Note on the Statute of Frauds in BC

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  S.59 of the Law and Equity Act effectively overrides this section although it does maintain some of its elements.
  
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    A contract respecting land or disposition of land will not be enforceable unless
    
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      A contract is present, in writing, with the subject matter clearly identifiable, OR
      
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      If you act like there was an agreement with respect to the land and conduct your business accordingly (as if the agreement was consummated)
      
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        This pertains normally to someone acting in reasonable reliance of an agreement being made. Courts don’t want to deprive someone on a technicality when the factual basis shows an otherwise valid agreement
        
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    Note: “Disposition” does not include trusts, however, case law has indicated that S.59(3) does not apply to all trusts in relation to land. Given normal commercial sentiment, it is unclear whether writing is required for trusts, but this is the case for contracts anyways so it shouldn’t surprise anyone.
    

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  Will must follow the applicable formalities to be valid: if invalid, any trust it purports to create will also be ineffectual
  
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    Document itself will be void, anything in it won’t count
    
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    Note: WESA s.36-40 has relaxed the formalities for those serving as witnesses to the signing of the will. Furthermore, WESA itself has made holographic wills easier to pass probate as well, indicates a more general sense of will validity, however, the trust still must meet all the necessary requirements
    

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  Where a will devises a “gift” to someone who has been instructed by the testator to hold it for the benefit of someone else (mystery person / organization)
  
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    Person receiving gift has special instructions with respect to the property
    
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      May come as written instructions akin to a guide (McCormick v Grogan)
      
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      May come as oral instructions given to one trustee who can give the other trustees an idea (Blackwell v Blackwell viz Semi Secret Trusts)
      
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      May arise where a proof is adduced that a moral obligation has been given to the trustee (Re Snowden)
      
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    Looks like a gift to the world (everyone can see will), but comes with attached conditions
    

Note: In Ottaway v Norman there was the mere understanding that the cottage would devolve back to the children based on the understanding of parties and the facts of the case. Clearly a low threshold may vest a secret trust obligation

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  Fully Secret – The trustee would take property absolutely (as everything is in their name but the impressed upon trust would take no effect)
  
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    This may even incentivize the trustee to merely burn the instruction document and take everything. Evidence may impose other obligations though
    
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  Semi-Secret – Property would revert back to the settlor via resulting trust due to a clear trust failing.
  
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    This may serve to eliminate bequeaths from the settlor, resulting in a windfall for the intestacy structure
    

1. 
   Communication by the testator to the trustee regarding the intent to create a trust
   
   1. 
      Can’t be caught by surprise, know an obligation is impending
      
2. 
   Acceptance of the trust obligation by the trustee; and
   
   1. 
      It would shock the conscience of the court of equity if you denied your appointment. The court will be glad to force you to execute
      
3. 
   The correct time of the communication
   
   1. 
      Fully Secret Trust: Any point before death
      
      1. 
         Ordinary trust law capacity considerations, can they deal competently with property
         
   2. 
      Semi-Secret Trust: Before drafting of the will
      
      1. 
         Seeing more as inter vivos, must know for whom trust is being created (objects viz 3 certainties)
         

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  The promotion of crime, immorality or misconstrual of the law is not acceptable and will not be enforced
  
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    This arises in cases predominantly relating to the rebutting of the presumption of advancement from a husband to his wife.
    
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      Historically, husbands have used gifts to their wives via trust as a way to defeat their creditors (Scheuerman v Scheuerman). The problem normally arises when the husband wants his stuff back and the wife declines.
      
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      The husband will claim a resulting trust while the wife will forward the presumption of advancement
      
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    Note: It also occurred in Krys v Krys between father and son, however, no creditors were defeated or defrauded and the evidence overwhelmingly showed that the son had overborne his father such that equity should not allow the conveyance to stand
    

Consideration: Can the evidence that shows the gift was indeed used to perpetuate a fraud or a sham be used to rebut the presumption of advancement such that the husband can get the property back? Does it matter if no harm befall any party or creditor (Goodfriend v Goodfriend)? What if there was no creditor to begin with?

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  In the normal case of a gift, the law presumes that a gift was not given and that your intention is to reclaim your property. This effectively creates a resulting trust on all property given. The presumption is easily rebuttable so long as you show your intention was to give a gift.
  
