The recent Ontario Superior Court case of Parson v.
McGovern, 2014 ONSC 1785, illustrates the principles that are
applicable when a beneficiary seeks a court-ordered interim
distribution from an estate. The facts of the case are relatively
simple. A brother and sister were the two equal beneficiaries of
their mother's estate. The sister and an unrelated individual
were the estate trustees. Approximately three years after the
mother's death, the brother brought a motion seeking a
substantial interim distribution to both beneficiaries. At the time
that the motion was brought, the parties were proceeding with a
contested passing of accounts. The substantial asset in the
mother's estate was a house in which the brother had resided
rent-free for almost 2.5 years after the mother's death. The
brother had interfered with the sale process, and the estate
trustees ultimately had to seek a writ of possession and a court
order to sell the house.
Within days of the closing of the house sale, the brother
advised the estate trustees that he wanted an interim distribution.
The estate trustees advised that they would prepare estate accounts
and make a distribution when the accounts were approved. The
accounts were produced approximately two weeks later, and a court
date was obtained for the passing of accounts. The estate trustees
proposed to make an interim distribution to each beneficiary,
keeping approximately $100,000 in reserve, if each beneficiary
signed a waiver of passing of accounts and release of trustees; if
the beneficiaries did not sign such a waiver, the trustees would
pass the accounts before making any further distribution.
The brother refused to sign the waiver and release. Shortly
thereafter, he brought a motion to compel the estate trustees to
make an interim distribution of almost all of the remaining assets
of the estate to both beneficiaries before passing accounts.
The court held that the following five factors should be
considered when deciding whether to order estate trustees to make
an interim distribution to beneficiaries:
Are the estate trustees deadlocked about the exercise of
discretion? In the earlier case of Re Blow (1977), 18
OR (2d) 516 (HCJ), a deadlock among the trustees was identified as
a situation in which the court had jurisdiction to intervene in the
exercise of discretion. In Parson v. McGovern, there was
Have the estate trustees acted with mala fides? This
factor had also been identified in Re Blow. It was derived from the
House of Lords decision in Gisborne v. Gisborne (1877 HL),
which is the starting point for considering the extent of
supervisory jurisdiction over the discretion of trustees. In
Parson v. McGovern, the court noted that the estate
trustees had proposed an almost final distribution but proceeded to
arrange to pass their accounts when one beneficiary refused to sign
a release and waiver, and alleged trustee negligence.
Have the estate trustees failed to exercise their
discretion? The court noted that it had jurisdiction to
intervene even in the absence of mala fides if a trustee failed to
exercise a power of discretion. In Parson v. McGovern,
however, the court noted that the estate trustees did not refuse to
exercise their discretion but rather exercised their discretion in
deciding not to make an interim distribution.
Have the estate trustees behaved unreasonably or breached
their fiduciary duty and duty of good faith and fairness to the
beneficiaries? The court noted that the estate trustees did
not act with any unreasonable delay; rather, the brother caused
delay by continuing to reside in the mother's house. The estate
trustees had invested the sale proceeds and were taking steps to
pass their accounts. The court also noted that the brother sought
damages only against one estate trustee (his sister), which was
illogical and revealed the personal feelings at issue.
Would a beneficiary suffer undue prejudice if an interim
distribution were not made? Because the passing of accounts
would take place in a short time, the court decided that the
brother would suffer only minimal prejudice.
On the basis of these factors, the brother was unsuccessful.
While the facts of the case seem clearly to lead to the result,
Parson v. McGovern is helpful for its elucidation of the
principles applicable when a beneficiary seeks court intervention
in an interim distribution.
Originally published by STEP Inside, May 2015, Volume
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