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Maxims of Equity
A trust will never fail for want of a trustee.
Equity is concerned with substance, not form.
Equity will not perfect an imperfect gift.
Equity will not assist a volunteer.
Equity assumes bargains, not gifts.
Modern Forms of the Trust
Pension Trusts
Trustee invests shares, typically as custodian employing a professional
Inter vivos trust
Employer and employee pay contributions to the trustee for the use of
retiring employees
Investment Trusts
Mutual Funds
Public Offerings
Asset Securitization
Income Trusts
Types of Trust
Express trusts: Testator declares intent to have property held on trust
Trusts for persons (private trusts)
Trusts for purposes (public trust)
o Charitable purpose trust
o Non-charitable purpose trust
Executed (fixed) trusts (settlor sets out beneficial interests)
Executory trusts (mere power, power of appointment)
(trustee to determine disposition as between beneficiaries)
Completely constituted trusts (property properly transferred to and
vested in trustees)
Incompletely constituted trusts (property not properly transferred
to and vested in trustees)
Revocable trusts (must be inter vivos, obviously)
Implied trusts
Largely a misnomer
o Expressions failing to use the exact words to create a trust still
give rise to an express trust
o Precatory language does not give rise to a trust
Statutory trusts
As when, in the Estates Administration Act, the decedents personal
representative is trustee over his property for the purposes of
disposal
Deemed trusts
Imposed by legislation to ensure employers do not avoid revenue and
social obligations
o Tax, vacation pay, WSIB premiums, etc.: funds are withheld from
employees on trust for the government
Bare trusts
A bare trustee holds property with no subjective decision-making
powers
Trust inter vivos: while living
Requirements in the Statute of Frauds
Trust post mortem: after death
Wills must be signed and witnessed by people all in the same room at
the same time, per the Succession Law Reform Act.
Takes effect after death
o Thus, codicils do not revoke a trust; it hasnt yet taken effect
ONE PERSON CAN BE BOTH AGENT AND TRUSTEE FOR THE SAME PRINCIPAL
Often easier to do so: trustees establish a holding corporation and
act as agents of that corporation (directors). Much easier to divest
oneself of 30% of a corporation than of being trustee of 900
investments
IF (S)HE IS VESTED WITH THE TITLE TO THE PRINCIPALS
PROPERTY, (S)HE IS BOTH TRUSTEE AND AGENT
Where there is sufficient power of control over the trustees so
there is an agency relationship and not merely a trust, the
beneficiaries are liable as partners: Scott, The Law of Trusts, cited
in Trident Holdings Ltd. v. Danand Investments Ltd. (1988 ONCA)
BOTH HAVE FIDUCIARY DUTIES
Agents: Soulos v. Korkontzilas
Agents are not party to the transaction, but trustees are: Lloyd v.
Grace Smith & Co.
And beneficiaries are not liable for the actions of the trustees
(e.g. tort): Trident Holdings Ltd. v. Danand Investments Ltd. (1988
ONCA)
o Being both imposes both sets of responsibilities for both parties:
Scott, The Law of Trusts, cited in Trident Holdings Ltd. v. Danand
Investments Ltd. (1988 ]ONCA)
If a trustee with no decision-making powers (bare trustee) makes decisions
on behalf of the beneficiaries, it is likely that he is acting as agent
otherwise, what legal basis can there be for the decision? Trident Holdings
Ltd. v. Danand Investments Ltd. (1988 ONCA)
Thus beneficiaries can be held liable for the actions of their
trustees if there is an agency relationship also
o As a result, the Trust Beneficiaries Liability Act was passed;
trustholders in an income / real estate investment trust got
shareholder protection
But since the defendants in Danand were liable as
principals, not as beneficiaries, this is empty protection
Agents exceeding their authority cannot bind principals unless the
other party relies on their ostensible authority; trustees have legal
title to the trust property and can transfer that property,
extinguishing the beneficiaries equitable interest in that
property, despite doing so in breach of trust (though they can be
called to account or sued for conversion)
Trust v. Contract
Consent matters to contract, but not to trust.
Settlors need not be parties to the trust, and beneficiaries need not
even know they are beneficiaries
Tricky part: does a third party collect a debt as agent (owes his principal
a debt) or as trustee (holds the property on behalf of the creditor on trust
until accounted for)?
