Re: Estate of Douglas Carson Smith

2008 BCSC 1189 Re: Estate of Douglas Carson Smith

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Re: Estate of Douglas Carson Smith, 2008 BCSC 1189 Date: 20080902 Docket: S077783 Registry: Vancouver Re: Estate of Douglas Carson Smith, Deceased Before: The Honourable Madam Justice E.A. Arnold-Bailey Reasons for Judgment Counsel for the Petitioner, Royal Trust Corporation of Canada, as Trustee of the Estate of Douglas Carson Smith: D. Jane Dardi Counsel for the Respondent, Pamela Armstrong: Ellen Bond Counsel for the Respondent, Kissandra Smith: Edward F. Macaulay Appeared in Person: Daryl Armstrong, Respondent Date and Place of Hearing: May 6, 2008 Vancouver, B.C. Introduction [1] This application is brought by the Royal Trust Corporation of Canada ("Royal Trust") in its capacity as trustee of the estate of the late Douglas Carson Smith ("the deceased"), who died on October 13, 1986. The application is for an order answering certain questions as to the true construction of the will of the deceased dated July 28, 1986 and a codicil dated August 21, 1986 (collectively referred to as "the will"), as certain provisions, given their plain meaning, appear contradictory. [2] The respondents are beneficiaries of the will, namely the deceased's daughter, Pamela Armstrong ("Ms. Armstrong"); and the deceased's grandchildren (Ms. Armstrong's children): Kissandra Smith, formerly known as Sondi Armstrong, ("Kissandra") and Daryl

Armstrong ("Daryl"). [3] Although not formally a respondent to the application, the deceased's sister, Evelyn Louise Maclachlan, whose surname was misspelled in the will as MacLaughlin ("Ms. Maclachlan"), was present at the hearing. She is presently 91 years of age, and as a beneficiary of the estate, she has been receiving $300 per month since the death of the deceased. Her nephew, and son of one of the deceased's brothers, The Honourable K.A.P.D. Smith, briefly addressed the Court on her behalf. [4] Several months prior to his demise on October 13, 1986, the deceased had his will prepared and executed, followed by a brief codicil. He was suffering from prostate cancer. Read as a whole it is clear that the deceased gave very careful thought to how he wished his executors and trustees to preserve the majority of his estate for a period of 21 years after his death so as to provide a monthly income for Ms. Armstrong, and upon their reaching age 25, to also pay a monthly income to Kissandra and Daryl. In his will the deceased also made a number of specific bequests. He also directed his trustees to pay his siblings, now deceased except for Ms. Maclachlan, $300 each per month for their lifetimes. Upon the 21st anniversary of his death, he directed that the residue of his estate be wound up and distributed. [5] The contradictory instructions contained in the will arise in the

context of certain sums to be paid for a beneficiary's lifetime, and the winding up and distribution of the estate upon the 21st anniversary of the deceased's date of death, which is October 13, 2007, insofar as Ms. Armstrong and Ms. Maclachlan both have survived beyond that date. [6] The will named Pamela Armstrong, Thomas Oliver and Robert Barter (collectively, the "former trustees") as executors and trustees of the deceased's estate. Probate of the will was granted to the former trustees on March 3, 1987. [7] The former trustees each resigned as executors and trustees of the deceased's estate on July 27, 1993. Royal Trust was appointed sole trustee by court order pronounced July 29, 1993. The former trustees were found to have failed in the proper discharge of their legal responsibilities in relation to the estate by Kirkpatrick J. (as she then was) in Royal Trust v. Barter et al., 2000 BCSC 1842, and were required to reimburse the estate accordingly. The Relevant Portions of the Will [8] After providing detailed instructions to his trustees in relation to how he wished his estate to be managed and making a number of monetary bequests to a list of named beneficiaries, the deceased directed as follows in his will, commencing at clause 3(e): (e) To keep invested the balance of my estate and from the income earned to pay all income taxes, property taxes and other proper

