An Introduction to the Law of Trusts

• Author: Eileen E. Gillese, Martha Milczynski
• Pages: 3-18

CHAPT ER 1

AN INTRODUCTION

TO THE LAW OF TRUSTS

A. UNDERSTANDING TRUST LAW

Trust law is dy namic; t rust pr inciples are not. These appa rently par a-

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

principles that form t he basi s of the law of trust s are well establi shed,

having been formulated and ref‌ined over hundreds of years. Those

principles can be distille d and their operation explained through t he

use of examples and reference to case law. Indeed, this book is de-

signed to do just that: to prov ide readers with a concise a nd current

statement of the major princ iples of tr ust law in Canada. At the same

time, however, reader s must recogn ize th at principle s are not rules,

nor are they a code. Principles do not provide answers to questions.

Rather, they provide the tools wit h which answers ca n be devised; they

provide guidance on how to approach new and novel situations; they

provide the ba sis on which people’s right s and obligations can be deter-

mined. While it may be fr ustrating to lear n that there are no ans wers

but only principles, thi s realit y explains why tr ust law i s dynamic; the

principles enable the courts and t hose using trus ts to be creative and to

adjust to new demands.

To understand trust law, we must study and understa nd trust pri n-

ciples. It is helpf ul, as well, to understa nd something of the history of

trusts and how the trust dif fers from other legal construct s. Those mat-

ters are the topics of chapters 1 and 2 of th is book. In chapter 3 the ele-

3

THE LAW OF TRUSTS4

ments neces sary to create a trust are ex plored. In chapter 4 the pr inciples

governing trusts for purposes, rather than for persons, are considered.

The mechanisms for changi ng and ending a tru st are the subject matter

of chapter 5. In ch apters 6 and 7 t he principle s that def‌ine the shape of

resulting and constructive trust s are set out and explored. Chapters 8,

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

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 a nd the consequences

to trustees of bei ng found liable for breach of trust.

The emphasis in thi s book is on the principle s that shap e and de-

f‌ine trust law. The legislation that governs t rustees is not like the Cri m-

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

legislation to gain insight into the structure or funct ioning of a trust.

The legislation addresse s discrete points of law and presupposes an

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

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

with a description of duties and powers, but it does set out mechan-

isms for the appointment and removal of tru stees. Trustee legislation

does not create or def‌ine the duty of loyalty, that being the overr iding

duty of trustees, nor does it expla in how that duty is fulf‌i lled or even

the standard to which t he trustee wi ll be held. The legislation does,

however, indicate how certain aspects of t hat duty may be fulf‌il led, as,

for instance, in its treatment of investment powers.

Often, the com mon law principles, and how t hey have been inter-

preted in the case law, are the only guid ance that exists. Trustee legisla-

tion has been passed in all Canadian provinces and territories, but all

too frequent ly it is of l imited or no application. Where tr ustee leg isla-

tion affects any given area, the effects are highlighted and samples of

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

consult the trustee leg islation in their jur isdiction,1 citations for that

legislation are given in note 1.

1Trustee Act, R.S.A. 20 00, c. T-8; R.S.B.C. 1996, c. 464; R .S.N.L. 1990, c. T-10;

R.S.N.S. 1989, c. 479; R.S.N.W.T. 1988, c. T-8; R.S.O. 1990, c. T.23; R.S.P.E.I.

1988, c. T-8; R.S.S. 1978, c. T-23; R.S.Y. 2 002, c. 223; The Trustee Act, C.C.S.M.,

T160; Tru ste es A ct, R .S.N.B. 1973, c. T-15; Arts. 1260–98 C.C.Q.