Equity & Trusts
Prof. J. Glenn (Fall 1999)
by Trent Mell
A. INTRODUCTION .....................................................................................................................................................1
1. HISTORICAL INTRODUCTION ......................................................................................................................................1
2. NATURE OF THE TRUST .............................................................................................................................................3
3. NATURE OF A BENEFICIARIES INTEREST ....................................................................................................................4
4. TRUST CONTRASTED WITH OTHER RELATIONSHIPS ...................................................................................................5
a) Fiduciary Relationships .......................................................................................................................................5
Hodgkinson v. Simms (S.C.C., 1994) ................................................................................................................................ 5
b) Contract ...............................................................................................................................................................6
Re Schebsman (Eng. C.A., 1994) ....................................................................................................................................... 6
c) Debt ......................................................................................................................................................................6
Air Canada v. M & L Travel (S.C.C., 1993) ...................................................................................................................... 7
d) Powers ..................................................................................................................................................................7
B. ADMINISTRATION OF TRUST ............................................................................................................................7
1. IDENTITY OF TRUSTEES .............................................................................................................................................7
a) Appointment .........................................................................................................................................................7
b) Retirement ............................................................................................................................................................8
Re McLean (1982, Ont. S.C.) ............................................................................................................................................. 8
c) Removal ................................................................................................................................................................8
Conroy v. Stokes (B.C.C.A., 1952) .................................................................................................................................... 9
2. DUTIES OF A TRUSTEE ...............................................................................................................................................9
a) Generally ..............................................................................................................................................................9
Bentley v. Canada Trust Co. (1992) B.C.S.C. .................................................................................................................... 9
Froese v. Montreal Trust Co. of Canada (1996) B.C.C.A. ............................................................................................... 10
Re Wright (Ont. H.C., 1976) ............................................................................................................................................ 10
b) Duty (Standard) of Care ..................................................................................................................................... 10
Fales v. Canada Permanent Trust Co.; Wohlleben v. Canada Permanent Trust Co. [1977] SCC ..................................... 11
c) Duty to Act Personally........................................................................................................................................ 11
Speight v. Gaunt (H.L., 1883) .......................................................................................................................................... 11
d) Duties of Investment ........................................................................................................................................... 11
Principles of investment........................................................................................................................................................ 11
Learoyd v. Whiteley (H.L., 1887) .................................................................................................................................... 12
Nature of Investments - Trustee Act, s.26 et seq................................................................................................................... 12
Cowan v. Scargill 1985 1 Ch. 285 .................................................................................................................................... 12
E) Duty to Act Impartially ...................................................................................................................................... 12
Even-Hand Rule.................................................................................................................................................................... 13
Re Smith (1971, Ont. S.C.)............................................................................................................................................... 13
Apportionment and the Duty to convert................................................................................................................................ 13
Apportionment between Income & Capital ............................................................................................................ 14
Lottman v. Stanford [1980] S.C.C. ................................................................................................................................... 14
Corporate Distributions......................................................................................................................................................... 14
Re Waters (S.C.C., 1956) ................................................................................................................................................. 14
Allocating Expenses ............................................................................................................................................................. 14
F) Duty to Account ................................................................................................................................................. 14
Sanfor v. Porter (1889, Ont. C.A.) .................................................................................................................................... 15
Re Londonderry's Settlement (1964, All E.R.) ................................................................................................................. 15
3. POWERS AND RIGHTS OF TRUSTEES.......................................................................................................................... 15
A) Administrative Powers ....................................................................................................................................... 15
B) Dispositive Powers ............................................................................................................................................ 15
Power of maintenance ........................................................................................................................................................... 16
Re McIntyre; McIntyre v. London and Western Trusts .................................................................................................... 16
Power of Advancement ......................................................................................................................................................... 16
C) Right to Remuneration ....................................................................................................................................... 16
Payment ................................................................................................................................................................................ 16
Re Atkinson Estate (1952, Ont. C.A.) .............................................................................................................................. 16
Indemnity .............................................................................................................................................................................. 16
Thompson v. Lamport (1945, SCC) ................................................................................................................................. 17
Set-off ................................................................................................................................................................................... 17
Re McMahon and Canada Permanent Trust (1980, BCCA) ............................................................................................. 17
4. REMEDIES FOR A BREACH OF TRUST ........................................................................................................................ 17
A) Personal Remedies ............................................................................................................................................. 17
i) Generally ........................................................................................................................................................................... 17
ii) Compensation................................................................................................................................................................... 17
Guerin (1984, SCC) .......................................................................................................................................................... 18
Canson Enterprises v. Boughton & Co. (S.C.C., 1991) .................................................................................................... 18
iii) Account ........................................................................................................................................................................... 19
MacMillan Bloedel v. Binstead (B.C.S.C., 1983)............................................................................................................. 19
b) Proprietary Remedies ......................................................................................................................................... 19
i) Generally ........................................................................................................................................................................... 19
ii) Following at Law ............................................................................................................................................................. 20
iii) Tracing in Equity............................................................................................................................................................. 20
Ontario (Securities Commission) v. Greymac Credit Corp. (Ont. C.A.) – SCC aff’d (772) ............................................. 22
Re Diplock: Diplock v. Wintle [1948] Ch. 465 ................................................................................................................ 23
c) Defences of Trustee ............................................................................................................................................ 23
i) Generally ........................................................................................................................................................................... 23
ii) Exculpation and Excuse ................................................................................................................................................... 24
Fales v. Canada Permanent Trust [1996] S.C.C. .............................................................................................................. 24
C. EXPRESS TRUSTS ................................................................................................................................................. 24
1. CREATION OF EXPRESS TRUSTS ............................................................................................................................... 24
A) Capacity ............................................................................................................................................................. 24
1. Settlor ........................................................................................................................................................................... 25
2. Trustee .......................................................................................................................................................................... 25
3. Beneficiaries ................................................................................................................................................................. 25
B) Three Certainties ............................................................................................................................................... 25
Generally .............................................................................................................................................................................. 25
Re Walker (1925), 56 O.L.R. 517. ................................................................................................................................... 25
i) Certainty of Intention (145) ............................................................................................................................................... 26
Johnson v. Farney (Ont. App. Div., 1913) ........................................................................................................................ 26
ii) Certainty of Subject Matter .............................................................................................................................................. 26
Re Romaniuk Estate (Alta. S.C., 1986) ............................................................................................................................ 26
Re Golay’s Will Trust (Ch. D., 1965) .............................................................................................................................. 27
iii) Certainty of Object .......................................................................................................................................................... 27
A. FIXED TRUSTS ......................................................................................................................................................... 27
B. DISCRETIONARY TRUSTS ..................................................................................................................................... 27
McPhail v. Doulton (1971) H.L. @155 ............................................................................................................................ 27
Re Baden (No. 2) (Eng. C.A., 1972) – [McPhail] ............................................................................................................ 28
DISCRETIONARY TRUSTS COMPARED WITH POWERS OF APPOINTMENT .................................................... 28
Re Weeks’ Settlement (Ch. D., 1897) .............................................................................................................................. 29
Re Gulbenkian’s Settlement (1970) H.L. @129 ............................................................................................................... 29
C) Constitution of the Trust .................................................................................................................................... 30
i) Methods ............................................................................................................................................................................. 30
A. TRANSFER OF PROPERTY ..................................................................................................................................... 30
Carson v. Wilson (Ont. C.A.) ........................................................................................................................................... 30
Re Rose ............................................................................................................................................................................ 31
B. DECLARATION OF TRUST ..................................................................................................................................... 31
Paul v. Constance (Eng. C.A., 1977) ................................................................................................................................ 31
C. PROMISE OF FUTURE TRANSFER (INCOMPLETELY CONSTITUTED TRUSTS) ........................................... 31
Re Kay’s Settlement (Ch.D., 1939) .................................................................................................................................. 32
Re Cook’s Settlement Trusts ............................................................................................................................................ 32
Re Ralli’s Will (Ch.D., 1964 ............................................................................................................................................ 33
ii) Formalities ....................................................................................................................................................................... 33
A. INTER VIVOS ............................................................................................................................................................ 33
Rochefoucauld v. Boustead .............................................................................................................................................. 34
B. ON DEATH ................................................................................................................................................................. 34
Fully-secret Trusts ............................................................................................................................................................ 34
Ottawa v. Norman (Ch.D., 1972) ..................................................................................................................................... 34
Semi-secret Trusts ............................................................................................................................................................ 34
2. VARIATION AND TERMINATION ............................................................................................................................... 35
a) Revocation by Settlor ......................................................................................................................................... 35
b) Termination by Beneficiary ................................................................................................................................ 35
The Rule in Saunders v. Vautier ........................................................................................................................................... 35
c) Variation by Court.............................................................................................................................................. 36
(1) COURT’S INHERENT JURISDICTION ................................................................................................................... 36
Chapman v. Chapman (1954, HL) .................................................................................................................................... 36
(2) VARIATION OF TRUST LEGISLATION ................................................................................................................ 36
Re Irving (Ont., 1975) ...................................................................................................................................................... 37
Teichman v. Teichman (Man., 1996) ............................................................................................................................... 37
D. PURPOSE TRUSTS ................................................................................................................................................ 37
1. CHARITABLE PURPOSES........................................................................................................................................... 37
a) Generally ............................................................................................................................................................ 37
* Rules .................................................................................................................................................................................. 37
Morice v. Bishop of Durham (1804, Ch.) ......................................................................................................................... 38
Commissioners for Special Purposes of the Income Tax v. Pensel [1891] (853) ............................................................. 38
b) Heads of Charity ................................................................................................................................................ 39
i) Relief of Poverty ............................................................................................................................................................... 39
Jones v. T. Eaton Co. (1973, SCC) ................................................................................................................................... 39
ii) Advancement of Religion ................................................................................................................................................. 39
Gilmer v. Coats (HL, 1949) .............................................................................................................................................. 40
iii) Advancement of Education ............................................................................................................................................. 40
Incorporated Council of Law Reporting for England & Whales v. A-G (C.A., 1972) ..................................................... 40
iv) Other Purposes Beneficial to Community ....................................................................................................................... 40
Re Laidlaw Foundation (Ont. SC, 1984) .......................................................................................................................... 41
c) Requirement of Public Benefit ............................................................................................................................ 41
Gilmer v. Coats (HL, 1949) .............................................................................................................................................. 41
Re Pinion (Eng. C.A., 1965)............................................................................................................................................. 41
d) Requirement of Exclusivity (Imperfect Charitable Trusts) ................................................................................. 42
Chichester Diocesan Fund & Board of Finance v. Simpsons (HL, 1966) ........................................................................ 42
Re Loggie, Brewer v. McCauley (SCC, 1954) ................................................................................................................. 42
e) Impossibility (cy-près doctrine) .......................................................................................................................... 42
Re Spence’s Will Trusts (Ch.D., 1978) ............................................................................................................................ 43
Canada Trust Co. v. O.H.R.C. (Ont. C.A., 1990) ............................................................................................................. 43
2. NON-CHARITABLE PURPOSES .................................................................................................................................. 44
a) Traditional Approach ......................................................................................................................................... 44
Re Astor’s Settlement Trusts (Ch.D., 1952) ..................................................................................................................... 45
b) Modern Trends ................................................................................................................................................... 45
i) Identifiable “beneficiaries” ................................................................................................................................................ 45
Re Denley’s Trust (Ch.D., 1969) ...................................................................................................................................... 45
ii) Legislation ........................................................................................................................................................................ 45
Perpetuities Act (Ont., s. 16) ............................................................................................................................................ 45
Wood v. R. (Alta. S.C., 1977) .......................................................................................................................................... 46
iii) Unincorporated associations............................................................................................................................................ 46
Re Lipinski’s Will (Ch.D., 1977) ..................................................................................................................................... 46
Equity and Trusts; Professor Jane Glenn (Fall 1999)
by Trent Mell
A. Introduction
Classic maxims of equity
1. Equity will not suffer a wrong to be without a remedy
2. Equity follows the law
3. Where the equities are equal, the first in time shall prevail

same applies in CL

e.g.: Life estate then fee simple granted
4. Where the is equal equity, the law shall prevail

e.g.: X  trustee in fee simple (legal) in trust for B in FS (equitable)

if trustee sells it to P, who knows nothing of the trust, equal equity - law prevails
5. He who seeks equity must do equity

looks to the future
6. He who comes to equity must come with clean hands

looks to the past
7. Delay defeats equity

Notion of laches (Fr.)

i.e.: equity aids the vigilant

Not like CL where prescription delays are fixed
8. Equality is equity

In the absence of any other indicator, the solution will be one that treats people equally

e.g.: constructive trusts (matrimonial home); common tenancy - favours equality unless it would be unjust

Seen particularly with discretionary trusts
9. Equity looks to intent, not form

One of the three certainties
10. Equity recognizes as done what ought to be done

Where a sale is incomplete, equity will regard it as done
11. Equity does not assist a volunteer

To be a plaintiff, must have given value (can’t enforce a gift…)

Thus, where a trustee makes a gift of the property it administers, no protection in E
12. Equity acts against the person - in persona (as opposed to in rem)

E issues an order to do / not to do
1. HISTORICAL INTRODUCTION
Use & trusts are creatures of Equity

Evolved because of the separation of the courts of common law & equity

Unique because of its flexible
Pre-Fusion

Chancellor assumed jurisdiction over matters of conscience

Enforcement: enjoined the wrongdoer from doing what common law said he had a right to do

Quarrel: Lord Coke (Chief Justice) & Lord Ellesmere (Lord Chancellor); King James decreed in favour of Chancery
Distinction

Common law declares rights

Equity acts in personam, it soed not declare rights
Fusion

Concurrent jurisdiction of common law & equity

But to the extent there is conflict, equity prevails

No superiority since equity did not annul CL judgment; it merely required that it not be enforced in certain
circumstances.

Equity is not a self-sufficient system, it presupposes the existence of common law & adds to it
1
Uses

Origin of the modern trust

4 periods:
1.
2.
3.
4.
First period: 13th century – 1400

Uses were obligations of conscience, not enforceable
Second period: 1400 – 1535

Chancellor began demanding that obligations of conscience be honoured

Lays foundation for distinction between legal & equitable interests in land
Third period: 1535 - 1635

Statute of Uses – meant to execute the use and give legal title to the cetui que use (beneficiary)
Fourth period: ~1635

Began finding ways around Statute of Uses
Development of Trusts

Could create a use upon a use and would be enforced by the Chancellor

Only first use executed (result: equitable interests revived)

Began to be called a trust (“in trust for” instead of “to the use of”)

In time, applied not just to land but also to chattel (trusts of personalty)
Class Notes:

Internal flexibility of CL cts via statute of Westminster was sufficient for contracts & torts

But not sufficient in property law, particularly with the introduction of uses: two people claiming title

Thus, much of the flexibility developed externally to CL cts for property law
By 19th century, two parallel court structures & sets of rules

separate but occasional points of contact / conflict, which required settlement

Doctrine of paramountcy developed: In equity would seek a common injunction from a person acting of CL rights. K
James II came down on the side of equity so that in cases of conflict, equity prevails
In the fully developed system, equity was systematized in three groups:
1. Exclusive jurisdiction
- Rights recognized by equity
2. Concurrent jurisdiction
- Remedies where CL remedy (damages) are insufficient
specific performance of a K; injunction to restrain a nuisance, etc.
3. Auxiliary jurisdiction
- Procedures available in equity were more modern - compelled testimony, etc.
Pre-fusion
Maxim: Equity follows the law - 3 meanings:
1. Equity does directly interfere with or change the CL. It imposes its own results of the matter.

e.g.: will not refute the title of a trustee; it merely imposes an equitable obligation on that trustee
2. Equity applies the CL solution where possible

Follows CL rules where possible so that system not entirely different.

e.g.: Doctrine of estates (life, fee simple/tail); interferes with rules only where necessary
3. Equity won’t exercise its auxiliary jurisdiction unless the person had a bona fides CL right

e.g.: no injunction if not CL k’l right
Preliminary steps towards fusion
1. Legislative - Common Law Procedure Act, 1854

Gave CL cts limited power to order injunctions (eq. remedy)
2. Legislative - Chancery Amendment Act, 1858

Gave cts of Equity a limited power to order damages
Fusion

1875 (UK), 1881 (Ont.)