expenses from net monthly income earned: (i) To pay $300 a month to each of the following for their life including the month of death: Evelyn Louise MacLaughlin, Vancouver Norman Fredrick Smith, Vancouver Harry Farqharson Smith, England (ii) To pay 30% of income monthly to Pamela Armstrong and payment of her personal income tax annually for her lifetime including the month of her death. (iii) To pay to SONDI ARMSTRONG and DARYL ARMSTRONG upon their attaining 25 years of age 10% of estate income monthly to each provided this amount to be increased to 20% to each upon the death of PAMELA ARMSTRONG (iv) To reinvest all surplus estate income in Grade A Bonds and Government Bonds. (v) To wind up and distribute the estate on the 21st Anniversary of my death as follows: To PAMELA ARMSTRONG 30% of my estate if she is still alive on the date of distribution, if she has died before the 21st anniversary of my death then the share she would have taken shall revert to and become part of the rest and residue of my estate. To divide in equal shares all of the rest and residue of my estate in equal shares per stripes [sic] among SONDI ARMSTRONG, DARYL ARMSTRONG and their issue if alive share and share alike.

4. IF ANY PERSON shall become entitled to a share of my estate before attaining the age of twenty-one years, the share of such person shall be held and kept invested by my Trustees and the income and capital or so much thereof as my Trustees in their discretion consider necessary or advisable shall be paid, applied or used for the benefit of such person until he or she attains the age of nineteen years. I further authorize my Trustees to make payment for any person under the age of twenty-one years to a parent or guardian of such person or to anyone to hom [sic] my Trustees in their discretion deem it advisable to make such payments, whose receipt shall be a sufficient discharge to my said Trustees. [Emphasis added] [9] Facts relevant to the interpretation of the terms of the will and their application include the following: - In July 1986 when the deceased made his will he knew that he was in poor health and his demise was near, given the state of his prostate cancer. - He had a sizable estate. - Two of his siblings named as beneficiaries in the will, Norman Fredrick Smith and Harry Farqharson Smith, died within the 21 year period after the deceased's death, on September 13, 1995, and October 25, 1995, respectively. - His third sibling, Ms. Maclachlan, born April 4, 1917, is living and is presently 91 years old. - Ms. Armstrong, the only child of the deceased, was not quite 36

years old when the will was made in 1986, and had been a housewife for most of her adult life. Ms. Armstrong, born June 28, 1950, is living. - Kissandra, the granddaughter of the deceased, born on April 29, 1967, is living. She was 19-years-old when the will was made. Kissandra has signed a statutory declaration that she has no children. - Daryl, the grandson of the deceased, born on May 26, 1971, is living. He was 15-years-old when the will was made. Daryl has signed a statutory declaration that to the best of his knowledge he has no children. - The 21st anniversary of the date of death of the deceased was October 13, 2007 (the "distribution date"). - On February 27, 2008, Truscott J. ordered that the class of residuary beneficiaries of the estate closed as of the distribution date and that the unborn issue of Kissandra and Daryl have no interest in the estate. - The value of the residue of the estate as of September 30, 2007, before payment of taxes and other expenses, was approximately $3,255,000. Questions for the Court [10] Royal Trust seeks answers from the court to the following questions: 1. Should the payment of $300 per month to Ms. Maclachlan pursuant to clause 3 (e)(i) of the will cease as of the distribution date?

2. If the answer to Question 1 is "no", is Ms. Maclachlan entitled to the payment of $300 per month until her date of death?

3. Does Ms. Armstrong's entitlement to payment of her personal income tax from the estate, pursuant to clause 3(e)(ii) of the will, cease as of the distribution date?

4. If the answer to Question 3 is "yes", what is Ms. Armstrong's entitlement, if any, to payment of her personal income tax for the taxation year ended December 31, 2007?

5. If the answer to Question 3 is "no", does Ms. Armstrong's entitlement to payment of her personal income tax from the estate pursuant to clause 3(e)(ii) of the will continue until her date of death?

6. If the answer to Question 5 is "yes", should Royal Trust distribute any of the residue of the estate or the income earned by it during the lifetime of Ms. Armstrong?

