What is a Discretionary Trust?

What is a Discretionary Trust?

The BC Court of Appeal in Putzki v Saunders 2016 BCCA 344 examined the nature of a family property trust and discussed what is a discretionary trust.

A discretionary trust is commonly used in estate planning often  when dealing with infants, disabled people on a government pension, spendthrifts and mentally challenged people of all sorts. The simple idea is that someone else who is neutral and competent manages the assets/ monies held in the trust for the benefit of the beneficiary, typically by paying the interest and some capital from time to time when necessary.

Underhill and Hayton: Law of Trusts and Trustees, 18th ed. (London: LexisNexis, 2010) at 98, describe the nature of a discretionary trust as follows:

Where a beneficiary has no such absolute current right to direct the trustees to pay him an ascertainable part of the net income or capital he has ‘no interest in possession’, only being interested under a discretionary trust. Typically, this is the case where a beneficiary will receive income only if the trustees positively decide to carry out their duty to distribute income by favouring him rather than another member of the class of potential beneficiaries. There is also the atypical case where a beneficiary must receive the income unless the trustees exercise distributive (or dispositive) powers to divert the income elsewhere … or to withhold it …: the discretion-conferring distributive powers prevent an interest in possession arising (eg where B is a life tenant subject to dispositive powers).
66      A discretionary trust is distinct from a fixed trust. The authors of Underhill and Hayton at 98, describe a fixed trust as follows:
Where a beneficiary has a current fixed entitlement to an ascertainable part of the net income or net capital, if any, of the trust fund after deduction of sums paid by the trustees in the exercise of their administrative powers of management, the beneficiary has a fixed interest which ranks as ‘an interest in possession’ under the trust.
67      Unlike a fixed trust, the beneficiaries of a fully discretionary trust and their entitlements (distinct from the potential beneficiaries and their potential entitlements) cannot be ascertained at the time of settlement. A discretionary trust may also come in a variety of forms. Under an “exhaustive” discretionary trust, the trustee must distribute the whole of the income or capital, or both, but retains the power to choose who among the potential beneficiaries should receive distributions, and in what amount. Under a “non-exhaustive” discretionary trust, the trustee has the added power to choose whether or not to make any distribution at all.

Removal of Executor

Removal of Executor
 Re Kolic Estate 2016 BCSC 1312 contains an excellent summary on the criteria for the removal of executor.
In Kolic the court ordered the removal of executor for basically choosing sides in the litigation concerning the very will that she was to remain impartial over pending the litigation.
22      The authority to remove Mary and substitute another individual as executor to Violet’s Will is found under s. 31 of the Trustee Act, R.S.B.C. 1996, c. 464, and the inherent jurisdiction of the court. Given that a Master does have any inherent jurisdiction to exercise, the basis for Joseph’s remedy must be s. 31. That provision reads as follows:
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.
23      In Miles v. Vince, 2014 BCCA 289 (B.C. C.A.), the court adopted the following guidelines when considering an executor’s removal and substitution:
84 What circumstances justify the removal of a trustee? In Letterstedt v. Broers (1884), 9 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.
5. The lack of jurisprudence in respect of the removal of a trustee reflects that a 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 where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.
24      The first question to be answered is whether Mary is properly fulfilling her role as executor. In my view, she is not.
25      The primary duty of an executor is to preserve the estate assets, pay the debts and distribute the balance to the beneficiaries entitled under the Will, or in accordance with any order made varying the terms of the Will. The executor should not pick sides between beneficiaries, and should be indifferent as to how the estate is to be divided: Quirico v. Pepper Estate, 1999 CarswellBC 2177 (B.C. S.C.).

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)

Executor/Trustees Fees

Executor/Trustees Fees

Zadra v Cortese 2016 BCSC 390 dealt with a passing of executor’s accounts before a registrar to determine the amount of executor/trustees fees for handling a complex estate for ten years but delegating most of the work to professionals.

The value of the estate increased from $800,000 to $4.8 million over this time due to the rise in the real estate market.

The registrar allowed fees of %3 of the gross estate, plus %3 of the estate’s income and a management fee of $12,000.

The executor had pre- taken fees of $70,000 but was not admonished for it as it was done in the belief that the executor was entitled to it.

The Court Stated:

41 Sections 88 and 89 of the Trustee Act, R.S.B.C. 1996, c. 464, provide as follows:

88 (1) A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

(2) The court or a registrar of the court if so directed by the court, may make an order under subsection (1) from time to time, and the amount of remuneration must be allowed to an executor, trustee, guardian or administrator, in passing his or her accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(3) A person entitled to an allowance under subsection (1) may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding 0.4% of the average market value of the assets.

89 The court may, on application to it for the purpose, settle or direct the registrar to settle the amount of the compensation, although the estate is not before the court in an action.

42 The administrator is entitled to remuneration for his work on the estate to a maximum of 5% of the gross aggregate value, including capital and income of all the assets of the estate at the date of passing, pursuant to s. 88(1) of the Trustee Act. The criteria to be considered in determining the amount of remuneration which should be awarded are set out in the much cited case of Toronto General Trusts Corp. v. Central Ontario Railway (1905), 6 O.W.R. 350 (Ont. H.C.) at para. 23wherein the Court states:

[23] From the American and Canadian precedents, based upon statutory provision for compensation to trustees, the following circumstances appear proper to be taken into consideration in fixing the amount of compensation:
(1) the magnitude of the trust;

(2) the care and responsibility springing therefrom;

(3) the time occupied in performing its duties;

(4) the skill and ability displayed;

(5) the success which has attended its administration.

