The Quebec Trust: Role Rich and Principle Poor?
Fourth Wainwright Lecture
A.J. McClean*
Introduction
The exact nature of the trust as an institution in the law of Quebec’
has been a source of continual controversy. Some, but not all of that con-
troversy will be stilled if the proposals contained in the Draft Civil Code
of the Civil Code Revision Office are adopted. 2 The debate on the nature
of the trust has usually been conducted on a conceptual level, and that
aspect of the issue cannot, of course, be ignored. It is, however, possible at
least to start the debate by looking at the function the trust serves. Its main
reason for existence is to enable property owners to deal with their property,
generally on a long-term basis, in such a way as to divide the burden and
the benefit of ownership, the burden being thrown on the trustee and the
benefit conferred on the beneficiaries. 3 It is, therefore, a planning device,
and in order to be a useful planning device it must satisfy three criteria. It
*The Fourth Wainwright Memorial Lecture was given by Albert J. McClean, Professor and
former Dean of the Faculty of Law, University of British Columbia, and present Editor-in-
Chief of the Canadian Bar Review. The McGill Law Journal is pleased to assist the Wainwright
Lecture Series by publishing its fourth contribution. The lecture, with the author’s modifications
and addition of footnotes, is reproduced here as delivered at the Faculty of Law, McGill
University, on 16 February 1982.
The Wainwright Lectures were established by the Faculty of Law of McGill University in
1973 to honour the memory of the late Arnold Wainwright Q.C. (1879-1967). The Lectures
were organized in order to promote the scholarly study of law and, in particular, the Civil Law
of Quebec, which remained the abiding interest of this generous friend and colleague throughout
his long and distinguished career. The Series of Lectures is under the general direction of the
Wainwright Trustees, J.E.C. Brierley, P.-A. Cr6peau, and Y.-M. Morissette, who wish to thank
the Editors of the McGill Law Journal for their co-operation in making possible the inclusion
of this, the fourth Lecture.
‘Quebec enacted legislation on trusts in 1879: see An Act Concerning the Trust, S.Q. 1879,
c. 29. In 1889 the provisions of the legislation were incorporated into the Civil Code: see articles
981a et seq.
2Report on the Quebec Civil Code (1977), vol. I : Draft Civil Code, Book Four, arts 600 et
seq. [hereinafter cited to Draft].
3There are, of course, in all legal systems various techniques which may be used to ensure
in some measure a division of burden and benefit; examples include agency, incorporation and
contracts for the benefit of third parties.
19841
THE QUEBEC TRUST
must be versatile, it must encompass the elements, at first glance perhaps
contradictory, of predictability and flexibility, and it must be compatible
with the general structure of the legal system in which it is being used. It
is arguable that the trust of both the Civil Code and of the Draft fail to
meet all three of these criteria. Little that is new can be added to the con-
troversy about the nature of the trust under the Code. It therefore will be
dealt with very briefly here, and the bulk of these comments will be devoted
to a consideration of the provisions of the Draft.
I. The Code
A. Versatility
The trust as a planning device must be versatile, that is it must be role
rich. Different property owners may well want to achieve different ends,
and a rigid mechanism which will achieve only a limited range of objectives
will inevitably be of limited usefulness. The trust that can be created under
the Code lacks this element of versatility. It may be created only by way of
gift or legacy and, read literally, article 981a of the Code would confine the
beneficiaries to those who could take under a gift or legacy.4 It may not be
created by onerous title,5 and it would seem that this prohibition may not
be avoided by adding an onerous obligation to a trust created gratuitously. 6
In general, therefore, the trust of the Code can be used only in a limited
fashion in a family setting, and not at all for commercial purposes.7
B. Predictability and Flexibility
Even if a trust is of the type that apparently may be created under the
Code it is not always clear how it will function. In part this is owing to
uncertainty about the very nature of the basic concept. La doctrine, if not
la jurisprudence, has not yet agreed on such fundamental questions as who
is the owner of the trust property and what is the nature of the beneficiaries’
4But see Tuckerv. Royal Trust Company [1982] 1 S.C.R. 250; (1982) 40 N.R. 361 [hereinafter
cited to S.C.R.].
