In Wall v Shaw, 2018 ONCA 929, the Divisional Court considered for the first time whether the two-year limitation period contained in the Limitations Act, 2002, applies to a notice of objection served in response to a passing of accounts application under the Ontario Estates Act and the Rules of Civil Procedure. The Court held that a notice of objection filed in response to an application by an estate trustee to pass accounts is not the commencement of a “proceeding” or “claim” within the meaning of the Limitations Act, 2002, and therefore is not statute barred, even if the accounts are more than two years old.
In this case, the estate trustee brought an application to pass accounts, including accounts from more than two years prior to the application. In response, beneficiaries of the estate filed notices of objection pursuant to r. 74.18(7) of the Rules of Civil Procedure. The core of the Court’s analysis was the wording of s. 4 of the Limitations Act, 2002, which prohibits a “proceeding” from being commenced in respect of a claim after two years from the day the claim was discovered. The Court noted that a notice of objection does not commence a proceeding. Rather, it is filed in response to an application to pass accounts. The estate trustee argued that the effect of a notice of objection was substantially the same as a counterclaim and therefore commences proceedings. The Court rejected that argument on the basis that the Rules of Civil Procedure include a counterclaim under the definition of action, while none of the definitions of proceedings, actions, or applications include a notice of objection.
The estate trustee also argued that the notice of objection was essentially a claim to remedy a loss suffered by the beneficiaries that occurred as a result of the trustee’s actions, and was therefore a “claim” within the meaning of the Limitations Act, 2002. Section 1 of the Limitations Act, 2002 defines “claim” as a claim to remedy an injury, loss, or damage that occurred as a result of an act or omission. The trustee argued that by seeking a reduction in the amount of compensation that the estate trustee pre-took from the estate, the beneficiary was seeking to “remedy an injury, loss or damage that occurred.” The Court also dismissed this argument, stating that whether a notice of objection to accounts constitutes a “claim” should not depend on the pre-taking of compensation. Rather, a notice of objection serves the same procedural function whether or not compensation has been pre-taken.
Finally, the Court observed that if beneficiaries are precluded from objecting to accounts more than two years old, estate trustees have an incentive to “wait out” the limitation period before bringing applications to pass accounts. In addition, beneficiaries would be required to rebut the presumption that they first knew they had a claim as soon as the estate trustee behaved inappropriately, and likely have to bring annual applications to force trustees to pass accounts, increasing estate litigation. The Court noted that these results would be “perverse” and “unnecessary”.