43 It is not required that remuneration be fixed at a specific percentage of the gross value of the estate, it can be calculated as a lump sum provided it does not exceed 5%. In Turley, Re (1955), 16 W.W.R. 72 (B.C. S.C.) at para. 11 the Court stated:

[11] As to grounds 1 and 2 of this application, I think the principles to be applied are well settled. I adopt the statement of the principles as given in, I think, all the cases and found in Re Atkinson Estate [1952] OR 688, that the compensation allowed an executor is to be a fair and reasonable allowance for his care, pains and trouble and his time expended in or about the estate. Both responsibility and actual work done are matters for consideration and, while there should not be a rigid adherence to fixed percentages, they are to be used as a guide. I think that the factors I mentioned in my judgment on the previous motion are found here. It is not only the presence of continuing trusts that makes the realization and administration of estates difficult. It is submitted that the capital fee should be charged only on the amount realized, excluding those assets that go over in specie. While the fact that considerable portions of the estate are transferred in specie is a factor the registrar may consider in settling the percentage he allows, I think it would be quite inappropriate as a rule to exclude these in the computation of aggregate value. There appears to be evidence here of extensive work. It is the duty of the executor to administer the whole of the estate. His work in some things might not be compensated sufficiently by a percentage much in excess of the maximum allowed.

44 Maximum remuneration is not awarded as a matter of routine. Appropriate remuneration is a matter of what is fair and reasonable in all the circumstances. As stated by the B.C.C.A, in Kanee Estate, Re [1991 CarswellBC 654 (B.C. C.A.)] (19 September 1991), Vancouver Registry CA014168:

Maximum remuneration does not go as a matter of course and it is to be expected that there will be disputes over the quantum of remuneration. Section 90(1) does not prescribe an adversarial process. There are no plaintiffs, no defendants, no pleadings, no discoveries, no provisions for offers of settlement or payment into Court, and no other trappings of an adversarial nature, All interested parties are entitled to be heard but in the end the officers of the Court must decide what is fair and reasonable in all of the circumstances.

45 The amount of remuneration to be paid to the administrator is determined on a quantum merit basis which reflects the reasonable value of the services rendered, which is subject to a 5% maximum.

46 In this regard, evidence is required concerning the administrator’s experience in estate matters, the nature of the estate, the tasks undertaken, the time spent, unusual problems arising during the administration of the estate, the skill employed by the administrator, and the results achieved which were directly attributable to the administrator’s efforts. Documentary evidence and time records should be provided where they exist. The administrator provided this evidence over the course of days of testimony. In addition, extensive documentary evidence was provided by both the administrator and the beneficiaries. However, no time records were provided, as the administrator did not keep a record in this regard.

47 An inference may be drawn against an administrator for failure to provide time records in appropriate circumstances. See Lowe Estate, Re, 2002 BCSC 813 (B.C. S.C.) at para. 33.

48 A negative inference in this regard will be appropriate where criticisms in the administrator’s administration of the estate are found to be valid. In these circumstances, the administrator’s remuneration may be substantially reduced. See Lowe Estate, Re , supra, at paras. 27, 28, 41 and 42.

Proprietary Estoppel

Promissory Estoppel Revisited

NOTE:   This Court of Appeal Decision was over turned by the Supreme Court of Canada 2017 SCC 61 and the claim was allowed


See blog entry dated  February 2,2018


The BC Appeal Court in Cowper-Smith v Morgan 2016 BCCA 200 allowed an appeal in part to over turn the successful  the claim brought for proprietary estoppel at trial by finding that the claim should not be allowed where a non owner of property gave assurances and a reliance thereon with respect to her future intentions based on the assumption she would inherit from her mother the owner., when she might not.  Since the sister  had no enforceable equitable or legal right to the property at the critical time being when the representation was made, the brother should not have relied upon it.

The deceased mother transferred her house into joint tenancy with her daughter in 2001. In 2002 the mother made a will leaving her estate equally to her three children. The mother’s investment accounts were over several years transferred into joint names with the daughter.

A declaration of trust for the house and bank assets was signed in 2001.

The defendant sister told her siblings that the house was put into her name only so she could assist in their mother’s affairs and would all eventually go to her mother’s estate.

The defendant daughter promised to sell one of her brothers her anticipated 1/3 share in the house to lure him back to Canada to take care of his mother.

The trial and appeal courts over turned the transfers and distributed her estate equally as per her will on the basis of undue influence  but the appeal over turned the portion of the judgement that allowed the brother to succeed on the basis that he relied upon the promise made by his sister, he took care of his mother for years, but the sister reneged on her promise to transfer to him her 1/3 of the house as she did not own it when she promised it.

The Appeal Court stated in part:

Commerce International Bank Ltd., [1982] Q.B. 84 (Eng. C.A.) at 122:

When the parties to a transaction proceed on the basis of an underlying assumption (either of fact or of law, and whether due to misrepresentation or mistake, makes no difference), on which they have conducted the dealings between them, neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.