5Birks v. Birks [1980] C.S. 730, rev’d on appeal, C.A. (Montreal, 500-09-001011-808) April,
6Crown Trust Company v. Higher[1977] 1 S.C.R. 418; (1975) 69 D.L.R. (3d) 404 [hereinafter
1983, but on other grounds. This decision is under appeal.
cited to S.C.R.].
7See the difficulties encountered with trusts for bond-holders; The Special Corporate Powers
Act, R.S.Q. 1977, c. P-16; Lalibertb v. Larue [1931] S.C.R. 7; [1931] 2 D.L.R. 12 (sub nom.
Lafontaine Apts. v. Larue); Caron, The Trust for Bond-holders in Quebec (unpublished D. Phil.
thesis, 1964); McGill University Faculty of Law, The W.C.J. Meredith MemorialLectures(1976-
77), Part 1, LegalAspects of Corporate Debt Financing; J. Smith and Y. Renaud, Droit quebecois
des corporations commerciales (1974), vol. 2, ch. 26.
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interest.8 In part the uncertainty flows from the very sparse detailed pro-
visions in the Code. Two examples will serve to illustrate the point. It is
clear that a trust may be created for charitable and other public purposes;
it is not clear who may enforce the carrying out of the obligations thereby
imposed on trustees. 9 Who would use a device whose enforceability is in
doubt? It has only recently been decided in Tucker v. Royal Trust Company’0
that a trust may be created for the benefit of primary beneficiaries who were
not born when the trust was established. If such a basic question was not
settled until 1982 would not a-draftsman be hesitant about using a trust in
a way not expressly and clearly provided for by the Code?
The trust is thus not predictable in its operation; nor can it be said to
be a flexible institution. Circumstances may change dramatically during the
life of any trust. It is highly desirable that there be some mechanism available
whereby the trust may accommodate itself to such change. It is not totally
clear how far powers of variation may be built into the original trust doc-
ument. More importantly, the courts have no power, inherent or statutory,
to authorize variation of trusts that have been overtaken by the passage of
time. There is thus an unfortunate lack of flexibility in a device which can
be used to control the property affairs of families for up to two generations.
C. Compatibility
One of the reasons for the unpredictability that surrounds the use of
the trust is the lack of agreement on the basic nature of the institution. That
disagreement is by itself a major obstacle to the acceptance of the trust in
8See, for example, Cardinal, La fiducie du Code civil (1966) 26 R. du B. 522; Caron, The
Trust in Quebec (1980) 25 McGill L.J. 421; Dussault, La fiducie dans le droit qu6becois (1963)
5 C. de D. 57; M. Faribault, Trait thorique et pratique de la fiducie ou trust du droit civil
dans la province de Quebec (1936); Graham, Some Peculiarities of Trusts in Quebec (1962) 22
R. de B. 137; Mankiewicz, Lafiducie qu~becoise et le trust de Common Law (1952) 12 R. du
B. 16; Mettarlin, The Quebec Trust and the Civil Law (1975) 21 McGill L.J. 175; Mignault, A
propos defiducie (1933) 12 R. du D. 73.
9Valois v. de Boucherville [1929] S.C.R. 234, [1929] 3 D.L.R. 801.
‘0Supra, note 4. But, as is pointed out earlier, the decision is of arguable validity. Art. 981a
C.C. provides that a trust may be created “for the benefit of any persons in whose favour they
[settlors or testators] can validly make gifts or legacies.” That, contrary to the decision of the
Supreme Court of Canada, would seem to require that the primary beneficiaries of a trust must
be born at the date the trust was created: see arts 608 and 765 C.C. On the facts of the case
the settlor had in fact reserved a life interest to herself. It was apparently not argued that she
could be treated as a primary beneficiary, thereby avoiding the question of the validity of the
gift to her unborn children. If, however, beneficiaries are confined to those in whose favour a
gift or legacy may be made, it is arguable that a settlor could not be made a beneficiary under
a trust, for a settlor could not make a direct gift to herself. On this latter question see Draft,
supra, note 2, Book Four, arts 600, 607, and 613.
