Removing an Executor

Burke v . Burke 2019 BCSC involved an application brought under sections 130  and  132 of WESA, along with section 31 of the Trustee act and the inherent jurisdiction of the court to remove an executor and trustee and substitute another.

The introduction of WESA legislation on March 31, 2014 added the provisions of sections 131 and sections 132 as a procedure to follow when making such applications. There is a great deal of case law on this topic, and I do not think WESA overrules any of them in their general principles.

As the case law indicates, as the Burke case did, the courts will not likely interfere with the testator’s choice of the estate trustee and will require strong evidence of necessity, such that the trustees acts or omissions, are of such a nature as to endanger the administration of the trust.

In burke the petitioner showed a strong prima facie case of executor conflict of interrst yet the court refused to remove the executor and substitute another.

WESA states:

131. If a person dies, leaving a will, and the executor named in the will renounces executorship, or is unable or unwilling to apply for a grant of probate, or if no executors named in the will, the court may grant administration with will annexed to one or more of the following persons in the following order of priority:

a) A beneficiary who applies having the consent of the beneficiaries representing the majority in interest of the estate, including the applicant;

b) a beneficiary who applies not having the consent of the beneficiaries representing a majority in interest of the estate;

c) any other person. The court considers appropriate to appoint, including, without limitation, and subject to the public Guardian and trustee’s consent, the public Guardian and trustee

s 132. Despite sections 130 and 131, the court may appoint as administrator of an estate any person. The court considers appropriate. If, because of special circumstances, the court considers it appropriate to do so.
The appointment of an administrator under subsection 1 may be conditional or unconditional, and it made for general, special, or limited purposes.

Section 31 of the Trustee act states as follows:

31. If it is expedient to appoint a new trustee and it is found in expedient, difficult or impractical 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 the making of the order, and either in substitution for, or in addition to any existing trustees.

In Parker V. Thompson 2014 BCSC 1916. Chief Justice Hinkson summarized the test to be applied on an application such as this at paragraphs 37:

37. I accept the principles pertaining to the removal of an estate trustee set out in Haines v. Haines 2012 ONSC 1816 at paragraph 10, as equally applicable to the removal of the trustee:

In Johnson v. Lanka 2010 ONSC 100 0. R. 258 at paragraph 15, the court summarize the principles that should guide the court’s discretion in deciding whether to remove estate trustees:

1) the court will not likely interfere with the testator’s choice of estate trustee;

2) clear evidence of necessity is required;

3) The court’s main consideration is the welfare of the beneficiaries; and

4) The estate trustees acts or omissions must be of such a nature as to endanger the administration of the trust

Fiduciary Must Account For Breach of Duty

The law is clear that a fiduciary who has breached a duty must account, but only for what the fiduciary acquired in consequence of the breach of duty.

The High Court of Australia in Warman International v Dwyer (1995) 128 ALR 201 (HCA) at 214 stated:

“ In determining the proper basis for an account of profits, it is of first importance in this, as in other cases, to ascertain precisely what it was that was acquired in consequence of the fiduciary’s breach of duty. And in some situation, it may also be relevant to ascertain what was lost by the plaintiff.

That passage was quoted with approval in 346-4920 Canada Inc. v Strother 2007 SCC 24.

The Supreme Court of Canada reiterated that there must be a causal connection between a breach of fiduciary duty and any benefits obtained by the wrongdoer before the court can order an accounting or disgorgement of the benefits.

There must be a causal relationship between the breach of fiduciary duty and the profits before an order for an accounting should be ordered.

The court also reiterated that equitable doctrined should not be used to impose awards out of proportion to the fiduciary’s behavior.

An accounting for profits is an equitable remedy and is not so rigid as to be susceptible to being used as a vehicle for punishing defendants with harsh damage awards out of all proportion to their actual behavior.

To the same affect the High Court of Australia noted in the Warman decision from at paragraphs 211 – 12 that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and in cases outside the realm of specific assets, the liability of the fiduciary should not be transferred into a vehicle for the unjust enrichment of the plaintiff.

In the Strother case, the court rejected Mr. Struthers argument that most of the amount of profit he earned came from his own skill and ability as a lawyer. The majority of the Supreme Court held that Strother must account for the profits he earned from the new vehicles up to a certain point in time, but not thereafter.

The majority was of the view that the purpose of deterring a lack of faithfulness was adequately addressed by requiring Strother to disgorge the profits he earned from the new venture during the time that he or his law firm continued to have a solicitor client relationship with the client.

Executor Denied Remuneration for Critical Behaviour

Executor Denied Remuneration for Critical Behaviour - Disinherited

Re the Estate of Lillian Lowe 2002 BCSC 813 is an example of where the executors claim for fees was denied entirely by the court for inter alia her critical failure to supervise the professionals that she retained.

The general principles relating to remuneration of executors were not disputed. Executors should be fairly compensated for the work that they undertake -Baker v Baker (1995) BCJ 1039.
Executors are required simply to do their best to manage the affairs of the estate as one would expect a person of ordinary prudence to do. Parish v Parish estate (1999) 26 ETR (sd) 276 BCSC.

In the Lowe decision, the matter of the executors fees was referred to the registrar to hold an inquiry, determine the facts, and report them to the judge, so that the judge could hold a hearing and determine what is the appropriate executor’s fees to order, if any, after taking into account the factors set out in the relevant relevant legislation.

The court, however, has authority to interfere with the findings of the registrar and vary the recommendation of the registrar as it sees fit. Larson v Larson (1993) 80 BCLR (2d) 303.

The court is not hearing an appeal from the registrar’s conclusions and recommendations, the report is to be considered, but even if there is no error in law or principle discovered in the report, the discretion as to awarding fees and the imposition of costs is the courts alone- Morgan v Edwards estate (2001) 86 BCLR (3d) 19 BCCA.