7. If the answer to Question 6 is "yes", what portion of the residue of the estate is Royal Trust required to hold back from distribution on the distribution date for the purpose of paying Ms. Armstrong's personal income tax until her date of death? [11] Royal Trust is not seeking answers to Questions 8 and 9 in the petition as Ms. Armstrong has agreed that her entitlement under the will is to 30% of the net income of the estate as opposed to its gross income. Positions of the Parties Position of Royal Trust: [12] Royal Trust, as trustee, is taking no position with respect to Questions 1 through 5 of the petition. [13] If the answer to Question 5 is yes, and Ms. Armstrong's entitlement to payment of her personal income tax continues until her death, Royal Trust's position with respect to Questions 6 and 7 is that in order for it to proceed with any distribution of the residue, Ms. Armstrong must first agree to a specific maximum amount that would be held back for the purpose of paying her income tax ("the holdback"). Further, she must agree not to seek any payment on account of her income tax in excess of the holdback. In these circumstances, Royal Trust is seeking an order that without such written agreement from Ms. Armstrong, there can be no distribution of residue until her death. [14] Royal Trust is also seeking an order pursuant to s. 39 of the Trustee Act, R.S.B.C. 1996,

c. 464, that it is at liberty to distribute the residue of the estate pursuant to clause 3(e)(v) of the will having regard only to the beneficiaries of which it is aware, namely, Ms. Armstrong, Daryl and Kissandra; and that Royal Trust shall not be liable to any other person who has not provided notice of a claim to share in the residue of the estate as of the date of distribution. Position of the Respondent Ms. Armstrong: [15] Ms. Armstrong submits that on a true construction of the will taken as a whole, she is entitled to payment of her personal income tax until the date of her death. [16] It is also her position that the monthly payment of $300 to Ms. Maclachlan is to continue until the date of the latter's death. [17] It is submitted on behalf of Ms. Armstrong that the words "the rest and residue of my estate" in clause 3(e)(v) mean the amount that remains after all payments made in compliance with the will have been taken into account, and in particular the amounts payable in accordance with the deceased's expressed intention to pay Ms. Maclachlan a monthly payment of $300 for her life, and to pay Ms. Armstrong's personal income tax for her lifetime. Hence, it is submitted on her behalf that ultimately no conflict arises as between these provisions of the will. [18] Similarly, it is submitted on behalf of Ms. Armstrong that in the words in clause 3(e)(v) above, "To wind

up and distribute the estate", the word "estate" can only mean the residual estate, which consists of the amount that remains after all payments made pursuant to the terms of the will have been taken into account. To conclude otherwise would effectively be rewriting the testator's will, so as to delete the words (in relation to payment of Ms. Armstrong's income tax) "annually for her lifetime including the month of her death" and to substitute therefore the words "up to and including the 21st anniversary of my death". Likewise, to fail to give effect to the direction to pay Ms. Maclachlan $300 per month for her life including the month of death would also require that the will be similarly rewritten. [19] It is further submitted on behalf of Ms. Armstrong that the court must be mindful that the particular words of the will can only be construed with reference to the will as a whole; and should the court find there is an ambiguity in the provisions of the will, the court may also consider relevant facts known to the deceased at the time the will was executed. [20] In particular, it is submitted that the court ought to keep in mind the nature of the bequests to Ms. Armstrong, the only child of the deceased, and in terms of the provision for payment of her personal income taxes, that he only made such provision for Ms. Armstrong and not for any other beneficiary. It is submitted

that the gift of payment of Ms. Armstrong's income taxes for her lifetime to some extent balances the distribution, considering that she, his only child, receives 30% of the capital of the estate, whereas his two grandchildren (and their issue) each receive a greater share (35%), but are required to pay their own personal income taxes. [21] After making what he considered to be appropriate arrangements to permit his executors and trustees to manage the majority of his estate for 21 years after his death, it is clear that it was the deceased's intention, after the 21 years had passed, to have his daughter take her 30% share of the capital into her own hands, so that she would have sufficient capital to generate income to provide for herself. That being the case, it is submitted on behalf of Ms. Armstrong that the deceased intended that her income would be free and clear of income taxes and, thus, it would be contrary to the deceased's intentions to cease payment of Ms. Armstrong's personal income taxes on the anniversary date. [22] To construe the will to give effect to the literal words of the deceased, according to counsel for Ms. Armstrong, does not prevent the trustee from making a distribution to the residual beneficiaries, now that their identity has been established, insofar as her income over the past 21 years has, as anticipated by her late father, been derived almost

