CITATION: Holgate v. Holgate, 2015 ONSC 259
OTTAWA COURT FILE NO.: 12-55701
DATE: 20150113
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Stephen Craven Holgate and John Edward Holgate
Plaintiffs
– and – The Estate of May Sheehan, The Estate of John Holgate, and Jo-Ellen Victoria Buss
Defendants
Ron Petersen and Kyle M. Lambert, for the Plaintiffs
Paul A. Dancause, for the Defendants, Plaintiffs by Counterclaim
HEARD: January 5, 2015
REASONS FOR JUDGMENT
BEAUDOIN J.
[1] These written reasons expand upon the oral reasons I gave on January 6th, 2015.
[2] May Sheehan, also referred to as May Holgate in this decision, died on March 1, 2012 in Ottawa, Ontario. She left the bulk of her estate to her own three children. The Plaintiffs are May Sheehan’s stepsons and they commenced these proceedings in October, 2012. In their claim the Plaintiffs seek, inter alia, a declaration that the Estate of John Holgate is holding money and assets in a resulting or constructive trust for their benefit. They also seek general damages in the amount of $5,000,000.00.
[3] The trial of this action commenced on November 25, 2014. After having heard three days of evidence from the Plaintiff, Stephen Craven Holgate, it became apparent to this Court that there was a critical issue to be determined with respect to the interpretation of the Will and codicil of the late John Holgate. I invited Counsel to consider bringing a motion under Rule 21 or alternatively for directions under Rule 75.06(3). Counsel agreed to proceed under Rule 21. While a motion to determine an issue before trial is generally not considered after a trial has commenced, the purpose of the rule is to dispose of all or part of an action, substantially shorten the trial or reduce costs. Having regard to the general principle set out in Rule 1.04(1) of the Rules of Civil Procedure that directs that the Rules are to be “liberally construed to secure the just, most expeditious and least expensive determination” of a proceeding, I conclude that nothing prevents the court from proceeding with such a motion after a trial has commenced and where the parties consent.
[4] At a Case Conference held on December 15, 2014 it was further agreed that the following question of law would be examined by the court on the within motion:
Having regard to the totality of the wording of the last Will and Testament of John Holgate, dated November 20, 1991 and the codicil of John Holgate dated July 24, 1992; and in particular, paragraph 3(c)(iii) of the Will as prescribed in the codicil and paragraph 3(d) of the Will, do the words of the Will of John Holgate preclude his widow the late May Holgate (Sheehan) from accumulating wealth in her own name from the two trusts created by the Will?
[5] It must be said at the outset that the word “wealth” simply means the accumulation of funds, in any amount, by May Holgate in her own name.
[6] There are two trusts in issue in this Will. Pursuant to paragraph 3(d) of the Will the first trust was established and I will refer to it as the “Holgate Trust” and it provides for the following:
To hold and keep invested the residue of my estate or the amount thereof remaining for the sole use and benefit of my wife, May Holgate during her lifetime, with power and authority to my Trustee to draw on both the income and the capital of my estate for the care and support of my said wife, as my trustee in their discretion considers advisable. In availing themselves of this discretionary power to encroach on the capital of my estate for my wife’s benefit, it is my strong wish and desire that at all times my Trustee’s first consideration shall be my wife’s well-being and comfort and that all her needs and requirements of every kind shall be provided for adequately in all respects out of my estate, as I do not feel that my estate need be largely conserved for the future use of my children and stepchildren. I therefore authorize and empower my Trustee to be generous in the exercise of this discretionary authority, even though there may be a considerable, or if necessary, total depletion of the capital of my estate by reason of such encroachments.
[7] The codicil, established what has been called the “UK Trust” and it provides:
To hold all my interest in real and personal property situated in the United Kingdom for the sole use and benefit of my wife May Holgate, during her lifetime with power and authority to my Trustee to draw on income, [but not the capital] of the said real and personal property for the use and benefit of my said wife, and on her death to pay or transfer to such of my sons, John Edward Holgate and Stephen Craven Holgate …
[8] The codicil revoked paragraph 3(c)(iii) of the Will which had previously provided:
To pay or transfer to such of my sons, John Edward Holgate and Stephen Craven Holgate, shall survive me, and if more than one (1) in equal shares between them, whatever interest I may have in real or personal property situated in the United Kingdom.
