Passing of Accounts

The jurisdiction of the Estate Trustee to pass accounts arises from Section 23(1) of the Trustee Act: Filing of accounts 23.(1) A trustee desiring to pass the accounts of dealings with the trust estate may file the accounts in the office of the Superior Court of Justice, and the proceedings and practice upon the passing of such accounts shall be the same and have the like effect as the passing of executors’ or administrators’ accounts in the court. R.S.O. 1990, c. T.23, s. 23 (1); 2000, c. 26, Sched. A, s. 15(2).

SECTION 48 OF THE ESTATES ACT

ACCOUNTING BY EXECUTOR TRUSTEE

48. Every executor who is also a trustee under the will may be required to account for their trusteeship in the same manner as they may be required to account in respect of their executorship. R.S.O. 1990, c. E.21, s. 48.

SECTION 49 OF THE ESTATES ACT

As to the extent of the issues which may be raised on a passing of accounts, whether by an estate trustee, or guardian, the powers of the court are set out at Section 49 of the Estates Act as follows:

PASSING ACCOUNTS BY GUARDIANS

49. (1) A guardian appointed by the Superior Court of Justice may pass the accounts of the guardian’s dealings with the estate before the judge of the court by which letters of guardianship were issued. R.S.O. 1990, c. E.21, s. 49 (1); 2006, c. 19, Sched. C, s. 1 (1).

POWERS OF JUDGE ON PASSING ACCOUNTS

49. (2) The judge, on passing the accounts of an executor, administrator or trustee under a will of which the trustee is an executor, has jurisdiction to enter into and make full inquiry and accounting of and concerning the whole property that the deceased was possessed of or entitled to, and its administration and disbursement. R.S.O. 1990, c. E.21, s. 49 (2).

FURTHER POWERS

49. (3) The judge, on passing any accounts under this section, has power to inquire into any complaint or claim by any person interested in the taking of the accounts of misconduct, neglect, or default on the part of the executor, administrator or trustee occasioning financial loss to the estate or trust fund, and the judge, on proof of such claim, may order the executor, administrator or trustee, to pay such sum by way of damages or otherwise as the judge considers proper and just to the estate or trust fund, but any order made under this subsection is subject to appeal. R.S.O. 1990, c. E.21, s. 49 (3).

MAY ORDER TRIAL AND GIVE DIRECTIONS AS TO PLEADINGS, ETC.

49. (4) The judge may order the trial of an issue of any complaint or claim under subsection (3), and in such case the judge shall make all necessary directions as to pleadings, production of documents, discovery and otherwise in connection with the issue. R.S.O. 1990, c. E.21, s. 49 (4).

49. (5)-(7) Repealed: 1997, c. 23, s. 8 (2).

NOTICE OF TAKING ACCOUNTS TO BE SERVED ON PUBLIC TRUSTEE

49.(8) Where by the terms of a will or other instrument in writing under which such an executor, administrator or trustee acts, real or personal property or any right or interest therein, or proceeds therefrom have heretofore been given, or are hereafter to be vested in any person, executor, administrator or trustee for any religious, educational, charitable or other purpose, or are to be applied by them to or for any such purpose, notice of taking the accounts shall be served upon the Public Trustee. R.S.O. 1990, c. E.21, s. 49 (8).

WHERE PERSON TO WHOM ADMINISTRATION GRANTED IS NOT NEXT OF KIN

49. (9) Where a person has died intestate in Ontario and administration has been granted to some person, not one of the next of kin, and it appears to be doubtful whether the intestate left any next of kin surviving them or that there are no known next of kin resident in Ontario, notice of taking the accounts shall be served upon the Public Trustee. R.S.O. 1990, c. E.21, s. 49 (9).

