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REPORT

ADMINISTRATION OF ESTATES OF DECEASED PERSONS

ONTARIO LAW REFORM COMMISSION

Ontario

1991

The Ontario Law Reform Commission was established by the Ontario
Law Reform Commission Act for the purpose of reforming the law, legal
procedures, and legal institutions.

Commissioners

Rosalie S. Abella, BA, LLB, Chair

Richard E.B. Simeon, Ph.D, Vice Chair

Earl A. Cherniak, QC, BA, LLB
John D. McCamus, MA, LLM
Margaret A. Ross, BA (Hon), LLB

Counsel

Melvin A. Springman, MA, MSc, LLB, General Counsel and

Director of Research
Larry M. Fox, LLB, Senior Counsel
Judith A. Bellis, BA, LLB
J. Jody Morrison, BA (Hon), LLM
Ronda F. Bessner, BA (Hon), BCL, LLB, LLM
Christine B. Henderson, BA, LLB

Secretary and Administrative Officer

Anne McGarrigle, LLB

The Commission's office is located on the Eleventh Floor at 720 Bay
Street, Toronto, Ontario, Canada, M5G 2K1.

The Commission wishes to acknowledge the contribution of the former members of
the Commission who considered many of the issues discussed in this report during
their tenure at the Commission: Justice Derek Mendes da Costa, H. Allan Leal,
Q.C, the late Richard A. Bell, William R. Poole, Q.C, and Barry A. Percival, Q.C.

ISBN 0-7729-8294-5

TABLE OF CONTENTS

Page

Letter of Transmittal ix

Chapter 1 Introduction 1

Chapter 2 The Office of Personal Representative:

The Estate Trustee 5

1. The Nature of the Office 5

(a) Introduction 5

(b) Historical Background 7

(i) England 7

(ii) Ontario 9

(d) Recommendations — A New Office of

"Estate Trustee" 15

2. Accession to the Office 17

(a) Appointment 18

(i) Where a Person is Appointed by Will 18

(ii) Where an Estate Trustee Must be

Appointed by the Court 20

(iii) Disabilities 25

(b) Renunciation of the Office 28

3. Powers and Duties of the Estate Trustee 34

(a) Duty to Dispose of the Body of the Deceased 35

(b) Duty to Maintain Records and to Provide

Information 42

(d) Duty to Pay Debts 56

(e) Administrative and Other Powers 60

(i) Administrative Powers 62

a. Investment 62

iii]

b. Leasing 63

(1) As Lessee 63

(2) As Lessor 63

c. Management, Maintenance and Repair . . 64

d. Insurance 65

e. Carrying on Business 66

f. Surrender of Property 68

g. Acquisition of a Dwelling Home 68

h. Borrowing Money 69

i. Execution of Administrative Powers 75

j. Enlargement of Administrative Powers . . 76

(ii) Power of Delegation 77

(iii) Joint Representation 79

(h) The Professional Estate Trustee 84

4. Liability 84

(a) Nature and Extent of the Liability of the

Estate Trustee 85

(i) Liability for Acts of the Deceased 86

(ii) Liability of the Estate Trustee for

Her Own Acts 87

a. In Relation to Strangers to the Estate ... 88

b. In Relation to Beneficiaries, Creditors,

and Claimants Against the Estate 90

(iii) Conclusions and Recommendations 93

(b) Statutory Provisions for Relief of Estate Trustees .... 95

5. Compensation and Reimbursement 104

(a) Introduction 104

(b) Method of Calculating Compensation 105

(d) Compensation Fixed by Agreement 113

(i) With the Beneficiaries 113

(ii) With the Deceased 115

(e) Nature of Compensation 115

(f) Compensation of the Public Trustee 116

(g) Reimbursement of Expenses 118

6. Suspension and Termination of the Office 119

(a) Introduction 119

(b) Suspension of the Office 119

(i) Retirement 120

(ii) Removal 122

Chapter 3 The Beneficiary 127

1. Introduction 127

2. Identification of Beneficiaries: Dead, Missing, and
Unascertained Beneficiaries 127

(a) Survivorship 128

(b) Missing Beneficiaries — Proof of Death 132

(i) Substantive Rules Respecting Declaration of

Death 132

(ii) Procedural Issues 134

(iii) The Uniform Presumption of Death Act .... 137

(iv) Recommendations 140

(i) General 142

(ii) Recommendations 144

3. Miscellaneous Rules Respecting Bequests and Devises .... 146

(a) Legacies to Persons Who Have Received Inter Vivos

Gifts from the Deceased 146

(b) Legacies Contracted For 148

(d) Homicide by a Beneficiary 153

(e) Lapse 159

Chapter 4 Creditors and Other Claimants 161

1. Introduction 161

2. Insolvent Estates 161

(a) General 161

(b) Procedural Alternatives 162

(i) Administration Under the Bankruptcy Act . . . 162

a. Present Law 162

b. Proposals for Bankruptcy Reform 167

(ii) Administration Under the Trustee Act 168

(iii) Proceedings For Administration 171

3. Solvent Estates 183

(a) Order of Application of Assets in Satisfaction of

Debts and Liabilities 183

(b) Specifically Encumbered Property —

Locke King's Act 192

4. Assertion of Claims Against the Estate 196

(a) Introduction 196

(b) Meaning of "Claims" 196

(i) Advertising for Creditors and Other

Claimants 197

(ii) Method of Notification Where Estate Trustee

Not Appointed 203

(iii) Where Estate Trustee Is Deemed to Have

Received A Notice of Claim 204

(iv) Effect of Failure to Give Notice 208

(d) Contestation of Claims 210

5. Contingent Liabilities 215

6. Evidence in Actions Involving Estates 218

7. Bonding of Estate Trustees 222

8. Exemptions Under the Execution Act 229

Chapter 5 Transfer of Assets of the Deceased 233

1. Introduction 233

2. The Present Law: Personal Property 234

(a) Vesting and Powers of Sale 234

(i) Vesting 234

(ii) Powers of Sale 235

Vll

(b) The Manner of Distribution 236

(i) Simple Distribution in Kind 236

(ii) Appropriation, or Allocation in Kind,
of Particular Assets to Particular

Beneficiaries 238

(iii) Distribution of Share to an Absolutely

Entitled Beneficiary 239

3. The Present Law: Real Property 240

(a) Vesting of Real Property 240

(b) Powers of Sale and Distribution Conferred by the

Estates Administration Act 244

(i) Sale for the Purpose of Payment

of Debts 244

(ii) Sale for the Purpose of Distribution 246

(d) Distribution to Beneficiaries in Kind 249

4. Recommendations 251

(a) Vesting in the Estate Trustee: Assimilation of

Personal and Real Property 251

(i) General Considerations 251

(ii) Automatic Vesting of Real Property in

Persons Beneficially Entitled 252

(iii) The Time of Vesting in the Personal

Representative 254

(iv) Vesting in Co-Estate Trustees 256

(b) The Power of Sale of the Estate Trustee 256

(i) Simple Distribution in Kind 263

(ii) Appropriation and Distribution in Kind
of Particular Assets to Particular

Beneficiaries 263

(iii) Distribution of Share of Absolutely Entitled

Beneficiary 266

(d) Standardization of Transmission Documents 268

Chapter 6 Estate Proceedings 269

1. Introduction 269

Vlll

2. Proposals for Reform 270

(a) Where Proceedings are Brought 270

(b) Powers of the Court 272

(d) Passing of Accounts 278

(e) Appeals 284

(f) Fees 286

Summary of Recommendations 287

Ontario
Law Reform
Commission

Ontario

The Honourable Howard Hampton
Attorney General for Ontario

Dear Mr. Attorney:

We have the honour to submit herewith our Report on Administration
of Estates of Deceased Persons.

Rosalie S. Abella
Chair

t£j~J

)

Richard E.B. Simeon
Vice Chair

Earl A. Cherniak
Commissioner

John D. McCamus
Commissioner

Margaret A. Ross
Commissioner

March 12, 1991

CHAPTER 1

INTRODUCTION

It is important that the law governing the administration of the estates of
deceased persons be rational, clear and accessible. It is an area of the law that
affects all of us. Moreover, it is one in which individuals may play a critical role
in relation to both the living and the dead. People often appoint their closest
family members or friends as their executors; where no executor is appointed
in a will, or where the person named in the will is not willing or able to act
as executor, courts generally appoint family members as administrators of the
deceased's estate. In many cases, the persons who are appointed executors or
who apply to be appointed administrators of the estate are laypersons, whose
experience may not prepare them for this important responsibility, and who
risk liability should they be found later to have failed to discharge it properly.

However, the law governing the administration of estates of deceased per-
sons is often difficult, uncertain, and obscure. It demands rationalization and
modernization. The statutory law is inconveniently located in three main
statutes — the Estates Act (formerly the Surrogate Courts Act),1 the Trustee
Act,2 and the Estates Administration Act.3 Much of the case law remains
dominated by English precedents and, because of this, Ontario practitioners
often must have recourse to English, as well as Ontario, texts in many areas.4

Our concern in this report is with estates administration: collecting the
deceased's assets, paying her debts, and managing any remaining assets until
they are distributed to the persons entitled. We are not here dealing with
the law governing how property is to be divided among the deceased's
family;5 nor do we deal with the requirements for the making of a valid will.6

R.S.O. 1980, c. 491.

R.S.O. 1980, c. 512.

R.S.O. 1980, c. 143.

The leading Ontario texts are Hull and Cullity, Macdonell, Sheard and Hull on Probate
Practice (3rd ed., 1981), and Baker, Widdifield on Executors' Accounts (5th ed., 1967). The
leading English text is Sunnucks, Martyn and Garnett, Williams, Mortimer and Sunnucks on
Executors, Administrators and Probate (1982).

Part II of the Succession Law Reform Act, R.S.O. 1980, c. 488, specifies how property is to
be divided where a person dies intestate.

Part I of the Succession Law Reform Act sets out the requirements for making a valid will.
A will need not be drawn by a lawyer and signed formally in the presence of witnesses. A per-
son may make a valid will in her own handwriting without witnesses being involved (s. 6).

l i l

In this report, we discuss a number of topics and a great many issues.
In chapter 2, we examine the office of personal representative in some detail.
We discuss appointment to the office, the powers and duties of personal
representatives, their responsibility and liability to others, compensation
and reimbursement, and suspension and termination of the office. In chap-
ter 3, we consider the identification of beneficiaries — in particular, the
rules governing proof of survivorship, proof of death in the case of missing
beneficiaries, and unascertained beneficiaries — and several miscellaneous
rules respecting bequests and devises.

In chapter 4, we examine a number of the substantive and procedural
issues respecting creditors and other claimants. We consider the administra-
tion of both insolvent and solvent estates. We also discuss the requirement
of advertising for creditors, and the procedures available for the processing
of claims against the estate. Finally, we review certain miscellaneous issues,
namely, contingent liabilities, evidence in actions involving estates, bonding of
estate trustees, and the availability of the exemptions under the Execution Act. 7

Chapter 5 deals with the vesting in personal representatives of both
personal and real property and their power of sale in relation to that prop-
erty. With respect to real property, we closely examine the provisions of the
Estates Administration Act. We also deal with the distribution of personal
and real property to beneficiaries.

Chapter 6 addresses several discrete issues relating to the role of the
Ontario Court (General Division) in estates administration, including the
passing of accounts and the function of the court as a depository for wills.

Our recommendations are summarized at the end of this report.

There are two fundamental policy directions in this report. First, we
take the view that, generally, the position of personal representatives should
be assimilated to that of ordinary trustees and that, except with respect to
the initial appointment to the office, many of the recommendations made
by the Commission in the Report on the Law of Trusts should apply to personal
representatives.8 Thus, personal representatives should have the same
administrative powers as trustees, and should be subject to the same rules
governing transmission of their office, liability to others, compensation for
their efforts, and suspension and termination of their office. In furtherance
of our recommendation to assimilate the office of personal representative
to that of a trustee, we recommend that a new term should be used to

R.S.O. 1980, c. 146.

The project on the administration of estates of deceased persons had its origins in the
Commission's law of trusts project, which culminated in the publication of the Report on
the Law of Trusts in 1984. Originally, a consideration of the law governing the administration
of estates of deceased persons had formed part of that project. However, the Commission
concluded that it should constitute a separate project.

signify this change. Whether appointed by the will or the court, personal
representatives are to be called "estate trustees".

Throughout this report, we use the term "estate trustee" to describe a per-
son who is to administer an estate under the new regime that we have recom-
mended. When we discuss the present law in Ontario, we continue to use the
familiar terms "personal representative", "executor", and "administrator".

The second major direction to our recommendations is that we favour
removing the difference in the way that the present law treats real property
and personal property. For historical reasons, very different rules govern
the sale of real property and personal property and the order in which real
property and personal property are applied to meet the liabilities of a solvent
estate. There is no principled justification for maintaining these differences.
In this report, we propose that there should no longer be any distinction in
the way that personalty and realty are treated by the law.

Earlier, we noted that the present statutory law governing the adminis-
tration of estates is found in three statutes. Requiring personal representa-
tives, through their advisors, to consult three sources to ascertain the basic
principles governing the discharge of their duties is inconsistent with the
principle of accessibility to which the law should aspire. In our view, all
legislation bearing directly upon the administration of estates of deceased
persons — the Estates Act, the relevant provisions of the Trustee Act, and the
Estates Administration Act — should be consolidated in a single statute. This
statute, moreover, should provide that the rules governing ordinary trustees
should apply to estate trustees in accordance with the recommendations in
this report.

It is important to emphasize that the Commission's recommendations
are not intended to constitute a complete codification of the law governing
the administration of estates of deceased persons. Rather, they respond to
problems in the law that, in our view, are critical and need legislative reform.

The initial Project Director was Professor George W. Alexandrowicz,
of the Faculty of Law, Queen's University. Background research papers
were prepared by the Research Team, which was comprised of the following
individuals: Professor C.T. Asplund, of the Faculty of Law, Queen's Univer-
sity; Professor Marvin G. Baer, of the Faculty of Law, Queen's University;
Professor Peter Hogg, of Osgoode Hall Law School, York University; Profes-
sor H.R.S. Ryan, of the Faculty of Law, Queen's University; Professor Judith
Swan, of the Faculty of Law, Queen's University; and Professor Timothy
Youdan, then of the Faculty of Law, University of Western Ontario. Profes-
sor Alexandrowicz also prepared a research paper. We wish to acknowledge,
with appreciation, the important contribution of the Research Team.

Consultation with recognized experts in a field is invaluable for law
reform. In the early stages of the project, the Commission was ably assisted
by an Advisory Board. Its Chair was Mr. Malcolm S. Archibald, Q.C. The
members of the Advisory Board were the following: Mr. J.E.C. Beatty, Q.C;

Mr. C.E. Bennett, Q.C.; Ms. Donna C. Cappon; Madam Justice Sidney
Dymond; Mr. David G. Fuller; Professor Ralph E. Scane, Q.C., of the
Faculty of Law, University of Toronto; and Mr. James J. Wardlaw, Q.C. The
Commission relied heavily on their advice in formulating its recommenda-
tions for reform.

In 1985, direction of this project was assumed by Mr. Larry M. Fox, our
Senior Counsel, who is primarily responsible for bringing this project to
fruition and for writing this report. Chapter 4 was written by Mr. J.J. Mor-
rison, one of the Commission's counsel. Chapter 5 was written by Professor
Timothy Youdan, of Osgoode Hall Law School, York University, with the
collaboration of Mr. Fox. Mr. M.A. Springman, General Counsel and
Director of Research, assisted with the preparation of the final report. We
wish to express our gratitude to all of these people for their contribution to
the completion of this very difficult project.

We also wish to acknowledge, with thanks, the dedication of Ms. M.
Patricia Richardson, the Commission's former General Counsel and Director
of Research, whose participation was critical in the early stages of the project.

We wish to express our gratitude to the Chief Justice of Saskatchewan,
the Hon. Edward D. Bayda, who as Visiting Scholar with the Commission,
assisted us greatly in our deliberations.

In the course of preparing the final draft of this report, members of the
Commission's legal staff consulted with members of the Bench and Bar
and other interested persons. We wish to acknowledge, in particular, the
contribution of Professor Youdan, upon whose prodigious knowledge and
wise counsel we relied considerably in completing this report. We also wish
to thank Ms. H. Lenore Roszell, who gave generously of her expertise and
time in consulting with Mr. Morrison in the preparation of chapter 4. Certain
important consultative meetings were arranged with the co-operation of the
executive of the Wills and Trusts Subsection of the Canadian Bar Associa-
tion—Ontario, for whose assistance we are grateful.

We wish to thank the following individuals for their assistance in various
stages of the project: Mr. Malcolm S. Archibald, Q.C; Ms. Anne E.P.
Armstrong; Ms. Donna C. Cappon; Mr. Howard M. Carr; Mr. Barry S.
Corbin; Mr. Maurice C. Cullity, Q.C; Madam Justice S. Dymond; Mr. David
G. Fuller; Madam Justice P. R. German; Mr. Wolfe D. Goodman, Q.C;
Madam Justice D.J. Haley; Mr. Alfred C Heakes, Q.C; Mr. Strachan
Heighington, Q.C; Mr. Rodney Hull, Q.C; Ms. P. Ann Lalonde, Counsel,
Office of the Official Guardian; Ms. Barbara E. LeVasseur, Deputy Director,
Property Law Branch, Ministry of Consumer and Commercial Relations;
Mr. Norman B. Lipson; Mr. John Marshall, Q.C; Mr. Willson A. McTavish,
Q.C, Official Guardian; Mr. Robert I. Morrison; Ms. Margaret R. O'Sulli-
van; Mr. Paul Reynolds, C.A., Accountant, Office of the Public Trustee;
Professor Ralph E. Scane, Q.C; Mr. Brian A. Schnurr; Mr. Justice J.D.
Sheard; Mr. James Stanley, National Trust; and Mr. James J. Wardlaw, Q.C.

CHAPTER 2

THE OFFICE OF PERSONAL
REPRESENTATIVE: THE
ESTATE TRUSTEE

1. THE NATURE OF THE OFFICE

(a) Introduction

In Ontario, personal representatives bear responsibility for the adminis-
tration of the estates of deceased persons. It is the function of a personal
representative to deal with the administration of the assets of the deceased
and to act, in a real sense, as the alter ego of the deceased. Put simply, this
involves "getting in" the estate of the deceased — that is, collecting its
assets — paying the debts of the deceased, and managing any remaining assets
until the personal representative distributes them in accordance with the
will of the deceased or, if there is no will, according to the law governing
intestacy.

There are two general kinds of personal representative, which are
distinguishable primarily by the manner of their appointment. A personal
representative may be appointed by the will of the deceased or appointed
by the court. Where appointed by a will, the personal representative is called
an "executor". The authority of the executor is derived from the will, and
exists from the date of death. In Ontario, evidence of this authority is
provided by letters probate issued by the Ontario Court (General Division),
which certify that the will has been duly proved and registered in the court,
and confirm that the administration of the property of the testator has been
committed to the executor or executors named in the will.1

Where the personal representative is appointed by the court, rather
than named in the will, the representative is known as an "administrator".
There are several types of administrator. If the deceased has died intestate,
the personal representative is known simply as "the administrator" of his
estate. If the deceased has left a will, but no person has been named
as executor, or if the person who has been appointed executor is dead,
incapacitated, disqualified or refuses to act, or if the appropriate court

A testator may appoint a person as executor for his entire estate without any reservation,
or may appoint a person subject to a qualification, for example, respecting the duration of
his office or the property that he is to administer: Hull and Cullity, Macdonell, Sheard and
Hull on Probate Practice (3rd ed., 1981), at 161-62.

[ 5 ]

considers that he should not act, the duty to appoint a personal representa-
tive devolves upon the court. A person appointed in one of these circum-
stances is called an "administrator with the will annexed". The authority of
an administrator and an administrator with the will annexed arises from the
grant of administration by the Ontario Court (General Division), evidence
of which is known as letters of administration and letters of administration
with will annexed, respectively.2

Personal representatives resemble trustees. There is no generally
accepted definition of "trust" or "trustee" that can comprehend the myriad
uses that may be made of the trust concept. In the 1984 Report on the Law
of Trusts,7, the Commission offered the following general explanation: a trust
exists where one person — "the trustee" — holds legal title to property, while
another person — "the beneficiary" — has equitable title or, in other words,
the right to enjoy that property. Generally, trusts may arise in one of two
ways: either by words or acts, a person may evince an intention to create a
trust, or the law may impose a trust to ensure that a person is able to enjoy
the property that has been made subject to the trust. Trusts may be created
by a person to come into effect during her lifetime or to become operative
upon her death. Trustees are subject to certain duties, and may exercise a
number of powers, matters that we discussed at considerable length in the
Trusts Report. These duties and powers pertain to the manner in which
trustees must discharge their basic responsibility to hold the trust property
for the benefit of the beneficiaries.

Even though executors and administrators have identical responsibili-
ties in connection with the administration of estates, the law governing the
two offices is not identical. In certain instances, distinctions are drawn
between them that cannot be functionally justified. Similarly, even though
personal representatives and trustees are both fiduciaries — that is, persons
charged with duties and given powers for the benefit of others — in some
cases there is uncertainty whether the same principles are applicable to the
two offices and in other cases the law clearly does distinguish between
them. Yet in many of these cases, it would seem logical, in our view, for the
same principles to apply.

We do not wish to suggest, however, that all the distinctions between
executors and administrators and between personal representatives and
trustees are insupportable. Certain distinctions between executors and
administrators simply reflect the differences in the way that persons are
appointed to the offices. There are distinctions between personal representa-
tives and trustees that mirror the basic difference in the responsibilities of
the two offices.

There are a variety of limited grants of administration that may be granted by a court,
under which administration of less than the entire estate may be granted to an administrator:
see Hull and Cullity, ibid., at 261-79.

Ontario Law Reform Commission, Report on the Law of Trusts (1984) (hereinafter referred
to as "Trusts Report").

Because the present law governing the office of the personal representa-
tive has been shaped by the origins of the office and its subsequent evolution,
we need to begin with a sketch of the historical background. We shall
then examine the contemporary state of the office and, in particular, its
relationship to the office of the trustee.

(b) Historical Background

(i) England

The offices of the executor and the administrator are of ancient origin,
their introduction predating the development of the modern trust by the
Court of Chancery. Although the office of the personal representative
appeared before the office of trustee, it was the law governing trusts that
further refined it.

In the period following the Norman conquest, the office of executor
first appeared in an embryonic form within the ecclesiastical courts, which
then had exclusive jurisdiction over probate and matters relating to the
making, revocation, and interpretation of wills.4 Gradually, the executor
became the main testamentary representative of the deceased.The office of
executor received early recognition from the common law courts, which
contributed to the fashioning of its powers and responsibilities.5 During
the medieval period, the office had assumed the basic features that would
characterize it until major legislative changes were effected in the nineteenth
and twentieth centuries.6 Further shaping of the office occurred when the
Chancellor, who had begun to administer Equity, became engaged in the
supervision of personal representatives, and later, trustees.

The office of administrator had its origins in the administration of the
goods of the deceased under the auspices of the ecclesiastical courts. Where
a person died intestate or without having appointed an executor, his goods
vested in a church official, known as the "ordinary", whose responsibility
was to administer them. The ordinary was not "a true representative"7 of
the deceased, for originally he could not sue or be sued in the place of the
deceased. In 1285, a statute made the ordinary liable to be sued as if he

Indeed, ecclesiastical courts exercised testamentary jurisdiction in England until 1857,
when the Court of Probate was created.

5 Holdsworth, A History of English Law, Vol. Ill (5th ed. 1942, Rep. 1966), at 585-91.

1 The executor was appointed by the will, either expressly or implicitly. The executor could
sue in the common law courts in debt, detinue, and covenant. The chattels of the deceased
were vested in the executor. The office of the executor was transmissible to the executor
of the executor. See, generally, Holdsworth, supra, note 5, at 563-66 and 576-85.

7 Ibid., at 568.

were an executor.8 The practice of the ordinary was to appoint others to
administer the goods of the deceased as his delegates.

The enactment of a 1357 statute was critical to the development of the
office of administrator.9 This statute required the ordinary to appoint a
person or persons to perform the work of administration "from the next and
most lawful friends of the deceased person intestate". The administrator
thus became an official in his own right, and ceased to be a mere delegate
of the ordinary. In addition, this statute gave administrators the right to
bring actions for debts owed to the deceased, and required them to account
to the ordinaries. With these changes, the administrator became a represen-
tative of the deceased.10 In many respects, the office of administrator had
begun to resemble that of executor.

With the evolution of the Court of Chancery and the development of
the principles of Equity — particularly in their application to trusts — the
office of personal representative came under an influence that would shape
it profoundly.

The Court of Chancery became involved in the supervision of executors
and administrators because creditors and beneficiaries were dissatisfied with
the inadequacy of the remedies available from the ecclesiastical courts and
common law courts. They therefore sought relief from the Court of Chan-
cery. The Court of Chancery was an attractive forum, as it had already
developed efficient procedures for discovery and accounting, and had a
variety of effective remedies at its disposal. Eventually, the Court of Chan-
cery assumed a large measure of control over personal representatives. In
choosing rules respecting the powers, duties, and liabilities of personal
representatives, the Court of Chancery turned to the principles that it had
developed, and was continuing to refine, in supervising the conduct of
trustees. Increasingly, the position of personal representatives came to
resemble that of trustees.11

While the details of the law governing personal representatives contin-
ued to be developed in the courts, important changes in England were
effected by legislation. Beginning in 1847, a series of statutes addressed the
administration of trusts, including testamentary trusts, and had an important

° Statute of Westminster the Second (1285), 13 Ed. I, st. I, c. 19 (Intestate's Debts) (U.K.).

Statute of Westminster (1357), 31 Ed. Ill, st. I, c. 11 (Administration on Intestacy). See
Holdsworth, supra, note 5, at 568-69.

10 Ibid.

The discussion in this paragraph and the preceding paragraph draws on Holdsworth, supra,
note 5, at 594-95, Vol. V (3d ed., 1945, Rep. 1966), at 288-89, and 316-30, and Vol. VI (2nd
ed., 1937, Rep. 1966), at 652-57.

impact on estates administration.12 Several statutes dealt with the powers
of executors.13 In 1888 and 1893, much of the previous legislation relating
to executors and administrators, as well as to trustees, was consolidated in
trustee statutes.14 In England, the important statutes are the Trustee Act
1925, x* which consolidated the previous law and also made some amend-
ments, and the Administration of Estates Act, 1925 }b

(ii) Ontario

English law was introduced in the first statute passed by the legislature
of the newly-formed province of Upper Canada.17 However, until the cre-
ation of the Court of Chancery in 1837,18 courts were unable to apply
equitable doctrines, for there was no court of equity in Upper Canada. In
1793, the Court of Probate was established in conjunction with surrogate
courts in each district of the province;19 the responsibility of the courts was
to grant probate and administration. There were never ecclesiastical courts
in Ontario.20

1 ?

An Act for better securing Trust Funds and for the Relief of Trustees (1847), 10 & 11 Vict.,
c. 96 (U.K.). This Act was amended in 1849, by 12 & 13 Vict., c. 74 (U.K.) and in 1852,
by 15 & 16 Vict., c. 55 (U.K.). Trustees were authorized to pay money into court, or transfer
certain securities to the credit of the Accountant-General, to the credit of the trust. The
Trustee Act 1850, 13 & 14 Vict., c. 60 (U.K.) authorized the Chancellor, inter alia, to vest
trust assets held by infants or "lunatic" trustees or personal representatives in new trustees.

See, for example, An Act to further amend the Law of Property and to relieve Trustees (1859),
22 & 23 Vict., c. 35 (U.K.), commonly known as Lord St. Leonard's Act (which enacted
enabling provisions concerning trustee investment powers); An Act to give to Trustees,
Mortgagees, and others certain Powers now commonly inserted in Settlements, Mortgages and
Wills (1860), 23 & 24 Vict., c. 145 (U.K.), commonly known as Lord Cranworth's Act, 1860
(which enacted enabling provisions concerning appointment and discharge of trustees);
and Conveyancing and Law of Property Act, 1881, 44 & 45 Vict., c. 41 (U.K.).

14 Trustee Act, 1888, 51 & 52 Vict., c. 59 (U.K.), and Trustee Act, 1893, 56 & 57 Vict., c. 53
(U.K.).

15
16

18
19

15 & 16 Geo. 5, c. 19 (U.K.).

15 & 16 Geo. 5, c. 23 (U.K.). Legislation enacted since these two statutes — for example,
the Administration of Estates Act 1971, c. 25, and Inheritance (Provision for Family and
Dependents) Act 1975, c. 63 — has had a relatively minor impact on the nature of the office
of personal representative.

An Act to repeal certain parts of an Act passed in the fourteenth year of His Majesty's Reign,
entitled, "An Act for making more effectual Provision for the Government of the Province of
Quebec, in North America, and to introduce the English Law as the Rule of Decision in all
matters of Controversy, relative to Property and Civil Rights" (1792), 32 Geo. 3, c. 1. See, now,
Property and Civil Rights Act, R.S.O. 1980, c. 395.

An Act to Establish a Court of Chancery in this Province (1837), 7 Will. 4, c. 2.

An Act to establish a Court of Probate in this Province, and also a Surrogate Court in every
District thereof, 33 Geo. 3, c. 8.

For a good discussion of the history of courts in Ontario, see Zuber, Report of the Ontario
Courts Inquiry (1987), at 8-28.

The inherited body of common law and equity was soon altered by local
legislation. Statutes enacted in 1834,21 1837,22 and 183823 gave executors the
powers that were already conferred on executors by legislation in England.
In 1851, additional powers were given to executors.24 In 1873, legislation
gave the Attorney General authority to take out letters of administration of
the estates of intestates who left no known next-of-kin in the province, and
conferred a power to sell real estate.25

In 1877, the piecemeal legislation that had been enacted was consoli-
dated as part of the first revision of Ontario statutes.26 This Act also extended
certain powers and declared certain rights and liabilities of personal
representatives.27

Since this revision, there have been several legislative changes affecting
the administration of estates. Statutes like The Devolution of Estates Act,
1886,28 The Dependants' Relief Act, 1929 ,29 The Succession Law Reform Act,
1977,30 and more recently, the Family Law Act, 1986,31 were important
milestones, which affected the discharge of duties and the exercise of powers
of personal representatives.

24
25

An Act to amend the Law in relation to the jurisdiction and procedure of the several Surrogate
Courts in Upper Canada, and to simplify and expedite the proceedings in such Courts, 1858, 22
Vict., c. 93 (Can.).

An Act to amend the Law respecting Real Property, and to render the proceedings for recovering
the possession thereof in certain cases, less difficult and expensive, 1834, 4 Wm. 4, c. 1 (Ont.).

An Act to amend the law with respect to the liability of legal Representatives of Joint Contractors,
and Defendants on Joint Judgments, 1858, 1 Vict., c. 7 (Ont.).

An Act to amend the Heir and Devisee Act, 1851, 15 Vict., c. 12 (Can.).

An Act respecting the Administration of Estates of Intestates, in which the Crown is interested,
1873, 36 Vict., c. 21 (Ont.).

An Act respecting Trustees and Executors and the Administration of Estates, R.S.O. 1877,
c. 107.

Powers of investment were extended. Executors gained the power to exercise a power of
sale of land when no person was named in the will for the purpose, including the power
to raise money by sale or mortgage when land was charged with payments of debts and
legacies, and the power to convey pursuant to a contract made by the testator. Personal
representatives were authorized to pay debts and compromise claims without the authority
of the Court, and to pay and distribute after advertising for creditors and other claims.
They could give notice of contestation of a claim, which would be barred unless action was
commenced within six months after receipt of notice by the claimant.

28 S.O. 1886, c. 22. See, now, Estates Administration Act, R.S.O. 1980, c. 143.

29 S.O. 1929, c. 47. See, now, Succession Law Reform Act, R.S.O. 1980, c. 488.

S.O. 1977, c. 40. See, now, Succession Law Reform Act, supra, note 29.
31 S.O. 1986, c. 4.

We have earlier indicated that the present Ontario law draws certain
distinctions between administrators and executors and between personal
representatives and trustees. While certain of these distinctions reflect
functional differences, others are simply historical anomalies. It is our view
that, as a matter of general principle, distinctions of the latter variety have
no place in a modern system of law.

We believe that the current state of the law respecting the persons
responsible for estate administration is a matter of concern not simply for
reasons of consistency or doctrinal purity. There is a price to be paid for
tolerating the existence of different rules applicable to persons who are
performing similar functions. While this problem is particularly obvious
in comparing executors and administrators, whose functions are virtually
identical, it also arises in comparing personal representatives and trustees.

In this section, we shall review how the present law treats the offices
involved in estate administration, with particular emphasis placed on the
various distinctions to which we have alluded. We shall first consider execu-
tors and administrators.

While the distinctions between the offices of executor and administrator
have existed since the medieval period, their functions have become identi-
cal. The process of assimilating the office of administrator to that of the
executor, which was undertaken initially by the common law and Court of
Chancery, has been continued in the Trustee Act32 and the Estates Administra-
tion Act.33

Notwithstanding similar treatment under the existing law and the iden-
tity of functions, several distinctions between the offices remain. Certain
distinctions relate to the method of appointment. An executor derives his
title and authority from the will, which has effect or "speaks" from the time
of death. The grant of letters probate by the court merely confirms that the
will has been duly proved and registered, and that the administration of the
property of the testator has been duly committed to the named executors.
The acts of the executor with respect to real property do not require probate
and, with respect to personal property, those acts done before probate are
ratified by the grant.

An administrator, on the other hand, derives his authority from the
grant of letters of administration by the court. Before the grant, his acts
are generally invalid, although they may be rendered valid in appropriate
circumstances through the operation of "the doctrine of relation back".

32 R.S.O. 1980, c. 512.
Supra, note 28.

Under this judicial doctrine, acts done prior to the grant may be rendered
valid if they were done for the benefit of the estate or for "the purpose of
protecting or preserving the estate from wrongful injury".34

Different rules govern appointment to the offices. Any person may be
named as executor by a testator, while the persons to whom administration
may be granted is governed by the Estates Act?5 Under the Act, a non-
resident may be granted letters probate,36 but may not be granted letters
of administration.37 However, letters probate or letters of administration
granted by a court of competent jurisdiction in another province or territory
of Canada, the United Kingdom, or "in any British possession" may be
resealed by the court, which gives them the force and effect they would have
had if granted in Ontario by an Ontario court.38

On the grant of administration, except where the administrator is a trust
company incorporated under the Loan and Trust Corporations Act, 1987, ,39 the
Estates Act requires an administrator to give the court a bond conditioned
on the due performance of his duties.40 A similar requirement is not imposed
on executors, except in the case of non-residents.41

The offices differ in the extent to which they are transmissible. As we
shall explain shortly, in some circumstances the office of executor may be
transmitted to a subsequent executor without the necessity of a second grant
of probate. By contrast, the office of administrator is not transmissible,
except in very narrow situations.42

34 Hull and Cullity, supra, note 1, at 211. See, also, rules of court, O. Reg. 560/84, r. 9.03(1),
which deals with actions brought by or against a person before a grant of probate or
administration. Formerly, the rules of court were known as the "Rules of Civil Procedure".
This was changed in 1989: Courts of Justice Act, 1984, S.O. 1984, c. 11, s. 160a, as en. by
S.O. 1989, c. 55, s. 31.

R.S.O. 1980, c. 491, s. 54. Formerly, this statute was known as the "Surrogate Courts Act";
its title was changed by the Court Reform Statute Law Amendment Act, 1989, S.O. 1989,
c. 56, s. 48(25).

Estates Act, supra, note 35, s. 24.

Ibid., s. 24. But see s. 61(2), ibid., which provides that a bond is not required where the
administration on an intestacy is granted to a surviving spouse and where the following 2
conditions are met: the net value of the estate, as computed for the purposes of s. 45 of the
Succession Law Reform Act, supra, note 29, does not exceed $75,000; and an affidavit is filed
with the application for administration setting forth the debts of the estate.

30 Ibid., s. 77.

39 S.O. 1987, c. 33, s. 175(4).

40 Estates Act, supra, note 35, s. 60, as am. by S.O. 1989, c. 56, s. 48(19). This also applies to
a grant of administration with the will annexed.

41 Ibid., s. 25.

See discussion, infra, this ch., sec. 2 (c).

We now turn to compare personal representatives and trustees under
present Ontario law.

For the most part, the position of personal representatives has been
assimilated to that of trustees. The similarities in the applicable law can be
explained in part by the historical development that we have traced — in
particular, the supervision of both offices by the Court of Chancery — and in
part by the Estates Administration Act and the Trustee Act, which equate them
for many purposes. Nonetheless, under the present law, certain significant
distinctions between personal representatives and trustees continue. More-
over, in relation to a number of issues, there is a degree of uncertainty
whether the same principles apply to both offices.

Before turning to compare the position of personal representatives and
trustees under the present law, we should recall their respective responsibili-
ties, as this is the background against which the appropriateness of the law
should be evaluated. Put very simply, to the extent the offices fulfil the same
role, it would appear logical and desirable that the same rules should apply;
distinctions in the law should be based on functional differences.

There is a basic difference in responsibility between the personal repre-
sentatives and trustees. It is the task of the personal representative to collect
the assets of the deceased, to pay funeral and testamentary expenses and
debts, and to distribute the remainder of the estate among the persons
entitled under the law. In discharging this role, personal representatives
serve as the alter ego of decedents: they succeed to their heritable estates,
and to the unsatisfied rights and the obligations and liabilities that survive
death. Their duty is to enforce the rights of decedents and to satisfy the
debts from the estate. In summary, the role of personal representatives is a
limited one, circumscribed by the fundamental responsibility to wind up the
affairs of decedents and distribute their estates among those entitled.

While, as we have indicated, a range of diverse functions may be carried
out by trusts, for purposes of comparison, it is most useful to refer to the
what may be called the "typical" family trust. Professor Donovan Waters
states that a trust is "a means whereby property can be enjoyed by a succes-
sion of persons over a period of time",43 and this description is apt in the
case of family trusts. Not only does the purpose of the trust obviously affect
the duration of the office, but it also has important implications for the
performance by a trustee of his duties. Trustees must often take a long-
range view of the interests of the various persons for whose benefit the trust
has been created. While both trustees and personal representatives are given
the property for which they are responsible, trustees bear no responsibility
for collecting property that is analogous to the obligation of personal repre-
sentatives to get in the assets of the estate.

Waters, Law of Trusts in Canada (2d ed.,1984), at 36.

Despite this fundamental difference between the two offices, there are
substantial similarities. The most important of these is that both personal
representatives and trustees are fiduciaries, who must perform their duties
and exercise their powers for the good of others. Moreover, certain of their
specific duties and powers are similar, however different the general context
in which they exist.

Legislation has emphasized the similarity of trustees and personal rep-
resentatives. Section 2 of the Estates Administration Act provides that "[ajll
real and personal property . . . devolves to and becomes vested in his per-
sonal representative from time to time as trustee for the persons by law
beneficially entitled thereto". Section l(q) of the Trustee Act states that the
term "trust" "extends to and includes the duties incident to the office of
personal representative", and gives "trustee" a corresponding meaning.
While the legislation might seem to equate the two offices, the situation is
not as clear as the statutory language would suggest.44 It is not entirely clear
whether personal representatives enjoy all the powers and rights conferred
on "trustees" by the Trustee Act; it remains to be seen whether courts will
give the definition of "trustee" this interpretation.45

The Trustee Act also differentiates between the two offices in certain
cases. Special provisions of the Trustee Act apply only to personal representa-
tives and the administration of estates.46 Section 2 of the Act, which deals
with retirement of trustees, does not apply to executors or administrators.
As a result, a personal representative may not retire, in effect retaining his
office for life, unless removed by the court.47

An important unresolved issue in Ontario is whether the actions of
a single personal representative bind the estate and his fellow personal
representatives or whether all the personal representatives must act jointly
to have such a legal effect.48

We observe that Professor Waters has concluded that "[sjtatute in
Canada may well have brought closely together the legal positions of the
personal representative and the trustee, but the differences that may still

Compare Re Wilson, [1952] O.W.N. 101 (H.C.J.), with Re Thompson, [1955] O.W.N. 521
and Re Baty, [1959] O.R. 13, 16 D.L.R. (2d) 164 (C.A.). For a discussion, see Ontario Law
Reform Commission, Report on Limitation of Actions (1969), at 55.

For example, Waters, supra, note 43, at 39, states that "[a]t this point it is a question
whether the Trustee Act powers, as opposed to duties, extend to personal representatives".

Supra, note 32, ss. 45-59.

Re McLean (1982), 37 O.R. (2d) 164, 135 D.L.R. (3d) 667 (H.C.J.) (subsequent reference
is to 37 O.R. (2d)).

Waters, supra, note 43, at 41-42.

exist are not inconsequential, and the subject is in need of statutory
clarification".49

To the extent that different principles apply to personal representatives
and trustees, or that there is uncertainty whether the same principles apply,
confusion may ensue. This danger is particularly likely in the relatively
common situation of a will that has appointed the same person as an executor
and a trustee. At a certain stage, the administration of the estate will be
completed, and the person appointed executor will assume the role of trustee
and become responsible for the administration of the trusts established
under the will. Having different principles apply to the same person who is
occupying two very similar, yet distinct, offices is obviously complex. What
heightens the problem for the person who is both executor and trustee, and
for her legal advisors, is that it is often difficult to determine when the
administration of the estate is complete and the trust commences. Thus, to
the extent that different principles of law govern trustees, it cannot be stated
with certainty when they apply.

(d) Recommendations— A New Office of "Estate Trustee"

We have concluded that the present law in Ontario regarding the office
of the personal representative is unsatisfactory. The precise nature of the
office is unclear. While, as a consequence of the legislation, personal repre-
sentatives resemble trustees, the relationship between the two concepts
remains uncertain and confused.

Independent of our concern about this uncertainty, we believe that the
complexity of the present law of estates administration that is attributable
to the distinctions drawn between personal representatives and trustees, and
between administrators and executors, is unjustifiable and inimical to a
rational and efficient system of law.

Legislation should be enacted to clarify the exact nature of the office
of personal representative. Specifically, in light of the similarity of the
basic fiduciary responsibility of personal representatives and trustees, we
recommend that the office of the personal representative should be generally
assimilated to that of a trustee, in accordance with the recommendations in
this chapter.50 We further recommend that, since the personal representative
has special rights, duties, and powers as the alter ego of the deceased in

49 Ibid., at 42.

~ Waters, supra, note 43, at 42, states as follows:

[I]t may be possible to go further, and say that the powers as well as the duties of
personal representatives and trustees ought to be the same, save where statute expressly
withholds a power. After all, a power enables something to be done; it does not
compel, and an express statutory withholding of a particular power, where that is
thought necessary, permits the suggested statutory change to be made without any
distortion resulting in the nature of the office of personal representative.

relation to the administration of the estate, and since these rights, duties,
and powers are not applicable to trustees, they should be expressly provided
for by legislation. Thus, the law governing estate trustees would be the law
of trusts, except where new legislation governing estates would apply.

Turning to the distinctions between administrators and executors, we
have already indicated our belief that virtually none of them can be sup-
ported on a functional basis. We therefore recommend that the differences
in the law between the offices of administrator and executor should be
abolished, except for the difference relating to the manner in which persons
are appointed to the offices.

Inasmuch as our recommendations to assimilate the position of the
personal representative with that of trustee would involve a departure from
the existing law, we believe that a new term should be employed to signify
this important change. We recommend that a personal representative should
be called an "estate trustee". This term will denote that the office compre-
hends both the unique functions of a personal representative of the deceased
and the responsibilities of a trustee.

In order to clarify the precise nature of the new office, we recommend
that the legislation should specify that the fundamental duties that are now
associated with personal representatives are "trusts" under which the estate
trustee holds the deceased's property. Accordingly, legislation should state
that the estate trustee should hold the deceased's estate upon the following
trusts:

(a) to exercise the powers conferred on him by law and by the will;

(b) to carry out the obligations imposed on him by law and by the will;

(d) to pay the debts of the deceased in accordance with the obligations
imposed on him by law and by the will; and

(e) to distribute the estate of the deceased in accordance with the law
and the will.

The legislation should clarify that the offices of administrator and execu-
tor have been assimilated. We believe that this best can be effected by
defining the new term "estate trustee" to comprehend both offices. Accord-
ingly, we propose the following definition:

In this Act, "estate trustee" means,

(a) the person named in the last will and testament of the deceased to
represent him on his death, and

(b) the person appointed by the court to represent the deceased on
his death.

Finally, since a single office of estate trustee is to be created, it will be
necessary to replace letters probate and letters of administration with a
single document issued by the court, which would be evidence of the appoint-
ment of the estate trustee. We recommend that this new document be called
an "estate trustee certificate".

2. ACCESSION TO THE OFFICE

In the previous section, we noted the fundamental difference between
accession to the office of an executor and an administrator under the existing
law. An executor derives his power from the will and, therefore, may act in
the estate from the moment of the testator's death.51 This basic principle
stands with the concurrent principle that a testator has the right to nominate
an executor. Generally, courts have refused to interfere with that nomination
unless the executor is demonstrably incompetent to act,52 such as where the
executor is serving a long prison term, has an interest adverse to that of a
beneficiary, or is of unsound mind.53 On the other hand, an administrator's
title and authority is derived from the grant of letters of administration issued
by the court. Since authority arises only from that grant, administrators have
no independent right to act prior to appointment, although the doctrine of
"relation back" to the time of death confers a measure of retrospective
power.54

Our basic recommendation to merge the offices of executor and admin-
istrator in the new office of estate trustee demands a reassessment of the
present dichotomy with respect to accession. While we have proposed the
replacement of the two offices by a single office responsible for estate
administration, our definition of "estate trustee" makes it clear that one
might assume that office by virtue of nomination in the will or, in the absence
of such nomination, by virtue of an appointment by the court. This raises a

51 Re Hollwey and Adams (1926), 58 O.L.R. 507, [1926] 2 D.L.R. 960 (App. Div.). In practice,
executors usually need letters of probate as evidence of their authority to deal with the
estate. Without probate, however, executors have the legal capacity to do almost everything
incidental to their office.

See, for example, Re Agnew Estate, [1941] 4 D.L.R. 653, 3 W.W.R. 723 (Sask. C.A.), and
Crichton v. Zelenitsky (1946), 54 Man. R. 79, [1946] 2 W.W.R. 209 (Man. C.A.). A court
will be very reluctant to decide that a named executor is incompetent to act. Bad character,
insolvency and bankruptcy, for example, are not grounds per se upon which a court of
probate may pass over an executor: see "Absent or Incapacitated Representatives" (1953),
103 L.J. 697.

See, for example, Re Becker (1986), 57 O.R. (2d) 495, 25 E.T.R. 174, (Surr. Ct.); Powers v.
Powers Estate (1988), 209 A.P.R. 336, 47 D.L.R. (4th) 471 (Nfld.S.C. T.D.); and Mardesic
v. Vukovich Estate (1988), 30 B.C.L.R. (2d) 170 (S.C.).

The doctrine of relation back allows certain acts to be done on the basis of the fiction that
the title of the administrator "relates back" to the death of the deceased. The common
thread running through the cases applying this doctrine seems to be protection of the estate
from wrongful injury and conferring on the estate rights relating to beneficial transactions.
See, also, rules of court, r. 9.03, supra, note 34.

question whether the same law should govern accession, irrespective of how
the estate trustee has been appointed. We shall consider this issue in the
following section. We shall also consider certain related issues: the effect of
a legal disability on entitlement to the office; renunciation of the office of
estate trustee; and transmission of the office.

(a) Appointment

(i) Where a Person is Appointed by Will

We have already indicated that the sole exception to our general recom-
mendation to remove the differences in law between the office of executor
and the office of administrator relates to the manner in which individuals
are appointed. This is the only practical difference between the two offices.

There is a fundamental difference between the situation where there
is an estate trustee named in the will, who is prepared to act, and the
situation where there is no such person. In the former case, it is a simple
matter to provide for immediate accession to the office, whereas in the latter
case, there will necessarily have to be an intervening period between the
death and accession to the office, during which there is an application for
an estate trustee certificate. It is clear that the only way that identical rules
can apply to both named estate trustees and other estate trustees is to
provide that accession to the office would occur only upon the grant of the
estate trustee certificate. If this were the case, it would be necessary to
provide that all the power and authority of the estate trustee is derived from
the grant of the estate trustee certificate.

Although acceptance of a rule stating that an estate trustee accedes to
office only upon receipt of an estate trustee certificate would certainly
follow from the fundamental recommendation that the distinctions between
executors and administrators be abolished, such a rule cannot be justified
on the basis of practical considerations. At present, the vast majority of
estates are administered under the provisions of a will by a named executor
who is willing to assume the office. In most cases, then, retention of the
principle of immediate accession by named estate trustees will ensure the
continuity necessary for effective management of the estate. To abandon this
principle, we believe, would impede the efficiency of estate administration, to
the ultimate detriment of the beneficiaries of the deceased. Moreover, in
some cases it would be unnecessary for an estate trustee to obtain an estate
trustee certificate — for example, if the sole asset of the estate were real
property held on joint tenancy.

Leaving aside the practical implications of the principle of immediate
accession, there is a second issue bearing upon the question whether the
estate trustee should derive authority from the court grant in all cases:
should the person named in the will of the deceased automatically become

estate trustee, where she is not otherwise precluded by law from assuming
office for a specific reason?

In theory, a regime that could allow estate trustees to assume authority
only upon the grant of an estate trustee certificate could afford the opportu-
nity to beneficiaries to challenge the appointment in the will and suggest a
nominee of their own. The reasons that such a position might be taken would
vary with individual estates. One likely reason for dissatisfaction with the
testator's choice would probably be that the costs of administration would
be too high; a nominee of the beneficiaries might be willing to act for free
or at a reduced rate. Similarly, the beneficiaries might prefer an estate
trustee who would be expected to be more responsive to their views rather
than taking an independent approach to the administration of the estate.
There may also be situations where the beneficiaries are of the view that the
selection of an estate trustee by the testator is not truly a considered decision,
but a hasty choice made on the suggestion of the person drafting the will.

Whether the choice of the testator should continue to prevail, despite
the wishes of the beneficiaries, is an issue of fundamental principle. Histori-
cally, the wishes of the testator have been considered paramount in all
decisions respecting property. Yet, an argument can be made that the estate
trustee administers the estate for the benefit of living beneficiaries rather
than the deceased testator. Indeed, section 2 of the Estates Administration
Act provides that all the property of the deceased is held by the personal
representative "as trustee for the persons by law beneficially entitled
thereto". In this report, we have recommended that the estate trustee should
hold the property of the deceased upon certain stipulated trusts, including
a trust to distribute the estate of the deceased in accordance with the law
and the will.

On the other hand, the testator has more familiarity with the property,
and may have a much clearer sense of what is in the best interests of the
beneficiaries, who are often family members, and of the management scheme
that is most appropriate for the property.

Allowing the appointment in a will to be challenged by beneficiaries on
any grounds would increase litigation and permit interference with the early
administration of the estate. Moreover, it would be inconsistent with what
we perceive to be a consensus in the community that the wishes of the
deceased should be respected, even if this entails additional cost or a degree
of inconvenience to the estate or its beneficiaries.

Accordingly, we recommend continuation of the current law that the
person named in the will of the deceased should be granted an estate trustee
certificate and be appointed estate trustee; the beneficiaries should not be
able to challenge the accession on any grounds, other than on the ground
of incapacity or legal disqualification.55 Notwithstanding the general desire

See discussion infra, this ch., sec. 2(a)(iii).

to assimilate the roles of executor and administrator, we further recommend
that the estate trustee named in the will should continue to derive power
from the will, and should be able to begin acting immediately upon the death
of the deceased.

(ii) Where an Estate Trustee Must be Appointed by the Court

Where there is no will or the will does not name a person as estate
trustee, or where the person named as estate trustee is unable or unwilling
to assume the office, it will be the duty of the court to appoint an estate
trustee. Conferral of this responsibility naturally raises an issue respecting
the basis on which entitlement is to be determined. The present law govern-
ing the appointment of administrators is characterized by complexity and a
degree of uncertainty and, in our view, should be clarified.

The complexity of the existing law is due, in part, to the fact that the
law draws on two sources, namely, judicial principles and practices and the
provisions of the Estates Act. The difficulty is compounded by the fact that
there is disagreement whether the principles governing the appointment in
the case of an intestacy apply to the appointment of an administrator with
the will annexed.

In the case of an intestacy, courts established an order of priority of
entitlement to apply for letters of administration. This order has been altered
somewhat by modern legislation, which recognized persons born outside
marriage and unmarried persons living in a conjugal relationship. Reflecting
these changes, the current order of preference is as follows:

1. spouse of the deceased or the person of the opposite sex with whom
the deceased was living in a conjugal relationship outside marriage
immediately before death;

2. children of the deceased;

3. grandchildren of the deceased if no child is living;

4. great-grandchildren of the deceased if no child or grandchild is
living and so on if there is a lineal descendant;

5. father of the deceased who leaves no issue;

6. mother of the deceased who leaves neither issue nor father;

7. brothers and/or sisters of the deceased who dies without issue or
parent;

8. grandparents of the deceased who dies without issue, parent,
brother or sister;

9. uncles, aunts, nephews, nieces, great-grandparents of the deceased
who dies without issue, parent, brother, sister, or grandparent;

10. collateral relatives of more remote degrees, those of equal degree
having an equal right.

Where there are no next-of-kin resident in Ontario, the Crown is entitled
to apply for administration.56

In circumstances where the testator has made a will, or fails to appoint
an executor in his will, or where the named executor is unable or unwilling
to administer the estate, the court must appoint an administrator with the
will annexed.57 There seems to be confusion as to the order of preference
that the court should follow in making an appointment. Some commentators
state that the order is the same as that applicable in the case of an intestacy.58
Hull and Cullity, however, state that "the right to administration follows the
right to the property".59 In their view, an order of preference different from
that governing intestacy applies to grants of administration with the will
annexed. Drawing on the English rules, they suggest that the following order
of priority prevails:60

1. residuary legatees or devisees in trust;

2. residuary legatees or devisees for life;

3. ultimate residuary legatees or devisees, or, where the residue is not
wholly disposed of, the persons entitled upon an intestacy;

4. legal personal representatives of persons indicated in 3;

5. legatees or devisees, or creditors;

6. contingent residuary legatees or devisees, or contingent legatees or
devisees or persons having no interest in the estate, who would have
been entitled to a grant had the deceased died wholly intestate;

7. the Crown.

56 Crown Administration of Estates Act, R.S.O. 1980, c. 105.

59
60

An administrator with the will annexed would have to be appointed in the following
circumstances: where the will does not name an executor; where the named executor has
died during the lifetime of the testator or after his death without taking probate; where the
executor has renounced probate, or having been cited to accept or refuse a grant of
probate, has not appeared to the citation; where the appointment of an executor is void for
uncertainty; where the court in its discretion passes over the executor and makes a grant
to another; where the executor is incompetent to take probate by reason of his infancy or
mental or physical incapacity; where an executor is out of the jurisdiction and applies for
a grant to be made to his nominee.

Brule and Histrop, "Grants of Letters Testamentary", in Law Society of Upper Canada Bar
Admission Course Materials, 32nd Bar Admission Course[:] Estate Planning and Administra-
tion (1990-91), at 11-4.

Hull and Cullity, supra, note 1, at 256.

Ibid., at 256-57. The present English rule is r. 119 of the Non-Contentious Probate Rules,
1954. SI 1954/796.

The Estates Act also deals with the persons to whom administration
should be granted. Section 54 of the Act provides, in part, as follows:

54. — (1) Subject to subsection (3), where a person dies intestate or the
executor named in the will refuses to prove the will, administration of the
property of the deceased may be committed by the surrogate court having
jurisdiction to

(a) the person to whom the deceased was married immediately before
the death of the deceased or person of the opposite sex with whom
the deceased was living in a conjugal relationship outside marriage
immediately before the death;

(b) the next-of-kin of the deceased; or

as in the discretion of the court seems best, and, where more persons than one
claim the administration as next-of-kin who are equal in degree of kindred to
the deceased, or where only one desires the administration as next-of-kin where
there are more persons than one equal kindred, the administration may be
committed to such one or more of such next-of-kin as the court thinks fitJ61!

(3) Where a person dies wholly intestate as to his property, or leaving a will
affecting property but without having appointed an executor thereof willing and
competent to take probate, or where the executor was at the time of the death
of such person resident out of Ontario, and it appears to the court to be
necessary or convenient by reason of the insolvency of the estate of the deceased,
or other special circumstances, to appoint some person to be administrator of
the property of the deceased, or of such part of such property, other than the
person who if this subsection had not been enacted would have been entitled
to the grant of administration, it is not obligatory upon the court to grant
administration to the person who if this subsection had not been enacted would
have been entitled to a grant thereof, but the court may appoint such person
as it thinks fit upon his giving such security as it may direct, and every such
administration may be limited as it thinks fit.

Section 54(1) appears to have little impact on the principles that we
have described above. In the case of intestacy, section 54(1) gives the court
a discretion to make an appointment from among the "spouse" and next-
of-kin, with none enjoying a preference as a matter of law. Hull and Cullity
explain as follows:62

The discretion is, however, a judicial one not to be exercised arbitrarily or
capriciously but with due regard to the best interests of the estate and of all
persons interested in the distribution of the property. The first duty of the Court
is, therefore, to place the administration in the hands of that person who is

61
62

Supra, note 35, s. 54(1), as en. by S.O. 1986, c. 64, s. 66.
Hull and Cullity, supra, note 1, at 220.

likely best to convert it to the advantage of those who have claims, either in
paying the creditors or in making distributions; the primary object is the interest
of the property.

In practice, courts continue to follow the order of preference that governs
intestacy.

Section 54(1) also deals with the situation where a named executor
refuses to prove the will. In these circumstances, the court would grant
administration with the will annexed. Hull and Cullity state that, while
section 54(1) seems to indicate that the choice of administrator should be
made from among the spouse or next-of-kin, the matter continues to be
determined by the beneficial interest in the estate, according to the order
of preference generally governing the administration with the will annexed.63

By contrast, section 54(3) does have a substantial impact on the appoint-
ment of administrators. Where the conditions of that provision are met, the
court has a discretion to depart from whatever order of preference would
have been applicable, and appoint a person as administrator other than the
person who would otherwise be entitled.64 It bears emphasizing that this
wide discretion does not exist in all situations in which it is necessary to
appoint an administrator or an administrator with the will annexed. Section
54(3) is applicable only where (1) there is an intestacy or the deceased has
died without having appointed an executor willing and competent to take
probate or has appointed an executor who is resident out of the province, and
(2) by reason of the insolvency of the estate or other special circumstances, it
appears to the court to be necessary and convenient to appoint a person as
administrator other than the person who would otherwise be entitled.

A person may challenge the appointment of another person who has a
prior right to appointment as administrator on the ground that there are
"material objections" to the appointment of the latter. One of the most
important possible grounds of objection is that the person otherwise entitled
to appointment would have a conflict of interest with the estate.65 Where a
person applying for administration wishes the court to prefer her to persons
with a claim of higher priority, that person must show that the others have
renounced or consented or that they have been served with a citation,
calling upon them to show why administration should not be granted to the
applicant.66

64
65
66

Ibid., at 256.

For a discussion of the breadth of this discretion, see Hull and Cullity, ibid.

Ibid., at 221-22.

Rules Governing Proceedings Under the Estates Act, R.R.O. 1980, Reg. 925 (hereinafter
referred to as "Estates Rules"), rr. 19-21, Form 38. See, also, Estates Act, supra, note 35,
s. 38, which provides that, where a person who is not a next-of-kin applies for letters of
administration, there should be an order requiring the next-of-kin, or others having or
pretending an interest in the property of the deceased, to show cause why administration
should not be granted to the applicant.

From the foregoing description,, it should be evident that the law govern-
ing the appointment of administrators is very complicated. The relevant
legislation is difficult to understand and its relationship to the practice —
and, in particular, to the order of preference that is followed by the courts in
appointing administrators — cannot be found on a reading of the provisions.
Moreover, there is disagreement on which order of priority applies where it
is necessary to appoint an administrator with the will annexed.67

Legislation should deal with two matters. It should set out the order of
preference68 and should give the court a discretion to depart from that order
where it would be advantageous to the administration of the estate to do so.

In setting out an order of priority, it is necessary to distinguish between
situations of intestacy and situations where there is a will. In the case of
intestacy, we recommend that the following order of preference should
prevail:

1. spouse;

2. children;

3. parents;

4. grandchildren;

5. brothers and sisters;

6. great-grandchildren;

7. uncles, aunts, nephews, nieces, grandparents; and

8. other collateral relatives of more remote degrees.

In cases where there is a will, but it is necessary to appoint an estate
trustee, we recommend that the order of preference should be based on the
English rules governing a grant to an administrator with the will annexed.69

We wish to clarify the meaning of certain of the terms appearing above.
We recommend that "spouse" should be given the expanded definition that
is used in Part III of the Family Law Act, 1986,10 which deals with support
obligations. By virtue of this definition, "spouse" means not only either a
man or woman who are married to each other, but also either a man or
woman who are not married to each other and who have cohabited continu-
ously for a period of not less than three years, or who have cohabited in a

(\1

Compare Hull and Cullity, supra, note 1, at 256 with Brule and Histrop, supra, note 58.

z:o

In England, the Non-Contentious Probate Rules, 1954, supra, note 60, rr. 19 and 21, set out
an order of priority for administration with the will annexed and intestacy, respectively.

See text at note 60, supra.

Supra, note 31.

relationship of some permanence, if they are the natural or adoptive parents
of a child.71 We further recommend that "child" and "parent" should be
given the same definitions used in the Family Law Act, 1986. "Child" is
defined to include "a person whom a parent has demonstrated a settled
intention to treat as a child of his or her family, except under an arrangement
where the child is placed for valuable consideration in a foster home by a
person having lawful custody".72 "Parent" is defined to include "a person
who has demonstrated a settled intention to treat a child as a child of his or
her family, except under an arrangement where the child is placed for
valuable consideration in a foster home by a person having lawful custody".73
Finally, we observe that the definitions of "spouse", "child" and "parent"
have been amended during the past fifteen years to adapt to changing
conceptions of the family. It is possible that the present definitions appearing
in the Family Law Act, 1986 will be amended in the future. We recommend
that, should the definition of "spouse", "child" or "parent" be amended,
the definition of that term for the purposes of estates administration should
be changed to reflect that amendment.

The recommended order of priority should be presumptive, and should
not be followed where it would be to the detriment of the estate. Accordingly,
we recommend that the court should be given a discretion to decline to
appoint a person as estate trustee who would otherwise be entitled where it
would not be advantageous to the administration of the estate, taking into
account all relevant circumstances, to appoint that person. In such circum-
stances, the court should be empowered to appoint another person as estate
trustee. However, where more than one person would be entitled to be
appointed estate trustee, the court need not appoint that number. For
example, if three children are equally entitled to the appointment, and the
court concludes that one of them should not be appointed as estate trustee,
it may simply refuse to appoint that person.74

(iii) Disabilities

Under the existing law, certain categories of person may not be able to
act as executors or be appointed as administrators. The rules applicable to
these exclusions are partly statutory and partly judicial creations. Among the
classes that have been addressed are minors, criminals, bankrupts, persons

71 Ibid., s. 29.

72 Ibid., s. 1(1).

73 Ibid.

Under s. 54(3) of the Estates Act, supra, note 35, the court has power only to appoint a
person instead of the person otherwise entitled to the grant of administration. It cannot
depart from the order of preference by declining to appoint that person.

incapable of managing their own affairs, and persons residing out of the
jurisdiction.75

While minors may be appointed as executors, they cannot act as execu-
tors during the period of minority.76 The Estates Act11 provides that, if a
minor is named as sole executor, administration with the will annexed is to
be granted to the guardian of the minor or to such other person as the court
thinks fit, until the minor attains the age of eighteen years, at which time
probate of the will may be granted to him. Where there are two or more
executors, of whom one is a minor, those of full age may prove the will. In
such a case, the grant will reserve the right of the minor to accept probate
on attaining his majority. In the case of an intestacy, administration cannot
be granted to a minor, even though he may otherwise be entitled.78

Neither poverty nor bankruptcy in itself is an absolute bar to becoming
an executor. Where the testator, aware of the circumstances, has nominated
an insolvent person to be his executor, the latter will not be excluded in
the absence of other reasons for a belief that the beneficiaries will be
prejudiced.79

Persons who are not mentally competent may not act as personal repre-
sentatives. Where an executor or the person otherwise entitled to letters of
administration is mentally incapacitated at the time when the grant should
be made, administration is granted to another person. If there is at least one
other executor, probate may be granted to him. Where, however, there is
only one executor and he is incapable, a special grant of administration is
made for his use and benefit until he recovers.80

The position of persons residing outside of Ontario is addressed in the
Estates Act. Section 24 provides that "[l]etters of administration shall not be
granted to a person not residing in Ontario".81 Under section 25, a person
who does not reside in Ontario or elsewhere in the Commonwealth cannot
be granted letters probate, unless the person has given the amount of security
that is required of an administrator on an intestacy or the court dispenses
with the security or reduces its amount.

76
77
78
79
80
81

Hull and Cullity, supra, note 1, at 153-57, and Sunnucks, Martyn, and Garnett, Williams,
Mortimer and Sunnucks on Executors, Administrators and Probate (1982) (hereinafter
referred to as "Williams, Mortimer and Sunnucks"), at 16-21.

Hull and Cullity, supra, note 1, at 154.

Supra, note 35, s. 51.

Hull and Cullity, supra, note 1, at 214.

Ibid., at 156.

For a description of the practice in Ontario, see Hull and Cullity, ibid, at 277-79.

But see Hull and Cullity, ibid., at 310.

While we have identified various categories of disability, we observe
that the categories are not closed; nor are the bounds of certain of them
firmly set. For example, one important category is where there is a conflict
of interest between the prospective personal representative and the benefi-
ciaries. Since the rules governing conflict of interest in this context owe their
development entirely to the courts, this category is capable of expansion or
contraction.

In view of the fluid nature of the categories of disability affecting
entitlement to appointment, and the desirability of allowing the law to
respond flexibly to unforeseen factual circumstances, we recommend that
legislation should not list the circumstances that should disentitle a person
from acting as an estate trustee. While the latter approach would conduce
to certainty, it would not permit the court to deal with situations that are
not anticipated in the statute. A better approach, we believe, would be to
confer a general power on the court to decline to appoint any person to be
estate trustee where it decides that the appointment of the person named
in the will is not desirable for the effective administration of the estate, taking
into account all relevant circumstances. We have already recommended that
a residual power of this nature be given to the court where there is no will
or no person is named as estate trustee in the will or the named estate
trustee is unwilling or unable to assume the office. We recommend that this
power should be extended to cases where the applicant for the estate trustee
certificate is named in the will.

The only category of disability that we wish to address is that of the
prospective estate trustee who resides out of the province. The present law
is characterized by distinctions which, if they once were supportable, are no
longer justifiable. Under the Estates Act, a non-resident may not be granted
letters of administration.82 Yet, on giving the requisite security, "a person
not resident in Ontario or elsewhere in the Commonwealth" may be granted
letters probate. The Act also provides for temporary administration where
the next-of-kin entitled to administer the estate are absent from Ontario,
pending their return.83

We can discern no functional basis for allowing the distinction between
executors and administrators to continue. Nor do we see any principled
reason to distinguish between non-residents living in Commonwealth coun-
tries, who can receive a grant of letters probate without providing security,
and non-residents living in other countries, who can do so only upon giving
security. Indeed, in certain circumstances, the present law may produce

However, where probate or letters of administration have been granted by a court of
competent jurisdiction in the United Kingdom or in a province or territory of Canada or
in any British possession, a copy of the letters probate or letters of administration may be
deposited with the Ontario Court (General Division) and resealed by the court, which gives
them the same effect in Ontario as if they had been granted by the Ontario Court (General
Division): Estates Act, supra, note 35 , s. 77(1).

Estates Act, supra, note 35, s. 38.

injustice where, for example, a sole beneficiary who resides out of Ontario
cannot obtain letters of administration. Surely, the speed and efficiency of
contemporary methods of communication will facilitate the administration
of estates by persons residing out of the province. Moreover, estate trustees
will be assisted by the extensive power of delegation that we shall recommend
later in this chapter.84 In those cases where distance does prove to be an
impediment to sound administration, an application may be made to remove
the estate trustee, in accordance with the recommendation that we shall
make below.85

Accordingly, we recommend that a non-resident of Ontario should be
entitled to apply for an estate trustee certificate, subject to compliance with
the bonding provisions to be specified by legislation.86

(b) Renunciation of the Office

A prospective estate trustee may prefer to disclaim his right to the
estate trustee certificate. Under the existing Ontario law, the extent to which
executors and administrators may renounce their offices is subject to certain
rules, which cannot be applied to the new office of estate trustee without
substantial modification.

At present, by the execution of a formal writing, a person may abandon
her right to a grant of letters probate or letters of administration. The
document must be filed with the court, together with the original will.87 In
addition, where an executor fails to bring in a will for probate within fourteen
days of the testator's death, or, on an intestacy, letters of administration
have not been issued, an interested person may cite the person entitled to
be personal representative to decide whether to accept or refuse the office.88

In the case of an executor, the effect of renunciation is governed by the
Estates Act,89 which provides that all rights in respect of the executorship
cease, and further representation and administration will take place as if
the person renouncing had not been appointed executor.90 The courts have

84
85
86

See infra, this ch., sec. 3(e)(ii).

Ibid., sec. 6(c)(ii).

We do believe that, in general, prospective non-resident estate trustees should be required
to post adequate security for the protection of the beneficiaries and creditors of the estate:
see discussion, infra, ch. 4, sec. 7.

In certain circumstances, the original will may be unnecessary. If the will has been lost, a
verified copy and an affidavit attesting to the loss of the original will should be filed.

Estates Rules, supra, note 66, rr. 48 and 55.
Supra, note 35, s. 59.
90 Stinson v. Stinson (1851), 2 Gr. 508 (Ch.), and Allen v. Parke (1866), 17 U.C.C.P. 105 (C.P.).

imposed certain limitations on the right of executors to renounce: an execu-
tor may not renounce in part, or if there has been intermeddling in the
estate. Finally, where the executor is a minor, the right to probate cannot
be renounced on his behalf by his guardian.91

The position of a person who has a prior right to letters of administration
differs in certain significant aspects. First, renunciation of the office is
permitted, notwithstanding intermeddling in the estate. Second, a minor
who is entitled to letters of administration may renounce his right to a grant
through a guardian. Finally, courts have been more willing to allow retraction
of a renunciation by administrators.92

In our view, the existing law governing renunciation presents certain
difficulties for the new office of the estate trustee. Apart from specific
principles that we find unclear or with which we disagree, the law reflects
the historical dichotomy between executors and administrators that we have
sought to erase. For these reasons, we believe that legislation should deal
with renunciation in some detail.

A threshold issue is whether estate trustees should have a right of
renunciation that may be exercised freely, or one that is subject to the
approval of the court. It has been suggested that imposing a limitation on
the right of renunciation might be an appropriate method of dealing with
an alleged practice by so-called "professional trustees" — for example, solici-
tors, trust companies, or accountants — of renouncing executorship where it
is not financially attractive or the administration appears to be too trouble-
some. In such cases, it is argued that these trustees have induced reliance
by the testator, who was given the impression that they would act as the
executors; therefore, they in effect had assumed an obligation to the testator,
which it would be inequitable to allow to be evaded without due regard to
the interests of the estate.

While we do acknowledge that there may be a problem, we are unper-
suaded that the answer is to place renunciation under judicial control.
Even if there are situations where testators have been induced to appoint
executors who later do not wish to assume the office, it would hardly be in
the best interests of the estate to compel administration by them. Moreover,
we believe that the problem to which reference has been made will, in part,
be solved by our recommendation to allow an estate trustee to apply to the
court for permission to waive the remuneration fixed by the will and obtain
compensation determined by the court.93 Consequently, we recommend that
an estate trustee named in the will or a person entitled to apply to the court
to be appointed estate trustee should be entitled to renounce her right to
be appointed estate trustee by an instrument in writing filed with the court.

Hull and Cullity, supra, note 1, at 187.
92 Ibid., at 188-89.
~ Infra, this ch., sec. 5(c).

As we have stated, certain details of the law pertaining to renunciation
should be clarified in their application to estate trustees. One principle that
should be abrogated is the rule that there cannot be a partial renunciation.
Under the existing law, where a surviving spouse is appointed the executor
of her husband's estate, she becomes the executor of all the estates of which
he was the executor. The rule preventing partial renunciation prevents
her from choosing to administer her husband's estate and renouncing the
administration of estates of which he was executor, and for which she does
not wish to be responsible. This seems to be an inflexible and absurd result.
We therefore recommend that an estate trustee named in the will or a
person entitled to apply to the court to be appointed estate trustee should
be entitled to accept appointment as estate trustee, while at the same time
she should be able to renounce her rights with respect to the administration
of any estates to which she might have been entitled because the deceased
was an estate trustee.

We believe that the differences in the existing law between executors
and administrators should not be continued. With respect to the effect of
intermeddling, we believe that the rule applicable to administrators reflects
the appropriate approach. In principle, we see no reason why intermeddling
in the estate should be of any consequence in determining whether an
uninterested person should be required to serve as estate trustee over an
extended period of time. If the intermeddling has benefited the estate, the
person should not be punished for such acts by being denied the normal
right of refusing the office of estate trustee. If the intermeddling has been
detrimental to the estate, such person should be liable to the estate on the
normal principles of liability governing interference with the property of
others. Indeed, to preclude renunciation in such circumstances would
require an estate to have an estate trustee who not only is unwilling, but has
demonstrated his lack of ability or dedication to the proper administration
of the estate. Such a result, to say the least, would be curious. Consequently,
we recommend that a person named in a will or entitled to apply to the
court to be appointed estate trustee should be entitled to renounce his
right to be appointed estate trustee, notwithstanding the fact that he has
intermeddled in the administration of the estate. The person, however,
should remain liable for any loss caused by his intermeddling.

The distinction between executors and administrators with regard to
minors should not apply to estate trustees. Again, we believe that the better
approach is that taken in relation to minor administrators, who are allowed
to renounce their right to administration through their guardians. We recom-
mend therefore that a minor who is named estate trustee in the will or who
is a person entitled to apply to the court to be appointed estate trustee
should be able to renounce the right to be appointed estate trustee by
instrument in writing executed by a guardian of the property of the minor
appointed under the Children 's Law Reform Act94 or by the Official Guardian.

94 R.S.O. 1980, c. 68.

The final matter that we shall address is retraction of a renunciation.
It would appear that courts in the United Kingdom, Australia, and New
Zealand allow an executor to retract a renunciation, but grant permission
to do so only in "very exceptional circumstances".95 Retraction of a renuncia-
tion by a person entitled to administration, however, is sanctioned more
freely. In our view, the extent of the right to retract should be clarified by
legislation, and that right should be available to both estate trustees named
in the will and to persons entitled to apply for an estate trustee certificate.
We believe that the right should be available at any time subject to court
approval. Judicial scrutiny will ensure that retraction will be allowed only in
appropriate circumstances. Where, for example, the retraction is capricious
or will interfere unduly with the effective administration of the estate, we
would expect the court to withhold permission. We therefore recommend
that, subject to court approval, retraction of a renunciation should be permit-
ted at any time.

One of our primary concerns is to facilitate the efficient administration
of estates. During the course of administration, an estate trustee may die,
or may, in accordance with recommendations that we shall propose later,
retire or be removed from office.96 The possible occurrence of such events
raises concerns that the ongoing administration of the estate not be unneces-
sarily disrupted. While this is a more substantial concern in the case of the
administration of a trust, owing to the longer duration of express trusts, it
nonetheless should be addressed in the context of estate administration.

The Commission considered this matter in the Report on the Law of
Trusts.91 As a matter of general principle, it took the view that the statutory
powers of non-judicial appointment and discharge of trustees should be
relatively simple and should provide, as much as possible, the same assur-
ances with respect to the validity of appointment and the vesting of property
as are afforded by the more expensive and cumbersome means of a court
application. In this section, we are not concerned about the circumstances
under which an estate trustee may be removed by the court.98 Nor will we
address vesting of the estate property in new estate trustees.99

Our concern is that which animated our proposals in the Report on the
Law of Trusts. We are of the view that the continuity of administration is as
crucial in the administration of estates as in the management of trusts.

95 Hull and Cullity, supra, note 1, at 188.
See infra, this ch. 6(c).
Trusts Report, supra, note 3, at 85-120.

98 Infra, this ch., sec. 6(c)(ii).

99 Infra, ch. 5, sec. 4(a).

Essential to this is a simple and efficacious means of appointing new estate
trustees, should the need arise.

The present law governing estate administration does not address the
issue of non-judicial accession to the office, except in the case of the death
of a personal representative. At present, neither executors nor administra-
tors may retire from office without a court order;100 removal of a personal
representative may be ordered by the Ontario Court (General Division), on
the application of an executor or administrator or any person interested in
the estate.101 An executor cannot assign his office because it is "an office of
personal trust".102 Likewise, the powers and rights of an administrator
generally are not transmissible.

The general rule of non-transmissibility is subject to a limited exception
in the case of the death of a personal representative. The position of execu-
tors is explained by Hull and Cullity as follows:103

[T]he rights and responsibilities of an executor are in certain circumstances
transmissible by will. Thus, if a sole executor, or the survivor of several executors,
having proved the will, dies without having completed the administration of the
estate, his executor when he proves the will becomes the executor of the original
testator unless the deceased, as the sole or the only surviving executor, has
appointed a separate executor for the estate of which the deceased had been
the executor.lt is only an executor who has proved the will who can transmit
the executorship, and, therefore, if the executor named predeceases the testator
or dies without having taken probate there must be an administration.

When there are more executors than one, the executorship is transmitted
through the survivor of the acting executors. Thus if A and B are appointed
executors, both proving the will, and A predeceases B leaving an executor, but
B subsequently dies intestate, A's executor does not succeed to the executorship
of the original testator. But if A alone proves, the rights of B having been
reserved, and on A's death B is cited but does not appear, A's executor succeeds.

The administrator of an executor does not succeed to the executorship nor
does the executor of someone appointed executor by the Court under The
Trustee Act.

100

Trustee Act, supra, note 32, s. 2(2).

101 Ibid., s. 37

102

" Williams, Mortimer and Sunnucks, supra, note 75, at 40. But see Baker, Widdifield on
Executors' Accounts (5th ed., 1967) (hereinafter referred to as "Widdifield"), who argues
(at 413) that s. 3 of the Trustee Act clearly implies that a sole or sole surviving executor may
retire and appoint a successor.

103

Supra, note 1, at 162-64. But see Trustee Act, supra, note 32, s. 37(6), which provides that
the office is not transmissible to the executor of an executor appointed under s. 37 to
replace an executor who has been removed by the court.

Administrators are in a different position under the present law. Gen-
erally, their rights and powers are not transmissible. Nor do the principles
outlined in the quoted passage apply to them in the case of death. The only
exceptions to this are established under the Trustee Act. Section 46 of the
Act provides as follows:

46. — (1) Where there are several personal representatives and one or more
of them dies, the powers conferred upon them shall vest in the survivor or
survivors, unless there is some provision to the contrary in the will.

(2) Until the appointment of new personal representatives, the personal
representatives of the representative for the time being of a sole personal
representative, or, where there were two or more personal representatives, of
the last surviving or continuing personal representative, may exercise or perform
any power or trust that was given to, or capable of being exercised by the sole
or last surviving personal representative.

The applicability of these provisions to administrators results in two narrow
exceptions to the rule that the office of administrator is not transmissible.
The first is where there are more than two administrators, and powers of
the deceased administrator are conferred on her survivor or survivors. The
second provides for a temporary transmission of the office on the death of
the administrator, effective only until the appointment of a new administra-
tor for the original estate.

The considerably greater extent to which the office of executor is trans-
missible is based on a perception of the privileged position of the executor
by reason of his nomination by the testator. The traditional assumption that
the testator has reposed "special confidence" in her executor is at the core
of the distinction.104

We are of the view that the present law should not apply to the new
office of estate trustee without amendment. It makes no provision for non-
judicial appointment of additional estate trustees in the event of voluntary
retirement or removal by the court, both of which will be permitted to occur
pursuant to recommendations that will be proposed later in this chapter.105
Should one of these events occur, in the absence of an expeditious mecha-
nism for appointing new estate trustees, the administration of the estate will
be impeded. In addition, we believe that the distinction in the treatment of
executors and administrators with respect to the devolution of the office on
death should not apply to the estate trustee by similarly distinguishing
between estate trustees named in the will and estate trustees who are
appointed by the court. The rationale for the distinction is untenable. In a
world where testators appoint large trust companies as their executors, and
where there is a relatively high degree of mobility among the population, we
doubt whether any "special confidence" can be said to repose in an executor

104 Ingalls v. Reid (1865), 15 U.C.C.P. 490 (C.P.).

105 Infra, this ch. 6(c).

to appoint a successor to the original estate. Where the executor of an
executor is unaware of the original testator or his estate, he would seem to
be less capable of, or interested in, dealing with it than would a person
eligible to apply for letters of administration. We believe therefore that
there is no reason to distinguish between persons who are chosen estate
trustees by a will and persons who must be appointed by the court.

In the Report on the Law of Trusts, we discussed the power of trustees
to appoint additional or substitute trustees upon the happening of certain
events. After due consideration of several related issues, we recommended
the enactment of detailed provisions in the proposed new Trustee Act to
govern non-judicial appointment of trustees.106 The proposed Trustee Act
provides that if, for example, a trustee dies, the persons nominated by
the trust instrument for the purpose of appointing substitute or additional
trustees may by deed appoint one or more persons to be a trustee or trustees
in the place of the trustee who has died. It further provides that, if there is
no such person or if there is no such person able and willing to act, then the
one or more surviving or continuing trustees, or the personal representatives
of the last surviving or continuing trustee, may by deed appoint one or more
persons to be a trustee or trustees in the place of the trustee who has
died.107 We also recommended that the sole trustee, or the last surviving or
continuing trustee, be permitted to appoint by will one or more persons to
act as a trustee or trustee in his place after his death.108

We believe that these provisions should apply as well when an estate
trustee has died, retired, or been removed, and we so recommend.

3. POWERS AND DUTIES OF THE ESTATE TRUSTEE

Pursuant to our initial recommendation, the office of estate trustee will
be assimilated to that of a trustee. Generally speaking, the estate trustee
will have all the powers possessed by a trustee under our proposed new
Trustee Act and, in addition, will have the powers and duties necessary
and incidental to his basic responsibility as personal representative of the
deceased. We have expressed the duty to exercise these powers and to fulfil
these duties as a series of "trusts" upon which the estate trustee holds the
property of the deceased.

In this section, we shall discuss the various powers and duties of an
estate trustee. We shall consider both the powers and duties that are shared
with an ordinary trustee and those that are unique to the estate trustee. Not
all the powers and duties of the estate trustee, however, will be discussed in

106 Trusts Report, supra, note 3, at 92-112, Draft Trustee Bill, ss. 19-25.

107 Draft Trustee Bill, s. 19(1).

108 Ibid, s. 20.

this chapter. The power to sell estate assets will be discussed in chapter 5,
in the context of our examination of several difficult issues respecting the
transfer of the assets of deceased persons. We shall discuss aspects of the
estate trustee's duty to pay debts in chapter 4, which addresses issues relating
to the satisfaction of creditors and other claimants.

Before turning to consider specific duties associated with the represen-
tation of the deceased, we wish to indicate that one important consequence
of our recommendation to assimilate the office of estate trustee to that of
a trustee is that the exercise of powers and the discharge of duties by the
estate trustee will be governed by the general principles that will apply to
trustees pursuant to the proposed new Trustee Act. These principles relate
to the basic duties of trustees, which include the duty of care, diligence, and
skill and the duty not to permit their personal interest to conflict in any way
with his duty to those whom he serves. We have discussed the general
principles respecting these duties in chapter 2 of the Report on the Law
of Trusts and have made recommendations concerning them, which are
incorporated in our proposed Trustee Act. In this chapter, we do not intend
to recapitulate that discussion or reiterate those recommendations. How-
ever, in the ensuing discussion, reference shall be made to our trust recom-
mendations, where appropriate. We shall consider the duty of care when we
discuss the nature and extent of the liability of the estate trustee. In our
consideration of the various powers and duties of the estate trustee, we shall
discuss the power of delegation by estate trustees.

We turn first to duties peculiarly associated with acting as a representa-
tive of a deceased person, and then consider the more general powers and
duties.

(a) Duty to Dispose of the Body of the Deceased

One of the immediate tasks in the administration of an estate is to
attend to the disposal of the body of the deceased. Obviously, if a problem
occurs, it does so at a time of acute emotional stress for the family and
friends of the deceased, and should be resolved without delay. In this context,
the law should strive to provide clear guidelines for the estate trustee and
the family of the deceased so that the respective obligations are understood
and the potential for conflict is attenuated, if not removed.

Unfortunately, the present law does not meet these standards. In certain
respects, it is unclear. To some extent, this is because very few reported
cases deal with issues that arise in connection with the disposal of the body,
and because the applicable rules are based on outdated assumptions and
concepts.

We believe that the present law concerning the disposal of the body of
the deceased should be clarified. In our view, two matters need to be
addressed: (1) the duty to dispose of the body; and (2) the manner of
disposal, including the effect of directions given by the deceased.

There is some uncertainty in the law respecting the duty of disposal.
Even referring to "the duty" is somewhat misleading, since it is doubtful
whether it can be enforced.109 However, a failure to carry out the duty may
lead to criminal liability.110

The law is clear where the deceased is a man or an unmarried woman
who has appointed executors: the primary duty rests on the executors.111 In
the case of a deceased married woman, however, the law is unclear. At
common law, the duty rested on her husband;112 this followed from the
inferior status of a married woman at common law — in particular, the princi-
ple of unity of personality under which she was completely identified with
her husband — and her limited capacity to hold property.113 With the enact-
ment of modern legislation placing a married woman in the same position
as a man with regard to the ownership and disposition of property, the better
position would seem to be that, where a married woman has appointed
executors, the primary duty to dispose of her body rests on them, at least
where she leaves sufficient assets in her estate to pay for such disposal.114 In
other cases, however, it appears that the common law duty of the husband
may remain.

It is not entirely clear whether, under the existing law, a married woman
is under a reciprocal duty to dispose of the body of her deceased husband
where he has not appointed executors. Undoubtedly, courts would not have
found such a duty as a matter of common law, given the subordinate position
of married women. At present, a court would take a different view of this
matter, and would presumably find it impossible not to impose the same
duty on a married woman that rests on a married man.

The duty to dispose of a body may rest on someone other than an
executor or a spouse. Depending on the circumstances, statutes may impose
this duty on hospitals,115 medical schools,116 and municipalities.117 English

109

110
111

112

In Rogers v. Price (1829), 148 E.R. 1080, at 1083, the court observed that "[i]t is not that
sort of duty which can be enforced by mandamus or other proceedings at law". The word
"law" was not used in contradistinction to "equity"; he did not seem to suggest that the
duty was enforceable at equity.

Criminal Code, R.S.C. 1985, c. C-46, s. 182(a).

Williams v. Williams (1882), 20 Ch. D. 659, [1881-5] All E.R. Rep. 840; Hunter v. Hunter
(1930), 65 O.L.R. 586, [1930] 4 D.L.R. 255 (H.C. Div.); and Schara Tzedeck v. Royal Trust
Co., [1953] 1 S.C.R. 31, [1952] 4 D.L.R. 529.

Bradshaw v. Beard (1862), 31 L.J.C.P. 273, 142 E.R. 1175.

113 Rees v. Hughes, [1946] K.B. 517, [1946] 2 All E.R. 47 (C.A.) (subsequent reference is to
[1946] K.B.).

114 Ibid., at 526.

115 Public Hospitals Act, R.S.O. 1980, c. 410, s. 22.

116 Anatomy Act, R.S.O. 1980, c. 21, s. 7. See, also, Cemeteries Act, R.S.O. 1980, c. 59, s. 53.

117

Anatomy Act, supra, note 116, s. 11.

cases assert that a duty of disposal may rest on parents118 and household-
ers.119 No reported Ontario case has dealt with these matters.

The right of disposal of the body follows the duty of disposal. It is trite
law that there is no property in a dead body;120 thus, there is no source of
independent rights in relation to the disposal of the body. The person who
has the duty of disposing of the body is treated as having correlative rights,
including the right to hold and protect the body until it is ready for disposal,
the right to select the place and manner of disposal, and the right to carry
out the disposal. Interference with these rights can constitute actionable
wrongs.121

We believe that the law should be clarified with respect to the duty to
dispose of the body of a deceased person.122 At present, while it would
appear that this duty rests on the executor, this is not entirely clear with
respect to a deceased married woman. In our view, as a general rule, the
duty of disposal should fall upon the estate trustee, and we so recommend.
Where, however, there is no will or an estate trustee has not been named in
the will, there will be a practical problem if the court does not appoint an
estate trustee in sufficient time. In such circumstances, the obligation of
disposal must be imposed on another.

It is not unduly burdensome to attend to the details of disposal. Our
society has relegated most of the duties to funeral directors licensed under
provincial legislation.123 Consequently, we recommend that, if no estate
trustee has been named in the will or appointed by the court, or if the estate
trustee is unavailable or unwilling to act, the family members should have
the duty to dispose of the body of the deceased in accordance with the
following order of priority. The duty should be given first to the surviving
spouse with whom the deceased was living at the time of death. Where there
is no surviving spouse, children of the deceased of the age of eighteen years

118

119

R. v. Vann (1851), 169 E.R. 523 (dicta ); R. v. Price (1884), 12 Q.B.D. 247; and Clark v.
London General Omnibus Co. Ltd., [1906] 2 K.B. 648 (C.A.).

R. v. Stewart (1840), 113 E.R. 1007 (Q.B.), at 1009 (dicta), and R. v. Price, supra, note 118,
at 252-53.

Williams v. Williams, supra, note 111.

121 Emonds v. Armstrong Funeral Home Ltd., [1930] 3 W.W.R. 649 (Alta. S.C. App. Div.).

1 77

Generally, liability for funeral expenses rests on the person with the primary duty to dispose
of the body: see, generally, Williams, Mortimer and Sunnucks, supra, note 75, at 701-02.

In chapter 4 of this report, we recommend that, in the case of insolvent estates, expenses
for the disposal of the body of the deceased should constitute a charge on the unencumbered
portion of the assets of the deceased ranking in priority to testamentary expenses and the
costs of administration, to the extent that the expenses for the disposal of the body were
reasonable in the circumstances. We recommend that disposal expenses should include,
among other things, funeral expenses, transportation expenses, casket, cemetery charges
and a marker.

