McGavin (Estate), 2011 ABQB 278

Court of Queen ’ s Bench of Alberta Citation: McGavin (Estate), 2011 ABQB 278 Date: 20110420 Docket: ES03 133063 Registry: Edmonton Court File Number ES03 133063 Court Court of Queen’s Bench of Alberta (Surrogate Matter) Judicial District Edmonton Estate Name John Douglas McGavin Applicant Concentra Trust _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R.A. Graesser _______________________________________________________ Introduction [ 1 ] John Douglas McGavin died on September 11, 2010 at Edmonton, Alberta, aged 83. He left no spouse or children.

The residue of his estate was left to the Edmonton Community Foundation “for the creation of a permanent endowment fund named The John Douglas McGavin fund with the annual income to be distributed” among the Salvation Army, Hope Mission, Mustard Seed Church and The Bissell Centre. [ 2 ] The Executor, Concentra Trust, has applied for probate. The application for probate did not include form NR6.1 completed by the Edmonton Community Foundaton. The application is otherwise in order. [ 3 ] The Edmonton Community Foundation submits that it is not required to submit a form NC6.1 pursuant to Surrogate Rule

13(7) and 13(8) having regard to the nature of the bequest to it, and the provisions of the Edmonton Community Foundation Act , S.A. 1971, c. 117 as amended. [ 4 ] Surrogate Rules 13(7) and (8) provide:

(7) If a trustee is appointed to hold property on trust, in a will or by a person authorized in a will to make the appointment, an acknowledgment of trustee(

s) in Form NC 6.1 signed by the trustee(

s) of each trust must be filed.

(8) The personal representative must not make a distribution to a trustee of any property that is subject to a trust under a will until after an acknowledgment of trustee(

s) in Form NC 6.1 signed by the trustee(

s) has been filed. [ 5 ] Form NC 6.1 requires the trustee to acknowledge that: 1. it was appointed trustee of a trust under a will; 2. (

a) it must use the funds in the trust only in accordance with the terms of the trust; (

b) it cannot borrow or take a benefit from the trust property unless the will expressly allows it to do so; (

c) it must keep adequate records of its administration of the trust property; and (

d) it must keep the trust property separate from any other property; and 3. it will faithfully administer the trust according to law and will give a true accounting of its administration. [ 6 ] Alternatively the Edmonton Community Foundation submits that if it is required to submit a form NR6.1 in order to receive the bequest, the form needs to be modified to permit the funds to be held and invested in its consolidated fund, as opposed to being kept separate from any other property.

Analysis [ 7 ] The Foundation initially argued that the bequest to it was an outright gift and did not involve the creation or imposition of a trust on it. It submitted that “all gifts received by the Edmonton Community Foundation are deemed to be governed by this legislation (the Act ) unless specific agreements with the donors are reached to the contrary at the time the gift is made.” [ 8 ] There was no such agreement with respect to Mr. McGavin’s gift. His gift is described by the Foundation as a “designated fund”.

Investment is dealt with under the Act , with the effect that the provisions of form NR6.1 are not applicable. [ 9 ] I note that there is nothing in the Act to exempt the Foundation from the Surrogate Court Rules or the requirement of Rule 13. Compliance with Rule 13 is mandatory under the Surrogate Rules. Undoubtedly, the Court has the jurisdiction to waive compliance

with the Rules, in appropriate circumstances. [ 10 ] I see no merit to the argument that the bequest to the Foundation did not create a trust, or impose trust obligations on it. Indeed, the Act expressly authorizes the Foundation to act as trustee. Its first object, under s. 5(

a) is “to accept, in trust or otherwise, gifts, grants, legacies, devises or bequests...” [ 11 ] Its investment powers under s. 5(

f) are to invest “in such investments as are from time to time authorized by law for trustees by the Trustee Act ...” and under s. 5(

i) it is authorized to open trust accounts. [ 12 ] Under s. 11(4), the Board of the Foundation “may establish a Consolidated Trust Fund”. [ 13 ] I recognize that s. 17(3) of the Act provides:

(3) For all purposes of the Act, where not inconsistent with other provisions thereof, a legacy, a devise or other testamentary bequest and any donation or other conveyance or transmission, whether on terms of trust or endowment Or otherwise, shall be deemed a donation of capital to he held and administered pursuant to the provisions of the Act and shall be invested and the net income from it devoted in perpetuity to charitable purposes as permitted by this Act. [ 14 ] That provision is relied on to support the Foundation’s argument that the bequest to it is to be held pursuant to the provisions of the Act. [ 15 ] I do not see, and I do not interpret, s. 17(3) as negating the Foundation’s role as a trustee when it receives a bequest “on terms of trust or endowment”.

