Simon's Megalomaniacal Legal Resources

Estates - Estate Trustees

. Di Santo v. Di Santo Estate

In Di Santo v. Di Santo Estate (Ont CA, 2023) the Court of Appeal refers to authority for the test for removing an estate trustee, and reviews some of the related case facts:

[24] Nor do we agree that the motion judge failed to consider whether it was necessary to replace them.

[25] The Trustees concede that the motion judge cautioned herself that the threshold for the removal of a trustee is a high one: the court will not lightly interfere with the testator’s choice of estate trustee.

[26] The Trustees also acknowledge that the motion judge specifically adverted to the several relevant considerations when the court is asked to remove a trustee, as summarized in Virk v. Brar Estate, 2014 ONSC 4611, 1 E.T.R. (4th) 241. As the motion judge noted, those factors include that “there must be a “clear necessity” to interfere with the discretion of the testator”.

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[28] The motion judge detailed the requests made by Ottavio for disclosure and funding and found that the mindset of the Trustees “with respect to any requests made by [Ottavio] has become intractable”. Motions were required to obtain what should have been straightforward requests for estate and Family Trust related documents. She characterized the Trustees as having exercised their discretion to pay additional income to Ottavio in a “minimalist manner”. They failed to consider the lifestyle that Ottavio was leading immediately before the deceased’s death, which could not be funded by $1000 per week. She found that the views of the Trustees were entrenched and unlikely to change.

[29] The motion judge concluded that “the Trustees are either in a position of conflict, have acted unilaterally or cannot objectively exercise their discretion”. Summarizing her reasons for this conclusion:

1. Ottavio has no children, so John and Carmela will benefit from any gift over from the Family Trust.

2. Ottavio’s claim of undue influence in relation to the Wills puts the Trustees in conflict of interest.

3. The Trustees have not exercised their discretion to pay any additional amounts to Ottavio since the deceased’s death.

4. John and Carmela are influenced by their views on Ottavio’s lifestyle choices and his behaviour and have a level of animus towards Ottavio.

5. The Trustees have not provided important information to Ottavio.

6. The removal of the Trustees is necessary to ensure a level playing field in the litigation.

[30] The motion judge considered the relevant factors. Her reasons explain why, in her view, it was clearly necessary to remove the Trustees. Essentially, the Trustees disagree with the motion judge’s conclusion and ask this court to re-weigh the evidence before her. They have not identified any error of law or palpable and overriding error. There is no basis for this court to interfere with the motion judge’s exercise of discretion in removing the Trustees.

. Baran v. Cranston

In Baran v. Cranston (Div Court, 2022) the Divisional Court held that not all receipts that the estate trustee sought reimbursement for need be confirmed by written receipt:

[15] The audit judge was also correct when he held that the case law relied on by the appellant, Zimmerman v. McMichael Estate, 2010 ONSC 2947 and Lanthier v. Cousineau Dufresne Estate, 2002 CanLII 2653 (Ont. S.C.), did not support the conclusion that an estate trustee must reimburse the estate for any expense for which there is no written receipt. At paras. 55-56 he stated,

[55] In the Lanthier and Zimmerman situations the power of attorney/trustees failed to keep any records for their substantial cash withdrawals and were unable to provide any explanation for the withdrawals. These cases are distinguishable because in this case the estate trustee provided an accurate record of all receipts and disbursements, provided detailed explanations under oath explaining the reasons for each expense, and also produced copious records to justify and corroborate the amount of each expense charged to the estate.

[56] The Lanthier and Zimmerman decisions do not stand for the proposition that a trustee should be ordered to repay all expenses paid on behalf of the estate where he or she is unable to provide a written receipt. For example, Toller’s staff were paid in cash each week and the trustee made a note of each payment in a ledger or in her iPad. The objectors do not dispute that Toller’s staff in Mexico were paid in cash each week nor do they dispute the accuracy of the amounts set out in the trustee’s accounts. Their objection is technical and not substantial in nature.

