BC Contested Wills: Removing Executors or Trustees and Grounds for Replacement

Removing Executors or Trustees and Grounds for Replacement

Trevor Todd and Jackson Todd have over sixty years of estate litigation practice, including removing executors and trustees

 

Removing executors or trustee is one of the most common enquiries that I receive.

The matter is both intriguing and somewhat complex, largely due to historical developments concerning the legal differences between the role of an executor and a trustee.

1. Voluntarily Removing Executors

The personal representative is sometimes just as fed up with the beneficiaries as the latter are with the handling of the estate. On such occasions, a personal representative may be prepared to simply resign. The law however is not as a straightforward as is the simple proposition of resignation. The difficulty is caused by the legal fact that a personal representative is firstly an executor, and then later, a trustee of the estate. The general consensus of most British Columbia practitioners is that a personal representative becomes a trustee once he or she has completed his or her duties by collecting all of the assets and paying all the debts of the estate. The personal representative then holds the remaining assets as trustee for the estate, and distributes the assets in accordance with the will or laws of intestacy. It is often difficult to determine exactly when this conversion from an executor to a trustee occurs. We are all familiar with the general principle of “once an executor, always an executor”. Many personal representatives have attempted in the past to simply resign from their office by way of a deed. The courts have generally speaking not allowed this to occur. In Re McLean (1982),37 O.R. (2d) 164, Justice Osbourne stated: “Section 2 of the Trustee Act establishes a procedure whereby a trustee may resign by deed, while executors may only be removed from their office by the court pursuant to Section 37. This reflects the common-law principle that the function of an executor and trustee are different and separate. After the executor has fully administered the estate, the role of trustee is assumed. This however does not mean that the person appointed to fill both functions ceases to be an executor merely because that function has been performed.” The judge held that a person can resign as a trustee, yet continue as executor. However to resign as executor, an application would have to be made under the usual court application procedures. In Re Berg Estate (1994) 90 B.C.L.R. (2d) 237 Chief Justice Esson (as he then was), in deciding an application for removal of an executor and the appointment of a replacement, found that he must follow the direction of Section 26 of the Estate Administration Act, for the removal and replacement of a trustee who continues to hold the office of executor, and that it must be dealt with by Sections 27-32 of the Estate Administration Act, rather than the provisions of the Trustee Act. Justice Esson found that Section 30 of the Estate Administration Act was a specific section dealing specifically with those who are both trustees and executors, rather than the general provisions of the Trustee Act, which only refers to trustees. The general provisions of the Trustee Act, must defer to the specific provisions of the Estate Administration Act. As a result of this case, in British Columbia it is likely that in order to obtain the voluntary discharge of a personal representative, it is necessary to go through the process as set forth in Sections 27-30 of the Estate Administration Act, and not proceed by the mere discharge by deed alone. The formal process for discharge is set out in Sections 27-30 of the Estate Administration Act. The matter is brought before the court by notice of motion with supporting affidavits, setting out the reasons for removing executors voluntarily. In order to be discharged, the personal representative must have passed his or her accounts pursuant to Section 99 of the Trustee Act, or alternatively, has obtained the consents of all the parties involved. The court must appoint a new personal representative in the place of the one who was discharged, unless the estate has been completed or the court determines that it is unnecessary.

2. Involuntarily Removing Executors

The courts have historically been very reluctant in removing executors. There is some case authority for the proposition that the courts in fact do not even have power in removing executors at all, regardless of improper conduct, until the executor has become a trustee, and it is difficult to determine just when this has occurred. The courts have an inherent jurisdiction to govern trustee’s and personal representative’s actions to ensure that they are fulfilling their duties, but it is doubtful that the courts have an inherent jurisdiction to removing executors. If an application is being considered for removing executors (as opposed to a trustee), then the proper recourse is to apply under Section 97 of the Trustee Act, for an order restraining the executor from acting any further, and for the appointment of a judicial trustee in his or her place. With respect to the removal of an administrator, the courts would likely find that they have the inherent jurisdiction to do so, since the powers of an administrator arise from a court order. However, as with an executor, it may also be required that an order be obtained restraining the administrator from acting further, and for the replacement of a new trustee . Section 30 of the Trustee Act states: “A trustee or receiver appointed by any court may be removed and a trustee, trustees or receiver substituted in place of him or her, at any time on application to the court by any trust beneficiary who is not under legal disability, with the consent and approval of a majority in interest and number of the trust beneficiaries who are also not under legal disability”. Section 31 of the Trustee Act states: “If it is expedient to appoint a new trustee and it is found inexpedient, difficult, or impracticable to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of making the order, and either in substitution for or in addition to any existing trustees”.

3. Power of the Court to Pass Over an Executor

In Mortimer on Probate 2nd ed., p.209, the learned author states: “Where a will has been made, and an executor appointed, “the court cannot exercise any discretion as to granting or refusing probate. If probate is refused, it must be on the ground of some legal disability, recognized and allowed by the common law. For an executor is but a trustee for the deceased, and such person as the testator thought proper to appoint for that office, without any previous qualification; nobody can add qualifications to him other than those which the testator has imposed, but he shall be who, and in what manner, the testator shall judge proper”. Many cases have stated that the right of a testator to nominate the executor to administer his estate should not be lightly interfered with. (see Re Agnew Estate (1941) 3 W.W.R.723) That case also stated that, apart from statute, a court of probate had no right to refuse probate to an executor named in a will unless he was legally incompetent to act. Ill will or animosity displayed between the parties is in itself not a sufficient ground to pass over an executor. In Re Wolfe Estate, 21 W.W.R. 85, B.C.C.A., the court held that under Section 92 of the Trustee Act, it is within the judicial discretion of the Supreme Court or judge thereof to appoint a judicial trustee before the grant of letters probate or letters of administration in place of an executor or person entitled to administration. Re Haggerty Estate, 60 W.W.R. 574 held that Section 9 of the Estate Administration Act confers a limited and unusual discretion on a court to pass over a named executor “by reason of special circumstances”. In that case a grant was refused where the named executor had within the last year been convicted of a crime involving misappropriation of estate funds. The court stated that while a testator’s choice of executor should not be lightly interfered with, this was a proper case where discretion should be exercised by refusing the grant to the named executor. The court discussed a long line of authorities that evidence of bad character alone is not a sufficient ground for refusing a grant. In fact, in Re Oughton, 40 E.T.R. 296, the notorious sex offender Oughton who was sentenced to an indeterminate sentence was not passed over as executor, on the basis that his circumstances were not sufficient to justify passing him over. In Stadelmier vs Hoffman 25 E.T.R. 174 however, the court passed over one of four named executors, where the other three intended to bring action against the fourth on the basis of undue influence with respect to some large inter vivos gifts. The court exercised its discretion to pass over due to the position of actual conflict that the fourth executor was in. He could not in his capacity of executor attack the gift to himself, while at the same time maintain in his personal capacity that the gifts were proper.

