Trusts CAN– SPRING 2018 SMITH

FRAMEWORK ........................................................................................................................................................... 3

CREATION OF EXPRESS TRUSTS ......................................................................................................................... 5

CONSTITUTION OF TRUST............................................................................................................................................5CERTAINTY OF INTENTION...........................................................................................................................................7

ALLEGED SELF-DECLARATION AS TRUSTEE.................................................................................................................7PRECATORY WORDS.....................................................................................................................................................8

CERTAINTY OF SUBJECT MATTER...............................................................................................................................9CERTAINTY OF OBJECT................................................................................................................................................9FORMALITIES.............................................................................................................................................................10

RESULTING TRUSTS ............................................................................................................................................. 12

AUTOMATIC RESULTING TRUSTS...............................................................................................................................121) FAILURE OF EXPRESS TRUST............................................................................................................................122) SURPLUS FUNDS:..............................................................................................................................................12

PRESUMED OR INTENDED RESULTING TRUSTS...........................................................................................................121) PRESUMPTION OF RESULTING TRUST..............................................................................................................122) PRESUMPTION OF ADVANCEMENT...................................................................................................................12

TRUSTEE’S DUTIES ............................................................................................................................................... 15

BASIC DUTIES– WHAT MUST A TRUSTEE DO?...........................................................................................................151) DUTY TO COMPLY WITH TRUST INSTRUMENT.................................................................................................152) DUTY TO PRESERVE TRUST PROPERTY............................................................................................................153) DUTY TO INVEST...............................................................................................................................................154) DUTY TO COMPLY WITH THE LAW..................................................................................................................165) DUTY TO PROVIDE INFORMATION TO BENEFICIARIES....................................................................................166) DUTY TO ACCOUNT..........................................................................................................................................17

PERFORMANCE DUTIES– WHAT SHOULD A TRUSTEE DO?.........................................................................................177) DUTY TO ACT PERSONALLY.............................................................................................................................178) DUTY TO EXERCISE APPROPRIATE SKILL, PRUDENCE AND CARE...................................................................189) DUTY OF LOYALTY...........................................................................................................................................1810) DUTY OF IMPARTIALITY– SUCCESSIVE INTERESTS)........................................................................................20

DUTY OF APPORTIONMENT........................................................................................................................................21

JURISDICTION OF COURTS ................................................................................................................................. 22

LIMITS TO JURISDICTION...........................................................................................................................................22 PERMITTED SCOPE OF DISCRETION.................................................................................................................22 EXCEPTIONS:....................................................................................................................................................221) BINARY CHOICE (RE FLEMING):........................................................................................................................222) BREAKING DEADLOCK (RE BILLES; KORDYBAN)...............................................................................................22

OTHER GROUNDS FOR INTERVENTION: TRUSTEE ACTING IMPROPERLY (NOT NECESSARILY MALA FIDES).................24

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CANNOT OUST COURT’S JURISDICTION WITH PRIVATIVE CLAUSE!............................................................................24

TERMINATION OF TRUST– RULE IN SAUNDERS V VAUTIER ........................................................................ 25

REMEDY: CONSTRUCTIVE TRUSTS .................................................................................................................. 26

REMEDY FOR BREACH OF FIDUCIARY DUTY...............................................................................................................26REMEDY FOR UNJUST ENRICHMENT...........................................................................................................................29ISSUES WITH ENFORCEMENT......................................................................................................................................31

OTHER REMEDIES ................................................................................................................................................ 32

1) EQUITABLE COMPENSATION.............................................................................................................................322) REMOVAL OF TRUSTEE.....................................................................................................................................323) PUNITIVE/OTHER DAMAGES..............................................................................................................................354) RECOVERY OF SPECIFIC PROPERTY FROM THIRD PARTY..................................................................................35

1) TRUSTEE DE SON TORT....................................................................................................................................352) KNOWING ASSISTANCE OR PARTICIPATION.....................................................................................................353) KNOWING RECEIPT...........................................................................................................................................35

PROTECTIONS FOR TRUSTEES .......................................................................................................................... 37

1) INDEMNIFICATION............................................................................................................................................372) EXCULPATION..................................................................................................................................................37

A) BY TRUST INSTRUMENT....................................................................................................................................37B) BY COURT.........................................................................................................................................................37

3) CONSENT OR ACQUIESCENCE BY BENEFICIARY.................................................................................................37

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Framework

1. Creation of Trust: Is there a trust?a. Express trust

i. Constitution (legal vesting of property in trustee):1) Transfer of property from settlor to trustee(s):

Rule ( Milroy; Re Rose ) : Must have done everything in power to effect transfer. Transfer effective when it would be unconscionable for transferor to revoke the transfer (Pennington), or when transferor has relinquished control of property and put transferee in position to complete transfer (Mordo). Once done so, transferor holds legal interest in trust for transferee until such transfer is complete.

2) Self-declaration: Constituted through declaration of self as trustee (no formalities required). Main issue is intention.

ii. Certainty of:1) Intention: Did the settlor intend to create a trust?

a) Issue– Self-declaration: Whether manifestation of sufficient intention of settlor to become trustee– i.e. from that point on, assume duties of trustee, act in best interests of beneficiary (Jones; Re Elliott Estate)

Relinquish beneficial interest + give beneficiary enforceable beneficiary interest self-declared trustb) Issue– Precatory words: Whether imperative words imposed an obligation on the beneficiary that was

accepted by the beneficiary under the will (Hayman; Ottaway). Communication + acceptance/undertaking trust

2) Subject matter: Trust property must be defined with sufficient precision. May use “formula” to determine beneficial interest if it will produce a definite result (Re Golay).

3) Object: Class of beneficiaries or objects of trust powers must be able to be established with certainty (Re Baden). Valid as long as some objective criteria can be used to determine membership in that class.

iii. Timing of disposition: Inter vivos or testamentary disposition? When is the trust intended to take effect? Test ( Carson ) : Whether testator intended inter vivos or testamentary disposition: intention to part with control and

beneficial interest. If testamentary disposition, must comply with formalities required by WESA.If not a validly constituted trust (i.e. failure of any of the above), then automatic resulting trust back to settlor.

b. Resulting trusti. Automatic resulting trust

Failure of express of trusta) Invalid trust provisionsb) Failure to dispose of entire beneficial interest

Surplus funds (Abbott; Barrett): Whether settlor intended an outright gift subject to condition or a gift to effect a purpose ( surplus held on trust). Issue of resulting trust only arises if trust was intended at all.

ii. Presumption of resulting trust vs. presumption of advancement Rule: Presumption of advancement for gratuitous transfers between spouses or from parent to minor child

(Pecore; VJF). For all other gratuitous transfers or purchases in recipient’s name, presumption of resulting trust. Rebuttable by evidence of transferor’s intention.

Evidence of illegal intention/scheme is generally inadmissible to rebut presumption (Goodfriend; Tribe). Exceptions (Tribe): 1) Disposition was not illegal or fraudulent/ illegal scheme not carried out (no creditor was hurt), 2) Evidence of illegality not central to claimant’s case (e.g. other sufficient evidence to rebut presumption)

YES NO2. Powers and duties of a trustee (10 Commandments):

a. Basic duties: What must the trustee do? Was there a breach of the trustee’s duties? 1) Comply with trust instrument (Y/N) (TLC v UBC)

Exception: Termination of trust in Saunders v Vautier 2) Preserve trust property (met standard?) (Fales)3) Invest (met standard?) (Miles; Cowan)4) Comply with the law (Y/N)5) Provide information (Y/N) (Re Martin; Breakspear)6) Account (Y/N)

b. Performance duties: What should the trustee do? Did the trustees meet the standard when performing their basic duties?1) Duty to act personally (Fales)– power to delegate (s 15.5; Speight)2) Duty to exercise appropriate skill, prudence and care (Fales)3) Duty of loyalty: put beneficiaries’ interests first! (Keech, Sun Indalex)

i) Cannot profit from office (Boardman), further own interests, or act in CoI

2. Was there a fiduciary relationship nonetheless?

1) Per se fiduciary relationships: Trustee-beneficiary; director-

corporation; solicitor-client; Crown-Aboriginal (Guerin); uniformed officer-office (Reading); statutory

2) Ad hoc fiduciary relationship (Elder Advocates): 1. Undertaking, express of

implied, by fiduciary to act in best interest of “beneficiary”

2. Vulnerability (fiduciary has power/discretion to unilaterally affect legal/practical interests of

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ii) No self-dealing– cannot purchase trust property or usurp opportunities4) Duty of impartiality/ even-handedness (successive interests) (Royal Trust)

beneficiary)

3. Does the court have jurisdiction to intervene? And to what extent?

Principle ( Gisborne ) : Court will advise on courses of actions but will not direct which one to take. Is trustee asking for direction on how to exercise discretion?

Exceptions: 1) Binary choice (Re Fleming)– alt. choice would be a breach of trust2) Breaking deadlock (Re Billes; Kordyban)– trustees failing to carry out duties by

not being able to act + testator’s intentions will be frustrated + beneficiaries’ interests will be hurt

3. Is a constructive trust appropriate? Soulos:1) Breach of legal obligation enforceable

by a court of equity2) Acquired asset as a result or because of

breach3) Personal or legitimate reason

(deterrence) for imposing constructive trust

4) Would not be unfair (3rd party/ creditors would not be affected)

4. What remedies are available?a) Equitable compensation ( Guerin ; Canson ) : Put beneficiary back in original

position had breach not occurred– liable for all losses caused from breach, regardless of foreseeability or remoteness

b) Removal of trustee ( Miles ; Parker ) : Necessary to protect beneficiaries’ interests b/c continuation of trustee jeopardizes proper and efficient administration of trust

c) Punitive or other damages? Probably not

4. If no fiduciary relationship, is there unjust enrichment? Pettkus, Kerr1) Enrichment;2) Corresponding deprivation;3) No juristic reason

i. Onus on plaintiff to show no established juristic reasons: contract, gift or legal obligation

ii. Onus shifts to defendant to show other juristic reasons: reasonable expectations, policy/moral considerations

5. Holding third parties liable: What if trust property is now in the hands of a third party?

a) Default: If holding property, must return property if not bona fide purchaser for value with notice

b) If not holding property anymore, may still be liable for whole loss if (Air Canada):

i. Trustee de son tort (Boardman): Person not appointed trustee but takes it upon himself to possess and administer trust property for the beneficiaries

ii. Knowing receipt (if once held property): Requires 1) receipt and application of trust property for own use and benefit; and 2) constructive knowledge: reasonable person would have been put on inquiry as to the possible breach of trust

iii. Knowing assistance (if never held property): Requires 1) dishonest and fraudulent breach of trust by trustee; 2) participation or assistance in the breach; and 3) actual knowledge, including wilful blindness or recklessness

6. Is a constructive trust appropriate? Kerr 1) Must consider monetary award

first (can calculate damages on quantum meruit or even beyond that);

2) If monetary award not sufficient/appropriate, must show causal link between contribution and acquisition, preservation, maintenance or improvement of property subject to the constructive trust

6. Protections for trustees/defences:a) Indemnification (s 95 of Trustee Act ): All expenses and costs reasonably and properly incurred in administration of trustb) Exculpation by trust instrument : Exceptions– fraud, dishonesty, deliberately acting against beneficiaries’ best interests,

gross negligencec) Consent/acquiescence by beneficiary ( Boardman ) : Full and informed consent; if conflict of interest, advise to seek ILAd) Exoneration by the court (s 96 of Trustee Act ) : If trustee acted honestly and reasonably

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Creation of Express TrustsA valid and enforceable express trust requires:

1) Constitution: Trust property must be legally vested in trustee2) Certainty of:

a. Intentionb. Subject matterc. Object

Constitution of Trust2 ways a trust can be constituted (Milroy):

1) Transfer of property from settlor to trustee(s): Proper mechanism for vesting title depends on nature of property Will: WESA– on person’s death, all property vests in personal representatives (executors/administrators). Executor

assumes duties of trusteeo Issue: Whether there was sufficient intention to create trust in the will.

Land: LTA– registration through the Land Title Registryo Issue : Unregistered transfers of title, execution and delivery of transfer formso S 20 : Unregistered transfer is valid as against the person that made it

2) Self-declaration as trustee: Owner of property determines they will no longer be the beneficial owner thereof, and hold the property for the beneficiaries as trustee

Issue: Incomplete transfer: When settlor has taken steps required to fully vest legal title in intended done or trustee, but transfer remained, or was at a critical time, incomplete

Rule ( Milroy ) : Court cannot and will not complete an incomplete gift or perfect an imperfectly constituted trust. Court is also reluctant to treat an intended (but incomplete) outright gift or transfer to trustees as a self-declaration of trust.

Exception (Rose; Pennington; Mordo): Where the settlor/transferor has done all in their power to effect transfer, equity may treat as effective disposition of beneficial interest pending completion of transfer of legal interest

Re Rose: Transferor must have done everything necessary in his power (according to nature of property) to effect transfer for beneficial interest to pass to transferee Transfer effective in equity; transferor becomes trustee of legal interest for transferee pending registration.

Pennington v Waine: Transfer effective in equity where settlor has done everything necessary to effect transfer and it would be unconscionable for settlor to revoke transfer

Mordo v Nitting: Transferor’s intention is crucial– transfer would be effective where transferor has relinquished control of the property and put transferee in a position to complete transfer

Milroy v Lord (1862)(UKCA)

F: Medley executed settlement (trust) in favour of niece, Eleanor, to transfer 50 shares in the Bank of Louisiana to Lord, who was to hold the shares in trust for E. Deed was signed and sealed by both parties. Transfer of legal title to shares required L, the trustee, be listed as the legal owner in the company's register, but while M had given L POA to deal with the shares and receive dividends in his name, L was not made the legal owner of the shares. On M's death, the executor of his estate took control of the shares. E sought declaration that the shares were trust property held for her benefit and not part of M's estate.H: Shares not held for E in trust.R: Courts cannot give effect to an incomplete trust or gratuitous transfer. In order to render voluntary settlement valid and effectual, settlor must have done everything which, according to nature of property comprised in settlement, was necessary to be done in order to transfer the property and render the settlement binding upon himself. Ways to effect a transfer: 1) transfer property to the intended recipient; 2) transfer property to a trustee for the

purposes of settlement; 3) self-declaration of trust. If intended one mode of transfer, courts will not give effect to it by applying another of those modes. Where intention

to create a trust through transfer of property to trustee, cannot find self-declaration of trust. Intention to effect the voluntary settlement is not sufficient

A: No transfer of the shares to the object of the settlement, E. No valid and effectual trust created in favour of L or in M himself. Intention was for trust to vest in L, so cannot be justified in holding that there was a self-declaration of trust. POA only made L agent of M, but not trustee. Court of equity could not decree agent of the settlor to make the transfer unless it could decree the settlor himself to do so. E could not force L to complete transfer.

Re Rose (1952)(UKCA)

F: R executed 2 transfers of shares to be held in trust for wife and son on March 30, 1943. Transfers not registered in the company's books until 3 months after they were transferred b/c required board of directors to approve the transfer. R died on April 10, 1948 and became liable to pay estate tax on gifts made by him within 5 years of his death. I: Whether estate tax is payable depending on when the beneficial interest in the shares passed to the beneficiariesH: Transfers were effective to pass the beneficial interest in the shares, and even pending registration, R was the legal trustee of the shares. Shares not subject to estate tax.R: If transferor has taken all the steps, which according to the nature of the property comprised in the settlement, was

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necessary to be done by him in order to transfer the property, then beneficial interest passes to transferee (transfer effective in equity). Pending registration, the settlor is a trustee of the legal interest for the transferee.

I.e. If transferor did everything in his power to effect the transfer, pending registration, settlor will hold interest in trust for transferee

A: Transfer was effective in equity at the time R signed the transfer document for the shares, not at the time they were registered b/c R did everything in his power to effect the transfer. Company was obligated to register the shares once the share transfers had been executed. Comment: No hardship for settlor to assume duties of trustee during period while waiting for shares to be registered

Pennington v Waine (2002)(UKCA)

F: Aunt intended to make gift of shares to nephew, but share register not updated with the name of new owner and aunt kept the completed share transfer forms rather than handing them to the nephew. Relied on accountant to register the transfer in the company's records, which the accountant did not do. Transfer incomplete, but accountant told nephew that transfer was complete.H: Transfer was effective and aunt held shares in trust for nephew. Delivery of the shares was unnecessary to perfect gift b/c would have been unconscionable for aunt to recall the gift, or for personal representatives to refuse to hand over the share transfer after her death. I: When is the transfer effective in equity? R: Affirmed Re Rose: transferor must have done everything in his power to effect the transfer. An incomplete gift is to be treated as completely constituted where it would be unconscionable for donor to be permitted to change his/her mind. A: Once the share certificates have been placed in the hands of the accountant, and the accountant has told the donee that everything has been done to complete the transfer, at that point, would be unconscionable for the transferor to change their mind. Aunt had made the gift of her own free will, told nephew about the gift and signed a transfer form, which was delivered to her accountant. Reliance: Nephew assumed role as director of Company, which he could not do w/o the shares being transferred to him, and accountant also told nephew he need not take action. O: If wrong that requirement of delivery was dispensed by reason that it would have been unconscionable for aunt’s personal representatives to refuse to hand over the share transfers, can construe accountant as acting as agent for the nephew. When aunt gave share certificates to accountant, accountant became the agent of the donee and has failed the donee in capacity as donee's agent to complete the transfer. Would be unconscionable for the donor to take advantage of the accountant's failure to take the property back.

Implication: Delivery might not be necessary to effect transfer. Timing: Point at which it would be unconscionable for transferor to revoke transfer.

Mordo v Nitting (2006)(BCSC)

F: Mordo family ran a successful business importing skis from Europe. As the children became involved in the business, relations became strained between Alex and the rest of the family. Parents began making plans to see that he was disinherited– transferred most of assets and accounts into joint ownership with sister, Viviane. Planned to move as much property out of estate as possible so that there would not be any property in estate for A to claim (made sure A could not apply for wills variation, set out reasons for disinheriting him). Mother, Eida, created a trust to hold warehouse property until her death, and named herself and V as beneficiaries. E executed a transfer (Form A) in transfer of the trustee, Mr. Wilson, which was not registered until after E's death. A claimed that trust was not validly constituted.H: Warehouse Trust was validly constituted.R: Intention of transferor is crucial. If transferor intends to transfer the property, the transfer will be complete when the transferor has relinquished control of the property and put the transferee in a position to complete the transfer. Affirmed Re Rose and Pennington: If intention is clear and transferor had done everything in power to effect transfer, holds legal title to property in trust for trustee until such transfer of ownership was complete. A: Transferor’s intentions: E did everything necessary to create a valid trust by completing Form A and giving it to the trustee to register (put trustee in a position to complete the transfer). Intention to transfer legal title to trustee is underscored by execution of Declaration of Trust that although transfer had not been transferred, held legal title to Warehouse only as trustee on behalf of the Trust.

