Davis Trusts CAN Winter 2009
TRUSTS – LAW 250.003
Steve Patterson
University of British Columbia
Prof. Ron Davis
TABLE OF CONTENTS
CHAPTER ONE – INTRODUCTION
I. Introduction...... 7
1. History of Equity and Trusts...... 7
2. Definition of Key "Trusts" Terms...... 7
3. Trust Relationships in Contrast with Other Legal Relationships...... 8
4. Powers v. Trusts...... 8
5. Obligations of a Donee of a Power of Appointment...... 9
CHAPTER TWO – CREATION OF EXPRESS TRUSTS
I. Introduction...... 10
II. Title in the Trustee – Completely & Incompletely Constituted Trusts...... 10
1. Introduction...... 10
2. Transfers to a Third Party...... 11
Milroy v. Lord (1862 HL) ...... 11
3. Exceptions to the Rule that Equity Will Not Perfect an Imperfect Gift…………………… 12
A. Gifts Involving Decisions By Third Parties………………………………………………………... 12
Re Rose (1952 UKCA) ...... 12
B. Personal Declaration of Trust...... 12
Glynn v. Commissioner of Taxation (1964 Aust. H. Ct) ...... 12
4. Exceptions to the Rule that Volunteers Receiving Gifts Cannot Enforce Them……… 13
A. Covenants in Favour of Volunteers...... 13
B. Rule in Strong v. Bird...... 14
Strong v. Bird (1874 UK Ch. D.) ...... 14
Re Halley Estate (1959 Nfld. SC) ...... 15
III. The Three Certainties...... 15
1. Introduction...... 15
2. Certainty of Subject Matter...... 16
Re Beardmore Trusts (1952 Ont. HC) ...... 17
3. Certainty of Words/Intention...... 17
Hayman v. Nicoll (1944 SCC) ...... 18
4. Certainty of Objects/Beneficiaries...... 19
A. Introduction...... 19
B. Private Trusts: Persons (Or Corporations) as Beneficiaries...... 19
i. What Kind of Trust Is It? ...... 19
ii. Is There Linguistic Certainty? ...... 20
Re Baden's Deed Trusts (No. 2) (1972 UK Ch. D) ...... 20
iii. What Definition of "Ascertainability" Is Required? ...... 21
Re Baden's Deed Trusts (No. 1) (1971 HL) ...... 21
Jones v. The T. Eaton Co. Ltd. (1973 SCC) ...... 22
iv. What are the Duties of the Trustee? ...... 22
Re Hay's Settlement Trusts (1982 UK Ch. D.) ...... 22
5. Summary Chart…...... 23
IV. Charitable Purpose Trusts...... 23
1. Introduction...... 23
2. What is Charity – General Principles...... 24
Native Communications Society of BC v. M.N.R. (1986 Fed. CA)…………….. 25
Chichester Diocesan Fund v. Simpson (1948 HL)……………………………………… 25
Oppenheim v. Tobacco Securities Trust Co. (1951 HL)……………………………. 26
Dingle v. Turner (1972 HL) ...... 26
National Anti-Vivisection Society v. Inland Revenue Comm. (1948 HL)…. 26
3. Specific Heads of Charity...... 26
A. Introduction...... 26
B. Relief of Poverty...... 27
Re Coulthurst's Will Trusts (1951 UKCA) ...... 28
C. Advancement of Religion...... 28
Thornton v. Howe (1862 UK) ...... 29
Re South Place Ethical Society (1980 UK Ch. D.)...... 29
Blais v. Touchet (1963 SCC) ...... 29
Gilmour v. Coats (1949 HL) ...... 29
D. Advancement of Education...... 29
In Re Pinion (1965 UKCA) ...... 30
Re Hopkins Will Trusts (1965 UK Ch. D.) ...... 30
E. Other Purposes Beneficial to the Community...... 30
Vancouver Society of Immigrant Women v. M.N.R. (1999 SCC)…………….. 31
V. Non-Charitable Purpose Trusts...... 32
1. Void and Anomalously Valid Purpose Trusts...... 32
Re Astor's Settlement Trusts (1952 UK Ch. D.) ...... 32
2. Exceptional Cases...... 32
A. Unincorporated Associations...... 32
Leahy v. AG for New South Wales (1959 PC) ...... 33
B. Convincing the Court of a Trust for Persons, not Purposes...... 33
In Re Denley's Trust Deed (1969 UK Ch. D.) ...... 34
VI. Formalities...... 34
1. Introduction...... 34
2. Inter Vivos Trusts...... 34