1984]
THE QUEBEC TRUST
a civil law system. Professor Lawson has drawn a general comparison be-
tween the civil and the common law which is particularly apt in the case
of a planning device like the trust:
The civilian likes to be able to see clearly the shape and limits of the abstract
concepts and doctrines with which he has to work before he starts to work
with them. Moreover, the law resembles the game of chess: the concepts must
move according to clear and definite rules; and indeed very often they are like
the pieces in chess, which are defined only in terms of the moves they can
make. The common lawyer is much more inclined to use a concept of half-
known outline as soon as he knows it is capable of performing the actual limited
task he wants it to perform, leaving for further consideration what its other
possibilities may be. Common law concepts are much more like human beings
whose personalities become known only by experience and may easily change
in course of time.”l
… The difference between the two points of view owes much to history; for
whereas in the Common Law systems, at any rate in the mother-system, English
law, the facts have always tended to be ahead of the law, in the Civil Law for
many centuries the law was usually ahead of the facts. 12
The “shape” and “limits” of the trust are not clear. A lawyer, whether
drafting a simple will, or, assuming it were possible to use the trust in such
a context, arranging a complex commercial transaction, cannot set off on a
voyage into the unknown with impunity. If the concept he is using has not
sufficiently crystallized, if it is not capable of giving reasonably clear op-
eration and effect to the terms of the document that he is drafting, he will
shy away from using it. While its basic conceptual framework is not clearly
defined, the trust will always be regarded as an alien institution in a civil
law system, and until it acquires more precise definition its use will be
inhibited. The trust of the Code, not only role poor but also principle poor,
fits uneasily into the framework of Quebec law.
H. Draft Civil Code
A. Versatility
It is clear that the trust provided for in the Draft is a much more
versatile institution than is the trust of the Code. Under the Draft trusts
may be created by onerous title. 13 It is true that trusts for bond-holders are
probably still governed by the provisions of the Special Corporate Powers
Act,14 and it may be argued, though wrongly it is submitted, that trusts
created by onerous title must be confined to those listed in article 607 of
“F Lawson, A Common Lawyer Looks at the Civil Law (1953), 66.
12Ibid., 79.
3Draft, supra, note 2, Book Four, arts 601, 607.
4Special Corporate Powers Act, R.S.Q. 1977, c. P-16.
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the Title on Trusts. However, there is no doubt that voting trusts or trusts
conferring benefits on employees could be validly created under the Draft.
There are very few restrictions on who may be the beneficiaries of trusts
for individuals, 15 and trusts for public or private purposes would appear to
be subject only to such restrictions as would arise on the application of the
general principles of the Draft in relation to such matters as public order
and good morals. The trust of the Draft has clearly the potential to be role
rich.
B. Predictability and Flexibility
The Draft contains answers to many more specific questions than does
the Code, and if it is enacted the Quebec lawyer could grasp the trust with
a surer hand. The nature of the interest of the beneficiary is clearly stated.
During the trust a beneficiary has no right in the trust property, but simply
a personal right, exercisable against the trustee, to call for the payment to
him of income or, where appropriate, capital.16 Full provision is made for
the enforcement of the trust. Private trusts, and purpose trusts assimilated
to them, can be enforced by private individuals. Purpose trusts may be
enforced by the public curator; that fills a major gap in the present law. A
settlor may enforce both public and private trusts, a novel provision in the
eyes of a common lawyer.17 The duties and powers of trustees are compre-
hensively spelled out.18 Finally, the revision makes provision for the du-
ration, for the failure and for the termination of trusts. 19
The trust contemplated by the Draft is also a much more flexible device.
For example, the settlor need not at the outset spell out precisely the exact
share of each beneficiary, but may reserve to himself, or may confer on a
trustee, a beneficiary or a third party, the power of designating from time
to time what the shares of the beneficiaries shall be.20 More importantly
perhaps, there is conferred on the court a power of variation which will
enable the trust to be adapted to changing circumstances. 2’
But comprehensive though these detailed provisions may be, they will
not solve all of the issues that may arise in the creation or administration
of trusts. Nuances of interpretation will need to be settled, conflicts between
the various provisions may arise, and it may become apparent that there
are gaps in the law. Is there in the Draft a general concept of the nature of
15Draft, supra, note 2, Book Four, art. 613 makes it clear that the settlor may be a beneficiary.
‘ 61bid., Book Four, art. 618.
7Ibid., Book Four, arts 607, 618, 626, 629.
81bid., Book Four, Title Seven, Ch. IV; see also Book Four, Title Six.
1
9lbid., Book Four, arts 621, 622, 632-8.
