Does a Creditor of the Deceased Have Standing to Intervene in Probate Applications?Magnotta v. Magnotta, 2020 ONSC 316 (CanLII)
The case of Magnotta v. Magnotta is one of those cases that is doubly unfortunate. The circumstances were unfortunate for the participants. Secondly, the ruling in the case may have unfortunate consequences as a precedent in the development of the law. While the decision was no doubt the right one in the unusual circumstances of this case, it should not be generalized to more ordinary situations.
The judge’s ruling in Magnotta decided that a creditor does not have standing to object or move for directions under Rule 75.03 of the Rules of Civil Procedure. I will argue that this is an incorrect conclusion to take away from this case as a general principle for other estates claims. There may be other situations where standing for a creditor is appropriate and important.
The Facts in Magnotta
This case involved members of an Ontario wine-making family. Joseph Magnotta tragically died at the age of 36 from cancer, leaving behind his mother Rossana and his wife Melissa. He had no will and no children, and therefore under the law of intestacy his widow Melissa would inherit his entire estate. Presumptively, the widow was the person with the greatest right to apply to become estate trustee in an intestacy.
However, Joseph’s mother had an unusual reason for wanting to challenge the right of the widow to become estate trustee.
Joseph had been interred in the Magnotta family crypt, and his mother feared that his widow would seek to move Joseph’s remains out of that crypt if she became estate trustee. She therefore brought an application challenging the granting of probate to the widow.
The mother’s ground for bringing the application was that she was a creditor of the estate. The funeral costs are a debt of the estate, and in this case the mother had spent about $45,000 in connection with Joseph’s funeral.
The Succession Law Reform Act defines the net value of the estate as “the value of the property after payment of the charges thereon and the debts, funeral expenses and expenses of administration.” A funeral expense of $45,000 may be considerably higher than average, but it appears that prior to the hearing, the widow had agreed to reimburse the mother from the estate.
Justice Dietrich ruled that there were insufficient grounds for the mother to intervene, particularly as the widow “had sworn an affidavit confirming that she had no intention of exhuming Joseph’s remains.” (para. 37)
The facts stated above ought to have been sufficient to dispose of the objection. However, in granting probate to the widow and appointing her as estate trustee, the judge made a number of assertions about whether a creditor has standing to make an application at all. Applying those conclusions as precedents for other cases would be problematic, and this will be reviewed below.
Does a Creditor Have a Financial Interest in an Estate?
Ontario’s Rules of Civil Procedure provide that anybody “who appears to have a financial interest in the estate” can bring a motion to seek directions from the Court regarding a range of estate issues:
74.15 (1) In addition to a motion under section 9 of the Estates Act, any person who appears to have a financial interest in an estate may move... for an order providing for any other matter that the court directs.
Later, Rule 75.03 allows a person with a financial interest to object to the appointment of an estate trustee.
The issue of who has a financial interest is not defined. Justice Dietrich referred to two earlier cases as authority for a position that only a potential beneficiary has an interest, and not a creditor:
 Rule 75 is not intended to be used by creditors to secure recovery of assets within an estate: Weidenfield, at para. 19. Granting creditors, who have a variety of means to enforce their rights against the estate of a deceased person, standing pursuant to Rule 75 introduces unnecessary complexity into estate procedures: Belz v. Mernick Estate,  O.J. No. 542, at para. 16.
With respect, she misconstrued these earlier cases, which were about different situations where the applicants were not creditors of the estate with actual judgments in their favour.
Weidenfeld v Parikh-Shah, 2016 ONSC 7330 (CanLII), <http://canlii.ca/t/gvsw0> was a case where a deceased woman’s ex-husband (Robert) had been suing her. He had not yet succeeded in getting any judgments, and therefore was not yet an actual creditor of the estate. As stated by Justice Charney in Weidenfeld:
 Robert commenced three different legal proceedings against Hana in April 1996, January 1998 and February 2006. A fourth proceeding was commenced against her estate in September 2016. None of the lawsuits has reached the trial phase, but Robert takes the position that they are all outstanding and active.
 The term “appears to have a financial interest in an estate” is found in both Rules 74 (Estates – Non-Contentious Proceedings) and 75 (Estates – Contentious Proceedings), but is not defined. The term has, however, been the subject of judicial interpretation.
 In HSBC Bank Canada v. Capponi Estate, 2007 CanLII 37889 (ON SC) the Court, relying on Belz v. Mernick Estate (2000), 42 C.P.C. (4th) 357, held that this term does not include persons who are creditors of estate beneficiaries or persons who have separate law suits against the estate.