If the agreement ever says on trust, its a trust relationship and all
incidents apply and are assumed no need to spell out specific
obligations: Air Canada v. M&L Travel Ltd.
If the trustee/debtor has free use of the funds prior to turning it over, it
gives rise to a presumption of debt: M.A. Hanna Co. v. Provincial Bank of
Canada
If bound to keep the money separate, you are a trustee: Henry v.
Hammond, Gore Bank v. Hodge, Bickle v. Matthewson
Debtors owe the money, whereas trustees can plead loss of it through
no lack of care (theft, etc.): Ontario Hydro-Electric Power Commission v.
Brown
Trust v. Bailment
Superficially similar B holds goods to return to A, but:
1) Trust relationship is fiduciary
2) Only goods and documents can be bailed, whereas promises and
land can be held on trust
3) Both bailor and bailee have some form of property rights to
the bailed chattel, whereas the beneficiary has only equitable title in
the trust property and settlor may have nothing remaining
4) Bailee receives only possession, where trustee acquires legal title
(though equitable rights and possession can also be held in trust)
5) If mere possession passes, it is bailment. If title, a trust.
Unless title is a mere incident of possession (e.g., title
transferred just so the bailee can collect dividends as well and
hold on to those too): Elgin Loan and Savings Co. v. National
Trust Co.
i. Might be the case that this only works if the alleged trust
appears to be a bare one
ii. Court held there was no cestui que trust unless it reads in
the loan company itself as its own beneficiary
6) Bailees responsible only for gross negligence, whereas trustees
are responsible for not taking due care.
7) Bailees can transfer authority; trustees are restricted to delegatus
non potest delegare: Wills v. Brown (didnt read)
Remember: if settlor makes himself beneficiary, he can revoke the trust
thus even if it is a trust it can work largely like a bailment with additional
fiduciary responsibilities (Elgin Loan and Savings Co. v. National Trust Co.)
Unless the trustee has mere power, in which case the beneficiary
even if its the settlor cant tell him what to do
If the bailee/trustee wont give it back, you can try suit in detinue or
conversion
Power of appointment need not be a trust; one can give his wife power of
appointment to distribute his remaining assets among his children without a
trust being involved
Donor: grantor of power of appointment
Donee: recipient of power of appointment
Objects: persons to be benefited by the grant of power
Appointor: grantor of assets to appointees
Appointees: recipient of assets from donee of power
This power can be held either with or without fiduciary obligation
can impose fiduciary obligation without creating trust: Penner,
The Law of Trusts at 55.
If held with fiduciary obligation, the power cannot be ignored; the
donee must decide whether or not to exercise his/her power
o Fiduciaries cannot release themselves of the obligation
without express authorization
o Power is then held virtute officii and will not be extinguished if
the donee predeceases the testator (assuming in this case a
testamentary power)
Three kinds of appointment powers:
General: appoint to anyone you want
Specific: particular class of objects
Hybrid: anyone except a particular class of objects
Any exercise in favour of non-objects is void
called a fraud on a power, although it is not properly fraud; may
be innocent mistake: Vatcher v. Paul
Power of Appointment v. Discretionary Trust or Fixed Trust
Consider always that any of these might be construed as an outright gift
Terminology used in the trust instrument is not determinative
Is it a fixed trust, discretionary trust or a power of appointment?
Must the trustees distribute the assets, or do they merely have the
option?
o No duty to distribute? Then power, not trust
o Restricting the appointment power does not change the
fact that it is a mere power. (e.g., power to distribute to my
wife = power of appointment, not a discretionary trust, as there
is no duty to distribute)
A fixed trust dictates the proportions in which the property must be
distributed
A gift over in default of appointment strongly implies power of
appointment/ it cannot be a discretionary trust: Re Llewellyns
Settlement / Re Weekes Settlement
o
o
Certainty of Subject-Matter
Uncertainty can void a trust outright
Although the trust was clear, the lack of clarity in the resulting
conditions voided the trust in Palmer v. Simmonds
If the trust is for a purpose and the purpose has lapsed, it is void: Re
Beardmore
Will clearly intended husband to predecease wife, which was not the
case
Wills Acts require the subject matter to be vested in the trustee for the
trust to be valid
In Re Beardmore there was a trust inter vivos that purported to
distribute net estate after funeral expenses, etc.: clearly that
property was not in the trustee and the trust as inter vivos trust failed
The bulk of my residuary estate is too unclear: Palmer v. Simmonds
Testatrix left absolutely, in confidence that if the beneficiary did not
have issue, he would provide for his wife and then leave the bulk of
the residuary estate to A, B, C, D and E.