exclusively from her portion of the estate income, and is likely to continue to be the same as she will receive 30% of the capital upon distribution. [23] Therefore, it is submitted that it is not difficult to calculate a sufficient amount to hold back from the residue of the estate to be used for the purpose of payment of Ms. Armstrong's future income taxes. In the event that the beneficiaries cannot agree on an appropriate amount, a further application can be made so that the court, presented with evidence of Ms. Armstrong's income, projected life expectancy and anticipated income tax rates, can make an order as to the appropriate amount of the residue to be held by the trustee. Position of the Respondent Kissandra: [24] Counsel for Kissandra submits that the payment of $300 per month to Ms. Maclachlan ought to cease as of the distribution date and, similarly, the payment of Ms. Armstrong's personal income tax also ought to cease as of that date. Therefore, Ms. Armstrong's 2007 personal income tax ought to be paid by the estate only up to the distribution date of October 13, 2007. [25] It is submitted on behalf of Kissandra that it is clear, on a plain and ordinary reading of the will, that the deceased's intentions were that the estate was to be wound up and distributed to the residual beneficiaries on the 21st anniversary of his death, who he intended to be Ms. Armstrong

and her children, Kissandra and Daryl, as well as any children of theirs. Therefore, counsel for Kissandra submits that in respect of Ms. Maclachlan, as a specific legatee, it is not unreasonable to interpret the will to limit her monthly payment of $300 to the distribution date. In order to give effect to the interpretation of the will urged upon the court on behalf of Ms. Armstrong, the court would have to import the sufficient language to create life estates for both of these beneficiaries, which would impact on the final distribution of the residue, which logically would have to be delayed until the death of both of these beneficiaries. It is respectfully submitted that such an interpretation would be a perversion of the deceased's intention. [26] Therefore, it is respectfully submitted on behalf of Kissandra that to give effect to the general intent of the deceased as testator it is appropriate for the court in the circumstances of the present case to disregard the particular intent of clauses 3(e)(i) and (ii) to give effect to the deceased's general intent. [27] It is further submitted on behalf of Kissandra that the deceased made sufficient provisions to care for his daughter, Ms. Armstrong, for the 21 years, by providing her with 30% of the income and the payment of her personal income tax. He did not know what his daughter's personal income tax would be at the time of

his death, but he did know that she would be receiving at the very least 30% of the income from the estate, and he made the clause broad enough to cover her income taxes for more than that amount. [28] However, it is submitted on behalf of Kissandra that to suggest that the payment of Ms. Armstrong's personal income tax was to continue after the final distribution of the estate is inconsistent with the deceased's general intention to provide her with 30% of the residue on the distribution date. Once the residue is distributed, there would no longer be funds available for use by the trustees to pay Ms. Armstrong's ongoing personal income tax. Therefore, it is submitted that to add language suggesting that the trustees were to hold back a sufficient amount to pay her personal income tax for the remainder of her life is importing too much into the will. [29] If, however, the court concludes that the estate is to continue to pay Ms. Armstrong's personal income tax after the distribution date, then it is submitted that the balance of the estate should be distributed in accordance with the will, with no more than $200,000 held back to pay for Ms. Armstrong's future income taxes until the date of her death. The Relevant Legal Principles [30] The guiding principle is that to interpret a will the court must first look to its language. Only if the court cannot ascertain the intention of

the testator should it look beyond the will itself, in which case the "armchair rule" applies. This principle is clearly articulated in Thomas G. Feeney, The Canadian Law of Wills, 3rd ed., vol. 2 (Toronto: Butterworths, 1987) at 13, as follows: If, in the first instance, the testator's intention cannot be discerned from the will itself, then, since the testator must be taken to have used the language of the will in view of the surrounding circumstances known to him at the time when he made his will, evidence of such circumstances is necessarily admissible, at least insofar as it corresponds to the facts and circumstances referred to in the will. [31] The "armchair rule" of construction to determine the true intentions of the testator was applied and approved by the Saskatchewan Court of Appeal in Haidl v. Sacher (1979), 7 E.T.R. 1 (Sask. C.A.). In that decision, at pp. 8-9, Bayda J.A. applied Re Burke (1959), 20 D.L.R. (2d) 396 (Ont. C.A.) and quoted Laidlaw J.A. at p. 398: Each Judge must endeavour to place himself in the position of the testator at the time when the last will and testament was made. He should concentrate his thoughts on the circumstances which then existed and which might reasonably be expected to influence the testator in the disposition of his property. He must give due weight to those circumstances in so far as they bear on the intention of the testator.

