Law 319 (Trusts) CANAuthor: Vivian BurtonProfessor: Mark Gillen

Table of ContentsI. Introduction.......................................................................................................................................................................9

The Origins of the Trust Concept.......................................................................................................................................9

Definitions.......................................................................................................................................................................10

Overview of Trust Administration...................................................................................................................................11

II. History and Development of Equity and Trusts...............................................................................................................13

Development of the Law of Uses and Ts.........................................................................................................................14

The Statute of Uses (1535)..............................................................................................................................................14

The Statute of Wills (1540)..............................................................................................................................................14

Historical Development of Equity in Canada...................................................................................................................15

Cansen Enterprises v Bowden SCC SCC neglected to determine whether the Judicature Act had created procedural/substantive fusion.....................................................................................................................................16

III. Express Trusts.................................................................................................................................................................16

A. Formation.......................................................................................................................................................................16

1. Capacity:..........................................................................................................................................................................17

2. The Three Certainties......................................................................................................................................................18

Knight v Knight The three certainties must be established for there to be a valid trust These apply to express trusts for persons AND express trusts for purposes.....................................................................................................18

Certainty of Intention......................................................................................................................................................18

Re Walker (1925) ONCA One cannot give a gift of property and then attempt to restrain alienation of the property; you need to determine whether the ‘gift’ or the ‘gift over’ predominates. Case does NOT mean that once you see the words ‘gift’ you stop your analysis...................................................................................................19

Haidl v Sacher..............................................................................................................................................................19

Re Shamas (1967) ONCA When dealing with wills, “the entire document and the relevant surrounding circumstances are looked at to determine the interest to be granted, so that while one passage in a will by itself would appear to grant an absolute interest, other passages may indicate that this was not the testator’s intention.” Testator’s armchair principle Consider beneficiary expectations & the testators intentions to share/provide. .19

Johnson v Farney (1913) ON Precatory language like “wish” not usually enough to create a trust; always consider the whole will & circumstances...................................................................................................................................20

Jones v Lock Intention influenced by criticism “in the heat of the moment”; S may not have intended a trust......20

Certainty of Subject Matter.............................................................................................................................................20

Re Romaniuk (1986) The subject matter must be certain to create a valid trust; here, “other property” was not sufficiently certain.......................................................................................................................................................21

Boyce v Boyce (1840) ER Subject matter must be certain to create a trust; a court cannot make a testator’s decisions for them.......................................................................................................................................................21

Sprange v Barnard (1789) UK “The property and the person to whom it is to be given, must be certain, in order to raise a trust”................................................................................................................................................................21

Re Beardmore Trusts (1952) Putting a fractional portion of one’s estate into an inter vivos trust fails the certainty of subject matter requirement, as the size of an estate isn’t known until after a testator’s death, when an estate is administered. The timing for subject matter calculation must be clear at the date the trust comes into effect......22

Certainty of Objects (Beneficiaries or Objects)................................................................................................................22

McPhail v Doulton (1971) HL – aka Re Baden’s Deed Trust #1 Defined the “individual ascertainability test” Rules of ascertainment depend on type of trust No presumption of equal division................................................23

Re Baden’s Deed Trusts (No. 2), (1973) When determining whether an individual is a beneficiary in a discretionary trust, the onus is on the claimant to prove that he is a beneficiary with evidentiary certainty...................................24

Re Connor (1970) Certainty of beneficiary note: ‘good friends’ is too conceptually unclear..................................24

Jones v Executive Officers of the Trust Eaton Company (1973) SCC adopted the McPhail v Doulton Individual Ascertainability TEST...................................................................................................................................................24

3. Constitution of Express Trusts.........................................................................................................................................25

A. Ways of Constituting a Trust.......................................................................................................................................25

Milroy v Lord (1862) Court of Equity Court will not substitute one mode of transfer for another and equity will not perfect an imperfect gift..............................................................................................................................................25

Re Rose (1952) Eng CA S must do everything possible to effect the transfer/constitute the Trust Corroboration and evidence of deliberation will be key S can self-declare as a Trustee for property............................................25

Paul v Constance (1977) Eng CA No technical words necessary for declaration of trust. There must be clear evidence to corroborate a self-declared trust..............................................................................................................26

Watt v Watt Estate (1987) Man CA There must be clear evidence of intention to declare a trust..........................26

B. Gratuitous Promises and the Constitution of Trusts...................................................................................................27

Re Pryce (1917) Eng. Trustees should not enforce a covenant for the benefit of volunteers who have given no consideration...............................................................................................................................................................27

Re Kay’s Settlement (1939) Applied Re Pryce (1917): Trustees should not enforce a covenant for the benefit of volunteers who had given no consideration Allowing beneficiaries to sue to enforce a covenant would be allow them to get indirectly what they will not get directly (through the Trust)...................................................................28

Canon v Hartley (1949) Eng. Ch. Covenantees cannot get specific performance but can sue for damages as a party to the agreement...............................................................................................................................................29

Fletcher v Fletcher (1844) Eng. Ch. Not good precedent in Canada, as it has never been adopted, but also has not been distinguished. Re-characterized the subject matter of the trust as the chose in action, not the property which is to be conveyed.........................................................................................................................................................29

Re Ellenborough Towry Law v Burne (1903) Eng. Assignment of future property can only be made for consideration...............................................................................................................................................................30

4. Formal Requirements to Create Express Trusts...............................................................................................................30

A. Trusts with Respect to Land (The Statute of Frauds)...................................................................................................30

Rochefoucauld v Boustead (1897) CA Where written evidence is lacking or insufficient, other evidence may be admitted to prevent the Statute of Frauds from being used to commit a fraud..........................................................32

B. Testamentary Trusts....................................................................................................................................................33

McCormick v Grogan (1869) HL Communication regarding a testamentary trust must be made during a testator’s lifetime and the Trustee must accept this obligation Note: exception to Wills Act requirements in rules from case....................................................................................................................................................................................33

Boyes v Carritt (1884) Fraud prevention basis for enforcing secret & semi-secret trusts; Communication regarding a testamentary trust must be made during a testator’s lifetime Resulting trust based on sealed letter received after T’s death; Trustee knew it was not a gift to him/was waiting for instructions....................................................34

Ottaway v Norman (1972) Defined the essential elements for secret trusts: 1. An intention of the testator to subject the primary donee to an obligation to a secondary done; 2. Communication of that intention to the primary donee; 3. Acceptance of obligation by primary donee either expressly or by acquiescence........................................34

Blackwell v Blackwell (1929) HL In semi-secret trusts the trust obligation is expressed in the will itself and therefore the Trustees cannot take themselves since no intention to make a gift to them (enforced to avoid fraud) For a semi-secret trust the communication must be made prior to or contemporaneously with the making of the will....................................................................................................................................................................................35

Jankowski v Pellek (1995) MB CA Intent trumps technicalities; the court interprets what was prima facie a semi-secret trust as a fully secret trust so as not to contradict the intent of the testator. Communication regarding a fully secret trust can come after execution of the will.................................................................................................35

5. Legality / Public Policy.....................................................................................................................................................36

a. Trusts for Illegal Purposes...........................................................................................................................................36

Symes v Hughes (1870) Eng No longer good law When a fraudulent purpose isn’t executed, an assignor retains the right to recover their property...............................................................................................................................36

Re Great Berlin Steamboat Company (1884) Eng CA If an illegal purpose has been carried into effect, the settlor of the illegal purpose trust loses their property...........................................................................................................37

Scheuerman v Scheuerman (1916) SCC Appears to take the view that property cannot be returned even if fraudulent intent not achieved....................................................................................................................................37

Krys v Krys (1929) SCC Appears to take the view that property can be returned if fraudulent intent not achieved37

Goodfriend v Goodfriend (1971) SCC Majority judgment avoided answering whether property can be returned if fraudulent intent not achieved (Note: current SCC contradictions in Krys v Krys and Scheuerman v Scheuerman); dissent of Spence J said that a resulting trust can be ordered if the intended fraud was not achieved Note: cannot rely on presumption of advancement where a settler is misled to transfer property to avoid creditors......................37

b. Traditional Prohibitions...............................................................................................................................................38

Chart for Conditions and Determinable Interests........................................................................................................39

Re McBain (1915) Example of a valid condition subsequent: provision for S’s daughters only until they are married....................................................................................................................................................................................41

Re Cutter (1916) OCA Example of an invalid condition subsequent: provision for S’s sister was only valid if she DID NOT MARRY (contrary to public policy to restrain marriage)......................................................................................41

Hurshman (1956) BCSC Example of a condition that is malum prohibitum (against a statute) being struck out and the gift being absolute (cannot restrain marriage from a person of a particular religion)..........................................41

Re Nurse (1921) Example of a gift that sought to constrain marital reconciliation (contrary to public policy to restrain marriage); condition struck down but gift was successful..............................................................................41

Re Blanchard (sub nom Eastern Trust Co v McTague) (1963) PEI CA Example of a gift that sought to constrain marital reconciliation (contrary to public policy to restrain marriage); condition struck but gift still successful.........41

Clarke v Darraugh (1884) Preventing a child from living with their parent is contrary to public policy; condition struck down but gift was successful............................................................................................................................41

Re Thorne (1922) Preventing a child from living with their parent is contrary to public policy; condition struck down but gift was successful.......................................................................................................................................41

Christie v York Corp (1940) SCC Refusing to serve all colored persons at a city bar was held not to be contrary to public policy.................................................................................................................................................................42

Re Drummond Wren (1945) Ont HC Covenant on land prohibiting sale to Jewish persons = contrary to public policy and therefore struck down................................................................................................................................42

Noble v Alley (1949) ON CA Court says insufficient evidence to be contrary to public policy to restrain sale of a property to Jewish persons; decision based on UN Charter (CA charter not in effect at this time)..............................42

Leonard Foundation (Canada Trust Company v Ontario Human Rights Commission) (1990) OCA Scholarships only for students of certain religions/males is contrary to public policy (CA Charter in effect)...........................................42

c. Fraud on Creditors.......................................................................................................................................................42

Fraudulent Conveyance Legislation.............................................................................................................................42

BC Fraudulent Preferences Act....................................................................................................................................42

Bankruptcy and Insolvency Act....................................................................................................................................43

d. The Rule against Perpetuities......................................................................................................................................43

***Remoteness of Vesting..............................................................................................................................................44

Robinson v Adair (2004) Sask QB If there is a class of beneficiaries, then the size of their relative interests must be known in the perpetuity period...................................................................................................................................44

***The Rule against Perpetual Duration.........................................................................................................................45

National Trust v McIntyre (1997) Ont Example of perpetuity issue resolved on intestacy; in BC would have been dealt with by the BC Perpetuity Act.............................................................................................................................47

e. Restraints on Alienation and Spendthrift Trusts..........................................................................................................47

Brandon v Robinson (1811) Principle of limits on restraints on alienation: if donor gives life interest “the donor cannot take away the incidents to a life estate [by] a proviso that he shall not sell or alien it” But property can be given to a person until the person becomes bankrupt................................................................................................48

Rochford v Hackman (1852) As per Brandon v Robinson, may not completely restrain alienation but can limit the term of an interest.......................................................................................................................................................48

Re Leach (1912) Right to income “until he shall assign, charge or otherwise dispose of the same or some part thereof or become bankrupt” held to create a valid determinable interest (i.e. limited the duration of the interest as per Brandon v Robinson and Rochford v Hackman)....................................................................................................48

Re Williams (1947) Court notes purpose of guarding against waste (spendthrift purpose)...................................48

B. Termination and Variation..............................................................................................................................................49

Overview.........................................................................................................................................................................49

1. Termination.....................................................................................................................................................................49

Saunders v Vautier (1841) Eng. If all of the beneficiaries in the trust are of adult age and under no disability, the beneficiaries may require the Trustee to transfer the legal estate to them and thereby terminate the trust .............49

2. Variation..........................................................................................................................................................................51

Trust and Settlement Variation Act.................................................................................................................................51

Interpretation of s. 1(b):..................................................................................................................................................52

Knocker v Youle (1985) Eng. Ch. Provision does not apply to persons having vested or contingent interests.........52

Bentall Corp v. Canada Trust (1996) BCSCCourt has jurisdiction to consent to variation on behalf of ppl w/contingent interests................................................................................................................................................52

Continental Lime Ltd. v. Canada Trust Co. (1998), 25 E.T.R. (2d) 128 Court has jurisdiction to consent to variation on behalf of ppl w/contingent interests; applied this to pass a variation where one of ninety-nine members opposed the proposed variation of a pension trust....................................................................................................................52

Interpretation of s. 2:......................................................................................................................................................52

Buschau v Rogers Communications Inc. (2004) BCCA The BCCA declined to follow two earlier B.C. decisions on the basis that the legislation does not permit a court to consent on behalf of a fully capacitated and ascertained beneficiary, even if his or her interest is a contingent one...........................................................................................52

Finnell v Schumacher Estate (1990) When consenting on behalf of beneficiaries with certain or contingent interests, there is only 1 TEST = Is the B obtained such that a prudent/rational adult would be likely to accept? .......52

Re Kovish (1985) BCSC While you have to look at every member of the class, you don’t have to show that every B is bound to be better off. Said there should be liberal interpretation of ‘benefit’ to include financial and other benefits........................................................................................................................................................................53

Smith v Smith Estate (2003) BCSC Confirmed the test from Schumacher Estate and confirmed that you can consider non-financial benefits (Re Kovish) such as ‘achieving family harmony’. All living family members wanted to help support Grandma! Noted that court can agree to variation even if contradicts intention of testator. ...............53

C. Purpose Trusts.................................................................................................................................................................53

1. Non-Charitable Purpose Trusts.......................................................................................................................................53

Morice v Bishop of Durham (1804) There must be someone (a beneficiary) in whose favour the court can decree performance A legal obligation must be enforceable otherwise it is nothing more than a power.........................54

Re Astor’s Settlement Trusts (1952) Limited exceptions to Morice are not a reason to do away with the rule; upheld rule of Non-Validity..........................................................................................................................................54

Re Thompson Case is an anomaly as the beneficiary could only get negative reinforcement, not positive reinforcement to ensure Trust spends for specified reason.........................................................................................54

Construing as Trust for Persons.......................................................................................................................................54

Re Denley’s Trusts (1968) If a Trust can be construed as a Trust for persons, then it should be treated as such....54

Keewatin Tribal Council Inc v City of Thompson (1989) MB Non-charitable purpose Trust can be valid as long as there are persons with the standing to enforce it........................................................................................................55

Peace Hills Trust Co v Canada Deposit Insurance Corp (2007) (2008) A non-charitable purpose Trust may be created in Canada and would be recognized by the courts in this country..................................................................55

Interpretation of s. 24 of the B.C. Perpetuity Act............................................................................................................55

Re Russell (sub nom Wood v The Queen) (1971) One must be able to say whether any given use would qualify as a proper use of the Trust funds....................................................................................................................................56

Problem of Unincorporated Associations........................................................................................................................56

Re Lipinski’s Will Trusts (1976) Despite a problem with an unincorporated association, the gift was valid as a trust for persons since members of the association were identifiable and the court wanted to respect the wishes of the settlor..........................................................................................................................................................................57

2. Charitable Purpose Trusts...............................................................................................................................................57

A. Introduction....................................................................................................................................................................57

B. Requirements for a Charitable Purpose Trust.................................................................................................................58

1. Exclusivity....................................................................................................................................................................58

2. to a Charitable Purpose...............................................................................................................................................58

3. Legal Meaning of Charitable Purposes........................................................................................................................59

***Relief of Poverty........................................................................................................................................................59

Trustees of Mary Clark House v Anderson (1904) The concept of poverty is relative to the person.......................59

Re Brown (1900) Ont HC Provision of luxuries to poor people found to be charitable............................................59

Re Hart (1951) NSSC Providing summer outings for poor children and their families found to be charitable.........59

***Advancement of Education.......................................................................................................................................59

Societa Unita v Gravenhurst (1977) Ont HC Educational institutions case.............................................................60

Re Seafarer’s Training Institute and Williamsburg (1983) Ont Professions case.....................................................60

Incorporated Council of Law Reporting for England and Wales v AG (1972) CA Professions case..........................60

Re Dupree’s Trusts (1944) Eng CA Games case.......................................................................................................60

Vancouver Society of Immigrant and Visible Minority Women v MNR (1999) SCC General advancement of education case; gave definition of advancement of education....................................................................................60

Re Pinion; Westminster Bank Ltd v Pinion (1964) Eng CA General advancement of education case There is a presumption that museum exists for the advancement of education (no need to prove this); it is rebuttable............60

***Advancement of Religion..........................................................................................................................................61

South Place Ethical Society (1980) UK.........................................................................................................................61

Church of New Faith v Commissioner of Pay-Roll Tax (Vic) (1983) Australia Not accepted as Canadian precedent, but gave a better possible definition of religion..........................................................................................................61

Gilmour v Coats (1949) UK Trust for a priory not charitable because there was no public benefit.........................61

Re Heatherington (1989) Trust for Catholic mass held to be charitable as it was open to the public and therefore provided a public benefit.............................................................................................................................................62

Fennel v Stewart (1996) Eng Private religious service open to the public but not advertised held to meet charitable purpose and provide a public benefit.........................................................................................................62

*** Other Purposes Beneficial to the Community..........................................................................................................62

Incorporated Council of Law Reporting for England and Wales v AG (1972) CA Decision said need to move idea of charitable purpose forward – look to ‘spirit and intendment’ Note: SCC did NOT agree........................................62

Native Communications Society (1986) FCCA Found charitable under the 4th head as fostering native language and culture (not linked to preamble at all). J looked to UK case law and the situation of natives in Canada. Case has not been followed........................................................................................................................................................62

***Traditional Approach Retained..................................................................................................................................62

Vancouver Regional Freenet Association v Minister of National Revenue (1996) FCA Court followed traditional approach. This trust was charitable under 4th head – preamble speaks of repair of highways, roads, etc and Internet is information highway................................................................................................................................................63

Vancouver Society of Immigrant and Visible Minority Women v MNR (1999) SCC Look to Lord McNaughton’s 4 categories to define charitable; can modernize the list by analogy but not any other way. Rejects ‘spirit and intendment’ approach. Public benefit must be in a way “that the law regards as charitable”...................................63

Amateur Youth Soccer Association SCC.......................................................................................................................63

***Taking a Different Approach to Charitable Purposes.................................................................................................63

4. Exclusivity....................................................................................................................................................................63

BC Law and Equity Act s. 47 (similar legislation in AB, MB, and NB)............................................................................63

Jones v Executive Officers of the Trust Eaton Company (1973) SCC ‘Deserving’ interpreted to mean the same thing as needy based on Depression-era timeframe for the trust...............................................................................64

Blais v Touchet (1963) SCC The word ‘Otherwise’ in a devise to a priest was interpreted as advancement of religion because B was a bishop..................................................................................................................................64

Guaranty Trust Co v MNR (1967) SCC A trust can meet exclusivity requirement if non-charitable purpose incidental to main charitable purpose.........................................................................................................................64

Re Russell AB Educational purpose was charitable so the court used s. 47 of BC’s Law and Equity Act to sever it from the non-charitable literary and religious purposes.............................................................................................64

5. Political Purposes........................................................................................................................................................65

Human Life International in Canada v MNR (1998) FCCA Court gave reasons similar to Bowman and adopted McGovern list (above). Found that a substantial part of the activities were devoted to political purposes and that s.2 of the Charter does not require govt to subsidize expressions of particular views.................................................65

6. Discriminatory Conditions...........................................................................................................................................65

Re Canada Trust Co and the Ontario Human Rights Commission (Leonard Foundation) (1990) Ont CA Implies that only allowed positive discrimination (e.g. affirmative action) will be upheld..............................................................65

Ramsden Estate Denominational Trusts are Valid (Trust for protestant students at PEI University) Says that Leonard Foundation was case of blatant racism and religious supremacy..................................................................66

University of Victoria Foundation v BC (AG) (2000) BCSC (In Chambers) A scholarship or bursary that simply restricts the class of recipients to a particular religious faith does not offend public policy........................................66

7. Administrative Schemes and the Cy Pres Doctrine......................................................................................................66

Rector, Wardens and Vestry of the Parish of Christ Church v Canada Permanent Trust (1985), NS SC TD There is no right to a cy-près order simply on the basis that the applicant argues, even quite persuasively, that there is a better use of the funds; there needs to be impossibility or impracticability. The court will not override the settlor’s intent simply because other persons think there might be a better use of the funds..................................................66

Royal Trust Corporation of Canada v Hospital for Sick Children (1997) Held that a general charitable intent was expressed in the will; in applying cy-près the court noted the apparent intention to benefit crippled children, and

ordered the gift be divided between four charitable institutions that had been suggested as ones that benefitted crippled children..........................................................................................................................................................66

Re Ramsden Estate (1996) PEI SC General charitable intent is examined where the donor’s intent cannot be carried out because it has become impossible or impracticable and the question is whether the donor would have devoted the property to some other charitable purpose if the originally intended purpose was not possible. ...........67

Re Killam Estate Court used scheme-making power to alter Trust to allow encroachment on capital where only supposed to access income for charity........................................................................................................................67

Re Stillman Court refuses scheme-making power to allow encroachment on capital when not enough income to make fixed payments– says it’s not that broad. Notes that this may be done under cy pres as the economic conditions make the fixed payout amount impracticable............................................................................................67

E. Administration of Express Trusts.....................................................................................................................................67

1. Background and Appointment, Retirement and Removal of Trustees............................................................................67

A. Introduction & B. Background.....................................................................................................................................67

B. Appointment...............................................................................................................................................................68

C. Retirement and Discharge...........................................................................................................................................69

D. Removal......................................................................................................................................................................69

Conroy v Stokes (1952) BCCA Not every mistake, neglect of duty, or inaccuracy of conduct will lead to removal of a Trustee; Acts or omissions have to endanger Trust prop or show lack of honesty/capacity or want of reasonable fidelity (good faith, loyalty, etc). ‘Welfare of Bs’ must be main guide of Trustee and that friction/hostility between Trustee and B is not in and of itself a reason for removal.............................................................................69

Re Consiglio Trusts (No. 1) (1973) CA Misconduct is not necessary requirement for removal; Courts can remove Tees in situations where cooperation between Tees has become impossible or improbable......................................70

2. Powers of Trustees..........................................................................................................................................................70

A. Overlap of Duties and Powers.....................................................................................................................................70

Tempest v Lord Camoys (1882) Court will NOT intervene to force the exercise of a power when it is purely discretionary. Court WILL prevent Tees from exercising power improperly. Court WILL ensure that powers are exercised in a reasonable manner/time when discretional ONLY if there is a duty to exercise the discretional power.....................................................................................................................................................................................70

