



COURT OF APPEAL FOR ONTARIO

CITATION: Walters v. Walters, 2022 ONCA 38

DATE: 20220120

DOCKET: C69455

Strathy C.J.O., Pepall and Pardu
    JJ.A.

BETWEEN

Gerald Walters

Applicant (Respondent)

and

Steven Walters
, Gregory Walters and
Janice Bonnin, Estate Trustees of the Estate
    of Florence Olive Walters

Respondents (Appellants)

Corey Wall, for the appellants

Michael F. Sirdevan, for the respondent

Heard: September 16, 2021 by video conference

On appeal from the judgment of Justice Jill
    C. Cameron of the Superior Court of Justice, dated April 12, 2021, with reasons
    reported at 2021 ONSC 2695.

Pepall J.A.:

INTRODUCTION

[1]

This appeal involves the interpretation of a
    will that provided trustees with the right to encroach on capital as they in
    their absolute discretion considered necessary or advisable for the benefit of
    the income beneficiary. This was to ensure his comfort and well-being. The main
    issue to address is whether the trustees improperly relied on extraneous
    factors in the exercise of their discretion.

[2]

The appellants, Stephen
[1]
Walters and Janice Bonnin, are
    the children of Florence Olive Walters (Ollie) and her husband, the respondent,
    Gerald Walters. Ollie died on May 8, 2016. She left a will naming Stephen,
    Janice and her third child, Gregory Walters, as Estate Trustees. Gregory was
    removed as a co-Trustee on consent by court order dated February 19, 2019 and,
    though aligned with Gerald, is not a party to the litigation.

[3]

Ollies will named Gerald as an income
    beneficiary and left the residue of the Estate to the three children. However,
    the will also provided the Trustees with an absolute discretion to encroach on
    capital in a manner that would ensure the comfort and well-being of Gerald.

[4]

Gerald asked the appellants, who were the
    remaining Trustees, to encroach on capital to pay his living expenses. The
    appellants mistrusted their father and the proprietor of the residence in which
    he resided and were not prepared to pay him the sum he requested. Gerald then
    applied for an order that the Trustees provide him with financial assistance.

[5]

The application judge granted Geralds request
    and ordered the appellant Trustees to pay their respondent father $3,875 per
    month commencing May 1, 2021 and arrears of $98,750 for the period
    August 1, 2018 to April 30, 2021. She also ordered that costs of $26,000 be
    paid out of the Estate to the respondent. The appellants appeal from that judgment.

BACKGROUND
FACTS

Ollie and Gerald

[6]

Ollie and Gerald were married for over 60 years.
    They lived in the parties matrimonial home in Coldwater, Ontario. It was
    registered in the name of Ollie, as was an adjacent vacant lot. Gerald was a
    builder and ran his own construction company. He built the matrimonial home and
    all of the other houses in the subdivision where it is located as well as
    countless other houses in the Orillia area.

[7]

Prior to her death, Ollie lived in a nearby
    nursing home called Spencer House while Gerald remained in the matrimonial
    home. According to Gerald, the cost of Ollies housing and care was in excess
    of $2,500 per month. She was 82 when she died in 2016 and Gerald was 86. The
    evidence on the nature of their relationship is contradictory but the
    application judge made no findings in this regard. Notes provided by Gerald to
    his and Ollies lawyer recorded that in the event Janice and Stephen brought
    Ollie home, Gerald would proceed with an application for divorce.

[8]

Ollies last will and testament, dated October
    18, 2006, provided Gerald with a life interest in her Estate, remainder to her
    three children. Paragraph 4(b) of the will states:

I DIRECT my Trustees to hold the residue of my estate in trust
    for my husband, GERALD CECIL FREDERICK WALTERS, for his lifetime, and I DIRECT
    my Trustees to keep such residue invested and to pay to or for the benefit of
    my husband, GERALD CECIL FREDERICK WALTERS, by monthly or other convenient instalments
    the net income derived from the residue of my estate. In addition, I DIRECT
    that my Trustees shall have the right to pay such part or parts of the capital of
    the residue of my estate as my Trustees in their absolute discretion consider necessary
    or advisable to or for the benefit of my said husband from time to time. 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.

[9]

On her death, the Estate lawyer prepared a list of Ollies assets. The
    total value of her assets was $428,006.56, $419,500.00 of which represented realty
    consisting of the matrimonial home and the vacant lot, and $8,506.56 of which
    represented personalty.

Geralds Court Proceedings

[10]

On
    May 17, 2017, Gerald issued a Notice of Application asking for, among other
    things, an order that: a January 11, 2011 agreement with Ollie be declared to
    be a marriage contract; Ollies will be declared invalid; he be named as the
    residual beneficiary, and the matrimonial home, where he continued to reside,
    and the vacant lot be placed in his name.

[11]

In
    January 2018, the parties attended at mediation and signed minutes of
    settlement that were subject to preparation of a more formal agreement.
    Numerous efforts were made by Geralds counsel, Michael Sirdevan, to move the
    matter forward, but for whatever reason, the appellants counsel, Corey Wall, was
    unresponsive. On May 28, 2018, Mr. Wall sent Mr. Sirdevan a revised agreement
    that was unsatisfactory to Gerald. On August 27, 2018, Mr. Sirdevan advised
    that Gerald considered the minutes of settlement to be at an end and that he wished
    to have the home and vacant lot listed for sale. He also advised that once the
    home was sold, Gerald expected that he would require monthly payments of $4,000
    from the Estate in order to pay his monthly living expenses. Gerald
    subsequently moved into a residence described as Rural Roots Retirement. Peggy
    Wainman was its proprietor.

[12]

On
    March 1, 2019, Mr. Sirdevan wrote again, provided some details of Geralds
    financial circumstances, and requested that the Estate contribute to Geralds
    expenses. He stated that Gerald had savings of approximately $50,000, income of
    $1,800 per month and expenses of $5,330 per month. Mr. Sirdevan opined that the
    request of $4,000 was appropriate.

