Problems With An Executor?

When To Remove An Executor

In Burke v Burke, 2019 BCSC 383 (Burke), the British Columbia Supreme Court reviewed the applicable law and procedures concerning the removal and replacement of an executor and trustee on the application of a beneficiary, under the will of the deceased. The court confirmed the test to be applied on such applications, as summarized by the Supreme Court of Ontario in Johnson v Lanka, 2010 ONSC 4124 (Johnson). When deciding whether to remove an estate trustee, the court will not likely, nor lightly, interfere with the testator’s choice. There must be strong evidence that the trustee’s acts or omissions are of such a nature as to endanger the administration of the trust, and the court’s primary consideration is the welfare of the beneficiaries.

The Applicable Law

Wills, Estates and Succession Act, SBC 2009, c 13:
131 If a person dies leaving a will, and the executor named in the will renounces executorship or is unable or unwilling to apply for a grant of probate, or if no executor is named in the will, the court may grant administration with will annexed to one or more of the following persons in the following order of priority:
(a) a beneficiary who applies to have the consent of the beneficiaries representing a majority in interest of the estate, including the applicant;
(b) a beneficiary who applies not having the consent of the beneficiaries representing a majority in interest of the estate;
(c) any other person the court considers appropriate to appoint, including, without limitation, and subject to the Public Guardian and Trustee’s consent, the Public Guardian and Trustee.

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

Trustee Act, RSBC 1996, c 464:

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.

Principles to Consider

In Johnson at paragraph 15, the Court summarized the principles that guide the Court’s discretion to remove estate trustees.

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

Applying the Law and Legal Principles

In Burke, the petitioner, a granddaughter of the deceased, applied to have her sister removed as executor of the estate and be replaced by a trust company. Their mother, daughter of the deceased and also a beneficiary under the will, supported the application, while the executor opposed it. The application was brought under sections 131(c) and 132 of the Wills, Estates and Succession Act, section 31 of the Trustee Act and the inherent jurisdiction of the court.

The court found that the executor of the deceased’s estate had a strong prima facie case that the testator intended for her to be the executor, therefore the court should not interfere with that preference lightly, unless there is no other reasonable alternative available. While the petitioner argued that there was a potential conflict of interest which could interfere with the administration of the estate, the court did not find it sufficient to justify the removal of the executor and there were reasonable alternatives to minimize, and even nullify, the potential conflict.

Executor/Trustee Removal: An Overview of the Law

 

The scope of the executor’s duty is guided by basic principles of neutrality and indifference to the division of the estate as specified in the deceased’s last will and testament. An executor must remain impartial and not have any conflicts of interest with the beneficiaries or the estate. The statutory authority that allows the court to intervene and consider the removal and replacement of an executor is found at sections 30 and 31 of the Trustee Act, RSBC 1996, c. 464. In making this decision, the court may consider four established guidelines that justify the removal of a trustee. There are further circumstances where such an application is granted, however the list is not exhaustive and will be dependant on the specific facts and circumstances of each case.

The Executor’s Duty

The basic principle of an executor’s duty is to remain neutral to specified and potential beneficiaries of the deceased’s will (Ketcham v Walton, 2012 BCSC 175 at para 10). An executor must remain impartial; they should not take sides between the beneficiaries and use estate funds to finance litigation on their behalf. An executor has a primary duty to preserve the assets of the estate, settle any debts and distribute the balance to the beneficiaries entitled under the will. “It is a matter of indifference to the executor as to how the estate should be divided.” (Quirico v Pepper Estate (1999), 22 BCTC 32 (BCSC), as para 15).

Authority to Remove and Replace an Executor

Trustee Act, RSBC 1996, c. 464:

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

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

Established Guidelines Justifying Removal

In Miles v Vince, 2014 BCCA 289, at paragraphs 84-85, the court reviewed the following established guidelines justifying the removal of a trustee.

  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 benefits 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.

“The principles to be applied in applications for the removal of executors are the same as for those for removal of trustees (Powers v Powers Estate (1988), 47 DLR (4th) 471 (Nfld SC (TD)) at para 20)

Circumstances in Which an Executor May be Removed

The court may intervene by removing and replacing the executor and trustee of an estate where:

  • The conduct of the executor has endangered the trust property, or has shown a want of honesty, or of proper capacity to execute the duties of the office, or of reasonable fidelity (Conroy v Stokes, [1952] 4 DLR 124 at 127);
  • The conduct of the executor is not in the best interests of the beneficiaries (McKay v Howlett et al, 2003 BCCA 555);
  • The executor has benefitted at the expense of the estate as a result of a conflict between his or her duties as executor and his or her personal interests, or as a result of the executor’s conduct endangering estate assets (Re Veitch Estate, 2007 BCSC 952 at para 24).
  • The proper administration of a trust is threatened and the executor responsible for its administration has shown a want of proper capacity to execute the duties. In these circumstances, the presence of misconduct from the executor in question is not necessary (Re Consiglio Trusts (No 1) [1973] 3 OR 326);
  • The executor fails to promptly communicate with the beneficiaries or fails to file trust tax returns in a timely manner, thus causing loss and damage to the estate and the beneficiaries (Loftus v Clarke Estate, 2001 BCSC 1136 at para 17);
  • The executor has conducted business on behalf of the estate and there is concern regarding the accounting of that business, or the executor has been treating the estate assets as his or her personal assets (Hayne v Moncrieff, 2012 ABCA 264).

Removal Due to Conflicts of Interest

As stated above, the executor’s primary duty is to remain neutral while also acting in the best interests of the beneficiaries. This means that the executor cannot have conflicting personal interests with the beneficiaries or the estate. As established by the BC Supreme Court in Re Ching Estate, 2016 BCSC 1111 as paragraph 22:

“Even a “perceived” conflict of interest between an executor’s personal interests and her obligation to administer the trusts in the will in the interests of the beneficiaries may cause this court to intervene to appoint a new executor or an administrator to avoid even the appearance of conflict.”

Furthermore, where a conflict of interest exists between the executor’s duty and his or her personal capacity, that executor must be removed. In Re Becker, 57 OR (2d) 495 (Ont SC), the executor faced a conflict between his capacity as an executor to attack the gift and the transfers of securities to himself, while at the same time maintaining in his personal capacity that the gifts and transfers were proper. In this case, the Ontario Supreme Court found the following:

“One duty of an executor is to bring in the estate for distribution among the beneficiaries. If it is perceived, on good grounds, that that important duty is compromised by a personal conflict of interest because the executor will be asked to sue himself to recover what may be a large part of the estate property, he must be passed over. That consideration is particularly important when the action against the executor is for a very significant amount in respect to the size of the estate.”

Estate Litigation Lawyer Angela Price-Stephens

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