Hill v. Hill, 2012 ABQB 256

Court of Queen ’ s Bench of Alberta Citation: Hill v. Hill, 2012 ABQB 256 Date: 20120509 Docket: 0501 00476 Registry: Calgary Between: Daniel Walter Hill Plaintiff - and - Paul James Hill, the Trustees of the Frederick W. Hill Family Trust, Richard P. Rendek, Rand Flynn, Famhill Investments Limited and Harvard Developments Inc. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice E.C. Wilson _______________________________________________________ Introduction [ 1 ] This action, filed in 2005, boils down to events occurring in late 1976 - early 1977.

This lengthy passage of time has proven difficult for the litigants and the Court when trying to accurately reconstruct the past. Memories have faded; documents have been misplaced, lost or destroyed; witnesses have died. Nevertheless, the following facts have emerged. The Evidence

[ 2 ] Fred Hill was the wealthy patriarch of a Regina, Saskatchewan family who, through various family corporate entities, owned whole or partial interests in a variety of businesses and undertakings which were based originally in Saskatchewan but, as the decades passed, expanded into, inter alia, Alberta and the United States. Fred was married to Shirley. She passed away in 1998. They had five children. Dan (who is the plaintiff); Paul (who is one of the defendants); Marilyn (who testified as a defence witness); Terry; and Colleen (who passed away in 2008).

Fred also died in 2008. [ 3 ] With the accumulation of wealth came inevitable tax consequences for Fred Hill. But in the early 1970's, two changes in the Canadian tax regime prompted more anxious concerns. On December 31, 1971 the federal government initiated a capital gains tax and also decided to abandon the estate tax field.

The latter decision prompted a number of provinces, including Saskatchewan, to enact their own succession duty statutes. [ 4 ] These legislative changes prompted a number of taxpayers, including Fred Hill, to retain legal and tax experts for the purpose of advising how to structure their affairs to lawfully avoid the payment of taxes. In Fred’s case, his concerns related to personal and corporate taxes as well as estate taxes that might arise upon his death. [ 5 ] The experts he retained during the 1970's were based in Regina, Vancouver and Winnipeg. The retainers occurred at various times.

It is clear to me, however, that the various experts were not always working together, hand-in-glove - even when working on the same project. It appears that Fred, the client, preferred to operate in this manner. The reason for doing so is not immediately obvious. If it was true, as I was repeatedly told, that Fred was always in control and always knew the “big picture,” it seems that his individual experts were retained to deal with only some portion or portions of that big picture and they sometimes were working at cross purposes. [ 6 ] Hence, I heard from the lawyer and estate planning expert, Mr. J.

Blair MacAulay who testified to the drafting of some trust documents as well as a new will for Fred, only to be subsequently confronted by a redraft of the latter prepared by another lawyer, whose work product actually undermined, if not gutted, all that which Mr. MacAulay had been paid to earlier create. In MacAulay’s unchallenged view, the singular effect of the problematic redrafting was to leave Fred “naked” from a tax planning and tax avoidance perspective and which would have led to devastating consequences had Fred died in the interim. [ 7 ] MacAulay’s testimony is significant in another way.

This problem spotted by MacAulay was neither trivial nor superficial. It was fundamental to Fred’s present and future tax status. Clearly it would seem, therefore, that not all of the “experts” retained by Fred may have been as adept at their work as Fred may have thought. [ 8 ] This unfortunate deficiency may help explain why later events may have unfolded as they did. [ 9 ] As earlier indicated, the heart of this lawsuit can be narrowed down to a series of events that occurred in the mid 1970's. [ 10 ] In these reasons I will be initially concentrating on the testimony of Mr. MacAulay.

Clearly his testimony is relevant to most of the issues in this trial. And I understood that all counsel were of the view that his skill set as a tax and estate lawyer was beyond question. Indeed, I recall counsel reference him as the leading western Canadian tax expert at the relevant time; a submission which was not challenged by opposing counsel. [ 11 ] Relying on personal diaries, MacAulay testified that his first contact with Fred occurred on January 14, 1975 at a meeting held in Regina.

Meetings occurred thereafter in various locations through the spring, summer and fall of 1975 as MacAulay worked through the various problems confronting Fred. [ 12 ] Included among the attendees at the various meetings were MacAulay; Rand Flynn, who was a chartered accountant and partner with Clarkson, Gordon; John Greene, a chartered accountant and head of the Clarkson, Gordon office in Winnipeg; John Thresher one of Fred’s executives; Lorne Green, a tax lawyer with the Vancouver office of Thorsteinssons and the plaintiff Dan Hill - who was then, a law student and aged 26 years.

Not all persons attended every meeting.

[ 13 ] The most pressing issue for MacAulay was Fred’s tax problems created by the recent capital gains legislation. Connected to that tax issue, but of less immediacy, was Fred’s estate planning needs. Fred was 55 years of age in 1975. [ 14 ] To deal with the most pressing issue, MacAulay advised that Fred take his two companies based in Saskatchewan, which had succession duties, and sell his shares in both to a newly incorporated holding company to be situate in Alberta, which had no succession duties. In turn, Fred would receive preferred shares in the holding company.

The growth in value of the holding company would accrue to the common shareholders of the holding company.

This simple outline of what MacAulay advised Fred to do is the concept of an estate freeze (826/24-41). [ 15 ] Fred instructed MacAulay to proceed and on February 3, 1975 letters patent were granted, pursuant to the Canada Corporations Act, evidencing the incorporation of the holding company Famhill Investments Limited, as a private company (see Exhibit 36, Tab 5). [ 16 ] Nothing operationally occurred regarding Famhill for several months - indeed up until December 1975 - while the accountants painstakenly worked at determining a proper value of the assets that Fred and his wife Shirley would be selling or transferring to Famhill as part of the estate freeze process. [ 17 ] Meanwhile, and among other things, MacAulay created Bylaw #1 of Famhill which put the company’s head office in Calgary and by paragraph 54 thereof (see Exhibit 36, Tab 6) established that the transfer of shares in the capital stock of Famhill could only be properly transferred on the register of transfers at the Company’s head office.

Through the use of a Calgary based transfer agent, the Royal Trust Company of Canada, MacAulay was hopeful of better arguing the placement of Famhill in Alberta. [ 18 ] This process was necessary in order to get the property i.e.

Fred’s shares in his two Saskatchewan based companies into an Alberta company by having Famhill’s head office in Calgary and with the share transfers conducted by a transfer agent sited in Calgary. [ 19 ] While the estate freeze planning was being pursued, MacAulay had also advised Fred on the closely related matter of the anticipated future growth in the value of the common shares of Famhill and who should be the beneficiary or beneficiaries of that growth. [ 20 ] One option, which MacAulay testified was usual when the client’s children were in their 30's or 40's, would be to immediately turn over the common shares to those children. [ 21 ] But for the Hill family there was a problem.

There were five children - all of whom were fairly young. Paul, one of the defendants, was the eldest but he would not turn 30 until October 1975. Marilyn, the youngest was 21 years old. Dan, the plaintiff, was 26 years old. [ 22 ] There was an additional problem.

The two remaining children - Terry, aged 28 and Colleen, aged 27 were described by Fred to MacAulay as being mentally incapable of maintaining their own affairs. [ 23 ] Fred made it clear to MacAulay that he did not know which, if any, of the other three children “would be fit or would be the best person to carry on the business, because it wasn’t like a company that just owned stocks and bonds.

It was a very, very active company and it required active management” (827/19-21). [ 24 ] I infer from the foregoing that in 1975, Fred was concerned enough about the unproven abilities of some of his children and the certain inabilities of the other of his children that the future control over the Hill group of companies reposing in some one or others of them was unknown to him and that he was, quite understandably, unable to make a hard decision at that time.

[ 25 ] The remedy that MacAulay advised and that I find Fred agreed to implement was a “sprinkling trust”. MacAulay described it as follows: The beneficiaries were his five children, and I recollect the children of two of his brothers. But these were all the beneficiary class.

