Burke v Burke 2019 BCSC 383, (CanLII), http://canlii.ca/t/hz7qg
In a recent case from the British Columbia Supreme Court, Burke v Burke, a beneficiary failed in her attempt to have her sister removed as executor[1] of their grandmother’s estate, based on allegations of conflict of interest.
Background
The grandmother died in 2018 at the age of 95. She had only one child, the mother of the sisters. There was a history of family estrangements, with the mother being estranged from the grandmother for 13 years and the older sister (executor) living away from her mother and sister from the age of 13.
In 2003 the grandmother executed a land transfer form, transferring a half interest in one of her properties to the older sister as a joint tenant with a right of survivorship.
A month prior to her death, the grandmother held a “family meeting” confirming that she wanted the older sister to be her executor because she “had always been there for her”. When the mother asked if each daughter would be inheriting one of the three properties owned by the grandmother, the grandmother responded that it was “none of your business”.
After the grandmother died, the younger sister brought a petition to have the executor removed, relying on the Wills Estates and Succession Act (“WESA”) RSBC 1996, c 464 and the inherent jurisdiction of the Court. The younger sister argued that the executor was in an “untenable conflict of interest” as she was named as a defendant in a separate WESA action brought by their mother. The WESA action alleges that the grandmother made inadequate provision for the mother and that the inter vivos transfer of property was subject to a resulting trust and that the executor was holding the property in trust for the benefit of the estate.
The executor defended the WESA action, arguing that the grandmother’s bequests were fair to all beneficiaries and that the grandmother made a valid inter vivos gift to her of the property. She produced a handwritten note from the grandmother explaining her rationale for the gift: she had already given the younger sister large cash deposits for her to purchase real estate.
The executor argued there was no conflict of interest as she could continue to serve as executor while the action was litigated independently among herself, in her personal capacity, her sister and her mother. Replacing her with a trust company (as the sister and mother suggested) would add an unnecessary financial burden on the estate and its administration.
Should the Executor be Removed?
Quoting from the Ontario cases of Haines v Haines 2012 ONSC 1816 and Johnson v Lanka 2010 ONSC 4124, Justice Milman summarized the test for the removal of an executor (or, as referred to in Ontario, an estate trustee) as being:
1) The court will not lightly interfere with the testator’s choice of estate trustee;
2) Clear evidence of necessity is required;
3) The court’s main consideration is the welfare of the beneficiaries; and
4) The estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the trust.[2]
Justice Milman agreed that the executor in this case presented a strong prima facie case that the testator intended for her to be the executor and commented that the “Court ought not to interfere with that preference lightly, and then only if there is no other reasonable alternative available.”
However, Justice Milman went on to observe that he also agreed with the sister and mother that the executor faces at “least a potential conflict of interest, insofar as the executor has a duty to maximise the assets available in the estate for distribution to the beneficiaries. In her personal capacity, [the executor’s] interest lies in resisting any attempt to bring the [property] into the estate.”[3]
In considering whether the “potential for conflict of interest” is sufficient in itself to justify the removal of the executor, it is important to keep in mind that “not every actual or perceived conflict of interest should lead to disqualification”.[4] Each case turns on its own facts:
In this case, [the executor] was named as a defendant both in her personal capacity and in her capacity as executor. There was no need for [the mother] to name [the executor] in that latter capacity, . . . there is no allegation advanced against [the executor] in that capacity. There is no relief sought against the estate or its executor per se. [The mother] seeks only a variation of the will and a declaration of resulting trust in relation to the Alberni Street Property. In that dispute, the estate itself can and must remain neutral.
. . . [The executor] is not seeking to challenge the will, so as to put her in a conflict of interest with the estate, but rather to uphold it. It is, rather, [the sister and mother] who seek to challenge the will.[5]
Justice Milman went on to discuss the “perception of disabling conflict” which arises when an executor could be called upon to sue herself in her personal capacity on behalf of the estate. This was not the situation here. Ultimately Justice Milman concluded:
I am satisfied that as long as [the executor] makes it clear that she is defending the WESA Action solely in her personal capacity and that she is taking no position in it in her capacity as executor (as her counsel stated her position to be) then the inchoate potential for a conflict of interest on her part should not disqualify her from continuing to act as executor.[6]
The petition was dismissed, with costs to the executor.
Takeaway
As discussed in this case, there are situations where a conflict of interest will be significant enough to warrant a removal of an executor/estate trustee. However, not all situations of potential or actual conflict of interest will justify such a removal. Courts will not lightly interfere with a testator’s choice of executor/estate trustee.
—
[1] “Executor” is the term used in British Columbia and in this case. In Ontario the term “Estate Trustee” is used.
[2] 2019 BCSC 383 at para 29.
[3] 2019 BCSC 383 at para 41.
[4] 2019 BCSC 383 at para 43.
[5] 2019 BCSC 383 at paras 47 & 49.
[6] 2019 BCSC 383 at para 57.
