In Graves v Nagy,[1] the Saskatchewan Court of Appeal upheld a trial level decision that removed a pair of co-estate trustees, and imposed cost consequences, due to their protracted administration of eight years.

Factual Background

Blanche Marie Therese Nagy (“Blanche”) passed away on November 13, 2012, leaving a will executed in 1983 (the “1983 Will”). The 1983 Will appointed Jo-Ann Graves (“Jo-Ann”) and Dennis Nagy (“Dennis”) as co-estate trustees. Blanche’s 1983 Will names seven of her children as beneficiaries.

Despite dying on November 13, 2012, Jo-Ann and Dennis did not apply for probate until February 2021… more than eight years later.[2]

The reasons for the lengthy delay are disputed. Jo-Ann claims that the delay was the result of erroneous advice she received, and subsequent relied on to her detriment, from a bank employee who purportedly told her probate was not necessary.[3] She went on to claim that the lack of administration was also because none of the beneficiaries inquired about the status of, or were eager to, finalize the estate.[4]

Karen Nagy (“Karen”) a beneficiary under the 1983 Will started asking Jo-Ann about her entitlement in or about 2019.[5] Jo-Ann did not take any steps toward administration, until November 5, 2020, where she met with and retained counsel. Letters probate were finally issued on April 16, 2021.[6]

In October 2021, Karen and six beneficiaries, those other than Jo-Ann and Dennis retained counsel. Counsel for the beneficiaries wrote to Jo-Anne, Dennis, and their lawyer, advising that the beneficiaries wanted the estate finalized.[7] The letter, inter alia, sought a complete accounting of the estate’s assets, debts, income and expenses.[8]

Unsatisfied with the response from Jo-Ann, Dennis, and their counsel, Karen served a Notice to File Accounts pursuant to Rule 16-50(1) of The Queen’s Bench Rules and section 35 of The Administration of Estates Act.[9]  Karen also sought the removal of Jo-Ann and Dennis as executors, and an order that she be appointed as the sole executor, without security, relying on section 14.1 of the Act, Rule 3-49(1)(c), and the inherent jurisdiction of the Court.

Legal Analysis:

The court begins by reviewing the applicable section for removal, section 14.1 of the Act, which states:

Removal of executor or administrator

14.1(1) On the application of a person having an interest in the estate, the court may remove an executor or administrator if the court is satisfied that:

(a) the executor or administrator:

(i) has failed to comply with an order of the court;

(ii) refuses to administer or settle the estate;

(iii) has failed to administer the estate in a reasonable and prudent manner;

(iv) lacks capacity to act as an executor or administrator;

(v) has been convicted of an offence involving dishonesty; or

(vi) is an undischarged bankrupt; and

(b) the removal of the executor or administrator would be in the best interests of those persons interested in the estate.

(2) If the court removes an executor pursuant to subsection (1), the court may grant letters probate or letters of administration with will annexed to another person in accordance with this Act.[10]

The issue before the court then became clear. The court was to determine whether the two conditions specified in section 14.1(1)(a) and (b) had been satisfied; that is, had Jo-Ann and Dennis “failed to administer the estate in a reasonable and prudent manner” and whether their “removal … would be in the best interests of those persons interested in the estate”.[11]

The court found that section 14(1) of the Act provides that if an executor fails to apply for probate within 60 days of the testator’s death, any person interested in the estate may apply to a judge for an order specifying a time within which the executor must apply, and that if they fail to apply within that time, their rights cease.[12] On that basis, the court concluded that “an executor who acts reasonably would ordinarily apply for letters probate within 60 days of the death of the testator”.[13]

Following this determination, the court then turned to the effect of section 35(1) of the Act, which looks at a trustee’s duty to account and is as follows:

Duty to account

35(1) An executor or an administrator must render a just and full account of the executorship or administration within two years after the grant of letters probate or letters of administration.[14]

