Certainty of Subject Matter

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  Subject matter of the trust must be certain at the time the trust is established (cannot be before or after)
  

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  Property subject to the trust must be clear
  
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    Specific Property, specific fund, all my property, all my bank accounts, a particular bank account, etc
    
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      Making inter vivos references to an estate is void as an estate is only determinable upon death. Subject matter could change in the time between creation of the trust and death (Re Beardmore Trust), see also Sprange v Barnard [“What is left over”]
      
    • 
      If a reference is made to a class of property but additional property is located that is not included in the class, it may serve to void the will for uncertainty as to the excluded properties place within the class (Re Romaniuk)
      
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    Formula or calculation – (ex: sufficient sum to prove funds per month – used in trusts)
    
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      Someone can actually value this accordingly, can take money from the estate
      
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      Might liquidate estate to meet this need
      
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    Any kind of property can be held in trust (even the beneficial interest in another trust)
    
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      Shares with voting rights or other intangible property such as patents, choses in action, etc
      
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  Amount of share of property to be received must be clear
  
  • 
    Typically arises in the context of multiple beneficiaries
    
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    If other determiners can be used by the court to give meaning to terms within the will or trust that are unclear (such as reasonable income), a trust may not be found void even though the amount of income or capital to distribute may be hazy (Re Golay’s Will Trust)
    

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  In order for there to be certainty of objects, there must be someone who benefits from the trust or who can call for the performance of the trust as beneficiary, whether present or contingent
  
  • 
    This applies to both persons or valid purposes (read: mostly charitable purposes)
    

1. 
   The trustee must know whether any person is a beneficiary; and
   
2. 
   The trustee must be able to identify every member of the class and/or make a complete list of all beneficiaries
   

Note: Cannot have a fixed trust for yet unborn people

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  All you need to know is whether any particular person is a beneficiary in the class
  
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    Don’t need to know they exist before they present themselves to you, but need to find out if they fit
    
  • 
    No complete list of beneficiaries is necessary
    

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  Conceptual Uncertainty: Refers to language which is too broad, vague or unclear such that the clear identification of beneficiaries is impossible
  
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    Example: In trust to all blonde people – What is blonde? How blonde?
    
    • 
      This was used primarily in McPhail v Doulton viz the conceptual certainty surrounding the terms “relatives” and “dependents”
      
      • 
        On Appeal in Re Badens Deed Trust; Sax J: Flexibility is needed in a big trust, we need to be able to “size up the problem” – words don’t need to be constructed with absolute precision, only enough precision to enable the administration of the estate.
        
  • 
    Conceptual Uncertainty will lead to voiding the trust
    
    • 
      A “Good friend” may be conceptually uncertain while simultaneously factually certain, but still void the trust (Re Connor – Decided before McPhail)
      
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  Evidential Uncertainty: Refers to a factual analysis wherein it is unclear whether an individual has satisfied the requirement in order to be a beneficiary
  
  • 
    Example: In trust to my brother – Need to satisfy proof of being a brother, may be more brothers than you know about but did not anticipate
    
    • 
      In McPhail v Doulton they were unable to make a complete list of available beneficiaries, but the concept of relatives and dependents was sufficiently clear that they would identify them down the road.
      
  • 
    Evidential certainty does not need to exist, there may be people down the road who may present themselves and may end up being proper beneficiaries – as such, a trust won’t be voided necessarily due to evidential uncertainty
    

Note on McPhail v Doulton: The trustees might leave and the standard used to determine inclusion may change as a result. The hope is that the conceptual certainty and discretion will avoid any issues.

Special Consideration: Gift to the trustee (Daniels v Daniels Estate)

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  A gift “to whomever the trustees want” is presupposed not to include the trustees
  

Case Quote [Referencing Higginson v Kerr] - The only question is whether the testator has made a gift of the power to the executors personally or has conferred a general power upon them [by virtue of their office]. If the latter, the default apportionment is said to be in favour of the next of kin.

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  Any construction that may allow a trustee to give themselves gifts is best avoided
  

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  Maximizing property values: intention of the settlor
  
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    People will want property to appreciate in value, court wants to avoid waste
    
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    There may be a presupposition that business-minded settlors would have intended property to be vested in certain people or invested in a certain way
    
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  Reasonable expectation or reliance
  
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    Not every expectation is reasonable, especially if over a long duration of time, court may stretch if extremely reasonable
    
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    Court does not want to incentivize people to rely on something they may not get
    
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  Unjust Enrichment
  
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    Can be for or against a trust, who will get money if trust fails? Are we depriving someone of a benefit?
    
