Estate Planning

Setting Aside a Default Order Passing Accounts

By Hull and Hull LLP

In the recent case of Re Estate of Assunta Marino, 2010 ONSC 5237 (CanLII), the court granted an order to set aside an unopposed judgment passing accounts obtained by the estate trustee, on a Rule 38.11(1) motion brought by a beneficiary who had failed to file a notice of objection to accounts within the prescribed time.  Justice Brown, presiding, applied the test in HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., 2008 ONCA 894 (CanLII), 2008 ONCA 894, which has three elements: 

(i) whether the motion was brought without delay after the defendant (i.e., the moving beneficiary) learned of the default judgment;

(ii) whether the circumstances giving rise to the default were adequately explained; and

(iii) whether the defendant has an arguable defence on the merits – in order to determine whether the interests of justice favour granting the order.  To that end, the court should consider the potential prejudice to the moving party if the motion were dismissed, the potential prejudice to the respondent if the motion were allowed, and the effect of any order on the overall integrity of the administration of justice. 

The first element was met: time elapsing between the beneficiary learning of the default judgment and the motion was the result of attempted negotiations rather than inactivity, so it was not "delay".  The second element was met by the beneficiary's lawyer filing an affidavit explaining the default.  With respect to the the third element, the beneficiary had raised valid arguable objections, which is analogous to a defence.  The prejudice resulting from a delay in the estate's distribution combined with the fact that the estate trustee had properly engaged the court's legal process to account for his administration was not enough to save the unopposed judgment.  Justice Brown wrote that while the case was close, "significant weight should be given to the need to ensure that fiduciaries fully account for their management of property", and so the order setting aside the default judgment was granted.  Mediation was ordered before further steps in the passing of accounts, and the beneficiary was ordered to pay all of the mediator's costs.

Enjoy your day,

Chris Graham

Full post as published by Toronto Estate Law Blog on October 14, 2010 (boomark / email).