Lecky Estate v. Lecky, 2011 ABQB 802

Court of Queen ’ s Bench of Alberta Citation: Lecky Estate v.

Lecky, 2011 ABQB 802 Date: 20120215 Docket: ES01 096832 Registry: Calgary Between: The Personal Representatives The Lecky Foundation Caroline Frances Lecky, Jonathan Robert Sirling Lecky, Christopher Hartpole Lecky, Edward Alexander Macmillan Lecky and William Anton Hardinge Lecky Plaintiffs - and - Euphemia Sarah Ann Lecky Respondent Corrected judgment: A corrigendum was issued on February 15, 2012; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C. A.

Kent _______________________________________________________

1. Background. ......................................................................................................................... -4- A. The Will ...................................................................................................................... -4- B. Purchase and Sale of Residences ..................................................................... -5- C. Financial Position of the Estate and Payments to Mrs. Lecky .................... -8- 2. Overview of Applications ................................................................................................. -10- 3.

The Trustees ’ Application for Advice and Direction ................................................ -10- Issue 1: Duties/Powers of the Trustees under Clause 5(

c) of the Will .................. -10- A. The Legal Principles ............................................................................................. -12- I. Indirect Evidence of the Surrounding Circumstances (the “ Armchair Rule ” ) -13- I. The “ Literal/objective Approach ” to

Interpretation of Wills............ -13- II. The “ Subjective/Liberal Approach ” to

Interpretation of Wills ....... -14- II. Direct Evidence of Intent .......................................................................... -16- III.

Summary: ................................................................................................... -19- B. Analysis: ................................................................................................................. -20- I. The Words of Clause 5(

c) and Context of Clause 5 ........................... -20- i)Clause 5(

c) Grants Discretion over Income Distribution ............. -21- ii) Clause 5(

c) does not Grant Discretion over Income Distribution -23- iii) Conclusion ....................................................................................... -24- II. The Whole Will in Light of The Surrounding Circumstances: ....... -24- III. Direct Evidence of Intent ......................................................................... -25- C. Conclusion ............................................................................................................. -26- Issue 2: Trustees ’ Requests for Financial Information and Documentation from Mrs. Lecky -27- 4.

Trustees ’ Application to Pass Accounts ..................................................................... -28- 1. Review the allocation of expenses to capital and income and prepare a revised allocation. ........................................................................................................ -28- 2. If any of the other objections have merit, to direct the Trustees to make the necessary adjustments.

................................................................................................... -28- 3. Devise a process to determine ownership and value of the art of the estate and Resource Funding Limited ......................................................................... -31- 5. Lecky Foundation Application Relating to Ven House Trust ................................ -31- Issue 1: The Nature of Mrs.

Lecky ’ s interest in the Ven House Assets ............... -31- Issue 2: Ven House Trust Funds ............................................................................... -33- Issue 3: Debts, Expenses and Administration Costs ............................................. -34- Issue 4: Entitlement to the Proceeds of Sale from the Ven House Properties ... -35- Appendix A................................................................................................................................ -42- 1. Background. [ 1 ] These applications concern the estate of John MacMillan Stirling Lecky (Mr.

Lecky), who died on February 25, 2003 at the age of sixty-three. Mr. Lecky was an entrepreneur and a philanthropist. During his lifetime, Mr. Lecky obtained both an economics degree from the University of British Columbia, and a law degree from Cambridge University. He began his career as an investment banker in Montreal and went on to become a successful businessman. He founded an oil and gas company, Resource Service Group, and was the owner of Okanagan Helicopters as well as the Bow Valley Club.

He was the chairman and principal shareholder of the charter airline Canada 3000, a company which was at one time the second-largest airline in Canada, but became bankrupt immediately following the September 11, 2001 terrorist attacks. Mr. Lecky was also an avid sportsman. [ 2 ] At the time of his death, Mr. Lecky was married to Euphemia “Effie” Sarah Ann Lecky (Mrs. Lecky), and was the father of five children from a previous marriage to Frances Marie-Jeanne Lecky - Caroline (who died in August 2010), Johnathan, Christopher, Edward and Anton. Mr.

Lecky was also the stepfather of Poppy, Thomas, and Fred, the three children of Euphemia Lecky from a prior marriage. A. The Will (attached as Appendix A) [ 3 ] At the time of his death, Mr. Lecky had considerable assets, which are now the object of these proceedings. In his Will, Mr. Lecky names two categories of beneficiaries: 1) His wife, Euphemia Sarah Ann Lecky (the primary beneficiary of the Will); and 2) The Lecky Foundation. In accordance with the terms of a Settlement Agreement reached by the parties, Mr.

Lecky’s children from his first marriage have become a third category of beneficiaries of the Will: 3) Caroline Frances Lecky (deceased),

Johnathan Robert Stirling Lecky, Christopher James Hartpole Lecky, Edward Alexander MacMillan Lecky, William Anton Hardinge Lecky (the Lecky Children). [ 4 ] The Personal Representatives and Trustees of the Will (referred to as “the Trustees”) are appointed by Mr. Lecky in clause 2(

a) of the Will. They are jointly: 1) Mrs. Lecky; 2) William J. Fowlis, Mr. Lecky’s lawyer and drafter of the Will; and 3) John K. Chan, a chartered accountant and long-serving employee of Mr. Lecky. [ 5 ] Three trusts, described in Clauses 4 and 5 of the Will, were created by Mr. Lecky. The first of those trusts is what has come to be known as the Ven House Trust, which holds the proceeds of the sale of the former residence of Mr. and Mrs. Lecky, known as Ven House. The Trust also contains Mr. and Mrs. Lecky’s Personal Effects.

According to the Will, the Ven House and the Ven House Personal Effects are to be held in trust during Mrs. Lecky’s lifetime and upon her death, the remaining assets in this trust are to be paid or transferred to the Lecky Foundation. [ 6 ] If Mrs. Lecky sells Ven House, the Will directs that the proceeds from the sale of Ven House and Ven House Personal Effects are to be applied to purchase a new residence for Mrs. Lecky, which shall not exceed after tax proceeds of the sale.

Under the terms of the Will, any excess funds from the sale of the Ven House and the Ven House Personal Effects are to be transferred to the Lecky Foundation. [ 7 ] The second trust created by Mr. Lecky is the Spousal Trust, which holds shares in Resource Funding Ltd. (RFL). The income generated by these shares is to be paid to Mrs. Lecky, so that she may continue to enjoy at least the standard of living to which she had become accustomed during the lifetime of Mr.

Lecky. [ 8 ] The third trust contained in the Will is the Euphemia Sarah Ann Lecky Trust (the Residual Trust). [ 9 ] Based on the provisions of the Will and the terms of the Settlement Agreement entered into by the beneficiaries of the Estate, upon the death of Mrs. Lecky the remainder of the Spousal Trust (RFL shares) and the Residual Trust are to be divided in two: half will go to the Lecky Children, and half will go to The Lecky Foundation. B. Purchase and Sale of Residences [ 10 ] At the time of his death Mr. Lecky owned a residence known as Ven House in the United Kingdom. As noted above, clause 4(

c) of the Will provides that Mrs. Lecky is entitled to the use of Ven House and the Ven House Personal Effects until her death. In the event that the proceeds from the sale of Ven House and the Ven House Personal Effects exceed the purchase price of the new residence and any new personal effects to be located therein, any excess funds shall be transferred to The Lecky Foundation. [ 11 ] After Mr. Lecky’s death, Mrs. Lecky, with the approval of the other Trustees, sold Ven House on December 17, 2004, for $20,204,000 after tax (all monetary amounts are expressed in Canadian dollars unless otherwise noted).

Three days later, the Trustees purchased a new house selected by Mrs. Lecky at 15 Wycombe Square, London, U.K., for an all-inclusive cost of $15,785,000.

[ 12 ] Prior to the sale of Ven House, the Trustees and The Lecky Foundation exchanged correspondence regarding requests made by Mrs. Lecky regarding the purchase and sale of residences. On behalf of the Trustees, William Fowlis wrote to the Lecky Foundation on October 7, 2004 and October 14, 2004, seeking the consent of The Lecky Foundation to a proposal that the net after tax proceeds from the sale of Ven House and the Ven House Personal Effects be utilized to purchase both a replacement home and a country home in England for Mrs. Lecky, together with additional personal effects to be used in these homes. Mrs.

Lecky would reside in both homes. [ 13 ] In their October 2004 letters, the Trustees explained to The Lecky Foundation that proceeds from the sale of assets would remain invested in the Estate for their ultimate disbursement to The Lecky Foundation. The letter was silent, however, on when that “ultimate disbursement” would be and sought no commitment from The Lecky Foundation as to a period by which it would be bound by its indulgence. [ 14 ] Notwithstanding the provisions of the Ven House Trust, The Lecky Foundation wrote to Mr.