123 Funeral Directors and Establishments Act, S.O. 1989, c. 49.

or older, should have the duty. Where there is no surviving children of the
deceased of the age of eighteen years or older, the parents of the deceased
person should have the duty. If there is no surviving parent, the brothers
and sisters, of full or half blood, of the deceased of the age of eighteen years
or older should have the duty. The terms "spouse", "child" and "parent"
should be defined in accordance with the recommendations that we made
earlier in connection with the appointment of an estate trustee by the
court.124

One of the most important decisions to be made concerns the manner
of disposal of the body. Two questions are related to this matter. What
methods of disposal are legally permissible? Should the person discharging
the duty of disposal be subject to direction as to the manner of disposal,
either by the deceased or by a member of by the deceased's family?

In large part, the present law reflects the experience that the usual
method of disposal of a dead body in England and Ontario has been burial.
In 1884, cremation was held to be lawful in England, provided that a nuisance
was not caused thereby.125 While no Ontario case has addressed this ques-
tion, there can be no doubt that cremation is lawful; it is widely practised
and is regulated under the Cemeteries Act.126

As we have explained, the person with the duty of disposal has the right
of disposal, which involves the right to possession of the body for the purpose
of disposal and the right to determine the manner of disposal. When this
rule was established, the right to determine the manner of disposal was of
little practical consequence. Since there was an established Church in
England and the almost invariable method was burial in the local churchyard,
there was unlikely to be any disagreement respecting this matter. In the
absence of an established religion in Ontario and with the availability of an
alternative to burial, the right to decide the method of disposal does assume
some importance.127

Under the present law, directions by the deceased as to the disposal of
his body, whether or not in testamentary form, are not legally binding on
the person with the right and duty of disposal of the body.128 The doctrinal
underpinning of this rule is the principle that there is no property in a dead

124
125
126

127
128

Supra, this ch., sec. 2(a)(ii).

R. v. Price, supra, note 118.

Supra, note 1 16, ss. 77-81. These sections were first enacted by The Cemetery Act, 1932, S.O.
1932, c. 40, s. 3.

See, for example, Hunter v. Hunter, supra, note 1 1 1, where there was a disagreement between
the executor and the widow and her children as to which religious rite was to be followed
in burying the deceased.

Williams v. Williams, supra, note 111; Hunter v. Hunter, supra, note 111; and Schara Tzedeck
v. Royal Trust Co., supra, note 111.

body. In theory, this prevents the deceased from disposing of his dead body
by will.129 Thus, the deceased cannot make a binding direction that his body
is to be cremated or that his funeral should be conducted according to the
rites of a particular religion. In Ontario, the rule as to the legal ineffective-
ness of directions by the deceased is qualified by the Human Tissue Gift Act,
which makes binding a consent to a use of the body or body parts for
therapeutic purposes, medical education or scientific research.130

Notwithstanding the state of the law, wills often include directions
concerning the manner of disposal of the body. Moreover, many people are
under the misapprehension that these directions are binding in law. It is
likely that in most cases there is compliance with them.

In our view, the doctrinal reason for the rule denying the binding effect
of directions by the deceased is unsatisfactory, and is irrelevant to the basic
policy issue whether the rule should continue to be a part of Ontario law.
The fact that a person can give a consent under the Human Tissue Gift Act,
which binds the person charged with the duty of disposal, but cannot give a
binding direction, for example, that he wishes his body to be cremated, or
that certain religious rites should be performed, is oddly anomalous. We
consider that the current rule is opposed to what we perceive to be a
general — and understandable — sentiment in the community. We see no
reason why the law should not defer to the common belief that the deceased
should have a choice in the manner of the disposal of his body. Accordingly,
we recommend that directions by the deceased should be binding on the
person with the duty of disposal, in accordance with the recommendations
below.

Certain aspects of this principle warrant further clarification. We have
considered whether the directions should be binding only if expressed in
testamentary form. The argument in favour of such a restriction is that, in
the relevant circumstances, where decisions must be taken quickly, there
should be a minimum of uncertainty as to whether a direction has been
made and whether it has been countermanded. We acknowledge that impos-
ing such a formality may give rise to some difficulty. The will of the deceased
may not be found during the period when the decision respecting disposal
must be made. Many persons will not make a will, either because they have
little property or because they are content that their property should pass
on an intestacy. Moreover, we realize that the Human Tissue Gift Act provides
an example of a direction that is binding, although it is not necessarily in
testamentary form.

We regard the evidentiary considerations as decisive in this context.
Given the immediate need for the disposal of the body of the deceased,
uncertainty as to the directions should be avoided, where possible. In our

1 ?q

Williams v. Williams, supra, note 111.

130 R.S.O. 1980, c. 210, s. 4, as am. by S.O. 1986, c. 64, s. 19(3) and (4).

view, any directions by a person should be followed if they are in a will.
However, we realize that individuals may choose not to make a will to
dispose of their property, but may still want to give directions for the disposal
of their body. They too deserve to have their wishes respected.

On balance, given our concern that there be clear evidence of the
deceased's intention, we are of the view that her wishes must be recorded
in a document for them to have legal effect. Accordingly, we recommend
that the directions of a deceased regarding disposal of his body should be
binding on the person under a duty to dispose of the body only if set out in
the will or any document dictated or signed by the testator.

If the directions in the will or other document are to be followed, the
person responsible for assuring compliance obviously must be aware of them
prior to disposal of the body. To ensure that the wishes of testators are
respected as much as possible, we recommend that there should be a duty
on the estate trustee or any person under a duty to dispose of the body of
the deceased to make reasonable efforts to ascertain whether the deceased
left binding directions concerning disposal of the body. Imposing such a
duty would not be unduly onerous, as we expect that the courts will liberally
construe "reasonable efforts" to locate the will or other document.

Thus far, our discussion has assumed that a testator has executed a will
or other document that gives directions for the disposal of his body. Yet
directions may not be available: for example, the deceased may leave no
will, or the will may not be located within a reasonable time after the death
of the deceased, or the will may make no provision for the disposal of the
body. The possibility that any of these circumstances might occur raises a
question concerning who should have the right to determine the manner of
disposal. We believe that, even though the estate trustee would have the
duty of disposal, the members of the deceased's family should have the right
to make the decision respecting the manner of disposal. This would effect
a change from the existing law, under which the person with the duty of
disposal has the unfettered right to make this decision. We believe that the
change is justified by the sensitive nature of the decision. Given the emotional
state of the family members, it would be unnecessarily callous to prefer the
estate trustee. Accordingly, we recommend that, if the deceased has left no
binding directions concerning disposal, or if his directions cannot be located
within a reasonable time of death, the estate trustee should be required to
dispose of the body of the deceased in accordance with the wishes of the
members of the deceased's family, according to the order of priority that we
set out below. The estate trustee should make reasonable efforts to locate
the family members to ascertain their directions.

Legislation should establish the order of priority respecting the right to
give directions to the estate trustee. First priority should be given to the
surviving spouse with whom the deceased was living at the time of death.
Where there is no surviving spouse, or the spouse does not give a direction
within a reasonable time, then a direction by a child of the deceased of the
age of eighteen years or older, or if there is more than one, a direction of

the majority of the children of the deceased of the age of eighteen years or
older, should be binding with respect to the disposal of the body of the
deceased. If a majority cannot agree within a reasonable time, a parent or
parents of the deceased person may make a direction. If there is no surviving
parent, or there is no direction from the parent or parents within a reason-
able time, a brother or sister of the deceased, of full or half blood, of the
age of eighteen years or older, or if there is more than one, a majority of
them may make a direction. The terms "spouse", "child" and "parent"
should be defined in accordance with the recommendations that we made
earlier in connection with the appointment of an estate trustee by the
court.131

Circumstances may arise where there are no binding directions in the
will, and the estate trustee may be unable to locate the family members in
order to receive directions or, after finding them, may not receive directions
within sufficient time. To deal with this situation, we recommend that, where
the deceased has left no will, or the will cannot be located within a reasonable
time after the death of the deceased, or if the will has made no provision
for the disposal of the body of the deceased, and the estate trustee, after
reasonable inquiry, cannot locate the family members or has received no
binding directions from them within a reasonable time, the estate trustee
should have the right to decide the details of disposal of the body of the
deceased.

A further question is whether the new right of a testator to make a
binding direction respecting the disposal of his body should be conclusive,
so that the person under the duty of disposal would be obliged to follow his
instructions, ignoring all other considerations. This would be a concern if a
testator were to direct that an unreasonable amount of money be spent on
the disposal of his body to the disadvantage of creditors of the estate. What
may seem to be a reasonable direction when the will is executed may be
regarded in a different light should circumstances alter and, in particular, if
there is uncertainty concerning the solvency of the estate. On balance, we
believe that the power to bind the estate trustee should be qualified to allow
the estate trustee to respond appropriately to changes in circumstances and
to unreasonable requests. We recommend that a direction made pursuant
to the above recommendations, whether by will or other document, or by a
person given the right to give such a direction, should be binding on a person
with the duty to dispose of the body unless it is not financially reasonable in
the circumstances.

The final matter to which attention should be given is the definition of
the expression, "disposal of the body", which we have used throughout this
discussion. In our view, legislation should define "disposal of the body" to

" Supra, this ch., sec. 2(a)(ii).

mean any lawful disposal of a body that may be made under Ontario law,
and we so recommend.132

(b) Duty to Maintain Records and to Provide Information

Pursuant to the recommendations that we shall make in the balance of
this chapter and in chapter 4, the estate trustee will be subject to certain
duties with respect to beneficiaries and creditors of the estate. Both benefi-
ciaries and creditors thus will have a legitimate interest in ascertaining
whether these duties are being discharged and their rights are being safe-
guarded. The present law, however, does not advance this interest effec-
tively; access to the records and information pertaining to the estate is
uncertain or is too difficult.

The law has not addressed the issue of access to information generally.
Rather, the law deals separately with two matters relating to the disclosure
of information. These are the duty of the personal representative to account
and the duty to provide an inventory of the estate. We shall first discuss the
duty to account.

Generally speaking, the duty to account concerns the maintenance of
ongoing records and the provision of information to persons lawfully entitled
thereto. This would include affording an opportunity to inspect the records.
The jurisprudence has not delineated specific rules to govern the proper
method of keeping estate accounts. The basic principle is simply that the
accounts should show clearly the property of the estate and the dealings of
the personal representative with that property.133 The accounts required to
be kept are generally those required by the rules governing proceedings
under the Estates Act for the purpose of the approval or "passing" of
accounts.134

Prior to statutory intervention, the judicial position was that the only
persons entitled to the accounts and information were beneficiaries of the
estate.135 In Ontario, the entitlement to an accounting has been extended
by legislation to persons interested in the property of the deceased and
creditors of the deceased.136

132

Legislation bearing upon this includes the Cemeteries Act, supra, note 116, Anatomy Act,
supra, note 116, and Human Tissue Gift Act, supra, note 130.

133

134
135

Waters, supra, note 43, at 871-72.

With respect to the passing of accounts, see infra, ch. 6, sec. 2(d).
Re Bosworth (1889), 58 L.J. Ch. 432.
136 Estates Act, supra, note 35, s. 75(1).

The jurisprudence is not clear with respect to what precisely must be
given to the person who asks to see the accounts.137 One question that has
been raised in this regard is whether a personal representative must allow
only an opportunity to inspect the accounts or must supply the requesting
person with a copy of the accounts. In Ontario, the position would seem to
be that the personal representative is under a duty only to afford facilities for
inspection and for the beneficiary to make a copy; in special circumstances,
however, the personal representative would be under a duty to supply a copy
of the accounts, if requested, although the beneficiary would have to pay for
such copy.138

The law governing the inventory constitutes the other strain of the
present law relevant to the duty to disclose information. The term "inven-
tory" has two meanings. The term is sometimes used in a wide sense to refer
to the accounts of a personal representative.139 The word is also used in a
more restricted sense to mean a statement as to the property of which the
deceased died possessed or to which he was entitled.140 It is in the latter
sense that the term has been employed in practice and is used here. An
inventory thus does not comprehend income arising after the death of the
deceased. Yet it does deal with assets owned by the deceased at the time of
his death that subsequently were lost or that disappeared before the making
of the inventory. The proper accounts of a personal representative should
deal with the property included in an inventory in the narrow sense.

The law concerning the inventory is of ancient origin. While the position
is not entirely clear, the ecclesiastical courts in England had the power to
require a personal representative to exhibit an inventory.141 The practice
may have been to require an inventory to be exhibited even before probate
was granted.142 In 1529, legislation expressly required executors and adminis-
trators to exhibit inventories as part of their duty, without being called upon
to to do so.143 Apparently, the statute was not applied literally, as the practice
was that personal representatives did not exhibit an inventory unless an
interested person had applied for it. In exceptional cases, however, the
ecclesiastical court, of its own motion, would require an inventory to be
exhibited. The 1529 legislation and the relevant ecclesiastical law respecting
inventories were part of the English law introduced into Upper Canada in
1792; such matters were soon administered by the surrogate courts. In 1897,

137 Waters, supra, note 43, at 872-74.

Sanford v. Porter (1889), 10 O.A.R. 565.

138
139

140
141
142
143

See Estates Rules, supra, note 66, r. 61. See, also, Campbell v. Hogg, [1930] 3 D.L.R. 673,
at 684 (P.C).

See Williams, Mortimer and Sunnucks, supra, note 75, at 70-72.

Re Russell (1904), 8 O.L.R. 481, at 489-90 (Div. Ct.)(per Meredith J.).

Phillips v. Bignell (181 1), 161 E.R. 972.

21 Hen. 8, c. 5.

personal representatives were required, prior to the application for a grant
of probate or administration, to prepare an inventory in duplicate of all the
property belonging to the deceased at the time of his death and to file a
copy with the appropriate surrogate court.144 In 1977, this requirement was
abolished and replaced with an obligation to deliver to the registrar a true
statement of the total value of all the property belonging to the deceased at
the time of his death.145

While the preparation of a full inventory is no longer necessary prior
to the grant of probate or administration, the concept of an inventory has
been preserved. Section 49 of the Estates Act provides that "[t]he court
having jurisdiction may summon any person named executor of any will to
prove, or refuse to prove, such will, and to bring in inventories and to do
every other thing necessary or expedient concerning the same". Section 75
also mentions an inventory of the property of the deceased.

These references clearly fit into the scheme of the former Surrogate-
Courts Act prior to 1977, since it required a personal representative to make
an inventory prior to obtaining a grant of probate or administration. With
the replacement of the requirement of an inventory with that of a statement
of the total value of the deceased's property, the effect of the references to
inventories is not entirely clear. Since it is extremely doubtful that a true
statement of total value can be regarded as an inventory, it would seem that
the court has been left with the power to order an inventory of its own
motion.

The apparent existence of a residual jurisdiction to order an inventory
makes relevant the old jurisprudence. In England, the ecclesiastical courts
took an expansive view of the persons entitled to apply for an order that a
personal representative render an inventory, which reflected the fact that the
1529 statute had required a personal representative to exhibit an inventory
without being called upon to do so. They regarded it as sufficient if the
applicant had an interest, or even the appearance of an interest in the
estate.146

The English ecclesiastical courts established that the persons who might
be compelled to exhibit an inventory were not confined to the personal
representative or even to those who, upon the death of the personal repre-
sentative, succeeded to the representation of the original testator. Repre-
sentatives of a deceased administrator with the will annexed, who were not

144

145

146

An Act respecting Executors and Administrators, R.S.O. 1897, c. 337, s. 9.

The Surrogate Courts Amendment Act, 1977, S.O. 1977, c. 43, s. 4. See, now, Estates Act,
supra, note 35, s. 57(1).

For example, an obligation to present an inventory might be found in the event of a probable
or contingent interest, or if a creditor swore that certain sums were due from the deceased
to him, although the debt was contested: see Williams, Mortimer and Sunnucks, supra,
note 75, at 69.

representatives of the first testator, were required to exhibit an inventory,
upon a reasonable presumption being raised that any part of the estate of
the first testator had got into their hands.147 Similarly, it has been held that
even where executors of a deceased executor were not personal representa-
tives of the original testator, they were compelled to bring in an inventory
of the effects of the original testator.148 The principle of these English cases
has been applied in Ontario,149 notwithstanding that the language of the
relevant provisions of the former Surrogate Courts Act would not have
appeared to justify such an interpretation. Indeed, in Ontario, the principle
has been extended: it has been held that the personal representatives of a
deceased administrator could be compelled to pass the accounts of the estate
of the original intestate.150

Before turning to our recommendations, we shall consider the impor-
tant question whether a provision in the will can affect the duty to keep
records and give information. The law is not entirely clear. However, based
on the obligations set out in the Estates Act,151 it would seem that a provision
that seeks to dispense with the duties respecting an inventory and accounts
would be void. A provision limiting these duties probably would be void.
Where a clause in a will provides for different duties in relation to the
inventory and accounts, it would be valid if those duties supplement those
imposed by the general law, but invalid if it purports to exclude or dilute
these duties.

A provision in a will may purport to absolve an executor from his duty
to account in relation to a specific asset. Whether it is effective depends
upon the intention that is imputed to the testator. If the court interprets
such a provision to indicate an intention on the part of the testator to make
a beneficial gift to the executor, the executor is under no duty to keep or
render accounts with respect to the administration of the asset. Although
there is little authority on point, where there is such a provision in the will,
but the executors are considered not to have made a beneficial gift, it seems
that the provision will not be effective, and the executor will still be under
the usual duties with respect to inventory and accounts.152

We are of the view that beneficiaries and creditors should be able to
subject the conduct of estate trustees to reasonable scrutiny so that they can
determine whether the estate trustee is discharging his duties properly and

147 Ritchie v. Rees (1822), 162 E.R. 51.

148

149

Gale v. Luttrell (1824), 162 E.R. 279. The executors of deceased executor were not the
executors of the original executor because an executor of the original executor had survived.

Re French, [1934] O.W.N. 447 (H.C.J. ). See, also, Cunnington v. Cunnington (1901), 2 O.L.R.
511 (C.A.), and Re Baskin, [1954] 2 D.L.R. 748 (B.C.S.C).

Re French, supra, note 149.

151 Estates Act, supra, note 35, ss. 64, 73, and 75.

Re Dean (1889), 41 Ch. D. 552.

152

whether their rights are being safeguarded. The existing law bearing upon
the maintenance and availability of records does not sufficiently facilitate
this. In some respects, the law is uncertain and difficult, which can frustrate
justifiable access to crucial information about the administration of an estate.
Problems of this nature can be overcome only by legislation.

We begin with the question whether estate trustees should be under an
express statutory duty to maintain accounts. The existing legislation requires
that personal representatives account only at the behest of others, but does
not impose an obligation to keep accounts that is independent of the right
of others to require that accounts be passed. While, as a practical matter,
personal representatives will keep accounts, we think that the information
contained in the accounts is so important that such an obligation should be
made express in the legislation. Accordingly, we recommend that estate
trustees should be under a statutory duty to keep accounts.

Special attention, we believe, should be given to the inventory, since it
is the most fundamental of the components of the estate accounts. The
inventory can assist both beneficiaries and creditors in ascertaining their
positions at any given time, and it can facilitate the determination whether
the estate is being properly administered. In this latter connection, we
believe that the inventory should not remain a static document, but should
be updated on a regular basis in order to ensure that it reflects accurately
the assets of the estate at any given time. We recommend therefore that
estate assets should be listed in a complete inventory, which should be kept
current.153

With respect to the inventory, we have considered another group of
potential claimants from the estate, in addition to beneficiaries and creditors,
namely, persons entitled to apply for support as dependants under Part V
of the Succession Law Reform Act. We shall shortly recommend that these
persons should have access to the estate accounts, including the inventory,
in order for them to ascertain whether it is appropriate to make an applica-
tion for support. At this juncture, however, we wish to address one aspect
of Part V. Pursuant to section 72 of the Act, the value of certain transactions
made by a deceased before death is deemed to be part of the estate for
the purpose of Part V of the Act. Depending on the circumstances, the
transactions listed may be within the special knowledge of the estate trustee,
or may come to his attention in the course of the administration of the
estate. If these transactions were required to be included in the inventory
of the estate, noting their peculiar nature as being part of the "net estate"
of the deceased as defined by the Succession Law Reform Act, it would assist
potential claimants under Part V in determining the extent of their rights

Under s. 57(2) of the Estates Act, supra, note 35, where property belonging to the deceased
at the time of death is discovered subsequently and has not been included in the statement
of total value that has been delivered to the local registrar pursuant to s. 57(1), a personal
representative must deliver a new statement of total value of that property within 6 months
of discovery.

and in making a decision whether it is worthwhile to assert them. This
obligation, however, should be limited to the listing of the transactions
enumerated in the section only insofar as they can be ascertained with
reasonable effort in the normal course of administration. We therefore
recommend that, where a person who comes within the definition of
"dependant" in Part V of the Succession Law Reform Act applies to the court
for access to the accounts, including the inventory, the inventory should
include the transactions listed in section 72 of the Succession Law Reform
Act. An estate trustee who is ordered to provide an inventory should be
required to list only those transactions that can be ascertained with reason-
able effort.

Having considered the obligation of the estate trustee to keep records,
it is appropriate to consider who should be entitled to access to information,
and the nature and extent of the disclosure that they should be given. Our
approach to this issue is affected by the person requesting the information.
We turn first to beneficiaries.

While the entitlement of beneficiaries to accounts and information is
established under the present law, the scope of their right is uncertain. As
we have explained, it is unclear whether personal representatives must
accord them an opportunity of inspection or give them a copy of the accounts.

We have balanced our belief in the importance of ensuring reasonable
access to estate records to beneficiaries against a concern that access be
afforded in a manner that does not impose unnecessary or excessive costs
on the estate, or expose it to the whims and caprices of unreasonable
beneficiaries. We suggest that, for a beneficiary, appropriate access consists
of a right of inspection of the accounts, which would include the inventory,
and books and records. This would entail inspection of not only financial
books and records, but all books and records in the possession or control of
the estate trustee.This right should be exercisable on reasonable notice. It
should include a right to obtain a copy of the accounts, books and records
at the expense of the beneficiary, also exercisable on reasonable notice. We
recommend that such a right should be established by legislation.

We also wish to note that, pursuant to recommendations that we will
make in chapter 6,154 dealing with the passing of accounts, interested persons,
including beneficiaries, will be entitled to compel estate trustees to file their
accounts with the local registrar of the Ontario Court (General Division).
Following filing, estate trustees will be required to send a copy of the
accounts to all interested persons, unless the court relieves them of this
obligation, in which case the accounts may be inspected.

To be effective in practice, statutory recognition of the beneficiary's
right of access to information must be accompanied by an expeditious
enforcement procedure. At present, in the face of a recalcitrant personal

154 Infra, ch. 6, sec. 2(d).

representative, the enforcement of existing rights is frustrated by unduly
cumbersome procedures. We recommend therefore that legislation should
provide a summary procedure for a beneficiary to apply to the court if the
estate trustee fails to afford access to the accounts, books and records. In
order to ensure that estate trustees are forthcoming with information, we
consider that two measures are necessary. First, we recommend that, where
a beneficiary uses the summary procedure to obtain an order for disclosure,
and the court orders that costs are to be awarded to the beneficiary, the
court should be empowered to order that the costs be paid by the estate
trustee personally. Second, we recommend that an estate trustee should be
liable in damages to the beneficiary for any loss caused by a failure to comply
with the statutory provisions respecting the maintenance of, and access to,
accounts, books and records.

The position of creditors and persons coming within the definition of
"dependant" in Part V of the Succession Law Reform Act should also be
clarified, for they deserve a degree of access to the estate accounts in order
to ensure that their interests are being protected adequately. However, they
should not be given access in the same fashion as we have recommended for
beneficiaries. While creditors share with beneficiaries an expectation that
the estate will be properly administered to protect the value of the assets,
thev have an interest that is adverse to the estate and the beneficiaries.

Dependants are in a position analogous to that of creditors, for they may
also have a claim against the estate. We recommend that, rather than having
a right of access, a person coming within the definition of "dependant" in
Part V of the Succession Law Reform Act or a creditor whose claim has not
been paid in full or in a timely fashion should be entitled to apply to the
court for an order giving her such access to accounts, books and records as
she can demonstrate should reasonably be made available. The court should
be empowered to limit disclosure to such matters as it thinks fit.

While the right of access differs from that proposed for beneficiaries,
we believe that the mechanisms for enforcement of this duty should be the
same. We therefore recommend that, where an estate trustee fails to afford
access to a creditor in compliance with a court order, forcing a further
application by that creditor, if the court orders that costs are to be awarded
to the creditor, costs are to be payable by the estate trustee personally.
Second, we recommend that an estate trustee should be liable in damages
to the creditor for a loss caused by a failure to comply with the court order
for access. These recommendations should apply to persons coming within
the definition of "dependant" in Part V of the Succession Law Reform Act.

We have considered whether a testator should be able to modify the
duties we have recommended. This involves an examination of two questions,
which approach the issue from opposite perspectives. Should a testator, by
will, be able to relieve the estate trustee from the obligations imposed by
legislation or the general law? Should a testator, by will, be able to impose
obligations that exceed those duties? As we have indicated, the law has not
settled these questions. With respect to the former question, we are of the
view that a testator should not be able to dispense with the duties of

disclosure, which are intended to provide a minimum of protection for
beneficiaries, creditors, and dependants. With respect to the second ques-
tion, we take the view that more rigorous conditions should be respected,
since the deceased may have special reasons for imposing them, relating to
the attributes of the particular estate trustees and beneficiaries. It is possible,
of course, that additional requirements may be capricious or unduly onerous.
An estate trustee may regard them as so intolerably oppressive that she may
consider renouncing her office. To deal with situations such as these it would
be useful if the court were empowered to modify or relieve him of duties
imposed by a testator.

Accordingly, we recommend that a testator should not be able to relieve
an estate trustee of the duties respecting the maintenance of, and access to,
accounts, books, and records, imposed upon him by legislation and the
general law. We recommend further that a testator should be able, by will,
to impose obligations that exceed those imposed by legislation and the
general law, and the estate trustee should be required to comply with these
duties unless the court modifies them or relieves him of them.

Our recommendations thus far have dealt with access to the accounts,
books, and records in the possession or control of estate trustees. However,
not all the information to which a person should be entitled may be found
in these documents. The estate trustee may have information or knowledge
that has not been placed in a document; for example, information about the
efforts that have been made to sell assets or the actions that have been taken
to enforce rights belonging to the estate may not be recorded. Valuable
information respecting estate assets may be unavailable because it is in the
control of persons other than the estate trustee. Indeed, the assets them-
selves might be in their possession.

Under the Estates Act, there is no mechanism by which non-documen-
tary information can be obtained easily from reluctant estate trustees. What
procedures do exist are unduly expensive and laborious, or simply ineffective.
Consistent with our earlier proposals, we recommend that legislation should
establish a summary procedure for beneficiaries, creditors, and persons
coming within the definition of "dependant" in Part V of the Succession Law
Reform Act that would allow them to apply to court for an order compelling
the estate trustee to provide information of which he has knowledge relating
to the administration of the estate where such information is not revealed
in the accounts, books and records. We recommend further that, where an
estate trustee fails to provide information in compliance with a court order,
and in a further application the court orders that costs are to be awarded to
the applicant, costs should be payable by the estate trustee personally. We
also recommend that an estate trustee should be liable in damages for a loss
caused to a beneficiary, creditor, or person coming within the definition of
"dependant" in Part V of the Succession Law Reform Act by a failure to
comply with the court order.

The final matter that we shall address in this section concerns informa-
tion in the possession of a person other than the estate trustee. Rule 50 of

the rules governing proceedings under the Estates Act155 provides that a
person with knowledge of any will or other document or any asset relating
or belonging to an estate may, by leave of the judge, be served with a
subpoena calling upon her to attend to be examined with respect to her
knowledge. The general principle embodied in this rule — that persons having
information concerning estate assets should be required to divulge it — is
one to which we subscribe. We believe, moreover, that this principle is of
such importance that it should be implemented by statute, rather than left
in regulations. Furthermore, we are of the view that the legislation should
expand the information that is now required to be given under Rule 50.

Accordingly, we recommend that a statutory provision, similar to Rule
50 of the rules governing proceedings under the Estates Act, should be
enacted to provide that, where, on the application of the estate trustee, a
court is satisfied that a person has knowledge or possession of any will or
other document or asset relating to or belonging to an estate, the court may
order that person to attend to be examined and to provide information
concerning the will, document, or asset, including the transactions set out
in section 72 of the Succession Law Reform Act. The court should be empow-
ered to order compensation for the work involved in providing the
information.

In an earlier section of this chapter, we recommended that legislation
should provide that the estate trustee is to hold the estate upon certain basic
trusts. Among these is the trust to get in the estate of the deceased. In
stating this trust, the legislation will not be effecting any change to the
existing law, but simply declaring one of the fundamental duties that has
long been discharged by personal representatives.

"Getting in" the estate involves collecting or assuming control over the
assets of the deceased's estate.156 This duty requires a personal representa-
tive, and will oblige an estate trustee, actively to seek out assets and to take
the necessary measures to bring them into the estate and under his control.
In this regard, his task differs from that of an ordinary trustee, who is
responsible only for the property that is transmitted to him by the settlor or
testator.

For the most part, the present law is satisfactory. There are a few
matters that warrant attention, and we shall confine our discussion to them.

155 Supra, note 66.

For a discussion of what are assets of the estate, see Williams, Mortimer and Sunnucks,
supra, note 75, at 543-58, and Widdifield, supra, note 102, at 9-10.

Generally, a personal representative "should get in as speedily as possi-
ble all money of his testator outstanding upon personal security only"157 and,
if necessary, should sue debtors of the estate in furtherance of this goal.
Where a loss to the estate ensues as a consequence of a breach of this duty,
the personal representative will be personally liable. Such will be the case,
for example, where undue delay in bringing an action enables a debtor to
plead the Limitations Act.158 In deciding whether to sue a debtor, personal
representatives have the burden of demonstrating that they have acted
reasonably.159

The performance of the duty to get in the estate is also governed by
section 48(2) of the Trustee Act, which empowers personal representatives
to allow any time for payment of a debt, and to compromise, compound,
abandon, submit to arbitration or otherwise settle any debt. It provides
further that, in the exercise of this authority, the personal representative is
not responsible for any loss occasioned by any act or thing done by him in
good faith.160 The effect of section 48(2) is unclear. There is authority stating
that it adds nothing to the powers available at common law.161 However, it
has also been suggested that the provision might have "a revolutionary
effect", insofar as it would make the question of good faith the only issue in
evaluating conduct.162 While the matter is thus not free from doubt, it would
appear that section 48(2) does considerably strengthen the position of the
personal representative: he will not be liable if he has acted in good faith
even if he has failed to act in accordance with the standard of care normally

157 Halsbury's Laws of England, Vol. 17 (4th ed., 1976), para. 1119, at 578. By contrast,
"[i]n the case of money outstanding on real security, there is no duty upon the personal
representatives to realise a mortgage created by the deceased himself where the realisation
is not required for a testamentary purpose, and the security itself is not in any peril:" ibid.

158 R.S.O. 1980, c. 240.

159

160

161

162

McCargarv. McKinnon (1868), 15 Gr. 361 (Ch.), and Baldwin v. Thomas (1868), 15 Gr. 119
(Ch.).

It provides as follows:

48. — (2) A personal representative . . . may, if and as he or they may think fit, accept
any composition or any security, real or personal, for any debt or for any property, real
or personal, claimed, and may allow any time for payment for any debt, and may
compromise, compound, abandon, submit to arbitration or otherwise settle any debt,
account, claim or thing whatever relating to the testator's or intestate's estate or to
the trust, and for any of these purposes may enter into, give, execute, and do such
agreements, instruments of composition or arrangement, releases, and other things as
to him or them seem expedient without being responsible for any loss occasioned by
any act or thing done by him or them in good faith.

Re Houghton, [1904] 1 Ch. 622, [1904-7] All E.R. Rep. 486. See, also, Re Johnston (1877),
25 Gr. 261 (Ch.), and Re McGrath (1918), 13 O.W.N. 398 (H.C. Div.).

Re Owens (1882), 47 L.T. 61 (C.A.), at 64. See, also, Re Earl of Strafford, [1978] 3 All E.R.
18 (Ch. D.), at 22, where Megarry V.C. states that, in exercising a power under s. 15(f) of
the Trustee Act 1925, supra, note 15, at 21, "the only criterion is whether the compromise
is desirable and fair as regards all the beneficiaries". This followed from his view that the
provision requires that "the trustees must act in good faith in the interests of all concerned.

required. In order to enjoy the protection of this provision, the personal
representative must exercise an active discretion, and not passively fail to
take proper steps to collect debts.163 Further, it would seem that in a case
where his action or inaction has been proved to have caused a loss to
the estate, the burden of proving good faith would rest on the personal
representative.

The powers set out in section 48(2) of the present Trustee Act should
continue to be available to estate trustees. We are of the view, however, that
the exercise of these powers should be subject to the normal duty of care to
which trustees are subject, which is set out in the proposed Trustee Act. We
can see no reason why these powers should be subject to a test of good faith
alone, which would tolerate conduct of a standard that, in other contexts,
would be unacceptable for an estate trustee or a trustee. We recommend,
therefore, that legislation should confer on estate trustees the powers set
out in section 48(2) of the Trustee Act, and should provide that their exercise
by estate trustees is subject to the normal standard of care.

One of the most important aspects of the duty to get in the estate is the
duty to bring actions on its behalf. At common law, the general rule was that
causes of action that had vested in the testator were transmitted to his
executors. Legislation extended this right to administrators in the fourteenth
century.164 The main exceptions to the general rule were causes of action
arising out of contractual rights based upon personal considerations,165
causes of action in tort, and causes of action arising from a breach of contract
that were in substance actions for injury to the person. In such cases, the
cause of action did not devolve on the personal representative.

In Ontario, section 38(1) of the Trustee Act modifies the common law
exceptions to the general rule respecting the devolution of causes of action.
It provides that, except in cases of libel and slander, a personal representative
may maintain an action for all torts or injuries to the person or property of
a deceased person.166

Section 38(1) does not extend the contractual rights of the deceased; it
does not enable a personal representative to enforce an obligation that is
discharged by the death of the deceased. For example, the death of a
contracting party terminates contractual rights and duties where the subsis-
tence of the rights and duties was dependent on the continuing existence of
the contracting parties or any one of them. Such dependence would be the

163
164
165

166

Re Greenwood (1911), 105 L.T. 509 (Ch. D).

Williams, Mortimer and Sunnucks, supra, note 75, at 489, n. 5.

For example, an action for damages for breach of promise to marry did not survive the
deceased. No action could be brought to enforce a contract of personal service under which
the deceased had promised to render services to another.

See Smallman v. Moore, [1948] S.C.R. 295, [1948] 3 D.L.R. 657, which was concerned with
liability of personal representatives under s. 38(2).

case if it were indicated in the terms of the agreement or by the nature of
the contract — if, for example, the contract were for the personal services of
the deceased.

While no doubt the duty of estate trustees to bring actions is an integral
part of the duty to get in the estate, we are of the view that it is so important
that it should be made explicit in the legislation that will govern estates
administration. We recommend therefore that legislation should state that
it is the duty of the estate trustee to bring actions on behalf of the estate
that may be brought under the common law or pursuant to section 38 of the
Trustee Act.

Although we shall not deal with the particular means by which an estate
trustee may seek to enforce obligations, there is one remedy that merits
particular attention. Section 39 of the Trustee Act provides that "[a] personal
representative has an action of account as the testator or intestate might
have had if he had lived". This provision refers to the common law action
of account, and does not address the more familiar accounting in equity.167
Section 39 has its origins in medieval legislation that had been enacted to
reverse the rule that a personal representative could not bring an action for
account at common law with respect to matters occurring before the death
of the deceased.

Once the Court of Chancery developed its own remedy of account, the
common law action of account fell into disuse, as the equitable remedy was
far more effective.168 Today, all actions for an accounting are rooted in
the equitable remedy, and section 39 of the Trustee Act has no practical
importance. Accordingly, we recommend that it should be repealed.

The final matter concerns the appointment of a debtor of the deceased
as estate trustee. We believe that the existing law applicable to executors
and administrators presents certain difficulties that should not be continued
in its application to estate trustees.

The following passage outlines the principles that apply where a debtor
is named executor:169

At common law an appointment by the testator of his debtor, whether he
was a sole debtor or one of several joint debtors, or even one of joint and several
debtors, to be his executor, operated as a release or extinguishment of the debt,

167

168
169

An action of account at common law, or an accounting action in equity, was a proceeding
to seek "[a] detailed statement of the mutual demands in the nature of debit and credit
between parties arising out of contracts or some fiduciary relation": Black's Law Dictionary
(5th ed., 1979), at 17.

Halsbury's Laws of England, Vol. 34. (4th ed., 1980), para. 84, at 70.

Williams, Mortimer and Sunnucks, supra, note 75, at 595-96.

on the principle that a debt is merely the right to recover the amount by way
of action, and as an executor could not maintain an action against himself, his
appointment by the creditor to that office suspended the action for the debt;
and where a personal action was once suspended by the voluntary act of the
party entitled to it, it was for ever gone and discharged.'170'

As between the debtor executor and the creditors of the testator, the
common law doctrine was applicable only in cases where there were assets
sufficient to satisfy the testator's debts, for it would have been unfair to defraud
the creditors of their just debts by a release which was absolutely voluntary.
Thus the debt due from the executor was considered, on their behalf, as assets
in his hands.

The effect in equity of the appointment of a debtor to the office of executor
is that the debt due from the debtor executor is considered to have been paid
to him by himself; and upon this supposition it is an established rule in equity
that the executor should be accountable for the amount of his debt as assets.
Semble, the debt is general assets for the payment, not only of the testator's
debts, but also of his legacies.

In the case of a debtor appointed as administrator, the situation is
entirely different. Since the appointment of the administrator is not a volun-
tary act of the deceased creditor, but a judicial act, the rule preventing
revival of the action does not apply. Hence, the debt is suspended during
the period of administration — as the administrator could not sue himself—
but is not extinguished.171

One consequence of the application of different principles is that an
anomaly was introduced into the law of limitations:172

3.86 The rule governing a debtor/administrator, known as the rule in Sea-
gram v. Knight, provides one of the very few examples of an exception to the
fundamental principle that once time begins to run it continues to run whatever
may happen. . . .

3.87 In the case of the debtor/executor, the extinction of the debt prevented
any question of limitation arising and in the event equity intervened by treating
him as if he had paid the debt to himself, so that he became accountable for
the amount of his debt as being as asset of the estate. Thus, equity effectively
overrode the common law rule that the right to claim the debt was suspended.
However, equity did not intervene in the case of the debtor/administrator,

170

171

172

At common law, the debt was extinguished even where the executor had died without having
proved the will or administered the estate. In Ontario, this was reversed by legislation: see
Estates Act, supra, note 35, s. 50.

For a more detailed explanation, see Law Reform Committee, Twenty-first Report (Final
Report on Limitation of Actions) (Cmnd. 6923, 1977), para. 3.86, at 54-55.

Ibid.

whose liability was merely suspended during the period of administration; the
solution adopted was to suspend the limitation period so long as the action
itself was suspended.

The distinction that is drawn between executors and administrators,
while understandable as a theoretical matter, is not functionally justifiable,
and should not apply to estate trustees.173 We subscribe to the general
principle that the appointment of a person as estate trustee should not affect
the rights of the estate against him. An estate trustee should be treated in
exactly the same way as any other person who is in a legal relationship with
the deceased. We therefore recommend that the present law should be
changed, and that the appointment of a person as estate trustee should not
extinguish or suspend a debt owed by that person to the deceased, in the
absence of specific provision in the will forgiving the debt. We recommend
that the estate should be able to pursue its rights against an estate trustee
who is a debtor.

From this recommendation certain procedural questions arise respect-
ing the manner in which a dispute as to the existence or the amount of the
debt can be determined. In the event of litigation, the estate trustee would
be both plaintiff and defendant. In the face of such an obvious conflict of
interest, one solution is simply to require the estate trustee to relinquish his
office. Yet, the debt may be small or inconsequential, having no effect on
the administration of the estate, while substantial prejudice might be caused
to the estate if an estate trustee, specifically selected by the testator to
discharge certain duties, were obliged to retire. While there may be cases
where removal of the estate trustee is justified — for example, where the debt
owed by him constitues a major part of the estate — a rule requiring him to
leave his office in all cases of conflict is too blunt a solution. We recommend
that an estate trustee who it is claimed owed debts to the deceased and who
disputes the existence or amount of such debts should not for that reason
alone be required to retire as estate trustee. Rather, he should have his
rights determined in the same manner and by the same procedure that is
available to any other debtor of the deceased.

While we have proposed that the rights of the estate trustee debtor
should be determined according to the procedure applicable to other debt-
ors, we recognize that an estate trustee cannot be permitted to act on behalf
of the estate as if the debt were that of a stranger. We recommend that an
estate trustee should not exercise any rights or duties with respect to the
determination of the existence or amount of a debt owed by him to the
deceased. The estate trustee's rights or duties on behalf of the estate should
be asserted by any other estate trustee who is not personally involved in the
subject matter of the litigation. If there is no other estate trustee, an estate

173

In the United Kingdom, the limitations problem was solved by legislation that altered the
law by placing the debtor who is appointed administrator in the same position as an executor
who is accountable in equity to the estate for the amount of the debt: See The Limitation
Amendment Act 1980, c. 24, s. 10, which implemented the recommendation of the Law
Reform Committee, supra, note 171, paras. 3.92-3.93, at 56.

trustee under a limited grant should be appointed by the court for this
specific purpose. Except in relation to the debt allegedly owed to the estate
by him, the estate trustee's duties and powers should not be affected. How-
ever, the court should be empowered to remove the estate trustee upon
application by a fellow estate trustee or an interested party.

(d) Duty to Pay Debts

Another basic trust upon which the estate trustee holds the estate of
the deceased is to pay the debts of the deceased in accordance with the
obligations imposed upon him by law and by the will. Numerous substantive
and procedural questions relate to the satisfaction of claims against the
estate. In this section, however, we shall focus on certain aspects of the duty
on the estate trustee to pay debts, leaving a more detailed consideration of
creditors and their claims to chapter 4.

The only legislative provision bearing upon the duty to pay debts is
section 48(1) of the Trustee Act, which provides that "[a] personal representa-
tive may pay or allow any debt or claim on any evidence that he thinks
sufficient".174 Section 48(1) seems to enact a subjective standard, which can
be met by demonstrating that the supporting evidence was considered and
that it was thought to be sufficient. There is no express requirement that the
evaluation of the evidence be conducted with care; if a payment has been
made erroneously, owing to a negligent consideration of a claim, arguably
the personal representative will not be liable for the loss, provided that
section 48(1) is satisfied. Where, however, loss is incurred in payment of a
purported debt or claim for a reason unconnected with the sufficiency of
the evidence, it is not clear whether section 48(1) would apply. If, for
example, a personal representative pays a claim in the mistaken belief that
it is enforceable, he may well be liable for the resulting loss, unless relieved
subsequently from liability by the court.175

We believe that section 48(1) of the Trustee Act is deficient because it
appears to reduce the duty of care with respect to the payment or allowance
of debts or claims. In this context, there is no reason to derogate from the fun-
damental principle that the performance of duties and the exercise of powers
by the estate trustee should be governed by the same duty of care to which
an ordinary trustee is subject. Accordingly, we recommend that the new
legislation governing estates administration should confer on estate trustees
the power set out in section 48(1) of the Trustee Act and should provide that
the exercise of this power is subject to the normal standard of care.

Under the existing law, a personal representative generally should not
pay a debt or allow a claim that is not enforceable against the estate. For

174 But see Re Cocomile (1985), 21 E.T.R. 113 (Ont. H.C.J.), which applied s. 48(2) in dealing
with debts owed by the estate.

175

Trustee Act, supra, note 32, s. 35.

example, a personal representative commits a devastavit if he pays a creditor
whose debt is unenforceable by virtue of a failure to comply with the Statute
of Frauds.116 There is, however, a single exception to the general rule: an
executor or administrator may pay a debt or allow a claim that is barred by
the Limitations Act.111 The courts regard this exception as an anomaly and
have strictly confined its application. For example, the personal representa-
tive cannot pay a debt where a court has previously held the debt to be
barred by a limitations provision.178

In our view, as a matter of general principle, there is no justification for
the exception allowing a personal representative a discretion to pay or allow
a claim barred by the Limitations Act or any other limitations provision.
Debts that are unenforceable due to the Statute of Frauds cannot be distin-
guished from debts that are rendered unenforceable by a limitations provi-
sion. Where, however, a testator directs that a statute-barred debt should
be paid by an estate trustee, there is no public policy reason to depart from
the ordinary principle that effect should be given to the expressed wishes of
the testator. We therefore recommend that estate trustees should have no
discretion to pay a debt or allow a claim that is barred by the Limitations
Act or any other limitations provision, in the absence of a specific direction
in the will authorizing him to pay the debt or allow the claim.179

Permitting the testator to authorize the estate trustee to pay a statute-
barred debt raises a collateral issue as to the characterization of the authori-
zation. Should it be treated as being in the nature of a legacy or as a debt?
This question is important where the estate is insolvent. If the creditor whose
debt is barred by statute is treated like other creditors, he will share with
them pro rata in whatever assets are available; if he is treated like a benefi-
ciary, he will receive nothing.

In our view, in the situation where a testator authorizes the payment of
a statute-barred debt, the elements of a debtor-creditor relationship predomi-
nate. A moral obligation may be said to exist where money has been advanced
to the testator on the understanding that it would be repaid at some time in
the future. On this basis, a distinction should be drawn between creditors
who have advanced funds and beneficiaries who are merely volunteers, and
the position of the latter should be subordinated to that of the former.

176

177

178
179

R.S.O. 1980, c. 481.

Williams, Mortimer and Sunnucks, supra, note 75, at 715, and Widdifield, supra, note 102,
at 60-61.

Midgley v. Midgley, [1893] 3 Ch. 282 (C.A.), and Re Rownson (1885), 29 Ch. D. 358 (C.A.).

In the Report on Limitation of Actions, supra, note 44, at 128, the Commission was opposed
to the principle that an executor may pay a statute-barred debt, including a debt owed by
the estate to herself. The Commission concluded that the right of an executor to pay this
debt should be extinguished, stating that there is "no good reason why a statute-barred
creditor should benefit at the expense of the beneficiaries under the will" (ibid.). The.
Commission, however, did not consider the question whether such a debt may be paid
pursuant to a direction in the will of the testator.

While we have concluded that the creditor whose debt is statute-barred
should be treated as a creditor rather than as a beneficiary, we believe that
he should not be treated exactly like other creditors. His claim should rank
below their claims because, but for the authorization in the will, his claim
would be unenforceable. Accordingly, we recommend that, where the testa-
tor authorizes payment of a debt barred by the Limitations Act or any other
limitations provision, that debt should not be paid until all the other debts
of the deceased have been paid in full, but should be paid in full in priority
to payments or gifts to the beneficiaries of the deceased.

The final issue that we shall consider in connection with the estate
trustee's duty to pay debts is the converse of an issue that we examined in
the previous section: how should the law deal with the situation where the
estate trustee is owed a debt by the deceased? Since, under the present law,
an executor cannot bring proceedings in his personal capacity against himself
as executor, he cannot enforce by action a debt owed to him by the deceased.
Moreover, where a creditor is appointed sole executor of the deceased
debtor, the debt is extinguished if the executor has sufficient assets of the
deceased in his possession that he could retain for the payment of his debt.180

The same general principle applies where the creditor is appointed as
one of two or more executors: generally, a creditor-executor cannot sue a
co-executor in respect of a debt owed to him by the deceased.181 Where,
however, a creditor of the deceased is appointed executor, but neither proves
the will nor acts as executor, he can sue the other executors in respect of
the debt.182

An administrator, like an executor, cannot bring an action in his per-
sonal right against himself as administrator.183

As a consequence of the inability of the personal representative to sue
the estate, he was given the interdependent rights of retainer and preference,
which allowed him to retain out of the assets of the estate in his possession
the amount of his debt.184 The right of retainer was conferred to overcome
a hardship to personal representatives caused by the fact that judgment
creditors once had priority over other creditors, and the personal representa-
tive was unable to convert his debt into a judgment debt in order to secure

180

Williams, Mortimer and Sunnucks, supra, note 75, at 598.
181 Ibid.

182

Ibid.

101

Williams, Mortimer and Sunnucks, ibid., state that, "a creditor who has taken out letters
of administration to his debtor can successfully sue a person who has intermeddled in the
deceased's affairs as executor de son tort, provided he can prove that he, the creditor
administrator, has no assets to satisfy his debt".

184

For a discussion of the law in England prior to the abolition of these rights, see Sunnucks,
Williams and Mortimer on Executors, Administrators and Probate (1970) (hereinafter referred
to as "Williams and Mortimer"), at 701-09. For a discussion of the present law, see
Williams, Mortimer and Sunnucks, supra, note 75, at 587-88.

this priority.185 By exercising his right of retainer, a personal representative
could prefer his own debt to those of other creditors of equal degree. In
addition, a personal representative was entitled to retain for a statute-barred
debt.186

The right of retainer does not compensate the personal representative
completely for the disadvantage suffered by reason of his inability to sue the
estate. He may retain only for debts and other claims that are in the nature
of debts, in that the claims are quantifiable by reference to a "certain
standard or measure".187 An amount that would represent damages in tort,
for example, may not be retained.188

For the most part, these principles remain unaffected by legislation.189
The only change has been effected by section 50(1) of the Trustee Act, which
abolishes the personal representative's right by retainer to prefer his own
debt to the debts and claims of other creditors. Personal representatives
may still retain assets for a statute-barred debt.

When we considered the collection of debts owed by the estate trustee
to the deceased, we began with the principle that the appointment of a
person as estate trustee of the deceased should not affect his legal relation-
ship to the deceased and the estate. We believe that this principle is generally
applicable in this context. If the estate trustee is to be placed on an equal
footing with other creditors, this would demand abolition of the right of
retainer, including the right to retain with respect to statute-barred debts.
After giving this matter very careful consideration, we have come to the
conclusion that, on balance, the right of retainer should be abolished in part
only. Total abolition in effect would require a determination by litigation of
every debt owed by the deceased to an estate trustee, even where the
existence and amount of the debt are not in dispute. This would not only
unnecessarily disrupt the administration of the estate, but may discourage
the participation of non-professional estate trustees.190 Hence, the law
should preserve that aspect of the law of retainer that allows an estate
trustee to pay to himself an undisputed debt owed to him by the deceased.

1 8S

Williams and Mortimer, supra, note 184, at 703, and The Law Commission, Administration
Bonds, Personal Representatives ' Right of Retainer and Preference andRelated Matters (Law
Com. No. 31, 1970), para. 8, at 4.

A personal representative could not retain a debt that is unenforceable by reason of a
failure to comply with the Statute of Frauds, R.S.O. 1980, c. 481, or s. 4 of the Sale of Goods
Act:, R.S.O. 1980, c. 462: Williams and Mortimer, supra, note 184, at 706.

Re Compton (1885), 30 Ch. D. 15 (C.A.), at 21.

188 Williams and Mortimer, supra, note 184, at 705-06.

189 Public Trustee v. Guaranty Trust Co. of Canada, [1980] 2 S.C.R. 931, 115 D.L.R. (3d) 513,
affg (1979), 24 O.R. (2d) 634, 99 D.L.R (3d) 574 (C.A.).

186

187

190

See Williams, Mortimer and Sunnucks, supra, note 75, at 588, where it is submitted that,
among several reasons for opposing abolition of retainer and preference, "it may be
desirable as a matter of public policy to avoid further discouragement of lay volunteers
from accepting duties which are already burdensome and unrewarding."

However, consistent with our earlier recommendation that estate trus-
tees should have no discretion to pay a statute-barred debt, in the absence
of a direction in the will, we favour abolition of the right of retainer in con-
nection with such debts. The present right to retain for statute-barred debts
gives personal representatives an advantage over other creditors of the
deceased, who suffer by reason of their failure to bring proceedings within
the prescribed limitation period. We cannot see that the mere fact of becom-
ing a personal representative entitles them to this special benefit. Where
an executor is appointed by a testator, it is extremely doubtful that the
appointment was intended to allow the executor to recover the amount of
the debt. In the case of an administrator, the fortuitousness of this exception
is even more pronounced. In both cases, the personal representative is in a
better position than he would have been had the deceased not died.

Accordingly, we recommend that the estate trustee should have the
same right to recover a debt from the estate as any other creditor. We
recommend further that, while estate trustees should continue to have the
right of retainer with respect to non-contentious debts, they should have no
priority over other creditors of the estate. However, in the absence of an
authorization in the will, estate trustees should not be able to retain for a
statute-barred debt.

Our recommendation to allow an estate trustee who is a creditor to
pursue his claims against the estate raises the same procedural questions
that were examined in the previous section. For the reasons that we stated
in that section, we would adopt those proposals in this context. Accordingly,
we recommend that, where an estate trustee claims to be owed debts by the
deceased, and there is a dispute as to the existence or amount of the debt,
or both, the estate trustee should not for that reason alone be required to
retire. Rather, he should have his rights determined in the same manner
and by the same procedure that is available to any other creditor of the
deceased. We recommend further that an estate trustee should not exercise
any rights or duties with respect to the determination of the existence or
amount of a debt owed to him by the deceased. The estate trustee's rights
or duties on behalf of the estate should be asserted by any other estate
trustee who is not personally involved in the subject matter of the litigation.
If there is no other estate trustee, an estate trustee should be appointed by
the court for this specific purpose. Except in relation to the debt allegedly
owed to him by the estate, the estate trustee's duties and powers should not
be affected. However, the court should be empowered to remove the estate
trustee upon application by a fellow estate trustee or an interested party.

(e) Administrative and Other Powers

In the previous section, we discussed certain duties associated with
representation of deceased persons; in this section we consider various
administrative and other powers. It may appear that our basic recommenda-
tion that the estate trustee should have all the powers and duties of an

ordinary trustee191 would settle this issue, removing the need for further
discussion. However, since there is a distinction in function between estate
trustees and ordinary trustees, it is appropriate to ask whether they should
be subject to the same duties and have the same powers in every respect.

Under the existing law, it appears that trustees and personal repre-
sentatives do share certain powers in common. As we have explained, under
the Trustee Act, "trustee" is effectively defined to include a personal
representative.192

We do not propose to review each of the powers that we have recom-
mended should be given to a trustee in the Report on the Law of Trusts.
There are areas of the law where a distinction has been drawn historically
between personal representatives and trustees, and consideration should be
given to whether the distinction should continue as an exception to our
general recommendation in favour of assimilating the two offices. There are
also powers in relation to which the difference in function between estate
trustees and ordinary trustees requires either comment or modification. We
shall confine our discussion to these powers.

In the Report on the Law of Trusts, we considered two general categories
of power that may be conferred upon a trustee: administrative powers and
dispositive powers. Administrative powers relate to the management by the
trustee of the trust assets on behalf of others according to the authority
conferred on him by the trust instrument or by statute. A dispositive power,
or power of distribution, is an authority to allocate trust property to a
beneficiary or a class of beneficiaries.

In this chapter, we focus primarily on certain administrative powers. It
is important to note that all of these powers must be exercised subject to
the five basic duties or "trusts" under which the estate trustee holds the
deceased's property. It will be recalled that these trusts are to exercise the
powers conferred on him by law and by the will, to carry out the obligations
imposed on him by law and by the will, to get in the estate of the deceased,
to pay the debts of the deceased in accordance with the obligations imposed
on him by law and by the will, and to distribute the estate of the deceased
in accordance with the law and the will.

Finally, it bears emphasizing that, in the proposed Trustee Act, the
exercise of administrative powers, including the power of investment, is

191 We have addressed in some detail the powers to be granted to trustees under the revised
Trustee Act in the Report on the Law of Trusts, supra, note 3. While we shall refer to the
earlier report, readers should consult it for a fuller discussion of the recommendations
pertaining to trustees, and their supporting reasoning.

Section l(q) of the Trustee Act, supra, note 32, states that " 'trust' . . . extends to and
includes the duties incident to the office of personal representative of a deceased person,
and 'trustee' has a corresponding meaning".

expressly made subject to the duty of care to which trustees are generally
subject in the discharge of their duties and the exercise of their powers.

(i) Administrative Powers

a. Investment

Under existing Ontario law, it would appear that the power of invest-
ment of a personal representative is identical to that of a trustee. This power,
however, must be exercised in light of the basic function of a personal
representative, which differs from that of a trustee. The task of the personal
representative is to "wind up" the estate of the deceased by gathering in
the assets of the deceased, paying funeral and testamentary expenses and
outstanding debts, and distributing the remaining assets among the persons
lawfully entitled thereto. Investment decisions should reflect the fact that
this entire process is to be completed within a relatively short period. By
contrast, the responsibility of a trustee for the administration of a trust
almost invariably extends for a much longer duration and the exercise of his
power to invest must be exercised accordingly.

In the Report on the Law of Trusts, we considered the trustee's powers of
investment at length, and we do not propose to recapitulate that discussion,
except to recount our recommendations. It was our view that the "legal list"
approach to trustee investment,193 which has long been a feature of trustee
legislation in England, Canada, and Australia, should be abandoned in
favour of the "prudent person" concept. Accordingly, we recommended that
sections 26 and 27 of the Ontario Trustee Act should be repealed and, in
their place, the revised Act should adopt a version of this concept for trustee
investment powers. We recommended that the power of investment should
be governed by the basic duty of care proposed for the revised Trustee Act.
The proposed standard is that, in the discharge of their duties and the
exercise of their powers, whether the duty or power is created by law or the
trust instrument, trustees shall exercise that degree of care, diligence, and
skill that a person of ordinary prudence would exercise in dealing with the
property of another person.194

We further recommended that subject to this basic duty of care and the
terms of the trust instrument, trustees should be able to invest trust money
in any kind of property. Finally, we recommended a list of criteria that
trustees may consult when making investment decisions.195

193

194
195

The legal list approach allows trustees to invest only in certain kinds of securities, which
are listed in the governing legislation, unless the trust instrument provides otherwise. See,
generally, Trusts Report, supra, note 3, at 187-222.

Ibid., at 219-22.

Ibid., at 219-21. See Draft Trustee Bill, s. 34.

We believe that the approach that we have taken to the exercise of
trustee investment powers is equally appropriate for the exercise of these
powers by estate trustees. However, as we have already stated, the standards
governing the exercise of these powers should be interpreted in light of the
basic difference in function between estate trustees and ordinary trustees.
Indeed, we have earlier recommended that the exercise of powers by estate
trustees should be subject to, and guided by, the fulfilment of five basic trusts
or duties unique to estate trustees. Thus, the duty of care of an estate trustee
may reflect factors different from those applicable to an ordinary trustee.
Accordingly, we recommend that the power of investment of estate trustees
should be identical to that of trustees under the proposed revised Trustee Act.

b. Leasing

(1) As Lessee

The Ontario Trustee Act authorizes trustees, where trust assets include
leasehold property, to renew the lease and, for that purpose, to raise money
by way of a mortgage of the lease.196 In the Report on the Law of Trusts, we
took the view that a general power to renew leases held by the trust should
be available, and therefore recommended that trustees, as lessees, should
be able to renew a lease held by the trust.197 We believe that estate trustees
should enjoy an identical power, and we so recommend.

(2) As Lessor

At common law, personal representatives had a limited power to grant
leases.198 In Ontario, legislation has conferred a restricted power of leasing,
which supplements the common law power and whatever power of leasing
is given under the will. Section 21(l)(a) and (b) of the Estates Administration
Act provides that the powers of a personal representative under that Act
include the power to lease from year to year while the real property remains
vested in him, and the power, with the approval of the majority of the
beneficiaries, to lease for a longer term.199

In the Report on the Law of Trusts, we recommended that the revised
Act should contain a provision to the effect that trustees may, as lessors,
grant or renew a lease or sublease of trust property for a term not exceeding,

196
197
198
199

Trustee Act, supra, note 32, s. 22.

Trusts Report, supra, note 3, at 241, and Draft Trustee Bill, s. 35(d).

Williams, Mortimer and Sunnucks, supra, note 75, at 664.

Under this provision, the Official Guardian must act on behalf of a minor or a mentally
incompetent person. See, also, Trustee Act, supra, note 32, ss. 41-42. In addition, among the
powers conferred on the court by the Settled Estates Act, R.S.O. 1980, c. 468, is the power
to authorize leases of land subject to the Act.

in the case of residential property, three years, or, in the case of any other
type of property, seven years, or with the consent of the court, grant or
renew a lease or sublease of trust property for longer periods or grant an
option to renew the lease or sublease or to purchase the reversion.200

As a matter of principle, we believe that estate trustees should have the
same power of leasing that we have proposed for ordinary trustees. More-
over, it is our view that the requirement in the Estates Administration Act
that a majority of beneficiaries approve a lease of a term longer than one
year is philosophically inconsistent with the approach taken in this report
to the power of sale, the exercise of which, we shall recommend, should no
longer be subject to the concurrence of beneficiaries.201

We are aware that the conferral of such a wide power on estate trustees
may raise concerns whether the exercise of this power may result in the
estate being encumbered with a long lease, perhaps contrary to the wishes
of the beneficiaries to whom the estate is devised. We are confident, however,
that our basic recommendation to render the exercise of the powers of the
estate trustee subject to the five fundamental trusts or duties should meet
this concern.

Accordingly, we recommend that section 21(l)(a) and 21(l)(b) of the
Estates Administration Act should be repealed, and that the power of an
estate trustee to grant or renew a lease or sublease of estate property should
be identical to that of a trustee in relation to trust property under the revised
Trustee Act.

c. Management, Maintenance and Repair

In the absence of an express provision in the will, it appears that a
personal representative does not have a general power to expend estate
money to repair or improve estate property. Such a power is neither recog-
nized by the courts nor conferred by statute.202

The relevant case law has not addressed this question directly, but has
been concerned with tangential issues. While most of the cases deal with
trustees, rather than personal representatives, it seems that the law is sub-
stantially the same in its application to both offices. There has been a
recognition that the court has a very limited inherent jurisdiction to authorize

200
201
202

Trusts Report, supra, note 3, at 241-42, and Draft Trustee Bill, s. 35(e).

Infra., ch. 5, sec. 4(b).

The Settled Estates Act, supra, note 199, and the Variation of Trusts Act, R.S.O. 1980, c. 519,
grant a very limited power that is subject to court approval. Section 13 of the Settled Lands
Act gives the court power to authorize a mortgage of the whole or any part of settled estate
under the Act for the purpose of raising money to repair, rebuild or alter any existing
building upon the estate, or otherwise build upon or improve the same. Under the Variation
of Trusts Act, the court has jurisdiction to approve an arrangement with respect to the
repair or improvement of trust property.

trustees, who otherwise would lack the necessary power, to expend trust
money to effect repairs.203 There are cases bearing on whether a personal
representative is entitled to an indemnity because he has spent his own
money on repairs and improvements; however, the cases are divided and
the position is unclear.204

We believe that estate trustees should be given a power of maintenance
and repair that will allow them to preserve the estate property. In the Report
on the Law of Trusts, we recommended that the revised Trustee Act should
provide that trustees may manage, maintain, repair, renovate, improve, or
develop trust property, including in the case of land subdividing, erecting
buildings, dedicating for any public purpose, granting easements, profits a
prendre, or licences, and entering into agreements with respect to boundaries,
party walls, fencing, or other matters in connection with trust property.205 It
is our recommendation that an estate trustee should have the same power.

Because some of the powers that we have proposed for ordinary trustees
go considerably beyond the powers necessary for the preservation of the
estate, and may seem inconsistent with the shorter duration of the duties of
an estate trustee, our decision warrants further explanation. We begin with
our fundamental assumption that the powers of the estate trustee should be
assimilated, as much as possible, to those of ordinary trustees. A second
consideration is that it often is a difficult question whether a particular
activity should be classified as keeping the estate in repair or making
improvements, and we do not wish to require estate trustees, and perhaps,
ultimately courts, to engage in an unnecessary definitional exercise that
might lead to continuing uncertainty. Finally, we wish to re-emphasize that
these powers, like all powers of the estate trustee, must be exercised subject
to the fundamental trusts that we have proposed.

d. Insurance

In Ontario, the duty to insure forms part of the general duty of personal
representatives and trustees to preserve the assets of the estate.206 Section
21 of the Trustee Act confers upon trustees a specific power to insure trust
property, and provides, in part,207 as follows:

203

204

205
206
207

The court's inherent jurisdiction has been restricted to what has been called "salvage".
This jurisdiction is limited by 2 factors. First, it must be necessary for the good of the trust
or estate that the transaction in question be effected. Second, the circumstances that gave
rise to the necessity must not be anticipated by the settlor or testator: see Crocker v.
Tomroos, [1957] S.C.R. 151, 7 D.L.R. (2d) 104. See, a\so,Re Montagu, [1897] 2 Ch. 8 (C.A.);
and Re New, [1901] 2 Ch. 534, [1900-3] All E.R. Rep. 763 (C.A.).

Compare Bevis v. Boulton (1858), 7 Gr. 39 and Conway v. Fenton (1888), 40 Ch. D. 512 with
Re Brazill (1865), 1 1 Gr. 253 and Re Winchester (1960), 32 W.W.R. 224, 26 D.L.R. (2d) 205
(Alta. S.C., Trial Div.).

Trusts Report, supra, note 3, at 242, and Draft Trustee Bill, s. 35(f).

Re Gamble (1925), 57 O.L.R. 504, [1925] 4 D.L.R. 768 (H.C. Div.).

It further authorizes the payment of premiums out of the income of trust property.

21. — (1) A trustee may insure against loss or damage by fire, tempest or
other casualty, any building or other insurable property to any amount, including
the amount of any insurance already on foot, not exceeding three-fourths of
the value of such building or property. . . .

(2) This section does not apply to any building or property that a trustee is
bound forthwith to convey absolutely to any beneficiary upon being requested
to do so.

Under section 21(1), there is no power to insure against public liability, and
there is no power to insure to an amount exceeding three-fourths of the
value of the property.

When we considered the power to insure in the Report on the Law of
Trusts, we took the view that a specific power should be included in the
statutory list of administrative powers. However, we believed that the limita-
tions set by section 21 of the Trustee Act were inappropriate and that the
power to insure should be conferred without qualification. We recommended
therefore that the revised Act should provide that trustees may insure against
loss or damage to trust property and against any other risk or liability.208

As a matter of principle, the power of estate trustees to insure should
be identical to that of trustees under the proposed Trustee Act, and we so
recommend.

e. Carrying on Business

The issue whether a personal representative has power to carry on an
existing business of the deceased is not addressed directly by statute in
Ontario, but is governed by judicial decision.

The general rule is that personal representatives do not have a general
power to carry on a business of the deceased.209 While it has been said that,
in order to authorize executors to carry on a business, "there ought to be
the most distinct and positive authority and direction given by the will itself
for that purpose,"210 courts have been prepared to imply such a power in its
absence.211 Moreover, even in the absence of a direction in the will, a
personal representative may carry on the business "for such reasonable time

208

Trusts Report, supra, note 3, at 243, and Draft Trustee Bill, s. 35(q).
Williams, Mortimer and Sunnucks, supra, note 75, at 702.
210 Kirkman v. Booth (1848), 50 E.R. 821 (Ch. D.), at 824.

211

In particular, it has been held that conferral of a power to postpone the sale and conversion
of the estate authorizes the executor to carry on a business of the testator until the time
for distribution: see Re Crowther, [1895] 2 Ch. 56; Re Ball, [1930] W.N. Ill (Ch. D.); and
Re Gilmour, [1936] O.W.N 1 (C.A.). Compare Re Smith, [1896] 1 Ch. 171, [1895-9] All E.R.
Rep. 1175.

as might be necessary to enable him to sell it to the best advantage of the
estate".212

Where there is a power to carry on the business, its exercise is subject
to certain constraints. A personal representative can properly employ only
those assets authorized by the testator to be used in carrying on the busi-
ness.213 In the absence of a direction respecting the assets to be employed
in the business, there is no power to invest capital of the estate in the
business, other than that which remained in the business at the death of the
testator.214 In order to secure the borrowing of money for the purposes of a
business, a personal representative may charge only assets expressly or
impliedly authorized to be used in the business, but has no power to charge
other assets of the estate.215 Finally, it would appear that, where there is
express authority to carry on a business, it would comprehend a power to
incorporate the business.216

We believe that the power of an estate trustee to carry on a business
should be clarified. When we considered this issue in the Report on the Law
of Trusts, we recommended that the revised Act should contain a provision to
the effect that trustees may carry on any business, whether as sole proprietor,
partner, limited partner or otherwise, and may incorporate or otherwise
change the form of the business, and dispose of or wind up the business.217

The power that we recommended for trustees is very broad and we have
considered whether such a power would be inconsistent with the basic
"winding-up" function of the estate trustee. As a matter of principle, we are
of the view that, while an estate trustee should be empowered to continue
a business, she should not be able to commence a new business. Nor would
we wish to see estate trustees carrying on the business of a deceased where
the proper course would be to wind it up.

These concerns do not call for us to depart from the recommendation
that we made for trustees. For example, the power to start a new business
is not comprehended by the proposal that we have made in the Trusts

Williams, Mortimer and Sunnucks, supra, note 75, at 703. See, also, Union Bank v. Clark
(1910), 43 S.C.R. 299.

213

214

215
216

217

Thompson v. Andrews (1832), 39 E.R. 625, and Cutbush v. Cutbush (1839), 48 E.R. 910.

M'Neillie v. Acton (1853), 43 E.R. 699; Smith v. Smith (1867), 13 Gr. 81 (Ch.); and Re
Bucovetsky, [1942] O.W.N. 618, [1943] 1 D.L.R. 208 (H.C.J.).

Re Dimmock (1885), 52 L.T. 494 (Ch. D.); M'Neillie v. Acton, supra, note 214, Smith v. Smith,
supra, note 214. But see Union Bank v. Clark, supra, note 212, and Bank of Montreal v.
Morrow (1936), 50 B.C.R. 540, [1936] 4 D.L.R. 331 (B.C.C.A.).

Williams, Mortimer and Sunnucks, supra, note 75, at 704, states that "[w]here executors
are expressly authorized to carry on a business, they probably have power to convert the
business into a private limited company having the same assets and management as the
business." But see Halsburys' Laws of England, Vol. 17 (4th ed., 1976), para. 1213, at 626.

Trusts Report, supra, note 3, at 243-44, and Draft Trustee Bill, s. 35(h).

Report. There may be circumstances where it is advantageous to the estate
for a business of the deceased to be continued for a purpose other than to
enable it to be sold to the best advantage. As with all the powers of an
estate trustee, the power to carry on a business is not immune from control:
it would be subject to exclusion, modification or limitation by the testator in
his will. Moreover, in deciding whether, and how, to exercise this power, the
estate trustee would be subject to the general duty of care and prudence.
Finally, and perhaps more importantly in light of the concerns that we have
raised, the exercise of this power would be subject to the fundamental duties
or trusts imposed on estate trustees and, in particular, the duty to get in the
assets of the estate and the duty to distribute the estate of the deceased
among those beneficially entitled thereto. We therefore recommend that
the estate trustee should have a power to carry on an existing business
identical to the power given to a trustee under the proposed Trustee Act.

f Surrender of Property

In the Report on the Law of Trusts, we recommended that the revised
Trustee Act should provide that trustees may surrender insurance policies,
leases or other trust property that is subject to onerous obligations of such
a nature that it would not be in the interests of the beneficiaries to retain
that property.218 While personal representatives may enjoy such a power
under the present law,219 we believe that it should be made clear by statute
that the estate trustee does indeed possess it. We therefore recommend that
the estate trustee should have the same power to surrender property that is
conferred on ordinary trustees under the proposed Trustee Act.

g. Acquisition of a Dwelling Home

There may be situations where it would be necessary to provide living
accommodation for a beneficiary of an estate, although the relatively transi-
tory nature of an estate renders this a less likely possibility than in the case
of a trust. At present, it would appear that personal representatives lack this
power. The Ontario Trustee Act does not permit trustees to rent, purchase,
or build a house for the use of a beneficiary.220

In the Report on the Law of Trusts, we recommended that the revised
Act should provide that trustees may purchase or rent living accommodation,

218
219

220

Trusts Report, supra, note 3, at 245, and Draft Trustee Bill, s. 35 (/').

Williams, Mortimer and Sunnucks, supra, note 75, at 712, state that "if the rent is greater
than the yearly value of the land, and the testator was the assignee of the term, the executor
may be guilty of a devastavit in neglecting to exonerate the estate of the testator from its
liabilities under the lease by assigning it, where permissible, to some other person".

It is very unlikely that the power of investment comprehends the power to acquire a dwelling
house for a beneficiary. There is English authority holding that a power to invest in land
does not authorize the purchase of land for use as a beneficiary's home, as the land would
not produce income: see Re Power, [1947] 1 Ch. 572, [1947] 2 All E.R. 282.

or construct a house on land held by them, for the purpose of providing a
home for the person entitled to the income of the money expended in respect
of the purchase, or to the income to be expended in respect of the rent, or
to the income of either the land or the money expended in respect of the
purchase or construction, if the person for whom the living accommodation
is provided consents thereto.221

We believe that an identical power should be given to estate trustees,
and we so recommend.

h. Borrowing Money

The existing law respecting the power of a personal representative to
borrow money and to give security for a loan is uncertain. Particularly
complex and confusing is the law governing the power to mortgage assets of
the estate.

Turning first to the power to borrow, a personal representative has
always had power to borrow money for payment of debts and other purposes
of administration. While there appears to be no authority, it would appear
that the personal representative could either repay the loan out of the assets
of the estate or repay the loan himself and then reimburse himself out of
the assets of the estate.222

The complexity of the present law relating to the power to mortgage
estate assets is attributable to the fact that it draws upon various discrete
sources. The common law power of mortgaging was exercisable only in
respect of the property vested in the personal representative.223 At common
law, only personalty, including leaseholds, vested in the personal representa-
tives. The real property of the deceased did not vest in the personal represen-
tatives; it vested directly in his heir or devisee and, at common law, it was
subject only to the claims of creditors either by judgment or by specialty.
The courts of equity, however, took the view that a devise or appointment
of real property held in trust for payment of debts, or subject to or charged
with debts, created an enforceable trust in favour of creditors, and that the
trust would be executed by the mortgage or sale of the realty and the payment

Trusts Report, supra, note 3, at 245-46, and Draft Trustee Bill, s. 35(k).

222

223

See, now, Trustee Act, supra, note 32, s. 33, which provides that a trustee "may reimburse
himself or pay or discharge out of the trust property all expenses incurred in or about the
execution of his trust or powers".

Williams, Mortimer and Sunnucks, supra, note 75, at 663, explain as follows:

Even at common law, unless the will peremptorily required an absolute sale, the
executor could raise any money required for administration purposes by a partial sale
or mortgage of the assets vested in him. The mortgage might have been either of legal
or equitable assets, or of a mere chose in action, it might have been by actual assignment
or by deposit, and might properly have given the mortgagee a power of sale. Again,
the executor might pledge a part of the assets to enable him to administer the estate.

of all creditors, pari passu, out of the proceeds. Where such real property
was devised to executors, they had the power of mortgaging, even apart from
any provision in the will to that effect.224 Moreover, where there was a
direction in the will to pay the debts and the real estate was devised to
executors, the debts were ordinarily treated as being charged on the real
estate so that, in this situation, the personal representatives would also have
a power to mortgage the real estate.225

The position of a mortgagee at common law has been summarized as
follows:226

1. A personal representative purporting to act for administration purposes
only would generally confer a good title upon a person in whose favour he
made a transfer or conveyance of the legal estate.

2. A personal representative selling or mortgaging part of the deceased's estate
was presumed to be acting in discharge of the duties imposed upon him as
such representative, unless there was something in the transaction showing
the contrary; and the contrary was not made out merely from the fact that
the conveyance or mortgage did not purport to be made by him in that
capacity. . . .

3. A mortgage made by a personal representative, known to be such, for a
purpose other than administration, would be set aside as against a mortgagee
having notice of the purpose for which the money was raised. Thus a mort-
gagee having actual notice that there were no debts, and no reason being
suggested for the mortgage, was not safe in lending.

The power to mortgage land has been addressed by legislation. Section
41 of the Trustee Act provides that, where there is in a will an express or
implied direction, inter alia, to mortgage or encumber any land, and no
person, by the will or otherwise, is appointed by the testator to carry it into
effect, an executor named in the will is empowered to do it. Section 42
provides that, under the same circumstances, a power to mortgage or encum-
ber land may be exercised by an administrator with the will annexed who
has given security for his dealing with the land and its proceeds.

Section 44(1) of the Trustee Act provides that, where a testator charges
land with the payment of his debts or with the payment of any legacy or
other specific sum of money, and devises it to his executors or to a trustee
without any express provision for the raising of the debt, legacy or sum of
money out of the land, the devisee may raise the debt, legacy or money by

224

225

Where the land was devised to executors charged with the payment of legacies (and not
debts), in the absence of provision in the will, the executors had power to mortgage in only
the limited sense that they had the legal estate and could convey it. The conveyance would
be subject to the claims of the legatees: see Stroughill v. Anstey (1852), 42 E.R. 700, and Re
Rebbeck (1894), 38 S.J. 399 (Ch.D). This has been changed by s. 44(1) of the Trustee Act.

Armour, "Sales by Executors and Administrators", [1927] 4 D.L.R. 753.

Williams, Mortimer and Sunnucks, supra, note 75, at 669-70.

a sale or mortgage of all or part of the land. Section 44(2) provides that
purchasers or mortgagees are not bound to inquire whether any of the
powers conferred by section 44(1) have been duly and correctly exercised
by the person "acting in virtue thereof.

Section 21(l)(c) of the Estates Administration Act provides that the
powers of a personal representative include the "power to mortgage for the
payment of debts". Section 21(2) requires the written approval of the
Official Guardian for mortgaging where it would be required if the real
property were sold.227 The power conferred by section 21 is in addition to
the powers given under the will or pursuant to the common law and the
Trustee Act.

Certain limitations attend the exercise of this power under the Estates
Administration Act. It can be exercised only where the real property is vested
in the personal representative. Consequently, the power cannot be used
once the real property, pursuant to section 9 of the Estates Administration
Act, vests in the persons beneficially entitled to it.228 Furthermore, the Estates
Administration Act does not provide specifically for the protection of the
mortgagee where the personal representative purports to exercise the power
under section 21. 229

From the foregoing summary, it is apparent that the existing law is
complex and confusing. In the Report on the Law of Trusts, we took the view
that trustees should be given a general borrowing power. Consequently, we
recommended that the revised Act should provide that trustees may borrow
money, and, as security, may mortgage, pledge, or otherwise charge any of
the trust property.230 We have considered whether this power should be

227

Arguably, s. 21(2) has no effect. Section 15(1) of the Estates Administration Act , supra, note
28, provides that, where minors are interested in real property, sale or conveyance of the
property is not valid without the written approval of the Official Guardian or an order of
a judge. However, it has been held that s. 15(1) must be read subject to s. 17(1) and that
the consent of the Official Guardian is not required for a sale for the purpose of paying
debts: Re Watson and Major, [1943] O.W.N. 696 (H.C.J. ). Hence, if the real property is
mortgaged for the purpose of paying debts, the approval of the Official Guardian is not
required, since it would not be required if the real property were sold.

For a discussion of s. 9 of the Estates Administration Act and "automatic vesting", see infra,
ch. 5, sec. 3(a).

By contrast, s. 19 of the Estates Administration Act, supra, note 28, protects a person
purchasing in good faith and for value real property from a personal representative in a
manner authorized by the Act. It could be argued that this provision is capable of extending
to mortgagees. The words "purchase" and "purchaser" have a technical meaning, which
includes "mortgage" and "mortgagee" respectively: see, for example, Megarry and Wade,
The Law of Real Property (4th ed., 1975), at 116, and Black's Law Dictionary, supra, note
167, at 1110-11. Moreover, the term "purchase money" is arguably capable of including
money paid on the security of a mortgage. Finally, there is no reason why a mortgagee
should not enjoy the protection conferred by s. 19 on other purchasers. The position,
however, remains unclear.

230 Trusts Report, supra, note 3, at 246, and Draft Trustee Bill, s. 35(1).

limited in the case of an estate trustee. Our conclusion is that estate trustees
should have the same power to borrow and mortgage real and personal
property as ordinary trustees, and we so recommend.

In our view, the power of mortgaging231 should be consistent with the
the power of sale that we recommend in chapter 5 of this report.232 We shall
discuss the power of sale in considerable depth, and we do not wish here to
present our analysis divorced from the context in which it was developed.
At this stage, we prefer simply to state our recommendations respecting the
power of mortgaging, with a summary explanation of the reasons, leaving
the matter to be explained fully in our discussion of the power of sale.

We recommend that, subject to the power of the testator to provide
otherwise, estate trustees should have a general statutory power to mortgage
both the real and personal property of the estate. This power should be
exercisable without notice to any person, including the Official Guardian
and the Public Trustee;233 moreover, it should be exercisable without any
order of the court.

A testator may limit the power to mortgage estate assets by placing
restrictions in his will. If restrictions were to affect the interest acquired by
a mortgagee, all mortgagees would be bound to undertake inquiries to
ascertain whether, and the extent to which, limitations were placed on the
estate trustee. Requiring extensive inquiries of this nature would undermine
the ability of estate trustees to exercise the broad mortgaging power we
propose. In our view, restrictions should be binding on a mortgagee only if
they come to his attention in two ways.

We recommend that a mortgagee in good faith and for value should be
entitled to hold his interest freed and discharged from any debts or liabilities
of the deceased owner, except those that are specifically charged thereon
otherwise than by his will,234 and freed and discharged from all claims of
persons beneficially entitled thereto, and to hold his interest subject to the
terms of the will only where the restrictions on the power of mortgaging are
noted on the estate trustee certificate or where he has actual notice at the
time of the mortgage that the estate trustee does not possess the power he
purports to exercise, or that he is exercising the power in a manner that is

231

232
233

234

Although we use the term "mortgage" in the text, all references in the textual discussion
and recommendations should be read as including charges.

Infra, ch. 5, sec. 4(b).

Under s. 17(4) of the Estates Administration Act, supra, note 28, the concurrence and
approval of the Public Trustee is required in place of that of the Official Guardian. While
the approval of the Public Trustee is not necessary in the case of mortgages, we wish to
make it explicit that it should not be required.

Examples of other liabilities are a construction lien on the property or a first mortgage.

contrary to that provided in the will. We also recommend that that a mort-
gagee should not be bound to see to the application of the money
advanced.235

In the Report on the Law of Trusts, our discussion and recommendations
respecting purchasers would also apply to mortgagees.236 Our view was that,
in general, a mortgagee from a trustee should be entitled to assume, on the
basis of the appropriate instruments of appointment, discharge or vesting,
that persons purporting to act as trustees are validly appointed, that the
trust property is vested in them, that they possess the powers they purport
to have, and that they are properly exercising those powers. We also took
the view that this protection for mortgagees should apply where a new
trustee is appointed, either as a substitute for a previous trustee or as an
additional trustee.

In our view, protection of this kind should also apply to estate trustees.
Consistent with the recommendations in the Trusts Report, we recommend
that mortgagees from an estate trustee who rely upon the production of an
estate trustee certificate or a deed of discharge that contains a vesting
declaration, express or implied, whether or not they otherwise have notice
of the will, should be able to assume without inquiry that the former estate
trustees and the substitute or additional trustees possessed or possess and
properly exercised or are properly exercising every power which they pur-
ported or purport to exercise over the property.237

In the Report on the Law of Trusts, we recommended that protection
should not be extended to mortgagees who have actual notice that the
trustees do not possess the power they purport to exercise, or that they are
exercising a power improperly.238 However, we were of the view that a
mortgagee who has actual notice should be protected in a case where he
obtains an interest from a mortgagee who did not have actual notice of this
defect. Such a person, we recommended, should not take the trust property
"subject to the terms of the trust".239 We are of the view that the same policy
should apply to mortgagees from estate trustees. We therefore recommend
that a mortgagee who, at the time of the mortgage from the estate trustee,
has actual notice that the estate trustee does not possess the power he
purports to exercise, or that he is exercising a power in a manner that is

235

236

See, now, Trustee Act, supra, note 32, s. 22(2), which provides that, where a trustee raises
money by mortgaging land for the purpose of renewing a lease, "no person advancing
money upon a mortgage purporting to be made under this power is bound to see that the
money is wanted, or that no more is raised than is wanted for the purpose or to see to the
due application of the money".

Section l(n) of the Draft Trustee Bill defines "purchaser" to include "a mortgagee and
any other person who for value has received an interest in or claim upon trust property".

237 Draft Trustee Bill, s. 30(1).

Trusts Report, supra, note 3, at 183.
Ibid.

238
239

contrary to that provided in the will, should hold his interest subject to the
terms of the will, unless he has obtained his interest from a prior mortgagee
without actual notice that the estate trustee does not possess the power he
purports to exercise, or that he is exercising a power in a manner that is
contrary to that provided in the will.

The final issue relating to the recommended borrowing power is whether
there should be an express restriction on the property that may be charged
by the estate trustee. Under the existing law, a personal representative with
power to carry on a business may borrow for that purpose only on the
security of assets expressly or impliedly authorized to be used in the busi-
ness.240 Under the Trustee Act, a trustee may mortgage land for the purpose
of renewing a lease, and the land given as security may be the land to be
comprised in the renewed lease or any other land that is subject to the same
trust.241

The breadth of the borrowing power that we have proposed raises a
concern that beneficiaries may be unfairly disadvantaged by the mortgage
of assets in which they may ultimately have an interest for the purpose of
benefiting other assets in which other beneficiaries may have an interest. In
our view, it is inequitable, for example, to mortgage an asset that forms part
of the residue, thereby diminishing its value in the hands of the beneficiary
who eventually receives it, in order to raise money to effect repairs on an
asset held for another beneficiary or, perhaps, to infuse capital in order to
continue a business.

However, while we accept this is a valid concern, we do not think that
the answer is to confine the borrowing power of estate trustees by permitting
mortgages to be charged only against the assets to be benefited by the funds
advanced. To do so would be to draw a distinction between estate trustees
and ordinary trustees where the potential problem can be otherwise effec-
tively addressed.

In our view, an asset should not be mortgaged for the advantage of
another asset without the written consent of the person entitled to the asset
to be mortgaged. That person is not receiving any advantage from the benefit,
and may indeed suffer a loss, should the mortgagee seek her remedies
against the asset. Beneficiaries should not be put to that risk without their
consent. Moreover, the ultimate liability for repayment of the loan should
rest on the asset that has been benefited. Persons whose assets have been
mortgaged or given as security should be able to have recourse to those
assets where they suffer a loss as a result. Even with this measure, it should
be appreciated that persons who consent to the mortgaging of the asset are
assuming a risk, in that the asset benefited may have a value less than the
amount of the loan.

Supra, this ch., sec. 3(e)(i)e.
Trustee Act, supra, note 32, s. 22(2).

There are two basic situations in which it is necessary to provide for a
mechanism by which a person whose asset has been mortgaged or given as
security may recoup her loss. The first situation is where the mortgagee or
secured lender realizes against that asset because there has been a failure
to make a required payment or to repay the principal of the loan. This may
occur while the estate is being administered or following distribution of the
asset, subject to the mortgage, to the person entitled. In both cases, a remedy
should be available. For example, a testator leaves the house to his surviving
spouse, the family business to his daughter, and the residue to his grandchil-
dren, and the house is mortgaged by the estate trustee to infuse needed
funds into the daughter's business. Payments are not made to the mortgagee.
If the mortgagee exercises her rights under the mortgage against the house
by selling it, the surviving spouse should be entitled to proceed against the
business. The scheme that we have in mind is analogous to the equitable
principle known as "marshalling".242

The second situation we have in mind is where, following distribution
of the property, the requisite payments are not made to the mortgagee. In
our example, the spouse is threatened with losing her house and makes the
payments herself. In such a case, she should be able to recover the amount
of those payments by proceeding against the business.

Accordingly, we recommend that the estate trustee should be entitled
to exercise his power to raise money by way of mortgage or other security
for the purpose of benefiting an asset by mortgaging or giving as security an
asset other than the asset to be benefited, but only with the written consent
of the person entitled to the asset mortgaged or given as security. Where
the mortgagee or secured lender realizes against the asset given as security
for the loan, the person entitled to that asset should be entitled to recover
against the asset benefited to the extent of his loss. Where the asset mort-
gaged or given as security is distributed to the person entitled to that asset,
and that person makes payments to avoid realization by the mortgagee or
secured lender, that person should be entitled to recover against the asset
benefited to the extent of the payments made.

i. Execution of Administrative Powers

In the Report on the Law of Trusts, we recommended that the revised
Act should provide that trustees may do all ancillary acts or things and
execute all instruments necessary or desirable to enable them to carry out

Baker and Langan, Snell's Principles of Equity (28th ed., 1982) (hereinafter referred to as
"Snell"), at 332, state that "[t]he general principle of marshalling is that if any beneficiary
is disappointed of his benefit under the will through a creditor being paid out of the property
intended for the beneficiary, then to the extent of the disappointment the beneficiary may
recoup or compensate himself by going against any property which ought to have been used
to pay the debts before resort was had to his property".

effectively the intent and purpose of the powers vested in them.243 We are
of the view that estate trustees should also be given this power expressly,
and we so recommend.

As in the Trusts Report, we would emphasize that the only procedural
or administrative acts that may be performed under this recommendation are
those ancillary to the exercise of powers conferred by the will or legislation. If
estate trustees wish to exercise a new administrative power that has not been
expressly provided by statute or the will, the assistance of the court should
be sought, in accordance with the proposals we make in the next section.

/ Enlargement of Administrative Powers

Under our proposals, testators will be free to exclude, modify, or add
to the administrative powers that will be given to estate trustees by legisla-
tion. We recognize, however, that situations may arise where the interests
of the estate would be served if estate trustees could exercise a power that
has not been authorized by the will or conferred by the legislation. In such
circumstances, we are of the view that there should be a mechanism available
to permit an enlargement of the powers of the estate trustee.

In the trusts context, we met this problem by proposing that the court
be given authority to grant the necessary power to the trustee. We recom-
mended that where, in the administration of trust property, any sale, lease,
mortgage, surrender, release, or other disposition, or any purchase, invest-
ment, acquisition, expenditure, or other transaction is in the opinion of the
court expedient, but it cannot be effected because of the absence of a power
for that purpose vested in the trustees by the trust instrument or by law, the
court should be able to confer upon the trustees, either generally or in any
particular instance, the necessary power on such terms and subject to such
conditions as the court thinks fit. We recommended, in addition, that the
court should be able to rescind, vary, or replace any such order, but that
such a rescission, variation, or replacement should not affect any act or thing
done in reliance upon the order before the person doing the act or thing
became aware of the application to the court to rescind, vary, or replace the
order.244

We recommend that the provisions respecting the enlargement of
administrative powers that we have proposed in the Report on the Law of
Trusts should apply to estate trustees.

