Klaptchuk v Johnson, 2023 SKCA 25

Court of Appeal for Saskatchewan Docket: CACV4006 Citation: Klaptchuk v Johnson , 2023 SKCA 25 Date: 2023-02-22 Between: Sylvia Klaptchuk and the Estate of Peter Klaptchuk Appellants (Defendants) And Randy Johnson, Harvey Granatier and HDG Holdings Ltd. Respondents (Plaintiffs) Before: Jackson, Barrington-Foote and Kalmakoff JJ.A. Disposition: Application to adduce fresh evidence dismissed; Appeal allowed Written reasons by: The Honourable Mr. Justice Barrington-Foote and The Honourable Mr.

Justice Kalmakoff In concurrence: The Honourable Madam Justice Jackson On appeal from: QBG 1977 of 2019, Regina Appeal heard: October 20, 2022 Counsel: David G. MacKay and Robert MacKay for the Appellants Tristan N. Culham for the Respondents Barrington-Foote and Kalmakoff JJ.A. I. INTRODUCTION [ 1 ] Sylvia Klaptchuk and the Estate of Peter Klaptchuk [Estate] have appealed against the decision of a judge of the Court of Queen’s Bench, sitting in Chambers ( Johnson v Klaptchuk (22 March 2022) Regina, QBG 1977 of 2019 (Sask QB) [ Decision ]). The Decision granted

summary judgment in favour of Randy Johnson, Harvey Granatier and HDG Holdings Inc. [collectively the respondents], holding Ms . Klaptchuk personally liable to them for an unsatisfied judgment they had previously obtained against the Estate. [ 2 ] The basis for the Decision was the Chambers judge’s conclusion that Ms . Klaptchuk had breached her obligations as executrix and trustee of the Estate by intermeddling with its assets and converting them to her own use instead of using them to settle the respondents’ claim against the Estate. In that respect, the Chambers judge found that even though Ms .

Klaptchuk was aware of the unsatisfied judgment against the Estate, she distributed assets — including her late husband’s shares in two businesses — to herself before paying the Estate’s lawful debts. The Chambers judge concluded that Ms . Klaptchuk’s conduct in that regard constituted waste or mismanagement which fell within the scope of the common law doctrine of devastavit , which is concerned with breaches of the duties of personal representatives.

He also found that she had not fully and properly administered the Estate and, for that reason, was not entitled to rely on the common law defence of plene administravit , which is available when there are no or insufficient assets to satisfy a claim by a creditor against an estate. Accordingly, she was found to be personally liable for the entire amount of the unsatisfied judgment. [ 3 ] In this appeal, Ms . Klaptchuk contends that the Chambers judge erred in several ways, including by granting

summary judgment, by improperly applying the common law doctrine of devastavit, and by failing to consider and apply relevant provisions of The Trustee Act, 2009 , SS 2009, c T-23.01 [ TA 2009 ]; The Administration of Estates Act , SS 1998, c A-4.1 ; The Business Corporations Act , RSS 1978, c B-10 [ BCA ]; and The Enforcement of Money Judgments Act , SS 2010, c E-9.22 [ EMJA ]. She also applies to introduce fresh evidence on the appeal. [ 4 ] For the reasons that follow, we would dismiss the application to adduce fresh evidence but nonetheless allow the appeal. II. BACKGROUND A.

The proceedings [ 5 ] Peter Klaptchuk was the sole director, officer, and shareholder of two corporations: Ozonator Industries Ltd. [Ozonator] and Peter’s Sewer Service Ltd. [PSS]. On March 9, 2017, the respondents obtained judgment in a civil action against Mr. Klaptchuk and Ozonator, in the amount of $160,000 ( Johnson v Klaptchuk (9 March 2017) Regina, QBG 1001 of 2014 (Sask QB) [Judgment]). Eight days later, on March 17, 2017, Mr. Klaptchuk unexpectedly passed away. [ 6 ] Shortly after Mr. Klaptchuk’s death, on March 27, 2017, counsel for the respondents sent a letter to Mr.

Klaptchuk’s solicitor, Merrilee Rasmussen, K.C., notifying her of the Judgment and advising that they would hold off on any enforcement proceedings for a reasonable period of time, to allow Mr. Klaptchuk’s family to grieve his passing. Respondents’ counsel also requested that Ms . Rasmussen bring the Judgment to the attention of the representative of the Estate. [ 7 ] By April 27, 2017, Ms . Rasmussen had replied to the respondents’ counsel, saying that Ms .

Klaptchuk was the executrix of the Estate, and that she was in the process of settling the Estate’s assets and debts and developing a plan to retire the Judgment. However, the Judgment was never paid.

