Executor Liable For Lost Rents

Executor Found Liable For Lost Rents

Executors sometimes let friends or relatives live in estate property and not collect fair rent. The executor can be personally liable for lost rent.

Where an executor permits tenants to live rent-free in estate property and the court is satisfied that the property was capable of earning rent money for the estate during that period of time, the executor can be held responsible to the estate for the rental income that was lost as a result.

Sowa Estate, Re, 2003 ABQB 761 (Alta. Q.B.) per Veit J., at para. 3. stated

“I have concluded that Mr. Sowa should repay a total of $28,047 to the estate in relation to rent. The evidence before the Court is that, while he controlled the estate property, Michael Sowa granted tenants rent-free periods and rent reduction periods. While a private owner of property can dispose of that property however he chooses, a trustee holds for the benefit of others and must make prudent decisions concerning the property. In other words, if the property was capable of earning money for the estate, it should have been doing so. I am satisfied with the calculations which indicate that a total of $9,951.00 represents rent available, but lost, during the period. In the result, Mr. Sowa must repay a total of $28,047 representing rent received plus rent lost.”

Fiduciary Duties of Corporate Directors

Fiduciary Duties of Corporate Directors

Ascent One Properties Ltd v Liao 2017 BCSC 1017 dealt with an aborted real estate development project that alleged inter alia a breach of fiduciary duties by a corporate director and officer.

The case outlines the law relating to the fiduciary duties owed by a director and officer of a corporation.

THE LAW

173      It is trite law that directors owe duties to the companies they serve.

174      The Business Corporations Act, S.B.C. 2002, c. 57 (“BCA“) provides in relevant part as follows:

Powers and functions of directors

136(1) The directors of a company must, subject to this Act, the regulations and the memorandum and articles of the company, manage or supervise the management of the business and affairs of the company.

Duties of directors and officers

142(1) A director or officer of a company, when exercising the powers and performing the functions of a director or officer of the company, as the case may be, must

(a) act honestly and in good faith with a view to the best interests of the company . . .

175      The statutory fiduciary duty requires company directors and officers to respect the trust and confidence that have been reposed in them to manage the assets of the company in pursuit of the realization of the objects of the company. They must avoid conflicts of interest and abusing their position for personal benefit: Peoples Department Store Inc. (Trustee of) v. Wise, 2004 SCC 68at para. 35.

176      A director must not usurp for herself a maturing business opportunity.

177      As was stated by the Supreme Court of Canada in BCE Inc. v. 1976 Debenture Holders, 2008 SCC 69:

[37] The fiduciary duty of the directors to the corporation originated in the common law. It is a duty to act in the best interests of the corporation. Often the interests of shareholders and stakeholder are co-extensive with the interests of the corporation. But if they conflict, the directors’ duty is clear — it is to the corporation . . .

[38] The fiduciary duty of the directors to the corporation is a broad, contextual concept. It is not confined to short-term profit or share value. Where the corporation is an ongoing concern, it looks to the long-term interests of the corporation. The content of this duty varies with the situation at hand . . . the fiduciary duty owed by directors is mandatory; directors must look to what is in the best interests of the corporation.

. . .

[40] In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions. Court should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule. The “business judgment rule” accords deference to a business decision, so long as it lies within a range of reasonable alternatives [citations omitted]. It reflects the reality that directors, who are mandated under s. 102(1) of the CBCA to manage the corporation’s business and affairs, are often better suited to determine what is in the best interests of the corporation. This applies to decisions on stakeholders’ interests, as much as other directorial decisions.

. . .

[66] . . . However, the directors owe a fiduciary duty to the corporation, an only to the corporation . . . not to stakeholders, and that the reasonable expectation of stakeholders is simply that the directors act in the best interests of the corporation.

178      The fiduciary duty is to maximize the value of the corporation: Carr v. Cheng, 2005 BCSC 445at para. 25. A director’s interests as a shareholder must be subservient to his fiduciary duty: Polar Star Mining Corp. v. Willock (2009), 96 O.R. (3d) 688 (Ont. S.C.); Peoples Department Stores at para. 43.

