Saskatchewan Estate Litigation Update: Choquette v Viczko, 2021 SKQB 167

The recent decision in Choquette v Viczko, 2021 SKQB 167, offers a new interpretation of s. 50.5 of the Administration of Estates Act (“Act”).

Background:

Under s. 50.5 of the Act, if an executor sells land to which a beneficiary is beneficially entitled, the executor requires the consent of that beneficiary. The provision reads as follows:

50.5(1) The executor or administrator shall not sell real property for the sole purpose of distributing the estate among the persons beneficially entitled to it unless those persons concur in the sale.

Facts in Choquette v Viczko

The factual background in Choquette may be summarized as follows:

  1. Joseph Viczko died on September 10, 2011. Joseph had three children, namely, Ms. Choquette, Donna Boots and David Viczko;
  2. Joseph had been a farmer. His will directed that it was his “intention to sell the W1/2 12‑39‑27 W2, or any other farm land that [he owned] while I am living and distribute the proceeds of sale equally between my daughters”. The will further provided that if, at his death, Joseph had not sold the farmland, then it “shall be sold by my Trustee and the proceeds divided equally between my daughters”;
  3. At the time of his death, Joseph had not sold the west half of section 12, and so it was left to be distributed in accordance with his will. Ms. Boots was named as executor under the will;
  4. In 2012, she sold the land to her brother, David Viczko, and his spouse, Jennifer Viczko;
  5. In 2013, Ms. Choquette commenced an action seeking to set aside the sale and transfer. In her statement of claim she identified two grounds. Among her objections, was the assertion that her consent to the sale was required because of s. 50.5(1) of the Administration of Estates Act.
Queen’s Bench Ruling in Choquette v Viczko:

One issue that Choquette considered was this: who qualifies as a  beneficiary whose consent to the sale of the land is required under s. 50.5 of the Act?

Choquette clarified that not every sale of estate land will trigger the need for s. 50.5 consents from Estate beneficiaries.

For example, Choquette said that if the Will is such that the beneficiaries of the Estate are only left the proceeds of the sale of the land (but not given a right to go on title to the land itself), then the executors need not obtain consent.

The Court in Choquette reasoned as follows:

23      This operation of s. 50.4 is consistent with the overall approach of the Legislature to wills and estates. That approach is to accommodate, where possible, the implementation of a testator’s final testamentary wishes. Reading “the persons beneficially entitled to it” to mean “the persons beneficially entitled to the real property” is consistent with that approach. I conclude that “the persons beneficially entitled to it” in s. 50.5(1) means “the persons beneficially entitled to the real property”.

24      Therefore, s. 50.5(1) refers to persons who are beneficially entitled to the real property that is proposed to be sold. Here, Ms. Choquette is not such a person. Rather, she is beneficially entitled to a portion of the proceeds of the sale of the real property. Therefore, the answer to this question is “no”. Ms. Choquette is not a beneficiary whose consent to the sale of the land is required under s. 50.5 of The Administration of Estates Act.

This has practical implications for many executors. Many wills say that the Estate is to be sold (liquidated) and the proceeds divided between the beneficiaries. In such case, the names of beneficiaries are not actually going on title to the land. Rather, the beneficiaries will later get a sum of cash (representing the sale proceeds).

Choquette also declared that where is a direction in the Will to sell land, and distribute the proceeds, s. 50.5 simply does not apply to that situation. That is because the terms of the Will already provide sufficient authority for the Executor to sell Estate land:

27             Put another way, s. 50.5 is an enabling provision, not a restricting provision. It enables an executor to sell real estate where the executor is not otherwise empowered to do so. Here, where the executor was expressly empowered by the testator to sell the land, there was no need for the executor to resort to s. 50.5 for authority to do so.

36      The question that I am considering here asks whether the specific direction given in the will of the deceased, to sell the land and distribute the proceeds thereof, is paramount to the provisions of the Act (specifically s. 50.5). The answer effectively is “yes”, but the more precise answer is that, because of the specific direction given in the will, the provisions of s. 50.5 have no application. It is not that both the will and s. 50.5 apply to the circumstances, with the direction in the will being paramount. Rather, because of the direction in the will s. 50.5 of the Act does not apply to the circumstances at all.

The court has the ability to retroactively approve a sale:

Choquette also affirmed that the court has the ability to retroactively approve a sale which occurred without beneficiary approval. The court will look at whether the sale was appropriate (i.e. is there evidence it was sold for fair market value? Would it serve no purpose to re-open the sale, causing delay or expense).

If the sale was appropriate, then the court can “cure” the prior lack of beneficiary consent.

We find the below in Choquette:

39      Section 50.5(4)(b) refers to court approval of a sale where a beneficiary does not concur in the proposed sale. Here, the sale occurred years ago. The sale to the Viczkos is not a proposed sale. What is sought is retroactive approval of the sale. In the circumstances of this matter, it is appropriate to approve the sale retroactively. In so saying, I have reference to the guidance provided to the court, in s. 50.5(5), when considering a request to approve a sale:

(5) On application pursuant to subsection (4), the court may make an order approving the sale of the real property if the court is satisfied that it is in the interest and to the advantage of the estate of the deceased and the persons beneficially interested in it.

