Breach of Fiduciary Duty, Estate Law, Executor's Fees

BC Executor’s Fee Disallowed Due to “Dismal Failures” in Administering the Estate

October 5, 2021 By Candace Cho

BC law states that an executor is entitled to remuneration of up to a maximum of 5% of the gross aggregate value of the estate, unless the deceased’s will provides otherwise. In Zaradic Estate (Re), 2021 BCSC 1037 the will provided that the executors could claim remuneration in the amount of 10% of the estate. The joint executors claimed over $110,000 in remuneration. The BC Court awarded them nil, finding their actions so egregious that they were disentitled to any fee.

Deceased’s Will

Mr. Zaradic’s Last Will and Testament (the “Will”) left his entire estate to Norma Brajevic, his friend who resides in Croatia. Mr. Zaradic’s Will named his life-long friends, Vlatko and Herminia Panovic, as joint executors. Mr. Zaradic’s Will provided that Vlatko and Herminia could claim remuneration in the amount of 10% of the net value of the residue of his estate for acting as executors. After Mr. Zaradic died on December 6, 2015, Vlatko and Herminia went about administering Mr. Zaradic’s estate. On passing of accounts, Vlatko and Herminia sought a total of $110,035.29 as remuneration for their work as executors. Ms. Brajevic, the sole beneficiary of Mr. Zaradic’s estate, argued that they ought to be denied any fees for administering the estate due to their misconduct.

Executor misconduct

The deceased owned a home at 11305 Paterson Road in Delta, BC. After his death, the joint executors of his estate attempted to sell the home to their daughter at roughly half of its market value. The executors also loaned their daughter $13,000 from the deceased’s estate to ensure she had enough money to complete the purchase. When the sole beneficiary learned of this, she commenced a legal action and obtained a certificate of pending litigation to prevent the sale of the deceased’s home. The $13,000 was returned to the estate shortly after the failed sale. The home was eventually sold for fair market value, despite the actions of the executors, and with resultant legal costs to the beneficiary as a consequence.

Criteria for determining appropriate executor’s fee

An executor’s entitlement to remuneration is determined on a quantum meruit basis, which is the reasonable value of the services rendered, subject to the 5% maximum set out in the Trustee Act if the will does not provide otherwise. The criteria to be considered in determining the appropriate amount of remuneration are:

the magnitude of the trust;
the care and responsibility involved;
the time occupied in administering the trust;
the skill and ability displayed; and
the success achieved in the final result.

In Zaradic Estate, the executors argued that those criteria did not apply as the Will prescribed a fee of 10%. The executors claimed that the 10% set out in the Will was a fixed amount which could not be varied and which applied regardless of their conduct in administering the estate. The Court did not agree.

10% is a ceiling; not a given

The Court held that the deceased’s Will did not prescribe a specific amount of remuneration; rather, it states that the executors “may claim remuneration” in the amount of 10%. In other words, the Will allows the executors to make a claim for remuneration, but the amount is not fixed. The 10% allowed for in the deceased’s Will is a ceiling, not an entitlement as a matter of right. As such, the criteria set out above must be applied to the circumstances to determine appropriate compensation.

Executors receive no remuneration

In terms of the skill and ability displayed and the success achieved, the executors’ efforts were a “dismal failure.” Their attempt to sell the deceased’s home at roughly half the market value to their daughter, their loan to her from the estate, and the fact that the sole beneficiary was forced to commence legal action to prevent the sale were significant factors in relation to the fee claimed. The actions of the executors were an egregious breach of their fiduciary duty. If they had been successful, the beneficiary would have been swindled out of 50% of the estate’s value, and the executor’s daughter, their only child, would have profited. This was not a situation where the executors acted honestly and reasonably, and ought to be excused for their breach of trust. In the Court’s view, the actions of the executors were sufficiently egregious to disentitle them to any fee. The executors were also denied a large portion of the legal fees claimed and further ordered to pay back unauthorized expenses they claimed from the estate, including half of the $11,525.01 to cover the cost of an all-expenses-paid trip by both of them to deliver Mr. Zaradic’s ashes to Croatia (something his Will did not specifically provide for; and there was no need for both executors to personally accompany the ashes to Croatia to make these arrangements).

BC Executor’s Fees and Estate Administration

A BC executor should not presume to be entitled to remuneration for their work in administering an estate. Egregious misconduct and breach of fiduciary duty may disentitle an executor to any fees, regardless of the time spent.

If you have any question about executing an estate, our team of estate lawyers are here to help.