Obligation of Disclosure Between Partners/Fiduciaries

Obligation of Disclosure Between Partners/Fiduciaries

McNight v Hutchinson 2019 BCSC 944 discussed the obligation of disclosure between partners and other relationships characterized by a duty of utmost fairness and good faith ( fiduciary) . ( see also Aero Services Ltd v O’Mally (1973) 4 DLR 371 ).

The authorities emphasize that the purpose served by the requirement of disclosure is to allow the informed party to exercise an independent will and take any position that party might adopt as appropriate, and to be aware of any risk that the other might be tempted to fall short of the requisite duty. Hitchcock v Sykes (1914) SCR 403.

In the case of partnerships, the institution requires there be trust. In the usual case, the firm enterprise requires contribution from each partner and proportionate division is made of the profits or losses. There is no limitation from firm liability, and each partner potentially has the power to expose the full worth of every other partner.

Where relationships are marked by the obligation of utmost fairness and good faith, the remedy for breach extends beyond damage where there has been a breach of the fiduciary duty.

The law calls on the defendants to account to the plaintiff for any profit made or benefit received is result of the breach of duty. This is not the same as damages, which are compensatory in nature. The purpose of damages is to put the plaintiff in the same position it would’ve been if not for the wrongdoing.

Secret profits can be an issue that arises between partners. The remedy for breach of a fiduciary duty by the realization of secret profits or benefits requires that the fiduciary be prevented from retaining any gain from the activity which arose from the breach of duty. The assessment for such a breach focuses on the wrongdoers gain and not the beneficiaries loss.

Duties and Liabilities of Executors / Trustees

Duties and Liabilities of an Executor / Trustee | Disinherited Estate Litigation

The duties and potential liabilities for executor/trustees can be onerous and personally risky if not properly carried out.

It is extremely important that the testator’s choice of his or her executor be given serious consideration. The attending notary or solicitor must remember that most clients have very little understanding as to the tasks and requirements that a personal representative must perform and the responsibilities that must be assumed. The appointment of the wrong person can be a costly and emotionally draining experience for all concerned. Accordingly it is important that the will’s draftsperson investigate the desired appointment and provide prudent legal advice as to who should be chosen to be the executor and trustee. Very often that choice cannot properly be made until the attending notary or solicitor firstly enquires as to the nature of the assets and the intentions to be carried out in the will.

It is very important that the prospective personal representative be made aware of the onerous duties associated with acting in such capacity. An executor who does not wish to act, or who has not intermeddled in the estate, can renounce the appointment.

11 considerations to make before naming your executor

There are many questions that the testator should consider prior to naming his or her executor, some of which are:

(i) will the executor be willing to act;
(ii) is the executor sufficiently sophisticated to carry out the job;
(iii) is the person trustworthy;
(iv) is the person young enough or healthy enough to carry out the job;
(v) will the executor be biased;
(vi) will the executor be able to work well with the beneficiaries;
(vii) does the executor have the time to do the job;
(viii) can the executor afford to do the job;
(ix) is there any conflict of interest or potential conflict of interest;
(x) should there be more than one executor;
(xi) the distance between where the testator and the executor reside.

The nature of the client’s affairs must be thoroughly examined to determine the type of active business interests, assets in foreign jurisdictions, loans or gifts to beneficiaries and the complexity of the various personal property and investments in the estate.

Duties of a personal representative

An executor/trustee derives his or her title from the will of the deceased while an administrator on the other hand derives his or her power by appointment from the court. Whether executor, trustee or administrator, both are referred to as the personal representative of the deceased.

A personal representative has a duty to act solely and exclusively for the benefit of the beneficiaries. This duty is construed strictly and forbids a personal representative from making a profit that is not authorized or occupying a position where the personal representative’s self interests would conflict with the duty to the beneficiaries. The Courts of Equity have required personal representatives to ensure that each beneficiary receives exactly what he or she is entitled to receive under the will or the estate. The personal representative must maintain an “even hand” when dealing with all beneficiaries.
Where there is no will, section 130 of WESA sets priorities for persons applying for grants of administration. It is prudent to have each person entitled to an interest in the estate and each person with an equal or prior right to apply for letters of administration, provide written consent to the application. This eliminates the risk of competing applications and minimizes the risk of the court requiring an administrator to provide a bond or other security.

