Royal Trust Co. v. Tucker

It is important to distinguish between a deed of donation and trust, in which the primary beneficiaries do not exist, and those made for unborn children when the latter are secondary or tertiary beneficiaries and there are primary beneficiaries in existence. In these latter cases, the stipulations made in favour of unborn children are valid and effective provided that the children are conceived at the time the benefit stipulated in their favour takes effect, and are subsequently born viable.

In Curran v. Davis this Court did not have to decide the point, but on p. 303 it took for granted that such deeds of donation and trust are valid. A similar ruling was made by the Court of Appeal of Quebec in Reford v. National Trust Company [1968] Que. Q.B. 689, at p. 697. See also Masson v. Masson (1912), 47 S.C.R. 42, which concerned a testamentary trust made before the Civil Code was adopted in 1866: the testator left his property in trust for the benefit of his eight children and their lawful issue, for an indefinite period of time or as long as the law allowed; at pp. 73, 74, 78 and 90 Sir Charles Fitzpatrick C.J. and Anglin J.

[Page 258] expressed the view that the limitations regarding substitution should be extended by analogy to this trust, which can thus benefit two ranks of successive beneficiaries as to the income, and the ultimate beneficiaries, who will receive the capital.

Text writers also recognize the validity of deeds of donation and trust for the benefit of unborn children when the latter do not rank first but after other living beneficiaries: Marcel Faribault, Traité théorique et pratique de la fiducie ou trust du droit civil dans la province de Québec, Montreal, Wilson and Lafleur, 1936, p. 190, No. 173; Madeleine Cantin Cumyn, Les droits des bénéficiaires d’un usufruit, d’une substitution et d’une fiducie, Wilson and Lafleur, 1980, p. 19, No. 29.

When, however, the question is as to the validity of a deed of donation and trust made primarily for the benefit of unborn children, as in the case at bar, opinions differ both in the cases and among text writers.

With respect to cases, apart from the case at bar, I have already referred to: Harwood v. Moncel and the Estate of the late Thomas Fyshe v. Fyshe.

Billette (Donations et testaments, Montreal, 1933, at p. 187), Faribault (supra, p. 190, No. 172) and Cantin Cumyn (supra, p. 22, No. 32) conclude that such gifts are invalid. In an unpublished thesis for the Faculty of Law of McGill University, The Law of Trusts in the Province of Quebec, 1935, Lionel Rubin concludes at p. 52 that they are valid. In 1935, Mignault made a presentation to the Faculty of Law of Paris on “La fiducie dans la province de Québec” [Trusts in the Province of Quebec]. The text was published in the Bulletin trimestriel de la Société de législation comparée, January-March 1936 issue, at p. 119. At page 130 we find the following:

[TRANSLATION] I do not think there is any need to give a detailed description of how trusts operate. Their advantage is that they allow an owner of property to make intermediaries responsible for administering property which he hesitates to give directly to individuals about whose character he knows nothing at the time, for example, for children who are under age or, even more

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so, for unborn children. The tool which it provides is a very flexible one. The profession of trustee has been organized through the establishment of very large companies with unquestioned solvency.

This passage is so general that it can apply to trusts like the one under consideration, but it is not absolutely clear.

Louis Baudouin appears to be of the opinion that trusts established for the benefit of unborn children are all valid; as Mignault, he does not distinguish between primary beneficiaries and those who rank after them: Le Droit civil de la province de Québec, 1953, at pp. 1245-46.

D.W.R. Waters raised the question in Law of Trusts in Canada, Carswell, 1974, c. 28: “The Trust in Quebec”, at pp. 948, 949 and 951, but he offered no solution.

Finally, such authors as Germain Brière and Roger Comtois do not specifically deal with the point, but the principles which they support appear to be more in keeping with the validity of a deed of donation and trust made primarily to benefit unborn children: Germain Brière, Les Libéralités, Editions Thémis, 7th ed., 1977, at p. 55; Roger Comtois, Les Libéralités, Répertoire de droit, Doctrine, Document 1, 1979, No. 688, at p. 238.

