Notes On Law of Trust Based On The Learning Objectives

Notes on Law of Trust based on the Learning Objectives
STEP Canada
Contents
CHAPTER 1 AN INTRODUCTION TO THE LAW OF TRUSTS ....................................................................2
CHAPTER 2 CLASSIFICATION OF TRUSTS ..............................................................................................5
CHAPTER 3 THE CREATION OF AN EXPRESS TRUST: CAPACITY AND THE THREE CERTAINTIES ................8
CHAPTER 4 CREATION OF AN EXPRESS TRUST: CONSTITUTION .......................................................... 12
CHAPTER 5 CREATION OF AN EXPRESS TRUST: FORMALITIES ............................................................. 17
CHAPTER 6 CREATION OF AN EXPRESS TRUST: LEGAL AND PUBLIC POLICY CONSTRAINTS .................. 23
CHAPTER 7 TERMINATION AND VARIATION OF TRUSTS .................................................................... 30
CHAPTER 8 USING THE EXPRESS TRUST: SOME COMMON EXAMPLES ................................................ 33
CHAPTER 9 NON-CHARITABLE PURPOSE TRUSTS ............................................................................... 41
CHAPTER 10 CHARITABLE PURPOSE TRUSTS...................................................................................... 44
CHAPTER 11 DUTIES OF TRUSTEES .................................................................................................... 48
CHAPTER 12 POWERS OF TRUSTEES .................................................................................................. 56
CHAPTER 13 OFFICE OF TRUSTEE ...................................................................................................... 62
CHAPTER 14 BREACH OF TRUST ........................................................................................................ 69
CHAPTER 15 POWERS OF ATTORNEY COMPARED TO TRUST .............................................................. 75
CHAPTER 16 RESULTING TRUSTS....................................................................................................... 78
CHAPTER 17 CONSTRUCTIVE TRUSTS AND CONSTRUCTIVE TRUSTEES ................................................ 83
CHAPTER 18 DRAFTING AND INTERPRETING TRUSTS ......................................................................... 87
CHAPTER 19 A NOTE ON THE TRUST IN QUEBEC ................................................................................ 92
1
CHAPTER 1 AN INTRODUCTION TO THE LAW OF TRUSTS
Learning Objective Topic Notes Statute/origins &
Cases Law
- middle ages or even
earlier
Set out a simple A trust exists where property is held by a person, or is - The person holding
notion of the trust transferred to another person to be held, for the benefit of title to the land on
concept. themselves or one or more other persons. behalf of the absent
lord was to care for
the land and use the
income from the land
for the benefit of the
lord’s family.
– an express trust 明示信托
Ex1: Trusts created where such an intention ( person Origins
expressly intends to create a trusts ) is present are referred - The Court of Equity
to as “express trusts”. might order that
Ex2 : A parent making a will wants to make a particular property
Provide one substantial gift to his now adult child (spendthrift trust 禁 owned by a person
example of each of 止挥霍信托) was held by that
the following: person in trust for
– an automatic resulting trust one or more other
– an express trust A woman – testor , the trust arises “automatically” since persons, even though
the woman has never disposed of the remaining capital of that person had no
– an automatic the fund in the event her daughter has no children in the intention of holding
resulting trust fund on a resulting trust for the woman’s estate. the property in trust
for others.
– a presumptive – a presumptive resulting trust 信托财产权的构成体
resulting trust 现了“二元所有权”
B is “presumed” to hold the property in trust for A if A 观念, 二元所有权观
transferred the money to B for purchasing a land , it is just 念源于衡平法的特殊
– a constructive a “presumption”. 历史进程.
trust It does NOT mean there is necessarily a trust.
– a constructive trust 推定信托 - Constructive

Trustee”- The Court
It may declare that a “constructive trust” by the court for
of Equity, over the
this --- a person is said to hold property on behalf of one
years, developed
or more other persons.
rules for the
behaviour of
Ex: court is ordering that C holds property on
trustees. 推定信托规则
constructive trust for B even C disposed the assets with its 旨在禁止占有他人财产
legal title ( B is working for free for years as a partner of 的当事人不公正地取得
C) 他人财产利益的状况
2
Cases Law
– settlor
Provide a brief a person who creates an express trust.
explanation of the ( Gift vs transferred assets ? ) no rights to control the assets.
following terms: Remark : gift vs transferred assets – means the title has been
– settlor changed …
– trustee
– trustee a) a person who holds title to property on trust for the benefit
of other persons.
b) can be more than one trustee.
– trust objects c) a trustee can also be the settlor.
(including d) The trustee can also be the beneficiary or one of the
explaining and beneficiaries of the trust.
distinguishing the e) a corporation with “ trust company” legislation. can be a
terms trustee.
“beneficiaries” and
– trust objects ( two objects )
“purposes”) I ) Persons
- Beneficiary and Beneficial Interests (Vested, Contingent, or
Defeasible), where trust is created for the benefit of persons,
those persons are referred to as “beneficiaries.”
- A settlor, trustee or a corporation can be a beneficiary.
X- life interest Vested, Contingent, or

Noting in trust Defeasible- A beneficial
Y- Reminder interest intstrutment interest is vested when
the beneficiary’s claim
- then X and Y would then both have vested interests. on the trust property
does not depend on
II ) Purposes ( two) some future event (or
- charitable purposes Contingency- 受若干条
i.e., assistance of poor immigrants or education 件限制) that may or
may not occur.
- non-charitable purposes
i.e., promotion of world peace or protection of freedom of the
press.
for the purposes of a
– trust property purpose trust- looks
– trust property A property that the trustee holds in trust for the benefit of the like an intangible item
beneficiaries, or for the purposes of a purpose trust. in the trust ( purpose )
– trust instrument A will often creates one

A written document is not necessarily required to create an or more trusts, although
express trust. generically, as the “trust instrument” or “trust it need not necessarily
– trust instrument deed” do so.
A trust created by will is
referred to as a
testamentary trust.
A number of titles,
including “declaration of
trust”, “trust deed”, or
“trust indenture”.
3
Cases Law
– discretionary – Discretionary trust
trust where the trustee is granted a discretion
to determine:
• the amount of income or capital of the trust (or both) that a The discretionary will
beneficiary or the beneficiaries receive. ( what / how much ) bring the power and
• which beneficiaries will receive income or capital of the trust duties , remuneration
(or both); ( whom ) or indemnification , and
• which beneficiaries will receive income or capital of the trust liabilities to the trustee
(or both) and the amounts of income or capital of the trust (or
both) that the beneficiaries receive. ( whom / how much)
– fixed trust – Fixed trust

“Fixed Interest trust”- no discretion to determine.
income or capital the amounts of the trust.
– inter vivos trust

– inter vivos trust It created while the settlor is alive.
– testamentary – testamentary trust

trust
Where the trust is created in a will, the settlor of the trust is also
referred to as the “testator.”
– equitable – equitable interest / equitable title
interest / Legal title but not entitled to the enjoyment. common law
equitable title i.e. the land ( legal title owners ) produces the income to the jurisdictions it is
beneficiary ( equitable title ) possible to separate
- A trust creates this separation of legal and equitable interests title to property into
-a trustee to hold either legal or equitable title to trust property legal and equitable
title.
– protector – protector a way of creating
- international trusts ; offshore financial centre interests in the
- protector is not a trustee. enjoyment of property
-owe fiduciary duties to the beneficiaries that were recognized
- does not have legal title to the trust assets. by courts of equity
-Examples include a power to veto decisions and came to be known
-have a power to remove trustees and appoint new ones as equitable interests.
– grantor – grantor how about civic law?

Canada the term “settlor”, not “grantor”, is typically used to - absolute title on the
refer to a person who settles property on trust. property in Quebec
In the U.S., the term “grantor” civic code
is often used when referring to the settlor of an inter vivos or
“living trust.”
4
CHAPTER 2 CLASSIFICATION OF TRUSTS
2.1 TRUST CLASSIFICATION: THE NEED TO CLASSIFY
Learning Objective Topic Notes Statute/origins
& Cases Law
Explain the need - broad array of specific instances hundreds of years
to classify trusts - situations, on a case-by-case basis and
thousands of cases
the law.
2.2 METHODS OF CLASSIFYING TRUSTS
& Cases Law
how the trust was created
1. Express Trust 明示信托 Express Trust -
An express trust is a trust that the settlor intended to create. settlor’s words
and conducts,
2. Trust by Operation of Law implied an
- the settlor did not intend or may not have intended create. intention to create
- it divided into “resulting trusts” and “constructive trusts” a trust.
Resulting trust – a court has found that property should “go
back to” or “result to” a particular person or persons ( i.e. ) settlor
has failed to deal with the entire interest in the property. Trust by
Operation of
“ constructive trusts” - because of a court order that property is held Law
in trust , and the court may order that certain property is held in It arises because a
trust as a means of remedying an injustice. court finds a trust
exists even though
3. Statutory Trusts 法定信托 there was not
Trusts can also be a useful device for accomplishing a clearly expressed
legislative objective., and it created by statute. intent to create a
i.e., pre-paid funeral funds are held in trust trust
Identify different
methods for i.e., withhold wages tax in trust
classifying trusts.
Classification According to the Trust Objects

Trusts for Persons
i.e., a trust provides for the education of particular persons
Trusts for Purposes
i.e. a trust does not provide for a particular person but for an
educational objective; various persons may ultimately receive the
funds.
• Whether the trust was created during the life of the settlor or
upon the death of the settlor
(Trusts for Persons)
- “ inter vivos trust” - during the life of the settlor
- testamentary trust”- death or in the will of the settlor
5
• Whether the trustee has a discretion as to who the
beneficiaries of the trust are or the amounts the beneficiaries
are to receive
- If the trustee is given discretions of this sort, the trust is
referred to as a “discretionary trust”.
Identify different - specific amounts , and the proportions for “ fixed trust”
methods for • the nature of the trust purpose
classifying trusts. Trusts for Purposes
( cont’d) - Express trusts for purposes can be divided into “non-charitable
purpose trusts”, and “charitable purpose trusts
- The “charitable purposes” recognized by courts are not what
might be considered in society as charitable.
Set out the classification of trusts used in these materials in a diagram.
2.3 OTHER COMMONLY USED CLASSIFICATION SCHEMES

- Use of the Expression “Implied Trust.” 默示信托 Under common law ,
意定信托是指
* A court finds that the settlor’s words.
依据委托人的意思
* it is created by operation of law.
表示而设立的信托;
Briefly describe 明示信托(Express
and distinguish - Resulting Trusts 回归信托 as Express Trusts Trust）
types of trusts court finds an “implied intention.”
within the so-called automatic resulting trust
回归信托: 在财产出让人意思表示不明确且实际已转移财产的情况下，由非意定信托是指
classification 不依据委托人的意
法院推定财产出让人与财产受让人之间成立事实上的自益信托关系，即把
scheme used in 财产出让人作为委托人（受益人），由财产受让人担任受托人，并且后者思表示而设立的信
these materials. 负有向前者转移信托财产及信托利益的义务。托，又可以分为法
定信托（Statutory
- No Division of Resulting Trusts into Automatic and Trust）和默示信托
Presumptive Resulting Trusts （Implied Trust）
“automatic resulting trust” and “presumptive resulting trust”
6
2.4 OTHER TERMS USED TO DESCRIBE TRUSTS WITH PARTICULAR FEATURES
& Cases Law
– public trusts : charitable trusts would be public trusts
- private trusts: Express trusts for persons and the limited set of
legally enforceable non-charitable purpose trust
– executed and executory trusts

An executed trust is one for which the terms of the trust have been
fully set out.
An executory trust just identifies the beneficiaries without
indicating how they are to share the benefits of the trust.
– completely and incompletely constituted trusts

A clear , and property subject to the trust is clearly defined, i.e., the
three certainties are met, and trust property is in the hands of the
Briefly describe the trustee, “ completed constituted”.
following types of
trusts A settlor has not transferred the property to the trustee, the trust is
said to be “ incompletely constituted.”
– bare trusts
For bare trust :
If the trustee has no duties imposed by the settlor, or no longer has
duties to perform imposed by the settlor, other than to convey the Land transfer tax
property to the beneficiaries on demand by the beneficiaries. or income tax ?
significant implications for potential beneficiary liability and for tax

purposes
How it works ?
– protective trusts The trust
provides that a particular beneficiary’s interest comes to an end instrument might
when the beneficiary becomes bankrupt. provide that the
trustee is not
– spendthrift trusts (禁止)挥霍信托 allowed to
prevents the beneficiary from disposing of his or her interest in the distribute income
trust to another. or capital of the
trust to any
In US institution by case law . person other than
the named
beneficiary.
7
CHAPTER 3 THE CREATION OF AN EXPRESS TRUST: CAPACITY AND THE
THREE CERTAINTIES
3.1 REQUIREMENTS FOR THE CREATION OF AN EXPRESS TRUST
Learning Objective Topic Notes ( five requirements for a valid trust ) Statute/origins &
Cases Law
1. Capacity: the settlor legal capacity to either transfer or to Need to apply to the
declare herself to be a trustee of an interest in property she case when apply these
holds. five requirements by
identifying the facts
2. Three Certainties: on the materials .
• certainty of intention
• certainty of subject matter; and
• certainty of objects. Beware the wording
Identify the “ validly constituted”
requirements for vs. “ creation of valid
3. Constitution: The trust must be validly constituted.( property
the creation of a that is to be held in trust must get into the hands of, or control of, express trust “ ..
valid express trust. the trustee.) Normally, most trusts
we are dealing with
4. Formalities: Any requisite formalities must be complied with.; are the “ express
i.e., trust be expressed in writing, or that wills legislation be trust”
complied
5. Public Policy: The trust must not be illegal or contrary to

public policy
3.2 CAPACITY
Cases Law
- transfer the intended trust property to the transferee or must Royal Trust Co. v. Diamant,
Explain the need for declare himself a trustee of property he owns. [1973] 3 D.L.R. 102
(B.C.S.C.)
the settlor to have Ouderkirk v. Ouderkirk,
- A settlor has reached the age of majority ( 18 or 19 older -
capacity to create [1936] S.C.R. 619, at 621,
Ontario) and is not suffering from any mental incapacity
an express trust. [1936] 2 D.L.R. 417
- A corporations incorporated under general statutes of “On the powers of
incorporation in Canada have the powers of natural persons persons suffering from
(constating documents of the corporation 公司法人文件) mental incompetency.”
Identify the main For Trustee

reasons why one * a trustee often needs to deal with the trust property.
may lack capacity * If a trustee lacks legal capacity, it may be necessary to replace
the trustee since they have to deal with the trust property.
to create an
express trust
For Beneficiary
Discuss whether the - It is also not necessary for the beneficiaries to have legal capacity.
trustee and the - trusts are often used to provide for persons, such as minors, who
have no, or only limited, legal capacity.
beneficiaries need - Trusts can create contingent beneficial interests for such
to have capacity. persons.
8
3.3 THE THREE CERTAINTIES

Cases Law
1. Certainty of Intention: There must be sufficient certainty that
Identify the three the settlor intended to create a trust.
required
2. Certainty of Subject Matter: There must be sufficient certainty
“ certainties” for as to the subject matter of the trust.
the creation of an
express trust. 3. Certainty of Objects: In the case of a trust for the benefit of
persons this requires certainty of the beneficiaries
Case : Bloorview
1) The Form the Expression of Intention May Take Children’s Hospital
- A settlor must intend to create a trust. (any forms of words can Foundation v. Bloorview
be used ) , to build fiduciary obligation, the word of “ trust “ is not MacMillan-
essential, rather than by person’s conduct. court considered whether
the incorporation of a
- formalities - generically referred to as the “trust instrument” , foundation with
such as :” deed of settlement, trust deed, or a declaration of trust.” clauses limiting its objects
could itself amount to the
creation of a trust
2.)The Interpretation of Precatory Words(“Precatory Trusts”) Case 1 : Re Walker (1925),

- Precatory expressions such as “it is my desire that”, “it is my wish 56 O.L.R. 517 (C.A.)- a
that”, or “I hope that” are NOT usually considered sufficient to mere wish.
express an intention to create a trust. The Court of Appeal
concluded that there was
a gift of the whole
Discuss key aspects - If there is insufficient evidence ( need to approve) of certainty interest and the gift over
of each of the three of intention to create a trust when precatory words have been was held to be repugnant
certainties. used, the result may be an absolute gift to the recipient of the to the gift.
property.
( Remark : trust property vs gift ??? why is important? ) Case 2 : Re Shamas,
i.e., title of the property, not comply with the trust instrument , no [1967] 2 O.R. 275, 63 D.L.R.
1. Certainty of (2d) 300 (C.A.).
beneficiary enjoyment , and different tax implications for the gift
- words used
Intention: vs trust property ) were interpreted as
creating a trust. that the
In Re Walker, the wife may be held to have received an absolute wife had a right to
gift of Adam’s property. It would be her property (both legally and encroach on capital until
equitably) and she would thus be allowed to use it in any way she her death, subject to her
wants. remarriage
3.) Drafting a Trust Instrument to Satisfy the Certainty of Case : *** Antle v.
Intention Canada, 2010 FCA 280
- one should use clear and unambiguous words to create a legally (CanLII)***
binding obligation on the intended trustee to hold property in trust - intention to avoid tax
for the benefit of the beneficiaries. ( tax planning) ,
- not intention of losing
-If the intent is to create a valid express trust, words such “in control the shares
transferred to the trust.
trust” are helpful; otherwise, it not necessarily led to the trust that -no intention to create a
was intended. trust ( no certainty of
subject matter - trust was
a sham)
9
Element# 1. Identified property sufficient precision that is to Case : ***Antle*** case
be subject to the trust obligations must be described. - Lack of certainty of
subject matter
- Why the Subject Matter Must be Certain - not clear what Mr. Antle
Discuss key aspects if not clear, the trustee may have difficulty determining the property intended to transfer.
of each of the three with respect to which she owes her duties as trustee.
Court cases reinforce the
certainties. need to ensure that
- Methods of Providing Certainty settlors understand the
2 . Certainty of a) If the court can identify the quantum of trust property transactions they enter
b) a formula for determining the property subject to a trust into and have the
Subject Matter obligation is considered necessary intent, and that
c) to avoid uncertain expression , such as word” bulk of the subject matter is
two elements to ‘ and even “ reasonable “ can NOT be determined . accurately described
the requirement of ( Remark : reasonable may be used for
certainty of subject
matter Element # 2. The interests of the beneficiaries Case : Boyce v. Boyce
The property that is subject to the trust must be clearly defined, (1849), 16 Sim 476.
If the subject matter and this can be satisfied in one of three main ways: -A predeceased
is not certain the a) the amount each beneficiary clearly described beneficiary the testator,
trust fails. b) a method for calculating the amount. and the remaining
c) the trustee’s discretion for distribute the income or capital. house are not clear
identified , the trust
failed.
Objects (Persons or Purposes)
the persons are referred to as beneficiaries referred to as the
requirement of “certainty of beneficiaries” below
Reasons for Certainty of Objects
trustees must know what it is they are to do with the trust
property.
Exception for Charitable Purpose Trusts
The court will provide an administrative scheme to achieve the
purpose.
Certainty of Beneficiaries Those should be
* have no discretion- for fixed interest trust. included or defined in
* with discretion – how much , and whom will be received. the trust instrument.
Discuss key aspects ( even what type of benefits and when will be receive)
of each of the three
Those should be
certainties. - The Test for a Fixed Trust
included or defined in
3 . Certainty of “class ascertainability test or “ full list test “ – trustee or court must
identify every member of class of beneficiaries. the trust instrument.
Objects
（1） determine whether they should be in the class
（2） identify every member of the class
-The Test for a Discretionary Trust

“Individual ascertainability” test.(make a complete list of the beneficiaries)
- Conceptual vs. Evidential Uncertainty Case ***McPhail v.
* A trust is void only for conceptual uncertainty. Doulton *** (UK)
ruled that the requirement
*A trust is not defeated where the uncertainty is merely evidential of certainty of
beneficiaries are met,
uncertainty. (.i.e., individuals having legal title to real property
applied to Canada .
within certain clearly defined boundaries. - “individual
* Assume that the court found this to be conceptually certain.) ascertainability” test.
10
Cases Law
A property has been transferred to another person for the
purposes of creating a trust without all of the three certainties A resulting trust is an
being satisfied, then the trust will fail, and the intended trustee implied trust that comes
will hold the property on resulting trust for the settlor. into existence by
operation of law, where
意定信托是指依据委托人的意思表示而设立的信托，英美法 Common property is transferred
Determine if the law 上称为明示信托（Express Trust）。 to someone who pays
three certainties nothing for it; and then
exist in a given fact 非意定信托是指不依据委托人的意思表示而设立的信托，又可以分为 is implied to have held
pattern and explain 法定信托（Statutory Trust）和默示信托（Implied Trust）。 the property for benefit
区分二者的意义在于两类信托的设立条件完全不同，意定信托的设立 of another person. The
why or why not.
需要委托人明确的意思表示行为，而非意定信托的设立则不需. trust property is said to
"result" or jump back to
回归信托（Resulting trust）回归信托，也被译为“归复信托”、“结果信 the transferor (implied
托 . 指信托设定后由于一定的事由使得该信托没有生效，委托人的身 settlor)
份享受信托利益时方才成立的信托，（受托人须将信托财产返还与委
托人. ）
11
CHAPTER 4 CREATION OF AN EXPRESS TRUST: CONSTITUTION
4.1 WHAT CONSTITUTION OF THE TRUST REQUIRES
(LO) Cases Law
What the constitution of a trust requires? Dual ownership creates
- The constitution of a trust requires that the trustee have title a fantastic structure for
to the property that is to be held in trust. the asset management
and succession in
common law system
provide an example: Suppose S, who is of
The following would satisfy the requirements of legal capacity legal age and is mentally
and the three certainties. competent.
Briefly describe “I will transfer legal title to the house and property on lot 12,
The three certainties(met)
what the plan 23A, on concession 115, in the town of Smithville,
1.) The intention to
constitution of a Ontario, known as 12 Oak Street (the “Trust Property”) to T create a trust is likely to
trust requires and to be held in trust for B until B reaches the age of 19. When be satisfied because T is
B reaches the age of 19 T is to transfer the legal title to the instructed to hold the
provide an
Trust Property to B.” property “in trust” for B.
example 2) Object - B is clearly
A valid express trust has NOT yet been created the object of the trust.
- The settlor (S) has yet to constitute the trust. 3.) The subject
- To constitute this trust, she must actually transfer the matter is the clearly
property to T. described property with
all of the benefit of the
-only the “shell of a trust” which is legally inoperative.
subject matter to go to B.
Gift vs Trust If S has written the note intending to make a gift in trust in All S ‘s decision
Property (NOT LO) favour of B there is nothing B can do to enforce the gift.
4.2 REASONS FOR REQUIRING CONSTITUTION OF THE TRUST

