TRUSTS CHECKLIST
CREATION OF THE TRUST
1. What kind of trust?
a.
b.
c.
d.
Express Trust OR by operation of law (resulting or constructive)
Creation – inter vivos or testamentary?
Objects – persons or purposes? (charitable or non-charitable)
Powers – fixed or discretionary?
2. What kinds of interests are created?
a. Legal or equitable?
b. Contingent or vested?
i. Contingent – RAP issues?
ii. Vested – defeasible or determinable or indefeasible?
 Interest or possession?
3. Is it a valid trust?
a. Capacity
i. Settlor – MUST have capacity
ii. Trustee – judicial person to hold property, capacity would be good
iii. Beneficiary – must be judicial person to have legal/equitable title
iv. Incapacity: minors, mental incapacity (nature and effect of trust), not a legal person
(unincorporated association), bankrupt person
b. 3 Certainties
i. Intention – settlor must intend to create trust relationship (Re Walker)
 Inferred from words or conduct if ambiguous (Re Shamas)
 No formal requirements, no specific words required
 Precatory trusts: hope, desire, expectation are not enough to satisfy intention
but could be enough if there is other evidence of intention are sufficient (creates
a Precatory Trust) (Johnson v Farney)
ii. Subject matter – certainty of property to be held on trust OR certainty of amount/share
of property to beneficiaries (Sprange v Barnard)
 Property – specific piece of property (Re Romaniuk)
 Amount – set amount OR formula to determine (Boyce v Boyce, Re Beardmore)
iii. Objects
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Trust for Persons – certainty of beneficiaries
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TRUSTS CHECKLIST
a. Must have way to determine who they are, look to intention and
surrounding circumstances if ambiguity (Jones v T.Eaton)
b. Fixed trust – class ascertainability or complete list
i. If any given person is member of class AND ID all members of
class
c. Discretionary trust – individual ascertainability (conceptual, NOT
evidentiary certainty) (McPhail v Doulton/Re Baden’s Deed Trusts)
i. If any individual is a member of the class
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Trust for Purpose – certainty of purpose
a. Must know or have way to determine if a particular act would be
consistent with the purpose
c. Constitution – settlor must do EVERYTHING in power to effect transfer (Re Rose), court will
not substitute one method for another to complete gift (Milroy v Lord)
i. Ways to constitute (Milroy v Lord)
 Transfer property to trustee to hold on trust
 Settlor declares themselves trustee of the property – need clear evidence of
intention (Paul v Constance, Watt v Watt Estate)
 3rd party transfer property to trustee
ii. Ways to Transfer – LEGAL INTEREST
 Land – statutory instrument (deed)
 Chattels – possession or deed
 Chooses in action – assignment (Legal = in writing, signed by assignor, notice
given to debtor. Equitable = no form required)
 Negotiable instruments – by negotiation
 Securities – statutory requirements
iii. Ways to Transfer – EQUITABLE INTEREST
 Assignment to trustee on trust for donee
 Declaration that they are trustee for equitable interest
 Instruction to existing trustee to hold equitable interest for a new beneficiary
iv. Gratuitous Deed – court won’t complete incomplete gift
 Cannot sue to enforce deed if not party (Re Pryce, Re Kay’s Settlement)
 No specific performance allowed (possibly damages IF they are party to deed,
Cannon v Hartley)
 Possible to argue that the promise itself was the subject matter of the trust so it
is constituted when signed/sealed/delivered (Fletcher v Fletcher)
v. Transfer for Value – promise for consideration (contract)
 Only person who gave consideration can sue, specific performance possible IF
damages are shown to be inadequate
vi. Promise to convey in the future (gratuitous)
 Not enforceable without consideration (Re Ellenborough, Re Kay’s Settlement)
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d. Formalities – for express trusts for persons and purposes
i. Statute of Frauds – doesn’t really apply in BC
 S.59 of Law and Equity Act – applies to contracts regarding land (not applicable
to disposition by way of trusts or assignment of equitable interest)
 Look to other written evidence other than contract to avoid unjust enrichment
and SoF being used to perpetrate fraud (Rochefoucauld v Boustead)
ii. Wills – requirements for will in Wills Act, must be complied with in order to be valid
 Secret Trusts – property given in a will with no indication that it is a trust
a. Testator must communicate trust obligation BEFORE DEATH and trustee
MUST accept/acquiesce (McCormick v Grogan, Boyes v Carritt)
b. Need clear evidence of intention, communication and acceptance
(Ottaway v Norman)
 Semi-Secret Trust – property given in a will with trust obligation but no
indication of who the beneficiaries are
a. Testator must communicate trust obligation and beneficiaries BEFORE or
AT TIME the will is executed and trustee must accept/acquiesce
(Blackwell, Janowski v Pellek)