[13]

In
    response, Mr. Wall asked for proof of expenses. He reiterated that request on
    May 9, May 13, and May 21, 2019.

[14]

On
    May 22, 2019, Ms. Wainman wrote a note addressed to whom it may concern simply stating
    that Gerald paid $3,000 per month for room and board at Rural Roots Retirement.
    Mr. Wall advised Mr. Sirdevan that this note was insufficient. Mr. Wall said
    that the Trustees are willing to exercise their discretion regarding
    encroachment on the capital but given the circumstances, need better
    documentary support. The Trustees also asked for authorization to speak to
    Peggy Wainman or Gerald directly. This was not forthcoming.

[15]

By
    correspondence dated May 21, 2019, Mr. Sirdevan wrote to Mr. Wall explaining
    that he had asked Gerald for the documentary support several times and was not
    sure why Gerald had not supplied it to him. He advised that Ms. Wainman
    had written to him stating that she was not going to be talking to anybody. Mr.
    Sirdevan wrote that he had asked Gerald for an invoice or corroboration of the
    claimed expense, had not yet received any, but would keep on trying.

[16]

On
    August 14, 2019, Mr. Wall served Stephens affidavit sworn August 13, 2019 and
    wrote a covering letter expressing the Trustees concerns that the amounts
    claimed by Gerald were an inaccurate reflection of what Gerald was paying and
    reiterating the request for documentary evidence. Stephen and his co-Trustee
    were willing to exercise their discretion with respect to capital payments but
    wanted supporting documentation on expenses. In his affidavit, Stephen said
    they had been unable to verify that Ms. Wainman was a legitimate service
    provider or that their father had been paying the amount she described and
    there was no description of the services she was providing. Searches of the Province
    of Ontarios Retirement Homes Regulatory Authority for Peggy Wainman and Rural
    Roots Retirement revealed no entries. Stephen also described the Trustees
    concern about the contents of a phone message that was inadvertently recorded
    between their father and Ms. Wainman and left on Stephens answering service on
    May 21, 2019. Stephens affidavit described the message as follows:

Gerald:
    ... Gerry calling, give me a call and I will let you know what time ... around
    9 o'clock tomorrow morning ... give me a call back ... and let me know you got
    the message. Bye ...

Gerald:
    That's great, thanks Peggy.

Peggy:
    That should be fine ...

Gerald:
    I hope so. Lots of things I would like to say ...

Peggy:
    ... Perfect. ... You've been here for ... month, you don't want them to see
    what youre paying now.

Gerald:
    Ya, if they say anything I'll say I've decided to go to the Birchmere;

Peggy:
    Ya, you'd be paying $8 - $10,000 a month see how they like that.

Gerald:
    Oh ya, it would be over 5 and  ya, be over 5.

Peggy:
    Tell them you want 5 ..., and palatial, at least $8,500 ...

Gerald:
    Laughter ... Peggy

Peggy:
    Say you want all the services to go with it ....

Gerald:
    I know, I know. Monies the whole thing ... right from day one.
I can sucker them in pretty good I think.

Peggy:
    You think so ...
I hope you F**k ... them now
.

Gerry:
I hope so
, I don't know what ... too
    bad that my kids and my  [Emphasis added.]

[17]

In
    his affidavit, Stephen described why he and his co-Trustee had concerns about Ms.
    Wainmans lack of detail and the legitimacy of the expenses claimed. The phone recording
    suggested that their father was intentionally trying to deceive them and was
    being supported and encouraged in this regard by Ms. Wainman.

[18]

On
    August 23, 2019, Mr. Wall reiterated the Trustees request for documentary
    evidence of Geralds expenses.

[19]

On
    May 31, 2019, the house was sold for $458,000 and following commission and
    other deductions, $400,000 was invested in short term guaranteed investment
    certificates. The closing date for the sale of the vacant lot was September 4,
    2019 with expected net proceeds of $117,900. The Trustees invested the proceeds
    and started to pay the net income derived from those proceeds to Gerald, paying
    him $1,972.60 in September and $2,465.75 at the end of December of 2019.

[20]

On
    October 1, 2019, Mr. Sirdevan advised Mr. Wall that there were no invoices for
    the expenses claimed by Gerald and instead sent a 12-month record of Geralds
    banking activity.

[21]

On
    November 27, 2019, Gerald caused his Notice of Application to be amended. He
    deleted the earlier requests contained in his May 17, 2017 Notice of
    Application (with the exception of his request for the appointment of an Estate
    Trustee During Litigation and costs). Now he sought an interim and final order
    that the Estate pay him $25,000 immediately and $5,000 per month retroactive to
    September 1, 2018, and an order removing the appellants as Estate Trustees. In
    his affidavit dated January 25, 2019, he stated that he believed the appellants
    to be in a conflict because they were attempting to preserve the assets of the
    Estate for their own purpose. Subsequently, in his December 4, 2019 affidavit,
    he stated that since January 25, 2019, the Trustees had refused to provide any
    financial assistance with the exception of one payment of $1,972.60 in
    September 2019. He went on to say that he had been forced to spend his lifes
    savings to support himself for coming up to three and a half years. He stated
    that he lived at Rural Roots Retirement where Peggy Wainman provided him with
    room and board, assistance with medication and other basic care needs, and
    transportation to and from medical appointments. He had lived there since
    August 2018 and paid $3,000 monthly but the fee had been increased to $3,875 as
    of September 1, 2019. He stated he had additional monthly expenses of $1,200
    which included the cost of maintaining his vehicle which he no longer drove,
    meals out, dental and eye care, and an annual bus trip. He noted that these
    expenses had been itemized in correspondence sent by Mr. Sirdevan to Mr. Wall on
    March 1, 2019. He did not address the Trustees concerns relating to the
    recorded phone message.

[22]

On
    November 29, 2019, the Trustees offered to exercise their discretion to provide
    quarterly payments of $1,000 from the capital in addition to quarterly interest
    payments
but struggled given the limited scope of the
    financial disclosure provided.
They indicated they would re-consider
    this amount if Gerald provided further financial disclosure. They described the
    basis for the exercise of their discretion as follows:

a.

