When someone pursues an action on behalf of an estate in their role as an estate trustee they may enter into a matter of litigation where they represent the interests of the estate, as opposed to their own interests. But on some occasions, the lines between the trustees personal interests and those of the estate may become blurred. This is what occurred in a recent case heard by the Court of Appeal for Ontario.
Brother sues on behalf of estate
The trustee was acting on behalf of the estate of his brother’s estate. His brother was a lawyer, and before he died, he had commenced an action against a group of former employees who removed 120 client files from his office over the course of one night. They also deleted his records related to the stolen files.
The trustee was able to obtain an order to continue the action in the name of his brother’s estate. He was successful in his action and the estate obtained a judgment for $318.174.55 in uncontested damages. However, the matter did not end there. Again, purporting to act as estate trustee, the brother retained a law firm to pursue an appeal. This appeal was also successful, with the result being an increased award to the estate, this time in the amount of $901,791.
Dispute arises over fees
Following the successful appeal, a dispute arose over the fees requested by the law firm. The trustee commenced a solicitor’s negligence action against the law firm, but did so in his own name and in his personal capacity. He was seeking $2 million in damages, claiming the law firm fell below the standard of care in conducting the appeal.
In response, the law firm brought a motion to dismiss the action on the grounds that the trustee does not have legal capacity to sue them since they had acted for the estate and not directly for the trustee.
Court of appeal
The motion judge originally dismissed the action, finding that the law firm was aware the trustee had purchased his late brother’s law firm and that the trustee had capacity to bring the action on the grounds that the legal fees were directed to the trustee (not the estate) and the trustee was the only person who could have been affected by the outcome of the appeal.
The court found that the motion judge made a palpable and overriding error in failing to ask “who retained the appellants?” The court said the answer to this is clearly the estate, which was the named party on the appeal and would benefit from the appeal. The court stated, “The respondent does not have a personal claim arising from the retainer of the appellants given the party on whose behalf this appeal was brought and on whose behalf the appellants were retained. He does not, therefore, have capacity to bring the solicitor’s negligence claim.”
While the trustee asked to amend the title of the proceeding in order to include the estate as the proper plaintiff, the court said it was too late or that, adding it would be up to the estate to determine if it wanted to pursue the action.
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