The trustees have the absolute ability to appoint, between any member of the beneficiary class all or any part of the capital of the trust, or income of the trust, in such manner, exclusive of any one or the other, as the trustees, in their absolute discretion, may determine (828/11 - 16). [ 26 ] But there was another aspect of the trust which merits comment. [ 27 ] The Income Tax Act imposed a 21 year rule to prevent a taxpayer from forever delaying payment of capital gains taxes.

If no trust disposition occurs within 21 years, the Act will deem a disposition of any trust assets and impose an accumulated capital gains tax. But if distributed before the 21 years, the beneficiary recipient would receive the assets at the adjusted costs basis of zero and any capital gains tax would be deferred until actual disposition (828/19-32). [ 28 ] This was clearly a vital consideration.

MacAulay testified that “the whole purpose of the plan” was to give Fred 21 years in which to determine how he wished to distribute the common shares of Famhill among his children (828/37- 40). [ 29 ] It should be noted that at the time of settling the trust, the common shares in Famhill would have no value, but MacAulay testified that that was expected to change: ... but in the future, we anticipated, over a fluctuation of time and inflation, that they would increase in value (828/2-3). [ 30 ] Given the significance of the sprinkling trust to the future of the Hill family of companies and in recognition of Fred’s life’s work, it is not surprising that MacAulay asked Fred to appoint trustees “in which he had complete confidence” (827/36-37). [ 31 ] In response, Fred named his wife Shirley, his eldest son Paul and an old family friend, Ross Sneath as the three trustees. [ 32 ] The drafting of the sprinkling trust indenture took some time to complete.

Ongoing discussions involving Fred, MacAulay and others - including Flynn and Gary Watson, a Vancouver tax lawyer with the Thorsteinssons firm occurred well into October, 1975 (see Exhibit 36, Tab 8 which exemplifies one proposal for the trust indenture). [ 33 ] On October 1, 1975 a conference call involving Fred, MacAulay, Flynn and Watson (see Exhibit 36, Tab 9) prompted MacAulay’s October 3, 1975 letter to Fred with a draft trust indenture attached. [ 34 ] That covering letter from MacAulay stated that Fred’s instructions were to create to a discretionary trust for the benefit of his five children and remoter issue and his two brothers (p. 835). [ 35 ] MacAulay invited Fred’s comments regarding the draft indenture.

MacAulay testified that he received none and, quite understandably, presumed that its contents - having reflected the client’s October 1, 1975 instructions - found favour with Fred. Yet, as it turned out, they apparently didn’t. [ 36 ] Changes were made to the draft prepared by MacAulay, in particular, in the matter of replacement trustees and the process therefore. MacAulay only learned of these changes some 29 - 30 years later.

[ 37 ] Meanwhile, working doggedly toward what he understood to be a December 31, 1975 completion target, MacAulay sent a letter dated December 11, 1975 to Fred enclosing various documents relating to the estate freeze, i.e. documents involving the Famhill Investments Limited entity, which had not yet been turned over to the Hill family (839/25 - 26).

In his covering letter MacAulay made the following comment: Accordingly, unless you direct otherwise, it is my [MacAulay’s] understanding that in the next week or two the company [Famhill] will be allotting or issuing all of its common shares to your children or trusts on their behalf... [ 38 ] What is interesting, in the court’s view, is that this appears to be the first time any reference was made to a possible allotment of common shares in Famhill (be it by simple transfer or subscription) to the children since the early 1975 discussions between Fred and MacAulay.

Thereafter, all of the evidence indicates that it had only been the option of the sprinkling trust that had been pursued. Secondly, the reference to an option other than a trust ie by alloting shares seems clearly at odds with a preparation of the trust indenture, as Fred had earlier instructed, back on October 1, 1975. [ 39 ] Regard might be had to the fact that MacAulay made no reference, in his letter, to any beneficiary beyond Fred’s children. MacAulay explained that away fairly simply.

He had come to understand from his discussions with Fred that “the principal beneficiaries” were always and only one or more of Fred’s children (907/20 - 908/4). [ 40 ] Presumably the trustees were made aware of this feeling; failing which it could be made to appear either by a letter of wishes or by way of informal “understanding” between relatives. [ 41 ] From the documents produced it appears that the next material development involved Fred’s December 22, 1975 written agreement to transfer assets of a value of more than 2.4 million dollars to Famhill with receipt in various stocks in return, including the majority of the voting stock in Famhill (see Exhibit 36, Tab 13). [ 42 ] Shirley’s agreement of December 22, 1975 was for the same purpose albeit her transfer was of a much lower value and her stock receipt accordingly differed from that of Fred. [ 43 ] By an Indenture made on December 24, 1975 Fred Hill then settled a trust entitled “The Frederick W.

Hill Family Trust” (see Exhibit 36, Tab 15). [ 44 ] The December 24, 1975 trust indenture varied from MacAulay’s October 3, 1975 draft indenture, presumably at the hands of Fred’s Regina counsel, John Embury (P. 894). [ 45 ] The changes from the original draft arise in paragraph 10. The significant changes are these. The executed indenture permitted Fred to now revoke any or all Trustees and appoint anyone new that he might wish.

Secondly, the listed, alternative trustees were no longer tied as a fixed replacement for any particular original trustee ie in MacAulay’s draft, for example, Dan Hill could only be appointed to replace Paul. In the executed indenture, Dan could replace any prior trustee. [ 46 ] Pragmatically speaking, perhaps nothing significant had changed.

But, clearly, these amendments insured that Fred continued to remain in control by reserving unto himself the sole power to change trustees without challenge and to choose their replacement with those whom he viewed as being appropriate. [ 47 ] Lastly, there was the December 24, 1975 minutes of the Directors Meeting of Famhill which, inter alia, recognized the content of Fred’s and Shirley’s agreements of December 22, 1975 and mirrored same by confirming Famhill’s purchases of their assets and, in exchange, granting Famhill’s allotment of class A, B and C preference shares to Fred and allotment of class B and C preference shares to Shirley.

[ 48 ] Those same Directors’ minutes (see Exhibit 36, Tab 14) confirmed that by virtue of cash payment and grants from Fred, Shirley and John Thresher, corporate secretary for Famhill, the Frederick W. Hill Family Trust received 3,800 common shares in Famhill Investments Limited.

To be clear then, no allotment or issuance of common shares to the children occured. [ 49 ] And thus it appeared to MacAulay that his detailed work had been accepted and implementated by Fred and that, effective December 31, 1975 an estate freeze and sprinkling trust were now in place. [ 50 ] But he found out, some 11 months later, that he was significantly mistaken. [ 51 ] On Tuesday November 16, 1976 MacAulay attended a meeting in Regina with Rand Flynn, John Thresher and John Greene. MacAulay learned that nothing had been done to actually create the estate freeze for Fred. eg.

Famhill was not registered in Alberta, no transfer agent had been established, etc. MacAulay described his reaction at learning that the matter had not proceeded: [It] really astounded me, because it meant that Mr. Hill was naked, if I can put it that way. He wasn’t protected by the plan that I had formulated for him. If he had died in the interim, it would have been a serious problem (855/34-36). [ 52 ] MacAulay was also shown a will that had been prepared by Fred’s Regina counsel, John Embury and which had been executed by Mr. Hill earlier in 1976.

It will be recalled that MacAulay had also prepared a will for Fred (as well as Shirley) in late 1975. [ 53 ] MacAulay’s reaction to reading the Embury will, executed by Fred, is most noteworthy: And when I read through it, it was not the draft will that I had prepared for him. He had - Embury has used many of the provisions that were contained in the draft will I had sent to him, but he had added some of his own. And he had created a few additional discretionary trusts in the will for Mr.

Hill, which both - which I was extremely concerned about that the wording could consult - I was not aware that he had done that. I was never told that he had executed that will, and that it could cause some substantial tax problems, and that - at, I guess, best. And at worst they weren’t very well drafted, and they could cause some substantial dispute as among family members as to their provisions (858/33 - 41). [ 54 ] On November 19, 1976 MacAulay attempted to take matters in hand.

He wrote one letter to John Thresher, the Famhill corporate secretary, and forwarded to him a number of documents that had to be executed in order to get Famhill Investments Limited and the Frederick W. Hill Family Trust up and running so that the estate freeze could be accomplished (see Exhibit 36, Tab 17). [ 55 ] On the same date, MacAulay wrote to Fred Hill advising of the content of his communication to John Thresher and the reason therefore. MacAulay also, in an indirect fashion, expressed his concerns with the will that had been drafted by John Embury and executed by Fred.

