The Rule in Cherry v Boultbee Redux
1. Introduction
The rule in Cherry v Boultbee[1] is designed to do equity between the parties entitled to share in a fund when one of them owes money to the fund. The rule prevents that party from participating in the fund until he has paid the debt owed. The rule has a general application and is not restricted estates. The Cherry case held that the debtor must pay the debt even if it is statute-barred. That aspect of the rule is sometimes questioned in modern cases.
I have written about the rule before.[2] It is not raised often, but it continues to crop up in cases from time to time. The most recent case is Re Kolic Estate,[3] and it is worth a comment.
2. Facts
The testator died in 2013. She was survived by her four children, Mary, Angela, Joseph, and Charles. By her will she appointed her daughter Mary executor, but the court removed her in 2016[4] and in 2021 appointed the applicant law firm as Administrator. The children engaged in litigation for nearly a decade. Charles and Mary brought an action to vary the will in 2014 but the court dismissed that action in 2021. Charles died in 2019. In 2018 Joseph and Angela brought a counterclaim against Mary because she had improperly taken funds from the estate. The court awarded judgment to Joseph and Angela in the amount of some $235,000 plus interest and punitive damages. The main issue concerned a house. The testator specifically devised it to Mary (1/6 interest), Angela (1/6 interest), and Joseph (4/6 interest). Joseph and Angela informed the Administrator that they did not wish to have their interests in the property transferred to them and asked that the property be sold and the proceeds distributed to the three devisees. However, Mary, who has lived in the house since the testator’s death and still lives in it (as did Charles until he died) insists that the will requires an in specie distribution, that is, a transfer to the three devisees at tenants in common in the proportions given in the will. Many of Mary’s possession are also still in the house. The Administrator told Mary that the estate would expect her to pay occupation rent while the litigation continued. Mary paid moneys to the Administrator since 2019, but the Administrator never accepted the payments as an agreed month-to-month rent. When the court dismissed Charles’ action, the Administrator served written notice on Mary to vacate the property.
The Administrator brought the application for advice or directions and the court found that it could give advice and directions since the application raised legal issues.
3. Application
Mary took the view that Joseph and Angela could sell the property as majority owners once the transfer was made to the three devisees. However, there was no evidence that Mary would be able to purchase Joseph and Angela’s interests. Moreover, she owed a significant judgment debt to the estate and the Administrator claimed to be entitled to set off that debt against her 1/6 interest in the house. This attracted the rule in Cherry v Boultbee. The court reviewed the Canadian case law on that case, most of which hold that the rule, including its application to statute-barred debts, continues to apply in Canada. For a discussion of the cases, I refer the reader to my earlier blog.[5]
The court recognized that a personal representative cannot retain funds from a beneficiary to whom the testator devised or bequeathed a specific property. But on the other hand, the personal representative can withhold payment or transfer of a specific bequest or devise until the estate’s debt against the beneficiary has been paid if the criteria for equitable set-off have been met. The court noted that the judgment debt went to the very root of Mary’s demand that the property be transferred to the three devisees. In the circumstances it would be unjust to grant Mary’s claim of an in specie transfer and fail to take her judgment debt into account. Moreover, her insistence on such a transfer was consistent with her pattern throughout the litigation of delaying and frustrating the resolution of the administration of the estate. The sale of the property was inevitable, since an in specie transfer would continue the conflict, serve no useful purpose, further deplete the estate with legal costs, and delay administration of the estate.
Thus, the court ordered that the Administrator could sell the house, require Mary to vacate the house and remove her possessions, and authorize the Administrator to dispose of Mary’s personal property that remains in the house. The court also ordered Mary to pay the applicant’s costs forthwith as special costs.
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[1] (1839), 4 My & C 442 (Ch),
[2] ‘The Rule in Cherry v Boultbee’, http://welpartners.com/blog/2017/05/the-rule-in-cherry-v-boultbee/. Posted 31 May 2017. It was a comment on Re Moody Estate, 2011 ABQB 222. The blog discusses the question whether the rule should no longer be held to extend to statute-barred debts.
[3] 2022 BCSC 1527.
[4] Re Kolic Estate, 2016 BCSC 1312.
[5] Footnote 2, supra.