  • 
    Courts clearly wrestle with cases where the law clearly militates in favour of destroying a trust with the unfortunate result that the beneficiaries of the estate will receive an insane windfall clearly against the settlors intent (McPhail)
    
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  Enforceability and Cost
  
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    Administrative concerns – the more unpredictable or likely to come to litigation, court may overturn.
    
    • 
      Courts are not interested in allowing a trust to exist which will have known beneficiaries constantly fighting off unknown beneficiaries or would-be beneficiaries making spurious claims against the estate
      
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  Distributional Equity
  
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    Who gets what share, especially for children
    
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    Courts will be incentivized to really drill into settlors intention to make sure they are not denying children their fair share, especially of capital income from the giftover
    
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  Public policy Concerns
  
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    Promoting things court thinks is good for society
    
    • 
      McPhail demonstrates a clear desire to keep the trust alive as it will benefit a large number of people
      

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  The act of settling shows the world that you mean to be held by the terms of the trust. Otherwise the presumption is that you are making a gift which has not been effectuated by delivery
  

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  The transfer of legal title may require appropriate registering
  
  • 
    The beneficiary will still enjoy the proceeds of the equitable interest
    
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  Note: Issues arise when settlor is self-declaring a trustee on someone else’s behalf
  

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  Note: Keeping the power of revocation will serve to keep the tax burden on the settlor. This is no doubt done to avoid a situation where the settlor can wield too much power over the trust while simultaneously holding it “at arms length” in order to receive preferential treatment where applicable. This rule avoids double dipping.
  

1. 
   Settlor transfers property to the trustee
   
   1. 
      Chattel delivery to trustee (physically) is common
      
   2. 
      Registering title, doing any other act which causes the property to be vested in the trustee
      
2. 
   Ask third party to transfer property to the trustee
   
   1. 
      Have someone else do it for you (perhaps even a lawyer as an intermediary)
      
3. 
   Settlor declares him/herself to be trustee
   

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  Direct transfer of property from settlor to the trustee is common
  
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    Can be done via gift or sale
    
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      May be a contract, trustee gives consideration
      
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      Gift not enforceable unless delivered (exception: deed – sealed)
      
      • 
        Where a gift is given, one must look to the settlors intention to see if the gift was meant to constitute the property of the trust (Paul v Constance)
        
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  Any kind of property may be put into the trust
  
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    But the settlor must do all things required to render the settlement binding and the trust constituted, otherwise the trust will not constitute (Milroy v Lord)
    
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      The settlor need not complete the establishment of the trust, but must do all within their own power to see it constituted (Re Rose)
      
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  Form and manner of transfer depends on the kind of property and ordinary transfer requirements
  
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    Real Estate – Particular statutory provisions before you can effect a trade
    
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      Registry system
      
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    IP – Legislation determines how to transfer interest
    
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    Chattel: Delivery
    
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    Chose in Action (Contractual Right): Assignment
    
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    Negotiable instruments (cheque)
    
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    Shares: endorsement
    

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  Assign the equitable interest to a trustee
  
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    Whether it is a joint tenancy interest or tenancy in common determined on the facts (Watt v Watt Estate)
    
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  Self-declaration of settlor to be trustee
  
  • 
    May assign half of the interest, more, less to another individual
    
    • 
      May be determined by actions taken to constitute the gift, such as signed documents or acts of delivery (Watt v Watt Estate)
      
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  (If you are the beneficiary of another trust) Instruct already existing trustees to hold the interest for another person (assign the right elsewhere)
  
  • 
    Trust interest might not allow this, trustee may not let funds flow to new beneficiary. You always have the right to assign your interest, not necessarily to force them to do what you want.
    

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  In the event of a self-declaration, there may not be any real or constructive delivery that would otherwise constitute the gift. As such, the declaration must be such that it divests the equitable interest of the settlor on behalf of the beneficiary
  
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    This may end up looking like an undelivered gift, must look to the settlors intention as to whether a trust was intended to be created as courts will not perfect an imperfect gift (Paul v Constance)
    
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      This may be deduced by actions (shared bank accounts, ease of access to bank account, joint ownership) or words (“As much mine as it is yours) (Constance)
      

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  Promise to create a trust (or settle future property on the trust) but the settlor fails to follow through with the promise
  
  • 
    What happens if you don’t follow through with the trust?
    
