LISA ARMSTRONG APPLICANT v. CHERYL LEE GRANT, 2023 SKKB 111
Opinion
REDACTED VERSION KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 111 Date: 2023 05 31 Docket: QBG-RG-02304-20 21 Judicial Centre: Regina BETWEEN: LISA ARMSTRONG APPLICANT -and- CHERYL LEE GRANT RESPONDENT Appearing: Jordan Hardy, K.C. for the applicant Sean Watson for the respondent FIAT MITCHELL J. MAY 31, 2023 I. OVERVIEW [ 1 ] This originating application brought by the applicant, Ms. Lisa Armstrong [Lisa] pursuant to ss. 16 (1) of The Trustee Act, 2009 , SS 2009, c T-23.01 [ Act ] seeks an order removing the respondent, Ms.
Cheryl Lee Grant [Cheryl] as a trustee of the trusts created by the Last Will and Testament of the late Mr. Brent Patrick Gibson [Brent] dated February 9, 2006 [Will]. As well, Lisa seeks an order pursuant to ss. 20(1) of the Act vesting all of the property held by the Lisa Trust in her absolutely. [ 2 ] Alternatively, should such orders not be available under the Act , Lisa asks this Court to exercise its inherent jurisdiction and direct the trust created specifically for her [Lisa Trust] be collapsed and its’ capital vested in her absolutely in accordance with the rule in Saunders v Vautier (1841), 41 ER 482 .
[ 3 ] Finally, should all else fail, Lisa asks for relief under The Dependants’ Relief Act, 1996 , SS 1996, c D-25.01 [ DRA ], and particularly to have title in the family home given over to her absolutely. [ 4 ] Lisa is Brent’s widow. Cheryl is his sister. They are co-trustees of the trusts created in the Will. (I use first names to identify the parties to this application, I mean no disrespect by doing so.) [ 5 ] By all accounts, Brent was an extremely fit individual who competed in amateur athletic events at an elite level.
Prior to his sudden death on October 30, 2006 from a heart attack at the age of 41, he had just returned from an Ironman Triathlon in Hawaii, USA. His immediate survivors included Lisa and the couple’s daughter, Emma, who was born on October 13, 2005, and only an infant at the time of her father’s passing. [ 6 ] As noted, prior to his death, Brent had executed the Will, a copy of which is attached as Exhibit “B” to the Affidavit of Lisa Armstrong sworn October 29, 2021 [Lisa’s Affidavit]. [ 7 ] Of relevance to this application are the two trusts which Brent created in that document.
One is for Lisa - the Lisa Trust. The second trust is for Emma and is identified in the Will as the “Children’s Trust”. As Emma is the only child of Lisa and Brent, I shall refer to this trust as the [Emma Trust]. [ 8 ] Importantly, as well, Brent designated in his Will both Lisa, and his father, Mr. Brian Wayne Gibson [Brian] to be the trustees of his estate. Should either of these individuals be unable or unwilling to act, then Brent designated Cheryl to be the alternate trustee.
See: Lisa’s Affidavit Exhibit “B” at II. [ 9 ] Over the ensuing years, Lisa and Brian had a difficult relationship disagreeing over many issues relating to the management of the Lisa Trust, particularly. At one point, after Brian allegedly refused to pay out any income from the trust capital to Lisa, the two of them attended mediation in an attempt to resolve their disagreements. [ 10 ] Subsequently, Brian resigned as a trustee of his son’s estate on September 11, 2019. At the same time, he consented to the appointment of his daughter, Cheryl, to act as the second trustee in his stead.
See: Lisa’s Affidavit Exhibit “D”. [ 11 ] Although Cheryl has assumed the role of a co-trustee, disagreements between Cheryl and Lisa relating to the proper administration of the trusts have continued. Lisa is especially frustrated by her lack of autonomy over how best to manage her financial affairs.
Cheryl, for her part, believes she is remaining true to her brother’s intentions as set out in the Will, and preserving the capital held by the Lisa Trust is in Lisa’s long-term best interests. [ 12 ] After all these years, Lisa now brings this application with the object of obtaining what she insists is rightfully hers, namely the capital currently held by the Lisa Trust. As noted, she advances a number of alternative arguments in support of a court order directing such a remedy. [ 13 ] These reasons explain that while I am sympathetic to Lisa’s plight, I am unable to grant her the relief she seeks.
Accordingly, I must dismiss her application with costs. II. FACTUAL BACKGROUND [ 14 ] In addition to Lisa’s Affidavit, the following affidavits were also filed in this matter: (1) the Affidavit of Cheryl Grant sworn December 6, 2021 [Cheryl’s Affidavit], and (2) the Affidavit of Lisa Armstrong sworn February 2, 2022 [Lisa’s Supplementary Affidavit]. The factual background set out below is gleaned from those affidavits. A. Events Prior to Mr. Gibson’s Death [ 15 ] Lisa and Brent first met in August 1999. The couple married on November 9, 2002.
At that time, Brent was extensively involved in his family’s insurance business, Campbell & Haliburton. This marriage ended with Brent’s sudden death in 2006. [ 16 ] Prior to their marriage, the couple purchased their family home located at [redacted] in Regina, Saskatchewan. They also owned a four-plex located at [redacted] in Regina. The family home was selected taking into account the fact that Lisa suffers from multiple sclerosis [MS], a chronic condition with which she had been diagnosed in 1990, many years before she met Brent. [ 17 ] Lisa and Emma continue to live in the family home to this day.
Currently, Lisa’s domestic partner, Mr. Shachaf Tcherni resides there with them. The family home which is currently valued at $490,000 is held by the Lisa Trust. [ 18 ] Since approximately 2008, Lisa has been unable to work due to her MS. She has been on disability from her employment with the Government of Saskatchewan. Lisa describes her financial situation at paras. 33 and 49 of Lisa’s Affidavit where she avers as follows: 33. Because of MS, I am unable to work, and rely exclusively on the income from the trusts created for me and Emma by Brent’s will.
I receive $2,000 from a trust that was created for my benefit, and $2,000 from a trust that was created for Emma’s benefit. Also, from these amounts I also pay approximately $2,000 per month for the upkeep, maintenance and property taxes for a fourplex rental property that is held in my trust. There is presently only one tenant in the fourplex. I am currently renovating the fourplex and would like to sell it once I am done. However, I won’t be able to sell is unless it is transferred to me out of the trust or Cheryl is removed as trustee. . . . . . 49.
At the time [of Brent’s death], my monthly income consisted of Manulife disability, child tax benefit and CPP widow’s pension, for a total monthly income of $1,846, on which to support myself and Emma. I was therefore totally reliant on the incomes from the Emma and Lisa Trusts in order to make ends meet.
B. The Trust Provisions of the Will [ 19 ] Brent executed the Will on February 9, 2006, a few months prior to his untimely death. The provisions of the Will most relevant to this application relate to the two trusts created in favour of Lisa and Emma, respectively. I reproduce the relevant articles in their entirety below: 4. Division If Spouse Survives If my wife, Lisa Jane Gibson , is living on thirtieth (30) day following the date of my death, my Trustees shall divide the residue of my estate into three
(3) Parts, the Parts of which and the assets comprised therein are hereinafter identified, as soon as reasonably possible after my death: A. Trust for Spouse (
a) The first Part of such division shall hereafter be identified as “the Lisa Trust” which shall include the following assets or the proceeds from such assets: (
i) The proceeds of the following life insurance policies on my life (hereinafter referred to in this paragraph as “the Insurance proceeds ”) which policies are identified as: (
a) Canada Life Policy No. [redacted]; and (
b) C&H Group Life Insurance under Canada Life Policy No. [redacted]; and the insurance proceeds shall be payable to and paid over to my Trustees under this my Will and set aside in this separate Lisa Trust under the terms hereinafter stated, and this shall always be regarded as a designation of beneficiary within the meaning of The Insurance Act (Saskatchewan) ; (ii) The family home located at [redacted], Regina, Saskatchewan or any other family home which I own and reside in at my death; (iii) The fourplex located at the civic address of [redacted], Regina, Saskatchewan, and; (iv) The Condominium which I own in the area of Summerland, British Columbia, described as [redacted], Summerland, British Columbia. (
b) During the lifetime of my wife, Lisa Jane Gibson , my Trustees may pay to my wife such portion of the net income derived from the assets held in trust under the Lisa Trust and my Trustees may also pay to my wife such amounts out of the capital of the Lisa Trust . Such payments from income or capital made from time to time may be made by my Trustees in the exercise of an absolute discretion as considered appropriate for my wife’s support and benefit. Any income not paid out or distributed by my Trustees shall be accumulated and added to the capital of the Lisa Trust . (
c) Upon the death of my wife, Lisa Jane Gibson , the remaining income and capital, if any, held in the Lisa Trust shall be paid or transferred to the Trust which I hereinafter have specified as “ the Children’s Trust ” and shall be held in trust by my Trustees under and pursuant to the terms of the Children’s Trust. B. Trust for Children (
a) If any child of mine is living on the thirtieth (30) day following the date of my death, my Trustees shall hold the following property and the same shall comprise the second Part of the division of my Estate in a Trust which I specify and designate as “ the Children’s Trust ”. The property initially comprising the Children’s Trust shall be all the shares and interest which I own in the following Companies: (
i) Campbell & Halliburton Insurance Ltd.; (ii) Campbell & Halliburton Regina Ltd.; (iii) 20 th Century Investments Ltd. (
b) During the continuation of the Children’s Trust , my Trustees shall deal with all assets comprise in the Children’s Trust on the following terms: 1. My Trustees shall divide the portion of the Children’s Trust so that there is: (
i) one equal part for each child of mine living on the thirtieth (30 th ) day after my death; and (ii) one equal part for each child of mine not then living with issue then living. 2. My Trustees shall deal with the divided parts in the Children’s Trust in each case as follows: (
i) My Trustees shall set aside one part for each child as aforesaid and keep the
part invested. My Trustees shall pay to the child in each case or apply to his or her support and education so much of the income and capital of the
part in trust for each child as my Trustees in exercising an absolute discretion consider appropriate from time to time. Any surplus income shall be accumulated and added to the capital of that part; (ii) On the twenty-first anniversary of my death, my Trustees shall pay and transfer the remainder of such part then remaining to that
child for his or her own use absolutely; (iii) If any child of mine dies before receiving the full or outright benefit of the part held in trust for such child then my Trustees shall divide the part or the amount not yet received by any child equally among the children of such child who survive him or her.
