There are many risks that the role of an executorship may bring, and one of them is the actions of the court in denying the executor to be indemnified for his or her legal fees, and under appropriate circumstances such as in recklessness, an executor may be ordered to personally pay the court costs of the winning party.
The classic examples of when an executor is denied full indemnity for legal fees and to pay the legal fees of the opposing party is when the executor has pursued wasteful or unnecessary litigation, and in this case ,a refusal to accept a very reasonable offer of settlement.
This occurred in Semenoff Estate v Bridgman 2014 BCSC 174, where the executor was found by the court to have refuse to settle a court action when offered full indemnity for the claim, amounted to recklessness that attracted personal liability to the executor for the costs of the third-party.
The Law When An Executor May Be Personally Liable For Costs:
The general rule is articulated in Feeney’s Canadian Law of Wills (4th ed.). At §8.62 it says:
“Finally, although the general rule is that an executor is entitled to costs of litigation out of the estate, he or she can sometimes incur personal liability. Before taking over the deceased’s litigation, an executor would be wise to first get an indemnity from the beneficiaries for the payment of costs out of the estate if he or she loses, for he or she runs the risk of having to pay the costs personally under an old English decision (Boynton v. Boynton (1879), 4 App. Cas. 773 (H.L.), per Lord Cairns). In any case, if the litigation is improper or negligently conducted the executor may have to pay the costs personally (Brown v. Burdette (1888), 40 Ch. D. 244).”
[34] In Brown v. Burdette, the Court of Appeal (Chancery Division) said quite clearly that the court will not permit the costs occasioned by improper litigation, or by negligent conduct of administration proceedings, to be paid out of an estate under its care. The court in that case concluded that the costs would probably equal the entire amount of the estate and found there was significant (undue) delay in the suit caused by the solicitor. Mr. Justice Kay said:
The Court has always had and exercised the power of making executors personally liable for costs of useless and improper litigation even in an administrative suit….
[35] I also note the decisions of Registrar Sainty which canvassed (mis)conduct of executors seeking recovery of fees from estates. In Starko Estate (Re), 2009 BCSC 1473 she stated at para 76:
…In general executors are entitled to full indemnification for their legal costs, provided such executor has not pursued unnecessary or wasteful litigation.
[36] In Estate of Myrtle Evertt Peterson, Re:, 2011 BCSC 223, she reiterated this point at para. 65:
It is well established that, in general, trustees are entitled to be indemnified for all costs, including legal costs, which they have reasonably incurred in carrying out their duties as trustees. It has been held (Geffen v. Goodman Estate) that “reasonable expenses” can include the costs of an action reasonably defended. However, in the ordinary course an estate has no obligation to pay for legal fees incurred by a person to protect his own personal interest in litigation: see: Wilcox v. Wilcox.
[37] At para. 66 she commented:
The questions to be answered are: whether the litigation expenses of the executor are “properly incurred”; and whether in defending the litigation he has acted “prudently and properly”? In determining whether the expenses are “properly incurred” and whether the executor has acted “prudently and properly” I must examine all the circumstances, including: (a) the initial decision to defend the proceeding: (b) the manner of conduct of the defence: and (c) all other matters relevant to the proceeding: see Craven v. Osidacz Estates.
[38] I find that the considerations laid out by Registrar Sainty are equally useful in the case at bar. Applying the above tests here, it is clear to me that the executor’s decision to refuse to settle his claim when he was offered full indemnity amounts to a reckless and improper course of action that attracts personal liability.