1
201bid., Book Four, art. 619.
21Ibid., Book Four, arts 636-7.
1984]
THE QUEBEC TRUST
a trust to which a lawyer can turn, and on the basis of which he can make
reasonably confident predictions about how the courts will interpret, resolve
conflicts or fill in gaps? If that is not possible then the inhibitions against
the use of the trust may still exist.
At first glance, it would seem that for all its detailed rules the Draft has
not addressed itself to the fundamental question of the nature of the trust.
The very first article of Title Seven of Book Four raises the same vexed
question that has been the object of so much debate under the Code – who
is the owner of the trust property, and, if it is thought that the trustee is
the owner, what is the nature of that ownership? If that question is still
unsettled, then so also is the nature of the trust, and so the issue remains
as to whether the trust of the Draft, rich in role, rich in many ways in detail,
is still principle poor.
In the past, the tendency of la doctrine, but not of la jurisprudence, has
been to approach that issue obliquely. The nature of the trust has been
sought not in a direct analysis of that institution per se, but by the pursuit
of analogy. Nuances of interpretation, conflicts and gaps in the law are then
to be filled in by reference to the ways in which the comparable institution
works. This methodology may be illustrated by a brief consideration of three
of the analogies that have been traditionally pursued.
The first can be mentioned only to be quickly dismissed. It is generally
accepted that the trust in Quebec owes something to the common law trust.
It does not follow, however, that either in concept or in detail the Quebec
trust need be but a pale reflection of its common law counterpart. Both the
Privy Council, and, more recently, the Supreme Court of Canada have made
that clear. In O’Meara v. Bennett22 it was argued that as there was no trust
in French law the provisions in the Civil Code ought to be interpreted as
having introduced English law except so far as that was expressly excluded.
The Privy Council rejected that argument. In doing so it stated:
[I]t is essential to remember that the law of trusts is not innate in the law of
Quebec, and that an examination of the question of how far the transaction
would have been valid at English law is misleading until it is ascertained to
what extent the English law applies. 23
The Supreme Court of Canada took the same position in Tucker v.
Royal Trust Company.24 Beetz J., speaking for the Court, said that it was
22[1922] 1 A.C. 80 (PC.).
23Ibid., 85.
24Supra, note 4.
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legitimate to refer to English law in dealing with arguments as to the nature
of the Quebec trust. He continued, however:
Mais rargument n’est pas dfcisif car ce n’est pas tout le droit anglais des trusts
qui a 6t6 introduit en droit civil. Ainsi par exemple, on ne peut, en vertu des
articles 981a et suivants se constituer soi-meme fiduciaire au moyen d’une
“declaration of trust”…. Au surplus, radoption des articles 981a et suivants,
n’a pas eu pour effet d’introduire au Quebec la distinction anglaise entre le
“legal title” et le “beneficial ownership”, sorte de dfdoublement de la propriftd,
notion ftrang&re au droit qufb~cois qui veut que la proprift6 reste unique et
porte toute enti~re sur une seule tate:.. .Le droit anglais n’est done pas pertinent
que dans la mesure de sa compatibilit6 avec les articles 981a et suivants du
Code civil.25
The second and third analogies seek to “civilize” the trust by treating
it as no more than a specific example of an existing civil law institution.
The trust has been said to be, or at least to resemble, a contract for the
benefit of a third party, or to be a separate legal entity.
Even under the Code, the trust had been compared with a contract for
the benefit of a third party, but that analogy was convincingly refuted by
Faribault.26 The Draft, not only because of the way in which it deals with
trusts, but also because of the way in which it deals with contracts for the
benefit of third parties, 27 enables the analogy to be re-examined. In the case
of a contract one of the contracting parties, the promisee, may enforce the
contract in favour of the third party beneficiary; as we have seen, in the
Draft a settlor may also enforce a trust in favour of a beneficiary. The right
of a beneficiary under a trust is expressly stated in the Draft to be a right
in personam against the trustee; it is thus similar to the right of a third party
to enforce a contract for his benefit. Third party contracts are no longer to
be confined to contracts which are for the benefit of the promisee or which
are donations with charges; that eliminates many of Faribault’s objections
to the analogy between contract and trust.28
But even allowing for all of these changes, substantial objections still
remain to the assimilation of one institution to the other. In the case of a
contract for the benefit of a third party the Draft provides that the beneficiary
must be alive at the date of the creation of the contract;29 that, as Tucker
v. Royal Trust Company30 decided, is not the law in the case of a trust. A
promisee, who, in the case of a contract, stipulates for the benefit of a third
25Ibid., 261.
