LAW 580

TRUSTS

Schlosser
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TRUSTS CAN

Class Overview
Trusts and Differences from Other Remedies: Litigators must ID cause of action and ID it based on Trusts
and advantages that pertain to this remedy. Lord Justice Millet (UK) in:

“Breach of trust for Fiduciary duty is widely seen as magic formula which automatically gives
Plaintiff advantages: in claim for restitution Beneficiary can
1. Trace property and assert better claim to the property instead of being restricted to damages – can
get stuff back,
2. Can claim proprietary relief and obtain priority in insolvency or maintain a claim for profits
(moves you from unsecured creditor to top of list, right in rem) and
3. Causation and remoteness of damages that often limit damages to what you lost can be side-
stepped here - starting point not what Ben lost, what T gained

P better off if can find Trust in terms of restitution, proprietary effects and dams: bad from D’s point of
view if P can make out Trust remedy: may lead to diff interest rates in recovery for example. For solicitors,
presented with certain options to achieve a goal, want to be able to draft something that will achieve that
goal. Both of these functions can be achieved by listing exercises: causes of action, defences and facts.
Need 3 certainties for Trust (words, subject matter and objects) while we also see RT and CT. Peters v.
Beblow says CT for UE needs enrichment, deprivation, and no juristic reason for deprivation.

Further, to see why Bens get such a good deal vs. those in torts, consider:
1. Accident of history, 2. Equity’s history (equity often leads to more powerful remedies)

CH. 1 INTRODUCTION

Maitland; ‘Lectures on Equity’: Why the Courts Avoid Uses (predecessor to Trust)
In 15th C, CL courts took on action of assumpsit (contract) and is difficult to see why didn’t
enforce agreements where uses had their origin (there is agreement at heart of Trusts); the answer
is I think that by this time they had missed their opportunity and were already enforcing them by
another procedure that was better and more flexible than that which could be done…he talks of
marriages, land, etc. (exs where uses might be good – i.e. no wills/ability pass land to heirs)

Key points (of quote):

1. Trust is like a contract and in some circumstances CL courts might not have enforced them since it is
somewhat more advanced than leg (i.e. ahead/afoul of public policy);
2. Equity’s jurisdiction left trusts under Chancellor. Rules that make up the rules of Trusts really come out
of Ct of Equity. Since Chancellor (not CL) got jurisdiction, accident of history occurred. Equity has always
had a longer reach than the CL.

Ex: in modern times we see equity of ‘abandoned wives’ in mat. home. Remedy of CT allowed W to get
interest in home when no other home or vehicle for this. Same CT remedy applies to CL relationships (not
Matrimonial Property Act) + w/ SS relationships as def. of ‘spouse’ ≠ encompass these situations. Laws
haven’t gone far enough to keep up with social ideas, CT provides solution and allows for Div of Prop

Separation: Concept of use or trust, at its heart, is idea of division of use and ownership. LT (ownership) is
in name of person who holds it for another (Trustee). Other has right to benefit, use or enjoyment of
property (beneficiary). In many ways, the Ben is real owner and often has use, possession of property. But,
T is legal owner of it and has title. An outsider would think its T’s property.

Definition: “A trust arises whenever a person is compelled in Equity to hold property over which he
has control for the benefit of others (the Bens) in such a way that the benefit of the property accrues
not to the Trustee, but to the Bens.”

ISSUE 1: How far reaching should rights of Beneficiary go?

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 Right in personam or maybe a right in rem (vs. world)? Gets complex when we add 3rd parties. In
contests between bona fide purchaser and anyone else, BF usually wins and B can only go after Tee.
 But in other circumstances, proprietary remedy to trace assets to 3rd person may lead to unrestricted
damages. If Trustee runs afoul of FD, maybe ignore limits other actions place. Maybe not giving them
right to trace would be fatal to this type of relat.

ISSUE 2: Rights of Beneficiary against the Trustee

 Starting point is contract in that there is an agreement as basis. However, Trust is creation of Equity,
(not CL) and though looks contractual w/ rights, obligs + privileges, what makes it diff. is partly
consequence of history: no element of bargain. What ct is enforcing is not agreement btw equal parties
but rather conscience of T.
[Defining concept of a Fiduciary relationship: Tee owes B a Fiduciary obligation, ≠ just contractual ones.]
 Must be able to discover when FR arises. Contractual model is useful but not determinative:
obligations, begins with personam rights. But usual contractual things: consideration, capacity, etc. ≠
necessarily help define a Trust.
 We ≠ have consideration flowing from Ben in Trust and we have ‘purpose trusts’ (often
charitable), ≠ need capacity (except of donor usually) as large purpose is to protect incapacitated.
Capacity of Ben is often an issue in opposite.
 Vulnerability: ≠ uncover existence of Trust by applying contractual analysis, despite similar
starting points. To see Fiduciary relationship, look for V, not equality. Whole object of Fiduciary
relationships is to protect V. In Norberg v. Wynrib, McLachlin says:
“foundation and ambit of the FO is distinct from tort, …in NG and Q, assume self -
interest so law seeks to award compensation and give ultimate freedom. In FR, 1 acts on
behalf of another and 1 pledges power to another creating vulnerability
Main issue defining scope and ambit of FR: limits, consequences, etc. Fiduciary concepts spilling over into
# other concepts: Insurance, Bankruptcy, etc.: more powerful remedies.

ISSUE 3: How Beneficiary’s Rights Relate to Rest of World

Consequences of this relationship to Outsiders.

Fundamental Trust Concept 1: Split Ownership

Vulnerability/inequality is at core of relationship. Ben, by giving title to T puts himself in vulnerable
position vis a vis T and to a certain extent to rest of the world also. This is something that distinguishes it
from other legal relationships: Contract: there is equality and bargaining power Tort: staring point for
implied CL duties are equal, ind. actors + one of them does something that affects another (i.e. Donoghue v.
Stevenson) – balance freedom vs. responsibility. Assume duty usually and then consider policy reasons.

Fundamental Trust Concept 2: Fiduciary Duty

Equitable obligation owed by T to Ben. Millet: this idea is spilling out into other areas of law but idea of
vulnerability and Trusts furthered it along.

2 Perspectives re: the Concepts (split ownership, Fid duty)

Perspective 1: Trustee – Beneficiary Relationship
What duties/obligations describe relationship? CL + others from stats and courts of Equity.

Similarities of Trusts & Contracts

 Usually a list of express and implied duties and come from same sources as contractual ones (i.e.
writing – wills often create Trusts).
 Other things implied by law, Act puts terms into agreement and cases as well have input.
 Element of personal right in Trusts like in Contracts; and both require certainty. But this is where
similarity to contracts ends.

Differences of Trusts & Contracts:

 Trusts require more, and more specialized types of certainty than do contracts. Types of certainty
(objects, subject matter, intention) are more highly regulated for Trusts to be created.
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 Donor (establisher) needs capacity, as in a contract. But in Trusts, the beneficiary (the other party)
does not need capacity and there is NO consideration flowing from the promisee (beneficiary) for
use and benefit of T property. Clearest Ex: that consideration not needed = ‘purpose’ trusts

Establishing Trusts
1. Transfer Property: to another and retains use of it (easiest/most common). Person who gets it holds it in
Trust, subject to that interest.
2. By Will: on someone’s death, property  executors/trustees to hold as says so, often in Trust.
Similar but one happens during life, other at death. More formalities for disposition by will (duress and UI).
No consideration from benefitted person to donor of property in any event.

Perspective 2: Trust – Rest of World Relationship

Rights of B against rest of world (not Trustee). What Millet called ‘magic formula’ of Trust or Fiduciary
duty gives you special things: Right to trace in restitution (follow property through people to hands of
recipient) through FO which gives you priority over one who doesn’t: powerful remedy, Existence of FR
might give you a proprietary right which might lead to a priority over other in various circumstances (i.e.
Trust of FO in Insolvency may put you at head of line; unsecured claims are at bottom but Trust owed to
you is valuable) Trust remedy gives you wider range of damages and limits of remoteness might not apply.
Might be able to claim interest as well at corporate rate (which Judgment Interest Act usually prevents for
contracts/torts).

Q: why should existence of Trust put B in better position than anybody else; strengths?
A: Equity’s job is to protect vulnerable which is reason for highly-defined FR. Another job is to bind
conscience of Trustee, to make perform obligations in circumstances. And 3rd, in many cases a B is in a
better position b/c concept of Trust is protecting something society thinks is a good thing and are no other
means to do so: i.e. legislation has not caught up to a common occurrence in society. Ex: Tax Avoidance -
opportunities no different than avoiding feudal tenure by use. Examples of Trusts providing remedies not
otherwise available: Wills: 14/15th Century: couldn’t give property by will but could thru Trust/Use.
Matrimonial Property Act has restricted definition of ‘spouse’ and CT will deal with CL relationships or
married people in a SS. Ahead of statutes

A. History

Quote of Day: Maitland’s lecture in Equity - Historical Starting Point

“1st occasion where land being held by one person, and the use of another or rather by one set of men to the
use of another set is this: in 2nd quarter of the 13th C came hither the Franciscan order, poverty was their
mandate and community only could own things, no individual ownership, neither collectively but they had
to have places to sleep so device is to have land conveyed to community at large to be used by friars.”

Title in town but get use of it + can go about doing good works. M says this is starting point for title being
in one person, use and benefit in another. As time progresses, main action happens in late 15th/early 16th C
(Renaissance in Europe). But Henry VII and VIII + Tudors in England focused on Franciscan friars and
mostly on land.

Monarchs ≠ care that town is holding title for use by the friars, ≠ create conflicts. Recall that after 12 th C,
no testamentary capacity to pass things on by will. So if you wanted land to go to daughter and not son, or
benefit goes to illegitimate children or something, you were in trouble. Incidents of feudal tenure stood in
way of these goals. Land transfer was major concern. Land going to underage children created ‘wardships’
which ultimately meant Crown. Land ultimately held by Crown so if doesn’t go to anyone, goes back to
them and nobody has better claim to it. In Tudor UK, very obvious since land held by Crown in various
ways. Land without proper heir goes to Crown generally speaking. Land might be forfeited if convicted of
felony or treason. The Use became a way to deal with this stuff.

Use is conceptually no different than Trusts or what Franciscans were doing. All goals accomplished by
conveying property during our lifetime to several people usually, ad opus liem. Friends hold property as JT
for your lifetime but you get benefit of land so long as you are alive (farm it, live on it, etc.) and when you
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die, friends are to convey it to people you designate. Not by will, you are making agreement during
lifetime. Friends have promised to do something with it and since agreement provides for what happens
when you die, has same effect of disposing of property by will. You have set things up the same way and
the agreement takes effect when you die. To create this, friends have to go along with what they have
agreed to do, not enforceable otherwise since those who would benefit ≠ enforce it. So this puts lots of
responsibility on friends’ shoulders

Consequences (of Use):

1. Defeat creditors since if you owe someone $ but conveyed property to someone else, it can’t be
recovered from that.
2. Defeat law of forfeiture: go off and commit treason but still have use/benefit land
3. Rough version of testamentary capacity by setting up arrangement during your lifetime that will
ultimately benefit people at your death. Bens ≠ necessarily have to be same people that land would go to
under feudalism. Disposes property same as Will.
4. Defeat incidents of feudal tenure: wardships, etc. But w/ elaborate enough agreement you can tie up
land in perpetuity: not necessarily a bad thing if you have heirs.

But Henry VIII hates it as do other monarchs since Crown doesn’t get land or benefit that they’d normally
be entitled to. So he tries to stamp it out: Statue of Uses passed.

Effect of Statue of Uses:

1. If A has property (seized of it) to use/confidence of B, statute treats B as owner of it. It conveys property
to the Ben. This throws wrench into works.
2. Chancellor and equitable jurisdiction enter and Chancellor has jurisdiction over uses and Trusts, found to
be w/in scope of equity, not taken up by CL courts. C ultimately thinks they’re good or obligation to court
is to enforce conscience of Trustee + are a series of loopholes to Statute which he enforces (allows?).

Loopholes: 1. Tyrell’s case: a use upon a use ≠ excluded so said Chancellor: if give land to A to use of B to
use of C you’ve still done what could have done before with one more step (B takes title but holds it for C).
Now intermediary gets title but still trust/use for benefit of next person in line. 2. Also, Statute of Uses only
affects seisin so property incapable of seisin is not affected; i.e. leasehold or pure personality (chattels).

17th C: Cook v. Fountain looks at developing jurisprudence + gives us the modern classification of Trusts.
1925: UK Law of Property Act, (Statute of Use is repealed): CDN provinces, depending on when came into
being, took up law of UK at time so in Ont we still have uses today and uses upon uses but not Alberta.

Broad ideas from history: origin looks like contract or bargain since imposing obligations on T to do certain
things. Enforcing them also like enforcing a contract but what is really happening is Chancellor is binding
conscience of T and development is all within the court of Equity, not CL court. Starting point is personal
right, not right in rem against whole world and irony is that Equity gives us the law of Trusts, where it is
supposed to follow CL. Since focus is on Chancellor’s jurisdiction and conscience of trustee, some things
branch off: no specific form for Trust as long as substance is like a Trust, Chancellor will enforce it. Other
considerations along the way: Statute of Frauds says Trust for land requires writing and in 19th C we start to
get Wills Act which imparts rules for disposing property on death by will. But subject to those
considerations, any words, oral or in writing will create valid T if suff. evidence donor/settlor’s intention

[Summary: (Friars – mischief – Statue of Uses – Loopholes) Traced to middle ages and religious orders
that could hold property collectively: could be used by monks without breaking vows and Ts could also
keep property from wife, Crown, etc. Statute of Uses by Henry VIII tried to kill but arose as jurisdiction of
Ct of Chancery found exceptions.]

A. Justice
As a remedy, Trusts can do great things (i.e. MP). Trusts developed in 20th C along with ↑ rights of W to
have equity in their homes: M were prevented from deserting wives by conveying house to a 3rd party who
would then sue for vacant possession. Also now, if you are in a CL or SS M and relationship came to end,
you’re not covered by MPA. Remedy of CT may permit an orderly or equitable division of property when
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other rights or mechanisms don’t exist. CT has gone beyond this (see Soulos) and in some cases became a
tort-like remedy with a proprietary effect.

B. Jurisprudence
Has its origins in Equity, is quite flexible. Subtle things and nuances may decide cases and shape future law
in this area and provide for inconsistencies (i.e. trusts for persons and purposes).

Ch. 2 DEFINITION AND NATURE OF TRUST AND FIDUCIARY RELATIONSHIPS

A. Definition
Guerin v. R. [1984] S.C.R.
Facts: Band talked to golf club re: surrendering land to Crown to lease it on terms negotiated. B voted in
favour of surrender, thinking C would stick to oral terms wanted. But terms C took were diff than agreed to
by B. B said ≠ have surrendered land on new terms. Issue: was obligation of Crown that of Trustee? Maj:
No. Min: Yes. Out: Crown guilty of breach of Fiduciary Obligation.
SCC Maj: Crown had FD, an equitable obligation enforceable by cts, but NOT a situation of a Trust. FD
arises in part as Indian interest in land is inalienable except upon surrender to Crown + also as Crown is
under an obligation to deal w/ land on Indians’ behalf when surrendered.
FO/Not a Trust:, discretion of Crown to decide best interests effect: FO. Nature of relationship, not
category of actor gives rise to FO. Crown’s oblig ≠ become a T upon surrender of land. ET requires: settlor,
Ben, trust corpus, words of settlement, C of subject + object. No prop is transferred (Indian interest
disappears) so no ET or I (RT) T arises. Nor does it give rise to CT (≠UE). FO sui generis
Breach of FO: Crown promised Band to lease land on certain terms and after surrender, used different
ones, ≠ ignore oral terms. Dams should be based on T law. Min (concurring): agrees on FO but thinks ET
arose on surrender: organic approach (16) – using FD (not mechanical).
Ratio: FD and T ≠ same but are somewhat similar. Maybe key is fiduciary relationship as unifying all
types. A FR is necessary, but not sufficient to the formation of the T.
NB: Dickson takes a listing sort of approach whereas Wilson J. aims to go right to the heart of matter +
find unifying principles (see 16: no magic…). From a general perspective, case is like a misrep action –
land surrendered on basis of incomplete info. Suit brought against Crown for dams. Why no misrep action?
 Limitation periods may apply to those actions that don’t apply to trusts.
 Advantage of suing based on a T – more damages: maybe no remoteness problem
SS: perhaps understanding Ts by FD is unifying principle, instead of dividing Ts into categories.

A. Fiduciary Relationships

Norberg v. Wynrib (1992, SCC) – FD necessary but ≠ sufficient for Trust.

FD necessary but not sufficient condition for existence of Trust. McLachlin compares Trust with Tort and
Contracts. 3 characteristics of FR.
Holding: “the foundation of the FO is different than that of Tort or Contract. In NG and Contract, actors
are thought to be equal and independent actors so law seeks balance btw enforcing obligations by awarding
compensation for breach and preserving freedom. Essence of FR is that
1. one party exercises power on behalf of another and, 2. pledges to act in their best interests,
3. FR has trust, not self-interest at its core.” Thus, is FR the force uniting all Trusts?

Frame v. Smith (1987, SCC)

Holding: Relats w/ a Fiduciary obligation seem to possess 3 general characteristics: (EAV)
1. Fiduciary has scope for exercise of some power; 2. Fiduciary can unilaterally exercise that power or
discretion so as to affect the beneficiary’s legal or practical interests; 3. Beneficiary is vulnerable or at
mercy of Fid. holding the power.

MILLET: 3 Circumstances when a Fiduciary Obligation can arise:

1) Relationship of trust and confidence – arises when one party undertakes to act in interest of another
presumably beyond a normal contractual obligation 2) Influence – w/ defining characteristic of
vulnerability and the inability of the Fiduciary to exploit their power over the other for his own benefit.
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3) Relationship of Confidentiality, whenever info imparted by 1 person to another in confidence

Clearly, you cannot have a Trust without a FD but you can have a FD without a Trust.

NB: this is a limit to the unifying theory (organic approach) that everything fits under Fiduciary Duty
approach: not everything will fit into these categories. Organic theory is that you classify Trust as a
Fiduciary Duty or other unifying principles (separation of ownership/series of duties arising out of
separation + subsequent relation) that are common to all Trusts vs. Mechanical Approach where the
individual components of a Trust are identified (and required for a Trust to be found).

FD can be defined by Guerin, Norberg and Smith; Millet defines 3 situations when it occurs. Organic
approach focuses on FD, separation of oship and duties might be common principles but these might also
be part of the definition whereas FD exists separately and independently. You can’t classify something by
its defintion and the duties that arise that’s the concept of the FR anyways. Fault of OA is that you go to
Millet’s principles which is perhaps too broad. FD are necessary but not sufficient as you need other
certaintities and formalities for a Trust.

Mechanical classifications: Creating event, Trustees Duties, Objects (peoples and purposes).

Summary: 1 Approach to law of trusts= ID Building Blocks (Unifying concepts)

1. Separation of ownership 2. Series of duties arising out of the separation and the subsequent relation
[Need a fiduciary obligation, as defined in above cases.]
Law divided into different areas, use classification systems: Event, Object or Trustee’s Duties: see ch. 3.

C. Discretionary Trusts
Trustees duties are another way of classifying Trusts. Generally Trust is inherently discretionary, T
exercises discretion in relation to investment decisions: if silent on matter, Act says investments to be
conservative. Discretion can be given wrt Objects too.

Ontario (Ministry of Comm. & Soc. Services) v. Henson (1987, Ont. Div. Ct.)
Absolute discretion of Tees ≠ grant the Beneficiary a BI
Facts: Govt appeals ruling by Review Board that gave H allowance for mentally ill. By statute H ≠ get
allowance from prov if had > $3G in liquid assets. A will left by her dad made her Ben but gave Tees
discretion to make payments to her in varying amounts over time. Issue: whether or not H has a “beneficial
interest” in assets held in trust for her, which would nullify the allowance she can claim? Out: W wins – no
BI.Holding: Trustees of deceased’s estate have absolute discretion to administer will and estate and H
couldn’t compel them to make any payments to her. Note this is likely a POWER.

Schipper v. Guaranty Trust Co. of Canada (1989, O.R.)

Where trustee trying to accomplish something inconsistent w/ purpose of discretionary T, Ct can interfere.
Facts: Will established T fund in favour of W: directed Tees to pay all income to W for her life + gave
Tees “uncontrolled discretion” to do so. After death, will states a separate T fund to be set up for ben of
Howard then goes to his kids if any. 3 Tees: C, H + GT. In exercising discretion under will to encroach
capital, opinion of maj rules (according to will) as long as GT is one of maj. C made app for allowance,
only GT refused saying primary goal of T to preserve capital + pass to H + kids.
Out: Ct upholds TJ, makes GT support other Trustees and allow $ to Cecile.
Holding: usually Cts refuse to interfere w/ “uncontrolled discretion” in Trusts where trustees are acting
bona fide. But here, fair reading of Will shows primary purpose of T was to care for C + G failed to
exercise discretion properly. Also, had undue concern for speculative notion that H might have kids 1 day.
Ratio: Ct can interfere w/ discretionary trusts where trustee is attempting to exercise its discretion to
achieve a purpose not intended under the terms of the trust.

B. Protective Trusts

Both cases say its OK to establish a T for a Ben until they go bankrupt (in which case something will
happen to T property) + also that the property will return to them after bankruptcy is resolved. Can
establish a T to protect financially challenged. Element of public policy operating in these decisions.
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Brandon v. Robinson (1811, L.C.)

Facts: testator left will that gave property to son for his life, but which went to someone else if he became
bankrupt. Issue: is T which protects assets from bankruptcy, valid?
Outcome: Demurrer (trust clause) was overruled. Ratio: you can set up valid Ts where property reverts to
donor upon bankruptcy of object.

Broadway National Bank v. Adams (1882, Am. Rep.)

It ≠ violate PP to hold that a testator can give Ben a qualified interest in income of a T fund and provide
against misfortune, i.e. bankruptcy. Ts whose property reverts upon Bankruptcy of object is valid.
Facts: guy left will that created T for bro, for his life, to give him $ free from his creditors -intention being
that use of income ≠ taken in bankruptcy. Rest of $ was to go to his bro’s wife + then onto kids. Out:
Adams wins; clause valid, creditors ≠ touch $ Holding: intention of testator clear that terms of will would
be violated if creditors were given $ from T income. Principle: if intention of founder of a trust, is to give to
equitable life tenant a qualified and limited, and not an absolute, estate in income, such life tenant cannot
alienate it by anticipation and his creditors cannot reach it at law or in equity. It doesn’t violate public
policy to hold that a testator can give Ben a qualified interest in income of a T fund and provide against
misfortune, i.e. bankruptcy. Ratio: Trusts whose property reverts upon Bankruptcy of object is valid.

Ch. 3 Classification of Trusts

1 way to approach law of trusts: divided into different areas = use class systems: by Creating Event, Object
or Trustee’s Duties. Bottom line: none of efforts at classification are complete; all = imperfect attempts to
define + classify subject. Some go to existence, some go to operation. Ultimately, systems are of limited
usefulness (including organic theory + various types of tax. divisions).

