MacCallum Estate

MacCallum Estate Court Supreme Court Date 2022-02-02 Citation 2022 NSSC 34 Docket Hfx No 510311 Judge/Registrar/Adjudicator Norton, Scott C. (Honourable Justice) Document Type Decision Decision Content PROBATE COURT OF Nova Scotia Citation: MacCallum Estate, 2022 NSSC 34 Date: 2022-02-02 Docket: Hfx No 510311 Registry: Halifax In the Probate Court of Nova Scotia In the Estate of Helen F. MacCallum, Deceased DECISION ON INTERPRETATION OF WILL Judge: The Honourable Justice Scott C. Norton Heard: January 25, 2022, in Halifax, Nova Scotia Decision: February 2, 2022 Counsel: Timothy Matthews, Q.C., for the Applicant Royal Trust Corporation of Canada, Executor By the Court: Introduction [1] On this Application, the Court is called upon to interpret the legal effect of a provision of a will in the context of conflicting lines of legal authority elsewhere in Canada and Britain. [2] Royal Trust Corporation of Canada (“Royal Trust”) is the executor of the last will and testament of Helen F. MacCallum, deceased (the “Will”), and the trustee of the Helen MacCallum Alter Ego Trust (the “Trust”). The executor has applied to the court for an interpretation of the legal effect of the Will, specifically clause 3(d) that states: Rest of my Estate. Pay or transfer the rest of my estate to Royal Trust, as trustee of the Helen MacCallum Alter Ego Trust (the “Trust”), to be added to the capital of the Trust and administered and distributed in accordance with the terms of the Trust. The receipt of the trustee of the Trust shall be a sufficient discharge and release to all concerned without any need to inquire into or investigate the terms of the Trust. If the Trust does not exist at my death, distribute the rest of my estate on the same trusts, terms and conditions as the Trust as it existed as of the date of this will. Although I wish to note it here for the benefit of my trustees, I expressly do not incorporate the trust Helen MacCallum Alter Ego Trust establishing the Trust into my will be reference and it does not form part of my will. I want it to remain a private document. I expressly relieve the Registrar of Probate from any duty to require its production pursuant to Regulation 14 of the Probate Court Practice, Procedure and Forms Regulations. [3] Helen F. MacCallum died at Halifax on December 19, 2020. She was predeceased by her parents and her husband, Robert MacCallum. Her five sisters all predeceased her. She is survived by thirteen nieces and nephews who are her next of kin and heirs at law. [4] Notice was served on the heirs at law of the late Helen F. MacCallum (being all her nieces and nephews) and who are the persons interested in the interpretation of the Will. No Notice of Contest was filed by any of the persons interested. A few of them attended the hearing which was conducted virtually due to the COVID-19 pandemic restrictions. [5] On December 15, 2017, Helen F. MacCallum executed the Helen MacCallum Alter Ego Trust. On the same date she executed her last will and testament. Probate was granted to Royal Trust as executor by the Probate Court on June 23, 2021. [6] The approximate gross value of the assets held by Royal Trust as executor of the Will at the date of death is $192,453.84. The approximate value of the assets held by Royal Trust as trustee of the Trust is $2,029,044.41. [7] Royal Trust makes this Application to determine if paragraph 3(d) of the Will is legally effective to authorize Royal Trust as executor of the Will to pay and transfer the residue of the estate to Royal Trust as trustee of the Trust, or alternatively, whether a partial intestacy results. Royal Trust seeks this direction from the Court to complete the administration of the estate. Royal Trust has no direct interest in the Court’s conclusion. [8] The intention of Mrs. MacCallum is very clear. The residue clause 3(d) creates a semi-secret trust; that is, the existence of the Trust is disclosed but the terms of the trust are private. This type of testamentary gift is often referred to as a “pour over will” because it is intended that the residue flows from the estate into the inter vivos trust. [9] Although Mrs. MacCallum’s testamentary intention is obvious, conflicting judicial decisions raise a doubt as to the legal efficacy of such planning. [10] Several British Columbia decisions, focusing on the formal requirements for execution of a will, raise the concern that the testatrix can, after the execution of her will, amend the distribution of her estate by amending the trust without compliance with the Wills Act. These decisions held that “pour over” residue clauses are invalid on these grounds. See Quinn Estate v Rydland, 2019 BCCA 91 and Kellogg Estate v Kellog, 2015 BCCA 203. [11] On the other hand, where the Court has focused on the fiduciary duty of the trustee of the secret or semi-secret trust, centuries of authority have upheld such testamentary gifts as valid. See Blackwell v Blackwell, [1929] All E.R. Rep 71; [1929] AC 318 and Jankowski v Pelek Estate, [1995] M.J. No. 663 (Man. C.A.). [12] The authorities conflict. I find that the English and Manitoba authorities are more persuasive on the facts of this case. I note that the reasoning favoured by the House of Lords and the Manitoba Court of Appeal in Blackwell and Pelek Estate respectively, was not considered by the British Columbia courts. [13] In Blackwell, the facts were that John Duncan Blackwell wished to provide for his mistress and their son, but he did not want to mention them in his will. Instead, he asked five of his friends to act as trustees and executed a codicil to his will stating, in part: “I give and bequeath to my friends…the sum of 12,000 pounds free of all duties upon trust to invest the same as they in their uncontrolled discretion shall think fit and to apply the income and interest arising therefrom yearly and every year for the purposes indicated by me to them…” After the codicil was executed his solicitor wrote a memorandum setting out the terms of the trust. After Mr. Blackwell’s death, his wife and son disputed the validity of