October 12, 2022
ONTARIO SUPERIOR COURT DECISION
County of Bruce v. Office of the Public Guardian and Trustee, 2022 ONSC5787 ….
JUSTICE G.D. LEMON
REASONS FOR JUDGMENT #2
Background
[1]There are two applications before me with respect to the County of Bruce’s
use of the “Krug trust.” Ms. Robinson and the Southampton Cultural Heritage
Conservancy sought a declaration that the County was in breach of the terms of
the trust. The County sought court approval of what it had done with the trust funds and what it
hoped to do with them in the future. The other parties took no position on the applications.
[2] For written reasons delivered January 31, 2022 (County of Bruce v. Office
of the Public Guardian and Trustee, 2022 ONSC 0352), I agreed with Ms.
Robinson and the Southampton Cultural Heritage Conservancy that the County
was in breach of the trust. For the purposes of this judgment, I presume that the
reader is familiar with those reasons.
[3] With respect to any remedy, I stated:
The County has been, at the very least, unreasonable in its failure to
provide Southampton (the party and the community) with proper and
transparent accounting of its decision-making process with respect to
the Krug trust. As set out above, for the purposes of this decision, I
need not make findings in that regard. However, based on my finding
above, I expect that the PGT and the Estate Trustee might wish to
make their own inquiries on that issue.
The County submits that Southampton seeks an injunction preventing
the County “from dealing with its land.” In this case, the County
obtained a demolition permit for the rectory. Of significance, of course,
is that the County is not dealing with “its land”; it is dealing with the
trust asset in dispute. That is clear from the County’s acknowledgement that it provided the net income from the property to the trust.
The request by Southampton is otherwise rather unclear. Counsel for
Southampton asked that I should be “creative” in fashioning a remedy.
But no clear creative request was made in the application or in
argument.
Although an injunction to prevent the demolition of the rectory was
requested in the original application, Southampton now agrees that
such relief is unnecessary if the trust funds are returned. Given my
finding that the High Street property is a trust asset, nothing further
will be done with respect to demolishing the house on the property
without further order of this court. I remain seized of that issue.
One of the County’s representatives is quoted in the materials as
saying, “I don’t see any connection between how the land was
purchased and this step that we are taking [to remove the rectory] ...
We own the land and we’re taking steps to clear it for redevelopment.”
I cannot rely on this record to be certain that this statement was
accurate; however, if any County representatives think that way, they
should be clearly advised that, pending the completion of this
proceeding, the land is a trust asset.
The demolition of the rectory would appear to be contrary to the
wishes of Mr. Krug, but I cannot answer that question. However, the
demolition may result in a diminution of the value of the trust asset.
The question of whether the County eventually ends up owning the
land and the rectory is for another day.
Further, any disbursements related to development of the property for
the archives must be returned to the Krug Reserve. Pending the
completion of this matter, the County will maintain the rectory and
property.
In argument, Southampton requested that there be orders relating to
the sale of the land, but those requested orders were not in the
application. I agree with the County that, without notice, I cannot make
such orders.
In the County’s reply submissions, it submits that if I find a breach by
the County, the result is that the County must reimburse the estate.
That appears to be correct, but I do not have fulsome submissions on
what that reimbursement amount should be. Southampton points out
that simply requiring the County to pay the money back would mean
that the County would reap the profits in selling the land hereafter.
The County cannot benefit from this breach.
Considering my finding of a breach of trust, the Estate Trustee and
the PGT may wish to take a more active role in this litigation or in
overseeing the County’s use of the trust. At this point, it would seem
to me that those parties cannot simply ignore the process and still live
up to their obligations. In any event, I am hopeful that they will have
helpful submissions on a remedy. Accordingly, I shall make no further
order without the input of the Estate Trustee and PGT.
Decision
For those reasons, I find that the County is in breach of the Krug trust
by virtue of its use of the funds to purchase the land at High Street.
The County’s application is dismissed other than as related to any
directions that may follow in the next part of these applications.
I require the assistance of both the PGT and Estate Trustee and I
would like to have their submissions with respect to what should occur
next.
Within thirty days, all counsel shall contact the Guelph trial coordinator
to arrange a Zoom “conference call” to determine a timetable
for any next steps. Counsel for Southampton and the County have a
great deal of experience with me in managing this file. They can
educate the others as to what is expected for such a meeting.
[4] I have now received factums and heard argument with respect to what the
appropriate remedy should be.
Positions of the Parties
[5] Southampton asks that the County take remedial actions with respect to the
property and be removed as a trustee under the trust. Southampton seeks to then have the court appoint five new trustees and order the sale of the property by that new board.
[6] The County submits that it should keep the property as its own but pay
restitution in the amount of $806,666.67 to the trust. The County submits that BMO Trust Co. should be appointed successor trustee to the County and be provided with the necessary administrative provisions to carry out its task. Finally, the County asks that I confirm that it has properly reimbursed the trust and asks for an order confirming its expenditures from trust funds into the future.
[7] The Public Guardian and Trustee has no objection to any of the relief sought
“as it all falls within acceptable resolutions for the breach under charity law in
Ontario.”
The Authorities
[8] The parties agree that I have a wide discretion to make orders as required,
including the removal of trustees. This authority comes from ss. 5, 14, 15, and
60(1) of the Trustee Act, R.S.O. 1990, C. T.23, and s. 10(1) of the Charities
Accounting Act, R.S.O. 1990, c. C.10, along with the Court’s inherent jurisdiction.
[9] In particular, s. 10(1) of the Charities Accounting Act allows me to “make
such orders as considered just for the carrying out of the trust under the law”:
Murray v. Highfield, 2011 ONSC 6518.
[10] With respect to the County’s submission that it should be allowed to keep
the property, MacDonald et al. v. BMO Trust Company et al., 2020 ONSC 93 is of assistance. At paras. 48-50, Belobaba J. said:
Equity provides a wide range of remedies for breach of trust or
fiduciary duty including an accounting of profits (also known as
equitable accounting or disgorgement), equitable compensation,
equitable lien, equitable tracing and constructive trust. . . .
Both courts and commentators agree that an accounting of profits or
disgorgement is the conventional remedy for breaches of trust and
fiduciary duty in the management of assets where, as here, fiduciary
misconduct results in the wrongful acquisition of benefits. As the Court
of Appeal noted in Brock v. Cole:
Where a trustee has retained trust money in his own
hands, he will be accountable for the profit which he has
made or which he is assumed to have made from the use
of the money.
The accounting of profits remedy focuses on the defendant's gain, not
the plaintiff's loss, and is available even in cases where no actual loss
can be established. The reason for this, as made clear over centuries
of case law, is the need to ensure that trust and fiduciary obligations
be taken seriously and wrongdoers be deterred from breaching these
obligations. In Strother, the Supreme Court discussed the accounting
of profits remedy and the importance of the "prophylactic" or
preventive purpose even where the beneficiaries have suffered no
loss:
Such a remedy may be directed to either or both of two
equitable purposes. Firstly is a prophylactic purpose,
aptly described as appropriating for the benefit of the
person to whom the fiduciary duty is owed any benefit or
gain obtained or received by the fiduciary in
circumstances where there existed a conflict of personal
interest and fiduciary duty or a significant possibility of
such conflict: the objective is to preclude the fiduciary
from being swayed by considerations of personal
interest.…
[E]quity requires disgorgement of any profits received
even where the beneficiary has suffered no loss because
of the need to deter fiduciary faithlessness and preserve
the integrity of the fiduciary relationship.
