Smith, DJ:—Minnie Green, who died at Winnipeg, in Manitoba, on November 5, 1971, left a will dated December 29, 1965, wherein she appointed as her executors and trustees of her will, her husband Ernest Green, and her father Louis Frank.
The issue in this case is the meaning and effect of certain provisions in her will and the effect, if any, of certain provisions in the Estate Tax Act, RSC 1970, c E-9, (hereinafter referred to as “the Act’’).
By the will, the testatrix devised and bequeathed all her property of every nature and description to her trustees upon the trusts set out therein. By paragraph 3(a) the trustees were given discretionary power to sell and convert into money any part of her estate, and power in their absolute discretion to retain any assets in the form existing at the time of her death. By paragraph 3(b) their trust obligation was the normal one of paying out of the capital of the general estate all debts, funeral and testamentary expenses, succession duties and inheritance and death taxes.
Then following the trust obligations that are relevant to this case:
(c) To keep invested the residue of my estate and to use the income therefrom and any amount or amounts out of capital that my trustees may deem advisable, for the advancement and education of my children or some one or more of. them, in such proportions and in such manner as my trustees in their absolute discretion consider advisable. Any income not so used in any year shall be added to the capital of the said residue of my estate and dealt with as part thereof.
(e) When there shall no longer be any child of mine living and under the age of twenty-one years, to divide the said residue of my estate or the amount thereof remaining among my children then alive in equal shares per stirpes.
The parties to this action are agreed that the words “per stirpes’" were in error and should be “per capita’’.
The testatrix left five children surviving her aged 8 to 18.
The plaintiff submits that the gifts to the children were contingent and must remain so until the condition on which the division of the residue was to take place has come to pass. The defendants, on the other hand submit that the gift to each child vested in that child at the date of the testatrix’s death, with only the date of transfer or payment being postponed.
The importance, for this case, of the distinction between “contingent’’ and “vested” is seen by referring to paragraph 7(1)(c) of the Act, which reads, in part:
7. (1) For the purpose of computing the aggregate taxable value of the property passing on the death of a person, there may be deducted from the aggregate net value of that property computed in accordance with Division B such of the following amounts as are applicable:
(c) in respect of each child of the deceased who survives him, the lesser of
(i) the value of any property passing on the death of the deceased to which the child is the successor that can, within six months after the death of the deceased or such longer period as may be reasonable in the circumstances, be established to be vested in the child for his benefit indefeasibly, or subject to defeasance only in the event of his death before attaining such age, not exceeding forty years, as is specified in the will or other instrument under or by virtue of which the property so passing became vested in him,
or
(ii) $10,000 plus
(B) ...
1. the product obtained when $1,000 is multiplied by the number of full years in the period commencing on the day of the death of the deceased and ending on the day on which the child will, if ever, become 26 years of age, . . .
At November 5, 1971 the ages of the 5 children and the amount which each would be entitled to deduct from the value of the property passing to him if subparagraph 7(1)(c)(ii) is applicable, are shown on the following table:
Age at
Nov 5, 1971
Birthday (Death of Name of Child of Child Testatrix) Amount Deductible Sheal Richard Green April 9, 1963 8 $10,000 + $17,000 $27,000 David Zalman Green June 17, 1959 12 $10,000 + $13,000 = $23,000 Charles Leslie Green Oct. 2, 1957 14 $10,000 + $11,000 = $21,000 Cheryl Adrienne Green July 13, 1954 17 $10,000 + $ 8,000 = $18,000 Coleman Oscar Green May 1, 1953 18 $10,000 4- $ 7,000 = $17,000 Total $106,000
On the assessment by the Minister of National Revenue, the aggregate taxable value of the estate, after allowing for the exemption to the textatrix’s husband was $81,027. The amount passing to each child, if the submission of the defendants as to vesting is correct, would thus be 1/5 of $81,027, or $16,205.54. The smallest amount deductible by any child is $17,000, under subparagraph 7(1)(c)(ii). Therefore subparagraph 7(1)(c)(i) would be the applicable rule, the whole value of the property passing to each child would be deductible, and no estate tax would be payable.
