Duthie v Gallagher & Duthie, 1930 CanLII 306 (BC SC)

Fisher, J. - #

The plaintiffs, who are beneficiaries under the will of William Duthie, deceased, complain, inter alia, of a breach of trust on the part of the defendants as executors and trustees under the will in omitting to sell the testamentary property when it might have been sold at a good price and retaining it and paying taxes thereon for a while until part of it (some eleven acres) was finally lost at a tax sale and the rest or the portion thereof unsold has become so depreciated in value that the estate, which was estimated to have had a net value of approximately, $21,000 at the time of the death of the testator in September, 1911, is now apparently at best little more than solvent. In reply the defendant Gallagher, who has been the active executor (the co-executor being now a man over 80 years of age), first calls attention to a fact which I think should be taken into consideration under the circumstances here where such a devastavit as aforesaid is alleged, viz., that since the death of the deceased, the plaintiffs, being the widow (who married again in 1912) and the children while infants, have lived rent free on the most salable part of the estate being one of the Burnaby properties consisting of about five acres and have also had certain rents from time to time therefrom. Attention has also been called to the fact admitted by the plaintiffs that the widow did not wish this part of the property sold and apparently the other plaintiffs since coming of age have all approved of the use being made of this portion of the estate though in the last paragraph of the will the testator directs that in the event of his wife marrying again his trustees should use the income for the benefit of the daughters (only).

Counsel on behalf of the plaintiffs contends that the executors should not have considered the widow as representing the children as well as herself as no guardian was appointed under the will. Under such circumstances however the mother being the natural guardian undoubtedly assumed to act for them and later on, in August, 1917, acting as their mother and next friend she gave specific instructions in writing to Mr. Findlay, who apparently on such instructions acted as solicitor on behalf of the children as well as for the mother in dealing with the executors and under the circumstances I would acquit the latter of any blame in recognizing the mother as representing the children. According to the evidence the property (most of which was Burnaby acreage) was at its peak in value about the time of the death of the testator who was apparently imbued with what would appear to have been the general feeling of optimism at that time for the said defendant. Gallagher, who drew the will, says that at the special request of the testator, a clause was added to the 4th paragraph stating his wishes that the real estate should not be sold unless the trustees should consider it necessary, the exact words of such 4th paragraph then being as hereinafter set out.

Before the war some other property in the neighbourhood, better situated however, as to transportation than the property in question, was selling as high at $1,500 an acre, and higher prices were expected. During this period before the war the defendant Gallagher says that the trustees did not sell the property having in mind the wording of the will as set out below and not considering it necessary to do so. Gallagher admits, however, that he endeavoured to sell the land at $700 an acre and thought it ought to bring that. He states, however, and I accept his statement, that the widow objected to a sale at that price and thought it should bring $1,000 an acre and he did not blame her at that time in view of the optimism then prevailing. Counsel for the plaintiffs contends that the fact that the trustees during this period offered to sell at $700 an acre indicates that they considered it necessary to sell and that they should therefore be liable for a breach of trust in not selling when the only alternative was to let the taxes accumulate and borrow money to help the beneficiaries. It might perhaps be argued that as trustees the defendants should not have speculated at all on the future but in view of the express wishes of the testator and also those of his widow, I would say that there was no breach of trust at this period and one might also add that, if the prices had soared instead of falling, those who insisted on calling the omission to sell a breach of trust would undoubtedly have conceded later on that it was a most judicious breach of trust — if they had been reminded of an expression by Lindley, M.R., who is reported to have observed in Perrins v. Bellamy, [1899] 1 Ch. 797, at p. 798, that his old master the late Selwyn, L.J., used to say, “’The main duty of a trustee is to commit judicious breaches of trust.’”

When the war came prices fell and the property became practically unsalable for some time. Later on in 1920 things improved and, though no such prices were obtainable as had previously prevailed, it would appear that at least some of the property might have been sold then at what the defendant trustee Gallagher calls a good price. The property was not sold and here arises what would appear to be the gravamen of the complaint and in this connection the evidence of the said trustee, as given in his examination for discovery, may be considered: —

…When we got a chance to sell the property their solicitor objected time after time. The solicitor would go so far as to say that he was acting for the widow or her children. Q. That was Mr. . . .? A. Findlay. Q. Findlay? A. Yes. If it was to shorten it up any I would tell you a little about it. My co-trustee and I in 1920 disagreed because I wanted to appeal to the Court from (?) the sale. Q. “Why didn’t you appeal to the Court? A. Well, my trustee wouldn’t join me. Q. That wouldn’t prevent you from appealing? A. Well, Mr. Russell, the solicitor at that time, said it was bad and foolish for the trustees to disagree. If we could get on at all, to do so. I certainly would have sold the property in 1920 or 1921 when we had a good offer for it, if I could have done it personally. Q. But your co-executor objected? A. They had objected, or Mrs. Stevens objected, and her solicitor objected, and then when I took it up with him he wouldn’t quarrel with them. He said the will provided that the wishes of the dead was that it wouldn’t be done as long as we could prevent it. and if the widow wouldn’t agree he wouldn’t join me — couldn’t agree. Q. Now, we will go back to the will. It speaks for itself, and you prepared it? A. I did.