4. Grounds for Removal and Replacement of a Trustee 

A. General Principles The most commonly quoted case in this area of the law is Letterstedt v Boers, 9 App. Cas. 371, which stated that the welfare of the beneficiaries of the trust is the primary concern. Lord Blackburn quoted Story’s Equity Jurisprudence, s.1287 and stated: “Story says, but in cases of positive misconduct, courts of equity have no difficulty in interposing to remove trustees who have abused their trust; it is not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce courts of equity to adopt such a course. But the acts or omissions must be such as to endanger the trust property or show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity”. The learned Judge held that the main guide for the courts must be the welfare of the beneficiaries.. B. Leading Case in British Columbia In the decision of Conroy v. Stokes, (1952) 4 D.L.R. 124 (B.C.C.A.), the court set out the test for the removal of a trustee. In that decision the Court was considering an appeal where the trial Judge removed trustees appointed under a will due to friction that had developed between the applicants and the trustees. An application was made under Section 30 of the Trustee Act which allowed the courts to remove and replace trustees where it “shall be expedient to appoint a new trustee”. The Court of Appeal applied the decision of Forster v. Davies (1861) 45 E.R. 1134 to the effect that: “The mere fact of there being a dissension between one of the several cestquis que trust and the trustee is not a sufficient ground for this court removing that trustee from the trust.” The court went on to quote with approval the test enunciated in Lettersteht v Boers (1884), 9 App. Cas. 371 where it was stated that in order to justify the removal of the trustee it must be shown that the acts or omission must be such as to endanger the trust property or to show a want of honesty, or want of proper capacity to execute the duties, or want of reasonable fidelity. Accordingly, the test as set out in Conroy V. Stokes can be stated as follows: In order to remove a trustee it must be shown that his or her acts or omissions either a) in danger trust property or, b) demonstrate dishonesty; or c) incapacity; or d) a lack of reasonable good-faith. Most of the recent cases demonstrate that the critical aspect of such an application is evidence that the trust property has been or is endangered by the conduct of the trustee. It therefore seems clear in law that while it is often the friction between the parties that causes the client to seek counsel, it is insufficient as a ground for removing a trustee unless the friction endangers trust property or otherwise demonstrates dishonesty, incapacity, or a lack of reasonable good-faith. It is essential that counsel critically consider the evidentiary basis for removing a trustee prior to bringing on such an application. The practitioner must analyze the particular family dynamics that are involved. There are increasingly more and more contested claims between siblings, step siblings, step parents and the like. While the clients will typically tell a tale of horror, embezzlement, and high handedness, it again must be stressed that the practitioner must carefully examine the aforesaid legal test, prior to rushing off to court to attempt to remove the offending trustee. The courts will also on occasions, gives the executor another chance to remedy the default or face being removed. The court will view a loss to the estate that is caused by inadvertence more tolerably then they will view a loss due to a breach of duty for personal gain, dishonesty, or incapacity.

5. Specific Conduct or Circumstances 

A) Bad character in itself is not sufficient ground for refusing a grant. See re Haggerty estate, and re Oughton estate; B) Hostility between the trustee and the beneficiaries; There must be more then mere friction or dissension, it must be near impossible for the trustee to act impartially and objectively (see Conroy V. Stokes); C) Dissension between trustees When the continued administration of the trust has by virtue of a situation arising between the trustees so that it has become impossible or improbable, the trustees were removed and a trust company up appointed (see re Consiglio Trusts ( No.1) (1973), 3 O.R. 326); D) Failure to pass accounts This is generally not sufficient to remove a trustee or a personal representative unless persisted in. A trustee has two years to pass accounts pursuant to the provision of the Trustee Act (see re Adams (1989) 62 D.L.R. (4th) 758 ( B.C.C.A.), and Conroy V. Stokes); E) Conflict of interest and duty (i) The question is whether it would be difficult for the trustee to act with impartiality (see Re Walter W. Shaw Company Ltd. (1922), 3 W.W. R. 119) (ii) It is not a conflict of interest and duty requiring the removal of a trustee where the trustee is also a beneficiary. (see Gillespie v Gillespie unreported, February 13,1991, Vancouver Registry No. C851522); (iii) In Stadelmier v. Hoffman 25 E.T.R. 174, the court passed over one of four named executors who had received a large inter vivos gift from the deceased, which was being attacked by the other three executors. The court found this to be an actual conflict of interest. F) Claims by an executor against the estate (a) The court used Section 31 of the Trustee Act to remove and replace a trustee who made a claim for compensation for services provided to the deceased (see Mardesic v Vukovich estate (1988), 30 B.C.L.R. (2d) 170); (b) An ongoing claim under the Family Relations Act by a widow who was executrix (see Harrison v Harrison (1982), 40 B.C.L.R. 143); G) Claims by the estate against the executor (a) Hall v. Hall (1983), 45 B.C.L.R. 154, where a claim was made by the estate against the trustee for breach of trust; H) Breach of Fiduciary Duty In Szpradowski v. Szpradowski (December 4,1991), Victoria Registry No. 903850, the court helped in removing executors where it found that the executor had taken money of the estate for his own purposes, had set an interest rate that was inappropriate, and pre took remuneration, was in gross breach of fiduciary duty. I) Failure to make a full and fair disclosure of gifts to the executor prior to the death of the deceased The court will make a presumption that the gift was held in trust for the benefit of the estate and ordered the executor to either pay a fund back to the estate or face removal as executor (see Ilott v. Klaussen ( January 14,1997) Nanaimo No. S14137); J) Intestacy or unwilling or incompetent named executor Section 7 of the Estate Administration Act states as follows: (1) This section applies if (a) a person dies intestate; (b) a person leaves a will, but without having appointed an executor willing and competent to take probate, or (c) the executor at the time of the death of the person resides out of British Columbia and it appears to the court to be necessary or convenient by reason of the insolvency of the estate of the deceased or of other special circumstances to appoint some person to be the administrator of the estate of the deceased, or part of it, other than the person who, but for this section, would have been entitled to a grant of administration. (2) In the circumstances referred to in subsection (1), the court may, in its discretion, appoint a person it thinks fit to be the administrator, on the person giving security the court must direct. (3) An administrator under subsection (2) may be limited or on condition or otherwise, as the court thinks fit.

6. Conclusion

I strongly believe that most estate practitioners will increasingly see an influx of upset beneficiaries in their office to help with removing executors and trustees demanding and replacing them when undesirable. A review of the law in this area quickly demonstrates to the practitioner that such an application is not nearly as straightforward and simple as one might think. The purpose of this paper has been to demonstrate that a careful analysis of the evidence available in order to make such an application must clearly be found and properly analyzed, if such an application is to succeed.