The applicable legislation is to be found in the chapter titled “Of Trusts”, chapter IV(A) of the Title “Of gifts ‘inter vivos’ and by will”. The provisions in question are arts. 981a et seq. of the Civil Code. The chief provisions are as follows:

981a. All persons capable of disposing freely of their property may convey property, moveable or immoveable, to trustees by gift or by will, for the benefit of any persons in whose favor they can validly make gifts or legacies.

981b. Trustees, for the purposes of their trust, are seized as depositaries and administrators for the benefit of the donees or legatees of the property, moveable or immoveable, conveyed to them in trust, and may claim possession of it, even against the donees or legatees for whose benefit the trust was created.

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This seizin lasts only for the time stipulated for the duration of the trust; and while it lasts, the trustees may sue and be sued and take all judicial proceedings for the affairs of the trust.

…

981l. At the termination of the trust, the trustees must render an account, and deliver over all moneys and securities in their hands to the parties entitled thereto under the provisions of the document creating the trust, or entitled thereto by law.

They may also execute all transfers, conveyances, or other deeds necessary to vest the property held for the trust in the parties entitled thereto.

These provisions were not in the 1866 Civil Code, which only provided for a kind of testamentary trust in arts. 869 and 964:

869. A testator may name legatees who shall be merely fiduciary or simply trustees for charitable or other lawful purposes within the limits permitted by law; he may also deliver over his property for the same objects to his testamentary executors, or effect such purposes by means of charges imposed upon his heirs or legatees.

…

964. The legatee who is charged as a mere trustee, to administer the property and to employ it or deliver it over in accordance with the will, even though the terms used appear really to give him the quality of a proprietor subject to deliver over, rather than that of a mere executor or administrator, does not retain the property in the event of the lapse of the ulterior disposition, or of the impossibility of applying such property to the purposes intended, unless the testator has manifested his intention to that effect. The property in such cases passes to the heir or the legatee who receives the succession.

It was at that time impossible to create a trust by way of an inter vivos gift.

The provisions which were to become arts. 981a et seq of the Civil Code were enacted in 1879, in the Act respecting Trusts, 1879 (Que.), c. 29. With minor changes, they were incorporated into the Civil Code in the 1888 statutory revision.

It has been said that this 1879 statute owed little or nothing to English law: see, for example, J.-Emile Billette, “Etudes de jurisprudence”, A propos de fiducie, (1932) 11 R. du D. 38; Daniel

[Page 261]

N. Mettarlin, “The Quebec Trust and the Civil Law”, (1975) 21 McGill L.J. 175.

That is an exaggeration. The trust was known in the old French law, but Faribault (supra, at pp. 45-50 and at p. 393) showed that the Quebec trust is of English inspiration, as appears from the English terminology of art. 981a and which is explained by the earlier cases and legal practice in the drafting of wills: see also Armand Lavallée, “Donation fiduciaire”, (1932) 11 R. du D. 227.

It is therefore legitimate to refer to English law, as this Court did in Curran v. Davis. And, as was indicated above, English law regards the deed of donation and trust now under consideration as valid. See also D.W.R. Waters, supra, at p. 96. However, the argument is not conclusive, because the entire English law of trusts was not incorporated into the civil law. Thus, for example, under arts. 981a et seq., it is not possible to make oneself a trustee by means of a “declaration of trust”: O’Meara v. Bennett, [1922] 1 A.C. 80. Additionally, the enactment of arts. 981a et seq. did not have the effect of introducing in Quebec the English distinction between legal title and beneficial ownership, a sort of dual ownership, and a concept foreign to Quebec law under which ownership is indivisible and vested in a single individual: Laliberté v. Larue, [1931] S.C.R. 7 at p. 16. See also Laverdure v. Du Tremblay, [1937] A.C. 666 at p. 682, Greenshields et al v. The Queen, [1958] S.C.R. 216 at p. 217, and Crown Trust Co. v. Higher et al., [1977] 1 S.C.R. 418 at pp. 424-26. English law is relevant only in so far as it is compatible with arts. 981a et seq. of the Civil Code.