A. By Creating Event
1. Express Trusts
Creating a T by INTENTION. Trusts were first recognized after Statute of Uses in 1536. Uses first
recognized to prevent people from acting unconscionably by going back on undertakings. No magic to
mode of creation of an Express Trust. In some circumstances, requirements apply:
 Requirement of writing if Trust is subject to Statute of Frauds (land)
 If Trust is in will, testamentary disposition must comply w/ requirements of the Wills Act
All that has to be done is to achieve the goal of separating title and benefit. If creating event is ET, look at
diagram for further divisions. Some things apply uniformly to ETs (e.g. 3Cs; + Constitution of T prop).
Also, things or reqs apply particularly to specific types of trusts (e.g ltd application, if any, of non
charitable purpose trusts).

2. Statutory Trusts
Trusts also arise by op of law + sometimes by statute where govt wants to protect someone from conseqs of
someone else’s insolvency (make creditor into a Ben=a promotion), make general contactor into trustee for
subcontractors when he gets paid $, make govt Ben for unpaid taxes. Look at statute creating the T. In
some circs, also need to figure out hybrid situations (i.e. when banks + T co merge) to det how hold funds.

Citadel v. Lloyd’s Bank – re: a stat T imposed on I premiums collected by an agent and held for the insurer.

3. Constructive Trusts
Does not exist until Ct finds/holds that it does: arise by operation of law, NOT INTENTION. Concept is
purely remedial. Typical circumstance in which arises =LT is in name of one person + more than one
contributes. Object is to balance rights of legal owner w/ rights of other person claiming interest. Object of
a Ben bringing this type of claim is to gain proprietary interest in thing contrib’d to

For example where an agent accepts bribes and breaches FO to his principal, Ben will be protected if A
goes bankrupt + will also be able to take away any profitable investment which is traceable proceed, A
holds $ on CT: Attorney General HK v. Reid. If A asks another to buy land and hold it for his benefit until
he can pay it off, a breach of the obligs if a T is found will still allow A to keep land and stop a sale of it,
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even if ≠ in writing since there is CT (SOF doesn’t apply to CT?). In Canada, prevailing view is that a CT
is “remedial”: one of several remedies a court can impose and are NO factual prereqs.

4. Implied / Resulting Trusts

Other trusts arising from operation of law. Not necessarily constructed by statute. Not necessarily
remedial. Tend to arise in a certain circs. Implied / RTs arise, essentially, in 3 circumstances:
1. Conveyance in the Name of Another: A pays but thing put in B’s name; raises the presumption of a use:
RT in favour of A. B ends up being T for A, the Ben
2. Voluntary conveyance T or gift? Depends on who gives to whom. Donor is to demonstrate on BOP
whether RT or a gift. F to child or to wife, Presumption of Advancement applies: law presumes a gift. F
has onus of showing RT and not gift. If W voluntarily conveys something to a child or if to spouse, there’s
NO POA (law presumes RT), reverses the onus: onus is on recipient to show gift, not T.
3. Unsuccessful trust: Equitable interest or subject of T ≠ used up, or for some reason, T is frustrated and ≠
be carried out to conclusion.
[E.g. A gives to B in trust for C, but says C is to hold until C dies and then property goes to C’s kids. C
dies childless. Trust prop: RT to donor or maybe someone else if T says so.]

Nature of RT are quite unclear because of ambiguity attached to word ‘implied’:

RT were always seen as implied trusts – either as an unstated intetion or through operation of law they
are implied in that they arise by operation of law
 Chambers: a RT arises by operation of law where there is (a) a transfer of property and (b) an absence
of intention that the transferee should take a beneficial interest. Intention is relevant in that it can
prevent the T from arising; but does not create trust.
2 kinds of UE: by subtraction and by wrongdoing;
A. RC: transfer of wealth from PD in circumstances making the transfer reversible (i.e.
mistake/compulsion)=RT: Chase Manhattan
B. A trust imposed to correct UE by wrongdoing=CT: HK v. Reid
Also arise by operation of law.

B. By Objects
Trusts can be created to benefit people or to benefit a purpose. In Purpose Trust, nobody can be called the
Ben + generally these can only be created INTENTIONALLY. Problems: ≠ know who can enforce them +
they have no natural ending point. In regular Trusts, the people can be called the Objects, needing to be
certain. 1. Persons 2. Purpose 3. Charity

C. By Trustees’ Duties
Discretionary trusts allow Trustees some flexibility. Fixed trusts where they are non-discretionary. Bare
Trust= trustee’s only duty is to transfer the T property to B

Summary - Ways to look at trusts:

1. Organic – fiduciary obligations
2. Classifying by way of creating event
3. Trying to define/ classify the subject in terms of Objects of Trust (people, purposes, charities,
protection) – but somewhat of a non-starter w/out an all-embracing category
4. Defining / classifying the subjects by trustee’s duties
Great threshold in this regard is distinctions between fixed and discretionary trusts, with each category
operating under separate sets of rules. Bottom line: none of the efforts at classification are complete; all are
imperfect attempts to define and classify the subject but they are decent starting point.

CH. 4 IMPLIED TRUSTS

GENERAL
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For CT, mostly arises in a relationship context of some kind. The MPA, deals w/ hetero relations and tells
us at s. 36 (p. 12 Stat Mats) that POA says that MPA does not apply in transactions between spouses (no
gifts). So for hetero marriages, MPA is authority when marriage falls apart, don’t worry about RT or CT.
Dealing with MP is pretty formulaic, so is Dower Act. These deal with conventional hetero relationships
because of the definition of ‘spouse’ in the Interpretation Act. Alberta has made some progress by enacting
Adult Interdependent Relations Act, where CL adult relationship allows for contracts to deal with division
of property if relationship comes to an end: tells us that it is not against public policy to contemplate
division in those circumstances. Anything else, outside of traditional marriage or AIR where there’s been a
partner agreement, the property is divided up on the principles of CT. Lawyer would hope for MP-type
division but otherwise have to sue and plead a CT to gain an interest in the joint property as a beneficiary.
Bottom line is that nobody wants to pay for Charter challenge so status quo will remain until laws are
amended which is not in the foreseeable future. CT is only available vehicle where MPA is not followed.
Fatal Accidents Act allows benefits to wife/parent/etc. allowing for statutory benefits or to a co-habitant so
long as they are person of opposite sex; arguably these reflect an ‘opening of the door’.

A. Resulting Trusts
Idea=LT is in one person’s name but b/c in FR w/out consideration, cts say they have an obligation to
return it after holding it for someone else’ benefit, usually because some unforeseen circumstance arises.
These Ts rely on fictional intent, which the Ct will imply in 3 cases, subject to an important exception
called the Presumption of Advancement:

1. Purchase in Name of Another: A buys house, puts it in B’s name with intention that A will have
use and enjoyment.
2. Voluntary transfer: A gives B house. Court will presume RT for A’s benefit was intended unless
presumption of advancement applies (see below).
3. Failure to exhaust the Trust purposes or failure of Trust Objects: Bens don’t exist or can’t
take $, T purposes complete and $ left over.

Voluntary transfer is where Presumption arises: looks like gift but people say it ≠ intended to be an
absolute gift, intention was to retain the benefit of it. Goodfriend – principle is: a RT arises in favour of
grantor where a person transfers his property into another’s name for fee and receiver must prove that a gift
was intended to keep title. Presumption of advancement: SEE 47.

This gets complicated where the purpose of the conveyance is illegal ex dolo: since the existence of a RT
and whether it can be rebutted depends on who has burden and on the evidence in question. If purpose is
illegal, question is whether you can adduce this evidence in your favour. At 53: if A puts property into B’s
name for fraudulent purposes, he won’t be able to recover it and this applies under transfer of property or a
purchase of property in the name of B. In these 3 circumstances, the law implies a trust but Presumption of
Advancement and whether it is illegal or not can stifle these though.

Standing v. Bowring (1880)

No RT will be implied (gift will be found) where it was obviously NOT the intent of the settlor (donor);
POA does not apply to W giving gift to Godson. Presumption of RT rebutted by showing gift intention.
Facts: voluntary transfer of shares to Godson, transfer complete. P (transferor) gets married and decides
wants shares back. [Note: voluntary transfer means no consideration for shares AND it’s a Mom to her
Godson so no POA (gift)]. Out: No trust – gift complete, D keeps shares. Holding: No T was intended.
Ratio: even though you have a voluntary transfer, it is still an evidentiary question and here no intention to
create a Trust and this negated existence of a Trust. Trusts are neither created by law nor implied to defeat
intention of the donor. Intention of donor is most important thing.All that happened was D Δed her mind
but it was too late to take them back. Intent was carried out + was binding even though P later Δed mind.

MacQuarrie v. Barber (1993)

Presumption of RT arises where voluntary conveyance or (PNA) from Mother  Child since Presumption
of Advancement ≠ app : didn’t intend to gift them
Facts: Bonds bought from Mom’s property, reg’d in her name + names of son + daughter. Son dies, M die
 10

Issue: was this a gift to them (if so, daughter would take as remaining survivor) or did a RT arise, sending
the Bonds back to W’s estate. NB: POA≠ Mother – Child. Outcome: RT=Estate wins
Holding: Ct divides $ btw sister + estate of son b/c transfer from Mom into joint names raises Presumption
of a RT (voluntary conveyance). Presumpt of RT here, not POA as Mother  child. VC or PNA by Mom
means no POA (outright gift) = there is RT, bonds held by son + daughter in T for Mom + go to estate.
Ratio: law presumes RT where Mom gives prop to child or buys in their name and there is no presumption
of advancement in this case. Where RT not rebutted by donee (showing intention of gift) it remains RT.

Brown v. Brown (1993, N.S.W.)

Presumption of RT arises where Purchase in Name of Another in a case of an apparent gift from
Momchild, POA (if present) can be rebutted by evid.
Facts: Mom + sons bought house, LT only in sons name. Sons made improvements, value ↑, they sell and
Mom wants share of proceeds. Issue: was there intention to give a gift to sons? Out: No gift intended, RT
arises here in favour of Mom.
Holding: while relationships btw Mom - kid have traditionally been held ≠ give rise to a POA (gift), Ct
acknowledges that such a POA could exist, but in this case, it was clear a gift ≠ intended and POA rebutted.
Where widowed Mom makes payment to sons to buy real estate, this points against intention of
advancement (gift). These are ultimately fact-driven despite operation of presumptions. Same result if he
found RT from Purchase in Name of Another w/ no presumptions (result consistent with no POA).
Ratio: Presumption of RT arises where Purchase in Name of Another and Presumption Of Advancement in
a case of an apparent gift from Momchild can be rebutted by evid. No intention of gift POA rebutted.
Public policy: this judge, though not deciding case on MotherChild gift being excluded from POA; case
tells you that POA and PRT are rebuttable by showing intention. Intention if fact-driven.

Macleod v. Macleod
Express Trusts, RTs and CTs often hard to distinguish.
Facts: Bro buys house and puts in Bankrupt Bro’s name (who originally owned it). BB keeps possession,
makes pmt on mortgage. Buyer supposed to re-convey w/in 1 year if pmts continued. BB now wants back
and alleges a Trust exists. Out: BB wins – a Trust DID exist here.
Holding: Parties intended to create a Trust here. Firm evidence of obligation to reconvey property. 1-year
condition was a condition subsequent which was ≠ met but was partially waived by accepting late
payments and allowing possession to continue. This is either a) an ET: settlor expressed intention, b) alt,
could be a RT: analogous to Purchase in Name of Another: equity presumes bargain, not gift; c) CT if you
toy with intention of the D and a possible UE: arises by operation of law to enforce what ought to be done.
Ratio: type of Trust is often hard to distinguish, consider all 3 given facts of case.

RT is really only an implied trust that tends to arise in a fixed # of categories and if we have one in front of
us, we recognize it as such. CT is fundamentally no different: law implies a Trust relation but in a wider
and more expansive set of circumstances than under RT criteria. RT in 3 situations: when you have one of
these 3, law thinks there is something more than this and starting point is that a Trust was intended.
1. If A transfers to B voluntarily, the question is whether it is a gift, in which case B takes absolutely, or a
Trust? No consideration from B to A in exchange of property so no enforceable bargain from Contract.
Law presumes that intention was to create Trust in favour of A.
2. Same when A buys something and puts it in B’s name: starting point is to presume that B holds it in
Trust for A. Law is saying that in these circumstances, we will make good, or imply an intent that was not
expressed between the parties. Intent if inferred as starting point.
3. Failure to exhaust is same type of thing: if A transfers to B for life, then to B’s kids absolutely in equal
shares. This raises Rule of Perp question but if B has no kids, then once life interest of B is used up, Trust
property must be distributed. Court will infer an intent and there are a variety of circumstances the court
could settle on. They could send it back to A, or infer intent and give it to a sister, or look at general intent
and give it to family. Much wider scope in terms or result in these circumstances.

In circumstances where starting point that we infer a trust because of transfer or relationship, nature of
relationship can have bearing on the ultimate result. When property goes from HW, new complexity.
Voluntary transfer from MW, if nothing more we would find a RT. BUT, if they are married and we are
under the CL situation to determine who gets property. POA applies where there is voluntary transfer of
 11

property from M to Wife or Father to kid. Starting point is not trust here, but rather a gift. This applies to
Voluntary gift, and Conveyance in Name of Another. Thus without details of relationship, assume RT,
otherwise Advancement. If Hetero marriage, and governed by MPA, no POA in these circumstances: see s.
36 of MPA: starting point is Joint Property and then subject to rules of divisions of MP. See page 12 of
materials.

1st: imply trust in some circumstances 2nd: trust or absolute gift

3rd: when you can raise evidence that will rebut Presumption of Advancement

Ex: M and W living together. He wins lottery, buys truck but puts it in the W’s name. Starting point:
purchase in name of another so she holds the truck in Trust for him. Not married so no MPA and thus not
joint property, also so presumption of advancement does not apply.

A: If POA did apply, she would take title to truck absolutely if he could not rebut gift. If he did this with
intent that his creditors could not get their hands on it, equity requires that you come to court with clean
hands. Where intent was to avoid/defeat or hinder creditors, he may be prevented from raising the evidence
in court and thus could not rebut the Presumption. Can’t use illegal or immoral intent to prove a trust, or to
rebut the presumption of a gift. Not only do you have to have the intent, it also must have that effect.

Most cases are fact-driven. Here are some illegal acts that prevent you from rebutting POA (creating T):
1. Statute of Elizabeth:
2. Fraudulent Preferences Act (current in AB)
3. Federal Bankruptcy and Insolvency Act
Wouldn’t let you transfer to get away from creditors.

All have provisions that allow creditor to set a conveyance aside, different time periods apply to them, but
usually within the debtor becoming insolvent or someone getting a big judgment against them. If only
reason you transferred $ was to keep it from creditor in this regard. Key things that apply are ‘how soon did
transfer take place before insolvency / judgment’ and ‘was valuable consideration given for transfer’. If
done outside period or for valuable C, court won’t and can’t look behind the transfer. Effect of intent for
Trusts: high water mark of moral ground is Scheurman.

B. Rebutting the Presumption of Advancement (giver trying to get property back)

Not unusual for someone who’s about to go bankrupt or to have assets taken by creditors, to transfer assets
to someone else. CL viewed this as fraud and the 1571 Fraudulent Conveyances Act prohibited transfers
accompanied by an intent “to defeat, hinder, delay or defraud” creditors and declares such transfers to be
void. Recall: where gift is made to someone, RT arises unless MW or Mchild.

2 Possibs
1. Intent of parties to create Trust 2. Tainted w/ Illegality: effect (Goodfriend) or reliance (Tinsly)

Scheuerman v. Scheureman (1916, SCR)

High-water mark of moral ground: intent to break law w/out effect is enough to prevent H from rebutting
Presumption of Advancement and getting property back = Gift.
Facts: H bought land w/ own $, built house but put in W’s name. H on trip, W sold it + H making claim for
$. H says transfer to W was a T whereby W would hold for him. W admits was Tee but transfer designed to
conceal H’s LT of house from creditors (who had judgment). Out: W wins. Holding: whether or not
parties had an ‘advancement’ in mind, scheme they had in mind, hiding assets from creditors, was illegal +
as such H fails since ≠ recover if acts were done w/ intent to break law, even though they didn’t or couldn’t.
Ratio: POA (M gives something to W) ≠ be rebutted if relying on transaction w/ illegal intent. Evidence of
an illegal contract or scheme ≠ be received to rebut POA as Ct must enforce equitable doctrine that P must
have ‘clean hands’. RT ≠ arise.
NB: Highest moral ground: even a whiff of illegality enough to taint whole transaction and can’t rebut
POA. Starting pt = Voluntary Conveyance, RT, Presumption applies and she should keep absolutely as
MPA doesn’t apply. Trans. runs afoul of Statute of Liz. NB: all other cases move away from this one.
 12

Goodfriend v. Goodfriend (1972, SCR)

Despite some intent to break law, where no evidence of illegal action (effect) exists, Presumption of
Advancement CAN be rebuttedRT
Facts: spouse-swapping dairy farmers. W convinces H to transfer house into W name in case he gets sued,
loses + has to give up house in judgment. In reality, was no such risk as no possible basis for action vs.
him. H wants house back. Out: H wins. Holding: W ≠ rely on POA to keep house. H was misled by her in
transfer and is no basis in illegality to taint him into forfeiture. Can’t be said that H had any intent to violate
law as against any judgment creditor. Illegal evidence ≠ rebut POA but was no defrauding, no basis in law
to hide from and he had other assets that could’ve been seized more easily. Ct finds Scheurman is confined
to its facts and real law is rebuttal can be made where ‘no proof that creditors were defeated / delayed, etc.
Ratio: despite apparent intent, where no illegal action (or where not possible) POA can be rebutted. An
exception to ‘illegality rule’ where illegal act hasn’t been carried out.

Tinsly v. Milligan (1994 HL)

RT can be established (POA rebutted) even if illegal activity is present, so long as the illegality is not relied
upon in court to establish the case
Facts: T&M bought house together (each contributed $) but put it in T’s name alone. VC raised a RT. Both
of them committed Fraud by screwing SS system. Relat ends, M wants ½ house. This illegality emerged
when T brought it up. M says prop was held on T for both of them. M ≠ want in her name since ≠ get SS if
did. Out: M wins ½ house. CA: look at transaction and decide whether it is an affront of ‘public
conscience’: obviously this would introduce huge variability in the law (NB: use of PP where Ct got to
decide) HL rejects: too vague.
Holding: The L&E rules (equity’s clean hands doctrine and fact that LT can pass in certain cases) have
become 1: someone can recover a L or ET if they ≠ forced to rely on or plead illegality, even if turns out
title was acquired by illegal means. Dissent: allows appeal, denies 1 girl an interest in house on basis she
was also guilty of breaking law thus no ‘clean hands’. TJ ≠ have used ‘public conscience’ test too much
discretion in deciding to give girl interest. Hands are tied, we need legislation, no value judgments.
Ratio: L or ET can be recovered based on an illegal transaction, but only where the illegality is not relied
upon as basis for ransaction: need to be able to prove interest, i.e. RT, by other means such as by contrib of
$ to a house. W/ POA if you need to rely on your illegal purpose to rebut it, you ≠ be allowed to do so.

NB: you don’t need to consider question of illegality to come to result and aside from principles here, law
is as set out in Goodfriend: illegality is only a bar if the illegal / immoral effect has been realized. So where
transaction made for any illegal motive, you can still rebut POA (gift): a) If no illegal effect/just thought,
OR b) If the illegality is irrelevant.
Can get LT or ET if don’t need to rely on your illegality. Effect can be realized but if you can show your
right on another ground you can still rebut it.

s. 36(1): MPA no POA in marriage, so its always a RT.

When transfer made with illegal motive, POA can be rebutted if 1. No effect or 2. Effect has happened but
irrelevant if you can make your case by relying on other means.

C. RT: Failure to Exhaust the Subject Matter of Express Trust

Re Gillingham Bus Disaster Fund, Bowman and Others v. Official Solicitor (1958)
A RT in favour of the donors will arise where a Trust fails to pay out all of its funds as the settlor does not
part with it absolutely but only to intent that their wishes carried out
Facts: cadets killed while marching. Mayors set up fund “to pay for funeral expenses, care for disabled
boys and then to worthy causes or causes in memory of boys, as mayors determine.” Lots of $ left over,
appl. made to Ct to see what should be done with it. Issue: should unused $ go to Crown? Should RT be
est’d in favour of people who gave $? Out: RT found – $ should go back to donors.
Holding: Purpose Trust. Surplus should ≠ be paid back to Crown (bona vacantia) either. General principle
is that where $ is held on Trust and Trustees declared ≠ exhaust the fund, it will revert to the donor or
settlor under a RT. Reason is settlor ≠ give $ absolutely, but only to intent his wishes, as declared by decl.
of T, should be carried into effect. When this has been done, any surplus belongs to him. Not based on state
 13

of mind of giver, but is an inference of law. Even though some of donors were anonymous RT still found.
If Bens ≠ be found, $ goes to Ct like other Ts of similar nature.
Ratio: failure to exhaust a Trust will result in a RT for the donors/settlors. Intention of donor is still key.

EXAMPLE: CT
 CT can arise in wider variety of circumstances than RTs

Facts: M and W (married) own some farm land, 2 sons: one good and other bad but both work on farm and
bad one manages the farm. He puts lots of resources into it (builds granaries, plants trees, digs ditches). At
some point they say to one of sons to build house. He builds it on land. Property divided into 2 quarter
sections by a road. He lives there for awhile, manages farm while other comes and goes a bit. Father dies
and land passes to mother who holds title absolutely. During her life, mother gives land to other son (good
one without house on land). This is unknown to son who has house on the land until he finds out that his
brother owns it all absolutely. Mother dies. Now 1 brother living in house on land that is owned by other
brother. They have falling out and he tries to throw him off the land. Need to balance interests of land
owner with what is fair and equitable in the circumstances but complicating factor is that this is not a
misrepresentation case or anything like that. Q: do we have way of reaching fair and equitable result?

Using Peters methodology, we have an UE when M&F own land because it is improved. Deprivation:
improver does not own land. Juristic reason: policy is balancing rights of title holder vs. fairness principle
to other claimants. Idea of Torrens is what you see is what you get so if nothing there, nothing to worry
about. Title moved from M&F -->M --> brother.
 Argument is that CT attaches to mom and dad, and to mom and gets passed to brother even though
its not registered. Might be different if BFPV but you could say he shouldn’t be in any better
position than original holder since he was privy to it. So, parcel with buildings is sub-divided out
and wind up with 2 parties.

Where get situation where one has invest $ or sweat equity in a property, ask if CT would apply to the
circumstances? Here brothers not in relationship other than family so it can apply beyond romantic
relationships.

