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Application for directions
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Application for directions86 (1) A trustee, executor or administrator may, without commencing any other proceeding, apply by petition to the court, or by summons on a written statement to a Supreme Court judge in chambers, for the opinion, advice or direction of the court on a question respecting the management or administration of the trust property or the assets of a will-maker or intestate. (2) The application under subsection (1) must be served on, or the hearing attended by all persons interested in the application, or by those that the court thinks expedient. (3) The costs of an application under subsection (1) are in the discretion of the court.
Issue: Should the trustees or executors come to court to ask if a price is good or not? When they have power to exercise the right to sale, should it be overridden? Ratio: It is not the role of the executors to ask the court whether a business deal is adequate or not. The court is only there to provide legal advice, not any advice with regards to how the executors pass judgment and govern under their own discretionary powers Analysis: Here, three of the executors felt like 55 was simply too low of a price. There was no mala fides and seemingly unlimited discretion to figure out the right price, a price it was not in the courts expertise to ascertain. Based on both Tempest v Lord Camoys as well as Re Haasz, the court demurred in exercising any ambit over the discretionary powers of trustees, especially exacerbated by the huge sums in this case. Part of it is expertise but another part is that the courts do not want to be seen as blessing a transaction that might go sideways. Holding: Application overturned. McKay Estate v Love Facts: Love was appointed executor after three residuary benefits were booted due to ongoing agreements. Estate consisted of land subject to numerous expropriations. Rather than continue to lose the estate, Love elected to sell it to the government and release all claims. Two of the beneficiaries liked it, one didn’t (due to a claim that it undervalued the land and that the estate should pursue the compensation claims, not just let them go.) Love hired an economist who recommended the course of action for a lump sum sale. KM claimed the court had no jurisdiction due to material facts being in dispute Issue: On an application such as this, can the court find facts in lieu of a full trial? Does the court have the power to bless the sale? Ratio: (Ontario Procedure Rules) – Do not distinguish between proper jurisdiction for fact finding, the court was satisfied it could make a decision using affidavit evidence Where a decision has been made, a trustee can ask the court for the approval of a decision once it has been clear that a decision has been made in good faith and is fair to the parties involved. Analysis: The court is not interested in determining whether the transaction is the fairest one possible, especially in light of the pure discretion Love had in exercising his duties. In this instance, Love had exercised his judgment diligently and was not coming for advice but for a blessing. Given the sale was bona fide and fair between the beneficiaries, this was within the courts power to grant. The cash offer was a very substantial one and was actually in the higher range of possibilities as determined by the appraiser. Not only that, but there was no offer anywhere near as close, so pursuing compensation litigation was a serious case of a danger of risking a big bird in the hand for possibly a slightly larger bird in the bush. Holding: Appeal dismissed, order granted. Re Haasz Facts: Testator died with 106k in cash and shares worth ~61k. An offer was made to buy the shares for 65k but the deadlock between the appellant and respondent trustees quashed the sale due to unanimity concerns. The shares, based on projections, were not likely to go up in price. They got another offer for 47k after when the shares were worth about 45k. Dividends were supposed to be used to pay the life interest, but the A and B shares were not producing nor was there a prospect of doing so. The trustees had the power to sell and power to retain with reasonable judgment to do either. Here they were clearly retaining, but not because of unanimity. Issue: Where powers are juxtaposed (sell vs retain) how will the court approach their implementation? Ratio: Where powers are juxtaposed, the court will force the use of one power or the other as eventually one power must be used in the exercise of the duties of the trustees. Analysis: By not being unanimous and not providing life income to the life interests, the trustees were actually failing to discharge their duties. Here the power essentially morphs into an ancillary duty of sorts, otherwise the intention of the settlor would be frustrated. Here, the courts compelled a sale out of want of concern for the income beneficiaries, even though they really didn’t force the trustees to act per se (but they really did). Note also that the settlement price was more than what they would fetch on the open market or what they were actually worth via market cap. Holding: Sale of shares. Re Blow Facts: Blows estate was to pass to his estates at which time they would convert the non-cash assets