, that one of them suffered depression, requiring psychiatric care and medication for more than a year. From a financial perspective, the court held that, had the uncle properly administered the estate, the sons would have been able to plan and pay for an education of their choice. Instead, their options were limited to programs they could afford, becoming encumbered by debt in the process.

The uncle disregarded earlier court orders to provide an accounting, pass his accounts and pay costs. He was found in contempt twice, and eventually imprisoned for seven days.

The court held that instead of protecting the interests of the children, the uncle exploited them by treating their father’s estate as his own cash box.  In addition to damages, interest and costs, the sons sought punitive and exemplary damages in the amount of $50,000 (on an estate that the court estimated to be worth approximately $40,000). The court considered the factors set out by the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18. The court considered the vulnerability of the young beneficiaries, and their uncle’s outrageous conduct. The court considered the impact of excluding the sons from the funeral ceremony and the uncle’s systematic failure to comply with court orders. Finally, the court considered whether an award of punitive damages in the amount of $50,000 was appropriate to reflect the court’s abhorrence and the need to deter the uncle and others from similar conduct in the future.  In this regard, the court disagreed with the sons…and awarded punitive damages in the amount of $100,000.

Jonathon Kappy