Executors’ Breach of Fiduciary Duty & Gift Mortis Causa
1. Introduction
The law is clear that executors are fiduciaries and are therefore liable for any breach of their fiduciary duties. The law on donationes mortis causa is also clear. Issues concerning both these matters arose in Deziel v Deziel.[1]
2. Facts
The testator, Elizabeth Dalziel, died on 14 April 2023. She was survived by four of her five children, the Applicant Sandra, the Respondents Debra and Bryan, and a non-party, Norman. They are the only beneficiaries and take equal shares under their mother’s Will. The testatrix’s health declined significantly before her death. Sandra provided care to her in 2022 and thereafter Debra was the primary caregiver. She was also her mother’s attorney for personal care and for property. The testatrix preferred the care provided by Debra. The testatrix’s main assets were a bank account with a balance of approximately $43,000, and a home valued between $290,000 and $350,000.
Two weeks before she died the testatrix told Debra to write a cheque to herself for $40,000 as a gift. Debra did so and her mother signed the cheque, but Debra did not cash the cheque until after her mother’s death. Bryan testified that his mother wanted to compensate Debra for unpaid time off work and expenses incurred by her.
The Will named Debra and Bryan Executors and Trustees. The Will states that any of the children can buy the testator’s home at ‘fair market value; such sale to be completed not more than ninety (90) days after’ her death.
After the testatrix’s death, the Respondents obtained two appraisals of the home. One valued it between $265,000 and $330,000, the other between $290,000 and $310,000. The Applicant obtained her own appraisal, which valued the house between $340,000 and $355,000. Bryan offered to purchase the home on 13 July 2023 within 90 days of his mother’s death, but with a closing date some 40 days later, which was more than 90 days after her death. The Trustees agreed to a sale price of $280,000, that is, $295,000, less $15,000 for the real estate commission. The transaction closed on 23 August 2023. Sandra and Norman only became aware of the provision in the will permitting the children to purchase the home and of the sale to Bryan until after the 90-dayperiod following their mother’s death.
3. Analysis and Judgment
3.1 Breach of Trust and Fiduciary Duties
Justice BA MacFarlane began her analysis by noting, with reference to Norberg v Wynrib,[2] that as Trustees, the Respondents owed fiduciary duties of ‘loyalty, good faith and avoidance of conflict of duty and self-interest’. Further, the standard of care the Trustees owed was one of ‘ordinary prudence as if managing their own affairs’. That meant that they had to obtain fair market value for the home.[3] Moreover, the Trustees had to act impartially and therefore could not give advantage or impose burdens that other beneficiaries do not share.[4] This means that the Trustees must prioritize the beneficiaries’ interest over their own. The Trustees failed to do that.
However, this did not mean that the sale to Bryan should be set aside. When properly interpreted, the testator intended the 90-day period to ensure a timely administration of the estate and in her Honour’s opinion it was not intended as a strict deadline. Bryan signed the purchase agreement within the 90 days and the fact that the transaction was closed beyond the 90-day period was not objectionable in the circumstances. However, Bryan had a conflict when he determined the purchase price and by fixing a price below the market price, he favoured his own interests over those of the other beneficiaries. Debra was complicit in his conduct. In the circumstances, Bryan should have recused himself and Debra should have sought legal advice on how to proceed. Thus the Trustees breached their fiduciary duties. The fact that the Trustees did not produce the Will until after Bryan signed the agreement was not a breach. Neither was the fact that Bryan did not fully fund the purchase price with his own money but relied on an interim distribution to pay it in part.
Nevertheless, because the Trustees sold the home below market value, there was an identifiable loss of $30,000 to the estate and Bryan should make restitution to the estate for that amount.
Her Honour found that the Trustees did not act maliciously and, considering that they were inexperienced, their actions were not egregious or excessive. Hence, she declined to award further damages.
3.2 Removal of Trustees
While the court has power under section 37(1) of the Trustee Act[5] to remove an executor and to appoint another person in his place, case law has made it clear that ‘the court should not lightly interfere with the testator’s choice of’ executor. Having regard to the well-known principles governing the removal of trustees and executors, her Honour did not find it appropriate to remove the Trustees.
3.3 Donatio Mortis Causa
The cheque the testator asked Debra to write in her own favour amounted to an intended gift mortis causa, that is, a gift made in contemplation of death and takes effect only when the donor dies, as distinct from an inter vivos gift, which takes effect immediately. To be effective, therefore, (1) the gift must be made in contemplation, though not necessarily in expectation of death; (2) the subject matter must be delivered to the donee; and (3) the gift must be made in circumstances that show that the property will revert to the donor if she should recover. The circumstances in which the gift was made, as confirmed by Bryan, show that the first and third requirements were met. However the requirement of delivery was not. A gift of money by cheque is only an instruction by a bank customer to the bank to exchange the cheque for cash. But once the customer dies, the bank can no longer negotiate the cheque. The drawer’s death revokes the bank’s authority to pay on a cheque, and the fact that the bank has not yet been notified of the drawer’s death (and it had not been in this case) does not validate the cashing of the cheque. Consequently, Debra had to repay the $40,000 to the estate.
—
[1] 2024 ONSC 5279.
[2] 1992 CarswellBC 155, 1992 CarswellBC 907, [1992] 2 SCR 226, paras 67 and 97.
[3] Citing Valard Construction Ltd v Bird Construction Co., 218 SCC 8, paras 12 and 18.
[4] Citing In the Estate of Norma Bear (deceased), 2014 ONSC 4468, para 18.
[5] RSO 1990, c T.23.