26Faribault, supra, note 8, 86.
27Draft, supra, note 2, Book Five, arts 85-93.
28ln relation to contracts for the benefit of third parties, see ibid., Book Five, arts 85-93; in
relation to trusts see text following note 13, supra.
29Ibid., Book Five, art. 87.
30Supra, note 4.
19841
THE QUEBEC TRUST
party, may revoke that stipulation before the third party accepts the benefit;
a trust is complete and irrevocable before the beneficiary accepts, or indeed
even knows of the provision operating in his favour.31 And, more signifi-
cantly, it is difficult to apply the third party contract analysis to a testa-
mentary trust..Thus the resemblances between a trust and a contract for
the benefit of a third party may be greater under the Draft than under the
Code, but there are still too many differences between them for the trust to
be regarded as a third party contract manqu. The pursuit of this analogy
is still not going to be of any great value in any attempt to clarify the nature
of a trust.
It has also been argued that the trust is a separate legal entity, of which
the trustee is simply an administrator. Many of the provisions in the Draft
dealing with the notion of legal person and the trust are compatible with
that theory. Property transferred on trust constitutes a distinct legal patri-
mony.32 The trust documents regulate the use which may be made of the
trust corpus and income; this corresponds to the provision in the case of a
legal person that the articles determine the purpose or the objects of the
entity.33 The administrator of a legal person and a trustee both have the
same general powers of administration. 34
The analogy may in some measure be sustained even with respect to
the liability of the trustee or the administrator towards third parties. Under
article 570 of Book Four neither an administrator of a legal person, nor a
trustee, are personally liable to” a third party if they contract in the name
of their beneficiary. For the purposes of the article a beneficiary is a person
whose property is subject to administration. 35 In the case of an administrator
the beneficiary is obviously the legal person. In the case of a trust it cannot
be the beneficiaries, for the one thing that the Title on Trusts appears to try
to do is to ensure that the beneficiary will not be treated as an owner.36 The
trustee himself cannot of course be the beneficiary. Does it not then make
more sense to regard the trust as a separate legal entity, which is the owner
of the trust property and one on whose behalf the trustee is acting as an
administrator? That argument does eventually lead to some difficulty. The
members of a legal person are responsible for the debts of the entity. If a
trust were to be regarded as a separate legal entity would the beneficiaries
become liable for its debts? That would be a strange position, and article
3’Draft, supra, note 2, Book Five, art. 88, and Book Four, art. 620; see also Curran v. Davis
[1933] S.C.R. 283; [1934] 1 D.L.R. 161.
32Draft, supra, note 2, Book Four, art. 603.
33Ibid., Book Four, art. 603; see also Book One, art. 248.
34Ibid., Book One, art. 247; see also Book Four, art. 624.
35Ibid., Book Four, art. 488.
36Ibid., Book Four, arts 617-8.
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625 of the Title on Trusts suggests that that is not the case. If, therefore, a
trust is to be regarded as a legal person, it appears that it should be treated
as a corporation, or as a special legal person to which article 249 does not
apply.
If, however, the analogy becomes difficult to pursue in considering the
liability of the beneficiaries towards third parties, it breaks down with respect
to some aspects of the formation, the management and the termination of
the legal person and of the trust. A trust may be created by a private transfer
of property; a legal person must be created according to law and registered.37
The members of a legal person have a right to be consulted in general
meeting and may, in some degree, exercise control over the decisions of the
administrators; 38 as a general rule those rights are not available to benefi-
ciaries under a trust. Any legal person may have a perpetual existence, but
that is true only of trusts established for public or private purposes. 39 The
termination of a legal person and of a trust is governed by quite different
rules. To take but one example, the members of a legal person may agree
to bring its existence to an end, but the beneficiaries of a trust may not
unilaterally decide that the trust should be terminated. 40
One can only conclude that, as with the common law trust and the
contract for the benefit of a third party, a sufficiently close parallel cannot
be established between the trust and the legal person. That is not really a
surprising result. If it had been intended that the trust was to be a replica
of its common law counterpart, or a type of contract or legal person, express
provisions to that effect would no doubt have been made. Rather than that
being done, at least one of those possibilities, the classification of the trust
as a legal person, was considered and rejected during the deliberations lead-
ing up to the writing of the Draft.41 The pursuit of analogy may be a fas-
cinating and, on occasion, an illuminating process. It will not however disclose
the true nature of the trust. That can only be done, if at all, by an analysis
of the nature of that institution itself
The Draft treats the trust as an institution of the law of property. In
the first instance, la doctrine and la jurisprudence should so treat it unless
it becomes clearly impossible to do so. The vexatious question in pursuing
that analysis is, of course, the location and the nature of the ownership of
the property subject to the trust. The Draft, unfortunately, does not address
either of those issues. Indeed it gives less direction than does the Code.