[9] At the outset the Defendants are prepared to acknowledge that May Holgate had a life estate in both trusts. They also agree that all of the income from both trusts was paid to May Holgate but maintain that once those funds were paid to her, she no longer held them as trustee; they were hers absolutely and she would have had to pay income tax on those funds. It is further admitted by the parties that May Holgate did not encroach on any of the capital in the Holgate Trust although there is an allegation that she encroached on capital of the UK Trust on two occasions. The largest of those payments appears to have been made however during John Holgate’s lifetime. Nevertheless, the possible encroachment of capital of the UK Trust is in dispute and remains to be resolved.
The Plaintiffs’ Position
[10] It is the position of the Plaintiffs that May Holgate could not accumulate any income she derived from the trusts and deposit them in a savings account or some other savings vehicle in her own name whatsoever. It is the Plaintiffs’ position that May Holgate could only withdraw funds from the trust in order to consume them, to provide for her own comfort and well-being. The Plaintiffs acknowledge the extremely generous language of the Will, particularly as it is contained in the Holgate Trust but maintain that May Holgate could not however, save any amount, no matter how small, in her own name. The trusts were to be her sole source of savings and she had to remain dependent on those trusts alone.
[11] On more than one occasion, the Plaintiffs had to concede that the generous language of the Holgate Trust in particular permitted May Holgate to use the income for any number of extravagant purposes, such as the purchase of a luxurious home, an expensive vehicle, extensive travel, or even the purchase of a Picasso. She could not, however, save a dime. She had to look at the trust as her sole source of savings.
[12] The Plaintiffs place particular emphasis on the fact that May Holgate held a life estate and they argue that the terms of the Will and the codicil were to ensure that the capital of the estate would be preserved for the remainder beneficiaries; namely, themselves and their three half siblings. It is their position that John Holgate’s clear intention was that any money which May Holgate did not need had to be preserved for the remainder beneficiaries. They argue that John Holgate had provided for May Holgate adequately in the trust accounts and that there was no need for her to accumulate any funds in her own name for the rest of her life.
[13] The Plaintiffs rely on the provisions of the Will setting out the remainder interests and say the intent of the testator was the preservation of the residue of the estate for the residual beneficiaries. In fact, a closer understanding of their argument reveals that their position is that May Holgate had not only an obligation to preserve the capital of the estate but she had a further obligation to capitalize any unused income.
The Defendants’ Position
[14] The Defendants take the position that the testator intended that his widow would have the absolute use of all of the income derived from both trusts and that there was no limitation on the use of those funds whatsoever. They rely on decisions from both Ontario and British Columbia that courts will not re-write a testator’s Will by inferring intentions that were not clearly contemplated by the author. They maintain that there are no overt or implied limitations or restrictions with respect to income contained in either the Will or the codicil. As a result, they say it is irrelevant what May Holgate may have done with the income as it was hers to use.
[15] It is not disputed that in a proceeding to determine the proper disposition of property pursuant to a Will, the role of the court is to determine the testator’s intentions by reviewing the Will as a whole and interpreting it based on the plain meaning of the words used therein. As the Supreme Court of Canada said in the case of Smith v. Chatham Home of the Friendless 1932 12 (SCC), [1932] 4 D.L.R. 173 at para. 21:[^1]
In construing a will the duty of the court is to ascertain the intention of the testator, which intention is to be collected from the whole Will taken together. Every word is to be given its natural and ordinary meaning and, if technical words are used, they are to be construed in their technical sense, unless for the consideration of the whole it is evident that the testator intended otherwise.
[16] In Re Burke 1959 113 (ON CA), [1960] O.R. 26 (C.A.) at para. 30, the Ontario Court of Appeal added:
Where the testator’s intention cannot be ascertained from the plain meaning of the language that was used, the court may consider the surrounding circumstances known to the testator when he made his Will – the so-called “armchair rule”
[17] Further, at para. 16, the Court of Appeal commented that since the meaning of words and Wills can differ significantly according to the context and the circumstances in which they are used, previously decided cases are of limited assistance except insofar as they may express general principles of construction.
The Argument
[18] In support of their argument, the Plaintiffs have relied on a number of decisions which I conclude do not assist in this matter because the facts of those cases are quite distinguishable and the principles enunciated are not in dispute here.
[19] The excerpts from Feeney’s Canadian Law of Wills deal with contingent interests and confuse the concepts “gifts over” with remainder interests. In this case, the Plaintiffs’ “gift over” status disappeared once May Holgate survived John Holgate. The excerpts refer to gifts that did not take place and to vested interests and are taken out of their context and cannot be relied on.
