What happens if you are a beneficiary and you believe that the estate ought to make a claim against the person who happens to be the executor of the estate?  This is a common scenario.  Often, the person that a will-maker chooses to be their executor is a person who was involved in their affairs during their lifetime, for example under a power of attorney.  This presents opportunity for undue influence, or for the person who later becomes executor to otherwise benefit from their position of control.  In such a case, the beneficiary will want “the estate” to investigate or pursue claims against the executor, but the executor has no incentive to investigate themselves (and is in a conflict of interest).

This is what happened in the recent B.C. Court of Appeal decision of Hoggan v. Silvey 2022 BCCA 176.

In Hoggan, the deceased divided her estate equally among her three daughters.  Two of the sister beneficiaries had concerns about cheques for substantial amounts ($150,000+) that had been made from the deceased during her lifetime to the third sister (“Lorna”) and her husband (“Ray”).  Lorna and Ray had some control over the Deceased’s finances when the cheques were written.  The matter was complicated by the fact that Ray was the executor of the estate (and Lorna was named as alternate executor).

If beneficiaries want a claim to be made on behalf of the estate against the person who is the executor or administrator of the estate, they have two options:

1. Seek removal and replacement of the executor, with the expectation that the replacement executor will bring the claim on behalf of the estate against the removed executor; or
2. Apply for standing to bring a claim on behalf of the estate against the executor.  This is because the executor cannot be expected to sue themselves.

I have previously written about the issue of applying for standing to bring an action on behalf of an estate here.

In Hoggan, the two sisters pursued both remedies: they applied to remove Ray as executor, and they sought standing to bring a claim against Ray (and Lorna) on behalf of the estate.

At the B.C. Supreme Court level, the chambers judge dismissed both applications.

The chambers judge refused to remove Ray as executor because the deceased had a close and trusting relationship with him and wanted him to be executor, and the estate funds were held in trust.

With respect to the application for leave to bring proceedings on behalf of an estate, the test is set out at s. 151 of the Wills, Estates and Succession Act.  If the executor will not commence proceedings on behalf of the estate, a “specified person” may apply for leave to commence proceedings on behalf of the estate.  The test is set out at s. 151(3):

(3) The court may grant leave under this section if

(a)   the court determines the specified person seeking leave

(i)    has made reasonable efforts to cause the personal representative to commence or defend the proceeding,

(ii)    has given notice of the application for leave to

(A)   the personal representative,

(B)   any other specified persons, and

(C)  any additional person the court directs that notice is to be given, and

(iii)   is acting in good faith, and

(b)   it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a specified person for the proceeding to be brought or defended.

The chambers judge held that the requirement at s. 151(3)(b) was not met, which requires that the proceedings be necessary or expedient for the protection of the estate.  To meet this requirement, three elements had to be established (as will be seen below, the Court of Appeal took a different view as to the elements required):

1. There is an arguable case;
2. The potential relief outweighs the inconvenience caused to the estate; and
3. The proceeding is in the best interests of the estate.

The chambers judge held that:

1. There was no arguable case.  There was no evidence of undue influence, only “mere allegations and suspicion”;
2. The relief sought was outweighed by the prejudice, in light of the limited value of the estate, the lawyers’ fees to litigation the claim, and the cost and delay if the claim was pursued; and
3. Given the substantial cost of the litigation and the weak case, it was not in the estate’s best interest to grant leave.

The two sisters appealed the dismissal of both applications.

The Court of Appeal dismissed the appeal of the dismissal of the application to removal Ray as executor.  The chambers judge did not err in the exercise of her discretion to not remove Ray at this junction.  Ray was to remain as executor.

However, the Court of Appeal allowed the appeal from the dismissal of the leave application.  The two sisters were granted leave to commence a proceeding on behalf of the estate against Lorna and Ray.

The Court of Appeal looked at the actual language of s. 151(b)(3):

(b)   it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a specified person for the proceeding to be brought or defended.

