Criteria For Removal of a Trustee

criteria to removeCriteria For Removal of a Trustee:

Grafton v Canada Trust 2012 ONSC 6955 is an interesting case on when a court will or will not remove a trustee.

In this case a 92 year old life tenant in a house of disrepair wanted to borrow $200,000 in a reverse mortgage at % 8 for the purpose of renovating the house she lived in. The capital account to maintain the house had expired in 1999.

The corporate trustee refused to authorize the reverse mortgage and the life tenant sought a court order to remove the trustee.

The court refused to remove the trustee, finding that it was acting in the best interests of both the life tenant as well as the residual beneficiaries. Any monies used to upgrade what was essentially a tear down house would not benefit the residual beneficiaries at all.

The court relied upon Radford v Radford 2008 43 ETR ( 3d) 74 and the five criteria it set out when determining whether to order the removal of a trustee or not:

1. Choice of estate trustee not to be lightly interfered with;

2. Clear necessity for removal must be established;

3. Removal must be the only course to follow;

4. Removal to be guided by the welfare of beneficiaries;

5. Non-removal must likely prevent proper execution of trust

The life tenant bears the onus of satisfying the Court that the removal of Canada Trust is logical and the only course for me to follow.

Clear necessity for removal of Canada Trust has not been established

Given that the court is not to lightly infer with the discretion exercised by the testator (in choosing that act as executors and trustees), as the Weil case, [1961] O.R. 888 at 889 (Ont. C.A.) interference must not only be well justified, but must amount to a case of clear necessity. I cannot see that a basis for justification of the removal has been adequately established; the evidence presented me falls far short of clear necessity. The only justification I see is that Canada Trust disagrees with Ms. Ross’s suggested approach.

Removal must be the only course to follow

The evidence presented me falls far short of proving that there is no other course to take but the removal of Canada Trust as a trustee/executor. Canada Trust proposes selling the property; something the will empowers the trustees and executors to do. The will gives them the “the right to list and sell the property where “it is advisable in the light of future events or circumstances not at this time determinable”.”

[25] It seems apparent that the testator had hoped that the capital account would be sufficient to pay for maintenance of the property over the life tenancies of her daughters, but it fell short. This is the unforeseen circumstance that brings us to the current situation of indebtedness and absence of an ongoing income stream to support the property.

[26] The most problematic factor for me however is that:

Removal must be guided by the welfare of the beneficiaries

Paragraph 103 of Justice Quinn’s Radford v. Wilkins decision cites Crawford v. Jardine, [1997] O.J. No. 5041 (Ont. Ct. (Gen. Div.)) which states that: “In deciding whether to remove an estate trustee, “the court’s main guide should be the welfare of the beneficiaries”.”

[27] While Ms. Ross argues that a reverse mortgage would provide funds to complete the required capital repairs to the foundation for instance, (thereby increasing the value of the property) I am uncertain if that will in fact increase the property value. If a purchaser were only interested in this lakefront property; intending to tear down the cottage for instance, it may well be that the money would have been unnecessarily spent.

Prior Unregistered Trust Takes Priority Over Creditor

Unregistered Trust Agreement and Creditors

Colantonio v Don Park and Mercedes Benz 2013 ONSC involves a dispute between an estate and a creditor with respect to an unregistered trust agreement, and the priority between the two competing claims.

A mother and father purchased a house in 1965, and when the father died in 2003 the mother became the sole owner. The mother shortly thereafter executed a transfer of title in the house to her two sons. Each son was to have an undivided 50% interest in the house while their mother reserved a life interest to herself.

Their mother also signed a declaration of trust which establish that her sons were her bare trustees but she retained the right to have the sons transferred title back to her.

This trust agreement was not registered on title to the house.

In 2006 one son applied to lease an expensive car and claim that he lived at the house and owned the house free and clear. That son subsequently died and the following year the estate agreed to reconvey title to the house back to the mother, so that she could sell the house to fund her assisted living.

At that time it was discovered that the car dealership had executions against the deceased son, which prevented the transfer of clear title being conveyed back to the mother.

The mother brought application, supported by the two estates, for a declaration that she was the legal and beneficial owner of the house.

The court agreed with the mother and found that the evidence of the car lease had little bearing on the determination of the parties interests.

The information in the application did not reflect the sons intentions nor those of her mother as settler of the trust.

The fact that the mother did not provide a motive in creating the trust was not fatal to finding that the trust existed.

The mother made sworn statements that she did not intend that her sons become beneficial owners of the house. When the mother made the sons bare trustees in 2003, she was not yet prepared to give away her house.

In fact the mother intentionally preserve beneficial interest in the house about the sons could not lose it.

The mother intended to convey the house to her sons in trust to herself. The fact that one son mispresented his interest in the house could not undermine his mother’s intention to the property. That sons information was false.