In his letter MacAulay wrote: Rand, John Greene and I at our meeting in Regina reviewed briefly the provisions of your present will and were unanimous in the view that we should meet with you at an early date and discuss, and hopefully finalize, your estate plan.

We are particularly concerned that the use of the discretionary trust as the recipient of a substantial portion of your estate may not achieve the desired succession duty saving and more importantly, may give rise to litigation between members of your family on your death (see Exhibit 36 Tab 16). [ 56 ] MacAulay testified why he was so concerned to meet with Fred no later than mid December 1976: ... I thought it imperative that I meet with Mr. Hill.

He was in Hawaii at this time, and I thought it imperative that I meet with him to discuss these matters, because I thought he was making, in that will, a serious mistake - some serious mistakes (859/8 -11). [ 57 ] While waiting to hear back from Fred, MacAulay was called to a meeting in Regina on December 2, 1976. MacAulay recalled

that neither Fred nor Shirley Hill were at the meeting. He recalled that John Thresher and John Greene were present. He was not certain whether Rand Flynn was at the meeting. Mr. Flynn testified that he was at the meeting. His recollection was that Fred was either present in person or by way telephone conference call (663/10 - 12). I’m satisfied that MacAulay’s recollection is the correct version. [ 58 ] MacAulay testified that he was instructed by John Thresher, on behalf of Fred, to draft a Deed of Appointment in regard to the Frederick W.

Hill Family Trust in favour of four of the five Hill children - Paul, Dan, Colleen and Marilyn. MacAulay testified that this instruction “came out of the blue” and left him flabbergasted. [ 59 ] MacAulay testified why he was flabbergasted to be instructed to draft the Deed of Appointment: Because I had set up a plan which I thought for Mr.

Hill would solve all of the problems that he had, and a mere 10 months afterwards, he was terminating in effect, distributing the assets of the trust, which he had ... 21 years in which he could do so (865/22 -25). [ 60 ] In cross-examination MacAulay confirmed that the instructions he received had the effect of reversing the mechanism that he had put into place to deal with Fred’s two concerns.

Being told that the Deed of Appointment was to equally distribute the common shares of Famhill Investments Limited to four of the five Hill children meant that one of the beneficiaries - Colleen - was included notwithstanding her handicap. In other words there was an inconsistency in Colleen being appointed in late 1976, when MacAulay had been told, a year earlier, that she would be excluded from any such appointment.

Secondly, the common shares would now be vested in all four children notwithstanding that no one, including Fred, knew who was going to be managing the business (917/17 - 20). [ 61 ] It will be recalled that the trust setup responded to the latter consideration and gave Fred the opportunity to consider a succession plan over a 21 year period. That plan was now destroyed. [ 62 ] The net effect of such a drastic step prompted MacAulay to ask why this had occurred. MacAulay did not recall being given the answer at the meeting in Regina, although he conceded that he may have received his answer at that time.

However he did testify to receiving a first hand response from Fred when he met Fred and Shirley at their condo in Maui on January 12 and 13, 1977. More of that meeting later. [ 63 ] It is crystal clear from the evidence that no trustee of the Frederick W. Hill Family Trust attended that December 2 meeting in person or by telephone. There is no evidence that any documentation was ever provided to MacAulay nor, apparently, even sought by MacAulay whereby the trustees confirmed their decision to appoint the four Hill children.

MacAulay testified that he never spoke to any of the trustees which corroborates Paul’s testimony that he had no recollection of ever having such a meeting with his co-trustees nor with MacAulay in regard to this alleged Appointment. [ 64 ] I note that MacAulay conceded in cross-examination that he had told Thresher during the December 2 meeting that the effect of his instructions “would be to irrevocably appoint all of the trust property on the four children” (917/35 - 39). [ 65 ] But while he may have told Thresher, there is no evidence to indicate that Thresher either passed those observations on to Fred nor, more importantly, to any of the three trustees or that anyone else did.

I do not fault MacAulay inasmuch as the trust and the trustees were not his clients - but it is rather interesting that he thought it appropriate enough to pass on his observations of the irrevocable nature of this purported decision to an individual who was not making the decision and without ensuring that Thresher passed on his remarks to the people who had allegedly made the decision. [ 66 ] As to what all may have been said or transpired during the December 2, 1976 meeting, the court really only had the testimony of MacAulay along with the documents that he subsequently prepared.

While Flynn recalled that he had been at that meeting he could provide no recollection of what was said. I was told that John Thresher is alive. Unfortunately for the court he was not called by either side at the trial nor was I advised of any impediment to him testifying. Thus I did not have the benefit of whatever information he may have been able to provide to me.

[ 67 ] MacAulay’s curiosity as to what had happened to trigger any Deed of Appointment is not surprising. It made no sense to him. Looking at events, some 36 - 37 years later, the court finds itself in a similar position. [ 68 ] But there are other concerns about the instructions given by Fred through Thresher. [ 69 ] While it is clear that Fred and Shirley and Famhill were MacAulay’s clients - the trust was not.

Nor were any of the three trustees his clients. [ 70 ] While MacAulay may have had no reason not to follow his client’s instructions, the reality is that the client - Fred - had no authority to appoint the trust property himself. That was the sole domain of the three trustees and MacAulay clearly received no direction or instructions from them in this regard. [ 71 ] Frankly, I find this more than a trifle disturbing. While MacAulay may have presumed the trustees must have made their decision, he did not actually inquire if that was so or even when they had come to their decision.

He simply followed Fred’s instructions or, better stated, Fred’s agent’s instructions. [ 72 ] There is no evidence before me by way of memorandum or viva voce evidence to help explain why or how the trustees made their decision. I must also observe that I could not find anything in the record to help me understand why two of those trustees ie. Colleen’s mother and her older brother Paul would have thought that Colleen should have been properly appointed as a beneficiary while her handicapped brother Terry could not. I recognize that the Indenture granted discretion wholly to the trustees.

My point is simply that the alleged decision doesn’t strike me - at least on a superficial level - as explicable. [ 73 ] To fulfill the instructions from Fred’s agent, MacAulay went away and drafted the various documents that were required to properly complete the appointment of the trust property upon the four Hill children.

He then enclosed them with a covering letter dated December 8, 1976 to the attention of John Thresher. [ 74 ] For the purpose of these Reasons, regard will be had to two of those draft documents in particular - the Deed of Appointment and the Power of Attorney to Transfer Stock which will be referred to as simply the Stock Power of Attorney.

The Deed of Appointment was the document by which the trustees executed their power to appoint the shares to the four Hill children (870/37 - 40). [ 75 ] Because this document was either destroyed, lost or misplaced, MacAulay testified as to what it would have contained: It would first recite the existence of the trust. Secondly, it would recite that the persons who are named below are the trustees of the trust. Fourth, it would refer to, I think it’s paragraph 12 of the trust [Indenture] wherein it described the class of the beneficiaries who may benefit.

Next, it would state that pursuant to the said paragraph 12, the trustees are authorized to appoint the assets of the trust among those beneficiaries in such a manner as they may ... without restriction, decide.

Fourthly - or fifthly, I guess I’m up to, that that they hereby appoint the said shares as follows: 950, 950, 950 [sic] to the four Hill children ... and lastly ... it would have said there being no further assets of the trust, the trust is hereby terminated (871/5 - 17). [ 76 ] The Stock Power of Attorney is the document whereby the trustees authorize the transfer of 950 common shares of Famhill to each of the four Hill children (871/30 - 39).

MacAulay later added: The purpose of this document was solely to secure transfer of the shares on the books of the [Famhill] company (921/15 -16). [ 77 ] MacAulay described how the two documents worked together: The operative document was the Deed of Appointment. The Stock Power of Attorney was only for the transfer agent to transfer the

shares, which was after you had done the other (919/11 - 13). [ 78 ] Another exchange during cross-examination merits consideration: Q And the terms of the Stock Power of Attorney, sir, they would have been wholly consistent with the terms of the Deed of Appointment, correct? A They should have been (919/15 - 17). ... Q Right. Then, sir, you also included in this Stock Power of Attorney the words, and its in the first paragraph, “by these presents do irrevocably convey, assign and transfer” ... .