B. Types of Trustee Powers.............................................................................................................................................71

C. Investment Powers......................................................................................................................................................71

D. Seeking an Opinion, Advice or Director from the Court..............................................................................................73

E. Court Intervention in the Exercise of Trustee Powers.................................................................................................73

Gisbourne v Gisbourne (1877) HL Where Trustees are given broad discretion, a court will not interfere unless the Tees act in bad faith/mala fides; scope of intervention very narrow when the Trustee given wide discretion............73

Re Blow (1977) Ont HC Court will intervene when there is a failure to even consider using the power (a failure to exercise discretion), and in such situations, the Gisbourne principle does not apply. Arguably gives the court a very broad basis for intervention, allowing it to effectively ignore the Gisbourne principle in many cases.................73

Re Hastings-Bass Said that a court can intervene in exercise of power where: (i) it is clear that the trustee would not have so acted if the trustee had not taken into account considerations which should not have been taken into

account, or (ii) failed to take into account considerations that ought to have been taken into account Applied in Fox v Fox Estate...........................................................................................................................................................74

Fox v Fox Estate (1996) ONCA where a Trustee is given wide discretion and acts in good faith court should not interfere UNLESS: 1. What he has achieved is not authorized by the power conferred on him, or; 2. It is clear that Trustee would not have acted as they did if they did not consider things they shouldn’t have, or; 3. Trustee failed to take into consideration things that they should have considered................................................................................74

Re Wright (1976) Ont HC where a Trustee has a power but no duty to do something, courts won’t intervene unless there is mala fides in the Trustee’s decision; Trustees must decide, courts will not do it for them...................74

Kordyban v Kordyban (2003) Eng courts CAN intervene in a deadlock and when doing so should look at whether failure to exercise that discretion is consistent or inconsistent with intentions of S. Will intervene if deadlock prevents operation of the T. If the failure to act frustrates testator’s intentions, then court must decide considering the interests of the Bs..................................................................................................................................................75

Summary of Court Interference with Trustee Exercise of Discretion..........................................................................75

3. General Duties of Trustees..............................................................................................................................................75

Core Duties......................................................................................................................................................................75

These are merely presumed duties.................................................................................................................................76

I. Introduction

The Origins of the Trust Concept- Pragmatic Origins

o Franciscan Monks/Dukhabors = ok to use property if someone else owns ito Crusades = Knights appointed someone to care for their estate while away

- Theoretical Originso Roman law = fide commissum = upon death you could give property to someone who was to hold it for a

period of time and then convey it o Waqf = Muslim concept of giving prop to religious group but being able to use it until deatho Saxons

- Development of Concepto Knights unable to reclaim prop from Tees because legal title vested in Teeo 1420 = Chancellor agreed to honour the use/To ‘Uses’ of T

Avoid feudal incidences (e.g. wardship) or taxes Multi-generational Uses Avoid creditors Avoid Feudal Requirements for Treason or Escheat for Felony To control inheritance (no wills)

- Court Expansions of Concepto Duties/Responsibilities of Teeo Remedies (e.g Remedy of Accounting)o Unjust Enrichmento “Constructive Tee” = person who is not a Trustee but has been unjustly enriched (often a fiduciary

relationship)

Definitions- A Trust exists where property is held by or transferred to a person for the B of one or more other persons- It is a mechanism for dealing with property- The Law of Trusts, 10th ed.

o “A Trust is the relationship which arises whenever a person (Tee) is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the B of some persons (of whom he may be one, and who are termed Bs) or for some object permitted by law, in such a way that the real B of the property accrues, not to the Tees, but to the Bs or other objects of the T”

- Underhill and Hayton: Law Relating to Ts and Teeso “A Trust is an equitable obligation binding a person (Tee) to deal with property over which is owned by him

(T prop, being distinguished from his private prop) for the B of persons (who are called Bs or cestuis que T), of whom he may himself be one, and anyone of whom may enforce the obligation”

- Doctor Waterso “The Trust is not easy to define because this CL concept has its roots in the Middle Ages, and has grown

gradually over the centuries, adapting with marked flexibility to the demands that the needs of society have made upon it. Its adaptability was one of the features, which prompted Maitland to consider it the greatest achievement of Equity. “

o Flaws: “Most definitions consequently suffer from the fact that they are really an attempt either to find the essence of a T, which all too often means emphasizing one kind of T, or to contain within a sentence all the facets of an institution that has grown pragmatically”

Trust Situations- Situations in which an Express Trust (person INTENDS to create the T) may be used:

o Ts for Persons Education of children/grandchildren Gift for spendthrift child Life Interest/Remainder Estate Freeze (less tax burden on estate AND can have B accrue capital gains, not S) Security for payment on long-term K Pension fund protection Restoration Trust (strip-mining co puts $ in Trust for restoration when mining done) – legislated Governance Trust (e.g. University of Victoria, First Nations groups)

o Ts for Purposes Non-Charitable = not legally enforceable Charitable = relief of poverty, advancement of religion/education, or other purposes B to the

community- Situations in which a Trust may be said to have Arisen by Operation of Law (T not intended but found by court)

o Resulting T Automatic Resulting T

Arises when an express Trust fails E.g. Set up Trust for daughter for life with remainder to her children – she dies with no

children – Trust funds revert back to the S – this was not intended but results automatically Presumptive T

‘Presumptive’ b/c they involve presumption that a gift was not intended E.g. A gives B $ to buy prop for A – title of prop gets registered in B’s name – B says nothing

was said about Trust – Court presumes a Trust because otherwise it would be a gifto Court always has presumption against a gift

o Constructive T Trustee Profiteering

E.g. Trustee has to sell Trust prop that is valuable – Trustee has his personal company buy the Trust prop for less than full value = company holding the prop in Trust for the initial B

Trustee de son tort (Tee by virtue of your own wrong)

E.g. Trust is in between Tees – solicitor takes funds and uses and loses them – solicitor is holding funds in T

Knowing Assistance in Breach of T E.g. New Trustee being appointed – Lawyer knows new up to no good – Trustee runs off

with funds – lawyer also considered a Trustee b/c he assisted in the breach of T Knowing Acquisition of Trust Prop Constructive Trust Generally

Important Terminology- Settlor: a person who intends to create the Trust (only in Express Ts)

- Trustee: a person who holds Trust prop for the B of another

- Beneficiary (cestui que trust): Person for whose B the Trust prop is held

- Trust Property (subject matter of the T/T res/T corpus): property that is held to be in the T

- Trust Instrument = any doc that creates a Trust (stated directly OR implied by the language)

E.g. Will, Titled Declaration of T, K, Deed of settlement, deed of T

- Bare Trust (simple T/naked T): the Trustee needs only to hold/protect the Trust prop and deliver it at some point

E.g. Cdn Repository is bare Trustee of shares that you own

Has important tax implications

- Discretionary Trust: the Trustee has a discretion or power to determine amount Bs will receive, what Bs will get

funds, or both

E.g. The Trustee decides how much B gets, how Trust is distributed between multiple Bs, or Trustee given total

discretion within a class (e.g. my grandchildren)

- Fixed Trust: beneficiaries are clearly identified as well as the proportions they will receive

- Testamentary Trust: a trust created under a will

- Inter Vivos Trust (living Trust): a trust that takes effect during the lifetime of the settler- Administrative powers: those that allow the Trustee to manage the trust property. - Dispositive powers: those that deal with the distribution of income or capital to trust beneficiaries.

Overview of Trust AdministrationDuties: Something that the Trustee MUST do; a legal obligation

- Must carry out the Trust according to the Trust instrument- Maintain their duty of Care- Maintain their duty of Loyalty (must act in best interests of beneficiaries)- Duty not to Delegate (Settlor has given Trustee power and not someone else)- Duty of Impartiality (can’t favour one B over another B) E.g. Trustee makes investments that produce lots of income but reduce capital = good for life interest but bad

for remainder = violation of duty of impartiality- Note that these can be enforced by the court through orders of specific performance- Note: duties are presumptions which can be overridden by Trust instrument

Powers: Something that the Trustee is ALLOWED to do (permissions)- Power to invest the prop, power to sell the prop, etc.- Settlor = donor of power; Trustee = donee of power

- Can grant powers with respect to prop (e.g. permission to repair) and legal obligations (e.g. power of attorney)- Powers can be given to any person (not just a Trustee)- Administrative and Dispositive Powers

Administrative powers = Powers that allow Trustee to manage prop (repairs, insurance, etc.) Dispositive powers = Power to dispose of income, prop, etc.

o May also give Trustee power to accumulate fundso Power to encroach on capitalo Power to advance capital (to remainder interest before life interest ends)

- Power of Appointment Usually given in a will Power of appointment = power to determine what happens to the prop or who gets it Types of Powers of Appointment

o General Power = you can give the prop to anyoneo Special Power = You can give it to anyone who is listed OR belongs to a certain class (e.g. my

children)o Hybrid Power = you can give it to anyone BUT Uncle Henry

- Personal, Fiduciary, or Trust Power Personal Power = you don’t have to exercise the power

o Also called a ‘bare power’ or ‘mere power’o Only constraint is that power must be exercised in accordance with the Trust

instrument/instructions Fiduciary Power = you have to consider in good faith using the power

o Power with fiduciary obligation – some Trust or expectation in the relationship Trust Power = you MUST exercise the power – it is a DUTY

Taxation of Trusts

Generally

- Attribution of Income IF the settlor can tell the Trustee how to manage the trust OR if the settlor retains power of revocation

THEN any income from the trust will be taxed as if it is in the hands of the settloro Beneficiaries gets the income but the settlor pays the taxo s. 75(2) of the Income Tax Act provides for this method of taxation

- Conduit Taxation of Income (Trust as a conduit) Trust treated as separate legal entity for tax purposes

o Trust must claim all income but can deduct monies paid to the beneficiaries To avoid taxes, testamentary Ts can made as a whole bunch of smaller Ts (to be in a lower tax bracket) Inter vivos Ts pay the highest tax bracket regardless of earnings

- Capital Gains You are only taxed on capital gains when the prop is disposed of – the settlor pays capital gains on prop

even if giving the property to the beneficiary for free Note an exception in the insurance legislation = When remainder interest gets prop govt will assume they

paid the value when it was put into trusto Capital gains will be paid when it leaves the estate of the remainder interest

- Alter Ego Trust E.g. I put all my prop in Trust and give myself a life interest with remainder to X

o Way to avoid probate feeso Only available to those over 65o Capital gains triggered when you die and not when Trust created

- Deemed Disposition of Prop Every 21 Years The moment you die you are deemed to have disposed of all your prop and will pay capital gains A Trust will pay capital gains every 21 years (to prevent massive amounts of money from accumulating tax

free)- Charities Under Income Tax Act (ITA)

ITA uses Trust definition of ‘charitable purpose’ Charities are not taxed on income and can issue tax receipts Two types of registered charities:

o Foundations (raise money that is given to charitable organizations) Have to show that you will only hand out income to charitable organizations carrying out charitable

purposeso Organizations (almost always organized as corporations)

Have to prove undertaking of charitable activities- Note: a bare Trust is not recognized to exist for tax purposes (ITA s. 149.1)

II. History and Development of Equity and Trusts

The Meaning of Equity- Equity as ‘fairness’- Equity as net worth (e.g. home equity)- Equity as Corrective to Law- Mere Equities (e.g. Setoff, mistake, etc.)- Equity as an existing body of legal rules and principles administered by Canadian courts- Maitland’s Definition:

“Equity is how that body of rules administered by our… courts of justice which, were it not for the operation of the Judicature Acts, would be administered only by those courts which would now be known as Courts of Equity”

Historical Development of Equity in England

Medieval Origins- Administrative Beginnings

Many complaints to the King regarding unfair juries, sheriffs refusing to act on court orders, etc- Development as a Corrective to Law

King would send Chancellor who would issue a writ to create a remedy Mid-14th c = concerns around inconsistent writs and writs were no longer allowed – yet there were still

cases where remedies were neededo E.g. Debt – developed rule that written evidence of debt prevails over anything else – sometimes

the payor of the debt forgot to have the document torn up – creditors would submit the amount to the court and get paid twice – the debtor would complain to the King – a bill would be sent to the Chancellor with evidence the debt had been paid – Chancellor would then ask lender for an explanation – If Chancellor’s questions could not be answered, the Chancellor would issue an order that said the lender could not execute court order (common injunction)

- Equity follows the Law Equity fills in the gaps but does not say the law is wrong or change it

- Remedies in Personam Writs were given to a person and not to a class

- Chancellors were originally ecclesiastical persons (until middle of 16th c)

Development of the Law of Uses and Ts- Ways the “use” was employed in its early development:

i. “Uses” – Franciscan Friars and the Form of the “Use”ii. Other Ways in Which the “Use” was Employed

a. To Avoid the Feudal Burdens of Wardship and Marriageb. To Avoid the Feudal Requirement of Forfeiture for Treason or Escheat for Felonyc. To Avoid Creditorsd. To Effect Testamentary Dispositions of Land

- Non-recognition by courts of law: initial non-recognition of the use by the Chancellor was actually helpful in terms of getting the intended benefit from the use e.g. to avoid creditors the debtor would employ the “use” so he could say he did not own the property –

recognition of the “use” would have given the debtor an interest the creditors could seize BUT non-recognition permitted abuses by the feoffee to uses (i.e. the trustee) – e.g. feoffee to uses might

keep profits from the land held to uses for himself rather than using them for the benefit of the cestius que use (i.e. the beneficiaries)

That eventually led to recognition of the use by the Chancellor (1420)

The Statute of Uses (1535)- One of the purposes of employing a “use” was to avoid feudal burdens which were a form of taxation in the

feudal system. This led to a significant loss of revenue for the Crown that led to the enactment of the Statute of Uses in 1535

- The effect of the statute was to ignore the conveyance to the feoffee to uses and to just treat the cestui que use as the feoffee - i.e. in “X to A for the use of B” the conveyance to A was ignored and the words were treated simply as a conveyance to B

- The statute prevented the ‘use’ by treating ‘A to B for the use of C’ the same as if it said ‘A to C’- Ways around Statute of Uses

Say ‘A to B for the use of C in trust for D’ so it would be read ‘A to C in trust for D’ Law courts said second use was repugnant and refused to recognize it other early similar word formulations would have the words “in confidence for” instead of “in trust for” so

in those early days (late 15th century and in the 16th century) devices based on these word formulations were known as “trusts or confidences”

courts of law did not recognize use upon a use (second use considered repugnant to the first use) Chancellor initially did not recognize use upon a use but later did so (in 1634)

- Consequence of Statute of Uses Could no longer the use the ‘use’ for testamentary distribution

o Statute of Wills (1540) corrected this

The Statute of Wills (1540)- “Uses” had been employed to make dispositions on death that were different from the rules of succession that

would otherwise have applied- Statute of Uses before recognition of use upon a use in 1634 put an end to this- Pressure brought to allow people to make dispositions on death different than would apply under rules of

succession led to Statute of Wills in 1540

From ‘Conscience’ to ‘Equity’ (1550-1700)- Courts of equity grow in popularity and even survive the civil war and the removal of the monarchy- 17th c = Equity as a Body of Substantive Law

No longer just a corrective body Jurisdiction over wardships transferred to Equity during civil war

Ts shifted from bare Tees to Tees being given powers (lease, mortgage, etc)- Equity of Redemption = prop interest that mortgagor (borrower) retains after conveying legal title to the lender

as security for debt

Disaffection, Reform, and Fusion- Equity continues to develop as body of laws (esp. in copyright and trademarks)- Changes in the T

Business Trust develops – Trust can have powers/responsibilities of a company Ts begins to include money/funds as well as land/prop

- Courts of Equity get bogged down and people get angry- 1873 = Judicature Acts = CL courts given ability to oversee equity

Historical Development of Equity in CanadaAtlantic Provinces

- Assumed that governor of colony was keeper of great seal (allowing him to administer equity)- NB and NS brought equity within law courts by 1850 (before UK)- PEI kept separate courts until 1974- Nfld had Prov SC deal with since 1835

Ontario and Quebec- Quebec = Had 11 yrs of CL and Equity (then went back to Civil Law)- Ontario

For 46 years, Governor did not exercise Equity Equity courts began in 1837

West and North- Merging of CL and Equity already underway when Western/Northern presence established- SK, AB and North never had separate courts- BC and MB had separate court within CL system to deal with equity

Fusion

Distinguish between Procedural and Substantive Fusion- See Diagram- Procedural Fusion = single procedure for both courts – still 2 different bodies of law

Two rivers running parallel- Substantive Fusion = CL and Equity mixed into 1 body of rules

Two rivers that merge into one channel

Example of the Potential Practical Effect of the Distinction- Court of Equity = Equitable Remedies and Equitable Defences not available under CL- Note that a Trustee can sue a Settlor to get the transfer of Trust prop (equitable remedy of specific performance)

BUT court of equity will not enforce specific performance on gratuitous transfer

Current Status- Not totally resolved – courts have dodged the issue- McL has suggested a willingness to draw from wherever they can

Cansen Enterprises v Bowden SCC SCC neglected to determine whether the Judicature Act had created procedural/substantive fusion.Facts: Engineers were employed to secure land. P bought land, built a building, the building sank, and so they

sued the engineers. The engineers were judgment-proof. The solicitor who negotiated the deal had made a secret deal to profit, which was contrary to the trust like relationship of solicitor/client.

Issue: Were law and equity joined procedurally or substantively?Rule:Application: The relationship between a client and solicitor is trust-like, and thus imposes a fiduciary duty (equity).

- The client sought equitable damages for breach of fiduciary duty.- The solicitor argued under law (not equity) that he had nothing to do with the building sinking,

and thus there was no causation.- The SCC dodged the issue as to whether the Judicature Act led to a substantive or procedural

fusion.- They did note that the solicitor’s defence could still be considered even if there was only

procedural fusion, as this defence could exist in equity and in law.Conclusion: No definite answer as to what kind of fusion exists in Canada

Trusts vs. K Law- Note: contracts are rooted in law, but many remedies are from equity.- Trusts are pre-contract, but are similar in that they deal with the enforcement of promises.- Note: the default rule is that Trustees are not compensated, but this can be changed with specific provisions to

provide remuneration.

III. Express Trusts

A. Formation

Requirements for the creation of an Express Trust (will be on exam):

Be able to assess all of these requirements in a fact pattern1. Capacity: Does the settlor of the trust have the legal capacity to create a trust?2. The Three Certainties: Are the three certainties required for the creation of an express trust met? The three

certainties are:1. certainty of intention;2. certainty of subject matter; and3. certainty of objects

3. Constitution: Has the trust been constituted (the property must be in the hands of the Trustee)?4. Formalities: If there are formal requirements to create a trust of a particular type, have those requirements

been met (e.g. Statute of Frauds and Wills Act regulations)?5. Public Policy: If all of the other requirements for the creation of a trust have been met, is the trust void on the

basis that it is contrary to public policy?

1. Capacity:

Who must have Legal Capacity?

A. The Settlor (or Settlors)• Must be a legally recognized “person” to hold a legal or equitable interest (includes individuals and

corporations)• The “person” must have legal capacity to dispose of an interest in property in order to create a trust• Trustees must be a “person” and DO NOT need legal capacity to hold property but do need it to exercise

B. The Trustee (or Trustees)• Trustee needs to be able to hold title to property (legal or equitable)• Any legally recognized “person” (individual or corporation) can hold title to property• Trustee does not have to have legal capacity to hold property in trust (can be minors/mentally incapacitated).• Trustee, however, needs to have legal capacity to exercise powers needed to manage the trust property –

therefore it is a good practice for the Trustee to have legal capacity and to replace a Trustee who does not have legal capacity

C. The Beneficiary (or Beneficiaries)• Beneficiary needs to be in existence to have legal or equitable title but does not need to have legal capacity to

deal with property• Even an unborn person can be a contingent beneficiary (contingent on being born – when born will be a person

capable of holding an equitable interest in property)

Main Types of Legal Incapacity

Objectives: be able to1. Identify the two main types of legal incapacity.2. Identify the circumstances in which each of these main types of legal incapacity arises.3. Briefly describe the potential limitations on the scope of the legal capacity of minors.

A. Minors• Subject to limited exceptions

1. Minors cannot make a valid will and, therefore 2. Minors cannot create a testamentary trust

• Contracts voidable unless for necessaries but these contracts can be repudiated within a reasonable time of reaching the age of majority – therefore may be difficult for minor to enter into a legally binding contract to create an inter vivos trust

• Inter vivos trust by gift may also be constrained – at common law gift of land voidable and gift of personal property likely void – legislation in several Canadian jurisdictions that restricts dealings with property (especially land) by minors

• Age of majority in Canada is 18 or 19 depending on the jurisdiction

B. Mental Incapacity• Mental illness does not mean there is a legal incapacity• Question is whether the person is incapable of understanding substantially the nature and effect of the

particular transaction – so for inter vivos trust means capacity of appreciating the extent of the property being disposed of and who will benefit

• For a will, and therefore for a testamentary trust, the test is whether the person understands the nature and effect of making a will, the extent of the property being disposed of and an appreciation of the needs of her or his dependents

C. OTHER CAPACITY ISSUES

A. Not Recognized in Law as a “Person” Unincorporated association, partnership and trust are not separate legal entities (i.e., they are not

“persons” under the law) They therefore cannot hold legal or equitable title to property and cannot therefore be settlors, Trustees

or beneficiaries B. Bankrupts

Property of a bankrupt is held by a Trustee in bankruptcy Transactions prior to bankruptcy may be void against the Trustee in bankruptcy and may be void under

provincial fraudulent conveyance or fraudulent preference legislation

2. The Three Certainties

The Three Certainties Are:1. The Certainty of Intention;2. The Certainty of Subject Matter; and3. The Certainty of Objects

Notes:

Knight v Knight The three certainties must be established for there to be a valid trust These apply to express trusts for persons AND express trusts for purposes.

Certainty of Intention

Required Intention to Create a Trust Relationship- Intention of the settlor to create a trust- Intention by one person that another person hold property for the benefit of persons or purposes or intention

expressed by a person that property he or she (or it) holds title to is to be henceforth held on trust (i.e. the self-declared trust)

Written, Oral or Inferred from Conduct- Can be expressed orally or in writing- Inferred from words expressed orally or in writing- Inferred from circumstances

No Formal Requirements except in Certain Situations- No formal steps required except in certain circumstances (testamentary trust and statute of frauds issues)

No Specific Words Required- Terms “Trust/Trustee” not required

Terms do typically satisfy certainty of intention but not necessarily Courts look at substance not form

- Precatory Words (e.g. hope, desire, expectation) Precatory words generally NOT sufficient to satisfy certainty of intention – Johnson v Farney T may still be found if other words/evidence sufficient to show intention Courts look to the substance

o Did A intend to put a legal obligation on D?