As bulk means not the whole but the greater part whatever that
means the court could not construe the trust and the beneficiary took
absolutely and his estate, not A, B, C, D and E, retained the residue
o On a more principled point, she couldnt have said bulk and
intended the slim pickings after hed had his way with a life
interest in her estates property; unclear what she intended
in general, or that she had intended compatible ideas
Testatrix used proper trust language elsewhere; thus this gift
was intended as precisely that
The subject-matter of the will must be clear at the time the trust was
created: Re Beardmore
Breaking the net estate into quarters after testamentary fees, funeral
expenses, etc. makes sense for a testamentary trust, but this was a
trust inter vivos: no way to tell at the time the trust was created
what the trust property would be
Leaving everything to A in confidence that the residue shall be given
to others makes the subject-matter of the trust unclear at the
time of its creation Re Walker (1925 OCA)
o Walker: Pure gift
o Johnson: No intent to give to the kids; purely precatory
o Simmons: Intended trust fails for uncertainty of subject matter
o No matter what, the wife gets it all; cant give to someone
completely and add further disposition
o BUT: The repugnancy of a full gift with a gift over is
subject to the construction of the will as a whole perhaps the
full gift was intended as a life estate: Re Shamas
Interpret the instrument in context: he had eight
children and not enough to support them all to 21 as well
as making provision for the widow; it must have been a
life estate to support her in the event she did not remarry
(non-remarriage was a condition), and as she had to
provide for the children, encroachment on capital must
have been acceptable
Power of encroachment allows the trustee to use
the capital for the trust purpose, whereas a pure
gift just allows the donee to knock herself right out
Court allowed this trust despite uncertainty
of subject matter, as that certainty [of subject
matter] is less important than allowing settlors to
turn over powers of encroachment?
So how do life interests with remainders work?
o Life interest gets the profits, remainders receive the capital
Reasonable income is not void for subject-matter unclarity. Onefifth of an indeterminate estate could be anything; its actually
impossible to know. But courts and trustees determine reasonable
income all the time: Re Golays Will Trusts
(Non-charitable purpose trusts survive for 21 years, and then the property
results.)
NOTE THAT THE PERPETUITIES ACT creates a power of appointment
in place of the non-charitable purpose trust
Rule Against Perpetuities
Inalienability
A non-charitable trust is void if it ties up the trust capital beyond the
perpetuities period: s. 6 Perpetuities Act, right up there ^: Re Astors
Settlement Trusts
Remoteness of Vesting
Dead hand control rule; applies even to charitable trusts
A gift or trust is void if it will vest or may vest in the donee after
the perpetuities period (s. 6 of the Perpetuities Act, a life-in-being
plus 21 years)
Concern that the dead will tie up the money and dictate who
gets what forever
What if its not clear that it will vest after that time? (e.g., to A for the
benefit of my teenage son, B and then to his son B1 when he turns 25?)
Then we wait and see:
o 4.(1)Every contingent interest in property that is capable of
vesting within or beyond the perpetuity period is
presumptively valid until actual events establish,
o (a) that the interest is incapable of vesting within the
perpetuity period, in which case the interest, unless validated
by the application of section 8 or 9, shall be treated as void or
declared to be void; or
o (b) that the interest is incapable of vesting beyond the
perpetuity period, in which case the interest shall be treated as
valid or declared to be valid.
o General power of appointment
o (2)A limitation conferring a general power of appointment, which
but for this section would have been void on the ground that it
might become exercisable beyond the perpetuity period, is
presumptively valid until such time, if any, as it becomes
established by actual events that the power cannot be exercised
within the perpetuity period.
o Special power of appointment, etc.
o (3)A limitation conferring any power, option or other right, other
than a general power of appointment, which but for this section
would have been void on the ground that it might be exercised
Exceptions
If the testator has done everything in his power to transfer the property,
the court will give effect to the trust: Re Rose
Note that the transfer was executed by transferor and transferee under
impression of stamp; it was the company that caused delay
Promissory estoppel is available in these cases if the defendant passively
or actively encouraged the plaintiff to rely on an interest in land
Donatio mortis causa: an imperfect gift given in direct anticipation of
death intended to be reversible in the even the testator lives is perfected
upon his death. Applies when a token delivery is successful: car keys, a
balance book, certificates to shares, or title deeds to land.
