In a recent Ontario decision, a court dismissed fraud and conflict of interest allegations made by the deceased’s niece against her uncle in his capacity as estate trustee.
Niece Makes Allegations Against Uncle
In May 2016, the deceased suffered a stroke. After this, his health declined precipitously; further psychiatric and other medical issues followed with repeated hospitalizations in 2017 and 2018.
In January 2018, the deceased was found to be incapable of managing his property and his personal care.
In December 2018, the deceased’s brother was appointed as his guardian for property and for personal care.
In January 2019, the deceased’s niece went to the offices of the brother’s lawyers. She said that she had just learned that in May 2017, the deceased had granted her powers of attorney for property and personal care. The niece was told that the brother had recently been appointed the deceased’s guardian.
In May 2019, the niece moved to challenge the brother’s appointment as the deceased’s guardian on the basis that she had not been given notice of the brother’s application to be appointed. The niece’s motion was scheduled to be heard in September 2019.
Then, on September 20, 2019, the deceased died unexpectedly.
The beneficiaries on the deceased’s intestacy were the brother (one third), another family member (one third), the niece (one sixth) and the niece’s sister (one sixth).
Following the death, the brother was appointed estate trustee on December 4, 2019, after serving his notice of application on all beneficiaries in October 2019.
The niece initiated an application in January 2020. She sought orders replacing the brother as estate trustee and requiring him to pass the accounts of the estate. She maintained that the brother was in a conflict of interest which precluded him from administering the deceased’s estate even-handedly and impartially. In support of her position that the brother was in a conflict of interest, the niece claimed that he had engaged in prior litigation against the deceased and there was a “clear animosity” between her and the brother, as well as her sister. Finally, she alleged that the brother had committed a fraud upon the court by obtaining the original certificate of appointment without serving her with a notice of application, which had therefore deprived her of the opportunity to file an objection to his appointment.
The brother opposed the application. He maintained that he was properly appointed estate trustee and that there was no conflict of interest.
The application was not heard in June 2020 as scheduled because of the COVID-19 pandemic; it was heard in September 2020 instead.
The central issue was whether the brother was in a conflict of interest position rendering him incapable of administering the deceased’s estate even-handedly and impartially.
Court Finds No Fraud or Conflict of Interest
The court began by setting out the applicable law and legal principles.
First, under Rule 75.04 of the Rules of Civil Procedure, a court may revoke the certificate of appointment of the estate trustee where the court is satisfied that the certificate was issued in error or as a result of a fraud on the court. Additionally, s. 37(1) of the Trustee Act provides that the court may remove a personal representative on any ground upon which the court may remove any other trustee, and may appoint another proper person to act in the pace of the executor or administrator so removed. An estate trustee may be removed if it is in the best interests of the trust and its beneficiaries to do so; the main guideline is the welfare of the beneficiaries. Finally, the court explained that actual incidents of alleged misconduct are generally provided but actual misconduct is not a prerequisite to removal.
However, the court found no basis for the niece’s allegations against the brother for conflict of interest or fraud that would warrant his removal as estate trustee.
First, the court rejected the niece’s claim that she was not properly served, thus constituting fraud, stating:
“This statement was not true. Like all other beneficiaries, [the niece] was served with [the brother]’s notice of application in October 2019. She signed for the registered mail envelope. She contacted her lawyer who, in turn, requested a copy of the materials which were provided on November 4, 2019. One month later, the court granted [the brother]’s certificate of appointment.”
Additionally, the court rejected her claim of a conflict of interest based on prior litigation between the brother and the deceased. The court explained that the litigation had been the result of a mortgage issue that was subsequently resolved, stating:
“There was nothing improper in the steps taken by [the brother]. There is nothing in [the brother]’s conduct in relation to the corporation or the mortgage that gives rise to a conflict of interest warranting his removal as estate trustee.”
Finally, the court dismissed the niece’s allegation that the brother had an animus toward her and that, as a result, he was unable to administer the deceased’s estate impartially, finding the allegations without foundation.
As a result, the court dismissed the niece’s application.
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