…Denying [the wrongdoer] profit generated by the
financial interest that constituted his conflict teaches
faithless fiduciaries that conflicts of interest do not pay.
The prophylactic purpose thereby advances the policy of
equity, even at the expense of a windfall to the wronged
beneficiary.
[Emphasis in original] [Citations removed]
Analysis
Evidentiary Record
[11] Pursuant to my earlier reasons for judgment, I met with counsel and issued
a further endorsement on March 28, 2022. In that endorsement, I noted that, on
consent:
Mr. Jones shall provide his written submissions with respect to
remedy by May 30, 2022.
Ms. Fischer shall provide her response submissions by June 30,
2022.
All other parties shall provide reply submissions as they think
necessary by July 23, 2022.
Mr. Jones and Ms. Fischer shall reply as they think necessary by
August 15, 2022.
There shall be no further evidentiary record unless by consent or by
further order.
[12] Despite that, the County has filed three appraisals to support its submission
as to the value of the property. I reject that evidence for three reasons.
[13] First, I made it clear what the record was to be. Southampton objects to that
new evidence so it is not filed on consent. The County relies on Brasseur v. York,
2019 ONSC 4043 to say that it can provide these materials; however, that case
deals with the merits of a motion to provide fresh evidence. Here, there is no motion to analyze. There has been no order in advance. Procedurally, the reports are inadmissible.
[14] Second, those expert reports were not subject to a voir dire as to their
admissibility. One of the reports does not have a description of the qualifications
to support the opinion. All of the report writers identify their client as the County;
they make no reference to their need to be independent. As opinion evidence, the reports are inadmissible. See: White Burgess Langille Inman v. Abbott and
Haliburton Co., 2015 SCC 23, [2015] 2 S.C.R. 182; Bruff-Murphy v.
Gunawardena, 2017 ONCA 502, 138 O.R. (3d) 584.
[15] Third, if this evidence was admissible, its value is negligible for the following
reasons:
1.The reports opine that the value of the property is $710,000 (June 9, 2022),
$960,000 (June 2, 2022) or $750,000 (May 31, 2022). Based on those
reports, the County submits that I should average the values but declines to
average in Southampton’s valuation of $1,100,000. Combined, they cannot
assist me to determine the value of the property to support the County’s
submissions on remedy.
2.The experts were not subject to cross-examination. In its submissions,
Southampton has noted some glaring deficiencies and qualifications in the
reports.
3. The reports all confirm that the County has removed the furnace from the
building and disconnected the utilities. If I were to use this evidence, it
appears that the County has not lived up to its obligations to maintain the
trust asset; accordingly, the property may have been more valuable had the
County lived up to its obligations.
[16] Similarly, Southampton asks that I appoint five new trustees. Their
qualifications are simply attached as a Schedule to Southampton’s factum. Despite Southampton’s objection to the County’s evidentiary record, Southampton seeks to have me rely on this document to appoint trustees for an asset that may exceed $1,000,000 in value. Like the County’s experts, there has been no cross examination on these qualifications. The suggested trustees may well be qualified to manage that important asset, but I cannot make that determination on this record.
[17] Southampton asks that I order the County to return the property to the
“period pristine” condition it was in before the breach of trust; however, without
admissible evidence of the property’s condition then and at the present time, I am
unable to make such an order. Further, such a request is unreasonable. Given
Southampton’s request for a sale of the property, such an expense may well be
vastly more expensive than any purchaser might desire. This overreaching request undermines the credibility of Southampton’s other requests.
Appointment of Trustee
[18] Southampton asks that the County be removed as trustee. The County
submits in response that:
While Bruce County is both prepared and equipped to continue
maintaining the trust, the practical solution to mitigate against ongoing
concerns by the complainants that Bruce County will not comply with
trust terms going forward is for a third party, professional trustee to be
appointed and the County has confirmed that BMO Trust Co. would
be prepared to act in its place and stead.
[19] The will stipulated:
SHOULD any of the beneficiaries named in this my Will decline or
refuse to comply with any of the conditions attached to one or more of
their legacies or refuse to use the legacy for the purpose designated
in this my Will, such legacy shall lapse and fall into the residual of my
estate.
[20] Since the County does not decline or refuse to comply with the will and
agrees to be removed as trustee, I can be brief with respect to its submission that
its actions were, as it says, “technical” or a “misstep” for the purposes of s. 35 of
the Trustee Act.
[21] The County appears to have missed an important part of my earlier reasons:
The issue here is whether the following uses of the funds can be
interpreted in the same way:
a) Used for the purchase of land for the general use of the County as
public space along with the use of the archive;
can be seen as:
b) Used for the schoolhouse where the archives were at the time of
the will for the storage and display of the archives.
Clearly, they cannot. They are two entirely different purposes.
[22] The details of the County’s conduct are reviewed in my earlier reasons. Such
a breach is not “technical;” it is an astonishing breach by elected officials and their staff.
[23] The County concedes that it was a fiduciary but submits that, as the Crown,
its duty is different than other fiduciaries. The County reminds me that in
Wewaykum Indian Band v. Canada, 2002 SCC 79, [2002] 4 S.C.R. 245, at para.
96:
…The Crown can be no ordinary fiduciary; it wears many hats and
represents many interests, some of which cannot help but be
conflicting.…As Dickson J. said in Guerin [[1984] 2 S.C.R. 335], at p.
385:
It should be noted that fiduciary duties generally arise
only with regard to obligations originating in a private law
context. Public law duties, the performance of which
requires the exercise of discretion, do not typically give
rise to a fiduciary relationship.
[24] However, on any definition of a fiduciary duty, the acts of the County breach
its obligations. This is not the situation of competing uses of County general
purpose funds. Instead, the issue is the proper use of specifically identified funds
for specifically identified uses. If the County were allowed to do as it has, no
testator would ever leave trust funds to a municipality in the manner of this will;
that would be to the detriment of the community at large.
[25] The County submits that Fales v. Canada Permanent Trust Co., [1977] 2
S.C.R. 302 applies and that the County has simply failed to live up to its standard
of care in managing the trust asset. However, this is not a case of negligently
carrying out the County’s duties; it is a case of the County ignoring its duties and
doing something entirely in breach of the terms of the will. The details of that
conduct are reviewed in my earlier reasons.
[26] The County’s failure to abide by its duties – intentionally or unintentionally –
before and after my decision is baffling and the County cannot continue to act as
trustee of the trust asset: the property in dispute. Be that as it may, the County has agreed to be replaced and it shall be.
[27] The County has requested a variety of administrative terms for BMO Trust
Co.’s exercise of its authority; however, since BMO Trust Co. will be doing the
work, I would prefer that any requested terms come from the trustee itself. For
reasons set out below, the property will need to be sold and the County has asked that its accounts to date be reviewed. I do not know the trustee’s qualifications to deal with those issues or the costs associated with those services.
[28] As a result of more pressing matters, I have been delayed in getting to this
decision; it should not be delayed by further investigation. Winter is coming and, if it is true that the property has no furnace or is otherwise not being properly
maintained, steps may need to be taken to properly care for the building. I am
satisfied that I have sufficient information to appoint BMO Trust Co. as an interim
trustee to take immediate steps to maintain and sell the property. For now, the
costs of the trustee and steps to maintain the property shall be paid by the County subject to further order.