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  The Presumption of Advancement is a presumption that a gift between a husband to a wife (but not vice versa) or from a parent to a child (but not vice versa) is actually presumed to be a gift. In order to get the property back, you must rebut the presumption
  
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    Of course, in the husband and wife instance, the husband must use evidence of his illegal purpose to get the gift back (Goodfriend v Goodfriend)
    
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  Note: BC has not eliminated the presumption of advancement from husband to wife
  
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    However, it has been largely displaced viz the statutory provisions relating to division of assets on the dissolution of a marriage (assuming the property is family property perhaps)
    

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  Conditions on a trust that intrude into someone’s personal or family life (Ex: in terrorem doctrines)
  
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    Conditions held unenforceable in property law: restraining freedom of religion, right to marry, interference with raising of children
    
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      Bad public policy to allow these kinds of restrictions, especially in dead hand situations
      
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      Concurrent: Rector Emmanuel Spence created a will which denied his daughter an inheritance as she (“Black”) had a child with a “white” man.
      
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        In this case, everything had been left to her sister and the sister’s sons. Had a close relationship until he found out she was having a bi-racial baby.
        
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        It was overturned at trial but upheld on appeal due to its private nature, court acknowledged the balancing was hard and should be done by the legislature
        

A trust set up to prejudice the rights of secured or unsecured creditors can be set aside, beneficial interest can be claimed by trustee in bankruptcy

Want to strike down conveyances that hinder, delay or defraud a creditor

If struck down, trust property comes back via resulting trust to estate, creditors can take property.

Does not apply to a disposition of property for good consideration, bona fide in good faith without notice.

“Good Consideration” – May not be FMV, but something of fair or proportional value.
Note on the BIA

People will often attempt to divest themselves of assets prior to their bankruptcy. A number of provisions exist such that (under 96(1)(A-B)) both arms length and non-arms length transactions within one year can be rendered void or transactions within a 5 year period that were made with the intent to defraud or with an eye to solvency can also be voided

As per Ramgotra, intention to defraud under BIA provisions will be important


Rule Against Perpetuities

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  Rule Against remoteness in vesting
  
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    All trust property must be vested within perpetuity period
    
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      Can only go for so long
      
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      Vested in Interest must occur, need not be vesting in possession
      
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      When property moves into hands of trustee, timer starts
      
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    Perpetuity period is a life or lives in being plus 21 years starting at the time of the disposition of property (constitution of the trust)
    
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      Need to examine at time of creation
      
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      If no person named, longest beneficiary life
      
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    Failure = void disposition, other interests remain
    
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    Policy: remote vesting restricts alienation of property and limits freedom
    
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      Avoid the dead-hand of ruling corpse, could plan hundreds of years in advance
      
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  Rule against perpetual duration
  
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    No creation of express trusts with the purpose of indefinite duration
    
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      Even if you comply with RAP (everything vests properly) must be an end date
      
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    Only charitable purpose trusts may continue indefinitely
    
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  Rule against accumulations of income
  
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    Dealt with by Accumulations Act (RSO), cannot direct accumulations 21 years after making of inter vivos disposition
    
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      Abolished in BC as per S25(1) of Perpetuity Act
      
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      Any money that vests after the 21 years becomes residue of the estate as a resulting trust by operation (National Trust Co v McIntyre)
      

Note: BC has 80 year “wait and see approach.” – Presumption of validity unless some act happens which definitively shows that such an event cannot happen

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  Settlors will often establish trusts that seek to protect against the bad spending habits of their beneficiaries. This also serves to protect against creditors as moneys held in trust are normally excluded as part of the beneficiaries estate
  
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    Such trusts will often include terms that should the trust income be encumbered, assigned, charged, etc, that the property will go back to the estate (Re Leach)
    
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    Such trusts must also be sufficiently clear to the trustees from the settlors intention that they want to guard against waste and dissipation of the assets (Re Williams)
    
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  Cannot unduly restrain alienation of property
  
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    Restrict the further sale or assignment, courts can strike it down for public policy reasons but will be sensitive to a trust that is spurred on by a parents love specifically for their childs maintenance (Re Williams)
    
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  What if you seek to protect against bad spending habits or creditors of the beneficiary
  
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    Conditions must be carefully drafted to comply with 3 certainties and to prevent improper interference with alienation. Trustee needs to know when you can terminate the trust, need certainty (Re Williams)
    

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  Other than charitable purpose trusts which may live on forever (with the appropriate level of care and good investment), all other trusts will eventually come to an end due to the rule against perpetuities. As such, it is wise to include provisions in the trust instrument that contemplate what might happen in the case that a trust breaks down
  
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    The most common trusts include a life estate for current family members with a capital distribution to current family member’s progeny. This effective vesting to a clear group of people helps to eliminate vesting issues that would void a trust ab initio.
    