Fowlis on October 20, 2004 and agreed to defer, for an unspecified period of time, the disbursement of the excess funds from the sale of Ven House and the Ven House Personal Effects. The Lecky Foundation allowed those funds to be used to purchase Wycombe Square, a second property in England in December 2004. [ 15 ] Future correspondence by Mr. Fowlis on behalf of the Trustees reveals that it was the Trustees’ understanding that the withdrawal of The Lecky Foundation’s consent to the deferral of funds was entirely in the hands of the Foundation. In a December 17, 2004 letter addressed to counsel for Mrs.

Lecky, Mr.

Fowlis wrote: It is up to The Lecky Foundation to decide the length of time for which this deferral will be applicable. [ 16 ] Similarly, minutes of a Trustees’ meeting held on February 14, 2005 indicate that it was also an important consideration for the Trustees that income on the deferred funds (including the payment of interest on the net proceeds left over from the sale of Ven House and the purchase of the Wycombe Square House), pending the eventual disbursement to The Lecky Foundation, be for the benefit of the Foundation. [ 17 ] On March 31, 2006, the Trustees sold the residence at 15 Wycombe Square at Mrs.

Lecky’s request. Upon the sale of Wycombe Square, two new residences, called South Pavilion in southern England and Henneker Mews in London, were selected by Mrs. Lecky and purchased by the Trustees with proceeds from the sale of Ven House and the Ven House Personal Effects, on February 28, 2006 and March 31, 2006 respectively. [ 18 ] At Mrs. Lecky’s request, the Trustees subsequently sold South Pavilion on June 20, 2008 for approximately $11,288,000 thereby leaving over $12,000,000 in the Ven House portion of the Estate. [ 19 ] On October 7, 2008, Mr.

Fowlis, on behalf of the Trustees, asked The Lecky Foundation to further defer receipt of funds in the Ven House Trust, in this case the sale proceeds of the sale of South Pavilion (purchased with some of the proceeds of sale from Ven House). He stated that Mrs. Lecky requested that the remaining funds be utilized to purchase a property on the Isle of Wight, to be used as a vacation residence, as well as a residence in either the country or in London. In his letter October 7, 2008 letter to The Lecky Foundation, Mr.

Fowlis indicated: If a residence in London was purchased, I would expect that Hennecker Mews would be sold at that time. [ 20 ] The October 7, 2008 letter specifically sought the consent of The Lecky Foundation to the deferral of the disbursement of funds arising from the sale of Ven House, Wycombe Square and South Pavilion and personal effects, pending the purchase of a third residence, and to ultimately purchase a third residence for Mrs. Lecky.

In the October 7, 2008 letter, the Trustees expressed the view that as it would be possible under the Will for all the after-tax proceeds to be used to purchase one replacement residence, it is reasonable that

the after-tax proceeds could also be used to buy up to three replacement residences for Mrs. Lecky. [ 21 ] The Lecky Foundation granted this request by Resolution dated October 8, 2008, whereby it approved the deferral requested, “...pending the purchase of a third residence and to ultimately purchase a third residence for the use of Effie Lecky, all in accordance with that certain letter of William J. Fowlis, dated... October 7, 2008." [ 22 ] On October 16, 2008, the Trustees purchased a new residence selected by Mrs. Lecky called Benbridge, Isle of Wight. Hennecker Mews is Mrs.

Lecky’s current main residence, and Benbridge is used as Mrs. Lecky’s Channel Islands vacation home. No third property was ever purchased. [ 23 ] On February 7, 2011, the Board of Directors of The Lecky Foundation resolved to pursue information on the current property and funds in the Ven House Trust and to demand the payment of the after tax excess proceeds of Ven House and the Ven House Personal Effects. The Board also resolved to terminate and withdraw its consent to any further deferral of the disbursement to the Foundation, considering that a reasonable amount of time had passed for Mrs.

Lecky to stabilize her housing arrangements. The Board of Directors stated in the

preamble to its resolution, inter alia , that the Foundation did not consent to any unlimited deferral of the disbursement of funds to the Foundation nor did it consent to any suggestion that Mrs. Lecky had some unlimited period in which to consider the purchase of a third residence. [ 24 ] On March 4, 2011, Martin Gifford, on behalf of The Lecky Foundation, asked the Trustees to transfer the excess proceeds held in the Ven House Trust to the Lecky Foundation, as well as all Ven House Personal Effects not being used by Mrs. Lecky.

At the present time, no funds have been paid to The Lecky Foundation. [ 25 ] On April 26, 2011, Mrs. Lecky asked the Trustees to use a large portion of the funds in the Ven House Trust to purchase a third home in the country, and proposed to downsize her London Home, Hennecker Mews, to help pay the cost. [ 26 ] In

summary, Mrs. Lecky, following Mr.

Lecky’s death, has had the Trustees purchase (and in two cases sell) the following properties selected by her, for use by her as her residences: December 2004 Sale of Ven House CAN$ 20,204,000 (after tax) December 2004 Purchase of Wycombe (15,785,000) Square, a house in London February 2006 Purchase of South Pavilion, (8,365,000) a country home in England Renovations to South (1,788,000) Pavilion, capitalized March 2006 Sale of Wycombe Square 12,738,000 (after tax) March 2006 Purchase of Hennecker Mews, (6,466,000) a mews house in London June 2008 Sale of South Pavilion 11,288,000 (after tax) October 2008 Purchase of Benbridge, on (4,337,000) the Isle of Wight Renovations to Benbridge, (367,000) capitalized

[ 27 ] As of May 31, 2011, the Ven House Trust consisted of:

(1) Hennecker Mews (appraised at a value of $7,644,000);

(2) Isle of Wight Property (appraised at a value of $3,185,200);

(3) CIBC Wood Gundy Account of $8,589,000; and

(4) Ven House Personal Effects (art and furnishings) of $3,889,000. In total, the sale of Ven House Personal Effects has generated after tax proceeds of $1,485,000. C. Financial Position of the Estate and Payments to Mrs. Lecky [ 28 ] In 2003, immediately following Mr. Lecky’s death, the Trustees provided Mrs. Lecky with advances towards her expenses. Following that, Mrs.

Lecky submitted to the Trustees of the Estate that her estimated living expenses relating to her standard of living were approximately ​22,000 per month. [ 29 ] During a meeting of the Trustees on October 5, 2004, the Trustees considered the nature of expenses and the standard of living acceptable to the Estate and to Mrs. Lecky. The Trustees acknowledged that the terms of the Will required them to utilize the income and capital of the Estate and the two Spousal Trusts to maintain the standard of living of Mrs. Lecky to the standard of living to which she had become accustomed during Mr.

Lecky’s lifetime. [ 30 ] Mr. Fowlis and Mr. Chan’s

interpretation of the Will is that the only mandatory distribution to Mrs. Lecky is the distribution of income from the Spousal Trust. As the only asset owned by the Spousal Trust is shares in RFL, the income that is required to be paid to Mrs. Lecky is the dividends on those statutes. As the Trustees did not anticipate the dividends on these shares to be sufficient for Mrs.

Lecky to maintain her standard of living, it appeared to them that it may become necessary to thereafter distribute capital from the Spousal Trust, secondly to distribute income from the Euphemia Sarah Ann Lecky Trust (Residual Trust), and thirdly to distribute capital from the Euphemia Sarah Ann Lecky Trust (Residual Trust) in order for Mrs. Lecky to maintain her standard of living. [ 31 ] It was the understanding of Mr. Chan and Mr. Fowlis that all income earned by the Spousal Trust was to be paid to Mrs.

Lecky and that the Trustees had the discretion to make payments of income and capital from the Residual Trust to Mrs. Lecky so that she could maintain the standard of living to which she had become accustomed during the lifetime of Mr. Lecky, taking into account the distributions of income and capital to Mrs. Lecky pursuant to the Spousal Trust. [ 32 ] In order to satisfy these obligations, a set of detailed guidelines relating to the expenses payable by the Estate in relation to Mrs. Lecky was proposed by the Trustees in November 2004 and provided to Mrs. Lecky (“Proposed Guidelines”).

These Proposed Guidelines were rejected by Mrs. Lecky and her counsel, in December 2004, on the basis that they were unacceptable in light of their

interpretation of the terms of the Will, in particular, with reference to the Trustees’ discretion concerning payments to Mrs. Lecky. [ 33 ] The Proposed Guidelines were the subject of ongoing negotiations between Mr. Fowlis and Mr. Chan on one hand, and Mrs. Lecky on the other, throughout 2005 and 2006. Mr. Fowlis and Mr. Chan’s position was that certain types of financial information were required to satisfy the Proposed Guidelines, and ultimately, to support decisions made by the Trustees in properly discharging their fiduciary duties. Accordingly, Mrs.