In Young v. LeMon (1985), 3 C.P.C. (2d) 163 (Ont. Dist. Ct), the Ontario District Court held that an un­registered trust agreement takes priority over an execution creditor where the trust instrument was created prior in time to the creditor’s Writ of Fi Fa. This court has recently reiterated the point in Michaud v. Coreslab Struc­tures (Ont.) Inc., 2012 ONSC 355 (Ont. S.C.J.), at para 59, where it stated (quoting Anger and Honsberger, Law of Real Property):

An execution creditor can sell the lands of his debtor under execution but the land to be sold is subject to the charges, liens and equities to which it was subject in the hands of the debtor. Hence, it has been repeatedly held that if there is an unregistered interest outstanding against the lands at the time that execution is lodged with the sheriff, the unregistered interest is entitled to priority over the execution. In other words the execu­tion creditor stands in no better position than his debtor.

It is long established that, “[i]n order to create a trust, there must exist what is commonly referred to as a certainty of intention.” Erb v. R. [1999 CarswellNat 2435 (T.C.C. [General Procedure]), 1999 CanLii 203, at para 27. As explained in Eileen E. Gillese, The Lawof Trusts (1997), at p. 39:

To satisfy the certainty of intention requirement, the court must find an intention that the trustee is placed under an imperative obligation to hold property on trust for the benefit of another. Certainty of intention is a question of construction; the intention is inferred from the nature and manner of the disposition considered as a whole. The language employed must convey more than a moral obligation or a mere wish as to what is to be done with certain property. The language used need not be technical, so long as the intention to create a trust can be found or inferred with certainty.

Rebutting the Presumption of a Resulting Trust

Dhaliwal v Ollek 2012 BCCA 86 discusses rebutting of the presumption of a resulting trust, and upholds that the recipient done bears the onus of proof, on the balance of probabilities, to rebut the presumption of a trust and to attempt to prove a gift.

Madam Justice Fenlon’s decision in Demir v. Peyman, 2009 BCSC 445, 68 R.F.L. (6th) 319, sets out a useful statement of the legal principles governing the ownership of property. The case arose from the breakdown of the marriage between James Peyman and Seylan Demir. The mother of Mr. Peyman, Elizabeth Peyman, had contributed a large sum of money to Mr. Peyman and Ms. Demir for the purchase of a residential property. Ms. Demir viewed her mother-in-law’s contribution as a gift, but Mrs. Peyman and her son James testified that the mother’s money had been advanced to enable the young couple to purchase a home containing a guest suite to house Mrs. Peyman.

[6] If Mrs. Peyman’s contribution was not a gift, then she would own about 80% of the property and the married couple would own about 20% based on their respective contributions to the purchase price. In the course of her reasons, Fenlon J. said:

[9] I turn first to a preliminary matter, which is the burden of proof in these proceedings. James Peyman and Seylan Demir are registered as the owners of the property and, under the Land We Act, R.S.B.C. 1996, c. 250, s. 23(2), such title is conclusive at law and in equity that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the title. In short, the law begins with the presumption that if your name is on the title in the Land Title Office, you own that property. That statutory presumption is, however, subject to equitable principles, one of which is the enforcement of an agreement between the parties in order to prevent unjust enrichment if the face of the title is upheld.

[10] In a case such as this where property is purchased with funds provided by a third party without consideration the law presumes that the person receiving the funds holds the property in trust. This is known as a resulting trust. As stated by the Supreme Court of Canada in Pecore v. Pecore, [2007] 1 S.C.R. 795, the presumption of a resulting trust is rebuttable. The effect of the presumption, though, is to alter the general rule that in a civil case the person who wants to challenge the names on title in the Land Title Office bears the legal burden of proof.

[11] In the case at bar Ms. Peyman challenges the legal title to the property on the basis that she made a gratuitous transfer of funds to her son and daughter-in-law so that they could purchase the property. A resulting trust is presumed with respect to the portion of the property paid for with those funds. It follows that Ms. Demir bears the burden of rebutting that presumption, that is. she bears the burden of proving that the money was a gift.

[Emphasis added.]

In the case of Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, the Supreme Court of Canada established that, as a general rule, ownership will be determined having regard to the intentions of a party at the time the transfer of property occurs:

56 The traditional rule is that evidence adduced to show the intention of the
transferor at the time of the transfer “ought to be contemporaneous, or nearly so”, to the
transaction: see Clemens v. Clemens Estate, [1956] S.C.R. 286, at p. 294, citing Jeans
v. Cooke (1857), 24 Beav. 513, 53 E.R. 456. Whether evidence subsequent to a
transfer is admissible has often been a question of whether it complies with the Viscount
Simonds’ rule in Shephard v. Cartwright, [1955] A.C. 431 (H.L.), at p. 445, citing Snell’s
Principles of Equity (24th ed. 1954), at p. 153:

The acts and declarations of the parties before or at the time of the purchase, [or of the transfer] or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration ….But subsequent declarations are admissible as evidence only against the party who made them….

