Sabey Rule Blog

Supreme Court of Canada Overturns B.C. Court of Appeal Decision in S.A. v. Metro Vancouver Housing Corp

By February 11, 2019 No Comments

The Supreme Court of Canada, in S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4, overturned the decision of the British Columbia Court of Appeal, a decision I wrote about here. This case deals with the use of a discretionary trust to provide benefits for a person with disabilities without jeopardising other benefits that are means tested. These trusts are sometimes referred to as Henson Trusts, and in many provinces, including British Columbia, are an effective way of preserving the person’s provincial disability benefits.

S.A. is a person with disabilities who lives in a subsidized rental residence provided by the Metro Vancouver Housing Corporation. The Metro Vancouver Housing Corporation also provides additional rental assistance to some of its residents who meet certain criteria, including having assets below a certain amount.

S.A. is the beneficiary of a trust, created by court order varying her father’s will. She and her sister are co-trustees of the trust. The terms of the trust provide that the trustees have discretion to decide if and when to make payments to her. Although she is one of the trustees, she and her sister must make decisions unanimously. The terms of the trust do not permit her to collapse it and take the funds. Accordingly, she does not have the ability to unilaterally take money out of trust for herself.

To receive additional rent assistance, S.A. is required to provide verification of her income and assets. She disclosed to the Metro Vancouver Housing Corporation that she was the beneficiary of the trust, but declined to provide any information about the trust assets on the grounds that it was not relevant to her eligibility. Metro Vancouver Housing Corp refused to consider her application for additional rent assistance, without further disclosure.

She unsuccessfully sought a declaration from the Supreme Court of British Columbia that the discretionary trust was not an asset within the meaning of her tenancy agreement or the application for additional rent assistance. She was also unsuccessful in her appeal to the Court of Appeal.

The majority of the Supreme Court of Canada allowed her appeal and declared that she has the right to have her application for a rent subsidy considered by the Metro Vancouver Housing Corp., and that her interest in the trust is not “an asset” for the purpose of deciding her application.

The outcome turned on the majority’s interpretation of the word “asset” in the contracts between S.A. and the Metro Vancouver Housing Corp. and in particular the Assistance Application. The majority concluded that “asset” refers to something that can be used by the applicant to discharge her debts and liabilities. Because S.A. did not have the control over whether she receives any funds held in trust, the funds are not an asset for the purpose of the application. Madam Justice Côté wrote:

[48]                          For this reason, a reasonable person who interprets the Assistance Application objectively and without reference to the Asset Ceiling Policy would understand the word “assets” to mean an applicant’s property or interest(s) in property that can actually be used to discharge his or her debts and liabilities, including the monthly rent that the applicant owes to MVHC. Given the purpose of the Rental Assistance Program, there is no reason why MVHC would concern itself with a financial resource — like a contingent interest in a trust — that an applicant cannot use in order to pay his or her monthly rent.  

What are the implications of this case? On the one hand, it is important to keep in mind that the Court here considered a particular program and contract. It is possible to define “asset” differently and in a manner that includes an interest in a discretionary trust.  Madam Justice Côté expressly stated that her “reasons should not be taken to suggest that the interest of a person with disabilities in a properly constituted Henson trust can never be treated as an “asset” for any purpose whatsoever.”

On the other hand, the analysis is likely to affect how courts interpret the term “asset” in other contracts or legislation in similar circumstances unless the term is defined in a manner that clearly brings interests in discretionary trusts within the definition.

The majority’s analysis of a beneficiary’s interest in a discretionary trust is helpful, and may have implications on the interpretation of legislation, such as some of the recent British Columbia legislation and proposed legislation with vague, circuitous definitions of “beneficial owner.”

Madam Justice Côté characterized S.A.’s interest as follows:

[36]                          It is thus clear that, although the Trustees have an obligation to consider whether to make distributions out of the Trust for S.A.’s care and maintenance, they are not actually required to distribute any of the Trust’s assets either to her or for her benefit. Unlike the beneficiary of a fixed trust (i.e. a trust where the trustee has no discretion as to distributions to the beneficiaries), S.A. therefore does not have an enforceable right to receive anything unless and until the Trustees decide to exercise their discretion in her favour. 

….

[39]                          The foregoing analysis makes two things clear. First, the terms of the Trust provide the Trustees with exclusive discretion as to whether payments should be made to S.A. While the Trustees must periodically consider whether distributions should be made, they are not obliged to exercise this discretion in any particular manner. Second, the structure of the Trust prevents S.A. from terminating the Trust on her own under the rule in Saunders v. Vautier. As a result, S.A. has no enforceable right to receive any of the Trust’s income or capital: unless and until the Trustees exercise their discretion in her favour, S.A.’s interest in the Trust is akin to a mere hope that some or all of its property will be distributed to her at some point in the future. 

The majority also approval of the decision in Ontario (Director of Income Maintenance Branch of the Ministry of Community and Social Services) v. Henson (1987), 26 O.A.C. 332, aff’d (1989), 36 E.T.R. 192 (Ont. C.A.), from which the name “Henson trust” is derived.

Leave a Reply