Court File and Parties

Ontario Court of Justice

Date: September 25, 2017

Court File No.: Halton 96/10

Between:

Maria Borges Applicant, Garnishor

— And —

Joseph G. Santos, Marlene Lavecchia Respondents, Garnishees

Trustees for estate of Maria Fatima Santos

Antonio Dos Santos Respondent, Payor

Before: Justice Marvin Kurz

Heard on: July 20, 2017

Reasons for Judgment released on: September 25, 2017

Counsel:

• Diana Staples, for the Applicant
• Fabio Gazzola, for the Respondents
• Antonio Dos Santos, Self-represented

Judgment

KURZ J.:

Overview

[1] There is a maxim, going all the way back to Roman law, which holds that for every wrong, the law provides a remedy. Sadly, when applied to the non-payment of child support, this adage often falls short. It may be more accurate to say that the law cannot solve all of life's challenges. This case illustrates that truism.

[2] This is a garnishment proceeding initiated by Maria Borges ("Maria"), a mother entitled to child support. The father, Antonio Dos Santos ("Antonio"), has never paid child support to Maria. He owes her over $40,000.00 in court ordered support arrears. Antonio has only one apparent source of funds: money from his late mother's estate. His mother's will created a discretionary trust whose professed first consideration is Antonio's comfort and well-being ("the trust"). Maria would like to garnish the trust to enforce the unpaid support order.

[3] The garnishees are the trustees of the trust. They are also Antonio's brother and sister. They resist the garnishment claim. They argue that the form of the trust, commonly referred to as a "Henson" trust, makes it immune to garnishment by Maria. It was set up in a manner that keeps all decisions regarding the payment of the trust funds out of Antonio's hands. Instead it places those decisions entirely within its trustees' discretion. Antonio has no right to any funds from the trust unless the trustees decide to pay it.

[4] This case hinges on whether a discretionary Henson trust can be garnished for unpaid child support. For the reasons set out below I am required to find that the answer is no.

Facts

[5] The facts in this case are not in dispute. Counsel helpfully prepared a statement of agreed facts, many of which are recounted below.

[6] Maria had a child with Antonio named Christopher Lucas Borges, born September 11, 1995 ("Christopher"). Christopher is a 21 year old college student. Maria has always been Christopher's custodial parent.

[7] On July 21, 2010, the Honourable Justice Roselyn Zisman ordered Antonio to pay Maria $400.00 per month and $4,800.00 in arrears for the support of Christopher. Unfortunately, Antonio has never willingly made a single child support payment under that order to Maria. On February 14, 2017, the date that Maria commenced this garnishment proceeding, Antonio was $37,527.00 in arrears of support payments. As of the date of this decision, Antonio's arrears totaled $40,327.00.

[8] On September 13, 2016, Antonio's mother, Maria Fatima Santos ("Mrs. Santos"), died. In her will ("the will"), Mrs. Santos provided that two of her three children, Joseph Santos ("Joseph") and Marlene LaVecchia ("Marlene"), be appointed the joint estate trustees of her estate.

[9] Mrs. Santos made certain bequests irrelevant to this proceeding. More importantly, she left the residue of her estate to be divided into three equal shares between her three children. But she provided that Antonio's share be held for his benefit in a discretionary trust. The terms of that trust grant the trustees full discretion to decide how and whether the trust funds will be distributed to and on behalf of Antonio.

[10] This type of trust is known as a "Henson" trust, because of a case by that name decided by the Ontario Divisional Court and affirmed by the Ontario Court of Appeal.[1] The Henson decision held that the beneficiary of a discretionary trust holds no beneficial interest in the trust funds. Thus the Ontario government could not claw back disability payments in the face of a Henson trust. I will have more to say about the Henson case later in this decision.

[11] Maria has issued and served notices of garnishment against each of the trustees, in both their personal and trust capacities. There is no dispute that the funds held in the trust are sufficient to honour the garnishment.