Lecky was asked to hire an accountant to provide the necessary accounting information in a budget which would list expenses relating to the expenditures covered by the Guidelines which Mrs. Lecky anticipated would be incurred. [ 34 ] Initially, Mrs. Lecky indicated that the Proposed Guidelines seemed very fair; however she expressed some concern about an invasion of her privacy. At a meeting of the Trustees in February, 2005, the Proposed Guidelines were discussed, and subsequently approved at a Trustees’ meeting in September 2005. It was decided at the February 2005 meeting that Mrs.

Lecky would find an accountant to help her prepare a budget to determine the cost of her living consistent with the Proposed Guidelines. Mrs. Lecky therefore engaged the services of Mr. Nigel Eastaway, an accountant in London, whose costs would be paid from the Estate. [ 35 ] On January 23, 2006, Mr. Fowlis sent Mrs. Lecky a copy of the Proposed Guidelines and specifically requested a budget from Mrs. Lecky which would provide an itemized listing of expenditures covered by the Guidelines that she anticipated would be incurred.

He reiterated that a budget and a reconciliation of actual expenses incurred to the budget was essential for the Trustees of the Estate to properly discharge their duties. [ 36 ] Eventually, a budget for Mrs. Lecky of ​39,000 per month was proposed by Mr. Eastaway. This budget was reviewed at a Trustees meeting convened on June 21,2006 and a monthly budget of ​36,000 was agreed upon based on the Proposed Guidelines. It was later decided that the ​36,000 monthly payment would be kept in place to December 2008, and the amount revisited in the spring of 2009

and thereafter every two or three years. [ 37 ] On March 26, 2009, Mr. Eastaway sent Mr. Fowlis a budget for the forthcoming year proposing a payment for Mrs. Lecky of ​45,000 per month. Mr. Fowlis responded on April 1, 2009, stating that the Trustees required a comparison of the actual 2006 to 2008 expenses incurred to budgeted items and not simply a budget. Mr. Eastaway communicated his view that a comparison of actual expenses to budgeted items would be a massive amount of work, was not practical, and he did not think it was appropriate. Mr. Fowlis then explained in a reply letter to Mr.

Eastaway that the request for financial information was to support the decisions of the Trustees and was in no way intended to be intrusive or overly inquisitive. [ 38 ] At a Trustees’ meeting on September 4, 2009, Mrs. Lecky stated that providing receipts for her actual expenses was an invasion of her privacy. She later wrote to Mr. Fowlis and Mr. Chan describing her past standard of living, her

interpretation of certain terms of the Will, and stated that the Will means that the cost of her past lifestyle should be quantified and she should be provided that sum, even if she might not necessarily need that amount. In her view, she was entitled to receive this amount and should be allowed to spend it as she wished. She retained a solicitor in October 2009, who stated that in his

interpretation of the Will, Mrs. Lecky was under no obligation to provide the financial information requested by the Trustees. [ 39 ] It is the position of the Trustees that distributions to Mrs. Lecky are not intended to provide for the accumulation of capital. Among the concerns of the Trustees is that payments to Mrs. Lecky may exhaust the capital of the Spousal Trust and the Residual Trust prior to her death. Mrs. Lecky’s date of birth is July 19, 1951. In his affidavit, Mr. Chan says that assuming Mrs.

Lecky lives for another 30 years, there is a risk that the capital of the Estate will be depleted before the end of the 30 year period. Mr. Fowlis and Mr. Chan believe this risk must be considered in the exercise of their fiduciary duties as Trustees. [ 40 ] A further concern of the Trustees is that if the Estate returns are lower or expenses higher than they anticipate, or if Mrs. Lecky lives more than 30 years, the income and capital of the Estate may not allow for the continuity of payments to Mrs. Lecky during her lifetime. 2. Overview of Applications [ 41 ] There are three applications before the Court.

Two applications have been filed by the Trustees, William J. Fowlis and John K. Chan, being a majority of the Trustees: 1) an application for advice and direction on the

interpretation of the Will; 2) an application to pass accounts for the period from February 26, 2006 to February 25, 2008. A third application has been filed by The Lecky Foundation, seeking declarations and other relief relating to the proceeds from the sale of the Ven House and the Ven House Personal Effects. 3. The Trustees ’ Application for Advice and Direction Issue 1 [1] : Duties/Powers of the Trustees under Clause 5(

c) of the Will [ 42 ] This interpretative question raises the issue of the scope of the duties and powers of the Trustees under Clause 5(

c) of the Will: Issue 1: Under Clause 5 (

c) of the Will, do the Trustees have the discretion whether to pay any, some or all of the annual income of the Residual Trust to or for Mrs. Lecky or are the Trustees Required to pay all of the annual income of the Residual Trust to or for Mrs. Lecky and only have discretion with respect to the timing of payment, manner of payment and the amounts of individual payments while so paying out all of the annual income to or for Mrs. Lecky? [ 43 ] It is the Trustees’ understanding that the Will imposes the obligation to pay all of the income from the Spousal Trust to Mrs.

Lecky until her death, and grants them the power to pay part of the capital of the Spousal Trust and the part of the income and capital of the Residual Trust to Mrs. Lecky so that she shall continue to enjoy at least the standard of living to which she had become accustomed during Mr. Lecky’s lifetime. [ 44 ] Specifically, the Trustees seek clarification as to the extent of their obligations regarding the income from the Residual Trust.

Clause 5(

c) of the Will states that until the Division Date, the Trustees, ...shall pay and apply on an annual basis the whole income of the Trust... [45] This suggests a mandatory duty to pay all of the income from the Residual Trust to Mrs. Lecky.

However, this phrase isfollowed by discretionary language: ...as my Trustees shall from time to time in their absolute discretion determine, to or for the benefit of my Beneficiary at such time ortimes in each calendar year and in such manner and in such amounts and in such shares or proportions as my Trustees shall in theirabsolute discretion from time to time determine advisable, to the intent and purpose that my Beneficiary shall continue to enjoy at leastthe standard of living to which she has become accustomed during my lifetime, taking into account the distributions of income andcapital to [Mrs.

Lecky] pursuant to the Spousal Trust. [46] In other words, what requires

interpretation is whether the discretion relates to: 1) the amount of the income to be paid to Mrs.

Lecky under the Residual Trust (in which case the Trustees are not required to pay Mrs.Lecky all the income from the Trust); or 2) the timing, manner and amount of each payment (in which case the Trustees must pay all of the Residual Trust’s income to Mrs.Lecky, but may decide when and how much is paid, as long as the total income is paid). [47] The Trustees say that the requirement to take into account the distributions from the Spousal Trust, as specified in Clause5(c), could be given no meaning if they were required to pay Mrs. Lecky all the income from the Residual Trust.

The Lecky Foundationand the Lecky children are in agreement. They take the position that it is within the discretion of the Trustees to determine whether,when and to what extent income from the Residual Trust ought to be paid to Mrs. Lecky. In their view, the Trustees are under noobligation to pay annually all of that trust’s income to Mrs. Lecky. [48] Mrs.

Lecky submits that the Will grants discretion to the Trustees solely to the extent that they may determine the timing,manner and amount of each payment and that based on the language of the Will and the surrounding circumstances, the Trustees areultimately required to pay her all of the income of the Residual Trust. A. The Legal Principles [49] On this application the Court is tasked with interpreting John Lecky’s Will to determine the nature and scope of the dutiesimposed and the powers conferred upon the Trustees. However, the Court cannot exercise discretion on behalf of Trustees.

The Court’sprimary function is to interpret the Will while the function of Trustees is to exercise the discretion vested in them. [50] As discussed in McNeil v. McNeil, 2006 ABQB 636, 408 AR 144 [McNeil] at paragraphs 85 and 87, once the nature and scopeof those duties and powers have been determined by the Court, it is solely the task of trustees to decide how best to employ the powersbestowed upon them in fulfilling their duties under the Will. The policy reason for this is patent: a testator’s intention that his executorsand not the court exercise their judgment in administering his estate is to be respected.

So long as they act within the scope of theirdiscretion, the Trustees are to be afforded considerable deference. [51] It is well-established that the Court’s main objective in the

interpretation of a will is to discover the subjective intent of thetestator at the time he or she made the will: see e.g. Daniels v. Daniels Estate (1991), (AB CA), [1992] 120 AR 17, 85 DLR (4th) 116, leave to appeal to SCC refused, [1992] 4 WWR lxix [Daniels]. Determining the testator’s intent is neverthelesscircumscribed by rules regarding the admissibility of evidence.

