Ontario Court Rules on Family Trust Dispute, Removing Trustee for Breach of Fiduciary Duty
CASE: Jones v. Jones, 2025 ONSC 695 (CanLII)
THE FACTS
In 2012, Morris Guy Jones, a lawyer, created the Morris Guy Jones Family Trust to hold a cottage in Youngstown, New York. He named his spouse, Vaska Micevski Jones, as the trustee, with himself as the settlor. The trust beneficiaries included Vaska, his son Brendan Jones from a prior marriage, and Brendan’s children. The cottage was purchased for $850,000 USD, with funds sourced from a mortgage on Morris’s Toronto home, which was paid from Morris and Vaska’s joint bank account. The property was legally registered under the Family Trust.
In February 2021, Morris was diagnosed with pancreatic cancer. Around this time, he provided Brendan with a copy of the Trust Agreement and emphasized its role in transferring assets to future generations. Seeking to minimize taxes and probate fees, Morris consulted an accountant and instructed that his assets be transferred to Vaska. In March 2021, he executed a Will leaving Brendan a $500,000 bequest, with the remainder of his estate passing to Vaska.
In June 2021, Vaska, acting as trustee, sold the cottage for the same $850,000 USD purchase price. The net proceeds of $839,322.38 were initially deposited into the Family Trust’s bank account but were then transferred into a joint investment account held by Vaska and Morris. After Morris passed away in December 2021, Brendan inquired about the trust, but Vaska claimed that the Family Trust had been depleted and that the transferred funds now belonged to her by right of survivorship.
Brendan contested Vaska’s actions, arguing that she had improperly diverted trust assets and breached her fiduciary duties. In response, Vaska maintained that the Family Trust was a sham, asserting that it was created solely for tax planning purposes and lacked any real intent to function as a trust. A legal dispute arose, with Brendan seeking to remove Vaska as trustee, restore trust assets, and compel her to pass accounts.
THE LAW
The court in this case examined the validity of the Morris Guy Jones Family Trust, whether it was a sham, whether it lacked certainty of subject matter, and whether the trustee breached her fiduciary duties. The legal principles applied by the court were drawn from well-established trust law, including cases cited by the judge.
- Certainty of Intention and Sham Trusts
To establish a valid trust, there must be three certainties: certainty of intention, certainty of subject matter, and certainty of objects. If a trust is found to be a sham, it is void due to a lack of true intention to create a trust. The Ontario Court of Appeal in Duca Financial Services Credit Union Ltd. v. Bozzo, 2011 ONCA 455 explained that a sham trust occurs when a trust instrument appears valid but does not reflect the settlor’s true intent, which is merely to create the illusion of a trust while retaining control of the assets.
In McGoey (Re), 2019 ONSC 80, the court clarified that deceit is not required for a trust to be a sham. Instead, if the settlor did not intend to part with the beneficial interest but executed documents to that effect, the trust may be void. The court must assess the settlor’s intention at the time the trust was created. The judge in this case found that the Morris Guy Jones Family Trust was not a sham because the deceased had clearly intended to create a trust, retained legal counsel, and structured the trust in a manner consistent with an estate planning objective.
- Certainty of Subject Matter
The respondent argued that the trust was void because it lacked certainty of subject matter. However, the court found that the trust agreement explicitly contemplated the transfer of assets and that contemporaneous emails confirmed the deceased’s intent to place the cottage into the trust. The court applied the principles from Stubart Investments Ltd. v. R., [1984] 1 S.C.R. 536, which held that a transaction done for tax purposes is not necessarily a sham unless it creates a false impression. The court concluded that the Family Trust had certainty of subject matter because the cottage was specifically identified, and assets were transferred into the trust.
- Breach of Trust and Fiduciary Duty
A trustee must act in accordance with the trust terms and cannot unilaterally divert trust assets. In Fox v. Fox Estate, 1996 CanLII 779 (ON CA), the Ontario Court of Appeal confirmed that improper dealings with trust property are grounds for a trustee’s removal. The judge applied this principle in finding that Vaska had breached her fiduciary duty by transferring trust assets to a joint account, thereby taking them out of the trust’s control.
Additionally, in Zimmerman v. McMichael Estate, 2010 ONSC 2947, the court emphasized that trustees have an obligation to keep full and accurate accounts and provide transparency to beneficiaries. The judge relied on this decision in ordering Vaska to pass the Family Trust’s accounts.
- Removal of Trustee and Replacement
Under Ontario’s Trustee Act, R.S.O. 1990, c. T.23, the court has the authority to remove a trustee who has improperly administered a trust. In Cahill v. Cahill, 2016 ONCA 962, the Ontario Court of Appeal outlined that a trustee seeking relief under section 35(1) of the Trustee Act must prove they acted honestly, reasonably, and should fairly be excused. The judge rejected Vaska’s argument that she should be excused for breaching the trust, finding that she had knowingly disregarded its terms.
The court also cited MacDonald v. BMO Trust Company, 2020 ONSC 93, which confirmed that trustees who improperly benefit from trust assets must disgorge any profits. The judge applied this principle in ordering Vaska to return all trust assets and any profits derived from them.
Conclusion
Justice M. D. Faieta found that the Family Trust was valid and not a sham. Vaska had breached her duties as trustee by transferring trust assets into a personal account, failing to account to the beneficiaries, and claiming that the trust had no remaining assets. As a result, she was removed as trustee, ordered to restore the trust assets, provide a full accounting, and potentially disgorge any profits gained. The court’s decision was based on well-established principles of trust law as articulated in the cited cases.
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