37Ibid., Book One, arts 241-2.
38Ibid., Book One, arts 253-64, 275.
9lbid., Book One, art. 266; see also Book Four, art. 634.
3
4 Ibid., Book One, arts 266-9; see also Book Four, arts 622-8.
41Caron, supra, note 8.
1984]
THE QUEBEC TRUST
Article 981a of the Code states that the property is transferred to the trustees.
In general the courts have interpreted this as meaning that the trustees do
become the owners of the trust property. On the other hand, la doctrine has
consistently refused to accept that such is necessarily the case.42 Article 600
of the Draft refers simply to a transfer, but does not purport to name the
transferee. Nonetheless, it may be implied that the trustees should be held
to be the owners. A trust is created by a transfer; ownership therefore would
seem to leave the settlor. A beneficiary has, during the trust, only personal
rights against the trustee, and no real rights in the trust property itself.43
Ownership would thus seem in the first instance to vest in the trustee. 44
But if that be so, what is the nature of that ownership? Quebec lawyers
will often start an analysis of that question by denying the possibility of any
dismemberment or dual ownership of property such as is said to occur in
the case of a common law trust. A common lawyer would no doubt respond
that no such dismemberment or dual ownership takes place. If a settlor
creates a trust by transferring property to a trustee to hold on trust for a
beneficiary, he does not divide his existing ownership into two parts, giving
one to the trustee and the other to the beneficiary. He gives his ownership
to the trustee, and then imposes an obligation on him running in favour of
the beneficiary. The effect of the creation of a trust is to bring into existence
a right which did not exist before. But if that is not a dismemberment of
ownership, is it not dual ownership? Again, the common law answer is in
the negative, for the Court of Chancery in recognizing the trust gave the
beneficiary no control over the trust property, but rather control over the
trustee. This was done by imposing a personal obligation on the owner
enforceable in favour of the beneficiary. Thus, in Underhill on Trusts45 a
trust is defined in terms of obligation running against the owner of property
rather than in terms of ownership per se. The rights of the beneficiary under
the Draft are, as we have just noted, also stated to be personal rights against
the trustee. Does that not solve the dilemma of ownership? The trustee is
indeed the owner; the beneficiary has in personam rights against him, but
no in rem rights in the trust property.
Even if all that be accepted, a civil lawyer would still have doubts about
the nature of the trustee’s ownership. A common lawyer, if he ever stopped
42Asto the case law, see the latest judicial pronouncement in Tuckerv. Royal Trust Company,
supra, note 4. As to la doctrine, see the material cited, supra, note 8.
43Draft, supra, note 2, Book Four, art. 618.
“4Assuming, of course, the rejection of the analogy to the legal person.
45D. Hayton, ed., Underhill’s Law Relating to Trusts and Trustees, 13th ed. (1979) 1.
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to analyze the trust in terms of general principle, might also share those
doubts. The Draft defines ownership in article 34 of Book Four:
Ownership is the right to use, enjoy and dispose of things to the fullest, within
the limits and under the conditions established by law.
If a common lawyer were to think in these terms, this definition could
apply quite easily to a fee simple title in the case of realty, or to the ownership
of personal property –
for example shares. If the trustee is the owner of
the trust property, does that not mean that in both the common law and
the civil law there are significant departures from the usual concept of own-
ership? It may be argued that that is indeed the case in at least three im-
portant respects.
