Executor found liable for ducking her obligations

In the recent B.C. Court of Appeal decision in Wade v Duck, 2018 BCCA 176, the Court held the former personal representative of the deceased’s estate personally liable for the deterioration of estate property and jointly and severally liable for a loan paid in full by the estate.

Mr. Wade (the “Deceased”) and Ms. Duck were common-law spouses. The Deceased had two children from a previous relationship.

In 2005, the Deceased purchased a motorhome, financed in part through a conditional sales contract that provided the Deceased, his company, and Ms. Duck were joint purchasers of the motorhome, and jointly and severally liable for the sales contract obligations.

In 2011, the Deceased died. Under his Will, Ms. Duck was appointed executor. She obtained a grant of probate for his estate. As executor, Ms. Duck made 26 monthly payments for the motorhome from the company account. Estate funds were later used to pay the outstanding loan balance. Ms. Duck otherwise largely ignored the motorhome and it deteriorated. In 2012, Ms. Duck transferred the motorhome to a friend for no consideration.

In 2013, the Deceased’s daughter successfully sought the removal of Ms. Duck as executor for, among other things, intermingling estate assets with her own and was appointed personal representative of the estate. In 2017, the daughter brought an application to recover the funds that Ms. Duck had used to pay off the motorhome loan. She also sought to establish Ms. Duck’s liability for the loss of value in the motorhome.

The trial judge found that Ms. Duck was not liable to the estate for any part of the loan, or for the motorhome’s deterioration.

On appeal, the Court found the following:

1. the wording of the contract clearly fixed Ms. Duck with joint and several liability for the loan. Ms. Duck has signed the sales contract alongside Mr. Wade, making her jointly and severally liable to the bank for the motorhome loan;

2. the Deceased and his estate had paid the entirety of the motorhome loan. Therefore, Ms. Duck was liable to the estate for $61,785, which was 50% of the monies paid towards the loan out of the estate.[1]

3. the motorhome’s value at the time of the Deceased’s death was lost by Ms. Duck’s failure to exercise “reasonable prudence” in preserving the motorhome, and by her decision to transfer the motorhome for no consideration. Accordingly, Ms. Duck had breached her duty to maintain the motorhome and was personally liable for the loss. She was ordered to pay $30,000 to the estate, which is what she herself said it was worth at the time of the Deceased’s death.

The Court also considered that, while it could have reduced Ms. Duck’s liability for the motorhome payments to the extent that the Deceased’s estate still retained the value of the motorhome, Ms. Duck had removed the value of the motorhome from the estate altogether by giving it to a friend. In other words, Ms. Duck’s own failure to preserve the value of the motorhome meant that the Court could not reduce her liability for the motorhome payments at all.[2]

In total, the Court ordered $91,785 to be paid to estate from funds held in trust for Ms. Duck.

If you have questions about your obligations as the executor or administrator of an estate, one of the lawyers in our Wills, Estates + Trusts Practice Group would be pleased to assist.

 

[1] The Court applied the general rule that, where a surety pays more than its proportion of the debt of the principal, the surety is entitled to recover contribution from its fellow sureties.

[2] Had Ms. Duck adequately preserved the value of the motorhome (approximately $30,000) on behalf of the estate, the Court may have been willing to reduce Ms. Duck’s liability by the same amount.