S. 86 Trustee Act Directions After a Murder

S. 86 Trustee Act Directions After a Murder | Disinherited

Re Unger 2022 BCSC 189 involved an application by the executors of the estate for advice and direction as authorized by Section 86 of the Trustee act regarding the disposition of the deceased’s estate, given that her own son had murdered her, the issue became who was entitled to his share of the estate.

The deceased was survived by two sons, Clayton and Logan, who were each 50% beneficiaries of her will.
As Clayton murdered his mother, all parties agreed there is a rule of public policy which excludes the person responsible for another person’s death from taking any benefit because of their criminal act.

The rule was discussed at length in the Supreme Court of Canada decision Oldfield v . Transamerica Life Insurance Co of Canada , 2002 SCC 22 at paragraphs 14 – 15.

Prior to his mother’s death, Clayton was found to have conceived a child ( Adeline) who was born approximately 11 days after his mother’s death. His mother knew of the child and the court found that the child was “en ventre sa mere” and could inherit.

The court was asked to determine who should inherit what was to be Clayton’s portion of his mother’s estate: his daughter, his brother Logan, or two charities named as alternate beneficiaries under the will. The value of the estate was approximately $860,000. The court found that the paramount concern was the intent of the testator at the time the will was executed.

Relevant Legislation to the Trustee Act

This application is authorized by s. 86(1) of the Trustee Act, which states:

86(1) A trustee, executor or administrator may, without commencing any other proceeding, apply by petition to the court, or by summons on a written statement to a Supreme Court judge in chambers, for the opinion, advice or direction of the court on a question respecting the management or administration of the trust property or the assets of a testator or intestate.

Section 46 of the Wills, Estates and Succession Act, S.B.C. 2009, c. 13 [WESA] is foremost for consideration in this case:

46(1) If a gift in a will cannot take effect for any reason, including because a beneficiary dies before the will-maker, the property that is the subject of the gift must, subject to a contrary intention appearing in the will, be distributed according to the following priorities:

(a) to the alternative beneficiary of the gift, if any, named or described by the will-maker, whether the gift fails for a reason specifically contemplated by the will-maker or for any other reason;

(b) if the beneficiary was the brother, sister or a descendant of the will-maker, to their descendants, determined at the date of the will-maker’s death, in accordance with section 42(4) [meaning of particular words in a will];

(c) to the surviving residuary beneficiaries, if any, named in the will, in proportion to their interests.

(2) If a gift cannot take effect because a beneficiary dies before the will-maker, subsection (1) applies whether the beneficiary’s death occurs before or after the will is made.

The Public Guarian on behalf of Adeline provided the Court with two authorities to support its position, being Jollimore Estate v. Nova Scotia (Public Archives), 2011 NSSC 218 and Dhaliwall v. Dhaliwall, [1986] B.C.J. No. 1463 (S.C.).In both cases, the testator was murdered by a named family beneficiary and intended, if the named beneficiary was not to receive the estate, for the estate to pass to the alternate beneficiaries. In Jollimore, to the Nova Scotia Public Archives, and in Dhaliwall, to the deceased’s children.

“The court should do its best to see, in a matter of this kind, that the obvious  intentions of a testator are not defeated. The proposition that there should be an intestacy because the will uses the words, “if X survives” and X did survive, results not only in the testator suffering the indignity of murder but also the affront of the defeat of his obvious testamentary intention. If the gift is a residuary gift and there is a gift over, less violence is done to the testator’s intentions if the court holds that a person barred by the rule of public policy is deemed to have died immediately before the testator than by any other possible solution to this problem. ”

DECISION

The portion of the residue of Ms. Unger’s estate is to pass to Adeline for the following reasons:

a) Under the rule of public policy, Clayton was not entitled to what would have been his portion of Ms. Unger’s estate, Ms. Unger having died as a result of Clayton’s actions.

b) The clear intent in the Will was that should either of Ms. Unger’s children predecease her, under para. 7(b)(ii) of the Will, any children of her children who are alive at her death or are en ventre sa mere should receive the deceased child’s share.

c) Adeline was an “alternate beneficiary” of the gift to Clayton as contemplated by s. 46(1)(a) of the WESA, and is therefore the first priority for distribution of Clayton’s share. Logan was not an alternate beneficiary of Clayton. He was a primary beneficiary of the residue along with Clayton and had no claim against Clayton’s share.

The Equitable Principle of Disgorgement

The Equitable Principle of Disgorgement | Disinherite

Disgorgement is the giving up of funds by a fiduciary where a breach of fiduciary duty was involved. They typically involve the restitution remedy of recovering ill-gotten profits made by the fiduciary.

There is a large degree of discretion in ordering disgorgement: Strother v. 3464920 Canada Ltd., 2007 SCC 24 at para. 74; Wang v. Wang, 2020 BCCA 15 at para. 59.

As Justice Cromwell notes in Kerr v. Baranow, 2011 SCC 10, all equitable remedies are characterized by the necessity of designing them to be responsive to the particular facts of each case:

This public interest aspect is served by the prophylactic purpose of disgorgement.

Disgorgement of a gain obtained in a breach of a fiduciary duty, irrespective of the plaintiff’s loss, “teaches faithless fiduciaries that conflicts of interest do not pay. The prophylactic purpose thereby advances the policy of equity, even at the expense of a windfall to the wronged beneficiary”: Strother at para. 77 [emphasis in original].

However, there are limits to prophylactic disgorgement    -Pirani v Pirani, [2021] BCJ No 1725, 2021 BCSC 1530

Sarzynick v Skwarchuk 2021 BCSC 443 reviewed the remedies available for a breach of fiduciary duty including the equitable principle of disgorgement.