In the Lowe decision the executor was a lawyer and the court found that she failed to administer the assets of the estate properly, including:

  1. despite repeated requests by the beneficiaries for a copy of the will, no copy was received for a period of one and a half years;
  2. unacceptable delays were involved in obtaining an order presuming the death of the deceased, that resulted in loss of orphans benefits under the Canada pension plan;
  3. the executor did not provide a proper accounting despite requests that she do so. The court application was required to produce the accounting which resulted in the beneficiaries incurring legal fees;
  4. there was a delay in obtaining bonds in the name of the deceased from the safety deposit box of over three years;
  5. the account of the executor’s first fees does not provide any detail. It only showed fees calculated on a percentage basis, and no time records were ever produced;
  6. the executor charged the maximum 5% on the capital of the estate;
  7. executor refused to produce revenue Canada notices of assessment until she was ordered to do so by the court. There was apparently no valid basis for her refusal and the documents contained relevant information.

The court found that the executor failed to supervise the activities and monitor the work done by the professionals that she employed Wagner v Van Cleeff (1991) 5 OR (3d) 477.

Executor Remuneration

Executor Remuneration | Disinherited Estate Litigation Vancouver

Re Mikaloff 2018 BCSC 756 reviews the criteria relating to the appropriate amount of executor remuneration on a passing of accounts application.

The deceased died in 2015 and directed that her will be distributed among nine beneficiaries equally.

The main asset was a Vancouver home, and following a challenge to the validity of her will and a wills variation application by a beneficiary, the matter came before the registrar to fix the amount of executors remuneration.

The executor claimed 4.5% of the capital and .4% of the average annual value of the assets is a care and management fee.

The register, observe that 5% is the maximum that can be charged for an entire administration of an estate, and in the present case, although the vast majority of the work in administering the estate had been completed, the administration was not complete.

An award of 4.5% at this time would undoubtedly equate with the 5% maximum by the time of the final passing of the accounts.

The value of the estate was $1.7 million, and the fact that the property had to be secured and maintain while the two estate actions render course, with the executor traveling to Vancouver from Victoria each month for 14 months, and the fact that the executor was required to instruct counsel and the two actions but did not appear in court, the registrar awarded the executor C of 3% and a care and management fee of .4%.

 

Legal Principles

The legal principles applicable to determining entitlement of an executor to remuneration is summarized in Re Chau Estate 2016 BCSC 2541 at paragraphs 14 – 16 and 18 – 19:

Section 88 of the Trustee Act governs that a personal representative or administrator is entitled to remuneration to a maximum of 5% of the gross aggregate value, including capital and income of all of the assets of the estate of the date of passing.

Section 88 (3) states that a person is entitled to an allowance under subsection 1, and may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding .4% of the average market value of the estate assets.

The criteria to be considered in determining the appropriate amount of remuneration are set out in a number of cases, the leading of which is Re Toronto General Trust Corporation v. Central Ontario Railway Company(1905) OWR 350 at 354:

The criteria are:

  • the magnitude of the trust,
  • the care and responsibility involved,
  • the time occupied in administering the trust,
  • the skill and ability displayed,
  • and finally the success achieved

In the final result remuneration does not need to be fixed as a percentage of the gross aggregate value of the estate. It may be calculated as a lump sum, provided it does not exceed 5% of the total value of the estate Re Turley Estate ( 1955) 16 WWR 72 (BCSC)

The factors to be considered in awarding the annual care and  management fee are set out in Re Pedlar (1982) 34 BCLR 185 (SC) at paragraphs 14 and 15:

“each application must be decided upon its own facts. Some of the important factors to be taken into consideration in determining whether any care and management fee should be allowed and, if allowed, the extent of such care and management fee, not exceeding .4% of the average market value of the assets of the estate bracket include the following:

a) The value of the estate assets being administered;
b) the nature of the estate assets being administered – such as an active business, farm, real property held for investment or appreciation, a portfolio investments in the type of such investments
c) the degree of responsibility imposed upon the trustee with the terms of the will or other instrument, including the length or duration of the trust
d) the time expended by the trustee and the care and  management of the estate;
e) the degree of ability exhibited by the trustee in the care and  management of the estate
f) the success or failure of the trustee and the care and  management of the estate
g) whether or not some extraordinary service has been rendered by the trustee in the care and  management of the estate

The foregoing list of factors is not intended to be exhaustive, it has been derive, primarily from a consideration of the Ontario Court of Appeal decisions In re Mortimer 1936 OR 438 and Re Smith (1953) OR 185.

The court recognizes that there may be other factors deserving of consideration depending upon the circumstances involved in a particular application.

Executor/Trustee Removal: The Law Summarized

Executor/Trustee Removal: The Law Summarized

1. Feeney’s The Canadian Law of Wills, 4th ed. (Markham: LexisNexis, 2000) at 8.17 states:

An executor has a duty to settle the affairs of the estate and to distribute in accordance with the terms of the Will. A power granted to an executor exists within the context of the executor’s duty to settle the affairs of the estate and to distribute.

2. A power to retain an asset does not override the executor’s duty to settle the affairs of the estate and to distribute, per Justice Middleton in Sievert, Re (1921), 67 D.L.R. 199 (Ont. C.A.) at p. 200.

3. In Ketcham v. Walton 2012 BCSC 175 at para. 10, Mr. Justice Wong stated: “The basic principle of an executor’s duty to specified potential beneficiaries of the will is neutrality.” He quoted Mr. Justice Bouck in Quirico v. Pepper Estate (1999) 22 BCTC 82 (BCSC) at para. 15, as follows:

The primary duty of an executor is to preserve the assets of the estate, pay the debts and distribute the balance to the beneficiaries entitled under the will, or in accordance with any other order made under the Wills Variation Act. An executor should not pick sides between the beneficiaries and use estate funds to finance litigation on their behalf under the Wills Variation Act. It is a matter of indifference to the executor as to how the estate should be divided. He or she need only comply with the terms of the will or any variation of it made by a court.

