The fiduciary relationship should not be entered into lightly. Examples of fiduciaries in estates and trusts law are estate trustees, attorneys, and guardians. The fiduciary owes legal duties to the beneficiary, for example an estate trustee must account for her management of estate assets. Failure to do so can lead to trouble for the estate trustee. While rare, when there is a breach of the fiduciary duties and the conduct of the fiduciary is egregious, the court can even award punitive damages against the fiduciary.
In the case of Queripel v Shaddock, 2023 ONSC 3114 (CanLII) (Queripel), the estate trustees began acting in 2002. A long term trust in the form of a life interest in a house tied up the bulk of the estate until the life tenant (the person who was given the right to live in the house) died in 2022. The will provided that after the death of the life tenant the house would be sold and the funds would be distributed to the deceased’s grandchildren when they turned 21. However, the beneficiaries had concerns about the management of the estate and sought an accounting from the estate trustee. Communications to the estate trustee, including letters from a lawyer, went unanswered. A motion to remove her as estate trustee was brought and granted. Three subsequent court orders including the requirement that the estate trustee account and produce documentation were not complied with by former the estate trustee. Finally, the beneficiaries sought a court order that the former estate trustee pay damages incurred by the estate as a result of the breach of fiduciary duty, and pay punitive damages to the estate for her egregious conduct.
The court agreed that this was a case in which the former estate trustee should pay damages to the estate (items and costs to the estate were particularized and documented), and also pay punitive damages. The court referred to the case of Walling v Walling, 2012 ONSC 6580 (CanLII) (Walling) in which punitive damages were awarded against the estate trustee. Among the egregious conduct in Walling was the court’s finding that the estate trustee squandered estate assets and caused emotional harm to the minor beneficiaries. The court found that many of the concerns in Walling were present in Queripel. It also found that the court needed to send a message of its “abhorrence” of the former estate trustee’s conduct and it must be sufficient to act as a deterrence in similar cases. The court ordered the former estate trustee to pay:
(i) damages for breach of fiduciary duty to the estate in the amount of $174,147,98;
(ii) punitive damages to the estate in the amount of $50,000; and
(iii) full indemnity costs of the motion (in which the beneficiaries sought costs against the estate trustee) in the amount of $49,601.09.
Ordering punitive damages against an estate trustee or other fiduciary may seem extreme. But it is a consequence that the court is willing to impose when warranted.