Ch6 Formal Requirements for Some Express Trusts Flashcards
What is the general rule re creation of express trusts? Where do formal requirements come in?
the general rule is that express trusts can be created orally and no specific words are required
The fourth requirement of an express trust is that in some circumstances, certain formalities are to be observed in order to create the trust.
Only in some situations must certain formal requirements be complied with
two general areas in which formal requirements arise are the statute of frauds and wills legislation
Origins of Statute of Frauds
Origins of Statute of Frauds
concerns about frauds based on oral evidence led to enactment of statute of frauds in 1677 (17th century)
CL rule couldnt give evidence in support of own case - assumed they would lie. Other people could though, which caused fraud by ppl paying others to support their position that there was allegedly an oral contract.
English statute of frauds required that certain things need to be proven by some note or memo in writing and signed
applies to: (i) contracts with respect to land and long term contracts – calling for performance over more than one year; (ii) the creation of trusts with respect to land; and (iii) grants or assignments of equitable interests
some provinces have re-enacted more modern versions of the 1677 English Statute of Frauds (e.g., Ontario, Nova Scotia and New Brunswick) while others (Alberta, Saskatchewan, Newfoundland and the Territories) have received the English 1677 Statute of Frauds
Manitoba has repealed the statute of frauds while B.C. has re-enacted part of it in s. 59 of the Law and Equity Act
Describe the three situations in which some written evidence may be required for the creation of a trust under statute of frauds legislation.
Requires that contracts with respect to land, or for which performance would be called for over a prolonged period (more than one year), to be proven by some note or memorandum in writing and signed by the person to be charged or by the person’s agent.
All trusts with respect to land had to proven by some writing signed by the settlor
All grants and assignments of equitable interests in trust (whether they were trusts of interests in land or otherwise) had to be in writing
Contracts with Respect to Land
S. 4 of the Act is a writing requirement. The agreement must be in writing and that it is signed by the person to be charged or by an agent of the person to be charged
Enforcement requires the agreement OR some memorandum as well as long as it or the note contains the terms of the agreement or refers to the document that contains the terms. The written document should also be signed by a person lawfully authorized by the party to be charged. Signed writing does not have to be made at the same time the agreement is made.
Ex. A pays B for B’s promise to hold lands to which B has legal title on trust for C – contract not enforceable then trust may not be created
Ex X life interest re land, Y remainder – contract in which X agrees to release life interest so Y can claim the property then sell it and settle proceeds on trust discretionary trust for X and her children; and discretionary trust for Y and her children – contract if enforceable (and could need to be specifically enforceable) then can create trust of the proceeds of sale – contract not enforceable then trust will not be created
Otherwise no action may be brought.
Creations of Trusts with Respect to Land
S. 7 provides all declaration or creations of trusts or confidence of any land, tenements or hereditament shall be written and signed by the party who is enabled to declare the trust.
Examples for Section 7:
a gratuitous transfer of land by A to B with oral understanding that B will hold land in trust for C – if B keeps profits from land, C will have to prove trust by writing signed by A
or, A owning legal and equitable title to land orally declares herself to be a trustee of the land for the benefit of C – C would have to prove trust by some writing signed by A
section 7 held to apply where beneficiary of trust of land declares himself to be a trustee of his equitable interest [Tierney v Wood (1854), 52 E.R. 377 (Eng. Ch.)]
This covers not only the creation of trusts by transfer of land but also declaration of trust with respect to land.
Requirement: trust obligation be manifested and proved by some writing. It CANNOT be signed by the agent of the settlor.
does not require signed trust instrument since trust obligation must be proved by some writing signed by the settlor (except Nova Scotia and New Brunswick that require trust instrument itself to be in writing)
signed writing does not have to be signed at same time as the creation, or declaration of trust
but cannot be signed by agent of the settlor
Void if its not in writing and signed.
section 7 says “utterly void and of none effect” but courts have read this as meaning unenforceable
Assignment of Equitable Interests in Trusts
S. 9 provides all grants and assignments of an trust shall be in writing, signed by the party granting, or shall be void.