[ 8 ] On August 24, 2017, a notice of change of shareholders for Ozonator was filed with the Director of Corporations. It named Ms . Klaptchuk as the sole shareholder for that corporation. Ms . Klaptchuk would later take the position that this transfer of shares had been made without her knowledge or authorization. Ozonator subsequently became inactive and was ultimately struck from the Corporate Registry on April 30, 2018, because it did not file an annual return. [ 9 ] Shortly after the Ozonator share transfer had taken place, Ms .

Klaptchuk engaged new counsel, David MacKay, and arranged through him to transfer all of the shares in PSS to herself. The requisite notice, naming Ms . Klaptchuk as the sole shareholder for PSS, was filed with the Director of Corporations on October 3, 2017. [ 10 ] On December 6, 2017, Mr. MacKay advised the respondents’ counsel that he represented Ms . Klaptchuk in her capacity as executrix of the Estate. However, on February 1, 2018, after the respondents had served Mr. MacKay with a notice of completion of a voluntary questionnaire and a sheriff’s questionnaire, pursuant to the EMJA , he advised that Ms .

Klaptchuk had not accepted the appointment as executrix. [ 11 ] Although Mr. Klaptchuk’s will named Ms . Klaptchuk as executrix, she has never applied for a grant of probate or letters of administration. Nor has she renounced the appointment or given any explicit indication that she has refused to accept it. In addition to the transfers of shares mentioned above, Ms . Klaptchuk has taken other steps to administer the Estate, including paying Mr. Klaptchuk’s funeral expenses and his tax arrears, and by paying certain debts owed by PSS out of her own funds.

She has also continued to operate PSS as a business. [ 12 ] On July 24, 2019, the respondents commenced a civil action against Ms . Klaptchuk by filing a statement of claim. In it, the respondents claimed that, even though Ms . Klaptchuk had not formally assumed the role of executrix, she had intermeddled as an executor de son tort (i.e., a person who takes it upon themselves to possess and administer estate property even though they have not been appointed as executor or administrator), by transferring Estate property to herself. They also claimed that Ms .

Klaptchuk was liable for devastavit because she had transferred Estate property, namely, shares of the capital stock in Ozonator and PSS, and shareholder loans owned by Mr. Klaptchuk, to herself without first satisfying the respondents’ judgment. Finally, the respondents asserted that these transfers were fraudulent conveyances, within the meaning of The Fraudulent Preferences Act , RSS 1978, c F-21 , as Ms . Klaptchuk had transferred the Estate property knowing that it would delay, defeat or hinder their enforcement efforts. [ 13 ] Ms . Klaptchuk filed a statement of defence on August 8, 2019.

In it, she pleaded that she was the executrix and sole beneficiary of the Estate. She denied being an executor de son tort and denied having any involvement with Ozonator or authorizing the transfer of its shares to herself. She stated that she was the office manager of PSS and that she had obtained the shares in that corporation so that she could continue to operate the business, provide its customers with ongoing service, pay the wages of its employees and, eventually, wind up the business in an orderly fashion. Ms .

Klaptchuk also asserted that PSS “is insolvent and unprofitable and its shares are of no value” and denied having ever personally taken any wages or remuneration from PSS since Mr. Klaptchuk’s passing. [ 14 ] On August 12, 2021, the respondents filed an application in the Court of Queen’s Bench, seeking

summary judgment against Ms . Klaptchuk and an order pursuant to s. 55(1) of the TA 2009 , directing her to provide a full accounting for the Estate, and tracing any assets she had removed from it. This application led to the hearing that resulted in the Decision . B. The Decision [ 15 ] The Chambers judge rendered the Decision on March 22, 2022. He granted the application for

summary judgment and found Ms . Klaptchuk personally liable to the respondents in the amount of $160,000. [ 16 ] In that regard, the Chambers judge found that there was no genuine issue requiring a trial, and that the action was suitable for

summary judgment. He observed that the evidence was “almost entirely uncontested”, such that it established “a core of undisputed facts”, and that there was “no conflicting evidence which would require a credibility assessment, or which would require a trial to resolve” (at para 48). As such, he concluded that he was “able to reach a fair and just determination on the merits based on the affidavit evidence and that a

summary determination [was] a proportionate, more expeditious and less expensive means to achieve a just result than going to trial” (at para 49). [ 17 ] Having made that determination, the Chambers judge proceeded to analyze the liability aspect of the respondents’ claim by addressing two questions. [ 18 ] The first question concerned Ms . Klaptchuk’s status in dealing with the Estate assets. Earlier in the Decision , in setting out the facts of the case, the Chambers judge had found that, despite Ms .

