In the recent decision of Zarrin–Mehr v. Shokrai, 2024 ONSC 6319, the court considered whether the circumstances warranted the appointment of an estate trustee during litigation.

Facts

Sadollah Zarrinmerh, died on November 15, 2020. He was survived by his wife, Soraya Shokrai, and two children, Mehdi Zarrin-Mehr, his son from a previous marriage, and Maral Zarrin-Mehr, his daughter with Soraya.

Soraya originally believed the deceased had died intestate, and so applied for a certificate of appointment of estate trustee without a Will (“CAET Without a Will”). After obtaining a CAET Without a Will, Soraya claimed she had discovered a Will signed by the deceased on September 30, 1999, which appointed her as estate trustee (the “1999 Will”).  Soraya then issued an application for orders revoking the CAET Without a Will and for the issuance of a CAET With a Will.

Mehdi commenced an application to challenge the validity of the 1999 Will, to alternatively seek directions interpreting the 1999 Will, to assert trust claims against assets of the estate, and to contest Soraya’s administration of the estate. Mehdi and Soraya each served motions with the application.

Motion to Appoint ETDL

Within his application, Mehdi brought a motion for the appointment of a professional estate trustee during litigation (“ETDL”) to administer the estate until the adjudication of the application.

Rule 75.06(3)(f) of the Rules of Civil Procedure provides that on a motion for directions, “the court may direct that an estate trustee be appointed during litigation, and file such security as the court directs”. Section 28 of the Estates Act empowers the court to “appoint an administrator of the property of the deceased’s person”. As Mehdi had a financial interest in the estate in the event of an intestacy, he was a proper person to bring a motion to appoint and ETDL.

The court has broad and inherent jurisdiction to supervise the management of estates and its own process, including the inherent jurisdiction to appoint an estate trustee to protect the assets of an estate if they are at risk during the litigation. The ETDL ensures a level playing field while the parties litigate and preserves the assets of the estate for the benefit of the beneficiaries.

The following factors have been considered by the court in exercising its discretion to appoint an ETDL:

(a)  Whether a trustee may be a witness in the litigation;

(b)  Potential for conflict of interest;

(c)  Conflict between the interests of the trustees and/or beneficiaries;

(d)  Hostility between the trustees and/or beneficiaries;

(e)  Lack of communication between the parties; and

(f)   Evidence of settlement discussions that exclude some of the parties.

The appointment of an ETDL is not an extraordinary remedy and the court will favour the appointment unless the estate administration is straightforward and simple.

The court considered and dismissed six arguments advanced by Mehdi as to why an ETDL should be appointed in this case.

First, although Soraya had originally failed (in error) to serve Mehdi with her new application for a CAET With a Will in which she stated that the deceased had no children, the error was corrected within days of being detected.

Second, Mehdi argued that Soraya swore an affidavit of debts in which she stated that the estate did not have an interest in a business or business assets, which was inaccurate as the deceased had an interest in a corporation; however, this argument was not accepted because the affidavit of debts disclosed the value of the shares.

Third, there was no evidence in support of Mehdi’s allegation that Soraya intended to improperly use estate funds to wind up the deceased’s corporation.

Fourth, Soraya’s refusal to produce documents from lawyers who acted for her and the deceased was subject to a determination of other motions within the applications which had since concluded, and such documentary production would now be made.

Fifth, contrary to Mehdi’s allegation, Soraya was not taking a position with respect to the ownership of real property owned by the estate that was contrary to how title was held.

Sixth, the court rejected Mehdi’s submissions that an ETDL was necessary to protect the assets of the estate. The alleged estate assets were subject to a “Restated No Dealings Order”, which Soraya had agreed to, and there was no evidence that she had breached the order.

Mehdi and Soraya were adverse in interest with respect to the validity of the 1999 Will, took different positions on various issues and Soraya had caused some delay and errors, which were explained. However, Mehdi had not established a lack of communication between the parties that was detrimental to the administration of the estate, nor was there hostility between the parties that impacted the preservation of the assets of the estate. The estate was straightforward and the costs of appointing a professional ETDL was not justified.

Takeaway

Where an estate is uncomplicated, there is no risk to the estate assets under the appointed estate trustee, and no hostility between the estate trustee and the other parties that could impact the assets of the estate, a court may decline to appoint an ETDL if the costs of doing so would aversely impact the value of the estate. The court is ultimately interested in proportionate and efficient resolutions to estate disputes.

————————————

The Advocates’ Society
Mediation and Arbitration: Transforming Estates Law
December 2, 2024 – 1:00 pm to 4:00 PM (ET)

Med-Arb is a hybrid option that combines both mediation and arbitration. The parties first attend mediation to try to negotiate a settlement. If a settlement is not reached, or if some issues are settled while some remain unresolved after the mediation, the parties then proceed to an arbitration with the mediator acting as the arbitrator. The arbitrator renders a binding arbitral decision of the issue or issues that were raised, but not settled, at the mediation.  Med-Arb is an under-utilized relatively new concept in estates disputes but is attracting interest among lawyers and their clients.  Med-Arb is often quicker, more efficient, and cheaper.

Check out The Advocates’ Society program at: Mediation and Arbitration: Transforming Estate Lawyer, co-chaired by Justin de Vries and Ian Hull.