The Failure to Exercise a Power of Discretion

The Court may be asked to intervene if a trustee does not give proper consideration to the exercise of a discretion for the benefit of any of the beneficiaries. Donovan Waters suggests that the non-exercise of discretion may amount to bad faith: "A trustee is in bad faith if he intentionally exercises a discretionary power for his own benefit; but it could be argued that bad faith includes the situation where the trustee abuses his discretion by exercising it in a manner, or not exercising it for a reason, which is outside the scope of his discretion." In Boe v. Alexander the British Columbia Court of Appeal stated: "From a consideration of these cases, it is in my view clear that the jurisdiction of the Court to review the exercise of the trustee's discretion cannot be displaced by even the broadest language creating the discretion. The law imposes overriding duties on trustees, breach of which will call for the Court's intervention….A privative clause protecting the exercise of a trustee's discretion will not be effective to prevent judicial review whenever the trustees: a. have failed to exercise the discretion at all; b. have acted dishonestly; c. have failed to exercise the level of prudence to be expected from a reasonable businessman; and d. have failed to hold the balance evenly between beneficiaries, or have acted in a manner prejudicial to the interests of a beneficiary." David Morgan Smith

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