Guest v. Lott et al. Lott et al. v. Guest et al.
[Indexed as: Guest v. Lott]
Ontario Reports
Ontario Superior Court of Justice,
Beaudoin J.
December 17, 2013
118 O.R. (3d) 439 | 2013 ONSC 7781
Case Summary
Trusts and trustees — Trusts — Termination — Trust for benefit of applicant providing that applicant was to take absolutely 21 years after death of testator and giving applicant power to appoint by deed or will — Applicant having no children and appointing residue of her estate as beneficiary of trust fund — Rule in Saunders v. Vautier applying — Applicant's application for termination of trust granted.
G brought an application seeking the termination of a trust created for her benefit under her father's will. The trust provided that G was to take absolutely after [page440] the expiration of the maximum period permitted by law (21 years), and gave G the power to appoint by deed or will. G was 66 years old, had no children and no intention to adopt, and had appointed the residue of her estate as the beneficiary of the trust fund. The estate trustees brought an application seeking the opinion and advice or direction of the court with respect to whether or not the rule in Saunders v. Vautier applied to an identical trust created in favour of G's sister.
Held, the applications should be granted.
The rule in Saunders v. Vautier applied. G was to take absolutely 21 years after the death of the testator, if she survived. Nothing turned on the fact that G was not entitled to all of the income during that period. The testator had given his daughters the power to appoint by deed, and G had exercised that right in favour of the residue of her estate. No other person could or would benefit from the residue of the trust fund under the terms of the will. G was entitled to have the trust distributed to her immediately.
Robinson v. Royal Trust Co., 1938 25 (SCC), [1939] S.C.R. 75, [1938] S.C.J. No. 36, [1939] 1 D.L.R. 257; Saunders v. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482, [1835-1842] All E.R. Rep. 58 (Ch.), apld
Other cases referred to
Berwick Estate (Re), 1948 30 (SCC), [1948] S.C.R. 151, [1948] S.C.J. No. 9, [1948] 3 D.L.R. 81; Campeau Family Trust (Re) (1984), 1984 3078 (ON CA), 50 O.R. (2d) 296, [1984] O.J. No. 3061, 18 D.L.R. (4th) 159, 17 E.T.R. 297, 31 A.C.W.S. (2d) 77 (C.A.), affg (1984), 1984 1977 (ON CA), 44 O.R. (2d) 549, [1984] O.J. No. 2669, 4 D.L.R. (4th) 667, 16 E.T.R. 97 (H.C.J.); Grieg v. National Trust Co., [1998] B.C.J. No. 52, 47 B.C.L.R. (3d) 42, 20 E.T.R. (2d) 309, 76 A.C.W.S. (3d) 872, 1998 4239 (S.C.); Hubbard v. Hubbard, [2005] O.J. No. 2405, [2005] O.T.C. 488, 140 A.C.W.S. (3d) 216, 2005 20811 (S.C.J.); Saracini v. National Trust Co. (1989), 1989 4239 (ON CA), 69 O.R. (2d) 640, [1989] O.J. No. 1436, 37 E.T.R. 311, 16 A.C.W.S. (3d) 354 (C.A.), affg (1987), 1987 4140 (ON SC), 59 O.R. (2d) 673, [1987] O.J. No. 486, 39 D.L.R. (4th) 436, 27 E.T.R. 70, 4 A.C.W.S. (3d) 393 (H.C.J.)
Statutes referred to
Variation of Trusts Act, R.S.O. 1990, c. V.1 [as am.]
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 14.05
Authorities referred to
Jarman, Thomas, A Treatise in Wills, 8th ed. (London: Sweet & Maxwell, 1951)
APPLICATION by the beneficiary for the termination of a trust; APPLICATION by the estate trustees for advice or direction.
John M. Connolly, for applicant Barbara Jane Guest.
Mark Muir Rodenburg, for respondents/applicants Russell Lott, Susan Guest and Thomas Gaskell as estate trustees of Arthur Ronald Guest.
John M. Connolly, for respondents Barbara Jane Guest, Bruce E. Culp, Bonnie M. (Culp) Banks and Barbara J. (Culp) Densmore.
W. Ormond Murphy, agent for the Office of the Children's Lawyer, litigation guardian for the issue of Marie Guest Culp, respondent. [page441]
[1] BEAUDOIN J.: — Since these applications have an issue in common, they were heard together. The Office of the Children's Lawyer, having been served with both applications, has intervened in these proceedings.
