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Implied indemnity of trustees

• While you may not be liable for the acts of others and not liable for deficiencies, this doesn’t get rid of joint/severable liability

Jurisdiction of court to relieve trustee of breach of trust

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  General Discretionary Relief: If they ARE liable but have acted honestly and reasonably and ought fairly to be excused for the breach of trust, court may relieve trustee of liability in whole or in part
  
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    Trustee has burden of proof, section presumes you have done something wrong but still may be forgiven (Fales)
    
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      Note that trustee conduct is same standard no matter what
      
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    See also Re Cooper (No. 2)
    

1. 
   Whether the trustee was paid
   
2. 
   The expertise of trustee
   
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   Whether the breach was minor or technical (or the inverse)
   
4. 
   Whether the decline caused by general economic conditions
   
5. 
   Whether conduct reasonable
   

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  Clauses included in trust, deed or will documents that excuse the trustee for liability in breach various duties that are owed within the trust document
  
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  Can exculpatory clauses excuse liability for fraud or gross negligence?
  
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    Canada: Gross Negligence / Fraud not excused: (Poche v Pihera)
    
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    UK: Gross Negligence excused / fraud not excused: (Armitage v Nurse)
    
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  There is an irreducible core of trustee obligations; They must act honestly and in good faith in the interest of the beneficiaries
  
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    To allow otherwise would be to remove the fundamental element that makes them a trustee
    
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    Highly unlikely you are abiding by settlors wishes by completely exonerating them, exculpatory clauses by their nature are to get you out of trouble you stumble into, not trouble you force yourself into
    
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  Courts must give effect to an exculpatory clause just as they must any other clause in order to carry out the settlors wishes (Steve Thompson Family Trust v Thompson)
  
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    But this does not grant a license for the trustee to act as they please
    
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    Not does it remove the inherent jurisdiction of the courts.
    

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  The presumption of a resulting trust can be rebutted by contrary evidence which is designed to show that something else was intended (such as a contract or a gift)
  
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  Note that equity generally presumes a bargain and not a gift, and this presumption underlies resulting trusts
  
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  The general test for rebutting a presumption includes:
  
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    A civil standard of proof: BOP
    
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    The burden on the party seeking to rebut the presumption (normally the transferee)
    
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    Evidence must relate to the intention at the time the transfer is made
    
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    A wide range of evidence can be introduced and should be read on the aggregate
    

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  This circumstance arises where party A gives party B funds to purchase a piece of property. The new property is presumed to be held on a resulting trust for the benefit of A
  
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    This is because A has not taken title in the property, but holds the equitable interest
    
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  The courts need to use evidence to determine whether the presumption is rebutted, but must be careful to use “After the fact” explanations and testimony which may obfuscate the true intention at the time of the deal
  
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  The standard of proof is on the BOP
  

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  This circumstance arises where party A transfers their property to party B for either nominal or no consideration whatsoever. The burden once again is on the transferee to show that not only the legal but beneficial interests passed by virtue of this exchange
  
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    Note that the presumption predominantly applies to a stranger. In Neazor, the transfer was to his sister and also appeared to be in order to hold up a promise to his parents that he would provide for the maintenance of his sister.
    
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      His widow won the day though
      

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  When two parties open a joint bank account but only one party makes contributions, who does the money belong to if rights of survivorship are included in the contract from the bank?
  
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    One needs to make contributions to the joint bank account in order to have any claim to an equitable interest in the funds, even if they are vested with the legal title by virtue of bank agreement documents (Niles v Lake)
    
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      Paul v Constance – both contributed bingo winnings
      
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    Banks most likely can allocate legal and equitable interest on survivorship, but this must be clear and must be the intention of the parties creating the bank account as well as the person making the lion’s share of the deposits (Pecore v Pecore)
    
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  The court will look to extrinsic evidence to determine what the intentions of the parties were and whether the factual matrix can rebut the presumption of a resulting trust (especially in the face of a contractual provision)
  

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  This is solely in the case that the parties are related, normally by blood
  
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  Thus, the presumption of a gift is what must be rebutted
  

Given that this applies only in one direction (and technically only from certain people to others), questions could be raised about charter compliance, especially with regard to same sex couples

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  Other jurisdictions have quite rightly eliminated the presumption of advancement, but BC still has it.
  

Note: Equity developed the presumptions in order to help courts sort out transfers of property. This create a reliable mechanism that also provides reasonable certainty while still having the necessary judicial discretion with which to rebut the presumption. In a gratuitous transfer, there is always a starting point at law.

