A trustee1 has a duty to give to the beneficiary of a trust, on demand, any and all information with respect to the trust funds. Correspondingly, a beneficiary is entitled to, in the absence of special circumstances, production and inspection of all trust documents in the trustee’s possession. As well, a beneficiary is entitled to be given any necessary authority to verify the information given. The beneficiary’s entitlement is founded upon the trustee’s fiduciary duty to keep the beneficiary informed and to render accounts.2
There are two ways a trustee can have their administration approved and be discharged. First, they may apply for a passing of accounts pursuant to section 23 of the Trustee Act. Alternatively, they “can avoid the cost and delay of a passing, and instead ask the beneficiaries to approve their administration and provide for their informal discharge directly” by way of a release.3
Even where the trustee elects to proceed by way of a formal passing of accounts before the Court, the procedure should be informal and summary in nature.4 To that end, the Rules of Civil Procedure sets out a specific, detailed process which allows the trustee to bring the matter before the Court in a summary fashion. The Rules even go so far as to set Tariffs for the costs to be awarded, where the Court grants judgment on passing accounts without a hearing.
Tariff C provides as follows:
|Amount of receipts||Amount of costs|
|Less than $300,000||$2,500|
|$300,000 or more, but less than $500,000||$3,000|
|$500,000 or more, but less than $1,000,000||$3,500|
|$1,000,000 or more, but less than $3,000,000||$5,000|
|$3,000,000 or more||$7,500|
But what happens when the trustee’s costs exceed the amount allowable under the Tariff?
Where an application to pass accounts will proceed on an unopposed basis, a hearing must be held where a request for increased costs (above the amount set out in Tariff C) has been filed.
While the Rules do specify the materials that must be filed where the application is to proceed unopposed, it does not expressly stipulate the additional materials that should be filed where the application proceeds unopposed, but with a request for increased costs.
Justice Brown identified and addressed this apparent gap in the Rules in the Mitchell Estate, Re decision. His Honour held that where an application to pass accounts proceeds unopposed, but with a request for increased costs so that a hearing must be held, the applicant should ensure that the following materials are filed with the Court:
- Proper initial application materials: Rule 74.18(1);
- A supplementary application record containing the materials specified by Rule 74.18(9). Although this rule speaks of the record required on an unopposed application without a hearing, the same materials must be filed where a hearing must be held because of a request for increased costs. The reason is evident: the supplementary record specified by Rule 74.18(9) provides the court with the evidence that all parties entitled to notice have been served and that no objections to the accounts remain outstanding. Proof of these matters is required where either the application will proceed as unopposed without a hearing, or as unopposed but with a hearing because of the request for increased costs. These materials initially were not filed by the applicants, leading to my endorsement of March 1, 2010 that they do so; and,
- Additional evidence – a simple affidavit either as part of the Rule 74.18(9) supplementary record or in a further record, depending on timing — which contains:
- the request for increased costs in proper form;
- proof of service of the request on all affected parties;
- a statement explaining the responses of affected parties to the request for increased costs (e.g. no response; consent; objection); and,
- the details of, and the reasons for, the request for the increased costs, either through a detailed Bill of Costs or an easily understandable copy of the relevant dockets.
Justice Brown goes on to explain that the person seeking increased costs must satisfy the Court that the request is fair and reasonable in the circumstances. Even where the affected parties reach a settlement, the person seeking increased costs must still satisfy the Court that the request is fair and reasonable.
Where a settlement is reached, Justice Brown recommends filing an affidavit explaining the agreement reached so that the Court can understand the basis of the request for increased costs.
The Mitchell Estate decision contains at least three important takeaways:
- Summary Process – passing of accounts are intended to be a summary process;
- Court’s Role – A passing of accounts is not a purely adversarial process. Even where the parties affected reach a consensus, the person requesting increased costs must still justify to the Court that the requested costs are fair and reasonable in the circumstances; and finally
- Materials to be filed – related to the Court’s role, the Mitchell Estate decision sets out the materials that should be filed in support of a request for increased costs.