Secret Trust Based on Verbal Instruction of Deceased

Secret Trust Based on Verbal Instruction of Deceased

Bergler et al v Oderthal 2019 BCSC 1882 is an example of the court finding a secret trust based on verbal instructions of the deceased that were accepted by the trustee.

The case was upheld at 2020 BCCA 175.

The facts in Bergler are very simple. On her death bed the deceased, having no will, told her common law spouse that she wanted her assets to be given to her niece, the plaintiff and the defendant agreed that he would abide by her wishes. The deceased told the defendant that he did not need to transfer the assets to the niece unit he began a new relationship which he in fact did.

The defendant admitted the conversation at his examination for discovery and the court found that a secret trust had been created that entitled the plaintiff niece to inherit the entire estate.

The defendant further admitted that he mixed the deceased’s assets with his own and prepared a new ill leaving the assets to others than the plaintiff.

The court held that the defendant had a fiduciary duty to protect the estate assets for the plaintiff and that he breached that trust.

The court stated that in circumstances where a person dies intestate relying upon the fat that the intestate heir has accepted the trust, the law compels the trustee to carry out the trust. Chinn v Hanrieder 2013 BCCA 310 at paras. 66-67.


What is a secret trust?

A fully secret trust arises where a testator gives property to a person apparently beneficially, but has told that person certain trusts on which the property is to be held. The trust arises outside of the will, is hidden from view, and is revealed only by extrinsic evidence. Where the beneficiary agrees to act as trustee or acquiesces in such arrangement, a Court of equity will enforce the secret trust to prevent the requirements of the Wills Act, or the Statute of Frauds, from being used as an instrument of fraud. The communication can be either oral or in writing, or both.


What is required to create a secret trust?

A plaintiff must prove on the balance of probabilities that:

(i) There was an intention of the testator to subject a primary donee to an obligation in favour of a secondary donee;

(ii) There must be communication of that intention from the testator to the primary donee;

(iii) The primary donee must accept to carry out that obligation. The method by which the primary donee is to carry out the obligation, whether by the making of a will in favour of the secondary donee or by some form of inter vivos transfer, is immaterial. Ottoway v. Norman [1971] 3 All E.R. 1325 and Hayman v. Nichol [1944] 2 D.L.R. 4 (S.C.C.)

The facts in Ottoway v. Norman were as follows:

The testator owned a bungalow where he lived with his housekeeper, and they in fact lived together as man and wife for many years. The testator’s son from a former marriage frequently visited. On one visit the testator told his son in the presence of the testator’s wife, that his wife should have the bungalow for the rest of her life, but that she should then leave it to his son on her death. The wife agreed to that plan. The testator subsequently made a will by which he devised the bungalow to his son. He also left his wife a pecuniary legacy and the residue of his estate divided between his son and wife. Between the date of the will and his death, the testator discussed the future plans for the bungalow with both his son and wife on a number of occasions. Immediately after the testator’s death, his widow made a will where she devised and bequeathed all of her real property to the testator’s son and his wife. However five years later the wife made a new will whereby she appointed a third party who had become her friend after the testator’s death, to be her executor. The following year she had a discussion with the son with respect to the construction of a proper bedroom to the bungalow and the son agreed to pay for it since the bungalow was going to be his. The son and widow then had an argument over the plans, and the widow subsequently changed her will whereby she left the bungalow to the third party and his wife. Following the widow’s death, the son and his wife sued alleging that the estate of the widow held the bungalow in trust for the son and his wife, and the Court action was allowed.

In Hayman v. Nichol, the Supreme Court of Canada dealt with whether a secret trust had been created or not, on the following facts, namely:

The testatrix died in 1937 having made her last will and four codicils thereto. In the fourth codicil she bequeathed an amount of money which she had on deposit at her death to her daughter, in “full confidence that she will dispose of the same in accordance with the wishes I have expressed to her”. The daughter received the money and treated it as her own, and died intestate in 1940, without having disclosed any wishes of the testatrix mentioned in the codicil.

The residuary legatees of the testatrix brought an action against the administrator of the estate of the daughter, alleging that the bequest to S was a trust which the daughter failed to carry out, and thus in the absence of any evidence showing the nature of the trust, the money should go to the residuary legatees.

The Court followed the reasoning stated aforesaid in Ottoway v. Norman, but declined to impose a secret trust on the wording of the will, on the basis that the language of the will was precatory, not imperative, and thus did not create a legal obligation.



Dr. Donovan Waters, in the Law of Trusts, 2d ed., page 110 states that:

Every care has to be taken not to make mandatory words from those which are the mere indication of a wish or request and that to construe the true intention of the testator the Courts must examine the will as a whole and not be mesmerized by particular words.