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  What if no harm befalls on a creditor? Judges have held in the past that although no harm befall a creditor, a fraudulent intent could not be used to rebut the presumption of advancement (Scheuerman v Scheuerman)
  
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    In this case, the wife unilaterally took the property, whether this is worse or better than the husband getting it back is up for debate
    
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  What if there was no creditor whatsoever? Evidence has been used in the past to rebut the presumption, however, this might be specific to the factual matrix of the case
  
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    In Goodfriend v Goodfriend, the wife convinced her husband that a creditor would soon be approaching as the couples swinger buddies were mad that Goodfriend had alienated the swinger’s wife affection such that her husband would sue Goodfriend. Here, there was no rightful cause of action and the husband was effectively duped, far less fraudulent than normal
    

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  Formerly used to address division on the breakdown of marriage, popular before legislation occupied the field
  
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  Came in situations where one person has everything on title but the other person contributed significantly to the endeavor
  
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    People entitled to resulting trust for marital contributions
    
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    Indirect (non-monetary) contributions by the spouse not on title, these should lead to an equitable interest in the title
    
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      How much contribution do you allot to each partner? Hard to figure out
      
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    Evidence of a common intention to divide the property
    
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      Must have been some proof of common intention that property was to be shared
      
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      Court couldn’t find express trusts, statute of frauds wouldn’t allow trusts other than in writing
      
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        Trust by operation in law need not be in writing
        
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  Matrimonial property legislation now deals with division of assets on divorce (and common law in BC)
  
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    The result is that most of the cases that deal with these issues are pre-legislation (Kerr v Baranow) or are from Quebec where the legislation is opt-in for common law couples
    
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  If the legislation does not apply, claims are likely to be made under a constructive trust
  

Note: Kerr v Baranow eliminated the use of CIRT’s for being Doctrinally Unsound:

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  Resulting trusts are presumptions relating to the intention of the settlor, not both parties. Looking at two peoples intentions makes no sense
  
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    Also no resulting back to the person considering she never had the property in the first place
    
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    Clearly evidentiary issues as well with proving what someone intended in retrospect
    
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  Search for common intent is highly artificial
  
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    People don’t actually have these intentions necessarily, sometimes they are unsaid, sometimes someone might actually wish to deprive their partner of any interest
    
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  Common intent arose from a misreading of English law
  
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    People misconstrued a minority opinion unrelated to resulting trusts. The UK case took on a life of its own and the courts had been dealing with its slimy tentacles ever since
    
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  Unjust enrichment and the remedy of the constructive trust provide a more suitable means of addressing circumstances of claims arising out of domestic partnerships
  
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    No reason to continue using this mechanism in these instances, especially in light of the legislation regarding matrimonial asset devolution
    
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    These things are more equitable, principled, transparent, sound
    
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      This does not mean the CIRT is not unsound in other areas necessarily (Chambers v Chambers)
      
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        There still must be joint contributions though. Even if there is, still wise to claim it in addition to unjust enrichment and CT
        

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  In the event of a total failure, property revests in the hands of the settlor (or their estate)
  
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  If persons have already been conferred benefits under the trust, title will vest if the trust is voidable (not void ab initio)
  
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    Courts are sympathetic in the case of a void ab initio failure and may allow them to keep what they have.
    
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    If there was a problem with capacity and the trust was vitiated, an ab initio failure will revest everything, including what the beneficiaries might already possess
    
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      Up to the court and how sympathetic they feel
      

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  Issues may arise where certain elements of the property are not dealt with. Whether the property goes to beneficiaries, remainder persons or the estate will depend on the courts examination of the intention of the settlor
  
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    See Royal Trust Corporation v Hospital for Sick Children, wherein the trust was valid but part of the trust allocated to certain hospitals which didn’t exist failed. The court allocated them to hospitals that dealt with similarly crippled children
    
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    A surplus in a charitable purpose trust may be applied to another purpose by the court using its power of cy-pres (L’Eveque Catholique Romain de Bathurst v New Brunswick (AG))
    

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  Issues may arise here with reasonable reliance, especially in regards to a deed that may or may not be valid
  
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  Issues also arise with regards to whether the trustee has self-declared (or later claims not to have done so)
  

Note also: In cases of an illegal purpose, the settlor is likely to not receive help from the courts in having their property returned (Scheuerman)

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  Courts may avoid a finding that a trust has failed if the effect of failure would lead to a fraud or ignore the clear intention of the settlor
  
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    May find an absolute gift instead (Re Barrett)
    
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      Court found that the housekeeping requirement were mere precatory words and not part of the constitution of the trust
      
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  Courts may use the severance doctrine where a gift is followed by a failed trust (Hancock v Wilson)
  
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    The original gift was fine but the life estate violated the RAP
    
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    Courts are not in a rush to terminate the whole trust as the life interest would get nothing
    
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      The life interest was an absolute gift, the remainder was a separate resulting trust
      
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  Courts will be hesitant to use severance where in doing so it would create any effect on the system of trusts or would make it more difficult to separate offending trusts (Watson v Holland)
  
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    This is particularly the case where a gift is coupled to a series of limitations that forms the system of the trusts itself
    
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    Multiple contingencies essentially bind the gift to the trust
    