Klaptchuk’s assertion that she had never accepted the appointment as executrix of the Estate, or acted in that capacity, she had “taken a number of steps in relation to the Estate assets and [had] paid some Estate debts” (at para 28). In this respect, he observed there was no dispute about the fact that Ms . Klaptchuk had: (

i) sold a recreational vehicle jointly owned with [Mr. Klaptchuk]; (ii) paid [Mr. Klaptchuk]’s funeral expenses; (iii) paid tax arrears owed by [Mr. Klaptchuk]; (iv) used proceeds from her RRSP to pay off credit card debts owed by PSS; (

v) transferred [Mr. Klaptchuk]’s shares in PSS into her own name; (vi) appointed herself as the sole director and officer of PSS; (vii) continue[d] to operate PSS as a going concern; and

(viii) accepted the transfer of [Mr. Klaptchuk]’s shares of Ozonator to herself [19] The Chambers judge also found as a fact that Ms. Klaptchuk had “transferred shareholder loans in the amount of $24,027 owedby PSS to [the] Estate to herself”, describing the evidence supporting that conclusion as “not contested” (at para 29). [20] All of this led the Chambers judge to conclude that Ms. Klaptchuk had “by her conduct, accepted the office of executrix” of theEstate (at para 52) and that she had “intermeddled in the Estate” to a degree sufficient to “constitute [her] as an executrix de son tort”,because she had (

i) represented through counsel that she was the executrix of the Estate; (ii) pleaded that she had acted as the lawfulexecutrix in dealing with Estate property; and (iii) exercised significant authority over the Estate assets and settled Estate debts (at para65). [21] As part of that conclusion, the Chambers judge rejected Ms. Klaptchuk’s argument that, as the residual beneficiary of theEstate, Mr. Klaptchuk’s shares in PSS devolved to her by operation of law, such that s. 47(3) of the BCA automatically entitled her toexercise shareholder’s rights outside of her capacity as executrix. In this regard, the Chambers judge said: [77] I respectfully disagree that s. 47(3) has this effect. If this

interpretation were accepted, a residual beneficiary under a will couldassume ownership of shares in a company without the involvement of a personal representative and without any regard for the properadministration of the estate. [78] In any event, [Mr. Klaptchuk]’s shares in PSS did not devolve to [Ms. Klaptchuk] by operation of law. Under the will, [Ms.Klaptchuk] could not become entitled to the shares in PSS before [Mr. Klaptchuk]’s just debts – including the Judgment – were paid. [22] The Chambers judge also addressed, and rejected, Ms.

Klaptchuk’s argument that she was entitled to continue to operate PSS asa going concern, based on her financial interest as an unpaid employee and as Mr. Klaptchuk’s surviving spouse. The sole authority for herto continue to operate PSS, he concluded, was found in Mr. Klaptchuk’s will, which gave her that entitlement only if she was acting as hisexecutrix. [23] The Chambers judge also rejected Ms. Klaptchuk’s argument that, because she had not authorized the transfer of the shares inOzonator to herself, the share transfer was not evidence of intermeddling.

He found that, despite her assertions to that effect, the onlyevidence before him was that Ms. Klaptchuk had accepted the transfer of the shares. [24] In the end, the Chambers judge concluded as follows on this point: [86] … [N]otwithstanding [Ms. Klaptchuk]’s statement that she never accepted the appointment as executrix, I therefore conclude thatthe significant authority she exercised over the Estate assets and her payment of Estate debts amount to an acceptance of the office ofexecutrix.

I also conclude her actions are sufficient to constitute her as an executrix de son tort. [25] The Chambers judge then moved on to consider whether Ms. Klaptchuk should be personally liable for the Judgment.

Hebegan that portion of the analysis by stating that her duties in that respect were the same whether approached from the standpoint that shewas an executrix named in the will, or from the standpoint that she was an executrix de son tort, and that they included paying the Estate’sjust debts, including the Judgment, before distributing the residue to herself. [26] The Chambers judge noted that the respondents relied on the doctrine of devastavit to ground Ms.

Klaptchuk’s personal liabilityand that, while she had not explicitly pleaded plene administravit, she appeared to assert that defence because she took the view that theEstate assets had already been fully administered and none remained to satisfy the Judgment. [27] Turning to the doctrine of devastavit, the Chambers judge began by instructing himself on the law, quoting from the decision inCommander Leasing Corp. v Aiyede (1984), (ON CA), 4 DLR (4th) 107 (WL) (Ont CA) [Commander Leasing].

Thatdecision holds that executors or administrators may be found personally liable for debts owing by an estate where they have squandered ormismanaged those assets to a sufficient degree, including where they have distributed estate assets in clear disregard of a creditor’soutstanding claim against the estate. The Chambers judge found that Ms.

Klaptchuk was guilty of devastavit because, on all of theevidence, he could reach no other conclusion than that she was aware of the existence of the Judgment and, thus, her obligation to pay it asone of the Estate’s just debts, before taking any other steps to transfer or distribute Estate property. He determined that Ms. Klaptchuk had“distributed Estate assets to herself in disregard of the Judgment” and that such conduct “amounts to devastavit which renders herpersonally liable for the Judgment” (at para 105). [28] With respect to plene administravit, the Chambers judge observed that Ms.

