Is it appropriate for a court order to permit an Estate Trustee During Litigation (“ETDL”) to distribute the Estate? Possibly.
The statutory authority to appoint the ETDL is found in Section 28 of the Estates Act1, which provides that an ETDL has all the rights and powers of a general administrator, other than the right of distributing the residue of the property. Generally, an ETDL is appointed when the court feels a neutral third party should be administering an estate to preserve estate assets.2
What is the role of the ETDL when the litigation is over? Sometimes, in context of a mediated settlement, all of the litigants agree that the ETDL should complete the administration of the estate. Given the restriction of the ETDL’s powers under Section 28 of the Estates Act, the ETDL will often insist that the minutes of settlement contemplate the ETDL bringing an application to be appointed as estate trustee. There are times that in order to save on probate fees and on the cost of the application for the certificate of appointment, the parties/beneficiaries of the estate will ask the ETDL to agree to an order providing for the ETDL to distribute. Arguably, if all the beneficiaries agree and the court gives the ETDL authority to distribute the estate, then notwithstanding the statutory prohibition said distribution may take place.3 Is the ETDL at risk when it distributes the estate under such an order? – Maybe.
I was reviewing Jennifer J. Jenkins and H. Mark Scott’s book, Compensation and Duties of Estate Trustees, Guardians and Attorneys4. The authors refer the reader to the McLennan Estate5 case, where a corporate trustee was appointed as ETDL. The authors observed, “… an issue arose as to the interpretation of an order appointing a corporate trustee as estate trustee during litigation. The corporate trustee sought compensation for the period of time following the conclusion of the litigation on the basis that the court order authorized its continued management of the estate. The court disagreed in reaffirming the principle that the duties of an estate trustee during litigation comes to an end when the litigation ceases.”6 As I reviewed the actual case I do not believe it applies to a situation where a court makes an order for the ETDL to distribute the estate. Let’s review the facts of this case that are relevant to our discussion.
In McLennan, the parties advised Cullity J. that a settlement of the Will challenge was imminent and that, if necessary, a motion would be brought seeking approval by the Court7. The court directed the ETDL and the parties to come to an agreement over outstanding fees of the ETDL and, pending determination of the matter, the ETDL was to move for an order granting or confirming that it has a lien on the assets of the estate for such compensation and any disbursements. Such motion was to be brought at the earliest practicable opportunity and, pending its determination, the Estate Trustee During Litigation was to continue to act in that capacity for the purposes of preserving the assets of the estate .The litigation settled, but there was no agreement on the ETDL’s fees. The ETDL brought a motion and Greer J. granted it a lien on the estate assets.
It was clear that according to Cullity J.’s order there was a period for which the ETDL continued its role after the litigation was over. It seems that the issue of compensation was tied to when the functions of Estate Trustee During Litigation terminated and for as long as they were ongoing there was no argument as to fees. This case may not apply to our fact scenario where an ETDL is appointed and granted the authority by court order to distribute the estate.
Regardless of the ratio of the McLennan Estate case, it would seem prudent for any order permitting the ETDL to administer an estate after the cessation of litigation to include a provision about compensation.
- Section 28 of the Estates Act, R.S.O. 1990, c. E.21 reads, “Pending an action touching the validity of the will of a deceased person, or for obtaining, recalling or revoking any probate or grant of administration, the Superior Court of Justice has jurisdiction to grant administration in the case of intestacy and may appoint an administrator of the property of the deceased person, and the administrator so appointed has all the rights and powers of a general administrator, other than the right of distributing the residue of the property, and every such administrator is subject to the immediate control and direction of the court, and the court may direct that such administrator shall receive out of the property of the deceased such reasonable remuneration as the court considers proper.” ↵
- It is beyond the scope of this blog to properly deal with the role of an ETDL. I refer the reader to an excellent piece by Jordan Atin, in his chapter in Schnurr, Estate Litigation, 2nd Ed. Mr. Atin suggests that where the authority of the personal representative is not in issue an ETDL is not required. He cites Forbes v. Gauthier Estate for the proposition that where there is no will challenge section 28 is not applicable and an ETDL should not be appointed. There are others who disagree. I refer the reader to Langston v. Landen 2006, CarswellOnt 2932, 24 E.T.R. (3d) 110. Here, there was no will challenge. The Deceased’s will indicated that $24 million out of the estate be transferred to organizations after the death of his wife. After the death of the deceased, many of the assets disappeared. Greer J. appointed an ETDL even though there was no will challenge. Arguably, the key issue is not whether the will is being challenged, it’s whether an ETDL is necessary for the preservation of the estate property. As an aside, In McColl v. McColl, Greer J. pointed out that the Court has the power under subrule 75.06(3)(f) of the Rules of Civil Procedure R.R.O. 1990, Reg. 194 to appoint an estate trustee during litigation, and file such security as the court directs. Subrule 75.06(3)(f) provides that on an application or motion for directions, the court may direct hat an estate trustee be appointed during litigation, and file such security as the court directs. Under the subrule, there is no restriction restricting it to a situation where there is a will challenge. Another article of interest about the role of the ETDL was written by Paul Trudelle entitled “The Estate Trustee During Litigation” which can be found online at https://hullandhull.com/the-estate-trustee-during-litigation-hull-on-estates-166/ ↵
- In preparation of this blog I canvassed a number of senior estate litigators on the propriety of an order permitting the ETDL to distribute the estate. Not surprisingly, there was no consensus. Some pointed out that the ETDL is a creature of statute and that its powers are only those outlined by statute. Others took the position that the courts have an inherent jurisdiction to deal with matters not addressed in statute and if a judge makes an order permitting an ETDL to distribute then it is so authorized. ↵
- Compensation and Duties of Estate Trustees, Guardians and Attorneys By: Jennifer J. Jenkins, H. Mark Scott ISBN: 0-88804-435-6 – For more information about the text see more at: http://www.carswell.com/product-detail/compensation-and-duties-of-estate-trustees-guardians-and-attorneys/ ↵
- McLennan Estate (Re) (2002), 48 E.T.R (2d) 59,118 A.C.W.S. (3d) 763(Ont. S.C.J.). The online version of this case can be found at Re Keith (Estate of), 2002 CanLII 7450 (ON SC). ↵
- See paragraphs 3:40:10 and 3:40:20 of Compensation and Duties of Estate Trustees, Guardians and Attorneys. ↵
- Such a motion is necessary Rule 7.08 (1) RULES OF CIVIL PROCEDURE – R.R.O. 1990, Reg. 194 which provides that no settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of a judge. ↵