Previously we have blogged on the case of Walters v Walters, 2022 ONCA 38 and in what circumstances a Court may substitute its discretion for that of a trustee. You can read a summary of the case here.

An interesting fact in this case was that the Will specifically stated what the Trust should be used for. The provision in the will said,

“I wish to advise my Trustees that my husband’s comfort and welfare are my first consideration and for this reason, it is my desire that my Trustees exercise their powers to encroach on the capital in a manner which will ensure his comfort and well being”.

The question becomes, then, when will the Court interfere when a testator has made provision for the well-being of an elderly person? In this case, the trustees were the children of the beneficiary and did not like nor trust him. Therefore, they did not provide sufficient funds for the beneficiary to cover his living expenses.

The application judge substituted her discretion for that of the trustees and found that the trustees’ dislike of the beneficiary was an extraneous factor that improperly influenced the exercise of their discretion.

On appeal, the Ontario Court of Appeal upheld the application judge’s decision and provided a thorough analysis of when a Judge can substitute his or her discretion in place of that of a trustee.

The first step in their analysis was determining the testator’s intention. This could be determined by looking at the language of the Will. The Court agreed with the application judge that, because the testator had advised her trustees that her husband’s comfort and welfare were her first consideration, any doubt would favour encroachment.

The Court went further to find that the trustees’ dislike of the beneficiary was an extraneous factor and upheld the application judge’s decision. However, the application judge erred when she found that the trustees’ distrust of the beneficiary was an extraneous factor.

This decision may provide some comfort to beneficiaries of trusts who do not have a positive relationship with their trustees.  The Courts may interfere even when trustees have the authority for absolute discretion. Trustees must be careful in making their decisions and ensure they are being fair and reasonable and observant of their fiduciary duty when exercising their discretion.

Thank you for reading.