Month: January 2024

Removal of Executor for Conflict of Interest

January 26, 2024

An executor may be removed if their position as personal representative of the estate is in conflict with their personal interests.  A court can order the removal of an executor pursuant to the Wills, Estates and Succession Act, the Trustee Act, or the court’s inherent jurisdiction.

A will maker is entitled to choose their executor, and this choice is entitled to deference.  A court should only interfere with the will maker’s choice of executor if there is clear and cogent evidence that the executor’s acts or omissions are of such a nature to endanger the administration of the estate.  The primary consideration is the welfare of the beneficiaries collectively.

There are certain categories of misconduct that may warrant removal: endangerment of trust property, want of honesty, want of property capacity to execute duties, and want of reasonable fidelity.

An executor may also be removed if they are in a conflict of interest, as this this may represent a want of fidelity.  An executor is a fiduciary and has a duty to protect the best interests of all of the beneficiaries.  If this duty is in conflict with their personal interests (for example, their interests as a beneficiary or a creditor of the estate) then this may warrant their removal.  Even a “perceived” conflict of interest may warrant removal.

This must be balanced against s. 151 of the Wills, Estates and Succession Act, which gives certain persons the right to seek leave to commence proceedings on behalf of the estate, often in circumstances where the personal representative is in a conflict of interest with respect to a potential claim and is unlikely to commence proceedings (i.e. to pursue a claim against their personal interests).

The B.C. Supreme Court recently considered this issue in Thomson (Re) 2023 BCSC 1591.

In Thomson, the Court made clear that they were not deciding issues relating to the beneficiaries not getting along and being suspicious of one another.  The Court was to determine whether the executor was in a conflict of interest such that she was unable to act in the best interests of all of the beneficiaries.  The Court held that by commencing actions against the estate, the executor could be liable to pay for costs to the estate.  This put her in a “disabling” conflict of interest.

Further, the executor’s “steadfast” position regarding debts owed by one of her siblings to the estate showed that she could not be neutral in order to act in the best interests of all beneficiaries.  For example, she refused to consider whether this sibling owed rent to the estate, and by refusing to even look into that issue, she endangered the administration of the estate to the detriment of the beneficiaries.

The executor argued that if other beneficiaries wanted to pursue her sibling for rent, they could apply for standing under s. 151 to pursue the claim on behalf of the estate.  The Court held that s. 151 did not absolve the executor of her conflict of interest.

The executor was removed, and as a result of the beneficiaries’ inability to cooperate and continuing mistrust (they were siblings), an independent trust company was appointed.

This decision is a reminder of the importance of an executor remaining neutral and even-handed,.  An executor cannot simply point to s. 151 and the ability of a beneficiary to apply for standing to take the actions that the executor should be taking.

B.C. Case Comment – Revoking a Grant of Probate:

January 19, 2024

A party may file a notice of dispute before a grant is obtained, if they dispute the validity of a will or the authority of another person to apply for a grant in relation to that will.  The filing of a notice of dispute prevents the court registry from issuing a grant (of probate or administration) until the dispute has been determined.

However, if a notice of dispute is not filed in time and the grant is issued, this does not necessarily end the matter – a person may seek an order revoking the grant.

In Narsaiya Estate (Re) 2023 BCSC 1350, the deceased made two wills, one in January 2021 and one in July 2021.  The distribution under the two wills was essentially the same, dividing the estate equally between the deceased’s six children.  The difference between the two wills was the person(s) appointed as executor.  The January will named five of the children as executors.  The July will named only one of the children as executor (Dorothy).

The four other children named as executors under the January Will (i.e. not Dorothy) filed notices of dispute, alleging that Dorothy was unfit to act as executor because she was in a conflict of interest, was hostile to the parties, and was too busy.  They did not contest the validity of the July will.

Next, the four children applied for a grant of probate of the January Will (despite the existence of the July Will).  As part of that application, they needed to confirm that there was no testamentary document that was dated later than the January Will (which was not the case, since the July Will Existed).

The four children obtained a grant of probate under the January Will.  Dorothy applied seeking orders revoking and nullifying the grant of probate of the January Will.

The Court confirmed that it has the jurisdiction to revoke grants of probate.  Courts have jurisdiction to revoke grants of probate where evidence discloses that the grant ought not to have been issued.  There are numerous grounds on which probate can be revoked, including:

  1. where subsequent wills have been discovered;
  2. where it has been found that the will is otherwise invalid;
  3. where it has been determined that the testator is not, in fact, dead;
  4. where it is shown that the executor is under a legal disability (minority or mental infirmity); and
  5. where probate has been obtained by fraud.

The Court in Narsaiya revoked the grant under the January Will.  Although the July Will was not “subsequently” discovered in the usual sense, there was a later will and its existence was not meaningfully brought to the registrar’s attention prior to the issuance of the grant.  The grant was also made, at a minimum, based on “inaccurate suggestions.”

B.C. Case Comment Update: Does the Doctrine of Unconscionable Procurement Apply in B.C.?

January 12, 2024

I previously wrote about the B.C. Supreme Court decision of Sandwell v. Sayers 2022 BCSC 605. In that case, a father (unsuccessfully) tried to take back the transfer of his property into joint ownership with right of survivorship. My post on that decision can be found here.

The father (unsuccessfully) appealed the result, and the B.C. Court of Appeal recently delivered reasons for judgment at Sandwell v. Sayers 2023 BCCA 147.