If my child leaves no child surviving him or her the part shall be divided among my issue alive at the death of my child in equal shares per stirpes . (iv) My Trustees shall set aside one Part for the issue of each child of mine not living on the thirtieth (30 th ) day after my death, but who has issue then living, and shall divide the part and maintain it in trust on the same terms for the then living issue of such child in equal shares per stirpes. C.
Residue to Spouse My Trustees shall pay or transfer all the rest and residue of my estate, which shall comprise the third Part of such division, to my wife, Lisa Jane Gibson , for her own use absolutely. . . . . . VI. WISHES I declare that the income, including capital gains, and the appreciation of capital which arises from any interest in trust for any beneficiary under my Will, and specifically any benefit under either the Lisa Trust or the [Emma Trust] contained in my Will, shall not be the property of the beneficiary of beneficiaries unless actually paid out by my Trustee to the person.
I specifically direct that the Family property of such beneficiaries hereunder shall not be increased by the assets comprised in the Lisa Trust and the [Emma Trust] under the terms of my Will whether on death, divorce, or separation of such beneficiary, unless the said benefit is actually paid to or for the beneficiary.
It is not my intention under this my Will to benefit any of the spouses or future spouses of any beneficiary and all such gifts made in trust or otherwise hereunder are made to the exclusion of the spouse of such beneficiary who shall have no entitlement thereto under the provisions of The Family Property Act , Saskatchewan, or any other such similar legislation, and all amendments thereto. [Emphasis in original] C.
Events Following Brent’s Death [ 20 ] Almost immediately following Brent’s death, Lisa and her then co-trustee, Brian began to experience significant difficulties respecting how best to administer the two trusts. Lisa avers that it was not uncommon for Brian to threaten to refuse to pay out any of the income from the two trusts unless she did what she was told: Lisa’s Affidavit at para. 52. [ 21 ] In late 2010, Brian unilaterally stopped payments to Lisa of the income earned from both trusts, and demanded she attend mediation before resuming monthly payments.
The two of them attended mediation, at the conclusion of which Brian agreed to marginally increase her monthly stipend from the trusts. [ 22 ] As noted, Brian subsequently stepped down from his role as a co-trustee of his son’s estate, and Cheryl assumed this responsibility. Lisa avers that her circumstances have not improved, however. Cheryl, like Brian before her, refuses to pay to her the capital of the Lisa Trust despite numerous requests to do so. As Lisa does not hold title to the family home, she enjoys no flexibility as to finding a home for herself, Emma, and Mr.
Tcherni. [ 23 ] Lisa has waited until now to bring this application. She avers that she avoided “dealing with this for years” but realizes now it can no longer be avoided. See: Lisa Affidavit at para. 68. [ 24 ] Lisa concludes at para. 69 as follows: Simply, I would like to independently manage the affairs of myself and my daughter Emma on my own terms without oversight, control and scrutiny from Cheryl…and the Gibson family. I want my privacy back, and my dignity. III. ISSUES [ 25 ] The following four issues fall to be determined on this application: (
a) How should the Lisa Trust be characterized? (
b) Should Cheryl be removed as Lisa’s co-trustee pursuant to s. 16(1) of the Act ? (
c) If not, can Lisa as the sole beneficiary of the Lisa Trust trigger the application of the rule in Saunders v Vautier ? (
d) If not, can Lisa obtain relief pursuant to the DRA ? IV. ANALYSIS A. Characterization of the Lisa Trust [ 26 ] The issue respecting the characterization of the Lisa Trust was raised by Cheryl’s counsel. It must be addressed at the outset because how the Lisa Trust is characterized will affect the analysis of the other legal issues presented on this application. [ 27 ] Cheryl submits that the Lisa Trust bears all the hallmarks of, and is intended to operate as, a Henson Trust.
While Lisa’s counsel did not explicitly address this issue, it is evident from his submissions that Lisa views the Lisa Trust to be a discretionary trust. 1. Law [ 28 ] A Henson trust derives its appellation from Director of Income Maintenance (Ontario) v Henson (1987), 28 ETR 121 (WL) (Ont Div Ct) , aff’d (1989), 36 ETR 192 (Ont CA) . Such a trust is a special category of an absolute discretion trust which properly constituted allows a beneficiary to retain their entitlement to government benefits, while simultaneously continuing to derive income from the trust at the trustee’s absolute discretion.
This is because no interest in the trust funds vests in the beneficiary. In order to prevent any such vesting, a Henson trust typically will include a gift over of any remainder of the trust fund capital upon the death of the beneficiary of the life estate. See: Stoor v Stoor Estate , 2014 ONSC 5684 at para 7 , 5 ETR (4th) 207 [ Stoor Estate ] . [ 29 ] The Supreme Court of Canada considered a Henson trust for the first time in S.A. v Metro Vancouver Housing Corp. , 2019 SCC 4 , [2019] 1 SCR 99 [ S.A. ] .
The appellant, S.A., was a person with disabilities whose sole source of income was social assistance benefits payable under British Columbia’s Employment and Assistance for Persons with Disabilities Act , SBC 2002, c 41 . For many years she lived in a subsidized housing complex operated by the respondent, Metropolitan Vancouver Housing Corporation [MVHC]. [ 30 ] In 2012, S.A.’s father died, and his will made provision for her which through court order was placed in a trust dedicated to her care and maintenance.
When S.A. applied for renewal of her lease, the MVHC asked her to disclose the current balance of her trust fund. S.A. refused on the ground that the trust was “not an asset which could affect [her] eligibility for a housing subsidy”: S.A. at para 15 .
A stalemate followed, and litigation ensued. [ 31 ] The British Columbia courts determined that because S.A. had an interest in the trust, it was a relevant consideration for purposes of her continued eligibility for subsidized housing, and its value must be disclosed to MVHC. [ 32 ] Ultimately, the Supreme Court disagreed and reversed the holdings of the lower courts.
Writing for the majority, Côté J. set forth the attributes of a Henson trust as follows at para. 2: [2] Resolving this issue requires this Court to consider, for the first time, the nature of a specific type of trust — commonly known as the “ Henson trust” — settled for the benefit of a person with disabilities who relies on publicly funded social assistance benefits (see: Ontario (Director of Income Maintenance Branch of the Ministry of Community and Social Services) v. Henson (1987), 26 O.A.C. 332 (Div. Ct.) , aff’d in (1989), 36 E.T.R. 192 (Ont. C.A.) ).
The central feature of the Henson trust is that the trustee is given ultimate discretion with respect to payments out of the trust to the person with disabilities for whom the trust was settled, the effect being that the latter (
a) cannot compel the former to make payments to him or her, and (
b) is prevented from unilaterally collapsing the trust under the rule in Saunders v. Vautier (1841), Cr. & Ph. 240 , 41 E.R. 482 . Because the person with disabilities has no enforceable right to receive any property from the trustee of a Henso trust unless and until the trustee exercises his or her discretion in that person’s favour, the interest he or she has therein is not generally treated as an “asset” for the purposes of means-tested social assistance programs (D. W. M. Waters , M. R. Gillen and L. D. Smith, eds., Waters ’ Law of Trusts in Canada (4 th ed. 2012), at pp. 572-73).