Are we asking a judge to wear two hats intermittently or is the result of fusion more complete?

The common view is that the fusion is complete - don’t tend to view the two as distinct1
1
See S.C.C. in Canson Enterprises v. Boughton (1991).
2


Increasingly, SCC fuses remedies, without regard to the nature of the claim. Will compel testimony is contract case
(procedural). Although there is some hesitation about imposing equitable remedies in CL cases or vice versa
Trusts are the clearest examples of fusion
2. NATURE OF THE TRUST
Trusts
_______________________|________________________
|
|
Express
Implied
(act of parties)
(operation of law)
_______|_____________
_______|_____________
|
|
|
|
persons (private)
purpose
resulting
constructive/remedial
_________|___________
|
|
public purpose (charitable)
private purpose (non-charitable)
Further classification:

Executed trusts: beneficial interests completely set out (strictly construed by courts)

Executory trusts: only general intentions expressed (courts will consider whole instrument to ascertain intention)
By operation of the law

Resulting: Propery returns to settlor

Constructive: Restitutive device to prevent unjust enrichment

Implied
Trust

An equitable relationship imposing fiduciary duties on trustee…

Fixed trust:
No discretion on amount or proportion of distribution

Discretionary trust: Discretion of trustee on amount distributed and/or to which beneficiary

Bare trust:
Trustee no longer has active duties other than conveying property upon demand
Instrument

Settlement – through a deed

Testament – through a will
Beneficiary

Can call for the property if sui juris (no legal incapacity) and solely entitled to property
Trustee

Active trustee - usual form

Bare / passive trustee - for tax or other reasons, could have a trustee with no active duties to perform. These are
exceptional & generally not part of the course.
Two Types of Trustee Powers
1.
Administrative powers

Power to sell, mortgage, invest

To be distinguished from duties, like the duty to insure
2.
Dispositive powers

Powers to pay or transfer property to beneficiaries: appointment, maintenance, advancement & encroachment

Always discretionary to the trustees

Powers, not duties
(a) Appointment (discussed later in course)

Can be general, special or hybrid
3
(b) Power of maintenance

Power to take assets in anticipation of an equitable claim, in order to sustain the person

Where there is a contingent remainder; no proprietary right (e.g.: under 18)
(c) Power of Advancement

For the benefit of the remainder person

Right to give the beneficiary some of the capital in advance of the right (regardless of whether the right is
contingent or vested). May have a present remainder right - can’t accept until person dies.
(d) Power of Encroachment

For the benefit of the life tenant

Where the life tenant is only entitled to interest income but it proves insufficient to sustain their needs, can
take some of the capital from the remainder person
Modern Uses
1. Estate planning
2. Tax planning
3. Public trusts

charitable
4. Business applications
5. Statutory trusts
3. NATURE OF A BENEFICIARIES INTEREST
Rights of a Beneficiary

Beneficiary has rights (benefits)

Trustee has duties (obligations)
Beneficiary’s interest: Personal or Proprietary?

Oosterhof & Gillese: both

Depends on the context of the question
1. Personal aspect

Personal remedy against trustee for breach of trust (equity).

Goal is to put the person in the position they would have been in had the breach not occurred.

Examples:

Trustee improperly administered the trust

Trustee has access to property

Entitled to an accounting for profits, not the property in specie (generally)
2. Proprietary aspect

Proprietary relationship: generally no property rights in specific property held in trust: rights are usually attached
to the fund, not the specific assets

Exceptions:

If sui juris and solely entitled, can invoke Saunders v. Vautier rule

Baker v. Archer (p. 26): Whether the interest held is taxable depends on language of the instrument.
Questions whether the fund was the beneficiary’s property. Generally, the answer is no but here as with
certain other cases, the court pierced the corporate veil & held the shares to be her property.

Tracing allowed where property misapplied: Where a trustee has, in breach of trust, sold an asset, can seek a
proprietary remedy over the property of the trust. Pertinent where a trustee is not in a position to
compensate for the loss. (larger exception than #1)

E.g.: trustee  3rd  will to M  gift to G. Where trustee sells to a third person, who had notice
that the asset was from a trust. Property is followed and holder becomes a constructive trustee (as
would the heirs or the recipient of a gift).
4
Common law v. civil law

In common law, don’t ask who has ownership since usually dispersed

Is the trust a legal person? Not necessary to over-analyze (“who cares”).
4. TRUST CONTRASTED WITH OTHER RELATIONSHIPS
A) FIDUCIARY RELATIONSHIPS
SCC has held2 that the existence of a fiduciary relationship can be inferred from the facts, such as:
1. Discretionary power
2. Ability to exercise the power in the interest of another
3. Vulnerability
4. Reliance
The most important duty is that of loyalty, which includes the obligation to act honestly, prudently, even-handedlt and in
the best interests of the beneficiaries

Fiduciary’s interests are inferior to those of the beneficiary

Can’t act in a self-interested fashion
Unique characteristics with trustees
1. No trust without property
2. Is the most intense fiduciary duty (high standards)
Hodgkinson v. Simms (S.C.C., 1994)3

Plaintiff retained an investment counsellor, stating investment objectives while trusting advisor’s stock advice

Lost money on a real estate venture in which the advisor had a pecuniary interest

Is there a fiduciary duty?
Held:

Beyond the traditional categories, can infer a FD upon evidence of a mutual understanding that one party has given
up own self-interest and agreed to act for another (finding of fact)

Will depend on the reasonable expectations of the parties, which itself depends on factors like trust, confidence,
complexity of the subject-matter and community & industry standards

Broker-client relationship is not per se a fiduciary one but is elevated to that status where there is trust, confidence in
the broker and reliance on his advice
Relationships where F/Ds mayn arise:

Re Property interests
(1) Trustees
(2) Personal representatives
(3) Bailiffs, sheriffs

Re Information and opportunity
(4) Officers & directors of companies
(5) Bankers, solicitors, etc.

Also Re information and opportunity but less chance to work on opportunities as employees
(6) Other agents
(7) Employees, joint ventures, etc.
Courts have gradually broadened the fiduciary relationships (1  7) to include other relationships

Requirement of proof of relationship is higher as you proceed down the list

Court’s starting point was that there was a presumption of a FD relationship and the presumption must be rebutted

Court is looking for a power-dependency relationship

Thus, moving beyond a purely economic realm (proprietary) to a personal realm (non-proprietary)
F/D - summary
1. Duty of loyalty
2
3
Canadian Aero Services v. O’Malley [1974]
Statements in this case is akin to Donoghue v. Stevenson in their revolutionary steps away from tradition
5
2.
3.
Subordination of own interests
Economic towards non-economic relationships
Although FD is about equity…

FD may overlaps with common law principles like: equitable principles, unconscionability, duress and undue
influence

In breach of contract FD may involve issues like: Negligence; Duty of care; and Misrepresentation

In common law restitution FD may involve issues like: money had & received

In contracts FD may involve issues like: Duty of good faith
Not clear on parameters of above 4 points
Point is that there is a substantial merging of common law and equity

Not distinct analyses between equitable & common law principles

The enlarged notion of F/D allows a co-mingling of remedies: by saying that a breach is not just common law but a
question of equity as well, have access to stronger remedies
B) CONTRACT
Trust and contract are quite different:
1. K from mutual agreement & reciprocal obligations;
2. Consideration is essential to a K
3. Transfer of property to a trustee is essential to a trust
4. Contracts create personal rights between parties where a trust (a creature of equity) creates proprietary right for
the beneficiary
5. Privity of contract excludes third parties from suits
6. Different limitation periods
Two ways a beneficiary can modify the provisions of a trust
1. Rule in Saunders v. Vautier

Where all beneficiaries agree and are legally capable, can wind-up
2. Variation of Trust Act

Can modify trust (rather than terminate) upon application to the court
With a trust, can avoid the problem of third party beneficiaries
Re Schebsman (Eng. C.A., 1994)

In exchange for retiring, employer agreed to pay a sum to S during his lifetime and to his family after his death

S went bankrupt and died

Trustee in bankruptcy claims the sums belong to the bankrupt’s estate
Held:

At issue is a tripartite contract which, once made, could not be altered without the consent of all parties

The issue, therefore, is not whether equity should intervene to help the widow but whether equity should intervene to
help trustee.

Court held that equity should not interfere with this contract.
Review after looking at improperly constituted trusts (court however says that such analogies are misleading)
C) DEBT
Distinction between a trust and debt is important, especially when a trustee is insolvent (since creditors will seek all of
trustee’s assets)

Test: what did the parties intend

Difficulty lies in applying the test
Distinctions between a debtor and a trustee
1. Debtor is not a fiduciary
2. Creditor has no interest in the property of a debtor; there is merely a personal obligation to repay
3. Debt is the result of an agreement; it can be the result of a compromise, can be altered, extinguished…
4. Debtor always remains liable until debt paid but trustee only liable for losses that are his fault
6
5.
6.
Debtor has not duty to invest or deal with property in a particular manner
Beneficiary
Air Canada v. M & L Travel (S.C.C., 1993)

Agreement was that money from ticket sales would be held in trust. Accounts set up but never used

A/C sued company and two directors personally for breach of trust

Successful in Ont. C.A.
Held: (for A/C)

Must look at the intention of the parties; agreement prevent the use of funds by the agency…

Relationship was one of trust since, per CP Air v. CIBC, the 3 certainties existed)

As a result, creditors (bank) were not intended pari passu with regards to this money

Director in breach
D) POWERS
A power is an “authority” to do something; it does not impose an obligation to do

2 general types: administrative & dispositive

e.g.: power of attorney
Appointment

General: anyone in the world can be appointed

Special: Restricted to a class

Hybrid: Anyone except certain designated individuals
Holder of power

Personal capacity:
1. Can ignore it with impunity
2. Attached to the person
3. If exercised, must do so honestly and per terms of the grant

Fiduciary:
1. Must consider exercising the power in accordance with duties as a fiduciary
2. Attached to the position
3. If exercised, must do so honestly and per terms of the grant
B. Administration of Trust
1. IDENTITY OF TRUSTEES
Relationship one of: rights & obligations - Trustee function is an onerous one
1. Remuneration can be provided for in the instrument

Early English cases held that trustees had to act gratuitously but position not adopted in Canada

Could even apply to court for remuneration

Usually seen in the form of professional trust companies
2. Gratuitous, familial trustee
What is the best choice?

Statute assumes a professional is best

Glenn disagrees: may have professionals doing too much or too little
A) APPOINTMENT
Order of sources re appointment
1. Settlor – ceases once trust is created
2. Trust instrument / document (primary source)
3. Non-judicial means (Statutory provisions)

Has existed since late 19th century - now the preferred source

Essentially keeps the appointment of replacement trustees with the remaining trustees.

Ontario:
7
4.
(1) per trust instrument;
(2) remaining trustees;
(3) personal representatives of last surviving trustee
Inherent jurisdiction (of equity): Application to court - fall back position after trust document
Lessons from case law:
1. Re Brockbank; Ward v. Bates

Beneficiaries have no say

Consenting adult beneficiaries can terminate the trust and create a new one but tax implications may arise

Power of appointment belongs with remaining trustee; provided it is done in the interest of the trust &
beneficiaries
2.
Re Moorehouse

Upon an application to the court, it may ignore the wishes of a trustee

Outgoing trustee has no say; unconditional retirement

Furthermore, in this particular case, the retiring trustee (also a life tenant) wanted her solicitor as replacement
(potential conflict situation)
Rules shed light re proprietary rights over the property

Can provide for the replacement in the trust instruments

If it is an inter-vivos trust, the settler can keep the right to himself

Replacement power must be expressly provided for
Section 3 puts a lot of emphasis of the ability of trustees to select replacement

Per section 5, courts can substitute or add a trustee where the instrument does not provide for another method

A court order is also desirable when a trustee is deemed unfit
Re choosing who will manage the money:

S has the initial power

B has none

trustee and court have power over replacement
Other provinces:

No court - Mb does not have judicial appointment powers - statutorily

Court only - NB & PEI are the opposite of MB: court appointment power

In the middle - Ontario
B) RETIREMENT
Trustee
1. Trust instrument
2. Otherwise legislation: deed obtaining the consent of co-trustees
Personal representative

Must file a deed with a court and obtain an order
Re McLean (1982, Ont. S.C.)

Applicant obtained a deed to retire as trustee but remained as executor for a time. Then applied to court for removal
as executor (incapable of continuing).
Held:

The two offices are separate; they are not indivisible. Thus can resign as trustee & remain as executor

Trustee: Concerned with enjoyment of property by successive persons

Executor: Concerns narrower – limited to winding up affairs of the deceased
C) REMOVAL
1.
Trust instrument
8
2.
Otherwise either:
(a) Non-judicial power of appointment

Removal through substitution; for just cause
(b) Application to the court

Under inherent jurisdiction or power conferred by statute
Forced removal of a trustee

ss. 3 & 5 deal with the issue to the extent that one can be removed if unfit or bankrupt

Need a just reason (competence reasons): misconduct, unable or unwilling to carry out duties, etc.

Court: must be guided by principle that not removing a trustee would jeopardize the trust assets or the welfare of
beneficiaries

Application of rules is not apparent
Conroy v. Stokes (B.C.C.A., 1952)

Two trustees appointed under a will. 2 of the 5 trustees wanted to remove the trustees due to friction between them
and dissatisfaction with the way trust was being administered.
Held:

Beneficiaries cannot dictate removal of trustees: removal is at the discretion of the courts.

Criteria: serious misconduct, endangering the assets, etc. Mere fact that there is dissention is insufficient

Main principle: "Welfare of the beneficiaries"
2. DUTIES OF A TRUSTEE
A) GENERALLY
Components of fiduciary duty

Loyalty

Selfless Responsibility

Stricter morals than the market place

Beyond simple honesty
Duty of loyalty underlies all other duties

It is the duty to act solely in the best interests of the beneficiaries

Underlies: duty to perform personally, invest the trust assets, act impartially, provide information and account
Upon appointment, trustee must:
(a) become acquainted with terms of the trust;
(b) become acquainted with the state of the trust property;
(c) ensure property properly invested;
(d) if a new trustee; ensure there were no prior breaches
Waters identifies three fundamental/substratum duties of trustees
1. Cannot profit personally from position

No conflict of duty & interest
2. Must ask honestly, with that level of skill and prudence that would be expected of business people administering
their own affairs
3. Cannot delegate his office to other persons

Save delegation of administrative duties (e.g.: stock broker). But no policy decisions
2 others can be added:
4. Duty to preserve the subject matter of the trust
5. Must act even-handedly
These duties can be displaced to some extent by the instrument or legislation

e.g.: statute that provides for an excuse for a breach of one of these duties

However, there is a limit to encroachment on these duties. Otherwise, attacks the very nature of the relationship.
Can be seen as public order provision. (see p. 624 - threshold below which a trustee cannot go)
Bentley v. Canada Trust Co. (1992) B.C.S.C.
9


Wife of B forged his signature, instructing Canada Trust to redeem shares
Court held that trustee breached their obligation to safeguard the trust property (could have inquired or obtained
signed in person)
Froese v. Montreal Trust Co. of Canada (1996) B.C.C.A.

