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.

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

All About Executors and Administrators

All About Executors and Administrators

INTRODUCTION

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.

2. 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”.

3. SHOULD THE PERSONAL REPRESENTATIVE AGREE TO ACT?

No one can be forced to be a personal representative, and an executor always has the option of renouncing, but this must be done before the executor “intermeddles 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.

4. 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.

5. 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.

6. 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.

7. CHOOSING THE EXECUTOR/ADMINISTRATOR

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.

8. DUTIES OF A PERSONAL REPRESENTATIVE

A personal representative 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 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 personal representative 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.

The personal representative’s general duties are as follows:

(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 personal representative 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.

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 OF 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. REMUNERATION

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, it would appear that the court very often will award fees more in the range of 2 1/2% to 3 1/2% rather than the maximum.

12. 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.

Trustee Cannot Be in Conflict With Duty

Trustee Cannot Be in Conflict With Duty

Equity will not allow a person who is in a position of trust to carry out a transaction where there is a conflict between his or her duty and his or her interest.

It is a rule of universal application that no trustee shall be allowed to enter into engagements in which he or she has, or can have, a personal interest, conflicting, or which may possibly conflict, with the interests of those whom he or she is bound by fiduciary duty to protect. So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness, or unfairness, of the transaction; it is enough that the interested parties object. It may be that the terms on which a trustee has attempted to deal with the trust estate are as good as could have been obtained from any other quarter or better, but so inflexible is the rule that no inquiry into that matter is permitted. It makes no difference whether the contract refers to real estate, personalty, or mercantile transactions, as the disability arises not from the subject matter of the contract, but from the fiduciary character of the contracting party. Broadly speaking, the reason for the rule is that the trustee should not be placed in a position in which his or her interests are liable to conflict with his or her duty to the cestui que trust. This reason applies equally to a person acting as an agent of the trustee.

For example in Butcher Estate v Hamilton 1997 CarswellBC 1917 (B.C. S.C.) a mother transferred substantial sums of money to her daughter. The transfers were not an  outright gift to the daughter, but were intended to be held in trust by her to use for care of mother and father. The mother and father lacked mental capacity at time of transfers. The daughter breached her  duty as trustee by dealing with funds as though her own.

The Profiteering Fiduciary

Fiduciary Duties: The Rules on Profit
Fiduciaries must account for their handling of trust properties to the trust beneficiaries, and are not allowed to profit from being a fiduciary other than being paid reasonable fees for services rendered.
Equity compels a fiduciary to hold and manage trust property on the terms of the express trust by imposing a trust obligation upon it in favour of the trust beneficiaries.
The typical example of this constructive trust is found as far back as 1726 in the English decision of Keech v. Sandford , 20 E.R. 223, that is authority for the principle that a trustee may not make a profit for himself through his trusteeship. This decision has been adopted many times in Canada.
It is a fundamental duty of a trustee that he not permit his personal interest to conflict with his duty as trustee. This duty extends to any profits which the court may consider to be acquired improperly.
The principle of profiteeship encumbrances any gains made personally by the fiduciary and the law will then impose a constructive trust on the asset on the terms of the express trust, all of which depends on the facts of the particular case.
If the profit remains in the same form in which it was held by the fiduciary, then the beneficiaries can recover it in the same form or trace it into any other form into which it was converted by the trustee. The beneficiaries are entitled to argue that the property in dispute was always theirs  and never the trustee/fiduciaries, and if they can identify it among the assets in the trustee’s name, or in mixed funds, they are entitled to recover it.
The nature of the fiduciary relationship arises from the placing of trust and confidence by the claimant in the fiduciary and equity will impose express trust obligations upon the fiduciary who abuses that trust and confidence. Once equity imposes the trust provisions, the fiduciary will become a constructive trustee of the assets.

The rule against profits is a strict one, which is designed to ensure that the fiduciary acts, as equity requires, from the purest motives – the fiduciary must be motivated only by the best interest of his beneficiary.

The Supreme Court of Canada in Soulos v Korkontzilas (1997) 2 SCR 217 held that to establish a constructive trust to be imposed upon a wrongful gain, four conditions must generally be satisfied:

  1. The defendant must of been under an equitable obligation- an obligation of the type that courts of equity have enforced in relation to the activities, giving rise to the assets in his hands;
  2. The assets in the hands of the fiduciary must be shown to have resulted from deemed or actual agency activities of the fiduciary in breach of his equitable obligation to the plaintiff/owner;
  3. The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties;
  4. There must be no factors which would render imposition of a constructive trust unjust in all of the circumstances of the case- for example, the interests of intervening creditors must be protected.
The imposition of constructive trusts in breach of fiduciary obligations have included cases that vary from the crown acquiring land from first nations people in breach of its fiduciary obligations to them, to commercial cases in which one Corporation owes a fiduciary duty to another; to information where the fiduciary has acquired information that is used to acquire a personal gain.

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.

Gratuitous Agency

Gratuitous Agency

Agency can simply be defined as a person authorized by another to act for him or her with entrusted business, and the agent represents that the agent is acting for another under the contract of the relation of agency.

