Trusts

Express Trusts

Constitution

Transfer

Self-Declaration

Certainty of Intention

Precatory Words?

Gift or Trust? Re Walker

Certainty of Subject

What property is to be held in trust?

What is each beneficiary’s interest?

Certainty of Objects (Beneficiaries)

Discretionary Trust

Purpose Trusts

Fixed Trust

Testamentary Trusts

Formalities

Secret Trusts

Fully Secret

Half-secret trust

Resulting Trusts

Presumption of Resulting Trust & Advancement

Resulting Trust

Advancement

Rebutting the Presumptions: Evidentiary Issues

Timing

Illegality

Joint accounts

Tax Treatment

Failure of Express Trust

Surplus Funds

Trustee’s Duties

Account

Act personally

Adhere to Trust Instrument

Best Interests of Beneficiary

Comply with Law

Impartiality

Investment

Exercise Skill, Prudence, and Care

Consider the beneficiary’s best interests

Losses

Delegation (exception from acting personally)

Loyalty

Profit from office

Conflict of interest

Self-Dealing: Breakspear

Purchase of trust property: Molchan

Acquisition of beneficial interests/Fair Dealing: Crighton

Safeguard and Preserve Trust Assets

Skill, Care, & Prudence

Fiduciary Relationships

Ad Hoc

Per Se

Unjust Enrichment

Jurisdiction to Intervene

Procedure

Reviewing Discretion

When discretion may be reviewed

The Rule in Saunders v Vautier

Remedies

Accounting

Comingling

Constructive Trust

Declaration & Advice

Equitable Compensation

Exculpation and Indemnity

Proceedings Against Third Parties

Proprietary Claim

Knowing Receipt

Knowing Assistance

Removal of Trustee

Express Trusts

Constitution

  • Two methods: transfer to a trustee or self-declaration: Milroy.
  • The court will not regard an imperfectly constituted transfer trust as a self-declared trust:Milroy.

Transfer

  • The Milroy Principle: There is no equity to perfect an imperfect gift (/gratuitous transfer):Milroy.
  • “Temper[ing] the wind”of the Milroy principle:A trust is constituted in equity when…
  • A settlor has done everything in her power to complete a transfer: Re Rose.
  • The gift was completed to such an extent that the donee could enforce her right against a third party without forcing the donor to do anything more: Pennington.
  • It would be unconscionable for a donor to recall a gift: Pennington.

Milroy / S signed a trust instrument w/POA, naming him T of shares held for S’s niece. T received dividends b/c of POA and paid them to niece. 3 years later, S died. S + T had never transferred shares to T’s name in corporate register.Held: no transfer, b/c equity does not assist a volunteer.
Re Rose / S transferred shares to T, but shares were not registered in company’s books for 3 months. Held: transfer effective in equity when transfer document signed, not when they were registered, b/c S did everything in his power.
Pennington / S directs company’s accountant to transfer shares to nephew. Accountant says everything is done, but fails to record transfer in books. Nephew serves as director (& must be shareholder to do so). Held: transfer effective, b/c (1) S did everything in his power, (2) unconscionable to revoke gift.
Mordo / S gives Form A to trustee, but directs not to register it until death; also completes a written self-declaration. Held: transfer effective when Form A completed, b/c (1) S did everything in power, (2) s. 20 of LTA, (3) unconscionability.

Self-Declaration

  • No technical words are required: Elliott.
  • Main issue is to demonstrate certainty of intention.
  • Requires the settlor to have “absolutely parted” with her beneficial interest in the property: Carson.
  • In the absence of formal trust documentation, the court must look at the surrounding circumstances, words, and conduct to determine what the parties intended: Elliott.
  • Words alone can be sufficient to constitute a trust, but those words must amount to more that “loose conversation”: Jones.
  • Does self-declarationindicate intention to make a gift at a later date (“this will be yours one day”), or immediate trust?
  • Remember that S may retain life interest.

Elliott / Deceased held GIC, alleged by executor to have been set aside for the benefit of disabled daughter. Held: Valid self-declaration (actions consistent w/this intention).
Re Mellen / Deceased put bonds in envelopes marked: “The contents of this envelope are to be used solely for the benefit of my dearly beloved son, Edward Mellen.” Held: valid self-declaration.
Paul / Deceased has joint account w/girlfriend, says $ “is as much mine as yours,” puts joint bingo winnings in it, made withdrawal for joint benefit. Held: valid self-declaration.
Jones / Deceased hands cheque to baby, says “I give this to baby for himself,” then “I’m going to put away for son.” Told solicitor he would invest $ for son. Held: no trust; statements indicate intention to provide for son.