APPOINTMENT OF EXPERT ON EXAMINATION OF ACCOUNTS

49. (10) Where accounts submitted to the judge of the Superior Court of Justice are of an intricate or complicated character and in the judge’s opinion require expert investigation, the judge may appoint an accountant or other skilled person to investigate and to assist him or her in auditing the accounts. R.S.O. 1990, c. E.21, s. 49 (10); 2006, c. 19, Sched. C, s. 1 (1).

JURIDSTICTION OF THE ATTORNEY AND GUARDIAN TO PASS ACCOUNTS

As to the jurisdiction of the attorney and guardian to pass accounts, such jurisdiction arises from the Substitute Decisions Act S.O 1992. c. 30, at Section 42(1)-(5) as follows:

42. (1) The court may, on application, order that all or a specified part of the accounts of an attorney or guardian of property be passed. 1992, c. 30, s. 42 (1).

ATTORNEY’S ACCOUNTS

42. (2) An attorney, the grantor or any of the persons listed in subsection (4) may apply to pass the attorney’s accounts. 1992, c. 30, s. 42 (2).

GUARDIAN’S ACCOUNTS

42. (3) A guardian of property, the incapable person or any of the persons listed in subsection (4) may apply to pass the accounts of the guardian of property. 1992, c. 30, s. 42 (3).

OTHERS ENTITLED TO APPLY

42. (4) The following persons may also apply:

1. The grantor’s or incapable person’s guardian of the person or attorney for personal care.

2. A dependant of the grantor or incapable person.

3. The Public Guardian and Trustee.

4. The Children’s Lawyer.

5. A judgment creditor of the grantor or incapable person.

6. Any other person, with leave of the court. 1992, c.30, s.42(4); 1994, c.27, s.43(2).

P.G.T. a party

42. (5) If the Public Guardian and Trustee is the applicant or the respondent, the court shall grant the application, unless it is satisfied that the application is frivolous or vexatious. 1992, c. 30, s. 42 (5).

The jurisdiction of the court as it extends to specific powers of enquiry, also arise from the Estates Act, Section 49 per above.

PROCEDURES AND FORM FOR PASSING OF ACCOUNTS

The procedure and form for the passing of accounts is set out in the Rules of Civil Procedure at Rule 74.16 through to 74.18 as follows:

PASSING OF ESTATE ACCOUNTS

74.16 Rules 74.17 and 74.18 apply to accounts of estate trustees and, with necessary modifications, to accounts of trustees other than estate trustees, persons acting under a power of attorney, guardians of the property of mentally incapable persons, guardians of the property of a minor and persons having similar duties who are directed by the court to prepare accounts relating to their management of assets or money.

FORM OF ACCOUNTS

74.17 (1) Estate trustees shall keep accurate records of the assets and transactions in the estate and accounts filed with the court shall include,

(a) on a first passing of accounts, a statement of the assets at the date of death, cross- referenced to entries in the accounts that show the disposition or partial disposition of the assets,

(b) on any subsequent passing of accounts, a statement of the assets on the date the accounts for the period were opened, cross-referenced to entries in the accounts that show the disposition or partial disposition of the assets, and a statement of the investment, if any, on the date the accounts for the period were opened;

(d) an account of all money disbursed, including payments for trustee's compensation and payments made under a court order, but excluding investment transactions recorded under clause (e);

(e) where the estate trustee has made investments, an account setting out,

(i) all money paid out to purchase investments,

(ii) all money received by way of repayments or realization on the investments in whole or in part, and

(iii) the balance of all the investments in the estate at the closing date of the accounts;

(f) a statement of all the assets in the estate that are unrealized at the closing date of the accounts;

(g) a statement of all money and investments in the estate at the closing date of the accounts;

(h) a statement of all the liabilities of the estate, contingent or otherwise, at the closing date of the accounts;

(i) a statement of the compensation claimed by the estate trustee and, where the statement of compensation includes a management fee based on the value of the assets of the estate, a statement setting out the method of determining the value of the assets; and

(j) such other statements and information as the court requires.