On the other hand if, as submitted by the plaintiff the gifts to the children were contingent and could not be established to be vested in them within six months of the date of the death of the deceased (or such longer period as might be reasonable in the circumstances) paragraph 7(1)(c) had no application, the right to the property remained vested in the executors and trustees of the estate and its value was taxable under the Act.
The fundamental rule for the interpretation of a will is that the intention of the testator, as that intention may be ascertained from the words of the will, read as a whole, must be given effect. In most cases the testator’s intention is clear, but sometimes the expressions used are ambiguous, particularly with respect to the time at which the testator intends a legacy to vest in the legatee. For such cases the courts have prescribed auxiliary rules of interpretation. At first, no doubt, these rules were based on what the court thought, in the circumstances of the case, the unexpressed or not clearly indicated intention of the testator was. In course of time, by similar decisions, they, along with exceptions to them, have for the most. part become firmly established, though some decisions may be difficult to reconcile with others. Where so established they are to be applied, subject always to the overriding rule that they must yield to a contrary intention clearly expressed in the words of the will.
The first rule that counsel for the defendants submitted should apply in the present case is stated in Williams on Executors and Administrators, 12th edition at page 791, as follows:
Where the bequest is in terms immediate, and the payment alone postponed, the legacy is vested.
Counsel submitted that the testatrix intended the residuary estate to vest in her five children at her death, with only the payment, by division between them, being postponed till the date of division.
The rule is one of long standing. Williams cites several cases. in which it was applied. one of which, Jackson v Jackson (1749), 1 Ves Sen 217; 27 ER 992, is sufficient by way of illustration. In that case the testator bequeathed to his son 400 pounds to be paid to him at the end of one year after the testator's death, and a further 100 pounds at the death of his mother. The son survived his father, but died before his mother. Lord Hardwicke held that the words "to be paid” applied to the legacy of 100 pounds as well as to that of 400 pounds, and that the legacy of 100 pounds (as well as that of 400 pounds) vested in the son at the testator’s death.
From other cases it is clear that this rule is not affected by a direction to deduct from the legacy money for maintenance of the legatee nor by a direction to accumulate interest until the date of payment.
The rule is the same where a gift to children as a class is immediate, only the time of division being postponed until they attain a certain age respectively.
The present case is concerned with five children who are a class of residuary legatees, but otherwise the provisions of the will differ materially from those stated in the will in Jackson v Jackson. There are no words of immediate gift to the children. There is a provision for the trustees to use the income from the residue of the estate of the testatrix any amount or amounts of the capital that the trustees deem advisable for the advancement and education of the children or of one or more of them, in such proportions and in such manner as the trustees in their absolute discretion consider advisable. This does not vest any ascertainable part of the income, nor any share of the capital in any child. In fact there are no words of gift to the children at any time until the youngest of them who survives to the age of 21 attains that age. At that date the trustees are directed to divide the residue, including accumulations of unused income, among the children then surviving in equal shares.
There is no question but that, as submitted by counsel for the defendants, the testatrix intended to benefit her children, at any rate those who survived till the date of distribution. The question is whether she intended the benefit to vest at her death. As the will contains no immediate gift to the children I am unable to say that the first rule, quoted above from Williams, can be invoked to hold that the children’s right to the residue became vested at the death of the testatrix.
The second rule is stated by Williams at p 794, as follows:
If the. words “payable” or ‘‘to be paid” are omitted, and the legacy is given at twenty-one, or if, when, in case, or provided, the legatee attains twenty-one, or “on” his attaining that age, or any other future definite period, this confers on him a contingent interest, which depends for its vesting, and its transmissibility to his executors or administrators, on his being alive at the period specified.
This rule states conditions very similar to what is said in clause 3(c) of the will in the present case, As we have seen, in this case there is no word of gift, such as “bequeath” or “give”, in relation to the children, with payment to take place at a later date. The only words from which a gift to them can be discovered are found in the direction to divide the residue among the children in equal shares at the time indicated in the clause, viz: “when there shall no longer be any child of mine living and under the age of twenty-one years.”
