David Reese Davis (Defendant) Appellant;
and
Ella W. Auld and others (Plaintiffs) Respondents
1938: February 18, 21; 1938: April 26.
Present:—Duff C.J. and Crocket, Davis, Kerwin and Hudson JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ALBERTA
Executors and Administrators—Action against administrator of deceased's estate for loss alleged to have been caused by failure to realize upon assets within reasonable time—Long delay, through settling amount of succession duties, between date of fiat for grant and actual issue, of letters of administration—Depreciation in value of assets—Liability of administrator.
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The appeal was from the judgment of the Appellate Division of the Supreme Court of Alberta, [1937] 3 W.W.R. 368, which, by a majority, reversing the judgment of Ives J., held the defendant (the present appellant), to whom had been granted letters of administration of a deceased's estate, liable, in an action brought by certain of deceased's next of kin to recover for loss alleged to have been caused by defendant's failure to realize within a reasonable time upon assets of the estate.
The deceased died, intestate, on June 15, 1929. Defendant applied for letters of administration on November 28, 1929. The judge's fiat for issue of 'grant was made on January 30, 1930. A lengthy delay occurred in settling the amount of succession duties, and, in consequence (by reason of the Rules of Court and the Succession Duties Act, Alta.), letters of administration (which recited the date of grant as of January 30, 1930) were not issued until November 6, 1931. The case was dealt with throughout on the assumption that the loss complained of could not be said to have been attributable to acts or omissions of defendant after the last mentioned date.
Held, that defendant's appeal be allowed and the judgment at trial (dismissing the action) be restored.
Per Duff C.J., Davis and Hudson JJ.: The fiat for the issue of grant of administration did not constitute the grant; defendant did not become an administrator until the actual issue of letters of administration on November 6, 1931; and he was not chargeable as administrator for anything that occurred prior to that date. It was difficult to find any principle on which he could be charged with liability as a trustee prior to that date (moreover, it appeared that plaintiffs were aware of the situation; also under the Judicature Act, Alta., plaintiffs had a right to have a public administrator appointed if they so desired); at any rate, that issue was not open under the pleadings, nor was it a case in which a court of appeal should now order an amendment.
Duff C.J. further pointed out obstacles or difficulties which stood in the way of earlier realization, as going to show that the loss complained of was not due to any neglect of defendant. He agreed with the trial Judge's finding that, in all the circumstances, no lack of due diligence could be ascribed to defendant in respect of the delay in the payment of succession duties.
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Per Crocket and Kerwin. JJ.: The plaintiffs' claim, as set forth in their pleadings and as developed at the trial, was against defendant as administrator and in no other capacity and on no other basis. Even assuming that the assets in question were vested in defendant by virtue of the fiat, he could not, in view of the terms of the Succession Duties Act, deal with those assets until the succession duties were arranged. There was (agreeing with the trial Judge's finding) no reason to attach any censure for the delay between the application for letters of administration on November 28, 1929, and the issue thereof on November 6, 1931.
APPEAL by the defendant from the judgment of the Appellate Division of the Supreme Court of Alberta, which, by a majority, reversing the judgment of Ives J. at trial, held that the plaintiffs were entitled to recover against the defendant for loss alleged to have been caused by defendant's failure to realize within a reasonable time upon assets of the estate in question.
The estate was that of John Davis, deceased, who died, intestate, on June 15, 1929, at Vegreville, in the Province of Alberta, which was his fixed place of abode at the time of his death. The defendant was a brother of the deceased. The deceased and defendant had large holdings in a grain company which they conducted, the defendant being the largest shareholder in the company. The chief assets of the deceased's estate, and about which the present litigation was mainly concerned, were 98 shares in the said company and a debt owing to deceased by that company.
Defendant applied for letters of administration to the said estate on November 28, 1929. The judge's fiat for issue of the grant was made on January 30, 1930. A lengthy delay occurred in settling the amount of succession duties, and, in consequence (by reason of the Rules of Court and the Succession Duties Act, Alta.), letters of administration (which recited the date of grant as of January 30, 1930) were not issued until November 6, 1931. In the meantime there had been a depreciation in the value of the estate's a;ssets. The plaintiffs, who were entitled as next of kin to share in the estate, brought the action (which was begun in September, 1934) to recover for the loss, alleging that it was caused by defendant's failure to realize upon the assets of the estate within a reasonable time.
