Dallas Estate (Re), 2024 BCSC 213

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Dallas Estate (Re), 2024 BCSC 213 Date: 20240209 Docket: P211916 Registry: Vancouver In the Matter of the Estate of George Dennis Dallas, Deceased Before: The Honourable Justice Kirchner Reasons for Judgment Counsel for the Applicant in her capacity as Executor: H.H. Low, K.C. Counsel for the Applicant in her personal capacity: J.C. Bellamy Counsel for the Respondent: R.D. Lee Place and Date of Hearing: Vancouver, B.C. February 2, 2024 Place and Date of Judgment: Vancouver, B.C.

February 9, 2024 Introduction [ 1 ] This is an application under s. 86 of the Trustee Act, R.S.B.C. 1996, c. 464 seeking the Court’s direction on whether the executor, Dyona Dallas, may sell the estate’s interest in certain Bowen Island properties to herself at values determined by an independent appraisal in a process directed by the Court. Ms. Dallas is the daughter of the deceased, George Dallas. The application is opposed by Dean Dallas, who is Dyona’s brother and the deceased’s only other living child.

Dyona and Dean are the only beneficiaries under the will and they are to share equally in the distribution of the estate. Since both parties and the deceased share the same last name, I propose to refer to them by their first names and intend no disrespect. [ 2 ] For the reasons that follow, I would dismiss the application and award costs to Dean against Dyona in her personal capacity. Background [ 3 ] The properties in question are located on the east side of Bowen Island. Two of them are waterfront and contiguous to one another. Two others sit to the west but are contiguous with the two waterfront properties.

One of the waterfront properties is jointly owned with a person who is neither a family member nor a party to these proceedings. That property is only accessible by boat or by land through one of the other contiguous properties. [ 4 ] Four other properties sit to the north of the first four properties. These are contiguous to one another but they are separated from the waterfront collection of properties. They are wholly owned by a company called Optimist Resources Ltd. The estate owns 80% of the shares in Optimist and Dean owns 20%. [ 5 ] George Dallas died in 2019.

Dyona has been administering the estate as executor but the administration has stalled in the past year or so due to a disagreement between Dyona and Dean over how the properties should be dealt with. [ 6 ] I do not propose to review the history of that dispute or how the parties’ positions have evolved. At present, it comes down to this. Dyona would like to buy one or more of the properties from the estate.

She proposes that they be independently appraised under a joint appraisal and in a process directed by the court. (The properties were appraised in 2019 and 2021 but those appraisals are now out of date.) The objective of the proposed new appraisal would be to ascertain the fair market value of the properties at their highest and best use, both individually and as an assembly. Dyona further proposes that the properties then be offered for sale to her and Dean as the beneficiaries before listing them for sale on the open market.

She seeks a direction that she, as executor, be given leave of the Court to sell the property to whichever of her or Dean makes the highest bid, provided the bid is no less than the appraised value. [ 7 ] Dean opposes the application, the proposed bidding process, and any sale of the properties to Dyona. He does not wish to buy any of the properties and wants them listed for sale on the open market. In his view, the properties should be sold as an assembly as he believes that will fetch the best overall price.

While he draws that opinion from comments made about the properties in the earlier two appraisals, his counsel concedes that the Court cannot assess on the evidence in this application whether a sale of individual lots or in one or more assemblies is more advantageous. He suggests that Dyona, as executor, has a duty to seek out advice from an experienced real estate firm as to how best to market the properties, including whether to list them individually, as an assembly, or as two or more assemblies.

[ 8 ] Thus, while some attention was given at the hearing to whether a sale of the properties individually or as an assembly (or assemblies) is more advantageous, I was not asked to decide that question. Dean simply asks that the application be dismissed. Dyona suggests that the proposed appraisal should give a value for both an assembly and individual sales, which suggests she also recognizes that it is not presently known which might be more advantageous.

Discussion [ 9 ] As I see it, this application comes down to this question: can the Court authorize a trustee who is also a beneficiary of the trust to buy trust property at an independently appraised value without exposing the property to sale on the open market and over the objection of the only other beneficiary? In my view, the answer is clearly no. [ 10 ] It is well settled as a general rule that a trustee, who owes a fiduciary duty of loyalty to the beneficiaries, cannot purchase trust property as doing so would put the trustee in a conflict of interest: Dewberry Estate (Re) , 2023 BCSC 1325 at para. 8 .

An exception may be made to this general rule where all beneficiaries of full capacity give their informed consent to the proposed transaction but that is not present in this case since Dean opposes the proposed sale. [ 11 ] Another exception applies where the Court approves the proposed sale but, as Justice Thompson recently observed in Dewberry Estate , the trustee has a heavy burden to persuade the Court that the sale to the trustee is necessary, that no other purchaser is likely forthcoming, and the offer is favourable to the beneficiaries.

He said at para. 10: [10] The burden on a trustee seeking permission to sell trust property to herself is substantial. She must establish that a sale is necessary and that “no other purchaser has been forthcoming or seems likely to come forward within a reasonable time, and that his or her own offer in the circumstances is a favourable one” : Waters’ Law of Trusts , at p. 1020.

