THE LAW REFORM COMMISSION OF SASKATCHEWAN

PROPOSALS FOR 

REFORM OF THE TRUSTEES ACT

2002


INTRODUCTION

1. The Law of Trusts in Saskatchewan
 

The trust is one of the fundamental creations of the English legal tradition. The legal historian Maitland observed that "of all the exploits of Equity the largest and most comprehensive is the invention and development of the Trust."(1) A modern text book on trusts adds to Maitland's comment that
 

The trust is unique because it is so flexible a tool for making dispositions of property for all kinds of purposes. It is not limited to specific situations such as bailment or agency, but can be created for any purpose which is not illegal or contrary to public policy.(2)
 

In Saskatchewan, trusts are created for a variety of purposes(3), but most are testamentary trusts, included in wills to hold and invest property for benefit of family members. The trust is an indispensable tool for estate planning. The typical testamentary trust is designed to provide for infant beneficiaries, and occasionally still for a surviving spouse. Trusts for children of the deceased are common; trusts for grandchildren frequent. Only rarely does a trust arrangement attempt to span more than two generations of beneficiaries.
 

A century ago, the trust served different purposes. In England, complex trust arrangements, "settlements of land", were designed to protect the wealth of the wealth of the gentry, preventing improvident heirs from jeopardizing the long term interests of the family. The settlement strongly influenced the development of trust law. Nineteenth century English trusts legislation was designed to facilitate settlements. In the last century, trust law has evolved to meet the changing purposes of the trust. But much of the innovation and adjustment of the law has been the work of the courts. The Saskatchewan Trustees Act(4) still reflects its origin in nineteenth-century English trusts legislation.
 

The Trustees Act was enacted in 1909, but copied an earlier Territorial Ordinance.(5) The ordinance was in turn based principally on the English Trustee Act,1893.(6)The Variation of Trusts Act, adopted in 1969, was a significant addition to the statutory regime, (8) but The Trustees Act itself has not been substantially revised. Most amendments have been limited to special purposes, such as empowering trustees to purchase crop insurance. The only significant innovation, adoption of a modern approach to regulation of the investment powers of trustees in 1998,(9) has been made in the legislation since 1909.
 

In England, nineteenth century trusts legislation was replaced by the Trustee Act, 1925.(10) This Act recognized that the settlement was no longer the dominant form of trust, and corrected inadequacies that had been discovered in the older legislation. This lead was followed in Australia and New Zealand(11), where some jurisdictions have gone considerably beyond the Trustee Act, 1925, as has England itself in the Trustee Act, 2000.(12) In Canada, only Manitoba has incorporated the English reforms of 1925,(13) but the need to modernize trusts legislation has been widely recognized. The Ontario Law Reform Commission recommended comprehensive reform,(14) and the British Columbia Law Institute is currently engaged in a major project on the law of trusts.
 
 
 

2. Reform of The Trustees Act

The Trustees Act is not a codification of the law of trusts. The drafters of the English model on which it was based left the basic principles of the law to the courts, including such basic matters as the constitution of trusts, the general duties of trustees, and the remedies for breach of trust. Legislation was designed primarily to facilitate the creation and administration of trusts. Prior to adoption of the nineteenth-century trustees Acts, trustees possessed only those powers specifically conferred on them by the terms of the trust instrument. In practice, clauses giving trustees the powers ordinarily required to administer the most common varieties of trusts came to be a standard part of trust documents. One of the purposes of trusts legislation was to make such clauses unnecessary. The full title of the Trustee Act, 1860 was "An Act to give trustees, mortgagees and others certain powers now commonly inserted in settlements, mortgages and wills". These statutory powers were available to all trustees unless the trust instrument specifically provided otherwise. Only in a few cases does the Saskatchewan Trustees Act and its English model go beyond this project, usually to clarify the law. For example, uncertainty about the scope of trustees' liability led to adoption of a provision relieving trustees from liability for technical breaches of trust in 1896.
 

The general principles of trust law are best left to the courts. Trust law has evolved over time into a complex but coherent body of law. Codification would likely not make the law any less difficult. The flexibility that has allowed the law to adapt to the changing uses to which trusts have been put requires interpretation and adaption of principles, whether they are contained in the case law or statute. Trust law is "lawyers' law". The Trustees Act is not often consulted by lay persons. Lawyers are aware of the relationship between the statute and the equitable principles that govern trusts. In the Commission's opinion, trusts legislation should continue to serve the same limited, but important, role it currently plays. This approach has been adopted by all Commonwealth law reform agencies that have recommended substantial reform of trusts legislation.
 

The Trustees Act is in need of substantial reform because it now fails to carry out its own purposes in a satisfactory manner. The statutory powers that where deemed appropriate in the nineteenth century are now inadequate. For example, while trustees have broad powers to invest trust property, they have no statutory authority to sell or lease real property that is part of the trust. The absence of such a power makes little sense in modern practice. It was not included in nineteenth-century trusts statutes because it was inappropriate in settlements, which were of course primarily intended to prevent dissipation of the family's landed wealth. This problem has been addressed in practice by including expanded administrative powers in trust documents. But if there is a place for trusts legislation at all, there is no good reason for allowing it to remain out of step with contemporary needs.
 

The Trustees Act also suffers from a lack of clarity that betrays its history. Some provisions are so tightly bound up with obsolete procedures or nineteenth-century case law that their meaning is now obscure, even to practising trust lawyers. In addition, many provisions in the Act are the product of a succession of incremental reforms that were never properly consolidated. For example, the Act gives trustees the power to appoint a replacement when one of their number is unable to continue. Nearly on third of the provisions in the Act are concerned with this topic, but because their effect is uncertain, they are rarely used. Because appointment and removal of trustees can be done by court order, this state of affairs may have been acceptable in the past. Increasing concern about the cost of court proceedings now makes it essential to provide workable alternatives.
 

Although we are of the opinion that trusts legislation should be primarily concerned with creation of statutory powers that can be excluded by the terms of a trust instrument, there are some more fundamental matters that require reconsideration because they involve significant policy issues that have not been adequately addressed by the courts. Perhaps the most important of these is the general duty of care owed by trustees. The present law has been criticized on two grounds. First, it fails to clearly distinguish between the standard of care that can be expected of non-professional trustees and professionals such as trust companies. Second, the present law permits even professional trustees to limit their liability by insisting on inclusion of an exoneration clause in the trust instrument. Both issues are important in Saskatchewan, where a member of a testator's family and a professional trustee are often appointed as co-trustees.
 

The guiding principles in the Commission's review of The Trustees Act flow from the considerations discussed above: .
 

1. Modernisation: New legislation should adopt modern language and terminology. Provisions in the Act that have outlived their usefulness should be removed; Provisions that are out of step with current business and financial realities should be replaced.
 

2. Clarification: Provisions of the Act that are now difficult to construe or that are misleading, due both to changes in the general law and the drafting style of the original, should be redrafted.

3. Codification: Areas of trust law that are not specifically addressed in the existing Trustee Act, but which call for reconsideration in light of the demands of modern trusteeship and changes in the judge-made law should be brought within the Act.

We do not recommend any radical departures from the established principles of trust law. In addition, there is little in our proposals that can be described as original. In formulating our recommendations, we have drawn heavily on reform of trust law in other jurisdictions and the proposals of other law reform agencies. Our goal is to lay the foundation for state of the art trusts legislation adapted to contemporary Saskatchewan requirements.

Our recommendations are set out in full in the last part of this report. Although they are not presented as a draft statute, they are intended to facilitate preparation of a statute.

TABLE OF CONTENTS

INTRODUCTION

DUTIES AND RIGHTS OF TRUSTEES

Introduction

The Trustees' duty of care

1. Scope of the duty 

2. The duty of care and investment powers 

3. Relief from technical breaches of trust 

4. Exoneration clauses 

Responsibility for administrative decisions: Delegation of authority 

The duty to avoid conflicts of interest 

1. The conflict of interest rule 

2. Should the rule be codified? 

3. Court approval of conflict of interest 

4. Exoneration clauses and conflict of interest

The duty of the trustees to act jointly

The duty to act impartially

The duty to disclose and account

1. Passing of Accounts 

2. The right to an accounting 

Application to court for advice and direction

Payment of trust funds into court

Remuneration of trustees and indemnification for expenses

1. Remuneration 

2. Indemnification 

ADMINISTRATIVE AND OTHER POWERS OF TRUSTEES

Introduction

Powers that should be included in a trusts statute

1. Power to sell and otherwise dispose of property 

2. Power to lease, grant easements etc. 

3. Postponing sale 

4. Power to carry on a business 

5. Power to improve, maintain and repair trust property 

6. Purchase of a dwelling 

7. Power to distribute trust property in specie

8. Power to insure trust property 

9. Power to borrow money 

10. Deposit of trust funds 

11. Incidental authority to deal with trust property 

Other administrative powers of trustees contained in The Trustees Act

Powers of executors and administrators contained in The Trustees Act

Dispositive powers of trustees

APPOINTMENT AND REMOVAL OF TRUSTEES

Introduction

Death of a trustee

1. The survivorship rule 

2. Death of a sole trustee 

Replacement of trustees without court order

1. Application of section 15 to personal representatives 

2. Grounds for removal of trustees 

3. Persons entitled to replace trustees 

4. Removal without replacement 

5. Incidental powers 

Retirement of trustees

Removal and appointment of trustees by the court

1. Removal and appointment of trustees under section 14 

2. Judicial trustees 

Reconstituting the trust: The effect of appointment and removal of trustees

1. The powers of new trustees 

2. Trustees who retire or are removed 

3. Vesting of trust property on non-judicial appointment and removal 

(a) Express vesting declarations

(b) Deemed vesting declarations 

(c) Effect of vesting declarations

(d) Property excluded from the scope of vesting declarations 

(e) Vesting apart from declaration 

4. Vesting orders 

(a) Vesting orders made to further administration of trusts 

(b) Effect of vesting orders 

(c) Appointment of persons to convey 

(d) Vesting property in charities 

(e) Vesting orders in other specified cases 
 

RECOMMENDATIONS 5.1

3. Other Recommendations
 

Reform of The Variation of Trusts Act has been discussed in two previous reports of the Commission: The Rule in Saunders v. Vautier and the Variation of Trusts Act (1994) , and Proposals Relating to the Rules Against Perpetuities and Accumulations (1987).
 

The report on The Rule in Saunders v. Vautier and the Variation of Trusts Act concluded that the rule which allows termination of a trust by competent beneficiaries is longer useful. In practice, it applies only when the drafter of a trust instrument has failed to use an appropriate formula to exclude it. Since adoption of The Variation of Trusts Act, the courts have had jurisdiction to terminate a trust if it is in the interests of the beneficiaries to do so. This is sufficient to cover any case in which the Rule in Saunders v. Vautier might still be useful.
 

In Proposals Relating to the Rules Against Perpetuities and Accumulations, the Commission concluded that the policy reasons for these rules are largely obsolete. In addition, in the unlikely event that a "perpetual trust" is created and causes inconvenience, The Variation of Trusts Act is now available to reformulate the terms of the trust. The rules are now little more than pitfalls for the unwary, which have been reformed or abolished in most common law jurisdictions.
 

Changes in The Variation of Trusts Act to accommodate the recommendations in these reports and to clarify the Act in some other respects were proposed in the report on The Rule in Saunders v. Vautier and the Variation of Trusts Act.
 

The Variation of Trusts Act could logically be included as part of new trusts legislation. Whether it included or not, we recommend that any comprehensive reform of trusts legislation should include the proposals made in the reports discussed here.
 
 

THE DUTIES AND RIGHTS OF TRUSTEES



Introduction
 

As a matter of form, a trust is an arrangement in which legal title to property is held by "trustees" for the benefit of others, the "beneficiaries". But more importantly, the trust is a fiduciary relationship. As a fiduciary, a trustee is under a strict duty to act in the interests of the beneficiaries. This, more than the formal description offered above, specifies the nature of the trust. For this reason, Lewin's treatise on trusts defines the trust in terms of duty. According to Lewin, a trust is "the duty or aggregate accumulation of obligations that rest upon a person described as a trustee in relation to property held by him, or under his control."(15)
 

The fundamental fiduciary duty imposed on trustees has been broadly described as loyalty to the trust and its beneficiaries. The more specific duties that can be enumerated are no more than applications of this general principle.(16) These duties may be classified and analysed in various ways, but for our purposes, a descriptive list is sufficient: 1. The general duty of care in administering the trust; 2. The duty of each trustee to take personal responsibility for administrative decisions; 3. The duty of the trustees to act jointly; 4. The duty to avoid conflicts of interest with the trust; 5. The duty to act impartially between the beneficiaries; and 6. The duty to account to the beneficiaries.(17)
 

The duties of trustees must be clearly distinguished from their administrative powers. Trustees may, for example, be given the power to sell trust property, or to invest in certain securities. Powers may be conferred by the trust instrument, or by statute.(18) But whatever powers the trustees may possess, they must be exercised with due care, impartially, and otherwise in conformity with their duties as trustees. . The powers of trustees are variable. Their duties are uniform, applying to all trustees.
 

Because the duties of trustees are heavy responsibilities, they have been coupled with certain rights and protections. Thus, for example, trustees have the right to seek the advice and direction of the court, and the right to submit their accounts to the court for approval. Some protections are the creation of statute. For example, section 57 of The Trustees Act permits the court to relieve a trustee from liability for a "technical breach"of trust.
 

The duties of trustees were inventions of the courts of equity, products of the long evolution of the trust as a basic institution of English property law. Although they have been modified by statute, the statutory contribution has been modest. This contrasts with the approach of legislators to the powers of trustees. We have noted that a major purpose of trusts legislation was to give statutory powers to trustees, making it unnecessary to insert commonly required powers in trust documents. Nineteenth-century legislators did not regard it as necessary or desirable to codify the general duties of trustees, and modified the duties of trustees only incidentally.
 

Only recently have commentators and law reform agencies recommended substantial statutory renovation of the duties of trustees. The perceived need does not reflect an attraction to codification for its own sake, but is in response to specific issues and problems. In some instances, the case for reform is analogous to the case for creating statutory powers. For example, it has become commonplace to give trustees a broad discretion to apportion trust property between capital and income, ousting rules established by the case law. It will be suggested below that a statutory discretion to apportion between capital and income would be appropriate, both because the discretion is now part of many trust documents, and because the changing investment climate has made many of the established apportionment rules inappropriate.
 

In other cases, reform seems desirable to clarify or reshape the law. The scope of the duty of care has never been completely certain. This problem has become less academic in recent years. Because of the difficulty faced by trustees who must make investments in an increasingly complex market, trust instruments often relieve trustees of the full weight of the duty of care in making investment decisions. This has created issues about whether it is appropriate to relieve trustees of their basic duty of care, and whether professionals (such as trust companies) should be held to a higher standard than non-professional trustees. The problem has recently been compounded in Saskatchewan and most other Canadian jurisdictions by adoption of a new statutory regime regulating investment powers..(19)

The Commission is not of the opinion that trusts legislation should attempt codification of the duties and rights of trustees. However, the examples set out above suggest that statutory modification, amounting to partial codification of some duties and rights, is desirable.
 

The Trustees' duty of care
 

1. Scope of the duty
 

In Speight v Gaunt(20) and Learoyd v. Whiteley(21), the House of Lords laid that the rule that
 

As a general rule, the law requires of a trustee no higher degree of diligence in the execution of his office than an ordinary man of prudence would exercise in the management of his own affairs.
 

This formulation of the duty of care has frequently been reaffirmed by Canadian courts.(22) The standard is objective. A trustee who acts imprudently is liable for breach of trust, even if he or she believed that the impugned decisions were prudent, and that all appropriate safeguards had been taken. In Speight v Gaunt, the Court of Appeal had been satisfied that an "honest trustee who has attempted to do his best"(23) should not be liable. On appeal, the House of Lords explicitly rejected the subjective criterion proposed by the lower court.
 

Waters writes that
 

[T]he trustee must show ordinary care, skill, and prudence, he must act as the prudent man of discretion and intelligence would act in his own affairs. Evidently this does not mean that, if the trustee is careless and inefficient in his own affairs, he need do no more in the conduct of the trust affairs. A man may speculate with his own funds, and be negligent in the administration of his own affairs, but as a trustee he is exercising the powers and discretions of an owner in favour of another or others. It follows that the beneficiary should be able to expect an objective test of what is careful, skilful, and prudent.(24)
 

Note that the standard requires to same minimum degree of skill from all trustees, regardless of training and experience. A trustee is expected to possess some expertise in business affairs of the sort encountered in the administration of a trust. It is not enough that the trustee acts as prudently and carefully as his or her background allows. In Fales v. Canada Permanent Trust Co., the Supreme Court of Canada affirmed that a single standard of care applies to all trustees:
 

The weight of authority to the present, save in the granting of relief under remedial legislation . . . . has been against making a distinction between a widow, acting as trustee for her husband's estate, and a trust company performing the same role. . . . Every trustee has been expected to act as the person of ordinary prudence would act.(25)
 

The objective character of the standard is essential to ensure that a uniform minimum of care and prudence can be expected of trustees. However, the standard applied to trustees is more rigorous than the objective standards applied in other contexts. The standard of care required in negligence law is that of the "reasonable person", but in applying the standard, allowance is made for the skill and experience of the defendant. Thus, for example, a family physician required to perform surgery is required to exercise the surgical skill that could be expected of a general practitioner, not the skill of a more highly trained surgeon. Even other fiduciaries are not placed under as heavy a responsibility as trustees. Thus, for example, the directors of corporations are required to act prudently, but, in contrast to trustees, a director is only required to demonstrate the prudence and care expected of a person with his or her business experience and training.(27) Even though it upheld the Learoyd v. Whiteley standard in Fales v. Canada Permanent Trust Co., the Supreme Court admitted that the conduct expected of trustees "has been at times, and in certain circumstances, unduly harsh and inflexible".(28)
 

Several reasons account for the persistence of the rigorous standard. Traditionally, the trust has been regarded as the highest form of fiduciary relationship. As Scott has observed
 

Some fiduciary relationships are more intense than others . . . . Thus, a trustee is under a stricter duty of loyalty than is an agent upon whom limited authority is conferred or a corporate director who can act only as a member of a board of directors or a promoter acting for investors in a new corporation.(29)
 

Although the trust may be a "more intense" fiduciary relationship than others, we are of the opinion that the standard of care expected of trustees should reflect to needs of settlors and beneficiaries, not an abstract classification of fiduciary relationships.
 

In Saskatchewan, the majority of trusts are testamentary, designed to hold the deceased's property until it can be distributed within the family. Many trustees are family members. When more expertise is thought necessary, a trust company is often appointed co-trustee with a family member. Is it reasonable to hold nonprofessional trustees to a higher standard than many can reach, usually a higher standard than the testator expected of either his trustee or himself? The facts in the Fales case demonstrate the problem. In that case, the trustees failed to sell shares in a company "in a timely fashion", resulting in considerable loss to the trust when the company went bankrupt. The trustees were the testator's widow and a trust company. The widow relied on the advance of her co-trustee. Although she questioned the decision to hold the shares, she acquiesced in it, and did not seek independent advice. In the result, she was found guilty of breach of trust with her professional co-trustee.
 

The inflexibility of the Learoyd v. Whiteley standard is often mitigated in practice. A more equitable result may be achieved by granting the relief offered by section 57 of The Saskatchewan Trustees Act or its analogs in other provinces. This remedial provision allows the court to excuse an honest trustee from the consequences of a breach of trust if the court believes the trustee "ought fairly to be excused".(30) The widow In the Fales case was exonerated from paying damages for her breach under the relief provision in the British Columbia Trustee Act.(31) The court justified retaining the Learoyd v. Whiteley standard because the relief provision made it possible to avoid the "unduly harsh" result dictated by the standard. But the scope of the protection afforded by the remedial legislation is far from certain, resting on what amounts to an open-ended judicial discretion. It is difficult to escape the conclusion reached by Waters that the court missed an opportunity in the Fales case to make a clear distinction between non-professional trustees with modest business experience and professionals such as trust companies.(32)
 

The English courts have consistently held to the standard adopted in Learoyd v. Whiteley, but unlike the Canadian courts, have made a distinction between professional and non-professional trustees. In Waterman's Will Trusts, the Learoyd v. Whiteley standard was treated as a minimum. Harman, J. expected more of a remunerated professional trustee:
 

[A] paid trustee is expected to exercise a higher standard of diligence and knowledge than an unpaid trustee, and a bank which advertises itself largely in the public Press as taking charge of administrations is under a special duty. (33)
 

A similar approach has been adopted in the United States. The Restatement of the law of trusts recommends that
 

[Where a trustee] has or procures his appointment as trustee by representing that he has greater skill than a man of ordinary prudence, he is under a duty to exercise such skill. (34)
 

The Uniform Probate Code provides that
 

. . . [I]f a trustee has special skills or is named trustee on the basis of representations of special skills or expertise, he is under a duty to use those skills.(35)
 

Note that the English authorities place emphasis on receipt of remuneration by trustees, while the American model legislation places emphasis on the holding out of greater than ordinary expertise. The Ontario Law Reform Commission has also recommended a higher standard for experts. In our opinion, the Ontario proposal improves on its English and American counterparts. It places the emphasis on possession of special skills or qualifications:
 

. . . [T]rustees who in fact possess, or because of their profession, business or calling ought to possess, a particular level of knowledge or skill which in all the circumstances is relevant to the administration of the trust, shall employ that particular level of knowledge or skill in the administration of the trust.(36)
 

Receipt of remuneration in not an appropriate distinction in Canada, because in Canada, unlike England, non-professional trustees usually receive remuneration.(37) While a trustee who advertises expertise should certainly be required to demonstrate it, we are of the opinion that all trustees who have special qualifications should be held to the level of skill that can reasonably be expected of them. The Ontario Commission's approach is analogous to the standard of care applied to professionals in negligence law. It has worked well in that context. We recommend adoption of a similar standard.. (38)
 

However, adoption of a higher standard for professional trustees will solve only part of the problem created by the Learoyd v. Whiteley standard. We are of the opinion that no more should be expected of any trustee than prudent application of the skill and experience he or she possesses. While superior skill should be expected of an expert, the non-professional who undertakes to manage a modest family trust should not be held to a standard that requires exercise of business and financial skills he or she does not possess.
 

We believe this approach accords with the realistic expectations of testators and settlors. When a testamentary trust is set up to distribute property to the testator's family, the testator knows the capabilities of the trustee. If a family member with no special skills is chosen, it is usually because the testator is satisfied that the trustee will be able to do an adequate, if not professional, job. If, as is often the case, a professional co-trustee is also appointed, it is undoubtedly with the expectation that the professional will take primary responsibility for difficult financial and business decisions, while the non-professional family member will provide input and advice about the family's needs and expectations. In neither case would the testator expect the non-professional trustee to be held to an artificially high standard of expertise.
 

Although the courts have held to the Learoyd v. Whiteley standard, they have recognized that it does not take the skill and experience of non-professional trustees into account in a realistic manner. The remedial provision has been used to prevent injustice in such cases,(39) but as the Ontario Law Reform Commission asked:
 

If the courts are prepared to exercise their power to excuse trustees for breach of trust in these circumstances, would it not be better to take the whole matter out of the realm of judicial discretion - where each case, as a decision on the facts, lends nothing to legal precedent - and for the revised Trustee Act to make express provision for a lower standard of care for non-professional, unremunerated trustees? (40)
 

Surprisingly, the Ontario Commission answered the question in the negative, fearing that "any standard of care that is lower than that of the ordinary prudent man of business would, in all probability, assume some overtly subjective character."(41) We do not agree. The counter example of the long-established objective standard applicable to corporate directors that takes into account individual skill and experience demonstrates that the fear is unwarranted. A more flexible general standard of care seems to us to be a logical complement to insistance on holding experts to the standard which can be expected of them. Finally because, despite its limitations, the existing remedial provisions amount to defacto recognition that the individual capabilities of trustees should be taken into account, adoption of the flexible standard will not dilute the standard in practice. It would instead make the application of the standard more consistent.
 

We recommend that the general standard of care expected of trustee should be codified to provide that:
 

In the discharge of his or her duties and the exercise of his or her powers, a trustee shall exercise that degree of care and diligence that a person of ordinary prudence would exercise, having regard to the skill, experience, and qualifications of the trustee. (42)
 

2. The duty of care and investment powers
 

The conclusion we have reached concerning the general standard of care presents a particular problem in regard to the investment powers of trustees. In 1998, The Saskatchewan Trustees Act was amended to introduce a new regime governing investment powers.(43) At the core of the new provisions is the concept of the "prudent investor". Section 3(1) of the Trustees Act now provides that
 

3 - (1) A trustee may invest trust property in any form of property or security in which a reasonable, prudent investor would invest, including a security issued by a mutual fund as defined in The Securities Act, 1988 or similar investments.
 

This is accompanied by section 3.1 , which carries the marginal note "standard of care":
 

3.1 - In investing trust property, a trustee must exercise the care, skill, diligence and judgement that a reasonable, prudent investor would exercise in making investments.
 

Section 3.1 would appear to require a trustee making investment decisions to possess the skills of a "prudent investor". Presumably, the trustee should be either a person who has professional training in investment, or a person who has considerable practical experience as an investor. This formula appears to conflict with our conclusion that no more can reasonably be expected of a trustee than prudent application of the skills and experience he or she actually possesses. Section 3.1 might, of course, be retained, operating as an exception to the general rule. We would be reluctant to accept this solution, however. Many contemporary trusts consist of little more than an investment fund. If the general standard of care we have proposed does not apply to investment decisions, it would lose much of its practical significance. On the other hand, we are also reluctant to propose any substantive change in the new investment powers regime. The new regime is a clear improvement on the "legal list" of authorized investments it replaced, and was the product of careful and lengthy consideration by the Uniform Law Conference of Canada.(44)
 

We believe there is a way out of this dilemma without abandoning the principle that trust investments should be those that a "prudent investor" would choose. Section 3.1 is not an essential part of the new regime. In fact, it may confuse rather than strengthen, the prudent investor approach as it is otherwise formulated in the amendments. To understand why this is the case, it is necessary to consider the origins of the prudent investor concept. Until recently, unless a trustee was granted wider investment powers by the trust instrument, Saskatchewan and other Canadian provinces restricted investments to a statutory list of authorized investments. In the United states, on the other hand, the legal list approach was never adopted. The American courts were initially content to subject investment decisions to the general standard of care, but the standard applicable to investment decisions was particularized by the first Restatement on trust law, adopted by the American Law Institute in 1935. The standard of care applied by the Restatement to investment decisions was more rigorous than the general standard. It "constrained" the prudent man, requiring a trustee to exercise the skill and judgement of a "prudent man who invests the property of others".(45) This approach has been retained in most American jurisdictions, though the Uniform Prudent Investor Act, adopted in 1994, constrains the prudent man in a different way.(46) Like section 3.1 of the Saskatchewan Act, it requires trustees to exercise the skill of a prudent investor.
 

The "constrained prudent man" standard rests on the assumption that investment decisions require particular care and skill. As such, it reflects the same concerns that led English and Canadian lawmakers to adopt a legal list of authorized investments instead of leaving trustees to determine for themselves whether an investment would be prudent. The legal list approach fell from favour because the list no longer reflected realistic investment options, and could not easily be amended to keep abreast of changing market conditions. It is not surprising that Canadian lawmakers turned to the American experience as an alternative. In 1970, the Uniform Law Conference of Canada proposed adoption of the constrained prudent man standard contained in the Restatement.(47) When it drafted the Uniform Trust Investments Act, 1997, the conference looked to more recent American models, and adopted the "prudent investor" standard.(48)
 

However, the Uniform Trust Investments Act, 1997 and the 1998 amendments to The Saskatchewan Trustees Act differ from their American model in a way that is critically important in the present context. Section 3(1) of the Saskatchewan(49)has no parallel in the American model. Its origin appears to lie in the language of the legal list approach. It does not formulate a standard of care. Rather, it in effect defines permitted investments, not by listing them, but by identifying them as securities or other property in which "a prudent investor would invest.". Thus the policy implemented in the American legislation as a standard of care is converted in section 3(1) into a definition of prudent investment.
 

Sections 3(1) and 3.1 of the Saskatchewan Act are different ways of formulating the prudent investor rule. The commentary to the Uniform Trust Investments Act, 1997 gives no explanation of why both were recommended. Section 3(1) is sufficient in itself to establish the prudent investor rule, and, we believe, less problematic in its application than the standard of care contained in section 3.1. Very few trustees will in fact be investment professionals or experienced investors. In order to make investment decisions acceptable under the prudent investor regime, it will be necessary for most trustees to obtain professional advice. The new regime clearly recognizes this, and permits trustees to both seek advice and to rely on it. Section 3.3(1) of the Saskatchewan Act provides:
 

3.3 - (1) A trustee may obtain advice respecting the investment of trust property.
 