These articles refer to the provisions regarding gifts inter vivos and by will, the following of which are the most significant for the purposes of the case at bar, and were still in effect at the time the trust at issue was created:

608. In order to inherit it is necessary to be civilly in existence at the moment when the succession devolves; thus, the following are incapable of inheriting;

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1. Persons who are not yet conceived;

2. Infants who are not viable when born.

…

754. A person cannot dispose of his property by gratuitous title, otherwise than by gift inter vivos or by will.

755. Gift inter vivos is an act by which the donor divests himself, by gratuitous title, of the ownership of a thing, in favor of the donee, whose acceptance is requisite and renders the contract perfect. This acceptance makes it irrevocable, saving the cases provided for by law, or a valid resolutive condition.

…

765. All persons capable of succeeding and of acquiring may receive by gifts inter vivos, saving any exception established by law, and subject to the necessity of legal acceptance by the donee, or by a person qualified to accept for him.

766. Corporations may acquire by gifts inter vivos, as by other contracts, such property as they are allowed to possess.

767. Minors become of age, and persons who have been under the control of others, cannot give inter vivos to their former tutors or curators, so long as their administration actually continues and they have not rendered their account; [they may however give to their own ascendants who have exercised these offices.]

768. Gifts inter vivos made in favor of the person with whom the donor has lived in concubinage, or of the incestuous or adulterine children of such donor, are limited to maintenance.

This restriction does not apply to gifts made in a contract of marriage entered into between the concubinaries.

Other illegitimate children may receive by gift inter vivos like all other persons.[1]

…

771. The capacity to give or to receive inter vivos is to be considered relatively to the time of the gifts. It must exist at each period, with the donor and with the donee, when the gift and the acceptance are effected by different acts.

It suffices that the donee be conceived at the time of the gift or when it takes effect in his favor, provided he be afterwards born viable.

772. The favor given to contracts of marriage renders valid the gifts therein made to the children to be born of the intended marriage.

[Page 263]

It is not necessary that the substitute should be in existence at the time of the gift by which the substitution is created.

…

929. Substitutions may be created by gifts inter vivos, made in contracts of marriage or otherwise, by gifts in contemplation of death made in contracts of marriage, or by will.

The capacity of the persons is governed in each case by the nature of the act.

The disposition which creates the substitution may be conditional like any other gift or legacy.

Substitutions may be appended to dispositions that are either universal, or by general title, or by particular title.

The substitute need not be present at the gift inter vivos which creates the substitution in his favor; he need not even have been born nor conceived at the time of the act.

Not only are these provisions older than the chapter on trusts, but for the most part they are derived from the most characteristic rules of a secular law. The introduction of the trust into such a closely-knit system of civil law was bound to present difficult problems, such as that before the Court, and to give rise to the most lively controversies, some of which still continue.

One of these controversies, which affects the outcome of the case at bar, concerns the acceptance of the trust. Does acceptance by the trustee suffice to render the creation of the trust irrevocable or must the beneficiary accept?

Article 981a provides that the trust can be made by gift, and art. 981b refers to the beneficiary as to a donee. Article 755 provides that acceptance by the donee is necessary and makes the contract perfect and irrevocable. It has thus been argued that acceptance by the beneficiary of the trust is necessary: Billette, Donations et testaments, Montreal, 1933, at p. 341; Mignault held the contrary view, relying primarily on English law: Le droit civil canadien, vol. 5, at pp. 157-58.

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This Court upheld the view of Mignault in Curran v. Davis.

For the purposes of the case at bar, that case has a negative determining effect: if indeed the opposite conclusion had been reached in Curran v. Davis, the question which the Court has to answer would no longer arise, since a contract cannot be made with non-existent persons whose acceptance is necessary to make the contract perfect and irrevocable.

It is therefore not possible to conclude from Curran v. Davis that the deed of donation and trust at issue is valid, but it removes one obstacle to its validity, since it establishes that acceptance by the trustee suffices to make the creation of the trust irrevocable.

Another controversy resulting from the introduction of the trust into Quebec civil law concerns ownership of the property while the trust lasts.

