Date: 20180110 Docket: PR 16-01-03410 (Winnipeg Centre) Indexed as: McGregor et al. v. Krall Cited as: 2018 MBQB 7 COURT OF QUEEN S BENCH OF MANITOBA BETWEEN: SARAH JEAN McGREGOR, CHRISTINE NOEL TAYLOR, ELIZABETH DAWN HOUSTON and VICTORIA LOUISE HOUSTON ) APPEARANCES: ) ) Peter M. Klymkiw and ) George E. Van Den Bosch ) for the Applicants ) Applicants ) ) Donald G. Zarow - and - ) for the Respondent ) DAWN ALLISON KRALL, AS EXECUTRIX FOR ) THE ESTATE OF RITA DOLORES HOUSTON ) Judgment delivered: ) January 10, 2018 Respondent ) SPIVAK J. [1] This is an application by four grandchildren of the testatrix Rita Dolores Houston for the court s opinion advice or direction regarding the disposition of her estate. The issue in this case is whether the applicants are entitled to the one-third share of the residue of the estate which was bequeathed to the applicants father, who predeceased the testatrix.
Page: 2 Background [2] Rita Dolores Houston executed a will on November 5, 2010. The will disposed of the testatrix s estate as follows: TO GIVE to my daughter, DAWN my jewellery. TO GIVE all the rest and residue of my estate to my daughter, DAWN and my sons, JAMES and ROBERT, each ONE-THIRD for their own use absolutely. [3] The testatrix died on October 12, 2015. The testatrix s son Robert Houston predeceased the testatrix, having died shortly before, on September 4, 2015. Robert had four children, the applicants, all of whom survived him and the testatrix. [4] The question for the court is whether Robert s one-third share of the residue of the estate is to be divided equally among his four children, the applicants, pursuant to s. 25.2 of The Wills Act, C.C.S.M., c. W150, or whether Robert s one-third share of the residue of the estate lapses and is to be distributed pursuant to The Intestate Succession Act, C.C.S.M., c. I85, amongst all of the beneficiaries of the estate. This turns on the interpretation of s. 25.2 of The Wills Act, which deals with failed gifts to a child, and whether it only applies to a lapsed specific gift or to a lapsed residuary gift as well. Positions of the Parties [5] The applicants submit that s. 25.2 of The Wills Act provides that the lapsed gift of one-third of the residue to Robert passes to his children, the applicants, to be divided equally. The applicants assert that this disposition is consistent with Manitoba case law that has interpreted s. 25.2 as applying to both specific and residuary gifts. The
Page: 3 respondent is the testatrix s daughter Dawn Krall, who, in her personal capacity as beneficiary, takes a contrary position. (An interim administrator of the estate has been appointed pending the determination of this application.) The respondent counters that s. 25.2 does not apply to residuary gifts and relies on the decisions of Sparks Estate, Re (1994), 95 Man.R. (2d) 181 (C.A.), and Wittick Estate v. Williams Estate, 2009 MBQB 140, 2009 CarswellMan 245 (WL Can), to support this interpretation. [6] If the applicants are correct, they share in one-third of the residue. If the respondent is correct, their interest is distributed pursuant to the provisions of The Intestate Succession Act and they share in one-ninth of the residue. Analysis and Decision [7] Testamentary gifts can be either specific or residuary. Where the beneficiary of a gift predeceases the testator, the gift fails or lapses. Pursuant to the common law, lapsed gifts of personalty went into the residue while lapsed gifts of realty created an intestacy. Lapsed residuary gifts of both real and personal property also passed on as an intestacy. [8] The matter of failed gifts is now governed by statute which modified the common law by preventing the lapse of certain gifts. Sections 25 and 25.2 of The Wills Act, relevant here, provide as follows: Lapsed and void devises 25 Subject to sections 25.1 and 25.2 and except when a contrary intention appears by the will, real or personal property or an interest therein that is comprised, or intended to be comprised, in a devise or bequest that fails or becomes void by reason of the death of the devisee or donee in the lifetime of the testator, or by reason of the devise or bequest being contrary to law or otherwise incapable of taking effect, is included in the residuary devise or bequest, if any, contained, in the will.
