Validity vs. Administration of a Trust

Validity vs. Administration of a Trust

Tyrell v Tyrell 2017 ONSC 4063 dealt with a jurisdictional case as to whether the  Supreme Court of Ontario had jurisdiction to deal with the administration of a trust as opposed to the validity of a trust. The court found that the test is whether there was a “substantial connection” with Ontario in the administration of the trust and found that since there was, the Ontario court had jurisdiction as  the address of the administrating trustee was in Ontario even though the trust assets were elsewhere.

Analysis

12      I conclude that this Court has jurisdiction over matters affecting the administration of the Will. The issue of jurisdiction is resolved on the basis of the distinction between the “validity” of a trust and the “administration” of a trust.

13      The Respondents did not provide any cogent submissions or any authority for the submission that different common law choice of law (jurisdictional) rules apply to inter vivos trusts versus testamentary trusts. The same rules apply in resolving choice of law issues. Choice of law questions are resolved on the basis of the correct characterization of the issue under consideration. Trust issues may be characterized as one of formal or essential validity; capacity; revocation; construction; administration; procedure or succession etc.: See Ian M. Hull & Suzana Popovic-Montag, Macdonell, Sheard and Hull on Probate Practice, 5th ed (Toronto: Carswell, 2016), at 407. Canadian courts have drawn a distinction between the validity and administration of a trust: Re Nanton Estate (1948), 56 Man. R. 71 (Man. K.B.) and Jewish National Fund.

14      Validity of the trust refers to all matters concerned with a determination of whether a trust is valid. There are two components: a) formal validity and b) essential validity. Formal validity is concerned with matters of form required to create a valid trust. It encompasses such matters as writing, witnesses, validity of signatures, etc. Essential validity refers to validity of the provisions of the trust: for example, capacity of the testator or the settlor and whether the provisions of the trust are permissible in law: see Donovan W.M. Waters, Mark Gillen & Lionel Smith, Waters’ Law of Trusts in Canada, 3rd ed (Toronto: Carswell, 2005), at 1379.

15      Administration of the trust refers to all matters relating to the administration or management of the trust. These include powers and obligations of the estate trustee, the distribution of assets, dealing with creditors, etc.: see Waters’ Law of Trusts in Canada, at 1380; Probate Practice, at 410.

16      The analytical framework for resolving choice of law issues can be summarized as follows: a) determine the correct characterization of the issue; b) determine the jurisdiction that is most “intimately or rationally connected” to the issue; c) determine applicable law of the jurisdiction most “intimately or rationally connected” to the issue; and d) apply the applicable law to resolve the issue or dispute: see Waters’, at 1373-1379; Probate Practice, at 407-410.

17      The remedies the Applicants seek are premised on allegations of the failure of the estate trustee to distribute assets of the estate in accordance with the provisions of the Will, failure to provide a proper account for the assets of the estate, including assets that form the residue of the estate, improper management and management of the estate for an improper purpose. All of these matters are correctly characterized as matters relating to the administration of the trust.

19      A determination of which law applies to matters relating to the administration of the trust is resolved by determining the jurisdiction with the most “substantial connection” to the trust: see Waters’, at 191-192. The “substantial connection” analysis is fact driven and factors such as the location of the assets, the testator domicile, location of the beneficiaries and the location of the trustees are all relevant considerations.

20      The residence or place of business of the estate trustee (administrator) is usually the most important factor in the “substantial connection” analysis because it is the trustee who carries out the business of administering the trust: see Waters’, at 191-192; Branco, at paras. 19-22.

21      All the substantial assets of the estate are located in Nevis. A few bank accounts are located in Ontario. The testator was domiciled in Nevis. The beneficiaries are resident in Nevis, Ontario and New York. The estate trustee is resident in Ontario. Only the estate trustee is authorized to administer the Will. The estate trustee administers the Will from the province of Ontario. For the purpose of administering the Will, the most significant connecting factor is the residence of the estate trustee. Therefore, the Will is most substantially connected to the province of Ontario and the applicable law on matters relating to the administration of the Will is the law of Ontario. Thus, the Courts of Ontario have jurisdiction over matters relating to the administration of the Will. Therefore, the estate trustee, Janet Tyrell, shall comply with the order previously described.