First, a trustee does not personally enjoy any of the benefits arising
from the property of which he is said to be the owner. For example, during
the trust he must account to the income beneficiary for the profits arising
from the trust property. However, a common lawyer would argue that he
is still the owner of the property against all the world, including the bene-
ficiary. If in a trust of realty the trust property is leased to a lessee, the
trustee alone can sue for the rent and enforce the terms of the lease. In the
case of a trust of shares, the trustee alone is registered as the owner, he alone
can vote at company meetings and he alone is entitled to receive dividends.
Does his obligation to account make him any less an owner than someone
who has contracted to account to a third party?
Second, are trustees’ powers of disposition not more limited than would
be the powers of disposition of any ordinary owner? In the common law,
a trustee is always in a position to pass good title to trust property to a third
party. Even if the transfer is made in breach of his duty as a trustee, the
third party nonetheless acquires title. He in turn may have an obligation
imposed upon him in favour of the beneficiary if he is not a bona fide
purchaser for value without notice of a breach of trust.4 6 But, the common
lawyer would contend, the normal attributes of title are not changed; the
fact that the courts control the good conscience of the owner from time to
time by the imposition of personal obligations is not incompatible with the
existence of normal powers of disposition. The terms of the Draft make
such an analysis difficult in the civil law. A trustee may dispose of property
by onerous title if that is in the interests of the beneficiaries. 47 The Draft
does not state what are the consequences of an unauthorized disposition
being made. May it be set aside or, if it is valid, are the trustees liable in
damages? However, if the consequences of an unauthorized disposition by
onerous title are not clear, the consequences of a disposition by gratuitous
46This may, of course, need to be modified where there is a system of registration of title.
47Draft, supra, note 2, Book Four, art. 508.
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title are. Article 528 of Book Four prohibits gifts by trustees, and provides
that any attempt to make a gift is void. Here, therefore, the common law
retains the facade of ownership, but the civil law does not.
Third, a trustee may lose title during, and inevitably will lose title at
the end of, a trust. In both systems a trustee may be removed by a court
order during the administration of the trust. That, it may be argued, is surely
not compatible with the idea of ownership, or with the idea that the ben-
eficiary simply controls the trustee and not the property. Even more sig-
nificantly, under article 630 of the Draft a trustee at the end of the trust
must transfer the corpus to those beneficiaries then entitled to it. Equally,
in the common law, if one beneficiary, or between them a group of bene-
ficiaries, controls the total beneficial interest, then the trustees may be com-
pelled to make a transfer of the property at his or their direction. It is surely
a strange type of ownership in respect of which the owner from the outset
knows that he will be under an obligation in due course to make a transfer
of his title at the direction of a third party.
It may therefore be possible to explain away arguments about the nature
of the trustee’s ownership in so far as the trustee must account to the income
beneficiary for the profits arising from time to time from the trust property.
It is somewhat more difficult to explain away the limits on a trustee’s powers
of disposition, and impossible to explain the limited duration of what in
most cases is prima facie supposed to be a perpetual title. The common
lawyer has not concerned himself with these conceptual problems. They
loom large in any attempt to fit the trust into the more conceptual and more
principled framework of the civil law. If issues such as the location of own-
ership or, should it be vested in the trustee, the nature of ownership, are as
unsettled under the Draft as they were under the Code, the trust, for all the
detail of the Draft, remains principle poor, or at least principle suspect.
C. Compatibility
If, as has just been suggested, the trust of the Draft is still principle
poor, its status within the Quebec legal system remains unresolved. Assum-
ing that the Draft is enacted without amendment, the attempt to accom-
modate the trust to a civil law system can take two forms. Neither offers
an attractive prospect for the future.
One possibility is that the debate about the nature of the trust will be
continued through a search for analogies that has not produced any con-
sensus in the past. There is no reason to suspect that, in the absence of more
precise guidance from the legislature, it will do so in the future. The Quebec
lawyer may still then hesitate about using the trust to the full, and, if that
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[Vol. 29
be so, the rich potential apparently offered by the provisions of the Draft
will remain untapped.
The second and, perhaps, more likely possibility, is that under the Draft
as under the Code, the courts, or at least the Supreme Court of Canada,
will continue to take a pragmatic approach to the way in which the trust
should operate. In Tucker v. Royal Trust Company48 there are, either implicit
or explicit, three suggestions as to how the trust should be dealt with.