END

D. Constructive Trusts

Implied trusts, but a sightly different species. Arise in a much wider variety of circumstances. CT is a
proprietary concept (based on formal trust tradition of Equity): P is found to have an interest in the
property. Finding of UE ≠ entitle person to remedy for CT. For a CT to arise, need a direct link to property
which is subject of trust by reason of plaintiff’s contribution and monetary compensation must be
inadequate. This applies equally in commercial as well as family contexts (Peters)

Early CT cases in Canada look like one making investment in property but LT in name of another. Not
putting $ in, just labour and end up with an interest: sweat equity type principle and Equity uses CT remedy
to return value of work put in by other person. Perhaps principle is as wide what Denning said originally
but all cases have specific requirements. Later on it changes (Soulos) but it is a remedy and cases go
BEYOND fairly specific requirements of early cases.

Peters v. Beblow (1993, SCC)

CT needs 5 elements. First 3 from UE (enrichment, deprivation, no J reason) and link between
contribution/property, and show that monetary damages inadequate.
Facts: LT CL relat, M owns house. Ends b/c M abusive. W provided HH services, improved property. H
leaves to boat, W left with nothing. Issue: who gets house? Out: W thru a CT.
TJ: valued services W provided (parallel to tort), discounts by 50%, gives her MH since value similar.
Could have ordered sale and split $, distinction important: proprietary
 14

Holding: SCC looks at wrong (UE), remedy (CT or $), quantum (how much). CDN courts have adopted
equitable concept of UE as basis for remedying situation where 1 makes a substantial contribution to
property of another w/out comp. Wrong: UE has 3 elements – are they made out?
a) Enrichment: yes – he got household services without having to pay b) Corresponding Deprivation – yes:
she provided services without paying c) Absence of Juristic Reason for Enrichment – yes: consider
reasonable expectations, no other evidence to suggest otherwise. NoPP violation.
Remedy ($ or CT): in order to find CT, $ compensation must be inadequate and link btw services and
property in which trust is claimed (nexus: Petkus). For $, look at likelihood of payment, and special interest
of property. Link obvious, he is poor. Quatum: “value-survived” approach to be used for value of CT:
amount property improved, not “value-received” (hours * wage). Full interest of house reflects contributs.
Concurring Decision: agree w/ result but differences –
1. Imposition of a CT in FL should be easier than in commercial settings and
2. OK to use “value-survived” or “value-received” approach for valuation purposes.
Ratio: CT available as remedy, by operation of law, where UE proven in CL relationships which
necessitates a link to the property and the inadequacy of monetary damages.

NB: SCC doing directly what she could have done indirectly by giving her house. Case is starting point for
CT, later cases build on. Short-coming: result might be practical but showing that $ inadequate not entirely
clear. Considerations are entirely pragmatic only.
GOOD CASE FOR PUBLIC POLICY: FAIRNESS>CERTAINTY

Waselenko v. Touche Ross Ltd. (1983, Sask QB)

CT remedy where UE made out and $ inadequate, CT and Fiduciary relationships expanded to commercial
settings, Bens of CT > secured creditors in bankruptcy
Facts: W bought new home (contract) to be moved to W’s property. Paid in part, builders went bankrupt
while house incomplete. Secured creditors claim house, W claims this is UE and they should get house
under CT. Issue: CT or debt? FD in commercial setting? Out: W wins - house held CT by builders, W
(bens) priority > secured creditors.
Holding: receivers hold house on CT for W. UE made out, CT is remedial, has nothing to do w/ intention:
even though builders to hold LT until complete, partial pmt and $ inappropriate. Ct found a Fiduciary
relationship in commercial context. As to value, no evidence but Ct finds worth about same as house.
Ratio: intention of parties not relevant to establish CT for UE. Fiduciary relationship was established
which led to CT. Remedial value of CT made clear. PUBLIC POLICY: FAIRNESS>CERTAINTY
NB: tells us how useful CT remedy is. Ct finds FR in commercial context, SS thinks amazing: Denning:
where 1 has contributed $ to house being built, CT arises despite absence of any explicit Trust setting.
Comment re: FD: Good result but seems questionable as difficult to impose Fiduciary relationships in
commercial settings – no end to this idea…Commercial work implies freedom/independent actors and
whole foundation of contracts that distinguishes it from Equity and adding 2nd layer of duties wrecks this
(whole foundation of Contract law).

Kimwood Enterprises Ltd. v. Roynat Inc. (1985 MBCA)

CT arises upon wrongful receipt of $ in response to UE and trust $>secured creditors.
Facts: Other company has $ wrongly given to if from Rev Can which was supposed to go to Kim goes
bankrupt, bank claims $ as secured creditors (tries to scoop). Only way for K to get $ is to establish CT to
get priority over bank. Issue: who gets $? Out: K wins, $ is exempt from creditors b/c CT in place.
Holding: company that got $ erroneously held it on Trust for K. in the absence of a CT here, the secured
creditors would be UE as 3 elements would be proven. CT developed in Petkus v. Becker with UE given
flexible meaning. Not a CT of resulting nature, nor of fiduciary duties but is a CT.
Ratio: CT arises on wrongful receipt of $ in favour of person who has proper claim. UE still basis.
NB: 2nd category of CT here that goes beyond Peters decision.

McDiarmid Lumber Ltd. v. CIBC (1992, BCSC)

CT not made out where no UE where $ mistakenly paid by one party to a 3rd party, even where that reason
is not between the parties in question. Lack of K crucial. Bank debt=juristic reason.
Facts: Mc is lumber co that buys from 2 companies (Sales & Supply). Someone at Mc screws up + issues
cheque to Sales instead of Supply. Sales takes, puts $ in account. Sales owes Bank $. Banks having power
 15

to consolidate + settle, scoop $ from account to pay debt owed. Mc: paid by mistake, $ under CT. Bank had
NO notice of trust. Issue: was $ held on trust? Out: no CT, bank wins.
Holding: Key here is that bank not aware of Trust so likely BFPV, innocent 3rd party secured creditors.
Ratio: CT not established where no UE occurs and lack of K re: existence of Trust. The last element of UE
was missing: debt without notice of existing Trust=juristic reason. NO NOTICE HERE.
NB: Crucial to decision is total lack of knowledge of mistake on part of Bank. Without this, we can’t
reconcile this with Air Canada and Citadel Bank.

Bedard v. Schell (1987, SKQB)

Assets administered by Trustee (ET and RT) do not make up his property to be divided for purposes of
Bankruptcy. Its not clear whether this is true for CT as well. Very broad dicta on CT.
Facts: P was in LT CL relationship w/ D + asserts a RT, ET or CT. D now bankrupt and Bankruptcy Act
says property of bankrupt is not to comprise assets he holds in T for another: essentially those assets ≠ form
part of his estate and creditors/trustee in bankruptcy ≠ access it. Property in T belongs to the Ben, not Tee.
This is true for RT and ET thus P ≠ need leave of the Bankruptcy Court to continue w/in the action.
Issue: does a CT exempt property from division in the bankruptcy of the Trustee and therefore not require
leave of court to continue a Bankruptcy action?
Out: Ct delays making judgment on whether CT exists, but ET and RT do fall under BIA.
Holding: CT remedy is simply a remedy to right a wrong (dicta: extremely broad!). On this basis it does ≠
come w/in s. 47(a) of BA as its ≠ property that’s easily IDable or divisible so she’d need leave if CT found.
Ratio: extremely BROAD rationale given to CT to characterize it as a remedy to right a wrong (instead of
a remedy for UE), and contrasts with the narrow proprietary relationships (UE) founded upon.
NB: Conflicts w/ Mt. Cashel case where Ont. CA uses property held on trust by Brothers of Ireland to
satisfy wrongs of the order – used $ which belongs to Ben to satisfy wrongs of Trustee.

Martin Commercial Fueling v. Virtanen (BCCA)

BFPV ≠ hold property in CT for creditors who registered their judgment prior to completion of sale. CT
remedy appears to be available whenever there’s a valid contract and equity would enforce against the
person who signed the document: broadens it.
Facts: V was 1/3 owner of some land. M was a judgment creditor of V. Land sold to a 3rd party but prior to
registration of transfer, M registered its judgment against land. M now claims new owners hold land on CT
for them (an asset to satisfy his debt).
Holding: M’s judgment + partially completed sale ≠ create a CT in favour of creditors as purchasers
provided valuable consideration and bona fide.
Ratio: remedy of CT is available where have valid contract that equity would enforce against the
conscience of the person who signed it; if and only if equity would grant specific performance will the trust
be imposed. Gives you BI in property and you’ll get LI when deal closed.

Recap:
 Pektus v. Becker (1986) is starting point for CT in Canada
 Peters v. Beblow: enunciates 3 requirements for UE
 Other cases from lower Cts: no mech. application of CT doctrine + seen as broader equitable principle.
 Suggestion that all it was is ‘remedy to right a wrong’ in Bedard.
 And then in Martin, its applicable whenever there’s a valid contract. General neighbour principle and
inferred contract that went away with Donoghue v. Stevenson somewhat resurrected here when there’s
a valid contract with conscience. Widening effect present.

Soulos v. Korkontzilas (1997 SCC)

 16

Widening of CT doctrine: Enrichment (UE) not needed and can exist to condemn wrongful act: now 2
situatioins. A CT in a case of wrongful conduct can arise if 4 conditions present: 1. Equitable Obligation,
2. Assets resulted from Breach of EO, 3. Legitimate Reason to seek proprietary remedy (personal,
deterrence) 4. No Unjust factors. In this sense, once first 3 made out, burden might shift to other side to
rebut a CT. Takes on tort like aspects here: good conscience principal is like good neighbour one,
PP as they say that CT should be applied where good conscience so desires: value judgment.
Facts: K agent for S and made offer for S to buy house. Vendor rejected, advised K of price he’d accept.
Instead of telling S, K bought himself. S brought action vs. K to have prop conveyed to him, alleging
breach of FD giving rise to a CT. Claim for dams abandoned, S said house had special value as belongs to
his banker. NB: no Enrichment here. Out: CT upheld, S wins. CA: CT. TJ: breach, no E=no CT.
Issue: can CT be found where no Enrichment proven? What is role of CT: narrow or broad remedy?
Holding: CT are recognized for more than UE; also for wrongful acts like fraud and breach of loyalty.
Following conditions needed for a CT for wrongful conduct:
1. D under an equitable obligation in relation to acts giving rise to assets in his hands
2. Assets in hands of D must have resulted from deemed/actual agency acts of D in breach of EO
3. P must show a legitimate reason for seeking a proprietary remedy: either personal or related to need to
ensure that others like D remain faithful to their duties (Deterrence)
4. Must be no factors which would render imposition of CT unjust in all circs.

Here, K was under equitable oblig to property at issue and failure to pass on info=breach. Assets he got
resulted from his agency activities in breach of eq. oblig. CT needed as remedy b/c of continuing desire to
own prop in question and as deterrent. No Unj factors. Dissent: CT a discretionary matter and much
deference should be left to CA. CT not good here since no enrichment (thus no UE). Unavailability of CT
in absence of UE is consistent with CT’s remedial role. Deterrence not important enough to be basis for CT
where no UE. Disputes facts that there are cases that have CT without UE. Sopinka thinks CT is
exceptional remedy only. Ratio: widening of CT to go beyond UE and may apply absent an established
loss to condemn a wrongful act and maintain integrity of relationship of trust.

Majority Notes 2 Views on Function & Ambit of CT

1. “Narrow”: CT exclusively a Remedy for clearly established loss – can only arise with enrichment and
corresponding deprivation
2. “Broad”: more than remedy for UE; may apply absent established loss to condemn a wrongful act and
maintain integrity of relationships of trust.
SCC finds that this broader view should prevail as it best accords with history of CT, theory underlying it
and purposes it serves.

Discretion + Review: SCC says imposition of CT is discretionary so 1st court that gets to apply its
discretion (QB probably), and std of review which varies on nature of decision below + CAs should give
them much deference. Moral of story: if going for CT, try to win 1st time out as it will get harder and harder

In 1993, need to start w/ UE and now you end up having to show that there are NO unjust factors: strange.
If you satisfy first 3 requirements for CT now, burden shifts to property holder to rebut the application of
the remedy. Like Torts post Anns v. Merton: many cases looked at whether neighbour principle exists in
those fact situations. Anns said we mostly start w/ duty + then look to policy reasons which effectively
shifted burden to D to disprove the case against him. Other points: K breached his duty of loyalty (100
bottom) which is interesting because in R. v. Neil, court talks expressly about duty of loyalty in terms of
existing and past clients. Duty here is picked up and developed later in SCC. 100: no unjust factors.

KEY POINTS: opens things widely, may have effect on burden of who has to prove what, applies
proprietary remedy to a breach of fiduciary/loyalty type of situation, spoken of in such wide terms that it
makes it look like a tort like remedy (wider than before). One of main debates is do you get $ or property
and its questionable here whether there are any damages or enrichment. Maj says desire for property may
seem whimsical but this is enough: one of main policy reasons is that we ≠ let RE agents get away w/ this +
take advantage of principals. We probably would have had to show that prop was unique or 1 of a kind
instead of having to award $, in CL matrimonial type situations, the reason is almost always practical since
it’s biggest asset + just do something directly they could do indirectly anyways. Apart from fact they say its
 17

bad that RE agents ≠ do this type of thing, its odd that they wanted this case unless to develop CT since no
dams + acceded to whimsical desire of purchaser. Dangerous if $ flows from this since most ICs exclude
breach of trust or FOs so nothing to back up judgment. Unusual decision + maybe high-water mark as
expands remedy to broad application and maybe a run could be made at CT not only where UE but also
where want to control actions of someone. Practical: CT may give you priority which may be especially
good in Insolvency settings and also M situations not covered by MPA (only situation now is hetero Ms).

E. Constructive Trusteeships

So far, we have Ct imposing a remedy: facts show trust. With CTs, unlike ET in sense that ET usually
require assent of Tee and here they just impose title of Trustee on them. In CTship, there is a trust that
already exists for one reason or another and question is, should we make 3rd party outsider subject to it?

Air Canada v. M & L Travel Ltd. (1993 SCR)

3 cases where stranger to Trust can be held PL as Constructive Trustee: trustee de son sort, knowing
assistance, knowing receipt. Knowledge requirement for “knowing assistance” is Actual Knowledge
(Wilful blindness, Recklessness may suffice).
Facts: M + Vaillant were Ds of a corp that was supposed to hold $ from ticket sales for AC in T for AC.
They kept $ in general account + when had $ difficulties, bank scooped some $. Clearly Corp they ran was
guilty of breach of T, AC alleges they should be held PL as well for breach of T in their capacity as
Directors. Issue: requs for a 3rd party to a T to be held liable for breach of T? Out: Directors held PL for
Breach of T done by Corp. AK made out as close co, knowingly participated in the breach, ≠ get property
Holding: Agreement btw co + AC clearly indicated it was a T relationship (3Cs – intent: wording; subject:
$; object; AC). Clearly the co’s actions were in breach of trust: failed to account for $ collected. A stranger
to a Trust can be held PL as a Constructive Trustee for Breach of Trust in 3 cases:
1. Trustees de son sort: outsider steps into Trustee’s shoes and administers Trust property
2. “Knowing assistance” participate in a breach of trust: outsider to T participates or influences breach of T
on part of Trustees – they assist trust property going to someone else.
3. “Knowing receipt” of trust property: reqs stranger to receivee T prop in pers. capacity
Knowledge: only relevant consideration here is “knowing assistance”. K requirement for this type of
liability = ACTUAL K; recklessness or wilful blindness will also suffice. NOT Constructive K
Participation: the directors caused (participated/assisted) in the breach of trust and they had actual
knowledge of the breach of trust and he received benefit.
Ratio: 3 kinds of CTrusteeships that can lead to PL. Actual knowledge (or WB or R) needed for “knowing
assistance” liability for breach of T. If they received a benefit as a result of the breach, this may ground an
inference that stranger knew of the breach. Actual subjective knowledge is required (pretty high standard).

Royal Brunei Airlines v. Tan Kik Ming (CA Brunei/UK)

In UK, dishonesty (not K) is touchstone for liability in “knowing assistance” cases: does 3 rd party have K
of circs which would indicate to an honest RP in position of D knows a breach committed or that circs were
suspicious to put them on inquiry. Canada=knowledge
Facts: travel agent takes T funds owed to RBA for own business. Out: PL.
Issue: is dishonesty/fraud required to est. liability of a 3rd party in a breach of trust action?
Holding: “KR” in breach of T action concerned w/ PL of person who is recipient of T property or traceable
proceeds. “KA” concerned w/ liability of an accessory to a T’s breach. If 3rd party acts dishonestly, no need
to prove Tee did too since he’ll be held liable for breach.
3 Stds for PL in “Knowing Assistance” in Breach of Trust: settle on fault-based.
1. No Liability: 3rd party who ≠ receive T prop should never be liable. Sux b/c 3rd party could interfere for
own purposes; some liability ensures B can look to 3rd for losses + deter I.
2. Strict Liability: 3rd party who ≠ know/suspect dealing w/ T prop/that acts are contrary to T agreement
held liable. Sux b/c bus. dealings impossible if liable for unknowingly interfering in due perf of pers. obligs
3. Fault-based liability: dishonesty fulfills this role. Dishonesty: obj standard –observed by an honest
person in that case. Subjective element too as have to consider what D knew at time. Recklessness can be
clue. Fraud= taking risk to prejudice of another where no right to take.
Application to Facts: Tee admitted breach + “knowingly assisted” in it since he applied $ in a way in
which he knew he could not: dishonesty. Ct rejects 5-point Baden test.
 18

Ratio: in UK, dishonesty is necessary to “knowing assistance” test for PL from breach of T or FO. Not
necessary that Trustee acting dishonesty but will usually be so where 3rd party is. K is not a necessary
ingredient and should be forgotten.
NB: absence of Actual Subjective Knowledge needed for PL of “knowing assistance” breach: AC In
Canada, dishonesty’s NOT foundation for liability: neither necessary nor sufficient: K.

Citadel General Assurance Company v. Lloyds Bank Canada

“Knowing receipt” liability for stranger to a T requires that strangers receive or apply T property for their
own use and benefit (Enriched at the Ben’s expense). Knowledge requirement: Constructive knowledge (K
of facts sufficient to put a RP on notice or inquiry) is needed, lower than “knowing assistance”.
Facts: dealer holding T$ (stat. T) for IC to insure customer’s car. Put $ into general account at bank, uses it
to satisfy dealer’s debt. IC sues bank, saying liable for breach of Trust. Issue: was bank a Ctee? If Y, what
level of K required to hold it liable for “knowing receipt”? Out: Yes; CONSTRUCTIVE K. Citadel wins.
Holding: Bank knew of T + took $ for own benefit: “knowing receipt” not acting for Agent of Trustee as
above: “KA” of breach of Trust (where $ paid out to someone else). “KR” liability requires that strangers to
T receive or apply T property for their own use and benefit (Enriched at Ben’s expense): occurred here. K
requirement: CONSTRUCTIVE knowledge (K of facts sufficient to put a RP on notice or inquiry) is
needed = lower threshold than “KA” cases b/c more is expected of recipient who, unlike accessory, is
necessarily enriched at B’s expense. So relief will be granted where a stranger to T having received T prop
for own benefit + having K of facts which would put a RP on inquiry, actually fails to inquire as to possible
misapplication of T property (gives recipient UE). Bank should have taken steps, in form of reas. inquires,
to det. if I prems were misapplied. Bank had CK of breach, E was U, liable as CT.
Ratio: “Knowing receipt” liability for stranger to a T requires that strangers receive or apply T prop for
own use + benefit (Enriched at the Ben’s expense). Knowledge requirement: constructive knowledge
(knowledge of facts sufficient to put a RP on notice or inquiry) is needed, lower than “knowing assistance”.

[NB: Here bank had knowledge of T whereas bank in CIBC did not. Bank knew what bus were in and of
stat trust. Its important they took all of $ b/c this goes to K of bank since had to know some was subject to a
stat trust. Bank physically takes $. Citadel’s remedies=nothing. If bank is CT, Ben has >right over creditor
Bottom line: ≠ prove actual subjective K, only that = Stat Trust, were deemed to have K of it + since they
actually had $, K threshold should be < actual subjective or objective K. Here Ct agreed + said less K
needed. Fundamental distinction btw liability means K should be diff. With KA, higher K required,
Constructive knowledge is excluded but for KR cases, lower thresh, CK: suff to put RP on inquiry is
enough. Once get over CK threshold, Citadel has better priority. 1. De son sort: actual; 2. KA: actual; 3.
KR: constructive (are circumstances suspicious enough to put RP under enquiry)]

EXPRESS TRUSTS
ET: need T property, split ownership: LT in one and benefit/use in another, + then gain right that is
enforceable at Equity at will of Beneficiary. Most cases arise in wills – donor/settlor establishing the T
dead. Also rules of evidence (parol evidence rule) preclude us from getting more info on intentions of
parties. Most cases look at whether a T was intended and if so what are the terms and limits of it. Possibs in
these cases:

1. Entire Will/Trust fails: Intestacy: people get property according to rules of Intestate Succession Act;
if your estate has a certain value and you have no will says who gets it. Diff people may get $ than what
will said. Often is competition btw these claimants.
2. Specific Gifts Fail:  go back into Residue: residuary bens (legatees) get to divide it up.
Gift or Trust will ultimately decide who gets the property. Look at will to see what was intended.

T vs. Other relationships:

1. Agency: A often owes FD to P. Agency normally from contract and Trust is a lot like a contract. Agent
deals with Property “on behalf of” P but LT vested in Trustee and not Agent. Agents can make Ps liable,
bind them. Trustees ≠ normally make Bens liable (exception: Mt. Cashel case). Consequences very
different though.
 19

2. Gift: absolute gift vs. transfer of property to trustee. One takes conditionally + 1 takes absolutely. In RT:
what might look like a gift might actually be a T unless RT presumpt can be rebutted.
3. Bailment: when give a chattel to someone else. Held by bailee subject to duties, but ≠ T duties and his
ability to deal w/ prop is diff. Duties of bailee are fairly strict but ≠ those of Trustee. Only personal
property can be bailed, but Trusts can be real or personal property. Right of bailee is only possessory and
maybe some things that flow from it like possessory right vs. Trustee can pass title to a 3 rd party +
technically a bailee ≠ do this legitimately. On face of it though, maybe difficult to distinguish.
4. Contract: T appear very much like these + at equitable intersection, distinctions blurred. Some 3rd
parties can enforce contracts, exert right by equity just as a Ben would: some contractual equitable
remedies like Specific Perf are like standard T remedies. Many sims especially if Ct willing to import FD to
commercial contract: at that point they would really look similar and especially if consideration is
overlooked. Consideration is truly a dividing line. Easier to distinguish bailments (PP only), contracts can
be about land or personal.
5. Power: someone has authority vested in them to dispose of property ≠ belong to them. Common
example = power of attorney: if parent going nuts + kid has POA: power to deal with property as if you
were a T, but there’s nothing specific you have to do. T + Power are v. similar concepts. Mostly, P gives
discretion but T mostly mandatory.

If starting point is that something is a Trust relationship and it falls short, result will probably be one of
these 5. Trusts used to have very different limitations considerations (p. 5 excerpt) as you had more time
under old Act for breach of trust. Now is all the same: 2 years. May have made big diff before in terms of
when you could sue but now its similar. T hardest to prove but best priority

Ch. 5 Essentials of a Trust

A. The 3 Certainties: necessary for a Trust - Knight v Knight:

1. Words=language must be sufficiently clear to show intention to form a Trust.
2. Subject Matter= what specific T property is included; mixed property can be a problem
3. Objects=who intended to benefit + in what circs.

