Removing an Executor Can Be Difficult

Burke v . Burke 2019 BCSC involved an application brought under sections 130 and 132 of WESA, along with section 31 of the Trustee Act and the inherent jurisdiction of the court to remove an executor and trustee and substitute another, and indicated  how difficult it can be to succeed without strong evidence.

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

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

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

WESA states:

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

a) a beneficiary who applies having the consent of the beneficiaries representing the majority in interest of the estate, including the applicant;
b) a beneficiary who applies not having the consent of the beneficiaries representing a majority in interest of the estate; and
c) any other person the court considers appropriate to appoint, including, without limitation, and subject to the public Guardian and trustee’s consent, the public Guardian and trustee.

s 132. Despite sections 130 and 131, the court may appoint as administrator of an estate any person the court considers appropriate. If, because of special circumstances, the court considers it appropriate to do so, the appointment of an administrator under subsection 1 may be conditional or unconditional, and it made for general, special, or limited purposes.
Section 31 of the Trustee Act states as follows:

31. If it is expedient to appoint a new trustee and it is found in expedient, difficult or impractical to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of the making of the order, and either in substitution for, or in addition to, any existing trustees.

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

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

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

1) the court will not likely interfere with the testator’s choice of estate trustee;
2) clear evidence of necessity is required;
3) the court’s main consideration is the welfare of the beneficiaries; and
4) the estate trustees acts or omissions must be of such a nature as to endanger the administration of the trust.

Removal of a Trustee Pointers

In exercising its discretion as to whether or not to remove a trustee, the courts will follow a general rule that their main guide must be the welfare of the beneficiaries. The circumstances of each case must be reviewed very carefully, as the courts are reluctant to remove an executor/trustee as same was chosen by the testator.

A court may remove a trustee on the basis of misconduct if the evidence shows that the executor acted in a manner that endangered the estate, or that as executor he or she acted
dishonestly, without proper care, without capacity to execute the duties, or without reasonable fidelity (Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C.C.A.), followed by
Dunsdon v. Dunsdon Estate, 2012 BCSC 1274 at para.202).

A trustee will be removed under section 30 of the Trustee Act where there is potentialconflict of interest between the personal interests of the trustee and those of the
beneficiaries, particularly in the situation where the trustee sold assets at far below market value, and the trustee had benefited from her administration of the estate
(VanKoughnett and Others v. Austin, 2006 BCSC 1856).

A trustee may be removed if there is a concern that the trustee has not made a proper accounting of business that he or she had conducted on behalf of the trust or evidence that
he or she was treating the assets of the trust as his or her own personal assets (Hayne v.Moncrieff, 2012 ABCA 264).

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

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

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

In matters involving an executor’s misconduct, the beneficiary may obtain an award of
special costs against him or her (Loftus v. Clarke Estate, 2001 BCSC 1136).

Passing Over/Removal of an Executor Trustee

Passing Over/Removal of an Executor Trustee

One of the most common enquiries in estate litigation relates to the beneficiaries’ dissatisfaction with the named executor/trustee and their intention to either pass over or remove him or her.

Passing over or removing an executor/trustee is very often a difficult task to achieve as the law has been clear for many years that the deceased’s right to nominate his or her executor is not to be lightly interfered with: Re Wolfe (1957) 7 DLR (2d) 215 at 219 (BCCA).

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

Section 158 of the Wills, Estates and Succession Act [SBC 2009] c. 13 (“WESA”)

Section 158 is a new provision where persons interested in the estate, including beneficiaries, intestate heirs, creditors and co-executors can apply to remove or pass over a person entitled to be the personal representative.

It must be noted that removal as a personal representative does not remove the person as a trustee, as the latter must be done under the Trustee Act. Whereas most personal representatives are named as the executor and trustee of the will, (or are court- appointed administrators), there is a distinction between the two roles of executor and trustee which can become important when applying to pass over or remove a personal representative, such as an executor.