179      It is a breach of fiduciary duty to use, for personal advantage or gain, information acquired as a director in order to attempt to take control of the company: Dockside Brewing Co. Ltd. v. Strata Plan LMS 3837, 2007 BCCA 183 at para. 54.

180      In determining whether a director has acted in the best interests of the company, the court will consider whether the director has applied informed judgment which had a reasonable basis: Maple Leaf Foods Inc. v. Schneider Corp., (1998), CanLII 5121 (Ont. C.A.) at p. 42. This “business judgment rule” operates to shield from court intervention business decisions which have been made honestly, prudently, in good faith and on reasonable grounds: Krynen v. Bugg, 2003 O.J. No. 1209 (Ont. C.J.) at para. 74(7).

181      A director will not be liable for breach of fiduciary duty when the conduct at issue is qua shareholder and not qua director: Polar Star Mining at paras. 33-34.

182      The court must scrutinize the circumstances of each case to determine whether the director has acted honestly and in good faith and with a view to the interests of the company. A finding that there was no fraud or dishonesty on the part of a director’s who was attempting to solve the company’s problems stands in the way of a finding of breach of fiduciary duty: Peoples Department Stores at paras. 39 — 40.

183      When assessing whether a breach of fiduciary duty has occurred, the subjective motivation of the director is relevant: Peoples Department Stores at paras. 62 — 63; Dockside Brewing Co. at paras. 54 — 55.

Executor/Trustee Must Decide and Not Delegate

Executor/Trustee Must Decide and Not Delegate
While a trustee or executor may retain an agent to perform a particular duty or give them advice, if the will permits delegation of such duties, the executor, trustee must ultimately make the decision about the course of action.
The leading decision on the matter is McLellan Properties LTD v. Roberge 1947 SCR 561 at 566 – 567:
The general rule that one who accepts the position of trustee undertakes to perform personally those duties requiring the exercise of his discretion is subject to certain exceptions. A trustee by the terms of his appointment may be permitted to delegate some or all of those duties. Again, if in the circumstances it would be regarded as prudent for a person in the ordinary course of business to delegate the performance of those duties, a trustee is permitted to do so: Speight v. Gaunt [(1883), 22 Ch.D. 727 (C.A.)]….

These authorities illustrate the general rule and the exceptions thereto founded upon the necessities of prudent business management…

In Re Hatfield Estate (1986), 5 B.C.L.R. (2d) 297 (C.A.), the Court held that trustees may not delegate a power involving the exercise of personal discretion unless they have the authority to do so (see discussion in 0847395 B.C. Ltd. v. Guilbride Estate 2009 BCSC 847 at paras. 64-69; see also Haughton v. Haughton Estate (1995), 80 O.A.C. 273 (C.A.)).

According to Eileen E. Gillese in The Law of Trusts, 3d ed. (Toronto: Irwin Law, 2014) at 160:

If delegation is permitted, trustees may use agents, but they are still responsible for making all decisions. In other words, ultimate decision making rests with the trustees; all they are entitled to do is have the particular agent perform a particular duty or give advice. Trustees, while permitted to delegate some of their duties, may not delegate all of them since that would amount to an abdication of responsibility.

Obligations of a Power of Attorney

Obligations of a Power of Attorney

The Manitoba Supreme Court in Krawchuk v Krawchuk 2017 MBQB 47 outlined the legal obligations  of a power of attorney.

Manitoba’s laws for powers of attorneys are essentially the same as for British Columbia.