Klaptchuk had not specifically pleaded thatdefence. He noted that the governing jurisprudence dictates that a failure to explicitly plead plene administravit is effectively an admissionthat there are sufficient assets in the estate to satisfy outstanding debts (or, at least, the failure to plead plene administravit raises apresumption to that effect), and the executor or administrator of the estate will be personally liable.

In that respect, he cited CommanderLeasing at paras 8–10, and Edwards v Law Society of Upper Canada (2000), (ON CA), 48 OR (3d) 321 at para 22(WL) (CA) [Edwards]. [29] Having established this base, the Chambers judge held that it was unnecessary to consider Ms.

Klaptchuk’s request to amendher statement of defence to permit her to plead plene administravit, because, even if such an amendment were permitted, “the defencewould fail because the assets of the Estate have not been fully administered and Estate assets remain which could be called upon to pay theJudgment” (at para 131). [30] In making that determination, the Chambers judge found that the evidence did not support a conclusion that the Estate wasinsolvent. He observed that the only evidence pertaining to insolvency was a bare assertion to that effect in Ms.

Klaptchuk’s affidavit,which contained no explanation or documentation that spoke to her basis for that belief. He also noted several other uncontroverted factswere inconsistent with a conclusion that PSS was insolvent, including that Ms. Klaptchuk continued to operate the business as a goingconcern and had asserted in her statement of defence that PSS continued to pay its ongoing liabilities in the ordinary course of business,and that its financial statements all showed, at worst, only modest losses in the relevant time frame.

[31] The Chambers judge also found that, contrary to Ms. Klaptchuk’s assertions, the Estate had other assets of value. In that regard,he observed that Ms. Klaptchuk had “transferred shareholder loans in the amount of $24,027 owed by PSS to [the] Estate to herselfbetween 2017 and 2018”, and that “[t]his supports the conclusion that there was value in the company at that time sufficient to permit theshareholder loans to be drawn down, which is inconsistent with the conclusion that PSS has no value” (at para 128). He also determinedthat Ms.

Klaptchuk’s evidence that Ozonator’s shares had no value was inadmissible, because it was an opinion that she was not qualifiedto give. [32] Having found that Ms. Klaptchuk’s conduct in relation to the assets of the Estate constituted devastavit and that the defence ofplene administravit would not be available to her even if it had been properly pled, the Chambers judge concluded that she was personallyliable for the Judgment. In that regard, he said: [135] … [Ms. Klaptchuk] breached her obligations as executrix and as trustee by not paying the Judgment. Clause 3(

a) of [Mr.Klaptchuk]’s will granted to [Ms. Klaptchuk] general power over his assets on certain specified trusts, one of which was to pay his justdebts. A trustee is personally liable if she commits a breach of trust while acting as a trustee: Air Canada v M & L Travel Ltd., (SCC), [1993] 3 SCR 787 at para 33. [136] I recognize that by reaching this conclusion, the [Respondents] may have recourse to assets that would not otherwise have beenavailable to them to satisfy the Judgment. However, in my view, it is inequitable for [Ms.

Klaptchuk] to avoid orderly payment of theJudgment by the Estate by declining to accept her appointment as executrix and then transferring Estate assets to herself without payingthe Estate debts. [137] This accords with the public policy rationale behind the concepts of executor de son tort and devastavit.

The doctrine of executorde son tort precludes an individual from taking a deceased’s property free of his liabilities by refusing to apply for letters probate([Alexander Learmonth, Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (London, UK: Thomson Reuters,2018] at para 5-36), and devastavit holds an executor personally liable where estate assets are distributed in disregard for outstandingclaims by creditors: Commander Leasing at para 12. [138] For these reasons, I conclude [Ms.

Klaptchuk] is personally liable for the Judgment. [33] With that conclusion made, the Chambers judge determined that it was unnecessary to consider the respondents’ alternativeclaim of fraudulent conveyance. [34] The Chambers judge also dismissed the respondents’ application for an accounting under s. 55(1) of the TA 2009, on the basisthat the only parties who may properly apply for such relief under that subsection are the beneficiaries of a trust, or their propertyattorneys or property guardians.

As such, he concluded that the respondents had no standing to request this relief. [35] Finally, the Chambers judge dismissed the respondents’ claim for punitive damages, because he concluded that, by being heldpersonally liable, Ms. Klaptchuk would have to “bear personal responsibility for her actions” and, as such, “a further award of damages topunish or deter her or to denounce her conduct is not necessary” (at para 153). He also dismissed the respondents’ request for solicitor-client costs, instead fixing costs at $3,500. III. ANALYSIS [36] As set out in the introduction to these reasons, Ms.