[52] The jurisprudence dealing with wills and estates has distinguished between two types of evidence: 1) evidence of surroundingcircumstances; and 2) direct evidence of the will-maker’s intent. According to James McKenzie, author of Feeney’s Canadian Law ofWills, loose-leaf (Markham: LexisNexis Canada Inc., 2000) [Feeney’s], at paragraph 10.25, the former type of evidence is generallyadmissible for

interpretation, while the latter is generally inadmissible. However, it is the author’s view that this differential inadmissibility in the law of wills is likely to evolve with the new “principled approach” to the admission of hearsay evidence. [53] The fundamental difference between “indirect evidence of surrounding circumstances” (or “armchair evidence”), and “directevidence of intent” is explained by Bayda, J.A. (as he then was) in Haidl v.

Sacher (1979), (SK CA), [1980] 1 WWR293, 2 Sask R 93, 106 DLR (3d) 360 (CA) [Haidl] at 363: ...surrounding circumstances' as used in these reasons refers only to indirect extrinsic evidence. It has no reference whatever to directextrinsic evidence. It has no reference whatever to direct extrinsic evidence of intent, the admission of which is governed by a differentset of conditions.

The former consists of such circumstances as the character and occupation of the testator, the amount, extent andcondition of his property; the number, identity, and general relationship to the testator of the immediate family and other relatives; thepersons who comprised his circle of friends, and any other natural objects of his bounty. (see Feeney, The Canadian Law of Wills:Construction (1978), p. 17). An example of the latter is the instructions which the testator gave to his solicitor for the preparation of thewill (as one finds, for instance, in Reishiska v. Cody (1967), (SK CA), 62 W.W.R. 581). I.

Indirect Evidence of the Surrounding Circumstances (the “Armchair Rule”) [54] The classic literal/objective approach to the evidence of surrounding circumstances is that such evidence is inadmissible. Thisapproach to the

interpretation of wills limits the court of construction to consideration of the objective meaning of words contained in thewill. However, the inadequacies of this strict constructionist/objective approach have become apparent, and modern-day case-lawfavours a more liberal, subjective approach to construction which permits evidence of surrounding circumstances to be admitted. I. The “Literal/objective Approach” to

Interpretation of Wills [55] Historically, courts followed the long-established tradition in the law of

interpretation of wills, whereby a court mustundertake the process of construction of a will without regard to any evidence other than the words of the will itself. [56] English case law established a strict application of the rules excluding extrinsic evidence. In cases such as Doe d. Gwillim v.Gwillim (1833), 2 LJKB 194, Grey v. Pearson (1857), HL Cas 61, and Simpson v. Foxon, [1907] p 54 at 57, extrinsic evidence wasexcluded altogether.

The courts of construction saw it as their duty to construe the testator’s intention as it was expressed in the will, andnot to ascertain the testator’s actual mental intentions. Further, the court’s primary concern was construing the meaning of the words inthe will. The expressed intention of the testator was considered to be his or her actual (subjective) intention: Feeney’s, supra at para 10.3. [57] Canadian jurisprudence is also replete with examples of the application of this strict objective approach to the

interpretation ofwills (see, e.g., Augur v. Beaudry, (UK JCPC), [1919] 3 WWR 559, [1920] AC 1010, 48 DLR 356 (PC); Re Warren(1922), 52 OLR 127 at 129 (HC); Re McIntosh, (MB KB), [1923] 2 WWR 605 at 606 (Man KB); Tottrup v. Patterson(1969), (SCC), [1970] SCR 318 at 322, 1 WWR 388, (sub nom Re Otterwell) 9 DLR (3d) 314 at 316). [58] In Grover v. Burningham (1850), 5 Exch 184 at 193, the function of the court of construction was summarized by BaronWolfe as one of “quod voluit by interpreting quod dixit.” This strict approach to

interpretation was termed by Lord Denning “thenineteenth-century view” in his dissenting judgment in Re Rowland, [1963] 1 Ch. 1 at 9-10, [1962] 2 All ER 837, 3 WLR 137 (CA). [59] Modern day courts now generally acknowledge that at some point in the process of construction of a will, consideration is tobe given to surrounding circumstances. II. The “Subjective/Liberal Approach” to

Interpretation of Wills

[60] Current Canadian (and particularly Alberta) case-law takes a much more flexible, subjective approach to construction, whereevidence of surrounding circumstances is admissible. There are two streams of authority within this approach. [61] One view is that the surrounding circumstances are admissible from the start, whether or not there is an ambiguity on the faceof the will and that the ordinary meaning rule of construction should be applied in light of those circumstances.

The other view is thatcourts should “pause” before considering surrounding circumstances, beginning with the ordinary meaning rule of construction withouttaking into account the surrounding circumstances at all.

Under this second approach, the meaning ascertained from the words of the willshould be applied unless the meaning is ambiguous or unclear, in which case the court may refer to evidence of surroundingcircumstances to resolve the ambiguity. [62] This difference in approach is summarized by the Alberta Court of Queen’s Bench in Re Davis Estate, [1983] 51 AR 377, 15ETR 296, which in turn references Bayda, J.A.’s decision in Haidl v. Sacher at page 296: Does the law require the 'ordinary meaning' rule of construction to be applied in cl. (

h) without admitting and taking into account anysurrounding circumstances at all and that the meaning so ascertained shall prevail unless it is found that such an application produces ameaning which is unclear and ambiguous in which event such surrounding circumstances may then be admitted and looked at (procedureA)? Or, does the law require those surrounding circumstances to be admitted at the start and that the 'ordinary meaning' rule ofconstruction be applied in the light of those surrounding circumstances (procedure B)?

In Re Davis, the court concluded that evidence of surrounding circumstances was admissible from the beginning of the process ofconstruction, following the intentional approach laid down in Haidl v. Sacher. The Haidl approach (or “Procedure B”) has been therecent trend in Canadian cases. This approach was again followed in the recent case of Decore v. Decore, 2009 ABQB 440, 179 ACWS(3d) 237 [Decore]. [63] An application of the “pause” approach, (or what is described in Haidl as “Procedure A”), is seen in the recent Alberta case ofMcNeil, supra.

In that case, the Court held that where the words of the will are clear, there is no need to resort to evidence of surroundingcircumstances. At paragraphs 111 to 113, the Court states: ( ... ) Therefore, evidence of a testator's intention that cannot be supported by the will itself is not admissible. When the language of the will isambiguous as to the intention of the testator, however, evidence of surrounding circumstances known to the testator when the will wasmade is admissible under the so-called "armchair rule"; see, for example, Venczel v. Kovari (2000), 32 E.T.R. (2d) 137 (Ont. Sup. Ct. J.)at para. 10.

There is no need to resort to the armchair rule in this case as Frederick's intention is clear from the will... [64] Based on the approach taken by the Court in McNeil, “armchair evidence” is admissible only when the language of the will isambiguous. In other words, when applying Procedure A, the appropriate method for arriving at a testator’s intention is to begin byreading the will, resorting to extrinsic evidence only when the words of the will are unclear or ambiguous. [65] Irrespective of the procedure adopted under the subjective approach to

interpretation, regard must be had to the words of thewill. As explained by the Alberta Court of Appeal in Daniels, quoting National Trust Co. v. Fleury, (SCC), [1965] SCR817 at p. 829, 53 DLR (2d) 700, in construing the will, one must start with the words of the will, having regard to the Rules ofConstruction as an aid in

interpretation: In the construction of wills, the primary purpose is to determine the intention of the testator and it is only when such intention cannot bearrived at with reasonable certainty by giving the natural and ordinary meaning to the words which are used that resort is to be had to theRules of Construction which have been developed by the courts in the

interpretation of other wills. [66] The objective Rules of Construction must not, however, obscure the subjective intention of the testator. They are by no means

rules of law which are binding on the testator, but merely rules of convenience applied by the Court. In Re Coughlin, (ON SC), [1982] 12 ETR 59, 36 OR (2d) 446, Rutherford, J. set out the approach the Court must utilize in interpreting a Will in thefollowing manner at paragraphs 5 and 6: The starting point, and in a sense the sole duty of the Court in construing the wording of a will, is to determine the subjective intention ofthe testator: 'If the Court is able to deduce the testator's intention from the will, that will prevail.

If the court cannot deduce his intention - and only ifit cannot - it adopts the so-called 'rules of construction'. These are not in any sense rules of law which are binding on the testator; theyare more rules of convenience applied by the court, more often than not In order to give some, rather than no, meaning to the will.'(Mellows, The Law of Succession (3rd ed., 1977), at p. 148.) 'In construing a will, the aim of the Court of construction should be to determine the precise disposition of the property intended by thetestator.