Dr. Waters relies upon the decision of Re Atkinson (1911), 103 L.T. 8 60 at 862 (CA) for this proposition.

Justice Fletcher Moulton L.J. in Re Atkinson stated:

“I can see that there has been a very great change of opinion in later years, if one regards the words which are considered to create a precatory trust now and what words were so considered in olden times. but I do not think that the principle on which the courts have acted can have changed. The principle is that you have to find from the words of the will the intention of the testator. The doctrine of precatory trusts does not mean that the courts may create an intention which they do not think from the words of the will was in the mind of the testator. It means that they may come to the assistance of weak or even inapt words and recognize his intention to create a trust in spite of the language being such that lawyers would not have used it for that purpose. It only meets the case of recognition of the intention of the testator and is not a doctrine by which an intention that did not exist is read into the will.”

The more modern view of the Courts is probably that precatory words may in fact create a trust, if it can be established on the evidence as a whole that the testator clearly intended to create a trust. There probably are really no such things as precatory trusts anymore, if the precatory words are imperative. If the precatory words are imperative, then the trust is an expressed trust. If the words used are not imperative, then there is no trust at all, and it’s a matter of interpretation. See McHugh v. McGuire 1917 (45 NBR 167)


Requirements of the 3 Certainties to Constitute a Trust

1. Certainty of Intention

It must be clear that the settlor intended that the property received by the trustee to be held in trust, is a binding obligation and not just a moral wish. The language used by the alleged settlor must be imperative, with the intention of creating legal relations.

2. Certainty of Subject Matter

The trust property must be clearly identified as must the entitlements of the beneficiaries in the property. It must be possible to clearly identify the property which is to be subject to the trust. In addition, even if the trust property is clearly defined, the share or shares in that property to which the beneficiaries are entitled must also be clearly defined.

3. Certainty of Objects

The beneficiaries or purposes for which the trust property is held must be clearly identified. The word “objects” is a neutral word because a trust may be created in favour of persons, as well as in favour of purposes, which the settlor or testator would like to see carry out. For example, the settlor or testator may not wish to benefit an individual directly, but instead may wish to indirectly benefit individuals through the use of a trust to “fund cancer research”.

If any one of the three certainties does not exist, the trust fails to come into existence and is void.


Examples of Successful Claims for Secret Trusts

(a) Re D’Amico 1974 2 W.W.R. 559 – one of the most “classic” fact patterns involving a secret trust is found in Re D’Amico.

Facts: The residuary clause of the last will of the deceased read: “(e) To pay or transfer the residue of my estate to my Trustees, Nigel Morgan and Maurice Rush subject to the Trusts that I have indicated to them.” The day before signing his will the deceased had written to the two trustees named therein advising them that he had appointed them as his trustees, that he was leaving the residue of his estate to them and adding: “I direct that you transfer the said residue of my estate to the Provincial Committee of the Communist Party of Canada, or its successor.”

Held: There was a secret trust communicated to the trustees prior to the execution of the will. There had been no contravention of The Wills Act, and trust was not rendered unenforceable by reason only that the trustees of the secret trust were also the trustees and executors named in the will. The secret trust was not so vague as to be void for uncertainty: Blackwell v. Blackwell, [1929] A.C. 318; Re Young; Young v. Young (No. 2) Ch. 344, [1950] 2 All ER 1245 applied.

In Blackwell v. Blackwell [1929] A.C. 318, at 339, Lord Summer stated:

“It is communicated of the purpose to the legatee, coupled with acquiescence or promise on his part, that removes the matter from the provisions of the Wills Act [1837 (Imp.), c. 26] and brings it within the law of trusts.”

(b) Re Romanow 17 Sask. R. 384

Facts: A sister of a testatrix challenged the validity of a second will. The sister submitted that the will did not correspond with the testatrix’s wishes that were orally expressed by the testatrix. The testatrix orally had provided for the distribution of a number of her personal effects.

Held: The Court held that the will was valid. Instructions had been given to the woman and accepted by her, and this created a secret trust in favour of the beneficiaries that had been described by the testatrix. The Testatrix was entitled to make these arrangements which she did following the execution of her will. As such the executors were legally bound to carry out the trust imposed by those instructions.

(b) Re Poohachoff Estate [1971] 1 W.W.R. 463

Facts: A testator gave her entire estate to her executor in trust “to be distributed in accordance with my wishes expressed to the said executor”.

Held: That the will must be admitted to probate. The Court followed the Supreme Court of Canada in Hayman v. Nichol supra, and stated that where a gift was made to a person upon trust to be applied for purposes already communicated to the legatee, evidence was admissible to show what the trusts or purposes were; if communicated to and accepted by the legatee before the date of the will, effect would be given to them if they were otherwise valid.

