Appeal Court Allows Trusts to Be Interpreted re Their Meaning

BC Appeal Court have jurisdiction to construe a Trust Deed. See Donovan W.M. Waters, Mark R. Gillen and Lionel D. Smith, Waters’ Law of Trusts in Canada, 4th Ed. (Toronto: Thompson Reuters, 2012) at 1165-66.

See also Engelman v. Engelman (1986), 23 E.T.R. 30 (B.C.C.A.) at 5, that reversed the trial decision and found the court had both inherent jurisdiction as well as s 88 Trustee Act to interpret and vary if necessary a Trust Indenture.

The will of the deceased made his two brothers co-executors and sole beneficiaries.
A major asset of the estate was a farm on which the respondent brother resided.
The will empowered the executors to sell and convert property of the estate into money.
The petitioner wished to accept a third party’s offer to purchase the farm. The respondent wished to reject this offer and was himself prepared to offer to purchase the petitioner’s interest in the farm for an amount that equalled the proceeds the petitioner would receive from the third party purchaser.
The petitioner sought the direction of the Court pursuant to s. 88(1) of the Trustee Act (British Columbia).
The respondent originally took the position that the Court had no jurisdiction under s. 88(1) to make an order directing the sale of the farm since that provision could not be used to decide a question affecting the rights of the parties to property. During the course of the argument, however, the respondent argued that the Court should direct the petitioner to accept the respondent’s offer to purchase his share.
At first instance it was held that the Court should direct the respondent to accept the third party’s offer since the result of the ensuing sale would be to give each party his legal entitlement under the will: this direction would, consequently, give effect to the parties’ rights. However, the Court did not have jurisdiction to require the petitioner to accept the respondent’s offer to purchase his interest: such a direction would alter the petitioner’s right under the will to require that the property be sold and converted into cash.
The respondent appealed, and the appeal was allowed.
The Judge at first instance incorrectly interpreted the will as containing a direction to sell the property rather than a discretionary power to do so.
The executors were not bound to sell the estate and divide the proceeds in cash. It was open to them to distribute the estate in specie. Accordingly, a sale of the farm to one brother could not be said to frustrate the intention of the testator.
Moreover, the Judge was not restricted to the exercise of jurisdiction pursuant to s. 88 of the Trustee Act. In the circumstances that there was a deadlock, the Court had an inherent equitable jurisdiction to intervene to break the deadlock.
The proper order to make was to direct the sale of the farm to the respondent at the same price as the third party had offered.
This was just and equitable since the respondent had a particular and long-lasting connection with the property and he had a personal interest in being able to continue to reside on it. Such an order would not, moreover, cause any prejudice to the petitioner since it was established that the price offered was the proper market price and the sale would give to the petitioner his proper share of the value of that part of the estate.

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