4. The statutory authority to remove a trustee and appoint a replacement for that trustee is set out in ss. 30 and 31 of the Trustee Act, R.S.B.C. 1996, c. 464:

30. 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.

31. If it is expedient to appoint a new trustee and it is found inexpedient, difficult or impractical 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.

5. In Miles v. Vince, 2014 BCCA 289 at paras. 84-85, Madam Justice Levine, for the Court, considered the bases upon which a court might remove a trustee, as follows:

[84] What circumstances justify the removal of a trustee? In Letterstedt v. Broers (1884), L.R. App. Cas. 371 (J.C.P.C.), the court established guidelines justifying the removal of a trustee (at 385-389):

“1. If the Court is satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.

2. The acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.

3. In exercising the delicate jurisdiction of removing trustees, the Court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in a matter that is so “essentially dependent on details often of great nicety.” The Court must proceed to look carefully into the circumstances of the case.

4. Where a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign.”

6. In deciding whether to remove an estate trustee, “the court’s main guide should be the welfare of the beneficiaries”: see Crawford v. Jardine, [1997] O.J. No. 5041 (Ont. Ct. (Gen. Div.)), citing Letterstedt v. Broers, ibid, at 385-387, and Anderson, Re, (1928), 35 O.W.N. 7 at 8 (Ont. H.C.).

7. A court may intervene by removing a trustee where it finds that the conduct of the named trustees has endangered the trust property, or has shown a want of honesty, or of proper capacity to execute the duties of the office, or of reasonable fidelity (Conroy v. Stokes, [1952] 4 D.L.R. 124).

8. An executor may be removed where the executor’s actions are not in the best interests of the beneficiaries (McKay v. Howlett et at, 2003 BCCA 555).

9. An executor may be removed where the executor’s duties are found to be in conflict with his or her personal interests or estate assets had been endangered by the executor’s conduct and the executor had benefitted at the expense of the estate (Hall v. Hall, (1983) 45 B.C.L.R. 154 (S.C.); Veitch Estate, 2007 BCSC 952).

10. Even in the absence of misconduct, a trustee may be removed by the Court where the proper administration of a trust is threatened, and where the trustee in question has shown a want of proper capacity to execute the duties. (Re: Consiglio Trusts (No. 1) [1973] 3 O.R. 326; Letterstedt v. Broers, ibid; Conroy v. Stokes, ibid).

11. The principles to be applied in applications for the removal of executors are the same as for those for removal of trustees. (Powers v. Powers Estate, [1988] N.J. No. 19 (S.C.N.T.D.)).

12. A trustee may be removed if he or she fails to communicate promptly with trust beneficiaries or fails to file trust tax returns (Loftus v. Clarke Estate, 2001 BCSC 1136); or if there is a concern that the trustee has not made a proper accounting of business that he or she had conducted on behalf of the trust or evidence that he or she was treating the assets of the trust as his or her own personal assets (Hayne v. Moncrieff, 2012 ABCA 264).

13. In matters involving an executor’s misconduct the beneficiary may obtain an award of special costs against him or her (Loftus v, Clarke Estate, ibid).

14. “Even a ‘perceived’ conflict of interest between an executor’s personal interests and her duty to act in the interests of the beneficiaries of the will can be sufficient to warrant her removal.” Yeh Estate (Re), 2016 BCSC 1550 at para. 17, quoting Ching Estate (Re), 2016 BCSC 1111, at para. 22.

15. In Re Becker (1986), 1986 CanLII 2596 (ON SC), 57 O.R. (2d) 495 (Ont. S.C.), (sub nom. Stadelmier v. Hoffman), the Court found the executor should be passed over because there was a conflict as a result of the fact the executor could not attack the gift and transfer of properties to him while at the same time maintaining in his personal capacity that the transfers were proper. The court summarized the findings at 500:

In considering the fitness of the respondent to act as an executor I have considered also the duties of an executor in a general way. One duty of an executor is to bring in the estate for distribution among the beneficiaries. If it is perceived, on good grounds, that that important duty is compromised by a personal conflict of interest because the executor will be asked to sue himself to recover what may be a large part of the estate property, he must be passed over. That consideration is particularly important when the action against the executor is for a very significant amount in respect to the size of the estate.

Executor’s Remuneration

Executor's Remuneration

A beneficiary has the right to challenge a claim by the executor for remuneration by compelling the executor to pass his or her accounts before registrar of the Supreme Court of British Columbia.

The decision in re Sangha 2018 BCSC 54 outlined the various criteria and law relating to same.

The legal principles relevant to a registrar’s passing of accounts, including the calculation of an executive’s remuneration are summarized in Bernhard v. Wist 2011 BCSC, 101 at paragraphs 98 – 108, where the court states:

98. Section 99(1) of the TRUSTEE act, provides as follows:

1) Unless his or her accounts are approved and consented to in writing by all beneficiaries, or the court orders otherwise, an executor, administrator, trustee under a will and judicial trustee must, within two years from the date of the granting of the probate or letters of administration or within two years from the date of his or her appointment, and every other trustee may, at any time obtained from the court an order for passing his or her first accounts, and he or she must pass his or her subsequent accounts at the times the court directs.

99. In order to account to the beneficiaries, the executor must provide:

  1. An account showing of what the original estate consisted;
  2. an account of all monies received; and
  3. an account of all monies remaining on hand

Campbell v. Hogg 39 OWN 85

 

100. Section 88 of the TRUSTEE act governs executors remuneration. The executors entitled to:

a) A maximum of 5% of the gross aggregate value of the estate;
b) a maximum of 5% of the income earned during the administration of the estate; and
c) an annual care and management fee of .4% of the average market value of the assets.