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The trial Judge, Ives J., dismissed the action. (His judgment provided for relieving defendant as administrator and appointing another administrator, if desired, owing to clash of interests).
On appeal, the Appellate Division of the Supreme Court of Alberta (McGillivray J.A. dissenting) gave judgment for the plaintiffs, holding that defendant should be personally liable for the amount of the debt (from said company to deceased) at the time of deceased's death, with interest, (credit being given for the amounts paid on account), and that plaintiffs recover from him their share thereof, and that plaintiffs recover from defendant their share of the value of the 98 shares held by deceased in the said company, such value to be ascertained as of June 15, 1930, being one year after the deceased's death.
The defendant appealed to this Court. By the judgment now reported, the appeal was allowed and the judgment of the trial Judge restored, the respondents to pay to the appellant the costs of the appeals to the Appellate Division and to this Court.
C. H. Locke K.C. for the appellant.
G. D. Noble for the respondent.
THE CHIEF JUSTICE.—I agree with the conclusion as well as with the reasoning of my brother Hudson, but I desire to emphasize two findings of the learned trial Judge.
First, he found in fact, as I understand his judgment, that any attempt to collect the claim of the estate against the Company before the sale of the Company's assets in the summer of 1930 would have been defeated by the assertion of the prior claim of the Bank and, consequently, that no loss accrued to the estate in consequence of the alleged neglect of duty under this head. I should add that, in my view, the probability is very high that any such attempt would have precipitated a liquidation and, among other undesirable results, would have extinguished the Company's shares as an asset of the estate.
Second, the learned trial Judge, in effect, found that in all the circumstances no lack of due diligence could be ascribed to the appellant in respect of the delay in the payment of succession duties. I agree with this finding.
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As regards the complaint respecting the failure to sell the shares, it should be remembered that the Company was a family company and it is altogether improbable, in view of rules 965 and 969 and section 15 of the Succession Duties Act, that any purchaser would have accepted a transfer of the shares before the issue of letters of administration. The circumstance that the Succession Duties Act was afterwards held to be ultra vires is really beside the point.
I have read with great care the very able judgment of the Chief Justice of Alberta, if I may without offence so describe it, but, with all the respect which every view of the Chief Justice commands, I have been forced to a different conclusion.
CROCKET J.—I am of opinion that this appeal should be allowed and the trial judgment restored with costs throughout for the reasons given by my brother Kerwin.
The judgment of Davis and Hudson JJ. was delivered by
HUDSON J.—This is an appeal from a judgment of the Appellate Division of the Supreme Court of Alberta which, by a majority, reversed the judgment delivered at the trial by Mr. Justice Ives in the trial division of the Supreme Court.
The respondents are next of kin of the late John Davis, deceased, and as such are entitled to a one-half interest in his estate. They brought this action against the appellant, alleging in their statement of claim, that by letters of administration dated 30th January, 1930, and issued out of the District Court of the District of Edmonton, the defendant was appointed administrator of the estate and effects of John Davis, deceased, who died intestate on or about the 15th May [June], 1929, that they had repeatedly requested the defendant to realize on certain assets of the said estate but defendant had refused and neglected to do so, and that he had failed and neglected to take reasonable and proper measures to obtain possession of outstanding estate property and to realize on same,
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and that meanwhile, by reason of such failure, the assets had seriously depreciated in value and the estate had suffered heavy loss; further, that the appellant's personal interests were inconsistent and conflicted with his duty as administrator; and claimed an accounting and the removal of the appellant from his administration.
The appellant in his statement of defence, besides making denials of charges in the statement of claim, set up that the letters of administration were not issued to him until the 6th of November, 1931.
Subsequently to the commencement of the action, the appellant's accounts were passed by the proper court.
