Is Friendship a bar to Trusteeship?


In a recent BC Supreme Court case, Re Newton Trust, 2013 BCSC 799, the court addressed the issue of appointing a third trustee to fill a vacancy left by the death of a former trustee (Mr. Mayson), where the two remaining trustees disagreed as to who should fill the vacancy. One of the remaining trustees (Ms. Cohen) sought to have Mr. Woodward appointed as trustee; however, the other remaining trustee (Mr. MacKenzie) sought to have a judicial trustee appointed. He argued that Mr. Woodward lacked independence due to his friendship with Ms. Cohen. Mr. MacKenzie alleged that Ms. Cohen had demonstrated a strong will and effort to control the trust, requiring that the new trustee be completely independent of her.

Based on the following three factors from the English Court of Appeal decision, In Re Tempest, (1866) 1 Ch. App. 485, the court found that Mr. Woodward was an appropriate trustee:

1)      The wishes of the author of the trust, expressed in or deduced from the trust instrument;

2)      The wishes of the beneficiaries, as held above all other interests; and

3)      The question of whether the appointment will promote or impede the execution of the trust.

Mr. Woodward was an appropriate trustee under the factors in Tempest because the trust allowed, and even promoted, the trustee to have a relationship with the beneficiaries, of which Ms. Cohen was one, and provided broad discretionary powers to the trustee.  Furthermore, the beneficiaries promoted Mr. Woodward as trustee and there was no evidence adduced that the execution of the trust would be impeded if Mr. Woodward was a trustee.

Despite the lack of evidence that the execution of the trust would be impeded by Mr. Woodward, the court still had to address whether Mr. Woodward’s friendship with Ms. Cohen barred him from being a trustee. The court concluded that friendship with a trustee or beneficiary does not impugn the independence of a trustee due to the presumption of good faith.  Mr. MacKenzie failed to provide cogent evidence to rebut the presumption of Mr. Woodward’s good faith.  Furthermore, Mr. MacKenzie failed to show that Ms. Cohen had tried to control the trust, as his evidence was rejected as insufficient to reach such a conclusion.  Due to these failures, Mr. MacKenzie did not demonstrate that friendship between Mr. Woodward and Ms. Cohen disqualified Mr. Woodward from being a trustee.

This case reminds us that a trustee does not have to be completely independent of other trustees or beneficiaries, as long as the trust instrument and the beneficiaries allow a relationship to exist, and the relationship will not impede the execution of the trust.  The court will give weight to the presumption of good faith, and it will not be rebutted based solely on a friendship between a trustee and his or her fellow trustees or the beneficiaries.

Thanks for reading.