Executive Summary: Key Legal and Evidentiary Issues

• Interpretation of a testamentary trust clause authorizing encroachments on capital “necessary to maintain Niel’s standard of living” and whether that power was properly exercised.
• Application and scope of the trustees’ common law “even hand” duty when a will grants “absolute” or “unfettered” discretion yet still names multiple beneficiaries.
• Adequacy of the trustees’ inquiries into Niel’s financial circumstances and the necessity of large encroachments, including whether they made “all necessary inquiries” before approving payments.
• Reasonableness of two substantial capital encroachments (totalling nearly 40% of the trust share) used mainly to pay Niel’s spousal and child support and related debts.
• Weight to be given to late-filed affidavits that contradict earlier cross-examination and rely on undisclosed legal advice said to justify the trustees’ decisions.
• Appropriate remedy and personal liability of the trustees under s. 49 of the Estates Act, including a joint and several repayment order to restore misapplied trust capital.

Facts of the case

Elizabeth Joan Karrow died in 2016 leaving a will dated January 31, 2003. After expenses and specific bequests, she directed that the residue of her estate be divided into four equal shares, each one-quarter share to be held in trust for the benefit of the grandchildren of each of her four children. For each share, the trustees were to hold the capital until the youngest grandchild in that “branch” reached 30, at which time the remaining capital would be distributed to those grandchildren in that branch. One of the four one-quarter shares was for the benefit of the children of her son, Niel Alexander Karrow – namely, his daughters, Jordan Boghosian and Sarah Karrow. After liabilities and specific bequests, the residual estate totalled $1.5 million, so each one-quarter share was $375,000. The share for Niel’s family was therefore a $375,000 trust fund, subject to possible encroachments before the younger daughter, Sarah, reaches age 30 in 2030, with the balance to be divided equally between Jordan and Sarah at that time.

The trust clause and its operation

The central provision was paragraph 3(s)(i)(b) of the will. Under it, the trustees were directed to keep one equal share invested and were authorized, “in their absolute discretion,” to pay income and “such part or parts of the capital” for the benefit of Niel and his children, “or some one or more of them, to the exclusion of any one or more of them,” in such proportions as the trustees considered advisable. However, this power was expressly constrained by purpose: payments to the children (Jordan and Sarah) were only permitted where the trustees considered them advisable for “medical necessity or illness or disability” of a child, and payments to Niel were only permitted “in such situations as my Trustees in their absolute discretion consider such payments to be necessary to maintain NIEL’S standard of living.” The will further provided that once Sarah, the younger daughter, turns 30, the remaining capital in this trust share is to be divided equally between Jordan and Sarah. In structure, the clause set the grandchildren up as the ultimate capital beneficiaries, while allowing intermediate, purpose-limited encroachments for the children’s medical needs and to maintain Niel’s standard of living.

Family breakdown and Niel’s financial circumstances

Niel and his then wife, Jodie Boghosian, separated in 2011 after nearly 21 years of marriage. Before separation, they had enjoyed a comfortable lifestyle in well-appointed homes on large properties, consistent with Niel’s privileged background and professional status as a university professor. After separation, Niel asserted that he left the relationship with few assets and was compelled to rent. Criminal complaints by Jodie and related family law proceedings led him to retain counsel, financed through a line of credit. His financial position was further strained by spousal support, child support, and section 7 special or extraordinary expenses for Jordan and Sarah, all of which he said produced debt he had not previously carried. Against this backdrop, Niel approached the trustees of his mother’s estate—his brother, Thomas (“Tom”) Karrow, and family friend and financial advisor, Brian D. Cameron—seeking payments from the trust created for his daughters as a way of alleviating his personal financial difficulties.