243 Trusts Report, supra, note 3, at 249, and Draft Trustee Bill, s. 35(r).
Trusts Report, supra, note 3, at 251-52, and Draft Trustee Bill, s. 63.

(ii) Power of Delegation

The rules developed by the courts of equity to govern the delegation of
duties and powers by trustees apply also to personal representatives. The
basic principles can be briefly stated. In the absence of a provision in the
will or trust instrument, a personal representative or trustee may delegate
"if the nature of the task to be performed necessitates delegation, or if it is
common business practice to employ an agent in the circumstances".245
Matters involving the exercise of discretion must be decided by the personal
representative or trustee herself, although she may rely on advice.246 Where
an agent is employed, a trustee or personal representative must exercise the
requisite degree of care in selecting the agent and in supervising the work
being done. The applicable standard of care is that of ordinary business
prudence. Where the proper care has been exercised in the choice and
supervision of the agent, a trustee or personal representative will not be
liable for loss caused by the defaults of the agent.

There has been statutory intervention in respect of the power to dele-
gate. Section 20 of the Trustee Act provides that solicitors and bank managers
may receive moneys as agents on behalf of trustees, and also empowers these
agents to give discharges to the payors. It further provides that, if money or
trust property is permitted to remain in the hands of or under the control
of the solicitor or bank manager for a period of time longer than is reasonably
necessary to enable her to pay or transfer the money or trust property to the
trustee, the trustee is not exempted from any liability that she would have
incurred had the Act not been passed. Section 33 of the Trustee Act provides,
in part, that a trustee "is answerable and accountable only for his own acts,
receipts, neglects or defaults, and not for those of any other trustee, nor for
any banker, broker or other person with whom any trust money or securities
may be deposited, nor for the insufficiency or deficiency of any securities,
nor for any other loss, unless the same happens through his own wilful
default". Both sections 20 and 33 apply to personal representatives.

We dealt at length with the delegation by trustees of duties and powers
in the Report on the Law of Trusts.241 We expressed the view that trustees
must have the authority to delegate wherever it is reasonable and prudent by

Trusts Report, supra, note 3, at 44. See, also, Waters, supra, note 43, at 696-710.

It is difficult to determine whether a power or duty is of a discretionary nature, which does
not permit it to be delegated. Waters, supra, note 43, suggests that the following rule may
be distilled from the authorities (at 707):

[W]henever the power, discretion, or duty assigned to the trustee requires that a policy
decision be made, the trustee must make it himself. A policy decision is one which,
if dispositive, determines how much and at what time a beneficiary takes; if admini-
strative, it directly affects the likelihood of the trust's object or purpose being
achieved.

Trusts Report, supra, note 3, at 42-57.

contemporary business standards to do so, but that the power of delegation
should extend only to the delegation of administrative discretions, and
should not permit the trustee to delegate dispositive discretions. We stated
our conviction that a trustee should perform dispositive tasks personally,
except where the testator or settlor provides otherwise.

We therefore recommended that section 20 of the Ontario Trustee Act
should be repealed. In its place, we recommended the enactment of a
provision authorizing trustees, where it is reasonable and prudent in the
circumstances so to do, to employ one or more persons as agents within or
outside Ontario to carry out any act required to be done in the administration
of the trust, including the execution of documents, the payment, transfer,
and receipt of money or other property, and the giving of discharges for
receipts, but excluding the exercise of any express or statutory discretion as
to the transfer or distribution of trust property to or among beneficiaries of
the trust.248

With respect to the liability of trustees for the acts of agents, we recom-
mended that, in employing an agent, trustees should personally select the
agent and be satisfied of his suitability to perform the act for which he is to
be employed, and that they should carry out such supervision of the agent
throughout his employment as is prudent and reasonable.249 In addition, we
recommended that no term in a trust instrument, or in an oral declaration
of trust, should be valid to the extent that it purports to absolve the trustees
from this duty in the employment of agents.250 Finally, in order to replace
that part of section 33 of the present Trustee Act dealing with the extent of
liability of trustees for defaults involving money and securities of the trust
in the hands of others, we recommended that trustees should be chargeable
for a loss caused by the default of an agent only if the loss is due, wholly or
partly, to a breach of the recommended provisions concerning the power to
employ agents and the duty of care in selecting and supervising agents, or
is otherwise due to the trustees' negligence or wilful wrongdoing.251

We considered whether, having personally selected an advisor and
having prudently supervised her, the trustee should be able to rely upon the
advice given without inquiring further or incurring liability for any loss
arising as a consequence of a failure to inquire. We recommended that
trustees should not be liable for any loss to the trust if they rely reasonably
and in good faith upon a written statement of an agent who is a duly

248

Ibid., at 49, and Draft Trustee Bill, s. 5(1). The Commission also made recommendations
respecting delegation by one trustee to another: ibid., and Draft Trustee Bill, s. 6.

249 Ibid., at 51, and Draft Trustee Bill, s. 5(2).

250 Ibid., at 51, and Draft Trustee Bill, s. 7(c).

251 Ibid., at 52, and Draft Trustee Bill, s. 5(3).

accredited member of the legal, accounting, engineering, medical or any
other profession.252

The final issue respecting delegation that we addressed concerned dele-
gation by way of a power of attorney. Subject to certain qualifications,253 we
recommended that, by granting a power of attorney, a trustee should be able
to delegate to any person, for any period not exceeding twelve months, the
execution or exercise of all or any of the duties and powers vested in him as
sole trustee or jointly with one or more other trustees.254

The reasoning underlying these proposals applies also to estate trustees,
who similarly require the statutory authority to delegate the performance of
certain tasks where it is reasonable to do so. However, as a practical matter,
we expect that this power would be used less frequently and for lesser
durations in the case of estates administration. Consequently, we recom-
mend that the power of an estate trustee to delegate the exercise of his
powers and the discharge of his duties should be identical to that of a trustee
under the revised Trustee Act.

(iii) Joint Representation

The classic texts of estate administration use the term "joint representa-
tion" to refer to questions respecting the right of individual personal repre-
sentatives to bind the estate and their co-personal representatives.255 In the
Report on the Law of Trusts, we addressed a similar issue in considering the
so-called "rule of unanimity".256

The general rule of English law is that executors have joint and several
authority; in other words, an act by one will have legal effect and bind the
estate and his fellow executors. In the absence of a statutory provision stating
otherwise, the act of one executor is regarded as the act of all of them. For
example, a release of a debt by one of several executors is valid, and binds
the other executors; similarly, in the absence of fraud, a settlement of an
account by one executor will bind the others.257

The general rule, however, is subject to qualification. At common law,
real estate did not devolve upon executors and, thus, acts done in relation
to real estate were not comprehended by the rule. Nor were contracts made

252 Ibid., at 54, and Draft Trustee Bill, s. 5(4).

253 Ibid., at 57, and Draft Trustee Bill, s. 8(2)-(7).

254 Ibid., at 56-57, and Draft Trustee Bill, s. 8(1).
Williams, Mortimer and Sunnucks, supra, note 75, at 683.
Trusts Report, supra, note 3, at 71-72.

These examples are taken from Williams, Mortimer and Sunnucks, supra, note 75, at 683-84.

by an executor subject to the rule, for, as we shall discuss subsequently,258
contracts made by an executor — even made exclusively for the benefit of the
estate — are personal contracts, which do not ordinarily bind the others.

It is unclear whether the general rule respecting the joint and several
authority of executors applies to administrators. While there would appear
to be no practical justification for a distinction in this context between the
two offices,259 a 1975 English case, Fountain Forestry Ltd. v. Edwards,260
found the authorities bearing on this issue inconclusive. However, after
acknowledging the absence of "decisive authority", the court accepted the
position that "an administrator has power, at the present day, to bind
the intestate's estate by his own act without the concurrence of his co-
administrator".261

While the general rule has long been accepted in England, doubt has
been cast upon its applicability in Ontario by a 1946 decision of the Ontario
Court of Appeal.262 However, the reasoning of this judgement is seriously
flawed.263

Legislation has appeared to have had only minor impact on these
general principles. Section 48 of the Trustee Act, which deals with the debts
or claims owed by and to the estate, confirms the several authority of one
of several personal representatives to bind the others. Section 3 of the

258
259

260
261

Infra, this ch., sec. 4(a)(ii)a.

But see Hudson v. Hudson (1737), 26 E.R. 292, where Lord Hardwicke suggested a theoreti-
cal justification based on the origins of the office of the administrator as a delegate of the
ordinary, who was the Church official responsible for the administration of estates.

[1975] Ch. 1.

Ibid., at 14.

262 Willcocks v. MacLennan, [1946] O.W.N. 490 (C.A.). See, also, Widdifield, supra, note 102,
at 255, which states that the rule respecting joint and several authority "seems to be
accepted in Canada only to the extent that one executor may give a valid discharge of a
debt or mortgage taken by the testator and owed to the estate."

263

In Willcocks v. MacLennan, supra, note 262, Hogg J. A. stated as follows (at 491):

If there are several executors of a will, one alone is not entitled to act on behalf
of the others in connection with the sale of property forming part of the assets of an
estate which is in their hands for administration: Gibb v. McMahon (1906), 9 O.L.R.
522, affirmed 37 S.C.R. 362. In the Court of Appeal, MacLennan J.A. said, at p. 525:
'Nothing is better settled than that where there are several trustees all must act.'

This decision is flawed in two respects. First, the only authority cited by the court, Gibb
v. McMahon, was misinterpreted; the quoted sentence indicates that the same persons were
appointed executors and trustees, and Gibb v. McMahon was decided on the basis that they
were acting as trustees at the relevant time. Second, reference was not made to several
Ontario cases that either applied, or assumed, the general rule of England to be correct.
See, for example, Cumming v. Landed Banking & Loan Co. (1893), 22 S.C.R. 246; Howitt
v. Cope, [1936] O.W.N. 523 (H.C.J.); and Re Stair & Yolles (1925), 57 O.L.R. 338, [1925]
3 D.L.R. 1201 (H.C. Div.). See, also Waters, supra, note 43, at 41-42.

Estates Administration Act provides a statutory exception to the general rule.
This provision assimilates the position of real property to that of personal
property, but concludes with a proviso "that it is not lawful for some or one
only of several joint personal representatives without the authority of a
judge to sell or transfer real property".264 While sections 51 and 52 of the
Limitations Act might appear to provide a further statutory exception,265 it
has been held that a written acknowledgment or part payment of a statute-
barred debt by one of several personal representatives is sufficient to bind
the estate.266

The present law in Ontario law in this area is uncertain in two important
respects. First, there remains some doubt whether the general rule of English
law that executors have joint and several authority is applicable. Second,
even if this rule does apply in Ontario, it is not established clearly whether
it extends to administrators.

Leaving aside the problem of uncertainty, we question the distinction
that is drawn in this context between personal representatives and trustees.
We can see no good reason why executors should have several authority,
while trustees have joint authority. We therefore recommend that, where
two or more estate trustees are appointed, they should have joint authority
with respect to the estate of the deceased, and their duties and powers
should be exercised only with the agreement of all.267

Requiring all the estate trustees to join in transactions may present
problems where the estate trustee certificate is granted to only some of the

264

In the Law of Trusts in Canada, supra, note 43, at 42, Waters states that "while in English
law since 1897 personal representatives have been unable to act singly when conveying
freehold interests . . . there appears to be no such restriction in the Canadian common law
provinces". This comment appears to disregard s. 3 of the Estates Administration Act, supra,
note 28.

265

Supra, note 158. These provisions state as follows:

51. Where there are two or more joint debtors or joint contractors, or joint obligors,
or covenantors, or executors or administrators of any debtor or contractor, no such
joint debtor, joint contractor, joint obligor, or covenantor, or executor or administrator
loses the benefit of this Act so as to be chargeable in respect or by reason only of any
written acknowledgment or promise made and signed or by reason of any payment of
any principal or interest made by any other or others of them.

52. In actions commenced against two or more such joint debtors, joint contractors,
executors or administrators, if it appears at the trial or otherwise that the plaintiff,
though barred by this Act, as to one or more of such joint debtors, joint contractors,
or executors or administrators is nevertheless entitled to recover against any other or
others of the defendants by virtue of a new acknowledgment, promise or payment,
judgment shall be given for the plaintiff as to the defendant or defendants against
whom he recovers, and for the other defendant or defendants against the plaintiff.

266 Re Macdonald, [1897] 2 Ch. 181, and Re Chamandy (1975), 8 O.R. (2d) 460, 58 D.L.R. (3d)
332 (Surr. Ct.).

267

With respect to the vesting of property in estate trustees where 2 or more are appointed,
see infra, ch. 5, sec. 4(a)(iv).

estate trustees named in the will. We have already explained that, where
estate trustees are appointed by the will, like executors under the present
law they will derive their authority from the will, and may perform acts
relating to their office immediately upon the death of the deceased. Where
the estate trustee certificate does not confirm the authority of all the estate
trustees named in the will, it would be undesirable, in effect, to require third
parties to find the estate trustees who have not received the estate trustee
certificate and to secure their consent to a transaction. While this problem
may arise rarely, given the present practice followed by Ontario courts in
dealing with executors,268 it is necessary to provide a mechanism that will
allow third parties to enter into relations with estate trustees, without being
concerned whether the particular transaction requires the consent of
another estate trustee whose name does not appear on the estate trustee
certificate. Throughout this report, we take the position that persons dealing
with estate trustees should be able to rely on the estate trustee certificate
as evidence of their authority, subject, in some cases, to the effect of actual
notice to the contrary.269

In England, this problem has been addressed by legislation. A convey-
ance of real estate by personal representatives generally requires the agree-
ment of all of them or an order of the court. Section 2(2) of the Administration
of Estates Act 1925 provides that, in the case of real estate, "where probate
is granted to one or some of two or more persons named as executors,
whether or not power is reserved to the other or others to prove, any
conveyance of the real estate may be made by the proving executor or
executors for the time being, without an order of the court, and shall be as
effectual as if all the persons named as executors had concurred therein".

In our view, a similar provision should apply to estate trustees, but
should not be confined to sales of real estate. Accordingly, we recommend
that, where the estate trustee certificate has been granted to one or some of
two or more estate trustees, whether or not power is reserved to the other
or others to prove the will, any transaction may be effected and any power
or authority exercised by the estate trustees named in the estate trustee
certificate for the time being, and that act should be as effectual as if all
persons entitled to be appointed estate trustees had concurred therein.

Finally, there are two ancillary matters that we shall address. First,
where there are two or more estate trustees, there is a possibility that they
will not be able to achieve unanimity with respect to an issue, thereby
paralyzing the administration of the estate. We addressed the problem of
deadlock in the Trusts Report, and recommended that, where it appears
that the trustees are unable to achieve unanimity on a matter, one or more
of them should be able to apply to the court for an order resolving the matter

268 Hull and Cullity, supra, note 1, at 199-200.
See ch. 5, infra, sec. 4(b).

in any way that it considers proper.270 We believe that a provision identical
to that in the proposed Trustee Act should be enacted in the legislation
governing estates, and we so recommend.271 We should add that, in the event
of a failure to act in concert, asking the court to resolve the matter would
be but one alternative available to an estate trustee. As we shall see,272 to
address the situation where the failure is due to recalcitrance or dilatory
behaviour on the part of an estate trustee, an application may be made for
an order directing an estate trustee to do a specific act. In a more serious
case, an estate trustee may be liable to removal by the court or by his fellow
estate trustees.273

The last issue that we wish to consider relates to the situation where a
will provides expressly that the estate trustees are to act by a majority. While
there is no authority in England or Canada, it would appear that ordinarily
it is the duty of estate trustees who are in the minority with respect to an
issue to comply with the decisions of the majority, in default of which they
may be held liable. Where, however, the minority knows, or ought to know,
that the majority is acting in violation of its duty, it is not justified in
complying with the majority position. In such a case, the minority may seek
the assistance of the court or apply to have the other estate trustees removed.

Where there is a difference of opinion between the estate trustees, a
problem may arise where the particular legal instrument by which the major-
ity of estate trustees purports to act requires concurrence by all estate
trustees, including the dissenting minority. For example, although the will
may empower the majority to act on behalf of the estate, a particular legal
instrument might have to be signed by all the estate trustees to give it legal

770

Trusts Report, supra, note 3, at 72, and Draft Trustee Bill, s. 13(2).

In the Trusts Report, the Commission explained why it did not think that the problem
of deadlock was met by s. 60 of the Trustee Act, supra, note 32, which allows personal
representatives to apply to the court for its opinion, advice or direction on any question
concerning the management or administration of the estate assets. The Commission stated
(at 71):

[Section 60] is of limited utility. The reason is that the exercise of a trust power involves
essentially the exercise of a discretion vested by the trust instrument or the legislation
in the trustees, and the courts traditionally have refused to interfere with the exercise
of discretion by trustees.Accordingly, in order for the court to exercise its power under
section 60, it must be clear that trustees are in disagreement about whether or not to
exercise a certain power. If they are agreed that a power should be exercised . . . but
disagree about the circumstances in which they should exercise the power ... it
appears that Ontario courts will not resolve this disagreement by issuing a direction
under section 60 of the Trustee Act.

271

272
273

But see Scane, "The 'Unanimity Rule' and Court Interference with Trustees' Discretion"
(1986-88), 8 E.T.Q. 204.

Infra, ch. 6, sec. 2(b).

Infra, this ch., sec. 6(c)(ii).

effect.274 While, under our recommendations, the majority would be entitled
to apply to the court for an order requiring the dissenting estate trustees to
perform the requisite act to effectuate the decision of the majority, we believe
that recourse to the courts in such a case should be rendered unnecessary. In
our view, it would be preferable to confer authority on the majority to give
legal effect to the acts on which it has agreed. Accordingly, we recommend
that, where a will authorizes a majority of estate trustees to act, the majority
should also be empowered to do all acts and things and execute all instru-
ments necessary to carry out the act.

(h) The Professional Estate Trustee

In the Report on the Law of Trusts, we discussed the so-called "profes-
sional trustee" and the standard of care to which she should be subject.275
Like the management of trusts, estate administration is often conducted by
persons who hold themselves out to the public as having particular expertise
to carry out this task and for which they receive compensation.

We believe that the conclusions stated in the Trusts Report are entirely
appropriate in this context. Suffice it to reiterate our view that a higher
standard of care should be asked of persons who have special skills, or who
attract business because they hold themselves out as having such skills. In
furtherance of this principle, we recommended that, in addition to the
general duty of care applicable to all trustees, trustees who in fact possess,
or who because of their profession, business, or calling ought to possess, a
particular level of knowledge or skill which in all the circumstances is relevant
to the administration of the trust, should employ that particular level of
knowledge or skill in the administration of the trust.276 We recommend that
professional estate trustees should also be subject to this higher standard.

4. LIABILITY

In this part of the chapter, we shall consider the liability of estate
trustees. We shall examine the nature and extent of the liability of estate
trustees; in particular, we shall consider whether, and the circumstances
under which, they should bear personal responsibility. We shall also discuss
whether, in the circumstances where estate trustees would otherwise be
personally liable, the court should be empowered to relieve them from
that liability. Finally, we shall consider whether exoneration from liability
provided in a will should be given legal effect.

For example, even where the will authorizes a sale of realty to be decided by a majority,
the signatures of all the estate trustees in whom the property was vested would be required
on the deed for it to pass good title.

275

Trusts Report, supra, note 3, at 29-35.
276 Ibid., at 35, and Draft Trustee Bill, s. 4(2).

(a) Nature and Extent of the Liability of the Estate Trustee

The nature and extent of the personal representative's liability arises
as a question under the present law because an estate is not a legal entity,
like a corporation, that itself can acquire rights or incur liabilities or that
can sue or be sued. Hence, the only legal person against whom an action
can be brought, whether it is for an act or omission of the deceased occurring
prior to death, or for a contract made by the personal representative in the
course of the administration of the estate, is the personal representative.
While the special character of the estate requires that suits be brought
against personal representatives as defendants, there is a question whether
they should bear liability of a personal nature, for which their own assets
may ultimately answer, or liability of a representative nature, rendering only
the assets of the estate liable.

Describing the nature of the liability of a personal representative under
the existing law is a somewhat complicated exercise. The complexity arises
from the necessity of considering the issue in various contexts. First, there
is an issue as to the nature of the liability assumed by the personal representa-
tive for acts or omissions of the deceased by virtue of her being the alter ego
of the deceased. Second, there is the question of the liability of the personal
representative for her own conduct in the administration of the estate. The
latter question must be considered separately in relation to two groups: (1)
the beneficiaries and creditors of the deceased, and claimants against the
estate in respect of acts of the deceased, to whom the personal representative
owes certain duties; and (2) third parties, who are strangers to the estate by
virtue of their not being members of the first group, but who are affected by
the acts of the personal representative in administering the estate, either
because they have entered into contractual relations with her or have been
otherwise affected, perhaps by being the victim of her tortious conduct.

While, therefore, the nature of the liability must be considered in
somewhat different contexts, the basic issue that shall concern us is constant:
should the personal representative bear personal liability for the acts in
question, or should she be liable only in a representative capacity, so that
only the assets of the estate, and not her own, be required to answer for
those acts?

We shall turn first to discuss the present law governing the liability of
a personal representative for acts of the deceased. We shall then consider
the liability of the personal representative for her own acts in the administra-
tion of the estate. In the latter connection, we shall consider the standards
governing her conduct in those circumstances where she does bear personal
liability for her acts. While, in a sense, we have already decided this latter
issue through our fundamental recommendation that the estate trustee
should be subject to the same duties as those imposed on an ordinary trustee
by the proposed Trustee Act, which, of course, would include the proposed
statutory duty of care, it is important to review the existing law to appreciate
fully the significance of this recommendation.

(i) Liability for Acts of the Deceased

The general rule has long been that a personal representative is liable
in a representative capacity in relation to causes of action that survive the
death of the deceased.277 While she may be sued, insofar as the liabilities of
the deceased devolve upon her as representative of the deceased, the assets
of the estate will be responsible for satisfying the judgment, and her own
assets are immune.278

The general principle is not reflected exactly in the Ontario rules of
court. Rule 9.01(1) provides that "[a] proceeding may be brought by or
against an executor, administrator or trustee as representing an estate or
trust". However, it does not explicitly indicate the nature of the potential
liability.279 By contrast, under the former Ontario Rules of Practice, the
Appendix of Forms included a "Judgment Against an Executor or Adminis-
trator", which stated that execution was to be levied against the property of
the deceased at the time of his death or which thereafter come into the
hands of his personal representative to be administered.280

The general rule that a personal representative is liable only in a
representative capacity is subject to an important qualification. In Com-
mander Leasing Corp. Ltd. v. Aiyede,281 the Ontario Court of Appeal
described the circumstances in which personal liability may be visited on an

Certain statutes deal with this issue specifically. For example, personal representatives
holding shares as personal representatives are not personally liable: see Business Corpora-
tions Act, 1982 , S.O. 1982, c. 4, s. 34(8); Co-operative Corporations Act, R.S.O. 1980, c. 91,
s. 72(5); Corporations Act, R.S.O. 1980, c. 95, s. 37(5); and Loan and Trust Corporations Act,
1987, supra, note 39, s. 50(7).

278
279

280

281

Hogan v. Morrissy (1864), 14 U.C.C.P. 441.

Rule 9.02(1) provides that, where a person wishes to sue an estate of a deceased person,
but an executor or administrator has not been appointed, the court may appoint a litigation
administrator to represent the estate for the purposes of the proceeding.

It should be noted that r. 9.02(2) provides that "[a]n order in a proceeding to which
a litigation administrator is a party binds or benefits the estate of the deceased person, but
has no effect on the litigation administrator in his or her personal capacity, unless a judge
orders otherwise". Rule 1.03.19, as am. by O. Reg. 323/86, states that " 'order' includes a
judgment".

Similarly, in England, the form of judgment required by the Rules of the Supreme Court
states that the defendant as executor or administrator is to pay the prescribed amount and
costs to be taxed. It provides further that the "said sum and costs [are] to be levied of the
real and personal estate within the meaning of the Administration of Estates Act 1925 of
the deceased at the time of his death come to the hands of the defendant as such executor
[or administrator] to be administered, if he has or shall hereafter have so much thereof in
his hands to be administered": see R.S.C. 1965, Appendix A, Form 49 (Judgment for
liquidated sum against personal representative), and Ord. 42, r. 1.

(1983), 44 O.R. (2d) 356, 4 D.L.R. (4th) 107 (subsequent reference is to 44 O.R. (2d)).
See, generally, Williams, Mortimer and Sunnucks, supra, note 75, at 803-04.

executor or administrator, even though the underlying cause of action related
to an act of the deceased:282

It has long been established that if an executor or administrator has no
assets to satisfy the debt upon which an action is brought, in the absence of a
plea of no assets or plene administravit, he will be taken to have conclusively
admitted that he has assets to satisfy the judgment and will be personally liable
for the debt and costs if they cannot be levied on the assets of the deceased. If
the executor has some, but insufficient, assets to satisfy the judgment and costs,
a plea of plene administravit praeter will render him liable only to the amount of
assets proved to be in his hands as executor.

(ii) Liability of the Estate Trustee for Her Own Acts

As we have explained, a personal representative bears personal liability
for the performance of her duties and the exercise of her powers in the
administration of the estate. This liability may arise in relation to two groups
who are affected by her administration. The first group consists of the
beneficiaries, creditors and persons having claims against the estate. To the
persons within this group, a personal representative owes a duty to manage
the estate carefully so as not to prejudice or defeat their interests. Under
the present law, the principles applicable to the nature of this duty are not
entirely clear.

The second group of persons to whom an executor or administrator
may be personally liable consists of strangers to the estate, in the sense that
they have had no relationship to the deceased during his lifetime, but who
are affected by the conduct of the personal representative in administering
the estate. This would include persons with whom the personal representa-
tive makes contracts and persons injured by his tortious or other conduct.

We shall begin by discussing the nature of the personal representative's
liability in relation to strangers to the estate and then proceed to consider
liability to beneficiaries, creditors and other persons with claims against the
estate.

282

Supra, note 281, at 358. It would appear that the procedure in Ontario for obtaining a
judgment against a personal representative personally differs from that in England. In
England, before a judgment creditor can proceed against an executor or administrator
personally, two judgments must be obtained: he must first obtain judgment against the
personal representative in a representative capacity and then must bring a second action
alleging a devastavit, usually following the sheriffs return of a nulla bona: see Williams,
Mortimer and Sunnucks, supra, note 75, at 818-19. In Ontario, it is not necessary to
proceed in two stages to obtain judgment against an executor or administrator personally. A
judgment creditor can pursue a claim against the estate and allege devastavit in a single
action and can have judgment against the personal representative personally if there are
insufficient assets to meet the judgment and there has been no plea to that effect: see
Commander Leasing Corp. Ltd. v. Aiyede, supra, note 281.

a. In Relation to Strangers to the Estate

In reviewing the law respecting the liability of a personal representative
incurred in the administration of the estate, it is important to recall the basic
principle that "the estate" is not recognized by the law as a distinct juridical
person. An estate cannot "act" in a legal sense, incur liability or be treated
as a principal in an agency relationship and, consequently, it cannot be sued.
Thus, after the death of the deceased, personal representatives do not, in
any legal sense, act on behalf of the estate, either as an agent or in any other
representative capacity; personal representatives can only act personally,
notwithstanding that their conduct is intended to benefit the estate and,
indeed, should not enure to their own personal advantage.

The following policy reason has been given for this rule

283

It is familiar learning that a trustee is personally liable for those debts
which he incurs in the course of the administration of the trust estate. So also
is he personally liable for the torts committed by him or his employees in
carrying out the trust, although they were committed in the performance of
duties imposed by the trust or in the execution of powers conferred upon him
by virtue of his office as trustee. The same doctrine of personal liability is applied
to executors and guardians. Although these liabilities are incurred in the further-
ance of an enterprise in which the trustee has no economic interest and which
is carried on for the benefit of the cestui que trust, whom courts of equity
consistently recognize as entitled to the entire economic interest in the trust
enterprise, nevertheless, the doctrine of personal legal liability of the trustee is
consistent with the policy of the law which entitles one to rights against him
with whom he contracts or against him whose acts, either personal or those for
which he is responsible on the doctrine of respondeat superior, have caused an
actionable wrong or injury.

Nor does the practical operation of this rule of personal liability operate
harshly with respect to the trustee or conflict with the economic interests of the
parties. If the trustee is compelled to satisfy the personal obligation which he
has incurred, he may appropriate from the assets of the trust such amount as
is required to indemnify him, unless his act in incurring the liability is of such
a character as to amount to a violation of his duties as trustee, in which case,
of course, it is proper both ethically and economically, as well as legally, that
the burden of loss should be cast upon him whose act occasioned it. If there
are no assets of the trust estate with which to indemnify the trustee, the practical
working out of the rule so that, in such a case, the trustee incurs the liability at
his peril is not unwholesome. He with whom the trustee contracted or who has
suffered from the trustee's tort should be compensated in damages. This can
be effected, if there are no trust assets, only through the personal liability of
the trustee, who may always avoid incurring such liability if the trust estate is
without funds to indemnify him.

There has been some confusion concerning the nature of contractual
liability. By contrast, the position with respect to tortious conduct is clear:

MO Stone, "A Theory of Liability of Trust Estates for the Contracts and Torts of the Trustee'
(1922), 22 Colum. L. Rev. 527 (emphasis added).

"[a] personal representative is, of course, personally responsible for all torts
committed by him, but where the injury has been occasioned by him or by
his agents in the reasonable management of the trust estate he is entitled
to be indemnified out of the assets".284

While the preponderance of authority states that the personal represen-
tative is liable personally for contracts made after the death of the
deceased,285 it would appear that the position is not entirely settled.286
However, it is clear that, where a personal representative incurs debts in the
course of carrying on a business of the deceased, she is personally liable for
them.287

More uncertain is the issue whether a personal representative is able
to contract in a representative capacity, exonerating himself from personal
liability, by including an express stipulation to that effect in an agreement.
The cases bearing upon this matter, which concern trustees, rather than
personal representatives, are conflicting. In Muir v. City of Glasgow Bank,288
a decision of the House of Lords, there is an obiter dictum stating that
executors can enter into a contract excluding their personal liability and
providing that the creditor will be paid out of the estate assets. In Re
Robinson 's Settlement,289 this dictum was approved by one of the judgments.
In Watling v. Lewis,290 the court held ineffective a covenant in a deed that
purported to deny personal liability on the part of trustees.

Before turning to consider the liability of personal representatives to
beneficiaries, creditors and other claimants, we wish to emphasize that the
practical reality of estate administration does not comport with the outline
of the law that we have presented. In theory, a personal representative
discharges the obligations assumed by him on behalf of the estate personally,
and he then seeks reimbursement from the estate. In practice, personal

284

285
286

287

288
289
290

Halsburys' Laws of England, Vol. 17 (4th ed., 1976), para. 1540, at 785. See, also, Williams,
Mortimer and Sunnucks, supra, note 75, at 695.

Halsburys' Laws of England, Vol. 17 (4th ed., 1976), para. 1537, at 784.

See Padwick v. Scott (1876), 2 Ch. D. 736, at 743, which suggests that a question remains
whether a personal representative should be sued in a representative capacity or personally
in respect of a contract made in the course of administration. See, also, Williams, Mortimer
and Sunnucks, supra, note 75, at 695-96, which explains certain apparent "exceptions" to
the general principle that a personal representative is to bear personal liability.

Re Robertson, [1948] O.R. 764, [1948] 4 D.L.R. 606 (H.C.J.), and G. Soloway & Sons Ltd.
v. Pearlman, [1964] 1 O.R. 1 (H.C.J.), affd [1964] 1 O.R. 448, 42 D.L.R. (2d) 690(C.A.);
Widdifield, supra, note 102, at 26; and Halsburys' Laws of England, Vol. 17 (4th ed., 1976),
para. 1214, at 624. The personal representative is entitled to indemnification out of the assets
of estate where she has properly incurred liabilities. For a discussion of indemnification, see
infra, this ch., sec. 5(g).

(1879), 4 App. Cas. 337, [1874-80] All E.R. Rep. 1017 (per Lord Cairns).

[1912] 1 Ch. 717 (C.A.), 81 L.J. Ch. 393 (per Buckley L.J.).

[1911] 1 Ch. 414, 80 L.J. Ch. 242.

representatives pay for services directly out of an estate account; only in
rare cases will a personal representative expend his own money and subse-
quently seek indemnification.291

b. In Relation to Beneficiaries ; Creditors, and Claimants
Against the Estate

The general principles relating to the personal liability of personal
representatives to beneficiaries, creditors, and claimants are not entirely
clear. In part, the confusion is caused by the fact that a breach of duty by a
personal representative is characterized sometimes as devastavit, while other
times it is regarded as a breach of trust. It is difficult, moreover, to distinguish
the two concepts.

Williams, Mortimer, and Sunnucks state that a devastavit is conduct
that amounts to "such a violation or neglect of duty by an executor or
administrator, as will make him personally liable or accountable".292 The
term itself refers to a wasting of assets. It has been given the following
definition:293

[Devastavit] is defined to be a mismanagement of the estate and effects of
the deceased, in squandering and misapplying the assets contrary to the duty
imposed on them, for which executors or administrators must answer out of
their own pockets, as far as they had, or might have had, assets of the deceased.

Williams, Mortimer and Sunnucks suggest that, insofar as a personal
representative is considered to be a trustee for certain purposes, breach of
the usual trusts that are associated with that office will lead to personal
liability.294 Accordingly, the distinction between devastavit and breach of
trust is explained as follows:295

The same act may amount both to breach of trust and devastavit, but the
strict distinction between the two, so far as material, is that devastavit is a breach
of the duty of administration and may therefore arise where there is no express
or implied trust at all, whereas simple breach of trust will normally occur after
administration is complete when the assets are being held upon the trusts of
the will or the statute.

A variety of acts may constitute devastavit. Deliberate misuse of the
estate assets, for example, by converting them to his own use or applying

291

With respect to trustees, see Waters, supra, note 43, at 944.

292

Williams, Mortimer and Sunnucks, supra, note 75, at 710.

293 Ibid., quoting Re Stevens, [1898] 1 Ch. 162 (C.A.), at 177. Widdifield, supra, note 102, at
270, states that the "common law referred to all neglect of duty by an executor as a
'devastavit1 and he was personally responsible therefore".

294 Ibid.

295 Ibid., at 711.

them to pay his own debts to a third party, would amount to devastavit.
Personal representatives may be found liable in devastavit for acts of negli-
gence or wrongful administration that defeat the rights of beneficiaries and
creditors.296 Paying debts out of their proper order or paying a legacy where
the assets are insufficient to pay creditors may lead to liability unless a
personal representative has first advertised for creditors.297 Applying the
assets to pay a claim that need not have been satisfied may be devastavit,
even though the personal representative, in making the payment, has acted
on the best advice that she could obtain.298

One confusing area is the responsibility of personal representatives for
loss of the deceased's assets. It has been suggested that executors and
administrators are not liable for loss of assets, except in the case of "wilfil
default".299 The leading commentators accept that "wilful default" means
that, in doing the alleged act, or failing to do what he should have done, the
personal representative is conscious that "he is committing a breach of his
duty, or is recklessly careless whether it is a breach of his duty or not".300 If
this is the applicable standard, it would mean that, while other acts of
negligence may constitute devastavit, in the case of a loss of estate assets,
mere negligence is insufficient to incur liability.

Personal representatives are liable not only for the assets that they have
received, but also for assets they might have received, but for their default;
the standard is said to be "wilful default".301 However, it has also been
suggested that liability for failing to get in assets depends simply on proving
loss to the estate resulting from a breach of duty,302 and, except as modified
by statute, that breach may consist of a negligent failure to collect the
assets.303

Professor Waters describes the basis of liability for breach of trust as

follows:304

296 Ibid., at 712 and 717.

297

See infra, ch. 4, sec. 4(c)(i).

298

Williams, Mortimer and Sunnucks, supra, note 75, at 711-12.
Ibid., at 712, citing Job v. Job (1877), 6 Ch. D. 562, at 564.

299
300

Re Vickery, [1931] 1 Ch. 572, at 583, [1931] All E.R. Rep. 562, at 567. Both Snell, supra,
note 242, at 341, n. 51, and Williams, Mortimer and Sunnucks, supra, note 75, rely on this
defintion even though Re Vickery interpreted "wilful default" within the context of an
English provision equivalent to s. 33 of the Ontario Trustee Act, supra, note 32.

301

Snell, supra, note 242, at 341.

302 Clark, Parry and Clark[:] The Law of Succession (9th ed., 1988), at 389, and Stannard,
"Wilful Default" (1978), 43 Conv. 345, at 348.

303

For a discussion of the impact of s. 48(2) of the Trustee Act, supra, note 32, see supra, this
ch., sec. 3(c).

Waters, supra, note 43, at 987-88. The strictness of these principles is mitigated by the
statutory provisions for relieving trustees from liability: see infra, this ch., sec. 4 (b).

A breach of trust occurs whenever a trustee fails to carry out his obligations
under the terms of the trust, the rules of equity, or statute. The failure may
may take the form of doing something contrary to those obligations, or of
neglecting to do something which he ought to have done.

A breach of trust occurs when the trustee's duty to act precisely within the
terms of his obligations is not fulfilled. If he fails in this, it is of no significance
that he had no intention of departing from his duty. Trustees have been found
in various conditions of blame-worthiness — fraudulent, wilfully neglectful, slov-
enly in their conduct of trust affairs, and incompetent — but none of these
elements needs to be proved in order to establish a breach of trust. If the letter
of the trustee's obligation has not been adhered to for whatever reason, he is
liable to his beneficiaries for any loss which has occurred as a result.

Before stating our conclusions and our recommendations for reform,
we should consider the concept of executor de son tort, which strictly speak-
ing, falls outside the purview of this section, insofar as it does not relate to
the liability of a personal representative. However, since it is a device that
is used to fix liability in connection with an estate, it may properly be
discussed under this rubric.

An executor de son tort is a person who, without authority, intermeddles
with the estate of the deceased and, as a consequence, is treated for some
purposes as an executor.305 A person will also be treated as an executor de
son tort if he makes a claim to act as executor, for example, by bringing or
defending an action in that capacity.306

As we have indicated, essentially the executor de son tort is a judicial
mechanism employed to fix liability on the intermeddler. Liability may
arise in relation to creditors and legatees and to the lawful personal
representatives.

An executor de son tort has no duty to get in the assets of the deceased
and a general order for administration cannot be made against him.307 He
is, however, liable in equity to account for assets actually received,308 and he
is liable to pay debts and legacies to the extent of the assets actually received
by him.

-jnc

Williams, Mortimer and Sunnucks, supra, note 75, at 93, state that "[t]he same term is used
whether the deceased died testate or intestate, for the law knows no such appellation as
'administrator de son torr'. "For a discussion of the acts giving rise to liability on this basis,
see Williams, Mortimer and Sunnucks, supra, note 75, at 94-95.

306

307

Ibid., at 95. See, also, Charron v. Montreal Trust Co., [1958] O.R. 597, 15 D.L.R. (2d) 240
(C.A.).

Williams, Mortimer and Sunnucks, supra, note 75, at 99.

308 Coote v. Whittington (1873), L.R. 16 Eq. 534, 42 L.J. Ch. 846.

The liability of an executor de son tort to the lawful personal representa-
tive rests on a different basis. Williams, Mortimer, and Sunnucks explain
that "liability in this case . . . depends not on his having so acted as to make
himself chargeable as executor, but on the general law regarding interference
with the property of another".309 Thus, liability may be founded in trespass
or conversion.

(iii) Conclusions and Recommendations

From the preceding discussion, it should be apparent that the existing
law relating to the nature and extent of the liability of the personal represen-
tative is complex and, in certain respects, uncertain. We believe that the law
should not continue to apply to the new office of estate trustee without
substantial modification to bring clarity to this area.

In setting out our recommendations for reform, we shall deal with the
topics in the order in which they were discussed in the previous sections.
We begin with liability for acts of the deceased.

With the exception of a single matter, we believe that the present law
respecting the responsibility for acts of the deceased is satisfactory. As we
have explained, the general rule is that personal representatives are liable
in a representative capacity. The only criticism we have of the existing law
concerns the exception to the general rule. The requirement of pleading
plene administravit or plene administravit praeter to avoid personal liability if
there are no or insufficient assets is a residuum of the medieval rules of
pleading.310 Moreover, it places plaintiffs in a better position than they would
have been in had the deceased lived; if the deceased were living, a plaintiff
would have been put to the usual inquiries to ascertain whether he had
sufficient assets to make a suit worthwhile. Had the plaintiff failed to
discover that the defendant had no assets, he would have received nothing.

A further criticism of this requirement of pleading is that the sanction
imposed for a failure to make the proper plea — personal liability for the
debt — is disproportionate to the injury suffered by the plaintiff, which is the
expense of fruitless litigation. While we disagree with the gravity of the
sanction, we are of the view that estate trustees should be encouraged to
warn plaintiffs where there are no or insufficient assets in the estate, so that
plaintiffs can choose to avoid the unnecessary expense and inconvenience
of proceeding to judgment. The appropriate incentive is a potential award
of costs against the estate trustees.

Accordingly, we recommend that the requirement of pleading plene
administravit or plene administravit praeter in actions brought against estate

Williams, Mortimer and Sunnucks, supra, note 75, at 100.
' ' See text at note 6, supra.

trustees, and the imposition of personal liability for a failure to make either
plea, should be abolished. However, we recommend that the estate trustee
should be personally liable for costs unless she advises a plaintiff in writing
that there are no assets or insufficient assets in the estate to satisfy the
amount of the debt upon which the action is brought.

In our discussion of the present law governing the liability of personal
representatives for their own acts, we explained that, in relation to strangers
to the estate, there was a degree of uncertainty in the law. While the law is
clear that personal representatives are personally liable for their own torts,
the principles governing contractual liability are unclear. Particularly uncer-
tain is whether personal representatives may contract in a representative
capacity, so that their own assets are immunized from any future claim
arising from the contract.

In our view, estate trustees should be able to contract on the basis that
their liability is limited to the assets of the estate. At present, a trustee may
have a term introduced in the contract that he undertakes no personal
liability, in which case the third party may have recourse only against the
trust property. If such a provision is incorporated in the contract, in the
event of a breach of contract by the trustee, the third party assumes the risk
that the trust property will be adequate to compensate her for her loss.311
In our view, the same principles should apply to estate trustees. Accordingly,
we recommend that estate trustees should be allowed to contract on the
basis that they incur no personal liability and that the person contracting
with the estate trustee should be able to have recourse only to the assets of
the estate.

With respect to the liability of the estate trustee to beneficiaries, credi-
tors, and claimants of the estate, we can see that the law has been compli-
cated by the parallel development of principles by the common law courts
and the Court of Chancery, the result of which is the confusing distinction
between liability in devastavit and liability for breach of trust. Both concepts
appear to cover identical ground, imposing liability for the same conduct.
Further uncertainty about the requisite standard has been imported by those
cases that assert that liability is to be based on "wilful default".

We believe that the confusion in the existing law would best be cured
by adoption of the principles of liability that we have proposed for ordinary
trustees in the Report on the Law of Trusts.

We therefore recommend that the nature and extent of the liability of
an estate trustee for his administration of the estate should be the same as
for an ordinary trustee. Where liability is premised upon a lack of care, the
standard of care set out in section 4 of the draft Trustee Act should apply
to estate trustees. The distinctions between devastavit and breach of trust
should be abolished; the liability of the estate trustee should be determined

31 1

Trusts Report, supra, note 3, at 371.

by the latter concept. In some cases, this will involve imposition of liability
in the absence of fault.

Finally, we believe that the concept of executor de son tort has no place
in a modern law of estates administration. In our view, the liability of a
person who intermeddles with estate property should be determined by the
general law governing interference with property, and the responsibility for
seeking relief should rest on the estate trustee. This is consistent with our
general view that the central locus of responsibility should be fixed on the
estate trustee.

We reject the approach taken in those jurisdictions that have sought to
modernize this concept by some manner of reform. In particular, we disagree
with section 28 of the "English Administration of Estates Act 1925 ,312 which
modifies the concept, most importantly by giving an executor de son tort the
right to retain debts owed to him by the deceased.313 We consider that this
is inappropriate.314

We prefer to abolish the concept of executor de son tort. Although
abolition of this concept would eliminate the present right of creditors and
legatees to sue the intermeddler directly, except insofar as such a right exists
independently, it would provide for certainty and eradicate the confusion
that is created by attempting to treat an intermeddler as an estate trustee.
We therefore recommend that the concept of executor de son tort should be
abolished, and that a person who intermeddles with the estate of a deceased
person should be liable under the general law for any loss caused to the
estate by the intermeddling.

(b) Statutory Provisions for Relief of Estate Trustees

Under the existing Ontario law, a personal representative may be
relieved from personal liability that would otherwise arise from his con-
duct.315 The source of the relief may be found in the Trustee Act and, in a

312
313
314

315

Supra, note 16.

At common law, an executor de son tort did not have any right to retain.

We agree entirely with the following criticism in Clark, supra, note 302, at 147-48:

Any debt for valuable consideration and without fraud due to the executor de son
tort from the deceased at death [may be deducted from the assets for which he is
liable]. Thus an executor de son tort may apparently 'retain' for his own debt as against
another creditor, even though the other creditor is of a higher degree and even though
the executor de son tort has reason to believe that the deceased's estate is insolvent.
In this respect, unfortunately, an executor de son tort is treated more favourably than
a personal representative.

In addition, there are statutory provisions — such as s. 48(1) and (2) of the Trustee Act,
supra, note 32, that permit acts that otherwise would be breach of duty. We have already
examined these provisions in connection with our discussion of the duty to get in the estate
and the duty to pay debts: see supra, this ch., sees. 3(c) and (d).

limited context, in the inherent jurisdiction of the court. The provisions of
the Trustee Act address relief in connection with breach of trust, the payment
of debts, and certain contingent liabilities. We shall consider each of these
matters in turn.

Turning first to breach of trust, two provisions of the Trustee Act are
relevant. The more important is the general relieving provision, section 35,
which provides as follows:

35. If in any proceeding affecting a trustee or trust property it appears to the
court that a trustee, or that any person who may be held to be fiduciarily
responsible as a trustee, is or may be personally liable for any breach of trust
whenever the transaction alleged or found to be a breach of trust occurred, but
has acted honestly and reasonably, and ought fairly to be excused for the breach
of trust, and for omitting to obtain the directions of the court in the matter in
which he committed the breach, the court may relieve the trustee either wholly
or partly from personal liability for the same.

Section 34 of the Trustee Act also deals with relief from breach of trust,
but in narrower circumstances. It provides that, where a trustee commits a
breach of trust at the instigation or request or with the consent in writing of
a beneficiary, the court may make an order impounding all or any part of
his interest by way of indemnity to the trustees or persons claiming through
them.316

In the Report on the Law of Trusts, we considered both section 34 and
section 35. With respect to section 34, we took the view that the power
contained therein should be retained; accordingly, we recommended that,
where trustees commit a breach of trust at the instigation or request or with
the consent in writing of a beneficiary, the court should be able to make an
order impounding all or any part of the interest of the beneficiary in the
trust estate by way of contribution or indemnity to the trustees or persons
claiming through them.317

With respect to section 35, it should be emphasized that it requires that
a trustee act honestly, reasonably, and be in the position that he ought fairly
to be excused. The requirement of honesty and reasonable conduct suggests
that the section is concerned essentially with technical breaches. As we have
indicated, a trustee or personal representative may be liable for a technical
breach of trust, notwithstanding the absence of fault on his part; acting in
any respect and to the slightest degree contrary to the terms of the trust or
will would constitute such a breach.

This statutory provision was intended to supplement and to enlarge the power of the court

under its inherent jurisdiction to order indemnification of a trustee from the beneficial

interest of a beneficiary in certain circumstances: see, generally, Waters, supra, note 43, at

1012-14. It would seem that the inherent jurisdiction also applies to personal

representatives.

•317

J1/ Trusts Report, supra, note 3, at 384, and Draft Trustee Bill, s. 55.

The power conferred by section 35 has been exercised to excuse trustees
in a variety of circumstances other than a technical breach. Moreover, since
the provision does not require a trustee to admit to a breach of trust, the
courts have often excused a trustee without actually deciding that there was
a breach, which can make it difficult to determine the difference between
behaviour that constitutes breach and behaviour that justifies relief. In our
view, this raised the question whether the revised Trustee Act should state
simply that "a trustee should be excused for breach of trust only in those
circumstances where he is not personally to blame, because of either his lack
of good faith or his negligence".318 We concluded that such a change could
not be proposed without first being able to identify all the circumstances
that might constitute technical breach for which a trustee should be excused.
Having regard to the present state of the law, this was thought to be impossi-
ble. Furthermore, we were of the view that it was valuable to allow courts
to assess the merits of the conduct of each trustee whose action has been
challenged on the basis of an alleged breach of trust. We observed that
"there may also be circumstances, possibly not constituting technical breach,
in which some of the older precedents would impose liability upon trustees,
but where, because of the absence or minimal degree of fault, a modern
court might prefer to take a less strict approach towards liability".319

It was our view that the judicial excusing power should be retained so
that a court can ensure that a trustee is liable only to the extent that blame
attaches to his conduct.320 We therefore recommended that section 35 of
the present Trustee Act, permitting the court to excuse trustees for breach
of trust, should be carried over to the revised Trustee Act. More particularly,
we recommended that the revised Act should contain a provision to the
effect that, if in any proceedings affecting a trustee or trust property it
appears to the court that a trustee, or any person who may be held to be
fiduciarily responsible as a trustee, is or may be personally liable for a breach
of trust, whenever the transaction alleged or found to be a breach of trust
occurred, but has acted honestly and reasonably and ought fairly to be
excused for the breach of trust, and for not obtaining the directions of the
court in the matter in which he committed the breach, the court may relieve
the trustee either wholly or partly from personal liability for the breach.321

318 Ibid., at 38.

319 Ibid.

With respect to the task that is given to the court, the Trusts Report, ibid., at 38, commented
as follows:

It requires more of the courts than a well-meaning indulgence towards trustees; it
presupposes a careful, indeed deliberate, assessment of the trustee's fundamental
duties as a fiduciary, and a sensitivity to the fact that the foremost, and perhaps only,
protection of the beneficiary is that the person, who with considerable powers is
administering the trust assets, must act with 'vigilance, prudence and sagacity'.

321 Trusts Report, ibid., at 39, and Draft Trustee Bill, s. 69.

Under our earlier proposals respecting liability, the principles respect-
ing breach of trust will continue to apply to estate trustees. In our view, the
reasons supporting the recommendations for relief of trustees that we have
made in the Trusts Report apply with equal force to estate trustees. As we
have explained, this would entail allowing courts to grant relief not only for
technical breaches of trust, but in other circumstances in which an estate
trustee may be held liable.322 We therefore recommend that the provisions
of the draft Trustee Act providing for relief for breach of trust should apply
to estate trustees.

The relieving provisions of the present Trustee Act with respect to the
payment of debts and contingent liabilities apply only to personal representa-
tives. Section 50 addresses relief from liability arising in connection with
the payment of debts. It provides as follows:

50. — (1) On the administration of the estate of a deceased person, in the
case of a deficiency of assets, debts due to the Crown and to the personal
representative of the deceased person, and debts to others, including therein
debts by judgment or order, and other debts of records, debts by specialty,
simple contract debts, and such claims for damages as are payable in like order
of administration as simple contract debts shall be paid pari passu and without
any preference or priority of debts of one rank or nature over those of another;
but nothing herein prejudices any lien existing during the lifetime of the debtor
on any of his property.

(2) Where a personal representative pays more to a creditor or claimant
than the amount to which he is entitled under subsection 1, the overpayment
does not entitle any other creditor or claimant to recover more than the amount
to which he would be entitled if the overpayment had not been made.

(3) Where a personal representative pays more to a creditor or claimant
than the amount to which he is entitled under subsection 1, the court may
relieve the personal representative either wholly or partly from personal liability
if it is satisfied that he has acted honestly and reasonably and for the protection
or conservation of the assets of the estate.

Section 50(3) deals with the situation where a personal representative
is sued personally by a creditor or claimant who does not receive his pari
passu share of the debt that he is owed because the personal representative
has made an overpayment to another creditor or claimant.

The relationship between section 50(3) and section 35 of the Trustee
Act, the general relieving provision, is unclear. As we have explained, section
35 deals with personal liability for breach of trust, and applies where a
trustee has acted "honestly and reasonably, and ought fairly to be excused".
By contrast, while section 50(3) also requires a personal representative to

322

Both the marginal note to s. 35 of the present Trustee Act and the marginal note to s. 69
of the Commission's revised Trustee Bill are "Relief of trustees committing technical
breach of trust". While perhaps reflecting the original intention of a relieving provision,
neither accurately reflects the applicability of the provision.

have acted "honestly and reasonably", there is the requirement that he has
acted "for the protection or conservation of the assets of the estate".

Whether section 35 of the Trustee Act would apply in the circumstances
addressed by section 50(3) depends on how the action by the creditor or
claimant is characterized. It would seem that the action against the personal
representative would be an action for debt, and it is far from certain whether
a court would consider an overpayment to a creditor as a breach of trust.

We are in agreement with the basic policy implemented by section 50(3)
of the Trustee Act. Since there appears to be doubt whether the judicial
power to relieve for breach of trust would apply in these circumstances, we
are of the view that this matter should be addressed specifically by legislation.

As we have indicated, under the present law, there are two different
statutory standards governing relief from liability, the one set out in the
general relieving provision, section 35, and the one prescribed in section
50(3). We can see no reason for different tests determining whether an
estate trustee should be relieved from personal liability for a failure to act
properly. Moreover, we consider the standard set out in section 50(3) —
"has acted honestly and reasonably and for the protection or conservation
of the assets of the estate" — to be obscure and difficult to understand.
Indeed, one might well question how a person is be found to have acted "for
the protection or conservation of the assets of the estate" when he has made
a payment and, in particular, an overpayment. The standard for relief of
estate trustees that we endorsed earlier should apply in these circumstances.
Accordingly, we recommend that, in the case of an insolvent estate, where
an estate trustee pays more to a creditor or claimant than the amount to
which he is entitled, the court should be empowered to relieve the estate
trustee either wholly or partly from personal liability if it is satisfied that he
has acted honestly and reasonably and ought fairly to be excused for the
payment.

The third matter in respect of which the Trustee Act provides for relief
from personal liability relates to certain types of contingent liability. Sections
51 and 52 of the Trustee Act provide as follows:

5 1 . — ( 1 ) Where a personal representative, liable as such to the rents, or upon
the covenants or agreements contained in a lease or agreement for a lease
granted or assigned to the testator or intestate, has satisfied all liabilities under
the lease or agreement for a lease, which accrued due and were claimed up to
the time of the assignment hereinafter mentioned, and has set apart a sufficient
fund to answer any future claim that may be made in respect of any fixed and
ascertained sum covenanted or agreed by the lessee to be laid out on the
property demised, or agreed to be demised, although the period for laying out
the same may not have arrived, and has assigned the lease, or agreement for
lease, to a purchaser thereof, he may distribute the residuary estate of the
deceased to and among the parties entitled thereto, without appropriating any
part or any further part thereof, as the case may be, to meet any future liability
under the lease or agreement for lease.

100

(2) The personal representative so distributing the residuary estate is not
personally liable in respect of any subsequent claim under the lease or agree-
ment for lease.

(3) Nothing in this section prejudices the right of the lessor, or those claiming
under him, to follow the assets of the deceased into the hands of the person or
persons to or among whom they have been distributed.

52. — (1) Where a personal representative, liable as such to the rent or upon
the covenants or agreements contained in any conveyance on chief rent or rent-
charge, whether any such rent is by limitation of use, grant or reservation, or
agreement for such conveyance, granted or assigned to or made and entered into
with the testator or intestate, has satisfied all liabilities under the conveyance, or
agreement for a conveyance, which accrued due and were claimed up to the
time of the conveyance by him hereinafter mentioned, and has set apart a
sufficient fund to answer any future claim that may be made in respect of any
fixed and ascertained sum covenanted or agreed by the grantee to be laid out
on the property conveyed, or agreed to be conveyed, although the period for
laying out the same may not have arrived, and has conveyed such property, or
assigned such agreement for conveyance to a purchaser thereof, he may distrib-
ute the residuary estate of the deceased to and among the persons entitled
thereto, without appropriating any part or any further part thereof, as the case
may be, to meet any further liability under the conveyance or agreement for
conveyance.

(2) A personal representative so distributing the residuary estate is not
personally liable in respect of any subsequent claim under the conveyance or
agreement for conveyance.

(3) Nothing in this section prejudices the right of the grantor, or those
claiming under him, to follow the assets of the deceased into the hands of the
person or persons to or among whom they have been distributed.

These complex provisions respond to a narrow problem. At common
law, a personal representative of a lessee was liable in a representative
capacity on the covenants of the lease, to the extent of the lessee's assets.
This representative liability lasted for the whole term of the lease, and
continued despite any assignment of the lease. Consequently, it was risky for
a personal representative to distribute the lessee's assets to the beneficiaries
without setting aside a fund to cover any possible liability that might arise
from a future breach of the lease. If a fund were not set aside, the personal
representative would be personally liable to the lessor if there were not
sufficient assets remaining in the estate to cover the liability. To meet this
problem, the practice was to set aside a fund, taken from the residuary
estate, and pay it into court, where it remained until all claims were paid or
until the expiry of the limitation period within which claims could be brought;
the fund was then paid to the beneficiaries.323

323

Bentley, McNair and Butkus, Williams and Rhodes Canadian Law of Landlord and Tenant
(6th ed. 1988), Vol. 2, at 15-3 to 15-4; Williams, Mortimer and Sunnucks, supra, note 75,
at 601; and Megarry and Wade, supra, note 229, at 729-730.

101

A similar practice was followed where personal representatives became
personally liable under the covenants of the lease. Personal liability to the
lessor arises where an executor or administrator has taken possession of the
lands subject to the lease, for the law treats her as if she were an assignee
of the lease.

The practice of setting aside a fund for possible future claims postponed
distribution of the estate, and placed the full weight of delay on residuary
legatees.

Legislation was enacted in 1859 to deal with the situation where an
executor or administrator is liable in a representative capacity.324 Sections
51 and 52 of the Trustee Act are the present versions of that provision.
Certain features of these provisions bear emphasizing. The basic scheme of
the provisions is that, where a personal representative has satisfied all exist-
ing claims, has set apart a fund sufficient to answer any future claim that
may be made in connection with "any fixed and ascertained sum covenanted
or agreed ... to be laid out on the property", and has transferred the
property to a purchaser, she may distribute the residuary estate to the
persons entitled to it without appropriating any of it to meet future liabilities.
Where a personal representative distributes the residuary estate in accor-
dance with these prerequisites, she cannot be held personally liable if there
is any later claim, for example, by a lessor. However, the protection given
to personal representatives does not impair the right of a lessor to follow
the assets of the deceased into the hands of persons to whom they have been
distributed.

The modern English provision applies in the same circumstances.325 In
other respects, however, it differs. First, it expressly applies to assignments
by a personal representative to a mortgagee as well as to a purchaser.
Second, it also applies to assignments by ordinary trustees. Third, there is
no reference to the archaic concept of chief rents. Finally, the English
provision combines section 51 and 52 in a single section.

Sections 51 and 52 of the Trustee Act reflect a concern that the ease of
administration not be impeded by the existence of contingent liabilities. We
share this concern. Moreover, we are of the view that the policy of these
provisions is applicable to all situations where an asset of the estate is subject
to continuing liability. In these situations, to protect themselves, personal
representatives must set aside a fund to meet possible liability, or distribute
the assets and obtain an indemnity from the beneficiaries, or obtain an
order from the court directing the administration of the estate.326 In the
case of commercial leases, the first alternative may be impracticable, or

324
325
326

Lord St. Leonard's Act, supra, note 13.
Trustee Act 1925, supra, note 15, s. 26.
Widdifield, supra, note 102, at 62-63.

102

at least extremely difficult, given the complexity of modern leases, par-
ticularly so-called "net" and "net, net" leases. The last of the three alterna-
tives is more theoretical than real, for administration orders are rarely used
in Ontario.

Where an estate is under a long-term obligation and that obligation
may be transferred to another, the person to whom that obligation is owed
will not be disadvantaged if the transfer can be effected only with her
prior approval. In such a case, the liability of the estate trustee should end,
which will allow her to distribute the estate. Accordingly, we recommend
that, where an estate trustee holds as an asset a long-term lease, mort-
gage or other instrument that imposes upon the estate a liability beyond
one year from the death of the deceased, and she assigns this asset
to a person approved by the person to whom the estate otherwise would
have been liable for the full term of the instrument, the liability of the
estate trustee for further payment under the instrument should cease
from the moment of the assignment. The person to whom the estate
otherwise would have been liable for the full term of the instrument
should not be entitled to withhold her approval arbitrarily. In making this
proposal, we acknowledge that we are accepting that considerations of
contract ought to defer to the policy in favour of the ease of administration
of estates.

An exoneration clause is a provision in a will that wholly or partially
exonerates a personal representative from liability for a loss arising in the
course of his administration of the estate. Such a clause may be inserted at
the request of an executor, as a condition of his agreement to accept the
office, or on the initiative of a testator in order to persuade a person to act
without compensation. As with exoneration clauses in trust instruments,327
it would appear that these clauses are common in Ontario.

There is a dearth of judicial authority on the effect of exoneration
clauses. However, the validity of such clauses would appear to depend on
how broadly they are drawn and the conduct to which they are applied.
Wide clauses that purport to relieve a personal representative from liability
for all losses, regardless of the degree of fault, would be pronounced invalid
as fundamentally incompatible with the fiduciary nature of the office.328 In
several nineteenth century Scottish cases329— which were approved in Re

327

Trusts Report, supra, note 3, at 39.

328 Waters, supra, note 43, at 756-57.

329 Knox v. Mackinnon (1888), 13 App. Cas. 753 (H.L.); Carruthers v. Carruthers, [1896] A.C.
659 (H.L.); and Wyman v. Paterson, [1900] A.C. 271 (H.L.).

103

Poche,m a 1983 decision of the Alberta Surrogate Court — the House of
Lords held that an exoneration clause was ineffective to relieve a trustee
from liability for loss resulting from "gross negligence" or conduct inconsis-
tent with good faith. However, it has been suggested that, to the extent that
the conduct in question may be characterized simply as negligence, as distinct
from "gross, negligence", an exoneration clause may be valid.331

In the Report on the Law of Trusts, we considered the exoneration of
trustees by the terms of the trust instrument.332 In particular, we expressed
concern about the ability of a trust instrument to exonerate a trustee from
liability for negligence. We stated that we saw no reason that would justify
shifting the risk of loss due to negligence to the beneficiaries. We observed
that a professional trustee should be carrying insurance, and a non-profes-
sional trustee who is so unsure of his competence that he believes that
such safeguards are required should not accept the office. In light of our
recommendation to retain the judicial relieving power, we questioned the
desirability of a clause in the trust instrument exonerating trustees from
liability for negligence.333

In the Trusts Report, we recommended that no term in a trust instru-
ment, or in an oral declaration of trust, should be valid to the extent that it
purports to exonerate trustees from liability for failure to exercise the degree
of care, diligence, and skill that a person of ordinary prudence would exercise
in dealing with the property of another person.334 Following from our recom-
mendation in favour of requiring a higher standard of care for professional
trustees, we recommended further that no term in a trust instrument, or in
an oral declaration of trust, should be valid to the extent that it purports to
exclude or lower the standard of knowledge or skill required by trustees who
in fact possess, or who because of their profession, business, or calling ought
to possess, a particular level of knowledge or skill which in all circumstances
is relevant to the administration of the trust.335

In our view, these proposals should apply as well to estate trustees, and
we so recommend.

330
331

332
333
334
335

(1983), 50 A.R. 264, 6 D.L.R. (4th) 40 (obiter dictum).

Cullity, "Trustees' Duties, Powers and Discretions — Exercise of Discretionary Powers", in
Special Lectures of the Law Society of Upper Canada[:] Recent Developments in Estate Planning
and Administration (1980) 13, at 20. But see Waters, supra, note 43, at 756-57, who states
that exoneration clauses are valid, but argues that courts would interpret clauses purporting
to exclude liability for negligence as not having that intention.

Supra, note 3, at 39-42.

Ibid., at 40.

Ibid, at 41-42, and Draft Trustee Bill, s. 7(a).

Ibid, at 42, and Draft Trustee Bill, s. 7(b).

104

5. COMPENSATION AND REIMBURSEMENT

(a) Introduction

Compensation is paid to personal representatives for the time, efforts,
and care expended on the activities of the estate. The right of a personal
representative to compensation may arise from various sources. A right is
conferred under section 61 of the Trustee Act. A provision in the will may
fix compensation, or a personal representative may make an agreement
respecting compensation with the deceased or the beneficiaries.

Compensation is to be distinguished from moneys paid to reimburse a
personal representative for expenses incurred in the administration of the
estate. In the discussion that follows, we focus on issues relating to the
compensation of estate trustees. At its conclusion, reimbursement will be
considered.

In the Report on the Law of Trusts,336 we proposed recommendations to
establish a general framework governing the compensation of trustees. We
believe that these proposals are apposite in this context as well, and we
therefore recommend that the relevant provisions of the draft Trustee Act
should apply to estate trustees. In view of the substance of these recommen-
dations, we see little purpose in reiterating the discussion that appears
in the Trusts Report. Except for our recommendation to allow interim
compensation or "pre-taking" of compensation by trustees, our recommen-
dations would consolidate and rationalize the existing provisions of the
Trustee Act bearing upon the compensation of trustees and personal repre-
sentatives. The recommendation to permit interim compensation under
certain controls, which may be more controversial, is fully explained in the
Trusts Report.

Rather than recapitulating our discussion of compensation, we prefer
to set out the relevant provisions of the draft Trustee Act. Sections 71-73
provide as follows:

71. — (1) Trustees are entitled to such fair and reasonable compensation for
their work and time spent on the trust as a court of competent jurisdiction on
application or on the passing of accounts may award.

(2) Trustees who possess or because of their profession, business or calling
have professional skills and have rendered necessary professional services to
the trust, apart from their duties and powers as trustees, are entitled to such
additional compensation for such services as a court of competent jurisdiction
may award.

72. — (1) Subject to subsections (2) and (3), and any regulation made under
section 73, trustees may, from time to time during the administration of the
trust, pay to themselves or any of them from the assets of the trust such sum as

336 Ibid, at 255-61. See, generally, Hull and Cullity, supra, note 1, at 384-95.

105

in their opinion is fair and reasonable compensation for their work and time
spent on the trust during the period of time to which the payment relates.

(2) Trustees who take compensation under subsection (1) must,

(a) at the time of the taking give notice to the beneficiaries of the sum
taken and an account of the services rendered; and

(b) on an application or on the passing of accounts, satisfy a court having
jurisdiction that the sum taken was fair and reasonable.

(3) Where a court of competent jurisdiction determines that the sum taken
as compensation under subsection (1),

(a) was fraudulently taken, the court shall order it to be returned to the
trust, and may deny any compensation to the trustees;

(b) was not fair and reasonable, the court shall determine what is fair
and reasonable and order the difference between the sum taken and
the sum fixed by the court be returned with interest to the trust.

(4) In any application or passing of accounts under this section, a court of
competent jurisdiction may make any order as to costs or otherwise as the court
considers proper in the circumstances.

73. The Lieutenant Governor in Council may make regulations,

(a) prescribing guidelines respecting the sums payable as compensation
to trustees; and

(b) respecting the taking of compensation under section 72.

As we have indicated, these provisions constitute only a very general
framework for the granting of compensation by a court of competent jurisdic-
tion. They establish the entitlement of trustees to compensation, including
interim compensation, and declare that the standard governing a judicial
award is that it must be "fair and reasonable". However, with respect to
estate trustees, there are several other important issues relating to compen-
sation that require resolution, which is apparent from an examination of
the present law respecting personal representatives. It is to these specific
questions that we now turn.

(b) Method of Calculating Compensation

Section 61(1) of the Trustee Act provides that a personal representative
"is entitled to such fair and reasonable allowance for his care, pains and
trouble, and his time expended in and about the estate as may be allowed
by a judge". This articulates a very general criterion that, by itself, offers
little direction to the courts charged with the responsibility of determining
the amount of compensation. Their task has been eased by the development
of factors to guide this determination, and the practice of relying on the

106

application of certain percentages to the items in the estate accounts, as
explained below.

The classic statement of the relevant factors, which has been continu-
ously applied in Canada,337 appeared in Re Toronto General Trusts Corp. and
Central Ontario R. W. Co. :338

[T]he following circumstances appear proper to be taken into consideration in
fixing the amount of compensation: (1) the magnitude of the trust; (2) the care
and responsibility springing therefrom; (3) the time occupied in performing its
duties; (4) the skill and ability displayed; (5) the success which has attended its
administration.

While this statement sets out the position in law, in practice the amount
of compensation is determined by the application of percentages to
the income and capital receipts and disbursements that appear in the
accounts. In Ontario, the following "usual" percentages have been
recognized:339

(a) income receipts — 2!/2%; income disbursements — 2Vi%

(b) capital receipts — 2Vi%\ capital disbursements — 2Vi%

While these percentages have been accepted by the courts as a useful
guide, it must be emphasized that they are not required to be applied.
Their purpose is to facilitate the determination of a "fair and reasonable
allowance". Reliance is to be placed on the percentages only insofar as they
can be applied to achieve this result.340

Compensation calculated on the basis of the receipts and disburse-
ments of items of capital and income may be supplemented by an additional
management fee, which is a "usual" percentage per year of the property
being administered. The theoretical justification for the fee is that, in
some cases, the application of the "usual" percentages to receipts and
disbursements does not produce adequate compensation for administration

337 Re Sproule Estate (1979), 13 A.R. 420, at 424, 95 D.L.R. (3d) 458, at 461 (S.C. App. Div.).

338 (1905), 6 O.W.R. 350 (Weekly Ct.), at 354.

339 Re Cohen (1977), 1 E.T.R. 80 (Ont. Surr. Ct.).

340 Re Atkinson, [1952] O.R. 685, [1952] 3 D.L.R. 609(C.A.), aff d sub. nom. National Trust Co.
v. Public Trustee, [1953] 2 S.C.R. 41, [1953] 3 D.L.R. 497; Re Sproule Estate, supra, note
337; Re Jones (1973), 1 E.T.R. 88, at 91 (Ont. Surr. Ct.); and to Welbourn (1979), 96 D.L.R.
(3d) 76, [1979] 3 W.W.R. 113 (Alta. Surr. Ct.).

107

of the estate.341 In particular, disbursements made in investing the capital
funds of the estate and liquidation of such investments do not attract
compensation.342

The attitude of the courts to allowing a management fee in addition to
the other "usual" percentages is unclear. There are statements that such a
fee may be justified in exceptional circumstances;343 yet it appears that, as a
matter of practice, a management fee is awarded unless special circum-
stances render it inappropriate.344

Subject to a single reservation, we believe that the present method of
calculating compensation for personal representatives is satisfactory, and
should continue to apply to estate trustees. We are in accord with the
fundamental principles developed by the courts, which allow for the applica-
tion of percentages only insofar as they represent fair and reasonable com-
pensation in the circumstances of the individual case, according to the
statutory standard.

It will be necessary periodically to review, and if appropriate, to adjust
the "usual" percentages. Such adjustments may involve various refinements.
Differential rates may be established for corporate and individual estate
trustees; sliding scales may be introduced; care and management fees may
be refined. On the whole, we regard modifications of this nature essentially
as matters of detail, which should not be incorporated in a statute, but left
to regulation, which can be more easily amended to respond to changing
circumstances.

We therefore recommend that, as a guide to a court in determining the
"fair and reasonable compensation" to which an estate trustee is entitled
pursuant to section 71 of the proposed Trustee Act, regulations made under
the authority of section 73 of the proposed Act should prescribe the "usual"
percentages. We further recommend the establishment of a broadly-based
committee, representing all members of the community affected by this

341

342

343

The source of authority for a management fee can be found in Re Berkeley's Trusts (1879),
8 P.R. 193 (Ch.), at 197, where Blake V.C. stated "that is not unreasonable to make some
allowance for services not covered by the commission awarded".

In Re Berkeley's Trusts, supra, note 341, at 197, Blake V.C. said that trustees are not entitled
to commission for the investment or reinvestment of the funds of the estate because it
would encourage a continued changing of the investments, which may be most injurious to
the estate. See, also, Neilson v. National Trust Co., [1954] S.C.R. 88, where the court
approved this rule, but suggested that the enhancement of the value of the estate by
continual reinvestment is a factor to be considered when fixing a management fee.

Re Kennedy, [1944] O.W.N. 734 (H.C.J.); Re Sproule Estate, supra, note 337; and Widdifield,
supra, note 102, at 321.

344 Widdifield, supra, note 102, at 320, and Hull and Cullity, supra, note 1, at 393-94.

108

matter, to advise the Attorney General as to what percentages are appro-
priate. Regulations should be adopted after this committee reports to the
Attorney General.

In Ontario, the statutory right to compensation under section 61 of
the Trustee Act does not arise where the amount of the allowance to the
personal representative is fixed in the will.345 In such a case, the personal
representative is entitled to precisely the amount established by the
will.346 In addition, where a legacy is given to an executor, there is a presump-
tion that it is intended to be given in lieu of compensation; if the presumption
can be rebutted, and it can be shown that the legacy was given to the executor
independently of that office, he can apply for compensation under the Trustee
Act.347

Where a clause in a will fixes compensation, it applies only to the named
executors. If successor executors are appointed subsequently, they are not
limited by a provision of this kind and, in the absence of a contrary provision
in the will, may seek compensation under the statutory authority.348 More-
over, where the persons are appointed both executors and trustees, the will
may stipulate that their compensation is fixed only in their capacity as
trustees, in which case, they may apply for compensation in their capacity
as executors.

If a named executor is unwilling to act for the amount of compensation
fixed in the will, he may make a contractual agreement with the beneficiaries
for further remuneration. We shall discuss this alternative in due course.349
Alternatively, he may renounce the office, in which case the court generally
will have jurisdiction to fix allowances for the personal representatives who
are substituted. There is also a dictum stating that, in order to prevent
damage to the estate, the court has jurisdiction to award compensation to
an executor under the statute on condition that he relinquish the compensa-
tion that is fixed in the will, provided that an application is made before
probate and there is clear evidence of the inadequacy of the compensation

* ~ Section 61(5) of the Trustee Act, supra, note 32, provides that "[njothing in this section
applies where the allowance is fixed by the instrument creating the trust".

"[R]egardless of what responsibilities he may have discharged, or the extent of the duties
performed, he is entitled to the amounts fixed, no more and no less": Hull and Cullity,
supra, note 1, at 385. See Re Anderson (1985), 53 O.R. (2d) 36 (Surr. Ct.).

347

348

349

Hull and Cullity, supra, note 1, at 385-86, and Widdifield, supra, note 102, at 311-16.

Re Robertson, [1949] O.R. 427, [1949] 4 D.L.R. 319 (H.C.J.) (subsequent reference is to
O.R.).

Infra, this ch., sec. 5(d)(i).

109

fixed in the will.350 While this statement was cited with approval in a single
case,351 it has never been applied or discussed since in a reported decision.

In our view, the present law respecting provision for compensation
raises a basic issue concerning whether, and the extent to which, the will
should be determinative, foreclosing challenge and judicial review. This
fundamental issue involves two questions, which examine the issue from
different perspectives. The first question is whether an estate trustee named
in the will should continue to be bound by the compensation fixed in the
will, notwithstanding that the amount is inappropriately low. The second
question is whether the estate trustee named in the will should continue to
be able to rely on the provision in the will.

With respect to the first question, it is not difficult to imagine circum-
stances in which the prescribed compensation may be inadequate. For exam-
ple, because of a lapse of time and the effect of inflation between the date
of making of the will and the death of the testator, the provision in the will
may have become insufficient; the administration of the estate may be more
complex than anticipated at the date of the making of the will; the will may
provide for small or no compensation on the basis that the estate trustee
was to obtain another benefit under the will, and that benefit may prove to
be smaller than expected or non-existent for some reason; or the will may
simply provide inadequate compensation for the estate trustee. While, in
practice, such a provision can be avoided by a contractual arrangement
with beneficiaries or by renouncing and having substitute estate trustees
appointed, these methods are not entirely satisfactory. It may be impossible
for the estate trustee to make a suitable contractual arrangement with
beneficiaries of the estate, and the persons named as estate trustees may be
the most appropriate persons to assume that responsibility, so that it may
not be in the best interests of the estate for them to renounce and for others
to be substituted. Finally, we should emphasize that the dictum allowing the
court to award compensation under the statute if the estate trustee
renounces his claim under the will is not clearly established.

The other provinces have taken various approaches to this problem.
Like Ontario, Alberta,352 British Columbia,353 New Brunswick354 and Sas-
katchewan355 provide that the statutory jurisdiction of the court to allow
compensation is removed where the compensation is fixed by the will. By

350 Williams v. Roy (1885), 9 O.R. 534 (Ch.), at 539, per Boyd C.

351 Re Robertson, supra, note 348, at 433-34.

352 Trustee Act, R.S.A. 1980, c. T-10, s. 44.

353 Trustee Act, R.S.B.C. I960, c. 398, s. 91.

354 Trustee Act, R.S.N. B. 1973, c. T-15, s. 38(4).

355 The Trustee Act, R.S.S. 1978, c. T-23, s. 83.

110

contrast, legislation in Newfoundland356 and Nova Scotia357 does allow a
personal representative to renounce his claim to compensation provided in
the will. Section 54 of the Newfoundland Trustee Act provides:

54. Where any provision shall be made by any will for specific compensation
to an executor, or the deed or other instrument creating the trust makes
provision for compensation to the trustee, the same shall be deemed a full
satisfaction for his services in lieu of any compensation as mentioned in Section
53 or his share thereof, unless such executor or trustee shall, by a declaration
under his hand, filed in the said court, renounce all claim to such specific legacy
or compensation so provided. Such declaration shall be filed before probate or
administration taken, or the acceptance of the office of trustee.

Section 77 of the Nova Scotia Probate Act provides:

77. When any provision is made by any will for specific compensation to an
executor, the same shall be deemed a full satisfaction for his services in lieu of
any commission, or his share thereof, unless such executor, within twelve months
from the date of probate, by declaration under his hand filed with the registrar,
renounces all claim to such specific compensation.

In 1976, Manitoba repealed a provision358 identical to section 61(5) of
the Ontario Act and replaced it with the following:359

90. — (5) Any agreement, instrument or document executed by a testator or
any person on his behalf fixing the amount of compensation or allowance that
may be paid to a trustee, guardian or personal representative with respect to
the administration of the estate of the testator, is not valid unless it is approved
by a judge of a Surrogate Court.

It seems that, while the Newfoundland and Nova Scotia provisions
deal with the situation where the personal representative wants to obtain
compensation under the statutory jurisdiction, rather than that provided in
the will, the Manitoba provision addresses circumstances where the personal
representative wants to obtain the compensation stipulated in the will.

We believe that the existing law in Ontario should be altered. By offering
estate trustees a choice between accepting the compensation provided in
the will or renouncing their office, it demonstrates a rigidity and insensitivity

356 The Trustee Act, R.S.Nfld. 1970, c. 380.

357 Probate Act, R.S.N.S. 1989, c. 359, s. 77.

358 The Trustee Act, R.S.M. 1970, c. T160, s. 90(5), as en. by S.M. 1976, c. 49, s. 1.

359 See now R.S.M. 1987, c. T160, s. 90(5). Section 61(5) of the Ontario Trustee Act, supra,
note 32, provides that "[njothing in this section applies where the allowance is fixed by the
instrument creating the trust".

Ill

that is potentially unfair both to estate trustees and to estates and beneficiar-
ies. We think it preferable to allow an estate trustee to waive the compensa-
tion stipulated in the will and to rely on the statutory jurisdiction of the
court to award compensation subject, however, to the approval of the court.

In these circumstances, judicial sanction is critical as a prophylactic
measure. The estate trustee is seeking remuneration, despite the fact that
the matter of compensation has been addressed by the will. There should
be some assurance that the intentions of the testator are not unreasonably
and unjustifiably frustrated. In our view, an estate trustee should be permit-
ted by the court to refuse the stipulated compensation and seek statutory
compensation only where she can demonstrate that, in the circumstances, it
would be unreasonable. We expect that an important factor would be
whether the provision in the will was inserted as a result of a bargain between
the estate trustee and deceased.

In conclusion, therefore, we recommend that, where the compensation
of an estate trustee is fixed by the will the estate trustee named in the will
should be entitled to apply to the court for an order permitting her to waive
her right to the compensation and to seek compensation under the court's
statutory jurisdiction. The court should be empowered to allow the estate
trustee to waive the compensation fixed by the will only where it appears
to the court that the compensation would be unreasonable in the
circumstances.

As we have indicated, the second issue respecting the effect of a provi-
sion in the will fixing compensation is whether estate trustees should be
absolutely entitled to take the compensation fixed in the will. Circumstances
may arise in which other persons would be affected by a compensation
clause, if such a clause were to entitle an estate trustee to obtain the amount
fixed. In chapter 4, we recommend that, in the case of an insolvent estate,
reasonable testamentary expenses and the costs of administration— which
would include compensation — should be a charge on the unencumbered
portion of the assets of the deceased.360 Compensation will therefore be paid
in priority to legacies.

If a compensation clause were to entitle an estate trustee to the amount
fixed, a testator could defeat her creditors by the simple expediency of
naming a person as estate trustee and providing for that person to receive
compensation sufficient to accomplish that goal. Another group of persons
whose interests may be unjustifiably compromised if a compensation clause
were to have this effect are persons who are found to be "dependants"
within the meaning of Part V of the Succession Law Reform Act, for they
would be able to have recourse to the estate only after the compensation
has been paid to the estate trustee.

360 Infra, ch. 4, sec. 2(c).

112

The answer to this problem can be found in our recommendations
respecting the nature of an estate trustee's compensation, which appear
later in this chapter. For reasons we shall explain, we recommend that,
where there is a deficiency of assets, the estate trustee's compensation should
be deemed to be an administrative expense and have priority over legacies
and other unsecured debts, to the extent that it does not exceed what would
be allowed as fair and reasonable compensation under the court's statutory
jurisdiction, and that any excess over that amount should be treated as a
legacy, and should be subject to the order of application of assets. We also
recommend that the excess should be paid in priority to other legacies,
subject to the Succession Law Reform Act.

Before turning to discuss issues relating to compensation fixed by agree-
ment, we wish to advert to a subsidiary issue respecting compensation fixed
by the will.

At present, the position of an executor who witnesses a will in which
his compensation is fixed is unclear. While no Ontario reported case
addresses this question, it would appear that section 12(1) of the Succession
Law Reform Act would render a clause fixing compensation void,361 unless
the executor, pursuant to section 12(3) satisfies the court that he has not
exercised any improper or undue influence upon the testator. In England,
compensation clauses in favour of executors who witness the will have
been held void as a consequence of the application of statutory provisions
equivalent to section 12(1) of the Ontario Act.362

The policy of section 12 of the Succession Law Reform Act is to ensure
that the testator is not subject to "improper or undue influence" in deciding
the disposition of his estate by persons who, by virtue of being chosen as
witnesses, presumably enjoy the trust and confidence of the testator. By
making any gift to them void, unless the court is satisfied that such influence
has not been exerted, overreaching, in theory, should be discouraged.

We believe that this policy is inappropriate insofar as it may apply
to all clauses fixing compensation. Circumstances may make it entirely
reasonable, and indeed sometimes necessary, for the executor to witness the
will, and we see no reason to nullify a clause fixing his compensation if it
otherwise conforms to the fair and reasonable standard that we have gener-
ally endorsed. Accordingly, we recommend that section 12(1) of the Succes-
sion Law Reform Act should be amended to read as follows:

361

362

Widdifield, supra, note 102, at 114, and Feeney, The Canadian Law of Wills: Probate (3rd
ed., 1987), Vol. 1, at 101, n. 193.

Re Barber (1886), 34 Ch. D. 77, 56 L.J. Ch. 216; Re Pooley (1888), 40 Ch. D. 1, [1886-90]
All E.R. Rep. 157 (C.A.); and Re Thorley [1891] 2 Ch. 613 (C.A.).

113

provision fixing the compensation of an estate trustee to the extent that such
compensation does not exceed the amount that would have been awarded by
the court under its statutory jurisdiction, is thereby given or made, the devise,
bequest or other disposition or appointment is void so far only as it concerns,

(a) the person so attesting,

(b) the spouse, or

but the person so attesting is a competent witness to prove the execution of the
will or its validity or invalidity.

Section 12(2) of the Succession Law Reform Act should be amended
along the same lines.

(d) Compensation Fixed by Agreement

(i) With the Beneficiaries

As we have indicated, a personal representative who is dissatisfied with
the compensation fixed in the will, or indeed whose compensation has not
been addressed in the will, may enter into an agreement with the beneficiar-
ies of the estate with respect to this matter. Subject to the general law of
contract, such an agreement will be binding on the beneficiaries who are
party to it.

What effect the agreement may have on the jurisdiction of the court to
order compensation under section 61(5) of the Trustee Act is unclear. There
is an isolated dictum stating that the statutory jurisdiction is ousted by a
contractual arrangement between a personal representative and the benefi-
ciaries of an estate.363 Opposed to it are cases in which courts take such an
arrangement into account in determining the allowance to be given to an
executor under the statutory jurisdiction.364 If, pursuant to the contractual
arrangement, the executor has obtained an amount equal to, or greater than,
that which would be allowed under the statutory jurisdiction, a court is most
unlikely to permit further compensation in the exercise of that jurisdiction.365
Where, however, the agreement was concerned only with part of his duties

363 Re Taylor, [1967] 2 O.R. 557 (Surr. Ct.), at 562. See, also, Re Cook (1974), 5 O.R. (2d) 388
(Surr. Ct.), at 395.

364 See Dart v. Dart (1915), 25 Man. R. 258, 23 D.L.R. 399 (Man. C.A.), where one reason
for refusal to allow remuneration was that the trustee was held to have agreed to act
gratuitously.

365 French v. Toronto General Trusts Co. (1923), 53 O.L.R. 336, [1921] 1 D.L.R. 288 (H.C. Div.).

114

personal representative, the court may exercise its statutory jurisdiction
award additional compensation.366

In our view, there are two matters that require attention: first, the
enforceability of these agreements should be made subject to certain prereq-
uisites; and second, the effect of these agreements on the statutory jurisdic-
tion to award compensation should be clarified.

Turning first to enforceability, we are of the view that these agreements
are useful. They would be binding and enforceable according to the princi-
ples of general contract law, subject to the recommendations that we made
in the Report on Amendment of the Law of Contract. However, we favour the
imposition of a formality requirement, namely that, in order for the agree-
ment to be binding on the estate trustee and the beneficiaries, it should be
written and should be signed by the estate trustee and the beneficiaries to
be bound.367

With respect to the effect of an agreement on the jurisdiction to allow
"fair and reasonable compensation", we recommend that it should not oust
the court's statutory jurisdiction, but should be taken into account in the
exercise of that jurisdiction. If, in the case of a solvent estate, all the benefi-
ciaries enter into an agreement giving the estate trustee greater compensa-
tion than otherwise would be allowed under the statutory jurisdiction, the
court ordinarily would allow this amount. However, if the estate is insolvent
and only some of the beneficiaries concluded an agreement that provided
for compensation greater than would be granted by the court under its
statutory jurisdiction, one would anticipate that a court would not allow this
amount because it would prejudice the creditors. Moreover, regardless of
whether the estate is solvent, where only some of the beneficiaries have
made an agreement providing for greater compensation, one would expect
a court not to follow the agreement in awarding compensation under its
statutory jurisdiction, for that would operate to the prejudice of the benefi-
ciaries who were not party to the agreement.368

Accordingly, we recommend that a contract between the estate trustee
and the beneficiaries of an estate regarding compensation should not oust
the jurisdiction of the court to allow compensation under section 71 of the

366 Re Anderson (1924), 55 O.L.R. 527 (H.C.), varied (1924), 56 O.L.R. 228 (C.A.).

Under general principles of contract law, an oral agreement between the estate trustee and
beneficiaries may be binding in some circumstances.

368

For example, an estate trustee may have made an agreement with 2 of 4 beneficiaries to
be paid $5,000. Only $3,000 would be ordered by the court in the exercise of its statutory
jurisdiction. The estate applies to the court for compensation under that jurisdiction in
order to establish a second basis for his compensation and to be authorized to take it from
the estate. This would obviate the necessity of seeking payment from the beneficiaries,
which perhaps may necessitate bringing actions, should they refuse to pay. In such a
situation, we envisage that the court would order that she recover $3,000. The estate trustee
would be obliged to seek the balance from the beneficiaries with whom she has contracted.

115

proposed Trustee Act, but the court should be empowered to consider the
agreement in exercising that jurisdiction.

(ii) With the Deceased

It would appear that, under the present law, effect will not be given
to an agreement between the deceased and the personal representative
concerning compensation, where it is not incorporated into the will. The
agreement is not binding on either the personal representative or the bene-
ficiary. Nor does it oust the jurisdiction of the court to allow compensation
under the Trustee Act?69

We are in substantial agreement with the present law. We believe that,
in order for an agreement respecting compensation to be effective, it should
be incorporated in the will in conformity with the general law respecting
wills.

We therefore recommend that any agreement between the deceased
and an estate trustee respecting compensation should not bind the estate
unless it is incorporated in the will.

(e) Nature of Compensation

Under the present law, there is uncertainty respecting the nature of
compensation that is to be paid to a personal representative, particularly
where the amount is fixed by a will. The specific issue is whether compensa-
tion should be treated as an ordinary legacy or an administrative expense.
The significance of this issue arises in circumstances where there is a defi-
ciency of assets. If compensation is considered to be an ordinary legacy, it
will abate with the other legacies; if treated as an administrative expense,
compensation will take priority over other unsecured debts of the estate,
and give the personal representative a charge upon the estate's assets to
secure payment.

While it is clear that compensation allowed to a personal representative
under the statutory jurisdiction is treated as an administrative expense,370
the position of compensation that is fixed in the will has not been firmly
established. In England, a provision in a will authorizing compensation to
personal representatives is treated as a legacy.371 In Canada, a different view
of this matter appears to have been taken.

Re Taylor, supra, note 363, and Re Cook, supra, note 363. For a discussion, see Hull,
"Agreements for Executors' and Trustees' Compensation" (1975), 2 E.T.Q. 249.

Harrison v. Patterson (1865), 11 Gr. 105 (Ch.), and Life Association of Scotland v.Walker
(1876), 24 Gr. 293 (Ch.).

371 Ellison v. Airey (1748), 27 E.R. 924. (L.C.).

116

As a matter of general policy, we question treating compensation fixed
in a will like a legacy. In our view, it appears absurd that an executor who
has been given compensation by a provision in the will should be in a worse
position in the event of a deficiency of assets than an executor in whose
favour there is no such provision; as we have indicated, in the case of the
latter, the law is clear that statutory compensation is to be treated as an
administrative expense. We believe that, to the extent that the stipulated
compensation is fair and reasonable, the estate trustee should be protected
in the event of a deficiency of assets. However, any excess of that amount
over what would otherwise be determined to be fair and reasonable should
not be regarded as compensation, but as a legacy.