Pension plan trust: employer failed to make required contributions

Duty to of custodial trustee of private pension plan failed to safeguard trust property: Duty to warn B of any threats to
the trust.
Trustees must Act Jointly

If not unanimous, have deadlock

Can apply to court to resolve deadlock (s. 60, Ont. Trustees Act, p. 624)

Courts reluctant to interfere: more likely regarding a duty than a power (discretionary).

Where a power has been considered but not acted upon, it will not interfere (but will force trustees to consider a
power where they have not).
Re Wright (Ont. H.C., 1976)

Resolution passed to sell shares in Crown Life, which accounted for more than half the trustee’s value. Disagreement
over whether to accept a $55 offer, given depressed market conditions.

Hired Burns Fry to sell shares. One of the co-executors of the estate resigned in July: was on the Board of Burns Fry
and was a major shareholder of Crown Life. Had also held an interest in the corporate trustee that wanted to sell.

Note: two of the beneficiaries were trustees - not a problem at law.
Duty or Power?

Court will intervene where a duty is involved but not for a power, where the power has been considered.

Duty to invest, etc. as the trustees, in their discretion, decide

Power to postpone for such time as they see fit (don’t want to impose upon the trustees the timing of the sale of
assets). Thus have a duty to sell with a subsidiary power to delay.

Investments limited to those allowable to trustees (safe investments) but can keep interests previously acquired (be
settler)
Section B

trustee shall “have regard” for the security of the account, not for greater interest - worded as a request, not a power.
[Precatory trust: Must look at the words to see if it imposed an obligation or whether it is simply an expression of a
wish. PTs are more complicated - distinction not clear; such as “it is my wish”]

If it is a wish, it could provide a partial response to a beneficiary complaint that the trustee did not administer trust
properly
Application dismissed:

Executor are not liable where they act honestly and with due care. But the responsibility is theirs - cannot be shifted
onto the court.
Re Wright:
1. Use of section 60 and the power to apply to the court for direction (expensive way to make a decision)
2. There is a hurdle to overcome
B) DUTY (STANDARD) OF CARE

Standard of care: that which a person or ordinary prudence would use in managing own affairs.
Higher standard in Canada for professional trustees?
(a) In Fales, SCC said no
(b) But in applying statutory excusing power, had the effect of setting different standards
Classic statements on Standard of Care (Learoyd v. Whiteley)
1. Must act honestly and with reasonable skill and prudence of a reasonable business person managing own affairs;
2. Reasonable person administering the affairs of someone else

Suggests a greater degree of prudence when administering the affairs of someone else
10
Fales v. Canada Permanent Trust Co.; Wohlleben v. Canada Permanent Trust Co. [1977] SCC

Trust instrument provided for a duty to convert shares in a drilling company, with a power to postpone

Trustees of Wohlleben (widow & Canada Permanent Trust) failed to sell speculative assets in a timely fashion

Trial: Canada Permanent held liable for a breach of duty and liable for damages ($250k); Mrs. Wohlleben was not.

Refused relief under s. 98 of Trustee Act (s. 98: if appears trustee personally liable but acted honestly & reasonably,
court can relieve him)

Appeal: Damages reduced & relief denied but Mrs. W held partially liable
Held:

Traditionally, the standard of care is that of an ordinary person managing own affairs; applied equally to all

Some suggest a higher standard for professional trustees but no authority exists for that, except for the granting of
relief under s. 98, Trustee Act.

First, Canada Trust breach their duty (applying a uniform standard).

Second, should someone be excused (apply the different standard at this level) – discussed elsewhere in book
Contrary to Re Wright, court says the proper route is to go to court for advice. While statement is from the SCC, was
obiter. Makes some sense since the alternative would be to ‘create’ deadlock then go to court.
C) DUTY TO ACT PERSONALLY
General rule: may not delegate powers or duties

Rationale: obligation is to manage affairs of the other
Where delegation is permitted
(a) Express authorization (trust instrument or statute)
s. 20, Trustee Act [narrow] p. 645

Trustee may appoint a bank manager or solicitor to receive and give a discharge for money payable

Only type of agency that is specifically mentioned on the Act.
(b) Duties are not required to be performed personally
(c) Clearly necessary: no other practical way for trustee to perform
(d) Where it is common business practice is to delegate a particular power or duty

See Speight v. Gaunt
Result: Could employ agents like real estate agents, brokers and bankers as it met the standard of what an ordinary
prudent business person would do.

As business needs change, practices change

The ultimate decision, however, must be made by the trustee.
Speight v. Gaunt (H.L., 1883)

Trustee invested trust money through a stockbroker, who falsified a proof of investment, appropriated the money for
trading losses and subsequently went bankrupt.

Beneficiaries sued trustee for breach of trust
Held: (for trustee)

Standard is ordinary prudent man investing his own money (except to the extent the trust instrument limits choices)

Transactions require some confidence to be bestowed and it would be unreasonable to subject a trustee to a higher
standard than ordinary business persons

Must look at the usual course of business
D) DUTIES OF INVESTMENT
Under a duty to invest and failure entails personal liability of trustees
Duty is circumscribed by:
1. Statute
2. Trust instrument

Where instrument narrows choices too much, can apply to court under the Variation of Trust Act
Principles of investment
11
1.
2.
3.
Even-handed rule (income & capital beneficiaries)
Act honestly
Must not select speculative or unduly risky investments
Authorized & unauthorized trust investments

Unauthorized investment: Where value decreases, trustee bears the loss (breach of trust)

Authorized investments: Trustee does not bear the loss

Double limitation:
1. Authorized investment
2. Standard of case
Most trust instruments provide for wide discretion

Any investments that they, in their judgement, deem advisable

Broad but kept in check with second duty
Standard of care

Modified version of the general duty of care, to take into account (1) the income & capital interests and (2) people
not all willing to accept same degree of risk:
Learoyd v. Whiteley (H.L., 1887)

Trustees investment in a first mortgage on the land of a brick business. Business went bankrupt and trustees lost
money on the investment. Beneficiaries sought to recover the loss
Held (for beneficiaries)

Appropriate investments for a trust are per the standard of an ordinarily prudent person, subject to the proviso that
income and capital interests be considered

Here, the trustees failed to exercise the ordinary amount of care (did not fully inquire)
Nature of Investments - Trustee Act, s.26 et seq.

s. 26 – public debt instruments, if reasonable & proper

s. 27 – (private) equities, if reasonable & proper

ss. 28-32 & 67-68 – Other powers relevant to investments
Can contract out of these provisions in the trust instrument (statute is merely the fallback position)

In the past felt that solid investments were in debt issues of public bodies

Investments in first mortgages on land, utility companies, government debt were regarded as acceptable in a
series of cases

1859 amendment introduced a list of acceptable investments: secured loans and fixed rates of interest were
perceived as ideal (equity too speculative)

s. 27 added in 1957, allowing for other types of investments, but common stock not allowed until 1961 in U.K.
and 1968 in Ontario. Section 27 investments are restricted to 35% of the value of the trust.

Prof.: high levels of government debt = less solid; sudden inflation = erosion of value of debt instruments

Could argue these are obsolete and the standard should be more general: reasonably prudent person
Duty to convert & Power to retain

Re Wright (Ont. H.C., 1976)

Fales v. Canada Permanent Trust Co. (S.C.C., 1977)
Can personal conviction affect investment decisions by a trustee?
Cowan v. Scargill 1985 1 Ch. 285

Pensions scheme for coal miners. Trustees named by the union objected to investments in oil & investment overseas
(esp. South Africa)

Court held that the decision was that of the trustees, in the best interest of beneficiaries. Best interest meant financial
interest. Personal views of trustees not relevant although investing contrary to the strong views of the beneficiaries is
not in the best interest of Bs.
E) DUTY TO ACT IMPARTIALLY
12
Even-Hand Rule
Trustee must be impartial: treat beneficiaries with an even hand

Failure to do so is a breach of trust (Re Smith)

Situations arise where interests of the life-tenant & remainder person conflict
Fulfilling even-handed rule
1. Apportionment of income

Including apportioning assets into income & capital and turning unauthorized assets into authorized ones
2. Allocation of expenditures
Re Smith (1971, Ont. S.C.)

Smith received shares in Imperial Oil as remainder person under his grandfather's will

Settled a trust for his mother for life. Canada Trust was given the power to convert or retain the shares. Mother
complained of insufficient income from the shares but trustee refused to convert.

Mother applied for a order of breach of trust
Held:

Vivid example of an uneven hand: shares worth over $1 million yielded an annuity of 2½% ($27,000 cumulative)

Held that the trustee failed to maintain an even-hand and, in light of the deference towards Mr. Smith, ordered the
appointment of a new trustee.
Comments:

Will said that the father’s “wish & desire” was that son would give ¼ of interest to mother. Is something less than a
legal obligation. Example of an improperly constituted trust: speaks of future earnings (clauses B & C)

Clause 3: power to retain & convert – lists allowable investments

Clause in trustee even tries to set aside evenhanded issue: “whether earning income or not”. Prof.: can’t override
substratum duties like these

Up until this decision, the duty to be evenhanded was regarded as governing new investments - not the duty to
converter per se (duty to sell), just the reinvestment
Apportionment and the Duty to convert
Authorized investments

Even-hand is easy: simply pay income to life tenant and capital to the remainder.
Unauthorized investments in the trust – To maintain an even-hand, must determine:
1. Is there a duty to convert a particular asset into an authorized investment?
2. If so, must the asset be apportioned between income and capital?
3. If so, how to calculate apportionment?
How to find a duty to convert:
1. Imposed by testator (traditional approach)
2. Imposed by law
(a) Specifically – Howe v. Lord
(i) Inter vivos settlement [Re Smith]
(ii) Testamentary
A. Specific
B. Residual
I. Real property
II. Personal property



Duty to convert only when dealing with a residual request of a personalty
Court was looking for a presumed intent of the testator that the trustee should convert
Rule: There is a presumption against conversion since entered into the arrangement with
knowledge of what they were doing. Onus on other party to rebut/
(b) Generally – Re Smith, evenhanded

Question about Smith: is it truly a duty to convert or merely new investments
13
Lord Dartmouth

Can only bequeath real property on the specific property owned at the time the will is made
Apportionment between Income & Capital
Lottman v. Stanford [1980] S.C.C.

Testator left income from residue of estate to widow and remainder to his kids. Widow dissatisfied with income level
and applied to the court for an order to sell property and declare an entitlement of 6% as income

Issue: Application in Ontario of the rule in Howe v. Lord Dartmouth (English case law).
Held:

The rule in Howe v. Lord Dartmouth is that trustees have a duty to convert property that is unproductive &
wasting. Once the rule is found to apply, the rule in Re Earl Chesterfield's Trusts applies for the apportionment
between income and capital beneficiaries.

The rule only applies to personalty, not real property

The rule is not applicable in this instance since the will creates a duty to convert personalty, subject to the discretion
of trustees (power to postpone)
People still refer back to Re Smith because instinctively it makes sense
In Re Zive, it was held that there where there is depreciable property, there must be a reserve account so that the property
can be replaced. Otherwise, the capital beneficiary will be adversely affected.
Corporate Distributions

General rule: Income distributions are property of income beneficiaries and capital gains are property of capital
beneficiaries

Rule Re Capital distributions (stock dividends, bonus shares, stock option rights):
1. Settlor is free to stipulate apportionment, otherwise
2. Settlor can leave it to the discretion of trustees (subject to impartiality), otherwise
3. Failing stipulations to the contrary, courts have held that they are property of the remainder interest
Re Waters (S.C.C., 1956)

Estate held a substantial interest in a limited company with a large undistributed surplus. Company paid a 15% tax to
capitalize the remainder by issuing redeemable preferred shares. Some of these were then redeemed, for a tax-free
distibution.

Issue: Receipt on account of income or capital?
Held:

Testator is held to know that the receipts by income and capital beneficiaries will depend upon the acts of a company

When corporate earnings are capitalized, they cease to be earnings and instead form part of the capital, which is
property of the remainder interest.
Allocating Expenses
How to allocate expenses between income & capital beneficiaries, otherwise:
1. Trust instrument
2. Trustee must look for intention of testator, otherwise
3. Look to common law
Common law rule

Expenses relating to the income of a trust are borne by income beneficiary (insurance, taxes)

Expenses relating to the capital assets are borne by capital beneficiary (major improvements)

Rule in Allhusen v. Whittel: Charge the life-tenant with interest on outstanding debts of testator so as to put lifetenant in same position as if debts paid immediately upon testator's death.

Difficulties with the rule, thus reversed by statute:
s. 49, Trustee Act
F) DUTY TO ACCOUNT
Duty to Account

Trustees must keep proper accounts and produce them for inspection by beneficiaries when requested
14



May include: inventory of the trust; original estate; receipts; disbursements; property remaining; compensation
requested.
Sanfor v. Porter: Trustees are allowed a reasonable time to prepare accounts after a beneficiary requests them
Of trustee causes expense by a refusal/neglect to furnish accounts, must bear expense personally
Manner of passing accounts
1. Trust instrument, otherwise
2. Statute (s.23 Ontario Trustee Act)
Sanfor v. Porter (1889, Ont. C.A.)

Plaintiff's solicitor requested an account from trustee but it was not immediately forthcoming as costs due by the
estate (from past litigation) were being revised. Solicitor brought suit shortly thereafter.
Held (for trustee):

Unreasonable to expect trustee to put aside everything else and render an account for beneficiaries

The duty to account must allow a reasonable time to prepare accounts after a beneficiary requests them
Duty to Provide Information
1. Must regularly provide beneficiaries with accurate and full disclosure and allow them to inspect trust documents
2. However, not obliged to give reasons for exercising their discretion

In Wilson v. Law Debenture Trust Corp., a judge held that this also applied to pension trusts (questionable
whether this is appropriate)

Problem: many decisions involve exercise of a discretion and it is thus difficult to know what a beneficiary is
entitled to see:
Re Londonderry's Settlement (1964, All E.R.)

Trustees to a discretionary trust distributed capital. One beneficiary was dissatisfied and asked to see relevant
documents: minutes of the meeting, correspondence, etc. but trustee excluded documents relating to the reasonings.
Held:

Two rules in conflict: duty to provide information v. right not to disclose reasons for exercise of a discretion (absent
evidence of bad faith)

The latter rule must take precedence, to protect deliberations & trustee discretion

Trust documents that disclose the reasons for a trustees exercise of his discretion are not property of the trust, which
can be viewed by beneficiaries
3. POWERS AND RIGHTS OF TRUSTEES
A) ADMINISTRATIVE POWERS
To manage the affairs of the trust, there are two sources of powers:
1. Legislation

Standard, general and basic powers (p. 690)

Can be excluded with trust instrument
2. Instrument

Powers needed to effectively manage the trust; should be specific & tailored to achieve the purpose
Court applications – Additional administrative powers can be requested in two ways:
1. Enlargement of existing powers

Under the inherent jurisdiction of the court

Scope: emergency situation; to protect trust property
2. Additional powers

Under the Variation of Trust Act (but expensive & inconvenient)

Usually requires consent of sui juris beneficiaries, with court approval on behalf on others
B) DISPOSITIVE POWERS
The power to allocate (dispose of) trust property to beneficiaries, including:
1. Power of appointment
15
2.
3.
4.
Power of encroachment
Power of maintenance
Power of advancement
Power of maintenance
Authority to apply income, and sometime capital, for basic physical needs like food, shelter, clothing & medical care

Sometime also education

Statute usually apply only to minors but instrument can say otherwise

Ontario has no statutory power of maintenance & must therefore rely on:
1. Express provision in instrument
2. Inherent jurisdiction of the courts:
Re McIntyre; McIntyre v. London and Western Trusts

Sons had a remainder interest in a house and $4000 upon attaining 25 but there was no provision for maintenance
Held:

Where child given a legacy for a future period with no provision as to maintenance, they are entitled to an amount up
to the interest on the legacy (starting point: parent owes a duty to support a child)

Where an amount for maintenance of a child is specified, it cannot exceed that amount, even if insufficient
Power of Advancement
"An authority to pay capital to or for the benefit of a minor so that she may take advantage of an opportunity that will
further her in life."