The hand-signed note from Peggy Wainman did not qualify as an
    invoice. The note would not suffice should the Trustees be asked to pass
    accounts before the court as evidence of legitimate estate expenses.

b.

Rural Roots Retirement was not licensed under the
Retirement
    Homes Act
, 2010, S.O. 2010, c. 11, nor was Peggy Wainman licensed under that
    Act.

c.

The additional monthly expense of $1,200 was not supported by Geralds
    bank records that had been provided.

d.

The eyewear, prescription expenses and the majority of the vehicle
    expenses were less than previously advised based on the bank records.

e.

There were no details or supporting receipts regarding any travel.

f.

There was no supporting evidence of meals purchased outside the home.

g.

Geralds bank records showed that he was receiving $10,000.00 in quarterly
    payments in addition to his Old Age Security (OAS) and Canada Pension Plan
    (CPP) payments, contrary to his affidavit of December 4, 2019, in which he
    stated that his sole income was limited to CPP.

h.

Gerald appeared to have significant holdings with other financial institutions,
    as evidenced from a 2011 TD Waterhouse statement, showing him having assets
    totalling $1,181,229.15. In that regard, Mr. Wall noted that It is
    acknowledged that this statement is over 8 years ago but respectfully if
    [Gerald] has gone through the $1,181,229.15 in 8 years it is clear why [Ollie]
    would have left the trustees with the absolute discretion with respect to the
    encroachment on the residue.

i.

The voicemail left by Gerald in which he stated that he intended to
    "sucker" the Trustees.

[23]

Mr.
    Wall wrote to Mr. Sirdevan on the same date, stating:

It is troubling to the trustees that there has been no explanation
    for the comments made in the voicemail that your client inadvertently left and
    which is now before the court as evidence and the fact that there has been such
    limited financial disclosure. The trustees may give some further consideration
    to this matter but would require full financial details from your client. I
    would suggest an authorization allowing the trustees to obtain any and all
    financial records for your client including his annual tax filings. You may
    think this to be reaching but given the expressed intentions of your client it
    is reasonable.

[24]

On
    January 7, 2020, McCarthy J. granted a consent order that the Trustees pay
    Gerald $1,500 per month commencing February 1, 2020. The Trustees complied.

[25]

On
    January 9 and March 17, 2020, Gerald swore additional affidavits reiterating
    his requests and asking that the payments be made retroactive to August 1, 2018
    when he said he moved out of the matrimonial home. He explained that his
    investment account was down to approximately $37,000 and he only had $5,928.20
    in his TD bank account.

[26]

On
    June 11, 2020, Mr. Sirdevan confirmed the conversation he had had with Mr. Wall
    writing it looks like it will take a total of about $3,000 per month to meet
    Gerrys needs. He also stated that he would be looking for $25,000 as a
    retroactive adjustment and a contribution of about $35,000 to his legal
    expenses. He said that if the Trustees were to propose something approaching
    those numbers, they would likely reach resolution. Mr. Sirdevan never received
    a response.

[27]

On
    March 24, 2021, Stephen swore yet another affidavit. He noted that before
    moving to Ms. Wainmans residence, Gerald had expressed a desire to live at
    Birchmere Retirement Residence where the best view for value was a lakeview
    room for $2,950 per month covering room, care, and board. Spencer House in
    Orillia, where Ollie had lived and where Geralds sister resided, charged
    $2,535 monthly. Stephen observed that the 29-30% increase of $3,000 to $3,875
    for Ms. Wainmans residence would not be allowed in a regulated facility.
    He also pointed out various discrepancies in Geralds January 9, 2020 and March
    17, 2021 affidavits and earlier disclosures.

[28]

At
    paras. 30, 31 and 32, he wrote:

My sister and I have researched Rural Roots Retirement and
    Peggy Wainman and neither is a registered facility with the Retirement Homes
    Regulatory Authority (RHRA) and as such does not provide the services found at
    registered facilities, is not monitored as to the level of care as registered
    facilities are and is not required to meet or confirmed to meet safety
    standards. There is no governing body to support the rights of the residents,
    or to ensure proper licensing or insurance requirements, ethics, conduct or
    otherwise monitoring. Ms. Wainmans refusal to provide an outline of the
    services provided and comments during the May 21, 2019 voicemail, furthers our
    concerns as to whether her charges are reasonable.

According to our research and information found on Happy at
    Home (a body that helps find appropriate housing accommodations for seniors)
    the reasonable rate for room and board in our area would average $2,000.00 per
    month. The Birchmere rates ranged from $2,215.00 to $3,884.00 for room, care
    and meals and it specifically set out the care. Gerald claims that Peggy
    provides room and board, 3 meals a day, assistance with medications and other
    basic needs and now transportation to medical appointments.

Gerald has not provided details of what assistance with
    medication Peggy is providing, nor what other basic needs entails nor how
    many medical appointments she takes him to per month nor the distance
    travelled.

[29]

Stephen
    stated that Gerald was not being honest and the bank statements did not support
    the expenses.

REASONS OF THE APPLICATION JUDGE

[30]

On
    March 30, 2021, the application proceeded before the application judge. Gerald
    argued that under the terms of the will, the Trustees were required to encroach
    on capital in order to ensure his comfort and well-being. In contrast, the
    Trustees argued that they had an absolute discretion and that their mother had
    set out a wish, not a direction, in the last sentence of paragraph 4(b) of her
    will. Moreover, they expressed concern about the charges.

[31]

The
    application judge gave brief reasons for decision. She found from the material
    filed by the Trustees that they did not like or trust their father.

[32]

She
    found that the Trustees were being influenced in their decision making by
    extraneous matters such as their
distrust of the
    proprietor of the home where their father resided and their dislike and
    distrust of their father.
She therefore granted the application and ordered
    the Trustees to pay Gerald the sum of $3,875 per month commencing May 1, 2021.
    She also considered it appropriate to make the order retroactive to August 2018
    less the $1,500 monthly payments made pursuant to the consent interim order
    dated January 7, 2020. This amounted to $98,750. She subsequently ordered that
    the Trustees pay Gerald $26,000 in costs on a partial indemnity scale.