3. Testamentary Trusts...... 35
VII. Wills: Secret Trusts...... 35
1. Basis of Enforcement...... 35
A. General...... 35
B. (Fully) Secret Trusts...... 36
McCormick v. Grogan (1869 HL) ...... 37
Ottaway v. Norman (1972 UK Ch. D.) ...... 37
Hayman v. Nicoll (1944 SCC) ...... 37
C. Half-Secret Trusts...... 38
Blackwell v. Blackwell (1929 HL) ...... 38
2. Time for Communication...... 38
A. (Fully) Secret Trusts...... 38
Re Boyes (1884 UK Ch. D.) ...... 38
B. Half-Secret Trusts...... 39
Re Keen...... 39
3. Time for Vesting of Interest...... 39
Re Gardner (1920 UKCA) ...... 40
4. Are Secret Trusts Testamentary? ...... 40
Re Young (1950) ...... 40
5. Beneficial Interests for Secret Trustees...... 40
Re Rees (1950 UKCA) ...... 41
VIII. Revocation by the Settlor...... 41
Bill v. Cuerton (1835 HL) ...... 41
CHAPTER THREE – IMPLIED OR RESULTING TRUSTS
I. Introduction...... 42
II. True Resulting Trusts – Exhaustion or Failure of Express Trust Objects……………………. 42
1. General...... 42
2. Private Trusts...... 44
A. Right to Surplus...... 44
Re West (1900 UK Ch. D.) ...... 44
Re Foord (1922 UK Ch. D.) ...... 44
B. Surplus of a Pension Fund...... 45
Schmidt v. Air Products Canada Ltd. (1984 SCC)……………………………………… 45
3. Public Trusts...... 46
A. General...... 46
British Red Cross Balkan Fund (1914 UK Ch. D.) ...... 46
Barclay's Bank v. Quistclose Investments Ltd. (1968 HL)……………………….. 46
B. Contributions by Contract...... 47
Re West Sussex Constabulary Fund (1971 UK Ch. D.)……………………………. 47
Re Bucks Constabulary Fund (No. 2) (1979 UK Ch. D.)………………………….. 48
III. Implied Trusts – Transfer To, Or Purchase In, Name of Another…………………………….. 48
1. The General Principles...... 49
2. Summary of Resulting Trusts in the Case of Transfer/Purchase to Another………… 49
3. Presumption of Advancement: Spouses, Parents, and Minor Children………………….. 50
Standing v. Bowring (1955 Aust. HC) ...... 50
Pecore v. Pecore (2007 SCC) ...... 50
4. Rebutting the Presumption: Evidentiary Requirements...... 50
Shephard v. Cartwright (1955 HL) ...... 51
IV. Common Intention Resulting Trusts...... 52
Pettkus v. Becker (1980 SCC) ...... 52
CHAPTER FOUR – THE BENEFICIARY
I. The Nature of the Beneficiary's Interest...... 54
1. The General Principle...... 54
A. Introduction...... 54
B. Personal Aspect of a Beneficiary's Right...... 54
Schalit v. Nadler (1933 KB) ...... 54
C. Proprietary Aspect of Beneficiary's Right...... 55
Baker v. Archer-Shee (1927 HL) ...... 55
2. Possession of Trust Property...... 56
Re Bagot's Settlement (1894 UK Ch. D.) ...... 56
3. Control of Trustees...... 57
Re Brockbank (1948 UK Ch. D.) ...... 57
Butt v. Kelson (1952 UKCA) ...... 57
II. Alienation of the Beneficial Interest...... 58
1. Introduction...... 58
2. Differences Between Law and Equity...... 58
3. Methods and Formalities...... 58
4. Equitable Assignment...... 59
Timpson's Executors v. Yerbury (1963 UKKB) ...... 60
5. Statutory Assignment...... 60
6. Priorities Between Assignees...... 61
7. Restraints on Alienation...... 62
III. Termination of a Trust...... 62
1. General...... 62
Saunders v. Vautier (1841 HL) ...... 63
2. Terminating Discretionary Trusts and Powers...... 64
Re Smith (1928 UK Ch. D.) ...... 64
3. Partial Termination...... 65
Re Sandeman's Will Trusts (1937 UK Ch. D.) ...... 65
Lloyd's Bank v. Duker (1987 UK Ch. D.) ...... 65
4. Terminating Perpetual Trusts of Income/Charities...... 65
Halifax School for the Blind v. Chipman (1937 SCC) ...... 66
5. Defeating the Rule in Saunders v. Vautier...... 66