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Certainty of Intention

Issues:a. Alleged self-declaration as trustee: Whether self-declaration as trustee or whether intention to make gift in the future that was

never carried outb. “Precatory” words in will: Whether outright gift was intended or whether limited interest where recipient is obligated to hold

remaining interest on trust for others

Alleged self-declaration as trustee

Rule ( Re Elliott Estate ): For self-declaration as trustee, must have sufficient evidence of manifestation of intention to become trustee (intention for settlor to give up beneficial interest; intention to transfer to beneficiary an enforceable beneficial interest in property), but no technical words are required. No formalities required, unlike transfer of legal title to trustee (words alone may be sufficient to constitute self-declaration of trust).

Intended giftJones v Lock (1865)(UKCA in Chancery)

F: Father brought a cheque for £900 and said: "I give this to baby… for himself, and I am going to put it away for him", then placed the cheque in his baby's hand, took it away and locked it in a safe. Expressed to his lawyer of his intention of adding £100 to it and investing the total sum for the benefit of the infant. Next morning, met his lawyer and said that he would attend his office on Monday to alter his will to take care of his baby, but died that day. Lawyer found cheque in the safe and included it in the estate. Father's will before the birth of the infant left annuity to wife and gave rest of property for the benefit of his other children from a previous marriage.H: No gift or valid declaration of trust for baby. Could not have said that at the point of the alleged declaration, the money was the child’s and the child’s alone. Words were only “loose conversation”.R: Words alone can be sufficient to constitute a self-declaration of trust, but those words must amount to more than "loose conversation". Issue is whether the settlor had intention to make a self-declaration of trust.A: Father did not intend to make declaration that he held property in trust for the infant. Although had the intention of settling something on the child, and his giving the cheque to the child was symbolic of what he meant to do, it was not his meaning to transfer beneficial interest in the cheque to the child such that the child could bring an action of trover for the cheque (did not intend to give child enforceable legal right to cheque). Merely meant to say he would make a provision for the child. Did not intend to deprive himself of all property in the cheque or declare himself as trustee of the money for the child.

Implication: Cannot say that every incomplete intended gift was a declaration of trust. Self-declaration of trustRe Mellen (1933)(UKCA)

F: Deceased held 15 $1,000 bonds in 4 separate envelopes, which were deposited in safety deposit box. Bonds were all registered in her name with her handwritten endorsements on each of the envelopes that the contents of the envelope are to be used solely for the benefit of her son.H: Express trust was created by deceased and held in trust by her for her son. Endorsements were evidence that deceased constituted herself as trustee by the language used in the endorsements on the envelopes.

Paul v Constance (1977)(UKCA)

F: Man received damage payments and went with girlfriend, with whom he was living, to deposit the money into the bank. After discussions with bank manager, decided to open account in man's name only, but man told girlfriend many times that "this money is as much yours as mine". Further deposits were made into account including joint bingo winnings. One withdrawal from account before man died, which was shared by man and girlfriend.H: Express trust was created. Words of the man conveyed a present declaration that fund was as much girlfriend's as it was the man's.R: For a declaration of self as trustee, there must be sufficient evidence of manifestation of intention to become trustee, but no technical words are required.

Re Elliott Estate (2008)(ONSC)

F: Mother made provision for children in will but left out disabled daughter, B, who was an adult dependant. Intended to provide for B by separate agreement, which she arranged between her other children wherein they would contribute amounts from their inheritance into a trust fund for B. G, son and executor, claimed that one of the GIC accounts that was part of the estate was intended by mother to be set aside for the benefit of B.I: Whether GIC was an inter vivos trust (not subject to probate fee) created for B or whether it was part of estateH: GIC was a discretionary inter vivos trust for the benefit of B.R: For a declaration of self as trustee, there must be sufficient evidence of manifestation of intention to become trustee, but no technical words are required (from Paul v Constance).A: Intention to become trustee: evident that though parents held legal title to GICs during lifetimes, beneficial interest in GICs was B's. Intention to create express trust and not gift: Aware of B's mental limitations and aware of impact gift might have on B's disability payments. Simple gift not intended b/c GICs not delivered to her.

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Precatory words

Precatory words: Words that express a hope, wish or expectation that the recipient of the property will pass some or all of it on to others, but does not impose mandatory obligation to do so.

Limited interest (trust) or precatory words (outright gift)? Rule ( Hayman ): In considering whether the words in a will impose an imperative direction, courts must consider whether they were made in circumstances in which such an obligation was imposed on and accepted by the beneficiary under the will. Need to determine what testator’s predominant intentions were (Re Walker). If court determines that it is an outright gift, cannot create a gift over (would be repugnant) (Re Walker). Hayman v Nicoll (1944)(SCC)

F: Testatrix, Lydia, left sum of money in will to daughter, Ina, "in full confidence that she will dispose of the same in accordance with the wishes which I have expressed to her." I died 3 years later w/o distributing the sum to anyone and the "wishes" L purportedly expressed are unknown. Heirs to residue of mother's estate claimed that money was not properly part of I's estate but part of L's estate.I: Whether words used by Lydia ("in full confidence") impressed a trust over the funds (in which case they belonged to L’s estate) or whether they were merely precatory (in which case they would remain in I’s estate). H: Words were merely precatory. No trust imposed on I by the words in the codicil. Funds belong to I’s estate. R: Mere communication of the testator's wishes does not ipso facto create an obligatory trust. In considering whether the words in a will impose an imperative direction, courts must consider whether they were made in circumstances in which such an obligation was imposed on and accepted by the beneficiary under the will. Trust can arise if:

1) On the face of the will, legal interest is in the beneficiary but it can be shown that an agreement outside of the will was made by which the beneficiary undertook an absolute obligation to carry out the testator’s wishes; or

2) Will expressly creates a fiduciary obligation and oral communication was made either before or at the time of the making of the will

A: No evidence of communication of wishes or what they were, and no evidence of acceptance by daughter of an obligation to carry them out.

Re Walker (1925)(ONCA)

F: Testator's will gave all of his property to wife but continued "should any portion of my estate still remain in the hands of my said wife at the time of her decease undisposed of by her such remainder shall be divided as follows…". Wife's will left property to different people than those designated in husband's will.H: Absolute gift to the widow. Wife had power to dispose of property in lifetime – clear indication of intention as outright gift. Attaching a provision for the later disposition of whatever remained was repugnant to that gift and therefore void.R: Courts cannot give effect to a testator’s intention to gift property absolutely and create a gift over. Court needs to give effect to testator’s wishes in a way that is legally possible: determine and give effect to predominant intention, and reject subordinate intention as being repugnant to dominant intention. A testator's attempt to gift property absolutely and create a gift over is an endeavour to do that which is impossible. 2 possible outcomes:

1) Gift to the first person named prevails and gift over fails as repugnant2) First named takes a life-estate only, so gift over prevails

O: Third possible outcome: Life tenant may have the power of sale and possibly power to encroach on proceeds of saleOttaway v Norman (1972)(UK Ch. Div.)

Secret trust: Property left outright to someone in will with clear understanding between the two to deal with property in a certain way

F: By will, Harry left his home, £1,500 and half of residue of estate to common law partner, Eva. Agreement that E would leave the home and contents to H's son, William, if she happened to survive Harry. William and his wife knew about the agreement. After H's death, E drew up a will in which she left the home and its contents to W and his wife, but she revoked the will shortly before her death and executed a new will, leaving the property to Mr. and Mrs. Norman. W and wife sued the Normans claiming property was held on trust for them.H: Only home was held in trust for W and his wife, subject to normal wastage, fair wear and tear. Other assets, e.g. money, not held in trust for W and his wife. No trust over the money due to uncertainty of subject matter– no ascertainable property to be held in trust.R: If the property is given to the primary donee on the understanding that the primary donee will dispose by his will of such assets, if any, as he may have at his command at his death, in favour of the secondary donee, then a valid trust is created in favour of the secondary donee, which is suspended during the lifetime of the primary donee, but attaches to the estate of the primary donee at the moment of his death.A: Home: E obliged to dispose of bungalow in favour of W and his wife at her death. H communicated intention to her,

and she accepted the obligation. Money: Not H's intention that E would leave all her money, from whatever source derived, to W and his wife. No

evidence that E accepted such obligation either. Obligation is confined to money derived from H's will, but it is meaningless and unworkable unless it includes the requirement that she keep the money separate and distinct from her own money. No such requirement was every discussed or intended.

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Certainty of Subject Matter

Rule: Trust property must be defined with sufficient precision. Determining beneficial interest by use of a “formula” is acceptable as long as it will produce a definite result (Re Golay– provision to pay a “reasonable income” was sufficiently certain)Ottaway v Norman (1972)(UK Ch. Div.)

H: Money not held in trust for W and wife. Even if there was an obligation to give the money to W and wife, there is no trust due to uncertainty of subject matter. No ascertainable property to be held in trust. No requirement that E held money separate and distinct from own money; was allowed to spend it, so cannot determine which portion of the money was to be held in trust for W and wife.

Boyce v Boyce (1849)(Vice Chancellor’s Court)

F: Testator gave 4 houses on trust that A should have one house "whichever she may think proper to choose or select", and that B should have the other three. A predeceased the testator and thus could not make the choice.H: Gift to B also failed b/c of uncertainty as to which 3 houses she would take.

Comment: Mechanical application of the principle. B could have argued that there was certainty of subject. Economically rational outcome: if A had been in position to choose, would have chosen house with highest value and B would get the remaining 3.

Re Beardmore Trusts (1951)(Ont. HCJ)

F: B and wife entered into separation agreement to make provision for wife and 2 children. Agreement created an express trust to settle 3/5 of the husband’s net estate in trust, to take effect upon B’s death. H: Lack of certainty of subject matter. Subject matter of trust is not described with sufficient exactness to permit that such matter be ascertained at the time the trust was created. Cannot ascertain at time of trust what 3/5 of net assets equals.

Certainty of Object

Rule: Beneficiaries of a trust must be defined with sufficient precision. Must know to whom a trustee’s duties are owed. Test ( Re Baden ) : Whether it can be said with certainty that any given individual is or is not a member of the class/ object of the power. May make application to court for direction if issues with criteria in defining class.

Requires only conceptual certainty: Must be able to establish with certainty the class of persons to be benefited (valid if able to establish objective criteria for membership in that class). Once able to do so, then it becomes a question of fact whether any candidate has proven to be within it; if unable to prove, then is not in it.

Not a “complete list” test– no need to be possible for trustee to prepare a complete list of all beneficiaries (Re Baden (No. 1); Re Bethel)

Re Manisty’s Settlement: Intermediate powers are valid (not too broad) if excluded class is sufficiently certain.

Powers to select recipients of property:1) Discretionary Trust (aka Trust Power): Mandatory obligation to distribute, but within that mandatory distribution, trustee

has a choice of whom to distribute to and in what proportion “Trustee shall distribute […] to such of my children in such proportions as the Trustee shall in his discretion

determine.”2) Power of Appointment: Empowered to distribute property in a certain way but not required to

“Trustee may distribute […] to such of my children in such proportions as the Trustee determines”3) Power may be given to third party (aka “Bare” power of appointment): Trust deed or will could grant power of

selection to a person other than the trustee “Trustee shall distribute […] to such of my children in such proportions as X may from time to time direct”

4) Intermediate power: Power to appoint anyone as beneficiary except for a particular class. Re Baden (No. 2) (1973)(UKCA)

F: Trust provided that distributions could be made to employees and ex-employees of a company and their relatives and dependants. Administrator argued that trust was invalid on the basis that the term “relatives” and “dependants” did not satisfy the test for certainty. H: Deed created a valid discretionary trust with a duty to distribute. Certainty of objects satisfied. R: Test for certainty of object: Whether it can be said with certainty that any given individual is or is not a member of the class of beneficiaries. Requires conceptual certainty: objective criteria to establish membership in that class of beneficiaries. Evidential uncertainty will not render trust void. May apply to court if issues in establishing criteria. A:

“Dependant”: Trustees or court (if necessary) are quite capable of coming to a conclusion in any given case whether or not a particular candidate could properly be described as a dependant.

“Relatives”: Taken literally, could mean ability to trace legal descent from a common ancestor, which could be considered too broad and make trust administratively unworkable. However, practically speaking, settlor using the word “relatives” in the context of his deed would assume that the trustees would in the exercise of their discretion make their selection in a sensible way from the field, however wide. In practice, would presumably select those whom a reasonable and honest employee or ex-employee would introduce as a relative, rather than “distant relative”.

Jones v T Eaton Co (1973)(SCC)

H: Trust for “needy or deserving Toronto members of the Eaton Quarter Century Club” was a valid charitable trust.A: Word “deserving” had a sufficiently clear meaning; did not enlarge class of potential recipients beyond those who might constitute a proper class for relief of poverty. Limited to Quarter Century Club, which was comprised of employees and former employees of Eaton’s who had served for 25 years or more.

Re Manisty’s F: Trust empowered trustee to add to the class of Beneficiaries “any person or persons, corporation or corporations, charity

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Settlement (1974)(UK Ch. Div.)

or charities (other than a member of the Excepted Class or of the Trustees)”. Excepted Class included settlor, his wife, any person who added property to the trust, and the wife of any such person. Trustee added settlor’s mother and any widow of the settlor to the class of beneficiaries. Appointments challenged by group of existing beneficiaries.H: Trust was valid b/c excluded class could be determined with certainty. Affirmed validity of intermediate powers.R: Power to appoint or trust is valid if it can be said with certainty that any given individual is or is not a member of the class. The principle of the rule thus established does not strike down an intermediate power provided that, having regard to the definition of excepted person, it can be said with certainty that any given individual is or is not an object of the power.

Re Coates (1954)(UK)

F: Will directed that “if my wife feels that I have forgotten any friend I direct my executors to pay to such friend or friends as are nominated by my wife a sum not exceeding £25 per friend with a maximum aggregate payment of £250.”H: Power of selection did not fail for uncertainty.A: Power of appointment given to third party, not a duty. Limit to the aggregate amount of the gift shows that the class of beneficiaries is a small one. Not necessary to define the limits of the class from the outset; it is sufficient if it can be seen that any individual satisfies the test.

Re Connor (1970)(ABCA)

F: Residue to be “divided among my close friends in such a way and at such time as my trustee in her discretion should determine.”H: Too indefinite and the ascertainment of the class so difficult, if not impossible, that it is invalid. Nothing in the context of the will to further restrict or define the word “friends”. To make gift valid, trustee must be able to ascertain the whole class of “close friends”. Gift must be divided amongst all of the close friends– not sufficient to run an ad in the newspaper seeking out close friends, for if a close friend missed or hearing about the ad then such person would be excluded from a gift to which she is entitled. D: Deceased lived in a small town for 42 years. Should be possible w/o great difficulty to ascertain who the close friends were. Note: Applied “complete list” test. Decided before Re Baden, so might not be good law anymore.

FormalitiesSelf-declaration of trust No formal requirements. Does not need to be in writingInter vivos transfer of land Law and Equity Act S 59(3): Disposition must be evidenced in writing and signed by the parties Testamentary disposition WESA S 37(1): A valid will must be in writing and signed at its end by the will-maker in the presence

of 2 witnesses. S 37(2): A will that does not comply with subsection (1) is invalid unless (a) the court orders

it to be effective as a will under section 58 [court order curing deficiencies]

Issue: Whether inter vivos transfer or testamentary disposition may trigger different formalities

Rule: Whether a trust is inter vivos or testamentary depends on intention of settlor (Mordo). An intended gift/ disposition that would only become operative on the death of the settlor cannot be given effect as an inter vivos trust (Carson; Mordo) If settlor’s intention is clear from the trust instrument/ will, then it is determinative. If unclear, then look at effect of document

to determine whether testamentary in effect (Mordo). o Factors ( Carson ) : Intention of grantor to part with control and beneficial interest over the deed, which may be inferred

from acts or declarations at time of delivery or from all the circumstances surrounding the transaction. Settlor may reserve any power (e.g. power to transfer legal title or revoke trust) to itself provided that the reservation is made

at the time the trust is created (Mordo)Carson v Wilson (1960)(ONCA)

F: Deceased executed deeds to transfer parcels and assignments of the mortgages to named persons while he was alive. Deeds were given to solicitor with instructions to deliver them to the done but not until the time of his death. While he was living, deceased continued to manage properties and collect mortgage payments.H: Intended testamentary disposition, not IV trust. Not a valid testamentary trust b/c did not comply with formalities of Wills Act.R: It is a rule, essential to the validity of a deed that there should be a delivery of the instrument. The test of delivery is whether or not the grantor intended to reserve to himself the locus poenitentiae. So long as the property is in the settlor’s control and subject to his authority (ability to recall at any time), it confers no title on the grantee. A:

1) Not an IV disposition: For a deed to be effective, must be delivered. Testator, at any point, could have gone to solicitor and demanded that the deeds be returned to him. Did not part with control over property, so no delivery.

2) Not a testamentary disposition: Improper instrument. Did not comply with formalities.3) Not a self-declared trust: Equity cannot complete an imperfect gift (Milroy v Lord). Cannot treat as declaration of trust

b/c did not relinquish beneficial interest to act as trustee.Re Beardmore Trusts

H: Express trust created in Separation Agreement not intended to take effect until settlor’s death. Besides failing for lack of certainty of subject, also failed b/c did not comply with formalities of the Wills Act.

Mordo v Nitting (2006)(BCSC)

F: E could call for Warehouse Trust as a beneficiary. Entitled to income from Trust. A argued that trust was testamentary in nature, did not comply with formalities of the Wills Act and therefore would form part of E’s estate.H: Valid inter vivos trust. Took effect immediately upon execution of trust deed.R: Whether a trust is inter vivos or testamentary depends on intention of settlor. If settlor’s intention is clear from the trust instrument/ will, then it is determinative. If unclear, then look at effect of document to determine whether testamentary in effect. Settlor may reserve any power (e.g. power to transfer legal title or revoke trust) to itself provided that the reservation

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is made at the time the trust is created.A: Clear from trust instrument that E intended for trust to be effective immediately. Entitlement to income as a beneficiary was only possible if Trust came into effect immediately. Trustee understood he was holding property in trust for her during her lifetime. Retention by settlor of a power to revoke a trust does not, by itself, render a trust testamentary.