Subject to a single reservation, we are of the view that the excess should
be treated as a special legacy, to be paid in priority to other legacies. Legatees
are mere volunteers, while the estate trustee is entrusted with an important
responsibility.

Our sole reservation concerns dependants under Part V of the Succes-
sion Law Reform Act. Under section 68(1) of the Act, the burden of any
provision for support ordered in favour of a dependant falls rateably upon
that part of the estate to which the jurisdiction of the court extends, unless
the court orders otherwise.372 If the compensation in excess of the statutory
jurisdiction were to be a legacy with priority over other legacies, the scheme
established in section 68(1) would seem to be undermined, for the burden
would no longer be borne rateably. We are of the view that this portion of
the compensation, like other legacies, should contribute to support rateably,
unless the court otherwise orders.

We therefore recommend that, where there is a provision in the will
fixing the compensation of the estate trustee named therein and there is a
deficiency of assets, the estate trustee's compensation should be deemed to
be an administrative expense and have priority over legacies and other
unsecured debts,373 to the extent that it does not exceed what would be
allowed as fair and reasonable compensation under the court's statutory
jurisdiction, and that any excess over that amount should be treated as a
legacy, and subject to the order of application of assets. Subject to section
68 of the Succession Law Reform Act, the excess should be paid in priority
to other legacies.

(f) Compensation of the Public Trustee

In the course of considering the issue of compensation generally, we
examined the basic legislative framework governing the compensation of the
Public Trustee. The Public Trustee has various responsibilities under several

372

Section 68(2) provides that "[tjhe court may order that the provision for support be made
out of and charged against the whole or any portion of the estate in such proportion and
in such manner as to the court seems proper".

373

For a discussion of priorities in the case of insolvent estates, see infra, ch. 4, sec. 2(c).

117

statutes,374 including the Crown Administration of Estates Act,315 which autho-
rizes the Public Trustee to apply for letters of administration in certain
circumstances.376

The Public Trustee Act371 addresses the issue of compensation in the
following terms:

8. — (1) The Public Trustee shall make the charges prescribed by the regula-
tions made under this Act for his services against every estate that comes to his
hand to be dealt with.

(2) All fees, charges, and expenses that would be allowed to a private trustee
shall be allowed to the Public Trustee and shall be collected and accounted for
in the manner prescribed by the regulations made under this Act.

(3) Notwithstanding this or any other Act, the Public Trustee may in connec-
tion with any estate or trust administered or managed by him make a reasonable
charge for any service performed by a member of the staff of his office where
the service is one for which a charge would be allowed as a disbursement against
the estate or trust if performed by a person retained, engaged or employed to
perform such service by a private trustee, and every such charge shall for the
purpose of such estate or trust be deemed to be a disbursement.

Section 13 of the Crown Administration of Estates Act addresses compen-
sation specifically in relation to the administration of estates. It provides as
follows:

13. The Public Trustee may deduct from the money received on account of
an estate all disbursements made by him in respect of inquiries that he made
before taking out letters of administration, as well as disbursements otherwise
made by him in respect of the estate, and a commission for his services not
exceeding 5 per cent of all moneys received by him as administrator.

In 1986, a surrogate court judge held that the commission claimed by
the Public Trustee was subject to review by a court in the exercise of its
jurisdiction under section 61(3) of the Trustee Act to ensure that the amount
of compensation is "a fair and reasonable allowance".378 In this case, the
court reduced the commission from five to four per cent.

374

See, for example, Charities Accounting Act, R.S.O. 1980, c. 65; Escheats Act, R.S.O. 1980,
c. 142; and Mental Hospitals Act, R.S.O. 1980, c. 263.

375 R.S.O. 1980, c. 105.

376

377
378

Section 2 provides that the Public Trustee may apply for letters of administration "[w]here
a person dies in Ontario intestate without leaving any known next of kin living in Ontario
or where the only next of kin are minors and there is no near relative in Ontario willing
and competent to apply for a grant of administration or to nominate some person to apply
for such a grant".

R.S.O. 1980, c. 422.

Re Brimicombe Estate (1986), 22 E.T.R. 1 (Ont. Surr. Ct.).

118

We are of the view that, where he is acting as an estate trustee, the
Public Trustee should be compensated according to the standards governing
other estate trustees. While the present law allows his commission to be
reduced, having regard to the "fair and reasonable" standard, it does not
permit it to exceed the five per cent maximum in the Crown Administration
of Estates Act. We consider that this is an arbitrary limit because there may
be estates that are so difficult and complicated that the commission that may
be realized will be wholly inadequate. We therefore recommend that the
Public Trustee should be compensated for acting as an estate trustee on the
same basis as private estate trustees, and that the five per cent maximum
set out in section 13 of the Crown Administration of Estates Act should be
abolished.

(g) Reimbursement of Expenses

Like a trustee, a personal representative may reimburse himself out of
the assets of the estate for all expenses that he has properly incurred in the
course of discharging his responsibilities. This right exists independently of
statute,379 and has been partially codified by section 33 of the Trustee Act,
which provides, in part, that a trustee "may reimburse himself or pay or
discharge out of the trust property all expenses incurred in or about the
execution of his trust or powers". In the Trusts Report, we took the view
that the power of reimbursement was a necessary administrative power that
should be included in our proposed statutory list. We recommended that
the revised Trustee Act should contain a provision to the effect that trustees
may reimburse themselves or pay or discharge out of trust property all
expenses incurred in or about the administration of the trust.380

We are of the view that estate trustees should enjoy this power as well,
and we so recommend.

Where there is more than one estate trustee, we believe that entitlement
to reimbursement should depend on subsequent approval of the act in
question by the estate trustees where they have not been party to that act.
Earlier, we recommended that, like ordinary trustees, estate trustees should
be required to act unanimously in order to bind the estate. If reimbursement
were available to an estate trustee whose act has not been approved by all
the other estate trustees, this principle would be circumvented, insofar
as the act, by definition, would have been unauthorized. Accordingly, we
recommend that, if one or more of several estate trustees enter into a
contract or exercise an authority or power without the concurrence of the
other estate trustees, such one or more estate trustees should not be entitled
to reimbursement from estate assets for sums expended unless the act is
subsequently ratified by all the estate trustees.

Williams, Mortimer and Sunnucks, supra, note 75, at 705.
380 Trusts Report, supra, note 3, at 248, and Draft Trustee Bill, s. 35(p).

119

6. SUSPENSION AND TERMINATION OF THE OFFICE

(a) Introduction

In the normal situation, estate trustees will discharge their various
duties and will wish, upon their completion, to end their responsibility
formally. Under the present law, personal representatives usually circulate
accounts and obtain releases from all the beneficiaries who are legally
competent, or pass their accounts with the Ontario Court (General
Division).

However, in extraordinary circumstances, prior to the completion of his
duties, the responsibility of a personal representative may cease, either
temporarily, by suspension, or permanently, as a consequence of death,
retirement, or removal from office. We have already discussed transmission
of the office when one of these latter events occurs.381

In this section, we shall not examine the termination of office in the
normal situation. This matter will be addressed in some detail in chapter 6,
where we discuss the approval or "passing" of accounts.382 We shall confine
our discussion to the rare situation where the performance of the office of
estate trustee is interrupted or terminated.

(b) Suspension of the Office ^

Under the present law, a personal representative in effect may be
suspended following the grant of letters probate or letters of administration
only in the case of incapacity.383 In such a case, it was the practice of
the ecclesiastical courts, where an executor or administrator "became of
unsound mind ... to grant administration for his use and benefit until he
should become of sound mind".384 This grant was known as administration
durante coporis aut animi vitio. The following passage describes the practice
in Ontario:385

181

Supra, this ch., sec. 2(c).

382 Infra, ch. 6, sec. 2(d).

There are other examples of grants of administration where the office of personal represen-
tative is temporarily assumed by a person not otherwise entitled thereto: see, generally,
Hull and Cullity, supra, note 1, at 271-77. However, in our view, these do not constitute
suspension of the office because the office has not been previously granted to the person
entitled. Such is the case, for example, where administration is granted to a person during
the absence from Ontario of the next-of-kin entitled to administration {Estates Act, supra,
note 35, s. 39) or where administration is granted to a person because the sole executor or
the person entitled to letters of administration is a minor {ibid., s. 51(1)).

384 Hull and Cullity, supra, note 1, at 277.

IOC

Ibid., at 278-79 (footnotes deleted). The practice is very similar in England: see Williams,
Mortimer and Sunnucks, supra, note 75, at 337.

120

When a sole executor or administrator becomes incapacitated through
mental or physical illness the grant to him can be impounded'386' and adminis-
tration granted to his committee, if any, or to some other person interested in
the estate.

When several executors have proved the will, and one becomes incapable
of acting, the Court, on the application of the others, will revoke the grant
and make a new grant of probate to the applicants, reserving power to the
incapacitated executor to join in the probate if and when he recovers. Similarly,
when a grant has been made to two or more administrators and one becomes
incapacitated the Court on the application of the others will revoke the grant
and make a new grant to the applicants.

We do not consider it necessary or desirable to continue the existing
rules respecting suspension of the office of personal representative. Continu-
ing to allow courts the power to suspend the office of estate trustee would
distinguish the office from ordinary trustees. Under the present law there is
no jurisdiction in the court to suspend a trustee, and we did not recommend
that such a power be conferred in the Report on the Law of Trusts. The
problem of supervening incapacity, to which the power of suspension
responds, can be addressed effectively by other means. Pursuant to recom-
mendations that we shall shortly discuss, the estate trustee may retire or be
removed.387 In light of these considerations, we recommend that the concept
of the suspension of the office of estate trustee should be abolished and
that, in the case of incapacity, the estate trustee should be subject to the
same rules as an ordinary trustee.

(i) Retirement

In Ontario, a personal representative cannot retire from office in the
absence of an order of the court.388 There are two sources of jurisdiction for
courts to sanction retirement. Courts have an inherent jurisdiction to revoke
the grant to a personal representative, and may do so on the basis that the

ID/:

Where a grant is "impounded", it is not revoked, but kept in the court office until the
recovery of the person who has become incapacitated. Where, in the case of a sole incapaci-
tated personal representative, the grant of administration durante corporis aut animi vitio
is made to a committee, the original grant is not impounded: see Re Cooke, [1895] P. 68.

387

388

Another alternative is for the court to use its equitable jurisdiction to appoint a receiver
appointed and to grant injunction to restrain the estate trustee from intermeddling with
the estate.

By virtue of s. 2(1) of the Trustee Act, supra, note 32, a trustee may retire without a court
order. Section 2(2) states that the section does not apply to executors or administrators.
Section 3(1) of the Trustee Act provides that a trustee who desires to be discharged from
any of the trusts or powers conferred on her may be replaced by another trustee: see
discussion, infra, this ch., sec. 6(c)(ii).

121

grantee wishes to be relieved of his duties.389 It seems that courts will exercise
this power only in "special circumstances"390 and it is unclear whether this
jurisdiction will ever be exercised to relieve an executor, as distinct from an
administrator, from his duties.391

Courts also have a statutory jurisdiction to allow a personal representa-
tive to leave her office. Section 37(3) of the Trustee Act provides that an
order for the removal of a personal representative may be made "upon the
application of any executor or administrator desiring to be relieved from the
duties of the office". It may be expected that the courts would be loath
to permit the retirement of executors, particularly where minors or other
incapacitated individuals are involved. While the cases bearing on this matter
concern trustees, rather than executors, the approach taken to trustees by the
courts would seem to be applicable to both offices. In restricting retirement,
courts emphasize the fact that the trustee has been selected by the deceased,
and where corporate or professional trustees have been appointed, courts
tend to underline the confidence placed in them by the deceased respecting
their continuity, impartiality and competence.392

When we considered this issue in the Trusts Report, we took the view
that section 2 of the present Trustee Act, which governs retirement by trustees
was generally satisfactory, but was in need of minor improvements.393 To
deal with this matter, the following statutory provision was proposed:

25. — (1) Where a trustee declares in writing that he desires to be discharged
from the trust or a part of the trust and if after his discharge there will be either
a trust company or two or more individuals to act as trustees in his place, then,
if his co-trustees and such other person, if any, as is empowered to appoint
trustees, consent by deed to his discharge and to the vesting of the trust property
in his co-trustees alone, he shall be deemed to have retired from the trust and
is discharged therefrom without any new trustee being appointed in his place.

(2) A trust instrument must not withhold from a trustee the right to retire
from the trust or a part of the trust and must not make the requirements for
retirement more onerous than are provided in subsection (1), and any such
provisions are invalid for all purposes.

It should be noted that this provision does not allow non-judicial retire-
ment where only one individual trustee would remain in office. In our

•jog

Williams, Mortimer and Sunnucks, supra, note 75, at 337.
390 Ibid.

"30 1

While no distinction is drawn between administrators and executors in Williams, Mortimer
and Sunnucks, supra, note 75, at 337, n. 43, the cases cited in support of the proposition
that grants may be revoked "occasionally" concern only administrators.

392 Re Thomas, unreported (June 11, 1980, Ont. H.C.J.), and Re Heintzman (1981), 31 O.R.
(2d) 724 (H.C.J. ).

393 Trusts Report, supra, note 3, at 88-92.

122

view, the consent of the court should be sought for the continuation of an
individual as the only trustee in these circumstances. Under the revised
Trustee Act, this could be accomplished pursuant to the broad judicial power
to remove a trustee, which contains no statutory limitation with respect to
the minimum number of remaining trustees.394

The policy underlying the case law applying to trustees and the recom-
mendations in the Trusts Report is simply that no one should be compelled
to continue as a trustee if she desires to retire. It may be contended that the
position of an estate trustee differs from that of an ordinary trustee, insofar
as the administration of an estate is a finite responsibility, often of a short
duration, while a trust continues for an indefinite duration. Yet, the adminis-
tration of an estate may continue for a considerable period of time and, in
such circumstances, it may be appropriate for an estate trustee to retire.
Extending the recommendations in the Trusts Report to estate trustees
would not unduly impede the efficient administration of estates. These
recommendations are designed to avoid disruption of the ongoing trust:
following the retirement, there must be either a trust company or two other
individuals remaining in office, and retirement requires the consent of the
remaining trustees or any other person empowered to appoint trustees.

In order to ensure the equitable and efficient administration of the
estate upon the retirement of an estate trustee, it would appear necessary
to institute a procedure whereby persons interested in the estate could be
apprised of this change. Accordingly, we recommend that the provisions for
the retirement of trustees under the revised Trustee Act should apply to
estate trustees, provided that such retirement should not be effective until
after registration of a notice of retirement in a form prescribed by regulation
and surrender of the estate trustee certificate in the office of the Ontario
Court (General Division) from which the estate trustee certificate was issued
to the retiring estate trustee. Surrender of the estate trustee certificate
should be solely for the purpose of revoking the designation of the estate
trustee.

(ii) Removal

In the Report on the Law of Trusts, we discussed both judicial removal
of trustees and non-judicial removal of trustees,395 and we propose to con-
sider the position of estate trustees from both of these perspectives.

We turn first to judicial removal. Since 1890,396 the court has had
a statutory power to remove a personal representative. At present, this
jurisdiction is incorporated in section 37 of the Trustee Act. The basic effect

394 Ibid., at 118, and Draft Trustee Bill, s. 56.

395 Ibid, at 92-113.

396 The Law Courts Act, 1890, 59 Vict., c. 18, s. 4.

123

of this provision is to give the courts the same power to remove personal
representatives that they possess with respect to trustees pursuant to their
inherent and statutory jurisdiction.397 Section 37(1) provides that a personal
representative may be removed by the court "upon any ground upon which
the court may remove any other trustee". The general guidelines governing
the removal and replacement of both trustees and personal representatives
have remained constant for over a century,398 and have been applied in a
variety of circumstances, which are too numerous to enumerate.399

Non-judicial replacement or removal of a trustee may be effected pursu-
ant to section 3 of the Trustee Act, which provides as follows:

3. — (1) Where a trustee dies or remains out of Ontario for more than twelve
months, or desires to be discharged from all or any of the trusts or powers
reposed in or conferred on him, or refuses or is unfit to act therein, or is
incapable of acting therein, or has been convicted of an indictable offence or
is bankrupt or insolvent, the person nominated for the purpose of appointing
new trustees by the instrument, if any, creating the trust, or if there is no such
person, or no such person able and willing to act, the surviving or continuing
trustees or trustee for the time being, or the personal representatives of the last
surviving or continuing trustee, may by writing appoint another person or other
persons (whether or not being the persons exercising the power) to be a trustee
or trustees in the place of the trustee dying, remaining out of Ontario, desiring
to be discharged, refusing or being unfit or incapable.

(2) Until the appointment of new trustees, the personal representatives or
representative for the time being of a sole trustee, or where there were two or
more trustees, of the last surviving or continuing trustee, are or is capable of
exercising or performing any power or trust that was given to or capable of
being exercised by the sole or last surviving trustee.

For our purposes, it is important to note that the removal of a trustee
under section 3(1) can be accomplished only by the appointment of a replace-
ment trustee. At present, there is no statutory authority, either in the Trustee
Act or elsewhere, that authorizes the non-judicial removal of a trustee
without a substitute trustee being appointed in his place. We examined this
provision in considerable detail in the Trusts Report,400 and we do not
propose to recapitulate that lengthy discussion.

Under s. 5 of the Trustee Act, supra, note 32, the court may remove a trustee only where
it appoints a substitute trustee. It has been held that s. 5 does not apply to personal
representatives: see Re Weil, [1961] O.R. 751, 29 D.L.R. (2d) 308, rev'd [1961] O.R. 888,
30 D.L.R. (2d) 91 (C.A.).

398 See Letterstedt v. Broers (1884), 9 A.C. 371, at 385-87, and [1881-85] All E.R. Rep. 882, at
886-87, for the classic statement. For a discussion, see Waters, supra, note 43, at 682-87.

See, general]
54, at 59-60.

See, generally, Hull, "Removal of Trustees and Personal Representatives" (1982), 6 E.T.Q.

400 Trusts Report, supra, note 3, at 92-112.

124

Whether section 3 applies to personal representatives is unclear. The
legislative history is equivocal and, while the leading commentators have
not addressed the question directly, it would appear that their views are
inconsistent.401 However, there is a 1982 Ontario decision stating that "exec-
utors may only be removed from their office by the court pursuant to s. 37",402
which suggests that section 3 does not apply to personal representatives.

In the Report on the Law of Trusts, the Commission recommended the
enactment of several detailed statutory provisions respecting the non-judicial
removal of ordinary trustees.403 These are too lengthy and complex to be
reviewed in this report. However, it is important to note that the proposed
Trustee Act continues the non-judicial power of removal by appointment of
substitute trustees — albeit in a substantially amended and improved form —
and, in addition, creates a new power of non-judicial removal that is exercis-
able without the appointment of a substitute trustee.404

Our recommendations respecting the non-judicial removal of trustees
followed from our basic concern that the ongoing management of the trust
not be unnecessarily disrupted in circumstances where the removal of a
trustee is required. We took the view that judicial intervention in this area,
inevitably involving time and expense to the trust, should be discouraged,
and that non-judicial discharge of trustees should be encouraged. Conse-
quently, it was essential to make the mechanism for non-judicial removal
relatively simple and, where substitute trustees are to be appointed, provide
for the same assurances as to the validity of the appointment and the vesting
of trust property that are given by a court order. It was to these ends that
our proposals were directed.405

With respect to judicial removal, in the Trusts Reports we recom-
mended the continuation of the existing power subject, however, to amend-
ment in several respects. Since we took the view that resort should be had
to the judicial power only in exceptional circumstances, we recommended
that judicial removal should be possible only where it appears to the court
to be in the best interests of a trust and where it would be inexpedient,
difficult or impracticable without the assistance of the court. We proposed
that courts should be empowered to remove a trustee without appointing a

Widdifield,s«/?ra, note 102, at 415-16, assumes that s. 3 applies to personal representatives,
while Waters, supra, note 43, at 37, n. 21 assumes that it does not. Neither, however,
discusses the issue.

Re McLean, supra, note 47, at 171.

Trusts Report, supra, note 3, at 92-117, and Draft Trustee Bill, ss. 19-25. The Commission
also recommended that there should be a non-judicial power to appoint additional trustees,
which may be exercisable where no replacement is sought: ibid., at 115-17, and draft Trustee
Bill, s. 21.

404 Ibid., at 112-13 and Draft Trustee Bill, s. 25(3).

405 Ibid., at 85-86.

125

substitute trustee. This power would complement the non-judicial power of
removal without the appointment of a substitute trustee.406

We believe that the policy considerations underlying the recommenda-
tions that we made with respect to removal of trustees apply to personal
representatives. There can be little doubt that it is equally important to
ensure that, where the removal of estate trustees is warranted, it should be
conducted in a manner that does not disrupt the efficient and orderly
administration of the estate. We can discern no principled basis on which
to distinguish trustees from estate trustees. Consequently, we recommend
that the provisions of the proposed Trustee Act governing the non-judicial
and judicial removal of trustees should apply to estate trustees.

406 Ibid., at 117-20, and Draft Trustee Bill, s. 56(1).

CHAPTER 3

THE BENEFICIARY

1. INTRODUCTION

In this chapter, we shift our focus from estate trustees to beneficiaries.
The discussion will be confined to certain discrete problems in the present
law, and thus will examine only a very small part of the massive body of law
concerning estate beneficiaries. The chapter is divided into two parts. In the
first, we consider the identification of beneficiaries, and discuss the rules
governing survivorship, missing beneficiaries and the presumption of death,
and beneficiaries whose existence must be ascertained.

In the second part, we discuss certain rules respecting bequests and
devises. It comprehends the following topics: legacies to persons who have
received inter vivos gifts from the deceased; legacies that are promised to a
person in return for services or work done for the deceased while the latter
was alive; conditions not to contest a will; the killing of a testator or intestate
by a beneficiary or heir; and the doctrine of lapse.

2. IDENTIFICATION OF BENEFICIARIES: DEAD, MISSING, AND
UNASCERTAINED BENEFICIARIES

The distribution of an estate in accordance with the will or the law
governing intestacy depends on finding the persons entitled to share in the
estate. In most cases, this will not pose a problem. Where, for example, the
will identifies the beneficiaries by name and they are immediately available,
it will be a simple task. In other circumstances, however, identifying benefi-
ciaries will be considerably more difficult. In this section, we shall consider
three such situations.

First, since succession to the property of a deceased depends upon a
beneficiary surviving the deceased, a problem arises where the testator or
intestate and the possible beneficiary are both dead, and it is unclear who
has died first.

The second situation is where a beneficiary, whose existence was once
known, is missing and there is no direct proof that she has died, so that the
existence of the beneficiary at the time of the death of the testator or
intestate is uncertain.

[127]

128

The third situation is where the estate is to be distributed to a class of
persons, and the personal representative must ascertain whether that class
does in fact exist, and, if so, who are its members.

(a) Survivorship

Questions of survivorship may arise either where two or more persons
die in a common disaster or where they die of independent causes in circum-
stances where the order of death cannot be determined. The common law
addressed only the first situation.

At common law, persons who died in a common disaster were known
as "commorientes". The issue of survivorship among commorientes was
dealt with by the general procedural rule that claimants must prove the facts
necessary to establish their claims. If no beneficiary could establish the order
of death in support of the claim, the property of the deceased would be
awarded to his next-of-kin. Depending on the particular circumstances, the
common law could lead to unsatisfactory results: the failure of a claimant
to prove that the deaths had occurred in a certain order could lead to the
property of a testator being distributed in a manner that she would certainly
have opposed.1

Until 1977, in Ontario the inadequacy of the common law was addressed
by The Survivorship Act,2 which created a statutory presumption that, where
two persons die at the same time or in circumstances rendering it uncertain
which of them survived the other, the deaths occurred in the order of

This can be illustrated by the following example:

T by will leaves his entire estate to X, but, if X should predecease him, to Y. T and
X die in a common accident. A is the beneficiary of X's estate. Z is T's next of kin who
would inherit T's estate on intestacy.

In this case, assuming that the order of T's and X's deaths cannot be established, A
(who claims through X) will be unable to prove that X survived T, and will therefore not
be entitled to inherit. Y has a similar problem, since his claim depends upon X having
predeceased T, a fact that Y will be unable to prove. The common law would award the
property to T's next of kin, Z. At common law, the next of kin of a deceased person had
the. prima facie right to inherit his property, which prevailed unless the beneficiary of a valid
will or someone claiming through him could affirmatively prove that he had a better right.
Neither A nor Y can provide the affirmative proof needed to displace the rights of the next
of kin.

See Hull and Cullity, Macdonell, Sheard and Hull on Probate Practice (3d ed., 1981), at
180-81.

R.S.O. 1970, c. 454. This statute was originally enacted as The Commorientes Act, 1940,
S.O. 1940, c. 4, and was based on the English Law of Property Act 1925, 15 & 16 Geo. 5,
c. 20, s. 184 (U.K.). It was repealed in 1977 by The Succession Law Reform Act, 1977, S.O.
1977, c. 40, s. 62(1). For a general discussion of the historical background, see Feeney, The
Canadian Law of Wills (3d ed., 1987), Vol. 2, at 356-57.

129

seniority; and, hence, the younger was deemed to have survived the older.3
The Act provided that there was an exception to this rule where the will
contained provisions for the disposition of property in case the beneficiary
did not survive the testator or died at the same time or in circumstances
where the order of death was uncertain; the disposition in the will would
take effect as if the beneficiary had not survived the testator or died at the
same time or in circumstances in which it was uncertain who survived.4 The
seniority rule was also subject to certain provisions of The Insurance Act,
which stipulated that, subject to a contract or declaration otherwise, where
the beneficiary of a life insurance policy and the person whose life was
insured died at the same time or in circumstances rendering it uncertain
which of them survived the other, the insurance money was to be paid as if
the beneficiary had predeceased the person whose life was insured.5

While the seniority rule was clear and easy to administer, it was arbitrary
and could produce capricious, if not harsh, results. The rule would disinherit
the living relatives or beneficiaries of the more senior of the commorientes,
and involved the complexity of double succession.6 In 1977, the seniority
rule was replaced by the rules that now appear as section 55 of the Succession
Law Reform Act,1 which provides as follows:

55. — (1) Where two or more persons die at the same time or in circumstances
rendering it uncertain which of them survived the other or others, the property
of each person, or any property of which he is competent to dispose, shall be
disposed of as if he had survived the other or others.

The Survivorship Act, supra, note 2, s. 1(1).

Ibid., s. 1(3).

Ibid., s. 1(2), as en. by S.O. 1972, c. 43, s. 1, referring to The Insurance Act, R.S.O. 1970,
c. 224, ss. 190 and 268 (see, now, Insurance Act, R.S.O. 1980, c. 218, ss. 192 and 272.) For
a discussion of the relationship between these provisions and The Survivorship Act, see Hull
and Cullity, supra, note 1, at 184, and the cases cited in n. 59.

This is illustrated by the following example:

H and W, husband and wife, both die intestate in a common accident. The survivor
would be entitled to inherit the other's estate. They have no children, but H's sister
S survives him and W's mother M survives her.

In this example, whichever spouse is younger is deemed to have survived the other,
and would therefore inherit the other's property. If H were younger than W, then H would
be deemed to have inherited all W's property; W's property (as well as H's property) would
therefore pass to H's sister, even though W's mother is living. If W were younger than H,
then H's property would pass through W's estate to his mother-in-law, even though H's
sister is living. These results are obviously unsatisfactory. The property of the older spouse
is subject to two successions, which is unnecessarily complicated. More importantly, the
property of the older spouse goes to the family of the younger spouse, instead of remaining
in the family of the former. In this example, the likelihood is that H would have preferred
his estate to pass to his sister S, and W would have preferred her estate to pass to her
mother M.

The Succession Law Reform Act, 1977, supra, note 2, ss. 61-63. See, now, Succession Law
Reform Act, R.S.O. 1980, c. 488, s. 55.

130

(2) Unless a contrary intention appears, where two or more persons hold
legal or equitable title to property as joint tenants, or with respect to a joint
account, with each other, and all of them die at the same time or in circumstances
rendering it uncertain which of them survived the other or others, each person
shall be deemed, for the purposes of subsection (1), to have held as tenant in
common with the other or with each of the others in that property.

(3) Where a will contains a provision for a substitute personal representative
operative if an executor designated in the will,

(a) dies before the testator;

(b) dies at the same time as the testator; or

and the designated executor dies at the same time as the testator or in circum-
stances rendering it uncertain which of them survived the other, then, for the
purpose of probate, the case for which the will provides shall be deemed to
have occurred.

(4) The proceeds of a policy of insurance shall be paid in accordance with
sections 192 and 272 of the Insurance Act and thereafter this Part applies to
their disposition.

It should be emphasized that, unlike the common law, which applied
only to persons who died in a common disaster, the present survivorship
rules apply as well to cases where two or more persons die of independent
causes at approximately the same time:8 the rules apply where persons die
"at the same time or in circumstances rendering it uncertain which of them
survived the other or others".

By providing that, where there is a question of survivorship, the property
of each person is to be disposed of as if she were the survivor, section 55(1)
responds to the major infirmity of the seniority rule — disinheriting the living
next-of-kin or beneficiaries of the more senior person. Nevertheless, we
consider the present rules to be unsatisfactory. Where, for example, a hus-
band and wife die intestate in a car accident within a very short time period,
but where the evidence establishes that the wife died immediately after her
husband, section 55(1) will be inapplicable. Persons claiming through the
wife will be able to establish the sequence of death; this will result in the
wife inheriting the husband's property, which, in turn, will subsequently
pass through her estate to the beneficiaries of her estate. Thus, the brief
period of actual survivorship will produce two quick successions. Where
both spouses have wills, this problem may be avoided by providing that a

Hickman v. Peacey, [1945] A.C. 304, at 314-15, [1945] 2 All E.R. 215 (H.L.) (per Viscount
Simon L.C.), and Re Lay Estates (1961), 32 D.L.R. (2d) 156, 36 W.W.R. 414 (Man. Q.B.).

131

beneficiary must survive a certain number of days as a condition of taking a
bequest or devise.

In our view, the problem of double succession would best be met if sec-
tion 55(1) were amended to follow the example of well-drafted wills, which
require a certain period of survival as a condition of inheritance. We believe
that a survival requirement of seven days is appropriate. This period is
preferable to that of fifteen days or thirty days, either of which often appears
in wills drafted by solicitors; since the effect of a survival requirement is to
place succession and the title of the estate trustee in doubt for the prescribed
period, we are loath to legislate uncertainty for more than a week.

We are also of the view that it should be made clear that the general
rule is applicable where two deaths occur independently of each other, and
it cannot be established that they occurred within seven days of each other.
Such a situation can arise where the date of death of either or both of the
two decedents is not known even approximately. Retaining the words "in
circumstances rendering it uncertain which of them survived the other or
others" will meet this situation. We believe, however, that the words "at the
same time" should be deleted from section 55(1), since the institution of the
seven day survival period would render them redundant.

Finally, we are of the view that the intention of the testator, as expressed
in her will, should prevail over the rules that we have proposed. This will
allow testators to provide for different periods of survival as they see fit.

In order to effect these changes, we recommend that section 55(1) of
the Succession Law Reform Act should be amended to read as follows:

55. — (1) Unless otherwise provided by will, where two or more persons die
in circumstances rendering it uncertain which of them survived the other or
others, or within seven days of each other, the property of each person, or any
property of which he is competent to dispose, shall be disposed of as if he had
survived the other or others.

Section 55(1) is the primary rule pertaining to survivorship. Subsections

(2) and (3) also deal with survivorship. The former concerns persons holding
title to property as joint tenants; it also deals with joint accounts. Subsection

(3) relates to the appointment of a substitute personal representative. We
suggest that the reasons in favour of a seven day survival requirement in
section 55(1) and the deletion of the phrase "at the same time" also apply
to these provisions. We therefore recommend that section 55(2) should be
amended to apply where all the joint tenants "die in circumstances rendering
it uncertain which of them survived the other, or others, or within seven
days of each other". The closing flush of section 55(3) should be amended
to apply when "the designated estate trustee and the testator die in circum-
stances rendering it uncertain which of them survived the other, or within
seven days of each other".

132

(b) Missing Beneficiaries — Proof of Death

In this section, we examine problems caused when a beneficiary, whose
existence was once known, is missing. Uncertainty about the whereabouts
of a beneficiary may raise the question whether she was alive at the death
of the testator or intestate, or at the time of any judicial determination
concerning her interest in the estate. In such cases, a court may be called
upon to declare a person to be presumed dead. A declaration of death will
affect the disposition of property to which the person would otherwise have
been entitled under the will or according to the law governing intestacy.

In the discussion that follows, we shall review the present substantive
and procedural law bearing upon this matter and the approach that has
been proposed by the Uniform Law Conference of Canada. We shall then
conclude with our recommendations for reform.

It should be emphasized that, although we are examining the matter of
missing persons by focussing on beneficiaries, the principles and procedures
that we shall discuss below are not so confined in their application. They
apply generally, and thus address the situation where the testator or intestate
has been missing, and a question arises whether that person is alive.

(i) Substantive Rules Respecting Declaration of Death

In most cases, the question whether a person has died does not arise;
nor do questions usually arise concerning the date of death. However,
difficulties do emerge where a person disappears, and there is no direct
proof that she has died.

Courts may make a declaration of death by either of two means.9 First,
a court may make such a declaration by drawing from the facts proven the
inference that the person in question has died. Second, a court may make
a declaration of death where the proof of certain facts gives rise to a
presumption of law that the person has died. After we explain finding a
death by inference, we will focus on the presumption of death because that
is the area in which reform is needed.

In certain cases, the circumstances surrounding the disappearance of a
person will justify the court making an immediate declaration of death
without the necessity of waiting a specified number of years between the
disappearance and the declaration. For a court to make such a declaration,
the circumstances of the disappearance would have to be such that a court
could infer that the death of the absentee was the probable explanation.10
While it will normally have to be shown that the absentee disappeared in

See, generally, Shepherd, "Presumption of Death in Ontario" (1977-78), 4 E.T.Q. 326.
10 See, for example, Re Kreutweiser and Taylor, [1946] O.W.N. 184 (Surr. Ct.).

133

the face of a "specific peril", such as a storm at sea, there have been cases
in which death has been inferred by a court in less dramatic circumstances.11

Where, however, a person disappears in circumstances that do not
suggest death, there is no basis upon which a court can draw an inference that
she has died, and consequently, it cannot make an immediate declaration. At
common law, even where persons who might be expected to have contact
with the absentee have not received any word of her, such an inference could
not be drawn on the basis of the evidence, although it may be reasonable to
do so after a certain period of time has elapsed. In such a case, the common
law requires a period of disappearance, during which there has to be no
indication of the existence of, or communication from, the missing person.
Upon the satisfaction of this requirement, the person wishing to prove the
death of the absentee is assisted by a presumption that the absentee is dead.

The common law presumption of death arises where the following two
conditions are met: (1) a person has been absent without explanation for
not less than seven years; and (2) fruitless inquiries have been made for her
among the persons who might have been expected to see or hear from her
and in the places where she might have been expected to be found.12 The
first condition requires an absence without explanation. A departure for a
perfectly good reason, such as to relocate in a different country or town, will
not begin the seven-year period,13 although a further lapse of time after
which the absentee cannot be traced, even in the absence of a specific event,
will start the period running.14 The second condition involves direct inquiries
of individuals, such as relatives, friends, or business associates, with whom
the absentee might have communicated, and general inquiries, usually by
advertisements in newspapers, in the places where the absentee was last
known to be or was likely to be. The extent of the investigation depends
upon the circumstances of the individual case.15

The presumption of death is not conclusive; it may be rebutted by
credible evidence that suggests that the absentee is still alive, or that there
is a good reason for her to keep her whereabouts secret. In the absence of
such evidence, a declaration of death will be made.

The common law presumption merely establishes the fact of death, and
does not imply that it occurred at any particular time. Moreover, at common

Shepherd, supra, note 9, at 333-35, and Hull and Cullity, supra, note 1, at 176-78.

See, gei

337-41.

See, generally, Hull and Cullity, supra, note 1, at 178-80, and Shepherd, supra, note 9, at

13 Re Duncan (1914), 7 O.W.N. 539 (H.C. Div.).

14 Olsson v. Ancient Order of United Workmen (1916), 38 O.L.R. 268 (H.C. Div.).

The circumstances include not only the facts known about the absentee's departure and
her destination, but also include the amount of money at stake. A small bequest will not
justify as extensive a search as a large bequest: see Shepherd, supra, note 9, at 338-39.

134

law, the court has no power to fix the date of death of a person who has
been declared dead by virtue of the presumption. Thus, a finding that an
absent beneficiary or next-of-kin is presumed dead will not by itself resolve
questions of succession, which depend upon establishing not only the fact
of death, but also the sequence of deaths.

The return of a person who has been declared to be presumed dead
will obviously raise various legal difficulties. Where the person is a benefi-
ciary whose share of an estate has been distributed to another, questions
arise respecting the liability of the personal representative and the remedies
available to the beneficiary.

Unless the personal representative has first obtained a court order,
declaring the beneficiary to be presumed dead,16 she is liable for devastavit,11
and will be personally liable to the returning beneficiary for the value of the
property that she would have inherited.

The returning beneficiary also has remedies against the person who has
received her share. Irrespective of whether there is a court order of presumed
death, a recipient, who will not have given value for the property, does not
acquire a title to the property that is good against the beneficiary, who is the
true owner. The beneficiary will have the right to recover the property to
the extent that it has been retained in an identifiable form.18 In addition,
the beneficiary will have a right to recover the value of the property by an
action against the recipient personally, whether or not the property remains
in an identifiable form.

(ii) Procedural Issues

Ontario courts have jurisdiction to make a declaration of death only in
proceedings in which they are properly exercising some other authority. At
common law, courts do not have power to make a declaration of death for
all purposes, and courts cannot make a declaration of death in proceedings
that have been brought exclusively for that purpose.19 Courts have declined
to assume such power due to their reluctance to issue an order in rem, which
may affect the rights of persons who are not parties to the proceedings in

16 Under s. 60(2) of the Trustee Act, R.S.O. 1980, c. 512, a personal representative who is
acting upon the opinion, advice or direction of the court shall be deemed to have discharged
his duty as personal representative, unless he has been guilty of some fraud, wilful conceal-
ment or misrepresentation in obtaining such opinion, advice or direction.

Supra, ch. 2, sec. 4(a)(ii)b.

For a discussion of the remedies available to beneficiaries, see Sunnucks, Martyn, and
Garnett, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (1982)
(hereinafter referred to as "Williams, Mortimer and Sunnucks"), at 973-77.

19 Re Sell (1924), 26 O.W.N. 462, [1924] 4 D.L.R. 1115 (H.C. Div.), and Re Hum Fong Shee,
[1967] 1 O.R. 220 (C.A.).

135

which the declaration is sought.20 Where, however, a finding of death is
necessary to the exercise of another jurisdiction, courts may make a declara-
tion of death.21

Faced with the possibility that a beneficiary has died before the death
of the deceased, it would appear that a personal representative may choose
between bringing an application or making a payment into court.

There has been a difference of opinion in Ontario courts as to what type
of application should be brought in these circumstances. Under the Trustee Act,22
"[a] personal representative may . . . apply to the Supreme Court for the
opinion, advice or direction of the court on any question respecting the man-
agement or administration of . . . the assets of . . . his testator or intestate".
Rule 14.05(3)(a) of the rules of court provides that an application may
be brought "on a question affecting the rights of a person in respect of the ad-
ministration of the estate of a deceased person", which would appear to com-
prehend an application for a declaration that an absent beneficiary or next-
of-kin is dead.23 A judge may direct a reference to inquire into and report on
the beneficiaries or next-of-kin of the deceased. On a reference, the referee
may take such evidence and direct such advertisements as may be deemed
advisable to determine whether they have survived the deceased.24 The
report of the referee may have to be reviewed and confirmed by the judge.

While effective in achieving the ultimate result, the procedure under
rule 14.05(3) is unduly cumbersome, for it may involve three court appear-
ances—before the judge initially, then the referee, and finally the judge

20 Re Hum Fong Shee, ibid., at 225-26.

1 See, for example, Darling v. Sun Life Assurance Co. of Canada, [1943] O.R. 26, [1943]
1 D.L.R. 316 (C.A.) (determination whether life insurance proceeds are payable), and
Homanuke v. Homanuke (1920), 13 Sask L.R. 186, [1920] 1 W.W.R. 673 (K.B.) (determina-
tion whether second marriage is valid), affd without reference to this point (1920), 13 Sask.
L.R. 557, [1920] 3 W.W.R. 749 (C.A.).

Trustee Act, supra, note 16, s. 60(1).

O. Reg. 560/84, as am. by O. Reg. 711/89, s. 15. Formerly, the rules of court were known
as the "Rules of Civil Procedure". This was changed in 1989: Courts of Justice Act, 1984,
S.O. 1984, c. 11, s. 160a, as en. by S.O. 1989, c. 55, s. 31.

Under r. 607 of the former Rules of Practice and Procedure of the Supreme Court of
Ontario, R.R.O. 1980, Reg. 540 (hereinafter referred to as "Rules of Practice"), it was more
clear that this question could be brought before the courts, as specific reference was made
to "[t]he ascertainment of any class of creditors, legatees, devisees, next of kin or others".

For a discussion of the practice under r. 607 of the former Rules of Practice, supra, note
23, see Archibald, "Estate Administration After the Repeal of the Succession Duty Act",
in Special Lectures of the Law Society of Upper Canada 1980 [:] Recent Developments in Estate
Planning and Administration (1980) 63, at 75-76. The practice has followed or approved in
several cases: see, for example, Re Bell, [1946] O.R. 854 (H.C.J. ), affd [1946] O.R. 859,
[1947] 1 D.L.R. 554 (C.A); Re Driscoll, [1948] O.W.N. 124 (H.C.J. ); Re Jones, [1955] O.R.
837, [1955] 5 D.L.R. 213 (H.C.J. ); and Re Hum Fong Shee, supra, note 19.

136

again to confirm the report of the referee.25 There is authority, however,
holding that it is wrong to proceed in this manner; the proper procedure, it
is said, is to apply to court for probate or letters of administration of the
estate of the absentee.26 In our view, this line of cases appears to be incorrect.
Even if the court were to issue probate or administration on the basis of the
presumption of death, this will not necessarily resolve the question of the
absentee's claim on the estate to be distributed, since the question whether
she had survived the testator or intestate will not be in issue on an application
relating to the estate of the absentee. Furthermore, the parties concerned
with the validity of the absentee's claim on the primary deceased's estate
may well not be parties to the application for probate or administration.
Notwithstanding this line of authority, the majority of Ontario cases have
been willing to determine the question of the death of an absent beneficiary
on the application of a personal representative of the deceased whose estate
is to be distributed, without insisting upon any prior application for probate
or administration of the estate of the absentee.27

A second procedure, which protects the personal representative, but
does not yield a final distribution of the estate, is payment into court of the
share of the absent beneficiary. This course of action is available on the final
passing of accounts.28 Payment into court frees the personal representative
from liability, and permits anyone who claims to be entitled to a share to
apply for payment out of court. If the applicant for payment out bases her
claim on the death of the absentee, that issue will have to be resolved in order
to decide the application. While the burden of proof is on the applicant, there
have been cases in which the court ordered payment out of court on the
basis that the absentee was dead, but accommodated a residual doubt as to
the death of the absentee by requiring the applicant to enter into an under-
taking for repayment should the absentee return.29 Even if no such undertak-
ing is given, as we have explained, a returning absentee would have the right
to recover the property, so long as it could still be traced in the hands of the
recipient, or to recover its value in a personal action against the recipient.

A final relevant statutory provision is section 35 of the Trustee Act,
which allows a personal representative to be excused from a breach of

Rules 54 and 55 of the rules of court, supra, note 23, deal with directing a reference and
the procedure on a reference, respectively.

Re Coots (1910), 1 O.W.N. 807n, 17 O.W.R. 727 (H.C. Div.); Re Leckie (1924), 27 O.W.N.
266 (H.C. Div.); and Re Bull, [1934] O.W.N. 284 (H.C.J.).

See, for example, Re Ashman (1907), 15 O.L.R. 42 (H.C.J.); Re Peacock (1915), 9 O.W.N.
175/i (H.C.J.); and Re Ramsay Estate, [1943] O.W.N. 169, [1943] 2 D.L.R. 784 (H.C.J.).

Courts may be asked to "pass" or audit the accounts of personal representatives: see infra,
ch. 6, sec. 2(d). Section 36(4) of the Trustee Act, supra, note 16, provides that, where on the
final passing of accounts of a personal representative there is found to be in his hands any
money belonging to a person whose address is unknown, it is his duty to pay the money
into court to the credit of that person. See Re Calder (1923), 24 O.W.N. 146 (H.C. Div.).

Re McNeil (1906), 12 O.L.R. 208 (C.P. Div.), and Re Fisher (1923), 23 O.W.N. 568 (H.C.
Div.).

137

trust.30 Conceivably, it could relieve a personal representative from personal
liability where she has not obtained the direction of the court or paid the
absentee's share into court.

(iii) The Uniform Presumption of Death Act

On two occasions, the Uniform Law Conference of Canada has recom-
mended draft legislation to meet the problems in the common law governing
absentees. In 1960, the Conference of Commissioners on Uniformity of
Legislation in Canada, which was the predecessor to the Uniform Law
Conference of Canada, adopted a Presumption of Death Act,31 which dealt
with the jurisdiction of the court to make an order declaring that an absentee
shall be presumed to be dead. In 1976, the Uniform Law Conference of
Canada adopted the Uniform Presumption of Death Act,32 which not only
addressed the jurisdiction of the court to make a declaration of presumed
death and the nature of that order, but also the extent to which the property
of the absentee is to be safeguarded. Since the substance of the 1960 Act
has been continued in large measure in the 1976 Act, we shall discuss the
later Act, and refer to the earlier only where it is necessary to indicate an
important distinction.

Five features of the 1976 Act are particularly noteworthy. First, it gives
the court an independent power to make an order declaring that a person
"shall be presumed to be dead for for all purposes, or for such purposes
only as are specified in the order".33 This would change the law dramatically,
since the common law position is that a declaration of presumed death
cannot be made by a court except when it is exercising some other jurisdic-
tion, and that such a declaration is effective only for that purpose.

Second, in establishing the grounds upon which a declaration may be
made, the Act does not require a seven-year period of absence or any other
specified period.34 This would change the law by making a declaration of

33
34

Supra, ch. 2, sec. 4(b).

Conference of Commissioners on Uniformity of Legislation in Canada, Proceedings of the
Forty-Second Annual Meeting (1960), at 30, and Appendix T, at 115.

Uniform Law Conference of Canada, Proceedings of the Fifty-Eighth Annual Meeting (1976),
at 32, and Appendix V, at 225.

Uniform Presumption of Death Act, ibid., s. 2(1).

Section 2(1) establishes the grounds upon which an order may be made:

2. — (1) Where, upon the application of an interested person by originating notice
of motion, the court is satisfied that

(a) a person has been absent and not heard of or from by the applicant, or to
the knowledge of the applicant by any other person, since a day named;

(b) the applicant has no reason to believe that the person is living; and

138

presumed death possible after an absence of less than seven years. However,
there is a requirement that there be "reasonable grounds ... for supposing
that the person is dead". One can therefore surmise that, in most cases, a
court would require a fairly long period of absence.

Like the common law, the Act does not specify what inquiries must be
made or what advertisements must be placed in order to find the absentee.
Since circumstances may vary considerably, it may have been thought that
the rules could not easily be formulated in other than vague terms offering
little, if any, guidance. Inquiries and perhaps advertisements would appear
to be necessary to satisfy the "reasonable grounds" requirement.

The third feature is that an order declaring that a person is presumed
dead must "state the date on which the person is presumed to have died".35
This overcomes the common law incapacity to fix a date of death, which may
lead to unnecessarily complex questions of survivorship. In most cases, the
selection of a date, although arbitrary, will resolve problems of succession.
In some cases, however, it will be sufficient to declare that the absentee was
dead after a particular date and there will be no point in fixing a specific
date of death.36 Thus, the 1976 Uniform Act seems to go too far in making
it mandatory to state the date of presumed death. Interestingly, the compara-
ble provision in the 1960 Presumption of Death Act stipulated that the order
must state either the date on which the person is presumed to have died or
the date after which the person is presumed not to be living.

Fourth, with leave of the court, any interested person37 may apply to
the court for an order to vary, amend, confirm or revoke an order declaring
a person to be presumed dead.38

the court may make an order declaring that the person shall be presumed to be dead for
all purposes, or for such purposes only as are specified in the order.

35
36

Ibid., s. 2(2).

Where, for example, the date of the testator's death is known and a beneficiary has
disappeared after the death, the only question is whether the beneficiary was alive on the
known date of death. If that can be established by means of the presumption, the date of
the beneficiary's death is entirely irrrelevant. In such a case, the declaration need state only
that the beneficiary has died after the date of the testator's death.

Section 1(b) defines "interested person" as follows:

(b) 'interested person' means any person who is or would be affected by an
order made under this Act and includes,

(i) the next of kin of the person in respect of whom an order is made
or applied for, and

(ii) a person who holds property of the person in respect of whom an
order is made or applied for.

Ibid., s. 2(3).

139

The fifth matter to which we wish to draw attention relates to the
remedies available to a returning absentee. Under the Act, any distribution
of the property of an absentee who has been declared to be presumed dead
"shall be deemed to be a final distribution and to be the property of the
person to whom it has been distributed as against the person presumed to
be dead".39 Where a person who has been declared to be presumed dead
returns, she cannot recover property that has been distributed; she is pro-
tected only with respect to undistributed property.40

Legislation dealing with the presumption of death has been enacted in
five provinces, the Yukon Territory, and the Northwest Territories. British
Columbia enacted the first legislation in 1958,41 which served as the model
for the 1960 Uniform Act; it subsequently adopted the 1976 Act.42 Similarly,
Nova Scotia,43 the Northwest Territories,44 and the Yukon Territory45
adopted the 1960 Act, and then replaced it with the 1976 Act. Newfound-
land,46 and Manitoba,47 New Brunswick48 have adopted the 1960 Act.

Although either the 1960 Act or the 1976 Act has been followed in
these jurisdictions, in some cases certain modifications have been introduced
in the legislation. Under the Nova Scotia Presumption of Death Act, on every
application for an order for a declaration of presumed death or appeal
from such an order, the Public Trustee must be served with the relevant
documents, and she "shall be entitled to make representation to ensure that
the interest and the property of the person in respect of whom the order is
sought or the appeal made are protected".49 The Manitoba Presumption of
Death Act requires that notice of the application be given.50

39 Ibid., s. 4(1).

Section 4(2) provides that, "[w]here a person who is presumed to be dead is found by the
court to be alive, the court may, upon the application of any interested person ... by order
give such directions the court considers appropriate respecting the property of the person
found to be alive and its preservation and return".

41
42
43
44
45
46
47
48
49
50

Survivorship and Presumption of Death Act, S.B.C. 1958, c. 57.

See, now, Survivorship and Presumption of Death Act, R. S.B.C. 1979, c. 398.

See, now, Presumption of Death Act, R.S.N.S. 1989, c. 354.

See, now, Presumption of Death Ordinance, O.N.W.T. 1978 (2d Sess.), c. 10.

See, now, Presumption of Death Act, R.S.Y.T. 1986, c. 135.

The Presumption of Death Act, R.S.N. 1970, c. 304.

The Presumption of Death Act, R.S.M. 1987, c. P120.

Presumption of Death Act, S.N.B. 1974, c. P-15.1.

Supra, note 43, s. 8.

Supra, note 47, s. 2(3). In the case of an application for an order declaring that a person
shall be presumed dead for all purposes, notice must be given by publication of an advertise-
ment in a newspaper having general circulation in the area in which the person was last

140

While the New Brunswick Presumption of Death Act follows the 1960
Uniform Act, it deals differently with the question of the remedies available
to a returning absentee whose property has been distributed. The New
Brunswick Act provides that "any estate distributed shall be deemed to be
a final distribution and to be the property of the person to whom it is
distributed as against the person presumed dead, and is not subject to
recovery by that person".51 However, it also gives the court power to order
a reconveyance of the estate of the absentee, in whole or in part, or payment
of an amount representing that value, "if, in the opinion of the court, having
regard to the circumstances of the case, including any inconvenience or
hardship that would be imposed upon the person subject to the order, the
making of such an order would be just".52

(iv) Recommendations

In Ontario, where a beneficiary is missing, the present law and practice
do not facilitate the expeditious administration of estates. The problems can
be easily summarized. Courts have no jurisdiction to make a declaration of
presumed death, except in the exercise of some other jurisdiction, and the
effect of any such declaration is confined to the proceedings in which it is
given. The available procedures for securing a declaration are circular and
unduly complicated.53 Moreover, in making a declaration that a person is
presumed to be dead, a court has no power to fix the date of death, which
may leave unresolved critical questions of survivorship. Finally, the right of
a returning beneficiary to exercise remedies against a recipient of her share
in an estate is disruptive of the orderly and expeditious distribution of
estates.

We believe that the deficiencies of the present law and practice can be
cured by adopting the 1976 Uniform Presumption of Death Act with certain
modifications. The Act offers a simple procedure that culminates in a decla-
ration of presumed death that is good for all purposes or for whatever
purposes are specified in the order making the declaration. We therefore
recommend that the Uniform Presumption of Death Act should be enacted,
subject to the comments that follow.

We believe that three changes are necessary. First, under the Uniform
Act the court is required to state the date on which the person is presumed
to have died. Yet in some cases, it will be sufficient simply to declare that

known to reside and to such other persons as the court may direct. In the case of other
orders under the Act, notice of the application must be given in such manner and to such
persons as the court may direct.

Supra, note 48, s. 6(1).
Ibid., s. 6(2).

Earlier we explained that an application under r. 14.05(3) of the rules of court, supra, note
23, may entail 3 court appearances — before the judge initially, then the referee, and finally

before the same judge again

141

the absentee is presumed dead after a particular date, and there would be
no point in fixing a specific date of death. We prefer the approach taken in
the 1960 Presumption of Death Act, and recommend that the legislation
should permit the court to state the date upon which the absentee is pre-
sumed to have died or to state the date after which the person is presumed
not to be living.

Second, we are of the view that, in all applications in which a declaration
of presumed death is sought, the interests of absent persons should be
represented. Depending on the circumstances, a declaration may detrimen-
tally affect entitlement to share in the estate, and it may be in the interest
of all other parties to the proceeding to have the person in question presumed
dead. We are of the view that, in most cases, a public official should be given
this responsibility. In this regard, we agree with the approach taken in Nova
Scotia Presumption of Death Act, which identifies the Public Trustee as the
appropriate public official to protect absentees. The other public official
who might have been given this duty, the Official Guardian, often would be
representing children whose entitlement to inherit property would be in
issue and would be arguing in favour of a declaration of presumed death.
We are also of the view that the court should be given the power to appoint
a person other than the Public Trustee to represent absentees where it
considers it more appropriate. In the exercise of this authority, it might
appoint the Official Guardian where that office is not otherwise involved in
the application. Accordingly, we recommend that either the Public Trustee
or, where the court considers it more appropriate, a person appointed by
the court, should be a party to all applications to have a person declared to
be presumed dead.

The third change concerns the remedies available to a returning absen-
tee who has been declared to be presumed dead. Under the Uniform Pre-
sumption of Death Act, a returning absentee has no remedy if her share has
been distributed to another; she is protected only with respect to undistribu-
ted property. In our view, the court should have jurisdiction to order the
return of the property, or its value, in the rare case where an absentee does
return and claims her property. Difficulty, however, lies in deciding whether
the returning absentee or the recipient should bear the burden of persuading
the court to make an order in her favour. While there are equities on either
side, we believe that the policies in favour of the finality of distribution
and in favour of benefitting living recipients justify placing the burden of
persuasion on the absentee. We therefore recommend that, where a person
who is presumed to be dead returns after her property has been distributed,
she should be entitled to apply to the court for the return of her property
or payment of its value. The court should be required to order the return of
the property, in whole or in part, or payment of its value, to the absentee
only if that person demonstrates that it would be more equitable to return
all or part of the property to her or make a payment in her favour. In
applying this jurisdiction, the court might consider various factors, such as
whether there has been any fault on the part in the absentee that contributed
to her not being found or whether there has been detrimental reliance on
the part of the recipient. We further recommend that, in making an order

142

in the exercise of this power, the court should be empowered to impose such
terms and conditions as is appropriate in the circumstances. For example,
where the court concludes that the balance of the equities does favour that
the property be given to the absentee, it may be appropriate for the recipient
to be compensated for any improvements made to the property.

Before turning to the next topic, we wish to make a further recommen-
dation. The issue whether a person is presumed to have died is important
in contexts other than that of estates administration. The matter has been
addressed by the provisions of the Conveyancing and Law of Property Act,54
the Insurance Act,55 and the Marriage Act56 In recommending the adoption
of the Uniform Presumption of Death Act in Ontario, our intention is that
this will be a general statute, applicable in all situations in which the death of
a person is an issue, including those already addressed by existing legislation.
Given our focus in this project on estates administration, we have not
examined the Conveyancing and Law of Property Act, the Insurance Act, the
Marriage Act, or indeed any other Ontario statute dealing with this issue, to
determine whether our recommendation to adopt the Uniform Presumption
of Death Act would create any problems. We therefore recommend that the
provisions of the Conveyancing and Law of Property Act, the Insurance Act,
the Marriage Act, and any other Ontario statute dealing with the presumption
of death be examined in light of our recommendation to adopt the Uniform
Presumption of Death Act with the changes we have proposed.

(i) General

In many cases, personal representatives are required to distribute
estates to a class of persons identified in the will or entitled to share under
the provisions of the Succession Law Reform Act governing intestacy.57 Diffi-
culties may be caused where it is not known whether the class of persons
ever existed or, if so, whether any of its members are still living.

We must emphasize that we are not concerned with problems in ascer-
taining beneficiaries caused by poor will drafting. Where vague or ambiguous
language is used to describe beneficiaries, the difficulty is one of construc-
tion. The problem with which we are concerned assumes a clear description
of the class of beneficiaries, and is caused by the fact that it is necessary to
determine its membership. This raises questions respecting the extent of the
duty of the estate trustee to inquire into the existence of beneficiaries, and
the power of the estate trustee to make a binding distribution of the estate

54 R.S.O. 1980, c. 90, ss. 46-51.

55 R.S.O. 1980, c. 218, ss. 149, 150, 186-89, and 190.

56 R.S.O. 1980, c. 256, ss. 9 and 14(c).
Succession Law Reform Act, supra, note 7, s. 47.

143

to the exclusion of beneficiaries of whose existence she is unaware. While
such problems have always been present in estates administration, they have
been heightened in Ontario since the law was amended to include children
born outside marriage in the classes of persons entitled to inherit on an
intestacy or under a class gift in a will.58

With this major substantive change in the law, an attempt was made to
address the difficulties of ascertainment that would inevitably accompany it.
Section 23 of the Estates Administration Act59 provides as follows:

23. — (1) A personal representative shall make reasonable inquiries for per-
sons who may be entitled by virtue of a relationship traced through a birth
outside marriage.

(2) A personal representative is not liable for failing to distribute property
to a person who is entitled by virtue of a relationship traced through a birth
outside marriage where,

(a) he makes the inquiries referred to in subsection (1) and the entitle-
ment of the person entitled was not known to the personal representa-
tive at the time of the distribution; and

(b) he makes such search of the records of the Registrar General relating
to parentage as is available for the existence of persons who are
entitled by virtue of a relationship traced through a birth outside
marriage and the search fails to disclose the existence of such a
person.

(3) Nothing in this section prejudices the right of any person to follow the
property, or any property representing it, into the hands of any person other
than a purchaser in good faith and for value, except that where there is no
presumption or court finding of the parentage of a person born outside marriage
until after the death of the deceased, a person entitled by virtue of a relationship
traced through the birth is entitled to follow only property that is distributed
after the personal representative has actual notice of an application to establish
the parentage or of the facts giving rise to a presumption of parentage.

Section 23 gives personal representatives a highly desirable measure of
certainty and protection. Where their reasonable inquiries and searches
have not revealed a person entitled to share in the estate,60 they will not be
liable to any person to whom they have failed to distribute property.

With respect to beneficiaries other than children born outside marriage,
there are no clear rules concerning the extent of the inquiries that must be

The Succession Law Reform Act, 1977, supra, note 2. See, now, Succession Law Reform Act,
supra, note 7.

R.S.O. 1980, c. 143. Section 23 had been originally enacted as s. 28 of The Devolution of
Estates Act, R.S.O. 1970, c. 129 by s. 50(2) of the The Succession Law Reform Act, 1977,
supra, note 2.

For a discussion, see Archibald, supra, note 24, at 74-79.

144

undertaken by a personal representative to find persons who may be entitled
to share in the estate of a deceased. Personal representatives have been held
liable for devastavit for not making sufficient inquiries, but the precise nature
of the inquiries that should be made has not been clarified.61 Even if the
personal representative has been as careful as possible in making inquiries
and advertising, it is not clear that she would be protected from liability in
devastavit to an overlooked beneficiary. Certainly, apart from section 23(2)
of the Estates Administration Act, there is no statutory provision specifically
relieving a personal representative from liability for failing to distribute an
estate to someone whose existence was not disclosed by reasonable efforts.

In the case of persons born outside marriage and other types of unascer-
tained beneficiary, if the personal representative is unable to find anyone,
or wishes to deal with the possibility that someone may exist, an application
may be brought under the rules of court so that a reference can be directed
to inquire into and report on who is entitled to share in the estate. The other
course of action available to a personal representative would be to make a
payment into court of that part of the estate to which an unascertained
beneficiary may have a claim. Should a personal representative fail to use
either procedure, but otherwise act with due care, relief from liability may
be available under section 35 of the Trustee Act, provided that the court
finds that she "has acted honestly and reasonably, and ought fairly to be
excused".62

(ii) Recommendations

The present law relating to unascertained beneficiaries is in need of
change. As we have indicated, it is not clear what inquiries are required of
a personal representative, who risks personal liability should she ignore an
unascertained beneficiary in making a distribution.

In evaluating the present law, we have weighed the interest of the
unascertained beneficiaries in receiving a share in the estate, either directly
or by tracing, against the policy favouring efficient distribution of estates,
security of title for recipients, and protection of estate trustees from unwar-
ranted personal liability. Consistent with the recommendations that we
have already proposed in connection with missing beneficiaries and the
presumption of death, we believe that the interests of unascertained benefi-
ciaries should be subordinated to the public interest in favour of efficient
distribution, security of title, and protection of estate trustees who have
acted reasonably.

We agree with the balancing of interests effected by section 23 of the
Estates Administration Act, except for the way in which the issue of tracing

61 Re Short Estate, [1941] 1 W.W.R. 593 (B.C.S.C).

Supra, note 16. For a discussion of these procedures, see supra, this ch., sec. 2(b)(i).

145

has been resolved. We see no reason why the basic policy of section 23
should not be extended beyond the context of persons who are entitled by
virtue of a relationship traced through a birth outside marriage to unascer-
tained beneficiaries and next-of-kin generally. Persons born outside mar-
riage constitute simply one type of unascertained beneficiary. We therefore
recommend that the law and practice governing claims by all types of unas-
certained beneficiaries and next-of-kin should be governed by rules similar
to those set out in section 23 of the Estates Administration Act, subject to the
change we propose below.

Accordingly, consistent with section 23(1) and (2)(a) of the Estates
Administration Act, we recommend that, where an estate trustee has made
"reasonable inquiries" for beneficiaries and next-of-kin, and the entitlement
of a person was not known to the estate trustee at the time of distribution,
she should not be liable to that person for failing to distribute property to
her. We further recommend that, in the case of persons who are entitled by
virtue of a relationship traced through a birth outside marriage, the sub-
stance of section 23(2)(b) of the Estates Administration Act should also
continue to apply to estate trustees. In other words, estate trustees should
be required to search the records of the Registrar General relating to
parentage, and should not be liable for failing to distribute property to a
person who is entitled by virtue of a relationship traced through a birth
outside marriage if reasonable inquiries have been made and the search has
failed to disclose the existence of that person.

As we have indicated, we disagree with the approach to tracing taken
in section 23(3) of the Estates Administration Act. Section 23(3) does not
affect the usual rights to trace property, except in the case where there is
no presumption or court finding of parentage until after the death of the
deceased. As we have explained, the usual right to follow property allows a
person to bring proceedings against the recipient of her property. Pursuant
to section 23(3), where there is no presumption or court finding of parentage
until after the death of the deceased, a person entitled to property by virtue
of a relationship traced through a birth outside marriage is entitled to follow
only property distributed after the personal representative has had actual
notice of an application to establish parentage or of the facts leading to a
presumption of parentage. Property distributed before the personal repre-
sentative has actual notice cannot be followed at all.

We are of the view that the proper approach to this matter is the one
we proposed in connection with beneficiaries who have been declared to be
presumed dead and who return to claim a share of an estate. This approach
is in furtherance of the public interest favouring efficient distribution.
Accordingly, we recommend that section 23(3) of the Estates Administration
Act should be repealed and replaced by a provision stating that, where a
person whose existence was not ascertained prior to the distribution of
the estate seeks to claim her share of the estate, which already has been
distributed, she should be entitled to apply to the court for a return of her
share or payment of its value. The court should be required to order the
return of the property, in whole or in part, or payment of its value, to the

146

returning absentee only if that person demonstrates that it would be more
equitable to return all or part of the share to her or make a payment in her
favour. We further recommend that, in making an order in the exercise of
this power, the court should be empowered to impose such terms and
conditions as is appropriate in the circumstances.

It is probably the existing law that inquiries that have been made in
accordance with court directions or that have received subsequent court
approval would satisfy the requirement of "reasonable" inquiries imposed
by the legislation. However, we are of the view that this should be made
explicit by legislation. We therefore recommend that, where all inquiries
and advertisements have been made in accordance with the direction of the
court, or where they have been subsequently approved by the court, the
estate trustee should be free from personal liability for failing to distribute
the estate to those persons whose existence was not revealed.

3. MISCELLANEOUS RULES RESPECTING BEQUESTS AND
DEVISES

(a) Legacies to Persons Who Have Received Inter Vivos Gifts
from the Deceased

A problem that may arise in estate administration is whether the entitle-
ment of a person should be affected by the fact that she has received a gift
during the lifetime of the deceased. At present, the general rule is that the
making of a gift by the testator does not prevent the donee of the gift from
also claiming a benefit under the will. It is assumed that the testator had
intended the donee to have both the inter vivos gift and the testamentary
gift.

There is a very narrow exception to the general rule; it may arise where
the testator is the father63 of, or stands in loco parentis to, the beneficiary
who has received the inter vivos gift. If, after providing for his children in his
will, a testator makes a substantial inter vivos gift to one of them that is
similar in nature to that in the will,64 the courts will presume that the inter
vivos gift was intended as an advance out of the legacy; accordingly, the gift
will be brought into account in determining the shares of the other children,
and will be debited to the share of the donee child. Since the effect of this
equitable doctrine is to reduce or extinguish a legacy, some refer to it as
"equitable ademption" or "ademption by advancement". It is also known

According to the standard texts, the exception is applicable to fathers. For the principle to
apply to mothers, they would have to stand in loco parentis to the beneficiary: see, for
example, Williams, Mortimer and Sunnucks, supra, note 18, at 857-58, and Feeney, supra,
note 2, Vol. 2, at 209, n.119. Today, one would expect a court to apply this exception in the
case of both mothers and fathers.

It is said that "[t]he second portion must ejusdem generis with the first": Halsbury's Laws
of England, Vol. 16 (4th ed., 1976), at 954, para. 1415.

147

as "the presumption against double portions", since the doctrine applies
generally only where both the legacy and the inter vivos gift constitute
"portions".65

The purpose of this doctrine is to do justice among the children of a
testator. It applies only to a gift to a child, and then only if the application
of the doctrine would benefit another child or children. The rule, however,
is only a presumption, and will be displaced by evidence that the testator
did not intend the inter vivos gift to be an advancement out of the legacy.66

In Ontario, the doctrine of ademption by advancement has been
extended to intestacy by section 24 of the Estates Administration Act.61 The
doctrine has also been extended to gifts of realty. Under section 24, for the
doctrine to apply, the advancement must be expressed by the intestate or
acknowledged in writing by the child to be by settlement or portion. In the
absence of such a writing from either the intestate or the child, the child
would take her full share on an intestacy, as well as the inter vivos gift.

We believe that this is an area of the law where codification and simpli-
fication would be desirable. In the case of children, different rules apply
depending on whether there is a will or an intestacy. We consider that the

"A portion is a sum of money given to a child, by way of advancement, on marriage, or for
the purpose of establishing him in business, or as a permanent provision, and in general it
is only such a gift which will operate as a satisfaction of a prior gift": ibid., at 950, para.
1409.

For a discussion of this doctrine, see Feeney, supra, note 2, Vol. 2, at 208-12; Williams,
Mortimer and Sunnucks, supra, note 18, at 857-60; and Halsbury's Laws of England, Vol.
16 (4th ed., 1976), at 948-56, paras. 1407-18.

Supra, note 59. Section 24 provides as follows:

24. — (1) If a child of an intestate has been advanced by the intestate by settlement
or portion of real or personal property or both, and the same has been so expressed
by the intestate in writing or so acknowledged in writing by the child, the value thereof
shall be reckoned, for the purposes of this section only, as part of the real and personal
property of the intestate to be distributed under this Act, and if the advancement is
equal to or greater than the amount of the share that the child would be entitled to
receive of the real and personal property of the intestate, as so reckoned, then the
child and his descendants shall be excluded from any share in the real and personal
property of the intestate.

(2) If the advancement is less than the share, the child and his descendants are
entitled to so much only of the real and personal property as is sufficient to make all
the shares of the children in the real and personal property and advancement to be
equal, as nearly as can be estimated.

(3) The value of any real or personal property so advanced shall be deemed to be
that, if any, which has been acknowledged by the child by an instrument in writing,
otherwise the value shall be estimated according to the value of the property when
given.

(4) The maintaining or educating of, or the giving of money to, a child without a
view to a portion or settlement in life shall not be deemed an advancement within the
meaning of this Act.

148

approach taken in the case of intestacy — that is, treating an inter vivos gift
as an advance only if that intention has been evidenced in writing — is more
realistic than the presumption that, in the case of a will, the testator did not
intend the donee to have both the inter vivos gift and the testamentary gift.
The policy of section 24, in our view, should apply to wills as well.

We have also concluded that, if this change were implemented, there
would be no reason to restrict the applicability of the amended section 24
to parents or persons standing in loco parentis and their children. We can see
no reason why children should be in a worse position than anyone else. The
nature of the relationship between the deceased donor and the beneficiary
donee would seem to be entirely irrelevant to the question whether a gift
should be considered in determining the interest of a beneficiary.

Accordingly, we recommend that section 24 of the Estates Administration
Act should be amended to apply to both testate and intestate succession. As
amended, it should provide that only where a person receives an inter vivos
gift that has been expressed by the donor in writing or acknowledged by the
donee in writing to be an advance on the future inheritance of the latter
should the value of the gift be taken into account in determining her share
in the estate of the donor. We further recommend that this rule should apply
without reference to the relationship between the deceased donor and the
donee.

(b) Legacies Contracted For

A person may contract to make a will containing certain dispositions,
or contract not to revoke an existing will or not to make a will at all. In each
case, the substance of the promise is that the promisee will acquire certain
property by way of succession on the death of the promisor.68

Despite the agreement, the promisor may make or revoke a will in
violation of the contract, and any such will or revocation will be valid. In
most cases, courts will not compel the promisor to make a will in accordance
with her contract;69 nor will they deny her the power to make an inconsistent
will. However, a disappointed promisee may obtain the usual remedies for
breach of contract, to the extent that they are applicable. As in the case of
contracts generally, breach of a contract relating to a will entitles the prom-
isee to damages from the estate of the promisor. The measure of damages
will be the value of the benefit that the promisee would have received had

See, generally, Campbell, "Promises to Make Testamentary Provision" (1947), 23 N. Z.L.J.
221; Cretney and Dworkin, Theobald on Wills (13th ed., 1971), ch. 11; Feeney, supra, note
2, Vol. 1, at 17-21; and Maddaugh and McCamus, The Law of Restitution (1990), at 474-81.

However, on the death of the promisor, a remedy analogous to specific performance
occasionally has been ordered. In one case, the court ordered that the estate be distributed
as if the promised testamentary disposition had been made: Synge v. Synge, [1894] 1 Q.B.
466, [1891-94] All E.R. 1164 (C.A.).

149

the promised testamentary provision been made. Indeed, damages have
been awarded even for an anticipatory breach in the lifetime of the promisor;
this has occurred where the contract was to leave the promisee, by will, a
specific asset that was subsequently sold by the testator.70 Of course, if the
promise were to take the form of an undertaking not to revoke an existing
will or not to make a will, that would be a promise that could be broken
during the life of the promisor.

Contracts relating to testamentary dispositions nevertheless present
dangers to promisees, as some common situations are not adequately
addressed under the existing law of contract. The main difficulties for the
promisee can be briefly summarized.71 First, even if the testator has made
her will in conformity with her agreement, if the provision in the will becomes
inoperative by operation of law, the courts do not consider this to be a
breach of contract. Consequently, where a will is revoked by marriage72 or
where a promised disposition lapses,73 no contractual remedy will be avail-
able to a disappointed promisee. Second, even though the will does reflect
the contract made by the testator, the promised disposition may be defeated
or reduced by an order for the support of dependants under Part V of the
Succession Law Reform Act. Third, if the contract is to make a disposition
of a specific asset or a particular sum, and an insufficiency of assets leads to
abatement or defeat of that disposition, the promisee will have an action for
breach of contract. By contrast, where the will makes the promised disposi-
tion and that disposition consists of a share of the estate or part of the
residue, the promisee will not have an action for breach of contract where
the disposition turns out to be worthless. Since the promised disposition
appears in the will, the contract is considered to be performed. Fourth, if
the contract relates to land, it will not be enforceable if it is not in writing,
as required by the Statute of Frauds. 1A Fifth, like any other agreement, the
contract will not be enforceable if it is based on past consideration; the most
common example is housekeeping services rendered prior to the promise.
Finally, the contract, like any other, may be too vague or uncertain to be
enforced.

While a remedy may be unavailable under the law of contract, a prom-
isee may be entitled to a restitutionary remedy in certain of the situations
described above. In the case of an agreement that is unenforceable under
the Statute of Frauds and a contract that is too uncertain or vague to be
enforced, restitution is available. In the case of a contract based on past
consideration, the availability of a restitutionary remedy is a possibility; it

72
73
74

Synge v. Synge, ibid.

This discussion is drawn from Coote, "Testamentary Promises Jurisdiction in New
Zealand", in Northey (ed.), The A.G. Davis Essays in Law (1965) 1, at 3-4.

Re Marsland, [1939] Ch. 820, [1939] 3 All E.R. 148 (C.A.).

Re Brookman's Trusts (1869), 5 Ch. App. 182, 39 L.J. Ch. 138.

R.S.O. 1980, c. 481, s. 1.

150

would not be available, however, if the services were rendered merely with
the hope, as opposed to expectation, of reward. In the other situations —
where the contract is considered to have been performed — the law of restitu-
tion does not provide a remedy.

In a situation where a restitutionary remedy may be available, the
following principles apply:75

[T]he modern Canadian case law has established an entitlement to restitution-
ary recovery for benefits unofficiously conferred under the expectation of
reward, even where that expectation cannot be said to have been induced by a
clear promise by the recipient that compensation would be made. If services,
for example, are provided in circumstances where the recipient knows or ought
to know that they are being rendered in the expectation of reward, an in
personam claim for their value will lieJ76!

Against this background, we are of the view that there is a need for
legislative intervention on behalf of non-family persons who have performed
unpaid or underpaid services for the deceased promisor on the faith of an
express or implied promise that they will receive a testamentary disposition.
They should not be left without any recourse where a remedy cannot be
found in the law of contract or the law of restitution. In other situations, we
would leave the problems that we have identified, which are inherent in the
interaction of the law of contract and the law of wills, to be resolved by
professionally drafted agreements. Such agreements are not likely to be used
in the case of persons who have rendered services to the deceased.

We have taken the view that, in most cases of this type, the promisee
is a housekeeper, who occupies a quasi-family position. We have therefore
concluded that the existing vehicle of Part V of the Succession Law Reform
Act might be used to deal equitably with the parties.

Part V enables the court to make an order for adequate provision for
proper support in favour of a "dependant" out of an estate of a testator or
intestate. In this context, a "dependant" is a spouse, parent, child, brother
or sister of the deceased who was being supported by the deceased or was
legally entitled to that support.77 On an application for an order for support,
the court is required to take into account all the circumstances and, in
particular, must consider a number of factors. Among the factors listed
are "the contributions made by the dependant to the deceased's welfare,
including indirect and non-financial contributions" and "any agreement
between the deceased and the dependant".78 If the dependant is a spouse,

75
76

Maddaugh and McCamus, supra, note 68, at 480.

Maddaugh and McCamus, ibid., observe that "[r]elief, in rem, through the device of the
constructive trust, has rarely been granted in the reported case law."

Succession Law Reform Act, supra, note 7, s. 57(d), as en. by S.O. 1986, c. 53, s.2.
78 Ibid., s. 62(l)(h) and (m), as en. by S.O. 1986, c. 53, s.4.

151

the court must consider "any housekeeping, child care or other domestic
service performed by the spouse for the family, as if the spouse had devoted
the time spent in performing that service in remunerative employment and
had contributed the earnings to the family's support".79 In making a support
order, the court has power to impose whatever conditions and restrictions
it considers appropriate.80

Of course, where persons who have rendered services in reliance on a
promise by the deceased qualify as "dependants" within the meaning of Part
V of the Succession Law Reform Act, they will be able to avail themselves of
a remedy. The difficulty arises with respect to persons who do not meet the
statutory definition. In their case, we propose that the provisions of Part V
of the Succession Law Reform Act should be made applicable to them.

We therefore recommend that, for the purpose of Part V of the Succes-
sion Law Reform Act, the definition of "dependant" should be expanded to
include a person who has rendered housekeeping or other domestic services
for a deceased person in the deceased's lifetime, and who has established
an express or implied promise by the deceased, whether or not enforceable
under the law of contract, to reward her for the services by making some
testamentary provision.

Before turning to consider the next topic, we wish to address another
issue. Section 71 of the Succession Law Reform Act provides that, where a
testator gives property by will pursuant to a contract, that property is liable
to an order made under Part V only to the extent that the value of the
property exceeds the consideration therefor. Where, however, the promised
testamentary disposition has not been made, the disappointed promisee
would be entitled to damages from the estate equal to the value of the
property promised; she would thus rank as a creditor of the estate, and
would take in priority to a person entitled to an order under Part V. To
meet this problem, we favour an approach similar to that taken in section
71. Accordingly, we recommend that, where the promise is not fulfilled and
the promisee is successful in damages in a contract action, the damages
recovered should be subject to the provisions of an order made under Part
V, to the extent that the amount of the damages exceeds the consideration
therefor.

A testamentary gift may be given on condition that the gift is to be
void should the named donee dispute the validity of the will. If the donee
challenges the will successfully, the condition will fall with the balance of

79 Ibid., s. 62(l)(r)(vi), as en. by S.O. 1986, c. 53, s.4.

80 Ibid., s. 63(1). Payment may take a variety of forms: see ibid., s. 63(2). For other powers of
the court, see ss. 64-66.

152

the will. Where, however, the challenge is unsuccessful, whether the condi-
tion will be effective to deny the beneficiary the gift depends on the
circumstances.

Under Anglo-Canadian law, conditions not to contest a will are gener-
ally valid.81 If attached to gifts of realty, they are valid without qualification.
If attached to gifts of personalty, they are valid if there is a gift over in the
event of a breach of the condition;82 in the absence of a gift over, the
condition will be regarded as in terrorem — that is, in the nature of a threat —
and therefore void. Such conditions apparently do not run afoul of the public
policy against ousting the jurisdiction of the court because they do not
altogether preclude litigation relating to the estate.83

Conditions not to contest a will may be drafted either as conditions
precedent or conditions subsequent. A condition precedent identifies an
event that must occur for the gift to come into existence. An example of
such a condition is the following: "provided that A does not bring any
proceedings in court challenging the validity of this will, she will receive a
legacy of $5,000 when she reaches the age of 16". A condition subsequent
describes an occurrence that will cause a gift that has already taken effect
to end. An example of such a condition is the following: "I give A a legacy
of $5,000 but, if she brings any proceedings in court challenging the validity
of this will, this legacy shall not be given to A, but become part of the residue
of my estate." If a gift is contingent on a condition precedent, and the
condition is held to be void, the gift will fail.84

In our view, the law in this area is unnecessarily complex. It distinguishes
between gifts of realty and gifts of personalty and, in the latter case, between
conditions with gifts over and conditions without gifts over. These technical
and artificial rules have no place in a modern legal system.

Conditions against challenging a will are detrimental because they might
discourage litigation that might expose incapacity, undue influence, fraud,
or forgery. The various grounds of invalidity of a will are designed to protect

Feeney, supra, note 2, Vol. 2, at 255-56, and Williams, Mortimer and Sunnucks, supra, note
18, at 749-50.

Feeney, supra, note 2, Vol. 2, at 256, explains as follows:

The reason for the rule is that the court considers an express gift over to someone else
sufficient prima facie evidence that the gift was not in terrorem; the presence of the gift
over tending to show that the condition was inserted not simply to coerce the original
donee but also to fix a possible benefit to another.

Feeney, supra, note 2, Vol. 2, at 256, and Cretney and Dworkin, supra, note 68, para. 1597,
at 589.

Feeney, supra, note 2, Vol. 2, at 225, notes that "[i]t is not always easy to tell whether a
condition attached to a gift creates an interest subject to a condition precedent, in which
case the gift is said to be contingent, or whether it creates a vested interest which is subject
to divestment".

153

the deceased's family, who would take on an intestacy, from an exercise of
testamentary power that is not a free and deliberate act by the testator. We
therefore recommend that any provision in a will designed to preclude or
discourage an application to the court with respect to the validity of a will
should be void, regardless of whether it is attached to a gift of realty or
personalty, or whether it is coupled with a gift over.

We have already noted that, where a condition not to contest a will that
is regarded as a condition precedent is held to be void, the gift attached to
that condition will fail because satisfaction of the condition is a prerequisite
to the gift coming into existence. We consider that it is unfair that a benefi-
ciary who has been successful in nullifying a condition that we regard as
inimical should, in effect, be punished by losing a gift to which she otherwise
would have been entitled under the will. We therefore recommend that, if
the provision is a condition precedent, the provision should be void, but the
gift should not fail for that reason. This will assimilate the position of
conditions precedent to that of conditions subsequent.

(d) Homicide by a Beneficiary

Where a beneficiary kills a testator or intestate, certain questions arise.
Should the killer be allowed to receive a benefit to which he would otherwise
be entitled upon the death of the victim? If the killer is not permitted to enjoy
the fruits of his wrong, how should the victim's property be distributed?85

At common law, these problems were solved by the application of the
archaic doctrines of attainder, forfeiture, corruption of blood and escheat.86
Following the abolition of these doctrines in the nineteenth century, courts
were called upon to resolve various questions raised by the killing of a person
by his beneficiary.87 The most fundamental question was whether the killer
should be allowed to benefit from the death of his victim. The courts devel-
oped certain rules, which continue to govern this matter in Ontario. In
England, the common law recently took a somewhat different direction and,
in 1982, legislation was enacted to address certain problems.88 We shall first

85
86

For a recent discussion, see Maddaugh and McCamus, supra, note 68, at 483-506.

The general effect of these doctrines was to deprive a criminal of his property when he had
committed treason or a felony: see, generally, Tarnow, "Unworthy Heirs: The Application
of the Public Policy Rule in the Administration of Estates" (1980), 58 Can. Bar Rev. 582,
at 582.

The concept of forfeiture was re-introduced in 1988 in connection with offences defined as
"enterprise crime offences": Criminal Code, R.S.C. 1985, c. 42 (4th Supp.), s. 462.37(1), as
en. by S.C. 1988, c. 51, s.2. See, also, Food and Drugs Act, R.S.C. 1985, c. F-27, and Narcotic
Control Act, R.S.C. 1985, c. N-l.

Forfeiture Act 1982, c. 34 (U.K.). For a discussion, see Cretney, "The Forfeiture Act 1982:
the Private Member's Bill as an Instrument of Law Reform" (1990), 10 Oxford J. Legal
Stud. 289.

154

discuss the present position in Ontario, and then consider the recent changes
in the United Kingdom.

In Ontario, a person who kills another cannot share in the estate of the
victim.89 Nor can a beneficiary under an insurance policy receive benefits
where he has killed the insured.90 These rules reflect the application of the
general public policy rule that a person should not be permitted to benefit
from his own wrongdoing.

The ambit of the rule "preventing the acquisition of property by kill-
ing"91 is not settled. While it is well-established that it applies to a person
who has murdered his victim, its applicability to other crimes resulting in
death is uncertain. In Lundy v. Lundy,92 the Supreme Court of Canada held
that no distinction should be drawn between murder and manslaughter, and
implied that the rule would apply to all crimes. A 1985 Ontario case held
the rule to apply where a widow had pleaded guilty to criminal negligence
causing the death of her husband.93 However, a recent treatise on the law
of restitution argues that the public policy rule should be confined to crimes
in which the wrongdoer has intentionally caused harm to the victim, and
suggests that support for this view may be found in the jurisprudence.94
Where death is caused not by a contravention of the Criminal Code, but by
an offence under provincial legislation, it appears that the rule would not
apply.95

The application of the public policy rule precluding the killer from
inheriting from the deceased necessarily involves the court in ruling on the
disposition of the property to which the killer would have otherwise been
entitled. The usual solution is to distribute the estate of the victim as if the
killer had predeceased the victim. Where the killer is a legatee, the legacy

89 Re Charlton [1969] 1 O.R. 706, (1968), 3 D.L.R. (3d) 623 (C.A.).

90 Cleaver v. Mutual Reserve Fund Life Ass 'n, [1892] 1 Q.B. 147, [1891-4] All E.R. Rep. 335
(C.A.), and Deckert v. Prudential Insurance Co.of America, [1943] 3 D.L.R. 747, [1943] O.R.
448 (C.A.).

91 Youdan, "Acquisition of Property by Killing" (1973), 89 L.Q. Rev. 235.

92 (1895), 24 S.C.R. 650.

Re Ontario Municipal Employees Retirement Board and Young (1985), 49 O.R. (2d) 78, 15
D.L.R. (4th) 475 (H.C.J.).

In The Law of Restitution, supra, note 68, at 494, Maddaugh and McCamus argue as follows:

As a general proposition, we would suggest that whenever a party commits a wrongful
act, whether it be serious or not, with the express motive of obtaining some benefit
from his victim, that party ought not be permitted to retain the benefit. Beyond this,
in the absence of such a specific motive, we would argue that, so long as the wrongdoer
commits a crime with the intention of causing harm to another, he should be prohibited
from acquiring any benefits that come to him as a direct result of the wrong done to
the person to whom he intended, and did in fact, harm.

95 Shaw v. Gillian (1982), 40 O.R. (2d) 146, 143 D.L.R. (3d) 232 (H.C.J.).

155

will become part of any residuary gift under the will; in the absence of a
residuary gift, or where the killer is the sole residuary legatee, the property
will be distributed as if the victim died intestate. Where the beneficiary
under an insurance policy kills the insured, the proceeds of the policy will
be payable to the victim's estate, unless there is an alternative beneficiary.96

Cases where the killer has committed suicide following the murder of
his victim indicate that the public policy rule also precludes inheritance by
persons claiming property through the killer. In such circumstances, the
estate of the victim has been distributed as if the killer had predeceased the
victim.97 Where, however, persons who would have inherited the victim's
property through the estate of the killer have rights of inheritance that
arise independently of their relationship with the killer, either as direct
beneficiaries or direct next-of-kin of the victim, they are not precluded from
inheriting.98

More difficult are the cases where the effect of the killing is not the
acquisition of property by the killer, but an increase in the value of an
existing property interest already held by the killer. This situation occurs
where one joint tenant kills another. In such a case, the problem is to apply
the public policy rule in a manner consistent with the essential nature of a
joint tenancy.

Where property is held in joint tenancy, each joint tenant owns the
whole of the property, subject to the same right of ownership in her co-
tenant, and each has a right of survivorship, entitling one joint tenant to
ownership of the entire interest on the death of the other. If the right of
survivorship were to be held inoperative, this would in effect work a forfei-
ture, insofar as the killer would be deprived of a right born out of the
creation of the joint tenancy. Yet to allow the killer to take full advantage
of the right of survivorship would be to ignore the public policy rule. In
Ontario, courts have solved this problem by holding that, where a joint
tenant kills his co-tenant, the former takes the full interest in the property,
but holds the property as constructive trustee with the beneficial interest
held in trust, half for himself and half for the person or persons entitled to
inherit from the victim.99

Maddaugh and McCamus, supra, note 68, at 491.

97 Re Mason, [1917] 1 W.W.R. 329 (B.C.S.C.) and Re Dreger (1976), 12 O.R. (2d) 371, 69
D.L.R. (3d) 47 (H.C.J. ). See, also, Cleaver v. Mutual Reserve Fund Life Ass 'n, supra, note
90.

98 See Re Dreger, supra, note 97. But see Re Missirlis, [1971] 1 O.R. 303, (1970), 15 D.L.R.
(3d) 257 (Surr. Ct.).

99 Schobelt v. Barber, [1967] 1 O.R. 349, (1966), 60 D.L.R. (2d) 519 (H.C.J.); Re Gore, [1972]
1 O.R. 550, (1971), 23 D.L.R. (3d) 534 (H.C.J.); and Herring v. Worobel (1988), 67 O.R.
(2d) 151, 31 E.T.R. 290 (H.C.J.).

156

There is a second situation where the value of the killer's property
would increase: where the killer is a remainderman, or one of the remainder-
men, and the victim is the life tenant whose death marks the end of the life
interest, the killing will accelerate the enjoyment of the killer's interest in the
property.100 Prior to the killing, the remainderman has an existing property
interest that should not be subject to forfeiture. However, he should not be
allowed to enjoy that interest earlier owing to his part in the death of the
life tenant. It would appear that this question has not been considered by
the courts.