Cases Law
Reason 1: Allowing Trustee to Carry out Trust Obligations. Execute the rights /
- control over the property (holding and managing the duties (common law )
property , such as” portfolio of investments”
- distributing income or capital from the property to
beneficiaries
-under a legal obligation to carry out the terms of the trust.
Identify and -Even for a “ bare trust “ – a trustee needs to hold the legal
explain two title and then hold and transfer the property to the beneficiary.
reasons for the
requirement that a Reason 2: Equity Will Not Perfect an Imperfect Gift courts of equity
trust must be Courts of Law ( for a valid gift ) court of equity has
1. that the donor expresses an intention to make the gift. the power to
constituted
2. the donor delivers the property, and produce documents
3. the donee accepts the gift. which common law
Courts of Equity had jurisdiction to direct accounts to be taken,
and in proper cases to order the solicitor to replace property
courts could not as a
improperly acquired from the client, or to make compensation if tool for discovery
he had lost it by acting in breach of a duty which arose out of his procedures.
confidential relationship to the man who had trusted him.
Remark : 1.) Its all about legal title. To make a gift, you need to
transfer legal title to the donee. To create a trust, the trustee
needs to have legal title. 2.) look at the three certainties
12
4.3 HOW A TRUST IS CONSTITUTED
Cases Law
- Two Ways of Constituting a Trust
1. the settlor transfers the property to the trustee; or
2. the settlor declares herself to be a trustee with respect to her
own property.
Describe and give
- Transfer of Legal Title to Property
an example of 1.) If legal title to property is to be transferred to a trustee, the
two ways in proper method for transferring that legal title must be followed.
which a trust can ( i.e., land transfer registration system )
be constituted. 2.) Some forms of property require compliance with statutory
forms of transfer (i.e., transfer of shares may be subject to
legislative requirements)
Describe two
ways to
constitute a trust
of an equitable
interest and give
an example of
each.
C’s title (or “interest”) is an equitable title as a beneficiary of the

remainder interest under the trust.
Suppose C wants to pass on that remainder interest ( if B dies )

to her children X and Y:
Steps
Way 1 ( creating a new sub trust )
1. assign her equitable interest to X and Y
2. assign her equitable interest to Z in trust for X and Y (a sub-
trust) ( new sub-trust is needed )
3. declare herself a trustee of her interest in X and Y (another
form of sub-trust), or
Way 2 ( staying in the first trust)
4. instruct Tony to hold her equitable interest henceforth in trust
for X and Y.
13
4.4 WHAT THE SETTLOR MUST DO TO CONSTITUTE A TRUST ( settlor ‘s duties )
Cases Law
- For the settlor to complete the gift in trust, the settlor would Case 1 ROSE
have to satisfy the delivery element of the gift by transferring Rose, [1952] Ch. 499, [1952]
the property. 1 All E.R. 1217 (Eng.
C.A.).
- transferred shares
- the settlor declared herself to be a trustee when she in fact had
required by the
indicated an intention to transfer property to another person as
company and were
trustee, it would be completing a
properly signed, but
gift that the settlor had NOT herself chosen to complete by
NOT registered on
transferring the property.
the books of the
company until June
Remark
30.
Explain what a Under trust law, the settlor transfers the legal title to trustee,
settlor must do to otherwise , it will be treated as a gift.
- Court held that the
constitute a trust trust was constituted
And the gift is NOT a “ trust property” which not subject to
that is to be on April 5th and that
the beneficiary enjoyment anymore , neither out of control by
constituted by the the shares did not
the trustee.
transfer of legal or form part of Rose’s
estate for the purposes
equitable title to The two cases below illustrate the importance of proper
of estate taxation.
another person (or documentations.
( signing date later)
persons) as trustee
(or trustees). Case 2 Antle case
From the Judge ( Antle Case )
The court held that
“no actual transfer of
“ In short, if you are going to play the avoidance game, it is not shares”. Backdating of
enough to have brilliant strategy, you must have brilliant documents, fuzzy
execution. I find no Trust was duly constituted.
intentions, lack of
transfer documents,
… no valid trust he either sold the shares to his wife and lack of discretion, lack
triggered a gain in his hands or he rolled the shares to his of
wife … he has been correctly assessed on the resulting capital
commercial purpose,
gain…”
delivery of signed
documents.
14
4.5 SETTLOR DECLARING SELF TO BE TRUSTEE OF PROPERTY HELD BY THE SETTLOR

Cases Law
Explain what will what will be required before a settlor will be held to have
be required before declared himself a trustee?
a settlor will be - This can be done in writing or orally.
held to have - courts tend to be very cautious about concluding that a person
has declared himself to be a trustee of property.
declared himself a
trustee of Explain why it is required?
property, he has Court tends to require
- for alleged settlor who
clear evidence that a
legal or equitable - either deceased ( no longer available to corroborate an
declaration of trust
title to, and allegation ) or
was made
explain why it is - he / she might be denying such a declaration.
required.
4.6 EFFECT OF CONSTITUTION OF A TRUST

Cases Law
Explain the effect what will be required before a settlor will be held to have Settlor can sue the
of the constitution declared himself a trustee? trustee for non-
Unless the settlor has expressly reserved a power of revocation. compliance with the
of an otherwise
( see chapter 7 for termination and variation ) trust obligations if
validly created
the trust is valid
express trust.
constituted
15
4.7 CAN A SETTLOR BE FORCED TO CONSTITUTE A TRUST?

Cases Law
1. If the beneficiaries have not provided consideration for courts of equity

a promise from the settlor to create a trust, then the settlor’s
would not complete
expressed intention to create a trust is an expression of anan incomplete gift
Explain the intention to make a gift to the beneficiaries in trust. by forcing the
common response settlor to constitute
of courts to a 2. No transfer of the property to the trustee and completed the trust , will not
request by an gift. assist a volunteer .
intended
Courts of equity would not force a settlor to constitute a Courts of law would
beneficiary to have
gratuitously created trust even where the settlor had enforce a promise
the court force the expressed his or her intention to create a trust by way of a made in a deed
settlor to deed.
constitute a trust.
A deed is a signed, sealed and delivered document.
契约是签名，盖章并交付的文件。
Explain the When intended beneficiaries of un-constituted trusts Court of Equity -

common response applied to courts of equity to force a settlor to constitute remedy of damages
of courts to an the trusts, those courts refused to do so. for failure by a
application by an promisor to fulfil a
This was so whether the settlor had expressed the intention promise expressed
intended trustee
to create a trust in a deed or otherwise. in a deed would
for a declaration require that a
as to whether the Courts of equity gave a similar answer to intended trustees payment be made by
intended trustee who sought a declaration as to whether they were obliged the promisor to the
was obliged to to take steps to force a settlor to constitute an un- promises to
take steps to force constituted gratuitous trust. They would answer that the compensate for the
the constitution of intended trustees were not obliged to take such steps. failure to fulfil the
a trust. promise
16
CHAPTER 5 CREATION OF AN EXPRESS TRUST: FORMALITIES
5.1 THE STATUTE OF FRAUDS

Cases Law
Contracts with Respect to Land English Statute of

(s. 4 of the English Statute of Frauds) Frauds in 1677.
1.) must be formalized in writing.- “ land and the Section 4 of the

assignment “ of equitable interests, or English Statute of
Frauds
2.) some memorandum or note in writing, or a written “ …shall be in
document can also be signed by another person lawfully writing, and signed by
authorized by the person. the party to be
charged therewith,”
A Contract – “ A pays B ( promise / hold the land ) in
Identify situations in trust for C .” Statute of Frauds (e.g.,
which it may be Enforcement : If a contract is not enforceable then the Ontario
necessary to have creation of a trust will not be enforceable.
written evidence of a
contract under which Section 7 of the
a trust is to be Creation of Trusts with Respect to Land English Statute of
created, signed by (s. 7 of the English Statute of Frauds) Frauds that
“ it covers not only the creation of trusts by the transfer “ …. shall be manifested
the person against and proved by
of land but also declarations of trust with respect to
whom the contract is some writing signed by
land,” the party who is by law
being enforced, or by
enabled to declare such
that person’s agent. Enforcement : trust, or by his last will
- The basis of “ constructive trust” makes enforceable even in writing”
in the absence of some writing signed docs.
- Section 7 does not require a signed trust instrument
- the written document cannot be signed by the
agent of the person enabled to declare the trust.
Identify situations in The English Statute of Frauds required contracts with

which it may be respect to land…, all trusts with respect to land had to The English Statute
necessary to have be proven by some writing signed by the settlor. of Frauds 1677
written evidence of a
Rules of evidence issue in 1677 - At the time, a basic
trust that is signed by rule of evidence was that the parties to litigation could
the settlor. not give evidence in support of their own case — such
evidence was presumed to be of limited probative value
since it was presumed that the parties would lie to
support their own interests.
17
Cases Law
Assignments of Equitable Interests in Trusts Section 9
(s. 9 of the English Statute of Frauds)
Application of Section 9 “ all grants and
- It is an assignment or a real trust ( sub trust ) for the assignments of any
transfer of an assignment trust or confidence
shall likewise be in
writing, or shall
Prudent approach : likewise be utterly
- have the instruction to the trustee, or void and of no effect.”
Identify situations in - the disclaiming of an interest in a trust,
which a transfer of - expressed in writing signed by the person giving the
instruction or disclaiming the interest.
an interest in a trust
must, or should be, in Enforcement
written form, signed - The grant or assignment must itself be in writing.
by the person making - grant or assignment can NOT be signed by an agent
the transfer. for the person having the equitable interest.
Problems with the Statute of Frauds and Responses Changes in the law of
evidence, and the law
Doctrine of Part Performance in general, reduced the
- an alternative means of proving the contract potential for
- ( the payment track ) may be a sufficient evidence of the frauds that the Statute
alleged oral contract in lieu of the requirement of of Frauds was intended
writing in the statute. to discourage
Doctrine of Fraud Canadian cases

Another principle developed to avoid the statute was the Rochefoucauld
“doctrine of fraud”. v. Boustead.
- the letters sufficient evidence of the trust Trust law – Breach of
- the other evidence is admissible ( such as the financial trust – Mortgage
track for returning the profit) takeover in trust for
somebody else ,but
has not committed as
a fraud.
18
5.2 TESTAMENTARY TRUSTS

Cases Law
Wills Acts
Concerns regarding potential fraudulent wills also led to Wills Act in England
requirements in the Statute of Frauds with respect to the in 1837
creation of a valid will.
Requirements - common law
- it must be in writing (s. 14(a). jurisdictions in
Identify situations - it must contain a signature of the testator Canada
in which - a signature in the presence of two witnesses who are both
compliance with present at the same time
wills legislation is - the witnesses must also sign the will in the presence of the
required for the testator.
Testamentary Disposition
creation of a trust.
“takes effect on death” of the person making the
disposition.
Remark:
the testamentary trust will not be executed until the event
of the death of testator , and it can be signed when testator
alive with her will.
- Since courts are

Secret Trust bound by legislation,
Bill ( testator) - John ( trustee )- Nancy ( beneficiary ) and since the
legislation clearly
Since Bill’s will did not give any indication that John was to makes the trust in
receive the $500,000 subject to a trust obligation, trust is favour of Nancy
referred to as a “secret trust”. invalid, a trust of this
- For a secret trust the communication sort enforced by a
by the donor to the trustee can be made at any time before court arguably could
Explain the terms the donor’s death. not be an express
secret trust and trust.
semi-secret (or Semi-secret Trusts
half-secret) trust - the communication must be made - It is therefore
before or at the time of the trust obligation is imposed (i.e., at sometimes argued that
or before the time of the execution of the will). a trust of this sort
must be a constructive
trust
This distinction between secret and semi-secret trusts in
terms of the timing of the communication of the trust has -As with the fully
been criticized and, indeed, is not followed in many foreign secret trust, courts did
jurisdictions. not favour such a
result. They imposed a
The distinction appears, however, to continue to operate in trust obligation on
Canada. John.
19
Case : McCormick v.
-legal requirements Grogan (1869), LR 4 HL
1. The testator must have intended to impose a trust obligation. 82.Timing
2. The donor or testator must have communicated that the
property should be held in trust for others and communicated Case : Boyes v. Carritt
the intended beneficiaries of the trust to the trustee. (1884), 26 Ch. D. 531.
3. The trustee acquiesced or accepted to hold the property in The court ruled that
trust for the specified beneficiaries; and Carritt did not hold the
4. The communication of the trust obligation by the donor or property on behalf of
testator to the trustee must be timely. Nell Brown. The
( secret trust – anytime before donor ‘s death communication must be
( semi-secret trust - the communication must be made made within the
before or at the time of the trust obligation is imposed) testator’s lifetime and
the purported trustee
- Uses of Secret and Semi-secret Trusts
must accept the trust.
Reasons for the Distinction between Secret and Semi-secret
Trusts
Set out the time of communication of the trust is based on the notion of
requirements for a incorporation by reference in a will.
valid secret trust (i) the document is in existence when the will is created.
and for a valid (ii) the will refers to the document as an existing
document; and
semi-secret trust.
(iii) the document is sufficiently described so that it
can be identified.
NOT A Learning Objective

The fully secret trusts allow one to avoid the wills legislation by
making a gift in the will without reference to any trust, and then
adding the trust obligation before the testator’s death but after
the will’s signing. In a subsequent document that does not
comply with the wills legislation.
It can also lead to a perceived injustice where the person who

received property in trust (as expressed in the will), but to whom
the details of the semi-secret trust obligation were only
communicated after the will’s signing, keeps the property
without being subject to the trust obligation the testator intended
to impose.
Why timing is important ??/ because of wills testator ‘s death ?

Uses of Secret and Semi-secret Trusts
NOT A Learning When a will takes effect on the death of the testator its contents
Objective become known? Secret and semi-secret trusts have been used to
make testamentary gifts to persons where the testator did not
want other persons to know the names of the persons to whom
the gifts have been made. Thus, the names of the persons on
whose behalf property is to be held in trust are not disclosed in
the will. Historically it was typically used as a device for making
a gift to a mistress and/or to children born of a relationship
between the testator and his mistress.
The testator may have thought best, given the social mores of
the time, not to make that information public. These days there
may be other situations in which a testator does not want certain
beneficiaries to be known.
20
5.3 SUMMARY
Cases Law
1. ) wills legislation comply with -- Is this a trust that is

intended to take effect on the death of the settlor?
2.) wills legislation does not comply with - If the will

provides that property is to go a particular person without
indicating a trust obligation (a fully secret trust), or
it states a trust obligation without indicating what that trust

obligation is (a semi-secret trust) have the requirements
Identify factors in for a secret or semi- secret trust been met?
a particular
scenario that 3.)” Land and land interest “ related - Is the trust created
suggest the pursuant to a contract that involves land, or an interest in
formalities of land? ( in writing requirement)
execution have or
have not been 4.) Signed by the alleged settlor-- Does the trust, even
met. though not created pursuant to a contract, involve land or
an interest in land?
5.) Trust is in transferring (by assignment) If a

beneficiary of a trust is transferring (by assignment) his or
her beneficial interest to others, either by assigning it
directly to one or more other persons
See flow chart below :
21
22
CHAPTER 6 CREATION OF AN EXPRESS TRUST: LEGAL AND PUBLIC
POLICY CONSTRAINTS
6.1 TRUSTS FOR ILLEGAL PURPOSES
Learning Objective Topic Notes Statute/origins & Cases
Law
- The normal result is
Know that a trust may A trust may be invalid even full capacity with all that the trust is
be invalid on the basis three certainties are met as well as valid unenforceable.
that it was created for constituted, such as : against public policy , and - Thus, the intended
security issues to the general public . trustee cannot be forced
an illegal purpose. to account and may end
up keeping the
transferred property
6.2 TRUSTS IMPOSING CONDITIONS THAT ARE CONTRARY TO PUBLIC POLICY

Cases Law
Conditions Precedent and Subsequent Definition : A

先决条件和后继条件 condition precedent is
condition precedent.- i.e. A trust might impose a a condition (or event)
condition such as a condition that the person is not that must occur
entitled to the capital of the trust until she or he before the trust comes
into existence or
reaches a certain age.
before a trustee can
distribute property in
condition subsequent -i.e. The trustee would be favour of a particular
required to distribute the income to that person as beneficiary
long as that person resided in British Columbia.
If the person no longer resided in BC, the person’s

Distinguish between interest in the income is a vested interest subject to Court- the courts
conditions precedent divestment. have generally been
and conditions slow to increase or
subsequent. Conditions Contrary to Public Policy reduce the scope of
Exactly what is considered to be contrary to public matters that are
policy will vary over time. contrary to public
(more see below ) policy, often leaving
the decision on such
Generally, the common law rule was that if a matters to the
condition precedent is void the entire gift fails. legislature.
a condition subsequent is void the common-law
rule strikes out the condition, meaning the gift
continues whether or not the circumstances
described in the condition do in fact occur.
23
Effect of Conditions Contrary to Public Policy
Explain the - Where a trust contains a condition that is contrary
Consequences of the to public policy the court may hold that the trust fails.
distinction as it applies
- Where there is an intended gift, or trust, that is
to the validity or
accompanied by words that qualify the gift, or trust,
invalidity of a gift where the first question is whether the qualifying words
there is a legal or public Re McBain8 ( 1939 )
constitute a condition precedent or a condition
policy constraint in the will provided a
subsequent.
applying the condition. gift to two daughters
but said that gifts
Types of Conditions that have been Held to be over
Contrary to Public Policy (i.e., to other
persons) should take
1) Restraint of Marriage place if either of the
Conditions have been held to be void if their daughters were to
purpose is to impose lifetime celibacy (独身). marry.
Hurshman1 a gift
2) Interference with Marital Relationships of personal property
a condition that encourages the separation of was made to a
married couples or discourages separated couples daughter on
from getting back together. condition that she
Identify conditions in a not be married to a
trust that may be Jewish person.
contrary to public policy
and that may result in In Clarke v.
3) Interference with Discharge of Parental Darraugh13 a gift
the invalidity of the
was made to an
trust. Duties
infant on condition
Suppose, for example, a gift is made to a minor on
that the gift would
condition that the gift is forfeit if the child resides
be lost if the child
with his or her parents.
lived with his father
at any time before
the child reached the
age of majority.
4) Discriminatory Conditions
i.e., Racial discrimination (the “Leonard
Foundation
case”), a trust to
5) Restraints on Alienation 限制异化 ( property provide scholarships
law concept ) only to white
i.e. prevent the beneficiary from disposing of all or Anglo-Saxon
part of his beneficial interest. i.e., a restriction on the protestant students.
sale of property to a person outside of the family
might be considered contrary to public policy.
Restraint on alienation comes up in the context of

trusts to deal with spendthrift dependents.
24
6.3 CONDITIONS THAT ARE UNCERTAIN OR IMPOSSIBLE OF PERFORMANCE

Cases Law
Uncertain Conditions
Conditions that are uncertain may not be contrary
to public policy, but if they are uncertain the court
may have difficulty discerning how the settlor
intended that the condition would apply.
Conditions that require a person to adhere to a

particular religion have not generally been
Identify conditions that considered contrary to public policy.
may be uncertain or
impossible to fulfill and For example, the condition may be inserted to
avoid the perpetuity rule against remoteness of
vesting. 反永久归属原则
Conditions Impossible of Performance

indicate the effect of the
uncertainty or If a gift of personal property is subject to a
impossibility. condition that cannot possibly be fulfilled at the
date the gift was made, the gift will take effect free
of that condition.
If a gift of property is subject to a condition, it will

fail if it is determined to be a condition precedent.
It will succeed if it is a condition subsequent.
25
6.4 TRUSTS THAT DEFRAUD CREDITORS
Cases Law
Fraudulent Conveyances Legislation反欺詐轉讓法 Abakhan & Associates
v. Braydon
Identify situations in Investments Ltd.,
which a transfer of A disposition of property in trust, either by way of a - the court held that
property into a trust. declaration of trust by a debtor or by way of a transfer an intent to defeat creditors
of property to another to be held in trust, may be void to protect assets,
as against creditors if it is made to delay, hinder, or new general partner
1. ) may be invalid on company and old
defraud creditors.
the basis that it is company ( transfer asset)
contrary to fraudulent Fraudulent Preferences Legislation欺诈性特惠 Bank of Montreal v.
conveyance or Crowell
fraudulent preference The legislation deals with dispositions of property Mr. Crowell
legislation that favour one or more creditors over other transferred 50%
interest of his
creditors.
property to his wife
for avoid probate fee,
Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 - Ontario
and it turned out to be
that the various
promissory notes went
into arrears.
Bankruptcy and
The Bankruptcy and Insolvency Act Insolvency Act
A settlement within five years of bankruptcy was void a settlement of
against a trustee in bankruptcy if the trustee in property was void
bankruptcy could prove that: against a trustee in
2.) may be invalid bankruptcy if the
( void) against a 1.) the settlor was unable to pay his or her debts settlor became
trustee in bankruptcy without the aid of the property; or bankrupt within one
under the federal 2) the property did not pass on the execution of the year of the
Bankruptcy and settlement settlement.
Insolvency Act.
Such settlements were not void as against a trustee in
bankruptcy if they were settlements made in favour of
a purchaser or encumbrancer in good faith and for
valuable consideration.
Summary
the trust may not be valid:
1. Prejudiced creditors of the settlor if the settlor was
insolvent.
2. In favour of one or more creditors in preference to
other creditors.
3. if the trust was made “to delay, hinder or defraud”
creditors, then it will be void
4. within five years of the bankruptcy
26
6.5 RULES AGAINST PERPETUITIES
Cases Law
Remoteness of Vesting（归属偏离原则）
1.) the rule The common law rule
“ ... an interest is valid if it must vest, if it is going to against remoteness of
vest at all, within a period calculated by taking the vesting was concerned
lives in being, at the date the instrument takes effect, plus with being able to
21 years.” determine whether a
- The analysis must occur at the beginning of the particular person, or
trust. persons, had a vested
- The rule applies only to contingent interests. interest.
It does not apply to a vested future interest.
- The rule does not affect vested interests in property
that last for a very long time, as long as the interest is
not contingent. Lucas v. Hamm
- An interest in property is also valid if it is clear at in which a gift that
the time the interest is created that it will never vest. was to be made to the
- The interest does not actually have to vest within Communist Party
the perpetuity period. within five years
- Under the common law rule against remoteness of of obtaining probate
vesting it did not matter that all interests would was held invalid
probably vest within the perpetuity period even though probate
is usually obtained
within no more than a
few years.
Articulate the rule against 2.) Legislative Modifications
remoteness of vesting and rule against perpetuities
explain how it operates in - The legislation contains a number of other rules
that reduce the risk that the remoteness of vesting
the context of a simple rule might be unwittingly violated.
example. ( rule against - Under the “wait and see” rules, where they
perpetuities= rule against apply, the trustee does not need to determine at the
remoteness of vesting ) beginning if there is a possibility of the gift not
反永久归属原则 vesting. (vest- 归属 v · 转归 v · 授予 v · 授权 v)
3.) Conflict of Laws Issues

still exists in a given jurisdiction’s laws, it forms part
of the fabric or system of law for that particular
jurisdiction…
Asset Based Approach for tangible and intangible
asset. Under the
Governing Law of Trust Approach ( steps) commonwealth
- Capacity of the settlor/testator to dispose of his or common law
her assets/Property ( mental capacity) conflicts of law,
- Validity of the transfer of legal title or ownership
from settlor/ testator to the trustee
- Validity of the transfer of equitable title or
ownership to the beneficiaries of the trust(valid term)
Canada that the law governing the essential validity

of a trust at common law may differ from the law
governing the trust’s administration.
27
3.) Conflict of Laws Issues ( continued )
How law governing a trust’s essential validity determined.

