Source: http://www.legacylawyers.com/news/2016/02/the-final-step-passing-the-accounts-in-a-contentious-estate/
Timestamp: 2019-04-18 18:31:55+00:00

Document:
All personal representatives and trustees (throughout this paper the term “trustee” represents both a true trustee and personal representative) have a duty to account to persons with a beneficial interest in the estate (Deutschmann Estate v. Fallis, 2011 BCSC 1009 at para. 53, affirmed 2011 BCCA 404).
The origins of the duty to account are traced, as with much of the law in the area of wills and estates, to the Ecclesiastical Courts of England. In his paper “The Last Word: Passing the Accounts in a Contentious Estate”, Scott Kerwin reviews these historical originals in some detail. For our purposes, it suffices to say that over time difficulties arose with policing the duty to account through the Ecclesiastical Courts and its jurisdiction over testamentary matters was eventually replaced by that of the Court of Probate, and today rests with the BC Supreme Court.
99 (1) Unless his or her accounts are approved and consented to in writing by all beneficiaries, or the court otherwise orders, an executor, administrator, trustee under a will and judicial trustee must, within 2 years from the date of the grant of probate or grant of administration or within 2 years from the date of his or her appointment, and every other trustee may at any time obtain from the court an order for passing his or her first accounts, and he or she must pass his or her subsequent accounts at the times the court directs.
3) an account of all monies remaining on hand.
Where all beneficiaries agree with the trustee’s accounts, this requirement is straightforward and the accounts may be passed by consent. This paper, however, focusses on the situation many trustees find themselves in, specifically, with beneficiaries who are either unwilling or unable to consent to pass the accounts.
Beneficiaries may be unhappy with the remuneration being claimed by a trustee, expenditures made from the Estate or Trust, or with other alleged improprieties or deficiencies in the accounting.
Whatever the reason behind the challenge, when accounts do not pass by consent the matter must be brought before the court for a resolution. As a practitioner, understanding the procedural steps required to effect this passing of accounts, and the tools that are available through the Rules to effectively conduct a contested passing of accounts, is fundamental to an efficient and successful resolution.
On March 31, 2014 the new rules dealing with probate and estate administration under the Supreme Court Civil Rules, BC Reg 168/2009, came into effect. While the fundamental duty to account remains the same, the new rules have overhauled the procedures surrounding the passing of accounts. Effective July 1, 2015, additional amendments to the Rules came into force, amending portions of the procedure rules for passing of accounts.
Roger Lee, “Passing Accounts: or, a Passel of Passing Problems” (CLE: Vancouver, November 2005).
Part 25 of the Rules now governs estate matters.
Rule 25-13 deals specifically with remuneration and passing of accounts for estate matters and has been described as “a fairly complete code governing applications relating to passing accounts” (Lau v. Chan, 2015 BCSC 623 at para. 22). Under Rule 25-13(1) “[a] personal representative or a person interested in an estate administered by a personal representative” may apply for a passing of accounts.
Rule 25-14 contains many of the procedural requirements for the passing of contentious accounts, notably those for bringing the application (R. 25-14(1)) and service (R. 25-14(5)). The combined effect of Rules 25-13 and 25-14 is that the procedure for passing of accounts has been streamlined: if there is an existing court file for the estate an application for passing of accounts is brought within this file, without the need for filing a separate petition in a new court file. Where there is no existing court file, however, the process of passing the account may still be initiated under Rule 25-14 by requisition in Form P41. Of course, when passing accounts for a trust, ones looks to the Trustee Act, and commences the passing of accounts by way of a petition.
In addition to the notice of application or requisition filed under Rule 25-14(1), the party initiating the process of a passing of accounts must file two affidavits: A Form P38 Affidavit in Support of Application to Pass Accounts (pursuant to Rule 25-13(2)) and a Form P 40 Statement of Account Affidavit (pursuant to Rule 25-13(6)).