Re Walker (1925) ONCA One cannot give a gift of property and then attempt to restrain alienation of the property; you need to determine whether the ‘gift’ or the ‘gift over’ predominates. Case does NOT mean that once you see the words ‘gift’ you stop your analysis.Facts: The testator left property to his wife as follows:

“Should any portion of my estate still remain in the hands of my said wife at the time of her decease undisposed of by her such remainder shall be divided” among certain named persons in named proportions.

Issue: Does the gift or the gift-over predominate; is this an absolute gift or a trust?Rule: Either the gift predominates or the gift-over predominates.

One cannot give a gift of property and then attempt to restrain alienation of the property.Application: - It’s not a firm rule that when you see words of gift you ignore the words that follow.

- It is difficult to find a basis to impose a legal obligation on the wife.- There was no strong, reasonable expectation among the named persons to receive anything from

the gift-over.Conclusion: The gift predominated and therefore the words do not show a sufficient intention to create a trust.

When answering a trusts problem, consider:1. Intention -2. Deliberation -3. Reasonable Expectations –4. Administrative Difficulties -5. Unjust Enrichment –6. Distributional Effects -

Haidl v SacherDecision: When interpreting a testator’s will, the court should put itself in the armchair of the testator – although direct evidence of testator’s intentions is not admissible.

Re Shamas (1967) ONCA When dealing with wills, “the entire document and the relevant surrounding circumstances are looked at to determine the interest to be granted, so that while one passage in a will by itself would appear to grant an absolute interest, other passages may indicate that this was not the testator’s intention.” Testator’s armchair principle Consider beneficiary expectations & the testators intentions to share/provideFacts: Testator left all to his wife, until their last child reached 21 years of age, for the purpose of their

maintenance and education. If she were to remarry, she would get her share like the children, and if not, she would get the whole thing and see that each child got their share when she died.TJ held that the wife held the estate in trust with the right to encroach on capital, unless she were to remarry, in which case she would lose her right to encroachment.

Issue: Was there a trust?Rule: When dealing with wills, “the entire document and the relevant surrounding circumstances are looked at

to determine the interest to be granted, so that while one passage in a will by itself would appear to grant an absolute interest, other passages may indicate that this was not the testator’s intention.” Testator’s armchair principle

Application: Interpretation based on circumstance provided a basis for imposing a legal obligation on the wife – i.e. a basis on which the court could control the exercise by her of her discretion to encroach on the capital.Was there a stronger expectation of children to receive something?

Consider that this case didn’t proceed to the ONCA until all of the children were adults. Effect of appreciation in value of assets – was there a desire to share the wealth?

Conclusion: This was found to be a trust.

Johnson v Farney (1913) ON Precatory language like “wish” not usually enough to create a trust; always consider the whole will & circumstances.Facts: Testator’s will left property to wife and then said:

“I also wish if you (my wife) die soon after me that you will leave all you are possessed of, to my people and your people equally divided between them, that is to say your mother and my mother’s families.”

Codicil:“Property known as the William McGuire property to go to my wife to do as she sees fit with it. ... If she my wife dies intestate divide what is left of it equally among my brothers and sisters...”

Issue: Was there a trust?Rule: Precatory language such as “wish” is not usually considered enough to create a trust. Wish” here was

just a suggestion based on looking at the whole will/surrounding circumstances.Application: 1. Intention: What did “wish” mean?

2. Deliberation:3. Reasonable expectations: hers to do with as she saw fit; was it reasonable for husband’s family to

expect something?4. Administrative difficulties: wife to die soon after and intestate; what is the meaning of families?5. Unjust enrichment: William McGuire property?6. Enforcement – amount of subsequent litigation?

Conclusion:

Underlying Values/Concerns for Certainty of Intention- Maximizing prop values

Importance of freedom of disposition- Evidence of Owner’s Intention – can give oral evidence on inter vivos T- Deliberation by Owner

Court wants to ensure that decision was thought through- Reasonable Expectation or Reliance- Unjust Enrichment - Enforceability and Administrative Costs

Uncertainties promote disputes (expensive litigation)- Distributional Equity

Jones v Lock Intention influenced by criticism “in the heat of the moment”; S may not have intended a trustFacts: Father scolded for not bringing home gift for infant son – writes son a cheque in his name.Decision: Trust not constituted. The court considered that he may have made a different choice had it not been in the heat of the moment.

Certainty of Subject Matter

Two Aspects:1. certainty of the property to be held on trust2. certainty of the amounts, or shares, of the trust property to the beneficiaries

Reasons:- Trustee has to know to comply- Court has to know to be able to determine if there is a breach of trust

- Court has to know in case it has to administer the trust Link with Certainty of Intention

Re Romaniuk (1986) The subject matter must be certain to create a valid trust; here, “other property” was not sufficiently certain.Facts: Testator made specific bequests and stated that the rest of his house and belongings were to be given to

his brother to be divided between the family, taking what they want and selling items. The amount from the sale was to be divided 4 ways. Problems = what is ‘other property’ and what is money from ‘bank accounts’? Listed 3 accounts in will but had opened a new one since.

Issue: What is the ‘other property’ and what is money from ‘bank accounts’?Rule: The subject matter must be certain to create a valid trust.Application: T failed for uncertainty b/c court could not determine what ‘other property’ was to be included in the T.

Clear testator wanted to provide for 2 beneficiaries but unclear how much she wanted to provide.The judge resolved possible interpretations of “other property” but felt unable to resolve the ambiguity as to which bank accounts were to held in trust.

Conclusion: 2 beneficiaries received nothing – intention of the testator NOT fulfilled.

1. Certainty of the Property Subject to the Trust Obligation

Ways of providing certainty of subject matter:- reference to a specific piece of property- reference to a specific fund or a fixed amount of a specific fund- a formula for determining the amount- Generally if court can find an objective basis for identifying the quantum (e.g. Re Golay’s Will Trust), they will

find that this requirement is met.

2. Certainty of the Amounts the Beneficiaries are entitled to ReceiveThree main ways:

1. Clearly setting out the amount each beneficiary is to receive;2. Providing a method for calculating the amount each beneficiary is to receive; or3. Giving the Trustee the discretion to decide the amounts the beneficiaries should receive.

Boyce v Boyce (1840) ER Subject matter must be certain to create a trust; a court cannot make a testator’s decisions for them.Facts: Testator had 4 houses to be divested under his will; one to one of his daughters, with her given the

choice as to which house she preferred, and the rest to his other daughter. The first daughter died before the testator.

Issue: Which houses go to the second daughter, and which one falls to the residue of the estate?Rule: There must be certainty of subject matter.Application: Since there was no specification as to how the houses would be divested since the first daughter died,

this trust didn’t meet the requirement for certainty of subject matter.Conclusion: All houses went to the residue of the estate.

Note: this seems contrary to the intention of the testator, as we do not know if his surviving daughter received anything from the residue of the testator’s estate.

Sprange v Barnard (1789) UK “The property and the person to whom it is to be given, must be certain, in order to raise a trust”Facts: £300 of joint stock annuities to Thomas Sprange “for his sole use; and, at his death the remaining part of

what is left that he does not want for his own wants and use, to be divided among …”Issue: Could Thomas take the whole amount for himself?Rule: The property and the person to whom it is to be given, must be certain, in order to raise a trust.Application: Authority cited (even in this 1789 case) to effect that:

“the property and the person to whom it is to be given, must be certain, in order to raise a trust”HELD: that property here was only “what shall remain at his death” and “only so much as he shall not want for his own wants” and if a trust it “would be impossible to execute”.This information was not sufficiently certain to allow a court to administer a trust; it would be impossible to determine with certainty the extent of Thomas’ right to encroach.

Real difficulty is determining the amount/share that the husband and others would get. No reasonable expectation for remainder interest to get anything.

Conclusion: The specifics of Thomas’ ability to use the income were not sufficiently certain to create a valid trust. Note: similar to Re Walker in terms of expectation interests of persons who were to get the left

over.

Re Beardmore Trusts (1952) Putting a fractional portion of one’s estate into an inter vivos trust fails the certainty of subject matter requirement, as the size of an estate isn’t known until after a testator’s death, when an estate is administered. The timing for subject matter calculation must be clear at the date the trust comes into effect.Facts: Separation agreement – husband agrees to hold three fifths of his net estate for his wife for her life (or

until she remarried) with the remainder to be held and paid out to two daughters over twenty years but with potential for remainders to children of the daughters it they died before end of twenty-year period:

- wife deceased; husband motioned for order that trust was void; daughters, both now adults, in favour of father’s motion (i.e. want trust held void);

- There are minor children of one daughter and potential unborn children that had contingent remainder interests Official Guardian appointed on their behalf and argues there is a trust

Issue: Is there a trust?Rule: Putting a fractional portion of one’s estate into an inter vivos trust fails the certainty of subject matter

requirement, as the size of an estate isn’t known until after a testator’s death, when an estate is administered.The timing for subject matter calculation must be clear at the date the trust comes into effect.

Application: Testamentary Trust Argument• no problem with subject matter if this was a testamentary trust – will administered then three-

fifths of net estate would be known• problem was that separation agreement did not comply with wills legislation requirements for

valid will and therefore could not operate as a valid testamentary trustInter Vivos Trust Argument

• so if not testamentary then inter vivos says Official Guardian• but then the problem is that three-fifths of the net estate is not a known amount at the time the

trust is to take effect (i.e. what is it the Trustee is to hold in trust – won’t know until husband dies and estate is administered but Trustee needs to know what is to be held in trust in order to carry out trust obligation)

Comment: Is this similar to Re Walker and to Sprange v Barnard?Conclusion: Court found that all parties not accounted for (unborn children of daughters). Unborn need to be

represented b/c they will lose out if there is no Trust found. Court ultimately found there was no valid T.

Certainty of Objects (Beneficiaries or Objects)

Reasons for Certainty of Objects (Persons or Purposes)- Certainty of objects means:

1. Certainty of beneficiaries for an express trust for persons, and;2. Certainty of purposes for an express trust for purposes

- A Trustee must know what to do with the trust property (i.e. for whose benefit do they hold the property and who can they distribute to or for what purposes they are to use the trust property)

- Trustees must know, or have some way of determining, for whose benefit the property is to be held or for what purposes it is to be held

- The court needs to know to determine breach of trust or to administer the trust itself if necessary- Exception for Charitable Purpose Trusts: need only have certainty of charitable intent – if purposes are not clear

the court will set out purposes (known as an “administrative scheme”; sometimes called cy pres, but Gillen disagrees with this use of that term)

Two Tests for Certainty of Beneficiaries1. Certainty of Subject Matter for Fixed Trusts for Persons (closed list or class ascertainability TEST)

Be able to determine if any particular person is in the class of beneficiaries Be able to make a complete list of persons in the class

2. Certainty of Subject Matter for Discretionary Trusts (individual ascertainability TEST – McPhail v Doulton) Be able to determine whether any given person is within the class or not (don’t need everyone in the class

because the Trustee has discretion to give persons nothing)o Trustee has fiduciary obligation to make good faith effort to determine the classo Tee must survey as far a range as their fiduciary duty would suggest to determine the classo Wider range for Trust powers than for mere powers

Distinction between conceptual certainty and evidential certainty- Must have conceptual certainty but not evidentiary certainty- Conceptual = we know what it means to be a biological child

Where class is too broad to be workable, Trust can be void for conceptual uncertainty (McPhail v Doulton)- Evidentiary = evidence that you ARE a biological child- Trust does not fail on the basis that the evidence concerning whether a person is a beneficiary or not is limited

or is ambiguous- Trust only fails when, once one has determined what the facts are on the basis of the available evidence, the

description of the class is too vague to determine whether the person is a member of the class

McPhail v Doulton (1971) HL – aka Re Baden’s Deed Trust #1 Defined the “individual ascertainability test” Rules of ascertainment depend on type of trust No presumption of equal division.Facts: Co. president transferred $ into a Trust for his employees and stated, “Trustees shall apply the net

income at their complete discretion… to any relatives or dependants [of employees]. He died in 1960 and executors claimed it was an invalid T.

Issue: Who were the beneficiaries, and what type of trust was created?Rule: Individual ascertainability test: “whether any given person can be said to be a member of the class or

not”Application: CA said that ‘shall’ really meant ‘may’ and Trustee was given a mere power and not a Trust power. HL

said ‘shall’ means ‘shall’ and it is a Trust power. HL said equal distribution was not stated in the Trust instrument and should not be assumed. Said that practically speaking, mere powers and Trust powers are almost the same (T power requires more comprehensive determination of class of beneficiaries). Set out Individual Ascertainability TEST (above). No presumption of equal division.House of Lords says this a trust power not a mere power – the Trustees must distribute the income.Test, per Lord Wilberforce is “whether any given person can be said to be a member of the class or not” you do not need to ascertain every member of the class, but you must only give the money to those that are listed/included.

Comment: HL overruled earlier Broadway Cottages decision that stated that the test for certainty of beneficiaries is the complete list.

Conclusion: Discretionary trust created due to words "at absolute discretion". Linguistic certainty established (all current/former employees, their dependents, and relatives - see Baden No. 2). Individual ascertainability test appropriate.

Re Baden’s Deed Trusts (No. 2), (1973) When determining whether an individual is a beneficiary in a discretionary trust, the onus is on the claimant to prove that he is a beneficiary with evidentiary certainty.Facts: Same facts as Baden No. 1: "Trust shall pay income, at absolute discretion, for benefit of present and

former officers and employees of company, any of their dependents and any of their relatives”.Case does go back to Chancery Division and there the judge says the words “relatives” and “dependants” were sufficiently certain. Appealed to Court of Appeal

Issue: Do "dependent" and "relative" have sufficient linguistic certainty?Rule: When determining whether an individual is a beneficiary in a discretionary trust, the onus is on the

claimant to prove that he is a beneficiary with evidentiary certainty.Application: Court takes practical approach to determining linguistic certainty, and as a result individual

ascertainabilityConceptual Certainty: Is there a definition of that term that can be arrived at?Evidentiary Certainty: Question of fact to be considered in the Ascertainability test. Is there evidence that the claimant can show to prove a connection to the term?Evidentiary uncertainty might exist as to whether a particular individual is a beneficiary, but this does not void the trust.On the facts of this case, a person is either a relative from a common ancestor or not. The burden is on the beneficiary to prove that they are a relative.If there is linguistic uncertainty, then trust will fail. “Dependants”?per Sachs, L.J. “dependant for ordinary necessaries of life…”Stamp, L.J. - similar to Sachs, L.J. – says it involves financial dependenceMegaw, L.J. – has to be clear since few trusts would be valid if it weren’t – Parliament had enacted a statute using the word and didn’t define it so it must be clear without further definition“Relatives”? Sachs, L.J. – can trace to a common ancestor and “in practice cannot cause the slightest difficulty”Megaw, L.J. – relatives if both trace decent from a common ancestorStamp, L.J. – “relatives as meaning descendants from a common ancestor would not lead to a valid trust since any survey of the range of objects would be incomplete” – “relatives” means “next of kin”

Conclusion: Appeal dismissed – linguistic certainty established based on accepted definitions of "dependent" and "relative" [sharing a common ancestor].

Re Connor (1970) Certainty of beneficiary note: ‘good friends’ is too conceptually unclearFacts: C’s will left residue of estate to be divided among her ‘close friends’ in the proportion and time the Executrix decides.Decision: First J says sufficiently certain b/c it’s a small town and potential class not too large. CA says that case fails under both old and new TESTs because ‘good friends’ is too conceptually unclear.

Jones v Executive Officers of the Trust Eaton Company (1973) SCC adopted the McPhail v Doulton Individual Ascertainability TEST.Facts: Testator left $50 000 in will to be paid to ‘needy or deserving’ Toronto members of the Eaton Quarter Century Club (7000 members).Decision: SCC found a way to say that it is a valid charitable purpose AND a valid express T; adopted the McPhail v Doulton Individual Ascertainability TEST.

3. Constitution of Express Trusts

Requirements of Constitution1. Trustee must have title to the prop that is the subject matter of the T2. Title may be legal or equitable depending on the subject matter of the T

Why a trust must be constituted:1. Tee can’t carry out obligations without control2. Equity will not perfect an imperfect gift3. Equity will not grant specific performance to a volunteer (even when entitled to damages in court of law)4. A gift requires intent, alienation, and acceptance

A. Ways of Constituting a Trust

2 main ways:1. S can transfer intended trust prop to the Trustee Note: can also have 3rd party transfer the prop

2. S can declare themselves a Trustee of the trust property

Milroy v Lord (1862) Court of Equity Court will not substitute one mode of transfer for another and equity will not perfect an imperfect gift.Facts: Uncle tries to create Trust of Bank of Louisiana shares for his niece (dividends to be paid during his life

and given to her upon his death). Deed states, “reserving to myself the power to force Trustee to transfer these shares to niece” – Trustee must wait for Uncle’s instructions. Uncle never ordered the transfer. Dividends paid to niece until Uncle’s death BUT some dividends used to purchase other shares in Uncle’s name.

Issue: Was the trust of the Bank of Louisiana shares properly constituted?Rule: S must do everything possible to effect the transfer/constitute the T. Court will not substitute one mode

of transfer for another (gift, T, self-declared T) and equity will not perfect an imperfect gift.Application: Uncle never declared himself a Trustee and court will not read it as such. Because Uncle transferred

dividends to niece he was self-declared Trustee over them (but NOT the shares). Awarding her the North American Fire Insurance shares was likely a recognition of the court’s discomfort in not being able to find a way to give her the other shares; they considered the dividends used to purchase the shares as already being the niece’s money (as she had been receiving the dividends) and she was therefore the resulting owner.

Conclusion: Court found resulting Trust on the shares purchased with dividends (niece had equitable interest b/c dividends were hers).

Re Rose (1952) Eng CA S must do everything possible to effect the transfer/constitute the Trust Corroboration and evidence of deliberation will be key S can self-declare as a Trustee for propertyFacts: March 30, 1943 R fills out all necessary paperwork to gift 10 000 shares to his wife and 10 000 in Trust for

wife and son. April 5 – paperwork delivered to company secretary for entry on to shareholder registry. June 30 – transfer complete. After R’s death, relevant date for tax purposes = April 10.

Issue: Was there a properly constituted trust?Rule: S must do everything possible to effect the transfer/constitute the T

Corroboration and evidence of deliberation will be keyApplication: R did everything he possibly could to effect the transfer by April 5. R had transferred equitable title and

the transfer of legal title was beyond his control by April 5.Comment: Consider function of delivery as corroborating evidence of deliberation (R did not make rash decision) Corroboration and evidence of deliberation will be key

S can declare self to be a Trustee with respect to Trust prop- Key element of a gift is missing = no delivery/transfer- Court requires clear evidence of intention to declare oneself a Tee

Conclusion: S can declare self to be a Trustee with respect to Trust prop

- Key element of a gift is missing = no delivery/transfer- Court requires clear evidence of intention to declare oneself a Tee

Paul v Constance (1977) Eng CA No technical words necessary for declaration of trust. There must be clear evidence to corroborate a self-declared trust.Facts: Mr. C is separated from wife and living w/P. Receives 950 from injury and opens bank acct in own name

rather than jointly (on advice of bank manager). P given authority to draw on acct. Acct used to deposit joint bingo winnings and money in acct used for food and Christmas presents. Dispute between P and Mrs. C about who gets the money.

Issue: Did Mr. Constance declare himself a Trustee of the funds in the account for the benefit or himself and Mrs. Paul?

Rule: No technical words necessary for declaration of trust.There must be clear evidence to corroborate a self-declared trust.

Application: No specific words necessary for declaration of T.Affirms Milroy: courts won’t substitute one mode for another, but there is no substitution here as Mr. C’s intention to be a Trustee was clear.Clear intention of self-declared Trust = testimony of bank manager and allowing P to draw funds from the account.

Conclusion: P was entitled to the funds as there was a valid trust

Watt v Watt Estate (1987) Man CA There must be clear evidence of intention to declare a trust.Facts: RW owned marina and SW helped out there. RW and SW’s husband built boat together – SW given keys

to use the boat but legally in RW’s name. RW wrote and signed note that boat is to be jointly owned by RW and SW – notes that if sold, money will be divided equally.

Issue: Issue 1: Was there a gift of the boat?Issue 2: If there was no gift, then did R.J. declare himself to be a Trustee of interest in the boat for Shirley.

Rule: There must be clear evidence of intention to declare a trust.Application: Issue 1: Boat was not a gift – keys were insufficient delivery (RW had given her keys to many boats

without intending a gift).Issue 2: RW’s written note was, however, effectively a declaration of trust – expressed an intention that was consistent with subsequently allowing Shirley free use of the boat

Conclusion: There was a trust for the boat.

How Interests in Prop are Transferred/Constituted

Legal Interests- Land

Land title registry (BC) or deed/registry system- Chattels

Delivery of the item Bill of laden from shipping co. endorsed by S and given to Tee Transfer by deed (can’t be gratuitous b/c then unenforceable)

- Choses in Action

Assignment See s. 36 of Law and Equity Act

o Written, signed by S, notice given by person who owed the obligation- Negotiable Instruments (shares, etc.)

