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Case Comment Presentation - September 10, 2013
- 1. Reznik v. Matty, 2013 BCSC 1346 Case Comment By: Gordon Behan
- 2. Overview • We will: – Discuss the significance of the case; – Review the decision; and – Talk about the value of the case as a precedent. 2
- 3. Significance • Beneficiaries – Want the estate wrapped up so that they can receive funds. VS. • Executors – Must secure and sell assets and satisfy all liabilities before distributing funds. • Interim distribution ordered. 3
- 4. Background • Testator died on December 30, 2000. • Four children share residue equally. • One of the children is the executor. • Executor given power to retain. • Value of Estate: – $96,000 in liquid assets. – Shares in company: • Properties listed for $560,000. • $44,000 in cash. • Previous interim distribution of $25,000. 4
- 5. Relief Sought • The three other children sought an interim distribution: – $15,000 - $20,000. • Executor opposed on the basis that the Court does not have jurisdiction. 5
- 6. Jurisdiction • Inherent jurisdiction vs. General jurisdiction: – “… the “inherent” jurisdiction of the court is only a part or an aspect of its general jurisdiction. The general jurisdiction of the High Court as a superior court of record is, broadly speaking, unrestricted and unlimited in all matters of substantive law, both civil and criminal, except in so far as that has been taken away in unequivocal terms by statutory enactment.” • Court had general jurisdiction in this case. 6
- 7. Assent • “an acknowledgment by a personal representative that an asset is no longer required for the payment of the debt, funeral expenses or general legacies….” • Assent can be compelled if withheld without just cause. • Key question: is the executor protected from potential liability? 7
- 8. Important Factors • the Estate had significant assets, including liquid assets; • the Estate had few anticipated future costs; • the administration of the Estate had been underway for over 10 years; and • one beneficiary had immediate need for the money to support his family. 8
- 9. Result • Executor did not show just cause for refusing to distribute. • $10,000 to each residual beneficiary. • Costs against executor personally. 9
- 10. Precedential Value • Provides framework for seeking interim distribution. • Reznik is not an ordinary case. • Opens the door, but just slightly. 10
Editor's Notes
- I will be presenting on Reznik and Matty, which a recent decision of the British Columbia Supreme Court. Throughout my presentation, I will refer to the case as “Reznik”. Just a note, this case was included in the CLE Civil Digest that went out today. You may have encountered the case through that means or by some other means.
- I will start by discussing the significance of the case. I will then review facts and law that supported the judge’s decision. This will be the meat of the presentation and include discussions of the court’s jurisdiction and the concept of assent. I will then discuss the value of this case as a precedent.
- I want to talk a little bit about the significance of this case. The question of whether an interim distribution of estate assets can be made arises fairly often. There is tension between beneficiaries who want to be paid out as soon as possible and the executor who needs time to secure and sell assets and satisfy all liabilities before distributing estate funds. As an articling student, I was tasked with searching Quicklaw and Westlaw and other resources for any case where an interim distribution has occurred. Of course, I was not able to find such a case because Reznik is the first British Columbia case where an interim distribution has been ordered. This is significant because it may open to door for other beneficiaries to seek an interim distributions. It will be a lawyer’s framework when evaluating these types of issues. We will talk more about this later.
- By way of background, the testator died on December 30, 2000, which was approximately 12 years before this petition proceeding was heard. Under the terms of the Will, the Testator’s four children share equally in the residue of the Estate. In other words, no child is favoured over another. Chad Matty, who is one of the Testator’s children, was appointed executor of the Estate and has obviously taken on that responsibility. Under the terms of the Will, the executor was given the discretion to retain “any portion of my estate in the form it may be at my death… for such length of time as my Trustee shall deem advisable”. The Estate consisted of the following assets: $96,000 in liquid assets and shares in a company that owned properties listed for $560,000 and had $44,000 in cash. The executor had made a previous interim distribution (about 3 years earlier) of $25,000.
- Three children (all of the children with the exception of the executor) petitioned the court to order the executor to distribute $15,000 to $20,000 to each of them. This distribution would, of course, include the executor. The petitioners argued that the executor’s year had long past and therefore there is no reason why some of the Estate’s liquid assets could not be distributed. The executor opposed the petition. Although the judgment does not state why the executor did not consent to distributing, the legal reason that is generally given is that if the executor makes a distribution and there are insufficient assets in the Estate to satisfy all future liabilities, the executor may be personally liable. While I cannot comment on this specific cases, there are other potential reasons why an executor might oppose such a petition: for example, in estate cases, we know that emotions can run high. The executor argued that if the petitioners did not agree with the executor’s position, the correct remedy to pursue was removal of the executor.