Klaptchuk asserts that the Chambers judge erred by deciding the case on asummary judgment basis. She also contends that the Chambers judge’s determination that she should be held personally responsible to therespondents was the product of a misapplication of the law concerning the duties of trustees in situations where it is alleged that estateassets have been mishandled. In particular, she argues that the Chambers judge failed to consider how the common law doctrine ofdevastavit is affected by the provisions of various statutes, including the TA 2009. [37] As we will explain, we are persuaded that Ms.

Klaptchuk’s arguments must succeed. In the circumstances, the Chambers judgewas required to consider whether there was a proper basis upon which to relieve Ms. Klaptchuk of personal liability, notwithstanding thathe found she had committed devastavit. He did not engage in that consideration, which was an error of law. This error undermines theChambers judge’s determination that the case could be decided on a

summary judgment basis, because it means he made thatdetermination by applying the wrong legal framework to the facts before him. [38] Before turning to that analysis, however, we will address Ms. Klaptchuk’s application to adduce fresh evidence. A. The application to adduce fresh evidence [39] Ms. Klaptchuk applies, under Rule 59(1) of The Court of Appeal Rules, to adduce two affidavits as evidence on this appeal; onesworn by herself on August 4, 2022, and the other sworn by Craig Van Eyck on August 9, 2022. [40] In her affidavit, Ms.

Klaptchuk provides some further explanation of the circumstances under which she took over the operationof PSS following Mr. Klaptchuk’s death, and an explanation for some of the delays in administering the Estate. She also deposes that,after the Decision was rendered, she retained Mr. Van Eyck, a chartered accountant, “to review the financial statements and in particularthe preparation and for an explanation of the reduction of the shareholder loan in 2018”. [41] Mr. Van Eyck’s affidavit attaches as exhibits copies of PSS’ financial statements from 2016 to 2021.

Those financial statementshad been prepared by PSS’ former accountant, Jennifer Bright. Mr. Van Eyck states that, from a review of them, he was unable todetermine why the shareholder loan was reduced in 2018. He also “estimate[s] that the shareholder of the company invested $394,286into the company shown as the shareholder loan in the 2022 financial statement”.

[42] Applications to introduce evidence on appeal, whether it is “fresh” evidence or “new” evidence, are assessed under the test setout in R v Palmer, (SCC), [1980] 1 SCR 759 at 775 [Palmer], and recently reaffirmed in Barendregt v Grebliunas, 2022SCC 22 at paras 2–3, 469 DLR (4th) 1 [Barendregt]. That test is well known and need not be repeated here. [43] In our view, none of the evidence that Ms. Klaptchuk seeks to tender on this appeal is properly admissible. With the exceptionof one paragraph, Ms.

Klaptchuk’s affidavit refers entirely to matters that occurred, and of which she was aware, prior to the hearingbefore the Chambers judge. This includes the explanation she received from Ms. Bright, prior to the original hearing, concerning thereduction in the shareholder loan in the 2018 financial statement. All of this evidence could have been tendered in the original hearingwith the exercise of due diligence. The remaining paragraph simply explains her rationale for retaining Mr. Van Eyck.

That bit ofevidence could not, even if believed, reasonably be expected to have affected the result of the hearing. [44] Mr. Van Eyck’s affidavit also fails on the due diligence consideration. The financial statements that he reviewed would havebeen available to Ms. Klaptchuk at the time of the original hearing and could have been tendered at that time with the exercise of duediligence, as could the evidence explaining what those financial statements meant. [45] In short, the evidence that Ms.

Klaptchuk seeks to adduce on appeal fails to meet the Palmer/Barendregt test for admission.Her application must be dismissed. B. Did the Chambers judge err in concluding that Ms. Klaptchuk should beheld personally liable to the respondents on the basis of devastavit? [46] As set out above, the Chambers judge determined that Ms. Klaptchuk had committed devastavit, because he found that she haddistributed the Estate assets to herself instead of fulfilling her obligation as executrix to pay a lawful debt that she knew existed, namely,the unsatisfied Judgment against the Estate.

He then determined that the only defence she could raise to avoid personal liability, pleneadministravit, was not available to her. [47] Ms. Klaptchuk argues that the Chambers judge erred in several ways in reaching this conclusion, but the core of her submissionis that she acted reasonably and in good faith in trying to carry out the administration of the Estate, while at the same time keeping PSS inbusiness.

She contends that, as executrix, her conduct in the administration of the Estate was subject to the provisions of the TA 2009, andthat the Chambers judge was required to apply the common-law doctrine of devastavit in a manner consistent with the provisions of thatAct.

This means, in her submission, he was required first to determine whether her actions breached the duty of care owed by a trustee,and if he was satisfied that she had breached that duty, he was then bound to consider whether it was appropriate to relieve her frompersonal liability under s. 45 of the TA 2009, rather than limiting his consideration to the defence of plene administravit. Ms. Klaptchuksays that, as part of this analysis, the Chambers judge was also required to consider and apply the provisions of various other statues thatshe says authorized the actions she took.