Since the courts have rejected the English concept of dual ownership in favour of sole ownership vested in a single person, the question has arisen as to who is owner of the property while the trust. lasts. This difficult question has been answered by the writers with various theories, some of which are ingenious and indeed attractive, but none of which may be entirely satisfactory. A description of most of these theories is to be found in a posthumous article by Yves Caron, completed by J.E.C. Brierley, “The Trust in Quebec”, (1980) 25 McGill L.J. 421.

According to the first theory, it is the beneficiary of the trust who owns the property conveyed to him in trust. This was the view of Mignault initially, in his Treatise Le droit civil canadien, vol. 5, at p. 155. It is also the view of Billette, “Etudes de jurisprudence”, “A propos de fiducie”, (1932) R. du D. 38. See also René-H. Mankiewicz, “La fiducie québécoise et le trust de common law”, (1952) 12 R.du B. 16.

If this theory were to prevail, the trust at issue in the case at bar would be void, since for a certain

[Page 265] period of time ownership of the property in the trust would have been vested in no one.

Mignault changed his mind following the decision in Curran v. Davis, and espoused another theory: the trust property is owned by the trustee; Mignault, “A propos de fiducie”, (1933) 12 R. du D. 73; “La fiducie dans la province de Québec”, Travaux de la semaine internationale de droit, vol. 5, Paris, Sirey, 1937, at pp. 35-55. See also, to the same effect, Peter E. Graham, “Some Peculiarities of Trusts in Quebec”, (1962) 22 R. du B. 137; Lionel Rubin, supra, at pp. 32-45; Roger Comtois, supra, at pp. 240 and 243.

If this theory is the correct one, there is no further impediment to the validity of the trust at issue, since, while it lasts, it is not necessary that there be beneficiaries in whom ownership of the property conveyed in trust be vested.

The other theories are somewhat more innovative.

According to Faribault’s theory, supra, there is a quasi-personification of the trust, which becomes an authentic institution, and the property conveyed in trust is owned by this institution. See also C.H. Lalonde, Traité de Droit civil du Québec, vol. 6, Montreal, Wilson and Lafleur, 1958, at pp. 449 et seq.:, Louis Baudouin, supra, at pp. 1249 et seq.; No. 199 v. Minister of National Revenue, 54 D.T.C. 488.

Faribault’s theory is somewhat analogous to that of the French jurist P. LePaulle (Traité théorique et pratique des trusts, Paris, Rousseau et Cie, 1932) who contends that the trust is a patrimony not vested in a person or a patrimony of assignment to a purpose. This is the position which Cantin Cumyn seems to approve: supra, No. 101, at pp. 71-72.

Finally, the most recent theory is an attempt to give a complete explanation of the trust purely in terms of the civil law: the powers of the trustee over the trust property are said to constitute a dismemberment of the ownership; the ultimate beneficiaries of the trust are the owners under a suspensive condition, and the grantor of the trust

[Page 266] or his estate are owners under a resolutive condition: Mettarlin, supra, at pp. 218-23.

The only one of all these theories which can be said to have received judicial support is Mignault’s second theory, namely that while the trust lasts the trustee is owner of the property conveyed to him in trust. It must also be said that this support has only been given with hesitation and reservations.

Paradoxically, this theory seems to have been taken for granted at the outset, with regard to the testamentary trust authorized by art. 869 of the Civil Code, prior to the enactment of the Act respecting Trusts.

In Abbot v. Fraser, (1874) L.R. 6 P.C. 96, the issue was the validity of a will by which the testator bequeathed the greater part of his fortune to trustees who were required to obtain the incorporation of an institution which would become a public library and museum known as the “Fraser Institute”, and then to convey all the property so bequeathed to this corporation. The Judicial Committee reversed the majority decision of the Court of Appeal of Quebec and restored the judgment of the Superior Court, which had found this will valid. At pages 122 and 123, there are the following passages of the decision of the Judicial Committee, given by Sir Montague Smith:

The devise is, in the first instance, to the trustees, and under it they are empowered, at least for a time, to hold and administer the property for the purpose of the trust, and until, in further execution of the trust, a corporation is created with authority to administer it.