In addition to the above affidavits, if the trustee is attempting a summary passing of the accounts, the trustee must also provide a summary of the work they have done as trustee. In a contentious passing of accounts, thought should be given to whether to provide affidavit evidence of the work done at the stage of obtaining the referral to the Registrar, or whether to wait to have the trustee testify in person as to their work done.
As can be seen, this Rule provides the court with broad discretion to tailor its response appropriately to the accounts at issue.
(iii) are the subject of an order made under Rule 18-1(20)(b).
If the Form P39 certification is filed under Rule 18-1(9), the certificate is binding, subject to appeal, on the persons interested in the estate who had notice of the inquiry, assessment or accounting, consented to the accounts or the remuneration, or are the subject of an order dispensing with service made under Rule 18-1(20)(b).
Given the significance of referrals to the Registrars now available under Rule 25-13, in the next section I explore the referral to the Registrar in more detail, outlining some practical considerations.
Frequently in passings of accounts there are beneficiaries who are minors (or potentially unborn or unascertained). In these circumstances, a passing of accounts cannot be avoided as the minor cannot agree to approve those accounts (see s. 19 of the Infants Act, R.S.B.C. 1996, c. 223).
Rule 25-14 (5) clearly states that the Notice of Application and other application materials must be served on “any other person who may be affected by the order sought”.
The Public Guardian and Trustee does not have the statutory authority to review the accounts of trustees on behalf of minors (unless they are the property guardian for the minor or have been ordered to review the accounts by the court.) The Public Guardian and Trustee will not sign a release or approval for the minor (See par. 3.96 of the Public Guardian and Trustee Handbook (CLE, 2015 update)).
That the proposed litigation guardian has no interest in the proceeding adverse to the person.
In a similar manner, the Court may appoint someone to represent an unborn or unascertained person pursuant to Rule 20-1(6).
Directing service of the Order on all the beneficiaries.
This process will only be possible if the consents of all of the sui juris parties can be obtained, otherwise it will be difficult to persuade a judge that the accounts should be passed in a summary fashion. See Roger Lee’s 2009 Paper, “Passing Accounts: Or, A Passel of Passing Problems p. 8.1.2 – 8.1.3.
It may also be possible attempt to obtain such an Order through the Consent Order process, in certain circumstances.
As mentioned above, in estate matters, the referral to the Registrar for a passing of accounts is now done by application to the court pursuant to Rule 25-13(3), requiring the application to be served pursuant to Rule 25-14(5). This reflects a change from the previous method used by personal representatives under Rule 21-5(70) of applying on a without notice basis for an order referring the passing of accounts to the Registrar. It also differs from the previous route used by beneficiaries, which required them to initiate the process by filing a petition under a new court file.
A Registrar’s jurisdiction, and the limits upon it, are created by the reference order, statute and s. 96 of the Constitution Act, 1867.
On referral for a passing of accounts, the Registrar’s jurisdiction is defined by the referral order. This creates an opportunity at the outset to identify the appropriate terms and conditions for the referral, and to seek relief that may be required from the Supreme Court in complicated and contentious estate matters. Careful thought and consideration should be paid to the terms on which the referral is sought when the passing of accounts will be contentious.
As mentioned above, under Rule 25-13(5) the default position is now that the Registrar’s results will be certified, “unless the court otherwise orders”. This is an important point to note, as it affects the role of the Registrar on referral. Where the Registrar’s results are to be certified, the Registrar’s report is akin to reasons for judgement (thus prompting the Rule 18-1(2) statement that if directed, and filed, the certificate “is binding on the parties to the proceeding”). However, thought and attention must be given to the directions given to the Registrar by the referral Order.
On the other hand, if the court “otherwise orders” that the Registrar’s report not be certified, then the role of the Registrar is altered. Although he or she may still provide his or her opinion on points of law, these will not be binding on the court when it reviews the Registrar’s report. (Laird v. Lyne Estate (Re), 2005 BCCA 437) The Registrar’s primary function in this case is to make findings of fact. As such, where the Registrar’s report is not certified, but rather put before the court for confirmation, the passing of accounts becomes a two-step process with the roles of finders of fact and law being divided between the Registrar and the court.