[20] In Re Taylor, 1982 CarswellSask 196 (Sask. Surr. Ct) the issue was whether the testator provided a life estate to his surviving wife or an absolute interest. He bequeathed all of his personal estate to his wife “to have and to use in her lifetime.” The words “sole use and benefit” did not appear. The decision focused on the surviving widow’s power to encroach on capital. The court concluded that the power of encroachment in that case did not change the nature of the gift but concluded at para. 64:
The case for such a change of character is much stronger where there is power of disposition than in the case where the donee has only a power to encroach on capital for purposes of maintenance.
[21] In distinguishing the decision of the Ontario Court of Appeal in Re Walker (1925), 56 O.L.R. 517 (C.A.), the court concluded at para. 42 that the testator had used clear words to indicate an intention to give only a limited interest. The word “maintenance” does not appear anywhere in the Will or codicil of John Holgate. As will be discussed later, much more expansive language was used by John Holgate with respect to his trustee’s power of disposition.
[22] In Re Rutherford and Rutherford, 1961 CarswellOnt 79, the question was once again whether the terms of the Will conferred an absolute gift to a son. The Will set aside a trust for the use of the son, his wife and children with full discretion to the trustee to pay such portion of the income or capital. The son later divorced and tried to resettle the estate and have all the income paid to himself and, on his death, have the capital paid to his second wife and his two children. The decision focused on the testator’s expressed intentions and relied on the particular language of the Will which directed that the income or portion of the capital be paid as may “be required from time to time for their proper support and maintenance and for the proper support, maintenance and education of their children”. Once again, the focus was on “maintenance and support.” Once again, the words “sole use and benefit” did not appear.
[23] In Banton v. CIBC Trust Corp. 1999 CarswellOnt 2596 the court focused on the word “required” which the Plaintiffs say echoes the term “requirement” found in clause 3(d) of the Will. At para. 9 the court held the use of the words “as required”, without more, created a condition precedent to a payment for “maintenance and support”. (Emphasis mine). Although that court held that the words “maintenance and support” have been traditionally been understood to place limitations on the powers of trustees to make distributions, those terms do not appear in the Will or the codicil in this case. The terms “sole use and benefit”, “care and comfort” “well-being and comfort” are used instead. Moreover, the term “requirements” is followed with much more namely the words “of every kind” and paragraph 3(d) goes on to advise the trustee that these requirements shall be provided for adequately in all respects.
[24] The decision in Mansen et al. v. Nash, 1954 CarswellOnt (Ont. C.A.) turned on the widow’s transfer of capital into her own name. The Court of Appeal held that she could not put the shares in issue into her own name although she could have sold them for her own needs. May Holgate did not encroach on capital even though the Will gave a clear authorization to do so insofar as the Holgate Trust is concerned.
[25] The Plaintiffs argue that the words “care and support”, “well-being and comfort” and that “all her needs and requirements be met” and the statement that the entirety of the trust may be depleted “if necessary” are words of limitation.
[26] While not conceding anything with regard to the Holgate Trust, the Plaintiffs note the different language with respect to the UK Trust. The expansive language of the Holgate Trust is not repeated and the Plaintiffs argue that this placed specific limitations on the use of income from that trust.
[27] The Defendants emphasize the relevance of silence and broad unrestricted language in the ascertainment of a testator’s intention. In Re Luke 1938 356 (ON SC), [1939] OWN 25 (H.C.J), Justice Roach held at para. 19:
…Had the testator intended that his widow should first exhaust her own funds before encroaching on the corpus of the estate he could have used appropriate language to express that intention. His failure to do so must surely indicate that her right of encroachment was an absolute right and not regulated by reference to other means of her own that she might have.
[28] The Defendants point out that there is no language in the Will that indicates that May Holgate had to avail herself of her own resources before accessing the benefits of his estate. They say that the absence of any such language indicates that May Holgate had an absolute right that is not regulated by any other means at her disposal. They refer to case law[^1] where the income in the hands of the beneficiary was irrelevant with respect to their entitlement of income from a trust. The Defendant say that it follows from that line of cases that if John Holgate intended May Holgate’s access to the benefits in his estate on the basis of what she may have otherwise available in terms of her own resources, he would and could have used appropriate language to express that intention.
[29] In Saunders v. Halom, [1986] B.C.J. No. 113, the B.C. Court of Appeal had to deal with facts similar to the case at hand in that the widow was to receive all of the income of the estate for her own use absolutely during her lifetime and the whole of the capital in the event of certain contingencies. The court noted that she had a very wide power to encroach on capital. The court remarked that the Testator had provided his widow with a very subjective test for the exercise of her discretion and that the power of encroachment was expressed in broad terms. The Court refused to intervene and review the exercise of the widow’s subjective decisions in the absence of any evidence of bad faith or of a failure on her part to exercise her discretion in accordance with the terms of the Will. In this case, the Defendants note that the Will expressly envisioned and authorized the entire depletion of the residue.