Further reading about removing executors

Court Orders Trustee Removed

Executor/Trustee Removal: The Law Summarized

Removal of an Executor Summarized

Fiduciary Relationships

 

FiduciariesMost of us likely do not give a moment’s notice to the concept of the fiduciary relationships. This concept, however, is an extremely important principle of the common law. It provides a very flexible legal remedy often used used to protect vulnerable individuals who have been wronged by another who holds a position of power over them.

Understanding fiduciary relationships and fiduciary duties is especially important to legal professionals as we are all in fiduciary relationships with our clients.

The focus of this paper will be to explain and give some examples of how fiduciary relationships have been imposed and interpreted by our courts.

Background

As you may know, our common law legal system originally developed from judicial precedents established by English courts beginning almost 1000 years ago. Over the centuries our courts have developed legally recognized rights and duties that arise when persons are in certain relationships with others. For example, the case law developed the principle that a parent has a duty to provide necessaries to his or her child.

A fiduciary duty is the most onerous duty imposed by the common law. It is imposed by the courts whenever they find that a fiduciary relationship exists. The concept originally developed in Roman law and was borrowed by the Courts of Equity who developed the branch of the common law known as equity. These principles of equity are now part of our common law and are used by our modern day courts generally to avoid injustices being perpetrated.

Fiduciary duties originally developed as part of the law of trusts. Thus, fiduciary duties would arise whenever parties made a trust agreement. Under the terms of a trust, the trustee became the legal owner of the property yet owned and managed that property for the benefit of the beneficiary. In such a case, the trustee was said to be in fiduciary relationship with the beneficiary.

Equitable notions of justice demanded that trustees who had undertaken responsibility for the property or affairs of another, should not be permitted to exploit their position for their own benefit at the expense of the beneficiary.

Our courts have expanded this very useful concept of a fiduciary relationship well beyond the law of trusts. Thus, in general terms, modern courts will likely find that a fiduciary relationship exists whenever a relationship of trust or confidence exists between two parties. For example, because clients rely upon the integrity of their lawyer the courts will deem this legal professional to be in a fiduciary relationship with his or her client.

Whenever a fiduciary relationship exists the court will impose fiduciary duties upon the fiduciary who is in a position of trust towards another person.

The essence of a fiduciary relationship is that the fiduciary is in a position of confidence and power over another person and thus must exercise their power or discretion in the other’s best interest.

Simply put where a fiduciary relationship exists, the fiduciary must not make a personal profit from his or her position and must not allow personal interest to conflict with his fiduciary duties. The fiduciary owes a duty of loyalty, a duty to act in good faith and a duty to avoid any conflict of interest or self-interest.

Every fiduciary is required to subordinate his or her own interests to the promotion of the interests of the beneficiary. The law dictates that the fiduciary cannot utilize his or her position of power to their own advantage or to the other’s detriment. Thus, the fiduciary must act solely and selflessly in the interests of the beneficiary.

How do we recognize a fiduciary relationship?

In the decision of Frame v Smith ( 1987) 2 S.C.R. 99 the court set out the following guidelines to help recognize fiduciary relationships, stating as follows :

“Relationships in which a fiduciary obligation has been imposed seem to possess three general characteristics:
(1) The fiduciary has scope for the exercise of some discretion or power.
(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.
(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. ”

Fiduciary relationships are of many different types and can range from giving money to the errand boy who is bound to bring back the change to the most intimate and confidential of trust. For example all professionals handling the affairs of others are typically in a fiduciary relationship with their clients. This would include partners, agents, directors and legal professionals as previously mentionned.

There is no closed category of cases where the courts will find a fiduciary relationship to exist. Indeed they have recognized fiduciary obligations in a wide variety of situations. Here are some examples

Guerin v. The Queen [1984] 2 S.C.R. 335 involved a lawsuit brought by the Musqueam against the federal government who made an agreement to lease their lands in 1958. These lands were 162 acres of superb green space, much of it waterfront, near UBC. The government rented these lands for 75 years to Shaughnessy Golf & Country Club in a sweetheart deal with a rent of merely $29,000. More troublesome yet was the lack of rent escalation for 15 years. Even then the escalation was capped at a maximum of 15 per cent per annum.

The Supreme Court of Canada found that this was an exploitative bargain which was “unconscionable” and a breach of the Crown’s fiduciary duty to the Musqueam nation whose affairs the Crown was managing. The court thus awarded damages of $ 10 million to the Musqueam.

More recently, in Norberg v Wynrib ( 1992) 92 DLR (4th) 449, at 499. McLachlin J. declared that “fiduciary relationships are capable of protecting not only narrow legal and economic interests, but can also serve to defend fundamental human and personal interests”.

In this case Ms. Norberg was a young woman addicted to painkiller medication. She was obtaining these drugs from an elderly doctor, who suggested that he would supply drugs in return for her giving him sexual favours . This casual arrangement of “sex for drugs” continued for some time. When Ms. Norberg asked Dr. Wynrib for help getting off drugs, he advised her simply “to quit”. He continued supplying drugs to Ms. Norberg until she decided, on her own, to go to a rehabilitation centre to get help with her drug addiction.

When the case reached the Supreme Court of Canada, two of the justices found that a fiduciary relationship existed. They found the doctor to be a fiduciary because he was in a relationship of trust and confidence who had the power to exercise a discretion over his patient. This discretion made her particularly vulnerable to any abuse by him and they ruled that the doctor had breached his fiduciary duties to his patient and awarded damages on that basis.

This case is also a good illustration of the courts’ ability to shape the common law to make it more socially responsive and acceptable to the community.

Similarly other decisions have recognized a fiduciary relationship between parent and child and school boards and students.

Another good example of the scope of fiduciary duties is the recent case of Olive Hospitality Inc. v. Woo 2006 BCSC 1554, appeal decision at 2007 BCSC 355. The facts and trial decision are summarized in the opening paragraphs of the appeal decision :

“Olive Hospitality Inc. was engaged in the development of a specialty restaurant franchise in this province, financed by Asian investors seeking entrepreneurial opportunities to facilitate their immigration to Canada. With an investment of $2,178,500 and financing from HSBC Bank Canada, the company had, through its subsidiaries, opened three restaurants and was about to open a fourth as part of a business plan for the eventual operation of 30 restaurants. Tae Soo Woo was a director of the company. He resigned in acrimonious circumstances. He sent a notice of his resignation to the bank and in so doing maliciously defamed the company in statements he made relating to its financial stability. The fourth restaurant was never opened and the investment was then lost when the company sold its assets for $10 and the assumption of some debt.

On the trial of this action, commenced by the company and its subsidiaries against its former director, Madam Justice Ross awarded general and punitive damages of $60,000 for defamation (plus $6,323.39 in respect of funds improperly taken from the company) and $1,088,995 in damages for breach of fiduciary duty based on the value of a lost opportunity to realize a future financial advantage: 23 B.L.R. (4th) 78, 2006 BCSC 1554.”