70      While the principles of fairness and flexibility have informed the modern approach to the application of proprietary estoppel, as adopted by this Court in its jurisprudence (see Idle-O Apartments Inc. v. Charlyn Investments Ltd., 2014 BCCA 451 (B.C. C.A.) at para. 49; Sabey v. von Hopffgarten Estate, 2014 BCCA 360 (B.C. C.A.); Scholz v. Scholz, 2013 BCCA 309 (B.C. C.A.) at para. 31; Sykes v. Rosebery Parklands Development Society, 2011 BCCA 15 (B.C. C.A.) at paras. 44-46; Erickson v. Jones, 2008 BCCA 379 (B.C. C.A.) at paras. 52-57; Trethewey-Edge Dyking (District) v. Coniagas Ranches Ltd. [2003 CarswellBC 657 (B.C. C.A.)] at paras. 64-73; Zelmer v. Victor Projects Ltd. (1997), 34 B.C.L.R. (3d) 125 (B.C. C.A.) at paras. 36-37), there remains a necessary balancing between an overly broad application of the doctrine under the general guise of “unfairness” and an overly narrow application of the doctrine that places excessive weight on the technical requirements of the doctrine. See Lord Scott’s observations in Cobbe v. Yeoman’s Row Management Ltd., [2008] UKHL 55 (U.K. H.L.) in contrast to Lord Neuberger’s comments in Thorner v. Major, [2009] UKHL 18 (U.K. H.L.).

71      These underlying rationales and explanations for the evolution of the doctrine have led to its modern iteration as enunciated by Madam Justice Bennett in Sabey and affirmed by Madam Justice Newbury in Idle-O Apartments Inc. at para. 49:

[49] From the foregoing I infer that although proprietary estoppel is, like most equitable remedies, flexible and aimed at doing justice, and although the basic elements of the doctrine are not to be technically confined, those elements must still be made out and an equity established. I reproduce again the encapsulation of the doctrine provided recently in Sabey:

Is an equity established? An equity will be established where:

There was an assurance or representation, attributable to the owner, that the claimant has or will have some right to the property, and

The claimant relied on this assurance to his or her detriment so that it would be unconscionable for the owner to go back on that assurance.

If an equity is established, the court must determine the extent of the equity and the remedy appropriate to satisfy the equity.

72      As was noted by Bennett J.A. in Sabey, the bulk of the analysis occurs at the first stage, where “findings with regard to assurances, reliance and detriment are made” and where the court must determine whether it would be unconscionable for the person “to fail to make good on a promise to create a legal right in favour of someone else” (at para. 27).

73      Thus, the elements of the modern doctrine of proprietary estoppel require:

(i) an assurance or representation by the defendant that leads the claimant to form a mistaken assumption or misapprehension that he or she has an interest in the property at issue;

(ii) a causative connection between the assurance or representation and the claimant’s reliance on the assumption such that the claimant changes his or her course of conduct; (

iii) a detriment suffered by the claimant that flows from his or her reliance on the assumption, which causes the unfairness and underpins the proprietary estoppel; and

(iv) a sufficient property right held by the defendant that could be transferred to satisfy the right claimed by the claimant.


The Majority of the Court held:

98      There is no doubt that the applicable standard of review in this case is that described by Newbury J.A. in Idle-O Apartments Inc. as follows (at para. 72):

[72] At the outset, I note that the granting of a remedy for proprietary estoppel is a discretionary matter that attracts a high degree of appellate [deference]. The classic statement of the applicable standard of review may be found in Friends of the Old Man River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, where the Court quoted with approval the following passage from Charles Osenton & Co. v. Johnston, [1942] A.C. 130 (H.L.):

The law as to the reversal by a court of appeal of an order made by the judge below in the exercise of his discretion is well-established, and any difficulty that arises is due only to the application of well-settled principles in an individual case. The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge. In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified…(See also Wenngatz v. 371431 Alberta Ltd., 2013 BCCA 225 at para. 9; Stone v. Ellerman, 2009 BCCA 294 at para. 94; and Harper v. Canada (Attorney General), 2000 SCC 57at para. 26.)

99      In considering whether there has been a wrongful exercise of discretion, I begin by noting that in Uglow v. Uglow, [2004] EWCA Civ 987 (Eng. & Wales C.A. (Civil)) at para. 9, the Court of Appeal described the following general principle:

The overriding concern of equity to prevent unconscionable conduct permeates all the different elements of the doctrine of proprietary estoppel; assurance, reliance, detriment and satisfaction are all intertwined.

100      In my view, the assurance given by Gloria to Max in this case was so based on uncertainty as to undermine any claim based on proprietary estoppel and that uncertainty goes to the root of reliance. The uncertainty arises from the fact that both at the time the assurance was given by Gloria and at the time Max acted upon the assurance, the Property was owned by Elizabeth; that is, Gloria had no beneficial interest in the Property and was uncertain what interest she would eventually inherit, if any. In the circumstances, Max cannot have been reasonably certain Gloria could do what she represented she would do. His hope and belief, initiated and encouraged by her, that he would likely be given the opportunity to buy whatever interest Gloria might inherit does not give rise to an interest in his mother’s estate. With respect, I do not agree with Smith J.A.’s view that Gloria’s “clear entitlement to a one-third interest in the Property at the time of the judge’s order” is relevant to whether an estoppel arose when Max acted upon the assurance given to him.