(2) A trustee is not in breach of trust for relying on advice obtained pursuant to subsection (1) if a reasonable, prudent investor would rely on the advice in comparable circumstances.(50)
 

This provision makes more sense in conjunction with section 3(1) than as a complement to section 3.1. A trustee who is not an expert investor can reasonably be expected to take advice to determine what investments a prudent investor would make. This is what section 3(1) clearly requires. What section 3.1 requires is not as clear. It is doubtful that its practical effect will be any different than section 3(1), but on its face it appears to suggest that the trustee must acquire the skill of a prudent investor, not merely take advice to ensure that investments are prudent.
 

We recommend that section 3.1 of The Saskatchewan Trustees Act be repealed.(51) If the section is repealed, there will be no conflict between the investment powers provisions in the Act and the general standard of care we propose. We also believe that the investment powers provisions would be conceptually sounder if section 3.1 were deleted. However, it must be stressed that this recommendation would not alter the practical effect of the investment powers regime adopted in 1998.
 

3. Relief from technical breaches of trust
 

Section 57 of The Saskatchewan Trustees Act provides:
 

57 - If in any proceeding affecting trustees or trust property it appears to the court that a trustee, whether appointed by the court or by an instrument in writing or otherwise, or that any person who in law may be held to be fiduciarily responsible as a trustee, is or may be personally liable for a breach of trust, but has acted honestly and reasonably and ought fairly to be excused for the breach and for omitting to obtain the directions of the court in the matter in which it was committed, the court may relieve the trustee either wholly or partly form personal liability.
 

The relief provision was originally enacted in England in 1896(52), and has been copied in all Canadian provinces except Prince Edward Island.
 

The marginal note to the section identifies its subject matter as "relief of trustees committing technical breach of trust". This reflects the origin of the provision, which was recommended by a Select Committee on Trust Administration in 1895. The committee was primarily concerned with what it characterized as "technical breaches", such as payment of money by mistake by trustees. However, the language of section 57 is broad enough to encompass more than technical breaches in any narrow sense of the term.(53) As noted above, it has often been used to excuse a breach of trust by an inexperienced trustee.(54) It has also been used to relieve trustees who placed more trust in professional advisors than was strictly prudent,(55) and has also proved invaluable as a mechanism for apportioning liability between trustees according to their relative culpability.(56)
 

Whatever the intention of the Select Committee, the relief provision has become in practice a broad judicial discretion to relieve honest and well-meaning trustees from liability for breach of trust. The courts have avoided placing any limits on the scope of the discretion, and have on occasion even refused to state any general principle to be applied in determining when an honest trustee "ought fairly to be excused".(57) It is because of the uncertain scope of the discretion created by the section that we are not content to allow it to remain the only mechanism for reducing the burden on trustees whose skill and experience fall below the level required by the Learoyd v. Whiteley standard. Our proposed reformulation of the standard of care would make section 57 less essential. However, we are of the opinion that a broad judicial discretion to relieve honest and well-meaning trustees would remain useful. Section 57 has played this role in a satisfactory manner. We see no reason to substantially alter a successful formula. As long as it is not the only mechanism to ensure that the standard care is not too inflexible, the lack of constraining criteria in the section is a virtue rather than a vice.(58)
 

However, one addition to the language of section 57 is necessary. It has been held that the section does not encompass a case in which the breach occurred as a result of improper delegation of authority by a trustee to an agent. The relief provision applies only to the actions of a trustee, not derogation of duty by allowing an agent to act in place of the trustee.(59) While this distinction may seem strained, it is consistent with other judicial authorities relating to improper delegation by trustees. We are of the opinion that there is no reason why this limitation on the scope of section 57 should remain. We recommend rephrasing section 57 to provide that:
 

Where a trustee, or any person who may be held liable as a trustee, is or may be personally liable for a breach of trust as the result of any act or omission of the trustee or of an agent of the trustee, the court may, if the trustee has acted honestly and reasonably and ought fairly to be excused for the breach, or for omitting to obtain the directions of the court in the matter in which it was committed, relieve the trustee either wholly or partly form personal liability.(60)
 

4. Exoneration clauses
 

It has become common practice to include in trust instruments a clause relieving trustees, in whole or in part, from liability for breach of the normal standard of care. Canadian courts have tended to give exoneration clauses a strict interpretation,(61) but Waters suggests that so long as only departures from the standard made in good faith are permitted, carefully drafted exoneration clauses are "without doubt valid" in England and Canada.(62)
 

Exoneration clauses are problematic because they cut to the very foundation of the trust. If Lewin is correct in defining the trust as neither more nor less than "the duty or aggregate accumulation of obligations" imposed on trustees(63), the trust loses its essential character if the duty cannot be enforced. Despite Water's apparent certainty than exoneration clauses are valid, Canadian courts have sometimes expressed reservations. Thus in Fales v. Canada Permanent Trust Co. , Dickson, J. observed in an obiter comment that:
 

This standard , of course, may be relaxed or modified up to a point by the terms of a will and, in the present case, there can be no doubt that the co-trustees were given wide latitude. But however wide the discretionary powers contained in the will, a trustee's primary duty is preservation of the trust assets, and the enlargement of recognized powers does not relieve him of the duty or using ordinary skill and prudence, nor form the application of common sense.(64)
 

In Re Poche Estate, an Alberta Court held that "a trustee must be held responsible for any loss resulting from his gross negligence, regardless of any provision in the trust instrument relieving him of such liability."(65) David Steele, while noting that there are few other cases on point, has concluded that Canadian courts "would likely adhere" to the principle that an exoneration clause will only be effective "to relieve a trustee from liability for breaches of lesser culpability then acts of gross negligence, intentional wrong-doing and bad faith".(66)
 

This issue has been more intensely debated in the United States than in Canada, but with mixed results. The Uniform Probate Code,1972 provides that both professional and non-professional trustees may be relieved of the duty of care contained in the Code.(67) In New York State, on the other hand, clauses that attempt "the exoneration of . . . [a] fiduciary for failure to exercise reasonable care, diligence and prudence" are invalid.(68) The Restatement adopts a middle ground. It permits dilution of the standard of care, but invalidates exoneration clauses that forgive bad faith, reckless disregard of the duty of loyalty to the beneficiaries' interests, or abuse of the fiduciary relationship(69):
 

222(2) . . . [A] provision in the trust instrument is not effective to relieve the trustee of liability for breach of trust committed in bad faith or intentionally or with reckless indifference to the interest of the beneficiary, or of liability for any profit which the trustee has derived from a breach of trust.
 

222(3) . . .[T]o the extent to which a provision relieving the trustee of liability for breaches of trust is inserted in the trust instrument as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor, such provision is ineffective.(70)
 

The Ontario Law Reform Commission was impressed that "we can find no evidence in the literature that any objection has been raised" to the New York law since its adoption in 1936. The Commission argued that professional trustees should carry liability insurance, and non-professionals who cannot meet the minimum standard required of them should decline office. Even when capable trustees fall into error, it is inappropriate, according to the Commission, to shift losses from the trustees to the beneficiaries through application of an exoneration clause. The Ontario Commission therefore recommended adoption of general prohibition on exoneration clauses based on the New York model.(71)
 

We are of the opinion that the Ontario Commission missed the point of most exoneration clauses. Elsewhere, we have argued that the standards imposed on trustees should reflect the legitimate expectations of settlors and testators. An exoneration clause is usually inserted in a trust document because the settlor is aware that even a reasonably diligent trustee may fall into error. Protection of a trustee who is a family member may seem particularly appropriate to the settlor. Investment decisions, which often depend on predicting an uncertain market, are particularly difficult. The settlor may accept that misjudgements are almost inevitable, and be content to allow the burden to be borne at least in part by the trust rather than expose the trustees to the full risk. Exoneration clauses have become an accepted part of trust practice in Canada, and in most cases are used for legitimate purposes.
 

We wish to qualify this position in two respects, however. First, we agree with those critics of exoneration clauses who argue that they should not undermine the basic substratum of duty and obligation underlying the trust. This appears to have the point of Mr. Justice Dickson's comment on exoneration clauses in the Fales case and the decision of the court in the Poche case. For this purpose, the approach taken in section 222 (2) of the American Law Institute's Restatement seems appropriate. It preserves liability in all cases for acts and omissions that not taken in good faith, or show a reckless disregard for the interests of the beneficiaries. The language of the Restatement is broad enough to allow the courts to impugn any exoneration clause that could be used a shield by a trustee who is dishonest or guilty of derogation of the basic duty of loyalty to the trust.
 

Second, we do not believe that professional trustees who receive remuneration for trust administration should be able to rely on exoneration clauses. We have recommended above that professional trustees should be held to a higher standard than others. At least when they receive remuneration, professional trustees should not be permitted to rely on the protection of an exoneration clause. Section 222(3) of the Restatement deals with this problem by focussing on circumstances in which professionals abuse their position by insisting on the protection of an exoneration clause. We believe that a more direct prohibition is justified.
 

We recommend that Saskatchewan trusts legislation should invalidate any clause in a trust that relieves
 

(a) A trustee who has committed a breach of trust in bad faith, intentionally, or with reckless indifference to the interest of the beneficiary, or of liability for any profit which the trustee has derived from a breach of trust; or
 

(b).A trustee who receives remuneration for administration of the trust, and who holds out that he or she possesses special skills or knowledge relevant to the administration of the trust.(72)
 
 

Responsibility for administrative decisions: Delegation of authority
 

Trusteeship is a personal obligation. Clearly, a trustee who turns the administration of the trust over to another without maintaining supervision and control fails to carry out his or her duty. In the Nineteenth Century, Equity applied this rule strictly and narrowly. Waters writes that
 

The rule adopted by equity towards persons occupying fiduciary positions was that such a person cannot delegate his duties, whatever they are. The Latin maxim was clear and succinct; delegatus non potest delegare, and the prime type of delegate to whom the rule referred was the trustee.(73)
 

Very few exceptions were permitted. Even permission to use banks and solicitors to "receive or give a discharge of money" required the intervention of legislation.(74) It was not until 1883 that the courts bowed to changing commercial realities , and countenanced the use of agents normally employed in "the ordinary course of business practice"(75) Since then, a trend toward a more liberal view of the use of agents can be detected, but the courts have remained reluctant to approve the use of agents unless close control and supervision is maintained.(76)

As recently as 1994, an Ontario court held that investment of trust money in mutual funds is an improper delegation of investment decisions to the fund managers.(77)
 

This state of affairs has long been regarded as unsatisfactory.(78) Change was forced in Saskatchewan and other provinces when a new investment powers regime modelled on the Uniform Trust Investments Power Act, 1997(79) was adopted.(80) As we have noted above, the new approach requires trustees to seek and rely on expert investment advice. The Saskatchewan Trustees Act now expressly permits trustees to rely on investment advice(81), and to invest in mutual funds.(82) In addition, the amendments created a broad general authority to use agents in the conduct of trust business. The Trustees Act now provides:
 

44- (1) In this section, "agent" includes a stock broker, investment dealer, investment counselor and any other person to whom investment responsibility is delegated by a trustee.
 

(2) A trustee may delegate to an agent the degree of authority with respect to the investment of trust property that a reasonable, prudent investor would delegate in accordance with ordinary business practice.
 

(3) A trustee who delegates authority pursuant to subsection (2) must exercise prudence and diligence in:

(a) selecting the agent;

(b) establishing the terms of the authority delegated; and

(c) monitoring the performance of the agent to ensure compliance with the terms of the delegation.
 

(4) In performing a delegated function, an agent owes a duty to the trustee and to the beneficiaries to exercise reasonable care to comply with the terms of the delegation.
 

(5) A trustee who complies with subsection (3) is not liable for the decisions or actions of the agent to whom the authority was delegated.
 

(6) This section does not authorize a trustee to delegate authority where the terms of the trust expressly prohibit the trustee from delegating authority to make investments.
 

(7) Investment in a security issued by a mutual fund as defined in The Securities Act, 1988 or in a similar investment is not a delegation of authority with respect to the investment of trust property.
 

This provision satisfactory answers criticisms of the case law governing delegation by trustees. It should be retained in Saskatchewan trusts legislation.(83)
 
 


The duty to avoid conflicts of interest
 

1. The conflict of interest rule
 

The trustees' duty of loyalty precludes any course of action that would put them in conflict of interest with the trust. Since Keech v. Stanford, decided in 1726, it has been established law that a trustee who profits from his or her position as trustee must surrender the benefit to the trust. In that case, the trustee unsuccessfully attempted to renew a lease on behalf the trust. The effort failed because the beneficiary was an infant who could not grant a covenant requested by the lessor. The trustee then leased the property himself. There was nothing to suggest that the trustee had defrauded the trust, but the court would not allow even the appearance of a conflict of interest. Lord King held that "though it may seem hard . . . the trustee is the only person of all mankind who might not have the lease."(84)
 

The rule in Keech v. Stanford was designed as a deterrent. It gives notice to trustees that they must scrupulously avoid any course of action that might lead them into conflict with their duty to the trust.(85) The principle has remained inviolate, but the courts have wavered in their efforts to define the full extent of its reach. In Broadman v. Phipps, the court suggested that the rule might not apply to profit-taking that was not detrimental to the trust if a conflict of interest could not have reasonably been anticipated as a result of the trustee's actions. Lord Upjohn said:
 

The relevant rule for the decision in this case is the fundamental principle that a person in a fiduciary capacity must not make a profit out of his trust which is part of the wider rule that a trustee may not place himself in a position where his duty and his interest may conflict. . . . In my view it means that a reasonable man looking at the relevant facts and circumstances of the particular case could think that there was a real possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict.(86)
 

If there is a real distinction between what has been called the "profit rule" in Keach and the "conflict rule" in Broadman, it has not been consistently recognized by the courts.(87) Nevertheless, as Waters has observed, the door has at least been opened to allow the argument that inadvertent or remote conflicts might be forgiven if the trust did not suffer any detriment.(88)
 

Some exceptions to the general conflict of interest rule have been allowed(89). The trust document may permit conflicts of interest. In practice, blanket exoneration of conflicts of interest are rare, but specific dealings (such as purchase of trust property by a trustee) are often permitted. Similarly, if all the beneficiaries are competent adults, they may consent to a conflict of interest between a trustee and the trust..(90) Finally, the court may allow a trustee to purchase trust property if the purchase is in the interests of the beneficiaries. This exception has long been recognized.(91). It recognizes a common situation that arises in the course of trust administration, but as the Ontario Law Reform Commission observed, "why this situation alone should have received judicial attention is not clear".(92)
 

2. Should the rule be codified?
 

The duty to avoid conflicts of interest is integral to the loyalty owed by trustees to the trust and its beneficiaries. It is at least as fundamental as the duty of care. We have recommended codification of the duty of care. A statutory conflict rule would be a logical complement to the statutory duty of care. On the other hand, part of the reason for proposing codification of the duty of care was to introduce flexibility, which we found lacking in the existing rule. While the conflict of interest rule is not free from uncertainties, it is an evolving rule best left to the courts to adjust and refine. Nevertheless, we agree with the Ontario Law Reform Commission that a statutory conflict of interest rule should be adopted, if for no other reason than to bring this fundamental rule to the attention of every trustee.(93) The rule should not seek to change the existing law, or state it in such a way as to impede further development of the conflict of interest rule by the courts. The Ontario Commission formulated the rule in these terms:
 

Trustees shall discharge their duties and exercise their powers solely in the interests of the beneficiaries of the trust, and without limiting the generality of the foregoing, they shall not knowingly permit themselves to be in a position in which their interest conflicts in any way with the discharge of their duties and the exercise of their powers, or in which they may derive any benefit for themselves or for any other person, except so far as the law or the trust instrument expressly permits.(94)
 

This recommendation satisfactorily states the conflict of interest rule. However, we have taken a different approach to exoneration clauses than the Ontario Commission. We recommend adoption of a formula similar to that proposed by the Ontario Commission, but would not include in it an exception to preserve clauses in trust instruments permitting conflicts of interest.(95) Our reasons for this decision are discussed below.
 

3. Court approval of conflict of interest
 

Not every conflict of interest is detrimental to the beneficiaries of a trust. In some cases, a trustee may even be in a position to benefit the trust by dealing with it. All too often, a perfectly sound transaction is impugned by strict application of the conflict of interest rule. For example, in Harrison v. Harrison, a trustee was required by the terms of the trust to invest in particular bank stock. He held stock in the bank himself, and sold it to the trust at market value. When the bank subsequently failed, the beneficiaries succeeded in having the sale overturned.(96) Similarly, in the Broadman case, trustees were forced to disgorge their profits to the trust, even though the trust had also profited from the impugned transactions.
 

The existing mechanisms for avoiding application of the rule are usually inadequate. If the beneficiaries are all of age and competent, approval of a conflict may be obtained, but in many cases, including the testamentary trusts most common in Saskatchewan, some of the beneficiaries will be minors. If the issue involves proposed sale of trust property to a trustee, the court may approve the sale if it is in the beneficiaries' interest, but other innocent dealings between trust and trustee are outside this jurisdiction. Because the conflict of interest rule is strict, a cautious trustee may be deterred from an otherwise reasonable course of action out of fear that a technical conflict of interest may be committed. More often, trustees will place themselves in technical breach of the conflict rule. So long as no loss results to the trust, the breach will likely go unnoticed. However, as the Harrison case demonstrates, liability may arise unexpectedly from an apparently innocent transaction.
 

It would clearly be desirable to give the courts a broader jurisdiction to approve transactions that apparently violate the conflict of interest rule. Such an approach has been adopted in the American Uniform Trustees' Powers Act:
 

5(b) If the duty of the trustee and the trustee's individual interest or his or her interest as trustee of another trust conflict in the exercise of a trust power, the power may be exercised only by court authorization . . . .(97)
 

The Ontario Law Reform Commission recommended a similar approach, but modified the American model in two ways. First, the Commission would permit the court to approve of a trustee's actions or proposed actions only if they are "for the benefit of the beneficiaries". Second, it would allow, the court to give retroactive approval to actions taken by trustees. This would, in the Ontario Commission's opinion, avoid unnecessary applications to court in cases in which a serious conflict seems to be a remote possibility. The Commission proposed that:
 

9(2) Where upon application to the court it is shown that it would be for the benefit of the trust and its beneficiaries, whether or not any beneficiary withholds his consent, the Court may make an order, on such terms and conditions as appear just.
 

(a) permitting the trustees to act notwithstanding that they may be in a position that contravenes [the duty to avoid a conflict of interest]; or
 

(b) excusing them from liability notwithstanding that they may be in breach 9of trust for having acted while in a position that contravened [the duty to avoid a conflict of interest].(98)
 

We prefer the Ontario recommendation to the unstructured discretion in the Uniform Trustees' Powers Act, and agree that retroactive approval would be appropriate. However, we are of the opinion that the Ontario recommendation puts too narrow a limit on the court's power to excuse conflicts. Perhaps because the existing jurisdiction to approve sale to trustees requires that the sale can be shown to benefit the beneficiaries, the Ontario recommendation adopted this test. But there are cases in which the trustees' actions may not be clearly beneficial, but are none the less not detrimental to the trust. Such cases are perhaps most apt to arise when an innocent course of action leads inadvertently to a technical conflict. In our opinion, it should be open to the trustee in such a circumstance to seek court sanction for what has occurred.
 

We recommend that the Trustee Act should provide that:
 

Where upon application to the court it is shown that it would not be detrimental to the trust or its beneficiaries, and whether or not any beneficiary witholds his consent, the Court may make an order, on such terms and conditions as appear just
 

(a) permitting the trustees to act notwithstanding that they may be in a position that contravenes the trustees' duty to avoid a conflict of interest; or
 

(b) excusing them from liability notwithstanding that they may be in breach of trust for having acted while in a position that contravened the trustees' the duty to avoid a conflict of interest.(99)
 
 
 

4. Exoneration clauses and conflict of interest
 

Because the conflict of interest rule is strict, exoneration clauses excusing conflicts are often attractive to both settlors and prospective trustees. However, if the courts are empowered to approve conflicts that are not detrimental to the trust, such exoneration clauses lose much of their appeal and justification.
 

We have argued above that exoneration clauses that completely oust the normal standard of care required of trustees should be invalid. The provision we recommended for this purpose would affect exoneration of conflict of interest as well. We have proposed that a clause that would "relieve the trustee of . . . liability for any profit which the trustee has derived from a breach of trust" should not be effective.(100) This formula reflects the language of the conflict of interest rule, and thus likely covers any conflict that would be a breach of trust in the absence of the exoneration clause.
 

The Ontario Law Reform Commission rejected any limitation on the use of exoneration clauses to excuse conflict of interest. This was a surprising conclusion for the Commission adopt, since it recommended an even stricter prohibition on exoneration of breaches of the standard of care than we have proposed. Our recommendation is based on section 222(2) of the American Restatement of the law of trusts(101). The Restatement's treatment of clauses excusing conflicts of interest does not appear to have caused practical difficulty in jurisdictions in which it has been adopted. It is particularly important to note that section 222(2) of the Restatement operates in a trust regime in which court approval of conflicts of interests is an established feature. The Ontario Commission does not appear to have fully appreciated the way in which a policy against exoneration clauses would work with the jurisdiction of the court to approve non-detrimental conflicts.
 

In fact, we believe prohibiting exoneration clauses would be less problematic under our proposals than in American jurisdictions that have adopted the Restatement's approach. Under American trust law, a conflict must be approved before it occurs. Thus a trustee who believes a conflict may arise must seek court approval before acting. Under our proposals, the court would be authorized to give retroactive approval. This would make it less likely that a trustee would need to go to court. No approval need be sought when there is as yet a mere possibility of conflict. In addition, trustees would likely continue to risk technical conflicts of interest. The power of the court to approve conflicts would operate in such cases as a defacto defence if the technical breach unexpectedly led to litigation.
 

Our recommendation is perhaps most questionable in cases in which the settlor wishes to permit a clearly defined conflict. For example, a trustee might be permitted to purchase a specified trust property without court approval. However, we believe that if a relatively simple procedure for obtaining court approval is available, no undue hardship will result from failure to give effect to exoneration clauses. Once again, this is particularly true if court approval may be retrospective. If it were possible to formulate a list of exceptions to the general rule, it might be desirable to do so. But in our opinion, the cases in which a conflict might reasonably be allowed are too fact specific to make it possible to formulate a list of appropriate exceptions.(102)
 
 

The duty of the trustees to act jointly
 

Trustees hold trust property as joint owners of the legal title. The trustees must therefore act jointly in administering the trust. All must be involved in administrative decisions, and they must be unanimous. Oosterhoff and Gillese write that
 

The requirement of unanimity exists for every decision of the trustees; whether the decision relates to the exerciser of a power or a duty is irrelevant for the purpose of determining how the trustees are to make decisions in relation to the exercise of the power or duty.(103)
 

If the trustees are unable to agree, they may seek the direction of the court,(104) and in cases of deadlock, the court may remove or replace a trustee to allow orderly administration to proceed.(105)
 

The reasons why the unanimity rule was adopted may only reflect the origin of the trust in property law. In the civil law regimes of Europe and Quebec, fiduciaries are usually bound by majority rule, rather than unanimity. The American Uniform Trustees' Powers Act has also adopted majority rule.(106) But whatever its origin, the unanimity rule is now the expectation of most settlors, and generally meets their needs. If more than one trustee is appointed, it is usually to ensure that each serves as a check on the other. Each may possess special skills useful to the trust, but unanimity ensures that all serve the overall purposes of the trust. In the unusual case in which a settlor would prefer majority rule, the unanimity requirement can be ousted by the terms of the trust, and majority rule substituted for it.(107) Departure from the unanimity requirement has not attracted support in the common law provinces of Canada or elsewhere in the Commonwealth.(108) We see no reason to modify the existing law in this regard.
 

Because they are jointly responsible for the trust, trustees are jointly and severally liable for breaches of trust. The consequences of joint and several liability are governed by the common law. All trustees are equally liable for the loss resulting from a breach. Each is expected to contribute an equal share to satisfy a damage award, but the beneficiaries may recover the full amount of the loss from one or more of them. The most important exception to this rule occurs when fraud has been committed by one of the trustees: A fraudulent trustee is solely responsible for the entire loss to the trust. In a few other limited circumstances recognized in the case law, trustees may seek indemnity from one of their number to compensate them for their contribution.(109)
 

The English Trustee Act, 1893(110) included two incidental statutory modifications of the contribution and indemnity rules. Both are now included in The Saskatchewan Trustees Act. Section 46 of The Saskatchewan Trustees Act permits a trustee who has committed a breach of trust at the instigation of a beneficiary to seek indemnity from the beneficiary:
 

46. Where a trustee has committed a breach of trust at the instigation or request or with the consent in writing of a beneficiary, the court may, notwithstanding that the beneficiary is married woman entitled for her separate use whether with or without a restraint upon anticipation, make such order as seems just for impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee or person claiming through him.
 

Section 13 of the Saskatchewan Act is broader in scope. When a trustee commits a breach of trust while acting without the concurrence or knowledge of the other trustees, the liability is personal unless the others are found to have acquiesced in the breach. However, if, for example, all the trustees have signed a receipt for property, but one of their number takes actual possession of it and later misappropriates it, should all be liable for the breach? Section 13 addresses this and similar problems:
 

13. A trustee is chargeable only for money and securities actually received by him, notwithstanding his signing a receipt for the sake of conformity, and is answerable and accountable only for his acts, receipts, neglects or defaults, and not for those of any other trustee, nor for any banker, broker or other person with whom trust money or securities are deposited, and may reimburse himself or pay or discharge out of the trust money all expenses incurred in or about the execution of his trust or powers.(111)
 

Both section 46 and section 13 remain useful. They should be retained. However, because section 13 was adopted to remedy specific problems encountered by the courts in the Nineteenth Century, its scope and limitations are no longer immediately obvious. It can only be properly construed in the context of the unanimity rule and the joint and several liability of trustees. For that reason, we have concluded that it would be useful to give statutory recognition to these principles. We recommend that new trusts legislation should provide:
 

(1) Unless the instrument creating the trust provides otherwise, trustees must act unanimously in discharging their duties and exercising their powers as trustees, and, except as otherwise provided by law, are jointly and severally liable.
 

(2) A trustee is chargeable only for money and securities actually received by him, notwithstanding his signing a receipt for the sake of conformity, and is answerable and accountable only for his acts, receipts, neglects or defaults, and not for those of any other trustee, nor for any banker, broker or other person with whom trust money or securities are deposited.
 

(3) Where a trustee has committed a breach of trust at the instigation, request, or written consent of a beneficiary, the court may make such order as seems just to indemnify the trustee or person claiming through him out of the beneficiary's interest in the trust. (112)
 
 
 

The contribution and indemnity rules applicable to trusts can hardly be regarded as satisfactory. In principle, the rule of equal contribution regardless of degree of fault is unfair. In Canada, contributory negligence legislation has replaced equal contribution of tortfeasors with apportionment of fault. A similar regime might be adopted in regard to contribution among trustees, and a more systematic approach to indemnification could certainly be justified as well. In England, the general law governing joint and several liability was substantially reformed by the Civil Liability (Contribution) Act, 1978. (113) This legislation gives the court a discretion to apportion fault between trustees, and fix both contributions and indemnities. The Law Reform Commission of Ontario recommended adoption of a similar regime.(114)
 

While comprehensive reform of indemnity and contribution rules would be attractive, we are of the option that it should take place as part of a comprehensive review of joint and several liability. We might still have been persuaded to consider at least some remedial measures if we believed the need was pressing. But in our view it is not. Courts in Canada and other Commonwealth jurisdictions have a broad statutory discretion to relieve trustees of responsibility for breaches of trust. This jurisdiction is contained in section 57 of The Saskatchewan Trustees Act. (115) This provision has been used routinely to apportion responsibility between trustees. In Fales v. Canada Permanent Trust Co., the Supreme Court of Canada found both trustees to be in breach of trust, but relieved one of them of any liability.(116) In McDonald v. Hauer, the Saskatchewan Court of Appeal was prepared to use section 57 to apportion fault between three trustees according to their relative culpability for the breach(117). The apportionment regime adopted in England and recommended by the Ontario Law Reform Commission would likely not be a significant improvement on what can already be achieved under section 57. Even the Ontario Law Reform Commission admitted that "the judicial excusing power has begun the process of rendering [reform of contribution and indemnity rules] unnecessary".(118)
 
 

The duty to act impartially
 

Trustees must scrupulously adhere to the terms of the trust, giving each beneficiary his or her due, and otherwise show no preference for one over another. As Waters writes:
 

It is a primary duty upon trustees that in all their dealings with trust affairs they act in such a way that, if there are two or more beneficiaries, each beneficiary receives exactly what the terms of the trust confer upon him and otherwise receives no advantage and suffers no burden which other beneficiaries do not share. In this way the trustee acts impartially.(119)
 

The duty to act impartially is straightforward in principle, but careful judgement is required when some beneficiaries are entitled to immediate income from the trust fund, while others are entitled to a capital distribution in the future. This is a common circumstance. For example, a testamentary trust may provide income for the surviving spouse and children, and distribution of the capital to the children when the surviving spouses dies. As a general rule, unless the terms of the trust provide otherwise, the capital cannot be encroached to meet income payments. Instead, the capital is invested. Investment income is the used to meet the income payments required by the terms of the trust. The capital assets, including any capital gains that have accumulated, remain intact for eventual distribution to the capital beneficiaries. The challenge facing the trustees is to devise an investment plan that fairly balances income against capital appreciation.
 