4. Void for Public Policy Reasons?
a. Illegality – INVALID for illegal reasons or socially unacceptable purpose
i. May be confiscated if property is proceeds of crime or being used for money laundering
or terrorism
ii. Prohibited under Criminal Code or other statute = Void or Voidable
b. Consequences of illegality – unenforceable or forfeit property
i. Settlor may not be able to get property back (conflicting cases)
 If illegal purpose carried out – no return
 If illegal purpose not carried out – possible return
ii. UK Position – seems to not give it back if there is intent to defraud (Symes v Hughes, Re
Great Berlin Steamboat)
 Recent: if fraud wasn’t achieved, can introduce evidence to get it back (Tinsley v
Mulligan, Tribe v Tribe)
iii. Canadian Position – if fraud isn’t achieved, can recover property
 Presumption of Advancement
a. OLD: if presumption, even if no fraud effected there is not return of
property (Scheuerman)
b. MODERN: if fraud isn’t achieved, can get return (Goodfriend, Krys)
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c. Imposing Conditions
i. Condition Precedent – something must occur before gift
 Real Property – void if contrary
 Personal property – depends
a. Malum se (bed in itself) – void
b. Malum in prohibitum (legally) – condition struck out, absolute gift
 Uncertain – gift fails
ii. Condition Subsequent – gift but can be taken back if condition occurs (defeasible)
 If contrary to public policy, condition is struck and there is absolute gift
 Uncertain – condition struck and absolute gift
iii. Words of Limitation – specific time period (until, as long as), determinable interest
 If contrary to public policy, gift fails (argument between CS and WoL)
 Uncertain – gift fails
iv. Conditions of Impossible Performance
 Impossible at the time the gift is made – gift is complete, valid
 Impossible after gift is made – gift fails (presume settlor didn’t intend for gift to
occur if condition was impossible to perform)
d. Conditions Contrary to Public Policy
i. Restraint on marriage – lifetime celibacy (Re Cutter) vs. providing until marriage (Re
McBain)
ii. Interference with marital relationships – encouraging separation (Re Hurshman) or
continued separation (Re Nurse, Re Blanchard)
iii. Interference with discharge of parental duties – forces minors to be apart from parents
or choose between parents (Clarke v Darraugh, Re Thorne)
iv. Discriminatory conditions – depends on circumstances (Christie v York, Re Drummond
Wren, Noble v Alley, Leonard Foundation, Re Ramsden, UVic Foundation)
v. Restraints on alienation – may be invalid depending on degree of restraint or
interference with enjoyment of property (invalid)
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e. Defrauding creditors
i. If illegal purpose carried out – no return
ii. If illegal purpose not carried out – possible return
iii. Fraudulent Conveyance Legislation – can’t dispose of property in a way that is meant to
defraud creditors
 S.1 – trusts to avoid creditors are void
 S.4 – good faith can prevent application (disposition for good consideration and
no notice or knowledge of fraud)
iv. Fraudulent Preference Legislation – can’t prefer one creditor over another if you are on
the eve of bankruptcy
 S.1 – disposition void against creditor if person was insolvent or knows they are
on eve of insolvency and it was made to (a) delay/defeat OR (b) for preference
 S.6 – doesn’t apply if it was in good faith
f. Rules Against Perpetuities – ONLY for CONTINGENT interests
i. CHECKLIST to Apply RAP:
1. Determine jurisdiction? (CL or statute)
2. What interests are created?
a. If contingent move to (c), if vested STOP
3. If contingent, what are the relevant lives in being? – everyone affected who is
alive when instrument created
a. Implicit and explicit (implicit = to my grandkids, the kids lives are implicit
lives in being)
4. Any possibility that an interest will vest outside perpetuity period?
5. How do legislative modifications affect the application of CL?
a. Saving provisions!!