101      In relation to reliance as an essential element of a claim founded upon proprietary estoppel, Snell’s Equity, 31st ed (London: Sweet and Maxwell, 2005) says, at §10-18:

A must have acted in the belief either that he or she already owned a sufficient interest in O’s property to justify the expenditure or that he or she would obtain such an interest although it is not necessary for A to establish that he or she had an expectation in relation to a specific or clearly identified piece of property. But if A has no such belief, and improves land in which he knows he has no interest or merely the interest of the tenant, or licensee or as an occupier who incurs expenditure in the hope of obtaining planning permission and then entering into a contract to buy the land, he or she has no equity in respect of his expenditure. It is not sufficient that A believes he will obtain an interest over O’s property if he is also aware that O may change his mind.

[Emphasis added.]

102      Snell’s Equity proposes that in order to establish the estoppel it is necessary for A to show that O “created or encouraged the belief or expectation on the part of A that O would not withdraw from the agreement in principle”. That is a description of a present and ongoing obligation.

103      The circumstances in the case at bar resemble those in the many reported inheritance cases, including In re Basham and Thorner v. Major, with an important exception: the assurance here did not come from the beneficial owner of the property interest. In my view, the interest found by the judge to have been wrongly obtained through undue influence in respect of the land transfer and Declaration of Trust cannot be regarded as sufficient interest to permit Gloria to make representations or give assurances that might give rise to a proprietary estoppel. The assurance Gloria gave to Max had nothing to do with an interest in the Property created by the transfer or Declaration of Trust (both of which she thought, at the time, to be intended to simply facilitate the handling of the estate). The interest she promised to Max was the right to buy her expected inheritance. She did not yet own that inheritance and might never have come into it.

104      Walker L.J., in the passage from Thorner cited by Smith J.A., was of the view that in order to constitute proprietary estoppel, “the assurances given to the claimant (expressly or impliedly, or, in standing-by cases, tacitly) should relate to identified property owned (or, perhaps, about to be owned) by the defendant” (emphasis added).

105      Walker L.J. does not expand upon his view that an estoppel may arise from assurances made by one who is about to be the owner of the property. Neither the source nor the extent of that qualification to simple ownership is described, other than by a reference later in the paragraph to Crabb v. Arun District Council, in which there is no discussion of property about to be owned by the Council that made the representation in that case. In fact, in Crabb there are repeated references to the legal rights of the person making the representation. Denning M.R. states: “Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights — knowing or intending that the other will act on that belief — and he does so act, that again will raise an equity in favour of the other; and it is for a court of equity to say in what way the equity may be satisfied” (emphasis added). Scarman L.J., citing Willmott, notes: “the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right” (emphasis added). In short, there is nothing expressly stated in Crabb that contemplates an estoppel arising with respect to property that is other than legally owned by the person making the representation.

106      Even assuming there to be some basis for the view that proprietary estoppel might arise as a result of an assurance given by one about to be the owner of property, I would not expand that class of persons so far as to include a potential beneficiary who gives an assurance to another, years before the death of a testator, with respect to what she will do with an inheritance that she merely anticipates receiving, if the person receiving the assurance acts as requested in the meantime. Not only is there uncertainty, in such a case, with respect to the promisor’s ability to deliver a proprietary interest to the promisee at the time the assurance is given, the uncertainty is not resolved when the promisee acts in reliance upon the promise.

107      Leaving aside, for the moment, the question whether Gloria was in a position to exert undue influence upon her mother, there was uncertainty with respect to the property interest Max was being promised. First, there was uncertainty whether Gloria would inherit anything from her mother. She might have predeceased her mother. Her mother might have changed her will and left Gloria more or less than a one-third interest in the property. Her mother might have sold the house and moved into accommodation more suited to her declining health. Simply by liquidating her property Elizabeth Cowper-Smith would have precluded Max from asserting a right to buy anything from Gloria. Certainly it is not suggested that Elizabeth was in any way restricted in her dealings with the property simply because her daughter made assurances to Max about what she would do on Elizabeth’s death.

108      Without exerting undue influence upon her mother, Gloria was not in a position to determine what property interest Max would receive in exchange for his move to Victoria. The fulfilment of Gloria’s promise was entirely conditional on her mother’s actions, which were outside her control.

109      Further, an obligation on Gloria’s part cannot have arisen before she inherited an interest in the Property. In this case, unlike the inheritance cases, no obligation arose simply as a result of the reliance upon the assurance. Where the assurance comes from the testator, the estoppel arises because there has been such reliance, making it inequitable to permit the testator to resile from the promise. A remedy is available before the testator’s death. As noted by Mummery L.J. in Uglow, proprietary estoppel may be relied upon to prevent a testator from making a will giving specific property to one person, if by his conduct he has previously created the expectation in a different person that he will inherit it:

The testator’s assurance that he will leave specific property to a person by will may thus become irrevocable as a result of the other’s detrimental reliance on the assurance, even though the testator’s power of testamentary disposition to which the assurance is linked is inherently revocable.