Formal Requirements
Trusts inter vivos require a note in writing, signed by the party
settling.
Statute of Frauds
4. No action shall be brought to charge any executor or
administrator upon any special promise to answer damages out of the
executors or administrators own estate, or to charge any person upon any
special promise to answer for the debt, default or miscarriage of any other
person, or to charge any person upon any contract or sale of lands,
tenements or hereditaments, or any interest in or concerning them, unless
the agreement upon which the action is brought, or some memorandum or
note thereof is in writing and signed by the party to be charged
therewith or some person thereunto lawfully authorized by the party.
R.S.O. 1990, c. S.19, s. 4; 1994, c. 27, s. 55.
If this is failed, contract is not void, just unenforceable. At that
point, if you wish to enforce the contract, you must expressly plead the
statute
Declarations or creations of trusts of land to be in writing
9. Subject to section 10, all declarations or creations of trusts or
confidences of any lands, tenements or hereditaments shall be manifested
and proved by a writing signed by the party who is by law enabled to
declare such trust, or by his or her last will in writing, or else they are
void and of no effect. R.S.O. 1990, c. S.19, s. 9.
If a declaration of trust, s. 11 applies
Really just means unenforceable, not non-contract in terms of
inter vivos trusts
A declares himself trustee for C but fails to pay. C sues, but
there is no written instrument. C has to show some note or
memorandum. If there is none, A can plead the statute.
A to B for the use of C. B fails to pay, C sues but no written
instrument? Trust fails on s. 9, unless B is ripping C off; then
statute of frauds is used to perpetuate a fraud, and the courts
will allow parol evidence: Rochefoucauld v. Boustead
Exception of trusts arising, transferred, or extinguished by implication of law
10. Where a conveyance is made of lands or tenements by which
a trust or confidence arises or results by implication or construction of
law, or is transferred or extinguished by act or operation of law, then and in
every such case the trust or confidence is of the like force and effect
as it would have been if this Act had not been passed. R.S.O. 1990, c. S.19,
s. 10.
s. 3.
Execution
4.(1)Subject to sections 5 and 6, a will is not valid unless,
(a) at its end it is signed by the testator or by some other person
in his or her presence and by his or her direction;
(b) the testator makes or acknowledges the signature in the
presence of two or more attesting witnesses present at
the same time; and
(c) two or more of the attesting witnesses subscribe the will
in the presence of the testator.
Idem
(2)Where witnesses are required by this section, no form of attestation is
necessary. R.S.O. 1990, c. S.26, s. 4.
Position of signature
7.(1)In so far as the position of the signature is concerned, a will,
whether holograph or not, is valid if the signature of the testator made
either by him or her or the person signing for him or her is placed at, after,
following, under or beside or opposite to the end of the will so that it
is apparent on the face of the will that the testator intended to give effect by
the signature to the writing signed as his or her will.
Idem
(2)A will is not rendered invalid by the circumstance that,
(a) the signature does not follow or is not immediately after the end
of the will;
(b) a blank space intervenes between the concluding words of the
will and the signature;
(c) the signature,
(i) is placed among the words of a testimonium clause or of a
clause of attestation,
(ii) follows or is after or under a clause of attestation either
with or without a blank space intervening, or
(iii) follows or is after, under or beside the name of a
subscribing witness;
(d) the signature is on a side, page or other portion of the paper or
papers containing the will on which no clause, paragraph or
disposing part of the will is written above the signature; or
(e) there appears to be sufficient space on or at the bottom of the
preceding side, page or other portion of the same paper on
which the will is written to contain the signature.
Idem
(3)The generality of subsection (1) is not restricted by the
enumeration of circumstances set out in subsection (2), but a signature in
conformity with section 4, 5 or 6 or this section does not give effect to,
(a) a disposition or direction that is underneath the signature or that
follows the signature; or
(b) a disposition or direction inserted after the signature was made. R.S.O.