Certainty of Intention

  • The issue here is whether the settlor intended to impose a trust on the property she transferred to X, and if so, on what terms the property is to be held.
  • Certainty of intention to create a trust is to be “inferred from the nature and manner of the disposition considered as a whole”: Elliott.
  • In the absence of formal trust documentation, the court must look at the surrounding circumstances and the words and actions of the parties to determine whether there was certainty of intention:Elliott.

Precatory Words?

  • Precatory words express a wish as to the use of property without imposing an obligation: Hayman.
  • The goal is to determine whether the testator intended to impose a trust, or merely express a wish: Hayman.

Hayman / Mother leaves $ to daughter in will, which expresses “full confidence” daughter will distribute $ “in accordance with the wishes I have expressed to her.” Daughter died w/o distributing $.Held: no trust; insufficiently specific to impose trust obligation.

Gift or Trust?Re Walker

  • When a testator gives property absolutely, any gift over is void (repugnant).Result:
  • (1) gift to the name person prevails and gift-over fails as repugnant;
  • (2) first named takes life estate [w/ or w/o power of encroachment] and gift over prevails.
  • Court must determine & give effect to testator’s predominant intention

Re Walker / Will gives everything to wife, but also specifies who should get anything left over @ her death. Held: Can’t accomplish both objectives, b/c giftover is repugnant to gift; predominant intention was to provide for wife.

Certainty of Subject

What property is to be held in trust?

  • The subject matter must be described “with sufficient exactness to permit that such matter be ascertained at the time the trust was created.” It is not sufficient to make subject ascertainable only at time of death (if it’s an IV trust).Re Beardmore.

Re Beardmore / Screated IV trust holding “an amount equal to three-fifths of [settlor’s] net estate” remaining at death.Held: void for want of certainty.

What is each beneficiary’s interest?

Not applicable if discretionary.

  • A beneficiary’s interest must be objectively ascertainable: Golay.

Golay / B to have “reasonable income” fromtrust properties.Held: sufficiently certain b/c “reasonable” is an objective measure.
Boyce / Will leaves houses to C+M. M to choose one; C gets other. M died w/o choosing. Issue: which does C get? Held: void b/c C’s share of trust assets is unclear.

Certainty of Objects (Beneficiaries)

Discretionary Trust

  • Test: can it be said with certainty than any given individual is or is not a member of the class? Re Baden.
  • The test requires only conceptual certainty of a trust’s objects. The beneficiaries of a trust will be considered conceptually certain where it is possible to establish objective criteria for membership in the class.
  • Evidentiary uncertainty, or whether it is in fact possible to prove that an individual is or is not a member of a class, will not render a trust void.
  • Atrustmayalso be void if it isadministratively unworkable, i.e., a trust that “cannot be executed” or whose range of potential objects are “so hopelessly wide as not to form anything like a class”: Re Baden 1.
  • Contextual analysis: “Friendship, of course, draws a picture particularly blurred in outline, but its context, and the circumstances of the case … may well fill in what would otherwise be vague.”Re Coates.
  • Exceptions:
  • Intermediate power: power to appoint anyone except particular class. Must consider whether excluded class is sufficiently certain:Re Manistay.

Re Baden / Trust to benefit “employees of Co. their relatives dependents.” Held: valid, b/c terms relatives & dependents are conceptually certain. C.f. “someone under a moral obligation”  uncertain.
Re Manistay / Trustee held power to add anyone as Bexcept members of excluded class. Held: valid, b/cexcluded class is certain.
Re Coates / Duty to distribute to friends his wife thinks he has forgotten & would like momento of him ($25 to each to aggregate max of $250). Testator made note of 2 friends he had forgotten.Held: “friends” sufficiently certain b/c context gives clues as to intention.
Re Connor / Duty to distribute to “close friends” w/discretion as to which and when.Held: Too many meanings of “friends” to be certain. (Dissent considers context of small town as helping provide certainty).
Re Bethel / Trust for “needy and deserving Toronto members of the Eaton Quarter Century Club”. Held: upheld.

