How far does a court’s power extend in dealing with estate trustees who defraud an estate?  Justice Greer’s recent reasons on sentencing in the Estate of Paul Penna (2010 ONSC 6693 (CanLII)), released on December 20, 2010, provides some insight. 

One of the estate trustees of the Estate, Barry Landen, had been found to have perpetrated a massive fraud in the Estate’s administration.  A forensic accounting firm had produced a report detailing some of the shocking amounts of money that Landen had taken for his personal use.  However, as Landen never passed his accounts as estate trustee, despite a court order requiring him to do so, there was no way to trace any further missing assets. 

In a previous endorsement, Justice Greer had found that Landen was in contempt of four court orders, including failing to pass his accounts and failing to attend at an examination in aid of execution (judgment debtor examination).  Rule 60.11 of the Rules of Civil Procedure which deals with civil contempt, permits a Judge hearing a contempt motion to order a variety of sanctions, including imprisonment, payment of a fine, to refrain from doing an act or paying costs.  Justice Greer found that there was little point in ordering Landen to pay a fine as he had pled  poverty.  Moreover, she found that ordering him to do a positive act was similarly pointless, as “there are no acts to be done, which would allow Landen to purge his contempt.”  Finally, Greer J. rejected as a mitigating factor Landen’s  apology to the court, finding it to be hollow and insincere. 

In arriving at her sentence, Justice Greer considered that “proper penalties make the public sit up and take notice.  The word goes out into the community that the Court will not tolerate disobedience of its Orders.  In this case, the “community” is specific as well as general in nature.  The specific community is that of estate trustees and other trustees, as well as persons in positions as fiduciaries, persons acting under powers of attorney or other positions of trust.”

Landen’s conduct called for a sentence of imprisonment.  As to its length, Justice Greer rejected both Landen’s counsel’s submission and the estate trustee during litigation’s submission as too low (ranging from 30-90 days’ imprisonment).   Instead, Justice Greer sentenced Landen to 14 months’ imprisonment.  She explained that his failure to pass accounts, his contempt of three other orders and his failure to ever account for his fraud, was so egregious that it called for a sentence that would deter others from breaching court orders.  

Interestingly, at the end of her reasons, Justice Greer noted that she was alert to the fact that, in civil contempt matters, unlike criminal sentencing, there is no method of parole. 14 months is truly 14 months in the slammer.

Should this decision be required reading for all estate trustees?

Thanks for reading.

Angelique