6. Accumulation issue? (generally Ontario problem) (National Trust v McIntyre,
Thellenson)
ii. Remoteness of vesting (modern rule) – an interest is valid if it will vest, if it is going to
vest at all, within period calculated by taking the lives in being at the date the
instrument takes effect plus 21 years
 Any possibility it will vest outside period, interest is INVALID (Lucas v Hamm)
 Class of beneficiaries and size of relative interests must be known within period
(Robinson v Adair)
iii. Rule against Perpetual Duration – with no lives in being
 If no lives in being, the period is 21 years
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iv. Rule in Whitby v Mitchell (old rule) – gift of lift interest to an unborn person with
remainder to issue of unborn with the lift interest is INVALID
v. Legislative Modifications – BC has WAIT AND SEE legislation (gets rid of Whitby rule),
keeps modern rule with series of saving provisions
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S.14 – age of having children: women over 55 don’t and men give evidence that
they can no longer have kids
S.8 – wait and see: mere possibility of not vesting will not make it void
S.9 – wait and see: gift valid until events indicate that the gift will not take effect
within the perpetuity period
S.11 – age reduction: if gift provides kid must reach age older than 21 before
getting gift, court can reduce age to 21 to make it valid
a. If it doesn’t vest in other members, they are cut off
S.13 – cy pres: court can vary gift to fit intention of donor
S.7 – 80 year rule: express 80 year period, can specify this instead of 21 year
g. Protective Trusts – can impose degree of restraint on alienation on mode, class and period of
time (degree of restraint is the issue) (Brandon v Robinson, Rochford v Hackman, Re Leach)
i. In Canada it is difficult – any degree of restraint is frowned upon (Re Williams)
h. Accumulations – s.25 of Perpetuity Act: if property disposed of in way that income can be
accumulated, power of discretion to accumulate is valid, must satisfy remoteness of vesting
i. Concern from Peter Thellenson (new rich – accumulation forever and ever)
5. Is it possible to terminate or vary Express trust for Persons?
a. Under terms of the trust instrument – provide for it through majority vote of beneficiaries
b. Settlor can reserve power of revocation (must be explicit in instrument), tax implications!!
c. Terminated under rule in Saunders v Vautier - one of more beneficiaries, all with full legal
capacity who collectively are entitled to all of the beneficial interest to trust can apply to have it
terminated
i. 3 elements:
 Full legal capacity
 Must, collectively have all beneficial interest in trust property
 Must UNANIMOUSLY agree to terminate
ii. Avoiding application:
 Contingent interest to someone who will refuse consent (could be paid off if
amount is big enough)
 Interest to minor or unborn (unable to consent)
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Discretion to trustee to distribute among class with some of the members of the
class being difficult to ascertain
d. Court application to vary or terminate trust pursuant to statutory power of court - Trust and
Settlement Variation Act
i. For large numbers of beneficiaries, if substantial majority agree to variation, court will
over rule the consent of the few who refuse – don’t want behaviour to negatively affect
the other beneficiaries (Bentall Corp, Continental Lime)
ii. S.1 – Court can consent on behalf of certain people – minors, lack legal capacity,
persons of specified class or description, unborn, discretion that can only be exercised
on failure or determination of interest
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S.2 – Must be for benefit of person who the court is consenting for (a-d),
benefits can be financial or non-financial (Re Kovish, Smith v Smith Estate)
S.3 – if consenting on behalf of minor or unborn, must notify Public Guardian
iii. Test for court to consent: would a reasonable prudent adult motivated by self interest
consent to variation? (Finnell v Schumacher Estate, Smith v Smith)