S.158(1) defines pass over to mean grant of probate or administration to a person who has less priority than another person to become a personal representative.

A person having an interest in an estate may apply to the court to remove or pass over a person otherwise entitled to be or to become a personal representative.

S.158(3) codified some of the common law decisions by setting out some of the criteria that the court may consider in adjudicating an application to either pass over or remove a personal representative such as the named executor as follows:

a) refusal to accept the office of or to act as personal representative without renouncing the office;
b) is incapable of managing his or her own affairs;
c) purports to resign from the office of personal representative;
d) being a Corporation, is dissolved during liquidation;
e) has been convicted of an offense involving dishonesty;
f.) is an undischarged bankrupt
g) is:
i) unable to make the decisions necessary to discharge the office of personal representative;
ii) not responsive, or
iii) otherwise unwilling or unable to or unreasonably refuses to carry out the duties of a personal representative

The aforesaid criteria must show that the personal representative is hampering the efficient administration of the estate, or a person granted power over financial affairs under the Patients Property Act (RSBC 1996) c.349.

Section 159 WESA

Section 159 of WESA is also a new provision that states that if the court discharges or removes a personal representative, the court must appoint another person who consents to act as the substitute personal representative, unless the administration of the estate is completed or the court does not consider it necessary that a new appointment be made.

Cases Involving Passing Over

In Re Thomasson Estate, 2011 BCSC 481, the court passed over the named executor by reason of personal conflict of interest.

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

There was a perceived conflict of interest between the named executor in his role as an executor and his interest in his personal capacity regarding the property transfer that was being challenged and he was passed over.

In Re Haggerty Estate 21 WWR 85 BCCA, a grant was refused where the named executor had within the last year been convicted of a crime involving misappropriation of estate funds.

The court stated that while a testator’s choice of executor should not be lightly interfered with, this was a proper case where discretion should be exercised by refusing the grant to the named executor. The court discussed a long line of authorities which state that evidence of bad character alone is not a sufficient ground for refusing a grant.

However, in Re Oughton, 40 ETR 296, Oughton, a notorious sex offender who was sentenced to an indeterminate sentence, was not passed over as executor on the basis that his circumstances were not sufficient to justify passing him over.

In Stadelmier v. Hoffman 25 ETR 174, however, the court passed over one of four named executors where the other three intended to bring action against the fourth on the basis of undue influence with respect to some large inter vivos gifts. The court exercised its discretion to pass over due to the position of actual conflict that the fourth executor was in. He could not in his capacity of executor attack the gift to himself, while at the same time maintain in his personal capacity that the gifts were proper.

Courts are hesitant to interfere with the testator’s right to nominate his or her executor trustee.

The court does, however, have both a statutory power under s. 31 of the Trustee Act, RSBC 1996, c. 464 and an inherent power to remove or pass over a trustee or executor: Mardesic v. Vukovich Estate (1988), 30 BCLR (2d) 170 (BCSC); Seaton Estate, Re, 2003 BCCA 555 (BCCA).

In fact, in Crawford v .Jardine (1997) OJ No. 5041 at para. 18, the court stated that removal of an estate trustee should only occur on the clearest of evidence that there is no other course to follow.

The court further stated that it is not every mistake or neglect of duty on the part of the trustees which will lead to the removal. It must be shown by the applicant that the non-removal of the trustee will likely prevent the trust from being properly executed.

Section 31 of the Trustee Act (RSBC 1996) c. 464

If it is expedient to appoint a new trustee and it is found inexpedient, difficult or impracticable to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of making the order, and either in substitution for or in addition to any existing trustees.

In Mardesic the court removed the trustee because he was in a conflict of interest with the interests of all the beneficiaries of the estate, noting that s. 31 conferred a very broad power on the court.

The test for removal of an executor or trustee is set out in Conroy v. Stokes, [1952] 4 DLR 124 (BCCA), where the Court confirmed at pp. 126-127 that the main test for removal of a trustee is the welfare of the beneficiaries.