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  The settlor of the estate may reserve an explicit power of revocation such that the trust may not be overridden by other sources. This will serve to give them unfavourable tax treatment but may carry out their intentions for meeting the true benefit of the beneficiaries
  
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    There may be other provisions related to the revocation or variation of the trust in the trust instrument (such as supra re: spendthrifts
    
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  However, the beneficiaries or court can override the terms of the trust in certain circumstances and end it prematurely, even against the intentions or wishes of the settlor
  
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    This is seen as a comparatively rare instance in theory as the trust instrument is given the utmost deference by not only the courts but also the legislature. If there is a need for variance, it better be a good reason
    

This requires complete unanimity amongst settlors and a lack of future contingent interests that may be prejudiced by the destruction of the trust

Should this occur, the trust property would be immediately distributed to the beneficiaries

3 Requirements – Restated

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  All beneficiaries must be of legal capacity (no minors, mental illness, etc) – all Sui Juris
  
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  Everyone must collectively represent entire interests in trusts, including contingent/future interests
  
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    Contingent interest may enter into agreement to get money they might not otherwise be guaranteed
    
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  Must be unanimous
  

Consideration: As a settlor may not wish to leave the door open to having the trust terminated, they can utilize a number of methods to make sure the Saunders rule cannot be utilized:

1. 
   They can provide a contingent interest to someone who is obstinate. If this person will never consent to a settlement that will allow the facilitation of the termination, it will never occur
   
2. 
   The settlor may maintain a contingent interest
   
3. 
   The settlor may give an interest to someone unborn or minor. As all interests must be Sui Juris, this could effectively delay the termination of the trust for years until the beneficiary reaches the age of majority
   
4. 
   The settlor could create a discretionary trust wherein the beneficiaries can come from an entire class of people such that the entire class is unlikely to ever agree to the termination of the trust
   

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  Trusts can be varied if the power to amend the trusts is reserved in the trust instrument
  
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    Changes must comply with the conditions and requirements specified in the trust instrument – any attempt to vary the trust such that it does not meet the settlors original intention will be met with skepticism (unless the variation power is all but limitless)
    
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  Might the trust otherwise be varied to override the trust instrument and the intention of the settlor?
  
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    What if some people aren’t available/ascertainable (such as unborn children – Re Kovish), some are minors
    
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    Beneficiaries may not want the trust to vest assets in them and may want it to continue (probably generating revenue that is managed by the trustee)
    
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    Might need to vary the trust for tax purposes (tax code changes constantly) (Finnell v Schumacher Estate)
    

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  S.1 allows variation on behalf of minors, unascertained persons, unborn persons and any person in respect of an interest that may arise by reason of a discretionary power
  
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  S.2 dictates that it must not approve unless it is for a S.1 individual
  
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    This will require an analysis of whether the variation is for their benefit (Smith v Royal Trust Corporation; see also Re Kovish)
    
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  S.3 – Public trustee must be notified in advance
  

1. 
   There must be a (potential) beneficiary incapable of consenting (due to incapacity, unborn, not ascertained, etc)
   
   1. 
      Re Kovish viz unborn beneficiaries
      
2. 
   Must be proposal to vary the trust
   
   1. 
      May be extremely complicated and even offer multiple different arrangements (Finnell v Schumacher Estate)
      
3. 
   Proposal must benefit the parties on whose behalf the court is consenting (Re Irving)
   
   1. 
      Does the arrangement keep alive the basic intention of the testator
      
   2. 
      Is there a benefit to be obtained on behalf of persons who may become interest
      
   3. 
      The proposal must be such that a prudent adult motivated by intelligent self-interest and sustained consideration of the expectancies and risks of the proposal would likely accept (This is the key part of the test to apply in BC)
      
      1. 
         Risk need not be completely avoided, must be a prudent balancing
         
   4. 
      Courts will seek both “sufficient and individualized benefits” (Finnell)
      
      1. 
         Note that benefits need not be pecuniary (Re Kovish)
         

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  Where one person or a small group of people object to a proposal that is clearly for their own benefit and the benefit of the group, the court may be loathe to not accept the proposal (Continental Lime Ltd v Canada Trust Co, see also Bentall Corp v Canada Trust Co)
  
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    In Continental Lime, the court held that any danger to contingent interests was too remote and that they would benefit from their descendants getting the cash now
    
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  (Re: Pensions) Surplus will often be held as a contingent right unless expressly granted to the beneficiaries (Bentall)
  
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    Courts have the jurisdiction to modify future and contingent interests (Bentall, Kovish)
    
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      Pension plans will often need to be delineated between current vested interests (granted by the pension plan document) and future contingent interest
      
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  Tax planning is a legitimate reason for trust variation, especially where a “pruning” of the trust is occurring in order to promote the “root” of the trust (Finnell v Schumacher Estate)
  
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  Note: The rule in Saunders is not appropriate for pension plans as this would not only defeat the purpose of pension legislation, but would also cause a rift between the termination of the underlying trust that holds the funds with a lack of termination of the pension plan itself (Buschau v Rogers Communications Inc)
  