…

It appears to [their Lordships] that the devise to the trustees was meant to be limited and transitory, the property remaining in them only until they could execute the ultimate purpose of the devise.

One of the arguments made against the validity of this will was that it bequeathed property to a corporation which did not exist at the time the succession devolved. The Judicial Committee dismissed this objection as follows, at pp. 124-25:

[Page 267]

The third and remaining objection is that the gift failed, being a gift to a society not in existence at the testator’s death.

If the devise had been to a society or a corporation to be afterwards called into existence or created without the interposition of fiduciary legatees or trustees, this objection might have given occasion to difficulties of great weight.

It was said by the Court of first instance in Des Rivières v. Richardson [Stuart’s Rep. 218]:—

“It may be admitted that, if by a will an immediate devise is made to a corporation not in existence, it will be void, as there is no such corporate body to receive, and it would be equally void even if the corporation were afterwards created without some special and express law to take the case out of the general principle.”

But it was also said in the same case in the Court of Appeal:—

“The second ground of objection is also untenable, for although it is admitted that a legacy is lapsed (i.e., ‘caduque’) when left to an individual, or to a body politic and corporate, not in esse; yet the principle does not apply to this case, inasmuch as the trustees were all alive when the testator made his will, and they received the bequest for the benefit of the Royal Institution, as soon as it should please the Provincial Government to give to airy nothing ‘a local habitation and a name.’”

That case no doubt differed in some of its facts from the present, as the Royal Institution had been, in some sense, incorporated before the date of the will; but the principle is asserted in it that the intervention of trustees will, in some cases at least, prevent a lapse.

Their Lordships on this point, having regard to Art. 869, which permits the appointment of fiduciary legatees for charitable and other lawful purposes, and to Art. 838, which, in the case of legacies suspended after the testator’s death in consequence of a condition or substitution, declares that the capacity to receive is to be considered relatively to the time when the right comes into effect, are of opinion that there has been no lapse in this case, and that the trustees may carry the purpose of the testator into effect if and when the corporation of the Fraser Institute is duly incorporated. The transfer of the property to the corporation is directed to be made by conveyance from the trustees, who, in then making it, will execute the lawful purpose for which the property was entrusted to them.

Similarly, in Masson v. Masson, speaking of a testamentary trust made before the 1866 Civil

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Code, Sir Charles Fitzpatrick C.J. considered, at pp. 73, 74, 75 and 76, that property bequeathed in trust is vested in the trustees. Duff J., as he then was, expressed his agreement. Anglin J., as he then was, gave a similar opinion at pp. 83, 84, 87 and 89.

In the case of the trust in arts. 981a et seq., however, the situation at first appears to have been different. The first time that this Court discussed these provisions was in Laliberté v. Larue, and it stated at pp. 16 and 20 that art. 981a does not have the effect of transferring ownership to the trustees. However, this was an obiter dictum which has become incompatible with subsequent decisions.

In theoretical terms, there is no reason why the solution should differ, with regard to the ownership of trust property, depending on whether there is a testamentary trust covered by art. 869 of the Civil Code or a trust covered by arts. 981a et seq. The difficulty arose, however, from the ambiguity of these new provisions. Thus, art. 981a provided that trust property is conveyed to trustees, whom art. 981b describes as depositaries and administrators, whereas the same section refers to the beneficiaries as donees or legatees. On the other hand, art. 981l provides that at the termination of the trust, the trustees must do whatever is necessary to vest the property held for the trust in the parties entitled thereto.

This Court dealt with these problems in Curran v. Davis. That case concerned a deed of donation and trust. The grantor reserved a life interest in the income from the trust. The beneficiaries were the grantor’s wife and his adoptive son, who received life annuities, and the grantor’s son, who was given the capital. However, it was stipulated that the trustees would continue to hold the trust property for fifty years after the grantor’s death. The grantor subsequently purported to revoke the benefit conferred on his adoptive son, before the latter had accepted it; as I mentioned above, it was held that this revocation was void because the acceptance by the trustees sufficed to make the trust perfect and irrevocable.