The Henson trust therefore makes it possible to set aside money or other valuable property for the benefit of a person with disabilities in a manner that jeopardizes that person’s entitlement to receive social benefits as little as possible. [Italics in original] [ 33 ] Scrutinizing the terms of the trust provision at issue in S.A. , Côté J. determined that it bore the essential elements of a Henson trust. First, it did not confer any fixed entitlements on S.A.
Rather, it gave to the trustees (who included S.A.) the “ultimate discretion over any distributions that might be made out of the Trust’s income or capital for S.A.’s care, maintenance, education or benefit”: S.A. at para 35 . This meant that S.A. had no “enforceable right to receive anything unless and until the Trustees decide to exercise their discretion in her favour”: S.A. at para 36 (italics in original). [ 34 ] Second, the trust was structured so that S.A. could not unilaterally collapse it under the rule in Saunders v Vautier .
Justice Côté explained that this rule permits “a beneficiary of a trust (or multiple beneficiaries acting jointly) can terminate the trust and demand that the trustee convey legal title over the corpus of the trust to him or her – but only if the beneficiary has capacity and is absolutely entitled to all the rights of beneficial ownership in the trust property”: S.A. at para 38 (citations omitted). 2. The Lisa Trust is not a Henson Trust [ 35 ] It is true the Lisa Trust bears some of the attributes of a Henson trust. For example,
Article 4A(
b) of the Will provides that the trustees (of which Lisa is one) have the absolute discretion to make payments to her from either the income derived from, or the capital of, the Lisa Trust which they consider appropriate for her support and benefit during her lifetime. This term resembles the stipulation in the trust scrutinized in S.A. See: S.A. at para 35 . [ 36 ] Second,
Article 4A(
c) of the Will provides for a gift over to the Emma Trust upon Lisa’ death. Typically, such a gift over is found in a Henson trust. See: Stoor Estate at paras 51-52 . However, the Lisa Trust further stipulates that this gift over will only be effective if there is some income and capital remaining in the Lisa Trust at the time of her death.
Simply put, the Will contemplates the possibility that there may be no property remaining in the Lisa Trust at the time of her death with the result that the gift over lapses. [ 37 ] However, the purpose of this trust and the factual circumstances existing at the time the Will, including the Lisa Trust provisions, was drawn up and executed militate against characterizing the Lisa Trust as a Henson trust. [ 38 ] It is plain, as Côté J. states at para. 2 of S.A. , that a Henson trust is a specific type of trust “ settled for the benefit of a person with disabilities who relies on publicly funded social assistance benefits”.
That is not the Lisa Trust, however, as Lisa has never been a recipient of government-sponsored social assistance benefits.
[ 39 ] When Brent executed the Will in February 2006, Lisa was still gainfully employed despite her MS diagnosis. She continued to be employed until 2008 when her illness forced her to apply for, and obtain, disability insurance benefits. At no time, prior to Brent’s death and the trust’s operation – or afterwards, for that matter – was Lisa a recipient of publicly funded social assistance benefits.
Admittedly, the evidence discloses that Lisa has been receiving disability insurance payments for a number of years; however, this is money obtained from an insurance scheme, and not a form of social assistance funded by government. [ 40 ] Accordingly, for these reasons I find the Lisa Trust cannot be characterized as a Henson Trust. 3. The Lisa Trust is a Discretionary Trust [ 41 ] Plainly, Brent had the Lisa Trust created for the support and benefit of Lisa during her lifetime: Will, Articles 4A(b), and (c).
The Will gives to the trustees of the Lisa Trust the absolute discretion to determine what is the requisite payment of income, and capital (when necessary) in order to achieve this purpose: Will,
Article 4A(b). [ 42 ] These directions contemplate that at times, Lisa may not receive any income from the Lisa Trust if she is not in need of it. In such an instance, the income shall be added “to the capital of the Lisa Trust”: Will,
Article 4A(b). Alternatively, the opening words of
Article 4A(
c) which read “Upon the death of my wife, Lisa Jane Gibson, the remaining income and capital, if any , held in the Lisa Trust…” (emphasis added) contemplate that all income and capital of the Lisa Trust may ultimately be spent to support and benefit Lisa during her lifetime. [ 43 ] In an earlier edition of the leading Canadian treatise on trust law, Donovan W.M. Waters, Mark R. Gillen & Lionel D.
Smith, Waters’ Law of Trusts in Canada , 4 th ed (Toronto: Carswell, 2012) [ Waters ], for example, the authors at page 1202 describe a discretionary trust as follows: Discretionary trust, or “sprinkling trusts” as they are known in the United States, occur when the trustees are vested with property and are required to allocate it as they think fit among a class of beneficiaries.
As we have seen, the trustees may be required to distribute all of the property, income and capital, among the members of the class; alternatively, there may be provision for any property left over at a certain time to revert to the testator’s estate or go on as a gift over to another or others. [Footnotes omitted] See further: Walters v Walters , 2022 ONCA 38 at para 38 , 467 DLR (4th) 127 [ Walters ] . [ 44 ] Further, at page 1205 of Waters , the authors observe that “because of the flexibility it offers, both to settlors and after the trust takes effect to their trustees, the discretionary trusts remains in this country a basic and widely employed estate planning instrument for the purposes of the family unit”. [ 45 ] These statements aptly describe the Lisa Trust.
Lisa is its’ primary beneficiary with a gift over to the Emma Trust, of which Emma is the ultimate and sole beneficiary. Clearly then, I am persuaded that the Lisa Trust must be characterized as an absolute discretionary trust. B. Should Cheryl Be Removed as a Trustee of the Lisa Trust? [ 46 ] Lisa seeks an order pursuant to s. 16 of the Act removing Cheryl as a trustee of the Lisa Trust.
It will be recalled that in addition to being the beneficiary of this trust, Lisa is also the other trustee of the Lisa Trust. [ 47 ] Essentially, Lisa offers four bases for removing Cheryl as a trustee, any one of which, she asserts, is a sufficient ground to make such an order under s. 16 of the Act . These four bases are: (
a) The trustees are deadlocked about encroaching upon the capital of the trust. The only way to resolve this impasse is to remove Cheryl as trustee; (
b) Cheryl by refusing to exercise the power to encroach upon the trust capital is not only ignoring the intention of the testator but also failing to act in the best interest of the beneficiary; (
c) It is in Lisa’s best interest to remove Cheryl as a trustee and permit her to manage her own financial affairs, (
d) Cheryl is failing to apply an even hand between the income beneficiary (Lisa), and the capital beneficiary (Emma) of the Lisa Trust. Consequently, she should be removed as a trustee. 1. Law [ 48 ]
Section 16 of the Act in its relevant parts, reads as follows: 16
(1) If the court is satisfied that it is in the best interests of the trust, the court may: (
a) remove a trustee, with or without appointment of a substitute; (
b) appoint an additional trustee; or (
c) appoint a separate set of trustees for any part of the trust property distinct from those relating to any other part.
(2) For the purposes of clause (1)(c), any existing trustee may be appointed or remain one of a separate set of trustees.
(3) An application to appoint or remove a trustee pursuant to this
section may be made by:
(
a) a trustee; (
b) a beneficiary of the trust; (
c) a person nominated in a trust instrument for the purpose of appointing and removing trustees; or (
d) the Public Guardian and Trustee. … [49] Although in this application Lisa invokes s. 16 of the Act, it is well-established that the Court of King’s Benchalso has the inherent jurisdiction to remove an executor, administrator, or a trustee in appropriate circumstances.
See: Figley v Figley,2012 SKCA 36 at para 31, 393 Sask R 44 [Figley]; Ocean Man Trust, Re (1993), (SK CA), 113 Sask R 179 (CA)[Ocean Man Trust], and Reiter v Powell, 2016 SKQB 100 at paras 26-32 [Reiter]. [50] The statutory or common law power to remove an executor or trustee should be exercised sparingly, and when atrustee wishes to continue in that role, and the circumstances are in dispute, a court is unlikely to intervene summarily.
See: Frizzell vBonneau, 2012 SKQB 358 at para 81, 404 Sask R 95. [51] In Figley, Richards J.A. (as he then was) summarized the law regarding the removal of an executor as follows: [32] The leading case with respect to the removal of executors is Letterstedt v. Broers (1884), 9 A.C. 371 (P.C.).
There, LordBlackburn referred with approval, at pp. 385–87, to a passage from Story’s Equity Jurisprudence: Story says, s. 1289, “But in cases of positive misconduct, Courts of Equity have no difficulty in interposing to remove trustees who haveabused their trust; it is not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce Courts ofEquity to adopt such a course.