It may be determined either by statute or by common
law, depending on whether the jurisdiction has
adopted statutory rules.
Statutory Law
The Trusts Convention provides that the law determined
by its rules to apply to a trust (i.e., the applicable or ONTARIO – use a
governing law of the trust) will govern all aspects of common law
the trust, including its essential validity.
Not in ONTARIO
This “proper law” as the concentration of

factual elements is the governing or applicable law. Common Law
only one law governs
Summary a trust for all aspects
of a trust regardless of
For inter vivos trusts of movable property, it is the law the location of the
intended by the settlor, either expressly or by trust’s assets or the
implication. If there is no evidence of intention, it is residence of its
Articulate the rule against generally regarded as the law of the place with which trustees, and that this
the trust is considered to have its “closest and most law is determined, in
remoteness of vesting and
real connection”. the absence of intent,
explain how it operates in
by the jurisdiction
the context of a simple For testamentary trusts of movable property, the with which the trust
example. ( rule against determination may be less clear, and will depend on has its closest and
perpetuities ) - Continued whether the testator, either expressly or by most real connection.
implication, can select the law governing a The factors include
testamentary trust’s essential validity. If not, or failing whether the trust
which, then it appears that it is the law of the testator’s assets consist of
domicile at death. moveable property or
immoveable property.
Public Policy
- It appears arguable that the rule against perpetuities 21 years rule as the
is no longer necessarily (assuming it was historically) rule against perpetual
a matter of public policy. duration.
- depending on the nature of the movables
- public policy should be considered to assess
whether the rule against perpetuities may apply to the
trust (and thus potentially render it invalid
Note Re Non-Charitable Purpose Trusts Look at the “original

Indicate whether the rule For the limited set of non-charitable purpose trusts intended charitable
that are considered valid, the perpetuity rule is set at purpose” still make
against perpetuities has just 21 years. sense – court allows
been modified in your
jurisdiction and briefly the funds for anther
Charitable Purpose Trusts
If against perpetuity , then have a gift over of any
charitable purpose.
describe the nature of the
modification. residual before the end of the perpetuity period or
limit the charitable trust to a period of twenty-one
years.
28
Cases Law
accumulation rules Case National Trust
Co. v. McIntyre
The Ontario Accumulations Act provides - testator ---
beneficiary 21 yrs.
“ The rules of law and statutory enactments relating rule – encroachment
to accumulations do not apply and shall be deemed was allowed , one
never to have applied to trusts created for a charity claimed the
Given a scenario, identify charitable purpose…” accumulated amount
the reasons why the rule
after 21yrs
against perpetuities or the it is necessary to turn one’s mind to what would
accumulation rules may happen if a fund held in trust generates excess
apply. income, and if it to be accumulated, one should
address with the testator (or settlor) what is to
be done with the accumulated amount.
What Regime Governs Determination of Which Legal System Applies

Province Conflict between laws of Conflict between laws of Conflict between laws of
province/ province/ territory in province/ territory in
territory in column 1 and other column 1 and territories only column 1 and international
provinces only jurisdiction
Ontario Common Law Common Law Common Law
BC Conflict of Laws Rules Common Law International Trusts
for Trusts Act R.S.B.C. Act, R.S.B.C. 1996,
1996, c. 65 c. 237
Quebec Quebec Civil Code, Quebec Civil Code, Quebec Civil Code,
e.g., Article 3107 e.g., Article 3107 e.g., Article 3107c. 237
29
CHAPTER 7 TERMINATION AND VARIATION OF TRUSTS
7.1 TERMINATION UNDER THE TERMS OF THE TRUST INSTRUMENT

Cases Law
Describe a right of - A trust may be terminated under the terms of
revocation. the trust instrument.
- A power of revocation allows the settlor to
revoke the trust and have the trust property
returned to the settlor.
Explain how a right of Revocation is NOT automatic ( must be

revocation must be reserved expressed reserved in the trust instrument )
to be effective.
- Reserved in the trust instrument, but a Power Section 75(2) of the
Explain the reason for the of Revocation is Rarely Reserved in Canada Income Tax Act ,
-while the settlor continues to be liable to pay property being taxed
infrequent use of a right of
tax on any income produced by that property. in the hands of the
revocation in Canada. settlor.
7.2 The Rule in Saunders v. Vautier
Cases Law
Rule *** Saunders v.
One or more beneficiaries, all of full legal capacity, and Vautier*** (1841),
who is, or are collectively, entitled to all the beneficial 41 E.R. 482
interest in the trust may apply to have the trust terminated
and the assets transferred even though the trust
instrument calls for final payment to be delayed.
Beneficiaries
-must all agree to terminate the trust
Given a scenario, identify -must all have capacity.
-must have all the rights of enjoyment in the trust
potential applications of property
the rule in Saunders v.
Vautier as well as Three general circumstances
1. A beneficiary who is adult with property claimed
from the trustee to be transferred.
2. Several concurrently interested beneficiaries
collectively request
3. Several beneficiaries who are entitled in succession
Six Situations of the three above.

1. Postponement to a certain age ( the DOB of sb)
2. Postponement to a date
3. Installment gifts
4. Discretionary trusts and powers(spendthrift.)
5. Life interest with general power of appointment of
the remainder
6. Charities- as a legal person could wind up the trust.
30
If the two key elements do NOT exist
situations in which the 1. The beneficiaries must all be of full legal
application of the rule in capacity.( if one does not reach the legal age )
Saunders v. Vautier is not 2. The persons applying to wind up the trust have
likely to be available. the full beneficial interest ( as long as one of them
does not have this )
-The settlor may want to prevent the beneficiaries

Suggest ways to avoid from winding up the trust.
the application of the - The general principle for avoiding the application
rule in Saunders v. of the rule is to provide for a contingent interest
( i.e., in favour of a minor or unborn person ) of
Vautier.
some kind ( against the element 1 above )
- postponement to a certain age
Underhill on Trusts
Variation of Trust under The trust can be varied by having the beneficiaries and Trustees
the Rule in Saunders v. who are able to terminate the trust under the rule. contains a right (i.e.,
Vautier an enforceable
opportunity
7.3 VARIATION OF TRUSTS LEGISLATION

Cases Law
Describe the nature and Income tax law is a motivation for the variation under provincial
probable purpose of the of the trust. legislation that
variation of trusts i.e., The taxation of capital gains allows for the
legislation. variation of
trusts
( Ontario) requires that the court not approve a
variation of trust unless it appears to be for the
benefit of each of the persons on whose behalf the
court may consent. ( too hard to determine )
Two key considerations the court will take
Identify relevant into account are: The court measures
considerations that may 1. Is there a benefit to be obtained on behalf of the benefit from the
influence whether a court infants and of all persons who are or may starting point of the
will allow a variation of a become interested under the trusts? entitlement.
trust under the variation of
trusts legislation. 2. Is the benefit obtained on behalf of those for The benefit must be
( to be continued) whom the court is acting such that a prudent not just a group
adult, motivated by intelligent self-interest and benefit but a benefit
sustained consideration of the expectancies and for every member of
risks and the proposal made, would be likely to the class as an
accept? individual.
31
Cases Law
Case Comments
Facts:
- primarily of mining properties producing
revenues generated from extraction of minerals Finnell v.
- Schumacher Foundation Schumacher Estate
(1990), 74 O.R. (2d)
-The creation of the trust in 1957 583 (C.A.).
Identify relevant
-Income Tax Act had been amended (in 1971) to
considerations that may tax capital gains
influence whether a court - An arrangement was proposed for the benefit
will allow a variation of a of existing and unborn beneficiaries that
trust under the variation of received a favourable advance tax ruling.
trusts legislation.
( continued ) ( case ) Held: the court concluded that there were
scenarios in which the issue could be worse off.
The court noted that the question is whether it is

a fair bargain and, taking into account the
potential bargaining range on the particular facts,
concluded that it was not clear that the proposed
variation represented a fair bargain.
Remark: focus on the three consideration

/measurement for the beneficiary and stay with
the testator’s original intention.
Court measured by three considerations:

1. intention of the testator
2. benefits to all ?
3. that a prudent adult motivated by intelligent self-
interest and sustained consideration
32
CHAPTER 8 USING THE EXPRESS TRUST: SOME COMMON EXAMPLES
8.1 PERSONAL TRUSTS
Learning Topic Notes Statute/origins &
Objective Cases Law
– Life interest trusts
Briefly describe 1.) Legal estates in land Common law
the (land is a broad meaning / definition/? In a trust , A is a allowed of intertest
characteristics testator , B is a beneficiary with remainder trust – no more in land to be
and special succession party, so B to have a life interest ) divided.
features of each
of the following: 2.) Using a Trust to Create Estates in Real and Personal Property Old courts of law
a) In modern times trusts often consist of a fund of investments did not allow for
b) The trust instrument can specify the proportions in which the estate to be created
life interest beneficiaries are to share in the income of the in personal
trust. property.
c) The remainder interest can also be divided in specified
proportions among the remainder interests.
Life interest d) adding a “ protector” , discretionary power … etc.
trusts
3.) Examples of the Use of Life Interest Trusts
The testator to provide not just for her husband ( bequeath
property ) but also for children ( reminder interest )
4.) Range of Possibilities

A>B , then C, D for their life cycle.
One does have to limit the interest to the life of the person to
whom it is granted.
5.) Life Interest Rights

A useful device- the possibilities of a trust are virtually endless.
i.e.The trust instrument could constrain the use of the income
from the fund to provide different beneficiaries in their different
needs.
– Trusts with other time limited interests

a) limited by time periods other just life, a specified age or a
specified date.
b) specified date to avoid the perpetuity rule against
remoteness of vesting.
c) before a deemed disposition of trust property for tax
purposes.
Trusts with
other time
limited interests
33
Objective (8.1) Cases Law
– Discretionary trusts
a) Nature of and Advantages of Discretionary Trusts
Nature: for trustee is given a discretion on whom and what type , and
how much for the distribution.
Advantage:
* the flexibility of the arrangement
* allow income to be allocated among possible beneficiaries.
* provide tax planning opportunities.
* allowing greater amounts to be distributed in the future.
* creditor protection.
* do not to distribute income or capital to an insolvent or bankrupt
beneficiary( including a settlor)
b) Controlling the Exercise of Discretion

- Trust Instrument Constraints on the Discretion
Such as constraints on the exercise of the discretion to control against
its exercise in a manner inconsistent with the settlor’s intent; and the consultation with the
discretionary power may be broadly stated to avoid loss of flexibility and settlor- This control
potential interpretation problems. by the settlor may,
however, causes
Three possibilities for a broad discretion income of the trust
(1) consultation with the settlor is that allowed under ‘ trustee act “ ? ? to be attributed to
need to consulate with settlors for the exercising the power … maybe the settlor for tax
purposes by
subject to sub75(2)
subsection 75(2) of
(2) a letter of wishes ITA
Shall be unsatisfactory with the trustee’s discretion power according to
Discretionary the terms in the trust instrument. use of protectors is
trusts (3) appointment of a protector relatively recent and
- must consulate the protector prior the exercising the law concerning
- mostly used in “ offshore trusts.” the obligations of
such persons
c) Perpetuities continue to be
The discretion can not be exercised outside the perpetuity period of somewhat uncertain
lives in being plus twenty-one year.
d) Certainty of Beneficiaries
- Naming all of the possible beneficiaries
- it must be able to determine whether that person fits within the
defined class or not.
e) Discretion over Income or Capital

The discretion could be given with respect to the distribution of
income, capital or both income and capital.
f) Default Provision
- undistributed when the trust comes to an end
- reopening the administration of the estate
- set out the someone else ( not a settlor ) to receive any remaining
trust property.
g) Use in Avoiding the Rule in Saunders v. Vautier
34
The adoption of using discretionary trust to against Sanudaer v Vautier
– all beneficiaries wind up the trust – by setting up / naming a
contingent interest in the trust .
Objective (8.1) Cases Law
– Trusts with contingent interests basis as to income or capital Saunders v.
voiding the premature termination under Vautier
Trusts with
contrary to public policy consideration
contingent
interests
– Trusts for spendthrift beneficiaries

“ Until [the son] shall assign or charge the interest given to him,
Trusts for
become bankrupt, or do something whereby the income or part
spendthrift thereof, would, through his act or default, or by operation of law, or
otherwise, if it belonged absolutely to him, become vested in, or
beneficiaries
payable to, some other person, or persons.” --In the trust
instrument .
– Trusts for disabled persons

Trusts for absolute discretion to make payments out of the income or capital of
disabled persons the trust in favour of the disabled person. Ontario v. Henson1
Henson case in Ontario, the term “Henson Trust” is now used to
describe trusts in that province which are drafted to meet the criteria
that will avoid the trust being declared an asset of the handicapped
person.
The court held that “ in our view, Miss Henson does not have a
beneficial interest, as that term is used in the definition of liquid
assets.”
– Testamentary trusts
-A testamentary trust is a trust that takes effect on death.
- It is created in a will complying with the applicable wills legislation.
Testamentary -create life interests and remainder interests
-trustees a power to encroach on capital
trusts -deal with a spendthrift or a beneficiary with a disability
– Secret trusts
fully secret - A secret trust can be used where someone wishes to
provide for a particular person without other persons becoming aware
that this is being done.
Secret trusts semi-secret trusts
the will indicates that the property is bequeathed to X in trust but does
not specify the terms of the trust.
The advantage of a fully secret trust is that the trust is not divulged
泄露 in the will, the contents of which will become public after the
testator’s death.
35
For the semi-secret trust, although a trust obligation is disclosed in the
will, the terms of the trust are not disclosed and thus do not become
publicly known.
- Insurance trusts
Insurance trusts can be testamentary or inter vivos trusts. Remark: why just
an insurance
In a testamentary insurance trust, the trust property comes from the policy with the
proceeds of a life insurance policy. beneficiary in it ?
- It can reduce probate fees since the payout to the designated why need a trust –
beneficiary under the insurance policy on the death of the insured does
Insurance reduce the
not form part of the deceased’s estate on death.
trusts - It can be used to make a confidential disposition on death, since the probate fee ?
insurance proceeds will be held in trust under a trust instrument that is
not a publicly disclosed document. Both trusts have to
- provide a degree of creditor protection. be subject to the
-tax consideration top margin tax rate
after 2016.
– Spousal trusts
Tax advantage ( rollover )- but only 50% of any capital gains are
included in the calculation of taxable income, thus giving this type of
income favourable tax treatment.
That is , Property transferred to a spousal trust is not subject to a
deemed disposition.
- A testamentary spousal trust may provide tax planning opportunities
Spousal trusts with respect to capital gains.
subsection 70(6.2).
case ??
If capital gains are realized and the person has accrued capital losses,
the capital losses can be applied against the capital gains. In other
words, the accrued capital losses of the testator can be used to reduce
tax … ( ????)
- It should be noted that the income in an inter vivos spousal trust is

attributed back to the settlor spouse (s74(1)
Alter ego trusts Alter ego trusts What ‘s the
Amendments to the Income Tax Act now allow property to be difference b/w
transferred into an “alter ego”, “joint spousal” or “joint common-law spousal trust and
partner” inter vivos trust created after 2000. joint spousal
( they are all the same trust just different name ?? ) trust ?
* An alter ego trust is created by a single individual.
A joint spousal trust applies to legally married couples. ITA

Joint spousal Requirements
trusts 1.) rollover over ( transfer to the trust) at its ACB
2.) exempt from the twenty-one-year deemed disposition unless the under the Income
death of the settlor occurs Tax Act for the
3.) capital gain deferred, and it will be realized on the later of the death creation of these
of the settlor or the settlor’s spouse or common-law partner. types of trusts
A joint common-law partner trust applies to couples who

meet the Income Tax Act definition of “common law partners. Creditor protection
Common law Even the settlor is
partner trusts All these trusts have some advantages below: one of the trustees
* used to reduce probate fees. trust property
* used for confidentiality is treated separately
* creditor protection , from the trustee’s
36
* in some jurisdictions, avoiding claims under dependents’ relief personal property
legislation with respect to the
* used for incapacity planning. trustee’s personal
creditors.
– Trusts used in estate freezes
1. Family Business Estate Freeze
- Achieved by deferring capital gains tax.
- Income may be redirected to family members in lower tax brackets
- reduce probate fees for the parents
- some level protection from prospective creditors
- protect assets before a risk of marital (kids)breakup arises
Estate Freeze Without a Trust

- through a corporate reorganization that takes advantage of
capital gains rollover provisions (S86) Income Tax Act s. 86.
- exchange the common shares for preferred shares Corp
- preferred share rights could have : Reorganization
* fixed preferred dividend and/or a fixed redemption amt ( exchange shares )
* with no right to participate with the common shares in dividends
beyond the amount of the fixed preferred dividend.
* This will limit the potential for future gain on the preferred shares.
- giving the preferred shares a voting right and by issuing nonvoting
common shares to the children.
- giving the preferred shares more than one vote per share.
Key Objectives
(1) the value of the shares has been frozen at the retraction and
redemption price for the preferred hares(PS) .
Trusts used in (2) Income can be allocated to the children by declarations of
estate freezes dividends ( > 18yrs old )
(3) The freezing of the value of the father’s shares has reduced future
probate fees.
(4) the degree of creditor protection has been achieved- only access to
the fixed value preferred shares.
(5) Continue retained control over the voting rights on PS.
Use of a Trust.
- Instead of issuing the common shares directly to the children they
could be held in a trust for the children, then trustee could have a
discretion for the distribution.
- a discretionary trust for the children also protects the common shares
since it was in the trust.
- An inter vivos trust in which the parent is the trustee can be
Income Tax Act s.
advantageous where there are some children who are active in the 75(2) attribution of
business and others who are not. the income or capital
- the executor is arranging for funds to buy out the interests of the gains back if the
children who are not active in the business. father ( settlor) is to
be the trustee.
Possible Use of Spousal Trust
- preferred shares on a spousal trust by taking advantage of the Income Tax Act, clause
rollover provision. 73(1.01)(c)(i). In a
- lose the income on the preferred shares. spousal trust the
- reduce probate fee ( no longer own the PS in the inter vivos spousal settlor’s spouse is
entitled to receive all
trust) the income.
37
-Creditor protection -attribution rule s for income back to the father
for tax purpose. Income Tax Act,
section 74.1.
“attribution rule”
2. Estate Freeze of Other Assets

(e.g., Investment Portfolio ) Income Tax Act, section
- The portfolio investments could be transferred to an investment 85. (rollover)
company, relying on a rollover.
- The children could be given common shares in the investment
Trusts used in company, thus transferring future capital gains on the investment
estate freezes portfolio to the children
( continued )
3. Complexity, Flexibility, and Advice
Doing an estate freeze and using a trust as part of the
estate freeze requires a combination of expertise in at least
three areas of law: tax law, trust law and corporate law.
Charitable remainder trusts

- The trust is often an inter vivos trust, or tax credit
- A testamentary trust for life interest in favour of one or more can be taken with
Charitable individual beneficiaries and a remainder to a named registered respect to the
remainder trusts charity or other qualified donee. expected present
- tax credit for a charitable donation. (trust must be irrevocable, value of the
no power to encroach on capital in favour of the life beneficiary) remainder
- One disadvantage of such a trust is that it must be irrevocable interest, ITA
to obtain favourable tax treatment.
Education trusts
- set up for the education of the settlor’s children, grandchildren, “ Saunders v.
or other relatives. Vautier”
Education trusts - twenty-one year deemed disposition rule
- intended beneficiaries cannot terminate the trust
- add one more beneficiary for unborn person
Pour-over Trusts
- an existing trust to which property is subsequently added
pursuant to a will, and a “pour-over will”
Pour-over trusts - The trust cannot be revoked or amended by the testator.
- Wills under legislation if a pre-existing inter vivos trust that is
added to by a will can be revoked or amended.
Charitable purpose trusts ( chapter 10)

