Estate trustees can be held personally liable for legal costs if their actions are found to be self-serving or contrary to the estate’s best interests. As confirmed in MacBeth Estate v. MacBeth, 2025 ONCA 360, trustees who pursue unnecessary litigation or appeals may be denied indemnity from the estate and ordered to pay costs personally. The Ontario Court of Appeal upheld an order removing two estate trustees and ordered them to personally pay $21,000 in costs, finding that their appeal was unnecessary and not in the interest of the estate.

Background

The appellants, Robert and Catherine Hurst, were named estate trustees under the will of Ruth Eileen Stevens MacBeth. Her son, John MacBeth, was the sole residuary beneficiary. At a March 2024 case conference, John indicated his intent to bring a motion to remove the Hursts as trustees. His motion, served in May 2024, alleged that the Hursts:

• failed to inform him of their intention to sell the family cottage,

• impeded his efforts to collect his belongings from the property,

• sold the cottage to a third party rather than transferring it to him directly, resulting in approximately $600,000 in avoidable capital gains taxes despite prior warning.

The appellants sought an adjournment due to Robert Hurst’s cancer diagnosis, but John’s counsel refused consent. The Hursts later offered to resign in exchange for a $450,000 holdback from the estate. John made a counteroffer proposing a $100,000 holdback. The parties did not reach agreement.

Motion Decision

On June 10, 2024, the Superior Court motion judge declined to grant an adjournment and proceeded to hear the motion. During submissions, both parties filed their respective offers to settle. The judge granted John’s motion, removing the Hursts as trustees and appointing John in their place. She also imposed a $50,000 holdback to allow for partial coverage of the appellants’ legal costs pending the passing of accounts.

The motion judge emphasized the court’s primary concern: the beneficiary’s interests. She found that John had lost all trust in the appellants and that their actions—particularly the mishandling of the cottage sale—constituted clear grounds for removal.

Appeal Dismissed

The Ontario Court of Appeal dismissed the appeal in its entirety. The panel found no basis to interfere with the discretionary decisions of the motion judge:

• Removal as Trustees: The court affirmed that removal of a trustee is a high-threshold, discretionary remedy, justified here by compelling evidence of mismanagement and loss of beneficiary trust.

• Adjournment: The court found that the motion judge appropriately considered the factors set out in Toronto Dominion Bank v. Hylton, including prejudice to John caused by delay. The decision to deny an adjournment was within her discretion.

• Holdback: Although no formal motion was brought regarding a holdback, the court found that the appellants introduced the issue strategically during the hearing via their offer to settle. The judge heard submissions on the issue and exercised her equitable jurisdiction to impose a modest holdback.

Importantly, the Court of Appeal noted that the appellants remain entitled to seek reimbursement for reasonable trustee expenses and costs of the passing of accounts in a separate proceeding.

Costs Award

The Court ordered the appellants to personally pay $21,000 in partial indemnity costs to the respondent. The court emphasized that the appeal was not brought in the interests of the estate and warranted personal cost consequences.

Lessons Learned

1. Trustee removal requires clear evidence—but loss of beneficiary trust can be enough.
The Court reaffirmed that removal of a trustee is a high-threshold, discretionary remedy. However, when the sole beneficiary loses all trust and confidence in the trustees—especially amid evidence of mismanagement—that can justify removal. Courts prioritize the interests of beneficiaries over preserving trustee appointments.

2. Mismanaging estate property can amount to a breach of fiduciary duty.
The trustees failed to consult the beneficiary and ignored tax advice when selling estate property, triggering $600,000 in avoidable capital gains taxes. Courts will scrutinize estate management decisions, especially where the trustees have acted unilaterally or imprudently.

3. Adjournments are not guaranteed—even in cases involving health issues.
Despite a cancer diagnosis, the adjournment was denied because the judge found insufficient supporting evidence and active litigation steps taken in the interim. Courts will consider the full context, including delay to the estate, fairness to beneficiaries, and procedural history.

4. Strategic mid-hearing offers can backfire.
By filing a settlement offer mid-motion that included a proposed holdback, the appellants effectively put the holdback issue before the court—without a formal cross-motion. Parties should consider how procedural tactics may open the door to unwanted outcomes.

5. Holdbacks and trustee compensation are best addressed at the passing of accounts.
Although a modest $50,000 holdback was ordered, the Court clarified that further claims for compensation and expense reimbursement must be pursued through the formal passing of accounts process, not through appeal or motion shortcuts.

6. Appeals not in the interest of the estate attract personal cost consequences.
The Court awarded $21,000 in costs personally against the appellants, holding that the appeal was unnecessary and pursued for personal reasons. This reinforces that trustees risk personal liability when litigating in their own interest under the guise of acting for the estate.

At Bobila Walker Law, we help fiduciaries, beneficiaries, and concerned family members navigate complex estate litigation. Whether you’re facing removal, defending your conduct as a trustee, or concerned about potential personal liability, our experienced Toronto-based team is here to protect your interests with strategic, results-driven representation. Contact us at info@bobilawalkerlaw.com or at 416-847-1859.