Nov 28th, 2017
Will you act as liquidator/trustee/executor of my estate?
Nov 9th, 2017
By Barry Landy
Nov 9th, 2017
By Barry Landy
Now, there is a seemingly innocent question that many of our readers will be faced with during their lifetimes. And what harm could there be in accepting? After, all you are probably feeling honoured, touched and humbled by being asked to help a good friend or loved one settle his or her affairs after death.
Ah, but if only it were so simple. The inter-generational transfer of wealth that occurs on death of a testator is often fraught with complications: disputes between siblings; disputes between surviving spouse and the siblings; disputes between second or third spouse and children of the first or second marriage; disputes regarding alleged exercise of undue influence; disputes regarding testamentary capacity and even disputes regarding testamentary intentions.
And where there are disputes, almost inevitably, there is litigation. And that means legal bills, often very substantial legal bills. So the question arises, where a liquidator/executor/trustee is sued in the course of his or her administration of the property of another, who pays the legal fees of that liquidator/executor/trustee?
The answer is not always simple.
The General Principle:
The general principle is that liquidators are reimbursed for legal fees incurred in connection with their mandate if the legal fees are incurred for the objective benefit of the estate. In order to determine whether legal fees were incurred by a particular liquidator for the objective benefit of the estate, it is necessary to evaluate for whom the fees were incurred, whether the liquidator was acting in good faith and reasonably, and whether the expenses themselves are reasonable in proportion to the interests at stake.
According to articles 789 and 1367 of the Civil Code of Quebec (“C.c.Q.”), the liquidator of an estate is entitled to be reimbursed for expenses incurred in fulfilling his mandate. This principle applies to legal fees incurred by the liquidator in connection with the execution of his or her mandate.
Article 87 of the Code of Civil Procedure requires liquidators acting in their capacity as liquidator to be represented before the courts by a lawyer in contentious proceedings.
The expenses incurred by a liquidator in the accomplishment of their mandate must be reasonable and the liquidator must be able to justify them in a satisfactory manner.
The requirement that the expenses incurred by the liquidator in the exercise of his functions must be reasonable prevents the liquidator from abusing his powers and incurring exaggerated expenses that are not proportional with the interests at stake.
According to case law concerning articles 789 and 1367 C.c.Q., there are several exceptions to the principle that the expenses incurred by the liquidator in the exercise of his functions ought to be reimbursed by the estate:
In Bell v Molson, a relatively recent decision, the Quebec Court of Appeal clarified existing jurisprudence and established that a liquidator is entitled to reimbursement of the legal fees incurred in the exercise of his function only insofar as (a) the legal fees are incurred in the objective interest of the estate and (b) the legal fees are reasonable.
According to the Court of Appeal in Bell v Molson, an important indication of whether the legal fees are incurred in the objective interest of the estate is whether the liquidator is sued in his personal capacity and whether the liquidator has in fact committed a fault in his administration of the estate and is seeking to defend himself against a claim in damages.
In Bell v Molson, the first instance judge found as a fact that the three liquidators and trustees were negligent in the administration of a trust patrimony for several reasons, the most important one being that they had invested a majority of the trust’s funds in shares of Nortel, GE and IBM, which later went down in value substantially. The liquidators were ordered to pay to the estate approximately $665,000 in damages. Despite this finding, the trial judge had ordered that the estate reimburse the liquidators for the legal fees they incurred to defend themselves, of approximately $3,000,000.
The Court of Appeal reversed the decision of the trial judge on the issue of the reimbursement of the legal fees incurred by the liquidators and, after analyzing the existing jurisprudence on this issue, noted that in all decisions where the legal fees of the liquidator were ordered to be reimbursed, the Court found that the liquidator has not committed an administrative fault (even if the liquidator was not successful on the merits of their legal proceedings) and that the conduct of the liquidator was useful for the estate:
 Ainsi, dans toutes les décisions citées de part et d’autre, on conclut à l’absence de faute administrative malgré un insuccès judiciaire et surtout, à une démarche utile et bénéfique au patrimoine administré, d’où l’admissibilité des frais judiciaires comme une dépense d’administration au sens de l’article 1367 C.c.Q.
In short, pursuant to Bell v Molson, a liquidator is entitled to reimbursement of their legal fees where the legal fees:
The same principle is applied in proceedings that involve conclusions seeking the removal of a liquidator rather than a condemnation to pay damages. In the Brassard c Brassard decision, the Court of Appeal ruled that a liquidator who successfully defended against an application seeking his removal should be reimbursed by the estate for the legal fees incurred for his defense:
 En fait, ce n’est que si l’administrateur est de mauvaise foi que l’on ne saurait permettre à celui-ci d’être remboursé des frais qu’il a engagés.
 Force est de constater qu’on ne saurait reprocher à l’appelant d’avoir agi de mauvaise foi; il s’est retrouvé, malgré lui, dans une affaire visant à obtenir sa destitution.
 Je suis donc d’avis que l’appelant a droit au remboursement des frais qu’il a encourus pour sa défense.
The Brassard decision was cited with approval in Hébert (Succession de), another Court of Appeal decision, and in Bell v Molson.
So here is a hypothetical:
A liquidator is sued based on allegations of conflict of interest. For example, the liquidator (one of three or five liquidators) is suggesting that a particular asset is not really owned by the estate, but owned by him or her personally and legal proceedings to remove the liquidator are instituted by the heirs.
Of course, while every case turns on its own facts, the liquidator’s legal fees in such a case likely must be reimbursed by the estate if (1) they are reasonable and (2) the Court dismisses the removal application and refuses to order the removal as a liquidator (in other words if the Court finds that the liquidator has not committed any faults justifying his removal).
For example, in the decision of the Court of Appeal in Deslongchamps v Deslongchamps, 2013 QCCA 495, the Court decided that a liquidator who defends a position that is favorable to himself in her capacity of heir to an estate can still be entitled to obtain reimbursement of her legal fees, insofar as the steps taken by the liquidator were useful for the liquidation of the estate.
The jurisprudence teaches that the best moment to determine what legal fees incurred by the liquidators ought to be reimbursed by the Estate is often at the end of the liquidation process or at the end of a trial on the merits because at that time all the facts will be known, evidence can be made concerning the legal fees incurred and the reasons for which they were incurred, and an informed decision can be made by the liquidators or by the Court concerning what portion of the legal fees ought to be reimbursed by the Estate.
Nevertheless, It is possible for an Estate to reimburse legal fees on an interim basis, with the proviso that, should subsequent facts make it clear that the reimbursement ought not to have been made, the liquidator who was reimbursed may have to repay the Estate as was decided by Justice Hélène Le Bel in Gold v Goldberg, 2016 QCCS 625
The take-away here is that agreeing to act as liquidator of an estate or administrator of the property of another is a delicate matter, involving serious potential exposure to significant legal risk and expense. Do I have to say it? Proceed with extreme caution.
 Articles 789 and 1367 C.c.Q.. M. Cantin Cumyn and M. Cumyn, L’administration du bien d’autrui, 2e e, Editions Yvon Blais, 2014, p. 175 at para. 186.
 Beaudin c Palin, REJB 2004-52686 (C.S.) at para. 5.
 Antoine Alwyn, « Les dépenses de la succession : quelles sont les règles? », Liquidation des successions, Collection Blais, vol. 24, 3e ed, 2016 EYB2016CBL97
 Ahern-Tisseyre c. Tisseyre, J.E. 2002-1252 (C.A.).
 Brassard c Brassard, 2009 QCCA 898.
 Bell v Molson, 2015 QCCA 583.
 2011 QCCA 1170 at para. 85.