When someone passes away, the executor of their estate takes on significant responsibilities, including managing the estate’s assets and ensuring that debts and taxes are paid. However, executors can also face personal liability, including when it comes to legal costs arising from claims against the estate.
In a recent case, Epic Restoration Services Inc v Fuller et al., 2024 BCSC 2245, the executor of an estate was held personally liable for costs awarded against the estate. This case stemmed from a flood at a residential property, leading to a series of legal actions involving the estate, an insurance company, and a restoration service provider.
The court found that the executor, who continued a counterclaim initiated by the deceased, was personally liable for the costs associated with that counterclaim. This decision was based on established legal principles that trustees and executors who bring legal actions on behalf of an estate and are unsuccessful are liable for the costs, except in specific circumstances. One example of a specific circumstance is when it would be a breach of a fiduciary duty not to bring the claim.
As a general rule, executors are personally liable for costs if they unsuccessfully make a claim against another person, subject to the qualification that they are entitled to indemnity out of the estate unless they are guilty of misconduct. When the estate does not have the money to pay costs the executor will personally incur the costs.
The court also addressed several legal doctrines, including cause of action estoppel, collateral attack, and functus officio, concluding that these doctrines did not prevent the applicants from seeking the enforcement of the costs award against the executor.
It is worth noting that there is no rule that executors be held liable for costs if they fail to successfully defend an estate against claims. Ultimately, the executor was found personally liable for the costs payable by the estate to both the restoration service provider and the insurance company, but only to the extent that those costs arose from the estate’s unsuccessful counterclaim.
This case highlights the importance of understanding the potential personal liabilities that executors may face and the need for careful consideration before pursuing legal actions on behalf of an estate.