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  The ability to fend of creditors is particularly important as a trust is not accessible to creditors upon bankruptcy
  
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  May not be the only remedy, but is a very powerful remedy indeed
  

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  Like an express trust and arises in certain circumstances determined in the case law over time
  
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    Fraud, breach of fiduciary duty, etc
    
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  Trustees have powers and duties as an ordinary trustee
  
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    Treated like a real trust
    
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  Not a cause of action or a remedy but an ordinary trust arising in defined situations related to wrongs such as breach of fiduciary duty, criminals benefitting from crimes, unconscionable conduct, equitable fraud
  

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  Purely a remedy seeking to prevent unjust enrichment
  
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    Just the mechanism to move property rights
    
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  Not a real trust, no trustee duties
  
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  Cause of action is unjust enrichment and one possible remedy is the CT
  
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  Only duty of the trustee is to pass the property to the claimant
  

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  We apply it under UK categories which grant constructive trusts
  
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  But we also use it as a remedy
  

Canada has adopted a broader view of the constructive trust and has been able to find harmony between the more literal, trust nature utilized in the UK and the remedial focused utilized in the US (Soulos v Korkontzilas)

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  The ability to use it in lieu of unjust enrichment was necessary in the Soulos case as the property had actually gone down in value but Soulos did not want to lose the ability to purchase the land back from K
  

1. 
   Defendant must have had an equitable obligation in relation to the activities giving rise to the asset in his hands
   
2. 
   Assets in the hands of the defendant must have been shown to result from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff
   
3. 
   Plaintiff must show a legitimate reason for obtaining the property can be personal or related to the need to ensure others like the defendants remain faithful to their duties
   
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      May be related to personal conditions
      
   2. 
      May be worth it to punish the wrong doer
      
4. 
   Must be no factors that render the imposition of a constructive trust unjust in all the circumstances
   
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      Look at third parties, will it be unfair to them?
      
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         Creditors, BFPV, etc.
         

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  Trustee/Beneficiary is a relationship, akin to others wherein higher duties are vested
  
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  A relationship will attract fiduciary duty obligations when the fiduciary has scope for the exercise of some discretion or power; the fiduciary can unilaterally exercise the discretion to affect the beneficiaries legal or practical interests and where the beneficiary is peculiarly vulnerable or at the mercy of the fiduciary holding said power (Frame v Smith)
  
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    Parent/Child, Doctor/Patient, etc
    
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    Special relationship, relying on principal to act in best interest to someone to whom they are vulnerable
    
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      Fiduciary might be only person in the world who can’t take an opportunity (Keech v Sandford)
      
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  Equitable remedies, including the constructive trust, might be available for breach of fiduciary duty
  
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    Other remedies may be available such as disgorging profits (Regal (Hastings) Ltd v Gulliver)
    
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  Fiduciary duty is treated strictly by courts
  
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    Taking a profit or opportunity by virtue of the fiduciary position, even without fraud or dishonesty, and even if the beneficiary cannot take the profit or opportunity, can be seen as a breach of fiduciary duty, unless this action is authorized by the beneficiary (Regal)
    
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      Conflict of interest situation, even where no bad intention (Boardman v Phipps)
      
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        May still be sued even if all you’ve done is generate a profit and improve a business (Boardman; see also Regal)
        
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      If you learn of the opportunity by virtue of being a fiduciary, no go (Can Aero v O’Malley)
      
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      Consent may authorize the profit taking
      
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        Although this is not a full defense, seeking consent may serve to blunt any effect (Regal)
        
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    The UK historically treated fiduciaries much more strictly than Canada did, but lightened up a bit over time (Boardman v Phipps)
    
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      Lord Cohen: Use of any knowledge gained in course of duty does not automatically make you liable to account
      
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      Lord Hodsen: Strict liability ala Keech to dissuade ne’er do wells
      
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      Viscount Dilhorne (Dissenting): No issue as they gave up business opportunity, leads to implicit authorization
      
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      Lord Denning – grant generous remuneration, inequitable to take profits due to skill exercised (could have helped Regal as well)
      
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  Fiduciaries can now take advantages or profits without the authorization of beneficiaries, but this is only where they no longer owe a duty to the beneficiary and where the beneficiary has had an opportunity to take the benefit but has decided not to (Peso Silver Mines Ltd v Cropper)
  
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    Fiduciary duties may last after dismissal or quitting from a company based on a number of factors (Can Aero v O’Malley)
    

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  Position or office held
  
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  Nature of the opportunity
  
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    Super secret or generic
    
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  Ripeness of the opportunity
  
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  How specific the opportunity is
  
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  Director or officers relationship with the opportunity
  
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  Degree of knowledge possessed
  
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    Close involvement give them info?
    
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  Circumstances in which the information was obtained
  
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  Whether the information was private
  
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  Length of time following termination of employment
  
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  Circumstances of termination of employment