 

101. However, the percentages stipulated in section 88 are not necessary to be applied in every calculation of remuneration. The percentages provide a rough guide to assist in appropriate computation of the executor’s remuneration. Re Turley estate (1955) 16 WWOR 72 BCSC

In the end, the court must be satisfied that the compensation claimed” there’s some reasonable relationship to the work and responsibility involved”

Re La Chance (1955) 15 WWR 141 BCSC

 

102. Various factors are to be considered when determining the appropriate executors fee. Those factors include :

1) the magnitude of the estate,
2) the care and  responsibility involved,
3) the time occupied in the administration,
4) the skill and ability displayed on the success(or lack thereof) achieved in the administration.

Re McColl estate (1967) , 65 WWR 110 BCSC

Similar, but not the same types of considerations apply with respect to a Karen management fee Re Pedlar (1982) 34 BCLR 185 BCSC

 

103. In terms of calculating the capital fee, the gross aggregate value of the estate is the realize the value of the original assets of the estate.

 

104. If the estate suffers any losses as a result of an executor’s actions or inaction the executors obliged to repay the estate, with interest the interest is calculated pursuant to the COURT Order Interest Act 1996, unless there is a finding that the executor has used the state monies for his or her own benefit. (In that circumstance, the executor may be required to pay compounded interest ) . See Waters Law of Trusts in Canada 3d addition, at pages 1228 – 1229.

 

105. An adverse inference may be drawn against an executor’s reliability if he or she fails to produce relevant documents as requested by the beneficiaries or ordered by the court. Booty v. Hutton (1996) BCJ 2286 BCSC.

 

106. The executors entitled to be reimbursed from the estate for a solicitor’s bill for legal services rendered, provided that those legal costs a been reasonably and properly incurred and do not relate to work that could of been performed by the executor. Fees paid for any services that could have been performed by the executor should be deducted from the executors remuneration. Read Lloyd estate ( 1954) , 12 WWR (NS) 445.

107. Furthermore, an executor is not entitled to employ a solicitor to do work that the executor could do, such as ordinary letters, attendances, pain insurance premiums and the like, attending to banking matters. Another ordinary duties that do not require the skill or expertise of a solicitor. Sharp v. Lush (1879) 10 CH 468 and applied in re-Smith (1972) 2 OR 256.

108. As a matter of practice, the solicitors charges may be included in the executors fees if the court finds that the executor could of done the work himself.

What to Expect as an Executor of Estate in BC

What to Expect as an Executor of Estate in BC - Disinherited

Everything to Know About Being an Executor

It is perhaps trite to state that the role of the drafting notary or solicitor is simply not to fill in the blanks and record the testator’s instructions, including his or her choice of executor, but instead to actively advise and draw to the testator’s attention all of the considerations relevant to his or her decision. Frequently the amount of discussion pertaining to the choice of the executor or administrator, is simply a discussion as to “who do you want your executor to be”? Prudent practice would dictate that any discussions pertaining as to who the appropriate executor or administrator might be, should perhaps be left to the end of the consultation, so that the drafting solicitor or notary is aware of all of the necessary personal and financial information relating to the testator’s intentions, or alternatively, to the estate. There is a huge responsibility to be undertaken on the part of the personal representative. Where so far as possible, the potential complexity and responsibility of the executor or administrator’s role should be impressed upon all concerned.

1. In General – The Office of Executor/Administrator

An executor derives the title from the will of the deceased, and does not have to wait for a grant of probate from the court before acting on behalf of the estate. An administrator on the other hand, derives his or her power by appointment from the court. The administrator may be appointed in the situation where the deceased dies intestate (without a will) or alternatively, dies with a will but there is no living named executor. In such instance, it is incumbent on someone to come forth and apply to the court to be appointed administrator.

The executor/administrator is the legal representative of the deceased and is often referred to as the personal representative. The office of the personal representative continues for life, so that if after completing the administration with regard to the assets discovered on the death of the testator, other assets fall into the estate, then the personal representative must reopen the administration and proceed with the distribution of the new assets in accordance with the terms of the will or intestacy.

An executor may be appointed expressly in a will or by implication. Sometimes the deceased fails to expressly name an executor, and upon a reasonable construction of the will being conducted, the court may conclude that the deceased did in fact grant to a named person, the essential duties of an executor. In such a case that person is said to be appointed “according to the tenor of the will”.

2. Should the Executor Agree to Act?

No one can be forced to e an executor, and an executor always has the option of renouncing, but this must be done before the executor “inter-meddles with assets of the estate”. Any prospective personal representative should give serious consideration as to whether or not he or she  is  prepared to act as the personal representative. Under no circumstances should the prospective personal representative deal with the assets or otherwise intermeddle in the estate, until he or she has in fact decided to act as the personal representative.

Some of the preliminary considerations for the prospective personal representative to consider are:

(a) the potential for personal liability which may arise under many circumstances;

(b) the possibility for conflict of interest, such as where the executor is also a business partner of the deceased;

(c) the nature of the deceased’s assets, including the complexity of the estate;

(d) the personal relationship of the prospective personal representative with the beneficiaries or intestate successors;

(e) the time, stress and hassle of being an executor and dealing with lawyers, beneficiaries and the like;

(f) the time involved versus the potential remuneration available;

(g) the actual terms of the will and such factors as whether there will be ongoing lengthy trusts.

Once a personal representative accepts an appointment, he or she becomes a trustee for the estate, and he or she must exercise the powers bestowed upon the office, with diligence and care. A personal representative may become personally liable if their office is carried out in a negligent or improvident manner.

There is a technical difference between the personal representative and the trustee, and that is why in most wills, the personal representative is appointed as the executor and trustee. One important difference is that a trustee can appoint other trustees and can also retire from the trust. An executor however cannot appoint someone to act as co-executor, and nor can he or she retire from the office once the will has been proved.

 

3. Intermeddling

An executor may also be appointed other than by a will, where the executor intermeddles in the assets of the estate, to the extent that the intermeddling makes that person an executor de son tort. This arises where the intermeddler has assumed the authority and office of the personal representative, and has dealt with the assets of the estate. It has arisen in such instances where the executor de son tort has arranged the burial of the deceased, gathered in assets and paid the debts. Once an executor has in fact intermeddled, he or she loses the right to renounce executorship, and may incur personal liability for any loss or damage that has resulted from any improper administration of the estate. However slight acts of intermeddling are not enough to make a person an executor de son tort.