[33]

The
    Trustees appealed from that judgment. On June 22, 2021, Tulloch J.A. granted an
    order on consent that the Trustees pay Gerald $2,500 monthly commencing July 1,
    2021 pending disposition of the appeal and a retroactive payment of $1,000 for
    June 2021.

GROUNDS OF APPEAL

[34]

In
    their appeal, the appellants submit that the application judge erred in
    substituting her discretion for that of the Trustees with respect to the
    encroachment on capital. They say they exercised their discretion reasonably
    and complied with their duty to handle income and capital beneficiaries with an
    even hand. They made payments to Gerald when the Estate was in funds and the
    application judge erred in ordering payment of arrears. They submit that the
    application judge erred in concluding that they relied on extraneous factors, namely
    their dislike of their father and their distrust of him and Ms. Wainman. The
    application judge failed to identify the evidence she relied upon in support of
    their alleged dislike of their father and their distrust of the two was
    relevant given the contents of the recorded telephone discussion and Ms.
    Wainmans desire to extract as much money as possible from the Estate.

ANALYSIS

(a)

Consideration of Extraneous Matters

[35]

In
    her will, Ollie provided her Trustees with an absolute discretion to pay such
    part or parts of the capital of the residue of her Estate as they considered
    necessary or advisable to or for the benefit of her husband from time to time. She
    advised her Trustees that her husbands comfort and welfare were her first
    consideration and for this reason, it was her desire that her Trustees exercise
    their powers to encroach on the capital in a manner which would ensure his
    comfort and well-being.

[36]

The
    question raised by this appeal is the purport of these provisions; what was
    Ollies intention?

[37]

A
    testators intention is ascertained from a consideration of the will and the
    surrounding circumstances. The court puts itself in the position of the
    testator at the time the will was made:
Trezzi v. Trezzi
,
    2019 ONCA 978, 150 O.R. (3d) 663, at para. 13, and
Ross v.
    Canada Trust Company
,
2021 ONCA 161, 458 D.L.R. (4th) 3, at
    paras. 35-41. This is known as the armchair principle.

[38]

This
    appeal involves a discretionary trust. Such a trust arises when property is
    vested in trustees and a class of beneficiaries or named persons appear as
    trust objects, but the trustees have complete discretion as to the payment of the
    income, or the capital, or both.: D.W.M Waters, Mark R. Gillen & Lionel D.
    Smith,
Waters Law of Trusts in Canada
, 4th
    ed. (Toronto: Carswell, 2012), at p. 650.

[39]

As
    emphasized in the jurisprudence and academic commentary, it is not for a court
    to simply substitute its discretion for that of a trustee clothed with a
    discretionary power. Put differently, the court may not intervene simply
    because it would not have come to the same decision itself:
Re Gulbenkian's Settlement
,
(1968)
,

[1970]
    A.C. 508, [1968] 3 All E.R. 785 (U.K.H.L.);
McPhail v.
    Doulton

(1970), [1971] A.C. 424,
    [1970] 2 All E.R. 228 (U.K.H.L.);
Waters
,
    at p. 989. However, as I will explain, the presence of a discretionary power
    does not mean that a court has no role to play.

[40]

Although
    dealing with an executor, in
Cowper-Smith v. Morgan
,
    2017 SCC 61, [2017] 2 S.C.R. 754, at para. 41, McLachlin C.J. stated that
    courts may interfere with an executors discretion where there is a breach of
    its fiduciary duty. Like executors, trustees are fiduciaries. That said, the
    question of the degree of control which the court can and should exercise over
    a trustee who holds an absolute discretion is filled with difficulty:
Fox v. Fox Estate

(1996), 28
    O.R. (3d) 496 (C.A.), leave to appeal refused, [1996] S.C.C.A. No. 241, at para.
    11. Professor Donovan Waters described the dilemma in his treatise,
Waters Law of Trusts in Canada
, at pp. 985-87:

The settlor or testator may create a power which by its nature
    is discretionary, or he may add that it is to be exercised at the discretion or
    at the absolute and uncontrolled discretion of the trustees. In the latter
    situation, he is attempting to underline that he wishes no interference with
    the trustees, and, since the beneficiaries have no such power to intervene in
    any event, his meaning can only refer to the courts. Indeed, all trustee
    discretions involve the question of how far the courts are thereby excluded . The
    creator of the trust  does not intend the court to make the discretionary
    decisions.



On the other hand, the principle of law is that no settlor or
    testator can take away from the courts their ultimate jurisdiction. There has
    to be a limit to the extent to which the court can be excluded.



[T]he courts are in a difficult position. The rule of behaviour
    required of trustees in the discharge of their duties is good faith and the
    care of the reasonable business person. Yet, as we have suggested, the
    conferment of discretion appears to make the trustees their own judges of what
    is reasonable. In attempting to uphold the courts necessary jurisdiction on
    the one hand, and the trust creators intention on the other, different courts
    have described the extent of the courts power of intervention in different ways.

[41]

The
    traditional formulation of the law was anchored in the good faith requirement
    referenced by Professor Waters; a court would not interfere with the exercise
    of a trustees absolute discretion unless the trustee exercised that discretion
    with
mala fides
. This principle dates back to
    the House of Lords decision in
Gisborne v. Gisborne
(1877), 2 App. Cas. 300 (U.K.H.L.). This was the formulation used by this court
    in
Fox

in 1996.