The three encroachment requests

Niel made three requests for encroachments on the trust capital. The first, in April 2018, was for $50,000 to pay off his maxed-out line of credit. Tom and Mr. Cameron consulted with the estate solicitor, Stephen Grant, met without Niel present, and ultimately authorized a $50,000 payment, which was made on June 29, 2018. Niel then used that sum to retire the approximately $49,700 balance on his line of credit. The second request arose in the context of ongoing family law negotiations. In September 2018, Jodie, through counsel, proposed that Niel commute his remaining spousal and child support obligations with a lump sum payment. Niel wanted to accept a lump sum arrangement but lacked the cash. On September 17, 2018, he emailed Tom, Mr. Cameron, and Mr. Grant, attaching Jodie’s settlement proposal and flagging that a potential payout would “greatly affect” his standard of living. He then forwarded draft counter-offer materials prepared by his family lawyer, which proposed lump sum amounts for spousal support, child support, and relief from maintaining life insurance as security for child support.

Niel’s second encroachment request was for $95,000 to cover the lump sum support obligation and his legal fees. On October 1, 2018, the family court made a final order requiring him to pay Jodie $60,000 for spousal support, $5,652 in child support arrears, and $10,000 toward future special and extraordinary expenses (including post-secondary education) for Jordan and Sarah, for a total of $75,652, and it terminated his obligation to maintain life insurance for their benefit. On October 11, 2018, Tom and Mr. Cameron authorized and paid Niel $95,000 from the trust. Niel used this money to pay the $75,652 lump sum support and section 7 amount, his legal fees of about $12,000, and approximately $6,400 on his Visa balance, with about $900 left unexplained.

The third request, in April 2019, was for $80,000 as an additional down payment so Niel could purchase a home in Guelph; he said he had saved $40,000 and needed another $80,000 to proceed. Tom initially suggested this fit within the wording about maintaining Niel’s standard of living. Mr. Cameron provisionally agreed, subject to Mr. Grant’s view. After Mr. Grant indicated that Jordan and Sarah might argue that such an encroachment was not “necessary” within the meaning of the will and suggested that the accounts should be passed before any further encroachments, Tom and Mr. Cameron ultimately refused the third request. Niel nonetheless managed to purchase a house in May 2019 without any additional trust payment.

The application to pass accounts and Jordan’s objections

The three trustees—Niel (as both trustee and beneficiary), Tom, and Mr. Cameron—brought an application to pass their accounts for Elizabeth’s estate. Jordan, one of the two capital beneficiaries of the relevant one-quarter share, objected. She asserted that the trustees had breached their fiduciary duties by: failing to act with an “even hand” among beneficiaries; focusing solely on Niel’s interests; failing to consider hers and Sarah’s interests; and authorizing payments that did not meet the will’s “necessity” requirement. She further contended that the trustees did not make adequate inquiries into Niel’s financial circumstances before approving the encroachments and that they had, in effect, allowed Niel to use capital held in trust for his daughters to satisfy his own legal obligations to them and to Jodie. The trustees responded that the even hand principle did not apply because paragraph 3(s)(i)(b) conferred “absolute discretion” and expressly permitted payments to “one or more” of Niel and his children to the exclusion of others. In their view, the only live question was whether the trustees’ exercise of discretion was one the court should interfere with under the narrow Waters test (i.e., decisions so unreasonable that no honest trustee could make them, reliance on irrelevant considerations, or a failure to give proper consideration before deciding). They argued their decisions were reasonable, based on the information available and on legal advice from Mr. Grant.

The admissibility of late affidavits

Procedurally, Jordan challenged the admissibility of affidavits sworn by the applicants in 2024, after they had retained new counsel, on the basis that they were filed without leave contrary to Rule 39.02(2). The court admitted the affidavits, noting that no cross-examinations had yet occurred on Jordan’s responding affidavit and that the late filing would go to weight rather than admissibility. At the same time, the judge observed that Jordan herself relied on aspects of the new affidavits, and he acknowledged that their late introduction might affect the weight ascribed to them, particularly where they departed from the applicants’ earlier cross-examination evidence.