Purpose Trusts

  • A trust for a non-charitable purposeis invalid for uncertainty of objects: Re Astor.
  • Such a trust must be construed as a power to appoint the income or the capital, but only for a period of 21 years: Perpetuities Act, s. 24.
  • Exceptions:
  • Individual benefit (“beneficiary principle”): A trust that is expressed as a purpose, but directly or indirectly benefits an individual or class of individuals, does not fall afoul of the rule against purpose trusts: Re Denley.
  • Quistclose trust: Where party A gives party B funds to be used only for a specific purpose, the funds are impressed with a Quistclose trust. They must either be used for that purpose or returned to Party A: Re Westar.

Re Denley / Land in trust for purpose of sports ground for Co’s employees. Held: valid, b/c co’s employees = Bs
Re Westar / Party to JV goes bankrupt. JV account usually used to pay operating expenses seized to pay creditors. Suppliers & employees contend $ in account impressed w/purpose trust (=to pay them). Held: yes, b/c JV agreement specified that account solely to be used for this purpose.

Fixed Trust

  • In a fixed trust, the trustees have no discretion as to the distribution of income or capital. They must distribute the property to each of the beneficiaries in a fixed proportion (e.g. “equally between all my children”).
  • Test: Trustee must be able to…
  1. Determine whether any person is a member of the class of beneficiaries; and
  2. Identify every member of the class – that is, the trustee must be able to make a complete list of all beneficiaries.

Testamentary Trusts

Is Trust IV or Testamentary? Mordo:

  • Whether a trust is inter vivos or testamentary depends on the intention of the settlor.
  • A testamentary trust arises where the settlor intends that the trust take effect on death.
  • Indices of intention to create IV trust: present tense in trust instrument; power of revocation (b/c unnecessary if trust takes effect only on death); naming settlor as holding life estate (also unnecessary if testamentary).
  • Analysis of whether the instrumentin fact creates a testamentary trust is only necessary where the intention of the settlor is unclear.

Formalities

  • To be valid, the trust instrumentmust comply w/will-making formalities. Must be written, signed, and witness, OR have deficiencies cured by the court: WESA s 37.
  • Curing deficiencies: WESA s. 58. If the court determines that a record/document/writing on a will represents the testamentary intentions of a deceased person, the court can order that it be fully effective as though it was a will/codicil/revocation.

Carson / Deceased instructed solicitor to deliver transfer deeds to donee on death. Held: invalid as IV + testamentary trust, b/c no delivery in life & did not comply w/will-making formalities.

Secret Trusts

  • Court will probably go farther to give effect to the settlor’s intention in light of WESA s. 59 (curing deficiencies) than it used to.

FullySecret

  • The will makes no mention of a trust and appears to be an outright gift to a specific donee
  • Enforceable if: Ottaway
  • The testator intends to subject the primary donee to an obligation in favour of the secondary donee; and
  • The testator communicates that intention to the primary donee during her lifetime.
  • Communication of instructions may happen:
  • Before or after will has been made;
  • In a form that does not comply with WESA.
  • The primary donee accepts this obligation (may be express or tacitly through acquiescence: Blackwell).

Re Boyes / Testator left everything to solicitor & said he would provide instructions on how to distribute, but never did so. Instructions found among papers after death. Held: instructions not valid; property held in RT for estate.
Ottaway / Mr. left house to Ms. in will on agreement she would leave it to Mr.’s son. Ms. left it to Normans instead. Held: valid secret trust.

Half-secret trust

  • The will specifies that property is to be held on trust, but does not specify a beneficiary.
  • Enforceable if:Blackwell
  • The deceased identifies the beneficiary:
  • Before or contemporaneously with the execution of the will, or
  • In a form that complies with WESA (e.g. a duly-witnessed codicil): Re Boyes.

Blackwell / Testator left $ to friends in trust for “such persons indicated by me”. Told all friends name of mistress before executing codicil. Held: valid, because communicated prior to execution.

Resulting Trusts

Presumption of Resulting Trust & Advancement

Presumptions not necessary where there is proof of intent:Eisener.

Resulting Trust

  • Applies where:Pecore
  • A provides funds to purchase an asset registered in the name of B, who provides no value, or
  • A gratuitously transfers legal title of an asset to B.
  • To rebut, must demonstrate that A intended a gift [=transfer of beneficial interest]: Pecore.
  • Why: Equity presumes bargains: Nishi.

Pecore / Father xferred money into a joint account with his daughter, then died. Held: Presumption of RT rebutted, b/c F & D v. close; D relied on F for financial assistance; D told lawyer that bank accounts had been dealt with, so not included in will. This evidence overcame letter from F to bank saying accounts were not gifts to daughter (court found this was for tax purposes).
Nishi / R offered to put $ toward purchase of land by N. R asks for interest in property; N says no. R agrees to give $ w/o “conditions or requirements”. Held: presumption rebutted.