[16] The audit judge meticulously considered the various objections made by the brothers and found Ms. Baran’s explanations given for the absence of receipts credible and reliable. He was in the best position to assess Ms. Baran’s credibility, having heard her over many days of testimony in chief and cross-examination. In my view, the appellant has not demonstrated any palpable and overriding error in the audit judge’s findings of fact or in his application of the standard of care with respect to record keeping and with respect to the administration of the estate. Paragraphs 61 and 69 of the audit judge’s reasons provide a useful explanation of his findings:

[61] I agree that the approach adopted in Laird [v. Mulholland, ][1988] O.J. No. 855 (S.C.J.)] applies in the circumstances of this complicated estate in Mexico. While obtaining a receipt for all estate expenses is the recommended approach, I find that the estate trustee was not required to obtain a receipt for every expense in order to allow her to be reimbursed for expenses she incurred, where she produced accurate accounts for all expenses, which were incurred for the benefit of the estate, along with volumes of corroborating documents. In addition, Philippa explained each expense that was objected to under oath and her evidence was not undermined during a lengthy cross examination. Having observed her for 11 days giving evidence in chief and being cross-examined on her explanations for the expenses, I find that Philippa acted honestly and reasonably throughout the administration of Toller’s estate.

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[65] For the above reasons, while the estate trustee’s accounting was not perfect, she has accounted for all capital receipts and all expenses accurately in the unique circumstances of this estate, she has explained the reason for each expense under oath, she has provided corroborating evidence for almost all expenses, and I find that she acted honestly, in good faith, and reasonably throughout her administration. As a result, I find that she has met the required standard of care of a person of ordinary prudence using common sense in the complicated circumstances of this estate. However, there are a few expenses that I will not allow that are outlined in this decision.

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[19] Given that I would uphold the audit judge’s findings with respect to the accounts, I see no basis to interfere with his award of compensation to Ms. Baran. The appellant argued strenuously before the audit judge that Ms. Baran’s compensation should be substantially reduced because of her failure to keep receipts. I see no error of law by the audit judge in the award of compensation. He considered both the tariff and the five factors approach approved by the Court of Appeal in Laing Estate v. Hines, 1998 CanLII 6867 (ON CA). His award of compensation was a reasonable exercise of his discretion.

. Baran v. Cranston

In Baran v. Cranston (Div Court, 2022) the Divisional Court stated the standard of care required of an estate trustee respecting record-keeping:

[1] This is an appeal pursuant to s. 10(1) of the Estates Act, R.S.O. 1990, c. E.21 from an order of R. Smith J. dated February 22, 2021 in respect of an application for the passing of accounts by the respondent Phillippa Baran in her capacity as Trustee of the Estate of Toller James Montague Cranston. ...

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[12] The appellant submits that the audit judge erred in the standard of recordkeeping that is expected of an estate trustee. Rule 74.17(1) of the Rules of Civil Procedure requires that an estate trustee “shall keep accurate records of the assets and transactions in the estate and accounts filed with the court shall include” the items that follow (emphasis added). The appellant submits that this requires a standard of perfection with respect to the keeping of records and includes a requirement to provide receipts to document all expenditures. In the present case, he argues that Ms. Baran failed to provide written receipts or documentation for some $142,099.67 of the expenses, and the audit judge erred in upholding these expenditures on the basis of Ms. Baran’s testimony at the hearing.

[13] The appellant further argues that the audit judge erred in failing to find that Ms. Baran was in breach of trust because she failed to keep proper records and did not meet her duty to account.

[14] The audit judge found that the accounts filed by Ms. Baran contained the details required by Rule 74.17(1) (see para. 48 of his reasons). He did not err in the standard of care that he applied. He correctly held, consistently with the decision of the Supreme Court of Canada in Fales v. Canada Permanent Trust Co., 1976 CanLII 14 (SCC), [1977] 2 S.C.R. 302 at p. 315, that the standard of care for an estate trustee is the standard of care of a person of ordinary care and diligence in managing their own affairs. The Supreme Court also held that the standard was to exercise “ordinary skill and prudence”, along with the application of common sense (at p. 316). The audit judge cited Fales at paras. 51-52 of his reasons and correctly followed it at para. 57.