Therefore, the cases relied on in Magnotta for authority are ones where standing was denied to claimants with unliquidated claims, or creditors of beneficiaries of the estate. In neither case was an actual creditor of the estate before the court.
In another case, Salzman v. Salzman, 2012 ONSC 1733 (CanLII), <http://canlii.ca/t/fqqp0>, the reasoning in Belz was distinguished, where a law firm that had represented the deceased person while she was alive was seeking to collect its unpaid fees from the estate:
 In my view, and with great respect to Justice Haley, there is no reason to limit the applicability of Rule 75.06 solely to issues concerning the validity of a will. I make this conclusion by looking at the content of Rule 75. Certain sub-provisions of Rule 75 do in fact pertain to issues relating to a validity of a will. For example, Rules 75.01 and 75.02 relate to proving a will. Other sub-provisions, however, do not relate to the validity of a will at all. For example, Rules 75.03 – 75.05 relate to issues regarding the issuance of a certificate of appointment of an estate trustee. Rule 75.07 governs service of documents when necessary.
 Most significantly, a court making directions under Rule 75.06 is free to direct “such other procedures as are just”: see 75.06(3)(g). This confers wide discretion to a court to make any procedural directions, not only those relating to the determination of a will’s validity, so long as they are just.
Similarly, in D’Angelo Estate, 2010 ONSC 7244 (CanLII), par. 16, http://canlii.ca/t/2f4qd#par16:
 Denise, on the other hand, is not a beneficiary. Her only financial interest in the estate consists of her entitlement to claim compensation as a named executor. Is this sufficient to give her standing under rule 74.15(1)(i)? Yes. In my opinion, the financial interest contemplated by rule 74.15(1)(i) may be direct, indirect or contingent. An entitlement to claim executor’s compensation is a contingent financial interest in the estate.
Policy Reasons for Giving Creditors Standing
Magnotta was an easy case in which to come to the just conclusion based on its facts, which the judge did. The applicant for probate, the widow, was clearly the most suitable person to be estate trustee. In this case, the debt was small relative to the size of the estate and the creditor was not at any significant risk of not being able to recover it from the trustee. However, that was not a reason to come to a general conclusion that creditors should never be given standing to intervene.
The justice of the situation might be quite different in a case where the debt is considerably larger. In some instances, the debt may exceed the assets in the estate. In such a situation, there is no incentive for the next of kin of an intestate deceased person to seek an appointment as estate trustee. Section 29(3) of the Estates Act contemplates such a situation. If no next of kin seek to be appointed, the court may appoint any other person that it thinks fit where “it appears to the court to be necessary or convenient by reason of the insolvency of the estate of the deceased, or other special circumstances, to appoint some person to be the administrator of the property of the deceased.”
In Ontario, if a creditor seeks to make use of section 29(3) of the Estates Act, it would generally have to seek directions from the court to bring the problem to the attention of the court. That would ordinarily have to be done pursuant to Rule 74.15. It would appear to be contrary to the intent of the Estates Act to suggest that a creditor is not a person with a financial interest in the estate.
There is also a relevant provision in section 32 of the Execution Act, which allows a creditor to execute against the property of a deceased person just as if he was alive. However, section 32 contemplates that there has to be an executor or administrator of the estate to defend the estate's interest. Therefore, unless a creditor has a means of ensuring that an executor is appointed, section 32 would leave the creditor without a remedy.
The Broad Wording “Financial Interest” Extends Beyond Potential Beneficiaries
The class of beneficiaries and potential beneficiaries of an estate is clear: those who are next of kin in an intestacy, those who are named in a will, and those who could potentially become beneficiaries by reason of kinship or dependency if the will is successfully challenged. As a matter of statutory interpretation, it therefore follows that there would be no reason to use a term as broad as “financial interest” unless it was intended to include creditors in addition to potential beneficiaries.
More generally, the principle of the priority of debt in estate matters should be a factor in interpreting the Rules. It has been a principle of estates law since time immemorial that no distribution of the estate can be made to any beneficiaries until all the known debts of the deceased have been paid. This is now codified in the Succession Law Reform Act. An interpretation of the Rules to suggest that a creditor of the deceased does not have a financial interest in the estate would be quite inconsistent with this fundamental principle of estates law.
Peter Spiro is Principal of Spiro Law P.C. and counsel to www.rogersonlaw.com for tax and estate litigation. This article is for general information purposes and you should seek specific advice for your particular case.