The process of removing an Estate Trustee is outlined under section 37(1) of the Trustee Act. This section requires that the Court, when removing a trustee, appoint a replacement. The Court may also exercise its inherent jurisdiction to remove the Trustee without appointing a replacement. In a 2010 case of Evans v Gonder, the Ontario Court of Appeal ruled that section 37 does not constrain the power of the court to remove a sole remaining trustee and provide an alternative mechanism for administering the trust.
It is common for a dispute to arise when administering an estate, usually between beneficiaries and estate trustees. There are instances when the court may order the removal and subsequent replacement of an estate trustee. Resolving the dispute through mediation is not always possible so appearing before the court is sometimes necessary, unless there is some applicable provision in the will or in a statute permitting an estate trustee to resign.
An estate trustee has the following responsibilities:
- Dealing with all beneficiaries fairly and equally, with an “even hand”;
- Avoiding conflicts of interest;
- Keeping accounts and records of the administration of the estate;
- Passing the accounts when required
Removing an estate trustee after an appointment is not an easy task, as the court requires there to be clear evidence of misconduct that cannot be addressed by passing of accounts, or the appointment of an estate trustee during litigation. What this means is that the sheer existence of a dispute between the trustee and beneficiaries is not sufficient grounds for removing an estate trustee.
A more secure course of action when there is clear evidence that an estate trustee is not performing correctly or a dispute with beneficiaries makes it difficult or impossible for the trustee to perform, is to appoint a third party as an “estate trustee during litigation”. While this person does not inherit the power to distribute the estate, they assume control for administering the estate, doing things such as handling assets. Ontario’s legal system makes it fairly convenient to satisfy the requirements for appointing an estate trustee. This option is easier than trying to pass over an executor prior to an appointment or removing a trustee after an appointment.
There are many factors and requirements that affect the success of removing an estate trustee. In Viertelhausen, the court dismissed an application to remove the estate trustee due to a lack of evidence of a true conflict of interest. The applicant sought to remove the trustee because she thought he would act impartially; however, she did not prepare strong evidence in a timely manner. The court made a point of saying that no other beneficiary had objected to the trustee’s appointment of the estate.
By contrast, where sufficient evidence is provided, the court may grant a removal application. In the 2010 case of Borisko, the court said that an application for removing a trustee was not a fact-finding process, given the significant allegations that warranted the suspicion of the beneficiaries. The court ultimately found that the trustee was withholding valuable information and was alleged to have tried to buy shares from the beneficiaries when he knew they were valued at nearly twice what he offered. He also refused to transfer the shares and dividends in a company to the family trust but instead included the assets in the Estate to increase the Estate’s value and his compensation. The result was that the evidence corroborating the allegations was sufficient for the trustee to be removed.
An estate trustee removal application will usually see the court balance the wellbeing of the beneficiaries as the governing principle in their decision, with the Testator’s testamentary freedom to select his or her estate trustee. Ontario estate law has made clear that estate trustees have a fiduciary obligation to appropriately administer the estate. Any abuse of power, conflict of interest, or misconduct may warrant a court-ordered removal.
Why Choose Us?
If an executor or trustee is not fulfilling their duties, anyone with an interest in the estate can apply for an order of removal. If you are seeking a removal, or have a concern about the conduct of a Trustee, our team of experienced and informed legal professionals can guide you through understanding your rights and ensure that you are provided with reliable legal protection. Contact Bickhram Litigation today for your complimentary consultation.
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