Applies to:
“trust or confidence” assumed to mean equitable interests – so grants or assignments of equitable interests must be in writing signed by the person making the grant or assignment
Applies to equitable interests in personal property since s. 7 applies to equitable interests in land (re land or interest in land, s 9 applies to assignment of equitable interest in land other than creation of trust with respect to equitable interest in land since Tierny v Wood, noted above, says s 7 applies to declaration or creation of trust re equitable interest in land)
not clear whether it applies to instruction to trustee to hold equitable interest for another person – arguably not an “assignment” (in the sense of a transfer) but it is arguably a “grant” (conferring something without consideration – i.e., gift) – cautious approach would be to have instruction in writing
may also apply where a beneficiary disclaims interest thereby increasing the interests of other beneficiaries – arguably a “grant” – cautious approach would be to have disclaimer in writing
Assumed that “grants and assignments of any trust of confidence” means equitable interests
Involves land and personal property
If not signed then its void.
Enforcement: must be in writing (some writing or subsequent writing showing existence of a grant or assignment of the interest is NOT sufficient) . The grant or assignment also cannot be signed by an agent for the person having the equitable interest.
Identify and describe the problems that were created by statute of frauds legislation and describe the judicial responses to those problems.
Could be used to perpetrate frauds
Otherwise could lead to reliance and unjust enrichment if promisor could avoid promise by pleading the statute
Problem with statute was that it often led to the promises acting on promises caught by the statute but that were not evidence in the way required by the statue. If the promisee acted on the promise it might also benefit the promisor.
There was often a reliance on the promise and in many cases there was also an unjust enrichment of the promisor.
Responses:
(1) Doctrine of Part Performance: some act done that can only be explained on basis of alleged contract or trust
develop a doctrine of part performance as an alternative mean of proving the K. Required some act be done that could only be explained on the bass of an alleged oral contract. Part performance may suggest that there has been reliance on the promise that is not supported by signed written evidence.
(2) Doctrine of Fraud: principle developed to avoid the statute was the doctrine of fraud. All that is required for there to be “fraud” is that the person retains the property knowing it was conveyed to him as trustee. Fraudulent intent is not required.
Rochefoucauld v Boustead (1897 Ch CA)
Rochefoucauld transfers land to Boustead in exchange for his oral agreement to hold land in trust for Rochefoucauld and remit profits and later to return land to Rochefoucauld
Boustead later writes letters signed by him and remits profits
subsequently Rochefoucauld asks for return of land and Boustead refuses claiming the statute
Decision:
Letters signed by boustead may have been enough to meet statute of frauds requriement
If not, other evidence admitted to prevent statute from being used to commit a fraud
NOTE: s8 of Act says Act doesnt apply to trusts arising by operation of law (ie resulting or constructive trusts)
Describe the changes made to the typical requirements of statute of frauds legislation by section 59 of the British Columbia Law and Equity Act.
Statute of Frauds was repealed and replace with s. 59 of the Law and Equity Act.
- This allows for contracts respecting land – allowing enforcement in ways other than a writing signed by the person to be charged.
s. 59(3) of the Law and Equity Act essentially re-enacts s. 4 of the English Statute of Frauds (contracts with respect to land) as modified by the doctrine of part performance and the doctrine of fraud - Does not apply to creation, assignment or renunciation of an interest under a trust
s. 59(3) applies to a “disposition of land” but s. 59(1)(a) says “disposition” does not include the creation, assignment or renunciation of an interest under a trust – therefore we no longer have section 7 of the English Statute of Frauds (creation of trust concerning an interest in land) - Does not apply to assignments of equitable interests - No requirement of writing for the grant or assignment of an interest in a trust.
s. 59 does not re-enact s. 9 of the Statute of Frauds (and see the definition of “disposition” above) so no requirement of writing for the grant or assignment of an interest in trust
Background of testamentary trusts?
Background - Wills Act
concerns with fraudulent wills also covered in the English Statute of Frauds of 1677
wills provisions moved to Wills Act in 1837
this English wills legislation copied throughout common law Canada
Current B.C. Wills, Estates and Succession Act says that to be valid a will must be: (i) in writing [s. 37(1)]; (ii) signed at its end by the maker of the will, or the signature at the end must be acknowledged by the will-maker as his or hers, in the presence of 2 or more witnesses present at the same time [s. 37(1)]; and (iii) signed by 2 or more of the witnesses in the presence of the will-maker [s. 37(1)];
Section 39 clarifies matters with respect to the place of the signature of the maker of the will
section 40 provides that the witnesses signing the will would have to be 19 years of age or older.
