In McLeod v McLeod BCSC 2014, Butler J. found an executor to have breached the terms of a trust by not putting the proceeds of the house sale proceeds into two separate accounts for the grandchildren beneficiaries, and instead used the monies for other purposes. She failed to even obtain the consent of the grandchildren to sue their monies for other purposes.
The trustee is obliged to follow the terms of the trust. The principle is so basic that it does not need authority; however, it is described succinctly in Merrill Petroleum Ltd. v. Seaboard Oil Co. (1957), 22 W.W.R. 529 at 557 (Alta. S.C):
… While it is also true that there are certain general obligations imposed by law on any trustee (e.g.. the duty not to profit from the trust at the expense of the beneficiaries) the more specific obligations and duties of a trustee are set forth in the instrument creating the trust – in other words, except for those general duties imposed by law on all trustees, the terms of a trust are to be found within the four comers of the trust instrument…. In other words, the first duty of this trustee (as of all trustees) was to follow implicitly the terms of the trust instrument, and, secondly, to observe those general principles of trustee law which did not run counter to the express terms of the trust.