In Re Mitchell (1970), 12 D.L.R. (3d) 68 (N.S.S.C.(A.D.)), Cooper J.A. reviewed the leading cases that show the limited circumstances in which the general rule will be relaxed, and held at p. 79 that “[a]pproval by the Court of a sale of trust property to a trustee will only be given where it is clearly to the advantage of the beneficiaries .” [Emphasis added] [ 12 ] Similarly, in Re Estate of Ronald R. Mitchell , [1970] N.S.J.

No. 106 (C.A.) the court stated: The only thing a trustee can do to protect his purchase is, if he sees that it is absolutely necessary that the estate should be sold and he is ready to give more than anyone else , he should apply to the court to let him be the purchaser.

That is the only way he can protect himself. [Emphasis added] [ 13 ] It can only be shown that the trustee is willing to give “more than anyone else” if others are first given the opportunity to make offers to buy the property through an open-market sale. [ 14 ] Dyona argues a sale of one or more of the properties to her without exposure to the open market will clearly be advantageous to the estate because it will be at the appraised fair market value and will save the estate the cost of substantial real estate commissions.

I am not persuaded by this. [ 15 ] First, even a fully independent appraisal does not overcome the requirement that of there be “no other purchaser” who has come forward. [ 16 ] Second, it may well be that another potential purchaser is willing to buy one or more of the properties for more than the appraised value but that will never be known if the properties are not exposed to the open market. [ 17 ] Third, even a very thorough appraisal of these unique properties may not accurately reflect their market value.

Dean has led evidence from Neil Hahn, a Principal with Garnett Wilson Realty Advisors Ltd., who opines that the uniqueness of the properties and the lack of comparable sale data make an accurate appraisal very difficult. He writes: The 8 Subject Properties all have distinct differences in terms of access, availability of services, topography, proximity to the waterfront and development potential. In the appraisal of real estate, an estimate of market value must be derived from market evidence of sales of similar property.

The more heterogeneous a property is vis-a-vis other properties in the market, the more adjustments an appraiser is required to make to arrive at a reliable estimate of market value. … On Bowen Island … my review of the available sales evidence indicates that there have been few sales of parcels greater than 5 acres in size in the past three years.

All the available sales evidence differs considerably from the Subject Properties in terms of location on the island, proximity to services, zoning, etc . … Due to the wide range of value displayed by the market data, any opinion of market value for the subject property is going to require that the appraiser make significant adjustments to the comparables. For most of these adjustments, there is insufficient market data from which to make a quantitative adjustment.

Therefore the appraiser will have to make somewhat more arbitrary qualitative adjustments which will increase the risk of the appraised value not accurately reflecting the true market value . [Emphasis added]

[ 18 ] In short, even the best of appraisals in this case will not provide the certainty of market value that comes only with an open- market sale. I am not persuaded that a sale without exposure to the open market is to the advantage of the beneficiaries. [ 19 ] In support of her application, Dyona points to the terms of the will that give her the “uncontrolled discretion” in management of the estate. However, I do not read this clause as displacing the fiduciary obligations that the trustee under the will owes to the beneficiaries, including the rule against self-dealing. [ 20 ] Dyona also cites Fuller v.

Fuller , 2022 BCSC 803 where the court ordered the estate property be sold to the trustee at an independently appraised value. However, in that case the beneficiaries agreed the trustee should buy the property and only disagreed on the price. That is not the case here. Further, none of the other authorities cited by Dyona overcome the fundamental principles summarized in Dewberry Estate or Re Mitchell discussed earlier. [ 21 ] Dyona’s counsel identified in the evidence several points that would make development of the properties challenging so that they are likely unattractive to a developer.

It is suggested this favours a sale at an appraised market value. However, this does not address whether, despite these challenges, there might be interest outside the family in buying these properties above an appraised value. [ 22 ] I acknowledge that Dyona maintains a personal and sentimental attachment to the properties due to their connection with the parties’ father and their late brother.

However, I was given no authority to suggest a personal attachment can overcome a trustee’s obligation to maximize the value of the trust property for all beneficiaries. [ 23 ] For these reasons, I find that Dyona has not established that conditions exist that would support an order of this Court sanctioning a sale of the properties to her, even at an independently appraised value. I would dismiss the application.

I would reach the same conclusion even if Dyona made an offer to buy the properties once they were exposed to the open market because, as executor, she would be in control of that sale process and a conflict of interest would be inevitable. Costs [ 24 ] Dyona, in her personal capacity and as executor, argues that the parties’ costs for this application should come from the estate at a full indemnity.

She argues the application was necessitated by a deadlock amongst the beneficiaries that prevented her, as executor, from administering the estate . [ 25 ] Dean argues the only reason for the application was to address Dyona’s wish to purchase the properties or some of them which is a personal interest of hers. She had no obligation or need as executor to seek the Court’s direction. While Dyona (properly) retained separate counsel to represent her in her personal capacity, the application would have been unnecessary if she did not want to buy the properties in conflict with her duty as executor.

Dean argues that he, as the only other beneficiary, should not be called upon to pay the costs of this application out of his share of the estate. [ 26 ] I agree with Dean.

Section 86 of the Trustee Act was a convenient vehicle by which this matter could be put before the Court but the application was necessitated by Dyona’s personal interest in buying the properties. I therefore find that Dean is entitled to his costs of this application at scale B as against Dyona in her personal capacity. “Kirchner J.”