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This court was a unanimous judgment of the Court in which reasons were delivered by Rinfret J., as he then was. After noting, at pp. 304-05, that the gift or legacy mentioned in art. 981a is not a gift or legacy as it had been understood in the Code up to that time, and still less a gift or legacy to which the ordinary rules of the Civil Code can be applied, he went on, at p. 305:

[TRANSLATION] Similarly, when Art. 981a C.C. refers to the trustees as “depositaries and administrators”, and to the beneficiaries as “donees or legatees”, it is impossible to take these words in the full sense which they have in the other chapters of the Code. It is clear that trustees are something different from ordinary depositaries or administrators. In fact, they have nearly all the rights of the owner without having title; and it is hardly necessary to show that the title “Of deposit” in the Civil Code has only a very remote connection with the situation created for trustees by the chapter “Of trusts”.

So far as the beneficiaries are concerned, they clearly are not donees or legatees as these are usually understood. They are in all respects third parties for the benefit of whom the creator of the trust has made a stipulation.

According to this passage, all the trustees really lack is the title of owner. At p. 294, Rinfret J. writes that the de facto owner is the son of the donor, the eventual beneficiary of the capital; [TRANSLATION] “but he is only a nominal owner”. However, at p. 293, Rinfret J. wrote:

[TRANSLATION] This gift to the trustees, or if one prefers, this conveyance (to use the word in Art. 981a C.C.), is in the words of the deed itself declared to be “irrevocable” by the donor himself. The terms on which this gift is made are that the “thing given”, described as the “trust property”, will be held in trust by the trustees for the purposes and for the benefit of the persons in whose favour the trust has been created. The trustees will however not be owners in the absolute sense. Although they are sole apparent owners with regard to third parties, the trustees will not have the usus, nor the fructus or the abusus of the trust property. This property however is in their names, and in the particular case now before the Court, it will never be in the name of Philippe Meyer Davis. The latter has no right of ownership over the thing given. At the time the trust was created, he simply acquired a claim against this trust.

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At page 294, he also stated:

[TRANSLATION] Throughout this period of time, the trustees actually have all the rights of an owner over the thing given, except that they can derive no personal advantage from it, and with, in addition, the special requirement that they have a duty to administer the property for the benefit of the beneficiaries; this means that they cannot allow the property to deteriorate without running the risk of being dismissed by the Court. They have a duty to perform the functions which they have accepted and to make the property conveyed to them productive. Under the contract submitted to the Court, the trustees have the seizin of the trust property, and the beneficiaries cannot claim as against them either possession of the property or even, while the trust lasts, any other right than that payment shall be made to them, or rights which may result from the dissipation or wastage of the trust property. In the latter case, however, the trust would not terminate, and the trustees would be replaced by others. In the meantime, they can sell, exchange, replace, borrow and hypothecate as they see fit, without intervention by the beneficiaries, and in their most absolute discretion.

The result of this is to give the trustees a kind of [TRANSLATION] “right of ownership, temporary and limited as to its effects”, as Mignault observes in his article cited above: “A propos de fiducie”, at p. 78, where he comments on Curran v. Davis. At p. 79, he also bases his argument on Masson v. Masson. Mignault returns to this argument in his address referred to above, “La fiducie dans la province de Quebec”. He did so before Rinfret J., who intervened to give his approval in the following terms, to be found at pp. 144-45 of La fiducie en droit moderne, fifth volume of the Travaux de la semaine internationale de droit, Paris, Sirey, 1937:

[TRANSLATION] The great difficulty we have found in attempting to reconcile the system of the English trust with French law, which is our own system, and formulating a unified approach on the question of the trust, was of course this fundamental principle that ownership is always vested in someone. As, however, it had to be concluded that the beneficiary was not yet the owner, and that under the wording of our Code, the trustee was not completely the owner, or at least was not an owner in the full sense, we attempted to find some means of reconciling the two legal concepts.

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We arrived at the conclusion, or if you will the solution, suggested by Mr. Mignault […] that under the Canadian system, the trustee should be regarded as owner.