 

4. Who May be Appointed?

Almost anyone can act as an executor, and generally speaking a testator may appoint whoever he or she likes to be his or her executor. Generally speaking the courts are very hesitant to interfere with the appointment of the executor as chosen by the testator.
However, persons of unsound mind are incapable of acting as personal representatives, and when the personal representative is or becomes insane, the court will grant administration to someone else. An infant may be appointed to be a personal representative, but the infant cannot act as personal representative during his or her minority. Accordingly if an infant is named sole executor, administration is granted with the will annexed to the guardian of the infant or to such other person as the court shall think fit, until the infant attains the age of majority.

In many instances, the court will refuse a grant of probate and will pass over an executor, where the court considers it inappropriate that such an appointment be made. These situations are typically where the proposed personal representative has been convicted of a fraudulent offence or has become bankrupt after the date of the will, or in situations where it has been established that a marked hostility existed between the proposed personal representative and the sole beneficiary. However, as previously stated, the court will not likely interfere with the discretion exercised by a testator in naming his or her personal representative. Before any application can be made for the removal of an executor and the appointment of someone else as administrator, probate must first have been granted to the executor whose removal is sought.

 

5. Qualified Appointment

The appointment of a personal representative may be either absolute or qualified. Where the appointment is qualified, it may be either as to time, place or as to purpose or subject matter. When the personal representative is appointed for a fixed period or until a specified event occurs, the authority ceases automatically when the period expires or when the event takes place. When the appointment is subject to a condition precedent, then that condition must be performed and the court has no power to relieve against an inadvertent failure to comply with it. A will may for example appoint one person as the personal representative for certain purposes or property, and another personal representative for general purposes. In that situation, probate will be granted to each personal representative, but will distinguish between their powers.

 

6. Choosing the Executor

It is extremely important that the testator’s choice of his or her executor be given serious consideration. The attending notary or solicitor must remember that most clients have very little understanding as to the tasks and requirements that a personal representative must perform and the responsibilities that must be assumed. The appointment of the wrong person can be a costly and emotionally draining experience for all concerned. Accordingly it is important that the will’s draftsperson investigate the desired appointment and provide prudent legal advice as to who should be chosen to be the executor and trustee. Very often that choice cannot properly be made, until the attending notary or solicitor firstly enquires as to the nature of the assets, and the intentions to be carried out in the will.

There are many questions that the testator should consider prior to naming his or her executor, some of which are:

(i) will the executor be willing to act;

(ii) is the executor sufficiently sophisticated to carry out the job;

(iii) is the person trustworthy;

(iv) is the person young enough or healthy enough to carry out the job;

(v) will the executor be biased;

(vi) will the executor be able to work well with the beneficiaries;

(vii) does the executor have the time to do the job;

(viii) can the executor afford to do the job;

(ix) is there any conflict of interest or potential conflict of interest;

(x) should there be more than one executor;

(xi) the distance between where the testator and the executor reside.

The nature of the client’s affairs must be thoroughly examined to determine the like of active business interests, assets in foreign jurisdictions, loans or gifts to beneficiaries and the complexity of the various personal property and investments in the estate.

Generally speaking the choice for the testator usually comes down to choosing between:

(i) family members;

(ii) friends or acquaintances;

(iii) a corporate trustee.

Testators are often reluctant to talk frankly about the respective capabilities of their family members in choosing an executor. Often it is the notary or the solicitor’s job to tactfully ask the appropriate questions as to each of the respective family member’s strengths and weaknesses. It should be stressed that it should be the most appropriate person in terms of temperament, sophistication and personality that should be selected, rather than for example the oldest child. Certainly the testator should be prodded to speculate as to how the dynamics between his or her children will be after they are no longer alive.
Testators often wish to co-appoint one or more family members and I personally am of the view that this should be discouraged. If the client is adamant that there be a multiple number of family members as executors, then a majority rule clause should be inserted in the Will. If there is a handicapped child or children and discretionary trusts are being established, then careful consideration must be given as to who will be the executor and trustee, particularly as it relates to the possibility of a conflict of interest with respect to any residual funds after the death of the handicapped child.

If there are no appropriate family members, then consideration will then most likely turn to friends or acquaintances Friends or acquaintances are often of the same generation as the testator, and if so may be a bit too old.

The corporate trustee is certainly an appropriate alternative in many instances, particularly where there is a dysfunctional family and/or a complex estate with sizeable assets. The corporate fiduciary is impartial and will have the necessary sophistication and means to handle a sophisticated estate and/or difficult beneficiaries. The corporate trustee will also have a good understanding of the concept of even handedness and the potential for conflict of interest. Certainly the corporate trustee has a wealth of special knowledge and expertise, and this must be weighed against the negative considerations of choosing a corporate trustee, which are typically the expense, and its relative inflexibility and relative lack of personal touch.

 

7. Duties of an Executor

An executor has a duty to act solely and exclusively for the benefit of the beneficiaries. This duty is construed strictly, and forbids a personal representative from making a profit that is not authorized, or occupying a position where the personal representative’s self interests would conflict with the executor fiduciary duty to the beneficiaries. The Courts of Equity have required personal representatives to ensure that each beneficiary receives exactly what he or she is entitled to receive under the will or the estate. The personal representative must maintain an “even hand” when dealing with all beneficiaries the executor  has a duty in exercising all of his or her powers, whether discretionary or administrative, to maintain the standard of care of a reasonably prudent businessperson managing someone else’s property. Generally speaking, the personal representative cannot delegate his or her duties. The Courts in recent years however have permitted delegation of administrative duties that a reasonable and prudent businessperson would delegate in the management of his or her own business affairs. This would include the use of brokers, real estate agents, accountants, lawyers, appraisers and so forth.

