Wednesday, July 31, 2013

Compelling an Executor to Distribute Estate Assets

Can a beneficiary of a will successfully sue in British Columbia to compel an executor to make a distribution?

In a recent decision, Reznik v. Matty, 2013 BCSC 1346, Mr. Justice Funt ordered an executor to make interim distributions to the four residual beneficiaries of their father’s will of $10,000 each.

Phillip Matty died on December 30, 2000. In his will, he appointed one of his four children, Chad Matty, as his executor, and after making some specific gifts left the residue of his estate to his four children equally.

The executor distributed the specific gifts, and made an interim distribution of $25,000 to each of the children, but had not fully administered the estate.

The remaining assets in the estate consisted of cash in the amount of about $96,000 and shares in a company, which in turn owned three lots on Passage Island that were listed for sale for a total of $560,000. The company also had cash of about $44,000.

The three other children brought an application to court for an order that the executor make an interim distribution to each residual beneficiary. They asked for a distribution in an amount in the range of $15,000 to $20,000 each.

The executor argued that the Court did not have the jurisdiction to compel him as an executor to make a distribution, and pointed out that there are no reported cases in British Columbia where the Court has done so. The executor argued that the Court’s power was limited to removing an executor.

Mr. Justice Funt, after reviewing authorities going back to the 17th century, held that the Supreme Court of British Columbia could order an executor to make a distribution under its general jurisdiction. He held that a superior court’s general jurisdiction gave the court all powers necessary to adjudicate civil disputes, except to the extent that legislation has limited that power.

The executor pointed out that the will gave him broad powers to retain assets “for such length of time as my Trustee shall deem advisable.” Mr. Justice Funt held that the clause in the will did not displace the executor’s overriding duty to settle the estate and distribute.

Mr. Justice Funt considered the law of assent which he wrote “has been described as ‘an acknowledgment by a personal representative that an asset is no longer required for the payment of the debt, funeral expenses or general legacies’: Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (London: Sweet and Maxwell, 2013) at 1411.” He held that the court could compel an executor to assent if the executor withheld assent without just cause.

In ordering the interim distribution, Mr. Justice Funt found that in the circumstances the executor would not be prejudiced. There was no real risk that there would be insufficient assets remaining to cover any further expenses. He wrote at paragraph 48:

[48]         In the case at bar, a distribution of $40,000 ($10,000 of which would go to the executor), represents a small portion of the residue and would leave the Estate with liquidity (approximately $56,000 held in the Estate proper and approximately $44,000 held by PIE). As noted above, there are no significant outstanding or anticipated costs. The respondent executor has not shown just cause for his refusal to distribute the sought distribution of $15,000 - $20,000 for each residuary beneficiary.

To be conservative, Mr. Justice Funt ordered a lesser distribution of $10,000 to each beneficiary.

This case is an important decision for beneficiaries seeking a distribution where an executor unreasonably delays. On the other hand, it is important to keep in mind that in this case the executor was taking an unusually long time to administer the estate, and there were clearly sufficient assets to meet future expenses. The courts in British Columbia are likely to give executors a fair amount of leeway in determining the timing of distributions as long as they are acting reasonably. 

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