She contends the Chambers judge did not do any of that, meaning that his decision to find herpersonally liable is grounded in legal error and cannot stand. [48] The respondents contend that this argument should not be considered by this Court because it is a new argument raised for thefirst time on this appeal. They also assert that, even if this Court decides to consider the applicability of s. 45 of the TA 2009, there was nobasis in the evidence upon which the Chambers judge could properly have relieved Ms. Klaptchuk of personal liability under that section. [49] As we will discuss, we are persuaded that Ms.

Klaptchuk’s argument must prevail. [50] Executors and administrators are “trustees”, as that term is defined in s. 2(h)(

i) of the TA 2009, and, like all trustees, they aresubject to the provisions of that Act, including the general duty of care and good faith set out in s. 7: 7(1) In discharging his or her duties and exercising his or her powers, a trustee shall exercise that degree of care, skill and diligence that aperson of ordinary prudence would exercise, having regard to the skill, experience and qualifications of the trustee.

(2) If a trustee possesses, or because of his or her profession or business ought to possess, a particular level of knowledge or skill that in allthe circumstances is relevant to the administration of the trust, the trustee shall employ that particular level of knowledge or skill in theadministration of the trust.

(3) A trustee shall administer the trust: (

a) in good faith; and (

b) in accordance with: (

i) its terms and purposes; (ii) the interests of the beneficiaries of the trust; and (iii) this Act. [51] As trustees, executors and administrators have a legal obligation to preserve and properly administer the assets of thedeceased’s estate (Fales v Canada Permanent Trust Co., (SCC), [1977] 2 SCR 302 at 316; and Wade Estate v Duck, 2018BCCA 176 at para 58, 422 DLR (4th) 423 [Wade]).

Generally speaking, this means they have a duty to abide by the terms of thedeceased’s will, to act impartially and honestly, to exercise reasonable care and prudence in dealing with estate assets, and to properlyaccount for such assets (see, for example: Wade at para 59; Lopushinsky Estate (Re), 2015 ABQB 63 at para 160, 610 AR 26, affirmed 2016 ABCA 102; and Widdifield on Executors and Trustees, loose-leaf (2022-Rel 10) 6th ed (Toronto: Thomson Reuters, 2002) at §8.2-1(WL)).

[52] An executor or administrator may be held personally liable for a breach of their obligations where such breach results in loss ordamages to the beneficiaries or creditors of the estate. One example of this is devastavit. A devastavit is committed where an executor oradministrator wastes the estate’s assets by mismanaging, misapplying, squandering or neglecting them, contrary to the duty imposed onthem as a personal representative of the estate (Commander Leasing at para 11; and Thomas G.

Feeney, Feeney’s Canadian Law of Wills,loose-leaf (Rel 96, Nov 2021) 4th ed (Toronto: LexisNexis, 2000) at §8.56 [Feeney]). Executors may be held personally liable on thisbasis “both for willful default and acting with reckless carelessness” (Halsbury’s Laws of Canada (online), Wills and Estates, “Devastavit:Estates: Executors and Administrators: Liability of Personal Representatives: Wasting Assets” (II.4(5)(

a) at HWE-286 “Devastavit” (2020Reissue) [Halsbury]), or for “deliberate or negligent acts or careless administration” (Commander Leasing at para 11).

The types ofconduct that can give rise to personal liability on the basis of devastavit include, among other things, paying legacies to beneficiariesbefore paying the estate’s lawful debts, where the result is to leave insufficient funds to satisfy the claims of creditors (see: Feeney at§8.56; Commander Leasing at para 12; In re City Equitable Fire Insurance Co., Ltd., [1925] Ch 407 (CA) at 439, [1924] All ER Rep 485;and Re Berry (1981), (ON SC), 34 OR (2d) 56 (Ont HCJ)). [53] To be clear, this does not mean that an executor or administrator will invariably be held personally liable for conduct thatresults in a failure to preserve or retain the assets of the estate.

Such a failure will only attract personal liability if there has been a breachof the standard described above. Absent such a breach, there will be no devastavit. This point was made in Wade where Kirkpatrick J.A.,writing for the Court, said: [58] Executors and trustees have a legal obligation to preserve the assets of the Deceased’s estate: Fales v. Canada Permanent TrustCo., (SCC), [1977] 2 S.C.R. 302; Miles v. Vince, 2014 BCCA 289 at para. 54.

At common law, the neglect of this dutyhas been referred to as a devastavit, and it gives rise to personal liability: Widdifield on Executors and Trustees, 6th ed., §10.1.1. [59] However, “like all duties imposed upon trustees, the standard to be met in respect of this particular duty is not perfection, butrather that of honesty, and reasonable skill and prudence”: Valard Construction Ltd. v.

