A case review of Finlayson Estate,Re1
In the Finlayson Estate case, the deceased owned certain shares in joint tenancy with her niece. The niece sought an order removing the deceased’s husband as executor. She claimed that the 99 year old husband was not competent to administer the estate because of his age and infirmities at the time of hearing. This case addresses what factors a court will consider when deciding whether to remove an executor on account of age, infirmity or illness.
First let’s review some key issues and points of law. An estate trustee may become incapacitated to the extent that they are no longer able to perform their duties. This may be apparent to everybody with an interest in the estate. This may be as a result of mental incapacity or illness through age or otherwise. If the incapacitated estate trustee agrees to be discharged from their duties, and if the will provides for an alternate estate trustee to step in, then problem solved. No need to continue reading.
What if there are no alternate estate trustees or the incapacitated estate trustee simply won’t step down? Now we have a problem.
Section 3 of the Trustee Act provides for the removal of an estate trustee, without resort to the courts, on the grounds that they are “incapable of acting therein”2. This may or not be a solution as, to utilize section 3, there are certain conditions;
- the incapacitated estate trustee must be replaced by a new estate trustee;
- the will must nominate a person with the power to appoint a new estate trustee;
- if the will does not so appoint, the surviving or continuing estate trustee(s) may appoint a new estate trustee; or
- the personal representatives of the surviving or continuing estate trustee(s) may appoint a new estate trustee.
Some of the obvious issues that the Trustee Act does not address are (a) what if there are no surviving or continuing estate trustees and (b) what if the will does not nominate a person with the power to appoint. It is here that one must look to the courts.
The court has power, under the Trustee Act, to remove estate trustees3. In addition to these statutory provisions, the court has an inherent jurisdiction to remove and appoint trustees4. The power to remove an estate trustee without any further appointment is exclusive to the court pursuant to its inherent jurisdiction. The court has repeatedly affirmed that it is prepared to remove an estate trustee on the grounds of incapacity5.
Remember that a court will be reluctant to interfere with a testator’s choice of estate trustee so the proposed removal must amount to a clear case of necessity6.
In a 19th century English case adopted as law in Ontario, Martin’s Trusts, Re.,7 Martin was the beneficial owner of land which he held in trust for the Land, Building Investment and Cottage Improvement Company (the “Company”). Martin subsequently became incapacitated and in the words of the court, suffered from “a permanent incapacity of the mind rendering him incapable of attending to business”. The medical evidence pointed to a brain injury with no likelihood of being able to return to work. The Company sought to replace Martin with his son so that the Company could continue its business. The court removed Martin as trustee and installed his son. The court distinguished incidences of temporary incapacity arising from an accident and relied on the fact that Martin’s incapacity was “permanent”.8.
In another English case,Galbraith, Re.,9 two aging executors were appointed under the will and had begun to administer the estate. There were significant securities interests in Argentina still to be administered which “required constant attention”. Evidence was given that the two executors were failing in health, and were unfit and unable to carry on the duties of executors adequately. The court had regard to the proper administration of the estate and the well-being of the beneficiaries and stated as follows;
Of the executors, one was over eighty and had become senile and mentally confused. His memory was defective, he had great difficulty in expressing himself, and he showed marked and increasing signs of arteriosclerosis. The other was seventy-six, had been very seriously ill for a year, and suffered from arteriosclerosis. The doctor expressed the view that his physical condition precluded extra worry, and that he was not in a fit state of health to attempt any sort of work. Evidence was also before the court that the solicitors were unable to obtain adequate instructions from one executor, or any instructions from the other, owing to the executors’ failure in health.
The court revoked the probate of the will and appointed a succeeding estate trustee10.
So what is the test for removal in Ontario? Let’s review the Finlayson Estate case which was adjudicated before the Nova Scotia Supreme Court.
