Part 3: The Trustee Act provides legislative authority for a Court to remove a trustee
The matter involved a dispute primarily between two children of the deceased, Leonard La Calamita (who died in 2018): James La Calamita and Diane La Calamita. James was named as the Estate Trustee of Leonard’s Estate. A third sibling, Nadine, does not figure prominently in the Court’s analysis. The three children were the residuary beneficiaries of the Estate.
In 2023, three applications filed by James and Diane were before Justice Sanfilippo. They were heard concurrently on July 26, 2024. One of the issues before the Court was Diane’s application to have John removed as Estate Trustee. The Trustee Act provides legislative authority for a Court to remove a trustee, which is in addition to the Court’s inherent jurisdiction to do so.
The Court at paragraph 95 sets out a clear and very helpful summary of well-established principles, drawn from a review of caselaw, respecting trustee removal:
- Removal should only be done where the proper administration of justice requires it
- Where possible, the testator’s selection of trustee should be honoured
- The “clearest of evidence” is required for removal when there is “no other course to follow”
- The standard against which a trustee’s performance is assessed is not what is ideal or perfect, but “whether the estate is likely to be administered properly in accordance with the fiduciary duty of the trustee and for the benefit of the beneficiaries”
- Friction between co-executors becomes relevant only when it rises to a level that prevents proper administration
- Prior trustee misconduct is relevant where it is likely to recur: the goal is not punishment but protection of assets and beneficiary interests
- The Court is guided by the welfare of the beneficiaries.
The Court distinguishes between the “removal” of a trustee who has been appointed by the Court and “passing over” a trustee who has not assumed the duties, although the grounds for removal are the same. In this case, Diane sought a “passing over:” John was named in his father’s will as Estate Trustee, and he applied for but had not been granted a Certificate of Appointment as the trustee because Diane filed a Notice of Objection to his appointment on the basis of unfitness (at paragraph 15).
The Court notes that where the application is for a “passing over,” although the grounds for granting it are the same as for a removal, “[p]assing over…is an unusual and extreme course,” “an extreme remedy” of “last resort” (at Paragraph 95(f)).
The Court alludes to the bases on which Diane sought John’s removal: that he was in a conflict of interest because he was also a beneficiary and that his conduct merited his removal. The conduct she relied on what that John had already filed two applications against Diane related to the Estate Administration, he refused to provide an account, he concealed income tax and valuation information and there was friction between John and Diane.
On the point of having filed litigation, John sought the Court’s direction on interpreting his father’s Will. The Court found this was proper conduct for an Estate Trustee who needed guidance.
On the point of providing accounting, John had provided informal accounting and committed to provide accounts “in the normal course” (at paragraph 102). The Court found Diane had sufficient knowledge of the Estate assets and liabilities. She also provided evidence of her own historical knowledge of the main Estate asset, a commercial property. The Court found John may have delayed providing information, but it was provided, and the delay did not meet the test for neglect of duty sufficient to discharge him.
On the point of friction, the Court noted that the testator had included provisions in his Will that could help deal with potential friction, such as language about disinterested trustees being involved in the event of a conflict of interest. The conflict between the siblings was not enough to “impair the administration of the Estate” although their “name calling and accusations….[do] not flatter either of them” (at paragraph 104).
Finally, when it comes to what the Court describes as its main guide, the beneficiaries’ welfare, Diane’s evidence did not establish any endangerment of property, dishonesty, or evidence that John “cannot, or will not, administer the Estate property” (at paragraph 106). The request for his removal was dismissed.
The Court agreed that should John seek to sell the Estate’s commercial property to himself and Nadine, the terms of the Will required him to appoint a disinterested trustee to manage that sale. The Court did not appoint a disinterested trustee at this stage, however, as no beneficiary had sought an order for private sale at the time of the hearing.
As noted above, John had not yet been appointed as Estate Trustee. The Court granted John’s application to have a Certificate of Appointment issued to him so that administration could proceed.
The case is a good reminder that the Court will be very reluctant to interfere with a testator’s choice of estate trustee unless there is compelling evidence of neglect of duty or another serious circumstance that demonstrates that estate administration is compromising or endangering beneficiary interests.
If you would like to know more, please contact us at: hello@dicksonappell.com or at (416) 927-0891