110      As Professor MacDougall observes in Estoppel at §6.38, there is a temporal element to proprietary estoppel. The demands of equity and how they are properly satisfied may change over time; but the equity arises when there is reliance. That is the foundation for what he describes at §6.73 as a “more orthodox approach” to the question we face than that which is taken by Smith J.A.:

… [P]roprietary estoppel will not apply where the owner in fact has no existing rights with respect to the property in question when the equity would otherwise arise — i.e., at the time of the detrimental reliance.

111      Uncertainty with respect to the promisor’s ability to fulfill the promise is closely related to the concept of reliance. Key to the acquisition of a proprietary interest by estoppel is the principle that it is unconscionable to permit a person to fail to keep a promise made and reasonably relied upon by the promisee. How can there be reasonable reliance upon a promise to convey an interest in property made by one who does not have such an interest or whose interest is uncertain?

112      Like my colleague, I recognize the evolution of the law of proprietary estoppel has been marked by tensions between, on the one hand, broad principles of flexibility and fairness, and on the other hand, narrow technical requirements. While the jurisprudence tells us that proprietary estoppel is no longer a “Procrustean bed constructed from some unalterable criteria” (see Idle-O Apartments Inc. at para. 23), the Court in Crabb nonetheless insisted the exercise of equitable jurisdiction be rooted in identifiable principles. To that end, the Court adopted the words of Harman L.J. in Bridge v. Campbell Discount Co., [1961] 1 Q.B. 445 (Eng. C.A.) at 459:

Equitable principles are … perhaps rather too often bandied about in common law courts as though the Chancellor still had only the length of his own foot to measure when coming to a conclusion. Since the time of Lord Eldon the system of equity for good or evil has been a very precise one, and equitable jurisdiction is exercised on well-known principles.

113      I do not read this Court’s judgment in Idle-O Apartments Inc. as suggesting that uncertainty that undermines reliance on a representation may be disregarded. To the contrary, when the Court considered whether an equity was established (at para. 23) it required the claimant to establish he believed in the existence of “a right created or encouraged by the words or the actions of the other party such that it would be unfair, unjust or unconscionable to allow the representor to set up its undoubted rights against the claimant”. At para. 57, the Court referred with approval to the trial judge’s recognition that detrimental reliance on the part of the claimant “underpins the claim and establishes the unfairness or unjustness that ought to be addressed by equity. Without such, … the doctrine may become ‘somewhat pointless’ and a ‘circumlocution for doing justice’.”

114      Newbury J.A., after describing the evolving conception of the scope of proprietary estoppel, noted:

[48] This court has adopted the “broader” approach to proprietary estoppel: see Zelmer at para. 49, Erickson at paras. 55-7, and most recently in Sabey at paras. 28-9. This approach is consistent with the judgment of Lord Denning in the seminal English case of Crabb v. Arun District Council, [1976] 1 Ch. D. 179 at 187-9; Oliver J. in Taylor Fashions; Buckley L.J. in Shaw v. Applegate, [1978] 1 All E.R. 123 at 130-1; and various other English authorities. On the other hand, English and Australian courts (and to some extent Canadian courts) have in recent years been at pains to emphasize that proprietary estoppel does not arise simply out of conduct that a court finds to be unconscionable. As observed by Lord Scott in Yeoman’s Row Management Ltd v. Cobbe, [2008] UKHL 55:

… unconscionability of conduct may well lead to a remedy but, in my opinion, proprietary estoppel cannot be the route to it unless the ingredients for a proprietary estoppel are present. These ingredients should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact and law, that the person against whom the claim is made can be estopped from asserting. To treat a “proprietary estoppel equity” as requiring neither a proprietary claim by the claimant nor an estoppel against the defendant but simply unconscionable behaviour is, in my respectful opinion, a recipe for confusion. [At para. 16.]

[Emphasis added.]

115      Professor MacDougall, at §6.34, echoes Lord Scott’s concerns, suggesting the doctrine of proprietary estoppel “should not be seen as a generalized remedial doctrine for unfairness.” Unfairness, in MacDougall’s view, is merely a general description of what the doctrine seeks to combat. Unfairness is not, in itself, an “overarching principle” that allows proprietary estoppel to be applied even in the absence of the typical requirements.

116      The Court in Idle-O Apartments Inc. further noted that the test for establishing a proprietary estoppel had recently been collapsed, in Sabey, into two components (see para. 30):

There was an assurance or representation, attributable to the owner, that the claimant has or will have some right to the property, and

The claimant relied on this assurance to his or her detriment so that it would be unconscionable for the owner to go back on that assurance.

[Emphasis added.]

117      While the criteria that define the limits of proprietary estoppel are not unalterable, I see no reason in principle why the cause of action should be expanded to permit a person to acquire an interest in property by reliance upon an assurance by a non-owner that falls short of a contractual obligation. Such an expansion would be problematic, untying entirely from its ties to property the only estoppel that can be used as a sword. I would not so extend the cause of action.

