Supreme Court of Canada rules "Henson trusts" valid.
Friday, January 25, 2019 - Filed in: Court Cases
"The respondent, Metro Vancouver Housing Corporation (“MVHC”), is a non-profit corporation that operates subsidized housing complexes. It also offers means-tested rental assistance in the form of rent subsidies to eligible tenants on a discretionary basis. Tenants wishing to receive rent subsidies must demonstrate, on an annual basis, that they meet the eligibility criteria by completing and submitting an assistance application. MVHC limits eligibility for rental assistance to tenants who have less than $25,000 in assets.
The appellant, A, a person with disabilities, has resided in one of MVHC’s housing complexes since 1992 and received rental assistance from MVHC every year until 2015. The terms of her tenancy were set out in a tenancy agreement, which required that she provide an income verification statement to MVHC once a year.
A also has an interest in a trust that was settled for her benefit in 2012. The terms of the trust provide that the two co-trustees — A and her sister — together have the discretion to pay so much of the income and capital as they decide is necessary or advisable for the care, maintenance, education, or benefit of A. The structure of this kind of trust, commonly known as a Henson trust, means that A cannot compel the trustees to make any payments to her and that she cannot unilaterally collapse the trust. In 2015, MVHC requested that A disclose the balance of the trust. A refused, taking the position that her interest in the trust was not an “asset” that could affect her eligibility for rental assistance. MVHC advised her that it was unable to approve her application, as in its view, her trust was an asset and its value was required for it to determine her eligibility for rental assistance.
Both A and MVHC filed petitions in the Supreme Court of British Columbia, seeking a determination as to whether A’s interest in the trust is an asset for the purpose of considering her application for rental assistance. The chambers judge held that the meaning of the word “assets” as used in the tenancy agreement was broad enough to encompass A’s interest in the trust, and therefore that MVHC was entitled to require that A disclose the value of the trust before it would consider her application for rental assistance. The Court of Appeal dismissed A’s appeal."
The S.C.C. (with two judges dissenting in part) allowed the appeal.
The appellant, A, a person with disabilities, has resided in one of MVHC’s housing complexes since 1992 and received rental assistance from MVHC every year until 2015. The terms of her tenancy were set out in a tenancy agreement, which required that she provide an income verification statement to MVHC once a year.
A also has an interest in a trust that was settled for her benefit in 2012. The terms of the trust provide that the two co-trustees — A and her sister — together have the discretion to pay so much of the income and capital as they decide is necessary or advisable for the care, maintenance, education, or benefit of A. The structure of this kind of trust, commonly known as a Henson trust, means that A cannot compel the trustees to make any payments to her and that she cannot unilaterally collapse the trust. In 2015, MVHC requested that A disclose the balance of the trust. A refused, taking the position that her interest in the trust was not an “asset” that could affect her eligibility for rental assistance. MVHC advised her that it was unable to approve her application, as in its view, her trust was an asset and its value was required for it to determine her eligibility for rental assistance.
Both A and MVHC filed petitions in the Supreme Court of British Columbia, seeking a determination as to whether A’s interest in the trust is an asset for the purpose of considering her application for rental assistance. The chambers judge held that the meaning of the word “assets” as used in the tenancy agreement was broad enough to encompass A’s interest in the trust, and therefore that MVHC was entitled to require that A disclose the value of the trust before it would consider her application for rental assistance. The Court of Appeal dismissed A’s appeal."
The S.C.C. (with two judges dissenting in part) allowed the appeal.
Justice Côté wrote as follows (at paras. 4, 73-74):
"...S.A. has no actual entitlement to the trust property under the terms of the Trust. Although she is a co-trustee, she has no independent, concrete right to compel any payments to be made to her or for her benefit, and cannot unilaterally terminate the Trust. Her interest in the trust property therefore amounts to a “mere hope” that the trustees will exercise their discretion in a manner favourable to her (Waters, Gillen and Smith, at p. 1204, note 155). For this reason, I conclude that her interest in the Trust is not an asset that could disqualify her from being considered by MVHC for a rent subsidy.
... S.A. has a right to have her application for a rent subsidy considered by MVHC in accordance with the terms of the Assistance Application, and that her interest in the Trust is not an “asset” for the purpose of such determination. The issue of S.A.’s request for monetary relief is returned to the British Columbia Supreme Court. I would also accede to S.A.’s request that MVHC pay the costs award into a trust on the same terms, for the same beneficiaries and with the same trustees as the Trust (A.R., at p. 21).
I would also grant MVHC’s motion to strike in part, and order that Section E of Part III (paras. 24-34) of DABC’s factum be struck accordingly."
Note: The summary and body are drawn from Eugene Meehan’s SupremeAdvocacy Weekly Updates for the Law Community.