In Sandwell, the plaintiff father had two children, a son and the defendant daughter.  In December 2020, the father transferred an interest in his home in Kelowna to his daughter, making them joint tenants.  He later brought legal proceedings to get the property back into his sole name.

The father tried to argue that the doctrine of unconscionable procurement applied. The doctrine of unconscionable procurement provides that where there is a transfer of significant benefit that the recipient actively caused to occur, there must be proof of the donor’s full comprehension and understanding of the effects of the transfer for it to be upheld.

The B.C. Supreme Court had “real doubt” about the place of the doctrine of unconscionable procurement in British Columbia law. If it did exist and had any place in B.C., it did not assist the father in this case. The B.C. Supreme Court also refused to set aside the transfer on the basis of unjust enrichment.

The father’s appeal was dismissed.

The B.C. Court of Appeal held that the judge in the court below correctly found that if there is evidence that the transferor intended to make a gift, this rebuts the presumption of resulting trust and any presumption of undue influence that might arise from the facts. Here, there was evidence to rebut the presumption. This included a deed of gift signed by the plaintiff father, as well as a further solemn declaration setting out an intention to gift. The Court also relied upon the evidence of the notary who prepared and witnessed the documents, and gave advice.

The presumption of resulting trust is simply a tool to assist the court in determining a donor’s intention where the evidence is unavailable, lacking or ambiguous. However, it is a presumption that can be displaced by the evidence that the transferor intended the transfer to be a gift.

With respect to the application of unconscionable procurement in B.C., the Court of Appeal held that the case at hand does not require this issue to be decided. The Court did observe that if the doctrine was found to exist, it could upend certainty for the recipients of intended gifts, including charities whose employees cultivate relationships in order to encourage donations. The parameters of such a doctrine would have to be carefully considered, including whether it should be limited to donors who become unconscionably financially vulnerably by the gift at the time it is made. However, the present case was not the best case to determine the existence of the doctrine (especially when the plaintiff/appellant had not established the factual basis for the application of the doctrine).

As a result, we can expect to continue to see claims which include allegations of unconscionable procurement, and there will likely be further direction from the court on (1) whether such a claim is available in B.C., and (2) if so, the parameters of such a claim.  In the meantime, this case serves as an important reminder that you cannot take back a gift that you have made.

 

B.C. Case Comment: Deceased’s Son ordered to Vacate Estate Property

January 5, 2024

We are often consulted when someone is residing in property owned by a deceased person, but is not the beneficiary of that property under the deceased person’s will.  Frequently, this will be a family member (often a child, living at their parent’s property).  The executor wants them to leave the property, and they refuse to do so.  They may make a claim to the property or an interest in the property, or they may claim a life interest entitling them to remain in the property.  They may challenge the will or seek to vary the will such that they will receive an interest in the property.  If someone makes such a claim, can they be forced to vacate the property before that claim is determined?

In Chen v. Zaleschuk 2023 BCSC 1976, the petitioner was the spouse of the deceased.  The respondent was the son of the deceased.  The respondent lived in the rental suite on the bottom floor of the petitioner and the deceased’s home (which was registered in the name of the deceased).  The deceased’s will provided that the petitioner becomes the sole owner of the property.  The petitioner sought the removal of the respondent from the property, and the respondent refused to leave.

First, the respondent challenged the validity of the deceased’s will.  He argued lack of testamentary capacity, and failure of the will to carry out the deceased’s intentions because of an omission, or misunderstanding of or failure to carry out the deceased’s instructions.  The respondent argued that the will should be interpreted in a manner that provided him with the ability to reside in the property for his lifetime (a “life interest”).

The Court held that the respondent did not have a life estate in the property.

Next, the respondent filed a notice of civil claim seeking (1) a variation of the deceased’s will in his favor, and (2) a declaration that the respondent holds an interest in the property in constructive trust for his benefit.  The respondent filed a response, and this action was ongoing.

In the meantime, the petitioner gave notice to vacate the property to the respondent.  The respondent filed a notice of dispute with the Residential Tenancy Branch.  The Residential Tenancy Branch concluded that it did not have jurisdiction because the matter was linked to a Supreme Court action.

The petitioner took the position that in light of the court’s determination that the respondent did not have a life interest in the earlier proceeding, the respondent had no legal right to live in the property and he was a trespasser.

The respondent argued that the new action seeks to vary the will to give effect to an agreement that he had with the deceased and provide for the alleged life estate.  In the meantime, he alleged that he should be entitled to stay at the property.  He argued that he was not trespassing given his claim to a life estate, and he also argued that he improved and contributed to the property and this entitled him to occupy the suite without paying rent until the property is sold.

The Court held that the claims had not been proven.  At this stage, they were mere allegations, and such claims do not entitle the respondent to remain in the property.  Any interest he may establish in the property was protected by the certificate of pending litigation filed in the civil claim.  The respondent had previously be found not to have a life estate in the property.  The Court also did accept the respondent’s claims that he had not other residence, and that leaving the property would cause hardship and disruption.

The Court concluded that the respondent has no right to possession of the property, and that the petitioner as executor was entitled to deal with estate assets: “simply commencing the Civil Claim does not establish such a right.”  The Court ordered that the respondent vacate the property within 30 days.

As a result, it cannot be assumed that if a tenant residing in estate property commences an action against the estate which includes a claim to that property, they get to stay in that property until the claim is determined.

The petitioner also sought an order that the respondent pay market rent for the property.  The Court adjourned this issue to be determined after the claims advanced in the respondent’s civil claim are resolved or dismissed.