At the trial it was shown that the defendant had applied for letters of administration on the 28th of November, 1929, that on the 30th of January, 1930, the judge of the District Court had written on the application the words "Let administration issue as prayed" and signed the same, and that on the following day a letter was sent by the Acting Deputy Clerk of the Court to the defendant's solicitor in the following terms:
Re: Estate of John Davis, Deceased.
I beg to advise you that Fiat has been granted in this matter. I am now waiting for advice from the Collector of Succession Duties as to payment of his fees and when that arrives Letters will issue. The fees required by this Office will be $155 in addition to $2 each for any certified copies which you may require.
Following this, there was a lengthy delay in settling the amount of succession duties and these were not finally paid until the autumn of 1931, and the letters were not actually issued, i.e., delivered out as an operative instrument, until the 6th of November, 1931. When issued they recited:—
Be it known that on the 30th day of January, A.D. 1930, Letters of Administration of all and singular the property of John Davis, * * * were granted by the District Court of the District of Edmonton, * * * to David Reese Davis.
It was further proved that in the interval between the application for letters of administration and the actual issue there was a great depreciation in the value of the assets of the estate. Such assets as might come under consideration here consisted only of shares which the deceased had owned in a grain company and of a debt of some $14,910.35 owing to him by such company. It was also proved that the appellant in his own right was the
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largest shareholder and in effective control of the company during the interval referred to.
It was claimed on behalf of the respondents that the appellant could, by the exercise of diligence and acting with sole regard to the interests of the estate, have obtained payment of the debt referred to at an early date, and could have settled the succession duties and divided up the shares in the company among the beneficiaries at a time when they could have been disposed of to advantage.
Mr. Justice Ives, in giving judgment at the trial, stated:
I think that the whole difficulty perhaps might have been avoided if the defendant had realized at the time that he applied for administration, that the fact that all the assets of the estate were within the affairs or the property of the Grain Company, the Limited Company, and the future of the Limited Company was in any way uncertain, that it would have been very much better if he had not applied and had let someone else do so, because there has been no doubt about the clash of interests. On the other hand I cannot see from the evidence where one can reasonably say that with any other Administrator, or that by the conduct of this Administrator, any loss has been occasioned which would not have occurred inevitably at the time that he applied for Administration, and continuously thereafter until he put up his own money together with the proceeds of the sale of the elevators. The Bank of Montreal had a prior claim against the assets of this Company that would have defeated any pressure brought to bear by the Administrator to collect the $14,000 odd.
In consequence, he dismissed the action but directed that a new administrator should be appointed in the place of the appellant.
In the Court of Appeal, Chief Justice Harvey held:(1) that, in his opinion, there was no doubt that the appellant's duties arose at latest at the date of the grant, namely, the 30th of January, 1930;(2) that in any event the application for administration, not having been withdrawn but pursued to a grant, was sufficient to impose upon the appellant the obligation to use due diligence to acquire full status as administrator, that he had failed in this and that he had really constituted himself a trustee for the beneficiaries and had failed in his duties in that respect;(3) that the appellant was not entitled to any relief under the Trustee Act.
Mr. Justice Ford concurred generally in the reasons of the Chief Justice, talking the view, however, that it was unnecessary to express an opinion as to when the grant of letters of administration was made, because in his view
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of the facts the defendant assumed the trust of administering the estate on behalf of himself and the other next of kin.
Neither of these members of the court held that there was any liability on the appellant as an executor de son tort.
Mr. Justice McGillivray dissented from the opinion of the other members of the court and held that:(1) the respondents in their pleadings had sought to charge the appellant only as an administrator;(2) the appellant did not become an administrator until the letters of administration had actually been issued to him;(3) any possible liability of the appellant as an executor de son tort was not open to be considered under the pleadings;(4) the position taken by the majority of the court that the appellant had put himself in the place of a trustee was equally untenable, inasmuch as he was not so charged under the pleadings; moreover, that the beneficiaries must be presumed to have known that they could have had a public administrator appointed at any time on showing that the appellant's delay was to the disadvantage of those interested in the estate; and concluded that, in his opinion, the appeal should be dismissed with costs.