• relief of poverty
Charitable • the advancement of education
purpose trusts • the advancement of religion, and
• other purposes beneficial to the community.
38
Asset protection trusts ( or creditor protection)
- Trusts can be useful for this purpose since assets held in trust do not Based on the dual
form part of a person’s personal estate. ownership
- hinder or delay creditors- ethical concerns of creating, participating in concept??( law of
the administration of such trusts. doctrine )
1. Potential Problems for Asset Protection trusts
1.1 Domestic Asset Protection Trusts
This might be done by settling property in trust in favour of yourself

but providing in the trust instrument for a gift over to other persons in
the event that you become insolvent or bankrupt, or if your interest
becomes subject to a charge or is otherwise seized
Another way one might attempt to protect property from creditors is to

put the property into a discretionary trust in which the trustee has a
discretion to distribute income or capital to more than one named
beneficiary or to a defined class of beneficiaries. Consideration of
the Offshore trust
1.2 Offshore Asset Protection Trusts
- sufficient assets
issue 1 - One is that a court order against the trustee, settlor or protector
to make such a
in the domestic jurisdiction might be recognized and enforced by a court
trust worthwhile
in the offshore jurisdiction
Asset protection - The main assets
trusts issue 2 - The offshore jurisdiction is likely to have a form of fraudulent for these purposes
conveyance legislation, and the settlor’s creditors may therefore be able will be cash in
to proceed in the offshore jurisdiction to have the trust unwound and bank accounts,
make trust property available to the settlor’s creditors. stocks and bonds
and similar
2. Offshore Asset Protection Jurisdictions investments.
jurisdictions have enacted laws features - settlor retains a
- Make a self-settled spendthrift trust fully enforceable right to revoke-
- Provide that creditors may not reach a settlor’s interest ( even the home jurisdiction
settlor retains a right to revoke the trust) court may order
- Modify their fraudulent conveyance legislation with respect to the trustee
international trusts to require proof beyond a reasonable doubt that - stability of the
the intent was to defraud the plaintiff creditor foreign jurisdiction
- Modify their fraudulent conveyance legislation with respect to and the security of
international trusts to provide a short limitation period on a creditor assets in that
- Enact legislation that courts in the jurisdiction will not recognize a jurisdiction.
foreign judgment against the trustee, settlor, or a beneficiary
- Have bank secrecy laws (i.e., it is an offence for the bank to reveal
the name of an account holder) and sometimes also have trustee
secrecy laws.
The trust could provide that the offshore trustee consults with an
offshore protector before exercising his discretion to choose amongst
beneficiaries.
39
3. Uses of trust in the commercial context
3.1 Mutual Fund Trusts I investment trust ?
- professional management of diversified portfolio
- exempt from 21 years rule foe deemed disposition
3.2 Shareholder Voting Trusts

Shareholders can thus settle the shares (with their associated voting
rights) on a trustee by assigning the shares to the trustee.
A trust deed can then set out specific instructions as to how the trustee In Canada,
is to vote the shares on behalf of the shareholders who have assigned however, to use a
their shares to the trustee. shareholder
voting agreement,
3.3 Debenture Trusts i.e. ( contract )
- A debenture is a document that provides evidence of indebtedness. rather than s
The cost is high for enforcement , and such cost can be shared
sharing voting
amongst all the debenture holders by appointing enforce the term.
trusts.
3.4 Trust to Buyout Interest of Deceased Business Associate
- The surviving promoters may want to buy out the deceased ‘s
portion .
-The proceeds of the insurance would go to a trustee with the object
of buying a deceased co-promoter’s interest
Asset protection 3.5 Business Trust

trusts ( cont’d ) - The trust instrument can provide the investors with rights very
similar to the rights that shares typically provide.
- Liability of the units holder vs corporation structure
3.6 Liquidation Trusts

A trustee may be appointed to liquidate the assets of a business on
behalf of creditors or may be appointed to carry on the business on
behalf of creditors.
3.7 Pension Trusts

Trusts are also set up to provide for pensions for retired Bankruptcy and
employees. Insolvency Act
3.8 Asset Securitization Trusts
Asset securitization involves taking assets that provide a regular flow of
income, such as amounts due on loans or mortgages, transferring them
to a trust and selling units in
the trust that give unit holders an entitlement to receive a portion of the
income.
Environmental reclamation trusts
- The purpose of the funds built up in the trust is to provide for the
restoration of the site when the resources have been depleted.
Environmental
reclamation - A trust is set up so that the company will not be able to use the funds
while they are being built up and the funds will be available when
trusts
needed for reclamation.
40
CHAPTER 9 NON-CHARITABLE PURPOSE TRUSTS
Why need a separate chapter to do so ? for purpose test – not for express trust ?
9.1 GENERAL RULE AGAINST VALIDITY OF NON-CHARITABLE PURPOSE TRUSTS

Cases Law
Reasons for Non-validity
Articulate various 1.) The Main Reason for the Rule
reasons advanced for * The Beneficiary Principle – the reason for the non-enforcement
the general rule of of purpose trusts generally is that there needs to be someone “in Morice v. The Bishop
non-validity of non- whose favour the court can decree performance.” of Durham, 1805
* Without a beneficiary there is no one to enforce the trust UK Case
charitable purpose
obligation.
trusts
阐明各种原因导致非慈 2. Other Reasons Sometimes Given for the Non-validity Rule
善目的信托无效的一般 Conceptual Uncertainty
规则 (e.g., a trust to maintain a gravesite or care for an animal have
been considered sufficiently certain)
And
Perpetual Duration
the arguments as to finding purpose trusts not to be valid is that they
what is said to be the often provide for perpetual duration and therefore violate the rule
primary reason for the against perpetuities
rule.
Excessive Delegation of Testamentary Power
The testator could simply transfer funds to a trustee for a purpose,
leaving the trustee a very broad discretion in carrying out that
purpose
The Modern Form of the Rule

– identifying the exceptions to the rule Re Astor’s Settlement
• erection of a monument at a gravesite Trusts, [1952] 1 All
在墓地竖立纪念碑 E.R. 1067 (Eng.)
• maintenance of a gravesite, and
Discuss the exceptions
• the care of specified animals
to the rule by:
- identifying the – explaining why those exceptions may have been made Modern Statement
exceptions to the rule The court noted
– explaining why those These exceptions have been said to be “historical anomalies, the recognized
exceptions may have derived from upper-class English social life and judicial exceptions to the
been made, and attitudes.” The exceptions have been adopted in Canada. rule and discussed
– discussing whether a possible
– discussing whether the implication of those exceptions is that exception where
the implication of
there is no general rule. there was a gift
those exceptions is over to another
that there is no
general rule. It was argued in support of the validity of the trust that there was person who could
no general rule against the validity of enforce the trust.
non-charitable purpose trusts since several exceptions (such as
those set out above) had been made.
41
9.2 PURPOSE TRUSTS WITH IDENTIFIABLE BENEFICIARIES

Cases Law
Court would interpret Common law case
a trust “for the education of my children “ as a trust “to my The English case
children for their education. of Re Denley’s Trusts
Describe and apply a is often referred to
means by which the Re Denley’s case – court interpret the words of the instrument as adopting this
allowing the trustees to permit other to use the facilities approach
general rule against
(benefits of its employees for the recreation or sports ground” of interpreting an
the validity of
apparent purpose
non-charitable Keewatin Tribal case : trust as a trust for
purpose trusts have - how this trust was being construed as a trust for persons. persons.
been avoided under - If there are persons who could enforce the trust, then the Canadian case of
the common law. “ beneficiary principal” ( from Morice v. Bishop of Keewatin Tribal
Durham” ) problem is not present. Council Inc. v.
City of Thompson.
9.3 THE PROBLEM WITH GIFTS TO UNINCORPORATED ASSOCIATIONS

Cases Law
Nature of the problem law of trusts

The expression “absolute gift” is used here to make it clear related concerns
that the transferee owes no trust obligation with respect to
the property — the transferee is free to do what he wants
with the property.
The expression “gift” in law refers to a voluntary transfer

of property to another without compensation.
This is often the way in which property is transferred to a

person who is to hold the property in trust — i.e., property
Explain the problem is voluntarily transferred to another person without
with gifts to compensation from the transferee, but the transferee is to
unincorporated hold the property for the benefit of one or more other
associations. persons.
1) not a legal valid gift for unincorporated association.

2) may be for the individual , may be express trust for such
person.
3) if it is not a legal valid gift , then fall into the residue of
the estate / interstate property.
42
Cases Law
It should treat the gift as a gift to the individual members
Describe ways in which of the association. courts have
a gift in trust to an - Gift to Individual Members addressed the
unincorporated (both existing and future members of the association) question of how
association may such a gift, clearly
- Gift to the Members Subject to use acc according to their intended by the
be saved as a valid
Contractual Agreement, otherwise, it may have issue for donor, could be
trust or in some other given legal effect.
way. “perpetuity against” remoteness of vesting since the gift could
be invalid)
-Gift to the Members to Hold in Trust for the Purposes of the

identify a potential Association
problem with a gift It is an invalid trust unless those purposes are charitable
to an purposes.
unincorporated
association and The court upheld a gift to an unincorporated association Case: Re
suggest alternative even though it is hard to determine from the judgment the Lepinski’s Will
ways to make the exact legal basis on which it was upheld. Trusts- court held
that the
gift to address the
unincorporated
problem. association has no
legal capacity to
hold the property.
9.4 STATUTORY REFORM

Cases Law
Existing Legislative Response
In Ontario, it deals with the problem of the non enforceability
of non-charitable purpose trusts by treating them as powers
Discuss and apply the and limiting the power to a period of twenty-one years.
statutory reform
provisions concerning The Requirement of Certainty
purpose trusts. creation of a trust requires satisfaction of the “three In Re Russell
certainties”, among other things (Wood v. Alberta),
[1977] 6 W.W.R
Facts: unincorporated Theosophical Society.
Re Russel case -- it was held that nothing in the section does

away with the requirement that the objects of a power must
be certain.
“McPhail v. Doulton “ test - be able to say whether any
given use of the funds would qualify as a proper use of the
funds under the purposes set out in the trust instrument.
43
CHAPTER 10 CHARITABLE PURPOSE TRUSTS
10.1 NON-PROFIT ACTIVITIES, CHARITIES, CHARITABLE PURPOSE TRUSTS AND TAXATION

Cases Law
charitable purpose trust is a trust for a purpose that
Distinguish between a is recognized under the common law as a “charitable
“charity” and a “charitable purpose”.
purpose trust”. A charity might be an incorporated entity such as a
society or non-profit corporation
Explain the distinction - Non-profit organizations are exempt from tax common law
under the Income Tax Act - Charitable organizations are given an additional definition of
between the tax advantage, as they can give donors tax receipts charitable purpose,
treatment of a non-profit for donations which is a tax credit against their income not the Income
Tax Act … this is
organization and the tax -property taxation (may be an exemption) from the
why S248(1) of
treatment of a “charitable provincial statutes. ITA has limited
organization”. definitions
10.2 PROBLEMS WITH PURPOSE TRUSTS ADDRESSED FOR CHARITABLE PURPOSE TRUSTS
Learning Objective Topic Notes Statute/origins/Case

Trusts for purposes (instead of persons) are, with
limited exceptions NOT enforced by courts.
- The Main reason is that the lack of a beneficiary,

Explain how problems which is addressed by having the Attorney General, or
Public Trustee, enforce the trust.
for purpose trusts —
such as the lack of a - The perpetuity rule against perpetual duration that
beneficiary to enforce a may make an otherwise valid purpose trust invalid can
purpose trust, the rule be avoided if the purposes are charitable.
against perpetual
duration, and the - The potential problem of uncertain purposes can
potential for uncertainty also be avoided if the trust purposes are charitable.
of purposes
This is addressed by a judicial power to provide a
scheme for the administration of a trust with uncertain
charitable purposes
44
10.3 REQUIREMENTS FOR CHARITABLE PURPOSE TRUSTS

Cases Law
purpose to be a “charitable purpose” there must be
Identify the three 1. an exclusive dedication of property
requirements for a 2. to a charitable purpose
charitable purpose 3. in a way that provides a public benefit.
trust. not be a political purpose.
Identify and apply 1. must be a benefit of some kind — that is, the purpose must
the tests for whether be something of practical utility.
a charitable purpose
provides a “public 2. benefit test is that the benefit must be a benefit to the
public. (“section of the community”)
benefit”
1. the relief of poverty Trustees of Mary
* Poverty as a Relative Concept Clark House v.
* More than the Provision of Necessities Anderson
(house for summer, etc.) “ladies in reduced
* “Public Benefit” in the Context of Relief of Poverty circumstances” –
(the person could benefit were related to the settlor have relief of poverty.
been approved as constituting a “public” benefit”
Re Scarisbrick-
2. the advancement of education “public benefits”
- Meaning of Advancement of Education
wide range of activities on the basis that they are Vancouver Society of
educational, professional and trade education, and Immigrant
trusts for encouraging aesthetic appreciation. and Visible Minority
- it must still provide a public benefit. Women- SCC –
Identify the four
categories (or heads) meaning of “advanced
3. the advancement of religion education” – structural
of “charitable
Meaning of Advancement of Religion manners.
purposes”. - very wide range of religions
- S2. Charter of Rights and Freedoms that has been given to
Pemsel’s case “the
“religion” in that context.
Identify the Public Benefit ( test) repair of church “
exceptions to the - trust for the advancement of religion is for
public benefit test for - The court noted that the celebration of the public benefit a
the charitable religious rite in private would not have the necessary
purposes of relief of element of public benefit. (TEST)
poverty and
advancement of 4. other purposes beneficial to the community. 1999 - Vancouver
education. Benefit to Community not Sufficient Society of Immigrant
Modern approach - the approach and Visible Minority
should be to look more broadly at the preamble’s “spirit and Women v. M.N.R.
Discuss what courts intendment (not in Canada)
have held to be the to analogies to
content of each of the preamble and to
The case (right column) involved a community-based analogies upon
the four categories volunteer-built network providing free internet access to previously accepted
(or heads) of selected internet sources that made local information analogies
charitable purposes. available on-line. 类似于序言和以前接受的类比- traditional
approach in Canada
45
Cases Law
Articulate the reason The reason usually advanced for this is that if a trustee were
given for the requirement to have a discretion to use funds for non-charitable
that charitable purpose purposes, then it would be hard to enforce the charitable
trusts must be exclusively purpose.
for charitable purposes.
Four techniques For 1. Jones v. T.
1. Interpreting the Settlor’s Intention as being Wholly Eaton Co. (Re Bethel)
Charitable (case law “gift could be saved as a charitable word “deserving” in
purpose”) the phrase “needy
and deserving” was
2. Inferring Charitable Intent from the Character of the interpreted as
Person Appointed as Trustee meaning “needy.”
- the court may infer a charitable intent where the
person appointed as trustee is a religious official. For 4. Guaranty Trust
Describe and apply four Co. v. M.N.R- e
ways in which mixed advancement of
3. Severing the Non-charitable Portion
charitable and non- education, and were
Inherent Power of the Court therefore charitable
charitable purposes may
Statutory Severance Provisions such as the
be saved as being
cultivation of good
exclusively for charitable 4. Finding the Non-charitable Portion is Merely a Power fellowship, and the
purposes. Ancillary to Achieving the Charitable Purpose(s) holding of dinners
- The court also might find the non-charitable purpose to be (UofT alumni
merely ancillary辅助的to accomplishing the charitable association for
women medical
purpose. (other activities for such charitable purpose)
students)
Trusts for “political purposes” are invalid even where they

are for otherwise charitable purposes. McGovern v.
Identify situations in which Attorney General
a purported charitable - meets the public benefit aspect of a charitable purpose.
purpose trust may not be - the case (right column) held not to be charitable
because they were directed at promoting political purposes
valid on the basis that it is
for “political purposes”.
10.4 THE ADMINISTRATIVE SCHEME-MAKING POWER AND THE CY-PRÈS POWER

Cases Law
scheme-making power
Describe the courts’
scheme-making power The court has the power to impose a scheme to address
certain problems that may arise with respect to charitable
and when it is used. purpose trusts.
when?
if the settlor has a charitable intent but has NOT made the
intended charitable purpose sufficiently clear, then the court
can impose a “scheme” for the distribution of the trust’s
income. (how to determine it? )
46
The Cy-Près Power 类似原则（公益信托中） Rector, Wardens
- When this happens, the court may apply the and Vestry of the
funds to another purpose or purposes “near to” (cy-près) Parish of Christ
the original ones for : Church v. Canada
1. Impossibility or Impracticability Permanent Trust
- Impracticability does NOT simply mean that there is
a better use for the funds
2. Initial and Subsequent Failure and General Royal Trust

Describe the courts’ cy- Charitable Intent Corporation of
près power and when it -whether the impossibility or impracticability arose before or Canada v. Hospital
is used. after the trust was constituted. for Sick Children
- the court would be defeating the settlor’s intention. The court held that
a clear charitable
intention was
expressed in the
will.
3. Schemes vs. Cy-près Re Killam Estate
the general scheme-making power applies where there is a had left property
clear charitable intent but the means or mode by which the for the
property is to be devoted to the charitable purpose is establishment of
unclear. certain scholarships
Re Killam Estate: The court reviewed the scheme-making and chaired
power and concluded that it was a broad enough power to positions at certain
allow for adopting the total income method proposed by the universities in
trustees. Canada.
and
Re Stillman.
The impossibility or impracticability that arose after the Re Stillman Case
constitution of the trust was the change in the investment
environment, which made it impractical (or impossible)
( the rate of return on mutual funds are not suitable for
future year)
47
CHAPTER 11 DUTIES OF TRUSTEES
11.1 DUTIES AND POWERS COMPARED

Cases Law
- A person who owes a “duty” in law is obliged to
Describe a duty and perform that duty.
provide an example. - remedy of damages compensating that person for
losses incurred as a result of the non-performance of the
duty.
for example, owes a duty of loyalty…. best interests of
the trust’s beneficiaries.
“Power” means an authority, or permission.
e.g., allow the trustee to accumulate income or not
accumulate income.
Scope of a Power
- The scope of a power may be wide or may be
constrained, i.e., encroach on capital.
Describe a power and
provide an example.
Power Coupled with a Duty
- i.e. distribute income to beneficiaries ( duty) a power
to choose the recipients ( power ) from among a
described class of beneficiaries.
No Action if Acting within Scope of Power

- There is no legal right of action against a person who
has a power if that person acts within the power’s
scope.
- i.e., to be within the scope of the power, the trustee
must be able to make a reasonable argument, with
supporting evidence, that the encroachment is for the
maintenance of the beneficiary with the life interest.
Explain the distinction “trust power”- the power that the trustee must exercise.
between trust powers A “mere power” - trustee is not obliged to exercise.
and mere power i.e., trustee would not be obliged to accumulate income.
Explain why the -a trust instruments often contain combinations of

distinction between duties and powers
duties and powers can - There is an overlap between duties and powers even
become complicated. where a trustee is given a mere power. Such as mere
power with that the trustees are fiduciaries
48
11.2 ABSOLUTE DUTIES AND DUTIES TO TAKE CARE.

Cases Law
“absolute duties” - liability for a failure to perform the duty
is absolute — it is no defence to say that the failure was
“reasonable”. Case: National
i.e., the duty of loyalty -- It is NO defence to a breach of the Trustees Company of
Distinguish Australia Ltd. v.
between absolute duty of loyalty.
General Finance
i.e., the trustee has a duty to invest the funds held on trust and Company
duties and duties
the trustee must carry out this duty with reasonable care. of Australasia Ltd
to take care. “Duties to take care” for which there is a defence based on
reasonableness.
Case: The underpayment to one of the beneficiaries was

based on legal advice the trustee had received, and the court
held that “the fact that such payment was made through the bad advice
of the solicitors of the trust company is no defence”
11.3 DUTIES OF TRUSTEES
Learning Objective Topic Notes (Duty of care) Statute/origins &

Cases Law
Given a scenario, • the duty to comply with the terms of the trust
identify the duties that • the duty of care
apply and suggest why • the duty not to delegate
the duties have or have • the duty of impartiality
• the duty of loyalty, and
not been complied with.
• the duty to provide information.
Default Nature of Trustee Duties
* Can be Modified by the Terms of the Trust.
* The courts found it reasonable to assume the
settlor would have written them into the trust instrument.
* Courts of equity dealing with trusts filled in many such blanks.
* A person who accepts the role of trustee accepts the obligation
Explain the default to carry out the terms of the trust.
nature of trust duties. *If the trust terms specifically addressed the matter, then the
trust terms normally prevailed（占了上风）.
(This is a key concept, since it means that the trust instrument
can vary the duties that courts usually infer)
standard of care for trustees *** Fales v.
- from case law … “ that the standard is “that of a person of Canada ***
ordinary prudence in managing his or her own affairs on the Permanent Trust
particular facts, such as professional services, portfolio Co.1977
Articulate阐明 the management services, or for the administration of the trust
standard of care for “standard of
(general matters) , such as trust company had not acted
trustees and apply it in reasonably will cause the liable for a breach of trust.”
care “
each fact situation.
Application – it should be applied equally to both professional
and non-professional trustees; paid trustees should have a higher
duty .
49
Brunswick’s Trustees Act also holds a trustee possessing a Brunswick’s
Discuss, and apply in a greater degree of care, diligence, and skill to a higher Trustees Act
given fact situation, standard
whether there is a … “ If, because of a trustee’s profession, occupation, or business,
higher standard of the trustee possesses or ought to possess a particular degree of
care, diligence, and skill that is relevant to the administration of the
care for paid or
trust and is greater than that which a person f ordinary prudence
professional trustees. would exercise in dealing with the property of another person, the
trustee shall exercise that greater degree of care, diligence and skill.”
Learning Objective Topic Notes (Duty Not to Delegate 职责不委托) Statute/origins &
Cases Law
Set out the general The general rule is that trustees cannot delegate the tasks they are
rule with respect to required to perform under the trust since the settlor did not want
delegation by just any person to carry out the terms of the trust.
trustees.
1.) Normal Practice for a Reasonably Prudent Person to Delegate
a registered broker for securities trading In Speight v. Gaunt
Case law - that trustees can delegate to agents and have agents ( 1883)
Explain the basis handle funds where it is normal in such transactions to engage
for common law agents for those purposes. - purchase
2.) Delegation of Purely Ministerial Tasks of the bonds was
exceptions to the
3.) Delegation Permitted by the Trust Instrument valid through a
general rule The trust instrument could specifically permit the trustee to broker in London
delegate in those instances. Stock Exchange
Describe the The trustee acts expressly permit a degree of delegation for specific
statutory acts where the trust instrument is silent on delegation.
exceptions to the
general rule under The statutory powers of delegation are quite limited in scope under
trustee acts most Canadian trustee acts.
Describe the duties • the trustee selects the agent.