The Court focused on the disjunctive “or”, which means that the section is to be read as follows:

(b)        it appears to the court that it is necessary or expedient for the protection of the estate

or

that it is necessary or expedient for the protection of the interests of a specified person for the proceeding to be brought or defended.

This means that while the best interests of the estate may be considered, they are not necessarily a factor when the interests of a specified person are raised.

With this in mind, the Court of Appeal concluded that:

• The chambers judge erred when she concluded there was no arguable case.  Whether there is an “arguable case” is a very low threshold, and the two sisters met it in this case;
• The chambers judge placed too much emphasis on the best interests of the estate, when the application was brought to protect the interests of a specified person, not those of the estate.
• Ray refused to make inquiries as to the cheques (and would be in a conflict of interest if he did), and so the only way to protect the interests of a specified person (in this case, the two sisters), was to grant them leave to commence proceedings.

This case confirms that beneficiaries ought to be given the opportunity to bring claims that they wish to pursue if the claims are in their interests, even if the claims may not necessarily be in the interests of the estate as a whole.

A personal representative of an estate (executor or administrator) has an obligation to account and to provide information about the administration of the estate to the beneficiaries.  The personal representative cannot simply ignore this obligation.  A beneficiary has remedies if the personal representative ignores requests.  The Court may reduce the remuneration payable to the personal representative (i.e. executor’s fees), or reduce the amount of costs that a personal representative is entitled to receive, with the result that the executor may be personally responsible for paying expenses that they expected to have paid by the estate.  The most common example is legal fees – if the personal representative delays or otherwise causes the estate to incur legal fees which could have been reasonably avoided, the executor may be personally liable for that expense.

The B.C. Supreme Court recently considered this issue in Bowling Estate (Re) 2022 BCSC 369.  In Bowling, the deceased died with no spouse and four children.  She left a will naming one of her children as executor, and dividing her estate equally between her four children.  The estate was worth approximately $110,000 and was primarily liquid assets, and so it was a straightforward administration.

The executor did not seek any remuneration.

The court identified “distrust” between the executor and one of her sisters.  The distrust was magnified when the executor ignored requests for information from her sister about the management and administration of the estate.  The executor did not provide any explanation for her failure to respond to requests for information.  The sister retained counsel, and then the executor retained counsel.

The executor eventually delivered formal accounts in relation to the estate.  There were no objections made or concerns raised with respect to the accounts.  The issue was the delay in delivering the accounts, and the fact that the sister had to retain counsel and incur legal expenses in order to compel the executor to produce those accounts.

In the normal course, legal fees which are reasonably incurred in the course of administering an estate ought to be treated as a disbursement of the estate, to be paid by the estate.  However, where an executor has misconducted themselves or is guilty of delay or neglect in administering an estate, there may be a reduction in their remuneration, and also a reduction in the amount of costs they are entitled to receive.

In Bowling, the executor claimed $10,000 in costs.  The sister sought special costs in the amount of $11,500.

The Court reduced the executor’s costs from $10,000 to $6,000.  The Court was not satisfied that the executor’s (mis)conduct was to the degree that she should not recover some of the legal expenses she incurred to have her accounts formally passed.  The executor was personally responsible for any legal expenses that she incurred over $6,000.

The Court awarded the sister $6,000, to be paid to her personally by the executor.  The sister was awarded an amount for costs because she had a legitimate reason to hire counsel in light of the executor’s refusal to respond to requests for information.  However, she did not get the entire amount sought because she ultimately consented to the accounts as presented when she found nothing suspicious (beyond the outstanding dispute about legal costs).

In making these awards, the Court was mindful of the very modest amounts left in the estate.  The Court expressed disappointment that this issue made it before the courts at all.  The entire application (including the legal expenses for both sides and the use of court time) could have been avoided if the executor had responded to the requests from the beneficiary for information about the administration of the estate.