But, the acts or omissions must be such as to endanger the trust property or to shew a want of honesty, or awant of proper capacity to execute the duties, or a want of reasonable fidelity.” It seems to their Lordships that the jurisdiction which a Court of Equity has no difficulty in exercising under the circumstances indicatedby Story is merely ancillary to its principal duty, to see that the trusts are properly executed. … It must always be borne in mind thattrustees exist for the benefit of those to whom the creator of the trust has given the trust estate. … In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyondthe very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries.
Probably it is not possible to laydown any more definite rule in a matter so essentially dependent on details often of great nicety. But they proceed to look carefully intothe circumstances of the case. [emphasis added] [33] This general approach appears to have been consistently applied by the courts of this Province and elsewhere. See, for example:Watson Estate, Re (1997), (SK KB), 159 Sask. R. 275 (Q.B.) at paras. 9–11; Matiko v. Matiko Estate, 2002 SKQB273; Mitchell Estate, Re, 2006 SKQB 267, 280 Sask. R. 151. … [46] The authorities indicate that a court should not act too readily to remove an executor.
As Wimmer J. said in Surminsky (LitigationGuardian of) v. Ulmer Estate, 2000 SKQB 209, “To override a testator’s choice of an executor is a sensitive exercise not to be lightlyundertaken.” See also: Mitchell Estate, Re, supra at para. 10. As well, the cases suggest the mere fact of conflict or bad personal relationsbetween a beneficiary and a trustee is normally not enough to warrant the removal of a trustee.
See, for example: Watson Estate, Re,supra at para. 12. [Emphasis in original] [52] To be sure, Figley involved the removal of an executor which amounted to a direct interference with atestator’s expressed wishes. However, these principles apply equally to the removal of either an administrator or a trustee.
See: Geran vGeran Estate, 2022 SKCA 143 at para 95 [Geran Estate] per Tholl J.A. (dissenting but not on this point). [53] In Ocean Man Trust, for example, the Court of Appeal held that when assessing whether a trustee should beremoved the well-settled principle that a trustee must act in the best interests of the beneficiaries is first and foremost.
And whendetermining if the trustee is acting in the best interests of the beneficiaries “a court must bear in mind that the nature of the trustee’spower is discretionary and that judicial interference should be exercised with restraint”: Ocean Man Trust at para 11 per Wakeling J.A.See also: Scott v Scott, (SK KB), [1991] 5 WWR 185 (Sask QB) [54] There is no exhaustive list of factors to be employed when determining whether an executor, administrator ortrustee ought to be removed.
However, in Geran Estate at para 97, Tholl J.A. stated that “helpful guidance” on this question may beobtained from authorities such as Hazelhurst Estate (Re), 2007 SKQB 343, 301 Sask R 121 [Hazelhurst Estate], and Whitworth vWhitworth, 2016 SKQB 369 [Whitworth]. [55] In Whitworth, for example, Mills J. at para. 4 identified a litany of factors which a court might consider whenassessing the merits of an application seeking the removal of an administrator. These factors include: 4…
(1) Mistake, neglect of duty or inaccuracy of conduct of trustees sufficient to endanger the trust property;
(2) Want of honesty;
(3) Want of proper capacity to execute the duties of executor;
(4) Want of reasonable fidelity;
(5) The exercise of discretion to remove an executor is not to be undertaken lightly;
(6) The overriding duty of the Court is to ensure the administration will be properly executed; and
(7) The ultimate concern must be for the welfare of the beneficiaries. See also: Hazelhurst Estate at para 6. [56] Even after these various factors have been considered, an administrator or executor should not be removed andreplaced unless it is demonstrated that such a drastic step is in the best interests of the trust and its beneficiaries. See: Figley at para 46,and Reiter at para 31. As Mills J. stated in Whitworth at para 8, removing an executor or trustee “is a serious step which should not betaken lightly”.
He elaborated, again at para. 8: “The rationale for that is the deceased has chosen the executor and absent good reasonthat choice should be respected”. See also: Geran Estate at para 97. [57] Indeed, as Richards J.A. reminds us in Figley at para 46, “the mere fact of conflict or bad personal relationsbetween a beneficiary and a trustee is normally not enough to warrant the removal of a trustee”. 2. Discussion [58] As noted, Lisa asks that Cheryl be removed as trustee either pursuant to s. 16 of the Act or the inherentjurisdiction of the Court of King’s Bench.
She cites four grounds which I address below. 2.1 Lisa and Cheryl are Deadlocked as Trustees [59] Lisa asserts that she and Cheryl in their capacities as trustees have reached an impasse or are deadlocked as tothe appropriate management of the Lisa Trust. More particularly, Lisa contends that by not agreeing to encroach on the capital of theLisa Trust and giving Lisa sole title to the family home, Cheryl is not fulfilling her responsibility as a trustee. Lisa invokes HazelhurstEstate in support of this argument. [60] Respectfully, Hazelhurst Estate is not an apt precedent here.
There the parties’ father had named his threedaughters to be executrixes of his estate. He also identified them as the principal beneficiaries of his estate. Due to personaldisagreements among them, one daughter (Ms. Hazelhurst) applied to the court to have her two sisters removed as executrixes and allowher to administer her father’s estate solely. The source of the disagreement related to a stipulation in their father’s will – clause 3(d) –which required one of the respondents to repay to the estate a loan of $23,000 before the estate assets could be distributed.
The applicantwanted to enforce this stipulation, the two other executrixes did not. [61] The court concluded that in these circumstances the two executrixes who wanted to ignore the terms of the willmust be removed. This was required in order to insure “the proper distribution of the estate assets under clause 3(
d) of the will”:Hazelhurst Estate, at para 25. [62] On the evidence, I am not persuaded that Cheryl is ignoring the terms of the Will or refusing to fulfil herobligations as a trustee in a reasonable and responsible manner. The affidavit evidence discloses that Cheryl ensures Lisa receivesmonthly payments of $2,000 from the Lisa Trust, and $2,000 from the Emma Trust. These are net payments with the trusts paying alltaxes owed by Lisa to the Canada Revenue Agency. See: Cheryl’s Affidavit at para. 32.
As well, Cheryl has agreed to Lisa’s reasonablerequest for a lump sum payment of $150,000 for renovations to the family home. See: Cheryl’s Affidavit at para. 37. [63] It is apparent that when creating the Lisa Trust and the Emma Trust, Brent deliberately created a balance ofpower between the two trustees. To remove Cheryl because she disagrees with Lisa respecting transferring legal title to the family hometo Lisa would, in my opinion, disrespect Brent’s wishes and disrupt the power balance he wanted.
See, especially: Mitchell v Mitchell,2006 SKQB 267 at para 13, 280 Sask R 151. [64] Accordingly, for these reasons I will not remove Cheryl as a trustee of the Lisa Trust because of a perceivedimpasse or deadlock on Lisa’s part. 2.2 Cheryl Fails to Act in the Best Interests of the Beneficiaries [65] On this prong of her argument, Lisa asserts that Cheryl is failing to exercise her duties as a trustee in a mannermost appropriate for maintaining and ensuring Lisa’s proper support and benefit.
Particularly, Cheryl is refusing to pay out the capital ofthe trust to Lisa which would permit Lisa complete and sole control over her personal and financial affairs. [66] This argument engages the ‘even hand rule’. As described by Professor Eileen E. Gillese (now Gillese J.A. ofthe Ontario Court of Appeal), for example, in her
article “Pension Plans and the Law of Trusts” (1996) 75 Can Bar Rev 221, at 245 thisrule holds as follows: Trustees must act impartially when dealing with beneficiaries. As a consequence, they must act even-handedly; they may not givepreferential treatment to any one beneficiary or group of beneficiaries unless authorised to do so by the trust instrument. … [67] Josephs v Canada Trust Co. (1992), (ON SC), 90 DLR (4th) 242 (Ont Div Ct) [Josephs]concerned the application of the even-hand rule in the context of a contest between a life tenant and residuary beneficiaries. At page 258,
Rosenberg J. (as he then was) in dissent wrote: Where property is held in trust for persons in succession, the duty to hold an even hand requires that the trustees must attempt to balancethe interests of the income beneficiaries and those of the capital beneficiaries when exercising their investment powers, including theirpowers of sale [authorities omitted]. The Ontario Court of Appeal allowed an appeal from the majority decision in Josephs on the basis of Rosenberg J.’s reasons in the courtbelow. See: (1993), (ON CA), 106 DLR (4th) 384 (Ont CA). [68] Lisa submits the Will contemplates in
Article 4A(
b) that the trustees in their discretion may pay out the trustcapital so as to comply with their corresponding duty to exercise this discretion in a manner “considered appropriate for [Lisa’s] supportand benefit”. For ease of reference, I reproduce the full text of
Article 4A(
b) of the Will below: (
b) During the lifetime of my wife, Lisa Jane Gibson, my Trustees may pay to my wife such portion of the net income derived from theassets held in trust under the Lisa Trust and my Trustees may also pay to my wife such amounts out of the capital of the Lisa Trust.Such payments from income or capital made from time to time may be made by my Trustees in the exercise of an absolute discretion asconsidered appropriate for my wife’s support and benefit. Any income not paid out or distributed by my Trustees shall be accumulatedand added to the capital of the Lisa Trust. [Emphasis in original] [69] Lisa submits further that by paying out all the trust capital to her accords with the direction in
Article 4A(
b) ofthe Will and does not run afoul of the ‘even hand rule’. On this aspect of this application, she relies principally on the followingauthorities: Jackson Estate (Re), [2004] OJ No 4835 (QL) (Ont CA) [Jackson Estate CA], affirming [2004] OJ No 547(QL) (Ont Sup Ct)[Jackson Estate]; O’Donnell (Litigation Guardian of) v Canada Trust Co., [1996] OJ No 3461(QL) (Ont CA J) [O’Donnell], andGrossman v Rinzler (1990), (NS SC), 95 NSR (2d) 313 (NSSC) [Grossman]. I canvas these cases below. [70] In Jackson Estate, the operation of the even hand rule proved central to its result.