6. If it is a non-charitable purpose trust, is it valid?
a. General Rule: invalid
i. Exceptions to rule: erection of monument at gravesite, maintenance of gravesite, care
of specified animals – concessions to human weakness (Re Astors Settlement)
b. Beneficiary Principle – needs to be someone who can be given standing to enforce the trust (Re
Denley’s Trust, Keewatin Tribal Council), otherwise there is no on to enforce obligation and
therefore no trust obligation (Morice v Bishop of Durham)
i. If remainder person, could be valid purpose trust because they could enforce the
obligations – negative enforcement, criticized (Re Thompson)
ii. Suggestion that there is no general rule against validity, valid as long as there is
someone to enforce (Peace Hills Trust)
c. If RAP problems, BC Perpetuity Act, s.24 – can treat it as a power and limit the power to period
of 21 years to make it valid (unclear about application)
d. If it is a gift to unincorporated association, different ways to save it depending on associations
constitution and nature of gift (Re Lipinski’s Will Trust) – not a person so not valid
i. Gift allowing members to sever and take their share – gift directly to members as joint
tenants (name of association is short hand for names of members)
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Difficult – changing membership over time so doubt as to who it applies to
ii. Gift to members for purpose of association – if they can wind up association and
distribute property then if could be saved
 If they can’t wind it up, then association can go on indefinitely without
distribution of property and violate remoteness of vesting – invalid
iii. Willingness to uphold these by courts – satisfy intent of donor, association may do
things that are beneficial to community even if they aren’t charitable (Re Lipinski)
7. If it is a charitable purpose trust, is it valid? – 3 elements required:
a. (1) Exclusive dedication of property – must only be for charitable purpose (no ½ and ½)
i. If other use, can be construed as ancillary to charitable purpose and allowed (noncharitable purpose needed to achieve charitable purpose) (Guaranty Trust v MNR)
ii. BC Law and Equity Act, s.47 – sever non-charitable portion
iii. Re-interpret words per intention of settlor (Jones v T.Eaton)
iv. Read non-charitable part as charitable based on donee (Blais v Touchet)
b. (2) To a charitable purpose – allowable purposes found in Statute of Charitable Uses (1601), 4
categories from Pemsel:
i. Relief of Poverty – relative concept that varies over time
ii. Advancement of Education – if purpose is for training of the mind (in structured
manner) for a genuine educational purpose (not for point of view or political
orientation) will be VALID
iii. Advancement of Religion – Statute refers to repair of churches, tolerant of a wide range
of religions, needs to be public in some way
 Requirements: have a god and worship the god
iv. Other purposes beneficial to the community – social welfare, community purposes,
needs to be beneficial to community AND consistent with case law on what is
considered to be charitable, catch all category
 No trusts for sports
 Spirit and Intendment approach (flexible) (Native Communications Society)
 Look to preamble, then look for analogy to preamble and then to analogies on
analogies of preamble (Vancouver Freenet Association v MNR, Vancouver
Society of Immigrant and Visible Minority Women v MNR)
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c. (3) Public Benefit – must be in a way that provides a public benefit
i. Benefit: something of practical utility or material/tangible benefit
ii. Public:
 Number of potential beneficiaries must not be numerically negligible, AND
 Must not depend on beneficiaries relationship to a particular person
iii. Presumption of public benefit for relief of poverty, education and religion
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Relief of Poverty: not as stringent requirement, small number of beneficiaries
will be ok, poor relations cases show that it could be interpreted as a trust for
persons instead of charitable, same for employee cases
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Education: must provide public benefit, rebuttable presumption, court can get
“expert” views on if it provides benefit (museum is ok)
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Religion: can’t be private activities, public access may be enough
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NO presumption for purposes beneficial to community
d. CANNOT be for a political purpose – INVALID even if otherwise charitable (Human Life
International v MNR)
i. List of things that count as political purpose (McGovern v AG)
 Promotion of party/candidate/political idea, influence legislative
process/government policy, improve intentional relations, influence foreign
government decisions/laws
ii. Rationale: no way to judge if proposed change is for public benefit (Bowman v Secular
Society), must proceed as though the law is correct (criticism: always have to decide
public benefit so why is that different, foster debate)
e. Cannot be discriminatory – blatantly racist/religious conditions will not be allowed (Leonard
Foundation, Re Ramsden, UVic v BC)
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8. Can the court vary the charitable purpose trust? – WILL NOT USE either just because there may be a
better use for the money
a. Cy Pres Doctrine – when charitable purpose is or has become impossible or impracticable to
carry out (Rector Wardens and Vestry case)
i. Apply funds to another purpose similar to the original one
ii. Initial Failure – arose before trust was constituted (Royal Trust Corp v Hospital for Sick
Children, Re Ramsden)
 Courts look to general charitable intent – would the settlor have directed the
funds to some other charitable purpose?