To "set-up" a beneficiary in life by purchasing a business or paying a debt

Source:
1. Trust instrument
2. Application to the court
C) RIGHT TO REMUNERATION
Payment
At common law, presumed to act gratuitously
In Canada, statutes empower courts to compensate trustees (s. 61, Trustees Act)

Calculation:
1. Calculate based on a percentage of the income and capital
2. Then check the amounts against various factors: size of estate, complexity, responsibility & risks assumed, time
spent, results obtained, etc.
3. Special circumstances may then warrant additional sums

Must supply sufficient information (Re Atkinson Estate)4
Re Atkinson Estate (1952, Ont. C.A.)

National Trust awarded compensation on a percentage basis. Beneficiary applied to the court on grounds the amount
was excessive.
Held (for beneficiary):

To award compensation, sufficient information must be supplied to the court

The practice of calculating compensation on a percentage basis is emrely a rough guide

Goal is to respect spirit of the statute: "fair and reasonable allowance for trustee's care, pains and trouble…"
Indemnity
At common law, trustees can be indemnified for expenses
Now codified (s. 33, Trustees Act)

Must demonstrate expenses were reasonably incurred

Held to include legal expenses to defend the trust
4
Since the information is of the same nature as contained in an application to pass accounts, compensation usually set at
that time rather than through a separate application under section 61.
16
General rule: No right of indemnity against beneficiaries (only from the trust)
Exceptions:
1. Trustee undertook the trust at the request of the beneficiary (codified: s. 34)
2. Beneficiary was also the settlor
3. Beneficiaries are sui juris, fully entitled to the property
Thompson v. Lamport (1945, SCC)

Beneficiary initiated proceedings against trustees and lost. Trustees then applied to court to know out of which funds
costs should be paid.
Held:

Court of Appeal wrongly said that the trustee must first show there was a "benefit" to the trust from an action.

The trustee is entitled to recover out of the trust estate as charges and expenses, all costs relating to an action which
was defended.
Set-off
If the trustee lends money to the trust for its proper administration, he is entitled to be reimbursed
Re McMahon and Canada Permanent Trust (1980, BCCA)

Trustee lent money to the sole beneficiary to enable him to acquire property. He went bankrupt and the trustee sought
to set-off the debt against the funds. Trustee in bankruptcy appealed lower court ruling.
Held:

Right to set-off not allowed here as there was no express or implied arrangement

Short of an express or implied agreement, set-off is only available when the debts are mutual, between the same
parties in the same right (not the case here: personal capacity v. trustee)

Trustee is in the same position as ordinary creditors for personal claims against a beneficiary
4. REMEDIES FOR A BREACH OF TRUST
Breach of trust arises where trustee fails to carry out a duty imposed by trust instrument, statute or rules of equity
Remedies:
1. Personal
2. Proprietary
All remedies are restitutionary in nature, except the remedy of compensation, which is compensatory
A) PERSONAL REMEDIES
i) Generally
2 types of personal remedies (must choose only one):
1. Compensation
2. Account of profits
Application

All fiduciaries: express trustees as well as resulting, constructive and Public trustees

May obtain both a personal and proprietary remedy (Keech)
Liability

To restore the loss or disgorge the profits

Can arise upon any breach of trust: innocent, fraudulent or technical…

Reason: goal is not to punish but to restore beneficiary

Liability is personal but other trustees can by liable if stood by

Not liable if pre-dates arrival (unless could/should have learned about it)

Not liable if after resignation (unless resignation facilitated the breach)

Joint and several
ii) Compensation
Law of trusts v. common law rules of compensation
17


Principles of foreseeability & remoteness are irrelevant

Every presumption is made against the trustee

Assume the beneficiary would otherwise have chosen best course of action (sold shares at highest price…)
Must still show causation
Advantages of Equity over Common Law:
1. Principles of foreseeability & remoteness are irrelevant
2. Loss calculated at the time of trial, not the time of breach
3. Presumptions
(a) Securities withheld would have been sold at the highest price
(b) Trust fund will be put to most profitable use
(c) Where there are two possible interpretations, no inference in favour of trustee
(d) Fiduciary must account on a basis less favourable to her
Guerin (1984, SCC)

Had the Crown not breached its duty, agreement with the band & golf course would not have been reached

Would instead have concluded agreement with residential developers

Compensation is the value of the lost opportunity, not the loss reasonably foreseeable
Interest
Loss is calculated with interest but not in the ordinary sense

Rate of interest is essentially a presumed profit. Reason: in accounting for compensation, cannot claim amounts
attributed to trustee's skill

Rate of interest & compounding left to court discretion

Toronto General Trusts v. Hogg: depends on the type of breach

Compounding limited to where there is (1) fraud or (2) improper profit earned by trustee
Limits of fiduciary liability to compensate
Canson Enterprises v. Boughton & Co. (S.C.C., 1991)

Land-flip resulted in a secret profit of $115,000. Canson was advised to develop the land, not knowing that there was
an intermediate purchaser that stood to gain.

Defendant law firm knew but did not disclose details; plaintiff would not have entered into agreement if the knew

Issue: Extent of recovery from a loss resulting in a breach of a fiduciary obligation
Held:

Where a fiduciary obligation exists, can be liable for conduct falling short of proven dishonesty (may have acted
innocently).

Can have a breach even when personal interests are not at stake (though this is a factor of some importance).

Here, the solicitors breached the fiduciary duty owed to the client purchasers by not disclosing that the land was not
being purchased directly from the vendors.
Test for compensation:
1. Did the losses claim flow from the breach and
2. Limiting proviso: a person in breach of a fiduciary duty will not be liable for all intervening acts of third parties or for
unreasonable intervening acts of the persons to whom he owes that duty.
Damages

Put plaintiff in the same position it would have been in had the breach not occurred. Principles of foreseeability and
remoteness that might apply to limit damages in a tort or contract do not apply to a breach of fiduciary duty.
Split:
(1) Mr. Justice LaForest (with Sopinka, Gonthier and Cory JJ. concurring)

The solicitor may be liable for breach of fiduciary duty of non-disclosure even when his or her personal interest is not
at stake, though this is a factor of some importance. The situation here involved a breach of fiduciary duty sufficient
to call upon equity's jurisdiction to compensate the purchaser for a breach of that duty. The purchasers could seek
equitable remedies with equity having an inherent jurisdiction to compensate for a breach of fiduciary duty. Equity
aims are restoring a person to whom a duty is owed to the position in which he or she would have been in had the
duty not been breached. An award is no less compensation because the amount recovered in a particular case is the
18
same as would have been awarded in an action at common law. Both the common law and equity sufficiently
supported the fiduciary position by compensating the victim of the breach of confidence. Damages equivalent to
those for deceit were sufficient.
(2) McLachlin J. (with Lamer C.J.C. and L'Heureux-Dube J. concurring)

The basis of the fiduciary obligation and the rationale for equitable compensation are distinct from the tort of
negligence and contract. The best approach is to look to the policy behind compensation for breach of fiduciary duty
and determine what remedies will best further that policy. Insofar as the same goals are shared by tort and breach of
fiduciary duty, remedies may coincide. But they may also differ. The court should start from trust, using the tort
analogy to the extent shared concerns may make it helpful. compensation is an equitable monetary remedy available
when the equitable remedies for restitution and accounting are not appropriate. Here, the further losses sustained in
the course of construction could not be said to have resulted from the breach of fiduciary duty. What the purchasers
lost as a result of that breach was the opportunity to say no to the acquisition of the land. The solicitor's duty had
come to an end when the purchasers assumed control of the land. The construction losses were not the result of the
solicitor's breach of duty, but of decisions made by the purchasers and those they chose to hire.
(3) Mr. Justice Stevenson

Compensation in equity differs from damages, particularly where equity is looking at restitution. As the solicitor had
nothing to do with the selection or obligation regarding the unanticipated neglect of the engineers and pile-driving
constructor, these losses were too remote in the sense of being unrelated to the solicitor's breach of duty to be
compensated for.
iii) Account
Trustee must account where he made a profit

Typically arises where property was appropriated by the trust but can also arise where trustee retains unauthorized
property that rise in value

Limits: although account is better than compensation where a trustee made money, it may not always be possible to
calculate profits

e.g.: if property mingled with that of others in a business venture, may be better to seek compensation

Profits attributable to the skill of trustee: not accountable

If partly skill: proportionate

If seeking an account, must allow for expenses like repairs and maintenance to the property
MacMillan Bloedel v. Binstead (B.C.S.C., 1983)

Binstead responsible for selling or trading plaintiff’s surplus logs. He set up a side-business with two others, which
bought some of the logs that he was selling, without the knowledge of the plaintiff.

Plaintiff did not suffer any substantial losses.
Held:

Constructive trust was found and a breach makes defendant liable to account for profits

Court also awarded interest

Must disgorge the profits, regardless of whether the cestui que trust lost money

Since “profit” is the surplus income over expenses, must deduct those expenses deemed reasonable and necessary to
carry on the business. This includes taxes, certain administrative & business expenses. No allowance for salary as it
would reward the three men for their scheme.

Funds to buy shares in a company came from this scheme thus plaintiff can trace these funds (value thereof, not in
specie)
B) PROPRIETARY REMEDIES
i) Generally
While the primary remedy is a personal one (for money), can also have a proprietary remedy

Goal is to restore plaintiff: Proprietary remedy seeks to restore the property
When the trustee no longer has the property, can pursue the third party via two causes of action:
1. A right in personam: personal action in equity against the recipient of the property, and
2. A right in rem: proprietary action, at law, in equity or both, to follow or trace the trust property into its product

Note: a trust beneficiary must usually bring an action in equity

Common law remedies are not usually invoked in a trust relationship. There may be exceptions.
19

e.g.: agency relationship
Advantages of proprietary remedies:
(a) Priority over other creditors
(b) Benefit where value of property increased
(c) May be available when a personal remedy is not
(d) Where property is income-producing, it carries interest from the day of the transfer
Concepts:

Following: locate a tangible (at law)

Tracing: Identify the substitute (in equity)

Claim: Once property is followed or traced, the remedy to these processes is a personal “claim”
ii) Following at Law
Following property from object to object
Actions include:
1. Conversion - Recover chattel from person who wrongly converted it (normally monetary award but can order
its return if it has a special value)
2. Detinue
- Damages for wrongful detention
While both are personal actions in the sense that the award is money, they are proprietary claims and, as such, rank ahead
of other creditors
Mixing allowed
Fiduciary relation required
Against a bona fide purchaser
Available to trust beneficiary
Common Law
No
No
Yes
No
Equity
Yes
No (was thought yes)
No
Yes
Property: X  Rogue  Third party converter (at common law)

NEMO DAT QUOD NON HABET (can’t give what you don’t have)

Legal title binds everyone. So if X was holding legal title, R got it in error.

At common law therefore, X can follow the object. Third party innocence & lack of notice are irrelevant (equity)
At common law, the right to trace is severely limited

Only where the totality of the object can be identified. Once there is mixing, can no longer trace.

Needed the actual existence of the property (e.g.: a tire, from car to car)
Common law remedy in a conversion action is damages

Treated somewhat as a forced sale

There is a possibility to get the object back – at discretion of the courts
Trustee in trust for beneficiary; but blocked where someone has
(1) paid value for property; and
(2) has not received notice
iii) Tracing in Equity
Following property from object to object5

Can still trace property that changes in form

Tracing allows for a proprietary remedy: thus, have priority over other creditors

Not applicable to commercial contexts as it would result in preferred ranking among creditors (unless a supplier
maintains title until payment)
Oosterhoff speaks of “following” at common law and “tracing” at equity. Prof. will use the terminology as described
here and as used by Smith.
5
20
Remedies
(a) Recover the property
(b) Recover the property’s product
(c) Obtain a lien against property’s value
Approach

Property increases in value: go for a proprietary remedy (as owner)

Property decreases in value: go for an equitable lien (value)

Per Foskett v. McKeown, may only be entitled to a lien (not a constructive or resulting trust) where the property
is traced to an innocent third party (p. 765).
Requirements at equity for tracing
1. Fiduciary relationship (p. 758)

“supposedly” need a fiduciary relationship, but
(1) Courts will create one where one does not exist (UK: Chase Manhattan6)

SCC doing something similar now re: constructive trusts
(2) It need not exist between the parties to an action (UK: Sinclair7)
(3) Restitution is really at the heart of attempts to “find” a fiduciary duty and since restitution is
recognized in Canada as an independent head of obligation, Oosterhoff argues that it is no longer
necessary to invent a fiduciary relationship so that tracing is allowed (p. 760).
2.
Equitable proprietary interest (p. 760)

To trace, plaintiff needs a pre-existing proprietary equitable interest

Problem: cases where claimant doesn’t just have an equitable interest but full ownership. In cases of theft,
courts will allow tracing into the bank account of a thief: BC Teachers Credit Union v. Betterly held that
employers always have an equitable interest in funds stolen by an employee. Is a fiction for tracing since a
thief does not hold legal title.8
Claims Against Trustee (mixed trust property)
(a) Mixed other than in bank account

Can make proprietary or equitable claim
1. Trace and obtain an equitable lien (where value has decreased)

Onus on trustee to prove what part is his; beneficiary gets everything else
2. Adopt a proportionate share of the mixed fund as a tenant in common (where value has increased)

Constructive trust rationale

Common law not well developed here (Sinclair v. Brougham was unsatisfactory) but the claim is justified,
else trustee would keep profits

Not available where trustee does not have an equitable interest in the fund: In Foskett v. McKeown the
insurance contract was for spouse & mother (innocent volunteers)
(b) Mixing in a bank account (768)
I. Rule in Hallett’s Case: Assumed that a trustee withdraws his own money first from a mixed account
II. Rule in Clayton’s Case: FIFO principle applies - money withdrawn is taken from the earliest deposit.

Claimant whose money went into a bank first could lose everything while the next person loses nothing
(i.e.: where trustee manages two trusts9).

Criticism (773): Applying a banking rule to trust law when the question should be the relationship of
the trustee towards the beneficiary.

While the rule has been generally followed strictly, it was decisively rejected in Ontario (Securities
Commission) v. Greymac – Seems that the rule will be varied where the outcome is more just?
6
In Chase, employee accidentally made a payment twice and thereafter, the recipient went bankrupt. Although here was
no apparent fiduciary duty, the court held that one arose when the payment went into the wrong hands.
7
Next-of-kin could take an action against a third party because of a fiduciary duty with the estate’s executors.
8
Why not extend this benefit to legal owners in such cases. Explains why SCC is so willing to recognize unjust
enrichment. Then, as a remedy, could find a constructive trust (an equitable remedy).
9
Rule not applicable if money withdrawn is earmarked as belonging to a particular trust nor does the rule apply to
deposits made on the same day (they are on equal footing).
21
III. Two modifications to this general rule:
1. Principle in Re Oatway: Where some money is invested, then the account is dissipated, put aside Rule
in Hallett’s Case and assume beneficiary’ money was invested.
2. It would seem to follow that, where money is invested and any increases in value, could presume it I
sthe beneficiary’s money (Re Tilley’s Will Trust).
IV. Lowest intermediate balance rule

Can only claim an amount up to the lowest account balance after the trust money was deposited
(protects trustee’s creditors)

To get around this rule:
(a) Show that the trustee intended to repay the amount taken (James Roscoe (Bolton) v. Winder).

