Toigo Estate (Re), 2018 BCSC 936

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Toigo Estate (Re), 2018 BCSC 936 Date: 20180608 Docket: S-184909 Registry: Vancouver Re The Estate of Peter Claude Toigo, Deceased, also known as Peter C. Toigo and Peter Toigo Before: The Honourable Madam Justice Shergill Reasons for Judgment Counsel for the Petitioner: Helen H. Low, Q.C. Place and Date of Hearing: Vancouver, B.C. April 26, 2018 Place and Date of Judgment: Vancouver, B.C. June 8, 2018 Overview [ 1 ] The petitioners, in their capacities as Trustees of the estate of Mr. Peter C.

Toigo (the “Estate”), have sought the Court’s approval of a resolution allowing for an encroachment of the Estate in favour of Elizabeth Toigo. There is no question that the Trustees have the discretionary power to pass such a resolution. The sole issue raised in this application is whether this Court has the jurisdiction to grant an order amounting to, in effect, a blessing of the exercise of that discretion. [ 2 ] The application was heard on April 26, 2018. I granted the order on the same date, with reasons to follow. These are my reasons.

Background [ 3 ] Peter Toigo died on October 6, 1993, leaving behind his wife, Elizabeth, and six children — Louise, Wendy, Peter, Alan, Ronald, and Richard (the “Toigo children”). In his last will and testament dated September 20, 1985 (the “Will”), Mr. Toigo appointed Elizabeth Toigo, Ronald Toigo (their son), and two associates, Frank Price and Sherman Willet Hood, as executors and trustees of his Estate (collectively referred to at the “Trustees”). Mr. Price resigned as trustee on February 8, 2016. The grant of probate of the Will was issued on April 6, 1994. [ 4 ] Pursuant to clause 3(

F) of the Will, a spousal trust was created for Ms. Toigo (the “Trust”) through which net income from the Estate would be paid to Ms. Toigo during her lifetime. Ms. Toigo has been receiving income earned by the Trust since her husband’s death. [ 5 ] Clause 4 of the Will permits the Trustees uncontrolled discretion to encroach on the capital of the residue of the Estate in favour of Ms. Toigo during her lifetime. The most significant asset of the Estate is the deceased’s shares in what is now the Peter C. Toigo Corporation (“PCTC”). At the time of Mr.

Toigo’s death, the shares in PCTC had a value of approximately $80 million. Those shares have increased considerably in value since then. [ 6 ] The Toigo family has also seen growth since Mr. Toigo’s death. Each of the Toigo children (aside from Richard) has had anywhere from one to five children of their own (the “Toigo grandchildren”). The 15 Toigo grandchildren are all adults under the age of 40. [ 7 ] Pursuant to the Will, the residue of the Estate after Ms. Toigo’s lifetime is to be divided into 12 shares. The six Toigo children receive one share each.

The remaining shares are held in separate trusts for the Toigo grandchildren, with one share for each group of grandchildren from each of the six Toigo children (a “Grandchild group”). The members of each Grandchild group share their inheritance equally amongst themselves, but cannot receive it until age 40. As Richard does not have any children, his children’s share is to be divided equally between the five existing Grandchild groups.

[8] The Grandchild groups range in membership from one to five. The resulting effect of the six shares being divided equallybetween the Grandchild groups is that some Toigo grandchildren will receive a significantly smaller share than others. [9] Ms. Toigo has asked the trustees to permit her to encroach on the Estate and to give her 50% of the issued and outstandingshares in PCTC. She seeks this in order to engage in her own estate planning, so that she can provide for a more equal distribution of theEstate amongst the Toigo grandchildren.

She and Ronald Toigo (who has four children that would be positively affected by Ms. Toigo’sintended estate planning), have recused themselves from the decision of whether or not to permit the encroachment. [10] By Resolution dated April 1, 2018, Sherman Hood, as the sole remaining non-interested trustee, has agreed to permit theencroachment. The following reasons are provided: 1. Elizabeth’s entitlement to one half of the PCTC shares (or value in those shares) as Peter’s long-standing spouse under theprinciples of family property division; 2.

The Legal and moral obligation owed to Elizabeth had she sought a variation of the Will; 3. The lack of any significant outright assets gifted from Peter’s Estate to Elizabeth under the Will; and 4.