(c) Glasspool v. Motiuk and Everett (1998) 22 ADAIR (2d) 66; upheld by the B.C. Court of Appeal January 19, 1999, Vancouver CA024500.

The facts of the case briefly stated are as follows:

Facts: (i) The deceased made a will leaving his entire estate to his common-law wife of eight years, with no mention of his son. The plaintiff’s son brought an action against the estate of the deceased for a declaration of ownership of certain mineral rights over property held by the deceased’s mother, or alternatively, a claim under the Wills Variation Act. Evidence of an independent witness (the deceased’s brother) was that the intention of the plaintiff’s grandmother was to bestow a gift on the deceased on the condition that he leave his share of the mineral rights to the plaintiff on his death, and the deceased promised to do so.

The Trial Judge regarded the mineral rights as a secret trust in favour of the plaintiff, and not forming part of the testator’s estate that had been bequeathed to his common-law wife. The deceased had not seen the plaintiff in approximately twenty-five years. The Trial Judge believed the evidence of the independent witness as to the conversation that led to the creation of the secret trust.

The entire evidence that created the secret trust was as follows:

Q. Is that — yes. Did you have — Did you and Larry, your brother, Larry and you, the deceased, Larry, you, and your mother have a conversation about a will?

A. Yes, we did.

Q. Yes, what was that conversation?

A. She wanted Larry to leave his share of the oil rights to his son.

Q. That would be the plaintiff?

A. Yes.

Q. Now, what did Larry say to that?

A. He agreed.

Held: The Trial Judge found that the grandmother created a secret trust in favour of the plaintiff by reason that:

(i) the intention of the testator (the grandmother) to subject the primary donee (the deceased) to an obligation in favour of the secondary donee (the plaintiff);

(ii) the communication of that intention by the testator to the primary donee; and

(iii) the acceptance of that obligation by the primary donee.

The Trial Judge found that the grandmother’s use of the word “want”, was not precatory, and that she intended to create a legal obligation by the use of that word.

Accordingly the mineral rights did not form part of the deceased’s estate, and were imposed with the provisions of a secret trust in favour of the plaintiff.

The Court of Appeal had no difficulty at all in unanimously finding that the Trial Judge came to the conclusion that the grandmother did in fact intend to create a binding trust, and that the essential ingredients of her finding a secret trust were present. As such the Court would not interfere with the Trial Judge’s findings.

The Court of Appeal also stated that corroboration is not an essential ingredient and the evidence of the independent witness was treated by the Trial Judge as being disinterested evidence, and itself was corroborative of the claim that was being put forward by the plaintiff.



The Court of Appeal in Glasspool v. Everett also stated that while corroboration is required as a matter of practice, corroboration is not an essential ingredient to prove a secret trust. In any event the evidence of the independent witness in Glasspool v. Everett, was treated by the Trial Judge as being a disinterested evidence, and itself was corroborative of the claim that was being put forth by the plaintiff.

In J.M. Lumber King Ltd. v. Von Transehe-Roseneck Estate, Mr. Justice Hutchinson examined the necessity for corroboration in claims by or against deceased persons, and after stating several authorities, found that there is a rule of practice but not a rule of law in British Columbia, that corroboration is generally required for a claim against an estate of a deceased person.

At paragraph 7 of his decision, Mr. Justice Hutchinson states “Counsel submits that the Courts generally require corroboration before allowing a claim against the estate of a deceased person. Until 1976 there was a statutory requirement in s. 11 of the Evidence Act, R.S.B.C. 1960, c. 134, which provided that a party could not obtain judgment against the estate of a deceased person on his own evidence alone, unless the evidence was corroborated by some other material evidence. In 1976 that section was repealed, S.B.C. 1976, c.2, s. 20(a) and the law that is to be applied is the law that existed before that legislation. The common law rule and the rule applied in equity was summarized by the Supreme Court of Canada in Adamson v. Vachon (1974) 6 W.W.R. 114 by Anglin, J. at page 20:

“A more suspicious claim against a dead man’s estate it would be difficult to imagine. While there is no absolute rule requiring corroboration in the case of a claim against the estate of a deceased person (In Re Griffin (1898) 1 Ch. 408, 413, 68 L.J. Ch 220), the uncorroborated evidence of a claimant will be regarded with jealous suspicion (In re Garnet (1885) 31 Ch. D. 1), and the Court will in general require corroboration (In re Hodgson, 31 Ch. D. 177, 183, 55 L.J. Ch. 241). The plaintiff’s testimony did not convince the learned Chief Justice who heard it. The Court ought to be completely satisfied before allowing such a claim as this (Rawlinson v. Scholes (1898) 79 L.T. 350. I am far from being so satisfied”.