(2) The accounts required by clauses (1) (c), (d) and (e) shall show the balance forward for each account.

(3) Where a will or trust deals separately with capital and income, the accounts shall be divided to show separately receipts and disbursements in respect of capital and income.

APPLICATION TO PASS ACCOUNTS

Material to be Filed 74.18 (1) On the application of an estate trustee to pass accounts, the estate trustee shall file,

(a) the estate accounts for the relevant period verified by affidavit of the estate trustee (Form 74.43);

(b) a copy of the certificate of appointment of the applicant as estate trustee;

Notice of Application(2) On receiving the material referred to in subrule (1), the court shall issue a notice of the application to pass accounts (Form 74,44).

Service(3) The applicant shall serve the notice of application and a copy of a draft of the judgment sought on each person who has a contingent or vested interest in the estate by regular lettermail.

(3.1) Where the Public Guardian and Trustee or the Children's Lawyer represents a person who has a contingent or vested interest in the estate, the Public Guardian and Trustee or the Children's Lawyer shall be served with the documents referred to in subrules (1) and (3).

(4) Where the person is served in Ontario, the documents shall be served at least 45 days before the hearing date of the application.

(5) Where the person is served outside Ontario, the documents shall be served at least 60 days before the hearing date of the application.

Appointment of Person to Represent Interest

(6) Where a person who has a financial interest in an estate is under a disability or is unknown and the Public Guardian and Trustee or Children's Lawyer is not authorized to represent the interest under any Act and there is no guardian or committee or other person to represent the interest on the passing of the accounts, the court may appoint a person for the purpose. Notice of Objection to Accounts

(7) Subject to subrule (8), a person who is served with documents under subrule (4) or (5) and who wishes to object to the accounts shall do so by serving on the estate trustee and filing with proof of service a notice of objection to accounts (Form 74.45), at least 20 days before the hearing date of the application.

(8) Where a person who has a contingent or vested interest in the estate is represented by the Public Guardian and Trustee or Children's Lawyer, the Public Guardian and Trustee or Children's Lawyer, as the case may be, shall serve on the estate trustee and file with proof of service, at least 20 days before the hearing date of the application, a notice of objection to accounts (Form 74.45) or a notice of no objection to accounts (Form 74.46) or a notice of non-participation in passing of accounts (Form 74.46.1). Judgment on Passing of Accounts Granted Without Hearing

(9) The court may grant a judgment on passing accounts without a hearing if the estate trustee files with the court, at least 10 days before the hearing date of the application,

(a) a record containing,

(i) an affidavit of service of the documents referred to in subrules (4) and (5),

(ii) the notices of no objection to accounts or notices of non-participation in passing of accounts of the Children's Lawyer and Public Guardian and Trustee, if served,

(iii) an affidavit (Form 74.47) of the applicant or applicant's solicitor stating that a copy of the accounts was provided to each person who was served with the notice of application and requested a copy, that the time for filing notices of objection to accounts has expired and that no notice of objection to accounts was received from any person served, or that, if a notice of objection was received, it was withdrawn as evidenced by a notice of withdrawal of objection (Form 74.48) attached to the affidavit,

(iv) requests (Form 74.49) or 74.49.1), if any, for costs of the persons served, and

(v) the certificate of a solicitor stating that all documents required by subclauses (i) to (iv) are included in the record; and

(b) a draft of the judgment sought, in duplicate, and

(c) if the children's Lawyer or the Public Guardian and Trustee was served with the notice of application and did not serve a notice of non-participation in of accounts, a copy of the draft judgment approved by the children's Lawyer or the Public Guardian and Trustee, as the case may be.

(10) Where the court grants judgment without a hearing, the costs awarded shall be assessed in accordance with Tariff C. Request for increased Costs

(11) Where the estate trustee or a person with a financial interest in the estate seeks costs greater than the amount allowed in Tariff C, the estate trustee or other person shall serve a request for increased costs (Form 74.49.2 or 74.49.3) on every other party to the application and file it, with proof of service.