To my mind these words have precisely the same meaning as “when the youngest of my children who survives to the age of twenty-one years has attained that age”. Stated in this form the legacy would seem clearly to fall within the rule. This view is supported by Williams in a short paragraph beginning at the bottom of page 795, where he Says:
Where there is no gift but by a direction to pay, or divide and pay, at a future time, or on a given event,, or to transfer ‘from and after’ a given event, the vesting will be postponed till after that time has arrived, or that event has happened, unless, from particular circumstances, a contrary intention Is to be collected.
Apart from the matter of particular circumstances this present case conforms exactly to the rule just stated. However, to both of these rules, as stated in Williams at pages 794 and 795, there are exceptions, depending on particular circumstances and other provisions of the will. One of these is of sufficient importance to the determination of this case that it requires examination at some length. It is stated in Williams at page 796:
Where a testator bequeaths a legacy to a person at a future time, and either gives him the intermediate interest, or directs it to be applied for his benefit, the Court there considers the disposition of the interest to be an indication of the testator’s intention that the legatee should at all events have the principal, and on this ground holds such legacies to be vested.
Williams quotes, in support of this rule, from the judgment of Leach, MR in Vawdry v Geddes (1830), 1 Russ & M 204 at 208; 39 ER 78:
Where interim interest is given, it is presumed that the testator meant an immediate gift, because, for the purpose of interest, the particular legacy is to be immediately. separated from the bulk of the property; but that presumption fails entirely when the testator has expressly declared that the legacy is to go over, in case of the death of the legatee before a particular period.
It seems likely that the origin of the rule was to avoid an intestacy. The exception where there is a gift over accords with this opinion, because where there is a gift over there will not be an intestacy.
The reason just quoted from Vawdry v Geddes does not apply to the present case, aS we are not dealing with a particular legacy which is to be separated from the bulk of the property, but with a legacy of all the residue remaining after debts and other things have been paid.
In Jarman’s Treatise on Wills, 8th edition, Vol 2, p 1397, we find the following concerning the vesting effect of a gift of interim interest:
.•
A gift of interest, eo nomine, obviously is difficult to be reconciled with the suspension of the vesting, because interest is a premium or compensation for the forbearance of principal, to which it supposes a title; but a mere allowance for maintenance out of, and of less amount than the interest, has, it seems, no such influence on the construction.
If, however, the entire interest is made applicable to maintenance, the argument in favour of the vesting exists in full force.
Similar expressions are found in the works of other writers and in many judicial decisions.
Thus far I have been discussing cases of particular legacies given to individual legatees. I turn now to legacies to a class, which is the Situation in the present case.
Williams says, at page 797:
On the same principle separate gifts to each member of a class, when they should respectively attain a certain age, the income in the meanwhile to be applied in maintenance of the person to whom each legacy is given, are vested. But it is otherwise where the gift is to such of the members of a class to attain a certain age, or where the income of a fund is given for the maintenance and education of all the members of a class indiscriminately, and there is no division of the fund until a future event.
What is said about income in the latter part of the foregoing quotation accords fairly closely with the provisions in the will in the present case concerning income, except that in our case the trustees have a very wide discretion as to the use of the income among the children or any of them.
Jarman, at page 1398, expresses the same opinion, but in fewer words:
Where the legacy is to a class, a gift of the interest for maintenance operates to vest the legacy, provided that each member of the class has a distinct title to the interest of his own share.
But where the interest is given as a common fund for the maintenance of all the members of a class, it does not vest the fund.
There are many cases which can be cited as the basis of this rule. I shall refer at this point to four of them, which I consider constitute a sufficient indication of judicial treatment of it.
The first is: In re Parker, Barker v Barker (1880), 16 Ch D 44.
In this case the testatrix gave her residuary estate to trustees in trust for sale and investment of the proceeds, and to pay the income thereof, “or such part thereof as her trustees’’ should “from time to time deem expedient,’’ in or towards the maintenance and education of her children until they should attain their respective ages of twenty-one years; then to pay and transfer the capital to the said children in equal shares.