 Likely won’t work if there is a gift over = no charitable intent
iii. Subsequent Failure – arose after the trust was constituted
 Cy Pres operates automatically, no search for charitable intent
 If long term trust, may be difficult/impractical to find original intention
b. Administrative Scheme – when there is uncertainty about how the charitable intent is to be
achieved (certainty of purposes)
i. Can make order when it is clear there is a charitable intent but haven’t made it clear on
how to achieve intent (Re Killam Estate, Re Stillman)
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ADMINSTRATION OF TRUST
1. What is the source of the law?
a. Trust Instrument – look here for powers first (can overrule CL and statute)
b. Common Law
c. Applicable Legislation
2. Are there any of the following issues to consider?
a. Letter of Wishes – NOT part of trust instrument, not legally binding – just tells trustee what the
settlor had in mind for using discretionary power
i. So that the settlor can have some control – cannot reserve power because of tax
implications (income taxed in their hands)
ii. Allows trustee flexibility in discretionary trust
b. Protectors – mainly in context of offshore trusts
i. Strangers can invest the money but settlor may not want them to decide distribution
among family members – appoint protector to have this discretion
c. Trustee Instructions – must follow trust instrument instructions (NOT settlor/beneficiary)
i. If settlor is trustee, must follow trust and act in best interest of beneficiary
ii. If unanimous agreement of beneficiaries, trustee could follow their instructions
iii. Following settlors instructions could be breach of trust – property is no longer there’s so
no control over it (if retain control, there are tax implications – taxed in their hands)
3. What TYPE of duties or powers does the trustee have? (fixed trust or does the trustee have discretion
of some kind with the powers?)
a. Administrative – allow trustee to manage property (sell, lease, repair, insure)
b. Dispositive – distribution of income or capital to beneficiaries (not in all trusts, not in fixed
trusts where there is NO discretion)
i. Power to determine amounts, accumulate, encroach on capital, advancement (take
from capital before life interest dies)
c. Express/Implied powers – expressed in instrument
i. Implied power when wording/circumstance suggests a power – court fills in blanks
d. Default powers – Trustee Act codifies powers as defaults, can be overridden
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4. What ACTUAL duties or powers does the trustee have? – look to Trust Instrument, Trustee Act and
then Case Law to identify trustee powers
a. Duty = obligation. Power = permission/authority
b. Personal power (bare/mere power) – in personal capacity, no obligation to exercise
c. Fiduciary power – must AT LEAST CONSIDER exercising the power
i. Duty to use power for benefit of beneficiary
ii. If power given to someone in fiduciary position, ASSUME it is fiduciary power
iii. Exercise in accordance with CORE duties
d. Trust power – obligation = MUST EXERCISE
e. Overlap of duties and powers – duty to exercise but discretion as to how to exercise
i. Duty to Invest with Power to choose investments – must invest, but discretion as to
where to invest
 Duty of care – can’t put all money into one
ii. Duty to select/determine amounts of distributions – must distribute but power to select
among beneficiaries and decide amounts
iii. Power to accumulate – able to accumulate income, no duty to distribute
5. Is there a BREACH of any of the CORE duties of trustee? – duties can be varied or waived (explicitly or
implicitly) in trust instrument
a. Irreducible core = duty to act honestly, in good faith (loyalty) (Armitage), without it, would just
be a moral obligation instead of trust obligation (would be no trust)
b. Absolute duties = acting with reasonable care is NOT a defence for these duties
i. Include: loyalty, impartiality, non-delegation
ii. Reasonable care defence for: investment, sell, retain/manage
c. Improper exercise of power – inconsistent with terms, exercise within constraints of power
i. Improper if exercise is in breach of core duty
d. Duty to carry out terms of trust – CORE, cannot vary in trust instrument
e. Duty of care – standard is what an ordinary, prudent person would do in managing their own
affairs (for professional and non-professional) (Fales v Canada Permanent Trust)
i. S.96 – considerations court should take into account (Fales v Canada Permanent Trust)
 If trustee was paid for services
 If breach was technical in nature or minor error in judgment
 If decline in value is attributable to general economic conditions
 If trustee is accepting a single trust to help friend or company organized for
purpose of administering estates (specialized, expertise)
 Was the conduct reasonable (most important consideration)
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f. Duty of non-delegation – general rule: may not delegate
i. EXCEPT where trust instrument allows it specifically
ii. EXCEPT where situations suggest the settlor would have allowed for delegation or
would have wanted the trustee to delegate (eg. Selling house = real estate agent)
iii. Would a person reasonable delegate in the circumstances? (Speight v Gaunt)
 Not bound by the duty if according to the usual mode of conducting business,
people acting with reasonable care and prudence on their own account would
delegate the business (Speight v Gaunt)
 Usual course of business for money to pass through the hands of an agent
iv. If trust company appointed as trustee, must select agent and make sure they are able to
do the duties they are being asked to – breach if delegated improperly (Re Wilson)
v. Delegation under Trustee Act
 S.7(1) – can appoint lawyer to receive and give discharge for money,
consideration or property receivable by trustee
 S.7(2) – can appoint banker or lawyer to receive/give discharge for money