1. Certainty of WORDS
Ct looking for evidence of INTENTON to create a T. Usually presence of T language gives suff evidence
to find T, but ≠ always. Usually absence of T language= no intention for T, but ≠ always. If it appears
absolute, then probably a gift and not a T. Remember golden rule.

Nicoll v. Hayman (1944, NSSC)

Intention of testatrix can be gathered from will & circs, if to ben others=Trust
Facts: will: “I give and bequeath $…to D in full confidence that she will dispose of the same in accordance
with the wishes which I have expressed to her”. Issue: absolute Gift (w/ precatory wish: non binding 1 in
testamentary disposition), invalid for uncertainty, or secret Trust? Out: TRUST
Holding: To find intention of testatrix, consider language of will + surrounding circs. If supposed to be a
gift, words would say get $ absolutely or would be at her discretion. More likely T intended, since D
misused funds for self, $ should go to residue.
Ratio: if intent of testatrix seems to have $ benefit someone else, Trust. See lang to det intention.

[Secret trust: give $ to someone, terms of T NOT spelled out in will –are OK (SCC)-can hide where $
going. If timing ≠ w/ rules of ST, then a RT arises + $ goes to residue, divided up amongst people in will.]

Hayman v. Nicoll (1944 SCR)

Intentions of testatrix: desire indicated but not imposed and no outside evidence of deal=Gift
Issue: deciding btw ST/Gift by will. Words here, though precatory, look to an oral or a written comm to
Daughter for completion. Out: Gift (w/ wish): $ stays w/ Daughter: absol gift, no evidence of terms of ST
Holding: try to det intent of testator. Words ≠ intended to do more than indicate desire + not impose will of
testatrix (precatory). No evidence of an outside deal that could give rise to T (where D promised to fulfill
conditions). If T created w/ secret conditions, would need evidence terms made known to Tee before/after
 20

will, otherwise a RT arises back to estate. Will gave gift, not T when intention considered as whole (other
Ts created) + no evidence of utaking.
Ratio: look to intention of testatrix to see if Gift or Trust: if desire indicated but not imposed and no
outside agreement with conditions known to Trustee…gift.
[NB: where no docs available, look to all circumstances which surround transaction said to create a T to
determine if intention there or not. All these are examples interpreting ambiguous words.]

Douet v. Budd (1978, BCCA)

Read will to give effect to testacy, not intestacy. Person named Trustee and Executor takes absolutely if
nobody else named, intention.
Facts: standard-form Will, blanks filled in but no Ben listed, only an executor/trustee.
Issue: Gift or intestacy (no valid will)? Out: Executor wins and becomes Ben. Holding: a golden rule that
when a testator has gone thru trouble of creating a will, Ct assumes ≠ intend to die intestate. If had intended
to leave stuff to nieces/nephews (claiming thru residue) would have said so. More reas. inference is when
testator named executor/tee, meant him as Ben. Ratio: assume valid will in place when testator fills out
will; reasonable inferences relied upon when Ben name left blank in will. Read will to give effect to
testacy, not intestacy. Person named Trustee and Executor takes absolutely if nobody else named, intention.

s. 38(1) Wills Act: where a will appoints an executor, + there is residue that’s not expressly disposed of, the
Executor becomes the Tee of that residue for the person(s) that would have been entitled to it on intestacy
(residue), unless the intention was for the executor to take the residue beneficially. [Softens conseqs: ≠
have to declare if testacy or not, can find all valid except for the prop that ≠ been specifically designated: 2
options to Executor 1. Absolutely or 2. as Tee who holds it for people in Intestacy Act]

In Re Frame (1939, Ch. D)

One invalid section of a Trust agreement can be ignored if not enforceable, leaving rest intact.
Facts: W’s will said she leaves $ + I policies to A ‘on condition she adopts my daughter’. Issue: Gift or
Trust? Outcome: $ payment is Trust as maintenance, adoption is not.
Holding: payment of $ was a Trust, but adoption was NOT something enforceable by Trust (series of acts,
parental duties, advice, affection, maint.). Only maintenance could be held in trust. T ≠ fail for uncertainty
b/c part of it not enforced. Ct ≠ force/compel an adoption of kids. Don’t have to use ‘adopt’ in formal
sense, can employ in more general way: to care for.

Summary
1. Look at whole document and try to infer intent
2. Subject to Wills Act apply golden rule: assume testacy if will in place + Trusts that arise
3. Whole thing won’t fail b/c part of it can’t be administered by court

Byers v. Foley
No magic to word ‘trust’: it is neither necessary nor sufficient, consider intention + circs.
Facts: BB tix; 8 guys bought together, now 2 want to keep themselves. Ps allege Trust.
Out: T of tix established. Holding: 3Cs in place. Clear intention to form T: ≠ spoken but taken from
surrounding circs + intentions of parties. Evidence T intended: returned tix shared, joint membership
decisions, each paid own pro rata share, etc. Intent>lang.Ratio: no magic to establish T (≠ to use word T, it
is substance not form). Use of word T is neither necessary nor sufficient.

Barry v. Garden River Band of Ojibways (1997, Ont. CA)

Where intention to form Trust carried through, Trustees must abide by T principles incl. Fairness
Facts: N land deal, $ given to Band for members. B imposed own limits on distributing $: a T on
themselves as Trustees. Problem: W who were dis-enfranchised (non-status Ins), then re-enfranchised (by
later law) ≠ given as much as others, kids of dis-enfran’d given 0$ Issue: were limits on time for
distribution + reductions for some members fair? Out: No. Holding: when B resolved to make per capita
distribution to members, ET created and as settlor and T, were under a duty to ensure carried out w/ T
principles: meant per capita distn had to treat all Bens fairly. Cut-off date arbitrary, ≠ fair to deny kids their
share. Cof Objects also questionable since T requires ability to see if someone is a member of class and all
possible members known/ascertainable. C had duty to do reas. inquiries of members: SOC failed.
 21

Ratio: per capita distn of $ to Band members governed by T principles + all Bens should’ve been treated
equally. C of O means will fail if ≠ ID people for who for + whether are a member/ascert. NB: where have
legitimate point to fight about in Trust or will case, lawyers to get paid from estate or client/solicitor basis
so not to much risk to making these arguments.
Clear language (clear intention) in general and in particular with objects of Trust and also what is
the T property (SM).

2. CERTAINTY OF SUBJECT MATTER

SM of T should be sufficiently clear so that T can take possession and distribute it according to conditions.
SM of T must be sufficiently clear, certain and capable of ID when T comes into effect, but ≠ necessarily
have to be certain when T doc made.

Re Beardmore Trusts (1952, Ont. HC)

Dicta: SM not Certain enough where Net Estate (SM of T) can’t be ascertained when T arose.
Facts: H&W had sep. agreement where H granted to W (Trustee): 3/5 of his net estate (=estate after
payment of debts, funeral expenses, duties, etc.). Sep agreement partially performed. Wife dies, H still
alive: there is no net estate as long as he is living. So can’t figure out what amount is. Valid Trust? Out:
No: its void – on 2 grounds (1st is Wills Act).
Ratio: will ≠ comply w/ Wills Act so invalid. Dicta - SM of T was too vague: SM ≠ be ascertained when
this Trust arose, since the H had not died yet. Fine if took effect when he died.

Hunter v. Moss (1993 Ch. D)

Certainty of SM met where 5% of shares of company declared to be held in T for another
Facts: M owned 950 shares in a company, orally declared self to be Trustee of 5% of shares issued by
company (of which there were 1000). Issue: Certainty of SM? Out: Yes.
Holding: SM of T declared was suff certain so T valid. Shares ≠ have to be ID’d individually, since
irrelevant (all had same rights, value). Each could satisfy T just as any other. If property is unascertained
prior to T coming into effect, prop must be distinguished. But w/ homo property (funds, intangibles) need
not ID in particular which property is T property. Portion clear enough. Might have argument if shares had
different rights, co.
Ratio: SM of intangibles need not be precisely distinguished if share same value, rights, etc. If T deemed to
be a portion of something, SM is certain enough.

Hunter v. Moss (1994 CA) Holding: lower decision upheld. No UnC of SM. No FR can attach to an
unappropriated portion of a mixed fund. The most H could have would be an equitable charge on a blended
fund, couldn’t make Moss hand over 50 shares. Need to ID company for shares to get certainty. You’d
think this would apply to bottles of wine and pounds in a bank as well…Oral declaration good enough to
create T there, with homo property, made one Trustee for the other.

British Columbia v. Henfrey Sampson Belair Ltd. (1989 SCR)

T$ can lose Trust identify if $ mixed with others and not traceable or identifiable, could no longer say with
certainty what the Subject Matter was
Facts: Stat T created when Car Dealer collected sales tax money for prov. $ deposited in a bank (mingled
w/ other assets). Bankruptcy + receiver sold all assets, put all proceeds to debt.
Issue: does the Stat Trust (prov) give Province priority > other creditors under s. 47(a) of Bankruptcy Act,
or is it just Crown debt (lower priority: s. 107(1)(j))? Out: creditors win: prop lost its T priority.
Holding: s. 47(a) should exempt only Ts from general law, not thru provinces’ tax system. When tax
collected, a stat T occurred. As $ mingled w/ other assets + converted to other prop, could no longer be
traced. At this pt no longer a T under law. If $ collected is ID or traceable, its given regular T meaning, but
if converted to other property + not traceable, not a trust. $ not traceable so Prov’s claim is only by debt.
No specific property impressed with a T can be identified.
Ratio: Stat Trusts for taxes only retain ‘Trust’ status if $ is identifiable OR traceable. If not, upon
bankruptcy the Province’s claim is reduced to that of a normal creditor.
 22

Dissent: (better according to SS) different angle: Cory refers to # of other Stat trusts (recall Citadel had I
proceeds). Need 3Cs, intention here from statute, SM was present at inception, Cts looking at certainty of
concept rather than whether its too difficult to ascertain the subject matter.
NB: SS says ≠ reconcile case with Air Canada v. M&L Travel

B. OTHER CERTAINTIES

Armitage v. Nurse (1997 England & Wales CA)

A Trustee exemption clause can validly exclude liability for Gross NG as its NOT contrary to public policy
to let settlor limit standards Trustee to be held to. Should be clear though: C.
Facts: Land to be held in T for PA until 40 y.o. A clause in settlment said Trustee ≠ liable for loss/dam to
fund or income unless caused by “Actual Fraud”. Trustees accused of GNG, not F.
Issue: permitted scope of Trustee exemption clauses for NG, Gross NG, Fraud. Out: Clause OK.
Holding: Not against PP for the settlor to create a T limiting breaches punishable to a Tee for Gross NG.
Ratio: a Trustee exemption clause can validly exclude liability for Gross NG as its not contrary to public
policy to let settlor limit standards Trustee to be held to. Gross NG, though borders on Fraud, is still NG.
Generally, exemption clauses need clear and unambiguous language.
[Recall: NG differentiated from Fraud in cases re: dishonesty in breach of Trust cases]

Re Poche (ABSurr Ct.)

Opposite conclusion than Armitage v. Nurse: AB Surrogate Court ruled a Trustee CANNOT be protected
by an exculpatory clause when their actions constitute gross NG. Ratio: need certainty in clear language in
terms of exculpatory clauses for the purposes of Trustee liability.

REVIEW
1. C of Intention: by words and/or conduct: golden rule is that you don’t have to say T to have one, nor is
saying the word by itself sufficient to create a T.
2. C of SM: T property – need to be able to say this at time T created. Easy to say when prop is identifiable,
like shares w/ same rights, harder elsewhere. Cases sometimes diff to reconcile if SM mixed and ≠
identifiable. Trustee must be able to ID T property to be able to carry out terms to not be held liable.
3. C of Objects:

CHAPTER 6: TRUSTS AND OTHER LEGAL RELATIONSHIPS

Mere powers (ex: POA): just b/c you have it ≠ mean you have to do anything. Trusts are mandatory. Mere
powers are not.
C
A ------------B D
10G E
If A gives to B on Trust to invest and hold and give income to C, D, E in equal shares. This is a simple non-
discretionary, mandatory Trust. Easy to figure out income and if B doesn’t do it, Ct can step in and make
him do it. Trust.
C
A-------------B D
10G E
If A gives to B to invest and give income to the “neediest” of C, D or E in the “absolute discretion” of B. B
has to invest the money (1st difference btw TP and mere power: he has to do something) then he has to
consider who is the neediest of C, D or E. He might not have to pay out any $ at all, but at very least he has
to consider the comparative neediness of the parties. T power.

Pay to C, D, or E if needy, otherwise accumulate for 10 years and give all to C, D or E in B’s absolute
discretion. B has to invest here, then has to consider relative neediness. He might pay out some of the $
before the 10 years is up, and then he has to choose.

In the first example, the income was the property of C,D,E: they had beneficial ownership of 1/3 of the
income in any given year. In these last 2 examples, at any time prior to 10 years, none of C, D or E could
 23

be said to be ben owners of Trust property. If B pays all of it to C, then E ≠ complain about that (unless B
has failed to exercise any discretion). B has Power to do things: a Trust power in the sense that its
mandatory but the Trust part of it is that the discretion has to be exercised and the power part is that he has
to pay out to the potential beneficiaries. Btw 0-10 years he doesn’t have to do anything. At 10 years, C,D
and E still only have a hope – could argue that intent was to create Trust, or it could revert to A.

[In first cases, has 3 obligations: invest, hold, consider. Whether they have to hand out $ is where
power/trust distinction comes in. If Trust=mandatory and have to pay out. If Power=not. If what Trustee
has to do is purely discretionary then it’s a power but if its mandatory it’s a T.]

Distinction btw Trust and Power: whether C,D, or E have beneficial interest in Trust property.

Quote: Trust is imperative, power is discretionary. Trust must perform obligations associated with T,
power may be exercised or not at discretion of donor of power. It’s a question of intention of settlor or
donor whether a Power or Trust is created. Mandatory vs. Discretionary. Under Trusts, Bens are owners
of property. Under Power, objects own nothing, only HOPE that power will be exercised in their favour.
Until exercise, ownership remains in those to whom property will go if interest reverts (the settlor who
originally gave the money). Distinction becomes blurred with Discretionary Trusts, especially non-
exhausted ones where they decide to accumulate $: if fail to exercise on behalf of 1 Ben, Ct will require
them to make an equal distribution.

Mere Power vs. Trust P: look for mandatory part. Every Discretionary Trust gives Tee a power (which
may/may not = mandatory). A DT may require Tee to decide how much to give Bens Trusts separate use
and ownership but in second cases, the bens are not of the same type as in A. Once B makes choice, before
$ is paid over, at least one of them becomes a beneficial owner.
If B doesn’t have to do anything, this is just a mere power (like a POA).

A. Trusts and Powers and Certainty of Objects

1. A Trust is an obligatory distribution, Courts can enforce them

2. A Power is discretionary and permissive, and there need NOT be a distribution. If no distribution, prop
goes back to settlor. Bens under a power cannot compel distribution.
3. Hybrid=instrument can be obligatory and permissive:
 Trust Powers/Discretionary Trusts (sometimes a mere power of appointment is called a
discretionary trust): Ct can compel Trustee to do something w/in intention of testator.

NB: Whether a Power or Trust, need to know who prop going to, Bens/Appointees. Main Q in these cases
is whether someone is w/in range of persons to be considered. Put in shoes of Trustees, try to fulfill duties.

Different Tests for Certainty of Objects

(a) List Certainty Test: list of people who must/may benefit (members of Ben class)
(b) Criterion Certainty Test: does a given person come w/in class or not
(c) 1 person only test – if you can point to at least 1 person definitely in class, there is C
NB: for trust=(b); for power=(b)

In Re Gulbenkian’s Settlements Trusts (1970) AC

Mere Power vs. Trust? Power b/c ‘absolute discretion’ and non-mandatory. Mere powers: test for
Certainty of Objects=does a given person come w/in class or not
Facts: settlor created instrument whereby Trustee had absolute discretion w/ regards to payment of invest.
income from property. Clause might be too vague – how is Ct to decide if someone is residing with the son.
TJ said too vague. CA: its OK. Issue: T or power? Did portion of T meet test for Certainty of Objects?
Outcome: mere Power (not Trust power). Criterion Certainty Test.
Holding: Power – settlor ≠ make intention to make Trust clear enough, the power is discretionary, Trustees
have no obligation to perform. On Certainty of Objects, Ct says test is: whether you can w/ certainty say
whether any given individual is or is not a member of class; you ≠ have to be able to ascertain every memb.
 24

Ratio: For Powers, the test for Certainty of Objects is whether it can be said with certainty if any given
individual is or is not a member of the class, ≠ ascertain all member

[NB: Basic difference btw mere power and trust power: no duty to exercise decision, vs. Trustees must
exercise and Ct can make them. Use of word Trust or bad language is not decisive. Trust power means Tee
has to pay somebody and to do this, need to enumerate the class, ID the people to whom it should go. Need
to figure out who’s in the class. NB: Denning suggests a slightly wider test here but don’t worry about…]

McPhail v. Daulton (1970 HL)

Mandatory nature of languageTrust power (enforceable by Ct). Test for Certainty of O for
Trusts=whether any given individual is or is not a member of the class, don’t have to ascertain everyone.
Facts: lang of deed setting up Trust is being interpreted. Issue: is this a Mere power, a Trust Power, or an
absolute Trust? Must you be able to drop a complete list? Out: T Power. Holding: Ct finds mandatory
nature of language means this is a Trust, wide distinction btw validity test for Powers and Trust Powers
should be eliminated: test for Certainty of Objects for Trust powers and Powers should be Criterion
certainty test – Trust valid if can be said with certainty that any given individual is or is not a member of
the class. Ct says this ≠ mean Trust powers are powers. Powers ≠ enforceable by court but Trusts Powers
are. Assimilation of validity C of O. Dissent: Trust - clause is mandatory. Doesn’t want C of O test Δ.
Ratio: HL wants Certainty of Objects test for Trusts to be that of Powers: whether any given individual is
or is not a member of the class; don’t have to ascertain everyone.

Note: Re Baden: Saks talks about ‘conceptual uncertainty’, flowing from the language itself…Megaw says
you don’t have to say of everyone, only of a substantial # of objects in which case it can be said that they
fall in the Trust. Evidential uncertainty can’t be used to invalidate a Trust (can’t ID fringe people who
might benefit) but conceptual uncertainty can (language of who is included). You need to fuss about
conceptual uncertainty: can’t figure out what class is but don’t need to worry about evidential uncertainty:
if can find substantial # you are fine.

SUMMARY
Power or Trust power usually exist in an existing Trust and makes Trustees deal with $ in a different way.
Distinguishing factor: T is mandatory, power is not. Mere power can be inside or outside Trust context
(Trustee can have mere power) and if no mandatory aspect to it, Ct ≠ do anything about it Trustee does not.

Re Glub: Lord couldn’t have stopped when found mere power b/c needed to find if it was void for mere
uncertainty to see who the $ would go to; needed to decide 2nd question. Test picked up in Glub, followed
in McPhail and ultimately in Jones in Canada. Glub deals w/ relatives + residing w/, McPhail is persons,
Jones is purpose trust (charitable purpose): C of Objects test.

In 3 contexts: Powers, T for persons: T for purposes: don’t have to say who all members are, just if
someone is or not. One thing that can distinguish T from other relationships is 3 certainties. Recall
Agency, Contract, Bailment, Gift, Power.

C. Certainty of Objects in Purpose Trusts

Jones v. Executive Officers of T. Eaton Co. (1973, SCR)

Purpose Trusts: Certainty of Objects test is whether someone is a member of the class
Facts: Will purported to establish Trust for relief of poverty (charitable T).
Holding: Ct adopts reasoning in McPhail: test for Certainty of Objects in this case was whether they could
determine whether any particular person fit into the description of the class ((b) from above). Ct finds that
the will constitutes a valid Trust for the relief of poverty (charitable trust).
Ratio: test for Certainty of Objects for Purpose Trusts is whether any particular person is in class or not
(follows McPhail). Objects were ‘deserving or needy members of the club’ Trust + objects are sufficiently
certain if can say someone is a member of the class, no need for exhaustive list.
 25

[There are certain established exceptions to the maxim that equity will not assist a volunteer but these are
both rare + difficult. In other words, if Trust is improperly constituted, Ct will still sometimes assist the Ben
in getting the property by disregarding its own requirement of complete constitution in the interest of
giving effect to clear intention.
1: a gratuitous promise contained in a deed to create a Trust some time in the future creates an immediate
Trust of a chose of action (even though no effort to transfer $ to Trustee): T here is regarded as complete in
law b/c promise to create it is enforceable as a promise made under the deed. The future T is incomplete but
there is a collateral immediate T, SM of which is benefit of the promise to create a future T.
2: Bird v. Strong: intended gifts are completely constituted if a donnee of the gift is named executor of the
donor’s estate (thereby getting LT to intended SM of gift) AND donor dies w/ intention of making the gift.
NB: this rule ≠ extend to Trusts in Canada.
Rule: intended gifts are completed constituted if a donee or Beneficiary if one of executors acquires title.
Once someone has authority and legal right to deal with property, this completely constitutes the Trust. ]

C. TRUSTS and AGENCY

Similarities: both Trustees and agents owe a Fiduciary duty to beneficiary/principal

Differences: Agent’s FD is enforceable at law, Trustee’s duty only enf in equity; There’s a contractual
relationship between Agent and Principal; Trustees have property vested in them (i.e. legal title), Agents do
not; Trustees ≠ make the Ben liable, Agents can; Agent acts “for and on behalf of his P” + subject to his
control while a Trustee is not subject to control of his Ben, but is under duty to deal with T property for
benefit of Ben according to terms of Trust.

[NB: in both cases, someone holds the property and question is whether hold it as A or T; if hold as
Trustee, then designated person takes a proprietary interest in the property but if not then they are outside
and settlor can Δ mind and Ben can’t compel transfer. Q is whether T is complete or not. If incomplete:
then relationship considered Agency. Impossible to reconcile these cases.]

McIntyre v. Royal Trust Co. (1946, MBCA)

Trust incomplete: letter with instructions not enough to create T here, only Agency
Facts: Deceased wrote RTC telling them to sell some shares and buy an annuity for the P. RTC sells shares
but ≠ buy annuity. Dies. P argues RTC= Tee of funds and he is Ben. Out: RTC was AGENT of testator,
no Trust. Holding: intention of settlor could have Δed at any time up to time Trust was completed. Since T
not completed (annuity not bought) there was no Trust. P, a volunteer, is not entitled to enforce the instrux
of the testator as she is not a Beneficiary, nor is there a gift. If T, Ben can compelt T to comply w/ terms, if
Agent, Principal ≠ make him do anything.
Ratio: Agency relationship formed, written instructions not enough to create T here.

214: being treated as outsider to contract, no consideration, so can’t get specific performance.

