BC Supreme Court removes executor who jeopardized estate assets and is in conflict of interest

The BC Supreme Court has ordered the removal of an executor who had put the estate assets at risk of diminishment and was in a conflict of interest, or at least a perceived conflict of interest.

In Rawji Estate (Re), 2023 BCSC 1652, Ghalib Rawji brought an application to remove his brother, Amman Rawji, as the executor of their deceased mother's estate. The deceased's husband, Nizarali Rwaji, supported Ghalib's application to remove Amman as executor. On the other hand, Ghalib and Amman's sister, Farheen Rawji, contended that Amman should remain as the executor of their mother's estate.

The BC Supreme Court noted that the relationship among the parties is acrimonious and underpinned by mistrust. The parties have commenced several legal proceedings against each other and filed certificates of pending litigations (CPL) on the properties at issue in the state, effectively halting its administration.

Ghalib and Nizar argued that Amman must be removed as executor because he was not neutral or even-handed towards Ghalib and, as such, did not satisfy the most basic requirements of an executor. They also asserted that Amman's actions to date as executor had put the estate assets at risk.

The parties brought the case to the BC Supreme Court, which ultimately ruled that Amman should be removed as estate executor. The court explained that the primary duty of an executor is to preserve the estate assets, pay the debts, and distribute the balance to the beneficiaries. An executor should not pick sides between beneficiaries and should be indifferent about how the estate will be divided. Additionally, the court noted that in deciding whether to remove a trustee, the court's central guidance must be the welfare of the beneficiaries.

The court emphasized that it has the jurisdiction to remove an executor when there is evidence the executor has acted in a manner that endangers the estate or has acted dishonestly without proper care or reasonable fidelity.

Interests of the beneficiaries

The court noted that Amman, as executor, commenced a claim against Ghalib on July 5, 2022, claiming damages for $22 million for the assets that Ghalib allegedly took from the deceased's assets or misused. Furthermore, on December 21, 2022, Amman, as executor and in his personal capacity, commenced a civil claim against Ghalib and Nizar, claiming that Ghali owes debts to their mother's estate for $27,000.

The court explained that Amman's hostility toward Ghalib was demonstrated by the size of the claim against Ghalib and the allegations contained within the July 2022 and December 2022 claims. The court found that these claims support the finding that Amman could not approach his role as executor of the estate in an impartial manner towards Ghalib. Although Amman said he would discontinue his will variation claim if he remained executor, the court believed that the allegations made in the claims provided evidence that he was not unbiased to all beneficiaries.

The court was concerned that if left as the executor, Amman would not act in a way that represented the interests of all of the beneficiaries fairly. The court found that the claims demonstrated that Amman could not be even-handed in administrating the estate toward Ghalib.

Conflict of interest

The court found several instances in which Amman was in, at least, a perceived conflict of interest between his personal capacity and his role as executor, disqualifying him as executor. The court said that by filing the December 2022 claim, Amman had put himself in a conflict of interest because he filed the claim in his personal capacity and as executor of the estate, seeking to vary the will.

The court also found that Amman was indebted to the estate. The court emphasized that if there is evidence that the administrator is a debtor of the estate but refuses to acknowledge the debt, the administrator is in a conflict of interest, which endangers the estate's assets.

Jeopardizing the estate assets

The court noted that the primary role of the executor of the estate is to preserve and protect the estate's assets for distribution. The court found that Amman's attempt to sell certain estate assets and the process he took to do so failed to maximize these assets and, consequently, placed the assets in jeopardy.

The court noted that he offered to sell an estate asset at below market value. He also refused to disclose the potential buyer's identity, which the court found troubling. The court said that the lack of transparency in how the potential sale was conducted was not in keeping with an executor's role as a fiduciary to the estate and beneficiaries.

Ultimately, the court found that Amman could not move the estate forward, given the animosity among the parties. If Amman was not removed, the court was concerned that the estate would be locked in intractable litigation for years.

Accordingly, the court concluded that Amman should be removed as the executor as he had not acted with detachment, even-handedness, transparency or without animosity. Moreover, given the mistrust between the parties and the likelihood that any of the proposed administrators would meet with fierce opposition from the other parties, the court found it appropriate for a professional trustee to be appointed.