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friction with executor

Removing an executor – friction with beneficiaries

A case review of Rose v Rose1

Will a court remove an executor where there is disagreement, friction, or hostility between the trustees and the beneficiaries? Is friction in of itself enough to warrant removal? One of the cases that highlights the Courts’ efforts to grapple with these questions is Rose v. Rose.

In Rose v. Rose a trust was established naming a father (also known as “Brian”) as trustee. His two daughters were the beneficiaries. The assets of the trust were a family cottage and chalet. The father, mother and their two children historically used the properties for recreational purposes, and everyone was happy. When the parents separated Brian’s relationship with his two daughters went downhill. They would not talk to him, and they did not want him to step foot into the cottage. The father said that the trust was set up only for tax planning purposes, and its intention was that he and his wife were to have continued use and enjoyment of the properties. His wife disagreed. The two children commenced an application seeking to remove their father as trustee. A prime factor considered by the court was whether hostility between the children (as beneficiaries) was sufficient to remove their father as trustee.

The judge presiding over the case was Justice Lissaman. Before we see what Lissaman J. had to say and how he ruled, let’s see what some of the secondary authorities have to say about the law.

In his seminal text, Waters’ Law of Trusts in Canada, 4th Ed., Professor Waters says, in part,

“A more difficult question arises, however, when there is disagreement, friction, or hostility between the trustees and the beneficiaries. In Forster v. Davies ,Turner L.J. said that these were not grounds for removing the trustee, and that view has been adopted and followed in common law Canada. Consequently, the mere desire of all the beneficiaries, a fortiori of only some of them, to remove the trustee is not enough….. Removal might also take place if the trustee has to exercise a discretion as to payments to beneficiaries, and it is shown that he and one or more of the beneficiaries are hostile to each other.2” (emphasis added)

In an excellent article written by a senior member of the bar3 and featured in Widdifield on Executors and Trustees, 6th Edition4, the learned author canvasses the issue of hostility being a ground for the removal of an executor. I include several excerpts from the article that are relevant to our discussion:

the Saskatchewan Court of Appeal decision in Ocean Man Trust,Re5..(stated) ….The paramount concern of the Court in determining whether to remove a personal representative is the welfare of the beneficiaries and not one in particular… Flowing from this, a personal representative can be removed for lack of neutrality, failure to disclose estate information or other misconduct including treating one or more of the beneficiaries with hostility (emphasis added)

The determination of whose conduct gave rise to hostility between trustees was not a central consideration and whether it was a consideration at all would be determinate at a removal hearing. The court’s main consideration is the welfare of the beneficiaries. The “modern and pragmatic approach” is to consider whether the trust will be administered in accordance with the trustee’s fiduciary duties and in the best interests of the beneficiaries: Cohen, Re,6. (emphasis added)

In Miles v. Vince7, …. the court reiterated the focus upon the welfare of the beneficiaries. Friction or hostility between trustees and beneficiaries is not of itself reason for removal unless the hostility is grounded in the manner of administration of the estate. The acts or omissions must be such as to endanger the estate property or to show a want of honesty.(emphasis added)

In Davis, Re8the dissension between the beneficiaries and the executor, regardless of its cause, was sufficient for the court to rule it was no longer possible for the executor to exercise the very wide discretion under the will in a completely impartial and objective manner. Hostility between the executors and the beneficiaries was sufficient to justify removal of the estate trustee: (emphasis added)

With that background let’s see Lissaman J.’ s analysis. Here are some key paragraphs from the judgment.

70……the court must be guided by the principle that a trustee will be removed when his or her continuance would jeopardize the assets of the trust, put the welfare of the beneficiaries at risk, or prevent the trust from being properly executed…Although misconduct of the trustee is not a prerequisite to removal, something more than mere friction is normally necessary…”(emphasis added)

72. There is a great deal of hostility between the Beneficiaries and the Trustee in this case. ….The daughters refuse to speak with their father and when they meet with their father, which does not happen often, the meeting is highly charged and acrimonious. The Court of Appeal in Davis, Re …found that there was a substantial degree of hostility between her and the Beneficiaries. The Court said that where it is no longer possible for the executrix to exercise her duties in a completely impartial and objective manner, it is desirable to remove the executrix and replace her with a trust company.(emphasis added)

74. The degree of hostility between the Beneficiaries and the Trustee is enough, however, that the administration of the trust has become difficult. It does not matter whether the fault lies on the Trustee or the Beneficiaries (see: Davis, Re (Ont. C.A.) and Consiglio, Re (Ont. C.A.) at 328). …. I do not see an end to the bickering and animosity between the Beneficiaries and the Trustee …(emphasis added)

75……the question to be asked, when removing a trustee “is whether it would be difficult for the trustee to act with impartiality, not whether, in fact, it [or he or she] would or would not do so”. I do not see how it would be possible for Brian to act impartially in this situation. …..(emphasis added)

