Today’s blog will provide some points to consider when preparing or responding to a notice of objection to accounts (the “Notice of Objection”).  This is a continuation of my series of blogs related to bringing an application to pass accounts (the “Passing Application”).[1]

How Does a Beneficiary Object?

If a beneficiary wishes to object on a Passing Application, they need to prepare the prescribed Notice of Objection (Form 74.45).  It must be served on the applicant and filed with proof of service at least 35 days before the hearing date.

The Notice of Objection form is broken down into two parts (1) objections to the amount of compensation claimed by the Executor/Trustee; and (2) objections to the accounts themselves.  The important thing to remember when preparing a Notice of Objection is that each objection must be specific or it could lead to dismissal of the objection.  The court has established in Re Vano,[2] that a beneficiary “must specify with precision each item in the account with which the objector takes issue, the reason for the objection, and the adjustment the objector asks the court to make to the accounts.”  General and vague language in a Notice of Objection is not acceptable.

While it may be tempting for a beneficiary to vent their frustrations, real or perceived, in the Notice of Objection, doing so may not lead to the desired results and could, in fact, be costly.

Earlier this week, my fellow blogger Karen Watters wrote about “300 Objections. 3 Week Hearing. $325,000 Costs Award.” As is clear from the title, the beneficiaries raised over 300 objections to various expenses paid by the executor personally to administer the estate of Toller Cranston in Mexico.  But for five objections, the beneficiaries were unsuccessful.  The court found that the beneficiaries “acted unreasonably by raising over 300 objections and forcing the Trustee to incur substantial legal expenses to prepare and respond to each one and then to abandon approximately half of them at the hearing. … The respondents also acted unreasonably by bringing an application to have the Trustee pass her accounts only 3½ months after she was appointed as the Estate Trustee in Ontario. … The respondents refused to narrow the issues to be decided before the hearing as requested by the court, which required each of the over 300 objections to be addressed separately during the hearing.”  As per the blog title, costs of $325,000 were awarded, which the beneficiaries were ordered to personally pay to the executor, and the balance of the legal costs incurred by the executor in the Passing Application were to be paid to her from the estate.

Notwithstanding the above, a beneficiary may have valid objections which need to be addressed in the Notice of Objection.  It is important to remember that all objections to be raised must be included in the Notice of Objection or they will not be heard at the Passing Application hearing unless the court order otherwise [rule 74.18(12)].

What are some Common Objections on a Passing Application?

“The following is a list of common objections raised by a beneficiary:

1. An objection as to the quantum of compensation claimed;
2. An objection that the fiduciary failed to maintain proper books and records;
3. An objection that the fiduciary charged excessive professional fees to the Trust Property;
4. An objection that the fiduciary charged other improper amounts to the Trust Property;
5. An objection that the fiduciary failed to properly invest the trust assets;
6. An objection that the fiduciary acted in conflict of interest; and
7. An objection that the fiduciary failed to maintain an even hand between beneficiaries.”[3]

How does an Executor/Trustee Respond to a Notice of Objection?

The Ontario Rules do not provide for a specific form to be used by the Executor/Trustee to respond to a Notice of Objection.  We typically prepare a document “Estate Trustee’s Response to Notice of Objection to Accounts of [Name of Beneficiary] dated [Date]”.  In the body of the document we have found it helpful to extract the objections from the Notice of Objection and put them into a chart format, with the response in the adjacent column.  An example of this format is below.

1. [Name of Beneficiary] objects to the amount of compensation claimed by the estate trustee on the following grounds:

Additional columns may also be added as applicable, e.g. “Surreply from Respondent – [Date]” and “Agreed Compensation Reduction”.

We have also found it to be helpful to colour code the text of each objection and response to see at a glance the status of the objection.  A sample of the legend is provided below.

■ Objection satisfied.

■ Objection and reduction of compensation agreed to by the parties; subject to all other issues being resolved.

■ Objection not satisfied or follow-up documentation required.

What Happens Next?

It may be that all the objections that are initially raised in the Notice of Objection are dealt with by production of further information and documents that the Executor/Trustee provides to the beneficiary, or through mediation.  If that is the case, the beneficiary would file a notice of withdrawal of objection (Form 74.48). It must be served on the applicant and filed with proof of service at least 15 days before the hearing date.  This allows the applicant to complete the Passing Application on an uncontested basis.  If the objections are not resolved, a court hearing will be required.

In my next blog I will set out some final thoughts on completing the Passing Application.  Thanks for reading.

[1] The court rules regarding passing of accounts are set out in rules 74.16, 74.17 and 74.18 of the Rules of Civil Procedure (Ontario) (the “Ontario Rules”).

[2] See also Vano (Re) 2011

[3] Melanie Yach and Andrea McEwan, with the assistance of Monica Carinci, Effectively Managing Contested Passing of Accounts Applications, December 12, 2018 at p. 2.