Section 40 also allows witnesses to include persons who may receive a gift under the will (although the gift might be void under s 43).
s. 58 allows court to order that record, document or writing not complying with the Act is fully effective as though made as a will, part of a will, a revocation, alteration or revival of a will
Wills Act must be complied with in order to make a valid “testamentary disposition” - “testamentary disposition” is one that “takes effect on death” of the person making the disposition
(i) Explain the terms secret trust (or fully secret trust) and semi-secret (or half-secret) trust.
Fully Secret Trust: Arises where property is bequeathed to a person in a will with no indication in the will that the person is to hold that property in trust. The testator, before her death, has communicated to that person an intention that the property is to be held on trust as described to the person and the person has accepted the trust or acquiesced by not indicating refusal. Also can be intestate heir who receives property having accepted or acquiesced to trust terms communicated by intestate.
The trust is full secret because there is no indication on the face of the will that there is any trust obligation.
Semi-Secret Trust: is bequeathed to a person in a will and the will indicates that the person is to receive the property in trust. The objects of the trust (beneficiaries) are, however, not set out in the will (ie we dont know who the beneficiaries are). Before the testator executes the will, he gives instructions to the person who will receive the property under the will as to the nature of the trusts on which the property is to be held.
Jankowski - just said “to my executor in trust” (??)
Difference: semi-secret testator indicates in the will that the property is held subject to a trust obligation vs. secret: where there is no indication of trust obligation or no will but trust terms have been communicated and accepted.
Timing is also different.
Set out the requirements for a valid fully secret trust
Conditions or requirements for both secret and semi-secret trusts:
Communication by the donor of the trust and its terms to the donee
Acceptance of the trust obligation by the donee (incl acquiescence by donee)
Communication must be timely.
Secret
Secret: communication of the trust obligation can be made at any time before the death of the testator
Essentials of a Secret Trust:
(i) an intention of the testator to subject the primary done to an obligation to a secondary donee;
(ii) communication of that intention to the primary donee; and
(iii) acceptance of the obligation by the primary donee either expressly or by acquiescence
communication may come before or after making the will
clear evidence of intention, communication and acceptance is required
Generally..
testate example: bequest of property in a will but before death testator has communicated trust terms to donee and donee has accepted the obligation or has not indicated he does not accept the obligation
intestate example: intestate communicates trust terms to heir and heir has accepted obligation or has not indicated he does not accept the obligation
contrary to wills legislation since trust takes effect on death and terms of trust (i.e., gift on trust that takes effect on death) not indicated in a will
but courts would enforce trust since otherwise would defeat intentions of deceased and would lead to enrichment of donee or heir at the expense of the intended beneficiaries
deceased could have changed will (or written a will) if deceased had known donee (or heir) would not carry out the terms of the trust
Examples:
McCormick v Grogan (1869): dying guy invites other guy into room alone. Tells him that the will is in drawer and devises whole of property to him. doesnt ask him to assent to contents. Dies. Will and letter later found in dawer. Asks the guy to pay annuities to persons including mccormick, annuities paid to ppl but not mccormick. Mccormick sues. Lord Hatherly notes exception to Wills Act where: (i) person induces the making of the will on understanding he will do what the testator wants; (ii) does not induce but accepts obligation; or (iii) acquiesces after being told of devise and obligation. Lord Hatherly holds for Grogan noting Grogan did not induce the will, did not assent (could not since Grogan did not know contents of letter), and could not acquiesce since testator said he would have it no other way. notes similar “fraud” concerns but says on the facts that there was no indication of the contents of the letter (i.e., no communication of the trust obligation)
Boyes v Carritt (1884) : will left all to carrit (solicitor for testator). Testator said hed communicate intent by letter after arrival on continent. No such letter sent in lifetime, Letter found in papers after death (carrit to take 25 and rest to nell brown). Action by next of kind that carritt held funds on trust.
Decision: fraud prevention basis for enforcing secret/semi sectret trusts, communication must be in testator lifetime. Perhaps receiving sealed letter would be enough but not receiving letter at all until after death NOT enough. Resulting trust for estate.