Application in Commercial Context– Quistclose TrustsQuistlose trust: Trust to carry a specific purpose w/o specified beneficiaries. Funds must be used for that purpose or returned to the settlor.

Benefit : Prove existence of a trust to improve remedial position (move up in priority amongst creditors).Barclay’s Bank Ltd v Quistclose Investments Ltd (1968)(HL)

F: Company was in clear financial difficulty but declared a dividend to its shareholders. Went to Quistclose to ask for a loan to pay the shareholders. Loan was delivered to the company's bank account. Letter was delivered to company that loan could only be used for the purpose of paying shareholders' dividends. Bank and other creditors argued that Quistclose had to get in line behind all the other creditors to figure out what they could reclaim. Quistclose claimed that loan was given on trust for a particular purpose, which could no longer be carried out, so there was a resulting trust and an equitable right to that amount. Still retained beneficial interest in the funds until they were applied for the particular purpose, which in this case, it never was.H: Trust exists, not for the benefit of the party who advanced by the funds but for the benefit of the people who would have received the funds had they been applied for the intended purpose.

Re Westar Mining Ltd (2005)(BCCA)

F: Joint venture coal mining operation. Westar had made contributions to operating expenses, but Poscan had not. W went bankrupt. Trustee in bankruptcy sued P for amounts owing; parties settled for the full amount of that claim and released each other from liability. Suppliers and employees of the mine wanted priority over W’s creditors, so claimed that the funds paid into the mine were held on a purpose trust in their favour.H: Trial judge correctly held that the funds were held on a purpose trust for the payment of P’s share of the mining operation expenses. A: The essential elements of the three certainties of trust must still be satisfied. 2 essential factors: Joint Venture Agreement requirements and segregation of the funds advanced by P. Intention to create trust: Yes, JV agreement specified that P’s funds were to be used solely for the purpose of the mine

operation. Until W paid the amounts owing by the venture for its operations, P’s funds were held on the condition that they were to be used only for that purpose.

Certainty of subject: Payments by P under JV agreement were separated from W’s other assets.

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Resulting Trusts

A resulting trust arises when legal title to property has been vested in person who is required to hold all or part of beneficial interest as trustee for the settlor or transferor for reasons other than the settlor being specifically designated as beneficiary.

Automatic Resulting TrustsWhen an automatic resulting trust may arise:

1) Failure of express trusta) Invalidity of trust provisions (e.g. uncertainty or vitiating trust)

i) Re Baden: An invalid trust for lack of certainty of objects would have been held on resulting trust for the settlor’s estate

ii) Hayman v Nicoll: If the “precatory words” had been found to create a binding legal obligation on daughter, the terms of which were unclear, property would have been held on resulting trust for mother’s estate

b) Settlor’s intended dispositions do not fully dispose of entire beneficial interest (e.g. beneficiary dies before distribution date and no alternate is appointed)

i) E.g. Capital to be divided into equal shares between number of living children at the time of testator’s death but the shares would only vest when the child turns 30 share of any child who survives the testator but dies before turning 30 would be held on resulting trust

2) Surplus Funds: Surplus trust funds remaining on death of beneficiary and no gift-over or intention that beneficiary takes absolutelyIssues: 1) Whether settlor intended for funds to benefit beneficiaries absolutely or only for a limited purpose2) Whether settlor intended outright gift (could be gift subject to condition precedent or condition subsequent) or trust

(gift to effect a purpose)Re Abbott (1900)(UK)

F: Fund raised for 2 women who were left destitute by the misappropriation of trust funds from the estate of a relative who had provided for them. Surplus remained in the fund after the death of the 2 women.I: Whether surplus was held on resulting trust for contributors to the fund. Whether funds should be returned to contributors or whether they would form part of the women’s estates.H: Surplus funds held on resulting trust for original contributors. No intention that the fund should pass absolutely to the 2 women. Intention to create discretionary trust for trustees to decide how much of the fund should be applied for the women's benefit.

Re Barrett (1914) F: Will provided "I give my daughter… whatever sum or sums of money may be to my credit in any bank or upon my person or in my domicile at the time of my decease for the purpose of enabling my said daughter to meet the immediate current expenses in connection with housekeeping".H: Outright gift to daughter. No room for resulting trust of whatever funds were not required for "expenses in connection with housekeeping".

Presumed or Intended Resulting Trusts1) Presumption of resulting trust: Gratuitously transfer of legal title to another or provision of funds for the purchase of an

asset registered in the name of another who provides no value , without explicit evidence of intention to make a gift. To rebut : Must demonstrate intention of gift/ transfer of beneficial interest (Successful: Pecore, Nishi;

Unsuccessful: Niles)2) Presumption of advancement: Gratuitous transfer of legal title or funds between spouses or from parent to minor child

(Pecore; VJF) To rebut : Must demonstrate no intention of gift/ transfer of beneficial interest (Successful: Tribe (even with

evidence of illegal intention); Unsuccessful: VJF)

Test ( Pecore ) :1) Which presumption applies? Presumption of advancement applies to transfers between spouses or from parent

(father/mother) to minor child (excludes dependent adult children).2) Rebutting the presumption– weigh all evidence relating to actual intention of the transferor. Whether named person

(“beneficiary”) is intended to have beneficial and legal ownership. May include evidence subsequent to transfer. Joint bank account does not necessarily mean intention to confer beneficial interest (Pecore; Niles)– management

and control is not by itself determinative (Pecore); bank agreement not conclusive (Niles) Parties must come with clean hands! Doctrine ( Goodfriend ; Tribe ) : Evidence of illegal contract or scheme will

not be admitted to rebut presumption of advancement. o Exception (Goodfriend; Tribe): Illegal intention bars recovery where: 1) disposition itself was illegal or

fraudulent (i.e. illegal scheme was carried out), or 2) evidence of illegality seeking to rebut presumption of advancement was central to case of claimant does not bar recovery 1) if no harm done or illegal

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scheme not carried out or 2) if other sufficient evidence to rebut presumption of advancement

Presumption of Resulting Trust CasesPecore v Pecore (2007)(SCC)

F: Deceased had joint bank account with defendant daughter, in which he made regular deposits. Upon his death, the balance remained in the accounts and it was not written into his will. Out of the deceased’s 3 daughters, the defendant was the closest to her father, and he often helped her and her family out financially. For tax purposes, deceased wrote letters to banks stating that he was the “100% owner of the assets and the funds were not being gifted.”H: The father intended a gift and the daughter may retain the assets in the accounts.A: Evidence considered:

Bank documents of evidence to suggest transferor’s intent regarding beneficial interest in account: Father retained control of account while alive. Can infer intent that he did not intend to give daughter beneficial interest in account during his lifetime, but father can intend to give right of survivorship to daughter. If intention was simply that daughter would, by right of survivorship, have the full benefit of the account, is not a testamentary disposition.

Control and use of funds in account– but only of marginal assistance w/o more: A parent can retain management control simply b/c more experienced, or child can have control over account simply to assist parents. Using or not using the funds doesn’t say much: a child could have refrained from using the account to leave parents with enough money, and a parent’s use of the account is not necessarily inconsistent with an intention to leave the remainder to the child.

Granting of POA Tax treatment of joint accounts

Niles v Lake (1947)(SCC)

F: Mrs. A and sister opened joint bank account and signed agreement with the bank that provided a right of survivorship to the joint account and made each sister an authorized signatory of the account. Mrs. A deposited $10,000 into account without sister's knowledge and died shortly thereafter. Beneficiaries of estate claimed that money should pass by will rather than by right of survivorship to the sister.H: The $10,000 was held on resulting trust for Mrs. A. Money should go to estate.R: Equity raises an equitable interest in the transferor by virtue of the doctrine of resulting trusts, and there is nothing in the bank agreement to cut down that equitable interest. A: Presumption of resulting trust. Not rebutted.

Parties' intentions: Parties intended to create a relationship to the bank in such terms that would preclude any challenge to the irrevocable authority of either of the depositors to deal with the account in unqualified fashion as if she were sole owner of the funds. Mrs. A did not intend the language of the form to touch any interest in the money as between her and sister. What she wanted was a joint account and the form was something required by the bank. Contractual documents had nothing to do with beneficial interest in the money– no explanation to rebut presumption of resulting trust.

Nishi v Rascal Trucking (2013)(SCC)

F: Rascal leased lands and tried to purchase them when property went into foreclosure. When unsuccessful, R offered to assist Nishi in acquiring the property for $237,000. Provided $85,000 in cash and assumed responsibility for paying $25,000 on mortgage. Requested an interest in the property once the sale was complete, but N refused. After N's refusal, R's principal, Mr. Heringa, indicated that funds would be advanced "without any conditions or requirements". After completion, R claimed 1/2 undivided interest in property on ground that he was beneficially entitled to an interest in the property since he had paid the purchase money.H: Presumption of resulting trust was rebutted. R intended for funds to be a gift. Advanced "without any conditions or requirements".R: Affirmed Kerr and Pecore: Contribution to purchase property made without consideration between unrelated individuals gives rise to presumption of resulting trust.

In context of purchase money resulting trust, presumption is that the person who advanced purchase money intended to assume the beneficial interest in property in proportion to contribution to purchase price. Presumption of resulting trust can be rebutted if recipient of property proves, on a BOP that the person who advanced the funds intended a gift.

In the case of a gratuitous transfer, there is a gift at law when evidence demonstrates that, at the time of the transfer, the transferor intended the transferee to hold the beneficial interest in the property being purchased/transferred.

Presumption of Advancement CasesVJF v SKW (2016)(BCCA)

F: $2 million gift from third party to husband, which was subsequently used to buy property put in the sole name of the wife for creditor protection.

Excluded property under FLA: With respect to property acquired by a spouse before marriage, only the increase in value that accrues during cohabitation is presumptively divisible under the Act. Rest is excluded property that is presumptively indivisible.

H: Presumption of advancement applies, and no evidence raised to rebut intention of gift. Husband lost exclusion when he voluntarily and unreservedly directed that the property be transferred to the wife. Property is marital property, to be divided under FLA. R: New FLA scheme does not constitute a complete code that eliminates common law and equitable principles relating to property. Scheme builds on those principles, preserving concepts such as gifts and trusts.

Eisener v Baker (2007)(BCSC)

F: B and E began common law relationship in 2002. Moved to Salmon Arm and B used money he had inherited to buy a residence in Salmon Arm for he, E and her child from a previous relationship. B signed interim agreement for purchasing the house and asked E to fax it to the realtor. E placed her signature below B's on the agreement without his knowledge and without a witness before faxing it. E was listed as co-purchaser on subsequent purchase documents and B and E ended up

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with joint title to the house. On dissolution of their relationship, E claimed share in the increase in value of the house.H: No need to resort to presumptions in this case. Regardless of whether presumption of advancement applies, intention was clear from evidence that B did not intend to benefit E by placing her name on title. A: No intention of gift: E inserted her name on interim agreement, and though B acquiesced in not removing her name from title and though it gave E right of survivorship, B did not intend at the time that she would receive a beneficial interest in the property.Implications: Presumption of advancement between spouses no longer has the significance it once enjoyed. Losing persuasiveness in courts.

Goodfriend v Goodfriend (1972)(SCC)

F: Husband and another couple entered into an arrangement to exchange souses from time to time for sexual purposes. Friend threatened to sue him for "alienation of affections". Husband transferred property to wife at her suggestion to avoid a possible judgment creditor who never materialized.H: Presumption of advancement may be rebutted by husband's illegal intentions.R:

Doctrine : Evidence of an illegal contract or scheme will not be received to rebut the presumption of advancement. Plaintiff must come into Court with clean hands.

Exception : May raise evidence of illegal intention to rebut presumption of advancement if there was no proof the claimant had creditors or that any creditor was defeated, hindered or delayed by the transfer.

A: No harm done: Husband not barred from recovering lands transferred to wife to escape a feared judgment in a cause of action that does not exist in lawComment: Disposition was not illegal– the creditor he was trying to escape never existed

Tribe v Soiseth (2006)(BCSC)*

Note: Pre-Pecore

F: T and S moved married and moved into a condo purchased by T's parents. On closing, title was registered under T's name and granted parents 2nd mortgage and option to purchase for $10, which was registered but never exercised. On dissolution of marriage, T sought declaration that she had no beneficial interest in the condo in order to exclude it from her assets. Claimed that property had been registered in her name to avoid tax on capital gains on disposition of property as T could claim condo as principal residence and qualify for exemption. Key fact: Illegal scheme never carried out: condo was never sold and PRE never claimed.H: House was held on resulting trust for parents. No intention to make gift of such magnitude to daughter.R: For illegal intention to bar recovery, 2 things must be established:

1) Disposition itself must be illegal or fraudulent (illegal scheme must be carried out)2) Evidence of illegality seeking to rebut the presumption of advancement must be central to case of claimant

A: Presumption of advancement (b/c transfer from parent to child pre-Pecore). Rebutted by evidence of intentions (albeit illegal). Illegal scheme not carried out. Daughter to whose benefit the presumption operates and parent claiming beneficial interest are not adverse parties, and daughter has given evidence as to parent's true intention. May rely on illegal intention b/c illegal scheme not carried out.O: Alternatively: Evidence of illegality was not central to his case. Ample credible evidence beyond evidence of illegal scheme that intention of parties was that the beneficial ownership would remain in the parent: mortgage and OTP– parents could have registered legal title any time.

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Trustee’s Duties

Source of duties: Trust instrument or Trustee Act (if trust instrument is restrictive or silent– ancillary powers and duties) Note: Trust is not a separate legal person (unlike corporations)– do not have all the powers and capacities of a natural person of

full capacity in the management and administration of trust property. Powers come solely from trust document or Trustee Act.

Basic Duties– What Must a Trustee Do?1) Duty to comply with trust instrument

Starting point: Is it a power or a duty? Any specific mandatory duty must be carried out as and when directed, and any prohibition must be obeyed (TLC v UBC).Failure to comply= Breach or possibly fraud on power (good faith/ best interests/ testator’s intentions not a justification)Defence/relief from liability: 1) Full and informed knowledge and consent by beneficiaries, 2) exculpation under s 96 of Trustee Act (good faith and reasonableness of actions is relevant)The Land Conservancy v UBC (2014)(BCCA)

F: Will left provision for trustee (CCAA) to dispose of historic property (Binning House) either by 1) creating a society for the preservation of the property and transferring it to the society, or 2) selling the house and giving the net proceeds of sale to a fellowship fund with UBC. Not feasible to create a society for preservation of the Binning House– estate didn’t have much left over. TLC, an existing society, entered into talks with trustee to transfer property to them. Trustee received legal advice that trust instrument did not permit the transfer to TLC, so created a new society and transferred property to it. Society then immediately transferred property to TLC. TLC faced financial difficulties and sought to sell property. UBC challenged transfer as fraud on the power granted to them by will.H: Though trustees acted in good faith, deliberately exercised power for ulterior purpose of benefitting a non-object of the power.R: Testator's intentions do not override clear words of limitation to the trustee's powersA: While testator’s intention was to preserve the Binning House, did not give trustee unfettered discretion to accomplish that goal. "Fraud on power": Onus on party claiming fraud to prove

1. Disposition beyond scope of power by the donee, whose position is referable to the terms, express or implied, of the instrument creating the power, and

2. Deliberate breach of implied obligation not to exercise that power for an ulterior purpose

2) Duty to preserve trust propertyRule : Must preserve trust assets (Fales)– e.g. real property must be insured and kept in reasonable repair (corresponding power to do so under s 8 and 11 of Trustee Act); chattels must be secured and insured

Issue of permissible delegation : Property deposited with third parties, e.g. bankersFailure to preserve= breach (good faith/ best interests not a justification) Remedy= accounting and equitable compensation, possibly recovery from third partyFales v Wohlleben Estate(1977)(SCC)

"However wide the discretionary powers contained in the will, a trustee's primary duty is preservation of the trust assets, and the enlargement of recognized powers does not relieve him of the duty of using ordinary skill and prudence, nor from the application of common sense"

Speight v Gaunt Trustees are entitled to gain assistance of bankers, brokers, etc. to help with administration of trust if it is in the regular course of business or out of a moral necessity.

3) Duty to investRule : Must invest trust assets.

Standard– s 15.1 of Trustee Act limited (if at all) by trust instrument : May invest property in any form of property or security in which you would invest in yourself. Must exercise care, skill, diligence and judgment of a prudent investor (s 15.2).o Prudent investment= invest in the best interests of beneficiaries = assess level of appropriate risk and

consider whether diversification is required (Miles) + yield best return for beneficiaries if purpose of trust is to provide financial benefit (Cowan).

Permissible delegation (s 15.5) : May delegate authority to invest trust property to an agent, but only to the degree that a prudent investor might delegate in accordance with ordinary business practice. See “Duty to act personally”

Failure to invest Failure to meet standard of a prudent investor? (see “8) Duty to Exercise Appropriate Skill”) No Not liable for losses on investments that met standard of care (s 15.3 of Trustee Act) Yes Breach (good faith/ settlor’s intentions not a justification) Remedy= accounting and equitable

compensation (overall losses may be offset by overall gains– s 15.4 of Trustee Act), removal as trusteeCowan v Scargill (1985)(UK Ch. Div.)

F: Joint-trustee pension plan for coal miners. Trust arrangement: Half of trustees nominated by management and half nominated by union. Union proposed rather limited investment strategy, which management opposed. Neither side wanted to agree on anything. Management sought declaration that union trustees were in breach of trust by trying to impose an investment strategy that was overly restrictive.

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H: Union trustees in breach of trust. Inappropriate in trying to limit investments. In doing so, limiting ability to make financial gains.R: Duty of trustees towards their beneficiaries is paramount. Subject to obeying the law, must put interests of beneficiaries first. When the purpose of a trust is to provide financial benefits for the beneficiaries, and that is usually the case, the best interests of the beneficiaries are normally their financial interests. In the case of power of investment, power must be exercised so as to yield the best return for the beneficiaries.

In considering what investments to make, trustees must put aside own personal interests and views. Trust investments cannot be motivated purely by personal views. Trustee may consider social, economic and political factors in deciding where to invest if investment made is equally beneficial to beneficiaries.

If a trustee chooses the less financially beneficial option, burden rests on him to justify that it is for the benefit of the beneficiaries as a whole to receive less by reason of the exclusion of some of the possibly more profitable forms of investment.