The law in England differs from that in Ontario in two significant
respects. First, the scope of the applicability of the public policy rule is more
certain, and has been narrowed. Recent cases have held that, in determining
whether the rule should apply, courts should differentiate among criminal
acts, and that a conviction for manslaughter will not necessarily require the
application of the rule.101 Courts have accepted that the appropriate test is
whether the killer has been "guilty of deliberate, intentional and unlawful
violence or threats of violence".102

The second major distinction was effected by the Forfeiture Act 1982,m
which allows a court to provide relief from the "forfeiture rule" in cases of
unlawful killing, except for murder,104 where it is required by "the justice of
the case".105 In the Act, "forfeiture rule" is defined as "the rule of public
policy which in certain circumstances precludes a person who has unlawfully
killed another from acquiring a benefit in consequence of the killing".106
Where a court determines that the rule applies to preclude a person who
has unlawfully killed another from acquiring an interest in property, the
court has power to make an order modifying the effect of the rule. However,
such an order cannot be made unless the court "is satisfied that, having
regard to the conduct of the [killer] and of the deceased and to such other
circumstances as appear to the court to be material, the justice of the case
requires the effect of the rule to be so modified in that case".107

100

101

102
103

Youdan, supra, note 91, at 250-51.

See/?, v. Chief National Insurance Commissioner; [1981] Q.B. 758, [1981] 1 All E.R. 769,
and Re K (deceased), [1985] Ch. 85, [1985] 1 All E.R. 403, aff d [1986] Ch. 180, [1985] 2 All
E.R. 833 (C.A.).

Gray v. Ban, [1970] 2 Q.B. 626, at 640, [1970] 2 All E.R. 702, at 710.

Supra, note 88. The impact of the legislation is illustrated by Re K (deceased), supra, note
100. See, also, Re Royse, [1985] Ch. 22, [1984] 3 All E.R. 339 (C.A.).

Section 5 provides that relief from the application of the rule is excluded where a person
"stands convicted of murder".

105
106
107

Forfeiture Act 1982, supra, note 88, s. 2(2).
Ibid., s. 1(1).
Ibid., s. 2(2).

157

We are of the view that the public policy rule is in need of reform. The
ambit of the rule is uncertain. More seriously, if it were given its widest
interpretation and were applicable to all crimes, the rule would disregard
intention and the extent of moral blame involved in the killer's conduct.
Such a rule is capable of working an injustice in individual cases. It would
show the civil law to be incapable of responding with flexibility to the
circumstances of individual cases. By contrast, in its application of sanctions,
the criminal law takes account of relative degrees of moral blameworthiness
in the same situations. Even in a narrower formulation that would involve
the wrongdoer acting with intention to cause harm to his victim, there may
be circumstances where the denial of benefits would be unjust.108

The potential for injustice inherent in a widely-cast public policy rule
is well illustrated by the 1985 case of Re Ontario Municipal Employees Retire-
ment Board and Young.109 Following the decision of the Supreme Court of
Canada in Lundy v. Lundy, the court applied the rule to deny pension
benefits to a widow who had pleaded guilty to criminal negligence causing
the death of her husband. She had consumed a large amount of alcohol and
had a motor vehicle accident. There had been no intention on her part to
harm her husband; he was very ill and would have died shortly thereafter.
Following her conviction, she was given a suspended sentence of three years
with probation.110

The answer, in our view, is to adopt the general approach taken in the
English Forfeiture Act 1982, and enact legislation giving the court power to
provide relief, in whole or in part, from the effects of the public policy rule.
We do not consider it prudent for legislation to attempt to delineate all the
situations where the public policy rule will apply. This would prove to be an
onerous exercise that, in the end, might result in the inadvertent omission
of circumstances that should be comprehended. It would be preferable for
the legislation, like the Forfeiture Act 1982, ,U1 simply to set out generally that
it is to govern situations where the public policy rule applies, leaving it to
the courts to continue to develop the substance of the rule. In exercising
their authority to provide relief from the effects of the public policy rule, we
would expect that courts would consider factors such as those identified in
the English Act, that is, the conduct of both the offender and the victim and
"such other circumstances as appear to the court to be material".112

We therefore recommend that legislation should be enacted providing
that, where the court would otherwise apply the rule of public policy preclud-
ing a person who has unlawfully caused the death of another from benefiting

108
109

110
111
112

See, for example, Re K (deceased), supra, note 101.

Supra, note 93. For discussion, see Youdan, "Annotation: Preventing the Acquisition of
Property by Killing — Recent Developments" (1986), 21 E.T.R. 2.

For another example of a harsh result, see Whitelaw v. Wilson, [1934] O.R. 415 (H.C.J. ).

For the definition of "forfeiture rule", see text at note 106, supra.

Supra, note 88, s. 2(2).

158

by his act, the court may order that the effect of the rule be modified, in
whole or in part, where it is just to do so. However, the court should not be
able to grant relief from the consequences of the rule where the killer has
been convicted of murder under the Criminal Code.

One further matter that, in our view, warrants attention is the disposi-
tion of the property that the killer would have inherited, but for his criminal
conduct. Although the courts have settled aspects of this question — the
treatment of a joint tenancy and insurance proceeds — lacunae remain. One
uncertain area is the effect of the killing of a life tenant by a person entitled
to an interest in the remainder. A second matter that should be clarified is
the treatment of a joint bank account.

With respect to joint bank accounts, we see no reason why the general
approach that is taken to joint tenancy should not apply. Accordingly, we
recommend that, where, in the case of a joint bank account, one joint tenant
has killed another, and the court has applied the public policy rule, the joint
tenant who has unlawfully caused the death should hold the whole bank
account as constructive trustee, with his beneficial interest held in trust for
himself and the beneficial interest of the victim held in trust for the persons
entitled to share in the estate of the victim. We further recommend that
there should be a prima facie presumption that the beneficial interests are
equal.113

The problem of a remainderman who has unlawfully caused the death
of a life tenant is complex. On the one hand, the remainderman has an
interest in the property — a vested future interest — and he cannot be
deprived of that interest. On the other hand, by killing the life tenant, he
has accelerated the enjoyment of that interest, which formerly had to await
the death of the life tenant. Clearly, he should not be allowed to benefit by
his act. The measure of the wrongdoer's gain is the period that the life tenant
would have enjoyed the property, had she not been killed. It has therefore
been suggested that the remainderman should not be permitted to have the
benefit for the property for the period that the life tenant would have been
expected to live.

We have borrowed a solution from other commentators.114 We recom-
mend that, where a remainderman has unlawfully caused the death of a life
tenant, and the court has applied the public policy rule, the person who has
caused the death should hold on constructive trust for the estate of the life
tenant an interest in the property for a period of time equivalent to the
victim's projected life span, calculated according to generally accepted actu-
arial principles.

113
114

For a comparable rule, see Family Law Act, 1986, S.O. 1986, c. 4, s. 14.

Goff and Jones, The Law of Restitution (3d. ed., 1986), at 630. After the deceased's projected
life span, the property would pass to the person who has caused the death or his estate.
For a discussion, see Maddaugh and McCamus, supra, note 68, at 491.

159

The final situation that should be addressed is where a person, wishing
to benefit a third party, kills the testator or intestate in full knowledge that
the death will benefit the third party. In such a situation, we believe that the
court should have the authority to impose a constructive trust upon the
interest conferred on the third party. We therefore recommend that, where
a court determines that a person has benefited from the death of a deceased
in circumstances that would have disentitled any other person who contrib-
uted to the death of the deceased from receiving or retaining a proprietary
interest arising as a result of the death, the court should be empowered,
notwithstanding the absence of wrongdoing on the part of the person bene-
fited, to impose a constructive trust on the benefit so received in favour of
the estate of the deceased or such persons whom it considers proper, includ-
ing the person so benefited.

(e) Lapse

In the course of reviewing the law affecting beneficiaries, we considered
the rules relating to lapse. The doctrine of lapse follows from the fundamen-
tal principle that succession to property depends upon survivorship. If a
donee dies before the testator, a gift by will is said to "lapse". With respect
to personalty, the common law rule was that property comprised in a non-
residuary gift fell into the residue of the testator's estate and passed under
the residuary gift. In the case of realty, the property passed as if there was
an intestacy; thus it benefited the heir, not the residuary devisee.

In Ontario, as a result of statute, there is now no distinction in the
treatment of realty and personalty. Subject to a contrary intention appearing
in the will, the rule governing personalty is applicable to both.115

The doctrine of lapse, in our view, is entirely consistent with the common
sense expectation that a testator would wish to benefit a living friend or
relative rather than the beneficiaries, next-of-kin, or creditors of a deceased
friend or relative. The present statutory rule forces a testator who wishes
to avoid the normal consequence of lapse to name, or provide for the
ascertainment of, an alternative living person or persons to take in substitu-
tion for the primary beneficiary. This is a reasonable rule, for it neither
promotes litigation nor defeats the wishes of testators.

Succession Law Reform Act, supra, note 7, s. 23, provides as follows:

23. Except when a contrary intention appears by the will, property or an interest
therein that is comprised or intended to be comprised in a devise or bequest that fails
or becomes void by reason of,

(a) the death of the devisee or donee in the lifetime of the testator; or

(b) the devise or bequest being disclaimed or being contrary to law or otherwise
incapable of taking effect,

is included in the residuary devise or bequest, if any, contained in the will.

160

There is, however, one aspect of the doctrine that we believe should be
addressed. One of the exceptions to the doctrine of lapse is the so-called
"moral obligation" exception.116 Where the exception applies, the gift takes
effect despite the prior death of the named beneficiary, and the property
passes to the estate of that beneficiary. While the ambit of this exception is
somewhat uncertain and controversial in England,117 in Ontario it has been
held that "[a] testator has a moral obligation to a beneficiary only when the
beneficiary is owed a fixed debt by the testator or a relative of the testator". 1 18

We consider this exception to be an unjustifiable anomaly. It has been
held to apply where a will has provided for the payment of a statute-barred
debt; it has also been applied where the will has directed payment of a debt
erased by bankruptcy.119 In circumstances such as these, we can see no
reason why the beneficiaries of the estate of the deceased beneficiary-
creditor should receive preferential treatment. They are treated better than
the beneficiaries of a deceased beneficiary who is not a creditor. Yet, in both
cases, the beneficiaries are volunteers, who have not given value. Indeed,
where the moral obligation exception applies, beneficiaries are in a consider-
ably better position than they would have been been in, had the beneficiary-
creditor survived the testator. They obtain a present benefit; however, if the
deceased beneficiary-creditor had not predeceased the testator, the latter
may have dissipated the property in question or simply chosen not to give it
to them. We do not think that the fact that the testator owed a debt to the
deceased beneficiary justifies placing her beneficiaries in this privileged
position.

We therefore recommend that the "moral obligation" exception to the
doctrine of lapse should be abolished.

116

117

118

119

The other common law exceptions are in the case of joint tenancy and class gifts: see
Feeney, supra, note 2, Vol. 2, at 137-39.

The most important statutory exception is the so-called "anti-lapse" provision, s. 31 of
the Succession Law Reform Act, supra, note 7, as am. by S.O. 1981, c. 66, sen., item 17. It
provides for a substitutional gift where a child, grandchild, brother, or sister of the testator
predeceases the testator. For a discussion, see Feeney, supra, note 2, Vol. 2, at 142-46.

Ford, "Lapse of Devises and Bequests" (1962), 78 L.Q. Rev. 88, at 88-90, and Youdan,
"Annotation — The Doctrine of Lapse: The Ambit and Applicability of the Common Law
Exceptions" (1980), 6 E.T.R. 95, at 95-97.

Re Mackie (1986), 54 O.R. (2d) 784, at 789, 28 D.L.R. (4th) 571 (H.C.J.). In this situation,
explained the court, "the testator intends that the debt must be discharged, whether to the
beneficiary or to the beneficiary estate [sic], since it is only morally proper to do so" (ibid.)
See, also, Ford, supra, note 117, at 88-89.

Youdan, supra, note 117, at 95, and Ford, supra, note 117, at 88.

CHAPTER 4

CREDITORS AND OTHER
CLAIMANTS

1. INTRODUCTION

Earlier in this report,1 we indicated that one of the basic trusts upon
which the estate trustee holds the estate of the deceased is to pay the debts
of the deceased in accordance with the obligations imposed upon him by
law and, in the case of a solvent estate, the obligations imposed by the will.
In the discussion that followed, we focused on the nature of the duty imposed
on the estate trustee. In this chapter, we examine a number of the substantive
and procedural issues respecting creditors and their claims. First, we con-
sider the various procedures governing the administration of insolvent
estates. We then turn to solvent estates, and consider the order in which the
assets are applied in satisfaction of the debts and liabilities of the estate.
Also in the context of solvent estates, we address the liability for the payment
of debts charged upon specific property. Thereafter we examine the require-
ment of advertising for creditors, and the procedures available for the pro-
cessing of claims against the estate. Finally, we discuss certain miscellaneous
issues, namely, contingent liabilities, evidence in actions involving estates,
bonding of estate trustees, and the availability of the exemptions under the
Execution Act?

2. INSOLVENT ESTATES

(a) General

The debts and liabilities of an estate must be paid or provided for, in
full, before any distribution can be made to the beneficiaries. Where the
assets of an estate are not sufficient to satisfy all of the debts and liabilities,
the estate is insolvent. In such a case, the essential task of the estate trustee
is to resolve the competing claims of creditors for priority of payment. The
estate trustee must ensure that any creditors preferred by law are paid in
accordance with the proper order of preference. In any particular case,
however, the proper order of preference might depend upon the procedural
regime adopted for the administration of the insolvent estate. At present,
in Ontario, an insolvent estate might be administered in accordance with

Supra, ch. 2, sec. 3(d).
2 R.S.O. 1980, c. 146.

[161]

162

one of three alternative procedures, namely:3 (1) pursuant to the provisions
of the Bankruptcy Act;4 (2) pursuant to the provisions of the Trustee Act;5 or
(3) pursuant to the terms of a judgment for administration, under the rules
of court.6 Each of these alternatives is discussed below.

(b) Procedural Alternatives

(i) Administration Under the Bankruptcy Act

a. Present Law

The Bankruptcy Act expressly contemplates that the remedies and proce-
dures provided for in the Act will apply in respect of decedents' estates.7
Thus, as we shall discuss, a decedent's estate might be petitioned into
bankruptcy by its creditors,8 or the personal representative of the estate

It might be noted that all 3 alternatives are also available in England. See infra, notes
7, 45, and 59 (administration in bankruptcy, administration outside of bankruptcy, and
administration proceedings, respectively).

R.S.C. 1985, c. B-3.

R.S.O. 1980, c. 512.

O.Reg. 560/84, rr. 65.01, as am. by O.Reg. 711/89, s. 72, and 65.02. Formerly, the rules of
court were known as the "Rules of Civil Procedure". This was changed in 1989: Courts of
Justice Act, 1984, S.O. 1984, c. 11, s. 160a, as en. by S.O. 1989, c. 55, s. 31.

In addition to the sections of the Bankruptcy Act discussed infra, this sec, see s. 2, which
defines "person" to include "the heirs, executors, administrators or other legal representa-
tives of a person". This extended meaning is incorporated into the definition of the terms
"bankrupt", "debtor", and "insolvent person" in s. 2 of the Act.

In England, s. 421(1) of the Insolvency Act 1986, 1986, c. 45 (U.K.) provides that "[t]he
Lord Chancellor may, by order made with the concurrence of the Secretary of State,
provide that such provisions of this Act as may be specified in the order shall apply to the
administration of the insolvent estates of deceased persons with such modifications as may
be so specified". Section 5 of The Administration of Insolvent Estates of Deceased Persons
Order 1986, S.I. 1986/1999, made under the Insolvency Act 1986, s. 421, provides that, unless
the court otherwise orders, where a debtor by or against whom a bankruptcy petition has
been presented dies, the proceedings shall be continued as if he were alive, subject to
certain statutory modifications. Moreover, by s. 3 of the Order, certain provisions of the
Insolvency Act 1986 (as modified in the Order) are made to apply to the administration in
bankruptcy of the insolvent estates of deceased persons dying before presentation of a
bankruptcy petition.

By contrast, in the United States, an insolvent deceased's estate cannot be administered
under the Bankruptcy Code, 11 U.S.C. §§ 101-151326. Such estates must be administered
under state probate legislation. See, for example, Re Walters, 113 B.R. 602 (Bktcy Ct. 1990).

Involuntary bankruptcy is commenced by one or more creditors filing a petition for a
receiving order against the debtor: Bankruptcy Act, supra, note 4, s. 43(1). The petition must
allege that (1) the petitioning creditor or creditors are owed debts by the debtor totalling
$1,000; and (2) the debtor has committed an "act of bankruptcy" within the 6 months
preceding the filing of the petition: s. 43(l)(a) and (b). As to what constitutes an "act of
bankruptcy", see s. 42(l)(a)-(j), in which 10 specific acts are enumerated. Upon the making

163

might make a voluntary assignment under the Act.9 Similarly, a proposal
might be filed under the Act in respect of an estate of a deceased debtor.10

Where a petition for a receiving order has been filed against a debtor
before his death, section 43(17) of the Act provides as follows:

43. — (17) Where a debtor against whom a petition has been filed dies, the
proceedings shall, unless the court otherwise orders, be continued as if he were
alive.

Moreover, the Bankruptcy Rules provide that where a petition has been
filed against a debtor, and the debtor dies before service of the petition,
service may be effected on the debtor's legal personal representative.11

While these provisions deal with the filing of a petition before the death
of a debtor, the Act also deals with the filing of a petition after the death of
a debtor. Section 44(1) provides that "[s]ubject to section 43, a petition for
a receiving order may be filed against the estate of a deceased debtor".12 In
these circumstances, once served with the petition, the personal representa-
tive is required to hold the assets of the estate for the trustee in bankruptcy,
and is personally liable for any payment or transfer out of the estate, except
those in respect of funeral or testamentary expenses.13

of a receiving order, s. 43(9) provides that "the court shall appoint a licensed trustee as
trustee of the property of the bankrupt". Section 71(2) provides for the automatic vesting
of the property of the bankrupt in the trustee named in the receiving order.

11
L2

Voluntary bankruptcy is commenced by an insolvent person making "an assignment of all
his property for the general benefit of his creditors": Bankruptcy Act, supra, note 4, s. 49(1).
Upon the assignment being filed with an official receiver, s. 71(2) provides for the automatic
vesting of the property of the bankrupt in the trustee named in the assignment.

A debtor, either before or after bankruptcy, may make a proposal to her creditors which,
if accepted by the required majority of creditors, and if approved by the court, becomes
binding on all unsecured creditors: Bankruptcy Act, supra, note 4, ss. 50, 54, and 60-62. The
term "proposal" is defined in s. 2 of the Bankruptcy Act, to include "a proposal for a
composition, for an extension of time or for a scheme of arrangement". If the proposal is
not accepted by the creditors, or approved by the court, or if the debtor fails to fulfil the
terms of the proposal, the debtor is deemed to have made an assignment, that is, there is
an automatic bankruptcy: Bankruptcy Act, ss. 57(1), 61(2) and (3), and 63(1), (4) and (6).

Bankruptcy Rules, C.R.C. 1978, c. 368, r. 71.

The application of ss. 43-46 of the Bankruptcy Act, supra, note 4, is restricted in s. 48:

48. Sections 43 to 46 do not apply to individuals engaged solely in fishing, farming
or the tillage of the soil or to any individual who works for wages, salary, commission
or hire at a rate of compensation not exceeding twenty-five hundred dollars per year
and who does not on his own account carry on business.

Section 44(2) of the Bankruptcy Act, supra, note 4, provides as follows:

44. — (2) After service of a petition for a receiving order on the legal personal
representative of a deceased debtor, he shall not make payment of any moneys or
transfer any property of the deceased debtor, except as required for payment of the

164

A petition for a receiving order must allege that the debtor has commit-
ted an act of bankruptcy within the six months preceding the filing of the
petition.14 Although section 44(1) of the Act provides expressly that a peti-
tion for a receiving order may be filed against the estate of a deceased
debtor, it does not address the question whether the act of bankruptcy that
must be alleged in the petition must have been committed by the debtor
before her death or, alternatively, whether the personal representative can
commit an act of bankruptcy on behalf of the estate. This issue was consid-
ered in Re Cavicchi,15 although prior to the enactment of what is now section
44(1).16 The most extreme view of the court was expressed by Mr. Justice
Mellish, in the following terms:17

But taking the word 'person' as making the word 'debtor' include not only
himself but his personal representatives for all purposes is I think going beyond
what the Act really means. A debtor and his legal representative are different
entities and it is not the part of the Legislature to make them the same or to
alter the powers or capacities of the legal representatives of deceased debtors.

The 'debtor' under the Act so far as 'committing' acts of bankruptcy or
making an assignment in bankruptcy are concerned is obviously intended to be
a person in esse as distinguished from his representative after he has ceased to
exist, the ultimate effect or object being to have the debtor's own property
equitably disposed of and release him from further liability for his debts.

The majority decision, written by Mr. Justice Doull, reached the same result,
but without quite so clear a statement of principle.

Assuming the correctness of this decision, the question arises whether
the enactment of what is now section 44(1) can be regarded as altering the
result. In Re Gillingham,ls Smily J. expressed the view, albeit in obiter, that
the provisions of the Act, including what is now section 44(1) and the
definition of the terms "debtor" and "person",19 were sufficient to apply to
the estate of a deceased debtor, notwithstanding the fact that the act of

proper funeral and testamentary expenses, until the petition is disposed of, otherwise,
in addition to any penalties to which he may be subject, he is personally liable therefor.

As to the meaning of the term "testamentary expenses", see infra, note 31.

Bankmptcy Act, supra, note 4, s. 43(l)(b). See, also, the discussion supra, note 8.

[1935] 2 D.L.R. 64, 16 C.B.R. 272 (N.S.S.C.) (subsequent references are to [1935] 2 D.L.R.).

16 The provision was first enacted in 1949 by the Bankruptcy Act, 1949, S.C. 1949 (2d Sess.),

c. 7, s. 22.

Re Cavicchi, supra, note 15, at 65.

18 [1955] O.W.N. 270, 35 C.B.R. 10 (H.C.J, in Bktcy) (subsequent references are to [1955]
O.W.N.).

See supra, note 7.

165

bankruptcy alleged in the petition did not occur until after the death of the
debtor.20 A similar view has been expressed in the following terms:21

In connection with the act of bankruptcy being committed after the death
of a deceased debtor, it would seem that the wording of the definition of 'debtor'
and 'person' is wide enough to include such an act. If the estate of a deceased
person can be petitioned into bankruptcy, it would seem that the act of bank-
ruptcy should be capable of being committed by the executor or administrator
of the estate.

Accordingly, it would appear that an insolvent estate might be adminis-
tered under the Bankruptcy Act, at the instance of the creditors, as the result
of a petition for a receiving order being filed either before or after the death
of the debtor. Moreover, it would appear that the act of bankruptcy, alleged
in the petition, might occur either before or, arguably, after the death of the
debtor.

We noted earlier that, not only might an insolvent estate be petitioned
into bankruptcy by its creditors, but the personal representative of the estate
might make a voluntary assignment into bankruptcy.22 Section 49(1) of the
Bankruptcy Act provides for this possibility as follows:

49. — (1) An insolvent person or, if deceased, his legal personal representa-
tive with the leave of the court, may make an assignment of all his property for
the general benefit of his creditors.

Moreover, section 49(1) has been applied, by analogy, in connection
with the filing of a proposal under the Act.23 Unlike the sections of the
Bankruptcy Act, discussed above, which apply expressly in the case of a
deceased debtor, section 50(1) of the Bankruptcy Act provides simply that a
proposal may be made by an insolvent person and a bankrupt.24 After
referring to the definition of the term "person" in section 2 of the Act,25 and
to certain sections of the Act that apply expressly to deceased debtors, it
was concluded that "in a proper case, by analogy to s. 26(1) [now section
49(1)], leave can be given by the court to the executors or other legal
representatives of a deceased insolvent person to file a proposal before
bankruptcy".26 As we noted earlier, if the proposal is not accepted by the

Re Gillingham, supra, note 18, at 273.

Houlden, Comment (1955-56), 35 C.B.R. 13, at 13-14. The author acknowledged, however,
referring to Re Cavicchi, supra, note 15, that strong support exists for the contrary view.

See the discussion supra, note 9.
23 Re Piotrowski (1970), 16 C.B.R. (N.S.) 28 (Ont. S.C. in Bktcy).
See the discussion supra, note 10.
See supra, note 7.
Re Piotrowski, supra, note 23, at 29.

166

creditors, or not approved by the court, or if the debtor fails to fulfil the terms
of the proposal, the debtor will be deemed to have made an assignment.27

Whether bankruptcy results from the making of a receiving order or an
assignment, the right to payment of all claimants in the bankruptcy will be
determined in accordance with the scheme of distribution set out in the Act.
The general principle embodied in the Act is equality of distribution. Section
141 provides that "[sjubject to this Act, all claims proved in a bankruptcy
shall be paid rateably". Accordingly, unless the Act itself provides for a
different order of priority, all claims rank pari passu. Section 136(1), however,
identifies ten classes of creditors who are entitled to be paid in the order of
priority set out in the section. Section 136(1 )(a), which is of particular
relevance, provides as follows:28

136. — (1) Subject to the rights of secured creditors, the proceeds realized
from the property of a bankrupt shall be applied in priority of payment as
follows:

(a) in the case of a deceased bankrupt, the reasonable funeral and testa-
mentary expenses incurred by the legal personal representative of the
deceased bankrupt;

Reasonable funeral and testamentary expenses, therefore, rank as a
first priority in the distribution of an estate of a deceased bankrupt. While
the words "deceased bankrupt" might have been thought to render this
section applicable only where the debtor dies after bankruptcy,29 it has been
held to apply as well where the debtor dies before bankruptcy, that is, where
a receiving order or an assignment is made in respect of an estate of a

27
28

Supra, note 10.

In addition to the preferred claim for funeral and testamentary expenses, the other pre-
ferred claims set out in s. 136(1) are as follows: the costs of administration of the bankruptcy;
the Superintendent of Bankruptcy's levy; wages and other compensation owing for services
rendered to the bankrupt; municipal taxes that are not a lien against the real property of the
bankrupt; arrears of rent; legal costs of the first seizing creditor; workmen's compensation,
unemployment insurance and deductions under the Income Tax Act, R.S.C. 1952, c.148, as
substantially re-enacted by S.C. 1970-71-72, c. 63; claims for injuries to employees not
covered by workmen's compensation legislation; and other claims of the provincial or
federal Crown.

See, for example, the following discussion in Canada, Report of the Study Committee on
Bankruptcy and Insolvency Legislation (1970) (hereinafter referred to as "Tasse Report"),
para. 3.2.068, at 120:

The reference to a 'deceased bankrupt' can only be to a debtor who has died after
he became bankrupt. It cannot refer to a debtor whose estate becomes bankrupt after
his death, as the estate cannot be referred to as a 'deceased bankrupt'. This creates
the anomalous result that a claim for funeral expenses, which existed as of the date
of bankruptcy of an insolvent estate, is not given a priority, while a claim for funeral
expenses, which was not even in existence at the date of the bankruptcy of the debtor,
ranks as a first priority. Furthermore, this is a strange result since such a claim, having
necessarily occurred after the bankruptcy, is not "provable in bankruptcy" and, for
that reason, should not normally qualify for a dividend.

167

deceased debtor.30 Accordingly, the reasonable funeral and testamentary
expenses31 incurred by the legal personal representative are to be paid out
of the estate in priority to all preferred claims, irrespective of whether the
debtor dies before or after bankruptcy.

After the preferred claims set out in section 136 have been paid in full,
the remainder of the estate is paid to the general creditors, who share
rateably.32

b. Proposals for Bankruptcy Reform

Any discussion of bankruptcy law in Canada is complicated by the
fact that the process of bankruptcy reform, commenced in 1966 with the
appointment of the Tasse Committee,33 is still incomplete. While no fewer
than six insolvency bills were introduced in Parliament between 1975 and
1984, all died on the Order Paper.34 To a large extent, those bills would have
enacted most of the substantive recommendations contained in the Tasse
Report.35 For present purposes, the most important of these proposals was
the recommendation that "the priority given for funeral and testamentary
expenses should be abolished".36

In view of the difficulties encountered in the unsuccessful attempts to
replace the Bankruptcy Act with comprehensive insolvency legislation, it

30 Re Bertram Estate, [1972] 3 O.R. 903, 30 D.L.R. (3d) 46 (S.C. in Bktcy).

It has been held that the term "testamentary expenses" includes the compensation payable

to the administrators of the estate, prior to bankruptcy, as well as compensation for the legal

services provided by their solicitors: ibid. Presumably this interpretation of "testamentary

expenses" would apply as well to s. 44(2) of the Act, reproduced supra, note 13.

In the event that all claimants in the bankruptcy are paid in full, any surplus would be
returned to the personal representative. Section 144 of the Bankruptcy Act, supra, note 4,
provides as follows:

144. The bankrupt or the legal personal representative of a deceased bankrupt is
entitled to any surplus remaining after payment in full of his creditors with interest
as provided by this Act and of the costs, charges and expenses of the bankruptcy
proceedings.

35
36

In 1966 the federal government appointed the Tasse Committee "to review and report on
the bankruptcy and insolvency legislation of Canada": Tasse Report, supra, note 29, para.
0.0.01, at xi.

For a brief chronology, see Morrison, "The Impact of Bankruptcy Preference Rules on
Commercial Secured Financing in the United States and Canada", in Springman and
Gertner (eds.), Debtor-Creditor Law[:] Practice and Doctrine (1985) 551, at 557, n. 42.

Supra, note 29.

Ibid., para. 3.2.069, at 121. The Tasse Report made no other recommendations dealing
expressly with deceased debtors. As to the intention to enact this recommendation, see,
for example, s. 265(4) of the Insolvency Act, Bill C-17, 1983-84 (32nd Pari., 2d Sess.), which
would not have included creditors in respect of funeral and testamentary expenses in the
definition of "preferred creditors".

168

would appear that the decision has been made simply to amend the existing
Act. In 1985, an Advisory Committee on Bankruptcy and Insolvency was
established "to examine the bankruptcy system, assess possible reforms and
recommend to the Minister amendments to the Act that would make it more
flexible and bring it more into line with current conditions".37 With respect
to the priority for funeral and testamentary expenses,38 the Colter Report
differed from the Tasse Report, recommending that the protection in section
136(l)(a) [then section 107(1 )(a)] of the Bankruptcy Act39 should be
retained.40 It recommended further, however, that "to avoid the uncertainty
of what constitutes 'reasonable expenses' and unnecessary legal actions, the
funeral expenses should not exceed in any case $5,000". 41

The most recent position of the federal government respecting bank-
ruptcy reform has been outlined in a paper issued in June 1988 by Consumer
and Corporate Affairs Canada.42 While this paper proposes that a number
of amendments be made to the current Bankruptcy Act, it is silent with respect
to the current priority accorded to funeral and testamentary expenses.43
Accordingly, it would appear that the intention to abolish or modify the
present priority has been abandoned.

(ii) Administration Under the Trustee Act

Section 50(1) of the Trustee Act44 provides, in essence, that, where there
is a deficiency of assets, the general creditors of a deceased's estate are to
be paid pari passu.45 It has been held that section 50(1) abolishes all priority

T -7

~ Canada, Proposed Bankruptcy Act Amendments[:\ Report of the Advisory Committee on
Bankruptcy and Insolvency (2d ed., 1986) (hereinafter referred to as "Colter Report"), at
18.

The Colter Report, ibid., made no other recommendations dealing expressly with deceased
debtors.

Reproduced supra, this ch., sec. 2(b)(i)a.
Colter Report, supra, note 37, at 80.
Ibid.

41
42

43
44

Consumer and Corporate Affairs Canada, Proposed Revisions to the Bankruptcy Act (1988),
reproduced in Houlden and Morawetz, Bankruptcy Law of Canada (3d ed., 1989), Vol. 1,
at ND-2.

Indeed, the paper is silent with respect to the position of deceased debtors generally.

Supra, note 5.

Section 50(1) of the Trustee Act, ibid., provides as follows:

50. — (1) On the administration of the estate of a deceased person, in the case of a
deficiency of assets, debts due to the Crown and to the personal representative of the
deceased person, and debts to others, including therein debts by judgment or order,
and other debts of record, debts by specialty, simple contract debts, and such claims
for damages as are payable in like order of administration as simple contract debts
shall be ^\d pari passu and without any preference or priority of debts of one rank or

169

among creditors in the administration of an insolvent estate, including the
priority otherwise accorded to an execution creditor, and that the Creditors'
Relief ActAb has not altered this result.47 Moreover, as we noted in an earlier
chapter,48 section 50( 1 ) abolishes the personal representative's right to retain
out of the assets of the estate in her possession the amount of any debt due
to her from the deceased, in preference to all other creditors of equal
degree.49

Secured creditors, on the other hand, must value their security and,
provided the personal representative does not elect to take over the security,
may participate in the distribution of the estate to the extent of their unse-
cured deficiency.50 The personal representative may elect either to consent
to the creditor ranking for the amount of her unsecured deficiency or,
alternatively, to require an assignment of the security at the value specified
by the creditor, in which case the creditor may rank for the remainder of
her claim.51

nature over those of another; but nothing herein prejudices any lien existing during
the lifetime of the debtor on any of his property.

Legislation similarly premised upon a deficiency of assets, and providing for the payment
of creditors on a pari passu basis, exists elsewhere in Canada. See, for example, The Trustee
Act, R.S.S. 1978, c. T23, s. 74; The Trustee Act, R.S.M. 1987, c. T160, s. 63(1); Administration
of Estates Act, R.S.A. 1980, c. A-l, s. 43(1); Probate Act, R.S.P.E.I. 1974, c. P-19, s. 19,
reproduced infra, note 108; and Probate Court Act, S.N.B. 1982, c. P-17.1, s. 64, reproduced,
in part, infra, note 108.

In England, insolvent estates might also be administered outside of bankruptcy. Section
4(1) of The Administration of Insolvent Estates of Deceased Persons Order 1986, supra,
note 7, provides as follows:

4. — ( 1 ) Where the estate of a deceased person is insolvent and is being administered
otherwise than in bankruptcy, subject to paragraphs (2) and (3) below, the same
provisions as may be in force for the time being under the law of bankruptcy with
respect to the assets of individuals adjudged bankrupt shall apply to the administration
of the estate with respect to the respective rights of secured and unsecured creditors,
to debts and liabilities provable, to the valuation of future and contingent liabilities
and to the priorities of debts and other payments.

The exceptions, set out in s. 4(2) and (3) of the Order, are (1) that "[t]he reasonable
funeral, testamentary and administration expenses have priority over the preferential debts
listed in Schedule 6 to the Act", and (2) the requirement in s. 292(2) of the Act that a
trustee of a bankrupt estate must be a qualified insolvency practitioner does not apply.

46 R.S.O. 1980, c. 103.

47 Re Williamson (1917), 39 O.L.R. 413, 36 D.L.R. 783 (H.C. Div.).

Supra, ch. 2. sec. 3(d).

See Baker, Widdijield on Executors' Accounts (5th ed., 1967) (hereinafter referred to as
"Widdifield"), at 85.

Trustee Act, supra, note 5, SS. 57-58.

Ibid., s. 57(2). "This effectively prevents the creditor from alleging an unreasonably low
value for his security, and by so doing increase his claim for the balance. Too high a
valuation is not a problem since it could only prejudice the secured creditor to the benefit
of the estate": Widdifield, supra, note 49, at 83.

170

Notwithstanding the general rule of equality of distribution embodied
in section 50(1), it would appear that funeral expenses, testamentary ex-
penses, and the costs of administration, continue to be entitled to priority.52
The existence and nature of that priority have been described as follows:53

Although priority among creditors has been abolished because the
deceased must be decently and properly buried, and because the executor or
administrator is personally liable for the costs of and incidental to the proper
administration of the estate, these expenses are a first charge upon the moneys
coming to the hands of the personal representative. 'It appears to me,' said
Jessel M.R., 'that the executor is liable to pay the funeral expenses, even without
an order on his part, if he has any assets available for the purpose; and it has
also been decided that the funeral expenses are a first charge on the assets':
Sharp v. Lush. . . .

Testamentary expenses and the costs of administration are the next charges
on the assets of the estate. . . . Costs of administration include whatever sum is
allowed to an executor or administrator for his care, pains and trouble and time
in and about the estate.

Finally, it should be noted that section 59 of the Trustee Act54 provides
for the appointment of inspectors, as follows:

59. — (1) Where in the administration of the estate of a deceased person the
personal representative fears that there may be a deficiency of assets or that all
the creditors will not be paid in full, the personal representative may call a
meeting of creditors and lay before them the situation of the estate and at such
meeting inspectors may be appointed by the creditors to assist the personal
representative in the administration of the estate and to advise him with respect
thereto.

(2) In any such case the personal representative shall call a meeting of
creditors for the purpose aforesaid at the request in writing of creditors holding
10 per cent of the amount of claims filed against the estate.

(3) In cases where no meeting of creditors has been held, the personal
representative may appoint a creditor or creditors as inspector or inspectors to
assist him in the realizing and management of the estate but in such case the
appointment shall be approved by the surrogate judged before the inspectors
accept office.

The funeral expenses, however, must be reasonable having regard to the circumstances.
See Hutzal v. Hutzal, [1942] 2 W.W.R. 492 (Sask. K.B.).

53 Widdifield, supra, note 49, at 82.
Supra, note 5.

Sections 160 and 160a of the Courts of Justice Act, 1984, S.O. 1984, c. 11, as en. by S.O.
1989, c. 55, s. 31, contain no equivalent terminology for the phrase "surrogate judge". It is
unclear whether this reference will be to the "judge of the Ontario Court (General Divi-
sion)", or simply to the "judge".

171

The appointment of inspectors under the Act is permissive.56 Unless
initiative is taken by either the creditors or the personal representative, or,
if the court fails to approve the appointment when required to do so, an
insolvent estate will be administered without inspectors.57

Although section 59 provides three procedural mechanisms for the
appointment of inspectors, the duties of the inspectors, once appointed, are
somewhat less well defined. The only explicit requirement in the Act is that,
in making the election referred to above respecting the valuation of security
held by secured creditors, the personal representative must act under the
direction of the inspectors.58 Beyond this requirement, section 59 provides
simply that the inspectors are "to assist" and "to advise" the personal
representative in the administration.

(iii) Proceedings For Administration

Under the rules of court, proceedings may be brought by a creditor,
beneficiary, or personal representative of an estate of a deceased person,
for administration of the estate by the court.59 The granting of a judgment
for administration, however, is a matter within the discretion of the court.60
The rules provide that "[a] judgment for administration of an estate . . . shall
be granted only if the judge is satisfied that the questions between the parties
cannot otherwise be properly determined".61

56 See Widdifield, supra, note 49, at 83.

The advantages and disadvantages of appointing inspectors have been described, ibid., as
follows:

The advantage of having inspectors is that they protect the trustee against an
attack by a dissatisfied creditor, and they are undoubtedly useful in this way where the
trustees' decisions could be contentious.

The disadvantage of the inspectors is that they have to be paid, and that working
with them will often complicate the administration.

Trustee Act, supra, note 5, s. 57(3).

Rules of court, supra, note 6, r. 65.01(1), as am. by O.Reg. 711/89, s. 72.

Administration actions are also provided for under the English Rules of the Supreme
Court. See R.S.C. 1965, Ord. 85, r. 1 of which defines "administration action" to mean "an
action for the administration under the direction of the Court of the estate of a deceased
person or for the execution under the direction of the Court of a trust".

60 See, for example, Re Sieve* ( 1921), 51 O.L.R. 305, 67 D.L.R. 199 (App. Div.), andRePorter
(1917), 11 O.W.N. 363 (H.C. Div.).

Rules of court, supra, note 6, r. 65.01(2). Instead of granting a judgment for administration
of the estate, the judge may order that the personal representative render a statement of
accounts to the applicant, where no accounts or insufficient accounts have been rendered
by the personal representative. See ibid., r. 65.01(3).

58
59

172

It would appear that, in the exercise of this discretion, where the
proceeding is brought by a creditor or beneficiary, the courts are reluctant to
interfere with the administration of the estate by the personal representative,
unless there is some indication of incompetency or bad faith on her part.62
Similarly, where the proceeding is brought by the personal representative,
the court will grant a judgment for administration only where there is a
"substantial reason" for the application;63 the personal representative must
show "some special circumstances requiring the intervention of the Court".64
For example, an order for administration was granted where there had been
repeated and protracted litigation respecting the construction of the will
and the distribution of the estate, and where it was desirable, in view of all
the circumstances, that the estate should be administered by the court.65

Where a judgment for administration is granted, it will direct a refer-
ence.66 The referee is given the "power to deal with the property of the
estate . . . including power to give all necessary directions for its realization",
and is required to "finally wind up all matters connected with the estate . . .
without any further directions, except where the special circumstances of
the case require interim reports or interlocutory orders".67 Specific authori-
zation is given in the rules for the referee to publish advertisements for
creditors or beneficiaries of the estate, for the filing and examination of
claims, and for the adjudication of contested claims.68 When the hearing of
the reference is completed, the referee must prepare a report containing
her findings and conclusions.69 The report is of no effect, however, until it
is confirmed.70 Where the judgment directing the reference requires the
referee to report back, the report may be confirmed only upon a motion,
ordinarily before the judge who directed the reference.71 However, where
the judgment directing the reference does not require the referee to report
back, the report will be confirmed automatically upon the expiration of

62
63
64
65

Re McCully (1911), 23 O.L.R. 156 (H.C. Div.).

Re Cronan (1916), 10 O.W.N. 300 (H.C. Div.), at 301.

Re Champagne (1904), 7 O.L.R. 537 (H.C.J.), at 539.

Kennedy v. Kennedy (1913), 28 O.L.R. 1, 11 D.L.R. 328 (App. Div.), aff g (1912), 26 O.L.R.
105, 3 D.L.R. 536 (H.C.J.), aff d [1914] A.C. 215, 13 D.L.R. 707 (P.C.).

See rules of court, supra, note 6, r. 65.02(1). See, also, Form 65A prescribed under the
rules.

fsl

Rules of court, supra, note 6, r. 65.02(1).
68 Ibid., r. 55.03.

Ibid., r. 54.06. See, also, r. 55.02(22), and Form 55C, the prescribed form of the report in
an administration proceeding.

Ibid., r. 54.07.

Ibid., r. 54.08, as am. by O. Reg. 323/86, s. 1.

173

fifteen days from the date the report is filed, unless, within that time, a
notice of motion to oppose confirmation is served.72

Although wide powers are given to the referee to wind up all matters
connected with the estate, a further appearance before the court is necessary.
All moneys realized from the estate must be paid into court, and these funds
may be distributed or paid out only by order of a judge.73 Finally, it should
be noted that where there is a deficiency of assets, section 50(1) of the
Trustee Act,14 requires that, when the funds are paid out, the ordinary
creditors of the estate must be paid rateably.75

Determination of the appropriate procedure for the administration of
insolvent decedents' estates is complicated by the fact that section 91(21) of
the Constitution Act, 1867 assigns to the Parliament of Canada exclusive
jurisdiction in relation to matters of "Bankruptcy and Insolvency". Since the
provisions of the Trustee Act, discussed above, are premised on a deficiency
of assets — that is, insolvency — a question arises concerning the extent of
provincial competence to deal with insolvent estates. Presumably, however,
when required to resolve this constitutional issue, the courts will adopt the
approach described by Madam Justice Wilson in Re Deloitte, Raskins & Sells
Ltd. and Workers' Compensation Board:76

[T]he trend of the more recent authorities favours a restrictive approach to the
concept of 'conflict' and a construction of impugned provincial legislation,
where this is possible, so as to avoid operational conflict with valid federal
legislation. Where this is done both provisions can stand and have their own
legitimate spheres of operation.

Although provincial legislation respecting the administration of insol-
vent decedents' estates might be vulnerable to constitutional challenge, we
recommend that the present parallel systems providing for the administra-
tion of such estates should be retained. We recommend below that the court
should be given the discretion to dismiss or annul bankruptcy proceedings
if, in its opinion, alternative means for the administration of the estate would
be more efficient, or less expensive.

73
74
75

Ibid., r. 54.09(1). A party seeking confirmation before the expiration of 15 days may bring
a motion for confirmation before a judge. See ibid., r. 54.09(4)

Ibid., r. 65.02(3).

Reproduced supra, note 45.

Section 50(1) of the Trustee Act applies to an administration by the court as well as an
administration by the personal representative. See Bank of British North America v. Mallorv
(1870), 17 Gr. 102 (Ch.).

[1985] 1 S.C.R. 785, at 808, 19 D.L.R. (4th) 577, at 594.

174

As a consequence of their familiarity with the Trustee Act,11 certain
estates practitioners might prefer to administer insolvent estates under the
provisions of that Act. To some extent, however, such a preference might
also be a function of the fact that, in a variety of respects, the Bankruptcy
Act has failed to provide adequately for the specialized requirements of
estates administration.78 Bankruptcy proceedings are also perceived as being
complex, expensive, and not particularly well suited to the quick and efficient
administration of estates of deceased persons.79 Retention of the parallel
systems, in our view, would respond to the needs of both the ordinary estate,
which could be administered relatively quickly and inexpensively under the
provisions of the Trustee Act, and the more complicated estate, which might
require the resolution of numerous complex commercial matters, and for
which the Bankruptcy Act might be better suited.

We now turn to consider each of the procedures that, under our propos-
als, would be available for the administration of insolvent decedents' estates
in Ontario, and we make a number of recommendations for their reform.

Earlier in this chapter80 we noted that the Bankruptcy Act applies gener-
ally to the estates of deceased persons. However, it makes only sporadic
reference to the specific context of decedents' estates. Since fundamental
reform of the Bankruptcy Act has been contemplated for some time, it might
be appropriate for the Parliament of Canada to consider the inclusion of
provisions directed at the unique problems associated with the administra-
tion of insolvent decedents' estates. Indeed, there are a number of difficulties
and lacunae that perhaps ought to be addressed expressly in the Act. In
general, these arise from the fact that the primary focus of the statute is the
administration of estates of living persons. Several examples follow.81

First, the Bankruptcy Act fails to address the question whether, and to
what extent, a distinction ought to be made between creditors of the
deceased, on the one hand, and creditors of the personal representative,
acting in a representative capacity, on the other. Debts might be incurred
by the personal representative, on behalf of the estate, for a variety of

77
78

80
81

Supra, note 5.

The shortcomings of the Bankruptcy Act, supra, note 4, in this context are discussed briefly
infra, this sec.

See, for example, Re Gillingham, supra, note 18, at 272, where a petition for a receiving
order was dismissed, leaving the estate to be administered by the executrix under the
provisions of the Trustee Act, to avoid "putting the estate to the expense of bankruptcy
proceedings".

Supra, this ch., sec. 2(b)(i)a.

The following discussion is derived, in large part, from Wellman, "Bankruptcy Proceedings
For Insolvent Decedents' Estates" (1973), 6 U. Mich. J.L. Ref. 552. While this article refers
to the U.S. Bankruptcy Code, supra, note 7, similar considerations arise in the Canadian
context.

175

reasons, including running a business authorized by the deceased, funeral
expenses, probate fees, and other expenses of administration.

Second, since a decedent's estate might be at any stage of administration
when it is sought to invoke the provisions of the Bankruptcy Act — from prior
to appointment of a personal representative, to essentially fully adminis-
tered—consideration might be given to the inclusion of a limitation period,
after which bankruptcy proceedings would not be permitted in respect of an
estate of a deceased person. Ideally, such a limitation period would seek to
achieve a balance between "the need of creditors for a decent opportunity
after learning of their debtor's death to discover facts and plan strategies
designed to minimize their losses" and "the legitimate concerns of those who
are interested in an early end to questions about the decedent's affairs".82

Third, it might be appropriate to consider the relationship between the
Bankruptcy Act and the summary claims procedure recommended later in
this report.83 For example, it might be desirable to resolve, as a matter of
principle, whether creditors who are precluded from asserting their claims
for failure to notify the estate trustee within the appropriate time limit
should be permitted nevertheless to commence or participate in subsequent
bankruptcy proceedings.

Fourth, in view of the proposals to abolish or restrict the priority granted
in the Bankruptcy Act for funeral and testamentary expenses,84 it might be
useful to seek a rapprochement between the federal and provincial philoso-
phies on priorities.

Fifth, a difficult issue arises in connection with the determination of
the property of the bankrupt.85 A number of devices are routinely employed

82 Ibid., at 568.

See infra, this ch., sec. 4(d).

Bankruptcy Act, supra, note 4, s. 136(l)(a). The proposals for such reform are discussed
supra, this ch., sec. 2(b)(i)b.

Section 67 of the Bankruptcy Act, supra, note 4, defines the property of a bankrupt divisible
among his creditors, as follows:

67. The property of a bankrupt divisible among his creditors shall not comprise

(a) property held by the bankrupt in trust for any other person,

(b) any property that as against the bankrupt is exempt from execution or
seizure under the laws of the province within which the property is situated
and within which the bankrupt resides,

but it shall comprise

(c) all property wherever situated of the bankrupt at the date of his bankruptcy
or that may be acquired by or devolve on him before his discharge, and

(d) such powers in or over or in respect of the property as might have been
exercised by the bankrupt for his own benefit.

176

by debtors to prevent assets from forming part of their estate upon death.
For example, property held by a debtor in joint tenancy with another does
not vest in his personal representative,86 but rather passes to the surviving
joint tenant by right of survivorship. While the bankruptcy estate of a living
debtor would include the debtor's interest in jointly held property, the
bankruptcy estate of the estate of a deceased debtor would not include the
decedent's interest in such property.87 Similarly, while the bankruptcy estate
of a living debtor would include a power in respect of property that might
be exercised by the bankrupt for his own benefit,88 where the debtor has
been given a general power of appointment that terminates on death, the
debtor's death ends both his, and his trustee in bankruptcy's, ability to
exercise the power.89 The existence of such discrepancies suggests that it
might be desirable to consider, as a matter of principle, whether any "suffi-
cient reason appears why property that a debtor might have made his own
as of a moment before his death, and so a part of his estate, should not be
included in his estate for bankruptcy purposes".90

Finally, while section 44(1) of the Bankruptcy Act provides expressly that
a petition for a receiving order may be filed against the estate of a deceased
debtor, we indicated above91 that it fails to address the question whether
the act of bankruptcy, which must be alleged in the petition, must have
been committed by the debtor before her death, or whether the personal
representative could commit an act of bankruptcy on behalf of the estate.

In view of these difficulties, the Commission recommends that repre-
sentations should be made to the Government of Canada to review the

90
91

Section 2(1) and (2) of the Estates Administration Act, R.S.O. 1980, c. 143, provides as
follows:

2. — (1) All real and personal property that is vested in a person without a right in
any other person to take by survivorship, on his death, whether testate or intestate and
notwithstanding any testamentary disposition, devolves to and becomes vested in his
personal representative from time to time as trustee for the persons by law beneficially
entitled thereto, and, subject to the payment of his debts and so far as such property is
not disposed of by deed, will, contract or other effectual disposition, it shall be adminis-
tered, dealt with and distributed as if it were personal property not so disposed of.

(2) This section applies to property over which a person executes by will a general
power of appointment as if it were property vested in him.

In the case of a living debtor, bankruptcy operates as a severance of a joint tenancy, vesting
the debtor's interest in the trustee for the benefit of creditors. See Re White (1928), 8C.B.R.
544 (Ont. S.C. in Bktcy), and Re Chisick (1967), 62 D.L.R. (2d) 319, 60 W.W.R. 432 (Man.
Q.B.), aff d (1967), 66 D.L.R. (2d) 543, 62 W.W.R. 586 (Man. C.A.). By contrast, in the
case of a deceased debtor, the debtor's death ends the ability to sever a joint tenancy.

Bankruptcy Act, s. 67(d), reproduced supra, note 85.

Nichols to Nixey (1885), 29 Ch.D. 1005.

Wellman, supra, note 81, at 589.

See supra, this ch., sec. 2(b)(i)a.

177

Bankruptcy Act from the perspective of estate administration, to ensure its
utility in estate administration procedures.

Section 43(7) of the Bankruptcy Act provides the court with the discre-
tion to dismiss a petition for a receiving order where it is satisfied that
"for . . . sufficient cause no order ought to be made". This discretion has
been used to dismiss a petition where the court was of the opinion that it
would not be to the advantage of the creditors of a deceased's estate to
make the order, since the assets could be distributed among the creditors
of the deceased more economically and expeditiously by leaving the estate
in the hands of the executrix.92 Moreover, section 181(1) of the Bankruptcy
Act provides that "[w]here, in the opinion of the court, a receiving order
ought not to have been made or an assignment ought not to have been filed,
the court may by order annul the bankruptcy". It is not clear whether
the discretion contained in section 181(1) would be exercised to annul a
bankruptcy where the court is of the opinion that the assets could be distrib-
uted more economically and expeditiously by leaving the estate in the hands
of the estate trustee. It has been held that an insolvent person has a right
to make an assignment under the Act, and that an assignment will not be
annulled "even if there is an ulterior purpose, provided there is no fraud on
the creditors and no abuse of the process".93 However, it has been further
held that where the effect of an assignment would be of no benefit to the
bankrupt, and would be detrimental to the only creditor who would receive
any distribution from the estate, the assignment ought not to have been filed
as it constituted an abuse of process.94 If, as we proposed above, the current
parallel systems providing for the administration of estates of deceased per-
sons are retained, it might be desirable if the Bankruptcy Act dealt explicitly
with the court's discretion in the context of decedents' estates. Accordingly,
the Commission recommends that representations should be made to the
Government of Canada to amend the Bankruptcy Act to provide explicit dis-
cretion to the bankruptcy judge to dismiss a petition for a receiving order, or
annul a bankruptcy, if, in her opinion, alternative legislation for the administra-
tion of the estate would provide a more efficient or less expensive procedure.

The Commission now turns to consider certain recommendations in
connection with the Trustee Act. We have already acknowledged the potential
vulnerability to constitutional challenge of the Trustee Act provisions respect-
ing insolvent decedents' estates, and we have recommended nevertheless
that the present parallel systems providing for the administration of such
estates should be retained.95 In our view, the risk that the Trustee Act
provisions might be held to be unconstitutional would be reduced substan-
tially by ensuring that the scheme of priorities established in the Act is, to

Re Gillingham, supra, note 18.

93 Re Louis & Peter Co. Ltd. (1988), 67 C.B.R. (N.S.) 176 (Ont. S.C., in Bktcy), at 178.

94 Ibid.

Supra, this sec.

178

the extent possible, the same as or similar to the scheme of priorities estab-
lished in the Bankruptcy Act. By rationalizing the two legislative schemes
there would be no substantive, as opposed to procedural, advantage in
utilizing one procedure over the other.

While both the Trustee Act96 and the Bankruptcy Act97 provide for a
pari passu distribution among creditors, there are fundamental differences
between the two schemes. As we noted earlier, the principle of equality of
distribution contained in the Bankruptcy Act98 is subject to section 136(1),
which identifies ten classes of creditors who are entitled to be paid in the
order of priority set out in the section. A review of these preferred creditors,"
however, discloses that the administration of most decedents' estates would
not involve such claims. Accordingly, in our view, the current Trustee Act
provisions might not be as vulnerable to constitutional challenge as might
otherwise be suggested. We recommend, therefore, that, subject to the
recommendations made below, the present provisions contained in the
Trustee Act respecting the administration of insolvent decedent estates
should be retained.

Earlier in this chapter, we indicated that section 136(l)(a) of the Bank-
ruptcy Act provides priority for "the reasonable funeral and testamentary
expenses incurred by the legal personal representative of the deceased
bankrupt".100 With respect to the Trustee Act, we indicated that while section
50(1) provides for a rateable distribution only, that section would appear to
be subject to the common law priority for funeral expenses, testamentary
expenses, and the costs of administration.101 Unfortunately, the precise
meaning of these terms, and their order of priority, are not entirely clear.
For example, in a passage quoted above,102 it was indicated that funeral
expenses constitute a first charge on the assets of an estate, while testamen-
tary expenses and the costs of administration are the next charges. The
same commentator later defined testamentary expenses to include funeral
expenses,103 and stated that "[t]estamentary expenses are a first charge upon

Supra, note 5, s. 50(1).

Supra, note 4, s. 141.

98 Ibid.

See supra, note 28.

100 See supra, this ch., sec. 2(b)(i)a. We also noted that, while certain proposals for reform of
the Bankruptcy Act would have abolished or restricted this priority, the most recent position
of the federal government respecting bankruptcy reform would retain the present priority.
See supra, this ch., sec. 2(b)(i)b.

101
102
103

See supra, this ch., sec. 2(b)(ii).

See supra, text accompanying note 53.

Testamentary expenses were described in Widdifield, supra, note 49, at 116, as follows:

Testamentary expenses, Administration expenses and Executorship expenses are
synonymous terms. T cannot distinguish between "executorship expenses" and "testa-

179

the estate".104 Moreover, while the personal representative's compensa-
tion—that is, the costs of administration105 — are stated not to be included
in testamentary expenses,106 it would appear that "[t]he compensation to
which an executor or administrator is entitled is treated by the Court as a
lien or charge upon the estate" and "[t]he compensation is in the same
category as any other expenses incurred by him".107

We have concluded that, in order to clarify the present law, the Trustee
Act should be amended to provide expressly that funeral expenses, testamen-
tary expenses, and the costs of administration, have priority. While it might
not be possible to provide an exhaustive definition of these terms, we have
concluded that, to the extent possible, their meaning should be clarified.
Moreover, in our view, the nature of the priority should be clarified, as
discussed below.108

mentary expenses". As I understand the words "executorship expenses", they are the
expenses incident to the proper performance of the duty of the executor in the same
way as testamentary expenses are, neither more nor less.' Per Jessel M.R., Sharp v.
Lush . . .

The term 'executorship expenses' in a will means expenses incident to the proper
performance of the duty of an executor, and includes costs incurred by executors in
obtaining the advice of solicitors and counsel as to the distribution of their testator's
estate; also the costs cf the executors and other parties in an action, whether instituted
by the executors themselves, or by the beneficiary, for the administration of the estate;
also the testator's funeral expenses; also expenses incurred by the executors for the
protection of specific legacies . . . and payments by the executors in discharge of debts
falling due from the testator's estate after his death. . . .

104 Ibid., at 118.

Costs of administration include "whatever sum is allowed to an executor or administrator
for his care, pains and trouble and time in and about the estate". See ibid., at 82.

106 Ibid., at 117.

107 Ibid., at 339.

A similar approach can be found in a number of jurisdictions. See, for example, s. 64(1) of
the New Brunswick Probate Court Act, supra, note 45, which provides as follows:

64. — (1) The assets of an estate shall be applied in priority of payment as follows:

(a) funeral expenses;

(b) probate costs;

(d) wages given priority by the Wage-Earners Protection Act;

(e) liabilities incurred by a personal representative in respect to the adminis-
tration of the estate;

(f) commission allowed a personal representative in relation to the administra-
tion of the estate.

Similarly, s. 19 of the Prince Edward Island Probate Act, supra, note 45, provides:

19. If the assets of the estate are insufficient to pay all the debts of the deceased in

180

The Commission has also considered whether a statutory lien should
be granted to secure the claims entitled to priority. In an earlier chapter of
this report109 we indicated that a personal representative, like a trustee, may
reimburse herself out of the assets of the estate for all expenses properly
incurred in the course of discharging her responsibilities. The personal
representative has, for the securing of this right of indemnity, a lien on the
assets of the estate.110 This principle has been partially codified by section
33 of the Trustee Act,111 which provides that a trustee "may reimburse himself
or pay or discharge out of the trust property all expenses incurred in or
about the execution of his trust or powers".112

At present, it is unclear whether the lien on the assets of the estate,
securing the personal representative's right of indemnity, would be sufficient
to constitute the personal representative a secured creditor in the event of
the bankruptcy of the deceased's estate. A similar concern arises in connec-
tion with the personal representative's right to compensation,113 which is
also treated as a lien or charge on the estate.114 The personal representative
would be entitled to rank as a secured creditor only if the lien were held to
constitute a specific charge on property. If, however, the personal represen-
tative's lien were held to be similar in nature to a solicitor's lien, which gives
a right merely to retain property, as opposed to a property right in specific

full, the personal representative shall make payment thereof in the following order

(a) mortgages on real or personal property and liens including judgment and
execution liens as against the property on which they severally attach;

(b) funeral expenses in an amount not exceeding $1,500;

(d) medical and nursing expenses of last illness but not exceeding the last one
month's expenses;

(e) all other debts on an equal footing including the balance of funeral
expenses and the balance of medical and nursing expenses (if any).

See, also, s. 4(1) and (2) of the Administration of Insolvent Estates of Deceased
Persons Order, supra, note 7, discussed supra, note 45, and National Conference of Commis-
sioners on Uniform State Laws, Uniform Probate Code, § 3-805.

Supra, ch. 2, sec. 5(g).

110 Widdifield, supra, note 49, at 102.

Supra, note 5.

112

In an earlier report, the Commission recommended that the revised Trustee Act should
contain a provision to the effect that trustees may reimburse themselves or pay or discharge
out of trust property all expenses incurred in or about the administration of the trust. See
Ontario Law Reform Commission, Report on the Law of Trusts (1984), Vol. 1, at 248. In an
earlier section of this report, we recommended that estate trustees should enjoy this power
as well. See supra, ch. 2, sec. 5(g).

113
114

The compensation of personal representatives is discussed supra, ch. 2, sec. 5.
Widdifield, supra, note 49, at 339.

181

assets,115 the personal representative would not be entitled to rank as a
secured creditor.

We have concluded that a statutory lien should be granted to secure
the claims we have proposed should be granted priority. In our view, this
would not only clarify the present uncertainty in the law, but it would, to
the extent possible, ensure consistency between the provincial scheme of
priorities and the scheme of priorities established under the Bankruptcy Act,
even if the current preference for reasonable funeral and testamentary
expenses, contained in section 136(l)(a) of the Bankruptcy Act, is ultimately
abolished.116 By constituting the estate trustee or other person who incurs
such expenses117 a secured creditor with respect to those claims, it would
ensure that the estate trustee or other person would rank in priority to
both ordinary and preferred creditors, irrespective of whether the estate is
administered under the Bankruptcy Act118 or the Trustee Act. Accordingly,
the Commission recommends as follows:

115

116

117

118

It has been held that the holder of a solicitor's lien is not a secured creditor in bankruptcy,
since the lien gives a right to retain property only, not a power to proceed against specifically
charged property. See Re Alberta Western Wholesale Lumber Ltd. (1961), 29 D.L.R. (2d)
277, 35 W.W.R. 648 (B.C.S.C), and Re Boscher (1961), 27 D.L.R. (2d) 359, 33 W.W.R. 644
(Alta. S.C. in Bktcy).

The proposals to abolish this priority are discussed supra, this ch., sec. 2(b)(i)b.

Earlier in this report we recommended that, as a general rule, the duty of disposal of the
body of the deceased should fall upon the estate trustee. However, we further recommended
that if no estate trustee has been named in the will or is appointed by the court, or if the
estate trustee is unavailable or unwilling to act, the family members should have the duty
to dispose of the body of the deceased. See supra, ch. 2, sec. 3(a).

As to the ability of provincial enactments to determine who is a secured creditor in
bankruptcy, see Hardy, Crown Priority in Insolvency (1986), at 23, where it is said:

A secured creditor is defined in section 2 of the [Bankruptcy] Act to include a person
holding one of a number of types of securities against a debtor's property. Because
the varieties of securities are not defined separately in the Act, their validity must be
determined by reference to other sources. The elements necessary for most security
interests in property to be created are defined in provincial enactments. It is clearly
within the competence of the provincial legislatures to pass these statutes under the
power to regulate 'property and civil rights within the province' granted by subsection
92(13) of the Constitution Act, 1867. Since the effect of subsections 50(6) and (7) [now
s. 72( 1 ) and (2)] of the Bankruptcy Act is that the provisions of the Act do not override
the application of other substantive laws not in conflict with them, the validity of
security interests asserted on the bankruptcy of the debtor is usually determined by
the applicable provincial laws.

It should be noted, however, that, to the extent the proposed charges secure reasonable
funeral and testamentary expenses, they might be held to be inoperative in bankruptcy, by
virtue of the priority accorded to such expenses in s. 136(1 )(a) of the Bankruptcy Act . The
Supreme Court of Canada has held that provincial statutory liens granted to secure claims
specifically referred to in s. 136 of the Bankruptcy Act will not entitle the holder to rank as
a secured creditor; provincial statutory liens cannot defeat the scheme of priorities expressly
created in s. 136(1). See Deputy Minister of Revenue (Quebec) v. Rainville, [1980] 1 S.C.R.
35, 105 D.L.R. (3d) 270, and Re Deloitte, Haskins & Sells Ltd. and Workers' Compensation
Board, supra, note 76. As a practical matter, however, the effect of such a result would be
insignificant if the priority contained in s. 136(1 )(a) is either retained or abolished. In both

182

(1) expenses for the disposal of the body of the deceased should consti-
tute a charge on the unencumbered portion of the assets of the
estate of the deceased, ranking in priority to the charges described
in paragraph (2) below, to the extent that such disposal expenses
were reasonable in the circumstances. Disposal expenses should
include, among other things, funeral expenses, transportation
expenses, casket, cemetery charges and a marker.

(2) testamentary expenses and costs of administration should consti-
tute a charge on the unencumbered portion of the assets of the
estate of the deceased, to the extent that such expenses are reason-
able in the circumstances. Such expenses should include fees associ-
ated with the obtaining of an estate trustee certificate, costs
incurred in obtaining legal advice as to the administration of the
estate, the costs of the estate trustees and other parties in an action
for the administration of the estate, expenses incurred for the
protection of the property of the estate, payments in discharge of
debts falling due after the death of the deceased, and the compensa-
tion to which the estate trustee is entitled by virtue of her adminis-
tration of the estate of the deceased.

Finally, in connection with the Trustee Act, we have considered the
desirability of retaining the provisions in the Act relating to the appointment
of inspectors.119 We noted earlier that the duties of the inspectors are not
well defined in the Act. Moreover, the Act fails to provide for the procedures
to govern the deliberations of inspectors, and fails as well to regulate their
relationship to the estate trustee. To overcome these problems extensive
statutory provisions would be required.120 As we indicated earlier, the pur-
pose of retaining the provisions contained in the Trustee Act was to provide
an expeditious and summary procedure for the administration of insolvent
decedents' estates. In order to fulfil this objective, it is essential, in our view,
that the estate trustee be given a relatively free hand in the management of
the estate. We have concluded, therefore, that the creation of complex
institutions, such as would be required to provide adequately for the appoint-
ment and duties of inspectors, would be counter-productive. Under our
proposals creditors would be protected adequately by the ability to have the
conduct of the estate trustee reviewed by the court. The sanction that, in
most cases, would deter wrongdoing is the personal liability of the estate
trustee.121 It should also be noted that creditors who do insist on further
safeguards might be able to obtain the additional protections afforded by

cases, the holders of such claims would be entitled to priority over all other preferred
creditors, in the case of retention, on the basis of the first priority granted in s. 136(l)(a),
and in the case of abolishment, on the basis of the statutory charge. The result might be
otherwise, however, if the relative priority granted to funeral and testamentary expenses
in s. 136(1) is altered, or if the priority is limited in amount.

119
120
121

Trustee Act, supra, note 5, ss. 59 and 57(3), discussed supra, this ch., sec. 2(b)(ii).
See, for example, ss. 116-20 of the Bankruptcy Act, supra, note 4.
The liability of the estate trustee is discussed supra, ch. 2, sec. 4.

183

the Bankruptcy Act by petitioning the estate into bankruptcy. Accordingly,
the Commission recommends that the institution of inspectors under the
Trustee Act should be abolished, and that sections 57(3) and 59 of the Trustee
Act should be repealed. Our conclusion in this respect is buttressed by the
understanding that, in practice, inspectors are seldom, if ever, appointed.

The Commission now turns to consider certain recommendations in
connection with proceedings for administration of an estate by the court
under the rules of court.122 Although such proceedings are rarely utilized,
they may be useful and appropriate in limited circumstances.123 Moreover,
such proceedings are not limited to cases of insolvency. Since proceedings
for administration would thus continue to have some residual utility, the
Commission recommends that such proceedings should be retained. How-
ever, in our view, the multi-step procedure — involving judgment, reference,
report, and order for payment out124 — should be rationalized. We recom-
mend, therefore, that the judge having carriage of the proceeding should
have carriage of the whole proceeding, from the application for administra-
tion, through all intermediate procedures, to the final distribution of the
estate. This proposal, in our view, would promote a greater willingness on
the part of estates practitioners and judges to utilize this remedy. Moreover,
since the rules of court respecting proceedings for administration are some-
what cryptic, and therefore fail to provide a sufficient indication of the
format or procedure of the proceeding, we recommend that the elements of
proceedings for administration of an estate by the court should be set out
expressly in legislation.

3. SOLVENT ESTATES

(a) Order of Application of Assets in Satisfaction of
Debts and Liabilities

In the preceding section we dealt with estates in which the assets were
not sufficient to satisfy the debts and liabilities in full. As we discussed, in
the case of such insolvent estates, no distribution would be made to the
beneficiaries; the contest would be exclusively among the creditors for pay-
ment of their claims. In this section we turn to consider solvent estates, that
is, estates in which the assets are sufficient to satisfy the claims of creditors
in full. In this case, while the creditors would be paid in full, a contest would
arise among the beneficiaries to determine which assets of the estate are to
be applied in satisfaction of the creditors' claims, and whose claims are to
be reduced accordingly.

1 22

Supra, note 6.

1 T-J

See, for example, the circumstances described supra, text accompanying note 67.

The present procedure in administration proceedings is discussed supra, this ch., sec.
2(b)(iii).

184

As will be seen below, the common law order of application of assets
depends, in part, on whether the assets are personalty or realty and on
whether the legacy125 or devise126 is general or specific.127 "A specific legacy
is a bequest of a specified part of the testator's personal estate which is so
distinguished. A general legacy is a bequest of some thing or money, not
necessarily part of the estate and not distinguished from all others of the
same kind."128 Reference should also be made to a demonstrative legacy,
which is a bequest "given with reference to a particular source from which
it is to be met".129 To the extent that the fund referred to in a demonstrative
legacy is sufficient, the legacy ranks as a specific legacy. However, to the
extent that the fund is not sufficient, the legacy ranks as a general legacy.

The common law order of application of assets has been set out as
follows:130

1. The general personal estate not bequeathed at all, or by way of residue
only.

2. Real estate devised in trust to pay debts.

3. Real estate descended to the heir[131l and not charged with the payment
of debts.

4. Real or personal estate charged with the payment of debts, and (as to
realty) devised specifically or by way of residue, or suffered, by reason of lapsed
devise, to descend; or (as to personalty) specifically bequeathed, subject to that
chargeJ132!

125

A legacy, or bequest, is a gift of personalty by will.

1 0f\

A devise is a gift of realty by will.

1 0-7

It has been suggested that "[s]ome of the rules for distinguishing specific bequests from
general or residuary bequests . . . seem to apply to devises, so far as the physical differences
between land and chattels will allow": Jarman, A Treatise on Wills (8th ed., 1951, by
Jennings), Vol. 2, at 936.

1 TO

Sunnucks, Martyn, and Garnett, Williams, Mortimer and Sunnucks on Executors, Administra-
tors and Probate (1982), at 894.

129 Ibid.

130 Widdifield, supra, note 49, at 86.
That is, intestate realty.

131

132

A number of authorities do not include, within this class of assets, personal property
specifically bequeathed and charged with the payment of debts. This variation has been
explained in Woodman, Administration of Assets (2d ed., 1978), at 20-21 in the following
terms:

First ... if a testator charged a specified fund of personalty, other than residue,
with the payment of debts, this was sufficient to discharge the general personalty
from its primary liability. . . . Personalty specifically bequeathed and charged with the
payment of debts necessarily came within this rule, so that it was the primary fund for
the payment of debts; this is inconsistent with a proposition that such property should
come within the fourth class.

185

5. General pecuniary legacies, including annuities and demonstrative legac-
ies which have become general. . . .

6. Specific legacies (including demonstrative legacies that so remain), specific
devises and residuary devises not charged with debts, to contribute pro rata.

7. Real and personal estate over which the testator had a general power of
appointment which has been expressly exercised by deed (in favour of volun-
teers) or by will.

8. Paraphernalia of the testator's widow.

The traditional rule, embodied in the above order of application of
assets, is that personal property — particularly intestate personal property
and personal property forming part of the residue— bears the primary bur-
den of satisfying the debts and liabilities of the estate. This rule gives a
preferred position to real property and the devisees of real property, even
those who take realty upon an intestacy. However, the rule is subject to an
expression of contrary intention in the will. The testator, therefore, may
designate in her will the order in which her property is to be applied in
satisfaction of the claims against her estate. Thus, the order of application
of assets is in the nature of a presumption, rebuttable by proof of a contrary
intention of the testator.

The above common law order is, of course, subject to statutory modifi-
cation. In Ontario, the following provisions of the Estates Administration
Act133 deal directly with the administration of assets:

2. — (1) All real and personal property that is vested in a person . . . devolves
to and becomes vested in his personal representative from time to time as
trustee for the persons by law beneficially entitled thereto, and, subject to the
payment of his debts and so far as such property is not disposed of ... it shall
be administered, dealt with and distributed as if it were personal property not
so disposed of.

Secondly, equity, in its endeavours to make realty available for the payment of
debts, readily inferred an intention that debts should be paid out of land, and consid-
ered that a general direction for payment of debts was sufficient to bring, within Class
4, all realty whether given specifically or by way of residue . . . and all personalty
specifically bequeathed. . . . [A] general direction for the payment of debts thus had
the effect of charging specifically bequeathed personalty with the payment of debts so
that, logically, the result should have been that such general direction made the
personalty specifically bequeathed primarily liable to satisfy debts, to the exoneration
of the general personalty. This argument is, of course, contrary to authority . . . but is
another explanation of the omission of specifically bequeathed personalty from Class
4 by the learned texts above mentioned.

The solution to the problem appears to be that, where there was a general direction
to pay debts, specifically bequeathed personalty was charged with the payment of the
debts to the extent of bringing such personalty into the fourth class, but not to the
extent of making it primarily liable for payment of the debts.

1 n

Supra, note 86.

186

4. Subject to the other provisions of this Act, in the administration of the
assets of a deceased person, his real property shall be administered in the same
manner, subject to the same liability for debts, costs and expenses and with the
same incidents as if it were personal property, but nothing in this section alters
or affects as respects real or personal property of which the deceased has made
a testamentary disposition the order in which real and personal assets are now
applicable to the payment of funeral and testamentary expenses, the costs and
expenses of administration, debts or legacies, or the liability of real property to
be charged with the payment of legacies.

5. Subject to section 32 of the Succession Law Reform Act, the real and
personal property of a deceased person comprised in a residuary devise or
bequest, except so far as a contrary intention appears from his will or any codicil
thereto, is applicable rateably, according to their respective values, to the
payment of his debts, funeral and testamentary expenses and the cost and
expenses of administration.

When originally enacted,134 these sections were thought to remove many
of the distinctions between real and personal property in administration.135
However, as we shall discuss below, not only did they not remove the
problems, they compounded them.

As we have seen, in an estate that consists solely of personal property,
the burden of debts is borne first by any intestate or residuary property.136
If intestate property and residuary property are insufficient to pay the
estate's debts in full, then, assuming that the testator has not expressed an
intention to the contrary, general legacies, including the general portion of
demonstrative legacies, will abate first, and specific legacies, including the
specific portion of demonstrative legacies, will abate after the general legac-
ies have been exhausted.137

In an estate that is composed of both realty and personalty the order
of application of assets is somewhat more complicated. It has been noted

These sections were originally enacted in The Devolution of Estates Act. See, for example,
The Devolution of Estates Act, R.S.O. 1914, c. 119, ss. 3(1), 5, and 6.

135
136

137

See, for example, Re Reddan (1886), 12 O.R. 781 (Ch. Div.), at 782.

The usual reason for a partial intestacy is the absence or failure of a residuary clause in a
will. Where there is a residuary legacy there will usually be no intestate personalty; the
residuary legatee receives only what remains after satisfaction of all debts and non-residuary
legacies.

The following illustration may be of assistance. Assume that T makes the following bequests

in her will:

(a)

To A:

my 1985 automobile.

(b)

ToB:

the shares in ABC Co. owned by me at my death.

(c)

ToC:

$4000 out of the proceeds of my Canada Savings Bonds

(d)

ToD:

$2000.

(e)

ToE:

$1000.

(f)

ToF:

the residue.

187

above that realty enjoys a favoured position under the common law order.
With the exception of intestate realty, which is resorted to before general
and specific legacies, personalty is the primary fund for the payment of debts
in the absence of an expression of a contrary intention.

In Ontario, for most purposes, the Estates Administration Act subjects
realty to the same rules as personalty.138 For the purpose of the payment of
debts, section 5 provides that realty and personalty "comprised in a residuary
devise or bequest" are applicable rateably. Section 4 provides that realty
and personalty "shall be administered in the same manner, subject to the
same liability for debts". However, section 4 also contains a proviso that
"nothing in this section alters or affects as respects real or personal property
of which the deceased has made a testamentary disposition the order in
which real and personal assets are now applicable to the payment of . . .

At death, T's estate is as follows:
Assets:

1985 automobile

$ 2,000

ABC Co. shares

$ 2,000

Canada Savings Bonds

$ 3,000

Other Assets

$ 4,000

$11,000

Liabilities:

(Debts, funeral expenses,

taxes and administration

expenses)

$ 1,000

Net value of estate $10,000

In this example, the sum required to satisfy all of T's nonresiduary legacies is $11,000.
The net value of the estate is $10,000. Accordingly, there is a $1,000 deficiency. The legacies
to A and B are specific, while the legacies to D and E are general. The legacy to C is
demonstrative. Since the fund out of which it is payable is insufficient to satisfy the legacy
in full, the legacy is treated as specific to the extent of the fund, namely $3,000, and general
to the extent of the insufficiency, namely, $1,000.

Therefore, the general legacies total $4,000, and the deficiency totals $1,000. The
general legacies must abate rateably, that is, by one quarter. In the result, D receives $1,500,
E receives $750, and C receives $3,750 (that is, $750 in respect of the "general" portion of
his demonstrative legacy and $3,000 in respect of the "specific" portion of his demonstrative
legacy).

Since the general legacies are not exhausted by the obligation to satisfy the debts of
the estate, the specific legacies do not abate at all. As noted above, C will receive the
"specific" portion of his demonstrative legacy in full.

If the debts of the estate were $5,000 instead of $1,000, the general estate would be
exhausted by the debts, and the debts would still not be satisfied in full. In that case, the
specific legacies would have to abate rateably. The total deficiency after exhaustion of the
general estate would be $1,000. The total value of the specific legacies, including the
"specific" portion of the demonstrative legacy, is $7,000. Therefore, each specific legacy
would abate by one-seventh.

138 Supra, note 86, ss. 2-7.

188

debts". The courts have held that the proviso to section 4 preserves for
Ontario the common law order of application of assets.139 The only change
to the common law is effected by section 5, which renders real and personal
property comprised in a residuary devise or bequest equally liable for the
payment of debts. Section 5, moreover, has been interpreted narrowly. It
has been held to apply only where both real and personal property is com-
prised in a single residuary gift.140 Further, since a "residuary bequest"
requires that something be taken out of the personal estate and that the
bequest apply only to the balance, it has been held that a gift of "all"
the testator's personal estate was not "residuary" within the meaning of
section 5.141

Where a will contains a residuary clause that disposes of the residue of
both real and personal property, section 5 will apply. The first assets to be
applied to the payment of debts will be the residuary realty and personalty,
which, under section 5, is treated as a single fund. If the residuary realty and
personalty is insufficient to pay the debts in full, then the effect of section
5 is spent, the proviso to section 4 applies, and the order of abatement of
the general and specific legacies and devises is the common law order. Where
a will contains no effective residuary clause, or no residuary clause disposing
of both realty and personalty, section 5 will have no application. The proviso
to section 4 will apply, and the order of application of assets will be the
common law order, set out above.

The unsatisfactory state of the law in this area has been the subject of
discussion in a number of jurisdictions. For example, the Queensland Law
Reform Commission made the following observations:142

Perhaps the most archaic area of the Queensland Succession laws, and one
where it is certainly true to say that Queensland law must be amongst the most
archaic in the world, is that part of the law which concerns the payment of debts
by executors, where the old common law rules have not been the subject of
legislative attention for over a hundred years. A series of rules, which defy
analysis and which only a reason tempered by long study of legal history could
justify, govern the mode of distribution of assets amongst beneficiaries. A lawyer
who attempted to satisfy the average client about the existence, let alone the
justification, of some of the existing rules in this respect, would have an unenvi-
able task. Indeed, how could one justify the present rule that if the testator
devises realty on trust to pay the debts of his estate, nevertheless that realty will
not be used for that purpose until all the residuary personalty has been exhausted
for the payment of debts? Or how could one justify the rule that a devisee of
land is protected, as against a pecuniary legatee, from the obligation to pay

139

140
141

142

Re Hopkins Estate (1900), 32 O.R. 315 (H.C.J., Q.B. Div.), and Re Swayze, [1938] O.W.N.
524 (H.C.J.).

Re Moody Estate (1906), 12 O.L.R. 10 (H.C.J., C.P. Div.).

Ibid.

Queensland Law Reform Commission,^ Report on the Law Relating to Succession, Q.L.R.C.
22 (1978) (hereinafter referred to as "Queensland Report"), at 1 (emphasis in original).

189

debts, whereas, if there happens to be a general direction contained in the will
that debts are to be paid, the rule is reversed and the pecuniary legatee is
protected as against the devisee?

Further, on the same topic, the Queensland Commission stated:143

The law governing the administration of assets, that is, the rules which
prescribe out of whose benefits, left by the will, the debts of the deceased are
to be paid, is in a state of unwarranted confusion. There are historical reasons
why the rules are as they are, but those reasons are no longer relevant. The
principal policy factor which the present rules inherit is the desire of former
times that realty devised should not be available for the payment of the debts
of the deceased. As the medieval reasons for that rule faded so attempts were
made, with increasing success, to bring realty into the creditors' net. The
eventual crystallising of the rules . . . left us with many anomalies.

The above comments, in our view, are equally applicable to the present
law in Ontario. We have already noted the privileged position accorded to
realty under the common law order. While this distinction might have been
rational, or purposeful, at one time, it is now an anachronism.144 Moreover,
the continued preference for realty is inconsistent with the apparent intent
of Ontario legislation.145 In addition, we have concluded that the present
law in Ontario is unnecessarily complex and productive of considerable
uncertainty.

In our view, the common law order of application of assets should be
replaced by a simplified order.146 The Commission recommends, therefore,
that, subject to the recommendations made below, the order of application
of assets to meet the liabilities of an estate should be as follows:

(a) property specifically charged with the payment of debts or left on
trust for the payment of debts;

(b) property passing by way of intestacy;

143
144

145

146

Ibid., at 38.

See Law Reform Commission of Western Australia, Report on the Administration of Assets
of the Solvent Estates of Deceased Persons in the Payment of Debts and Legacies, Project No.
34, Part VII (1988) (hereinafter referred to as "Western Australia Report"), para. 2.12, at
9-10.

When originally enacted, it was assumed that the effect of ss. 2, 4, and 5 of the Estates
Administration Act, supra, note 86, was to constitute a single fund, comprising both realty
and personalty, out of which debts were to be satisfied. See Widdifield, supra, note 49,
at 87.

The common law order has been the subject of statutory modification in a number of
jurisdictions. See Western Australia Report, supra, note 144, paras. 4.2-4.40, at 25-39, for
a review and criticism of the statutory orders enacted in England (Administration of Estates
Act 1925, 15 & 16 Geo. 5, c. 23 (U.K.), s. 34(3), and Sched. 1, Part II), New South Wales
(Wills, Probate and Administration Act, 1898, No. 13, ss. 46A(1), 46C(2) and Sched. 3, Part
II), Victoria (Administration and Probate Act 1958 (No. 6191), ss. 38-40, and Sched. 2, Part
II), and Queensland (Succession Act 1981, ss. 29, 55(a), and 59-61).

190

(d) general legacies and devises;

(e) specific legacies and devises;

(f) property over which the deceased had a general power of appoint-
ment that she might have exercised for her own benefit without the
assent of any other person, where the property is appointed by will.

The Commission further recommends that, since there is no longer any
principled rationale for distinguishing between personalty and realty in the
application of assets for the payment of debts, there should be no distinction
between personalty and realty in the application of the above order.

Several comments might be made with respect to the above recommen-
dations.147 The property that, under our proposal, would be applied first in
the satisfaction of debts is property specifically charged with the payment of
debts or left on trust to pay debts. This category would modify the common
law significantly in two respects. First, by combining property specifically
charged with the payment of debts and property left on trust to pay debts
within a single category, it would eliminate a distinction made at common
law that, in our view, cannot be justified in principle.148 Second, it would
make such property applicable to the payment of debts before even intestate
property. This, we believe, would better effect the testator's expressed inten-
tion.149 While it might be argued that the first category is not necessary

147

148

149

In this context, reference should also be made to s. 68 of the Succession Law Reform Act,
R.S.O. 1980, c. 488, which provides as follows:

68. — (1) Subject to subsection (2), the incidence of any provision for support
ordered shall fall rateably upon that part of the deceased's estate to which the jurisdic-
tion of the court extends.

(2) The court may order that the provision for support be made out of and charged
against the whole or any portion of the estate in such proportion and in such manner
as to the court seems proper.

We agree with the comment made in the Queensland Report, supra, note 142, para. 59, at
41, that "we doubt whether any testator would really wish to make a distinction between
a trust to pay debts and a charge to pay debts, or would intend, even if he did, that the
former should be applicable for the payment of debts before the latter"

This approach has been adopted in Queensland. See the Succession Act 1981, s. 59. See,
also, the Western Australia Report, supra, note 144, paras. 5.7-5.8, at 44-45, which discusses
this approach in the following terms:

5.7 Except in Queensland, intestate property must be applied first in the payment
of debts, unless the will expressly and with unequivocal clarity provides to the contrary.
This is on the ostensible ground that a testator's bounty to named beneficiaries will
thereby be maximized, and at the expense of those for whom (presumably) he had no
particular intention of providing.

5.8 The Queensland approach is very different. It is based on the ground that where
a testator has expressly appropriated or charged property with the payment of his
debts there is no good reason at all why the law should impose some other rule —

191

since, as we recommend below, the statutory order should be subject to the
expression of a contrary intention in the will, we have concluded, like the
Queensland Commission, that it should be retained "both as a statutory
expression of the view we take and to provide personal representatives with
clear guidance as to the order in which such property should be used.
Otherwise the executor would have himself to consider whether a direction
or trust to pay debts out of property placed that property in a class of its
own and where that class was in relation to the other classes."150

It should also be noted that the above recommendation would preserve
one of the significant features of the common law order. Under our proposals
specific legacies would be applied in the satisfaction of debts and liabilities
only after the general legacies have been exhausted. The policy underlying
this issue has been described in the following terms:151

The point of policy is whether it is desirable that the law require that the
subject-matter of a general legacy (for example, 'I give the sum of $50,000 to
X') be applied in the payment of debts before the subject-matter of a specific
disposition (for example, 'I give Blackacre to Y'). From these examples it could
hardly be said that the testator intended to give the legacy to X any less strongly
than the devise to Y.

We have concluded, however, like the Law Reform Commission of
Western Australia, that "[o]n balance ... in many cases general legatees
will not in point of fact have been intended to be benefited by a testator
quite as strongly as specific beneficiaries: the reverse will not as often be the
case, especially in regard to valuable property".152

Finally, we note that the last category of property to be applied in
satisfaction of debts and liabilities, namely, property over which the deceased
had a general power of appointment, where the power is exercised by will,
is derived from section 54 of the Trustee Act.153

namely, that intestate property be nevertheless applied first. In short, the Queensland
approach is to take the testator at his word. Other approaches attempt to answer a
theoretical question on behalf of a testator which, because his is dead, he cannot
answer for himself. But they do so on the real basis that it is somehow 'better' to
maximize benefits to named beneficiaries. At this point, the Queensland rule reflects
the reality that takers on partial intestacy are likely to be at least as closely related by
blood to the testator as are named beneficiaries, who could be anything from charities
to mere acquaintances.

For a contrary view, see Woodman, supra, note 132, at 161-62.

Queensland Report, supra, note 142, para. 59, at 42.

Western Australia Report, supra, note 144, para. 5.15, at 46.

152 Ibid., at 46-47.

I c-j

Section 54 of the Trustee Act, supra, note 5, provides as follows:

54. Property over which a deceased person had a general power of appointment,
which he might have exercised for his own benefit without the assent of any other
person, shall be assets for the payment of his debts where the same is appointed by

192

The above order, in our view, should be subject to the expression of a
contrary intention in the will. To the extent possible, the wishes of the
testator regarding the payment of debts and legacies should be effective.
"[T]hese matters are so closely associated with the act of testation itself as
to be, in reality, inseparable from it."154 The Commission recommends,
therefore, that where a will expresses an order of application of assets other
than the one recommended above, effect should be given to the directions
in the will.

The simplified order of application of assets recommended above will
be sufficient to deal with most cases. However, we acknowledge that, in
some cases, a rigid scheme of application might frustrate the wishes of the
testator, and work an injustice on some of the beneficiaries.155 Accordingly,
the Commission recommends that the court should have the discretion to
direct an order of application of assets, other than the one recommended
above, where it is of the opinion that the order of application directed by it
more closely approximates the wishes of the testator.156 This judicial discre-
tion, we believe, would not be used frequently. However, it might be useful
in appropriate circumstances, for example, to enable the court to cure cases
of hardship in circumstances in which the dependants' relief provisions157
do not apply.158

(b) Specifically Encumbered Property — Locke Kincs Act

We now turn to consider an issue that is closely related to the order in
which assets are applied in satisfaction of debts, namely, the effect of a
specific encumbrance held by a creditor on estate property. At common law,
secured debts were payable out of the estate in the same manner as other
debts. As we discussed above, the primary fund for the payment of debts, at
common law, is the intestate and residuary personalty. Consequently, a

his will, and, under an execution against the personal representatives of such deceased
person, such assets may be seized and sold after the deceased person's own property
has been exhausted.

Western Australia Report, supra, note 144, para. 5.2, at 43.

155

See the illustration provided infra, note 158.

156

157
158

A similar discretion is conferred on the court in the Uniform Probate Code, supra, note
108, § 3-902(b), which provides that "[i]f the will expresses an order of abatement, or if the
testamentary plan or the express or implied purpose of the devise would be defeated by
the order of abatement stated in subsection (a), the shares of the distributees abate as may
be found necessary to give effect to the intention of the testator".

See, now, Part V of the Succession Law Reform Act, supra, note 147.

Such a case might arise, for example, where a testator makes a bequest of "my paintings
to A, the residue to my wife". Even though the testator might have made adequate provision
for the proper support of his wife, if the paintings were to appreciate substantially in value
before the death of the testator, the wife, as the residuary legatee, might be burdened with
the payment of substantial capital gains tax, attributable to the paintings, quite contrary to
the expectations of the testator.