A spouse who has separated from their partner does not meet the definition of a “spouse” under the Wills, Estates and Succession Act.  This means that they are not entitled to advance claims under that act, most notably wills variation claims or claims to entitlement on in intestacy.  Prior to death, the separated spouse could have brought a claim for property division under the Family Law Act.  What happens if a spouse has separated from their partner, but does not commence a family law claim for division of property prior to death?  Can the deceased’s estate commence a family law claim on their behalf?

The B.C. Court of Appeal recently considered this issue in Weaver Estate v. Weaver 2022 BCCA 79. In Weaver, the deceased married the defendant in 1993.  They separated in 2005.  The deceased passed away 15 years later.  While the deceased had consulted with a family law lawyer, no proceedings were commenced.  There were no divorce orders or other court orders, and there was no family law agreement.

After the deceased’s death, the administrator of her estate filed a notice of family claim against the deceased’s ex-spouse, seeking a division of property.

The surviving spouse applied to have the claim struck due to lack of standing to bring the claim, or lack of jurisdiction.  The application was dismissed, i.e. the family law proceeding brought by the administrator was allowed to continue.  This decision was upheld on appeal.

The interplay between the Family Law Act and the Wills, Estates and Succession Act allows the administrator of a separated and deceased spouse to commence a claim for the division of family property, as long as the time limits have not expired.  The fact that the deceased spouse did not personally commence that proceeding during their lifetime is not a bar to the action.

The Family Law Act provides that on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.  This applies to married spouses, and “common law spouses” (who lived with each other in a marriage-like relationship – the term “spouse” is defined in the Family Law Act).  The interest crystallizes upon separation, and does not expire upon death.  The triggering event is separation.

The Family Law Act sets out a limitation period for bringing a claim for division of property.  The claim must be started no later than two years after, in the case of spouses who were married, the date a judgment granting a divorce of the spouses was made, or the date an order was made declaring the marriage of the spouses to be a nullity.

There is nothing in the Family Law Act which expressly prohibits an estate from commencing a family law claim for property division on behalf of a deceased spouse.  The Wills, Estates and Succession Act confirms that a cause of action or proceeding is not annulled by reason only of the death of a person who had the cause of action, and the personal representative for the deceased person may commence or continue a proceeding that the deceased person could have commenced or continued.

The Court of Appeal also agreed that a finding to the contrary “would result in a gap that carries the realistic potential for substantial injustice.”  A separated and surviving spouse could seek the division of family property and family debt against the estate of the deceased spouse.  The estate of the deceased spouse must have the same entitlement as against the surviving spouse.  As noted above, a separated spouse does not meet the definition of “spouse” entitled to advance a claim for relief under the Wills, Estates and Succession Act.  If the Court of Appeal did not reach the conclusion that it did, the estate of the deceased spouse would be cut out of both the Family Law Act regime, and the Wills, Estates and Succession Act regime.

The Court of Appeal was not asked to decide the issue of the limitation period for bringing a family law claim for division of property on behalf of a deceased spouse.  However, they “noted” that principles of statutory interpretation may support the position that the administrator of an estate would have two years from the date of death of the separated and deceased spouse to commence such a claim.  An administrator would be well-advised to commence an action on behalf of a deceased and separated spouse within the two years if at all possible to do so.

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.

I am often asked by clients (whether they are the executor of an estate or a beneficiary) whether a person occupying real property which was owned by the deceased and has become an estate asset must pay rent for staying in that property.

Where an estate holds real property, there will usually be a period of time before the executor or administrator is ready or able to deal with the property, whether they intend to transfer the property to the beneficiary(ies) or sell the property and distribute the sales proceeds.

This issue is straightforward where, for example, one spouse dies, and the surviving spouse is the sole beneficiary of the estate and sole occupier of the property. The surviving spouse would not pay rent to occupy the property, because any rent would ultimately go back to that spouse as the beneficiary of the estate.