Implications: Trustees’ ability to practice “ethical investment” and “socially responsible investment” or “investment with reference to environmental, social and governance (ESG) factors”. Not prohibited per se, b/c a company that does not practice ethical or environmental awareness might not be a worthwhile investment. Acceptable to have a “negative screen” as long as trustee believes, based on material analysis, that screening out certain investments will not erode the purpose of the trust.

Miles v Vince (2014)(BCCA)

F: Housing and Insurance Trusts both created by the deceased. Housing Trust held 3 properties on Main Street ("Main Street Properties")– Plan was to develop affordable housing in the DTES. Deceased knew he was terminally ill, so purchased life insurance policy, which was paid into the Insurance Trust. Widow and his three children were income and capital beneficiaries of the Insurance Trust. Children were income and capital beneficiaries of the housing trust. Made his sister the trustee for both trusts. Trustees loaned money from insurance trust to housing trust at an interest rate, which was never paid (the "Loan"). Eventually, all the capital in the insurance trust was moved into housing trust.H: Trustee was in breach of trust: conflict of interest + failure to invest prudently. Ordered removal and replacement of trustee– breach too egregious.R: No duty to diversify per se, but prudent investor standard requires the trustee to assess the level of appropriate risk and whether diversification is required. Trustee must seek to maximize return within that level of appropriate risk. A: Investment of all of the Insurance Trust's assets through the Loan in the Main Street Properties was not a prudent investment. No evidence that Trustee assessed the appropriate level of risk for the insurance trust and then sought to maximize return within that constraint. While no express statutory requirement to diversify investments, should have at least assessed whether diversification is required to preserve trust assets.

4) Duty to comply with the lawRule: Must comply with any general legal requirements that are imposed on owners of property of that kind. Trustee is indemnified from trust property for costs and expenses properly incurred in the management and preservation of trust property, but not from improper management by trustee.

5) Duty to provide information to beneficiariesSubjects of disclosure/enquiry:

1) Information concerning existence of trust and interests under it: No obligation to seek out beneficiaries and inform them that they are holding assets in trust for them, but if beneficiaries ask, should disclose.

2) Information about trust property, receipts and disbursements3) Information concerning trustee’s reasons for making decisions: Not required to disclose (Breakspear)4) Content of letters of wishes: Not required to disclose (Breakspear)5) Legal opinions received by trustees: If legal advice sought out by trustee and paid for by trust fund, then legal advice

becomes trust asset and must be disclosed to beneficiaries (Re Londonderry Settlement)6) Information of corporations in which trust holds shares: Balancing exercise (Re Martin)

General rule ( Re Martin ) : Proprietary right of beneficiary (or other person interested in trust) is neither necessary nor sufficient to compel disclosure (Re Martin). Court must balance competing interests of various parties (beneficiaries, trustees and third parties)– consider commercial confidentiality/sensitivity of information (Schmidt). Beneficiaries are not limited to a shareholder’s disclosure. Breakspear v Ackland (2008)(UK Ch. Div.)

1) Trustees and the court should approach a request for disclosure of a wish letter (or of any other trust document) as an exercise of discretion rather than the adjudication of a proprietary right (followed in Re Martin)

2) Affirmed Londonderry: At the heart of the Londonderry principle is that it is in the interests of beneficiaries of family discretionary trusts, and advantageous to the due administration of such trusts, that the exercise by trustees of their dispositive discretionary powers be regarded, from start to finish, as an essentially confidential process

Schmidt v Rosewood Trust (2003)(UKPC)

Beneficiary's right to seek disclosure of trust documents is best approached as one aspect of the court's inherent jurisdiction to supervise the administration of trusts. No beneficiary (least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document.

Situations in which trustees may refuse or limit disclosure: Issues as to personal or commercial confidentiality– court must balance competing interests of different beneficiaries, the trustees themselves and third parties

Re Martin Estate (2009)

F: Deceased was a land developer, operating through a wholly-owned company. Shares in company were the deceased's most significant asset. Made bequest that shares were to be divided into 3 trusts, one for each daughter, with income from the trusts to be paid to the daughters for their respective lifetimes, and upon the death of a daughter, the

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(BCSC) corresponding trust was to be divided 75% in favour of 4 charities in stated proportions, and 25% in favour of the deceased's daughter's children, or in the absence of any children, to the other grandchildren of the deceased. Charities had potential proprietary interest in shares and requested trustees to provide information on company. Trustees denied request on grounds that information sought is within their knowledge or possession only in their capacity as directors of the company and not as executors and trustees. Argued that in capacity of trustee or executors, access to information was limited to that of a shareholder’s. H: Trustees must disclose information requested by the Charities.R: A proprietary right of the beneficiary (or other person interested in the trust) to information of which disclosure is sought is neither necessary nor sufficient to compel disclosure. Questions of disclosure had to be answered by balancing the interests of various parties– complete ownership of company by estate militates in favour of greater disclosure towards beneficiaries in this balancing exercise. Beneficiaries not limited to shareholder’s right of information. A: Beneficiaries are similar to shareholders of a company but are not automatically limited to the disclosure that a

shareholder would receive from a company. To hold otherwise might invite mischief that it was open to trustees to incorporate companies to carry on estate business in order to shield themselves from scrutiny by beneficiaries.

No evidence that information sought was commercially sensitive. No unmanageable prejudice to the company in answering questions as that relating to payments from the trust to the Charities. Charities offered confidentiality agreements, which would adequately manage risks to commercial interests.

N-Krypt International Corp v LeVasseur (2018)(BCCA)

F: N-Krypt and Cirius enter subscription agreement whereby N-Krypt purchased shares in Cirius on condition that shares would be held in a voting trust by Cirius' CEO and director, LeVasseur. As part of agreement, N-Krypt waived voting and information rights. Relationship between parties broke down, and N-Krypt petitioned for relief as trust beneficiary, including disclosure of information, return of its shares or removal of LeVasseur as trustee.H: No need to disclose the information to N-Krypt. Erred in ordering disclosure that Trustee obtained in capacity as CEO of Cirius, even though company wasn’t named a respondent in the petition. A: Must consider parties' obligations and rights in the context of the commercial agreement entered into. Equity follows the law: trusts is an equitable concept while contracts follow the common law. The voting trust was a mechanism used to give effect to the contract, and the two are dissociable. N-Krypt must be held to the terms of the agreement it entered into; trustee's duty to account does not override terms of K.

6) Duty to account (relates to equitable compensation– see “Remedies”)Rule: Must be ready to “account for” assets to beneficiary– accountable to compensate beneficiaries for lost capital from improper investments, wrongful distributions or misappropriation of funds. S 99 of Trustee Act requires trustees to “pass” their accounts in court, in accordance with the timing set out in that

section. May be waived if consent in writing by all beneficiaries.

Performance Duties– What Should a Trustee Do?7) Duty to act personally

Power to delegate ( Speight ) : Trustee cannot delegate to others the confidence reposed in himself but may in the administration of the trust fund avail himself of the agency of third parties if does so from a “moral necessity” or “in the regular course of business”.

Default rule (s 15.5 of Trustee Act ): Trustees may delegate only in relation to investment and only the degree of authority that a prudent investor might delegate in accordance with ordinary business practice. In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with terms of delegation.

May be altered by trust instrument or will containing a provision permitting general power to delegate functions and indemnity for trustees against default of any agents so employed in good faith (i.e. breadth of Manitoba Trustee Act)

Exercising duty to act personally:1) Use appropriate skill and care2) Each trustee must participate in any discretionary decision made by the trustees and must exercise own judgment with

respect to the matter at hand. Must make own independent assessment of appropriate course of action, bearing in mind best interests of the beneficiaries. Cannot acquiesce unthinkingly in decisions made by other trustees, nor simply follow the wishes of the settlor (unless specifically directed to do so by trust instrument), third party or beneficiary (Fales).

Correspondingly, trustee has a duty to keep co-trustee informed, especially where asset is comprised of securities in a company (Fales).

Speight v Gaunt (1883)(UKHL)

F: Stockbroker scammed trustee. No suggestion that trustee was not bona fide and honestly doing what he thought was right. Beneficiaries sued trustee for breach of duty to act personally.H: Not a breach of duty to act personally. In the ordinary course of business for Trustee to trust and rely on broker, to think that he had indeed bought stock on the London Stock Exchange and to pay broker. R: Trustees are entitled to gain assistance of bankers, brokers, etc. to help with administration of trust if it is in the regular course of business or out of a moral necessity. Trustee is not liable unless own negligence or default has led to the beneficiaries’ loss.

Fales v Wohlleben Estate (1976)

F: W and Canada Permanent were joint trustees. Purchased shares and held on to the shares for 2.5 years. Shares comprised of over 60% of assets of a substantial estate and were shares in a speculative venture that were not intended to have a long holding period. Company eventually went bankrupt and shares became worth nothing. Complaint

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(SCC) against trustee W for failure to invest and act personally.H: W breached duty to act personally by doing nothing and letting CP sit on the shares for 2.5 years. R: Each trustee must participate in any discretionary decision made by the trustees and must exercise their own judgment with respect to the matter at hand. Must make own independent assessment of the appropriate course of action, bearing in mind the best interests of the beneficiaries.

Re Smith (1971)(ONCA)

F: Shares in Imperial Oil Limited were the initial and only assets of trust fund. Mother was an income beneficiary. Son was both settlor and residuary beneficiary of the trust. Mother received a very low interest rate from the shares. Trustees refused to sell shares for a much higher dollar income for benefit of mother. Trustees were following directions of only the son, and not paying the mother sufficient income from the trust.H: Breached duty to act impartially by only following instructions from the residuary beneficiary.

8) Duty to exercise appropriate skill, prudence and careRule ( Learoyd ) : No higher degree of diligence required of trustee than a man of ordinary prudence in the management of his own affairs, but a trustee must confine himself to a class of investments which are permitted by the trust and avoid all investments of that class which are risky or speculative.

S 15.2 of Trustee Act : In investing trust property, trustee must exercise care, skill, diligence and judgment that a prudent investor might exercise in making investments.

Fales: No higher standard of care imposed on paid professional trusteesFailure to meet standard of a prudent investor?

No Not liable for losses on investments that met standard of care. S 15.3 of Trustee Act : Trustee is not liable for loss arising from investment of trust property if conduct that led to loss conformed to a plan/strategy for investment of trust property, comprising of reasonable assessments of risk and return, that a prudent investor would adopt under comparable circumstances.

Yes Breach (good faith/ settlor’s intentions not a justification) Remedy= accounting and equitable compensation (overall losses may be offset by overall gains– s 15.4 of Trustee Act), removal as trusteeo Exoneration under s 96 of Trustee Act: Good faith, honesty and reasonableness of trustee’s conduct may

exonerate a trustee from liability at court’s discretion. Paid professional trustees less likely to be exonerated (held to a higher standard when considering exoneration by the court).

Fales v Wohlleben Estate (1976)(SCC)

F: W and Canada Permanent were joint trustees. Purchased shares and held on to the shares for 2.5 years. Shares comprised of over 60% of assets of a substantial estate and were shares in a speculative venture that were not intended to have a long holding period. Company eventually went bankrupt and shares became worth nothing. Complaint against trustee that a duty rested upon it to sell the shares received on exchange and use the proceeds for the purchase of trust investments as soon as could reasonably and advantageously be done, and that such duty was breached.H: W and CP jointly liable for breach of duty to exercise appropriate skill, prudence and care in administration of trust, but W was granted relief under s 96. CP was solely responsible for damages.R: Where there is a basic duty to convert and invest, what is a reasonable delay in selling will depend upon the

particular circumstances, and a heavy burden rests upon a trustee, where loss is suffered by reason of retention of speculative non-trustee securities, to show that the delay in selling was reasonable and proper in all the circumstances. Trustee must be alert to changes in the fortunes of companies represented in the portfolio of the trust estate.

No higher standard of care imposed on paid professional trustees A co-trustee with greater information and skill should provide an informed and proper explanation to the other

co-trustee(s) with inferior financial/investing knowledgeA: CP was wrong to sit by and do nothing while shares declined in value. CP should have informed W. Even if after recommendation and proper explanation to co-trustee and co-trustee refuses to sell, proper course would have been to have applied to Court for advice and directions.

9) Duty of loyaltyRule: Must act in best interests of beneficiaries to the exclusion of trustee’s interests– put beneficiaries’ interests ahead of own interests. Prohibitions: Trustees must not1) Profit from office: Trustee must never benefit from any transactions into which he has entered with trust property

(Boardman). Cannot acquire trust property made by purchase or make use of an opportunity that is only available as a result of his trusteeship (Keech; Boardman).

a) Self-Dealing Rule: Trustee is not allowed deal with trust property on both sides of the transaction– cannot purchase trust property for himself, cannot usurp opportunities.

E.g. Appointing self as beneficiary; appointing self as director of company controlled by trust and benefiting from position– using trustee position to obtain directorship

Breach (good faith, denial of benefits to beneficiary not a justification) Remedy= Account of profits Exception/defence: If beneficiaries give full and informed consent (Boardman)

2) Attempt to further own interests3) Otherwise place himself in a conflict of interest (self-interest or interest of another party): A conflict of interest occurs

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when there is a substantial risk that the trustee’s representation of beneficiaries would be materially and adversely affected by the trustee’s duties to himself/someone else (Cromwell J. in Sun Indalex).

Does not merely arise b/c individual serves 2 roles, which could possibly conflict, or makes decision in non-trustee role.

If serving 2 roles, must act in a manner that fairly balances the different interests (Sun Indalex)

Remedies: Conflict of interest does not automatically lead to remedy (Sun Indalex): Depends on consequences of the conflict,

not its nature. Beneficiaries’ loss must have been caused by the conflict or trustee’s failure to protect their interest b/c of conflicting duties/interests. If there had been no conflict, would there have been a different outcome?

Resignation/removal of trustee and appointment of new trustee (Sun Indalex, Miles)

Exceptions/Relaxation of the Rule:1) Exceptions to Self-Dealing Rule:

a) Self-dealing rule disapplied by trust instrument (Breakspear)b) Court authorized sale of trust assets to trustee (Molchan): Best interests of trust + transaction is voidable

2) Fair-Dealing Rule: Allowed to acquire beneficiary’s interest if: 1) No fraud or concealment or advantage taken by trustee of information acquired by him in the position of trustee; 2) Beneficiary received ILA and every kind of protection + fullest information with respect to property; and 3) Adequate consideration. If purchase the beneficial interest, fiduciary relationship is terminated.

Keech v Sanford (1726)(UK Lord Chancellor’s Court)

F: Testator devised estate to a trustee in trust for his infant, which included the lease of a marketplace. Before expiration of the lease, trustee applied to landlord for lease renewal for the benefit of the infant, which the landlord refused. Trustee obtained a lease made to himself. Infant came of age and sought to have the lease assigned to him and for an account of profits.H: Lease should be assigned to the infant, and the trustee should be indemnified from any covenants comprised in the lease, and an account of profits since the renewal should be made. Trustee should have let lease run out rather than to have had it to himself.R: Trustee cannot profit from position as trustee, even if that means the beneficiary couldn't have the benefit. If trustee deals in any way with the trust property and propose to act for own benefit, in taking over trust property, will require an account of profits for the beneficiary.

Boardman v Phipps (1967)(UKHL)

F: Testator dies, leaving estate to 3 sons and a daughter. Trustees were his widow, daughter and Mr. Fox (accountant). Boardman was solicitor to the estate and for Tom, one of the sons of the testator. Held shares in Lester & Harris, but not to the degree of complete control. Company was not run well, so Boardman and Tom attended general meeting as proxies to the trustees to buy out the shares of the company. Used information learned at the meeting to negotiate with minority shareholders and eventually bought out their shares (with their own money) b/c estate would not have paid for the shares– did not have the money and company was doing very poorly. If had asked for judicial approval of transaction, court would have said no. Not in the best interest of estate to buy out the shares. Made the trustees aware of purchase. What they did significantly benefited the company and the estate and therefore the beneficiaries. H: Boardman and Tom were constructive trustees of the shares. Breached fiduciary duties to the trust. A profit was made by Boardman and Tom, and they are accountable accordingly (disgorgement of profits). Should be given liberal compensation for doing a wonderful job in increasing the value of the estate.R: Law has strict regard for principle in ensuring that a person in a fiduciary capacity is not allowed to benefit from

any transactions into which he has entered with trust property. No trustee shall be allowed to enter into engagements in which he has or can have a personal interest conflicting,

or which may possibly conflict with the interests of those whom he is bound to protect. Possibility of conflict: Reasonable man looking at relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict. Does not mean any imaginable situation which could result in a conflict

A: Conflict of interest: There is a clear possibility of conflict. If the trustees had contemplated buying the shares, would have asked B for advice, which would have put him in a conflict. Only way to avoid this is to obtain full informed consent of the trustees.

Sun Indalex v United Steelworkers (2013)(SCC)

F: Indalex became insolvent and sought protection from creditors under CCAA reorganization to avoid bankruptcy. Indalex was the employer and administrator of 2 employee pension plans. CCAA court approved agreement for DIP financing where Indalex would receive money in exchange for granting creditor priority. Did not notify pension plan members of this. Plan members brought action alleging that Indalex breached fiduciary obligation towards them by making arrangements while in a conflict of interest. Reorganization was directly adverse to plan members' interest in seeing that the money owed to pension deficits were fully paid. Statutorily imposed fiduciary duty as administrator of pension play, and statutory prohibition of conflict of interest. H: Reorganization was not a breach of Indalex's fiduciary duty, but a breach arose from I's failure to ensure that pension plan beneficiaries had the opportunity to have their interests effectively represented in the insolvency proceedings. While there was conflict of interest, consequences of breach not material since court would have granted DIP financing anyways– with or without pension’s approval of CCAA proceedings, would have resulted in the same loss. No constructive trust.R: Where interests conflict, not an issue of whether a trustee is capable of wearing two hats, and which hat he wears when he makes decisions. What is important is to consider the consequences of the decision, not its nature. The

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solution has to fit the problem, and the same solution may not be appropriate in every case.Cromwell J: A conflict of interest occurs when there is a substantial risk that the employer-administrator's representation of the plan beneficiaries would be materially and adversely affected by the employer-administrator's duties to the corporation. To respond to this conflict, the employer-administrator must bring the conflict to the attention of the CCAA judge. It is not enough to include the beneficiaries in the list of creditors; the judge must be made aware that the debtor is or may be in a conflict of interest.D (Lebel J): Indalex was in a conflict of interest from the moment it started to contemplate putting itself under the protection of the CCAA and proposing an arrangement with its creditors. Indalex cannot wear "two hats". Had to discharge corporate duties and address fiduciary obligations to plan members. Breach of duty not in applying under CCAA but for failing to relinquish position as administrator. Indalex maintained a strong adversarial attitude towards the interests of the beneficiaries throughout the arrangement process, while it was still the administrator. Failed to give procedural fairness in CCAA proceedings, which was a more serious consequence than the majority viewed it to be.