The personal representative has a duty in exercising all of his or her powers, whether discretionary or administrative, to maintain the standard of care of a reasonably prudent businessperson managing someone else’s property. Generally speaking, the personal representative cannot delegate his or her duties. The Courts in recent years however have permitted delegation of administrative duties that a reasonable and prudent businessperson would delegate in the management of his or her own business affairs. This would include the use of brokers, real estate agents, accountants, lawyers, and appraisers.


The personal representative’s general duties are as follows: 

Prior to the introduction of WESA on March 31, 2014 it was far easier for the personal representative to search for and locate the last will of the deceased. There are now a large number of documents and types of information that may be relevant to what is a testamentary instrument as the will itself is not necessarily a single instrument. For example, recent court cases have held that the will may consist of a will and codicils, a will with documents incorporated by reference, or several documents which, when read together, comprise one will. Other documents might be held to be testamentary instruments pursuant to section 58 of WESA so the lawyer must ensure that the client is advised to bring any and all documents that appeared to express a testamentary intention to the lawyer for consideration.
Section 58 of WESA also states that data recorded or stored electronically may be a will or a revocation, alteration or revival of a will or stated testamentary intention so that searches of the deceased’s electronic records need to be made in case there is a document that might be determined to be such a record. Even suicide notes have been held to be valid wills while various diary extracts have also beenconsidered by the court to be testamentary in nature.

(1) To dispose of the deceased’s body.

It is the executor and not the testator’s spouse or family, who has the right to determine the place and manner of burial. Section 5 of the Cremation, Internment and Funeral Services act, SBC 2004 sets the hierarchy of persons who are entitled to control the disposition of remains. At the top of the list is the personal representative named in the will of the deceased. The right of the executor takes priority over the right of a spouse or other close relatives. If the person who has the right to control disposition is unavailable or unwilling, the right passes to the next person on the priority list. Proper funeral expenses incurred are payable out of the estate. Generally, the person who instructs the funeral director will be personally liable to pay all expenses incurred, but is entitled to indemnity as a first priority against the estate for the reasonable expenses of a suitable funeral. There are some cases where the executor has been denied reimbursement of the full funeral costs where the costs have been found to be excessive under the circumstances.

(2) Searching For and Taking Possession or Control of the Deceased’s Assets.

The personal representative must take steps to search for any cash, jewelry, and valuables and arrange for their safekeeping. Any personal property must be locked up and properly insured. Other assets that may require insurance coverage must also be checked into. Financial institutions and government agencies must be notified of the death. Mail must be re-directed and the bills, including mortgages, must be paid. Rents must be either collected or paid and businesses must be managed for the interim until distribution of the estate or until the sale of the business. A personal representative must enquire as to whether they have sufficient legal authority to carry on the business, and must also be cognizant of the potential for personal liability for carrying on the business.
Property that does not pass to the personal representative includes joint tenancy with a right of survivorship, property that will pass to a named beneficiary, such as in a pension plan, or RRSP and property held by the deceased as trustee.

(3) Complete a Schedule of all of the Deceased’s Assets and Ascertain Their Value.

After the executor has taken charge of the assets of the estate and has made a full inventory of the assets and a valuation of same, the personal representative should then arrange to have an application made to the court for the issue of a grant of probate. In the case where the deceased dies intestate or without a named beneficiary, there is often a delay experienced in finding some appropriate person to step forward and apply for letters of administration. The Rules of Court assume that in practice, in the absence of special circumstances, the court will usually give priority to appointing as administrator of the estate, the person or persons who have the greatest interest in the estate. In practice, consents will be required from any person entitled to share in the estate who has a greater or equal right to apply. Thus, if two or more persons are equally entitled to apply, they must either apply jointly, consent to the appointment of one of them or have the appointment confirmed by the Court. There is no limitation on the number of administrators who may be appointed.