the codicil. [14] Lord Sumner explained the application of equitable principles to secret trusts this way: The necessary elements on which the question turns are intention, communication and acquiescence. The testator intends his absolute gift to be employed as he and not as the donee desires; he tells the proposed donee of this intention and, either by express promise or by the tacit promise, which is signified by acquiescence, the proposed donee encourages him to bequeath the money in the faith that his intentions will be carried out. The special circumstance, that the gift is by bequest, only makes this rule a special case of the exercise of a general jurisdiction, but in its application to a bequest the doctrine must in principle rest on the assumption that the will has first operated according to its terms. [15] Lord Sumner distinguished between the formal validity of wills (compliance with the terms of the Wills Act) and the construction of wills or trusts: In the authorities it has been common to classify these cases according as the terms of the will make the gift in question absolute or fiduciary. If it is by force of the words of the will that the residuary legatee takes what is given in trust without any specification of the trust, then parol evidence to show what that trust is would contradict the written will. Accordingly, the crucial point is whether or not it is the will itself that gives this fund to the residuary legatee in such a case. Section 9 of the Wills Act prescribes the form in which any disposition in a will must be testified, if it is to be valid, but it does not deal with the construction of wills, or the application of the general law of trusts to interests created by wills. It is one thing to say that in itself the trust cannot be given effect to, not being expressed in the will, but it is quite another to say that, when for this reason the trust fails, the will gives the fund to the legatee in trust for the residuary legatee, as if the document, signed and witnessed, had said so in words. The question appears to be whether the resulting trust in favour of the named residuary legatee in such a case arises as part of the will or only as the result of the application of equitable doctrines to a portion of the testator's estate, which in the circumstances of the will has not been consistently disposed of. [16] After a review of historic cases involving secret trust sand semi-secret trusts (extending back to the 17th century), he concluded: The limits, beyond which the rules as to unspecified trusts must not be carried, have often been discussed. A testator cannot reserve to himself a power of making future unwitnessed dispositions by merely naming a trustee and leaving the purposes of the trust to be supplied afterwards, nor can a legatee give testamentary validity to an unexecuted codicil by accepting an indefinite trust, never communicated to him in the testator's lifetime … To hold otherwise would be to enable the testator to “give the go-by” to the requirements of the Wills Act, because he did not choose to comply with them. It is communication of the purpose to the legatee, coupled with the acquiescence or promise on his part, that removes the matter from the provision of the Wills Act and brings it within the law of trusts, as applied in this instance to trustees, who happen also to be legatees. If I am right in thinking that there is no contradiction of the Wills Act in applying the same rule, whether the trustee is or is not so described in the will, and the whole topic is detached from the enforcement of the Wills Act itself, then, whether the decisions in equity are or are not open to doubt in themselves I think that, in view of the subject-matter of these decisions, and the length of time during which they have been acquiesced in, your Lordships may well in accordance with precedent refuse to overrule them lest titles should be rendered insecure and settlements, entered into in reliance on their authority, should now be disturbed. [Emphasis added] [17] Lord Warrington, in concurring reasons, summed up the doctrine of secret trusts: I think the principle on which this doctrine is founded is that the parol evidence is not adduced for the purpose of altering or affecting the will itself, the legatee still takes under the will, but is under a personal obligation the breach of which would be a fraud on the testator… The question is whether the same principle applies where as in the present case the fact that the gift is upon trust is mentioned in the will though the terms of the trust can only be established by parol. … I think the solution is to be found by bearing in mind that what is enforced is not a trust imposed by the will, but one arising from the acceptance by the legatee of a trust, communicated to him by the testator, on the faith of which acceptance the will was made or left unrevoked as the case may be. If the evidence had merely established who were the persons and what were the purposes indicated, it would, in my opinion, have been inadmissible, as to admit it would be to allow the making of a will by parol. It is the fact of the acceptance of the personal obligation which is the essential feature, and the rest of the evidence is merely for the purpose of ascertaining the nature of that obligation. [18] In Pelek Estate, the Manitoba Court of Appeal considered this issue in the context of a deceased’s will that concluded: [c] To pay transfer and deliver all the residue of my estate to my said Executor to deal with as he may in his discretion [sic] decide upon. [19] The executor was the lawyer who drafted the will. He filed affidavit evidence to state that the testatrix instructed him to divide the residue among three persons whom she named. He proceeded to print those names on a blank sheet of paper. The testatrix signed the paper, but it was neither dated nor witnessed. [20] The majority of the Manitoba Court of Appeal upheld the residue gift as a secret trust. Helper, J.A., wrote: 107 A fully secret trust is a trust which a court of equity imposes on a