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Written by: Kimberly A. Whaley
Posted on: April 18, 2019
Categories: Commentary, WEL Newsletter
Burke v Burke 2019 BCSC 383, (CanLII), http://canlii.ca/t/hz7qg
In a recent case from the British Columbia Supreme Court, Burke v Burke, a beneficiary failed in her attempt to have her sister removed as executor[1] of their grandmother’s estate, based on allegations of conflict of interest.
Background
The grandmother died in 2018 at the age of 95. She had only one child, the mother of the sisters. There was a history of family estrangements, with the mother being estranged from the grandmother for 13 years and the older sister (executor) living away from her mother and sister from the age of 13.
In 2003 the grandmother executed a land transfer form, transferring a half interest in one of her properties to the older sister as a joint tenant with a right of survivorship.
A month prior to her death, the grandmother held a “family meeting” confirming that she wanted the older sister to be her executor because she “had always been there for her”. When the mother asked if each daughter would be inheriting one of the three properties owned by the grandmother, the grandmother responded that it was “none of your business”.
After the grandmother died, the younger sister brought a petition to have the executor removed, relying on the Wills Estates and Succession Act (“WESA”) RSBC 1996, c 464 and the inherent jurisdiction of the Court. The younger sister argued that the executor was in an “untenable conflict of interest” as she was named as a defendant in a separate WESA action brought by their mother. The WESA action alleges that the grandmother made inadequate provision for the mother and that the inter vivos transfer of property was subject to a resulting trust and that the executor was holding the property in trust for the benefit of the estate.
The executor defended the WESA action, arguing that the grandmother’s bequests were fair to all beneficiaries and that the grandmother made a valid inter vivos gift to her of the property. She produced a handwritten note from the grandmother explaining her rationale for the gift: she had already given the younger sister large cash deposits for her to purchase real estate.
The executor argued there was no conflict of interest as she could continue to serve as executor while the action was litigated independently among herself, in her personal capacity, her sister and her mother. Replacing her with a trust company (as the sister and mother suggested) would add an unnecessary financial burden on the estate and its administration.
Should the Executor be Removed?
Quoting from the Ontario cases of Haines v Haines 2012 ONSC 1816 and Johnson v Lanka 2010 ONSC 4124, Justice Milman summarized the test for the removal of an executor (or, as referred to in Ontario, an estate trustee) as being:
1) The court will not lightly interfere with the testator’s choice of estate trustee;
2) Clear evidence of necessity is required;
3) The court’s main consideration is the welfare of the beneficiaries; and
4) The estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the trust.[2]
Justice Milman agreed that the executor in this case presented a strong prima facie case that the testator intended for her to be the executor and commented that the “Court ought not to interfere with that preference lightly, and then only if there is no other reasonable alternative available.”
However, Justice Milman went on to observe that he also agreed with the sister and mother that the executor faces at “least a potential conflict of interest, insofar as the executor has a duty to maximise the assets available in the estate for distribution to the beneficiaries. In her personal capacity, [the executor’s] interest lies in resisting any attempt to bring the [property] into the estate.”[3]
In considering whether the “potential for conflict of interest” is sufficient in itself to justify the removal of the executor, it is important to keep in mind that “not every actual or perceived conflict of interest should lead to disqualification”.[4] Each case turns on its own facts:
In this case, [the executor] was named as a defendant both in her personal capacity and in her capacity as executor. There was no need for [the mother] to name [the executor] in that latter capacity, . . . there is no allegation advanced against [the executor] in that capacity. There is no relief sought against the estate or its executor per se. [The mother] seeks only a variation of the will and a declaration of resulting trust in relation to the Alberni Street Property. In that dispute, the estate itself can and must remain neutral.
. . . [The executor] is not seeking to challenge the will, so as to put her in a conflict of interest with the estate, but rather to uphold it. It is, rather, [the sister and mother] who seek to challenge the will.[5]
Justice Milman went on to discuss the “perception of disabling conflict” which arises when an executor could be called upon to sue herself in her personal capacity on behalf of the estate. This was not the situation here. Ultimately Justice Milman concluded:
I am satisfied that as long as [the executor] makes it clear that she is defending the WESA Action solely in her personal capacity and that she is taking no position in it in her capacity as executor (as her counsel stated her position to be) then the inchoate potential for a conflict of interest on her part should not disqualify her from continuing to act as executor.[6]
The petition was dismissed, with costs to the executor.
Takeaway
As discussed in this case, there are situations where a conflict of interest will be significant enough to warrant a removal of an executor/estate trustee. However, not all situations of potential or actual conflict of interest will justify such a removal. Courts will not lightly interfere with a testator’s choice of executor/estate trustee.
—
[1] “Executor” is the term used in British Columbia and in this case. In Ontario the term “Estate Trustee” is used.
[2] 2019 BCSC 383 at para 29.
[3] 2019 BCSC 383 at para 41.
[4] 2019 BCSC 383 at para 43.
[5] 2019 BCSC 383 at paras 47 & 49.
[6] 2019 BCSC 383 at para 57.
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