118      In my view, the fact Gloria used undue influence to obtain de facto control over the Property and Investments does not affect that conclusion. Max did not, in fact, rely upon that undue influence as assurance that Gloria would deliver on her promise. Even if he had known of the influence exerted by Gloria, equity should not come to the assistance of one who says he arranged his affairs in reliance upon a promise made by a person exerting improper control over a testator with respect to what she would do with the inheritance assured by the exercise of that control. In fairness to him it should be said that Max is not advancing that argument. Even so, the logic of that argument lies at the root of the proposition that undue influence distinguishes this case from others where a non-owner makes assurances about what rights an owner will exercise over property.


119      In the result, I would allow the appeal on this aspect of the order only and set aside the Order made in Max’s favour. In all other respects, I agree with my colleague’s reasons and conclusions.

Saunders J.A.:


Appeal allowed in part.

Joint Account Holders Are Fiduciaries

Joint Account Holders Are Fiduciaries

MacKay v. MacKay Estate,2015 ONSC 7429, held that one joint account holder may serve as a fiduciary in relation to the other simply via the traditional indicia of such a relationship as set out in Frame v. Smith, [1987] 2 SCR 99 (i.e., the ability by the fiduciary to exercise unilateral control over the beneficiary’s interests; the vulnerability of the beneficiary).

In MacKay, supra, the defendant daughter-in-law had been added as a joint account holder to her mother-in-law’s account in order to help her with her day-to-day finances; this occurred while the mother-in-law retained capacity. The daughter-in-law did not hold power of attorney. She was her mother-in-law’s main caregiver, emotional support and confidante. In her capacity as joint account holder, in addition to covering the mother-in-law’s expenses, she paid herself a modest weekly sum in compensation for her services. The son (ex-husband of the daughter-in-law at the time of litigation), who held power of attorney for his mother, brought an action against his ex-wife seeking an accounting and repayment of the funds in question.

The court held that the daughter-in-law had a fiduciary obligation to her mother-in-law in her management and operation of the joint bank account, but that she had not breached her duty; her payments to herself were reasonable in the circumstances.

The holding in MacKay underscores the principle that the prima facie nature of a joint account—that is, of its being equally owned and equally subject to the discretion of all account holders—will give way, in some circumstances, before deeper considerations of equity.

In some respects MacKay stands for this proposition more strenuously than Pecore itself, as the former is less reliant on traditional doctrines concerning gifts and donors’ intentions. MacKay does not treat the nature of a joint account as an either/or proposition by which either a gift or trust is created. Rather, MacKay concerns itself solely with the question of fiduciary obligations, specifically as they may arise in the context of a “typical” joint account where one party is vulnerable to the discretion of the other.

Company Director is a Fiduciary

Company Director is a Fiduciary

It is common in estate disputes to encounter a party attempting to deal inappropriately with the affairs of a limited company whose shares should be an estate asset, and when this occurs, one should look for a breach of the directors fiduciary duty owed to the company.

The fiduciary duty of a director to the company is one of loyalty ,good faith, avoidance of conflict of duty and self-interest.

The leading case in this area is Canadian Aero Services Ltd v O’Malley 1974 SCR 592 where the court found senior management who had left the plaintiff with confidential information were fiduciaries and that duty continued after their employment ceased.

25      An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.
26      It is this fiduciary duty which is invoked by the appellant in this case and which is resisted by the respondents on the grounds that the duty as formulated is not nor should be part of our law and that, in any event, the facts of the present case do not fall within its scope.
27      This Court considered the issue of fiduciary duty of directors in Zwicker v. Stanbury1, where it found apt for the purposes of that case certain general statements of law by Viscount Sankey and by Lord Russell of Killowen in Regal (Hastings) Ltd. v. Gulliver2, at pp. 381 and 389. These statements, reflecting basic principle which is not challenged in the present case, are represented in the following passages:
28      Per Viscount Sankey:
In my view, the respondents were in a fiduciary position and their liability to account does not depend upon proof of mala fides. The general rule of equity is that no one who has duties of a fiduciary nature to perform is allowed to enter into engagements in which he has or can have a personal interest conflicting with the interests of those whom he is bound to protect. If he holds any property so acquired as trustee, he is bound to account for it to his cestui que trust. The earlier cases are concerned with trusts of specific property: Keech v. Sandford ((1726), Sel. Cas. Ch. 61) per Lord King, L.C. The rule, however, applies to agents, as, for example, solicitors and directors, when acting in a fiduciary capacity.
29      Per Lord Russell of Killowen:
In the result, I am of opinion that the directors standing in a fiduciary relationship to Regal in regard to the exercise of their powers as directors, and having obtained these shares by reason and only by reason of the fact that they were directors of Regal and in the course of the execution of that office, are accountable for the profits which they have made out of them. The equitable rule laid down in Keech v. Sandford [supra] and Ex p. James ((1803), 8 Ves. 337), and similar authorities applies … in full force. It was contended that these cases were distinguishable by reason of the fact that it was impossible for Regal to get the shares owing to lack of funds, and that the directors in taking the shares were really acting as members of the public. I cannot accept this argument. It was impossible for the cestui que trust in Keech v. Sandford to obtain the lease, nevertheless the trustee was accountable. The suggestion that the directors were applying simply as members of the public is a travesty of the facts. They could, had they wished, have protected themselves by a resolution (either antecedent or subsequent) of the Regal shareholders in general meeting. In default of such approval, the liability to account must remain.

