Are Income Fund Trustees Subject to Different Standards than Directors?

Originally published February 13, 2006

As the market for income funds has matured, an increasing number of situations are emerging in which the actions of trustees are likely to be subject to review in and by the courts. A question that inevitably will arise in this context is whether trustees should be assessed against the strict standards applied to fiduciaries under trust law or be afforded the greater deference enjoyed by corporate directors, including the benefit of the "business judgment rule".

While there has been much debate of the question there has been little by way of judicial guidance to date.

Trustees may, however, take some comfort from observations that Mr. Justice Farley provided (notwithstanding that he did not find it necessary to deal with the question specifically) in his 2001 decision in Rio Tinto Canadian Investments Ltd. v. Labrador Iron Ore Royalty Income Fund (Trustee of).