The long-standing principle that estate trustees are entitled to be indemnified for all reasonably incurred costs was recently reiterated in the case Sawdon Estate v. Sawdon, 2014 ONCA 101 (CanLII). Specifically, the Ontario Court of Appeal confirmed that legal costs, including those incurred for trial, are repayable to the Estate Trustee on the basis of public policy considerations. The facts of the case were summarized in our recent post Creating Informal Trusts.
The court observed that the public policy considerations in estate litigation generally fall into two categories: (1) the need to give effect to valid wills that reflect the intention of competent testators; and (2) the need to ensure that estates are properly administered, including by seeking direction of the courts to rectify any difficulties or ambiguities created by the deceased’s actions.
One of an estate trustee’s duties is to determine the estate assets and call them in (or collect them). Thus, in Sawdon Estate, the Estate Trustee was obliged to determine whether the Bank Accounts formed a part of the Estate by way of resulting trust or belonged to the deceased`s five (5) children (the “Children”) by right of survivorship.
The court outlined the principle that where the problems giving rise to the litigation were caused by the testator, it is appropriate that the testator, through his or her estate, bear the cost of their resolution. The court felt that in such situations, it ought not to fall to the Estate Trustee to pay the costs associated with having the court resolve the problems.
On this point, the court determined that the difficulties and problems arising from the Bank Accounts were caused by the testator, Arthur, who transferred the Bank Accounts into his name jointly with two of his five children, Wayne and Stephen, without clearly spelling out, by will or otherwise, what he intended by those transfers. Specifically, the court surmised that it was not clear whether Arthur intended to make a beneficial gift of the right of survivorship in the Bank Accounts to Wayne and Stephen; to have them hold the funds in the Bank Accounts on resulting trust for the Estate; or, on Arthur’s death, to have them hold the funds in the Bank Accounts on trust for the Children. The court determined that because these problems were caused by Arthur, it is appropriate that he – through his estate – bears the cost of their resolution.
Finally, the court reasoned that if estate trustees were required to bear their legal costs in such situations, they might decline to accept the role of estate trustee or be reluctant to bring the necessary legal proceedings to ensure the proper administration of the estate.
It was observed that the estate trustee acted reasonably throughout the case and for the benefit of the Estate. Furthermore, their fiduciary duty, as Estate Trustee, compelled them to participate in these proceedings to ensure that the court had the best evidence on which to determine Arthur’s intentions in respect of the Bank Accounts. From this perspective, the court concluded that the Estate Trustee’s involvement engages both of the public policy considerations.
For assistance with an estate litigation matter or information about the role of an estate trustee, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.