However: can’t result in insolvency of trustee
(b) If money can be trace out of the account and then back in
Remedies Generally
1. Right in personam

Equitable
2. Right in rem

Proprietary remedy – at law or equity

Advantages
(i) Priority over other creditors
(ii) Can take advantage over an increase in value of property
(iii) Available when a personal action is not
(iv) Carries interest, if property is income-producing
Remedies relating to Profits
1. Remedies Generally

Where beneficiary has 2/3 interest and trustee as 1/3: any appreciation of property will be allocated
proportionately.

Why? Perhaps to protect the trustee’s innocent third party creditors.
2. Remedies for Bank Accounts
(a) Clayton’s
(b) Hallett’s
(c) Oatway
(d) Lowest intermediate balance
3. Ontario (Securities Commission) v. Greymac Credit Corp. (Ont. C.A.) – SCC aff’d (772)
Ontario (Securities Commission) v. Greymac Credit Corp. (Ont. C.A.) – SCC aff’d (772)

Greymac held a mortgage along with other participants. Land was sold and proceeds were held in trust by
Greymac, which mingled the funds into a general account. Made withdrawals and shortfall resulted.

Appealed as to the application of Clayton’s or a proportionate rule for claims between beneficiaries
Held: Rejects the approach in Clayton’s (all of #2 above)

The Rule in Clayton’s Case is illogical, unfair and inappropriate between beneficiaries (merely convenient)

It does not apply when allocating losses between beneficiaries when the trustee has made unauthorized
withdrawals from a bank account and an insufficient amount remains to repay each beneficiary in full

Instead, should look to Sinclair v. Brougham and allocate property proportionately between beneficiaries (equal
standing)
Prof. not sure that Clayton’s is dead (See note 4 at 784).
A. Third party tracing
A. Trustee is personally liable and may hold the proceeds in trust for the beneficiary
B. Third Party – 3 options
(1) Not liable (cannot trace) where bona fide purchaser for value without notice
(2) Liable as constructive trustee (can trace) if taken with notice, whether or not value is given
22
(3) Liable but not as a constructive trustee where innocent volunteer (no notice) and can trace the property, subject
to certain exceptions
Re Diplock: Diplock v. Wintle [1948] Ch. 465

House of Lords held that the will was void (in Chichester Diocesan Fund Board of Finance v. Simpson): Imperfect
gift because it instructed that money be given to non-charitable organizations (benevolent organization), which are
uncertain in law. Problem with the will: void for technical reasons

The 139 charitable gifts made under the will were also void and the next-of-kin filed a person action in equity and a
proprietary tracing claim
Held (tracing attempts fail):

Equity does not intervene to render absolute justice for the claimant but to prevent a defendant from acting in an
unconscionable manner.

If money was mixed with charity’s money to purchase an asset, could sell the asset and apportion proceeds. This is
fair since the charity is not deprive of anything they previously had.

However, where money is used to improve a building already owned by the charity, selling the assets would be
unfair. The improvement may not have increased the value of the building. It is thus not possible to locate and
disentangle Diplock’s money, thus tracing is impossible.

Similarly, where the money is used to repay a debt, it removes a charge on a land – no tracing here

Where funds have been mixed, Clayton’s Case will only apply to mixed bank accounts
Re Diplock on the Special Equitable in Personam Claim

The special equitable in personam action succeeded: could recover money from those that are not beneficiaries under
the will, whether or not the charities acted unconscionably

Not applicable to bona fide purchasers without notice and probably not to volunteer’s successors
C) DEFENCES OF TRUSTEE
i) Generally
Types of Defences
1. Not a trustee

Not liable for acts before becoming a trustee or after resigning

Liable if stands by and allows another trustee to commit a breach

Liable for reigning in the knowledge the remaining trustees will commit a breach (Head v. Gould)
2.
Consent and Participation

A beneficiary that consents to a breach cannot later sue; the other non-consenting beneficiaries may sue

Elements of consent where the beneficiary: had capacity; full knowledge; will not overborne by trustees (duress);
full disclosure

Re Pauling’s Settlement Trusts: Children were entitled to the remainder interest but bank made numerous
advances to the parents, with the supposed “consent” of children.

Children eventually sued on the “presumption of undue influence” flowing from parental control

Court found a breach of trust on numerous occasions but consent elsewhere (after turning age of majority)

Court has an inherent jurisdiction to impound a beneficiary’s interest where he instigated or consented to a
breach: can apply part of the beneficiaries interest to indemnify a trustee. (s.34, Trustees Act and Re Pauling’s)
3.
Acquiescence and Release (812)

May refuse relief for a breach where the beneficiary:

Acquiesced: Refraining from action upon knowledge of a breach (long delay: could infer acquiescence)

Release: Positive act (formal document or informal waiver) given with full knowledge
4.
Limitations and Latches (813)

Statutory protection given to the honest trustee (Taylor v. Davies)

s.43, Limitations Act extents limitation periods in other statutes to trustees

Martin v. Donaldson Securities: Acquiescence constituted latches
5.
Ex post

Release (express, implied)
23


Acquiescence
Time/ laches limits
Statutes somewhat incoherent

Starting point: trustee is not protected by a statutory limitation period. Reflected in section 44 of Limitations Act
(815)

Then, in time, there were added a number of provisions to apply to the honest trustee; statute of limitations would
thus apply where there were technical breaches.

Further, then extended liability only applies to express trustees. Thus, statute of limitations will apply to the benefit
of constructive trustees.

* Beware of English limitation cases and their definition of express trustees (distorted distinction)
ii) Exculpation and Excuse
Protection form the strict rules applicable to breach of trust rules:
(a) Statute (826)

Trustee’s Act offers protection against various specific breaches, subject to a duty of care
(b) Settlor

Exculpatory clauses often included, usually for minor breaches or breaches by co-trustees

Unlikely to be effective against major breaches

Re Poche: Will states that trustee not liable unless it was a willful breach or dishonesty

Point: instrument clauses are narrowly construed; can’t be exonerated from their duties as trustee
(c) Court

Court discretion to provide relief if:
1. Acted honestly
2. Acted reasonably, and
3. Ought fairly to be excused

See Fales and s.35, Trustee Act

Ontario: court may forgive a breach in trustee acted honestly, reasonable and ought fairly to be excused
(called “technical breaches”)
Fales v. Canada Permanent Trust [1996] S.C.C.

Canada Trust held unauthorized shares in speculative for too long, causing large losses

Sought relief under s. 98, BC Trustee Act
Held:

Trustees cannot be treated as infallible nor as guarantors of assets

Considerations include: nature of the breach (was it technical or minor), cause of the decline in value, whether trustee
was a professional trustee (trust company), etc.

Per the facts, Canada Trust acted unreasonably and no case can be made for forgiveness

However, the other trustee, Mrs. Wohlleben, ought fairly to be excused for her breach of trust; as she clearly tried to
fulfill her duties to the best of her abilities.
C. Express Trusts
1. CREATION OF EXPRESS TRUSTS

Contrasted with resulting & constructive trusts, which are created by operation of the law

Four requirements for a valid private express trust:
1. Capacity of parties
2. Three certainties
3. Trust must be constituted (property transferred to trustee)
4. Formalities must be complied with

Two types of express trusts
1. Where beneficiaries are people
 focus of this section
2. Where beneficiaries are purposes (charitable)
 later in the course
A) CAPACITY
24
Types
1. Age of minority
2. Mental incapacity
3. Bankruptcy
Nature of the transaction
1. Inter vivos
2. Testamentaty
1. Settlor
a) Minors

Minors are incapable of making a will

Statutory exceptions: Married (is, was or contemplated & it occurs), military in the course of a voyage

Inter vivos transactions also limited: voidable at the minor’s option

Marriage settlements allowed subject to court approval
b) Mentally incompetent

Must be able to appreciate what they are doing / not doing

Sizeable estates subject to greater scrutiny

What degree of incompetence? Unable to understand the nature & effect of a transaction and the extent of the
property being disposed of (FN at 141).

Inter vivos transactions: rules are more case-by-case (per Re Beaney)
c) Bankrupt

Public policy: will not allow assets to be given away; belong to creditors
2. Trustee
If can hold property as an individual, can also do so as a trustee

Capacity

Legal personality (individual or a corporation): not an association or unincorporated company
a) Minors

Could be a minor but not a good idea

Incapable of making a valid conveyance

Courts empowered to remove them

Could void their responsibility as adults
b) Mentally incompetent

Subject to impediments:

Court may empower a committee to fulfil the duties

Could request their removal in court
3. Beneficiaries
No limitations on who can be a beneficiary

Often set up for a minor or an incapacitated person

Can be a person or a purpose

Exception: unincorporated entities can’t be a beneficiary
B) THREE CERTAINTIES
Generally

The seminal English case on three certainties (applied in Canada), Knight v. Knight (1840), states that the three
certainties are interrelated.

If one certainty is incomplete or worded so as to negate the effects of another, no trust is created.
Re Walker (1925), 56 O.L.R. 517.
25

Testator gave wife all property but instructed an apportionment of the remainder, should there be any, upon her
death.
Held:

While the intention is clear, it is not possible to give effect to a wish to “give and yet withhold”.

Solution: Accept predominant wish and strike out subordinate wish as repugnant to the former.

Possible outcomes: (1) the first named prevails, or (2) the first gets only a life estate 10

In this instance, the first case applied
i) Certainty of Intention (145)
Must find an intention that the trustee is under an imperative obligation to hold property in trust for the benefit of another
and ultimately to distribute to another

Construction is inferred from nature & manner of disposition, considered as a whole

“Precatory” words: words of wish, hope or desire.

Also referred to as certainty of words (but this sounds more black letter & technical than purposive)
Case law

Older case law looks at precatory words with a view to discovery whether there is a trust

Modern cases look at the words without a predisposition towards finding a trust; more strict

For an example of finding a trust in precatory words:
Johnson v. Farney (Ont. App. Div., 1913)

I leave everything to my wife, I also wish that if you (wife) die soon after, that you leave it equally to both our
families.

Question: does the subsequent statement impose a trust on her?
Held:

No trust is created: this was merely a wish or advice, insufficient to create an obligation.

“The earlier cases on precatory trusts have now been departed from, and a stricter rule now applies…: an absolute
gift is not to be cut down to a life interest merely by the expression [of a wish]… a wish is no more than a
suggestion…”
Case falls into what is called the “what remains” cases (absolute gift but what remains to X)

Courts will ask whether there is certainty of intention to give something to B. Otherwise, inquire as to the wife’s
interest so as to ascertain whether there is something left over.

Solution: Give a trustee the power to encroach.
ii) Certainty of Subject Matter
Two elements:
1. Trust must have property that is clearly identified; and

Where it is ascertained of ascertainable
Re Romaniuk Estate (Alta. S.C., 1986)

Will provided for the residue of the contents of her house & personal property to go to brothers and the money
from sale of certain assets & that in bank accounts into a trust for children
Held:

Trust fails since content uncertain: (1) lists 3 banks accounts but had four – (did she mean all or the 3 listed?);
(2) “and other property” not clear since there was a residues for brothers.

Should be distributed according to the Intestate Successions Act
2.
10
Portion for each beneficiary is either defined or discretion vested with trustee

Trust fails where quantum is uncertain.

Certainty of quantum requirement is unusual though since courts accept that this can be cured:
(1) Trustee discretion to decide quantum (must be done expressly);
(2) Equitable maxim “equity is equality” will apply is the right circumstances; and
(3) The rule in Re Golay’s Will Trust:
Per Oosterhoff, this is misleading, as it is also possible to create a gift subject to a condition or personal obligation.
26
Re Golay’s Will Trust (Ch. D., 1965)

Will left a woman with use of deceased’s house, car, jewellery and to “receive a reasonable income” until death

Executors applied to court to determine whether “reasonable income” was void for uncertainty
Held:

The will is not void

Jackson v. Hamilton (Irish case) held that trustees could have the discretion to retain “reasonable” sums for
themselves. Not uncertain & could be quantified.

Yardstick to be applied here is reasonable income, objectively measured

This is capable of measurement, by executors & by the courts (courts habitually make objective assessments)
iii) Certainty of Object
Class of beneficiaries must be described in sufficiently certain terms that the trust can be performed

Required so that trustee knows he is carrying out the settlor’s intention

Reasons for needing a complete list:
1. Fixed trust requires that trustees know class
2. If court is called upon to distribute property, they tend to distribute equally. To do so need to know how
many people there are & who they are.
3. Saunders v. Vautier: Need all the agreement of all sui juris beneficiaries that are absolutely entitled come
together to terminate a trust.
A. FIXED TRUSTS

Test for certainty of object is the “class ascertainability” test

Trustee must know who each beneficiary is to perform his duty since he has no discretion as to beneficiaries or
proportions of property for each.
B. DISCRETIONARY TRUSTS

Test for certainty of object is the “individual ascertainability” test. (Ambiguous test)

Until the McPhail case (below), all trusts were subject to the class ascertainability test

However, the test for certainty of objects of a power of appointment was a test individual ascertainability (i.e.:
could it be said with certainty that any given individual is or is not a member of a class)

McPhail v. Doulton assimilated the two tests so that there is no need to be able to ascertain every member of the class
of objects in a discretionary trust

Why assimilate the two: discretionary trusts and powers of appointment are very similar in nature (who gets
property)

Caveat: assimilation does not mean the two tests are identical. Lord Wilberforce said that a discretionary test that
passes the individual ascertainability test could still fail if the definition of beneficiaries is so wide that it does
not create a workable class.
McPhail v. Doulton (1971) H.L. @15511

Trust set up (company shares) to benefit “offices & employees, past & present, and their dependants”. Executors said
it was invalid for uncertainty

Issue: is the provision under review a power of appointment or a trust, and is it sufficiently certain?
Lord Wilberforce

Compares a non-exhaustive discretionary trust & a power of appointment: Artificial distinction drawn between a
power to do something (discretionary) and a trust (with legal obligations): each is still a trustee and has fiduciary
responsibilities. Yet one requires a complete list of beneficiaries while the other does not.

Clearly, a trust is created here but what is the relevant test? Is equity always equality? Finds old case law to support
his view that you do not need equality. As a result, do not need a complete list.

Rejects Inland Revenue v. Broadway Cottages Trust in favour of Re Gulbenkian’s: a trust is valid if it can be
said with certainty that ‘x’ is or is not a member of the class.

Could have certainty in language but with the result of a class that is so large as to be administratively unworkable.
11
Was applied by the Supreme court in Jones v. trustee. Eaton a quarter century later (see text footnotes).
27
Lord Hodson (dissenting in part)

Supports the ratio in Broadway Cottages Trust that unless the subjects of a class of objects are ascertainable, the trust
is void – (certainty)

Distinction between trusts and bare powers: (a) trusts are void for uncertainty if can’t be enforced by the court; (b)
objects of a power have no right to complain.

