March 18, 2014

In reasons delivered last week in Michipicoten First Nation v. Michipicoten First Nation Community Trust, Justice Varpio emphasized that objections to trustee accounts must be specific.  If objections are too vague, then the objectors run the risk of having their objections struck.  An added risk of delivering vague objections is that the lack of specificity will result in increased legal fees.

In this case, the Michipicoten First Nation Community Trust (the “Trust”) was established for the purpose of ensuring that funds obtained from a land claim settlement with the federal government ($8 million) were to be managed and invested prudently, and for the benefit of the present and future generations of the Members of the Michipicoten First Nation (the “First Nation”).

Within a couple of years after the Trust was created, the relationship between the nine appointed trustees of the Trust and the Chief and Counsel of the Michipicoten First Nation soured. The Chief and Counsel required the trustees to pass accounts and subsequently filed a number of objections to the trustees’ accounts.

The judge noted that “several of the objections were such that, upon reading of same, I was uncertain as to their specific contentions”.  Citing Vano, Justice Varpio held that a lack of particulars can result in the dismissal of the objection.  Varpio J wrote:

While a beneficiary has the right to object to the passing of accounts, a beneficiary appears to have a concomitant duty to ensure that his/her objections are sufficiently specific to enable trustees to answer the objections in a meaningful fashion.

By way of example, an objection that the trustees spent too much of the Trust’s investment income on operating expenses ($554,138 was spent on operating expenses of a total of $752,548 in investment income) was too vague. The Court held that merely pointing out the percentage of investment income spent on operating costs was not, in and of itself sufficiently particularized to ground a proper objection.  Similarly, the objectors asserted that there “were instances where source documentation was insufficient to justify expenses”.  This objection was also rejected as imprecise and untimely.

Interestingly, the judge also declined to resolve certain issues on the basis that the objectors had not alleged fraud and were not asking for any funds to be returned to the Trust.  Rather, it appeared that what the objectors sought was an order preventing the trustees from passing their accounts.  Instead, the Court simply passed the accounts without a specific ruling on some of the issues raised by the objectors.

In awarding the trustees legal fees on a full indemnity basis in the amount of $181,499.84, the judge accepted the trustees’ position that the high costs were, in some measure, driven by the need to reply to vague objections.

The practical take away for estate litigators is that it is worth it to do the work necessary well in advance of the application date to sufficiently particularize objections.  If that is impossible because you lack source documents, you should seek access to the documents you require and then go back and revisit your objections as necessary once you have the particulars you need.

Thanks for reading.