[12] The parties have jointly framed the issues to be determined in this proceeding in the following manner:

Whether it is possible to garnish an estate that holds money in a discretionary trust for a defaulting support payor:

a. From the time that the estate is probated, or

b. When the estate trustees choose to pay any money to or on behalf of the support payor recipient.

Mrs. Santos' Will

[13] Before moving further, it is necessary to examine the terms of the will. If one looks closely at the will, one can read between the lines. Before she got to the residue of her estate, Mrs. Santos left specific bequests to Joseph and Marlene to reimburse them for their payments towards her mortgage. No such bequest (or any specific bequest other than a discretionary trust for a 1/3 share of the residue of the estate) is made to Antonio.

[14] The fact that Joseph and Marlene financially assisted their mother while Antonio did not do so may in part explain Mrs. Santos' unusual treatment of her estate residue. This view is reinforced by the unopposed statements of counsel that Antonio was residing with Mrs. Santos when she died. Joseph and Marlene had to make a payment to him before he would move out of his mother's home to allow it to be sold. Be that as it may though, the reasons for Mrs. Santos making her bequests are not determinative of the legal issues before the court.

[15] The relevant provisions in the will are set out below, although not strictly in the order that they are found in the will:

a. Joseph and Marlene ("the trustees") are directed to set aside an equal 1/3 share of the residue of Mrs. Santos' estate ('the share") for Antonio.

b. However none of the share allocated for Antonio's benefit or the income earned from the share shall "…vest in [Antonio] and the only interest he shall have therein shall be the payments actually made to him or for his benefit therefrom."

c. The trustees are to keep the share invested during Antonio's lifetime.

d. The trustees are, during Antonio's lifetime, to pay any part, whether income or capital, for the benefit of Antonio as they "… shall in the exercise of an absolute and unfettered discretion, consider advisable from time to time."

e. Further, Mrs. Santos requested that the trustees keep in mind, in exercising their discretion, that Antonio's "… comfort and well being…is their first consideration."

f. While it is Mrs. Santos' "wish" that the trustees primarily consider "the comfort and welfare" of Antonio when exercising their discretion, that wish does not bind their discretion.

g. Mrs. Santos' further non-binding wish is that the trustees "…take such steps as may be necessary or desirable to maximize the benefits which [Antonio] would receive from other sources if payments of income and capital from such fund were not paid to him, or if such payments were limited as to amount or time." [emphasis added]

h. In order to maximize the benefits from other potential income sources, the trustees are granted the specific discretion to vary the times and amounts of payments, keeping in mind that their "first consideration" is Antonio's comfort and well-being.

i. Any amount of Antonio's share not paid to or on his behalf within 21 years after Mrs. Santos' death will be paid equally to Joseph and Marlene (after paying Antonio's funeral expenses). This term keeps the trust in conformity with the rule against perpetuities.[2]

[16] Mrs. Santos' will dealt with the obvious conflict of interest between the trustees' "first consideration" and their own financial interests. While the trustees were directed to consider Antonio's comfort and well-being in the exercise of their fiduciary duties, they are the ultimate beneficiaries of any funds not distributed within 21 years of Mrs. Santos' death. Mrs. Santos resolved the obvious conflict between the fiduciary duties of the trustees and their own self-interest in favour of the trustees. She declared:

… that my Trustees shall not be required to maintain an even hand between the income beneficiaries [sic, i.e. Antonio] and the remainder beneficiaries [i.e. themselves] when investing and administering this fund, but may in their absolute discretion favour one class of beneficiary over another.

In other words, Mrs. Santos directed the trustees that they may favour their own interests above those of Antonio.

[17] The terms set out above are similar to those in the original Henson trust and reflect what have become standard terms for such trusts. However I note that in Henson, the unpaid residue of the estate was paid to charity rather than the trustees. I am unaware of and have not been presented with any authorities that would show that this distinction is relevant to the issues before the court.

