January 23, 2007

Rose v. Rose is a recent Ontario case that deals with marriage breakdown, disillusioned children, and the finality of an irrevocable trust.

Brian and Janice were married and had two daughters.  In 1992, Brian and Janice transferred a ski chalet and cottage into trust for the benefit of their daughters.   Brian was the trustee for the trust.  The trust was irrevocable.  The family enjoyed the use of the chalet and cottage before and after the establishment of the trust.

Brian and Janice separated after the trust was established.  Brian’s relationship with his daughters also deteriorated.  The daughters ultimately became frustrated with their father as trustee and commenced an application to have him removed.  They also sought an order winding up the trust and distributing the capital income to them.

For his part, Brian wanted to continue to use and enjoy the chalet and cottage despite the separation from his wife.  However, the court held that the trust deed, the foundation document for the trust, could not be interpreted as authorizing Brian (or Janice for that matter) to use and enjoy the two properties without the consent of his two daughters.  Furthermore, the court was not prepared rectify the trust deed to provide Brian with the use and enjoyment of the properties.

Brian also hoped to transfer the two properties back to him and his former wife.  The court held that once the trust had been created, no such transfer could take place as Brian had failed to retain the power to revoke the trust.

However, the court did remove Brian as trustee.  The court noted there was a great deal of hostility between Brian and his daughters.  According to the court, it did not matter where the fault lay.  The question to be asked when removing a trustee is whether it would be difficult for the trustee to act with impartiality, not whether in fact he would or would not do so.  The court held that it would be impossible for Brian to act impartially in this situation.

Finally, the court held there was no basis for the claim by the daughters that they were entitled to call for the winding-up of the trust and for the distribution to them of the property of the trust.