However, matters are usually not that straightforward. For example, a common scenario is the death of a parent, and one of their children resides in their property (or seeks to move into the property after the parent’s death). The property will eventually be sold so that the proceeds can be distributed between the deceased’s children, but in the meantime one of the children gets the additional benefit of getting to live in the property.

Another example is where the deceased was the sole occupier of the property, and rather than leave the property vacant someone moves in. This may be one of the beneficiaries, or even the executor.

The issue may be further complicated if the person occupying the property is paying expenses relating to the property (which would otherwise be payable by the estate), or if they allege that they are occupying the property for the benefit of the estate (so that it doesn’t remain vacant).

Where someone occupies and has the benefit of property belonging to the estate, they may be required to pay occupational rent to the estate. This may take the form of a debt payable to the estate, or a set-off from their share of the estate.  The concept of occupation rent is tied to unjust enrichment, as well as trespass. To permit someone to use estate assets results in an enrichment, to the detriment of the estate. Occupational rent will be considered where there is a claim of unjust enrichment and it is just and equitable to impose the remedy.

The issue of occupational rent was recently considered by the B.C. Supreme Court in In the Matter of the Estate of Euphemia Reagh, Deceased, 2021 BCSC 1807.  In Reagh, the deceased made a will dividing her estate equally amongst her four children. One of the children (“Randy”) was named as executor.

Randy and his family lived in the basement suite of the Deceased’s residence in Burnaby for 12 years prior to the Deceased’s death. The year before her death, the Deceased moved into a care facility, but returned to the Burnaby property after a short period of time. Upon her return, Randy and his family were now occupying the main floor. Randy claimed he paid his mother $1,000 per month in rent while she was alive, and he paid this amount for the first 12 months after her death.

After her death, there was a dispute concerning the appropriate rent to be paid. For a period of time (until the property was sold), Randy increased the amount paid for rent to $2,150 per month. Randy maintained the property, and claimed it as his principal residence, saving the estate $50,000 in taxes after its sale.

The Court agreed that $1,000/month in rent was too little. While there was an email discussing rent of $3,000, there was no confirmation that this was agreed to, and so no agreement was established. While the evidence of market rent before the court was “less than perfect”, the court was satisfied that $2,000/month in rent was more appropriate. Although the court was flexible in this case, a party who is making a claim for occupational rent should bring evidence as to the appropriate amount of occupational rent (i.e. market value).

It was just and equitable in this case that the executor pay occupational rent at market value. The executor was ordered to pay $12,000 (the difference between the $1,000 paid and the $2,000 rent which was appropriate, for 12 months).

This case serves as a reminder that executors (or others) cannot expect to occupy estate property rent-free, or for below market rent. If they try to do so, then the remedy of occupational rent may be available.

When an estate is being distributed, it is not uncommon for disputes to arise over sentimental objects that belonged to the deceased, often of low or no monetary value.  On occasion, a dispute over a sentimental family heirloom may be the only truly contentious issue between the beneficiaries.  Parties may agree on the distribution of the majority of the estate (i.e. the monies, real estate, etc…), but refuse to budge on certain of the deceased’s personal possessions.  In some cases, parties may become entrenched in their positions on the distribution of a sentimental object, and that hostility may result in a much larger (more expensive) dispute over the estate.

This could have been the case in the recent B.C. Supreme Court decision in Rhodes v. Myers 2021 BCSC 2043.  In Rhodes, a will-maker made a will dividing her estate into four equal shares, with each share to be given to one of her four adult children. Two of the children were named as co-executors of the estate.

There were disputes and disagreements between the children prior to their mother’s death, which only intensified after her death.  One of the co-executors sought the removal of the other co-executor (“Donald”).  Donald consented to the relief sought, including his removal, on the condition that his brother (“Allan”) receive the deceased’s bolt ring.

The ring was made by the deceased’s husband out of a bolt. The deceased never took it off. The Court observed that it clearly had “tremendous sentimental value to the children, but no monetary value”. The bolt ring was identified by the Court as the “sticking point” in the children being able to resolve the estate issues.