1990, c. S.26, s. 7.
Overlap with Insurance Plans
Succession Law Reform Act ss. 50-54 protect insurance plans that
appear to be insufficiently witnessed testamentary instruments:
Macinnis v. Macinnis
50.In this Part,
participant means a person who is entitled to designate another person
to receive a benefit payable under a plan on the participants death;
(participant)
plan means,
(a) a pension, retirement, welfare or profit-sharing fund, trust,
scheme, contract or arrangement or a fund, trust, scheme,
contract or arrangement for other benefits for employees,
former employees, directors, former directors, agents or former
agents of an employer or their dependants or beneficiaries,
(b) a fund, trust, scheme, contract or arrangement for the payment
of a periodic sum for life or for a fixed or variable term, or
(c) a fund, trust, scheme, contract or arrangement of a class that is
prescribed for the purposes of this Part by a regulation made
under section 53.1,
and includes a retirement savings plan, a retirement income fund and a
home ownership savings plan as defined in the Income Tax Act
(Canada) and an Ontario home ownership savings plan under the
Ontario Home Ownership Savings Plan Act. (rgime) R.S.O. 1990,
c. S.26, s. 50; 1994, c. 27, s. 63 (4).
Designation of beneficiaries
51.(1)A participant may designate a person to receive a benefit
payable under a plan on the participants death,
(a) by an instrument signed by him or her or signed on his or her
behalf by another person in his or her presence and by his or
her direction; or
(b) by will,
and may revoke the designation by either of those methods.
Idem
(2)A designation in a will is effective only if it relates expressly to a
plan, either generally or specifically. R.S.O. 1990, c. S.26, s. 51.
Revocation and validity of designation
Revocation of designation
52.(1)A revocation in a will is effective to revoke a designation made
by instrument only if the revocation relates expressly to the designation,
either generally or specifically.
Idem
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Administration of a Charity
Courts will construct a scheme for the dissemination of charitable
funds if need be
Distinct from cy-prs, in which a scheme is concocted because the
charitable purposes intended are impossible
Public Benefit v. Private Benefit
A trust for the provision of television and radio of particular relevance to First
Nations was upheld as for public benefit in Native Communications Society
of BC v. MNR.
Any of the four charitable purposes apart from #1 (relief of
poverty) must also be beneficial to the community or of an
appreciably important class of the community [in a way the law regards as
charitable: circular per Pemsel], as the ending of 4 is read into 1-3.
(Oppenheim v. Tobacco Securities Trust Co.)
Section of the community test prior to Pemsel: Oppenheim v.
Tobacco Securities Trust Co. (UKHL 1951)
(1)Possible beneficiaries must not be numerically negligible
(2)Quality distinguishing those individuals from other members
of the community must not be relationship to a
particular individual
a. It would seem the Crown and God are not particular
individuals under this test; Royal coal miners can
have a trust but private ones cant
b. HL majority dismissed this concern out of hand, which
resulted in the
Dissent of Lord MacDermott would reject the essentially
impersonal or essentially personal test if poor members of a
small parish is public, why not members of a company, and
whats more personal than, say, blindness?
Prefers a contextual test, wants a new statute (gets one
53 years later!)
But public benefit alone does not equal charity: Vancouver Society
of Immigrant & Visible Minority Women v. Minister of National Revenue
Relief of poverty has followed its own line in this matter,
permitting charitable trusts in favour of poor relations
Oppenheim v. Tobacco Securities Trust Co.
Does not follow any principle except a long line of authority
finding that alleviating the poverty of blood relations is a
charitable object: Re Scarisbrick
o
o
Gifts to such members are, of course, valid, but trusts for the
attainment of political ends never fly
Any purpose of influencing legislation is a political purpose in
this connexion on the clear authorities: National Anti-Vivisection
Society v. Inland Revenue Commissioners
o Porter L.J. in dissent: Some groups can only achieve their end
through legislative reform. Others, like this one, can do so by
appealing to moral sensibility though they may be inclined to
go the surer legislative route
But in Bowman v. Secular Society, there is no way to tell
what amount of the trust the court will be
authorizing for political uses; it matters not how much
of the trust appears to be charitable equity will not
assist political ends
Thus, a putative charitable trust educating the public
about the harms of pornography failed for its advocacy
for political change: Positive Action Against Pornography
v. MNR
o Further, he found that since protection of animals had been
charitable in the past it was not for the court to go further and
weigh this particular groups social costs and benefits
Does not refer to the aged or the handicapped, which are heading #4.
