2007 BCSC 952 Veitch Estate

Before: The Honourable Mr. Justice Kelleher

Reasons for Judgment

Counsel for the Petitioner:	Geoffrey W. White
Counsel for the Respondent, Scott McGregor Veitch:	Roger D. Lee
Counsel for the Respondent, Charmaine Lynn Veitch-Clayton:	Keith E. Clark
Date and Place of Hearing:	May 2, 3, 2007
	Vancouver, B.C.

[1] The petitioner, Kevin Veitch, is a beneficiary of the estate of his mother, Ruth Veitch, who died on November 23, 2003. His brother, Scott McGregor Veitch ("Scott Veitch"), is the executor of the estate. The petitioner seeks an order removing his brother as executor and appointing him instead. In the alternative, he seeks the appointment of an independent trust company or a lawyer as executor and trustee in substitute for Scott Veitch. In the further alternative, the petitioner seeks an order that Scott Veitch pass the accounts of the estate forthwith and an order directing how and when the assets of the estate be sold and distributed.

[2] The position of Scott Veitch is that the conditions necessary to justify his removal are not present. In the alternative, should he be removed, the court should appoint Charmaine Clayton, the sister of Scott Veitch and Kevin Veitch to replace Scott Veitch. Counsel for Scott Veitch advises that the materials necessary for the passing of accounts are being prepared and will be served on the other parties shortly. Finally, the position of Scott Veitch is that there have been negotiations to settle the distribution of the estate. If the court imposes a deadline for such negotiations, the executor should have a reasonable time to sell the assets so property listings are staggered and do not represent an apparent "distress" sale.

[3] Ruth Veitch died on November 23, 2003. She made a Will on January 19, 1984. It is a two-page Will with simple terms: she named her spouse as executor. He predeceased her. The alternative executor is her son Scott Veitch. The alternative executor to Scott is her daughter, Charmaine Clayton. Her son Kevin Veitch is the alternate executor to Charmaine Clayton. The Will provides for the estate to be divided equally among the three children, Scott Veitch, Kevin Veitch and Charmaine Clayton.

[4] Scott Veitch therefore became the executor. Probate was not granted until December 17, 2004.

[5] Although the Will is relatively simple, the estate is not. The value exceeds $5 million. The assets include:

(a) real estate consisting of 16 properties in Creston, B.C.;

(b) Veitch Realty Ltd. (the "Company"), an active Creston real estate company which itself owns two lots;

(d) other investments totalling $272,000; and

(e) a vehicle, equipment and personal possessions.

[6] The testatrix and her husband owned and operated Veitch Realty Ltd. in Creston. Mr. Veitch died in 1988. The testatrix continued to operate the business until her death in November 2003.

[7] Kevin Veitch and Scott Veitch were both involved in the family business. Kevin worked there as an agent from 1998 until a few years ago. In the early 2000's he began pursuing other interests including a degree at Royal Roads University. This did not require him to move away from Creston. He did the degree online and attended the University for short periods of residency.

[8] Kevin Veitch was paid commission on real estate listings. As well, he received $2,000 per month for the company's use of his real estate license.

[9] Scott Veitch originally pursued a career in real estate in Vancouver. He returned to Creston in 1993 to assist in the family business.

[10] In approximately 2001, Veitch Realty began to operate under Scott Veitch's broker's license rather than Kevin's license. Kevin was thereupon paid a reduced fee.

[11] When Mrs. Veitch died, Scott Veitch took over the management of the business.

[12] There was and is tension between Kevin Veitch and Scott Veitch. In late 2004, Kevin Veitch advised that he wished to return to work for the Company. Scott Veitch and Kevin Veitch were unable to agree to terms and conditions of employment. As a result, Kevin did not return to work. The Company then stopped paying him a monthly fee.

[13] When Kevin Veitch's real estate licence came up for renewal in 2005, Scott Veitch decided it was not appropriate that the Company pay the licensing fees any longer.

[14] Kevin Veitch has since relocated to Prince Edward Island. He deposed that he was "squeezed out" of the Company by Scott Veitch. Scott Veitch denies this characterization of what occurred.

[15] The powers of the executor are set out in the Will. In the fourth paragraph of the document, the testatrix gave all her estate to her executor and trustee:

4. To sell, call in and convert into money such part or parts thereof, upon such terms and in such manner as my Trustee(s) may decide upon, with power in his discretion to postpone the sale or conversion of any of the said assets, real or personal, as investments of my estate and to hold my said estate or the proceeds thereof as follows:

(a) to pay all my just debts, funeral and testamentary expenses;

(b) the rest and residue of my estate to be divided equally among my children, ... that they may share and share alike.

[16] The affidavits of Kevin Veitch and Scott Veitch are not consistent on several points. There are allegations of fact by Kevin Veitch which are denied by Scott Veitch. It is to be noted that Charmaine Clayton has deposed that she agrees with Scott Veitch's version of the facts.