The reason that subsequent acts and declarations have been viewed with mistrust by courts is because a transferor could have changed his or her mind subsequent to the transfer and because donors are not allowed to retract gifts. As noted by Huband J.A. in Dreger, at para. 33: “Self-serving statements after the event are too easily fabricated in order to bring about a desired result.”

57 Some courts, however, have departed from the restrictive — and somewhat
abstruse — rule in Shephard v. Cartwright. In Neazorv. Hoyle (1962), 32 D.L.R. (2d)
131 (Alta. S.C., App. Div.), for example, a brother transferred land to his sister eight
years before he died and the trial judge considered the conduct of the parties during the
years after the transfer to see whether they treated the land as belonging beneficially to
the brother or the sister.

59 Similarly, I am of the view that the evidence of intention that arises subsequent to a transfer should not automatically be excluded if it does not comply with the Shephard v. Cartright rule. Such evidence, however, must be relevant to the intention of the transferor at the time of the transfer: Taylor v. Wallbridge (1879), 2 S.C.R. 616. The trial judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention.

[40] In the recent case of Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, Cromwell J. writing for the Court, noted that it is the intention of a transferor (or donor of funds) that is significant and that the concept of a joint intention trust is discredited.

Sham Trusts and the Three Certainies

Sham Trusts

The three certainties: certainty of intention and the issue of sham trusts

In order to be valid, trusts must comply with the three certainties at the time of settlement:

It is of course trite law that for a valid trust to come into existence, the three certainties -certainty of intention, objects and subject matter – must be met…. If the first requirement is not met — i.e., a transfer of property is construed as not intended to have been subject to a trust obligation – the transferee takes the property beneficially … If the first test is met but the intended trust fails due to uncertainty of subject matter or objects, then … the property is held on a resulting trust in favour of the settlor…(Lewis v. Union of B.C. Performers, (1996) 18 B.C.L.R. (3d) 382 at para. 21 (C.A.) [Lewis]).

To meet the first certainty, there must be an intention on the part of the settlor to impose enforceable trust obligations on the trustee. The language used by the settlor is critical and must show a clear intention that the recipient of the trust property holds that property on trust: Lewis at para. 22.

The issue of sham trusts is treated in different ways by different authors. WJ. Mowbray et al, Lewin on Trusts, 17th ed. (London: Sweet & Maxwell, 2000) at paras. 4 -19 to 4 – 28 [Lewin] considers that whether a trust is invalid as a sham depends primarily on the intention of the settlor at the time the trust is created (citations omitted):
The sham concept…would appear to involve a finding of fact akin to, but nevertheless falling short of, actual fraud. In the trust context, a finding will be necessary that, whilst an apparent settlor did not in fact intend to part with the beneficial interest in the trust property, nevertheless he executed documentation with the apparent effect of so parting (Lewin at paras. 4-21).

If at the [time of execution] the settlor genuinely intends the documentation to take effect according to its terms, and those terms are such as to create a trust, then nothing the settlor or trustees do thereafter can render a valid trust a sham (Lew/77 at paras. 4 – 22).

Mere examination of the deed itself will, of course, be incapable of revealing its sham nature (Lewin at paras. 4-22).
[Courts have] distinguished between the class of case where parties entered into a written agreement which was “a sham intended to mask their true agreement”, and the distinct class of case where, without any question of sham, there “has been held to be some objective criterion in law by which the courts can test whether the agreement the parties have made does or does not fall into the legal category in which the parties have sought to place their agreement {Lewin at paras. 4-24).
The difference [between a sham and merely an improperly constituted trust] is that between an apparent settlor who has no relevant intention to create a trust, but executes documentation by which he pretends to have such an intention; and the quite distinct settlor who fully intends his documentation to take effect according to its terms, but, as a matter of proper legal analysis, fails to create a trust (Lewin at paras. 4 – 25, emphasis in original).
[A] finding of sham makes it unnecessary for the court to consider the requirement of certainty of intention at all, because it has evidence before it that the settlor’s documentation has been crafted to mislead {Lewin at paras. 4-27).

[7]he mere retention of wide beneficial powers and interests by the settlor does not of itself make the trust a sham, so long as the trustee genuinely has control over the assets and exercises his own independent discretions in respect of those matters where the terms of the trust require him to do so (Lewin at paras. 4 – 28).

Simply put, Lewin distinguishes between a settlor with devious intent and a settlor who signs
a document that does not have the legal effect he or she thought it would have. The discussion in Donovan Waters et al., Waters’ Law of Trusts in Canada, 3rd ed. (Toronto: Thomson Carswell, 2005) at 145-149 [Waters] is consistent with the Lewin approach.