Bird Construction Co., 2018 SCC 8at para. 25.… [54] Furthermore, Saskatchewan, like most other provinces, has enacted legislative provisions that give courts discretion to relieve atrustee from personal liability arising from improper dealing with trust property where it would be fair to do so because the trustee hasacted honestly and reasonably, notwithstanding the breach (Wade at para 59. See also: Comeau v Gregoire, 2005 NSCA 135 at para 20,754 APR 390).

In that regard, s. 45 of the TA 2009 reads as follows: 45 If a trustee is or may be personally liable for a breach of trust as the result of any act or omission of the trustee or of an agent of thetrustee, the court may relieve the trustee either wholly or partly from personal liability if the court is satisfied that the trustee: (

a) acted honestly and reasonably; and (

b) ought fairly to be excused: (

i) for the breach; or (ii) for omitting to obtain the directions of the court in the matter in which it was committed. [55] There are “no hard and fast

definitions of the types of behaviour that will be excused or those that will not” under s. 45(Langley, Bevans and Julson v Brownjohn, 2007 BCSC 156 at para 62, 35 ETR (3d) 38 [Langley]). As the Ontario Court of Appeal notedin Cahill v Cahill, 2016 ONCA 962 at paras 50–51, 26 ETR (4th) 207 [Cahill], the question of whether a trustee has acted honestly andreasonably “will depend on the facts of the particular case”, and a trustee who seeks to be relieved of personal liability under a statutoryprovision like s. 45 bears the burden of proving their entitlement to that relief. In order to do so, a trustee must establish three things:(

i) that they acted honestly; (ii) that they acted reasonably; and (iii) that they ought fairly to be excused.

The decision as to whether atrustee should be excused from personal liability under s. 45 requires consideration of the nature of the breach in light of all of thecircumstances of the case. [56] Relevant factors, in considering whether a trustee has acted honestly and reasonably, may include whether the trustee was paid,whether the trustee was a professional, whether the trustee sought and relied upon appropriate professional advice, and where the breachfalls on a spectrum from minor, technical and unintentional to flagrant, serious and deliberate (see: Cahill at para 51; Langley at para 60). [57] Of course, the reasonableness and honesty of the trustee’s actions are not the only considerations.

The third element of s. 45focuses on fairness. This requires the court to determine whether it is more equitable for the beneficiaries or creditors, as the case may be,to bear the loss which has occurred, rather than the trustee (Hopgood v Hopgood (Estate), 2018 NSSC 100 at para 64, 36 ETR (4th) 169). [58] In our respectful view, the Chambers judge in this case fell into error because, once he found that Ms.

Klaptchuk had breachedher duties as a trustee in a way that amounted to devastavit, he considered only the availability and applicability of the defence of pleneadministravit and did not turn his mind to whether it would be fair to relieve Ms. Klaptchuk of personal liability under s. 45 of the TA2009. [59] Contrary to what the respondents assert, we do not view Ms. Klaptchuk as having raised this argument for the first time onappeal. While it may be observed that Ms. Klaptchuk did not explicitly plead s. 45 in her statement of defence, there was no requirementfor her to do so.

We do not read a prayer for relief from personal liability under that

section as falling into the category of statutorydefences that must be explicitly pleaded under Rule 13-8 of The Queen’s Bench Rules. [60] Moreover, on the record that was before the Chambers judge, it is apparent that Ms. Klaptchuk was seeking to be relieved frompersonal liability in the event that she was found to have breached her duties as a trustee. In fact, she explicitly raised the applicability of s.45 of the TA 2009 in the brief of law she filed in opposition to the Respondent’s

summary judgment application. In her statement ofdefence, she had pleaded that she viewed the shares in PSS as having no value because the company was losing money and its onlyphysical assets were “old trucks and a lease on a building”. She stated in her affidavit that she had paid various Estate debts and otherexpenses related to the administration of the Estate out of her own pocket and, because of that, also viewed herself as a creditor of the

Estate. She also deposed that she had taken control of PSS as “[Mr. Klaptchuk]’s wife and as a creditor of the company” (due to the outstanding shareholder loan), and not simply as executor for the Estate. She argued that she believed, given the state of the business, the provisions in Mr. Klaptchuk’s will, and her status as a beneficiary, the transfer of shares to her was authorized by s. 47(3) of the BCA . [ 61 ] In short, there was material in the record before the Chambers judge that obligated him to turn his mind to s. 45 of the TA 2009 . He did not do so. That was an error of law. C. Did the Chambers judge err by deciding the case on a

summary judgment basis? [ 62 ] In our respectful view, the Chambers judge’s error in failing to consider whether Ms . Klaptchuk should be relieved of personal liability for the Judgment under s. 45 of the TA 2009 is also sufficient to undermine his decision to determine the case on a

summary judgment basis. [ 63 ] The standard of review that applies on an appeal of a

summary judgment decision depends on the matter at issue. The usual appellate standards of review apply. A decision as to whether there is a genuine issue requiring a trial is a question of mixed fact and law and, absent an extricable error of law, is reviewable on the palpable and overriding error standard.