193

person who became entitled to mortgaged property upon the death of the
mortgagor was entitled to have the mortgage discharged out of the general
personalty, and thus took the property free of the encumbrance.159 In the
United Kingdom this position was changed, as to realty, by the Real Estate
Charges Acts of 1854, 1867 and 1877,160 referred to collectively as Locke
Kings Act. This legislation provided that, unless a contrary intention is
clearly expressed by the testator, where realty is subject to a mortgage at the
time of the testator's death, the realty itself is the primary fund for the
repayment of the mortgage. Thus, a devisee or heir of mortgaged realty
would take the property subject to the mortgage. The rationale underlying
this legislation has been described in the following terms:161

The legislation depends partly upon the theory that if, for example, the deceased
person had intended his residuary beneficiaries to pay in order to give an
unencumbered title to a devisee of mortgaged land, he would have said so
expressly. But it appears also to depend upon the policy ground of wealth-
equalization.

The relevant legislation in Ontario, also commonly referred to as Locke
King's Act, is found in section 32 of the Succession Law Reform Act,162 which
provides as follows:

32. — (1) Where a person dies possessed of, or entitled to, or under a general
power of appointment by his will disposes of, an interest in freehold or leasehold
property which, at the time of his death, is subject to a mortgage, and the
deceased has not, by will, deed or other document, signified a contrary or other
intention,

(a) the interest is, as between the different persons claiming through
the deceased, primarily liable for the payment or satisfaction of the
mortgage debt; and

(b) every part of the interest, according to its value, bears a proportionate
part of the mortgage debt on the whole interest.

(2) A testator does not signify a contrary or other intention within subsection
(1) by,

(a) a general direction for the payment of debts or of all the debts of the
testator out of his personal estate, his residuary real or personal estate
or his residuary real estate; or

For a relatively recent application of the common law rule, see Brumwell v. Caldwell (1984),
65 N.S.R. (2d) 293, 17 E.T.R. 197 (N.S.S.C, App. Div.).

Real Estate Charges Act 1854, 17 & 18 Vict., c. 113 (U.K.); Real Estate Charges Act 1867, 30
& 31 Vict., c. 69 (U.K.); and Real Estate Charges Act 1877, 40 & 41 Vict., c. 34 (U.K.).

Western Australia Report, supra, note 144, para. 3.27, at 18-19.

160

162

Supra, note 147. Formerly, the provision was contained in s. 37 of The Wills Act, R.S.O.
1970, c. 499.

194

(b) a charge of debts upon that estate,

unless he further signifies that intention by words expressly or by necessary
implication referring to all or some part of the mortgage debt.

(3) Nothing in this section affects a right of a person entitled to the mortgage
debt to obtain payment or satisfaction either out of the other assets of the
deceased or otherwise.

(4) In this section, 'mortgage' includes an equitable mortgage, and any charge
whatsoever, whether equitable, statutory or of other nature, including a lien or
claim upon freehold or leasehold property for unpaid purchase money, and
'mortgage debt' has a meaning similarly extended.

Perhaps the most obvious deficiency of this section is the fact that it
does not apply to personalty.163 The corresponding legislation in the United
Kingdom, by comparison, was extended to personalty in 1925.164 We have
already expressed our view that real and personal property should be assimi-
lated in the application of assets for the payment of debts.165 We have
concluded, therefore, that realty and personalty should be subject to the
same rules respecting the satisfaction of encumbrances. Accordingly, we
recommend that section 32 of the Succession Law Reform Act should be
amended to apply to personal, as well as real, property.

In section 32(4), the term "mortgage" is broadly defined to include not
only an equitable mortgage or other charge, but also a lien for unpaid
purchase money. It is unclear, however, whether a writ of seizure and
sale would be treated similarly. Consequently, the Commission considered
whether the definition should be extended expressly to include a writ of
seizure and sale, which, in a sense, constitutes a charge on realty since it
"binds the . . . lands against which it is issued from the time it has been
received for execution and recorded by the sheriff".166 We concluded, how-
ever, that, since there is no necessary correlation, in the case of a writ,
between the debt and the charge, the underlying rationale of the section
would ordinarily be inapplicable. In most cases, there will be no connection
between the judgment debt and the "charge" on the realty and, therefore,
there is no reason that the realty should be the primary fund for the payment
of the judgment debt. Accordingly, the Commission recommends that a writ
of seizure and sale should be excluded from the definition in section 32(4)

163

164

165

See, for example, Re Simpson (1927), 60 O.L.R. 310, [1927] 2 D.L.R. 1043 (H.C. Div.),
where a specific legatee of an automobile purchased by the testator under a conditional
sales contract was entitled to have the unpaid balance of the purchase price paid out of
the general assets of the estate.

See s. 35 of the Administration of Estates Act 1925, supra, note 146, which refers only to
"property", and s. 55(l)(xvii), which defines "property" to include "a thing in action and
any interest in real or personal property".

Supra, this ch., sec. 3(a).

166 Execution Act, supra, note 2, s. 10(1), as en. by S.O. 1988, c. 37, s. 1(1).

195

of the Succession Law Reform Act. However, this recommendation is not
intended to exclude from section 32 a claim that would otherwise fall within
section 32(4). For example, section 32(4) defines a mortgage to include,
among other things, a "claim upon . . . property for unpaid purchase money".
It is not intended that our recommendation would exclude such a claim from
the operation of section 32 merely because such a claim has been reduced
to judgment and a writ of seizure and sale has been recorded.

Finally, the Commission found it necessary to re-consider the funda-
mental rule embodied in section 32, in the light of modern commercial and
banking practice. It is relatively common practice for banks, when making a
business loan, to require a collateral mortgage on the borrower's personal
assets as security. Thus, for example, a testator might have borrowed funds
for his business, secured by a collateral mortgage on his house. If the testator
left the business to his son, and the house to his wife, without expressing an
intention to the contrary, section 32 would require the wife to discharge the
mortgage debt irrespective of the fact that the debt was incurred to benefit
the business. The testator, on the other hand, would probably have expected
the debt to be paid out of the business bequest to his son. This potential
inequity, in our view, is not addressed adequately by the section.167

Our attempts to resolve this difficulty, for example, by restricting the
application of the section to purchase money charges, or charges intended
or suffered by the testator with respect to the particular property, or by
ensuring that the section would not apply to collateral mortgages, all proved
unsatisfactory. Indeed, given the pervasiveness of the above practice and
the unfairness of the result, it was even suggested that the presumption in
section 32 should be reversed.

Ultimately the Commission concluded, however, that the presumption
in section 32 should be retained, as modified by the above recommendations.
However, the harshness of a strict application of the statutory rule, in our
view, should be tempered by the creation of a judicial discretion that would
permit the court to deviate from the rule in appropriate circumstances.168
The Commission recommends, therefore, that the court should have the
discretion to order the payment of a debt secured on property in a manner
other than as provided for in section 32 of the Succession Law Reform Act
where it is of the opinion that this more closely approximates the wishes of
the testator. This recommendation, of course, is simply the corollary, within

167

While it is true that the section does permit an informed testator to establish a scheme for
the payment of such debts, the problem of the uninformed testator remains.

For a further illustration of the type of circumstance in which it might be desirable for the
court to have the discretion to deviate from the rule in s. 32, see Perry v. Hicknell (1981),
34 O.R. (2d) 246, 128 D.L.R. (3d) 63 (H.C.J.). In that case, while the testator probably
intended certain life insurance proceeds to be used to satisfy the mortgage on his house,
effect could not be given to this contrary intention since it was not clearly expressed in the
will, deed or other document.

196

the context of secured debts, of our earlier recommendation for a judicial
discretion within the context of ordinary debts.

4. ASSERTION OF CLAIMS AGAINST THE ESTATE

(a) Introduction

In this section we consider the procedures by which claims against an
estate are asserted and by which disputes concerning those claims are
resolved. With respect to the former, we recommend a system of notification
of claims. With respect to the latter, we propose a summary claims procedure
for the contestation of claims made against an estate. Immediately below,
however, we discuss a prior issue, namely, the nature of the claims that
should be subject to these procedures.

(b) Meaning of "claims"

At present, there is no definition of the word "claim", in either the
Trustee Act or the contestation of claim provisions in the Estates Act.169 In
this latter context, however, the meaning of the phrase "claim or demand"
has been described as follows:170

The 'claim or demand' referred to in [section 69(1) of the Estates Act] is
clearly a claim or demand against an estate by a creditor for payment of a
money demand. . . . The words 'claim or demand' do not extend to a claim for
tort for unascertained damages before judgment recovered therefor. Nor to a
claim for a legacy. Nor to a claim for foreclosure; nor to a claim for dower after
the widow's death. But apparently it would cover a claim that a promissory note
given by the claimant to the deceased had been paid off by services rendered
to him during his lifetime.

It should be noted, however, that section 70 of the Estates Act, which was
added to the Act in 1946, 171 was enacted to extend the contestation proce-
dure to unliquidated claims.

In the view of the Commission, the present rule, which excludes claims
for legacies from the contestation procedure, is entirely appropriate, since
claims for legacies are not third party claims. However, there appears to
us to be no reason to restrict the proposed notification and contestation
procedures to "claims and demands", as currently interpreted.

R.S.O. 1980, c. 491, ss. 69 and 70. This Act was formerly known as the "Surrogate Courts
Act"; the statute was renamed by the Court Reform Statute Law Amendment Act, 1989, S.O.
1989, c. 56, s. 48(25). Sections 69 and 70 are discussed infra, this ch., sec. 4(d).

170 Hull and Cullity, Macdonell, Sheard and Hull on Probate Practice (3d ed., 1981), at 360-61.

Section 65a [now s. 70] was enacted by The Surrogate Courts Amendment Act, 1946, S.O.
1946, c. 93, s. 12.

While it might have been thought appropriate to exclude property
ownership claims from the contestation procedure, limited provision for
such claims already exists in section 71 of the Estates Act:

71. Where the personal representative of a person claims the ownership of
any personal property not exceeding in value $800 and his claim is disputed by
any other person, the dispute may be determined in a summary manner and
section 69 applies with necessary modifications.

This section, it has been suggested,172 was enacted as a response to the
decision in Re Graham,177, which held that a claimant seeking to establish a
donatio mortis causa did not come within the contestation provision because
the court was not asked to establish the validity of a debt against the estate
by a creditor. By enacting section 71, 174 the legislature has acknowledged that
certain property claims should be disposed of by the summary procedure. We
agree that it should be possible to resolve property claims by means of the
summary procedure, but we are of the view that the restriction contained in
section 71 is entirely unnecessary.

One of the fundamental purposes of the notification process is to pro-
vide the estate trustee with complete information respecting the liabilities
of the estate, and to facilitate the distribution process. Similarly, the contes-
tation procedure is intended to facilitate the expeditious administration of
estates by providing for the summary resolution of disputed claims. Accord-
ingly, in our view, the notification and contestation system should compre-
hend all third party claims. The Commission therefore recommends that,
for the purpose of the proposed notification and contestation procedures,
the word "claimant" should be defined to mean a person who has a claim
against the estate of the deceased, whether arising prior, or subsequent,175
to the death of the deceased, in respect of a contract, tort, property interest
in any property of the deceased, or any other cause, whether the claim is
contingent or not, liquidated or unliquidated, secured or unsecured, matured
or unmatured.

(i) Advertising for Creditors and Other Claimants

Thus far in our discussion, we have assumed that all claims against the
estate have been ascertained by the personal representative. However, if
one or more claims are not ascertained before the assets of the estate are

172 Hull and Cullity, supra, note 170, at 361.

173 (1911), 25 O.L.R. 5 (H.C.J. , C.P. Div.).

1 4 Section 69a (now s. 71) was enacted by The Surrogate Courts Act, 1927, S.O. 1927, c. 31, s. 5.

It should be recalled that, earlier in this report, we recommended that an estate trustee
should be able to enter into contracts in a representative capacity, in which case the

198

distributed to the beneficiaries, the personal representative will be person-
ally liable to the claimants, to the extent of the value of the estate, whether
or not she had notice of such claims.176 This liability, however, may be
avoided by complying with section 53 of the Trustee Act,111 which provides
as follows:

53. — (1) Where a trustee or assignee acting under the trusts of a deed or
assignment for the benefit of creditors generally, or of a particular class or
classes of creditors, where the creditors are not designated by name therein, or
a personal representative has given such or the like notices as, in the opinion
of the court in which such trustee, assignee, or personal representative is sought
to be charged, would have been directed to be given by the Supreme Court in
an action for the execution of the trusts of such deed or assignment, or in an
administration suit, for creditors and others to send in to such trustee, assignee,
or personal representative, their claims against the person for the benefit of
whose creditors such deed or assignment is made, or against the estate of the
testator or intestate, as the case may be, at the expiration of the time named in
the notices, or the last of the notices, for sending in such claims, he may
distribute the proceeds of the trust estate, or the assets of the testator or
intestate, as the case may be, or any part thereof among the persons entitled
thereto, having regard to the claims of which he has then notice, and is not
liable for the proceeds of the trust estate, or assets, or any part thereof so
distributed to any person of whose claim he had not notice at the time of the
distribution.

(2) Nothing in this section prejudices the right of any creditor or claimant
to follow the proceeds of the trust estate, or assets, or any part thereof into the
hands of persons who have received the same.

(3) Subsection (1) does not apply to heirs, next of kin, devisees or legatees
claiming as such.

While section 53 gives no legislative guidance as to the form, content,
placement, or timing of the advertisement, the time limits to be specified
for the notification of claims, or the warnings to be given to claimants,178

estate trustee would not be liable personally. Judgments against the estate trustee in her
representative capacity would be satisfied from the assets of the estate. See supra, ch. 2,
sec. 4(a)(iii).

176 Smith v. Day (1837), 2 M. & W. 684, [1835-42] All E.R. Rep. 521 (Ex. Ct.); Hill v. Gomme
(1839), 1 Beav. 540, 48 E.R. 1050, on appeal 5 My. & Cr. 250, 41 E.R. 366 (L.C.); and
Knatchbull v. Fearnhead (1837), 3 My. & Cr. 122, 40 E.R. 871 (L.C.).

177

Supra, note 5. Similar provisions may be found in Newfoundland {The Trustee Act, R.S.N.
1970, c. 380, s. 25); British Columbia {Trustee Act, R.S.B.C. 1979, c. 414, s. 38); and Saskatch-
ewan {The Trustee Act, supra, note 45, s. 78).

178

By contrast, considerable detail is prescribed in Nova Scotia {Probate Act, R.S.N.S. 1989,
c. 359, s. 43); Prince Edward Island {Probate Act, supra, note 45, s. 47); and Alberta {Admin-
istration of Estates Act, supra, note 45, s. 38).

199

these matters had been well settled as a matter of practice.179 Recently,
however, it would appear that there is no longer a consensus among estates
practitioners as to the requirements imposed by section 53. For example,
while some practitioners are of the view that the advertisement must be
published on three occasions, others are of the view that two placements
are sufficient. Similarly, there is some divergence of opinion respecting the
type of publication in which the advertisement must appear, the time limits
for submission of claims, the content of the advertisement, and the nature
of the warning that must be given to claimants. In the result, there is
considerable uncertainty respecting the advertising requirement.

It will be noted that the Trustee Act does not impose a mandatory
requirement of advertising for creditors, although there can be considerable
incentives for a personal representative to do so. The most obvious reason
for a personal representative to advertise for creditors is to avoid personal
liability with respect to any claims asserted after the estate has been distrib-
uted, of which the personal representative had no notice. Of course, since
such a creditor may still advance her claim against the beneficiaries of the
estate,180 there would be little purpose in advertising where the personal
representative is also the sole beneficiary of the estate. Nevertheless, the
personal representative might be required to advertise for creditors in a
number of other circumstances. First, section 25 of the Estates Administration
Act181 provides that no distribution of an intestate's estate can be made until

179

180

181

See, for example, Schnurr, "Debtor-Creditor Considerations Relating to Estates and
Trusts", in Springman and Gertner, supra, note 34, 161, at 163:

The accepted procedure is to place the advertisement on three separate occasions,
allowing three to six weeks between the date that the advertisement is first placed and
the date by which the claims must be received by the personal representative.

See, also, Armstrong, Estate Administration[:\ A Solicitor's Reference Manual (1984), at
3-40, where it is stated that the practice is to insert the advertisement "on three different
occasions ... in a daily newspaper in the area where the deceased lived and worked at the
time of death". Further, it is usual to "allow at least one month from the date of the first
publication to the date fixed for filing of claims": ibid.

A form of advertisement, in general use in Ontario, is provided in both publications.
See Schnurr, at 162, and Armstrong, at F-66.1.

Although a creditor of an estate would have no right, at law, to recover payment of his debt
against a beneficiary, the creditor's right to a refund was developed in equity. This remedy
was described in Harrison v. Kirk, [1904] A.C. 1, at 7, [1900-03] All E.R. Rep. 680 (H.L.),
in the following terms:

[T]he Court of Chancery, in order to do justice and to avoid the evil of allowing one
man to retain what is really and legally applicable to the payment of another man,
devised a remedy by which, where the estate had been distributed either out of court
or in court without regard to the rights of a creditor, it has allowed the creditor to
recover back what has been paid to the beneficiaries or the next of kin who derive title
from the deceased testator or intestate.

See, also, s. 53(2) of the Trustee Act, supra, note 5, which confirms that the creditor's
right to follow assets into the hands of the beneficiaries is not prejudiced by the section.

Supra, note 86, as am. by S.O. 1983, c. 23, s. 2.

200

after the expiration of one year from the date of death, unless the personal
representative has complied with section 53 of the Trustee Act. Therefore,
in the case of an intestacy, if the personal representative wishes to distribute
the estate within one year after the death of the intestate, she must advertise
for creditors. Second, proof that the personal representative has advertised
for creditors might be required by the court on a passing of accounts.182
Until November 1, 1982, on the first passing of accounts, a personal represen-
tative was required to file an affidavit showing whether an advertisement for
creditors had been published.183 Although the prescribed form of Applica-
tion to Pass Accounts184 still asks, on the first passing of accounts, whether
there has been publication of an advertisement for creditors, the require-
ment that an affidavit proving publication be filed was repealed as of Novem-
ber 1, 1982. 18S While existing legislation does not impose a mandatory
advertising requirement, the current practice appears to be that, on a passing
of accounts, advertising will be required unless it is dispensed with by the
court.186 Finally, where the personal representative does not obtain a formal
passing of accounts, current practice would seem to require evidence of
advertising for creditors before the court will make an order for the surrender
of an administration bond187 for cancellation.188 It has been suggested that
the affidavit in support of such an application must disclose, among other
things, the following:189

That the debts of the deceased have been paid. Proof of advertisement for
creditors should be filed. If this has not been done the reason for the omission
should be given and full information supplied upon which the Judge may

182
183

184
185
186

The passing of accounts is discussed infra, ch. 6.

Rules Governing Proceedings Under the Estates Act, R.R.O. 1980, Reg. 925 (hereinafter
referred to as "Estates Rules"), r. 60(2).

See ibid., Appendix A, Form 52, en. by O. Reg. 845/82, s. 11.

O. Reg. 845/82, s. 3.

See Hull and Cullity, supra, note 170, at 369-70, where the authors, referring to the
former requirement that an affidavit proving publication be filed, suggested that "the rule
contemplates the filing of an affidavit justifying the deficiency when there has been no
advertisement for creditors. This rule would apply only where the accounts of the estate of
a deceased person are being passed." Presumably such a deficiency would still have to be
justified on a passing of accounts, notwithstanding the repeal of the affidavit requirement.

187

Administration bonds are discussed infra, this ch., sec. 7.

188

Cancellation, in these circumstances, is pursuant to s. 68 of the Estates Act, supra, note 169,
which provides, in part, as follows:

68. Where an executor or administrator has produced evidence to the satisfaction
of the judge that the debts of the deceased have been paid and the residue of the
estate duly distributed, the judge may make an order directing the bond or other
security furnished by the executor or administrator to be delivered up to be
cancelled. . . .

189

Hull and Cullity, supra, note 170, at 252.

201

conclude that there are no outstanding debts. The source of information of the
deponent should be disclosed.

Notwithstanding these factors, in practice, advertisements for creditors
are published in connection with only a minority of estates. In each case,
the personal representative must balance the cost of advertising against the
potential liability she might incur if she does not advertise. Of course, a
scheme of advertising is intended not only to enable the personal representa-
tive to identify actual and potential liabilities of the estate, but also to give
notice to claimants that the debtor has died, and to advise them of the
person to contact with respect to the claim. In practice, however, it would
seem that creditors are relatively successful at keeping informed about their
debtors, and in most cases are able to determine who will settle their claims
without the need for such notice.

In certain jurisdictions where advertising for creditors is mandatory, for
example, Nova Scotia,190 and Prince Edward Island,191 advertising costs are
minimized by requiring publication of the advertisement in the provincial
Gazette. The Commission considered whether a similar requirement would
be practical or useful in Ontario. The Ontario Gazette is a province-wide
publication, and is relatively accessible to those engaged in the business of
granting credit. Moreover, the cost of advertising in the Ontario Gazette
would be substantially lower than the present cost of advertising in the
commercial newspapers, particularly if the requirement were to publish
the advertisement on a single occasion only.192 However, advertisements
published in the Ontario Gazette are less likely to come to the notice of
individual creditors, or small business creditors, who advance credit in a
relatively small number of cases. This type of creditor would have to under-
take periodic searches of the Gazette to ensure that no advertisements had
been missed. On the other hand, perhaps undue concern ought not to be
shown for such creditors, since they are more likely to have a closer relation-
ship with their debtors, and are therefore more likely to learn that their
debtors had died.

The Commission also considered a procedure for providing public
notice through the court clerk's office. This would involve the establishment
of a register, in which the court clerk would record the relevant information
concerning decedents' estates throughout the province. The establishment
of such a register would put the onus on creditors to conduct periodic
searches. While this obligation might be regarded by some as unduly onerous,
particularly if searches could be conducted only at a central location for the
province, this difficulty could be alleviated by the periodic publication of the
register index.

190 Probate Act, supra, note 178.
Probate Act, supra, note 45.

1 97

As noted above, supra, note 179, the present practice is to publish the advertisement on 3
separate occasions.

202

For a variety of reasons, the Commission has rejected both of these
alternatives. First, in our view, neither the Ontario Gazette nor the register
would be a particularly effective means of giving notice to creditors. Second,
the additional cost of publication associated with the increase in size of the
Ontario Gazette, or the cost of establishing and maintaining the proposed
register, would be substantial. Finally, both systems would apply only to
estates where there has been an application for an estate trustee certifi-
cate.193 We have considered the situation of creditors of estates where
there has been no application for an estate trustee certificate, and we have
concluded that the additional administrative burden that would be required
to deal with such estates would be unjustifiable.

On balance, the Commission has concluded that, subject to the recom-
mendations made below, the present position with respect to advertising for
creditors should be retained. In most cases, we believe, the necessity of
advertising for creditors and other claimants should be a matter within the
discretion of the estate trustee, and the present consequences of advertising
or a failure to advertise should be retained. However, we believe that the
protection now provided by section 53 of the Trustee Act should be available
where the estate trustee has not advertised for creditors, but where the
creditors have had a reasonable opportunity to give notice of their claims to
the estate trustee. A six month period following the death of the deceased
appears to us to be a reasonable period for the notification of claims.
Moreover, we believe that the same rules should apply in the case of both
testate and intestate estates. Finally, we have concluded that, in order to
clarify the present confusion respecting the advertising requirement, the
specific elements of the requirement should be set out expressly. In this
regard, we have attempted to balance the interests of creditors and other
claimants in receiving notice of the death of the debtor and the identity of
the person to whom they should submit their claims, with the interests of
those who are beneficially interested in the estate in minimizing the expenses
associated with the administration.

Accordingly, the Commission recommends as follows:

(1) The necessity of advertising for the notification of claims by credi-
tors and other claimants should be a matter within the discretion
of the estate trustee.

(2) Where an estate trustee has advertised for the notification of claims
in accordance with the recommendations contained in paragraph
(3) below, and the time for the notification of claims as set out in
the advertisement has elapsed, or where the estate trustee has not
advertised for the notification of claims, but six months have elapsed
from the date of death of the deceased, the estate trustee should
be free to pay the claims of which she then has notice and to
distribute the property of the deceased to the persons entitled

193

Estate trustee certificates are discussed supra, ch. 2, sec. 1(d).

203

thereto. In these circumstances, the estate trustee should not be
personally liable to any claimant of whom she did not have notice
at the time of payment or distribution.

(3) For the purposes of paragraph (2) above, advertisements for the
notification of claims

(a) should be published on two separate occasions, once per week
for two consecutive weeks;

(b) should be published in a newspaper having general circulation
in the locality or localities in which the deceased resided,
worked, and carried on business, at the time of death;

(c) should provide a time limit for the notification of claims that
is not less than four weeks from the date on which the adver-
tisement is first published; and

(d) should contain the following:

(i) the name of the deceased;

(ii) the deceased's place or places of residence, employment,
and business;

(hi) the date of death;

(iv) the name and address of the person to whom notice of
claim should be given;

(v) the date by which notice of claim should be given; and

(vi) a warning that the estate trustee may distribute the assets
of the estate after the date specified having regard only
to the claims of which she then has notice.

(4) Section 25 of the Estates Administration Act, which provides that no
distribution of an intestate's estate can be made until after the
expiration of one year from the date of death unless the personal
representative has complied with section 53 of the Trustee Act,
should be repealed.

(ii) Method of Notification Where Estate Trustee Not Appointed

At present, section 72(1) of the Estates Act194 permits creditors to file a
notice of claim with the office of the local registrar of the Ontario Court
(General Division) where no personal representative has been appointed.

Section 72(1) of the Estates Act, supra, note 169, provides as follows:

72. — (1) The Limitations Act does not affect the claim of a person against the estate
of a deceased person where notice of the claim giving full particulars of the claim and
verified by affidavit, is filed with the executor or administrator of the estate at any time
prior to the date upon which the claim would be barred by the Limitations Act, but

204

We have concluded that the ability to file a notice of claim with the court
should continue, although, in our view, the purpose of such notice should
not be limited to the effect of the Limitations Act as it is in section 72(1).
Such a notice, filed with the court, should have the same effect, for all
purposes, as if it had been filed with the estate trustee. We have further
concluded that the present requirement for an affidavit of verification, as
required by section 72(1), is unnecessary. If the claimant chose to proceed
by way of ordinary action, no such affidavit would be required; and there
would appear to be no compelling rationale for the additional requirement
in the present context.195 Moreover, the affidavit requirement creates a trap
for the unwary, making it difficult for claimants who are not represented by
solicitors to give proper notice of their claims. In order to prevent claims
from being filed with the court in anticipation of death, however, the Com-
mission has concluded that the claimant should be required to file proof of
death of the debtor, in addition to his claim. The Commission has also
concluded that a procedure should be established to ensure that a claim
filed with the court would be brought to the attention of the office for the
county or district in which an application for an estate trustee certificate is
subsequently made.

The Commission recommends, therefore, that, where no application
for an estate trustee certificate has been made, a claimant should be able to
file her claim with a local registrar of the Ontario Court (General Division).
Upon receipt of such claim and evidence of death of the debtor, the local
registrar should immediately send a copy of this material to the Estate
Registrar for Ontario. The Estate Registrar for Ontario should keep a file
of such claims, and should notify any local registrar when an application for
an estate trustee certificate is subsequently made.196

(iii) Where Estate Trustee Is Deemed to Have Received A
Notice of Claim

Earlier in this section,197 we recommended a regime respecting advertis-
ing for the presentation of claims by creditors and others. Where the estate
trustee complies with our recommendations in that regard, she would be
protected from personal liability if she distributes the estate taking into

where no executor or administrator has been appointed, the notice may be filed in the
office of the registrar of the surrogate court of the county where the deceased person
resided at the date of his death.

195

196

197

Sections 69(2) and 70(2) of the Estates Act, supra, note 169, also require the filing of an
affidavit of verification. These requirements are discussed infra, this ch., sec. 4(d).

It should be noted that ss. 41-45 of the Estates Act, supra, note 169, require that local
registrars give notice of every application for a grant of probate or administration to the
Estate Registrar for Ontario. In the absence of a special court order, probate or administra-
tion cannot be granted unless the local registrar has received a certificate from the Estate
Registrar for Ontario stating that no other application appears to have been made in
relation to the property of the deceased.

Supra, sec. 4(c)(i).

205

account only those claims of which she had notice prior to the distribution.
In this section we consider whether notice of all claims must be given to the
estate trustee, irrespective of their nature, or whether circumstances exist
in which the claimant ought not to be required to file a notice of claim with
the estate trustee.

The first type of claim to be considered is a federal or provincial tax
claim. While an estate trustee might encounter some difficulty in ascertaining
the existence of these claims, it would be unreasonable, in our view, to
exclude such claims for a failure to notify the estate trustee. We have
concluded, therefore, that the estate trustee ought to bear the burden of
determining the existence of tax claims and, accordingly, should be deemed
to have received notification of such claims.

In the case of other statutory claims, the Commission is similarly of the
view that it would be unreasonable to exclude all such claims for a failure
to give notice. On the other hand, the Commission acknowledges that it
would be equally unreasonable to require the estate trustee to ascertain the
existence of all statutory claims. On balance, the Commission has concluded
that the estate trustee should be deemed to have received notification of
only those statutory claims that would be disclosed upon a search of a public
register. We have reached a similar conclusion concerning secured claims.
In this context, it is the view of the Commission that, rather than imposing
the burden on secured creditors to monitor whether their debtors are still
alive, the balance of convenience would seem to require that the estate
trustee conduct the appropriate public register searches and determine
whether the assets of the estate are encumbered.

The Commission has also decided that the estate trustee should be
deemed to have received notification of writs of seizure and sale that have
been filed with the sheriff, and notices of garnishment that have been filed
with the sheriff of the county in which the deceased resided at the time of
her death. With respect to the former, however, until the adoption of a
province-wide system for the filing of writs of seizure and sale,198 the duty
of the estate trustee to search for writs should be limited. In these circum-
stances, the estate trustee should be deemed to have received notification
of writs of seizure and sale filed with the sheriff only in those counties or
districts in which, to the knowledge of the estate trustee, property of the
estate is situated. With respect to notices of garnishment, while the registrar
of the court issuing a notice of garnishment is required to send a copy of the
notice to the sheriff of the county in which the debtor resides,199 it would
appear that no public register is maintained of such notices. Nevertheless,
the information is readily available to the sheriff, and the sheriff should be
required to provide particulars, in writing, of notices of garnishment filed in

See, for example, the recommendations made in Ontario Law Reform Commission, Report
on the Enforcement of Judgment Debts and Related Matters (1981) Part I, at 145 et seq.

199 Rules of court, supra, note 6, r. 60.08(6), as am. by O.Reg. 441/90, s. 11.

206

her office in response to an inquiry from an estate trustee of a deceased
debtor.

Finally, the Commission has concluded that the estate trustee should
be deemed to have received notification of support orders200 filed with the
Director of Support and Custody Enforcement under the Support and Cus-
tody Orders Enforcement Act, 1985. m Again, no public register of such orders
is maintained, although the eight regional support and custody orders
enforcement offices are able to respond to an inquiry from an estate trustee
of a deceased debtor with information concerning the entire province.
Indeed, we understand that, as a matter of practice, the support and custody
orders enforcement office responds to such enquiries at present. However,
if the obligation is to be imposed on estate trustees to search for support
orders filed with the Director of Support and Custody Enforcement, there
should be a corresponding obligation on the Director to respond to such
inquiries. Therefore, the Commission has concluded that the Director of
Support and Custody Enforcement should be required to provide particu-
lars, in writing, of support orders filed in her office, in response to an inquiry
from an estate trustee of a deceased debtor.

With the exception of tax claims, we concluded above that the estate
trustee should be deemed to have received notification of certain types of
claim, the existence of which would be disclosed either upon a search of a
public register, or upon a request for information from the relevant authority.
In order to protect the estate trustee from the possibility that a claim might
be registered or filed after the appropriate searches have been conducted,
but before a distribution of any portion of the estate, the Commission
has concluded that the estate trustee should be deemed to have received
notification of such claims only if they are registered or filed more than ten
working days before a distribution of the estate. This would ensure that the
estate trustee is not deemed to have received notification of claims that she
has not had an adequate opportunity to discover prior to a distribution. Of
course, it should be emphasized that such claimants would be permitted to
give actual notice of their claims to the estate trustee at any time.

Finally, we should note that, in most cases, the above recommendations
would not alter significantly the burden already undertaken by personal
representatives. For example, personal representatives currently ensure that
any tax liabilities of the deceased are satisfied. Similarly, it is often necessary
for the personal representative to search the title to the deceased's realty,

200

201

It should be noted that, in s. 1 of the Support and Custody Orders Enforcement Act, 1985,
S.O. 1985, c. 6, "support order" is broadly defined to include not only a provision for the
payment of money as support or maintenance contained in an order made in or outside
Ontario and enforceable in Ontario, but also a wide variety of support provisions contained
in a marriage contract, co-habitation agreement or separation agreement that is enforceable
under section 35 of the Family Law Act, 1986, S.O. 1986, c. 4.

Supra, note 200.

207

or determine whether there are any encumbrances on the deceased's person-
alty. It has also been suggested that "[i]t is good practice to search executions
to determine if any creditors' claims have been filed".202 To a large extent,
therefore, our recommendations would simply formalize and clarify the
present practice. On the other hand, while no search is ordinarily made at
present for notices of garnishment, since the estate trustee will be required
under our proposals to conduct a search for writs of seizure and sale filed
with the sheriff in the counties or districts in which, to the knowledge of the
estate trustee, property of the estate is situated — including, of course, the
county or district in which the deceased resided at the time of her death —
little additional burden would be imposed on the estate trustee by also
requiring her to search for notices of garnishment in that office.

The Commission therefore recommends as follows:

(1) Subject to the recommendations made in paragraphs (2) and (3)
below, an estate trustee should be deemed to have received notifi-
cation of the following:

(a) tax claims;

(b) secured claims and claims that arise by operation of statute,
the existence of which can be determined by the search of a
public register;

(d) notices of garnishment that have been filed with the sheriff of
the county in which the deceased resided at the time of her
death; and

(e) support orders filed with the Director of Support and Custody
Enforcement under the Support and Custody Orders Enforce-
ment Act, 1985.

(2) An estate trustee should be deemed to have received notification
of the claims set out in paragraphs (l)(b)-(e) only if such claims
are registered or filed more than ten working days before a distribu-
tion of any portion of the estate.

(3) Until the adoption of a province-wide system for the filing of writs
of seizure and sale, the estate trustee should be deemed to have
received notification of writs filed with the sheriff only in those
counties or districts in which, to the knowledge of the estate trustee,
property of the estate is situated.

(4) The sheriff should be required to provide particulars, in writing, of
notices of garnishment filed in her office in response to an inquiry
from an estate trustee of a deceased debtor.

202 Dickson and Wilson, Ontario Estate Practice (2d ed., 1986), para. 224, at 44.

208

(5) The Director of Support and Custody Enforcement should be
required to provide particulars, in writing, of support orders filed
in her office in response to an inquiry from an estate trustee of a
deceased debtor.

(iv) Effect of Failure to Give Notice

The Commission now turns to consider the consequences that should
flow from a failure of a claimant to notify the estate trustee of her claim.
Under present law, a creditor who fails to notify the personal representative
of her claim within the required time is not necessarily without a remedy.
Such a creditor may still have her claim satisfied out of any assets still
remaining in the hands of the personal representative. Alternatively, as we
noted earlier,203 the creditor may seek to recover some of the distributed
assets from the hands of the beneficiaries. Section 53(2) of the Trustee Act
provides as follows:

53. — (2) Nothing in this section prejudices the right of any creditor or claim-
ant to follow the proceeds of the trust estate, or assets, or any part thereof into
the hands of persons who have received the same.

The issue for determination by the Commission is whether the present
partial preclusion of claims that are not notified within time should be made
absolute. An example of this latter approach is provided by section 3-803(a)
of the United States Uniform Probate Code,204 which provides as follows:

3-803(a) All claims against a decedent's estate which arose before the death
of the decedent, including claims of the state and any subdivision thereof,
whether due or to become due, absolute or contingent, liquidated or unliqui-
dated, founded on contract, tort, or other legal basis, if not barred earlier
by other statute of limitations, are barred against the estate, the personal
representative, and the heirs and devisees of the decedent unless presented as
follows:

( 1 ) within 4 months after the date of the first publication of notice to creditors
if notice is given in compliance with Section 3-801; provided, claims barred by
the non-claim statute at the decedent's domicile before the first publication for
claims in this state are also barred in this state;

(2) within [3] years after the decedent's death, if notice to creditors has not
been published.

The approach embodied in the above provision favours early distribu-
tion of estates, and opts for certainty of tenure for beneficiaries. While these
undoubtedly are desirable objectives, we have concluded that the interests

203

' See supra, note 180 and accompanying text.
204 Supra, note 108.

209

of creditors and other claimants would be unduly prejudiced by such a
regime.

Earlier in this section205 we recommended that the estate trustee should
be permitted to distribute the estate, without advertising for creditors, after
six months from the death of the deceased. In these circumstances, the
estate trustee would not be personally liable to any claimant of whom she
did not have notice at the time of distribution. To preclude any remedy to
a creditor who has failed to notify the estate trustee would be, in effect, to
shorten the limitation period to six months after the death of the deceased.
At present the limitation period is two years.206 We acknowledge that reten-
tion of the present system would keep beneficiaries at risk for up to two
years, but, unlike creditors and other claimants, beneficiaries are volunteers,
and it would not be inequitable, in our view, to keep volunteers at risk for
an additional eighteen months. We have concluded, therefore, that the type
of system that now exists respecting the rights of a creditor or claimant who
has failed to notify the personal representative should be retained, and we
so recommend.

Accordingly, where an estate trustee has advertised for the presentation
of claims, and the time for the presentation of claims as set out in the
advertisement has elapsed, or where the estate trustee has not advertised
for the presentation of claims, but six months have elapsed from the date of
death of the deceased, a claimant who has not given notice of her claim to
the estate trustee would not be barred from claiming payment of her claim,
as follows:

(a) from the assets still in the hands of the estate trustee;

(b) from the assets distributed to beneficiaries of the estate, to the
extent of such assets or the proceeds thereof, subject to the recom-
mendation we shall make in chapter 5 concerning the remedy of
an aggrieved creditor for an estate trustee's improper exercise of
the power to make appropriations or to make distributions in
kind;207

(d) where the claim is protected by liability insurance to the extent of
its limits.

Of course, where a claim arises against the estate trustee in her personal
capacity, the claimant would not be barred from claiming against the estate
trustee.

205 Supra, sec. 4(c)(i).
6 Trustee Act, supra, note 5, s. 38, as am. by S.O. 1984, c. 1 1, s. 216(3).

207

See infra, ch. 5, sec. 4(c)(ii).

210

(d) Contestation of Claims

The Commission now turns to consider the procedures that should be
available to resolve a dispute, once the estate trustee has received notice of
a claim. In that connection, the Commission makes a number of recommen-
dations respecting a summary claims procedure by which creditors might be
permitted to assert their claims against the estate of a deceased person.208
At present, a summary procedure for the contestation of claims against
estates is contained in the Estates Act.209 We have concluded that, while
these provisions are generally satisfactory, some modifications would appear
to be desirable.

First, the procedures contained in sections 69 and 70 of the Estates Act
apply where a claim or demand "is made against the estate of a deceased
person or where the personal representative has notice of such a claim or
demand".210 It is generally understood, however, that section 69 applies to
liquidated claims while section 70 applies to unliquidated claims, although
it has been suggested that "it is hard to imagine claims that would come
under [section 70] and not [section 69]".211 This complexity, in our view, is
entirely unnecessary, and we have concluded that sections 69 and 70 should
be consolidated into a single provision dealing with the contestation of all
claims made against the estate.

Pursuant to the current provisions,212 where the personal representative
has notice of a claim or demand, she may serve a notice in writing upon the
claimant, indicating that the personal representative contests the claim, in
whole or in part. This notice of contestation must refer specifically to the
section under which it is given.213 In the view of the Commission, a simple
reference in the notice to the section under which it is given might not be
sufficient to convey to the claimant the rights available to her under the
section, or the consequences that flow from her failure to take appropriate
action. The Commission has concluded that these matters, discussed below,
should be set out expressly in the notice of contestation.

Within thirty days after receiving the notice of contestation, or within
three months if a judge, on application, allows, the claimant may apply for

208

209

Of course, instead of utilizing the summary claim procedure, a creditor has the option of
commencing an action, in the ordinary way, against the personal representative of the
estate. See the Trustee Act, supra, note 5, s. 38(2), and the rules of court, supra, note 6, r. 9,
as am. by O. Reg. 366/87, s. 1.

Supra, note 169, ss. 69-71.

210

Estates Act, supra, note 169, s. 69(1). The wording of s. 70(1) is slightly different. It applies
where a claim or demand "is made against the estate of a deceased person or where the
personal representative has notice or knowledge of the claim or demand".

211 Widdifield, supra, note 49, at 57.

212 Estates Act, supra, note 169, ss. 69(1) and 70(1).

213 Ibid. See, also, Re Lawrence, [1950] O.W.N. 571 (H.C. Div.).

211

an order allowing his claim by filing "a statement of his claim verified by
affidavit and a copy of the notice of contestation".214 Failure by the claimant
to file these documents, within the required time, results in the claimant
being deemed to have abandoned his claim and the claim being barred.215
In the view of the Commission, the requirement that the statement of claim
be verified by affidavit is entirely unnecessary. It should be recalled that it
is always open to the claimant to commence an ordinary action against the
estate trustee, in which case no such affidavit would be required. A sufficient
record for the summary proceeding may be created from the statement of
the creditor's claim and the notice of contestation.

It has been held that the personal representative must contest a claim
before the summary procedure set out in the Estates Act is available to a
claimant.216 Fanjoy Surr. Ct. J. stated that "[t]he plain language of s. 68 [now
section 69] indicates that a 'notice of contestation' in writing by the personal
representative is a necessary preliminary to the application of the section
and the procedure set out therein".217 He concluded as follows:218

[TJhere must be a contestation of the claim before the procedure set out in
s. 68 can be used by a claimant. The practical effect of this conclusion is that
the executors of an estate can avoid the provisions of s. 68 by simply failing to
contest a claimant's claim. The remedy lies in the legislature and not in the
Courts.

The Commission is of the view that the estate trustee should not be
permitted to defeat the purpose of the legislative scheme simply by refusing
or neglecting to contest a claim. The speedy resolution of claims and the
expeditious administration of the estate are generally in the interests of
everyone concerned in the administration. Accordingly, the Commission
recommends that if within sixty days after the estate trustee has notice of a
claim she has neither contested the claim, nor paid or allowed the claim,
the claimant should be permitted to commence proceedings against the
estate for the amount of the claim, in accordance with the summary claims
procedure.

It has also been held that sections 69 and 70 do not confer jurisdiction
on the court to adjudicate a counterclaim by the estate.219 "[T]he Surrogate

214
215

Estates Act, supra, note 169, ss. 69(2) and 70(2).
Ibid.

216 Re Somers (1979), 6 E.T.R. 101, 15 C.P.C. 165 (Ont. Surr. Ct.) (subsequent references are
to 6 E.T.R. ).

217
218

219

Ibid., at 103.

Ibid., at 104. See, also, Schnurr, supra, note 179, at 169-70, where this requirement was
identified as a major weakness of the present provisions, from the point of view of the
creditor who wishes to have his claim determined as quickly as possible.

Re Huffmon and Breese (1974), 3 O.R. (2d) 416 (H.C.J.).

212

Court's jurisdiction . . . with respect to 'claims' is in reference to claims
made against the estate".220 In the view of the Commission, the contestation
procedure should permit the hearing of a counterclaim, and the judge should
have the authority to give judgment to the estate for the excess of any
counterclaim against the claimant.

Where a claimant applies to the court to have her claim determined,
the present contestation of claims provisions require that the Official Guard-
ian be given notice of the application if minors are concerned.221 Notice of
the application may also be given "to such, if any, of the persons beneficially
interested in the estate as the judge may direct".222 Similarly, section 69(5)
provides that "in addition to the persons to whom notice has been given,
any other person who is interested in the estate has the right to be heard
and to take part in the proceedings". These provisions were inserted in the
Act out of a concern that the estate trustee might not defend the claims
vigorously if she were not financially and personally interested in the out-
come of the litigation, or that she might be in collusion with a claimant to
prefer one particular claim over the claims of other creditors. We agree with
the observation that the requirement of notifying the Official Guardian "is
somewhat anomalous since in an ordinary action by a creditor against an
estate, it is not required that the Official Guardian be named as a party
defendant simply because minors have an interest in the estate".223 We would
add, however, that if the claimant had asserted her claim by commencing an
ordinary action none of these additional requirements would be imposed,
and we have concluded, therefore, that they should be eliminated from the
summary claim procedure. On the other hand, a discretionary power in the
judge to require notification of the Official Guardian, or interested parties,
including creditors, might be useful, if used sparingly. In most cases, however,
adequate protection from the estate trustee will be provided by the threat
of action by a dissatisfied beneficiary or creditor.

The current procedure contains a provision that refers claims within
the Small Claims Court jurisdiction to be heard by that court.224 This transfer
can be avoided, however, if both the claimant and the personal representa-
tive consent to have the matter heard by the judge of the Ontario Court
(General Division). Clearly the purpose of this provision is to relieve the
court of the burden of hearing claims involving small amounts. In addition,
section 69(6) provides as follows:

220
221
222
223

Ibid., at 421 (emphasis in original).

Estates Act, supra, note 169, ss. 69(4) and 70(3).

Ibid.

Schnurr, "Claims Against Estates: Summary Procedure", in Schnurr (ed.), Estate Litigation
(1987) 149 (hereinafter referred to as "Claims Against Estates: Summary Procedure"), at
152.

Estates Act, supra, note 169, s. 69(3).

213

69. — (6) Where the claim, or the part of it that is contested, amounts to $800
or more, instead of proceeding as provided by this section, the judge shall, on
the application of either party, or of any of the parties mentioned in subsection
(5), direct the creditor to bring an action for the recovery or the establishment
of his claim, on such terms and conditions as the judge considers just but, where
the claimant and the personal representative consent to have the trial before
the judge of the surrogate court [now the Ontario Court (General Division)],
the trial shall take place and be disposed of before the surrogate court judge
under this section.

As a result of this section, a contested claim in excess of $800 can be
resolved in accordance with the summary procedure only where both parties
agree. If either party requests that the matter not be dealt with under the
summary procedure, the court must direct the creditor to bring an action
for the recovery of his claim. This lack of discretion has been identified as
the primary reason for the relatively little use that has been made of the
present summary procedure.225 The Commission has concluded that the
jurisdiction to require the claimant to commence an action against the estate
for the amount of the claim, in the ordinary manner, should continue, but
it should be a matter within the discretion of the judge. Among other things,
this would permit the reference of small claims to the appropriate court.

In accordance with the above conclusions, the Commission makes the
following recommendations:

(1) Sections 69 and 70 of the Estates Act should be consolidated and
amended as follows:

(a) Where a claim or demand has been made against the estate
of a deceased person, the estate trustee should be permitted
to serve the claimant with a notice in writing that she contests
the same in whole or in part, and if in part, state what part.

(b) The notice of contestation should set out expressly the claim-
ant's rights, as contained in paragraph (c) below, and the
consequences for failure to take action, as contained in para-
graph (e) below.

(c) Within thirty days after the receipt of such notice of contesta-
tion of the claim, the claimant should be permitted to

(i) commence an action against the estate for the amount of
the claim in the ordinary manner and serve the estate
trustee as provided in the rules of court, or

(ii) commence proceedings against the estate for the amount
of the claim, in accordance with the summary claims pro-
cedure (see paragraph (g)).

225

• See Claims Against Estates: Summary Procedure, supra, note 223, at 152-53.

214

(d) To commence a proceeding against the estate in accordance
with the summary claims procedure, the claimant should not
be required to verify a statement of her claim by affidavit.

(e) If the claimant does not proceed as provided in paragraph (c)
in the time limited therefor or within such time as is allowed
by the judge, she should be deemed to have abandoned her
claim and it should be forever barred.

(f) If within sixty days after the estate trustee has notice of a claim
she has neither contested the claim, nor paid or allowed the
claim, the claimant should be permitted to commence proceed-
ings against the estate for the amount of the claim, in accor-
dance with the summary claims procedure.

(g) The manner of proceeding in the summary claims proceedings
should be prescribed by regulation.

(h) The court should have the following powers:

(i) to extend the time for the commencement of an action
or proceedings or the service thereof for a period not
exceeding three months from the time of the receipt of
the contestation of the claim;

(ii) to give directions for the conduct of the action;

(iii) to require the claimant to commence an action against
the estate for the amount of her claim in the ordinary
manner;

(iv) to dispose of any counterclaim or claim for a set-off by
the estate trustee and if the counterclaim or set-off
exceeds the claim to render a judgment against the claim-
ant in the amount of the excess;

(v) to prescribe the time when the judgment may be enforced
where the claim is proved, but not yet recoverable;

(vi) to fix costs and order the payment of the same; and

(vii) to give directions with respect to the enforcement of any
judgment, by execution or otherwise.

(2) The necessity of serving the Official Guardian in contestation of
claim proceedings should be eliminated.

(3) A judge should have the power to require notice of the contestation
of claim proceeding to be given to the Official Guardian if minors
are concerned or in any other case where in her discretion the
ends of justice would be served by serving any or all the persons
beneficially interested in the estate, including creditors, and to
permit them to participate in such proceedings on such terms as to
costs as she shall determine.

215

(4) The judge should have the power to assess costs against the persons
permitted to participate in a proceeding under paragraph (3) if in
her opinion their participation in the proceedings added unneces-
sarily to the costs that the claimant or the estate would have other-
wise borne.

5. CONTINGENT LIABILITIES

The existence of contingent liabilities can cause considerable difficulties
for an estate trustee. At present, in the absence of statutory protection, a
personal representative who distributes the assets of an estate, with notice
of a contingent liability, does so at his own peril. If the contingent liability
later matures, the personal representative will be personally liable to the
claimant.226 This would appear to be the case, moreover, no matter how
remote the possibility that the estate will be called upon to satisfy the
liability, and no matter how long the period of contingency. Under present
law, therefore, in order to protect himself, the personal representative will
either delay distribution of the estate, or retain a fund sufficient to meet the
contingent liability when it matures. Alternatively, a personal representative
could bring proceedings for administration of the estate by the court under
the rules of court.227 Although such proceedings are rarely utilized, where
the assets of an estate are distributed pursuant to an order of the court,
provided the personal representative has made full and fair disclosure,
the personal representative will be protected.228 As the following passage
suggests, however, the principles upon which the court will order distribu-
tion, without regard to the contingent claims, have not been articulated
explicitly:229

In this case the executors seek the direction of the Court to distribute the
estate among the residuary legatees notwithstanding the claim of a limited
company in respect of unpaid shares, no calls having been made. It appears to
be the practice to direct such distribution notwithstanding the existence of
contingent claims, and, as the law stands, I think it is clear that the order of the
Court in such a case exonerates the executors from ultimate liability to the
creditor. The practice appears to have grown up gradually and in a manner
which is not to my mind altogether satisfactory. One cannot help seeing that the
rights of absent parties of whose claim the Court has notice may be prejudicially
affected by the order. Nor are the authorities themselves in a very satisfactory
state, but I think the outcome is reasonably clear.

226

Taylor v. Taylor (1870), L.R. 10 Eq. 477, 39 L.J. Ch. 676, app'd in Re Berry (1981), 34 O.R.
(2d) 56, 10 E.T.R. 152 (H.C.J. ).

227

Proceedings for administration are discussed supra, this ch., sec. 2(b)(iii).

228

229

See Smith v. Smith (1861), 1 Dr. & Sm. 384, 62 E.R. 426 (V.C.), and Re Nixon, [1904 J 1 Ch.
638.

Re King, [1907] 1 Ch. 72, at 76-77 (per Neville J.).

216

As we noted earlier in this report,230 provisions were enacted in the
Trustee Act22,1 to provide relief for personal representatives in respect of
certain contingent liabilities. The Act provides protection for a personal
representative, liable as such, for "the rents . . . covenants or agreements
contained in a lease or agreement for a lease",232 or for "the rent . . . cove-
nants or agreements contained in any conveyance on chief rent or rent-
charge".233 With respect to these sections, it has been observed as follows:234

While the sections seem to invite the executor to distribute the estate, the relief
given is subject to the executor retaining sufficient funds to answer identifiable
future claims and may appear somewhat illusory. However, when read with
other sections in the Act relieving trustees the provisions could be helpful to a
trustee who did not retain a sufficient reserve.

Special provision has also been made in section 57(4) of the Trustee Act,
which applies in the case of a deficiency of assets, for contingent liabilities
of the deceased as a guarantor or endorser of a negotiable instrument. In
such circumstances, the creditor is treated as a secured creditor, the security
being the liability of the person primarily liable on the instrument. A secured
creditor is required to value his security, and is permitted to rank upon a
distribution of the assets of the estate for the unsecured deficiency only.235
However, in the circumstances noted in section 57(4), the creditor is permit-
ted to amend or revalue his claim after the maturity of the liability and non-
payment. Section 57(4) provides as follows:

57. — (4) If the claim of the creditor is based upon a negotiable instrument
upon which the estate of the deceased debtor is only indirectly or secondarily
liable and which is not mature or exigible, the creditor shall be considered to
hold security within the meaning of this section and shall put a value on the
liability of the person primarily liable thereon as his security for the payment
thereof, but after the maturity of such liability and its non-payment he is entitled
to amend and revalue his claim.

While the statutory provisions described above would resolve some of
the difficulties encountered by an estate trustee, there is a need, in our view,
to address the problem of contingent liabilities in other contexts.

However, the Commission is also of the view that, in order to avoid
hardship or inequity to the estate in particular circumstances, court review

230 Supra, ch. 2, sec. 4(c).

oil

Supra, note 5.

232 Ibid., s.51(l).

233 Ibid., s. 52(1).

234 Widdifield, supra, note 49, at 63.

The treatment of secured credito

a deficiency of assets, is discussed supra, this ch., sec. 2(b)(ii).

The treatment of secured creditors in a distribution under the Trustee Act, where there is

217

should be available. It should be recalled that the Commission earlier recom-
mended that proceedings for administration should be retained.236 Accord-
ingly, an estate trustee would continue to have the alternative of dealing
with contingent liabilities by bringing proceedings for the administration of
the estate by the court. However, in our view, if this is the only issue to be
determined, some more summary procedure should be available. In addition,
we believe, the court should be provided with some guidance in dealing
with contingent claims. In this respect, the United States Uniform Probate
Code237 is instructive. Section 3-810 provides as follows:

3 — 810(a) If a claim will become due at a future time or a contingent or
unliquidated claim becomes due or certain before the distribution of the estate,
and if the claim has been allowed or established by a proceeding, it is paid in
the same manner as presently due and absolute claims of the same class.

(b) In other cases the personal representative or, on petition of the
personal representative or the claimant in a special proceeding for
the purpose, the Court may provide for payment as follows:

(1) if the claimant consents, he may be paid the present or agreed
value of the claim, taking any uncertainty into account;

(2) arrangement for future payment, or possible payment, on the
happening of the contingency or on liquidation may be made by
creating a trust, giving a mortgage, obtaining a bond or security
from a distributee, or otherwise.

While these alternative methods of dealing with contingent claims seem
to us to be desirable, we believe that the court should enjoy even greater
flexibility. In arriving at our recommendations in this regard, we have sought
to achieve an appropriate balance between the legitimate interests of claim-
ants in satisfying their claims, and the interests of estate trustees and benefi-
ciaries in the expeditious administration of estates.

In order to achieve these objectives, the regime we propose involves
the following elements. First, we have already recommended that contingent
claims should be subject to our proposed notification and contestation proce-
dure.238 Accordingly, assuming the estate trustee complies with the advertis-
ing requirements, he will be protected from personal liability in respect of
the contingent claim if he distributes the estate without notice of the claim.
Second, we have also recommended that in situations where substantial pro-
tection exists for the claimant, for example, in the case of an assignment by the
estate trustee of a long-term lease, mortgage, or other long-term obligation,
the claimant's rights will be extinguished as against the Estate Trustee.239

Supra, this ch., sec. 2(c).
237 Supra, note 108.

Supra, this ch., sec. 4(d).
239 Supra, ch. 2, sec. 4(b).

218

In these cases other sources exist to satisfy the claim. Finally, in all cases,
sufficient flexibility should exist in order to permit an appropriate resolution
in the particular circumstances. The Commission therefore recommends
that where a contingent liability of an estate exists, and there is a desire to
distribute the estate, the court upon application by an interested party
should be required to provide for the disposition of the claim as follows:

(a) by the valuation of the present value of the claim (taking into
account any uncertainty) and immediate payment in the same
manner as a matured claim;

(b) by the arrangement for the future payment or possible payment of
the claim by the creating of a trust, giving a mortgage, obtaining a
bond or security from the distributee or otherwise; or

6. EVIDENCE IN ACTIONS INVOLVING ESTATES

The task faced by creditors and other claimants in establishing their
claims against decedents' estates is made somewhat more difficult by the
statutory requirement that their evidence must be corroborated. Section 13
of the Evidence Act240 provides as follows:

13. In an action by or against the heirs, next of kin, executors, administrators
or assigns of a deceased person, an opposite or interested party shall not obtain
a verdict, judgment or decision on its own evidence in respect of any matter
occurring before the death of the deceased person, unless such evidence is
corroborated by some other material evidence.

The requirement of corroboration is one of the limited class of eviden-
tiary rules in which the quantity of the evidence is as important as the quality.
That is, the evidence of an opposite or interested party cannot be the basis
of a judgment involving interests in a decedent estate unless it is qualified
by the corroboration of material evidence. The danger against which the
rule embodied in section 13 is directed has been described as follows:241

Look at the result of acting on such evidence alone. A claimant, who cannot by
possibility be contradicted, and who may be too clever and unscrupulous to
break down under cross-examination, could put forward a claim founded solely
on his own oath, which the Judge can detect no reason for disregarding, and
which in the absence of such a rule he would be bound to act upon, the only
person who could contradict it being dead. It is not a rule which depends on
the character of the witness, but on the manifest danger which requires the
establishment of a general rule applicable to all alike from the great difficulty
or impossibility of detecting falsehood.

240
241

R.S.O. 1980, c. 145.

Re Harnett (1886), 17 L.R. Ir. 543 (V.C.), at 547.

219

While the rule requiring corroboration in these circumstances had
developed merely as a rule of practice, it "was made an absolute requirement
by statute and is contained in many of the provincial Evidence Acts".242

According to section 13, the evidence that must be corroborated is that
of "an opposite or interested party". It has been held that, since the section
refers to an opposite or interested "party", as opposed to an opposite or
interested "person", the evidence of a person who is not an actual party to
the proceeding need not be corroborated, notwithstanding any interest she
might have in the result.243 Moreover, it should be noted that the evidence
of one interested party cannot be used to corroborate the evidence of
another having a similar interest.244

It should also be noted that section 13 applies whether the action is by
or against the decedent's estate, and requires corroboration only in respect of
any matter occurring before the death of the deceased person. Consequently,
claims in respect of the actions of the personal representative need not be
corroborated.245

While the section is silent with respect to the degree or extent of the
corroboration required, it does specify that the evidence of the opposite or
interested party must be corroborated by "some other material evidence".
As the courts have traditionally construed the rule, it is not necessary for
the opposite or interested party to re-prove his entire case by other evidence;
rather, he must satisfy the court of support on some material point. In
Smallman v. Moore,246 Mr. Justice Kellock stated the rule in the following
terms:247

[T]he section here does not say that every fact necessary to be proved to
establish a cause of action must be corroborated by evidence other than that of
the interested party but that the evidence of the interested party itself is to be
corroborated by some other material evidence. I do not think that the word
'matter' in the section is to be taken as synonymous with every fact required to
be proved in establishing a cause of action and it has never, as far as I am aware,
been so construed.

It has been held that the corroborative evidence required by section 13
"must be evidence, independent of the evidence of an opposite or interested
party, which shows or tends to show that such opposite or interested party

242
243
244
245
246
247

Sopinka and Lederman, The Law of Evidence in Civil Cases (1974), at 409.

Re Miller Estate, [1949] O.W.N. 569 (Surr. Ct.).

Ibid.

McClenaghan v. Perkins (1903), 5 O.L.R. 129 (C.A.).

[1948] S.C.R. 295, [1948] 3 D.L.R. 657 (subsequent references are to [1948] S.C.R.).

Ibid., at 301 (emphasis in original).

220

is speaking the truth upon a material issue in the proceedings".248 Thus, the
"corroborating evidence must be independent of the veracity of the party
whose evidence requires corroboration".249 Perhaps the greatest difficulty
created by this requirement occurs when the need for corroboration forces
the exclusion of documentary evidence that would otherwise be corrobora-
tive, but is unacceptable in the particular circumstances because the docu-
mentary evidence can be proved only by the person whose own evidence
must be corroborated.250

The corroborative evidence might consist of circumstantial evidence,
although, to be corroborative, the circumstances must be consistent only
with the evidence requiring corroboration.251 If the circumstances are consis-
tent with the theories of both parties, they can be corroborative of neither.252

Finally, once the evidence of an opposite or interested party has been
corroborated, the trier of fact must weigh the evidence in the ordinary
manner.253

There have been a number of expressions of judicial dissatisfaction
with the statutory requirement, criticizing the section on the basis of both
substance254 and principle.255 Indeed, there would appear to be a judicial

248 Sands Estate v. Sonnwald (1986), 9 C.P.C. (2d) 100 (H.C.J.), at 119.
Sopinka and Lederman, supra, note 242, at 417.
Ibid.

McTaggart v. Boffo (1975), 10 O.R. (2d) 733, 64 D.L.R. (3d) 441 (H.C.J.).
Ibid.
Sopinka and Lederman, supra, note 242, at 418.

249
250
251
252
253
254

255

See, for example, Kudlaciak v. Trela (1975), 11 O.R. (2d) 330, at 341, 66 D.L.R. (3d) 72,
at 83 (H.C.J. ), where the following appears:

What has already been said is enough to dispose of the issue of corroboration in
the present case. However, having had to consider the relevant case law it might be
permissible to add some observations which are purely obiter. In Ryan v. Whitton, supra,
Gale, J., discussed some of the authorities and difficulties raised by them. At p. 101
O.R., p. 149 D.L.R., he said:

On those authorities, therefore, it would be my conclusion that if there is evidence
corroborating or tending to corroborate evidence of the plaintiff in an action of
this kind on some of the material issues which have been raised by the pleadings
the purpose of the Act has been satisfied, although, I repeat, the Court may
thereby be given little or no assistance in its endeavour to decide the veracity of
the plaintiff on the matters that are in dispute.

There is considerable support for that view in some of the cases cited by Gale, J.,
and by me. If it is a correct statement of the law, s. 14 [now s. 13] fails to achieve its
purpose. However, any helpful clarification of this very unsatisfactory area of the law
will have to await some matter in which the construction of s. 14 is directly in issue.

See, for example, Sands Estate v. Sonnwald, supra, note 248, at 109-10, where the following
appears:

Whilst the inflexibility of a rule abrogating the general principle of the common law

221

trend toward a strict interpretation of the section, deriving from the more
general reluctance on the part of courts to require corroboration in any
matter, preferring, instead, to rely on an assessment of the credibility of the
evidence.256 The section has also been the subject of criticism by commenta-
tors. For example, the rule has been said to be misguided, for the following
reasons:257

In the first place, it favors the dead above the living, for it would rather
see an honest survivor unjustly lose his claim than an honest decedent be made
unjustly to pay; yet, the equities being equal, the living person should rather be
favored.

In the next place, it is based on a mere contingency — the contingency that
the claim will be dishonest and that there will be no means of exposing its
dishonesty; and so, for the sake of defeating the dishonest man who may arise,
the rule is willing to defeat the much more numerous honest men who are sure
to possess just claims.

Finally, there is always an abstract impropriety and injustice in any rule
which interposes a technicality to prevent judicial action upon testimony which
is in fact completely believed and trusted.

Finally, it appears that the statutory provision has been abandoned in
a number of contexts. British Columbia, for example, has abrogated the
rule,258 and the Uniform Evidence Act259 has adopted the same position.260

It should be noted that the Commission, in its Report on the Law of
Evidence,261 retained the equivalent of section 13 in the Draft Act appended
to the report.262 It was retained, however, without comment. Having consid-
ered the provision in the present context, the Commission is of the view that
the rule has outlived its usefulness. Even in the absence of the compelling
criticisms outlined above, if it could be argued legitimately that the rule is

that the testimony of a single witness, no matter what the issue nor who the person,
may legally suffice in proof of the issues to which such evidence relates, may rightly be
criticized ... it nonetheless remains an integral part of the adjectival law applicable
in cases such as the present. It would seem particularly incongruous to visit upon a
party responding to a claim initiated on behalf of a deceased person a synthetic rule
denying such respondent relief, notwithstanding belief, in the absence of corroboration.

256

See Ken Ertel Ltd. v. Johnson (1986), 53 O.R. (2d) 220, at 223, 25 D.L.R. (4th) 233 (Div.
Ct.).

Chadbourn (ed.), Wigmore on Evidence in Trials at Common Law (1978), Vol. 7, §2065, at
488.

258 Section 11 of the Evidence Act, R.S.B.C. 1960, c. 134 was repealed by S.B.C. 1976, c. 2,
s. 20(a).

-ICQ

Uniform Law Conference of Canada, Proceedings of the Sixty -Third Annual Meeting (1981),
at 52, and Appendix U, at 326.

Uniform Evidence Act, ibid., s. 125.

Ontario Law Reform Commission, Report on the Law of Evidence (1976).

262 Ibid, Appendix A, s. 19.

222

a justified protection against the temptation of unchallengeable perjury,
the present technical complexity, and the exclusions from its application,
combine to call its value into question. We find persuasive the argument,
alluded to above, that to the extent a problem exists, it can be dealt with
most appropriately by the court assessing the credibility of the evidence.
Accordingly, we recommend that section 13 of the Evidence Act, requiring
corroboration in an action by or against estates, should be repealed.

7. BONDING OF ESTATE TRUSTEES

Traditionally, administration bonds have been required to provide pro-
tection for claimants and beneficiaries of an estate against a defalcating
personal representative. Section 60 of the Estates Act263 provides:

60. Except where otherwise provided by law, every person to whom a grant
of administration, including administration with the will annexed, is committed
shall give a bond to the judge of the court by which the grant is made, to enure
for the benefit of the Accountant of the Ontario Court, with a surety or sureties
as may be required by the judge, conditioned for the due collecting, getting in,
administering and accounting for the property of the deceased, and the bond
shall be in the form prescribed by the surrogate court rules, and in cases not
provided for by the rules, the bond shall be in such form as the judge by special
order may direct.

While the posting of a bond is generally not required of executors,
section 25 of the Estates Act imposes such an obligation in limited circum-
stances. Section 25 provides as follows:

25. Letters probate shall not be granted to a person not resident in Ontario
or elsewhere in the Commonwealth unless the person has given the like security
as is required from an administrator in the case of intestacy or in the opinion
of the judge such security should under special circumstances be dispensed with
or be reduced in amount.

In addition to the above sections, the Act and rules264 contain numerous
provisions respecting the bonding requirement, which may be summarized
as follows:

1. The amount of the bond must be double the amount or value of the
assets of the estate for probate purposes,265 and the judge may
investigate the value of the estate property, in a summary way, if he
doubts the declaration of the applicant.266

263 Supra, note 169, as am. by S.O. 1989, c. 56, s. 48(19).

264 Supra, note 183.

Estates Act, supra, note 169, s. 62(1).

7ftf\

Estates Rules, supra, note 183, r. 36.

223

2. The bond must be the bond of a guarantee company or a personal
bond and, in the case of a personal bond, the court may require the
surety to attend before it for examination.267

3. Any person with an interest in the estate may, by memorandum,
require that notice be given to him of any consideration of the bond
by the court, and thereby obtain the opportunity to inquire into its
sufficiency.268

4. A single surety is sufficient where the value of the estate is $5,000
or less; but where the value of the estate property exceeds $5,000,
at least two sureties are required, unless the judge otherwise
directs.269 If, after the grant has issued, the judge concludes that the
sureties are insufficient, the judge may require further security.270

5. Where there is a personal bond, the surety must be at least eighteen
years old.271 No registrar or solicitor may be a surety under an
administration bond.272

6. Security is not necessary where the administration is undertaken by
the Government of Ontario, any ministry thereof, or any provincial
commission or board.273

7. Where there are special circumstances, the judge may reduce the
amount of the bond or dispense with the bond entirely.274 A bond is
not required where administration is granted to a surviving spouse,
and (a) the net value of the estate does not exceed $75,000, and (b)
the spouse files an affidavit setting forth the debts of the estate.275

8. The form of the bond is prescribed in the rules

276

In order to satisfy the terms of the administration bond the personal
representative must (1) make an accurate inventory of the estate; (2) admin-
ister the estate as required by law, paying all proper debts and claimants

267 Ibid., r. 33.

268 Ibid., r. 35(1).

269 Ibid., r. 34(2).

770

Estates Act, supra, note 169, s. 65, and Estates Rules, supra, note 183, r. 37.

271 Ibid., r. 34(1).

272 Ibid., r. 34(4).

273 Estates Act, supra, note 169, s. 61(1).

274 Ibid., s. 62(2).

275 Ibid., s. 61(2).

"JHf.

Estates Rules, supra, note 183, Appendix A, Forms 19, 20 and 22.

224

and properly marshalling the assets; (3) make an accounting of the adminis-
tration; and (4) pay the residue to the persons entitled.277

When an administrator has fulfilled her obligations under the terms of
the bond, to the satisfaction of the court, the bond may be delivered up for
cancellation, either after the administrator has passed her final account,278
or upon presentation of evidence satisfactory to the court that the debts
have been paid and the residue of the estate distributed.279 In the latter case,
notice must be given to the Official Guardian or the Public Trustee if an
infant or mental incompetent, respectively, is entitled to a part of the estate.
The procedure under section 68 for an order discharging a bond where the
administrator has not passed her accounts "is followed in many cases, as it
obviates the necessity of passing accounts the expense of which is often not
justified: in many cases all beneficiaries are anxious that the surety be
released and are glad to consent".280

It was noted above that section 60 requires that the bond "enure for
the benefit of the Accountant of the Ontario Court". A claimant against an
administrator who wishes to realize on a bond must obtain an assignment
of the bond from the court. Upon application, the court may, in a summary
way, assign the bond to the claimant where the court is satisfied that a
condition of the bond has been broken.281 The claimant may then sue on the
bond, in her own name, and recover as trustee for all persons with claims in
respect of the breach of condition.282

The assignment procedure enables the court to maintain discretionary
power over the use of administration bonds. A number of requirements have
evolved respecting the exercise of this discretion, as follows:283

The application for an order to assign the bond should be on notice to the
sureties. . . .

The procedure for assignment of the bond does not offer a creditor an alterna-
tive method of collecting his debt; he must first exhaust his normal remedies.

On an application for assignment of the bond the applicant need make out
only a prima facie case. On such an application a contention that the condition

277

Hull and Cullity, supra, note 170, at 249. See, also, Estates Rules, supra, note 183, Appen-
dix A, Form 19, which also includes a condition that the administrator will deliver up the
letters of administration if a will of the deceased is later proved.

278

Estates Act, supra, note 169, s. 67.

Ibid., s. 68, reproduced, in part, supra, note 188.

Hull and Cullity, supra, note 170, at 251-52.

Estates Act, supra, note 169, s. 63.

Ibid.

Hull and Cullity, supra, note 170, at 249-50.

279
280
281
282
283

225

of the bond is, in part, invalid will not be considered. But the Court has
discretion to refuse to direct the assignment if the proceedings appear to be
wholly frivolous or vexatious.

In modern practice, administration bonds are usually secured, for a fee,
from a surety company. The cost of an administration bond is increased by
the requirement in section 62(1) of the Act that the amount of the bond
must be double the amount of the sworn value of the property of the estate.
While the costs of administration are increased by the necessity of obtaining
a bond, it is quite rare for proceedings to be taken for enforcement. Indeed,
none of the many practitioners or court officials consulted in connection with
this project had any experience with the realization of administration bonds.

Earlier in this report we recommended that the offices of executor and
administrator should be assimilated.284 In accordance with that general
proposition, we believe that a single rule respecting bonding should apply
in respect of all estate trustees. We have reached this conclusion not only
as a matter of theoretical consistency, but also as a matter of principle. In
our view no principled rationale can be advanced for a rule that would
require a close relative who is an administrator to obtain a bond, but would
not require a stranger who is an executor to do so. Accordingly, if the
Commission were to recommend the continuation of the general bonding
requirement, it would be necessary, in our view, to extend that requirement
to all estate trustees. The result of such a proposal, if all estate trustees were
to be bonded through surety companies, would be a substantial increase in
the business of surety companies, and a corresponding increase in the pres-
ent dissatisfaction with the high cost of bonding.

There would appear to be a modern trend, evidenced in a number of
jurisdictions, away from a general bonding requirement. For example, sec-
tion 3-603 of the United States Uniform Probate Code285 provides as follows:

3-603. No bond is required of a personal representative appointed in informal
proceedings, except (1) upon the appointment of a special administrator;

(2) when an executor or other personal representative is appointed to admin-
ister an estate under a will containing an express requirement of bond or

(3) when bond is required under Section 3-605 [demand for a bond by an
interested person]. Bond may be required by court order at the time of appoint-
ment of a personal representative appointed in any formal proceeding except
that bond is not required of a personal representative appointed in formal
proceedings if the will relieves the personal representative of bond, unless bond
has been requested by an interested party and the Court is satisfied that it is
desirable. Bond required by any will may be dispensed with in formal proceed-
ings upon determination by the Court that it is not necessary. No bond is
required of any personal representative who, pursuant to statute, has deposited
cash or collateral with an agency of this state to secure performance of his duties.

284
285

Supra, ch. 2, sec. 1(d).
Supra, note 108.

226

In England, pursuant to the recommendations of the Law Commis-
sion,286 administration bonds, and the general requirement for sureties, were
abolished in 1971.287 The English Law Commission recommended that, while
administration bonds should be abolished, the power should be retained to
require a guarantee by sureties for the due performance of the administra-
tor's duties on any application for a grant to the following persons:288

(a) a creditor as such,

(b) a person having no immediate beneficial interest in the estate,

(d) a person to the use and benefit of a minor or of someone incapable
of managing his own affairs,

(e) a person who appears to the Registrar to be resident outside the
United Kingdom, the Channel Islands, or the Isle of Man or where
the Registrar considers that there are special circumstances making
it desirable to require sureties.

A similar approach has been recommended in Western Australia,289 South
Australia ,290 and Victoria.291

287

288
289

England, The Law Commission, Administration Bonds, Personal Representatives' Rights of
Retainer and Preference and Related Matters, Law Com. No. 31 (Cmnd. 4497, 1970) (herein-
after referred to as "English Report"), paras. 12-14, at 7-9.

Supreme Court of Judicature (Consolidation) Act 1925, c. 49, s. 167, as am. by Administration
of Estates Act 1971, c. 25, s. 8, rep. by Supreme Court Act 1981, c. 54, s. 152(4) and Sch.
7. See, now, Supreme Court Act 1981, s. 120, and Non-Contentious Probate Rules 1954, S.I.
1954/796, r. 38, as en. by S.I. 1971/1977, and am. by S.I. 1982/446 and S.I. 1985/1232.

English Report, supra, note 286, para. 14, at 8-9.

Law Reform Commission of Western Australia, Report on Administration Bonds and Sureties,
Project No. 34, Pt. II (1976). In addition to the circumstances in which the English Report,
supra, note 286, would require a surety, the Western Australia Report on Administration
Bonds and Sureties would require a surety in the following circumstances (para. 22, at
12-13):

(a) where the grant of administration is limited, for example, ad colligenda
bona or ad litem;

(b) where one or more of the beneficiaries are not of full age or capacity; and

(c) where one or more of the beneficiaries are not resident in Western Austra-
lia and they have no agent or attorney in that state.

Law Reform Committee of South Australia, Twenty-Second Report of the Law Reform
Committee of South Australia to the Attorney-General Relating to Administration Bonds and
to the Rights of Retainer and Preference of Personal Representatives of Deceased Persons (1972).
The South Australia Report adopts most of the recommendations contained in the English
Report, supra, note 286. However, while it would retain the use of administration bonds,
the use of both administration bonds and sureties would be restricted.

291

Victoria, Chief Justice's Law Reform Committee, Report of Sub-Committee Re Administra-
tion Bonds (1971).

290

227

In general, we agree with the direction of these reform proposals, and
have concluded that there should be no general bonding requirement for estate
trustees in Ontario. As we indicated above, the present requirement adds
unnecessarily to the costs of administration, and it would be unjustifiable,
in our view, to extend the present requirement to apply to all estate trustees.

However, we have also concluded that bonding should be required only
in limited circumstances. For example, in view of the difficulties associated
with obtaining and enforcing a judgment outside the jurisdiction, estate
trustees who are not resident in Ontario should be bonded. On the other
hand, bonding should not be required if any one of the estate trustees is
resident in Ontario. The Commission recommends, therefore, that no bond
should be required of a recipient of an estate trustee certificate unless,

(a) the recipient of, or all of the recipients of, an estate trustee certifi-
cate are nonresidents of the Province of Ontario;

(b) the recipient applied for an estate trustee certificate solely in her
capacity as a creditor of the estate;

(d) the will requires the posting of a bond.

The Commission further recommends that, notwithstanding the above
recommendation, the court should be able to dispense with the necessity of
posting a bond in any situation where it determines that the posting of a
bond is not necessary or where the beneficiaries and a majority of the
creditors (by value) concur.

As we indicated earlier, section 61(1) of the Estates Act provides that
security is not required of the Government of Ontario, or any of its ministries
or agencies. We recommend that section 61(1) be retained. In addition, with
respect to the bonding of trust corporations, we recommend that section
175(4) of the Loan and Trust Corporations Act, 1987292 should be retained.
Section 175(4) provides as follows:

175. — (4) Notwithstanding any rule, practice or statutory provision, it is not
necessary for a trust corporation approved under subsection (2)[293' to give any

292 S.O. 1987, c. 33.

Section 175(2) of the Loan and Trust Corporations Act, 1987, ibid., provides:

175. — (2) Where a registered trust corporation is authorized to execute the office
of executor, administrator, trustee, receiver, liquidator, assignee, guardian or commit-
tee, and the Lieutenant Governor in Council approves of the corporation being
accepted as a trust corporation for the purposes of the Supreme Court [now the
Ontario Court (General Division)], every court or judge having authority to appoint
such an officer may, with the consent of the corporation, appoint the corporation to
exercise any of such offices in respect of any estate or person under the authority of
such court or judge, or may grant to the corporation probate of any will in which the
corporation is named as an executor.

228

security for the due performance of its duty as executor, administrator, trustee, re-
ceiver, liquidator, assignee, guardian or committee unless so ordered by a court.

It would be desirable, in our view, to permit an interested individual to
petition the court to require a bond in circumstances in which a bond would
otherwise not be required. Similarly, we believe that it would be desirable
to permit such a person to request additional protection after a grant has
been made. We recommend, therefore, that, either before or after the
grant of an estate trustee certificate, any person having an interest in the
administration of an estate should be able to apply to the court for an order
requiring the posting of a bond or an additional bond by the estate trustee.

Where a person who is required to post a bond fails to do so, we recom-
mend that the court should have the power to revoke the estate trustee
certificate, and to make such further order as may be just in the circum-
stances. While our previous recommendation would permit an application
to the court to increase the security, we believe that an application should
similarly be permitted to the court to decrease or otherwise vary the terms
of a bond. Accordingly, we recommend that an estate trustee, surety, or any
person having an interest in the administration of the estate should be able
to apply to the court at any time to have the amount of the bond reduced
or the terms of the bond varied, or a substitution of the security granted.

It is apparent from a review of the form of bond prescribed by the
present rules294 that the language employed is somewhat archaic. Moreover,
it is unclear whether the terms of the bond impose liability on the surety for
loss to the estate due to the simple negligence of the personal representative.
It is our view that, if the bond is to provide meaningful protection, the law
should be clarified to ensure that the liability imposed under the terms of
the bond is co-extensive with the liability of the estate trustee. Further, we
believe that this should be clearly and expressly stated in the terms of the
bond itself, for the benefit of the surety as well as the beneficiary.

A number of the other terms and conditions of the bond should also be
addressed. For example, as we noted above, section 60 of the Estates Act295
requires that the bond "enure for the benefit of the Accountant of the
Ontario Court". Upon default, a claimant must obtain an assignment of the
bond from the court before he can sue on the bond in his own name. This
procedure, in our view, is unnecessary. We have concluded that the bond
should be stated to enure for the benefit of the persons interested in the
administration of the estate.

At present, the amount of the bond must be double the sworn value of
the estate.296 This requirement increases the cost of obtaining the bond and,

Estates Rules, supra, note 183, Appendix A, Form 19.
295 Supra, note 169.

296 Estates Act, ibid., s. 62(1).

229

in our view, it does so unnecessarily. It would be a very rare case in which
the estate doubles in value after the date of death. We have concluded that
the amount of the bond should be equal to the value of the estate, since this
is ordinarily the extent of the estate trustee's liability. It should be recalled,
however, that the court will have the discretion to increase the security
required, if it is warranted in the circumstances. Finally, certain other issues,
which are self-explanatory, are addressed in the recommendation that fol-
lows. The Commission therefore recommends that a standard and plain
language form of bond should be prescribed, the terms and conditions of
which should be as follows:

(a) a guarantee given in pursuance of a bonding requirement should
enure for the benefit of the beneficiaries, creditors, and other
persons interested in the administration of the estate of the
deceased as if contained in a contract made by the surety or sureties
with every such person, and where there are two or more sureties,
as if they had bound themselves jointly and severally;

(b) the bond shall be conditioned on the liability of the estate trustee
to the beneficiaries, creditors and other persons interested in the
administration of the estate;

(d) the bond shall be filed in the court;

(e) the surety shall be given notice of any proceedings to establish the
liability of an estate trustee;

(f) upon a final passing of accounts or where it appears that all liabili-
ties of the deceased have been satisfied the court may authorize
the estate trustee to arrange for the cancellation of the bond; and

(g) unless upon order of the court, or with the consent of all the
beneficiaries, no bond may be cancelled without notification of the
beneficiaries or creditors of the estate.

8. EXEMPTIONS UNDER THE EXECUTION ACT

The Execution Act provides that certain of a debtor's chattels are
exempt from seizure.297 The Act extends that protection to the debtor's

297

Section 2 of the Execution Act, supra, note 2, provides as follows:

2. The following chattels are exempt from seizure under any writ issued out of any
court:

1. Necessary and ordinary wearing apparel of the debtor and his family not
exceeding $1,000 in value.

2. The household furniture, utensils, equipment, food and fuel that are con-
tained in and form part of the permanent home of the debtor not exceeding

230

spouse and family after the death of the debtor. Sections 5 and 6 provide
as follows:298

5. — (1) After the death of the debtor, chattels exempt from seizure are
exempt from the claims of creditors of the debtor.

(2) A surviving spouse is entitled to retain the chattels exempt from seizure
for the benefit of the surviving spouse and the debtor's family.

(3) If there is no surviving spouse, the family of the debtor is entitled to the
chattels exempt from seizure for its own benefit.

6. The debtor, the surviving spouse or the debtor's family, or, in the case of
minors, their guardian, may select out of any larger number the chattels exempt
from seizure.

Several issues arise in connection with these provisions. First, it is not
clear whether the exemptions in the Act are available to the surviving spouse
or the debtor's family in respect of debts that arise after the death of the
deceased. As we noted earlier in this report,299 a personal representative is
personally liable for any debts incurred in the course of the administration,
although she has a right to reimbursement from the estate.300 Thus, while
section 5(1) provides that "[a]fter the death of the debtor, chattels exempt
from seizure are exempt from the claims of creditors of the debtor", m as a
matter of legal theory, the estate trustee is "the debtor" in respect of debts
that arise after the death of the deceased. Of course, as we indicated, she

$2,000 in value.

3. In the case of a debtor other than a person engaged solely in the tillage
of the soil or farming, tools and instruments and other chattels ordinarily
used by the debtor in his business, profession or calling not exceeding
$2,000 in value.

4. In the case of a person engaged solely in the tillage of the soil or farming,
the live stock, fowl, bees, books, tools and implements and other chattels
ordinarily used by the debtor in his business or calling not exceeding $5,000
in value.

5. In the case of a person engaged solely in the tillage of the soil or farming,
sufficient seed to seed all his land under cultivation, not exceeding 100
acres, as selected by the debtor, and fourteen bushels of potatoes, and,
where seizure is made between the 1st day of October and the 30th day of
April, such food and bedding as are necessary to feed and bed the live
stock and fowl that are exempt under this section until the 30th day of
April next following.

298 Ibid., s. 5, as en. by S.O. 1986, c. 64, s. 15(2), and s. 6, as am. by S.O. 1986, c. 64, s. 15(3).

Supra, ch. 2, sec. 4(a)(ii)a.

300

301

We recommended above, supra, ch. 2, sec. 4(a)(iii), that an estate trustee should be able
to enter into a contract in his representative capacity, in which case the estate trustee would
not be personally liable. Claims based on contracts entered into by an estate trustee in his
representative capacity would be asserted against the estate.

Emphasis added.

231

may claim reimbursement from the estate in respect of these expenses. The
policy underlying the above sections of the Execution Act would seem to
require that the exempt chattels remain available for the benefit of the
surviving spouse and the debtor's family irrespective of whether the debts
arise before or after the death of the deceased. We have concluded, there-
fore, that it should be made clear that chattels exempt from seizure before
the death of the deceased should remain exempt after the death of the
deceased, without regard to whether the claims arise prior to or subsequent
to the death.

Second, it is not made clear in the Execution Act whether funeral and
testamentary expenses have priority over the exemptions. The relationship
between the exemptions provided in section 5 and funeral and testamentary
expenses were discussed in Re Tatham.302 In that case, Meredith C.J. indi-
cated that "[t]he section does not, however, free the exempted goods from
liability for the funeral and testamentary expenses; and the exempted goods
are therefore liable to satisfy these expenses".303

We agree that the exemptions in section 5 of the Execution Act should
be subject to liability for the funeral and testamentary expenses and the
costs of administration. In this case, we have concluded that the interests of
ensuring a proper burial for the deceased, and that the estate is fully and
properly administered, are paramount.

Finally, there might be some uncertainty whether certain of the chattels
exempt from seizure prior to the death of the debtor remain exempt under
section 5. Specifically, it might be suggested that the exemption for the
debtor's tools of the trade304 are not exempt after the death of the debtor.
This possibility was alluded to, for example, in Pickering v. Thompson305
where it was stated:306

The right to select exempt chattels is, by sec. 7 [now section 6], given to
the debtor, 'his widow or family;' the right to claim $100 in lieu of tools and
implements of trade is a right given to the debtor personally;!307] and the
distinction may well have been made intentionally. The general exemptions
which may be selected are articles used not alone by the debtor, but also by his
family. The tools of the debtor's trade are of use to him personally, but are not
generally of value to the widow.

302

(1901), 2 0.L.R. 343 (Ch. Div.).

303 Ibid., at 346.

See Execution Act, supra, note 2, s. 2, paras. 3 and 4, reproduced supra, note 297.
305

306
307

(1911), 24 O.L.R. 378 (H.C. Div.).

Ibid., at 386-87.

See, now, Execution Act, supra, note 2, s. 3.

232

It is the view of the Commission that the debtor's tools of the trade
should continue to be exempt after the death of the debtor. Where the
exemption relates to farming tools, it is quite possible that the family might
be able to use the tools for self-support. For similar reasons, other tools of
the trade should continue to be exempt, although we acknowledge that in
some cases the tools will not be used to earn a living, but rather will be sold
to raise cash. Nevertheless, we are of the view that such chattels should
remain available for the continued maintenance and support of the surviving
spouse and the debtor's family.

Accordingly, the Commission recommends that the Execution Act
should be amended to clarify the following:

(a) after the death of the debtor, all property exempt from seizure in
the hands of the deceased should remain exempt in the hands of
the surviving spouse and the debtor's family, without regard to
whether the claims arose prior to or subsequent to the death, or
whether they were asserted against the estate trustee and not the
deceased; and

(b) expenses for the disposal of the body of the deceased, testamentary
expenses and costs of administration, as defined above,308 should
have priority over the exemptions granted in the Act.

Supra, this ch., sec. 2(c). The priorities between these expenses is also discussed ibid.

CHAPTER 5

TRANSFER OF ASSETS OF
THE DECEASED

1. INTRODUCTION

The most striking feature of the present law dealing with the vesting
and disposition of assets of the deceased is that radically different schemes
are applicable to real and personal property. With only minor exceptions,
the law affecting personal property is free of statutory intervention and
is relatively simple. The personal property of a deceased vests in her
personal representative, who has a generally unrestricted power of sale
over it.1 There is uncertainty, however, in some aspects of the present
law. In particular, there is obscurity about the legal position during the
period before the appointment of an administrator under an intestacy
or where no executor is appointed by the will. There are also doubts sur-
rounding the power of a personal representative to distribute property in
kind2 to beneficiaries.

The law dealing with the vesting and distribution of real property
stands in marked contrast to that affecting personal property. Generally,
the powers of sale conferred on personal representatives are restrictive.
The law is often obscure and highly complex. The result is that the con-
veyancing of estate property in Ontario may be unnecessarily complicated
and expensive.

One final introductory point should be emphasized. In the case of
both real and personal property, testators generally are free to modify the
general law by means of express provisions in their wills. Consequently,
the obscure, complex, and restrictive general law affecting real property
in fact applies only infrequently. Yet when it does so, it tends to be in
small estates, where a professionally drawn will is less likely to have been
made, and where the delays and costs caused by the general law least can
be afforded.

Even where personal property is specifically given to a beneficiary, this power exists: see
discussion, infra, this ch., sec. 2(a)(ii).

This is also known as "distribution in specie". Throughout this chapter, we shall use the
term "distribution in kind".

[233]

234

2. THE PRESENT LAW: PERSONAL PROPERTY

(a) Vesting and Powers of Sale

(i) Vesting

Generally, the law dealing with the vesting of personal property, and
with the personal representative's power of sale over it, is clear and
straightforward.