of trustees when • the matter the agent is selected to deal with is within the agent’s
they do delegate. area of expertise; and
• the agent’s activity is supervised with reasonable care.
Describe the trustee Statutory Exculpation Clause 法定免责条款 Re Brier

act provisions
dealing with Vickery v.Stephens
-These statutory provisions relieving trustees of liability for the acts
liability of trustees of agents also refer to “any other loss
for the acts of
agents or other -The Ontario and Prince Edward Island trustee acts do NOT have
trustees, and the this provision
interpretation that - it ( the clause) does not substantially alter the law” regarding a
trustee’s duty to use prudence in delegating
has been given to
these provisions.
50
Learning Objective Topic Notes ( Duty of Impartiality 公正义务 ) Statute/origins &
the Duty of “Even-handedness) Cases Law
-The trustee is to treat ALL the beneficiaries fairly and not favour Re Smith
Briefly explain any one or more beneficiaries over others.
- The settlor can do so expressly in the trust instrument. large number of
what the duty of
impartiality Imperial Oil
Court Case - In the appeal court’s view, the trust company did not shares in the trust
requires. put its mind to the exercise of discretion because of its erroneous
view that it was obliged to retain the shares.
Implied Trust for Sale of Personal Property
- A trustee may be under a duty to sell assets settled on trust and
invest the proceeds for the benefit of a series of successive *** Howe v. Earl
interests. of Dartmouth ***
-The first branch of the rule -the presumed duty to sell (1802), 7 Ves. Jun.
- Exemption 1 : duty to sell was made for land 137, 32 E.R
- Exemption 2 : to testamentary trusts in which the trust property
Discuss the came from a specific bequest in the will. - The rule of this
application of the - the rules apply to personal assets of a wasting character , not too case required a
duty of impartiality much remainder interest left. trustee of an estate
settled in
in the context of
Apportionment of Sale Proceeds succession to deal
trusts for even-handedly
sale The second branch of the rule of Howe v. Lord Dartmouth is the
between the life
duty to apportion the proceeds of the sale between the income and
tenant and the
capital beneficiaries
remainder interests.
Drafting Consideration - the proceeds in
drafting a trust instrument and state clearly whether there is a trust authorized trustee
for sale or not. investments
Case Law for Howe v. Lord Dartmouth ( 1802 UK Case)
The rule states that, subject to a contrary provision in the will, -a duty to
there is an implied duty to sell residuary personal property that is of apportion the
a wasting character or that is a remainder or reversionary interest. proceeds
The proceeds of the sale must then be invested in authorized of a sale
investments.
- duty of
Key issue- was whether there was a presumed trust for sale of impartiality (one of
State and explain unproductive property that consisted of land.
the rule in Howe v. the equitable
- Implied Trust for Sale of Personal Property, a rule about the Rules) should be
Lord Dartmouth circumstances in which a presumed duty to sell arises. OK
- The proceeds of the sale must then be invested in
authorized investments.
- The duty under this rule is limited to testamentary trusts, and it
applies to inter vivos settlements where there is an express or implied
duty of conversion.
- the rule was limited to personal property.
Describe and Courts developed apportionment ( sharing) rules to apportion

explain the proceeds received on the sale of the asset between income and
apportionment capital, to take account of the period prior to the sale.
rules The allocation of the sale proceeds on the sale of wasting assets is
based on the income the life tenant would reasonably have received
if the sale had taken place on the date the sale would have taken place
but for the retention of the property and the proceeds had been
invested in authorized investments.
51
Capital or Income Treatment of Distributions to Trustees Lottman v.
(p35.) Stanford, [1980
Whether amounts received by trustees in connection with a
particular trust property are income or capital depends on the
property’s nature
- is consistent with the treatment of income for business
- consistent with the treatment of income under the Income
Tax Act
Corporate Distributions
* When a corporation pays a cash dividend out of its previously Waters v. Toronto
earned income, the corporation itself is treating the dividend as General Trusts
being paid out of income. 1956
* Stock dividend is treated for corporate accounting purposes as an
addition to the paid-up share capital of the corporation.
* Although the cash dividend has been reinvested in shares of the Corporation -
corporation, trust law still treats the dividend as income to the trust The form the
corporation
Walters case gives to the
distribution
Identify and
Facts: therefore normally
explain factors dictates how it is to
- create 500,000 new preference shares redeemable by the company
that guide a be treated.
- Income Tax Act (Canada) provision at the time that allowed a
trustee as to company to pay a 15% tax on the accumulated profits ( “ retained The test is often
whether a earnings” ) referred to as the
corporate - distribute the net amount to shareholders tax free as a return of “form rule”
distribution capital.
Re Welsh
should be paid to
Held
capital or income.
“ ….that if the settlor chose not to expressly address how
distributions from the corporation are to be treated, then the settlor
is presumed to have accepted the treatment that the corporation
gives to its distributions”
“ Form Test” – Case law “ Re welsh “

- In that case the court said that the primary method
of determining whether a corporate distribution was income or
capital was to look to the settlor’s intention
- It was noted that whether receipts are income or capital for the
purposes of a trust depends on the nature of the property that
generated the income .
Other Applications of the Duty of Impartiality

Expenses
Depreciation
Annuities
Business Losses and Losses on Secured Investments Amortization of Premiums
and Discounts on Bonds or Debentures
Insurance
52
Learning Objective Topic Notes (Duty of Loyalty) Statute/origins &
Cases Law
Trustees must administer the trust in a way that is in
the best interests of the beneficiaries Court approval
- disregard their own interest in some
- owe fiduciary duties circumstances, to
- factors that are directly relevant to their exercise of obtain the
discretion in the bet interest of the beneficiaries consent of the
Court Approaches to the Duty of Loyalty court to a
In other cases, courts have taken a more flexible potential conflict
approach, perhaps being more concerned with whether of interest
there was actual harm to beneficiaries. transaction where
Circumstances in Which a Conflict of Interest May the transaction is
Describe the duty of Arise necessary
loyalty. The fact that a trustee is permitted a fee does not, for the trust, there
however, put the trustee in a conflict of interest that is no foreseeable
will result in denial of the fee. ( remuneration of trustees issues) alternative.
( Remark: need to
Duty Subject to Trust Instrument, Informed Consent, get an approval
and Court Approval from the court on
The duty of loyalty can be qualified by the trust every decision of
instrument. The trustee may engage in a particular exercising
transaction ( is too detailed clauses ??? ) description of the
trust ) ???
- a trustee is not permitted, directly or indirectly, to
Identify in a particular purchase property from a trust
fact pattern whether a - a trustee is not permitted to sell property to himself
trustee may have that he has an interest in for a trust of which he is a
breached the trustee.
- he will be liable to account for any benefit obtained
duty of loyalty.
through the transaction.
53
Learning Objective Topic Notes (The Duty to Provide Information) Statute/origins &
Cases Law
1. information as to the existence of the trust.
Discuss the duty to Traditionally the beneficiaries must be told of their
inform beneficiaries of interest in the trust, except for beneficiaries who have a
their interest in the contingent interest or remainder interest.
Schmidt v. Rosewood Trust
trust. 2. trust accounts; (see below ) and (Isle of Man), [2003]
3. information concerning the exercise of trustee
discretion ( see below ) .
Recent judicial decision suggests that this area is
continuing to develop and is arguably in a state of flux.
- Trust instruments can contain provisions on the
requirement to provide accounts
Discuss the duty to - Accounts are the most important documents to the
provide accounts. beneficiary. ( inspect the accounts , supporting
documents
- All fiduciaries must keep complete and accurate
accounting of the assets they manage.
With respect to the duty General Principle
to disclose information There is no obligation of trustees to disclose anything
relating to the exercise to the beneficiaries if no request for information has
of discretion been made.
Proprietary Right Approach

beneficiaries have a “proprietary right” (i.e., a property
right) to trust documents. However, it could be
– describe the two main withheld for reasons of confidentiality with respect to
approaches courts have the trustee’s reasons.
Principle #1 - trustees are NOT bound to disclose the Re Londonderry’s
taken: and
reasons for exercising their discretion. Settlement81
Principle #2- trust documents that are in possession two competing
of trustees are trust property and are therefore the general principles
property of the beneficiaries.
Problems:
- Discretionary beneficiaries have a “proprietary right
until the discretion was exercised in their favour
- Discovery of documents in such an action would
extend to documents related to the action that are not
protected by solicitor-client privilege or litigation
privilege
Balancing of Interests Approach
- whether the “proprietary right” was the appropriate
approach. Schmidt v. Rosewood
- The person petitioning for the disclosure of Trust (Isle of Man),
information was petitioning in his capacity as the [2003] has been
administrator of his father’s estate and in his personal referred to
capacity in some Canadian
- The Privy Council expressed the view that a cases
“proprietary right” was neither sufficient nor necessary
to be entitled to disclosure of information.
54
– assess, in a given How Should a Trustee Respond to a Request for Information?
situation, whether Given the apparently developing “balance of interests”
beneficiaries are approach, trustees should take a balance of interests
entitled to such approach that considers the interests of
disclosure all the beneficiaries. ( such as : insolvency, health
problems, marital problems, or other such private
information )
11.4 EXCULPATION CLAUSES
Learning Objective Topic Notes (EXCULPATION CLAUSES 法定免责条款) Statute/origins &

Cases Law
The trust instrument can provide provisions modifying

the presumed core duties of trustee
- how far the trust instrument can go in relieving

trustees of these core duties. Re Poche (1984), 6
- Case : The Court found the conduct of the trustee to D.L.R
have been “grossly negligent” and held the trustee - Court said that
liable “ In my opinion a trustee must be held responsible “the submission
Discuss the cases on for any loss resulting from his gross negligence, regardless of that it is contrary
exculpation clauses any provision in the trust instrument relieving him from to public policy
referred to in this part such liability.” to exclude the
and apply them to a - even the clauses contain : liability of a
particular fact situation. “ I DECLARE that the Trustee of this my Will shall not be liable trustee for gross
for negligence is not
any loss not attributable: supported by
(a) To her own dishonesty, or English or
(b) To a wilful commission by her of any act known by her to be a
Scottish
breach of trust.”
- the court noted that there is a widely held view that authority.”
paid trustees should not be able to exclude liability for
gross negligence.
55
CHAPTER 12 POWERS OF TRUSTEES
12.1 TYPES OF POWERS
Learning Objective Topic Notes ( type of powers) Statute/origins &
Cases Law
1.) Administrative powers
- allow the trustee to manage the trust property
Examples :
• sell trust property.
• postpone the sale of trust property.
• lease land.
• grant options to purchase or to renew a lease of land
Distinguish between 2.) Dispositive powers

- give trustees a discretion in the distribution of income
administrative powers
or capital to beneficiaries
and dispositive powers, Examples:
providing two examples •apply income or capital for the maintenance or
of each. education of one or more beneficiaries.
• make a payment out of capital in favour of a capital
beneficiary before the time he or she is to receive the
capital; and
• make an appointment to choose who among a class
of beneficiaries is to receive a distribution of income or
capital.
Remark : duties and power ? ?
Powers can be expressly provided in the trust
instrument; they may also be found in the applicable
trustee act.
Discuss the purpose
behind statutorily Purpose Behind the Default Statutory Powers
By setting out a set of statutory default powers, trustee
implied powers
acts addressed both the length of powers clauses in trust
instruments and the uncertainty associated with trusts
that did not expressly provide certain powers.
The statutory powers filled gaps for trusts that were

lacking in express powers and reduced the uncertainty
as to whether a court would infer that the settlor had
intended to confer power.
Trust Instruments Still Tend to Set out Powers
why powers are often - The powers set out in trustee acts are a limited set of
included in a trust powers necessary for the administration of trusts.
instrument even when - Even if the act contains a default power, the scope of
there is a corresponding the power in the act may not be quite what is needed
for the particular trust.
statutorily implied
- a clause providing that power in the trust instrument
power so that the trust instrument can serve as a more
complete compilation of the terms of the trust.
56
Approach to Identifying Powers of Trustees
- One should look first to the trust instrument.

- Then one should consult the relevant trustee
act for powers that may not be expressly set out in the
the approach one
trust instrument and that may apply unless the trust
should take to instrument indicates otherwise.
determining what - One might also then look to the case law to see whether
powers a trustee has particular powers have been implied in similar trusts and
in similar circumstances.
12.2 ADMINISTRATIVE POWERS

Cases Law
to sell
-Trust for Sale vs. Power to Sell
A power to sell is a power to sell trust property and
convert it into cash.
Describe the following A power to sell can be express, and it should be set out
administrative powers, expressly in the trust instrument if it is intended
noting whether the
power is statutorily -Express or Implied Scope of the Power
implied in your The scope of a power to sell can be expressly provided
for in the trust instrument.
jurisdiction, as well as
The default scope of the power permits them to sell
the scope of the either as a whole or in lots, by public auction or private
statutory power if it contract.
exists: Courts have held that where there is a trust for sale, or
a power of sale, the trustee can exchange property
-Statutory Provisions Dealing with the Scope of a

Power to Sell
A condition that led to inadequate consideration might
be said to be contrary to the trustee’s duty to act in the
best interest of the beneficiaries, or contrary to the
trustee’s duty of care
No Ontario trustee act ????
to lease land.
Ontario allows the trustees to renew the lease or raise
money by a mortgage of the lease.
to insure.
Ontario - that trustees obtains insurance on trust
property and they empowered to obtain insurance against
a storm or other casualty.
57
to issue receipts.
The power to issue receipt issued by a trustee for
money, securities or other personal property received
by the trustee.
to compound liability and compromise claims

accept a composition of a debt or security, allow time
for payment of a debt , etc.
Describe the following
to employ agents or delegate duties during
administrative powers,
absence.
noting whether the
The acts amended to add a power to employ agents to
power is statutorily make investment decision
implied in your
jurisdiction, as well as to obtain a passing of accounts.
the scope of the passing of accounts in legislation dealing with the
statutory power if it administration of estate.
exists ( cont’d )
to pay into court
The trustee acts of all the Canadian common law
jurisdictions provide for the payment of trust funds
into court
to seek an opinion, advice, or direction from the

court
This is normally done only when the trustees are in real
doubt about who they should pay trust funds to, or
where payment must be made to someone who cannot
be found or cannot give the trustee a valid release (such
as an infant or mentally incompetent person).
58
Learning Objective Topic Notes ( Administrative Power- Investment Power) Statute/origins &
Cases Law
statutory investment power
Permitted Types of Investment
The statutory scope of the investment power no longer
restricts the types of property in which trustees can
invest.
Standard of Care in Making Investments
“prudent investor” standard in Ontario, set out
factors trustees must consider in planning investments for
the trust.
Obligation to Diversify
It requires that trustees diversify the investment
portfolio ( Ontario)
Liability of Trustee for Loss on an Investment
Describe the statutory adopted this concept by providing that a trustee is not liable
for a loss on a particular investment if it was made as a result
investment powers in of a prudent portfolio investment strategy. ( Ontario) ( you
your jurisdiction and have to prove prudence)
given a scenario, Delegation of Investment Functions
determine whether or expressly permit delegation of investment powers,
not a trustee has acted specifically permit trustees to obtain investment advice.
within the scope of ( Ontario)
the power Mutual Fund Investments
expressly provide that the purchase of units of a mutual
fund is not a delegation of trustee investment duties.
( Ontario)
Common Trust Fund Managed by a Trust Company
allow for an investment in a common trust fund
managed by a trust company. (Ontario)
( a lam sum investment portfolio vs a common trust
fund ??? )
Scope of the power

Trustees must not only invest within the scope of the
power of investment granted to them under the trust
instrument or implied statutory investment powers, but
they must also meet the underlying fiduciary duties
59
12.3 DISPOSITIVE POWERS
Learning Objective Topic Notes ( four type of dispositive powers ) Statute/origins &
Cases Law
1. Power of Maintenance
A power of maintenance is a power to provide for the living
expenses of a beneficiary with power of encroach on
capital . express words - in drafting a clause providing a
power of maintenance.
The scope of the power might be given in very broad terms,

such as an “absolute discretion” to encroach on
capital for one or more life interests or one or more
remainder interests.
2. Power of Advancement
Description of a Power of Advancement
An advancement is a payment to a capital beneficiary before
the time the capital would be due to that beneficiary. Brooke v. Brooke
(1911), Ontario
Court case : simple test is whether the payment is for
something of a casual nature or not.
Express Power of Advancement
A power of advancement can be given expressly in the trust
instrument, and it reduces the potential flexibility of the
Describe the dispositive power and may introduce other difficulties of interpretation.
powers of Inherent Power of a Court to Allow an Advancement
The court has an inherent power to permit an advancement.
maintenance,
However, for this inherent power to apply, the beneficiary
advancement, and must be entitled to the capital absolutely.
appointment, noting for Statutory Power of Advancement
your jurisdiction only the Manitoba Trustee Act and the Prince Edward Island
whether the power is Trustee Act provide for a power of advancement.
statutorily implied, as 3. Power of Appointment
well as the scope of the - A power of appointment gives the donee of the power the
statutory power if it right to choose who is to receive a particular gift.
- A general power of appointment gives the donee of the
exists. power the right to appoint anyone of her choosing
- A special power of appointment gives the donee a power
to appoint only among specified persons or a defined class
of persons.
-A hybrid power of appointment allows the donee to choose
anyone except for specified persons or a defined class of
persons
For instance, a testator may give property to his wife for life
and give her a power to choose who is to get the remainder
interest
4. discretionary trust.
A discretionary trust gives the trustee a discretion to
determine the amount of income or capital (or both) the
beneficiaries receive, which beneficiaries will receive income
or capital (or both), or a discretion over both which
beneficiaries will receive income or capital (or both) and the
amounts they will receive.
60
12.4 SEEKING AN OPINION, ADVICE OR DIRECTION FROM THE COURT
Cases Law
n/a As noted above, trustee acts in the Canadian common
law jurisdictions, except New Brunswick and Nova
Scotia, have since addressed this cumbersome
procedure by allowing trustees to apply to the court for
an opinion, advice, or direction. ( who is going to pay
for it ??)
n/a Once the court’s declaration is obtained the trustee is no
longer responsible if he follows the direction of the court,
unless the trustee has been guilty of fraud, willful concealment
or a misrepresentation in seeking the court’s opinion.
12.5 INTERVENTION BY COURTS IN THE EXERCISE OF POWERS BY TRUSTEES

Cases Law
The exercise of a power by trustees can be challenged in
court, normally by one or more beneficiaries of the trust, on
the basis that the trustees have acted beyond the scope of
their power.
Basis for Court Intervention in the Exercise of Trustee
Powers
Courts will defer to the exercise of a power by a trustee
unless the trustee acted beyond the scope of the discretion
given.
Recognize when a court Examples of Court Intervention in the Exercise of Trustee Tempest v. Lord
may intervene in the Powers Camoys.
- Court will not Intervene Where Trustees have an
exercise of a power by
Unfettered ( absolute ) Discretion Unless the Power has Gisborne v.
trustees, and discuss the
been Exercised Impartially or in Bad Faith . Gisborne
basis for intervention - Broad Discretion Only Interfered with if it is Exercised in
Bad Faith.
Canadian Case Examples

Fox v. Fox Estate (Bad faith may include taking into
account things that should not have been taken into account
or failure to take into account things that should.)
Re Wright (Trustees must exercise a discretion given to
them and cannot shift the responsibility to the court by
seeking advice or directions.)
Re Blow (A court may intervene where the trustee has
failed to exercise his discretion.)
Schipper v. Guaranty Trust
The court held that Guaranty Trust had failed to exercise its
duty by putting the priority on future contingent interests.
Kordyban v. Kordyban
the court held that there was a failure to exercise the
discretion, since the trustees did not vote the shares and the
order was refused since no shareholder agreement has been
signed.
61
CHAPTER 13 OFFICE OF TRUSTEE
13.1 APPOINTMENT AND REPLACEMENT OF TRUSTEES
Learning Objective Topic Notes (APPOINTMENT OF TRUSTEES) Statute/origins &
Cases Law
Appointment in the Trust Instrument
1. It is the settlor of the trust who appoints the initial trustee
or trustees ( orally – discerned firm the words ; in writing
on trust instrument )
2. the settlor can appoint himself as the sole
trustee or as one of the trustees
Describe how trustees It is worth noting, however, that a settlor cannot be both a sole trustee
and sole beneficiary.
are appointed
Case : Where the words used by the settlor, expressed orally Re Shamas, [1967] 2
or in writing, do not clearly appoint a trustee, the court will O.R. 275 (Ont. C.A)
determine, from the words used or the circumstances, who
the intended trustee is.
Acceptance of the Role of Trustee
Acceptance of an appointment to act as trustee can be
express or implied
- where the appointed trustee signs the trust instrument or
an instrument appointing the trustee
- person who is named an executor takes out probate of a
will that creates a trust of which the executor is to become
trustee.
- once the person has expressly or impliedly accepted the
role of trustee but wishes to no longer be a trustee, a formal
discharge must be sought. (i.e., as a friend , take title of the
property , then must formal discharge )
- If the constituted trust fails for want of a trustee the
court will appoint a trustee if necessary.
Appointment of Additional Trustees by the Trust
Instrument
- Once the trust is constituted, the settlor cannot remove
existing trustees, or appoint replacement or additional
trustees, unless the trust instrument expressly reserves such
a power for the settlor.
- The trust instrument also provide for the appointment of
future trustees, either naming specific persons as alternate
Describe the statutory trustees, or conferring a power to appoint trustees.
power to appoint
additional trustees What’s statuary power ?
- There is no general statutory power to appoint additional
trustees.
- A trustee act enacted in England in 1864 reduced
the number of applications to court by providing a power,
subject to the trust instrument, for the replacement of
trustees where the trust instrument did not contain such a
provision, or where the provision in the instrument did not
address the circumstances that arose, and version of this
provision began to appear in Canadian trustee acts in
Ontario in 1877.
62
Replacement of Trustees
* Trust Instrument
A well drafted trust instrument should contain a provision
for the replacement of trustees.
* Statutory Power to Replace a Trustee
Reason for and Origin of the Statutory Power
Prior to the enactment of trustee acts, the court
would appoint one or more trustees where the trust was left
with no trustees and the instrument either failed to provide
for the appointment of replacement trustees, or the
provision in the instrument did not cover the circumstances
that arose.
Power to Replace a Trustee ( how many trustees needed ? )
The provisions providing for a statutory power to replace
trustees confers the power on persons nominated to appoint
trustees.
Vesting of the Trust Property
* If the trustee is replaced, the title to the property must be
vested in the new trustee. ( joint titles for multiped trustees
appointed ) under common law system.
* trustee acts contain provisions for the vesting of trust
property in new trustees
* exemptions: declaration does not apply to a mortgage
securing a loan due to the trust for vesting purpose, or share,
stock, annuity or specified (untransferable) properties.
* In the other jurisdictions, particular care should be taken
to assure that the written document appointing new trustees
Replacement of contains a
Trustees declaration as to the vesting of the trust property
* Judicial Powers to Appoint Trustees
- Courts have an inherent jurisdiction to appoint trustees
- The Ontario Trustee Act states very simply that “the Superior
Court of Justice may make an order for the appointment of a
new trustee or new trustees, either in substitution for or in
addition to any existing trustee or trustees, or although there
is no existing trustee.
- allows the person empowered to appoint trustees, or the
surviving or continuing trustee, to replace a trustee
without an application to court.
- the same powers, authorities and discretions, and
may in all respects act as if he had been originally appointed a
trustee by the instrument, if any, creating the trust.
* Principles to be Applied by a Court on Appointment
of New Trustees
- When the court exercises a power to appoint new trustees
it will consider the wishes of the settlor. Keyes v. Hope
-case law : The court would not confirm the appointment Trading Syndicate,
of Plummer ( given Plummer’s connection with the [1949] O.W.N. 307,
syndicate, and said that someone independent should be [1949] 3 D.L.R. 299
appointed (i.e., someone without a conflict of interest) (Ont. H.C.).
63
State the rules Acceptance of an appointment to act as trustee can
concerning the be express or implied
acceptance of the role - An express acceptance of an appointment occurs, for
instance, where the appointed trustee signs the trust
of trustee under an instrument or an instrument appointing the trustee , or
express trust. - person who is named an executor takes out probate of a
will that creates a trust of which the executor is to become
trustee.
Describe how An implied acceptance normally arises from the conduct of

acceptance of the role a person appointed as trustee.
of trustee under an Acceptance can be implied if the person deals with any of
express trust can be the trust property or carries out even minor tasks of a
implied. trustee with respect to the trust.
Thus, one needs to be careful not to perform even minor

acts in relation to the role of trustee before deciding whether
to accept the role.
13.2 RETIREMENT AND DISCHARGE