When bringing an application for passing of accounts, it is therefore useful to consider whether you wish to request the court to “otherwise order” that the Registrar’s report not be certified. On the one hand this will require further time and expense, but on the other it may be useful to have the issues determined by the courts after the Registrar has laid out the facts.
 Some of the directions Ms. Chan seeks would have the court attach to the order for the passing of the accounts terms that would call upon the registrar to construe the underlying trust documents. I refer here to the request the registrar be directed to inquire into and report on things like the validity of the alter ego trust and any exercise by the deceased of a special power of appointment under the trust, or the validity of the terms of paragraphs 9 and 10 of the testamentary instrument of November 13, 2009.
 With respect to these requests, these are matters that this court, and not its registrar, should deal with. If Ms. Chan wishes to question the validity of the alter ego trust and/or paragraphs 9 and 10 of the testamentary instrument, it should bring the appropriate action seeking construction of these documents or attacking their validity.
 Ms. Chan also requests that the court direct the registrar to report on the appropriateness of the manner, timing and proportionality by which the trustees of the alter ego trust funded $5 million to Deborah’s fund, including seeking an assurance and the use of the $5 million insurance monies received by the companies, and the nature and extent of the beneficial interest held by Daphne’s trustee in the Deborah’s fund, including the $5 million added to Deborah’s fund.
 The respondents suggest in argument that the trustees had alternate sources to fund Deborah’s trust (that trust is not before the court on this petition), and that the trustees did not need to take somewhat over $2 million from assets from which she was entitled to benefit. This apparently prompts the request that the registrar be directed to explore the appropriateness of the manner, timing and proportionality of the funding of Deborah’s trust. That, and the further request that the registrar be directed to construe the documents to determine what, if any, beneficial interest Daphne’s trust had, or has, in any portion of Deborah’s fund goes far beyond, in my view, what a court should be directing a registrar to do on a passing of accounts.
 These arguments, if Ms. Chan has these arguments, on matters such as appropriateness, timing and proportionality, are arguments that should be brought to this court and not sent by this court to a registrar.
 I conclude on that point by saying I agree with Registrar Blok when he says of Mr. Curtis that he was unsuccessful on this application and these steps were more in the nature of litigation than in the nature of the passing of accounts proper. Mr. Curtis took on the role of a litigant as opposed to someone who is a beneficiary making a reasonable inquiry. He pursued the action as a litigant. And if the effect of it is that he, being unsuccessful, has to bear the responsibility of costs, then that is his choice.
(10) Before the master, registrar or special referee has concluded a hearing of an inquiry, assessment or accounting, he or she may, in a summary or other manner, ask the opinion of the court on any matter arising in the hearing.
The use of this option ties into the issue of the appropriate jurisdiction of the Registrar, and the importance of framing the issues being referred to the Registrar appropriately at the beginning.
Where there are issues arising out of the fundamental validity of the underlying documents being construed, or the exercise of discretion of the trustee, it may be appropriate for the legal challenge to be brought before the passing of accounts is dealt with.
A party who alleges that there are errors or omissions in an account must file and serve on all parties of record a notice of those errors with brief particulars.
This Statement of Errors and Omissions is an opportunity for the party alleging errors in an account to both set out the specific errors and omissions they will require to be addressed by the Registrar at the hearing, properly falling within his or her jurisdiction, and potentially to request the Registrar to seek the opinion of the court on specific matters under Rule 18-1(10) (where appropriate).
The Statement of Errors and Omissions is filed with the court, and should be given appropriate thought and consideration. The trustee should require any beneficiary to provide it to them before attending at the first pre-hearing conference, and a beneficiary contesting accounts should draft the Statement of Errors and Omissions with thought and care, to ensure their issues are appropriate dealt with at the hearing.
… to ensure reasonable pre-hearing disclosure and preparation so that when the hearing takes place it is done fairly and efficiently and there is much less likelihood that a party will complain of ambush and request an adjournment.
