O.E. Smith Trust v. Nova Scotia (Attorney General)

O.E. Smith Trust v. Nova Scotia (Attorney General) Court Supreme Court Date 2012-11-27 Citation 2012 NSSC 460 Docket 407897 Judge/Registrar/Adjudicator Duncan, Patrick J. (Honourable Justice) (SC) Document Type Decision Decision Content SUPREME COURT OF NOVA SCOTIA Citation: O.E. Smith Trust v. Nova Scotia (Attorney General), 2012 NSSC 460 Date: 20121127 Docket: 407897 Registry: Halifax Between: The Canada Trust Company as Trustee of the O.E. Smith Trust Applicant v. Attorney General for the Province of Nova Scotia Respondent Judge: The Honourable Justice Patrick J. Duncan Heard: November 27, 2012 in Halifax, Nova Scotia (Oral Decision same date) Written Decision: September 17, 2013 Counsel: Bianca C. Kreuger and Andrea Isabelle, for the applicant Edward A. Gores, Q.C., for the respondent By the Court: [1] This is an application brought by Canada Trust acting as Trustee of the O.E. Smith Trust. It seeks the application of the doctrine of cy-près in the interpretation of the Will of Obed Edmund Smith who died testate in 1934. A Petition for Probate and Letters Probate were granted on December 27, 1934. [2] The Will included a number of bequests with the rest and residue to be used to establish a permanent trust fund known as the O.E. Smith Trust. The beneficiaries of the Trust were 23 different charitable, educational and philanthropic institutions. It is one of those specified charitable institutions that brings us here today. In the Eighth Clause at paragraph 22 the Will provides that 1% of the whole income of the Trust funds go to the “Public School Section in Port Hood Island”, Nova Scotia. Specifically it requires that: The Trustees of said Section will use the monies thus received to secure well qualified teachers and thus maintain a high standard of teaching at my old school. [3] Within two years of his death, the testator’s “old school” closed. However, the Margaret Ann Memorial School was constructed, and so for a number of years that school was the beneficiary of this bequest. [4] In 1982, Margaret Ann Memorial ceased being a traditional school as there were no longer school aged children living on Port Hood Island. For a number of years thereafter the Margaret Ann Memorial was used for field trips by mainland school children, as an historical tourist site and as a community centre. [5] In 1992, Canada Trust, as the successor to earlier trustees designated by the Will, learned that Margaret Ann Memorial was no longer being used as a school and withheld remittances, placing the funds in a separate account. [6] In 2005 the Margaret Ann Memorial school building was sold to a private purchaser. The funds have continued to be collected in a separate trust account but have not been distributed. [7] The amount held as of today is approximately $30,000.00, and there is another approximately $463 to be deposited tomorrow. So there is money available for distribution. Barring better returns in the future, the amount of the annual distribution may be fairly modest. [8] I have been presented with two options as possible recipients of the monies set aside for the purposes designated by Clause 8, paragraph 22 of the Will. Both of the options that have been put before me today are very worthwhile and the unfortunate part is that there will be one that does not get the benefit of Mr. Smith’s generosity. [9] I have been referred to and considered the law pertaining to the application of the Cy-Pres Doctrine. The threshold conditions for application are set out in Waters’ Law of Trusts in Canada, 3rd ed., (Waters, Gillen, Smith) (Toronto: Thomson Carswell, 2005) at page 773: It sometimes happens that when the donor’s instrument of gift takes effect, the charitable object or the required mode of achieving the object cannot be carried out. The court will then by order approve a scheme, or require a scheme to be drawn up, which is as close as possible to that set out by the donor. For the court to have this jurisdiction two things must be established; first, that it is impossible to carry out the object or mode of attainment, or, if it is indeed possible, that to carry out the object or mode would in the circumstances be impracticable. Second, it must be shown that the donor in making the gift had a general or overriding charitable intent. If both tests are satisfied, then the court as part of its inherent jurisdiction will, in its discretion, make the appropriate order for a cy-pres scheme. [10] I am satisfied that the original bequest is impossible to fulfill inasmuch as the old school designated by the testator in his Will no longer exists on Port Hood Island. In fact, I am told that there are no families with school aged children on Port Hood Island at this time. Further, given the public funding of schools, and in particular, the way that all teachers are compensated under a collective agreement Mr. Smith’s intention of ensuring that the teachers on Port Hood Island were properly funded to ensure their very high quality is no longer a live issue. With a standardized system of hiring teachers throughout the province, that kind of differentiation is at least theoretically not an issue anymore. All schools have access to fully qualified teaching staff. [11] Similar issues have previously arisen in relation to the Trust provisions of this Will. It was determined by Chief Justice Ilsley in 1963, that this