Rationale: memo w/ Deceased was an instruction to his own agent which he might have Δed or amended
before coming into effect. SS: no more Δing of minds of settlor since he’s dead so case is wrongly decided
and should be T, which RTC is compelled to carry out. Residuary Bens get estate if no T, and Mc ≠ get it
as specific Ben. Agency relationship is essentially contractual. B/c Agency here, could say its an
incompleted T: they say T ≠ come into effect until annuity purchased + then + only then do legal rights Δ.

Ex Parte Pye (1811, LC)

Trust complete: letter here was enough to create a Trust, not Agency. Writing critical.
Facts: Testator wrote letter asking Trust Co to buy annuity for benefit of another, ≠ done.
Outcome: Who has the beneficial interest in the annuity?
Holding: Equity ≠ assist a volunteer, BUT Ct finds letter is sufficient declaration of intention to create a
Trust, and even though process not complete, should be carried out. Letter itself is a Trust document.
Ratio: A letter purporting to buy an annuity for another is sufficient to create a Trust document (not
Agency) which must be followed through by the Trustee.
NB: SS says this is better reasoning. Complete constitution is the key to enforceability of a Trust, and
negates the maxim that Equity ≠ assist a volunteer. Writing makes diff here.
 26

Q6: NB equity ≠ assisting volunteer again. Lord Eldon acknowledges that court won’t assist a volunteer but
if act is complete and voluntary, court will act upon it…gives enforceable right to outsider.

Fundamental Diff btw Agency & Trusts: Agents carry out instrux of Principals and if steal, As are on hook
(i.e. Soulos). Secondly, A in so doing can BIND the Principal. This is fundamentally diff than what
Trustees can do as they ≠ bind Bens in same way Agent can bind P (except for Mt. Cashel case). Trustee
liable to live by terms of Trusts, but A can bind P.

Trident Holdings Ltd. v. Danand Investments Ltd.

In order for Bens of a Trust to be liable to 3rd parties for acts of Trustee, a Principal-Agency relationship
(acting for and on behalf, A at control of P) must ALSO be present.
Facts: # of investors investing thru a co. (if T: investors not liable, A:can be bound). Danand is Tee for
several companies (commercial Trust) from a contract made on behalf of the Bens (Principals). Contract ≠
fulfilled. Issue: Are Bens/Principals liable in Trust, Agency, or both? Out: Ps liable in Agency.
Holding: In order for Bens of a T to be liable, Ct must find it was an Agent-Principal relationship also.
Agent acts “for and on behalf” of Principal and is subject to his control. Trustee is not subject to control of
Ben but is under duty to deal with property for his ben, in line w/ Trust terms and can be compelled to do
so. Person can be both agent and Trustee of another: if undertake to act on behalf of other and subject to his
control=agent; but if vest w/ title for P, also Trustee Agency predominates over T. Bens of T are ≠
subject to PL to 3rd parties on obligations incurred by Trustee in admin of Trust but an Agent, acting w/in
the scope of his employment, can subject his P to PL in contract + tort. Danand had to hold LT and do
bidding for Bens=A+T. A>T.
Ratio: In order for Bens of a Trust to be liable to 3rd parties for acts of Trustee, a Principal-Agency
relationship (acting for and on behalf, A at control of P).
NB: On these facts, D ≠ exercising any power or discretion from T agreement but rather was carrying out
mandate of Bens, greater indicia of Agency > Trust to make Principals liable. Agency is used as way to get
around corporate entity doctrine.

A. TRUSTS and DEBT

Primary distinction=debt is personal obligation, T =proprietary obligation: Ben has right to property itself,
creditor has right to enforce payment of debt. Particularly important in insolvency where Bens have
priority > creditors (incl. Secured; only take in % to what loaned from what is left over). Trust is a higher
right (in rem) vs. world. NB: Had these cases come later, would have issues of knowing receipt/assistance.

Space Investments Ltd. v. CIBC Trust Co. (1986, PC Bahamas)

Generally Trust account holders have ability to trace $ held by bank and right to demand its return which
is better than rights of regular holders who simply keep a personal right.
Facts: Priority competition btw regular bank account holders + holders of Trust accounts. Bank Insolvent.
Outcome: Priority is tied here (as a result of an unusual agreement).
Holding: A regular customer who deposits $ authorizes Bank to use $ for their own purposes, and retains a
chose in action over funds, i.e. right to demand Bank give them back $. A Trust account holder has the
equitable right to trace the $ to any property to which its been converted, directly or indirectly + have $
given back (in addition to chose in action). In most cases, they’ll have priority over secured AND
unsecured creditors (regular bank account holders). But here, T account holders had signed an agreement
saying they allowed Bank to use funds for their own benefit, so they’re no better off than regular holders.
Ratio: Generally Trust account holders have ability to trace $ held by bank and right to demand its return
which is better than rights of regular holders who simply keep a personal right.
NB: T remedies deadly. Q: is a Trust account like a Trust?

Barclay’s Bank Ltd. v. Quistclose (1968, HL)

A loan (debt) of $ for a specific purpose becomes a RT if the primary purpose cannot be carried out.
Facts: Co. called Roll’s Razor wants to pay dividend but don’t have $. Ask bank if can do this, bank
refuses. RR persuades Quistclose Inv. to lend them $ for payment of dividend. RR tells bank they are doing
this. Bank goes into RR’s account and bank scoops it by combining and settling it. Outcome: RT.
 27

Holding: despite the loan of $ to RR, the fact that it was lent for the specific purpose of providing a
dividend (and if this was impossible then it would be returned to lender) means that the lender acquires an
equitable right to see that its applied to its primary purpose. Bank had notice: telephone call + letter told
them $ only to be used for dividend. This loan of money for a specific purpose create a RT after all.
Ratio: “knowing receipt” breach of trust: had notice of trust and interfered with money.
NB: You’d probably argue this case as CT: Knowing Receipt case these days. Bottom line: find a Trust,
bank ≠ scoop $ and rationale similar to Citadel v. Lloyd’s Bank but not as developed.

Re Kayford (1975, Ch. D.)

Separate Trust account for customer $ is indicia of T intention (≠debt) for creditors upon insolvency
Facts: stretch-cover furniture business, people sending in $. Co. struggling, has some customer $, officers
set up Customers’ Trust Deposit account + puts $ in, only take $ out when slip-covers sent out so that in
liquidation their $ will be protected (+later returned). Used a dormant account w/ 47 pounds in it.
Issue: $ held on Trust or is it a debt owed to Bank? Outcome: Trust exists, not debt.
Holding: Q of priorities. Apart from 47 pounds, is this $ held on T or does it make up part of general assets
of company? W acting for liquidators asserts ≠ T and should be available for creditors generally. This was a
T, 3Cs met: intention, no formal diffs, prop is pure personalty so writing though desirable is not necessary
(SOF: lands). SM clear, same with ben interests therein + bens, words: created without word Trust as
enough certainty. $ sent in is held in T for persons who sent it and they get priority in liquidation.
Ratio: customers who send $ in can have Trust created and not debt obligation if proper steps are taken.
[NB: general rule= if you sent $ to a company for goods which ≠ delivered, you’re merely a creditor of co.
unless a T has been created. Sender may create a T by using appropriate words when sends $, or co. may do
it by taking suitable steps on or before receiving $. If either done, personalproperty; debtT. Payment
into a separate account is useful (≠ conclusive) of intention to create Trust.]

E. Trusts and Bailment

Personal: B can only be personal property, not real. Bailee only gets a possessory right (not Oship).
Transfer: T can pass prop at their peril to BFPV w/out notice but a Bailee ≠ since Rt is not proprietary

Same sort of problems emerge, if can show it’s a T, Bens w/ proprietary right will generally have better
right than a Bailee or someone who’s taken it.

F. Trusts and Contract

Trusts very contract like. By binding conscience of T, we are in a sense enforcing a bargain btw settlor and
Trustee. Many elements of similarity btw obligs. Contracts can relate to personal or real property so can be
difficult to distinguish. Debts are really no more than contracts. Only distinguishing factor is enforceability
of the obligation from outsider.

Re Scott and Manufacturers Life Insurance Co. (1974, MBQB)

Facts: Annuity contract entered by Scott for Ben of someone. Settlor Δes her mind. If T or Life I, then Ben
has an enforceable right (prop right) but if contract btw settlor and person who grants annuity then intended
Ben ≠ have an enforceable right (since outsider to contract which exists btw settlor and annuity company).
Holding: not covered by Insurance Act (in which case it would be irrevocable), she was free to change her
mind. Annuity says as much. Bargain governs parties only and not enforceable by someone not privy to the
agreement. If only a contract and its between Scott and company, can’t enforce it. If T and they are
completed Ben, then they can enforce the Trust agreement but it could not be established here. Volunteer
stuff again 231: in absence of evidence strongly…but even where T was completely constituted, settlor
may be able to rescindthis latter statement should be taken with a grain of salt.
Ratio: force of doctrine that Equity will not assist a volunteer (outsider to contract: SOL) but if Trust on
other hand, need strong evidence of intention and creation, then Ben gets enforceable right.

Ch. 7: The Nature of Beneficiaries’ Interests

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ISSUE: Whether T is completely constituted – does Ben have a property Rt. Volunteer is someone who ≠
given consideration for bargain seeking to enforce; ≠ do anything. Policy and fact driven cases; largely
irreconcilable except on facts.

Stamp duties: ben ≠ interest in residue until T completely administered and ascertained (until then, all she
has is a chose in action). Widow avoids tax
Hillis: Ben has I in some but not all property + difficult to accept distinction by majority for interest from
ISA and rest of it (especially with interest in 1/3 of NE). Gives rise to some difficulties as you are wanting
to say Ben has > right than a chose in action. Widow avoid capital gains taxes.
Attenborough: Bens have suff interest to > pawn shop since all property is vested in co-trustees.
Beneficiary not allowed to be screwed by joint-trustees, one of whom is a rogue.

Answer to question regarding if Ben has interest in T, you can’t give a definitive answer. You have to
argue based on the cases and acknowledge the larger picture of equities. Gives lawyers many
potential arguments.

Commissioner of Stamp Duties v. Livingston (PC Australia)

Property could not vest until Trust complete – when Admin done and SM can be identified
Facts: Widow was residuary legatee under H’s will of 1/3 of his residuary estate which W was to inherit as
Tee. Prior to estate being fully administered and residue being established, she died.
Issue: what was W’s interest at time she died – vested Trust or not? Outcome: Not vested.
Holding: if vested, she owed taxes. Not vested – at date of death, there was no T fund consisting of the
residuary estate in which she could be said to have a BI b/c no T had yet come into existence on assets. The
T property ≠ vest in T until it can be said what the prop is that is subject to the T (when admin done) or
what residue, when ascertained, would consist of + value. She ≠ BI at death. Until T completed, Ben was
entitled only to a chose in action enforceable vs. the administrators for proper admin of the estate.
Ratio: no BI arises until T complete in a testamentary disposition, chose of action exists ony.
Q: What interest does resid legatee have in T property if dies before T property fully constituted/ trying to
avoid taxing a widow.

Hillis v. The Queen (1983, Fed CA)

Some property vests immediately in a surviving spouse upon death of another, others by admin of estate
Facts: Widow trying to get around paying taxes on H’s estate. Income Tax Act said if land vested in her
w/in 15 months of H’s death, no taxes due. H died intestate. Issue: W’s entitlement since kids disclaimed
interests + she claimed for $10G and not only 1/3 of estate as allowed by Intestate Succession Act, but more
(whole of net estate) by Dependants Relief Act. When prop vest in W? Out: immed. at H’s death.
Holding: Vesting of interest under Dependents Relief Act ≠ dependent upon an order of the Ct granting
admin of the intestate’s estate, it takes place immediately upon his death + no taxes have to be paid on this.
Further, the prop given to W under Intestate Succession Act was ≠ vested at time of death, but did vest w/in
a reas. amount of time after 15 month period (since complex) and so she ≠ have to pay taxes on that either.
Ratio: results-oriented decision: some property vests immediately in the surviving spouse at the time of
death of the other while some other is dependent upon administration of the estate, subject to 15 months.

NB: do we charge Widow’s estate w/ capital gains tax? A theme of PP is that tax avoidance is legitimate
solution for Trusts to enforce. Ct seems to want to enforce tax avoidance. Problem: you’d expect court to
say 10G is vested but 1/3 shouldn’t have been vested according to Commissioner (chose with no
proprietary action). SS: Dissent is better since puts 2 cases in line. She had no specific interest in any
residue of the estate, until it had been ascertained in due course of administration. Maj made distinction
btw ISA and DRA but can’t reconcile with Commissioners or cases dealing with residue, net estate, etc.

Attenborough v. Solomon (1913, HL)

Bens’ interest vests when Admin of Trust/Will is complete and at that point Trustees ≠ screw w/ property
Facts: 2 sons were executors. It was administered (debts paid) but not distributed. After admin, one of
them pawned some property then died. Ben of Father’s residue now claims that property. Out: Ben wins.
Holding: if prop vested in Ben immediately at death, Ben has better claim over item than pawn broker, but
if not then the broker wins. Following admin, Ct finds 2 executors were joint Tees of the property so son
 29

had no right to sell it. Executors had lost their vested right of property + when the dispositions of the will
become operative, the Bens have their vested right in the property.
Ratio: Beneficiaries interest becomes vested after administration, and Executors/Trustees cannot act
contrary to their interests.
NB: consistent w/ Stamp Duties (prop vests when T complete: Admin done and SM ascertainable)
executors of a will become Trustees of the property that is owed to the Bens + as such can only act jointly.
[Is property vested or not? Following Stamp Duties, we’d say no since estate has to be administered (plate
part of residue not specific request) + technically residue ≠ totally defined until complete admin occurs.
Hillis would say vested. Solomon could NOT pass title, purely fact driven as court says it was vested in
him and co-trustee when attempted bailment made. Reasoning; vesting occurs in executors/co-trustees on
death and its jointly vested in them when pawn made. Hard to see why Sol ≠ have acted as Agent for
himself + other Trustee and pass title. Hard to fit cases in line. Also, property vested in Trustees + at that
point, Bens prob only have chose in action until Admin happens. Tee’s rights + ≠ Ben’s to prop.]

Ch. 8: The Formal Requirements of a Trust

A. Completely + Incompletely Constituted Trusts: “Equity Will Not Assist a Volunteer”

Certain formalities must be met prior to court recognizing an enforceable Trust: vary w/ mode of creation
of T + with the nature of the property that is to be subject matter of the Trust.

Generally, (1) Constitution: prop must be transferred in name of T, + (2) Might have to be in writing
Exceptions (rare + difficult): a gratuitous promise contained in a deed to create a Trust some time in the
future creates an immediate Trust of a chose of action. Bird v. Strong: intended gifts are completely
constituted if a donnee of gift is named executor of the donor’s estate (thereby getting LT to intended SM
of gift) AND donor dies w/ intention of making the gift. NB: this rule ≠ extend to Trusts in Canada.

Milroy v. Lord (1862 CA Ch)

Transfer of property to intended Trustee is a requirement before a Ct can recog. a properly constit’d Trust.
To properly constitute a T, the settlor/Tee must have done all things required in order to transfer property.
Facts: Med intended to give Lord 50 shares in Trust for Eleanor. Transfer had to be lodged at bank w/ a
POA. Divs paid to Eleanor but shares ≠ transferred into Lord’s name. Ben trying to enforce it by getting
title, unpaid dividends and compensation. Trsfer docs filled out. Issue: T properly created? Out: No.
Holding: In order to constitute the T, the settlor + Trustee must have done all things reqired in or der to
transfer the property. Since LT never transferred to Lord, it ≠ properly constituted and Ben ≠ enforce it.
Could have been done by transferring property to Trustee or declaring himself Trustee but neither happened
and there is no equity of Court to perfect an imperfect gift: Ct ≠ give effect to it by applying solutions.
Ratio: formalities of T are needed to bring it into existence + Ct won’t assist parties who fail to do=no T.
No equity to perfect an imperfect gift. Intent is there, no transfer. Settlor doesn’t see it through, Lord could
have seen it thru but ≠. Tee disabled self from perfecting T and Ben’s ultimately out of luck. That is done
which ought to be done: equitable maxim seems to be violated.

Re Rose (1952, CA)

Where settlor’s intention to transfer property for T is clear and he’s done everything possible=Trust
Facts: Deceased transferred stocks on Trust for his wife. Transfers were in the form required by the
company’s articles of association, were stamped and registered in the company’s books later. Trust?
Holding: T was formed – intention was to complete the transfer, and even thought it was not officially
transferred there were sufficient actions by the settlor to complete the transfer (and T) as it was out of his
hands and he’d done everyone thing he could. Completed share transfer.
Ratio: where intention clear and settlor does everything in his power to complete a T, Ct will find as such.
NB: Crown wanted taxes paid and if court finds completed T, tax is avoided.
Milroy and Lord: they say that the T was incomplete and settlor ≠ do everything he could have to complete
T. SS: transfers in appropriate form, hard to say what difference is between Rose and Milroy as completion
of docs here, even though transfer ≠ complete was found to be sufficient to create a T but this ≠ enough.

B. Exceptions to the Maxim that “Equity will Not Assist A Volunteer”

 30

If Trust is improperly constituted, Ct will still sometimes assist the Ben in getting the property by
disregarding its own requirement of complete constitution in the interest of giving effect to clear intention.
Ex1: a gratuitous promise contained in a deed to create a Trust some time in the future creates an
immediate Trust of a chose of action (even though no effort to transfer $ to Trustee): T here is regarded as
complete in law b/c promise to create it is enforceable as a promise made under the deed. The future T is
incomplete but there is a collateral immediate T, SM of which is benefit of the promise to create a future T.

Ex2: Bird v. Strong: intended gifts are completely constituted if a donnee of the gift is named executor of
the donor’s estate (thereby getting LT to intended SM of gift) AND donor dies w/ intention of making the
gift. NB: this rule ≠ extend to Trusts in Canada.
Rule: intended gifts are completed constituted if a donee or Beneficiary if one of executors acquires title.
Once someone has authority and legal right to deal with property, this completely constitutes the Trust.

Re Halley Estate (1959)

Intended gifts are completely constituted if a donnee of gift is named executor of donor’s estate (thereby
getting LT to intended SM of gift) AND donor dies w/ intention of making gift. Rule ≠ extend to Trusts
Facts: Deceased intended to create T in favour of GD of some shares and dividends, gives prop to Murph
to be held on trust for GD. Another Daushgter was executor of his will and was to be trustee. Intended gift
≠ completed. Settlor writes to co of whom shares are owned, says he has GD, wants to give deed to her so
that can sell at age 17 to pay for education. Issue: should this intent be given effect + should shares be
transferred to Murphy + subject to using them for education. O: Yes – but Ct ≠ extend Strong v. Bird to
Trusts context.
Holding: SS: all you have is idea in the letter, co. does not follow thru on request or reply. Prop had not
passed by time settlor died (to be held in Trust). Fight btw GD + residuary beneficiaries (thru estate). Did
shares leave estate before death of man and if did, Karen gets an interest but if not then go to estate +
residuary Bens. Ct finds certainties but all he did was write to co. + told them what he wanted done to
shares. Other cases say there has to be something else done but here they say it is enough; GD gets the prop
+ words of letter, where otherwise may not completely constitute a Trust, satisfied purpose. Case probably
≠ be reconciled with others. Policy good: let Karen pay for education + ≠ let resids get $.
Ratio: intended gifts are completely constituted if a donnee of the gift is named executor of the donor’s
estate (thereby getting LT to intended SM of gift) AND donor dies w/ intention of making the gift. NB: this
rule ≠ extend to Trusts in Canada.

Mechanisms here are really artificial and are lots of arguments to be made in these areas and the success or
failure will have interesting results. What is behind this is policy: save widows from tax, help kids save for
education, etc. 3Cs and Constitutoin are linked.

C. REVOCABILITY
In Milroy v. Lord the court said that in order to effectively create an inter vivos trust the “settlor must have
done everything possible to transfer the property. Canadian courts are divided on the issue as to whether a
settlor who has reserved himself a power to revoke a trust has done this.

Ch. 9: The Formal Requirements of a Trust Cont’d

A. Inter Vivos Trusts and the Statute of Frauds

1677 SOF (s. 7) requires writing for trusts for land, signed by donor or someone by law enabled (settlor,
property owner, someone with POA, agent), or else Trust is NOT enforceable by the Ben. SOF rule ≠ apply
where a T arises by operation of law or construction. s. 9 says assignments of trusts need writing (or a will).
Wills Act says that not only do wills need writing, but also certain other formalities: signature of testator,
witnesses, etc. Wills requirements go above and beyond SOF.
Principle: you can’t hide behind SOF if you are trying to perpetrate a fraud on someone else.

Rouchefoucauld v. Boustead (1897, CA)

SOF defence cannot be used to perpetrate a Fraud (i.e. denying existence of T), including Trusts for land
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Facts: P claims D bought land from her + promised to hold it in T for her b/c of $ difficulty. P claims
certain lands should be conveyed to her from creditors of D who took some of his land upon his bankrupt.,
+ as Ben she has better claim than creditors. D mortgaged land, sold it + creditors in bank foreclosed Out:
W wins. Holding: although conveyance ≠ mention T, req. of writing is side-stepped b/c P showed D
committed a Fraud by denying existence of Trust which he accepted. B/c of Fraud, he ≠ rely on SOF to
protect himself. P can raise evidence of a parol Trust (some docs), then evidence of Fraud on D, + T will be
enforced despite lack of writing. NB: the T itself ≠ have to be in writing as long as there’s some writing to
prove it exists. Cts can infer Trust from series of docs and parol evidence helps too. Ratio: SOF ≠ be used
to commit a Fraud and other evidence (oral) is admissible to show that a Trust for land is valid.

Bannister v. Bannister (1948, UK)

An absolute conveyance made with attempt to kill a beneficial interest (orally made) amounts to Fraud and
the wrongdoer cannot then rely on the SOF as a defence to a Trust for land being formed.
Facts: P orally promised D that D could live rent free in cottage for as long as D wanted if she’d sell 2
cottages to P (this≠ included in formal conveyance). D occupied room, P wants back saying D was a tenant
at will + could be kicked out w/ notice. D: P held cottage in T Out: D wins T existed, no recovery of posses
Holding: someone who insists on an absolute conveyance of land to himself for purpose of defeating a
beneficial interest which was supposed to belong to someone else commits fraud. This F ≠ covered by SOF
and a lack of written evidence ≠ allow wrongdoer to hang onto land.
Ratio: an absolute conveyance made w/ attempt to kill a beneficial interest (orally made) amounts to Fraud
and the wrongdoer cannot then rely on the SOF as a defence to a Trust for land being formed.
NB: Land Titles Act s. 51: registrar ≠ record land as a conditional ownership; ≠ record Trustees. They are
regarded as absolute owners of property + need to file a caveat or something to that effect if the Bens are to
give notice to someone who may be looking at the Title.