[17] Kevin Veitch's complaints about Scott Veitch's conduct are:

1. That Scott Veitch is in a conflict of interest;

2. That Scott Veitch has taken personal advantage from the estate;

3. That Scott Veitch has endangered the value of the estate;

4. That Scott Veitch has not acted with the honesty and fidelity required of a fiduciary; and

5. Scott Veitch has failed to exhibit the skills required of a fiduciary, both in terms of specific acts and in failing to deal with estate assets within a reasonable period of time.

[18] The first matter to be considered is whether on the material before me, the evidence establishes that the executor should be removed.

[19] The principles in this regard are well-developed. In the first place, courts are reluctant to remove an estate trustee. That is because a priority is to respect the testator's decision to appoint that person. Thus, the Ontario Court of Appeal in Re Weil, [1961] O.R. 888, 30 D.L.R. (2d) 91 said:

It seems to me that such an interference with the discretion and choice of a person in preparing his last will and testament must be not only well justified but, as has been said before, must amount to a case of clear necessity.

See also Re Winter Estate (2001), 197 N.S.R. (2d) 385, 2001 NSSC 121 at para. 69, aff'd (2002), 202 N.S.R. (2d) 5, 2002 NSCA 23.

[20] Animosity or hostility between the executor and a beneficiary is not sufficient on its own to warrant removal of an executor: Letterstedt v. Broers (1884), 9 A.C. 371 at 389 (P.C.); Re Winter Estate, 2001 NSSC 121 at para. 25.

[21] The considerations for the court in a petition to remove a trustee remain those described by the Privy Council in Letterstedt v. Broers, supra, at 385-386:

... in cases of positive misconduct, Courts of Equity have no difficulty in interposing to remove trustees who have abused their trust; it is not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce the Courts of Equity to adopt such a course. But the acts or omissions must be such as to endanger the trust property or to show a want of honesty or a want of proper capacity to execute the duties, or a want of reasonable fidelity.

See also Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C.C.A.); Re Seaton Estate (2003), 188 B.C.A.C. 28, 2003 BCCA 555; Re Winter Estate, supra.

[22] The main guide in exercising the court’s discretion to remove trustees is the welfare of the beneficiaries: Letterstedt v. Broers, supra, at 387. It is not the interests of a particular beneficiary that are to be considered, but rather the benefit of the beneficiaries collectively: Conroy v. Stokes, supra, at 128; Re Winter Estate, 2001 NSSC 121 at para. 22.

[23] Scott Veitch relies on the decision in Re Adams Estate (1989), 62 D.L.R. (4th) 758 (B.C.C.A.) in support of his position that his failure to pass accounts is not a sufficient reason to remove him as executor, unless this failure is persisted in, and to argue that the fact that he is the most suitable person to act as administrator by virtue of his residence in and knowledge of Creston militates against removing him as executor.

[24] Kevin Veitch relies on the case of Hall (Public Trustee of) v. Hall (1983), 45 B.C.L.R. 154 (S.C.), as an example of how the restructuring of a business to the benefit of the executor and the detriment of the estate was found to be grounds for the removal of an executor, both because the executor was in a conflict of interest, and because his actions endangered the assets of the estate.

[25] Kevin Veitch's complaints can be summarized as follows:

1. He argues that Scott Veitch has run Veitch Realty in such a way that Kevin Veitch was prevented from working for the Company. Counsel argues that he attempted to impose unreasonable conditions of employment and that Scott Veitch has expanded his role to be the sole management of the company.

2. Scott Veitch has changed the real estate commission split between the Company and its sales agents in a way that personally benefits Scott Veitch.

3. Kevin Veitch argues that as executor, Scott Veitch should have sold the properties and distributed the proceeds before now.

4. There was a fire in early 2004, which damaged the offices of Veitch Realty. Scott Veitch made a decision to use the insurance proceeds to rebuild the office and added his own funds into the project. Kevin Veitch's complaint is that he has mixed his funds with those of the estate and that Scott Veitch has built an office which is extravagant.

[26] There is conflicting evidence with respect to many of these complaints. A determination of all of these issues would require either a full trial or at least cross-examination on the party's affidavits.

[27] However, there is one circumstance where the evidence before the court establishes that Scott Veitch has demonstrated a want of reasonable fidelity. I am satisfied that Scott Veitch was in a position of conflict and gained personally from the decisions that he made.

[28] This relates to the commission structure at Veitch Realty. At the time of the testatrix's death, real estate commissions by agents, including Scott Veitch, were split with the company on a 60/40 basis. That is, the agent received 60% of the commission and the company received 40%.