Will maintained a general charitable intent. see, In the Matter of the Trusts of the Will of the Late Obed Edmund Smith, Eastern Trust Company, Trustee of the Last Will and Testament of the late Obed Edmund Smith, applicant and The Attorney-General of Nova Scotia et al., respondents, Nova Scotia Supreme Court case no. 7807, unreported. For the reasons set out therein I agree that was and continues to be the case; I see no reason to take a different view at this time. The bequest cannot be permitted to fail. The problem is to ascertain the testator’s intent in making the bequest and how we might fulfill his purposes today. [12] I have looked at the wording and at the overall intent of the Will and there are themes that run through it which Chief Justice Ilsley spoke to as well. You can see very clearly, I think, what the testator was trying to accomplish. [13] In this particular case, it seemed to be a goal to enhance the quality of education that was available, particularly to young students. Mr. Smith’s old school, according to the affidavit evidence of Mr. John Gillies, provided education to elementary and junior high school aged children. Mr. Gillies believes that Mr. Smith would have attended high school in the town of Port Hood although there are no existing records to confirm that. [14] So although Mr. Smith could have sought to benefit the high school or universities, in this particular bequest he set out a geographic component, being his home of Port Hood Island, and an age group, being elementary and junior high school students. [15] So in my view the purpose was to focus the benefit on young people for the general enhancement of education and with a geographic tie to the area of Port Hood Island. [16] In my view, Bayview Educational Centre in Port Hood is the successor to the “old school”. The school is located in Port Hood and provides primary to grade eight education. [17] It is the catchment school that exists for any student that might one day reside on Port Hood Island. So for a student from Port Hood Island, it would be the teachers of the Bayview Education Centre that would be asked to educate that student in the manner that is consistent with Mr. Smith’s intent. [18] The school is a registered charity, and it is clearly tied to the designated geographic area. I acknowledge Mr. Gores’ comment that schools now provide a community based facility as well as providing a place for an academic education. So the school provides that additional benefit, similar to the activities carried on at the alternative possible beneficiary that has been put forward, being the Chestico Museum and Historical Society. [19] The Museum holds a real attraction as a potential beneficiary because it is community based facility operated by volunteers who have been doing this for a number of years. The Museum houses a significant historical collection from the Port Hood area and has educational information available regarding the Smith Family and the Island. It is open to the public and is used as a resource for local schools. [20] There is a lot of good that probably could be accomplished with the funds. The difficulty I have with the Museum as a possible beneficiary arises because it focuses on a much broader program than what Mr. Smith’s bequest intends. So, for example, the Museum’s user demographic is broader. It serves people of all ages and not just young children. The Museum offers a venue for entertainment events and a number of things which are undoubtedly beneficial to the community, but it would be difficult to say that these events are tied to the education of young students. It does offer some programming to students and young people of the community that relates local history, but that seems to be the extent of the student specific programming. There are activities more clearly aimed at adults. For example, genealogy research is not something that most elementary or even junior high school students would be very interested in. [21] The Museum pursues some very worthwhile objectives, but at the end of the day, it is not what the original bequest addressed. And so while the Museum does some things that fulfill the intentions of the bequest, there are many things that do not fit the bequest. [22] Another concern for me is that even to the extent that the Museum provides some educational programming, it relates to a narrow geographic area and a very narrow area of history. My interpretation of Mr. Smith’s intention is that he sought to broaden the educational experiences of the students, presumably so that they could make their way in the world in a better and more successful way, much as he did. I believe that a public school offers the breadth of educational subjects which I believe is more consistent with the overall intent. And so, while it is great for the local students to know all about the history of Port Hood and Port Hood Island, it does not fulfill that goal of sending these students out into the world as broadly educated students. [23] As I read the evidence offered in support of this application and look at the testator’s own life path he obviously valued the education he received and its ability to help him advance in the world. And I think that a public school system in today’s context has the better way of achieving what I took his overall intents and bequests to address. [24] I conclude that the Museum, as worthwhile as it is, offers