(4) Advertise for Creditors.

Before any debts of the estate are paid, the executor or administrator should see to the publication of the proper advertisement for creditors, claims and other claims against the estate. From my experience, common sense should prevail in deciding whether or not to advertise for creditors as the costs can be considerable. In the case of a deceased with simple assets and a history of paying his or her bills on time, it may not be necessary to publish such an advertisement. However, if the personal representative is to protect him or herself from liability, then serious consideration should be given to the placement of such an advertisement, as provincial legislation states that the personal representative shall not be personally liable to creditors where notice has been properly given and the assets of the estate have already been distributed.

(5) To Notify Beneficiaries, Possible Beneficiaries Such as a Possible Common Law Spouse and Persons Who Would Inherit On an Intestacy With Respect to an Application For Probate or Grant of Administration;

(6) Enquiries must be made with respect to the Canada Pension plan, obtaining full particulars of any insurance on the deceased’s life, reviewing beneficiary designations, which may be revocable or a revocable, and reviewing RRSPs and RRIF’s

(7) To Ensure That Investments Are Authorized.

There is a duty to examine the assets and investments of the estate and, in general, to convert in a reasonable and timely manner, the assets that do not qualify as authorized investments for the estate. The executor must be concerned with assets that may waste (ie, an unheated greenhouse) or that are too speculative (penny stocks) or reversionary assets;

(8) To complete and file income tax returns and where necessary obtain a Clearance Certificate from Revenue Canada. Previous tax return should be reviewed in order to discover assets of the deceased and an estate tax return must be filed for the year preceding the death of the deceased.

(9) To pay the debts, including funeral, legal, testamentary expenses, succession duties and probate fees.

(10) To claim all debts due to the deceased and generally collect all of the assets that form part of the estate.

(11) To keep accounts:

One of the most important duties of the personal representative is to keep records and to be prepared to account to creditors and to persons who have a beneficial interest in the estate. The personal representative must give to anyone to whom he or she owes a duty such information as that person reasonably requires. The type and amount of information varies but the duty to account is owed to beneficiaries, unpaid legatees, unpaid creditors, successors, trustees, others who may have an interest in the deceased’s assets and others provided for by statutes such as the Public Guardian or Revenue Canada.

(12) To Investigate, Continue or Bring and Maintain Court Actions on Behalf of the Estate:

A personal representative of a deceased claimant may continue or bring and maintain an action for a loss or damage to the person or property of the deceased in the same manner and with the same rights and remedies as the deceased, except for certain actions such as libel and slander, pain and suffering and loss of expectancy of earnings.

The personal representative should remain neutral in any litigation concerning the distribution of estate assets, such as a wills variation action under section 60 WESA, and to assist the parties in determining the net amount of the estate that might be available for distribution. A personal representative, however, cannot maintain his or her own court action where he or she and the estate are on opposite sides. If that situation arises, then the personal representative must resign. The exception is that section 151 WESA now allows a beneficiary to seek leave of the court to prosecute an action without the need to replace the personal representative first.

(13) To distribute the assets in accordance with the will or the laws of intestacy.

Potential liabilities of the personal representative:

In Ketcham v Walton 2012 BCSC 175 at paragraph 10 , the court stated that the basic principle of an executor’s duty to specified potential beneficiaries of the will is neutrality. The court quoted Quirico v Pepper estate (1999) 22 BCTC 82 BCSC : “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 former Wills Variation act ( now Section 60 WESA). 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 the court.”