The testatrix left three children, of whom two attained twenty-one, and the third died an infant.
Jessel, MR held that the infant (deceased) did not take a vested interest in his one-third share of the residuary estate. He said, at page 46:
I am not aware of any case where, the gift being of an entire fund payable to a class of persons equally on their attaining a certain age, a direction to apply the income of the whole fund in the meantime for their maintenance has been held to create a vested interest in a member of the class who does not attain that age.
The second case is: /n re Mervin, Mervin v Crossman, [1891] 3 Ch 197.
The facts of this case, taken from the headnote, were: The testator directed his trustees to hold his residuary estate (in investments) and the income thereof “upon trust to pay and divide the same equally between the children (5 named persons) of my son J M and any other children who may hereafter be born, as and when they shall respectively attain the age of twenty-five years,’’ and the testator gave his trustees power “in the meantime to pay and apply the whole or any part of the remainder of the income of the investments for the maintenance and education of such grandchildren during their minority;” and also “to pay and apply for the benefit or advancement of his said grandchildren or any of them any part not exceeding one-half of the capital to which they or he may be entitled expectant on their, his, or her attaining the age of twenty-five years.”
At the testator’s death, his son J M had five children living and three were born thereafter.. All these children were alive at the time of the hearing in 1891. JM’s eldest son attained the age of 25 in January, 1890.
Stirling, J held that the children of J M did not take vested interests. The gift was a gift to a class which must be ascertained when the first child of J M attained twenty-five. At page 203, he quoted with approval Sir George Jessel’s view in /n re Parker, quoted in part supra.
The third case is Fox v Fox (1875), LR Eq 286.
This case, like /n re Parker, was a decision of Jessel, MR. It was given five years before In re Parker and was distinguished therein by the learned Master of the Rolls.
In Fox v Fox the testator directed his trustees to raise a sum of 15,000 pounds, and after two life interests therein to T and his wife had ended, to divide and transfer one-fifth of the fund to and amongst the children of T equally as and when they should respectively attain the age of twenty-five years, applying from time to time the income of the presumptive share of each child, or so much thereof as the trustees for the time being might think fit, for his and her maintenance and education until such share should become payable. There was a gift over if no child of T survived him and attained the age of twenty- five.
Sir George Jessel held that the children of T took vested interests. He said, beginning at the bottom of page 290:
I hold that a gift contained in a direction to pay and divide amongst a class at a specific age, followed by a direction to apply the whole income for maintenance in the meantime, is vested, and not the less so because there is a discretion conferred on the trustees to apply less than the whole income for that purpose.
I also think that the gift over, if not conclusive on the question, certainly aids the construction adopted by me.
Five years later, in /n re Parker he distinguished Fox v Fox, saying, referring (to In re Parker) at page 46:
The trust is of residue; “to pay the dividends, interest, or income thereof, or such part thereof as my trustees for the time being shall from time to time deem expedient, in or towards the maintenance and education of my children, until my said children shall attain their respective ages of twenty- one years;’’ so that there is nothing here giving an aliquot share of income to any individual child; the direction being to pay the income of the whole fund in such shares as the trustees shall think fit.
The distinction is of course that in Fox v Fox the presumptive share of each child was separated from those of the others and the income from each child’s share was to be applied for that child’s maintenance and income until the share itself became payable.
Our case is similar in this respect to /n re Parker in that in the will there is no separation of income into shares for each child. In fact the whole residue is treated as a whole until the time of distribution will arrive.
The fourth case is Fast v Van Vi/et (1965), 51 WWR 65. It is a majority decision of the Manitoba Court of Appeal. A testatrix directed that her estate be divided into three equal shares, and the will contained the following clauses:
(e) Two thirds share to be paid to my infant grandchild, Calvin Ralph Fast upon his attaining the age of twenty-five years.
