An Introduction to the Law of Trusts

• Author: EILEEN E. GILLESE
• Pages: 3-20

3

CHA PTER 1

AN INTRODUCTION

TO THE LAW OF TRUSTS

A. UNDERSTANDING TRUST LAW

Trust law is dynamic; trust principles are not. These apparently para-

doxical statements are meant to dr ive home an important point. The

principles that form the basis of the law of trusts a re well established,

having been formulated and ref‌ined over hundreds of years. Those

principles can be distilled and their operation explained through the

use of examples and reference to casel aw. Indeed, this book is designed

to do just that: to provide readers with a concise and current statement

of the major principles of trust law i n Canada. At the same time, however,

readers must recognize t hat principles are not rules, nor are they a code.

Principles do not provide answers to quest ions. Rather, they provide the

tools with which ans wers can be devised, guidance on how to approach

new and novel situations, and the basis on which people’s rights and

obligations can be determined. W hile it may be frustrating to lear n that

there are no answers but only principles, t his reality explains why t rust

law is dynam ic; the principles enable the courts and those using trusts

to be creative and to adjust to new demands.

To understand trust law, we must study and understand trust pr inci-

ples. In order to illustrate how those principles operate, this book offers

examples from daily li fe and analyzes the core cases that have shaped

Canadian t rust law. While the aim is to provide readers w ith an access-

ible introduction to trust law, this edition al so highlights contemporary

leading cases from the Supreme Court of Canada. Readers wi shing to

THE LAW OF TRUSTS4

delve into the details of a part icular topic are well advised to consult, a s

well, the comprehensive Waters’ Law of Trusts in Canada.1

It also helps to understand something of the history of trust s and

how the trust dif fers from other legal constructs. Those matters are

the topics of Chapters 1 and 2 of this book. In Ch apter 3, the elements

necessary to create a trust are explored. In Chapter 4, the principles gov-

erning tr usts for purposes, rather than for persons, are considered.

The mechanisms for chang ing and ending a trust are the subject matter

of Chapter 5. In Chapters 6 and 7, the principles that def‌ine the shape of

resulting and constr uctive trusts are set out and explored. Chapters 8,

9, 10, and 11 are directed towards those who act as trustees. In Chapter

8, the matters of appointment, retirement, and removal of tr ustees are

discussed. Trustees’ duties, powers, and rights are examined in Chap-

ters 9 and 10, respectively. The book concludes, in Chapter 11, with

an examination of what constitutes a breach of trust and the conse-

quences to trustees of being found liable for breach of trust.

The emphasis in this b ook is on the principles that shape and de-

f‌ine trust law. The legislation that governs trustees is not like the Cr im-

inal Cod e or the Charter of Rights and Freedoms. You cannot turn to the

legislation to gain insight into the structure or functioning of a tr ust.

The legislation addresses d iscrete points of law and presupposes an

understanding of what tr usts are and how they operate. For example,

trustee legislation does not set out the role of the trustee, complete

with a descript ion of duties and powers, but it does set out mechanisms

for the appointment and removal of trustees. Trustee legi slation does

not create or def‌ine the duty of loyalty, that being the overriding duty

of trustees, nor does it explain how that duty is fulf‌illed or even the

standard to which the trustee will be held. The legislation does, how-

ever, indicate how certain aspects of that duty may be fulf‌illed, a s, for

instance, in its t reatment of investment powers.

Often, the common law principles, and how they have been inter-

preted in the caselaw, are the only guidance that exists. Trustee legisla-

tion has been passed in all Canadia n provinces and territorie s, but all

too frequently it is of limited or no application. Where trustee legislation

affects any given area, t he effects are highlighted and samples of such

legislation are given. For the convenience of readers who wish to con-

sult the trustee legi slation in their jurisdiction,2 citations for that legi s-

lation are given in note 2, below.

1 Donovan Waters, Mark Gille n, & Lionel Smith, Waters’ Law of Trusts in Canada ,

4th ed (Toronto: Carswell, 2012).

2 Trustee Act, RSA 2000, c T-8; RSBC 1996, c 464; RSN L 1990, c T-10; RSNS 1989,

c 479; RSNWT 1988, c T-8; RSNWT (Nu) 1988, c T-8; RSO 1990, c T.23; RSPEI