Primo Poloniato Grandchildren's Trust, Re, 2012 ONCA 862

• Judge: Feldman, Simmons and Cronk, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: April 11, 2012
• Jurisdiction: Ontario
• Citations: 2012 ONCA 862;(2012), 300 O.A.C. 71 (CA)

Primo Poloniato Trust, Re (2012), 300 O.A.C. 71 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. DE.037

In The Matter Of the Primo Poloniato Grandchildren's Trust

The Canada Trust Company Trustee of the Primo Poloniato Grandchildren's Trust (applicant/respondent) v. Russell Browne, John Mori Jr. , Andrea L. Mori-Mickus, Laura Lee, Marla L. Ashmore , Teresa O'Neil , Michael Poloniato, Kristen Wiley, Brandon Ashmore, and The Children's Lawyer on behalf of the minors, Rachel Browne, Hailey Browne, Michelle Wiley, Jessica Ashmore, Julia Mickus, Robert Mickus, Olivia Mickus, John Mickus, Marissa Lee, Erica Lee and on behalf of the unborn and unascertained beneficiaries of the Primo Poloniato Grandchildren's Trust (respondents/ appellant / respondents )

(C53262; 2012 ONCA 862)

Indexed As: Primo Poloniato Grandchildren's Trust, Re

Ontario Court of Appeal

Feldman, Simmons and Cronk, JJ.A.

December 7, 2012.

Summary:

Canada Trust Co., trustee of the Primo Poloniato Grandchildren's Trust, applied for advice and directions concerning the interpretation of certain terms of the trust, as varied. The trust had both income beneficiaries (grandchildren) and capital beneficiaries (great grandchildren).

The Ontario Superior Court, in a decision reported [2011] O.T.C. Uned. 731, issued directions accordingly. The application judge interpreted the trust deed as varied to require the trustee to make percentage distributions to the income beneficiaries annually in spite of the downturn in the market and its effect of eroding the capital value of the trust. The Children's Lawyer appealed.

The Ontario Court of Appeal dismissed the appeal. The applications judge interpreted the trust deed as varied in accordance with proper trust principles and in the way it was understood and intended by all the consenting parties and by the approving court at the time.

Contracts - Topic 7521

Interpretation - Surrounding circumstances - General - The Ontario Court of Appeal discussed the relevance of the factual matrix to contractual interpretation - The court stated that "It is well established that in interpreting a contract, the court may consider the 'factual matrix' surrounding the contract, even where there is no ambiguity. 'Indeed, because words always take their meaning from their context, evidence of the circumstances surrounding the making of a contract has been regarded as admissible in every case' ..." - See paragraphs 66 to 71.

Contracts - Topic 7521

Interpretation - Surrounding circumstances - General - A trust, which had income and capital beneficiaries, was varied with court approval in 1997 - Subsequently, the trustee sought an interpretation of the trust deed as varied - An applications judge held that the trust deed as varied required the trustee to make annual percentage distributions to the income beneficiaries notwithstanding the possible erosion of the capital assets - The Children's Lawyer appealed, arguing that the application judge erred by stating that the 1997 variation approval and its basis were irrelevant to his interpretation - The Ontario Court of Appeal agreed with the Children's Lawyer's submission, but stated that this was not what happened in this case - The variation approval was considered as part of the factual matrix - See paragraphs 72 to 82.

Trusts - Topic 4045

Administration - Duties of trustee - Even hand rule - A trust, settled in 1980, had income beneficiaries (children) and capital beneficiaries (grandchildren) - The trust was varied with court approval in 1997 - Subsequently, an applications judge interpreted the varied trust as making annual percentage distributions to the income beneficiaries mandatory, notwithstanding capital encroachment - The Children's Lawyer appealed, arguing that the applications judge erred in his interpretation because it failed to give effect to the duty of the trustee to maintain an even hand between the interests of the income and capital beneficiaries - The Ontario Court of Appeal held that to the extent the trust deed as varied set forth a minimum annual payment to the income beneficiaries, the even hand duty on the trustee was ousted, implicitly, by the words and intended operation of the trust deed as varied - The application judge made no error in making that finding - See paragraphs 101 to 107.

Trusts - Topic 4045

Administration - Duties of trustee - Even hand rule - The Ontario Court of Appeal stated that "It is trite law that executors and trustees have a duty to maintain an even hand between the interests of the income and the capital beneficiaries, unless that duty is ousted explicitly or implicitly by the words of the instrument ... However, in a percentage trust, the trustee's duty is not to obtain a large income yield while preserving the capital but, instead, to increase the size of the entire trust for the benefit of both classes of beneficiaries. This includes increasing the capital rather than preserving it, and therefore involves an investment strategy that may include more risk. Because in a percentage trust the trustee is investing to increase the entire value of the trust to benefit all, the issue is not whether the trustee's even hand duty is ousted in respect of the management of the trust's investments. What is disputed is whether the duty has been ousted in respect of the obligation of the trustee to make distributions to the beneficiaries" - See paragraphs 102 and 103.