The  case of Siemens v Howard 2017 BCSC 587 involved the plaintiff alleging a gratuitous realtor agency agreement that had been breached and damages should be awarded. The judge found that there was no agency agreement created.

A lawyer and a realtor are two common examples of the many types of agency relationships that exist in the business world.

The plaintiff  Siemens asserted that Mr. Howard was his realtor and agent, and that Mr. Howard acquired Old Riverside in breach of Mr. Howard’s obligations to Mr. Siemens.

The principal relief sought by Mr. Siemens is a declaration that Mr. Howard holds Old Riverside on a constructive trust for Mr. Siemens, and an order that the property be conveyed to Mr. Siemens accordingly. Mr. Siemens asserts that he is entitled to that relief based on the principles set out by the Supreme Court of Canada in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217 (“Soulos SCC“), where a constructive trust was imposed as a remedy for wrongful conduct by an agent. A claim for general damages was abandoned by Mr. Siemens at the close of trial.

3      Mr. Howard says that there was never any agency relationship between him and Mr. Siemens, that he owed no obligations to Mr. Siemens and that, at all times, he was entitled to acquire Old Riverside for himself.

Mr. Howard says that he and Mr. Siemens discussed Mr. Siemens acquiring a portion of Old Riverside from Mr. Howard, but they were never able to reach an acceptable agreement on the essential terms. Accordingly, Mr. Howard says that he has no liability to Mr. Siemens and the action should be dismissed.

The Court found there was no agency relationship and dismissed the claim.

130      The principle applicable to deemed or gratuitous agency is stated in Bowstead & Reynolds on Agency, 20th ed. (London: Sweet & Maxwell, 2014), at p. 61, as follows:

Agreement between principal and agent may be implied in a case where each has conducted himself towards the other in such a way that it is reasonable for that other to infer from that conduct consent to the agency relationship.

131      That principle was cited and applied, for example, at trial in Soulos v. Korkontzilas (1991), 4 O.R. (3d) 51 (Gen. Div.) (“Soulos Trial“), at pp. 65-66, in support of the trial judge’s finding that Mr. Korkontzilas was the agent of Mr. Soulos. This finding was accepted in the subsequent appeals to the Ontario Court of Appeal and the Supreme Court of Canada. Indeed, in Soulos SCC, McLachlin J. observed, at para. 12, that “Most real estate transactions involve one person acting gratuitously for the purchaser, while seeking commission from the vendor.”

132      Thus, the fact that Mr. Siemens had no obligation to pay a commission to Mr. Howard is irrelevant to the question whether a deemed agency relationship existed.

133      The concept of gratuitous agency in relation to a realtor or real estate agent appears to have received little explicit attention in B.C. It is mentioned in Sandhu v. Shiell, 1996 CanLII 2193 (B.C.C.A.), where Lambert J.A. (writing for the court) said:

16      The [plaintiffs/appellants’] argument based on the existence of a relationship of gratuitous agency is said to be supported by a decision of the Ontario District Court in Calandra v. B. A. Cleaners (1990), 11 R.P.R. (2d) 63 where such a relationship was found. Reliance was also placed both on that case and on this passage from the “Restatement of the Law” 2d ed., vol. 2: Agency (2d) of the American Law Institute, at s.378:

One who, by a gratuitous promise or other conduct which he should realize will cause another reasonably to rely upon the performance of definite acts of service by him as the other’s agent, causes the other to refrain from having such acts done by other available means is subject to a duty to use care to perform such service or, while other means are available, to give notice that he will not perform.

17      That is a statement of a very attractive legal principle. I would not be prepared to say, in the context of this case, that the concept of “gratuitous agency” is entirely foreign to the law of British Columbia, but it is not necessary for me to say anything more about it than that.

 

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.

Probate Revoked For Improper Service

Probate Revoked For Improper Service

Al- Sabah Estate 2016 BCSC 1781 both have a probate revoked and removed the administrator for both failing to disclose important information to the court as well as sending the required probate notice to her close relatives at addresses that were mostly incorrect and could have easily been corrected.

The court held that   equity favoured the revocation of grant of letters of administration and followed the decision of Desbiens v Smith Estate 2010 BCCA 394 where a grant of probate was set aside in order to allow a wills variation action brought” out of time”, but the defendants had not received notice of the probate application due to an incorrect address used by the executor who should have been more diligent.

40      Moreover, I am satisfied that, at the time she applied for the grant of letters of administration of the estate, Sheikha Salem failed to disclose to the court pertinent information that ought to have been disclosed.

41      Where the evidence discloses that the person who is obliged to give notice failed to exercise sufficient diligence to ascertain the correct address to which the notice was to be mailed, the notice requirements of the Act are not complied with, and the court has a general discretion to revoke a grant of letters of administration: Desbiens v. Smith Estate 2010 BCCA 394 (B.C. C.A.) at paras. 21 to 35 inclusive. I do note that that decision dealt with the Act’s predecessor, the now-repealed Estate Administration Act, which was replaced by the Act. However, the general principles of law remain applicable.

42      When it is alleged that an administrator should be removed because he or she is not acting in the best interests of the estate, the main factor to be considered is the welfare of the beneficiaries: Veitch v. Veitch Estate, 2007 BCSC 952 (B.C. S.C.) at para. 22