Re Smith illustrates the fundamental allocation problem trustees must address. In that case, the trust fund consisted largely of shares in Imperial Oil, a sound investment with a high capital growth rate. However, the shares paid dividends of only 2½ % of capital value per annum, as compared to rates of 7%-10% on other good investments with lower capital growth rates. The income beneficiary (the testator's widow) complained that retention of the shares did not produce enough income for her to maintain the standard of living she had enjoyed during her husband's lifetime. The court found that the trustees' investment strategy unfairly preferred the capital beneficiaries.(120)
 

Re Smith may represent no more than an obvious error of judgement on the trustees' part. Moreover, the problem could have been avoided if the trust had specified the income the widow was to receive, or permitted encroachment on capital. Both these approaches are commonly adopted by settlors. Unfortunately, the allocation problem is often not so simple. In what can be regarded as the traditional analysis of the allocation problem, the issues focus on three critical nodes: (1) Allocation between capital and income producing assets when the trust property is converted to an investment fund, (2) allocation of expenses and other "outgoings" between the capital and income earning assets, and (3) allocation of receipts and other "incomings" such as dividends between capital and income. All three are infected with issues that cannot be said to have been finally resolved by the courts. In addition, changes in investment markets have blurred distinctions between capital and income earning assets, bringing much of the traditional analysis and the legal rules it spawned into question.
 

The rule in Howe v. Dartmouth(121) places an executor under a duty to convert all wasting and residuary property (other than realty) into authorized investments. In other cases, the terms of the trust may expressly or impliedly require conversion to carry out the purposes of the trust. Pending conversion, a fair allocation of receipts between income and capital must be made. There have been problems determining the scope of the rule in Howe v. Dartmouth(122), but until recently, the allocation issue was perhaps not particularly difficult. The investments authorized by trusts legislation were sound securities that provided both modest capital appreciation and reasonable interest. A trustee who invested in authorized investments automatically made an acceptable allocation between the needs of income and capital beneficiaries. Even if trustees were permitted by the terms of the trust to make other types of investments, the rates of return on securities in the "legal list" provided a benchmark for determining whether an acceptable allocation had been made. Changes in investment markets undermined the "legal list" approach to authorized investments. Under the new approach to trustees' investments adopted in Saskatchewan in 1998,(123) trustees are permitted to make any investment a "prudent investor" might make.(124) But a prudent investment is not necessarily an investment that properly balances the interests of income and capital beneficiaries. The new statutory investment regime does recognize this problem. Investors are required, "in planning the investment of trust property", to have "regard to . . ."
 

(d) the role that each investment or course of action plays within the overall portfolio of trust property;
 

(e) the expected total return from income and appreciation of capital; . . .
 

(g) needs for liquidity, regularity of income and preservation or appreciation of capital;
 

(h) an asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.(125)
 

These factors are all relevant to the problem of maintaining an even hand between beneficiaries, but they provide no easy answers. In fact, modern investment strategies no longer make easy answers possible. Investment advisors today recommend a portfolio approach that balances growth and security. Common shares provide growth and reasonable rates of return when interest rates are low; bonds and guaranteed investment certificates provide security and good returns when interest rates are high. The portfolio approach does not make a rigid distinction between capital appreciation and income. Under market conditions characterized by low interest rates and high capital gains, the best way to ensure adequate income from a fund may be to invest for capital gains, then convert to interest-earning liquid assets only as required to meet income payments. A trustee whose primary duty is investment to generate income is constrained to invest in stable securities that can easily be liquidated, while a trustee concerned primarily with capital distribution may invest in a buy-and-hold portfolio of common stocks at a higher level of risk and expected return.(126)
 

The law governing allocation of "incomings" has long been problematic(127). Changes in investment markets have only compounded the problems. Traditionally, the core issue regarding "incomings" was one of classification of receipts between income and capital. Ordinary share dividends were classed as income, a distribution of corporate profits. Capital gains or distribution of assets on the winding-up of a corporation were clearly capital. But many other corporate distributions proved difficult to classify. For example, during the 1950's, Canadian tax law favoured retention of corporate earnings. Rather than pay dividends out of earnings, many companies issued redeemable preference shares, which could later be redeemed for cash. The Ontario courts characterized such shares as an income distribution(128). However, in Re Waters, the Supreme Court of Canada held that since the earnings had been capitalized, they retained that form even when distributed as redeemable shares.(129) Donovan Waters suggests that "we have come to the position that whether a distribution by a company is to be regarded as income or capital (and it cannot be both) is determined by what the company does", but the law is still far from clear, because "whether what has done is a distribution of earnings or a capitalization is a question of fact in each case."(130) More important still, it is doubtful whether this kind of analysis of corporate intention leads to results that can now be regarded as a useful way of determining how receipts should be allocated between capital and income beneficiaries.
 

The law governing allocation of expenses and other "outgoings" is perhaps better settled than the law governing "incomings", but has been regarded as uncertain enough in particular cases to have encouraged a variety of statutory innovations. For example, New Zealand(131) provides for establishment of a depreciation fund to cover the costs of improvements to income-earning property, to prevent loss in capital value. Prince Edward Island requires a similar fund, but only in regard to real property.(132)
 

Despite the efforts of the courts to provide concrete rules to assist in determining whether an allocation decision is acceptable, the law remains incomplete and uncertain. Much is still left, in practice, to the discretion and judgement of the trustees(133). The rules are more apt to be regarded as a potential impediment to exercise of good judgement than practical guides. Oosterhoff and Gilese observe that:
 

. . . [I]t is common practice today to exclude some or all of the rules governing apportionment and allocation of outgoings in the trust instrument. This is done for two reasons. First, the rules may block trustees form making decisions that reflect tax considerations; second, because application of the rules often makes administration of the trust unjustifiably complicated.
 

Unless the current state of the law is improved by legislation, this trend can only be expected to intensify.
 

In our opinion, the only workable approach to reform is to recognize that most settlors would prefer to give their trustees a broad discretion to make allocations between beneficiaries in a fair manner than to rely on specific allocation rules. We do not believe it is possible for either courts or legislators to frame specific rules that are both comprehensive and responsive to the changing business realities confronting trustees. We therefore recommend giving all trustees the discretion now commonly inserted in trust instruments.
 

The Ontario Law Reform Commission recommended a similar course of action in 1984. However, it was not prepared to recommend that the discretion in regard to outgoings should apply to trusts constituted before the new legislation came into effect, and was only prepared to recommend the discretion in regard to incomings if the settlor expressly adopted the proposed statutory regime. The Commission was concerned that existing trusts might have been premised on the traditional allocation rules. That argument may have been persuasive in 1984, but since then the traditional rules have grown even less relevant, particularly since abolition of the legal list of authorized investments. We recommend that the provisions relating to allocation we propose should apply to all trusts(134), unless the trust instrument itself ousts them.
 

Except that we would apply them to all trusts, our proposals are based on the recommendations of the Ontario Law Reform Commission. We recommend that:
 

1. Trustees shall act impartially as between income and capital beneficiaries, having regard to each item of trust property, whatever the nature of the property, and whether it is an original asset or an asset acquired subsequently.
 

2.(1) Subject to recommendation 1, unless the trust instrument provides otherwise
 

(a) Trustees may apportion any payment or expenditure for any outgoing between the income and capital accounts, or they may charge the payment or expenditure, exclusively to either income or capital as they consider just and equitable in all the circumstances;
 

(b) Trustees may pay for any outgoing from income or capital, or wholly or partly from each, as appears to them to be in accord with sound business practice and in the best interests of the trust beneficiaries as a whole, and, where the whole or part of the payment or expenditure is made out of or charged to capital, they may recoup income from capital, if, in either case, they consider that course to be just and equitable in all the circumstances; and
 

(c) Trustees may, and if ordered by the Court upon application shall, deduct from the income derived from trust property that is subject to depreciation or obsolescence such amounts as are fair and reasonable having regard to sound business practice in order to protect the capital of the trust from loss, and any sums so deducted shall be set aside and added to the capital of the trust so as to become capital for all purposes.
 

(2) This recommendation does not apply to trust for the exclusive benefit of the spouse of the testator or settlor within the meaning of the Income Tax Act (Canada).
 

3.(1) Subject to recommendation 1, unless the trust instrument provides otherwise, trustees shall allocate receipts to the income and capital accounts as they consider just and equitable in all the circumstances.
 

(2) For the purposes of this recommendation and for determining the relative proportionate interests of beneficiaries of the trust, but not so as to limit in any way the powers conferred by recommendation 3(1):
 

(a) income may be understood to be the return in money or property derived from the use of capital; and
 

(b) capital may be understood to be the property set aside by the trust instrument to be delivered eventually to a remainderman, while the return or use of the capital is in the meantime taken or received by or held for accumulation for an income beneficiary.(135)
 
 

The duty to disclose and account
 

Trustees have a duty to account and to provide information to the beneficiaries and other persons interested in the trust. Waters writes that
 

A trustee is essentially one who is managing the affairs of others. He may have a personal beneficial interest, indeed, he may for all apparent purposes be the only beneficiary, but as a trustee he still remains subject to the obligation to account for his administration to those who may have an interest in the trust fund, whether as beneficiary or creditor. This obligation has been called the duty to disclose.(136)
 

This duty is most often discharged by passing accounts, an application to the court for an order approving accounts presented to it. In addition, however, trustees must be ready to allow the beneficiaries and other interested parties to examine their accounts.
 

1. Passing of Accounts
 

Section 35 of The Administration of Estates Act(137) provides that executors and administrators are ordinarily required to pass accounts within two years, after which they may be discharged, though section 36 allows formal passing of accounts to be avoided with consent of the beneficiaries and proof that the estates's debts have been paid. Section 35(3) of the Act requires a trustee of a testamentary trust who is also executor of the will setting up the trust to account "in the same manner" as an executor.(138) Other trustees are not required to pass accounts unless they desire to be formally discharged from the trust.(139) In addition, although remuneration for trustees can be approved in an application to court for that purpose, passing of account is often a practical necessity if remuneration is sought.(140)
 

Trustees may also voluntarily pass accounts as a way to obtain court approval of their administration, even when the trust is not being wound up. Waters observes that
 

[The] trustee for his protection has an historical right of access to the courts for a voluntary passing of accounts, an opportunity which the wise trustee will use at regular intervals(141).
 

This right has been recognized by statute in Ontario(142) and Manitoba.(143) In our opinion, it would be desirable to clearly recognize the right to voluntarily pass accounts in The Trustees Act.
 

There are in addition several other matters relating to passing of accounts that require further consideration.
 

First, there are at present no statutory requirements governing the practice of passing of accounts by trustees who are not personal representatives. This problem can easily be cured by providing, as does the Ontario Trustees Act(144), that the practice on passing of executors' and administrators' accounts applies to all trustees. Passing of accounts by executors and administrators is largely governed by rules of court that are also adequate for regulation of the passing of other trustees' accounts.
 

Second, since the purpose of voluntary passing of accounts is usually to obtain official approval, the effect of the court order obtained on passing accounts should be clarified. In Re Campbell,(145) the trustees passed their accounts, but the beneficiaries later alleged that property had been misappropriated before the passing of accounts. The trustees sought a further order discharging them from liability on the basis that their accounts had been approved. The Court declined to make the requested order, deciding that it had no jurisdiction to do so. As Waters observes, the passing of accounts should not leave "the sword of Damocles" hanging over the heads of trustees.(146)
 

The Manitoba Trustees Act provides that when an order is made upon passing of accounts, it is binding on all persons interested in the trust.(147) The Saskatchewan Administration of Estates Act applies a similar rule to approval of executors' and administrators' accounts:
 

37.- Except to the extent that mistake or fraud is shown, the approval by the court of the accounts of an executor or an administrator with respect to the dealings of the executor or the administrator with the estate is binding on:
 

(a) each person who was notified of the proceedings, present at the proceedings, or represented at the proceedings; and
 

(b) each person who claims through a person described in clause (a).
 

This protection should be extended to all trustees.
 

Finally, section 87 of the Saskatchewan Trustees Act requires consideration. This section permits a trustee to obtain a formal discharge from the office of trustee. Discharge is ordinarily available only on passing of accounts, but the court may dispense with that requirement in appropriate cases:
 

87.- When the accounts of a trustee have been passed, or when the passing of such accounts has been dispensed with, the Court of Queen's Bench or a judge thereof may, in its or his discretion, order that the trustee be discharged and that any bond or security given by the trustee be cancelled or delivered to him or his solicitor.
 

This section codifies the practice of the Courts of Equity in England. Although it fails to directly so state, it is only applicable if the trust is completed and is being wound up.(148)
 

Section 87 applies to executors and administrators, but has been partly superceded in this respect by The Administration of Estates Act. Section 36 permits discharge of an executor or administrator without passing accounts if the conditions stipulated in the provision are met. It also allows the court to cancel a security bond given by the executor or administrator. Surprisingly, section 35, which requires executors and administrators to pass amounts when their duties are completed, does not refer to either discharge or cancellation of security. We are of the opinion that discharge of executors and administrators should be comprehensively included in The Administration of Estates Act.
 

Discharge of non-testamentary trustees is uncommon in practice, though it may be done if a final passing of accounts is requested. We recommend keeping a discharge provision in the trusts statute, but it need not be elaborate. If it were to include authorization to discharge without passing of accounts, it would be desirable to include criteria for dispensing with an accounting. Many estates are simple to administer. The personal representative may require a discharge, but a full passing of accounts would serve no purpose. However, there are very few cases in which there would be any point in seeking a formal discharge from a non-testamentary trust without passing accounts. For that reason, we recommend that discharge of a non-testamentary trustee should be available only on passing of accounts.
 

We recommend the law regarding voluntary passing of accounts by trustees be clarified to provide:
 

(1) A trustee may at any time apply to the Court for an order passing the accounts of the trustee.
 

(2) The procedure upon an application under recommendation (1) shall follow the procedure for the passing of executors' and administrators' accounts.
 

(3) Unless mistake or fraud is shown, the approval by the court of the accounts of a trustee is binding on any person interested in the trust who was notified of the proceedings, or who claims through such a person.
 

(4) Except in the case of a executor, administrator, or trustee who must pass accounts in accordance with The Administration of Estates Act, when administration of the trust has been completed, a trustee may, upon passing accounts, be discharged, and any bond or security given by the trustee may be cancelled or delivered to him or her.(149)
 

(5) Section 35 of The Administration of Estates Act should be amended to provide that on passing accounts under the section, an executor, administrator, or trustee may be discharged and any bond or security given by the trustee may be cancelled or delivered to him or her.(150)
 

2. The right to an accounting
 

Trustees administer property belonging to the beneficiaries, who are entitled to know what has been done with their assets. Their right to demand an accounting from the trustees is fundamental to the trust relationship. The terms of the trust may specify the manner in which the trustees account, but it has been held that the beneficiaries cannot be deprived of the right to an accounting.(151)
 

The right to an accounting is recognized by statute in the Manitoba(152) and British Columbia(153) Trustee Acts. Since these statutes appear to do no more than codify the "action for accounting" recognized by the English Courts, (154) it is surprising that the Ontario Law Reform Commission cast doubt on the existence of the right in the absence of a statutory sanction.(155) While we do not believe that the courts in Saskatchewan would deny beneficiaries the right to an accounting, it would be desirable to remove doubt by giving statutory recognition to the right to an accounting.
 

If the right to an accounting is codified, it must clearly identify what is expected of trustees. Beneficiaries should not be permitted to use a demand for accounting to harass trustees or to undertake a fishing expedition in search of irregularities when there is no good reason for suspicion. In the leading Canadian case, Sanford v. Porter, the Court affirmed that "the duty of a trustee or other accounting party is to have his accounts always ready, to afford reasonable facilities for inspection and examination, and to give full information whenever required." However, the court insisted that access to the accounts must be reasonable. Thus when the trustees undertook to prepare a statement that dealt with the matters of concern brought to their attention, it was held that an action for a full accounting was premature. MacLennan, J.A. observed that
 

It seems to have been thought by the solicitors of the plaintiffs that it was the duty of a trustee, upon demand for an account, to lay aside everything else, and to sit down and make out an account for them, at the peril of a suit for an account and costs. But the law is not so unreasonable.
 

He held that while a trustee is required to respond to specific requests for information, and must open files for inspection, "as a general rule, the trustee is not obliged to prepare copies of his accounts".(156)
 

The key to the practical application of the trustee's duty to disclose is reasonable response to the beneficiaries' requests for information. In Sanford v. Porter, the court declined to order an accounting because the trustees had offered to make disclosure in a manner that was satisfactory under the circumstances. In Re Smith(157), on the other hand, the court ordered an accounting when the beneficiaries had made every reasonable effort to obtain the requested information from the trustees.
 

We recommend that:
 

Notwithstanding anything to the contrary in the terms of a trust, if a beneficiary or other interested party has requested information concerning the accounts of a trustee, and the trustee has refused to comply with the request in a reasonable and timely manner, the court may order the trustee to pass accounts.(158)
 
 
 

Application to court for advice and direction
 

Section 79 of The Saskatchewan Trustees Act permits trustees to apply to the court for "advice or direction":
 

79.- (1) A trustee, guardian, executor or administrator may, without the institution of an action, apply in court or in chambers in the manner prescribed by rules of court for the opinion, advice or direction of a judge of the court of Queen's Bench on any question respecting the management or administration of the trust property or the assets of a testator or intestate.
 

(2) The trustee, guardian, executor or administrator acting upon the opinion, advice or direction given by the judge shall be deemed so far as regards his own responsibility to have discharged his duty as trustee, guardian, executor or administrator in the subject matter of the application, unless he has been guilty of fraud, wilful concealment or misrepresentation in obtaining the opinion, advice or direction.
 

This provision, like its analogs in other provinces, is based on legislation adopted in England in the mid-Nineteenth Century.(159) Note that section 79 applies to executors and administrators, which it would do in without specific reference to them because the Act defines "trustee" to include an executor or administrator, and to guardians, who would not otherwise be included.
 

Waters suggests that the power to seek advice and direction "has proved to be one of the most important to all trustees".(160) It is a way for trustees to determine whether they are carrying out their duties and properly exercising their powers in difficult cases, and thus avoid disputes with the beneficiaries. In addition, it has proved to be a useful mechanism for resolving deadlock between the trustees.(161)
 

Section 79 and the Rules of Court adopted to complement it (162) create a broad jurisdiction to give direction and advice. Underhill, summarizing the older authorities, stated that "almost any question of construction or administration can now be decided" except matters that would amount to determining whether a breach of trust has occurred, and adjudication of the rights of parties claiming "adversely to the settlement."(163) These are matters that are properly resolved by litigation rather than an application for advice and direction. The more recent authorities have also made it clear that the courts will not tell trustees how to exercise their discretion. The court will tell trustees what they may or may not do under a power granted to them, but will not make the choice between acceptable options.(164) Nor will the court look favourably on an application, with intendant costs to trust, for direction from an overly cautious trustee who should have been able to resolve the matter without the court's help.(165) These self-imposed limits on the jurisdiction of the court are appropriate. The settlor has appointed the trustees to administer the trust and exercise their judgement and discretion. An application to court for advice and direction should not be an opportunity to turn the trustees' responsibility over to the court.
 

We are of the opinion that the courts should be left to determine the limits of their discretion to give advice and direction. However, there is a problem that should be addressed. It has been held that the Rules of Court permit the court to give advice and direction in some cases that would fall outside the scope of statute.(166) Thus, for example in Re Tecumseh Public Utilities Commission and McPhee, the court held that the Ontario Trustee Act did not allow the court to determine the rights of the parties on an application for advice and direction, but that the Rules of Court did.(167)Although it may be that the Rules of Court can be construed as dealing with only the jurisdiction of the court, there is at least a defacto overlap here between procedure and substance. In our opinion, the scope of the court's authority on applications for advice and direction should be comprehensively identified in the statute.
 

Rule 452 of the Saskatchewan Rules of Court provides, in part, that on originating notice, the court may "determine any of the following matters":
 

(ii) the administration of the trust;
 

(iii) any question affecting the rights or interests of a person claiming to be a creditor, devisee, legatee, next of kin, or cetui que trust;
 

(iv) the ascertainment of any class of creditors, legatee, devisee, next of kin, or others; . . .
 

(vii) directing the executors, administrators, or trustees to do or abstain from doing any particular act . . . .
 

We recommend that these matters should be included in the statutory provision governing applications for advice and direction. Section 79 should therefore be replaced by a provision that provides that:
 

(1) A trustee or guardian may apply to court for the opinion, advise and direction of the court on any question respecting the management or administration of the trust or estate, including any question affecting the rights or interests of a person or class of persons claiming to be interested in the trust or estate.
 

(2) Upon an application under Recommendation (1), the court may direct the trustee or guardian to do or abstain from doing any particular act respecting the management or administration of the trust or estate
 

(3) Unless a trustee or guardian has been guilty of fraud, misrepresentation, or wilful concealment in obtaining the opinion, advise and direction of the court, a trustee or guardian acting upon the opinion, advise and direction of the court shall be deemed to have discharged his or her duty as a trustee or guardian in respect to the matter on which the opinion, advise and direction was sought.(168)
 

One other matter relating to applications for advice and direction should be briefly considered. The court has no authority on an application for advice and direction to enlarge the powers of trustees. In the United States, the situation is different. The Uniform Trustees' Powers Act permits the court to authorise "any act which a prudent person would perform for the purposes of the trust".(169) The Ontario Law Reform Commission recommends adoption of a similar provision.(170)
 

We see no need for such a provision. The statutory powers granted to trustees under our proposals are intended to be broad and comprehensive. If a settlor has excluded some of these powers, we do not believe that his or her decision should be overturned on a routine application to court. It should be noted that the American trust law regime does not include anything equivalent to Commonwealth variation of trusts legislation. Under this legislation, the terms of a trust can be changed by the court, but only if the court is satisfied that it is in the interests of the beneficiaries to do so. In our opinion, this is sufficient to cover any case in which an expansion of trust powers is necessary.
 

Payment of trust funds into court
 

It was common practice until the late Nineteenth Century for trustees to pay trust funds into court is response to allegations of wrong doing on their part. In these cases, the court would assume responsibility for the trust at least until the dispute had been disposed of. (171) Because of the cost and inconvenience it caused the courts, this practice was discouraged by the courts after reform of procedure in Equity provided alternatives. In 1906, Underhill warned that " now that most questions of doubt or difficulty can be decided on originating summons, the right of paying money into court can only be used with safety in very rare cases".(172)
 

The right to pay trust funds into court was codified in the Trustee Act, 1893.(173) This provision found its way into the Saskatchewan Trustees Act as section 56:
 

56- (1) Trustees or the majority of trustees having in their hands or under their control money or securities belonging to a trust or to the estate of a deceased person may pay the same into the Court of Queen's Bench, and the same shall subject to the rules of court be dealt with according to the orders of the Court of Queen's Bench.
 

(2) The receipt or certificate of the proper officer shall be a sufficient discharge to trustees for the money or securities paid into the court.
 

(3) Where moneys or securities are vested in any persons as trustees and the majority are desirous of paying the same into court but the concurrence of the others cannot be obtained, the Court of Queen's Bench may on application ex parte order payment into court by the majority without the concurrence of the others; and, where any such moneys or securities are deposited with a banker, broker or other depositary, the court may on application ex parte order payment or delivery of the moneys or securities to the majority of the trustees for the purpose of payment into court, and every transfer, payment and delivery made in pursuance of the order shall be valid and take effect as if the same had been made on the authority or by the act of all the persons entitled to the moneys and securities so transferred, paid or delivered.
 

There now seems to be no good reason for retaining this provision.
 
 

Remuneration of trustees and indemnification for expenses
 

1. Remuneration
 

Equity regarded remuneration of trustees for the services they perform as a potential conflict of interest, a temptation, as Waters observed, to a trustee "to work up his fees from the trust rather than place first the best interests of the trust.(174) This is still the law in England. Trustees may receive remuneration only if the trust instrument provides for it, or all the beneficiaries consent. "Charging clauses" for this purpose have become a standard part of English trust documents. Canada, following American practise, has taken a different approach. An Ontario statute adopted in 1858 authorized the courts to allow trustees to receive remuneration.(175) Legislation passed on the Ontario model has been adopted in all Canadian provinces.
 

The Saskatchewan Trustees Act provides:
 

80.- A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by a court and a testamentary guardian or other trustee, howsoever the trust is created, is entitled to such fair and reasonable allowance for his care, pains and trouble and his time expended in and about the trust estate as may be allowed by the Court of Queen's Bench or a judge thereof or by an officer thereof to whom the matter may be referred.
 

81.- A judge of the Court of Queen's Bench may, on application to him for the purpose, settle the amount of such compensation although the trust estate is not before the court in an action.
 

82.- (1) A judge of Her Majesty's Court of Queen's Bench for Saskatchewan may allow to the executor or trustee or administrator action under a will or letters of administration a fair and reasonable allowance of his care, pains and trouble and his time expended in or about the executorship, trusteeship or administration of the estate and effects vested in him under the will or letters of administration and in administering, disposing of and arranging and settling the same and generally in arranging and settling the affairs of the estate and may make orders form time tot time therefor, and the same shall be allowed to an executor, trustee or administrator in passing his accounts.
 

(2) Where an application is made for an order dispensing with the passing of accounts, the judge may, by the same order, grant an allowance pursuant to subsection (1).
 

83.- Sections 80, 81, and 82 do not apply where the allowance is fixed by the instrument creating the trust.
 

84.- Where a solicitor is trustee, guardian or personal representative, and has rendered necessary professional services to the estate, regard may be had, in making his allowance, tho that circumstance, and the allowance shall be increased by such amount as may be deemed fair and reasonable in respect of those services.
 

The perhaps somewhat prolix language of these provisions is a product of accretion over time. Originally, it was the practice to have remuneration set when trust accounts were passed. Section 81 seems to have been adopted to permit an application for the express purpose of approving remuneration prior to passing of accounts, or when accounts are not passed. Section 84 was required to counter the rule adopted by the English courts in Cradock v. Piper,(176) which prohibited a solicitor who is trustee from charging for professional services to the trust except in regard to litigation.
 

The core of the remuneration provisions is the entitlement to a "fair and reasonable allowance for . . . [the trustee's] care, pains, and trouble and for his time expended" in administration of the trust. It is usually the practice to allow compensation based on a percentage of capital and income.(177) However, the language of section 80 makes it clear that compensation must be proportionate to the work actually done by the trustees, so that a large estate does not necessarily justify a large fee.(178)
 

The Commission has found no evidence that the present method of approving remuneration is inadequate. The substance of sections 80-84 should be retained, though the language can be simplified.(179) However, both the Ontario Law Reform Commission and the British Columbia Law Institute have reviewed the law and practice relating to trustees' remuneration. Two matters discussed by these law reform agencies deserve consideration.
 

Section 83 permits the court to fix remuneration only if the trust instrument does not do so. There is a danger in pre-setting compensation, particularly by will. The compensation may appear adequate when the will is drafted, but be less than reasonable when the will takes effect, perhaps decades after it was drafted. The British Columbia Institute of Law Reform recommends the court should be able to revise the compensation scale in such cases. The institute proposes that:
 

7.(a) The Trustee Act should be amended to provide that on application, the court may vary a term of a will or instrument creating a trust that fixed the remuneration of a trustee (other than by contract), if that term does not provide for sufficient remuneration. Where the court varies such a term, it may fix the remuneration the trustee should receive at the level the court considers appropriate, subject to the other provisions of the Trustee Act.
 

(b) The amendment referred to in Recommendation 7(a) should not extend tot he variation of a contract between a settlor or testator and a trustee extraneous to the trust instrument or will, whether or not the contract is incorporated by reference in the instrument or will.(180)
 

Note that the proposal is designed primarily for executors who were not consulted when the remuneration clause was drafted. It is not intended to allow professional executors who negotiated or insisted upon a fixed fee for services to seek an increase in remuneration. We recommend adoption of a similar provision in Saskatchewan.(181)
 

Both the British Columbia Institute and the Ontario Law Reform Commission also recommend that trustees should be permitted to collect compensation before court approval has been obtained. This practice, known as "pre-taking" of remuneration is not expressly prohibited by The Trustees Act. It appears to be the usual practice in some jurisdictions, and has recently been approved by the courts in Ontario.(182). In Western Canada, the practice has generally been frowned upon.(183)
 

As Waters notes, "in all cases should the trustee assume later court approval, he runs the grave risk that such approval might not ultimately be forthcoming".(184) Nevertheless, the Ontario Law Reform Commission argued that it is reasonable for trustees to receive compensation during the course of administration of the trust, particularly if the trust may not be wound up and accounts passed for a considerable time. While a separate application for approval of remuneration may be made, the Commission noted that a definitive calculation of fees on the usual percentage basis may not be possible until the final accounts are prepared. In addition, pre-taking avoids the cost of a separate application to set compensation.(185)
 

We are of the opinion that the arguments advocated by the Ontario Law Reform Commission are persuasive. We are also impressed by the fact that the courts rarely deny compensation to a competent trustee, and that the method of calculating compensation is predictable enough to allow a reasonable estimate of fees.
 