Elizabeth’s intentions for the assets to be distributed to her, which is to her benefit to distribute the estate of both Peter and her in amanner that more equally benefits their grandchildren on a per person basis… [11] Given the magnitude of the encroachment and that only one trustee was conflict-free so as to make the decision, the Trusteesseek the approval of the Court prior to proceeding with the encroachment. [12] The deceased’s children and grandchildren, who are all sui juris, have consented to the exercise of the Mr. Hood’s discretion toencroach upon the Trust, and to give Ms.

Toigo outright ownership of 50% of the PCTC shares. Legal Framework [13] The Trustee Act, R.S.B.C. 1996, c. 464, governs the court’s exercise of powers in relation to a trust. Section 86(1) of the TrusteeAct, permits an executor or administrator to seek the following by way of petition: 86

(1) A trustee, executor or administrator may, without commencing any other proceeding, apply by petition to the court, or bysummons on a written statement to a Supreme Court judge in chambers, for the opinion, advice or direction of the court on a questionrespecting the management or administration of the trust property or the assets of a will-maker or intestate. [14] In addition, the court retains its inherent jurisdiction to supervise trusts despite statutory enactments on the matter. In PublicGuardian and Trustee v.

Colwell, 2004 BCSC 1622 at para. 32, Madam Justice Allan stated: … In addition, Donovan Waters (Law of Trusts in Canada, 2nd ed. (Toronto: Carswell, 1984) notes that Courts have retained theirinherent jurisdiction to supervise trusts: “None of this legislation has taken away the inherent powers, so that the courts can fall backupon them should the statutory powers prove inadequate…” (at 661). [15] The key principle governing the court’s inherent jurisdiction is the welfare of the beneficiaries of a trust: Colwell at para. 33. Analysis [16] In Jones v. McLeod, 2017 BCSC 1478, Mr.

Justice Pearlman discussed the limits of s. 86(1) of the Trustee Act. At paras. 30-33,he states: [30] The authorities provide some assistance on the scope of the questions which may be asked of the court on an application unders. 86(1). [31] In Philip K. Matkin Professional Corp. v.

Northmont Resort Properties Ltd., 2013 BCSC 2071, rev’d on other grounds, 2014BCCA 227, Madam Justice Loo said this at para. 116: [116] The seeking of legal advice on legal issues arising in connection with the trustee’s obligations is an appropriate category ofapplication under s. 86 of the Trustee Act ... [32] In Mansbridge and Roulston (In the Matter of), 2004 BCSC 1605, Madam Justice Loo also discussed s. 86 of the Trustee Act.At para. 51 she said this: [51] On an application for directions under s. 86 of the Trustee Act, the court should not exercise the trustees’ powers, but ratherconfine itself to advice on any legal issues that arise in connection with the trustees’ obligations.

This principle is enunciated byMiddleton J. in Re Fulford (1913), (ON SC), 29 O.L.R. 375 at p. 382: It is suggested that some scheme should be devised by which the Court should approve of realisation in each particular case, taking theopinion of some advisory committee, if necessary, upon each particular transaction. I do not think that any such scheme can beauthorized. The executors are protected from all liability if they honestly and with due care exercise the discretion vested in them. Butthe responsibility is theirs, and cannot be shifted upon the Court.

The executors cannot come to the Court and ask whether the present isa good time or a bad time to sell stock or anything else, or ask whether a price offered is sufficient or insufficient. The advice which the

Court is authorised to give is not of that type or kind; it is advice as to legal matters or legal difficulties arising in the discharge of theduties of the executors, not advice with regard to matters concerning which the executors’ judgment and discretion must govern. [33] What I take from these authorities is that an executor or trustee may seek the advice, opinion or directions of the court on alegal question and then act on that advice. [17] In Tomlinson Estate (Re), 2016 BCSC 1223 Madam Justice Dorgan dealt with a request for advice and direction over themanagement or administration of trust property, and the use of estate funds, in a situation where there was a conflict between theinterested parties.