Cases Law
Non-Judicial
The trust instrument can provide for the retirement and
discharge of a trustee
The trustee acts in the Canadian common law jurisdictions

also provide a default term for retirement and discharge Ontario Trustee
where the trustee wishing to retire is not being replaced and Act, …. by the
the trust instrument does not deal with the matter. deed, discharged
Certain conditions : therefrom under
- more than two trustees this Act without
- discharge generally be by way of deed if the trustee is not any new trustee
to be replaced being appointed….
- Subject to a contrary intent expressed by the settlor (i.e.,
Describe how trustees the settlor can require that a retirement only be
can retire and be allowed upon an order of the court)
discharged from their Judicial
duties. * Courts have a statutory power to appoint a new trustee
and could exercise this power in the context of a retirement
by a trustee.
* Courts also have an inherent jurisdiction to permit a
trustee to retire and to give a discharge.
* The general principle applied by courts on an application
to permit a trustee to retire is that no person can be
compelled to remain a trustee.
* A trustee who was in breach of trust will not be allowed to
retire from the trust until he has fully compensated the trust.
64
13.3 DEATH OF A TRUSTEE

Cases Law
The title to the trust property passes to the remaining trustees
Describe what happens when one of the trustee dies
on the death of a It is possible for the sole or last continuing trustee to appoint
trustee where there is in writing one or more persons to be a replacement trustee
more than one trustee. after his or her death, and such representative should be
capable of exercising or performing any power or trust” of
the deceased trustee ( Ontario)
How the trust will be administered in the interim period

between the death of the sole or last surviving trustee and the
appointment of his replacement.
Identify the problem The problem of the interim period between the death of a
that can arise on the sole or last surviving trustee and the appointment of a
replacement trustee does not appear to be expressly
death of a sole or last addressed in the remaining six common law jurisdictions in
surviving trustee, and Canada.
indicate if, and how, the
problem is dealt with a new trustee should be appointed by the personal
under trustee acts representatives of a sole or last surviving trustee as soon as
in your province or possible, or an application to court for an interim
appointment should be made as soon as possible.
territory.
65
13.4 REMOVAL

Cases Law
Non-Judicial
* The trust instrument can provide for removal of a trustee
by conferring the power of removal on a specified person or
persons.
* the court noted that it would be an extreme remedy to
remove a trustee without appointing a replacement ( Ontario
intended to do so )
Judicial
* The court also has an inherent jurisdiction to remove a
trustee, and under its inherent jurisdiction it can do so
without replacing the trustee.
* The court could use this power to replace a trustee it has
removed with a new trustee.
What the Court Considers on an Application to
Remove a Trustee ( Factors ) Conroy v. Stokes,
Describe how a trustee The application had been
may be removed and made by two of five
On an application to remove a trustee, it is not sufficient to
beneficiaries who were
identify factors that show that the trustee has neglected his or her duty or made unsatisfied with the
might influence the some mistake in carrying out the trust. trust’s administration
chance of succeeding in that the trustees had
( case law ) - The acts or omissions must endanger the trust not consulted them
an application to property, show that the trustee is not acting honestly or
remove a trustee. loyally in the beneficiary’s interests, or show that the trustee
does not have the capacity to execute the trust duties. Consiglio Trusts,
It was held that
( case law ) The main guide is the welfare of the misconduct is not a
beneficiaries. Friction or hostility between trustees and the necessary requirement for
beneficiaries is not, of itself, a reason for the removal of the removal of a trustee.
trustees.
Dicks v. Scott
trustee’s investment
While misconduct by a trustee is not sufficient to remove
strategy and
the trustee, it is also not necessary to show misconduct. A decisions to not grant
trustee can be removed where the continued administration requests to encroach on
of the trust in the interests of the beneficiaries has become capital and the law on
impossible or improbable. the exercise of discretion.
66
13.5 REMUNERATION

Cases Law
* Trustees are not, as a general rule, entitled to remuneration ** * Sproule v.
Identify the general rule * Under duty of loyalty a trustee is not to put himself in a Montreal Trust
position where his personal interest and his duties as trustee Co***
concerning trustee conflict.
remuneration. Case Law : the sproule case as guideline that should only be
employed as a rough guide to assist in the computation of
what may be considered fair and reasonable as the statute is
paramount.
three key qualifications:
1) The courts recognize the right of the settlor to create a
trust that can give rise to a conflict of interest and settlor
can put a specific provision in the trust instrument that
allows for trustee remuneration. ( settlor allows )
Identify three 2) the beneficiaries could agree to remuneration of the

qualifications to the trustees if they are all adult and are otherwise of full legal
general rule concerning capacity and they have unanimously consented to the
remuneration.
trustee remuneration. ( all beneficiaries agreed )
3.) where the trust instrument does not provide for the
remuneration of the trustees, courts have both an
inherent and a statutory power to allow for the
remuneration of trustees. ( Court ‘s power )
Courts have rarely exercised this. Ontario, a percentage is

consider five factors applied to the capital
Identify the factors receipts, capital is
1. the trust’s magnitude
considered by courts in 2. the care and responsibility springing therefrom disbursements, revenue
assessing trustee receipts and revenue is
3. the time occupied in performing its duties
disbursements
remuneration. 4. the skill and ability displayed, and during the period for
5. the success which attended its administration which remuneration is
sought
* The general rule is that a trustee is not allowed to take
remuneration from time to time without court approval on *** Re William George
the assumption that a court will subsequently approve the King Trust, 1994
CanLII 7497 (Ont.
remuneration.
Describe the legislation S.C.) at 11-12.
Case law : potential unfairness to trustees in having to wait
governing trustee for compensation… the court’s power to allow remuneration The Trustee Act
remuneration in your to trustees applies only where the trust instrument fails to references “fair and
province. provide for their remuneration reasonable”
allowance
Therefore, trusts that appoint a professional trustee often and the five factors
includes a compensation clause to avoid any uncertainty. outlined above
* the trustees in Ontario can agree on the amount of
compensation directly with the beneficiaries if all of the
beneficiaries are adult and capacitated.
67
13.6 INDEMNIFICATION
Cases Law
Discuss the right of * Trustees are entitled to be indemnified for expenses or
trustees to be liabilities properly incurred in the administration of the trust
two potential sources for this indemnification Section 23.1 of the
indemnified out of the Ontario Trustee Act
1. Out of the Trust Assets
assets of the trust. codifies the common law principles of trustee indemnification and and Sawdon Estate
applies to all trustees, including estate trustees, and further does v. Sawdon
not distinguish litigation costs from other costs incurred by a
trustee
2. From the Beneficiaries

Identify circumstances 2.1 Where the trust’s assets are insufficient to cover the
in which trustees may expenses or liabilities properly incurred by the trustees in the
be entitled to administration of the trust, it may be possible, in some
indemnification circumstances, for trustees to obtain indemnification from
the beneficiaries. ( insufficient trust assets )
from the beneficiaries of
the trust. 2.2 The trustees can claim indemnification from a
beneficiary who is the sole beneficiary of the trust and who
has legal capacity (i.e., not a minor or of unsound mind).
2.3 where the trust has multiple beneficiaries and where the
assets are insufficient to cover the trustees’ properly incurred
expenses and liabilities. ( 2.1 extension)
68
CHAPTER 14 BREACH OF TRUST
14.1 DEFENCES TO BREACH OF TRUST
Learning Objective Topic Notes (DEFENCES TO BREACH OF TRUST) Statute/origins &
Cases Law
- Terms of trust , ule of equity , provision of a statue
- contrary to his duties under the trust
- neglects to carry out a duty under the trust
- may be able to assert certain defences
1. the beneficiary may have approved of, consented to, or

Identify three defences instigated the breach.
2. the time period for a suit by the beneficiary, or
or responses a trustee beneficiaries, may have expired; and
may be able to make in 3. the court may relieve the trustee of liability for a breach
response to a breach of he was otherwise responsible for.
trust claim.
Consent
1. In writing
consent may be written or oral, but proving that the consent
was given will be facilitated if it was in written form, signed
and perhaps also witnessed
two additional requirements for consent)
2. Capacity
A beneficiary’s consent will not be valid if the beneficiary
lacked the legal capacity to give a valid consent.
( where there are unborn or minor beneficiaries, it will not
State and discuss what be possible to get the consent of all the beneficiaries.)
3. Knowledge
must be established for It is simply necessary that the beneficiary knows sufficient
the defence that the details of the proposed action or omission that may
beneficiaries have constitute a breach of trust.
consented to an alleged Other elements
breach of trust Act of Consent
It may also take the form of some positive act that indicates
consent.
Undue Influence
The consent of a beneficiary is not valid if it is obtained
through undue influence.
No Requirement of Proof that Beneficiary Benefited

from the Act Consented to
The trustee does not have to show that the consenting
beneficiary benefited from the act consented
Trustee-beneficiary
A trustee-beneficiary has been presumed to have consented
to a breach of trust in his capacity as a beneficiary.
Impounding the Beneficiary’s Interest

Courts have an inherent jurisdiction to require a beneficiary
who has instigated, requested, or consented to a breach of
trust to indemnify the trustees.
69
Learning Objective Topic Notes (DEFENCES TO BREACH OF TRUST) Statute/origins &
Cases Law
Expiry of Time for Bringing an Action
Identify and discuss Statutory Limitations
Ontario
defences based on delay * One is a two-year limitation period that applies from the
in bringing an action, date the plaintiff became aware of a right to bring an action
including statutory or could reasonably have been expected to take action.
limitation periods, the
doctrine of laches and * The other is a final period when the action is
the doctrine of extinguished regardless of when the plaintiff became aware
of a right to bring an action (or could reasonably have been
acquiescence. expected to take action). ( final limitation 15 years –
Ontario )
Doctrines of Laches and Acquiescence

Courts of equity developed the doctrine of laches under
which they could dismiss an action in equity on the ground
of long delay in the bringing of the action.
Relief from Liability by Court

Trustee acts in several Canadian jurisdictions give the court
the power to relieve trustees from liability for breach of
trust.
Case law - the Supreme Court of Canada applied this

provision to relieve an unpaid, non-professional, non-expert
trustee.
The Court did not relieve the paid, professional trustee. *** Fales v. Canada
Considerations: Permanent Trust, [1977] 2
* whether the breach was merely technical in nature or a S.C.R. 302, 70 D.L.R.
minor error in judgment. (3d) 257 (S.C.C.).
Identify and discuss the * whether the decline in the value of the securities was
statutory power of the attributable to general economic conditions.
court to relieve a trustee * whether the trustee is someone who accepted a single trust
from liability for breach to oblige a friend or is a company organized for the purpose
of trust of administering the estate, and presumably chosen in the
expectation that it will have specialized departments and
experienced officials; and
* above all, whether the trustee’s conduct was reasonable.
Smith v. Mason (1901), 1
O.L.R. 594 (Ont. Ch.);
More modern cases have taken the approach of
considering what a prudent businessperson would have
done in the circumstances in assessing whether the trustee McDonald v. Trust &
has acted reasonably. Guarantee Co. (1910), 16
O.W.R. 507, 1 O.W.N.
886 (Ont. C.A.);
70
14.2 TRUSTEE LIABILITY TO BENEFICIARIES AND LIABILITY AMONG TRUSTEES
Cases Law
Liability of Trustees to Beneficiaries
Trustees who have breached the trust are jointly and
Discuss the meaning severally liable.
and effect of trustees’ - Several liability means that they are separately liable for
their own breach of trust or their part in the breach of trust
joint and several ( several liable )
liability to beneficiaries
for breach of trust. - The “joint” liability of the trustees means that each trustee
who is responsible for the breach of trust is also liable to
compensate the beneficiaries for the whole amount of the
loss caused by the breach, regardless of whether other
trustees are also responsible for the breach.
Remark: business insurance may relief the liability

Liability of Trustees to Each Other
The trustees responsible for a breach of trust share equally
in paying compensation for the breach.
They are also liable to contribute to compensation where

one or more other trustees have been obliged to pay a
judgment in favour of one or more of the beneficiaries.
a trustee’s estate is liable for the breach of trust. And his

Discuss the estate of the bankrupt trustee is liable for the breach of trust.
Where a trustee is partly responsible for a breach he shares
responsibility of co- equally in the compensation, regardless of his degree of
trustees to share in involvement in the breach. It is no defence for a trustee to
providing compensation say that he was merely a passive trustee.
for a breach of trust.
Not be required to share in paying compensation
1. court may relieve a trustee from liability under

a statutory power to do so
2. one trustee may have acted fraudulently while
the other trustee did not
3. there is authority for not requiring a trustee to share
in paying compensation where the other trustee is a
solicitor and the non-solicitor trustee reasonably relied
on the solicitor-trustee
4. trustee may avoid the liability to
contribute to the compensation for breach of trust
where a fellow trustee is also a beneficiary of the trust.
71
14.3 DAMAGES FOR BREACH OF TRUST
Learning Objective Topic Notes (DAMAGES FOR BREACH OF TRUST) Statute/origins &
Cases Law
Case law : * The measure of damages for a breach of trust *** Fales v. Canada
“is the actual loss which the acts or omissions have caused Permanent Trust***
to the trust estate.”
* The principle is to restore the beneficiaries to the position

Discuss the measure of they were in before the breach of trust occurred.
damages for breach of
trust * The other principle in compensating the beneficiaries is
that where the trustee has benefited from the breach, then
the trustee will be required to account for and pay
back to the trust the benefit he has received. ( conflict
interest issue)
In contract and tort, courts considered questions such as how

remote the damages were and whether the plaintiff had
mitigated his damages.
Damages that were too remote (too unlikely to have been

anticipated to arise due to the tort or breach of contract)
would not be compensated for in the damages remedy.
Damages that the plaintiff could have mitigated (i.e., could

have reduced by taking steps after the breach to reduce the
the question of whether damages) would also not be included in the measure of
damages can be damages.
reduced using concepts
of remoteness or Courts of equity in assessing damages for breach of trust did
not consider questions of remoteness or mitigation. This is
mitigation consistent with the principle of protecting the
beneficiaries’ interests.
A law firm (Redferns) held funds from a lender (Target) in

trust. This was a breach of trust, and the lender sued the law
firm for the full amount of its loss, being the difference Target Holdings Ltd.
between the amount of the loan and the price for which the v. Redferns, [1996]
land was sold, with NO success, ( as the loss to ( UK Case ) This
the lender was not caused by the breach of trust, but rather English case cited
it was a loss that would have occurred even if the law fi rm the Canadian
complied with the terms of the trust) Cadbury Schweppes
Inc. decision,
The primary object of awarding damages for breach of trust
is to compensate the beneficiaries of the trust, not to
penalize the trustees.
72
14.4 RIGHTS TO HAVE PROPERTY RETURNED TO THE TRUST

(RIGHTS TO HAVE PROPERTY RETURNED TO THE TRUST) Cases Law
The primary remedy for beneficiaries is a personal claim
Distinguish between against the trustees for compensation for the loss caused by
the trustees’ breach of trust.
proprietary and
personal remedial A property substituted for trust property, into the hands of
claims. others and claim the property itself. (i.e., a claim to the
property itself).
* A proprietary claim can be useful for beneficiaries in a
Explain why it may be number of situations.
advantageous for a * Even if the trustee is still solvent, such that a personal
beneficiary to pursue a claim against the trustee would be satisfied
proprietary claim
所有权主张. *A proprietary claim may also be useful where the defendant
trustee is out of the jurisdiction, making bringing a personal
action against the trustee difficult.
It is common to refer to a proprietary claim in trust property

against a third party, or property substituted therefore, as
“tracing”. The process of “tracing” involves identifying
Distinguish the concepts assets that have been exchanged for, or substituted for, trust
of “following”, tracing”, property
and “claiming” trust
property. The process of “following” involves tracking what has
happened to a particular asset.
the beneficiaries would not be able to claim the shares

from Smith ( 3rd party) where he acquired the shares for
value in good faith without notice of the trust.
– tracing comes to an Tracing will come to an end when it is no longer possible to

trace what has happened to the trust property since the
end when proceeds are proceeds has no asset left that one can say the proceeds went
dissipated消散了 into.
This impossible factual inquiry is resolved by making a

– the interests of presumption against the wrongdoing trustee.
The beneficiaries are allowed to claim the boat if it is paid by
wrongdoer are wrongfully paid by trust funds.
subordinated
Funds subsequently coming into the account were clearly
not proceeds from the initial wrongful sale of trust property.
– the lowest The proceeds from the wrongful sale can thus not be traced
intermediate balance into any more than the $40,000 amount that was the lowest
rule balance between the time the wrongful proceeds were
originally deposited and the subsequent time when the
tracing of the proceeds is being done.
73
(RIGHTS TO HAVE PROPERTY RETURNED TO THE TRUST) Cases Law
It is impossible to determine whether the trustee dissipated
innocent contributors proceeds from the sale of the trust A asset or from the sale
of the trust B asset.
to a mixture are treated It is arguably unfair to the beneficiaries of trust B to be
equally disadvantaged to the beneficiaries of trust A by taking a last-
in first-out approach
Identify the possible
defence of a third party The beneficiaries cannot succeed in claiming property from
a third party who is a bona fide purchaser for value without
to a property claim by notice of the trust.
trust beneficiaries
Equitable Lien公平留置权
secure that claim with an equitable lien against the land.
Identify and briefly
explain two other
possible proprietary Subrogation 代位
claims. The beneficiaries could seek to be subrogated to the rights
of the creditor , that is . they could take over the position of
the creditor.
74
CHAPTER 15 POWERS OF ATTORNEY COMPARED TO TRUST
15.1 WHAT IS AGENCY

Cases Law
Agency is a legal relationship in which a person, referred to
Define agency and as an “agent”, has the authority to affect the legal relations
of another person, called the “principal”
provide an example
e.g. A may execute a document that gives B authority
to act on behalf of A.
An agent can affect the legal relations of the principal in
Describe the ways in several ways but does so primarily through entering into
contractual relationships on behalf of the principal.
which an agent can
affect the legal relations The agent can also affect the legal relations of the principal
of the principal. in tort, because the principal can be vicariously liable for the
torts committed by the principal’s agent.
15.2 WHAT IS A POWER OF ATTORNEY

Cases Law
Explain what a power of a written document that creates an agency relationship is
attorney is. referred to as a “power of attorney
A power of attorney can be a “general power of attorney”
Distinguish between giving the donee power to enter into any contractual
relationship the donor might enter into.
general and limited “ Limited power of attorney “ the donee only the powers
powers of attorney specifically provided in the document that constitutes the
power of attorney.
Discuss when a power of - It can come into effect upon execution (signing) by the
attorney comes into donor, or it can come into effect on the happening of a
particular event (i.e., incapacity) or at a particular point in
effect and how long a time
power of attorney may - undefined period of time or a fixed period of time
last.
If legal capacity is lacking, the power of attorney is likely not Legislation re
Discuss the effect of a valid. Powers of
lack of legal capacity on Attorney
The common law rule is that even if a power of attorney was
the validity of a power valid when it was created, it comes to an end if the donor Substitute
of attorney, and the becomes legally incompetent.
Decisions
validity of a power of
Termination Act,1992,
attorney if the donor S.O.1992, c. 30
becomes egal - court appoints a guardian or committee
- All powers of attorney will terminate on the death of the
incompetent. donor.
75
15.3 TRUST AND AGENCY COMPARED
Cases Law
Discuss the similarities different legal concepts, but both owes fiduciary
between trust and duties for Trust- beneficiaries ; for Agency – principal
agency.
Instructions
Trust- acts according to the terms of the trust.
Agent- according to instructions of the principal or the
terms of a power of attorney
key difference- For trust , the trustee is not an agent of the

beneficiaries, nor is he an agent of the trust’s settlor.
Trustee is still liable even he follows the instructions from
settlor and beneficiaries to act on behalf them if there are
conflicts between terms of the trust and instructions.
Case law: Re Brockbank, [1948]