He should then study the whole contents of the will and, after full consideration of all the provisions and language used therein, try to find what intention was in the mind of the testator. When an opinion has been formed as to that intention, the Court should strive to give effect to it and should do so unless there is some rule or principle of law that prohibits it from doing so. [Italics are of Bayda J.A.] [32] In Re Harmer (1963), 40 D.L.R. (2d) 825 (Ont. H. Ct.), aff'd (1964), 42 D.L.R.(2d) 321, the court was asked to interpret a will in which there was a clause dealing with the contingency of the simultaneous death of the testatrix and her husband, but which did not deal with the possibility of her husband predeceasing her. In utilizing the surrounding circumstances the court found that it was the testatrix's intention to provide the same distribution of her estate as contained in the clause dealing with the simultaneous death of her and her husband. Fraser J. stated the following at p. 827: However, although normally the words in a will are to be read in their ordinary and grammatical sense that sense may be modified or extended to accord with the intention of the testator ascertained from the whole will... [33] In upholding the trial decision Kelly J.A. of the Ontario Court of Appeal stated the following at p. 325: ...I take it as a governing principle that the very

words used by the testatrix in framing her will should be interpreted so as to give effect in its ordinary meaning to every word and phrase employed by the testatrix, unless there are such inconsistencies as to make it impossible to accomplish this end. [34] Furthermore, the court should make every effort to reconcile two apparently conflicting provisions of a will, rather than to absolutely ignore one or the other of them, or call either or both of them void for uncertainty: James MacKenzie, Feeney's Canadian Law of Wills, 4th ed. (Toronto: Butterworths, 2000) at para. 10.98. [35] If there are irreconcilable clauses in a will, the accepted rule of construction is the court should enforce the clause that appears last and abrogate the one that comes first: Feeney's Canadian Law of Wills, at para. 10.99; Thomas Jarman, A Treatise on Wills, 8th ed., vol. 1 (London: Sweet & Maxwell, 1951) at 576; and John G. Ross Martyn, Stuart Bridge & Mika Oldham, Theobald on Wills, 16th ed., (London: Sweet & Maxwell, 2001) at 758. [36] However, the law is also clear that routine enforcement of last clause in a will, thus abrogating the prior contradictory one, is not the correct approach. In Re Galt, Royal Trust Co. v. Martin (1957), 12 D.L.R. (2d) 140 (B.C.C.A), the Court of Appeal considered this rule of construction in circumstances where the testator left a half share of certain assets in

trust to pay the income to the grandchildren (children of a deceased daughter) for life, with such payments not to begin until the child reached the age of 25 (subject to power in the trustees to advance income to any child at age 21), and also left the same share of the assets in trust to hold the capital for such children of the said grandchildren as attained the age of 21, the share of each great-grandchild to be paid to them with accumulations of income. Another clause of the will provided for the advancement of income held on behalf of any interested infants, for their maintenance and education, if it was necessary or desirable. [37] In reversing the decision of the trial judge, the Court of Appeal found that it would be unreasonable to find that the grandchildren would lose their right to income for life at any time that the trustees decided to divert income to the great-grandchildren, and therefore, the proper construction was to find that the interests of the great-grandchildren were subject to the prior life interests. [38] In Re Galt Smith J.A. for the court stated the following at p. 142: The Court should only follow the later disposition because it is the later when all indications of intention fail. The intention of a testator may be indicated negatively as well as positively. When we find that cl. A read as modified by a repugnant cl. B produces anomaly and

incongruity, but that cl. B when read as modified by cl. A produces no such anomaly and incongruity, then I should say that there is evidence of intention: I think the presumption must be that the testatrix intended the construction that operates reasonably. As Coleridge J. said in Morrall v. Sutton at pp. 545-6: "But I think it may be taken as clearly established that this rule must not be acted on so as to clash with another paramount rule, which is, that before all things we must look for the intention of the testator as we find it expressed or clearly implied in the general tenor of the will; and when we have found that on evidence satisfactory in kind and degree, to that we must sacrifice the inconsistent clause or words, whether standing first or last, indifferently." Application of the Law to the Deceased's Will [39] I find, having reviewed the wording of the will itself, the codicil, and the affidavit of George C. Chapman, Barrister and Solicitor, sworn November 20, 1986 and filed in support of the application to admit the will to probate, that the deceased took an active role in the preparation of his will and gave careful thought to how he wanted his estate to provide for his close family and others, how he wanted it to be invested and managed in the 21 years immediately following his death, and ultimately how he wanted it wound up and distributed. [40] I also find