The Court stated inter alia as follows:

18      The applicable law with respect to the obligation of an attorney in his or fiduciary relationship with the donor was not at issue. Some of the applicable principles can be summarized as follows:

(a) as a fiduciary, an attorney has an obligation to act in the best interests of the settler or donor and cannot permit his or her personal interests to conflict with that obligation (see Brown v. Lefebvre, 2007 ABQB 195, 419 A.R. 347 (Alta. Q.B.) at para. 20);

(b) the obligations of an attorney include keeping proper accounts of the trust estate, distinct from other accounts and preserving receipts for cancelled cheques (see Re Lefebvre at para. 21);

(c) the obligations of an attorney include producing accounts to the donor, court and any beneficiary and insuring the accounts clearly show all monies and assets received or accounted for;

(d) an enduring power of attorney requires the highest commitment of good faith, loyalty and trust (see B. (E.) v. B. (S.), 2010 MBQB 15, 248 Man. R. (2d) 260 (Man. Q.B.) at para. 50; Todosichuk v. Daviduik Estate, 2004 MBCA 191, 190 Man. R. (2d) 254 (Man. C.A.));

(e) breach of a fiduciary relationship gives rise to the widest array of equitable remedies (see Todosichuk at para. 21; Wewaykum Indian Band v. R., [2002] 4 S.C.R. 245, 2002 SCC 79 (S.C.C.));

(f) equitable remedies are always in the discretion of the court which is concerned not only in compensating a wronged plaintiff but also in upholding the obligations of good faith and loyalty (see Todosichuk at para. 22; Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534 (S.C.C.));

(g) the fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged (see Todosichuk at para. 22; Canson Enterprises at p. 543 per McLachlin J. (as she then was)); and

(h) in considering whether to grant a remedy, and if so, the nature of the remedy, the question of deterrence is often most relevant (see Todosichuk at para. 25).

Use of Multiple Wills Approved

Use of Multiple Wills Approved

In re: Berkner Estate 2017 BCSC 619 the Court approved the use  of Multiple Wills in estate planning. 

The applicant submits that a person is entitled to have more than one valid will. As an example, multiple wills may be used when a will maker has assets in multiple jurisdictions. Rather than preparing a single will and then seeking a resealing in all other jurisdictions where the deceased holds property, multiple wills may be utilized. The Canadian Estate Planning Guide (Toronto: Wolters Kluwer, 1995) (loose-leaf revision 233), ch. 10, at p. 216 states:

In a world in which individuals frequently maintain assets in different jurisdictions, the convenience of using multiple wills has long been recognized. The testator simply prepares an original will for each jurisdiction in which he or she has assets. The principal advantage is that each will can be submitted to the proper court or put into effect without any dependence on the other will(s). Where there are assets in several jurisdictions, there is no need to limit oneself to two wills. But in each case, care should be taken to ensure that the will satisfies the formalities of execution of the relevant jurisdiction. Likewise, it is necessary to ensure that one will does not accidentally deal with assets that are also dealt with under another will and thereby create a situation of conflict, presumably resulting in the provisions of the later-dated will having priority with respect to the disposition of such assets.

10      There is no evidence that the deceased prepared two wills to address jurisdictional issues. A more likely motivation for the two wills is found in the following paragraph from the Canadian Estate Planning Guide:

Multiple wills are also used in some provinces as a means of reducing probate tax. Simply put, the basic strategy is to sequester assets that do not require probate in one will, while dealing with the remaining assets that do require probate in a second will. Of course, only the second will is probated, thereby saving probate tax on the assets covered by the primary will. . . .

11      The estate planning strategy of preparing two wills but only applying for probate of one of them was permitted in two Ontario cases, Granovsky Estate v. Ontario, 1998 CanLII 14912, 156 DLR (4th) 557, which I will refer to later, and also in Kaptyn v. Kaptyn (2010), 2010 ONSC 4293.

12      Authority for permitting two wills can be found in Astor, In the Goods of, [1876] P.D. 150, at p. 152:

. . . The question of incorporation in the probate of separate documents has frequently been a subject of consideration, and, I may say, a troublesome matter both to myself and my predecessors, in carrying out the jurisdiction I have now to exercise. I endeavoured to lay down the principles which should guide me in these cases In the Goods of Lord Howden (4), in which I held that where an English will ratifies and confirms a foreign will, it is right that the latter should be incorporated in the probate. In the present case, however, the testator has carefully used the clearest and strongest language to indicate his intention of keeping the English property separate from the American, and for that purpose has made the English will, which does not purport to ratify or confirm the American will, but merely expresses his desire that, if the two cannot be kept totally distinct, the English will shall be treated as a codicil to the American one. I have come to the conclusion that his wishes need not be disappointed, and that there is no reason why I should insist on the incorporation of the American will in the English probate.