too narrow an educational scope and is offering events that go beyond what was intended by the bequests and find that it does not speak to his purposes. On a prospective basis the schools are going to be there to educate children for long period of time and whether it is the current school or its successor it will be in a position to benefit the students of Port Hood Island potentially, but certainly of the Port Hood area where Mr. Smith was educated. [25] And so, as much as one might wish to benefit the Museum, it seems to me that the bequest should go to the Strait Regional School Board with the direction that the funds are to be used solely for the Bayview Education Centre. [26] One of the things that I want to discuss is how to frame this finding in a way that satisfies the Trustee so that they know what it is that has to be done. I see lots of opportunity for monies in a public school system to go for the general education whether it is for materials or overall enhancement of the educational experience. And one of the realities that occurred to me, is that although we have a standardized education system in the province and so theoretically everybody gets the same education, I think we all recognize that by virtue of the size of schools, the number of students that are attending, how broad based they are in terms of the grade levels, that there are a lot of extras that we talk about going into some schools that don’t make it into other schools. So maybe this funding will help, particularly in a school that is situated in a rural area. In that way, it has the potential to satisfy Mr. Smith’s intent which was to try to help a rural school provide the education that they might not otherwise have been able to provide as compared to a wealthier school board district of that day. [27] And so for all of these reasons, I have concluded that it will go to the School Board. Please, if you are speaking with Mr. Gillies, convey to him that in making this decision it is by no means intended to under-value or minimize the good work that the volunteers for the Museum are doing. It is simply a matter of trying to ascribe in today’s terms the intent that Mr. Smith had at the time of making his Will. [28] [Discussion with counsel as to the form of order] [29] It is intended that these funds are to be supplemental to the general funds that are provided to Bayview by the School Board. It is not intended as a replacement for existing funding and I want the Order to be clear that these are to be segregated funds, specifically identified as to the purposes for which they are to be used; and I believe there should be an annual report to the Trustee from a representative of the School Board or from the School setting out how the funds were used and confirming in writing that these were supplemental to and not part of the usual public funding that is offered to the School. [30] [Further discussion with counsel as to the form of order] [31] I recognize that there is no authority to order a non-party, being the School Board to provide such a report. While the report is to the Trustee, the Court can supervise the administration of the Trust and if the Trustee runs into concerns that the funds are not being used for the purpose that they are intended, and wants the Court to reconsider the payment of funds to the Bayview Education Centre, then it is open to the Trustee to return the matter to court for direction. [32] So the first principle is that these are supplemental funds, and not to be considered part of the general fund. I expect there to be an annual report back to the Trustee by someone on behalf of the School Board that identifies the manner in which the funds were used through the year and if the Trustee has any concerns with respect to the disposition of the funds not meeting the purposes of the trust, then, in the Trustee’s discretion, the question can be returned to court for review and direction by the Court. [33] I acknowledge that there are a wide variety of uses that may conform to the intention of the bequest, which I take to be the enhancement of the educational experience and opportunities of the elementary students in the Port Hood area. I equate that, for example, with learning materials among other things. I recognize that staffing is likely a contract issue for the province, but provision for instruction by specialists who are not part of the regular teaching staff and not included in any budget otherwise would be consistent with the intention. Funding for field trips and guest speakers would be other possible examples of uses that would be consistent with the testator’s intention. [34] In terms of the Order, I am quite open to wording that evolves after counsel and the Trustee, Ms. Purcell, have a discussion about how best to administer this bequest. Ms. Purcell, and her successors, have to be comfortable with what they are seeking to enforce. I do not want to create a situation where you are spending more money on Trustee’s fees trying to administer the money than the amount of money that you are trying to give away. It is not a huge amount of money, so that’s why I feel that the annual report puts the burden on the recipient to satisfy the Trustee that it is being used appropriately. [35] [Discussion as to Costs] [36] There is no Order for costs. [37] [Discussion] [38] Order to be prepared by counsel for the applicant. [39] Court adjourned. J.