Confusing, be sure to cite Oosterhoff, p. 402; its his fault!
Hybrid classes: (elderly poor, low-income children) courts often dont
bother assigning a head, but it could matter if there is a question of
public benefit: test lower for poverty
Helping the poor must be the main purpose of the organization
Family planning doesnt count though it may benefit the poor: Re
Planned Parenthood of Toronto and City of Toronto
Canadian Mental Health Assn. v. Ontario Property Assessment Corp.:
access based on mental health status, not financial status thus not
for relief of poverty
Advancement of Religion
To advance religion means to promote it, to spread its message ever wider
among mankind; to take some positive steps to sustain and increase religious
beliefs; and these things are done in a variety of ways which may be
comprehensibly described as pastoral and missionary. (United Grand Lodge
of Ancient Free & Accepted Masons of England v. Holborn Borough Council)
(The Lodge promoted a high standard of behaviour and ethics, but
failed to show they promoted religion)
Trusts for ministers (Re Mountain Estate), the repair of churches (Re
McConville Estate), and church missions (Re Long Estate) are kosher.
Gifts to individual clergy or religious corporations are usually absolute
private gifts, unless it is given to them virtute officii which can be done as
Application of Cy-prs
Combine the virtues of proximity, usefulness, and practicability,
mindful of the testators intention: Re Fitzpatrick
Can always order more study and submissions on possible schemes:
Re Fitzpatrick
Discriminatory Trusts
Impossibility of law is just as relevant as impossibility of fact in terms of
voiding charities; if a trust is inimical to the public interest, but it has already
vested, cy-prs may apply: Canada Trust Co. v. Ontario HRC
Formerly practicable trusts can grow impracticable as attitudes change
Cy-prs can be used to sever offending portions of discriminatory trusts: Re
Dominion Students Hall Trust (colour bar in hostel)
Royal College of Surgeons named trustee for medical scholarships
excluding Jews and Catholics. When they refuse to administer it, cyprs amends the trust. It was impossible to perform as the College
was the only possible trustee, and this was the nearest fix.
The Leonard Scholarship trust document was infused with the offending
subject matter such that none of it was severable. Canada Trust Co. v.
Ontario HRC
Having operated for 25 years post mortem, the court found the
scholarships had taken on a public character and could be challenged
on public policy grounds
Resulting Trusts
Three kinds:
(1) Express trust fails
(2) Surplus trust funds
(3) Apparent gifts
a. If given not for value and intent is questionable, resulting trust
occurs: Hodgson v. Marks (retired colonel con man)
i. That presumption is rebuttable if intent to confer a
gratuitous benefit is made out: Standing v. Bowring
A claim of undue influence fails if only the legal title passes; if the
beneficial ownership did not and was not intended to pass, undue influence is
not at issue: Hodgson v. Marks
Public Appeals
Was the trust perfected and charitable? If so, cy-prs may apply.
Overage in public solicitations for funds for a particular purpose are not
intended for the trustees (or, occasionally, beneficiaries beyond a particular
purpose) to keep: Re Abbott Fund Trusts
Consider: would the trustees or beneficiaries have been accountable
for the funds in bankruptcy? If not, its probably not for them!
Bona vacantia applies when individuals part with their money for a
contractual benefit and none have an expectation that it will be returned
after exhaustion of a certain purpose: Cunnack v. Edwards
But where there is no contract, the money is held on resulting trust:
Re Gillingham Bus Disaster Fund
Nova Scotia Trustee Act
52 (1) In this Section, "fund" includes money and property other than real
property and tangible personal property.
(2) Where any funds are held by, or are under the control of, one or more
persons and the funds have been paid, transferred or contributed by
members of the public or by any public officer, body or authority, with or
apparently with the intention that the funds will be used or applied for the
benefit of a class of persons in respect of whom an appeal for funds has been
made, the person or persons who receive and hold the funds shall be
trustees thereof and there shall be a trust to which this Act applies.
Pension Trusts
Whether or not the fund is a trust will depend on the instrument; plans
created since 1981 must make provision for distribution of surplus
on termination: Schmidt v. Air Products of Canada Ltd.