[42]

In
Fox
, Galligan J.A. reasoned that intervention
    based on
mala fides
had not always been
    limited to fraud but could extend to circumstances where the trustees decision
    was influenced by extraneous matters. At para. 12, he quoted with approval from
Hunter Estate v. Holton

(1992),
    7 O.R. (3d) 372 (Gen. Div.), at p. 379:

Trustees must act in good faith and be fair as between
    beneficiaries in the exercise of their powers. There is no allegation of bad
    faith in the present case. A court should be reluctant to interfere with the
    exercise of the power of discretion by a trustee. I adopt the following
    criteria in [
Re Hastings-Bass,
[1975] 1 Ch. 25 (U.K.H.L.), at p.
    41], as being applicable to the courts review of the exercise of such power:

To sum up the preceding observations, in
    our judgment, where by the terms of a trust (as under section 32) a trustee is
    given a discretion as to some matter under which he acts in good faith, the
    court should not interfere with his action notwithstanding that it does not
    have the full effect which he intended, unless (1) what he has achieved is
    unauthorized by the power conferred upon him, or (2) it is clear that he would
    not have acted as he did (a) had he not taken into account considerations which
    he should not have taken into account, or (b) had he not failed to take into
    account considerations which he ought to have taken into account.

[43]

The
    court in
Fox
decided that the trustees
    exercise of her discretionary power had been motivated, at least in part, by a
    factor that she ought not to have considered: her disapproval of the religion
    of the woman her son proposed to marry. This was considered to be an extraneous
    matter that justified the courts intervention on the basis of
mala fides
, and accordingly, the trustees exercise of
    the power was set aside.

[44]

In
Edell v. Sitzer

(2001),
    55 O.R. (3d) 198 (S.C.), affd 9 E.T.R. (3d) 1 (Ont. C.A.), leave to appeal
    refused, [2004] S.C.C.A. No. 372, at para. 159, noting that non-interference is
    still the general rule, Cullity J. said this about
mala
    fides
:

The grounds on which the court will strike down an attempt by a
    trustee to exercise discretionary powers  even where, as here, the discretion
    is intended [to] be as unfettered as possible  have been described in
    different terms over the years. The old approach that limited the courts intervention
    to cases of
"
mala fides
"

has been
    reformulated in the more recent cases in terms of a concept of abuse of
    discretion .
[2]

[45]

He
    also described this approach more fully in
Banton v.
    Banton
, (1998) 164 D.L.R. (4th) 176 (Ont. Gen. Div.), at p. 234.

It is established in this jurisdiction that, in the exercise of
    their powers, trustees must give careful consideration to the scope of the
    power and the purpose for which it has been conferred. The terms, and the
    purpose, of the power indicate the facts that are relevant to its exercise. If
    the trustees ignore relevant factors or give significant weight to irrelevant
    considerations, they will have abused their discretion and the purported
    exercise of the power will be set aside by the Court . These principles flow
    from their fiduciary status as trustees and apply even where the power is
    expressed to be absolute or uncontrolled.
[3]

[46]

In
    that case, the trustees were provided with a discretionary power to encroach on
    capital for the maintenance and support of a beneficiary. They exercised their
    discretion and gave part of the trust capital to the beneficiary for two
    reasons: the beneficiary had expressed a desire for it, and in any event, the
    trustees considered that the capital belonged to him. Cullity J. intervened. He
    determined that the two reasons relied upon by the trustees constituted extraneous
    matters; instead, the trustees should have been considering whether the
    beneficiary required the capital for maintenance or support.

[47]

The
    courts approach in Canada to intervention with the exercise of a trustees
    discretionary power is described in
Waters Law of Trusts
    in Canada
at p. 989: The court will intervene, however, if (1) the
    decision is so unreasonable that no honest or fair-dealing trustee could have
    come to that decision; (2) the trustees have taken into account considerations
    which are irrelevant to the discretionary decision they had to make; or (3) the
    trustees, in having done nothing, cannot show that they gave proper
    consideration to whether they ought to exercise the discretion. See also
Ghag v. Ghag
, 2021 BCCA 106, 46 B.C.L.R. (6th) 351; and Corina
    S. Weigl, Keeping Fiduciaries Fit: The Exercise of Discretion, Canadian Bar
    Association of Ontario, Institute of Continuing Legal Education, The Outer
    Limits: Exploring Issues and Opportunities in Agency, Attorney and Trusteeship,
    January 28, 1999.
[4]

[48]

To
    sum up, court intervention into the exercise or failure to exercise a
    discretionary power flows from a trustees fiduciary status. The court may
    intervene even where the testator has conferred an absolute discretion on the
    trustee.
Mala fides
and improper consideration
    of extraneous matters are encompassed by this analytical framework. Applying
    this framework to this appeal, the focus of the appeal was the application
    judges intervention on the basis of the Trustees consideration of extraneous
    or irrelevant matters.

(b)

Application of Principles

[49]

Before
    the application judge, Gerald argued that the Trustees had exercised their
    discretion based on irrelevant considerations, or to use the language of the older
    jurisprudence, extraneous matters. The application judge agreed and concluded
    that the Trustees should be ordered to encroach on capital by paying the cost
    of Geralds residence. Although I reach the same conclusion as the application
    judge on the issue of the monthly encroachment, I do so for different reasons.

(i)

Application Judges Analysis of Jurisprudence

[50]

The application judge drew on three general propositions
    described in
Barnes v. Barnes
(2008), 42 E.T.R. (3d) 16 (Ont. S.C.),
    at paras. 39-42, to guide her analysis. She first noted that the courts may
    interfere with the exercise of a trustee's discretion if the trustee's decision
    is influenced by extraneous matters. As we have seen, this proposition is well
    supported by the jurisprudence and academic commentary
.

[51]

As a second proposition, the application judge determined
    that in a trust established for the support, care and comfort of a beneficiary,
    the omission of any mention of the income of the beneficiary in the trust
    document means that a trustee may not demand that the beneficiary's own income be
    called on first and a means test is inappropriate. This proposition is more
    contentious.

[52]

As a general premise,
Re Butler
, [1951]
    O.W.N. 670 (Ont. H.C.) confirms that trustees holding a discretionary power to
    encroach on capital must obtain sufficient information to enable them to decide
    whether to exercise their powers. In that case, the trustees failure to seek
    any information from the income beneficiary on her means, income, or
    circumstances resulted in intervention by the court.

