A recent case from the Ontario Court of Appeal (published in French) dealt with the principles to consider in evaluating an application to remove an executor due to a conflict of interest.
The deceased in Talbot c. Bergeron, 2016 ONCA 956, had two children, a son and a daughter. The deceased owned several greenhouses, a store and 150 acres of land. Both the son and daughter were involved in the family business. Following a decline in the deceased’s health, the son managed the finances and sales of the business and the daughter ran the greenhouse. The daughter claimed that she agreed to work for the business for a very low salary on the understanding that she would inherit 50% of the business on her father’s death. The son disputed that such an agreement ever existed.
In the months before his death, the deceased executed new Wills appointing his son as trustee and left most of his estate to his son and a small portion to his daughter. The daughter challenged the validity of the Wills and sought to have the son removed as executor.
The motion judge correctly found that, at the initial stage of proceedings, he was only being asked to determine whether the son should be removed as trustee. He nonetheless went on to consider the mental capacity of the deceased, finding the deceased mentally capable of executing the Wills appointing the son. He then proceeded to consider the question of whether the son should be removed as executor. The judge found that the son should remain as executor. In his opinion, the simple fact that the son and daughter were in conflict was not sufficient reason to remove the son as executor. He also noted that there was no evidence the son had acted negligently, maliciously or contrary to the interests of the estate or its beneficiaries. The daughter appealed.
The Court of Appeal granted the appeal, removing the son as executor and appointing an independent trustee for the balance of the proceedings regarding the validity of the Wills. The Court found that the motion judge should not have considered the validity of the Wills at this stage and had failed to fully address the daughter’s submissions on Will validity.
The motion judge also incorrectly applied the test for removal of an executor in a conflict of interest situation. The issue was not whether the executor had acted maliciously or negligently; rather, this issue was whether a conflict of interest existed which would make it difficult for the executor to act impartially in carrying out his duties. Proof or even a probability of misconduct was not necessary.
The Court made note of the factors a judge should consider in determining whether an executor should be removed. They are: the value of the estate, the presence of conflicts of interest, the potential advantage of appointing a neutral trustee, the need for expertise in administrating the estate and difficulties in identifying and administering assets and liabilities.
Here, the value of the estate was significant (in the millions). Multiple potential conflicts of interests existed for the son in his role as executor and beneficiary. In addition, there was evidence that the son had been mixing the operations of his personal company with the family business, which may make it difficult for him to act impartially and weighed in favour of bringing in an independent expert.