 

Executor Duties Checklist:

1. To dispose of the deceased’s body.

It is the executor and not the testator’s spouse or family, who has the right to determine the place and manner of burial. The Cemetery and Funeral Services Act sets up a priority structure as to who has the right to control the disposition of human remains. First priority is given to the executor, then to the spouse, and then to various categories of relatives. If the person who has the right to control disposition is unavailable or unwilling, the right passes to the next person of the priority list. Proper funeral expenses incurred are payable out of the estate. Generally, the person who instructs the funeral director will be personally liable to pay all expenses incurred, but is entitled to indemnity as a first priority against the estate for the reasonable expenses of a suitable funeral. There are some cases where the executor has been denied reimbursement of the full funeral costs, where the costs have been found to be excessive under the circumstances.

2. Take possession or control of the deceased’s assets.

The personal representative must take steps to search for any cash, jewelry, valuables and the like, and arrange for their safekeeping. Any personal property must be locked up and properly insured. Other assets that may require insurance coverage must also be checked into. Financial institutions and government agencies must be notified of the death. Mail must be re-directed and the bills, including mortgages, must be paid. Rents must be either collected or paid and businesses must be managed for the interim until distribution of the estate or until the sale of the business. A personal representative must enquire as to whether they have sufficient legal authority to carry on the business, and must also be cognizant of the potential for personal liability for carrying on the business.

3. Complete a schedule of all of the deceased’s assets and ascertain their value.

After the executor has taken charge of the assets of the estate, and has made a full inventory of the assets and a valuation of same, the personal representative should then arrange to have an application made to the court for the issue of a grant of probate. In the case where the deceased dies intestate or without a named beneficiary, there is often a delay experienced in finding some appropriate person to step forward and apply for letters of administration. Rule 61(20) of the Rules of Court, seems to assume that in practice, in the absence of special circumstances, the court will usually give priority to appointing as administrator of the estate, the person or persons who have the greatest interest in the estate. In practice consents will be required from any person entitled to share in the estate who has a greater or equal right to apply. Thus, if two or more persons are equally entitled to apply, they must either apply jointly, consent to the appointment of one of them, or be served with notice under Rule 61(20). There is no limitation on the number of administrators who may be appointment.

4. Advertise for creditors.

Before any debts of the estate are paid, the executor or administrator should see to the publication of the proper advertisement for creditors, claims and other claims against the estate. From my experience, common sense should prevail in deciding whether or not to advertise for creditors, as the costs can be considerable. In the case of a little old lady with simple assets and a history of paying her bills on time, it may not be necessary to publish such an advertisement. However if the personal representative is to protect him or herself from liability, then serious consideration should be given to the placement of such an advertisement, as Provincial Legislation states that the personal representative shall not be personally liable to creditors, where notice has been properly given and the assets of the estate have already been distributed.

5. To notify beneficiaries, and persons who would take on an intestacy with respect to an application for probate or letters of administration;

6.  To act personally, although as aforesaid, delegation may be allowed in certain administrative circumstances;

7. To ensure that investments are authorized.

There is a duty to examine the assets and investments of the estate, and in general, to convert in a reasonable and timely manner, the assets that do not qualify as authorized investments for the estate. The executor must be concerned with assets that may waste (ie, an unheated greenhouse) or that are to speculative (penny stocks), or reversionary assets;

8. To complete and file income tax returns and where necessary obtain a Clearance Certificate from Revenue Canada;

9. To pay the debts, including funeral, legal, testamentary expenses, succession duties and probate fees;

10. To claim all debts due to the deceased and generally collect all of the assets;

11. To keep accounts:

The executor has a duty to be prepared to account to creditors and to persons who have a beneficial interest in the estate. The personal representative must give to anyone to whom he or she owes a duty such information as that person reasonably requires. The type and amount of information varies, but the duty to account is owed to beneficiaries, unpaid legatees, unpaid creditors, successors, trustees, others who may have an interest in the deceased’s assets, and others provided for by statutes such as the Public Guardian or Revenue Canada.

12. To continue or bring and maintain court actions on behalf of the estate:

Under Section 59 of the Estate Administration Act, a personal representative of a deceased claimant may continue or bring and maintain an action for a loss or damage to the person or property of the deceased in the same manner and with the same rights and remedies as the deceased, except for certain actions such liable and slander, pain and suffering, and loss of expectancy of earnings. A personal representative may continue or bring and maintain an action under the Wills Variation Act, or an action for constructing or resulting trust on behalf of the deceased.

13. To distribute the assets in accordance with the will or the laws of intestacy.

8. The Executor’s Year

Generally speaking the personal representative must not unreasonably delay in calling in the assets and settling the affairs of the estate, and distributing the assets in accordance with the will or the rules of Intestate Succession. There is no hard and fast rule as to what constitutes undue or unreasonable delay, but as a general rule of thumb, there is an executor’s or administrator’s one year to do so. The general rule is that the executor has one year from the testator’s date of death, and in the case of an administration, the administrator has one year from the date of the grant, to settle the affairs of the estate.

There is case law to the effect that in the case of a legacy, the executor is entitled to withhold payment during the one year, even though the will indicates that the testator wishes payment to be made as soon as possible.

I will not deal with the topic of removal of an executor in the paper, but will do so at a later date.

 

9. Renunciation

Where the proposed personal representative has not intermeddled in a substantial way, then he or she can renounce the appointment as executor. Any renunciation must be unconditional and be in writing and properly witnessed. The renunciation takes effect as of the date of execution, but it may be withdrawn prior to filing it with the court. The renunciation is usually filed at the same time that the application for the grant of probate is made.

There are many reasons why an executor may wish to renounce, and this should be canvassed with the proposed personal representative at the initial meeting, and as soon as possible after the death of the deceased. For example I recently had a Provincial Court Judge renounce as executor, when it was likely that he would be named as a defendant as personal representative, in an action brought for an alleged sexual assault. This would be embarrassing to the executor given his job as a Judge.