based on the language of the will itself that the deceased had two main objectives. [41] The first main objective was that his surviving close relatives, his daughter, Ms. Armstrong and her children, Kissandra and Daryl, were to have the income from his estate available to them (in relation to Kissandra and Daryl upon attaining their attaining the age of 25 years) for a period of 21 years after his death. [42] The second main objective was that upon the 21st anniversary of his death his estate was to be wound up and distributed to those three persons, or the survivors of them, along with any children of Kissandra or Daryl, alive at that time, in the shares as specified. [43] Within those parameters the deceased made a number of specific bequests, including a monthly payment of $300 per month to his siblings for their lifetimes, which included his sister, Ms. Maclachlan. It is, in my view, indisputable that the deceased intended his siblings each to receive this monthly amount for their lifetimes. To sit in the armchair of the testator is to reach this conclusion. It is also likely that he expected all of his siblings to die before 21 years after the date of his death, and that the contradictory effect of the directions in his will in the event that one or more of them lived longer than 21 years were not brought to his attention by his solicitor. [44] However, it is also clear

that the deceased intended his estate to be wound up and distributed on the 21st anniversary of his death. From his armchair, I am quite confident that the deceased would not have wanted the distribution of his estate after 21 years from his death to be further delayed until the demise of Ms. Maclachlan. Nor, I am certain, would he have wanted his sister, Ms. Maclachlan, who I note was the only one of his siblings to whom he made an additional bequest of $200, to be deprived at a very advanced age of the monthly sum he saw fit to leave her for her lifetime. The language of the will in clause 3(e) is clear that she was to receive the sum of $300 monthly for her life including the month of her death, although the bequest was tied to income the estate was to earn while invested. [45] The problem then becomes how to reconcile the language that provides for such a bequest to Ms. Maclachlan, and the almost identical language that provides for the payment of Ms. Armstrong's personal income tax annually for her lifetime, with the clearly expressed intention of the deceased that his estate be would up and distributed once the 21st anniversary of his date of death passed, in a manner that preserves the deceased's two main objectives as articulated in his will. [46] In this regard I find that I accept the submissions made on behalf of Ms. Armstrong that the wording in clause 3(e)(v), "To

wind up and distribute the estate on the 21st anniversary of my death ", must be interpreted to mean the residual estate, which consists of the amount that remains after all payments made pursuant to the terms of the will have been taken into account. I find that to conclude otherwise would amount to effectively rewriting the testator's will, so as to delete the words (in relation to payment of Ms. Armstrong's income tax) "annually for her lifetime including the month of her death" and to substitute therefore the words "up to and including the 21st anniversary of my death". The same applies to the wording of the bequest to Ms. Maclachlan. [47] I have considered and rejected whether in relation to Ms. Armstrong and the payment of her personal income tax annually I ought enforce only the second clause (clause 3(e)(v)) that 30% of the residue of the estate to be paid to Ms. Armstrong on the distribution date) as irreconcilable with the first (clause 3(e)(ii)). However, the second clause is silent as to the payment of her personal income tax annually and so cannot truly be found to be irreconcilable with the first, the potential irreconcilability arising with the continuing payment of her income tax and distribution of the estate. However, I am obliged to make every effort to reconcile two apparently conflicting provisions of a will rather than ignore one or the other or call

either or both void for uncertainty. In this case, given that I find the residue of the estate subject to distribution may properly be interpreted to include the two lifetime bequests, I find no true irreconcilability arises and that it is possible to interpret the provisions of the will to give effect to the deceased's clearly expressed intentions regarding his two main objectives as identified previously, and also to accommodate the two lifetime bequests to his sister and his daughter. [48] Therefore, to give effect to the deceased's clearly expressed intention in relation to Ms. Maclachlan, I find that the parties ought to agree on a reasonable anticipated lifespan for her, perhaps to 100-years-old, and pay her a lump sum based on that amount, to which she most reasonably ought to agree, and failing such an agreement the matter may be brought back before me for determination. [49] Similarly, in relation to Ms. Armstrong's personal income tax to be paid annually for her lifetime, I find that the amount is to be determined in the manner suggested by her counsel, and if not agreed to between the parties, the matter of the amount of the holdback may be brought back before me for determination. I note in this regard that the deceased's intention, given Ms. Armstrong's circumstances at the time the will was drawn, was that her personal income was likely to be substantially or