“In a more recent decision Aikins J. in Re Murray (1966), 60 D.L.R. (2d) 76 (B.C.S.C.), suggested that this was a rule of practice rather than a rule of law. I proposed to apply those principles to the claim against the estate of the personal defendant as fairness requires that any allegation that cannot be rebutted due to the death of the defendant be very carefully scrutinized.”

Sham Trusts

Sham Trusts

Borges v Santos 2017 ONCJ 651 dismissed a claim brought against a trust alleging that the trust was a sham trust.

The case involved a garnishing order brought against a trust set up by the defendant’s mother from which he lived on.

The defendant had no other source of funds or assets and owed $40,000 of child support.

The plaintiff failed in her allegation that the trust was a sham. There was no deception when the trust was established and the defendant did not secretly control the trust.

Water’s Trusts in Canada describes a sham trust as follows:

The term sham is not a precise term, and practically means that “ something that is not what it seems , a counterfeit. It means that the parties true intent is that others will be mislead by the terms appearing on the document. 

Used in a trust that the courts will declare void because the provisions in the document do not represent the settlor’s true intent as to the terms upon which the trustee is to hold the trust assets.

Though the trust sets out the persons  or purposes that are to benefit, the settlor’s true intent is to retain control of the assets because the trusts intent is to appear as that the settlor has disposed of assets and so to defeat taxes, creditors, prejudice the rights of a spouse or the children of the relationship.

Thus a trust created by a Settlor who declares himself the trustee of the property, rather than make a transfer of the assets to another as trustee, lends itself to this misrepresenting behaviour. A trustee who agrees to assists the falsity, or who is indifferent to whether, in fact, he merely implements the trust , lends himself to the misrepresenting behaviour will equally enable the assertion to be made that the fraud is a deception and thus a void document.

“Knowing Receipt” of Trust Property

"Knowing Receipt" of Trust Property | Disinherited Estate Litigation

Vancouver Coastal Health Authority v Moscipan 2019 BCCA 17 dealt with the proceeds of misappropriated funds from the employer of the deceased, in favor of her husband, and the court reviewed the law relating to “knowing receipt” of trust property.

The leading decision is Citadel and Gold v Rosenberg 1997 ( 3) SCR 767, where the court described the essence of a knowing receipt claim at paragraphs 41, 46 and 49:

The essence of unknowing receipt claim is that, by receiving the trust property, the defendant has been enriched. Because the property was subject to a trust in favor of the plaintiff. The defendants enrichment was at the plaintiff’s expense. The claim, accordingly falls within the law of restitution.

A stranger in receipt of trust property is unjustly enriched at the expense of the trust beneficiary. Participation in a fraudulent breach is irrelevant to the plaintiff’s claim. Liability essentially turns on whether or not the defendant has taken property subject to an equity in favor of the plaintiff. The jurisprudence is long held that, in order to take subject to an equity, a person need not have actual knowledge of the equity, notice will suffice. In my view, the same standard applies to cases of knowing receipt.

Rather, the cause of action in knowing receipt arises simply because the defendant has improperly received property which belongs to the plaintiff. The plaintiff’s claim amounts to nothing more than “you unjustly have my property. Give it back.” Unlike knowing assistance, there is no finding of fault, no legal wrong done by the defendant, and no claim for damages. It is at base, simply a question of who has a better claim to the disputed property.

In order to prove recovery of the disputed property, the plaintiff must prove the following:

1) That the property was subject to a trust in favor of the plaintiff;
2) that the defendant did not take the property as a bona fide purchaser for value without notice. The defendant will be taken to have notice if the circumstances were such as to put a reasonable person, on inquiry, and the defendant made man, or if the defendant was put off by an answer which would not have satisfied a reasonable person.

With respect to constructive knowledge, the court referred to Groves-raffin Construction Ltd fee. Bank of Nova Scotia (1975) , 64 DLR (3-D) 78 BC CA were at paragraph 138, the court set out the test:

“ Under what I think is the proper test no necessity to take care arises until either. It is clear that a breach of trust is being, or is intended to be, committed, or until there has come to the attention of the person something that should arouse suspicion in an honest reasonable man and put them on inquiry. The person for his own protection, in the first event should have nothing to do with the improper transaction, then the second event should not continue to be involved in the suspected transaction until his inquiry shows him, or more correctly caught, which will reasonable man, that the suspicion is unfounded”

Trust Re: Land Requires Transfer of Title

Trust Re: Land Requires Transfer of Title | Disinherited Estate Litigation

Mehmal v Mehmal 2018 BCSC 2057 discussed an alleged family agreement that certain siblings held property in trust for other siblings, but because the legal and beneficial title was never divided and no property was ever transferred, the court held that without a transfer of title no trust can result and the presumption ( of resulting trust) is not engaged.

