Judge Criticizes Costly Estate Litigation: Warns Against Rising Legal Fees in Insolvent Estate’s Passing of Accounts

Judge Criticizes Costly Estate Litigation: Warns Against Rising Legal Fees in Insolvent Estate’s Passing of Accounts

Case: In the Estate of Christina Georgiou Psoma  2025 ONSC 1476 

The case involves a contested passing of accounts concerning the estate of Christina Georgiou Psoma. The applicant, Steve, served as the estate trustee and presented accounts for the period between October 12, 2021, and December 1, 2023.

The objectors, Zevoulla and Panayiotios, raised several concerns, including allegations of improper expenditures and questioned the validity of Christina’s signature on a key document. The dispute also included issues related to an ex parte order compelling Steve to pass his accounts, which he later sought to challenge. The estate was insolvent, and the parties engaged in prolonged litigation over trustee compensation and expenses​.

The court ruled that the estate accounts were passed, subject to adjustments based on specific findings. The court rejected Steve’s challenge to the ex parte order, holding that he had opportunities to appeal or seek to have it set aside but failed to do so. It also found that Steve had not sufficiently rebutted the presumption of resulting trust regarding certain funds. The judgment required the parties to submit revised calculations for estate trustee compensation and cost determinations. The court encouraged settlement to avoid further litigation costs​

The judge noted that legal costs and trustee compensation could exceed the estate’s remaining assets. After settling undisputed post-death expenses, only $5,388.20 remaind in the estate.

The judge expressed skepticism that any scenario would deny the estate trustee recovery of basic legal fees, disbursements, and trustee compensation, as they would likely exceed the estate’s remaining assets​.

The judge strongly criticized the disproportionate litigation costs in relation to the small size of the estate, calling the entire passing of accounts process “ultimately futile” from any practical standpoint​.

He observed that far too much time and expense had been devoted to the matter and urged the parties to stop litigating and avoid throwing good money after bad

The judge reprimanded both sides for escalating costs in an insolvent estate, emphasizing that the dispute had consumed more resources than the estate was worth. He strongly encouraged settlement and warned against continued litigation expenses that would ultimately deplete any remaining funds.

At the time of Christina’s death, her estate was relatively modest and later determined to be insolvent. The key components included:

• Bank Account: Approximately $1,000.
• Canada Pension Plan (CPP) Death Benefit: $2,500.
• Life Insurance Policy: $10,006.16 (but designated to Steve personally, not the estate).
• Real Estate in Cyprus: Originally included in her 2002 will, but she had already transferred all of it during her lifetime, meaning it was no longer part of the estate.
• Funeral and Headstone Costs: Over $20,000, which Steve claimed he personally paid.
• Potential Debts: Including overpayments of WSIB benefits and amounts allegedly owed to Steve.

Since the estate had little cash and Christina had disposed of her real estate before her death, the estate was effectively insolvent, meaning there were more expenses and claims than assets available for distribution

Applicant’s Position (Steve – Estate Trustee)

Steve argued that the ex parte order requiring him to pass accounts was improperly obtained because it lacked full and fair disclosure, and the objectors failed to disclose that he had previously provided an informal accounting in 2022. He contended that the estate was insolvent, meaning there was little to account for, and that the court should not require a costly formal accounting for an estate with no remaining assets.

He maintained that he acted properly as estate trustee, fulfilling his duties in good faith, and that any allegations of mismanagement were unsubstantiated.

He claimed that the joint bank account with Christina was intended for his benefit and did not belong to the estate, asserting that Christina had gifted him the funds before her death. He defended his use of life insurance proceeds ($10,006.16), stating that Christina had instructed him verbally to distribute the money to specific family members and friends, and that he was under no obligation to use the funds for estate expenses.

He rejected claims that jewelry and cash were missing, stating that there was no evidence of such assets at the time of Christina’s death.

Objectors’ Position (Zevoulla and Panayiotios – Beneficiaries):

The objectors challenged the legitimacy of the ex parte order but insisted it was necessary due to Steve’s failure to provide transparency about the estate’s administration. They alleged that Steve failed to properly account for estate assets, particularly regarding funds from a joint bank account, which they claimed belonged to the estate and were not a gift to Steve.

They argued that Christina’s life insurance proceeds should have been used for her funeral and estate expenses, rather than being distributed at Steve’s discretion. They questioned the validity of Christina’s signature on a key document (the roofing agreement), claiming it may have been forged or obtained improperly.

They asserted that Steve personally benefited from estate funds and alleged that jewelry and cash Christina owned before her death were missing and not accounted for. They maintained that Steve should have formally probated the will, ensuring a transparent administration of the estate rather than handling it privately.

Applicable Law:

Rules of Civil Procedure, Rules 74.15(1)(h) & 74.15(2)

Allows a financially interested party in an estate to bring a motion requiring the estate trustee to pass accounts.

Rule 39.01(6) – Full and Fair Disclosure Requirement in Ex Parte Applications

Requires full and fair disclosure in ex parte applications, emphasizing that failure to do so can justify setting aside the order.

Ontario Evidence Act, Section 13 – Corroboration Requirement

Requires corroboration for claims made by an interested party regarding a deceased person’s actions or statements.

Presumption of Resulting Trust

Courts presume that a transferor of property retains beneficial ownership unless there is evidence to the contrary.

Equitable Jurisdiction to Prevent Unjust Enrichment

The court can impose a constructive trust to prevent the use of legislation as an instrument of fraud

Lessons Learned

The court emphasized that estate litigation should be proportional to the value of the estate. Estate trustees should ensure early transparency to avoid unnecessary disputes. Beneficiaries must act promptly if they wish to challenge ex parte orders. Clear estate planning documents can prevent conflicts over joint accounts, life insurance, and gifts. Legal fees can consume an entire estate, making litigation financially futile. Courts encourage settlement to avoid excessive legal costs. Mediation and early resolution should be prioritized over lengthy court battles.

For experienced guidance on estate disputes, Bobila Walker Law provides strategic solutions to protect your interests.