Advancement

  • Applies where: A is a parent and B is a minor child (Pecore); or A is a husband and B is a wife (VJF).
  • Note that there isn’t any authority that the presumption applies where the transfer is wifehusband (VJF). However, in light of the decision in Pecore that a mother can pass property to her child, it seems likely that the court could decide as much.
  • Note also that there isn’t an authority for transfers between common law spouses (VJF; Eisener).
  • Effect: in the absence of proof that A intended the property to be held on resulting trust at the time of the transfer, the court will presume that such a transfer/registration was intended as a gift (Pecore)
  • Weak presumption:“a gift will not be found by mere lack of thought; there must be an intention to make a gift” (Eisener).
  • Clean hands: you can’t rely on the presumption if you misled other party into making xfer: Eisener.

VJF / Mr. buys house w/his $, puts it in name of Ms. Held: Presumption of advancement not rebutted; can’t be a gift as against creditors but trust as against Ms.
Eisener / Mr. buys house, asks CL Ms. to fax agreement to realtor; she does, but first puts her name on agreement. Held: Presumptions not applied. Conclusive evidence of intention: Mr. didn’t do anything to put Ms. on title; only acquiesced, which is not enough.

Rebutting the Presumptions: Evidentiary Issues

Timing

  • Evidence must relate to transferor’s intention at the time of the transfer.However, such evidence may be derived from events subsequent to the transfer: Pecore.

Illegality

  • A P must come to equity with clean hands. Therefore, evidence that a transfer was made for an illegal purpose (e.g. defeating a creditor) will not be admissible to rebut the presumption of advancement: Goodfriend.
  • This principleonly applies if the P actually carried out his illegal scheme, e.g. had creditors who were defeated, hindered, or delayed by the transfer: Goodfriend.
  • Where the scheme has not yet been carried out, the transferor may repent from it in order to make the evidence of same admissible: Tribe.

Goodfriend / Swingers; letter alleging alienation of affection; property xferred to Ms. Held: presumption of advancement rebutted, b/c Ms. misled Mr. so can’t rely on equity.
Tribe / Condo paid for by parents, but title in Ms. name for tax savings if sold. Parents have option to repurchase for $10. Held: RT. Illegal intention ok because time to repent.

Joint accounts

  • Bank forms may provide evidence of intention: Pecore.
  • Control and use of jointly held funds may be of limited use (and will never be determinative): Pecore.

Niles / Sisters (A+L) opened a joint bank account. A deposited $10K, then died. Held: RT, b/c no evidence of intent to pass funds except bank’s standard form agreement.

Tax Treatment

  • May be considered, but is not determinative: Pecore.

Failure of Express Trust

  • Invalidity: Where a settlor transfers property to the intended trustee, but the trust provisions are invalid because of uncertainty.
  • Distribution impossible: Where a trust is validly created, but distribution cannot be effected for practical reasons (e.g. the sole beneficiary dies before the distribution date).

Surplus Funds

  • Where trust funds remain on the death of the sole beneficiary/beneficiaries and there is no gift-over or intention that beneficiary take absolutely: Re Abbott.

Abbott / Trust held for the benefit of two women had not been distributed in whole by the time of their death.

Trustee’s Duties

Account

  • A trustee is always liable to account to his beneficiary, without any allegation of wrongdoing or breach of trust. The accounting mechanism is the means by which the beneficiary can learn what has been done w/trust property: how it is invested, what revenues it had produced, etc.
  • Must also pass accounts in court before a registrar as set out in s. 99 of the TA, unless accounts are consented to in writing by beneficiaries.
  • If you pass accounts, they are treated as final (absent fraud).

Act personally

  • A trustee cannot delegate to others the confidence reposed in himself: Speight.
  • Each trustee must participate in any discretionary decision made by trustees, and must exercise his or her own judgment in respect to the matter at hand. It is not sufficient for the trustee to acquiesce unthinkingly in decisions made by the other trustees: Fales.
  • Unless specifically directed to do so by the trust instrument, the trustee cannot simply follow the wishes of the settlor, a third party, or the beneficiaries as to the administration of the trust (though she may consider them). Must make own, independent assessment of best course of action: note.

Re Smith / Trust co consulted settlor as to interpretation of trust document, rather than seeking legal advice. Held: [Smith suggests this was breach of duty to act personally, but court doesn’t so hold]

Adhere to Trust Instrument