A transaction is no sham merely because it is carried out with a particular purpose or object. If what is done is genuinely done, it does not remain undone merely because there was an ulterior purpose in doing it (Lewin at paras. 4-26 citing Miles v. Bull, [1969] 1 Q.B. 258 at 264 [Miles v. Bull]).

Duties of a Trustee

Duties of a Trustee

Zimmerman v. McMichael Estate 2010 ONSC 2947, 57 E.T.R. (3d) 101,103 O.R. (3d) 25 is an excellent review of the strict duties that govern the conduct of a trustee.

Deceased were husband and wife and founders of extensive Canadian art collection (Collection) donated to province of Ontario in 1966. The Trustee was an attorney and friend to deceased .
In 2001 deceased executed mirror wills that appointed the other as sole executor and niece and her husband as alternates .
Their Wills left estate to their spouse but if no surviving spouse, residue of estate was to go to Collection after five bequests of $50,000 .
The Husband died November 2003 and wife signed power of attorney appointing trustee as her sole attorney.
In January and February 2004 lawyer prepared trust deed contemplating trustee would settle trust of wife’s property . The Niece then raised questions about trustee’s ability to settle trust in his capacity as attorney and wife executed deed creating trust and authorized all property be transferred to trust except for $250,000 which was held back to satisfy bequests in will.
The Trust deed contained terms that differed from will, including provision that on wife’s death property was to be retained for 21 years rather than immediately being distributed to Collection
The Wife died July 2007 and the niece and her husband were granted certificate of appointment of estate trustee with will.

The Niece and her husband successfully brought application for declaration that power of attorney and trust were void and order that required the trustee to account.

The Law

An attorney is a fiduciary whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith,
for the incapable person’s benefit:
An attorney who receives compensation for managing property must exercise the degree of care, diligence and skill that a person in the business of managing the property of others is required to exercise:

30 A trustee of a trust owes the same duties of loyalty, prudence and good faith that an attorney
for property does pursuant to the S.D.A.: Banton v. Banton. [1998J O.J. No. 3528, 164 D.L.R.
(4th) 176 (Ont. Gen. Div.), at paras. 151 and 152. As a fiduciary, a trustee has three principal
duties:

(a) to carry out the terms of the trust with honesty and due care and attention;
(b) to personally carry out the responsibilities entrusted to him or her and not to delegate those responsibilities; and
(c) to ensure that his own interests do not conflict in any way with his duty to the beneficiaries that he serves.
See: Jenkins & Scott, Compensation & Duties of Estate Trustees, Guardians & Attorneys (Aurora, ON: Canada Law Book, 2006) at p. 12:20, citing the Ontario Law Reform Commission Report on the Law of Trusts – Volume 1 (Toronto: Ministry of the Attorney General, 1984) at p. 23; Donovan W.M. Waters, Waters’ Law of Trusts in Canada, 3d. ed. (Toronto: Thomson Carswell,2005)atp. 877.

(b) The duty to account

31 A trustee has an obligation to keep proper accounts. A trustee must keep a complete record of his/her activities and be in a position at all times to prove that he/she administered the trust prudently and honestly. He/she must have the accounts ready and give full information whenever required: Carmen S. Theriault, Widdifield on Executors and Trustees, 6th ed.(Scarborough, ON: Thomson Carswell, 2002) at p. 13-1; Waters’ Law of Trusts in Canada, above, at p. 1063; Sandford v. Porter, [1889] O.J. No. 43,16 O.A.R. 565 (Ont. C.A.).
32 An attorney for property has the same obligations. An attorney must, in accordance with the regulations established pursuant to the S.D.A., keep accounts of all transactions involving the grantor’s property: s. 32(6). Sub-section 2(1) of Ontario Regulation 100/96 relating to the S.D.A. provides that the accounts maintained by an attorney shall include, among other things:

(a) a list of the incapable person’s assets as of the date of the first transaction by the attorney or guardian on the incapable person’s behalf…;
(b) an on-going list of assets acquired and disposed of on behalf of the incapable person, including the date of and reason for the acquisition or disposition and from or to whom the asset is acquired or disposed;
(c) an on-going list of all money received on behalf of the incapable person, including the amount, date, from whom it was received, the reason for the payment and the particulars of the accounts into which it was deposited;
(d) an on-going list of all money paid out on behalf of the incapable person, including the

amount, date purpose of the payment and to whom it was paid; [and]
(h) an on-going list of all compensation taken by the attorney or guardian, if any, including the amount, date and method of calculation.
33 Sub-section 6(1) of that regulation provides that an attorney shall retain the accounts and records required by the regulation until he/she ceases to have authority and the attorney is discharged by the Court on a passing of accounts under s. 42 of the S.D.A.