So you were making it clear in this document that this was an irrevocable assignment and - - A That’s correct Q And again, that would be consistent with the wording in the Deed of Appointment, correct? A Right (921/18 - 26). [ 79 ] The Stock Power of Attorney drafted by MacAulay was exhibited in its executed form.

MacAulay had not seen the executed document until shown it in preparation for this trial (see Exhibit 36, Tab 21; a better copy is found at Exhibit 1, Tab 15). [ 80 ] From examining page 2 of the document it purports to reflect a decision made by the three trustees on December 2, 1976. [ 81 ] There is a further draft document that was one of the enclosures accompanying his December 8, 1976 letter to John Thresher which warrants comment. That document is the Minutes of a Meeting of the Board of Directors of Famhill Investments Limited held on December 2, 1976 at 11:00 a.m. in Regina.

Present at the meeting were Fred Hill, John Thresher, Shirley Hill and Paul Hill. The latter two being two of the three trustees for the family trust as well as being directors of the holding company. The Minutes confirm that the directors expressly consented to the transfer of the common shares to each of the four Hill children. [ 82 ] MacAulay testified that he drafted these Minutes in accord with the instructions he had received from John Thresher “to do what was necessary” (922/21).

MacAulay testified that the purpose of these minutes was to comply with the provisions of the Canada Corporations Act which prevented the transfer of shares of a private corporation unless the directors had approved same (922/21 -25). [ 83 ] As with the Stock Power of Attorney these Minutes were subsequently executed after MacAulay had drafted them and, again, the first time that he saw the executed copy was in preparation for this trial. [ 84 ] The plaintiff asserts that while the Deed of Appointment is not available to us, the content of the Stock Power of Attorney and the Famhill Board of Directors Minutes can be relied upon as a sufficient indicator that the trustees must have properly executed the Deed of Appointment that had been prepared and forwarded by Mr.

MacAulay, particularly since Paul and Shirley were both trustees, as well as directors of Famhill. [ 85 ] In a nut shell, Dan Hill - one of the four Hill children identified as a beneficiary in the latter two documents - asserts that he was appointed his share of the common stock in December 1976. [ 86 ] With respect, the plaintiff’s assertion sounds quite reasonable, but, only on a superficial level.

[ 87 ] I am not satisfied that I can presume - even if a Deed of Appointment was executed by the trustees - that it was the one that MacAulay had drafted and the content of which he described. I have already made reference in these Reasons to the fact that some documents previously drafted by MacAulay had been altered without his knowledge or without even seeking his opinion. For example, there were the changes in the trust indenture itself. There was also the significant changes to Fred’s will as revealed when he was asked to look at a will subsequently prepared by Regina lawyer John Embury.

In MacAulay’s opinion the work product of Mr. Embury was extremely problematic from any number of perspectives and not only failed to resolve any outstanding potential problems but actually manage to create significant future difficulties which could lead to litigation between family members. In the case of the will drafted by Mr.

Embury there appears to have been no appreciation by its author of the problems that he was causing nor does it appear clear why he thought it necessary to make any of the significant changes that he did. [ 88 ] Plaintiff’s counsel also argues that there is some evidence to indicate that the Deed would not have been altered based upon MacAulay’s testimony that the Stock Power of Attorney document that was executed by the trustees appeared to have been unchanged from his draft.

He submits that I can presume that the Stock Power of Attorney accurately represents ie. is consistent with, what was said in the Deed of Appointment. [ 89 ] However, I do not feel comfortable in presuming that this is so, given the examples I have cited where efforts at “redrafting” MacAulay’s documents actually left them inconsistent with each other, and in fact, undermined what was purportedly being sought. In such circumstances, why would I presume matters had improved such that I could be confident that the content of each document was consistent with the other?

In short, I am not satisfied as to what were the actual contents of any Deed that may have been executed by the trustees. [ 90 ] In this regard, I note that the only surviving trustee, Paul Hill, testified that after hearing MacAulay’s evidence as to the contents of the Deed of Appointment that he had drafted, he was now 90% confident he had not signed such a document. Plaintiff’s counsel takes serious issue with Paul’s credibility generally, but specifically with respect to this portion of his evidence. I will deal with that later in these reasons.

Suffice it to say that I am not troubled about Paul’s credibility regarding this piece of his evidence. [ 91 ] Thus, while one might argue that the Stock Power of Attorney amounted to a “Deed” (as is required for an Appointment pursuant to the trust indenture’s terms) and, in the absence of the actual Deed of Appointment, to suggest that the former document met the “best evidence rule” requirements to permit it to operate as the Deed of Appointment, I am not satisfied that it can be reliably presumed that the terms of the Stock Power of Attorney eg. “an irrevocable decision” accurately reflected the terms of any Deed of Appointment that may have been signed by the trustees.

For example, one word may have been different - “irrevocable” as opposed to “revokable” and the impact would be significant. [ 92 ] There is further wording in the Stock Power of Attorney with which I am uncomfortable. It states that the “... Trustees of the Frederick W. Hill Family Trust, for value received, have bargained and sold ...” the shares (Exhibit 36, Tab 21). The plain meaning of these words is that the shares were sold. However, everyone concedes that there was no sale; no purchase. Indeed plaintiff submits that there was but a grant of the shares without any consideration being paid.

Hence the use of a Deed. Clearly that is at odds with the language used in this document. [ 93 ] MacAulay was asked in cross-examination regarding the purpose of the phrase which contained the above referenced words but he was not asked specifically as to their intended meaning.

But when asked as to the importance of the phrasing he testified that he could not remember (921/11 - 22). [ 94 ] The plaintiff submits that this is merely boiler-plate language and relies on a New Brunswick decision predating Confederation which had concluded that similar language found in a land transfer grant had no bearing on whether the grant was valid regardless if any payment had been made. [ 95 ] Frankly, this decision provides little detail of the evidence.

One does not know whether the parties to the agreement - the purchaser and the vender - ever testified on what was the problem that brought the case to court. It is also difficult to determine which of the Court’s comments were part of the ratio as opposed to mere dicta. In the result I do not find this decision particularly helpful.

[ 96 ] But I did find materials within Exhibit 1, Volume 2, Tab 51 at pages 45 - 51 wherein the same phrase is found. An Agreement dated July 6, 1988 between Paul Hill and 12 others - including Famhill - collectively called “the Trustees”, had the latter purchase some bonds on Paul’s behalf, which were to be repaid by him in the future. The manner of repayment was a promissory note from Paul with interest at the prime rate.

The bonds were subsequently transferred to Paul on January 26, 1989 from Famhill on the basis “for value received, have bargained and sold ...” [ 97 ] Thus, in this situation, the plain meaning of the English language ie that there was a payment made for the property was properly articulated in the document. I would have thought that this language would have been equally clear to the 3 trustees on behalf of the family trust who would have known whether any payment for the shares had been arranged.

Thus the Stock Power of Attorney incorrectly recited the very basis for the share transfers. [ 98 ] Thus, as with other documents entered into evidence, the language of the Stock Power of Attorney is problematic for the Court. I am not prepared to accept that this was mere boiler-plate language.

Nor would it make much sense to utilize such misleading language when the alternative was to utilize English language accurately stating that the trustees simply granted the transfer of the common shares. [ 99 ] Where all parties are agreed that the intention of the trustees is fundamental to understanding what was actually intended to occur in December 1975, I am not assisted by the executed Stock Power of Attorney given my findings. [ 100 ] Clearly, MacAulay took his instructions seriously and prepared all the documents to formally establish the appointment of the trust property upon the four Hill children and the transfer of the common shares to each of the four beneficiaries through a transfer agent in Calgary, Alberta.

But, unknown to MacAulay, the process came to a halt. The transfer agent in Calgary was never specifically directed to transfer the common shares, no common shares certificates issued at all. [ 101 ] MacAulay knew none of this until he was finally able to have his face to face meeting with Fred and Shirley Hill in Maui on January 12 and 13, 1977. [ 102 ] MacAulay testified that the following occurred: Q Can you tell us what happened at the meeting, as you best can recall? A Yes. I remember it surprising vividly. I walked into their condo - I think they picked me up at the airport.