The British Columbia Institute drew upon the Ontario proposal in formulating its recommendation in regard to pre-taking of compensation. The Institute recommended:
 

3.(a) The Trustee Act should allow a trustee to receive fair and reasonable remuneration for services already rendered, without previous court authorization.
 

(b) A trustee intending to take remuneration without previous court authorization, though the be minor, unborn or incapacitated beneficiaries, should be required to give notice, with full details of the remuneration sought and of the services to which it relates, to adult ascertained beneficiaries.
 

(c) The notice given under paragraph (b) should state that the recipient of the notice may object to the proposed taking of remuneration within a stated period, which should not be less than 60 days from the date of the notice.
 

(d) Anyone entitled to notice under proposal 2(b) who objects to the remuneration proposed, should be entitled to apply to the Supreme Court within the period stated in the notice to fix the remuneration, if any, that the trustee should receive.
 

(e) If a person entitled to notice makes an application under proposal 2(d), the trustee should be prohibited from taking remuneration until the Supreme court has disposed of the application.
 

(f) If the trustees' remuneration, as finally decided by the court, is less than the aggregate of the amounts previously obtained by the trustee without court authorization during the administration of the trust, the trustee should be liable to repay the balance to the trust. (186)
 

We recommend that a similar provision should be adopted in Saskatchewan.(187)
 

2. Indemnification for Expenses
 

Although equity did not permit trustees to take remuneration, it did entitle them to be indemnified out of the trust property for expenses incurred in the course of administration of the trust. The right to indemnification was given statutory recognition in England as part of a general provision designed to protect trustees. This provision was adopted in Saskatchewan as Section 13 of The Trustees Act,(188) which provides in part that trustees "...may be reimbursed out of the trust property for all expenses incurred in or about the execution of the trust or powers."
 

Indemnification for expenses has not been controversial. The courts have reserved jurisdiction to determine whether expenses charged to the trust are reasonable(189) Most of the reported cases on indemnification have been concerned with determining whether expenses should be paid out of capital or income.(190) This issue has been discussed above.
 

We recommend that the statutory right to indemnification for expenses be retained. However, it should be severed from the other matters dealt with in section 13.(191)
 
 


ADMINISTRATIVE AND OTHER POWERS OF TRUSTEES



Introduction
 

Trustees must have the powers necessary to administer the trust. As Waters observes:
 

The object of the trustees' administrative powers is to enable them to manage the trust property, so that they are best able to fulfill the terms of the trust. The instrument creating the trust is therefore likely to confer powers upon the trustees which take account both of the nature and duration of the beneficial interests created.(192)
 

In the absence of trusts legislation, almost all the powers required for efficient administration of the trust must be expressly provided in the trust instrument.
 

Obviously, administrative powers must be fitted to the particular needs of the trust. Nevertheless, by the middle of the nineteenth century, certain basic administrative powers had become a standard part of trust instruments. One of purposes of nineteenth century trusts legislation was, as Waters described it, "to reduce the necessary length of trust deeds and wills by making the most familiar of the then administrative powers statutory, so that, unless he wished to exclude them, the settlor or testator need make no specific reference to them."(193) This exercise in law reform was completed in the Trustee Act, 1893. Most of the statutory powers in the 1893 Act were copied in Canadian trust legislation, including the Saskatchewan Trustees Act.(194)
 

The most important statutory powers included in the 1893 Act related to trust investments. The trust investment provisions in the Saskatchewan Trustees Act have recently been substantially revised, and have been discussed in the last chapter of this Report.(195) The other statutory powers inherited from English legislation were actually rather limited in scope. They do not include, for example, a power of sale, which is now almost universally found in trust instruments. Legislatures in Canada have added a few powers to the original list. However, the additions have been piecemeal, dictated by specific local needs. In Saskatchewan, power to purchase crop insurance, to participate in a grain company or co-operative, and to dispose of mineral rights, have been added to the list. In England some additional powers of more general application were enacted in the Trustee Act, 1925. In Canada, only Manitoba has adopted the new powers set out in the English act of 1925.
 

As the Ontario Law Reform Commission has observed
 

Trusts drafted today are very different from those that were drawn when the powers contained in the present...[legislation] were first enacted, and that as a result some of the powers now contained in the act have little relevance to contemporary circumstances.(196)
 

Although there does not appear to be any pressing demand from the legal profession to revise the statutory powers contained in The Trustees Act, it would clearly be desirable to bring the Act in line with contemporary realities.
 

There are two ways in which this goal might be achieved. First, the list might be modernized by deleting powers that are no longer relevant, and adding a select few new powers that are now routinely included in most trust instruments. Waters suggests that the conservatism of statutory lists of administrative powers is justified. They were adopted on the theory that the list should only "reflect what all conveyancers would regard as standard." While some changes might be made, Waters appears to doubt that many additional statutory powers would be appropriate. He points to "the variety of subject matter involved in commercial trusts", and notes that income tax legislation now often requires "the drafting of administrative powers to accommodate the particular trust in its particular tax setting."(197)
 

We are not convinced by this argument. While it is true that the powers appropriate in commercial trusts, and even in family trusts designed for specific tax purposes, can hardly be reduced to a standard list, we believe it is important to recognize that the great majority of trusts in Saskatchewan are relatively simple testamentary trusts. Usually, these trusts establish a fund to provide for the testator's family until the children are adults, and then distribute the fund to the beneficiaries. The powers required under trusts of this sort are in fact relatively standard. If a problem arises in regard to trust powers, it is most often the result of failure to include a power that has proved to be necessary. In our opinion, most trusts drafted in Saskatchewan would benefit from access to a broad range of standard statutory powers, encompassing matters which are now often included in properly drafted trust instruments. The list would include power to sell, lease, or mortgage trust property, power to carry on a business, and other matters routinely required to manage trust property. If a testator or settlor did not want to entrust his trustees with the full range of powers, some of them could be expressly excluded. But in the usual case, they would be available when required even if they were not set out in the trust instrument.
 

This approach to statutory powers was adopted in the New Zealand Trustee Act, 1956, and has been copied in the Western Australia Trustees Act, 1962 and the Queensland Trusts Act 1973. In the United States, the Uniform Trustees' Powers Act , adopted in 1964, also includes a comprehensive list of statutory administrative powers. A similar approach has been recommended by the Ontario Law Reform Commission.
 

We agree with the Ontario Commission that reform of statutory administrative powers should follow two principles:
 

First, we believe that the statutory list should comprehend those administrative powers that are likely to be useful in the execution of common trusts. Secondly, we consider that each power should be relatively simple in concept and briefly expressed.(198)
 

In the remainder of this chapter, the powers we believe should be included in a comprehensive statutory list will be discussed. In preparing this list, we have followed the Ontario Law Reform Commission's recommendations as closely as possible. It is, in our opinion, the most complete of the comprehensive list models, and has the advantage that it drew on its predecessors. Some of our recommendations depart significantly from the Ontario proposals, however.
 

We have thought it appropriate to include in our proposed list all powers that will useful in the administration of the majority of family trusts in Saskatchewan. It is necessary, therefore, to continue to allow settlors and testators to exclude any power that is unwanted, or unnecessary in the circumstances of the trust.(199) Nevertheless, none of the proposed powers is apt to prove harmful in any but very special cases, which would require careful drafting in any event.
 

Power to sell and otherwise dispose of property
 

Good management of a trust requires that the trustees be given authority to sell trust property and re-invest the proceeds as may be required to preserve the value of the fund and earn a reasonable rate of return on it. Powers of sale are almost always included in trust instruments, and the courts have been willing to imply a power of sale from the general tenor of the trust.(200) Nevertheless, sale is not an inherent power of trustees. It must be conferred by the settlor or implied from the trust instrument.
 

At the time when English trusts legislation was first adopted, it was common practice to insert a power of sale in many types of trust instruments. However, a power of sale was withheld from trustees under settlements of land: One of the principal objects of settlements was to preserve the family's landed wealth from generation to generation.(201) Likely for that reason, 19th Century English trusts legislation did not enact a statutory power of sale, though the Settled Estates Act, 1877 did allow trustees of land to sell with court approval. Similar Settled Estates Acts were adopted in Ontario, British Columbia, and New Brunswick. But since the Saskatchewan Trustees Act is based on the Trustee Act, 1893, even the concession made in settlements legislation did not become part of our law.
 

Because a power of sale is now almost always included in trust instruments, the lack of a statutory power of sale is not often a problem. Nevertheless, there is no reason why drafters of modern trusts should continue to be required to insert a power of sale. Power of sale has been included among the enumerated statutory powers in all recent legislation that has adopted the comprehensive list approach.
 

As a practical matter, creation of a statutory power of sale is attractive because it offers an opportunity to ensure that the power is comprehensive. The authorities on the scope of standard powers of sale are incomplete. Thus, for example, it has been held in Ontario that a bare power of sale confers authority to exchange properties(202), but there is no authority allowing trustees with such a power to agree to partition and sale of trust property, or to surrender property when obligations attached to it have become onerous (203). Both exchange and partition are included in modern statutory lists of trustees' powers. The Ontario Law Reform Commission proposes a simple but comprehensive formula for powers of sale and related powers to dispose of property:(204)
 

[Subject to the terms of a trust] trustees may. . . :
 

(b) sell trust property by public auction or private contract for cash or credit on appropriate security;
 

(c) dispose of trust property by way of exchange for other property, or where the trust property consists of an undivided share, concur in the partition of the property in which the share is held;.
 

(f) surrender insurance policies, leases or other property subject to onerous obligations of such a nature that it would not be in the interests of the beneficiaries to retain the trust property.
 

Similar provisions should be adopted in Saskatchewan.(205)
 

Prior to adoption of trusts legislation in England, there were certain other problems, most relating to the method and conditions of sale under the standard terms of powers of sale, that appeared to require a legislative cure.(206) Most of these problems were addressed in the Trustee Act, 1893, and adopted as sections 37 and 38 of the Saskatchewan Trustees Act:
 

37.-(1) Subject to The Devolution of Real Property Act, where a trust for sale or a power of sale is vested in a trustee he may sell or concur with any other person in selling all or any part of the property either subject to prior charges or not and either together or in lots, by public auction or by private contract, subject to such conditions respecting title or evidence of title or other matter as the trustee thinks fit, with power to vary any contract for sale and to buy in at any auction or to rescind any contract for sale and to resell without being answerable for loss.
 

(2) This section applies only if an as far as a contrary intention is not expressed in the instrument creating the trust or power and has effect subject to the terms of that instrument.
 

38.-(1) No sale made by a trustee shall be impeached by a beneficiary upon the ground that any of the conditions subject to which the sale was made may have been unnecessarily depreciatory , unless it also appears that the consideration for the sale was thereby rendered inadequate.
 

(2) No sale made by a trustee shall, after the execution of the conveyance, be impeached as against the purchaser upon the ground that any of the conditions subject to which the sale was made were unnecessarily depreciatory, unless it appears that the purchaser was acting in collusion with the trustee at the time when the contract for sale was made.
 

(3) No purchaser upon a sale made by a trustee shall be at liberty to make any objection against the title upon the ground aforesaid.
 

Because the problems these sections were intended to cure arose out of 19th Century authorities interpreting the powers of sale then current in trust instruments, they are not likely to arise in regard to modern statutory powers of sale. None of the jurisdictions that have adopted the comprehensive list approach to powers have thought that provisions as elaborate as section 37 and 38 are necessary. Note, however, that the Ontario Draft Act does refer to sale by auction, a matter dealt with by section 37, and sale on credit, which is not expressly included in section 37. The latter is obviously necessary in the modern commercial context, and is included in most of the non-statutory power of sale precedents we have examined.. The Manitoba Trustees Act also makes provision for sale on credit, by agreement for sale, or by taking a mortgage back.(207)
 

Power to lease, grant easements etc.
 

The Saskatchewan Trustees Act does not include a general power to lease trust property, though section 42 does authorize lease of mineral rights with approval of the court. A statutory power to lease is included in trusts legislation in some other jurisdictions, including the Manitoba Trustees Act.(208) Similarly, the Saskatchewan Act does not authorize trustees to renew a lease or sublease trust property. This power is also included in some trusts legislation, including the Ontario Trustee Act.(209)
 

We are of the opinion that trusts legislation should confer broad powers on trustees to lease property and otherwise deal with leases.(210) The Ontario Law Reform Commission also recommends adoption of such a statutory power. However, the Ontario Commission is of the opinion that the power to lease or sublease property should be limited to short-term leases. It argues that long-term leases might interfere with the interests of beneficiaries, who may desire to take property free of the encumbrance of a long term lease.(211) We do not agree. Long term leases are little different in practice than sale. They are most often used in Saskatchewan when sale is not possible. For example, cottage lots may be leased for terms of 20 to 99 years on land that has not been subdivided for sale. The statutory power to lease in the Manitoba Trustees Act places no limit on the term of the lease that may be granted, with no apparent ill consequences.
 

Leases are not the only interests in land apart from the fee simple that trustees may wish to dispose of. Easements, profits a prendre, and options to purchase fall into this category. Many non-statutory powers of sale we have examined do not expressly deal with disposal of such interests, and the need to encompass them may be overlooked when trust instruments are drafted. The value of a statutory power covering miscellaneous interests in land is underlined by section 42 of the Saskatchewan Trustees Act. This section responded to commercial necessity by authorizing trustees to dispose of mineral rights with court approval:
 

42.- A judge of the Court of Queen's Bench may by order authorize a trustee to lease, grant a profit a prendre in respect of or otherwise deal with or dispose of mines and minerals or sand and gravel forming part of the trust estate whether the same have already been worked or not and either with or without the surface or other land, or to grant an easement, right or privilege of any kind over or in relation thereto.
 

The requirement of court approval was likely adopted for no reason other than the fact that English trusts legislation contains no similar power.(212)
 

The Ontario Law Reform Commission, following the model adopted in Australian trusts legislation, has proposed a general power to manage, repair, and maintain trust property that would encompass granting of easements and profits a prendre in the course of property management.(213) However, disposal of interests such as these is often more than a mere incident of property management. The only trusts legislation we have examined that deals comprehensively with easements, profits a prendre, options to purchase, and other rights in land is the Manitoba Trustees Act. Section 27 of the Manitoba Act authorizes trustees to grant profits a prendre, and other rights over land without court approval:
 

27(1) Where a trust for sale or a power of sale of land is vested in a trustee, he may at any time grant leases of the land, or of any part thereof, or of any easement, right, or privilege of nay kind over or in relation to the land, including mining leases, for any term, and for any purpose, whether involving waste or not.
 

(2) A trustee in whom no trust for sale or power of sale is vested may grant leases, other than mining leases, of any land subject to the trust for a term which does not exceed three years from the date on which the lease is made. . . .
 

The Manitoba Act also allows trustees to grant options to purchase:
 

28. (1) Where a trust for sale or a power of sale of land is vested in a trustee, he may at any time, either with or without consideration, grant by an instrument an option to purchase or take any authorized lease of the land or any easement, right, or privilege over or in relation to the land, at a price or rent which is either fixed at the time of the granting of the option, or can be effectually ascertained at the time of the time of the exercise of the option by a method which is set forth in the instrument granting the option. . . .
 

We recommend that Saskatchewan enact a broad statutory power to grant easements, profits a prendre, and other rights over land.(214)
 
 

Postponing sale
 

A distinction must be made between a power of sale and a trust for sale. The former gives trustees a discretionary power to sell trust property. A trust for sale requires trustees to convert trust property to establish an investment fund. Trusts for sale are commonly inserted in wills, and even in the absence of an express trust for sale, executors are usually required to liquidate the residue.(215) They are appropriate estate planning mechanisms, but may cause difficulty if not carefully drafted. If, for example, the trust for sale provision requires immediate sale, the trustees may be forced to sell when market conditions would dictate delay.
 

Waters is of the opinion that
 

All statutes should confer . . . authority [to postpone sale] upon trustees with an obligation to sell. It is eminently sensible, may be omitted unless the draftsman is careful, and prevents the beneficiaries from demanding sale before the trustees think it wise to sell. (216)
 

Surprisingly, the only trusts legislation we have examined that includes a general statutory power to postpone sale is the Manitoba Trustees Act, which provides:
 

33(1) Unless a contrary intention is expressed in the will or other trust instrument, if any, a trustee in whom a trust for sale or conversion, or a power of sale or conversion, of property is vested may postpone the sale or conversion of the whole or any part of the property subject to the trust for such period as is reasonable in the circumstances; and he may retain the property, or any part thereof, in the form in which it is invested.
 

(2) The powers granted under subsection (1) may be exercised by a trustee notwithstanding that the property subject to the trust, or any part thereof, is of a kind in which he is not authorized to invest, or is of a hazardous or speculative nature or does not produce income.
 

(3) A trustee exercising any of the powers granted under subsection (1) is not answerable for any loss incurred thereby while acting in good faith.
 

(4) Nothing in this section authorizes the postponement of the distribution of any property beyond the time at which it becomes distributable to, or among the beneficiaries.
 

A power to postpone sale should be included in Saskatchewan trusts legislation.(217)
 
 
 

Power to carry on a business
 

The Saskatchewan Trustees Act contains no statutory power to carry on a business that is part of the trust property. Until recently, businesses were not authorized investments. Unless the trust instrument provided otherwise, it was necessary to sell the business and reinvest the proceeds. Since revision of the investment powers provisions of The Trustees Act, it may now be possible in some cases to retain a business as a trust investment, though this result is not certain .(218) It is possible that a power to postpone sale, whether contained in the trust instrument, or created by statute, would allow the trustees to carry on a business. However, doubt has been expressed that a power to postpone will be effective for this purpose.(219)
 

In any event, a decision to carry on a business involves more than simply postponement of sale: It is a decision to become actively involved in the management of a business enterprise on behalf of the trust, and to do all those things required as owners and managers. For that reason, we believe that a statutory power to carry on a business should be included in trusts legislation. Such a power has been included among the statutory powers of trustees adopted in all jurisdictions that have adopted the comprehensive list approach. The Ontario Draft Act is typical. It provides that :
 

[Subject to the terms of a trust] trustees may. . . :
 
 
 

(h) carry on any business, whether as sole proprietor, partner, limited partner or otherwise, incorporate or otherwise change the form of the business, and dispose of or wind up the business.(220)
 

We recommend that a similar provision be adopted in Saskatchewan.(221)
 

Power to improve, maintain and repair trust property
 

While trustees can no doubt make expenditures to repair and maintain property in order to preserve its value as a trust asset(222), in Canada, only British Columbia, Nova Scotia and Prince Edward Island confer a general power on trustees to repair, maintain and improve trust property.(223) The statutory power presumably allows improvements and repairs that might not be strictly required to preserve trust property.
 

A general power to improve, maintain, and repair trust property is a reasonable statutory addition to the powers of trustees. Such a power has been included among the enumerated statutory powers in all recent legislation that has adopted the comprehensive list approach. The Ontario Law Reform Commission recommends that:(224)
 

[Subject to the terms of a trust] trustees may. . . :
 

(f) manage, maintain, repair, renovate, improve or develop trust property, including in the case of land, subdividing, erecting buildings . . . and entering into agreements with respect to boundaries, party walls, fencing or other matters in connection with trust property.
 

A similar provision should be adopted in Saskatchewan.(225)
 
 

Purchase of a dwelling
 

It was until recently the common practice to include a power to invest in land in trust instruments. Since the statutory investment power now permits any prudent investment, such an express power is no longer necessary.(226) However, a power to invest in land does not appear to permit purchase a dwelling house for a beneficiary. It has been held that an express power in a testamentary trust to invest in land did not allow purchase of a house for the testator's widow and children because the house would not be an income-earning investment.(227) Similarly, purchase of a house for beneficiaries is unlikely to qualify as a prudent investment under The Trustees Act.
 

The most common trusts in Saskatchewan are established to provide for the families of testators. Such trusts usually provide for maintenance out of family income, and often permit the trustees to retain the family home. If the beneficiaries do not stay in the family home, rental accommodations can be paid for out of trust income. It is less common to anticipate the possibility that a new home might be purchased, either for he entire family, or for one of its members. We are of the opinion that a statutory power to purchase, rent, or erect accommodations for income beneficiaries should be enacted. A statutory power to purchase a dwelling house has been included in recent Australian trusts legislation, and recommended by the English Law Reform Committee.(228) The New Zealand Trustee Act also permits rental and erection of homes. The Ontario Law Reform Commission(229) follows the New Zealand lead:
 

[Subject to the terms of a trust] trustees may. . . :
 

(k) purchase or rent a living accommodation or construct a house on land held by them for the purpose of providing a home for person entitles to the income of the money expanded in respect of the purchase, or the income to be expanded in respect of the rent or the income of either the land or the money expanded in respect of the purchase or construction, if in any case under this clause, the person for whom the living accommodation is provided consents thereto.
 

A similar provision should be adopted in Saskatchewan.(230) Note, however, that the Onario recommendation would require the consent of the person for whom the dwelling is purchased or rented. We do no believe this is necessary or appropriate. In some cases, a beneficiary who is unable to consent because of mental incapacity may benefit if the trustees were authorized to rent accomodation in a suitable facility.
 
 
 

Power to distribute trust property in specie
 

Trust property is normally administered as a fund. If the trust is testamentary, after specific bequests have been honoured and legacies paid, the residue is converted to trust investments.(231) In other cases, unless the trust instrument clearly provides otherwise, the trustees are required to make appropriate investments to preserve the trust fund and earn income. The beneficiaries are entitled, when trust property is distributed, to a share of the fund, not to trust property in specie. (232)
 

If the original trust property is still intact when a distribution is made, there does not appear to be any reason why a distribution in specie of a particular asset cannot be made if a beneficiary so requests, and if the request can be complied with without prejudicing the other beneficiaries. Nevertheless, because distribution in specie is rarely expressly authorized, trustees may be reluctant to comply with such a request. It is apparently for that reason that trusts legislation in Australia and New Zealand confers a statutory power on trustees to distribute property to a beneficiary in specie, and to value and appropriate property for that purpose. The Ontario Law Reform Commission has proposed a similar provision.(233) We recommend that this power should be contained in Saskatchewan trusts legislation.(234)
 
 

Power to insure trust property
 

Section 45 of the Saskatchewan Trustees Act provides:
 

45.- (1) It is lawful for but not obligatory upon a trustee to insure against loss or damage by fire any building or other insurable property to an amount, including the amount of any insurance already in force, not exceeding three fourth parts of the full value of the building or property, and to pay the premiums out of the income thereof or out of the income of any other property subject to the same trusts, without obtaining the consent of any person wholly or partly to such income.
 

(2) This section does not apply to a building or property that a trustee is bound forthwith to convey absolutely to a cestui que trust upon being requested to do so.
 
 
 

(3) It is lawful for but not obligatory upon a trustee to insure against loss or damage by hail, to an amount not exceeding $10 per acre, the crops growing or to be grown upon any land that he is farming, or that he has sold or leased on terms made wholly or partly pursuant to The Crop Payments Act, or to insure those crops, under a contract of crop insurance, against loss from risks or perils to which they may be exposed; and to pay the premiums out of the income thereof or of any other property subject to the same trusts, without obtaining the consent of any perosn entitled wholly or partly to such income.
 
 
 

This provision is adapted from the English Trustee Act, 1925. The English Act is restricted to fire insurance, and is the source of the coverage limit in the Saskatchewan Act. The extension to crop insurance is, of course, a Saskatchewan addition. Most provinces have similar provisions, but Manitoba has adopted a more comprehensive approach, allowing trustees to insure "any loss or damage" to trust property, and has eliminated the coverage limit.(235)
 

Power to insure property is obviously desirable. It has been held in Canada that insuring against fire is usually an obligation of prudent trustees.(236) There is no longer any reason for excluding insurance for damage other than fire, and in fact standard insurance policies usually extend to other forms of property damage. Similarly, the coverage limit should be eliminated. As Waters notes, "it surely is preferable today for trustees to prove to have been somewhat overinsured."(237)
 

A simple, comprehensive statutory power to insure is appropriate. The Ontario Draft Act provides:(238)
 

[Subject to the terms of a trust] trustees may. . . :
 

(g) insure against loss or damage to trust property and against any other risk or liability.
 

A similar provision should be adopted in Saskatchewan.(239)
 

Power to borrow money
 

The Saskatchewan Trustees Act contains no statutory power permitting trustees to borrow money for trust purposes. In the past, there was perhaps some justification for allowing trustees to borrow money only if permitted to do so by the trust instrument. The principal duty of trustees is protection of the trust fund. Trustees were expected to invest soundly, and earn income. Incurring debt could be regarded as inherently risky, incompatible with the interests of the beneficiaries. But even in the 19th Century, it was recognized that raising money using trust property as security was sometimes prudent. Section 64 of the Saskatchewan Trustees Act provides that an executor or administrator may mortgage trust property to pay estate debts and legacies.(240)
 

Contemporary management of trust investments, which may include businesses, rental properties, and similar properties may require the borrowing of money as a matter of course. A statutory power to borrow money has been included among the statutory powers of trustees adopted in all jurisdictions that have adopted the comprehensive list approach. No restriction is placed on the power to borrow in these jurisdictions. We agree with the Ontario Law Reform Commission that this is an appropriate approach. The Commission observed that "as there are numerous purposes for which trustees should be entitled to borrow funds, any attempt to list them all might well result in omission of one or more."(241) We recommend that Saskatchewan trusts legislation should contain a general statutory power permitting trustees to borrow funds, with or without giving trust property as security.(242)
 
 

Deposit of trust funds
 

Section 6 of the Saskatchewan Trustees Act provides:
 

6.- (1) Pending the investment of any trust money, a trustee may deposit it, for any period of time that is reasonable in the circumstances, in:
 

(a) a chartered bank;

(b) a credit union that is incorporated under The Credit Union Act, 1998 or any former Credit Union Act;

(c) Saskatchewan Co-operative Credit Society Limited;

(d) a trust company that is licensed under The Trust and Loan Companies Licensing Act;

(e) a loan company that is licensed under The Trust and Loan Companies Licensing Act and that is a member of the Canada Deposit Insurance Corporation;

(f) any other body corporate that is empowered to accept moneys for deposit and that has been approved for that purpose by the Lieutenant Governor in Council.
 

(2) Where a trustee, other than a trust company registered and entitled to transact business as a trust company in Saskatchewan, deposits trust moneys under subsection (1), he shall open and keep a separate account in his name in the bank or other depository for each trust for which moneys so deposited are held.
 

Apart from extension to include credit unions and trust companies as well as banks, this section is copied from the Trustee Act, 1893. It has been adopted throughout common law Canada. Trusts are, of course, older than wide-spread use of banks as deposit institutions. A bank can be regarded as an agent to which the management of deposited funds is delegated. Although the authority of trustees to delegate is limited(243), by the middle of the 19th Century, the courts were prepared to allow trustees to deposit funds in the circumstances later codified in trusts legislation.(244)
 

Note that section 6 only allows deposit of trust funds pending investment. Although this limitation is now often ignored in practice, the 19th Century authorities suggesting that trust funds should not be left on deposit for longer than six months remain part of the law.(245) Since revision of the statutory investment powers of trustees, investment in term deposits and perhaps some other interest-bearing deposits may now qualify as trust investments(246). Use of a chequing account to pay bills as they come due is still not authorized. The limitation in section 6 reflects the cautious approach of the courts toward use of banks as deposit institutions more than a century ago. It is no longer appropriate.
 

The Ontario Law Reform Commission would continue to specify that deposit "pending investment" is authorized, but would also authorize deposit "for the purposes of paying the ongoing expenses of the trust". (247) This allows use of chequing accounts , and codifies the circumstance in which use of a current account would be prudent. We prefer to leave the question of whether a particular use of a deposit account is prudent to the general law governing investments by trustees. This is the approach adopted in the American Uniform Trustees' Powers Act. Saskatchewan trusts legislation should confer a general power on trustees to deposit trust funds in banks and other financial institutions.(248)
 

Incidental authority to deal with trust property
 

Section 48 of the Saskatchewan Trustees Act provides:
 

48.- (1) A trustee or tow or more trustees acting together, or a sole acting trustee where by the instrument, if any, creating the trust a sole trustee is authorized to execute the trusts and powers thereof, may if and as he or they may think fit, accept a composition or any security real or personal for a debt or for any property real or personal claimed, and may allow time for payment of a debt and may allow time for payment of a debt any may compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing whatever relating to the testator's or intestate's estate or tot he trust and for any of those purposes may enter into, give and execute such agreements, instruments of composition or arrangement and releases and do such other things as to him or them seem expedient without being responsible for loss occasioned by any act or thing so done by him or them in good faith.
 