Trusts - Topic 8013

Variation of trusts - Interpretation of varied trust - Settlor's intention - A trust, settled in 1980, had income and capital beneficiaries - The trust was varied with court approval in 1997 - Subsequently, the trustee sought an interpretation of the trust deed as varied - An applications judge held that the trustee had to make annual percentage distributions to the income beneficiaries, notwithstanding the possible capital encroachment - The Children's Lawyer appealed, arguing that the applications judge erred in finding that the settlor's intention was irrelevant to the interpretation - The Ontario Court of Appeal held that this was not a variation application, but an interpretation application - Therefore, if the varying court approved a variation that did not take the settlor's intent into account, and its meaning was clear, it was not the role of the interpreting court to distort the meaning of the deed as varied - See paragraphs 89 to 92.

Trusts - Topic 8013

Variation of trusts - Interpretation of varied trust - Settlor's intention - A trust, settled in 1980, had income and capital beneficiaries - The trust was varied with court approval in 1997 - Subsequently, the trustee sought an interpretation of the trust deed as varied - An applications judge held that the trustee had to make annual percentage distributions to the income beneficiaries, notwithstanding the possible capital encroachment - The Children's Lawyer appealed, arguing that the applications judge erred in finding that the settlor's intention was irrelevant to the interpretation - The Ontario Court of Appeal held that the case law both in Ontario since Re Irving (H.C. 1975), as well as in other provinces, suggested that the original intention of the settlor need not be considered when the court approved a variation as long as the necessary criteria were met - See paragraphs 89 to 93.

Trusts - Topic 8013

Variation of trusts - Interpretation of varied trust - Settlor's intention - A trust, settled in 1980, had income beneficiaries (children) and capital beneficiaries (grandchildren) - The trust was varied with court approval in 1997 - Subsequently, an applications judge interpreted the varied trust as making annual percentage distributions to the income beneficiaries mandatory, notwithstanding capital encroachment - The Children's Lawyer appealed, arguing that by permitting unlimited capital encroachment, the variation would destroy the settlor's intention to benefit two generations of beneficiaries - The Ontario Court of Appeal disagreed that the intent and effect of the 1997 variation was to benefit only the income beneficiaries at the expense of the capital beneficiaries - If the economy improved, the value of the trust should also see improvement - Moreover, the capital beneficiaries had the indirect benefit of a consistent income flowing to their parents since the variation - See paragraphs 89 to 94.

Trusts - Topic 8014

Variation of trusts - Interpretation of varied trust - Surrounding circumstances - [See second Contracts - Topic 7521 ].

Cases Noticed:

Hi-Tech Group Inc. v. Sears Canada Inc. (2001), 141 O.A.C. 56; 52 O.R.(3d) 97 (C.A.), refd to. [para. 67].

Dumbrell v. Regional Group of Companies Inc. et al. (2007), 220 O.A.C. 64; 85 O.R.(3d) 616; 279 D.L.R.(4th) 201 (C.A.), refd to. [para. 68].

Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62; 164 W.A.C. 62; 49 B.C.L.R.(3d) 317 (C.A.), refd to. [para. 70].

Irving, Re (1975), 11 O.R.(3d) 443 (H.C.), refd to. [para. 91].

Russ v. Public Trustee (B.C.) et al. (1994), 43 B.C.A.C. 209; 69 W.A.C. 209; 89 B.C.L.R.(2d) 35 (C.A.), refd to. [para. 93].

Teichman Estate, Re (1996), 110 Man.R.(2d) 114; 118 W.A.C. 114; 134 D.L.R.(4th) 155 (C.A.), refd to. [para. 93].

Finnell v. Schumacher Estate (1990), 38 O.A.C. 258; 74 O.R.(2d) 583 (C.A.), refd to. [para. 93].

Armstrong, Re, [1924] O.L.R. 639 (C.A.), refd to. [para. 102].

Authors and Works Noticed:

Hall, Geoff R., Canadian Contractual Interpretation Law (2nd Ed. 2012), p. 27 [para. 71].

Ontario (Ministry of the Attorney General), Ontario Law Reform Commission's Report on the Law of Trusts (1984), generally [para. 19], p. 303 [para. 104].

Waters, Donovan W.M., The Law of Trusts in Canada (3rd Ed. 2005), pp. 966 to 969 [para. 49]; 1059 [para. 90].

Counsel:

Earl A. Cherniak, Q.C., and Cynthia B. Kuehl, for the appellant;

Archie J. Rabinowitz, David Lobl and Jeremy C. Millard, for the respondent, Canada Trust Company;

Mark Abradjian, Christopher R. Durdan and Brad Wiseman, for the respondents, John Mori Jr., Marla L. Ashmore and Teresa O'Neil.

This appeal was heard on April 11, 2012, before Feldman, Simmons and Cronk, JJ.A., of the Ontario Court of Appeal. The following decision was released for the court by Feldman, J.A., on December 7, 2012.