Scheuerman v. Scheuerman (1916, SCR)

SOF not a defence to fraudulent conveyance of land, but neither can a Trust be formed for illegal purposes.
Facts: H bought land, put in W’s name by oral agreement. She sold it + he claims to be entitled to
purchase price alleging that W was holding the prop on T for him. Outcome: W wins.
Holding: there’s no writing to support a T for land but W’s actions were fraudulent in any event so she ≠
rely on defence to hold onto it. BUT, whole purpose of M in 1st place was to give LT to W so he could
evade creditors (Fraud): no T ever arose. POA then says a M can give his W prop as gift: gets $ + gift
Ratio: SOF not a defence to fraudulent conveyance of land, but neither can a Trust be formed for illegal
purposes. Court follows Rochefoucaud. NB: ET here that was trying to be imposed (arguably)

Langille v. Nass (NSSC, 1917)

For CT or breach of Trust, SOF can’t be used as shielf for fraud.
Facts: A # of people pooled $ to get land build hall/church. Ps were made Tees and LT to land was
transferred to them. They occupied place, locked it most of time + made it open for some worshipping
times (but closed it at other times). Defendant Bens wanted in at a time when it was locked, broke in. Ps are
suing in Trespass, Beneficiaries counter T was breached by Trustees.
Out: Trespass suit can proceed vs. Bens; Bens can sue for breach of Trust.
Holding: Trespass suit against Bens can go ahead: no right to enter by force + Tees have obligation to
protect T property in any event. It was not right for Trustees to favour one group of worshippers over
another. Bens can sue them for breach of Trust + compel performance. There may not be an ET articulated
in conveyance itself (as by SOF) but there seems to be a CT at least + Tees ≠ convey LT to anyone else.
Ratio: Trustee has duty to protect T property and follow instructions of Beneficiaries in Trust agreements.

Ch. 10: Still More on the Formal Requirements of a Trust

A. Secret Trusts
ST ≠ comply w/ requirements of Wills Act. Used when testator wants to benefit someone but wants to keep
it private. Enforcement requires conscience of donnee to be made good. Several methods:
1. Full ST in will or inter vivos: Testator gives prop to someone by will (legally & beneficially) +
person agrees to do something w/ it. On face of will, gift goes to Trustee absolutely, but secretly
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there’s an agreement btw testator and Tee (not in will). No mention of conditions in will. Equity will
enforce b/c of sep agreement: Tee has to know of ST during lifetime though. Outside WA.
2. Intestate Succession Act: figure out who property would go to if you don’t make will, + make an
agreement w/ them regarding what they should do w/ the property.
3. Half-Secret Trust: give gift in will to Tee but also say in will that gift is subject to certain conditions,
but ≠ state what they are. Harder to enforce b/c the conditions need to have been made known to Tee
or else T is improperly constituted. Also, the Wills Act requires writing and signature; + if T conditions
are in a separate doc that ≠ meet reqs, technically it should ≠ be enforced as a Testamentary document,
but courts will likely enforce to fulfill intentions of S (and bind conscience of Trustee).
HST RULE: terms of Trust must be revealed to intended donee/Trustee before the will/codicil is
executed for this to be valid. However, some courts (Legerwood: NSWC) have said its OK if the terms
come after the execution, as long as they are made known during the testator’s life.

In Re Boyes (1884, Ch. D.) Bens of Full ST (apparent absolute gift) must be revealed to intended Trustee
during testator’s life or it will be invalid. Destination of gift ≠ communticated to Tee during testator’s life.
F: apparent absolute gift from testator; donee (Tee) has been instructed to give $ to a lady + kid by testator,
but no other details. Bro of deceased (also next of kin) challenges gift as donee ≠ know who Ben was until
after testator died (read letters). I: T valid (fully constituted)? O: No, Full ST fails.
H: to make a ST binding, it has to be revealed to Tee during lifetime of testator. Usually Trust will be
declared at time will is made but in any case, by time the testator dies, ST has to be revealed (objects of it
in this case) or else its invalid. Envelope?
R: conditions of fully ST (no reference to something more) must be revealed to Trustees before testator
dies if they are to be valid. Trustee has to accept the particulars of the Trusts, its not enough for the Trustee
to say he’ll do something without knowing the details. Might be OK if terms are written down in sealed
envelope, otherwise too much violation of WA (PP). You can’t keep the Trust secret from the Trustee!

In Re Blackwell (1929 HL)

Half ST will be valid where conditions are made known (memo) prior to execution of will/codicil
F: Testator executed a codicil (made mention of conditions), gave certain sums of $ to be held on T
pursuant to oral instrux that had been privately commt’d to Trustees (terms specified in memo). Testator’s
widow + son say T fails + $ left forms part of residue. ST constituted? Y H: validly constituted T,
conditions known to Tee, + intention of testator must be given effect. If ST ≠ held up, donee could
fraudulently hold $. Fully ST: conditions must be communicated to Tee prior to death. Operate outside
Wills Act, so compliance ≠ big deal. Half ST: conditions must be made known prior to execution of
will/codicil. Communication of purpose to legatee, coupled w/ his acquiescence removes matter from WA
Ratio: Half ST will be valid where conditions are made known (memo) prior to execution of will/codicil
If Trustee accepts Trust, Ct is going to make him comply. Object is to bind conscience of Tee and in certain
cases we won’t let formalities of WA stand in way of claim.
HST are OK + ≠ conflict w/ Wills Act since operate outside it, thus can get around formalities.
FST ≠ conflict with WA either since they get prop apparently absolutely + next q= should it be enforced.

Legerwood v. Perpetual Trustee Co. Ltd. (1997, NSWSC)

Communication of terms of HST can come after execution of will as long as before testator dies, T valid
Facts: Communicat. of terms of HST was made by a memo AFTER execution of will (not before or at time
of as in Re Blackwell). Out: will + T are OK. No big deal that comm came after.
Holding: (dicta) there ≠ be a distinction between ST + HST wrt communicat. reqs. Goal is still to prevent
donee from committing F by promising to do something by way of T + then retreating. So long as intention
of testator was communicated to Tee + accepted prior to death of Testator (not pre-will), all that matters.
Rationale: against conscience of donee/Trustee to escape from undertakings.
Ratio: Comm. of terms of HST can come after execution of will as long as before testator dies, T valid

Jankowski v. Pelek Estate (MBCA)

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Valid FST where conditions revealed before death of testator. NB: dissent here picks up on Legerwood
Reasoning
Facts: Testatrix married twice + 2nd husband trying to get more from will; 2nd M unhappy only supposed to
get a small #. In will was HST: Trustee known but not conditions (clause: “residue to my said executor to
deal with as he may in his discretion decide”). Conditions (people/residue) set out after will was signed
(post execution), but during life of testator: told Tee names of people she wanted $ to go to, not signed.
Issue: was this T enforceable as a Half ST? Out: 2 judges agreed H’s appeal should be denied.
Holding: J2: this is a FST + thus the conditions can be imposed any time before the testator dies. While it
is wrong to use extrinsic evidence in interpreting the will, the use of that evidence to determine whether the
testatrix create a ST is permissible and necessary.
Dissent: Judge 1: HST + conditions of T must be set out before or at time of making of will, but not after.
Arrangement here against WA + ≠ be allowed. If had written out instrux, doc could get testamentary effect.
Runs afoul of Legerwood decision.
Ratio:

[on face of it looks like a Discretionary Half ST, or a binding Trust. Terms of maybe Half ST were
disclosed after the will before the death and in a form that does not comply with the formalities of the Wills
Act. SS: borderline one since could be a T that is fully discretionary in which case there’s no secret, or
secret where there is discretion is compromised by this subsequent communication. SS: Half ST and follow
Legerwood and come to same conclusion as Majority: its OK to communicate the terms of the T after the
execution of the will so long as communication and accepted by Tee during the life of the testator. ]

In Re Gardner (1923, Ch. D)

HST given effect even though terms not communicated to Trustee before will executed. T prop vests immed.
F: Testatrix gives prop to H fully in her will, stating that “he will carry out my wishes”. Testatrix made a
list of conditions after signing the will (memo), terms include a life estate to H and then to nieces and
nephews. 1 of nieces dies prior to testatrix. T said that if this happened, the gift was to go to someone else,
who also predeceases the H. Q: who is entitled to $?
O: Nieces and nephews all get a share: MC, LB and estate of MOH.
H: inter vivos T, MOH’s interest vested immediately upon HST being created (communicated and
accepted). If contingent, residue divided up btw survivors. Result: nieces and nephews all get a share.
R: HST given effect even though terms not communicated to Trustee before will executed. T prop vest
immediately.

Another Half ST. Case of vesting – if HST are given effect to and right is vested then on the H’s death,
prop would go these individuals and estate of deceased’s neice. If contingent, residue divided up among
survivors. 2 ideas on vesting: whether apply maxim that equity looks upon that which ought to be done as
done (if apply this, we interpret to mean that all surviving neies and nephews of H take in equal shares and
not just particularly to May not survicing H).

NB: Here immediate vesting, but strictly speaking there ≠ an amount when T communicated since it
will depend on what’s left in estate. Very difficult to reconcile with earlier cases of unascertained
property. Even though tells us of vesting rules, its hard to reconcile.

CH. 11: LIMITATIONS ON THE SETTLOR’S POWER OF DISPOSITION

Idea: you ≠ tie up property for too long, establish infinite dynasties since against Public Policy (policy
against inalienability). Specifically this applies to non-charitable Trusts with people. CL is a mess and leads
to absurd results. CL only applies to pre-1973 dispositions + and in some jurisdictions where no Perps Act.
1. CL screws all up. 2. Hardly ever see CL results b/c of PA laws.
The CL deals with possibilities of vesting outside PP and thus creates a giant mess and often absurd results
[invalid even if vests within PP if possible that it won’t, many absurd results]
Possibilities are magnified by lack of limits, i.e. W can have kids over whole life.
[Only need to deal with CL pre-1973 Trusts in AB and Ontario.] RAP applies only to non-purpose Trusts.
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Common Law - Duke of Norfolk’s case (1683): Starting point: No interest is valid unless it MUST vest
during life in being plus 21 years (maybe 121 years): modern rule.
 Children en ventre sa mere are lives in being.
 Old rule: Whitby v. Mitchell (1889): interest is void if its given to the unborn son of an unborn son of a
living person.
 Ct assumes for these rules that W can have kids at any age between 0-90.

Many ways to pick a life in being. Could pick a foetus as a life in being. Examples:
 For on death of A, +21 years: good since you specify life in being.
 Upon death of X, Y or Z plus 21 years is also good: property vests in Ben w/in period ending on
death of survivor.
 Death of survivor of all children born at U of A hospital in 2000 plus 21 years (whole class) is
pretty good too since we could probably figure out the whole list of babies born during the year,
find longest living and tack 21 years onto that day.
These are threshold for vesting.
 21 years from death of last survivor of all persons residing in Edmonton who were alive at my
death plus 21 years  you could figure this out (valide), then who lives the longest. Vesting
period here is theoretically valid since it’s a life in being plus 21 years. But it could fail for
administrative uncertainty (same problem that plagues some C of Objects questions).

Class Closing Rules:

All or Nothing Rule: no members’ interest are vested unless all members’ interests are vested.
If income on Trust to child of A who shall attain 21 years. B 21 C 7 D 14 y.o.
If A is still alive and might have more children. If B wants her share and apply all or none rule, all of them
have to be 21 before any of them get anything. This is especially difficult if A is still alive since may have
more children so you just don’t know.
Andrews v. Hartigan: you can give a minimum share (i.e. 1/3) to B. If C and D reach 21, they get their
thirds, if C dies before living to 21 years, then B and D split C’s share. Allows you to pay out minimum
share and then wait and see.

Trusts can be invalidated for public policy

Promote celibacy (i.e. conditions attach that say Ben can’t get married); Encourage weakening of sanctity
of M (i.e. to induce separation of H & W); Interfere with parental duties (i.e. encourage separation of parent
and child); Trusts designed to defeat creditors may be void/able at their instance; Those for fraud, executed
in ignorance or under some error can be rectified or cancelled maybe.

A. PERPETUITIES [CL rules apply outside AB and Ontario and pre-1973 in AB.]

Perpetuities Act 1973, AB & Ont. MAIN PRINCIPLES

1. “wait and see”: Eliminates declaration of invalidity for the mere possibility that a T may not vest w/in
the specified time. Act states that Cts will “wait and see” if it vests within the required time. Not
possibility, but actuality that matters.
2. Cy pres: Gives Ct the power to amend the disposition to make it conform w/ rule. Ct has the power to
infer that the testator mean to give a valid gift and make the disposition as close to the original intent but in
the form that complies w/ rule. Ct can amend terms of T to save it by RAP.
[Vested=interest is vested when precise identity of person to take is ascertained.]

Follow these to try to save an interest that would otherwise be void by CL rules of PP
s. 11: order of relief: apply remedial procedures in following order: 9,4,6,7,8,21
s. 9: procreation limits: presumes males can have kids after 14, and women can have kids between 12-55
[Ameliorates CL problem where they can reproduce theoretically at any age. Constraint on possibilities;
may resolve uncertainty but if not, keep going with other sections.]
s. 4: wait and see rule – if the property vests within the perpetuity period then it is valid
s. 6: read down age: Ct has power to read down the age of the intended beneficiary
[i.e. if LIB + 25 years: this would be void but under this they could read it down to 21; redrafts disposition]
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s. 7: class closing rule – can save the gift by excluding potential class members that don’t fall into the class
within the perpetuites period. [save Trust by excluding potential members :i.e. unborn son of unborn son]
s. 8: safety net – if no other section can save it, can try to prove the intention of the settlor, + Ct can rewrite
the gift to give effect to the general intention in a way that conforms with the perpetuities rule.
[Ct infers expressed intent as closely as possible to wind up on side of validity]
[s. 21: the rule that a gift to an unborn son of an unborn son is invalid (Whitby v. Mitchell rule abolished)]

Very few Trusts would ≠ be saved by Perp Act. Examine facts, ask 1. Whether there’s a potential P
problem (under CL is it possible it could vest outside PP) and if so, 2. Apply the Perpetuities Act.
Make sure you don’t draft a Trust that is potentially going to be rectified by the Act.

CHAPTER 12: PURPOSE TRUSTS

At CL, non-charitable purpose Trusts are void w/ 2 exceptions: maintenance of gravestones or animals.
However they can be treated as a power to appoint though by Perpetuities Act and remain valid. Every
other purpose is bad except if its charitable.

Issues:
1.Tax Exempt Status: Charitable Purpose Trust are valid and are tax exempt under Income Tax Act as
thought to be a good thing.
2. Validity: discussion hinges on enforceability. Since there is nobody to enforce the Trust as designed for a
purpose, maybe they are invalid.

A. CHARITABLE TRUSTS

Vancouver Society of Immigrant and Visible Minority Women v. MNR (1999, SCR)
To be considered a charitable org under ITA, must have charitable purposes + devote all of its resources to
charitable activities.[Ct upholds traditional view that to get RC status, an org must have a Charitable
purpose (as per Pemsel, though Education is broadened) such that benefits the comm. or suff impt part of
society AND all of the org’s resources must be devoted to charitable activities in furtherance of those
purposes (with a few exemptions). Ct rejects notion of ‘public benefit’ test for what constitutes charitable
purpose as being a radical Δ that should be left to Parl.]
F: A T was created “to educate members of comm at large, including immigrant and visible minority W, on
needs + concerns of immigrant +visible minority W in Canada.” NB: was this a charitable trust?
O: No, neither category to get RC status was met.
I: did Ct err in law in finding that Society ≠ qualify as a charitable org w/in meaning of ITA? If Society ≠
qualify under traditional def of ‘charity’ should a new approach to law of charity be adopted? If so, what
form should it take, + can Society qualify under new approach?
H: to be considered a charitable organization under ITA, must have charitable purposes and devote all of its
resources to charitable activities. CL def of “charity” developed in context of Trusts, where a charitable
purpose Trust is an exception to the general rule that a purpose Trust is invalid. Court is concerned with
charitable objects, not activities. Charities consist of 4 principle divisions (Pemsel):
1. Ts for relief of poverty; 2. Ts for the advancement of education, 3. Ts for advancement of religion,
4. Ts for other purposes beneficial to the community.
But Ct has discretion to determine what is “charitable” beyond those cats. Diff btw Pemsel classification +
“benefit for community” notion= latter is necessary but not sufficient to form charity at CL, also 4 heads
focus on ‘what’ of charity while benefit focuses on ‘who’ receiving. Ct considers whether test should be
made into “public benefit”.
Education: For education, Ct feels category should be expanded to include “any knowledge or training or
advancement in structured manner as long as not just the promotion of 1 point of view”: no good reason to
keep ltd definition to formal initiatives (incremental Δ). On this basis, their purpose to hold seminars meets
the education head (would not have under the CL approach).
4th Head of CL Charity: The Society also claimed that they fit under the 4th head but SCC said this ≠ work
under CL understanding as the purpose is not exclusively charitable since not all immigrant W have trouble
b/c they suffer from prejudice or discrimination. Purposes ≠ all charitable.
Ancillary and Incidental Purposes: too vague + indeterminate to allow Society to get charitable status.
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New Approach (to what is charitable): REJECTED on whether the org is performing a “public benefit”
without a fixed category of what that is: Ct says Parl has to make dramatic Δ, not them.
Org’s Resources: not all charitable either (like Purposes). Neither criteria for RC status has been met.
Public Benefit Test (to determine if it is a Charitable Trust)
1. Does it have a Charitable Purpose (1 of 4) and do they define the scope of the activities engaged in by
org? [Does it benefit the community or a sufficiently important class of the society?]
2. Is it constituted exclusively for charitable purposes? [All of the org’s resources must be devoted to these
activities unless the org falls w/in spec exemptions]
All of the funds must be devoted to the charitable purpose, other purposes must be NI. Creation of job lists
is not charitable, neither ancilliary, so ≠ meet 2nd part of test.
R: Ct upholds traditional view that to get RC status, an org must have a Charitable purpose (as per Pemsel,
though Education is broadened) such that benefits the comm. or suff impt part of society AND all of the
org’s resources must be devoted to charitable activities in furtherance of those purposes (with a few
exemptions). Court rejects notion of ‘public benefit’ test for what constitutes charitable purpose as being a
radical Δ that should be left to Parl.

[For charity need to fit purpose in 1601 statute or within one of categories from Pemsel.
SS: Dissent seems better. Case turned on ‘exclusivity’ are there purposes other than charitable ones.
Gonthier raises good questions of public benefit, abstract concepts like altruism, etc. Also tells us about
judicial discretion and stances and where bold judges can make decisions where parl has not legislated but
some will refuse to make decision. Sociological context: most charitable purpose trusts really turn on
whether you can have tax-free status. Category in act matches CL stuff and this is important since have
government who has shifted burden to private sector to determine charitable and they’ve also given
judiciary fairly wide discretion. ]
D: All charitable Trusts must fit into 4 categories above. There are 4 requirements of a Char. T: Law does
not need to be reformed (wrt to fact that a charitable org must pursue a public ben in a way which the law
regards as charitable): but legal conception of charity must evolve too. Best approach is that which ties
principle with respect for existing categories. Should avoid reference to abstract principle of ‘public benefit
in attempting to evaluate the charitable status of a purpose (Charybdis). Should also avoid blind adherence
to inflexible enumeration of charitable purposes by testing them against broad principles (Scylla). We
should maintain categories, but make them sufficiently broad, flexible and unrestrictive.
In determining whether a particular purpose is charitable, the courts must look to BOTH broad
principles – altruism and public benefit – as well as the existing case under Pemsel categories.
Process: a) IDing primary purposes of org; b) Determining whether those are charitable c) whether the
other purposes are NI to primary ones d) whether the activities engaged in by the org are sufficiently
related to its purposes to be considered furthering them.
Application: a) +b) are met: Education: agrees with majority that it should be broadened, given wider
definition. They meet this one. Other purposes Ben to Community: Society’s purposes meets this sub-
category too. Canadian authority says helping immigrants find work is a charitable purpose. d) directly
furthers the purposes, this is also met. Also open to big enough class, not too political. Not too vague.
CL Def of Charity: Should NOT be changed; Pemsel is flexible enough to comprehend S’s claim.

B. NON-CHARITABLE PURPOSE TRUSTS

At CL non-charitable Trusts are void with 2 exceptions: maintenance of gravestones or animals. They can
be treated as a power to appoint though:

Perpetuities Act – somewhat of an exception;

s. 20: A T for a specific non-charitable purpose that creates no specific enforceable equitable interest in any
specific person shall be treated as a power to appoint and is VALID so long as:
A) its not for an illegal purpose, and B) the power is exercised by Trustee w/in 21 years.
So once again the PA steps in to save something else that would otherwise be void at CL probably.

L.I.U.N.A. Local Members Training T Fund v. R. (1992, Tax Ct.)

S. 20 of the Perpetuities Act can save a Trust that is specific, not charitable if the trust funds are appointed
within 21 years.
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F: Union and employees association were parties to a deed of T for training of members.
I: 1. is this a valid non-charitable purpose Trust? And 2. is it Tax-Exempt?
O: Non-Charitable Trust is valid.
H: Not charitable so would normally fail by CL but it satisfies s. 20(1) of Perpetuities Act if the trust funds
are appointed within 21 years.
Recap: recall most purpose trusts invalid except for animals gravestones, Perpetuitites Act. See class notes

CHAPTER 13: TERMINATION AND VARIATION

General Principles - CL
1. All of Bens together can terminate Trust if they are absolutely entitled (and divide things up):
Saunders v. Vautier
2. Resulting Trusts may have a role in this context (i.e. Gillingham Bus Disaster): Could be RT in
favour of donors which in itself is a termination since gives prop back to settlors.
3. Court has NO inherent power to vary trust (Chapman): only 4 situations where this comes in.
Power comes from s. 42 of Trustee Act – two important rules for this is that you have to APPLY
for Ct permission and show a BENEFIT for each person on who’s behalf court may consent
(interpreted liberally: Re Riddals, i..e. tax avoidance).
4. Sometimes settlor can terminate Trust
5. Court can authorize actions of Trustee that were unauthorized under the terms of the Trust, but
only in emergencies. This can occur when there are a # of Trustees, all of age, and agree to action.
If they don’t agree, Trust may be terminated and all take their share. Public Trustee will speak on
behalf of those Trustees that are not of age.

Trustee is obliged to administer Trust strictly in terms of the Trust and if doesn’t do that, Public Trustee
could take over OR could be sued by Bens or certain classes of. Trustee can’t simply listen to Bens and
terminate trust if they ask, in AB need court approval and a benefit must be demonstrated. Cases show that
courts will look far and wide to try to find some Bens who may benefit or should have say if it is to be
terminated or varied.

A. Termination

Saunders v. Vautier (1841)

Person beneficially interested in Trust could override Trust and cancel it: even contingent or defeasible or
future interest
F: testator left stock in will, to held on Trust for guy (by accumulating interest and dividends) until 25. Sole
Ben turns 21 and wants $ now. Court agrees to discharge.R: where a legacy is directed to accumulate for a
certain period or where the payment is postponed, the legatee if he has an absolute indefeasible interest in
it, is not bound to wait until expiration of that period but may require payment the moment he is competent
to give a valid discharge. NB: this likely flies in face of testator’s intention.