13      The Astor case was referred to by the Ontario Court in each of Granovsky Estate and Kaptyn, and I am satisfied that it remains good law in the absence of any rule or legislation to the contrary 

Renewal of Wills Variation Claim Not Served In Time

Renewal of Wills Variation Claim Not Served In Time

Rodgers v Rodgers Estate 2017 BCSC 518 dealt with an application for a  renewal  court proceedings in a wills variation claim under S 61 WESA that states in 61 ( B) that the proceeding must be served on the executor of the will no later than 30 days after the expiry of the 180 days after the representation grant ( probate) has been issued.

The plaintiff also claimed other relief that was improperly pleaded and 30 days was granted to the plaintiff to bring on an application to amend the pleadings.

The Court in Rodgers stated with respect to the renewal of an action to effect service under s 61 WESA:

22      The court has no jurisdiction to hear the wills variation action if it is not commenced within 180 days from the date the representation grant is issued in British Columbia. The court does have discretion to grant leave to extend the time for service under s. 61(1)(b).

The deadline for service is no later than 30 days after the expiry of the 180 day period referred to in s. 61(1)(a).

23      Counsel for the executor equates the extension of the time for service of a wills variation notice of civil claim to an application for a renewal of a writ. This comparison makes logical sense to me given that, in both scenarios the notice of civil claim or writ expires if it is not served within the proscribed time period. 

24      When hearing an application for renewal of a writ the authorities rely on the test set out in Bearhead v. Moorhouse, (1977) 3 B.C.L.R. 81 (B.C.S.C.) aff’d (1978) 5 B.C.L.R. 380 (CA) (B.C.C.A.):

1. Was the application brought promptly?

2. Did the defendant have notice of the claim from sources other than the writ?

3. Has the defendant suffered prejudice?

4. Was the failure to serve the writ attributable to actions of the defendant? and

5. Was the plaintiff or solicitor at fault?

25      In Seeliger v. Eagle Ridge Hospital, 2007 BCCA 582, the British Columbia Court of Appeal said that it is inappropriate to have an in-depth review of the merits of the case on a renewal application but that the plaintiff is required to demonstrate that the pleadings disclose a cause of action.

If a defendant can make out a case that the action has no hope of success and is bound to fail, then the interest of justice support refusing application on those grounds.

The burden is on the defendant to prove that it is plain and obvious that the action has no merit and is bound to fail.

The Court granted an additional 30 days to serve the court process on the executor.

Executors Entitled To Indemnification For Fees and Expenses

Executors Entitled To Indemnification For Fees and Expenses

Re Collett Estate 2017 BCSC 473  confirmed the well settled law that executors at entitled to  indemnification for properly incurred fees and expenses in carrying out their administration of an estate.

Jackson et al v. King et al, 2003 BCSC 328 at para. 12:

As Executors, the Respondents are entitled to be indemnified out of the Estate for all proper expenses incurred in relation to the Estate and this right of indemnity is a first charge upon the capital and the income of the Estate: Halsbury’s Laws of England, vol.17, 4th ed. (London: Butterworths, 1976) at 612, paragraph. 1190. The Respondents are also entitled to be indemnified for all costs including legal costs which are reasonably incurred: Geffen v. Goodman(1991), 81 D.L.R. (4th) 211 (S.C.C.). As well, the Respondents are entitled to full indemnity for all costs and expenses properly incurred in the due administration of the Estate: Thompson v. Lamport, [1945] S.C.R. 343.

The Supreme Court of Canada in Geffen v Goodman stated:

75      The courts have long held that trustees are entitled to be indemnified for all costs, including legal costs, which they have reasonably incurred. Reasonable expenses include the costs of an action reasonably defended: see Re Dingman (1915), 35 O.L.R. 51. In Re Dallaway [1982] 1 W.L.R. 756, [1982] 3 All E.R. 118, Sir Robert Megarry V.C. stated the rule thus at p. 121:
In so far as such person [trustee] does not recover his costs from any other person, he is entitled to take his costs out of the fund held by him unless the court otherwise orders; and the court can otherwise order only on the ground that he has acted unreasonably, or in substance for his own benefit, rather than for the benefit of the fund.