Endorse it in favour of the other person Not subject to the equities

- Securities Are choses in action but made into negotiable instruments by legislation

o Company keeps register of all shareholders – this gives you legal rights MOST IMPORTANT

o You must do everything that can be done to effect the transfer in order for there to be a valid T

Equitable Interests- Assignment of the equitable interest to a Trustee on T- Declaration by person that he/she is Trustee of equitable interest for B- Instruction to existing Tees to hold the equitable interest in favour of the new intended B

B. Gratuitous Promises and the Constitution of Trusts

Forcing the Settlor to Constitute a Trust:

- Specific Performance Equity will not perfect an imperfect gift = no specific performance of gratuitous deed

o Would not force a settlor to transfer property to a Trusteeo Would not force Trustee to sue or allow intended beneficiaries to sue to specifically enforce a deed o Reason: enforcement would complete delivery and would therefore complete an otherwise

imperfect gift – delivery may serve useful functions (corroborating intent, etc.) Court will enforce a promise in a deed with a remedy of damages – question re Trustee is what the

damages would be (arguably nil) If an intended beneficiary were a promisee in the deed and sued for damages it would go to the

beneficiary directly not the Trustee and therefore would not constitute the intended trust May, however, be able to argue that the promise in the deed was itself intended to be the subject matter

of the trust and therefore the trust is constituted as soon as the deed is signed, sealed and delivered

Re Pryce (1917) Eng. Trustees should not enforce a covenant for the benefit of volunteers who have given no consideration.Facts: 1887 marriage settlement between Meyrick and Mabel

Mabel settles property on the trust and Meyrick promises that funds he might become entitled to in future would be settled on the trustlife interests for Mabel and Meyrick, remainder to survivor, then to children of the marriage, or if no children then to Mabel’s statutory next of kin1891 Meyrick’s father dies and Meyrick became entitled to two remainder interests vested in interest only but would vest in possession on death of his mother1904 Meyrick executes deed giving those remainder interests to MabelMeyrick dies in 1907his mother dies in 1913 at which time Meyrick’s remainder interests vest in possessionTrustees of 1887 marriage settlement sought determination of whether they should enforce Meyrick’s promise under the 1887 settlementNote

• if 1887 marriage settlement enforced the remainder interests in Meyrick’s estate would go to the

1887 marriage settlement trust for life for Mabel with remainder to her next of kin• if not enforced the remainder interests would go to Mabel under the 1904 deed executed by

Meyrick (i.e. she would get the full interest rather than the remainder interest)Issue: Specific Performance? Forcing Settlor to Deliver the Property to the Intended Trustee?Rule: Trustees should not enforce a covenant for the benefit of volunteers who had given no consideration.Application: If the court had forced Meyrick’s property to be settled under the 1987 agreement, they would have

been perfecting an imperfect gift.• Trustees should not take steps to enforce the 1887 marriage settlement• Mabel’s statutory next of kin were “volunteers” (i.e. they gave no consideration for Meyrick’s

promise in the deed)• volunteers have no right to specific performance• and had no right to damages since promise in deed made to Mabel and Trustees but not to

Mabel’s next of kinComment

• Was there next of kin reliance?• even if they had become aware of the 1887 marriage settlement Meyrick would have to have

become entitled to interests in property, there would have to be no issue of marriage• in fact it was Trustees not next of kin that were suing• no reliance then why not let Mabel and Meyrick rearrange their affairs (and indeed Mabel was

the respondent – she did not want the 1887 marriage settlement enforced)• question of deliberation by Meyrick re interests that he did not yet have in possession

Conclusion: Simonds J. refused to direct the Trustees to put either covenant for the benefit of the settlor's children.

Re Kay’s Settlement (1939) Applied Re Pryce (1917): Trustees should not enforce a covenant for the benefit of volunteers who had given no consideration Allowing beneficiaries to sue to enforce a covenant would be allow them to get indirectly what they will not get directly (through the Trust)Facts: Mary Kay, while not yet married, executes a voluntary settlement by deed settling all her after-

acquired property on trust. She was to have life interest with power to appoint to husband for life if she were to marry and

she were to pre-decease him She had a power to appoint remainder to children She married and had three children She later became entitled to certain property and Trustees of the settlement claim the property Mary Kay refused to settle the property on the trust The Trustees apply to court to ask whether they should sue Mary Kay for damages (admitting

they could not get specific performance)Issue: Was there a properly constituted trust?Rule: Refusal to depart from Re Pryce (1917): Trustees should not enforce a covenant for the benefit of

volunteers who had given no consideration.Application: Comment

• only persons who are directly named as covenantees in a deed can enforce the deed• husband could not be named since Mary Kay had yet to marry• no children yet so they could not be directly named in the deed• therefore husband and children could not enforce the deed to get either damages or specific

performance• this was not a marriage settlement so no consideration of from husband (and no children “within

the marriage consideration”)• Was there reliance by the children? – Mary had power to appoint to husband for life with power

to appoint remainder to children and interests would arise on exercise of these powers – suggests no reliance interests defeated

Seeking a Remedy of Damages

• Trustee would be a direct covenantee in the deed• could sue for damages (but not specific performance)• What damages would there be if the Trustee was not a beneficiary?• damages would not constitute trust where trust property was something other than a fund of

money• if a beneficiary was named as a covenantee the beneficiary could sue for damages (but not

specific performance if the beneficiary did not provide consideration)• damages would be compensation for beneficial interest not provided but would be paid directly

to the beneficiary and therefore would not constitute the trustConclusion: The court directed Trustees not to take proceedings against Mary Kay since doing so would be to allow

the children who could not enforce the covenant themselves to get indirectly what they would not get directly

Canon v Hartley (1949) Eng. Ch. Covenantees cannot get specific performance but can sue for damages as a party to the agreementFacts: • covenant in deed of separation in which husband promises to settle certain after-acquired

property in favour of wife for life remainder to daughter• husband came into property in 1944• wife died in 1946• daughter sues to enforce covenant

Issue: Is the covenant enforceable?Rule: Covenantees cannot get specific performance but can sue for damages as a party to the agreementApplication: Daughter could not get specific performance since she provided no consideration for the promise in the

deed – but as a direct covenantee in the deed she could get, and did get, damagesConclusion: Damages awarded.

Note: Reliance (3rd party relying on agreement)- Courts usually try to protect reliance interests (could re-characterize the Trust to enforce the promise?)

Fletcher v Fletcher (1844) Eng. Ch. Not good precedent in Canada, as it has never been adopted, but also has not been distinguished. Re-characterized the subject matter of the trust as the chose in action, not the property which is to be conveyedFacts: Ellis Fletcher has two sons born out of wedlock (John and Jacob)

In 1829 he executes deed covenanting with Trustees that if either of those sons outlive him his executors should pay £60,000 to the Trustees within twelve months to be held for such of the two sons as reach age 21Mr. Fletcher retains deed in his possession until his death and did not communicate its contents to John and Jacobson Jacob did outlive Mr. Fletcher

Issue: Was the trust of £60,000 properly constituted?Rule: Not good precedent in Canada, as it has never been adopted, but also has not been distinguished.

Re-characterized the subject matter of the trust as the chose in action, not the property which is to be conveyed.

Application: Held• trust was constituted• trust property, the court said, was the debt of Mr. Fletcher to Trustees that came into existence

when he executed the deed though the debt was not to be paid until a later date• In other words, trust was constituted the moment Mr. Fletcher executed the deed because debt

was the trust property and the deed gave the Trustees the right to enforce payment of the debt (i.e. a chose in action which was the trust property)

Comment

• case suggests that if one can characterize the promise to the Trustees in the deed to be the intended subject matter of the trust then the trust is constituted the moment the deed is executed giving the Trustees the chose in action represented by the deed

Note: there was no reliance by the beneficiaries as they had no idea that the trust existed until their father died and the trust came to light.

Conclusion: Trust was constituted as soon as the deed was executed.

Transfer for Value- If an intended beneficiary provided consideration to the settlor for the settlor’s promise to settle on trust then

could sue settlor – could lead to constitution of the trust if specific performance available (otherwise just damages to the beneficiary and that would not constitute the trust)

- If a Trustee provided consideration for the promise and specific performance was available the trust might be constituted – but if only damages then it would be just damages to the Trustee

Promise to Convey in the Future (Expectation)- A promise to convey property that one does not yet have but has some expectation of receiving in the future

(sometimes called “future property”)- Such a promise is only enforceable if consideration for the promise is given

Re Ellenborough Towry Law v Burne (1903) Eng. Assignment of future property can only be made for considerationFacts: Miss Towry Law enters into voluntary deed, and promises to settle on trust property she might receive

under wills or intestate succession of her brother or sister if they died in her lifetime.Her sister died and Miss Towry Law settled property she received from estate of sisterLater, she gets property from estate of brother when he dies but Miss Towry Law refuses to settle this property on the trust – applies to court to determine whether she could refuse to settle the property on the trust

Issue: Could the deed be enforced?Rule: Assignment of future property can only be made for considerationApplication: The court said she did not have to settle the property on the trust

At the time she executed the deed she did not have the property, only an expectation to receive property.The deed could only operate as a promise to settle property if she became entitled to it

assignment of future property can only be made for considerationConclusion: She did not have to settle the property on the trust

4. Formal Requirements to Create Express Trusts

A. Trusts with Respect to Land (The Statute of Frauds)General Rule: Express trusts can be created orally and no specific words are required

Exceptions: Law and Equity Act s. 59 (which partially re-enacts the 1677 UK Statute of Frauds) and Wills Act impose formalities on trusts involving contracts for land and testamentary trusts.

Origins of the Statute of Frauds

Concerns about frauds based on oral evidence led to enactment of statute of frauds in 1677

Applies to:

1. Contracts with respect to land (also long term contracts – usually those calling for performance over more than one year);

- English Statue of Frauds s. 4 Must be in writing and signed by the party charged or their agent E.g. A pays B for B’s oral promise to hold B’s land in Trust for C

o K not enforceable, Trust not created E.g. X has life interest, Y has remainder – they sign K that X will relinquish claim so that Y can sell prop

and they will split the $. o If K enforceable, the proceeds of sale will be in To If K not enforceable, no Trust will be created

Enforcemento Requires written proof (doesn’t have to be K itself as long as it contains/refers to the terms) of K

signed by person to be charged (or their agent)2. Creation of trusts regarding land

- English Statute of Frauds s. 7 Must be “proved by some writing by the party who is by law enabled to declare such T, or by his last will

in writing” or else it is totally void and of no effect E.g. A transfers land to B with oral agreement that B will hold it in Trust for C – if B keeps profit from

prop then C will need proof of Trust in writing from Ao Applied to situations where B declared himself Trustee of his equitable interest

Enforcemento Does not require signed Trust instrument but Trust obligation must be proven in some writing

(NS and NB require Trust instrument itself to be in writing)o Does not need to be signed at time Trust was createdo Cannot be signed by agent of S

3. Grants/assignments of equitable interests- English Statue of Frauds s. 9

Must be “in writing, signed by the party granting/assigning” or by their will, or it will be totally void/unenforceable

Section applies to:o “T or confidence” assumed to mean equitable interestso E.g. Cathy has remainder interest that she assigns to her two kidso Both land and personal prop

Enforcemento Grant/assignment must be in writing and cannot be signed by an agent

Current Status of Canadian Provinces

- AB, SK, Nfld, Territories = received 1677 Statute- ON, NS, NB = re-enacted more modern versions of the Statute- MB = repealed Statute- BC = repealed but part of Statute in s. 59 Law and Equity Act- Note s.8 of Statute of Frauds says Act does not apply to Ts by operation of law (constructive Ts)

Problems with Statue of Frauds

- Could be used to perpetuate frauds defraud people by fooling them into oral agreements that you know will not be enforceable

- Leads to further problems of reliance and unjust enrichment

Formalities under the Statute of Frauds (Especially Contracts with Respect to Lands)

Background: The Statute of Frauds was enacted to combat fraud based on oral evidence (mostly by making them unenforceable). Problems: Clever fraudsters would defraud others by making oral promises and using the Statute of

Frauds to their benefit, and even non-fraudulent oral transactions might result in violations of parties’ reliance and possible unjust enrichment.

Doctrine of Part Performance: If one party performs, and the other party refuses to perform on the basis that the agreement was oral, the court may still enforce to protect reliance.

Doctrine of Fraud: A person claiming fraud may use parole evidence to demonstrate that the Statute of Frauds is being used to defraud.

- If there is fraud, the statute does not apply (Rochefoucauld)

Contracts with Respect to Lands: No action regarding an interest in land can be brought unless the agreement on which it is based (or a note or document evidencing it) is in writing and signed by the person charged or his agent (Law and Equity Act s. 59, re-enacting Statute of Frauds s. 4)

Applicable in BC: This has been re-enacted in BC, with the modification that the contract can be proved in ways other than writings signed by the person charged. (Law and Equity Act s. 59)

Written Evidence: If relying on a note or document as evidence, it must include the terms of the contract or make reference to such a document, but need not be the contract itself.

Example: Signed letters indicating the state of the property might be enough (Rochefoucauld) Note: This is relevant to trusts if there is a promise to create a trust that is found in a contract

Rochefoucauld v Boustead (1897) CA Where written evidence is lacking or insufficient, other evidence may be admitted to prevent the Statute of Frauds from being used to commit a fraudFacts: Boustead orally agrees to hold land in trust for Rochefoucauld and remitting profits and later to return

land to RochefoucauldBoustead later writes letters signed by him and remits profitsStill later, Rochefoucauld asks for return of land and Boustead refuses claiming the Statute of Frauds

Issue: Was there a valid trust for land and was it in compliance with the Statute of Frauds?Rule: Where written evidence is lacking or insufficient, other evidence may be admitted to prevent the Statute

of Frauds from being used to commit a fraudApplication: Letters signed by Boustead may have been enough to meet Statute of Frauds requirement

Even if they were not, other evidence admitted to prevent the statute from being used to commit a fraudConclusion: The land was held on trust, and must be returned to Rochefoucald.

Constructive TrustsSection 8 - Act does not apply to trusts by operation of law

Law and Equity Act s. 59 (valid law in BC)

1. Ks Respecting Land- s. 59(3) essentially re-enacts s. 4 of Statute as modified by doctrine of part performance and doctrine of fraud

2. Does not Apply to Dispositions of Land by Way of T- s. 59(1)(a) says ‘disposition of land’ does not include creation, assignment, or renunciation of an interest under a

T- Does away with s. 7 of Statute

3. Does not Apply to Assignments of Equitable Interests- No re-enactment of s. 9 of Statute- No requirement of writing for the grant/assignment of an interest in T

B. Testamentary TrustsWills Act (1837)

- Background Concern over fraudulent wills Before the Wills Act, you only had to produce written doc (not necessary to be signed or in testator’s

writing) Wills Act said testamentary gifts must be in writing AND signed by testator/agent AND be witnessed by

at least three people- BC Wills Act

Valid Will = in writing (s.3); signed by testator/agent (in testator’s presence at testator’s direction) (s.4(a)); testator makes/acknowledges signature in presence of 2+ witnesses (s.4(b)); and witnesses sign the will (s.4(c))

o Witness cannot be B or spouse of B Changed enacted but not in force (Wills, Estates, and Succession Act)

o 16 and over could make will; testator’s signature must be at the end; witnesses must be over 19; B can be witnesses (although their interest may be void)

Testamentary Dispositiono Must comply with WA to make valid testamentary disposition (takes effect upon death)

Secret and Semi-Secret Ts Requirementso Communication by the donor of the Trust and its terms to the donee ANDo Acceptance of the Trust obligation by the donee (includes mere acquiescence) ANDo Communication must be timely

Secret and Semi-Secret Trusts (both are testamentary trusts)

- Secret = no indication in will that donee takes on trust- Semi-secret = indication that donee takes on trust but no indication of who the beneficiaries are- Requirements for both secret and semi-secret trusts:

i. Communication by the donor of the trust and its terms to the donee (i.e. the person to whom the property is given under the will and who will be subject to the trust obligation);

ii. Acceptance of the trust obligation by the donee (which can include mere acquiescence by the donee); and

iii. The communication must be timely.

McCormick v Grogan (1869) HL Communication regarding a testamentary trust must be made during a testator’s lifetime and the Trustee must accept this obligation Note: exception to Wills Act requirements in rules from caseFacts: Craig’s will left all of his property to Grogan. Craig tells Grogan on his deathbed that he has left everything

in Grogan’s ‘power and discretion’ – Craig dies – Craig’s brother finds Will and letter in drawer – Letters asks Grogan to pay annuities to named persons, including McCormick – McCormick not paid, so he sues.

Issue: Was this a valid secret trust?Rule: Exception to Wills Act where one of the following apply:

1. Person induces the making of the will on understanding he will do what the testator wants and then Trustee fails to follow through,

2. Does not induce but accepts obligation, deterring testator from taking things further; or3. Acquiesces after being told of devise and obligation.

Application: Lord Hatherly holds for Grogan (not a valid trust) noting Grogan did not induce the will, did not assent, and could not acquiesce since testator said he would have it no other wayLord Westerly notes similar fraud concerns but says on the facts that there was no indication of the

contents of the letter (i.e. no communication of the trust obligation)Conclusion: Not a valid trust

• notes fraud prevention basis for enforcing secret and semi-secret trusts• communication must be made in testator’s lifetime• perhaps receiving sealed letter in lifetime would be enough• not receiving letter until after death of testator not enough• resulting trust for estate

Boyes v Carritt (1884) Fraud prevention basis for enforcing secret & semi-secret trusts; Communication regarding a testamentary trust must be made during a testator’s lifetime Resulting trust based on sealed letter received after T’s death; Trustee knew it was not a gift to him/was waiting for instructionsFacts: Everything left to C (solicitor for testator) – says he will send instructions once he reaches continent –

letter never arrives with instructions – letter found among testator’s things (C to take 25 and rest to Nell Brown) – next of kin claimed $ left in Trust for estate.

Issue: Was there a valid trust?Rule: Communication of a testamentary must be made during the testator’s lifetime and Trustee must accept

obligation.Application: Notes fraud prevention basis for enforcing secret and semi-secret trusts

Court suggests sealed letter (received by C but not opened) sent to C during testator’s life may have been sufficient.Would have allowed testator to change his mind and gives the Trustee the option of viewing the details and either agreeing to be Trustee or refusing

Conclusion: Resulting Trust for estate because C understood all along that it was not a gift to him – he knew he was awaiting instructions.

Ottaway v Norman (1972) Defined the essential elements for secret trusts: 1. An intention of the testator to subject the primary donee to an obligation to a secondary done; 2. Communication of that intention to the primary donee; 3. Acceptance of obligation by primary donee either expressly or by acquiescence.Facts: O made testamentary gift of house and contents to housekeeper – gift said to have been on the basis

that housekeeper would devise it testator’s son and daughter-in-law when done with it – Testator dies 1963 – Housekeeper makes will devising house as requested – Same when will updated in 1966 – Dispute between housekeeper and son re: bathroom reno – Housekeeper changes will and leaves house to N

Issue: Whether there was a secret trust obligation and if so, what did it apply to?Rule: Essentials of Secret Trusts:

1. An intention of the testator to subject the primary donee to an obligation to a secondary donee,2. Communication of that intention to the primary donee,3. Acceptance of obligation by primary donee either expressly or by acquiescence.

Rules for Secret Trusts:- Communication of Secret Trust can be either before or after the will.- Transfer can be inter vivos or testamentary.- Clear evidence of intention, communication, and acceptance required

Application: Found evidence clear enough given affidavits of executor of Ottaway’s will about intention of Ottaway and of friend of housekeeper who heard this intention mentioned when she was visiting at the house

Conclusion:

Semi-Secret Trusts

- Definition: there is an indication that donee takes on Trust but no indication of who the beneficiaries are- Contrary to Wills legislation

Danger of someone forging doc stating B

Room to defeat intentions of testator OK to refer to other docs for instructions on executing the T

- Problem with Non-enforcement of the S-S Trust obligation Can defeat testator’s intention – acceptance/acquiescence may have deterred testator from taking

further steps If Trust invalid, property reverts to the estate (against S’s intentions)

- Difference in Timing of Communication Tee must be notified at or before the signing of the will Incorporation by reference Allows execution of testamentary gifts not in will or in compliance with wills legislation (re-opens door

to fraud)

Blackwell v Blackwell (1929) HL In semi-secret trusts the trust obligation is expressed in the will itself and therefore the Trustees cannot take themselves since no intention to make a gift to them (enforced to avoid fraud) For a semi-secret trust the communication must be made prior to or contemporaneously with the making of the willFacts: Will with codicil – gave 12 000 to executor/Tee to invest and use income for things ‘which I have already

indicated to them’ – Two Tees – one had been given specific details while the other only had a general idea. Intention communicated at or before the will. Trustees wanted to give money to woman and her 16 yr old son rather than the wife.

Issue: Was there sufficient communication of the T?Rule: 1. In semi-secret trusts the trust obligation is expressed in the will itself and therefore the Trustees

cannot take themselves since no intention to make a gift to them (enforced to avoid fraud)2. For a semi-secret trust the communication must be made prior to or contemporaneously with

the making of the willApplication: The court noted that in semi-secret trusts trust obligation is expressed in the will itself and therefore the

Trustees cannot take themselves since no intention to make a gift to themThey also noted that such trusts enforced for the same reason as fully secret trusts, that otherwise there would be a fraudThe fraud here is that if trust obligation had not been accepted testator might have revoked the will and perhaps written anotherThe court also held that for a semi-secret trust the communication must be made prior to or contemporaneously with the making of the will

Conclusion: Semi-secret Trust found to be valid – sufficient communication.

Jankowski v Pellek (1995) MB CA Intent trumps technicalities; the court interprets what was prima facie a semi-secret trust as a fully secret trust so as not to contradict the intent of the testator. Communication regarding a fully secret trust can come after execution of the will.Facts: P had property from 1st marriage that she did want her 2nd husband (Jankowski) to get. Will signed that

prop was to be sold with $ split between 6 nephews. P later changed her will to split the prop $ between 3 nephews with residue going to executor to be divided as he saw fit. She indicated she wanted to benefit 3 people with residue. AFTER drafting will, she wrote the three names down and signed it and gave it to lawyer, Mr. Hnidan (does not comply with wills legislation). Jankowski sues to get the $

Issue: Was there a valid trust?Rule: Communication regarding a fully secret trust can come after execution of the will.Application: Argument for Jankowski that cases in the past had said gift to “my executor” with an instruction to

distribute then presumption it was not gift with power of appointment but was instead a trust obligationJankowski argues that Mr. Hnidan was, therefore, a Trustee on the face of the will and therefore it is a semi-secret trust

- therefore communication terms of the trust after signing of the will is too late - semi-secret trust therefore could not be enforced and property would revert to estate

- since it had been part of the residue that was now not dealt with in the will, it would be intestate property and would, under intestate succession, go to Jankowski (just the person Mrs. Pellek did not want the property to go to)

- minority judgment accepts Jankowski argumentMajority judgment:

- notes courts prefer (favour) interpretation of will that leaves all property distributed- agrees that if Mr. Hnidan holds as Trustee then it is a semi-secret trust and communication must

come at or before the making of the will – and on the facts that communication came too late- but concludes on facts that intention was to make a gift to Mr. Hnidan personally (on basis that

Mrs. Pellek did not intend an intestacy, Mr. Hnidan is long-time friend, and she did not intend to benefit Jankowski)

- therefore communication can come after execution of the will (i.e. it is a fully-secret trust not a semi-secret trust)

Conclusion:

Decision: MAJ = work to find semi-secret Trust b/c they know it needs to be communicated at/before signing the will. Say there were other factors that support a gift to executor (did not want intestacy, exec was friend, and very clear she wanted to keep assets from husband). Presumption is to T, but this can over-turned by evidence. Find a gift to executor so writing names on paper was fine. MIN = semi-secret Trust not sufficiently communicated.

