Removing an executor also known as an estate trustee is a difficult mountain to climb and we have touched upon the law surrounding that issue in other blog articles. I refer one to our recent blog article on Walters v. Walters titled An Absolute Discretion. This website also features two other blog articles titled Applying to Remove an Estate Trustee.
The Superior Court of Justice in Clayton v. Clayton, a August 2021 decision of the Honourable Madam Justice Sylvia Corthorn reviewed this sensitive issue. This case featured a family patriarch dying in 2002 leaving an estate valued at over eight million dollars.
The Will contained the usual terms of granting the executors an absolute discretion on administering the estate, at other times described as an unfettered discretion. To the average person, that would be interpreted as being a blank cheque permitting the estate trustees to act without any review or second-guessing.
The fact situation if one reads between the lines is a husband and wife with three children. The father was quite successful financially, which accounted for the significant estate that he left behind.
The wills described below are interesting in that the husband clearly did not think his wife was worthy of simply inheriting everything and when she died then dividing the estate amongst the children. If the husband had followed this “standard” practice the wife could have gifted or lent money as she saw fit during her lifetime. All of this court conflict and a family that will never be healed could have been avoided.
Instead this is what the family patriarch did.
The father’s lawyer prepared a relatively sophisticated set of Wills, which created two separate trusts. Firstly, a family trust that allowed the executors at their absolute discretion to sprinkle both income and capital amongst the family members, including their spouses and children. The second trust was a trust simply for the wife so that income could be distributed to her during her lifetime. Upon her death and as of the time of the court decision, she was still alive although aged and beginning to suffer psychiatric setbacks, the two trusts would be divided amongst the children equally. Two of the three children seemed to be quite accomplished and were named along with the mother as one of the trustees. In the event of a disagreement amongst the executors, the majority ruled and all decisions must include the decision of the widow. However, one of the three children one can assume was clearly a black sheep of the family. He was not named as an executor and this son who had been married three times was to receive over the years significant payments from the estate. He was paid a $5,000 per month stipend along with various capital distributions to assist him.
However at the same time, the executors with no real paperwork or documentation, began to lend money to various members of the family. Compounding this, the situation with respect to the management of the estate fell apart when the widow’s mental capacity began to deteriorate.
Also the executors for 10 years never either formally applied to pass their accounts or provided the black sheep son with any specific details of the financial administration of the estate.
After 10 years had elapsed, all the family’s accountant provided the black sheep son were a set of unaudited financial statements with no supporting documentation.
The black sheep son applied to have his siblings and mother removed as estate trustees.
As we had described in earlier blog articles, the test for removing an executor especially one that has been granted explicit and unfettered discretion is extremely high. In this case, the court easily found that such a threshold had been met. The law is reviewed in great detail and the case and those decisions contained therein are extremely helpful for any serious student of this area of the law.
Once again the law of wills and estates leave a trail that leads back to England. The law for the removal of an executor is first set out in Lettersted v. Broers, an 1881 decision that holds that the main guide in determining whether or not an executor should be removed is the welfare of the beneficiaries. This has been supplemented by section 37 of The Trustees Act and there are a number of Ontario decisions that expand upon this greatly. One can do no better than the decision of Justice Ricchetti in Virk. As we have described elsewhere, an absolute discretion does not mean you can do whatever you want. The court held in this particular case that the trustees/executors had engaged in several forms of conduct that were so unreasonable as to amount to conduct in which no honest or fair dealing trustee would have engaged.
They were removed and replaced by a trust company.