In this case, the BCCA overturned the trial decision essentially on the basis that the resultant loss to the company had not been properly established. At trial the loss that was proven was actually the loss to the other individual shareholders rather than to the company who was the plaintiff.

The list continues to expand. As this article goes to press, Madame Justice Wedge has very recently reserved in the case of Canucks dispute involving Francesco Aquilini’s purchase of the team. According to press reports Tom Gaglardi and Ryan Beedie have brought that action alleging that Aquilini was their partner and thus owed them the duties of a fiduciary. They allege that he breached those duties by secretly negotiating to purchase the Canucks while they were still attempting to do so.

Powers of Attorney

A common fiduciary relationship is that of a person holding a power of attorney for another. Many B.C. decisions have made it clear that a holder of a power of attorney owes a fiduciary duty to the donor.

For example Kask Estate v. Welsh 2000 BCSC 791 which involved a daughter who held a POA for her elderly father. She succeeding in depleting his estate in the years before his death after he became mentally incompetent. By the time of his death, little was left in the estate. In finding the daughter liable for breach of fiduciary duty, Lysyk J. said as follows :

[24] In that Ms. Welsh held her father’s power of attorney, she owed to him a fiduciary duty: ” It was her duty not to prefer her interest or that of her family over his in the handling of his money which he had entrusted to her. I do not consider that Ms. Welsh determined she would deplete all of what would be her father’s estate once she held his power of attorney and had the opportunity to spend his money. Rather, it seems more probable that she simply found his money to be a ready resource and, instead of preserving it as apart from the costs of maintaining him she was duty bound to do, she spent it. ”

A similar case, Egli (Committee of) v. Egli 2004 BCSC 529, involved a son who had transferred his father’s home and investment accounts to him and his wife under a power of attorney that the father had given him some years before. By the time of the father’s death, the estate had been completely depleted by these inter vivos transfers.

The trial judge ultimately decided that the transfer of the family home was valid however the transfer of an investment account was in breach of the son’s fiduciary duty. The son was thus ordered to compensate his father’s estate for the amounts transferred.

Garson J. stated at paragraph 82:

“It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage (Chapman) The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor. I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members”.

In this case, the judge found the transfer of the house was done with full knowledge and consent however the transfer of the investment account was not.

The principle enunicated in the above case may be somewhat problematic in that, almost invariably, where the holder of the power of attorney executes some transaction which personally benefits the holder, he or she will insist that all was done with the full approval and knowledge of the elderly, frail donor.

In Fraser v Fraser 2000 BCSC 0211, four brothers were assisting their 90 year old mother to manage her financial affairs. One of them, unbeknowst to his three brothers, obtained a power of attorney from their mother without her first obtaining independent legal advice. A few days later he convinced her to take $ 40,000 from her GIC and invest it in Eron Acceptance. This represented 70% of her estate and was clearly a risky investment in which he lost all of her money. Although he did not use the POA to effect the transaction, the judge found that he had obtained the POA specifically for that purpose and would have used it, if necessary.

In finding the defendant liable for the loss, Dillon J. observed as follows :

[26] The defendant breached his fiduciary duty to the plaintiff in conducting himself in this manner when he knew that the plaintiff relied upon him. This fiduciary duty arises in all of the circumstances here, but also arose from the power of attorney whether or not it was actually used in the transaction “… He failed to exercise reasonable care in numerous respects, including: failing to read or understand the investment documents, failing to adequately protect the bulk of the plaintiff’s assets, failing to diversify the investment, failing to obtain independent advice, unreasonably relying on oral representations made at large meetings, investing at high risk in all of the circumstances, failing to obtain the consent and advice of his brothers, and failing to inform the plaintiff or his brothers either before or after the investment. ”

Remedies for Breach of Fiduciary Duties

Whenever a court finds a breach of fiduciary duty, then the fiduciary will be liable to place the beneficiary in that same position as the claimant would have been, had no breach been committed. Equity adopts the position that, where a breach occurs, any gain resulting belongs to the beneficiary whereas any loss is the trustee’s personal loss and full restitution must be made.

A breach of a fiduciary relationship can give rise to a wide range of remedies. Generally speaking, in addition to awarding compensation (damages are the common law remedy, compensation is the equitable remedy) our courts can impose restitutionary remedies such as the constructive trust, rescission, injunctive relief , equitable compensation and tracing and lastly an accounting for profits. Thus a claim of breach of fiduciary duty may open many doors not otherwise available at common law.

Conclusion

Whenever there is an inherent trust relationship between the parties with a corresponding potential for exploitation or damage, our courts are increasingly willing to recognize the existence of a fiduciary relationship and award a remedy for breach of fiduciary duties.

The concept of fiduciary relationships with corresponding fiduciary duties is one of the most sensible and flexible responses of the common law to the modern requirements of justice in individual cases.

Removal of an Executor – Trustee

 

Removing executorDunsdon v Dunsdon 2012 BCSC 1274 has an excellent and brief summary of the law relating to the removal of an executor-trustee, pre WESA as of April 1, 2014 :

[202] Put broadly, a trustee may be removed where his or her acts or omissions endanger the trust property or demonstrate a want of honesty, of reasonable fidelity, or of the proper capacity to execute the duties of office: Conroy v. Stokes [1952] 4 D.L.R. 124 (B.C.C.A.). The existence of friction between the trustee and one or more beneficiaries is usually not sufficient, of itself, to justify removal of the trustee: Erlichman v. Erlichman, 2000 BCSC 173; Re Blitz Estate, 2000 BCSC 1596. However, where there is dissension among the trustees themselves by which the trust administration grinds to a standstill or otherwise hampers the proper administration, the courts tend to remove one or more of them. In those instances, misconduct per se is not an essential prerequisite: Re Consiglio Trusts (No. 1) (1973), 36 D.L.R. (3d) 658 (Ont. C.A.); Wilson v. Heathcote, 2009 BCSC 554.

[203] In all cases, the fundamental guide must be the welfare of the beneficiaries: Letterstedt v. Broers (1884), 9 App. Cas. 371 (South Africa P.C.).

Criteria For Removal of a Trustee

criteria to removeCriteria For Removal of a Trustee:

Grafton v Canada Trust 2012 ONSC 6955 is an interesting case on when a court will or will not remove a trustee.

In this case a 92 year old life tenant in a house of disrepair wanted to borrow $200,000 in a reverse mortgage at % 8 for the purpose of renovating the house she lived in. The capital account to maintain the house had expired in 1999.

The corporate trustee refused to authorize the reverse mortgage and the life tenant sought a court order to remove the trustee.