Application of the even hand principle

On the central legal issue, the court first addressed whether the trustees were bound to act with an even hand between income and capital beneficiaries in the face of “absolute” discretionary language. Relying on authorities such as Re Carley Estate, Re Fleming, Clayton v. Clayton, and Edell v. Sitzer, the judge held that conferring “absolute” or even “uncontrolled” discretion does not, without more, displace the trustee’s core duty to act impartially between beneficiaries. Clear, express language is required to relieve trustees of the even hand obligation. The court examined paragraph 3(s)(i)(b) and found that, although it allowed the trustees to make payments to Niel or his children “to the exclusion of any one or more of them,” it did not expressly state that the trustees could ignore the interests of the excluded beneficiaries or that the even hand principle was ousted. The judge contrasted this clause with wording in other decided cases that specifically authorized discrimination among beneficiaries and explicitly referred to not maintaining an even hand. In this case, the will’s structure—leaving the lion’s share of the estate to grandchildren, with parents largely bypassed—confirmed that Elizabeth’s overarching intention was that the grandchildren, including Jordan and Sarah, receive a generous inheritance, subject only to limited, purpose-driven encroachments. On that reading, the trustees were required to consider the impact of any encroachment on Jordan and Sarah’s eventual share and could not simply treat the trust as a pool of capital for Niel’s personal use.

Findings on whether the trustees acted even-handedly

The court concluded that the trustees did not act with an even hand for several reasons. First, Mr. Cameron acknowledged in his original affidavit that he had been advised that he did not need to act with an even hand, and the applicants maintained this position throughout the litigation, indicating that they were proceeding on a fundamentally mistaken view of their duties. Second, the record contained no evidence that the trustees in fact turned their minds to Jordan and Sarah’s interests when approving the $50,000 and $95,000 encroachments. Early affidavits, cross-examinations, and produced emails all showed deliberation about Niel’s needs, legal strategy, and the risk that Jordan and Sarah might later complain, but nothing demonstrating a balancing of their interests as beneficiaries. Third, the sheer magnitude of the encroachments—$145,000 from a $375,000 share, nearly 40% of the capital—was found disproportionate when measured against Elizabeth’s intention that her grandchildren be the primary capital beneficiaries. Drawing a parallel to Carley, where a 14.75% encroachment was criticized as a “complete negation” of the even hand principle, the judge held that the much larger percentage taken here was inconsistent with a reasonable, balanced administration of the trust.

Compounding this, the court emphasized that significant parts of the encroachments were used to discharge Niel’s obligations for spousal support, child support, and post-secondary education expenses for Jordan and Sarah. Child support, including section 7 expenses, is the right of the child, not merely a payment to an ex-spouse. By allowing Niel to satisfy these personal legal obligations using funds held in trust for the very same children, the trustees permitted an outcome that no even-handed fiduciary should have endorsed. The judge noted that Mr. Cameron was aware that part of the second payment would be used to meet support obligations, yet no serious concern or independent analysis of this conflict appeared in the record.

Assessment of the trustees’ reasonableness and diligence

Having found a failure to act with an even hand, the court held that the trustees had breached their fiduciary duties. A breach of fiduciary duty goes directly to the good-faith and fairness requirements that frame the court’s review of discretionary trust decisions. Trustees who ignore relevant factors—such as the competing interests of capital beneficiaries—abuse their discretion, even where a power is expressed to be “absolute” or “uncontrolled.” The judge also examined whether, independently of the even hand failure, the trustees had made “all necessary inquiries” to satisfy themselves that the encroachments were truly “necessary to maintain Niel’s standard of living,” as the will required.

On the first $50,000 payment, the court found that Tom and Mr. Cameron made minimal inquiry. They essentially accepted Niel’s statement that his line of credit was maxed out and that he was under financial strain from support and litigation costs. No meaningful documentary verification was sought or preserved before the payment was approved. Little or no effort was made to understand how the debt had been incurred, whether Niel had other means to manage it, or whether a smaller sum would suffice. While later records confirmed the line of credit balance and how the payment was applied, that after-the-fact confirmation did not show that the trustees had exercised the ordinary prudence expected of them at the time of decision.

