Executor Can Be Liable For Unaccounted Expenses

Executor Can Be Liable For Unaccounted Expenses

Jackson v King 2003 BCSC 328 is a good decision on a passing of accounts and held inter alia that an executor is entitled to be indemnified expect for unaccounted or excessive expenses for which the executor can be held personally liable.

The Court held:

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: Goodman Estate v. Geffen (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 (S.C.C.).

14      In these regards, the following passages from D.W.M. Waters, Law of Trusts in Canada 2nd ed.(The Carswell Company Limited: Toronto, 1984) are instructive:

A trustee is essentially one who is managing the affairs of others. He may have a personal beneficial interest, indeed, he may for all apparent purposes be the only beneficiary, but as a trustee he still remains subject to the obligation to account for his administration to those who may have an interest in the trust fund, whether as beneficiary or creditor. This obligation has been called the duty to disclose.(at p. 871) (footnotes and citations omitted)

The trustee is expected to have his accounts ready within a reasonable period of time from receiving the request. If the trust has been in existence for some time, the affairs or investments of the trust are complex, and the records are to be found in a series of books and documents, the court would take an appropriate view of what is reasonable. These are the kind of factors which are relevant. It may also make a difference as to what is reasonable whether the person making the request is interested in the accounts at large, or the particular accounts which concern his own interest. Nor will the courts permit the requesting person to use the courts as a means of gaining rapid access to the trust accounts. In Re Smith, McRuer C.J.H.C. followed Maclennan J.A.’s word in Sandford v. Porter that the law only asks of the trustee what is reasonable. This means that no beneficiary or creditor can bring a vexatious motion for the purpose of harassing a trustee. (at p. 872)(footnotes and citations omitted)

Creditors will normally have the right to demand an account as a consequence of statute, but the question arises as to what persons with an interest in the trust can claim an accounting. An “interest” is in fact broadly construed. Persons with vested or contingent interests are entitled to seek an inspection or request the court for an accounting, and next-of-kin and personal representatives of such interested persons are recognized. As far as asking the court for an accounting is concerned, none of these persons has an absolute right. As we have seen, harassing the trustee is vexatious litigation, and whether the court will order an accounting depends entirely upon the court’s discretion and the circumstances of the case. (at p. 873) (footnotes and citations omitted)

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