See also Re Ladner Estate, 2001 BCSC 943 at para. 9:

The cases and texts to which I have referred above indicate: (1) that executorship expenses, testamentary expenses and administration expenses are in essence synonymous terms which relate to the proper performance of the duties of the executor of the estate;

(2) such expenses include the costs incurred in obtaining the advice of solicitors or counsel with respect to ascertaining the debts and liabilities due from the estate, the payment of such debts and liabilities, and the legal and proper distribution of the estate among the persons entitled.

Trustee Fee For Care and Management of Estate Assets

Trustee Fee For Care and Management of Estate Assets

Re Pedlar 1982 BCJ 1553 deal with the criteria for an estate trustee fee for the care and management of estate assets not to exceed .4% of the average market value of the estate assets.

It was recently followed in Collett Estate 2017 BCSC 473

In 1980 the BC Trustee act was amended to allow an executor trustee to claim an additional fee for the care and management of estate assets not to exceed .4% of the average market value of the assets.

Re Pedlar estate stated inter alia:

3      Because s. 90(2) of the Act refers to s. 90(1) thereof, it will be convenient to set forth both s. 90(1) and (2) of the Act.

90.(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 the registrar of that court if so directed by the court, to allow him 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 care, pains and trouble and his time expended in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him under any will or letters 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 the registrar of the court if so directed by the court thinks proper. The court or the registrar of the court if so directed by the court, may so order from time to time, and the amount of remuneration shall be allowed to an executor, trustee, guardian or administrator, in passing his accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(2) 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.

4      Briefly stated, it is apparent that s. 90(1) pertains to an allowance to be awarded to an executor, administrator, guardian appointed by any court, testamentary guardian, or any other trustee (hereinafter referred to as “a trustee”) for his care, pains, trouble and time expended by him in administering, arranging, disposing and settling an estate or trust, whereas s. 90(2) pertains to the allowance to a trustee of a care and management fee with respect to an estate or trust.

12      Under the common law of the provinces of Ontario and Nova Scotia a fee for the care and management of an estate or trust has been allowed for many years in addition to an allowance for the care, pains, trouble and time expended in administering, arranging, disposing and settling of an estate or trust: see Re Berkeley’s Trusts (1879), 8 P.R. 193; Re Williams (1902), 4 O.L.R. 501 (C.A.); Re Farmers’ Loan & Savings Co. (1904), 3 O.W.R. 837; and Re Creelman (1973), 40 D.L.R. (3d) 306 (N.S.).

13      It is apparent that by the addition of subs. (2) of s. 90 of the Act in 1980, the provincial legislature decided to accord a trustee in the province of British Columbia an opportunity to apply to the Supreme Court for a similar care and management fee. The care and management fee referred to in s. 90(2) is clearly an allowance for remuneration in addition to the allowance for remuneration referred to in s. 90(1) of the Act. To hold otherwise would frustrate the obvious intent of the legislation.

14      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 0.4 per cent of the average market value of the assets of the estate), include the following:

15      (a) the value of the estate assets being administered;

16      (b) the nature of the estate assets being administered — such as an active business, a farm, real property held for investment or appreciation, a portfolio of investments and the type of such investments;

17      (c) the degree of responsibility imposed upon the trustee by the terms of the will or other instrument, including the length or duration of the trust;

18      (d) the time expended by the trustee in the care and management of the estate;

19      (e) the degree of ability exhibited by the trustee in the care and management of the estate;

20      (f) the success or failure of the trustee in the care and management of the estate;

21      (g) whether or not some extraordinary service has been rendered by the trustee in the care and management of the estate.