Operation of Garnishment Under the Family Law Rules

[18] As Justice Joseph James of this court (as he then was), explained in Ontario (Support and Custody Enforcement Act, Director) v. Drosos,[3] the process of garnishment is "… wholly [an] artificial creature of the court's rule-making powers." In other words the process for effecting a garnishment is fully set out in the applicable garnishment rule under the Family Law Rules ("FLR").[4]

[19] However as Justice Paul Reinhardt of this court pointed out in Snead v. Snead,[5] the FLR are "completely silent" in explicitly describing any of the applicable defences or grounds to dispute a notice of garnishment. That being said, Reinhardt J. adopts the seven common sense defences to a garnishment request set out by James J. in Ontario (Support and Custody Enforcement Act, Director) v. Drosos.[6] They are:

1. That, at the time the notice of garnishment was served, the debtor did not owe money to the creditor, either,

(a) because the amounts claimed to be in arrears were paid; or

(b) because the amounts claimed to be in arrears had accrued under an order that, on its face, is suspended or no longer operative or that has been suspended or found to be inoperative in a proceeding before a court of competent jurisdiction.

2. That, at the time the notice of garnishment was served, the debtor owed a lesser sum than that claimed by the creditor in the notice of garnishment, either,

(a) because some of the amount claimed to be in arrears was paid; or

(b) because some of the amount claimed to be in arrears had accrued under an order that, on its face, is suspended or no longer operative or that has been suspended or found to be inoperative in a proceeding before a court of competent jurisdiction.

3. That, at the time the notice of garnishment was served, the garnishee did not owe, does not now owe and will not owe the debtor any money that is payable to the debtor within the time prescribed in rule 83, but if any such money becomes payable after the expiry of the time prescribed in rule 83, the reason for this deferred payment must be disclosed in the dispute.

4. That the garnishee owes or will owe money to the debtor that is payable to the debtor, but that this money is not attachable or garnishable on account of a legal exemption, the details of which must be set out in the dispute.

5. That the garnishee has a right of set-off against the debtor, the details of which must be set out in the dispute.

6. That the amount sought to be deducted by the notice of garnishment exceeds the percentage or the amount of the deduction allowed,

(a) under the provisions of section 7 of the Wages Act, R.S.O. 1980, c. 526, as amended;

(b) in a court order made under section 7 of the Wages Act;

(c) in a court order made under section 68 of the federal Bankruptcy Act, R.S.C. 1985, c. B-3; or

(d) by any other provision in law, the precise details of which must be set out in the dispute.

7. In light of paragraph 2 of rule 86 b, that the amount of the deduction sought in the notice of garnishment from the non-wage payments to the debtor imposes an urgent financial hardship on the debtor. (In the case of excessive hardship because of amount deducted from wage payments by the notice of garnishment, the debtor should not file a dispute but make a motion under section 2 of the Wages Act.)

[20] Here the garnishees' defence is the third one cited by Reinhardt J. It arises by implication from FLR r. 29(4): that the trustees owe no debt to Antonio because of the discretionary nature of the trust. Under FLR r. 29(4), a garnishment attaches to every debt that is payable by a garnishee to a support payor at the time that the notice of garnishment is served, after the notice is served, or on the fulfillment of a condition after the notice is served. The garnishment then continues in effect until it is withdrawn or stopped under r. 29 or the court orders otherwise.[7]

[21] In other words, a debt must be owing by the garnishee to the payor in order for a garnishment to be effective. The absence of such a debt is necessarily a defence to a garnishment under r. 29(4).

[22] Here the key issue, although not directly articulated by the parties, is whether Joseph and Marlene, whether in their personal or trustee capacities, owe the funds in the trust as a debt to Antonio. If they owe such a debt, the notice of garnishment must be enforced. If not, the garnishment cannot survive.

[23] It must be stated that there is no real argument that Joseph and Marlene actually owe a personal debt to Antonio. Their alleged liability arises because of their failure to honour the notices of garnishment served on them in their trust capacity.

[24] But their refusal to honour the garnishment arises from their view that the law does not make the trust a debt owed to Antonio. There is no evidence that they have hidden or misappropriated the funds in the trust or deliberately flouted the law. To the best of the court's knowledge, the funds in the trust remain available to honour the garnishment if the court finds that they can be garnished to enforce payment of Antonio's support arrears.