[30] In another decision of the B.C. Court of Appeal, namely Wilson v. Wilson 1944 260 (BC CA), [1944] B.C.J. No. 46, 2 D.L.R. 729, the words “sole use and benefit” were held to having given the beneficiary an outright gift of the estate despite other wording in the Will purporting to limit that gift.
[31] In Re: McElwain and Demartini, 1974 890 (Div Ct.) the Divisional Court had to consider the term of a Will that made a gift to a widow “for her use during the term of her natural life with powers to use the principal as well as the income therefrom in any way that she may see fit” and concluded that these words were considered to have given the entirety of the estate to the testator’s widow notwithstanding a gift over to a daughter.
[32] The Defendants argue that words “sole use and benefit” connote an extremely broad generous availability to the gift of income in this case and that May Holgate could take that gift free from any limitations that are not expressly set out. There are no such express limitations in the Will or the codicil.
[33] The Defendants note that the testator expressly stated that his wife’s well-being, comfort and welfare were his “first consideration” and these are primary to the context of all beneficiaries.
[34] The Defendants cite case law, Re: Mattick’s Will, (1967) CarswellBC 72 where it was held at para. 12 that the term “well-being” is a broad term, and includes freedom from worry, financial or otherwise.
[35] The Defendants also note that the words “care and support” do not appear in the UK Trust and the trustee is given an express mandate to draw on the income for May Holgate’s “sole use and benefit” without reference to her care and support and without reference to any other limitation or qualification. They note that “use and benefit” appears twice in the short paragraph setting out the terms of the trust.
[36] The Defendants refer to the language of the Will that clearly states the preservation of capital is not a concern except for the UK Trust. They note that although the trustee was invited to encroach on capital there is no evidence that May Holgate ever did that.
[37] The Defendants also argue that it was not unreasonable for May Holgate to save money in her own name in anticipation of her old age or her future. They invite the court to take notice of the high cost of elder care particularly if May Holgate would have required residence in any form, retirement or assisted-living.
[38] Moreover, the Defendants point out that there is no evidence before the court that demonstrates the income from the trusts was sufficient for her well-being, care and comfort. The Defendants argue that if the court were to give effect to the Plaintiffs’ argument, a forensic accounting would be required of May Holgate’s life estate and to analyse every receipt she received from the trust over nearly twenty years and to match that receipt against her needs and expenditures. We know that during that time she remarried and purchased another home.
[39] In addition, the Defendants raise five arguments in support of their position that there were no limitations on what use May Holgate could have made with respect to the income from the trust.
[40] First, they invite the court to look at the Will. The terms of this Will spend very little time discussing income. All of the language of the Will focuses on the discussion of capital and in that context, the discretion of the trustee is described in extremely liberal terms. There are no restrictions.
[41] Second, the Defendants note that John Holgate was so concerned about his widow having sufficient income he amended his Will by providing her with additional income from the UK trust. This was additional financial security. This was over and above giving her the income, and if necessary, all the capital of the Holgate Trust.
[42] Third, the Defendants argue that the court can presume that John Holgate knew the extent of his estate at the time of his drafting his Will. His concern that his widow would have sufficient funds is clearly manifested in the terms of this Will. It is clear that he was concerned that there may not be enough income and he gave his trustees unfettered discretion to encroach upon capital even if it meant the depletion of his estate.
[43] Fourth, the Defendants note that there is no instruction in the Will or the codicil directing the trustees to capitalize unused income.
[44] Fifth, the Defendants note income is paid out of the trust first and that tax liability follows that payment. Paying all of the income out of the trust would have been an ideal way to achieve income splitting.
Conclusion
[45] In reference to the Holgate Trust I note the following terms. First the trustees are told to hold and keep invested the residue of the estate for the “sole use and benefit of my wife”. It then goes on to give authority to the trustees to draw on both income and capital for the “care and support” of his said wife. (emphasis mine)
[46] In my view, the next paragraph is critical. It instructs the trustee as to how the trustee should exercise their discretionary power to encroach on the capital of the estate for May Holgate’s benefit. Here we find a very clear and strong statement of testator’s wishes. There is no need for the “armchair rule”. John Holgate said this: “It is my strong wish and desire that at all times my trustee’s first consideration shall be my wife’s well-being and comfort in that all her needs and requirements of every kind shall be provided for adequately in all respects out of my estate, as I do not feel my estate need be largely conserved for the future use of my children and stepchildren.” (emphasis mine)
[47] The word “all” is repeated three times. May Holgate’s needs and requirements are expanded to include those of “every kind and in all respects”.