Overview
[2] The Guest application seeks the termination of a trust created under the limited property will of Arthur Ronald Guest dated March 11, 2005 (the "Will") for the benefit of Barbara Jane Guest (the "Jane fund") and for an immediate distribution of the property of the Jane fund to the applicant Barbara Jane Guest. The application is brought under the Variation of Trusts Act, R.S.O. 1990, c. V.1, and rule 14.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The second application, brought by the estate trustees, seeks the opinion and advice or direction of the court with regard to whether or not the rule in Saunders v. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482 (Ch.) applies to an identical trust created in favour of Susan Guest (the "Susan fund").
Background
[3] Barbara Jane Guest is the daughter of the late Arthur Ronald Guest who died on August 31, 2007 and is an income beneficiary and the ultimate contingent capital beneficiary of the trust which was created by the limited property will of Arthur Ronald Guest.
[4] No application for a certificate of appointment of estate trustees with a will ("probate") has been sought by the named estate trustees of the will, Mr. Russell Lott, C.A.; Gordon V. Meekins, B.A., LL.B.; and Susan Guest; and the Will is being administered without any court certificate or appointment of estate trustees. Gordon V. Meekins, B.A., LL.B. has renounced his appointment and has been replaced by Thomas Gaskell, C.A., and the estate trustees with the Will are Russell Lott, Susan Guest and Thomas Gaskell.
[5] At the time of the death of Arthur Ronald Guest, on August 31, 2007, his wife, Florence Alice Guest, survived. Florence Alice Guest died on December 14, 2007, approximately three and a half months after Arthur Ronald Guest.
[6] Florence Alice Guest had a life interest in the estate of Arthur Ronald Guest but on her death the residue of the estate was divided into two equal trusts for each of the daughters of Arthur Ronald Guest and Florence Alice Guest, being Susan Guest (the "Susan fund") and the applicant Barbara Jane Guest (the "Jane fund") if each survived. Both Susan Guest and Barbara Jane Guest survived and consequently became entitled to the trust created. Barbara Jane Guest is 66 years of age (date of birth is April 20, 1947) and is unmarried and has no issue. She is unable to bear children nor does she have any intention to adopt any child or any children. Susan Guest is 59 years of age (date of birth is September 21, 1954), has no children and she has indicated that she has no intention of having any children or adopting any children.
The Trusts
[7] While the will sets out the provisions of the Jane fund first, the provisions for the Susan fund are identical. The trusts provide the following:
One of such equal parts, the Jane fund, shall be paid or transferred to my Trustees, or the survivors of them, to be held in trust for the benefit of my daughter Barbara Jane Guest and her issue, and my Trustees shall keep the Jane fund invested and during the lifetime of my daughter Barbara Jane Guest, my Trustees may in each year pay the whole or any part of the net income derived from the Jane fund to or for Barbara Jane Guest and her issue who are then alive, to the exclusion of any one or more of them, in such manner and proportions as my Trustees in their absolute discretion consider advisable. Any net income not so paid in any year shall be accumulated and added to the capital of the Jane fund to be dealt with as part thereof, provided that after the expiration of the maximum period permitted by law for the accumulation of income hereunder, my Trustees shall thereafter pay all of the funds into the Jane fund to Barbara Jane Guest for her own use absolutely. Upon the death of my daughter Barbara Jane Guest, the Jane fund or the amount thereof then remaining shall be dealt with as Barbara Jane Guest in her personal capacity may by deed or will appoint; provided that in default of such appointment, or to the extent that any such appointment fails to take effect, the Jane fund, or the amount thereof remaining shall be paid or transferred to my daughter Susan Guest for her own use absolutely. If Susan Guest is not then alive and has no issue her surviving, then to pay all of the net proceeds of the Jane fund to the issue of my late daughter Marie Guest in equal shares per stirpes.
[8] The trust set up in favour of Susan Guest is an exact mirror image except that it provides that Barbara Jane Guest is to receive the benefit if Susan Guest does not survive.
[9] By her last will and testament dated September 11, 2012, Barbara Jane Guest has appointed the residue of her estate as the beneficiary of the Jane fund and has confirmed such appointment by deed of appointment dated December 18, 2012.
[10] In addition, the applicant has also named the three children of her deceased sister, Marie Guest Culp, being Bruce Culp, Bonnie (Culp) Banks and Barbara (Culp) Densmore, or their respective issue per stirpes, as her principal residual beneficiaries, each to receive 25 per cent of the entire residue (not merely [page443] the Jane fund) of her estate, with the remaining 25 per cent designated to charity.