Page: 4 When issue predecease testator 25.2 Except when a contrary intention appears by the will, where a person dies in the lifetime of a testator, either before or after the testator makes the will, and that person (a) (b) is a child or other issue or a brother or sister of the testator to whom, either as an individual or as a member of a class, is devised or bequeathed an estate or interest in real or personal property not determinable at or before the death of the child or other issue or the brother or sister, as the case may be; and leaves issue any of whom is living at the time of the death of the testator; the devise or bequest does not lapse, but takes effect as if it had been made directly to the persons among whom, and in the shares in which, the estate of that person would have been divisible if that person had died intestate without leaving a spouse or common-law partner and without debts immediately after the death of the testator. [9] Section 25 of The Wills Act essentially provides that unless a contrary intention appears, a gift that would otherwise fail because the beneficiary predeceased the testator should instead be included in the residue. Section 25.2 deals with lapsed gifts to a testator s child, issue, brother or sister. It states that absent a contrary intention, the gift does not lapse, but passes to those persons entitled to share in the deceased beneficiary s estate on an intestacy without leaving a spouse and without debts. There have been a number of Manitoba decisions that have considered these sections and specifically whether they apply to both specific and residuary gifts. Some of the cases deal directly with s. 25, but also touch on the interpretation of s. 25.2. [10] Re Nixey (1972), 31 D.L.R. (3d) 597 (Man. Q.B.), involved the applicability of s. 32 of The Wills Act (now s. 25.2) to a specific gift, but in the course of that determination the court also commented on whether that section included a residual gift. The case concerned the disposition of a specific gift to the testator s brother who
Page: 5 predeceased the testator but had a surviving daughter. Counsel for the residuary beneficiary argued that s. 32 did not apply to specific gifts so as to benefit that surviving daughter. The court disagreed and interpreted s. 32 as making no distinction between a specific gift and a gift of the residue. The court referred to Toronto General Trusts Corporation v. Minister of National Revenue, [1958] S.C.R. 499, where the Supreme Court noted that a gift of one-half of the residue to the testator s predeceased brother did not lapse because of a similar provision to s. 25.2. [11] Gillis Estate, Re (1988), 55 Man.R. (2d) 39, is a Manitoba Court of Appeal decision that dealt directly with the applicability of the forerunner of s. 25.2 to residuary gifts. In Gillis Estate, the testatrix s sister, a residuary beneficiary, predeceased the testatrix but had surviving issue. The court held that the residuary gift did not lapse because it fell within the provisions of s. 34 of The Wills Act (now s. 25.2). The court explained (at para. 18): The intended residual beneficiary, Regina Gillis, did in fact die during the lifetime of the testatrix. Regina Gillis was a sister of the testatrix. The devise to Regina Gillis of a 50 percent share in the residue was not determinable at or before the death of Regina Gillis. Regina Gillis did indeed leave issue living at the time of the death of the testatrix. Accordingly, unless a contrary intention appears in the will, the bequest does not lapse, but takes effect as if it had been made to those persons among whom the estate of Regina Gillis would have been divisible under devolution of estate laws.... [12] Doucette v. Fedoruk Estate (1992), 83 Man.R. (2d) 179 (C.A.), is another case involving the disposition of a specific gift where the court also remarked on the applicability of s. 25.2 to a residuary gift. The testator bequeathed a specific gift of $10,000 to his sister, who predeceased him leaving two sons. It was acknowledged that absent a finding of a contrary intention in the will, s. 25.2 would prevent the lapse and
Page: 6 would take effect as if made directly to her sons. The court rejected the argument that a contrary intention could be construed by other provisions in the will where the testator gave the residue of his estate to three other siblings and indicated that in the event any of them predeceased him it would go to their children in equal shares. The court observed that this gift over added nothing to the residuary clause as s. 25.2 would have provided for the same disposition, thus interpreting s. 25.2 as preventing the lapse of a residuary gift. The court stated (at para. 29): The gift over provision added nothing to the deceased s residuary clause. Without that provision, the disposition of the share of a deceased brother or sister in the residue of the estate would be the same by virtue of the operation of s. 25.2 of the Act. That unnecessary provision may well have been the result of prudent or even overly cautious drafting. Whatever the purpose might have been, I am not persuaded that its presence in the residuary clause indicates the clear and positive intention of the deceased that the specific bequest to his sister in another part of the will is to lapse on her prior death. [13] Sparks Estate involved the interpretation of s. 25 and whether it applied to a residuary gift. However, the court had occasion to comment on the meaning of s. 25.2 during its analysis. The case concerned a residuary gift to the testatrix s niece who had died. The question for the court was whether the anti-lapse provisions of s. 25, which provided that the gift should be included in the residue, only applied to a specific bequest or devise or also applied to a bequest or devise of the residue. The court highlighted that Manitoba case law which had interpreted s. 25 as applying to both gifts was at odds with the trial courts of several other Canadian provinces, which have interpreted similar sections as only applying to specific gifts. The court held that s. 25 only applied to specific gifts. In the course of its reasons, the court rejected the respondent s argument that such a conclusion would be inconsistent with s. 25.2, which it noted applied to both lapsed
Page: 7 specific and residuary bequests. The court explained that s. 25 and s. 25.2 provided different solutions to different problems, and that s. 25.2, in contrast to s. 25, dealt with gifts to specific relatives of a testator. It stated (at para. 14): In response, counsel for the respondent points to the interpretation given by this court to s. 25.2 of the Act in Doucette v. Fedoruk Estate, [1993] 3 W.W.R. 232; 83 Man.R. (2d) 172... Section 25.2 deals with the situation where a beneficiary who dies in the lifetime of the testator is a child or other issue or a brother or sister of the testator who leaves issue. In this event, the devise or bequest does not lapse but takes effect as if made directly to the surviving issue. In Doucette (and the earlier decision of Re Nixey (1972), 31 D.L.R. (3d) 597 (Man. Q.B.), per Matas, J. (as he then was)), the court concluded that s. 25.2 applied to the residue of an estate. Thus, says counsel for the respondent, an inconsistency would develop between the interpretation of s. 25 as opposed to s. 25.2 of the Act. The simple answer to this assertion can be found in a comparison of the wording of the sections themselves. Section 25 provides that a lapsed gift is included in the residuary devise or bequest. Section 25.2 on the other hand provides that when the defined issue predeceased the testator, the devise or bequest automatically passes as if made directly to the issue. The sections provide different solutions to different problems. There is no inconsistency. [14] Other Manitoba cases have similarly interpreted s. 25.2 as applying to both specific and residuary gifts to a child, issue, brother or sister who predeceased a testator. See Cera Estate v. Wolfe et al. (1986), 46 Man.R. (2d) 117 (Q.B.), and M.V. v. W.P.V. et al., 2003 MBQB 110, 175 Man.R. (2d) 192, aff d Vidal v. Vidal, sub nom. M.V. v. W.P.V. et al., 2005 MBCA 7 (CanLII). [15] This leads to the most recent decision of Wittick Estate. In Wittick Estate, the testator s brother was a beneficiary who had predeceased him but was survived by two sons. The sons argued that they were entitled to the share that their father would have received pursuant to s. 25.2 of The Wills Act. In rejecting their argument, the court found that this position ignored the Sparks Estate decision, which the court interpreted as determining that s. 25.2 did not apply to lapsed bequests to a residuary legatee.