5. Legality / Public Policy

a. Trusts for Illegal Purposes- Illegal = against a Statute- Example

$ in Trust for person who commits most murders each year $ in Trust for terrorist training school

o Note: both are invalid non-charitable purpose Ts Ts for fraudulent purposes

- Consequences of Illegality Unenforceability and Return of Trust Property

o Two approaches:1. If illegal purpose carried into effect then you lose your property2. If no harm yet done the property is returned

The English Courts’ Position

Symes v Hughes (1870) Eng No longer good law When a fraudulent purpose isn’t executed, an assignor retains the right to recover their propertyFacts: S needed to avoid creditor – S gave M his house with no consideration (presumption of resulting T) – S

paid off creditors – M gave house to H in exchange for free lodging for life – M dies – S declares bankruptcy and wants house in order to pay new creditors.

Issue: Can S get his house back?Rule: When a fraudulent purpose isn’t executed, an assignor retains the right to recover their propertyApplication: Transfer was to avoid creditors but creditors paid anyway = illegality intended but not done.Conclusion: No longer good law.

Re Great Berlin Steamboat Company (1884) Eng CA If an illegal purpose has been carried into effect, the settlor of the illegal purpose trust loses their propertyFacts: Tort fraud case. GBS intends to sell shares but has no assets. GBS convinced Bowden to deposit $ with

GBS. GBS passed resolution that money being held in Trust for 1 month for express purpose of enticing buyers. Bowden left $ in GBS and it was used for GBS purposes. GBS went under and Bowden made claim to get his $ back.

Issue: Can Bowden get his $ back?Rule: If an illegal purpose has been carried into effect, the settlor of the illegal purpose trust loses their

propertyApplication: Arguably different then Symes given finding that fraudulent intent had been achievedConclusion: $ was not returned - $$ was used to create false credit (illegal purpose).

So the view from the early English cases was that the person with the fraudulent intent could get the property back if the fraud was not carried into effect

Other view is that the court should not order the return of the property even if the fraud is not carried into effect – doing so would allow person with fraudulent to benefit if fraud achieved but avoid loss if fraud not achieved thereby encouraging fraud

Canadian Position

- Canadian position is not clear- There is Supreme Court of Canada judicial support for both views

Scheuerman v Scheuerman (1916) SCC Appears to take the view that property cannot be returned even if fraudulent intent not achievedFacts: Husband transfer property to his wife to avoid creditor. The creditor was later paid, and the husband

sought return of the property.Issue: Can he get his property back?Rule: Appears to take the view that property cannot be returned even if fraudulent intent not achievedApplication: Three of five judges held that the husband could not get the property back, even if no fraud effectedConclusion: Property was returned.

Krys v Krys (1929) SCC Appears to take the view that property can be returned if fraudulent intent not achievedFacts: Property conveyed by father to son for purpose of avoiding creditors that might arise due to expenses

incurred in wife’s hospitalization- No creditors ever prejudiced- Father later wanted the property returned

Issue: Can he get his property back?Rule: Appears to take the view that property can be returned if fraudulent intent not achievedApplication: Since no creditors were ever prejudiced, the father was able to get his property back.Conclusion: Father could have his property returned.

Goodfriend v Goodfriend (1971) SCC Majority judgment avoided answering whether property can be returned if fraudulent intent not achieved (Note: current SCC contradictions in Krys v Krys and Scheuerman v Scheuerman); dissent of Spence J said that a resulting trust can be ordered if the intended fraud was not achieved Note: cannot rely on presumption of advancement where a settler is misled to transfer property to avoid creditorsFacts: Wife persuades husband to transfer property to wife to avoid possible future creditors

- No creditors ever prejudiced- Husband seeks property back

Issue: Can he get his property back?Rule: No SCC clarification of contradicting decisions from Krys and ScheuermanApplication: Spence J. (Pigeon J. concurring) adopts first view that he can get his property back if fraud was not

actually effectedLaskin, J. (Judson and Hall JJ. concurring) say wife could not rely on presumption of advancement where she mislead husband into believing transfer was necessary to avoid creditors.

Conclusion:

Forfeiture of Trust Property

Proceeds of Crime Legislation (sections 462.3 to 462.5 of the Criminal Code)

- Applies to designated crimes (any indictable offence)- Property forfeit so trust no longer operates and property does not go back to settlor

Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17

- Record keeping required of financial institutions and of some professions that might be used for money laundering or financing of terrorist activities

- Reporting of suspicious transactions and currency or monetary transactions over $10,000- If a transaction is connected to money laundering or terrorism, then the funds are subject to forfeiture- List of organizations presumed to support terrorism – money held for them subject to forfeiture

Effect of Condition Subsequent or Words of Limitation for an Illegal Purpose- E.g. $1M is transferred to J in BC for a period of 80 yrs with the income being paid to N, for so long as N commits

one murder per year ‘For so long as’ sounds like words of limitation making the Trust void Court may treat as condition subsequent – Conditions subsequent contrary to public policy can be

struck out and the Trust can still operateo UNLESS it involves real prop and then the gift is voido UNLESS personal prop is malum in se (bad in and of itself/morally wrong)o Malum prohibitum (against statute) is still valid Trust for personal prop but that provision is

struck

b. Traditional Prohibitions Trusts Imposing Conditions that are Contrary to Public Policy, Impossible of Performance or Uncertain

Distinction between Conditions Precedent, Conditions Subsequent and Determinable Interests

1. Conditions Precedent = Condition that has to occur BEFORE a gift can be effective (e.g. upon attaining 30 years of age)

Impossibility: If condition could not possibly be met at required date then gift will be free of condition2. Conditions Subsequent = Gift is effective but can be taken BACK if X happens (e.g. but if ever H uses it for

commercial purposes then it goes to F) This is a defeasible interest

3. Conditions Subsequent vs. Words of Limitation E.g. My farm to Richard, in T, as long as he is married to Lucy Condition Subsequent = divorces Lucy then loses the house

o Flag words: but if, provided that, if it happens that

Words of Limitation limit the length of time for the gift (the time-limited interest is known as a “determinable interest”) E.g. he gets the house until Lucy dies or they split

o Flag words: until, as long as, while, duringo Word of limitation will sometimes be read as a condition subsequent b/c a condition subsequent

can have part of it struck down w/out destroying the whole T

The Effect of a Condition or Words of Limitation for an Illegal Purpose

1. Effect of Illegal Purpose in a Determinable Interest

gift fails

2. Conditions Precedent for Illegal Purpose real property – gift fails personal property

o malum in se (void in and of itself) – gift failso malum prohibitum (forbidden by law – i.e. In a statute or regulation) gift operates free of the

condition3. Conditions Subsequent for Illegal Purpose

condition struck out – gift operates free of the condition (same for real and personal property

Conditions Impossible of Performance- Could not possibly be fulfilled at date gift is given- Courts have allowed gifts to operate despite impossible conditions- If S clearly intended clause to be performed, but it became impossible of performance afterwards then the gift is

void/invalid

Uncertain Conditions- Uncertain conditions = void- Uncertain condition precedent = gift fails- Uncertain condition subsequent = condition struck and gift operates

Chart for Conditions and Determinable Interests

Discretion of Court and Underlying Factors

- Court will often try to reach outcome that they feel is fair - Courts want to satisfy intention of S- Reliance or reasonable expectation by B or B’s creditors- Unjust enrichment of S at expense of B

Conditions Contrary to Public Policy (Historic Situations)

1. Restraint on Marriage - E.g. impose lifetime celibacy

Re McBain (1915) Example of a valid condition subsequent: provision for S’s daughters only until they are marriedFacts: Gift to two daughters but gift over if they marryDecision: Gift valid subject to the condition subsequent. It will only provide for daughters until they are married

Re Cutter (1916) OCA Example of an invalid condition subsequent: provision for S’s sister was only valid if she DID NOT MARRY (contrary to public policy to restrain marriage)Facts: Gift to sister with gift over in event she marries.Decision: Condition subsequent invalid as against public policy; gift to sister was absolute

2. Interference with Marital Relationships- E.g. encourages separation or discourages reconciliation

Hurshman (1956) BCSC Example of a condition that is malum prohibitum (against a statute) being struck out and the gift being absolute (cannot restrain marriage from a person of a particular religion)Facts: Gift of personal prop to daughter on condition she not marry a Jewish person (she did)Decision: J found condition to be malum prohibitum so gift valid but condition struckComment: Possibly void for uncertainty? If so, then gift would fail. How do you determine Jewish?

Re Nurse (1921) Example of a gift that sought to constrain marital reconciliation (contrary to public policy to restrain marriage); condition struck down but gift was successfulFacts: Gift of prop to daughter unless she should in any way help her estranged husbandDecision: Condition void – put constraint on marital reconciliation

Re Blanchard (sub nom Eastern Trust Co v McTague) (1963) PEI CA Example of a gift that sought to constrain marital reconciliation (contrary to public policy to restrain marriage); condition struck but gift still successfulFacts: Real prop given to housekeeper IF she is still living apart from husband. Trust also made a gift of personal prop to housekeeper, UNLESS she reunites with her husband.Decision: Said real prop was condition precedent and let it stand (contrary to our chart). Personal prop provision found contrary to public policy – condition struck but gift successful

3. Interference with Discharge of Parental Duties

Clarke v Darraugh (1884) Preventing a child from living with their parent is contrary to public policy; condition struck down but gift was successfulFacts: Gift on condition that child not live with father before reaching age of majorityDecision: Condition struck down

Re Thorne (1922) Preventing a child from living with their parent is contrary to public policy; condition struck down but gift was successfulFacts: Girl lived with uncle – gift given but if EVER lives with mother gift is lostDecision: Condition found to be a Void Condition Subsequent

4. Discriminatory Conditions

Christie v York Corp (1940) SCC Refusing to serve all colored persons at a city bar was held not to be contrary to public policyFacts: Staff at bar told not to serve colored persons.Decision: NOT contrary to public policy

Re Drummond Wren (1945) Ont HC Covenant on land prohibiting sale to Jewish persons = contrary to public policy and therefore struck down.Facts: Covenant on prop prohibits sale to Jewish personsDecision: Struck down as contrary to public policy

Noble v Alley (1949) ON CA Court says insufficient evidence to be contrary to public policy to restrain sale of a property to Jewish persons; decision based on UN Charter (CA charter not in effect at this time)Facts: Deed contained covenant that prop not be sold to Jewish or colored personsDecision: Court says insufficient evidence to say it’s contrary to public policy. Decision based on UN Charter (was not Canadian law at the time).

Leonard Foundation (Canada Trust Company v Ontario Human Rights Commission) (1990) OCA Scholarships only for students of certain religions/males is contrary to public policy (CA Charter in effect)Facts: Racist Foundation.Decision: Court looks at UN Conventions and Charter. Finds that this is now clearly contrary to public policy

5. Restraints on Alienation or Interference with Enjoyment of Property- E.g. Cannot sell land to someone outside the family

6. Adherence to Particular Religion- NOT generally found contrary to public policy- Can be struck down for uncertainty

c. Fraud on Creditors

Fraudulent Conveyance Legislation- English FC Act (1571) applies in AB, SK, PEI, NS, NB and Territories

Similar provincial enactments in BC, MB, ON, and Nfld- BC Fraudulent Conveyance Act

s. 1 = disposition of prop made to delay, hinder, or defraud creditors is void against creditors despite a pretence to the contrary

s. 4 = this does not apply to disposition of prop for good consideration and in good faith to a person not having notice/knowledge of the collusion/fraud

BC Fraudulent Preferences Act- Legislation intended to deal with situation where you pay one creditor over another

s. 2 - (i) insolvency or eve of insolvency of debtor; and (ii) collusion with a creditor to agree to judgment against debtor (a) with intent to defeat or delay creditors or (b) to give one or more creditors a preference over other creditors, or some of them then judgment void against creditors

s. 3 – disposition when insolvent or person knows he is on the eve of insolvency void against injured creditor if made with intent to defeat, hinder, delay or prejudice creditors and to or for a creditor with

intent to give that creditor a preference over other creditors s. 6 – does not apply if for consideration in good faith

- Legislation intended to deal with situation where you pay one creditor over another s. 3 = a disposition by an insolvent person or person on eve of insolvency is void against an injured

creditor IF made with intent to defeat, hinder, delay, or prejudice some creditors AND IF made to or for a creditor with intent to give creditor preference over another

o s. 6 = does not apply if for consideration in good faith

Bankruptcy and Insolvency Act Arm’s Length Transfer (matter of fact)- s. 96(1)(a)

o Transfer Void against Trustee in bankruptcy if: Transfer was at undervalue

No consideration or considerably less than market value Transfer occurred w/in 1 year of bankruptcy Debtor insolvent at time of transfer or rendered insolvent by transfer Debtor intended to defraud/defeat/delay creditor

Non-arm’s Length Transfer (e.g. family member) – s. 96(1)(b)o Transfer Void against Trustee in bankruptcy if:

Transfer was undervalue AND Transfer occurred w/in 1 year of bankruptcy OR Transfer occurred w/in 5 years of bankruptcy AND debtor insolvent/rendered insolvent at

the time OR intended to defraud, defeat, delay creditor Preferences (one creditor over another) – s. 95(1)

o Arm’s Length Transfer Void against the Trustee in bankruptcy if it is:

Made in favour of a creditor dealing at arm’s length with an insolvent person, or in favour of a person in Trust for that creditor AND

Transfer was made with a view to giving creditor a preference over another creditor AND Transfer made w/in 3 months of bankruptcy

o Non-Arm’s Length Transfer void against the Trustee in bankruptcy if:

Transfer made in favour of creditor who is not dealing at arm’s length with insolvent person, or in favour of a person in Trust for that creditor AND

It has the effect of giving that creditor a preference over another creditor AND It is made w/in one year of bankruptcy

Note that putting prop in Trust to avoid bankruptcy will not work in Canada but may be achieved by using International Ts in places such as the Cayman Islands and Belize. International Ts make it VERY difficult for creditors to get your money

d. The Rule against Perpetuities

Overview• Perpetuity problems can arise in grants of legal interests in real property BUT in the modern context these

problems are most likely to arise in the context of trusts that can create conditional in real property or personal property

• Perpetuity rules are part of general concern with restraints on alienation – can restrain alienation of property for a period of time but not indefinitely

• Vesting of interests in property conditional on future events effectively restrains alienation of property • ALWAYS note that the rule is often modified by legislation and that the legislative modifications, if any, need to

be researched

• BC, ON, AB, Territories = wait and see legislation• NS, NB, PEI, Nfld = full CL rules• SK and MB = abolished the rules

***Remoteness of Vesting• Designed to deal with ‘dead hand controlling’ and be more economically efficient E.g. at some point it may make more sense to sell the prop and use the $$

Rule = “An interest is valid if it must vest, if it is going to vest at all, within a period calculated by taking the lives in being, at the date the instrument takes effect, plus 21 years”

1. Interest: This refers to a contingent interest (since non-contingent interests are vested)2. Must vest: The rule is violated if it is possible for the interest to vest after the allowed period

To vest, both the identities of the beneficiaries, and the size of their interests (Robinson v Adair) must be known.

If there is even the most remote chance that it will not vest then it is void Doesn’t have to vest – but it must be determined whether or not it will vest within the perpetuity period not enough that contingency might, or even probably, or almost certainly, will be determined within the

perpetuity period – it must be determined within the perpetuity period [(Lucas v Hamm 364 P.2d 685 (Cal. S.C. 1961)]

3. If at All: If it is clear that the interest will not vest, that’s also acceptable. E.g. ‘to my grandchildren who marry within 21 years of my death’ It’s possible that no one will marry but that’s ok because you will know who is included by the deadline

of 21 years4. Lives in Being and the Perpetuity Period: Perpetuity period expires 21 years after the death of the last

individual who is connected with the grant (measuring lives) and was in existence at the time the instrument took effect.

Look to individuals (i.e. human beings) that have some connection to the gift All lives in being + 21 years May include lives implicitly referred to – e.g. “to all my grandchildren who turn 21” implicitly includes

the children If testator/S directs funds to be divided amongst a class, the class closes as long as there is at least one

member entitled to their share at the end of the perpetuity period. Others would be cut off from gift (Andrews v Partington (1791))

can specifically refer to the life of persons other than settlor and beneficiaries – e.g. Royal lives clause – but reference must be clear – uncertainty or administratively unworkability then not valid

“Royal Lives Clause”o E.g. ‘to end 21 years after the death of the last lineal descendant of Queen Elizabeth II)o Can be too broad (creating uncertainty as to end of perpetuity period)o Valid in Re Villar but courts had said clauses will be invalid after 1943

Example: John makes a gift of land to the hospital. If the land ceases to be used for that purpose, then it goes to Lydia. This violates the rule: must Lydia’s gift vest in time?

Example: Funds left to Trustee, to be given to charities that apply for funding. No time period given within which charities must be selected. Void due to the rule against remoteness

Robinson v Adair (2004) Sask QB If there is a class of beneficiaries, then the size of their relative interests must be known in the perpetuity periodFacts: S left prop to Trustee to give to charities at Tee’s discretion.Decision: Void because it is possible that it could take longer than 21 years to distribute the funds (T instrument gave no

time limit)

Steps to Applying the Rule

- Is the interest contingent?- What are the relevant lives in being referred to in the instrument?- Is there a possibility that an interest will vest outside the perpetuity period?

***The Rule against Perpetual Duration• Where you don’t have any “lives in being”, the period is 21 years• Application of this rule most often in context of purpose trusts – if the purpose trust is valid it can operate for 21

years then property must vest

Rule in Whitby v Mitchell• Repealed by Statute BUT now used in QB• Rule = An interest to an unborn person followed by an interest to the unborn person of the first unborn person

is automatically invalid

Legislative Modifications

- Note: these are listed in the order that they should apply- Only instruments that took effect after Dec. 31 1978 (BC Perpetuity Act)- Age at Which Persons can have Children (s. 14)

• Deems that a woman over 55 cannot have children (in order to prevent frustration of gifts by saying that she could create more Bs)

• For a man, there must be evidence that he is no longer able to have children- Wait and See (s. 8)

• In BC and Yukon• Have repealed the Whitby rule but preserve remoteness of vesting• Means that mere possibility that a contingent interest will vest outside the period does not make T/gift

invalid – will only become invalid if it actually fails to vest within the period- Age Reduction (s. 11)

• Provides that when a gift is made upon a person reaching a certain age, the court can reduce that age to 21 in order to have it vest within the period

- Class Splitting (s. 12)• If a gift vests in some members of a class within the perpetuity period, they are entitled to the gift while

other potential claimants are cut off- Cy Pres

• Court has power to vary gift in a way that makes it fit the general intention of the donor- Eighty-Year Rule (s. 7)

• Allows for Express 80-yr period – allows the Trust to operate for that length of time regardless of perpetuity violations

• Not a great idea in BC due to the tax implications: if capital gains accrue for more than 21 years, they will be subject to tax!

Conflicts Issues- Look to where the prop is

• Land = jurisdiction where it is located• Chattels = where chattel is located• Choses in Action = jurisdiction of the debtor

Revised Checklist:1. Determine all the Interests in the T2. Is the Interest Contingent?3. What the Relevant Lives in Being referred to in the Instrument?4. Is there a Possibility that the Interest will Vest Outside the Perpetuity Period?5. If the prop is located in a ‘wait and see’ jurisdiction, how do the legislative modifications affect the application of

the CL rule?

