In the recent decision of Pitt v. Beattie, 2025 ONSC 5654 (CanLII) (“Beattie”), the court considered the rule in Saunders v. Vautier and whether the sole beneficiary of a trust could demand a larger distribution than the trustee was willing to provide. In Beattie, the last will and testament provided that the residue of the estate was to be held in trust until the beneficiary turned 25. At the time of the beneficiary’s motion, she was 23, under no disability, and there was no evidence of financial hardship.

The beneficiary had commenced an action against the trustee alleging that he improvidently sold the primary asset of the trust (a house) to his son and daughter-in-law. The allegations included that the house was not listed on the open market and that there were vastly different opinions of its value obtained by each party. The beneficiary claimed that the value of the trust amounted to just under $650,000. The trustee disagreed. He argued that the plaintiff was using the gross value of the estate and not taking into account disbursements totalling almost $200,000. The beneficiary challenged the validity of all the disbursements.

Prior to the motion, the trustee exercised his discretion and distributed $100,000 to the beneficiary. The trustee offered to the beneficiary that he would further distribute $200,000 if the beneficiary signed a partial release of the management of the trust. The partial release excluded the issue of the sale of the property in the action against the trustee. The beneficiary refused to execute the partial release and sought the court’s intervention to distribute $300,000 of the trust funds. The trustee argued that the residue of the estate could not be determined until after the trial because of the trustee’s lien against the trust property for indemnification and compensation.

The court reviewed the rule in Saunders v. Vautier as summarized in Buschau v. Rogers, 2006 SCC 28 (CanLII) and held that there was no dispute that the beneficiary was absolutely entitled to the trust funds. She was the sole beneficiary, of age of majority, under no disability, and understood the implications of terminating the trust. The trustee agreed that the beneficiary was entitled to invoke the rule in Saunders v. Vautier but that it does not equate to bypassing the administration of the estate. In response, the beneficiary argued that the trustee’s position was akin to security for costs.

The court considered issue of interim distributions to beneficiaries. It cited Wilton-Siegel J. in Furfari v. Furfari, 2016 ONSC 4882, at para. 30, as follows:

[30]           There is no legal entitlement of a beneficiary to receive an interim distribution.  A beneficiary is only entitled to expect that a trustee will discharge his or her duty with honesty, objectivity and care.  Moreover, as the applicant recognizes in his factum, it is trite law that a court will not involve itself in an estate trustee’s exercise of discretion relating to the administration of an estate unless it finds that a trustee has failed to meet this standard of behaviour or has otherwise acted unfairly or in bad faith. 

Moreover, as articulated in in Parson v. McGovern, 2014 ONSC 1785, the court in Beattie noted that it has jurisdiction to intervene in the exercise of a discretion by trustees in three situations: 1) a mala fide exercise of such a discretion; or 2) a failure to exercise such a discretion; or 3) a deadlock between trustees as to the exercise of such a discretion. None of these situations were present in Beattie.

With respect to the release requested by the trustee, the court reviewed the authorities which hold that it is improper to hold the trust funds hostage in exchange for a release. However, the trustee’s alternate route of passing his accounts was not available to him in Beattie, given that the plaintiff sought an accounting in her action against him. The court agreed with the trustee that a passing of accounts would be a “collateral attack” on the claims in the action while the litigation was ongoing.

Finally, the court disagreed that the trustee’s position amounted to security for costs. Rather, the trustee’s decision was a “holdback” of a portion of the trust funds until after the trial. There was no evidence that the trustee had already used trust funds for the litigation. The court noted that it would be improper to do so given the allegations against the trustee (the litigation was not due to the actions of the testator but instead the trustee’s decisions regarding the sale of the house). However, it was not improper for the trustee to holdback a portion of the trust funds for indemnification of legal costs, should the beneficiary be unsuccessful at trial. While the court in Beattie may have been of the view that a distribution of more than $100,000 was appropriate, it found that the quantum was within the trustee’s discretion. In dismissing the beneficiary’s motion, the court commented that:

The rule in Saunders v. Vautier applies to allow a beneficiary to access his or her gift held in trust prior to attaining the age as set out in the will.  I am not, however, persuaded that it trumps the discretion of the estate trustee, where the discretion is being exercised reasonably and where the amount of the residue remains uncertain.

The exercise of a trustee’s discretion can be scrutinized by the court and a beneficiary can invoke the rule in Saunders v. Vautier where applicable. But a trustee must always exercise his discretion reasonably and act with honesty, objectivity and care.