Not surprisingly, its particularfacts are important.
At para. 1 of the decision at first instance, Greer J. reproduced the provisions of the will providing for a trustauthorizing the trustees among other things: 1 … (vii) To invest and keep invested all the rest and residue of my estate and to pay the next income derived therefore to or for thebenefit of my said wife MARGARET IRENE JACKSON until her death or remarriage, whichever shall first occur; with power to myTrustees to pay to or to use for the benefit of the (sic) my said wife MARGARET IRENE JACKSON all or any part of the capital of theresidue of my estate a sin their direction my Trustees consider necessary or advisable; it being my intent and direction that the primaryresponsibility of my estate is to maintain my said wife MARGARET IRENE JACKSON in the manner to which she has been accustomedduring our marriage; … [71] The testator’s will designated his wife, Margaret, as well as his two children, Duncan and Suzanne, as thetrustees of estate.
It further permitted Margaret to reside in the house “rent-free until her death or remarriage whichever shall occur first”and the “rest and residue” of his estate to be divided between his two children if they are alive with a gift over to their issue of his or hershare, if he or she is not alive at that time. Margaret was the “income beneficiary” of her late husband’s estate, while his children,Duncan and Suzanne were the capital beneficiaries. [72] The evidence disclosed that although she was named as a trustee, Margaret did not play an active role in themanagement of the trust.
The other two trustees made some ill-advised investments with the trust capital. Justice Greer concluded thisstrategy demonstrated a failure to maintain an even hand between the income and capital beneficiaries and required an order removingthem as trustees. In Jackson Estate at para 24, she held: 24 It is clear that Donald and Suzanne have not kept an even-hand between the income and the contingent capital beneficiaries. TheWill of the deceased makes it clear that he intended Margaret to live in the manner to which she became accustomed during theirmarriage. This has not happened.
Margaret's income has rapidly decreased as Donald and Suzanne allowed Heakes to invest inspeculative non-income producing securities that lost approximately $106,000 of the capital of the Estate. After the residence was sold,in 1996 Margaret received $23,700 income. By 2003, that gross income was reduced to approximately $19,000. Her net income, after theHeakes' expense and income tax are deducted each year, leaves her with less than that. Had there been capital growth in the Estate,Margaret could have counted on her income increasing over the years instead of decreasing.
Margaret's direct expenses at Central ParkLodge are $25,700 approximately. Margaret not only has to pay her other expenses from her personal funds, she has been forced todeplete her revenue and capital each year. I am satisfied, on the wording of the Will, that this is not what the deceased intended.Margaret and her late husband lived a comfortable lifestyle while they were married. She lives in a very modest accommodation, has noluxuries and worries about when she may need the support of paid-caregivers. … [73] On appeal, the Ontario Court of Appeal upheld Greer J.’s ruling.
The Court stated in Jackson Estate CA at paras1, 3, and 4 as follows: [1] In our view, the application judge correctly interpreted the provisions of Dr. Jackson’s will. In the words of the will, “theprimary responsibility of the estate is to maintain my said wife [Margaret Jackson] in the manner to which she has become accustomedduring our marriage” . . . [3] Paragraph. III (d)(vii) makes Margaret Jackson the income beneficiary and gives the estate trustees the power to encroach oncapital to the extent that the trustees felt was “necessary or “advisable”.
[4] In light of these provisions, we see no merit in the appellants’ position that Ms. Jackson must exhaust her own modest income in order to meet her equally modest expenses before resorting to capital. This is especially so in the face of the appellants’ candid admission that Ms.
Jackson was entitled to all of the annual income coupled with the finding of the application judge that the estate investments were not made in evenhanded manner but instead in a way that favoured the capital beneficiaries. [ 74 ] In Grossman , the Nova Scotia Supreme Court was asked by the trustees of the last will and testament of Louis B. Grossman to interpret certain provisions of that document, particularly clause 4(
e) which provided: "To keep invested the residue of my estate and subject as hereinafter provided,... [there is no question or problem to that] ..to pay the net income derived therefrom... [and therefor relating it back to the residue of his estate] ...to or for my wife during her lifetime... [there is still no problem and no dispute] ...and if the net income therefrom... [referring back to the residue of his estate] ...shall not be sufficient to support my wife adequately, then I hereby authorize and empower my Trustees to encroach on the capital of my estate so that my wife shall be adequately supported during her lifetime." [Emphasis in original] [ 75 ] The court began this interpretive exercise by stating it must look to the text of the will, and, more particularly, of clause 4(e), itself.
This is known as the “armchair principle” where the court puts itself in the position of the testator at the time the will is made in order to ascertain the testator’s intentions from a “consideration of the will and the surrounding circumstances”: Walters at para 37 . Justice MacDonald determined that the testator clearly directed the net income of the estate’s residue to be paid to his wife. He further empowered the trustees to encroach upon the capital of the residue should it be necessary to provide adequately for his wife’s support. [ 76 ] The Court in Grossman concluded: I find that paragraph 4(
e) is a direct and unambiguous direction to the trustees to pay adequate maintenance for Mrs. Grossman for the rest of her life and encroach on the capital of that estate, if necessary and to the extent necessary. The fairness of this is not for me to decide and I cannot change the words of a competent testator. [ 77 ] The last case relied upon by Lisa’s counsel is O’Donnell , a decision of the Ontario Court of Justice (General Division). This case involved a will that stated that “my wife’s comfort and welfare are my first consideration” ( O’Donnell at para 2).
In a short, and exceedingly cryptic judgment, the application judge held that the “comfort and welfare” of the testator’s wife were of paramount importance. Consequently, the interests of all the other beneficiaries were a “secondary consideration”: O’Donnell at para 2.
Additionally, any doubt must be resolved in favour of an encroachment, and the court relied on Hinton v Canada Permanent Trust (1979), 5 ETR 117 (Ont SC) , aff’d [1980] OJ No 1720 (QL) (Ont CA) for the principle that express language would have been used by the testator had he intended the trustees to have regard to the private means of the beneficiary: O’Donnell at para 4. [ 78 ] Of these, I conclude Jackson Estate in the most relevant. Like the trust direction in that case, the Lisa Trust in
Article 4A(
b) of the Will directs that the trustees may pay such portion of the net income of the assets held by the trust as they consider appropriate for Lisa’s “support and benefit”. It also authorizes them to encroach on the capital of the Lisa Trust if the trustees find it appropriate to do so in order to provide adequately for Lisa’s support. [ 79 ] Lisa submits because Brent emphasized in the Will that the capital of the Lisa Trust may be paid out, he was not overly concerned about preserving this capital for Emma who was more than adequately provided for in the Emma Trust.
Consequently, she submits the trustees could effectively collapse the Lisa Trust without in any way countermanding Brent’s wishes or intentions when creating it. Particularly, Lisa invokes Holgate v Holgate , 2015 ONSC 259 , 5 ETR (4th) 291 [ Holgate ] to support this assertion. [ 80 ] Respectfully, in my view, this is not an accurate
interpretation to give to the terms of the Lisa Trust. I acknowledge that the trustees of whom, Lisa is one, are empowered to encroach upon the capital of the Lisa Trust.
However, the terms of the trust impose an important qualifier, namely any such encroachment is necessary, even mandatory provided the trustees consider it to be appropriate for Lisa’s support and benefit. [ 81 ] This factual circumstance is markedly different from Holgate where the language emphatically stipulated that the trustees should be “generous” in the exercise of their discretion to encroach on the trust capital, even to the extent that it may result in the “total depletion of the capital of my estate”: See: Holgate at paras 48-49 . [ 82 ] That, of course, is not this case.