Key Point- You still need to watch out for perpetuity issues and know what the law is in different jurisdictions- Don’t forget the 21 year deemed disposition rule under Tax law (capital gains application)

Charitable Purpose- Charitable purpose Ts can last indefinitely

• Perpetuity problem dealt with by cy pres doctrine – says that if after the Trust has been created, it is impossible/impracticable to apply that money to the charitable purpose, then a similar purpose can be chosen by the court)

• Watch out for situations where Trust prop is subject to a condition subsequent that would end the charitable purpose

Accumulations- History

• Pre-1800 = If Trust allowed to accumulate income beyond perpetuity period then Trust is void• Accumulations Act (1800) shortened the period of accumulation to 21 years regardless of perpetuity

period

Ontario Legislation- Permitted Periods of Accumulation under Accumulation Act

• Periods are laid out in TB (6 different ones)• Inter Vivos Trust = life of grantor

- Any $ accumulated beyond the period is directed to the person entitled to the income if the S died intestate- Accumulation cannot be longer than “one of the following” terms:

i. life of the grantorii. 21 years from date of inter vivos disposition

iii. duration of minority/minorities of person(s) living or conceived but not born at the date of inter vivos disposition

iv. 21 years from the death of the grantor, settlor or testatorv. duration of minority/minorities of person(s) living or conceived but not born at the date of the death of

the the grantor, settlor or testatorvi. duration of minority/minorities of person(s) who would, if of full age, be entitled to the income directed

to be accumulated.- If the accumulation is directed in a way that would run beyond the periods allowed then the direction is invalid

and the income is to be paid to the person who would have been entitled to it if the accumulation had not been so directed

- Problem = adds further complication to perpetuities rule• Ts established for disabled persons

BC Perpetuity Act (s. 25)- Provides that “if prop is disposed of in such a manner that all or part of the income of it may be accumulated,

the power or discretion to accumulate that income is valid if the disposition of the accumulated income is or may be valid, but not otherwise”

- Means that disposition of accumulated income valid if it complies with CL remoteness of vesting rule as modified in Perpetuity Act

- S. 25 looks to see whether accumulation fits within common law lives in being plus 21 years as modified by the Act

National Trust v McIntyre (1997) Ont Example of perpetuity issue resolved on intestacy; in BC would have been dealt with by the BC Perpetuity ActFacts: Trust fund for testator’s sister gave her monthly allowance and allowed Trustee to draw on capital if she became ill. Trust stated that when she died, the remaining funds were to go to 2 charitable organizations. If any legacy was unable to take effect, it would revert to the residue of the estate. After 21 years, sister still alive and charities said they should get the money.Decision: No failed legacy. Testator thought he dealt with all property but he did not consider excess income. B/c it was not dealt with in the will it went to next of kin.Comment: Would likely be valid in BC under BC Perpetuity Act

e. Restraints on Alienation and Spendthrift Trusts- Settlor CAN restrain…

1. Class of persons who will get prop2. Mode of disposing of prop/alienation3. For a period of time

- CAN’T say that you can never get rid of anything for any reason perpetuities/social policy issue with restraining alienation/limiting to a certain use for too long Can’t say can never assign/mortgage interest

- Allows person who owns land to do what they want with it

Protective Ts and Spendthrift Ts- general idea of both these expressions is concern for the person who will spend every last nickel they have in a

short period of time instead of saving to have enough for later- so put property in trust and have Trustee just pay an allowance to the person- but the person then just assigns their allowance for $ now and then spends all the money in a short period of

time – this defeats the whole purpose of the trust- so the trust terms try to prevent the person from doing that – but terms that say you can never assign to anyone

for as long as you have the interest (usually a life interest) is likely to be struck down as an excessive restraint on alienation

- Both generally have restraints on alienation- Problems:

Saunders/Vautier Rule = allows B to agree to wind up the Trust and take all the money right away Can sell income stream for a lump sum to get cash now If B becomes insolvent or declares bankruptcy creditors can seize equitable interest (income stream)

US Spendthrift Trusts- Trustee not allowed to pay income stream to anyone but B- Can provide that if anyone claims entitlement to the income you can have a gift over (B cannot sell interest)- If you assign your interest, your interest comes to an end

Problem = restraint on alienationo Some jurisdictions allow it and some don’t

English “Protective Trust”- In England there is a provision in the Trustee Act there that says if the trust instrument uses the expression

“protective trust” it means certain terms specified in the Act apply (i.e. a sort of opt-in to trust terms that have legislative imprimatur)

- No such provision in Trustee acts in Canada

Canadian Approach - Discretionary Trust + Letter of Wishes- If the beneficiary’s interest is sold, the Trustee could choose not to pay the new recipient

Anglo-Canadian Jurisprudence

Brandon v Robinson (1811) Principle of limits on restraints on alienation: if donor gives life interest “the donor cannot take away the incidents to a life estate [by] a proviso that he shall not sell or alien it” But property can be given to a person until the person becomes bankrupt

Rochford v Hackman (1852) As per Brandon v Robinson, may not completely restrain alienation but can limit the term of an interestClause said life interest to come to an end if the beneficiary “should in any manner sell, assign, transfer, incumber or otherwise dispose of or anticipate his share or any part thereof”

- Again principle of limits on restraints on alienation noted citing Brandon v. Robinson- But can limit the term of an interest and here clause treated as a valid limitation of the duration of the interest

Re Leach (1912) Right to income “until he shall assign, charge or otherwise dispose of the same or some part thereof or become bankrupt” held to create a valid determinable interest (i.e. limited the duration of the interest as per Brandon v Robinson and Rochford v Hackman)

Re Williams (1947) Court notes purpose of guarding against waste (spendthrift purpose)- Income to daughter but to come to an end if she “shall become bankrupt or shall assign, charge or encumber the

said income …”- If events in clause occurred then income only for maintenance and otherwise to be accumulated but if clause

later no longer operated payments of income could start again Court notes purpose of guarding against “waste” (i.e. notes spendthrift purpose)

- Clause held valid but court only dealt with question of whether clause was uncertain not question of whether void as an undue restraint on alienation

- Noted, however, that:“It would be unfortunate if the court was obliged to interpose difficulties in giving effect to the intentions of testators so obviously framed for the well-being, and well-doing, of the objects of their bounty, and especially so when these objects are their own children”

Current Approach:- Common approach now is to create a discretionary trust for a class of persons (usually family members) with

a fairly broad discretion to Trustee- Attempts by spendthrift beneficiary to dispose of interest will lead to Trustee no longer exercising discretion

in favour of that beneficiary

B. Termination and Variation

Overview

4 Ways to Override/Vary a T:1. Termination/Variation per Terms of the Trust Instrument2. Terminated under Saunders v Vautier3. Termination/Variation with Court Approval under Ts variation legislation (court can consent for double

contingent interests or those lacking legal capacity)4. Variation of charitable purpose Trust by Court (Cy Pres)

1. Termination

Termination Under the terms of the Trust Instrument- In B.C. use of 80 year period per s. 7 of the Perpetuity Act- Income trusts allowed termination by majority vote of beneficiaries- Shorter period often provided for because of the Income Tax Act; after 21 years must pay capital gains tax!!!- Prior to 2007, most business income Ts had provision allowing Trust to be varied/terminated by 2/3 or 3/4 B maj

vote

Revocation- A power of revocation allows the settlor to revoke (or bring an end to) the trust and have the trust property

returned to the settlor- Settlor could then retain property or subject it to new trusts- Right to revoke is not automatic – it must be expressly reserved- Rarely used because under ITA s. 75(2) the income on the trust property will be attributed to the settlor who

retains a right of revocation The settlor must then pay the tax on the income of the trust even though the settlor no longer gets the income from the trust

The Rule in Saunders v Vautier- The rule: One or more beneficiaries, all of full legal capacity, and who is, or are collectively, entitled to all the

beneficial interest in the trust may apply to have the trust terminated and the assets transferred even though the trust instrument calls for final payment to be delayed.

- Useful where few beneficiaries and trust no longer serving its purposes – e.g. Trustee fees greater than returns, or net of fee returns significantly lower than beneficiaries could receive on their own; or investment of funds leaves portfolio risk while the beneficiaries await distribution (i.e. why not distribute now)

- In theory don’t need to apply to court – just make demand of Trustee BUT if beneficiaries don’t apply to court the Trustees should so that court can watch out for contingent interests (i.e. question of whether all the beneficiaries have agreed)

Saunders v Vautier (1841) Eng. If all of the beneficiaries in the trust are of adult age and under no disability, the beneficiaries may require the Trustee to transfer the legal estate to them and thereby terminate the trustFacts: Vautier’s uncle left stock on trust for Vautier with income accumulated until Vautier reached age 25 then

accumulated fund and stock to be given to VautierVautier had reached age of majority, was to be married and planned to start a business but he was not

yet age 25Vautier sought to wind up the trust

Issue: Can Vautier take the assets of the trust early?Conclusion No contingent interests since there were no gifts over (so only other possibility was reversion to estate of

uncle if Vautier did not reach age 25)Vautier over 21 and had whole interest in property since he was the only beneficiary

Situations in Which the Rule May Apply

The rule has three key elements:

- The beneficiaries must have full legal capacity. They must, therefore, be adult and of sound mind.- Together the persons applying to wind up the trust have the full beneficial interest in the trust property. If there

are persons with contingent interests, they too must agree to the winding up of the trust.- All the beneficiaries must agree to the termination of the trust.

Rule can frustrate intention of settlor – e.g. spendthrift trust or accumulation to certain age It is important to spot potential applications of the rule and take steps to prevent its operation if that

would frustrate objectives of settlor (client)

When might the rule apply?

1. Single Adult Beneficiary of Sound Mind Clearly applies to single adult beneficiary – e.g. Saunders v Vautier: amount on trust to a certain age

(e.g. 25th birthday)2. Several Adult Beneficiaries of Sound Mind with Concurrent Interests

Can apply to several beneficiaries - e.g. fund invested for four minor children and direction to accumulate until youngest reaches age 25 – when youngest reaches age 19 (age of majority in B.C.) the four children can wind up the trust

3. Several Adult Beneficiaries of Sound Mind with Successive Interests Entitlement in succession whether vested or contingent can combine to terminate the trust E.g. trust of fund for William for life, remainder to his children Xavier and Yolanda, but if William dies

before Xavier and Yolanda reach age 25 direction to accumulate until they reach age 25, and if either of them then dies before reaching age 25 survivor takes, and if both die before 25 then to remainder to Zane – Xavier and Yolanda reach age 19 and everyone still alive then William, Xavier, Yolanda, and Zane can terminate the trust

4. Postponement to a Future Date E.g. testamentary trust with life interest to surviving spouse with remainder to be divided among

children five years after death of surviving spouse – potential application of the rule if remainder interests of children as vested already (but question whether another interpretation is that remainder interests of children are contingent on surviving five years and possible reversion to estate)

5. Instalment GiftsE.g. amount per month to Adam for life and capital to Adam’s estate on his death – Adam can terminate trust if of legal capacity

6. Discretionary Trusts and Powers E.g. Trust of income for education and maintenance of sole beneficiary Candice and power to encroach

on capital also for education and maintenance of Candice – education and maintenance determined at discretion of Trustee – capital to go to Candice at age 30 – Candice can terminate the trust when she reach age of majority and is of sound mind

E.g. Trust for education and maintenance of Candice and David with power to encroach on capital for same purpose with capital to go to Candice and David at age 30 – Candice and David can terminate the trust when they reach age of majority and are of sound mind

7. Life Interest with General Power of Appointment of the Remainder Sole beneficiary with life interest only but with general power to appoint remainder in lifetime – then

can apply to terminate the trust But, if life interest with general power to appoint only by will – beneficiary of remainder interest is

contingent on exercise of power by life interest beneficiary in her will (if not exercised remainder reverts to estate of settlor) – cases inconsistent here some allowing termination under Saunders v. Vautier and others not

Avoiding the Application of Saunders v Vautier

Drafting to avoid the rule:1. Include a contingent interest in a person who will refuse consent2. Include an interest or contingent interest in minor or unborn person3. Give the Trustee discretion to distribute among a class with some members of the class being difficult to

ascertain (can’t be sure of all beneficiaries)

Competing Views on Saunders v Vautier Application:- US tends to emphasize intentions of the S – some jurisdictions require Trust purposes to be served before Trust

can be wound up- AB (1973) and MB (1983) gave courts discretion not to apply rule even if the 2 key elements are met if court

feels the termination of the Trust is not of ‘justifiable character’ Fact that S’s wishes would be overridden not enough to establish non-justifiable character Saunders does not apply but legislation allows you to do the same thing by application to the court

2. Variation

Trust and Settlement Variation Act

Nature/Purpose- Basic approach of the legislation that generally allows a court to consent on behalf of those who cannot consent

themselves- Said to have been motivated by tax legislation – trust reasonably drafted from a tax perspective may no longer

make sense from a tax perspective when the tax legislation changes- E.g. in Canada capital gains tax introduced in 1972 and that may have affected many trusts then and later when

the first 21 year period came to an end- Prior to variation of trust legislation it would not be possible to make the needed changes if Saunders v. Vautier

could not be applied, no power of revocation retained, and no provision for the termination or variation of the trust

The Legislation in BC – Trust and Settlement Variation Act- s. 1 sets out the Persons on Whose Behalf the Court can give Consent

a. Any person having directly, or indirectly, an interest, whether vested or contingent, under the Ts who by reason of infancy or other incapacity is incapable of assenting

b. Any person, ascertainable or not, who may become entitled, directly or indirectly, to an interest at a future date or on the happening of a future event, a person of a specified description or of a specified class

o E.g. to Adam and his then-wife, if he is alive and married (Adam is currently single)o E.g. gift to Fiona for life and remainder to her statutory next of kin (not ascertainable until her

death)o UK court said (b) does not give the court the power to consent on behalf of persons with vested

or contingent interests Court cannot consent on single contingencies but CAN consent on behalf of double

contingencies

Interpretation of s. 1(b):

Knocker v Youle (1985) Eng. Ch. Provision does not apply to persons having vested or contingent interests

Bentall Corp v. Canada Trust (1996) BCSCCourt has jurisdiction to consent to variation on behalf of ppl w/contingent interestsFacts: Varying pension plan, 97% of ppl approved proposed arrangement.Application: Act allows ct to consent to variation on behalf of Bs whose interest is contingent. Here, ct has jurisdiction bc some unascertained persons might benefit in the future. Suggests good bargain test, would prudent adult be likely to accept? Here, ct consents

Continental Lime Ltd. v. Canada Trust Co. (1998), 25 E.T.R. (2d) 128 Court has jurisdiction to consent to variation on behalf of ppl w/contingent interests; applied this to pass a variation where one of ninety-nine members opposed the proposed variation of a pension trust.

Interpretation of s. 2:

Buschau v Rogers Communications Inc. (2004) BCCA The BCCA declined to follow two earlier B.C. decisions on the basis that the legislation does not permit a court to consent on behalf of a fully capacitated and ascertained beneficiary, even if his or her interest is a contingent one

- This decision was appealed to the Supreme Court of Canada where the B.C. Court of Appeal decision was reversed but not on this particular point.

- In the Supreme Court of Canada it was held that the termination of a pension trust was subject to the Pension Benefits Standards Act provisions on the distribution of pension benefits.

- This leaves the scope of paragraph (b) in some doubt. - The British Columbia Law Institute has recommended that the legislation should clearly state that the court be

given discretion to consent on behalf of an ascertainable beneficiary of full capacity where a “substantial majority” of the beneficiaries approves of the variation, it would be detrimental to the trust as a whole not to approve of the variation, and the variation would not be detrimental to the objecting ascertainable beneficiary of full capacity.

- Until the legislation is amended, however, perhaps the suggestion that paragraph (b) allows the court to consent where an interest is subject to more than one contingency is an interpretation that at least leaves some scope to the provision.

Finnell v Schumacher Estate (1990) When consenting on behalf of beneficiaries with certain or contingent interests, there is only 1 TEST = Is the B obtained such that a prudent/rational adult would be likely to accept?Facts: Testamentary Trust begins in 1957 and includes mining props. Trust could not sell mining prop. ¾ of capital to be divided 21 years after death of grandchild F – other ¼ divided ¾ to charity and ¼ to the issue of F. Actuary estimated F’s death to be 2009 and date of distribution to be 2030. F already had 2 children and there was potential for children and grandchildren to come. Income was to be given 5/8 to charity, 2/8 to F, and 1/8 to F’s sister. Problem = value of prop

constantly diminishing as mining goes on. There is an obscure law that says that $ from removed ore is capital not income and revenue from ore is taxed as an individual under ITA. Testator also did not consider the deemed disposition every 21 years. Bs want variance to treat ore as income in exchange for putting aside some of the $ for the remainder interest.Decision: Trustee needs to balance benefits between the Bs. Court consented on behalf of the minor and unborn interests?? (Even though the Ontario Public Guardian opposed deal on their behalf). Looked at Re Irving, which said that there are 3 TESTS:

1. Does the proposed action keep testator’s basic intention alive? 2. Is there a B to be obtained on behalf of minors/unborn? 3. Is the B obtained such that a prudent adult would be likely to accept?

Here, Court said that now there is only 1 TEST = Is the B obtained such that a prudent/rational adult would be likely to accept? Court ultimately denied the change because they felt the deal failed this test – Bs may not end up better off.

Re Kovish (1985) BCSC While you have to look at every member of the class, you don’t have to show that every B is bound to be better off. Said there should be liberal interpretation of ‘benefit’ to include financial and other benefits.Facts: Trust gives life interest to daughter ($100/month) and then to the grandchildren and great-grandchildren. Grandchildren want capital to start business. Saunders did not apply b/c there were unborn interests.Decision: Application was granted. Court said that while you have to look at every member of the class, you don’t have to show that every B is bound to be better off. Said there should be liberal interpretation of ‘benefit’ to include financial and other benefits.

Smith v Smith Estate (2003) BCSC Confirmed the test from Schumacher Estate and confirmed that you can consider non-financial benefits (Re Kovish) such as ‘achieving family harmony’. All living family members wanted to help support Grandma! Noted that court can agree to variation even if contradicts intention of testator.Facts: Charles had daughter (deceased) and son (living) – Trust stated that each child’s share should go to their children if they die. Daughter had 2 children. Son had 2 children with potential for unborn interests. Charles wanted to vary Trust to add wife as life interest. Consent of court sought on behalf of minor and unborn children. Charles would add $800 000 to the Trust in exchange for the Bs adding his wife.Decision: Confirmed the test from Schumacher Estate and confirmed that you can consider non-financial benefits (Re Kovish) such as ‘achieving family harmony’. All living family members wanted to help support Grandma! Noted that court can agree to variation even if contradicts intention of testator.

C. Purpose Trusts

1. Non-Charitable Purpose Trusts- Note that these are Express Ts and must meet the tests of Capacity, 3 Certainties, etc

General Rule against Validity of Non-Charitable Purpose Trusts- Reasons for Non-Validity- The B Principle This is the MAIN/most important reason (Morice v Bishop of Durham)

Morice v Bishop of Durham (1804) There must be someone (a beneficiary) in whose favour the court can decree performance A legal obligation must be enforceable otherwise it is nothing more than a power.

- Conceptual Uncertainty Things like ‘world peace’ or ‘social harmony’ can be vague and hard to determine

- Perpetual Duration Perpetuities issues

o Could easily create non-charitable purpose Trust for 21 yrs to get around this- Excessive Delegation of Testamentary Power

Tees given same power in Ts for persons or charitable purposes so this is weak argument

The Modern Form of the Rule- 19th C Valid Exceptions to the Rule (Morice v Bishop of Durham):

Erection of monument at gravesite Maintenance of gravesite Care of specified animals

Re Astor’s Settlement Trusts (1952) Limited exceptions to Morice are not a reason to do away with the rule; upheld rule of Non-ValidityFacts: 20 year Trust for promoting cooperation between nations, integrity of press, etc. Decision: Reiterated court’s concern with enforcement. State that limited exceptions from Morice are not a reason to do away with the rule. The trust also failed for certainty – it was too vague; Upheld rule of Non-Validity

Re Thompson Case is an anomaly as the beneficiary could only get negative reinforcement, not positive reinforcement to ensure Trust spends for specified reasonFacts: Trust for foxhunting for 21 years and then to Trinity College, Cambridge.Decision: Valid because enforceable by Cambridge.Comment: Only negative reinforcement. Cambridge could ensure $ not spent on something other than foxhunting but cannot force Trust to spend $ on foxhunting. Case is anomaly and rule still applies.

Construing as Trust for Persons

Re Denley’s Trusts (1968) If a Trust can be construed as a Trust for persons, then it should be treated as suchFacts: Company put land in Trust for employee’s recreational use. Tees also allowed to accept non-employees. Provision stated that if 75% of employees don’t sign up then the land goes to a hospital. They did not get 75%. Company wanted to sell land and get the money – hospital said they wanted the land. Company questioned validity of T.

Decision: “Where […] the T, though expressed as a purpose, is directly or indirectly for the B of an individual or individuals, it seems to me that it is in general outside the mischief of the B principle.” Stands for acceptance of the notion that: if a Trust can be construed as a Trust for persons, then it should be treated as such.

Application of Re Denley’s Ts in Canada- It is possible that now in Canada there is no general rule against non-charitable purpose Ts so long as there is

someone to enforce the Trust obligation.- Courts have not yet addressed the question of who may have standing to enforce the T

Keewatin Tribal Council Inc v City of Thompson (1989) MB Non-charitable purpose Trust can be valid as long as there are persons with the standing to enforce itFacts: KTC put some of their land in Trust with themselves as Tees. Purpose was to provide housing for natives students attending high school. Problem was that KTC is not an incorporated entity and cannot be treated as a person. KTC claimed prop exempt from tax b/c lands held on Trust for 1st Nations are tax-exempt. Municipalities want the taxes.

Decision: Non-charitable purpose Trust can be valid as long as there are persons with the standing to enforce it. This Trust could be enforced by native high school students.

Peace Hills Trust Co v Canada Deposit Insurance Corp (2007) (2008) A non-charitable purpose Trust may be created in Canada and would be recognized by the courts in this countryFacts: Cdn and SK govts entered into settlement with native band where they provided $ instead of land; the $ was put in a Trust for purpose of acquiring land. Bank holding the funds said they would only ensure $100 000. Band said they should insure $100 000 per band member.

Decision: If Trust valid then insurance is $100 000/person; if Trust not valid, then $100 000 total. “A non-charitable purpose Trust may be created in Canada and would be recognized by the courts in this country.”

Interpretation of s. 24 of the B.C. Perpetuity Act

Existing Reforms

‘Wait and See’ Legislation – BC Perpetuity Act, s. 24- T for specific noncharitable purpose w/no enforceable equitable interest = Trust with power to appoint

income/capital.- If Trust described in (1) is not illegal purpose or contrary to public policy then it is valid and should not run for

more than 21 years. Seems to recreate Re Thompson (fox hunting) Estate or remainder or gift over interest can enforce

- If Trust prop/funds last longer than 21 years, they revert back to the estate

Interpretation of Legislation- When does this provision apply?- 4 possible interpretations:

Where there is a perpetuity problemo Court in Re Russell disagreed

If there is no enforcement mechanismo Unlikely according to Re Russell

If there is no one with a clearly identifiable equitable interest All non-charitable purpose Ts whether or not they are recognized anomalies

- What is the meaning of a ‘specific non-charitable purpose’?

Re Russell (sub nom Wood v The Queen) (1971) One must be able to say whether any given use would qualify as a proper use of the Trust fundsFacts: Testamentary Trust to theosophical society (not a person) for advancement of religion, education, and literary purposes. Could not see a way to save the T; asked the court to use legislated power to sever the charitable purpose (religion, education) from the non-charitable (literary).

Decision: “legislation appears to equate ‘specific purpose T’ with other recognized anomalous purpose Ts that have been permitted to operate as powers.” ‘Specific non-charitable purpose’ equates to test for certainty of objects by analogy to McPhail v Doulton

Comment: E.g. one must be able to say whether any given use would qualify as a proper use of the Trust funds

Other Proposals for Reform- Manitoba

T would be valid if you named the person with standing to enforceo Problem = who monitors the monitor?

- British Columbia Have considered giving the court a general supervisory power where both personal representatives and

the AG could grieve Trust funds

Problem of Unincorporated Associations

Problems with Gifts to Unincorporated Associations and Possible Solutions1. Gift to No One

Association is not a person2. Gift to the Members Allowing Members to take their Share

Gift is really to the members of the society Problems:

o Not what testator intended when gift made o Does it go to those who were members at the time the will was written or at the time the

testator died?3. Gift to Members for Purposes of Association (2 types of Societies)

Where members CAN wind-up association and give prop to themselveso Result = a completely vested interest not subject to perpetuities

Where members CANNOT give prop to themselves when winding up associationo Association papers may stipulate what happens to prop on winding upo Possible perpetuity problem = could wind up in 2 yrs or 200 yrs. If it goes longer than 21 yrs then

the gift is invalid due to remoteness of vesting.o May be able to construe it as a Trust for persons

- Gift to Unincorporated Association for Specific Purpose Gift to members to jointly hold in Trust for the purpose Definitely a Trust for purpose – if purpose not charitable then the Trust is not valid unless saved by s. 47

Law and Equity Act- Policy

Court generally works very hard to find a way to make these Ts work (fulfill intentions of S)

Re Lipinski’s Will Trusts (1976) Despite a problem with an unincorporated association, the gift was valid as a trust for persons since members of the association were identifiable and the court wanted to respect the wishes of the settlor.Facts: Trust to construct new buildings for unincorporated Jewish youth organization (on dissolution of association the prop would go to Jewish association with similar goals). Dissolution procedures could be changed by ¾ vote.