[29] The record does not disclose a consent of BMO Trust Co. to act but I can
presume that what counsel has told me is accurate. In any event, BMO Trust Co.
shall file its consent within 10 days of the date of this endorsement. If BMO Trust
Co. does not do so, counsel shall immediately arrange a conference with me
through the Guelph trial office.
Sale of the Property
[30] The County seeks to retain the land and Southampton submits that the
County should not benefit by its actions in breach of the trust.
[31] The County submits that it does not want the property sold to a third party
“as the property is valuable for future public use” and that such a sale “would be
akin to punitive damages.” I do not agree.
[32] Southampton submits that the County plans to use the lands for purposes
that would be contrary to the wishes of Mr. Krug. It certainly thinks that the County intends to use the lands for purposes contrary to Southampton’s wishes. I can make no finding to that effect. However, as set out in my first judgement, the
County can only say that it “has no intent not to use this property for archival
storage.” Accordingly, there does not appear to be a pressing need for the County to own the property.
[33] Without proper evidence, the only way to determine the value of the property to, as the County submits, “make the trust whole,” is to list it and sell it on the open market. The County relies on Fales to submit that damages can be determined by averaging the appraised values; Southampton submits that Fales does not support that proposition. Be that as it may, I have no admissible, reliable evidence to carry out such a calculation. In Fales, the average value was calculated on actual share values and not dubious opinions of value. The property must be sold on the open market to determine what should be returned to the trust.
[34] The County acknowledged that it was in a fiduciary relationship with respect
to the trust funds. I have found that it should not have purchased the land with
those trusts funds and should not have put the property in its own name without
restriction. Accordingly, the bulk of the Krug trust is the property in issue.
[35] A sale to a purchaser other than the County will serve the “prophylactic”
purpose of teaching “faithless fiduciaries that conflicts of interest do not pay.” The
County should be divested of its “wrongful acquisition” in order to ensure that “trust and fiduciary obligations be taken seriously, and wrongdoers be deterred from breaching these obligations.”
[36] It is clear that, while the County is trustee, it would only be able to purchase
the property in exceptional circumstances; it cannot sell to, and buy from, itself.
While it will soon cease to be a trustee, its close association with the property and the County’s conduct to date will also prevent it from purchasing the property so soon after being removed as a trustee. See: Ellis, Mark Vincent, Fiduciary Duties in Canada, Thomson Reuters Canada Limited, 2022, 2:15. While I cannot
determine if the County’s acts are intentional or unintentional, the history here
confirms that the County cannot be trusted to act appropriately with this property.
[37] I leave the sale process to the new trustee, but the sale shall not be to the
County or any non-arm’s length individual or entity.
Other Requests
[38] Southampton seeks an order directing the County to disclose a variety of
records relating to the purchase of the property. Those issues have already been
dealt with in this proceeding or elsewhere and are no longer relevant to my
determinations. That request is dismissed.
[39] In its application, the County asked: if its use of the funds were not allowed
by the terms of the Last Will and Testament of Bruce Arthur Krug, “what are the
appropriate steps to be taken by the County with respect to the Estate of Bruce
Arthur Krug?” The answer follows below.
The Result
[40] Accordingly,
a. The Corporation of the County of Bruce is removed as trustee for the
premises at 254 High St., Southampton and the “Krug trust.”
b. BMO Trust Co. is appointed interim trustee for the premises at 254
High St., Southampton and the “Krug trust” subject to further orders
of this court. I shall remain seized of those issues.
c. As part of its duties, BMO Trust Co. shall inquire into the expenses
paid by the County to determine whether the County has properly
reimbursed the trust for disbursements related to development of the
property.
d. BMO Trust Co. shall take all necessary steps to sell the property to a
purchaser other than the County or any individual or entity not in a
non-arms length capacity from the County. The net proceeds of sale
shall be included in the Krug trust.
e. BMO Trust Co. may obtain directions from me on notice to the other
parties by contacting the Guelph Trial Office at
GuelphOffice.SCJ@ontario.ca
f. Within 45 days, BMO Trust Co. shall report to me and the parties with
respect to the steps to be taken and the costs to be incurred to at least
the end of the sale process.
Costs
[41] If costs cannot be agreed upon, Ms. Robinson and the Southampton Cultural
Heritage Conservancy shall provide their costs submissions within the next 20
days. The County shall provide its response within 20 days thereafter.
[42] Each submission shall be no more than five pages, not including any Bills of
Costs or Offers to Settle. No reply submission will be accepted unless I request it.
If I have not received any submissions within the time frames set out above, I will assume that the parties have resolved the issue and make no order as to costs.
[43] Neither party need include the authorities upon which they rely so long as
they are found in CanLII and the relevant paragraph references are included.
[44] Any costs submissions shall be forwarded to my office in Guelph by
electronic transfer to GuelphOffice.SCJ@ontario.ca or by mail to Guelph
Superior Courthouse, 74 Woolwich St., Guelph, N1H 3T9.
Justice G.D. Lemon
Released: October 12, 2022
================================================================
The Corporation of the County of Bruce v. OPGT et al.Judgment.Lemon J. January 31, 2022
CITATION: County of Bruce v. Office of the Public Guardian and Trustee, 2022
ONSC 0352
COURT FILE NO.: CV-19-25 and CV-19-18 (Walkerton File)
DATE: 2022 01 31
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Court File: CV-19-25 — The Corporation of the County of Bruce Applicant
AND: The Office of the Public Guardian and Trustee, CIBC Trust Corporation, Estate Trustee for the
Estate of Bruce Arthur Krug, deceased, Laura Robinson and Southampton Cultural Heritage
Conservancy Respondents
AND:
Court File: CV-19-18
BETWEEN:
Julia M. Fischer, Counsel for The Corporation of the County of Bruce
Brendan Jones, Counsel for Laura Robinson and The Southampton Cultural Heritage Conservancy
No one appearing for Corporation of the Town of Saugeen Shores, The Office of the Public Guardian and Trustee, CIBC Trust Corporation, Estate Trustee of the Estate of Bruce Arthur Krug, deceased
Page: 2
Laura Robinson, and The Southampton Cultural Heritage Conservancy Applicants
AND:
Corporation of the County of Bruce, The Corporation of the Town of Saugeen Shores and The Public
Guardian and Trustee Respondents
HEARD: November 12, 2021
JUSTICE G.D. LEMON
Judgment
Background
There are two applications before me with respect to the County of Bruce’s
use of the “Krug trust.”. Ms. Robinson and the Southampton Cultural Heritage
Conservancy seek a declaration that the County is in breach of the terms of the
trust. The County seeks court approval of what it has done with the trust funds and
hopes to do with them in the future. The other parties take no position on the
applications.
In particular, Ms. Robinson and the Southampton Cultural Heritage
Conservancy ask for an order:
Page: 3
(a) Declaring that the County breached the restricted purpose charitable
trust created by the estate of Mr. Krug.
(b) Directing the Public Guardian and Trustee to make an investigation into
the County’s use of the trust and to monitor the county’s administration
of the estate; and
(c) Declaring that the land purchased by the County be used for purposes
consistent with the trust.
