Estate Litigation Blog

No Two-Year Limitation Period for Passing of Accounts


by Mitchell Rattner, Published: December 10, 2018

Tags: armitage v. the salvation army,  estate litigation,  fiduciary,  passing of accounts,  power of attorney,  trustee,  wall v. shaw,  wills and estates

Attorneys for property and estate trustees have a legal obligation to maintain complete and accurate accounts of the transactions which they undertake in the course of performing their duties.  Passing of accounts refers to the process of obtaining the Court's approval of the accounts.

In 2016, and again, in 2018, the Ontario Court of Appeal (“ONCA”) considered whether a passing of accounts application, and a notice of objection to accounts are subject to the standard two-year limitation period, provided in the Limitations Act.

Specifically, section 4 of the Limitations Act provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 

In 2016, the ONCA rendered its decision in Armitage v. The Salvation Army(“Armitage”). The Court held that an application to pass accounts (in this case, by an attorney for property) is not a “claim” within the meaning of the Limitations Act, and therefore is not subject to the two-year limitation period.

In its 2018 decision in Wall v Shaw (“Wall”), the ONCA, sitting as Divisional Court, considered the issue of whether the two-year limitation period applies to the filing of a notice of objection to accounts. In this case, the estate trustee brought an application to pass accounts. Some of the accounts pre-dated the issuance of the application by more than two years. A beneficiary filed a notice of objection in response, and the estate trustee then moved to strike the objections on the basis that they dealt with issues pre-dating the issuance of the application by more than two years.  The ONCA upheld the Application Judge’s decision in finding that filing a notice of objection does not commence a proceeding in respect of a claim, as within the meaning of the Limitations Act.

The first issue considered by the ONCA was whether a notice of objection commences a proceeding, within the meaning of the Limitations Act. The Court concluded that an application to pass accounts commences a proceeding, whereas a notice of objection does not. The ONCA also agreed with the Application Judge’s reliance on Armitage, stating that: “if the estate trustee’s initial application to pass accounts is not a ‘claim’ within the meaning of the Limitations Act, then neither is a responding objection made by the beneficiary within that proceeding” (para 37).

The ONCA further distinguished an application to pass accounts from a typical civil claim. While a trustee may be ordered by the Court to repay a sum of money, by way of damages or otherwise, the payment is made to the estate, and not to one or more of the claimants as a personal remedy.

Finally, the ONCA noted that it would be inequitable as between the beneficiaries and trustee to impose a two-year limitation period regarding notices of objection. Hypothetically, if a trustee wished to avoid scrutiny, he/she would only need to “wait out” the limitation period to avoid scrutiny. To avoid that scenario, the Court writes, beneficiaries would be required to compel yearly passings of accounts, which in turn would unnecessarily increase the amount of litigation in the province.

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