for certain disbursements and to hold for the surviving children as capital for their benefit. They were given an encroachment on capital power as part of a memorandum to the trustees. The son got a life interest because he was receiving funds from multiple trusts. The son was allowed capital encroachment for business purposes if he showed himself to be a capable and prudent person with a “saving disposition”. Capital encroachment was only allowed for the daughter in case of “actual necessity or emergency” which he did not foresee. She was also allowed for marriage, purchasing a house or other large capital outlays. The daughter Mrs. Callan wanted to destroy the trust and distribute capital (her brother consented) but the corporate trustee didn’t do it. They felt themselves bound by the memorandum and refused. Issue: How much may a trustee let their discretion be fettered by instructions of the testator? Ratio: While trustees must try to attempt to keep the settlors intentions alive, they cannot completely abdicate their role to exercise judgment and prudence in administering the estate and handling beneficiary requests Analysis: It is clearly ok to be influenced by the letter, especially given how clear and concise it was. Here however, the court did not intervene to override the judgment of the trustees as they essentially had exercised no judgment at all. They assumed they were completely fettered by the letter, but this cannot be the case as nothing can totally fetter the discretion of a trustee to make the prudent decisions necessary. Almost like a judicial review, the court demanded the trustee actually turn its mind to the exercise of powers and make a decision, essentially by putting the letter out of their mind for the time being. Considering the court says that the letter places no “practical or legal restriction” on the trustee’s discretion, they might still come to the same result, but that must be a result they come to, not the court or anyone else. Holding: Dismissed Re Beddoe; Downes v Cottam Facts: The trustee here was making a claim for indemnification against litigation costs viz the estate. They had pursued an unsuccessful defence of an action against them for detinue of deeds. Because he neglected to give the deeds, he got dinged but he took the fees and costs from the trust fund before the matter was brought before court to decide whether he could do so. Issue: is the trustee allowed to indemnify themselves for litigation or other costs? Ratio: A trustee is entitled to an indemnity for all costs incurred in the administration of the estate so long as they are not improperly incurred. Analysis: In the UK, it was normal for trustees to ask for advice as to whether they should litigate or not (the trustee could obtain the advice of a chancery division judge for a small fee). In the event that they do not ask for leave, they must prove that the costs were incurred properly. Acting on the advice of a lawyer is probably a good way to do this (As was most likely done here) Consideration: Canada has not nor currently adopts this approach. It is clearly fraught with peril as the judge may be making a determination of suitability to pursue a suit with a limited and or non-existent evidentiary standard. Should this occur, they are also in some way validating the litigation in advance of findings of facts, which is problematic for obvious reasons. Holding: IDK KEV Re Kaptyn Estate Facts: One of the executors was seeking leave to commence an action against several other co-executors. The estate was worth ~68 million and one of the beneficiaries was challenging a codicil, claiming the advisors who prepared the will were negligent. They felt litigation was necessary to hammer everything out. The limitation date was coming up so they needed an answer from the courts as to whether to proceed ASAP. Issue: Should the courts be approached as to whether or not litigation should be commenced? Ratio: It is inappropriate for the court to give advice as to whether or not a person should commence an action Analysis: The court has no problem in helping people administer the estate, but given the judges role in actually adjudicating the litigation, it strikes the court as improprietous to cast off the veil of impartiality, especially with no affidavits, viva voce evidence or proof whatsoever that the suits aren’t completely spurious. There are obvious risks to pursuing litigation, but the courts here saw no reason to relieve them of the burden of their duties to exercise good judgment on behalf of the beneficiaries. The trustees wanted to get a court blessing because the Trustee Act would deem them to have discharged their duty appropriately, thereby avoiding liability. Of course, they will avoid liability if they do a good job anyways, so it’s not fair to shift the burden to the court Note: Issues here surrounded the limitation date, the trustees could have filed their claim and simply sat on it for a while as an alternative as well. Holding: No advice given, no directions given Compensation Trustee Act – S.88-91 Directory: wp-content -> uploads -> gravity forms -> 1-7d6c8355b7f07846e8789d85deabdb60 -> 2016 gravity forms -> Earl E. Klein Jr gravity forms -> Narrative of how the entry meets the award criteria – July 28, 2016 gravity forms -> Revonda M. 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