[11] At the present time, the Jane fund and the Susan fund each consists of investments with an approximate value of $1 million.
[12] Barbara Jane Guest's position is simple. She indicates that two scenarios may occur:
(a) the applicant will survive until 21 years from the death of the testator, Arthur Ronald Guest, to September 1, 2028, being the expiration of the maximum period permitted by law for the accumulation of income, at which time the trustees of the estate of Arthur Ronald Guest are obligated to pay all of the funds in the Jane fund to the applicant for her own use absolutely; or
(b) if the applicant fails to survive the 21 years to September 1, 2028, then pursuant to the appointment made in her last will and testament dated September 11, 2012, and confirmed by a deed of appointment dated December 18, 2012, the applicant has appointed the residue of her estate as the beneficiary of the Jane fund.
[13] For this reason, Barbara Jane Guest says that no other person can or will benefit from the residue of the Jane fund under the terms of the limited property will of Arthur Ronald Guest and the Jane fund shall become hers absolutely or will form part of the residue of her estate and be dealt with thereunder. Consequently, the applicant claims an absolute and immediate entitlement to the Jane fund.
[14] There is no issue that this court has inherent jurisdiction as well as jurisdiction pursuant to the Variation of Trusts Act and rule 14.05 of the Rules of Civil Procedure to vary the trust in the circumstances of this application. There is also no issue that Barbara Jane Guest has full capacity. The only issue in these proceedings is whether or not the terms of the respective trusts entitle the trust beneficiaries to have the trust property immediately vested in their names pursuant to the rule in Saunders v. Vautier.
[15] The rule in Saunders v. Vautier provides that beneficiaries of a trust may end the trust and call in the property from the trustee
(1) if all the beneficiaries are under no legal incapacity, and
(2) if the beneficiaries are unanimous and constitute the only persons entitled to the trust property. [page444]
[16] When the estate trustees became aware of Barbara Jane's request, they retained a lawyer to advise them and that lawyer questioned whether the rule in Saunders v. Vautier was applicable to the Jane fund trust. Having regard to the conflicting opinions, the estate trustees claimed that they would be at risk in making out a payment to Barbara Jane Guest absent a court order obtained on notice to all persons who may have an interest in the Jane fund.
[17] The estate trustees take the position that there are four provisions in the limited property will which may result in the rule in Saunders v. Vautier having no application to the trusts.
[18] The first such provision concerns the fact that Barbara Jane Guest, with regards to the "Jane fund" trust, is not entitled to all of the income of the trust during the period before the capital either devolves to her or devolves to others upon death. Instead, the income of the trust is stated to be for the benefit of Barbara Jane Guest and her issue. In addition, the estate trustees have the absolute discretion to pay all such income or any part of such income to any of Barbara Jane Guest or her issue, to the exclusion of any one or more of them, including to the exclusion of Barbara Jane Guest. The estate trustees say it is arguable then that Barbara Jane Guest cannot be said to have a life interest in the income of the trust.
[19] The estate trustees recognize that Barbara Jane Guest, as well as Susan Guest, do not have any children at the present time and have no intention of having any children or adopting them. Nevertheless, they maintain that it remains a possibility, however remote, that either of these women could adopt someone in the future. In view of the fact that the will does not provide for all of the income to be paid exclusively to Barbara Jane Guest or to Susan Guest, this may result in the rule in Saunders v. Vautier having no application to the respective trust. In this regard, the estate trustees rely on the decision of Campeau Family Trust (Re) (1984), 1984 1977 (ON CA), 44 O.R. (2d) 549, [1984] O.J. No. 2669 (H.C.J.), affd (1984), 1984 3078 (ON CA), 50 O.R. (2d) 296, [1984] O.J. No. 3061 (C.A.).
[20] The second provision concerns the fact that Barbara Jane Guest is entitled to the capital of the Jane fund only after the expiration of the maximum period permitted by law for the accumulation of income (21 years from the death of Arthur Ronald Guest). If Barbara Jane Guest passes away before that time, there is a gift over of the capital of Barbara Jane Guest to either Susan Guest or the issue of Marie Guest Culp. It is the existence of the gift over that raises some doubts on the part of the estate trustees. In this regard, they rely on the decision of 1987 4140 (ON SC), 59 O.R. (2d) 673, [1987] O.J. No. 486 (H.C.J.), affd (1989), 1989 4239 (ON CA), 69 O.R. (2d) 640, [1989] O.J. No. 1436 (C.A.) and a reference therein to Berwick Estate (Re), 1948 30 (SCC), [1948] S.C.R. 151, [1948] S.C.J. No. 9.