First, it must be accepted that the trustee is the owner of the trust
property, and that his ownership is a modification of the conventional view
of ownership. This is a necessary inference from the way in which the trust
has been incorporated into the civil law. In this connection, the Supreme
Court might also have noted that there is some authority for the view that
Roman law and early civil law did accept a form of fiduciary ownership,
and that the absolute concept of ownership which is presently found in the
Code is, arguably, a somewhat modem Napoleonic conceit.49
Second, Tucker suggests that the search for analogies in the civil law
should be abandoned. In that case the Court rejected the argument that
because a gift could not be made in favour of an unborn person, it follows
that a trust could not be created for unborn persons who were to be the
primary beneficiaries. The trust has an independent status. It was introduced
into Quebec law in order to enable things to be done that otherwise perhaps
might not have been possible. Applying that reasoning to the Draft, the
potentially role rich trust would be unduly constrained if it were narrowed
by drawing unnecessary analogies to other legal institutions.
The third point may in part overlap the second. It would be going too
far to suggest that Tucker is authority for the view that one should abandon
the search for principle. The case does, however, support the proposition
that one should pay due attention to purpose. The trust in both the Code
and the Draft is designed to enable property owners to plan for the long
term management and enjoyment of property. A draftsman should ob-
viously expect a trust to be held invalid if it contravenes any of the specific
mandatory provisions of the Draft. Equally, he should not be surprised if
the trust is held invalid on the basis that it runs contrary to principles of
public order or good morals. Beyond that, however, his expectation should
be that the trust will be held valid rather than invalid, even if there is no
specific provision authorizing the provisions in question. Again in terms of
the Draft, if that is not done, the potentially wide range of uses to which
the trust may be put will be unduly limited.
48Supra, note 4.
49Bolgar, Why No Trusts in the Civil Law? (1953) 2 Am. J. Comp. L. 204.
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THE QUEBEC TRUST
If this approach is taken, it may by force of authority bind the courts.
But, judging by the relationship between la jurisprudence and la doctrine
with respect to trusts under the Code, it will probably not still the debate
about the nature of the trust. The practising lawyer, assured though he may
be by judicial decision, may still hesitate to use the trust to the full, and
once more the potentially rich role of the trust will be frustrated.
Conclusion
The Draft, it is suggested, should have grasped the nettle more firmly.
There is, it would seem, one of two ways of dealing with the issue of the
integration of the trust into Quebec law. On the one hand, it can be argued
that the trust mechanism, as it exists in the common law, should either be
fully accepted or should not be accepted at all. If it is decided that the
common law mechanism is to be accepted, the Draft should give clear
guidance, in terms of basic principle, on what consequences flow from that
decision. If the trustee is to be the owner of the property, then that position
should be stated in the Draft, with whatever qualifications may be necessary
in light of the general definition of ownership in article 34 of Book Four.
Assuming that this is a desirable solution, it should be spelled out in the
Code rather than based upon judicial decision. If that is not done it seems
clear, from past experience, that the debate about the nature of the trust in
Quebec will never be stilled.
The other possible approach is to abandon the use of the trust mech-
anism completely, and to provide in some other way for the carrying out
of the purposes for which the trust is needed. It is clear that there is great
value in being able to arrange a division of burden and benefit with respect
to property. It may, however, be that the incompatibility of the common
law trust mechanism with what are regarded as basic concepts of the civil
law make it an undesirable device in the law of Quebec. The solution then
would be to select an existing civil law device that has the capacity to bring
about the end of the division of burden and benefit, making whatever mod-
ifications may be necessary to that institution. Adopting that approach, it
would make most sense to treat the trust as a separate independent legal
entity, in other words as a legal person. The legal person would then be the
owner of the trust property, and the trustees would be simple administrators.
That solution was rejected by the Civil Code Revision Office.50 However,
having rejected that option, the Draft does not clearly adopt any alternative.
It would be unfortunate if, as a result of this failure to settle basic issues,
uncertainty and doubt as to the nature of the trust continue to plague Quebec
law.
50Caron, supra, note 8. But see now Title Six of Bill 58, An Act to add the reformed law of
property to the Civil Code of Quebec 1983, presently in first reading. This proposed legislation
describes the trust as a “patrimonium by appropriation”: see arts 1292-6.