payable to trustee under insurance policy
a. S.7(3) – money cannot stay in their hands longer than reasonably
necessary
 S.7(5) – trust can override
vi. Liability for Agent’s Fault/Negligence – trustee is NOT liable for fault of agent UNLESS
the fault occurred as a result of the trustee’s own wilful default
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Trustee MUST: (Speight v Gaunt)
a. Select agent
b. Matter to be dealt with must be within agent’s expertise
c. Agent’s activity must be supervised with reasonable care
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Wilful Default – consciousness of negligence OR breach of duty OR recklessness
in performance of the duty (Re Vickery), be aware or recklessly aware of agent’s
liable conduct
vii. Exculpation Clauses – limit liability of trustees (especially if trustee is friend)
 Doesn’t relieve trustees from liability of gross negligence (Re Poche)
 Relieves of everything short of “actual fraud”, contrary to interests of
beneficiaries and trustee knows it or is recklessly indifferent (Armitage)
g. Duty of Loyalty – must administer in best interests of beneficiaries (irreducible core), must
avoid conflicts of interest
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h. Duty of impartiality – general rule: must treat all beneficiaries fairly, not favour any
beneficiaries over others (problem in context of succession interests) – trustee must act with an
even hand (Re Smith)
i. Trusts for sale – rule in Howe v Lord Dartmouth: rule is presumption, subject to
testator providing to the contrary
ii. 1st Branch of Rule: Duty to Sell
 Implied duty to sell residuary personal property that is of wasting character or is
a remainder or reversionary interest – proceeds of sale must be invested in
authorized investments
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Applies to:
a. Testamentary trusts ONLY (assume inter vivos that settlor knew of
wasting character whereas in a will the testator may not know)
b. Personal assets of wasting character
c. Assets that produce little or no income for income beneficiary
d. Hazardous, high-risk investments that don’t meet prudent investor
standard
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Does NOT apply to land (Lottman v Stanford)
Does NOT apply to testamentary trusts if property from specific bequest in will
No application if settlor has indicated (expressly/impliedly) that the property be
retained, not sold
iii. 2nd Branch of Rule: Rules for Apportionment of Proceeds
 if presumed duty to sell, presumed power to retain so trustees can wait for the
opportune time to sell
 Interim period: problem for some beneficiaries, may be disadvantaged relative
to other beneficiaries by waiting
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i.
Addressed by duty to apportion proceeds of sale between income and capital
beneficiaries – calculations to determine amount (Re Earl of Chesterfield’s Trust)
a. Based on income the life tenant would have received if sale had taken
place when it should BUT FOR the retention AND proceeds invested
b. Inter vivos: date sale would have taken place = date of creation of trust
c. Testamentary: one year after death of testator
Duty to provide information – 3 types of information to provide
i. Existence of trust: beneficiaries must be told of interest in trust, except for contingent
or remainder interests UNLESS condition is likely to be satisfied and amount is
substantial (Ontario v Ballard Estate)
 When minor beneficiary reaches majority, must be told of interest and nature
(Re Short Estate)
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ii. Provide Accounts: no general obligation to provide accounts but beneficiaries can
inspect accounts and make copies at their own expense (Sandford v Porter)
 Periodic and final accounts are required by Trustee Act, s.99 (default rule)
iii. Information about Exercising Discretion: trustees not bound to disclose reasons for
exercising discretion AND trust documents are trust property so the beneficiaries have a
proprietary right to trust documents (documents that come into existence for purpose
of trust) (Re Londonerry’s Settlement)
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Balancing of Interests Approach: Rejects proprietary right (Ballard Estate) and
finds right to information is based on courts inherent jurisdiction to supervise
the administration of trusts
6. Did the trustee have the duty or power to INVEST? Consider if there was a breach
a. Subject to underlying duties BUT now:
i. Duty of care = prudent investor standard
ii. Duty of non-delegation = modified
iii. Other duties still apply
b. Default provisions in Trustee Act (no longer a legal list of investments) – trust can vary these
provisions, these are just the defaults if the trust instrument doesn’t address it
i. No requirement to diversify but likely would be considered prudent (failure to diversify
may constitute a breach of duty of care)
ii. S.17(1) – corporate trustee can’t invest in its own securities
iii. S.15(1)(2) – terms of trust can restrict types of investments allowed
iv. S.15(2) – standard of care in making investments (exercise care, skill, diligence and
judgment that a prudent investor would exercise)
v. S.15(3) – portfolio risk approach (derivative security): not liable for loss on particular
investment if it was part of prudent portfolio strategy
 Funds held by trust company may be invested into fund managed by trust
company for trusts they manage
vi. S.15(4) – assessment of loss may take into account any gains in other investments
vii. S.15(5) – permits delegation of investment powers (no duty of non-delegation for
investments – normal person would delegate to investment advisor)
viii. S.15(1)(1) – permits investment in mutual funds
 S.15(5)(7) – mutual funds investment is not delegation of investment powers
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7. Is a trustee being APPOINTED? How?