Nowhere is it charged that the appellant had been guilty of any fraud or malfeasance in connection with the estate.
The formal judgment of the Court of Appeal awarded the respondents a judgment for $5,318 and one-half of the value of the 98 shares in the grain company which had been owned by the deceased, such value to be determined as of the 15th June, 1930.
It was assumed below, and from what was said before us I assume, that the loss and damage complained of cannot be said to have been attributable to the acts or omissions of the administrator after the date on which the letters of administration were delivered to him.
I agree with Mr. Justice McGillivray in his view that the appellant did not become an administrator until the actual issue to him of the letters of administration, on the 6th of November, 1931.
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An administrator derives his authority entirely from the appointment of the court. Williams on Executors, page 272:—
With respect to an administrator, the general rule is, that a party entitled to administration can do nothing as administrator before letters of administration are granted to him; inasmuch as he derives his authority entirely from the appointment of the Court.
And also see 14 Halsbury, page 175.
In my opinion, the act of the judge of the district court in granting his fiat for the issue of the grant does not constitute the grant. That is something which is not complete until the letters have been signed and sealed by the clerk of the court and are capable of delivery. This is something which the clerk of the court had no right to do until he had, first, the fiat of the judge, and secondly, the certificate as required by the statute from the Provincial Treasurer fixing the amount of succession duties and that such succession duties have been paid or security furnished. The relevant statutes and rules are set out in the judgment of Mr. Justice McGillivray and need not now be repeated. I would, however, refer to Rule of Court 965 which provides:—
* * * No grant of probate or administration shall issue, nor shall any grant be resealed, until after the receipt by the clerk of a certificate from the Provincial Treasurer fixing the amount of duty to be paid in respect of the estate, if any, nor until such duty is paid or security furnished as required by law.
The letter of the clerk of the court to the appellant's solicitor, quoted above, states the position which was taken and which is in accord with the rules.
Until the letters had actually been issued, the appellant had no right,(1) to get from a bank any moneys which might have stood to the credit of the deceased;(2) to sue and get judgment against any debtor of the estate;(3) to sell and transfer any land of the deceased;(4) to legally get a company to transfer any shares or securities of such company to himself or to any beneficiary of the estate;(5) to legally divide any of the assets of the estate among beneficiaries.
For these reasons, it seems to me quite clear that the appellant was not chargeable as administrator for anything that occurred prior to the actual issue to him of the letters of administration.
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The appellant is not charged in the pleadings as an executor de son tort, and, indeed, such an allegation would have been inconsistent with the respondents' demand therein. What they charge the appellant with is failing to get in assets and account for them, not with having wrongfully got possession of assets.
An administrator, unlike an executor, cannot be sued for failing to take out letters of administration. In Williams on Executors, at page 275, it is stated: —
Though a next of kin may have intermeddled with the effects, and made himself liable as executor de son tort, he cannot be compelled by the Court to take upon himself the office of administrator.
This statement is fully borne out by the decision of the court in the case of Ackerley v. Oldham.
There is difficulty in finding any principle on which the appellant could be charged with liability as a trustee prior to his appointment as administrator. Moreover, it appears that the respondents were aware of the situation and, on the 13th of November, 1030, wrote a joint letter to the solicitor for the appellant in regard to the estate. On December 2nd following, the appellant, in person, replied to this letter, stating the general position, and further said:—
You must understand that I have not yet been formally appointed Administrator—as this could not be done until the amount of the Succession Duties was settled and that amount paid. When my appointment is made I will proceed to administer the estate in the manner required by law and then will be ready to consider any suggestions you or any of the heirs have to make regarding the administration.
Under the Judicature Act, R.S.A., 1922, chapter 72, sections 48 and 50, the respondents had a right to have a public administrator appointed if they so desired.
At any rate, this issue is not open under the pleadings, nor is it a case in which a court of appeal should now order an amendment. For these reasons, it is not necessary to consider whether or not the trial Judge was correct in his view that there was no loss attributable to the acts or omissions of the appellant, or whether or not the explanations of the appellant for the delay in securing the letters of administration were sufficient, and it is also unnecessary to consider whether or not it is a case in
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which the appellant should be relieved under the provisions of the Trustee Act.