The second payment fared no better. The evidence showed that the trustees knew only that a lump sum settlement was being negotiated and that Niel also anticipated legal fees, but they did not know the final ordered amount before approving the $95,000 encroachment, nor did they establish or record any reliable estimate of legal fees. They never revisited the question after the family court’s order was made and did not attempt to reconcile the actual figures with the sum advanced, even when it later emerged that roughly $7,300 was used to pay Niel’s personal Visa debt and that about $900 remained unexplained. Again, there was no evidence that the trustees considered whether a smaller amount might have met the true “necessity” threshold under the will.

In assessing the later affidavits, the judge gave no weight to Mr. Cameron’s 2024 attempt to revise his earlier testimony about his knowledge of Niel’s standard of living, finding the new account inconsistent with his clear and repeated answers on cross-examination. Tom’s 2024 affidavit, which asserted broad awareness of Niel’s circumstances and reliance on Mr. Grant’s legal advice, also lacked documentary support on key points. Both trustees leaned heavily on legal advice while maintaining privilege over that advice. The court held that, having put the advice in issue as a shield for their conduct, their refusal to disclose it meant their claimed reliance could not be given weight.

Interpretation of “standard of living” and necessity

Applying the armchair rule, the court considered Elizabeth’s intentions at the time she executed her will in 2003. At that time, Niel was well-educated, debt-free, happily married, employed as an associate professor, and living comfortably. There was no evidence that Elizabeth harboured particular concerns that Niel, among her four children, would be uniquely unable to maintain his lifestyle. The judge inferred that the “standard of living” she had in mind was the comfortable, professional lifestyle Niel then enjoyed and that she contemplated the possibility—perhaps remote—that he might in future need targeted assistance, but not that a substantial portion of the grandchildren’s capital could be diverted to him. The use of the word “necessary” in the clause was taken to impose a high threshold: encroachments for Niel were to be exceptional and proportionate, not large, routine drawdowns of capital.

The judge emphasized that family law already calibrates support obligations in light of the payor’s income and assets. In Niel’s case, his obligations were determined without counting the daughters’ trust as his property; had that trust been considered, his obligations would have been higher, not lower. Against that backdrop, characterizing a payment from the daughters’ trust to enable Niel to meet those same obligations as “necessary to maintain Niel’s standard of living” was difficult to justify. This tension reinforced the conclusion that the trustees’ approach did not align with either the will’s wording or Elizabeth’s objectively ascertainable intentions.

Outcome and remedy

On an application to pass accounts, the trustees bear the onus of showing that they acted with the care and diligence of an ordinarily prudent person managing their own affairs. The court held that the applicants failed to discharge this burden. Their approach to the trust, particularly the two large encroachments, reflected an attitude that the fund was a ready source of relief for Niel rather than a capital gift primarily intended for Jordan and Sarah. In light of the failure to act even-handedly, the inadequate factual inquiries into Niel’s true needs, the disproportionate scale of the encroachments, the use of trust funds to satisfy Niel’s personal legal obligations to his daughters and ex-spouse, and the partial use of the second payment for purposes beyond those put to the trustees, the court found the encroachments unreasonable and an abuse of discretion.

Exercising its remedial powers under s. 49(3) of the Estates Act, the court dismissed the application to pass the accounts and ordered that all three applicants—Niel Alexander Karrow, Brian D. Cameron, and Thomas Paul Karrow—be jointly and severally liable to repay to the trust the full amount of the two encroachments, namely $50,000 (from June 29, 2018) and $95,000 (from October 11, 2018), together totalling $145,000, with interest running from the respective payment dates. The judge did not fix costs in the reasons, instead directing a schedule for written costs submissions, so the precise costs figure cannot yet be determined. In practical effect, therefore, the successful party is the respondent, Jordan Boghosian, on whose objection the court refused to approve the accounts and ordered restoration of $145,000 plus as-yet-uncalculated interest to the trust in her and her sister’s favour, with any separate costs award to be quantified in subsequent submissions.