In Part 1 of our passing of accounts blog series, we outlined the basics, including the executor’s duty to account, the process of passing of accounts, and triggering events. This week’s blog will detail what happens when a passing of accounts is contested by another party as this often results in a detailed and lengthy legal process.
Refresher: Executor Duties and Passing of Accounts in Ontario
An Executor is the person identified by a testator to carry out the will’s instructions. They are required to “account” to the beneficiaries by demonstrating that they paid the estate’s debts and distributed the estate following the will-maker’s instructions.
A passing of accounts is the process of obtaining court approval of the executor’s accounts. There are three primary reasons why a passing of accounts is used in Ontario:
- Where an executor applies for a passing of accounts voluntarily
- Where a beneficiary applies for a passing of accounts
- Where a law or statute requires a passing of accounts
Contested Passing of Accounts in Ontario
The beneficiaries of an estate have the right to know the extent of an estate’s value. Passing of the accounts provides the beneficiaries with the opportunity to review expenditures, credits, payments, receipts and invoices charged to, or paid to, the estate. Beneficiaries also have a right to question the actions of an executor if they believe the executor is not adequately representing the estate. A “contested passing of accounts” is where one or more of the beneficiaries dispute the executor’s handling of the estate.
Some common reasons why a contested passing of accounts occur include the following:
- A beneficiary or beneficiaries disagree with the amount the executor is claiming as compensation for their services
- A beneficiary or beneficiaries question expenses claimed as estate expenses
- A beneficiary or beneficiaries question the sale of estate assets or the value for which they sold for
- A beneficiary or beneficiaries assert that the estate is not being distributed promptly
How a Contested Passing of Accounts is Initiated in Ontario
A contested passing of accounts in Ontario starts in one of two ways. An executor will file the Notice of Application to Pass Accounts themselves, or they will be forced to file a Notice of Application to Pass Accounts in response to a court order obtained by a beneficiary.
After the executor has filed the Notice of Application to Pass Accounts, the beneficiary who wishes to contest the account will outline their objections in a Notice of Objection to Accounts. The Notice of Objection to Accounts must then be filed with the court at least 35 days before the hearing date for the passing of accounts.
Pre-Hearing Issues for Contested Passing of Accounts in Ontario
On occasion, challenges to the accounts can resolve prior to the hearing date. As outlined in Ontario’s Rules of Civil Procedure, if a beneficiary files a Notice of Objection but is later satisfied regarding a disputed fee or action, they can file a Notice of Withdrawal of Objection at least 15 days before the hearing. This process helps to streamline the issues to be determined at the contested passing of accounts hearing.
If one or more Notices of Objection to Accounts have been filed but not withdrawn at least 10 days in advance of the hearing, the executor will combine the remaining Notices of Objection to Accounts and prepare a Reply to Notices of Objection. The executor must then file and serve these documents on all the individuals entitled to notice. The beneficiaries can then respond to the executor’s Reply to Notices of Objection.
Five days before the hearing, the applicant will file various documents, including the Application to Pass Accounts, the consolidated Notices of Objection to Accounts and Reply to Notices of Objection, any responses to the Reply to Notices of Objection, a draft order, and any requests for costs. Additional documents may also be required depending on the nature of the case.
During a contested hearing, the executor and all beneficiaries who have filed a response to the Notice of Application to Pass Accounts will be able to present their case in court.
The court maintains discretion in a contested passing of accounts hearing. Instead of approving the accounts in whole or in part, the court may order that the hearing for a contested passing of accounts proceed to a full trial and make orders relating to the issues to be considered, timing, and witnesses. Alternatively, the court can make an order that the parties undergo mediation to resolve their dispute outside of court.
Costs in a Contested Passing of Accounts
Like any legal action, parties are likely to incur costs for their application or response. In addition to the resolution sought in the Notice of Application or Notice of Objection, each party may make a request for costs.
While there are special rules for an uncontested passing of accounts that proceeds without a hearing, costs in a contested proceeding are the same as those that can be claimed in other proceedings. Whether or not a party will be awarded their costs is up to the court’s discretion. However, the guiding principle for costs awards in Ontario is that they are made to a successful party to indemnify them for certain expenses and services in relation to the proceeding and paid by the unsuccessful party. Keep in mind that a costs award is not made until the conclusion of a proceeding. If, for instance, the court does not make a final decision and refers the matter to trial or mediation, no costs award would be made at the contested passing of accounts hearing.
Contact Toronto Estate Lawyers at Derfel Estate Law for Passing of Accounts
At Derfel Estate Law, our experienced team of estate lawyers regularly advise on the passing of accounts, including helping executors prepare and file the documents needed, reviewing and ensuring accounts are in order, and representing parties at any hearings or legal proceedings that may arise. Our team has experience guiding both executors and beneficiaries through various stages of estate litigation. To speak with one of our lawyers about your estate needs, contact us online or call us at 416-847-3580.