This section derives from the Trustee Act, 1893, and has been adopted in all common law provinces except Prince Edward Island. It gives trustees broad powers to do things that will arise in the course of the management of trust assets, such as payment of debts, collection of debts, the writing off of bad debts, and compromising of claims. These powers are merely incidental to proper administration of trust property, and likely require no sanction either in statute or in the trust instrument. Writing only a decade after the Trustee Act, 1893 was adopted, Underhill was already forced to conclude that it "is by no means clear" that the provision had changed the law. He suggested that it may have been intended to relieve trustees of the onus of demonstrating that a decision, for example, to abandon a debt, was prudent.(249) However, it has been held that under the section, the burden of justification remains on the trustee.(250)
 

Trusts legislation in Australia and New Zealand confer additional incidental powers required in the day to day administration of trust property. These cover:
 

1. Payment of "outgoings" such as taxes and premiums. Once again, these powers are incidental. According to the long established rule, trustees are expected to pay normal "outgoings" from trust income.(251)
 

2. Express authority to exercise rights, powers, and obligations attendant on ownership of corporate shares. As the Ontario Law Reform Commission observed, since trustees are vested with the legal title to shares in the trust portfolio, they are likely entitled to exercise the powers of a shareholder without express authorization.(252)
 

3. Authority to do acts and execute instruments that are necessary to carry out the administrative powers of the trustees.
 

It might be argued since all the incidental powers discussed above can likely be exercised by trustees without the support of legislative sanction, statutory recognition is unnecessary. Nevertheless, a succinct summary of incidental administrative powers may have a place in a comprehensive list of statutory powers. This conclusion is perhaps strengthened by the fact that section 48 has long been part of trust law in Canada. The Ontario Draft Act provides:
 

[Subject to the terms of a trust] trustees may. . . :
 

(i) exercise all rights and powers and satisfy all liabilities incidental to the ownership of shares or obligations of a corporation, including power to sell or exercise subscription rights, to exchange the shares and obligations for other shares and obligations, to join in plans for reconstruction, reorganization or amalgamation, to enter into pooling or other agreements, or to authorize sale of the assets or undertaking of the corporation;
 

(m) pay or assert or contest any claim, and compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing relating to the trust or trust property;
 

(r) do all supplementary or ancillary acts or things and execute all instruments necessary or desirable to carry out the intent and purpose of the powers vested in the trustees. (253)
 

Similar provisions should be adopted in Saskatchewan. We would amend the Ontario list only by extending the authority to exercise shareholder rights to include membership rights in a co-operative or credit union.(254)
 

A somewhat different rationale justifies retention of section 47 of the Saskatchewan Trustees Act, which empowers trustees to give receipts:
 

47. The receipt in writing of a trustee for any money, securities or other personal property or effects payable, transferable or deliverable to him under a trust or power is sufficient discharge for the same and exonerates the person paying, transferring or delivering the same from seeing to the application or being answerable for any loss or misapplication thereof.
 

Like section 48, this section derives from the Trustee Act, 1893, and has been adopted throughout common law Canada. However, the purpose achieved in this case is clear. Prior to 1893, there was extensive, but rather confusing, law governing the giving of receipts by trustees. The 1893 Act swept the old law away, replacing it with a relatively simple formula.(255) A similar provision has been adopted in all recent legislation that has adopted the comprehensive list approach. The substance of section 47 should be retained.(256)
 

Other powers of trustees contained in The Trustees Act
 

There are certain other sections of the Saskatchewan Trustees Actthat might be included in a comprehensive enumeration of statutory powers, but which we have concluded are unnecessary.
 

Section 50 of The Trustees Act provides:
 

50.- (1) A trustee acting or paying money in good faith under or in pursuance of a power of attorney is not liable for any such act or payment by reason of the fact that at the time of the payment or act the person who gave the power of attorney was dead or had done some act to avoid the power if this fact was not known to the trustee at the time of his so acting or paying.
 

(2) Nothing in this section affects the right of a person entitled to the money against the person to whom the payment is made, and the person so entitled has the same remedy against the person to whom the payment is made as he would have had against the trustee.
 

This provision was adopted from the English Trustee Act, 1893. Underhill commented that this enactment "although restricted on its terms to trustees, is but little more than the general law now applicable to all persons acting upon the faith of a power of attorney". In addition, the Saskatchewan Powers of Attorney act now provides protection where an attorney continues to act after the power of attorney has been terminated.
 

Section 51 of The Trustees Act provides:
 

51.- A trustee may become a member of a company or association formed for the purpose of buying, selling and marketing grain on the non-profit co-operative plan, and may enter into a contract with the company or association for marketing all grain grown upon the land of the trust estate through such company or association, notwithstanding that the contract may provide for the retention from the purchase price of the grain of a certain sum or percentage to provide a reserve fund or facilities for handling the commodities in which the company or association deals.
 

The general statutory powers recommended above are sufficient to authorize participation in a grain growers' company or co-operative. Note in particular that we have recommended that trustees should be empowered to exercise shareholder rights in corporations and membership rights in co-operatives.
 

Powers of executors and administrators contained in The Trustees Act
 

Sections 61 to 78 of The Trustees Act are contained under the heading "executors and administrators". These sections do not apply to trustees. They are properly part of the law of administration of estates, not the law of trusts.
 

Although it is common practice to name the same persons "executors and trustees" under a will, the offices are distinct. As executors, the testator's representatives pay debts and the distribute property or proceeds from its sale according to the terms of the will. Once these duties are discharged, their duty as executors is complete. If the will establishes a trust, the executors transfer the property comprising the trust to the trustees, or if they are themselves trustees, undertake administration of the trust as trustees, not as executors. The powers in this part of The Trustees Act were designed to assist personal representatives in carrying out their duties as such rather than as trustees. Section 67, for example, allows personal representatives to borrow money to pay estate and income taxes.
 

These provisions appear to have been assembled from a variety of English statutory sources. They were likely included in The Trustees Act for lack of better place to put them. In our opinion, they have no place in trusts legislation. In 1998, many provisions relating to administration of estates formerly contained in The Surrogate Court Act and other legislation were consolidated in a new Administration of Estates Act.(257) Those "rights and liabilities of executors and administrators" contained in The Trustees Act which need to be retained should be removed to The Administration of Estates Act.(258)
 

Since the expanded administrative powers recommended in this report will apply to personal representatives as well as trustees per se, some of the sections in this part can be dispensed with. These include:
 

Sections 61and 62 - power to distrain for rents

Sections 64-66 - power to raise money to satisfy charges

Section 67 -- power to borrow to pay estate and income taxes

Section 71 -- power to convey in pursuance of a contract made by the deceased.
 

Section 73 vests the powers of personal representatives in their survivors if one of their number dies. We recommend below adoption of a similar provision applying to trustees as well as personal representatives.
 
 

Dispositive powers of trustees
 

The power discussed above are "administrative powers", necessary for the management of trust property. They are distinct from, and quite different in kind from "dispositive powers". Waters defines a dispositive power as [A] power or discretion to allocate or distribute trust property to a beneficiary of a trust." He recognizes four common dispositive powers: The power of maintenance, the power of advancement, the power of appointment, and discretionary trusts.(259)
 

Two of these present no particular difficulty. A power of appointment is authority to vest property in an individual, usually a member of a class identified in the trust instrument. Under the terms of a discretionary trust, the trustees have an absolute discretion as to the amount of income or capital a beneficiary is to receive. Both are useful for certain estate planning purposes(260), but neither requires either statutory sanction or regulation. The powers of maintenance and advancement, on the other hand, have attracted the attention of legislators.
 

A power of maintenance is the authority to apply income to the maintenance of a beneficiary whose maintenance needs are not met by the express terms of the trust. As Waters notes: "essentially the situation is one where a person will or may take beneficial possession of property tomorrow, but today has needs which he has no other resources to meet."(261) The courts have an inherent jurisdiction to authorize maintenance of minors, but a statutory power of maintenance was created by the English Trustee Act, 1860. Saskatchewan inherited this provision, but has revised it substantially to expand both the statutory power and the power of the courts, . The Saskatchewan Trustees Act now provides:
 

52.- Where property is held by trustees in trust for an infant, either absolutely or

contingently they may at their sole discretion pay to the guardians, if any, of the

infant or otherwise to apply for or towards the maintenance or education of the

infant the whole or any part of the income to which the infant may be entitled in

respect of that property, whether or not there is a fund applicable to the same

purpose or any other person bound by law to provide for such maintenance or

education; and the trustees shall accumulate all the residue of the income by way of

compound interest by investing it and the resulting income thereof from time to

time in proper securities for the benefit of the person who shall ultimately become

entitled to the property from which the accumulation has arisen:
 

Provided that such trustees may at any time, if it appears expedient, apply the

whole or any part of the accumulations as if the same were part of the income

arising in the then current year.
 

53-(1) Where:
 

(a) a sum of money is held by an executor or administrator in trust for an

infant either:
 

(i) absolutely;
 

(ii) contingently on his attaining the age of eighteen years; or
 

(iii) contingently on the occurrence of an event prior to his attaining the

age of eighteen years;
 

(b) the fund would be available for distribution to the infant but for his

infancy; and
 

(c) the income from the fund or any other property is insufficient for the

maintenance and education of the infant;
 

the executor or administrator may, subject to subsection (2), by order of a judge of

Her Majesty's Court of Queen's Bench for Saskatchewan acting at the judicial

centre at which probate or administration was granted, to be obtained ex parte, or

upon such notice as the judge may direct, pay to the guardian, if any, of the infant

or otherwise apply for or towards his maintenance or education the whole or any

part of the fund.
 

(2) In addition to the amounts authorized by the court to be applied towards the

infant's maintenance and education, the court may authorize application of any

additional amounts that are, in its opinion, required to meet special circumstances

or expenditures in the best interests of the infant.
 

54.- (1) Where personal property is held by trustees in trust for an infant absolutely

or contingently on his attaining the age of eighteen years or on the occurrence of an

event previously to his attaining that age, and where the income from the property

is insufficient for the maintenance and education of the infant, the trustees may, by

leave of a judge of the Court of Queen's Bench, to be obtained in a summary

manner, sell and dispose of any portion of the property and pay to the guardians, if

any, of the infant, or otherwise apply for or towards his maintenance or education,

the whole or any part of the money arising from the sale.
 

(2) If the whole of the money arising from the sale is not immediately required for

the maintenance and education of the infant, the trustees shall:
 

(a) from time to time invest the surplus moneys and the resulting income

therefrom in proper securities; and
 

(b) apply such moneys and the proceeds thereof from time to time for the

maintenance and education of the infant; and
 

(c) hold all the residue of the moneys and interest thereon not required for

such maintenance and education for the benefit of the person who shall

ultimately become entitled to the property from which the moneys and

interest have arisen.
 

Section 52 permits trustees to provide maintenance out of income; Sections 53 and 54 allow encroachment on capital with the Court's permission. Saskatchewan has the most comprehensive legislation governing the power of maintenance of infants in Canada. The substance of sections 52-54 should be retained. However, because the provisions were adopted at different times, their language and structure are inconsistent. They would benefit from redrafting.(262)
 

Alberta(263) and Prince Edward Island extend the power of maintenance to adults. A statutory power of maintenance for widows might once has been justified, but in hardly necessary since adoption of matrimonial property legislation, which gives the surviving spouse access to the capital of the estate. A power of maintenance might be applied for the benefit of a handicapped adult, but might jeopardize entitlement to other benefits(264). We do not recommend extending the power of maintenance to adult beneficiaries.
 

A power of advancement is similar to a power of maintenance, but allows the trustees to advance capital to a beneficiary to take advantage of "some opportunity that will further him in life".(265) The court has an inherent jurisdiction to approve an advancement. The English Trustee Act, 1925(266) and the Manitoba Trustee Act(267) both include a statutory power of advancement. The power of maintenance in the Saskatchewan Trustees Act contains what amounts to a limited power of advancement with court approval. Sections 53 and 54 permit advancement of capital for education of an infant, and section 53 also allows advancement of funds to provide for "special circumstances". We agree with the Ontario Law Reform Commission that statutory powers of advancement are difficult to justify(268). In the case of minor beneficiaries, the limited power of advancement contained in the Saskatchewan Act is adequate. If a settlor has purposefully designed a trust to postpone distribution of capital to an adult beneficiary, exercise of a statutory power of advancement would undermine the settlor's intention. In such cases, an application under the Variation of Trusts Act would be an appropriate mechanism to determine whether the terms of the trust should be altered.
 
 

APPOINTMENT AND REMOVAL OF TRUSTEES




Introduction
 

Trust law must provide some mechanism for removing and replacing trustees. A trustee may die. The trust may prove more difficult and time-consuming to administer than the trustee imagined when the appointment was accepted. Occasionally, a trustee may become incompetent or otherwise unable to carry out his or her duties in an acceptable manner. In contemporary practice, most non-commercial trusts operate for only a few years, diminishing the likelihood of a problem. But trusts that endure for decades are not rare.(269) In such cases, the odds are that some change in the trustees will be required before the trust has run its course.
 

The courts have always possessed a broad inherent jurisdiction to appoint and remove trustees. Rules devolving the office of trustee on the survivors when there is more than one trustee, or on the personal representative of a deceased sole trustee, have long been established. But until trusts legislation was enacted in nineteenth century England, trustees could not otherwise be replaced unless the trust instrument provided a mechanism for that purpose. It became the common practice to give the trustees themselves, or some other person nominated in the trust instrument, authority to remove and replace trustees who desired to retire or had become incapable of acting. One of the purposes of English trusts legislation was to make it unnecessary to include this power in trust instruments. Non-judicial appointment of trustees was first permitted in the Trustee Act, 1860. Some additional provisions relating to appointment and removal of trustees were included in the Conveyancing Act, 1881. The final nineteenth century rendition of these statutory powers was enacted in the Trustee Act, 1893. The provisions in the Saskatchewan Trustees Act governing appointment and removal of trustees are based on the English Act of 1893, and have not been substantially changed since they were originally adopted.
 

The Saskatchewan Trustees Act appears to provide comprehensive coverage of appointment and removal of trustees. Section 14 deals with the power of the court to appoint new trustees. Sections 15-16 and 19 provide for non-judicial replacement of trustees, and section 20 allows retirement without replacement in some cases. Sections 18, 22 and 39 apply when a trustee dies. Sections 17 and 35 specify the powers of new trustees. Vesting of trust property in new trustees when a non-judicial appointment is made is governed by Section 21. Sections 27 to 33 provide for vesting of trust property by court order.
 

Unfortunately, the comprehensiveness of these provisions is illusory. Despite the fact that appointment and removal of trustees accounts for nearly one third of the provisions in the Saskatchewan Trustees Act, it fails to create a practical mechanism for this purpose. The Ontario Law Reform Commission found that the statutory non-judicial powers of appointment and removal of trustees "are rarely employed in Ontario".(270) Our inquiries suggest that this is also the case in Saskatchewan.(271) In practice, the assistance of the court is almost always sought because of uncertainty about the validity of replacements made using the non-judicial mechanism.
 

Part of the problem is the confusing and often repetitive way in which the replacement and removal provisions are set out in the Act. For reasons that are obscure, many of the appointment and removal provisions are grouped in the act under the heading "Rights and Liabilities of Trustees". Some of the provisions relating to the powers of new trustees (e.g. Section 17) are included under this heading, while others (e.g. Section 35) appear later in the Act under the heading " Powers of New Trustees". The jurisdiction of the court to replace and appoint trustees is contained in Section 14, but what appears to be an alternative is contained in Sections 85 and 86 of the act under the heading " Judicial Trustees".
 

The Victorian draftsmen who prepared the 1893 Act inserted only those provisions thought necessary to supplement the general law of trusts. The legislation does not comprehensively codify the law relating to appointment and removal of trustees. Today, the omissions left by partial codification are confusing, and even misleading. For example, the Saskatchewan Act includes extensive provisions relating to vesting orders for real property and choses in action, but recourse to the inherent jurisdiction of the court is required to vest other personal property. Similarly, Section 14 fails to provide for removal of a trustee without the appointment of a successor, though the court will do so under its inherent jurisdiction. In some cases, the confusion seems to have been compounded by the way in which Saskatchewan legislators adapted the English model. Thus, for example, a straightforward reading of the Act suggests that non-judicial replacement of a personal representative is possible under section 15. But it is established law that executors and administrators can only be removed by the court, and section 15 has never been used to replace executors and administrators.
 

The most important deficiencies in the legislation have to do with uncertainty about the effect of non-judicial appointment. Trustees must be able to demonstrate that they have been validly appointed and that the trust property has vested in them. At present, a person purchasing trust property must satisfy himself or herself that the appointment of the trustees was made in conformity with the Act and trust instrument. The Ontario Law Reform Commission suggests that this is the main reason why the certainty provided by judicial appointment and judicial vesting orders is preferred.
 

In England, the appointment and removal provisions in the Trustee Act, 1893 were revised and clarified by the Trustee Act, 1925. The English Act of 1925 has been widely copied in the Commonwealth, particularly in Australia and New Zealand. However, in Canada these reforms have been adopted only in Manitoba. The Trustee Act, 1925 was a major improvement, but did not eliminate all the problems inherited from the older legislation. A more complete over-haul of legislation governing appointment and removal of trustees has been proposed by the Ontario Law Reform Commission.
 

We are of the opinion that the appointment and removal provisions in the Saskatchewan Trustees Act require thorough revision. Our goal is to clarify and simplify the law. The changes we recommend clarify the existing law, and in few cases extend it to better reflect contemporary needs and practice.
 

A major goal of reform should be to make non-judicial appointment and removal a practical alternative to judicial appointment. As the Ontario Law Reform Commission suggested, "judicial application . . . involving time and expense to the trust, should be discouraged . . . and non-judicial appointment and discharge encouraged." (272) This is in fact no more than the drafters of the Trustee Act, 1893 sought, but at a time when the cost of applications to court is an increasing concern, it is an even more attractive and necessary goal than in the past.
 

Death of a trustee
 

The general rules applicable when a trustee dies are reasonably clear. When one of a number of trustees dies, the surviving trustees take full responsibility for the trust, and title to the trust property automatically vests in them. On the death of a sole trustee, the personal representative of the deceased becomes trustee in his or her place. Both rules reflect the policy of equity to ensure continuity in the administration of trust property. But despite the apparent simplicity of these rules, they are not entirely satisfactory. Their origin antedates enactment of trustee legislation. They were modified by provisions in the English Trustee Act, 1893 which were subsequently adopted in Saskatchewan. Statutory intervention did not resolve some uncertainty about the scope of the rules.
 

1. The survivorship rule
 

Trustees hold legal title to the trust property as joint tenants. At common law, all joint tenancies are subject to the survivorship rule. Thus title to trust property vests in the surviving trustees when one of their number dies. However, it was not entirely clear prior to statutory intervention that transmission of the legal title to trust property also gave the surviving trustees full authority to administer the property as trustees.(273) For this reason, section 22 of the Trustee Act, 1893 provided that surviving trustees acquire "every power given to trustees which enables them to deal with or affect the trust property". The English provision applied to transmission of the office of trustee, executor and administrator. It was copied by most Canadian jurisdictions, but for reasons which are now obscure, the Saskatchewan Trustees Act, unlike the English model and other Canadian counterparts(274), applies the statutory rule only to executors and administrators:
 

73. Where there are several executors, administrators, or administrators with will annexed and one or more of them die, the powers thereby created shall vest in the survivor or survivors.
 

While this oversight does not appear to have generated any litigation in Saskatchewan, it should obviously be corrected. In England, the powers of surviving trustees are now governed by the English Trustee Act, 1925:
 

6(1) Where a power in a trust is given to, or imposed on, two or more trustees jointly, it may be exercised or performed by the survivors or survivor of then for the time being.
 

A similar provision should be adopted in Saskatchewan(275) .
 
 
 
 
 

2. Death of a sole trustee
 

At common law, the personal property of a deceased person vested in his or her personal representative. In consequence, legal title to trust property passed to the executor or administrator of a deceased sole trustee. However real property devolved directly on the deceased's heirs or devisees. Thus the heir of a sole trustee of real property would usually become the new trustee. The distinction between devolution of real property and succession to personal property was abolished by a series of nineteenth-century enactments.(276) Each change in devolution law was mirrored by a change in trusts legislation. Underhill described the process as "even more half-hearted and complex than is usual with the attempts of Parliament to amend our property law."(277) The last effort of Victorian legislators was enacted in the Trustee Act, 1893, and adopted without change in the Saskatchewan Trustees Act:
 

22. Where an estate or interest of inheritance in real property is vested on an express trust in a person solely, the same shall on his death, notwithstanding any testamentary disposition, devolve to and become vested in his executor or administrator in like manner as if the same were personal estate vesting in him and, accordingly, all the like powers for one only of several joint executors or administrators as well as for a single executor or administrator and for all the executors and administrators together to dispose of an otherwise deal with the same, shall belong to the deceased's executor or administrator with all the like incidents but subject to all the like rights, equities and obligations as if the same were personal estate vesting in him, and for the purposes of this section the executor or administrator of the deceased shall be deemed in law his heirs and assigns within the meaning of all trusts and powers.(278)
 

This example of Victorian drafting is far from satisfactory. As Waters observes, the section "merely say[s] that trust realty shall vest in the personal representatives as personalty vests in those representatives."(279) Logically, it would seem that devolution of estates legislation necessarily implied as much. Perhaps legislators thought clarification was required because of the uncertainty created by the confusing way in which the law of devolution of estates was reformed. If that is the case, section 22 is no longer necessary.
 

What the section does not do is as important as what it does. It does not explicitly confer trust powers on the personal representatives of trustees. As noted above, the drafters of the 1893 statute saw fit to expressly state that surviving trustees have the powers of the original trustees. Why they did not do the same in this case is unclear, though the anomaly did not trouble nineteenth-century commentators, who assumed that trustees by devolution would have the "powers and duties incident to the office of trustee".(280)
 

In England, the 1893 provision was replaced in the Trustee Act, 1925(281) with a provision that focuses directly on the authority of personal representatives of a decreased trustee to carry on administration of the trust. This provision has been adopted in substance in Manitoba. The Manitoba Trustees Act provides:
 

6(2) Until the appointment of new trustees, the personal representatives or representative for the time being of a sole trustee, or where there were two or more trustees, of the last surviving or continuing trustee, are or is capable of exercising or performing any power or trust that was given to or capable of being exercised by the sole or last surviving trustee.
 

This is a more satisfactory approach, and should be adopted in Saskatchewan(282).
 

Two other matters relating to the devolution of trusteeship need clarification. First, since section 2(1) of the Saskatchewan Trustees Act defines "trustee" to include "executor" and "administrator", section 22 would appear on its face to apply upon the death of a personal representative, devolving the office onto the deceased's executor or administrator. It is unlikely, however, that the section should be read in this way. The "chain of executorship" , which transmits the office of personal representative to the executor of a deceased personal representative, is established law.(283) But the rule does not apply to the administrator of a deceased personal representative. The relevant English law when the 1893 Act was in force was stated by Halsbury:
 

The office [of personal representative] does not devolve upon the administrator of an executor. Upon the death of an administrator, a fresh grant of administration to the property of the original testator must be obtained.(284)
 

The different result implied by the Saskatchewan Trustee Act is the result of a drafting error. Fortunately, the error appears to have been ignored. Saskatchewan surrogate practice follows the English rule stated by Halsbury. The error should be corrected.(285)
 

Second, section 18 of the Saskatchewan Trustees Act provides that provisions in the Act "relative to a trustee who has died include the case of a person nominated in a will but dying before the testator". Since in this context, "trustee" includes "personal representative", the chain of representation will devolve through the personal representative of a trustee even if the personal representative predeceases the trustee. This is a useful provision to ensure continuity in administration, and should be retained.(286)
 

Replacement of trustees without court order
 

Prior to adoption of trusts legislation, a trustee could be replaced only by the court unless the trust instrument expressly provided a mechanism for that purpose. By 1860, when the first Trustee Act was adopted, it had become standard practice to insert such a mechanism in trust instruments. The Trustee Act, 1860, provided a statutory power to replace trustees modelled on the standard clause in contemporary trust instruments(287). This provision was continued without change in substance in the Trustee Act, 1893, and subsequently adopted in the Saskatchewan Trustees Act:
 

15. (1) Where. a trustee dies or desires to be discharged from the trusts or powers in him reposed, or refuses or becomes unfit to act or incapable of acting therein, the person nominated for that purpose by the deed, will or other instrument creating the trust, if. any, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustee or trustees, or the personal representative of the last surviving and continuing trustee, may by writing appoint another person or other persons to a trustee or trustees in place of the trustee or trustees dying or desiring to be discharged or refusing or becoming unfit to act or incapable of acting.
 

(2) When a new trustee or trustees is or are so appointed all the trust property that for the time being is vested in the surviving or continuing trustees or trusteed or in the heirs, executors or administrators of nay trustees or trustee shall with all convenient speed be conveyed, assigned and transferred so that it may be legally and effectually vested in the new trustee or trustees either solely or jointly with the surviving or continuing trustees or a surviving or continuing trustee as the case may require.
 

(3) Every new trustee has, as well before as after such conveyance, assignment or transfer, and every trustee appointed by the court has, the same powers, authorities and discretions and shall in all respects act as if he had originally been nominated a trustee by the deed, will or other instrument creating the trust.
 

Note that the section permits both discharge of a retiring trustee and removal of unfit trustees, but in either case, only if substitutes are named in their place. In certain cases, retirement without replacement is allowed under section 20 of the Act. Otherwise, reduction in the number of trustees by discharge or removal is possible only with approval of the court.
 

Section 15 facilitates replacement of trustees when it is necessary to do so to maintain continuity in the administration of the trust without the expense and delay of an application to court. It is a useful and appropriate provision. Law reform agencies have consistently recommended that non-judicial removal and appointment of trustees should be encouraged.(288) Unfortunately, section 15 and its analogs in most Canadian jurisdictions is not often used in practice. Instead, judicial removal and appointment of substitutes is preferred. This state of affairs results from uncertainty about the effect of section 15. Rather than attempt to make sense of the statutory power to replace trustees, most legal practitioners rely on the courts to ensure valid appointment of new trustees.(289) In England, non-judicial appointment was clarified in the Trustee Act, 1925(290), which has also served as the basis for modern legislation in New Zealand and most Australian states. More comprehensive reform has been adopted in Manitoba, and recommended by the Ontario Law Reform Commission. Similar reforms are overdue in Saskatchewan.
 

1. Application of section 15 to personal representatives
 

Since section 2(1) of the Saskatchewan Trustees Act defines "trustee" to include "executor" and "administrator", section 22 would appear on its face to apply to replacement of personal representatives. This reading of the section seems to be strengthened by the fact that section 14, which governs judicial appointment and removal of trustees, expressly excludes application to personal representatives, while section 15 is silent on this point. Nevertheless, it is unlikely that section 15 was intended to apply to personal representatives.
 

It has long been settled law that a personal representative can only be replaced by court order(291). There is no suggestion in the English authorities that the Trustee Act, 1860 changed this rule.(292) In Saskatchewan, replacement of trustees is governed by The Administration of Estates Act; section 15 has never been invoked for this purpose. The apparent application of section 15 to personal representatives is a drafting oversight that should be corrected.(293)
 

2. Grounds for removal of trustees
 

The statutory power to replace trustees applies when the original number of trustees has been reduced by death or retirement of a trustee, and to replace a trustee removed because he or she "refuses [to act as trustee] or becomes unfit to act or incapable of acting". Use of the section to facilitate retirement of a trustee or to replace a deceased trustee is not problematic. More consideration must be given to removal of trustees for cause without court approval. We agree with the Ontario Law reform Commission that "where subjective value judgements concerning the ability of a person to act as trustee are concerned, these determinations should be made by the court".(294) If grounds for removal are not objective, it would be all too easy for the trustees to resolve a conflict with one of their number by removal of the recalcitrant. In addition, the validity of removal of a trustee under subjective criteria will inevitably be in doubt without court approval of the grounds for the action.
 

