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Conflicts of Interest in Matrimonial Property Claim Brought by Administrator Against an Estate 

Chippett Estate (Re), 2019 NLSC 51 (CanLII), http://canlii.ca/t/hxs3c

The Supreme Court of Newfoundland and Labrador[1] denied a surviving spouse’s request to remain as administrator for some aspects of the administration of her husband’s estate, while also being an applicant in a matrimonial property claim against the estate.

The wife applied for, and was granted, Letters of Administration for her deceased husband’s estate. A few months later, the wife commenced an application requesting an order for an equal division of matrimonial property. The application was brought by the wife in her personal capacity.

The wife then brought an interlocutory application seeking an order that the Public Trustee be appointed as the administrator of the estate in relation only to her claim for division of matrimonial property. The wife wished to remain the administrator for all other aspects of the administration of the estate. The wife relied on section 71 of the Family Law Act, RSNL 1990 c F-2 which provides that:

71(1) An executor or administrator of a deceased spouse may enter into an agreement with the surviving spouse as to the ownership or division of property under this Act

 (2) Where an executor or administrator of a deceased spouse is the surviving spouse, the public trustee may act in the place of the executor or administrator under subsection (1).

Justice Murphy began his analysis by noting that there were no reported cases interpreting this section of the legislation and that counsel could not find any reported cases interpreting a similar provision in other jurisdictions.

On a plain reading of section 71(1), Justice Murphy concluded that this clause merely authorizes an executor or administrator to enter into an agreement with the surviving spouse as to ownership of or division of property, and section 71(2) simply allows the Public Trustee to act in the place of the executor or administrator where that person is the surviving spouse. The question before the Court therefore was:

absence an agreement, does the section in question authorize the Public Trustee to in essence step in as Administrator of the estate for the purpose of defending the matrimonial claim or trying to negotiate a settlement of that claim while allowing [the wife] to remain Administratrix for all other purposes?[2]

Justice Murphy concluded that section 71(2) did not extend beyond circumstances where an agreement already existed, and it would only apply in limited circumstances where the surviving spouse as administrator reached an agreement with the estate. Such situation might be where there is “no dispute or disagreement between the beneficiaries of the estate and the surviving spouse as to the ownership or division of property”. The Public Trustee would then step in to the role of legal representative of the estate for the limited purpose of entering into the agreement.

However, that was not the case here. Justice Murphy went on to observe the common law rule that a trustee (which includes an administrator) can be removed where there is a “disqualifying conflict” between the personal interest of the trustee and his or her duty as a trustee. Justice Murphy noted that a conflict existed in this case that was significant enough to warrant the removal of the wife as administrator:

By claiming an ownership interest in certain assets of the estate on the basis of a claim for division of matrimonial property under the Act, she is placing herself directly in opposition to her duty to the estate beneficiaries. . . To the extent [the wife] is successful in her claim for division of matrimonial property, the amount of estate assets available for distribution will be correspondingly diminished and the daughter of [the deceased] will be correspondingly disadvantaged.[3]

Justice Murphy concluded that he “cannot imagine a greater conflict than that which exists in this case where [the wife’s] claim has put her directly in opposition to her duty as Administrator to the daughter of [the deceased].”[4]

While Justice Murphy found the wife do be in a “disqualifying conflict of interest” he did not make an order for her removal at that time. However, he found that it would be “inappropriate for [the wife] to continue to act” and that the “appropriate course of action” was for her to resign.

An estate trustee clearly owes a duty to the estate beneficiaries. Family law claims for division of property or dependant support claims must be brought against the estate trustee or administrator of the estate (in their role as representative, not personally). Spouses who are estate trustees or administrators who also commence such claims will be in a clear conflict of interest and must step aside. See for example, the Ontario cases of Mohammed v Heera 2008 CanLII 54317, http://canlii.ca/t/2198f and Mahon v Costa 2013 ONSC 914, http://canlii.ca/t/fw9rc .

[1] Chippett Estate, Re 2019 NLSC 51.

[2] At para 11.

[3] At para 18.

[4] At para 19.

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