14. Debts and Liabilities

A personal representative may be personally liable for the debts of the deceased to the extent of assets coming into the hands of the personal representative. It is therefore extremely important that the debts are properly listed and valued in the inventory of assets and liabilities. Particular care must be given to not distribute the assets to beneficiaries until either a clearance certificate has been issued by the federal tax authorities or more than sufficient assets have been held back from any interim distribution, so that the taxes can be paid. Failure to pay federal and provincial taxes can result in personal liability for the personal representative. Personal representatives are strongly encouraged to use the expertise of a tax accountant, so as to determine capital gains and losses for income tax purposes, to calculate foreign taxes, and to determine what property tax if any, is payable. This list is not exhaustive.
Valuations may often be difficult and complex and again, the personal representative should use a professional appraiser, qualified accountant or other expert for determining such valuations.

15. Failure To Keep Accounts

A trustee has an obligation to keep proper accounts, including a complete record of his or her activities and be in a position at all times to prove that he or she administered the trust prudently and honestly. He or she must have the accounts ready to give full information whenever required- Sandford v Porter (1889) OJ No.43, 16 OAR 565 (CA)

A trustee who fails to retain receipts supporting substantial cash withdrawals of expenses charged against an estate has not adequately carried out his or her duties and may be held personally liable for the unsubstantiated withdrawals.

If a trustee has mixed his or her own funds with the funds being held for another, all of the property must be taken to be the other’s property until the trustee is able to prove what part of it is his or her own Norman estate (1951) OJ 501 CA.

The trustee, not the beneficiaries bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the trust.

16. Using Trust Assets For Personal Gain

It is a basic principle of trust law that a trustee is not entitled to use the trust property for his or her own personal benefit. If the trustee cannot account for or explain disbursements or expenses charged against a trust, he or she is personally liable to the trust for those disbursements and expenses.
A trustee who improperly enjoys the benefit of trust assets without authority and allows non-beneficiaries, such as his family, to also benefit is liable to the trust for the amounts of the value of the benefits received -Langston v Landen 2008 ONCA 321

17. Improper Delegation to Third Parties and improper Charging of Fees

There is authority for the proposition that the fees paid by a trustee in respect of the preparation of accounts must be borne by the trustee and deducted from the amount of compensation payable Eisenstat Estate v O’Hara (1995) OJ 548.

There is also authority for the proposition that where the trustee delegates the care and management of a trust to a professional, the professional fees incurred by the trust are deducted from the compensation paid to the trustee . Holt Estate (1994) 2ETR (2d) 163

18. Reckless and Unreasonable Behavior

An executor/trustee may be personally liable for costs for reckless and unreasonable behavior that amounts to reprehensible conduct for the opposing plaintiff’s action for no other reason than to frustrate the plaintiff’s claim. From my experience this typically arises between competing siblings Craven v Osdacz 2017 ONSC 4396.

19. Losses Due to Actions or Inactions

If an estate suffers any losses as a result of an executor/trustee’s actions or inactions such as failure to rent real property, the executor is obliged to repay the estate for such losses with interest. Re Sangha 2018 BCSC 54. An executor/trustee may be personally liable for interest lost to the estate for failing to invest estate assets. Re Proniuk 1984 CarswellAlta 285.

20. Conflicts of Interest

Moffat v Weststein (1996) 29 O.R. (3d) 371 canvassed the duty of an executor/trustee to avoid conflicts of interest, and at page 390 stated ” subsumed in the fiduciary’s duties of good faith and loyalty is the duty to avoid a conflict of interest. The fiduciary must not only avoided direct conflict of interest, but also must avoid the appearance of a potential or possible conflict. The fiduciary is barred from dividing loyalties between competing interests, including self-interest.

21. Improper Investments

Executors/trustees are only authorized to make investments of estate assets as provided for under the Trustee Act and must not invest any estate assets in speculative or risky types of investments. They must undertake their responsibilities with the ordinary care and prudence of a reasonable investor Stranger v Royal trust Co (1947) 1 WWR 538 and may be found personally liable for losses incurred by the estate for improper investments.

