Suing a Trustee for Breach of Trust in Ontario

If you are a beneficiary and the trust money does not seem to add up, it is stressful. You may wonder whether the trustee has done something wrong, and whether you can take action.

This article explains in general terms how breach of trust claims work in Ontario, what steps are available and how time limits can affect you. Every case turns on its facts, so treat this as a starting map.

What breach of trust generally means

A trustee holds property for the benefit of others and owes duties to the beneficiaries. Whether something a trustee did amounts to a breach of trust depends on the trust document and the facts, so it is worth confirming with a lawyer.

Not every disappointing result is a breach. A trustee who followed a sound plan can still see a loss, and the law takes that into account.

Trustees are also allowed to be paid back and, in some cases, paid for their work, so a payment out of the trust is not automatically a problem. A trustee may pay a trust expense personally and recover the same amount from the trust property, although the court may later disallow the expense. A trustee is entitled to a fair and reasonable allowance for their care, pains and trouble and the time spent, which a judge of the Superior Court of Justice fixes. That rule does not apply where the document creating the trust fixes the allowance.

Investment duties and protection

In investing trust property, a trustee must use the care, skill, diligence and judgment of a prudent investor. A trustee must consider listed criteria when planning investments, must diversify to an appropriate extent, and may obtain investment advice. A trustee may also delegate investment functions to an agent.

These powers do not authorize or require a trustee to act inconsistently with the terms of the trust. A trustee is not liable for an investment loss if the conduct that led to the loss followed an investment plan or strategy that a prudent investor could adopt.

A court may relieve a trustee from personal liability for a breach if the trustee acted honestly and reasonably and ought fairly to be excused. That relief does not apply to losses from investing trust property.

Steps a beneficiary can take

• Ask the trustee for information and records in writing.
• Seek an order requiring the estate trustee to pass accounts, if you appear to have a financial interest in the estate.
• Ask the Superior Court of Justice to remove an estate trustee, which the court can do on any ground on which it could remove any other trustee.
• Ask the court to appoint a new trustee, replacing or adding to existing ones.

Passing accounts is often the first practical step, because it puts the trustee's records before the court and gives you a formal way to object. What further remedies are available, such as repayment of lost money, depends on the facts and is something a lawyer can assess.

To pass accounts, the trustee files the accounts verified by affidavit (Form 74.43), a copy of the certificate of appointment, and any earlier judgment on passing of accounts. The court then issues a notice of application to pass accounts (Form 74.44). The notice and a draft judgment must be served on everyone with a contingent or vested interest, at least 60 days before the hearing in Ontario or at least 75 days before if outside Ontario. A beneficiary who objects must serve and file a notice of objection to accounts (Form 74.45) at least 35 days before the hearing date. Form numbers can change, so confirm the current ones before relying on them.

If a minor or unborn person has an interest, the Office of the Children's Lawyer must be served with an application to pass estate accounts. It represents the child and does not take instructions from the parents.

Time limits

The general limitation period in Ontario is two years from the day a claim was discovered. A claim is discovered when the claimant knew, or reasonably ought to have known, of it. No proceeding may be started more than 15 years after the act or omission.

Because the discovery date and the exceptions are fact-heavy, do not assume you have more time than you do. Get advice promptly if you suspect a problem.

What to do next

• Write down what you noticed and when you first noticed it.
• Collect the will or trust document, statements, emails and any accounts you received.
• Do not confront the trustee in a way that could lead to records disappearing.
• Note the dates relevant to the time limits.
• See a lawyer soon to discuss accounts, removal and a possible claim.

Frequently asked questions