person who has obtained title to property obliging him to hold it for the benefit of the persons for whom or purposes for which he knew that it was given or allowed to pass to him. It arises where a testatrix gives property to a person apparently beneficially, but has communicated to that person during his lifetime certain trusts on which the property is to be held. The trust arises outside the will. Any trust obligation which the legatee has undertaken is hidden from view, revealed only by extrinsic evidence. In such circumstances, where the testator has communicated the intention that the legacy should be held in trust for others, where the objects of the trust are known to the legatee, and where the legatee agrees to act as trustee or acquiesces in that arrangement, the trust will be enforced and extrinsic evidence is admissible to prove the essential facts. A court of equity will enforce the secret trust to prevent the requirements of the Wills Act being used as an instrument of fraud. (Halsbury's Laws of England, 4th ed. reissue 1995, vol. 48, pp. 291-96, and In re Keen, [1937] 1 Ch. 236 (C.A.).) 108 The contents of Mr. Hnidan's affidavit are admissible to establish the creation and specifics of the trust imposed on him. 109 All the elements of a secret trust are established in this case. Mr. Hnidan's extrinsic evidence is admissible not to contradict, vary or add to the will, but to bind him to his obligation in equity, which obligation he acknowledges, and to clarify the extent of that obligation. [21] Kroft, J.A., concurred with the judgment of Helper, J.A., “on the simple basis that is gives effect to the reasonably certain intention of the testatrix and is therefore completely appropriate in the circumstances of this case” (at para. 113). [22] The dissenting judgment of Huband, J.A., was founded on the fact that the trust was not created prior to the Will. I find his reasoning supportive of my conclusions in the present case. At paras. 55-56 he reasoned: 55 In the case of Re Keen's Estate; Evershed v. Griffiths, [1937] 1 Ch. 236, a testator wished to leave property by will to several named trustees, to be held by them on certain trusts which were not disclosed in the will itself. The will directed the trustees to dispose of the legacy among such person, persons or charities as the testator might notify to them during his lifetime. As a matter of interpretation, Lord Wright M.R., for a unanimous Court of Appeal, concluded that the words of the will referred to a definition of trusts which had not yet, at the date of the will, been established. The court ruled that extrinsic evidence cannot be admitted to provide the missing directions. Lord Wright M.R. comments (at pp. 246-47): In Blackwell v. Blackwell; In re Fleetwood [15 Ch.D. 594] and In re Huxtable ([1902] 2 Ch. 793), the trusts had been specifically declared to some or all of the trustees at or before the execution of the will and the language of the will was consistent with that fact. There was in these cases no reservation of a future power to change the trusts, in whole or in part. Such a power would involve a power to change a testamentary disposition by an unexecuted codicil and would violate s. 9 of the Wills Act. This was so held in In re Hetley ([1902] 2 Ch. 866). Johnson v. Ball is again a somewhat different example of the rule against dispositions made subsequently to the date of the will in cases where the will in terms leaves the property on trust, and shows that the position may be different from the position where the will in terms leaves the gift absolutely. The trusts referred to but undefined in the will must be described in the will as established prior to or at least contemporaneously with its execution. 56 In the present case, the fact that the instruction to divide the residue between three specific individuals came after the execution of the will is fatal to the concept of a half secret trust. The will must not only speak of the trust arrangement as anterior to the execution of the will, but in fact it must precede execution. [Emphasis added] [23] In the present case, the Will bequeaths the residue to Royal Trust in trust. Applying Blackwell, all the essential elements are present: (a) Mrs. MacCallum communicated the purposes of the trust to Royal Trust set out in a document signed by her. (b) Royal Trust promised in writing to execute the trust. (c) The Trust document was signed by both parties prior to the Will. (d) Mrs. MacCallum transferred substantial assets to Royal Trust as trustee during her lifetime (more than ten times the value of the estate assets) so the Trust was fully constituted. (e) The Trust was never revoked nor amended. Royal Trust has a fiduciary duty to administer it on terms agreed to before the Will was executed. [24] The Trust was clearly established prior to the execution of the Will and was fully constituted. There was no amendment or revocation of the Trust after the Will was executed. The concerns raised by the British Columbia Court decisions do not arise on the facts of this case. I find that this approach is supported by the public policy presumption against intestacy and is in keeping with the obvious intentions of the testatrix. [25] The purposes of the strict execution requirements of the Wills Act are to provide safeguards against fraud, undue influence, or lack of testamentary capacity. In the present case, the Trust and the Will were drafted simultaneously by the same solicitor and were intended to operate together as part of one estate plan. The safeguards were in place for both documents. [26] It would be ironic if the Wills Act upholds both holograph wills and testamentary “writings”, both of which have no witnesses and therefore no procedural safeguards, but the statute was interpreted to forbid “pour-over” wills in the circumstances of this case. [27] I find that paragraph 3(d) of the Will is legally effective to authorize Royal Trust as executor of the Will to pay and transfer the residue of the estate to Royal Trust as trustee of the Trust. [28] Order accordingly. Norton, J.