Executor Cannot Use Estate Funds To Defend Personally

Executor Cannot Use Estate Funds To Defend Personally

In a Wills variation claim (now section 60, WESA) an executor cannot use estate funds to defend him or herself if a beneficiary, and may  use reasonable estate  funds to defend the claim but only in the capacity of executor and not beneficiary.

In a wills variation claim the executor cannot use estate funds to defend his personal interests.

The executor may have his reasonable legal fees paid in his role as executor but should have separate counsel in most cases and the fees should be kept to a minimum–typically for advising on estate developments, liabilities and assets.

Generally, the executor is required to play a neutral role in litigation, and as a result of having to play a neutral role, the executor is generally entitled to special costs from estate.

But when the executor is also a beneficiary the costs must be separated.

If one counsel acts for the executor in both the capacity of executor and personal beneficiary, then the legal fees must be apportioned between the two separate roles, with the estate paying only for the role of executor. Wilcox v Wilcox 2002 BCCA 574.

Steernberg v. Steernberg Estate (2007), 33 E.T.R. (3d) 78, 74 B.C.L.R. (4th) 126, 40 R.F.L. (6th) 106, 2007 BCSC 953, 2007 CarswellBC 1533, Martinson J. (B.C. S.C.); additional reasons to (2006), 2006 CarswellBC 2751, 32 R.F.L. (6th) 62, 28 E.T.R. (3d) 1, 2006 BCSC 1672, [2006] B.C.J. No. 2925, D. Martinson J. (B.C.S.C.)  is one of my favourite cases, primarily for the reason in the headnote.

Prior to this case, it was not uncommon for defendants to routinely use estate funds in the hope of depriving a plaintiff of sufficient resources to continue the fight.

Steernberg levels the playing field by making each party pay for their own legal costs as the litigation proceeds, save for the executor, who must remain neutral in the litigation.

Here are the facts of Steernberg:

The Wife, husband’s son, husband’s three daughters and husband’s brother-in-law were beneficiaries under husband’s will.

The Plaintiff wife challenged husband’s will–husband’s son was the executor of the will.

An offer to settle made under R. 37 of Rules of Court, 1990 was signed by son as executor and the other four beneficiaries, but not on behalf of son in his personal capacity as beneficiary.

Legal fees for defendant’ litigation counsel of $148,250.62 and legal fees of counsel for executor of $72,895.24 were deducted before net values of estate were calculated.

Shortly after the trial ended and before reasons for judgment were issued, the estate paid defendants’ litigation counsel’s invoice of $60,700.

None of these payments were made or recorded with the wife’s consent and no funds from estate were made available to the wife before, during or after trial for her legal fees.

During the trial, the wife raised the concern that the defendants took substantial sums of money out of estate for legal fees to defend action before the trial started.

The parties agreed that the issue would be decided after the court gave its decision on whether will should be varied.

It was inappropriate to withdraw funds from estate at start of litigation, or throughout the course of litigation to fund defence of Wills Variation Act claim in the absence of a court order or unanimous agreement of beneficiaries

In a Wills Variation Act (S. 60 WESA) claim the validity of will itself was not being challenged and there was no need for the executor to “defend” will

The son was not entitled, in his neutral role as executor, to make a R. 37 offer and he did not join in the offer in his personal capacity as a beneficiary.

It was not an offer made on behalf of all persons beneficially interested in the assets of the estate and hence would not be binding on the estate.

The losing beneficiaries must pay the wife’s costs personally, not out of the estate.

It was directed that the executor pass his accounts before a registrar and that the registrar inquire into and make recommendations with respect to the net value of the estate after taking into account appropriate legal fees and income that ought to have been earned on the funds had they remained invested.

Passing Over: Removing An Executor

Passing Over: Removing An Executor

Special circumstances sometimes occur where it is appropriate for the Court to Pass Over the named executor in favour of another  which effectively removes the named executor

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

The Court stated:

[28]         The application is not to remove Alex as an 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.

[29]         In the circumstances of this case, it is my opinion that there is a perceived conflict of interest between Alex in his role as an executor and his interest in his personal capacity. If an action is instituted by the executors as a result of the transfer of the Property, it would be against Alex. In my opinion, Alex, in his capacity as executor, cannot attack the transfer of the Property to himself while at the same time maintaining, in his personal capacity, that the transfer of the Property was proper. By making such a finding I am not prejudging the case. I am simply of the view that, in the circumstances of this case, if an action is commenced as a result of the enquiries into the transfer, Alex cannot conscientiously act as a plaintiff in his capacity as an executor in a case where he will be the defendant.

Many cases have stated that the right of a testator to nominate the executor to administer his estate should not be lightly interfered with. (see Re Agnew Estate (1941) 3 W.W.R.723) That case also stated that, apart from statute, a court of probate had no right to refuse probate to an executor named in a will unless he was legally incompetent to act.

Ill will or animosity displayed between the parties is in itself not a sufficient ground to pass over an executor.