The Court should attempt to ascertain, if possible, the testator's actual or subjective intent as opposed to an objective intentpresumed by law.' (Feeney, The Canadian Law of Wills: Construction (1978), at p. 1) It is precisely because it is the subjective intent which is to be determined from the instrument that the citation of past cases is so oftensaid to be of little value in will construction cases." .....

In construing a will, furthermore, 'the Court has the right to ascertain all the facts which were known to the testator at the time when hemade the will, and thus to place itself in the testator's position at that time' (Mellows, supra, at p. 167)." [67] This approach was used by the Alberta Surrogate Court in Re Allan Estate, (AB KB), [1994] 161 AR 292,50 ACWS (3d) 1355, per Mason, J. [68] In summarizing the armchair rule of evidence of surrounding circumstances, it is noted in Feeney’s, supra, at paras1 1.7411.76, 11.79 that Canadian courts are not only free to consider surrounding circumstances, but that they should take the “subjectiveapproach” to the ordinary meaning of words by applying the armchair rule to its fullest extent.

Under the subjective approach, a courtgives a word its ordinary meaning in light of all the facts and circumstances surrounding the life of the testator, given that the meaning ofwords is to be regarded as the meaning they had for the testator. Indeed, the most recent trend in Canadian cases seems to indicate thatevidence of surrounding circumstances should be taken into account, together with the words of the will, in all cases before a finaldecision is made by the court as to the meaning of those words: see: Feeney’s, at para 10.54. II.

Direct Evidence of Intent [69] The traditional approach to direct evidence of intent has been to categorize it as inadmissible for the purposes of determiningthe meaning of words used by the testator.

Examples of direct extrinsic evidence of intent include the instructions given to the solicitorfor the preparation of the will and declarations as to the persons or property which a will-maker meant to include under a particularexpression. [70] Direct evidence has historically been deemed inadmissible in all but two situations: 1) where there is “equivocation”; and 2)cases where gifts have been made to persons known by the will-maker to have been deceased at the time of making the will: Feeney’s,supra, at paras 11.86-11.102).

Neither of these situations arise in the present case. [71] A more liberal trend in the treatment of direct evidence appears to be surfacing in Canadian case-law. In Re Bruce, [1998] 24ETR (2d) 44, 80 ACWS (3d) 1278 at 12-19 of 20 (YTSC) and in Johnson Estate v. Forbes, 2007 MBQB 101 , [2007] 216 ManR (2d) 156, 33 ETR (3d) 123 (QB), trial judges noted that there may be cases where direct evidence might very rightly be admissible,although in both cases, the judges did not admit the evidence.

[72] This type of evidence is, by definition, hearsay. The law excluding hearsay evidence was originally rooted in the dangers thatare presented when a declarant is not before the court. As stated in R. v. Abbey, (SCC), [1982] 2 SCR 24, at 41, 138DLR (3d) 202 (SCC): The main concern of the hearsay rule is the veracity of the statements made.

The principal justification for the exclusion of hearsayevidence is the abhorrence of the common law to proof which is unsworn and has not been subjected to the trial by fire of cross-examination. [73] Several policy reasons for restricting the admissibility of extrinsic evidence which may be probative of the testator’s intent ormeaning are outlined by Clackson, J. in Decore, supra, at para 8. Firstly, he describes the danger that a flood of spurious claims backedby hearsay will clog the courts and bring chaos to the orderly administration of estates.

Secondly, he states there is a danger that thewritten document will be supplanted by an oral or a verbal direction. Additionally, one might add to the second policy concern that thewill is the testator’s last opportunity to speak for himself. [74] Despite these concerns, the development of a more liberal approach to extrinsic evidence may be required, in light of theevolution of hearsay rules.

In my respectful view, Clackson J. correctly held at paragraphs 9 to 12 of the Decore case that the evidentiarylandscape has evolved, resulting in a more flexible approach to hearsay evidence under the Supreme Court of Canada’s “principledapproach”: The Supreme Court of Canada in R. v. Starr (2000), 2000 SCC 40 , 147 C.C.C. (3d) 449 confirmed the process it had begun inR. v. Khan, (SCC), [1990] 2 S.C.R. 531 and R. v. Smith (1992), (SCC), 75 C.C.C. (3d) 257.

Describedas the principled approach to hearsay, the Supreme Court of Canada identified the twin requirements of necessity and reliability as thetouchstones for the admission of hearsay evidence. Any evidence which is not the best evidence but which is necessary is potentiallyadmissible if it is reliable. Necessity in this context means the proposed evidence will advance the inquiry and there is no better existingsource for the evidence. Reliability, in relation to admissibility, means that the evidence has trustworthiness.

Additionally, where thereexists a traditional exception to the rule against the admission of hearsay evidence, the evidence will be presumptively admissible unlessit fails to meet the required necessity or lacks sufficient threshold reliability. The Supreme Court of Canada refined the principled approach in R. v. Khelawon, 2006 SCC 57 , [2006] S.C.J. No. 57. Indetermining threshold reliability, it is now appropriate to look at the circumstances surrounding the hearsay event.

As a result of this new direction, the exclusion of extrinsic evidence of intent, as hearsay, even though justifiable on policy groundsrequires further examination. Starting from the premise that all relevant and circumstantially trustworthy evidence is or ought to be admissible, there must be aprincipled reason to refuse to receive such evidence. In the case of a will where the testator's intention is in issue, any evidence on thesubject which is probative should be received. Plainly, direct evidence of the context in which the testator lived and wrote her will wouldbe helpful.

Probative evidence of her actual intent would also be helpful. Of course the proposed evidence is not probative unless it hassufficient potential reliability to actually bear upon the issue. [75] The Court held at paragraphs 14 and 15: In my view it would be wrong to reject what might be compelling evidence in pursuit of efficiency or to preclude potential spuriouschallenges. The prohibition is simply too broad.

However, I think it is reasonable to require the party seeking admission of such evidenceto establish that some part of the testamentary instrument is illogical, irrational, inconsistent, incongruous, unintelligible, confusing oruncertain and that the proposed evidence is directed at resolving the issue. The burden can be discharged by demonstrating a reasonableprobability that one or more of the described ills is apparent in the document in the context of the circumstances which existed at thetime the will was written.

Additionally, the evidence proponent should be able to establish that the claimed deficiency is reasonably supportable by evidence fromsources other than the proposed evidence. That independence will protect against unworthy claims. Beyond that, I do not think the law

should go. [76] These passages clearly favour a review of the traditional exclusion of direct evidence, in keeping with the current rulesregarding hearsay. Similarly, in discussing the

interpretation of a codicil, Justice Clearwater employed a liberal approach to extrinsicevidence in establishing the will-maker’s intent, in order to avoid an intestacy in the case of Wittick Estate v.

Williams Estate, 2009MBQB 140 , [2009] MBQB 140, 241 Man R (2d) 58. [77] A liberal approach to admission of evidence of the testator’s intent has also been recommended by the Alberta Law ReformInstitute (ALRI) in its report entitled Wills and the Legal Effects of Changed Circumstances: Final Report No. 98 (Edmonton: AlbertaLaw Reform Institute, 2010), at paragraphs 198 et ss. [78] The Legislature of the Province of Alberta has accepted the recommendation of the ALRI; it has passed the Wills andSuccessions Act, Statutes of Alberta, 2010 Ch. W-12.2.

This was assented to on December 2, 2010 and is expected to be promulgated inearly 2012. With respect to the

interpretation of wills and the evidence that the court should consider in determining the testator’sintention the Act contains

section 26 which is set out below: 26. A will must be interpreted in a manner that gives effect of the intent of the testator, and in determining the testator’s intent theCourt may admit the following evidence: (

a) evidence as to the meaning, in either an ordinary or a specialized sense, of the words or phrases used in the will, (

b) evidence as to the meaning of the provisions of the will in the context of the testator’s circumstances at the time of the making of thewill, and (

c) evidence of the testator’s intent with regard to the matters referred to in the will. [79] It is also noteworthy that in the past, certain types of direct evidence of intent were also excluded under the principle of thesolicitor-client privilege. The issue of solicitor-client privilege arises in the context of direct evidence of intent provided by a will-maker’s solicitor after the will-maker’s death, given the solicitor-client privilege against non-disclosure continues even after the death ofthe client (see Bullivant v. A.G. Victoria, [1901] AC 196 at 206 (HL); Stewart v.

