There are times when one executor can be held liable for the misdeeds of another. In Cahill v. Cahill the Court dealt with this issue. This educational video highlights whether all estate trustees have a responsibility to fully participate in the administration of the trust and under what circumstances liability flows from delegation and failure to supervise their co-executor.
Let’s start by discussing a case decided by Ontario’s Court of Appeal called Cahill v. Cahill.
What if one executor is doing all of the work and the other executor is just rubber-stamping everything? Can the rubber-stamper be held liable if the co-executor cheats the beneficiaries? That is the question put to the court in Cahill. In this case, the father’s will appointed his son, Kevin, and daughter, Sheila as executors and trustees.
The will provided that Kevin and Sheila should set $100,000 aside in trust for their brother, Patrick with the balance of the residue to go to the grandchildren. Kevin said he would take care of everything, but Kevin did not set up the trust. Kevin stole the money and he disappeared. His co-executor Sheila did nothing about it, and she didn’t receive any of the money.
Patrick sued his brother Kevin, but he was nowhere to be found. Patrick also sued his sister, Sheila, claiming she was a co-executor and therefore was equally responsible. Sheila’s defence was that it was Kevin who did the bad stuff. It was Kevin who had the sole discretion, and it was only Kevin’s fault, so she should not have to pay. Kevin should have to pay.
The Ontario Court of Appeal ruled that Sheila was liable. They quoted from Donovan Waters Book, Waters Law of Trusts in Canada. Let me refer you to the quote. “[A trustee] is not entitled to shrug off the wrongful actions of a co-trustee on the basis that he knew nothing of what the other was doing; as a fiduciary, he is responsible for all acts of trusteeship, and he therefore carries a several, as well as a joint, liability for all that is done in the name of the trust or through the exercise of the office of trustee.”
So what are the takeaways from this case?
- Trustees have an obligation to supervise each other
- A passive executor may be equally responsible and liable for a breach of a trust by a co-executor
- A person who’s co-executor acts inappropriately, should immediately contact a competent lawyer and explore options to protect the beneficiaries and to insulate themselves from liability
- Depending on the case, the executor could apply to court for directions or commence an application to remove their co-executor or seek to prevent the implementation of their co-executors breach of fiduciary duty
Finally, it would be a mistake to substitute this three-minute case review for substantive legal advice. Every case is different and turns on its own set of facts. There’s no replacement for hiring a competent lawyer whose own research, analysis and judgment should be canvas before going to court.
My name is Charles Wagner, and if you have any questions regarding this sort of case, you’re welcome to call me.