Page: 8 Despite this view, the court nonetheless concluded that the testator intended for the estate to be distributed as though s. 25.2 of The Wills Act applied to the residue, in part because the testator relied on a legal opinion that it did. [16] The respondent relies on Wittick Estate as the most recent case that has considered s. 25.2 and says that it determined that it does not apply to residual gifts and interpreted Sparks Estate as authority for that conclusion. The respondent does not argue that if the court interprets s. 25.2 as applicable to residual gifts, a contrary intention exists here. The applicants contend that Wittick Estate is at odds with all the other Manitoba decisions, including Sparks Estate, which they argue the court in Wittick Estate misconstrued. [17] With the greatest of respect to my former brother judge who decided Wittick Estate, I do not share his view that the Manitoba Court of Appeal in Sparks Estate concluded that s. 25.2 did not apply to residuary gifts. To the contrary. The issue in Sparks Estate was whether s. 25 applied to a residuary gift or only a specific gift. Sparks Estate involved a residuary gift to a niece and not a gift to a child, issue, brother or sister of the testatrix within the ambit of s. 25.2. Sparks Estate concluded that s. 25 did not apply to residuary gifts, but noted in obiter (with reference to Doucette and Re Nixey) that, in contrast, s. 25.2, which addressed gifts to certain close relatives, applied to both specific and residuary gifts. Unfortunately, the meaning and applicability of Sparks Estate was not argued before the learned judge in Wittick Estate as the case was not raised by counsel. Nor was there reference to any of the other Manitoba cases,
Page: 9 including those of the Manitoba Court of Appeal, that are now before me and have interpreted s. 25.2 to apply to both types of gifts. [18] It is clear from Sparks Estate that s. 25 applies only to specific gifts. Moreover, it is also clear from the case law previously reviewed, including Sparks Estate, that Manitoba courts have interpreted s. 25.2 (which has different wording and addresses failed gifts to close relatives) as applying to both specific and residuary bequests. While some commentary in the cases has been made in obiter, the courts have nonetheless interpreted s. 25.2 in that way. Further, as I earlier pointed out, other decisions, including the Manitoba Court of Appeal decision of Gillis Estate, have directly applied s. 25.2 to determine the disposition of a lapsed residuary gift. See also, Cera Estate, M.V. v. W.P.V. et al. and Vidal. [19] This was also the observation of the Manitoba Law Reform Commission, in its report Wills and Succession Legislation, Report #108, March 2003, which stated that s. 25.2 has been interpreted by all courts, including the Manitoba Court of Appeal, to apply to all kinds of testamentary gifts, including a residuary gift. That s. 25.2 applies to all testamentary gifts is consistent with the decisions from other jurisdictions in Canada. See Rothstein Estate v. Rothstein (1996), 11 E.T.R. (2d) 125 (B.C.S.C.), Rosychuk Estate, Re, 2005 ABQB 707, 20 E.T.R. (3d) 77, and Bennett Estate, Re, 2002 SKQB 162, 44 E.T.R. (2d) 13. Likewise, in discussing the statutory exceptions to the doctrine of lapse that applies to gifts to children, grandchildren, brothers and sisters of the testator, it is noted in the text Feeney s Canadian Law of Wills that the gifts may be either in the form of specific or residuary bequests (James MacKenzie, Feeney s
Page: 10 Canadian Law of Wills, 4th ed. (Toronto: LexisNexis Canada Inc., 2000) (loose-leaf updated 12/2016, release 65), ch. 13 at p. 13-14). [20] Accordingly, pursuant to s. 25.2 of The Wills Act, the one-third share in the residue of the estate that would have gone to Robert Houston should be distributed to the applicants, his surviving children, in equal shares. Costs may be spoken to if they cannot be agreed upon. J.