It is likely that the drafters of the Trustee Act, 1860 intended that non-judicial removal would be an option only in cases in which unfitness or incapacity to act as a trustee was clearly recognized in law. The phrase used in the legislation likely seemed adequate because it had been construed in the context of the standard removal clauses in trust instruments. Such clauses were very strictly construed. Thus, for example, it had been held prior to 1860 that a bankrupt trustee was not "incapable" of acting, but was "unfit" to serve as a trustee. (295) Nevertheless, the phase "unfit to act or incapable of acting" proved to be an inadequate guide to non-judicial removal. Underhill observed that under the 1860 and 1893 Trustee Acts:
 

With regard to a trustee becoming unfit to act, bankruptcy (at all events where the trust property consists of money or other property capable of being misappropriated, and where the cetuis que trusts desire his removal . . . or conviction of a dishonest crime, are grounds for removal by the court . . . . Whether, however, they would enable the donee of a power of appointing new trustees to displace him hostilely on the ground of unfitness seems questionable. . . . With regard to incapacity, the word is strictly limited to incapacity of the trustee arising from some personal defect, as illness, lunacy, or, possibly, infancy.(296)
 

The uncertainty reported by Underhill would appear to narrow rather than enlarge the statutory authority to remove trustees for cause without court approval. The Ontario Law Reform Commission's concern is that the phrase the phase "unfit to act or incapable of acting" might now be given too broad a meaning. For example, it might permit removal of a trustee who, though not incompetent, suffers from some diminished capabilities as the result of old age. Despite the Ontario Commission's fears, there may in fact be sufficient judicial authority on section 15 and its English predecessors to prevent its use in ambiguous cases such as this. However, the Ontario Commission was also concerned that even relatively objective grounds for removal may not be appropriately defined and limited in the present law. Thus while it may be that declining capabilities falling short of incompetency is not a ground for non-judicial removal, it is not clear how incompetency is to be determined for this purpose. A person who has been declared incompetent clearly could be removed under section 15. The position of a person who is merely alleged to be incompetent, an "incompetent not so found," is ambiguous.
 

We are of the opinion that the grounds for non-judicial removal of a trustee under statutory authority should be expressly stated in clear language. The list of grounds set out in the statute should be exhaustive. The Ontario Law Reform Commission would confine non-judicial replacement of trustees to cases in which a trustee (1) dies; (2) desires to be discharged from the trust; (3) refuses to act or disclaims the trust; (4) is a mentally incompetent person so found by the court; (5) has been convicted of an indictable offence; or (6) is a bankrupt (a person against whom a receiving order is in force or who has made an assignment in bankruptcy), or a corporate trustee who has been dissolved, or is in liquidation.(297) In our opinion, with the addition noted below, this is an appropriate list of circumstances in which non-judicial removal should be permitted. We recommend that similar criteria be adopted in Saskatchewan(298), but would make one addition.
 

In our opinion, non-judicial removal of an infant trustee should also be permitted. Under the general law of trusts, an infant does not lack capacity to act as a trustee. However, an infant may lack capacity to deal with trust property. Thus the courts will inevitably remove an infant trustee .(299) But it is uncertain whether an infant trustee could be removed non-judicially under the English Trustee Act, 1860(300) or section 15 of the Saskatchewan Trustees Act. The English Trustee Act, 1925 expressly permits non-judicial removal of infant trustees.
 

The Ontario Law Reform Commission does not agree with the policy of the Trustee Act, 1925 in regard to infants. It argues that if the settlor has seen fit to select an infant as trustee, the infant should only be removed if the court is satisfied that removal is necessary for proper administration of the trust. We are not convinced. There will be few, if any, cases in which an infant will be able to function as a trustee. In addition, The only circumstance in which an infant is likely to become a trustee is upon the premature death of a testator who has named a person who is still an infant executor and trustee by will. Under Saskatchewan Rules of Court, an infant executor will not be granted probate. It should be possible to expeditiously remove an infant trustee.(301)
 

The English Trustee Act, 1925 also permits non-judicial removal of a trustee who is absent from the United Kingdom. Under the Ontario Act, absence from the province for 12 months is likewise a ground for non-judicial removal(302). Such a provision has never been part of the law in the Western provinces. We agree with the Ontario Law Reform Commission that there is no longer any reason, if there ever was, to object to "a trustee actively administering the trust from outside the jurisdiction".(303) If an absent trustee abandons his or her responsibility, removal would of course be justified. But whether such dereliction of duty has occurred is a matter of fact appropriately left to the court to determine.
 

3. Persons entitled to replace trustees
 

Section 15 sets out a hierarchy of authority to remove and replace trustees: (1) If the trust nominates a person or persons to act in this capacity, the trust instrument governs. (2) If no one is nominated, or if "no such person [is] able and willing to act", the trustees may act. (3) If there is no surviving trustee, the personal representative of the last survivor may appoint replacement trustees. Most modern trusts do not include make provision for replacement or removal trustees. Thus, section 15 usually operates to give the trustees themselves authority to name replacements. Nevertheless, settlors should continue to be permitted to nominate some person other than the trustees to make decisions about appointment and removal. Section 15 was designed to assist settlors, not to dictate the terms on which trustees may be changed. This policy is further underlined by section 19 of the Saskatchewan Trustees Act:
 

19. Sections 15, 16, 17, and 18 apply only of and as far as a contrary intention is not expressed in the instrument, if any, creating the trust, and have effect subject to the terms of the trust.
 

However, relationship between section 15 and trust instruments is not entirely clear.
 

Note that the trust instrument ousts section 15 only when it expresses "a contrary intention". Thus, the Act is presumably available to fill any gaps in mechanism set out in the trust. But this may create a problem. Section 15 allows the trustees to act if the person nominated to make replacements is not "able and willing to act". The phase "able and willing to act" is vague. A nominee is presumably not "able" to act if incapacitated, but a nominee may not be "willing" to act for a variety of reasons. A nominee who refuses to consider whether removal or replacement of a trustee is necessary, thus effectively refusing to accept the role conferred by the trust, is certainly not "willing to act". But it might be alleged that a nominee who, after considering the question, declines to remove a trustee accused of unfitness, is not "willing to act". The same charge might be levelled against a nominee who, believing that the trust is being properly administered, declines to fill a vacancy.
 

In our opinion, a clear distinction should be made between refusal to exercise the authority to remove or replace a trustee, and a decision that removal or replacement is not required in the circumstances. If the trustees or beneficiaries are unhappy with a decision not to remove or replace a trustee, the matter should be settled in court. The Ontario Law Reform Commission agreed with this point of view, but recommended no change in the phase "able and willing to act"be made.. This conclusion rests on the observation that the phase was retained in the English Trustee Act, 1925, and does not appear to have caused difficulty in practice. We do not agree. If non-judicial appointment is to become a practical alternative, the validity of appointments must be beyond question. There is no reason why clearer language should not be adopted. In our opinion, a person nominated to remove and replace trustees should not lose the authority conferred by the trust unless he or she (1) refuses to exercise the authority, or (2) lacks capacity to exercise the authority.(304)
 

A similar problem may arise when the trustees are authorized to make replacements and removals. Section 18 of the Saskatchewan Trustees Act provides in part that:
 

18. The provisions of this Act . . . relative to a continuing trustee include a refusing or retiring trustee if willing to act in the execution of the provisions of section 15.
 

Since the authority of trustees is joint, when the trustees are authorized to remove and replace trustees, all of the "surviving or continuing trustee or trustees" must act together. Section 18 makes it clear that a retiring trustee may be involved in choosing his or her successor. This is appropriate. However, section 18 also permits a "refusing trustee" to be involved in the selection of a successor. A refusing trustee is presumably a trustee who has accepted the office of trustee, but is unwilling to act further. A disclaiming trustee, who has refused to accept the office, must be distinguished.
 

In allowing a refusing trustee to participate in naming a successor, section 19 follows the English Trustee Act, 1925. The Ontario Law Reform Commission, on the other hand, argues that a refusing trustee "is not a suitable person to exercise the statutory power."(305) This presupposes that a refusing trustee lacks the loyalty to the interests of the trust required of a trustee. But a trustee may refuse to become actively engaged in administration of a trust because he or she is unable to make the commitment of time and energy required. In such a case, a trustee may "refuse" rather than "disclaim" for the purpose of assisting in selection of a willing successor. For that reason, we are of the opinion that a refusing trustee should continue to be involved in removal and replacement of trustees. There are no doubt cases in which this approach will cause inconvenience. For example, a refusing trustee could attempt to block his or her own removal. However, we believe that on balance, allowing refusing trustees to be involved in removal and replacement of trustees will solves more problems than it creates.(306)
 

Section 18 makes no reference to disclaiming trustees or trustees who are removed for cause. The language of section 15 might be broad enough to encompasses disclaiming and unfit trustees among those who are authorized to be involved in removal and replacement of trustees. However, the contrary conclusion has been reached by the English courts. In Re Stoneham Settlements, it was held that a trustee who had to be removed for cause against his will could not block the removal when it was agreed to by the other trustees.(307) In our opinion, any remaining doubt should be removed by expressly providing that disclaiming trustees and trustees who may be removed for cause have no right to participate in the removal or replacement of trustees.(308)
 

4. Removal without replacement
 

Section 15 provides that replacement trustees may be appointed "in place of the trustee or trustees dying or desiring to be discharged or refusing or becoming unfit to act or incapable of acting". Section 20, on the other hand, allows discharge of a retiring trustee without replacement if at least two trustees remain.(309) There is otherwise no statutory authority for non-judicial removal of a trustee without replacement.
 

This formula was modelled on replacement and removal clauses in 19th Century trust instruments. It was perhaps appropriate in settlements of land, which were then the most important class of trust in England. More than one trustee was the rule in settlements. Management of the family's assets was usually placed in the hands of one of a panel of trustees, the "first beneficiary" and head of the family. He was, however, subject to the control of the other trustees, who ensured that the current head of the family did not squander the assets to the detriment of other family members and future generations. The character of such a trust would be changed substantially if all the trustees but the first beneficiary retired. Thus the policy against reduction of the number of trustees, and especially reduction to a sole trustee.
 

The modern trust bears little resemblance to the English settlement. If more than one trustee is now appointed, it is likely to ensure continuity in administration or to share the burden. Occasionally, a family member, most likely a principal beneficiary, and a trust company may be jointly appointed. In this case, the family member provides insight into the beneficiaries' needs, and the corporate trustee provides expertise. In any event, retirement of a trustee is unlikely to cause difficulty. If one of the trustees dies, the other takes responsibility for administration. In practice, appointment of a replacement is the exception, though of course the survivor or the court may procure a replacement if it is deemed desirable to do so.
 

Under the English Trustee Act, 1925 and the Manitoba Trustees Act(310), removal without replacement is allowed so long as at least two trustees remain, or if the sole remaining trustee is a trust company. The Ontario Law Reform Commission recommends a similar approach(311). In our opinion, this improves on the present law, but is still too restrictive. We do not believe reduction to a single trustee is a problem in the vast majority of cases. The case for requiring replacement is strongest in cases in which a family member and trust company were appointed as co-trustees. Removal of either would upset the balance intended by the settlor. However, trust companies rarely retire from administration of a trust. The family member may retire, but if imbalance is perceived to be a problem, the retiring trustee can insist on appointment of a replacement. Even failing that, a beneficiary may apply to court for appointment of a replacement. On balance, we conclude that non-judicial removal of a trustee should not require appointment of a replacement, even if only a sole trustee is left.(312)
 
 
 

5. Incidental powers
 

Section 16 of the Saskatchewan Trustees Act confers what the marginal note refers to as "incidental powers when making appointment" on those authorized by the statute to appoint new trustees.(313)
 

16. On the appointment of a new trustee for the whole or any part of trust property:
 

(a) the number of trustees may be increased; and
 

(b) a separate set of trustees may be appointed for any part of the trust property held on trusts distinct from those relating to any other part or parts, notwithstanding that no new trustees or trustee are or is to be appointed for other parts, and any existing trustee may be appointed or remain one of such separate set of trustees, or, if only one trustee was originally appointed, then one separate trustee may be so appointed for any such part of the trust property; and
 

(c) it shall not be obligatory to appoint more than one new trustee where only one trustee was originally appointed or to fill up the original number of trustees where more than two trustees were originally appointed, but, except where only one trustee was originally appointed, a trustee shall not be discharged under section 15 unless there remain at least two trustees to perform the trust; and
 

(d) any assurance or thing requisite for vesting the trust property or any part thereof jointly in the persons who are the trustees shall be executed or done.
 

Clause (c) makes it unnecessary to fill pre-existing vacancies when a trustee desires to retire or must be removed, so long as at least two trustees remain when there were originally two or more. Since we have proposed that non-judicial removal without replacement should be permitted in all cases, this case will no longer be necessary. Clause (d), which has to do with vesting of trust property in new trustees will be discussed later.
 

The two remaining clauses in section 16 are significant, and should be retained.(314) Clause (a) permits the appointors to increase the number of trustees. While this power is rarely used, it is potentially useful. For example, a sole trustee may find administration time consuming and desire assistance, or may find it useful to procure the expert assistance of a corporate trustee as a co-trustee. In England, the equivalent to clause (a) is now contained in section 36(6) of the Trustee Act, 1925. This legislation places some restrictions on the appointment of additional trustees. In particular, it limits the total number of trustees to four. The Act also limits the number of trustees under a settlement of land to four. Thus, a limitation on the number of new trustees of land that can be appointed is appropriate in the context of the English Act. Perhaps inadvertently, the limitation on the number of additional trustees was extended to trusts of personal property as well. The Ontario Law Reform Commission has recommended that no more than four trustees should be permitted in any trust.(315) We see no reason for such a limitation. In England, settlements of land were often complicated and cumbersome. The 1925 reform was part of an effort to discourage traditional settlements and generally simplify land law. Excessive numbers of trustees has never been a problem in Saskatchewan, and is unlikely to become one. In addition, there are some circumstances in which appointment of more than four trustees may be desirable. Charitable trusts and trusts for other beneficial public purposes, for example, may benefit from a large board of trustees.
 

Clause (b) recognizes that administration of complicated trusts may benefit from division of responsibility between trustees. Elsewhere in this report, we recommend additional measures to facilitate this approach to trust administration.
 

Retirement of trustees
 

Section 20 of the Saskatchewan Trustees Act allows retirement of a trustee without replacement if the number of trustees is not reduced to less than two:
 

20.- (1) Where there are more than two trustees, if one by deed declares that he is desirous of being discharged from the trust and if his co-trustees and such other person, if any, as is empowered to appoint trustees consent by deed to the discharge and to the vesting of the trust property in the co-trustees alone, then the trustees desirous of being discharged shall be deemed to have retired from the trust and shall by the deed be discharged therefrom without any new trustee being appointed in his place.
 

(2) Any assurance or thing requisite for vesting the trust property in the continuing trustees alone shall be executed or done.
 

(3) This section applies only if and as far as a contrary is not expressed in the instrument, if any, creating the trust and has effect subject to the terms of that instrument.
 

As noted above, section 20 operates as an exception to the rule in section 15 that non-judicial removal of trustees can be made only if substitute trustees are appointed. Since we recommend that non-judicial removal without replacement should be allowed in any case in which at least one trustee remains in office, (316) much of section 20 is unnecessary. However, it is desirable to treat some aspects of retirement of trustees apart the more general removal and replacement provisions in section 15.
 

Equity has always taken the position that no one should be compelled to accept appointment as a trustee, or continue in office as a trustee, against his wishes.(317) Section 20 was adopted to facilitate retirement, but if section 20 is not available, the courts will permit retirement as a matter of right.(318) In the United States, the courts have taken a different approach: Trustees are not permitted to retire if retirement would prejudice the beneficiaries' interests.(319) This approach has not been adopted in any Commonwealth jurisdiction. We are of the opinion that the Equity's policy remains sound. Trusteeship is often onerous, and often undertaken by friends and family members of the settlor with out full compensation. Moreover, a trustee who acts under duress cannot be expected to serve the trust in any more than a minimally adequate fashion.
 

It is perhaps surprising that section 20, while facilitating retirement, does not recognize that a trustee has a right to retire. Note that the section allows retirement only if the trustee's "co-trustees and such other person, if any, as is empowered to appoint trustees, consent by deed to the discharge", and only if the trust instrument does not prohibit retirement. It is even more surprising that the consent requirement was retained in the English Trustee Act, 1925, and that the Ontario Law Reform Commission recommends retention of the consent requirement (though it would allow the right to retire without court approval to override a prohibition on retirement in the trust instrument). The Ontario Commission took the position that if a trustee could not obtain the necessary consents, court approval should be required. Since the court will not deny a trustee the right to retire, we cannot see any purpose in forcing the retirement issue into court. We recommend that a trustee should be permitted to retire without court approval even if the trust instrument purports to deny this right. We also recommend that when a trustee desires to retire, neither co-trustees or any other person whose consent to retirement is required should be entitled to withhold consent.(320)
 
 

Removal and appointment of trustees by the court
 

1. Removal and appointment of trustees under section 14
 

Section 14 of the Saskatchewan Trustees Act provides for court appointment of trustees "either in substitution for or in addition to any existing trustees":
 

14.-(1) When it is expedient to appoint one or more new trustees, and it is inexpedient, difficult or impracticable so to do without the assistance of the court, the Court of Queen's Bench may make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee, and, in particular, and without prejudice to the generality of the foregoing provision, the court may make an order for the appointment of a new trustee in substitution for a trustee who is convicted of an indictable offence, or is insolvent.
 

(2) No order under subsection (1) or consequential vesting order or conveyance shall operate further or otherwise as a discharge to any former or continuing trustee than an appointment of new trustees under a power for that purpose contained inn an instrument would have operated.
 

(3) Nothing in this section gives power to appoint a personal representative.
 

Under section 34, application to the court for appointment (and presumably removal) of new trustees may be made by a trustee or beneficiary:
 

34.-(1) An order pursuant to this Act appointing a new trustee or concerning any land or personal estate subject to a trust may be made on the application of:
 

(a) any person, whether under a disability or not, beneficially interested in the appointment of a new trustee or in the land or personal estate subject to the trust;
 

(b) a person duly appointed as a trustee of the land ir personal estate; or
 

(c) the public trustee appointed pursuant to The Public Trustee Act.
 

(2) A person entitled may apply, upon notice to such persons as the court or judge may think proper, for such an order as he deems himself entitled to.
 

(3) Upon the hearing of the application the court may direct a reference to inquire into any facts that require investigation, or may direct the application to stand over to enable further evidence to be adduced or further notice to be served.

Section 14 is identical to section 10 of the English Trustee Act, 1893. It is a partial codification of inherent jurisdiction of the court. to appoint, replace, and remove trustees. It is likely that the section was inserted as a complement to the non-judicial authority to substitute new trustees. Note that section 14 is to operate when it is "inexpedient, difficult, or impractical" to replace a trustee without assistance from the court. Thus it is not surprising that scope of section 14 is similar to the section governing non-judicial substitution. Unlike the inherent jurisdiction(321), section 14 does not allow removal of a trustee without replacement.
 

The inherent jurisdiction gives the court a broad discretion to remove or replace in any case in which such action is required for the welfare of the beneficiaries of the trust.(322) Section 14 does not limit this discretion, but does expressly provide for replacement of an insolvent trustee, or a trustee who has committed an indictable offence. The reason why these particular cases, and no others, are enumerated also likely has to do with the relationship between judicial and non-judicial replacement of trustees. In England in 1893, removal on these grounds was apparently reserved to the court. The formula in the statute reflects this division of authority.(323) Unsoundness of mind was also reserved to the court, but does not appear in the statutory list because a separate procedure for removal of a trustee of unsound mind was provided by the Lunacy Act, 1890.(324)
 

While the partial codification enacted in 1893 may have seemed logical to Victorian legislators, section 14 now appears merely peculiar in its scope. Since courts in Saskatchewan and elsewhere in Canada continue to exercise the full inherent jurisdiction to remove and replace trustees, section 14 and its analogs in other provinces is now not very helpful. If it is in fact relied upon as a guide to the court's jurisdiction, it is misleading. There is obviously a place in trusts legislation for a statement of the authority of the court to remove and replace trustees. However, to be useful such a provision should encompass the full scope of the inherent jurisdiction of the court. To achieve this goal, three changes in section 14 are required.(325)
 

First, the statutory formula should allow the court to remove trustees without replacement. This is of course part of the inherent jurisdiction of the court. In addition, it would complement the recommendation made above to permit non-judicial removal without replacement. The court is authorized to remove a trustee without replacement under the Manitoba Trustee Act(326), and a similar power has been recommended by the Ontario Law Reform Commission.(327)
 

Second, the statutory formula should encompass all grounds for removal of a trustee recognized in law. In the English Trustee Act, 1925, some additional grounds for removal not included in the English Act of 1893 were included. The list in section 14 could be made more comprehensive. However, we doubt that it is desirable to do so. The situations in which courts have exercised their jurisdiction to remove trustees are fact specific. For example, a common occasion for an application for removal is a dispute between trustees. The courts are prepared to remove a trustee to break a deadlock and restore orderly administration of the trust(328), but will not do so lightly. Evidence that the disagreement endangers the trust property is usually required.(329) Codification that would adequately cover this and all others cases in which removal is appropriate is not practical. Since judicial removal is governed by well-established precedents, it would be sufficient to confer a discretionary power to remove and appoint without enumerating specific grounds. We agree with the Ontario Law Reform Commission hat there is " no useful purpose in the adoption of a particularized approach". We recommend that appointment or replacement or a trustee by the court should be permitted under the statute in any case in which it is in the interests of the beneficiaries to do so.

Third, the statutory formula should not be limited in application to situations in which it is "inexpedient, difficult, or impractical" to appoint a trustee "without assistance of the court". The inherent jurisdiction of the court is not limited in this way, nor should it be. In fact, since section 34 allows a beneficiary or any one of the trustees to apply under section 14, the phase is misleading even in the context of the existing legislation. The Ontario Law Reform Commission saw some utility in retaining the phase as a means to encourage non-judicial appointments(330). We do not think the phase is necessary for this purpose. If a reliable non-judicial method of appointment is made available, it will almost certainly be used in preference to application to court in appropriate cases.
 

Certain other minor matters require attention. Section 16 deals with "incidental powers when making appointment". It has been discussed above in the context of non-judicial appointments. The "incidental powers" it contains are appropriate in cases of judicial appointment as well. These powers may be encompassed by the court's inherent jurisdiction, but it would be desirable to avoid doubt.
 

Section 34 permits application to the court to appoint or remove a trustee by a trustee or beneficiary. This is a useful formula. In the usual case, he application will be made by he trustees as a group when non-judicial action is not feasible. If the trustees cannot agree to take action, one of their number may appeal to the court to resolve the issue. Finally, the section also provides beneficiaries with a remedy when administration of the trust is compromised by vacancies, or by the actions of a disloyal or incapable trustee. In one respect, however, the section is deficient. It does not permit a person nominated in a trust instrument to appoint trustees to turn to the court for assistance. Section 34 is likely confined to applications by trustees and beneficiaries because it applies to other matters in addition to appointment and removal trustees. We are of the opinion that a person nominated in a trust instrument to appoint trustees should having standing to apply to the court to appoint or remove a trustee.(331)
 

2. Judicial trustees
 

Section 85 of the Saskatchewan Trustees Act appears to provide an alternative means of replacing trustees:
 

85.- (1) Where application is made to the Court of Queen's Bench or a judge thereof by or on behalf of the person creating or intending to create a trust, or by or on behalf of a trustee or beneficiary, the court or judge may in its or his discretion appoint a person, hereinafter called a judicial trustee, to be a trustee either jointly with another person or as sole trustee, and, if sufficient cause is shown, in place of all or any existing trustees.
 

Note that since section 3 of The Trustees Act defines "trustee" to include personal administrators, section 85 can be employed to replace an executor or administrator of an estate. This is not an oversight. Section 85(2) expressly refers to replacement of personal representatives, providing that
 

(2) The administration of the property of a deceased person, whether a testator or intestate, is a trust and the executor or administrator a trustee within the meaning of this section.
 

Trusts legislation in British Columbia, Alberta, Saskatchewan, and the Northwest Territories, but not in other provinces, provide for appointment of judicial trustees.(332)
 

Despite its perhaps deceptive appearance, the purpose section 85 is intended to serve is quite different than section 14. Section 85 was adapted from the English Judicial Trustees Act, 1896. The judicial trustee was modelled on a Scottish officer of the court, called a "judicial factor", who administers trusts and estates on behalf of the courts when normal administration has broken down or the trustees have been discharged by the court. Prior to 1896, the remedy available in England in similar circumstances was a general administration order under which the court itself assumed responsibility for administration. According to Underhill, the object of the Judicial Trustees Act, 1896 "is to give to trust property the same protection as would be given by a general administration order, but at less cost, and without the necessity of making numerous applications to court". (333) It also, of course, relieves the court from direct responsibility for administration of trusts and estates.
 

A judicial trustee is not simply a replacement trustee appointed by the court, but is instead an officer of the court, carrying out administration on behalf of the court. Section 85 provides for extensive control of the judicial trustee by the court:
 

(3) Any fit and proper person named for the purpose in the application may be appointed a judicial trustee and in the absence of such nomination, or if the court or judge is not satisfied of the fitness of a person so named, an official of the court or other competent person may be appointed, and in any case a judicial trustee shall be subject to the control and supervision of the court as an officer thereof.
 

(4) The court or judge may, either on request or without request, give to a judicial trustee any general or special directions in regard to the trust or the administration thereof.
 

(5) There may be paid to a judicial trustee out of the trust property such remuneration, not exceeding the prescribed limits, as the court or judge may assign in each case, and the remuneration so assigned shall, save as the court or judge may for special reasons otherwise order, cover all his work and personal outlay.
 

(6) Once in every year the accounts of every trust of which a judicial trustee has been appointed shall be audited and a report thereon made to the court by the prescribed persons, and, in case the court or judge so directs, an inquiry into the administration by a judicial trustee of any trust or into any dealing or transaction of a judicial trustee shall be made in the prescribed manner.
 

The office of Public Trustee was created in England in 1906, and provision was made under the Public Trustees Act, 1906 for appointment of the Public Trustee as a "custodian trustee". It appears to have become the usual practice to employ the Public trustee as a judicial trustee unless the application for appointment was made by a beneficiary who could assume administration or suggest a suitable nominee. (334) The Saskatchewan Trustees Act makes no provision for appointment of the Public Trustee as judicial trustee, though the practice was likely intended.(335) However, section 40 of The Administration of Estates Act makes the Public Trustee the "official administrator", to whom the court can assign the office of administrator of an estate. Waters suggests that although Canadian Public Trustee legislation does not expressly provide for appointment of the Public Trustee as a judicial or custodian trustee , " the office is certainly not unknown in common law Canada, and there would appear to be no reason why the Public Trustee should not be asked . . . to accept custodian trusteeship".(336)
 

Very little use has been made in Saskatchewan or elsewhere in western Canada of the authority to appoint judicial trustees. It can be regarded as an earlier effort to achieve the purposes of public trusteeship. Waters doubts that there was a need for judicial trusteeship once the office of Public Trustee was created.(337) If the authority of the court to appoint and replace trustees under section 14 is expanded in the manner proposed in this report, there will be no circumstance in which a judicial trustee could be appointed in which the same result could not be achieved using the ordinary appointment and removal provision.(338) In any circumstance in which a suitable replacement for a trustee is not otherwise available, or supervision of the trust by a public official on behalf of the court appears necessary, the Public Trustee could be appointed.
 

We recommend that section 85 be deleted. It would be desirable, however, to clarify the role of the Public Trustee by expressly providing that the court may, when no other suitable person is available, appoint the Public Trustee as a trustee.(339)
 

Reconstituting the trust: The effect of appointment and removal of trustees
 

When a change in the roster of trustees occurs as a result of retirement, replacement, or addition, the new trustees must be granted full authority and responsibility for administration of the trust, and old trustees must be relieved of their responsibility. In addition, since the trustees are the legal owners of the trust property, it must be vested in the new group of trustees. Uncertainty about the way in which these three goals are to be achieved when non-judicial appointment or removal occurs is a major reason why the judicial assistance is usually sought. We have suggested that use of the non-judicial mechanism should be encouraged. Clarification of the law governing what we call here "reconstituting the trust" would be the most effective way to encourage non-judicial appointment and removal of trustees.
 

1. The powers of new trustees
 

Section 17 of the Saskatchewan Trustee Act provides that:
 

17. Every new trustee so appointed has, as well before as after all the trust property becomes by law or by assurance or otherwise vested in him, the same powers, authorities and discretions and may in all respects act as if he had been originally appointed a trustee by the instrument, if any, creating the trust.
 

This section presumably applies to trustees appointed by the court under section 14. Whether it is intended to apply to trustees appointed without judicial intervention under section 15 is doubtful, since subsection 15(3) contains a similar formula, which is, likely as a result of a drafting error, repeated in substance in section 35 . Why this apparently unnecessary repetition occurs cannot now be discovered. Both sections 17 and 15(3) effectively confer the authority for administration of the trust on the new trustees.
 