Q. There is nothing in that will that would indicate that you should obtain the consent of the beneficiaries, of the widow or anyone else, except Mr. Duthie and yourself, who were the only executors and trustees under the will, might sell the real and personal estate as soon after Mr. Duthie’s demise as you and Mr. Duthie might deem expedient. A. Just read the clause. Q. I am reading: ‘I direct my trustees to sell and convert into money such of my real and personal estate as soon after my demise as they may deem expedient and to invest the said sums of money thus arising in the names of my trustees in real estate or real estate securities, and to vary the investments from time to time if any there are of a like nature; it is my wishes that my real estate be not sold unless my trustees consider it necessary.’ Now, you thought it was necessary to sell; Mr. Duthie disagreed with you? A. Personally I thought it was necessary and advisable. Q. To sell? A. To sell in 1920, when we had a good offer. Q. But Mr. Duthie disagreed with you? A. Mr. Duthie only partly disagreed. He approved of the sale, but he disagreed with going to the Court to force the sale against the wishes of Mrs. Stevens and her solicitor. Q. That was Mr. Findlay? A. Mr. Findlay. Q. Yes? A. I did say that it would be wise, and tried to advise her to sell. Q. But it was owing to the objections of Mrs. Stevens — now Ida Stevens? A. And her solicitor. Q. And her solicitor, Mr. Findlay? A. She claimed he was acting for her and the children. Q. And that he wouldn’t allow you to sell? A. Oh, he disapproved of it. Q. Oh, he disapproved of the sale. A. Time and time again. When I advertised it for sale he disapproved of it before they were received, in writing. Q. Who? A. Mr. Findlay and the plaintiffs. Q. Well, was that disapproval in writing? A. Yes. Q. Or was it verbal? A. In writing, in writing. Q. In writing; who wrote the letters? A. Mr. Findlay. Q. Did Mrs. Stevens write any letters? A. No, not that I know of.

The plaintiff, Mrs. Stevens, on this point and also concerning the question of the sale of the home, says: —

Q. Yes, I see. Do you remember in 1916 the executors had an offer to sell part of the property for $3,500 and they took the matter up with you to see what you thought of it? A. That was a home — the home, and I was there, that I didn’t like to lose the home. Q. Well, they did make a proposition to you to sell at that time and you refused to accept it? A. The home, just the home, nothing else. Q. Well, whatever it was, you refused to accept the proposition they made? A. Well, the children were not able to look after themselves and I needed a home and they needed a home. Q. Mr. Findlay was acting for you at that time? A. Yes. Q. He was acting also for your children as well as yourself? A. Yes.

Q. Do you remember in 1920 the executors had another offer of $4,000 for the wild acreage? A. I don’t remember. Q. And you refused? A. I don’t remember that. I remember that Mr. Gallagher wrote and he said he could get $190 an acre — either $190 or $195. Q. For what? A. For part of the Bundy place. Q. Part of what? A. Well, I think he sold the Bundy place for — one part of the acreage for 300 an acre, something like that. It was $190 and I did refuse then. Q. Well, wait until we get that clear. I have it in my mind that there were two parcels, one with a five acre parcel where the home was — two houses? A. Yes. Q. The other was a 16 acre parcel that was some distance away. Now you say that Mr. Gallagher had an offer of $190 an acre for the 16 acre parcel? A. Yes, I think it was 11 acres. Q. Well, it was eleven ultimately? A. Yes. Q. Yes, but did you accept that offer? A. Well, there were no properties selling as low as that right then. Q. Well, you refused — you objected to that offer? A. I said it was pretty low. Q. Yes, and your solicitor objected to that offer, did he, Mr. Findlay? A. Well, I think he said it was rather low with what they had been paying.

From the above evidence it is apparent that in 1920 the trustees considered it necessary to sell but they did not do so owing to the objections which I find were made by the plaintiffs or their solicitor on their behalf. It is stoutly contended by Mr. Johnston of counsel for the plaintiffs that the trustees at this time should have either sold or being in a fiduciary position should have applied to the Court for directions in the matter. To me it does appear that when they considered it necessary in 1920 to sell and the beneficiaries objected the trustees should have sought the advice of the Court and I would hold that there was a breach of trust at this time for which the trustees might be personally liable. Counsel for the defendants however, rely on s. 88 of the Trustee Act, R.S.B.C. 1924, c. 262, and urge that in any case the defendants should be relieved wholly from personal liability. Said section reads as follows: —

If it appears to the Supreme Court or a Judge thereof that a trustee, however appointed, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the passing of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed such breach, then the Court or Judge may relieve the trustee either wholly or partly from personal liability for the same.

My view is that the trustee in the embarrassing circumstances in which they were placed, when the beneficiaries refused to consent to the sale, acted honestly and reasonably and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which they committed such breach. In such a case the said section of the Trustee Act enables me to relieve the trustees either wholly or partly from personal liability for same and I relieve them from such liability, except that I will not allow them costs of the action herein against the plaintiffs personally, and direct that the defendants shall have only their party and party costs herein out of the estate if and so far as the estate is solvent.

I might add that I have not overlooked consideration of the other grounds of complaint raised by the plaintiffs herein, but as to these I cannot see any liability on the part of the defendants.

I note that in his will the testator directed that so soon as his youngest daughter becomes twenty-one years of age the trustees should divide his estate equally between his wife and three daughters. The youngest daughter became twenty-one years of age in 1928. It may be that there is nothing to divide, but it would seem that the estate should now be wound up and if the parties cannot agree directions might be applied for. The accounts of the defendants as executors and trustees should be passed, and in the taking of the accounts the defendants should be allowed the amounts advanced personally by them or either of them without interest, and the monies borrowed and used on behalf of the estate and secured by promissory note signed by them. Monies paid out on account of taxes should be allowed. See Re Breckenridge, [1918] 3 W.W.R. 803, at p. 808 If any further directions are necessary, the matter can be spoken to.