IV. Variation of Trusts...... 66
1. Trusts and Settlement Variation Act...... 66
2. Who Can Apply Under the Act? ...... 67
3. On Whose Behalf May the Court Approve an Arrangement Under the Act?...... 67
Buschau v. Rogers (2006 SCC) ...... 68
4. What is the Extent of the Court's Jurisdiction to Revoke or Vary a Trust?...... 69
Re Harris (1974 BCSC) ...... 69
Russ v. British Columbia (Public Trustee) (1994 BCCA) ...... 70
5. What Criteria Should the Court Use Before Approving An Arrangement?...... 70
Re Burns (1970 BCSC) ...... 71
Re Weston's Settlement (1969 UKCA) ...... 71
Re Remnant's Settlement Trusts (1970 UK Ch. D.)…………………………………… 71
Re Tweedie (1976 BCSC) ...... 71
CHAPTER FIVE – ADMINISTRATION OF TRUSTS
I. Appointment, Retirement, and Removal of Trustees...... 72
1. Sources of Law for the Administration of Trusts...... 72
2. Appointment of Trustees...... 72
A. Introduction...... 72
B. The Trust Instrument...... 72
C. Non-Judicial Power of Appointment of Trustees Under the Trustee Act…………….. 73
3. Retirement of Trustees...... 74
4. Judicial Removal of Trustees...... 74
A. Statutory Powers...... 74
B. Grounds for Removal of a Trustee...... 75
Conroy v. Stokes (1952 BCCA) ...... 76
Re Consiglio Trusts (1973 Ont. CA) ...... 76
CHAPTER SIX – DUTIES UNDERLYING THE OFFICE OF TRUSTEE
I. Introduction...... 77
II. Adhere to Trust...... 77
III. Standard of Care...... 78
Fales v. Canada Permanent Trust (1977 SCC) ...... 78
IV. The Duty Not To Delegate...... 79
1. General Principle...... 79
2. Employment of Agents...... 80
McLellan Properties and Roberge (1947 SCC) ...... 80
Speight v. Gaunt (1893 HL) ...... 80
3. Liability of Trustees Employing Agents...... 81
Fry v. Tapson (1884 UK Ch. D.) ...... 81
In Re Vickery (1931 UK Ch. D.) ...... 81
4. Corporate Trustees...... 82
Re Wilson (1937 Ont. CA) ...... 82
Fales v. Canada Permanent Trust (1976 BCCA) ...... 82
5. Statutory Provisions Permitting Delegation...... 82
A. Section 7 – Solicitors and Bankers...... 82
B. Section 15.5 – Investment of Trust Property...... 83
V. The Duty of Loyalty...... 83
1. The General Principle...... 83
Keech v. Sanford (1726 UKCL) ...... 84
Boardman v. Phipps (1967 HL) ...... 84
2. Circumstances in Which the Rule Has Been Invoked...... 85
A. General...... 85
B. Acquisition of Gain Through Exploitation of Opportunity Arising out of Office……. 85
Peso Silver Mines Ltd. v. Cropper (1966 SCC) ...... 85
Canadian Aero Services v. O'Malley (1974 SCC) ...... 85
Re Gee (1948 UK Ch. D.) ...... 86
C. Purchase of Trust Property By Trustee...... 86
Holder v. Holder (1968 UKCA) ...... 87
Molchan v. Omega Oil & Gas (1988 SCC) ...... 87
D. Purchase of Beneficiary's Beneficial Interest...... 87
Crighton v. Roman (1960 SCC) ...... 87
3. Obligations When Making Discretionary Decisions...... 88
Cowan v. Scargill (1985 UK Ch. D.) ...... 88
Fox v. Fox Estate (1996 Ont. CA) ...... 89
4. Defences to an Alleged Breach of Loyalty...... 89
CHAPTER SEVEN – CONDUCT OF THE DAY-TO-DAY BUSINESS OF THE TRUST
I. The Duty of Impartiality...... 89
1. The Principle of Holding an Even Hand...... 89
Nestle v. National Westminister Bank (1993 UKCA) ...... 90
2. Rule in Howe v. Lord Dartmouth...... 90
A. "Reasonably Prudent Investor" Standard...... 90
B. The Duty to Convert...... 90
Lottman v. Stanford (1980 SCC) ...... 91
C. The Duty to Apportion...... 92
i) General...... 92
ii) Income Pending Sale – Personal Property...... 92
iii) Income Pending Sale – Real Property...... 92
In Re Oliver (1908 UK Ch. D) ...... 93