The court refused to remove the trustee, finding that it was acting in the best interests of both the life tenant as well as the residual beneficiaries. Any monies used to upgrade what was essentially a tear down house would not benefit the residual beneficiaries at all.

The court relied upon Radford v Radford 2008 43 ETR ( 3d) 74 and the five criteria it set out when determining whether to order the removal of a trustee or not:

1. Choice of estate trustee not to be lightly interfered with;

2. Clear necessity for removal must be established;

3. Removal must be the only course to follow;

4. Removal to be guided by the welfare of beneficiaries;

5. Non-removal must likely prevent proper execution of trust

The life tenant bears the onus of satisfying the Court that the removal of Canada Trust is logical and the only course for me to follow.

Clear necessity for removal of Canada Trust has not been established

Given that the court is not to lightly infer with the discretion exercised by the testator (in choosing that act as executors and trustees), as the Weil case, [1961] O.R. 888 at 889 (Ont. C.A.) interference must not only be well justified, but must amount to a case of clear necessity. I cannot see that a basis for justification of the removal has been adequately established; the evidence presented me falls far short of clear necessity. The only justification I see is that Canada Trust disagrees with Ms. Ross’s suggested approach.

Removal must be the only course to follow

The evidence presented me falls far short of proving that there is no other course to take but the removal of Canada Trust as a trustee/executor. Canada Trust proposes selling the property; something the will empowers the trustees and executors to do. The will gives them the “the right to list and sell the property where “it is advisable in the light of future events or circumstances not at this time determinable”.”

[25] It seems apparent that the testator had hoped that the capital account would be sufficient to pay for maintenance of the property over the life tenancies of her daughters, but it fell short. This is the unforeseen circumstance that brings us to the current situation of indebtedness and absence of an ongoing income stream to support the property.

[26] The most problematic factor for me however is that:

Removal must be guided by the welfare of the beneficiaries

Paragraph 103 of Justice Quinn’s Radford v. Wilkins decision cites Crawford v. Jardine, [1997] O.J. No. 5041 (Ont. Ct. (Gen. Div.)) which states that: “In deciding whether to remove an estate trustee, “the court’s main guide should be the welfare of the beneficiaries”.”

[27] While Ms. Ross argues that a reverse mortgage would provide funds to complete the required capital repairs to the foundation for instance, (thereby increasing the value of the property) I am uncertain if that will in fact increase the property value. If a purchaser were only interested in this lakefront property; intending to tear down the cottage for instance, it may well be that the money would have been unnecessarily spent.

Prior Unregistered Trust Takes Priority Over Creditor

Unregistered Trust Agreement and Creditors

Colantonio v Don Park and Mercedes Benz 2013 ONSC involves a dispute between an estate and a creditor with respect to an unregistered trust agreement, and the priority between the two competing claims.

A mother and father purchased a house in 1965, and when the father died in 2003 the mother became the sole owner. The mother shortly thereafter executed a transfer of title in the house to her two sons. Each son was to have an undivided 50% interest in the house while their mother reserved a life interest to herself.

Their mother also signed a declaration of trust which establish that her sons were her bare trustees but she retained the right to have the sons transferred title back to her.

This trust agreement was not registered on title to the house.

In 2006 one son applied to lease an expensive car and claim that he lived at the house and owned the house free and clear. That son subsequently died and the following year the estate agreed to reconvey title to the house back to the mother, so that she could sell the house to fund her assisted living.

At that time it was discovered that the car dealership had executions against the deceased son, which prevented the transfer of clear title being conveyed back to the mother.

The mother brought application, supported by the two estates, for a declaration that she was the legal and beneficial owner of the house.

The court agreed with the mother and found that the evidence of the car lease had little bearing on the determination of the parties interests.

The information in the application did not reflect the sons intentions nor those of her mother as settler of the trust.

The fact that the mother did not provide a motive in creating the trust was not fatal to finding that the trust existed.

The mother made sworn statements that she did not intend that her sons become beneficial owners of the house. When the mother made the sons bare trustees in 2003, she was not yet prepared to give away her house.

In fact the mother intentionally preserve beneficial interest in the house about the sons could not lose it.

The mother intended to convey the house to her sons in trust to herself. The fact that one son mispresented his interest in the house could not undermine his mother’s intention to the property. That sons information was false.

In Young v. LeMon (1985), 3 C.P.C. (2d) 163 (Ont. Dist. Ct), the Ontario District Court held that an un­registered trust agreement takes priority over an execution creditor where the trust instrument was created prior in time to the creditor’s Writ of Fi Fa. This court has recently reiterated the point in Michaud v. Coreslab Struc­tures (Ont.) Inc., 2012 ONSC 355 (Ont. S.C.J.), at para 59, where it stated (quoting Anger and Honsberger, Law of Real Property):

An execution creditor can sell the lands of his debtor under execution but the land to be sold is subject to the charges, liens and equities to which it was subject in the hands of the debtor. Hence, it has been repeatedly held that if there is an unregistered interest outstanding against the lands at the time that execution is lodged with the sheriff, the unregistered interest is entitled to priority over the execution. In other words the execu­tion creditor stands in no better position than his debtor.

It is long established that, “[i]n order to create a trust, there must exist what is commonly referred to as a certainty of intention.” Erb v. R. [1999 CarswellNat 2435 (T.C.C. [General Procedure]), 1999 CanLii 203, at para 27. As explained in Eileen E. Gillese, The Lawof Trusts (1997), at p. 39:

To satisfy the certainty of intention requirement, the court must find an intention that the trustee is placed under an imperative obligation to hold property on trust for the benefit of another. Certainty of intention is a question of construction; the intention is inferred from the nature and manner of the disposition considered as a whole. The language employed must convey more than a moral obligation or a mere wish as to what is to be done with certain property. The language used need not be technical, so long as the intention to create a trust can be found or inferred with certainty.

Duties of a Trustee

Duties of a Trustee

Zimmerman v. McMichael Estate 2010 ONSC 2947, 57 E.T.R. (3d) 101,103 O.R. (3d) 25 is an excellent review of the strict duties that govern the conduct of a trustee.

Deceased were husband and wife and founders of extensive Canadian art collection (Collection) donated to province of Ontario in 1966. The Trustee was an attorney and friend to deceased .
In 2001 deceased executed mirror wills that appointed the other as sole executor and niece and her husband as alternates .
Their Wills left estate to their spouse but if no surviving spouse, residue of estate was to go to Collection after five bequests of $50,000 .
The Husband died November 2003 and wife signed power of attorney appointing trustee as her sole attorney.
In January and February 2004 lawyer prepared trust deed contemplating trustee would settle trust of wife’s property . The Niece then raised questions about trustee’s ability to settle trust in his capacity as attorney and wife executed deed creating trust and authorized all property be transferred to trust except for $250,000 which was held back to satisfy bequests in will.
The Trust deed contained terms that differed from will, including provision that on wife’s death property was to be retained for 21 years rather than immediately being distributed to Collection
The Wife died July 2007 and the niece and her husband were granted certificate of appointment of estate trustee with will.