The court held that at some point title has to pass from one party to another and relied upon Fuller v Harper 2010 BCCA 421 in which the BC Court of Appeal referred to Pecore v Pecore (2007) 1 SCR 795 said the presumption arises when entitled the property is in one party’s name, but that party, because he or she is a fiduciary, or gave no value for the property, is under an obligation to return it to the original title over.

Without a transfer of title no trust can result in the presumption is not engaged. This point was expressly made by the BC Court of Appeal in Elsen v Elsen 2011 BCCA 313

Elsen stated at paragraph 19:

“first, and most obviously, the principal as stated by Waters regarding the “transfer”of a legal or equitable interest is literally inapplicable because there was no transfer owned in equity. The properties were received by her as trustee for the beneficiaries-she never owned the beneficial interests and never transfer them.

The court noted that one of the key features of a resulting trust is that the claimant must have provided the property or equitable interest vested in the person bound by the trust ie the beneficiaries. Waters cited Baird v Columbia Trust Company (1915) 22 DLR 150 BCSC.

The court found that on the facts that a none of the siblings behaved as if they had any obligations to the trust. No one returned to the ranch or participated in any way and activities of the ranch once they left home. There were no papers drawn to reflect trust. The court found that it made sense for the siblings would all remove the way to begin on their own, to give up their interests in order to ensure that their mother continued to have a place to live along with the two siblings who remained on the ranch. It was a small sacrifice for them, and ensured that the ranch did not need to be broken up and sold to pay their inheritance. For some of the siblings it was no sacrifice at all.

Substantive v Remedial Constructive Trusts

Substantive v Remedial Constructive Trusts

Trainer v Tractorhill Sales Ltd v Teck Metals Ltd 2018 BCSC 2043 discusses the difference between a substantive constructive trust and a remedial constructive trust.

In BNSF Railway Co v Teck Metals Ltd 2016 BCCA 350, the Court of Appeal reviewed the development of the constructive trust in Canada, the United Kingdom and the United States in order to consider whether constructive trusts were only available to remedy unjust enrichment and breach of fiduciary duty or whether they were also available on a wider substandard or institutional basis. ( They are available for ” good conscience” reasons).

The Trainer decision involved a plaintiff who had pled unjust enrichment and constructive trust in relation to the claims pertaining to the shares and warrants of a company.

The Law

A substantive constructive trust is distinguished from a remedial constructive trust in that a substantive constructive trust, the acts of the parties in relation to some property are such that those acts or later declared by a court to have given rise to a substantial of constructive trust and to of done so at a time when the acts of the parties brought the trust into being.

The difference between a substantial of constructive trust and a resulting trust may, in cases where the property reverts to the settlor, be no more than a matter of terminological preference.

In a remedial constructive trust on the other hand, the acts of the parties are such that a wrong is done by one of them to another so that, while no substantial trust relationship is then and there brought into being by those acts, nonetheless a remedy is required in relation to property and the court grants that remedy in the form of a declaration which when the order is made creates a constructive trust by one of the parties in favor of another party.

In BNSF Railway the appeal court concluded that in Canada, a remedial constructive trust is available to remedy unjust enrichment and breach of fiduciary duty but it is also open to the court to develop the law pertaining to substantial of constructive trusts on a case-by-case basis where “good conscience so requires”. The BNSF decision followed Soulos v Korkontzilas (1997) to SCR at paragraph 34.

In both substantial and remedial constructive trusts, there are two criteria that must be met:

a) The plaintiff must demonstrate a substantial and direct link, a causal connection or a nexus between his or her claim in the property which is the subject of the substantial of construction trust or the proposed remedial constructive trust ( Pro- Sys consultants Microsoft Corporation 2013 SCC at paragraph 92;

b) The plaintiffs must demonstrate that a monetary award is insufficient or an appropriate in the circumstances. Pro-Cys at para. 92,.

The election in this regard need not be made until the end of trial but at that stage the plaintiff must select and if you she Alexa constructive trust he or she must be able to show that monetary damages are insufficient or inappropriate.

The court cites BSNF at paragraph 85 as authority for the factual basis for asserting that damages would be an insufficient remedy should be pled.

