Not all parties involved in estate administration are entitled to apply for a passing of accounts. Section 42(4) of the Substitute Decisions Act (SDA) lists all the people who may apply. While the list does not include estate trustees or beneficiaries of an estate, it does allow the court discretion to give leave to appeal when it sees fit. In Testa v Testa (2015 ONSC 2381) the court explored when it is appropriate to exercise this discretion for beneficiaries and trustees.
Fred and Angelo Testa sought to obtain their brother Tony’s accounting while he was acting as POA for their mother’s property. They also sought explanations for Tony’s use of her assets. Their mother had five sons in total; all five children were equal beneficiaries but only Fred and Tony were estate trustees.
Fred and Angelo first sought to obtain Tony’s accounts by alleging that he breached his fiduciary. In the alternative, they sought leave to apply for a passing of accounts. The court ruled that breach of fiduciary duty alone would not entitle a beneficiary or trustee to seek a passing of accounts outside the general discretion afforded to the courts in the SDA. The court also noted that beneficiaries are entitled to seek redress against a third party if they have taken every reasonable measure to get the trustee to act. Under those circumstances, if the trustee continues not to act, the beneficiary can assume the position of the trustee and sue to recover trust property. The more appropriate course of action in this case would have been to remove Tony as estate trustee and have the remaining trustee (Fred) apply for a passing of accounts. Despite the fact that the plaintiffs did not properly apply in their capacity as beneficiaries or as a trustee, the court proceeded to consider its discretion under the SDA.
In deciding whether to exercise its discretion, the court considered the two main factors discussed in McAllister Estate v Hudgin ((2008) 42 ETR (3d) 313 (Ont SCJ)): “first, the extent of the attorney’s involvement in the grantor’s financial affairs and second whether the applicant has raised a significant concern in respect of the management of the grantor’s affairs to warrant an accounting”. The court ruled that Tony’s role as POA satisfied the first branch of the McAllister test and his various decisions while acting in that role (living in the grantor’s house rent-free, failure to cover house expenses, etc.) were enough to raise concern in the second branch. Leave was granted to require Tony to pass his accounts.
Testa v Testa follows McAllister as the test for determining whether the court should exercise its discretion and order a passing of accounts regardless if there exist allegations of breach of fiduciary duty (which in and of themselves are insufficient to entitle a passing of accounts on its own where leave is required).