Being named the trustee of an estate might seem like a lot of responsibility, and that’s because it is. Trustees, as well as executors, attorneys for property, and guardians for property are responsible for fulfilling a number of obligations in carrying out the wishes of the person who died (the “testator”). These obligations include distributing the estate to the beneficiaries named in the will, paying any debts owed by the estate, and when necessary, collecting any debts owed to the estate. As demonstrated in a recent decision from the Court of Appeal for Ontario failure to fulfill these obligations can have serious consequences.
In 2007 the testator made a $55,000 loan to the respondent. The loan was accompanied by a promissory note stating the loan was to be paid back upon demand or upon the sale of a specified piece of property, whichever of the two came first. On June 6, 2013 the testator became aware the property in question had been sold. However, the testator did not demand repayment. Instead, the repayment was requested by the trustee in May 2015 with an action not commenced until July 17, 2015. At trial, the motion judge found the action to be barred by statute because it was commenced more than two years after the property was discovered to have been sold on June 6, 2013. The claim was dismissed on summary judgment.
The Limitations Act
The relevant law in play is s.7 of the Limitations Act, which outlines the time within which an estate trustee can bring a claim that a deceased person had before their death. The trustee sought to extend the limitation period by six months.
S.7 of the Limitations Act reads,
7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved.
(3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends.
The trustee’s position
In seeking to have the court apply a liberal definition to the Limitations Act, the trustee referenced a 1990 decision from the Ontario High Court of Justice, Divisional Court, in which the court stated,
“I think the provisions of a statute of limitations should be liberally construed in favour of the individual whose right to sue for compensation is in question. Where two interpretations of the statute are possible, reason favours the one which enables the plaintiff to bring his action”
The trustee argued s.7 should be interpreted to apply when the person having the claim dies before the proceedings can be commenced. It was the trustee’s position that a deceased person is incapable of commencing a proceeding because of their physical, mental, or psychological condition. The trustee said the same concerns would apply to a person who was alive but incapable, adding it takes time for an estate trustee to review the affairs of the deceased and to obtain probate.
The court was not persuaded by the trustee’s argument, stating “The grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.”
Being named the trustee of an estate is a serious responsibility that should not be taken lightly. As we saw in the case discussed in this blog, there can be significant consequences for failing to follow procedures and meet deadlines. This case underscores the importance of having proper legal counsel in the event you are put in the position of being a trustee.
At Derfel Estate Law, we recognize that estate and trust matters can be complex and time consuming. We work with our clients to make them aware of important time limits involved with the administration of the estate, and assist them to resolve disputes with the best possible outcome. Please call us at 416-847-3580 or reach us online for a free initial consultation.