The Niece and her husband successfully brought application for declaration that power of attorney and trust were void and order that required the trustee to account.

The Law

An attorney is a fiduciary whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith,
for the incapable person’s benefit:
An attorney who receives compensation for managing property must exercise the degree of care, diligence and skill that a person in the business of managing the property of others is required to exercise:

30 A trustee of a trust owes the same duties of loyalty, prudence and good faith that an attorney
for property does pursuant to the S.D.A.: Banton v. Banton. [1998J O.J. No. 3528, 164 D.L.R.
(4th) 176 (Ont. Gen. Div.), at paras. 151 and 152. As a fiduciary, a trustee has three principal
duties:

(a) to carry out the terms of the trust with honesty and due care and attention;
(b) to personally carry out the responsibilities entrusted to him or her and not to delegate those responsibilities; and
(c) to ensure that his own interests do not conflict in any way with his duty to the beneficiaries that he serves.
See: Jenkins & Scott, Compensation & Duties of Estate Trustees, Guardians & Attorneys (Aurora, ON: Canada Law Book, 2006) at p. 12:20, citing the Ontario Law Reform Commission Report on the Law of Trusts – Volume 1 (Toronto: Ministry of the Attorney General, 1984) at p. 23; Donovan W.M. Waters, Waters’ Law of Trusts in Canada, 3d. ed. (Toronto: Thomson Carswell,2005)atp. 877.

(b) The duty to account

31 A trustee has an obligation to keep proper accounts. A trustee must keep a complete record of his/her activities and be in a position at all times to prove that he/she administered the trust prudently and honestly. He/she must have the accounts ready and give full information whenever required: Carmen S. Theriault, Widdifield on Executors and Trustees, 6th ed.(Scarborough, ON: Thomson Carswell, 2002) at p. 13-1; Waters’ Law of Trusts in Canada, above, at p. 1063; Sandford v. Porter, [1889] O.J. No. 43,16 O.A.R. 565 (Ont. C.A.).
32 An attorney for property has the same obligations. An attorney must, in accordance with the regulations established pursuant to the S.D.A., keep accounts of all transactions involving the grantor’s property: s. 32(6). Sub-section 2(1) of Ontario Regulation 100/96 relating to the S.D.A. provides that the accounts maintained by an attorney shall include, among other things:

(a) a list of the incapable person’s assets as of the date of the first transaction by the attorney or guardian on the incapable person’s behalf…;
(b) an on-going list of assets acquired and disposed of on behalf of the incapable person, including the date of and reason for the acquisition or disposition and from or to whom the asset is acquired or disposed;
(c) an on-going list of all money received on behalf of the incapable person, including the amount, date, from whom it was received, the reason for the payment and the particulars of the accounts into which it was deposited;
(d) an on-going list of all money paid out on behalf of the incapable person, including the

amount, date purpose of the payment and to whom it was paid; [and]
(h) an on-going list of all compensation taken by the attorney or guardian, if any, including the amount, date and method of calculation.
33 Sub-section 6(1) of that regulation provides that an attorney shall retain the accounts and records required by the regulation until he/she ceases to have authority and the attorney is discharged by the Court on a passing of accounts under s. 42 of the S.D.A.

34 A trustee must make a proper accounting as a condition precedent to being awarded compensation. Without a proper accounting, the court is unable to assess the conduct of the fiduciary and to determine the compensation to which he or she is entitled. Where a trustee is found to have failed to keep proper accounts and to have been grossly indifferent to his/her fiduciary obligations, he/she may be disentitled to compensation: Widdifield on Executors and Trustees, above, at page 13-7; Gibson, Re, [1930] M.J. No. 34, [1931] 1 D.L.R. 159 (Man. C.A.); Picov Estate, Re, [2000] O.J. No. 682 (Ont. S.C.J.).

35 In Assaf Estate (Re) (2009), 94 O.R. (3d) 561, [2009] O.J. No. 1086 (Ont. S.C.J.), I referred to the following statement in Rodney Hull, Maurice Cullity & Ian Hull, Macdonell, Sheard and Hull on Probate Practice, 4th ed. (Toronto: Carswell, 1996) the authors state at 358-359:
The conduct of an executor or trustee in carrying out his or her duties may be such as to justify the Court in depriving him or her or the right to remuneration; and an executor must make a proper accounting as a condition precedent to being awarded compensatioa But only exceptional misconduct should deprive him or her of the right to remuneration … In general, although an executor may be guilty of neglect and defaults, these, if not dishonest, and capable of being made good in money, do not deprive the executor of the right to compensation although they may influence the amount allowed, [emphasis added]
See also: Sievewright v. Leys (1882), 1 O.R. 375, [1882] OJ. No. 137 (Ont. H.C.); McClenaghan v. Perkins (1902), 5 O.L.R. 129, [1902] O.J. No. 24 (Ont. C.A.); Picov Estate (Re.), above.

36 An attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property has not adequately carried out his/her duties and will be held personally liable for the unsubstantiated withdrawals: Lanthier v. Dufresne Estate, [2002] OJ. No. 3397, [2002] O.T.C. 671 (Ont. S.C.J.) at paras. 52-57; Ronson Estate, Re, [2000] OJ. No. 1294 (Ont. S.C.J.) at paras. 15-20.

c) Misuse of trust funds

44 It is a basic principle of trust law that a trustee is not entitled to use the trust property for his or her own personal benefit. If a trustee cannot account for or explain disbursements or expenses charged against a trust he/she is personally liable to the trust for those disbursements and expenses. This is known as a “surcharge”: See, for example, Jacobs v. Hershorn, [2006] O.J. No. 1333, [2006] O.T.C. 331 (Ont. S.C.J.) at paras. 18-21.
45 Falsification of accounts occurs when there is a disbursement shown on the accounts which the objectors allege is wholly false or in some part erroneous: Picov Estate, Re, above, at para. 25; MacDonnell, Sheard, Hull, Probate Practice, (4th ed.) at p. 350.

The Authority of the Executor

Romans Estate v. Tassone 2009 BCSC 194 is a very good case authority of the executor that reviews the legal authority of an executor appointed under a valid will.

The matter related to the estate of an elderly man who was stricken late in life and
conveyed assets to a friend and named his new apparently much younger female caregiver his sole beneficiary.

The Court found:

The Executor’s Authority

[29] Probate in common form is the procedure by which a will is approved by the Court as the last will of a testator. Probate in solemn form pronounces for the validity of the will. It also confirms the appointment of the person named as executor in the will. The Court issues an order, called the “letters probate”, as proof of his or her authority to deal with the estate.