22      While the foregoing list of factors is not intended to be exhaustive, it has been derived, primarily, from a consideration of the Ontario Court of Appeal decisions in Re Mortimer [1936] O.R. 438, [1936] 3 D.L.R. 380 (C.A.), and Re Smith, [1953] O.R. 185 (C.A.). It is recognized that there may be other factors deserving of consideration depending upon the circumstances involved in a particular application.

23      Section 90(2) of the Act does not indicate what information should be placed before the court in support of the application for a care and management fee. In my view, the trustee should give a general summary of the estate and of his services performed in the care and management of the estate, including information with respect to the factors previously referred to, and any other factors which may be relevant to the particular application.

Executor Trustee Removed For Delay

Executor Trustee Removed For Delay

Re Collett Estate 2017 BCSC 473 is the most recent of a judicial trend to remove an executor trustee for delay in the distribution and finalization of an estate.

In Collett the deceased died in 2008 and was removed as a result of the inordinate delay in finalizing a simple estate in a timely manner.

In Dirnberger Estate, 2016 BCSC 439, this Court wrote as follows in deciding to remove an executor as a result of his delays:

[13] The duty of an executor is to settle the affairs of the deceased and to distribute the estate in accordance with the terms of the will in a timely manner. Mr. Chase has failed to do this.

[14] I have concluded that Mr. Chase must be removed as trustee. I have reached this conclusion for two reasons. His actions demonstrate that he lacks the necessary capacity to act as trustee. . . . There is as well a want of reasonable fidelity.

[15] With regards to the first reason, this is a simple estate that has not been distributed more than four years after probate.

[16] In Levi-Bandel v. McKeen, 2011 BCSC 247, Justice Butler stated at paras. 21 and 23:

[21] . . . it is not only an act of misconduct that can be grounds for removal of a trustee. A failure to act can amount to grounds for removal . . . .

. . .

[23] . . . I have little difficulty in concluding that [the executor’s] inaction and her intransigence caused unnecessary delay. Her refusal or reluctance to proceed with the administration of the estate amounts to a want of reasonable fidelity and a failure to carry out her duties.

 Justice Butler further stated:

19      The test for removal of an executrix or trustee is not contentious. The leading authority in British Columbia remains the decision in Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C. C.A.). In Conroy, the Court of Appeal considered whether it was expedient to remove one trustee and appoint a replacement when some of the beneficiaries were dissatisfied with the way the trustee was handling the estate. The court confirmed at 126-127 that the main test for removal of a trustee is the welfare of the beneficiaries:

In Letterstedt v. Broers (1884), 9 App. Cas. 371, their Lordships of the Judicial Committee held that the main principle upon which the jurisdiction of Courts of Equity has been exercised to remove old trustees and substitute new ones in cases requiring such a remedy, is the welfare of the beneficiaries of the trust estate. 

20      In Letterstedt v. Broers [(1884), L.R. 9 App. Cas. 371 (South Africa P.C.)], the court noted that it is not every act of misconduct that should result in removal of a trustee, only acts or omissions which 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.”

21      However, it is not only an act of misconduct that can be grounds for removal of a trustee. A failure to act can amount to grounds for removal. In Scott v. Scott, [1991] 5 W.W.R. 185 (Sask. Q.B.), Baynton, J. relied on the inherent jurisdiction of the Saskatchewan Court of Queen’s Bench to remove a trustee where the actions of one trustee in refusing to sign cheques or provide an accounting produced a stalemate amongst the trustees. His refusal was motivated by his wish to be compensated by the trust for caring for one of the principals of the trust. He refused to sign cheques or provide the accounting until he was paid. The court found that the trustee’s deliberate failure to act placed him in breach of his fiduciary duties to the beneficiaries of the trust.

Passing Over an Executor

Passing Over an Executor

Passing over an executor utilizes essentially the same legal criteria as removing an executor except it occurs before the named executor starts to act in the representative capacity.

Re Thommasson Estate 2011 BCSC 481 removed a named  executor who was not a beneficiary but his siblings wished to review a questionable land transaction made to him by the deceased prior to death .

The criteria for the passing over of an executor is essentially the same as removing an executor- the court’s are reluctant to do so except for good reason having regard to the best interests of the beneficiaries.