I walked into their condo ... and the first thing Fred Hill said to me when he saw me was he said, we didn’t proceed with the document, which he - he meant the document - the Deed of Trust, the one that I had questioned. Q The Deed of Appointment? A Yes, whatever you call it - I’m sorry your right. Q O.K. and did he say anything further? A I don’t know that he did, but I can tell you that Mrs. Hill was very vocal. Q O.K. what did she say?

A And said as a trustee she refused to sign anything that didn’t treat all her children equally, and this left out her son Terry, and she was not prepared to have a - do something that would discriminate against one of her children. Q O.K. did the Deed of Appointment that you prepared leave Terry out? A It did. He was one of the two children I mentioned earlier, of their children that had an impediment. Q And did you understand what position Shirley Hill held in the trust at that time?

A She was a trustee (878/24-879/6). [ 103 ] This surprising twist was the first time that MacAulay had heard that the Deed of Appointment had not been proceeded with. This was also the first time that MacAulay heard that Shirley would never sign anything that didn’t treat all of her children equally (929/20 - 36). [ 104 ] MacAulay recalled Fred’s reaction to Shirley’s pronouncement: A I got the feeling that his wife had dug in her heels, he wasn’t going to try and change her mind. Q And did he say anything to that effect?

A No, but I gathered, yes, dear, a lot, and that, you know, he respected her decision in this regard (880/12 - 17). [ 105 ] Shirley’s pronouncement was clearly at odds with what MacAulay had been told on December 2, 1976 was to occur - that only four of the five children were going to share as beneficiaries. Clearly this would have meant unequal treatment of the children had been apparently decided upon.

Shirley’s pronouncement was also at odds with the contents of the Stock Power of Attorney which she signed as a trustee as well as inconsistent with the Minutes of the Famhill Directors meeting which she had signed as a director - both of which suggest that she had apparently decided to treat her children unequally. [ 106 ] In an attempt to try to resolve Shirley’s apparent inconsistencies, I turn to some other testimony which may shed light on Shirley’s attitude toward her children. [ 107 ] Dan testified to the following: So, I remember their discussions, and I remember very clearly that my mother said, on numerous occasions, which my dad agreed to ultimately, that she wanted all of her children treated equally, other than Terry because of his mental issue, and that she said, I have seen other families with wealth and when they don’t treat their children equally, it ends up tearing the family apart.

And she said, I do not want that happening to our family. She said, the only way I’m going to contribute or sign off on the trust is if all the children, the four children - healthy children are treated equally ... (131/31 -38). [ 108 ] Although it is not particularly clear it appears that Dan takes the position that, as early as when the family trust was set up, an equitable treatment was also in existence for Terry: My understanding was that there was separate provision outside this estate freeze trust for Terry (149/13 - 21).

[ 109 ] I was not able to locate the particular source for Dan’s understanding of a separate provision for Terry in existence contemporaneous with the trust indenture in 1975 or 1976. In fact, MacAulay testified that that wasn’t attended to until he was called upon to set up a separate trust for Terry during the Maui meeting in January 1977. [ 110 ] But I note that Marilyn testified about a particular proposal that may be the source of Dan’s confusion. Marilyn testified that up to December 1976 - January 1977 the family trust discussions were an ongoing process.

One proposal had been a four way split among the four healthy children; it being always understood that Terry - due to his mental illness - would be treated a little differently (962/29 - 963/1). [ 111 ] I’m satisfied that Dan is not correct in the existence of a separate provision for Terry existing prior to MacAulay’s work in 1977. I am satisfied that all that was in existence up to mid January 1977 was the trust indenture wherein all five children were listed as potential beneficiaries.

Having participated in that settlement, Shirley would know of this and thus would not have stated, as Dan alleges, that only the four healthy kids were dealt with by the terms of the estate freeze. Thus, in the circumstances, when only the trust indenture was in existence, any purported appointment by the trustees in 1976 upon only four of the five children would result in an unequal treatment of the fifth child - Terry. [ 112 ] Dan’s belief that at the time of the alleged appointment in 1976 Terry was also equally dealt with or looked after is mistaken.

Thus it would mean that Shirley - if she intended to act in an inequitable manner - would be acting contrary to what she had said to Dan ie “... that she wanted all of her children treated equally ...”. Would Shirley have intended to act in an inequitable manner? What are the recollections about Shirley’s attitude from her other children? [ 113 ] Marilyn testified to having a number of conversations with her father about his plans. She recalled that in one of those conversations, Shirley had been present.

Marilyn was asked if Shirley expressed any concerns about Fred’s comments: Q Did you ever hear any concerns from her? A No, not in regards to what he was doing with us children. I mean, her - well, I believed their philosophy was more about making sure each of us were dealt with fairly. I have four kids, its impossible to be equal, but they were always - and she emphasized that about whatever was done, that it was done fair, and she - my impression that was very comfortable with what my father was doing.

I never heard any issue about that (965/14 - 20). [ 114 ] So, again, we have a witness to Shirley’s emphasis upon fair treatment of her children. [ 115 ] Paul’s testimony was that while he never talked directly to Fred about his intentions regarding the trust assets, he had a pretty good idea, given that he “was always fair and equitable with all of the children” (1367/35 - 36). [ 116 ] Paul added: And so I always just trusted him and I knew that he would do what he wanted to do anyway, but I never had hesitation about that question. It wasn’t a question in my mind.

I knew that he would take care of all of the children fairly, equitably and appropriately, and I knew that he would develop a plan to do that (1368/1 - 4). [ 117 ] Turning specifically to his mother, Paul was asked the following: Q The same questions with respect to your mother; did you ever discuss with her, as a co-trustee, what her wishes would be in terms of the division of the property of the trust?

A I didn’t have any direct conversations on that subject with her. Q And why not? A For the same reason. I knew that the trustees would follow the wishes of my father, and my father would not come forward with any wishes that were inconsistent with my mother’s desires as well (1369/12 - 20). [ 118 ] I infer from this that Fred’s nature to treat all of his children fairly and equitably was consistent with Shirley’s desires as well. I find that Shirley was committed to a fair and equitable treatment of all of her five children.

All three children who testified are consistent in their understanding of their mother’s nature and her commitment to fair and equitable treatment of all the children. This is consistent with Shirley’s comments to MacAulay in Maui in January 1977. [ 119 ] It must be kept in mind that at the time of the purported Appointment upon only four of the five children, no trust for the fifth child - Terry - was yet in place.

Thus at the time of the purported Appointment, there would not have been a “fair and equitable” treatment in place for Terry. [ 120 ] Given her clear commitment to equitable treatment of her children before the purported Appointment, her signature as a trustee and director would apparently demonstrate a complete sea change in this life long attitude - if she truly intended that result . [ 121 ] I rely upon her comments to MacAulay for their truth pursuant to the principled exception to the hearsay rule. Counsel are agreed that threshold “necessity” is met inasmuch as Shirley is deceased.

I also find that threshold “reliability” is established. [ 122 ] I take into consideration that her words were uttered to a stranger to the family (MacAulay) but that they were consistent with the understanding of her nature by the three children who testified before me. It should be kept in mind that Shirley’s words to MacAulay did reflect what Fred had said to him as well - that the matter did not proceed. It had been aborted.

Shirley’s comments, even if not admissible for their truth, reflect her commitment to not discriminate as between her children - the purported Appointment allegedly being aborted would be reflective of Shirley’s commitment to equal treatment of the children. [ 123 ] The matter may now be reduced to this observation. Prior to and subsequent to the purported Appointment, Shirley was consistent in insisting on a fair and equitable treatment of her five children.

If she truly intended to only benefit four of her five children by way of the purported Appointment, then she would have acted contrary to her principles and, perhaps worse, had betrayed the trust all her children had placed in her.