In finding that the directions sought did not fall within the scope of s. 86 of the Trustee Act, Dorgan J. stated: [51] In Re Bailey (1982), (BC SC), 38 B.C.L.R. 227 (B.C.S.C. in chambers), Taylor J. in following the decision ofthis court in Re Royal Trust Co. (1962), (BC SC), 39 W.W.R. 636 (B.C.S.C.), stated the object of s. 86 (then section82) as: … the

section is designed to enable the court to assist trustees in ‘little matters of discretion’ concerning ‘the management andinvestment of trust property’, and it is not to be used as the basis for applications to construe an instrument, or to affect ‘the rights ofparties to property’. [18] Dorgan J. went on to say at paras. 53-54: [53] Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012) at 1164 writes: The issue of “management or administration as a limitation upon the Trustee Act power of the court to give its opinion, advice, ordirection has been more particularly raised in connection with motions which turn out to involve a conflict as to ownership of the assets.

The courts refuse to give such assistance when there is essentially a conflict between interested parties, and this is not merely becausethe court has not the necessary evidence before it, but because it is felt that a ‘fight’, whether or not it is patent, is not a matter ofmanagement or administration.” [54] I am of the opinion that the directions sought by Ms. Foster do not relate to the management or administration of the will asenvisioned by s. 86 of the Trustee Act. The focus of the

section is for the court to help the trustees administer the trust by giving advicenot in respect of conflicting parties, but advice regarding the obligations of a trustee. On that basis, I decline to make the order sought byMs. Foster under s. 86. [19] In my view, the order sought in the case at bar falls within the scope of s. 86(1) of the Trustee Act. The legal question raised iswhether Mr. Hood’s decision to permit the encroachment was made lawfully and in conjunction with his duties as a trustee. There is noadvice sought on the discharge of the trustee’s powers.

Further, there is no conflict between any of the interested parties. [20] However, I am mindful of the fact that s. 86(1) does not explicitly contemplate the situation before this Court. This is incontrast, for example, to New Zealand’s Trustee Act, 1956 No. 61, which reads at s. 66:

(1) Any trustee may apply to the court for directions concerning any property subject to a trust, or respecting the management oradministration of any such property, or respecting the exercise of any power or discretion vested in the trustee. [Emphasis added.] [21] As such, in the event that I am incorrect in my view that s. 86(1) of the Trustee Act permits the granting of the order sought, Iturn to a consideration of the inherent jurisdiction of this Court to supervise trusts. [22] The petitioners argue that where there is a momentous decision taken by a trustee, the court’s inherent jurisdiction can beinvoked to seek approval of such a decision.

What makes the decision momentous in this case is the substantial value of the shares inPCTC.

The encroachment of 50% of them will have a significant negative financial impact on the Toigo grandchildren who fall within aGrandchild group with fewer members, with a corresponding benefit to those Toigo grandchildren falling within a Grandchild group withgreater numbers. [23] There is an absence in the Canadian jurisprudence of cases explicitly dealing with the considerations a court should apply underits inherent jurisdiction in the context of whether or not to approve a momentous decision taken by a trustee. [24] In Courage Estate (Re) (1975), 10 Nfld. & P.E.I.R. 511, 1975 CarswellNfld 49 (S.C.T.D.), the application was regardinginterpretation of clauses of a will.

The will indicated, inter alia, that net income from the residuary estate was to be paid to thedeceased’s wife during her lifetime, with power to the trustees in their absolute discretion to encroach on capital to meet any unusualexpenses of the wife or any of the deceased’s children. Certain conditions were stipulated.

At para. 10, Morgan J. wrote: 10 The law is long settled that where Trustees are given the right to encroach on capital, coupled with broad discretionary powers, theCourts will not interfere with the exercise to these powers unless they are exercised unfairly and there are no mala fides with regard totheir exercise.

It is to be noted that, in this case, the Trustees are given power to encroach on the capital of the whole residuary estate, notjust a portion thereof, and I can find nothing in the will to support the contention that, the amounts to be divided amongst the childrenafter the wife's death, are to be placed in any special category during her lifetime. [25] Common law authorities from the United Kingdom address the issue before this Court, more directly.