Re McCrossan (1961, BCSC)

A Settlor/Sole Ben can revoke/terminate Trust where there are no other beneficial interests.
F: W gave life interest of prop to H, then back to W, + upon her death to certain people dedicated in will. H
dies, W wants prop back unfettered by interest of those she’d declare. Wants T retracted as sole Ben. O:
Sole Ben can terminate T. H: since she was settlor and had not dedicated it any further after her death (her
POA not exercised) she remained Sole Ben + could terminate it (even though purposes of the Trust may not
have been fully accomplished). No contingent interests in favour of others exist here. R: a Sole Ben can
revoke/terminate Trust where there are no other contingent interests.
NB: settlor there, ct says that there are situations where Ct can go contrary to their originally expressed
intention. There’d be no point in keeping the Trust here, if she wanted to give it away later by will that’s
fine, but when you are sole ben for life, this doesn’t add much to the equation.
Settlor/Sole Ben. If others have contignet interests in AB today, Ct must decide if revocation, variation or
termination is for the benefit of those Beneficiaries. Sole Ben can terminate Trust.
 38

Re Bell (1980, Ont. HCJ)

Ct will not terminate a Trust if goes against clear intention of testator/settlor.
F: W leaves prop to Church & Hospital, each to get $500/year from capital. The 2 Bens agree they want
whole residue now (not over next 75 years) and apply to court for termination. O: No termination.
H: despite many good reasons to do hold that residue should be distributed immediately, this was not
intention of testatrix (from language of will) and that is the overriding concern here.
R: Ct will not terminate a Trust if goes against clear intention of testator.
NB: here Ct refuses to vary terms of Trust where it goes against express intention in eyes of judge. First
instance of taking express intention of settlor really seriously. Have 2 Bens here, some evidence of a
benefit but only thing that stands in way is Court who says that intention of settlor was to have maintenance
ongoing over a # of years. 350: acknowledges that this decision would not be made by everyone.

Zeidler v. Campbell (1988, CA)

Settlor cannot revoke voluntary Trust which she has established where the Ben has a beneficial interest (in
this case = voting rights which he may use) and he would not benefit from the revocation.
F: W gives some shares to son-in-law, he gets right to vote with them (irrevocable voting Trust), runs
company. Separates from daughter. Z now wants to cancel voting rights of donnee, and thus is trying to
terminate Trust of the voting shares. O: No term allowed. H: son-in-law has the BI in the Trust and thus
termination or variation can only be done with his consent: s. 42(6) Trustee Act. NB: trust property here are
the voting rights and he has a beneficial interest in them since he can use them. The option that son had
here, which he could operate to give himself a bonus was enough to give him a beneficial interest, thus he
can veto Trust’s cancellation.
R: when donee (Ben) has beneficial interest in Trust, termination or variation can only be had with his
consent as per. S. 42(6). Must be benefit to him.

[NB: If he has BI in Trust, question of whether he gets a BENEFIT by revocation is crucial. He has a BI
here since he may use the voting rights. To terminate trust, gives him no voting rights, thrown out of
company: its not for benefit if this thing is terminated and thus we won’t approve it. SS: court might
approve it if Ms. Z could show that kicking him out is proper and right and he wouldn’t be entitled to
anything. Benefit to anybody.
NB: instance of considering element of ‘benefit’, Ct is considering abstract and intangible benefits of which
there is no evidence and err on side of preserving Trust, despite fact that we have settlor there. Indirectly
this case shows the LIMIT of the settlor’s intention in the variation or revocation of Trust.
NB: it wasn’t that Trust couldn’t be revoked, rather it was a case of evidence on the facts…]

Alberta (Public Trustee) v. Sabo Estate (1995, ABQB)

s. 42 Trustee/executor ≠ pay out all $ of a Trust from a will, thereby killing Trust, without approval of Ct
F: Trust for spouse from will allowed Trustee to make advances to her subject to Trustee’s absolute
discretion. Trustee decides to exercise this, pays the whole amount to Beneficiary spouse, thereby
terminating the Trust, without applying to Court. Out: Not allowed to terminate without applying to Court.
Held: by paying out all the money, executor/Trustee effectively terminated the Trust which goes against
requirement of s. 42: there is to be no variation or termination of a Trust in will without approval of the
Court unless the terms of Trust reserve a power to someone to revoke or vary Trust.
Ratio: Trustee/executor cannot pay out all $ of a Trust from a will, thereby killing Trust, without approval
of Ct as per s. 42.

Discretionary trust where Trustee has absolute discretion, pays out all T$ to Ben and did so without Ct
approval. PT says you can’t do that, s. 42 says you need permission even if have. Trustee Act prevails over
express right of executor to terminate Trust. S. 42>Absolute discretion of Trustee.

Q: if have bank account and want to close it and they say you have to pay $10 to do this, you could leave
$1 in there and keep it open indefinitely? Similarly, could a Trustee advance almost all of the T$ in his
absolute discretion or would PT step in this case?
 39

B. VARIATION

Chapman v. Chapman (1954): Ct found it didn’t have an inherent jurisdiction to vary Trust terms and
didn’t in an estate tax avoidance situation (up till then it seemed OK). There are 4 exceptional
circumstances when it can vary (invoke inherent discretion to do so):
1. Conversion, 2. Compromise 3. Emergency 4. Maintenance Jurisdiction

In Re Steed’s Will Trusts (1960, CA)

Trust can’t be varied where potential/speculative Beneficiary does not consent where it would uphold
intention of testator
F: Testator gave a protective Trust to a former servant. Servant now asking for a variation, for the removal
of he word “protective” (variation) which would give her a full life estate in the prop. But result of this
would be to put the prop at risk of falling into hand which testator trying to avoid against. O: no Var.
H: Trust cannot be varied. Reason: servant may marry and this would create a new Beneficiary whose
consent we would need to vary the Trust. Ben has some bad family members and testator’s intention was to
save servant from the bad brother.
R: Trust can’t be varied where potential Beneficiary does not consent

[NB: this case also shows Ct’s reluctance to vary Trust where testator’s intention would clearly be
frustrated, even where Ben goes to court trying to have it changed. Here testator’s intention is first and
foremost and he wanted to protect against this eventuality. How can TJ protect sole Ben who would
otherwise be able to collapse it? Court goes to great lengths here to give effect to settlors’ intention/protect
servant. Ct invents a potential beneficiary, a possible spouse for her even though she is old. Almost like
going back to Perpetuities possibilities approach. SS: we’ve come full circle, under guise of ‘benefit’ , to
give effect to intent of testator. Court won’t go against it here. Essentially gives effect to intention of
testator.]

CL starting point, then into s. 42 TA which sets out conditions for variation and termination: one of
requirements is that there be a benefit to the term or variation demonstrated, most other cases have to do
with this benefit. S. 42(7): benefit required.

Re Zekelman (1971, Ont HCJ)

Benefit to Beneficiary should be construed liberally: includes earlier vesting time, family harmony, taxes.
Benefit is more than money.
F: Dad made inter vivos Trust for 1 son exclusively should he survive settlor and reach 25. Dad then has
other children, goes to Ct asking for variation of Trust so it could benefit all kids equally and vest at 21.
According to Variation of Trust Act, variation had to benefit beneficiary to be valid. [NB: on face this
would be to the detriment of the Ben since kid’s share would be watered down] O: Variation allowed.
H: there are 3 benefits to the Ben from this variation (benefit is more than $):
1. Time of vesting will be accelerated. 2. Source of dissension amongst family members will be eliminated
since all treated equally. 3. Taxation will be eliminated that would have applied due to accumulation of $.
R: benefit to Beneficiary (for purposes of varying Trust) can come about in many ways and includes more
than just money.
Ct: only made variation which what it thought was consistent with intention of settlor which was made
easier by fact that this was inter vivos and not testamentary. Example of how far court will go to find
benefit (some will go further). Like Lord Denning’s 3rd point: there are things more important than $.
Outcome would probably have been the same (in terms of benefits) even if testator dead but this was made
easier by fact he was living. Silence of deceased testator would not prohibit variation.

Re Irving (1975, Ont HC)

F: attempt to vary a Trust.
H: they cannot satisfy Ct that variation would produce a benefit. Case adjourned, go back to drawing board
to somehow make this benefit fly. Improving ‘bargaining power’ of grandchildren is taken to be the benefit
but this is pretty thin.
 40

Re Riddals (1983 Sask QB)

Court can vary Trust to help avoid taxes
F: Trust of farm land, life interest to widow (and income) and then upon certain circs to be divided up by
kids. If Trust not varied it would be subject to significant cap gains taxes and some of it would be sold.
O: Variation OK. H: its not against public policy to vary Trust to avoid taxes. Bens to grandkids protected
in other ways. Role of Ct is to protect those who can’t do itself, gives his check to tax avoidance, and there
may be other benefits that are as valuable as money. R: its not against public policy for Court to vary Trust
to avoid taxes.
NB: court looks at intention of testator to see what he had in mind at beginning when made this trust: basic
intention was to provide stable income to widow until reached 65 and then rollover to kids, Trust will now
be completed in 4 years, to refuse to grant the variation would create big tax liability…See public policy
question and this coincides with wishes of Bens and intentions of settlor. Benefit, agreement and settlor’s
intention. (theoretically Benefit should be enough to allow variation) NB: court says has to speak for those
who can’t speak for themselves… “weighing the benefits…” formula to try to decide whether something
should be decided on behalf of those who can’t speak for themselves: prudent adult motivated by self-
inteterst and consideration of the expectancies and rsks would approve the proposal.

Russ v. BC (Public Trustee) (1994, BCCA)

Settlor’s intention irrelevant – consider what is best for the Beneficiary in addition to Settlor’s intention
F: Shares of company being held in T for kids. Parties want to wrap up company, start 2: one for each fam.
Some of potential Bens are dead. Want to vary trust for 1. More control and 2. $ Up front: interim
distribution by making into 2 corps.
H: Variation of Trust was upheld. TJ exercised discretion properly.
1. Parties are free to amend a proposed variation and reapply to Court and they will examine that: not a take
it or leave it. Litigants can go back and proposal can be modified.
2. Intention of settlor should be considered when varying, but is not determinative. The most important
thing is benefits of the parties concerned.
3. Court should also consider point of view of unborn beneficiary: variation should be good for them too.
Ratio: court need not consider the basic intention of the settlor: court not charged with that, etc.
Court must look at situation thru eyes of unborn children and see if proposed transaction is good in their
eyes NB: so far settlor’s intetion has been consistent with proposed variation in court’s eyes, here is
contrary view. His is different situation for those who cannot speak for themselves, shows divergence btw
Sask QB’s formula and BCCA here.

Q: look at s. 42 of Act and ask, do we agree with Fitch in BCCA Russ in so far as considering the settlor’s
intention is concerned. Need to ask whether or not there is anything spelled out in Act that requires
consideration of settlor’s intent or whether benefit or considerations that are required are just those of
existing and/or potential Beneficiaries. There is nothing specific in the section, some cases say it’s a good
thing to have proposed variation (benefit) identified and have settlor’s general intention to be in alignment
but if BCCA is right, that may essentially be an irrelevant consideration, or at least one that is not decisive.

From settlor’s perspective, can probably always raise something against proposed variation or terms, even
those that accelerate absolute vesting of an interest as in Saunders since maybe the ultimate purpose was to
keep the money from Saunders until he got to 25. a bunch of cases you have to take into account and good
if they coincide but BCCA says its irrelevant.

Other points from BCCA:

Standard of review – generally for overturning facts its ‘palpable and overriding error’, i.e. TJ was really
crazy. But, if pure matter of law, then it is ‘correctness’ and CA can freely substiute their opinions on these
matters. This case says that in circs where what’s happened below is someone seeking variation or
termination of Trust, first TJ is exercising their discretion and this is very difficult to overturn on appeal.
Need to show pretty serious mistake by TJ, once decision on variation has been made its tough to overturn
on appeal.
 41

Schmidt v. Air Products Canada Ltd (1994, SCC)

Pension plan surplus could be governed by Trust or contract law depending on conditions. If Trust, no
variation or termination can occur without consent of Bens; where some $ is left and objects not fully
satisfied, no RT in favour of employer will arise. No general amending power gives employer right to
partial revocation of Trust (by keeping surplus $), must be explicitly described in terms of plan.
F: defined benefit pension surplus case. 2 companies merge to form AP. The predecessor companies, after
paying out all benefits and thereby terminating the pension plan, had a surplus of $1.5M.
I: 1. Who does surplus belong to? 2. Should company be given break from paying contributions?
H: Trust or contract: (Catalytic plan) where express intention is trust and prop has been alienated to
Trustee from benefit of employees, pension fund =Trust (and all $, regular and surplus, unless specifically
excluded forms part of this Trust). Otherwise, contract law would govern. The pension fund is a Trust fund
created for the employees (not ‘purpose’ Trusts). So $ could not be given to employers, must remain with
company unless employees agree to termination/variation (Bens). Any revocation power must be explicitly
reserved in order to be valid (≠general amending clause) here it was not. Surplus $ could form a Resulting
Trust (very rarely) in favour of employer if all purposes were fully satisfied but here they were not: was to
benefit employees. Trust objects were not exhausted here so long as some $ remains in the fund and some
eligible employees can be found: no RT. The amendment that purported to give company the power to
distribute surplus to itself and reversion clause are both invalid: can’t revoke w/out express clause.
Contribution Holiday: Co can stop making contributions to it until the requirements of the employees meet
the funds available (could have been excluded by terms of plan but was not). Case by case basis.
(Stearns Plan): no Trust existed here (since the only basis was a brochure), look to plan terms – the
amendment that was made with respect to surplus $ going to the company was valid.
D: surplus in Catalytic plan should go to employer. There’s no magic in saying something is revocable or
not so the amending power was good enough to give partial revocation (giving the surplus $ to the
employer). We should not adopt a rule of interpretation that ignores clear intentions of parties in order to
maintain fundamental nature of Trust.
R: Pension plan surplus could be governed by Trust or contract law depending on conditions. If Trust, no
variation or termination can occur without consent of Bens; where some $ is left and objects not fully
satisfied, no RT in favour of employer will arise.

[SS: not good majority writing. Could pay out surplus, let it sit there (contrib.. holiday). Classic trust:
meant to be in favour of ascertainable class of person. Purpose: only certain people. NB: comment at 382
that Equity prevails over CL: SS – this makes no sense since texts say it should follow law. NB: like
‘absolute discretion’ case where paid out all Trust money without getting Ct’s permission, can’t use general
amending formula to revoke a Trust. RT: as in Gillingham, where found no use left gave RT for
settlor/donors. Bottom line: co can’t take surplus, maj says it must stay in Trust and there’s a contrib.
holiday. SS: reasoning of Sopinka minority is clearer – you can pay out surplus, as does McLachlin for
purely pragmatic reasons: there is RT in favour of employer. Difference of leaving it in Trust or getting
Contribution holiday: you get use of it over time, present value of $1.5M is worth more than it would be
over time. In both variation and termination cases, assume same: figure out who Bens or potential ones are,
often have all there for term, for variation may not have that. In any event, make a list and figure out who
may benefit.]

Ch. 14: DUTIES UNDERLYING THE OFFICE OF TRUSTEE

Trustees duties are Imperative as Trusts have imperative nature. Equity requires strict compliance.
Within this framework are TP which usually say something must be done within a range of
possibilities, and may not make you do antyng, but usually have to consider something and make choice.
The kinds of options we have been talking about are accumulate, invest, pay as said in Will.

Another layer of limitations come from Trustee Act. If will says someone is to hold prop in Trust and invest
it does not mean they can invest in whatever they want. Act sets out list of approved investments (p. 32 stat
materials).
 42

s. 14 Trustee Act: also deals w/ appointment and discharging of Trustees, circs where Trustee is NOT
following what’s required by Trust instrument of will or not doing proper investments or otherwise
required by TA.

Duty to act impartially, avoid conflict of interest (Trustee’s and Ben’s): i.e. where Trustee is tempted to buy
some of the Trust prop. Range of duties here are akin to those of lawyers in practice. Duty to Account,
range of powers bring along duties.

Bottom line; typically will or instrument provides skeleton and act or CL provide flesh or definition. Have
to decide when conduct falls short of the mark and mostly they are pretty clear but there can be difficulties
as in where his sense of morality conflicts with maximizing profit. Damages are also important once a
breach is established. We started out with Equity having a very ambiguous foundation and then it firmed up
again…

Trustee duties are imperative: cases today set the boundaries and set the standard they are to conform to in
the exercise of their duites. One series where they fail their duties by Act or Agreement: appropriate
remedy is to have them discharged, get substitute. These are 2nd layer: Trustee does something and falls
short of mark somehow. Guiding principles
1. Hindsight is 20/20: easy to say later that he breached duty after investment went down.
2. Moral Element: Trustee has obligation has duty to maximize return to Beneficiary, even if morally
bankrupt. Choice may not be clear when his conscience plays on the investments being selected.
[Many investments may benefit him financially but step on moral considerations and vice versa]

Trustee Act: starting point

s. 14: allows for appointment and discharge of Trustees
s. 42: variation
s. 25-26: liability of Trustee/scope of this liability.
s. 25: chargeable for moneys received. Answerable only for own acts, not for those of other Trustee. Any
other loss unless happens by his fault.

s. 41 (key): [starting point is fairly onerous duty on Fiduciary – read subject to s. 25 of Act and even if it
appears there has been a breach court can excuse it by s. 41] If it appears that he acted reasonably, fairly,
honestly than Ct can relieve PL for breach in whole or part.

Cowan v. Scargill (pension funds for miners): MeGarry: “the starting point is the duty of Trustees to
exercise their powers in the best interests…must put interests of Bens first, subject to law. Best interests or
Bens are normally the best financial interests: maximize profit is starting point.

Analogy for Trustees’ duties generally: like those of lawyers:

 Supposed to advocate for clients’ position = duty to max. $ interests: even if unpopular
 Duties to avoid conflicts

A. Duty of Affirmative Action and Standard of Care

Davies v. Nelson (1927, Ont. CA)

Trustee held to standard of a man of ordinary prudence honestly exercising his best judgment as if the
property was his own given the circumstances and expertise. Need to do best and act with common
intelligence and in any event Ct can excuse breach by s. 41 of TA. Standard is mix of objective + subjective.
F: Trustee sold house for $2.5G, Beneficiaries (from will) wanted $4G, sued Trustee for difference. Both
sides called expert witnesses at trial and jury said Trustee owes $700. O: Trustee wins.
H: the Trustee’s actions were reasonable – the value of the house was depreciating and Trustee’s feeling to
sell rather than hold on hoping to sell later for more was good. The Trustee is held to the standard that a
man of ordinary prudence would exercise in the management of his own affairs. All that he is called upon
to do is honestly exercise his best judgment, to take the same care as if the prop his own.
R: Trustee is held to standard of a man of ordinary prudence honestly exercising his best judgment and will
not be guilty of breach of Trust if this happens.
 43

[Asking if this was improvident or imprudent sale? Viewing it with hindsight: take into account and also
the capabilities and abilities of the particular trustee in question. SS: best judgment is Middleton’s – he says
Ct can relieve against breach if Trustee acted honestly and reasonably (s. 41 of Act). Looking thru things
by seller’s mind, it was his duty to sell and his decision to sell at reasonable amount instead of waiting for
uncertain higher offer. Ct: look at this thru his eyes to determine what prudent thing to do was. Can’t look
at things in purely practical terms, have to consider the abilities of Trustee. When a trustee is chosen he
brings certain faults – doesn’t guarantee satisfactory results but if acts honestly and with common
intelligence, he is NOT liable for error in judgment. This was sensible decision to accept $2.5G instead of
higher amount asked for by expert witnesses and also the expert standard is not what we look to. Need to
look at particular trustee and see if they did their best and acted with common intelligence. [If the seller had
expert training, they would be held to higher standard: it’s the same with professional organizations that
hold self out.] The standard is somewhat objective and subjective  reas. person who had no experience
would ask for expert help. S. 41 most likely to give relief if technical breach.]

Fales v. Canada Permanent Trust Co. (1977, SCC)

Whether Trustee acted reasonably is fact-based but need to consider if breach technical in nature/minor,
general economic conditions ~ investments. 3. Nature of Trustee: person/company 4. Reasonableness.
Court does not decide if higher standard is owed by professional Trustee vs. regular since clear breach

F: Mr. W left stuff to Mrs. W and kids. A professional Trust company (Tee) exercises power to invest in a
company owned by a power company, thinking it is guaranteed to be profitable. It was a very speculative
investment, company goes broke, Trustee gets sued. The stock plummeted, bad news kept coming out,
some info was not passed onto co-Trustee (widow) and even after she wanted to sell, T Co. ≠. They were
found liable at TJ and CA for failing to sell the shares whose value was rapidly ↓ in timely manner. Ps
appealing want more damages. D wants co-Trustee (mom of Bens) made liable and wants forgiveness for
any breach of Trust CA may have found. O: Trustees liable for breach of Trust, TJ damages upheld.
H: Ct ≠ whether paid (pro) Trustee is held to higher standard than regular since even the lower standard:
man of ordinary prudence managing his own affairs was breached. What is reasonable delay in selling
shares is case by case but here they sat by idly and remained apathetic=unreasonable. No good reason for
them to have hung onto shares that were speculative for extended period when had good opp to sell. Co-
trustee (widow) also breached duty but she tried her best and as a housewife that was reas. enough. Other
relevant consids:1. Was breach technical in nature or minor error in judgment 2. Was ↓ in shares from
general econ conditions, 3. whether Trustee is someone who accepted a single T for friend or company
organized for such things. 4. Whether Conduct of Trustee was reasonable.
R: whether Trustee acted reasonably is fact-based but need to consider if breach technical in nature/minor,
general economic conditions ~ investements. 3. Nature of Trustee: person/company 4. Reasonableness.

Issues: have 2 trustees – one professional and one housewife: should pro Trustee be held to a higher
standard? Some cases go back and forth on this point.
Bottom line in this case: they DON”T decide if there is higher standard since there is a clear breach
regardless.
Rationale for holding shares was that the Power Corp.’s ownership was a circumstantial guarantee that it
was financially sound.
1. Should CP be on the hook? 2. If yes, is widow jointly on hook?
CP
[CP says invoke s. 41 and excuse us from breach: clearly in some cases you can get relief if you are a pro-
Trustee: consider if paid for services, technical breach, general economic conditions, whether they accepted
single trust or are they specialized, were they reasonable above all else. Findings: inaction of CP were not
reasonable. They don’t apply different standard explicitly as does CA but they do same thing by backdoor
by looking at the similar circs: they apparently apply a higher standard in this way, as opposed to doing it
while establishing if there is a breach.

Damages (peripheral issue)

They figure out amount by averaging the high and low: here is one way of doing it – not by assesnig Ben’s
loss but by doing arbitrary method to figure out amount.
 44

Widow’s Liability
Law: with certain exceptions co-Trustee can look for contribution. But in AB need 2 things to get this off
the ground – CP would need to show it gets over s. 25 Trustee Act hurdle: co-Trustee NOT liable for
neglects or acts of ANY other Trustee Ct finds she is on hook but lets her off b/c of 41: she acted
reasonably and honestly. Standard for Her: that expected of someone in her position. They look at her
training and find her conduct to be reasonable and rational. Different standards for Trustees based on
different abilities. s. 25 more factual. S. 41 is letting someone off hook based on their training, conduct, etc.