- The petitioners argued that the court could exercise its inherent jurisdiction to grant the relief they sought. Justice Funt held that inherent jurisdiction is only part of the court’s broader general jurisdiction. He then quoted from an article by I.H. Jacob, which explained the distinction as follows: QUOTE. So, what does that mean? It means that while the court’s inherent jurisdiction may not have been sufficient to grant an interim distribution in this case, the Supreme Court has jurisdiction to do justice between the parties, unless that jurisdiction has been taken away by statute. In this case, Justice Funt held that the Court retained this jurisdiction. I want to point out at this stage that this discussion of inherent vs. general jurisdiction may be applicable in other contexts. If you are looking to give a judge power to award a certain remedy, this decision as it relates to the general jurisdiction of the court may be useful.
- Okay, so now we know that the court has to jurisdiction to adjudicate this petition. Where does this prayer for relief fit within the legal framework? How will the court evaluate the strength of the case? Justice Funt invoked the concept of asset, which 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….” The court has the ability to compel a personal representative (in this case, the executor) to assent where assent is withheld without just case. In other words, the court can compel the executor to acknowledge that an asset is no longer required for the payment of the debt, funeral expenses or general legacies. Well, if that’s the case, the asset should be distributed. After all, an executor has a duty to settle the affairs of the estate and to distribute the estate funds. Justice Funt held that, even though the Will gave the executor the power to retain the assets for such length of time as advisable, “a power to retain an asset does not override the executor’s duty to settle the affairs of the estate and to distribute”. In other words, Justice Funt resolved the apparent conflict between the duty to distribute and the power to retain in favour of distributing. The critical question for Justice Funt was whether the executor was protected from potential liability. We know that if an executor makes a distribution and there are not sufficient assets in the Estate to satisfy all future liabilities, the executor may be personally liable. Can you imagine a situation where the court ordered an executor to distribute and it turned out that there were not sufficient assets in the estate to satisfy all future liabilities? This absolutely cannot happen. Therefore, the court’s answer to the question “is the executor protected from potential liability?” must be yes.
- So in order to answer the question of whether consent should be compelled, Justice Funt put stock in the following facts: the Estate had significant assets, including liquid assets – the Estate consisted of $96,000 in cash and shares in a company that owned properties listed for sale for $560,000 in total and which company also had $44,000 in cash. the Estate had few anticipated future costs – Chartered Accountants had prepared various statements which confirmed that the Estate had few outstanding or anticipated costs. the administration of the Estate had been underway for over 10 years –This is an important factor because an executor must not unreasonably delay in getting in assets and settling the affairs of the estate. Again, this is related to the executor’s duty to distribute. one beneficiary had immediate need for the money to support his family – this factor (and these types of factors generally) may make a case for an interim distribution more compelling.
- Justice Funt held that the executor did not demonstrate just cause for refusing to distribute the $15,000 to $20,000 to each beneficiary that was sought in the petition. Nevertheless, a conservative approach was taken. Justice Funt held that, in the case at bar, $40,000 total, which is $10,000 to each residual beneficiary, would leave the Estate with sufficient liquidity. Although reasons are not given, costs were also awarded against the executor personally. This is the court showing its disapproval with the executor’s defending this petition. As a practice tip, one of my colleagues suggested that if she was representing the beneficiaries in this case, she would have asked for the costs against the executor to be paid out of the distribution to the executor.
- As we now know, a British Columbia judge has never adjudicated an application for an interim distribution (or at the least never written reasons on such an application). As a result, when you are advising an executor on whether to make an interim distribution, considering whether to apply for an interim distribution or strategizing about how to defend an application, Reznik will be your framework. To summarize, you will ask yourself whether the executor is unjustly withholding assent and, relatedly, whether, if assent is compelled, the executor is protected from potential liability. From the perspective of someone seeking an interim distribution, Reznik sets a high standard. It is not a usual estate case because it has extraordinary facts: The administration had taken over 10 years, significant assets remained in the estate, and the future liabilities of the estate were predictable and measureable. The court could be sure that the assets were significantly more than the potential liabilities. Put briefly, Reznik opens the door to beneficiaries seeking interim distributions, but only slightly.
- I am happy to answer any questions.