Re Gulbenkian’s rule applies to powers, it should not apply to trusts (a different animal)
Implications of ruling

Pushes the dividing line to non-exhaustive discretionary trusts

Unclear where exhaustive discretionary trusts fall

Unclear whether Canadian courts would apply McPhail, although it was employed at trial level in a case involving an
Eaton trust (unclear if it was a charitable trust)

Charitable trusts: completely different test for certainty of objects
Ambiguities in the test for Certainty of object:
1. How to distinguish between what is conceptually certain and uncertain?
2. What if there are several classes of beneficiaries, one of which fails the test?
3. Must a beneficiary show he included or is it sufficient to show he is not excluded?
4. Do the words “given individual” exclude potential applicants?
5. When have a sufficient number of objects qualified for inclusion such that class can be said to be certain?
Re Baden (No. 2) (Eng. C.A., 1972) – [McPhail]
(Subsequent decision, applying H.L. decision; same case)

Issue: Under the new test, is the trust sufficiently certain?
Held:

Application of the test: “relatives” & “dependents” sufficiently certain

Only need a “substantial number” of objects with certainty. Need not ascertain the whole range of objects.
DISCRETIONARY TRUSTS COMPARED WITH POWERS OF APPOINTMENT
Difference between powers and trusts

A power is discretionary (enabling); need not be exercised

A trust is imperative; creates a duty or an obligation to do something (otherwise, have a breach of trust)

Significance: under a power of appointment, potential appointees have no proprietary interest in the subject-matter

Re Lloyd: More likely to find a trust as the degree of specificity in describing objects rises.
Power of Appointment

Appoint the power to decide who is to receive property

Usually found in a will, defers decision as to distribution

Donor of power  Donee of power (appointor)  Appointees (beneficiaries / objects)

As close as possible to ownership since, unless there are limitations, could decide to give the property to oneself

Types:

General power of appointment: can appoint anyone

Special power of appointment: lists possible beneficiaries (e.g.: kids)

Hybrid power of appointment: lists persons not eligible (other than)

Should have an express provision dealing with appointment where Appointor does not exercise his power (“giftover”)

X  A for life, then to such persons as A may appoint, and in default, to all children equally

Result: in default, have a fixed trust

A need not be a trustee (power is transmissible upon death), can be a personal power (thus not
transmissible). Usually is the latter.
Spectrum:
Power (Individual ascertainability required)
1. Power of Appointment, in personal capacity (bare/mere power)
( power)
28





2.
Must act honestly
Must select from eligible objects
If a bare trust, do not have to exercise their power of appointment
Can have a fixed trust in default
No fiduciary duties
Power of Appointment, qua trustee (fiduciary power)

Fiduciary responsibility: honest, non-capricious, survey objects

Must consider their power of appointment, but may decide not to exercise it

More than a mere power
Trust / Duty / Obligation (Class ascertainability required)
3. Trust power / Power in the nature of trust

Power coupled with duty

Unlike #4, power is only exercised once: could be understood as a discretionary trust with a once and for
all distribution. (i.e.: distribution of capital)

Problem: Confusing terminology, mixes trusts & powers; power & duty
4.
Discretionary trust
(a) Exhaustive
(b) Non- exhaustive

Unlike #3, is distribution is ongoing (i.e.: distribution of income)

Case law debate as to ascertainability tests & discretionary trusts
5.
Fixed trust

Must perform: no discretion
(no power)
Beneficiaries

1: Hope / judicial review – Only have hope, no proprietary interests. Can contest appointments made outside
scope of the power.

2: Hope / judicial review / merits – More chance for substantive review: can contest the trustee for breach of
fiduciary duties to consider & in the manner of appointment.

5: Proprietary interest – benefits are not dependent on the discretion of another. Breach of fiduciary duties.
Saunders v. Vautier (as of right rule)
Which of the characteristics of the fixed trust can be applied to a discretionary trust. Prof. believes that it leads you
to the conclusion that fixed & discretionary trusts both require a complete list. The rationale above, easily applied to
#5, can spread to 4 & 3.
Appointee Rights
Re Weeks’ Settlement (Ch. D., 1897)

Wife gave life interest to husband with a power to dispose to children under his will. Husband died without
exercising the power. Are children entitled to the property?
Held:

Wife created a power, not a trust. As such, no vested rights in the children.
Certainty of Objects of a power of appointment
A power must pass two tests:
1. Certainty of objects
2. Void if capricious
Re Gulbenkian’s Settlement (1970) H.L. @129

Trustees had a power to pay income to G, wife kids and anyone under whose care G is employed, residing, etc.

Is this object of the power too vague?
Held:

Test stated in Re Park: Valid where one can with certainty say that someone is or is not part of the class; need
not ascertain every member. Approved in Inland Revenue v. Broadway Cottages Trust.
29

Language employed is not too vague: must read words with a view to giving effect to intention.
C) CONSTITUTION OF THE TRUST

Section’s case law is concerned with (a) the method of transfer and (b) the intention
Transfers
1. Can have an outright transfer of property
2. Can have a transfer of property in trust
(a) Third party as trustee

Method of transfer
(b) Self as trustee (declaration)

Intention
Approach
(1) is it on death or inter vivos?
(2) what is the proper method of transfer?
i) Methods
A. TRANSFER OF PROPERTY
1. On death
(a) Intestacy (statute)  not relevant to us since no trusts will result
(b) Testament (will)

Formalities (Will Act)

Subject matter not important
2. Inter vivos

Subject matter is important: each has its consequences
(i) gratuitous  equity will not interfere in a gift that is not properly given
(ii) for value
 equity will regard done what was meant to be done
Maxim: “Equity looks to intention, not to form”

Must ask what the intention was

But to say that the intention was “to benefit B” is too wide to be applicable; contravenes other rules. Rather, “to make
a gift by way of transfer”

Equity will not intervene in a will (too late) or on a gift, but will interfere in a sale
Carson v. Wilson (Ont. C.A.)

Wilson made inter vivos deeds but there was a problem with the form: not delivered to donees but rather held by his
solicitor until death: was only meant to take effect on death
Held:

Courts will not complete an imperfect gift nor re-characterize the method of transfer to carry out the intention of the
giver.
Transfer of Property to Trustees
A. Inter vivos gift for value

Legal title to trustee

Real property: transfer with a deed

Deed can also be used to transfer personal property, chose in possession

Chose in possession: delivery

Chose in action: assignment

Equitable transfer
B. Inter vivos gift (gratuitous)

Deed (of gift)

Chose in possession / personal property: delivery

Chose in action: assignment
30
Need to find the tools to properly transfer property

Once the trust is complete, equity will intervene to enforce

Equity will not intervene to set up a gratuitous trust

Milroy v. Lord: Transferor must complete all of the steps required to affect a transfer of the particular type of
property. Otherwise, no transfer arises and the courts will not give effect to transferor’s intention
Re Rose
“The rule in Re Rose”:

Testator tried to transfer shares inter vivos: Did everything required to transfer rights and interests; sent them to the
company for registration (adjust registry to complete the transfer); then he died.

A gift is generally not complete until the formalities are followed.

Issue: was the inter vivos gift complete, given the ruling in Milroy v. Lord?
Held:

Exception articulated: if the transferor has done everything in his power, equity will intervene to allow the gift.

The court found that the effect of the waiting period is to create a trust until registration complete.
B. DECLARATION OF TRUST
The goal is to name oneself as trustee

Constitution is not the problem since title is already vested in the owner

The issue is proving that the creator of the trust actually intended to become trustee of the property.
Paul v. Constance (Eng. C.A., 1977)

Equal drawing rights on the bank account between deceased and girlfriend. Upon death, estranged wife sought to
close the account but girlfriend claims that an express trust had been created for the couple.
Held:

Based on the facts, the court upheld trial finding that an oral express trust had been created: “the money is as much
yours as it is mine”.

The must be a manifestation of an intention to become a trustee for a third person. Technical words are not required.

Will not discover a trust where the facts show that the intention was a gift.
C. PROMISE OF FUTURE TRANSFER (INCOMPLETELY CONSTITUTED TRUSTS)
A. Promise of a transfer – with Consideration

The promise is enforceable

In equity, consideration is broader than at common law: a settlement in a marriage contract assumes
consideration to have been given (Pullman v. Koe)

Remedies where the beneficiary is not a volunteer (has given value): 12
1. Against trustee: Compel trustee to sue at law, for a breach of contract

Claim is for damages, since value has already been given by the beneficiary
2. Against settlor: B takes an action in own right in equity
B. Promise of a transfer – without Consideration

Short answer: “Equity will not assist a volunteer”

There are exceptions, whereby the promise will be enforced

Where the promise is contained in a covenant, the answer is less certain

Remedies where the beneficiary is a volunteer:
1. Against settlor: Action at law, if they are a party to the contract

Cannon v. Hartley

Remedy is damages (not specific performance)
2.
Equity? No, since equity does not recognize a volunteer
3.
Against trustee: Must assume that there is a contract that allows the B to sue trustee

See Re Kay’s Settlement
12
The unborn cannot give value. Value in equity is not the same thing as consideration in contract: value could include
pecuniary consideration or otherwise.
31

Positions adopted:
(i)
B may not compel
(ii)
Court directs trustee no to sue
(iii)
Where trustee decides to sue settlor, the damages should take into account third party
beneficiaries
Prof. wonders what would happen to this area if it was approached with the notion of unjust enrichment.

As this area is ‘un-fused’ should ask what is the approach & remedy at law and at equity?

Classical approach is predicated on separation of the two whereas the S.C.C. is tending towards fusion, particularly
with remedies.

When will a court intervene in an improperly constituted trust?
(1) Where there is clearly an agreement to do so;
(2) Involving property to be acquired in the future; and
(3) When the settlor tries to constitute a trust but fails to do so because he chose the right method
I. CIRCUMVENTING THE CONSTITUTION REQUIREMENT:
(i) Beneficiary as party to the Convenant
Cannon v. Hartley (1949, Ch.D.)

Deed of separation whereby father agreed to give half on any entitlements to wife & daughter. Defendant’s
father died leaving an inheritance but he refused to execute the covenant.
Held:

Well-settled that there is no claim in equity where no consideration has been given (can’t ask for specific
performance)

But as a party to the covenant, can sue for damages at common law.
(ii) Trustee as party to the Convenant

No clear answer as to whether common law will assist

Despite the Kay ruling, other cases have held that trustee should have the discretion; that he must; and that he
must not sue.

Even if he can sue, can he recover damages, given that they were incurred by third parties?
Re Kay’s Settlement (Ch.D., 1939)

Covenant whereby a woman agreed to settle certain after-acquired property. She subsequently married & had
children and then received property under a will that fell within terms of the covenant.

Trustee applied to the court after she refused to transfer the property to the trust
Held:

Discusses Pryce, where the court remained neutral and did not order the trustee to sue because to do so would
mean giving beneficiaries a recourse indirect, which they do not have directly

On this basis, the court ordered the trustee not to take any action for specific performance or damages.
Strong case for the argument that B can’t take action to force the trustee to sue
(iii) Re-Characterization of the Subject-Matter of the Trust

A final way to allow a volunteer beneficiary to enforce a promise is to characterize it as a chose in action: argue
that there was an immediate settling of an obligation, not merely a covenant to do something in the future
(Fletcher v. Fletcher).

If seen as an assignment of a debt, can be seen as completely constituted since it is a present and existing
property (chose in action). To complete the trust, will then require a deed or the requisite formality.

No a widely accepted proposition
Re Cook’s Settlement Trusts

Defendants failed to argue that there was a settlement of an obligation.
II. FUTURE PROPERTY
Where the subject-matter of the trust is future property, the trust cannot be fully constituted.

Equity will not regard a mere expectancy as property

Common law, however, does allow it to form the basis of a contract; therefore, can use contract principles to enforce
a promise
32

Re Ellenborough: Equity would not enforce a gratuitous declaration of trust because:
1. They were volunteers; and
2. Trust held not validly declared in the absence of subject-matter.
The only way out would be to characterize the future property as a chose in action (as seen above)
Settling a future debt to a trustee

Must turn it into something that exists today: Find a way to take an agreement to do something in the future and turn
it into something that exists in the present.

e.g.: a call or a put option, that can be immediately transferred.

To look upon this as the settlement of a contract makes the settlement the subject of the contract. Trying to turn an
improperly constituted trust (futurity) inside-out by making it a present subject matter. This can be done with debt.

Prof. has a problem with this since it makes the agreement itself (debt) as the subject matter.
III. Exceptions to the rule that “Equity will not assist a volunteer”
1. Doctrine of past performance
2. Equitable estoppel
3. Gifts motis causa
4. The Rule in Strong v. Bird

When a gift is made during the donor’s lifetime and the donor appoints the would-be recipient as executor, the
vesting of the property in the donee qua executor can be treated as a completion of the gift (considered in Re
Gonin).
Re Ralli’s Will (Ch.D., 1964

Helen received half the residue of her father’s estate. Helen then made a marriage settlement for her property but did
not transfer her share in her father’s estate. The sole surviving trustee of that second trust made an application as to
whether the residue of Helen’s inheritance should be distributed to the beneficiaries (Helen is now deceased).
Held:

If title to property is vested in the trustee through a third party the trust is still held to be constituted beyond
revocation.
ii) Formalities
Statute of Frauds enacted in England in 1677

At equity, a trust could be created orally or in writing so needed something to counter fabrications of evidence

Imposed minimum formal requirements for certain transfers and contracts
A. INTER VIVOS
Ontario Statute of Frauds
s. 4 No action unless the agreement is in writing

Where a contract to create a trust is breached, have:
(a) contractual remedies: specific performance & damages
(b) proprietary/trust remedies: when:
i. the party creates the trust & breaches the trust
ii. also before creation of the trust if they covenant that the would-be beneficiary holds the beenfit of
the covenant immediately… (217)

The section governs contracts to create trusts but where contracts do not meet the requirements here, they
are not void, only unenforceable. Unless: doctrine of past performance.
s. 9 Declarations or creations of trusts in writing

Re formalities required to create a trust; but personalty excluded
s. 10 Trusts can arise or result by implication or construction of law

Re formalities required to create a trust; constructive & resulting trusts excluded
s. 11 All grants or assignments of trusts in writing, else void…

Applies to both land & personalty

It may be construed as including the transfer by a beneficiary of a beneficial interest
Oral trusts on land

Can circumvent the statute where a reliance thereupon would assist someone to perpetrate fraud. Oosterhoff argues
that there is here a constructive trust.
33
1.
2.
After an oral contract to transfer land, transferee seeks to enforce the trust: Can argue that transferee satisfied the
doctrine of past performance (that his acts or performance are solely referable to the contract). Equity regards the
transferor as a constructive trustee.
Parties agree that A will hold property for B and B acts accordingly. Apply the principle that a statute may not be
used to perpetrate fraud (Rochefoucauld)
Rochefoucauld v. Boustead

Plaintiff defaulted on mortgage so defendant paid the balance for her. He assumed title but would transfer it back
after she paid him back the amount outstanding. He later denied the trust and pleaded the Statute of Frauds
(nothing in writing)
Held:

Correspondence was sufficient evidence of the trust. In any event, oral evidence was held to be admissible as
evidence of an express agreement to create a trust.

Statute of Limitations not applicable in a trust relationship.
Could also have argued there was a constructive trust.
B. ON DEATH
Statutory requirements for a testamentary trust are those required in a will: Succession Law Reform Act
s. 3 Will valid when it is in writing
s. 4 Not valid unless signed in the presence of testator & 2 witnesses and signed by two of them, with testator’s consent
s. 6 Can make a will entirely in own handwriting with signature, without formalities or the presence of a witness
s. 7 Signature placed at the end of the will
Secret Trusts

Where property is left to someone under the undertaking that it will be held for another.

E.g.: Leave money for X with the secret agreement that he will hold it for A for life and the remainder to B.
Creates a binding obligation: a fully-secret trust.

Alternatively, can have partly-secret: “To X upon trust for such purposes as I have communicated to him”

Secret trusts circumvent the writing requirement. But they are permitted, otherwise the statute could be used to
perpetrate fraud.