22. Failure to Pay Income Taxes

Under the Income Tax act an executor trustee will be personally liable for any unpaid taxes, interest and penalties that may be payable by an estate if the assets are distributed before obtaining a clearance certificate from the Canada Revenue Agency certifying that all taxes, interest and penalties have been assessed and paid. As such, it is crucial for the personal representative to obtain tax advice from a properly qualified accountant and to withhold substantial monies to ensure sufficient funds to pay taxes, in the event that an interim distribution is made to the beneficiaries.


The duties and liabilities of a personal representative set out in this article are not exhaustive but do give an indication as to the number of factors to not only decide whether a person should be appointed to act as the personal representative, or alternatively agreed to act as the personal representative due to the onerous tasks and potential liabilities that can be imposed on an executor/ trustee.
A personal representative should always retain an estate lawyer and accountant for the purpose of handling the rigours of carrying out the duties imposed by the office of being a personal representative and avoiding the serious liabilities that can be personally imposed on him or her for improperly carrying out the duties associated with such a fiduciary duty.

BC Lawyer -Power of Attorney Abuse

Power of Attorney Abuse | Disinherited | Estate Litigation

Trevor Todd and Jackson Todd have practiced contested estate law for over sixty combined years, including financial abuse by a power of attorney.


Goyal v. Estate of Maisie Meng 2017 BCSC 2474 involved an abuse of a power of attorney who were sued by the estate representatives for breach of fiduciary duty.

Mr. Liem and Mr. Tuan acted as powers of attorney for Mr. and Mrs. Meng prior to their deaths.

In 2012 the Mengs entered into a listing agreement for the sale of their home. The wife signed the listing agreement, but the powers of attorney never communicated with the husband to determine his wishes.

The attorneys were also directly involved in signing the necessary documents to reduce the listing price without contacting either the husband or the wife to discuss their wishes.

Both attorneys, then committed the Mengs to selling their property for $1.4 million, which was below even the reduced listing price. They did so without consulting the wife, who disagreed with the sale price when she learned about it.

Mr. and Mrs. Meng revoked the powers of attorney and refused to complete the sale.

The prospective purchaser then sued the Mengs for specific performance and the Mengs defended on the basis that the powers of attorney were void and the contract of purchase and sale was void due to lack of capacity.

The court action was settled after the Mengs had both died, and the property was ultimately transferred to the purchaser for $1.65 million

The estate representative of the Mengs then sued the attorneys for breach of fiduciary duty, and the action was allowed.

The court held that an acting as he did in the sale of the property, the attorney Liem failed to act in their best interest, and breached the duty that he owed to them as their attorney.

As a result , the attorney breached his fiduciary duty, the husband and wife were sued ,and incurred legal expenses to defend themselves.

The court concluded that the Meng’s estates were entitled to be indemnified for the legal expenses and costs that were incurred.

The court followed the decision Egli v Egli 2004 BC SC 529, at paragraph 76 – 79.

The evidence established in respect of the powers of attorney, the three indicators of a fiduciary relationship or present, namely:

a) the fiduciary has scope for the exercise of some discretion or power;

b) the fiduciary can unilaterally exercise this discretion or power to affect the beneficiaries legal or personal interest; and

c) the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary.

The court held that given the age and circumstances of Mengs they were particularly vulnerable to their attorneys.

The court ordered that the legal fees incurred by the legal counsel in relation to the action be submitted to the registrar for review, for an assessment of costs and review the bills incurred on behalf of counsel for the Mengs.

Removal of a Committee or Litigation Guardian

Removal of a Committee or Litigation Guardian

The applicable case law and test for the appointment and removal of committee or litigation guardian of a patient’s estate is the Supreme Court of Canada decision of Gronnerud v Gronnerud (2002) 2 SCR 417, which essentially was a useful statement of the parens patriae jurisdiction of the court in the best interests of the patient.

In that decision, the litigation guardians were removed on the basis that the guardians were in a conflict of interest towards the dependent adult. There was also an added element of acrimony or a high level of conflict between the guardians in the opposite parties in the litigation, which was found to amount to a conflict of interest.

