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22 lacible | Août 2016 FEATURE ARTICLE capacity until 1983 and was then replaced by his son, Georges H., who died in 2006. Under the terms of the trust, the trustees' decisions were made by majority, and the will included a clause protecting a dissenting trustee from any liability. The trustees who were not beneficiaries of the trust and Royal Trust had a right to compensation for their services. On December 12, 2004, the last income beneficiary of the trust created by the grandfather died, leaving a balance of about $3.3 million in the trust. Diana and Peter estimated, however, that they should have received over $17 million and they filed charges against the trustees. A few questions the court had to answer Did the trustees have the obligation to increase the capital? Were the trustees negligent? Do the trustees have the right to have the trust pay the fees of the lawyers and experts they retained to represent them in the trial? Trustees' responsibility with regard to the administration of investments The trust lasted over 67 years. The judge therefore had to examine the laws in effect for the entire period. Before 1994, the standard that engaged the liability of trustees was the prudence of an ordinary man managing his own affairs. 2 The court also examined this issue from the angle of the standard applicable to the industry and its compensation. After 1994, when the Civil Code of Québec was adopted, trustees had to not only preserve the patrimony but make it productive and sometimes increase the capital through free management tempered by the obligation of prudence. 3 Thus, since 1994, the trustees had the duty to preserve the purchasing power of the capital. This means that while remaining prudent and diligent, the trustees had to make the effort required to increase the capital in order to maintain its value over time. These criteria are relative, however. We must refer to the terms of the will, the wishes of the testator and the allocation of the trust to determine whether or not the trustees were negligent. Georges R., his son George H. and David were all, in fact, respected, well-known advisors in the financial community. Royal Trust served in an administrative capacity but left great latitude to the two other trustees, including David, the income beneficiary. THE RESPONSIBILITY OF ADMINISTRATORS OF THE ASSETS OF OTHERS Administering the property of others, whether as a mandatary, a trustee or the liquidator of an estate, is not a task that should be taken lightly. Each of these roles is subject to rules that must be upheld. Fulfilling the often-complex obligations of trustee takes time and specific knowledge. The administrators can be held personally responsible for damages incurred by the beneficiaries and be prosecuted in the courts. Bell v. Molson 1 provides one example of the kind of complaint that may arise when carrying out the tasks of trustee. The Facts At the time of his death, on July 10, 1937, the grandfather of plaintiffs Diana Mary Bell (Diana) and David Peter Hodgson (Peter) set up a testamentary trust from which his wife drew income of $12,000 a year. The balance of the annual income was paid to the couple's son, David, the father of the plaintiffs. The wife died in 1945. The will stipulated that after her death, the entire net income from the trust would be paid to David. Under the grandfather's will, the trust capital would be paid to David's descendants, which he would identify in his own will. Then a complicated family history ensued. David had two children in his first marriage, the plaintiffs Diana and Peter. He divorced his wife and married a woman who already had four sons from a previous union. Diana and Peter lived with their father and the four sons of his new wife. The biological children's relationship with their father deteriorated over time. Royal Trust was named co-trustee and served in that capacity from the time the trust was created. The other trustees changed over time. David replaced his mother as trustee after her death. The other trustee named by the grandfather was Georges R. Hodgson, his brother. He served in this Hélène Marquis LL.L., D. Fisc., F. Pl., TEP Regional Director, Tax and Estate Planning CIBC Private Wealth Management 1 2012 QCCS 5498. The Superior Court ruling was appealed in file 500-09- 023136-120. The decision of the Court of Appeal was rendered on April 7, 2015. 2 Superior Court Judgment, para. 52 (translation). 3 Ibid., para. 62 (translation).

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