34 A trustee must make a proper accounting as a condition precedent to being awarded compensation. Without a proper accounting, the court is unable to assess the conduct of the fiduciary and to determine the compensation to which he or she is entitled. Where a trustee is found to have failed to keep proper accounts and to have been grossly indifferent to his/her fiduciary obligations, he/she may be disentitled to compensation: Widdifield on Executors and Trustees, above, at page 13-7; Gibson, Re, [1930] M.J. No. 34, [1931] 1 D.L.R. 159 (Man. C.A.); Picov Estate, Re, [2000] O.J. No. 682 (Ont. S.C.J.).

35 In Assaf Estate (Re) (2009), 94 O.R. (3d) 561, [2009] O.J. No. 1086 (Ont. S.C.J.), I referred to the following statement in Rodney Hull, Maurice Cullity & Ian Hull, Macdonell, Sheard and Hull on Probate Practice, 4th ed. (Toronto: Carswell, 1996) the authors state at 358-359:
The conduct of an executor or trustee in carrying out his or her duties may be such as to justify the Court in depriving him or her or the right to remuneration; and an executor must make a proper accounting as a condition precedent to being awarded compensatioa But only exceptional misconduct should deprive him or her of the right to remuneration … In general, although an executor may be guilty of neglect and defaults, these, if not dishonest, and capable of being made good in money, do not deprive the executor of the right to compensation although they may influence the amount allowed, [emphasis added]
See also: Sievewright v. Leys (1882), 1 O.R. 375, [1882] OJ. No. 137 (Ont. H.C.); McClenaghan v. Perkins (1902), 5 O.L.R. 129, [1902] O.J. No. 24 (Ont. C.A.); Picov Estate (Re.), above.

36 An attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property has not adequately carried out his/her duties and will be held personally liable for the unsubstantiated withdrawals: Lanthier v. Dufresne Estate, [2002] OJ. No. 3397, [2002] O.T.C. 671 (Ont. S.C.J.) at paras. 52-57; Ronson Estate, Re, [2000] OJ. No. 1294 (Ont. S.C.J.) at paras. 15-20.

c) Misuse of trust funds

44 It is a basic principle of trust law that a trustee is not entitled to use the trust property for his or her own personal benefit. If a trustee cannot account for or explain disbursements or expenses charged against a trust he/she is personally liable to the trust for those disbursements and expenses. This is known as a “surcharge”: See, for example, Jacobs v. Hershorn, [2006] O.J. No. 1333, [2006] O.T.C. 331 (Ont. S.C.J.) at paras. 18-21.
45 Falsification of accounts occurs when there is a disbursement shown on the accounts which the objectors allege is wholly false or in some part erroneous: Picov Estate, Re, above, at para. 25; MacDonnell, Sheard, Hull, Probate Practice, (4th ed.) at p. 350.

The Authority of the Executor

Romans Estate v. Tassone 2009 BCSC 194 is a very good case authority of the executor that reviews the legal authority of an executor appointed under a valid will.

The matter related to the estate of an elderly man who was stricken late in life and
conveyed assets to a friend and named his new apparently much younger female caregiver his sole beneficiary.

The Court found:

The Executor’s Authority

[29] Probate in common form is the procedure by which a will is approved by the Court as the last will of a testator. Probate in solemn form pronounces for the validity of the will. It also confirms the appointment of the person named as executor in the will. The Court issues an order, called the “letters probate”, as proof of his or her authority to deal with the estate.

[30] Executors, however, take their authority not from the letters probate, but from the will itself, and, thus, they may act for the estate from the death of the testator.

[31] Of course, it may be necessary for an executor to act on behalf of the estate pre-emptively, for example, to preserve assets or to make claims and satisfy limitation periods. That said, the author of Feeney’s Canadian Law of Wills, 4th ed. (Toronto: Butterworths, 2000) at s. 7.33, page 7.13 notes that “[a]s a practical matter, however, there is little executors may do, other than pay debts, until letters are issued to them because the letters, for most purposes, are the only recognizable evidence of their authority”.

ER 991 (Ch. D.), Goulding J. referenced earlier jurisprudence noting that an executor’s authority was based on the will, not on obtaining probate, but obtaining probate was necessary to perfect the action and obtain judgement. Goulding J. held that the court should not, even where the defendant is prepared to admit the executor’s title, waive the production of letters probate:

40] The authorities in my view make several matters clear: (1) an action can be commenced without obtaining probate, as an executor’s authority is based on the will, (2) before proceeding with an action already commenced, the parties to an action may require that the Plaintiff prove their authority by producing letters probate, (3) the court may require that a Plaintiff prove their authority, by producing letters probate, of its own motion, when appropriate and (4) the court may order a stay of proceedings any time after the commencement of an action where it is in the interests of justice to do so, pending the issuance of letters probate.

The law seems to be clear that an executor can bring an action in his or her capacity as executor before probate is granted but cannot obtain judgment in the action without probate having been granted: see Chetdyv. Chetdy, [1916] 1 A.C. 603 (P.C.), cited by Allen J. in Harshenin v. Bayoff, [1991] B.C.J. No. 3161 (S.C.).