Byl v. Carrier Lumber Ltd., 2003 BCSC 1337 at para.11.
This Administrative Notice sets out the circumstances in which a pre-hearing conference may be required to be held in respect of matters to be heard before a registrar of the court. The purpose of a pre-hearing conference is to assist in defining the issues that may be before the registrar and to make directions (as appropriate) in respect of (a) the production of documents; (b) oral examinations for discovery; (c) service of notices to admit; (d) service of experts’ reports; (e) service of witness lists; (f) any other matter that may assist in the just and efficient determination of the issues (see Rule 23-6(5) of the Supreme Court Civil Rules and Rule 22-7(5) of the Supreme Court Family Rules). This Administrative Notice is being issued to ensure consistency in service throughout the Province and to assist Supreme Court Scheduling in booking hearings before a registrar.
d. All matters estimated to require, in Vancouver, New Westminster and Victoria, one day or longer of hearing time; and in all other locations, one half day or longer of hearing time.
2. If any of the above circumstances apply, a party should obtain a date for the pre-hearing conference from Supreme Court Scheduling.
3. In registries where the appointment date is obtained at the same time as the prehearing conference date, both dates should appear on the Appointment.
4. In registries where the appointment date will not be set until after the prehearing conference, the subsequent Appointment hearing date may be set by Requisition and the fee for filing the Requisition (if any) will be waived. The Appointment should indicate on its face that the hearing date will be set after completion of the pre-hearing conference.
The pre-hearing conference is a critical tool in a contentious passing of accounts in establishing the manner in which the passing of accounts will proceed on a procedural basis, including production of documents, examinations for discovery, use of notices to admit, service of experts reports and service of witness list, as well as any other matter for the just and efficient determination of the issues.
Given the issues that must be determined, the amount of time required for the pre-hearing conference is appropriate to consider. There is also the potential for more than one pre-hearing conference, should that be required.
As a result, the pre-hearing conference is a critical tool for parties to obtain directions from the Registrar that will streamline the process for the passing of accounts. Given the nature of some of the more contentious passing of accounts, there may be the need for more than one prehearing conference.
Although there is no provision within the Rules to have one Registrar assigned as the pre-hearing conference Registrar, it may be a consideration to consider an agreement between counsel, together with the approval of the Registrar, for one Registrar to hear all pre-hearing matters.
Normally, where a Registrar issues directions at a pre-hearing conference these directions are followed, fulfilling the purpose of the conference. However, it is important to be aware of the distinction between orders and directions, and to clarify the nature of the Registrar’s ruling.
 Thus at pre-hearing conferences Registrars, and Masters sitting as Registrars, typically make directions or orders of various sorts for the pre-hearing preparation of the proceedings. It must be noted, however, that very little of this procedure is set out or prescribed in either the Legal Profession Act or the Rules of Court.
Not all decisions of a mater or registrar are subject to appeal under Rule 23-6(8). Directors by a master or registrar given for the conduct of a hearing at a prehearing conference or a ruling relating to the admission of evidence or production of documents will not found an appeal separate from an appeal on the merits. So long as the decision is identifiably an order or decision it may be appealed in chambers under Rule 22-1(1)(d). But in many cases a registrar will perform a ministerial act which does not involve the making of any order or decision within the meaning of 23-6(8) … There is no provision from an appeal from such a ministerial act.
It is wise to consider asking the Registrar for clarification at the pre-hearing conference as to whether they are making orders, which should be reflected in an entered Order, or directions.
The entitlement of a beneficiary to production of trust documents, and the scope of that entitlement, often arises at a pre-hearing conference. There is a significant body of law with respect to the entitlement of beneficiaries to trust documents. This law is extensively dealt with in Rhys Davies, QC’s paper “Beneficiaries’ Right to Documents from Their Trustee or Their Executor” (CLEBC: Vancouver, Estate Litigation – 2005 Update) and updated by Lauren Blake in her paper “Legal Entitlements of Beneficiaries in Discretionary Trusts” (PBLI, Trusts: Beyond the Basics, June 10, 2014).