Walker (1903), 6 OLR 495 (Ont CA) at 497). [80] However, as stated in Goodman v. Geffen, [1987] 80 AR 47 (Alta QB), rev’d on other grounds 1989 ABCA 206 , [1989] 98 AR 321, 61 DLR (4th) 431 (Alta CA), aff’d (SCC), [1991] SCR 353, 125 AR 81 (SC), at para 24, anexception to the above principle has developed in cases where the succession of property turns on the existence,

interpretation or validityof a will. The rationale for this exception is based on the fact that in such circumstances, it is both in the interest of the client and in theinterest of justice that the solicitor give testimony. [81] In the cases of Stewart v. Walker (1903), 6 OLR 495 (CA), Langworthy v. McVicar (1914), 25 OWR 297, 5 OWN 345 and ReOtt, (ON SC), [1972] 2 OR 5, 7 RFL 196, 24 DLR (3d) 517, which dealt with the issue of the testator’s intention in thepreparation or revocation of a will, solicitor-client privilege was discussed in relation to direct evidence of intent.

The position taken inthose cases was that the interests of justice to discover the true intentions of the testator outweighed the purpose underlying solicitor-client privilege which is to promote free and full disclosure between client and solicitor. [82] Given the policy reasons behind the exception to the solicitor-client privilege, the principled approach to hearsay evidence,and the recommendations of the ALRI, it appears that the law is moving in the direction of relaxing the rule excluding direct extrinsicevidence of intent. III.

Summary:

[83] It is a well-established principle that the intention of the testator is to be ascertained from the whole will (see, for example,Marchuk v. Marchuk, (SK KB), [1965] 52 WWR 652 (Sask QB)). In addition, the meaning of the words in every partof the will is to be determined according to the testator’s general intention (see, e.g. Re Anderson, (MB KB), [1979], 1Man R (2d) 143, sub nom North Canada Trust Co. v.

Lindsay (QB)). [84] At paragraph 7 of Decore, supra, the Court summarized the law with respect to armchair and direct extrinsic evidence ofintent when interpreting a will: The law with respect to armchair and extrinsic evidence is well developed and reasonably straight forward and may be summarized asfollows: 1. Where the testamentary instrument is clear and unambiguous, no evidence beyond the document is received. Presumably becausenone is necessary. 2. Where the testamentary instrument is unclear as to intent or in construction, armchair evidence is receivable.

Again, presumably,because that evidence will bring clarity. In my view that rule is too narrow. I accept the view of Bayda J.A. (as he then was) in Haidl v.Sacher (1979), (SK CA), 106 D.L.R. (3d) 360 (Sask. C.A.), as adopted by Egbert J. in Davis, Re, [1983] A.J. No. 744(Alta. Q.B.). I conclude that the rule has been relaxed such that in any case where there is an apparently legitimate contest over theconstruction of a testamentary instrument, context or armchair evidence is likely to assist in resolving the dispute and should be received. 3.

Where a testamentary instrument is ambiguous, extrinsic evidence of intent is receivable. In this context ambiguity does not simplymean competing possible

interpretations. The

interpretations must be equally plausibly intended. 4. Where there is reason to believe that the testator made a mistake and the mistake was one of fact, not law, both armchair evidence andextrinsic evidence may be received.

Where the alleged mistake is established, the offending portions of the instrument are struck andwhat remains is then construed. [85] While I acknowledge that some authorities limit the circumstances when extrinsic evidence is admissible, I share the view ofClackson, J., who stated at paragraphs 2 and 3 in Decore that the law has now evolved to the point where armchair or context evidence isalways admissible, when construing a will, and that extrinsic evidence of intent which is potentially probative, necessary and mayreasonably be true, is also admissible. B.

Analysis: [86] In order to determine the scope of the Trustees’ discretion and their obligations under Clause 5(

c) of the Will, I must beginwith the words of the Will, in light of the surrounding circumstances at the time the Will was created. As indicated in Haidl, supra, atparagraph 7, the proper approach to

interpretation when applying Procedure B, requires the application of the “ordinary meaning rule” ofconstruction as the initial step and that it should be done in the light of the contents of the whole will. I. The Words of Clause 5(

c) and Context of Clause 5 [87] Both sides argued an

interpretation of Clause 5 that favoured their position. Central to their arguments was how to interpretthe word “shall”. Each side took the legal principles that are applied in determining whether shall is imperative or directive in the contextof Clause 5 as a whole. The law does recognize that in some cases “shall” means “shall” and sometimes it means “may”. An objectiveapproach reveals that “shall” is most commonly interpreted as imperative or mandatory, particularly under the strict standards of legal drafting (see Bryan A. Garner, ed., Black’s Law Dictionary, 9th ed., s.v. “shall”; Merriam-Webster’s Collegiate Dictionary, 10th ed., s.v.“shall”). Moreover, the

Interpretation Act, RSA 2000, c I-8, s. 28(2)(

f) provides that in an enactment, the word “shall” is to be construedas imperative. [88] However, counsel for the Lecky Children argue that Black’s Law Dictionary, and courts have recognized in R. v. H.(J.), (ON CA), [2002] 155 OAC 146, 161 CCC (3d) 392 and Lavallee v. Alberta (Securities Commission), 2009 ABQB 17, that

in some circumstances, “shall” may also be interpreted as directive, and not a requirement. They submit that “shall” can variously mean: “has a duty to ” ; “ is required to ”; “ should ”; “ may ”; “ will ”; or “ is entitled to ” and that different meanings may therefore be given to this word depending on the context in which it is used. [ 89 ] The task of the Court, then, is to determine the subjective meaning Mr. Lecky intended the word to have, in light of the surrounding circumstances and a reading of the whole Will.

Within the context of the Will as a whole, there are reasonable arguments to find that ‘shall’ means ‘may’ and likewise, reasonable arguments to find that ‘shall’ means ‘shall’. i)Clause 5(

c) Grants Discretion over Income Distribution [ 90 ] The Lecky Foundation points out that the word “shall” appears four times in Clause 5(

c) of the Will; reading each “shall” within its own context, it is apparent that at least three of them are not used in the imperative or mandatory sense. Two examples where the word “shall” is used in the permissive sense are found in the phrases: “... as my Trustees shall from time to time in their absolute discretion determine ”; and, “... as my Trustees shall in their absolute discretion from time to time determine advisable .”The word “shall”in these phrases is not used in the mandatory, imperative sense. A more reasonable

interpretation of the word “shall” in these contexts is “ may ” or “ are entitled to ”. [ 91 ] A third example is found in the phrase: “... to the intent and purpose that my Beneficiary shall continue to enjoy at least the standard of living to which she has become accustomed ”. The Lecky Foundation is of the view that this phrase was not intended to mean that Euphemia Lecky “ has a duty to ” or “ is required to ” enjoy at least the standard of living to which she has become accustomed. How could the Will force her to do so?

A more reasonable construction, they submit, is that she “ may ” or “ is entitled to ” enjoy such a standard of living. [ 92 ] It is a well-established rule of construction that a word is presumed to have the same meaning in a document regardless of how many times it is used. In light of this rule, and because at least three of the four instances of the word “shall” in the same Clause 5(

c) appear to actually mean “ may ” or “ entitled to ”, it is reasonable to conclude (consistent with such usage) that the word “shall” in the phrase “ ...my trustees shall pay and apply on an annual basis the whole of the income of the Trust... ”, is also intended to mean “ may ” or “ are entitled to ”. [ 93 ] This construction is further supported by the language directly following the phrase “ my Trustees shall pay and apply ...” in Clause 5(

c) of the Will: ...my Trustees shall pay and apply on an annual basis the whole of the income of the Trust as my Trustees shall from time to time in their absolute discretion determine, to or for the benefit of my Beneficiary... [ 94 ] If the Trustees were required to pay and apply the whole of the income of the Residual Trust to or for the benefit of Mrs. Lecky on an annual basis, as she suggests, then what is it that they are required to determine “ from time to time in their absolute discretion ”? [ 95 ] Another consideration in interpreting Clause 5(

c) of the Will arises from this language: ...to the intent and purpose that my Beneficiary shall continue to enjoy at least the standard of living to which she has become accustomed during my lifetime, taking into account the distributions of income and capital to EUPHEMIA SARAH ANN LECKY pursuant to the Spousal Trust;... [ 96 ] If the Trustees were required to pay all of the income from the Residual Trust to Mrs. Lecky on an annual basis, why would amounts paid to her from the Spousal Trust need to be taken into account?

The strong inference to be drawn from this language is that whether, and to what extent, Mrs. Lecky should receive interest from the Residual Trust is a matter of the Trustees’ discretion.

[ 97 ] A final issue of

interpretation of the Will is found in the following language of Clause 5(c): ...to or for the benefit of my Beneficiary at such time or times in each calendar year and in such manner and in such amounts and in such shares or proportions as my Trustees shall in their absolute discretion from time to time determine advisable... [ 98 ] The Lecky Foundation argues that as explained in Feeney ’s , at paragraph 11.11, each word in a will is presumed to have a meaning, and when different words are used, they are presumed to have a different meaning.