At common law, all the personal property owned by the deceased at
the time of death vested in his personal representative. Section 2(1) of the
Estates Administration Act, so far as personalty is concerned, merely codifies
that principle.3

Where a person dies leaving a will that appoints an executor who accepts
the office, the executor derives title from the will itself and the property
vests in the executor at the date of the death of the deceased. In such a case,
probate of the will does not confer authority; it acts only as a confirmation
of the executor's status and, in general, is not essential.4 By contrast, adminis-
trators do obtain their authority from the order of the court appointing
them, "and the property of the deceased vests in [them] only from the time
of the grant".5

Obviously, special treatment is required where there is no executor. In
this regard, two doctrines are relevant. The first is as follows:6

The right of succession to the personal estate, before administration was
granted, formerly belonged to the ecclesiastical Ordinary in cases of intestacy

R.S.O. 1980, c. 143. Section 2(1) provides as follows:

2. — (1) All real and personal property that is vested in a person without a right in
any other person to take by survivorship, on his death, whether testate or intestate and
notwithstanding any testamentary disposition, devolves to and becomes vested in his
personal representative from time to time as trustee for the persons by law beneficially
entitled thereto, and, subject to the payment of his debts and so far as such property
is not disposed of by deed, will, contract or other effectual disposition, it shall be
administered, dealt with and distributed as if it were personal property not so dis-
posed of.

See, for example, Oosterhoff and Rayner (eds.), Anger and Honsberger[:] Law of Real
Property (2d ed., 1985) (hereinafter referred to as "Anger and Honsberger), Vol. 2, §2905,
at 1456.

Sunnucks, Martyn and Garnett, Williams, Mortimer and Sunnucks on Executors, Administra-
tors and Probate (1982) (hereinafter referred to as "Williams, Mortimer and Sunnucks"),
at 428. See Anger and Honsberger, supra, note 4, at 1456.

Hull and Cullity, Macdonell, Sheard and Hull on Probate Practice (3d ed., 1981), at 192. In
British Columbia, s. 3 of the Estate Administration Act, R.S.B.C. 1979, c. 114, provides that
"[f]rom and after the decease of a person dying intestate, and until administration is granted
in respect of his estate and effects, the personal estate and effects of the deceased person
are vested in the court, subject only to the power of a court of competent jurisdiction to
grant administration in respect of them".

235

or of the inability or refusal of the executor to act, and after the abolition
of these Courts, to the Judge of the Court having the grant of probate or
administration. It would seem that in Ontario it vests in the Judge of the
Surrogate Court, by whom it is delegated to the administrator by the grant of
letters of administration.

The second is the doctrine of relation back.7 This doctrine deals in a
limited fashion with the hiatus between the date of death of the deceased
and the appointment of an administrator, since it allows certain acts to be
done on the basis of the fiction that the title of the administrator "relates
back" to the death of the deceased. While the scope of the doctrine is not
entirely clear, the theme running through the cases applying it seems to be
protection of the estate from wrongful injury and conferring on the estate
rights relating to beneficial transactions. For example, the doctrine of rela-
tion back renders "valid dispositions of the deceased's property made before
the grant, when it is shown that such dispositions are for the benefit of the
estate".8 Another example of the doctrine is that a "promise to pay a debt
made to a person assuming to act as administrator, who subsequently obtains
letters of administration",9 will be effective to prevent the debt becoming
statute-barred. Rule 9.03 of the rules of court10 deals with court proceedings.
It provides that "[w]here a proceeding is commenced by or against a person
as executor or administrator before a grant of probate or administration has
been made and the person subsequently receives a grant of probate or
administration, the proceeding shall be deemed to have been properly consti-
tuted from its commencement".

(ii) Powers of Sale

The sale of personal property is governed by the common law. A per-
sonal representative has "an absolute power of disposition over all the
personal estate of his testator or intestate"11 without regard to the fact that
it was specifically bequeathed to a beneficiary, and without the need for
concurrence of a beneficiary.12 A purchaser takes title free and clear of the
rights of any beneficiary or creditor.13

7
8
9
10

Hull and Cullity, supra, note 6, at 210-13.

Ibid., at 210.

Ibid., at 211.

O. Reg. 560/84.

Williams, Mortimer and Sunnucks, supra, note 5, at 661.

It does not follow that, because a personal representative has power to give a good title to
a transferee, the exercise of that power may not be a breach of trust or devastavit for which
the personal representative may be personally liable to a beneficiary or creditor. For
example, if an executor were to sell personal property that was specifically bequeathed to
a beneficiary in a case where there are no debts, he may be liable.

For a statement of the rationale for the treatment of personal property, see Whale v. Booth
(1784), 100 E.R. 1211 (K.B.), at 1212.

236

(b) The Manner of Distribution

The law dealing with the powers and duties of a personal representative
as to the manner of distribution of property to beneficiaries is obscure. In
particular, it is unclear when a personal representative may, and when she
must, distribute property in kind.14 There may, of course, be a provision in
the will conferring a power, or even imposing an obligation, on the personal
representatives to distribute the property in a particular manner, and such
a provision will be effective according to its terms. The difficulties arise
on intestacy or where a will has no relevant and clear provision. Part of
the difficulty has been caused by the failure of courts and commentators
to differentiate three different things:15 (a) a simple distribution in kind;
(b) an appropriation, or allocation in kind, of particular assets to particular
beneficiaries; and (c) a distribution to a beneficiary absolutely entitled in
possession of an undivided share in pure personalty.

(i) Simple Distribution in Kind

What we are calling a simple distribution in kind occurs where particular
property in the estate is distributed in kind to a legatee, and, where there is
more than one such legatee, the distribution is made to them as co-owners.

In the case of specific or general legacies in a will, this matter is not
problematic. In principle, it is a matter of construction of a will whether
such distribution in kind is permitted or required. However, where there is
a specific gift,16 the very nature of the gift requires that the subject-matter
of it must be distributed in kind to the legatee or legatees, if it is not required
to be sold for the purpose of payment of debts and taxes or administration,
testamentary, and funeral expenses.17 An example of such a gift would be:
"I give my antique diamond necklace to A". A pecuniary legacy, which is a
general legacy18 of an amount of money, such as "I give $10,000 to B", on
the other hand, does not identify any particular asset in the estate and, by
its nature, is satisfied by payment of the required amount of money. Other
general legacies will ordinarily give the personal representative the choice

Cullity and Brown, Cullity, Forbes and Brown [:] Taxation and Estate Planning (2d ed., 1984),
at 325-27; Brule, "Specie Distribution in Estates" (1976), 3 E.T.Q. 28; and Holland,
"Annotation — Distribution of Specie of Residuary Personalty" (1982), 10 E.T.R. 261.

See, for example, Lloyds Bank Pic v. Duker, [1987] 1 W.L.R. 1324, [1987] 3 All E.R. 193
(Ch. Div.).

"A specific testamentary gift is a gift of an identifiable property or object which the testator
has described with sufficient particularity to distinguish it from his or her general estate":
Oosterhoff, Text, Commentary and Cases on Wills and Succession (3d ed., 1990), at 424.

17 Re Leblanc (1978), 18 O.R. (2d) 507, at 512-13, 83 D.L.R. (3d) 151 (C.A.).

"A general legacy is one payable out of the general assets of the estate. Thus, it is not a
gift of an identified article owned by the testator, nor is it a direction to pay moneys out
of a specific fund. Rather, it is a direction to the personal representatives to pay or transfer
the assets described to the legatee": Oosterhoff, supra, note 16, at 418.

237

whether to distribute the amount of property given or to pay the value of it.
An example of such a legacy would be: "I give 10,000 common shares in
ABC Ltd to C". The personal representatives may either go into the market
and buy the required shares and transfer them to the legatee (or, in the
event that the estate happens to own the number of shares in question, they
may simply transfer those shares), or they may pay to the legatee the amount
of money required to buy the shares.19

The law affecting residuary gifts and entitlements on intestacy, however, is
unclear. The Ontario position appears to be that, in the absence of a provision
in the will or agreement by the beneficiaries, it is the duty of a personal rep-
resentative to convert — that is, sell — the residuary estate and distribute the net
proceeds in the form of cash. This position, however, rests on tenuous author-
ity: a dictum and a decision of a single judge on a motion. In Re Bucovetsky,
Mr. Justice Hope offered the following observation as obiter dicta:20

[I]t might not be amiss to remark that it would appear to be incontrovertible
that failing a specific direction in the will, and failing the unanimity of all
beneficiaries who might be entitled to share in the distribution, the executors
would not be entitled to distribute in specie but only after conversion.

For this statement of the law, Hope. J. relied on the leading Ontario case
of Re Harris.21 Because of the importance of this case to understanding
our conclusions about the uncertainty of the Ontario law governing simple
distribution in kind and its bearing upon the law governing the third type
of distribution we shall discuss — a distribution to a beneficiary absolutely
entitled in possession to an undivided share in pure personalty — it is neces-
sary to review this decision in some detail.

Re Harris concerned the estate of an intestate who was survived by a widow
and four children, two of whom were infants. The assets of the estate included
2,994 out of 3,000 shares in a company. Although the shares were apparently
of considerable value, they were not readily marketable, and a winding-up
of the company would have caused considerable loss. The members of the
testator's family differed about what should be done with these shares: the
widow and the adult son desired the administrator to give them the shares
that would be coming to them upon a distribution, which was one-half of them;
the adult daughter opposed a partition of the shares, preferring them to be
held by the administrator "until a realisation can take place at a fair price".22
The administrator sought the advice and direction of the court. Middleton
J. held that it was "the duty of the trustee to refuse to transfer any portion

21
22

For a discussion of specific and general legacies, see Williams, Mortimer and Sunnucks,
supra, note 5, at 894-95. See, also, Re Millar (1927), 60 O.L.R. 434, [1927] 3 D.L.R. 270
(H.C Div.).

[1942] O.W.N. 618, at 620, [1943] 1 D.L.R. 208 (H.C.J. ).

(1914), 33 O.L.R. 83, 22 D.L.R. 381 (H.C. Div.) (subsequent references are to 33 O.L.R. ).

Ibid., at 85.

238

of the stock to the beneficiaries, unless all agree".23 In coming to this
conclusion, Middleton J. held that the assets of the estate were subject to a
duty of conversion. In deciding this, she equated the position with that of
the residue of an estate subject to an express trust for conversion:24

[A]s soon as debts have been paid the administrator holds the estate in trust to
convert and divide among those entitled under the statute to distribution, in
precisely the same way that an executor holds an estate in trust under a will
when he is directed to convert and distribute among several residuary devisees.

For this view, he relied on the judgment of Lord Cairns L.C. in Cooper v.
Cooper.25

However, Lord Cairns L.C.'s judgment is tenuous support at best.26 It
was not directly concerned with this issue: the judgment dealt with the
application of the doctrine of election to a share of an intestate's estate.
While, in the course of his reasons, Lord Cairns L.C. did discuss the nature
of the interest of an intestate successor and did liken it to that of the interest
of a residuary legatee under a will, he did not make any reference to such
residue being subject to a trust for conversion. In fact, his treatment of this
matter is quite ambiguous. Nevertheless, he probably did not intend to affirm
that the personal representative's obligation is prima facie distribution in the
form of money. Indeed, in England the judgment of Lord Cairns L.C. is
interpreted to have an opposite effect so that "[u]nless there is a direction
in the will requiring conversion into money or such conversion is necessary
in the course of administration, or for distribution, the actual residue should
be conveyed in its unconverted state".27

(ii) Appropriation, or Allocation in Kind, of Particular Assets
to Particular Beneficiaries

Appropriation of particular assets to particular beneficiaries gives rise
to special concerns.28 For example, assume that the residue of an estate has
been given to A and B equally and, after payment of debts, legacies and

23
24
25
26

Ibid., at 88.

Ibid., at 86.

(1874), L.R. 7 H.L. 53, [1874-80] All E.R. Rep. 307.

There are also difficulties with Middleton J.'s treatment of the third matter we discuss, a
distribution to a beneficiary absolutely entitled in possession to an undivided share in pure
personalty. See infra, this ch., sec. 2(b)(iii).

Williams, Mortimer and Sunnucks, supra, note 5, at 841 . This general principle was accepted
in Lloyds Bank Pic v. Duker, supra, note 15, but it was held to give way to the special
circumstance that distribution of shares giving the beneficiary a controlling interest in a
company would give that beneficiary more than he was entitled to. The shares were ordered
to be sold and the proceeds distributed.

We have been unable to find any Ontario case dealing with this topic. Baker, Widdifield on
Executors' Accounts (5th ed., 1967), at 138-39 and 299-300, assumes the existence of a body
of law conferring powers of appropriation on executors, and cites some of the relevant

239

funeral, testamentary, and administration expenses, the residue of the estate
comprises various assets, including some antique furniture. Beneficiary A
states that she would like the furniture to be included in her share of residue.
The exercise of such a power by a personal representative has a greater
impact on the interests of the beneficiaries than does a simple distribution
in kind since, as in the example given, it will often require a selection of
assets to be made and a value to be placed on the assets selected. In a family
context, depending on the types of asset from which a selection is to be
made, this may be a very sensitive matter.

Notwithstanding the potential difficulties, appropriation is allowed by
the common law in certain circumstances:29 for example, "[w]here a share
of residue is immediately payable the executor may enter into an arrange-
ment with the legatee to take over a particular asset in satisfaction of his
legacy either in whole or pro tanto without obtaining the consent of the
other residuary legatees; and if the transaction is a fair one, and the legatee
does not receive more than his share of the assets, the appropriation is
unimpeachable".30

In the context of estates, appropriation of the asset is normally followed
immediately by its distribution to the beneficiary so that the two steps of
appropriation and distribution are indistinguishable. By contrast, in the case
of an ongoing trust, the assets that are the subject of appropriation continue
to be be held in trust for beneficiaries, and are not distributed.

(iii) Distribution of Share to an Absolutely Entitled Beneficiary

A line of English cases31 appears to establish that a beneficiary who is
absolutely entitled in possession32 to a share of residue33 can generally
require that her share be distributed to her "even though other shares

English cases. In Re McCarthy (1981), 10 E.T.R. 261 (P.E.I.S.C), the court upheld an
executor's appropriation of personalty to satisfy the shares of residuary legatees, but no
reference was made to relevant principles or authorities.

29
30
31

32
33

Halsbury's Laws of England, Vol. 17 (4th ed., 1976), paras. 1359-67, at 705-09.

Ibid., para. 1364, at 708.

Re Marshall, [1914] 1 Ch. 192, [1911-13] All E.R. Rep. 671 (C.A.); Re Sandeman's Will
Trusts, [1937] 1 All E.R. 368 (Ch.); Re Weiner's Will Trusts, [1956] 1 W.L.R. 579, [1956] 2
All E.R. 482 (Ch.); and Stephenson v. Barclays Bank Trust Co. Ltd., [1975] 1 W.L.R. 882,
[1975] 1 All E.R. 625 (Ch. D.). This line of cases was referred to with approval by Gray
J. in Re Campeau Family Trust (1984), 44 O.R. (2d) 549, 4 D.L.R. (4th) 667 (H.C.J.), affd
(1984), 50 O.R. (2d) 296 (C.A.), although he treated it as an extension of the rule in
Saunders v. Vautier (1841), 49 E.R. 282, affd 41 E.R. 482. For criticism, see Paciocco and
Krishna, "Re Campeau Family Trust: Two Wrongs Make a Right" (1985-86), 7 E.T.Q. 65.

Paciocco and Krishna, ibid., at 68-72.

The rule is probably not restricted to shares in the residue of an estate. All the cases deal
with such shares, but there is no reason in principle why it should be so restricted and
authoritative formulations do not limit the rule in this way: see, for example, Re Marshall,
supra, note 31, at 199.

240

remain settled and are not yet distributable"34, and even where the residue
is subject to a trust for sale.35 Known as "the rule in Re Marshall", this
principle is generally considered to apply to pure personalty.36 It is said to
give way to special circumstances.

The status of the rule in Re Marshall is uncertain in Ontario. In Re
Harris,7,7 Mr. Justice Middleton considered this decision. While he purported
to follow it, the reasoning of the two decisions is at odds. Re Marshall held
that a person entitled to his share of the residue is entitled to receive it,
even though the shares of others remain held in trust, notwithstanding that
the will provides that the residue is subject to an express trust for sale. By
contrast, Re Harris held that a share in an intestate estate is analogous to a
share in the residue held on trust for sale, and that consequently a beneficiary
entitled to her share is not entitled to an immediate distribution. Such a
distribution would be permitted only where the beneficiaries are in agree-
ment or, perhaps where a dissenting beneficiary has objected "manifestly
unreasonably and vexatiously".38 In other words, Re Marshall creates a pre-
sumption in favour of immediate distribution and Re Harris creates a pre-
sumption that there will be no distribution until it can be made in favour of
all the beneficiaries.39

3. THE PRESENT LAW: REAL PROPERTY

(a) Vesting of Real Property

At common law, real property passed directly to the persons to
whom it was given by the will or, in the case of intestacy, the heir or
heirs. Section 2(1) of the Estates Administration Act alters the common

35
36
37
38
39

England, Law Reform Committee, Twenty-third Report (The Powers and Duties of Trustees)
(Cmnd. 8733,1982) (hereinafter referred to as "Law Reform Committee Report"), para.
3.64, at 32.

Re Werner's Will Trusts, supra, note 31, at 486.

Law Reform Committee Report, supra, note 34, para. 3.64, at 32.

Supra, note 21.

Ibid., at 89.

The actual decision in Re Harris, ibid., is not necessarily inconsistent with the rule in Re
Marshall. The rule is said to defer to "special circumstances" and, in Re Harris, Middleton
J. did place emphasis on the rift between the family members and the fact that distribution
of their portion of the shares to the mother and the son, with the other shares owned by
them, would give them a controlling interest in the company.

It should also be noted that there was a trust for sale, and that all concerned agreed
that a sale would not be appropriate at that time. Implicitly, then, when a propitious time
for the sale would occur, it would not be necessary to postpone the entitlement of one
beneficiary until all the other beneficiaries were entitled to share in the estate.

Re Harris should be contrasted with Re Sandeman's Will Trusts, supra, note 31, and Re
Weiner's Will Trusts, supra, note 31. Each held that the fact that distribution would cause

241

law40 by providing for the vesting of real property of the deceased in her
personal representative, except for real property that person has a right to
take by survivorship.

We have previously mentioned, in relation to the vesting of personalty,41
that property vests in administrators at the time of the grant, and that the
present law attempts to deal with the resulting hiatus between death and
the grant of administration by two methods: first, by vesting the property of
the deceased in the judge and, second, by the doctrine of relation back. The
latter doctrine applies to realty as well. The former doctrine, however, is not
securely established even in relation to personal property, although it has
been suggested that it should also apply to realty in Ontario.42

The present system in Ontario does not entirely get rid of the common
law idea of title passing directly from the deceased— whether dying testate

the trustees to lose control of a company was not a sufficient special circumstance, which
would justify not making an immediate distribution to the person absolutely entitled in
possession to her share of the residue.

The common law was orginally changed by The Devolution of Estates Act, 1886, S.O. 1886,
c. 22. The Act vested all property — real, as well as personal — in the personal representative,
and gave personal representatives the same powers over real property as they had over
personal property save that, where infants were interested in the land, a sale or conveyance
of the land required approval of the Official Guardian or an order of the court. Except for
this qualification, the Act gave personal representatives an unrestricted power to deal with
real property so that they were able to confer a good title on a good faith purchaser.

In 1891, this simple scheme was changed by An Act respecting the Sale of Real Estate by
Executors and Administrators, S.O. 1891, c. 18. This Act re-affirmed the basic principles of
the 1886 legislation. It expressly asserted the legislation's applicability where personal
representatives sold for the purpose of distributing the estate among beneficiaries, as well
as when they sold for payment of debts. It confirmed the inviolable position of a good
faith purchaser obtaining title under the Act, whether by purchase from the personal
representative or from a beneficiary in whom title had been vested by the personal represen-
tatives. Purchasers would take the real estate free of the debts and liabilities of the deceased
"not specifically charged thereon otherwise than by his will" (s. 5).

The 1891 Act also introduced two concepts that continue to be a part of Ontario law.
The first is the concept of automatic vesting, coupled with the system of cautions. The real
property was to remain vested in the personal representative for only 12 months, after
which period it would automatically vest in the beneficiaries without any conveyance or
other action by the personal representatives unless a caution were registered. The effect
of registering the caution was to delay vesting for 12 months from the date of registration.
The second concept was the distinction between a sale for the purpose of paying debts and
a sale for the purpose of distribution. In the latter case, a sale could not be made against
the wishes of non-concurring beneficiaries unless the Official Guardian approved of it.

The Devolution of Estates Act was amended on several occasions, most notably in 1910,
1927, and 1930. For discussion, see Denison, "Conveyances under the Ontario Devolution
of Estates Act" (1937), 15 Can. Bar Rev. 516. These amendments were attempts to mediate
among the conflicting interests of creditors, beneficiaries, and good faith purchasers for
value. The result is the present Estates Administration Act, supra, note 3, a statute of
extraordinary complexity that is bereft of a unifying rationale.

Supra, this ch., sec. 2(a)(i).

Hull and Cullity, supra, note 6, at 192.

242

or intestate — to the persons beneficially entitled. Section 9(1) of the Estates
Administration Act43 provides that the real property automatically vests in
the persons beneficially entitled if it has not been disposed of or distributed
within three years and if a caution has not been registered by the personal
representative:

9. — (1) Real property not disposed of, conveyed to, divided or distributed
among the persons beneficially entitled thereto under section 17 by the personal
representative within three years after the death of the deceasedj44] is, subject
to the Land Titles Act in the case of land registered under that Act and subject
to subsections 48(3) and (5) of the Registry Act,[45] and subject as hereinafter
provided, at the expiration of that period, whether probate or letters of adminis-
tration have or have not been taken, thenceforth vested in the persons benefi-
cially entitled thereto under the will or upon the intestacy or their assigns
without any conveyance by the personal representative, unless such personal
representative, if any, has registered, in the proper land registry office, a caution
in Form 1 under his hand, and, if a caution is so registered, the real property
mentioned therein does not so vest for three years from the time of the registra-
tion of the caution]46] or of the last caution if more than one was registered.47

This system of automatic vesting in beneficiaries does enable title to be
made out without the need for any conveyance or other act by the personal
representative; indeed, it enables title to be made out even where no personal
representative is appointed and, it is generally considered, where any will
that may exist has not been admitted to probate.48

This system of vesting is, however, qualified in three main ways. First,
the personal representative is allowed to register a caution even after the
expiry of the three year period on the terms provided by section 11 of the

Supra, note 3.

In 1902, An Act to further amend the Devolution of Estates Act, S.O. 1902, c. 17, provided that
automatic vesting would take place 3 years after death. The original period for automatic
vesting was 1 year from the date of death: see note 40, supra.

45 Section 48(3) and (5) of the Registry Act, R.S.O. 1980, c. 445, deals with consent to a
transaction required in some cases from the Minister of Revenue and with the issuing by
the Minister of a certificate with respect to the payment of succession duties.

The further postponement created by the registration of a caution remained as 1 year from
the date of registration until 1933, when The Statute Law Amendment Act, 1933, S.O. 1933,
c. 59, s. 16(1), provided that the registration of a caution postponed vesting for a period of
3 years.

Section 9(6) of the Estates Administration Act, supra, note 3, makes it clear that a caution
may be renewed from time to time.

Re Hollwey and Adams (1926), 58 O.L.R. 507, [1926] 2 D.L.R. 960 (H.C. Div.); Re Dennis
and Lindsay (1927), 61 O.L.R. 228, [1927] 4 D.L.R. 848 (H.C. Div.); Re National Trust Co.
Ltd. and Mendelson, [1941] O.W.N. 435, [1942] 1 D.L.R. 438 (H.C.J.); and Re Pickles and
Johnson, [1942] O.R. 246 (H.C.J. ). It should be noted that the statutory power of sale
provided by s. 17 of the Estates Administration Act, supra, note 3, is circumscribed by the
requirement that "an executor shall not exercise the powers conferred by this section until
he has obtained probate of the will except with the approval of a judge": ibid., s. 17(7).

243

Act. These include the requirements that there be obtained either the
written consent of all adult beneficiaries and of the Official Guardian on
behalf of minor and mentally incompetent beneficiaries whose property or
interest would be affected49 or, alternatively, an order of the court or certifi-
cate of the Official Guardian.50 The effect of the registration of a caution
under section 11 is as follows:51

11. — (3) Where a caution is registered or reregistered under this section, it
has the same effect as a caution registered within the proper time after the
death of the deceased and of vesting or revesting, as the case may be, the real
property of the deceased in his personal representative, save as to persons who
in the meantime have acquired rights for valuable consideration from or through
a person beneficially entitled, and save also and subject to any equities of any
non-consenting person beneficially entitled, or of a person claiming under him,
for improvements made after the time within which the personal representative
might, without any consent, order or certificate, have registered or reregistered
a caution, if his real property is afterwards sold by the personal representative.

The second way that automatic vesting in the beneficiaries is qualified
is that, save for protection conferred on a good faith purchaser for value
without, it seems, notice of the creditor in question, the property remains
liable for the debts of the deceased. In addition, the beneficiary who sells to
a good faith purchaser for value is personally liable for the deceased's debts
to the extent of the proceeds of the property sold.52

The third qualification is that this system operates only imperfectly in
the context of property registered under the Land Titles Act.53 The concept
of automatic vesting is contrary to the basic requirement of the Land Titles
Act that only a registered owner "is entitled to transfer or charge registered
freehold or leasehold land by a registered disposition".54 The Act provides
a scheme for the transmission of title on the death of the registered owner
so that, in the case of freehold land, "such person shall be registered as
owner ... as may ... be appointed by the land registrar, regard being had

49
50
51
52

53
54

Ibid., s. ll(l)(c).

Ibid.,s. ll(l)(d).

Ibid., s. 11(3).

Ibid., ss. 20(2) and 22. The interrelationship of s. 20(2) and s. 22 is not completely clear.
First, s. 20(2) extends protection to a "purchaser in good faith and for valuable consider-
ation", whereas s. 22(1) provides an exception for such of the claims of creditors as the
purchaser had notice at the time of his purchase. Second, s. 20(2) limits the personal
liability of the beneficiary to the extent of the proceeds of the property sold, whereas
s. 22(2) refers generally to a claim against the person beneficially entitled.

In addition, a creditor is not prevented from suing the personal representative person-
ally "where [the personal representative] has permitted the real property to become vested
in the person beneficially entitled to the prejudice of the creditor": ibid., s. 22(2).

R.S.O. 1980, c. 230.

Ibid., s. 71(1).

244

to the rights of the several persons interested in the land and in particular
to the selection of any such person as for the time being appears to the land
registrar to be entitled according to law to be so appointed".55 If the personal
representative has applied for such transmission of title and been registered
as owner, under the Land Titles system, it is unnecessary for any caution to be
registered in order to prevent the title vesting in those beneficially entitled.56
Difficulty, it will be appreciated, is caused in the Land Titles system if
there is a succession of persons who become owners but die without being
registered as owners. Section 83 of the Act confers on the land registrar
broad powers to enter the appropriate person as owner in this situation.

(b) Powers of Sale and Distribution Conferred by the Estates

A DMINISTRA TION A CT

(i) Sale for the Purpose of Payment of Debts

The power of personal representatives to sell real property for the
purpose of paying the debts of the deceased can be found in section 16 and
section 17(1) of the Estates Administration Act. Section 16 provides as follows:

16. Except as otherwise provided in this Act, the personal representative of
a deceased person has power to dispose of and otherwise deal with the real
property vested in him by virtue of this Act, with the like incidents, but subject
to the like rights, equities and obligations, as if the real property were personal
property vested in him.

At common law, a personal representative had, and still has, a general power
to sell personal property for the purpose of paying debts.57

Section 17(1) also refers to the power to sell real property for the
purpose of paying debts:

17. — (1) The powers of sale conferred by this Act on a personal representa-
tive may be exercised for the purpose not only of paying debts but also of
distributing or dividing the estate among the persons beneficially entitled
thereto, whether there are or are not debts, and in no case is it necessary that
the persons beneficially entitled concur in any such sale except where it is made
for the purpose of distribution only.

The power to sell real property for the purpose of paying debts is broad
and generally unrestricted. Concurrence of those beneficially entitled to the

55 Ibid., s. 121.

56 Lamont, Real Estate Conveyancing (1976), at 270.

57 See, for example, Reid v. Miller (1865), 24 U.C.Q.B. 610, at 617 and 622.

245

estate is not required.58 Even where infants are beneficially entitled, it is not
necessary to obtain the approval of the Official Guardian or the court.59
Moreover, this wide power extends to a sale that is partly for the payment
of debts and partly for distribution.60

Purchasers, moreover, are amply protected in the event that the per-
sonal representatives have acted improperly: Section 19 of the Act provides
as follows:

19. A person purchasing in good faith and for value real property from a
personal representative in a manner authorized by this Act is entitled to hold
it freed and discharged from any debts or liabilities of the deceased owner,
except such as are specifically charged thereon otherwise than by his will, and
from all claims of the persons beneficially entitled thereto, and is not bound to
see to the application of the purchase money.

A good faith purchaser for value is protected so long as the instrument
of conveyance purports to be for the payment of debts, as long as she does
not have notice to the contrary, and it seems to be established that she is
not required to have proof that in fact the conveyance was made for that
purpose.61 In the case of the sale of land under the Land Titles Act, it is
necessary for the land registrar to be satisfied that the personal representa-
tive purporting to be exercising the power is in fact exercising it properly.62
Consequently, in such a case "there should be an affidavit stating that the
sale is necessary in order to pay the debts of the deceased and that it is a
bona fide sale for fair market value. In practice a statement to this effect is
frequently included in the land transfer tax affidavit".63

58
59

62
63

Re Ross and Davies (1904), 7 O.L.R. 433 (C.A.).

Re Watson and Major, [1943] O.W.N. 696, [1944] 1 D.L.R. 228 (H.C.J.), and Hilliard v.
Dillon, [1955] O.W.N. 621 (H.C.J.).

Re Ross and Davies supra, note 58; Hilliard v. Dillon, supra, note 59; and Re Kinross Mortgage
Corp. and Central Mortgage and Housing Corp. (1979), 22 O.R. (2d) 713 (H.C.J.).

Howland, "The Sale of Lands of a Deceased Owner", 1951 Special Lectures of the Law
Society of Upper Canada[\] Conveyancing and Real Property (195 1 ) 57, at 61-62, and Lamont,
supra, note 56, at 276. See, also, Porter, "Case and Comment — Administration of Estates"
(1940), 18 Can. Bar Rev. 799, at 800. Re McCutcheon and Smith, [1933] O.W.N. 692 (C.A.),
rev'g [1933] O.W.N. 413 (H.C.J.), has been cited for this proposition: see Lamont, supra,
note 56, at 176. However, that case dealt with a sale under s. 47(5) of The Trustee Act,
R.S.O. 1914, c. 121, which provided that "[purchasers . . . shall not be bound to inquire
whether the powers conferred by this section, or any of them, have been duly and correctly
exercised by the person acting in virtue thereof. See, now, Trustee Act, R.S.O. 1980, c. 512,
s. 4(2).

Lamont, supra, note 56.

Lamont, ibid., at 276. See, also, "Land Titles Procedural Guide"(1986), in CCH Ontario
Real Estate Law Guide, Vol. 1, 133125, at 5536.

246

(ii) Sale for the Purpose of Distribution

The Estates Administration Act deals with sales of real property by a
personal representative for the purpose of distribution of the proceeds to
those persons beneficially entitled. The provisions, however, are complex
and cumbersome.

Section 17(1), which we have quoted above, recognizes the general
power. Section 17(2) sets out a basic restriction, and then subjects it to
complex qualifications. The basic restriction is that a sale for the purpose of
distribution is not "valid as respects any person beneficially entitled thereto
unless he concurs therein".64 The first qualification to this is that a sale is
binding on a non-concurring beneficiary where there is obtained "the
approval of the majority of the persons beneficially entitled thereto repre-
senting together not less than one-half of all the interests therein, including
the Official Guardian acting on behalf of a minor or mentally incompetent
person". The second qualification is expressed as follows:

17. — (2) [WJhere a mentally incompetent person is beneficially entitled or
where there are other persons beneficially entitled whose consent to the sale is
not obtained by reason of their place of residence being unknown or where in
the opinion of the Official Guardian it would be inconvenient to require the
concurrence of such persons, the Official Guardian may, upon proof satisfactory
to him that the sale is in the interest and to the advantage of the estate of the
deceased person and the persons beneficially interested therein, approve the
sale on behalf of such mentally incompetent person and non-concurring persons,
and any such sale made with the written approval of the Official Guardian is
valid and binding upon such mentally incompetent person and non-concurring
persons, and for this purpose the Official Guardian has the same powers and
duties as he has in the case of minors. . . .

The third qualification under section 17(2) is that the court is given a
general, apparently unrestricted, power to dispense with the concurrence of
beneficially entitled persons.

Not surprisingly, these complex provisions have given rise to difficulty.
Until recently, there was disagreement whether the approval of the Official
Guardian, in the absence of the direction of the court, was required in all
cases where a minor or mental incompetent is a beneficiary, or only where
it was needed to constitute a majority.65 However, in January, 1991 the
Office of the Official Guardian clarified its policy in sales under the Estates

Section 17(1) provides that "in no case is it necessary that the persons beneficially entitled
concur in any such sale except where it is made for the purpose of distribution only."

The former position was reflected in Lamont, supra, note 56, at 277, and Anger and
Honsberger, supra, note 4, Vol. 2, §2906.2, at 1460. The latter position can be found in
Dickson and Wilson, Ontario Estate Practice (2nd ed., 1986), at 111.

247

Administration Act. bt Its position is that the approval of the Official Guardian
is required in all sales for the purpose of distribution where a minor or a
mentally incompetent person has an interest in the property, even where
adults approving the sale constitute a majority of the persons beneficially
entitled to not less than one-half of all the interests in the real property.67

The scope of these provisions has been reduced in practice by the policy
adopted by the Official Guardian and, possibly, by a restrictive position
taken by the court to its role under section 17(2). It seems that the Official
Guardian has taken a limited view of his role under section 17(2). As far as
approval on behalf of minors is concerned, the Official Guardian requires
the consent of minors over sixteen years of age who are interested in the
estate, and will not concur where they refuse to consent or where they cannot
be located; in such cases, a court application is required.68 Section 17(2) also
confers on the Official Guardian power to approve a sale on behalf of
beneficiaries who cannot be located, mentally incompetent beneficiaries not
so found,69 and beneficiaries whose concurrence it would, in the opinion of
the Official Guardian, be inconvenient to require.

A narrow view has been taken of the court's power to dispense with the
concurrence of persons beneficially entitled:70

It appears to me that the Court should refrain from acting so as to compel
a sale against the wish of any beneficiary at a price which the beneficiary deems
inadequate, except in extreme cases where the objection of the beneficiary is
plainly shewn to be purely capricious or obstructive.

Ontario, Office of the Official Guardian, Practice and Procedure with respect of Sales of Land
Pursuant to Sections 15, 17, and 21 of the Estates Administration Act, R.S.O. 1980, c. 143
(1991) (hereinafter referred to as "Official Guardian Policy"), at 2.

Ibid., at 2. This position is based on s. 15 of the Act, which provides as follows:

15. — (1) Where a minor is interested in real property that but for this Act would
not devolve on the personal representative, no sale or conveyance is valid under this
Act without the written approval of the Official Guardian, or, in the absence of such
consent or approval, without an order of a judge.

Official Guardian Policy, supra, note 66, at 3. Where only minors are beneficially entitled
to the real property, it is generally considered that the appropriate procedure for the sale
of the property is an application under the Children's Law Reform Act, R.S.O. 1980, c. 68,
s. 60, as en. by S.O. 1982, c. 20, s. 1.

Section 17(4) of the Estates Administration Act, supra, note 3, provides that "[w]here a
person beneficially entitled is a patient in a psychiatric facility under the Mental Health Act
and the Public Trustee is committee of his estate, the concurrence and approval required
by subsections (2) and (3) may be given by the Public Trustee on behalf of such patient".
Subsection (4) deals with the division of real property among beneficiaries: see discussion,
infra, this ch., sec. 3(d).

Re Logan (1927), 61 O.L.R. 323, at 326, [1927] 4 D.L.R. 1074 (App. Div.) (per Middleton
J.A.). It should be noted that the concurrence of all beneficiaries was required until 1931
when the Act was amended to provide that there need only be concurrence of a majority
of beneficiaries, including the Official Guardian on behalf of infants: The Devolution of
Estates Act, 1931, S.O. 1931, c. 32, s. 3.

248

The complex provisions dealing with sale for the purpose of distribution
are designed to provide protection to beneficiaries. Section 19 also amply
protects good faith purchasers. Creditors of the deceased's estate, however,
lose their ability to have recourse against the real property sold; section 19
makes it clear that a good faith purchaser for value "is entitled to hold [the
property] freed and discharged from any debts or liabilities of the deceased
owner, except such as are specifically charged thereon otherwise than by his
will . . . and is not bound to see the application of the purchase money".

The provisions of the Estates Administration Act are merely facilitative:
they confer powers of sale where no such powers are given by the deceased's
will; they do not in any way control or restrict powers that are given by the
will.71 Consequently, where personal representatives are expressly given a
general power of sale under a will, the land will not automatically vest in
beneficiaries at the end of three years. Nor is there any need for personal
representatives to obtain the consent of beneficiaries or, where there are
minor or mentally incompetent beneficiaries, the consent of the Official
Guardian, in order to effect a sale for the purpose of distribution of the
proceeds.

Even where the will does not confer an express power of sale, a power
of sale may be implied in certain circumstances, and the same consequences
follow as in the case of an express power of sale. At common law, it was
established that a direction — as distinct from a mere authority — to executors
by the will to pay debts created a charge on the assets, including real
property, and that it gave them an implied power of sale. This principle was
further expanded by statute. The current version, section 44 of the Trustee
Act,12 provides as follows:

44. — (1) Where by any will coming into operation after the 18th day of
September, 1865, a testator charges his land, or any specific part thereof, with
the payment of his debts or with the payment of any legacy or other specific
sum of money, and devises the land so charged to his executors or to a trustee
without any express provision for the raising of such debt, legacy or sum of
money out of such land, the devisee may raise such debt, legacy or money by
a sale of such land or any part thereof, or by a mortgage of the same.

(2) Purchasers or mortgagees are not bound to inquire whether the powers
conferred by this section, or any of them, have been duly and correctly exercised
by the person acting in virtue thereof.

Two provisions of the Act deal with this explicitly. Section 10 provides that "[njothing in
section 9 derogates from any right possessed by an executor or administrator with the will
annexed under a will or under the Trustee Act or from any right possessed by a trustee
under a will". Section 17(7) provides that "[sjection 16 and this section ... do not derogate
from any right possessed by a personal representative independent of this Act".

Supra, note 61.

249

The courts have interpreted this provision expansively. First, the provi-
sion has been held to apply where the testator does not expressly charge the
land with the payment of debts or legacies; a direction to pay debts, in
accordance with the common law principle, has been taken to create a
charge.73 Similarly, a direction to pay legacies seems also to attract the
operation of section 44.74

The second point is that, although section 44(1) makes specific refer-
ence to the land being devised to "his executors . . . without any express
provision for the raising of such debt, legacy or sum of money out of such
land", it was held in ReJefferies and Calder15 that section 44(1) applies even
in the absence of such a devise. The background to this is that prior to 1926
the equivalent provisions to section 44 contained a subsection that explicitly
stated that the power of sale conferred by the section was not dependent on
the testator having devised the land to the executor. This subsection was
omitted in The Trustee Act, 1926.16 The position taken in Re Jefferies and
Calder, however, can be justified by the fact that section 2(1) of the Estates
Administration Act vests the testator's property in her personal representa-
tives, making redundant any express devise to them.77

(d) Distribution to Beneficiaries in Kind

Section 17 of the Estates Administration Act provides in elaborate detail
for the distribution of real property of an estate among the persons benefi-
cially entitled. The scheme is restrictive.

Section 17(3) authorizes personal representatives "to convey, divide, or
distribute" the real property among persons beneficially entitled according
to their respective snares and interests. Its effect is restrictive in three main
ways. First, the provision requires the concurrence of all adult persons so
entitled. Second, the subsection calls for "the written approval of the Official
Guardian on behalf of minors or mentally incompetent persons".78 In addi-
tion, section 17(6) confers a power on the Official Guardian to approve

73
74

Re Reynolds and Harrison (1921), 51 O.L.R. 123, 66 D.L.R. 398 (H.C. Div.).

Lamont, supra, note 56, at 273. Compare Re Nattress and Levy, [1946] O.W.N. 690, [1946]
4 D.L.R. 156 (H.C.J.) (subsequent reference is to O.W.N. ), where emphasis was placed on
the will of the testator directing the executors to pay legacies. However, emphasis was also
placed on the fact that "the residuary clause contained in the will is worded in such a
manner as to blend the real and personal estate in one mass" {ibid., at 691). Moreover, no
reference is made in the reasons for judgment to the predecessor of s. 44 of the Trustee Act
that was applicable at the time.

,J [1951] O.W.N. 27 (H.C.J. ).
76 S.O. 1926, c. 40.

Lamont, supra, note 56, at 273.

Section 17(4) provides that "[w]here a person beneficially entitled is a patient in a psychiat-
ric facility under the Mental Health Act and the Public Trustee is committee of his estate,
the concurrence and approval required by subsections (2) and (3) may be given by the
Public Trustee on behalf of such patient".

250

on behalf of beneficiaries who cannot be located and beneficiaries whose
concurrence it would be inconvenient to require. This power is equivalent
to that conferred on the Official Guardian by section 17(2) in the case of a
sale for the purpose of distribution.79

The third limitation on the effect of section 17(3) is that, in the absence
of an order of a judge, real property distributed to beneficiaries continues
to be liable for the debts of the deceased owner.80 If a beneficiary to whom
real property is distributed sells it to a good faith purchaser for value, the
property continues to be subject to the debts of the deceased. The purchaser
will be free of any such claims only after the expiration of the period of three
years from the death of the deceased, but even then it will continue to be
subject to the debts if "some action or legal proceeding has been instituted
by the creditor, his assignee or successor to enforce the claim and a lis
pendens or a caution has, before . . . [the end of such period], been registered
against the property".81 The purchaser is then given a right to relief over
against the person beneficially entitled and against the personal representa-
tive but, in the case of the latter, only if she conveyed it with knowledge of
the debts or without duly advertising for creditors.82

Section 17(5) explicitly confers on the court jurisdiction to order the
distribution of real property to or among beneficiaries:83

17. — (5) Upon the application of the personal representative or of any person
beneficially entitled, the court may, before the expiration of three years from
the death of the deceased, direct the personal representative to divide or
distribute the estate or any part thereof to or among the persons beneficially
entitled according to their respective rights and interests therein.

If the property is vested in a beneficiary pursuant to such a court order,
a purchaser in good faith and for value from the beneficiary would take the
property free of the debts of the deceased "except such as are specifically

80
81
82

Formerly, the Official Guardian did not consent to such conveyances on behalf of any of
the classes of persons on whose behalf he was empowered to concur. This made it necessary
to obtain a court order in the circumstances where the Official Guardian was empowered
to approve the division of the estate: see Howland, supra, note 61, at 68, and Lamont, supra,
note 56, at 279.

Estates Administration Act, supra, note 3, s. 17(8)(a).

Ibid., s. 17(8)(a).

Ibid., s. 17(8)(b). Where the property is retained by the beneficiary at the end of the 3 year
period, and where no lis pendens or caution has been registered, the beneficiary holds the
property on the same basis that he would have held if it vested in him under the automatic
vesting provision: ibid., s. 17(8)(c). See discussion, supra, this ch. sec. 3(a).

It is unclear whether the court's power extends beyond the 3 year period in a case where
the real property remains vested in the personal representatives because of the registration
of a caution or cautions under s. 9.

251

charged thereon otherwise than by his will".84 But the Act preserves any
rights of the creditors against the personal representative personally or
against the beneficiary to whom the land was conveyed.85

Apparently the established practice86 is that the court will grant an
order under section 17(5) only upon proof that there has been advertisement
for creditors, and either that their claims have been satisfied or that there
are sufficient assets to pay them in full.87

The provisions in the Estates Administration Act, it should be re-empha-
sized, are facilitative. Like the provisions dealing with powers of sale, they
provide for distribution in kind where such a power is not given by the will.
They do not in any way control or restrict powers that are given by the will.88

4. RECOMMENDATIONS

(a) Vesting in the Estate Trustee: Assimilation of Personal
and Real Property

(i) General Considerations

We have already expressed our general conviction that distinctions
between the treatment accorded to real property and that given to personal
property are now generally unjustified.89 This view is of particular importance
in the present context. From this view flows our basic recommendation that

Estates Administration Act, supra, note 3, s. 20(1).
85 Ibid.

Lamont, supra, note 56, at 280.

Section 126 of the Land Titles Act, supra, note 53, provides a procedure for land registered
under that Act to be registered as clear of debts of the deceased:

1 26. Where land has been transferred to a person beneficially entitled thereto within
three years after the death of the registered owner or has become vested in the person
beneficially entitled thereto under the Estates Administration Act, the land registrar,
upon application and the production of satisfactory evidence showing that all debts of
the deceased registered owner have been paid and that creditors have been notified,
may,

(a) where the person beneficially entitled is shown on the register as owner of
the land and the register shows that the land is subject to the unpaid debts
of the deceased registered owner, delete the reference to the unpaid debts
from the register; or

(b) register the person beneficially entitled to the land without reference to
the unpaid debts of the deceased registered owner.

Estates Administration Act, supra, note 3, s. 17(7).

89 Supra, ch. 1.

252

no distinction should be drawn between real property and personal property
with respect to the vesting and the disposition of the property. The second
matter that is fundamental to our recommendations is the view that we have
taken that all property of the deceased should vest in the estate trustee, and
that title should in all cases be derived from a transfer from the estate
trustee.

It is remarkable that these principles were introduced into the law of
Ontario in 1886 by The Devolution of Estates Act, 1886.90 The essential
purposes of that reforming statute, however, were so qualified by judicial
interpretation and, more importantly, substantial statutory amendment, that
there are now substantial differences in the treatment of real and personal
property. By contrast to personal property, the system of vesting and transfer
of real property is uncertain, complex, and inconvenient in practice.

(ii) Automatic Vesting of Real Property in Persons Beneficially
Entitled

There are two main arguments in support of the present system of
automatic vesting and its attendant caution mechanism. First, it is argued
that the system is economical: why waste money in vesting property in the
personal representative, who would then have to transfer it to the benefi-
ciary, if the property could be vested directly in that same beneficiary? A
second argument is that, in some cases, practices may have grown up in
reliance on this system. Quite often, especially in rural areas, nothing is
done about the title to real property as it passes from generation to genera-
tion, either by testate or intestate succession. When the property is finally
sold out of the family, a chain of title can be made by the combined operation
of section 48 of the Registry Act,91 which permits the registration of the will
itself, and the automatic vesting provisions of the Estates Administration
Act. Otherwise, conveyances from the appropriate personal representatives
would have to be made and registered and, in many cases, probate or letters
of administration would have to be obtained, all of which, so the argument
goes, would unnecessarily increase costs.92

We do not find these arguments persuasive. First, the proof of title that
has devolved by virtue of the automatic vesting provisions will often be
complicated. The chief reason for this is that title passes through those
beneficially entitled. For a number of reasons, this will often give rise to
difficulty. First, there may be several persons to whom beneficial interests
have been conferred, and title will pass through all of them. Second, there

90 Supra, note 40.
Supra, note 45.

" Where an executor is appointed by the will, it would not be necessary to obtain an estate
trustee certificate, since the executor derives his authority from the will. Where no executor
is appointed or a purchaser doubts the validity of the appointment, an estate trustee
certificate would have to be obtained. Otherwise, the chain to title would be broken.

253

may be difficult questions of law or fact in the determination of beneficial
entitlement. For example, the determination of beneficial entitlement under
a will may depend on questions of interpretation of the will, or entitlement
may depend on the order of deaths of a number of people about whom the
facts are obscure. These difficulties obviously will be compounded where a
title is required to be traced back in this fashion through several generations.
The third source of difficulty is that it will be necessary to determine whether
the automatic vesting provisions in fact apply in any particular case. Uncer-
tainty about this could arise because of the fact that section 10 of the Estates
Administration Act provides, in effect, that a will may preclude the operation
of the automatic vesting provisions and because it will sometimes be a
difficult matter of interpretation whether a will has had that effect.93 In
addition, it will be necessary to determine whether a caution has been
registered, because such a caution will prevent the automatic vesting.

The argument that this system produces low transaction costs in the
transmission of title on death seems, therefore, to be open to doubt since
difficult questions of fact and law will frequently arise in the proof of
title by virtue of this system. Moreover, the very complexity of the Estates
Administration Act, and its infrequent use, means that lawyers must expend
considerable time in understanding its provisions. This, of course, tends to
increase costs.

The system is infrequently used for two main reasons. First, it is inconsis-
tent with the fundamental principles of the Land Titles system and, conse-
quently, land registered under that Act does not automatically vest in those
beneficially entitled; rather, transmissions from the name of the deceased,
to the name of the personal representative, and to the name of the benefi-
ciary, are required to be registered.94 Second, most professionally drawn
wills include provisions that have the effect of vesting all the property of the
deceased in the personal representatives and of giving them wide powers of
disposition. Such clauses completely exclude automatic vesting under the
Estates Administration Act. Use of these provisions in wills demonstrates the
aversion of professional advisers to the effect of the statutory provisions.
The net result is that Act operates, therefore, mainly in cases of intestacy
and as a trap for the unwary draftsman of a will.

Comparison with the law in other jurisdictions shows the system of
automatic vesting and cautions to be peculiar to Ontario law. One other
province, New Brunswick, does have an automatic vesting provision.95
Indeed, it was amended in 1977 to enlarge its scope, by extending its applica-
tion to "jm]oney and securities for money to a value of [$2,500], [and]

' See, for example, Re Jefferies and Calder, supra, note 75, and Re Brankston and Wright
(1985), 50 O.R. (2d) 666, 37 R.P.R. 165 (H.C.J.).

Supra, this ch., sec. 3(a).

95 Devolution of Estates Act, R.S.N.B. 1973, c. D-9, s. 19 (2 years after the death of the
deceased).

254

personal chattels".96 The New Brunswick legislation, however, does not
provide for cautions. Other provinces provide for all the property of the
deceased to vest in the personal representative, and they require some
positive act by the personal representative (or, in some cases, the court) to
transmit the title to the beneficiaries. They deal with the problem of the
failure of the personal representative to convey within a reasonable time by
providing that, after a specified time, the beneficiary may apply to the
personal representative for a distribution of the estate. If the personal
representative fails to do so, an application may be made to the court. The
court may then order the personal representative to convey or, in default,
may order the vesting of the realty in the beneficiary.97

We think that it is clear that the retention of the system of automatic
vesting, and the ancillary system of registration of cautions, is unjustified.
Accordingly, we recommend that it should be abolished. We recommend
that this system should be replaced with a system under which the chain of
title from the deceased is traced solely by means of the estate trustee
certificate, except where it is necessary to effect vesting by court order.98 We
also recommend repealing the section 48 of the Registry Act, which deals
with the registration of wills as a link in the chain of title. The only permissible
link should be the estate trustee certificate. This will forestall any problems
as to the authenticity of wills and will assure a purchaser that the purported
will can, in fact, be treated as the deceased's valid will. This will strengthen
the position of purchasers, who will not need to have recourse to the Registry
Act, but will be able to rely on the chain of title established from the deceased
to the personal representative.

We are, however, concerned that persons should not be prejudiced by
reliance on the existing system. We therefore recommend that legislation
should not affect the vesting of property that occurred before its coming
into force. We recommend, in addition, that persons whose interests in
property vested before that date should continue to be able to use the
existing provisions of the Registry Act to register wills affecting their title
with the same effect as under the present law.

(iii) The Time of Vesting in the Personal Representative

It will be recalled from our summary of the present law99 that, where
an executor is appointed and willing and able to act, the property of the
deceased vests in the executor at the time of death. In other cases, imme-
diate vesting cannot occur in the person who is eventually appointed as

96 S.N.B. 1977, c. 18, s. 2.

Anger and Honsberger, supra, note 4, Vol. 2, §2906, at 1458.

Trustee Act, supra, note 61, ss. 10-13.
Supra, this ch., sees. 2(a)(i) and 3(a).

255

administrator. To some extent, this hiatus is dealt with by the doctrine
of relation back. We recommend that the current law respecting the immedi-
ate vesting in the estate trustee named in the will, as well as the rule giving
retrospective effect to a vesting in an estate trustee subsequently appointed,
be retained.

Title to the estate property cannot actually be located in the administra-
tor unless and until the person is in fact appointed. This apparent gap in
the title to property of the deceased raises puzzling theoretical questions.
More importantly, it gives rise to potential practical problems, the chief of
which is that there are a number of circumstances in which notice might
need to be served with respect to property of the deceased prior to the grant
of an estate trustee certificate.100 It is arguable that this apparent gap is filled
under the present law in Ontario by the property vesting in a judge of the
Ontario Court (General Division).101 However, this is not clearly established,
and some jurisdictions have dealt with the problem by legislation. For exam-
ple, in British Columbia the personal estate of the deceased vests in the
court until administration is granted.102 In England the real and personal
property of the deceased vests in the President of the Family Division of the
High Court;103 in New South Wales it vests in the Public Trustee;104 and in
New Zealand it vests in the Crown.105 It has been held in England that the
legislative provision does not impose any active obligations on the President
of the Family Division.106

We recommend that similar legislation should be enacted in Ontario.
Any gap in the vesting of the property of the deceased should be filled
by the interim vesting of the property in an appropriate public official.
There should be someone to serve with any document, particularly where
the appointment of an estate trustee is not possible in the time avail-
able. The public official best suited for this position is the Estate Registrar
for Ontario.

100

See, for example, Fred Long & Sons Ltd. v. Burgess, [1950] 1 K.B. 115, [1949] 22 All E.R.
484 (C.A.).

101
102

See supra, this ch., sees. 2(a)(i) and 3(a).
Estate Administration Act, supra, note 6, s. 3.

103 Administration of Estates Act 1925, 15 & 16 Geo. 5, c. 23 (U.K.), s. 9. Section 9 states that
the property is vested in the "Probate Judge", which is defined to mean the President
of the Family Division of the High Court: see Administration of Estates Act 1925, ibid.,
s. 55(1) (xv), as en. by Administration of Justice Act 1970, 1970, c. 31 (U.K.), s. 1(6), Sch. 2,
para. 5.

104 Wills, Probate and Administration Act, S.N.S.W. 1898, s. 61. This explicitly provides for such
interim vesting on testate, as well as intestate, succession.

105 Administration Act 1969, S.N.Z. 1969, No. 52, s. 22.

106 Re Deans, [1954] 1 W.L.R. 332, [1954] 1 All E.R. 496 (Ch.).

256

(iv) Vesting in Co-Estate Trustees

In chapter 2, we considered the authority of estate trustees where there
are two or more of them.107 In that chapter, we recommended that, like
other trustees, estate trustees should have joint authority: one of several of
them, acting alone, should not be able to bind the estate.

A related question concerns the vesting of property in several trustees.
We see no reason to distinguish in this context between estate trustees and
other trustees. It is clear that property vests in ordinary trustees as joint
tenants108 and, even under the present law, it seems that the same principle
does in fact apply to personal representatives.109 Moreover, this principle
seems to be assumed by section 46(1) of the Trustee Act. 110 Nevertheless, we
recommend that the vesting of property in estate trustees as joint tenants
should be made explicit by statutory provision.111

(b) The Power of Sale of the Estate Trustee

In the case of real property, the Estates Administration Act distinguishes
sharply between an exercise of a power of sale for the purpose of paying
debts of the estate and an exercise of a power of sale for the purpose of
distribution of the proceeds among the beneficiaries. The exercise of the
power in the latter case is restricted by elaborate provisions designed to
mediate among the competing interests of purchasers, creditors of the estate,
and beneficiaries.112 By contrast, in the case of personal property, personal
representatives have an unfettered power of sale, which allows them to give
good title to a purchaser without regard to the interests of beneficiaries and
creditors.113

We take the position that this distinction is unjustified and that estate
trustees should have a general power to sell property of the estate, subject

Supra, ch. 2, sec. 3(h).

108

Waters, Law of Trusts in Canada (2d ed., 1984), at 675. See, also, Trustee Act, supra, note
61, s. 9.

Williams, Mortimer and Sunnucks, supra, note 5, at 466.

Section 46(1) provides that "[w]here there are several personal representatives and one or
more of them dies, the powers conferred upon them shall vest in the survivor or survivors,
unless there is some provision to the contrary in the will". Section 25 of the Trustee Act
makes the same provision for trustees.

Compare the New Zealand Administration Act, supra, note 105, s. 24(3), which provides for
vesting in administrators as joint tenants.

112

See supra, this ch., sec. 3(b)(ii).

1 1 -j

Of course, their power to give a good title to purchasers does not mean that personal

representatives will be immune from personal liability for a wrongful exercise of this power.

See note 12, supra.

257

only to minor qualifications, which we shall explain shortly. In support of
this view, we wish to make three points. First, a general power of sale will
facilitate transactions by estate trustees: purchasers will not be discouraged
by complications caused by the present elaborate provisions; the cost of
transactions will be reduced and efficient estate administration encouraged;
and recalcitrant beneficiaries will be unable to block proper exercises of the
power of sale by estate trustees.

The second point is that one of our general concerns in this report has
been that the powers and duties of an estate trustee should not differ from
those of an ordinary trustee, except where there is a good reason. In the
Report on the Law of Trusts, the Commission made the following
recommendation: 1 14

5. The revised [Trustee Act] should contain a set of administrative powers
that are customary in well-drawn contemporary trust instruments. Further, the
testator or settlor should be able to exclude or modify any of the statutory
administrative powers conferred upon trustees.

The Commission also noted that the present Trustee Act does not give
trustees a power of sale,115 and recommended that "[t]he revised Act should
provide that trustees may sell trust property by public auction or private
contract for cash or credit on appropriate security".116 The facilitative
approach that was followed in the Report on the Law of Trusts supports the
adoption of a general power of sale for estate trustees, since the inclusion
of such a power is in fact "customary in well-drawn contemporary" wills.

The third point is concerned with the protections that will be removed
by granting such a general statutory power of sale. The creditors of an estate
have an interest in ensuring that their debts are paid, and their position is
weakened when property of the estate is sold or distributed, leaving them
with only personal claims against the personal representatives. Beneficiaries
have an interest in ensuring that unduly depreciatory sales are not made,
that sales are not unnecessarily carried out against their wishes, and that
the personal representatives account for the proceeds of sale. We think,
however, that any system that fully meets these concerns will be so cumber-
some as to impede seriously the convenient administration of estates. More-
over, for reasons that we shall mention below, the Ontario system in practice
has been one in which personal representatives most often have a general
power of sale, and it does not appear that there has been any systematic
prejudice to the interests of either beneficiaries or creditors.

Ontario Law Reform Commission, Report on the Law of Trusts (1984) (hereinafter referred
to as "Trusts Report"), Vol. 1, at 305. For a discussion, see ibid., at 233-34.

115 Ibid., at 238.

Ibid., at 306. For a discussion, see ibid., at 238-40.

258

For a number of reasons, the protection afforded by the present elabo-
rate provisions in the Estates Administration Act is generally illusory. We
have already discussed the prime reason previously in the context of the
system of automatic vesting and cautions: it is "customary in well-drawn
contemporary" wills to include a general power of sale. This means that
professionally-advised testators do not generally allow beneficiaries and
creditors of their estates the protections afforded by the Estates Administra-
tion Act. Putting it another way, those protections are in fact afforded
haphazardly, applying most often in cases of intestacy and home-made wills.
The inclination of professionally-advised testators to give executors a power
of sale has been supported by the legislature in the enactment of section 44
of the Trustee Act,111 which, in some circumstances, gives a power of sale to
executors to whom such an explicit power has not been given by the will. In
this context, the judiciary have also carried out a policy of encouraging the
exercise of powers of sale by executors, since they have held that section 44
applies even where the land is not explicitly devised by the will to the
executors.118

Even where a power of sale is not given by the will or by virtue of section
44 of the Trustee Act, the restrictive provisions of the Estates Administration
Act often will have no effect on a sale by the personal representative. The
reason is that these provisions do not apply to a sale for the purpose of
paying debts, and this is so whether the sale is wholly or even partly for the
purpose of paying debts: the restrictive provisions apply only where a sale
is made solely for the purpose of distribution.119

A related point should also be emphasized. For a good faith purchaser
for value, the consequences of a sale for the purpose of paying debts are as
follows: purchasers take the land freed and discharged from any debts and
liabilities of the deceased, except such as are specifically charged thereon
otherwise than by the will; they take free from all claims of the persons
beneficially entitled; and they are not bound to see to the application of the
purchase money.120 Good faith purchasers for value are protected so long
as the instrument of conveyance purports to be for the payment of debts, as
long as they do not have notice to the contrary. They need not make inquiries
whether it is in fact being made for this purpose.121 Consequently, these
provisions are not effective protection for the beneficiaries or the creditors
against an unscrupulous personal representative who is embarking on a
course of intentional wrongdoing.

Supra, note 61. See supra, this ch., sec. 3(c).

118 Ibid.

119 Ibid., sec. 3(b)(i).

120

Estates Administration Act, supra, note 3, s. 19.

121

Supra, this ch., sec. 3(b)(i).

259

The restrictions created by the Estates Administration Act are also lim-
ited in their application because of the fact that they apply only to sales of
real property. As we have explained, personal representatives have a general
power of sale over personalty.122 This distinction is inconsistent with our
general view that the same treatment should be accorded to both real
property and personal property. Moreover, there would be no justification
for extending to personalty the existing complex provisions applicable to
realty. Personalty in an estate often will be very valuable. Nevertheless, it
does not seem that persons interested in estates, whether as beneficiaries or
creditors, have suffered because personal representatives have a generally
unrestricted power to sell personal property.

Consideration of the systems in operation in other jurisdictions has not
weakened our view that the elaborate provisions in the present legislation
restricting the power of sale over real property should be replaced with a
generally unrestricted statutory power of sale. Like Ontario, other Canadian
jurisdictions generally restrict the statutory power of sale over real prop-
erty.123 Nova Scotia,124 moreover, has a statutory scheme that is even more
restrictive than the Ontario system, in that court intervention is more exten-
sive. Similarly, most American jurisdictions have traditionally required court
supervision of sales by personal representatives, including those for payment
of debts. This reflects the general approach to estate administration taken
in American jurisdictions, which have adopted a system of court-supervised
administration. However, such supervision of estates has been subjected to
trenchant criticism in the United States.125 In large measure, the current
American Uniform Probate Code126 has been influenced by this criticism; in
broad terms, it represents a movement towards a system under which court
intervention is reduced and personal representatives are given extended
power. This is clearly exemplified by section 3-711, which grants personal
representatives a broad power of sale:

Until .termination of his appointment a personal representative has the same
power over the title to property of the estate that an absolute owner would
have, in trust however, for the benefit of the creditors and others interested in
the estate. This power may be exercised without notice, hearing, or order of
court.

122 Ibid., sec. 2(a)(ii).

123 See, for example, The Devolution of Real Property Act, R.S.S. 1978, c. D-27, ss. 11-12;
Devolution of Real Property Act, R.S.A. 1980, c. D-34, ss. 9-12; Probate Act, R.S.P.E.I. 1974,
c. P-21, ss. 109, 110, and 113; and Devolution of Estates Act, supra, note 95, ss. 9-12, as am.
by S.N.B. 1986, c. 4, s. 12(2) and (3).

124 Probate Act, R.S.N.S. 1989, c. 359, ss. 50-64.

l ?s

See, for example, Langbein, "The Nonprobate Revolution and the Future of the Law of

Succession" (1984), 97 Harv. L. Rev. 1108, at 1116, nn. 36 and 37.

National Conference of Commissioners on Uniform State Laws, Uniform Probate Code.

260

The English Administration of Estates Act 1925 gives personal represen-
tatives a general power of sale over both real and personal property, provid-
ing as follows:

33. — (1) On the death of a person intestate as to any real or personal estate,
such estate shall be held by his personal representatives —

(a) as to the real estate upon trust to sell the same; and

(b) as to the personal estate upon trust to call in sell and convert into
money such part thereof as may not consist of money,

with power to postpone such sale and conversion for such a period as the
personal representatives, without being liable to account, may think proper,
and so that any reversionary interest be not sold until it falls into possession,
unless the personal representatives see special reason for sale, and so also that,
unless required for purposes of administration owing to want of other assets,
personal chattels be not sold except for special reason.

(2) Out of the net money to arise from the sale and conversion of such real
and personal estate (after payment of costs), and out of the ready money of the
deceased (so far as not disposed of by his will, if any), the personal representative
shall pay all such funeral testamentary and administration expenses, debts and
other liabilities as are properly payable thereout having regard to the rules of
administration contained in this Part of this Act, and out of the residue of the
said money the personal representative shall set aside a fund sufficient to
provide for any pecuniary legacies bequeathed by the will (if any) of the
deceased.

Accordingly, we recommend that, subject to the power of the testator
to provide otherwise, estate trustees should have a general statutory power
to sell both the real and personal property of the estate, whether for the
purpose of payment of debts or for the purpose of distribution. This power
should be exercisable without notice to any person, including the Official
Guardian and the Public Trustee;127 moreover, it should be exercisable
without any order of the court.

Conferral of this power, we must emphasize, would not affect the
question of the personal liability of estate trustees to beneficiaries and
creditors, a matter that would continue to be governed by the principles
applied by the courts. Thus, an estate trustee who, in the exercise of this
power, sells property that has been specifically bequeathed or devised may
be found liable to a beneficiary if the sale was not necessary to the administra-
tion of the estate. Similarly, an estate trustee of an insolvent estate who sells
property at a gross undervalue risks liability to a creditor.

127

Under the present Estates Administration Act, supra, note 3, in certain circumstances the
concurrence and approval of the Public Trustee is required in place of that of the Official
Guardian. See note 69, supra.

261

As indicated above, we are of the view that the testator should be free
to limit the wide power of sale by providing restrictions in the will, and we
so recommend. It is important, however, that the potential reduction of an
estate trustee's power should not seriously undermine the policy of facilitat-
ing transactions with estate trustees: a purchaser should not be required to
undertake any extensive inquiries or to make any difficult determination
about the power of sale possessed by the estate trustee. A purchaser should
not be required to peruse and interpret the will to ascertain whether the
sale is authorized and conducted in accordance with the will. A reasonable
compromise between the policy of allowing freedom to the testator and the
policy of facilitating transactions with the estate trustee is that restrictions
should bind a purchaser only if they come to her attention in two ways.
Otherwise, the purchaser should receive an unimpeachable title.

First, a purchaser should be bound by any restrictions provided by the
will if, and to the extent that, the restrictions are noted on the estate trustee
certificate.128

Second, a purchaser who, at the time of her purchase from the estate
trustee, has actual notice that the estate trustee does not possess the power
she purports to exercise, or that she is exercising a power in a manner that
is contrary to that provided in the will, takes the property subject to the
terms of the will.

Accordingly, we recommend that a person purchasing property from
an estate trustee in good faith and for value should be entitled to hold it
freed and discharged from any debts or liabilities of the deceased owner,
except such as are specifically charged thereon otherwise than by her will,
and from all claims of persons beneficially entitled thereto, and takes the
property subject to the terms of the will only where the restrictions on the
power of sale are noted on the estate trustee certificate or where she has
actual notice at the time of the purchase that the estate trustee does not
possess the power she purports to exercise, or that she is exercising the
power in a manner that is contrary to that provided in the will.

We have been generally concerned to facilitate the dealings of purchas-
ers with estate trustees. We have attempted to do this by conferring wide
general powers of sale on the estate trustee, and by severely limiting the
extent to which the purchaser is required to make inquiries about the
propriety of the transaction. The effect of the recommendations we have
already discussed is that a purchaser from an estate trustee will only need
to make the usual inquiries about title and, in addition, to satisfy himself

1 ?K

The application for an estate trustee certificate should require that applicants, or their
solicitors, copy any restrictions on the power of sale of the estate trustee. If the clauses
dealing with the power of sale are too lengthy for a standard application form, the clauses
should be appended to the application. The estate trustee certificate would replicate the
clauses appearing in the application.

262

that the purported estate trustee has duly received the estate trustee certifi-
cate and that it does not prohibit the sale. If this procedure is followed, the
purchaser will receive a title that is unimpeachable at the suit of beneficiaries
or creditors. We recommend also that the purchaser should not be bound
to see to the application of the proceeds of the sale.

Before turning to our proposals respecting distribution in kind, there
are two related matters we wish to address.

In the Report on the Law of Trusts,129 we expressed the view that, in
general, a purchaser from a trustee should be entitled to assume, on the
basis of the appropriate instruments of appointment, discharge or vesting,
that persons purporting to act as trustees are validly appointed, that the
trust property is vested in them, that they possess the powers they purport
to have, and that they are properly exercising those powers. We also took
the view that this protection for purchasers should apply where a new trustee
is appointed, either as a substitute for a previous trustee or as an additional
trustee. Protection of this kind should also apply to estate trustees. We
therefore recommend that purchasers from an estate trustee who rely upon
the production of an estate trustee certificate or a deed of discharge that
contains a vesting declaration, express or implied, whether or not they
otherwise have notice of the will, should be able to assume without inquiry
that the former estate trustees and the substitute or additional estate trustees
possessed or possess and properly exercised or are properly exercising every
power that they purported or purport to exercise over the property.130

In the Report on the Law of Trusts, we recommended that protection
should not be extended to purchasers who have actual notice that the
trustees do not possess the power they purport to exercise, or that they are
exercising a power improperly.131 However, we were of the view that a
purchaser who has actual notice should be protected in a case where title
to the property has been vested in a purchaser who did not have actual
notice of this defect. Such a purchaser, we recommended, should not take
the trust property "subject to the terms of the trust".132 We are of the view
that the same policy should apply to purchasers from estate trustees. We
therefore recommend that a purchaser who, at the time of the purchase
from the estate trustee, has actual notice that the estate trustee does not
possess the power she purports to exercise, or that she is exercising a power
in a manner that is contrary to that provided in the will, should take the
property subject to the terms of the will, unless title to the property has been
held by a prior purchaser without actual notice that the estate trustee does

1 29

Trusts Report, supra, note 114, at 183. See, also, ibid., at 163-72.

130 Draft Trustee Bill, s. 30(1).

L Trusts Report, supra, note 114, at 183.
132 Ibid.

263

not possess the power she purports to exercise, or that she is exercising a
power in a manner that is contrary to that provided in the will.

(i) Simple Distribution in Kind

In our discussion of the present law, we explained how, in the case of
personal property, the law dealing with distribution in kind is unclear,133
and, in the case of real property, distribution in kind is generally not possible
under the provisions of the Estates Administration Act.134 In framing an
appropriate general rule, we have taken account of factors similar to those
relevant to the estate trustee's power of sale: the same rule should apply to
real and personal property; the rule should be consistent with the result
produced by typical well-drafted wills; and, of course, so far as reasonably
possible, the rule should be simple and clear so that it can be applied
easily and inexpensively. The general rule that we recommend is that, after
payment of debts and taxes, administrative and funeral expenses, and legac-
ies, the estate trustees should be required to convert the residue of the estate
and pay the shares of the beneficiaries in cash. This rule should apply to
both testate and intestate succession. The proposed rule would accord with
a widely held view of the existing law applicable to personalty,135 and with
the almost invariable practice in professionally-drafted wills. This rule would
provide for what in most cases is the simplest and most convenient way to
administer an estate. We wish to emphasize, however, that this rule will in
three respects be merely a prima facie rule. First, it should be subject to a
contrary provision in the will, which will allow a testator to provide for
distribution in kind in whatever way is considered appropriate. Second, we
recommend that, in the absence of contrary, provision in the will, estate
trustees should have a power of appropriation. Finally, where the estate is
solvent, and all the beneficiaries have legal capacity and agree that a distribu-
tion in kind should be made, the estate trustees should be required to make
such distribution.

(ii) Appropriation and Distribution in Kind of Particular
Assets to Particular Beneficiaries

While the position in England seems to be clear, there is virtually no
jurisprudence in Canada on the appropriation and distribution of personal
property.136 The law is therefore unclear in Ontario. In the case of real

133

134
135

136

Supra, this ch., sec. 2(b).

Ibid., sec. 3(d).

But this view of the present law is probably restricted to the case of intestacy, as well as
testate succession where there is an express trust for sale: see Cullity and Brown, supra,
note 14, at 326-27. But for a less restrictive view, see Brule, supra, note 14.

Supra, this ch., sec. 2(b)(ii).

264

property, the law and practice on appropriation and distribution in kind,
under section 17 of the Estates Administration Act, is highly restrictive.137 At
least in relation to real property, the law and practice has been partly
influenced by a desire to protect creditors of the estate. The protection
given, however, may impede the convenient administration of an estate and
its application is uneven or, in many cases, illusory.

The relevant points are similar to those we made previously in relation
to the limitations placed by the Estates Administration Act on the power of
sale for the purpose of distribution.138 First, the protection is uneven, in that
it is applies only to real property; we need not belabour our view that there
is today no justification for a system that produces markedly different results,
depending upon whether the property in question happens to be personalty
or realty. Second, in many cases, the protection is illusory since it can be
removed by the insertion of an appropriate provision in a will. In any
event, we do not think that protection of creditors is a sufficient reason for
obstructing the distribution in kind of property to beneficiaries of an estate.
Many wills, in fact, give personal representatives extensive powers to make
appropriation and distribution in kind,139 and it does not appear that this
has led to systematic prejudice to creditors. The fact that there are remedies
available against a personal representative personally is a sufficient disincen-
tive against distributions being made in prejudice of creditors.

In devising an appropriate rule, we have again taken account of the
factors mentioned in the previous section, and note that extensive powers to
appropriate and distribute in kind are commonly included in professionally-
drawn wills. We have adopted the principle that, in the absence of any
reason to the contrary, the powers and duties of estate trustees should be
the same as those of ordinary trustees. In our Report on the Law of Trusts,
we recommended a power of appropriation in the following terms:140

The revised Act should provide that trustees may appropriate property in specie
in or towards satisfaction of the share or interest of any beneficiary, with the
consent of that beneficiary. For the purpose of the appropriation, following
consultation with a qualified person where the trustees are not personally
qualified, trustees should place a valuation on the property. However, no specific
gift made by the trust instrument should be adversely affected by an appropria-
tion of property in specie. In addition, within one month of the valuation or
such further time as the court authorizes, the trustees, beneficiaries or any other

137
138
139

140

Infra., this ch., sec. 4(d).

Ibid., sec. 4(b).

Such provisions are generally included in published books of precedents. See, for example,
Honsberger, Brule and MacGregor (eds.) O'Brien's Encyclopedia of Forms (11th ed., 1970),
Vol. 9, ch. 24; Scott-Harston and Johnson, Tax Planned Will Precedents (3d ed., 1989), at
11 and 20 (clause 13); Sheard, Hull and Fitzpatrick, Canadian Forms of Wills (4th ed.,
1982), at 19; and Taube, Estate and Tax Planning (1978), at 33-35.

Trusts Report, supra, note 114, at 307-08. See discussion, ibid., at 248-49. See, also Draft
Trustee Bill, s. 35(q).

265

interested person should be able to apply to the court for a review of the
appropriation or the valuation, and, following such notice as the court may
order, the court should confirm or make such variation as it considers proper.

We recommend that this power should apply to an estate trustee.

The power that we recommended in the Report on the Law of Trusts was
simply a power of appropriation, as distinct from the power to appropriate
and distribute, to which we have made reference in the course of this
discussion. In the trusts context, a power of appropriation alone was suffi-
cient, for the trustee would continue to hold the assets in trust for the
beneficiary or beneficiaries. As we noted earlier, in the context of estates
administration, appropriation is almost invariably followed by a distribution
that is so immediate that the two stages of appropriation and distribution are
imperceptible. It is necessary, therefore, to deal specifically with distribution.

First, we believe that is necessary to confer the power to make a distribu-
tion. We therefore recommend that, where a beneficiary of an estate is
entitled to any specific real or personal property, whether because of the
exercise of the power of appropriation recommended above or otherwise,
the estate trustee should be able to transfer in kind to such person the
property to which she is entitled.

Where distributions in kind are made today in Ontario — whether under
the general law or under the provisions of a will — the distribution is custom-
arily made by a transfer in the form appropriate to the property that is the
subject of the distribution. It is arguable, however, that title to personal
property could pass from the personal representative to the beneficiary by
the personal representative making an assent. The doctrine of assents has
fallen out of use in Ontario.141 Nevertheless, we recommend that legislation
should make it clear that title can only be transferred from an estate trustee
to a beneficiary by the form of transfer appropriate to the property that is
the subject of the distribution.

In our view, the remedy of an aggrieved creditor or beneficiary for a
wrongful exercise of the power of making appropriation and distribution in
kind should ordinarily lie only against the estate trustee, subject to a single
qualification, which we shall discuss below. Generally, creditors and benefi-
ciaries should have no right to claim against the beneficiary to whom a
distribution was made, against the property distributed, or against a trans-
feree from the beneficiary. It would be undesirable to attach liability to the

141

Although a legatee derived his title from the will, transfer of the title to him was not
complete until the personal representative had shown that the asset was not required in
the administration of the estate, and this was done by an assent. An assent is an act by the
executor that indicates, or is presumed to indicate, that he intended the gift in the will to
become operative. Such an assent could be expressed or implied, in writing or oral. At
common law, the doctrine of assents applied only to gifts by will of personalty. For a
discussion, see Oosterhoff, "Practice Note- Assents" (1988-89), 9 E.T. J. 83, and Williams,
Mortimer and Sunnucks. supra, note 5, at 943-56.

266

property itself, since it would tend to make the property inalienable in the
hands of the beneficiary. Purchasers will be concerned about the risk of a
liability of an uncertain amount affecting the property in their hands.

Usually, the beneficiary will not have any reason to know whether either
the appropriation or the distribution in kind was properly made and, if she
could be fixed with liability, she might be affected by unpredictable liability.
This uncertainty would tend to inhibit the beneficiary from utilizing the
property to its highest capability, and would be unfair to the beneficiary who
has relied on the estate trustee's exercise of these powers.

The person with the best information about the financial position of
the estate, and who has control over the appropriation and distribution of
an asset, is the estate trustee. Consequently, it is the estate trustee to whom
any aggrieved creditor or aggrieved beneficiary should ordinarily look for
redress. This is subject to a single qualification: the beneficiary for whom an
appropriation or distribution is made should not be protected where she has
actual notice at the relevant time that the exercise of the power by the estate
trustee was improper.

Accordingly, we recommend that the remedy of an aggrieved creditor
or beneficiary for a improper exercise of the power of making appropriations
or making distributions in kind should be only against the estate trustee,
and that she should have no statutory claim against the beneficiary to whom
the distribution was made, against the property distributed or against any
transferee from the beneficiary. However, a beneficiary who at the time of
the appropriation or distribution in kind had actual notice that the estate
trustees were exercising the power improperly should not be entitled to this
protection.

(iii) Distribution of Share of Absolutely Entitled Beneficiary

We have mentioned in our summary of the present law that it is appar-
ently established in England that a beneficiary who is absolutely entitled in
possession to a share of the residue can generally require that her share be
distributed to her, even though other shares remain settled and are not yet
distributable.142 We have called this "the rule in Re Marshall".

The rule in Re Marshall was considered by the English Law Reform
Committee in its report on the powers and duties of trustees.143 The Commit-
tee had received the following suggestion to alter the law:144

Supra, this ch., sec. 2(b)(iii).
Law Reform Committee Report, supra, note 34.
144 Ibid., para. 3.64, at 32.

267

[Legislation should confer on trustees of pure personalty held on trust in
undivided shares any of which is not yet distributable power to postpone distri-
bution of a share which has become distributable if the distribution (or sale
preparatory to a distribution) would diminish the value of the trust property as
a whole.

The Law Reform Committee responded by concluding that there should
be no change in the law. It saw the issue as follows:145

The difficulty here ... is one of balancing the competing interests of the benefi-
ciary whose share has become distributable and who is therefore, under the
present law, entitled to take his money out and reinvest it elsewhere should he
wish, and those of the other beneficiaries, the value of whose interests might
be considerably diminished as a result.

The Committee indicated that a settlor or testator could provide for
the problem by conferring "upon the trustees power to delay either the
vesting of the beneficiaries' interests or the distribution of their shares".146
In the absence of such a provision, the Committee was satisfied with the
present law's preference for the beneficiary seeking distribution.

We agree that ordinarily this will be the preferable way to resolve
the dilemma. However, for two main reasons, we recommend legislative
treatment of this problem. The first reason is that the applicability of the
rule is uncertain in Ontario.147 The second reason is that the rule is generally
considered to apply only to pure personalty and to be inapplicable to land.
Given our general principle that differences between real property and
personal property should be eliminated, we do not accept that there is
justification for this difference in the treatment of pure personalty and
land.148 We are unconvinced by the reasons that have been given for the
special treatment of land in this context. In Re Marshall,149 Cozens-Hardy
M.R. said:

[W]here real estate is devised in trust for sale and to divide the proceeds
between A, B, C, and D — some of the shares being settled and some of them
not — A has no right to say 'Transfer to me my undivided fourth of the real
estate, because I would rather have it as real estate than personal estate'. The
Court has long ago said that that is not right, because it is a matter of notoriety,
of which the Court will take judicial notice, that an undivided share of real
estate never fetches quite its proper proportion of the proceeds of sale of the
entire estate; therefore, to allow an undivided share to be elected to be taken

145
146

147
148

149

Ibid., para. 3.65, at 32.

Ibid., para. 3.65, at 33.

This is due primarily to Re Harris, supra, note 21.

It should be pointed out that the distinction suggested is between land, including leaseholds,
and pure personalty, rather than between realty and personalty.

Supra, note 31, at 199.

268

as real estate by one of the beneficiaries would be detrimental to the other
beneficiaries.

In our view, this reasoning does not satisfactorily indicate why a distinc-
tion should be made between land and pure personalty. The cases in which
the rule under consideration has been applied have been ones involving
company stock. In those cases, some of the shares were appropriated to the
beneficiary and then distributed. Similarly, in the case of land, some of it
might be appropriated and distributed to satisfy the beneficiary's share. We
realize that these types of disposition might more often give rise to difficulty
in the case of land — for example, in the case of a family home — than in the
case of other property, such as shares. Yet this will vary with the circum-
stances, and does not justify a special rule for land.

Despite our general agreement with the preference in favour of the
beneficiary claiming distribution, we recognize that there could be circum-
stances where the detriment to the other beneficiaries would outweigh the
detriment to the claimant beneficiary if distribution were refused. Courts
have acknowledged that, in certain cases, the rule may defer to "special
circumstances".150 Courts should continue to be permitted to respond to
individual situations. In addition, our preference for the beneficiary claiming
distribution should be subject to the wishes of the testator.

Consequently, we recommend that, subject to a contrary provision in
the will and subject to a court order, a beneficiary of an estate who is
absolutely entitled in possession to a share of property, whether land or pure
personalty, and whether or not such property is subject to a trust for sale,
should be entitled to require that her share be distributed to her even though
other shares in the property remain settled and are not yet distributable.

(d) Standardization of Transmission Documents

A great deal of inconvenience in the administration of estates arises
out of the fact that financial and other institutions use different forms for
the transmission of assets from the deceased to the personal representative
or to persons designated by the personal representative. Accordingly, in
order to standardize and facilitate such transfers, we recommend that a
standard form of transmission be provided for by statute. This document
would evidence transfers from the deceased to the estate trustee and from
the estate trustee to the ultimate transferee. It would identify the deceased,
the estate trustee, the property being transferred, and the transferee; and it
should refer to the estate trustee certificate granted to the estate trustee.

See cases cited in note 31, supra.

CHAPTER 6

ESTATE PROCEEDINGS

1. INTRODUCTION

The Ontario Court (General Division) may become involved in estates
for various purposes. The most common estate functions of the court are to
make grants of letters probate and letters of administration and to "pass"
or audit the accounts of personal representatives. Usually, these functions —
and, in particular, the former — are essentially administrative in character.
They do not involve the court in its more familiar role of adjudicating
disputes between opposing parties. The court also serves as a depository for
wills.

Less frequently, contentious issues may arise in connection with an
estate that do involve the court in its usual capacity. The range of potential
issues is considerable. The validity of the will may be contested, in the course
of which the testamentary capacity of the testator may be challenged or
undue influence may be alleged. Parties may differ over the meaning of the
will, and the court may be asked to interpret it. Beneficiaries or creditors
may apply to have the personal representatives removed and replaced. An
application under Part V of the Succession Law Reform Act1 may be brought
for the support of dependants. Under the Trustee Act, personal representa-
tives may apply "for the opinion, advice or direction of the court on any
question respecting the management or administration of the trust property
or the assets of his ward or his testator or intestate."2 As we discussed in
chapter 4, claims against an estate may be brought by creditors and other
claimants.

Until recently, jurisdiction in estates matters was divided among the
surrogate courts, the Supreme Court of Ontario, and the District Court of
Ontario.3 The surrogate courts were responsible for granting probate and
administration and for passing the accounts of personal representatives; in
addition, they heard applications for support under the Succession Law
Reform Act. Surrogate courts, however, did not have authority to interpret

R.S.O. 1980, c. 488.

R.S.O. 1980, c. 512, s. 60(1). "Trust" is defined to extend to include "the duties incident
to the office of personal representative of a deceased person" (s. l(q)).

See, generally, Allen, "Estate Jurisdiction of the Surrogate Court and the Supreme Court
of Ontario", in Schnurr (ed.), Estate Litigation (1987) 1.

[269J

270

wills. The Supreme Court of Ontario had this jurisdiction. Moreover, it also
had jurisdiction to try the validity of wills, which was concurrent to that of
the surrogate courts.4 The Supreme Court also had jurisdiction, under the
Trustee Act, to remove and appoint personal representatives and to make
vesting orders.5

The fragmentation of jurisdiction in estate matters was complex and
dysfunctional. While it may have been understandable as a historical phe-
nomenon, it was not supportable on grounds of policy. The practical conse-
quence of this division of responsibility was that, depending on the particular
issues, proceedings in a single estate may have to be brought in different
courts before all the outstanding questions could be resolved. If, for example,
a question requiring the interpretation of a will arose in the course of a
proceeding in the surrogate court — for example, on a passing of accounts —
that proceeding would have to be adjourned to allow an application to be
brought in the Supreme Court of Ontario to settle it.

With the coming into force of the new "court reform" legislation,6 the
problem of fragmentation has been cured. Surrogate courts have ceased to
exist, and their jurisdiction has been transferred to the Ontario Court (Gen-
eral Division). All proceedings involving estates will be brought in the first
instance in this court,7 which will have the authority to deal with all questions
that may arise.

While this legislation has satisfactorily resolved the major jurisdictional
problem, there are other matters relating to estate proceedings that, in our
view, should be addressed. They will be the focus of this chapter.

2. PROPOSALS FOR REFORM

(a) Where Proceedings are Brought

Section 26(1) of the Estates Act provides that "an application for a grant
of probate or letters of administration shall be made to the Ontario Court
(General Division) and shall be filed in the office for the county or district
in which the testator or intestate had at the time of death a fixed place of
abode".8 Section 26(2) provides that where, at the time of death, the
deceased had no fixed place of abode in or resided out of Ontario, "the

4 Ibid., at 4-5.

5 Trustee Act, supra, note 2, ss. 5, 10, and 37, as am. by S.O. 1984, c. 11, s. 216.

Courts of Justice Amendment Act, 1989, S.O. 1989, c. 55, and Court Reform Statute Law
Amendment Act, 1989, S.O. 1989, c. 56.

•7

With respect to appeals, see infra, this ch., sec. 2(e).

8 R.S.O. 1980, c. 491, as en. by S.O. 1989, c. 56, s. 48(10). This Act was formerly known as
the "Surrogate Courts Act"; the statute was renamed by the Court Reform Statute Law
Amendment Act, 1989, supra, note 6, s. 48(25).

271

application shall be filed in the office for the county or district in which the
testator or intestate had property at the time of death". Section 26(3) further
provides that "in other cases" the application may be filed in any office.
Thus, it would appear that the Ontario Court (General Division) can assume
jurisdiction even where the deceased was not resident in Ontario and left
no assets in the Province.9 For example, in such a situation an application
for a grant of probate or letters of administration may be brought where a
tort action is to be brought by the estate.10

With respect to the question of where an application for an estate
trustee certificate should be brought, we favour continuation of the basic
policy reflected in section 26, subject to two changes. First, the meaning of
the phrase "fixed place of abode" in section 26(1) is unclear. Since it probably
means residence,11 we believe that the provision should be amended to make
residence the criterion. This concept has been adopted in numerous other
Ontario statutes and the rules of court, and appears elsewhere in the Estates
Act}2 We therefore recommend that an application for an estate trustee
certificate should be filed in the office for the county or district in which the
deceased had at the time of death her place of residence. We recommend
that subsections (2) and (3) should be retained.

Second, we are of the view that the rules for filing applications for estate
trustee certificates that are set out in section 26 should be subject to an
exception that would allow an application to be filed elsewhere where it
is more convenient. We therefore recommend that, notwithstanding the
recommendations made above, the court on motion by any party should be
empowered to order that an application for an estate trustee certificate may
be filed in an office for another county or district where the balance of
convenience substantially favours it.

We have thus far dealt with the place where an application for an estate
trustee certificate is filed. In the vast majority of cases, an estate trustee
certificate will be granted and the estate will be administered without further
involvement of the court, for there will be no disputes concerning the estate.

9 Castel, Canadian Conflict of Laws (1977),Vol. 2, at 432.

In 1877, the original version of what is now s. 26(3) was added: see An Act to provide for
certain amendments and additions to the Statutes of the Province, as consolidated by the
Commissioners appointed for that purpose , 40 Vict., c. 7 (Ont.), sched. A, item 60. Although
this change appeared to envisage that probate or letters of administration might be granted
even though the deceased left no property in Ontario, the provision defining the jurisdiction
of the surrogate courts continued to refer to the deceased "having estate or effects in
Ontario" until 1910 (The Surrogate Courts Act, S.O. 1910, c. 31, s. 19). The purpose of the
1877 change is thus difficult to determine. Modern commentators consider that s. 26 deals
with questions of international jurisdiction, as well as domestic jurisdiction: Castel, supra,
note 9, at 430.

1 ] Castel, ibid.

12 Estates Act, supra, note 8, ss. 26(2), as en. by S.O. 1989, c.56, s. 48(10), ss. 35(1), 36, and
74(7).

272

If a contentious issue does arise, the proceedings will be held in the county
or district in which the application has been filed.

Under the rules of court applicable to actions brought in the Ontario
Court (General Division), the court may make an order changing the place
of trial from the place named in the plaintiffs statement of claim.13 The
court may order a change where it is satisfied that the balance of convenience
substantially favours the holding of the trial at another place, or it is likely
that a fair trial cannot be had at the place named. However, this rule would
not apply to applications for an estate trustee certificate.14 In our view, this
policy should apply to proceedings arising under the Estates Act. We there-
fore recommend that, in contentious proceedings under the Estates Act, the
court on motion by any party should be empowered to order that the
proceedings be held at a place other than the county or district in which the
application for an estate trustee certificate is filed where it is satisfied that
the balance of convenience substantially favours holding the proceedings at
another place, or it is likely that a fair trial cannot be had in the county or
district in which the estate trustee certificate is filed.