76……Given this conflict, it is incongruous that Brian maintains that he has the right to use the property while simultaneously submitting he is acting in Ashleigh and Kelsey’s best interests as the Trustee. This is difficult to understand, as Ashleigh and Kelsey have been clear and adamant that they oppose Brian using either property. I believe, that although Brian may have had the best of intentions, he is in a conflict of interest here. A trustee would not place himself in a position where he must inevitable weigh his personal interests against the interests of the Beneficiaries (see: Orenstein v. Feldman (Ont. H.C.)). I believe that Brian is in such a position. He can no longer be objective regarding his role as a trustee. When it is difficult to accept that a trustee could deal with the interests of the beneficiaries in an objective manner, the trustee is removed (see: Orenstein v. Feldman (Ont. H.C.) and Owen Family Trust, Re (B.C. S.C.). In view of the interests of all the parties before me, Brian’s Trusteeship must end. If he does not resign by July 15th, 2006, he is to be removed as trustee and replaced by Brian G. Saunderson, a solicitor in Collingwood.(emphasis added)

Lissaman J. removed the father as a trustee but it was not really because there was friction. It was because the friction created an atmosphere that the father could not exercise his discretion as a trustee in an objective even handed manner.

Conclusion

So let’s turn back to the questions we asked at the outset.

  1. Will a court remove an executor where there is disagreement, friction, or hostility between the trustees and the beneficiaries? From our review of the case law and secondary authorities the answer depends on the facts specific to the situation.
  2. Is friction in of itself enough to warrant removal? The answer appears to be no. In Miles v. Vince9 the British Columbia Court of Appeal referenced Letterstedt v. Broers10 which set out seven factors adopted in Canada as guidelines for the removal of a trustee.11 The last factor was “Friction or hostility between trustees and the beneficiary is not of itself a reason for the removal of the trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.”

What is clear from a review of the case law is that friction or hostility between a trustee and beneficiary in of itself will not persuade a court to remove an executor. There has to be some other factor whereby the continuation of the status quo is not viable. The main guide for the Court will be what’s in the best interests and welfare of the beneficiaries.

 

All Posts in This Series

Removal of an Executor
Do Conflicts of Interest warrant removal of an Executor?
Removal of an Executor on account of age, infirmity or illness
Removal of an executor for Substantial Breach of Trust
Removing an executor – friction with beneficiaries
Does friction between co-executors warrant removal?
Can a trustee be removed without evidence of bad behaviour?
Removing an Executor: Delay & Non-Action
Footnotes
  1.   2006 CarswellOnt 3776, 24 E.T.R. (3d) 217, 81 O.R. (3d) 349
     
  2.   See the text that deals with footnotes 30-36 in Waters’ Law of Trusts in Canada, 4th Ed. 16 — Death, Retirement and Removal of Trustees Editor: Donovan W.M. Waters, Contributing Editors: Mark R. Gillen and Lionel D. Smith
     
  3.   Elena Hoffstein is a partner at Fasken. Her practice is focused in all areas of estate planning and is a recognized leader in charity law. See https://www.fasken.com/en/elena-hoffstein#sort=%40fclientworksortdate75392%20descending .
     
  4.   Widdifield on Executors and Trustees, 6th Edition 15 — RESIGNATION, REMOVAL AND APPOINTMENT OF TRUSTEES Contributing Editor: Elena Hoffstein, Editor: Carmen S. Thériault
     
  5.   (1993), 50 E.T.R. 150 (Sask. C.A.)
     
  6.   2013 CarswellBC 2810 (B.C. S.C.)
     
  7.   2014 CarswellBC 2028, 2014 BCCA 289, (2014) 9 W.W.R. 1, (2014) B.C.W.L.D. 4466, (2014) B.C.W.L.D. 4467, (2014) B.C.W.L.D. 4468, 242 A.C.W.S. (3d) 749, 358 B.C.A.C. 280, 36 C.C.L.I. (5th) 1, 614 W.A.C. 280, 63 B.C.L.R. (5th) 23, 98 E.T.R. (3d) 60
     
  8.   (1983), 14 E.T.R. 83 (Ont. C.A.). For an interesting read on this case, I refer the reader to a blog by Charles Wagner entitled, “Removal of Executor” found at https://www.wagnersidlofsky.com/removal-of-executor
     
  9.   2014 CarswellBC 2028, 2014 BCCA 289, (2014) 9 W.W.R. 1, (2014) B.C.W.L.D. 4466, (2014) B.C.W.L.D. 4467, (2014) B.C.W.L.D. 4468, 242 A.C.W.S. (3d) 749, 358 B.C.A.C. 280, 36 C.C.L.I. (5th) 1, 614 W.A.C. 280, 63 B.C.L.R. (5th) 23, 98 E.T.R. (3d) 60
     
  10.   Letterstedt v. Broers (1884), (1883-84) L.R. 9 App. Cas. 371 (South Africa P.C.)
     
  11.   These were the seven factors set out at pages 126-127 of the decision
    1. If the Court is satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.
    2. The acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.
    3. In exercising the delicate jurisdiction of removing trustees, the Court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in a matter that is so “essentially dependent on details often of great nicety.” The Court must proceed to look carefully into the circumstances of the case.
    4. Where a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign.
    5. The lack of jurisprudence in respect of the removal of a trustee reflects that a trustee when asked to do so, will resign.
    6. If, without any reasonable ground, the trustee refuses to do so the court might think it proper to remove him.
    7. Friction or hostility between trustees and the beneficiary is not of itself a reason for the removal of the trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.
       

Matthew Stroh

Matthew is a senior member of the estate and litigation groups. He maintains a broad civil, commercial, insurance and securities litigation practice.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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