Our estate litigation lawyers have prepared a series of posts on the issue of removing an executor appointed in a BC will. We discussed cases in which one co-executor is removed due to conflict, inaction, or delay, leaving the remaining co-executor appointed in the will to administer the estate as sole executor. In today’s post, our BC estate lawyers will answer the question of whether both co-executors can be removed or “passed over” in favour of another person such as a professional trustee.
Both co-executors removed or “passed over”
In Weisstock v. Weisstock, 2019 BCSC 517, two brothers were named as co-executors in their late mother’s last will and testament, but due to acrimonious disputes that arose, neither of the brothers believed that the other was fit to serve in that capacity, and both applied to the court to remove the other as executor. The Honourable Mr. Justice Milman concluded that the appropriate order was for both co-executors to be passed over in favour of a professional trustee.
Deadlock in Weisstock leading to both co-executors applying to remove the other
Maria Weisstock (“Maria”) passed away on December 29, 2016 at the age of 91. She was predeceased by her husband, Willy, who died in 2012. Maria and Willy had four children. During their lifetimes, Willy and Maria created a successful real estate investment and rental business operated through a corporation called Witmar Holdings Ltd. (“WHL”). The value of the business was disputed, but was estimated to be in the range of $24 million to $55 million.Willy and Maria’s wills stipulated as follows:
- Willy’s last will and testament named one of his children, Tony, as sole executor, and stipulated that the residual interest in his estate was to be held in trust for Maria during her lifetime, to be used for Maria’s benefit. When he made his will, Willy also settled a trust known as the “Willy and Maria Weisstock Trust” (the “Trust”). After Maria’s death, the residue of the Trust was to go to their four children in equal measure unless one of them commenced or became involved in legal proceedings against the Trust, the trustee or WHL, in which case the trustee was empowered to remove that person as a beneficiary. When Maria died, there had been no grant of probate with respect to Willy’s estate.
- Maria’s last will and testament left all of her property to Willy, or if he predeceased her (as he did), to their four children in equal measure. The principal assets in Maria’s estate were her 25% interest in WHL and a 1/76 interest in a multi-unit rental building known as the “Palisades” (the other 75/76 interest in that building is held by WHL). Her last will and testament named two of her sons, Tony and Albert, as co-executors.
As a result of disagreements between Tony and Albert, the administration of Maria’s estate became deadlocked and no substantive steps were taken to administer the estate or to obtain a grant of probate in the period of more than two years that elapsed since Maria’s death. Each co-executor applied to remove the other as executor, contending that the other was in breach of trust and in an untenable conflict of interest.
Principles that guide the court when removing an executor
The principles that guide the court’s discretion in deciding whether to remove an executor or estate trustee are as follows:
(1) the court will not lightly interfere with the will-maker’s choice of executor(s) or estate trustee(s);
(2) clear evidence of necessity is required;
(3) the court’s main consideration is the welfare of the beneficiaries; and
(4) the executor or estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the estate.
It has repeatedly been held that a conflict of interest may disqualify an executor from acting in that capacity. Such a conflict may arise if the executor has or may have a claim against the estate or if the estate has or may have a claim against the executor. In addition, it has been held that an impasse between co-executors that interferes with the proper administration of the estate may suffice to justify passing over one or more of them, even without a showing of wrongdoing. In all cases, the fundamental guide must be the welfare of the beneficiaries.
Removing an executor may not be enough; it may be necessary to remove both
It was apparent to Justice Milman that it was necessary to pass over at least one of the two co-executors in order for any progress to occur, and in fact, there were good reasons to pass over both of them due to untenable conflict of interest:
- Reasons for removing Albert as executor: Maria had executed a power of attorney in favour of Albert in 2004 (the “POA”), which Albert began using to manage Maria’s affairs starting in 2013. Tony had suspicions that Albert used the POA without authority. After Maria’s death, Tony repeatedly demanded that Albert formally account for his use of the POA, including any joint accounts he and Maria may have held together. Albert was dilatory and selective in his responses to the legitimate questions that Tony raised. Entries in the general ledger that he prepared did not appear to align in at least some cases with the bank statements that he produced. There remained several issues in Albert’s use of the POA requiring investigation on behalf of the estate, and Albert was in no position to direct the estate in the conduct of any such investigation. Moreover, the manner in which Albert discharged his duties as attorney did not bode well for the prospect of his carrying out his duties as executor of Maria’s estate to the requisite standard.
- Reasons for removing Tony as executor: Tony too was in an untenable conflict of interest flowing from his position as sole executor of his father’s estate, sole trustee of the Trust, and a director of WHL. The executor of Maria’s estate would need to investigate and reach a conclusion on, among other things, the value of Maria’s shares in WHL, the status of the shareholder loans owed by WHL, the advisability of the proposed WHL refinancing from the perspective of Maria’s estate, the payments that were made (or should have been made) by the Trust and WHL, the value of the assets in the Trust and the degree to which the Trust can or should be paying some or all of the debts of Maria’s estate. Tony had conflicting interests in that regard which precluded him from being a neutral investigator and decision-maker on behalf of Maria’s estate with respect to those and potentially other related questions.
Who is appointed if both co-executors are removed or “passed over”?
Having concluded that both Tony and Albert should be passed over, the next question to be decided was whether to appoint an Administrator Pending Legal Proceeding (“APL”) pending the outcome of the litigation or a permanent replacement. In Weisstock, Justice Milman preferred the latter option, not being persuaded that Albert and Tony would ever be capable of cooperating effectively with one another as co-executors, even after the litigation was resolved. Even if either Tony or Albert were to resume the duties of executor alone following the conclusion of the litigation, there would still be a significant risk that the orderly administration of the estate would founder yet again over new disagreements, miscommunications or misunderstandings. Instead, it was in the best interests of the beneficiaries for both Tony and Albert to be passed over in favour of a permanent and neutral replacement. By order of the court a recently retired lawyer was appointed as sole executor of Maria’s estate.
Bottom line on removing an executor: It is possible and may be necessary to remove both
A conflict of interest, such as whether an executor has a claim against the estate or where the estate may have a claim against the executor, may disqualify an executor from acting in that capacity. In addition, where there is dissension among the co-executors themselves by which the administration of the estate grinds to a standstill or which otherwise hampers the proper administration, the courts can remove one or more of the executors. The court can appoint a temporary or permanent neutral replacement such as a professional trustee. In all cases, the court’s main consideration must be the welfare of the beneficiaries