Certainty of Subject Matter In Trusts

One of the three requirements of a valid trust is the “certainty of the subject matter”,

There are two elements to certainty of subject matter:

  • First, the property which is subject to the trust must be clear.
  • Second, the nature of the interest due to each beneficiary must be clear.

To satisfy the first of the two elements, the subject matter must be described with “sufficient exactness to permit that such matter be ascertained at the time the trust was created”: Re Beardmore Trusts, [1952] 1 D.L.R. 41 at 46 (Ont. H.C.) [Beardmore].

Clearly, the subject matter must also be certain on future dates when the trustees are required to deal with the trust property. However, the trust property need not be fixed in quantity or nature; property can be added later, and the nature of existing property may be changed by the trustees exercising their power of investment. If the initial trust property is certain, and the property which may be added is certain, then the subject matter is certain because at any point the current trust property can be determined by tracing the original property to its current form: Waters at 155 -156.

The second element of certainty of subject matter requires that it be clear what beneficial share each beneficiary will receive in the trust property: Boyce v. Boyce (1949), 60 E.R. 959 (C.A.).

Trustees Must Not Co-Mingle or Misuse Estate Funds For Their Own Purpose

trustess not co mingleTrustees must not co mingle or misuse estate funds or assets  for their own purposes.

It is trite law that trustees are fiduciaries and must not personally use, profit from, or co-mingle estate funds with their own.

If a trustee has mixed his/her own funds with the funds being held
for another, all of the property must be taken to be the other’s property until the trustee is able to prove what part of it is his/her own: Widdifleld on Executors and Trustees, above, at p. 13-2; Norman, Re, [1951] O.R. 752, [19521 1 D.L.R. 174 (Ont. C.A.) at p. 5; Cook v. Addison (1869), L.R. 7 Eq. 466 (Eng. Ch. Div

It is an “inflexible rule of the Court of Equity” that a fiduciary must not make a profit or to
put himself/herself in a position where his/her interests and his/her duty conflict unless the trust
instrument expressly so provides: Simone v. Cheifetz, [1998] O.J. No. 3267, 74 O.T.C. 18 (Ont.
Gen. Div.) at para. 47, citing Bray v. Ford (1895), [1896] A.C. 44 (U.K. H.L.); Bikur Cholim

Jewish Volunteer Services v. Langston, [2007] O.J. No. 3667,160 A.C.W.S. (3d) 921 (Ont. S.C.J.), at paras. 30 and 31. As a fiduciary, an attorney for property is not entitled to exercise that power for his or her own benefit unless expressly authorized to do so: Howlader v. Alamgir, [2006] O.J. No. 2575,149 A.C.W.S. (3d) 275 (Ont. S.C.J.)

The trustee, not the beneficiaries, bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the trust: Maintemp Heating & Air Conditioning Inc. v. Momat Developments Inc. (2002), 59 O.R. (3d) 270, [2002] O.J. No. 2722 (Ont. S.C.J.).

A trustee who improperly enjoys the benefit of trust assets without authority and allows non-beneficiaries (e.g. the trustee’s family) to also benefit is liable to the trust for the amounts or the value of the benefits received: Waters’ Law of Trusts in Canada, above, at p. 877; Bikur Cholim Jewish Volunteer Services v. Langston, above, at paras. 13 to 16 and 38, affd (2008), 90 O.R 3d) 673, [2008] O.J. No. 1582 (Ont.

Trust For Care of Deceased’s Cats Held Valid

Deceased’s Cats

In Zinn v Bergen 2012 SKQB 214, the deceased left a five page typewritten will dated July 7, 2003 wherein he made several specific bequests, and asked to convert the rest and residue of the estate into cash for the purpose of initially maintaining feeding and caring for his pet animals (but not their offspring), until their death, which presently consisted of four cats. Upon the death of the cats than the residue was to be distributed to two charities.

The deceased subsequently signed a handwritten codicil, which was mostly almost illegible, but dated June April 19, 2011. The first two sentences of the codicil were significant in that they stated :

“This is a supplement to my will that made on July 7, 2003. The main part of the 2003 seventh of July remained the same.

My cats come first– after my expenses are paid been plenty of money for the cats”

The codicil did not purport to revoke any portion of the will, and accordingly the court admitted both documents into probate. Following the decision of Oh v Robinson 2011 SKQB 374,which held “the fact that some of the portions of the will may be in illegible or incomprehensible does not disqualify or prohibit the remaining portions of the will from satisfying the legal requirements for probate.”

 

The Law

 

The Court found that the testator gives clear expression of an intention to provide for his four cats following his death. He did so by purportedly creating a trust from the
residue “for the purpose of maintaining, feeding and caring for my pet animals,
(but not any off-spring thereof) until their death”, to “find a good home” forthem, and to “pay whatever reasonable amounts may be necessary and advisable from time to time to provide for the maintenance and care of my pets.”

