In my two previous posts, I’ve written about Mr. Justice Cullity’s decision in Bantonv. Banton,1998 CanLII 1496, a case involving Muna Yassin who married George Banton when she was 31 and he, 88. The dispute was between Ms. Yassin in George Banton’s five children. I described in my first post Mr. Justice Cullity’s finding that two wills Mr. Banton made leaving his estate to Ms. Yassin were invalid on the grounds that he did not have the requisite mental capacity to make the wills, and that she exercised undue influence over him. In my second post, I outlined Mr. Justice Cullity’s finding that Mr. Banton’s marriage to Ms. Yassin was nevertheless valid, which had the effect of revoking the will Mr. Banton made before the marriage in which he left the residue of his estate to his five children. Because Mr. Banton died without a valid will, Ms. Yassin was entitled to a large portion of his estate.
Mr. Banton’s children were concerned about his relationship with Ms. Yassin, and they did not stand idly by. In 1987, before Mr. Banton met Ms. Yassin, he made a power attorney, appointing his two sons, George Jr. and Victor Banton, as his attorneys. One step his two sons took was to use their power of attorney to create a trust for their father and transfer his assets to themselves as trustees. The terms of the trust provided that they had discretion to use the income and capital from the trust for their father’s benefit during his lifetime, and then on his death, the trust assets would be divided equally among all five children (except if any died before Mr. Banton, the deceased child’s share would go to his or her own children).
If the trust were valid, then the effect would be that most of Mr. Banton’s assets would go to his children under the terms of the trust, rather than to Ms. Yassin as an intestate beneficiary of his estate. Not surprising, Ms. Yassin challenged the validity of the trust. Mr. Justice Cullity considered two questions concerning the trust. First, were Mr. Banton’s sons authorized to create a trust under the terms of the power of attorney? Second, if they had authority, was the creation of this trust a proper exercise of that authority.
On the first question, Mr. Justice Cullity held that the broad wording of the power of attorney was sufficient to provide authority to Mr. Banton’s sons to use it to create a trust, even without express language in the power of attorney authorizing them to transfer assets to a trust. Mr. Justice Cullity wrote:
 The power of attorney given to George Jr. and Victor contained the standard provision set out in Form 1 under the Powers of Attorney Act. Under this provision the donor authorized the attorney, or attorneys, “to do on my behalf anything that I can lawfully do by an attorney”. It is not unknown for individuals to settle irrevocable inter vivos trusts through attorneys under a power conferred upon them either generally or for the purpose. I do not doubt that the provision in Form 1 is wide enough for this purpose. In consequence, the question is not whether the terms of the power held by George Jr. and Victor were broad enough to authorize the creation of a trust. Rather, the issue is whether the trust should be set aside on the ground that, in so exercising the power, they were in breach of their fiduciary responsibilities.
I should note for British Columbia readers that, although the British Columbia Court of Appeal agreed with Mr. Justice Cullity’s reasoning on this point in Easingwood v. Cockroft, 2013 BCCA 182, and held that the attorneys in that case also had authority to create a trust for their father, amendments to British Columbia’s Power of Attorney Act may limit the attorney’s authority to settle a trust if the power of attorney document does not itself provide express authority. See my commentary in my post on the Court of Appeal decision in Easingwood here.
The second question was perhaps more difficult. On the one hand, Mr. Justice Cullity found that George Jr. and Victor Banton acted in good faith in creating the trust, and they had no ill motives in doing so. He wrote in paragraph 189 of his reasons:
It is implicit in the findings I have made that George Jr. and Victor acted in good faith and with honesty and integrity in connection with the establishment of the 1994 Trust. They attempted to discharge the responsibility their father had requested, and trusted, them to perform by seeking to protect his assets for his benefit in the light of their knowledge of the deterioration in his mental condition and of the fact that he had been found to be incompetent to manage property pursuant to the Mental Health Act. They were concerned, and in my judgment reasonably so, about Muna’s influence and they sought, and acted on, legal advice. I do not believe they should be found to have acted without diligence and I do not think their conduct calls for any criticism from this Court.
The difficulty though was whether this trust was in Mr. Banton’s benefit. The terms of the trust went beyond protecting his assets during his lifetime, and conferred benefits on his descendants. Furthermore, the trust was more intrusive on Mr. Banton’s autonomy than was necessary to protect him. Mr. Justice Cullity wrote:
 In my view, the major weakness in the case for upholding the validity of the 1994 Trust is not that a trust was created but that interests in remainder were given to George Banton’s issue. The purport of the trust agreement was to make irrevocable inter vivos gifts to them of these interests in his property and even if, and this does not seem very likely, attorneys would ever be entitled to make irrevocable inter vivos gifts of remainder interests to persons other than the donor, I do not believe this was so in the circumstances of this case. If such interests were validly created, they would have the effect not only of depriving George Banton of the beneficial ownership of his property: they would defeat his power to revoke his will by marriage—a power that it not dependent on the existence of testamentary capacity to revoke a will—and they would deprive Muna of her potential rights under Part I of the Family Law Act and Parts II and V of the Succession Law Reform Act, R.S.O. 1990, c. S.26. If the 1994 Trust was valid and effective it would also negate George Banton’s power to replace his attorneys—a power that, in the opinion of each of the medical experts, he had capacity to exercise.  I do not doubt that, from the viewpoint of George Jr. and Victor, there was an urgent need to deal with the situation. Under the Substitute Decisions Act, 1992, the appropriate solution in such a case would appear to be to seek the intervention of the Public Guardian and Trustee by way of an application for temporary guardianship pursuant to subsection 27(3.1) of the Act. The procedure under the Substitute Decisions Act, 1992 was not available in December 1994, and I am not aware of any cases in which temporary restraining orders were made pending proceedings under the Mental Incompetency Act. However, whether or not it might have been reasonable and proper to create a trust of some kind to protect George Banton’s assets pending a determination of his competency, the gift of the remainder interests to George Banton’s issue went beyond what was required for that purpose. A trust under which the trust funds would be payable on his death to his personal representatives in trust for his heirs, testate or intestate, would have done far less violence to his rights while still having the practical effect—that the 1994 Trust did achieve—of freezing his powers of disposition until an application to Court to determine his mental capacity and for the appointment of a committee under the Mental Incompetency Act, or statutory guardian under the Substitute Decisions Act, 1992, could be heard.
For British Columbia readers, the Court of Appeal in Easingwood did not follow this aspect of Mr. Justice Cullity reasons, although the Court did not expressly reject it, but rather purported to distinguish Banton.
Mr. Justice Cullity set the trust aside. The result is that the trust created by Mr. Banton’s sons did not have the effect of preventing his assets from falling into Mr. Banton’s estate on his death.
But, there was another trust.
To be continued. . .