Trustee Personally Liable For Trust Contract

Trustee Personally Liable For Trust Contract

In Johnson v North Shore Yacht Works Corp. 2017 BCSC 1229 the court held that a trustee of a trust was personally liable for a contractual debt that was entered into by the trust.

 The case concerned responsibility for the costs of repairs carried out to a yacht that was an asset of the Chester Allison Johnson Alter Ego Trust (the “trust”). The plaintiffs are the trustees of that trust.
They claimed that the defendant had undertaken to complete the repairs for a fixed-price amount of $80,000, and claimed damages for wrongful seizure and negligent storage.
The defendant counterclaimed for all of its parts and labour charges and storage costs.
 Reasons for Judgment released November 3, 2014, indexed as Johnson v North Shore Yacht Works Corp., 2014 BCSC 2057, awarded net damages of $118,219 plus costs on the counterclaim against the plaintiff trustees.
Information obtained on an examination in aid of execution  indicated that substantially all of the assets of the trust had been transferred to its sole beneficiary, and that the trust was insolvent.
The defendant then registered a certificate of judgment against two parcels of land owned in whole or in part by Mr. Johnson,
It is a long-standing principle of trust law that a trustee is personally liable on contracts into which it enters on behalf of the trust. The trustee’s remedy is to seek indemnity from the trust for that liability. The only exception to the trustee being personally liable is where he has specifically contracted to limit his liability to the assets of the trust.
The authorities bear this out: see, for instance, Benett v Wyndham (1862), 4 DeG F & J 259 (CA); Muir v City of Glasgow Bank (1879), 4 App Cas 337 (HL); Davis v Sawkiw (1983), 38 OR (2d) 466 (H Ct J); Pettit, Equity and the Law of Trusts, 12th ed (2012) at pp 413-414; and Underhill and Hayton, Law Relating to Trusts and Trustees, 18th ed (2010), p. 1066, para 81.5.
 In Hall v MacIntyre, [1934] 2 WWR 145 (BCCA), Chief Justice Macdonald put it this way:
It is well-understood law that an executor or trustee who makes a contract in relation to his trust is personally liable to the contractor for the price agreed upon.

The Presumption of Resulting Trust

Rebutting the Presumption of Resulting Trust

The BC Appeal Court in Winstanley v Winstanley 2017 BCCA 265 ordered a new trial on the basis that the trial Judge erred in his determination as to whether the evidence at trial had rebutted the presumption of a resulting trust that arises when a parent transfers an asset for little or no consideration to an adult child. The Court stated very clearly that there is no longer any presumption of advancement from a parent to an adult child as per the decision of Pecore v Pecore 2007 SCC 17.

Analysis

29      I begin my analysis by reviewing Pecore v. Pecore 2007 SCC 17, which is authority for the proposition that there is no longer a presumption of advancement between parents and their adult children. The Court decided that in modern social conditions the reverse is true: there is a presumption of a resulting trust where a parent makes a gratuitous transfer to an adult child, such as placing funds in a jointly-held bank account.

30      The facts in Pecore involved joint accounts held by a father and his adult daughter. The father transferred the majority of his assets to these joint accounts before he died. The terms of the accounts included a right of survivorship upon his death. At trial, the judge held that the presumption of advancement applied and the daughter was entitled to the legal and beneficial ownership of the assets. The question on appeal was whether the presumption of advancement as between a parent and child had continuing relevance under present social conditions. Rothstein J. for the majority held at paras. 4, 5 and 6:

[4] It is not disputed that the daughter took legal ownership of the balance in the accounts through the right of survivorship. Equity, however, recognizes a distinction between legal and beneficial ownership. The beneficial owner of property has been described as “[t]he real owner of property even though it is in someone else’s name”: Csak v. Aumon (1990), 69 D.L.R. (4th) 567 (Ont. H.C.J.), at p. 570. The question is whether the father intended to make a gift of the beneficial interest in the accounts upon his death to his daughter alone or whether he intended that his daughter hold the assets in the accounts in trust for the benefit of his estate to be distributed according to his will.