[25] For those reasons I find that Joseph and Marlene do not personally owe a debt to Antonio. Any debt would arise in their role as the joint trustees of the trust. Thus they are not personally subject to the notice of garnishment served on them on behalf of Maria.

Henson Discretionary Trust

[26] Both parties refer to the seminal decision of the Ontario Divisional Court in the Henson case.[8] In that case, a beneficiary of a trust was a "mentally handicapped" woman living in a specialized residence. She subsisted on an Ontario government allowance under the Family Benefits Act. The relevant government ministry attempted to claw back Ms. Henson's benefit payments because her father had set up a trust for her in his will, worth $82,000.00.

[27] In terms that are quite similar to those of the will, Ms. Henson's father directed his estate trustees to "…exercise…their absolute and unfettered discretion…" to spend the funds in the trust he had set up for the benefit of his daughter. Any funds remaining after the death of the beneficiary were to be paid to a specified charity.

[28] The Divisional Court was called upon to decide whether Ms. Henson's interest in the trust established by her father entitled the government to claw back her disability allowance. The court framed the issue as "…simply whether or not [Ms. Henson] has 'a beneficial interest in assets held in trust and available to be used for maintenance…' in respect of the estate pursuant [to the applicable regulation under the Family Benefits Act ]."

[29] The court decided the issue in the negative. As Associate Chief Justice Frank W. Callahan, writing for the court, stated:

In our view the provision of the will, set out above, gives the trustees absolute and unfettered discretion; [Ms. Henson] could not compel the trustees to make payments to her if there were not funds available to her under the Family Benefits Act, sufficient to meet her needs. Therefore, in our view, Ms. Henson does not have a beneficial interest, as that term is used in the definition of liquid assets [in the applicable regulation under the Family Benefits Act].

[30] The court went on to state that it would not override the testator's intentions on public policy grounds because to do so would do violence to both the clear wording of the will and the definition provisions of the relevant regulation.

[31] The Henson decision confirmed the propriety and status of Henson trusts. They have now become an established part of estates law. Their use was summarized by Justice Susan G. Himel of the Superior Court of Justice in Stoor v. Stoor Estate[9] as follows:

A Henson trust is an absolute discretionary trust. The trust instrument leaves the distribution of the income and capital of the trust in the absolute discretion of the trustee. The trust funds are beyond the reach of the beneficiary, who has no ability to compel the trustee to make payments to him or her: Elliott (Litigation guardian of) v. Elliott Estate (2008), 45 E.T.R. (3d) 84 (S.C.), at para. 35. The Henson trust, properly constituted, allows the beneficiary to retain entitlement to government benefits, while simultaneously deriving funds from the trust, at the trustee's discretion. The trust funds do not interfere with beneficiary's qualification for government benefits because no interest in the trust funds vests in the beneficiary. In order to prevent any such vesting, a Henson trust will include a gift over of any remainder of the trust fund capital, upon the death of the beneficiary of the life estate.

[32] There has been some judicial discussion of the purpose of a Henson trust being:

"…to remove the assets of the trust from the control of the beneficiary, so that the assets cannot form part of the "income" or "assets" of the person for the purposes of qualifying for benefits under the Ontario Disability Support Program Act, 1997, S.O. 1997, c. C-25, Sched. B.[10]

[33] However that purpose does not seem to be a prerequisite to the formation of a Henson trust. In finding that the testator had created a Henson trust in Stoor v. Stoor Estate, Himel J. did not find it necessary to refer to any incompetence of the beneficiary or his receipt of government funds. Rather it appears that the testator was worried about the spending habits of the beneficiary (her son) and perhaps his girlfriend.

Maria's Arguments in Favour of Garnishment

[34] Notwithstanding the Henson case, Maria makes three arguments to the effect that the funds in the trust can be garnished. Her point is that they are property which the trustees owe to Antonio as a result of the will. She argues that:

a. The trust is property, as defined in the property section of the Family Law Act ("FLA");

b. The trust is not a true trust because Joseph and Marlene are not at arms-length from Antonio; and

c. The trust is a sham because it was created to defeat Antonio's creditors.