There is nothing inconsistent with “administering” the bequest in accordance with the Act , and the Foundation being held to the duties and obligations imposed on it as a trustee. [ 16 ] Here, the bequest to the Foundation was imposed with a specific trust obligation: to pay 25% of the annual income to each of the four beneficiaries. While “annual income” may be determined in accordance with the Act , the four beneficiaries are still beneficiaries of a trust; the Foundation is still a trustee; and the bequest is trust property. Mr.

McGavin, via his Executor, is the settlor of a trust, and his Estate is entitled to insist on his wishes being carried out (as are the beneficiaries). [ 17 ] The amendments to the Surrogate Rules requiring trustees to complete and file form NC 6.1 were intended to reinforce the duties and obligations of trustees to people and entities who are appointed as trustee and may have an imperfect understanding of what being a trustee involves. [ 18 ] There is no public policy reason to exempt charitable organizations such as the Foundation from the obligation to acknowledge its trust obligations. [ 19 ] That being said, it is clear to me that the Foundation is, under the provisions of the Act , entitled to invest the bequest from Mr.

McGavin in the Consolidated Trust Fund, if it chooses. Under the Act , it is not required to keep all trust funds separate. The Foundation has a very legitimate concern about being required to commit to create separate trust funds. [ 20 ] The Surrogate Rules are intended for general application. There may be situations, such as this, where the general requirement should, for appropriate reason, yield to the specific circumstances of a settlor, trustee or beneficiary. Here, the trustee is entitled at law to invest the trust funds in a consolidated account.

It does not have to create a separate fund and manage and account for that fund separately from the hundreds of other designated funds it holds. [ 21 ] The amendments to the Surrogate Court Rules were not intended to increase the obligations of trustess beyond what they are

obliged by law to do, but rather to bring some of the important obligations home to trustees. The Foundation undoubtedly needs no reminder of its obligations, and at law is entitled to consolidate its trust funds. Decision [ 22 ] The Edmonton Community Foundation is not exempt from filing NC 6.1 forms with respect to trusts imposed on it by the will of a testator. It is not required, however, to keep such trust funds separate from other trust funds. It is appropriate for the Foundation to provide an NC 6.1, with paragraph 2 amended as follows: (

a) it must use the funds in the trust only in accordance with the terms of the trust; (

b) it cannot borrow or take a benefit from the trust property unless the will expressly allows it to do so; (

c) it must keep adequate records of its administration of the trust property; and (

d) it must invest the trust property in accordance with the provisions of the Edmonton Community Foundation Act . [ 23 ] The Foundation in its submissions noted that form NC 6.1 may cause difficulties for many charitable organizations which, like itself, are created by specific legislation, or which might be governed by specific legislation. I expect that there may be many situations where the court may be asked to accept an amended form NC 6.1 to deal with specific problems or concerns unique to that charitable organization. [ 24 ] Those concerns are best addressed, in my view, as they arise.

The purpose of the introduction of form NC 6.1 would not be served by granting blanket exemptions to charitable organizations.

I would expect, however, that once a precedent is set with the court resolving the concern, future applications for probate involving the same trustee and the same type of trust might proceed relatively routinely by the trustee providing a copy of the precedent along with the application for probate. [ 25 ] On the Foundation providing a form NC 6.1 with paragraph 2 amended as above, I see no reason why probate should not be granted, and there should be no impediment to the Executor paying the bequest to the Foundation in accordance with Mr. McGavin’s will.

Dated at the City of Edmonton, Alberta this 19 th day of April, 2011. R.A. Graesser J.C.Q.B.A.

Appearances: Dustin Stewart Minsos Stewart Masson for the Personal Representative, Concentra Trust