Trusts will exist where there has been express or implied
declaration of trust and the alienation of trust property to trustees for
specified beneficiaries
If not a trust, resolve via contract law. If a trust, it is a classic nonpurpose trust and equity prevails over plan provisions but an
employer may limit the operation of the trust so that it does not
apply to surplus
Pension trusts are for individuals, not purposes: Schmidt
Employers cant have access to surplus in a pension trust unless they are
themselves beneficiaries or if they have powers of revocation; they are the
settlors: Schmidt
As pension trusts are established with consideration on the part of
employees, it is inequitable to read broad powers of amendment
on the employers part as power of revocation
Employer cannot claim reversion at all if there was intent to
part with the trust property entirely
o A non-reversion clause suffices to show an intent not to have
the trust result: Schmidt
In the absence of language to the contrary, employers and employees should
get their contributions back in proportion to their contributions as original
settlors: Schmidt
All objects must be satisfied before the trust results: Schmidt
McLachlin J. (as she then was): Employers are on the hook for defined
benefits, so since the risk is theirs the benefit of surplus is theirs as well.
Once the benefit is paid, the employee is no longer a beneficiary. How can
we gauge what one employee is owed vs. another in the result?
Quistclose trusts
Normally, money on loan becomes property of the borrower, subject to an
action in debt by the lender: Twinsectra Ltd. v. Yardley
Did the parties intend the money to be at the free disposal of
the recipient?
But money loaned for a specific purpose properly results to the lender if
the purpose of the loan becomes impossible: Barclays Bank Ltd. v. Quistclose
Investments Ltd.
Lender (settlor) has no intent to make trustee (Rolls Razor, not the
bank) owner of the beneficial interest in the property; rather, trustee
holds the property on trust to satisfy the purpose
o Equitable title remains in the settlor until the purpose is
effected: Twinsectra Ltd. v. Yardley
Lender has an equitable right to see it applied for the
designated purpose; when that purpose has been carried out, lender
has its action in debt to recover from borrower/trustee: Quistclose
Investments Ltd.
Third party requires notice of the purpose, which in this case it
had. Separate account is not enough purpose must be clear in order
to give rise to a trust
o Because the legal title passes to the trustee so a third party
can claim bona fide purchaser for value if it mistakenly
contracts for the trust property
Anyone offered money on a condition can refuse it or accept it subject
to a fiduciary duty to use it on that condition: Twinsectra Ltd. v. Yardley
Duggan: Twinsectra dispenses funds to Sims for its own benefit subject to
a power of appointment in favour of the stated purpose.
Must be a clear indication of intent to create a trust: separate account,
purpose articulated are good signs
Trust resolves when purpose is achieved; there is no more trust after
purpose complete
Provincial PPSAs exist to disclose such security interests to prevent
unknowing parties from acquiring an interest in goods or monies on trust
can discover the existence of competing claims before going into business
with the debtor
It is common for solicitors to require a charge be put on property
purchased with trust funds on loan for the purpose of buying that
property: Twinsectra Ltd. v. Yardley
Cases like these can give rise to equitable action for dishonestly assisting
breach of trust: Twinsectra v. Yardley
Canada hasnt chosen between Twinsectra and Quistclose, as they would
have come to the same result in our leading case, Re Cliffs Over Maple Bay.
All advances to Cliffs Over by Century were to be held by Cliffs Overs
solicitor for the purpose of completing the development. When the
development failed, Cliffs Over went bankrupt and the court found that
those loaned funds were held on resulting trust for Century
But in that case intent to give gift was made out, rebutting the
presumption of resulting trust
The fact that it is a gift is unaffected by the fact that the donor can
drain the account before his death; it the nature of a bank account that
the balance will fluctuate: Rothstein J. in Pecore
Concern for supporting a child is consistent with intent in gifting a right
of survivorship in the bank account: Rothstein J.