Is the Trust Property, as Defined in the FLA?

[35] In arguing that the trust is property capable of garnishment, Maria begins with the definition of property found in s. 4(1) of the FLA. That provision defines property for the purpose of Part I of the FLA, dealing with family property, as follows:

"property" means any interest, present or future, vested or contingent, in real or personal property and includes,

(a) property over which a spouse has, alone or in conjunction with another person, a power of appointment[11] exercisable in favour of himself or herself,

(b) property disposed of by a spouse but over which the spouse has, alone or in conjunction with another person, a power to revoke the disposition or a power to consume or dispose of the property, and

(c) in the case of a spouse's rights under a pension plan, the imputed value, for family law purposes, of the spouse's interest in the plan, as determined in accordance with section 10.1, for the period beginning with the date of the marriage and ending on the valuation date;

[36] Maria adds in her factum that "[c]learly a beneficial interest in a trust is considered property under the FLA". She cites the decision of the Ontario Court of Appeal in Brinkos v. Brinkos.[12] There the court found that the present value of the stream of income from a trust that granted a spouse a vested life interest in its income was property under s. 4(1) of the FLA. Maria then points out that a court may garnish a trust.[13] Thus she argues that the trust can be garnished.

[37] In response, the trustees argue that this situation is analogous to that in Henson. The trust is discretionary in the same manner as the original Henson trust. Antonio can no more require his siblings to make payments out of the trust than Ms. Henson could require payments from her father's trust.

[38] In Durakovic v. Durakovic,[14] Justice Margaret A. C. Scott of the Superior Court of Justice considered the inclusion of a contingent discretionary family trust in the calculation of net family property under the FLA. Ms. Durakovic's interest in the trust was contingent because it only crystalized after her mother died. The trust was discretionary in that neither Ms. Durakovic nor her mother had any say about the distribution of the trust's funds.

[39] While Scott J. agreed that even a contingent interest under a trust may be family property under s. 4 of the FLA, she found that the family trust before her did not meet that definition. That is because of its discretionary nature. In other words, the beneficiary (Ms. Durakovic's mother, and potentially Ms. Durakovic herself) lacked the essential element of control over the trust.

[40] In coming to that conclusion, Scott J. referred to Henson. While the FLA s. 4 definition of property was not the same as that found in the Family Benefits Act, the Henson analysis was helpful to Scott J.:

… in isolating the essential element required for the contingent interest to be property for a spouse - either control or an ability to fall within the criteria that would require a trustee to provide funds in certain exigent circumstances.

[41] Finding that the trust in question failed to meet both criteria, Scott J. determined that it was not family property under s. 4 of the FLA.

[42] In Kochar v. Kochar,[15] Justice David Aston of the Superior Court of Justice was even more definitive than Scott J. about whether a discretionary trust constitutes family property. He stated at par. 20 that:

There is no legal precedent for the proposition that the beneficiary of a discretionary trust, without any power of appointment[16] has a proprietary interest in the trust for the purposes of the broad definition of property in Part II[17] of the Family Law Act. Mr. Kochar's "interest" is akin to the expectation of an inheritance, which has consistently been found not to form part of a spouse's net family property. [emphasis added]

[43] As the trustees' counsel points out, Antonio is in no different position than Mr. Kochar. He too is a discretionary beneficiary of the trust without a power of appointment.

[44] I note that Antonio's lack of control over the trust distinguishes his situation from those cited by Maria in Sagl v. Sagl[18] and Kushnir v. Lowery.[19] In each case the beneficiary of a discretionary trust whose interest was found to be property under s. 4 of the FLA was also a trustee of that beneficiary trust.

[45] For the reasons set out above, I find that Antonio's interest in the estate would not be considered his property under s. 4(1) of the FLA.

Is the Trust a True Discretionary Trust?