In Mortimer on Probate 2nd ed., p.209, the learned author states: “Where a will has been made, and an executor appointed, “the court cannot exercise any discretion as to granting or refusing probate. If probate is refused, it must be on the ground of some legal disability, recognized and allowed by the common law. For an executor is but a trustee for the deceased, and such person as the testator thought proper to appoint for that office, without any previous qualification; nobody can add qualifications to him other than those which the testator has imposed, but he shall be who, and in what manner, the testator shall judge proper”.

In Re Wolfe Estate, 21 W.W.R. 85, B.C.C.A., the court held that under Section 92 of the Trustee Act, it is within the judicial discretion of the Supreme Court or judge thereof to appoint a judicial trustee before the grant of letters probate or letters of administration in place of an executor or person entitled to administration.

Re Haggerty Estate, 60 W.W.R. 574 held that Section 9 of the Estate Administration Act confers a limited and unusual discretion on a court to pass over a named executor “by reason of special circumstances”.

In that case 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 that evidence of bad character alone is not a sufficient ground for refusing a grant.

In fact, in Re Oughton, 40 E.T.R. 296, the notorious sex offender Oughton 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 vs Hoffman 25 E.T.R. 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.

Pre-Taking Executors Fees is Breach of Fiduciary Duty

Pre Taking Executors Fees Is Breach of Fiduciary Duty

Despite holding that the pre-taking of a $70,000 fee by an executor was a serious matter, being contrary to Supreme Court rule 25 – 13, a breach of the executors fiduciary duty, and done without consultation with the beneficiaries or their consent, the court excused the administrator stating that he was not to be held to a standard of perfection judged on the basis of hindsight. The court further found that the executor had acted honestly in believing he was entitled to pre-take a portion of his executors fees. Zadra v Cortese 2016 BCSC 390

The court went on to approve additional remuneration of another $89,000 after reviewing the law and the duties carried out by the executor/trustee.

Pre-taking of fees

[49] The administrator is entitled to remuneration for his work. However, unless otherwise agreed, the amount of remuneration is to be determined by the court pursuant to Rule 25-13 of the Supreme Court Civil Rules. It is a breach of trust for an administrator to take remuneration from the estate without the approval of all the beneficiaries, or before a court order is made fixing remuneration.

[50] In administering an estate, an administrator is not to be held to a standard of perfection judged on the basis of hindsight. The standard of care is reasonableness. In Langley v. Brownjohn, 2007 BCSC 156, the Court addressed the issue of the standard of care in relation to whether a breach of trust ought to be excused. At paras. 64-66, the Court stated:

[64] At page 1258 Waters points out that the question of whether a trustee has acted honestly is not typically an issue in the cases. The more contentious question ordinarily focuses on whether the other requisite elements have been established and, in particular, whether the actions of the trustee can be characterized as being reasonable in the circumstances.

[65] At 1260, Waters describes in general terms what is considered to be reasonable conduct:

Reasonable conduct is what the prudent business person would have exhibited in his own affairs. The court puts itself in the position of the trustee at the time of the disputed conduct, and considers what the prudent business person would have done in the light of the facts as they were then known and the prevailing opinion among business people at the time. [footnotes omitted.]

[66] Among the factors to be considered when determining whether a trustee should be excused are: whether the trustee sought out and/or relied upon the advice of a professional in relation to the impugned conduct; whether the opinion relied upon was correct; the relationship and communication, or lack of it, between the trustee and the beneficiaries leading up to the commission of the breach; whether the breach was merely technical or a minor error in judgment; whether the trustee is a lay person or a professional; whether the trustee has received remuneration; and the quantum of the loss: Fales; Laird v. Lyne Estate (2004), 5 E.T.R. (3d) 132, 2004 BCSC 39; Re: Potter (2000), 32 E.T.R. (2d) 256, 2000 BCSC 628; Linsley v. Kirstiuk (1986), 28 D.L.R. (4th) 495 (B.C.S.C.); Re Heuvels Estate, 2001 MBQB 73; Verma v. Chopra, [1994] O.J. No. 111 (Ont. Ct. Gen. Div.); Re Stoyko Estate, [1992] M.J. No. 587 (Q.B.); Duthie et al. v. Gallagher and Duthie, [1930] 2 D.L.R. 582 (B.C.S.C).

[51] In equity, a trustee had no right to remuneration unless expressly given that right by the trust. In Re Prelutsky, [1982] 4 W.W.R. 309 (B.C.S.C.). The Court stated at para. 8:

What then, of the propriety of the pre-taking? In equity a trustee had no right to remuneration unless expressly given that right in the trust. The basis for that rule being that a trustee claiming compensation is in somewhat of a conflict of interest. In accepting compensation he would, in effect, be benefitting from his own trust. …

[52] The Court further stated at para. 10:

In my view there is no significant distinction between the pertinent section of the Alberta Trustee Act and section 90 of the B.C. Trustee Act. I adopt the reasoning and conclusions of the learned judge and hold that in British Columbia it is improper for a trustee to pre-take trustee compensation without court approval unless all of the beneficiaries are adults and have consented. I also agree that a trustee may estimate its expected allowance and may retain that sum in the trust to ensure a fund to pay the compensation ultimately allowed. The interest earned on that sum’ would, of course, accrue to the benefit of the beneficiaries.