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Two Against One Doesn't Always Win

Judicial Guidance on the Removal of Estate Trustees

Majority rules: the hallmark of democracy. For that matter, the best way to decide where to order take out. But according to a recent Ontario court decision, the majority doesn't necessarily rule when there’s a disagreement among co-executors trying to administer an estate.  

A Sister and Two Brothers

In Dewaele v. Roobroeck 2020 ONSC 7534, a sister applied to have her two brothers removed as co-executors of their parents’ estates. The three siblings were co-estate trustees and the sole beneficiaries. By the time the sister’s application was heard, both parents had passed and the children were in the midst of administering both estates. 

The estates consisted of a variety of assets, but those most at issue were the family farm and a number of firearms in one brother's possession. He alleged he owned the firearms but wouldn’t provide ownership records. These disagreements resulted in the complete halt of the estate administration.  

There were a number of interim proceedings and orders with which the brothers did not comply. The sister submitted that their conduct and refusal to cooperate warranted their removal as estate trustees. This conduct included, but was not limited to: 

  • The refusal to accept appraised valuations, which resulted in the delay of the Certificate of Appointment of Estate Trustee with a Will application; 

  • Delayed deposit of rent cheques from one of the estate properties (amounting to $14,000);   

  • Tape recording 10 to 15 hours of meetings when the sister and her counsel were unaware they were being recorded; 

  • Refusal to cooperate with the estate accountant despite consenting to her being retained. This caused a delay to the point where tax rollovers and other benefits were nearing expiry at the three-year anniversary of the mother’s death. 

The Brothers’ Argument

At the crux of the brothers’ justification for their actions was “majority rule.”  Since their opinions aligned, they argued they outnumbered their sister in decision making. 

Justice Sheard rejected their argument. She stated:

Unless the will provides otherwise, executors appointed pursuant to a will are subject to the general principle that if there are several executors of a will, their decision must be unanimous… [W]hen there is no provision for a majority vote, all executors must act in concert." (quoting Kaptyn Estate, Re 2009 CarswellOnt 2160 (Ont. SCJ) at para 16). 

Justice Sheard also reviewed section 37(1) of the Trustee Act, which authorizes the Court to remove an executor, and referred to the Court’s inherent power to remove a trustee when circumstances require it. 

Scenarios Justifying the Removal of an Estate Trustee

Justice Sheard considered the respondents’ other behaviours before ultimately concluding they should be removed as estate trustees. In doing so, Her Honour provided a concise, non-exhaustive summary of scenarios in which a Court will be justified in removing an estate trustee: 

  • A trustee act or omission that endangers the trust property or demonstrates a want of honest and capable execution of duties, or a want of reasonable fidelity. (Mere neglect or mistake absent these elements will not warrant removal); 

  • Whether the conduct that has created difficulties is likely to continue; 

  • In some cases, where there is dissension and animosity, even absent misconduct. Trustees must act jointly. If animosity compromises the administration then removal is justified; 

  • When there is an obvious conflict between their personal interest and duties as trustee.

Justice Sheard also distinguished between a conflict between a trustee and a beneficiary and a conflict amongst trustees themselves. When the former is alleged, there must be evidence that the trustee is unable to exercise their duties in an impartial and objective manner. But when there is a conflict between co-trustees, the Court will more readily intervene. 

Justice Sheard found that there existed such animosity between the siblings which, when combined with acts and omissions of the brothers, had brought the estate administration to a standstill. The Court found this behaviour was likely to continue to the detriment of the estate and its beneficiaries. The brothers’ lack of cooperation and their position on certain issues left them in a position where they could not impartially and objectively exercise their duties as trustees, leaving the due administration of the estate compromised if they were not removed. 

A Cautionary Tale

This case acts as a reminder to estate trustees to keep their fiduciary duties to the estate and its beneficiaries at the forefront of their attention. Estate administrations almost always involve personal decisions and emotions often run high. Nonetheless, those appointed as trustees should bear in mind that the Court will not hesitate to interfere with the testator’s executor appointment when those emotions put due administration and beneficiaries’ interests in jeopardy. 

A Note on Costs 

The cautionary tale for difficult co-executors continued on March 4, 2021 when Justice Sheard provided additional reasons regarding costs (2021 ONSC 1604). 

The applicant sister organized her bill of costs with regard to fees incurred to further the estate administration and to achieve a degree of “reasonableness” as required by the existing law and jurisprudence. She sought an order that her substantial indemnity costs be paid by the respondent brothers and the balance of her full indemnity costs be paid by the estate. The brothers did not deliver cost submissions.

Justice Sheard started her analysis with s. 131 of the Courts of Justice Act which provides that costs are at the discretion of the court, which may determine by whom and to what extent the costs shall be paid. The overriding objective in a costs award is that it be fair and reasonable. The general rule is that estate trustees are entitled to be indemnified for costs reasonably incurred in the administration of the estate (Geffen v. Goodman Estate [1991] 2 SCR 353 at 390-1). This is qualified by the “loser pays” cost regime introduced to estate matters in McDougald Estate v. Gooderham (2005) 255 DLR (4th) (Ont. CA). 

Rule 57.01 of the Rules of Civil Procedure sets out factors to consider in exercising judicial discretion. Justice Sheard notes 57.01(4)(c) authorized the sister’s request for substantial indemnity from the brothers “where the losing party has engaged in behaviour worthy of sanction.” 

Justice Sheard noted:

“that the respondents, to the detriment of the estate, had i) not fulfilled their obligations as co-estate trustees; ii) preferred their own self-interest; iii) failed to comply with court orders, even orders made on consent; iv) refused to take any meaningful steps to facilitate the realization of the estate; and v) by their conduct, brought the administration of the estate to a standstill” (at para 20).

In Her Honour’s view, the respondent brothers’ conduct could be characterized as reprehensible and outrageous and was worthy of sanction. Justice Sheard ordered the sister be fully indemnified for the costs she had incurred, with the brothers liable to pay $60,821.50 of the total $78,802.63 cost award and the balance paid by the estate.  

The subsequent cost decision acts as a further warning to estate trustees, and litigants more generally: be conscious of your behaviour and act reasonably or risk a substantial cost award against you.