If the proposed personal representative is one of two or more executors appointed under a will, then he or she may choose not to participate in the administration of the estate initially, and leave it up to the remaining executors to do so. In these circumstances, the remaining executors would apply for probate, and would reserve the right of the prospective personal representative to apply at a later date if he or she should choose to do so. Reserving the right to apply for probate may be appropriate where the prospective personal representative prefers not to act for reasons such as distance, lack of time, age, illness, or other such reasons.

The fact that an executor has not obtained a grant of probate does not mean that person is no longer an executor. Renunciation is generally preferable to a reservation of the right to apply for probate, unless the non-proving executor seriously wishes to reserve the right to apply for probate in the future.

 

10. The Chain Executorship

If two or more executors have proved a will, and one of them dies after the grant, and no alternative executor has been named, then the surviving executor will continue, unless the will requires a minimum number of executors greater than the number of surviving executors.

However if a grant has issued and the sole executor or the survivor of several executors have proved the will, but dies before completing the administration of the estate, and no alternate was named in the will, then the executor of the deceased’s executor will become the executor of the original testator once he or she obtains probate of the deceased executor’s will. The replacement executor will stand in the shoes of the original executor in all respects.

This rule is referred to as the chain of executorship and it applies only in the circumstances where the executor named in the will has taken probate of the will before death, and each will in the chain must have been proved or probated.

 

11. Estate Executor Fees

Unless the will provides otherwise, all executors whether lay or professional, whether experienced or not, are entitled to be paid remuneration in accordance with the provisions of Section 88 of the Trustee Act, R.S.B.C. This section allows the executor to be paid, in the discretion of the court, up to a maximum of 5% of the gross aggregate value of the estate, including capital and income, together with an annual care and management fee of up to .4% of the average market value of the estate.

In most circumstances, the beneficiaries may well approve a 5% fee to the executor. In many instances however the courts will not allow the executor be paid the maximum 5% of the gross aggregate value of the estate. The courts will enquire into a number of factors, including the complexity of the estate, the experience of the executor, the time spent by the executor, the value of the estate, the amount of time spent administering the estate, and the like. However from a perusal of the somewhat limited number of cases on point, and the growing gross amount of estates largely due to inflated real estate, it would appear that the court very often will award fees more in the range of 2 to 3 rather than the maximum.

Conclusion

It is very important that the testator’s choice of an executor or executors be given sufficient scrutiny and discussion. As previously stated, most clients have little or no understanding of the onerous responsibility that an executor or alternatively an administrator, must perform. An inappropriate or improvident appointment can often complicate the administration of the estate unduly, and in certain cases, unnecessarily result in litigation. Accordingly, it is incumbent upon the drafting notary or solicitor to thoroughly investigate the desired appointment and to provide suitable legal advice.

Power of Attorney Creates a Fiduciary

Power of Attorney Creates a Fiduciary

Attorney Using a Power of Attorney is a Fiduciary

As a fiduciary, an attorney for property is “ obliged to act only for the benefit of the donor,  putting his/her own interests aside”. An attorney is prohibited from using the power of their own benefit, unless “ it is done with the full knowledge and consent of the donor” Richardson Estate v. Mew 2009 ONCA paragraphs 49 – 50.

Duties of an Attorney as a Fiduciary

In Zimmerman V. McMichael estate 2010 Onsc 2947 the various duties of an attorney as fiduciary are discussed, and include:

  • A fiduciary is under a duty to account,
  • A fiduciary has a duty not to co-mingle trust funds with the attorneys property, and to provide an accounting if they are co-mingled
  • A fiduciary must not make a profit or to put him/ herself in a position where his/her interests and his/her duty conflict unless the trust instrument expressly so provides;
  • As a fiduciary, an attorney for property is not entitled to exercise that power for his or her own benefit unless expressly authorized to do so, and;
  • The fiduciary bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the power of attorney

Passing of Accounts and Court Costs

Passing of Accounts and Court Costs

Re Rodgers Estate 2017 BCSC 2001 discussed who should bear the costs of a passing of accounts hearing where it was asserted that no valid complaints were raised re the accounting by the party challenging them.

The court ultimately held that the estate should bear the costs but cited authority for who should pay for the costs if the administrator was forced to take the proceedings by a beneficiary who did not have valid reasons for forcing the issue to a hearing.

The Court:

I have considered the two authorities relied upon by Mr. McLellan and a decision not referred to but in my view helpful to the analysis, being Re Chevrefils Estate, 2010 BCSC 753. In that decision, District Registrar Sainty, in respect of costs of the passing of accounts said:

[28] As for the costs of this passing, in general, the costs of a passing of accounts are assessed as special costs and are paid out of the residue of the estate before the estate is distributed. Here, however, Mr. Kasting submits that Catherine Croft be denied her share of the residue of the estate as some form of “special costs” of the passing of these Accounts. He argues that, but for the refusal (or failure) of Catherine Croft to consent to the Accounts, this passing (and the legal fees associated with it) would not have been necessary and that if I hold that the “usual” course be followed (that the costs of this passing be paid out of the residue of the estate), Catherine Croft will “profit” from her actions, to the detriment of the other beneficiaries, leading to an unjust result.

[29] As I have noted, the general rule is that the estate must bear the costs of settling disputes as a cost of administration. The question to be asked is: whether the administrator was forced to the expense of passing the accounts by the conduct of a beneficiary? In my opinion, but for Catherine Croft’s refusal to approve the accounts this application would not have been necessary.

[30] That does not mean, however, that she ought not to be accorded the satisfaction and peace of mind which having this formal passing may bring if it is felt that such a passing was reasonable. An administrator has a duty to account to the beneficiaries. There is no requirement that a beneficiary consent to the accounts prepared by an administrator. He or she is entitled to attend at a hearing and to question the administrator and the accounts.