[5] While the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer, intention is often difficult to ascertain, especially where the transferor is deceased. Common law rules have developed to guide a court’s inquiry. This appeal raises the following issues:

  1. Do the presumptions of resulting trust and advancement continue to apply in modern times?
  2. If so, on what standard will the presumptions be rebutted?
  3. How should courts treat survivorship in the context of a joint account?
  4. What evidence may courts consider in determining the intent of a transferor?

[6] In this case, the trial judge found that the father actually intended a gift and held that his daughter may retain the assets in the accounts. The Court of Appeal dismissed the appeal of the daughter’s ex-husband.

31      Rothstein J. noted that the rebuttable presumption of law “is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption” (at para. 22). The presumptions of advancement and resulting trust apply to gratuitous transfers “where evidence as to the transferor’s intent in making the transfer is unavailable or unpersuasive” (at para. 23).

32      The effect of the majority’s decision in Pecore is that an adult child  whether independent or dependent  who receives a gratuitous transfer from a parent is now presumed to hold the transferred property on resulting trust for the parent, whereas formerly the parent was presumed to have advanced the property to the child as a gift.

33      Rothstein J. noted that the presumption of resulting trust may be rebutted with sufficient evidence:

[41] There will of course be situations where a transfer between a parent and an adult child was intended to be a gift. It is open to the party claiming that the transfer is a gift to rebut the presumption of resulting trust by bringing evidence to support his or her claim. In addition, while dependency will not be a basis on which to apply the presumption of advancement, evidence as to the degree of dependency of an adult transferee child on the transferor parent may provide strong evidence to rebut the presumption of a resulting trust.

[Emphasis added.]

34      Rothstein J. also considered the interaction between the right of survivorship in a joint account and the presumption of resulting trust at law. He concluded at para. 48:

[48] Courts have understandably struggled with whether they are permitted to give effect to the transferor’s intention in this situation. One of the difficulties in these circumstances is that the beneficial interest of the transferee appears to arise only on the death of the transferor. This has led some judges to conclude that the gift of survivorship is testamentary in nature and must fail as a result of not being in proper testamentary form: see e.g. Hill v. Hill (1904), 8 O.L.R. 710 (H.C.), at p. 711; Larondeau v. Laurendeau [1954] O.W.N. 722 (H.C.); Hodgins J.A.’s dissent in Re Reid (1921), 64 D.L.R. 598 (Ont. S.C., App. Div.). For the reasons that follow, however, I am of the view that the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature. This has also been the conclusion of the weight of judicial opinion in recent times: see e.g. Mordo v. Nitting, [2006] B.C.J. No. 3081 (QL), 2006 BCSC 1761, at paras. 233-38; Shaw v. MacKenzie Estate (1994), 4 E.T.R. (2d) 306 (N.S.S.C.), at para. 49; and Reber v. Reber (1988), 48 D.L.R. (4th) 376 (B.C.S.C.); see also Waters’ Law of Trusts, at p. 406.

. . .

[53] Of course, the presumption of a resulting trust means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will.

[Emphasis added.]

35      Despite finding that the trial judge had erred by applying the presumption of advancement, the majority in Pecore affirmed the judge’s disposition because there was strong evidence showing the father intended to gift the daughter the right of survivorship to the joint accounts, thus rebutting the presumption of resulting trust.