o
A gift given is a gift received; if donor intends a gift and donee accepts it,
it is no defence to say it was accepted as a loan unless the donor then agreed
to transfer the property on that basis. (Dewar v. Dewar)
If a gift is given gratuitously to purchase property, it gives rise to a
resulting trust that will ultimately require a share in the beneficial
interest in the property to result to the beneficiary. If it was a loan,
then the borrower would not be a trustee and would be free to merely
pay back the principal of the loan
Illegality
The history of the jurisprudence has divided into four camps of solution:
(1) The hands-off approach of Lord Eldon
a. Courts will not intervene once finding out about an illegal
purpose. Presumption of advancement applies, wont hear your
illegal-basis rebuttal
i. Muckleston v. Brown (if both are guilty, possession rules),
Curtis v. Perry
(2) Reliance on wrong
a. Court wont hear the case of someone raising illegality to ground
their rights, whether they are the ones involved in the illegality
or not
b. Tinsley v. Milligan, Maysels v. Maysels
i. Problem: the relationship governs in this case if shes
my wife, she keeps it because I cant raise illegality to
fight the presumption; if shes my sister, I get it because
she cant raise my illegality to fight the presumption of
resulting trust
The duty to hold property for the benefit of another person, howsoever
arising, gives rise to a trust. If it is voluntary, it is express. If not,
constructive.
Constructive trusts are defined by the event that gives rise to them:
- unjust enrichment
- disgorgement of gain by wrongful act against plaintiff
- perfect intention of person transferring property
- detrimental reliance
- breach of fiduciary duty
Unless already subject to one, constructive trustees owe no fiduciary
duties: Restatement, Restition 160, comment a (U.S.), Lonhro plc v. Fayed
(No. 2) (U.K.)
Merely a duty of conveyance
Critical similarity with express trusts: superseding interest in bankruptcy
Americans: Its Remedial
When the holder of legal title cannot in good conscience retain the property,
equity converts him into a trustee: Beatty v. Guggenheim Exploration Co.
(Cardozo J.)
The remedial device through which preference of self is made
subordinate to loyalty to others (Meinhard v. Salmon)
Judges have a discretion to find or enforce them
They exist when a judge constructs them
nonsensical other than as a legal fiction
Britons: Its Institutional
Like an express trust, ones obligations under constructive trust are not
discretionary
They exist when the duty underlying it first arises
nonsensical if courts will occasionally not construe them
Canada follows this: Chase Manhattan Bank N.A. v. Israel-British
Bank (London) Ltd., trust arose with the receipt of the accidental
duplicate payment; Re Sharpe, trust arose when lender of funds moved
in with debtor as consideration for her loan when bankruptcy
occurred, there was a constructive trust consisting of her license to
occupy
Property interest under constructive trust arises not when the
trust is declared but when the unjust enrichment first arose:
Rawluk v. Rawluk (SCC)
McLachlin in dissent thought the trust was remedial but
that courts could define the vesting at an earlier point
Not just ideology the question is, when does the property
constructive trustee holds vest in plaintiff?
Investment advice
(7) A trustee may obtain advice in relation to the investment of trust
property. 1998, c. 18, Sched. B, s. 16 (1).
Reliance on advice
(8) It is not a breach of trust for a trustee to rely on advice obtained
under subsection (7) if a prudent investor would rely on the advice under
comparable circumstances. 1998, c. 18, Sched. B, s. 16 (1).
Terms of trust
(9) This section and section 27.1 do not authorize or require a trustee
to act in a manner that is inconsistent with the terms of the trust. 2001, c. 9,
Sched. B, s. 13 (4).
Same
(10) For the purposes of subsection (9), the constating documents of a
corporation that is deemed to be a trustee under subsection 1 (2) of the
Charities Accounting Act form part of the terms of the trust. 2001, c. 9,
Sched. B, s. 13 (4).
Relief of trustees committing technical breach of trust
35. (1) If in any proceeding affecting a trustee or trust property it
appears to the court that a trustee, or that any person who may be held to be
fiduciarily responsible as a trustee, is or may be personally liable for any
breach of trust whenever the transaction alleged or found to be a breach of
trust occurred, but has acted honestly and reasonably, and ought fairly to be
excused for the breach of trust, and for omitting to obtain the directions of
the court in the matter in which the trustee committed the breach, the court
may relieve the trustee either wholly or partly from personal liability for the
same. R.S.O. 1990, c. T.23, s. 35.
Exception, investment loss
(2) Subsection (1) does not apply to liability for a loss to the trust arising from
the investment of trust property. 1998, c. 18, Sched. B, s. 16 (2).