Breakspear v Ackland (2008)(UK Ch. Div.)

F: Discretionary trust– settlor communicated to trustee that he wished for the defendant to be provided for if she survived him. Trustees appointed widow as an additional trustee and added her as a beneficiary. Turned around and made large distribution to the widow.H: Self-dealing rule was disapplied by the terms of the Settlement in relation to the second and third appointment.R: A trustee who appoints herself as a beneficiary of the trust, or who, separately or together with other trustees, exercises a dispositive power in her own favour commits a breach of the self-dealing rule unless either:

a) The rule is disapplied by the terms of settlement (instrument specifically states that you can do that); orb) The trustee is placed by the settlor in a position of necessary conflict, by being given a power which is

expressed to be capable of being exercised in one’s own favourA: Clear that Settlor intended the self-dealing rule not to have effect in respect of wide areas of the trustees' powers, provided that an independent trustee approved the relevant transactions. It was from the outset and for the life of its principal beneficiary, a settlement designed to give full dispositive powers to a trustee who was also a beneficiary. Turned on clause: "Trustee can engage with a transaction with the trust if approved by the other trustees".

Molchan v Omega Oil & Gas Ltd. (1988)(SCC)

F: Partnership– assumption that GP holds assets in trust from LPs. GP purchased land that was trust property b/c trust was struggling financially and having trouble selling the land due to encumbrances.H: Circumstances of this cases are such that approval should be given.R: In special circumstances, a court of equity may authorize a sale of trust assets to a trustee, including ex post facto approval, if it appears that the sale is for the best interests of the trust estate. Power to confirm (ex post facto approval) must be exercised only when there is a corresponding power to refuse to sanction the sale– must be able to set aside the transaction (i.e. trust asset must not have been disposed of). Beneficiary must bring action to void transaction within "reasonable time"– laches. A: At the time of its approval of the sale, the Court of Appeal was not in a position that it had no alternative but to approve, and there was no evidence of subsequent disposition by the transferee (the Trustee) of the lands in question. No evidence of any significant alteration of market price of the non-producing lands.D (Wilson J): Not an appropriate case for ex post facto court approval. The test for retrospective approval should be applied very strictly. If it were to be applied, should at least have evidence that trustee brought application for approval prior to purchasing trust assets. Applicant for prospective court approval of a sale must show that a sale of the property was necessary, that no other purchaser was forthcoming or was likely to come forward within a reasonable time and that his offer in the circumstances was a favourable one. Not the case here.

Crighton v Roman (1960)(SCC)

F: Trustee purchased beneficiary’s beneficial interest in trust property but did not disclose material facts, e.g. planning on trading shares rather than parting with his shares altogether, which was the impression he gave the beneficiary. Obtained shares in exchange for forgiveness of beneficiary’s debt. H: R did not obtain a valid release or transfer of C's beneficial interest in the shares. R: Trustee may purchase beneficial interest in property from beneficiary. If he does, fiduciary relationship between them is terminated. Trustee must show that:

1) No fraud or concealment or advantage taken by him of information acquired by him in the position of trustee;

2) Beneficiary received independent advice and every kind of protection, and the fullest information with respect to the property; and

3) Consideration was adequate.A: At the lowest, R had a duty to make full disclosure to beneficiary the true nature of the transaction. Gave C the impression that trustee would be parting with his shares altogether, and that the shares obtained by the trustee had little value.

10) Duty of impartiality– successive interests)Principle of even-handedness ( Royal Trust ) : If not given overt discretion to discriminate among beneficiaries, should not be using management/administrative power to produce a disproportionate result to the 2 classes of beneficiaries. Should not benefit one to the undue effect of the other. Within trustee’s powers conferred by trust instrument, balance between keeping capital interests for capital beneficiaries (protecting capital for secondary beneficiaries) and generating reasonable income for income beneficiaries (cannot settle for minimal income).Questions to consider

Dispositive powers? If discretionary trust with obligation to distribute, then there is an obligation to distribute with a power to select. If power of appointment, barring mala fides, trustees can choose not to distribute to primary beneficiaries.

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Income or capital? Settlor intentions override considerations of form of the transaction or the substance (Re Welsh). Interpretation of what settlor meant by income, not what the CRA defines as income.

Breach Remedy= removal of trustee (Re Smith)Royal Trust v Crawford (1955)(SCC)

F: Bulk of estate consisted of shares in a company with few assets. Testator left estate to widow for life, and nieces and nephews in remainder. Left as a trust for sale with instructions to convert the residue of his property into money, but with wide powers of postponement and retention (even of unauthorized investments). Issued $450,000 dividend to widow, reducing value of company by 75%.H: Dividend to be treated as “capital” (despite tax treatment). Direction to pay widow the “income” of the residue does not require the special dividend, representing the bulk of the estate to go to her. Only a notional amount should be paid to the widow, and the rest reinvested as capital, on which return on capital goes to the widow and the capital remains capital for the nieces and nephews. R: In the absence of clear authorization to prefer one interest over another, duty of a trustee is to act impartially. When property is to be enjoyed successively, the testator normally contemplates its preservation for that purpose.

Re Smith (1971)(ONCA)

F: Deceased left shares in Imperial Oil Limited in will to son with wishes for son to make provisions for mother. Son settled ¼ of the shares in trust: with mother as income beneficiary during her lifetime and son as residual capital beneficiary. Mother received a very low interest rate from the shares. Had an opportunity to sell some of the shares for a much higher dollar income for the benefit of the life tenant, which was what the life tenant had suggested to the trustee. Trustee had power to sell Imperial shares. Trustees interpreted trust document to mean that it was required by the intention of the settlor, as expressed in the terms, to retain the shares, so did not sell the shares for the benefit of the life tenant. Trustees were following directions of only the son, and not paying the mother sufficient income from the trust.H: Breached duty of impartiality. Should have reinvested the unproductive shares to produce a reasonable income for the mother while preserving capital for the son. No evidence that trustee put its mind to question of what it should do to carry out those obligations. Did not seek legal advice nor direction from court even when life tenant's solicitors said such interpretation was erroneous. No reason to think that trustee was capable of acting impartially as trustee Removed trustee.R: A trustee is obliged to follow the well-recognized principle applicable to a trust fund where there are interests for life and interests in remainder: must maintain an even hand between the respective interests of both classes of beneficiaries. Must consider and weigh interests of both classes of beneficiaries.

Re Welsh (1980)(ONCA)

F: Testator’s only asset was shares in Welsh Lumber Company Limited. Wished to provide for 2 successive interests: life interest to wife and on her death, interests to his children from first marriage. Power to sell, convert and retain any investments notwithstanding that such may not be trustee-authorized investments. During wife's lifetime, earned income from interest on capital. Capital of company from the sale of its assets was distributed to shareholders by cash dividend. Treated as capital and re-invested to generate income. Wife died and her estate sued the trust for the dividend. H: Clearly intended that the assets of his estate at the time of death would be capital from which income would be derived. Dividends were capital which were to be distributed to his children.R: Court must determine testator's intentions as expressed in the will as a whole and in light of the circumstances. Testator's intentions override considerations of form of the transaction or the substance.A: Testator surely could not have contemplated that amendments would be made to the ITA in 1972 that would change the nature of income distribution from securities. The will can only make sense by regarding the fund as capital at all times, so the amount of the cash dividend was capital in the hands of the trustee. Intention was clear that the share asset comprising his total estate was to be capital of his estate from which income was to be earned to be paid to wife for life, and then to be distributed amongst his children.

Duty of ApportionmentHowe v Earl of Dartmouth: If in a will, there is a residual interest in personal property which is of a speculative, wasting or hazardous character, then there is an implied duty to sell those assets, unless will expressly provides for retention and maintenance.

If there is a duty to sell (express or implied), the income beneficiary gets notional income (duty to apportion)

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Jurisdiction of Courts

Powers of the court:1) Remedial jurisdiction: Award compensation or other remedies after breach of trust2) Intervention in administration of trusts: Provide guidance so as to avoid, or act to prevent, or put an end to improper

conduct.

Procedure:1) Application to the court

a) By a trustee (s 86 of Trustee Act): Seek advice or direction of the court to guide their conduct. Can be brought in adversarial or non-adversarial context. Limits to jurisdiction.

b) By a trustee or other interested party (Rule 2-1(2)(c) or (d) of the Civil Rules): Question arising in the execution of a trust or an issue relating to the performance of an act by a trustee.

c) WESA: Probate proceeding if trust arises under will or matter relates to administration of estate2) Petition to the court (affidavit evidence): Usual course of action if trustee or other interested person seeking guidance or

declaration as to entitlement, matters of interpretation or otherwise. 3) Notice of Civil Claim (full or summary trial w/ viva voce evidence): Seek compensation for breach of trust or claim for

constructive trust

Limits to jurisdiction Permitted scope of discretion: Court will advise as to courses of action trustees are properly required or permitted to take but

will not advise or direct trustees as to how to exercise that discretion (Gisborne). Gisborne v Gisborne (1877)(UKHL)

F: A fund (the "Subject Fund") was left to trustees with provision that trustees "in their discretion, and of their uncontrollable authority" might pay and apply all or part of annual income for maintenance and support "or otherwise for the personal and peculiar benefit and comfort of my dear wife" for her life. Widow also entitled to receive income from another settlement. Trustees declined to pay full costs required for her maintenance and support out of Subject Fund, and only paid amounts required in excess of her necessities of life, which they considered should be paid out of the other settlement. H: Trustees had uncontrollable power to exercise discretion as to what amounts were paid out to widow from the Subject Fund. Court of Appeal erred in ordering that the Court approve the exercise of discretion by the trustees to pay a specified amount.R: Court should not express any opinion as to whether exercise of the discretion by the trustees is a wise or an unwise exercise of that discretion. Courts should not intervene in trustee’s discretionary decision-making, unless there has been a breach of duty.

Exceptions : 1) Binary choice (Re Fleming): Of 2 possible courses of action, if court views one course of action as improper, more

likely to direct the other course of action.Re Fleming (1973)(OHCJ)

F: Testator gave wide discretion to executors with regard to sale, retention and reinvestment of assets. Directed to keep invested residue of estate, pay net income to widow, with power of encroachment on capital of estate. Widow renounced right to encroachment for purpose of preventing bankruptcy of estate. Estate contained shares representing 1/2 interest in a corporation. Trustees faced with issue of deciding how to distribute surplus of income, in consideration of 1) tax consequences, 2) prospect of further income enhancements, and 3) need to be even-handed. Trustees applied to court for direction as to how they should structure a distribution from a wholly-owned company.H: Shares should be redeemed rather than distribute dividend to widow. A: Option 1– dividends: If money paid out as dividend, will constitute income in the hands of the trustees

under s 196(1) of the ITA. 15% tax on amount, which would be a diminution of estate's assets and would substantially reduce future income (to the detriment of residuary beneficiaries) inevitable breach of duty to act even-handedly

Option 2– redeem shares: If redeemed shares, then $118,000 (redemption amount) would be capital payable on death of life tenant to residuary beneficiaries.

2) Breaking deadlock (Re Billes; Kordyban)Starting point: Trustees must act unanimously in the exercise of their discretion and powers. May be displaced by trust term allowing decision of majority to prevail.Issue: Failure to act unanimously means failure to act trust duty not carried out breach of trustAnalysis:1) Whether trustees are under duty to do something, e.g. sell (or purchase– Tempest) an asset. 2) Is there a deadlock? Whether trustees’ disagreement over how the act must be carried out, (e.g. how sale should

be conducted, what price to obtain or pay) is a failure to perform that duty, or as relating to a discretionary

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aspect of execution of the duty or exercise of the power. If failure to perform (deadlock), court may intervene. Basis for intervention: Frustration of testator’s

intentions + beneficiaries’ interest (as a whole) may suffer as a result (Re Billes; Kordyban) If relating to discretionary aspect of execution of duty/ power, courts will decline jurisdiction

Discretionary Aspect– Declined JurisdictionTempest v Lord Camoys (1882)(UK Ch. Div.)

F: Disagreement about exercise of both discretion with respect to purchase of assets with trust monies and power to borrow for purpose of such purchase. Beneficiaries wanted to acquire a piece of property with which the family had historical association. Estate had on hand half the proposed purchase price, which had been realized from a relevant sale and were therefore required to be reinvested in real estate. Would have to raise the other half by mortgage. One trustee approved this course of action but the other did not. Willing trustee and one of the beneficiaries asked court to compel other trustee to concur.H: Duty to reinvest in real property the proceeds of sale of certain properties, but trustees could choose which real property. Also a power to borrow money. Declined to compel other trustee to concur. 2nd trustee was perfectly entitled to disapprove of the investment in that property and to borrow funds for that investment.R: If there is a duty or only a power to do the act in question, then courts may compel trustee to do that act, but if trustees have absolute discretion as to how that power is to be exercised, then courts cannot compel trustee to act in a certain manner.A: There was a trust fund to invest the fund in the purchase of land, which the trustee cannot disregard. If trustee had refused to invest the money in the land at all, the Court would have no difficulty in interfering. It is a different thing from saying that the Court ought to take from the trustees their uncontrolled discretion as to the particular time for the investment and the particular property which should be purchased. Power to raise money by mortgage is at the absolute discretion of the trustees.

Re Wright (1976)(OHCJ)

F: Application by Canada Permanent for advice and direction with respect to disposition by estate of 400,000 shares of Crown Life Insurance Company to another company. Power to sell and equal power to retain. Application opposed by 3 individual executors and trustees and all the beneficiaries.H: Court should not intervene to force the sale of the shares considered to be too low by the majority of the executors.R: The Court has no power, save in the case of mala fides or a refusal to discharge the duty undertaken, to put a control on the exercise of discretion which the testator has left to the trustees. A: Individual executors and trustees concurred in the decision to sell the shares if a buyer for them can be found who will pay what they consider to be a fair price. The purchase offer was rejected b/c majority of trustees thought the price was too low.

Failure to Perform Duty– IntervenedRe Billes (1983)(OHCJ)

F: By will, testator directed that specific annual annuities and other payments be paid from the capital of estate to widow and each of his 3 children during their lifetime. Will also directed executors and trustees to pay income annually to 23 charities in specific parts, and at the date of distribution to pay the capital of the estate to specified charitable institutions that are then in existence. Estate consisted largely of shares in Canadian Tire. Half the trustees wanted to sell the shares (National Trust Company), the other half wanted to retain (Aldamar Group). Charities (beneficiaries) strongly supported National Trust's application for conferred sale.H: Court will intervene. Course of action proposed by National Trust is the prudent and correct one. Trustees are ordered to sell the common shares of Canadian Tire when the opportunity for an advantageous and beneficial sale of them arises, and trustees are ordered to actively seek such opportunity.R: Courts may intervene in a deadlock if, as long as the trustees continue to fail to discharge their duty, the intention of the testator will be frustrated with the result that the beneficiaries may suffer.A: Proper case for court to intervene, otherwise, income and capital beneficiaries may suffer. Course of action proposed by National Trust is the prudent and correct one. Some reasons: Prudent not to continue holding 95% of the estate’s assets in one corporation (should diversify), and market value of shares in Canadian Tire have been volatile in the past (further retention involves unwarranted speculation and risk-taking). Distinguished from Re Wright on the facts.

Kordyban v Kordyban (2003)(BCCA)

F: Testator was very successful in forestry industry. Survived by 2 children, Bill and Valerie. Before he died, gathered his children and told them they would run the company together. Bill already had some shares, but father left controlling shares with direction that 40% of shares would go to V and 60% to B (intention that B would have majority control). Secondary will provided trustees with power to vote the shares held by the trust. Trustees could not agree on how the shares held by the testamentary trust should be voted at either the annual general meeting or the special meeting requisitioned by Valerie, one of the trustees. V argued she should be on the board of directors, but B opposed it.H: Court will not intervene to break the deadlock. Will not appoint V to the board.R: Court has equitable jurisdiction, statutory and inherent, to intervene to break a deadlock of trustees where necessary to carry out the terms of the trust in the interests of the beneficiaries. To determine whether the court should intervene, must first determine what the intentions of the testator are.

1) In context of the will as a whole, are the trustees not carrying out the testator’s intentions at all? Are the trustees’ failure or consequence of the failure to exercise their discretionary powers or choosing a course of action consistent with or do they frustrate the testator’s intentions?

2) If testator’s intentions are being frustrated, should the court make the order? Factors: Testator’s intentions and interests of beneficiaries.

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A: 1) Are the trustees carrying out the testator’s intentions? Trustees have a discretionary power here to

vote the shares in the company, but not duty. B/c cannot agree on how to exercise their discretionary power, failed to exercise it at all. Court has grounds to intervene.

2) Factors for making order:a) Testator's intentions: Give other trustee, Bill, majority control. Requirement of unanimity of

directors in voting the shares should frustrate that intention. Valerie did not have to be a director to discharge her duties as trustee. B/c co-trustee owned majority of the shares outside the trust and the other beneficiaries objected to her becoming a director, no practical risk she could be exposed to any liability for breach of her duties as trustee for failing to become a director.

b) Interests of beneficiaries: Appointment of Valerie to board of directors would lead to discord and harm to the company, and therefore to the beneficiaries as well.

Other grounds for intervention: Trustee acting improperly (not necessarily mala fides)a) Action based on improper motiveb) Action to secure a result other than the best interests of the beneficiariesc) Fraud on a power: Deliberately subverts terms of will/trust to benefit non-object

Fox v Fox Estate (1996)(ONCA)

F: By will, testator gave wife 75% life interest and son 25% life interest in residue of estate. Wife, as executrix, had power to encroach on capital for benefit of son and son's children. Used power by giving all of residue to son's children. Motivated primarily by disapproval of son's second marriage outside of Jewish faith. Some evidence that wife was concerned about son's children's welfare too.H: Wife dealt with residue of estate improperly and should be removed as executrix.A: Unclear whether widow was motivated only by religious bias b/c did want to benefit grandchildren (mala fides not decisive), but breach of trust in failing to exercise discretion. Obvious that widow in no way considered the terms of the will when she made the encroachments she did– did not understand duties as executrix and acted in firm belief that she was dealing with her own property. D: Court may interfere if trustee's decision is influenced by extraneous matters (may intervene if improper ulterior motive). Fact that son intended to marry outside of Jewish faith was extraneous to duty which the will imposed on the wife. Extraneous consideration demonstrated sufficient mala fides to bring wife's conduct within any reasonable interpretation of that term. Also would be contrary to public policy to allow for a trustee to effectively disinherit the residual beneficiary because he married outside her religious faith.Implications: If mixed motives (including improper motive), perhaps that’s alright.