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  Example: 50K to be held in trust to my daughter for her education
  
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    Predominant intention seems to be that the trust is for the daughter
    
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  Example: 50K to be held in trust for the further education of my daughter
  
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    Predominant intention seems to be for the educational aspect
    

1. 
   Charitable Purpose Trusts: These are trusts that fall under the specific heads of charitable causes stemming from the Statute of Charitable Uses or analogous reasons relating to its provisions
   
   1. 
      These are treated as belonging to a special class of carve-outs and do not necessarily correspond to the popular construction of what is charitable and what is not
      
   2. 
      These trusts are treated favourable in relation to both the period in which they operate, tax benefits, judicial supervision and more. As such, at common law, all elements of the trust must be charitable or the non-charitable elements must be ancillary to the charitable elements (ie: do not represent a purpose themselves)
      
2. 
   Non-Charitable Purpose Trusts: These are trusts that do not meet the definition of being charitable (essentially, charitable and everything else as categories)
   
   1. 
      The general rule is that these trusts are void and courts will not recognize them or enforce them in any way, shape, or form
      

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  NCHPT’s are void based on the fundamental premise that, hypothetically, there is no beneficiary that can compel the performance of the trust (Morice v Bishop of Durham – must be such a person)
  
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    While trusts are treated as a person for tax purposes, they are not recognized as a legal entity. As such, they have no standing and cannot sue or compel its own enforcement
    
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    NCHPT’s also tend to be vague or nebulous in their description of their goals, or have goals with terms that a trustee cannot possibly honour (Re Astor’s Settlement Trusts)
    
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      Given courts advisory and supervisory powers, it should come as no surprise that trusts that cannot be completed would find no favour in the common law
      
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        The court does not want to expose itself to liability for negligent administration of the trust
        
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  Some exceptions do exist for NCHPT’s but these are primarily relegated to historical anachronisms that synchronize with the value of the landed gentry at the time, such examples include the promotion of fox hunting (Re Thompson), maintenance of grave sites, provision of food and shelter for certain animals (usually horses or pets) and the erection of a monument over a burial site.
  
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    Legislation has codified these exceptions
    

1. 
   Characterizie as having a charitable purpose instead of a non-charitable purpose
   
   1. 
      Construct is accordingly
      
2. 
   Characterize the trust as one for persons instead of a trust for purposes (Re Denleys Trusts)
   
   1. 
      Make sure purpose is not beneficiary
      
   2. 
      Give trustee additional discretionary power to allow encroaching for non charitable purposes
      
3. 
   Interpret the purpose as a discretionary power instead of a trust obligation
   
   1. 
      More of an discretionary authorization – not a trust in this construction
      
      1. 
         Power means that the person doesn’t have to act in accordance as not a trust
         
      2. 
         Must also be certainty with regards to certainty of objects (test)
         
   2. 
      BC legislation allows trust obligation to be converted into a power
      

4. 
   Treat the trust as an absolute gift
   
   1. 
      All of the things surrounding the gift are precatory words with no legal power
      
      1. 
         Same issue with compelling trustee as it isn’t a valid trust
         
5. 
   Incorporate a society and have it fulfil the purposes
   
   1. 
      Create a non-profit corporation with a constitution that must follow through with your wishes
      
6. 
   Don’t apply the rule if someone can enforce the trust (Keewatin Tribal Council Inc v Thompson)
   

Note: As per Peace Hills Trust Co v CDIC, the common law seems to be relaxing the standard applied to NCHPT’s. The test in the case simply states that they can be enforced if they don’t violate the rule against perpetuities and there is a person with standing to compel the enforcement of a trust.

Given that the major concern dating back to Morice v Bishop of Durham was the lack of someone to compel the trust, meeting this standard represents the eventual culmination of the common law
Unincorporated Associations: Issues arise when gifts of property are made to such associations as they have no legal personality and therefore no control of property mechanism aside from the acting members of the society itself. Analysis must be done to determine the true intention of the gift:

1. 
   Absolute Gift: An absolute gift to the association will pose no problems (for current members)
   
2. 
   Absolute gift to members current and future: May result in potential perpetuity problem
   
3. 
   Absolute gift adds to the associations assets: Can be applied in accordance with rules amongst members, usually divested upon bankruptcy or closure of association
   
4. 
   Gift to the association to further its purpose: Will be a problem unless it is seen as a trust for persons (such that they can compel performance)
   

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  In Re Lipinski’s Will Trusts, the gift was construed as an absolute gift to the members which rendered the purpose for which the testator wanted to devolve it (constructing new buildings or improving old ones) could not be legally binding.