What could have occured to cause this mother to suddenly take what would otherwise be a bewildering, if not a practically dishonest decision? [ 124 ] The answer is suggested to be - because Fred wanted to buy a T.V. station. [ 125 ] Harvard Developments Ltd. – one of Fred’s two companies placed into the Famhill Investments Limited holding company – purchased the Regina C.T.V. station on December 8, 1976. (Exhibit 49, Tab 1) A term of the purchase agreement required Harvard Developments Ltd. “to forthwith and as soon as possible” make application to the C.R.T.C. (“CRTC”) for a licence to carry on the business of the T.V. station (see paragraph 5.2 of the purchase agreement).

This requirement is consistent with Paul’s recollection “... we were in a hurry-up mode to get an application in for the acquisition of the television station ...” (1376/13-14). [ 126 ] A CRTC requirement demanded that Canadian residents had to own a certain percentage of the station in order to be licensed.

The CRTC had some concerns that the ownership of the Famhill common shares might go to non-Canadian resident beneficiaries (as related by Fred to MacAulay during the Maui meeting: 865/33-866/4; and as recalled by Paul: 1376/15-17). [ 127 ] One way to respond to this CRTC problem would be to appoint the Famhill common shares to the four Hill children which was the explanation for the alleged appointment in December, 1976 (as related by Fred to MacAulay in January, 1977 and as recalled by Paul and Rand Flynn: 663/4-8).

[ 128 ] In an affidavit sworn by Fred on August 16, 2006 (Exhibit 37), some additional information was provided: 3. In or around December 1976, it was proposed by one of my legal advisors that the Trustees transfer the 3,800 common shares in the capital stock of Famhill Investments Limited (“Famhill”) held by the Trust to four of my children, Paul James Hill, Daniel Walter Hill, Colleen Patricia Hill and Marilyn Anne Horsman in equal shares (hereinafter referred to as the “Aborted Transaction”).

At that time I received this advice I had reservations about whether we should proceed in the manner proposed but I allowed the documentation to be prepared. 4. The documentation to execute the Aborted Transaction was drafted, and the Trustees of the Trust executed the same.

However, before the Aborted Transaction was complete, I expressed to my professional advisors and the Trustees of the Trust my wishes that this transaction should not proceed as I no longer wished to follow the advice I was being given. [ 129 ] The legal advisor to Fred is unnamed and I was never advised who it might have been except, clearly, it was not MacAulay. Indeed MacAulay was astounded when told of this “solution” to the CRTC problem.

He had never been asked for a proposal to get around the problem but was confident he could have, since he also represented most of the major broadcasters in western Canada (866/6- 9). [ 130 ] Fred’s affidavit is noteworthy in the fact that it clearly indicates that only Fred’s legal advisor and Fred were involved in making this decision to prepare the documentation for execution. No request from the trustees to appoint the trust assets, let alone a joint decision to do so is referenced in his affidavit at all.

When reading his affidavit, one gets the impression that the process was this: documents were simply put before the trustees and they signed them without necessarily appreciating their effect that the trust’s existence would come to an end and that inequitable treatment of the children would result. [ 131 ] But it is clear that having the assets appointed was not the only possible resolution to the CRTC licensing requirement. Paul recalled the following: And I know that one of the options was related to this potential transaction [meaning the Appointment].

But I also knew there were other options, and I didn’t know if he was going with this ... The trustees did not have a discussion nor did we have a letter of wishes on this subject. So I assumed it was a matter of convenience to get the application in that we signed a bunch of papers and this was one of them (1376/20-27). [ 132 ] MacAulay testified that he was told in Maui that another proposal to get around the CRTC problem was, in fact, the solution which was followed. [ 133 ] That solution was simply to expand the Board of Directors of Famhill from four to five persons by adding one more Canadian director.

The new director was Mr. Leo C. Ell. MacAulay was instructed to draft the appropriate corporate resolution minutes. Those instructions are reflected in his reporting letter to Fred dated January 26, 1977. [ 134 ] Such a simple device as the expansion of the Board of Directors to satisfy CRTC requirements clearly indicates that the Appointment process was only an option being considered. If it had, in fact, been proceeded with then there would have been no need to consider, let alone, implement the board expansion decision.

The former proposal would have the effect of destroying the trust which would be contradictory to the rationale behind its creation. The latter proposal had the effect of preserving the trust, while honouring the purposes behind its creation and permitted the T.V. acquisition to proceed. [ 135 ] In hindsight, it is difficult to understand how any lawyer advising on the acquisition difficulty could have failed to recognize the simple directorship resolution.

No fuss; no muss. [ 136 ] Yet again we have an example where lawyers retained by Fred may not have been as adept or skillful as they or Fred may have thought they were.

[ 137 ] And yet again, we have an example of Fred and his unknown legal advisor proceeding down a path open only to the trustees to tread. [ 138 ] The evidence is that the trustees had no discussion and no meetings wherefrom their intention to Appoint could have been formed. [ 139 ] Indeed, had the trustees been made aware of the various proposals to deal with the CRTC one would have to wonder why they would decide that it would be appropriate, let alone, necessary to appoint the trust assets in the infancy of the trust’s existence. [ 140 ] If the plaintiff is correct in his claim, it means that the trustees would have made a decision that had nothing to do with the best interests of the trust or of its assets or of the beneficiaries to the trust.

It would have been a decision motivated solely by a desire or intention to ensure that one of Fred’s companies (Harvard) as controlled by the holding company (Famhill) acquire an asset . [ 141 ] Nowhere in the trust indenture is there any reference to the trustees having the duty, responsibility or authority to help a subsidiary of the holding company to acquire assets. [ 142 ] The trust indenture only speaks of the trustees’ responsibility being restricted to dealing with the trust estate for the benefit of any number of listed beneficiaries.

Thus I question how these trustees could have properly fulfilled their responsibilities when acting in such a fashion.

In point of fact, the real direct beneficiary would only have been Harvard. [ 143 ] Whatever be the purposes behind the creation of this family trust ie partial estate freeze, tax avoidance, future growth and development with an eye on future succession, there is no basis to assume that it included the trustees becoming involved in asset acquisitions on conditions that would have immediately frustrated any of the purposes which the settlor sought to achieve and, worse, resulting in the immediate winding up of that trust. [ 144 ] Examined in this light raises the question whether the trustees could have lawfully appointed the trust assets in any event.

In addition, there is no evidence that the trustees ever met or discussed any alleged Appointment. But presuming that such an Appointment was lawful (or, at least, no one raised the issue), Paul’s testimony that various proposals were being considered to get around the CRTC problem also included a recollection that it was not an uncommon practice for various documents to be prepared and signed, strictly as a matter of convenience, while awaiting a formal decision to either proceed or not to proceed.

While he cannot say that that practice was put into use with the signing of the Stock Power of Attorney or the Directors minutes, it might be noted that while everyone was in Regina for much of December, some members would be scattering pretty quickly. Fred and Shirley were going on their annual Maui vacation and Paul was heading out of town to attend the Super Bowl.

Thus getting things signed ahead of time as a convenience – particularly when they were also working against the clock, i.e. “in a hurry-up mode” – all provide a quite understandable explanation why some documents may have been signed notwithstanding no decision on taking action had yet been made. [ 145 ] But, in particular, there is no evidence that the Appointment Deed was ever signed. Paul’s testimony was that he was 90% confident that he had not signed such a document.

At various times when being cross-examined at discovery, Paul had consistently stated that he had no recollection whether he did or did not sign any Appointment document. He sat in the courtroom and heard all the other witnesses, including MacAulay and heard MacAulay detail the contents of the Appointment document that he had drafted.

Having heard that detailed description of the contents, Paul testified that he was now 90% confident that he did not sign such a document. [ 146 ] The plaintiff strenuously challenges Paul’s credibility on this point having altered his position when giving sworn evidence at discovery and only after hearing evidence from MacAulay. [ 147 ] Having reflected on the matter, I find there is no basis to challenge Paul’s credibility on this point. It is clear to me that until MacAulay provided his detail, Paul had no knowledge of what a deed could/should contain.

The effect of MacAulay’s testimony upon Paul was to allow him to search his memory whether he had signed a document that contained such detail. He does not say that he knew for certain that he had not signed such a document. He only says that he is now 90% confident that he did not.