The equitable remedy of disgorgement serves two purposes:

One is restitutionary and the other prophylactic: Strother, at paras. 75–77. The restitutionary component of disgorgement aims to restore to the aggrieved party the benefits that they otherwise would have enjoyed, such as when a fiduciary usurps a business opportunity or purchases a property that otherwise would have gone to the beneficiary

Two- The prophylactic rationale aims to deter faithless behaviour and preserve the sanctity of fiduciary relationships by forcing the fiduciary to disgorge all profits obtained from their breach.

Prophylactic disgorgement arises even in circumstances where the beneficiary has suffered no loss. This can often result in a windfall for the plaintiff.

Where a fiduciary has retained profits by breaching their fiduciary obligations, they can be disgorged of their profits in one of two ways:

(1) by imposing a personal debt on the fiduciary, thereby requiring them to repay the unjustified gain; or
(2) by imposing a constructive trust requiring the fiduciary to transfer the gain to the aggrieved party (Kyle Estate v. Kyle, 2017 BCCA 329 at para. 37).

The use of remedial constructive trusts for disgorgement in the breach of fiduciary duty context is well-established:
in The Law of Restitution, loose-leaf (Toronto: Tomson Reuters, 2020) at 27:500, “a principal may assert a proprietary claim not only for misappropriated assets, but for property…and opportunities which the fiduciary has deflected and captured for personal benefit.”

Removal of Trustee Refused

Removal of Trustee Refused | Disinherited

Re Koglin Estate 2021 BCSC 2525 is one of many court decisions where an application to remove an executor/trustee was refused by the courts. This is not to say that such application cannot succeed, but the evidence must be clear and strong for the courts to interfere with the choice of the will maker as to his or her chosen executor.

The law is reasonably well settled with the leading case in British Columbia, being Conroy v Stokes (1952) 4 DLR 124 BCCA that stated that in order to succeed in such an application, the evidence must show that:

1. The executor acted in a manner that endangered the asset, or

2. As executor, he or she acted dishonestly, without proper care, or without reasonable fidelity;

In Parker v Thompson ( Trustee) 2014 BCSC 1916 . The deceased established in inter vivos trust in which is corporate solicitor was trustee. His chief for children from his first marriage sought to remove the trustee on the basis that he acted in a way that gave precedence to the interests of the second wife and son of his second marriage.

The court quoted an Ontario judgment that stated the principle that “removal of an estate trustee should only occur on the clearest evidence that there is no other course to follow”.

The court stated that the standard of care and diligence required of a trustee is that of a man of ordinary prudence in managing his own affairs and accepted the following principles applicable to the court’s discretion on an application to remove a trustee:

• The court will not lightly interfere with the testator’s choice of estate trustee;
• clear evidence of necessity is required
• the court’s main consideration is the welfare of the beneficiaries;
• the estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the trust.

The existence of friction between the trustee in one or more beneficiaries is not usually sufficient of itself to justify the removal of the trustee Erlichman v Erlichman 2000 BCSC 173 at para.8, however, the court will remove a trustee, where the welfare of the beneficiaries requires it.

In Dimberger Estate 2016 BCSC 439 the court did remove the trustee for failure to distribute the estate after four years after the grant of probate, and took into consideration the trustees ongoing hostility towards his sister the co-beneficiary

Professional Negligence

Professional Negligence | Disinherited

A claim in professional negligence requires a duty of care, a breach of the standard of care and a causal relationship between that breach and damages suffered.

The core issue is generally as the professional’s conduct below the standard of care required of a competent professional in that field.

In a lawyer negligence case , the Supreme Court of Canada in Central Trust v. Rafuse, [1986] 2 S.C.R. 147 at 208:

[a] solicitor is required to bring reasonable care, skill and knowledge to the performance of the professional service which he has undertaken. The requisite standard of care has been variously referred to as that of the reasonably competent solicitor, the ordinary competent solicitor and the ordinary prudent solicitor.
[Citation omitted.]
Citing Zink v. Adrian, 2005 BCCA 93 at para. 23, the plaintiffs submit that it is well-settled that the standard of care includes the following requirements:

(1) To be skilful and careful.
(2) To advise his client on all matters relevant to his retainer, so far as may be reasonably necessary.
(3) To protect the interests of his client.
(4) To carry out his instructions by all proper means.
(5) To consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him.
(6) To keep his client informed to such an extent as may be reasonably necessary, according to the same criteria.

Expert Advice

The courts generally want to hear the expert opinion evidence of a senior practitioner in that are as to the common competent practice.
The Court referred to the “common sense” discussion provided by Justice Southin (in concurring reasons) in Zink (at paras. 43–44):

[43] But it does seem to me that in cases of alleged negligence by a solicitor, judges can only rarely make such a finding in the absence of expert evidence as to the standard of a competent solicitor conducting the business in question.

[44] The judge can only properly do so, in my opinion, if the matter is one of “non-technical matters or those of which an ordinary person may be expected to have knowledge.” See Anderson v. Chasney, [1949] 2 W.W.R. 337 at 341 (Man. C.A.). There is an underlying reason – the expert witness can be cross-examined with a view to showing he knows not whereof he speaks. But the parties have no means of discrediting a judge’s implicit assertion that he knows the proper way to conduct a certain kind of legal business. One must not overlook that the reason some judges are judges is that whilst they were practising the profession they were of a standard far above that of the ordinary reasonably competent member of the profession.