[46] In arguing that the trust is not a truly discretionary trust, Maria argues that Joseph and Marlene are not independent of Antonio. That is because of what she characterizes as a lack of arms-length between Antonio and his trustee siblings. Maria cites the decision of Justice Kevin B. Philips of the Superior Court of Justice in Tremblay v. Trembley.[20] There, Philips J. adopts the following statement of Justice Eileen Gillese of the Ontario Court of Appeal:

A trust is a form of property holding. It is not a legal entity or person. A trust does not hold title to property nor can it. It is the trustee who holds legal title to the trust property. A trust is also a type of relationship, namely, the fiduciary relationship that exists between trustee and beneficiary. The foundation of the trust relationship is the separation of roles between the trustee and beneficiary with the trustee being the legal owner of the trust property and the beneficiary being the equitable owner of the trust property. The trustee holds legal title to the trust property so that it can manage, invest and dispose of the trust property solely for the benefit of the beneficiaries. A trust can only exist when there is a separation between legal ownership in the trustee and equitable ownership in the beneficiaries.

If the court were to ignore or conflate the separate entities, it would destroy the foundation of the trust relationship. Put another way, absent the separate entities, there is no trust relationship and, therefore, no trust.[21] [emphasis added]

[47] In Trembley, Philips J. was required to determine whether the husband's interest in a certain family trust was property subject to equalization under the FLA. He found that the central issue was the degree of control that the husband exercised over the trust. As he put it, Philips J. looked to the husband's:

… ability to control whether distributions of trust property are made to him for his benefit. His having meaningful control in that regard would undermine the separation as between the entities.

[48] In order to determine whether the husband's level of control over two particular family trusts placed them within the FLA's definition of property, Philips J. set out a non-exhaustive list of factors that the court must consider. He stated at par. 32:

Assessing the level of control that a beneficiary actually has in respect of a trust can involve a contextual analysis, informed by the nature of the relationships as between the parties and the concept of fairness touched upon by Cory J., above. Without trying to set out an exhaustive list, this may involve consideration of the degree to which he as beneficiary can directly or indirectly control the actions of the trustees, which may include consideration of such factors as:

i. any evidence with respect to the founding intent of the trust. Was the trust designed to effectively allow control by the beneficiary?;

ii. the composition of the trustees, including whether the beneficiary is a trustee;

iii. any requirement, including veto powers, that the beneficiary be part of any trustee decisions;

iv. any history of past trustee actions which demonstrate direct or indirect control by the beneficiary;

v. any powers of the beneficiary to remove trustees, or to appoint replacement or additional trustees;

vi. the relationship of the beneficiary to the trustees. Are the trustees independent and at arm's length or are they instead family members or other persons who may not act independently?

[49] Maria relies on the last factor in Trembley to argue that Joseph and Marlene, as family members, must not be independent or at arms' length from Antonio. As proof she cites the fact that Marlene advanced money to Joseph to pay his first and last month's rent when he moved out of his late mother's home.

[50] The court must reject Maria's argument. The concerns raised in Trembley arose because the putative beneficiary really controlled the trust. He could decide when the trust funds could be distributed and could even choose the beneficiaries to the trust. That is far from the case here. There is no evidence before the court that anyone but Joseph and Marlene control the trust. Antonio cannot legally or effectively compel them to release any trust funds to him or anyone else. The trustees can hold on to the trust funds for 21 years and then pocket them. That state of affairs is the antithesis of Antonio having control of the trust.

[51] It is true that one factor considered by Phillips J. in Trembley was a family relationship between the trustees and the beneficiary. But Trembley does not stand for the proposition that all familial relationships between trustees and beneficiaries automatically demonstrate that the trust is under the control and hence the property of the beneficiary. Instead, Phillips J. sets out a non-exhaustive list of factors potentially relevant to the determination of the control of a trust. But those cited factors are only part of a broader contextual analysis that must be ultimately determined on a case by case basis.