[ 148 ] There is nothing improper in a witness testing or refreshing his memory in such a fashion. Clearly MacAulay’s evidence influenced Paul’s evidence. Paul clearly admits to that fact. But I heard no evidence that a detailed description of the content of a Deed of Appointment was ever explained or detailed to Paul on any prior cross-examination. [ 149 ] People have their memory “refreshed” in many ways. It may occur when someone else says something which has the effect of jogging the listener’s memory. That is what occurred here.

The fact that he was listening to evidence in a court of law adds nothing to the discussion. True it is that MacAulay’s evidence, being under oath, made his recollection more of a certainty. But there never was any suggestion put to MacAulay that the details he was providing concerning the content of a document he had drafted were inaccurate.

Indeed, had the document existed and been produced to Paul to test a recollection whether he had ever seen it before no objection could have been properly raised. [ 150 ] Turning to Shirley, her commitment to equality as between her children makes it unlikely that she would have intended to appoint the trust assets in such a discriminatory fashion. Paul, who would have been one of the beneficiaries had the appointment actually occurred, never expected to see any assets come his way because he knew that this proposal had not proceeded. Fred also told this to MacAulay in Maui.

Rand Flynn, Terry Downie and William Berezan also testified that Fred told them over the years that the appointment “had not been proceeded with” or “had not gone ahead” (669/14-676/14; 999/10-21; 1001/5-22; 1272/36-1274/30). [ 151 ] But even if a Deed of Appointment was signed, there is no evidence regarding the content of that document. We know what MacAulay’s draft stated. But we also know that other documents that he had drafted were, on occasion, altered by other persons for no apparent reason and, on other occasions, were altered with the effect of actually undermining what MacAulay was trying to achieve.

I can have no confidence that such did not occur in the case of any Deed of Appointment. [ 152 ] But there are three documents that the plaintiff points at to suggest that the Appointment did, in fact, proceed. [ 153 ] The first is a statutory declaration dated December 8, 1976 sworn by Fred Hill wherein he attested to the share structure of Famhill showing each of the four children holding 950 common shares. (Exhibit 58, Tab 3) But the defendant points out that since MacAulay only mailed out the Deed of Appointment that he had prepared on December 8, 1976, it was impossible for it to have been mailed from Manitoba or Ontario (MacAulay could not recall in which province he was when the letter went out) and received in Regina on the same day.

In other words, the statutory declaration was incorrect. [ 154 ] The statutory declaration was located with other Harvard documents related to the application for the T.V. licence. But there is no evidence what document(

s) were sent to and received by the CRTC as they have apparently destroyed all their old documents. Paul testified that he believed Fred’s statutory declaration was amended or corrected before the February, 1997 CRTC hearing (1392/15 - 17). [ 155 ] Other Harvard documentation relating to subsequent licence applications or renewal applications show an inconsistency in the matter of share ownership. For example, the aforementioned application contains the same information as is found in a 1980 FM licence application (Exhibit 58, Tab 4) and in a 1980 AM licence application (Exhibit 58, Tab 5).

Interestingly, all three also erroneously claim that the common shares had been issued when they had not. A 1984 T.V. licence application shows all the shares held by the trust but erroneously quantified them at 3900 (as opposed to 3,800) and erroneously describes them as class A preference shares - not common shares (Exhibit 58, Tab 6). There errors are replicated in another T.V. licence application in 1985 (Exhibit 58, Tab 7).

They are finally corrected in a 1991 radio renewal application and in all subsequent applications showing that the trust holds all 3800 common shares. [ 156 ] The inexplicable inconsistencies in these various documents leaves me with no ability to ferret out which should be relied upon. It is unclear who are the authors. It is unclear why the documents contain inconsistent information. Clearly there was no in house “quality control”. It is unclear what the content of the versions sent to and received by the CRTC might contain.

But whatever it might have been, the evidence suggests that the various documents sent to the CRTC must have been consistent. [ 157 ] Paul testified ... I do know that the CRTC requires absolute approval to any change of ownership so that if there had been a change of ownership from this period to the next application, they would have been all over us” (1392/20 - 22).

[ 158 ] There was no evidence of any such wranglings with the CRTC in subsequent years. Thus it seems more probable than not that the December 8, 1976 statutory declaration had to have been amended or corrected before it was filed with the CRTC and that subsequent documentation was consistent with its forebears. [ 159 ] The second document relied on by the plaintiff is Fred’s August 16, 2006 affidavit (Exhibit 37) of which previous mention was made.

In the portion previously detailed, Fred swore that “the documentation to execute the Aborted Transaction was drafted, and the Trustees of the Trust executed the same.” The defendant suggests that it is not clear if Fred was including a reference to the Deed of Appointment. I disagree. I am satisfied that Fred was probably referring to all of the documents.

The plaintiff argues that if, as Fred apparently deposed, the Trustees had executed the Deed of Appointment, then beneficial interest in the common shares immediately passed to each of the four Hill children. [ 160 ] I find, however, that Fred’s recollections 30 plus years later aren’t reliable. My reading of paragraphs 3, 4 & 5, in light of the unchallenged testimony of MacAulay in this regard, leads me to this conclusion. [ 161 ] I am prepared to accept that some unnamed legal advisor advised Fred that the trust assets should be appointed upon the four Hill children.

But Fred next asserts that: At the time I received this advice I had reservations about whether we should proceed in the manner proposed but I allowed the documentation to be prepared. [ 162 ] I interpret Fred’s words as meaning that it was the unnamed legal advisor who also prepared the documentation. Fred’s language of his practically passive state ie “but I allowed the documentation to be prepared” suggests this would be so.

Our common experiences suggests that it would be usual for the advisor’s legal office to complete the documentation, particularly here, where time was of the essence to completion of the purchase and obtaining of the T.V. licence. [ 163 ] Yet we know that it was MacAulay who drafted the documents. We also know that he was not the unnamed legal advisor. At no time was MacAulay advised that the decision to appoint was based on some other solicitor’s advice.

It would make no sense not to tell MacAulay of this, if only to concurrently secure a second opinion that what Fred didn’t want to see occur was not, perhaps, a fait accompli. [ 164 ] But, more importantly, MacAulay had not received any sense from Fred nor his agent nor anyone else that Fred had any reservations about this Appointment. [ 165 ] There are simply too many unanswered questions which prevent me from putting much stock in this 2006 affidavit.

That is in addition to my earlier observation that Fred’s description of the process suggests that the trustees would have been acting as nothing more than a rubber stamp. Indeed, he makes no reference in his affidavit to expressing his wishes for the trustees to proceed nor does he make even an oblique reference to the trustees coming to a decision which was only theirs to make. [ 166 ] The plaintiff also points to the signed letter of John Thresher dated January 12, 1977 to the attention of the Calgary transfer agent which directed the transfer of the shares to the Hill children.

It was found in the Harvard/Famhill files. It never was mailed. The plaintiff also points to another letter dated January 12, 1977 addressed to MacAulay which the latter testified he had never received. It was also found in the Harvard/Famhill files. Plaintiff argues that this corroborates the existence of the trustees’ decision as it was taking the process to the next step, which was the transfer of the shares to the children. [ 167 ] But this submission is problematic on a couple of levels.

On the same day, January 12, 1977, Fred Hill and Shirley Hill were telling MacAulay that the matter had not proceeded - past tense . So the dates do not line up. Secondly, the letter to the Calgary transfer agent establishes that no share transfer had yet occured which supports the notion that Fred’s even earlier statutory declaration of December 8, 1976, purportedly to the contrary, was mistaken. Alternatively, the conflict demonstrates further inconsistencies in various written assertions of Fred and his employees about what had occured or was occurring. The resultant confusion makes it difficult for the

court to successfully reconstruct all events some 35 or 36 years later. [ 168 ] Meanwhile the absence of any documentation reflecting trustee meeting(

s) or decisions regarding any Appointment leaves the court unaided in its quest to find trustees intention in the fashion that the plaintiff seeks.

The Intention of the Trustees [ 169 ] Notwithstanding no Deed of Appointment is exhibited, the plaintiff submits that: There is no credible evidence to suggest that any of the trustees did not execute the documents in December of 1976 with any intention other than that stipulated on the face of the Stock Power of Attorney, which was that they intended the effect of the Deed to be that the trustees: “by these presents do irrevocably convey, assign and transfer” the common shares of Famhill to the Four Hill Children. [ 170 ] I disagree. [ 171 ] Even after presuming a Deed of Appointment was signed and that’s its wording tracked the wording in the Stock Power of Attorney, I find as a fact that Paul’s motivation to sign was simply to have all necessary documents in place should it be subsequently decided that it was necessary to use them in order to facilitate the T.V. station purchase.