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    Beneficiary will want to have the trust enforced to either constitute the trust or add the additional property to the trust
    
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      Otherwise they get no benefit
      
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  General Rule: Courts generally will not compel a transfer of the property from settlor to trustee. Courts will not constitute the trust. The act of settling the trust shows how serious you are about the trust itself
  
  • 
    Any failure to deliver a gift in order to constitute a trust is especially loathe to be enforced as you not only have equity presuming no gift has occurred but also that the settlor does not intend to be bound by the trust
    
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  Special Consideration: If the court or counsel can frame a document as a “debt”, this will serve to immediately establish a chose in action which may circumvent the need for the constitution of a trust in the normal way it is done (Fletcher v Fletcher)
  
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  Note also, a trust cannot be created that assigns future rights, even under seal, unless there has been consideration granted in exchange for said rights (Re Ellenborough)
  

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  Was it a gratuitous promise (a gift) or was there consideration given (a bargain)
  
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    If it was a gift with no delivery, there will be no trust
    
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      A future promise to place funds in a trust where no consideration is given will render a party a volunteer and not able to seek enforcement of the trust (Re Pryce)
      
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      Failure to be a “party” to the trust will render no personal loss and thereby no action (Re Kay’s Settlement)
      
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    If a bargain was struck, the party may have contractual rights
    
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      Courts are much happier to enforce in this case as there has been an ad idem and now one party is simply not meeting their end of the bargain
      
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  If it was a gratuitous promise was it made under a deed?
  
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    Deed is the only legally enforceable way to make a gratuitous promise as a contract requires consideration (under seal)
    
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      Deed needs no consideration
      
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      If you are a party to the deed, you will be allowed to seek damages due to breach of covenant (Cannon v Hartley)
      
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  If it was made under a deed, who was a party to the deed?
  
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    The trustee?
    
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      If it is only the trustee listed, what happens?
      
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        The trustee might cave in to pressure from the beneficiary to funnel the funds down as they are still the ultimate beneficiary, even if they have no rights via the deed
        
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    The beneficiary?
    
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      What if beneficiary is listed but no trustee?
      
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  What do they want?
  
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    Damages?
    
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      May just want value of property
      
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    Specific Performance?
    
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      May want specific performance – beneficiary wants trust constituted so they get the chattel, house, etc
      
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        Specific performance will only be granted in the event that you give consideration as per equitable doctrines (Cannon v Hartley)
        

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  A deed is a special obligation that does not require consideration to be valid
  
  • 
    May be totally gratuitous
    
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      If a gratuitous promise is not by deed, the courts will once again not enforce a trust as it simply will not have been constituted
      
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  Deeds are executed under seal
  
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  Sealing shows an intention to be bound
  
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    No real formalities anymore, just need some sort of distinguishing mark
    
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    Deeds are old, before even contracts. Showed intention to be bound when people couldn’t write their own name
    
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  Law of covenant governs deeds as opposed to the law of contract
  
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    Need to “deliver” – not traditional delivery, just show the other party
    
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    Covenant and contract are very different, may convert document into entirely different form of law
    
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  Might want to create a deed where there is concern about the sufficiency of consideration, formality is desired, or there is a legal requirement to use a deed.
  
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  Deeds can only be enforced by a person who is a party to the deed (although in reality if a trustee is a party to the deed a beneficiary might exert pressure on them to get whatever benefits are given by the deed instrument)
  
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    Named and assented via signature
    
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      Can recover damages
      
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      If completely gratuitous, can’t get SP
      

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  Beneficiary and trustee are “volunteers”
  
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    Equity doesn’t help people who didn’t pay consideration
    
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    No legally binding promise and no real remedies as a result (likely to also be no loss in the traditional sense by virtue of being a non party)
    
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  Transfer of property by the settlor to the trustee is needed to demonstrate that the trust was made deliberately not rashly
  
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    Need to assure intent for the constitution
    
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  Transfer of property by the settlor shows intent, provides clear evidence of the gift in trust
  

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  If you have a binding promise, who can sue? Who is the party to the deed?
  
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    Problem similar to third party beneficiaries. If you have no consideration, no privity, can’t sue.
    
