Passing over the Executor: What BC Law Says About Executor or Administrator Conflicts of Interest

What if you are a beneficiary under a will, and you have concerns about the person named as executor in that will? Maybe you believe the named executor is in a conflict of interest or may not treat the beneficiaries with an even hand (especially if the will allows for the exercise of some discretion by the executor). Maybe you suspect that the named executor will engage in impropriety or misconduct once they obtain a grant of probate. Maybe you simply do not get along with the named executor. At what point is it appropriate to ask that the court pass over a person as executor or administrator of an estate?

The Wills, Estates and Succession Act, S.B.C. 2009, Chapter 13 [“WESA”] allows for a person having an interest in an estate to apply to remove or pass over a personal representative. To “pass over” means to grant probate or administration to a person who has less priority than another person to become a personal representative. This means passing over a named executor where there is a will, or passing over the person entitled to become administrator if there is an intestacy (no will).

The court may pass over a person entitled to become the personal representative if the court considers that the person should not be granted probate or administration. Section 158 of WESA includes a non-exhaustive list of circumstances that the court may consider. Some of them are clear, such as if the person refuses to accept the position, or is incapable of managing his or her own affairs, or has been convicted of an offence involving dishonesty.

Subsection 158(3)(f) is more general, and allows the court to consider whether the person is (1) unable to make the decisions necessary to discharge the office of personal representative, (2) not responsive, or (3) otherwise unwilling or unable to or unreasonably refuses to carry out the duties of a personal representative, to an extent that the conduct of the personal representative hampers the efficient administration of the estate.

The court will consider the following principles when deciding whether to pass over an executor named in a will:

  1. Recognize that the testator’s choice of estate trustee should not be lightly disregarded. A deceased’s right to nominate his executors is not to be lightly interfered with;
  2. Require clear evidence of necessity;
  3. Focus on the main consideration of the welfare of the beneficiaries; and
  4. Require proof that the executor’s acts or omissions are of such a nature as to endanger the administration of the estate.

In the recent case of Gawdun v. Lord 2020 BCSC 266, the court considered an application to pass over the person named as executor of the deceased’s will. The deceased and the proposed executor (“Ms. Lord”) were in a common law relationship at the date of death. The applicants were the deceased’s children from a previous marriage.

The plaintiffs argued that Ms. Lord should be passed over for the following reasons:

  1. The plaintiffs doubted that Ms. Lord would maintain an even hand between her own children and the plaintiffs, all of whom were residuary beneficiaries;
  2. The plaintiffs alleged that Ms. Lord had continually demonstrated hostility and animosity towards them and the deceased’s sister (who was named as co-executor);
  3. The plaintiffs alleged that Ms. Lord was involved in the deceased’s estate planning in 2010 and 2011, which resulted in the execution of the will providing the majority of the estate to Ms. Lord and her children, which conduct was at issue in an underlying wills variation application;
  4. The plaintiffs alleged that Ms. Lord offered to pay the deceased’s sister $50,000 from the estate during the course of the action which the plaintiffs found suspicious;
  5. Foreclosure proceedings had been initiated to recover funds owing to the estate, which was being funded entirely by the plaintiffs, and Ms. Lord had refused to assist in collecting the debt owing; and
  6. The plaintiffs alleged Ms. Lord entered into a share exchange agreement as attorney for the deceased. The terms of the share exchange agreement were alleged to have conferred an improper benefit on Ms. Lord.

The court dismissed the application, concluding that passing over Ms. Lord was not justified. There was no evidence demonstrating misconduct by Ms. Lord that was capable of supporting a decision to pass her over. Even if the court accepted there was misconduct as alleged, it is past misconduct and was not done in her capacity as executor.

If may be difficult to convince a judge that a person will endanger the welfare of the beneficiaries or commit misconduct as executor or administrator before they have even been appointed. If you have concerns about the person who is entitled to be personal representative, but don’t believe that you can succeed with an application to pass over, you may also bring an application remove and replace a personal representative if those concerns become a reality. This will be discussed in an upcoming post.

Executors and Trustees May Seek Advice From the Court

Executors and trustees may be hesitant or indecisive when administering estates and trusts, especially when the will or trust deed gives them some discretion in carrying out their duties or when they are concerned about balancing the interests of competing beneficiaries – keeping everyone happy.

The Trustee Act permits a trustee, executor or administrator to apply “for the opinion, advice or direction of the court on a question respecting the management or administration of the trust property or the assets of a will-maker or intestate.”  The court also has the inherent jurisdiction to supervise trusts, to protect the welfare of the beneficiaries.

It may be tempting for an executor or trustee to seek court approval for any decision or exercise of discretion.  It would be comforting to have a judge give his or her blessing to a proposed course of action.  However, it is not the court’s job to consider and approve every decision of an executor or trustee.  When is it appropriate to involve the court in decisions that should be made by executors and trustees?

Prior court decisions suggested that section 86 of the Trustee Act allowed an executor or trustee to seek the advice, opinion or directions of the court on a legal question, and then act on that advice.  The section was not intended for the court give advice, for example, in a situation where there was a conflict between interested parties, such as competing beneficiaries.

However, the Court went beyond merely advising on legal questions in Toigo Estate (Re) 2018 BCSC 936.  In Toigo, the deceased created a spousal trust which provided that the net income of his estate would be paid to his wife during her lifetime.  The will also permitted the trustees to encroach on the capital of the estate in favour of his wife, in the trustees’ uncontrolled discretion.  The residue of the estate was to be divided between the deceased’s children and grandchildren after his wife’s death, but in a manner which would provide that that there would not be an equal distribution amongst the grandchildren.

The wife asked the trustees for a significant encroachment into the capital (tens of millions of dollars), in order the engage in her own estate planning, which would provide for a more equal distribution of the deceased’s estate amongst the grandchildren.

The trustees were clearly permitted to make the encroachment (and had uncontrolled discretion to do so).  However, they still wanted the court’s “opinion, advice or direction” as to whether they should proceed.

The court held that it had the jurisdiction to approve the encroachment under s. 86 of the Act or the inherent jurisdiction of the court to supervise trusts, and they approved the encroachment.  The court held that because of the magnitude of the encroachment, the court could provide advice on this “momentous decision”.

In making the decision, the court asked the following questions:

  1. Does the trustee have the power under the trust instrument and the relevant law to make the “momentous decision”?
  2. Has the trustee formed the opinion to do so in good faith and is it desirable and proper to do so?
  3. Is the opinion formed by the trustee one that a reasonable trustee in its position, properly instructed, could have arrived at?
  4. Is the Court certain that the decision has not been vitiated by any actual or potential conflicts of interest?

Executors and trustees should consider whether they ought to apply to the court for a stamp of approval when taking drastic or “momentous” action in relation to the administration of estates or trusts.  There are other options to protect executors and trustees, such as requiring that all beneficiaries sign release and consent documents before taking the proposed course of action.  However, this may not always be practical or possible, especially if some beneficiaries refuse to sign such a document.