The surviving and continuing trustees had the power to Ch. 206, [1948] 1 All
appoint new trustees. They had to exercise this power E.R. 287 (Eng. Ch.
Div.).
jointly. Or Wind up the trust under the rule of “ Saunders v
vantier”
Legal Relations
Agent- The acts of an agent affect the legal obligations of
the principal.
Trust- legal relations of the trustee but not the legal relations
of the settlor or the beneficiaries.
* A trustee is vested with title in the property that is the

Identify and discuss subject matter of the trust. In carrying out the terms of the
seven differences trust the trustee may enter into contracts, but these contracts
will be contracts between the trustee and the persons the
between trust and trustee deals with.
agency. * An agent who acts within the scope of his or her authority
will bind the principal, but not the agent.
Modification
Trust- A settlor must reserve power to modify a trust, and
the beneficiaries can only terminate, not modify, a trust.
Under “ rule in Saunders v. Vautier” or under variation of
trust legislation.
Agency- An agency arrangement can be modified by the
principal and the agent.
Consent to Creation
Agency- Agency is normally created by consent
Trust- A trust can arise without the consent
or even the knowledge of the named trustee or the
beneficiaries.
The settlor of an inter vivos trust can appoint another
person as trustee.
for a testamentary trust, a trustee will be appointed by the

court if necessary.
76
Effect of Bankruptcy
Trust- The creditors of a personally bankrupt trustee cannot
claim the trust assets.
A beneficiary will not have to rank as an unsecured creditor

of the bankrupt trustee’s personal creditors with respect to a
claim for his/her interest in the trust.
Agency- If an agent becomes bankrupt the principal

normally shares equally with the agent’s unsecured creditors
in the distribution of the bankrupt agent’s estate .
The principal has an unsecured creditor of the bankrupt
agent.
Tort Liability
Trust- A trustee may engage in acts that cause the
Identify and discuss trustee to be liable in tort, but neither the settlor nor the
seven differences beneficiaries are vicariously liable for the trustee’s tortious
acts in carrying out the trust’s purposes.
between trust and
agency.( cont’d )
Agency- principal is vicariously liable for torts committed by
an agent within the scope of the agent’s authority
Death
Trust- is not terminated by the death of the settlor of
an inter vivos trust ,no trust fails for want of a trustee ,and
death of a trust beneficiary does not necessarily lead to the
termination of a trust.
Agency- agency terminates on the death either the principal
or the agent.
It is important to note that agency and trust are not mutually Trident Holdings Ltd.
exclusive — they can co-exist. v. Danand
Investments Ltd.
English and Canadian courts had treated trustees as agents (1988), 49 D.L.R.
of beneficiaries where the trustee was a bare trustee. (4th) 1 (Ont. C.A.).
- depends on the degree of control the investors have over
the trustees “ …where the beneficiaries have power to control the
conduct of the trustees to such an extent that the trustees are their
agents, the beneficiaries are personally liable as principals… “ ( Lack Advanced Glazing
of independence ) Systems Ltd. v.
Identify the
Frydenlund (2000), 2
circumstances in which Case law : beneficiaries were found liable for acts of the C.L.R. (3d) 241, 32
trust and agency may trustee on the basis that the trustee (Multimetro Mortgage R.P.R. (3d) 162
(B.C.S.C.
overlap. Corp. (“MMC”)) was also the agent of the investor
beneficiaries) Thus the control basis for finding trustees to
be agents of the beneficiaries, and making the beneficiaries
liable as principals, has gained judicial
support in Canada.
Remark :
The legal relationship changed ; the difference consequence of
the liability will be affected
77
CHAPTER 16 RESULTING TRUSTS
16.1 A NOTE ON TERMINOLOGY
Cases Law
n/a One categorization uses the term “implied trusts” to refer to
both resulting trusts and constructive trusts (拟制信托 or推
定信托)
Characterizing both resulting trusts and constructive trusts
as arising by operation of law distinguishes such trusts from
trusts that more clearly arise out of the settlor’s intentions.
16.2 SITUATIONS IN WHICH RESULTING TRUSTS ARISE

Learning Objective Topic Notes （Resulting Trust 回归信托） Statute/origins &
Cases Law
Automatic Resulting Trusts
Failure to Create a Valid Express Trust
A resulting trust arises where property has been transferred
to another person, but a legally valid express trust has NOT
been created, such as :
1.) not described the beneficiaries with sufficient certainty.
2) neither the certainty of intention nor certainty of subject matter
3) illegal purpose
4) Does not comply with certain formalities required for the
creation of an express trust. ( required writing respect to land )
5.) Trust for non-charitable purposes that did not fi t within the
limited exceptions
Failure of the Settlor to Dispose of his Whole Interest

A resulting trust may also arise where the settlor has not
Identify situations in dealt with the whole of his interest in the property to be held
which a resulting trust in trust. (i.e., failure to set up the remainder interest in the
may arise. trust )
Beneficiary Disclaiming his Interest

Where a beneficiary disclaims his interest in the trust, and
the remainder interest on resulting trust in favour of
the settlor.
Resulting Trusts do Not Always Arise

* A resulting trust does not always arise where an express trust is
not validly created, the settlor does not dispose of the whole of his
interest in the property, or a beneficiary disclaims his interest in a
trust. ( i.e., the settlor still holds the legal and beneficial title of the
property )
* where an express trust that is not validly created has yet to be
constituted, there is no need for a resulting trust to return the
property to the settlor ( the title has NOT been transferred yet )
Settlor’s Intention and Automatic Resulting Trust Vandervell v.
Case Law : a resulting trust in favour of the settlor had significant Inland Revenue
negative tax implications for the settlor
Commissioners
“automatic resulting trusts” and “presumed resulting trusts”;
( see below )
78
Learning Objective Topic Notes 回归信托 Statute/origins &
Cases Law
Presumed Resulting Trusts
Purchase in the Name of Another
A resulting trust is presumed to arise where a person
purchases property, but title is put in the name of another.
*A presumption of resulting trust will also arise when two or

more persons advance the purchase money for property, but
the title is taken in the name of just one of them.
Identify situations in *A person who claims a resulting trust in the circumstances
which a resulting trust described above must show that he advanced all, or a
portion of, the purchase money
may arise.
*A person claiming there is a resulting trust in the situations
( cont’d ) described above must also show that he was acting as
purchaser in the transaction.
Voluntary Transfer
* A resulting trust may arise where a person ( who??? )
voluntarily transfers property to another.
* The transferee is presumed to hold the property on
resulting trust for the transferor.
The Presumption
The person to whom property was transferred, or in whose
name title was taken, can rebut the presumption of resulting
trust by providing sufficient evidence to establish
that a gift was intended.
79
16.3 PRESUMPTION OF ADVANCEMENT -赠与意图的推定
Learning Objective Topic Notes () Statute/origins &
Cases Law
Provinces and Territories Other than ( Alberta, British
Columbia and Manitoba)
Discuss the law The presumption of advancement is the opposite of a
presumption of resulting trust, and it is a presumption that a
concerning the gift was intended.
presumption of The legislation has abolished the presumption of
advancement from a advancement on a transfer from a husband to his wife.
husband to a wife in The effect of the legislation is that a resulting trust is now
your province or presumed to arise in a transfer from a husband to his wife.
territory
Presumption of Advancement -赠与意图的推定 ** Pecore v. Pecore,

Discuss the law [2007] S.C.J. No.
Between Parent and Child
concerning the The SCC held that the presumption of advancement does
presumption of not apply between a parent and his or her adult children.
advancement from a
This is so even where the adult children might be said to be
parent to a child. dependent on the parent. ( see next page for more details
for the case)
Effect of Fraud or Illegality in Rebutting the Presumption

In a particular fact of Advancement
situation, discuss
whether a presumption
Property held as Joint Tenants or in Joint Bank Accounts Ontario
of advancement will The legislation abolishing the presumption of advancement Family Law Act,
arise in your province or in these jurisdictions makes exceptions for property held as R.S.O. 1990, c. F.3,
territory. joint tenants and in joint bank accounts. （ with proof）
Discuss whether the Husband transfer assets to wife - avoid creditors is contrary
to fraudulent conveyance legislation --- contrary to public
presumption of policy (marital breakdown) – husband’s fraudulent
advancement can be scheme .
rebutted with evidence
that indicates a transfer To rebut the presumption of advancement the parent would
was made for a have to introduce evidence of his fraudulent intent.
fraudulent purpose.
80
16.4 RESULTING TRUSTS AND JOINT BANK ACCOUNTS
Cases Law
Resulting trusts often arise in the context of joint bank ***Pecore v.
accounts. This right of survivorship is a common law right. Pecore***
Explain the implications Case law : Evidence of the intent of the parties as to the
of resulting trusts for equitable title to monies in a joint bank account may be
joint bank accounts. found in the bank documents.
transferor’s intent regarding the beneficial interest in the
account; ( bank statement )
STEP Summary from Pecore case :
•A transfer of property by a parent to an adult child for no
consideration gives rise to a presumption of resulting trust.
• The above is true whether the transfer is to the child
outright or into joint name with the parent.
• This is also true where a parent purchases an asset with his
or her own funds and directs that title be put in the name of
an adult child.
• Underlying this presumption is the concept that equity
presumes bargains, not gifts.
• Presumption of resulting trust is rebuttable(可以反驳的)
• Onus of rebutting the presumption is on the transferee
(the adult child) to demonstrate that the transferor (the
parent) intended a gift.
• The onus must be satisfied on the balance of probabilities.
• It is the intention of the transferor (the parent) at the time
of the transfer that is relevant. The intention of the
transferee (the adult child) is not relevant.( ??)
• Subsequent to the time of the transfer, evidence of the
transferor’s intention is only relevant to the extent that it
demonstrates the intention of the transferor at the time of
transfer.
• Language of the bank documentation or other standard
transfer documentation signed at the time of the transfer is
one relevant fact, but not at all determinatives of the
transferor’s intention.
• Income tax treatment of the assets after the date of
transfer is one relevant fact, but not at all determinatives of
the transferor’s intention
Post-Pecore cases
a significant doctrinal change into the concept of joint
tenancy ??
Sawdon Estate v.
Case Law : Watch Tower
Post-Pecore cases ( NOT A The Ontario Court of Appeal held that “the power of an
LO) owner [a joint tenant] to dispose of his or her ownership
rights by means of a trust is fundamental.
Remark – cash as a gift – no tax since it has tax implications

when the asset disposed .
81
* The trial judge found that the presumption of resulting Harrington v
trust was not rebutted, therefore the joint assets belonged to Harrington
Post-Pecore cases ( NOT A the estate and not the husband. Ontario’s Family
LO) * On appeal, the court upheld the decision that the original Law Act.
$500,000 did belong to the father’s estate (husband ‘s father
‘s investment)
* At the trial level, the court found that the presumption of Doucette v. McInnes
resulting trust had not been rebutted so the proceeds of the
GICs would fall to the estate. Father purchased
GIC with sons
* On appeal, the court considered Pecore , and the court singed by sones
found that the deceased did intend a gift to each of her
children, and the presumption of resulting trust was
rebutted. 被驳斥驳回
* the court was asked to consider whether or not Fuller v. Harper
the presumption of resulting trust applied where the
deceased had transferred property into the name of himself
and a close friend
* the court reversed the trial court decision and allowed the
transfer to stand.
82
CHAPTER 17 CONSTRUCTIVE TRUSTS AND CONSTRUCTIVE TRUSTEES
17.1 TERMINOLOGY
Cases Law
The terms “implied trust”, “resulting trust” and
“constructive trust” have not been used consistently by
courts or by those who write about the law of trusts.
回归信托 (Resulting Trust) whether “resulting trusts” arise
because of an implied intent of the person who transferred
n/a the property, the approach in these materials is to treat
resulting trusts as arising not out of the intent of the
transferor but by “operation of law”.
推定信托“ constructive trust” is used here to refer to those
trusts that arise not from the intention of a particular person
but by “operation of law or by the exercise of judicial
discretion, and that are not resulting trusts. ( so it is NOT a
real trust? )
17.2 DEVELOPMENT OF THE INSTITUTIONAL CONSTRUCTIVE TRUST

Constructive Trust 推定信托( 依公平原则确定的权益）
Cases Law
* Historically the constructive trust developed through
specific situations in which the court recognized a
constructive trust obligation.
* These constructive trust situations have since been
described as “institutional constructive trusts
Situations Involving a Breach of Fiduciary Duty

*Certain types of relationships came to be recognized as
fiduciary in nature.
*A trustee, company director, agent, partner, lawyer,
personal representative or parent might, in his fiduciary
Discuss the historical capacity, come into possession of property as a
development of the consequence of a breach of his fiduciary duty , and the court
institutional might then order that the property was held on constructive
constructive trust and trust.
its continuing relevance * Example: the directors of a parent company incorporate a
subsidiary which to lease a property ,and it turns out the capital
in Canada
gain of their shares due to the value of sub has been increased.
* The directors thus benefited personally, and possibly at the
expense of the parent company.
* The directors owed a fiduciary to act in the
best interests of the company
---- The court would often describe the directors in

these circumstances to be “constructive trustees”
recognizing the duty they owed to the company
83
Trust Arising where a Statute of Frauds is Used as an
Instrument of Fraud
The trust that arises where a Statute of Frauds has been used
as an instrument of fraud is often treated as a constructive
trust.
Trust Arising on the Enforcement of a Secret Trust

A “secret trust” or “semi-secret trust” is often treated
as a constructive trust.
A secret trust can arise where a bequest of property was

made in a will to a person subject to a requirement that that
person hold the property in trust, but the trust obligation
Discuss the historical was not indicated in the will.
development of the
institutional A semi-secret trust can arise where the trust obligation was
constructive trust and indicated but the terms of that trust were not set out in the
its continuing relevance will. And they would not meet the requirements of the wills
in Canada ( cont’d ) legislation and would thus not be valid.
Courts would not let the intended trustees retain the

property for themselves, ignoring the intended trust
obligations.
court is ignoring the application of the wills legislation that

makes the offending testamentary disposition invalid
Other Institutional Constructive Trust Situations
other constructive trust including knowing assistance in

breach of trust; knowing receipt of trust property; the
trustee de son tort; and the profiteering fiduciary. These
constructive trust situations can arise in the context of the
administration of a trust
84
17.3 DEVELOPMENT OF THE REMEDIAL CONSTRUCTIVE TRUST IN CANADA

Cases Law
Unjust Enrichment as a Basis for Imposing a *** Pettkus v. Becker,
Constructive Trust Unjust Enrichment (one party benefits ** [1980] 2 S.C.R. 834,
117 D.L.R. (3d) 257
at the other party’s expense ) (S.C.C.).
Case law imposed a constructive trust to remedy an unjust plaintiff, Becker, was
- identifying each part enrichment. the three elements ( tests ) of an unjust in a relationship with
of the test for unjust enrichment set out in Pettkus v. Becker Pettkus. She had
enrichment set out in 1) an enrichment of the defendant supported
Pettkus for five years
Pettkus v. Becker 2) a corresponding deprivation of the plaintiff (i.e., the
and then worked in a
enrichment of the defendant came at the expense of the business owned by
plaintiff), and Pettkus for the next
3) the absence of any juristic reason for the enrichment. fourteen years for no
remuneration.
In that case the plaintiff would have had an obligation to （渣男的故事）
provide the benefit to the defendant as part of the
contractual obligation, and presumably in return for some
consideration. There might also be a juristic reason for the
enrichment if the enrichment was intended as a gift. It is the
“absence of juristic reason” for the enrichment that makes
the enrichment unjust.
- explaining the concept “ absence of juristic reason” – the above elements would
of “absence of juristic be a juristic reason for the enrichment if, for instance, the
reason” relationship had been contractual.
A constructive trust is just one possible way of remedying an

unjust enrichment. The defendant might, for instance, be
ordered to account for benefits received and pay that
amount to the plaintiff.
Step1 - focuses on whether there has been an unjust
enrichment ( three elements above )
Step2 - to consider the appropriate means of remedying the
unjust enrichment.
Wrongful Conduct- Remedy unjust Enrichment Soulos v. Korkontzilas,

- Discuss the potential [1997] 2 S.C.R. 217,
Facts: 145 D.L.R. (4th) 214
for a constructive trust
Soulos is an investor, Korkontzilas is an agent , offer to bid (S.C.C.).
order to remedy unjust a property , court offer – did not accept first , then accept
Enrichment the offer , but the agent did not inform the client , , instead ,
the agent ‘s wife bought it , so breach the fiduciary duty
from the client ‘s prospective with supposed “ constructive
trust” for Soulos.
Case Law : In Canada, under the broad umbrella of good
conscience, constructive trusts are recognized both for
wrongful acts like fraud and breach of duty of loyalty, as well
as to remedy unjust enrichment and corresponding
deprivation.
85
Remedial Device
* The constructive trust is just one of the remedies that
might be considered to remedy an unjust enrichment.
* It is also just one of the remedies that might be
considered as a remedy for wrongful conduct.
Continuing Relevance of the Institutional Constructive Trust
Unless “enrichment” is interpreted very broadly to extend Pettkus v. Becker
beyond pecuniary claims, it does not explain all situations in
which the constructive trust has been applied.
17.4 IMPORTANT CONSTRUCTIVE TRUST SITUATIONS FOR PERSONS INVOLVED IN THE

ADMINISTRATION OF TRUSTS
Learning Objective Topic Notes Statute & Cases
Law
Trustee de son tort - 受托人对他的错 ( , a trustee of his own
wrong)
Describe the concepts A person who is not a trustee will be treated as if he were a
trustee where he takes it upon himself to possess and
of: administer trust property for the beneficiaries when he
– trustee de son tort knows, or ought to know, that the property is trust property.
i.e., the solicitors ( even they are not “trustee “ ) were held
liable for having assumed the duties of trustees and having
breached the trust by making an imprudent investment of
the trust funds. ( trustee assets )
The court nonetheless referred to such a person as a
“constructive trustee.”
Knowing Assistance in a Breach of Trust Air Canada v. M
A person who assists in a breach of an express trust can be & L Travel Ltd.,
– knowing assistance in liable for the breach. The person must have actual ( travel agency as a
breach of trust knowledge of the breach or must be reckless or willfully trustee to sell the
blind to the breach — mere carelessness is not sufficient to air ticket )
make such a person liable.
Case Law - separate trust did not use for proceeds of the Ontario Court of
ticket , instead keeping them in its general account Appeal
M&L and its directors were held personally liable for their
knowing assistance in the breach of trust.
Case Law - The court may impose an equitable remedy such as Waters’ Law of
requiring the person who knowingly assisted in the breach of trust
Trusts in Canada
to account for any benefit received from the breach of trust, or to
pay equitable damages for a loss caused by the knowing assistance
in the breach of trust.
Knowing Receipt of Trust Property （明知故犯） Citadel General
Assurance Co. v. Lloyds
* A person who receives property held on express trust Bank of Canada
knowing that his receipt of the trust property is contrary to
the trust will be a constructive trustee of that property.
– knowing receipt of * The degree of knowledge of a person in receipt of trust
trust property. property is different than that required for a person to be
liable for knowing assistance in a breach of trust.
NOT A LO Profiteering Fiduciary (暴利受托人) Keech v. Sandford (1726),
This approach extended to anyone in a fiduciary relationship who 25 E.R. 223.
Boardman v. Phipps,
profited from a conflict of interest with the person with whom he [1967] 2 A.C. 46 (Eng.
had the fiduciary relationship. H.L.)
Case Law constructive trustees by reason of the fiduciary position
86
CHAPTER 18 DRAFTING AND INTERPRETING TRUSTS
Trust drafting is a professional skill. It requires a knowledge of trust law, succession law, a considerable
amount of tax law, some property, and a dash of insolvency and family law.
Learning Objectives
• Explain the duties of the solicitor when drafting a trust deed.
• Identify some of the key elements that a client should understand before establishing a trust.
• Identify the hallmarks of a well-drafted trust.
• Review the provisions of a trust document and explain the key legal principles and implications
relevant to the provisions, including:
– the purpose of a provision
– the implications of the provision for the trustee, settlor or beneficiaries, and
– the consequences of an invalid provision
18.1 GENERAL POINTS

Cases Law
Duty to the Client
1. determine the client’s wishes
Explain the duties of the 2. must address key preliminary issues with the client, such
solicitor when drafting a as: the nature of the trust property, the tax position of the
trust deed. client
3. prepared in a modern, clear drafting style
4. The settlor’s appreciation that the trust fund is not his
fund is all that much more important if the settlor intends to
be a trustee or beneficiary.
Importance of Drafting (Clear)
modern, clear drafting style, extremely clear but lead to
unintended results if it does not reflect the circumstances or
the relevant law.
Flexibility
It is important to try to be flexible where possible.
Identify the hallmarks of a Circumstances change over time, and it may be necessary for
the trust to adjust to changing circumstances
well-drafted trust.
Simplicity - One should strive for simplicity. This
involves using shorter sentences where possible ,
logical order. should be structured in as simple a way.
The more complex it is, the more it will cost professionals to
interpret it, and the greater the risk that it will be
misinterpreted.
Drafting Style “ Plain English”. Shorter expressions Clause
headings
Use of Precedents should only be a guide
87
18.2 CREATION OF THE TRUST （ Five requirement for the creation of the trust ）
Learning Objective Topic Notes Statute
1. the capacity of the settlor
– legal capacity and not a minor
2. the three certainties
1.) Intention
* written form will typically provide more reliable evidence of the intention
* No formal language is required to create a trust.
* “trustees”, and “trust property” is also likely to convey a certainty of intention
to create a trust.
* the document conveys a certainty of intention to create a trust.
2.) Subject Matter