Oosterhoff treats these as constructive trusts: Although legal formalities have not been complied with, there is
detrimental reliance by the testator that the trustee will carry out his wishes. Equity thus intervenes to prevent unjust
enrichment (557).13

Standard of proof to establish existence of a secret trust is high (McCormick v. Grogan)
Requirements to create a secret trust:
1. Communication by donor to donee of the trust & its terms;
2. Acceptance by donee (silent acquiescence is sufficient); and
3. Communication must be timely

Timing requirement depends on whether it is a secret or semi-secret trust
Fully-secret Trusts
Ottawa v. Norman (Ch.D., 1972)

Widow had agreed to her husbands request to devise their property to his son and daughter-in-law. After his death,
she made a will in favour of another. The intended beneficiary took action against the latter beneficiaries.
Held:

Secret trust held to exists as the essential elements were sufficiently proven: (1) Intention; (2) Communication; and
(3) Acceptance
Semi-secret Trusts
Intention to create a trust is known but objects are not

Illogically, the courts hold that communication & acceptance must exist before the will is made
13
Other writers have argued that these trusts are express.
34



Arise from a confusion by the courts of constructive trusts with incorporation by reference. In the latter doctrine, the
documents incorporated must pre-exist.
Also enforced on the basis on detrimental reliance. A document need not exist.
Re Mihalopulos: Will instructed executors to give money to charities designated per instruction left among his
papers. The two witnesses two the will signing were not aware of their existence. Held that it was an attempt to
include future dispositions, which is not allowed under the Wills Act. Documents thus disregarded.
2. VARIATION AND TERMINATION
A) REVOCATION BY SETTLOR
Gifts
Must distinguish between trusts made for value and those as gifts

If set up for value, it clearly cannot be revoked (like a sale); unless there was fraud, duress, etc.
Gratuitous Gifts

Basic rule: once completed, a gift can’t be set aside. If a gift is merely a promise (incomplete), can set it aside.14

Gratuitous transfers can also be set aside
Trusts
Similar rules to those applicable to gifts

Gratuitous transfer by way of trust can be revoked if not completed

Unlike simple gifts, however, a settlor can include an express provision for revocation.

Three dangers to the power of revocation (253):
(1) Intention: It can cast doubt on the intention of the testator – did he mean for equitable title to pass?
(2) Inter Vivos or Testamentary? (Testamentary gifts must comply with written formalities)
Re Beardmore Trusts

Held to be a testamentary trust, not inter vivos,

Reason: it called for a transfer of 3/5 of the net estate
Anderson v. Patton

Property transferred to trustee, held in trust for transferor (LE), remainder to two friends. Is this a
transfer to take effect now or upon death?

Held to be an inter vivos trust, with a power of revocation.
(3) Power of revocation will attract attribution rules under the ITA (bare trust)
B) TERMINATION BY BENEFICIARY
The Rule in Saunders v. Vautier
In Saunders v. Vautier, the beneficiary successfully called for the assets at 21 rather than 25, as the testator called for.
The Rule: A beneficiary who is (1) sui juris and (2) absolutely entitled can require the trustee to make an
immediate distribution of the trust property and thereby terminate the trust prematurely.






Extended to trusts with multiple beneficiaries, provide they all agree and represent the full beneficial interest (future,
contingent, etc.)
Principle: Equitable owners should have the right to decide what happens to the property
Can terminate without court assistance
Premature end can be contrary to testator’s intentions
Rule cannot be used to modify a trust. This can only be done indirectly by winding-up the trust under this rule and
creating a new one (but resettlement will attract adverse tax consequences)
Applied in Canada in Re McCrossan (1961, BCSC) (259).
Could be applicable where:

Not to be paid until a certain date

LE with remainder upon a certain age

To be paid in instalments
14
An incomplete gift will not be completed by the court.
35

Discretionary trusts
Argument is that the testator did not trust the beneficiary; so the beneficiary must establish that he/she is a competent
adult
Not applicable where:

Infant interests

More difficult where there a numerous beneficiaries – can avoid the rule with unascertained minors.

The only ways to remove one beneficiary from a trust is to:
1. Argue that there are in fact separate trusts
2. Have all parties agree to resettle a new trust

Gift-over situations: if he does not reach 25, then to Y.
Requirements:
1. Ascertained beneficiaries
2. All adults
3. All are competent
4. Unanimous agreement
Discretionary trusts

Must be in a position to draw up a complete list of beneficiaries and show that all agree o terminating the trusts

Uncertainty of objects means this rule will not apply
C) VARIATION BY COURT
(1) COURT’S INHERENT JURISDICTION

Can leave a trust in place but apply to a court to vary its terms

House of Lords held that the courts do not have an inherent power to vary the terms of a trust (leading case):
Chapman v. Chapman (1954, HL)

Trusts were set up to avoid taxes but is was discovered that a power of encroachment would attract tax liability of
their estate upon death. Applied to the court to exercise their inherent authority to vary the trust instrument

Beneficiaries were infants so Saunder v. Vautier not applicable
Held:

Courts do not have an inherent power to vary the terms of a trust, not even where all beneficiaries are sui juris

Could only modify trusts in certain circumstances:
1. Emergency jurisdiction: could expand powers of the trustee where it is necessary to preserve the trust property.
2. Power of conversion: realty to personalty & vice versa if to the benefit of the minor
3. Power of maintenance: Provide income to maintain an infant where there is a need but no immediate entitlement
encroach
4. Compromise jurisdiction: Court can approve an out-of-court settlement on behalf of the infants involved (must be
an actual dispute (litigation) under way).
(2) VARIATION OF TRUST LEGISLATION

As a result of Chapman, the UK adopted legislation and Ontario followed suit with the Variation of Trust Act (most
provinces follow Ontario model):
s. 1 – Court can approve of a trust variation on behalf of beneficiaries (present or future) that are not sui juris
s. 2 – Must be for their benefit

Allows Saunders v. Vautier to be invoked by the court (judicial discretion)

Categories of classes are mostly those that cannot invoke Saunders v. Vautier as of right: unborn, minors,
incompetent.

Competent adults consent for themselves while the court will consult for the remainder
Alberta’s Trustee Act (& Mb) are different from Ontario: No variation or termination of a trust without court approval

Abolished the rule in Saunders v. Vautier in its pure form (no longer a “right”)
36

42(2) says that the approval of the court is required for competent adults 15
In both Ontario & Alberta type jurisdictions, the court may not impose a solution
Unanimity not required for pension trusts (267)
Re Irving (Ont., 1975)
Classic case on the application of the Variation of Trust Act

Court has broad power to approve a variation proposal but it must find some “benefit”

In so doing, court must protect the interests of those who cannot protect themselves: Is the proposal one that a
prudent adult would negotiate for themselves?
Case canvases 3 points:
1. Intention: Must find the testator’s intention and decide whether arrangement respects it. Intention of testator is of
prime concern here (other cases will take different view). Question: is it the donor or donee’s property?
2. Substratum objectives of the trust. Goal is to find a different arrangement that gives substantial effect to testator’s
intentions (don’t want to reconstruct the trust).
3. Benefit: Is it purely a financial question & what factors must be considered? Courts have been flexible at interpreting
what a benefit is.
Benefit: Court cannot approve a variation for someone unless it is to their benefit
Teichman v. Teichman (Man., 1996)

Estate split equally between two children but daughter’s held in trust for ten years, likely because she had suffered
from a depression. She applied to the court for a variation, with the consent of the trustee, her brother and a
psychiatrist. Rule in Saunders v. Vautier not applicable in Manitoba.

Trial judge refused to subvert the clearly stated intention of the testator, however unfair it may seem.
Held:

The legislation was not meant to subvert the rule in Saunders v. Vautier, merely to leave it to the court to apply.

There were contingent interests but they were remote - Variation allowed.
D. Purpose Trusts
1. CHARITABLE PURPOSES
A) GENERALLY
Trusts
1. Private Trusts
a) Persons
b) Purposes
2. Public Purpose Trusts
a) Charitable
* Rules
First Rule: Rule against Perpetuities

Rule against remoteness of vesting applies: 21-year rule
Examples

To McGill Law Faculty when 1st woman named Dean16 – Would apply the rule against perpetuity to this gift.

Either: void ab initio (traditional jurisdiction) or apply wait and see rule (reformed jurisdiction)

To A in fee simple until 1st woman named Dean17

To McGill Law Faculty until 1st woman named Dean, then to X’s heirs then living18

Rule against perpetuities would also apply here
15
Read 42(2) in conjunction with 42(6): Court may not approve an arrangement unless all adults agree. However it may
refuse its consent where all have agreed.
16
Straight springing interest.
17
Shifting interest.
18
Determinable interest.
37
Only time rule against perpetuities does not apply is when there is a gift to one charity that vests in time with a
subsequent gift-over to another charity

Initial gift must vest but once it is given to a charitable purposes the rule against perpetuities will not apply so long as
gift remains dedicated to a charitable purpose
Second Rule: Rule Against Inalienability

Also known as the Rule against Perpetual Duration: Rule against indefinite duration applies to non-charitable
purpose trusts but not to charitable

General rule: A gift is void if gift precludes the alienation of capital during the perpetuity period (i.e.: it is a
requirement that the capital not be distributed for more than 21 years).

Charity: To what extent can someone give property to McGill with a restraint against alienation. Rule against
alienation does not apply to public trusts. 19 (e.g.: Wainright Trust)
Third Rule: Rule Against Accumulations

An accumulation is a direction by the testator: that the income must accumulate within the trust. This possibility
exists with all trusts.

In the past, could accumulate for someone’s lifetime + 21 years then distribute.

Law amended so that accumulation period is now the shorter of 20 years or the minority of designated individuals.

Charities are subject to the same rules. (Charity could nonetheless opt to do this of their own accord; but it cannot be
a stipulation in the deed)
Other Advantages of Charity
(a) Certainty

Certainty of objects not required
(b) Scheme-making power

In the final analysis, must see a clear intention that the property be devoted to charity.

Of the purpose is not clearly defined, the court will then say who will benefit.
(c) Cy-près

Court can order a scheme when the intended charitable purpose is no longer possible
(d) Taxation

Rules are set out in the I.T.A.

Taxation rules are distinct from private law (U.K.: there is consideration to the private law meaning of a trust)
Morice v. Bishop of Durham (1804, Ch.)

Leading case on the concept of charity (strict construction of the concept)

Origin of the distinction between charitable and non-charitable purpose trusts
Held:
1. If a trust is not ‘wholly’ charitable, it fails
(no longer the case?)
2. Preamble of the Statute of Elizabeth (list) is the source of the definition of charity
Commissioners for Special Purposes of the Income Tax v. Pensel [1891] (853)

Enunciation of the 4 heads of charitable trusts

The preambles are still relevant with regard to the 4th head: purposes beneficial to the community. 20
Interpretation Today

More lenient approach to charity today; HL said that courts should construe trusts in favour of charity benignly.

See Jones v. T. Eaton and Re Laidlaw
19
20
Gift would be deemed void for a private trust as contrary to public policy. Not so for public trusts.
Prof. Also believes that given the historical importance of the preamble, courts will continue to look at it.
38
B) HEADS OF CHARITY
Classic tests to determine whether a trust is a charitable

1st try to fit it into one of the four heads

2nd ask whether there is a public benefit

Then other considerations
Aspects of a charitable trust:
1. Overriding objectives:

Public benefit

Exclusivity
2. Pigeon-Holing

Look at preamble (p. 851 – esp. for 4th head)

4 heads
i) Relief of Poverty
ii) Religion
iii) Advancement of Education
iv) Any other purpose beneficial to the community
i) Relief of Poverty

This head of charity is in a privileged position: less stringent requirement for “public benefit”

Courts: relief from poverty is held as being material want (age or health under head #4)

Poverty is relative term but it seems to exclude someone who is employed
Public benefit requirement:

Arbitrariness about who belongs in the group but must find that the trust is open to more than next-of-kin or a mere
group of acquaintances (all have a private nexus with donor; need a public element)

What if the group targeted was not a cross-section of society but members of a particular group?
(i) Exception to the public benefit requirement: Poor Relations cases

A charitable trust for one’s poor relations is charitable despite the personal nexus with the donor

In Re Scarisbrick, Cockshutt v. Public Trustee, “relations” found to be broader than next-of-kin thereby
avoiding the problem of a lack of a public element

Followed in Keshen v. Ferguson (N.S.)
Point of the “poor relations” cases:
Think about the interrelationship of purpose trusts and private purpose trusts. Court left the poor relations cases in
the public realm to keep them valid. Prof.: 2 complimentary parts of a puzzle.
(ii) Extension of the Exception: Poor Employees

Poor employees of a company can satisfy the public purpose requirement

Position adopted by SCC in T. Eaton
Jones v. T. Eaton Co. (1973, SCC)

In 1936, a legacy of $50,000 was left for the “needy and deserving” members of the T. Eaton Quarter Century Club
living in the Toronto area

Does this satisfy the public benefit requirement given that all of the persons were former employees or a relation?
Held:

First, the court interpreted “deserving” in the context of the will as meaning someone of moderate means who might
require assistance. Reason: written in the context of the Great Depression when many were in need.

Second, the court applied the HL decision of Dingle v. Turner and held that poor employees are a broad enough class
to constitute a public benefit.

(Court drew a distinction between the objects of the gift and its purpose. Relieving poverty is a public benefit)
ii) Advancement of Religion
Statute of Charitable Uses only mentioned “repair of churches” it was understood that most matters concerning religion
were charitable
39


Burial grounds, memorial widow, church bell, etc.
Public benefit is presumed once a trust is deemed for religious purposes
Courts have drawn 2 lines as to what constitutes a religion
1. Must be a belief in a supreme being

Excludes ethical societies, that do not believe in a God, etc.
2. Religions that believe in a single God
Subject to the public benefit requirement

Cults, etc. likely ineligible
Thornton v. Howe (UK, 1862)

Her bizarre religion was seen to be of no use to anyone but nor was it seen as doing any harm
Held:

Since the purpose of the trust was to propagate religion, is was charitable

Test applied is usually that there be no public harm (don’t have to prove public benefit)
Gilmer v. Coats (HL, 1949)

Beneficiaries were a closed order of nuns, were required to live in isolation.

Here public benefit could not be assumed and lower courts said their was not a charitable purpose.
Held:

There was no proof of public utility given the closed nature of the order. Sufficient public benefit could only exist if
the public could attend
Establishes boundaries
iii) Advancement of Education
What constitutes education?

Courts have argued for a broad interpretation of education, to include physical, spiritual, moral and mental elements

Sports, research, professional education, etc.

Trusts that are educational in some respects but in fact for a political purpose will not qualify
Requisite public benefit

Oppenheimer case raised the issue: failed the test as it did not have the requisite cross-section

Nexus relationship will thus make education trusts void under public law

Would they instead be valid at private law. Likely 2 problems: 1. Certainty of objects and 2. Most often they are
endowments meant to be perpetual (thus need to classify it as public)

Re Pinion (Eng. C.A., 1965): What school is not for a public benefit? School for prostitutes or pick-pockets
Incorporated Council of Law Reporting for England & Whales v. A-G (C.A., 1972)

Council incorporated in 1870 by members of the legal profession to publish reports of judgements. Applied for
charitable status in 1966 but were refused.
Held:

Publisher of law reports qualifies for under the 3 rd head because its goal is to educate people in the profession about
judge-made law.

It would also qualify under the 4th head since there is a benefit derived by the community in having informed lawyers
iv) Other Purposes Beneficial to Community
While this head of charity used to be based on the preamble to the Statute of Charitable Uses, case law has expanded this
modern list

Requirement of public benefit is stronger here than under the other 3 – The test of “sufficient segment of the public”
normally requires that the purpose assist the public generally (or at least a very broad segment)

Includes: relief of the old & disabled; care of the young; public works; the benefit of a municipality or the country;
administration of justice; relief for prisoners; rehabilitation; promoting economic activity; animals; health; sports…

Conclusions:
1. Courts have moved away from a strict “analogy” principle (preamble) to a “general public utility” principle
2. All of the causes can be seen as objects of general public utility
40

Laidlaw, therefore, may not be such a marked departure given the decreased emphasis on contents of the
preamble
Re Laidlaw Foundation (Ont. SC, 1984)

The Foundation was a charity: it gave its net income from its property to various Ontario causes. It made payments to
various amateur athletics organizations like the Canadian Special Olympics; Commonwealth Games, etc.