Any encroachment upon the capital of the Lisa Trust may only occur if it is appropriate for Lisa’s continued “support and benefit”. There is broad discretion given to the trustees to decide when, if at all, to encroach upon the capital to fulfil that direction. Here, the evidence discloses that monthly payments from the trust continue to be paid to Lisa - $2,000 from the Lisa Trust, and $2,000 from the Emma Trust. There is no evidence, for example, which suggests that Lisa’s medical bills, equipment and other personal requirements remain unsatisfied.
Indeed, in her affidavit, Cheryl avers that to date there has been a considerable decrease in the assets of the Lisa Trust. When Brent died, the value of the Lisa Trust was approximately $1,000,000 without including the family home or the fourplex. However, it is now valued at approximately one-half that amount, i.e. $500,000. See: Cheryl’s Affidavit at para. 33. [ 83 ] As well, Cheryl avers that since she replaced Brian as a co-trustee of the Lisa Trust, she is more than willing “to sign any cheque required for [Lisa’s] benefit”.
See: Cheryl’s Affidavit at para. 35. [ 84 ] More pertinently, Cheryl avers that on August 24, 2020, she agreed, at Lisa’s request, to authorizing the expenditure of $150,000 from the capital of the Lisa Trust for the purpose of underwriting renovations to the family home, and to the fourplex included as trust capital property. See: Cheryl’s Affidavit at para. 36. [ 85 ] It is apparent that the evidence does not disclose a failure by Cheryl to be even-handed in the administration of the Lisa Trust.
It is understandable that almost 17 years after Brent’s death, Lisa would now want to have entirety of the trust paid out to
her. Yet, such a result would only be warranted if the trustees determine it was appropriate for her support and benefit. Her co-trusteedoes not believe it is. This does not mean that Cheryl is not fulfilling her obligations as co-trustee. [86] Accordingly, I am unable to detect any evidence which would support a finding that Cheryl is failing in herresponsibility to be even-handed in how the trust is administered.
Indeed, if the entirety of the Lisa Trust is paid out, it could be assertedthat the trustees were not maintaining an even hand by failing to have sufficient regard for the gift over to the Emma Trust. 3. Conclusion [87] Accordingly, for these reasons I am not persuaded that the evidence presented on this application satisfies theheavy burden needed to demonstrate that it is necessary to remove Cheryl as a co-trustee of the trusts created in the Will. Consequently,Lisa’s application brought pursuant to s. 16 of the Act must be dismissed. C.
Is Lisa Entitled to the Property Held in the Lisa Trust? [88] Lisa alternatively invokes the rule in Saunders v Vautier and asserts that as the sole beneficiary of the Lisa Trustthe rule permits the Lisa Trust to be collapsed and the property held in it given over to her. I begin my analysis of this alternative groundby reviewing the law respecting the rule in Saunders v Vautier. I will, then, outline Lisa’s arguments in favour of its application, andCheryl’s arguments opposing it. Finally, I will analyse and determine the merits of this particular aspect of Lisa’s claim. 1.
Law [89] In White v Compton and Compton, 2021 PESC 10, Gormley J. (now C.J.P.E.I.) offered the following survey ofthe law relating to the rule in Saunders v Vautier at paras 5 – 14: [5] As the authors in Waters’ Law of Trusts in Canada, 4th ed. (Toronto Carswell 2012) make clear the rule in Saunders v. Vautierpredates the actual decision and is described as an implicit understanding of Chancery judges (Waters’, ch. 23.II p. 1235). [6] As the authors state: It is based upon the theory that, though title and management rest in the trustees, the significance of property lies in the right ofenjoyment.
This enjoyment is in the beneficiaries of the trust, and therefore, the theory goes, in the last analysis it is for them to decidehow they will enjoy the property. (Waters’ p. 1235). [7] Canadian courts have been applying and refining the test since the 1840s. In some instances, the courts expressed reservationsabout doing so but have reluctantly followed the well trodden path. One of many examples is the decision of In the Matter of the LastWill and Testament of Charles H. Townsend [1941], CarswellNB 7 wherein the court states as follows: 3.
While a Court is supposed to exert its abilities in discovering and enforcing the will of a testator yet it is sometimes confronted byauthorities which compel it to depart from common sense. This is such a case. I am not left in the least doubt as to what the testatorintended. He had no thought but that his grandson would not receive this legacy until he had accumulated so much experience as twenty-five years of life might give him. But the law has never admitted a restraint upon anticipation in the case of male persons.
Hence we havean unbroken chain of decisions by which a legatee, attaining his majority, may call for immediate payment of a legacy which the testatorintended he should not receive until a later age…. [8] Although the court cannot hide its disapproval of this line of reasoning it manages to overcome its hesitation and order an earlytransfer of the funds subject to the trust. [9] In Halifax School for the Blind v. Chipman, (SCC), [1937] S.C.R. 196, the Supreme Court of Canada recognizedthe principle and described it as follows: 4.
There is unquestionably a rule of law that where a legacy is directed to accumulate for a certain period, or where the payment ispostponed, the legatee, if he has an absolute indefeasible interest in the legacy, is not bound to wait until the expiration of that period, butmay require payment the moment he is competent to give a valid discharge. That rule is sometimes called the rule in Saunders v. Vautier,where Lord Langdale said that that principle had been repeatedly acted upon. … [10] The court went on to describe the rationale for the rules as follows: 37 It is true that in Saunders v. Vautier; Gosling v.
Gosling; Wharton v. Masterman, and other cases, to which we were referred by theappellant’s counsel, where there were absolute vested gifts of real estate and capital funds, entitling the donees to complete ownershipand possession at a future event, the courts disregarded express directions of the testators to accumulate the rents and income in themeantime. This doctrine, which is generally spoken of as the rule laid down in Saunders v. Vautier, has been so often recognized that, asHerschell, L.C., said in Wharton v.
Masterman, it would not be proper now to question it. 38 Various reasons have been ascribed for its establishment. Lindley, L.J., in Harbin v. Masterman, which went to the House of Lords onappeal under the name of Wharton v. Masterman, above cited, described it as “a remarkable exception” to “the general principle that adonee or legatee can only take what is given him on the terms on which it is given.” He explained it as follows: Conditions which are repugnant to the estate to which they are annexed are absolutely void, and may consequently be disregarded.
Thisdoctrine, I apprehend, underlies the rule laid down in Saunders v. Vautier and enunciated with great clearness by Vice-Chancellor Woodin Gosling v. Gosling. 39 Herschell, L.C., said:
The point seems, in the first instance, to have been rather assumed than decided. It was apparently regarded as a necessary consequenceof the conclusion that a gift had vested, that the enjoyment of it must be immediate on the beneficiary becoming sui juris, and could notbe postponed until a later date unless the testator had made some other destination of the income during the intervening period. 40 Lord Davey said: The reason for the rule has been variously stated.
It may be observed, however, that the Court of Chancery always leant against thepostponement of vesting or possession, or the imposition of restrictions on the enjoyment of an absolute vested interest. [11] More recently the Supreme Court restated the rule in Baschau v. Rogers Communications Inc., [2006] SCC 28. The court statedas follows: 21. The common law rule in Saunders v.
Vautier can be concisely stated as allowing beneficiaries of a trust to depart from the settlor’soriginal intentions provided that they are of full legal capacity and are together entitled to all the rights of beneficial ownership in thetrust property…(emphasis added) [12] In Baschau v. Rogers Communications Inc. the applicants were not successful in convincing the court to apply the rule in thecontext of a complex pension plan but the court clearly stated that the rule continues to operate in Canada. [13] Most recently the Supreme Court confirmed the rule in S.A. v. Metro Vancouver Housing, 2019 SCC 4.
In this case, the argumentwas made that the rule in Saunders v. Vautier should be applied to collapse a “Henson trust” which is a form of trust “settled for thebenefit of a person with disabilities who relies on a publicly funded social assistance benefit”. (See S.A. v. Metro Vancouver Housingpara. 2). [14] The court recognized the rule but found it had no application in that case particularly as the “Henson trust” was structuredspecifically so it could not be made subject to the Saunders v.