It is somewhat trite law that the court’s main guide in deciding to remove an executor or trustee should be the welfare of the beneficiaries: Letterstedt v. Broers (1884) 9 App. Cas. 371.

The sanction of removal of an executor or trustee is not intended to punish the executor or trustee for past welfare of the beneficiaries, but instead is to protect the assets of the trust and the interests of the beneficiaries. However, past misconduct that is likely to continue will often be sufficient to justify removal.

In Dirnbeger Estate (2016) BCSC 439 the court considered an application for removal and replacement of an executor. The executor had in fact retained numerous professionals to assist, but eventually dismissed each one due to his inability to maintain a professional relationship with them. After four years the estate remained undistributed.

The court, citing Conroy v. Stokes (1952) 4 DLR 124 set out the four categories of conduct on the part of an executor or trustee that warrant removal:

  1. endangerment of the trust property;
  2. want of honesty;
  3. want of proper capacity to execute duties; and
  4. want of reasonable fidelity.

The court removed the trustee due to his inability to discharge his duties after four years, and to maintain relationships with trustees, as well as his unaccountable hostility towards a sibling who was a beneficiary and an alternate executor.

Conclusion

The courts are most reluctant to interfere with the deceased’s right to nominate his or her executor/trustee, and it is only the most egregious conduct, that harms or potentially harms the best interests of the beneficiaries, that will prompt the court to pass over, or alternatively, remove an executor or trustee and substitute another.
Each case is very fact-specific and most applications to remove an executor are vigorously contested as there are often great personal conflicts between the beneficiaries and the named executor/trustee. However, emotional conflict is not a major factor in the court’s decision as to whether to pass over or remove an executor/trustee and substitute another.

Wife Substituted as Executor: Courts Declaratory Powers

Wife Substituted as Executor- Courts Declaratory Powers

Re Rattray estate 2019 BC SC 1611 used the courts inherent jurisdiction to provide declaratory relief in the for of directions in substituting a former common-law spouse as an alternate executor in the place of the testator’s two sisters.

The facts are a bit complicated, but the surviving spouse paid the mortgage and other expenses as were required on the former matrimonial home. The bank took the position that the testator’s death constituted a default and began foreclosing on the property, and the sisters were unwilling to defend the proceeding or commit to refinancing.

Only the surviving spouse had the opportunity to apply for and perhaps receive alternate financing, and she was substituted as executor and the others removed”.
The Courts Declaratory Powers

What was noteworthy about the decision was that the court exercised its inherent declaratory powers to make various orders removing the sisters as executors and substituting the former spouse as the alternate executor and such other usual relief also ordered when removing and substituting an executor.

The court has inherent jurisdiction to provide declaratory relief, but the power to do so is limited by judicial discretion to refuse to do so with the circumstances so warrant. Chambers v. Atty. Gen. Canada 2004 BC SC 854 at paragraph 20, citing Solosky v R. ( 1879) , 50 CCC 495 SCC.

More recently, the BC Court of Appeal in Tele- Mobile Co. British Columbia 2013 BCCA 216 set out the factors that constrain the court in exercising this power:

11-“ while it is clear that the Supreme Court has broad powers to make declarations of rights, even in the absence of live controversies, the power to grant a declaration is discretionary. In general, there is a strong preference toward deciding actual disputes rather than hypothetical ones. The factual components of such disputes place the legal issues in context and allow a more thorough evaluation of them. The requirement that there be a genuine dispute ensures that judicial resources are devoted to resolving real controversies rather than speculative ones. Further, the presence of a concrete dispute

Removing an Executor

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

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

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

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

WESA states:

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

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

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

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

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

Section 31 of the Trustee act states as follows:

31. If it is expedient to appoint a new trustee and it is found in expedient, difficult or impractical to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of the making of the order, and either in substitution for, or in addition to any existing trustees.