The County requests an order:
(a) Dismissing the Robinson and Southampton application;
(b) Confirming that the language in the Last Will and Testament of Bruce
Arthur Krug is broad enough to encompass the expenditure of funds as the
County has and plans to do;
(c) Alternatively, declaring that the doctrine of cy-pr s be applied to expand
the use of estate funds to include the charitable purpose of the development
of a new archival storage site, including the acquisition of land and all
necessary steps to carry out new construction of the archival facility on said
land, together with ongoing capital and operation expenses for the archival
facility;
(d) In the further alternative, giving directions on how Bruce County can
expend the monies derived from the Estate of Bruce Arthur Krug in
compliance with the charitable purpose set out in the Last Will and
Testament of Bruce Arthur Krug.
Page: 4
In brief, the County has used almost the entirety of the Krug trust to purchase
land near the current museum in Southampton. Ms. Robinson and the
Southampton Cultural Heritage Conservancy object to both the purchase and the
way the County went about its purchase of the land.
The application was argued based on both paper and electronic records.
The witnesses were cross-examined on their affidavits prior to the hearing and
those transcripts were made available to me. None of the parties requested viva
voce evidence or a trial.
For the following reasons, I agree with Ms. Robinson and the Southampton
Cultural Heritage Conservancy; the County is in breach of the trust. It is unfortunate
for all that the County did not bring its application in advance of breaching the trust.
That step may have maintained any confidence that Ms. Robinson and the
Southampton Cultural Heritage Conservancy may have had in the County and its
advisors.
The Parties
Bruce County operates the Bruce County Museum and Cultural Centre in
Southampton, Ontario. The museum operates an archive, a museum, and a
cultural centre.
Page: 5
The respondent, Laura Robinson, is a long-time resident of Saugeen Shores
and a member of the Bruce County Museum and Cultural Centre. The
Southampton Cultural Heritage Conservancy is a not-for-profit corporation formed
by a group of local residents, with the mission “to promote, protect and advocate
on behalf of the history, cultural heritage, cultural landscape, civil society, and built
environment of the Town of Southampton and the surrounding area.” For ease of
reading, I shall refer to these two parties as Southampton.
There is no suggestion that Southampton has anything other than sincere
concerns relating to these issues and has no conflict of interest in the outcome.
The Archives
It is not disputed that Bruce Krug was an expert in local and natural history.
His financial support of Bruce and Grey County museums and historical societies
is well known within the County and the province. He was appointed as a lifetime
Honourary Vice-President of the Bruce County Historical Society in 1990.
One of the properties in issue is the current archives building. It is the
repurposed and renovated 1878 Southampton Public School and is listed on the
Ontario Heritage Building Registry. The archives building was in use when
Mr. Krug made his will in 2006.
Page: 6
Between 1972 and 1976, the Bruce County Museum was expanded with the
addition of a new wing in which the archives were stored and displayed. In 1976,
the new wing opened and was named the Krug Wing. The expanded building was
renamed the Bruce County Museum and Archives.
In 2005, the Krug Wing was demolished, and a much larger museum
building was constructed in its place. It is physically connected to, but distinct from,
the historic Southampton schoolhouse. At that time, the archives were moved to
the schoolhouse building and the floor was reinforced to accommodate the new
location. It consists of 2850 square feet of storage and office space. The actual
archives storage space is approximately 1750 square feet.
The current archives have been in the schoolhouse since it was renovated
and reopened in 2005, one year before Mr. Krug’s will was executed.
The Krug Trust
Mr. Krug made his will on December 21, 2006. That will creates the following
trusts:
(3) Upon trust to pay to the county of Bruce the sum
of Five Hundred Thousand ($500,000.00) Dollars for
the archives building for the storage and display of
the archives of the county, in memory of Bruce and
Howard Krug.
…
Page: 7
(18) Upon Trust to give to the County of Bruce for the
Archives Building, the following: all books, catalogues
and manuscripts pertaining to Krug Bros. history, all
catalogues of other furniture manufacturers, (all other
books, catalogues, manuscripts of my library), all my
diaries, scrapbooks and files of historical interest to Bruce
County, all my collection of photographs and negatives,
excluding: the notes on natural history and all of my
brother, Howard Krug’s bird banding notes, which I give
to the University of Guelph Wildlife Management Centre.
…
(31) I direct my Estate Trustees to set aside the
proceeds from the realization of the rest, residue and
remainder of my estate as a trust fund to be named
“Howard and Bruce Krug Memorial Trust”, and to use the
income therefrom in support of the following, or their
successors, equally:
(a) Hospital in Chesley or publicly funded health care
facility in Chesley should the hospital cease to function as
a hospital,
(b) The Bluewater Education Foundation Endowment
Fund to be used for the benefit of the Outdoor Education
Centre at Wiarton, ON, in accordance with paragraph (21)
of this my will.
(c) The Archives building referred to in paragraph 3
of this my Will, provided that should there cease to be a
hospital in Chesley or publicly funded health care facility
in Chesley, its share in the fund shall be divided equally
among the remaining beneficiaries of the fund.
I AUTHORIZE my Trustees to appoint, in writing, a trust
company to administer the trusts established in
paragraphs (2) and (31) of this my Will in accordance with
the provisions of this my said Will.
SHOULD any of the beneficiaries named in this my
Will decline or refuse to comply with any of the
conditions attached to one or more of their legacies
Page: 8
or refuse to use the legacy for the purpose
designated in this my Will, such legacy shall lapse
and fall into the residual of my estate. [Emphasis
added.]
Mr. Krug passed away on May 21, 2013.
On or about February 6th, 2014, then acting Museum Director Cathy McGirr
submitted a report to the Bruce County Museum Committee regarding the Krug
trust. The report noted that the funds were "designated solely for the use of the
Bruce County Archives.” The report recommended that the original $500,000 and
any further monies from the estate (residuals from the Howard and Bruce Krug
Memorial Fund) be placed in a Krug Reserve Fund, "and that the funds received
be used only for the purposes of the Bruce County Archives in accordance
with the provisions contained in the Last Will and Testament of Bruce A.
Krug". [Emphasis added.]
On March 6, 2014, County Council passed By-law 2014-012, which is titled
"A By-law to establish a Bruce County Archives Krug Reserve Fund" and reads:
1. A reserve fund will be established and known as the "Krug
Reserve Fund".
2. The Krug Reserve Fund shall consist of the money
received from the Estate of Bruce A. Krug, in accordance
with the provisions contained in his Last Will and
Testament.
3. All monies in the Krug Reserve Fund shall be expended
only on the recommendations of the Bruce County
Museum & Cultural Centre and Bruce County Archives,
Page: 9
and on the approval of Bruce County Council. Monies are
to be used for the Archives building for the storage
and display of the archives of the County, in memory
of Bruce and Howard Krug. [Emphasis added.]
The County does not dispute that the “archives building” is the schoolhouse
where the archives were and are now.
The County does not dispute that the $500,000 donated to the County was
subject to “a trust for the archives building for the storage and display of the
archives of the County.”
To be clear, for the purposes of these reasons, the funds from the estate
and the reserve funds are one and the same and I will generally refer to them as
the Krug trust funds or the reserve fund.
Actions of the County
As in the past, the museum continued to grow and, in 2015, the County
commissioned a Strategic Plan (2015-2020) to identify operational capacity
concerns at the museum and establish a five-year plan. The Strategic Plan
recognized the need for more archival space to house and display materials. One
of the recommendations of the Strategic Plan was to pursue an Accommodation
Plan for the museum to outline what areas of the existing museum building could
be re-purposed, and what additional space would be required, specifically
considering archival space planning. The Strategic Plan recommended completion
of the proposed Accommodation Plan in 2016 and implementation in 2017.