The petitioner (the other co-executor, “Patti”) claimed that the deceased gave her the ring sometime in the last months of her life.

The Court held that since the ring was an asset of the estate, they had jurisdiction to deal with it, and dealing with it now may enable the court to move forward with concluding the estate without further litigation. This is consistent with the object of the Supreme Court Civil Rules of securing the just, speedy and inexpensive determination of every proceeding on its merits. The bolt ring, which has no monetary value, should be dealt with now, if it will avoid further proceedings later.

The Court considered the circumstances of the ring in detail, and concluded that the deceased intended the ring to go to Allan, and that this was well-known to all four siblings. The deceased lacked the capacity to gift the ring in the last months of her life. In this regard, the Court held that a geriatric consultation assessment was compelling. As a result, the ring was an asset of the estate, and Patti was directed to distribute it to Allan in accordance with the Deceased’s wishes.

In settling the issue of who was to receive the ring at this early stage, the Court likely assisted the parties in avoiding further time consuming and expensive estate litigation.

This morning the Supreme Court of Canada released its decision on the sealing of the court files relating to the estates of Bernard and Honey Sherman, the wealthy victims of murders that remain unsolved, and that were widely reported in the media. I previous wrote about the case here, after the Supreme Court of Canada heard submissions on whether the media ought to have access to the court files.

The Supreme of Canada dismissed the appeal brought by the trustees of the estates. The Court held that the sealing orders should not have been issued by the lower court, and the files were open to the public. The decision of the Supreme Court of Canada can be found here: Sherman Estate v. Donovan 2021 SCC 25

There is a strong presumption in favor of open courts. Court openness is a constitutional guarantee. Public scrutiny can cause inconvenience and even embarrassment to those who feel that the court system has intruded on their private lives. However, the Court confirmed that this discomfort is not enough to overturn “the strong presumption that the public can attend hearings and that court files can be consulted and reported upon by the free press.”

The court confirmed that there may be exceptional circumstances which justify a restriction on the open court principle.  An applicant for a sealing order or similar relief must demonstrate that openness presents a serious risk to a competing interest of public importance. This is a high bar.  Next, the applicant must show that the order is necessary to prevent the risk, and that the benefits of the order restricting openness outweigh its negative effect.

The estate trustees in the Sherman case argued that the concerns for (1) privacy, and (2) public safety were important public interests that are at such serious risk that the files should be sealed.

With respect to privacy concerns, the respondents to the appeal argued that virtually every court proceeding requires some intrusion on privacy.  The Court held that proceedings in open court can lead to the dissemination of highly sensitive personal information, that could result in discomfort or embarrassment, or even an affront to dignify. In the latter case, an exception to the open court principle may be necessary.

However, the Court was not convinced that there was such a risk in these circumstances. The Court is not concerned with the mere fact of the dissemination of sensitive personal information – this happens in almost every court proceeding. The focus must be on the impact of the dissemination. The trustees failed to show how the lifting of the sealing order engages the dignity of the affected individuals. The Court observed that “the information in the court files about which the Trustees are concerned must be sufficiently sensitive in that it strikes at the biographical core of the affected individuals.” The trustees also failed to establish that there was serious risk of physical harm to the affected individuals.

The court did not accept that the matters in a probate file are quintessentially private or fundamentally administrative.  The information contained in the files did not reveal anything particularly private about the affected individuals. It was acknowledged that there was near certainty that the media would publish at least parts of the estate files. Again, the risk of inconvenience and embarrassment resulting from publication is not enough.

In the end, the estate files will show the type of information found in any probate file. They may shed light on the relationship between the deceased and the affected individuals, in that we will see who they named as beneficiaries of their estate, and who they trusted to administer their estate. The only difference between this case and any other probate application is the high profile murders and intense media interest which will result in a larger audience for what are, in the normal course, publicly available documents. In those circumstances, a sealing order was not appropriate.