(b) Powers of the Court

Courts exercising jurisdiction in estates administration should possess
the powers necessary to respond effectively to any problem that may arise.
We have been informed by estates practitioners that, in Ontario, this is not
the case at present.15 After considering the system in place under the Estates
Act, we concluded that the answer is to grant certain powers to the Ontario
Court (General Division).

Under the Estates Act and the rules governing proceedings under that
Act16 — formerly known as the "Rules of Practice — Surrogate Court" — provi-
sion is made for a variety of citations. Essentially, a citation is an order
calling for a party to enter an appearance or to take certain action in specific
situations.17 Where a citation is issued in connection with an application,
the person cited is usually advised of the nature of the application and the
consequences of failing to obey the order.

1 3
~ O.Reg. 560/84, r. 46.03. Formerly, the rules of court were known as the "Rules of Civil

Procedure". This was changed in 1989: Courts of Justice Act, 1984, S.O. 1984, c. 11, s. 160a,

as en. by S.O. 1989, c. 55, s. 31.

An application for letters of representation would not be an "action" within the definition
of "action" in the rules of court, ibid., r. 1.03.1.

One problem is the difficulty of obtaining information, or indeed even a response, from
unco-operative personal representatives. We have made recommendations to require estate
trustees to give information to beneficiaries and creditors: supra, ch. 2, sec. 3(b).

6 Rules Governing Proceedings Under the Estates Act, R.R.O. 1980, Reg. 925 (hereinafter
referred to as "Estates Rules").

Hull and Cullity, Macdonell, Sheard and Hull on Probate Practice (3d ed., 1981), at 322.

273

Citations are granted without notice by a judge, based upon an affidavit
stating the facts upon which the citation is founded. As a matter of practice,
duplicate copies of the draft order and the accompanying affidavit are
submitted to the local registrar, who presents them to the judge for signature.
There is neither a separate application for the order nor a personal appear-
ance before the judge. In essence, the procedure is administrative.

A lengthy exposition would be required to discuss each of the common
types of citation in any detail. For our purposes, a few examples will suffice.18

Certain citations are sought to compel disclosure of information.
Where, for example, a beneficiary believes that someone has custody of the
will, she may obtain a citation from the judge, ordering that person to deposit
the will in the office of the registrar.19 Alternatively, where a judge is satisfied
that a person has knowledge of a will or any document or asset relating to
an estate, a summons may require that person to be examined.20 A citation
may order a personal representative to deposit a detailed list of the assets
of the estate in the office of the registrar.21

Citations may also be issued to facilitate the conduct of proceedings:
where a party seeks to revoke a grant of probate or administration, a citation
may require the personal representative to bring the grant into the office
of the registrar.22 Finally, citations are an integral feature of contentious
proceedings. In an application for proof of a will in solemn form or for
revocation of probate or in any proceedings where the validity of a will is
contested, all interested persons must be made parties to the proceedings.
Such persons must be served with a citation calling upon them to enter an
appearance and warning them that, if they do not, they nonetheless will be
bound by the proceedings.23

We believe that it would be useful to supplement the various specific
citations with an additional judicial power that can be exercised at any stage
during the administration of the estate.

Circumstances may arise, particularly before an estate trustee certificate
is granted, where, in order to preserve assets or protect the rights of inter-
ested persons, it may be necessary to restrain any dealing or intermeddling
with the property of a deceased person or with assets that might be held

For a description, see Hull and Cullity, supra, note 7, at 322-29, and The Permanent's
Surrogate Guide (1984), at 27-29.

Estates Act, supra, note 8, s. 31(1), Estates Rules, supra, note 16, r. 49 and Form 36.

Estates Act, supra, note 8, s. 31(2), and Estates Rules, supra, note 16, r. 50.

Estates Rules, supra, note 16, r. 51 and Form 40. See, also, r. 52.

Estates Rules, supra, note 16, r. 56 and Form 39.

•yx

- Estates Act, supra, note 8, s. 47 and Estates Rules, supra, note 16, rr. 46 and 47, and
Form 30.

274

ultimately to be part of the estate. Disappearance or mismanagement of
assets would concern beneficiaries, creditors, and dependants who might be
entitled to support under Part V of the Succession Law Reform Act. While
they may have recourse to the existing judicial causes of action that may
lead to an award of damages, as a practical matter, such relief may come
simply too late. At present, only dependants enjoy a degree of protection
under the law. The Estates Act does not address this problem generally and
the existing procedural devices — the caveat and the citation — are unequal
to the task.

Under Part V of the Succession Law Reform Act, any application to the
court by or on behalf of a dependant may result in an order suspending the
administration of the estate, in whole or in part, for such time and to such
an extent as it may decide.24 Further protection is afforded if a certified copy
of this order is served on any person or corporation enjoining the payment
or transfer of funds or property that otherwise would have taken place as a
result of transaction entered into by a deceased before her death.25 Regard-
less of whether a suspensory order has been obtained, where an application
for support is made and notice of it is served on the personal representative,
she cannot thereafter proceed with the distribution of the estate, save with
the consent of all the persons entitled to apply for support, or under a court
order.26

While the protection provided to dependants is not comprehensive, they
are nevertheless in a more favourable position than creditors or beneficiaries,
who are able to avail themselves of the existing remedies only after the assets
may have been dissipated. We agree with the salutary policy reflected in
Part V of the Succession Law Reform Act, and believe that it should be
extended to all persons who might be prejudiced by the mismanagement of
estate assets.

We therefore recommend that, in all cases where it appears to the court
to be necessary for the grant of an estate trustee certificate, the inventory
and preservation of the assets of the estate of the deceased, the distribution
of assets, or the management of the estate, the court should be empowered
to require any person to do or to refrain from doing any act, either uncondi-
tionally or upon such terms or conditions as the court deems just, or to attend
to be examined by the court. We further recommend that an application for
the court to exercise this power may be brought by the estate trustee, any
person who appears to have an interest in the estate, or a dependant of the
deceased as defined in Part V of the Succession Law Reform Act.

Supra, note 1, s. 59.

25 Ibid., s. 72(5) and (6).

Ibid., s. 67(1). However, there is an exception for "reasonable advances for support to
dependants who are beneficiaries" (s. 67(2)).

275

We believe that it would be useful to give the court a general power to
order that notice be given to persons who should be made parties to proceed-
ings or who are otherwise affected by them. Accordingly, we recommend
that the rules of court should provide that, where the court determines that
notice of the proceedings is necessary for the proper disposition of any
matter before it, the court should be empowered to order notice to any
person, including the Official Guardian or the Public Trustee.

In Ontario, there are basically three ways to safeguard a will. First, the
testator may preserve it in a place thought appropriate; this may be at home
or in a safety deposit box. Second, the testator may choose to leave the will
in the office of a lawyer or a trust company. Third, the will may be deposited
in the office of the local registrar of the Ontario Court (General Division).

Where the testator retains the will, it is readily available for revocation
or the addition of a codicil. It is, however, also more easily lost or misplaced,
particularly where the testator has told no one of its existence or location.
Another danger is the accessibility of the will to persons who may wish to
suppress it.

Leaving the will in the custody of the solicitor certainly provides greater
assurance against the will being suppressed by interested persons or lost
through inadvertence. The difficulty with this alternative is that the high
degree of mobility in our society may demand that inquiries be made in the
various places where the deceased has resided in order to locate her last
will. Another problem may arise where the lawyer dies, retires, or simply
ceases to practice, or where a trust company closes a particular office, since
there is no procedure in Ontario under which the wills that have been stored
may be transferred to another place. By contrast, under the Saskatchewan
Surrogate Court Act,21 in similar circumstances, the will may be deposited
with the registrar for safekeeping without specific authority of the testator.28

Under the Ontario Estates Act, wills may be deposited for safekeeping
at the office of the local registrar of the Ontario Court (General Division).29

R.S.S. 1978, c. S-66, s. 12(3), as am. by S.S. 1979-80, c. 92, s. 93(7)(c).

Section 12(3) of the Act provides as follows:

12. — (3) A solicitor retiring from practice, the personal representative of a deceased
solicitor, a trust company that has ceased to have an office in the province or which
has ceased to be an approved trust company, or the liquidator or receiver of a trust
company, may deposit with the local clerk for safekeeping any will in the custody of
the solicitor, personal representative or trust company, without specific authority from
the testator, and the local clerk shall accept for safe keeping any will tendered to him
for that purpose. When a will deposited under this subsection is withdrawn from his
custody, a fee of $1 shall be paid to the local clerk.

29 Estates Act, supra, note 8, s. 17, as en. by S.O. 1989, c. 56, s. 48(7).

276

The operation of the wills depository is governed by the rules governing
proceedings under the Estates Act, which attempt to ensure the confidential-
ity of the content of the will.30

Depositing a will with the local registrar ensures that it will not be
suppressed or lost. However, it cannot guarantee that it will be located if
the testator has moved from the county or district in which it had been
deposited, for there is no central registry of deposited wills in Ontario.
Furthermore, once a will is deposited, it becomes somewhat more difficult
for a testator to revoke or alter it.

In 1990, we conducted a survey to ascertain the extent to which wills
are being deposited for safekeeping at local offices of the Ontario Court
(General Division). We discovered that there has been virtually no use of
the court as a depository, except in certain very large urban centres. Even
in these centres, relatively few wills have been deposited for safekeeping.31

The Commission favours the court continuing to serve as a depository
for wills. For persons who wish secure storage for their wills, but do not wish
to leave them with their solicitors, a court depository provides a practicable
alternative. It also is an alternative for solicitors who do not wish to retain
original wills in their custody and who are concerned about leaving them
with their clients. Other provinces, including Alberta, Saskatchewan, and
Manitoba,32 have established a will depository. We therefore recommend

Estates Rules, supra, note 16, rr. 64-67. Rule 64 provides that every will deposited for safe
keeping must be enclosed in an envelope that is securely sealed with the name and address
of the testator and the executor or executors endorsed on it. Under r. 66(1), a will that has
been deposited for safe keeping cannot be removed, copied or inspected during the lifetime
of the testator, except by the testator in person or, upon order of the judge, by a solicitor
acting on the written authority of the testator. After the death of the testator, the will must
be delivered to the executor, upon his personal application, or to such other person as the
judge directs (r. 66(2)).

In March, 1990, before the coming into force of the Courts of Justice Amendment Act, 1989,
supra, note 6, and the Court Reform Statute Law Amendment Act, 1989, supra, note 6, we
wrote to each local surrogate court office in Ontario, asking the registrar how many wills
have been deposited for safekeeping in a single year. The responses indicated that in certain
counties and districts no wills at all have been deposited for many years. In other counties
and districts, only 1 or 2 wills have been deposited annually. The only jurisdictions where
there is a departure from the general trend are the Judicial District of Ottawa-Carleton,
the County of Essex, which includes Windsor, and the Judicial District of York, which
includes the Municipality of Metropolitan Toronto. In Essex County, approximately 12
wills are deposited annually. In the Judicial District of York, approximately 150 wills are
deposited each year. In the District of Ottawa-Carleton, 230 wills were deposited in 1989,
140 in 1988, and 81 in 1987.

We wish to acknowledge with gratitude the generous assistance of the registrars, deputy
registrars, and other court officials in the local offices throughout the Province.

Surrogate Court Act, R.S.A. 1980, c. S-28, s. 6(4); The Surrogate Court Act, supra, note 27,
s. 12(2), as am. by S.S. 1979-80, c. 92, s. 93(7)(b); and The Court of Queen's Bench Surrogate
Practice Act, R.S.M. 1987, c. C290, s. 3(1).

277

that the depository function be continued in the local offices of the Ontario
Court (General Division).

However, we believe that the existing system should be improved. In
our view, its most glaring deficiency is that, unless every local court office is
searched, there is no assurance that the last will of the deceased will be
found in a case where the testator has moved to another county or district.
This problem can be readily solved by requiring local registrars of the
Ontario Court (General Division) to give notice of the deposit of a will to
the Estate Registrar for Ontario.33 A search in the office of the Estate
Registrar for Ontario would indicate whether a will has been deposited and
the local office in which it can be found. We therefore recommend that the
local registrar should be required to give notice of the deposit of a will to
the Estate Registrar for Ontario.

One reason for the failure of Ontario lawyers to deposit wills may simply
be that many are unaware that the court has a depository function under
the Estates Act. To ensure use of the improved system that we have proposed,
we recommend that extensive publicity should be given to the depository
function of the Ontario Court (General Division).

One of the difficult questions we have considered is whether it was
proper for a solicitor or trust company having possession of wills to deposit
them with the local registrar without the prior consent of testators. Permit-
ting wills to be deposited without the consent of testators undoubtedly would
have certain advantages; it would be administratively attractive and would
facilitate recourse of the depository. Yet we cannot endorse it. Given the
intensely personal nature of wills and the familial and other sensitivities
associated with them, we are of the view that it would be inimical to the
integrity of the fiduciary relationship between a testator and her solicitor or
trust company if wills could be deposited without her express authorization.
Accordingly, we recommend that, subject to the prior consent of the testator,
any person or institution having original wills in her or its possession should
be authorized to deposit them with the local registrar.

To this requirement of consent we wish to propose a single exception.
The approach taken in the Saskatchewan Surrogate Court Act34 commends
itself to us, for it recognizes that circumstances may arise where it is not
practicable to secure the consent of testators. In such a situation it would
be useful if those with custody of wills were able to deposit them with the

Implementation of this recommendation would establish a system, similar to that estab-
lished by ss. 41-45 of the Estates Act, supra, note 8. Under these provisions, local registrars
must give notice of every application for a grant of probate or administration to the Estate
Registrar for Ontario, who must keep them on file. In the absence of a special court order,
probate or administration cannot be granted unless the local registrar has received a
certificate from the Estate Registrar for Ontario stating that no other application appears
to have been made in relation to the property of the deceased.

See s. 12(3) of the The Surrogate Court Act, reproduced in note 28, supra.

278

court. We therefore recommend that a solicitor retiring from practice, the
estate trustee of deceased solicitor, a trust company that has ceased to have
an office in the province or that has ceased to be an approved trust company,
or a liquidator or receiver of a trust company, should be permitted to deposit
with the local registrar for safekeeping any will in her or its possession
without specific authority from the testator, and the local registrar should
be required to accept for safekeeping any will tendered to her for that
purpose.35

(d) Passing of Accounts

The expression "passing of accounts" refers to the process by which a
personal representative submits formal accounts relating to the administra-
tion of the estate to the court for examination and approval. Should the
judge approve or "pass" the accounts, either in the form in which they are
presented or in an amended form, the administration of the estate for the
period covered by the accounts will also be approved, effectively immunizing
the executor or administrator from personal liability.36

As we explained in chapter 2,37 personal representatives have a duty to
maintain accounts. Accounts may be passed in two situations; personal
representatives may either pass them voluntarily or be compelled by inter-
ested persons to pass them.

Personal representatives may choose to pass their accounts in order to
"close the books on that time frame of the administration"38 and obtain
compensation for their efforts.39 The alternative to a court passing would be
to present the accounts to the estate beneficiaries for their approval, and
ask them to sign releases discharging them from personal liability. This
alternative, however, is efficacious only where all the beneficiaries are
known, are under no legal disability, and are willing to accommodate the
executor or administrator. A personal representative who secures releases
from all the adult beneficiaries nonetheless will remain exposed to possible

37
38

Wills deposited pursuant to this recommendation would, of course, be governed by the
rules respecting confidentiality: see discussion, supra, note 30.

The accounts, however, may subsequently be opened in the case of fraud or mistake.

Supra, ch. 2, sec. 3(b).

Armstrong, Estate Administration [:]A Solicitor's Reference Manual (1984), at 4.2.1. One of
two or more executors can seek separate approval for her dealings with the estate: Cunning-
ton v. Cunnington (1901), 2 O.L.R. 511 (C.A.), at 516.

Rule 59 of the Estates Rules, supra, note 16, states that "[ejxecutors, administrators,
trustees under a will and guardians of infants may pass their accounts voluntarily or they
may be called upon by citation to do so on the application of any person interested therein".
See, also, Trustee Act, supra, note 2, s. 23, which deals with the passing of accounts by a
trustee.

279

future claims by beneficiaries who cannot give releases, such as unborn or
minor beneficiaries.40

Under the Estates Act and rules governing proceedings under that Act,
an executor or administrator may be compelled to pass her accounts by
interested persons.41 Section 64 of the Act states that the oaths that must
be taken by personal representatives and guardians require them to "render
a just and full account of [their] executorship, administration or guardianship
only when thereunto lawfully required". Section 75(1) provides that "[a]n
executor or an administrator shall not be required by any court to render
an account of the property of the deceased, otherwise than by an inventory
thereof, unless at the instance or on behalf of some person interested
in such property or of a creditor of the deceased, nor is an executor or
administrator otherwise compellable to account before any judge".42 Rule
59 provides that an executor or administrator may be required by citation
to pass her accounts on the application of an interested person.43 The right
to compel a passing of accounts is subject to the discretion of the court,
which may refuse to issue a citation to the personal representative.44

The Estates Act addresses the jurisdiction and powers of a judge on a
passing of accounts45 and the question of who should receive notice of the
passing.46 Among the matters addressed by the rules made under that Act
are the procedure for obtaining and serving an appointment for the passing
of accounts47 and the form of the accounts.48

44
45
46

47
48

For a discussion, see Schnurr, "Passing Trustees' Accounts in Court", in Schnurr (ed.),
Estate Litigation (1987) 71, at 71-73.

See, generally, Hull and Cullity, supra, note 17, at 373-74, and Schnurr, supra, note 40, at

73-74.

Section 73 states that "[a]n executor who is also a trustee under the will may be required
to account for his trusteeship in the same manner as he may be required to account in
respect of his executorship". Trustees of an inter vivos trust cannot be compelled to pass
their accounts under the existing law, except where the trust instrument so provides: see
Ontario Law Reform Commission, Report on the Law of Trusts (1984), Vol. 1, at 254.

In identifying who may compel a passing of accounts, there is a difference in language
between s. 75(1) of the Estates Act and r. 59 of the Estates Rules, supra, note 16. The former
refers to a person interested in the property of the deceased. The latter confers the right
on a person interested in the "accounts": for a discussion, see Baker, Widdifield on Executors'
Accounts (5th ed., 1967) (hereinafter referred to as "Widdifield"), at 352, and Hull and
Cullity, supra, note 17, at 374.

Widdifield, supra, note 43, at 356-58, and Hull and Cullity, supra, note 17, at 373.

Estates Act, supra, note 8, s. 74(3), as en by S.O. 1989, c. 56, s.48(21), and 74(4).

Ibid., s. 74(7). For persons entitled to notice who are under a legal disability, see s. 74(8)
and (9). Section 74(8) provides that notice is to be served upon the Official Guardian where
a person entitled to notice of the passing is a minor or is of unsound mind and is not a
patient in a psychiatric facility. Section 74(9) provides that notice is to be served upon the
Public Trustee where a person entitled to notice is a patient in a psychiatric facility.

Estates Rules, supra, note 16, r. 60, as en. by O.Reg. 845/82. s.3.

Ibid., r. 61.

280

The nature of the passing of accounts proceeding cannot easily be
categorized. Indeed, in 1960, Macdonell Surr. J. observed that "the passing
of accounts was not a motion, a trial, or a reference".49 He explained that
"[t]he procedure . . . designed many years ago was a simple, inexpensive and
informal procedure to enable an executor to obtain his discharge and have
his compensation fixed and costs taxed".50 Apparently, the practice in
Ontario varies among the counties and districts.51

Section 74(3) of the Estates Act provides that on a passing the court
"has jurisdiction to enter into and make full inquiry and accounting of and
concerning the whole property that the deceased was possessed of or entitled
to, and its administration and disbursement."52 Several decisions have con-
sidered the nature of this jurisdiction in the context of dealing with the
passing of accounts before surrogate court judges. In an important decision,
ReMacIntyre,53 Meredith C.J. explained that the purpose of an earlier version
of this provision was "to enable [the judge] to enter into any question which
it was necessary for him to deal with in order to determine how much the
personal representative had received or ought to have received and to be
charged with, and to credit him with what he properly had paid, so as to
ascertain the balance with which he was chargeable".54 He held that, while
the surrogate court had jurisdiction to determine the propriety of a creditor's
claim that had been paid by a personal representative and to allow or
disallow the item in the accounts, it had no jurisdiction to call upon an
unpaid creditor to make her claim and to adjudicate upon it.

Other cases elaborated on a court's jurisdiction on a passing of accounts.
That jurisdiction comprehends allowing or disallowing a retainer by an
executor to pay her own claim against the estate,55 and determining the
ownership of certain mortgages, where they had been taken jointly in the

49 Re Willumsen, [1960] O.W.N. 91 (Surr. Ct.), at 92, affd [1960] O.W.N. 92 (C.A.).

50 Ibid.

With respect to the practice on the hearing, see, generally, Widdifield, supra, note 43, at
361-65, and Schnurr, supra, note 40, at 80-82.

5 Estates Act, supra, note 8, s. 74(3), as en. by S.O. 1989, c. 56, s. 48(21). The first version of
s. 74(3) was introduced by An Act to amend The Surrogate Courts Act, S.O. 1905, c. 14, s. 1,
which added s.s. (3) to s. 72 of The Surrogate Courts Act, R.S.O. 1897, c. 59. Subsection (3)
was enacted in response to Re Russell (1904), 8 O.L.R. 481 (Div. Ct.), which had held that,
on a passing of accounts, a surrogate court judge did not have jurisdiction to decide whether
the estate included an amount that one of the executors had claimed was an inter vivos gift
to her from the testator.

53
54

(1906), 11 O.L.R. 136 (Div. Ct.).

Ibid., at 139. Earlier, he said that "the purpose of the amending section was only to enlarge
the powers of the Judge, so as to enable him to take the accounts of the receipts and
disbursements of the executors" {ibid., at 138). See, also, Oke v. Oke (1915), 8 O.W.N. 180
(H.C. Div.).

55 Shaw v. Tackaberry (1913), 29 O.L.R. 490, 15 D.L.R. 475 (App. Div.). For a discussion of
the right of retainer, see supra, ch. 2, sec. 3(d).

281

names of the deceased and another individual.56 A court may conduct a full
inquiry into the rights of the deceased at the time of her death to property
owned her during her lifetime, which came into the possession of her execu-
tors prior to her death, and which is alleged by them to be inter vivos gifts;
if the court finds that the deceased was entitled to the property, it can order
an accounting by the executors.57 On a passing of accounts, a judge has
power to decide whether payments should be charged to the income account
or the capital account of the estate.58

In 1933,59 additional powers were conferred on surrogate court judges,
which now appear in section 74(4) of the Estates Act as follows:

74. — (4) The judge, on passing any accounts under this section, has power
to inquire into any complaint or claim by any person interested in the taking of
the accounts of misconduct, neglect, or default on the part of the executor,
administrator or trustee occasioning financial loss to the estate or trust fund,
and the judge, on proof of such claim, may order the executor, administrator
or trustee, to pay such sum by way of damages or otherwise as he considers
proper and just to the estate or trust fund, but any order made under this
subsection is subject to appeal.

Where there is a complaint or claim, the judge may order the trial of an
issue, in which case "he shall make all necessary directions as to pleadings,
production of documents, discovery and otherwise in connection with the

issue".60

In examining the passing of accounts in Ontario, the threshold question
that we considered was whether the fundamental nature of the process
should continue. The most salient feature of our system is that, for the most
part, effective scrutiny of the personal representative's accounts and dealings
with the estate depends on the vigilance of interested persons. Unless they
contest any aspect of the accounts presented, the judge can acquire only the
most superficial knowledge of the state of the accounts and the administra-
tion of the estate. She is in no position to conduct an effective investigation
on her own initiative concerning the management of the estate assets. While
the Estates Act does give the judge authority to "appoint an accountant or
other skilled person to investigate and to assist him in auditing the accounts",
the exercise of this power is confined to circumstances "[w]here accounts

Re Baechler (1931), 66 O.L.R. 483, [1931] 2 D.L.R. 997 (H.C. Div.).
Re Estate of Taerk, [1957] O.R. 482, 9 D.L.R. (2d) 601 (C.A.).

58 Leonard v. Crown Trust and Guarantee Co., [1949] O.R. 678, [1949] 3 D.L.R. 815

(C.A.).

See The Surrogate Courts Act, 1933, S.O. 1933, c. 63, which added clause (a) to s. 65(3) of
The Surrogate Courts Act, R.S.O. 1927, c. 94.

Estates Act, supra, note 8, s. 74(5).

282

submitted . . . are of an intricate or complicated character and in his opinion
require expert investigation".61

At present, the most useful review of accounts occurs where a person
under a legal disability has an interest in the accounts. In such a case,
depending on the particular circumstances, notice of the passing must be
given either to the Official Guardian or the Public Trustee.62 These offices
conduct an independent review of the accounts.

We have considered the possibility of generalizing this policy by giving
a judge of the Ontario Court (General Division) jurisdiction to conduct an
independent review of accounts, analogous to that undertaken by the Public
Trustee or the Official Guardian. Such a jurisdiction would be particularly
useful where a passing of accounts is uncontested; it could be used to
determine whether the estate has been administered properly and whether
the compensation claimed is "fair and reasonable".63 Conferring such a
power undoubtedly would fundamentally change the role of the court on a
passing of accounts.

We have also considered whether there should be a statutory require-
ment that accounts be passed at a fixed interval, or within a certain period
from the grant of an estate trustee certificate.64 Providing for mandatory
passing of accounts would make the review function more effective by sub-
jecting all accounts to judicial scrutiny.

In the end, we have come to the conclusion that the fundamental
character of the passing of accounts procedure should not be altered. Pri-
mary responsibility for policing the management of estate assets should
remain with interested persons — that is, beneficiaries and creditors — except,
of course, where an interested person is under a legal disability. This report
has reflected our conviction that the court should not be charged with the
task of ongoing supervision of estates, but should intervene only when it is
asked to do so by an interested person. We do not believe that a sufficiently
strong reason exists to depart from that general principle in this context.
This is essentially a private matter between the estate trustees and the
persons interested in their administration of the deceased's estate.

Similarly, we have rejected mandatory passing of accounts after fixed
time periods. We suggest that such a requirement would add to the expense
of estate administration, as well as increase court costs, in return for what

61 Ibid.,s. 74(12).

62 Ibid., s. 74(8) and (9).

Trustee Act, supra, note 2, s. 61(1).

See, for example, Trustee Act, R.S.B.C. 1979, c. 414, s. 101(1), which requires personal
representatives to pass their accounts within 2 years from the date of the granting of probate
or administration, or within 2 years from the date of appointment, unless the accounts are
approved in writing by all the beneficiaries or the court otherwise orders.

283

would be marginal advantages in enforcement. On the whole, we are of the
view that the existing system works adequately; a dramatic intervention by
the legal system in the relationships between estate trustees and beneficiaries
and creditors would be unjustifiable.

Notwithstanding our general satisfaction with the philosophy underlying
the existing approach, we are of the view that the procedure by which
accounts are approved should be restructured. We believe that there should
be a passing of accounts, with attendances before a judge, only where there
is a dispute in connection with the accounts or the conduct of the estate
trustees. At present, there is no assurance that this will be the case; benefici-
aries may wish to attend a passing simply to obtain information that other-
wise would have been willingly given or to recover the costs of having their
lawyers review the accounts. In our view, it is a waste of scarce and valuable
judicial resources to conduct a hearing where there is no dispute to adjudi-
cate. At the same time, we consider that it would be salutary to facilitate, if
not encourage, the submission of accounts to interested persons so that they
would, in fact, have an opportunity to challenge the administration of an
estate in appropriate cases.

In furtherance of these views, we favour the establishment of a filing of
accounts procedure. This new procedure will allow accounts that are not
contested to be approved by the court in an expeditious manner without a
passing before a judge. The estate trustee will be required to pass her
accounts only where there is a dispute.

The filing of accounts procedure that we recommend is as follows:65

1. An estate trustee and an interested person is entitled to a passing
of accounts only after the accounts have been filed in accordance
with the following procedure.

2. An estate trustee may file her accounts voluntarily with the local
registrar of the Ontario Court (General Division) or she may be
required to file the accounts upon the application to the court of an
interested person. The estate trustee must file the accounts, verified
by affidavit, a copy of the estate trustee certificate, and a copy of the
previous order, if any, made on a filing or passing of accounts in the
estate.

In 1975, a filing of accounts procedure was proposed by a Special Committee of the Wills
& Trusts Section, of the Canadian Bar Assocation, Ontario Branch. The Chair was Mr.
Strachan Heighington, Q.C.

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Estates Act.66 The form of the notice and the method of service
should be prescribed by regulation. At a minimum, the notice must
be accompanied by a copy of the accounts and a schedule of the
compensation claimed and any claim for costs. The notice should
advise recipients that, if no interested person gives notice that she
requires that the accounts be passed before a judge within 45 days
of the date of filing, the accounts and draft order approving them
will be presented by the local registrar to a judge for approval as an
unopposed application. A person who has received notice of the
filing is entitled to require a passing of accounts within 45 days of
the date of the filing. The form of the notice requiring a passing of
accounts should be prescribed by regulation.

4. Notwithstanding paragraph 3, the court, upon application, may give
directions with respect to service of the notice of filing, and may
dispense with service of the notice of filing or the copy of the
accounts, or both. Where the court dispenses with the service of the
copy of the accounts, a person who is entitled to notice of the filing,
or her solicitor, is entitled to examine the accounts at the office of
the local registrar.

5. Upon filing proof of service, and, where a person under a disability
is entitled to notice, a certificate of the Official Guardian or Public
Trustee stating that the accounts have been examined and there is
no objection, the estate trustee may apply after 45 days from the
date of filing, to a judge, without notice, for an order approving the
accounts as filed, provided that there is no notice requiring the judge
to pass the accounts.

(e) Appeals

Depending on the particular issue, appeals in estates matters may be
governed by the Courts of Justice Act, 1984 ,67 the Estates Act, or the Succession
Law Reform Act.

The Courts of Justice Act, 1984 applies to appeals generally, and estab-
lishes the grounds for appeal to the Court of Appeal, the Divisional Court,
and the Ontario Court (General Division). It would apply in estates where
the more specific provisions of the Estates Act and the Succession Law Reform
Act are inapplicable.

Section 33(1) of the Estates Act gives any person or party taking part in
a proceeding under that Act a right of appeal to the Divisional Court

66 Supra, note 8, s. 74(8) and (9).
Supra, note 13.

285

"from an order, determination or judgment of the Ontario Court (General
Division) if the value of the property affected . . . exceeds $200". 68

Section 77 of the Succession Law Reform Act provides that an appeal
from an order under Part V of the Act, which is made by the Ontario Court
(General Division), lies to the Divisional Court.

The diversity of appeal routes in estate proceedings is unnecessarily
complex and confusing. Moreover, with the abolition of the surrogate courts
and the transfer of surrogate court jurisdiction to the Ontario Court (Gen-
eral Division), we can see no principled reason why appeals in certain estates
matters should be treated differently from other estate matters, or indeed
other civil proceedings brought before the Ontario Court (General Division).
Consequently, there is no justification for retaining the requirement in the
Estates Act that the value of the property in issue exceed $200. 69 Under the
Courts of Justice Act, 1984, the amount that determines which appeals of
final orders may be heard by the Ontario Court of Appeal, rather than the
Divisional Court, is $25,000.70 The Act also provides that the monetary
threshold for appeals of final orders of the Small Claims Court to the
Divisional Court is $500.71

We have concluded that appeals in estate matters should be governed
by the general provisions respecting appeals set out in the Courts of Justice
Act, 1984. We therefore recommend that section 33(1) of the Estates Act
should be amended to state that an appeal by any party or person taking
part in a proceeding under this Act from an order of the Ontario Court
(General Division) is governed by the Courts of Justice Act, 1984.72 This
would, of course, remove the $200 requirement. We also recommend that
section 77 of the Succession Law Reform Act should be amended to state
that an appeal from an order of the Ontario Court (General Division) made
under Part V is governed by the Courts of Justice Act, 1984.

68 Estates Act, supra, note 8, s. 33(1), as en. by S.O. 1989, c. 56, s. 48(14).

This requirement was introduced in 1859: The Surrogate Courts Act, C.S.U.C. 1859, c. 16,
s. 26.

An appeal lies to the Divisional Court from a final order of a judge of the General Division
where the order involves not more than $25,000, exclusive of costs: Courts of Justice Act,
1984, supra, note 13, s. 18(1), as en. by S.O. 1989, c. 55, s. 2. An appeal lies to the Court
of Appeal from a final order of a judge of the Ontario Court (General Division), except a
final order for a single payment of not more than $25,000, exclusive of costs: ibid., s. 6(1 )(b),
as en. by S.O. 1989, c. 55, s. 2.

Section 30 of the Courts of Justice Act, 1984, supra, note 13, as en. by S.O. 1989, c. 55, s. 2,
states that "[a]n appeal lies to the Divisional Court from a final order of the Small Claims
Court in an action, (a) for the payment of money in excess of $500, excluding costs; or (b)
for the recovery of possession of personal property exceeding $500 in value".

Implementation of this recommendation would necessitate consequential amendments to
s. 33 of the Estates Act, supra, note 8, as am. by S.O. 1989, c. 56, s. 48(14).

286

(f) Fees

Proceedings under the Estates Act are subject to a special schedule of
fees,73 which formerly applied to the surrogate courts. This schedule differs
from the schedule applicable to other proceedings in the Ontario Court
(General Division), including other proceedings involving estates. The for-
mer schedule provides for a sliding scale, so that the fees payable increase
with the value of the estate being administered.74 By contrast, fees for other
proceedings in the Ontario Court (General Division) bear no relation to the
value of the claim or property in issue.75

It is difficult to discern a principled justification for the schedule of fees
applicable to matters within the purview of the Estates Act. In granting
probate or administration to a personal representative, the effort required
on the part of the court does not increase with the value of the estate.
Indeed, a very valuable estate may simply consist of insurance proceeds or
real property that is owned jointly by husband and wife. Proceedings in the
Ontario Court (General Division) involve widely disparate amounts and a
range of complexity of issues. Yet neither factor affects the amount of court
fees payable by litigants.

The only rationale for the graduated fee schedule appears to be that it
has been regarded as a suitable vehicle for raising revenue. While this is
certainly understandable on a pragmatic level, we are of the view that it is
inappropriate to single out certain uses of our court system in this manner.
Court fees should be established in a consistent manner for those who
consume this public service, especially for matters coming before the same
court. We therefore recommend that Appendix C to the rules governing
proceedings under the Estates Act should be amended so that fees in relation
to matters comprehended by the Estates Act are set in the same manner as
for other proceedings brought in the Ontario Court (General Division).

O. Reg. 393/90, s. 2. These fees are established under the Administration of Justice Act,
R.S.O. 1980, c. 6, s. 7(c).

The fee on grants of probate and administration is $5 for every $1,000 or part thereof of
the estate being administered.

75 O. Reg. 393/90, s. 1.

SUMMARY OF RECOMMENDATIONS

The Commission makes the following recommendations:

CHAPTER 1: INTRODUCTION

1. The legislation bearing directly upon the administration of estates of
deceased persons — the Estates Act, the relevant provisions of the
Trustee Act, and the Estates Administration Act — should be consolidated
in a single statute.

CHAPTER 2: THE OFFICE OF PERSONAL REPRESENTATIVE:
THE ESTATE TRUSTEE

The Nature of the Office

2. The office of the personal representative should be generally assimi-
lated to that of a trustee, in accordance with the recommendations
that follow.

3. The special rights, duties, and powers of personal representatives as
the alter ego of the deceased in relation to the administration of the
estate should be expressly provided for by legislation.

4. The differences in the law between the offices of administrator and
executor should be abolished, except for the difference relating to the
manner in which persons are appointed to the offices.

5. A personal representative should be called an "estate trustee", and
this term should be defined to mean:

(a) the person named in the last will and testament of the deceased
to represent her on her death, and

(b) the person appointed by a court of competent jurisdiction to
represent the deceased on her death.

6. The estate trustee should hold the deceased's estate upon the following
trusts:

(a) to exercise the powers conferred on her by law and by the will;

(b) to carry out the obligations imposed on her by law and by the will;

[287]

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(d) to pay the debts of the deceased in accordance with the obligations
imposed on her by law and by the will; and

(e) to distribute the estate of the deceased in accordance with the law
and the will.

7. Letters probate and letters of administration should be replaced by a
single document issued by the court, to be called an "estate trustee
certificate".

Accession to the Office

8. (1) The person named in the will of the deceased should be granted

an estate trustee certificate and be appointed estate trustee. The
beneficiaries should not be entitled to challenge the accession
on any grounds, other than the ground of incapacity or legal
disqualification.

(2) The estate trustee named in the will should continue to derive
power from the will, and should be entitled to begin acting immedi-
ately upon the death of the deceased.

9. In cases where there is a will, but it is necessary for the court to appoint
an estate trustee, the following order of preference should prevail:

1. residuary legatees or devisees in trust;

2. residuary legatees or devisees for life;

3. ultimate residuary legatees or devisees, or, where the residue is not
wholly disposed of, the persons entitled upon an intestacy;

4. estate trustees of persons indicated in 3;

5. legatees or devisees, or creditors;

7. the Crown.

10. Where, in the case of intestacy, it is necessary for the court to appoint
an estate trustee, the following order of preference should prevail:

1. spouse;

2. children;

3. parents;

4. grandchildren;

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5. brothers and sisters;

6. great-grandchildren;

7. uncles, aunts, nephews, nieces, grandparents;

8. other collateral relatives of more remote degrees.

11. (1) For the purposes of recommendations 9 and 10, the term "spouse"

should be given the expanded definition that is used in Part III of
the Family Law Act, 1986.

(2) For the purposes of recommendations 9 and 10, the terms "child"
and "parent" should be given the same definitions used in the
Family Law Act, 1986.

(3) If the definition of "spouse", "child" or "parent" is later amended,
the definition of that term for the purposes of estates administra-
tion should be changed to reflect that amendment.

12. The court should be given a discretion to decline to appoint a person
as estate trustee who would otherwise be entitled under recommenda-
tions 9 and 10 where it would not be advantageous to the administration
of the estate, taking into account all relevant circumstances, to appoint
that person. In such circumstances, the court should be empowered to
appoint another person as estate trustee.

13. Legislation should not list the circumstances that should disentitle a
person from acting as an estate trustee.

14. Where an applicant for an estate trustee certificate is named in the
will, the court should be given a discretion to decline to appoint that
person where it would not be advantageous to the administration of
the estate, taking into account all relevant circumstances, to appoint
that person. In such circumstances, the court should be empowered to
appoint another person as estate trustee.

15. A non-resident of Ontario should be entitled to apply for an estate
trustee certificate, subject to compliance with the bonding provisions
to be specified by legislation.

16. An estate trustee named in the will or a person entitled to apply to the
court to be appointed estate trustee should be be entitled to renounce
her right to be appointed estate trustee by an instrument in writing
filed with the court.

17. An estate trustee named in the will or a person entitled to apply to
the court to be appointed estate trustee should be entitled to accept
appointment as estate trustee, while at the same time she should be
entitled to renounce her rights with respect to the administration of

290

any estates to which she might have been entitled because the deceased
was an estate trustee.

18. A person named in a will or a person entitled to apply to the court to
be appointed estate trustee should be entitled to renounce her right
to be appointed estate trustee, notwithstanding the fact that she has
intermeddled in the administration of the estate. The person, however,
should remain liable for any loss caused by her intermeddling.

19. A minor who is named estate trustee in the will or who is a person
entitled to apply to the court to be appointed estate trustee should
be entitled to renounce the right to be appointed estate trustee
by instrument in writing executed by a guardian of the property of
the minor appointed under the Children 's Law Reform Act or by the
Official Guardian.

20. Retraction of a renunciation should be permitted at any time, subject
to the approval of the court.

21. The recommendations in the Ontario Law Reform Commission's
Report on the Law of Trusts governing non-judicial appointment of
trustees should apply to estate trustees.

Powers and Duties of the Estate Trustee
Duty to Dispose of the Body of the Deceased

22. (1) Subject to paragraphs (2) and (3), the duty to dispose of the

deceased's body should fall upon the estate trustee.

(2) If no estate trustee has been named in the will or appointed by
the court, or if the estate trustee is unavailable or unwilling to act,
the family members should have the duty to dispose of the body of
the deceased in accordance with the following order of preference:

1. the surviving spouse with whom the deceased was living at the
time of death;

2. children of the deceased of the age of eighteen years or older;

3. the parents of the deceased person;

4. the brothers and sisters, of full or half blood, of the deceased
of the age of eighteen years or older.

(3) The terms "spouse", "child" and "parent" should be defined in
accordance with recommendation 11.

23. (1) Directions by the deceased should be binding on the person with

the duty of disposal, in accordance with paragraphs (2) and (3).

291

(2) The directions of a deceased regarding disposal of her body should
be binding on the person under a duty to dispose of the body
only if set out in the will or any document dictated or signed by
the testator.

(3) There should be a duty on the estate trustee or any person under
a duty to dispose of the body of the deceased to make reasonable
efforts to ascertain whether the deceased left binding directions
concerning disposal of her body.

(4) If the deceased has left no binding directions concerning disposal,
or if her directions cannot be located within a reasonable time of
death, the estate trustee should be required to dispose of the body
of the deceased in accordance with the directions of the members
of the deceased's family, according to the following order of
preference:

1. the surviving spouse with whom the deceased was living at the
time of death;

2. where there is no surviving spouse, or the spouse does not
give a direction within a reasonable time, then a child of the
deceased of the age of eighteen years or older, or if there is
more than one, the majority of the children of the deceased of
the age of eighteen years or older;

3. if a majority cannot agree within a reasonable time, a parent
or parents of the deceased person;

4. if there is no surviving parent, or there is no direction from the
parent or parents within a reasonable time, a brother or sister,
of full or half blood, of the deceased of the age of eighteen
years or older, or if there is more than one, a majority of them.

(5) The terms "spouse", "child" and "parent" should be defined in
accordance with recommendation 11.

(6) The estate trustee should make reasonable efforts to locate the
family members to ascertain their directions.

(7) Where the deceased has left no will, or the will cannot be located
within a reasonable time after the death of the deceased, or if the
will has made no provision for the disposal of the body of the
deceased, and the estate trustee, after reasonable inquiry, cannot
locate the family members or has received no binding directions
from them within a reasonable time, the estate trustee should
have the right to decide the details of disposal of the body of the
deceased.

(8) A direction made pursuant to the above recommendations,
whether by will or other document, or by a person given the right

292

to give such a direction, should be binding on a person with the
duty to dispose of the body unless it is not financially reasonable
in the circumstances.

24. "Disposal of the body" should be defined to mean any lawful disposal
of a body that may be made under Ontario law.

Duty to Maintain Records and Provide Information

25. Estate trustees should be under a statutory duty to keep accounts.

26. Estate assets should be listed in a complete inventory, which should
be kept current.

27. Where a person who comes within the definition of "dependant" in
Part V of the Succession Law Reform Act applies to the court for access
to the accounts, including the inventory, the inventory should include
the transactions listed in section 72 of the Succession Law Reform Act
(see recommendation 31(1)). An estate trustee who is ordered to
provide an inventory should be required to list only those transactions
that can be ascertained with reasonable effort.

28. Beneficiaries should have a right of inspection, exercisable on reason-
able notice, of the accounts, including the inventory, and all books
and records. Beneficiaries should also have a right, exercisable on
reasonable notice, to obtain a copy of the accounts, books and records
at their own expense.

29. (1) Legislation should provide a summary procedure for a beneficiary

to apply to the court if the estate trustee fails to afford access in
accordance with recommendation 28.

(2) Where a beneficiary uses the summary procedure to obtain an
order for disclosure, and the court orders that costs are to be
awarded to the beneficiary, the court should be empowered to
order that the costs be paid by the estate trustee personally.

30. An estate trustee should be liable in damages to the beneficiary for
any loss caused by a failure to comply with the statutory provisions
respecting the maintenance of, and access to, accounts, books and
records.

31. (1) A person coming within the definition of "dependant" in Part V

of the Succession Law Reform Act or a creditor whose claim has
not been paid in full or in a timely fashion should be entitled to
apply to the court for an order giving her such access to accounts,
books and records as she can demonstrate should reasonably be
made available. The court should be empowered to limit disclo-
sure to such matters as it thinks fit.

293

(2) Where an estate trustee fails to afford access to a creditor in
compliance with a court order, forcing a further application by
that creditor, if the court orders that costs are to be awarded to
the creditor, costs are to be payable by the estate trustee person-
ally. An estate trustee should be liable in damages to the creditor
for a loss caused by a failure to comply with the court order for
access. These recommendations should apply to persons coming
within the definition of "dependant" in Part V of the Succession
Law Reform Act.

32. A testator should not be entitled to relieve an estate trustee of the
duties respecting the maintenance of, and access to, accounts, books,
and records, imposed upon her by legislation and the general law.
However, a testator should be entitled to impose obligations by will
that exceed those imposed by legislation and the general law, and the
estate trustee should be required to comply with these duties unless
the court modifies or relieves her of them.

33. Legislation should establish a summary procedure for beneficiaries,
creditors whose claims have not been paid in full or in a timely fashion,
and persons coming within the definition of "dependant" in Part V
of the Succession Law Reform Act. This procedure should allow
them to apply to court for an order compelling the estate trustee
to provide information of which she has knowledge relating to the
administration of the estate where such information is not revealed
in the accounts, books and records. Where an estate trustee fails to
provide information in compliance with a court order, and in a further
application the court orders that costs are to be awarded to the appli-
cant, costs should be payable by the estate trustee personally. An estate
trustee should be liable in damages for a loss caused to a beneficiary,
creditor, or person coming within the definition of "dependant" in
Part V of the Succession Law Reform Act by a failure to comply with
the court order.

34. A statutory provision, similar to Rule 50 of the rules governing proceed-
ings under the Estates Act, should be enacted to provide that where,
on the application of the estate trustee, a court is satisfied that a person
has knowledge or possession of any will or other document or asset
relating to or belonging to an estate, the court may order that person
to attend to be examined and to provide information concerning the
will, document, or asset, including the transactions set out in section
72 of the Succession Law Reform Act. The court should be empowered
to order compensation for the work involved in providing the
information.

Duty to Get in the Estate

35. Estate trustees should have the powers set out in section 48(2) of the
Trustee Act. The exercise of these powers should be made subject to
the normal standard of care (see recommendation 55).

294

36. Legislation should state that it is the duty of the estate trustee to bring
actions on behalf of the estate that may be brought under the common
law or pursuant to section 38 of the present Trustee Act.

37. Section 39 of the present Trustee Act, dealing with the action of account
at common law, should be repealed.

38. The appointment of a person as estate trustee should not extinguish
or suspend a debt owed by that person to the deceased, in the absence
of specific provision in the will forgiving the debt. An estate should be
entitled to pursue its rights against an estate trustee who is a debtor.

39. (1) An estate trustee who it is claimed owed debts to the deceased

and who disputes the existence or amount of such debts should
not for that reason alone be required to retire as estate trustee.
Subject to paragraph (2), she should have her rights determined
in the same manner and by the same procedure that is available
to any other debtor of the deceased.

(2) An estate trustee should not exercise any rights or duties with
respect to the determination of the existence or amount of a debt
owed by her to the deceased. The estate trustee's rights or duties
on behalf of the estate should be asserted by any other estate
trustee who is not personally involved in the subject matter of the
litigation. If there is no other estate trustee, an estate trustee
under a limited grant should be appointed by the court for this
specific purpose. Except in relation to the debt allegedly owed to
the estate by her, the estate trustee's duties and powers should
not be affected. However, the court should be empowered to
remove the estate trustee upon application by a fellow estate
trustee or an interested party.

Duty to Pay Debts

40. Estate trustees should be given the power set out in section 48(1) of
the present Trustee Act. The exercise of these powers should be made
subject to the normal standard of care (see recommendation 55).

41. Estate trustees should have no discretion to pay a debt or allow a claim
that is barred by the Limitations Act or any other limitations provision,
in the absence of a specific direction in the will authorizing her to pay
the debt or allow the claim.

42. Where the testator authorizes payment of a debt barred by the Limita-
tions Act or any other limitations provision, that debt should not be
paid until all the other debts of the deceased have been paid in full,
but should be paid in full in priority to payments or gifts to the
beneficiaries of the deceased.

295

43. An estate trustee should have the same right to recover a debt from
the estate as any other creditor. While estate trustees should continue
to have the right of retainer with respect to non-contentious debts, they
should have no priority over other creditors of the estate. However, in
the absence of an authorization in the will, estate trustees should not
be entitled to retain for a statute-barred debt.

44. (1) Where an estate trustee claims to be owed debts by the deceased,

and there is a dispute as to the existence or amount of such debt,
the estate trustee should not for that reason alone be required
to retire. Subject to paragraph (2), she should have her rights
determined in the same manner and by the same procedure that
is available to any other creditor of the deceased.

(2) An estate trustee should not exercise any rights or duties with
respect to the determination of the existence or amount of a
debt owed to her by the deceased. The estate trustee's rights or
duties on behalf of the estate should be asserted by any other
estate trustee who is not personally involved in the subject matter
of the litigation. If there is no other estate trustee, an estate
trustee should be appointed by the court for this specific pur-
pose. Except in relation to the debt allegedly owed to her by
the estate, the estate trustee's duties and powers should not be
affected. However, the court should be empowered to remove the
estate trustee upon application by a fellow estate trustee or an
interested party.

Administrative and Other Powers

45. Estate trustees should be given the following powers that were pro-
posed for ordinary trustees in the Report on the Law of Trusts:

1. investment;

2. leasing;

3. management, maintenance and repair;

4. insurance;

5. carrying on a business;

6. surrender of property;

7. acquisition of a dwelling home; and

8. borrowing money.

46. (1) Subject to the power of the testator to provide otherwise, estate

trustees should have a general statutory power to mortgage both
the real and personal property of the estate. This power should

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be exercisable without notice to any person, including the Official
Guardian and the Public Trustee, and it should be exercisable
without any order of the court.

(2) A mortgagee from an estate trustee in good faith and for value
should be entitled to hold her interest freed and discharged from
any debts or liabilities of the deceased owner, except those that
are specifically charged thereon otherwise than by her will, and
freed and discharged from all claims of persons beneficially
entitled thereto, and to hold her interest subject to the terms
of the will only where the restrictions on the power of mort-
gaging are noted on the estate trustee certificate or where she
has actual notice at the time of the mortgage that the estate
trustee does not possess the power she purports to exercise, or
that she is exercising the power in a manner that is contrary to
that provided in the will.

(3) A mortgagee should not be bound to see to the application of the
money advanced to the estate trustee.

(4) Mortgagees from an estate trustee who rely upon the production
of an estate trustee certificate or a deed of discharge that contains
a vesting declaration, express or implied, whether or not they
otherwise have notice of the will, should be entitled to assume
without inquiry that the former estate trustees and the substitute
or additional trustees possessed or possess and properly exercised
or are properly exercising every power that they purported or
purport to exercise over the property.

(5) A mortgagee who, at the time of the mortgage from the estate
trustee, has actual notice that the estate trustee does not possess
the power she purports to exercise, or that she is exercising a
power in a manner that is contrary to that provided in the will,
should hold her interest subject to the terms of the will, unless
she has obtained her interest from a prior mortgagee without
actual notice that the estate trustee does not possess the power
she purports to exercise, or that she is exercising a power in a
manner that is contrary to that provided in the will.

(6) An estate trustee should be entitled to exercise her power to raise
money by way of mortgage or other security for the purpose of
benefiting an asset by mortgaging or giving as security an asset
other than the asset to be benefited, but only with the written
consent of the person entitled to the asset mortgaged or given
as security. Where the mortgagee or secured lender realizes
against the asset given as security for the loan, the person
entitled to that asset should be entitled to recover against the
asset benefited to the extent of her loss. Where the asset mort-
gaged or given as security is distributed to the person entitled
to that asset, and that person makes payments to avoid realization

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by the mortgagee or secured lender, that person should be entitled
to recover against the asset benefited to the extent of the payments
made.

47. Estate trustees should be given the power to do all ancillary acts or
things and execute all instruments necessary or desirable to enable
them to carry out effectively the intent and purpose of the powers
vested in them.

48. Where, in the administration of estate property, any sale, lease, mort-
gage, surrender, release, or other disposition, or any purchase, invest-
ment, acquisition, expenditure, or other transaction is in the opinion
of the court expedient, but it cannot be effected because of the absence
of a power for that purpose vested in the estate trustees by the will or
by law, the court should be empowered to confer upon the estate
trustees, either generally or in any particular instance, the necessary
power on such terms and subject to such conditions as the court thinks
fit. The court should be empowered to rescind, vary, or replace any
such order, but such a rescission, variation, or replacement should not
affect any act or thing done in reliance upon the order before the
person doing the act or thing became aware of the application to the
court to rescind, vary, or replace the order.

49. The power of an estate trustee to delegate the exercise of her powers
and the discharge of her duties should be identical to the power
recommended for a trustee in the Report on the Law of Trusts.

50. (1) Where two or more estate trustees are appointed, they should

have joint authority with respect to the estate of the deceased,
and their duties and powers should be exercised only with the
agreement of all.

(2) Where the estate trustee certificate has been granted to one or
some of two or more estate trustees, whether or not power is
reserved to the other or others to prove the will, any transaction
may be effected and any power or authority exercised by the estate
trustees named in the estate trustee certificate for the time being,
and that act should be as effectual as if all persons entitled to be
appointed estate trustees had concurred therein.

(3) Where it appears that the estate trustees are unable to achieve
unanimity on a matter, one or more of them should be entitled to
apply to the court for an order resolving the matter in any way
that it considers proper.

5 1 . Where a will authorizes a majority of estate trustees to act, the majority
should also be empowered to do all acts and things and execute all
instruments necessary to carry out the act.

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The Professional Estate Trustee

52. Estate trustees who in fact possess, or who because of their profession,
business, or calling ought to possess, a particular level of knowledge
or skill which in all the circumstances is relevant to the administration
of the trust, should employ that particular level of knowledge or skill
in the administration of the trust. (See recommendation 55.)

Liability

53. The requirement of pleading plene administravit or plene administravit
praeter in actions brought against estate trustees, and the imposition of
personal liability for a failure to make either plea, should be abolished.
However, the estate trustee should be personally liable for costs unless
she advises a plaintiff in writing that there are no assets or insufficient
assets in the estate to satisfy the amount of the debt upon which the
action is brought.

54. Estate trustees should be allowed to contract on the basis that they
incur no personal liability and that the person contracting with the
estate trustee should be entitled to have recourse only to the assets of
the estate.

55. The nature and extent of the liability of an estate trustee for her
administration of the estate should be the same as for an ordinary
trustee. Where liability is premised upon a lack of care, the standard
of care recommended in the Report on the Law of Trusts should apply
to estate trustees. Accordingly, in the discharge of their duties and the
exercise of their powers, whether the power or duty is created by law
or by the will, estate trustees should exercise that degree of care,
diligence and skill that a person of ordinary prudence would exercise
in dealing with the property of another person. (But see recommenda-
tion 52.) The distinctions between devastavit and breach of trust should
be abolished; the liability of the estate trustee should be determined
by the latter concept.

56. The concept of executor de son tort should be abolished and a person
who intermeddles with the estate of a deceased person should
be liable under the general law for any loss caused to the estate by
the intermeddling.

57. The recommendations in the Report on the Law of Trusts providing for
relief for breach of trust should apply to estate trustees.

58. In the case of an insolvent estate, where an estate trustee pays more
to a creditor or claimant than the amount to which she is entitled,
the court should be empowered to relieve the estate trustee either
wholly or partly from personal liability if it is satisfied that she has

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acted honestly and reasonably and ought fairly to be excused for
the payment.

59. Where an estate trustee holds as an asset a long-term lease, mortgage
or other instrument that imposes upon the estate a liability beyond
one year from the death of the deceased, and she assigns this asset to
a person approved by the person to whom the estate otherwise would
have been liable for the full term of the instrument, the liability of the
estate trustee for further payment under the instrument should cease
from the moment of the assignment. The approval of the person to
whom the estate otherwise would have been liable for the full term of
the instrument should not be arbitrarily withheld.

60. The recommendations made in the Report on the Law of Trusts in
relation to clauses that purport to exonerate trustees from liability
should apply to estate trustees.

Compensation and Reimbursement

61. The recommendations made in the Report on the Law of Trusts in
relation to the entitlement to compensation of trustees, and the quanti-
fication of that compensation, should apply to estate trustees.

62. As a guide to a court in determining the "fair and reasonable com-
pensation" to which an estate trustee is entitled under legislation,
regulations should prescribe the "usual" percentages. A broadly-based
committee, representing all members of the community affected by
this matter, should be established to advise the Attorney General what
percentages should be prescribed. Regulations should be adopted after
this committee reports to the Attorney General.

63. Where the compensation of an estate trustee named in the will is fixed
by the will, the estate trustee should be entitled to apply to the court
for an order permitting her to waive her right to the compensation
fixed by the will and to seek compensation under the court's statutory
jurisdiction. The court should be empowered to allow the estate trustee
to waive the compensation fixed by the will only where it appears
to the court that the compensation would be unreasonable in the
circumstances.

64. (1) Section 12(1) of the Succession Law Reform Act should be

amended to read as follows:

12. — (1) Where a will is attested by a person to whom or to whose then
spouse a beneficial devise, bequest or other disposition or appointment of
or affecting property, except charges and directions for the payment of
debts or a provision fixing the compensation of an estate trustee to the
extent that such compensation does not exceed the amount that would
have been awarded by the court under its statutory jurisdiction, is thereby

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given or made, the devise, bequest or other disposition or appointment
is void so far only as it concerns,

(a) the person so attesting,

(b) the spouse, or

but the person so attesting is a competent witness to prove the execution
of the will or its validity or invalidity.

(2) Section 12(2) of the Succession Law Reform Act should be
amended along the same lines.

65. In order for an agreement between estate trustees and beneficiaries
concerning compensation to be binding, it should be written and should
be signed by the estate trustee and the beneficiaries to be bound.

66. An agreement between the estate trustee and the beneficiaries of an
estate regarding compensation should not oust the jurisdiction of the
court to allow compensation under its statutory jurisdiction, and the
court should be empowered to consider the agreement in exercising
that jurisdiction.

67. Any agreement between the deceased and an estate trustee respecting
compensation should not bind the estate unless it is incorporated in
the will.

68. Where there is a provision in the will fixing the compensation of the
estate trustee named therein and there is a deficiency of assets, the
estate trustee's compensation should be deemed to be an administra-
tive expense and have priority over legacies and other unsecured debts,
to the extent that it does not exceed what would be allowed as fair and
reasonable compensation under the court's statutory jurisdiction. Any
excess over that amount should be treated as a legacy, and subject to
the order of application of assets to meet liabilities. Subject to section
68 of the Succession Law Reform Act, the excess should be paid in
priority to other legacies.

69. The Public Trustee should be compensated for acting as an estate
trustee on the same basis as private estate trustees, and the five per
cent maximum commission for services, set out in section 13 of the
Crown Administration of Estates Act, should be abolished.

70. Estate trustees should be entitled to reimburse themselves or pay or
discharge out of estate property all expenses incurred in or about the
administration of the estate.

71. If one or more of several estate trustees enter into a contract or exercise
an authority or power without the concurrence of the other estate
trustees, such one or more estate trustees should not be entitled to

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reimbursement from estate assets for sums expended unless the act is
subsequently ratified by all the estate trustees.

Suspension and Termination of the Office

72. The concept of the suspension of the office of estate trustee should be
abolished and, in the case of incapacity, the estate trustee should be
subject to the same rules as an ordinary trustee.

73. The recommendations for the retirement of trustees in the Report on
the Law of Trusts should apply to estate trustees, provided that such
retirement should not be effective until after registration of a notice
of retirement in a form prescribed by regulation and surrender of the
estate trustee certificate in the office of the Ontario Court (General
Division) from which the estate trustee certificate issued to the retiring
estate trustee. Surrender of the estate trustee certificate should be
solely for the purpose of revoking the designation of the estate trustee.

74. The recommendations in the Report on the Law of Trusts governing the
non-judicial and judicial removal of trustees should apply to estate
trustees.

CHAPTER 3: THE BENEFICIARY

75. Section 55 of the Succession Law Reform Act should be amended to
read as follows:

55. — ( 1) Unless otherwise provided by will, where two or more persons
die in circumstances rendering it uncertain which of them survived the
other or others, or within seven days of each other, the property of each
person, or any property of which such person is competent to dispose,
shall be disposed of as if that person had survived the other or others.

(2) Unless a contrary intention appears, where two or more persons
hold legal or equitable title to property as joint tenants, or with respect
to a joint account, with each other, and all of them die in circumstances
rendering it uncertain which of them survived the other or others, or
within seven days of each other, each person shall be deemed, for the
purposes of subsection (1), to have held as tenant in common with the
other or with each of the others in that property.

(3) Where a will contains a provision for a substitute estate trustee
operative if an estate trustee designated in the will,

(a) dies before the testator;

(b) dies at the same time as the testator; or

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and the designated estate trustee dies in circumstances rendering it
uncertain which of them survived the other or others, or within seven
days of each other, then, for the purpose of probate, the case for which
the will provides shall be deemed to have occurred.

(4) The proceeds of a policy of insurance shall be paid in accordance
with sections 192 and 272 of the Insurance Act and thereafter this Part
applies to their disposition.

76. (1) The Uniform Presumption of Death Act, proposed by the Uniform

Law Conference of Canada, should be enacted, subject to the
changes set out in paragraphs (2)-(5).

(2) The court should be empowered to state the date upon which the
absent person is presumed to have died or to state the date after
which the person is presumed not to be living.

(3) Either the Public Trustee or, where the court considers it more
appropriate, a person appointed by the court, should be a party
to all applications to have a person declared to be presumed dead.

(4) Where a person who is presumed to be dead returns after her
property has been distributed, she should be entitled to apply to
the court for the return of her property or payment of its value.
The court should be required to order the return of the property,
in whole or in part, or payment of its value, to the returning
absentee only if that person demonstrates that it would be more
equitable to return all or part of the property to her or make a
payment to her.

(5) In making an order in the exercise of this power, the court should
be empowered to impose such terms and conditions as is appro-
priate in the circumstances.

77. The provisions of the Conveyancing and Law of Property Act, the Insur-
ance Act, the Marriage Act, and any other Ontario statute dealing with
the presumption of death should be examined to ensure that the
implementation of recommendation 76 will not cause any problems.

78. (1) The law and practice governing claims by all types of unascer-

tained beneficiaries and next-of-kin should be governed by rules
similar to those set out in section 23 of the Estates Administration
Act, subject to the recommendations that follow.

(2) Where an estate trustee has made reasonable inquiries for benefi-
ciaries and next-of-kin, and the entitlement of a person was not
known to the estate trustee at the time of distribution, she should
not be liable to that person for failing to distribute property to her.

(3) In the case of persons who are entitled by virtue of a relationship
traced through a birth outside marriage, estate trustees should be

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required to search the records of the Registrar General relating
to parentage, and should not be liable for failing to distribute
property to a person who is entitled by virtue of a relationship
traced through a birth outside marriage if reasonable inquiries
have been made and the search has failed to disclose the existence
of that person.

(4) Section 23(3) of the Estates Administration Act should be repealed
and replaced by a provision stating that, where a person whose
existence was not ascertained prior to the distribution of the estate
seeks to claim her share of the estate after it has been distributed,
she should be entitled to apply to the court for the return of her
share or the payment of its value. The court should be required
to order the return of the share, in whole or in part, or payment
of its value, to the returning absentee only if that person demon-
strates that it would be more equitable to return all or part of the
share to her or make a payment to her. In making an order in the
exercise of this power, the court should be empowered to impose
such terms and conditions as is appropriate in the circumstances.

(5) When all inquiries and advertisements have been made in accor-
dance with the direction of the court, or approved subsequently
by the court, the estate trustee should be free from personal
liability for failing to distribute the estate to those persons whose
existence was not revealed.

79. Section 24 of the Estates Administration Act should be amended to
apply to both testate and intestate succession. It should provide that,
where a person receives an inter vivos gift, which has been expressed
by the donor or acknowledged by the donee to be an advance on the
future inheritance of the latter, the value of the gift should be taken
into account in determining her share in the estate of the donor. This
rule should apply without reference to the relationship between the
deceased donor and the donee.

80. For the purpose of Part V of the Succession Law Reform Act, the
definition of "dependant" should be expanded to include a person who
has rendered domestic or housekeeping services for a deceased person
in the deceased's lifetime, and who has established an express or
implied promise by the deceased, whether or not enforceable under
the law of contract, to reward her for the services by making some
testamentary provision.

81. Where the promise to give property by will is not fulfilled and the
promisee is successful in damages in a contract action, the damages
recovered should not be subject to an order made under Part V of the
Succession Law Reform Act, except to the extent that the value of the
property exceeds the consideration therefor.

82. (1) Any provision in a will designed to preclude or discourage an

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application to the court with respect to the validity of a will should
be void, whether or not it is attached to a gift of realty or personalty
and whether or not it is coupled with a gift over.

(2) If the provision described in paragraph (1) is a condition prece-
dent, the provision should be void, but the gift should not fail for
that reason.

(3) There should be no change in the law respecting conditions
subsequent.

83. (1) Where the court would otherwise apply the rule of public policy

precluding a person who has unlawfully caused the death of
another from benefiting by her act, the court should be empowered
to order that the effect of the rule be modified, in whole or in
part, where it is just to do so.

(2) Paragraph (1) should not apply where the person has been con-
victed of murder under the Criminal Code.

84. (1) Where, in the case of a joint bank account, one joint tenant has

killed another, and the court has applied the public policy rule,
described in recommendation 83(1), the joint tenant who has
unlawfully caused the death should hold the whole bank account
as constructive trustee, with her beneficial interest held in trust
for herself and the beneficial interest of the victim held in trust
for the persons entitled to share in the estate of the victim.

(2) There should be a prima facie presumption that the beneficial
interests are equal.

(3) Where a remainderman has unlawfully caused the death of a life
tenant, and the court has applied the public policy rule, the person
who has caused the death should hold on constructive trust for
the estate of the life tenant an interest in the property for a period
of time equivalent to the victim's projected life span, calculated
according to generally accepted actuarial principles.

85. Where a court determines that a person has benefited from the death
of a deceased in circumstances that would have disentitled any other
person who contributed to the death of the deceased from receiving
or retaining a proprietary interest arising as a result of the death, the
court, notwithstanding the absence of wrongdoing on the part of the
person benefited, should be empowered to impose a constructive trust
on the benefit so received in favour of the estate of the deceased
or such persons whom it considers proper, including the person so
benefited.

86. The "moral obligation" exception to the doctrine of lapse should be
abolished.

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CHAPTER 4: CREDITORS AND OTHER CLAIMANTS

Insolvent Estates

87. The present parallel systems providing for the administration of insol-
vent decedents' estates, under the federal Bankruptcy Act, the provin-
cial Trustee Act, and the rules of court (proceedings for administration
of an estate), should be retained.

88. Representations should be made to the Government of Canada to
review the Bankruptcy Act from the perspective of estate administra-
tion, to ensure its utility in estate administration procedures.

89. Representations should be made to the Government of Canada to
amend the Bankruptcy Act to provide explicit discretion to the bank-
ruptcy judge to dismiss a petition for a receiving order, or annul a
bankruptcy, if, in her opinion, alternative legislation for the administra-
tion of the estate would provide a more efficient or less expensive
procedure.

90. Subject to recommendation 92, the present provisions contained in the
Trustee Act respecting the administration of insolvent decedent estates
should be retained.

91. (1) Expenses for the disposal of the body of the deceased should

constitute a charge on the unencumbered portion of the assets of
the estate of the deceased, ranking in priority to the charges
described in paragraph (2), to the extent that such disposal
expenses were reasonable in the circumstances. Disposal expenses
should include, among other things, funeral expenses, transporta-
tion expenses, casket, cemetery charges and a marker.

(2) Testamentary expenses and costs of administration should consti-
tute a charge on the unencumbered portion of the assets of the
estate of the deceased, to the extent that such expenses are reason-
able in the circumstances. Such expenses should include fees
associated with the obtaining of an estate trustee certificate, costs
incurred in obtaining legal advice as to the administration of the
estate, the costs of the estate trustees and other parties in an
action for the administration of the estate, expenses incurred for
the protection of the property of the estate, payments in discharge
of debts falling due after the death of the deceased, and the
compensation to which the estate trustee is entitled by virtue of
her administration of the estate of the deceased.

92. The institution of inspectors under the Trustee Act should be abolished
and, accordingly, sections 57(3) and 59 of the Trustee Act should be
repealed.

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93. (1) Proceedings for administration of an estate should be retained.

(2) The judge having carriage of the proceeding should have carriage
of the whole proceeding, from the application for administration,
through all intermediate procedures, to the final distribution of
the estate.

(3) The elements of proceedings for administration of an estate by
the court should be set out expressly in legislation.

Solvent Estates

94. Subject to recommendations 96 and 97, the order of application of
assets to meet the liabilities of an estate should be as follows:

(a) property specifically charged with the payment of debts or left on
trust for the payment of debts;

(b) property passing by way of intestacy;

(d) general legacies and devises;

(e) specific legacies and devises;

(f) property over which the deceased had a general power of appoint-
ment that she might have exercised for her own benefit without
the assent of any other person, where the property is appointed
by will.

95. In the application of the order set out in recommendation 94, there
should be no distinction between personalty and realty.

96. Where a will expresses an order of application of assets other than the
one set out in recommendation 94, effect should be given to the
directions in the will.

97. The court should have the discretion to direct an order of application
of assets, other than the one set out in recommendation 94, where it
is of the opinion that the order of application directed by it more
closely approximates the wishes of the testator.

Specifically Encumbered Property— Locke King's Act

98. Section 32 of the Succession Law Reform Act, dealing with the liability
of property to satisfy a mortgage debt, should be amended to apply to
personal, as well as real, property.

307

99. A writ of seizure and sale should be excluded from the definition of
"mortgage" in section 32(4) of the Succession Law Reform Act.

100. The court should have the discretion to order the payment of a debt
secured on property in a manner other than as provided for in section
32 of the Succession Law Reform Act where it is of the opinion that this
more closely approximates the wishes of the testator.

Notification of Claims

101. For the purpose of the proposed notification and contestation proce-
dures, the word "claimant" should be defined to mean a person who
has a claim against the estate of the deceased, whether arising prior,
or subsequent, to the death of the deceased, in respect of a contract,
tort, property interest in any property of the deceased, or any other
cause, whether the claim is contingent or not, liquidated or unliqui-
dated, secured or unsecured, matured or unmatured.

102. (1) The necessity of advertising for the notification of claims by credi-

tors and other claimants should be a matter within the discretion
of the estate trustee.

(2) Where an estate trustee has advertised for the notification of
claims in accordance with the recommendations contained in
paragraph (3), and the time for the notification of claims as set
out in the advertisement has elapsed, or where the estate trustee
has not advertised for the notification of claims, but six months
have elapsed from the date of death of the deceased, the estate
trustee should be free to pay the claims of which she then has
notice and to distribute the property of the deceased to the per-
sons entitled thereto. In these circumstances, the estate trustee
should not be personally liable to any claimant of whom she did
not have notice at the time of payment or distribution.

(3) For the purposes of paragraph (2), advertisements for the notifi-
cation of claims

(a) should be published on two separate occasions, once per
week for two consecutive weeks;

(b) should be published in a newspaper having general circula-
tion in the locality or localities in which the deceased resided,
worked, and carried on business, at the time of death;

(c) should provide a time limit for the notification of claims
that is not less than four weeks from the date on which the
advertisement is first published; and

(d) should contain the following:

(i) the name of the deceased;

308

(ii) the deceased's place or places of residence, employ-
ment, and business;

(iii) the date of death;

(iv) the name and address of the person to whom notice of
claim should be given;

(v) the date by which notice of claim should be given; and

(vi) a warning that the estate trustee may distribute the
assets of the estate after the date specified having regard
only to the claims of which she then has notice.

(4) Section 25 of the Estates Administration Act, which provides that
no distribution of an intestate's estate can be made until after the
expiration of one year from the date of death unless the personal
representative has complied with section 53 of the Trustee Act,
should be repealed.

103. (1) Where no application for an estate trustee certificate has been

made, a claimant should be entitled to file her claim with a local
registrar of the Ontario Court (General Division).

(2) Upon receipt of such claim and evidence of death of the debtor,
the local registrar should immediately send a copy of this material
to the Estate Registrar for Ontario.

(3) The Estate Registrar for Ontario should keep a file of such claims,
and should notify any local registrar when an application for an
estate trustee certificate is subsequently made.

104. (1) Subject to the recommendations made in paragraphs (2) and (3),

an estate trustee should be deemed to have received notification
of the following:

(a) tax claims;

(b) secured claims and claims that arise by operation of statute,
the existence of which can be determined by the search of a
public register;

(d) notices of garnishment that have been filed with the sheriff
of the county in which the deceased resided at the time of
her death; and

(e) support orders filed with the Director of Support and Custody
Enforcement under the Support and Custody Orders Enforce-
ment Act, 1985.

309

(2) An estate trustee should be deemed to have received notification
of the claims set out in paragraphs (l)(b)-(e), only if such claims
are registered or filed more than ten working days before a distri-
bution of any portion of the estate.

(4) The sheriff should be required to provide particulars, in writing,
of notices of garnishment filed in her office in response to an
inquiry from an estate trustee of a deceased debtor.

105. The type of system that now exists respecting the rights of a creditor
or claimant who has failed to notify the personal representative should
be retained.

Contestation of Claims

106. (1) Sections 69 and 70 of the Estates Act should be consolidated and
amended as follows:

(b) The notice of contestation should set out expressly the
claimant's rights, as contained in paragraph (c), and the
consequences for failure to take action, as contained in
paragraph (e).

(c) Within thirty days after the receipt of such notice of contesta-
tion of the claim, the claimant should be permitted to

(i) commence an action against the estate for the amount
of the claim in the ordinary manner and serve the estate
trustee as provided in the rules of court, or

(ii) commence proceedings against the estate for the
amount of the claim, in accordance with the summary
claims procedure (see paragraph (g)).

310

(d) To commence a proceeding against the estate in accordance
with the summary claims procedure, the claimant should not
be required to verify a statement of her claim by affidavit.

(e) If the claimant does not proceed as provided in paragraph
(c) in the time limited therefor or within such time as is
allowed by the judge, she should be deemed to have aban-
doned her claim and it should be forever barred.

(f) If within sixty days after the estate trustee has notice of a
claim she has neither contested the claim, nor paid or allowed
the claim, the claimant should be permitted to commence
proceedings against the estate for the amount of the claim,
in accordance with the summary claims procedure.

(g) The manner of proceeding in the summary claims proceed-
ings should be prescribed by regulation.

(h) The court should have the following powers:

(i) to extend the time for the commencement of an action
or proceedings or the service thereof for a period not
exceeding three months from the time of the receipt of
the contestation of the claim;

(ii) to give directions for the conduct of the action;

(iii) to require the claimant to commence an action against
the estate for the amount of her claim in the ordinary
manner;

(iv) to dispose of any counterclaim or claim for a set-off by
the estate trustee and if the counterclaim or set-off
exceeds the claim to render a judgment against the
claimant in the amount of the excess;

(v) to prescribe the time when the judgment may be
enforced where the claim is proved, but not yet
recoverable;

(vi) to fix costs and order the payment of the same; and

(vii) to give directions with respect to the enforcement of
any judgment, by execution or otherwise.

(2) The necessity of serving the Official Guardian in contestation of
claim proceedings should be eliminated.

(3) A judge should have the power to require notice of the contesta-
tion of claim proceeding to be given to the Official Guardian if
minors are concerned or in any other case where in her discretion
the ends of justice would be served by serving any or all the persons
beneficially interested in the estate, including creditors, and to

311

permit them to participate in such proceedings on such terms as
to costs as she shall determine.

(4) The judge should have the power to assess costs against the per-
sons permitted to participate in a proceeding under paragraph (3)
if in her opinion their participation in the proceedings added
unnecessarily to the costs that the claimant or the estate would
have otherwise borne.

Contingent Liabilities

107. Where a contingent liability of an estate exists, and there is a desire
to distribute the estate, the court upon application by an interested
party should be required to provide for the disposition of the claim as
follows:

(a) by the valuation of the present value of the claim (taking into
account any uncertainty) and immediate payment in the same
manner as a matured claim;

(b) by the arrangement for the future payment or possible payment
of the claim by the creating of a trust, giving a mortgage, obtaining
a bond or security from the distributee or otherwise; or

Evidence in Claims Actions Against Estates

108. Section 13 of the Evidence Act, requiring corroboration in an action by
or against estates, should be repealed.

Bonding of Estate Trustees

109. No bond should be required of a recipient of an estate trustee certifi-
cate unless,

(a) the recipient of, or all of the recipients of, an estate trustee
certificate are nonresidents of the Province of Ontario;

(b) the recipient applied for an estate trustee certificate solely in her
capacity as a creditor of the estate;

(d) the will requires the posting of a bond.

1 10. Notwithstanding recommendation 109, the court should be empowered
to dispense with the necessity of posting a bond in any situation where
it determines that the posting of a bond is not necessary or where the
beneficiaries and a majority of the creditors (by value) concur.

312

111. (1) Section 61(1) of the Estates Act, which provides that security is

not required of the Government of Ontario, or any of its ministries
or agencies, should be retained.

(2) Section 175(4) of the Loan and Trust Corporations Act, 1987, which
provides that it is not necessary for certain trust corporations to
give any security for the due performance of their duty as executor,
administrator or trustee, unless so ordered by a court, should be
retained.

112. (1) Either before or after the grant of an estate trustee certificate,

any person having an interest in the administration of an estate
should be entitled to apply to the court for an order requiring the
posting of a bond or an additional bond by the estate trustee.

(2) Where a person who is required to post a bond fails to do so, the
court should have the power to revoke the estate trustee certifi-
cate, and to make such further order as may be just in the
circumstances.

113. An estate trustee, surety, or any person having an interest in the
administration of the estate should be entitled to apply to the court at
any time to have the amount of the bond reduced or the terms of the
bond varied, or a substitution of the security granted.

1 14. A standard and plain language form of bond should be prescribed, the
terms and conditions of which should be as follows:

(a) a guarantee given in pursuance of a bonding requirement should
enure for the benefit of the beneficiaries, creditors, and other
persons interested in the administration of the estate of the
deceased as if contained in a contract made by the surety or
sureties with every such person, and where there are two or more
sureties, as if they had bound themselves jointly and severally;

(b) the bond shall be conditioned on the liability of the estate trustee
to the beneficiaries, creditors and other persons interested in the
administration of the estate;

(d) the bond shall be filed in the court;

(e) the surety shall be given notice of any proceedings to establish the
liability of an estate trustee;

(f) upon a final passing of accounts or where it appears that all
liabilities of the deceased have been satisfied the court may
authorize the estate trustee to arrange for the cancellation of the
bond: and

313

(g) unless upon order of the court, or with the consent of all the
beneficiaries, no bond may be cancelled without notification of
the beneficiaries or creditors of the estate.

Exemptions Under the Execution Act

115. The Execution Act should be amended to clarify the following:

(b) expenses for the disposal of the body of the deceased, testamen-
tary expenses and costs of administration, as defined above (see
recommendation 91), should have priority over the exemptions
granted in the Act.

CHAPTER 5: TRANSFER OF ASSETS OF THE DECEASED

116. No distinction should be drawn between real property and personal
property with respect to the vesting and the disposition of the property.

117. Subject to recommendation 119, the system of automatic vesting of
real property in the persons beneficially entitled, and the ancillary
system of registration of cautions, should be abolished. It should be
replaced by a system under which the chain of title from the deceased
would be traced by means of an estate trustee certificate and a convey-
ance from the person named in the estate trustee certificate, subject,
where necessary, to vesting being effected by court order.

118. Subject to recommendation 119, section 48 of the Registry Act, provid-
ing for the registration of wills as a link in the chain of title, should
be repealed.

119. Legislation implementing recommendations 117 and 118 should not
affect the vesting of property that occurred before its coming into
force. In addition, persons whose interests in property vested before
that date should continue to be entitled to use the existing provisions
of the Registry Act to register wills with the same effect as under the
present law.

120. Where an estate trustee is appointed by will, the property of the
deceased should continue to vest in her immediately upon the death
of the deceased.

121. Where there is an intestacy, no estate trustee is named in the will, or

314

the named estate trustee is unable or unwilling to accept her office,
the property of the deceased should continue to vest in the person
receiving the grant, upon the grant of an estate trustee certificate.

122. To cover the gap in title between the death of the deceased and the
grant of an estate trustee certificate where the property has not vested
automatically in an estate trustee named in the will, the property of
the deceased should vest in the Estate Registrar for Ontario.

123. Legislation should confirm that property vests in two or more estate
trustees as joint tenants.

124. (1) Subject to paragraph (2), estate trustees should have a general

statutory power to sell both the real and personal property of the
estate, whether for the purpose of payment of debts or for the
purpose of distribution. This power should be exercisable without
notice to any person, including the Official Guardian and the
Public Trustee; moreover, it should be exercisable without any
order of the court.

(2) An estate trustee's statutory power of sale should be subject to
any restrictions provided by the will.

125. A person purchasing property from an estate trustee in good faith and
for value should be entitled to hold it freed and discharged from any
debts or liabilities of the deceased owner, except such as are specifically
charged thereon otherwise than by her will, and should take freed and
discharged from all claims of persons beneficially entitled thereto, and
should take the property subject to the terms of the will only where

(a) the restrictions on the power of sale are noted on the estate trustee
certificate; or

(b) where she has actual notice at the time of the purchase that the
estate trustee does not possess the power she purports to exercise,
or that she is exercising the power in a manner that is contrary to
that provided in the will.

126. A purchaser from the estate trustee should not be bound to see to the
application of the proceeds of the sale.

127. Purchasers from an estate trustee who rely upon the production of an
estate trustee certificate or a deed of discharge that contains a vesting
declaration, express or implied, whether or not they otherwise have
notice of the will, should be entitled to assume without inquiry that the
former estate trustees and the substitute or additional estate trustees
possessed or possess and properly exercised or are properly exer-
cising every power that they purported or purport to exercise over
the property.

315

128. A purchaser who, at the time of the purchase from the estate trustee,
has actual notice that the estate trustee does not possess the power
she purports to exercise, or that she is exercising a power in a manner
that is contrary to that provided in the will, should take the property
subject to the terms of the will, unless title to the property has been
held by a prior purchaser without actual notice that the estate trustee
does not possess the power she purports to exercise, or that she is
exercising a power in a manner that is contrary to that provided in
the will.

129. (1) After paying debts and taxes, administration, testamentary and

funeral expenses, and legacies, estate trustees should be required
to convert the residue of the estate and pay the shares of the
residuary beneficiaries in cash. This general rule should apply
both to intestate and testate succession.

(2) The rule set out in paragraph (1) should be subject to a contrary
provision in the will and the exercise of the power of appropriation
that is proposed in recommendation 130. In addition, where the
estate is solvent, and all the beneficiaries have legal capacity and
agree that a distribution in kind should be made, the estate trust-
ees should be required to make such distribution.

130. Estate trustees should be entitled to appropriate real or personal
property in kind in or towards satisfaction of the share of any benefi-
ciary, with the consent of that beneficiary. For the purpose of the
appropriation, following consultation with a qualified person where
the estate trustees are not personally qualified, the estate trustees
should place a valuation on the property. However, no specific gift
made by the will should be adversely affected by an appropriation of
property in kind. In addition, within one month of the valuation or such
further time as the court authorizes, the estate trustees, beneficiaries or
any other interested person should be entitled to apply to the court
for a review of the appropriation or the valuation and, following such
notice as the court may order, the court should confirm the appropria-
tion or the valuation or make such variation as it considers proper.

131. Where a beneficiary of an estate is entitled to any specific real or
personal property, whether because of the exercise of the power of
appropriation set out in recommendation 130 or otherwise, the estate
trustee should be entitled to transfer in kind to such person the prop-
erty to which she is entitled. Legislation should make it clear that title
can be transferred from an estate trustee to a beneficiary only by the
form of transfer appropriate to the property that is the subject of the
distribution. (With respect to personalty, see recommendation 134.)

132. The remedy of an aggrieved creditor or beneficiary for an improper
exercise of the power of making appropriations or making distributions
in kind should be only against the estate trustee, and the creditor or
beneficiary should have no statutory claim against the beneficiary to

316

whom the distribution was made, against the property distributed or
against any transferee from the beneficiary. However, a beneficiary
who at the time of the appropriation or distribution in kind had actual
notice that the estate trustee was exercising the power improperly
should not be entitled to this protection.

133. Subject to a contrary provision in the will and subject to a court order,
a beneficiary who is absolutely entitled in possession to a share of
property, whether land or pure personalty, and whether or not such
property is subject to a trust for sale, should be entitled to require that
her share be distributed to her even though other shares in the property
remain settled and are not yet distributable.

134. A standard form of transmission, transfer or assignment of personalty
from the name of the deceased to the estate trustees and in turn from
the estate trustees to the ultimate transferee should be appended to
legislation. This form should identify the deceased, the estate trustees,
the property being transferred, and the transferee; the form should
also refer to the estate trustee certificate.

CHAPTER 6: ESTATE PROCEEDINGS

135. (1) Section 26(1) of the Estates Act should be amended to read as
follows:

26. — (1) An application for an estate trustee certificate shall be made
to the Ontario Court (General Division) and shall be filed in the office
for the county or district in which the testator or intestate resided at the
time of death.

(2) Section 26(2) and (3) should be retained.

(3) Notwithstanding paragraphs (1) and (2), the court on motion by
any party should be empowered to order that an application for
an estate trustee certificate may be filed in an office for another
county or district where the balance of convenience substantially
favours it.

(4) In contentious proceedings under the Estates Act, the court on
motion by any party should be empowered to order that the
proceedings be held at the place other than the county or district
in which the estate trustee certificate is filed where it is satisfied
that the balance of convenience substantially favours holding the
proceedings at another place or it is likely that a fair trial cannot be
had in the county or district in which the estate trustee certificate
is filed.

136. (1) In all cases where it appears to the court to be necessary for the

317

grant of an estate trustee certificate, the inventory and preserva-
tion of the assets of the estate of the deceased, distribution of
assets, or the management of the estate, the court should be
empowered, upon motion, to require any person to do or to refrain
from doing any act, either unconditionally or upon such terms or
conditions as the court deems just.

(2) An application for the court to exercise the power proposed
in paragraph (1) may be brought by the estate trustee, any
person who appears to have an interest in the estate, or a
"dependant" of the deceased as defined in Part V of the Succession
Law Reform Act.

137. The rules of court should provide that, where the court determines
that notice of the proceedings is necessary for the proper disposition
of any matter before it, the court should *be empowered to order that
notice shall be given to any person, including the Official Guardian or
the Public Trustee.

138. (1) The wills depository function should be continued in the local

offices of the Ontario Court (General Division).

(2) The local registrar should be required to give notice of the deposit
of a will to the Estate Registrar for Ontario.

(3) Extensive publicity should be given to the depository function of
the court.

139. (1) Subject to the prior consent of the testator, any person or institu-

tion having original wills in her or its possession should be author-
ized to deposit the wills with the local registrar.

(2) Notwithstanding paragraph (1), a solicitor retiring from practice,
the estate trustee of a deceased solicitor, a trust company that has
ceased to have an office in the province or that has ceased to be
an approved trust company, or a liquidator or receiver of a trust
company, should be entitled to deposit with the local registrar for
safekeeping any will in her or its custody, without specific authority
from the testator, and the local registrar should be required to
accept for safekeeping any will tendered to her for that purpose.

140. The fundamental character of the passing of accounts procedure
should not be altered. The responsibility for scrutiny of an estate
trustee's accounts and administration should remain with the individu-
als interested in the estate.

141. A new procedure for the "filing of accounts" should be enacted, as
described below:

318

1. An estate trustee and an interested person is entitled to a passing
of accounts only after the accounts have been filed in accordance
with the following procedure.

2. An estate trustee may file her accounts voluntarily with the local
registrar of the Ontario Court (General Division) or she may be
required to file the accounts upon the application to the court of
an interested person. The estate trustee must file the accounts,
verified by affidavit, a copy of the estate trustee certificate, and a
copy of the previous order, if any, made on a filing or passing of
accounts in the estate.

3. Upon filing the accounts, the estate trustee must give notice of the
filing to the persons entitled to receive notice of a passing of
accounts under section 74(7) of the Estates Act. Where the person
entitled to notice is a person under a disability, notice should be
given to either the Official Guardian or the Public Trustee, as
required under the Estates Act. The form of the notice and the
method of service should be prescribed by regulation. At a mini-
mum, the notice must be accompanied by a copy of the accounts
and a schedule of the compensation claimed and any claim for
costs. The notice should advise recipients that, if no interested
person gives notice that she requires that the accounts be passed
before a judge within 45 days of the date of filing, the accounts and
draft order approving them will be presented by the local registrar
to a judge for approval as an unopposed application. A person who
has received notice of the filing is entitled to require a passing
of accounts within 45 days of the date of the filing. The form of
the notice requiring a passing of accounts should be prescribed
by regulation.

4. Notwithstanding paragraph 3, the court, upon application, may give
directions with respect to service of the notice of filing, and may
dispense with service of the notice of filing or the copy of the
accounts, or both. Where the court dispenses with the service of
the copy of the accounts, a person who is entitled to notice of the
filing, or her solicitor, is entitled to examine the accounts at the
office of the local registrar.

5. Upon filing proof of service, and, where a person under a disability
is entitled to notice, a certificate of the Official Guardian or Public
Trustee stating that the accounts have been examined and there is
no objection, the estate trustee may apply, after 45 days from the
date of filing, to a judge, without notice, for an order approving the
accounts as filed, provided that there is no notice requiring the
judge to pass the accounts.

142. (1) Section 33(1) of the Estates Act should be amended to state that
an appeal by any party or person taking part in a proceeding under
this Act from an order, determination or judgment of the Ontario

319

Court (General Division) is governed by the Courts of Justice
Act, 1984.

(2) Section 77 of the Succession Law Reform Act should be amended
to state that an appeal from an order of the court made under
Part V of the Succession Law Reform Act is governed by the Courts
of Justice Act, 1984.

143. Appendix C to the rules governing proceedings under the Estates Act
should be amended so that fees in relation to matters comprehended
by the Estates Act are set in the same manner as for other proceedings
in the Ontario Court (General Division).

Copies of this publication may be purchased from the Ontario Government Book-
store, 880 Bay Street, Toronto, or by mail order from Publications Services Section,
5th Floor, 880 Bay Street, Toronto, Ontario M7A 1N8. Telephone (416)326-5300.
Toll free long distance 1-800-668-9938.

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