19      Courts are hesitant to interfere with the testator’s right to nominate his or her executor. However, the court has both a statutory power under s. 31 of the Trustee Act, R.S.B.C. 1996, c. 464 and an inherent power to remove or pass over a trustee or executor: Mardesic v. Vukovich Estate (1988), 30 B.C.L.R. (2d) 170 (B.C. S.C.); Seaton Estate, Re, 2003 BCCA 555 (B.C. C.A.).

20      Section 31 of the Trustee Act provides:

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.

21      In Mardesic, Finch J. (as he then was) in finding it necessary and expedient to remove the trustee because he was in a conflict of interest with the interests of all the beneficiaries of the estate, noted that s. 31 conferred a very broad power on the court.

22      The test for removal of an executrix or trustee is set out in Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C. C.A.), where the Court confirmed at 126-127 that the main test for removal of a trustee is the welfare of the beneficiaries:

In Letterstedt v. Broers (1884), 9 App. Cas. 371, their Lordships of the Judicial Committee held that the main principle upon which the jurisdiction of Courts of Equity has been exercised to remove old trustees and substitute new ones in cases requiring such a remedy, is the welfare of the beneficiaries of the trust estate.

23      In Stadelmier v. Hoffman (1986), 57 O.R. (2d) 495 (Ont. Surr. Ct.), (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.

24      In this case, Alex asserts he should not be removed because it would be pre-judging the case. He says that Brian is seeking to overturn the testators’ right to nominate an executor. Alex submits that the possibility of a future lawsuit is not sufficient to overturn a testator’s right to nominate an executor. He relies on the following cases for the proposition that this is not an appropriate case in which to pass over him as an executor: Hautakoski Estate, Re, 2009 BCSC 868 (B.C. Master); De Cotiis v. De Cotiis, 2008 BCSC 1206 (B.C. S.C. [In Chambers]); Le Roux v. Shannon, 2009 BCSC 331 (B.C. S.C. [In Chambers]); and Fawcett Estate v. Steiner, 1998 CarswellBC 625 (B.C. S.C. [In Chambers]).

25      Brian provided the following authorities in which the courts found a conflict that warranted either passing over or removal of an executor or trustee because of either a potential or actual conflict: Stadelmier v. Hoffman; Mardesic; Montgomery v. Osborne Estate1993 CarswellOnt 3482 (Ont. Gen. Div.); Maki Estate, Re, 2007 BCSC 1034 (B.C. Master); and Stern v. Stern, 2010 MBQB 68 (Man. Q.B.).

26      It is clear from reviewing the case law that each case turns on its own facts.

27      In this case, Alex is not a beneficiary under either of his parents’ wills, and his only interest in the estates is as an executor. The other named executor wants to make enquiries into the transfer of the Property to Alex in order to determine what, if any, interest the estates have in the Property, and what, if any, obligations Alex and his wife have to the estates as a result of the transfer.

28      The application is not to remove Alex as an executor but simply to pass over him so that an enquiry can be undertaken of the transfer of the Property to him and his wife by the deceased in 2006, and a determination can be made if any further actions need be taken in regards to the Property.

29      In the circumstances of this case, it is my opinion that there is a perceived conflict of interest between Alex in his role as an executor and his interest in his personal capacity. If an action is instituted by the executors as a result of the transfer of the Property, it would be against Alex. In my opinion, Alex, in his capacity as executor, cannot attack the transfer of the Property to himself while at the same time maintaining, in his personal capacity, that the transfer of the Property was proper. By making such a finding I am not prejudging the case. I am simply of the view that, in the circumstances of this case, if an action is commenced as a result of the enquiries into the transfer, Alex cannot conscientiously act as a plaintiff in his capacity as an executor in a case where he will be the defendant.

30      As a result I conclude that the passing over of Alex is necessary and expedient. His right to apply to be added as a co-executor under the grant of probate after the enquiry has been completed is reserved. There will be a grant of probate naming Brian as the personal representative of the estate of Herbert Thomasson and the estate of Agnes Annie Thomasson.