Quistclose Trusts: Trusts By Implication

Quistclose Trusts: Trusts By Implication | Disinherited Vancouver

Bentley v Hansen 2018 BCSC 1844 discusses Quistclose trusts that arise by implication and where so found, create a resulting trust.

Quistclose is named after the leadidng case from the House of Lords in 1970- Barclays Bank v Quistclose Trust 1970 AC 567.

The court concluded that the plaintiff had made out his claim for the existence of a Quistclose trust with respect to $100,000 that he deposited with the company for the specific purpose of securing inventory financing.

The funds were impressed with the trust for that purpose.

The plaintiff’s intent at the time of advancing the funds was that the funds would be returned to the plaintiff personally upon the letter of credit no longer being required by the financing company for this purpose.

The court found that the funds were kept separate from the companies operating funds from the time they were there were advanced by the plaintiff. The funds were never drawn down or spent for the original purpose. The fact that the funds were kept separately is legally significant.

The court concluded that the hundred thousand dollar deposit was returnable to the plaintiff on a resulting trust when the financing company released the letter of credit.


The Law

A Quistclose trust arises by implication.

Where it is established, the funds given by A to B must be used to pay C. Should the purpose of the trust fail, that is C no longer requires the funds are they no longer required for their original purpose by C, B may not make use of the funds for any other purpose, and the funds was then be returned to a on a resulting trust.

As with all trusts, and intention of the donor :

a) Must be established with certainty. In order to be established as such a trust, the intention must include that should the object of the trust fail, that the funds would return to A.

b) A, B, and C must be different persons.

c) There must also be the three requirements of certainty of intention, subject and object, as required of trust generally.

A Quistclose is an automatic resulting trust which arises by implication, for which no trust documentation would typically exist.

Its elements were described as follows by the BC Court of Appeal in Bank of Montréal v Milk Marketing Board (1994) 94 BCLR at paragraph 12 as follows:

“12. Where A gives money to B for the specific purpose of paying C, that money is impressed with the trust that may not be appropriated by B. I certainly do not doubt this principle, which — is supported by longevity, authority, consistency and good sense.”

In that case the Court of Appeal found that no such implied trust existed on the basis that the funds at issue were not kept separately from other funds held by the milk marketing board.

The existence of a Quistclose trust was most recently used in BC in Alta West Mortgage Capital Corp. v Strege 2016 BC SC 127:

“Barclays bank LTD v Quistclose Trust (1970) AC 567 stands for the proposition that were a party transfers money to another for the specific purpose of paying a third-party, the money is impressed with the trust and cannot be used by the recipient for another purpose. A Quistclose trust only arises where there is an express or implied agreement between the parties that the money is to be kept separate from the recipients other funds.

Trust? Three Certainties Must Be Present

Trust? Three Certainties Must Be Present | Disinherited Estate Litigation

PKMB v DHL 2018 BCSC 186 provides an overview of the law of trusts, including the required presence of the “three certainties” in order to vest a trust.

The three certainties must be established on the evidence: the certainty of intention, the certainty of subject matter, and the certainty of objects.

In Bankruptcy of Taylor Ventures LTD(554925 BC LTD) 2004 BCSC 1612 the three certainties were described as follows:

1) Certainty of Intent

It must be established that there was a clear intent to create a trust , the language used by the set floor must be imperative, and the intention of the set floor of the trust must be ascertained at the time of the settling of the property transferred upon the trustee. For the trust to be valid, the certainty of intent must be made known to the trustee. -Re-New Home Warranty of British Columbia 2000 29 CBR 232 BCSC

2) Certainty of Subject Matter

A trust cannot be established if the subject matter of the alleged trust is undefined Robinson v Manitoba (1986) 61 CBR 21 (Manitoba CA)

3) Certainty of Object

The beneficiaries must be clearly identified as must the way in which the property is to be applied. There must be no uncertainty as to whether a person is a beneficiary. If a description of a class of beneficiaries is used, the description must be certain and it must be possible to ascertain who are the members of the class and the total membership in the class. Re Eron Mortgage Corp. (1999) 10 CBR 257 (BCSC)

Intention is a Question of Fact

Intention Is a Question of Fact | Disinherited

Law Society of BC v Brito 2018 BCCA 407 held inter aiia by the BC Appeal Court that the intention to create a trust is a question of fact.

The trial judge had been asked to determine whether the parties funding agreements amounted to loans which give rise to a creditor debtor relationship, and not to a trust.

The judge had found that the first of the three certainties required to constitute a trust, namely certainty of intention to create a trust, was not made out on the evidence.

The appellant had argued that the judge’s reasons for judgment were deficient but the appeal court stated that reasons for judgment must be read as a whole, in the context of the evidence, the issues and the arguments the trial, together with an appreciation of the purposes of functions for which they are delivered–R. v Villaroman 2016 SCC 33 at para 15.