[21] The third provision involves the fact that the Will of Arthur Ronald Guest states that any power of appointment to be exercised by Barbara Jane Guest, whether by deed or will, is effective only upon her death. For that reason, they submit, she is unable, while alive, to appoint the capital to herself and thus it is not certain that she has a "absolute indefeasible interest" in the trust as required by Saunders v. Vautier.
[22] The fourth provision involves the fact that, in the event that Barbara Jane Guest appoints a party or parties to take the capital of the trust upon her death, whether such appointment is made in her will or by deed effective upon her death, the Will of Arthur Ronald Guest appears to provide that it is the estate trustees of the estate of Arthur Ronald Guest who will actually distribute the capital of the respective trust to such party or parties and not the estate trustees of the estate of Barbara Jane Guest or Susan Guest. The trustees submit that the Will of Arthur Ronald Guest could be interpreted so as to conclude that the capital of the respective trust never becomes an asset of the estate of either Barbara Jane Guest or Susan Guest, but instead remains an asset of the estate of Arthur Ronald Guest to be distributed by the estate trustees of the estate of Arthur Ronald Guest to whomever Barbara Jane Guest or Susan Guest appoint.
[23] The Children's Lawyer adopts the arguments put forth by the estate trustees. The Children's Lawyer represents the contingent interest of the issue of Marie Guest Culp. The Children's Lawyer first submits that the golden rule of interpretation requires that the intention of the testator should be collected from a construction of the Will as a whole. The Children's Lawyer also cites the decision of the Superior Court in Campeau Family Trust (Re) that provides that if an interest is vested but defeasible on a future event, it is not an absolute interest even if the chances of that actually occurring are remote, and the instrument does not identify the person who is to take by way of gift over, should the event occur.
[24] The Children's Lawyer submits that the intention of the testator is clear. He directed the trust be set up for each of his living daughters and that they would receive the income for a period of 21 years, at which time the capital would be paid for them. Their interest was vested but subject to divestment if they predeceased the distribution date. The daughters were given a power of appointment exercisable by either deed or Will, but only on their death. If they failed to exercise their power of appointment or to the extent it was ineffective, the Will directs payment to the surviving daughter or her issue, but failing issue to the issue of their late sister Marie Guest Culp. The Children's Lawyer maintains that the "issue" of Marie Guest Culp cannot be determined until the death of either daughter because the distribution is "per stirpes" and, therefore, it is possible that one of Marie Guest Culp's children or grandchildren might predecease either daughter and their children would become a potential beneficiary.
[25] The Children's Lawyer submits that if the testator had intended that the trust could be terminated before the 21-year distribution date, this could have been easily achieved by allowing the life tenant to exercise the power of appointment during the life of the daughter to herself. Since the power of appointment was only effective upon death, the potential divestment as a result of the daughter dying before the 21-year distribution date precludes the early termination of the trust.
[26] Initially, Barbara Jane Guest relied on two cases in support of her position that the rule in Saunders v. Vautier applied to the Jane fund trust. Those cases were Hubbard v. Hubbard, [2005] O.J. No. 2405, 2005 20811 (S.C.J.) and Grieg v. National Trust Co., [1998] B.C.J. No. 52, 1998 4239 (S.C.). The estate trustees questioned the applicability of those decisions to the within fact situation since both of those cases involved trusts which were essentially structured settlements set up as a result of damages being awarded to the beneficiaries as a result of a motor vehicle accident. The moneys in those trusts were therefore only ever the property of the beneficiaries and would only ever be the property of those beneficiaries. There was no possibility in either case that the moneys in the trust would ever devolve to anyone other than the plaintiff beneficiaries or their estates. In particular, neither of the trusts had a gift over provision.
[27] The applicant places particular reliance on the decision of the Supreme Court of Canada in Robinson v. Royal Trust Co., 1938 25 (SCC), [1939] S.C.R. 75, [1938] S.C.J. No. 36. That decision stands for the proposition that a life interest in a trust, coupled with a power to appoint the corpus by deed, enables a beneficiary to appoint to anyone, including herself, notwithstanding a testator's manifest intention to the contrary, and allows a beneficiary to vest the share in the trust immediately. The applicant submits that the decision in Campeau Family Trust (Re) can be distinguished because the beneficiary in that case had no power of appointment by deed during his lifetime. In fact, in Campeau Justice Gray adopted the general principle of law found in Jarman, A Treatise in Wills, 8th ed. (London: Sweet & Maxwell, 1951), p. 1178, as follows:
A gift to A for life, with a power of appointment by deed or will, with a gift over away from A or his estate, or with no gift over, gives A entire dominion over the fund, and therefore if he applies to the Court for it the Court need not require a formal appointment of the fund, as his application to the Court is a sufficient intention to take the fund.