Public trustee argued these recipients were not charitable; he lost at trial and appealed.

(In the past, sports were not considered charitable activities unless it was associated with economic activity)
Held:

Furthering amateur sport is charitable

It is artificial and of no real value today, in Ontario, to pay lip service to the preamble of a statute passed during
the reign of Elizabeth I. Quoting from Re Orr, judge found that the Ontario Mortmain and Charitable Uses Act had
the effect of making older English case law inapplicable (not bound).
C) REQUIREMENT OF PUBLIC BENEFIT
In the past, a purpose was ipso facto charitable if it benefited the public

Morice v. Bishop of Durham held that it must also fall within the preamble or its spirit & intent

In Ontario, Morice not longer seems to apply in light of Laidlaw
What is Public Benefit

Two distinct elements: benefit & for the public

Generally, the public element is most stressed

Increasingly stringent progression from relief of poverty (low)  advancement of religion  advancement of
education  purposes beneficial to the community (high public benefit requirement)
Case law evolution

R. v. Burns – Payment to the Canadian Ski Association not charitable since there was an “expectation” which
negated the existence of a gift; consideration was the daughter’s skiing instructions.

Public element: Re Crompton (UK) – a trust for the education of children from three families not charitable since it
was for a group of private individuals related through a common ancestor (Conversely: public requirement is much
lower is relief of poverty cases).

In Oppenheim v. Tobacco Securities Trust Co., H.L. followed Re Crompton, holding that a trust for the education of
110,000 employees’ children was not a sufficient section of the public since connected by a personal relationship.

Today, the trend is away from strict application of these rules: see dicta in Dingle v. Turner (HL): public-private
distinction is a question of degree…
Extra-territorial Trusts

General rule: if a purpose would be charitable in Canada, a gift to such a cause outside Canada is held to be
charitable

Re Levy Estate settled the matter – Gifts to Israeli charities must be for causes not contrary to Canadian public policy
Political Purposes

Bowman v. Secular Society Ltd. – A trust for political purposes is not charitable although absolute gifts are

Where a group mixes politics with relief of poverty or education, strong chance that it will fall off-side
Gilmer v. Coats (HL, 1949)

Beneficiaries were a closed order of nuns, were required to live in isolation.

Here public benefit could not be assumed and lower courts said their was not a charitable purpose.
Held:

There was no proof of public utility given the closed nature of the order. Sufficient public benefit could only exist if
the public could attend
Establishes boundaries
Re Pinion (Eng. C.A., 1965)

Wealthy but untalented painter sought to create a museum and left the residue of his estate for its maintenance. Nextof-kin appealed as to its public purpose.
41
Held:

The opinion of the donor that a gift serves a public purpose is irrelevant: the matter must be decided by the court.

Prima facie, a museum for public education can be charitable. However, the works were junk of such an atrocious
nature that there was no benefit to the public to be gained.
D) REQUIREMENT OF EXCLUSIVITY (IMPERFECT CHARITABLE TRUSTS)
Imperfect trust provisions will vitiate the effect of the gift

In Morice, a trust for objects of “benevolence or liberality” fell outside the definition of charity

While the testator may have intended charitable aims, “imperfect trust provisions” state it imperfectly
Chichester Diocesan Fund & Board of Finance v. Simpsons (HL, 1966)

Will directed the residue be paid to “such charitable institution other charitable or benevolent objects as the trustees
shall choose”
Held:

Court held that benevolent was different from charitable: not restricted to charitable purposes

Property must be dedicated exclusively to charity

Turned on the meaning of “or” – it was used disjunctively and could not be construed as conjuntive (“and”)
Re Loggie, Brewer v. McCauley (SCC, 1954)

Residue for “charitable, religious, educational or philanthropic purposes
Held:

Applied the ratio in Chichester and found that “philanthropic” vitiated the gift. (adjunctive)
Exceptions to Exclusivity Problem
1. Severability

Must be possible to sever the non-charitable part of a trust, allowing the remainder to exist independently

Subordinate clause: Condition subsequent could be struck out

E.g.: Endowment to a church, on condition that part be used for ‘X’ ethical society. Since ethical societies are
not valid charitable objects, the condition subsequent is struck without affecting the gift.
2.
Main v. Ancillary purposes

If the principle purpose of an institution is charitable but that it has an “ancillary” non-charitable element, the gift
will stand

Not so where the non-charitable purpose is not ancillary

E.g.: Where ancillary activities include lobbying for legislative change. See also Laidlaw, where some of the
activities of certain Amateur Athletics groups not charitable.
3.
Gifts to persons or institutions whose work is charitable

Where a person’s office is dedicated to charity, can interpret an imperfect gift accordingly

Blais v. Touché (SCC, 1963): Gift by priest to bishop – charitable causes inferred
E) IMPOSSIBILITY (CY-PRÈS DOCTRINE)
Part of the court’s scheme-making power:
a) Inherent general

Administration of a clearly charitable trust that lacks specific objects – court helps clarify and give meaning
to intentions

E.g.: A trust that will use money “for charity”

Distinct from the cy-près doctrine although often treated as one and the same
b) Cy-près

Only arise where the testator has defined a specific charitable purpose but it is impossible or impractical to
carry out.

Not giving effect to the testator’s intention; instead, giving effect to something “as close as possible”

Distinction between initial & supervening impossibility is important as different consequences arise

Two types of cy-près:
42
1.
2.
Prerogative Cy-près: No trust is interposed between donor & charity so the court acts with the consent
of the A-G
* Judicial Cy-près: Money given to a charitable trust but impossible/impractical to carry out intention
Circumstances
1. Initial impossibility or impracticability

Must assess initial impossibility or impracticability at the time the trust takes effect (will or inter vivos
document)

Two issues:
(1) Impossibility/impracticability

Impractical: No longer a need (slave trust)

Impossibility: Institution never existed or cease to exist
(2) General charitable intent

Where gift was intended for a specific purpose only, impossibility/impracticability creates a
resulting trust on the estate

If a general charitable intention can be found, can apply the money cy-près

General charitable intention can be found where the institution never existed or where it ceased to
exist and intention not specific. Change in name or amalgamation does not lead to application of
cy-près, just identification by the court.
Re Spence’s Will Trusts (Ch.D., 1978)

Testatrix gave residue of her estate to a trust to be divided equally between “the Blind Home at Scott Street”
and “the Old Folks Home at Hillworth Lodge”
Held:

Blind Home did not exist per se but there was a similar association such that the court could interpret the gift
as one for a cause, not a particular institution.

The second gift was to something that ceased to exist prior to testatrix’s death. Seniors now had various
other residences and the building now serves as office space.

Prima facie, the gift fails (since place no longer exists) unless a general charitable intention can be found.

In Re Harwood, the absence of a specific purpose left undisturbed the general purpose. Here, we have a
problem because the specific purpose stated makes it difficult to argue that a general one exists.

The gift fails as there is nothing that can be done to give effect to the gift (no general intention nor an
identifiable institution or group of patients that could give effect to the stated intention)
All a question of interpretation
2.
Supervening impossibility or impracticability

Once the property vests in the charity but the purpose subsequently becomes impossible or impractical, the
property cannot revert back to the donor. It belongs to the ‘charity’.

In general, the court will apply the cy-près doctrine, regardless how general or specific the intention

Two exceptions:
1. Where there is no exclusive dedication to charity, such as where the donor retains an interest or there is
a gift-over to a non-charitable purpose upon a certain event.
2. If only the income is gifted, the capital cannot be applied via cy-près.

Court asks: Has the property been dedicated exclusively for charitable purposes? If so, they will approve a
cy-près application.

Re Fitpatrick: Charitable trust for musical education of a school in Winnipeg. School ceased to exist but
judge was willing to hear new schemes where the cy-près doctrine could apply.
Discriminatory trusts

Where there are provisions that discriminate against a segment of society, Canadian courts have often found ways to
deal with them outside the law of trusts.

English court have applied impossibility or impracticability concepts when trustees refuse to administer trusts unless
the discriminatory provision is removed (Re Dominion Students’ Hall Trust)
Canada Trust Co. v. O.H.R.C. (Ont. C.A., 1990)
43

The Leonard Foundation created via an inter vivos trust in 1923 for educational scholarships. Deed expressed the
settlor’s views favouring white, Christians of the British Empire, and instructed that the trust should favour children
whose parents were in certain professions.
Held:

While the offending clauses are not contained in the operative part of the deed, it is intended to provide guidance.
Must read the document as a whole.

While judges should not be quick to find a declaration void as against public policy (as they risk imposing their
views) there are cases, like this one, when the interest of society clearly requires it.

However, the trust should not fail since it was initial certain (given public policy standards in 1923). There is a
general charitable purpose: education. The cy-près doctrine should be applied to remove discriminatory provisions.
2. NON-CHARITABLE PURPOSES
Courts initially against them

Morice: Will not enforce them since there must be someone in whose favour the court can enforce performance

Known as the beneficiary principle or enforceability objection

See also Re Astor’s Settlement Trusts

Problems magnified where the purpose is an unincorporated association (not a legal person)

Recent movement in favour (common law & legislation)
Issue of certainty of objects

Public purpose trusts were less stringent. What rules do you then apply to non-charitable trusts?

Basic rule (starting point): Apply the same rules as are applied to private persons trusts.
A) TRADITIONAL APPROACH
5 Objections:
First objection: Enforceability principle

Must have an individual with standing to enforce a trust. The exception is the charitable purpose trust: the person
with the authority to enforce trust is the Attorney-General.

Result: objection to the recognition of a private trust. (Who will enforce it?)
Positive enforcement:
Making sure that a trustee does what he is supposed to do.
Negative enforcement:
Making sure that a trustee does not do what he is not allowed to do.
This is the most important hurdle to overcome for the creation of a non-charitable purpose trust.21
Second objection: Uncertainty (Execution)

Purpose must be described in such a way that its object is certain22

Allows the court to enforce it (assuming it is enforceable)
Third objection: Excessive delegation of testamentary powers

Starts with the notion that each person must make their own will and not leave the task to another

Too much discretion in the hands of trustees is objectionable

This objection is for testamentary trusts, not inter vivos

Non-charitable purpose trust are said to constitute an excessive delegation of testamentary powers

* Not a valid objection: since the law of trusts already recognizes the ability of a testator to defer decisions on
distribution of property through the power of appointment.
Fourth objection: Rule against perpetuities

The private purpose trust will offend the rule against perpetuities

* Not a fatal objection: can draft around this problem.
Main objection: Beneficiary principle

There must be someone in whose favour the court can enforce performance
Four Exceptions:
21
22
We’re working our way towards the powers to appointment.
See Chichester.
44
Purposes trusts that are not charitable but enforceable
1. Graves

Upkeep of cemeteries, etc. (e.g.: use of money to upkeep the tomb). Courts will oversee what can be
included/excluded in this exception. Notion of positive/negative enforcement.
2. Animals

If limited to the perpetuity period.
3. Monuments

(Including a mass in honour of a specific individual?)
4. Fox-hunting
These have been held capable of indirect enforcement if money is not used for the proper purpose where the legacy is
sufficiently defined.
Re Astor’s Settlement Trusts (Ch.D., 1952)

Sought to create a non-charitable purpose trust for newspapers & understanding between nations.
Held

Void for not falling within one of these categories.

The court of Equity will not recognize as trusts those which it cannot enforce and control
B) MODERN TRENDS
i) Identifiable “beneficiaries”
The trend has been to make an effort to validate them as much as possible

However, achieved indirectly: terms of the request are reinterpreted so as to reclassify the trust as a person trust 23

Problem: had to meet the complete list test before 1971

Push the purpose to the background and the people to the fore by identifying individuals with sufficiently direct
interests to be given standing in court. Threshold question: “Is there any way that this trust can be interpreted as a
trust in favour of individuals?”
Re Denley’s Trust (Ch.D., 1969)

Inter vivos trust conveying real property for a recreation or sports ground for the benefit of employees. Otherwise,
land would go to a local hospital.

Is it a valid non-charitable purpose trust?
Held:

The employees have a sufficiently direct interest to be given standing to enforce the trust in a positive and negative
manner
Question becomes: How do you know when you are in a pure purpose trust?

Look at the breadth of the beneficiaries & “outward/inward” the purpose is (humanity v. employees of a particular
company).
Result: a private purpose trust becomes a private person trust through the identification of ‘indirect’ beneficiaries. But
how much of the people’s trust rules are you going to apply? (Re Denley, Re Vautier, etc.)
ii) Legislation
Can also validate a trust via legislation

Modern perpetuity statutes will validate some non-charitable purpose trusts for a limited period

Found in B.C., Alta., Ont., Yukon, N.W.T.
Perpetuities Act (Ont., s. 16)

“A trust for a ‘specific’ non-charitable purpose that creates no enforceable power in a person will be construed as a
power of appointment of the income or capital as long as exercised within 21 years”

Effect: Gets rid of problems (perpetuity, enforceability, etc.)

Where it is clearly an endowment (perpetual), court has the option to say that it is void ab initio or valid for 21 years.
23
Since it can’t be recast the other way: towards a charitable purpose (lacks public benefit).
45

Same as that discussed in Wood (below)
Wood v. R. (Alta. S.C., 1977)
Only case that discusses this legislation (s. 20 in Alta. is equivalent to s. 16 in Ont.)

Estate given to an Edmonton library for religious, educational and literary purposes. Problem: it was an
unincorporated body (no legal personality)
Held:

The remedial legislation helps save “specific purpose trusts”

Invalid since it lacks specification as to what is “religious, literary and education” in the context of a private trust.
These terms have meaning only in the charitable trust common law.
iii) Unincorporated associations
Lack legal personality

Merely a group of people bound together by contract for a purpose. Property may be held by a treasurer ot president
but group itself has no rights.

In Re Woods, the court held that there are four ways to treat money given to an unincorporated association.
Way to analyze a gift:
1.
Gift to present members of an association
- persons

Valid as an out & out gift

Seems to suggest that benefit conferred on those who are fortunate enough to be members at a particular
point in time.
2.
Gift to present and future members
- persons

Invalid out & out gift as it offends the rule against perpetuities

Getting closer to testator’s intention but danger is that it can create a class gift with a perpetuity problem
(the worst possible perpetuity problem)

Stated in Re Woods, not Re Lipinski
3.
Gift to present members subject to contractual obligations inter se

Gift / contract law analysis

Given qua member, with contractual strings attached which would limit actions that could be taken (i.e.:
winding up the trust, etc.)
4.
Gift to director/members in trust for purpose

Trust law – This is the one that is most clearly the law of trusts. The problem is the purpose.

If a Denley construction is possible (people sufficiently interested), upheld as a non-charitable purpose trust.

If the purpose is narrower than the association, may be forced to categorise under 4. This raises the question
of ‘what is the purpose; charitable or not?’ If not, must then attempt to bring ultimate beneficiaries to the
fore… (this is what they did in Re Lipinski at 977)

Purpose analysis:
1. Charitable?
2. Non-Charitable?
(a) Anomaly
(b) Inward purpose (Denley) - valid
(c) Outward purpose (Wood) - invalid
Re Lipinski’s Will (Ch.D., 1977)

Gift to an unincorporated association, to be used to construct & improve buildings for the association (strings
attached)
Held:

Suggests 3 ways to analyze the gift (1, 3 & 4 above).

Finds that the members of the association have standing to enforce the gift since it was being done to their benefit
(indirectly)

Therefore, whether viewed as an absolute gift or a purpose trust, it is valid.
46
Case Law Rules
Rule in Saunders v. Vautier
Rule in Howe v. Lord Dartmouth
Rule in Clayton’s Case
Hallett’s
Oatway
Rule in Re Golay’s Will Trust
Re Gulbenkian’s rule
Rule in Re Rose
39
18
25
25
35
47