Vautier application as it contained a gift over upon S.A.’s death, therebyrendering S.A.’s interest less than absolute. [Emphasis in original] [90] As identified in Waters at 1237-1238 there are three situations in which the rule in Saunders v Vautier mayoperate. These situations are:
(1) A beneficiary who is adult, of sound mind, and entitled to the whole beneficial interest may require the trustees to transfer the trustproperty to him…
(2) Several concurrently interested beneficiaries who are all adult, of sound mind, and between them entitled to the whole beneficialinterest may collectively compel transfer…
(3) Several beneficiaries who are entitled to succession, whether their interests are vested or contingent, may combine to requiretransfer, provided they are all adult, of sound mind, and between them entitled to the whole beneficial interest… [Footnotes omitted] [91] Furthermore, there are two keys to the termination of a trust pursuant to the rule in Saunders v Vautier: (1) thebeneficiary or all beneficiaries, if there is more than one, are fully capacitated in the sense of being adult and of sound mind, and (2) theperson or persons seeking to terminate the trust represent the full beneficial interest, actual and possible in the trust property.
See: Watersat 1239. 2. Positions of the Parties [92] There is no question that Lisa is an adult person and fully capacitated for purposes of the rule. Nothing in theevidence suggests otherwise. [93] Lisa submits further that she enjoys an absolute interest in the trust property because Brent has given thetrustees an unfettered right of encroachment on the trust capital to the point of exhausting the trust.
She relies particularly on Re KaneEstate, (MB CA), [1934] 2 WWR 202 (Man CA) [Kane Estate] and Re Rankin Estate, (SK CA),[1951] 3 WWR (NS) 433 (Sask CA), aff’g without written reasons (SK KB), [1951] 2 WWR (NS) 562 (Sask KB)[Rankin Estate KB] as support for this aspect of her argument. [94] Finally, Lisa contends she is dissatisfied with how Cheryl, as the co-trustee of the Lisa Trust, is fulfilling herduties.
Lisa says because the Will contemplates encroachment on the capital of that trust, Cheryl’s persistent refusal to allow for the LisaTrust to be collapsed, and the property given over to her, is unreasonable. The fact that Lisa is dissatisfied with the administration of theLisa Trust, she asserts, meets the third element of the rule in Saunders v Vautier. [95] For her part, Cheryl maintains that because the Lisa Trust is a discretionary trust with a gift over to the EmmaTrust, she does not have an absolute or beneficial interest in the capital.
Consequently, the Lisa Trust cannot unilaterally be collapsed.Cheryl relies principally on S.A., and Stoor Estate in support of her position. 3. Analysis [96] Success on this aspect of Lisa’s application depends on whether as the person seeking to terminate the trust sheholds the full beneficial interest, actual and possible in the trust property, to paraphrase Waters at 1239. This is because the otherelements – the applicant is an adult and fully capacitated – are not in issue here.
[ 97 ] After careful review of the Will; the affidavits filed on this application, and the relevant authorities, I conclude she does not. Accordingly, for the following reasons, the rule in Saunders v Vautier cannot operate in these circumstances [ 98 ] I begin by reviewing the authorities cited by Lisa’s counsel. Turning first to Kane Estate , there the testator gave all his property to his wife. In a separate clause, he directed that upon her death, any remaining property go to his grandchildren, “if there is any [property] left” ( Kane Estate at 202).
A majority of a five-member bench of the Manitoba Court of Appeal per Prendergast C.J.M. (Robson and Richards JJ.A. dissenting) determined that the testator intended his wife to have an absolute interest in his estate, despite the gift over to his grandchildren.
He concluded at 202 and 204: …The Courts, of course, will always strive to carry out as fully as may be the testator’s manifested intention that there should be the two gifts, and with this object in view, they have generally made the most of any word in the will that seemed at all inconsistent with an absolute gift, which they then cut down to a life estate (with or without power to encroach on the corpus) so as to make it logically complementary of the gift over… … But here, the very words in the gift over “if there is any left,” are confirmatory of the absoluteness of the prior gift, which the testator thus contemplates could properly be used in such way that there be nothing left. [ 99 ] Rankin Estate KB is a decision of a judge of this Court affirmed without reasons by our Court of Appeal, and, consequently, the more pertinent authority.
In this case, the testator - a Roman Catholic priest - gave the residue of his estate to his sister “to be used by her and at her death if any of the money is left I wish it to go to the University of St. Francis Xavier Antigonish N.S.”: Rankin Estate KB at 563. At first instance, Thomson J. was asked to decide if this provision of the will constituted an absolute gift to the testator’s sister or if it created a trust in favour of the University. [ 100 ] Justice Thomson concluded that the testator intended his sister to have an absolute gift of the property of his estate.
He reasoned at 563 as follows: It will be noted that the testator did not say that his sister was to have the use of the property for her life only…The use of the expression “if any of the money is left” makes it clear that the testator anticipated the possibility that none of the property would be left at the time of his sister’s death. Obviously he intended that she should have an unfettered right to use up or wholly exhaust as she might see fit the capital or corpus of the property as well as the income therefrom.
Ordinarily this would constitute an absolute or unconditional gift of the property[.] [Citations omitted] [ 101 ] These authorities, in my view, are distinguishable from the present case. As noted earlier, the Will authorizes the trustees to encroach on the capital of the Lisa Trust provided it is necessary for Lisa’s “support and benefit”. It is useful to reproduce
Article 4A(
b) of the Will below: (
b) During the lifetime of my wife, Lisa Jane Gibson , my Trustees may pay to my wife such portion of the net income derived from the assets held in trust under the Lisa Trust and my Trustees may also pay to my wife such amounts out of the capital of the Lisa Trust . Such payments from income or capital made from time to time may be made by my Trustees in the exercise of an absolute discretion as considered appropriate for my wife’s support and benefit.
Any income not paid out or distributed by my Trustees shall be accumulated and added to the capital of the Lisa Trust . [Emphasis in original] [ 102 ] It is clear that Brent did not give Lisa an absolute interest in the property held by the Lisa Trust. He directed that she would be entitled only to “the net income derived from the assets held in trust” under the Lisa Trust. In my opinion, this important fact distinguishes the Lisa Trust from the trust provisions interpreted in the two case authorities cited by Lisa’s counsel. [ 103 ] As well, the Will provides in
Article 4A(
c) for a “gift over” to the Emma Trust should Lisa die before the Emma Trust is collapsed. The Will at
Article 4B(2)(ii) stipulates that the Emma Trust shall be collapsed on the twenty-first anniversary of Brent’s death i.e. October 30, 2027 so as to avoid the operation of the rule against perpetuities. Consequently, any capital remaining in that trust must be given over to Emma “for her own use absolutely”. [ 104 ] Additionally,
Article VI, the final provision of the Will entitled “Wishes” explicitly sets out Brent’s intention that “the income, including capital gains, and the appreciation of capital which arises from any interest in trust for any beneficiary under my Will, and specially any benefit under either the Lisa Trust or the [Emma] Trust … shall not be the property of the beneficiary or beneficiaries unless actually paid out by my Trustee to that person ” [bold in original, underlining added]. In my view, this
article underscores that the bequest contained in the Lisa Trust did not give over the property to her absolutely. [ 105 ] Taken together these three elements: (1) the express language of the Lisa Trust bequeathing to Lisa only the net income generated from the trust, and not the trust property itself; (2) the gift over to the Emma Trust, and (3) the explicit statement of Brent’s intention not to give over any property to a beneficiary unless and until the trustees agree to its disposition, demonstrate that Lisa does have an absolute interest in the capital of the Lisa Trust.
Consequently, the last element needed to be demonstrated in order for the rule in Saunders v Vautier to operate and allow for the Lisa Trust to be collapsed is not satisfied. [ 106 ] Before leaving this aspect of the application, Lisa points to an e-mail dated March 18, 2021 which her counsel, Mr. Hardy received from Cheryl. It is Exhibit “A” to Lisa’s Supplementary Affidavit. In particular, Lisa highlights the following paragraph from that e-mail where Cheryl writes: I also feel Lisa doesn’t understand that she 100% owns everything that is in the trust. She is the sole beneficiary. That a co-trustee
is only there to help protect the trust. A co-trustee doesn’t have any benefit from the trust. Brent was adamant on Lisa having a co-trusteebecause he did not trust her financial decision making. I am only following his wishes by doing what I believe is in her best interest anddoing what my brother would want for her. Pulling her home out of the trust makes it vulnerable in the event of divorce.
Keeping thehouse within the trust protects it from this event and it remains, and will remain 100% in her ownership. [Emphasis added] [107] Lisa submits these statements demonstrate that Cheryl, as co-trustee, holds the view that Lisa is the sole ownerof, and enjoys an absolute interest in, the capital of the Lisa Trust, including the family home located at [redacted]. From this, Lisainvites me to extrapolate that she is the sole beneficiary of the Lisa Trust, and it may be collapsed at her instigation. [108] I do not accept that line of reasoning.