[53]

In
Re Luke
, [1939] O.W.N. 25 (Ont. H.C.),
    which was relied upon by
Barnes
,
the bequest was to the wife
    to use the income therefrom and so much of the corpus thereof as she may have
    need of for her comfort, maintenance and support during her lifetime. The
judge stated that had the testator intended that his widow should
    first exhaust her own funds before encroaching on the corpus of his estate, he
    could have used appropriate language to express that intention. His failure to
    do so indicated that her right of encroachment was not regulated by her other
    means. This was followed by
Hinton v. Canada Permanent Trust Co.
(1979),

5 E.T.R. 117 (Ont. H.C.), affd [1980]
    O.J. No. 1720 (Ont. C.A.), and
ODonnell
    (Litigation Guardian of) v. Canada Trust Co.
, [1996] O.J. No. 3461
    (Gen. Div.).

[54]

Hinton
involved a trust fund of
    $100,000 for a 50 year-old son who suffered from a lifelong disability requiring
    continued medication and treatment and who had rarely been employed during the
    testatrixs lifetime. He was the only child of the testatrix and the $156,000
    residue of the estate was left to him. The trustees were directed to pay him
    the income from the trust fund. If, in the discretion of the trustees, that income
    was insufficient to provide for his competent support, care or comfort  in keeping
    with his station in life and similar to that which he enjoyed during [the
    testatrixs] lifetime, including  proper maintenance of his residence and all
    hospital, medical and institutional expenses, provision for adequate wardrobe
    and proper yearly replacement thereof, they could pay so much of the capital
    of the trust fund as they in their absolute discretion deemed proper or
    necessary. The testatrix went on to direct that any doubt as to encroachment
    was to be resolved in favour of encroaching and the trustees were authorized to
    make such encroachment without regard to the usual rules of trust
    administration involving impartiality between life tenant and remainderman, and
    without regard to the degree to which the principal of the trust fund was
    depleted. The sons monthly expenses significantly exceeded the income payments
    out of the trust fund.

[55]

The question in
Hinton
on an
    application for advice and directions was whether the trustees should consider
    the income beneficiarys own assets and income when exercising their discretion
    to encroach. In oral reasons, the application judge construed the testatrixs
    will and concluded that the testatrix deliberately omitted any reference to the
    sons income as a factor to consider. He reasoned that the principle in
Re
    Luke
had application, namely that had the testator intended that trustees
    have regard to the private means of the beneficiary, appropriate language would
    have been used.

[56]

ODonnell (Litigation Guardian of) v. Canada
    Trust Co.
involved a will that stated that my wifes comfort and
    welfare are my first consideration. In an endorsement, the application judge
    treated this as being the same as the provision in
Hinton
that stated that any doubt be resolved in favour of an encroachment, and also
    relied on
Hinton
for the principle that
    express language would have been used by the testator had he intended the
    trustees to have regard to the private means of the beneficiary.

[57]

In contrast, other decisions have applied a
    different approach.

[58]

Re McVean
(1985), 51 O.R. (2d)
    685 (H.C.), involved a power of encroachment of such sums as may be necessary
    to properly support and maintain  the children of the testator both in
    sickness and in health according to their present status in life as long as
    they shall live. Van Camp J. stated at para. 12: The difficult question
    is to what extent the right to encroach on capital is affected when there are
    funds of their own available. The authorities to which I have been referred are
    not in agreement, but those authorities must be considered in light of the
    wording of the wills therein. Although she did not expressly refer to
Hinton
, she did review some of the case law including
Gisborne v. Gisborne
where at p. 309, Lord Penzance had
    noted that there were no words in the will from which one could conclude that
    other sources of income available to the income beneficiary were to be
    disregarded by the trustees. He observed that the object to be obtained was the
    support and comfort of the testators wife but the means of obtaining that
    support was left entirely to the discretion of the trustees.

[59]

The application judge in
McVean
determined that while the assets of the income beneficiaries did not need to be
    exhausted before recourse was made to the corpus of the estate, the power of
    the trustees to encroach arose only after the income beneficiaries income had
    been considered.

[60]

In

Re Passmore Estate

(1965), 49 D.L.R. (2d) 176 (Alta. App. Div.), the
    Alberta Court of Appeal held that trustees were entitled to take the income
    beneficiaries financial positions into consideration.
Paterson
    (Attorney of) v. Paterson Estate

(1996),
    109 Man. R. (2d) 294 (Q.B.) took a similar approach.

[61]

Commentary on whether trustees should consider
    the resources of an income beneficiary in their exercise of a power of
    encroachment is also mixed.

[62]

By way of example,
Widdifield on Executors
    and Trustees
at p. 8-12.6 states that despite the courts reasoning in
Hinton
,
    it is generally considered prudent to inquire into the life tenants assets
    before proceeding with an exercise of the power to encroach on capital. The
    authors note that in assessing requests by a life tenant for a grant of capital
    under a discretionary clause, the trustee may wish to consider the financial
    resources of the applicant. These do not have to be exhausted before the
    applicant qualifies, but neither should the discretionary fund be exhausted
    before the applicant uses his own capital (citation omitted).

[63]

In a similar vein, C.S. Weigl notes, at p. 28 of
    Keeping Fiduciaries Fit: The Exercise of Discretion, that often a trustee is
    given a power of encroachment with respect to capital for the maintenance,
    support and well-being of a beneficiary. Given there are particular purposes
    for which the discretion is to be exercised, one would expect there to be some
    form of due diligence required of a trustee prior to exercising his
    discretion. As with
Widdifield
, at p. 31, the author suggests that
    regardless of
Hinton
and
Re Luke
, it seems in most cases, no
    express language needs to be included in the trust document in order for a
    trustee to require the beneficiaries to produce information relevant to the
    exercise of his discretion.