Re Lauer and Stekl (1976 SCC) ...... 93
iv) Practical Problems with Distributing Notional Income...... 93
Earl of Chesterfield's Trusts (1883 UK Ch. D) ...... 93
Royal Trust Co. v. Crawford (1955 SCC) ...... 93
3. Discretion to Retain or Sell...... 93
Re Smith (1970 Ont. HC) ...... 94
4. Obligation to Retain...... 94
5. Trust of Shares – Apportionment Between Capital and Income...... 94
Waters v. Toronto General Trusts Corp. (1956 SCC) ...... 95
Re Welsh (1980 Ont. HC) ...... 95
II. The Duty to Disclose: Accounts and Information...... 95
1. Duty to Provide Information...... 95
In Re Londonderry's Settlements (1965 UKCA) ...... 95
Froese v. Montreal Trust Co. of Canada (1993 BCSC) ...... 96
Schmidt v. Rosewood Trust Co. (2003 PC) ...... 96
2. Duty to Account...... 96
Sandford v. Porter (1889 Ont. CA) ...... 96
III. Limits to Powers of Allocation and Decision-Making...... 97
IV. Judicial Advice and Directions...... 97
1. Applications for Directions...... 97
Re Wright (1976 Ont. HC) ...... 97
Re Lohn (1991 BCSC) ...... 97
Re Blow (1977 Ont. HC) ...... 97
Re Billes (1983 Ont. HC) ...... 97
Schipper v. Guaranty Trust Co. of Canada (1989 Ont. CA)………………………… 98
2. Sources of Jurisdiction...... 99
Kordyban v. Kordyban (2003 BCCA) ...... 99
V. Indemnity and Remuneration of Trustees...... 100
1. Indemnification...... 100
Re Reid (1970 BCCA) ...... 100
2. Remuneration...... 100
Re Pedlar (1982 BCSC) ...... 101
CHAPTER EIGHT – FIDUCIARY RELATIONSHIPS
I. Introduction to Fiduciaries...... 101
II. Characteristics of a Fiduciary Relationship...... 101
III. Obligations Imposed on Fiduciaries...... 102
Guerin v. The Queen (1984 SCC) ...... 102
Lac Minerals v. International Corona Resources Ltd. (1989 SCC)………………. 102
Hodgkinson v. Simms (1994 SCC) ...... 103
M. (K.) v. M. (H.) (1992 SCC) ...... 104
CHAPTER NINE – REMEDIES FOR BREACH
I. Principles of Liability...... 105
II. Personal Remedies...... 105
1. General...... 105
2. Action for Compensation for Loss...... 105
Guerin v. The Queen (1984 SCC) ...... 106
Canson Enterprises Ltd. v. Boughton & Co. (1991 SCC) ...... 107
Hodgkinson v. Simms (1994 SCC) ...... 108
3. Action for Accounting for Profit...... 108
Warman International Ltd. v. Dwyer (1995 Aust. HC) ...... 109
Scott v. Scott (1963 Aust. HC) ...... 109
III. Constructive Trusts...... 109
1. Introduction...... 109
2. Substantive Constructive Trusts – Trustees and Fiduciaries...... 110
Keech v. Sanford (1726 UKLC) ...... 111
Boardman v. Phipps (1967 HL) ...... 111
Scott v. Scott (1963 Aust. HC) ...... 111
3. Remedial Constructive Trusts – Unjust Enrichment...... 111
Pettkus v. Becker (1980 SCC) ...... 112
Lac Minerals v. International Corona Resources Ltd. (1989 SCC)…………….. 113
Peter v. Beblow (1993 SCC) ...... 113
4. The Resurrection of "Good Conscience"...... 113
Korkontzilas v. Soulos (1997 SCC) ...... 114
IV. The Stranger as Constructive Trustee………………………………………………...... 114
1. Introduction...... 114
2. The Doctrine of Knowing Assistance/Dealing...... 115
Air Canada v. M & L Travel Ltd. (1993 SCC) ...... 115
Royal Brunei Airlines v. Tan (1995 PC) ...... 116
Twinsectra Ltd. v. Yardley (2002 HL) ...... 116
3. The Doctrine of Knowing Receipt...... 116
Citadel General Assurance Co. v. Lloyds Bank Canada (1997 SCC)………….. 117
Carl Zeiss Stiftung v. Herbert Smith & Co. (No. 2) (1969 UKCA)………………. 117
4. Trustee De Son Tort...... 118
V. Tracing...... 118
1. General Principles...... 118
Foskett v. McKeown (2000 HL) ...... 119
2. Withdrawing From Mixed Accounts...... 119