36      I now turn to the application of the principles emerging from Pecore to the facts of this case.

37      The correct legal analysis in the present case required the judge to first instruct himself that there is no presumption of advancement as between a parent and an adult child and to apply a presumption of resulting trust in regard to any gratuitous transfers of Jessie’s property to Carl. The burden of proof would then rest on Carl to rebut the presumption with respect to each transfer.

Beneficiary Trusts in Leasehold Estates

Beneficiary Trusts in Leasehold Estates

Pallot v Douglas 2017 BCCA 254 discusses the interest of a beneficiary of a trust in a decision that held that the beneficiary of a leasehold interest in a trust does not have the standing to partition the property and force a sale. This is because  the very nature of an interest in a trust only gives one the use of an asset as opposed to actually owning an interest in the asset.

The Personal Nature of the Trust Interest

[30]      Regardless of the terminology used, Mr. Pallot says his interest as a beneficiary under a trust of an interest in a leasehold estate gives him a right to immediate possession of the property. However, in my view, that position ignores one of the fundamental features of a trust.

[31]        One of the essential features of a trust is that one or more parties hold title to property and manage it for the benefit of one or more parties who have a right to enjoy the property. The beneficiaries under the trust enjoy the property subject to the terms of the trust. Professor Waters describes the principle as follows:

The trust is, perhaps, better described by isolating its essential features. The hallmarks, the essential characteristics of the common law trust, are heavily reflective of a particular legal history. The foremost of these is the fiduciary relationship which exists between trustee and beneficiary. One party holds the title to property, and

manages it. for the benefit of another who has exclusive enjoyment of the property. As we have seen, it is possible to have a variation on this basic framework, for the trustee may himself be a beneficiary. In that case he will have a share in the enjoyment….

Donovan W.M. Waters, Mark Gillen & Lionel Smith, Waters’ Law of Trusts in Canada,

4th ed. (Toronto: Thomson Reuters, 2012) at 9.

[32]        There are both personal and propriety aspects to a beneficiary’s rights under a trust. The proprietary aspect concerns a beneficiary’s rights to pursue trust property as against, for example, a buyer with actual or constructive notice of the trust. With respect to the personal aspect of a beneficiary’s right, Professor Oosterhoff says this:

If we consider first the personal aspect of the beneficiary’s right, it will be apparent that, since the management and control of the trust property is vested in the trustee, the beneficiary only has a personal right against the trustee that the latter perform the trust that he is bound to perform. The trustee can never “go around” the trustee and assert a claim to the trust property directly. On the contrary, the beneficiary’s claim must always be against the trustee….

…only the trustee, and not the beneficiary, has the right and the duty to make claims against third parties who may have interfered with or damaged the trust property….

A.H. Oosterhoff, Robert Chambers & Mitchell Mclnnes, Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed. (Toronto: Carswell, 2014) at 38.

[33]        Professor Oosterhoff further explains the respective rights of trustees and beneficiaries:

Similarly, the beneficiaries are not generally entitled to direct the trustee. For example, the beneficiaries cannot require the trustee to resign and appoint another person as a replacement. In general, then, we see that the structure of the trust is that trust property is held by the trustee, and this gives the trustee rights in rem. rights against the whole world: the beneficiary, on the other hand, can reguire the trustee to use those rights according to the terms of the trust. It is not so much that the beneficiary has an interest in the trust property that lies alongside the interest of the trustee.

Rather the rights of the beneficiary encumber the rights of the trustee, with the result that the trustee can be forced to use his rights in a particular way. As one legal historian has put it, “The interest of cestui que trust depends on the interest of the trustee: the creation of a trust is a process of cumulation, and not division”.

Oosterhoff on Trusts at 39.

[34]        In short, the interest of the beneficiary under a trust is the right to claim that the trust be performed in accordance with its terms. It is not an immediate right to possession of the trust property. This position was clearly shown in relation to a beneficiary’s equitable interest in Taylor v. Grange (1879), 13 Ch. D. 223, affd (1880), 15 Ch. D. 165 (C.A.). In Taylor manages it. for the benefit of another who has exclusive enjoyment of the property. As we have seen, it is possible to have a variation on this basic framework, for the trustee may himself be a beneficiary. In that case he will have a share in the enjoyment….