[30] Executors, however, take their authority not from the letters probate, but from the will itself, and, thus, they may act for the estate from the death of the testator.

[31] Of course, it may be necessary for an executor to act on behalf of the estate pre-emptively, for example, to preserve assets or to make claims and satisfy limitation periods. That said, the author of Feeney’s Canadian Law of Wills, 4th ed. (Toronto: Butterworths, 2000) at s. 7.33, page 7.13 notes that “[a]s a practical matter, however, there is little executors may do, other than pay debts, until letters are issued to them because the letters, for most purposes, are the only recognizable evidence of their authority”.

ER 991 (Ch. D.), Goulding J. referenced earlier jurisprudence noting that an executor’s authority was based on the will, not on obtaining probate, but obtaining probate was necessary to perfect the action and obtain judgement. Goulding J. held that the court should not, even where the defendant is prepared to admit the executor’s title, waive the production of letters probate:

40] The authorities in my view make several matters clear: (1) an action can be commenced without obtaining probate, as an executor’s authority is based on the will, (2) before proceeding with an action already commenced, the parties to an action may require that the Plaintiff prove their authority by producing letters probate, (3) the court may require that a Plaintiff prove their authority, by producing letters probate, of its own motion, when appropriate and (4) the court may order a stay of proceedings any time after the commencement of an action where it is in the interests of justice to do so, pending the issuance of letters probate.

The law seems to be clear that an executor can bring an action in his or her capacity as executor before probate is granted but cannot obtain judgment in the action without probate having been granted: see Chetdyv. Chetdy, [1916] 1 A.C. 603 (P.C.), cited by Allen J. in Harshenin v. Bayoff, [1991] B.C.J. No. 3161 (S.C.).

No Lack of Capacity or Undue Influence – Will Admitted to Probate

Chang Estate v Chang 2013 BCSC 976 is a well considered judgement of Justice Dardi, who had extensive experience in estate litigation prior to her elevation to the Bench.

The testatrix,a widow, died in 2007 at age 98. She and her late husband had four children, and their only daughter the plaintiff, was the youngest. Their three sons were the defendants.

In 1998 the deceased and her husband purchased a house and put one son on title as a joint tenant with his parents. The testatrix and her husband never did live in that property, and that particular son collected the rent and prayed paid the property taxes and expenses , until 2004 when the testatrix paid two thirds of the property taxes and utilities.

In 1997 that sons, son sued his grand mother and grandfather over a dispute that had arisen regarding the property.

The matter went to trial in July 1999 and was dismissed.

The testatrix found those events very distressing and in January 1998 she and her husband severed the joint tenancy , leaving that son with a one third interest as a tenant in common.

 

The testatrix executed her will in July 2000, and her husband executed a reciprocal will at the same time.

The plaintiff was appointed the executrix, and the son with the one third interest in the property was given a $10 bequest, with the remainder of the estate being divided 30% to the plaintiff, 30% to one brother and 40% to the other brother.

 

The will explain the reasons for the minimal bequest to the one son, saying the testatrix and her husband had provided much assistance to him and had given him one third of the Surrey property, from which he had collected all of the rents for his own use.

 

The will also said that he and his family house have caused us much grief, heartache, and unhappiness and shame.

 

The plaintiff applied to prove the will and codicil dated July 2005 in solemn form.

 

The son challenged the validity of the will and codicil on the grounds that the testatrix lacked testamentary capacity and that the will was a product of coercion and or undue influence.

 

The court held that the testatrix had proved on the balance of probabilities that the will was executed in compliance with the statutory formalities, that the testatrix knew and approved of the contents of the will, and that she had testamentary capacity.

 

The professionals who prepared the will gave evidence, and it was proven that both documents were executed after having been read to the testatrix, who appeared to understand the contents.

 

The law presume the testatrix knew and approved of the will and possess the requisite testamentary capacity.

 

The evidence of the testatrix physician and those who prepared the documents and attended upon execution also established attempted testamentary capacity.

 

No suspicious circumstances arose in the facts established by the evidence, nor was there any evidence of undue influence by the plaintiff or anyone else.

Legal Framework

[25] The Supreme Court of Canada in Vout v. Hay, [1995] 2 S.C.R. 876 clarified the principles with respect to the burden of proof in litigation regarding contested wills. The Court articulated the considerations which govern the interrelation of the doctrine of suspicious circumstances and the issues of testamentary capacity, knowledge and approval, undue influence and fraud.

[26] In an action for proof of will in solemn form, the party propounding the will must prove on a balance of probabilities that the will was executed in compliance with the statutory formalities, that the will-maker knew and approved of the contents of the will and that the will-maker had testamentary capacity: Vout at paras. 19-20.

[27] In order to make a valid will, the will-maker must have a “baseline level of mental acuity” or a “disposing mind and memory”, sufficient to appreciate and comprehend the nature and effect of the essential elements of the testamentary act. This encompasses an appreciation of the claims of the persons who are the natural objects of her estate and the extent of her property of which she is disposing: Laszlo v. Lawton, 2013 BCSC 305 at para. 185; Banks v. Goodfellow (1870), L.R.5 Q.B. 549; Leger v. Poirier, [1944] S.C.R. 152 at 161. The assessment of whether a will-maker possesses testamentary capacity is a highly individualized inquiry and is a question of fact to be determined in all the circumstances: James v. Field, 2001 BCCA 267 at para. 51; Laszlo at para. 197.

[28] In certain circumstances, the propounder of the will, in discharging the burden of proof, is aided by a rebuttable presumption of validity. If the will was duly executed in accordance with the requisite statutory formalities after being read over to or by a testator who appeared to understand it, it is presumed the testator possessed the requisite testamentary capacity and knew and approved of its contents:Vout at para. 26.

[29] This presumption may be rebutted by evidence of “well-grounded suspicions”, referred to in the jurisprudence as “suspicious circumstances”, relating to one or more of the following circumstances:

(i) surrounding the preparation of the will;

(ii) tending to call into question the capacity of the will-maker; or

(iii) tending to show that the free will of the will-maker was overborne by acts of coercion or fraud: Vout at para. 25.

[30] If suspicious circumstances are established, then the presumption is spent and the legal burden of proof reverts to the propounder of the will. The propounder of the will then reassumes the legal burden of proving knowledge and approval, as well as proving testamentary capacity, if the suspicious circumstances reflect on the mental capacity of the will-maker to make a will: Woodward v. Grant, 2007 BCSC 1192 at para. 108. In order to discharge the burden, the propounder of the will is required to dispel the suspicious circumstances that have been raised: Ostrander v. Black (1996), 12E.T.R. (2d) 219 at para. 30 (Gen. Div.).

[31] In Vout, the Court affirmed that if a court determines that suspicious circumstances exist, the applicable standard of proof is a balance of probabilities. However, the evidence must be scrutinized in accordance with the gravity of the suspicion raised in any particular case.