a. Trust Instrument
i. Accepting: cannot be compelled to act (even if they indicated willingness), acceptance
must be express or implied (carrying out minor tasks)
 If not accepted, person may disclaim
 If accepted then no longer wishes to act, seek formal discharge
ii. Power to Appoint: trust usually provides for appointment (either names specific people
to appoint trustees or gives power to appoint)
 May be power to appoint additional trustees in specific circumstance
iii. If inter vivos trust and person refuses to act, trust is NOT constituted, settlor arranges
for another to be trustee
iv. If testamentary trust and person refuses to act, trust is constituted and court will find a
replacement OR administer trust itself
b. Statute – Trustee Act for appointment
i. S.27(1) – if any of the following apply:
a) Is dead
b) Outside of BC for over 12 months
c) Wants to be discharged from any or all of trusts or powers
d) Refuses to act
e) Is unfit to act
f) Is incapable of acting
Trustee-ship shifts to person named in trust instrument OR if they are not surviving,
refuse to act or incapable of acting, then the surviving/continuing trustees may appoint
another trustee in their place
ii. S.27(2) – on appointment of a new trustee:
a) Can increase number of trustees
b) Can split part of property and appoint a separate set of trustees
c) If 1 trustee originally, there is no obligation to appoint more than 1
i. If there were 2 trustees originally, there is no obligation to maintain the
original number of trustees
ii.
If 2+ trustees originally, then trustees can’t be discharged unless at least
2 trustees remain
d) Must take steps to vest property in new trustees
iii. S.27(3) – new trustee has all power as if they were originally appointed
iv. S.27(4) – can use the power of appointment in 27(1) when person nominated in the will
as trustee has died before the testator
v. S.27(5) – s.27 is default provision
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vi. Vesting trust property
 S.29(1) – can appoint a new trustee by deed (vests title to trust property and
covers interests in land, chattels, choses in action)
 S.29(2) – if retiring, person with power of appointment can declare in the deed
of discharge that the remaining trustees have joint title
 S.29(3),(4) – other steps necessary for assets that involve steps required by
legislation or corporate agreements
c. Judicial power – courts have inherent jurisdiction to appoint new trustees
i. Trustee Act – gives court powers:
 S.31 – if it is expedient to appoint a new trustee AND it is inexpedient, difficult or
impracticable to do it without assistance of court, court can appoint new trustee
 S.33 – can make order vesting trust property in new trustee
 S.34 – can give trustee power to call for share transfer, give rights under a chose
of action
 S.35 – order replacement of trustees convicted of indictable offence and vest
property in new/remaining trustees
 S.36 – application for statutory judicial appointment can be made by any
beneficiaries or trustees
 S.37 – order doesn’t discharge former or continuing trustees from existing
liabilities
ii. Courts considerations in appointing trustees (Re Tempest)
 Consider wishes of settlor
a. Avoid appointing someone settlor said should not be appointed
b. Avoid someone who appears, based on circumstances, to be someone
the settlor would not have wanted appointed
 Avoid conflicts of interest
 Ask whether appointment of particular person would promote/impede the
execution of the trust
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8. Should a trustee be REMOVED or does someone want a trustee removed?