Miles v Vince (2014)(BCCA)

Could have been an improper motive case, but court found clear breaches of duties to intervene.

The Land Conservancy v UBC (2014)(BCCA)

F: Trustees had received legal advice that the Binning House could not be transferred directly to TLC, i.e. TLC was not a proper object of the power given to the trustees under the will. Trustees then set out to do indirectly that which they knew could not be done directly. Transferred Binning House to the New Society with intention that the New Society would immediately transfer it to a non-object, TLC. Acted in good faith, trying to fulfill testatrix' hope that the Binning House would be preserved for historical purposes. Did not act with unfettered discretion, as Binning House could only be transferred to TLC with prior agreement. Not a "hope" that the New Society would transfer the Binning House to TLC– it was a certainty.H: Trustees acted improperly in deliberately subverting the terms of the will to benefit a non-object. R: Good faith is not a defence to a claim of fraud on a power. A trustee commits fraud on a power where s/he deliberately, in a pre-conceived course of action to subvert the terms of the will/trust, to benefit a non-object.

Cannot Oust Court’s Jurisdiction with Privative clause!Rule ( Boe v Alexander ) : A privative clause protecting the exercise of a trustee's discretion will not be effective to prevent judicial review where the trustees have acted in breach of their duty, e.g. failure to exercise discretion at all, acted dishonestly, failure to exercise level of prudence expected from a reasonable businessman, failure to act impartially Boe v Alexander (1987)(BCCA)

F: Trust clause to a pension trust stated "Subject to the provisions of this agreement the Trustees shall have full authority to determine all questions of coverage, eligibility and methods of providing or arranging for provision of benefits and all other related matters. The Trustees shall have the power to construe the provisions of this agreement and the terms used herein. Any such determination and any such construction adopted by the Trustees in good faith shall be binding upon all parties hereto and the beneficiaries hereof".H: To the extent that this clause attempted to shield trustees from judicial review, was ineffective. Result would have been the same even if clause expressly concluded "and may not be reviewed by any court or tribunal"

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Termination of Trust– Rule in Saunders v Vautier

Rule in Saunders v Vautier : If a beneficiary has been given the full beneficial interest in trust property but trustee if directed to hold it for a period of time, then notwithstanding the trust provisions, beneficiary can immediately demand distribution of the trust property to him outright and trustee must comply with that demand if:

1) Beneficiary reaches age of majority2) Any conditions precedent to vesting the interest have been satisfied

Rule also applies to discretionary trusts with multiple beneficiaries. All beneficiaries have to agree and satisfy above conditions.

Inquiry: Is the gift vested or contingent? Vested= Enjoyment of which is merely postponed; may be subject to subsequent divestment. Condition subsequent. Contingent= Subject to the happening of an event that may never occur. Condition precedent.

Ward v Roberts (2017)(BCSC)

F: Will provided that residue of estate was to be divided into 2 equal shares: one for William Sr., his son, and one for Barbara Laurel, his daughter– Laurie's Trust. Will directed executor to invest Laurie's Trust, pay the annual income of Laurie's Trust to B for 10 consecutive years, and on expiration of the 10 years, pay the balance of the Trust to B for her own use absolutely. Will provided that if B were to die before the testator, or within the 10-year period, then $10,000 would go to B's husband, and the balance would go to the testator's grandchildren, and if any of the grandchildren were to die before the 10-year period expired, the survivor would receive the balance. Demanded termination of trust and immediate distribution. H: Vested interest subjected to divesting. Trust must be terminated and B is entitled to assets.A: B is the only person with a vested interest in Laurie's Trust. Testator's son-in-law, son and grandchildren all have contingent interests (contingent upon B dying before 10-year period expired). All concerned are over 19, none are under any disability and all consent to the termination of trust.

1) Either B is entitled to entire beneficial interest and can terminate Trust on her own; or2) Trust can be terminated b/c all those with successive interests have full capacity and all consent to the termination

Either way, same outcome: trust must be terminated. Re Chodak (1975)(ONHC)

F: Will directed trustees to invest and send residue of estate in the form of parcels to 2 classes: 1) his nephews, and 2) other relatives. Trustees had full discretion as to manner and time of payment.H: Can invoke Rule in Saunders v Vautier here. Discretionary power is inoperative, and the nephews take equally.R: Discretionary power as to time and manner of payment is inoperative where gift was vested. Such a scheme can only be carried out effectively by making the gift entirely dependent on the discretion of the trustee, or by means of a gift over to some other beneficiary.A: Testator intended to benefit his nephews but intended his executors to have discretionary power to send parcels to them equally or unequally, or to one to the exclusion of the other. Cannot have discretionary power where testator intended to benefit beneficiaries absolutely.

N-Krypt International Corp v LeVasseur (2018)(BCCA)

F: N-Krypt and Cirius enter subscription agreement whereby N-Krypt purchased shares in Cirius on condition that shares would be held in a voting trust by Cirius' CEO and director, LeVasseur. As part of agreement, N-Krypt waived voting and information rights. Relationship between parties broke down, and N-Krypt petitioned for relief as trust beneficiary, including disclosure of information, return of its shares or removal of LeVasseur as trustee. N-Krypt submits that Voting Trust Agreement states unequivocally that N-Krypt is the sole beneficial owner of the shares and is entitled to their return when the term of trust expires, so the rule in Saunders v Vautier governs and N-Krypt can demand the return of its shares.H: Rule in Saunders v Vautier does not apply here. Not entitled to a demand of the return of its shares.A: In this case, the beneficiary is also the settlor. The settlor beneficiary has contracted to create a voting trust for a set term as a condition of obtaining the shares which form the property of the trust. N-Krypt is not solely entitled to beneficial enjoyment of property during term of the trust. Voting trust is a special trust– trustee is empowered to vote the shares to the advantage of the company, and not necessarily the beneficiary. Voting rights which form part of property rights are enjoyed by the company and voted by CEO as trustee and in company's interest.

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Remedy: Constructive Trusts

Remedy: Grants successful applicant a proprietary interest in the asset subject to the constructive trust

When can a constructive trust be imposed as a remedy?1) Breach of fiduciary duty

a) There has been a breach of a fiduciary duty; andb) The fiduciary has acquired some asset subject to the constructive trust

2) Unjust enrichment

Why seek constructive trust over monetary award?1) No other legal avenues available to claimant: e.g. defendant might have obtained a gain through breach, but plaintiff did

not suffer deprivation or loss seek to have defendant’s gain and any interim profits held on constructive trust. See Boardman.

2) Property worth more than contribution: Claimant may have contributed to acquisition of property by another which has gone up in value; proprietary interest > monetary judgment for amount contributed

3) Property has indeterminate or arguable value: May be preferable to going through property appraisal leading to an award of damages, which might prove to be a less valuable remedy. See Lac Minerals.

4) Priority over creditors: If defendant is in financial difficulties, constructive trust could give claimant priority over defendant’s creditors– takes the property out of the bankruptcy estate. See Indalex.

5) Recovery of property from third parties: Remedies against third parties may not be available if claimant only has personal claim against defendant.

6) Special significance of property to claimant: See Soulos.7) Longer limitation period for trusts (BNSF Railway v Teck Metals)

Remedy for breach of fiduciary dutyNote: Fiduciary relationships may be found outside of trust relationships.

Analysis1) Is there a fiduciary duty?

a) Is there a “per se” fiduciary duty? Well established categories of fiduciary relationships:i. Trustee-beneficiary

ii. Director-corporationiii. Solicitor-clientiv. Uniformed person-office (Reading)v. Crown-Aboriginal people (Guerin)

vi. Fiduciary duties imposed by the law (Guerin)*Note: “Per se” categories of fiduciary relationships only establish a rebuttable presumption (Hodgkinson)

b) If not, is there an “ad hoc” fiduciary duty? Test ( Elder Advocates ): In establishing new categories of fiduciary duties, must have:

i. Reasonable implication of an undertaking by the fiduciary to act in the best interest of the “beneficiary”. Agreement, express or implied (reasonable expectation), to forsake own interests for beneficiary’s interest.

Consider scope of undertaking– undertaking to do what? ii. Vulnerability (as defined by Wilson J. in Frame):

1. Duty is owed to a defined person or class of persons; cannot be an amorphous class2. Fiduciary has the scope for exercise of some discretion or power to affect the legal/practical interests

of the beneficiary 3. Fiduciary can unilaterally exercise that power or discretion

*Note: Galambos: Power-dependency relationship is neither necessary nor sufficient to impose fiduciary obligations.

2) Was there a breach of the fiduciary duty? Relates to scope of fiduciary’s undertaking.3) Is a constructive trust appropriate? Soulos: Four conditions for constructive trust based on wrongful conduct: duty +

causation + personal/ deterrence factor in seeking remedy + third party/ creditor’s interests would not be affected1. Defendant must have been under an equitable obligation (enforceable by court of equity) in relation to activities

giving rise to assets in his hands. (If already established breach of fiduciary duty, then this ground is met).2. Must have acquired asset b/c of breach of equitable obligation, or as a result of that breach3. Claimant must show legitimate reason for seeking proprietary remedy, either personal or related to need to ensure

others like the defendant remain faithful to their duties; and4. There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the

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case– interests of intervening creditors must be protected

Per se Fiduciary RelationshipReading v The King (1951)(UKHL)

F: English soldier, serving in Egypt in 1944, had made a practice of wearing his uniform to sit in a conspicuous place in trucks trafficking goods (presumably illegal or smuggled) to enable the trucks to pass unchallenged through police checkpoints. Found in possession of a large sum of money, which was seized on the assumption that they were payment for his services. Brought proceedings to recover the money from the Crown.H: R was in breach of his fiduciary duty to the Crown and therefore not entitled to recover his profits.R: A fiduciary relationship exists in 2 types of situations:

1) Whenever the plaintiff entrusts to the defendant property, including intangible property, e.g. confidential information, and relies on the defendant to deal with such property for the benefit of the plaintiff or for purposes authorized by him, and not otherwise.

2) Whenever the plaintiff entrusts to the defendant a job to be performed, e.g. negotiation of a contract on or for his behalf and relies on the defendant to procure for the plaintiff the best terms available.

A: Falls within 1st category: R used the uniform and the opportunities and facilities attached to it to obtain the sums. Obtained the sums by acting in breach of the duties imposed by that relation.

Guerin v The Queen (1984)(SCC)

F: Dispute over lease to Shaughnessy Golf Club of Aboriginal lands. Crown signed lease with golf club on terms not agreed to by the Band. H: Crown owes a fiduciary duty to the Aboriginal people in dealing with Aboriginal land. Crown failed in fulfilling fiduciary obligations.A: Royal Proclamation and Indian Act provide for the general inalienability of Indian reserve land except upon surrender to the Crown. Purpose of this surrender is clearly to interpose Crown between Aboriginal people and prospective buyers or lessees of the land, so as to prevent the Aboriginals from being exploited. By the historic responsibility which Crown has undertaken, to act on behalf of the First Nations so as to protect their interests in transactions with third parties, Parliament has conferred upon Crown a discretion to decide for itself where the Aboriginals' best interests really lie. This discretion has the effect of transforming the Crown's obligations into a fiduciary one.

Ad hoc Fiduciary RelationshipElder Advocates of Alberta (2011)(SCC)

F: Class action against the Province of Alberta and Regional Health Authorities alleging that charges to elderly residents of long-term care facilities for food and accommodation were excessive and were not used for those purposes but were instead used to cover some of the cost of medical expenses.H: No breach of fiduciary duty b/c no duty– government cannot be held to have undertaken to act solely in the interests of one group of citizens.R: Test for fiduciary duty is essentially: Reasonable implication of undertaking + Vulnerability (incl. power by alleged fiduciary to affect legal/ practical interests that can be unilaterally applied)A: Upheld and applied Galambos’s introduction of “undertaking” in the test for fiduciary duty.

Comment: Most cases in which claimants seek to fix government with a fiduciary duty have failed. Very difficult to establish that government undertook to act solely in the interests of one group of citizens. Exception– Guerin: Fiduciary duty imposed by the law. When Crown chose to utilize specific powers granted under the Indian Act to deal with reserve lands, it undertook to act in the best interests of the relevant Band.

Galambos v Perez (2009)(SCC)

F: P made voluntary sizeable advances of cash (~$200,000) to her employer, a law firm founded by G, often without informing G beforehand. P was a part-time bookkeeper, who oversaw firm's finances and accounting. Firm provided free legal services for her and her husband's will and two mortgage transactions. Firm was failing financially, and P made various voluntary cash advances to firm during her employment. Firm went into receivership and G went bankrupt. P found herself an unsecured creditor. Recovered nothing. Sued G and firm for negligence, breach of contract and breach of fiduciary duty (if able to establish breach, then can claim under lawyer insurance fund, otherwise, just a creditor). H (unanimous!): No fiduciary duty owed by G or the firm to P. CA erred in concluding that power-dependency relationship is sufficient to establish fiduciary relationship. Also erred in overturning trial judge's factual findings that P was not vulnerable in terms of her relationship with G; essentially subbed own findings of fact for trial judge's findings of fact.R (introduced undertaking element): Fiduciary relationship requires:

1) Undertaking by a fiduciary, express or implied, that the fiduciary will act in the best interests of the other party, in accordance with the duty of loyalty reposed on him/her.

2) Discretionary power held by fiduciary to affect the other party's legal or important practical interests. Transfer of discretionary power (necessary but not sufficient factor).

Power-dependency relationship is neither necessary nor sufficient to impose fiduciary obligations. A: No per se fiduciary duty– no solicitor-client relationship re cash advances, which were independent of the retainers for the wills and mortgages. No ad hoc fiduciary duty– evidence did not establish that P relinquished her decision-making power over the loans, and G had no discretionary power over P’s interest that he could exercise unilaterally or otherwise. No vulnerability either: no express requests for loans, which makes it illogical to conclude that P could not refuse G’s requests, for there were none.

Hodgkinson v Simms (1994)(SCC)

F: Stock broker who was inexperienced in tax planning relied on accountant who specialized in real estate tax sheltering advice. Relationship had developed to point that H would invest in anything S advised him to invest. Accountant advised him to invest in some real estate investment projects, which, by conventional wisdom, were safe and conservative. Accountant did not disclose that he was also involved in structuring these projects. H bought 4 properties and suffered heavy losses when their value fell during a decline in the real estate market. H would not have invested in properties had he known that S would obtain a commission.

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H: Breach of (ad hoc) fiduciary duty. There is a relationship of dependence that gave rise to ad hoc fiduciary relationship. S acted inappropriately within ad hoc fiduciary relationship. Key findings of fact: relationship between H and S was one of trust to the extent that H would invest in anything S advised him to invest in, and H would not have invested had he known of S’s conflict of interest.A (by LaForest):

Professional advisory relationship is not a per se fiduciary relationship (no per se fiduciary relationship between accountants/financial advisors and clients, unlike solicitor-client).

Ad hoc fiduciary relationship: Must have elements of trust, confidence and reliance on skill, knowledge and advice. Reliance was found by trial judge here.

D (Sopinnka, McLachlin & Major): Distinguishing characteristic of advice giving rise to fiduciary duty is the ceding by one party of effective power to the other. Hallmark of fiduciary relationship: one party is dependent upon or in the power of the other. Requires total reliance and dependency on fiduciary. Evidence did not establish the necessary grant of power, so could not have resulted in fiduciary obligation.

Lac Minerals Ltd. v International Corona Resources Ltd. (1989)(SCC)

F: Claimant, International Corona, a junior mining company, was assembling rights and information concerning an ore body in Ontario. Entered into discussions with a much larger company, Lac Minerals, with a view of establishing a joint venture. In the course of discussions, Corona provided information to Lac about a particular property– the Williams property, which was owned by a third party. W/o concluding the joint venture or notifying Corona, Lac acquired the Williams property and then embarked on the successful development of a mine at a cost of about $150 million. Corona claimed that Lac held the mine, estimated to be worth over $1 billion, on constructive trust for Corona, with Lac being entitled only to recover the value of tis expenditures.

Trial: Damages assessed at $300 million, b/c Corona was a junior company and probably could not have acquired entire property independently.

CA: Imposed constructive trust over the mine. No need to assess value of the mine.R: Guide to imposing new fiduciary relationships (pre-Galambos: did not include requirement of undertaking)

1. Fiduciary has scope for exercise of some discretion or power2. Fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical

interests3. Beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power (relevant,

but not necessary factor). Vulnerability of beneficiary not limited to particular individual, can include class of beneficiaries.

H (3:2): No breach of fiduciary duty, but liable for breach of confidence. But for Lac acquiring the property, Corona would have acquired it. Mine held on constructive trust for Corona. Fiduciary duty:M (Sopinka, Lamer, McIntyre): Fiduciary relationship not established. No vulnerability. In commercial context, parties are expected to protect own interest.

Dependency cannot exist when dealings are between experienced mining promoters who have ready access to geologists, engineers and lawyers. If Corona placed itself in a vulnerable position to give Lac confidential information, did so gratuitously. Could have required Lac to undertake not to acquire Williams property unilaterally but didn't do that.

D (La Forest & Wilson): Found ad hoc fiduciary relationship and also unjust enrichment. Either way, a constructive trust was an appropriate remedy.

Both parties would reasonably expect that a legal obligation would be imposed on Lac not to act in manner contrary to Corona’s interest with respect to the Williams property based on relationship of trust and confidence that had developed between the parties, and well-known industry practice premised on disclosure of confidential information in serious negotiations. Corona was vulnerable to Lac, and given industry practice, Corona would not expect Lac to use this information to its detriment.

Constructive trust:M (La Forest, Wilson & Lamer): Constructive trust was the only appropriate remedy here given uniqueness of Williams property, fact that Corona would have acquired the property but for Lac’s breach of confidence, and virtual impossibility of accurately valuing the property. D (Sopinka & McIntyre): Damages are the appropriate remedy for breach of confidence. No reason to extend use of constructive trust here.

Comment: If revisiting case today, hard to find an undertaking by Lac to act only in the interests of Corona within the context of commercial negotiations. No discretionary power that Lac could exercise to the detriment of Corona.