If the power of appointment in the last case had been by will only, the Court would not decree payment because an appointment by will must be executed in accordance with the Wills Act.
If there is a gift over to A's executors and administrators, then, whether the power is by deed or will, or by will alone, there is substantially an absolute gift to A, and consequently the Court will make an order for transfer without requiring an appointment or a release of the power.
[28] In that case, Justice Gray concluded that the beneficiary could not rely on part 1 of the Jarman rule because there was no power of appointment by deed or will and that in the absence that power of appointment, the gift over to the estate arose as a result of the settlor's will and not as a result of anything that the beneficiary, Jack Campeau, could do.
[29] In Saracini, there was no power of appointment by deed or will but only a power of appointment by will.
[30] Barbara Jane Guest relies on the fact that she made her appointment both by Will, dated September 11, 2012, and by deed, dated December 18, 2012, as she was empowered to do. By making this application, Barbara Jane Guest has exercised sufficient intention and has therefore taken entire dominion over her interest in the estate. She maintains that, having done so, there are no others who have an interest in the Jane fund and that have standing to oppose this application. Most significantly, however, Barbara Jane Guest emphasizes that the Robinson v. Royal Trust Co. decision is on all fours with her application. In Robinson, a daughter had a life interest only in the income with the provision that "upon her death said share to go and be disposed of as she may by deed or will appoint" (p. 75 S.C.R.). The specific question that the Supreme Court asked itself (at p. 78 S.C.R.) was this:
Can Helen Chilton Mewburn Robinson exercise the power of appointment vested in her by the said will, by deed in her own favour so as to vest in her immediately her share of the residue of the said estate and so as to entitle her to have the same transferred to her immediately? [page448]
[31] The language of the trust in question was as follows (at p. 77 S.C.R.):
As to the remaining half of said residue I authorize and direct my trustee to invest, reinvest and keep the same invested in such securities as aforesaid in trust to pay the income therefrom yearly or oftener if convenient to my said daughter Helen Chilton Mewburn during her lifetime and upon her death said share to go and be disposed of as she may by deed or will appoint and in default of such appointment or so far as such appointment shall not apply if she should die leaving issue then living I direct that her said share shall go to her child or children then living and if more than one then equally among them to be paid to each of said children on attaining the age of twenty-one years the income in the meantime to be paid and applied for the support, maintenance and education of such child or children during their respective minorities. If my said daughter should die without leaving issue then living and without having made any such appointment as aforesaid her said share shall be divided equally between and added to the shares hereby respectively given to my said two sons or to the survivor of them.
[32] The court went on to canvass various authorities and concluded (at p. 83 S.C.R.):
In the present case, I conclude that the daughter's life interest, coupled with a power to appoint the corpus by deed, enables her so to appoint to anyone, including herself. The testator's manifest intention is contrary to the authority he conferred upon her. By giving his daughter a power to appoint by will only, he could have ensured that his wishes should be respected. If it be urged that in that event she would be unable to appoint by deed the corpus or part of it so as to assist a child, the same argument now advanced as to why she should not be authorized to deprive herself of the income, would apply. On principle as well as upon a consideration of the authorities referred to, she is able to exercise the power and disregard the testator's wishes.
Conclusion
[33] I conclude that the facts of the Robinson decision are nearly identical to those at hand. In this case, however, Barbara Jane Guest has more than a life interest. Barbara Jane Guest takes absolutely, 21 years after the death of the testator, if she survives. Nothing turns on the fact that she is not entitled to all of the income during that period of time. By conferring on his daughters a power to appoint by deed, the general principle of law found in Jarman, A Treatise in Wills, applies. No other person can or will benefit from the residue of the Jane fund under the terms of the limited property will of Arthur Ronald Guest.
[34] While this result may allow the beneficiaries to override the intentions of the testator, I conclude that the rule in Saunders v. Vautier applies and that Barbara Jane Guest is entitled to have the trust distributed to her immediately. Subject to an agreement otherwise, this appears to be an appropriate case [page449] where the costs of the parties ought to be paid by the estate. The parties are to provide me with their brief written submissions (not exceeding three pages in length) within 20 days of the release of this decision.
Applications granted.
End of Document