[64]

Waters
describes the dilemma at p. 651, footnote 156, saying that from a common sense
    point of view, consideration of outside income of the income beneficiary would
    seem a logical factor for trustees to take into account but notes the
    conflicting case law. At p. 1197, the authors state: In the absence of clear
    direction in the instrument, it seems difficult to fault a trustee for taking
    account of all the circumstances. Whether there is a principle requiring the
    court to lean towards one construction rather than the other, it may be that
    the judicial remarks in both
Re Luke
and
Hinton v. Canada
    Permanent Trust Co.
were based upon the particular facts in those cases.

[65]

Having examined the jurisprudence and the
    commentary, one can extract certain threads. The starting point is that effect
    must be given to the testators intentions as ascertained from the language of
    the will and surrounding circumstances. Trustees must therefore carefully
    examine the wording of the will or trust instrument. The duty to consider all
    relevant matters has as its obvious corollary, a duty to make all necessary
    inquiries so that the trustee is adequately equipped to make a decision:
    Cullity,
Judicial Control of Trustees' Discretions
, at p. 116. Absent
    other direction in the will, I fail to see how a trustee can satisfy itself
    that payment of capital to the income beneficiary is necessary or advisable
    without considering the beneficiarys financial circumstances.
The
    absence of words mandating consideration of an income beneficiarys financial circumstances
    is as unrevealing of intention as the absence of words that an income
    beneficiarys financial circumstances be disregarded. Put differently, this is
    a neutral factor.
As in
Hinton
, while it may be that
    the absence of such words may lend strength to an interpretative exercise, they
    should not be treated as a standalone determinative proposition. Ideally,
    testators will state in wills that contain a discretionary trust with a power
    of encroachment whether the income beneficiarys resources are to be
    considered. Indeed, this would be an advisable practice. In the absence of such
    a direction however, reliance should not be placed on propositions stated to be
    of general application. Rather, in each case, resort must be made to the
    language of the will and the surrounding circumstances. T
he proper
    approach is case specific.

[66]

This does not mean that in the absence of
    direction in the will or trust instrument that a means test is required of the
    beneficiary. Rather, it simply means that trustees may make some inquiries to
    satisfy themselves of their mandate and ought not to be criticized for doing
    so.

[67]

This
    analysis undercuts the reliance placed by the application judge on the second
    principle extracted from
Barnes
. There was
    nothing in Ollies will that addressed specifically the issue of consideration
    being given to Geralds financial circumstances. On the other hand, it is
    difficult to see how his resources would not necessarily inform both his
    comfort and well-being and the Trustees ability to consider what was
    necessary or advisable. Although admittedly dated, Gerald did declare in
    excess of $1 million in assets in 2011, yet claimed impecuniosity at the time
    he initiated his application without fully explaining the disbursement of those
    assets. The encroachment would not be regulated by Geralds means but his
    financial circumstances were a proper factor for the Trustees to consider in
    their discretion under the will.

[68]

The
    third proposition drawn from
Barnes

and relied upon by the application judge was that in a trust
    established for the care, comfort and support of a beneficiary, any doubt as to
    the desirability of encroaching on capital should be resolved in favour of
    encroaching.

Barnes

relied on
Hinton v. Canada Permanent Trust Co.
,
    at para. 14, as support for that proposition. However, in that case, the will
    contained an express provision that it was the testators intention that any
    doubt as to the desirability of a given encroachment be resolved in favour of
    making such an encroachment. Thus, the proposition extracted in
Barnes
and relied upon by the application judge in this
    case was explicitly written into the trust instrument in the
Hinton
case. However, as in
ODonnell
,
    Ollie advised her Trustees that her husbands comfort and welfare were her
    first consideration, and as such, the application judge properly considered
    that any doubt would favour encroachment.

[69]

In
    summary, although reliance on the second proposition cited in
Barnes

was ill-placed and
    reliance on the third proposition more properly was an exercise in construing
    the will rather than a free-standing principle, the application judges
    reliance on the first proposition relating to extraneous matters was well
    founded. Her determination of that issue serves to defeat any shortcoming in
    the remainder of her analysis. I will turn next to the application judges treatment
    of the issue of consideration of extraneous matters.

(ii)

Application Judges Consideration of Extraneous Matters

[70]

As
    mentioned, the application judge held that the Trustees were being influenced
    in their decision making by extraneous matters such as (i) their distrust of
    their father and the proprietor of the home and (ii) their obvious dislike of
    their father.

[71]

Dealing
    first with the application judges reliance on the Trustees distrust of their
    father and Ms. Wainman, in my view, it was an error for her to characterize the
    distrust factor as extraneous or, to use the more modern formulation, as
    irrelevant to the exercise of the Trustees discretion. Ollie expressed her
    desire that her Trustees pay such part of the capital as they considered necessary
    or advisable and that they encroach in a manner which will ensure [Geralds]
    comfort and well-being because his comfort and welfare were her first
    consideration. His residence played a key role in any exercise of that discretion,
    and while an important factor, Geralds desire to live at Ms. Wainmans
    residence, as in
Banton
, was not
    determinative.

[72]

The
    Trustees were exercising their discretion in the face of: the unintentionally
    revealed conversation between Ms. Wainman and Gerald, including his statement
    that he could sucker in the appellants, and Ms. Wainmans that she did not want
    them to see what he was paying now and that she hoped he would F**kthem now,
    or as stated by the application judge, that Ms. Wainman seemingly encouraged [Gerald]
    to extract as much money as possible from the estate; the close to 25% increase
    in cost over one year attributable to transportation, in circumstances where Gerald
    also incurred extensive independent transportation costs; the absence of any
    evidence that Ms. Wainman was a legitimate service provider; Ms. Wainmans
    refusal to meet with them; and the inconsistent evidence on Geralds financial
    circumstances and the difficulties encountered with obtaining financial
    disclosure, difficulties shared by Geralds own lawyer. The Trustees needed to
    know whether the capital encroachment would go towards the proper purpose of Geralds
    comfort and well-being or would go towards the improper purpose of lining the
    proprietors pockets. These factors legitimately raised a spectre of distrust;
    it was a palpable and overriding error to characterize the distrust as an irrelevant
    or extraneous matter.