Constructive Trust for Breach of Fiduciary DutySoulos v Korkontzilas (1997)(SCC)

F: K was a real estate broker for S. In 1984, K found a commercial building which he thought might interest S. Negotiated the purchase of the building for S. When Vendor and K had agreed on a price, instead of conveying this to S, K arranged for his wife to purchase property under her name. Wife then transferred property to herself and K as joint tenants. K told S that Vendor had changed his mind and no longer wanted to sell. Later, S learned that K had purchased property for himself. Brought action to have property conveyed to him, alleging breach of fiduciary duty giving rise to constructive trust. S asserted that property held special value to him b/c of the tenant (held great prestige for him in the community if his bank was his tenant), and abandoned claim for damages b/c market value of property had decreased from time of K's purchase (S suffered no real loss).

TJ: K breached duty of loyalty to S, but constructive trust was not appropriate b/c K had purchased property at market value and therefore had not been "enriched".

H: Constructive trust is an appropriate remedy. Does not require unjust enrichment. Constructive trust may be applied for breach of equitable obligation or unjust enrichment.

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A: 1) K was under equitable obligation in relation to property at issue. Failure to pass on to his client the information he

obtained on his client's behalf as to price vendor would accept on the property and use of that information to purchase property for himself constituted breach of equitable duty of loyalty. Duty of loyalty was an obligation a court of equity would have enforced.

2) Assets in K's hands resulted from agency activities in breach of duty of loyalty to S.3) K was not monetarily enriched by acquisition of property, but S suffered deprivation b/c of continuing desire to own

that property. Personal reasons were sufficient to justify imposition of constructive trust to return parties to the position they would have been in had the breach not occurred.

a) Policy reasons: Constructive trust required to ensure agents and others in position of trust remain faithful to duty of loyalty. If real estate agents are permitted to retain properties which they acquired for themselves in breach of duty of loyalty provided they pay market value, trust and confidence which underpin institution of real estate brokerage will be undermined.

4) No third parties would suffer from order requiring K to convey property to S, nor would K be treated unfairly.Sun Indalex LLC v United Steelworkers (2013)(SCC)

H: Constructive trust ordered by ONCA was not an appropriate remedy for the breach of fiduciary duty in this case.A: Did not find that property (pension funds) was directly related to the breach of fiduciary duty or that the breach could be traced to the property.

Remedy for unjust enrichmentAnalysis:1) Is there unjust enrichment? Test ( Pettkus ): Elements of unjust enrichment:

1. Enrichment by the defendant2. Corresponding deprivation suffered by plaintiff3. Absence of any juristic reason for enrichment (Kerr).

A) Onus on plaintiff to show no juristic reasons exist within established categories: contract, gift, legal obligation (statutory, common law or equitable).

B) If no juristic reasons within established categories, onus shifts to defendant to show other reason for enrichment. Court should consider 2 factors: reasonable expectations of the parties (mutual or legitimate reasons, cannot be one-sided expectations) and public policy considerations

2) Remedies for unjust enrichment (Kerr)1. Monetary award: Must first consider monetary award, which will be sufficient in most cases.

Mutual conferral of benefits and quantum meruit can still be quantified and remedied through damages. Also consider equitable compensation– monetary award not limited to quantum meruit.

2. Proprietary award (constructive trust): If monetary award not appropriate, then may turn to proprietary award. Plaintiff must demonstrate link or causal connection between contributions and acquisition, preservation, maintenance or improvement of the disputed property.

Share of property proportionate to unjust enrichment can be impressed with a constructive trust in plaintiff's favour

Pettkus v Becker (1980)(SCC)

F: P and B were in a common law relationship from 1955 to 1974, except for a brief separation in 1972. P developed a successful beekeeping business over the years, and came to own 2 rural Ontario properties and the proceeds from sale of a third property in Quebec. Success was not attributed to his efforts alone. B, through labour and earnings, contributed substantially to the good fortune of the common enterprise. However, B's earnings were deposited directly into P's account and lands were under P's name alone. After leaving P, B commenced action seeking declaration of entitlement to one-half interest in the lands and a share in the beekeeping business.

TJ: Awarded B 40 beehives, without bees and $1,500, representing earning from those hives for 1973 and 1974. CA: Awarded B one-half interest in the lands and in the beekeeping business

H: Constructive trust applies here. P was unjustly enriched by B's unpaid contribution. Constructive trust may apply to common-law relationships.A:

Resulting trust? No common intention. P and B did not have express arrangement for sharing economic gain. Unjust enrichment? 1) Enrichment: Had the benefit of 19 years of B's unpaid labour; 2) Corresponding deprivation:

B received little or nothing in return for her labour; 3) Reasonable expectation of acquiring interest in property: P knew or should've known of B's reasonable expectation of interest in property. No juristic reason for enrichment.

Kerr v Baranow (2011)(SCC)

R: Unjust enrichment claims may be applied to common-law relationships, notwithstanding property division legislation.Elements of an unjust enrichment claim:

1) Defendant has been enriched by plaintiff Must be a tangible benefit May be positive or negative (i.e. saves defendant money s/he otherwise would have needed to spend) Need not be a permanent benefit. Must be benefit which can be restored to plaintiff in specie or by money

2) Plaintiff has suffered corresponding deprivation3) No juristic reason for defendant's enrichment (2 step analysis)

A) Plaintiff must show that no juristic reasons exist within established categories: contract, disposition of law,

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gift, other valid common law, equitable or statutory obligationsB) If no juristic reason from established categories exist, plaintiff has made prima facie case under this step of

the analysis. Onus shifts to defendant to show there is another reason to deny recovery. Court should consider 2 factors: reasonable expectations of the parties and public policy considerations. o Reasonable expectations: Mutual or legitimate reasons, not simply expectations of either the

claimant or the defendant.Entitlement to remedy (family law context): Must show joint family venture + link between joint family venture and accumulation of assets and/or wealth. Factors:

1) Mutual effort: Whether parties worked collaboratively towards common goals2) Economic integration: Degree of economic interdependence and integration (e.g. joint bank account)3) Actual intent: Could be intent to share in wealth, or intent to not have lives economically intertwined.

Express or implied (from parties' conduct). E.g. Parties accept relationship was "equivalent to marriage" or presented themselves as being married to the public.

4) Priority of the family (i.e. detrimental reliance on the relationship, by one or both of the parties, for the sake of the family or relationship)

Haigh v Kent (2013)(BCCA)

F: H and wife moved onto K's land at K's invitation, and contributed over 20 years to K's informal, undocumented family resort business, which K later ran as a sole proprietorship. Alleged promise by K to give H one-acre parcel of the property when H first moved there. Legal ownership of property was transferred to K many years after H and wife had already moved onto land. In 2000, parties' relationship soured, and H stopped being involved in the business, but continued to live on property. TJ: Found unjust enrichment and ordered 25% of property to be held on constructive trust for H.

H: Dismissed appeal. Trial judge did not err in finding unjust enrichment, nor in ordering constructive trust. Deference to trial judge's findings of fact and determination of appropriate remedy.A: Unjust enrichment?

3) Enrichment: K had been enriched by the free labour and improvements that H provided over the 20 years. H contributed significantly to increase the value of the resort business.

4) Deprivation: Rejected K's argument that H's contributions were a form of investment in a business venture that ultimately did not produce profitable return. Resort was not a failed business, but H never got any repayment of the loan or share of the profits H did not enjoy fruits of contributions.

5) No juristic reason: A) Reasonable expectations of parties: Given promises made by K to H when they first moved onto

property, K could not reasonably expect H's occupation of his cottage to serve as compensation for his years of efforts. K had offered "partnership" in business of resort. Fruits of venture included share in the enhanced value of the land on which business was conducted, and without which it could not exist.

B) Does not fall within established category of partnership as a juristic reason: No enforceable partnership. No clear demarcation between K's interest as owner of the property and business interests of K and H.

Constructive trust? 3) Causal link: Distinction between legal and beneficial ownership of business and property was unclear and never

properly formalized. Contributions to resort business also contributed to property, and directly and significantly enhanced value of both. Contributions were so direct and significant that H is entitled to share of any profits if land were to be sold, either independently of business or together with it.

o Parties' expectations may be a factor in deciding to grant proprietary remedy but are not determinative. Proprietary remedy may be granted even where contribution is made w/o expectation of interest in particular property. Not significant that H did not expect proprietary interest

D: Claim of unjust enrichment was made out, but the appropriate remedy should have been monetary award not constructive trust. TJ failed to first address whether monetary award was sufficient, and it was.

McInerney v Laass (2015)(BCSC)

F: M and L lived in a common law relationship, but later separated. Property had been jointly purchased, and on separation date, M moved out and commenced family law action seeking petition and sale of property. Parties ended up agreeing that in exchange for L releasing any claims she may have against the Company and L's pension, she would be entitled to sole ownership of the property. Did not sign formal Separation Agreement but conducted themselves in accordance with informal agreement. L paid all of the Property's expenses. M's Company went bankrupt and creditors registered judgment against M's interest in the Property. Debts were incurred after parties agreed that L would have sole ownership of property.H: Property held on constructive trust for L.A: No intentional trust b/c no certainty of intention to create a trust. M did not do everything necessary to create a valid

trust by completing a Form A transfer and either registering it or delivering it to L. No self-declaration of trust either. Cites Mordo v Nitting.

Unjust enrichment? Yes. 2) Enrichment: L paid all of Property's expenses since agreement. M would be unjustly enriched b/c he wouldn't

have had to pay his share of expenses3) Corresponding deprivation: Yes. For same reason as above.4) Juristic reason: No. Separation Agreement suggests no intention of gift or benefit.

Constructive trust? Yes.o Counsel of HSBC referred judge to Soulos as authority that a constructive trust should not be imposed if it

would disrupt interests of creditors. Conditions outlined in Soulos are limited to where a constructive trust is ordered based on wrongful conduct.

Cathy Lee

o Pettkus is the proper authority for prerequisites of constructive trusts based on unjust enrichment. o Will consider creditors' interests, but the balance of fairness favours L.

MacKinnon v Donauer (2017)(BCCA)

F: Mother loans $150,000 to daughter and son-in-law to purchase a home. Understanding is that mother and father would move into the basement suite. Father dies and not long afterwards, the mother's son moves in with them. Daughter and son-in-law asked her when the son would be moving out. Mother and son feel insulted and move out. Daughter said mother is free to return any time– alone. Mother starts legal action claiming proprietary interest, either a resulting trust or constructive trust on the basis of unjust enrichment.H: No resulting trust, but there was unjust enrichment. No constructive trust b/c monetary judgment was sufficient. A: No resulting trust (Nishi): No intention on part of mother to retain proprietary interest at the time she transferred the

$150K, which was sufficient to rebut presumption of resulting trust. (Note: Could also argue $150K was not a gratuitous transfer, so presumptions do not even apply.)

Unjust enrichment: Prima facie would be entitled to return of money. Enrichment, deprivation and no juristic reason (no contract and no intention of gift).o TJ found other juristic reason for the enrichment: Children agreed she could live rent-free. She left on her own

accord. Found that family arrangement and the "reasonable mutual expectations" of the parties about it constituted a juristic reason for the enrichment.

o Rev’d: Mutually beneficial family arrangements does not bar recovery for plaintiffs who could prove other elements of unjust enrichment. Considering objectively what the parties could have reasonably expected in light of all the circumstances when they entered into the family arrangement (e.g. the benefit of the funds and their appreciation in the real estate market), trial judge erred in ruling that it constituted a juristic reason that justified the daughter and son-in-law retaining the entire benefit of mother's funds.

Constructive trust? No. Proprietary remedy should not be granted unless monetary judgment would be inadequate. No indication that defendants would be unable to satisfy a monetary judgment.

Issues with enforcementConstructive trust grants a proprietary interest to do anything with the proprietary interest, must apply for partition and sale of property. Otherwise, cannot register judgment against defendant (not a monetary award). Pettkus v Becker (1980)(SCC)

Although B received proprietary interest in property, could not enforce it. Required order for partition and sale of property in order to actual get any monetary compensation. Ended up chasing him for money but couldn't actually register a monetary judgment against him b/c not a monetary award. P did all he could to diminish value of his beekeeping business so B would not receive anything in the end. Ended up committing suicide…

Haigh v Kent (2016)(BCSC)

F: H seeking a vesting order of his 25% interest in the property and an order for partition and sale of property. H: Ordered undivided 25% interest in property vest in H in fee simple. Not entitled to interest in any of the profits of the business earned b/c order granted 25% interest in property (not business) held on constructive trust. Declined to order partition b/c K had > 70% interest in property so was entitled to buy H’s interest. Directed H to sell his 25% interest to K.

Cathy Lee

Other Remedies

Remedies:1) Equitable compensation: Trustee liable to account for/ restore the trust assets where trustee has improperly parted with trust

property (breach of duty to preserve trust assets)Mechanism of accounting (duty to account): Factual inquiry into what has been done with trust property. If accounting process reveals improper transaction, beneficiary has choice to adopt or reject transaction. By rejecting

transaction, trustee will have to make reality match account (restore account out of own resources).Valuation: Value of property at time trustee is called to account for the property. Internal limit– trustees will not be made liable for more than the value of that property.

McNeil v Fultz (1906): Assessment of value should be at the highest value of property during period of withholding Fales: Not necessarily, especially when breach was in good faith or w/o mala fides. Damages valued at average price

of shares (not highest intermediate value) over the 2.5-year period in which shares could have been sold.Standard/liability ( Guerin ; Canson ): If a breach has been committed, a trustee is liable to place the trust estate in the same position as it would have been in if no breach had been committed (actual loss assessed with full benefit of hindsight). Considerations of causation, foreseeability and remoteness do not readily enter into the matter.

Canson: Liability is not unlimited– compensation must be limited to loss flowing from trustee's acts in relation to interest he undertook to protect.

When should equitable compensation apply? (Canson) Certainly where fiduciary was entrusted with and misuses or loses property. Less certain in other circumstances where trustee breaches performance (majority says no, but minority says yes)Relief (s 15.4 of Trustee Act ): Allows increase to be netted off against the loss if trustee made 2 unauthorized investments, one of which increased in value and the other declinedGuerin v The Queen (1985)(SCC)

H: Breach of fiduciary duty. Equitable compensation: Loss of property leased to Golf Club lost opportunity for residential development Crown liable to compensate the whole amountValuation of loss from breach of fiduciary duty (upheld TJ’s assessment): Damages ≠ difference between lease entered into and lease that Band was prepared to authorize b/c Golf Club

would not have entered into any lease on the terms sought by the Band. Could not be said that breach caused Band to lose opportunity to enter into lease on those terms.

Damages ≠ difference between value of lease actually entered into and the amount the land was worth at the time of trial. Does not take causation into issue.

Compensation should be based on cost and profit of leasing for residential development. But for the breach, the Band would have eventually leased the land for residential development.

Canson v Boughton & Co. (1991)(SCC)

F: Canson and Peregrine Ventures entered into agreement to purchase property and enter into joint venture to develop it. Agreed to pay Treit a commission of 15% of the profit of resale. Unknown to Canson, Treit had arranged for an intermediate company, Sun-Mark, to share in the profit from the sale, a profit from which Treit would share equally. Sun-Mark entered into an interim agreement to buy the land from the vendors for $410,000, though the purchasers paid $525,000, and thus Peregrine and Treit made a profit of $115,000 from the "flip". Solicitor for the purchasers, Boughton & Co., knew of this secret arrangement, but did not disclose to Canson that the property was not being purchased directly from the vendors. Solicitor prepared different statements of adjustments and did not disclose the secret profit paid to Sun-Mark. Property development was not successful and was foreclosed on and the purchasers suffered a loss. Boughton breached fiduciary duty in failing to disclose the secret profits. Plaintiff sought compensation for losses from construction project beyond contractual damages. H: No equitable compensation. Regardless of whether equitable compensation applies here, causation was not made out. The breach did not cause the losses from the construction project.A: Breach of fiduciary duty: A fiduciary duty may be breached when the solicitor fails to inform a client of a fact of

which he should have informed him, or that he should seek independent advice. A solicitor may be liable for a fiduciary duty of non-disclosure of a factor of some importance, even when personal interest not at stake. Law does not limit fiduciary obligations to situations where the solicitor may benefit from a misstatement.

Application of equitable compensation should be restricted to fiduciaries who are entrusted with and misuse property. Compensation for other breaches of fiduciary duty should be assessed by reference to common law principles applicable to tort and contract, where foreseeability and remoteness are relevant.

D: Should not approach the matter of compensation for breaches of fiduciary duty by analogy to common law principles. Equitable compensation should be the remedy for all breaches of fiduciary duty, regardless of whether breach involved handling of property. Application: Direct link between solicitor's breach of fiduciary duty and plaintiff's losses from purchase of the

land. However, solicitor's liability did not extend to loss suffered by the plaintiff during the subsequent course of construction on the land.

Hodgkinson v Simms (1994)(SCC)

LaForest: Proper approach to damages in this case was the monetary equivalent of a rescisionary remedy (put plaintiff back in the position they would have been in). Remedy of disgorgement (of commission) is not sufficient to guard against the type of abusive behaviour engaged in by the fiduciary. Not required to mediate– should not suffer from fact that he did not discover the breach until the market has already taken its toll on his investments.

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2) Removal of trusteea) By the beneficiary (s 30 of Trustee Act): On application by any beneficiary either

i) With consent and approval of majority of trust beneficiaries; orii) By court’s inherent jurisdiction to removal trustees when the circumstances require, regardless of majority’s wishes

Fox v Fox Estate

H: Removed widow as trustee, though grandchildren (majority of beneficiaries) were probably content with widow remaining as trustee, since she encroached on the entire capital of the estate and gave it to the grandchildren, leaving nothing for her son who brought the application.

Re Smith H: Removed trust company as trustee. Breach of duty of impartiality benefited son to detriment of mother. Son probably would've been happy keeping trustee (1/2 beneficiaries).

b) By a trustee (s 86 of Trustee Act or s 2.1(2)(d) of Civil Rules)Principle ( Parker ): Court will not lightly interfere with testator’s choice of trustee. Clear evidence of necessity is required. Test ( Miles ; Parker ) : To justify removal of trustee, petitioner must first establish that removal is necessary and expedient to protect interests of beneficiaries b/c continuation of trustee jeopardizes proper and efficient administration of trust

Main concern is welfare of beneficiaries (collectively) Jeopardize proper/efficient administration of trust: Endangerment of trust property in the past or present,

whether through lack of honesty, lack of capacity or lack of reasonable fidelity; cannot agree on anything (Consiglio Trusts)

Insufficient grounds alone: Mere dissension between one of the beneficiaries and the trustee (Conroy)Unnecessary factors for removal: Trustee misconduct (Re Consiglio Trusts)– unnecessary but usually sufficient for removal if jeopardizes proper and efficient administration of trust (Miles)Letterstedt v Broers (1884)(JCPC)

Guidelines justifying removal of trustee:1. If the Court is satisfied that the continuance of the trustee would prevent the trusts being properly

executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.