[52] Here it is clear that Antonio does not exercise control over the trust. He has advised the court and his trustee siblings that he wishes them to pay the outstanding support arrears to Maria. That would obviously relieve him of his present support arrears obligation and forestall enforcement proceedings by the Family Responsibility Office. Nonetheless the trustees have not followed his expressed wishes.

[53] Further although there is no evidence on the point,[22] it was the trustee's uncontested and un-objected to contention, made with Antonio present in court, that the funds to cover Antonio's first and last month's rent were paid by Marlene personally, and not from trust funds. They were paid to convince Antonio to leave Mrs. Santos's house so that it could be sold after her death.

[54] In other words, far from controlling the distribution of trust funds, Antonio could not force the trustees to pay him his rent money out of trust. Instead he had to bargain for a one-time quid pro quo directly from his sister, using the lever of vacant possession of his mother's home. Marlene did not pay him out of her pocket because the trust obliged her to do so. Rather, she paid him to get him out of the home so that she could sell it and obtain her share of the will's proceeds. The payment was independent of the trust.

Is the Trust a Sham?

[55] Finally, Maria argues that the trust is a "sham" or "counterfeit" trust because it was created to avoid Antonio's creditors. She cited a Federal Court of Appeal tax case, Antle v. Canada,[23] which adopts a definition of a sham trust from the leading textbook, Water's Law of Trusts in Canada.[24] There, the authors consider a situation where the trust instrument does not reflect the true intentions of the settlor of the trust. Although the trust appears have usual trust terms, the settlor intends to retain control over the trust.

[56] The text's authors go on to explore the contours of the term, sham trust, as follows:

The term "sham" in English and offshore parlance, adopted in Canada, is not a precise term. It is more a turn of speech; its meaning has been given as "something that is not what it seems; a counterfeit" (Black's Law Dictionary, 7th ed. (St-Paul. Minn.: West Group 2000)). It originated in England with regard to transactions, to which of course there are always at least two parties, and it means the parties' true intent is that others shall be misled by the terms appearing in the transactional instrument. The real terms are something other, and the instrument is therefore declared void. Used in the trust law setting, now a practice in Canada as elsewhere, it describes a trust that the courts will declare void because the provisions in the trust instrument do not represent the settlor's true intent as to the terms upon which the trustee is to hold the trust asset(s). Though the trust instrument sets out the persons or purposes that are to benefit, the settlor's true intent is to retain control of the assets purportedly held in trust because the true intent is to appear to have disposed of the assets and so to evade tax, to defeat personal creditors, or prejudice the claim of an estranged spouse or the children of the relationship. A trust created by the settler who declares himself the trustee of the property, rather than make a transfer of assets to another as trustee, lends itself to this misrepresenting behaviour. But another as trustee who agrees to assist the falsity, or who is indifferent to whether, in fact, he merely implements the settlor's decisions, will equally enable the assertion to be made that the fraud [sic] [I believe the intended word was "trust"] is but a deception, and consequently void.

[57] It is hard to give credit to the argument that the trust is a sham. There is no deception involved in the trust. I have found, for reasons set out above, that Antonio does not secretly control the trust. For whatever reason, Mrs. Santos clearly intended to keep the funds in the trust out of Antonio's hands. The fact that he is a man who has failed to pay any child support and had to be paid to move out of his mother's home may help explain that decision.

[58] But whether that is the case, there is simply no evidence that Mrs. Santos set up the trust for any improper purpose. She may not have wanted any money from her will paid for purposes she did not intend. She may have preferred that her funds go to Joseph and Marlene in 21 years rather than Maria and her grandson, Christopher, now. She was legally entitled to make that decision, just as Mr. Henson was when he created his discretionary trust that kept the Ontario government from clawing back its payments from her benefits.

Is the Trust Subject to Garnishment for Child Support from the time that Mrs. Santos' will is Probated Onward?

[59] For the reasons set out above, I find that Maria cannot garnish the trust[25] or more properly, the trustees, for money held in the trust from the time that Mrs. Santos' will is probated onward.

Can the Trustees' Payments to or on Behalf of Antonio be Garnished for Child Support?