Decision: Not a charitable Trust or a gift to members. Court found it to be a gift to unincorporated association for specific purposes. J decided that it was a power in order to uphold the gift – S saying ‘sole use’ was just a non-binding direction to members. J further stated that gift should not fail as Bs could enforce the T. Purpose T, absolute gift with power, and Trust for persons (members both Tees and Bs) all lead to a valid gift; upholds as Valid gift for persons.

Comment: Confusing case! Hard to what the real reason was for upholding the gift.

Pragmatic Notes1. ALWAYS check the name of the organization is correct! People don’t always know the registered/legal name2. Is the organization incorporated or unincorporated?3. Look at the constitution of the association – what happens on dissolution?4. Can always give funds to someone you trust with letter of wishes!

2. Charitable Purpose Trusts

A. Introduction

A. Beneficiary Principle, Certainty of Objects and Perpetuity

• charitable purpose trusts are recognized as valid trusts

1. The Beneficiary Principle- Although a purpose trust the lack of a beneficiary to enforce the trust is dealt with by allowing the Crown to

enforce the trust (through Attorney General or designated official such as a Public Trustee)

2. Certainty of Objects- All that is required is certainty of charitable intention- Court will deal with a lack of clarity as to what the charitable purpose is or how it is to be carried out by ordering

an administrative scheme

3. Relief from Perpetuity Rules - Remoteness of vesting rule or rule against perpetual duration does not apply to charitable purpose trusts- Instead court deals with property being tied up in a particular use through the doctrine of cy près

B. Tax and Charities

1. “Charity” vs. “Charitable Purpose Trust”- no common law recognized legal entity of a “charity”- but in trust law area courts have developed a concept of “charitable purpose”- Income Tax Act refers to a “charity” defining it as a “charitable foundation” or a “charitable organization”- there are trusts for charitable purposes and corporations with charitable objects

- in Canada most “charities” are organized as corporations

2. Non-profit vs. Charitable Organization under the Income Tax Act

a. Non-profit Corporation vs. For-profit Corporation- there are for profit corporations (in B.C., e.g., might be incorporated under the Business Corporations Act) - AND there are not-for-profit corporations (in B.C., e.g., might be incorporated under the Society Act – and

referred to as a “society” but it is, nonetheless, a corporate form of organization )

b. Non-profit vs. Charitable Organization under the Income Tax Act- Non-profit Corporations

non-profit corporations exempt from tax under the Income Tax Act “registered charities” are also exempt from tax under the Income Tax Act but can also give receipts for

charitable donations that allow donors to take a tax credit- Registered Charities and Charitable Donation Tax Credit

only “registered charities” can give donors receipts for charitable donations that allow them to claim tax credit

must apply to Canada Revenue Agency (“CRA”) for registration as a registered charity CRA decides where applicant is a charitable organization or charitable foundation and what is

“charitable” is based on the trust law concept of charitable purposes most modern decisions on what falls within “charitable purposes” come from court challenges of CRA

decisions- Charitable Organizations Activities must also be Charitable

for a “charitable organization” all the Income Tax Act requires that not only must its purposes be charitable but its activities must also be charitable

so the CRA sometimes removes an organizations registered charity status on the basis that it is no longer engaging in charitable activities

removal of charitable status is also sometimes challenged and this also leads to cases where trust law concepts of charitable purposes are invoked

c. Municipal Taxation Relief for Charitable Organizations• municipal tax cases can also be relevant since may involve exemption from municipal taxation for land used for

charitable purposes, or, more particularly, for relief of poverty

B. Requirements for a Charitable Purpose Trust

The legal definition of a “Charitable purpose” involves:1. exclusive dedication of property2. to a charitable purpose3. in a way that provides a public benefit (THIS IS ASSUMED NO NEED TO PROVE EXAM)

1. Exclusivity- Must be entirely for charitable purposes – can’t be partly for persons or partly for non-charitable purposes

2. to a Charitable Purpose- 4 categories:

1. Relief of Poverty

2. Advancement of Education3. Advancement of Religion4. Other purposes beneficial to the community

o Category is NOT open-ended – means other purposes within what is legally recognized as ‘charitable purpose’

- 1601 Statute Preamble listed/suggested things that fell under Charitable Purposes See the Pemsel case where Lord McNaughton laid out the 4 categories derived from this statute

- In a way that provides a public benefito Benefit

Something of “practical utility” or “material or tangible benefit” – Gilmour v Coates Benefit if presumed but rebuttable – Re Pinion (below)

o Public ‘Section of the Community’ TEST from Oppenheim v Tobacco Securities Trust Co

1 - Potential Bs must not be ‘numerically negligible’ 2 - Distinguishing between Bs and other community members must not depend on

relationship to a particular individual Comment

Bs can have common link of profession but not individual Lots of taxpayer $ for AG to enforce all of these Ts

Presumption of Public Benefit Applies to poverty, religion, and education

- NOT for a political purpose

3. Legal Meaning of Charitable Purposes

***Relief of Poverty- Poverty is a Relative Concept - The definition of poverty varies over Time- May include relief for more than basic amenities/necessities

Trustees of Mary Clark House v Anderson (1904) The concept of poverty is relative to the personFacts: House for women with reduced wealth comparative to their station in life.Decision: Poverty is relative to the person.

Re Brown (1900) Ont HC Provision of luxuries to poor people found to be charitableDecision: Gift to director of poorhouse to provide people with luxuries found to be charitable.

Re Hart (1951) NSSC Providing summer outings for poor children and their families found to be charitable

“Public Benefit”- Courts have allowed some cases where beneficiaries did have a connection to a particular person

o 2 exceptions from Oppenheim (‘Section of the Community’ TEST ) = poor relations and poor employeeso Poor Employees = Jones v Trust Eaton where ‘needy’ and ‘deserving’ were both found to be

charitable re: company’s employees (Quarter Century Club).o Poor Relations = Re Scarisbrick where Trust upheld for relations in needy circumstanceso Might be seen as a Trust for persons today

***Advancement of EducationApproved Categories:

- Educational Institutions, Scholarships, and Prizes- Private, Non-Profit Schools- Libraries- Learned Societies- Adult Learning Institutions- Research Conducted at a University- Private Research (must have published results)- Museums (See Re Pinion below)- Professions- Games- Aesthetic Appreciation

o Many have been upheld under Education (showing plays, performing works of certain composer)- Provision of Information

o If JUST providing information then NOo See Council of Law Reporting under ‘Professions’o See Vancouver Society of Immigrant and Visible Minority Women v MNR below

- General Advancement of Education

Societa Unita v Gravenhurst (1977) Ont HC Educational institutions caseDecision: Summer camp for kids found to be charitable ONLY because they taught Italian language, history, and customs.

Re Seafarer’s Training Institute and Williamsburg (1983) Ont Professions caseDecision: Broadened scope beyond higher professions. Advancing education is wherever there are students, facilities, teachers, and curriculum to advance a vocation.

Incorporated Council of Law Reporting for England and Wales v AG (1972) CA Professions caseDecision: Trust to subsidize cost of printing law reports found to be advancement of education. Said law reports were the raw material for the study of law.

Re Dupree’s Trusts (1944) Eng CA Games caseDecision: Trust for purpose of encouraging playing chess found charitable (truly education game).

Vancouver Society of Immigrant and Visible Minority Women v MNR (1999) SCC General advancement of education case; gave definition of advancement of educationFacts: Society to help immigrant women find work trying to get charitable status.Decision: Mere provision of information to people who may/may not choose to use it to education themselves = not charitable. No reason why advancement of education should not include informal initiatives teaching life skills. Education should not be limited to traditional fields so long as information is genuinely structured for educational purpose. Education can be theoretical, speculative, practical, moral, scientific, etc. Limit = making available materials, educating people about particular viewpoints, etc. Advancement of Education is:

1. Geared at training the mind, 2. Provided in structured manner (but informal delivery of classroom training in a non-traditional manner is OK)3. For genuinely educational purpose, and 4. Not just for promotion of one viewpoint or political orientation.

Re Pinion; Westminster Bank Ltd v Pinion (1964) Eng CA General advancement of education case There is a presumption that museum exists for the advancement of education (no need to prove this); it is rebuttableFacts: Man gave paintings, furniture, money, etc. to create museumDecision: Gift to museum or to create museum = presumption of advancement of education BUT this presumption can be rebutted. Court said testator’s intent was to perpetuate his own name/family. Paintings were atrociously bad with no theme to the collection = court found no useful object would be served by foisting this junk on the public (no public benefit); also stated that there must be some practical utility.

Exam question: there is a presumption that museums advance education, but here it was rebutted

***Advancement of Religion- General Information

Originally only included repair of churches but by 1891 it extended to:o Publishing, teaching, and propagation of religious beliefso The building and maintenance of churches and burial groundso Work of churches and ministers

o Courts have become tolerant of a wide range of religions Thornton and Howe (1862) upholds propagation of delusional artist’s beliefs – court does not

decide if religion is true! Requirement of a God

o This requirement seems too narrow in light of Charter decisions and the presence of world religions that do not meet this requirement (some forms of Buddhism)

South Place Ethical Society (1980) UKFacts: Society for the cultivation of rational religious sentiment (no God).Decision: Not a religious purpose since religion involves faith in a God and worship of a God, and religion is concerned with a person’s relationship with God.

Church of New Faith v Commissioner of Pay-Roll Tax (Vic) (1983) Australia Not accepted as Canadian precedent, but gave a better possible definition of religion.Decision: Gave a definition for what religion might include:

1. One criterion for religion is a belief in a supernatural being, thing, or principle 2. Second criterion for religion is whether there are accepted canons of conduct (e.g. moral/ethical behavioural

guidelines)Neither criterion is an absolute necessity, but belief in a being, thing or principle would likely be required.

Public Benefit – Private Activities may Not Satisfy Requirement

Gilmour v Coats (1949) UK Trust for a priory not charitable because there was no public benefitFacts: G = prioress; C = Tee. Trust left to priory ‘if activities were charitable.’ Counsel for G argued that prayer benefits society, that religion has moral influence, and that numbers were non-negligible (open to all Roman Catholic women).Decision: Not charitable because no public benefit. Prayer argument not feasible given multiplicity of religions; any religion could have morel effect; and 20 nuns praying in private is not a public benefit.

Public Access May be Sufficient

Re Heatherington (1989) Trust for Catholic mass held to be charitable as it was open to the public and therefore provided a public benefitFacts: Gift to hold Catholic mass for reposes of souls of her named family members and herself.Decision: Charitable and public benefit because mass would be accessible to anyone (observing mass could have edifying effect).

Fennel v Stewart (1996) Eng Private religious service open to the public but not advertised held to meet charitable purpose and provide a public benefitFacts: Private religious service held by small # of people in someone’s basement. Open to public but not advertised.Decision: Court found it to meet charitable purpose and public benefit. Note that some commonwealth countries have done away with public benefit requirement for advancement of religion (non-rebuttable presumption).

o Others have suggested that religion should not be charitable purpose at all.

*** Other Purposes Beneficial to the Community- Types of Ts Held to be for Charitable Purposes under this Head

o Social Welfare To help the old, young, or disabled To care for sick and provision of hospitals To provide health care or advance medicine To provide disaster relief To care for veterans To provide aid to prisoners

o Community Objectives Parks, Cemeteries, Monuments

- Approach of Courts to this Heado Traditional Approach

‘Other Purposes’ is a catchall for other charitable purposes referred to in preamble of Statute of Charitable Uses

Look at preamble and then use analogies to recognize new categorieso Move Towards more Flexible Approach – “Spirit and Intendment”

Incorporated Council of Law Reporting for England and Wales v AG (1972) CA Decision said need to move idea of charitable purpose forward – look to ‘spirit and intendment’ Note: SCC did NOT agree.

Native Communications Society (1986) FCCA Found charitable under the 4th head as fostering native language and culture (not linked to preamble at all). J looked to UK case law and the situation of natives in Canada. Case has not been followed.Facts: Society for creating communication productions for native people and training native workers in communications.Decision: Not relief of poverty. Found charitable under the 4th head as fostering native language and culture (not linked to preamble at all). J looked to UK case law and the situation of natives in Canada. Case has not been followed.

***Traditional Approach Retained

Vancouver Regional Freenet Association v Minister of National Revenue (1996) FCA Court followed traditional approach. This trust was charitable under 4th head – preamble speaks of repair of highways, roads, etc and Internet is information highway.Facts: Organization made local information available at free internet kiosks.Decision: Court followed traditional approach. Charitable under 4th head – preamble speaks of repair of highways, roads, etc and Internet is information highway.

Vancouver Society of Immigrant and Visible Minority Women v MNR (1999) SCC Look to Lord McNaughton’s 4 categories to define charitable; can modernize the list by analogy but not any other way. Rejects ‘spirit and intendment’ approach. Public benefit must be in a way “that the law regards as charitable”Facts: See above.Decision: Since ITA provides separately for charities and non-profits they are not the same thing. Look to Trust law to define ‘charitable’ as it is not defined in ITA. Look to Lord McNaughton’s 4 categories to define charitable; can modernize the list by analogy but not any other way. Rejects ‘spirit and intendment’ approach. Public benefit must be in a way “that the law regards as charitable”

Amateur Youth Soccer Association SCCDecision: Key feature of charitable youth sports association is that it is national. Possible to have youth sports association come under a charitable heading but amateur sports in and of themselves are not charitable.

***Taking a Different Approach to Charitable Purposes- English Charities Act 2006

o Broader approach to charitable purpose, adding: Prevention of poverty Advancement of human rights, amateur sports, arts, culture, heritage, science, citizenship, health, or

the saving of lives Environmental reclamation Ts Anything analogous or in the spirit of the named categories

- Ontario Charities Accounting Act (1915)o Handed over a lot of control of charitable Ts to the Public Guardian/Teeo Includes a section laying out a charitable purpose (uses 4 categories from McNaughton)

They stand alone in the Statute as it is no longer connected to the preamble of the Statute of Charitable Uses

4. Exclusivity

General Rule: Charitable Purpose Trust Void if Not Exclusively for Charitable Purpose- Reason = otherwise, Trustee can use funds for either charitable or non-charitable purposes and it becomes very

hard to enforce.

Ways of Avoiding Invalidity on the Basis of Non-Exclusivity- Reinterpret per Intention of S/Testator

o Court will say that Trust instrument APPEARS to say X but really MEANT Y

BC Law and Equity Act s. 47 (similar legislation in AB, MB, and NB)s. 47 = “If a person gives, devises, or bequeaths prop in Trust for a charitable purpose that is linked conjunctively or disjunctly in the instrument by which the Trust is created with a non-charitable purpose, then the gift, devise, or bequeath is not invalid as a result but operates solely for the B for the charitable purpose”

Jones v Executive Officers of the Trust Eaton Company (1973) SCC ‘Deserving’ interpreted to mean the same thing as needy based on Depression-era timeframe for the trustFacts: Trust established to benefit needy and deserving members of the Eaton Quarter Century ClubDecision: Accepted that ‘needy’ fit under relief of poverty. However, said ‘deserving’ could mean person had worked hard (non-charitable) but in light of the bylaws of the Club and the fact that the Trust was created during the depression court decided that ‘deserving’ really means the same thing as needy.

- Read the Non-charitable Part as Charitable Based upon who the Donee is

Blais v Touchet (1963) SCC The word ‘Otherwise’ in a devise to a priest was interpreted as advancement of religion because B was a bishopFacts: Gift from priest to bishop for purposes charitable or ‘otherwise’Decision: ‘Otherwise’ interpreted as advancement of religion because B was a bishop

- Sever the Non-Charitable Portiono Court often reluctant to do thiso Will only be done if the severed portion is of minor significance and is not the primary intention of the

S/Testator- Find Non-Charitable Purpose to be Merely Ancillary to the Charitable Purposes

Guaranty Trust Co v MNR (1967) SCC A trust can meet exclusivity requirement if non-charitable purpose incidental to main charitable purposeFacts: $ given to association to make loans to female med students. Purposes of association were to promote medicine, promote U of T, cultivate membership (teas, dinners, etc), etc.Decision: Can meet exclusivity requirement if non-charitable purpose incidental to main charitable purpose (cultivating good fellowship to future improvement of funding and the field).

- Apply a Statutory Provision to Sever the Non-Charitable Portiono E.g. BC Law and Equity Act s. 47 (similar legislation in AB, MB, and NB)

s. 47 = “If a person gives, devises, or bequeaths prop in Trust for a charitable purpose that is linked conjunctively or disjunctly in the instrument by which the Trust is created with a non-charitable purpose, then the gift, devise, or bequeath is not invalid as a result but operates solely for the B for the charitable purpose”

Elements:o A person must give, devise, or bequeath prop;o In T;o For a charitable purpose;o Linked conjunctively or disjunctly in the Trust instrument with a non-charitable

purpose; ANDo Gift, devise, or bequeath would be void for uncertainty or remoteness

Allows court to sever non-charitable purposes in certain instances Severance occurs without consideration for the intention of the Testator

Re Russell AB Educational purpose was charitable so the court used s. 47 of BC’s Law and Equity Act to sever it from the non-charitable literary and religious purposesFacts: Gift for literary and religious purposes – see above.Decision: Educational purpose was charitable so the court used s. 47 of BC’s Law and Equity Act to sever it from the non-charitable literary and religious purposes.

5. Political Purposes- The Rule: Ts for ‘political purposes’ are invalid even where they are for otherwise charitable purposes- What the Rule Applies to (according to McGovern v AG 1982)

Promotion of political party Promotion of a political candidate Promotion of political ideas Any attempt to influence the legislative or executive process Any attempt to influence govt policy To Ts to improve international relations or influence foreign govt decisions/laws

- Reasons for Rule (according to Bowman v Secular Society 1917 HL) Court has no means of judging whether a proposed change in the law will/will not be for the public B

and thus cannot say whether the purpose is charitable Court must proceed on assumption that the law is correct as it stands

- Counterargument Public B can come from debating these things Public B is itself a political question Value in encouraging pluralism and debate – can be done without taking sides Religious organizations seek to influence legislative process – Ts for advancement of religion are very

political choices Some organizations found to be charitable on certain grounds also pursue political purposes (see Native

Communications Society above) Scope of the doctrine is too wide!!!!

o You either have to allow everything or nothing

Human Life International in Canada v MNR (1998) FCCA Court gave reasons similar to Bowman and adopted McGovern list (above). Found that a substantial part of the activities were devoted to political purposes and that s.2 of the Charter does not require govt to subsidize expressions of particular viewsFacts: Purposes included promoting natural conception, social welfare, and rights of children born and unborn as well as educating the importance of protecting life. Were granted charitable status until they sent pictures of aborted fetuses to MPs.Decision: Court gave reasons similar to Bowman and adopted McGovern list (above). Found that a substantial part of the activities were devoted to political purposes and that s.2 of the Charter does not require govt to subsidize expressions of particular views.

6. Discriminatory Conditions - See Public Policy notes above – note that restraints on alienation and rules against perpetuities do not apply- Local Case = Trust in favour of UVic Catholic students was upheld

Re Canada Trust Co and the Ontario Human Rights Commission (Leonard Foundation) (1990) Ont CA Implies that only allowed positive discrimination (e.g. affirmative action) will be upheldFacts: Trust for scholarships for Christian white people (limited availability to women).

Decision: While there are some acceptable discriminatory Ts, this is not one of them. Implies that only allowed positive discrimination (e.g. affirmative action)

Ramsden Estate Denominational Trusts are Valid (Trust for protestant students at PEI University) Says that Leonard Foundation was case of blatant racism and religious supremacyFacts: Gift to PEI University for protestant students. University had provision preventing it from administering this Trust because it was denominational.Decision: Denominational Ts are Valid. Say that Leonard Foundation was case of blatant racism and religious supremacy.

University of Victoria Foundation v BC (AG) (2000) BCSC (In Chambers) A scholarship or bursary that simply restricts the class of recipients to a particular religious faith does not offend public policyA denominational trust was also found not to be contrary to public policy; a trust that created bursaries for practicing Roman Catholic students. It was held that the terms of the scholarship in Re Leonard were distinguishable because in that case the terms were “clearly offensive”. The judge in the University of Victoria Foundation case said he had “no hesitation in concluding that a scholarship or bursary that simply restricts the class of recipients to a particular religious faith does not offend public policy.”

7. Administrative Schemes and the Cy Pres Doctrine- Scheme-making = Charitable purpose clear but not specific – need court to fill in gaps

o E.g. “I leave this money to charity” – which one? Only one?- Impracticability has been held not to mean that there is, in the view of the Trustees, a better use that could be

made of the funds. - Impossibility involves a situation, such as that in Re Schneckenburger, in which it is unlikely that funds would

ever be used for the originally intended purpose.

Rector, Wardens and Vestry of the Parish of Christ Church v Canada Permanent Trust (1985), NS SC TD There is no right to a cy-près order simply on the basis that the applicant argues, even quite persuasively, that there is a better use of the funds; there needs to be impossibility or impracticability. The court will not override the settlor’s intent simply because other persons think there might be a better use of the funds.Facts: A will provided for one-half of residue of estate to be used for repairs to a particular church. The other half of the residue of the estate was to be used for the construction of a new church. The corporation that owned the church wanted to have the second half of the fund immediately for repairs because it was restoring the old church. It argued that the funds of the estate that were directed to the construction of a new church would never be used because the rector and wardens of the church had no intention of building a new church and if the old church was destroyed there was insurance to provide for rebuilding. Issue: The corporation requested that the court make a cy-près order directing the second half of the funds of the estate be used for church repairs.Application: According to the court, the testator knew what he was doing and it was clear he wanted one-half of the funds put aside for the building of a new church. The fact that the existing rector and wardens had no intention to build a new church did not mean that a later rector and wardens would not want to. The availability of insurance also did not necessarily cover for loss of the existing building because the policy might be found to be void for some reason or might not be renewed (perhaps through inadvertence).Conclusion: The court refused to grant the order.