a. Non-judicial methods (without court application, trust instrument is the only way)
i. Trust instrument – can provide for removal by conferring removal on specific person
(often a protector with this power)
ii. Statute – Trustee Act, s.30: VERY LIMITED, only applies to trustees appointed by the
court AND with majority beneficiary consent
b. Judicial methods – court has inherent jurisdiction to remove trustees (usually relied on because
Trustee Act doesn’t give court statutory power of removal except s.30)
i. Principles applied by the court in deciding to remove a trustee:
 Welfare of beneficiaries (Conroy v Stokes)
 Friction or hostility between trustees and beneficiaries is not a reason for
removal (Conroy v Stokes)
 If continued administration of trust in interest of beneficiaries has become
impossible or improbable (Re Consiglio Trusts)
 Misconduct is not necessary for removal (Re Consiglio)
 If there is misconduct: (Re Consiglio)
a. Not every instance of misconduct will result in removal
b. Misconduct (acts/omissions) must:
i. Endanger trust property
ii. Show lack of capacity to execute trustee duties
iii. Show lack of honesty (not fair, not truthful)
iv. Show lack of fidelity (bad faith)
9. Does trustee want to RETIRE or be DISCHARGED?
a. Non-judicial methods – Trustee Act
i. s.28(1) – if 2+ trustees then 1 can be discharged WITH the CONSENT of the co-trustee
AND any person with power to appoint new trustees in deed
ii. S.28(2) – steps for vesting property in remaining trustees must be completed
iii. S.28(3) – s.28 is default provision
b. Judicial methods – inherent jurisdiction to allow trustee to retire or give discharge
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TRUSTS CHECKLIST
10. Will the court intervene in administration of trust?
a. Will ONLY intervene where trustee has exercised power in a way that is NOT within scope
b. S.86 – allows for trustees to apply to court for advice or direction (question as to proper
interpretation of terms – NOT for court to make decisions for trustees)
c. Absolute discretion to trustee – where there is absolute discretion given to trustee court
generally will not intervene UNLESS there is MALA FIDES (Gisbourne)
i. Broad idea of bad faith (Re Blow)
ii. Don’t have to show actual fraud or dishonestly (Fox Estate, Re Blow) to be mala fides
iii. Conduct that isn’t fraud can still be bad faith (Gisbourne)
d. Take into account considerations they should not have taken into account – court MAY
intervene in this circumstance (Fox Estate, from Re Hastings-Bass)
e. Fail to take into account things they should have taken into account – MAY intervene if
trustee fails to take things into account (Fox Estate, from Re Hastings-Bass)
f. Failure to Exercise Power – court MAY intervene if trustee has failed to consider the exercise of
a power (Re Blow)
i. Rely on letter of wishes as basis to not exercise power could count (Re Blow)
g. Court will not exercise power for trustee, must do it themselves (Re Wright)
h. Deadlock between trustees – ask: whether the failure to exercise discretion is consistent with or
frustrates settlors intention? (Kordyban)
i. If failure to exercise frustrates settlor’s intention, court will consider the interests of the
beneficiaries when deciding on whose side to intervene (Kordyban)
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11. Is the trustee entitled to REMUNERATION in administration?
a. General rule: no remuneration (could create conflict of interest, historically done by friends)
b. Exceptions: Trust instrument can provide for it OR beneficiaries can collectively agree OR court
has inherent jurisdiction to grant (only where trust does not provide for it!)
c. S.88 – provides remuneration for “care, pains and trouble and time spent in administration”
i. Reasonableness requirement – court will assess: (Laing Estate v Hones)
 Magnitude of trust
 Care and responsibility springing from trust
 Time occupied in performing duties
 Skill and ability displayed
 Success which attended its administration
d. May disallow remuneration if:
i. Trustee guilty of serious misconduct (Avram v Kerr Estate)
ii. Trustee found to be dishonest (Proctor v Bentley)
12. Can the trustee be INDEMNIFIED for expenses of administration?
a. General rule: can be indemnified for expenses/liabilities properly incurred in administration of
trust (Worral v Harford) – must have been in course of administration of trust
b. 2 sources:
i. Trust assets
ii. Beneficiaries – possible on hook for indemnification if trust assets don’t cover it
(Hardoon v Belilios)
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