(11.1) Unless the court orders otherwise, a request for increased costs may be served and filed only during the following period:

1. in the case of an estate trustee, the period beginning 10 days after service of the notice of application is complete and ending 10 days before the hearing date specified in the notice.

2. In the case of a person with a financial interest in the estate, the period beginning 10 days after the notice of application is served on the person and ending 10 days before the hearing date specified in the notice.”

As to how the passing of accounts may come about, Rule 74.15(1)(h) gives any individual having a financial interest in an estate to compel a passing of accounts. The forms applicable to passing of accounts matter whether contested or uncontested are set out in the Rules and Forms at 74.44 through 74.51.

OTHER RULES

Other applicable Rules include Rule 38.10(1)(a) which gives the court the jurisdiction to grant the relief sought on a passing of accounts or direct a trial of the issues.

Additionally Rule 75.06 states that any person who has a financial interest in an estate to apply for directions concerning any matter respecting the estate. There is no mandatory obligation to pass accounts and estate trustees, attorneys or guardians, will either voluntarily pass their accounts for any number of reasons, and/or be compelled to do so by those with a legal interest to request same. The court will normally determine only the matters raised on the objection, unless there are further issues raised at the hearing for directions, wherein such matters can be included in the Order Giving Directions.

The mandatory mediation rules apply as at Rule 75.1 to passing of accounts matters. Rule 75.1 also gives the court the jurisdiction and power to order that no mediation be conducted or that mediation be exempted. The Estates Act, Section 10, governs appeals from passing of accounts, which states that any appeal for a judgment amount exceeding $200.00 is to the Divisional Court.

As to executor’s compensation, there is an excellent article written by Jordan Atin, “Executor’s Compensation”. In terms of timing, there is no particular timing mandated by statute, case law, or otherwise, concerning the passing of accounts procedure in Ontario.

CASE LAW

There has been a great deal of case law in 2007, concerning passing of accounts, primarily addressing compensation, and the calculation thereof.

Of particular interest is the judgment on passing of accounts of October 2, 2007, K.F. Ross J, in the matter of Strickland v. Thames Valley District School Board. This case concerns the accounting by an attorney prior to death, and an executor accounting. The deceased had capacity up until the date of death, and consideration as to the entitlement to a passing of the attorney accounts was given, and a review of Roger Estate v. Leung [2001] O.J. No. 2171, Haley J. As to the accounts of the executor, the principles established in Laing Estate, Re Flaska, Re Jeffrey Estate, Toronto General Trust v. Central Ontario Railway , considered and taken together, applied in calculating compensation. This case is also worthy of review, since it considers the executor’s entitlement to costs, relying on the cases of Meredith v. Plaxton, Geffen v Goodman Estate.

Kimberly A. Whaley, Whaley Estate Litigation

The Estates Trusts & Pensions Journal- (1999), 19 E.T.P.J. 1.

Strickland v Thames Valley District School Board, 2007 WL 2884417 (Ont. S.C.J.) 2007 CarswellOnt 6248

Toronto General Trusts and Central Ontario R.W. Co. (1905), 6 O.W.R. 350 (H.C.) at p. 354.; Laing Estate (1998) 41 O.R. (3d) 571 (C.A.); Flaska Estate, Re (October 20, 1998) Doc. CA C29542 (Ont. C.A.); Jeffery Estate (1990), 39 E.T.R. 173 (Ont. Surr. Ct); Meredith v Plaxton 62 O.R. (3d) 427 [2002] O.J. No. 4472; Geffen v. Goodman 1991 CarswellAlta 91, 80 Alta L.R. (2d) 293, [1991] 5 W.W.R. 389, 127 N.R. 241, 42 E.T.R. 97

This overview is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This information is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive. Whaley Estate Litigation.

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