In Norman Estate v Watch Tower Bible and Tract Society of Canada 2014 BCCA at paragraph 14 , the appeal court held that the interpretation of instruments such as agreements and wills, may raise questions of both fact and law. The court went on to write that the issue of intention to create a trust is a question of fact ( at paragraph 17)

The exercise is akin to the interpretation of a contract, which generally involves questions of mixed fact and law, and which is reviewable only were the first instance judges committed a palpable and overriding error— Sattva Capital Corporation v Creston Molly Corp 2014 SCC 53

In the Britto decision the court stated that in light of the standard of review of palpable and overriding error in the largely factual nature of the judge’s findings, it was not open to this court to set aside the judgment simply because we might interpret the parties agreements differently -Rosas v Toca 2018 BCCA 191 at para. 34.

Court Finds Gift Over Resulting Trust

Court Finds Gift Over Resulting Trust | Disinherited Vancouver

Gully v Gully 2018 BCSC 1590 involved in a case where a mother transferred a one half interest in her home in 2015 to her son as joint tenant on title, on the basis of estate planning advice that she received. Her intention was to avoid the payment of inheritance tax on her death, but she did not advise her son that he had been added as a joint tenant to the property.

The son subsequently became indebted in the amount of $800,000 and a judgment was filed against his interest in the said property.

The mother subsequently commenced a court action alleging that the son held his joint tenant interest in the property as a resulting trust for the mother, and alleged that she did not intend to gift the property to her son and that her son maintained no beneficial interest in the property. She argued that accordingly the judgment debtor could not register its judgment against the property.

The judgment creditor challenged the presumption of resulting trust and the court found that the mother did in fact intend to gift the property to her son, particularly by reason that at the same time that she executed the transfer, she signed a declaration stating “ I declare that I contemplate naming my son and others as joint owners of some of my assets, or designated beneficiary of my RRSP, insurance and other investments, it being my intention that upon my death, such to belong to the named beneficiary, at law and in equity, and that such are not to be shared or allocated to other persons”

The mother executed a new will one month after the judgment was registered against the property, stating that she wished to disinherit her son because he had many personal debts.

The court referred to Fuller v Harper 2010 BCCA 421 that discussed how evidence of a transferor’s intention should be considered, and followed other decisions that held that evidence by a party to litigation may be admissible against that party for a limited purpose if it is found to be relevant to the issue of the transferor’s intention at the time of the transfer.

The court followed a more liberal stance on the admissibility of post-transfer conduct and cautioned that 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 the change in intention. The assessment of the reliability of post-transfer conduct admitted into evidence will include an assessment of the reasonableness of any inferences that are sought to be drawn from that conduct, including the inherent probability or in probability of competing explanations as to the transferor’s intent. In short the court must consider if the transferor had any rational purpose for the transfer other than a gift.

The court referred to sections 23 and 29 of the Land Title act to establish the proposition that an unrelated third party is not affected by unregistered changes, and is entitled to rely on the certificate of indefeasible title.

Section 23(2) of the Land Title Act states:

An indefeasible title, as long as it remains in force and on counsel, is conclusive evidence at law and in equity, as against the crown and all other persons, that the person named in the title as registered owner is indefeasible he entitled to an estate in fee simple to the land described in the indefeasible title, subject to the following—

Section 29(2) of the Land Title act states:

2) except in the case of fraud in which he or she has participated, a person contracting are dealing with are taking are proposing to take from a registered owner

a) a transfer of land, or

b) a charge on the land, or transfer assignment or sub charge of the charge, is not, despite the rule of law or equity to the contrary, affected by a notice, express and implied or constructive trust, of an unregistered interest affecting the lander charge other than—

The court conclusively found that the mother did in fact intend to gift the property to her son, and even if the court accepted that she did not intend to gift the property to her son at the time she registered her son’s interests, the argument may have some bearing on a dispute between the family members, but by virtue of the Land Title act and has no bearing on the interests of third parties such as the judgment creditor.

Rebutting the Presumption of Resulting Trust For Gratuitous Transfers

Rebutting the Presumption of Resulting Trust For Gratuitous Transfers

Rebutting the presumption of a resulting trust for the gratuitous transfer of property was discussed in Wong v Huang 2012 BCSC 975 and Frischnecht v Nowak 2018 BCSC 1430. In both cases the court reviewed the relevant authorities and found that the transfers of property in both cases had rebutted the presumption of a resulting trust.

The presumption of a resulting trust is rebuttable by proof on a balance of probabilities, given that were a transfer of property has been made for no payment, the onus is on the transferee to prove that a gift was intended.

