What is the limitation period for an attorney to seek compensation on a passing of accounts? In Armitage v. The Salvation Army, 2016 ONCA 971, the Court of Appeal confirmed that there is no such limitation period (although the equitable doctrine of laches and acquiescence can be asserted).
In Armitage, the attorney for property brought an application to pass her accounts almost two years after the death of the grantor of the power of attorney. The estate’s sole beneficiary took the position that attorneys could claim annual compensation pursuant to the Substitute Decisions Act, 1992. As such, the end of each year of service would trigger the beginning of a two-year limitation period to claim such compensation and the attorney would be out of time to claim a majority of her compensation. The application judge rejected this argument, holding that – pursuant to the Limitations Act, 2002 – the limitation clock started ticking when the grantor died. The attorney’s application thus barely squeaked in (another week to commence the application would have been over two years).
Justice Hourigan, writing for a unanimous panel of the Court of Appeal, agreed with the result reached by the application judge. However, Justice Hourigan concluded that the application judge was incorrect that the Limitations Act, 2002 was applicable in these circumstances.
Citing Matthew Furrow and Daniel Zacks’ article “The Limitation of Applications to Pass Accounts” (2016) 46 Adv. Q. 2, Justice Hourigan noted that in Ontario there was historically no statutory limitation period for a passing of accounts. The enactment of the Limitations Act, 2002, did not change the common law, as it limited “claims” and a passing of accounts is not a claim.
A “claim” is defined as: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.” On a passing of accounts, attorneys do not seek redress for any loss, injury, or damage. Instead, attorneys seek court approval of their actions, including for compensation taken or now sought. A passing of accounts is the opposite of remedial; it is the quest for a court order that no remediation is necessary to the accounts. Additionally, the “act or omission” in the act could not be an act or omission of the plaintiff or applicant – as the beneficiary’s argument would suggest.
As the Limitations Act, 2002 is not applicable in this circumstance, the only defences were those of laches and acquiescence – neither of which were asserted. However, Justice Hourigan expressly noted that he was not holding that the Limitations Act, 2002 had no applicability to the passing of accounts. For example, it might be that a beneficiary filing a notice of objection is a claim under the Limitations Act, 2002. Justice Hourigan left this determination to another case where this situation arose directly on the facts.
Neither the application judge nor the Court of Appeal considered the limitation period set out in subsection 38(2) of the Trustee Act. However, that statute refers to a limitation period with respect to where “a deceased person committed or is by law liable for a wrong to another”. Under the logic of Armitage this provision would not be applicable to an attorney seeking compensation pursuant to a passing of account.
While Armitage is correct in law, it also fits public policy. Fiduciaries should avoid pre-taking compensation before it is confirmed on a passing of accounts, unless the beneficiaries consent. If Armitage had gone the other way, there would have been a perverse incentive to either pretake compensation or engage in overly frequent passings of accounts (tying up valuable court resources).