(f) If any beneficiary hereunder shall be under the age of twenty-one years, to use so much of the income and/or capital of the share of such beneficiary as my Trustee in his discretion shall deem necessary to provide for his or her maintenance and education as well as for any illness or other emergency him or her affecting.
The grandson, Calvin Ralph Fast, having become 21 years of age, brought an application in the Court of Queen’s Bench for an order that the Trustee pay him his two-thirds share. His application was refused and he appealed to the Court of Appeal.
The majority of the Court, Monnin, JA and Schultz, JA with Miller, CJM dissenting, held that the residuary bequest to Calvin Ralph Fast was contingent upon his reaching the age of twenty-five and nothing in the will permitted a departure from the plain words used.
Two questions were involved, (1) Had the gift to the applicant (appellant) vested in him on the death of the testator and (2) If so, was he entitled to payment at age 21 instead of age 25 as specified in the will. For the purposes of the present case this Court is not concerned with the second question.
Monnin. JA reviewed the applicable law at some length. Referring to the principle that the law favours early vesting of estates, he said, at page 76:
This principle of early vesting, which at best is an indefinite one, is not a binding presumption of law. In the instant will the language is clear and unambiguous. One need not strain words or mind to find the testatrix’ clear intention. She did not wish her grandson to inherit until he attained the age of 25 and clearly said so. No one but a person who has attained the age of 25 can claim anything under such a gift. This is not the case of an antecedent gift followed by a postponement of enjoyment. The clause read in the context of the will indicates that there is no vesting until the applicant has reached the age of twenty-five.
Monnin, JA then considered whether clause (f) of the will, quoted Supra, made any difference and came to the conclusion that it did not. In this conclusion he appears to differ with Jessel, MR in Fox v Fox, to which case he did not refer. I note here that the decision in Fox v Fox has been both criticized and distinguished in a number of cases.
At page 77 Monnin, JA made a further strong statement:
The tendency of modern decisions is to construe plain words according to their proper meaning with little regard for some of the old rules of construction. If the construction of the will, in conformity with the old rules, would have the effect of rendering nugatory the clearly expressed intentions of the testator, a court should not hesitate to ignore the rules. It should even struggle to avoid such a rigid and unnecessary construction. Rules have their value, but too rigid an application of them can only unduly fetter the hands of the court. Further, I consider it unsound to apply a canon of construction of wills to something that is abundantly clear. In the instant case we are not dealing with a direction as to payment after a clear bequest, but with a bequest conditional upon the beneficiary attaining a given age. The condition upon which the grandson is to inherit is so clearly expressed that to treat the bequest as vested upon his attaining the age of 21 would be to do violence to the plain, unambiguous language used by the testatrix.
It is clear that in Monnin, JA’s view the meaning of the will was so clear that no rules of construction were needed to interpret it.
In my view, both by analogy with many decisions of the courts, to a few of which I have referred in these reasons, and from the rules derived from a vast number of cases and expounded by eminent writers, and also from what I consider the clear meaning of the words of the will, the residuary gifts to the children of the testatrix are clearly contingent. There is no gift of anything to all or any of the children prior to the date at which distribution is to take place, except for what the trustees in their absolute discretion may use, of income or capital, for the advancement and education of the children or one or more of them. Until the date. of distribution the residuary estate is to remain one whole fund, to which any unused income is to be added. There is no reference to the share of. one child or the shares of all or more than one.
The date for dividing the residue among the children is “when there shall no longer be any child of mine living and under the age of twenty-one years”. These words necessarily import a contingency, the condition being that those who are to share in the distribution of the residue must all have attained the age of twenty-one years. There is a further contingency, because the division is to be in equal shares to the children then alive. It is only the children then alive who are to share and who they will be cannot be determined until the time for division has arrived.
To my mind the language of the will is clear and unambiguous, and I can find nothing in it to indicate an intention to vest anything in the children at the death of the testatrix, nor until the date, of distribution.
The plaintiff's appeal is allowed, the decision of the Tax Review Board is set aside and the reassessment of the estate for estate tax is restored.
The plaintiff is entitled to the costs of this action.