Page: 10
Bruce County authorized the expenditure of $30,000 from the Krug Reserve
Fund to commission the recommended Accommodation Plan for the museum. The
Interim Accommodation Plan was received on January 25, 2016.
The Interim Accommodation Plan noted several deficiencies with respect to
the existing archives at the museum and determined "the Archives needs more
space to accommodate holdings and workspaces for researchers." Further, the
recommendation was to move the archives programme from the existing building
to another facility as a long-term arrangement. The Plan presented options to the
County, and once one was selected, a 'Final' Accommodation Plan, with costing,
would be presented.
On May 5, 2016, the County received a "Final Report on the Accommodation
Plan" which addressed costing of an off-site facility for storage and a new-build
scenario to house archives. That report confirmed that "the existing archives will
reach capacity in less than three years" and the projected costs of a new build was
$675,000.
The County then commissioned a Feasibility Study as recommended in the
Final Report. Half of the cost of this study was funded from the Krug Reserve. The
Feasibility Study confirmed archive capacity would be reached by 2020, endorsed
a new archives facility be built, and recommended that a Financial Feasibility Study
should be pursued to confirm financial projections.
Page: 11
On October 19, 2017, the County signed an agreement of purchase and sale
to purchase the archive’s neighbouring property at 254 High St. for $550,000. The
County also approved the use of the Krug Reserve for that purchase.
A Financial Feasibility Study was then commissioned by the County and
received on November 16, 2017, which was paid for from the Krug Reserve. The
study tested the assumptions set out in the Feasibility Study received by the
County and set out financial strategies to fund the project. The Museum Committee
for the County supported those recommendations to expand the museum through
a 'new-build' scenario, and conceptual drawings were prepared for the County.
On March 29, 2018, the County purchased 254 High Street, Southampton,
directly adjacent to the existing museum, for the new archives building. The land
and the rectory house on it were purchased for $550,000 from the Krug Reserve.
It is the purchase of this property that is in issue in this litigation.
After purchase, the County issued a request for proposals to have the
existing Rectory removed or demolished so that the County could pursue
development of the land as set out in the studies it commissioned. Any
disbursements related to development of the property for the archives have also
been spent from the Krug Reserve. In return, however, the County has deposited
any income from the property into the Krug Reserve. For instance, the property
was initially tenanted, and this rental income was deposited.
Page: 12
Conduct of the County
Southampton outlines what they see as a significant lack of disclosure by
the County.
The County’s use of closed meetings was investigated under the authority
of s. 239.1 of the Municipal Act 2001, S.O. 2001, c. 25. The County was found to
have unlawfully closed to the public at least 18 meetings relating to the purchase
and use of the property for an "improper purpose" in violation of s. 239 of the
Municipal Act.
The County did not disclose records relating to the decision to purchase the
property, or any record relating to the use of Krug funds to pay for the property, in
its materials filed for these applications. Then it repeatedly refused to produce
records and took the position that they are not relevant.
In response, the County submits that Southampton’s challenges regarding
the County’s council meetings prior to the purchase of the property have all been
addressed through the provisions of the Municipal Act, 2001. Closed meeting
investigations were carried out, corrective action was taken by the County, and the
investigators concluded that nothing further was needed.
In motions leading up to this hearing, the County has twice been ordered to
produce relevant records (although they have also been successful in refusing to
Page: 13
produce some irrelevant documents requested by Southampton). On another
occasion, the County produced records only after a motion was brought by
Southampton.
The County’s representative swore an affidavit to reply to one of
Southampton’s affidavits that suggested Southampton’s evidence was incorrect.
The County’s representative swore that she was not aware of any inquiry or offer
made by the County to purchase the "closest forty-feet" of the property. However,
during cross-examination, she acknowledged that there were discussions about
the option of purchasing part of the property and that she had no reason to believe
Southampton’s evidence was inaccurate. I find that the County’s representative
was misleading in her affidavit, even if she eventually clarified her evidence.
Rather than applying to the court before unilaterally electing to alter the
terms of the Krug trust, or when an issue was raised about the improper use of the
Krug trust, the County dismissed those concerns and proceeded with a request for
proposals to demolish the rectory building.
Southampton points to these and other instances where the County has not
followed the proper procedures in considering this purchase and improperly
withheld minutes of meetings related to the purchase. Southampton has had to
bring Freedom of Information applications and motions within this proceeding to
successfully obtain information and documents from the County. As a result, there
Page: 14
was no way for any member of the public to know if the Krug trust funds were used
to purchase the property. By withholding this record of the use of the funds, the
County prevented any oversight of its actions as trustee.
Southampton submits that the fact the County concealed its use of the Krug
trust and unlawfully closed meetings relating to the property, contrary to its
obligations of transparency and accountability, suggests that the County knowingly
breached the Krug trust and sought to conceal its wrongdoing. The County gave
no consideration to its obligations as a trustee, it simply concealed the expenditure
from the public and proceeded to spend the Krug trust on the property. Within two
months of purchasing the property, the County publicly announced it would build
a structure with a different purpose on the property and it has not put forward any
other specific plan to use the property. As a noted historian who was passionate
about preserving the history of the County, it would have been contrary to Mr.
Krug’s wishes to demolish the existing attractive rectory building in the heart of the
community. To use the funds to tear down that building is offensive to
Southampton.
I need not make the findings that Southampton seeks relating to the conduct
of the County except to find that, on the admitted record, the County’s behaviour
has been atrocious throughout. I cannot tell, and do not find, that the County’s
Page: 15
conduct was intentional or unintentional, but the impact has been the same to
Southampton (the party and the community).
Position of the Parties
Position of Southampton
It is the position of Southampton that the effect of the bequest and the county
by-law is to create a restricted charitable purpose trust with the County as trustee.
The funds are to be used only for the benefit of the archives building for the storage
and display of the archives of the county, in memory of Bruce and Howard Krug.
Since becoming trustee of the Krug trust in early 2014, the County has not
spent any of the Krug trust funds on the archives building. None of the expenditures
listed in the Krug Reserve summary prepared for this litigation relate to the
archives building, nor to the storage and display of the archives of the County in
memory of Bruce and Howard Krug.
The County has not spent any of the funds on, for example, the three
employees of the archives or supplies and equipment. In addition, the County has
not completed digitizing the archival items donated by Mr. Krug in his will. Those
items include thousands of pages of scrapbooks, journals, business accounts,
logbooks, and catalogues. As of April 29, 2021, the County digitized only 57 pages
of those materials.
Page: 16
Instead of using the Krug trust for this purpose, the County used other
sources of funds, for example, the Community Foundation of Grey Bruce.
Inexplicably, the County intends to spend the Krug trust on various "ordinary
expenses" for the "archives", if and when it builds another archives structure,
although there is no funded plan to build anything. Yet no explanation is offered
for withholding funding for these items at the present building.
Instead, the County secretly used almost all the Krug trust funds ($551,000)
to purchase the neighboring rectory property. Two months later the County
announced plans to demolish the rectory building to develop a Nuclear Innovation
Institute with Bruce Power. Following public opposition, the NII is purportedly being
relocated to Port Elgin, but is only a tenth of the size the County stated was
required, and the County will not commit that the NII will not be relocated back to
the High Street property.