In light of these rules, the Lecky Foundation raises the question of how one might reconcile the various meanings to be ascribed to the words “ amounts ”, “ shares ” and “ proportions ”. If all of these words are simply intended to mean that the Trustees may vary the sums paid to Mrs. Lecky from time to time, then how are they different from one another? [ 99 ] The Lecky Foundation also takes the position that the use of the word “ shares ” is commonly used to describe one’s rights vis- à-vis a third party.

The words “ shares ” and “ proportions ” appear to be treated as having fairly similar meanings given that they are separated by an “or”; whereas they would together appear to have a more distinct meaning from the word “ amounts ”, as they are separated from that word by an “and”. While “ shares ” and “ proportions ” may be viewed as synonyms within this context, together they must mean something qualitatively different than simply varying amounts paid to Mrs. Lecky.

A reasonable construction of those words is that they are intended to mean sums paid to her in relation to the Residual Beneficiaries. [ 100 ] Further, the Lecky Foundation and the Lecky Children submit that Mrs. Lecky’s position that the income of the Residual Trust must be paid to her each year without the exercise of discretion has the effect of rendering redundant the first discretion contained in Clause 5(

c) as the second reference to discretion applies to when, to whom and in what amounts the income is to be paid. If, as Mrs. Lecky submits, all of the income must be paid to her annually, there is no reasonable room for the functioning of the first reference to ‘ their absolute discretion ’. Additionally, by including the proviso that the discretion is to be exercised for the purpose of allowing Mrs.

Lecky to ‘continue to enjoy ’ at least the standard of living to which she had become accustomed, there is no real purpose for the inclusion of this reference in a clause which provides the Trustees a discretion only as to when, in what manners and amounts all of the income is to be paid out during each calendar year. ii) Clause 5(

c) does not Grant Discretion over Income Distribution [ 101 ] First, nowhere in Clause 5 is undistributed income dealt with. An obvious explanation of this failure to mention undistributed income is that all the income should be paid to Mrs. Lecky. [ 102 ] Second, it is difficult to reconcile a permissive reading of “ shall ” in Clause 5(

c) with the use of the word “ may ” used in the Clause 5(d), the subparagraph which immediately follows the clause at issue. This clause, which relates to payment of the capital from the Residuary Trust to Mrs. Lecky, is identical in nearly every respect to Clause 5(

c) except that it uses the permissive “ may ” instead of the word “ shall ”. As stated above in discussing the meanings of the words “ amounts ”, “ shares ” and “ proportions ”, the overriding context of a Will dictates that where different words are employed with reference to a given subject matter, it will be assumed that the testator intends a different meaning when different expressions are employed. This same reasoning, applied to the terms “ shall ”, and “ may ” contained in Clauses 5(

c) and 5(

d) dictates that both cannot be permissive. [ 103 ] There is another difference between Clauses 5(

c) and 5(d). In Clause 5(

c) the phrase “the whole of the income” is to be paid whereas in Clause 5(d), it reads “the whole or such part or parts of the capital”. [ 104 ] Next, it is arguable that no discretion is granted to the Trustees under Clause 5(

c) until after the imperative direction “ shall pay ”, that is to say, the word precedes the direction to the Trustees to pay the income of the Residuary Trust. [ 105 ] Additionally, Clause 5(

e) of the Will allows the Trustees to make distributions from the Residual Trust to the Lecky Foundation even before Mrs. Lecky’s death. But the permitted distribution under Clause 5(

e) is of capital only. Had Mr. Lecky intended that distribution of the income of the Residual Trust would be discretionary, he would have authorized early distribution to the Lecky foundation of both income and capital. He did not do so. [ 106 ] Mrs. Lecky further raises the argument that the absence of a clause in the Will dealing with uncapitalized income from the Residual Trust produces an intestacy if the Trustees have discretion under the Residual Trust.

iii) Conclusion [ 107 ] Each side parsed Clause 5(

c) into small phrases. Each side compared the same words when used in different parts of the clause or in another clause. That is not necessary. While there is an ambiguity, it is much simpler than was argued. If you read Clause 5(

c) up to the last comma (just after the word ‘advisable’) the clause can be easily read to conclude that the Trustees were given discretion over the timing and method of payment of the income, but that the whole of the income was to be paid to Mrs. Lecky. The word ‘whole’ is important in the clause. The confusion arises only when you look at the first part of the clause in conjunction with the last phrase. How that phrase was inserted in the will will be addressed below.

However because the clause is not clear, it creates an uncertainty so I turn to the whole Will and the surrounding circumstances and whether there is any admissible direct evidence. II. The Whole Will in Light of The Surrounding Circumstances: [ 108 ] Mr. Lecky’s Will was created in March of 2001. Mr. Lecky called Mr. Fowlis on Thursday, March 1 st and signed the Will one week later, on Thursday, March 8, 2001. Mr. Lecky was trained as a lawyer, so presumably had a better understanding than most of the technical language used in the Will. At that time, Mr. and Mrs.

Lecky had been married for several years and were living in London; they enjoyed a luxurious lifestyle which included a number of residences, support staff, and travel. [ 109 ] At the time of the drafting of the Will, Mr. Lecky owned, in his name alone, several properties and companies, including a majority of the shares in Canada 3000, then a very successful airline company. Those shares, at the time he drew the Will, were worth approximately $100,000,000. [ 110 ] At the time of Mr. Lecky’s death Canada 3000 had gone bankrupt. However, while he was alive Mr.

Lecky created an inter vivos trust which had nine beneficiaries, namely, Mrs. Lecky, each of Mr. Lecky’s five children from his first marriage as well as Mrs. Lecky’s three children. This trust contained Canada 3000 shares and on the basis of the value of Mr. Lecky’s holding in Canada 3000 at the time he wrote the Will, each of the nine beneficiaries had an interest of approximately $10,000,000. No provision was made in the Will for any of the children. Given the inter vivos gift given to each of the children and their absence as beneficiaries in the will, it is reasonable to conclude that Mr. Lecky only had Mrs.

Lecky and his charitable works in mind when he signed his Will. [ 111 ] Upon a reading of the whole Will, Mr. Lecky established three trusts, with three different purposes. Firstly, the Ven House Trust provides a residence for Mrs. Lecky. Anticipating that Mrs. Lecky might wish to sell this residence and acquire a smaller, less expensive one, more suitable for a single person, his clearly expressed intention in the Will was that the excess funds from the Ven House assets (the land and Ven House personal effects) were to be applied to his charitable purposes. [ 112 ] Next, the Will establishes a Spousal Trust.

This trust operates as a tax-effective spousal trust; taxation law requires that the spouse be the only life beneficiary and that the spouse be entitled to all of the income each year. Accordingly, based on the object of the trust, the Trustees are not afforded discretion with regard to income: all capital distributions must be paid to Mrs. Lecky. Encroachment on the capital is in the discretion of the Trustees, but can only be paid to Mrs. Lecky for the purpose of supporting her standard of living. [ 113 ] The third and final trust is the Residual Trust. Notwithstanding the

interpretation of the word “shall”, this trust affords the Trustees discretion as to encroachment on the capital for Mrs. Lecky’s support and directs the Trustees to have regard to distributions made to Mrs. Lecky under the Spousal Trust. The Trustees are also given a certain discretion as to the possible distribution of capital to the Lecky Foundation under this trust. III. Direct Evidence of Intent [ 114 ] The testimony and documents provided by Mr. Fowlis, the lawyer who drafted Mr. Lecky’s Will, which the applicants seek to admit, constitute direct evidence of intent. As previously discussed, this type of evidence is considered hearsay.

[115] Based on the principled approach outlined by the Supreme Court of Canada, the twin requirements of necessity and reliabilityallow hearsay evidence to be admitted in situations where such evidence could not otherwise fit into existing exception (see R. v. Khelawon,2006 SCC 57 , [2006]2 SCR 787, 274 DLR (4th) 385; see also R v. Starr, 2000 SCC 40 , [2000] 2 SCR 144, 190 DLR (4th) 591; R. v. Khan, (ON CA), [1990] 2 SCR 531, 42 CCC (3d) 197). Hearsay evidence is not admissibleunless these requirements are present. [116] Mr. Fowlis’ evidence has two forms.

First there is a draft copy of the Will (the “Draft Will”) and a letter from him to Mr. Leckydated March 6, 2001 (the “March 6 letter”). As well, Mr. Fowlis was questioned. With respect to the questioning, counsel for Mrs.Lecky argues this evidence is not about Mr. Lecky’s intention but rather Mr. Fowlis’ intention; it is what Mr. Fowlis believed, not whatMr. Lecky intended. [117] I agree with this submission. For example, Mr. Fowlis is asked about the inclusion of the word “shall” in the clause. Thatevidence is interpreting the Will. That task belongs to me. Therefore the questioning of Mr.