Written by: Albert Oosterhoff
Posted on: June 24, 2025
Categories: Commentary
1. Introduction
The law is clear that executors are fiduciaries and are therefore liable for any breach of their fiduciary duties. The law on donationes mortis causa is also clear. Issues concerning both these matters arose in Deziel v Deziel.[1]
2. Facts
The testator, Elizabeth Dalziel, died on 14 April 2023. She was survived by four of her five children, the Applicant Sandra, the Respondents Debra and Bryan, and a non-party, Norman. They are the only beneficiaries and take equal shares under their mother’s Will. The testatrix’s health declined significantly before her death. Sandra provided care to her in 2022 and thereafter Debra was the primary caregiver. She was also her mother’s attorney for personal care and for property. The testatrix preferred the care provided by Debra. The testatrix’s main assets were a bank account with a balance of approximately $43,000, and a home valued between $290,000 and $350,000.
Two weeks before she died the testatrix told Debra to write a cheque to herself for $40,000 as a gift. Debra did so and her mother signed the cheque, but Debra did not cash the cheque until after her mother’s death. Bryan testified that his mother wanted to compensate Debra for unpaid time off work and expenses incurred by her.
The Will named Debra and Bryan Executors and Trustees. The Will states that any of the children can buy the testator’s home at ‘fair market value; such sale to be completed not more than ninety (90) days after’ her death.
After the testatrix’s death, the Respondents obtained two appraisals of the home. One valued it between $265,000 and $330,000, the other between $290,000 and $310,000. The Applicant obtained her own appraisal, which valued the house between $340,000 and $355,000. Bryan offered to purchase the home on 13 July 2023 within 90 days of his mother’s death, but with a closing date some 40 days later, which was more than 90 days after her death. The Trustees agreed to a sale price of $280,000, that is, $295,000, less $15,000 for the real estate commission. The transaction closed on 23 August 2023. Sandra and Norman only became aware of the provision in the will permitting the children to purchase the home and of the sale to Bryan until after the 90-dayperiod following their mother’s death.
3. Analysis and Judgment
3.1 Breach of Trust and Fiduciary Duties
Justice BA MacFarlane began her analysis by noting, with reference to Norberg v Wynrib,[2] that as Trustees, the Respondents owed fiduciary duties of ‘loyalty, good faith and avoidance of conflict of duty and self-interest’. Further, the standard of care the Trustees owed was one of ‘ordinary prudence as if managing their own affairs’. That meant that they had to obtain fair market value for the home.[3] Moreover, the Trustees had to act impartially and therefore could not give advantage or impose burdens that other beneficiaries do not share.[4] This means that the Trustees must prioritize the beneficiaries’ interest over their own. The Trustees failed to do that.
However, this did not mean that the sale to Bryan should be set aside. When properly interpreted, the testator intended the 90-day period to ensure a timely administration of the estate and in her Honour’s opinion it was not intended as a strict deadline. Bryan signed the purchase agreement within the 90 days and the fact that the transaction was closed beyond the 90-day period was not objectionable in the circumstances. However, Bryan had a conflict when he determined the purchase price and by fixing a price below the market price, he favoured his own interests over those of the other beneficiaries. Debra was complicit in his conduct. In the circumstances, Bryan should have recused himself and Debra should have sought legal advice on how to proceed. Thus the Trustees breached their fiduciary duties. The fact that the Trustees did not produce the Will until after Bryan signed the agreement was not a breach. Neither was the fact that Bryan did not fully fund the purchase price with his own money but relied on an interim distribution to pay it in part.
Nevertheless, because the Trustees sold the home below market value, there was an identifiable loss of $30,000 to the estate and Bryan should make restitution to the estate for that amount.
Her Honour found that the Trustees did not act maliciously and, considering that they were inexperienced, their actions were not egregious or excessive. Hence, she declined to award further damages.
3.2 Removal of Trustees
While the court has power under section 37(1) of the Trustee Act[5] to remove an executor and to appoint another person in his place, case law has made it clear that ‘the court should not lightly interfere with the testator’s choice of’ executor. Having regard to the well-known principles governing the removal of trustees and executors, her Honour did not find it appropriate to remove the Trustees.
3.3 Donatio Mortis Causa
The cheque the testator asked Debra to write in her own favour amounted to an intended gift mortis causa, that is, a gift made in contemplation of death and takes effect only when the donor dies, as distinct from an inter vivos gift, which takes effect immediately. To be effective, therefore, (1) the gift must be made in contemplation, though not necessarily in expectation of death; (2) the subject matter must be delivered to the donee; and (3) the gift must be made in circumstances that show that the property will revert to the donor if she should recover. The circumstances in which the gift was made, as confirmed by Bryan, show that the first and third requirements were met. However the requirement of delivery was not. A gift of money by cheque is only an instruction by a bank customer to the bank to exchange the cheque for cash. But once the customer dies, the bank can no longer negotiate the cheque. The drawer’s death revokes the bank’s authority to pay on a cheque, and the fact that the bank has not yet been notified of the drawer’s death (and it had not been in this case) does not validate the cashing of the cheque. Consequently, Debra had to repay the $40,000 to the estate.
—
[1] 2024 ONSC 5279.
[2] 1992 CarswellBC 155, 1992 CarswellBC 907, [1992] 2 SCR 226, paras 67 and 97.
[3] Citing Valard Construction Ltd v Bird Construction Co., 218 SCC 8, paras 12 and 18.
[4] Citing In the Estate of Norma Bear (deceased), 2014 ONSC 4468, para 18.
[5] RSO 1990, c T.23.
Author