[73]

This
    brings me to the second extraneous factor found by the application judge: the
    Trustees dislike of Gerald. Their dislike of Gerald had nothing to do with his
    comfort and well-being, and the application judge properly identified this
    factor as extraneous in nature. It was irrelevant to the purpose for which
    their discretion had been granted and ought not to have influenced their
    exercise of discretion. The Trustees exercise of discretionary power for this
    purpose was an abuse of discretion similar to that contemplated by Cullity J. in
Banton
, at para. 172. It legitimately attracted
    judicial intervention.

[74]

The
    Trustees complain that the application judge failed to identify the evidence
    she relied upon in support of her finding of dislike. The application proceeded
    based on a paper record and there were no examinations. While it would have
    been desirable to elaborate, a reading of the entire record supports the inferences
    drawn by the application judge that the Trustees discretion was animated by
    their dislike of Gerald. Janice Bonnins affidavit exemplifies her sentiments.
    Among other things, she describes her fathers controlling behaviour and his
    disregard for other family members. Furthermore, given the history of the
    parties relationship, the Trustees dislike is unsurprising.

[75]

Moreover,
    as stated in
Edell
at para. 162, If, of
    course, the discretion was exercised on the basis of a belief that no
    reasonable person could hold, it would be legitimate for the court to infer
    that extraneous matters  whether emotional or otherwise -- must have
    influenced his judgment.

[76]

The
    evidence before the application judge was that by January 9, 2020, Gerald only
    had an investment account of $37,000 and a bank account of $5,928.20 that
    included a cheque of $2,465.75 from the Trustees. By March 17, 2021,
    he was in dire financial need and could not wait any longer. It was open to the
    Trustees to cross-examine Gerald and to examine Ms. Wainman, but for whatever
    reason, they opted not to do so. Therefore, the only evidence before the
    application judge was that Gerald had basically run out of money and he needed
    the encroachment on capital to cover the costs of his residence. The
    application judge made a finding of fact that the amount that Gerald was being
    charged by Ms. Wainman was consistent with the cost of similar facilities in
    the area. This finding was not seriously challenged on appeal and in any event,
    was a finding that was open to the application judge to make. In the face of
    this context and Ollies intentions, no reasonable trustees would refuse to exercise
    their discretion in favour of a monthly encroachment that reflected the $3,875
    monthly cost of Geralds residence at Rural Roots Retirement. In the
    circumstances, it was reasonable for the application judge to conclude that the
    Trustees discretion was improperly influenced by an extraneous factor, namely,
    their dislike of their father.

[77]

In
Edell
, at para. 178, Cullity J. observed that:

There is ample authority for the proposition that extraneous
    motives or purposes will vitiate an attempt to exercise a discretion if they
    form part of the basis upon which the trustees decision was reached.

[78]

The
    application judges intervention was fully justified.

(iii)

Arrears

[79]

The application judge based her arrears order on
    the date Gerald stated he moved into Ms. Wainmans residence, August 1, 2018.
    As I have explained, it was legitimate for the Trustees to conduct some
    investigation into Geralds circumstances and proposed living accommodation. On
    March 1, 2019, Mr. Sirdevan provided some details in support of his
    clients request for a monthly contribution of $4,000. Mr. Wall repeatedly
    sought some proof of expenses but was repeatedly rebuffed to the point that
    even Mr. Sirdevan wrote that he was unsure why he did not have the information
    from Gerald, as he had asked for it several times. In the meantime, the
    Trustees received the concerning voicemail recording. On October 1, 2019, Mr.
    Sirdevan provided the Trustees with a 12-month record of Geralds banking
    activity. By that date, the Trustees had material disclosure, were in a
    position to conduct any necessary cross-examination but opted not to do so, and
    were in possession of funds. Given these facts, October 1, 2019,
    rather than August 1, 2018, is a reasonable date from which to calculate
    arrears.

[80]

The
    arrears therefore consist of four payments of $3,875 for the period of October
    1, 2019 to January 31, 2020; and 15 payments of $2,375 for the period February
    1, 2020 to April 30, 2021, this latter calculation reflecting the deduction for
    amounts already paid by the Trustees pursuant to the order of McCarthy J. The
    total arrears in the April 12, 2021 judgment therefore amount to $51,125. In
    addition, the Trustees are to pay arrears of $1,375 per month for the period
July 1, 2021 to and including January 1, 2022
so
    as to augment the quantum of the interim order of Tulloch J.A. ($3,875 less $2,500
    = $1,375). This totals $9,625 in arrears.

DISPOSITION

[81]

In
    conclusion, I would dismiss the appeal of paragraph one of the judgment
    relating to the monthly encroachment and would allow the appeal of paragraph
    two of the judgment by replacing the sum of $98,750 with the sum of $51,125
    relating to the arrears. In addition, the Trustees are to pay arrears of $9,625
    for the period July 1, 2021 to and including January 1, 2022.

[82]

As
    for costs of the application, I see no error in the costs awarded by the
    application judge in the amount of $26,000 inclusive of HST and disbursements. On
    appeal, Gerald was largely successful. As agreed by the parties, the Estate
    shall pay costs to Gerald fixed in the amount of $5,000 inclusive of
    disbursements and applicable tax.

Released: January 20, 2022 G.R.S.

S.E.
    Pepall J.A.

I
    agree. G.R. Strathy C.J.O.

I
    agree. G. Pardu J.A.





[1]

The title of proceedings in the Notice of Application
    describes the appellant using a different spelling but he identifies the proper
    spelling of his name in his affidavit and I have used it throughout these
    reasons.



[2]

See also his article entitled
Judicial Control of Trustees' Discretions
(1975), 25 U.T.L.J. 99.



[3]

See also
Carmen S. Thériault,
Widdifield on
    Executors and Trustees
, loose-leaf (2021-Rel. 11), 6th ed. (Toronto:
    Carswell, 2021), at p. 8:5.



[4]

The author groups the non-exhaustive list of categories
    meriting judicial intervention as: improper purpose, failure to consider, and
    unreasonable decisions. The categories are substantially similar to those
    described in
Waters
.