When trust documents are necessary for the purposes of preparing for the passing of accounts, requesting disclosure of the required trust documents should be made at the pre-hearing conference, with reference to the supporting case law.
(b) during the process of the contested passing of accounts occurring.
Careful consideration must occur as how to proceed when allegations such as these are brought against the trustee.
However, the postponement is not automatic, and counsel should be aware that there have been circumstances in which the Court has declined to order a postponement. See, for example, Laird v. Lyne Estate, 2005 BCCA 347 where the BC Court of Appeal declined to reinstate an appeal of Gerow J’s refusal to interfere with Master Baker’s “judgment” call not to adjourn the Registrar’s hearing while there was an outstanding breach of trust action.
If, in fact, a beneficiary either discovers or determines they have a cause of action against the trustee in the middle of a contested passing of accounts, consideration must be given to the procedural decisions the beneficiary must then make. They must consider the appropriate forum within which to raise the issue they wish to, and how to handle the overlap between the Registrar’s hearing and their potential action against the trustee.
The parties have a number of options in these circumstances. If, during the course of the passing of accounts, facts are revealed that may give rise to a claim for breach of trust or some other cause of action, one option is for a party to request that the Registrar ask the opinion of the court on the issue pursuant to Rule 18- 1(1)). Having the issue referred to the court would likely result in the legal issue being placed on the litigation track. In circumstances where there is already a pending action against the executor, the beneficiary could also simply adjourn the Registrar’s hearing pending the outcome of the action.
However, there may be practical reasons why a party simply wishes to press ahead with the passing of accounts, even in the face of a pending or potential claim against the executor. The Registrar’s hearing may provide a more expeditious and less expensive forum to deal with some, if not all, of the issues between the parties. The question then arises as to how far a Registrar is likely to go on a passing of accounts in considering evidence relating to matters such as resulting trust and breach of trust which could form the subject matter of separate litigation.
(See Amy Francis and Claire Wilson, above, p. 5.1.7 to 8).
Finally, parties should weight the potential cost savings of dealing with numerous issues at the Registrar’s hearing with the potential findings of fact made by a Registrar on the basis of an evidentiary record that may be limited by the lack of discovery and other pre-trial evidence-gathering tools clearly provided by the Rules. Whether the Registrar’s Report is conclusively binding, or must be referred to the Supreme Court for confirmation, upon conclusion the Order of the Court that issues when either made or confirmed would “conclusively determine those issues before the court on the confirmation application”. (For further discussion, see Amy Francis and Claire Wilson, above, p. 5.1.8).
It is likely that in a contested passing of accounts, issues of the appropriate remuneration for the trustee, and indemnification for their legal fees and other incurred expenses will be raised.
….a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate….
As alluded to in the introduction, disputes about a trustee’s remuneration can often precipitate a contested passing of accounts. On a passing of accounts, the Registrar will assess the trustee’s claimed remuneration. Relevant to this assessment are the magnitude of the estate; the care and responsibility involved; the time occupied in the administration of the estate; the skill and ability displayed; and the success achieved in the final result (Re Newton Trust, 2005 BCSC 1049 at para.128, citing Re Toronto General Trusts Corporation v. Central Ontario Railway Company 1905), 6 O.W.R. 350 (Ont. H.C.) and Re McColl Estate (1968), 65 W.W.R. 110 (B.C.S.C.)).
The Registrar may also have to consider whether the trustee should be indemnified for legal costs, and other disbursements, properly incurred in the discharge of his or her duties.
Whether legal fees were properly incurred is a distinct issue from the appropriateness of a lawyer’s fees. The former is an appropriate consideration on a passing of accounts, while the latter is a separate matter to be dealt with by way of review under the Legal Profession Act, S.B.C. 1998, c. 9.
Further discussion on this topic is provided by Scott Kerwin in his paper “Passing of Accounts and the New Probate Rules” and in Chapter 17 of the Probate Manual, cited above.

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