wholly as provided by his estate, and the calculation of the amount of the anticipated holdback for her future income tax ought to proceed on that basis. [50] With these two bequests quantified and provided for, the residue of the estate ought to be distributed as soon as reasonably practical in view of the deceased's clearly expressed intentions for distribution on the 21st anniversary of his death, which has now passed, and the fact that the class of residual beneficiaries is determined to be closed and distribution is limited to Ms. Armstrong, Kissandra and Daryl. Conclusion [51] The answer to Question 1 is that the payment of $300 per month to Ms. Maclachlan pursuant to clause 3 (e)(i) of the will did not cease as of October 13, 2007, and pursuant to the will is to continue. [52] The answer to Question 2 is that an amount agreed upon between the parties, or to be set by the court, ought to be paid to Ms. Maclachlan as a lump sum based on a reasonable assessment of her life expectancy, to permit the deceased's estate to be wound up and distributed pursuant to clause 3(e)(v) of the will in accordance with the deceased's clear directions, the 21st anniversary of his death having passed. [53] The answer to Question 3 is "no", Ms. Armstrong's entitlement to payment of her personal income tax annually from the estate, pursuant to clause 3(e)(ii) of the will, does not cease as of

the distribution date, in view of the clear direction in that regard expressed by the deceased. [54] Given that the answer to Question 3 is "no", Question 4 does not require an answer. [55] Given that the answer to Question 3 is "no", the answer to Question 5, does Ms. Armstrong's entitlement to payment of her personal income tax from the estate pursuant to clause 3(e)(ii) of the will continue until her date of death, is "yes." [56] Although the answer to Question 5 is "yes", the answer to Question 6 is also "yes", Royal Trust is permitted and ought to distribute the residue of the estate and the income earned by it during the lifetime of Ms. Armstrong, after the determination of a proper holdback to cover the reasonable projected personal income tax of Ms. Armstrong for her lifetime, and that holdback is not limited to $200,000 as sought on behalf of Kissandra. Prior to a determination of the proper amounts of this holdback, and the one for Ms. Maclachlan, and the payments of same to Ms. Armstrong and Ms. Maclachlan (either by agreement by the parties accompanied by a release from each of them or by further order of the court), Royal Trust is not permitted to distribute the residue of the estate. [57] As the answer to Question 6 is "yes", the answer to Question 7 as to what portion of the residue of the estate is Royal Trust required to hold back from distribution on the

distribution date for the purpose of paying Ms. Armstrong's personal income tax until her date of death remains to be determined, either upon agreement between the parties or by further application to the court, based on actuarial and accounting information that includes a reasonable estimated life expectancy for Ms. Armstrong, and that her income in the future is based on her receipt of her 30% share of the deceased's estate and no other income. [58] I also make an order pursuant to s. 39 of the Trustee Act to permit Royal Trust to distribute the residue of the estate pursuant to clause 3(e)(v) of the will having regard only to the beneficiaries of which it is aware, namely, Ms. Armstrong, Daryl and Kissandra, once the amounts payable to Ms. Maclachlan and Ms. Armstrong are determined. I further order that Royal Trust shall not be liable to any other person who has not provided notice of a claim to share in the residue of the estate as of the date of distribution. [59] In relation to costs I find that Royal Trust is entitled to reasonable legal fees and disbursements to be paid from the estate on an indemnity basis and so order. In relation to the costs of the respondents, Ms. Armstrong, and Kissandra, counsel have agreed that their costs are to be paid by the estate. Counsel for each of the respondents seek an order from the court that their reasonable legal fees and disbursements, as agreed to or as assessed, be paid from the estate, also on an indemnity basis, and I so order. "E.A. Arnold-Bailey J." The Honourable Madam Justice Arnold-Bailey