The recent decision of Jochem v. MacPherson addresses the circumstances under which the court should approve a sale transaction made by an executor. 

By way of background, the applicant was one of four executors of the deceased’s estate.  The other three executors were the applicant’s children. The applicant, as an executor of the estate, accepted an offer to sell shares the estate held in a privately-owned company to a corporation owned by her son (who was also an executor). 

The applicant then brought an application seeking a declaration that she had acted within her discretion and in accordance with her fiduciary duties when accepting the offer and an order approving the transaction. 

Justice Hoy set out the test that the court should apply when determining whether to approve a sale transaction.  Specifically, the court must be satisfied that the sale price is the “best which can be obtained” and that the sale is in the best interests of the beneficiaries.  In seeking court approval, the trustee has an obligation to obtain and put before the court all the material appropriate to allow the court to make the determination sought. 

In this situation, Hoy J. had significant concerns about the sale of the shares, including the following:

• The applicant did not consult the other executors about the selection of the valuator of the shares or the parameters of the valuation;
• A number of the valuator’s underlying assumptions appeared questionable;
• The valuation was a “limited exercise” and the information used appeared to have been received, in part, from the prospective purchaser of the shares;   
• No attempts had been made to sell the shares on the open market and alternate purchasers had not been sought; and
• The other executors were neither consulted with nor informed of any discussions regarding the sale.

While the proposed purchase price was the appraised value of the shares, given the limitations of the valuation and the material before the court, Hoy J. was not persuaded that the applicant was acting in accordance with her fiduciary duty.  She was also unconvinced that the offer was the best price that could be obtained.  As a result, Hoy J. declined to approve the sale of the shares.