[32] In order to rebut the presumption of validity, those attacking the will must meet the threshold of demonstrating that there is some evidence “which, if accepted, would tend to negative knowledge and approval or testamentary capacity”: Vout at para. 27; Maddess v. Racz, 2009 BCCA 539 at para. 31. The court in Scott v. Cousins (2001), 37 E.T.R. (2d) 113 (Ont. S.C.J.) describes the requisite evidence as that which “excites the suspicion of the court”. A “general miasma of suspicion that something unsavoury may have occurred” is insufficient to rebut the presumption of validity; the evidence must raise a “specific and focused suspicion”: Clark v. Nash (1989), 61 D.L.R. (4th) 409 at 425 (B.C.C.A.).

[33] The court in Laszlo provides the following instructive observations regarding the doctrine of suspicious circumstances at para. 207:

Suspicious circumstances have been found to exist in a wide array of situations and are not necessarily sinister in nature. There is no checklist of circumstantial factors that will invariably fit the classification. Commonly occurring themes include where a beneficiary is instrumental in the preparation of the will (especially where the beneficiary stands in a fiduciary position to the testator), or where the will favours “someone who has not previously been the object of [the testator’s] bounty and does not fall within the class of persons testators usually remember in their wills, that is to say their next of kin.

Undue Influence

[34] When undue influence or fraud is alleged, the party opposing probate always bears the legal burden of proving on a balance of probabilities the affirmative defence of undue influence: Vout at para. 28. It is important to appreciate that in these circumstances, the doctrine of suspicious circumstances and the shifting of the burden of proof has no application.

[35] In order to invalidate a will on the grounds of undue influence, the asserting party must prove that the influence exerted against the will-maker amounted to coercion, such that the will did not reflect the true intentions of a free will-maker and was not the product of the will-maker’s own act. The undue influence must constitute coercion which could not be resisted by the will-maker and which destroyed his or her free agency. It is well-established on the authorities that if the will-maker remains able to act freely, the exercise of significant advice or persuasion on the will-maker or an attempt to appeal to the will-maker or the mere desire of the will-maker to gratify the wishes of another, will not amount to undue influence: Maddess v. Racz, 2008 BCSC 1550 at para. 324 aff’d 2009 BCCA 539; Freeman v. Freeman (1889), 19 O.R. 141 at 155 (C. A.); Scott at para. 112.

How Much Should An Executor Be Paid

How Much Should An Executor Be Paid?

Hooke Estate v. Johnson 86 E.T.R. (3d) 92

 

The deceased appointed her solicitor as trustee of her estate. The Trustee handled her estate in accordance with deceased’s wishes and claimed executor’s compensation in amount of $21,900.93 for work done.

 

The Trustee applied to pass estate accounts and the Respondents objected on the ground that cthe ompensation claimed was excessive and unreasonable.

 

The Trustee reduced her claim for executor’s compensation to $10,287.84.

 

The Court awarded the Trustee compensation of $8,986.84, stating that the Trustee is entitled to such fair and reasonable allowance for care, pains, trouble and time expended in administering estate.

 

While the practice has developed in Ontario of awarding compensation on basis of 2.5 per cent against, inter alia, capital receipts and capital disbursements, those fees will not be automatically or routinely allowed.

 

The determination of fair and reasonable compensation does not necessarily involve maintaining fidelity to fixed percentages. The work involved in carrying out the deceased’s wishes as set out in her will was relatively simple and uncomplicated, and did not require an inordinate amount of time. This was relatively uncomplicated estate to administer. There were no court proceedings to deal with . The work performed did not require great skill and ability.

 

Given quantum and nature of work involved in fulfilling work either as trustee or counsel, reliance on 2.5 percentages was unwarranted.

 

Capital receipts claim was reduced from $1,582.32 to $1,264.84 — Capital disbursements claim was reduced from $1,483.52 to $500 — Total amount of executor’s compensation was $8,986.84.

 

The Law

 

The Trustee ActRSBC provides that a trustee is entitled to such fair and reasonable allowance for the care, pains, trouble and the time expended in administering the estate.

 

7 In assessing the appropriateness or otherwise of an executor’s compensation, five factors should be considered namely;

 

1) the size of the trust;

 

2) the care and responsibility involved;

 

3) the time occupied in performing the duties;

 

4) the skill and ability shown; and

 

5) the success resulting from the administration.

 

See Toronto General Trusts Corp. v. Central Ontario Railway(1905), 6 O.W.R. 350(Ont. H.C.).

 

8 In some cases, proper compensation may be attained by the allowances of percentages. These percentages however, should be employed only as a rough guide to assist in the computation of what may be considered fair and reasonable compensation. The reliance on percentages in some cases may violate the true principle of fairness and reasonableness upon which compensation should be estimated. See Atkinson Estate, Re(1951), [1952] O.R. 685(Ont. C.A.) at page 698.

 

9 While a practice has developed in Ontario, of awarding compensation on the basis of 2 1/2 percentage against the categories of Capital Receipts, Capital Disbursements, Revenue Receipts and Revenue Disbursements along with a management fee on the gross value of the estate, these fees will not be automatically or routinely allowed. See: Jeffery Estate, Re, [1990] O.J. No. 1852(Ont. Surr. Ct.), page 4..

Administration By Attorney

administration by attorneyRule 21 (27) provides for the administration of an estate by an attorney.:

“ If a person entitled to administration resides outside British Columbia, administration by attorney, or administration with the will annexed, may be granted to the person or the person’s attorney acting under a power of attorney”.

The attorney need not be a resident of British Columbia, and such a grant generally will not be made to an attorney residing in the same jurisdiction as the donor.

 

In re Edmundson Estate 1963, 44 WWR 119 (BCSC) , the court commented at page 123 that the case law:

“suggests that if the principal and the attorney are both resident in the same place, the court would prefer the principle be appointed rather than the attorney. In other words, the provision for the appointment of an attorney is an additional right given to the person otherwise entitled to the administration to have an attorney appointed if the residence of the person otherwise entitled out of the jurisdiction makes it difficult for that person to perform his or her duties.”

The grant is limited for the use and benefit of the person who appoints the attorney and until that person applies for administration in British Columbia.

 

Administration by an attorney might be used when the person entitled to the administration has one or more of the following criteria:

 

A. Has language difficulties that may prevent him or her effectively handling the estate in British Columbia;

B. May be difficult to contact for the purpose of providing instructions are executing documents;

C. May have difficulty dealing with assets in this jurisdiction ie running an active business.

If there are several persons entitled to the grant, all residents of the jurisdiction, the grant may be made to the attorney of one, but subject to the consent of the others. Such an attorney is not merely the agent of the principal, but is responsible for the due administration of the assets and is liable to be called to account by the persons interested in the estate.