Bartlett v. Barclays Bank Trust Co (1980): higher duty of care is due from someone like a Trust
corporation which carries on specialized business of Trust management>ordinary prudent man.
Trust cos have special skill, explicit statement that there’s higher duty for pro Trustees, at ‘breach level’

B. Other Duties

Can. Safeway v. Thompson (1952, BCSC)

H: In a CT situation where what’s being complained of is being deprived of profits, CT has to account for
profit they made as result of the breach jointly with the other Trustees. R: Constructive Trustees are held to
same standard as other Trustees, and are jointly and severally liable just like all Trustees.

s. 2 of CNG Act: whereby fault of any 2 persons, both of them are liable for 100% even though differently
responsible.] Consequence is that where 2 liable: if jointly liable, even if 1% your fault, victim can claim
100% of loss from you. Procedurally the P gets judgment against TF for all: can only collect from 1
obviously but result is that D’s are left to fight it out themselves as to how they contribute. Even though
only partly responsible, on hook for whole thing. Case strange since deals with CT and not ETs. This
makes big difference wrt to which Defendants have the ability to pay and which don’t. Contrast this
situation for CT with liability of an Express Trustee or a Non-Implied Trustee under s. 25 of Act which
suggests ‘several liability’. Trustee seems only to be accountable for his own acts, faults and neglects,
implies that if he is 1% to blame, he should only have to pay 1% of the loss.

Island Realty Investments v. Douglas (1985, BCSC)

A Trustee who has breached duty to Bens and a loss has occurred cannot defend case by saying that loss
would have occurred even if the terms of the Trust had been followed (no breach).
F: Ps had some $ they wanted to invest in real estate (mortgages), gave it to Ds (mortgage brokers) as
Trustees to do so: they were instructed to invest $ in a certain property, but instead they advanced money
for the mortgage loan and became the mortgagee with its name on title. Co ≠ do what was expressly told.
Losses, P sues. O: Trustee liable. H: the intentions of the Trustee may not have been fraudulent in the
traditional sense but any breach of Trust is fraudulent in equity’s eyes. It doesn’t matter that the loss may or
may not have arisen from the breach of Trust, in fact it probably didn’t here, it was still breach of T.
R: A Trustee who has breached duty to Bens and a loss has occurred cannot defend case by saying that loss
would have occurred even if the terms of the Trust had been followed. Once you’ve established a breach
you are guilty for the loss, whether attributable to the breach or not. Even though the real reason for the loss
wasn’t the breach, he is liable for whole loss. Breach of trust by company but the damages here are not like
those of contract. In other areas of law, you have to demonstrate causation but here, if you have
coincidence of damages and breach, the Trustee is on the hook. Difference is the extra duties and nature of
obligations that fiduciary owes to beneficiary. Recall Norberg: McLachlin talks about diffs btw trusts and
other relationships and treating people as equal, all of this goes into damages assessment – there you need
causation, consider intervening causes, etc. Almost a Strict Liability since FR has Trust, not self-interest at
its core. Freedom of Fiduciaries is limited by duties they have undertaken. Even though consequences
coincidental, not causally linked, Trustee liable. If looking at Trust advantage, recall Millet who said that
FO free you up from things to prove in other contexts and here is example. FO or Trust relieves you from
proof of causation. Liability is closer to being strict, as opposed to fault-based. S. 41 is only thing that
mitigates this by allowing court to excuse. But once non-excused damage and coincidence, Trustee is toast]
 45

Kruger v. The Queen (1985, FCA)

F: Minister of Transport bought land from Minister of Indian Affairs. Band argues land should have
fetched more $. Was there a breach by the Trustee? O: No. H: the difference in price was not significant
and difficult to prove. Trustees have an obligation to take the highest offer present, but don’t have oblig to
go back on an offer (that they had already accepted), and further they are free to rely on a certain lower
offer over an uncertain higher offer.
R: there are no limitations on actions by Abs against the government for breach of Trust (s. 13 ) .
2 main issues;
1. Whether govt on behalf of band negotiated deal for land?
2. Whether there was limitations issue since this happened in 1943?
There is internal conflict in Crown (btw Indian Affair and Transport). Was one of only pieces of land that
was suitable for a landing strip. So Transport wants it badly to make strip and at best price and IA wants
best price for Band. Follow Guerin case in terms of nature of obligation owed: argument was that there was
breach of FO of Crown to band since land taken should have rendered more $. Peripheral issues about
whether land can be expropriated. Murry: no breach of FD and on that basis he doesn’t have to decide the
Limitation Issue. Recall: Trustee not accountable to discharge service that an expert would and we have
similar reasoning here by Stone: reasonableness must be looked at in terms of the circumstances. He finds
this reasonableHeald (dissents in part): Crown can’t default on its FO through plea of competing conflicts.
Very difficult for Trustee to discharge FD if Ben later complains about price of sale. (dicta): limitations
issue is insurmountable since 33 years too late. In BC, there is 30 year cap, the action is statute barred.

LP: Relevant statutory cap in AB is 10 years. Universal limitation period is 2 years in AB under
Limitations Act from coincidence of 3 elements in 3(1)(a), or 10 years. To determine applicability of cap,
go to 3(3)(b): for purposes of 10 year cap, a claim based on breach of duty arises when act, conduct,
omission occurred. Since this occurred in 1940 or 43, so far this action would be completely precluded by
Limitations Act, BUT in AB, many were worried this would kill many latent injury claims creating great
injustice. Ab land claims usually refer to events that are long past and fear was 10 year cap would
extinguish those too.

s. 13 of Act, action brought after 1999 by Abs vs Crown for breach of FD owed to them is governed by old
Limitations Act: effect of this s. 40: NO time limit at all if it’s a claim for an Aboriginal person for a
breach of trust. There is equitable doctrine of ‘laches’ that a limitation should apply despite a lack of a
provision barring the claim on purely equitable grounds and nothing in the old act prevented this argument
so you could always try this but it is a remote possibility.

C. Investment of Trust Funds

Cowan v. Scargill (1984, Ch. D)

F: Bens wanted to prevent Trustees from investing the miners’ pension in overseas investments + those that
competed w/ coal. Trustees refused to accept this investment plan + are being sued for breach of FDs
(breach of Trust). 5 Plaintiff Trustees (from Coal Board) sue 5 D Trustees (from union). O: Prohibitions on
Trustee’s discretion not allowed. H:
1. It is duty of Trustees to exercise their powers in best interest of present and future beneficiaries of Trust,
holding the scale impartially btw different classes of them. Best interests are normally best $ interest.
Trustees have to make investments that are most beneficial to Bens even if this means bad social/ political
2. In considering what investments to make, Trustee must pout aside their own personal interests and
views. They may be even have to act dishonourably (not illegally) if interests of Bens require it.
3. Benefit of Bens must be paramount but this can mean more than financial benefit (i.e. socially
responsible investing) where $ gain is NOT only purpose of Trust. [NB: this is not one of those cases]. $=$
4. Standard required of a Trustee in exercising his powers of investment is that of ordinary prudent man
would hif were to make investment for benefit of others. Prudence and reasonableness, not good faith.
5. Trustees have a need to consider diversification of investments. [NB: here limiting them would not offer
benefit to the Bens, including many of the people receiving pension money]
6. These principles apply to Trusts of pension funds as well as normal funds.
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R: no policy to protect coal mining as industry is compatible with best interests of Bens, many of whom no
longer in industry. Trustees must do best ben for Bens, not merely avoiding harm. Duty of Trustees to take
advantage of full range of investments allowed by Trust and not to narrow it. P wins.

5 points from this decision: starting point is duty of Trustees to exercise duties in BI of Bens, must put
interests of Bens first. Usually this means financial interests.
A. Go with financial benefits over social ones if at issue
B. Trustees must put aside own personal views when making investment decisions in favour that which is
most in favour of Ben’s financial interests.
C. Trustees may even have to act dishonourably if Bens require it (not illegally).
D. $ benefit is not always the key thing, even where object seems as such, ‘benefit’ has wide meaning.
Standard of required of Trustee is that he must take such care as an ordinary prudent man were investing
for others for whom he felt morally bound to provide.
E. Trustees have need to consider diversification of investment.
F. These principles apply to pension trust funds too, they apply generally to trusts and Trustee duties.
If not spelled out, the Trustee CANNOT narrow the range of the investments.

Nestle v. National Westminster Bank PLC (1994, CA)

To show breach of Trust, must show how Bens were worse off b/c of investment decisions by trustee, not
enough to show conservative investing and possible misinterpretation of Trust agreement. Proven default
F: testator left will and Trust which Bank is to invest with income to Ben relatives. The funds were worth
$270G when P became solely and absolutely entitled to it but she says it should have been worth $1M had
they invested it properly. Sues for breach of Trust. The Bank ≠ understand the investment powers it had
(thought more limited than really were) and kept most investments in existing stock and pretty much all in
Bank and Insurance stocks which were good at time. O: No breach of Trust.
H: prudent man should do at time what economic and financial conditions show is to give best benefit to
Ben. Here, it has not been shown that keeping investments in those stocks induced a loss, nor that the
proceeds from the sale of the house shouldn’t have gone into the equities. Onus is on P to show breach and
that they should have made different decisions.
R: to show breach of Trust, must show how Bens were worse off b/c of investment decisions by trustee, not
enough to show conservative investing and possible misinterpretation of Trust agreement.

Disgruntled Beneficiary saying Trustee made lousy choice of investments which would have otherwise
Trustees more $ and he should have bought more equities. If no breach, the threshold is pretty low, only
has to refrain from improvident investment. Key to decision about standard: as Trustee its to be judged not
by success, but by absence of proven default. If you can show a breach , there are really signincant
considquences but to demeonstrate one is hard sometimes since.

o Need to consider abilities of Trustee: take them as they find to them, not expected to be experts and if
conduct themselves reasonably and prudently then they are in pretty good shape.
o Even though hindsight is 20/20, Ct will put self in shoes of Trustee and like subjective standard they
will say what would I have done if I were there with that type of education, etc. they weigh things at
time without benefit of hindsight.
o Threshold is not success, but rather absence of proven default. Absence of failure important.
o To extent we are considering abilities of Trustee, those who hold themselves out as professionals are
held to higher standards

If there is a breach and if so, can you invoke s 41 to excuse it. Assuming proven breach, what are damages.
Since relation of loss is not a causal one, not fault based liability, even a coincidence of a loss is enough.

CHAPTER 15: REMEDIES

Restitutionary awards takes you outside of Judgment Interest Act, potentially leading to more $. This
section takes us full circle, we’ve compared remedies in tort/contract on one hand with trust-type ones on
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the other, such that if get self into Breach of Trust/Fiduciary one, you get better choice of remedies,
damages. These take us back to beginning and blur distinctions.

Principles
1. Liability: Trustees are personally liable to compensate Bens.
2. Liability is Joint and Several, however,
a. It is personal in the sense that it is not vicarious (Act: only responsible for own defaults, not
liable for acts of co-trustees
b. Except that they usually act jointly which would make them jointly liable.
c. CT: joint and several liability – Canada Safeway
d. Canada Permanent case: widow who was co-trustee, indemnity sought[Only liable for joint
acts they take part in]
3. Professional Trustees/Fiduciaries protect selves with Insurance [goes hand in hand with concept
that legal obligations and standards for them tend to be higher than those people on the street]
4. Trustee Act might allow Trustee to be excused for a breach
[First 4 deal with Liability generally, next ones do with nature and extent of liability]
5. Trust remedy vs. Tort one: in restitutionary context, Trustee must usually restore what was taken and
disgorge profits. Starting point for measure of damages: what Trustee GAINED, not what Ben LOST. As
an example, expectation lost in contract cases, or what would have been situation had tort not occurred
(restore to original position) and in contract (measure dams based on expectation, had the contract been
performed). Trusts: look at what Tee gained from breach – different way of measuring loss. [i.e. if Trustee
takes $ from T and buys lottery ticket + wins, gain that flows from wrongful taking is lots but what is lost is
fairly small: this difference is significant. Many cases will show that consequences for breach of trust are
strict: i.e. where market fell + Tee said ≠ his fault + Ct said no. More onerous obligation and measures /resp
6. Trust Remedies can also give you remedies in Tracing – attach claims to property against somebody
else. I.e. A lends car to B who goes bankrupt. A still has priority to vehicle since it doesn’t go into his
estate to be divided by creditors. If he lends 500$ to B, bankruptcy, as unsecured creditor you’d rank with
all others for share of what’s left. No claim against specific asset/piece of property. Tracing allows you to
go somewhere in between – if A lends car to B who sells it for $500 to BFPV, bankruptcy. If purely
personal claim, you are just unsecured creditor at end of list, if Tracing Remedy can be established, can
argue that $ stands in place of car in B’s hands. With action for $ received, might assert a priority over
$500 than everybody else by following car into proceeds of sale. Ex3: can get priority by asserting an
equitable remedy that gives us significantly better results than if unsecured creditor, like first example but
on different facts. If in realm of Trust remedies, we can invoke liability of outsiders – by knowing receipt
or knowing assitance in a breach of Trust: different knowledge threshold required to establish liability.
7. Equity Lets us Trace Unmixed Funds into BFPV: things get problematic if things mixed though, same
with mixed or unascertained property. [2nd case today show mixed fund with not enough to go around…]

Old rule was Clayton’s case = funds on deposit and loss, you attribute first sum drawn out to first sum put
in, FIFO. So if settlor 1 puts $1G in and settlor 2 puts $500 in; and Trustee takes $500 of this…how do you
portion remaining $1000? If pro rata: might be argument for settlor 1 taking twice as much as settlor 2, but
rule in Clayton’s was that first settlor takes the bite, those stolen were those of Bens of first settlor.

A. Introduction

Canson Enterprises Ltd. v. Boughton & Co. (1991, SCC)

F: Lawyer acting for buyer + seller of land allowed a secret profit to be made by a 3rd party intermediary +
≠ tell either party. Buyer was made to pay all costs of the transaction (including the intermediary’s fees).
Buyer built a warehouse which collapsed b/c idiot engineers ≠ uncover a layer of peat on the land. They sue
the lawyer in breach of FD + are trying to get $ for the difference in purchase price AND $ resulting from
the NG of the engineers (which they were only able to recover in part). I: compensation in equity.
O: Ps recover for difference in purchase price (secret profit) only and not damage from NG of engineers
H: McLachlin (Maj): liability of lawyers for breach of FD ≠ go all the way to NG of engineers. This is
based in equity. Basis of FO and equitable compensation are distinct from tort, NG, contract b/c of
fundamental diffs in the relationship. Equity concerned with enforcing Trusts and compensation. The need
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for a link btw the equitable breach and the loss (must flow from breach of FD) for which compensation is
awarded is fair and sound in policy and is supported by Guerin (but need not be RF at time of breach). .
Summary: compensation is an equitable monetary remedy available when equitable remedies of restitution
and account ≠ appropriate: like restitution, attempts to restore to P what has been lost b/c of breach. P’s
actual loss as conseq of breach is to be assessed with full benefit of hindsight. F is not a concern in
assessing compensation but its essential that losses made good are only those which on a common sense
view of causation were caused by the breach. P won’t be required to mitigate (as meant in law) but losses
that are from unreas. behaviour won’t be found to have flowed from breach. Where Trustee’s breach
permits the wrongful or NG acts of 3rd parties thus establishing a direct link btw breach and loss, the
resulting loss will be recoverable. Where no link, loss must be recovered from 3rd parties (as here).
Construction loss was caused by 3rd parties, no link btw breach of FD and this loss. Diff in purchase prices
from secret profit restores the lost opportunity. This accords w/ common sense: only liable for breach-loss.
Equity and CL are merged in a sense that the 2 overlap in terms of compensation and principles mixed.
LaForest (Min concurring): liability for breach of FD ≠ extend to NG of engineers. Except for cases of
‘true trust’(where trustee controls property of T), damages for breach of FD should be measured by analogy
to tort and contract. Not completely merged.
R:

[Basis for lawsuit = profit made by 3rd party in original RE transaction, question is if you can make lawyer
into fiduciary who breached duty, what are measure of damages allowed in these circs? If Island Realty
prevails: whole amount even though true cause is something outside true scope of responsibility of lawyer
(coincidence of breach and loss, regardless of causal relationship might let you recover whole thing from
breaching fiduciary). They beef up argument by saying if they knew of secret profit, they ≠ have dealt.]

Relationship of law and equity:

Should dams be restricted by remoteness and forseeability? If tort, too remote and not recoverable vs.
lawyer or could say it was an intervening cause for which lawyer not responsible. CA: damages are limited
by remoteness and Causation, don’t impose SL just b/c breach and damages. La Forest: agrees with CA:
yes you can apply Tort principles. McLachlin: no causal relationship btw breach and loss,
Stevenson: equity should draw line at putting a fiduciary on the hook for an unanticipated act by a 3rd party.

Analysis: Nocton v. Lord Ashburn (483): appellants try to establish connection to this – in that case get
concept of retitutionary-type result: distinguishing factors btw cases, solicitor got benefit from breach but
here the lawyer didn’t since the profit was made by somebody else. Here the fiduciary may have breached
duty but didn’t gain a benefit from it. 484: overlap – btw contract and tort…left with failure to perform
fiduciary duty, no benefit to him. 485: equity aimed…practical result of compensation and damages is by
no means clear…diff btw compensation and damages might be difference without distinction. 486:
restoration or compensation, for breach of duty, find loss from that, any benefit can be disgorged but
without benefit…SS: LaForest easing us into tort and contract measures since its more like those since
Fiduciary has not gained from the breach. Mitigation , Remoteness saying that there are number of
caes where courts have treated it as if CL question and have applied these notions without paying much
attention to doctrinal diffs btw CL and equity. SS: doesn’t really matter. Quote on 487, 2 streams of
jurisdiction run parallel…that case concludes and LaForest agrees: if Prof Ashburn right, the streams have
mingled now.

He also affirms it’s a difference without a distinction – see quote on 488. he says 489: agrees that equity
can be flexibly applied these days, mingled streams, like concurrent liability situation: can pick remedy that
best suits you, in Central Trust, judge said can pick one that gives you greatest advangate.

LaForest concludes 490: where situation requires diff policy objectives, remedy might be found in that
which is more appropriate – he preserves artificial distinction. This will often be equity since flexible
remedies like CT, tracing, etc. are good.

SS: first we get stuff about equity and unpredictablilty, then once get reported decision, it crystallizes under
Eldon and becomes like law with guiding, binding precedents. In any event, fused by Judicature Acts, but
SCC says there are 2 streams from doctrinal standpoint, still some conceptual differences btw the 2
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remedies, even though we can describe in that way, it’s a difference without a distinction. So even though
might learn remedies from Torts or Equity or Contracts, in many circumstances we can pick and choose
and if can find selves in equitable realm, we get the broadest range of remedies and we can pick and choose
with our ultimate goal being ‘fairness and justice’. Maximum flexibility with object of fairness and justice.

He says common sense and resonableness are central to law of equity. SS: apparent situtaton that an
equitable remedy might lead to an absurd result, might end up in much more unfair or less common
sensical result if you hadn’t bee subject to equitable remedy, opposite of what happened.

SS: are we any farther ahead than we were in 18th C as new spin on old goal? Used to have Equity attached
to concepts of morality as court of conscience, but no longer universal concepts of morality so very bad for
someone on basis of moral considerations to imposes those thru Equity onto others. So to get around this
we go back to common sense and justice which is universal. Are we in any different position under
LaForest’s views: pick remedy for greatest benefit, goal to achieve vague justice, b/c who know what that
is? With uniform view, could say moral code.

McLachlin: cannot agree with LaForest that apart from cases where Trustee control the Trust it should be
measured by analogy tort and contract – she likes distinction more than he does. She says tort overlooks
basis of Fiduciary relationship, independent and equal actors, concerned with self-interest, need balance
between optimum freedom and…diffs mean we can’t say analogy with tort is appropriate. 491: she wants
to start from trusts, not tort. Adds forseeability into mix: equitable compensation must be limited to act of
Trustee - see 493. with this comes Causation 494-495: she says without link (causal connection) puts
lawyers off hook…she agrees with result. Element of causation brought into equation, balancing from
policy perspective.

Stevenson: sides with McLachlin, F should be let off hook, affirms result below.

Bottom line: once in Equity and established something that would normally be FR, have broader range of
remedies as strating point. But if invoking one of those creates unfairness or injustice as seen by other
assemessment, or measurement ideas, rationale here might let us lessen harshness of that by bringing in
concepts from other areas. No more strict separaton of law and equity, maybe anything goes…FAIRNESS.
SS: its not that anything goes but where what seems is an equitable principle and inequitable result, have
other things you can argue, would have been helpful to Island Realty.

B. Proprietory Rights of Beneficiaries

Re Ontario Securities Commission and Greymac Credit Corp

F: there was $5.7 in GTrust account (companies owned $4.683 and participants owned $841G). $4M
withdrawal to new account and more was taken too and dissipated so that only $353G was left in the
original account and there was a shortfall of $1.3M over the two accounts with respect to the claims of the
Trustee and the 2 groups of Beneficiaries: companies and participants. An application was brought to
determine the parties’ entitlements to the funds. O: Pro rata
H: (a) Clayton’s rule (whoever’s $ went in first to the Trust account gets priority and is that which is
withdrawn first) does NOT apply (b) the total loss must first go against the Trustee’s interest (since he is at
fault) and (c) the remaining funds in 2 accounts should be divided in proportion to the respective
contributions of the 2 groups of beneficiaries: pro rata. The respective property interests continue, on a pro
rata basis, in the total amounts of Trust moneys or property available (based on tracing?). This is more fair
than Clayton. Clayton’s rule should only apply to Trustees’ current bank accounts, not where T property of
more than one Ben is mingled in something else (?). can contract out of pro rata if want to.
R:

Ct rejects rule in Clayton’s case in favour of pro rata approach. Rejects CL approach in favour of
Equity/Fiduciary approach.

2 kinds of remedies in this area

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1 Damages-like remedies: types that apply when we have remedy against Trustee. They are like damages
since that what’s we’re claiming but measurement is done differently than other areas of law. Usually let
you recover sum of $ for breach, but not necessarily preferential claim to something else. Breach of Trustee
cases fall into this category. Problem here is that if liability is essentially strict, you lose all reasonableness
that is attached to damages in other areas, mitigation, intervening acts, outside realm of fault. One example
of this: mortgage case where falling market caused loss which would have occurred without breach by
Trustee: Island Realty.

2. Proprietary-type remedies: usually give you priority over others to specific thing or portion of fund.
These usually deal with something that’s in existence, claim of property or fund of money. CT remedies
fall into this category.

Where do the kinds of things that we use to ascertain damages in tort, contract, etc. meet up with damages-
like remedies in Trust? Recall Guerin: loss of opportunity type argument. Canada Permanent concerned
liability of co-Trustee and breach involving failure to sell shares, measurement by averaging share prices –
discussed in lots of cases but focused in Canson: extreme situation like in Island Realty (loss anyways) and
people arguing about applicability of other concepts that would apply there. See above.