(emphasis added)

Leave to appeal:

The unsuccessful party in Choquette sought  an order extending the time within which to appeal the Queen’s Bench decision. The Court of Appeal did not give her permission to appeal. In large part, the Court of Appeal found that there was no error with the underlying conclusion that the sale should be approved as reasonable, in any event.

However, the Court of Appeal did suggest that Choquette’s interpretation of s. 50.5 may one day be revisited (and thus is not yet cemented in stone):

[36]           If the Chambers judge’s decision to dismiss Ms. Choquette’s claim rested solely on his analysis in relation to these three questions, I would have found that there was an arguable issue raised by her appeal and would also have been inclined to grant Ms. Choquette an extension of time to appeal, even in the face of her significant delay in making her application. The conclusions reached by the Chambers judge involve determinations of questions of law, largely turning on the proper interpretation of the Act. In the course of his analysis, he acknowledged the existence of ambiguity in the meaning of several of the key provisions. On several key issues, the Chambers judge referred only to decisions of judges of the Court of Queen’s Bench. In this regard, on the question as to whether s. 50.5(1) is applicable when a will gives an executor a right of appeal was raised, but left undecided, in Viczko CA. Moreover, although the Chambers judge supported his conclusion with reference to several decisions from the Court of Queen’s Bench, he was required to distinguish Tomochko Estate v Wilchuk2017 SKQB 381, 34 ETR (4th) 283, and Holter v Holter2019 SKQB 102. Regardless of whether the distinctions he offered are sound, it is at least arguable that s. 50.5(1) should be interpreted as applying even when a will provides for a right of sale.

Choquette v Viczko, 2022 SKCA 11

Thus, it is very possible that the proper interpretation of s. 50.5 may continue to be litigated in Saskatchewan court, until the Court of Appeal addresses this specific issue.

The law in light of Choquette

For now, as Choquette was not overturned on appeal, the law of Saskatchewan is currently set out below:

  1. Where a person is merely beneficially entitled to a portion of the proceeds of the saleof the real property, but not the land itself, s. 50.5 does not apply (Choquette at para 24);
  2. Where the executor was expressly empowered by the testator to sell the land, there was no need for the executor to resort to  50.5for authority to do so” (Choquette at para 27).

Thus, some executors may find their task simplified, when they go to sell Estate land.

However, executors should still, if possible, attempt to obtain beneficiary approval to sales of Estate land. While this consent may not be strictly legally required under s. 50.5, getting advance consent can reduce headaches later. That is, a beneficiary could still later complain that land (in whose proceeds they have an interest) was sold for undervalue. Getting prior approval from beneficiaries, is a means to avoid any later complaints.

 

Contacting a Lawyer on this Subject

James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

Read more on our blog.

The Saskatchewan Estate Law blog is dedicated to providing practical, real-world information on Estate Law issues that affect Saskatchewan residents. The blog is written by RS lawyer, James Steele, whose practice focuses on estate litigation.

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Who Approves Compensation for the Executors?

Typically, executor compensation will be governed in one of three ways:

  1. By a specific term in the Will, setting out a compensation percentage (these terms rarely exist however);
  2. By the agreement of the beneficiary (this is most common)
  3. If the beneficiary and executor do not agree, by a court order.

The vast majority of estates see beneficiaries consent to the compensation amount requested by the executor. The executor will first provide an accounting which sets out all of the transactions of the estate, so the beneficiaries can make sure they have no concerns. The executors will then often ask for a sum for compensation, and for their out of pocket expenses. Often, the beneficiaries will agree, and sign a consent.   

However, sometimes the beneficiaries feel that the compensation is too high for the work actually done. Or sometimes, there are minor (children) beneficiaries who are unable to provide capacitated consent. In these situations, the executor will need to go to court to seek court approval for their compensation. This approval should be given before the executor actually pays themselves anything.

How will the court fix the appropriate compensation:

There has grown to be a “rule of thumb” that an executor will receive a fee of 5% of the estate, as compensation for their work.

However, in estates which are very large, or, which were not specially complicated, courts routinely reduce compensation to below 5%. After all, 5% of a $2 million estate could be a huge amount of money, which may be too much compensation if the executor only dealt with a straightforward sale of farmland (often assisted by a lawyer).

In terms of the considerations that a court would examine, they include:

  1. The size of the estate;
  2. The care and responsibility required to administer the estate;
  3. The time occupied by the executor;
  4. The skill and ability displayed; and
  5. The success in administering the estate.

In short, before any executor “pays themselves” any fair compensation, be sure to first get written consent to the compensation from the affected beneficiaries. The last thing you want is to pay yourself a fee, and only then find there is a dispute, and perhaps you may even need to pay some of the money back to the estate.

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