[60] When the trustees choose to pay any money to or on behalf of Antonio, they are not paying a debt owed to him. Rather, any payments that they make to Antonio are akin to the gifts made to or on behalf of the support payor, Mr. Dobell, by his father in Bak v. Dobell.[26]

[61] In that case, the Ontario Court of Appeal found that the regular gratuitous payments made to or on behalf of Mr. Dobell by his father were not his actual income for support purposes. Further, the payments could not be the basis for an imputation of income against the payor under s. 19(l) of the Child Support Guidelines.[27]

[62] In coming to this conclusion, Justice Susan E. Lang, writing for the appellate court, conceded that the payments made by Mr. Dobell's father bore some similarity to (ordinary)[28] trust income cited in s. 19(l) of the Child Support Guidelines. However she distinguished the payments made by Mr. Dobell's father from the trust income cited in Guidelines s. 19(l). That is because Mr. Dobell, like Antonio, had no control over the funds paid to or for him. As Lang J.A. explained:

[Mr. Dobell] has no entitlement to the stream of income, which could be reduced or terminated at any time by his father with no recourse to the respondent.

[63] Like Mr. Dobell, Antonio has no control over the trustees' exercise of their discretion in deciding whether or not to make payments to or on behalf of him. Although any payments by the trustees will not, strictly speaking, be gifts, they are akin to them. Until Antonio receives them, they are neither his property nor owing to him.

[64] Since any payments made to or on behalf of Antonio are not owed to him, the trustees cannot be garnished for any funds that they choose to pay out to or on behalf of Antonio. However as the trustees point out, the money can be garnished or subject to execution once they come into Antonio's hands.

Disposition

[65] For all of the reasons set out above, Maria's notices of garnishment are dismissed.

Costs

[66] At first blush, this novel case does not seem to be one that would attract a costs award. However if the parties cannot agree on the costs of this proceeding, they may make an appointment before me to make brief submission on costs. If a party seeks costs, I will require a bill of costs, copies of any offers to settle, and brief written submissions, akin to a costs outline.

Final Note

[67] The FLA recognizes each parent's obligation to support his or her children. Its preamble speaks about "equitable sharing by parents of responsibility for their children" as part of its purpose. The statute requires each parent to provide support for each unmarried child who is a minor or is enrolled in a full-time program of education, to the extent that the parent is capable of doing so.[29]

[68] Judges play an important role in carrying out the purpose of the FLA. The key medium through which they do so is the application of the FLR. Those rules proscribe all aspects of procedure through which judges determine family law cases, including garnishments.

[69] The primary objective of the FLR is "… to enable the court to deal with cases justly."[30] Judges are required to apply the FLR to promote the primary objective. That means that they are required to ensure that the procedure is fair, not wasteful, expeditious, and proportional. None of that ensures that the purpose of ensuring that children are properly supported is carried out.

[70] Here, I have found that the trust fund set up to benefit Antonio is not available to honour his support obligations to his son unless the trustees chose to make the payments. In making that finding, I recognize that the trust's funds came from Mrs. Santos. She was entitled to bestow the discretion on her two favoured children that she granted. That is the state of the law.

[71] But there is still a gap between the dictates of the law and what may seem to be just in ensuring that family members are properly supported. Here Mrs. Santos asked the trustees to make Antonio's comfort and well-being their first consideration. By requesting the trustees to honour his support obligations, Antonio has signaled that he feels that such a payment would enhance his well-being. It would also advance his comfort if it prevents the Family Responsibility Office from engaging in enforcement proceedings that could lead to the loss of his driver's license and passport, and perhaps his imprisonment.

[72] While I cannot oblige them to do so, I can, like Mrs. Santos, make a request that the trustees exercise their discretion in a manner that will clearly promote Antonio's comfort and well-being. My request is that they do so by supporting his son, Christopher: their nephew and Mrs. Santos' grandson. Whatever motivated Mrs. Santos to arrange her affairs as she did, it certainly was not Christopher's fault.

Released: September 25, 2017

Signed: Justice Marvin Kurz