In Guaranty Trust Co. of New York v. The King, [1948] S.C.R. 183, an estate tax case, Taschereau J., as he then was, speaking for himself and for Rinfret C.J., at pp. 204, 205 and 206, quotes lengthy passages from Masson v. Masson, Curran v. Davis and Mignault’s article “A propos de fiducie”; without formally taking any position on the ownership of property bequeathed in trust, he concluded that in that case the trustees had seizin of the moveable and immoveable property. Though he dissented, he agreed with the majority that the beneficiaries of the income are only creditors of the trustees and have no right of ownership in the trust property.

Greenshields et al. v. The Queen is another estate tax case. Taschereau J., as he then was, speaking for the majority, refers to arts. 981a et seq., to Laverdure v. Du Tremblay, to Curran v. Davis and to a [TRANSLATION] “remarkable article” by Mignault, titled “A propos de fiducie”. On p. 218 he writes:

[TRANSLATION] … appellants are in fact the trust administrators of the property bequeathed. They exercise over the latter a right of ownership limited by the enactments and the cases quoted above; they are accountable to the legatees for the income allocated to them.

Finally, in Reford v. National Trust Company, supra, Salvas J.A., writing the unanimous reasons of the Court of Appeal, refers to Curran v. Davis and to Mignault’s article, “A propos de fiducie”, and expressed the following views at pp. 697-98:

[TRANSLATION] Under the law (arts. 981a et seq. C.C.) and the contract, ownership of the said fund was conveyed to the trustees, but it was not ownership as defined in Art. 406. As long as the trust continued to exist, the trustees had the widest powers to sell, exchange or otherwise dispose by onerous title of the property comprised in the trust fund (art. 981j C.C.), but at the termination of the trust, they were required to render an account and hand over to the beneficiaries “all moneys and securities in their hands …” and “… also execute all transfers, conveyances, or other deeds

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necessary to vest the property held for the trust in the parties entitled thereto” (art. 981l C.C.).

While the trust lasts, the beneficiaries do not have ownership of the property conveyed to the trustees. It may even happen that as a result of the exercise by the trustees of their power to dispose, the property which they must return to the beneficiaries is, to a greater or lesser degree, not the same as they received from the grantor. However, the ownership is not in suspense during this time; it is necessarily limited by the effect of the trust and it is vested in the trustees. The latter undoubtedly only have a limited right of ownership, although they have the power to confer a complete ownership title on purchasers of property subject to the trust. This is a departure from the general principles of our civil law, but is a departure intended by the legislator.

These cases show the preference of the courts for Mignault’s theory as to the ownership of the trust property, and I know of no decision which supports any other theory, apart from No. 199 v. Minister of National Revenue, a decision of the Tax Appeal Board in which Faribault’s theory is mentioned.

It must be said that it is difficult to escape the logic of Mignault’s reasoning, if we assume that ownership cannot remain in suspense. This reasoning may be summarized as follows. The grantor is no longer the owner of property conveyed in trust: if it is a testamentary trust, he is dead, and if it is a trust created by way of gift inter vivos, it is essential to its validity that the grantor has actually and irrevocably divested himself of the property conveyed in trust. Property cannot be both given and retained. Ownership is not vested in the beneficiary of the income, who is only a creditor of the trustee. It also is not vested during the trust in the beneficiary of the capital: in a great many cases he ranks second or third and has not even been born or conceived. When the property held in trust is finally conveyed to him, as art. 981l expressly provides, the trust has terminated. That leaves only the trustee in whom ownership of the trust property can be vested. Clearly the right of ownership is not the traditional one, since, for example, it is temporary and includes no fructus. It is a sui generis property right, which the legislator implicitly but necessarily intended to create

[Page 273] when he introduced the trust into the civil law.

In my view, Mignault’s theory is the correct one. Although it contains the innovation of a sui generis property right, it is still the one with which practising lawyers are most familiar and feel most secure, in view of its support in the decided cases.

As with Curran v. Davis, acceptance of this theory has a negative determining effect for the purposes of the case at bar: it too has the effect of removing one of the possible obstacles to the validity of the trust which is at issue here. It is no longer necessary that there be beneficiaries in whom the ownership of property conveyed in trust be vested.

It thus remains to consider the question in positive terms.