The recent case of Karrow v. Boghosian, 2026 ONSC 2425 (CanLII) is a detailed decision which warrants a thorough review. This blog will focus on the key takeaways from the case, which focussed on the duties of trustees in exercising discretion in administrating a testamentary trust.
The applicant estate trustees brought an application to pass their accounts. The respondent Jordan Boghosian (“Jordan”) raised objections to the accounts and maintained that the estate trustees failed to act with an even hand, exercised their discretion inappropriately, and depleted the capital of the estate for the benefit of her father, the applicant Niel Karrow (“Niel”), and to the detriment of the respondent and her sister, Sarah Karrow (“Sarah”). The respondents are the daughters of Niel. The respondents objected to the accounts being passed and sought the repayment of certain funds distributed to Niel from the Estate.
By way of background, the deceased died in 2016 and executed her will on January 31, 2003 (the “Will”). According to the Will, the residue of the estate was to be divided into four equal shares for the benefit of the deceased’s grandchildren. Each of those four shares was to be held in trust until the youngest of the grandchildren in each of the four sets (of grandchildren) reached the age of 30. The estate trustees were authorized to make payments from two of the four shares in certain circumstances. As the court simplified at paragraph 8 with respect to the share at issue: “one-quarter share of the residue of Elizabeth’s estate was to be for the benefit of her grandchildren, Jordan and Sarah, when the younger of them turns thirty, less costs incurred prior to that date for (i) their medical needs; or (ii) to maintain Niel’s standard of living. Payment of any such costs was to be approved by the trustees.”
$1.5 million dollars of the estate’s residue was distributed in four shares (i.e. $375,000 each), including one such share for Niel and his daughters to be managed pursuant to the Will’s terms.
In short, due to Niel’s personal circumstances and based on requests made to the estate trustees, the estate trustees authorized two payments to Niel in 2018 and 2019 totaling $145,000.
The payments were opposed on the basis that the estate trustees breached their fiduciary duties to Jordan and Sarah by considering only the interests of Niel and by failing to consider the interests of Jordan and Sarah at all. It was also alleged that the payments made were not “necessary to maintain Niel’s standard of living” in accordance with the Will.
The Court reiterated the key duties of estate trustees; namely, that they have a duty to act impartially between beneficiaries and that in their dealings they act in such a way that, if there are two or more beneficiaries, each beneficiary receives exactly what the terms of the trust confer upon him and otherwise receives no advantage and suffers no burden which other beneficiaries do not share. In this way the trustees must act impartially; they hold an even hand.
Two of the court’s key findings were:
- Absolute discretion is not unlimited and conferring a trustee with absolute discretion does not, without something more, eliminate the trustee’s common law duties; and
- The duty to act impartially requires the individual with the exercise of discretion to give proper consideration to relevant matters and exclude from consideration matters which are irrelevant.
The court concluded that the trustees were not even-handed in this case for 3 reasons: (1) one of the trustees received advice that he was not required to act with an even hand, and so acted; (2) there was no evidence that the trustees considered the interests of Jordan and Sarah; and (3) the trustees did not act with an even hand relative to the size of the payments to Niel, which totalled $145,000 (the entirety of the one-quarter share set aside for Jordan and Sarah was $375,000 less expenses related to their medical care or to maintaining Niel’s standard of living. The payments to Niel, then, amounted to nearly 40% of the capital of that one-quarter share.).
The court further stated: “To encroach on the capital of a trust for the “benefit” on the income beneficiary does not mean one can do so without keeping the even-hand principle in mind. Encroachments must be looked at in light of the competing interests of the income and capital beneficiaries, and at the reasonableness of the request and the magnitude of the request.”
Effectively ignoring the interests of Jordan and Sarah, the court further found, amounted to a failure to apply the even hand rule, a breach of fiduciary duty, an absence of good faith, and an abuse of discretion. In these circumstances, the trustees could not be said to have acted reasonably in approving the payments to Niel. In other words, they acted unreasonably.
Notably, in the result, it was held that although Niel requested and received the payments, all three applicants were deemed to be responsible for them – it was ordered that they were jointly and severally liable for the return to the trust the amount of $145,000, with interest from the dates of the two payments. The application to pass the accounts was also dismissed.
