I want to highlight a provincial statute that
is also important for the administration of a deceased estate; the Trustee Act, R.S.O.
1990, c. T.23 (Trustee Act Ontario). This blog continues my blog series to show
how it would be appropriate to appoint a licensed insolvency trustee (LIT or bankruptcy trustee)
(formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor
or executrix) of a solvent deceased estate. As always, since we are not lawyers, and I
am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate
planning matters. For that, you must consult your lawyer. Trustee Act Ontario: Things an estate trustee
must be aware of There are various sections of the Trustee
Act Ontario that affects the duties and responsibilities of an estate trustee in administering a deceased
estate. All the concepts are very familiar to a LIT. Power of court to appoint new trustees Section 5(1) of this Trustee Act Ontario gives
the Ontario Superior Court of Justice the authority to make an Order for the appointment
of a new trustee. This is the same Court that we attend for Court-appointed receivership
and bankruptcy matters. So, a LIT is very familiar with the workings and requirements
of this Court. Who may apply for appointment of new trustee,
or vesting order Section 16(1) of this provincial statute says
that anyone who has a beneficial interest in the property of the trust can apply for
the appointment of a new trustee. This is very similar to how a Court-appointed Receiver
is appointed. Although it is normally a secured creditor
who makes the application, in theory, it could be any party that has an interest. Section
101(1) of the Ontario Courts of Justice Act states that a receivership Order may be made
“…where it appears to a judge of the court to be just or convenient to do so.”.
It is the “just and convenient” clause that was relied upon by the judge when we
were appointed Receiver and Manager of the assets, properties and undertakings of The
Suites at 1 King West condo strata hotel back in August 2007. For this reason, as a LIT, we are very familiar
with this aspect of appointing a trustee. Power and discretion of trustee for sale Section 17 of the Trustee Act Ontario provides
the trustee with the authority to sell, but subject to the requirements of the Estates
Administration Act. A LIT, either in a receivership or bankruptcy,
is extremely acquainted and experienced in the sale of real and personal property. The
LIT likewise makes certain that the creditors are paid in the correct order of priority. Sales by trustees not impeachable on certain
grounds Section 18(1) deals with a certain aspect
of the sale of property by a trustee. It states that unless it is proven that there was an
inadequate sales price, a sale made by a trustee cannot be impeached by any beneficiary claiming
that the conditions of the sale led to a depressed sales environment. In other words, any beneficiary
wanting to try to impeach a sale must prove that the process used by the trustee resulted
in a sales price at less than fair market value. Similarly, in a Court-appointed receivership
or bankruptcy, the receiver or trustee must be able to prove that both the conditions
of the sales process and the sales price achieved, was appropriate for the types of assets in
the circumstances. The leading case is the Ontario Court of Appeal
decision in Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). The process
a receiver or trustee must follow is known as the “Soundair principles”. This is
the test used when deciding whether a receiver or trustee applying for Court approval of
a sales process and the authority to sell assets has acted properly.
The Court must determine whether the receiver or trustee has:
made a sufficient effort to get the best price and has not acted improvidently;
considered the interests of all parties; devised a fair process that has integrity
by which offers were obtained; and introduced an element of unfairness in the
working out of the process. Therefore, I submit, that a LIT is very experienced
in devising a sales process and selling assets in a manner that is fair to all stakeholders
or beneficiaries to attempt to maximize sales proceeds. Trust funds and investing Section 26 of the Act deals with the whole
area of the requirement for a trustee to maintain trust accounts and to invest trust property
in a manner that will maximize the return while not putting the capital at risk to swings
in investment pricing, inflation or income tax. The LIT is very familiar and experienced in
the area of trust accounts and the investing of trust funds. Section 25 of the Bankruptcy
and Insolvency Act (Canada) (BIA) deals with the requirement of a trustee to establish
trust accounts. Also, the Superintendent of Bankruptcy Directive
no. 5R5 deals with Estate funds and banking. The Superintendent also monitors the banking
of trust funds by all LITs across Canada. Therefore a LIT is very knowledgeable and
experienced in the banking, investing and protection of trust funds. Security by the person appointed If letters of administration were granted
under the Estates Act, R.S.O. 1990, c. E.21, section 37(2) of the provincial legislation
requires every trustee to post security. I discussed in my blog ESTATES ACT ONTARIO:
of security by way of an insurance company bond. Actions for torts Section 38(1) of the provincial statute gives
authority to an estate trustee of a deceased person to maintain an action for all torts
and injuries to the deceased person or his or her property, except in cases of libel
and slander. Any recovery forms part of the deceased’s personal estate.
Section 38(3) provides for a limitation on such actions. The action cannot be brought
after the expiration of two years from the date of death. As a LIT, this is a familiar concept to us.
When a person or company is insolvent and has a chose in action against one or more
parties, such action can be started or continued by a receiver or bankruptcy trustee. In fact,
in a bankruptcy, the action actually vests in the trustee. The receiver or trustee has to make sure that
they have a legal opinion on the likelihood of success. The receiver or trustee also has
to make sure that they can afford to fund the litigation without reducing the value
of the assets under administration. This includes the issue of costs if the action proves unsuccessful. Distribution of assets under trust deeds for
benefit of creditors, or of the assets of the intestate Section 53(1) of the Act lays out the requirements
of a trustee to make a distribution for the general benefit of creditors. As I have described
in previous blogs, Section 135 of the BIA deals with the admission and disallowance
of proofs of claim and proofs of security. A LIT is an expert at sorting out creditor
claims and could certainly do so under the Trustee Act also. Trustee Act Ontario: Summary I hope that this blog reveals to you how the
provisions of this provincial statute, detailing the duties of a trustee or estate trustee
tracks really close to how a LIT performs in either a Court-appointed receivership or
bankruptcy administration. Therefore, the LIT is used to acting as a
Court officer and could very easily perform the requirements and duties of a trustee as
described in this provincial legislation. If you have any questions about a deceased
estate and the need for an estate trustee, whether it is solvent or insolvent, contact
the Ira Smith Team. We have decades and generations of experience in helping people and companies
overcome their financial problems. You don’t need to suffer; we can end your pain. In my next blog, I am going to write a similar
comparison. It will be about the requirements outlined in the Ontario Succession Law Reform
Act, R.S.O. 1990, c. S.26 and how a LIT is most familiar with them also. In the meantime, if you have any questions
at all, contact the Ira Smith Team.