2. The acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.

3. In exercising the delicate jurisdiction of removing trustees, the Court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in a matter that is so “essentially dependent on details often of great nicety.” The Court must proceed to look carefully into the circumstances of the case.

4. Where a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign.

5. The lack of jurisprudence in respect of the removal of a trustee reflects that a trustee when asked to do so, will resign.

6. If, without any reasonable ground, the trustee refuses to do so the court might think it proper to remove him.

7. Friction or hostility between trustees and the beneficiary is not of itself a reason for the removal of the trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.

Conroy v Stokes (1952)(BCCA)

F: Application brought by children of testator's first wife for removal of trustee. Trial judge granted application to remove trustees holding that "it is in the interest of all parties under the circumstances that the administration should be placed in the hands of an independent administrator". Majority of beneficiaries had expressed no dissatisfaction with administration of estate by the trustees removed. Judge did not find misconduct or breach of trust on part of trustees, or acts or omissions so as to endanger trust property. Ordered removal on the sole ground that friction had developed between applicants and trustees relative to trustee's conduct of the affairs of the estate. H: No sufficient grounds shown for removal of trustees. Reinstated trustees.R: The mere fact that there is dissension between one of the beneficiaries and the trustee is not a sufficient ground for the court to remove the trustee. Courts may remove trustees where trustee's acts or omissions endanger the trust property, or where trustee shows lack of honesty, lack of proper capacity to execute the duties, or lack of reasonable fidelity. Main guide for the court must be the welfare of the beneficiaries (collectively).A: Trustee's conduct did not endanger trust property, did not lack honesty or proper capacity to execute duties or lack reasonable fidelity. No evidence to support that the welfare of the beneficiaries as a whole has been impaired by any act or omission of the trustees.

Re Consiglio Trusts (No. 1) (1973)

F: Judge granted application by the Official Guardian of the beneficiaries to remove trustees and appoint Canada Permanent Trust company as the new trustee. Trustees opposed removal. No misconduct on part of the trustees, but it was clear from a meeting held that from the widespread misunderstandings among the 3 trustees and as a result of accusations made, bitterness had developed that would render it virtually impossible for the trustees

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(ONCA) to agree on policies having to do with the efficient management of the Trust.H: Judge did not err in removing trustees. Appeal dismissed.R: Misconduct on part of a trustee is not necessary for Court to act. Court is justified in interfering and should interfere when the continued administration of the trust with due regard for the interests of the beneficiaries has by virtue of the situation arising between trustees become impossible or improbable.

What this case stands for: Example of circumstances where applicant doesn't have to prove wrongdoing, but it's perfectly clear that trustees don't get along and beneficiaries' interests won't be served if trustees remain

Miles v Vince (2014)(BCCA)

H: Removed sister as trustee.R: Petitioner must first establish that removal of present trustee is necessary and expedient to protect interests of beneficiaries b/c continuation of trustee jeopardizes the proper and efficient administration of the trust. Actual misconduct will usually be cause to remove a trustee, but not every neglect of duty or mistake will result in removal.A: Trustee of Insurance Trust failed to protect interests of all the beneficiaries of that trust. By investing all of the trust property in the Housing Trust, put trust property at risk, put herself in a conflict of interest and failed to act with an even hand among the beneficiaries. Continuation as trustee jeopardizes the proper and efficient administration of the trust.

Parker v Thompson (Trustee) (2014)(BCSC)

F: Application to remove trustee from Family Trust by children from deceased's previous marriage. Alleged failure of trustee to exercise any discretion with respect to the Trust, failure to exercise level of prudence expected from a reasonable businessman by failing to engage in any substantive participation in Parker's affairs, acted in a manner prejudicial to the interest of the Beneficiaries and failed to ensure that the petitioner's interests were protected, acted in a conflict of interest by acting as solicitor for the Dealership and holding himself out as Janet Parker's solicitor, allowed J and C to receive unreasonable salaries, refusing appointment of co-trustee.

Background: Deceased-settlor operated Parker 46 (holding co.) and Parker's Chrysler (car dealership). Transferred shares in Parker 46 to the Family Trust with children (2 from previous marriage, 1 from second marriage) as beneficiaries. When trust was created, deceased appointed 3 trustees: himself, T (his corporate solicitor) and his corporate accountant. Accountant later resigned, leaving T to be the sole trustee. Terms of trust fully protected trustees in exercising any discretion granted to them in the Trust deed and are not liable to any beneficiary by reason of the exercise of their discretion. Trust terms also expressly waived the "even hand rule" by allowing trustees to pay income to one or more beneficiaries in his uncontrolled discretion. Upon termination of trust (December 2015), assets of Trust were to be divided in equal shares between the 3 beneficiaries. Financial welfare of Parker 46 and Trust were dependent on financial performance of dealership. Dealership was not particularly profitable at time of settlement of the Trust.

H: No grounds for removal of trustee. T actually did a great job administering the trust.R: Guiding principles in deciding whether court should remove trustee:

1. Court will not lightly interfere with testator's choice of trustees2. Clear evidence of necessity is required (but not to extent that removal must be the only course to

follow)3. Court's main consideration is the welfare of beneficiaries; and4. Estate trustee's acts or omissions must be of such a nature as to endanger the administration of the

trust Includes actual dishonesty, lack of proper capacity to execute duties or lack of reasonable

fidelity May also include inability to act impartially Length of trust term remaining is irrelevant. Does not matter if future administration of trust is

limited or that trust will terminate by its own terms soon. 5. Removal is not intended to punish past misconduct, but past misconduct that is likely to continue will

often be sufficient to justify removalA: No grounds for removal. No misconduct:

Exercise of discretion: T did consider the issue of payment of dividends but determined that given the financial condition of the Dealership, dividends could not be paid until 2013. Prudent decision, keeping with sound business practice.

Exercise of prudence: T was involved in the operations of the Companies and was consulted by the director and vice president regarding its affairs. Was aware of business operations and approved of them as being prudent business practices.

Actions prejudicial to interest of beneficiaries: T continuously reported to beneficiaries on the Companies' financial circumstances.

Conflict of interest: While T's role as trustee and role as solicitor offered the potential for conflicts of interest, which the settlor knew when he appointed him as trustee, T has not acted in any way that could be said to be a conflict of interest.

Salaries paid to J and C: Deceased had wanted J to operate the Parker Companies after his death. Remuneration not unreasonable given industry standards and the work they put in, which T knew, since he had other dealership clients.

Dealt with potential breaches of trust efficiently. J bought a boat from Parker's Chrysler and sold it at a profit. T advised her that she needed to return the profit to the company, which she did.

No need to appoint a co-trustee. Within T's discretion to continue as sole trustee, pursuant to Trust Deed.

Cathy Lee

3) Punitive/other damages: Rare and only recently have the courts begun to order damages for non-pecuniary loss and punitive damages

4) Recovery of specific property from third party: If third party acquires property as a result of trustee’s breach of trust, beneficiary is entitled to demand return of that property from third party, UNLESS party can prove defence of bona fide purchaser for value w/o notice

Why? Foskett v McKeown: Beneficiary’s claim against trustee for breach of trust is a personal claim (unsecured). Does not entitle him to priority over trustee’s creditors unless he can trace the trust property into its product and establish a proprietary interest in the proceeds.

3 ways to hold 3rd party liable for breach of trust (Air Canada):1) Trustee de Son Tort (Boardman): Person who is not appointed a trustee but takes it upon himself to possess and

administer trust property for the beneficiaries– treated as a trustee2) Knowing assistance or participation (aka accessory liability) (Air Canada): Elements of liability

1. Dishonest/fraudulent breach of trust: “Dishonesty” on the part of the trustee– Taking of a risk to the prejudice of another's rights, which risk is known to be one which there is no right to take;

2. Participated or assisted in breach of trust 3. Degree of knowledge by third party : Actual knowledge, wilful blindness or recklessness as to fact that trustee’s

action was a breach of trust.3) Knowing receipt (Citadel): Elements of liability

1. Receipt by third party: Third party/ stranger to the trust receives or applies trust property for own use and benefit (third party is enriched at beneficiary’s expense).

2. Property obtained from breach of trust : Property was subject to trust in favour of plaintiff and was taken from the plaintiff in a breach of trust

3. Degree of knowledge by third party : Constructive– Had knowledge of facts which would put a reasonable person on inquiry and fails to inquire as to the possible misapplication of trust property.

Remedy (Bank of China)– “Tracing”:1) If trust property in third party’s hands, and defence of bona fide purchaser for value w/o notice does not apply return

property to trust2) If knowing assistance liable for losses resulting from trustee’s breach (liability not reduced by contributory

negligence). Assistance must have had some causative impact in facilitating trustee's breach of duty. May be tempered by principle that a fiduciary's liability should not exceed what s/he gained in consequence of the breach of duty (Bank of China).

3) If knowing receipt but disposed of trust property could be made a “constructive trustee”, and liable for the full amount received.

Following co-mingled trust property (Oatway): Treat remaining funds as most advantageous to beneficiaries and least advantageous to claimants against trustee (e.g. creditors). Boardman v Phipps (1967)(UKHL)

H: Boardman and Tom were constructive trustees of the shares (trustees de son tort). A: B's fiduciary position arose from fact that he was at all material times solicitor to the trustees of the will of the testator. Trustees employed him as solicitor and looked to him for advice. It was as solicitor to the trustees that he obtained the information he used to buy out the shares of the company. Information was obtained on behalf of the trustees.

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

F: Guy borrowed money on a personal loan and invested it in the travel agency. Became one of two directors, and both had signing authority for the corporate bank account. Agency entered into agreement with Air Canada for ticket sales to forward receipts less commission to the airline. Though company had a separate trust account for money from ticket sales, money was placed in the travel agency’s general operating account. Directors also obtained an operating LOC from the bank. Dispute arose between the 2 directors and issued contradictory instructions to bank as to operating LOC, resulting in bank refusing to transfer funds out of the account. Bank continued to withdraw amount owing from LOC. Travel agency became indebted to Air Canada for money owing from ticket sales. Air Canada sued company and directors personally for money owed.H: Trust relationship between Air Canada and Agency. Directors were personally liable as well as corporation.A:

1) Trustee de son tort: N/A b/c directors did not personally take possession of trust property or assume office or function of trustees

2) Knowing receipt: N/A b/c money was taken by the bank.3) Knowing participation:

1. Dishonest/Fraudulent breach of trust : Knowingly took wrongful risk resulting in prejudice to beneficiary. Knew funds were held in trust for Air Canada and not for general use of travel agency, set up trust account for that money but never used it. Knew that any positive balances in general account was subject to Bank’s demand, and by placing trust monies in general account, travel agency took risk to the prejudice of rights of Air Canada as the beneficiary.

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2. Participated and assisted in breach : Dealt with funds in question. Actions protected own self-interest to the detriment of Air Canada’s interest.

3. Knowledge of breach of trust : Knowledge requirement usually not a difficult hurdle in cases involving directors of closely held corporations. Active directors usually have knowledge of all the actions of the corporate trustee. While director was not the managing director, did have knowledge of the agreement between the travel agency and Air Canada b/c signed the agreement and knew that trust funds were being deposited in the general account, which was subject to a demand loan from the bank.

Citadel General Assurance Co v Lloyds Bank Canada (1997)(SCC)

F: Drive On sold insurance to auto dealers. After collecting premiums, paid commissions and settled any current claims under the policies. Balance of premiums was remitted on a monthly basis to Citadel insurance companies, the underwriters. D started banking with Lloyds Bank and used one bank account for all its transactions. Through its senior officers, bank was aware that insurance premiums were being deposited into that account. Knew that D was reluctant to establish a trust account for the premiums but would do so if necessary. Bank received instructions to transfer funds from D's account to parent company's account to reduce overdraft. A couple months later, D advised C that the July and August premiums could not be remitted. Agreed to pay these outstanding receipts by way of promissory note. D and parent company ceased carrying on business, and C brought action against Bank for the outstanding insurance premiums.H: There was a statutory trust under Alberta’s Insurance Act. Bank is liable as a third party for D’s breach of trust.A: Trust? Statutory trust. Promissory note confirmed amounts owed by D to C, and was not a

revocation of trust. Arrangement between C and D met the characteristics of trust: certainty of intent, certainty of subject-matter and certainty of object. Fact that trust funds were co-mingled with other funds does not undermine the trust relationship.

1) Trustee de son tort: N/A b/c Bank never assumed office or function of a trustee2) Knowing participation/assistance: N/A b/c Bank only had constructive knowledge. 3) Knowing receipt:

1. Receipt and application of trust property for own use and benefit : By applying deposit of insurance premiums to offset parent company's overdraft, bank received a benefit and thus received the trust funds for own use and benefit. Deposit of trust monies in D's account was "property" not "debt obligation".

2. Knowledge : Bank was aware of the nature of funds being deposited into and transferred out of D's account. Knew that D's sole source of revenue was sale of insurance policies and premiums collected by D were payable to C. In light of knowledge, the daily emptying of D's account was very suspicious. Under these circumstances, a reasonable person would have been put on inquiry as to the possible misapplication of trust funds. Bank should have inquired whether the use of the premiums to reduce the account overdrafts constituted a breach of trust. By failing to make such inquiries, had constructive knowledge of the breach of trust.

Bank of China v Fan (2015)(BCSC)

H: Knowing participation/assistance: Satisfied that Tan had requisite degree of knowledge concerning the breach of trust and her participation in or assistance thereof.Remedy:

Kuang: Liable for entirety of bank's loss, including pre-judgment interest. Sufficient link between conduct and bank's loss due to the fraud perpetuated by the principal fraudsters. Was involved extensively in efforts to conceal the fraud and to disperse and launder funds obtained by way of the fraud. Clear that assistance was not limited to a few discrete transactions, but rather was engaged in assisting the overall pattern of fraud.

Tan: Not involved to the same degree or in the larger pattern of fraud that led to bank's loss. Involvement was more limited and directed towards specific transactions. Ordered disgorgement of profits. Also knowingly received $350,000, and judgment against Tan for that amount.

Re Oatway (1903)(UK Ch. Div.)

F: Trustee sold property for 7000£, of which 3000£ was trust property. Deposits whole amount in own account, instead of investing the 3000£ trust money. Account had 771£ at the time. Paid into account 30£ and withdrew 510£, which he used for own purposes. Purchased shares in a company for 2000£. Trustee died, and shares were later sold. Accounts emptied after death.H: If hadn't bought shares and had 3000£ left in account, then the 3000£ left is trust money.

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Protections for Trustees1) Indemnification

S 95 of Trustee Act: Basic right of indemnification from trust property for expenses and costs reasonably and properly incurred by trustees in the administration of trust and in discharging duties.

2) Exculpationa) By trust instrument: Cannot exclude liability for gross negligence (Poche), dishonesty/fraud or conscious decision to act

contrary to best interests of beneficiaries (Armitage). Can exempt liability for negligence or deliberate failure to perform duties where trustees honestly believe it to be in the best interests of beneficiaries if they do not comply with their duties.

Armitage v Nurse (1997)(UKCA)

F: Trust instrument provided that "no trustee shall be liable for any loss or damage which may happen [to the trust fund] at any time or from any cause whatsoever, unless such loss or damage shall be caused by his own actual fraud".H: Allowed exclusion of liability for gross negligence. A: Interpreted “fraud” to mean dishonesty– intention on part of trustee to act, knowingly or with reckless indifference, in a manner contrary to beneficiaries’ interest. Interpreted clause as allowing exclusion of liability for trustee's actions, no matter how indolent, imprudent, lacking in diligence, negligent or wilful the trustee may be so long as he has not acted dishonestly. No authority that precluded settlor from excluding liability for "gross negligence".

Re Poche (1984)(ABQB)

F: Will contained clause that exonerated trustees from liability for any loss not attributable to her own dishonesty or to a wilful commission by her of any act known to her to be a breach of trust. Loss in question was due to trustee's omission, not commission. No dishonesty on part of trustee nor wilful commission of any act in breach of trust.H: Clause exempting liability for "gross negligence" was ineffective. Clause cannot relieve trustee from liability for a loss resulting from own gross negligence.R: A trustee must be held responsible for any loss resulting from his gross negligence, regardless of any provision in the trust instrument relieving him from such liability.

b) By court (statutory exculpation under s 96 of Trustee Act): Court may relieve trustee either wholly or partly from personal liability where trustee has acted honestly and reasonably, and ought fairly to be excused for the breach of trust

Fales v Wohlleben Estate(1977)(SCC)

H: Exonerated W, but not CP. R: S [96] is a remedial legislation allowing relief where standard of conduct that courts have expected of trustees, at certain times and in certain circumstances, have been unduly harsh or inflexible. Considerations:

1) Whether breach was merely technical or minor error in judgment2) Whether decline in value of trust asset was attributable to general economic conditions3) Whether trustee was a person who accepted position as a friend/relative, or whether trustee

was a professional trustee (company organized for purpose of administering estates and presumably chosen b/c it will have specialized departments and experienced officials)

A: CP had not given W an intelligent analysis and she hadn't received annual reports that revealed the grave financial situation of the company. Acts were not greatly less nor more than one might expect of a person in her position: housewife with young children who used to be a school teacher. Extent of business exposure was a 3 months' night school course on "How to Invest your Money". Made all the decisions she was asked to make within the limits of her experience and knowledge.

3) Consent or acquiescence by beneficiaryDefence: Beneficiary gave fully-informed consent to the course of action which constituted a breach of trustWaters’ Law of Trusts:

4) Not necessary for trustee to show that beneficiary knew the proposed or perpetrated action or omission constituted a breach of trust

5) Concurrence: Must fully understand what he is concurring in6) Acquiescence: Must be fully informed of his rights and of all material facts and circumstances of the case7) Whether alleged approval comes before or after the breach, there must be no question of concealment of information

by the trustee or the omission to tell the beneficiary facts concerning the matter. It is irrelevant that the trustee himself was ignorant of any particular fact b/c it is the state of mind of the beneficiary that is in question.

8) If trustee who is in a conflict of interest seeks concurrence from beneficiaries on the basis of full disclosure, beneficiaries may very well need to receive ILA

Boardman v Phipps (1967)(UKHL)

Had trustees been fully aware of what Boardman was doing and consented to what he was doing, then in principle, Boardman would have been allowed to keep the profits of his endeavour.

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Cathy Lee