Generally speaking, the beneficiary of an estate has the right to compel an estate trustee to commence an application to pass the estate accounts, which process is to be carried out in accordance with Rules 74.16-75.18 of the Ontario Rules of Civil Procedure. As with any litigation, the question of who pays for what and when often arises in the context of accounting proceedings. Below is a brief overview of the caselaw to consider in addressing which costs are to be paid, by whom and at what time.
The common understanding is that the costs of a passing of accounts application is a proper expense of the estate (see, for example, Steen v. Gibson, 2015 ONSC 4933, para. 26). This case provides, in part, “…Executor’s compensation (and estate legal fees) can be and in the absence of agreement is normally fixed by the court in a passing of accounts. The costs of passing accounts is normally recognized as a proper expense of the estate”. However, the guiding principle now appears to be to apply the “loser pays” model to contested passings of accounts (McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA)). As such, in many cases, the determination as to costs is reserved to be determined at the end of the hearing or trial, as the case may be.
With regard to the matter of interim costs, such as the costs for the preparation of estate accounts and other associated expenses, there are two conflicting lines of cases. Following DeLorenzo v. Beresh, 2010 ONSC 5655 (CanLII) (para. 24), the parties should each bear their own costs, until resolution of the matter, particularly in the context of a contested passing of accounts application, where the court can make a ruling on estate trustee indemnification. On the other hand, following Furtney v. Furtney, 2014 ONSC 3774 (CanLII) (para. 44), and having in mind section 23.1 of the Trustee Act, R.S.O. 1990, c. T.23 (which enshrines the indemnification of trustees), it is also acceptable for an estate trustee to pay for reasonably incurred litigation expenses from estate funds, at first instance, without the consent of beneficiaries or a court order. Arguably, this includes the costs associated with a court-ordered passing of accounts. Another factor to consider is that an estate trustee’s compensation may be reduced, having in mind the estate trustee’s conduct over the course of the estate’s administration and the litigation.
As with all litigation costs, including applications to pass accounts, courts will look at the surrounding circumstances of each case to determine the costs to be paid. Notably, courts may make blended costs awards in accounting proceedings, such that a portion of a passing of accounts is ordered to be paid by the estate, and a portion by the estate trustee. In any event, estate trustees are always cautioned to act and spend reasonably, and at all times have in mind the best interests of the estate beneficiaries.