The court held that, “implicit in this two-year rule is the expectation that an executor would have ordinarily applied for letters probate more proximate to the date of death”, particularly within 60 days as per section 14, and that “a ‘just and full accounting’ implies that accounting records have been kept since the date of the testator’s death”.[15]

Following the review of the standards and timeframes the estate trustee’s ought to have abided by, the court turns to examine if these breaches rise to violate section 7(1) of The Trustee Act, 2009, which provides as follows:

Duty of care and duty of good faith

7(1) In discharging his or her duties and exercising his or her powers, a trustee shall exercise that degree of care, skill and diligence that a person of ordinary prudence would exercise, having regard to the skill, experience and qualifications of the trustee.[16]

The court ultimately held that Jo-Ann and Dennis had failed to satisfy this standard laid out above. The court highlighted the approximation of estate expenses, the lack of receipts and invoices, and the potential liability that might arise as a result of failing to deal with the income taxes. Further, the court found that Jo-Ann and Dennis had failed to comply with the obligations imposed by section 9 of The Trustee Act, which states:

Conflicts of interest prohibited

9 A trustee shall discharge the trustee’s duties and exercise the trustee’s powers solely in the interests of the beneficiaries of the trust and, without limiting the generality of the foregoing, a trustee shall not knowingly permit a situation to arise:

(a) in which the trustee’s interest conflicts in any way with the discharge of the trustee’s duties and the exercise of the trustee’s powers; or

(b) in which the trustee may derive a personal benefit or a benefit for any other person, except so far as the law or the trust instrument expressly permits.[17]

Here, the court was referencing the fact that Dennis had lived in an estate property rent-free, without compensating the estate, and that his reporting called into question the legitimacy of the expenses he claimed to have incurred, including $9,000 for an addition to the house.[18]

Should the Estate Trustees Be Removed?

After all that, the court explained why it would be appropriate to change executors. While it seems obvious that they should be removed, it is important to note at this point in the litigation/ administration, most of the substantial assets in the estate had been sold at a favourable price.[19]

Nonetheless, the court found that the executors had shown “a past and unexplained lack of diligence”, and that “the absence of probate for eight and one-half years, the lack of estate record keeping, an accounting that offers little more than rounded approximations of expenses without receipts or invoices, the failure to file estate income tax returns, an apparent and unaccounted benefit to Dennis who lived in the estate property for several years … all show a dereliction of duty one expects of an executor”.[20]

While these comments by the court were well deserved, they clarified that executor removal is not to punish them for past misconduct, but to protect the estate and the beneficiaries.[21] In the court’s view, the trustee’s had demonstrated “a continued and current lack of understanding of what is necessary to discharge an executor’s duties” and that “[a]n apparent conflict of interest looms over the several years of Dennis’ residency in the estate”.[22]

Final Remarks

Despite the countless wrongdoing on the part of the trustee’s (delay in applying for probate, failure to maintain proper records, inadequate accounting, and a conflict of interest), all of which constituted a breach of their statutory and common law duties, the court in Graves emphasized that executor removal is not punitive but protective. Paramount in estate administration is transparency and the beneficiaries’ interests. Costs were appropriately imposed to reflect the trustees’ dereliction.

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[1] Graves v Nagy, 2024 SKCA 17 (CanLII). (“Graves”)

[2] Ibid. at para 4.

[3] Ibid. at para 5.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid. at para 9.

[8] Ibid.

[9] The Administration of Estates Act, SS 1998, c A-4.1 at section 35. (the “Act”)

[10] Ibid. at section 14.1.

[11] Graves, at para 15.

[12] Ibid.

[13] Ibid.

[14] The Act, at section 35.

[15] Graves, at para 16.

[16] The Trustee Act, 2009, SS 2009, c T-23.01 at section 7(1). (“The Trustee Act”)

[17] The Trustee Act, at section 9.

[18] Graves, at para 22.

[19] Ibid. at para 24.

[20] Ibid.

[21] Ibid.

[22] Ibid. at para 39.