Trustee Removed For Selling Assets Below Market Value and Benefiting

Trustee Removed For Selling Assets Below Market Value and Benefiting

VanKoughnett & Others v. Austin, 2006 BCSC 1856 is authority for the proposition that a trustee removed under section 30 of the Trustee Act where there is potential conflict of interest between the personal interests of the trustee, and those of the beneficiaries, particularly in this situation where the trustee sold assets at far below market value, and the trustee had benefited from her administration of the estate

The Law

The present petition seeks to replace the designated executor and trustee with the alternate named in the will of the deceased.

[20]            The application is brought, in part, under s. 30 and 31 of the Trustee Act, R.S.B.C. 1996, c. 464, and amendments, which provide:

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 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.

[21]            The test to be applied in an application to remove an executor on the basis of misconduct is that set out by our Court of Appeal in Conroy v. Stokes, [1952] 4 D.L.R. 124.  To succeed on this basis the evidence must show that the executor acted in a manner that endangered the estate, or that as executor he or she acted dishonestly, without proper care, or without reasonable fidelity.

[22]            Misconduct is, however, not a prerequisite to the court removing a trustee “when the continued administration of the trust with due regard for the interests of the cestui que trust has by virtue of the trustees become impossible or improbable”, Re Consielio Trusts (No. 1) (1973), 36 D.L.R. (3d) 658 at 660 (Ont. C.A.).

[23]            In Hall v. Hall (1983), 45 B.C.L.R. 154, the court granted an application for removal of an executor where the executor’s duties were in conflict with his or her personal interests, estate assets had been endangered by the executor’s conduct, and the executor had benefited at the expense of the estate.


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