Initially, an estate trustee during litigation (“ETDL”) could be appointed where the validity of a will was being challenged. However, the role proved popular and now ETDLs are appointed in a wide variety of situations where a neutral party is needed to administer and preserve the estate assets. The question addressed in Baran v Cranston, 2020 ONSC 589, is in what circumstances should an ETDL should be appointed.
The Canadian figure skater and painter, Toller Cranston, died on January 23, 2015, in Mexico. Since he died without a will, his estate passed on intestacy to his three surviving siblings.
On the consent of all three siblings, Toller’s sister, Phillippa, was appointed as estate trustee without a will in Mexico (in 2015) and Ontario (in 2016). For the next several years, Phillippa worked diligently to administer Toller’s estate. However, a dispute arose over the distribution of Toller’s artwork – Phillippa intended to sell everything and distribute the residue in cash, while her brothers wished to receive some of the residue of the estate in the form of paintings.
In 2017, Phillippa’s brothers commenced an application to have Phillippa removed as estate trustee. That application was adjourned to April 2020, to be heard at the same time as Phillippa’s application to pass her accounts. In the meantime, Phillippa’s brothers brought a motion to temporarily suspend Phillippa’s administration of the estate and appoint an ETDL in her place. In May 2019, a master granted the brother’s motion and appointed an ETDL to take over the administration of the estate until the issue of Phillippa’s removal was finally determined. Phillippa appealed.
Phillippa argued that the master exceeded her jurisdiction under s. 37 of the Trustee Act, RSO 1990, C T.23, by removing Phillippa as estate trustee. Section 37 states that the removal of an estate trustee can only be done by a judge.
In response, the judge found that Phillippa has not been removed as estate trustee – that issue had yet to be determined. The master’s decision also made clear that she was only temporarily suspending the estate trustee’s administration of the estate. Rather, the only issue determined by the master was whether to appoint an ETDL.
The court’s authority to appoint an ETDL is found at s. 28 of the Estates Act, RSO 1990, c E.21, an rule 75.06(3)(f) of the Rules of Civil Procedure, RRO 1990, Reg. 194. Of particular note, rule rule 75.06(3)(f) grants the authority to appoint an ETDL to the “court,” which by definition includes a master.
Next, Phillippa argued that the master did not properly apply the test for determining whether the appointment of an ETDL was necessary.
The judge carefully reviewed the circumstances in which a court will appoint an ETDL. While s. 28 of the Estates Act only contemplates the appointment of an ETDL where the validity of a will has been challenged, the judge found that the decision whether to appoint an ETDL is discretionary and part of the court’s inherent jurisdiction to oversee the administration of estates. In practice, courts have appointed ETDLs in a wide variety of situations beyond will challenges, including cases of intestacy.
The judge found that the master had considered and applied the correct legal principles in reaching her decision, including:
- The court has broad, inherent powers to supervise the management of estates;
- The inherent jurisdiction of the court includes appointing an officer of the court to preserve and protect the estate assets;
- The court must ensure that neither side is able to use their control over the estate to benefit themselves or to prejudice the other beneficiaries;
- The assets of the estate ought to be administered to the maximum advantage of the beneficiaries;
- An estate trustee who is in an adversarial position towards a beneficiary should not normally be left in charge of trust property;
- The appointment of an ETDL is not an extraordinary measure and the court should refuse to appoint an ETDL in only the clearest of cases.
The judge then reviewed the master’s reasons for appointing an ETDL. The judge held that the master had taken into consideration the appropriate factors, including:
- Whether the estate trustee may be a witness in the litigation;
- Potential for conflict of interest;
- Conflict between the interests of the estate trustee and/or beneficiaries;
- Hostility between the estate trustee and the beneficiaries;
- Lack of communication between the parties; and
- Evidence of settlement discussions that exclude some of the parties.
In particular, the master found that the administration of the estate was not simple and had become highly adversarial. The master also held that Phillippa’s decision to sell the remaining artwork or make plans regarding the future rights of the artwork without consulting her brothers was unreasonable and contrary to her obligations as an estate trustee to act only in the interests of the beneficiaries. Accordingly, the master held that an ETDL should be appointed.
The judge dismissed the appeal and upheld the master’s decision to appoint an ETDL.
This case highlights the different tests for removing an estate trustee and appointing an ETDL: while there is a high bar to remove an estate trustee, there is a correspondingly low bar to appoint an ETDL. This is especially true where the heart of the dispute revolves around the estate trustee’s management of estate property; an ETDL will be appointed where it is necessary to stop the estate trustee from disposing of the property until such time as all of the circumstances may be reviewed by the court.