[31] However, in the circumstances of this case, I am of the view that there was no rational reason for Catherine Croft’s refusal to agree to the Accounts. She did not provide any particulars for her refusal – only the statement . . . regarding the residue of the estate which either makes no sense or is contrary to law. Further, in respect of her complaint in relation to the Administrator’s remuneration, she has failed to provide any particulars of her complaints or point to any specific failures on the administrator’s behalf . . .

18      While it has been ultimately conceded by Diane Rodgers that the accounts should be passed as presented, I am of the view that it was not unreasonable in all of the circumstances for her to proceed to the hearing. While her objections all fell by the wayside as a result of the hearing process, and perhaps she could have and should have reached that conclusion before the hearing, I cannot say, unlike in Re Chevrefils, that there was no rational reason for her not to agree to the accounts. There was a concern expressed about the amount of legal expense and a concern expressed about the relationship of the agent and the executor as it related to the expenses incurred by the estate.

19      Unlike in Re Chevrefils, there was some rational connection between the objections and the circumstances that prevailed, albeit those objections were eventually abandoned.

20      Accordingly, the costs of the passing incurred by the executor will be assessed as special costs, and will be paid out of the residue of the estate before the estate is distributed.

Executor Remuneration and Passing of Accounts

Executor Remuneration and Passing of Accounts

Re Beerenbrouk 2017 BCSC 1785 is a good summary of the law relating to executor remuneration and the passing of executor accounts.

A farm property worth $2 million was administered for 8 years and was complex and the beneficiary difficult.

The court awarded Capital Fee – (4% x $2 million): $80,000.00, b) Care and Management Fee: 64,000.00, c) 5% of rental income and interest income: 3,488.68 for a Total of $147,488.68

12 The administrator’s application to pass accounts and fix his remuneration is brought pursuant to Rule 25-13(1) which provides as follows:

(1) A personal representative or a person interested in an estate administered by a personal representative may apply, in accordance with subrule (2), for an order for one or both of the following:

(a) an order for the passing of the personal representative’s accounts in relation to the estate;
(b) an order to fix and approve the personal representative’s remuneration.

13 Upon hearing such an application, the options available to the court are provided in Rule 25-13(3):

(3) In an application under subrule (1), the court may do one or more of the following:
(a) hear and decide any matter relating to the accounts or the remuneration of the personal representative;
(b) direct the registrar to conduct an inquiry, assessment or accounting in relation to any matter relating to the accounts or the remuneration of the personal representative;
(c) make any other order or give any direction that the court considers appropriate in the circumstances.

The maximum amount for remuneration that may be charged by a personal representative is set out in s. 88 of the Trustee Act:

88 (1) A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

(2) The court or a registrar of the court if so directed by the court, may make an order under subsection (1) from time to time, and the amount of remuneration must be allowed to an executor, trustee, guardian or administrator, in passing his or her accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(3) A person entitled to an allowance under subsection (1) may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding 0.4% of the average market value of the assets.

30 The parties do not disagree on the test for an administrator’s remuneration. The criteria to be considered in determining the amount of remuneration which should be awarded are set out in Toronto General Trusts Corp. v. Central Ontario Railway (1905), 6 O.W.R. 350 (Ont. H.C.) at para. 23, wherein the Court states:

[23] From the American and Canadian precedents, based upon statutory provision for compensation to trustees, the following circumstances appear proper to be taken into consideration in fixing the amount of compensation: (1) the magnitude of the trust; (2) the care and responsibility springing therefrom; (3) the time occupied in performing its duties; (4) the skill and ability displayed; (5) the success which has attended its administration.

31 The compensation claimed must bear “some reasonable relationship to the work and responsibility involved”: Brown v. Martin, 2007 NLTD 115 (N.L. T.D.) at para. 9.

32 Maximum remuneration is not awarded as a matter of routine. Appropriate remuneration is a matter of what is fair and reasonable in all the circumstances: Zadra v. Cortese, 2016 BCSC 390 (B.C. S.C.) at para. 44.

The maximum amount for remuneration that may be charged by a personal representative is set out in s. 88 of the Trustee Act:

88 (1) A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

(2) The court or a registrar of the court if so directed by the court, may make an order under subsection (1) from time to time, and the amount of remuneration must be allowed to an executor, trustee, guardian or administrator, in passing his or her accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(3) A person entitled to an allowance under subsection (1) may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding 0.4% of the average market value of the assets.

30 The parties do not disagree on the test for an administrator’s remuneration. The criteria to be considered in determining the amount of remuneration which should be awarded are set out in Toronto General Trusts Corp. v. Central Ontario Railway (1905), 6 O.W.R. 350 (Ont. H.C.) at para. 23, wherein the Court states:

[23] From the American and Canadian precedents, based upon statutory provision for compensation to trustees, the following circumstances appear proper to be taken into consideration in fixing the amount of compensation: (1) the magnitude of the trust; (2) the care and responsibility springing therefrom; (3) the time occupied in performing its duties; (4) the skill and ability displayed; (5) the success which has attended its administration.

31 The compensation claimed must bear “some reasonable relationship to the work and responsibility involved”: Brown v. Martin, 2007 NLTD 115 (N.L. T.D.) at para. 9.
32 Maximum remuneration is not awarded as a matter of routine. Appropriate remuneration is a matter of what is fair and reasonable in all the circumstances: Zadra v. Cortese, 2016 BCSC 390 (B.C. S.C.) at para. 44.

I consider a care and management fee for eight years to be appropriate, which is until sometime shortly after the entire estate was held in trust such that no care or management was required. The care and management fee is also based on an average estate value of $2.0 million.

64 To summarize, I have utilized the following amounts in consideration of the administrator’s remuneration:

a) Capital Fee – (4% x $2 million): $80,000.00
b) Care and Management Fee: 64,000.00
c) 5% of rental income and interest income: 3,488.68
d) Total: $147,488.68