The general statement of the authority of new trustees contained in sections 17 and 15(3) should be retained.(340) However, despite its apparently comprehensive scope, the statutory formula is inadequate, at least in regard to non-judicial appointments. A person dealing with trustees needs assurance that the trustees were validly appointed, and thus capable, for example, of conveying good title to trust property. In the case of judicial appointment of trustees, the court order naming the trustees is sufficient warrant of authority. In the case of non-judicial appointment, a person dealing with the trustees may be shown the documents by which new trustees were appointed, but will have no guarantee that the appointment was properly made under the terms of section 15. The Ontario Law Reform Commission suggested that this state of affairs "seems to explain, in part, the modest use that is made . . . of the non-judicial appointment power".(341)
 

Protection for purchasers of land from trustees in England was provided by section 38 of the Trustee Act, 1925. This protection has been copied by several Commonwealth jurisdictions, usually with an extension of its scope to include purchases of personal property as well as land. In Canada, the protection has been enacted in the Manitoba Trustees Act:
 

12.- (1) A statement, contained in any instrument coming into operation after June 30, 1931, by which a new trustee is appointed, to the effect that a trustee has remained out the province for more than 12 months, or desires to be discharged, or refuses or is unfit to act, or is incapable of acting, or is an infant, or that he is not entitled to a beneficial interest in the trust property in possession, is, in favour of a purchaser in good faith and for valuable consideration, conclusive evidence of the matter stated.
 

(2) In favour of the purchaser, any appointment of a new trustee depending on that statement, and any vesting declaration, express or implied, consequent on the appointment, is valid.
 

The Ontario Law Reform Commission has recommended a similar provision. However, the Ontario Commission also proposed further changes in the formula. We are impressed with the fact that the English provision, with few modifications, has been widely adopted and has proved satisfactory in practice. We would, therefore, be less inclined than the Ontario Commission to make additions to the formula without clear justification. Nevertheless, one of the additional changes proposed by Ontario deserves consideration.
 

The English formula recites circumstances in which appointment or discharge of a trustee is valid. The protection offered to third parties is assurance that the grounds were appropriate. However, the listed grounds are not exhaustive. They do not cover, for example, a case in which a trustee has been appointed to replace a deceased trustee. We believe the Ontario Commission is correct in suggesting that it should not be the grounds for appointment or discharge that are deemed valid, but rather the appointment or discharge itself. The Ontario draft Act provides:(342)
 

27. (1) Except as otherwise provided in subsection 2, a deed of appointment or a deed of discharge of a trustee, whether pursuant to this Act or the trust instrument, is conclusive evidence of the validity of the appointment or discharge in favour of a purchaser of trust property.
 

A similar provision should be adopted in Saskatchewan.(343) However, subsection (2) of the Ontario provision, unlike the Trustee Act, 1925 and the Manitoba Act, would limit third party protection to cases in which the purchaser does not have actual notice of an "improper act or admission". We do not believe this limitation is necessary or desirable. It might interfere with the protection afforded purchasers under The Land Titles Act if title has been registered by trustees.
 

The Ontario Commission was also concerned that the formula in the Trustee Act, 1925 operates only in favour purchasers of trust property. For example, the registrar of land titles should be able to rely on an instrument appointing a new trustee when called upon to register a transfer from the trustees. The Ontario Commission proposed to deal with this problem by deeming "any official " and "any other person registering or certifying instruments of title" to be a "purchaser" for this purpose.(344) We agree that it would be desirable to make it clear that the registrar of titles and other officials should accept a transfer from the new trustees. However, we are of the opinion that such a provision is properly a matter relating to the vesting of title to trust property in the new trustees. This topic will be discussed below.(345)
 

2. Trustees who retire or are removed
 

A trustee is responsible for all acts and omissions while carrying out his or her duties as trustee. Removal of a trustee, whether by retirement or for cause, does not relieve the trustee of any liability incurred while in office. This proposition is equally true whether the trustee is removed non-judicially or judicially. Nevertheless, section 14(2) of the Saskatchewan Trustee Act appears to be intended to ensure that that removal by the court has no different effect on the liability of former trustees than does non-judicial removal:
 

14.-(2) No order under subsection (1) or consequential vesting order or conveyance shall operate further or otherwise as a discharge to any former or continuing trustee than an appointment of new trustees under a power for that purpose contained in an instrument would have operated.
 

The explicit concern of this provision is to distinguish "discharge" by the court, as understood in 19th Century usage in Equity, from removal under sections 14 and 15. The court may discharge a trustee, but a discharge is quite distinct from removal under sections 14 and 15. The circumstances in which a trustee may be discharged are now set out in section 87 of The Trustees Act. Under this section, a trustee may be discharged by the court when the trust accounts have been past and the trust wound up. Because the court has approved the accounts of the discharged trustee, a question of liability can no longer arise. Section 14(2) makes it clear that when the court removes a trustee, the order of the court does not effect a discharge in the sense of section 87. However, section 14(2) seems to us to have been adopted out of an over abundance of caution. It is unlikely that confusion between "discharge" following passing of accounts and "removal" under section 14 would have occurred in the absence of section 14(2).(346)
 

It might nevertheless be argued that symmetry between the cases of old and new trustees would suggest that if the position of the new trustees is set out in the statute, so should the position of the old trustees. But the cases are different. It s necessary to deal with the new trustees because their authority flows from appointment under the statute, and should therefore be defined by statute. The liability of former trustees while holding office is not created by the statute, and need not be confirmed by it.
 

We are of the opinion that section 14(2) is unnecessary. However, because our conclusion in this regard is quite different from that of the Ontario Law Reform Commission, some additional explanation is required. Section 14(2) was adopted from the English Trustee Act, 1893. The Ontario Trustee Act also copied this provision, but with a significant change in wording:
 

5. - An order under this section and any consequential vesting order or conveyance does not operate as a discharge from liability for the acts or omissions of the former or continuing trustees.
 

Note that the Ontario provision speaks directly to the liability of former trustees, but has lost the cross-reference to non-judicial removal contained in the original. Thus the distinction which explains why a liability provision was adopted with respect to judicial, but not non-judicial removal, was obscured. The Ontario Law Reform Commission, regarding the different treatment as an anomaly, recommended extending the liability provision to cover both judicial and non-judicial removal.(347)
 

Section 14(2) has no purpose part from its function to avoid confusion between "discharge" and "removal". The analogous Ontario provision does in addition confirm that trustees are responsible for their acts and omissions while in office, but this is so obvious an application of the general principles of the law of trusts that there is little point in codifying it.
 

3. Vesting of trust property on non-judicial appointment and removal
 

Th legal title to trust property is vested in the trustees. In order to properly constitute a trust, the trust property must be conveyed to the trustees. When the roster of trustees is changed, the trust property must be vested in the new trustees. When the court appoints new trustees, this result is usually achieved by a vesting order. Prior to statutory intervention, when non-judicial appointments were made, it was necessary either for the former trustees to convey the trust property to the new trustees, or for a vesting order to be obtained. Section 12 of the English Trustee Act, 1893(348) made reconveyance unnecessary in most cases by deeming vesting of the trust property to have occurred if the instrument appointing the new trustees contained a declaration to that effect. This provision was adopted as section 21 of the Saskatchewan Trustees Act:
 

21.-(1) Where an instrument by which a new trustee is appointed to perform a trust contains a declaration by the appointor to the effect that any estate or interest in land subject to the trust or in any chattel so subject, or the right to recover and receive any debt or other thing in action so subject, shall vest in the persons who by virtue of he instrument become and are the trustees for performing the trust, that declaration shall, without any conveyance or assignment but subject to The Land Titles Act, operate to vest in those persons as joint tenants and for the purposes of the trust that estate, interest or right.
 

(2) Where an instrument by which a retiring trustee is discharged contains such a declaration as is in this section mentioned by the retiring and continuing trustees and by the other person, if any, empowered to appoint trustees, that declaration shall, without any conveyance or assignment but subject as aforesaid, operate to vest in the continuing trustees alone as joint tenants and for the purposes of the trust, the estate, interest or right to which the declaration relates.
 

(3) This section does not extend to any share, stock, annuity or property transferable only in books kept by a company or other body or in manner prescribed by or under an Act of the Legislature.
 

(4) For the purposes of registration of an instrument the person or persons making the declaration shall be deemed the conveying party or parties and the conveyance shall be deemed to be made by him or them under a power conferred by this Act.
 
 
 

Vesting declarations make reconstitution of the trust when the trustees are changed less difficult. However, section 21 is seriously flawed. Uncertainty about the effect of vesting declarations discourages non-judicial appointment and removal of trustees, forcing court applications for appointment and removal or for vesting orders that should be unnecessary. Section 12 of the Trustee Act, 1893 has been replaced in England by section 40 of the Trustee Act, 1925. The English reform has been widely adopted in the Commonwealth. In Canada, Manitoba has followed the English lead.(349) The formula adopted in Manitoba and other commonwealth jurisdictions appears to have worked well in practice.
 

(a). Express vesting declarations
 

The language used in the Saskatchewan to give recognition to vesting orders on appointment of new trustees (section 21(1)) and on retirement of a trustee (section 21(2)) is repeated without significant change in the Trustee Act, 1925 and provisions based on it. A close reading of these sections suggests that the vesting declaration must list the trust property. This is obviously inconvenient, since not all the property owned by the trust may be known to the new trustees when the declaration is made, or some trust property may be inadvertently omitted. The Trustee Act, 1925 cured this defect by deeming that vesting declarations apply to all trust property, whether it is enumerated in the declaration or not. Manitoba similarly provides that:
 

13.- (3) An express vesting declaration, whenever made, notwithstanding that the estate, interest or right to be vested is not expressly referred to, and provided that the other statutory requirements were or are complied with, operates, and shall be deemed always to have operated, to vest in the persons respectively referred to in subsection (1) and (2), as the case may require, such estates, interests, and rights, as are capable of being, and ought to be, vested in those persons.(350)
 

This is a rather indirect way of relieving the new trustees of the need to list the trust property, if that was in fact what was intended in the original vesting declaration legislation. The Ontario Law Reform Commission has suggested a formula that makes it clear that no list is required without the need for a clarifying subsection:
 

A deed by which one or more substitute or additional trustees are appointed, or by which a trustee is discharged without another trustee being appointed, may contain an express declaration that the trust property vests in one or more trustees who shall perform the trust as of the date of the instrument or such other date as is stated in the instrument for that purpose.(351)
 

We prefer the simpler language recommended by the Ontario Law Reform Commission to the Trustee Act, 1925 and the Manitoba Act. Note that the Ontario recommendation avoids repetition by dealing with both appointment and retirement in a single provision. However, two small changes in the wording proposed by the Ontario Commission appear to us to be unnecessary. First, the Ontario provision refers to a "deed" appointing or removing trustees. We see no reason to require the instrument to take the form of a deed, which is not required under existing Saskatchewan legislation. Second, note that the Ontario proposal refers to "discharged" trustees. For reasons discussed above, we do not believe "discharged" is an appropriate term in this context. Thus reference should be made to "removal or appointment" in its place.(352)
 

(b). Deemed vesting declarations
 

The Trustee Act, 1925 also addressed cases in which an appointment or retirement occurs, but no vesting declaration is included in the instrument making the appointment or retirement. In such cases, rather than requiring the new trustees to apply to the court for a vesting order, the 1925 Act deems the instrument of appointment or retirement to vest the property as though it had contained a vesting order. The analogous Manitoba provision (353) states that:
 

13.- (1)(b) If the instrument . . . does not contain such a declaration, the instrument operates as if it had contained such a declaration by the appointor extending to all the estates, interests, and rights, with respect to which a declaration could have been made.
 

The Ontario Law Reform Commission recommends a similar provision, but simplifies the terminology:
 

Where a deed within the meaning of subsection (1) does not contain an express declaration, a declaration that the trust property vests in one or more trustees who shall perform the trust is implied therein as of the date of the instrument.
 

A similar provision would be appropriate in Saskatchewan.(354)
 

(c). Effect of vesting declarations
 

Outside the present context, the term "vest" is usually applied to future interests in land. A interest vests when no contingency can prevent an interest from eventually falling into possession. The use of the term "vest" in regard to trustees has a somewhat narrower meaning. To constitute a trust, legal title to the trust property must be "vested" in the trustees by conveyance to them.(355) Thus to "vest" property in trustees is equivalent to conveyance of the property to them.
 

Because "vest" is used in a rather special sense in trust law, it is surprising that neither the Trustee Act, 1893 nor the Trustee Act, 1925 sets out the effect of vesting when a vesting declaration is made or implied.(356) Anomalously, both Acts do set out the effect of a vesting order made by the court in regard to real, though not personal, property. This provision is included in the Saskatchewan Act.(357) The absence of a comprehensive definition of "vest" does not appear to have created any difficulty. It could be argued that no definition is required. However, we are inclined to agree with the Ontario Law Reform Commission that trust legislation could usefully include a comprehensive statement setting out the effect of vesting under both vesting declarations and vesting orders by equating vesting with deemed conveyance.(358) We recommend including this statement in the provisions relating to vesting orders. The provisions governing vesting declarations should provide that such declarations have the same effect as vesting orders. (359)
 

One consequence of vesting declarations is set out in section 21(4) of the Saskatchewan Act. Although this section was copied from the Trustee Act, 1893, its most useful role is to make it clear that the new trustees may register title under The Land Titles Act.. The Manitoba Act contains a similar provision.(360) It should be retained in substance in trusts legislation.(361)
 

The existence of the land titles system is expressly acknowledged in section 21(1), which states that a vesting declaration vests trust property "subject to The Land Titles Act". However, this addition appears to have been grafted on to the language of the 1893 Act without proper consideration of the effect of the land titles system on conveyance of real property. Just what it implies is uncertain.

Real property may be conveyed outside the land titles system. Thus, the conveyance required to constitute a trust need not be a transfer registered in the land titles system. A vesting order is similarly sufficient to convey real property to the new trustees without registration. The trustees have full authority to deal with the property as legal owners by virtue of the declaration, though registration of their title will be a practical necessity if the new trustees seek to sell or mortgage the property. It is thus section 21(4) rather than the reference to The Land Titles Act in section 21(1) that reconciles vesting declarations with the land titles system.
 

A final consequence of vesting declarations should also be considered. As a practical matter, vesting declarations are evidence that the new trustees have title to the trust property, and are authorized to sell, mortgage or otherwise convey the property to others. The Ontario Law Reform Commission would further clarify this authority by providing that a vesting declaration is "conclusive evidence of the validity of the vesting of trust property" in favour of a purchaser of the property without actual notice to the contrary.(362) In our opinion, this recommendation is unnecessary. We have recommended above that the instrument appointing or removing trustees should be deemed to be conclusive evidence of proper appointment of the new trustees. The vesting declaration has the statutory effect of conveying the trust property to these trustees. It is not necessary to future provide that the declaration is evidence of authority to dispose of trust property. In addition, we are concerned that, without further elaboration, the Ontario recommendation may be difficult to reconcile with the priorities established by registration under the land titles system.
 

(d). Property excluded from the scope of vesting declarations
 

Section 21(3) of the Saskatchewan Act recognizes only one type of property that cannot be vested by a vesting declaration: "[A]ny share, stock, annuity or property transferable only in books kept by a company or other body or in manner prescribed by or under an Act of the Legislature". This is a significant exception. Many modern trusts are composed primarily of corporate securities. We agree with the Ontario Law Reform Commission that this exception undermines "the whole system of express and implied vesting declarations."(363)
 

Under older English and Canadian corporation law, corporate securities could only be transferred upon a request to the corporation to enter the transfer on the books of the corporation. In the result, it was held that a trust of securities is not properly constituted unless the conveyance to the trustees has been entered on the books of the corporation.(364) Modern corporation statutes in Saskatchewan in most other Canadian jurisdictions now provide that a security is transferred by endorsing the share or bond certificate and delivering it to the corporation for registration. In our view, the modern system for transferring securities is analogous to the land titles system. Although there are apparently no authorities directly on point, it is likely that endorsement creates ownership rights in the transferee(365), but the benefits of ownership, such as the right to vote shares and receive dividends, cannot not be secured without registration.(366) We agree with the Ontario Law Reform Commission that the exception for corporate securities can, and should, be dispensed with.
 

The Trustee Act, 1925 contains two additional exceptions, which have been carried over into the Manitoba Act. The Manitoba Act provides:
 

13.- (4) This section does not extend
 

(a) to land conveyed by way of mortgage for securing money subject to the trust, except land conveyed on trust for securing debentures or debenture stock; or
 

(b) to land held under a lease that contains any covenant, condition, or agreement, against assignment or disposing of the land without licence or consent, unless, prior to the execution of the instrument containing, expressly or impliedly, the vesting declaration, the requisite licence or consent has been obtained, or unless, by virtue of any statute or rule of law, the vesting declaration, express or implied, would not operate as a breach of covenant or give rise to a forfeiture . . .
 

We do not believe either exception is necessary. The mortgage exception was originally contained in the Trustee Act, 1893, but was deleted in the Saskatchewan adaption of that legislation. It was thought necessary in England because it was the practice to prepare mortgage documents without any reference to the underlying trust. This was done to make it unnecessary for the subsequent purchasers of the mortgage to investigate trust instruments to verify the validity of title.(367) Since trusts are not in any event registered under in the land titles system, this exception is unnecessary in Saskatchewan.
 

The exception for leaseholds was adopted in England in 1925, apparently out of concern that a vesting declaration might amount to breach of a covenant in a lease against assignment without consent of the lessor. This is an another example of an over abundance of caution. Assignment of a lease by operation of law does not breach a covenant against assignment.(368) We are of the opinion that this covers the case of assignment of a lease by a vesting declaration. Although the Ontario Law Reform Commission(369) would follow Manitoba in retaining this exception, we do not believe it is necessary to introduce it into Saskatchewan law.
 

(e). Vesting apart from declaration
 

As noted above, prior to 1893 it was necessary to convey trust property from the old trustees to the new trustees when the roster of trustees was changed. Under the Saskatchewan Act, actual conveyance will still be required if no vesting declaration is made, or if the property consists of corporate securities. The deemed declaration provision we have proposed will make actual conveyance unnecessary in the first case, and we have also recommended eliminating the exception with respect to corporate securities. Under these recommendations, there is little reason for resorting to conveyances to vest trust property.
 

The Saskatchewan Trustees Act contains several provisions that relate directly to vesting by conveyance: Section 15(2) directs that when new trustees are appointed, the trust property shall "with all convenient speed" be conveyed to the new trustees. Section 16(d) requires that "any assurance or thing requisite for vesting trust property . . . shall be executed or done" when new trustees are appointed. Section 20(2) is identical to section 16(d), but applies when a trustee retires. These provisions will be unnecessary if our other recommendations are adopted. Even in the context of the present Act, the instruction to convey to new trustees is misleading; it would be even more inappropriate under our recommendations. There may remain a few situations in which it will be convenient to convey trust property to new trustees rather than rely on a vesting declaration, but even if the provisions discussed here are deleted, nothing will prevent such a course of action.
 

4. Vesting orders
 

When trustees are removed or appointed by the court, the trust property is vested in the new trustees by a vesting order. In some cases, when non-judicial appointment or removal of trustees has been made, the new trustees may nevertheless seek the assistance of the court by requesting a vesting order. Finally, in a few cases, it may be desirable to vest trust property in some one other than a trustee, such as beneficiary or purchaser. The Trustees Act contains extensive provisions governing vesting orders. Section 23 provides for vesting orders "as to land". Sections 27 and 28 set out the effect of vesting orders "of land". Sections 30 and 31 deal with vesting orders "as to stocks and choses in action". Section 34 allows trustees and beneficiaries to apply for vesting orders. Section 29 allows the court to appoint some person to convey the trust property instead of making a vesting order. Sections 32 and 33 allows the court to vest property in charities. Sections 24-26 relate to vesting of property in what are effectively constructive trustees in special circumstances. All of these provisions were taken from the Trustee Act, 1893.
 

Despite obvious duplication and rather obscure language, there is no evidence that the vesting order provisions have created serious practical difficulty. In England, they were carried over without significant change in the Trustee Act, 1925. We recommend few change in substance. Otherwise, our recommendations in regard to vesting orders are intended to clarify and simplify.
 

(a). Vesting orders made to further administration of trusts
 

Section 23 of The Saskatchewan Trustees Act provides for vesting of real property:
 

23.- (1) In any of the following cases, namely:
 

(a) where a trustee either original or substituted is appointed by the court or otherwise; or
 

(b) where a trustee dies or desires to be discharged from the trust or refuses or becomes unfit to act or incapable of acting, and the trust property is to be vested in the surviving or continuing trustees; or
 

(c) where a trustee entitled to be possessed of any land, or entitled to a contingent right therein, either solely with any other person, is an infant, or outside Saskatchewan, or cannot be found; or
 

(d) where it is uncertain who was the survivor of two or more trustees jointly entitled to or possessed of any land; or
 

(e) where it is uncertain whether the last trustee known to have been entitled to or possessed of any land is living or dead; or
 

(f) where there is no heir or personal representative of a trustee who was entitled to or possessed of land and has died intestate as to that land, or where it is uncertain who is the heir or personal representative or devisee of a trustee who was entitled to or possessed of land and is dead; or
 

(g) where a trustee jointly or solely entitled to or any land, or entitled to a contingent right therein, has been required by or on behalf of a person entitled to require a conveyance of the land or to a release of the right, to convey the land or release the right, and has wilfully refused or neglected to convey the land or release the right for fourteen days after the date of the requirement;
 

the Court of Queen's Bench may make an order, in this Act called a vesting order, vesting the land in such person in such manner, and for such estate, as the court may think fit, or releasing or disposing of the contingent right to such person as the court may direct.
 

(2) Where the order is consequential on the appointment of a new trustee the land shall be vested, for such estate as the court may direct, in the persons who, on the appointment, are the trustees.
 

(3) Where the order relates to a trustee entitled jointly with another person, and that trustee is outside Saskatchewan or cannot be found, the land or right shall be vested in the other person, either alone or with some other person.
 
 
 

Section 30 The Saskatchewan Trustees Act provides for vesting of securities and choses in action:
 

30.- (1) In any of the following cases:
 

(a) where the Court of Queen's Bench appoints, or has appointed, a new trustee; or
 

(b) where a trustee entitled alone, or jointly with another person, to stock, or to a chose in action:
 

(i) is an infant; or
 

(ii) is outside Saskatchewan; or
 

(iii) cannot be found; or
 

(iv) neglects or refuses to transfer stock, or receive the dividends or income thereof, or to sue for, or recover a chose in action, according to the direction of the person absolutely entitled thereto, for fourteen days next after a request in writing has been made to him by the person so entitled; or
 

(v) neglects or refuses to transfer stock, or receive dividends or income thereof, or to sue for, or recover a chose in action for fourteen days next after an order of the Court of Queen's Bench for that purpose has been served on him; or
 

(c) where it is uncertain whether a trustee entitled, alone or jointly with another person, to stock or to a chose in action is alive or dead;
 

the Court of Queen's Bench may make an order vesting the right to transfer, or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover a chose in action in any such person as the court may appoint.
 

(2) Where the order is consequential on the appointment by the court of a new trustee, the right shall be vested in the persons who, on the appointment, are the trustees.
 

(3) Where the person whose right is dealt with by the order was entitled jointly with another person, the right shall be vested in that last mentioned person, either alone or jointly with any other person whom the court may appoint.
 

(4) Where a vesting order may be made under this section the court may, if it is more convenient, appoint some proper person to make, or join in making, the transfer.
 

(5) The person in whom the right to transfer or call for the transfer of any stock is vested by an order of the court under this Act may transfer the stock to himself, or any other person, according to the order, and all chartered banks and all companies shall obey every order made under this section.
 

(6) After notice in writing of an order under this section it shall not be lawful for any chartered bank or any company to transfer any stock to which the order relates, or to pay any dividends thereon except in accordance with the order.
 

(7) The Court of Queen's Bench may make declarations and. give directions concerning the manner in which the right to any stock or chose in action, vested under this Act, is to be exercised.
 

(8) The provisions of this Act as to vesting orders apply to shares in ships registered under the Acts relating to merchant shipping as if they were stock.
 

Sections 23 and 30 each list circumstances in which vesting orders can be made. This list includes, in addition to appointment and removal of trustees, circumstances in which a trustee is incapable of acting, or in which the required course of action is difficult without court assistance. Thus the court may make a vesting order in cases in which trustees have not been appointed or removed.
 

There are, however two significant incongruities in these sections. First, neither section authorizes the court to vest personal property other than securities and choses in action. Second, it is remarkable that the lists in sections 23(1) and 30(1) are somewhat different in substance, and that even taken together, are not exhaustive. Thus, for example, section 23 refers to cases in which a trustee has died, while section 30 does not. In cases not covered by the statute, vesting orders must be made under the inherent jurisdiction of the court.(370)
 

A partial explanation of these inconsistencies lies in the history of the vesting order provisions. They were originally enacted in England at different times, and to cure particular problems.(371) Nevertheless, the problem was not cured by the Trustee Act, 1925. The vesting order provisions in the Manitoba Trustee Act were based on the Trustee Act, 1925, and improved on the model by consolidating vesting order provisions in respect of real property, securities and choses in action in a single section(372). But the Manitoba Act does not encompass other personal property, nor is the consolidated list comprehensive.
 

We agree with the Ontario Law Reform Commission that a single section should govern vesting of trust property in a comprehensive fashion. This goal could be achieved by consolidating and expanding the lists of circumstances in which vesting orders can be made under sections 23 and 30. This is the approach that has been by Australian reformers. The Western Australia Trustees Act, 1962, for example, lists thirteen circumstances in which a vesting order may be made.(373) However, it is likely that not even Western Australia's list is exhaustive. We agree with the Ontario Law Reform Commission that it would be better to avoid listing specific circumstances in which vesting orders can be made. It would be more appropriate to simply affirm the court's broad jurisdiction to make vesting orders whenever required to assist in the administration of a trust.(374) The Ontario recommendation provides:(375)
 

(1) Where it appears to the Court to be in the best interests of a trust, the Court, subject to subsection (2), may upon application vest the trust property or an interest therein in one or more persons in such manner, for such estate or interest and on such terms as the Court orders.
 

(2)Where an order under subsection (1) is consequential on the appointment of one or more new trustees or on the retirement or removal of a trustee without the appointment of anew trustee in place of the trustee retiring or removed, the Court shall vest the trust property in the person or persons who, on the appointment, retirement or removal, are the trustees.
 

A similar provision should be adopted in Saskatchewan(376).
 
 

(b). Effect of vesting orders
 

Section 27 of the Saskatchewan Trustees Act provides:
 

27.- A vesting order under any of the foregoing provisions shall, in the case of a vesting order consequential on the appointment of a new trustee, have the same effect as if the persons who before the appointment were the trustees, had duly executed all proper conveyances of the land for such estate as the court of Queen's Bench directs, or if there is no such person, or no such person of full capacity, then as if such person had existed and been of full capacity and had dully executed all proper conveyances of the land for such estate as the court directs; and shall in every other case have the same effect as if the trustee, or other person, or description or class of persons, to whose rights or supposed rights those provisions relate, had been an ascertained and existing persons of full capacity, and had executed a conveyance or release to the effect intended by the order.
 

We have noted above that this provision is probably not strictly necessary, but is nevertheless useful.(377) It should, however, be extended to specify the effect of vesting of personal property, and the language of the section can be considerably simplified.(378)
 

Section 28, also included under the heading "effect of vesting orders of land" in the Saskatchewan Act, provides:
 

28.- Where a vesting order is made as to land, founded on an allegation of the personal incapacity of a trustee, or on and allegation that a trustee is outside Saskatchewan or cannot be found, or that it is uncertain which of the several trustees was the survivor, or on an allegation that a trustee has died intestate without an heir, or has died and it is not known who is his heir or personal representative or divisee, the fact that the order has been so made shall be conclusive evidence of the matter so alleged in any court upon a question as to the validity of the order; but this section does not prevent the Court of Queen's Bench from directing a conveyance on the payment of costs occasioned by the order if improperly obtained.
 

Section 31, which carries the heading "effect of vesting orders on choses in action", appears to be similar in effect:
 

31.- Where an order has been made under this Act by the Court of Queen's Bench vesting the legal right to sue for or recover a chose in action, or an interest in respect thereof, in any person, he may carry on, commence and prosecute in his own name an action or proceeding for the recovery of the chose in action in the same manner and with the same right as the person in whose place he has been appointed.
 

These provisions are not contained in modern English trusts legislation. In our opinion, they are unnecessary. A court order can be relied upon as evidence of title to trust property by both the trustees and persons dealing with trustees in the absence of provisions such as these.
 

(c). Appointment of persons to convey
 

Section 29 of the Saskatchewan Trustees Act provides:
 

29.- Where a vesting order is made under any of the foregoing provision, the court of Queen's Bench may, if it is more convenient, by order appoint a person to convey the land or release the contingent right, ad a conveyance or release by that person in conformity with the order has the se effect as an order under the appropriate provisions.
 

This remains a useful provision(379), giving the court an alternative to a vesting order when the property involved can easily be conveyed or transferred. The court might, for example, appoint a retiring trustee to transfer trust realty under The Land Titles Act, or to transfer securities by endorsement and delivery under a corporation statute.(380)
 

(d). Vesting property in charities
 

Sections 32 of the Saskatchewan Trustees Act provide:
 

32.- The Court of Queen's Bench may exercise the powers herein conferred for the purpose of vesting land or personal estate in the trustee of a charity or society over which the court would have jurisdiction upon action duly instituted.
 

