Citation: Powell Estate Date: 20021202 2002 PESCTD 81 Docket: ES-1339(P) & ES-1342(P) Registry: Charlottetown PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION IN THE MATTER of the Estate of Carswell Francis Powell late of St. Peters, in Kings County, Province of Prince Edward Island, Retired, Deceased, Testate; AND IN THE MATTER of the Estate of Ellen G. Powell, late of St. Peters, in Kings County, Province of Prince Edward Island, Widowed, Deceased, Testate; AND IN THE MATTER of an application by Les J. Zielinski, Public Trustee, Administrator with Will Annexed, pursuant to Rule 14.05(3) of the Civil Procedure Rules and pursuant to the Trustee Act R.S.P.E.I. 1988, cap. T-9, s. 52, for the opinion, advice or direction of the Court concerning the administration of the said estates; and pursuant to the Supreme Court Act, s. 36, for a certificate of pending litigation with respect to the lands in question herein. BEFORE: The Honourable Justice Kenneth R. MacDonald Philip Mullally, Q.C. - Solicitor for Public Trustee M. Lynn Murray - Solicitor for respondents Petrie Stephen D.G. McKnight - Solicitor for respondent Frank Powell David R. Sanderson - Solicitor for respondents MacKinnon Place and date of hearing - Charlottetown, Prince Edward Island November 20, 2002 Place and date of judgment - Charlottetown, Prince Edward Island December 2, 2002
Citation: Powell Estate 2002 PESCTD 81 ES-1339(P) & ES-1342(P) IN THE MATTER of the Estate of Carswell Francis Powell late of St. Peters, in Kings County, Province of Prince Edward Island, Retired, Deceased, Testate; AND IN THE MATTER of the Estate of Ellen G. Powell, late of St. Peters, in Kings County, Province of Prince Edward Island, Widowed, Deceased, Testate; AND IN THE MATTER of an application by Les J. Zielinski, Public Trustee, Administrator with Will Annexed, pursuant to Rule 14.05(3) of the Civil Procedure Rules and pursuant to the Trustee Act R.S.P.E.I. 1988, cap. T-9, s. 52, for the opinion, advice or direction of the Court concerning the administration of the said estates; and pursuant to the Supreme Court Act, s. 36, for a certificate of pending litigation with respect to the lands in question herein. Prince Edward Island Supreme Court - Trial Division Contested Chambers Before: MacDonald J. Heard: November 20, 2002 Judgment: December 2, 2002 [4 pages] Estates - administration seeking advice of Court - duties of administrator. TEXT CONSIDERED: D.W.M. Waters - Law of Trusts in Canada, 2 nd ed. Carswell (1984). CASES CONSIDERED: Davies v. Nelson, [1928] 1 D.L.R. 254 (Ont. C.A.); Re Dornan Estate, [2002] A.J. No. 1033; Re Collins, [1927] 4 D.L.R. 770 (Ont. S.C.); Re Cleverley, [2000] B.C.J. No. 2072. RULE CONSIDERED: Prince Edward Island Rules of Civil Procedure, Rule 14.05(3). STATUTE CONSIDERED: Trustee Act, R.S.P.E.I. 1988, Cap. T-8. Philip Mullally, Q.C. - Solicitor for Public Trustee M. Lynn Murray - Solicitor for respondents Petrie Stephen D.G. McKnight - Solicitor for respondent Frank Powell David R. Sanderson - Solicitor for respondents MacKinnon
MacDonald J.: [1] The administrator seeks the opinion, advice or direction of the Court as to the extent of his discretion in administering these estates. [2] The applicant was appointed by the Court as administrator with the will annexed of both estates on June 4, 2001. By the same order, the two original executrices and trustees were removed, by consent, from their positions. [3] Carswell Powell pre-deceased his wife by some months and bequeathed his estate to his wife. Ellen Powell bequeathed her estate equally among her four children. One of the children, Frank Powell, alleges that his two sisters, who were appointed executrices and trustees of their parents estate, failed to account for all the assets in their parents estates. [4] Frank Powell is now requesting the administrator, Les J. Zielinski, to commence legal proceedings to recover the assets that he alleges were misappropriated by his sisters. The gross assets accounted for by the former executrices in the two estates amounted to approximately $83,616. The applicant states that Frank Powell is alleging that approximately $150,000 was not accounted for by his sisters, which amount is made up of land deeded to the sisters or their husbands in the lifetime of the two deceased and money taken under an alleged agreement between one of the sisters and her father to pay for the care given by the sister to her parents. [5] The applicant states that he is concerned that legal proceedings will further deplete the assets of the estates. He also states the legal costs may become the responsibility of his office, that of the Public Trustee, however, as long as he conducts himself prudently, any costs would not be his personal responsibility or that of the office he represents. The administrator asks whether he can wind up the estates without taking legal proceedings or must he first take proceedings to determine if any assets were misappropriated. [6] During the course of the hearing, I raised the issue of the effect that the passing of the accounts in the two estates by the former executrices would have on this current matter. Counsel for the applicant has since the hearing drawn by attention to para. 9 in the petition to pass accounts that acknowledges the claim of Frank Powell is still outstanding. In effect, the accounts of the former executrices were passed subject to Frank Powell s claim. [7] How should a trustee exercise his discretion and what is his standard of care? D.W.M. Waters in Law of Trusts in Canada, 2 nd ed. Carswell (1984) summarizes the duty of a trustee at p. 750:
Page: 2 The law itself was clarified in the second half of the nineteenth century, and in particular in the case of Learoyd v. Whiteley. There it was established that the trustee must be more than honest in the discharge of his duties, he must give his mind to his various tasks and show a degree of care. But as a general rule, said Lord Watson, the law requires of a trustee no higher degree of diligence in the execution of his office than a man of ordinary prudence would exercise in the management of his own affairs. This rule has been expressed in the following way: the trustee must show ordinary care, skill, and prudence, he must act as the prudent man of discretion and intelligence would act in his own affairs. Evidently this does not mean that, if the trustee is careless and inefficient in his own affairs, he need do no more in the conduct of the trust affairs. A man may speculate with his own funds, and be negligent in the administration of his own affairs, but as a trustee he is exercising the powers and discretion of an owner in favour of another or others. It follows that the beneficiary should be able to expect an objective test of what is careful, skilful, and prudent. A trustee must show vigilance, prudence and sagacity, said Dickson J. in Fales v. Can. Permanent Trust Co. [8] The test may be said to be the man of ordinary prudence. [9] In Davies v. Nelson, [1928] 1 D.L.R. 254 (Ont. C.A.) two sons of the deceased brought an action against the deceased executors alleging they had sold the deceased s house at a gross undervalue. Middleton J.A. found the executor was justified in selling the property rather than hold onto it in the chance that someone might make a higher offer at a later time. Middleton J.A. pointed out that the property would depreciate rapidly unless repairs were made, and there was no money for repairs. This case illustrates the type of discretion that an administrator may use without having someone claim he has incorrectly used his discretion. [10] In reference to the position courts have taken when asked to give advice, opinion or direction under rules and legislation similar to Civil Procedure Rule 14.05(3) or s. 2 of the Trustee Act, R.S.P.E.I. 1988, Cap. T-8 in the recent case of Re Dornan Estate, [2002] A.J. No. 1033, Veit J. of the Alberta Court of Queen s Bench, August 19, 2002 was asked the same question as I have been asked. At para. 24 (Quicklaw version) she stated: 24 The court does not give advice and directions to personal representatives as to whether they should initiate law suits. A personal representative can be sued if he does not litigate when he should have and can also be sued if he litigates when he should not have done so. The court therefore does not give advice to a personal representative as to whether legal proceedings should be undertaken not only because the testatrix has chosen a personal representative - not the court - to make those decisions, but also because the court may be called upon to decide whether a personal representative s decision to litigate or not to litigate was proper. [11] In Re Collins, [1927] 4 D.L.R. 770 (Ont. S.C.) Hodgins J.A. stated it was not for the court to decide a question of fact on a summary application. He also stated that
Page: 3 under the Trustee Act, a trustee is protected if he has acted honestly and reasonably, and in case of doubt the trustee can secure sound advice from their own solicitor instead of expecting the court to tell them what to do. [12] In Re Cleverley, [2000] B.C.J. No. 2072, October 6, 2000, Master Joyce was dealing with what he described as a summary passing of accounts brought by Mr. Adair, the executor of the estate. At issue was the liability of a Ms. Goddard to repay money to the estate. At para. 25, Master Joyce states: 25. I agree with counsel for Mr. Hill that I cannot decide the validity of any claim that the estate might advance against Ms. Goddard. However, I do not agree that merely because a possible claim exists the court should require the executor to advance that claim. I agree with Mr. Adair that such an approach would be tantamount to the court usurping the role and duties of the executor in whom the testatrix reposed her trust. I agree with Mr. Adair s submission that on the passing of accounts the function of the court is to determine whether the executor has exercised his duties under the will properly and in accordance with the law. [13] The administrator in the present instance is asking a more general question in seeking advice on how he should proceed. It may be said that he has a general power to get in all the assets that rightfully belong to the estate. [14] The administrator must look at each claim that is being alleged by Frank Powell and determine its legitimacy. The facts that the administrator will consider include the amount of work and expense involved in each claim, the value of the claim, the amount of funds to be expended, the total value of the estate. [15] Once the administrator has reached a decision to advance any claim, he should do so as quickly as possible. Upon completion of settlement of the claims either by agreement or action, the administrator should then proceed to close the accounts. [16] Upon coming to court to have his accounts passed, the administrator is required to satisfy the court that he used ordinary care and prudence in his administration of the estate. In Law of Trusts in Canada, the instances when a court will intervene to set aside the discretion exercised by the trustee are discussed at p. 761: Secondly, the court will not intervene simply because the beneficiaries or any other complainants do not agree with the decision of the trustees in the exercise of their discretion. Nor will it intervene merely because it would not have come to the same decision itself. The court will intervene, however, if (1) the decision is so unreasonable that no honest or fair-dealing trustee could have come to that decision; (2) the trustees have taken into account considerations which are irrelevant to the discretionary decision they had to make, or (3) the trustees, in having done nothing, cannot show that they gave proper consideration to whether they ought to exercise the discretion.
Page: 4 [17] I had considered setting a time limit for the guidance of the administrator to follow in his administration. However, on reflection, the most I can say is that the administrator should use diligence in proceeding with the administration of the estates. [18] The administrator has requested a Certificate of Pending Litigation be issued with respect to the lands alleged to have been misappropriated. The entitlement to a certificate of pending litigation is sufficiently shown if an interest in land is in question. Such an interest is involved here and consequently I would grant a certificate. [19] I wish to point out an error that occurred in the order appointing Mr. Zielinski administrator of the estates in that the order does not state he was also appointed trustee as was requested in the application. [20] Finally, as I have stated at the hearing, each party shall bear their own costs from the commencement of this application, with the administrator s costs being payable by the estate. December 2, 2002 J.