Donovan W.M. Waters, Mark Gillen & Lionel Smith, Waters’ Law of Trusts in Canada,

4th ed. (Toronto: Thomson Reuters, 2012) at 9.

[Emphasis added.]

Fiduciary Duties of Corporate Directors

Fiduciary Duties of Corporate Directors

Ascent One Properties Ltd v Liao 2017 BCSC 1017 dealt with an aborted real estate development project that alleged inter alia a breach of fiduciary duties by a corporate director and officer.

The case outlines the law relating to the fiduciary duties owed by a director and officer of a corporation.

THE LAW

173      It is trite law that directors owe duties to the companies they serve.

174      The Business Corporations Act, S.B.C. 2002, c. 57 (“BCA“) provides in relevant part as follows:

Powers and functions of directors

136(1) The directors of a company must, subject to this Act, the regulations and the memorandum and articles of the company, manage or supervise the management of the business and affairs of the company.

Duties of directors and officers

142(1) A director or officer of a company, when exercising the powers and performing the functions of a director or officer of the company, as the case may be, must

(a) act honestly and in good faith with a view to the best interests of the company . . .

175      The statutory fiduciary duty requires company directors and officers to respect the trust and confidence that have been reposed in them to manage the assets of the company in pursuit of the realization of the objects of the company. They must avoid conflicts of interest and abusing their position for personal benefit: Peoples Department Store Inc. (Trustee of) v. Wise, 2004 SCC 68at para. 35.

176      A director must not usurp for herself a maturing business opportunity.

177      As was stated by the Supreme Court of Canada in BCE Inc. v. 1976 Debenture Holders, 2008 SCC 69:

[37] The fiduciary duty of the directors to the corporation originated in the common law. It is a duty to act in the best interests of the corporation. Often the interests of shareholders and stakeholder are co-extensive with the interests of the corporation. But if they conflict, the directors’ duty is clear — it is to the corporation . . .

[38] The fiduciary duty of the directors to the corporation is a broad, contextual concept. It is not confined to short-term profit or share value. Where the corporation is an ongoing concern, it looks to the long-term interests of the corporation. The content of this duty varies with the situation at hand . . . the fiduciary duty owed by directors is mandatory; directors must look to what is in the best interests of the corporation.

. . .

[40] In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions. Court should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule. The “business judgment rule” accords deference to a business decision, so long as it lies within a range of reasonable alternatives [citations omitted]. It reflects the reality that directors, who are mandated under s. 102(1) of the CBCA to manage the corporation’s business and affairs, are often better suited to determine what is in the best interests of the corporation. This applies to decisions on stakeholders’ interests, as much as other directorial decisions.

. . .

[66] . . . However, the directors owe a fiduciary duty to the corporation, an only to the corporation . . . not to stakeholders, and that the reasonable expectation of stakeholders is simply that the directors act in the best interests of the corporation.

178      The fiduciary duty is to maximize the value of the corporation: Carr v. Cheng, 2005 BCSC 445at para. 25. A director’s interests as a shareholder must be subservient to his fiduciary duty: Polar Star Mining Corp. v. Willock (2009), 96 O.R. (3d) 688 (Ont. S.C.); Peoples Department Stores at para. 43.

179      It is a breach of fiduciary duty to use, for personal advantage or gain, information acquired as a director in order to attempt to take control of the company: Dockside Brewing Co. Ltd. v. Strata Plan LMS 3837, 2007 BCCA 183 at para. 54.