I find as a fact that when he signed the documents he did not do so with any concurrent, immediate intention to appoint the trust assets. [ 172 ] In regard to Shirley, there is no direct evidence as to why she signed the documents but it had to be connected to the C.R.T.C. problem.

It is clear to me and I find it as a fact that at some subsequent point she either was told or came to understand that the effect of her signing would be that assets would be transferred so as to benefit four of her children and to discriminate against the fifth - and that she would never do. [ 173 ] And she made that crystal clear to MacAulay and in the presence of Fred who was not about to challenge his wife on the matter.

Indeed, given her apparent life-long commitment to fair dealings for her children, I would not have expected anything less. [ 174 ] The sense that I received from MacAulay’s evidence was that Fred was then doing a lot of kowtowing to Shirley: he appears to have been reacting in a sheepish fashion - a lot of “yes dears” were recalled by MacAulay. [ 175 ] I am satisfied that when Shirley signed she was not aware of the effect of having done so. And when she signed she certainly was not intending to appoint the assets. [ 176 ] There is no suggestion that Shirley was “acting” in front of MacAulay.

I find as a fact that she was sincerely stating her position. Further, her statement on that date reflected the same mindset on whatever date it was that she had signed the documents. [ 177 ] If, as the plaintiff submits, there was a signing by the trustees with the concurrent intention that the assets be appointed, subsequent to which Fred intervened to prevent asset transfer, there would have been no need for Shirley to have said anything at all to MacAulay. The plaintiff says that as a trustee, Shirley had made her decision; Fred then put a stop to things. End of discussion.

But it that was so, why would she feel a need to tell MacAulay that she had made some sort of error? Her motivation would be irrelevant since Fred had put a stop to the matter in any event. [ 178 ] But Shirley did speak, and it appears, in a fairly animated way. “I can tell you Mrs. Hill was very vocal” (878/35). “I got the feeling that his wife had dug in her heels, he wasn’t going to try and change her mind” (880/12-13).

[ 179 ] I agree with the defendants that it was really Shirley who made the decision that no appointment of the trusts assets was going to occur - not Fred. And she made her decision after she was told or came to understand the effect of what she had signed. Fred simply acquiesced. “He respected her decision in this regard” (880/16-17). [ 180 ] The third trustee - Ross Sneath - passed away prior to this litigation so we do not have any information from him that might have a shed a light on his thought processes, understanding or intention when he signed the documents.

But it does not matter in any event. [ 181 ] The common law of Canada requires that the trustees be unanimous in their decision (Donovan W.M. Waters, Waters’ Law of Trusts in Canada , 3 rd ed. (Toronto: Carswell 2005) at p. 846, footnote 24). Each trustee, when called upon to exercise a discretionary power comes under certain fiduciary duties. One duty is the “duty to consider” which includes the requirement that they understand the effect of what they are signing ( Turner et al v.

Turner et al [1984] Ch 100 at pp. 109 - 110) . [ 182 ] I have found that Shirley did not understand the effect of what she was signing in the sense that she did not intend the discriminatory appointment result. That is enough therefore to permit me in conclude that any alleged power of appointment had not been effectively exercised by her and that the purported Appointment is therefore void ( Turner v. Turner , p. 110). [ 183 ] One cannot help but notice that MacAulay never received any instructions, memorandum or letter from any trustee claiming there had been a meeting or a decision taken to appoint.

Only Fred or his agent suggested otherwise. On the other hand Paul testified there had been no meetings; no joint decision taken. [ 184 ] The only time MacAulay heard from a trustee was in Maui in January 1977 when he spoke with Shirley and her words made it clear she was against this discriminatory appointment. [ 185 ] But there was another interesting point.

While in Maui, Fred and Shirley also told MacAuley that it was the present intention of the trustees to execute a new Deed of Appointment appointing the common shares to all five children (Exhibit 1, Tab 22; 885-886/7). [ 186 ] This was news to Paul at the trial. He was a trustee at the time but was completely unaware of any such decision or intention (1386/1-9). MacAulay testified that he never heard anything more about this claim (886/2-3). [ 187 ] There was no evidence that such had been decided at any time.

I find that there never was such a decision taken in January 1977 or any time earlier. [ 188 ] This confusing evidence underscores the need for the Court to be particularly vigilant when deciding the matter of trustee intention; and particularly when persons other than the trustees purport to be speaking on their behalf. [ 189 ] The discretionary nature of the trustees’ authority means, as I noted above, that the trustees came under certain fiduciary duties. [ 190 ] The Turner v.

Turner decision, cited above, relied upon the comments of Sir Robert Megarry in In Re Hay’s Settlement Trusts [1982] 1 W.L.R. 202 at p. 210 with which I agree: ... the duties of a trustee which are specific to a mere power appear to be threefold. Apart from the obvious duty of obeying the trust instrument, and in particular of making no appointment that is not authorized by it, the trustee must, first, consider periodically whether or not he should exercise the power; second, consider the range of objects of the power; and, third, consider the appropriateness of individual appointments.

I do not assert this list is exhaustive ... [ 191 ] Thus the exercise of the trustee’s discretion means the independent exercise of that discretion. The trustee breaches his duty if

he fails to act in such a fashion. [ 192 ] I have earlier expressed my misgivings that the wording of Fred’s 2006 affidavit which suggested that the trustees’ actions appeared to be only that of a rubber stamp. [ 193 ] But there is a more compelling piece of evidence in this regard. Among the plaintiff’s read-ins of Paul’s examination for discovery is the following: Q All right. So let me get this straight. You saw yourself as a trustee, as merely a person who did what your father decided; your father took the decisions, you did what he told you to; you had no independent function as a trustee?

A It was a matter of his wishes. Q So you -- although it was entirely discretionary trust, you were prepared to cede your discretion to your father? A I was prepared to, as a trustee, to take wishes from my father. Q And put them into effect without further consideration, without examining them and make your own decisions; you would simply put into effect what your father told you? A At the time, yes. Q At any time, did that change? A No. Q Okay. So let me get this straight. So you, at no time, ever considered that you had obligations to act independently of your father’s instructions as a trustee of this trust?

A No. (Exhibit 32, pp. 16-17) [ 194 ] Based upon everything I have heard and read about Fred ie that nothing really was done unless Fred directed that it be done, I am satisfied that Paul’s evidence is truthful. [ 195 ] Accordingly, I find that, not only did Paul sign the documents exhibited before me with no concurrent intention that they be put into effect and that a decision to reach such an intention was never taken, but that even if he signed the documents - indeed, even if he signed a Deed of Appointment - he never did so of his own volition. There was no independent exercise of his discretion.

Paul never thought he was supposed to act in such a fashion. He simply did as he was told. [ 196 ] In the result, if Paul had made a decision to appoint I would find that he failed to do so independently and thus in breach of his fiduciary duty to do so. In such a situation I would void his “decision”.

Signed, Sealed and Delivered [197] It is common ground between counsel that a deed, to be legally effective, must be signed, sealed and delivered. Because counselargued the matter at length in their written materials I will offer the following brief comments, although they are somewhat redundant tomy earlier findings. [198] “Signing” occured by the trustees. There is no doubt about that. [199] “Sealing”, however, was only partially completed and, as I have found with regard to Shirley and Paul, ineffective. [200] “Sealing” requires, as a first step, that a seal was affixed on the document.

But that does not alone create a deed. The processrequires that “there are acts or words sufficient to show that it is intended by the party to be executed as his deed presently binding onhim”. (Xenos v. Wickham

(1866) L.R. 2 H.L. 296 applied in Romaine v. Romaine 2001 Carswell BC 2039 (C.A.) at para. 41. [201] I have found as a fact that Shirley, due either to mistake, misapprehension or oversight, was ignorant that the effect of hersignature would be to appoint the assets in an unacceptable, discriminatory fashion. Onc

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