The appeal should be allowed and the judgment at the trial restored, with costs of the appeals to the Appellate Division and to this Court.
KERWIN J.—This is an appeal from a decision of the Appellate Division of the Supreme Court of Alberta granting relief to the plaintiffs as next of kin of the late John Davis and thereby reversing the judgment at the trial, which had dismissed the action. The Chief Justice of Alberta states that "the claim is against the defendant as administrator," and Mr. Justice McGillivray, who dissented, agreed with this. Mr. Justice Ford concurred in the result arrived at by the Chief Justice "and, speaking generally, with his reasons therefor." But Mr. Justice Ford continued:-—
In the view I take of the case it is unnecessary to express an opinion as to when the "grant" of letters of administration was made, because in my view of the facts the defendant at a time anterior to his application for letters of administration, and certainly by the time he so applied, assumed the trust of administering the estate of the deceased on behalf of himself and the other next of kin. He did not become simply an executor de son tort with the coincident limited liability attachable thereto.
In my view, the claim of the plaintiffs, set forth in their statement of claim and as developed at the trial, is against the defendant as administrator and in no other capacity and on no other basis. John Davis died June 15, 1929. The defendant, who was a brother and the one best entitled to administer, applied to the proper District Court for a grant on November 28th, 1929. On January 30th, 1930, the Judge of the District Court endorsed the following fiat on the application:—
January 30, 1930.
Let administration issue as prayed,
Lucien Dubuc J.
We are not concerned with the power of the defendant after the granting of this fiat to bring an action with respect to the assets of the estate and as to whether it would be sufficient for him to produce at the trial of such an action the letters of administration issued after the
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commencement of the proceedings, but it is important to refer to no. 965 of the Rules of Court, which provides:—
* * * No grant of probate or administration shall issue, nor shall any grant be resealed, until after the receipt by the clerk of a certificate from the Provincial Treasurer fixing the amount of duty to be paid in respect of the estate, if any, nor until such duty is paid or security furnished as required by law.
It is shown in the evidence that considerable delay occurred in arranging the amount of the succession duties and that, as a result of this delay, letters of administration were not delivered until November 6th, 1931.
While the section of the Succession Duties Act in force at the time the application, for administration was made was ultimately declared ultra vires by the Privy Council, the Appellate Division of the Supreme Court of Alberta had declared it intra vires.
Restricting, therefore, the claim of the plaintiffs to a claim for loss and damage by reason of the failure of the defendant as an administrator to realize upon the debt owing by the D. R. Davis Grain Co. Ltd. to the deceased, and upon the deceased's shares in the capital stock of that company, it is apparent that no matter what the force and effect of the District Court Judge's fiat may be, the defendant could not, in view of the terms of the Succession Duties Act, deal with either of these assets, even if it be assumed that they were vested in him by virtue of the fiat, and on that short ground I would allow the appeal and dismiss the action.
It so happened that the defendant was also President and sole Manager of the D. R. Davis Grain Co. Ltd., but no claim is made against him in that capacity, and it cannot be said that any damage or loss ensued from the failure of the defendant as administrator to realize upon the assets mentioned when, until the succession duties were arranged, he was never in a position to do anything in connection with such assets.
Complaint was made of the long delay that occurred between the date of filing the application for a grant of administration and the actual delivery of the letters of administration to the defendant; but I agree with the finding of the trial Judge and "see no reason to attach any censure for the delay between the end of 1929 and November, 1931." It was admitted by counsel for the respond-
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ents that the District Court had power to make an order in a proper case, expediting the application for administration and directing that, in default of that order being obeyed, administration issue to someone else, and it is common ground that no such steps were taken.
It is unnecessary to consider whether the appellant could be held liable as a trustee from the time he filed his application for administration, as no such claim was made in the pleadings or advanced at the trial. I would allow the appeal and restore the judgment at the trial with costs throughout.
Appeal allowed with costs.
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