The Codicil reinforces this predominant motivation with the statement “my cats come first”. He goes on “After my expenses are paid then plenty of money for the cats, including medical service and if deemed necessary declawing expenses.”… “The house will likely be used to pay for the cats home and the expenses. … The (house) must not be sold until after the cats are comfortable.”
This purported trust raises obvious questions about its validity (A. J.
Oakley, Parker and Mellows: The Modern Law of Trusts, 9th ed., (London: Sweet & Maxwell, 2008) at pps. 82 and 83 offer these insights:

3-102 Gifts for the maintenance of animals in general are charitable. However, gifts for the maintenance of one or more particular animals are not; … Re Dean is an explicit authority — not all the early cases in this area of the law are particularly explicit — that a non-charitable purpose trust for the upkeep of a given animal may be valid notwithstanding the fact that by its nature it is not enforceable by the beneficiary.

Relying upon these authorities, I find the trust valid. The executors are directed to retain the sum of $10,000.00 dedicated to the exclusive purpose of care, maintenance and health needs of the testator’s cats. Upon the death of the last of the four cats, the balance of this fund shall be disbursed as residue.

The Requirements of a Valid Inter Vivos Transfer to a Trust

The Requirements of a Valid Inter Vivos Transfer to a Trust

 

The decision Mordo v Nitting 2006 BCSC 1761 is a primary source on many aspects relating to trusts. Morodo was suing to set aside an alter ego trust settled by his mother in favour of his sister, and utilized just about every legal argument on the subject that could have been made, including this one.

 

[263] To form a valid inter vivos trust, there must be a valid act of transfer to a clearly identified trustee.

[264] It is clear from the Trust Indenture that Mr. Wilson was to be the original Trustee. Further, a Form A transferring the Warehouse to Mr. Wilson “as Trustee” was executed by Eida on September 5, 2000. Accordingly, in this case, the identity of the Trustee was clear.

[265] However, the creation of a valid inter vivos trust requires a valid act of transfer to that clearly

identified trustee. In this case, was it enough for Eida to complete the Form A and hand it to Mr. Wilson, or was it also necessary to register the Form A before the Trust came into existence? As noted, Mr. Wilson did not register the Form A until after Eida’s death for property tax reasons.

Legal authorities concerning the requirements for a valid transfer

[266] The rule as to the formation of a valid trust was stated in Milroy v. Lord (1862), 45 E.R. 1184 (C.A.) [Milroy]:

[l]n order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him (Milroy at 1189).

[267] In Milroy, the trustee was given share certificates and a power of attorney under which he

could transfer the shares into his name. The shares were such that legal title did not pass until the new owner’s name was entered in the share register; that was not done until after the settlor’s death. The court concluded it was not sufficient that the trustee was capable of transferring the shares. The transaction was incomplete without the actual transfer having occurred. The court would not compel the agent of the settlor to complete the transfer because it could not compel the settlor to complete the transfer:

Equity could not, I think, decree the agent of the settlor to make the transfer, unless it could decree the settlor himself to do so, and it is plain that no such decree could have been made against the settlor (Milroy at 1190).

[268] The court in Milroy refused to hold that the settlor held the legal title on trust for the trustee:

[T]here does not appear to me to be any sufficient ground to warrant us in holding that the settlor himself became a trustee of these bank shares for the purposes of this settlement (Milroy at 1190).

[269] In the case of Re Rose, [1952] Ch. 499, [1952] 1 All E.R. 1217 (C.A.) [Re Rose] the English

Court of Appeal distinguished Milroy and found a valid trust. In Re Rose, the registration of the shares could not be completed until the board of directors approved the transfer. The court concluded that the settlor had done all that he could by completing the documentation and forwarding it to the board for approval, and accordingly held that legal title passed before registration, when the settlor gave up possession of the documents.

[270] In Fenton v. Whittier (1977), 26 N.S.R. (2d) 662 at paras. 86 to 96; 40 A.P.R. 662 (S.C.)

[Fenton], the Nova Scotia Supreme Court, considering Re Rose, concluded there was no inter vivos gift of shares. Although the donor had completed the share transfer forms, she kept them in a safety deposit box until her death because she wanted the benefit of the dividends during her lifetime. The court concluded that the donor intended the gift to take effect only upon her death.

[271] In Pennington v. Waine, [2002] 1 W.L.R. 2075, [2002] EWCA Civ 1587 an aunt intended to

make a gift of shares to her nephew. However, the share register was not updated with the name of the new owner and the donor kept the completed share transfer forms rather than handing them to her nephew. On a strict application of the principle in Re Rose, there was no valid inter vivos gift. However, the English Court of Appeal held that it would have been unconscionable for the executors of the giftor to refuse to hand over the share certificates, and found that the gift was valid. In so concluding, the court relaxed the rule in Milroy and imposed a trust on the settlor such that she held the legal title to the shares in trust for the trustee until the transfer of ownership was completed.