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    Equity: If you did not pay consideration for a promise made under deed you are a “volunteer” and equity does not assist a volunteer or perfect an imperfect gift
    
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      Can you sue for damages if you are a party to the deed
      
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  Policy Concerns: Reliance, unjust enrichment, frustration, etc
  
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    Creating an action for people who did not give consideration would go against the old common law principle of giving third parties the ability to enforce promises on their own behalf, even when they are not privy. Serves as a harmonization between trust and contract law
    

1. 
   Trustee is party to the deed (not beneficiary) – Beneficiary will attempt to sue trustee
   
   1. 
      Beneficiary may threaten to bring a breach of trust action if they don’t enforce promise on beneficiaries behalf
      
      1. 
         This is what invariably leads the trustee to ask for court direction on the matter, effectively to attempt to sever their own liability.
         
         1. 
            Can lead to the seemingly manifest absurdity of asking whether the trustee should sue the settlor to force property into the trust (Re Ellenborough)
            
            1. 
               Note: No SP granted in supra as volunteers, no value
               
   2. 
      Trustees is a voluntary but may be able to sue under common law (not equity) for non-performance of the promise: Damages only, no SP
      
      1. 
         Apply to court for direction (Statutory right of trustee to ask judge for guidance)
         
   3. 
      Problem re: measure of damages: What did the trustee suffer from non-perfromance
      
      1. 
         Damages are measured as loss to trustee – may have lost fees if trust isn’t constituted, but may do nothing for beneficiary
         
      2. 
         No consideration due to gratuitous promise, therefore no SP
         
   4. 
      Re Pryce & Re Kay’s Settlement: Trustees should not sue as they have not suffered a loss
      

2. 
   Beneficary is party to the deed
   
   1. 
      Have standing, can sue for breach of covenant
      
      1. 
         As a party, can sue for damages
         
   2. 
      Still a volunteer (Assuming no value given) so no equitable remedies (No SP, injunctions, etc)
      

3. 
   Recharacterizing the Res of the trust
   
   1. 
      Rather than seeing whether trust property in the traditional sense has been settled, the court can choose to see the trust property as a chose in action which may have constituted itself at some point long ago (Fletcher v Fletcher – Serve as an inter vivos trust)
      
      1. 
         This is especially prudent in our current age as the right to dividends or intellectual property may be much more valuable than simply a hard asset
         
      2. 
         The right to a debt also gives the settlor the freedom to actually manage his estate as he wishes, knowing only that once they decide to fulfill the trust conditions they can settle that debt in multiple ways
         
         1. 
            If you go broke, beneficiaries can sue estate but it will have nothing be judgment proof. Can help to inoculate your family members
            

4. 
   Future Property as the Res of the Trust
   
   1. 
      Cannot constitute a trust with property that doesn’t exist. Future contingency that is unclear, but:
      
      1. 
         If you have a future interest in present property, counts as a real property interest right now (property is vested)
         
      2. 
         If there is a contract (consideration), you can settle future property in a trust
         
      3. 
         Can also be done via deed where person to the deed is party to it.
         
   2. 
      Gratuitous Promise for future property – may be settling debt or chose in action rather than property itself (Fletcher)
      

• 
  Where consideration is provided, the promise is enforceable both at common law and in equity (no longer problems viz volunteers or standing)
  
  • 
    Courts will want to protect the bargain struck assuming it meets the normal contractual principles that would militate against upholding the bargain
    
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  Party can obtain damages or specific performance (if unique and damages not sufficient)
  
  • 
    Given that most estates contain fungible assets, SP should be necessary comparatively fewer times than damages.
    

Note: If a trustee recovers damages, the damages go straight to them if they paid consideration (assuming they are not for trust purposes)

Must comply with formalities – do what needs to be done to transfer those forms of property

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  Trusts with respect to land
  
  • 
    Often special rules relating to deal with land
    
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  Statute of Frauds 1677 – Trying to deal with frauds being perpetrated at time viz land – no more oral contracts in regards to land. Statute overrides common law rule which allows oral agreements normally.
  
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    All contracts with respect to land must be in writing
    
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    All trusts related to land must be acknowledged in writing by settlor
    
    • 
      Person divesting land must evidence it somehow
      
    • 
      Trying to clean up messiness that was occurring at the time
      
  • 
    Assignments of equitable interests in a trust must be in writing
    
    • 
      Want to assign interest however, must have the writing requirement
      
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  But statutes cannot be used as an instrument of fraud – people committing original frauds used statute to perpetrate more frauds (Rochefoucauld v Boustead)