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

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

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

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

2) clear evidence of necessity is required;

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

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

Court Orders Trustee Removed

Court Orders Trustee Removed | Disinherited Vancouver

Sheppe v Harlingten 2018 BCSC 1460 involved a court ordered removal of a trustee pursuant to the beneficiaries of the Harlingten trust which was established when they were children.

Two beneficiaries of the trust lived in a residential property owned by the trust. The trustee wanted the trust to sell the property and invest the proceeds in real estate development that his own company is developing. the two children wished to continue to live in the trust property that had been established for their benefit.

The trustee held the property in trust pursuant to a trust settlement document that also names him as protector, with the power to replace the trustee.

Under the terms of the trust the trustee has broad discretionary powers that include selling, investing or borrowing against the property, favoring one beneficiary over another, and naming additional beneficiaries. Of particular importance to the petition, the trustee is permitted to enter into transactions, on behalf of the trust, with himself for companies in which he has an interest.

The trustee failed to pay taxes on a property owned by the trust, and that property was forfeited to the crown for nonpayment of property taxes.

The petitioners blocked the sale of property, and the trustee responded with scathing and abusive letters to them, as well as naming six additional trust beneficiaries, all members of his extended family.

The court removed the trustee and substituted another.

The trustee did not meet his statutory obligation to act as a prudent investor of trust property. Although the terms of the trust allowed them to enter into a transaction with his own company, the court found that he had done so in terms that he arranged to clearly prefer his own interest, failed to adequately protect those of the trust, and put the assets of the trust at risk.

The Law

A trustee’s powers, however broadly they may be stated, must still be exercised for the benefit of the trust. In Miles v Vince 2014 BC CA 289, the Court of Appeal set at paragraph 54:

In Fales v Canada Permanent Trust Co.(1977 2 SCR 302 the Supreme Court of Canada held that the primary duty of a trustee is to preserve trust assets. This principle applies despite broad discretionary powers given to the trustee in the trust document. Justice Dickson as he then was articulated the standard:

“The standard, of course, may be relaxed or modified up to a point by the terms of the will and, in the present case, there can be no doubt that the co trustees were given wide latitude. But, however wide the discretionary powers contained in the will, the trustees primary duty is preservation of the trust assets, and the enlargement of recognize powers does not relieve him of the duty of using ordinary skill in prudence, nor from the application of common sense.

The Court of Appeal in Miles referred to guidelines to be applied in considering whether to remove a trustee. Those guidelines come from Letterstedt v Broers (1884) LR Cas. 371 (JCPC)

1. If the court is satisfied that the continuance of the trustee would prevent the trust being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate
2. the acts or omissions must be such as to endanger the trust property or to show all want of honesty, or a want of proper capacity to execute the duties, or want of reasonable fidelity
3. in exercising the delicate jurisdiction of removing trustees, the court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in the matter that is so essentially dependent on details often of great nicety. The court must proceed to look carefully into the circumstances of the case
4. when a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficiary and interested, or those who act for them, from working in harmony with the trustee, if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee of benefit or otherwise, the trustee is always advised by his own counsel to resign.
5. The lack of jurisprudence in respect of the removal of a trustee reflects the trustee when asked to do so, will resign
6. if, without any reasonable ground, the trustee refuses to do so the court might think it proper to remove him
7. friction or hostility between trustees and the beneficiary is not of itself a reason for the removal of the trustees. But were the hostility is grounded on the mode in which the trust is being administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.