Ottaway v Norman (1972): Problem of proof of secret trust. Testamentary gift said to be made on the basis that housekeeper would divise house and contents to son and daughter in law of testator. But no trust made from will. Housekeeper doesnt need to listen. Makes some wills that obey, then later makes will that gives half to her own executor and half to the son and daughter in law. Action is by son and daughter in law. Was there a secret trust obligation?
Decision: essentials of secret trust are (i) intention of testator to subject the primary donee to an obligation to a secondary donee (ii) communication of that intention to primary donee, (iii) acceptance of the obligation by primary donee either expressly or by acquiescence. (note timing is also important). Communication can come before or after will. Doesnt matter how transfer made (inter vvos or will). Clear evidence of intent, communication and acceptance required
Found clear evidence given affidavits of executor of ottaways will and of friend of housekeeper who hear when she was visiting house
→ the requirements for the creation of trusts must be met (ie 3 certainties) and not be contrary to public policy
Set out the requirements for a valid semi secret trust
Conditions or requirements for both secret and semi-secret trusts:
Communication by the donor of the trust and its terms to the donee
Acceptance of the trust obligation by the donee (incl acquiescence by donee)
Communication must be timely.
Semi Secret
Semi-secret: the communication of the trust obligation must be before or at the time of the making of the will
Indicates on its face that there is a trust obligation but does not set out the terms of that trust obligation (contrary to wills legislation)
Only comes into effect on the death of the testator and the gift of property subject to the trust obligation, therefore a testamentary disposition.
Communication for a semi-secret trust must be before, or at the time of, the making of the will
this timing difference not followed in many other common law jurisdictions but followed in Canada
Justifications for timing difference (???):(i) incorporation by reference (?) (ii) allows post will execution testatmentary gifts not in compliance with wills legislation (and therefore re-opens the door to fraud that wills legislation was intended to avoid) (?)
Problem with non enforcement of semi secret is that non enforcement can defeat testator intent, acceptance or acquiescence may have deterred testator from taking other steps to accomplish intent (the fraud aspect); might defeat expectations of intended bens.
Examples
Blackwell (1929): makes distinction btwn secret and semi secret trusts with respect to timing. Clear here that semi secret trust was communicated. Altered his will by a codicil making specific bequest of £12,000 to trustees to invest and apply the income and to encroach on capital “for the purposes indicated by me to them.” One trustee knew for 2 years before death, it was communicated to others before death. Intent was to give 12k to person other than wife and son and so contested by them. Has to be communicated at or before making of will.
Decision:
noted that in semi-secret trusts trust obligation is expressed in the will itself and therefore the trustees cannot take themselves since no intention to make a gift to them
also noted that such trusts enforced for the same reason as fully secret trusts, that otherwise there would be a fraud
fraud here is that if trust obligation had not been accepted testator might have revoked the will and perhaps written another
court also held that for a semi-secret trust the communication must be made prior to or contemporaneously with the making of the will
“A testator cannot reserve to himself a power of making future unwitnessed dispositions by merely naming a trustee and leaving the purposes of the trust to be supplied afterwards … To hold otherwise would indeed be to enable the testator to ‘give the go-by’ to the requirements of the Wills Act, because he did not choose to comply with them.”
on the facts it was held that the communication was made at time of the execution of the will and consequently the semi-secret trust was enforced.
Jankowski v Pellek (1995): P Leaves property to 3 nephews and residue to exxecutor to deal with as he may in his discretion…. She later signs a blank paper saying she wants 3 other nephews to be benefitted. J sues, claims this makes executor a trustee and it is a semi secret trust in which case the terms given after trust signed cant be enforced and property will revert to estate and return to J under intestate succession (which P wanted to avoid). Minority accepts J.
Majority decision: Prefer interp pf will that leaves all property distributed. Executor holds as trustee of semi secret trust and communication must be at or before will. On facts, communicated to late. But on facts intent was to make gift to executor personally ( P did not intend intestacy - defs didnt want to benefit J- executor was her friend).
Therefore, communication can come after execution of will (ie it is a fully secret trust not a semi secret trust)–> because it said “its yours you have discretion” means it is fully secret trust.
Gillen thinks the distinction doesnt rlly make a lot of sense
→ the requirements for the creation of trusts must be met (ie 3 certainties) and not be contrary to public policy
