Being a trustee is not easy. Sometimes trustees need some help. In those cases, the trustee (or trustees) may apply to the court for directions (see for example, rules 74.15 and 75.06 of the Rules of Civil Procedure, section 60 of the Trustee Act, and subsections 39(1) and 68(1) of the Substitute Decisions Act). The court has the discretion to refuse to make an order for directions. The court has warned trustees that it will not assume the role of the trustee – the court will help determine a legal question, interpret a trust document, or break an impasse between co-trustees, but it will not alleviate a trustee from having to exercise her discretion.
Impasses between co-trustees, which are not uncommon, have serious results. They can lead to a standstill in the administration of a trust or estate, to the detriment of the beneficiaries. In those circumstances, the court may decide the issue and direct the trustees on how to move forward. Such was the case in Squillace v Sampogna.
In her will, Maria Sampogna named her five children as equal beneficiaries of her estate and appointed them all estate trustees. Unfortunately, the children quickly divided into two camps (with one estate trustee refusing to participate) and the administration of the estate ground to a halt. Two of the estate trustees applied to the court for directions pursuant to rule 75.06 of the Rules of Civil Procedure. The Court held that it would provide the parties with directions that would not only result in the winding up of the estate and the distribution of all the assets, but would also deal with all accounting and expense issues between the parties. Justice Le May held that none of the issues raised in the application were significant enough to direct a trial of the issue. He also seized himself of the matter in case any issues arose after disposing of the application for directions. Finally, the Court allowed two of the trustees to be removed from their role as soon as certain steps in the administration had been completed.
The issues in contention are likely familiar to lawyers practicing in estates. Among other issues, the Court’s direction was sought regarding:
- A dispute over the disposal of household items: half the trustees wanted to auction off the items, the other half believed the items were worthless and should be disposed of immediately. As a result, the household items were sitting in storage incurring storage fees.
- An unsubstantiated allegation that two of the estate trustees had stolen jewellery from the deceased.
- Failure of the estate trustees to agree to pay the creditors of the estate.
The Court first addressed the individual issues raised in the application to pass accounts. For the examples set out above, the Court held:
- It was reasonable for the household items to be held in storage for approximately a year after Maria died. After that time, two of the estate trustees indicated their willingness to give up any interest in the items (which they believed were worthless). As a result, the other estate trustees were ordered to pay all storage fees from that date forward. The Court then turned its mind to how to deal with the items going forward. It held that the estate trustees who wished to auction off the items were to be provided with a key to the storage locker within 10 days of the decision. They were then at liberty to dispose of the items in any way they saw fit. However, they were prohibited from involving any of their siblings in the disposal of the items.
- The estate trustees were prohibited from pursuing their claims that the other parties had stolen jewellery from the estate unless additional (or any) evidence came to light.
- The Court ordered that the creditors of the estate be paid out of the assets of the estate.
The Court then turned to the next steps needed to wind up the estate (for example, filing tax returns). It listed those steps and imposed explicit timelines for their completion. The Court also ordered that the parties file with the Court a reporting affidavit at specific intervals confirming that the steps had been completed.
The Court’s decision to offer directions to the parties was likely, at least in part, a practical one – the estate was not large and would likely be drained by extended litigation. Based on the history of litigation between the parties, there was little reason to believe that the parties would be able to work together cooperatively to finish the administration. By offering directions to the parties, the Court helped break the deadlock and set the estate administration on a path to completion.