Southampton contends that it is plain and obvious that the County breached
the terms of the Krug trust by knowingly spending the funds in contravention of the
restricted purpose identified in Mr. Krug's will. There is no wording in the will or the
County's by-law to spend the Krug trust funds on "further development". In doing
so, the County improperly put its own interests ahead of the Krug trust.
Southampton submits that the County gave no consideration as trustee to
whether it was appropriate to spend the Krug trust funds on the property. The
Page: 17
County did not seek any advice, recommendations, or reports regarding whether
the purchase was an appropriate use of the Krug trust funds. When Southampton
provided an opinion that such a step was improper, the County gave no
consideration to that opinion. The County has only come to the court now for
directions because of Southampton’s application.
Southampton points out that the County Museum Director acknowledged
that purchasing the High Street property does not relate to the schoolhouse
referred to in Mr. Krug's will. Further, the County Museum Director confirmed that
the County's expenditure of the Krug trust funds did not align with the requirements
of Mr. Krug's will and the County was seeking to expand the use of the Krug trust
beyond the use stated in the will.
Southampton points out that the High Street property is not being used as a
trust asset. Effectively, the County took title to the property in the County's name,
free and clear of any restrictions. There is nothing restricting the use of the property
in the by-law authorizing its purchase. Nor does the by-law authorize the use of
the Krug trust funds. Similarly, there are no restrictions registered on title for the
property and nothing to indicate the property is subject to the restrictions of the
Krug trust. There is nothing in the County's reporting letter for the purchase
suggesting that there are any restrictions on the use of the property or that the
Page: 18
County was taking anything other than full legal and beneficial ownership of the
property.
As trustee, the County has a fiduciary duty to ensure the Krug trust funds
are used for the archives building. As a fiduciary, the duties owed by the trustees
to the beneficiaries include the duties of loyalty, good faith, and the avoidance of
conflicts of interest and pursuit of self-interest. By not spending any funds for the
stated purpose of the Krug trust and instead buying the property, the County:
(1) breached the Krug trust by, at minimum, purporting to unilaterally alter the
terms of the trust without court approval; and (2) favoured the County's own
interests over the Krug trust by purchasing the property for strategic "future
development" for the County's benefit. The County's proposed use of the Krug trust
for a new build at a different location would have the exact opposite effect to what
was intended by Mr. Krug's will.
Southampton submits that the cy-pr s doctrine (discussed below) may be
used by the court to direct a gift in a will to an institution or organization other than
the one named in the will if the following is satisfied: the gift in the will is
impracticable or impossible to carry out; the testator manifested a general
charitable intention in making the gift in the will; and the gift to the alternative
institution or organization would be a gift resembling the initial purpose of the gift
in the will.
Page: 19
In Southampton’s view, it is not impracticable or impossible to use the gift as
intended and there was no general charitable intent in the gift. The mere fact the
archives may have been nearing capacity does not render spending the Krug trust
funds impossible or impracticable and does not explain the failure to expend funds
on the current use.
Finally, Mr. Krug’s will provides a "gift over" clause with specific directions
from Mr. Krug to apply in the event the County declines or refuses to comply with
the will:
SHOULD any of the beneficiaries named in this my Will
decline or refuse to comply with any of the conditions
attached to one or more of their legacies or refuse to use
the legacy for the purpose designated in this my Will,
such legacy shall lapse and fall into the residue of my
estate.
Accordingly, in the event of impossibility or impracticability, Mr. Krug's will
calls for the Krug trust to go to a hospital or publicly funded health care facility in
Chesley and the Bluewater Education Foundation Endowment. There is no
opportunity to apply the cy-pr s doctrine to expand the Krug trust purposes.
Position of the County
It is the position of the County that development of a new archives building
will address the needs of the museum by freeing up space for such things as
Page: 20
exhibits and public space. As well, a new build adjacent to the museum would fulfill
the current function of the museum as a cultural hub for the community.
The goal of the County is to spend the trust funds from the estate on a new
archival development, as has been the model for the museum in the past. The new
build, endorsed by the various studies commissioned by the County, is intended
to be funded partially from the Krug Reserve. For example, a joint-use building
would have expenses shared on a pro-rata basis after deducting any governmental
grants or funding available.
In addition to the construction of a new building to house the archives, the
County expects the ordinary, operational expenses for the archives at the museum
to be drawn from the Krug Reserve. These expenses include operational expenses
for processing archival material, software, and staffing; reference books, training,
and future studies; along with capital expenses, including equipment such as
microfiche, scanners, office equipment, and specialized map cabinets, racking,
and ladders.
The County submits that the issue is whether the phrase in the will, "the
archives building" should be restricted to the existing multi-use building partially
housing the archives. The County points to the County's Museum Director’s view,
and third-party studies, that have confirmed archival storage space in the existing
Page: 21
structure is at capacity and external overflow space has been rented by the
museum to address the capacity issue.
The County’s view is that the clause in the will must be reviewed such that
the phrase "for the storage and display of the archives of the county in memory of
Bruce and Howard Krug" should serve to broaden the scope of the "archives
building." To that end, I should consider the words used in the will in light of the
surrounding circumstances and give the words the meaning intended by the
particular testator.
Given that Mr. Krug had a long-standing relationship as a benefactor of the
museum, including past donations to new builds at the museum, it is submitted
that a restricted reading of the will that the existing multi-use building be the only
"archives building" would not be appropriate. Instead, a general intention with
respect to the storage and housing of archives should be adopted. The County
seeks to continue with the pattern of growth and new builds for the museum as
has historically been done and in which Mr. Krug took part.
The County also points out the fact that Mr. Krug bequeathed a significant
collection of archival material to the museum in his will, with the intent that it be
displayed and stored by the museum. He did not specifically identify the "Krug
Wing" for the donation, which he was aware of at the time of making the will.
Page: 22
It is submitted that this contextual reading of the "archives building" should
support an expanded interpretation of the will with the result that the court's
analysis of the matter ends at this stage and approval should be given to the
County to expend funds for a new archival structure.
In the alternative, the County relies on the cy-pr s doctrine which allows the
court to impose an administrative scheme, where appropriate. The cy-pr s
doctrine can give effect to a charitable gift where the charitable objects are
described with sufficient certainty but are otherwise impossible or impracticable to
realize.
The County says that I have inherent jurisdiction to compose a scheme
whereby any uncertainty is removed, and the gift made operative. This allows the
court, on the failure of the testamentary gift for impossibility or impracticability, to
apply the fund to a purpose which is close to its failed original.
The County submits that the existing archives building has reached its
capacity and expending funds from the Krug Reserve to expand it would be
impossible or impracticable. In the circumstances, it is submitted the court should
apply the cy-pr s doctrine to allow for the charitable purpose of maintaining a
museum archives, albeit at a different location.
Page: 23
The County submits that Mr. Krug’s expressed intent of benefiting the
archives at the museum "for the storage and display of the archives of the county"
can properly be met through using the bequest to construct a new archives building
immediately adjacent to the museum. This new building will service the same
community, will be operated by the museum, and is physically adjacent to the
existing museum footprint.
It would not be appropriate in the circumstances to allow the gift to lapse
when Bruce County has a use for the funds that fits within the charitable intent of
the will.
Authorities
In Re Fitzpatrick (1984), 6 D.L.R. (4th) 644 (Man. Q.B.), Justice Simonsen
set out at pp. 648-649 (paras. 18–21):
By tradition the courts have had a bias in favour of the
continuation of a charitable trust. In furtherance of this
bias the cy-pr s doctrine was developed. It had its origin
in the jurisdiction exercised by the ecclesiastical courts.