[ 26 ] In Public Trustee v. Cooper , [2001] W.T.L.R. 901 Ch (Eng) at 922-924, Mr. Justice Hart detailed categories of cases in which trustees can seek directions from the court. Relevant to this case in particular, he stated the following:

(2) The second category is where the issue is whether the proposed course of action is a proper exercise of the trustees’ powers where there is no real doubt as to the nature of the trustees’ powers and the trustees have decided how they want to exercise them but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action on which they have resolved and which is within their powers. … In a case like that, there is no question of surrender of discretion and indeed it is most unlikely that the court will be persuaded in the absence of special circumstances to accept the surrender of discretion on a question of that sort, where the trustees are prima facie in a much better position than the court to know what is in the best interests of the beneficiaries. [ 27 ] The Royal Court of Guernsey ruled on a matter with similar circumstances to the case at bar in In the matter of the Trusts (Guernsey) Law, 2007, and In the matter of an application by the Trustee of the LKM Discretionary Trust , [34/2016] [ LKM ] — an anonymized decision dated July 20, 2016 .

The trustee in that case was asked to make a substantial distribution from trust assets to enable a beneficiary to satisfy the terms of a deferred prosecution agreement and a settlement agreement.

The discretionary trust had been established conventionally such that the trustee had the power to make the distribution. [ 28 ] Referring to the “momentous decision” category of cases set out in Cooper , the court in LKM noted at para. 17 that the test to be applied in these types of cases is that as outlined in In re: F , [32/2013], a decision of the Guernsey Court of Appeal: In the second type of application, however, the court is not exercising a discretion.

What it is doing is in effect making a declaration that the trustees’ proposed exercise of the power is lawful; in other words, that the proposed exercise is within the proper ambit of the power, that the trustees are acting honestly, and that in reaching their decision the trustees have taken into account all relevant matters, have taken into account no irrelevant matters, and have not reached a decision that no reasonable body of trustees could have reached.

The effect is to protect the trustees from any challenge to their decision by persons interested in the trust, and to make clear that the trustees are entitled to indemnity from the trust assets in respect of the costs or other financial consequences of their decision. It is immaterial that the court, had it been exercising a discretion of its own, would have exercised it in a way different from that proposed by the trustees. … [ 29 ] After considering other authorities, the court in LKM summarized the relevant questions to be addressed at para. 19, being in substance as follows:

a) Does the trustee have the power under the trust instrument and the relevant law to make the “momentous decision”?

b) Has the trustee formed the opinion to do so in good faith and is it desirable and proper to do so?

c) Is the opinion formed by the trustee one that a reasonable trustee in its position, properly instructed, could have arrived at?

d) Is the Court certain that the decision has not been vitiated by any actual or potential conflicts of interest? [ 30 ] At para. 20, the Court in LKM further noted that in considering whether or not the trustees have exercised their power properly, “the Court should exercise caution, and not act as a rubber stamp or take a lax approach”. [ 31 ] These legal considerations are consistent with s. 86(1) of the Trustee Act and Canadian jurisprudence in this area.

I find them useful in my analysis in this case. [ 32 ] Turning then to the first question of whether the Trustees have the power under the Will to encroach upon the Trust in the manner proposed, I find that they do. [ 33 ] The second question involves two different considerations: whether the opinion is formed in good faith and whether it is desirable and proper to embark on the proposed action. I find that Mr. Hood’s decision to approve the encroachment — as the sole remaining disinterested trustee — is made in good faith. Mr. Hood does not stand to gain from the encroachment in any way.

In addition, given the manner in which the original bequest was framed, i.e. equal shares to each of the Toigo children and equal shares to the Toigo grandchildren groups, I find that it is desirable and proper for Ms. Toigo to seek the encroachment in order to more equitably distribute the Estate amongst the Toigo grandchildren. My conclusion is further bolstered by the consent to the encroachment given by all of the deceased’s children and grandchildren. [ 34 ] Turning to the third question, I find that the decision to approve the encroachment is one that a reasonable trustee in Mr.

Hood’s position, properly instructed, could arrive at. [ 35 ] Finally, there is no concern of a conflict of interest vitiating the decision as Ronald Toigo and Ms. Toigo have recused themselves from the decision. Order [ 36 ] On consideration of all of the evidence, and statutory and case authorities, I find that the trustee’s decision to encroach upon the Trust in Ms. Toigo’s favour, is appropriate.

To be clear, my decision is not an exercise of the Court’s discretion, but a recognition that the trustee’s exercise of power was lawful, made in good faith, and reasonable with regard to the factual circumstances presented. As such, the order sought by the petitioners is granted. Shergill J