Trusts: The Certainty of Intention

Trusts: The Certainty of Intention

In order to create a valid trust the  “three certainties” must be present- the certainty of the intention to  impose enforceable trust obligations on the trustee, the certainty of the subject matter to be included in the trust and the certainty of objects, a clearly identifiable group of persons entitled to benefit from the trust.

Dusanjh v Wright Estate 2017 BCSC 340 involved a discussion of the three certainties, but primarily dealt with the certainty of intention.

The deceased was a sophisticated businessman and the argument advanced by the plaintiffs was that certain documents such as the articles of association of a company of which  the deceased was the principal shareholder created a trust in favour of his children.

The court dismissed the claim finding inter alia that there was no certainty of intention on the part of the deceased to create a trust.

THE  LAW

(a) Certainty of Intention

[63]         With respect to the first certainty, what must be shown is “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”: Mordo  v Nitting 2006 BCSC 765 at para. 293.

[64]         While it may be useful for the settlor to use such words as “trust” or “trustee”, no such wording is required to create a trust: Donovan W.M. Waters, Mark R. Gillen and Lionel D. Smith, Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012) at 204; Re Kayford, [1975] 1 All E.R. 604 at 607. Even conduct may suffice. The question is one of fact: McInerney v. Laass, 2015 BCSC 1708 at para. 40:

… In the absence of formal documentation creating a trust, the court may infer an intention to create a trust from the surrounding circumstances. Evidence of what the parties intended, what they actually agreed upon and how they conducted themselves will be considered (Elliott at paras. 26 and 28).

[65]         The petitioners rely on a series of cases, primarily involving laypeople and more informal circumstances, whereby the courts held trusts to exist without formal documentation or wording: Union Bank of Chicago v. Wormser, 256 Ill. App. 291; Re Kayford, supra. In Paul v. Constance, [1977] 1 All E.R. 195 (Eng. C.A.), the alleged settlor was described as a man of unsophisticated character and the trust was created by him telling his girlfriend that the money in a particular account was as much his as it was hers.

[66]         The executors do not disagree that courts are capable of inferring a trust in a document without express language. However, they contend that a court should be less willing to do so when documents prepared by a lawyer do not contain specific and clear declarations of trust: Daley, Kero, Morgan and Wong v. OHR Whistler Management Ltd., 2007 BCSC 383 at para. 14:

[14] I find no trust is created by the terms of the Hotel Management and Rental Pool Agreement. This is a sophisticated legal document prepared by lawyers to create a very specific and defined bundle of legal rights. If it was intended that a trust be created, I would expect a trust would have been expressly stipulated.

[67]         Further, the following principles may weigh against an inference of the establishment of the certainty of intention:

·       the parties to the agreement may alter the terms of the agreement without reference to the alleged beneficiaries: Mohr v. C.J.A., [1989] B.C.J. No. 2083 (S.C.), aff’d [1991] B.C.J. No. 209 (C.A.);

·       the parties to the agreement may cancel the agreement without reference to the alleged beneficiaries: Mohr;

·       the agreement is not in the form of a declaration of trust; there is no settlor, no disposition of trust property from a settlor to a trustee and no express declaration of trust by a trustee: Khavari v. Mizrahi, 2016 ONSC 101 at para. 48;

·       the parties to an agreement do not treat the agreement as a trust in their dealings with third parties: Khavari, supra at para. 55; and

·       it is possible for certainty of intention to be found even where the settlor retains legal title to the item, provided the beneficial ownership is transferred: Elliott (Litigation Guardian of) v. Elliott Estate, 2008 CarswellOnt 7448 (S.C.J.) at para. 37.

[68]         I do not find that the Articles established a trust in favour of the petitioners. While a court may infer a trust in a document that does not contain express language to that effect, I am not satisfied that it is appropriate to do so here. I base this conclusion on the following:

·       Mr. Wright was familiar with the legal requirements of a trust and had previously set up the Alter Ego Trust and was in the process of setting up the Joint Partner Trust;

·       the fact that Mr. Wright chose to create the trusts through formal trust documents prepared by his lawyer suggests that, if he wished to set up a trust for the petitioners, he would have done so in a similar manner, or, if he chose to do so through the Articles, he would have made it expressly clear that he was setting up a trust;

·       Mr. Wright was a highly sophisticated businessman and the Articles were drafted by a lawyer based on instructions from him. It is doubtful that a sophisticated businessman working with a lawyer for many years would not have inserted express language to set up a trust if that had been the intention. The majority of cases put forward by the petitioners considered laypeople who set up trust situations without knowing it or using express words. Mr. Jamieson and Mr. Wright were fully aware of how to effect a trust and the lack of express language, while not fatal to the existence of a trust, points away from a trust existing;

·       the fact that Mr. Wright chose to give the shares to his children in his Will and clearly considered he had provided for them by his Will, supports the conclusion that there is no trust. If Mr. Wright had set up a trust, there would have been no need to distribute the shares through his Will;

·       if subsequent conduct may be considered pursuant to a finding of ambiguity, the fact that Mr. Wright issued the contested Preferred Shares to himself personally and issued the Yun Preferred Shares to himself as trustee for the Joint Partner Trust is helpful in demonstrating his intention. If Mr. Wright had considered himself a trustee, it is likely that he would have issued the shares to himself in that capacity, as he did with the Yun Preferred Shares; and

·       the Articles could have been amended at any time without the knowledge or consent of the petitioners, which is inconsistent with a trust. The shares could also have been revoked at any time.

[69]         I conclude that the requisite certainty of intention does not exist.

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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