Class notes
Trust Law - Class Notes
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- Trusts
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- Université De Sherbrooke (UdeS )
The class notes for Trusts with Prof. Alexandra Popovici on summer 2021.
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DTN 724 – Trusts/FiduciesIntroduction
“To understand trust law, we must study and understand trust principles.”
Eilleen E. Gillese, p.3
Discussion – What is a trust?
The beneficiary holds title against the world, not simply against the holder. The holder
and the beneficiary have interest into property. The holder is holding for the benefit of the
beneficiary. The holder does not benefit from the property.
1. Reasons for trusts
2. History of trusts
3. Defining the trust
4. Role of the trustee and why a trust is NOT a contract
1. The Reasons for Trusts
Examples in class:
- Estate planning, tax avoidance, taking care of someone/something, creation of a
business association
- Creditor avoidance: When you are the trustee, your creditors do not have access to
the property hold in trust – you can avoid your creditors with trust.
A ‘family trust’
“I leave all the rest and residue of my estate to my trustees ON TRUST for my beloved
wife Mary for life, and then for my three sons, Jacob, Jasper, and Jeremy in equal
shares.”
This is a ‘will trust’; many family trusts are created inter vivos (and these may be called
‘settlements’)
When the person dies, it goes right away to the trustees who will have to give it in
a certain way (to the wife in life estate, then to the sons).
This could also be done inter vivos
A commercial trust (collective investment)
1
,This illustrates how complex a trust can become.
A charitable trust
“I leave all the rest and residue of my estate to my trustees ON TRUST for the
advancement of legal education”
More likely: a gift to an existing charity
Enforcement? By the State, or an agency of the State
There is no beneficiary, but there is still an enforceable obligation. The trustee will have
to render account to an agent of the State. The trust must have a charitable purpose
(poverty, education, etc.)
A ‘resulting’ trust
Imagine that S creates a trust for the benefit of B
The creation of any trust requires the transfer of the trust property to the trustee, T
o There has to be a transfer.
But: imagine that B renounces his or her interest
What do we do?
T now holds the property on trust for S: the benefit ‘results’ to S
Resulting meaning it jumps back to the settlor. The trustee never owns the property for
his own benefit, even if the beneficiary renounces his interest.
A ‘constructive’ trust
2
, Imagine that S creates a trust for the benefit of B
The creation of the trust requires the transfer of the trust property to the trustee, T
But: imagine that T wrongfully gives the trust property to his friend X
X holds the property on ‘constructive’ trust for B
o B cannot hold the property for himself.
Tracing: a remedy available to the beneficiary to follow the property in third parties’
hands.
2. Trusts and Aboriginal Land Claims
The Crown’s fiduciary obligation
The issue of the Crown's liability was dealt with in the courts below on the basis of the
existence or non-existence of a trust. In dealing with the different consequences of a
“true” trust, as opposed to a “political” trust, Le Dain J. noted that the Crown could be
liable only if it were subject to an “equitable obligation enforceable in a court of law”. I
have some doubt as to the cogency of the terminology of “higher” and “lower” trusts, but
I do agree that the existence of an equitable obligation is the sine qua non for liability.
Such an obligation is not, however, limited to relationships which can be strictly
defined as “trusts”. As will presently appear, it is my view that the Crown's
obligations vis-à-vis the Indians cannot be defined as a trust. That does not, however,
mean that the Crown owes no enforceable duty to the Indians in the way in which it deals
with Indian land.
In my view, the nature of Indian title and the framework of the statutory scheme
established for disposing of Indian land places upon the Crown an equitable
obligation, enforceable by the courts, to deal with the land for the benefit of the Indians.
This obligation does not amount to a trust in the private law sense. It is rather a
fiduciary duty. If, however, the Crown breaches this fiduciary duty it will be liable to the
Indians in the same way and to the same extent as if such a trust were in effect.
The fiduciary relationship between the Crown and the Indians has its roots in the concept
of aboriginal, native or Indian title. The fact that Indian Bands have a certain interest in
lands does not, however, in itself give rise to a fiduciary relationship between the Indians
and the Crown. The conclusion that the Crown is a fiduciary depends upon the further
proposition that the Indian interest in the land is inalienable except upon surrender to the
Crown.
Guerin v. The Queen, [1984] 2 S.C.R. 335, 375-376
The Court used trust law to impose on the State an obligation. It is not a trust, but a
fiduciary obligation which imposes certain duties on the State and gives the communities
certain remedies. The fiduciary obligation stems from the nature of Aboriginal title.
The fiduciary duty has an autonomy from the trust – it can stand alone. There is a
distinction between fiduciary obligations and a trust.
3. Trusts and the Civil Law
3
, There are no fiduciary obligations nor trust in civil law as it is a creation of equity, but
there is the same logic (administrating the property of another with obligations) in civil
law.
4. The History of Trusts
Evolution…
From non-legal to legal
From the ‘use’ to the ‘trust’
From obligations to… ‘equitable ownership’
Trust is a Creature of Equity
History of Law and Equity
“Equity acts in personam”: Equity looks at the specific situation.
Pre-conquest origins
o There is no such thing as the common law – based on custom.
The beginning of Equity: the Chancery (1200-1400)
o The king is justice. The chancellor was the “secretary”/administrator of
the king – not the one doing justice. The chancellor had the power to
create new writs. The law started to be more rigid.
The Chancery as a Court (1400-1600)
o Judgments are written down – body of law.
Systematization and reforms in procedure (1600-1900)
o Tension between common law and equity. The common law was in Latin,
whereas equity in English.
Supreme Court Judicature Acts 1873; 1875 (Fusion of law and equity)
Conscience is at the heart of equity – the chancellor was not acting in law at the
beginning, but rather acting in conscience. It then became a body of law.
Emergence of the use/trust
Many motivations for deploying it
o Did not want to pay incidents, did not want to give property to the eldest
son, so that the property can be taken. care of, estate planning, tax
avoidance, etc.
One good example is that (until 1540) it was impossible to make a will of an
estate in land
o The estate descended automatically to the ‘heir at law’ (eldest son)
Obviously, many people did not like this rule and wanted to find ways around it
The use
Ad opus: on the behalf of
4
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