Royal Trust Corporation of Canada v Hospital for Sick Children (1997) Held that a general charitable intent was expressed in the will; in applying cy-près the court noted the apparent intention to benefit crippled children, and ordered the gift be divided between four charitable institutions that had been suggested as ones that benefitted crippled children.Facts: Not a case of the creation of a charitable purpose trust. Trust made a gift to the “Crippled Children’s Hospital in Vancouver” and the “Crippled Children’s Hospital in Toronto” in equal shares, but there were no such institutions by these names nor had there ever been institutions by these names. There were, however, four other institutions that were reasonably close in terms of what they did. Issue: Whether the gift failed resulting in an intestacy as to the remainder interest in the residue or whether the cy-près doctrine could be applied. Application: If there was a general charitable intent cy-près could apply. If not, the gift failed. In other words, the question was: if the testator had been made aware that these institutions did not actually exist, would the testator have given the remainder interest to other similar institutions (i.e. a general charitable intent) or would the testator have instead directed the remainder interest to something non-charitable such as making a gift of the remainder to some other relative or perhaps children of the niece or nephews?Conclusion: It was held that a general charitable intent was expressed in the will. The court’s basis for this was that the overwhelming purpose of will was to divide the estate amongst various institutions for charitable purposes. This inference was based on the many specific bequests in the will to charitable institutions before the will dealt with the residue of the estate. In applying cy-près the court noted the apparent intention to benefit crippled children. The court ordered the gift be divided between four charitable institutions that had been suggested to the court as ones that benefitted crippled children.

Re Ramsden Estate (1996) PEI SC General charitable intent is examined where the donor’s intent cannot be carried out because it has become impossible or impracticable and the question is whether the donor would have devoted the property to some other charitable purpose if the originally intended purpose was not possible. Conclusion: In Re Ramsden the original intended purpose was possible (assuming, as the court held, it was not contrary to public policy) and only the administration of that purpose was changed.

Re Killam Estate Court used scheme-making power to alter Trust to allow encroachment on capital where only supposed to access income for charityDecision: Court used scheme-making power to alter Trust to allow encroachment on capital where only supposed to access income for charity.

Re Stillman Court refuses scheme-making power to allow encroachment on capital when not enough income to make fixed payments– says it’s not that broad. Notes that this may be done under cy pres as the economic conditions make the fixed payout amount impracticableFacts: Trustee wants to alter Trust to allow to encroach on capital b/c income not enough that year.Decision: Court refuses scheme-making power – says it’s not that broad. Notes that this may be done under cy pres as the economic conditions make the fixed payout amount impracticable

- Cy Pres = Court can re-purpose or wrap-up a Trust when the purpose is no longer relevanto MUST have either impossibility or impracticality in order to invoke cy pres

E. Administration of Express Trusts

1. Background and Appointment, Retirement and Removal of Trustees

A. Introduction & B. Background- The Trust Instrument

o T instrument states the appointed Trustee (S can appoint themselves)o Acceptance of Appointment

Tee cannot be compelled (even where willingness previously indicated) Can be express or implied (carrying out any Trustee tasks) If not accepted, appointed Trustee can disclaim the position If Trustee accepts and then changes mind then must get formal discharge from court

o T instrument can name alternate/future Tees or can give someone power to appoint new Tees Power to appoint can be given to Trustee or other persons (including S, B, Protector, or 3 rd party)

Giving power to S may have tax implicationso A fully constituted and valid Testamentary Trust does NOT fail for want of a Tee

Court can appoint a Trustee of administer the Trust itselfo If Trustee of Inter Vivos Trust refuses to act, the Trust is not constituted and S can choose another Tee

B. Appointment- Trustee Act

o Read the Trust instrument as if s. 27 of Trustee Act was in the terms of the Trust (unless Trust instrument specifically states otherwise)

s. 27(1) = IF Trustee is: Dead Remains outside BC more than 12 months Wants to be discharged or retire Refuses to act Is unfit to act Is incapable of acting

THEN the remaining Tees or personal representative of old Trustee can, by writing, appoint a new Tee

Note that some provinces require a deed and not just writing Deed is preferable as you will need it to vest the legal interest On appointment of new Trustee you can partition assets on distinct Tees

Specific Provisions s. 27(2)(c) = If only 1 Trustee is named you don’t need to appoint any more s. 27(2)(c) = If more than 2 Tees originally appointed then you don’t need to maintain that number,

you just need at least 2 Tees at all times s. 27(2)(c) = If 2 or more Tees originally appointed, Trustee cannot be discharged unless at least 2

Tees remain s. 27(2)(d) = Steps to vest Trust prop in new Tees must be taken s. 27(3) = New Trustee has same powers as if originally appointed s. 27(4) = s. 27(1) applies where Trustee dies before testator s. 27(5) = s. 27 is default provision

Vesting of Trust Property in Tees- Trustee Act

o s. 29(1) = deed appointing new Trustee can contain declaration vesting Trust prop in new and remaining Tees

Covers interests in land, chattel, and choses in actiono s. 29(2) = If Trustee retiring, person retiring and person with power of appointment can declare in deed that

remaining Tees have joint titleo s. 29(3) and (4) = Further steps may be required for particular assets due to legislation or corporate

requirements e.g. entry in books of company, registration at land titles office

Judicial Appointment and Vesting- Power to Appoint Tees and Vest Trust Property

o Inherent Power (originally given by the Chancellor) Can deal with transfer of title Courts will seldom rely on these powers today – use statutory powers instead

o Statutory power to appoint new Tees = s. 31 Trustee Acto Statutory power to vest land in new Tees = s. 33 Trustee Act

Has same effect as if existing Trustee had executed conveyance docso Statutory power to vest shares in new Trustee = s. 34 Trustee Acto Statutory power to vest choses in action in new Trustee = s. 34 Trustee Acto If Trustee convicted of offense = see s. 35 Trustee Acto Application for judicial appointment can be made by Bs or Tees = s. 36 Trustee Acto Court orders do not discharge liability from former/continuing Tees = s. 37 Trustee Act

- Principles Applied by Courtso Re Tempest (1866)

Court should: Consider the wishes of the S Avoid conflicts of interest

o Note that you don’t get rid of a Trustee just b/c of a conflict of interest Ask whether appointment will promote or impede execution of the T

Court should AVOID: Appointing someone S said should not be appointed Appointing someone who appear from the circumstances to be a person S would not want

to be appointed

C. Retirement and Discharge- Non-Judicial

o T instrument can/may deal with thiso s. 28(3) Trustee Act = s. 28 is a default provisiono s. 28(1) Trustee Act = if there are 2 or more Tees then one can be discharged with consent of other Tees and

any person with power of appointment by deedo s. 28(2) Trustee Act = Steps for vesting Trust prop in remaining Tees must be done

- Judicialo Courts have inherent jurisdictiono Courts will not compel a Trustee but Trustee should provide good reason to be relieved of duties

D. Removal- Non-Judicial

o Can be dealt with in Trust instrument Can give someone (maybe Protector) power to remove Tee

- Judicialo s. 30 Trustee Act = ONLY applies where Trustee has been appointed by the court and the majority of Bs

consent to the removalo Courts have inherent jurisdiction

Principles applied in Deciding to Remove Tee

Conroy v Stokes (1952) BCCA Not every mistake, neglect of duty, or inaccuracy of conduct will lead to removal of a Trustee; Acts or omissions have to endanger Trust prop or show lack of honesty/capacity or want of reasonable fidelity (good faith, loyalty, etc). ‘Welfare of Bs’ must be main guide of Trustee and that friction/hostility between Trustee and B is not in and of itself a reason for removal.Facts: Trust for 5 children (2 from 1st marriage and 3 from 2nd). 1st marriage kids grieve the sale of property without their consultation. Trustee had power of sale and Bs were fine with the price.Decision: Court looked at Letterstedt v Broers (1894) South Africa – Not every mistake, neglect of duty, or inaccuracy of conduct will lead to removal of Tee. Acts or omissions have to endanger Trust prop or show lack of honesty/capacity or want of reasonable fidelity (good faith, loyalty, etc). J added to this that ‘welfare of Bs’ must be main guide of Trustee and that friction/hostility between Trustee and B is not in and of itself a reason for removal.

Re Consiglio Trusts (No. 1) (1973) CA Misconduct is not necessary requirement for removal; Courts can remove Tees in situations where cooperation between Tees has become impossible or improbableFacts: Official guardian applying to have a Trustee removed. One co-Tee opposed the move. Tee’s defence was that he had not done anything improper.Decision: Misconduct is not necessary requirement for removal. Courts can remove Tees in situations where cooperation between Tees has become impossible/improbable

2. Powers of Trustees

A. Overlap of Duties and Powers

Differences- Duty = obligation- Power = permission/authority

o Mere power = power you CAN exercise but don’t need/have too Power = you MUST exercise

Held in fiduciary capacity if held by Tee

Overlap Examples- Duty to invest with power to choose investments- Duty to accumulate with power to determine amounts to accumulate and distribute- See examples on p232 of Gillen’s notes

Duty VS Trust Power VS Mere Power- Whether term is a duty of a power often depends upon interpretation

o See McPhail v Doulton (above) where court read ‘shall’ as ‘may’

Tempest v Lord Camoys (1882) Court will NOT intervene to force the exercise of a power when it is purely discretionary. Court WILL prevent Tees from exercising power improperly. Court WILL ensure that powers are exercised in a reasonable manner/time when discretional ONLY if there is a duty to exercise the discretional power.Facts: Tees given power to sell land and use the proceeds to buy other land as well as power to grant a mortgage. Some

Bs wanted to buy Gracewell Hall but didn’t have enough from the sale. One Trustee opposed granting a mortgage to purchase the Hall. Default rule is that Tees act unanimously.Decision: Court will NOT intervene to force the exercise of a power when it is purely discretionary. Court WILL prevent Tees from exercising power improperly. Court WILL ensure that powers are exercised in a reasonable manner/time when discretional ONLY if there is a duty to exercise the discretional power.

Q: When is an exercise of power ‘improper’?- When it is exercised in a way inconsistent with the terms of the power

E.g. if power comes with constraints, constraints must be obeyed (duty to infringe on capital for maintenance of life interest)

- When it is exercised in breath of underlying duties (duty of care, duty of non-delegation, duty of loyalty, duty of impartiality, etc)

B. Types of Trustee Powers

Administrative Powers VS Dispositive Powers- Administrative powers = powers allowing Trustee to manage property

o Includes: Sell Trust prop Postpone sale of Trust prop Lease real prop Repair/Improve real prop Insure Trust prop Settle debts

o Can vary according to the type or nature of the T

- Dispositive powers = power to deal with distribution of income or capital to the Bso Not all Ts have dispositive powerso Includes:

Power of selection Power to determine amounts of distribution Power to accumulate income Power to encroach on capital Power of advancement

Express and Implied Powers- Express = stated clearly in Trust instrument- Implied = courts fill in the blanks or read between the lines to determine powers

o A default term for when normal implications would not make sense

Statutory Default Powers- Trustee Acts have codified many implied powers and other powers likely to be used in a wide range of Ts in

order to reduce applications to court.- Are default powers that can be overridden explicitly in the Trust instrument or implicitly in the circumstances

Identifying Powers of Tees- T Instrument- Trustee Act – ideal if provisions are incorporated into Trust instrument- Case Law- Precedents – can be found online or from practitioners

Names for Powers- Do not use short-hand or implied terms for powers- Do not simply state the power – describe it for the sake of clarity

Presumption of Unanimity in the Exercise of Powers- Default rule = Tees must exercise power unanimously (Gibb v McMahon)

o Can be overridden by Trust instrument- Note: proposed legislative changes have included Tees acting by a majority

C. Investment Powers

Background- It is a power of selection- Court will infer this power if not expressly dealt with in Trust instrument- History

o Early 19th c = scope of the power was to invest prudently to preserve capitalo “Legal List” legislation came out in England in 1859 and was soon copied in Canada – remained in BC until

2003 Focused on protecting Trust capital

“Legal List” did include some riskier investments (which was exploited by some law firms that created investment ventures)

Concerned with detrimental impact on remainder interest in times of inflation Inconsistent with development of investment theory in 1960s

- Recommendations were made that would make the approach that of a prudent investor and would bring the law more in line with current theories

Statutory Investment Power Provisions- Permitted Investments

o Trustee Act s. 15.1-17.1 (2003) got rid of legal list and created new default investment power provision s. 17.1 = Corporate Trustee cannot invest its Trust funds in its own securities

Would also violate the Duty of Loyalty s. 15.1(2) = Terms of Trust instrument can restrict types of investments Trustee can make

- Standard of Care o Trustee Act s. 15.2 = when “investing Trust prop, a Trustee must exercise the care, skill, diligence, and

judgment that a prudent investor would exercise” BC, NS, ON, PEI, SK = prudent investor MB, NB, Nfld, Territories = prudent person

For more see p239 of Gillen’s notes

- Obligation to Diversifyo Trustee Act does NOT expressly require diversification (NS, SK, ON do)o However, it is likely that diversification would be considered the method of a prudent investor

- Liability of Trustee for Losseso Tee is personally responsible for losses suffered to the Trust prop

Courts have historically applied this principle to each investment rather than the portfolio as a whole – Dimes v Scott

Trustee Act s. 15.3 states that the portfolio must be prudent so Tees only responsible for losses of the overall portfolio

o Note: Derivatives can be risky but in the right combination can also reduce risk

- Delegation of Investment Functionso Tees are NOT to delegate – S chose Trustee specifically!o Yet, wise investment requires expertise that the average individual does not have

Trustee Act s. 15.5 expressly permits the delegation of investment powers TA s. 15.2 standard of care – applies to the selection of the investment agent and

determines their scope of authority. Tee must keep an eye on how funds are managed and THEN they will not be liable for the

actions of the agent

- Mutual Fund Investmentso Easy way to make portfolio with lower brokerage fees (pools everyone’s funds together)o Problem = mutual fund manager invests the $ = delegation of investment decisionso TA s. 15.1(1) expressly allows for investment in mutual funds

TA s. 15.5(7) = purchase of mutual fund is not a delegation of duty

- Common Trust Fund Managed by Trust Company = valid in BC – see TA s. 15.1(3)

Duties- Underlying Fiduciary Duties:

o Default Duty of Care (prudent Tee)o Modified Duty of Non-Delegationo Underlying Duty of Loyaltyo Underlying Duty of Non-Partiality

D. Seeking an Opinion, Advice or Director from the Court- Trustee Act s. 86 = allows Trustee to make application to the court to get opinion/advice/direction on a matter of

difficultyo Courts did not want to do this but Tees began handing over Trust administration to courts when they could

not determine something so courts ended up making the decision by giving their interpretation of the Trust instrument

o Still not allowed in NS and NBo Application must be served on all interested partieso Once declaration of court is obtained, Trustee is no longer liable if he follows the direction (unless Trustee is

guilty of fraud, willful concealment, or misrepresentation when at the court)- Court will NOT exercise a power for a Trustee but may provide an interpretation of the terms of the T

E. Court Intervention in the Exercise of Trustee Powers

Tee terms are often very broad (especially when drafted for Trust companies) Difficulty of courts = If Tees are given absolute discretion can they do whatever they want?

o Have to exercise the discretion within the scope of their fiduciary duty to the B Hastings-Bass Rule

o Court can intervene in exercise of discretion where: It is clear that the Trustee would not have so acted if the Trustee had not taken into account

considerations which should not have been taken into account Tee failed to take into account considerations that ought to be taken into account

o Rule applied in Fox Estate

Gisbourne v Gisbourne (1877) HL Where Trustees are given broad discretion, a court will not interfere unless the Tees act in bad faith/mala fides; scope of intervention very narrow when the Trustee given wide discretionFacts: Testator left residue of estate in Trust for brother with a power to use all or part of the annual income for the life of the wife. 1 Trustee refused to use the power because wife already had fair amount of money.Decision: Where Trustees are given broad discretion, a court will not interfere unless the Tees act in bad faith/mala fides (not the case here); scope of intervention very narrow when the Trustee given wide discretion.

Re Blow (1977) Ont HC Court will intervene when there is a failure to even consider using the power (a failure to exercise discretion), and in such situations, the Gisbourne principle does not apply. Arguably gives the court a very broad basis for intervention, allowing it to effectively ignore the Gisbourne principle in many casesFacts: Testator left a Trust for daughter and a Trust for son. Son was a Trustee of daughter’s T. Tees had power to dip into capital. Son agreed to use power but Trust company did not.Decision: Court will intervene when there is a failure to even consider using the power (a failure to exercise discretion), and in such situations, the Gisbourne principle does not apply. Arguably gives the court a very broad basis for intervention, allowing it to effectively ignore the Gisbourne principle in many cases. Mala fides = have not exercised power in the best interest of the B. Company stated that they did not consent because of the letter of wishes. Letter of wishes not legally binding – legally binding doc says you have full discretion. J did not exercise power but removed Trust company as Trustee (said this disagreement would make future cooperation too difficult).

Re Hastings-Bass Said that a court can intervene in exercise of power where: (i) it is clear that the trustee would not have so acted if the trustee had not taken into account considerations which should not have been taken into account, or (ii) failed to take into account considerations that ought to have been taken into account Applied in Fox v Fox EstateFacts: Trustee consulted accountants and solicitors and acted on their advice. It led to a very bad tax implication for the T. Trustee went to court and said ‘we made a mistake’; asked for decision to be voided and opportunity to re-file to avoid tax implications. Decision: Hastings = Court intervened and allowed it. Decision really benefitted financial advisors because Trustee could have sued them as they were personally liable for the loss otherwise. Pitt = Court would not declare anything void/voidable at the request of the Tee, only at the request of the B. Failure to consider all aspects is a breach of fiduciary duty unless it is based on advice of professional.

Fox v Fox Estate (1996) ONCA where a Trustee is given wide discretion and acts in good faith court should not interfere UNLESS: 1. What he has achieved is not authorized by the power conferred on him, or; 2. It is clear that Trustee would not have acted as they did if they did not consider things they shouldn’t have, or; 3. Trustee failed to take into consideration things that they should have considered.Facts: Testator has wife (mother) (life interest) and son (remainder interest). Mother is Trustee for son with power to encroach on Trust for son and his family. Son has children with 1st wife. Plans to marry Jewish woman in 2nd marriage. Mother writes son out of will and gives entire Trust capital to son’s children.Decision: Mother used irrelevant considerations as a basis for intervention. Mother had absolute power BUT also had a duty of non-partiality. Applicable criteria = where Trustee is given wide discretion and acts in good faith court should not interfere UNLESS i) what he has achieved is not authorized by the power conferred on him, or ii) it is clear that Trustee would not have acted as they did if they did not consider things they shouldn’t have, or iii) Trustee failed to take into consideration things that they should have considered.Note: Ontario case so it may not be true countrywide. Also, how do Tees know what is relevant at the time?

Tees Must Exercise the Power Themselves: Courts WILL NOT exercise the power for the Tee

Re Wright (1976) Ont HC where a Trustee has a power but no duty to do something, courts won’t intervene unless there is mala fides in the Trustee’s decision; Trustees must decide, courts will not do it for themFacts: Trust $ was invested in company and Trustee was looking to sell shares. Trustee got an offer and wanted to know whether to accept it.Decision: Trustee has a power to sell and no duty to retain, BUT court will not decide whether to sell those shares at that price unless there is mala fides. Even if the Trustees here had a duty to sell, the court would not have intervened here as this duty includes a power to retain (at least for a period of time)

Tees Must Decide – court will not do it for them

Intervention in the Case of Deadlock Default rule = Tees act unanimously When there is a deadlock between Tees, court will occasionally intervene

Kordyban v Kordyban (2003) Eng courts CAN intervene in a deadlock and when doing so should look at whether failure to exercise that discretion is consistent or inconsistent with intentions of S. Will intervene if deadlock prevents operation of the T. If the failure to act frustrates testator’s intentions, then court must decide considering the interests of the Bs.Facts: K held shares in his company and set up both inter vivos and testamentary Ts. Each of his 2 children and his wife also held shares in the company. Children were co-Tees of testamentary T. At shareholder meeting, wife and 1 child voted themselves directors of the company and ousted the other child. If Trust could vote shares this move could have been defeated. Trust shares could not be voted because of deadlock between children.Decision: Court did NOT intervene. Stated that courts CAN intervene in a deadlock and when doing so should look at whether failure to exercise that discretion is consistent/inconsistent with intentions of S. Will intervene if deadlock prevents operation of the T. If the failure to act frustrates testator’s intentions, then court must decide considering the interests of the Bs. Court found that testator’s intentions did not concerning voting.

Summary of Court Interference with Trustee Exercise of Discretion1. A court will interfere in the exercise of a power by a Trustee where the Trustee has exercised the power in a way

that is not within an expressed limit on the scope of a power.2. A court will only intervene in the exercise of power that gives an absolute discretion where there is mala fides

(Gisbourne). Mala fides, however, does not mean the Trustee must be show to have committed a fraud in the common law sense and it also does not mean the Trustee must be shown to have been dishonest (Fox Estate; Re Blow).

3. A court may intervene in the exercise of a power by Trustees where the Trustees have failed to consider the exercise of a power (Re Blow). Reliance on a letter of wishes as a basis for not exercising a power may be considered a failure to consider the exercise of the power where a letter of wishes has no legally binding effect and therefore purported constraints on a power in such a letter are not binding on the Trustee (Re Blow).

4. A court may interfere in an exercise of a discretion by Trustees where the Trustee takes into account considerations they should not have taken into account (Fox v Fox Estate – arguably per all three of the Court of Appeal judges, although for two of those judges this might be said to be an obiter dictum).

- A court may intervene in an exercise of discretion by Trustees if the Trustees fail to take into account things they should have taken into account and if Trustees take into account considerations they should not have (per Galigan, J. in Fox v Fox Estate)

5. A court will not exercise a power for Trustees; the Trustees must exercise it themselves (Re Wright)

3. General Duties of Trustees

Core Duties1. Carry out the terms of the trust2. Duty of care – this is a fiduciary duty (existed prior to the DoC established in tort by Donoghue)3. Duty not to delegate – important as it represents trust/faith that the settler had in their Trustee(s) and reflects

their reasons for choosing them; S has given power to their Trustee, and not anyone else.4. Duty of impartiality - Duty to act evenly between the Bs (often between life interest and remainder interest). S

can expressly take away this duty (or implicitly by giving a power to encroach upon capital or a power of advancement).

5. Duty of loyalty - Has been strictly applied – acting honestly is not enough if you have conflicts of interest6. Duty to provide information – need to inform Bs of their rights, etc (this is a developing area)

These are merely presumed duties- Terms of a trust doc can explicitly or implicitly (via wording) override the above duties- E.g. duty of care may be waived when a Trustee is appointed due to their personal relationship with S, not for

their expert experience in a particular area (e.g. making investment decisions)-