Wong v Huang cited the leading case of Pecore v Pecore 2007 SCC 17 at para. 24. – Only the intention of the transferor is relevant, and intention is determined at the time of the transfer.

Pecore is the leading case on the presumption of resulting trust with respect to gratuitous transfers of property from one individual to another, and the legal decision as to whether the property should be treated as a gift or whether the property is subject to return or repayment as it is held in trust.

Pecore discussed two presumptions namely the presumption of a resulting trust and the presumption of advancement. The court described the nature of these competing presumptions at paragraph 24, and 27 – 28 respectively:

24. The presumption of resulting trust as a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged the presumption allocates the legal burden of proof. Thus where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended- this is so because equity presumes bargains, not gifts.

27. The presumption of resulting trust is the general rule for gratuitous transfers. However, depending on the nature of the relationship between the transferor of the transferee, the presumption of resulting trust will not arise and there will be a presumption of advancement instead. If the presumption of advancement applies, it will fall on the party challenging the transfer to rebut the presumption of a gift.

28. Historically, the presumption of advancement has been applied in two situations. The first is where at the transfer is a husband and the transfer is his wife ( Hyman v Hyman (1934) 4 DLR 532 (SCC) at para. 538. The second is where the transfer is a father in the transferee as his child, which is at issue in this appeal.

Regardless of which presumption applies, either presumption may be rebutted by evidence on the ordinary civil standard of a balance of probabilities.

Pecore limited the rebuttable presumption of advancement with regard to gratuitous transfers from parent to child and be limited in application to transfers by mothers and fathers to minor children.

In the Wong decision, the transfer was made to the defendant minor child, but the plaintiff was not his mother or father. Thus the presumption of advancement did not apply.

Since the transfer was made without consideration, the presumption of resulting trust applied unless that presumption is rebutted on the balance of probabilities. Therefore the onus of proof was on the minor defendant to prove on a balance of probabilities that the plaintiff’s intention in making the transfer was to complete a gift of a one half interest in the property to the defendant.

It is only the intention of the plaintiff transferor that governs, not the intention or understanding of the transferee or anyone else- Rascal Trucking : Kerr v Baranow 2011 SCC 10.

It is only the transferor’s intention at the time of the transfer that matters. Thus if a transfer later regrets the transfer or changed his mind about his intentions, that does not change the nature of the transaction.

In the Wong decision the plaintiff was an 86-year-old man who transferred a one half interest in his property to his six-year-old great-nephew. At the time of trial the nephew was 12 years old.

The plaintiff and the infant defendant had a close relationship at the time of the transfer of the property, and the plaintiff was estranged from his own children.

The court concluded in Wong that on the balance of probabilities the plaintiff’s intention when he made the transfer six years before the trial date, was to make an unconditional gift to the defendant of the one half interest in the plaintiff’s home.

The court viewed several aspects to the circumstances relating to the transfer, and found that it was not an isolated event, but instead must be viewed in the context of the plaintiffs expressed intentions going back to 2000 when the defendant was born. At that time the plaintiff wrote letters that he signed to transfer to change the ownership of the home to himself of the defendant as co-owners, indicating he would be leaving the remainder of his estate to the defendant as well.

The plaintiff wrote letters indicating that the transfer had been completed, and that the ownership certificate indicated that he and the defendant were co-owners. The plaintiff’s lawyer created a joint tenancy, and not a tenancy in common, with the effect that so long as the joint tenancy was not severed, the entire legal interest in the property would best of the defendant, outside of his will, upon the plaintiff’s death.

In the Frischknecht decision the plaintiff and the defendant were unrelated but had a relationship akin to that of mother and son. The plaintiff signed over her share of the property to the defendant at a time when she was suffering from diminishing mental capacity.

Her biological children who lived in Europe challenged the transfer.

In May 2001, the plaintiff and the defendant executed a co- ownership agreement, which when read by the court, was evidence of an intention by the plaintiff to transfer the property as a gratuitous gift to the defendant.

Despite the plaintiffs diminishing mental capacity, the lawyer who handled the transfer testified that the plaintiff clearly understood what she was doing and wanted to gift her half of the property to the defendant.

The court was impressed with the evidence of the experienced, careful and diligent solicitor, who testified that there were no issues relating to undue influence or mental competency.

The court concluded that the gift was unconditional and that the plaintiff intended to gift her interest in the property without any conditions attached, and specifically without any conditions relating to the repayment of mortgage funds. The plaintiff intended that the property be transferred to the defendant without consideration.

In both cases the court found evidence sufficient to rebut the presumption of resulting trust.