Estate trustees must be ready at all times to account for their management and administration of an estate. There is no statutory requirement for an estate trustee to formally pass his or her accounts. However, the court may order an estate trustee to do so. As part of the estate accounting application, beneficiaries can file a “notice of objection” to the estate trustee’s accounts to request further information or documents if needed.
The court’s role in an estate accounting application is inquisitorial. The Estates Act empowers the court to “make full inquiry” of the deceased’s assets as well as the administration and distribution of those assets. Notices of objection, in essence, help the judge inquire into or narrow down the accounts for which the estate trustee must provide further explanation.
Is there a limitation period for accounts beneficiaries can object to? In its recent decision in Wall v Shaw, the Ontario Court of Appeal confirmed that notices of objection are not subject to the general two-year limitation period set out in the Limitations Act, 2002.
In Wall v Shaw, the deceased died in 2005. The deceased was survived by family members including her two children, Elizabeth and Ted Wall. In her will, the deceased appointed Mr. Shaw, a lawyer, as the estate trustee of her estate. The deceased divided the residue of her estate into two equal shares to be held in trust for each of Ted and Elizabeth until they turned 60 years old. Ted died in 2014, before attaining age 60. Pursuant to the will, Elizabeth received Ted’s share.
Throughout Mr. Shaw’s appointment, he did not pass his estate accounts. Instead, for approximately 10 years, Mr. Shaw had annual meetings with Elizabeth and Ted (while he was alive) to discuss the estate’s administration. Mr. Shaw and Elizabeth eventually came to disagree on how much compensation Mr. Shaw was pre-taking from the estate.
In March 2015, Mr. Shaw commenced an application to pass his estate accounts commencing from the deceased’s date of death (2005) until December 2013. Elizabeth and two of the deceased’s nieces filed notices of objections. Mr. Shaw then brought a motion to strike Elizabeth’s objections to Mr. Shaw’s estate administration from 2005 until 2012 on three grounds:
(i) the objections were statute-barred by the two-year limitation period set out at ss 4 and 5 of the Limitations Act, 2002;
(ii) the claim was barred by laches; and
(iii) Elizabeth’s approval of the accounts at the annual meetings amounted to acquiescence of Mr. Shaw’s estate administration.
The motion judge dismissed Mr. Shaw’s motion on all three grounds. Mr. Shaw appealed the motion judge’s decision only with respect to the limitation period argument. The Court of Appeal dismissed the appeal.
Section 4 of the Limitations Act, 2002 states that “a proceeding shall not be commenced in respect of a claim after the second anniversary on which the claim was discovered”. Mr. Shaw argued that, with her notice of objection, Elizabeth was asserting a “claim” against him because she sought a “remedy” in the passing of accounts application (e.g. a reduction in Mr. Shaw’s compensation).
The Court of Appeal rejected the argument that notices of objection are either a “proceeding” or a “claim” per s 4 of the Limitations Act, 2002. The Court of Appeal clarified that a notice of objection is merely a response to a proceeding that has already started (i.e. the application to pass accounts); it is not a proceeding on its own. Moreover, the Court of Appeal explained that an application to pass accounts is not a “claim”. It therefore follows that a responding notice of objection is also not a claim. In further support of this analysis, the Court of Appeal cited its decision in Armitage v The Salvation Army (previously blogged about by my colleague, Jacob Kaufman).
The Court of Appeal provided additional reasons why notices of objection should not be subject to a limitation period. For example, it explained that an application to pass accounts is unlike a conventional civil claim that renders a judgment in favour of the claimant (if the claimant is successful). Rather, such an application asks the court to inquire as to the ins and outs of an estate’s administration.
In dismissing the appeal, the Court of Appeal stated that “in bringing a motion to strike out the notice of objections he [Mr. Shaw] acted unreasonably and in his own self-interest.” The Court of Appeal therefore ordered Mr. Shaw to pay Elizabeth’s costs personally.
If you are an estate trustee, make sure to keep proper accounts of your administration of the estate at every stage of the process. Whether for actions as estate trustee for the past 2 years or 20 years, you will have to be ready to account for them at all times.
This blog is also published on All About Estates.