180      In determining whether a director has acted in the best interests of the company, the court will consider whether the director has applied informed judgment which had a reasonable basis: Maple Leaf Foods Inc. v. Schneider Corp., (1998), CanLII 5121 (Ont. C.A.) at p. 42. This “business judgment rule” operates to shield from court intervention business decisions which have been made honestly, prudently, in good faith and on reasonable grounds: Krynen v. Bugg, 2003 O.J. No. 1209 (Ont. C.J.) at para. 74(7).

181      A director will not be liable for breach of fiduciary duty when the conduct at issue is qua shareholder and not qua director: Polar Star Mining at paras. 33-34.

182      The court must scrutinize the circumstances of each case to determine whether the director has acted honestly and in good faith and with a view to the interests of the company. A finding that there was no fraud or dishonesty on the part of a director’s who was attempting to solve the company’s problems stands in the way of a finding of breach of fiduciary duty: Peoples Department Stores at paras. 39 — 40.

183      When assessing whether a breach of fiduciary duty has occurred, the subjective motivation of the director is relevant: Peoples Department Stores at paras. 62 — 63; Dockside Brewing Co. at paras. 54 — 55.

Loan or Gift Within the Family?

s it a Loan or Gift Within the Family?

ABP v KGW 2017 BCSC 977 provides a template of the criteria a court will examine in determining if a gratuitous advance of monies or property within a family from parents to children will be a loan or a gift.

5      The topic of gratuitous transfers between parents and adult children was covered in Pecore v. Pecore, [2007] 1 S.C.R. 795, in which it was held that these come freighted with a rebuttable presumption of resulting trust putting the transferee to the onus of demonstrating that a gift was intended. What matters is the intention of the transferor at the time of handing over the property.

6      A template for evaluating whether the presumption has been rebutted was set up in Locke v. Locke, 2000 BCSC 1300, and applied and approved in Kuo v. Chu, 2009 BCCA 405 at para. 9, where the questions to be considered on the loan/gift issue in a family law context were said to include:

a. whether there were any contemporaneous documents evidencing a loan;

b. whether the manner for repayment is specified;

c. whether there is security held for the loan;

d. whether there are advances to one child and not others, or advances of unequal amounts to various children;

e. whether there has been any demand for payment before the separation of the parties;

f. whether there has been any partial repayment; and

g. whether there was any expectation, or likelihood, of repayment.

Secret Trusts: Is It An Overlooked Plaintiff’s Remedy?

This video is about secret trust. It firstly explains what a trust is and talks about the three necessities that are required to have valid trust. But it deals with what is called secret trust.

I was counsel on the appeal of a decision called glass pool a few years ago. And what had happened and the facts of that matter was that granny called her son into the kitchen and said, “Son, I’m going to give you my oil rights to mineral rights and that upon your death, you’re going to give them to your son.” This was said in the presence of a witness.

25 years passed and the son was dying and he drew up a will leaving all of his assets to his common law wife of eight years. The only asset he owned were these mineral rights. His son that he hadn’t seen in 25 years came along and challenged that and won at trial and it was upheld by the Court of Appeal.

So even though there was nothing in writing and even though it went outside of the will, the court simply said, she wanted the oil rights to go his son. What could be more clearer than that? And that is a very good example of what a secret trust is. I’ve entitled this video “Is It An Overlooked Plaintiff’s Remedy?” because many people have similar types of stories that they really should discuss with their lawyer.

Intention to Gift: The Legal Requirements

Intention to Gift: The Legal Requirements

A gift requires three elements  to be legally effected, namely an intention to donate, an acceptance of the gift, and delivery of the gift. All three elements must be present for the gift to be complete, and it is then irrevocable.