[29] Scott Veitch changed that. He deposed at paragraph 17 of his affidavit:

17. ...Veitch Realty's sales agents are compensated through a share of the gross sales commissions. At the time of my mother's death, Veitch split these commissions 60/40 in favour of the sales agent. Since that time, we have had difficulty retaining qualified sales staff, particularly after our office burned down in March 2004. In order to attract and retain effective sales agents, Veitch Realty now offers a 70/30 commission split with its agents, but only if they bring in commissions of $65,000 or more per year. As an active realtor, I qualify for this commission split if I reach this quota. I understand from speaking with other realtors in Creston that this is standard remuneration for the Creston marketplace and has been for some time.

[30] There are serious difficulties with this. First, and obviously, the change directly favours Scott Veitch and is at the expense of the company, and indirectly, the estate and beneficiaries. Second, the threshold of $65,000 means that Scott Veitch and his wife received the vast majority of the increased commission. Kevin Veitch deposes:

Scott claims that the change was made for all employees; however, the $65,000 threshold and reality of the allocation of listings in the office make it clear that he and his wife collected the vast majority of the benefit. In fact, the listing commissions show that as a result of the change, Scott and his wife received an extra $20,000 in 2004 and $42,000 in 2005. In contrast, the total extra amount to the entire remaining staff of four agents would be minimal - only two agents would reach as much as $75,000 per year which is just over the $65,000 threshold.

The increased commission is only for the portion of sales in excess of $65,000. Thus, no one else would benefit nearly as much as Scott Veitch and his wife.

[31] The timing of the implementation is not consistent with the rationale put forward by Scott Veitch. The payments go back to January 2004, before the fire took place. Moreover, the change was implemented in 2006, retroactive to January 2004. Finally, and curiously, this did not show as a liability of the company in the financial statements of 2004, 2005 or 2006.

[32] On the evidence, I conclude that the change was made to benefit Scott Veitch. There was only a minimal benefit to other agents. The ability of the Company to retain and attract agents could not be materially enhanced by this change.

[33] Moreover, there is no evidence of any agent resigning because of poor remuneration or of any specific inability of the Company to attract agents. Furthermore, the retroactive nature of those payments make the rationale particularly suspect.

[34] Counsel for Scott Veitch argues that a distinction must be made between the role of Scott Veitch as executor of the estate and his role as manager of Veitch Realty.

[35] However, Scott Veitch’s position as executor of the estate permits him to continue to delay distribution of the estate, including the distribution of the beneficiaries’ respective interests in Veitch Realty. His personal interest is therefore in direct conflict with the interests of the estate: his desire to maintain a comfortable lifestyle through his management of Veitch Realty so as to favour himself is in conflict with his duty to manage the business for the benefit of the estate, and with his duty to distribute the estate to the beneficiaries, which includes distributing to the other beneficiaries their respective interests in the Company.

[36] I agree with counsel for Scott Veitch that Mr. Veitch may benefit as an employee of Veitch Realty from decisions made as manager and that does not automatically lead to the conclusion that he is self-dealing as executor of the estate. But where, as here, a decision is made with significant benefit only to Scott Veitch and his wife, with no defensible rationale, the conclusion is inescapable that he is in a conflict of interest and should be removed as executor and trustee.

[37] The next question which arises is whom to appoint as executor and trustee in the place of Scott Veitch. Kevin Veitch's position is that he should be appointed in substitution for Scott Veitch. In the alternative, he argues that an independent trust company or lawyer should be appointed.

[38] The position of Scott Veitch is that in he event he is removed, Charmaine Clayton should be appointed.

[39] I have concluded that Charmaine Clayton should be appointed. There are several reasons for this conclusion.

[40] First, the Will contemplates Charmaine acting as executor if Scott Veitch is unwilling or unable to act. That in itself is a significant factor: Weinstein v. Weinstein (1996), 81 B.C.A.C. 282, 13 E.T.R. (2d) 227, B.C.J. No. 2061 (B.C.C.A.) at para. 13.

[41] Second, while there are accusations between Scott Veitch and Kevin Veitch about each other's conduct in this matter, no one has accused Charmaine Clayton of acting improperly. Unlike Scott Veitch, her personal situation does not appear to pose a conflict of interest with the estate.

[42] Third, both Scott Veitch and Charmaine Clayton, beneficiaries of two-thirds of the residue, vigorously oppose the appointment of Kevin Veitch. The appointment would likely lead to further conflict and delay.

[43] Fourth, it is not apparent that an independent trust company would be willing to take on the responsibility. CIBC Trust has advised Scott Veitch that it is not willing to take this on. Kevin Veitch has received similar notification from the BMO Trust Company.

[44] I conclude that Scott Veitch should be removed as executor and trustee and that Charmaine Clayton should be appointed in his place.

[45] This is an appropriate case for an award of costs in favour of the petitioner. If there is a dispute as to whether the costs should be payable by Scott Veitch or by the estate, it may be spoken to.

"The Honourable Mr. Justice Kelleher"

Citation:	*Veitch Estate,*
	2007 BCSC 952