In Finlayson Estate, the applicant was an alternate executor with (crucially) no interest under the will. The court referenced the English case of Galbraith, Re11, the Ontario case of Derrick Re12 and Widdifield on Executors and Trustees, 6th edn., for the proposition that trustees may be removed in cases of incapacity through illness, age or inclination and lack of appreciation of duties. The court dismissed the application for a number of reasons. Primarily, there was no medical evidence in support of the proposition that the executor did not have capacity. The Court heard that the executor had bad eyesight, poor hearing, was almost 100 years old, could not understand questions put to him on discovery and did not answer coherently. But that was not enough.
The judge set out a two part test in these circumstances:
- It must be established that the executor is unable to perform his duty to administer the estate on account of age, infirmity or illness.
- It must be shown that a primary beneficiary’s interest in the estate is at risk.
In applying the test in the Finlayson Estate case the judge said,
“In the present case, the first branch of the test is met. I am satisfied from a review of the discovery evidence that Mr. Finlayson does not have a clear understanding of his duties. While he claims he can instruct counsel, it is clear that he is relying heavily upon Mr. Conrod, as well as counsel. I infer that counsel prepared the affidavit submitted in support of the show-cause application. This is evident from his answers on discovery. He appeared to have some recollection of certain events, but a weak grasp of other events. ….On the equally important second test, however, I am satisfied that Mr. Finlayson himself is the only person whose interest is at risk if he fails to properly administer the estate. He is the only beneficiary of the will. As was the case in Re J.J., it is my view that, although Mr. Finlayson has difficulties with vision and hearing and lacks a clear understanding of the proceeding or his position as executor, I believe, based on all the evidence, that he has sufficient presence of mind to instruct counsel in the circumstances.
There is not a lot of case law on this particular issue. But, it behooves the reader to remember that when analysing any potential ground for the removal of the executor there is a common theme to these cases. It is the seminal case of Letterstedt v Broers13 where the Privy Council held that their main guide must be the welfare of the beneficiaries. The higher the degree of incapacity the more likely it will impact on the welfare of the beneficiaries. The greater the welfare of the beneficiaries is impacted, the more likely a court will take steps to remove the executor.
- 2007 CarswellNS 688, 2008 NSSC 58, 169 A.C.W.S. (3d) 464, 268 N.S.R. (2d) 5, 42 E.T.R. (3d) 277, 857 A.P.R. 5 (the “Finlayson Estate case”) ↵
- Trustee Act, R.S.O. 1990, c. T.23, section 3 ↵
- Ibid, sections 5 and 37 ↵
- St. Joseph’s Health Centre v. Dzwiekowski, (2007) O.J. No. 4641 (Ont. S.C.J.) at para 25 ↵
- Rose v. Rose, (2006), 24 E.T.R. (3d) 217 (Ont.S.C.J.) at para. 70. ↵
- Weil, Re,(1961) O.R. 888 at 889 (Ont. C.A.) at para 5 ↵
- Martin’s Trusts, Re: Land, Building, Investment and Cottage Improvement Co. v. Martin (1887), 56 L.J. Ch. 229; ↵
- Ibid, Cotton L.J. stated at pp. 622-23:
I think that a person is of unsound mind within the meaning of the Act (the Trustee Act, 1850, c. 60) when, from continuing infirmity of mind, he is incapable of managing his affairs. He could not be considered of unsound mind within the Act if his incapacity was a temporary one arising from an accident — as, for instance, concussion of the brain, or from illness of a temporary character; but he is to be so considered where he is subject to a permanent incapacity of mind, rendering him incapable of attending to business. ↵
- Galbraith, Re: In the Goods of Galbraith (1951) 2 All E.R. 470. ↵
- Ibid – Karminski J. stated at pp. 424:
I propose to make an order in the terms of the motion, namely, to revoke the probate of the will with its three codicils, which was granted to the two surviving executors named in the will, and to grant letters of administration de bonis non together with the will and codicils to the applicant, Peter Musson, a great-nephew of the deceased. ↵
- See footnote 9 ↵
- (1936) O.W.N. 223 (Ont. H.C.), ↵
- , (1883-84) L.R. 9 App. Cas. 371 (South Africa P.C.), ↵