Where it is alleged that the Chambers judge has made an extricable error of law, the standard of correctness applies ( Zoerb v Saskatoon Regional Health Authority , 2022 SKCA 111 at paras 37-38 , 86 CCLT (4th) 271; Saskatchewan (Highways and Infrastructure) v Venture Construction Inc. , 2020 SKCA 39 at para 32 , 447 DLR (4th) 316; Deren v SaskPower , 2017 SKCA 104 at para 41 [ Deren ]; Ter Keurs Bros.

Inc. v Last Mountain Valley (Rural Municipality) , 2019 SKCA 10 at para 23 , [2019] 4 WWR 586; Thomas Estate v Hess , 2019 SKCA 26 at para 29 , 433 DLR (4th) 60; and Holmes v Jastek Master Builders , 2019 SKCA 132 , [2020] 6 WWR 386). [ 64 ] Where a party applies for

summary judgment, the decision as to whether there is a genuine issue requiring a trial must take account of the applicable legal framework. This requires the judge to consider the evidence in light of the nature of the claim and the defences being advanced, if any, in order to decide whether they can find the necessary facts and apply the relevant law to fairly resolve the dispute (see: Deren at para 45 ). [ 65 ] As discussed above, the Chambers judge did not apply the proper legal framework in making his determination on the

summary judgment motion, in that he did not consider the applicability of s. 45 of the TA 2009. As a result of that error, he did not approach his assessment of the evidence from the proper angle. By this, we mean that he did not fully consider whether he could make necessary factual findings about the value of the Estate or the reasonableness of Ms . Klaptchuk’s actions in dealing with its assets. [ 66 ] When the matter is viewed through the correct legal lens, a determination of the value of the Estate was crucial to deciding not only whether Ms .

Klaptchuk had committed devastavit , but also to deciding whether she ought to be relieved of personal liability and, if so, to what extent. In that respect, the Chambers judge made no firm finding. He simply concluded that PSS had “some value which could be called upon to pay the Judgment” ( Decision at para 127). He also engaged in no consideration of whether the evidence was sufficient to answer the related questions of how the Estate’s value, or lack thereof, affected the reasonableness of Ms .

Klaptchuk’s actions or whether it would be fair to excuse her from personal liability. [ 67 ] The failure to approach the question from the correct legal angle is significant because the evidence relating to the value of the Estate was thin and contradictory, and there was some evidence that explained why Ms . Klaptchuk had acted as she did. In that regard, Ms . Klaptchuk had deposed that the Estate had no assets of value and that, as a result, she had used her own funds to pay credit card debt and funeral expenses owing by the Estate.

She also said that she had continued to work for PSS without remuneration, and that she did not receive the shareholder loan payment that was recorded in PSS’ financial statements. On the other hand, there was also evidence that suggested PSS had value because, among other things, it owned physical assets that could be liquidated, and it had been able to draw down the shareholder loan in part.

Much of that evidence, of course, came from PSS’ financial statements and was of limited value, given the context in which it was provided and lack of explanation for the figures contained in the financial statements. [ 68 ] Our point in all of this is that, if the Chambers judge had applied the correct legal framework, there would have been no proper basis upon which to conclude that there was no genuine issue requiring a trial.

The evidence relevant to the legal issues that had to be decided was thin and contained conflicts that could not properly be resolved on the affidavits that had been filed. [ 69 ] In our view, this aspect of the Decision must also be set aside. As the matter was presented to the Chambers judge, this was not an appropriate case for

summary judgment. [ 70 ] Accordingly, the Decision must be set aside in its entirety, and the matter must be remitted to the Court of King’s Bench. [ 71 ] Having reached that conclusion, it is unnecessary to deal with Ms . Klaptchuk’s argument regarding the respondents’ failure to comply with the provisions of the EMJA . IV. CONCLUSION [ 72 ] For the foregoing reasons, we would allow the appeal, set aside the Decision , including the order of costs, and remit this matter to the Court of King’s Bench.

We would make no order as to costs in that Court. [ 73 ] As to the question of costs in this Court, we observe that Ms . Klaptchuk was successful on the appeal, but unsuccessful in her application to introduce fresh evidence. Bearing those results in mind, we would award costs to Ms . Klaptchuk in the total amount of $1,000. “Barrington-Foote J.A.” Barrington-Foote J.A.

“Kalmakoff J.A.” Kalmakoff J.A. I concur. “Jackson J.A.” Jackson J.A.