Property Subject to the Trust
* by referring to a specific piece of property
* A reference can be made to a specific fund.
* “property transferred to the Trustees to hold on the terms of this trust”
Certainty of Amounts the Beneficiaries are to Receive
* an express trust for persons is certainty of the amounts the beneficiaries are to
receive
* trustees’ discretion as to the amounts beneficiaries are to receive out of either
the income or capital of the trust, or both.
3.) Objects
Fixed Trust
* identify all the beneficiaries of the trust or complete list of the beneficiaries.
* a settlor can still expressly exclude illegitimate children.
Identify some of
the key elements Discretionary Trust
that a client * the class must still be sufficiently clearly described to allow one to determine
should with certainty whether any given person is or is not a member of the class.
understand
before Expressing Purposes
establishing a While the purpose may explain the reason for the trust, it runs the risk that the
trust will be interpreted as a purpose trust and may then be found to be an
trust.
invalid trust unless the purpose is charitable.
Gifts to Charities
* that a gift to a charity is not the same thing as creating a charitable purpose
trust.
* charitable entity ‘s name under which it is registered
* The trustees will be legal persons either as individuals or as corporate trustees.
Charitable Purpose Trust
* an express trust is relaxed in some respects in the context of a charitable
purpose trust (its cy-près power.)
*needs to be reasonably confident that the purpose the settlor has in
mind fits the legal meaning of “charitable purpose”.
Gifts to Unincorporated Associations
* The result may be that the gift is held invalid, and the settlor’s intention may
be frustrated.
* If the objects are not charitable, one should consider other ways of making the
gift.
88
3. Constitution ( of the trust)
Transfer to Trustees
* This requires that the proper form of transferring the particular type of
property be carried out. i.e., how title to land is properly transferred or company
shares and important to examine the company’s relevant constating documents.
Settlor Declaring Himself to be a Trustee
* If he declares himself a trustee of property he has title to, he will be a trustee
of it and he will have the duties of a trustee, including the duty to act in the best
interests of the beneficiaries, not himself.
Identify some of
the key elements 4. Formalities (complying with any requisite)
that a client * a written form.
should * Assignment is in writing as well as for assigning an equitable interest.
understand * with respect to land calls for the creation of a trust , it confirms that the
before contract or some memorandum acknowledging the contract is signed
by the party one might later want to enforce the contract against, or by that
establishing a person’s agent.
trust. ( cont’d )
5. Public policy Consideration
* any illegal act or contrary to public policy.
* not contrary to provincial or territorial fraudulent conveyance or fraudulent
preference legislation
* whether it would be void as against a trustee in bankruptcy
* the interest would vest outside the perpetuity period for contingent interest
* accumulation income is allowed under legislation
18.3 TERMINATION OF THE TRUST

Cases Law
the trust is terminated by the beneficiaries under the rule in Saunders v.
Saunders v. Vautier, the settlor’s objectives in creating the Vautier19
trust may not be achieved
Obtaining the consent of all the beneficiaries may be
difficult, and may have significant tax consequences
variation of trust legislation require agreement from the
ascertainable beneficiaries with legal capacity, as well as
consent of the court.
18.4 DUTIES OF TRUSTEES AND EXEMPTION CLAUSES

Cases Law
Conflicts of Interest
A consequence of this duty is that the trustee cannot
enter into a transaction in which he has an interest that
conflicts with his duty to the beneficiaries.
“A Fiduciary” and “An Independent Trustee”
Duty of Care Alberta case of Re
* was held that an exemption clause cannot relieve a trustee Poche,
of liability for gross negligence
* no clear line between gross negligence and ordinary
negligence
89
18.5 POWERS CLAUSES
& Cases Law
Presumption that the Trustees Act Unanimously
The default common law rule with respect to the exercise of trustee
powers is that where there is more than one trustee, the trustees must
act unanimously.
Controlling Trustee Exercise of Discretion
* If the exercise of the power is to be controlled in some way,
* one must consider the alternatives for doing so
require that the trustees consult with the beneficiaries ( potential issue )
Overriding Powers
* To make the trust flexible trustees are sometimes given the power to
create new trusts for the beneficiaries of the trust.
* 75(2) of the Income Tax Act. With this breadth of power in the hands
of the trustees one should also carefully consider how control over
these powers is to be exercised
Other Powers
review the range of administrative powers the trustees may need
to administer the trust, particularly if the trust property includes real
property
18.6 TRUSTEES
Cases Law
Number of Trustees
- There is no limit on the number of trustees
- The common law presumption is that trustees act unanimously
Choice of Trustees
*have a professional trustee where the assets in the trust are
sufficient to justify the fees for such a trustee
*The lawyer drafting the trust could be a trustee
The settlor could be a trustee but if, in his capacity as trustee
* A beneficiary can be a trustee, and there may be situations in
which it is useful to appoint a beneficiary as trustee.
* the residence of each trustee
Appointment of New Trustees
*Canadian trustee acts allowing continuing trustees to appoint new
trustees in certain circumstances
*A provision to appoint new trustees should be set out in the trust
instrument.
* The provision might also name another person as having the
power to appoint new trustees after the settlor’s death.
Provision for Removal
If a person is given such a power, it is presumably a fiduciary power
and cannot be exercised for the personal benefit of the person with
the power.
Retirement
There is no trust law requirement that a trustee retire at a certain
age. If retirement of a trustee at a certain age is to be required, it
must be put in the trust instrument.
90
18.7 SETTLOR EXCLUSION CLAUSE
Cases Law
The settlor thus should not be a capital beneficiary under the Section 75(2) of the
trust, unless the following Income Tax Act
* settlor under a resulting trust if the settlor has failed to attributes the
dispose of his entire beneficial interest in the property. income, or the
capital gains or
* if the trustees are required to pay the costs of setting up capital losses
the trust, or if they are to pay taxes arising from the transfer
of property to the trust
18.8 SPECIFIC TYPES OF TRUSTS

Cases Law
n/a n/a
91
CHAPTER 19 A NOTE ON THE TRUST IN QUEBEC
19.1 A BRIEF COMPARISON OF COMMON LAW AND CIVIL LAW

Cases Law
Quebec- all law in such a system is written. It is written in a
code that sets out the general law, or is written
in particular statutes. Judicial decisions must be based on the
written law.
Conceptual approaches in the two systems differed in other
ways besides those described in the preceding paragraphs
19.2 DIFFICULTIES FITTING THE COMMON LAW TRUST INTO A CIVIL LAW SYSTEM

Cases Law
Civil Law Concept of Absolute Ownership
* The concept of ownership of property is one of absolute
ownership.
* This concept of absolute ownership did not fi t well with
the common law concept of trust, which divides certain
rights in the property between the trustee and the
beneficiaries.
* In other words, the creditors would discover, contrary to
the usual civil law of property concept of absolute
ownership, that the person’s ownership was not absolute.
Civil Law Concept of Patrimony 继承的概念
Explain why the * A patrimony is indivisible.
* In civil law a patrimony is a group of assets and related
common law trust does
liabilities, and it is the assets of the patrimony that answer to
not fit well in the civil the liabilities of that patrimony
law system of *that a person can have only one patrimony (i.e.,
Quebec. a group of related assets and liabilities) that is
indivisible.
Need to Replace the 1879 Concept of Trust in Quebec

* Interpretation of the trust provisions was difficult and
controversial, and the important question of the ownership Royal Trust Co. v.
of trust property was contested Tucker 1982
* case law : the trustee’s ownership was a unique type of
ownership distinct from other types of ownership found in
civil law.
Many saw this as unsatisfactory since
it did not fit with the civil law concept of ownership.
92
19.3 CONCEPTUAL APPROACH TO THE TRUST IN QUEBEC
Cases Law
Describe the Concept of the Trust in Quebec Civil Law
current conceptual To treat the trust as a “patrimony遗产 by appropriation 拨用”
approach to the ( 挪用财产) the civil law
trust in Quebec - In this approach, property appropriated to a trust purpose concepts of
is treated as a separate patrimony absolute
- It is not “owned” by the settlor, the beneficiaries or even ownership and
the trustee. patrimony
- a single legal person - The power of the trustee to
manage the property does NOT derive from ownership of
the trust property (which the trustee does not have), but by
giving the trustee the power to manage the property of the
trust patrimony.
- Ownership is not divided since it is with the single trust
patrimony.
- The creditors of a bankrupt trustee cannot have access to
the trust property because the trustee does not own it.
One Interpretation
The Trustee as Owner of the Trust Property in a Separate
Patrimony article 1261 of
- it might be interpreted to mean that the trustee has no the Code
rights in the trust patrimony in his personal capacity.
- If this approach is correct, it would be inappropriate to
including name the “trust” as a party to litigation. Instead, the trustee
two possible would have to be named as the party to litigation concerning
the trust assets.
interpretations of
- This approach, however, is inconsistent with the civil law
that approach. concept., that a legal person can have only one patrimony.
Another Interpretation: The Trust as a “Subject of Law”

The trust, while not a legal person, is a “subject of law” Article 1260 of
- A subject of law is said to be something less than a “legal the Code
person” but something that can be subject to claims against
it such as the claim of a debtor against the trust, or the right
of a beneficiary to receive income or capital out of the trust.
- a trust resulting where a settlor “transfers property from

his patrimony to another patrimony constituted by him
which appropriates [the property] to a particular purpose.
93
19.4 SOME KEY FEATURES OF THE TRUST IN QUEBEC
Cases Law
Types of Trusts
Creation of the Trust
( similar approaches as Common law )
four similarities
The Code sets out four ways in which a trust can be created. In a civil law
1. It can be created pursuant to a contract. (common law : by a system
gift or a contract) “authorized by
2. It can be created gratuitously (i.e., by gift), inter vivos or by will. law” means
((common law : by a will) authorized by
3. A trust can also be created by statute or under a provision of statute or by the
the Code. ( common law : statutory trusts ) Code.
Identify and 4. Like the common law trust, the settlor can also be a
describe four beneficiary and can even be a sole beneficiary.
similarities and
The differences
1. the Code does not specifically require the presence of the
“three certainties”.
2. -A trust can be established by a judgment of a court, but only
where this is authorized by law. (common law : operation of law
** not quite the same )
** since the establishment of a trust by a court judgment must be
four differences
authorized by statute or the Code.
between the
The common law trust by operation of law, by contrast, is
Canadian ordered on a case-by-case basis, and the authority to make
common law such an order does not depend, as it does in Quebec, on a statute
trust and the or code.
trust in Quebec. 3. not be possible for a settlor to create a “bare trust” since a
settlor cannot retain significant control over the trust assets.
4. the civil law emphasis on absolute ownership, the property
that is appropriated to the trust patrimony would need to be
clear.
Constitution
The trust in Quebec has a similar feature
Common Law :
four differences - requires that the trustee have title to the property that is
between the intended to be subject to the trust.
Canadian - Transfers the property to the trustee or because the settlor has
declared himself to be a trustee of property to which he has title.
common law
Civic Law
trust and the like the common law trust, the property must be transferred Article 1260 of
trust in Quebec. before the trust comes into effect. the Code
（cont’d ） “a trust results from an act whereby a person, the settlor, transfers
property from his patrimony to another patrimony constituted by
him which he appropriates to a particular purpose” and settlor
cannot be a sole trustee of a trust.
Formalities
Common law:
94
- Requires formalities ( in writing if required for land , and
securities , and transfer/ assignment and so on )
Civic Law :
- The Quebec Civil Code provisions on trusts do not set out any
specific formal requirements for the creation of a trust.
- The formalities required to make a legally valid gift, create a
legally valid contract, or create a legally valid will must be
complied with.
- There is NO requirement in the Code that trusts must be
created in writing, but it is advisable for evidentiary purposes to
four differences do so.
between the
Canadian Gift
common law A gift under article 1824 of the Code. makes an exception,
however, for moveable property with oral agreement.
trust and the
trust in Quebec. Contract
（cont’d ） - is an agreement of will by which one or several persons obligate
themselves to one or several other persons
- The contract is formed when acceptance is received by the
offeror.
- require compliance with registration requirements with respect
to immoveable property.
Trust Created Pursuant to a Will
provides that a will is “a unilateral and revocable juridical act For a will -
drawn up in one of the forms provided for by law …”. Article 704 of the
Three formats ( there must be a written document) Code
1.) notarial will, 2.) the holograph will and 3.) the will made in the
presence of witnesses
Public Policy Constraints (differs from the common law)

One concerns rules against perpetuities
Civic law : provides that a personal trust “may not include
more than two ranks of beneficiaries of the fruits and revenues
exclusive of the beneficiary of capital”.
First rank: not later than 100 years
Second rank: entitled to receive the income would be the
children.
Common law : rule against remoteness of vesting.
The Code allows Private and social trust to be perpetual.
concerns constraints on alienation 异化 of property.

- In contrast to the Anglo-Canadian common law,53 a broad
restriction can be imposed on the right to dispose of property in
a trust created by gift or will.
Termination and Variation

Revocation by the Settlor
95
Common law : -A trust created under the law of a Canadian
common law jurisdiction could be terminated by a settlor where
the trust instrument contains an express provision allowing the
settlor to terminate the trust (although this can
have disadvantageous tax consequences for the settlor)
Civic Law: - does not permit a settlor to retain significant control

over trust assets, since doing so suggests there was no intention
to create a trust.
- if the settlor retains a right of revocation, it might be held
that the settlor has failed to create a trust
- it is possible to revoke a trust created pursuant to a contract.
Termination at the Request of the Beneficiaries (or Other

Interested Parties
common law: trust can be terminated under
the rule in Saunders v. Vautier, all full legal capacity , all
collectively
Civic law: -the court may, on the application of an interested

person, terminate the trust.
unlike the common law rule in Saunders v. Vautier, the settlor’s Civil Code, Article
intent is paramount. 1294
Variation
The court has a power to vary the terms of trust “ ….the court
may amend the provisions of the constituting act.” Article 1294 of
the Code
Purpose Trusts (Non-charitable and Charitable)
Canadian common law :
- to recognize only a limited range of non-charitable purpose
trusts as legally valid trusts.
- to recognize the validity of purpose trusts that are created for
charitable purposes.
- a charitable purpose trust can be of perpetual duration, while
a non-charitable purpose trust cannot.
- common law courts exercise a cy-près power to deal with
charitable purpose trusts for which the purpose has become
impossible or impracticable to carry out, by directing the use
of the trust property to a purpose near to the original purpose.
Civic Law : a private trust” or “social trust”, as those terms are

described in the Code, can go on forever.
- an equivalent of the notion of cy-près with respect to a “social
trust; on the application of an interested person, substitute
another closely related purpose for the original purpose of the
trust.
Duties of Trustees
96
Common Law : trustee must comply with the terms of the trust
instrument.
It was also noted there that trustees have certain core duties
even if the trust instrument does not set them out.
The core duties discussed in that chapter were the duty to take
care, not to delegate, to be impartial or even-handed between
beneficiaries, to be loyal to the beneficiaries, and to provide
information.
Civic Law:
The Code treats a trustee as an administrator of the property of
another.
Obligation to Comply with the Terms of the Trust Instrument
Is obliged to comply with the obligations imposed on him by the
trust instrument and is to act within the powers conferred on
him ( both laws )
Duty of Care
A trustee under the Code is required to act with prudence and
Diligence ( both common law and civic law requirement )
Duty Not to Delegate

* The Code permits a trustee to delegate his duties or to be
represented by a third party for specific acts.
* Similar to the common law rule, if he does delegate he is
accountable for the person selected if he was not authorized to
make the selection.
*If he was authorized to make the selection, he is accountable
only for the care with which he selected the person and gave him
instructions.
Duty of Impartiality
The common law trustee’s duty of impartiality is also reflected in
the Code.
If there are several beneficiaries entitled either concurrently or
successively, a trustee of a trust governed by the Code must act
impartially between them.
Duty of Loyalty
honestly and faithfully, best interests of the beneficiaries or

of the objects of the trust, and trustee must also not mingle trust
property with his own property under both laws.
Duty to Provide Information

* The Code addresses the duty to provide information
* The Code also provides that the trustees must, at all times, allow
the beneficiaries to examine the books and vouchers relating to
the administration of the trust.
97
Powers of Trustees
common law: trusts that requires trustees to act unanimously.
Civic Law : there are more than two trustees a majority of the
trustees may act unless the trust instrument requires them to
either act jointly or in some way other than by majority.
Under the Code trustees may make any form of investment and
are not bound to invest the sums of money under their
administration in accordance with the rules relating
to “presumed sound investments” unless the trust instrument so
requires.
Appointment, Retirement, Death, Removal and Article 1274 of

Remuneration of Trustees the Quebec Civil
Civic Law : “any natural person having the full Code
exercise of his civil rights [i.e., has legal capacity], and any legal
person authorized by law, may act as trustee.”
a settlor can appoint one or several trustees and can provide for
the appointment and replacement of trustees
A trustee’s duties terminate on his death, resignation, or

replacement, or on his becoming bankrupt.
A trustee may also resign by giving notice to the beneficiaries

and the co-trustees, or the person empowered to appoint
trustees may appoint a new trustee in his place.
The trustee is presumed to be entitled to remuneration fixed by

the trust instrument, by usage or by law, or to the remuneration
established according to the value of the services rendered.
Breach of Trust
Liability to Beneficiaries and Reduction of Damages
A trustee can sue and be sued in respect of anything connected
with his administration of a trust with reducing if acting
gratuitously.
Liability Among Trustees — Joint Administration

A trustee can be relieved of liability if he proves he was unable,
“for serious reasons”, a trustee is also presumed to have
approved of a decision made in his absence unless he makes his
dissent known to the other trustees and to the beneficiary within
a reasonable time after becoming aware of the decision
Liability to Third Parties
Where a trustee binds himself, within the limits of his powers, in
the name of the beneficiaries or the trust patrimony, he is not
personally liable towards third persons with whom he contracts.
98
Rights to Have Property Returned to the Trust
There is no specific provision in the Code permitting the
beneficiaries to follow trust property into the hands of others or
trace the substitution of trust property for other property.
It is not clear whether the proceeds of a disposition of trust

property by a trustee of a Quebec trust would be treated as trust
property.
There is a strong argument that the proceeds would themselves

be treated as trust property on the basis of the civil law
doctrine of “real subrogation” (真正的代位 ) whereby one asset
stands, for legal purposes, in the place of another.
Trusts by Operation of Law

Common law : providing a remedy for unjust enrichment (不当
得利)
Civic Law : Code has specific provisions to provide remedies
for unjust enrichment
Courts in Quebec are not authorized to develop trusts by
operation of law as a form of judge-made law on a case-by-case
basis.
The End of the Note
99

Notes On Law of Trust Based On The Learning Objectives

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Notes on Law of Trust based on the Learning Objectives

CHAPTER 2 CLASSIFICATION OF TRUSTS ..............................................................................................5

CHAPTER 4 CREATION OF AN EXPRESS TRUST: CONSTITUTION .......................................................... 12

CHAPTER 5 CREATION OF AN EXPRESS TRUST: FORMALITIES ............................................................. 17

CHAPTER 7 TERMINATION AND VARIATION OF TRUSTS .................................................................... 30

CHAPTER 8 USING THE EXPRESS TRUST: SOME COMMON EXAMPLES ................................................ 33

CHAPTER 9 NON-CHARITABLE PURPOSE TRUSTS ............................................................................... 41

CHAPTER 10 CHARITABLE PURPOSE TRUSTS...................................................................................... 44

CHAPTER 11 DUTIES OF TRUSTEES .................................................................................................... 48

CHAPTER 12 POWERS OF TRUSTEES .................................................................................................. 56

CHAPTER 13 OFFICE OF TRUSTEE ...................................................................................................... 62

CHAPTER 14 BREACH OF TRUST ........................................................................................................ 69

CHAPTER 15 POWERS OF ATTORNEY COMPARED TO TRUST .............................................................. 75

CHAPTER 16 RESULTING TRUSTS....................................................................................................... 78

CHAPTER 17 CONSTRUCTIVE TRUSTS AND CONSTRUCTIVE TRUSTEES ................................................ 83

CHAPTER 18 DRAFTING AND INTERPRETING TRUSTS ......................................................................... 87

CHAPTER 19 A NOTE ON THE TRUST IN QUEBEC ................................................................................ 92

– a constructive trust 推定信托 - Constructive

X- life interest Vested, Contingent, or

– trust instrument A will often creates one

– fixed trust – Fixed trust

– inter vivos trust

– testamentary – testamentary trust

– grantor – grantor how about civic law?

Classification According to the Trust Objects

Set out the classification of trusts used in these materials in a diagram.

2.3 OTHER COMMONLY USED CLASSIFICATION SCHEMES

– executed and executory trusts

– completely and incompletely constituted trusts

significant implications for potential beneficiary liability and for tax

5. Public Policy: The trust must not be illegal or contrary to

Identify the main For Trustee

Learning Objective Topic Notes Statute/origins &

2.)The Interpretation of Precatory Words(“Precatory Trusts”) Case 1 : Re Walker (1925),

-The Test for a Discretionary Trust

4.2 REASONS FOR REQUIRING CONSTITUTION OF THE TRUST

C’s title (or “interest”) is an equitable title as a beneficiary of the

Suppose C wants to pass on that remainder interest ( if B dies )

Learning Objective Topic Notes Statute/origins &

4.6 EFFECT OF CONSTITUTION OF A TRUST

Learning Objective Topic Notes Statute/origins &

Learning Objective Topic Notes Statute/origins &

1. If the beneficiaries have not provided consideration for courts of equity

Explain the When intended beneficiaries of un-constituted trusts Court of Equity -

5.1 THE STATUTE OF FRAUDS

Contracts with Respect to Land English Statute of

1.) must be formalized in writing.- “ land and the Section 4 of the

Identify situations in The English Statute of Frauds required contracts with

Doctrine of Fraud Canadian cases

Learning Objective Topic Notes Statute/origins &

- Since courts are

NOT A Learning Objective

It can also lead to a perceived injustice where the person who

Why timing is important ??/ because of wills testator ‘s death ?

1. ) wills legislation comply with -- Is this a trust that is

2.) wills legislation does not comply with - If the will

it states a trust obligation without indicating what that trust

5.) Trust is in transferring (by assignment) If a

See flow chart below :

6.2 TRUSTS IMPOSING CONDITIONS THAT ARE CONTRARY TO PUBLIC POLICY

Learning Objective Topic Notes Statute/origins &

Conditions Precedent and Subsequent Definition : A