Fowlis is not admitted. [118] Dealing with the documentary evidence, I must be satisfied that the evidence is both necessary and reliable. The evidence isnecessary, for it is both relevant and unavailable from the testator himself. The evidence relates to the reasons why Mr. Lecky chose tostructure his Will in a certain way, and his intentions in doing so. Further, Mr. Lecky is deceased and therefore unavailable to testify as tohis intentions.

The evidence is also reliable in the sense that both are documents prepared by a lawyer whose reputation and veracitywere not challenged. [119] However, where that evidence takes me is the real issue. Both documents add to rather than resolve uncertainty about Mr.Lecky’s intention at the time he signed the Will. I refer first to the March 6 Letter. Mr. Fowlis explains the Spousal Trust and then goeson to discuss Clause 5. He says: It obligates the trustees to use the income and capital of the trust to at least maintain the lifestyle enjoyed by your spouse during yourlifetime.

It does however permit the use of income and encroachment of capital for the purpose of distributing funds to The LeckyFoundation even during your spouse’s lifetime provided that sufficient income and capital is maintained with this trust in order toprovide for your spouse. This trust is much more flexible in terms of the use of the funds and the timing for the use of the funds. [120] Clause 5(

c) deals with the entitlement of The Lecky Foundation to funds during Mrs. Lecky’s lifetime. They may be paid “suchpart or parts of the capital of the Trust as my Trustees shall from time to time, in their absolute discretion determine...” Clause 5(

c) doesnot permit the payment of income which is what Mr. Fowlis said in his letter. Moreover, what happens to the income is precisely thequestion before me. I conclude that at the time of the letter, it was not clear at least to Mr. Fowlis what Mr. Lecky’s intentions were. [121] There is a further question raised about the clarity of Mr. Lecky’s intention at the time of the March 6 Letter. That questionarises because of the notations made on the Draft Will. The very phrase which I find creates the ambiguity was not typed in the draft.Rather it was added by hand. C.

Conclusion [122] As indicated above, I must look first to the words of the Will. The Will is not clear. There are reasonable arguments to supportthe positions on both sides of the issue. There is one, however, that is more significant than the others. Nowhere does the Will say whatto do with unpaid income in the Residual Trust. [123] I then look at the surrounding circumstances. The Will has only two beneficiaries. In Mrs. Lecky’s lifetime, only she was tobenefit from the income of the Spousal and Residual Trusts.

The Spousal Trust was a tax planning device where there would besignificant consequences if the capital was used for Mrs. Lecky. The Lecky Foundation was not central to Mr. Lecky’s thinking. Indeed,in Clause 5 he specifically contemplates the possibility that The Lecky Foundation would not exist into the future. These surroundingcircumstances are important given the two documents from Mr. Fowlis’ file. These documents add to, not resolve, the confusion.However, the absence of a provision to deal with unpaid income along with the surrounding circumstances clear up the confusion.

Mr.Lecky had two beneficiaries in mind. One, The Lecky Foundation, was only ever to be a residual beneficiary. He knew that the lifestylethat he and Mrs. Lecky had was expensive and he wanted that to continue for her after his death. That all leads me to conclude that Mr.

Lecky’s intention was to have the whole of the income paid to Mrs. Lecky each year. Issue 2: Trustees’ Requests for Financial Information and Documentation from Mrs. Lecky Do the Trustees have the power and obligation to request such financial information and documentation from Mrs. Lecky as theyconsider necessary, including the budget for anticipated living expenses of Mrs. Lecky, a comparison of actual expenses incurred byMrs. Lecky to the budget previously provided and supporting documentation, to assure the Trustees that Mrs.

Lecky is utilizing theamounts of funds paid to her to continue to enjoy at least the standard of living to which she became accustomed during John Lecky’slifetime rather than to accumulate capital for Mrs. Lecky’s personal benefit or that of her estate and to the detriment of the residualbeneficiaries of the Residual Trust and the Spousal Trust? [124] Given my decision above, this issue will arise only with respect to the discretionary distribution of capital from the Residual andSpousal Trusts. Much of the initial disagreement on the issue has been resolved.

First, the parties have agreed upon the guidelines to beused by Mrs. Lecky to report her actual expenses from year to year. Both sides drew up a set of declarations which for the most part arethe same. There are, however, three issues. The first is a clause sought by Mrs. Lecky that in circumstances when the Trustees havediscretion over a payment to Mrs. Lecky, they are entitled to request an accounting. This provisions is proposed by Mrs. Lecky to dealwith the possibility that there may be years when the income from non-discretionary payments is sufficient to keep Mrs.

Lecky at least inthe style to which she became accustomed during Mr. Lecky’s lifetime. That request seems reasonable. Mrs. Lecky should not berequired to account when the Trustees have no need for the information. [125] Second, the Trustees propose a declaration that they have “the power and obligation to request such financial information anddocumentation from Mrs. Lecky as are necessary for the purpose of fulfilling their obligations as Personal Representatives...”.

Mrs.Lecky objects to the use of the word ‘necessary’ because it gives the Trustees more power than is commensurate with their discretion.While I do not see a great deal of difference between the two clauses proposed, Paragraph 2 of Mrs. Lecky’s proposal will be thewording. [126] The most significant point of disagreement is the request for retroactive accounting back to the beginning of this accountingperiod, namely from July 1, 2006. The Trustees say that Mrs. Lecky has known all along that they wanted the kind of accounting that hasnow been agreed to. She has received approximately $7.9 million since Mr.

Lecky’s death. Mrs. Lecky likens this somewhat to thedecision in D.B.S. v. S.R.G., 2006 SCC 37 , [2006] 2 SCR 231, sub nom Hiemstra v. Hiemstra, L.J.W. v. T.A.R., Henry v. Henry,which deals with a demand for retroactive child support. Some of the factors considered in D.B.S. are relevant here, she says, particularlythe hardship for Mrs. Lecky to go through 5 years of accounting.

She says that even if some accounting is ordered it should be limitedeither to 3 years or the level of accounting should be least expansive. [127] First, if the income in the Residual Trust was equal to or more than payments received by Mrs. Lecky, she would not need toaccount given my findings above. What complicates the situation is the April 2010 resolution whereby all three Trustees agreed that thepayments made up to that date to Mrs. Lecky be characterized as capital. This apparently was advantageous to Mrs. Lecky from a taxperspective. I have one of two choices.

The first is to direct the Trustees to determine whether the income in the Residual Trust over thatperiod was equal to or greater than the amount paid to Mrs. Lecky. If it was, notwithstanding the resolution, she need not account. Theother choice is to say that since the parties agreed that the payments be from capital and for payments of capital, the Trustees are entitledto have an accounting, then Mrs. Lecky ought to provide that accounting. I direct the former, and if the income was not sufficient toequal the payments, then Mrs.

Lecky will have to account, but not in the detail contained in format agreed upon by the parties for futureaccounting. I refer to Exhibit 13 to Mr. Chan’s affidavit which I understand is the format agreed upon. There are 13 general categories.Some have subcategories. For categories 1 and 9, Mrs. Lecky will provide the accounting a broken down by subcategory. For the others,she need only provide an amount for the category. If any issues arise about that account, counsel may apply to me for further direction. 4.

Trustees’ Application to Pass Accounts [128] Twice, accounts have been passed in this estate: the first for the period February 25, 2003 to December 31, 2004 and the secondfor the period January 1, 2005 to February 25, 2006. The accounts supporting the application were in the same format for each. OnOctober 19, 2010, an application was made to pass the accounts from February 26, 2006 to February 25, 2009. The accounts in supportwere in the same format as in the previous applications. Mrs. Lecky opposes the application for several reasons.

[ 129 ] Having reviewed Mrs. Lecky’s objections, counsel for the Trustees sought three directions: 1. Review the allocation of expenses to capital and income and prepare a revised allocation. [ 130 ] One of the objections of Mrs. Lecky was that expenses had been paid from income rather than capital. The Trustees agree that based upon Clause 4(

b) of the Will, the expenses should be paid from capital. Accordingly a reallocation needs to be completed. Mrs. Lecky agrees with this direction. 2. If any of the other objections have merit, to direct the Trustees to make the necessary adjustments. [ 131 ] Mrs. Lecky makes a number of objections, some of which are valid and some of which are not. Her counsel characterizes the objections as concerns about the state of the accounts and concerns about the manner of administration of the accounts. [ 132 ] There are some substantive objections that require a decision from me. However, there are some that should not have reached the

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