[48] The Will concluded:
I therefore authorize and empower my trustee to be generous in the exercise of this discretionary authority, even though there may be a considerable, or if necessary, total depletion of the capital of my estate by reason of such encroachments. (emphasis mine)
[49] This is not a “boiler-plate” Will. John Holgate was a lawyer and a magistrate. Deliberate language is used. A clear statement of intention appears. There is no requirement to capitalize unused income. There are no expressed limitations on the use of income. There is no express requirement for May Holgate to look to her own resources before accessing income from the trust.
[50] I find the arguments of the Defendants to be persuasive. Contrary to the arguments put forward by the Plaintiffs it is abundantly clear that the testator did not want to preserve the estate for the remainder beneficiaries. That was the least of his concerns. We find these two clear statements of John Holgate’s intention: I do not feel my estate need be largely conserved for the future use of my children and stepchildren. – and if necessary, total depletion of the capital of my estate by reason of such encroachments. This language is fatal to the Plaintiffs’ arguments that the testator intended May Holgate to not only preserve capital (which she did) but also to capitalize unused income.
[51] I conclude that there were absolutely no limitations contained at all with respect to the payment of income to May Holgate. The liberal language contained in the Holgate Trust and, in particular, the use of the words “sole use and benefit” with respect to the residue of John Holgate’s estate come as close as possible to conferring on May Holgate with an absolute gift of not only the income but of the entire residue. This argument could have been advanced by the Defendants although they chose not to do so. John Holgate would not have taken the pains to confer on his trustee such a generous power to encroach on capital if he did not contemplate that May Holgate would first have the use of all of the income without reservation. While those extremely generous terms in the Will are directed to encroachments on capital they inform the trustee as to how to exercise their discretion as to income for both the Will and the codicil.
[52] The same result applies with respect to the UK Trust. It must be remembered that this was created in a codicil to a Will that previously made a gift of the UK funds to his sons. It is clear from that codicil that John Holgate was not satisfied that he had provided his widow with enough funds for her lifetime notwithstanding the generous terms set out in his original Will. He gave her more, and once again, without limitation.
[53] Again, in the codicil, the words “sole use and benefit” and “use and benefit” appear twice. These words have been held by the B.C. Court of Appeal in Wilson to have conferred an outright gift. The only words of limitation that appear anywhere are found in the codicil and they are expressly limited to capital.
[54] I conclude that in the exercise of the broad discretion conferred upon her by the Will and codicil, nothing prevented May Holgate from accumulating money outside of the trust in her own name if she concluded that she required them for her “sole use and benefit”, care and comfort”, “comfort and well-being” and sense of financial security given the broad interpretation those terms have been given by the courts.
[55] The frailty of the Plaintiffs’ argument is underlined by their contention that May Holgate could spend all of the income from the trusts (as well as the capital in the case of the Holgate Trust) but she could not save any of it as an additional security for her own future needs and well-being. These future needs were of such a concern to the testator that he used expansive language in the Holgate Trust and he added a codicil to his Will to increase her access to income. May Holgate survived John Holgate by nearly twenty years, she remarried and was widowed a second time; it was open to her in the exercise of that broad discretion conferred upon her by the Will and codicil to take her own additional steps to ensure her freedom from financial worry.
[56] As noted earlier, the Plaintiffs conceded that May Holgate could have spent all of the income. If so, they would be in no better position than they are now. They are still entitled to their share in the remainder, undisturbed capital of the Holgate Trust and the capital of the UK Trust plus whatever benefits their stepmother provided for them in her Will. Bad faith has not been pleaded.
[57] As a result, the question asked at the outset of this motion is answered “No”.
Mr. Justice Robert Beaudoin
Released: January 13, 2015
CITATION: Holgate v. Holgate, 2015 ONSC 259
OTTAWA COURT FILE NO.: 12-55701
DATE: 20150113
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Stephen Craven Holgate and John Edward Holgate
Plaintiffs
and
The Estate of May Sheehan, The Estate of John Holgate, and Jo-Ellen Victoria Buss
Defendants
REASONS FOR JUDGMENT
Beaudoin J.
Released: January 13, 2015
[^1]: Hinton v. Canada Permanent Trust Co. [1979] O.J. No. 3461 (Ont. Gen. Div.); O’Donnell v. Canada Trust [1996] O.J. 06-0026 (Ont. S.C.); Re Atwell Estate, (1997) 1985 ABCA 144, 19 ETR 92d) 234 (Ont. Gen. Div.) .