For the reasons I set out above, the Will plainly does not give to Lisa anabsolute interest in the capital of the Lisa Trust at this time. By that, I mean that as long as the Emma Trust is extant Lisa cannot disposeof the Lisa Trust in the manner she wishes. However, once the Emma Trust is collapsed in accordance with
Article 4B(2)(ii) of the Will,the “gift over” will lapse. Lisa may then be in a position to make such a claim. As this question does not arise on this application,however, I refrain from deciding it. [109] Simply put, this isolated statement in an e-mail cannot over-ride Brent’s express wishes as set out in the text ofthe Will. That is the instrument which governs. 4.
Conclusion on the Application of the Rule in Saunders v Vautier [110] Accordingly, for these reasons, I conclude in the circumstances of this matter, the rule in Saunders v Vautier doesnot apply and cannot assist Lisa in her pursuit to obtain absolute title to the capital of the Lisa Trust. D. Is Lisa Entitled to Relief Under the DRA? 1. Overview [111] The final ground Lisa advances on this application is that she is entitled to relief under the DRA including but notlimited to the transfer to her of title to the family home.
She invokes Tataryn v Tataryn Estate, (SCC), [1994] 2 SCR807 [Tataryn Estate], and Fliczuk Estate (Re), 2019 ABQB 946, 9 Alta LR (7th) 186 [Fliczuk Estate] to support her position that she isentitled to obtain title to the family home. [112] Cheryl disputes this aspect of Lisa’s application. She advances two alternative arguments.
First, she asserts thather claim pursuant to the DRA is statute-barred because she brought outside the six-month limitation period set out in s. 4 of the DRA.Second, should an extension be granted under ss. 4(2), nevertheless, Lisa is not entitled relief as she is more than adequately provided forunder the terms of the Will. She relies in particular on the following authorities: 2. Relevant Statutory Provisions [113] The provisions of the DRA most relevant to this aspect of this application read as follows:
Interpretation 2(1) In this Act: “application” means an application for maintenance pursuant to this Act; . . . “dependant” means: (
a) the wife or husband of a deceased; (
b) a child of a deceased who is under the age of 18 years at the time of the deceased’s death[.] . . . Time limited for entertaining application 4(1) Subject to subsection (2), an application must be made within six months from the grant of probate of the will or of letters ofadministration.
(2) The court may, if it considers it appropriate, allow an application to be made at any time as to any portion of the estate remainingundistributed at the date of the application. . . . Directions respecting maintenance 7(1) The court may direct that maintenance may be by way of: (
a) an amount payable annually or otherwise;
(
b) a lump sum to be paid; (
c) specified property to be transferred or assigned, either absolutely or for life or for a term of years, to the dependant or for the use and benefit of the dependant; or (
d) a trust fund established pursuant to
section 9.
(2) If a transfer of property is ordered pursuant to clause (1)(c), the court may: (
a) give any directions that it considers necessary for the transfer to be executed by the executors, the administrators with the will annexed or any other person that the court may direct; or (
b) grant a vesting order. Factors to consider in ordering maintenance 8
(1) In determining whether, and in what way, and from what date, maintenance ought to be provided, the court shall consider the nature of the property representing the deceased’s estate and shall not make an order requiring a sale of property that would be improvident having regard to the interests of the dependants and of the person who, apart from the order, would be entitled to that property.
(2) In making an order for maintenance, the court shall consider: (
a) any past, present or future capital or income from any source of the dependant; (
b) the conduct of that dependant in relation to the deceased; (
c) the claims that any other dependant of the deceased may have; and (
d) any other matters that the court considers appropriate.
(3) In making an order for maintenance, the court shall consider the deceased’s reasons, so far as they are ascertainable, for making the dispositions made by will, or for not making any provision or any further provision, as the case may be, for a dependant. . . . [ 114 ] As Lisa is seeking an order transferring title to the family home to her absolutely, s. 30 of The Family Property Act , SS 1997, c F-6.3 is also pertinent. It reads in part as follows: Application by spouse of deceased 30
(1) An application for a family property order may be made or continued by a surviving spouse after the death of the other spouse or may be continued by the personal representative of the deceased spouse.
(2) No application by a surviving spouse for a family property order may be commenced more than six months after the date of the issue of a grant of probate or administration for the estate of the deceased spouse. … 3. Analysis 3.1 Is Lisa’s Application Defeated by Delay? [ 115 ] Cheryl’s principal argument is that Lisa’s application for relief under the DRA should be denied because it was commenced more than 15 years after Brent’s death.
Cheryl’s counsel relies upon the following authorities: Anderson v Mueller , 2021 SKQB 135 [ Anderson ] ; Clark v Hogan , 2010 SKQB 440 , 365 Sask R 287 [ Clark ] , and Hatch v Cooper , 2001 SKQB 491 , [2002] 2 WWR 159 [ Hatch ] . [ 116 ] I agree with Cheryl’s counsel that it is difficult to defend a delay in excess of 15 years in bringing such an application. In Anderson , for example, respecting ss. 4(2) of the DRA the court stated the following a para. 14: [14] In addressing the discretion provided to the Court under the DRA , I conclude the two primary considerations should be:
(1) Reason for the delay; and
(2) Does any party suffer prejudice if the claim is allowed to proceed? [ 117 ] There, the applicant only learned in March 2021 that the daughters of the testator had been granted probate of their father’s estate in July 2020. Justice R.S. Smith concluded that an approximately nine month delay in bringing the application was of no moment and proceeded to adjudicate it. See: Anderson at para 15 . [ 118 ] In Clark , while the claim for dependant’s relief was “not commenced with dispatch”, the delay – approximately 17 months – “was not extreme”: Clark at para 12 . Justice Gerein permitted the application to proceed.
[ 119 ] Clark referenced the analysis in the earlier decision in Hatch . Hatch did not directly involve a dependant’s relief claim; rather, it was a professional negligence lawsuit in which one of the allegations against the defendant law firm was that it had failed to properly advise the client/plaintiff about her rights under the DRA , among other legislation.
Respecting the issue of whether the plaintiff’s application under the DRA could be dismissed because of delay, Klebuc J. (as he then was) relied upon two Ontario authorities to find that the delay did not defeat her claim: Re Stewart Estate , [1944] OWN 380 (Ont CA) [ Stewart Estate ] , and Re Bourne Estate , [1950] OWN 807 (Ont Sur Ct) [ Bourne Estate ] . At para. 68 of Hatch , Klebuc J. quoted from Stewart Estate at 381: . . .
The discretion to extend or to refuse to extend the time is to be exercised having regard to what is equitable as between the parties concerned in all the circumstances of the particular case. The existence or non-existence of good reason for delay in applying may, in any given case, be a circumstance to be considered, but the statute does not mean that that is the sole consideration upon which an extension of time is to be granted or refused.
Where, as in the case at bar, the applicant is the only person within the statutory class of dependants, and no reason is offered as to why the application should not be permitted to be heard beyond the mere delay, it would appear to be inequitable not to extend the time. . . . [Emphasis added] [ 120 ] In Bourne Estate , for example, a dependant’s relief application was permitted to proceed ten years following probate because the applicant had not received proper legal advice at that time and could have commenced such an application had she received correct advice. [ 121 ] Here, Lisa asserts that she was reluctant to bring a dependant’s relief application until now, in part, for fear of creating further and unwanted friction between her and members of Brent’s family, most notably Cheryl.
By way of explanation, she avers in para. 68 of Lisa’s Affidavit that: 68…I just want to be to be able to take care of my daughter and live in peace with my husband Shaq and our families, on my own terms. I have been avoiding dealing with this for years, but I realize now, I can’t put this off forever. I hope it doesn’t drag on. [ 122 ] While understandable, Lisa’s reluctance to pursue such an application, without more, is hardly a sufficient justification for the long delay in commencing it.
There is no evidence, for example, that Lisa received inaccurate legal advice which explained in part the length of time which elapsed between the probate of the Will, and this application, as was the case in Hatch and Bourne Estate .
Rather, it appears that Lisa voluntarily chose to wait this long before commencing her application. [ 123 ] Although I would characterize Lisa’s delay in commencing her application for dependant’s relief as extreme, I would not reject her claim solely on the basis of delay. [ 124 ] Turning then to the second consideration relevant to the operation of ss. 4(2) of the DRA – prejudice to any party if the application proceeds – Lisa asserts that no party would suffer prejudice should her application be allowed to proceed.
She submits that because she is the sole beneficiary of the Lisa Trust, no other party – Emma or the Emma Trust – will be deprived of any property should title to the family home be transferred to Lisa absolutely. [ 125 ] Cheryl as co-trustee of the Lisa Trust demurs. She maintains that to permit this application to proceed would prejudice not only the estate itself but also Emma. She asserts that Emma is unaware of the existence of the Emma Trust, and as a ‘dependant’ as defined in s. 2 of the DRA , she currently has a potential beneficial interest in the Lisa Trust by virtue of the gift over to the Emma Trust.
Accordingly, Cheryl submits that before Lisa’s appl
[…]
Loading document…