The expression was derived from the French term "aussipr s"
(as near as possible) and intended to give the court
jurisdiction to adopt an alternate mode of disposition
where a charitable legacy had failed or lapsed.
In abbreviated form the principle is stated in Halsbury's
Laws of England, as follows:
Where a clear charitable intention is expressed, it
will not be permitted to fail because the mode, if
specified, cannot be executed, but the law will
Page: 24
substitute another mode cy-pr s, that is, as near as
possible to the mode specified by the donor.
There can be no question of an application cy-pr s
until it is clearly established that the mode specified
by the donor cannot be carried into effect and that
the donor had a general charitable intention. If,
however, the mode specified by the donor is
perpetual and has been carried into effect but
ceases to be practicable, there will nevertheless be
a cy-pr s application independently of any general
charitable intention. In order to establish whether the
mode specified by the donor is practicable, the Court
may direct an inquiry.
...
Before the doctrine can be applied, several questions
must be addressed. These questions were outlined by
counsel for the Sisters of Providence in four points:
1. Is the trust in question charitable?
2. If the answer to the first question is yes, is the
charitable trust impossible or impractical to perform?
3. If the answer to the second question is also yes,
was the charitable purpose designated by the
Testatrix impossible to fulfill at the date of her death
or has it subsequently become impossible to carry
out?
4. If the charitable trust was impossible or impractical
to carry out at the date of death, the Court must find
a general charitable intention on the part of the
Testatrix before the cy-pr s doctrine can be applied.
If the trust became impossible or impractical to carry
out sometime after the Testatrix's death, the Court
need only find that the trust monies have been given
absolutely and perpetually to charity and can then
apply the cy-pr s doctrine without finding any
general charitable intention in the Testatrix.
Page: 25
In Romanic et al. v. La Fabrique de al Paroisse Sainte-Sophie et al., 2020
ONSC 3534, Madam Justice T. J. Nieckarz outlined:
The court may infer a general charitable intention when a
gift of residue to a charitable organization does not
provide for a gift over on its failure. Because the testator
did not address what would happen in the event of lapse,
the court is entitled to infer that he planned that the money
would go forward for is general charitable
purpose. [Citations omitted.]
Analysis
Jurisdiction
The County relies on s. 60 of the Trustee Act, R.S.O. 1990, c. T.23, in
bringing its application:
A trustee, guardian or personal representative may,
without the institution of an action, apply to the Superior
Court of Justice for the opinion, advice or direction of the
court on any question respecting the management or
administration of the trust property or the assets of a ward
or a testator or intestate.
The County also relies on rules 14.05(2) and (3)(a) to (c) of the Rules of Civil
Procedure, R.R.O. 1990, Reg. 194:
(2) A proceeding may be commenced by an application
to the Superior Court of Justice or to a judge of that court,
if a statute so authorizes.
(3) A proceeding may be brought by application where
these rules authorize the commencement of a proceeding
by application or where the relief claimed is,
Page: 26
a. the opinion, advice or direction of the court on a
question affecting the rights of a person in
respect of the administration of the estate of a
deceased person or the execution of a trust;
b. an order directing executors, administrators or
trustees to do or abstain from doing any
particular act in respect of an estate or trust for
which they are responsible;
c. the removal or replacement of one or more
executors, administrators or trustees, or the
fixing of their compensation.
Southampton relies upon s. 10(1) of the Charities Accounting Act, R.S.O.
1990, c. C.10, which provides that:
Where any two or more persons allege a breach of trust
created for a charitable purpose or seek the direction of
the court for the administration of a trust for a charitable
purpose, they may apply to the Superior Court of Justice
and the court may hear the application and make such
order as it considers just for the carrying out of the trust
under the law.
Was there a breach of trust?
The County seeks permission or direction on whether it can spend the Krug
trust funds to “construct a new archives” or “a new archival structure” and for the
“charitable purpose of maintaining a museum archives, albeit at a different
location.” It seeks an order for “the application of the gift to an existing physical
structure.” The County hopes that such a development will be a “cultural hub for
the community.” Those are interesting questions for another time.
Page: 27
On this record, the County has not spent, nor has any clear plans to spend,
more than $550,000 of the Krug trust on those matters. The funds have already
been spent on land without prior approval and little oversight. From the County’s
reports, we can see that the land was purchased for “future development” for the
County’s benefit and was more than necessary for the purposes of the archive.
There is no explanation of why the trust would pay for the entire lot when the
archive did not need the full lot. There is no explanation why the trust would pay
for a building on the lot that the County wished to demolish for its own purposes
unrelated to the trust.
The issue here is whether the following uses of the funds can be interpreted
in the same way:
(a) Used for the purchase of land for the general use of the County as public
space along with the use of the archive;
can be seen as:
(b) Used for the schoolhouse where the archives were at the time of the will
for the storage and display of the archives.
Clearly, they cannot. They are two entirely different purposes.
Page: 28
I agree with Southampton that the County has essentially taken the Krug
trust and converted it to a property in the County's name without documented
restrictions. If the County wanted to build a joint-use building, the County ought to
have purchased and developed the property with its own money. The County
should not have used the Krug trust for that purpose.
On this record, I have no concrete proposal of how the funds would be used
to build this proposed facility on the High Street property. As set out in the
materials, the best the County can provide is that “the County has no intent not to
use this property for archival storage.”
When, in the future, the County uses its own funds to buy the land, the terms
of the trust may well allow for payment towards the building or other aspects of a
new archive. But that is not how the funds were used. The funds were used to buy
land in the name of the County for its own benefit. If one applies any other name
to the title on the land, the breach is clear. The fact that title is taken in the name
of the County does not change the principles to be applied.
The Krug funds might well be better spent on a new building or its expenses,
but that is not what I am asked to decide. Southampton properly objects to what
the County has already done. The County asks for permission to do something
other than what it has done. The County’s position is a non sequitur.
Page: 29
For those reasons, I find the County in breach of the Krug trust.
The use of the trust to pay for disbursements related to development of the
property in the name of the County is also a breach of the trust.
That said, I do accept that the funds spent on feasibility studies are an
appropriate use of the trust funds. Southampton does not seriously dispute that
the present archive building is about to be outgrown; studies to determine how best
to deal with that reality are appropriate. While the amounts seem exorbitant to me,
I am not asked to pass on that topic.
Does the Cy-Pr s Doctrine Apply?
Given my decision above, I need not answer the question of whether the cypr s
doctrine applies; however, out of respect to the County’s principal submission,
I can comment as follows. On this record, had the County sought an opinion before
it breached the trust, I do not agree that cy-pr s would assist it to purchase the
land.
The County relies on Dr. Donovan Waters, the long-standing, Canadian
authority on charitable trusts. Professor Waters has written on when the court has
jurisdiction to devise a scheme of administration:
First are the cases of initial impracticability or
impossibility, where, when the donor's instrument or gift
Page: 30
takes effect, the charitable object or the required mode of
achieving the object cannot be carried out. In such a
case, the court has jurisdiction to approve a scheme or
require a scheme to be drawn up, for the trust property to
be applied in a way as close as possible to that set out by
the settlor. The two conditions for this jurisdiction are first
that it be impossible or impractical to carry out the settlor's
original instructions and second that the donor in making
the gift had a general or overriding charitable intent, as
opposed to an intention to benefit only a specific
institution, for example, in a specific way. [Donovan
Waters, Law of Trusts in Canada (Toronto: Carswell,
1974) at 522-23.]
