Clash of the Executors: Brothers at Arms

When a will is drafted, an executor of the estate is appointed in the will. The executor is essentially assigned to help manage the deceased’s affairs/estate after he or she passes away. The executor may be your lawyer, or alternatively your children, among others. Sometimes, a will-maker appoints co-executors - e.g. two siblings - to determine how the will-maker’s estate ought to be handled. Unfortunately, this can lead to significant challenges once the will-maker passes because the co-executors disagree in how to manage the deceased will-maker’s estate.

It is best to appoint 1 or 3 executors which permits unilateral or majority decision making when it comes to management of the deceased’s Estate.

This is exactly what occurred in the recent case of Smith Estate, 2021 BCSC 1753; in this case, an application to pass the accounts in respect of the estate of William Charles Benson Smith, deceased (“Mr. Smith”). The parties to this application were co-executors, Ian Smith and Eric Smith, brothers and the sons of the deceased. Their father sadly died on January 20, 2016. Under his will, he left his three children, Eric, Ian and Betty Smith, as co-executors. Unfortunately, Betty had predeceased her father leaving Eric and Ian as co-executors. The value of the estate was approximately $2.0M, with the primary assets being a home located in Victoria and numerous investment/bank accounts with a total estimated balanced of approximately $800,000. Disputes arose between the brothers from the onset but predominantly concerned the deceased’s property: Ian wanted to sell it “as in”, whereas Eric wanted to subdivide it and eventually build and sell two homes for profit. At issue in Court was the following:

[14] As best that I was able to understand Eric’s disputes, which with respect to Eric who is not acting with the benefit of counsel were not always easy to categorize into a proper legal basis, can be summarized under the following categories:

a)   Ian’s conduct, including delay, are sufficiently egregious that he ought to be disentitled from receiving any remuneration, or reimbursement of his out of pocket expenses;

b)   Eric seeks repayment from the estate as to his own out of pocket costs and expenses for dealing with estate matters;

c)   Eric should be granted “special costs” for the loss of the value of the estate to which he ought to have been entitled as a beneficiary, which he considers to be $425,000, as a result of Ian’s refusal to subdivide or deal with Benson Property in such a manner that it could have been sold as development property and with much higher realization;

d)   Ian has failed to properly account for the disposition and realization of all personal property. It seems that both parties had taken various items from Benson Road which have not all been appraised, with much of them being of a sentimental nature; and

e)   Ian has failed to make the final distribution in a timely manner.

In review the law and obligations of executors, the Court aptly noted as follows:

[63] An executor has a duty to account to creditors and all persons with a beneficial interest in the estate. The form of the accounts is prescribed, and must be verified by affidavit, in compliance with Rule 25-13(6).

[64] On a passing of accounts, “the function of the court is to determine whether the executor has exercised his duties under the will properly and in accordance with the law”: Re: Estate of Fannie Cleverley, 2000 BCSC 1454 at para. 25.

…[79] …the entitlement to remuneration, an executor is entitled to remuneration for his or her work for the estate, with the court setting that amount if the parties with an interest in the estate are not able to agree to it. Any such remuneration cannot be greater than 5% of the gross aggregate value of the estate, including capital and income.

[80] The executor claiming the fee bears the burden to prove the work done justifies an allowance: Deutschmann Estate v. Fallis, 2011 BCSC 1009, at para. 59.

[81] The considerations for the court in determining an appropriate amount of remuneration have been fully particularized by Registrar Nielsen in Chau Estate (Re), 2016 BCSC 2541 (“Chau”), at para. 14:

[14]      The personal representative, or administrator, is entitled to remuneration to a maximum of five percent of the gross aggregate value, including capital and income, of all the assets of the estate at the date of the passing. Section 88 of the Trustee Act RSBC 1996 c. 464 provides:

Setting remuneration of trustees and guardians

88  (1)  A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

(2)  The court or a registrar of the court if so directed by the court, may make an order under subsection (1) from time to time, and the amount of remuneration must be allowed to an executor, trustee, guardian or administrator, in passing his or her accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(3)  A person entitled to an allowance under subsection (1) may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding 0.4% of the average market value of the assets.

[82] The considerations for the entitlement were set out in Re Toronto General Trusts Corp. and Central Ontario Railway Co (1905) 6 O.W.R. 350 (H.C.), and approved in Chau, at para. 15, as follows:

a)   the magnitude of the trust; b)   the care and responsibility involved; c)   the time occupied in administering the trust; d)   the skill and ability displayed; and finally, e)   the success achieved in the final result.

[83]      In assessing the above considerations, remuneration need not be fixed as a specific percentage, however, and can be assessed on a lump sum basis provided it does not exceed 5%: Turley Estate, (1955) 16 W.W.R. 72 (B.C.S.C.), 1995 CanLII 570.

[84]      Ultimately, the allowance is on a quantum meriut basis, subject to the 5% limit: Chau, at para. 18.