The law in Ontario is currently unclear as to whether a discretionary beneficiary of a trust can compel a trustee to pass accounts. As noted in Suzana’s previous blog post, the Rules of Civil Procedure, RRO 1990, Reg 194 do not elucidate whether a discretionary beneficiary can compel a passing of accounts: see Compelling an Accounting Under the Rules as a Discretionary Beneficiary. Rule 74.15(1)(h) simply states that only parties with a financial interest in an estate can apply for an accounting. 

Recognizing that a discretionary beneficiary technically may not have a financial interest in a trust, there is another route that can be taken to obtain an accounting – asking the court to exercise its inherent supervisory jurisdiction over trust administration.

The Court of Appeal went into great detail discussing the court’s inherent jurisdiction to supervise and administer trusts in Carroll v. Toronto-Dominion Bank, 2021 ONCA 38, explaining that this inherent jurisdiction is recognized primarily to protect the interest of beneficiaries:

The court also noted that those with a contingent interest in a trust may also, on occasion, access the court’s inherent jurisdiction, as long as the applicant has some type of interest in the trust which he or she is seeking to enforce. 

Similarly, in the fifth edition of Waters’ Law of Trusts in Canada, Donovan Waters, Lionel Smith and Mark Gillen note that “[t]he courts seem to be coming to the view that any person with any kind of interest in the trust, including the objects of a mere power, ought to be able to ask for account information.” On this point, the authors point to the decision of the New South Wales Court of Appeal in Hartigan Nominees v. Rydge (1992), 29 N.S.W.L.R. 405, in which the court held that the beneficiaries under a discretionary trust could have access to trust documents, even though no beneficiary could be said to have an actual proprietary right to any of the trust assets.

So while it is clear that the court may exercise its inherent jurisdiction and compel an accounting if this relief is sought by a discretionary beneficiary, the circumstances under which this discretion will be exercised is less clear. In British Columbia, the courts have embraced the Privy Council’s decision in Schmidt v Rosewood Trust Ltd. (Isle of Man), [2003] 2 A.C. 709, holding that the strengths of an application for trust information must be assessed and balanced against competing interests, such as personal or commercial confidentiality: see, for example, Al-Sabah Estate (Re), 2020 BCSC 169. Practically speaking, the assessment and balancing of competing interests may result in a discretionary beneficiary being granted limited disclosure, tailored to fit the circumstances; safeguards may even be put in place. That said, Waters, Smith and Gillen note in Waters’ Law of Trusts in Canada that “[i]t is difficult to imagine situations in which the trust accounts themselves could not be disclosed to beneficiaries; the problems tend to arise in relation to other kinds of information, where confidentiality issues may arise.” 

Overall, it appears probable that a discretionary beneficiary may succeed in compelling an accounting by relying on the court’s inherent jurisdiction to supervise a trust. However, a few caveats ought to be noted before utilizing this approach. First, utilizing this approach could end up being expensive, particularly if the record put before the court must be sufficient for assessing and balancing competing interests. Second, if the trustee is compelled to provide an accounting, there remains a risk that full disclosure will not be ordered. Third, depending on the interests involved, there is also a risk that the court may simply decline to order an accounting after evaluating the claims of a discretionary beneficiary. In Schmidt, Lord Walker expressly recognized that “[i]n many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief.”

Thank you for reading, and have a great day,

Ian Hull