B.C. Case Comment: Wording of Remuneration Clause Does Not Entitle Executors to Fixed Fee

Under the B.C. Trustee Act, an executor is entitled to remuneration for the administration of an estate, unless the Will states otherwise.

Section 88 of the Trustee Act provides that the court may allow an executor or administrator or trustee a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, of all of the assets of the estate.  Determining the appropriate fee in any given case is a fact specific inquiry.  The criteria for determining an appropriate fee includes: the magnitude of the trust, the care and responsibility involved, the time occupied administering the trust, the skill and ability displayed, and the success achieved in the final result. The Court must exercise its discretion to determine a reasonable fee in any given case.

However, section 90 of the Trustee Act provides that s. 88 does not apply in any case in which the allowance is set by the instrument creating the trust. In other words, a will maker or settlor may purport to take away the discretion of the Court by expressly stating the amount of remuneration payable to the executor or trustee in the Will or Trust Deed.

Will-makers and trustees must take care when drafting remuneration clauses, as ambiguities or drafting errors may result in confusion and ultimately legal proceedings. This was the case in the recent decision of the B.C. Supreme Court in Zaradic Estate (Re) 2021 BCSC 2478.

In Zaradic, the Will contained the following provision:

My trustees may claim remuneration for acting as Trustees in the amount of Ten Percent (10%) of the net value of the residue of my estate to be shared equally between them, in lieu of any Executor or Trustee Fee’s.

This was the appeal of a registrar’s decision. I previously wrote about the registrar’s decision here.  The registrar held that this language meant that the executors were allowed to make a claim for remuneration, but the amount was not fixed. The 10% was a ceiling, not an entitlement as a matter of right.

The registrar went on to hold that the executors’ efforts were a “dismal failure” and their actions “were an egregious breach of their fiduciary duty,” and as a result they were not entitled to any fee. I discuss the particulars of the egregious conduct in my previous post.

On appeal, the executors argued that the remuneration was fixed in the will at 10%. Since the remuneration was fixed, the registrar had no discretion to determine remuneration (and so should not have even considered their conduct as executors).

The beneficiary agreed that fixed fees may not be challenged, but said that the will in this case did not set a fixed fee.   In the alternative, the beneficiary argued that even if the will set a fixed fee, the fee can be reduced.

The Court had to determine the intention of the testator, as expressed in the will, when read in light of any admissible extrinsic evidence.  The Court held that this particular clause was “poorly drafted” and “internally inconsistent”.

The Court concluded that the better interpretation was that the remuneration was discretionary and nature, and to be set in accordance with the factors to be applied under s. 88 of the Trustee Act. The use of the words “may claim” implied the exercise of discretion and not an absolute entitlement. The burden of establishing a fixed fee was on the executors, and they failed to meet their burden of proof.

The court did not have to consider the beneficiary’s alternative argument – that a court has discretion to reduce a fixed fee (although they did observe that only a judge and not a registrar would have that jurisdiction if it existed). This is an interesting issue that may have to be considered in a future case where there is a proper fixed fee.

The appeal was dismissed.   Since the clause did not create a fixed fee, the registrar was entitled to exercise discretion and order that no remuneration was payable as a result of the conduct of the executors.

Finally, the executors (not the estate) were ordered to bear the costs of the appeal, “as it was purely their own interests that they were pursuing.” This is another reminder that the Courts will not simply order that all parties are entitled to their costs payable by the estate.