The gift is the voluntary transfer of property from one person to another without full consideration.
It is well settled law, as confirmed by the Supreme Court of Canada in the Pecore v Pecore  2007 SCC 17 that the courts look to the intention of the donor at the time of the transfer in order to determine if a gift was actually intended.
Anyone who intends to make a gift of property for little or no consideration must ensure that the intention of the donor is well documented. A Deed of gift given under seal, along with the statutory declaration of the intention to gift is probably the best evidence that the courts will rely upon.
The problem however is that a minority of purported gifts are not substantiated at all as to the intention of the donor, which then forces, the court to assess the reliability of the evidence, if any of intention to gift.
Probably the most common form of contentious gifts are the use of joint tenancy in both real property and investments. By reason of the nature of the joint tenancy, upon the death of a joint tenant, the surviving joint tenant automatically becomes the registered owner of the property by right of survivorship. This happens immediately upon death, and does not form part of the estate of the deceased or attract probate fees.
Common reasons for putting property in joint tenancy is to avoid probate fees or avoid a claim under the wills variation statutes, which are inconsistent with an intention to gift and will typically result in a claim of resulting trust being made against the surviving joint tenant.
Accordingly, a mere transfer of the legal title into joint tenancy is not conclusive as to the transfers intention as the beneficial interest may belong to the estate of the deceased and not the surviving joint tenant unless there was a clear indication of the transfers intention to gift.
While the courts will primarily look at the time of the transfer as to  the intention of the deceased as to whether a gift was intended, the courts may also consider the donors subsequent actions to the extent that those actions are relevant to the donors intention of the time of transfer.

Accordingly, a transfer of title into joint tenancy has three potential legal consequences:

A) an immediate gift of both legal and beneficial title;
B) a transfer of the legal title only, so that the transferee holds the property on a resulting trust for the transferor’s estate;
C) as recognized in the Pecore decision, a transfer of the legal title with a right of survivorship in the asset, but a transfer of beneficial title only upon the death of the transferor.

McKendry v McKendry  2015 BCSC 2433 followed the Pecore case and stated inter alia:

[109]   The legal principles applicable when considering a gratuitous transfer into joint tenancy are not in dispute. The basic question is whether the transferor intended to make a gift, or whether the transferee holds the property transferred on a resulting trust.

[110]   Pecore v. Pecore, 2007 SCC 17, is the leading case.

[111]   It is the actual intention of the transferor at the time of the transfer that is relevant: Pecore, at paras. 5,44 and 59. The presumption of resulting trust is 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. See Pecore, at paras. 24 and 43.

Rothstein J. also noted (Pecore, at para.44):

[44]   As in other civil cases, regardless of the legal burden,

both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. Thus, as discussed by Sopinka et al, in The Law of Evidence in Canada, at p. 116, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.

[112]   Accordingly, where a gratuitous transfer is being challenged, the trial judge must begin the inquiry by determining the proper presumption to apply and then weigh all the evidence relating to the actual intention of the transferor to determine whether the presumption has been rebutted: Pecore, at para. 55. In general, evidence of the transferor’s intention at the time of the transfer ought to be contemporaneous, or nearly so to the transaction: Pecore, at para. 56.

Nevertheless, evidence of intention that arises subsequent to a transfer should not automatically be excluded. However, such evidence “must be relevant to the intention of the transferor at the time of the transfer

The Pitfalls of Joint Tenancy

This video is about joint tenancy. Many years ago, financial advisors in particular, started to advise people to put their assets in joint tenancy with others, in particular, their spouses or children in order to avoid probate fees. It was a minimal type of estate planning.

Unfortunately, all of those joint accounts have now ended up in litigation in the sense that in many occasions, the deceased did not make it clear if he or she intended to gift the monies to the other joint tenant or if the other joint tenant simply held the assets in trust.

I’ll give you an example. Many parents trust that their children will do the right thing amongst themselves. So the parent might put a condominium or a house in joint tenancy with one child knowing that that child, will upon the parent’s death, do the right thing and share it equally with the other children. In fact, this often doesn’t happen. The deceased child feels entitled and takes it as a gift. The other children end up in years of litigation arguing that mom intended it as a trust. It is essential that the intention be noted or there is a presumption that, or there is a transfer of an asset of significant value for no value per one dollar another consideration, it is a presumption of a trust.

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.