[272] In Bank Leu AG v. Gaming Lottery Corp. (2003), 231 D.L.R. (4th) 251 at para. 56 (Ont.

C.A.) Weiler J.A. (for the court), referring to Pennington, affirmed the principle in Re Rose that a transfer may be valid notwithstanding that the transferee must perform further acts to complete the transfer.

[273] The foregoing cases deal with the transfer of shares. As noted in Milroy, what constitutes “everything necessary” to achieve an effective transfer depends on the nature of the property being settled. In the case of real property, what is “everything necessary” to effect a transfer?

[274] In Mascall v. Mascall (1989), 50 P. & C.R. 119 (C.A.) the plaintiff father applied for a

declaration that a transfer of real property to his son, the defendant, was invalid. The plaintiff had completed the land transfer forms and handed them to the defendant, anticipating that any further steps concerning the forms would be taken by the defendant. At the time of the plaintiffs death, the defendant had not yet registered the forms. The English Court of Appeal, applying Re Rose, found that the plaintiff had done all that he could to complete the transfer and therefore the transfer was complete. In the result, the son was the holder of legal title despite registration having not yet taken place.

[275] The acts necessary to affect a valid transfer of land is more a question of the legislation governing land transfers than a matter of trust law: The Australian Law Journal, [1968] A.L.J. Vol. 42 at 227. Section 20 of the Land Title Act, R.S.B.C. 1996, c. 250 [Land Title Acf\ deals with the transfer of land in British Columbia:

20. Except as against the person making it, an instrument purporting to transfer, charge, deal with or affect land or an estate or interest in land does not operate to pass an estate or interest, either at law or in equity, in the land unless the instrument is registered in compliance with this Act.

[Emphasis added]

[276] In Davidson v. Davidson, [1946] 2 D.L.R. 289 (S.C.C), affg [1945] 2 W.W.R. 576 (B.C.C.A),

the Supreme Court of Canada, considering language of the Land Title Act almost identical to that now contained in s. 20, held that an unregistered transfer of land took effect on the day the transfer was executed and not on the day it was registered. More recently, in Chung Estate v. Chan (1995), 4 B.C.LR. (3d) 370 (S.C.) [Chung], affd (1995), 13 B.C.LR. (3d) 157 (C.A.) the court held that if the transferor has properly completed a freehold transfer form, the opening words of s. 20 – “except as against the person making it” – apply such that the form may be registered after the transferor’s death to effect a transfer of the property.

[277] Chung was distinguished in the case of Kovacs v. Tuteckyj (2000), 147 Man. R. (2d) 161,

2000 MBQB 104 [Kovacs]. In Kovacs, the transferor had executed the transfer form and given it to another, but instructed that it not be registered until after he had consulted with his solicitor. The court held that the intention of the transferor at the time he handed over the transfer form was relevant. The court drew the inference from the circumstances that the transferor had not done everything necessary to complete the transfer and, as such, the transfer was not complete.

[278] As the foregoing case law indicates, the intention of the transferor is crucial. If the transferor intends to transfer the property, the transfer will be complete when the transferor has relinquished control of the property and put the transferee in a position to complete the transfer. The importance of control was discussed in Re Evans, Royal Trust Co. v. Lloyd’s Bank Ltd. (1956), 7 D.L.R. (2d) 445 (B.C.S.C.) [Re Evans]. The Court, citing Austin W. Scott, The Law of Trusts, 1st ed. (Boston: Little, Brown and Company, 1939) at 225 [Scott] said the following:

A conveyance, whether absolute or in trust, is ineffective if the transferor does not

surrender control of the property…. A conveyance in trust is incomplete unless the settlor has passed the title to the property to the trustee by delivery of the subject matter of the trust or of an instrument of transfer. On the other hand, if the conveyance in trust is completed by such delivery, the trust is not incomplete merely because the settlor reserves power to revoke or to alter the trust. There is a sufficient surrender of control over the property if the settlor transfers the title to it to the trustee, even though he reserves power to undo what he had done. The surrender of control is sufficient even though the settlor reserves power to reassume the control (Re Evans at 451 – 452).

[279] Alex argued that Eida did not effectively transfer the property, or relinquish control of it,

because Mr. Wilson did not register the transfer form. As such, said Alex, Eida had the unrestricted right to deal with the property. In particular, Alex relied on the following words from Re Pfrimmer Estate [1936], 2 D.L.R. 460 at para. 10 (Man C.A.) [Re Pfrimmer Estate] citing Malim v. Keighley (1794), 30 E.R.659at660:

I will lay down the rule as broad as this; wherever any person gives property, and points out the object, the property, and the way in which it shall go, that does create a trust, unless he shews clearly, that his desire expressed is to be controlled by the party; and that he shall have an option to defeat it.

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