In Gronnerud , the court stated evidence must demonstrate that the litigation Guardian is both qualified and prepared to act, and in addition is indifferent as to the outcome of the proceedings.

The third criterion, that of indifference to the result of the legal proceedings, essentially means that the litigation Guardian cannot possess a conflict of interest with respect to the interests of the disabled person.

Indifference by a litigation Guardian requires that the Guardian be capable of providing a neutral, unbiased assessment of the legal situation of the dependent adult and offering an unclouded opinion as to the appropriate course of action.

In essence the requirement of indifference on the part of a litigation Guardian is a prerequisite for ensuring the protection of the best interests of the dependent adult. A litigation Guardian who does not have a personal interest in the outcome of the litigation will be able to keep the best interests of the dependent adult front and center, while making decisions on his or her behalf. Given the primary of protecting the best interests of disabled persons, it is appropriate to require such disinterest on the part of a litigation Guardian.

It is acceptable in most cases, and perhaps desirable and some cases, to have a trusted family member or a person with close ties to the dependent adult act as litigation Guardian.

There are, however, exceptions, such as in the situation where there is a particularly acrimonious and long-standing dispute among the children concerning their dead parent’s estate. In such cases, the indifference required to be litigation Guardian is clearly absence.

Essentially the same criteria for the removal of a litigation Guardian is the same as in the case of removal of a committee. See Re Poon 2005 BCSC 254.

The requirement that the property Guardian not be in conflict of interest is a proxy for ensuring that the property Guardian protect the best interests of the dependent adult. Similar to the requirement the litigation Guardian be indifferent, at minimum, a property guardian must be able to handle the finances of the represented party in a disinterest, unbiased manner.

Although the statute is clear in stating that being a family member or potential beneficiary is insufficient by itself to prove a disqualifying conflict, in some cases, a family members or potential beneficiaries, there is evidence of other factors indicating a lack of objectivity. It is the unusual case where a family member or potential beneficiary in a troubled estate can demonstrate an absence of conflict and bus act as property Guardian.

S. 132 WESA: Special Administrator

S. 132 WESA - Special Administrator
S. 132 WESA (Wills, Estates, Succession Act) allows the Court to 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 can be conditional or unconditional and made for general, special or limited purposes.
This is of potential great use to the many fractured families embroiled in estate litigation where there are accusations that the executor is being unfair and the estate is dragging on due to infighting.
In Re Godby Estate 2015 BCSC 1809 the court considered appointing  an experienced estate lawyer in the place of a trust company but chose the trust company largely as the majority of the beneficiaries wanted the trust company who had already started work on the administration and had a contract for the sale of the major asset.
The trust company was appointed special administrator pursuant to S 132 WESA unconditionally and generally.

The Law:

45      By their opposing applications, the parties effectively seek the same result: appointment of a special administrator under s. 132 of WESA. As noted earlier in these reasons, the initial grant of administration to Solus is or may be flawed in that Barbara’s and Brenda’s opposition to Solus was not or may not have been considered. Simply setting aside the ex parte order of Harris J. and reinstating the order appointing Solus does not take this apparent oversight into account.
46      The appointment sought is within the discretion of the court. The discretion must be exercised with a view to placing the administration of the estate in the hands of the entity that is likely best to convert it to the advantage of those with claims to the estate, per Earl of Warwick v. Greville (1809), 1 Phill. Ecc. 132, 161 E.R. 934 (Eng. P.D.A.).
47      The fact that the majority of the beneficiaries in this case support the appointment of Solus is a significant factor for me to consider, per Williams v. Wilkins (1812), 2 Phill. Ecc. 100, 161 E.R. 1090 (Eng. K.B.). The majority beneficiaries are entitled to about 80% of the estate and have a significant interest in its administration.
48      Friction between a beneficiary and a trustee, in the absence of misconduct or breach of trust on the part of the trustee, is not sufficient to merit the removal of a trustee: Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C. C.A.).