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Written by: Albert Oosterhoff
Posted on: December 9, 2022
Categories: Commentary
1. Introduction
The rule in Cherry v Boultbee[1] is designed to do equity between the parties entitled to share in a fund when one of them owes money to the fund. The rule prevents that party from participating in the fund until he has paid the debt owed. The rule has a general application and is not restricted estates. The Cherry case held that the debtor must pay the debt even if it is statute-barred. That aspect of the rule is sometimes questioned in modern cases.
I have written about the rule before.[2] It is not raised often, but it continues to crop up in cases from time to time. The most recent case is Re Kolic Estate,[3] and it is worth a comment.
2. Facts
The testator died in 2013. She was survived by her four children, Mary, Angela, Joseph, and Charles. By her will she appointed her daughter Mary executor, but the court removed her in 2016[4] and in 2021 appointed the applicant law firm as Administrator. The children engaged in litigation for nearly a decade. Charles and Mary brought an action to vary the will in 2014 but the court dismissed that action in 2021. Charles died in 2019. In 2018 Joseph and Angela brought a counterclaim against Mary because she had improperly taken funds from the estate. The court awarded judgment to Joseph and Angela in the amount of some $235,000 plus interest and punitive damages. The main issue concerned a house. The testator specifically devised it to Mary (1/6 interest), Angela (1/6 interest), and Joseph (4/6 interest). Joseph and Angela informed the Administrator that they did not wish to have their interests in the property transferred to them and asked that the property be sold and the proceeds distributed to the three devisees. However, Mary, who has lived in the house since the testator’s death and still lives in it (as did Charles until he died) insists that the will requires an in specie distribution, that is, a transfer to the three devisees at tenants in common in the proportions given in the will. Many of Mary’s possession are also still in the house. The Administrator told Mary that the estate would expect her to pay occupation rent while the litigation continued. Mary paid moneys to the Administrator since 2019, but the Administrator never accepted the payments as an agreed month-to-month rent. When the court dismissed Charles’ action, the Administrator served written notice on Mary to vacate the property.
The Administrator brought the application for advice or directions and the court found that it could give advice and directions since the application raised legal issues.
3. Application
Mary took the view that Joseph and Angela could sell the property as majority owners once the transfer was made to the three devisees. However, there was no evidence that Mary would be able to purchase Joseph and Angela’s interests. Moreover, she owed a significant judgment debt to the estate and the Administrator claimed to be entitled to set off that debt against her 1/6 interest in the house. This attracted the rule in Cherry v Boultbee. The court reviewed the Canadian case law on that case, most of which hold that the rule, including its application to statute-barred debts, continues to apply in Canada. For a discussion of the cases, I refer the reader to my earlier blog.[5]
The court recognized that a personal representative cannot retain funds from a beneficiary to whom the testator devised or bequeathed a specific property. But on the other hand, the personal representative can withhold payment or transfer of a specific bequest or devise until the estate’s debt against the beneficiary has been paid if the criteria for equitable set-off have been met. The court noted that the judgment debt went to the very root of Mary’s demand that the property be transferred to the three devisees. In the circumstances it would be unjust to grant Mary’s claim of an in specie transfer and fail to take her judgment debt into account. Moreover, her insistence on such a transfer was consistent with her pattern throughout the litigation of delaying and frustrating the resolution of the administration of the estate. The sale of the property was inevitable, since an in specie transfer would continue the conflict, serve no useful purpose, further deplete the estate with legal costs, and delay administration of the estate.
Thus, the court ordered that the Administrator could sell the house, require Mary to vacate the house and remove her possessions, and authorize the Administrator to dispose of Mary’s personal property that remains in the house. The court also ordered Mary to pay the applicant’s costs forthwith as special costs.
—
[1] (1839), 4 My & C 442 (Ch),
[2] ‘The Rule in Cherry v Boultbee’, http://welpartners.com/blog/2017/05/the-rule-in-cherry-v-boultbee/. Posted 31 May 2017. It was a comment on Re Moody Estate, 2011 ABQB 222. The blog discusses the question whether the rule should no longer be held to extend to statute-barred debts.
[3] 2022 BCSC 1527.
[4] Re Kolic Estate, 2016 BCSC 1312.
[5] Footnote 2, supra.
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