It is not disputed that the trust is for a charitable purpose. Further, I find that
the will is not ambiguous or uncertain in its meaning and direction.
I do not find that the use of the funds for the purposes set out in the will is
impossible or impracticable. The County has used other funds to pay expenses for
the archives. Southampton points out various ways that the money can be spent
on the archives. The County replies with an explanation of why they have used
other funds. That is their right; I cannot tell the County how to spend its money.
However, on this record, the archive has expenses and the trust has (or had) funds
to assist. Indeed, the County proposes to use the remainder of the trust to pay for
some of the same expenses (staffing, equipment, etc.) at the future site which it
declines to pay for now. I find that it is neither impossible nor impracticable to carry
out the terms of the will.
Page: 31
Further, the will does not leave the funds to a general charitable intent. The
gift over clause is clear:
SHOULD any of the beneficiaries named in this my Will
decline or refuse to comply with any of the conditions
attached to one or more of their legacies or refuse to use
the legacy for the purpose designated in this my Will,
such legacy shall lapse and fall into the residue of my
estate.
Mr. Krug addressed what would happen in the event of the bequest being
refused. Accordingly, if the County declines or refuses to spend the Krug funds for
the archives building and the storage and display of the archives in memory of
Bruce and Howard Krug, the will allows for the trust fund to fall into the residue of
the estate. In any event, since the County does not yet decline or refuse to comply
with the terms of the trust, I need not apply the cy-pr s doctrine in these
circumstances and on this record.
It appears that the archive has outgrown its present facilities. I cannot make
that determination on this record and I do not think it appropriate that I make such
micro-managing decisions. If a new building is needed, the parties will, individually
or collectively, need to find a new building. But, because of this ruling, the Krug
trust cannot be used to pay for land under that archive with title in the sole name
of the County. I leave the use of the cy-pr s doctrine to another application and
another record.
Page: 32
Remedy
The County has been, at the very least, unreasonable in its failure to provide
Southampton (the party and the community) with proper and transparent
accounting of its decision-making process with respect to the Krug trust. As set out
above, for the purposes of this decision, I need not make findings in that regard.
However, based on my finding above, I expect that the PGT and the Estate Trustee
might wish to make their own inquiries on that issue.
The County submits that Southampton seeks an injunction preventing the
County “from dealing with its land.” In this case, the County obtained a demolition
permit for the rectory. Of significance, of course, is that the County is not dealing
with “its land”; it is dealing with the trust asset in dispute. That is clear from the
County’s acknowledgement that it provided the net income from the property to the
trust.
The request by Southampton is otherwise rather unclear. Counsel for
Southampton asked that I should be “creative” in fashioning a remedy. But no clear
creative request was made in the application or in argument.
Although an injunction to prevent the demolition of the rectory was requested
in the original application, Southampton now agrees that such relief is unnecessary
if the trust funds are returned. Given my finding that the High Street property is a
Page: 33
trust asset, nothing further will be done with respect to demolishing the house on
the property without further order of this court. I remain seized of that issue.
One of the County’s representatives is quoted in the materials as saying, “I
don’t see any connection between how the land was purchased and this step that
we are taking [to remove the rectory] ... We own the land and we’re taking steps
to clear it for redevelopment.” I cannot rely on this record to be certain that this
statement was accurate; however, if any County representatives think that way,
they should be clearly advised that, pending the completion of this proceeding, the
land is a trust asset.
The demolition of the rectory would appear to be contrary to the wishes of
Mr. Krug, but I cannot answer that question. However, the demolition may result in
a diminution of the value of the trust asset. The question of whether the County
eventually ends up owning the land and the rectory is for another day.
Further, any disbursements related to development of the property for the
archives must be returned to the Krug Reserve. Pending the completion of this
matter, the County will maintain the rectory and property.
In argument, Southampton requested that there be orders relating to the sale
of the land, but those requested orders were not in the application. I agree with the
County that, without notice, I cannot make such orders.
Page: 34
In the County’s reply submissions, it submits that if I find a breach by the
County, the result is that the County must reimburse the estate. That appears to
be correct, but I do not have fulsome submissions on what that reimbursement
amount should be. Southampton points out that simply requiring the County to pay
the money back would mean that the County would reap the profits in selling the
land hereafter. The County cannot benefit from this breach.
Considering my finding of a breach of trust, the Estate Trustee and the PGT
may wish to take a more active role in this litigation or in overseeing the County’s
use of the trust. At this point, it would seem to me that those parties cannot simply
ignore the process and still live up to their obligations. In any event, I am hopeful
that they will have helpful submissions on a remedy. Accordingly, I shall make no
further order without the input of the Estate Trustee and PGT.
Decision
For those reasons, I find that the County is in breach of the Krug trust by
virtue of its use of the funds to purchase the land at High Street. The County’s
application is dismissed other than as related to any directions that may follow in
the next part of these applications.
I require the assistance of both the PGT and Estate Trustee and I would like
to have their submissions with respect to what should occur next.
Page: 35
Within thirty days, all counsel shall contact the Guelph trial co-ordinator to
arrange a Zoom “conference call” to determine a timetable for any next steps.
Counsel for Southampton and the County have a great deal of experience with me
in managing this file. They can educate the others as to what is expected for such
a meeting.
Costs
While costs would normally be dealt with at the end of the litigation, this
determination has been long coming. It may be that Southampton will play a lesser
role in future steps. Those parties should not wait for, at least, interim costs.
If costs cannot be agreed upon to this point in the proceedings, Ms.
Robinson and the Southampton Cultural Heritage Conservancy shall provide their
costs submissions within the next 20 days. The County shall provide its response
within 20 days thereafter.
Each submission shall be no more than five pages, not including any Bills of
Costs or Offers to Settle. No reply submission will be accepted unless I request it.
If I have not received any submissions within the time frames set out above, I will
assume that the parties have resolved the issue and make no order as to costs.
Neither party need include the authorities upon which they rely so long as
they are found in CanLII and the relevant paragraph references are included.
Page: 36
Any costs submissions shall be forwarded to my office in Guelph by
electronic transfer to GuelphOffice.SCJ@ontario.ca or by mail to Guelph Superior
Courthouse, 74 Woolwich St., Guelph, N1H 3T9.
Justice G. D. Lemon
Released: January 31, 2022
CITATION: County of Bruce v. Office of the Public Guardian and Trustee, 2022
ONSC 0352
COURT FILE NO.: CV-19-25 and CV-19-18 (Walkerton File)
DATE: 2022 01 31
Court File: CV-19-25
The Corporation of the County of Bruce
Applicant
AND:
The Office of the Public Guardian and Trustee,
CIBC Trust Corporation, Estate Trustee for the
Estate of Bruce Arthur Krug, deceased, Laura
Robinson and Southampton Cultural Heritage
Conservancy
Respondents
AND:
Court File: CV-19-18
BETWEEN:
Laura Robinson, and The Southampton Cultural
Heritage Conservancy
Applicants
AND:
Corporation of the County of Bruce, The
Corporation of the Town of Saugeen Shores
and The Public Guardian and Trustee
Respondents
Justice Lemon
Released: January 31, 2022