Not every neglect of duty or mistake will result in removal of the trustee. The key question is whether there is or has been endangerment of trust property, whether through a lack of honesty, lack of capacity or lack of reasonable fidelity. Conroy v Stokes (1952) 4 DLR 124 BCCA

Dissension between the trustee in beneficiaries is not necessary a reason to remove the trustee. The questions is whether it would become difficult for the trustee to act with impartiality or whether the friction is of a nature or degree that it prevents, or is likely to prevent, the proper administration of the trust. Radford v Radford estate (2008) 169 ACWS (3d) 688 at paragraphs 112 – 113

Executor/Trustee Removal: The Law Summarized

Executor/Trustee Removal: The Law Summarized

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

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

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

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

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

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

30. A trustee or receiver appointed by any court may be removed and a trustee, trustees or receiver substituted in place of him or her, at any time on application to the court by any trust beneficiary who is not under legal disability, with the consent and approval of a majority in interest and number of the trust beneficiaries who are also not under legal disability.

31. If it is expedient to appoint a new trustee and it is found inexpedient, difficult or impractical to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of making the order, and either in substitution for, or in addition to any existing trustees.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Removal of an Executor Summarized

Removal of an Executor Summarized

I am frequently asked about the removal of an Executor that beneficiaries complain about and the following briefly summarizes when and if the court will act to remove and replace an executor.

Lord Blackburn stated in Letterstedt v. Broers (1884), [1881-85] All E.R. Rep. 882 (South Africa P.C.), at 887 (a case cited consistently by courts in this province) that the court’s “main guide must be the welfare of the beneficiaries”. At paragraphs 10-16 of Fleming v. Fleming, 2006 NLTD 112 (N.L. T.D.), Green, J. discussed the legal principles relating to removal of an executor:

(a) the removal of a trustee or executor will not be lightly undertaken;

(b) the court has to be satisfied that it is in the interests of the beneficiaries generally that removal should occur;

(c) if it is clear that the continuance of the trustee or executor in office would be detrimental to the execution of the trusts or the administration of the Estate, the court may remove him or her;

(d) positive misconduct amounting to abuse of trust; endangerment of the Estate or trust property; want of honesty or reasonable fidelity; lack of proper capacity or ability to execute the duties of office; and conflict of interest can justify removal;

(e) friction or hostility between the executor and one or more of the beneficiaries will not normally be enough, in itself, to ground the removal, nor will mere suspicions that the executor will favour one beneficiary over another;

(f) an isolated mistake or a technical breach of trust may not be enough, if done in good faith with the best interests of the beneficiaries in mind; and

(g) consistent administration of the Estate in a manner than does not maintain an even hand between beneficiaries will often be enough to justify removal.

9      The court has an inherent power to effect removal if the executor is in a conflict of interest. A conflict of interest occurs whenever the personal interest of the personal representative conflicts with the interests of others for whom he or she has a duty to act. This is a potential issue here because the executor is a creditor to the Estate relating to legal services rendered prior to the testator’s death. To address whether the conflict is such as to disqualify the executor, one must examine if the executor has placed himself in a position where his personal interest and his duty conflicted conflict, such that he could no longer be impartial vis-a -vis the beneficiaries

Trustee Removal

9 Legal Principles of Trustee Removal

Two Ontario cases summarize the law relating to the removal of a trustee appointed by a will and would likely be followed as the law in British Columbia.

In Chambers Estate v. Chambers 2013 ONCA 511, the court found that a testator’s wishes as to who should act as trustee should only be interfered with in rare circumstances.

In Radford v. Wilkins, 2008 CanLii 45548 (ONSC), Quinn J. set out the legal principles that apply in an application to remove an estate trustee.

9 Principles of Trustee Removal

  1. The Superior Court of Justice has inherent jurisdiction to remove trustees
  2. An application to remove an executor may be made by any person interested in the estate of the deceased
  3. The choice of estate trustee is not to be lightly interfered with
  4. There must be a clear necessity warranting the removal
  5. The removal of an estate trustee should only occur on the clearest of evidence and there is no other course to follow
  6. In deciding whether or not to remove an estate trustee, the court’s main guide should be the welfare of the beneficiaries
  7. The applicant must show that the non-removal of the trustee will likely prevent the trust from being property executed
  8. Removal is not intended to punish past misconduct
  9. Friction alone is not a reason for removal

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.