Section 32 was copied from the English Trustee Act, 1925. Charitable trusts are subject to the cy-pres doctrine: If property is donated in trust to a charity that has ceased to exist or otherwise cannot accept the donation, the court may direct that the trust property be applied to similar charitable objects. Section 32 was intended to facilitate application of the cy-pres doctrine by using a vesting order to achieve its purpose.(381) This remains a necessary provision, but it is deficient in one respect. Like its English model, section 32 purports to allow vesting in a "charity" or a "society". The cy-pres doctrine applies only to charities. It would be inappropriate to apply section 32 to vest property in a society whose purposes are not recognized in law as charitable. The section should be limited to charities.(382)
 

(e). Vesting orders in other specified cases
 

Sections 24, 25 and 26 of the Saskatchewan Trustees Act provide for vesting orders in certain anomalous cases:
 

24.- Where land is subject to a contingent right in an unborn person, or a class of unborn persons, who, on coming into existence, would, in respect thereof, become entitled to or possessed of the land on any trust, the Court o Queen's Bench may make an order releasing the land from the contingent right, or vesting in any person, the estate to or of which the unborn person or class of unborn persons, would, on coming into existence, be entitled or possessed.
 

25.- Where a court gives a judgment or makes an order directing a sale of land, every person who:

(a) is entitled to or possessed of the land, or entitled to a contingent right therein as heir or under the will of a deceased person for payment of those debts the judgment was given or order made; and
 

(b) is a party to the action or proceedings or is otherwise bound by the judgment or order;

shall be deemed to be so entitled or possessed as a trustee withing the meaning of this Act, and the Court of Queen's Bench may make an order vesting the land or any part thereof, for such estate, as that court thinks fit, in the purchaser or any other person.
 

26.- Where a judgment is given for the specific performance of a contract concerning land, or for the partition or sale in lieu of partition, or exchange of land, or generally where a judgment is given for the conveyance of land, either in cases arising out of the doctrine of election, or otherwise, the Court of Queen's Bench may declare that any of the parties to the action are trustees of the land, or any part thereof, within the meaning of this Act, or may declare that the interest of unborn persons who might claim under a party to the action, or under the will, or voluntary settlement, of a person deceased, who was during his lifetime a party to the contract or transactions concerning which the judgment was given, are the interests of person who, on coming into existence, would be trustees within the meaning of this Act, and thereupon the Court of Queen's Bench may make a vesting order relating to the rights of those persons, born ad unborn, as if they had been trustees.
 

Section 24 has its origin in the English Trustee Act, 1850. It may have been useful to deal with problems arising out of complex settlements of land. Its purpose is to make it possible for purchasers to get a conveyance of an estate in fee simple when land is subject to contingent legal interests in unborn persons. The provision has little to do with trusts, and in any event, contingent future interests in land are now invariably equitable rather than legal, and do not present the problem section 24 was designed to cure. Section 24 can be safely deleted.
 

Sections 25 and 26 remain useful. However, neither has anything to do with express trusts, which is the general subject matter of The Trustees Act. In both cases, a conveyancing problem is solved by vesting land in a person who becomes, in effect, a constructive trust. We recommend removing these provisions from The Trustees Act, and re-enactment in the Queen's Bench Act, which contains similar miscellaneous provisions relating the powers of the court. (383)
 
 


RECOMMENDATIONS



The Commission recommends adoption of a new Trustees Act. The substance of the new legislation should provide as follows:
 
 

General





1.1 Except as otherwise provided, a "trustee" in these Recommendations includes a personal representative.
 

1.2 Except as otherwise provided, any power, duty or authority conferred on a trustee by these Recommendations is subject to any express provision to the contrary in the trust instrument.
 

1.3 Except as otherwise provided, when these Recommendations allow or require an application to court, all matters of practice, costs, and standing shall be governed by The Queen's Bench Act and the Rules of Court.
 
 

Duties and Rights of Trustees





Duty of care of trustees

2.1 (1) In the discharge of his or her duties and the exercise of his or her powers, whether the duty or power is created by law or by the trust instrument, a trustee shall exercise that degree of care and diligence that a person of ordinary prudence would exercise, having regard to the skill, and experience, and qualifications of the trustee.
 

(2) A trustee who in possesses, or because of his or her profession, business or calling ought to possess, a particular level of knowledge or skill which in all the circumstances is relevant to the administration of the trust, shall employ that particular level of knowledge or skill in the administration of the trust.
 

2.2 Any clause in a trust that relieves a trustee
 

(i) who has committed a breach of trust in bad faith, intentionally, or with reckless indifference to the interest of the beneficiary, or of liability for any profit which the trustee has derived from a breach of trust, or .
 

(ii) who receives remuneration for administration of the trust, and who holds out that he or she possesses special skills or knowledge relevant to the administration of the trust from the duty of care set out in these recommendations
 

is invalid for that purpose
 

Conflicts of interest
 

2.3 Trustees shall discharge their duties and exercise their powers solely in the interests of the beneficiaries of the trust, and without limiting the generality of the foregoing, they shall not knowingly permit themselves to be in a position in which their interest conflicts in any way with the discharge of their duties and the exercise of their powers, or in which they may derive any benefit for themselves or for any other person, except so far as the law permits.
 

2.4 Where upon application to the court it is shown that it would not be detrimental to the trust or its beneficiaries, and whether or not any beneficiary withholds his consent, the Court may make an order, on such terms and conditions as appear just
 

(a) permitting the trustees to act notwithstanding that they may be in a position that contravenes the trustees' duty to avoid a conflict of interest; or
 

(b) excusing them from liability notwithstanding that they may be in breach of trust for having acted while in a position that contravened the trustees' the duty to avoid a conflict of interest.
 

Use of agents and delegation by trustees
 

2.5 (1) In this recommendation, "agent" includes a stock broker, investment dealer, investment counselor and any other person to whom investment responsibility is delegated by a trustee.
 

(2) A trustee may delegate to an agent the degree of authority with respect to the investment of trust property that a reasonable, prudent investor would delegate in accordance with ordinary business practice.
 

(3) A trustee who delegates authority pursuant to recommendation (2) must exercise prudence and diligence in:
 

(a) selecting the agent;

(b) establishing the terms of the authority delegated; and

(c) monitoring the performance of the agent to ensure compliance with the terms of the delegation.
 

(4) In performing a delegated function, an agent owes a duty to the trustee and to the beneficiaries to exercise reasonable care to comply with the terms of the delegation.
 

(5) A trustee who complies with recommendation (3) is not liable for the decisions or actions of the agent to whom the authority was delegated.
 

(6) This section does not authorize a trustee to delegate authority where the terms of the trust expressly prohibit the trustee from delegating authority to make investments.
 

(7) Investment in a security issued by a mutual fund as defined in The Securities Act, 1988 or in a similar investment is not a delegation of authority with respect to the investment of trust property.
 

Duty to act impartially
 

2.6 Trustees shall act impartially as between income and capital beneficiaries, having regard to each item of trust property, whatever the nature of the property, and whether it is an original asset or an asset acquired subsequently.
 

2.7 (1) Subject to recommendation 6, unless the trust instrument provides otherwise
 

(a) Trustees may apportion any payment or expenditure for any outgoing between the income and capital accounts, or they may charge the payment or expenditure, exclusively to either income or capital as they consider just and equitable in all the circumstances;
 

(b) Trustees may pay for any outgoing from income or capital, or wholly or partly from each, as appears to them to be in accord with sound business practice and in the best interests of the trust beneficiaries as a whole, and, where the whole or part of the payment or expenditure is made out of or charged to capital, they may recoup income from capital, if, in either case, they consider that course to be just and equitable in all the circumstances; and
 

(c) Trustees may, and if ordered by the Court upon application shall, deduct from the income derived from trust property that is subject to depreciation or obsolescence such amounts as are fair and reasonable having regard to sound business practice in order to protect the capital of the trust from loss, and any sums so deducted shall be set aside and added to the capital of the trust so as to become capital for all purposes.
 

(2) This recommendation does not apply to trust for the exclusive benefit of the spouse of the testator or settlor within the meaning of the Income Tax Act (Canada).
 

2.8 (1) Subject to recommendation 6, unless the trust instrument provides otherwise, trustees shall allocate receipts to the income and capital accounts as they consider just and equitable in all the circumstances.
 

(2) For the purposes of this recommendation and for determining the relative proportionate interests of beneficiaries of the trust, but not so as to limit in any way the powers conferred by recommendation (1):
 

(a) income may be understood to be the return in money or property derived from the use of capital; and
 

(b) capital may be understood to be the property set aside by the trust instrument to be delivered eventually to a remainderman, while the return or use of the capital is in the meantime taken or received by or held for accumulation for an income beneficiary.
 

Accounting by trustees
 

2.9 (1) A trustee may at any time apply to the Court for an order passing the accounts of the trustee.
 

(2) The procedure upon an application under recommendation (1) shall follow the procedure for the passing of executors' and administrators' accounts.
 

(3) Unless mistake or fraud is shown, the approval by the court of the accounts of a trustee is binding on any person interested in the trust who was notified of the proceedings, or who claims through such a person.
 

(4) Except in the case of a executor, administrator, or trustee who must pass accounts in accordance with The Administration of Estates Act, when administration of the trust has been completed, a trustee may, upon passing accounts, be discharged, and any bond or security given by the trustee may be cancelled or delivered to him or her.
 

2.10 Notwithstanding anything to the contrary in the terms of a trust, if a beneficiary or other interested party has requested information concerning the accounts of a trustee, and the trustee has refused to comply with the request in a reasonable and timely manner, the court may order the trustee to pass accounts.
 

Joint liability of trustees
 

2.11(1) Unless the instrument creating the trust provides otherwise, trustees must act unanimously in discharging heir duties and exercising their powers as trustees, and, except as otherwise provided by law, are jointly and severally liable.
 

(2) A trustee is chargeable only for money and securities actually received by him, notwithstanding his signing a receipt for the sake of conformity, and is answerable and accountable only for his acts, receipts, neglects or defaults, and not for those of any other trustee, nor for any banker, broker or other person with whom trust money or securities are deposited.
 

(3) Where a trustee has committed a breach of trust at the instigation, request, or written consent of a beneficiary, the court may make such order as seems just to indemnify the trustee or person claiming through him out of the beneficiary's interest in the trust.
 
 
 

Relief from breaches of trust
 

2.12 Where a trustee, or any person who may be held liable as a trustee, is or may be personally liable for a breach of trust as the result of any act or omission of the trustee or of an agent of the trustee, the court may, if the trustee has acted honestly and reasonably and ought fairly to be excused for the breach, or for omitting to obtain the directions of the court in the matter in which it was committed, relieve the trustee either wholly or partly form personal liability.
 
 
 

Application for advice or direction
 

2.13 (1) A trustee or guardian may apply to court for the opinion, advise and direction of the court on any question respecting the management or administration of the trust or estate, including any question affecting the rights or interests of a person or class of persons claiming to be interested in the trust or estate.
 

(2) Upon an application under Recommendation (1), the court may direct the trustee or guardian to do or abstain from doing any particular act respecting the management or administration of the trust or estate
 

(3) Unless a trustee or guardian has been guilty of fraud, misrepresentation, or wilful concealment in obtaining the opinion, advise and direction of the court, a trustee or guardian acting upon the opinion, advise and direction of the court shall be deemed to have discharged his or her duty as a trustee or guardian in respect to the matter on which the opinion, advise and direction was sought.
 

Remuneration and indemnification
 

2.14 (1) Unless remuneration is fixed by the trust instrument, a trustee or a property guardian is entitled to a reasonable allowance for administration of an estate, including remuneration for professional services rendered to the estate by a solicitor who is a trustee or guardian.
 

(2) The amount of remuneration shall be fixed by the court on application for that purpose, or upon passing of accounts.
 

(3) The court may vary a term of a will or instrument creating a trust that fixed the remuneration of a trustee (other than by contract between the settlor or testator and the trustee), if that term does not provide for sufficient remuneration.
 

2.15 (a) A trustee or guardian may receive remuneration for services already rendered prior to court approval under Recommendation 14 if notice, with full details of the remuneration sought and of the services to which it relates, is given to the adult beneficiaries. Such notice must include the statement that the recipient of the notice may object to the proposed taking of remuneration within 60 days from the date of the notice.
 

(b) Anyone entitled to notice under Recommendation 2(b) may objects to the remuneration proposed by application to the court within 60 days of the date of the notice
 

2.16 A trustee .may be reimbursed out the trust property for all expenses incurred in administration of the trust.
 

Consequential
 

2.17 These recommendations replace sections 3.1, 13, 44,46,79, and 80-84, and 87 of The Trustees Act.
 

2.18 Section 35 of The Administration of Estates Act should be amended to provide that on passing accounts under the section, an executor, administrator, or trustee may be discharged and any bond or security given by the trustee may be cancelled or delivered to him or her.
 
 

Powers of Trustees



Administrative powers
 

3.1 The administrative powers proposed in Recommendation 2 apply only if not excluded by the terms of the trust.
 

3.2.Trustees may:
 

(a) sell trust property by public auction or private contract for cash or credit on appropriate security;
 

(b) dispose of trust property by way of exchange for other property, or where the trust property consists of an undivided share, concur in the partition of the property in which the share is held;.
 

(c) surrender insurance policies, leases or other property subject to onerous obligations of such a nature that it would not be in the interests of the beneficiaries to retain the trust property;
 

(d) grant an option to purchase land , or any easement, right, or privilege of any kind in relation to the land, including mining leases or other disposition of rights to mines and minerals;.
 

(e) enter into or renew a lease as lessee or lessor;
 

(f) postpone sale or conversion under a trust for sale or conversion, for such period as is reasonable in the circumstances;
 

(g) carry on any business, whether as sole proprietor, partner, limited partner or otherwise, incorporate or otherwise change the form of the business, and dispose of or wind up the business;
 

(h) manage, maintain, repair, renovate, improve or develop trust property, including in the case of land, subdividing, erecting buildings,. and entering into agreements with respect to boundaries, party walls, fencing or other matters in connection with trust property;
 

(i) purchase or rent a living accommodation or construct a house on land held by them for the purpose of providing a home for person entitles to the income of the money expanded in respect of the purchase, or the income to be expanded in respect of the rent or the income of either the land or the money expanded in respect of the purchase or construction;
 

(j) appropriate with the consent of a beneficiary property in specie in full or partial satisfaction of the share of the beneficiary, and for that purpose, value the property;
 

(k) insure against loss or damage to trust property and against any other risk or liability;
 

(l) borrow funds, with or without giving trust property as security;
 

(m) deposit trust funds in:
 

(i) a chartered bank;

(ii) a credit union that is incorporated under The Credit Union Act, 1998 or any former Credit Union Act;

(iii) Saskatchewan Co-operative Credit Society Limited;

(iv) a trust company that is licensed under The Trust and Loan Companies Licensing Act;

(v) a loan company that is licensed under The Trust and Loan Companies Licensing Act and that is a member of the Canada Deposit Insurance Corporation;

(vi) any other body corporate that is empowered to accept moneys for deposit and that has been approved for that purpose by the Lieutenant Governor in Council
 

provided that unless the trustee is a trust company registered and entitled to transact business as a trust company in Saskatchewan, the trustee shall deposit trust funds in a separate account in his name in the bank or other depository for each trust for which moneys so deposited are held;
 

(m) exercise all rights and powers and satisfy all liabilities incidental to the ownership of shares or obligations of a corporation, or membership in a co-operative or credit union, including power to sell or exercise subscription rights, to exchange the shares and obligations for other shares and obligations, to join in plans for reconstruction, reorganization or amalgamation, to enter into pooling or other agreements, or to authorize sale of the assets or undertaking of the corporation, co-operative or credit union;
 

(n) pay or assert or contest any claim, and compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing relating to the trust or trust property; and
 

(o) do all supplementary or ancillary acts or things and execute all instruments necessary or desirable to carry out the intent and purpose of the powers vested in the trustees.
 

3.3 The receipt in writing given by a trustee relieves the person to whom the receipt is given from responsibility for any loss or misapplication of the trust property in respect of which the receipt is given.
 

Dispositive powers
 

3.4 (1) Where property is held in trust for an infant, either absolutely or contingently, the trustees they may at their sole discretion pay to the guardians, if any, of the infant or otherwise to apply towards the maintenance or education of the infant all or any part of the income accuring to the infant, whether or not there is a fund for that purpose, and whether or not any other person is bound by law to provide for such maintenance or education.
 

(2) The trustees shall accumulate and invest any residue of the income , and
 

(a) apply the accumulated fund to the maintenance and education of the infant, and
 

(b) hold any of the accumulated fund not required for the maintenance and education of the infant for the benefit of the person who shall ultimately become entitled to the property from which the income was derived.
 
 
 

3.5 (1) Where a trust fund is held in trust for an infant, either absolutely or contingently, and the income from the fund or any other property is insufficient for the maintenance and education of the infant; the court may direct the trustees to, pay to the guardian, if any, of the infant or otherwise apply towards the maintenance or education of the infant all or any part of the fund.
 

(2) In addition to the amounts authorized by the court to be applied towards the infant's maintenance and education, the court may authorize application of any additional amounts that are, in its opinion, required to meet special circumstances or expenditures in the best interests of the infant.
 

3.6 (1) Where personal property is held in trust for an infant absolutely or contingently and the income from the property is insufficient for the maintenance and education of the infant, the court may direct the trustees may to sell any portion of the property and pay to the guardians, if any, of the infant, or otherwise apply towards the maintenance or education f the infant all or any part of the money arising from the sale.
 

(2) If the whole of the money arising from the sale is not immediately required for the maintenance and education of the infant, the trustees shall invest any surplus, and
 

(a) apply the surplus to the maintenance and education of the infant, and
 

(b) hold any of the surplus not required for the maintenance and education of the infant for the benefit of the person who shall ultimately become entitled to the property from which the income was derived. :
 

Consequential
 

3.7 These Recommendations replace sections 37-43, 45, 47-48, and 50-51, 61-62, 64-67, and 71 of The Trustees Act.
 

3.8 Sections 63, 68,-70, and 72 of The Trustees Act should be re-enacted in The Administration of Estates Act. .
 
 

Appointment and removal of trustees



General
 

4.1. The Recommendations in this part do not apply to personal representatives
 

4.2 In these Recommendations, a reference to a trustee or personal representative who has died includes a person nominated as trustee or executor in a will but dying before the testator.
 

Death of a trustee
 

4.3. Where a power in a trust is capable of being exercised by two or more trustees jointly, it may be exercised by the survivors or survivor of the trustees.
 

4.4. The personal representatives or representative of a sole trustee, or of the last surviving or continuing trustee, may exercise any power or trust capable of being exercised by the trustee.
 
 
 

Appointment and removal without court order
 

4.5 (l) The person nominated in a trust instrument for the purpose of appointing and removing trustees, or if there is no such person, then the surviving or continuing trustee or trustees, or the personal representative of the last surviving trustee may in an instrument for that purpose:
 

(a) remove any trustee who
 

(i) desires to retire from the trust,
 

(ii) refuses to act as trustee,

.

(iii) has been declared mentally incompetent,
 

(iv) is an infant,
 

(v) has been convicted of an indictable offence,
 

(vi) is a person against whom a receiving order is in force, or who has made an assignment or a proposal under the Bankruptcy Act (Canada),
 

(vii) is a corporate trustee that is dissolved or in liquidation;
 

(b) appoint a substitute for any trustee removed under (a);
 

(c) appoint a trustee to in place of a trustee who has died, has disclaimed the trust in writing, or to fill any other vacancy ;
 

(d) appoint additional trustees;
 

(e) appoint a separate set of trustees for any part of the trust property distinct from those relating to any other part or parts, and any existing trustee may be appointed or remain one of such separate set of trustees.
 

provided that at least one trustee remains, or where there are separate trustees for a part or parts of he trust property, at least one trustee remains for each part.
 

(2) Notwithstanding anything to the contrary in a trust instrument, if a trustee requests in writing to retire from the trust, the trustee shall be removed under subsection (1).
 

(3) For the purposes of this section, a surviving or continuing trustee includes a trustee who desires to retire, or who refuses to act, but does not include a trustee who has disclaimed the trust in writing, or any other trustee who may be removed under subsection (1).
 

(4) For the purposes of this section, a person nominated in a trust instrument for the purpose of appointing and removing trustees does not include a person who refuses to exercise the authority so conferred by the trust instrument, is an infant, or has been declared to be mentally incompetent.
 

Court appointment and removal
 

4.6. (1) Where it appears to the court to be in the interests of the trust, the court may, notwithstanding anything to the contrary in a trust instrument
 

(a) remove a trustee, with or without appointment of a substitute;
 

(b) appoint an additional trustee; or
 

(c) appoint a separate set of trustees for any part of the trust property distinct from those relating to any other part or parts, and any existing trustee may be appointed or remain one of such separate set of trustees;
 

provided that at least one trustee remains, or where there are separate trustees for a part or parts of he trust property, at least one trustee remains for each part.
 

(2) An application for appointment or removal of a trustee under this section may be made by a trustee, a beneficiary, a person nominated in a trust instrument for the purpose of appointing and removing trustees, or the Public Trustee.
 

(3) Where it appears to be in the interests of the trust to appoint a trustee, and no suitable person will accept the appointment, the court may appoint the Public Trustee.
 
 
 

Effect of a change in trustees
 

4.7. A trustee appointed under these Recommendations has , as well before as after all the trust property is vested in the trustee, the same powers, authorities and discretions and may in all respects act as if he had been originally appointed a trustee by the instrument, if any, creating the trust.
 

4.8. An instrument appointing or removing a trustee under Recommendation 6 is conclusive evidence of the validity of the appointment or discharge in favour of a purchaser of trust property.
 
 
 

Vesting of trust property without court order
 

4.9. (1) An instrument removing or appointing trustees under Recommendation 7 may contain an express declaration that the trust property vests in one or more trustees who shall perform the trust as of the date of the instrument or such other date as is stated in the instrument for that purpose.
 

(2) Where an instrument referred to in subsection (1) does not contain an express declaration, a declaration that the trust property vests in one or more trustees who shall perform the trust is implied therein as of the date of the instrument.
 

(3) The vesting of property in trustees under this Recommendation shall have the same effect as if a vesting order had been made in respect to the property.
 

(4) For the purposes of registration or transfer of title to any trust property, the instrument referred to in subsection (1) or (2) shall be deemed to be conclusive evidence that the trust property has vested in the trustees named in the instrument.
 
 
 

Vesting orders
 

4.10. Where it appears to the Court to be in the best interests of a trust, the Court, subject to subsection (2), may upon application vest the trust property or an interest therein in one or more persons in such manner, for such estate or interest and on such terms as the Court orders.
 

(2) Where an order under subsection (1) is consequential on the appointment or removal of trustees under these Recommendations the Court shall vest the trust property in the person or persons who, on the appointment or removal, are the trustees.
 

(3) An application for an order vesting trust property in accordance with this section may be made by a trustee or beneficiary of the trust.
 

4.11. A vesting order made under these Recommendations has the same effect as if the legal or other interest in the property had been conveyed or assigned to the person in whom the property is to be vested.
 

4.12. For the purpose of vesting any property in the trustees of a charity, the court may exercise the powers conferred on it by these Recommendations.
 

4.13. Where a vesting order may be made under these Recommendations, the Court may, in lieu thereof, appoint a person to convey, assign, or transfer the trust property to the person in whom the trust property would otherwise has vested by the order of the court.
 

Consequential
 

4.14. These Recommendations replace sections 14-32, 34-36, 39 and 85-86 of The Trustees Act
 

4.15. Sections 25 and 26 of the Saskatchewan The Trustees Act should be re-enacted in The Queen's Bench Act.



 


NOTES

1. Maitland, Equity: A Course of Lectures, 1936.

2. Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, p.1.

3. For a review of modern uses of the trust, see Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, p. 9, and D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 3. Intervivos trusts, created while the settlor of the trust property still lives, are infrequently created for family purposes. Charitable trusts, both testamentary and intervivos are occasionally created, but it is now much more common to make a donation or bequest to an established charity than to create a charitable trust. Most charities are non-profit corporations rather than trusts, though some administer trust funds. The trust is sometimes used for business purposes, but other forms of organization are much more common.

4. The Trustee Act, R.S.S. 1978, c. T-23 as amended by R.S.S. 1978 (Supplement), c.79, S.S. 1980-81, c.31; 1983, c.80; 1990-91, c.S-66.1; 1992, c.62; 1994, c.10; 1997, c.18; and 1998, c.C-45.2 and c.40.

5. O.N.W.T. 1903 (2nd sess.), c.11. The ordinance was re-enacted as The Trustees Act, R.S.S. 1909, c. 46.

6. 56 & 57 Vict., c. 53. Some additional provisions were adopted from the Judicial Trustees Act, 1896(7)

7. '

8. S.S. 1969, c. 71. See now R.S.S.1978, c. V-1.

9. 1998, c.C-45.2 and c.40.

10. 15 & 16 Geo. 5, c.19.

11. The New Zealand Trustee Act, 1956 is typical of Commonwealth legislation that incorporated the reforms in the English Trustee Act, 1925. The Queensland Trusts Act (1973-81) is the most innovative of the Australian reforms of trusts legislation.

12. Statutes (England) 2000, c. 29.

13. Trustee Act R.S.M. 1987, c.T160.

14. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984.

15. Lewin on Trusts ( 6th ed.), p. 3.

16. For a discussion of fiduciary duties in these terms see Scott, "The Fiduciary Principle" (1949), 37 Cal. L. Rev., p. 539.

17. A similar classification is adopted, for example, by Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, pp. 620 ff.

18. Administrative powers of trustees will be discussed below.

19. S.S. 1998, c. 40, s. 3. See now The Trustees Act, s. 3.1.

20. (1884), 9 App. Cas. 1 (H.L.).

21. (1887), 12 App. Cas. 727 (H.L.).

22. e.g. Fales v. Canada Permanent Trust Co., [1977] 2 SCR 302.

23. (1883), 22 Ch. D. 727 (C..A.).

24. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 656.

25. [1977] 2 SCR 302. It may not appear to be self evident in the formula adopted by the House of Lords in Learoyd v. Whiteley and Speight v Gaunt(26)

26. (1884), 9 App. Cas. 1 (H.L.). " " " " " " " " "

27. See, for example, Re City Equitable Insurance Co. Ltd. [1925] 1 Ch. 407 (C.A.) (England).

28. Fales v. Canada Permanent Trust Co., [1977] 2 SCR 302

29. Scott, "The Fiduciary Principle" (1949), 37 Cal. L. Rev., p. 539.

30. Section 57 is discussed in more detail below.

31. This is a common use of the remedial provisions. See for example, Linsley v. Kirstiuk (1986), 28 DLR (4th) 495 (B.C.S.C.) and McDonald v. Hauer [1977] 1 WWR 51 (Sask. C.A.).

32. D. W. M. Waters, "Comment" (1977), 55 Can. Bar Rev., 342.

33. [1952] 2 All ER 1054. Following National Trustees Co. of Australasia Ltd. v. General Finance Company of Australasia Ltd. [1905] A.C. 373.

34. American law Institute, Restatement of the Law, Second -- Trusts, (1959), p. 379.

35. National Conference of Commissioners on Uniform State Law, Uniform Probate Code, (1972).

36. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), Draft Act, s. 4(2).

37. See below

38. See Recommendation 2.1(2).

39. McDonald v. Hauer [1977] 1 WWR 51 (Sask. C.A.); Fales v. Canada Permanent Trust Co., [1977] 2 SCR 302.

40. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 28.

41. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 28.

42. Recommendation 1(1).

43. S.S. 1998, c. 40. The new investment powers regime will be discussed below.

44. Uniform Law Conference of Canada, Uniform Trust Investments Act, 1997.

45. This innovation appears to have been proposed by a leading American expert in trust law, A.A. Scott, who wrote the commentary to the Restatement. See Jeffrey N. Gordon, "The Puzzling Persistence of the Constrained Prudent Man Rule", (1987),62 New York University Law Review, 52.

46. National Conference of Commissioners on Uniform State Law, Uniform Prudent Investor Act, 1994.

47. Proceedings of the Annual Conference on the Uniformity of Legislation in Canada, 1970, 115.

48. Uniform Law Conference of Canada, Uniform Trust Investments Act, 1997, s,. 2.

49. Section 1(1) of the Uniform Trust Investments Act, 1997 is identical.

50. Section 6 of the Uniform Trust Investments Act, 1997 is identical.

51. Recommendation 2.14.

52. Judicial Trustees Act, 1896, 59 & 60 Vict., c. 35, s. 3.

53. On the scope of the provision generally, see L. A. Sheridan, "Excusable breaches of trust", (1955), 19 Conv. (N.S.), p. 420.

54. See above

55. Thus in Perdue v Perdue (1928), 34 OWN 172 (Ont. C.A.), a farmer who turned over administration to his solicitor was relieved of liability for the solicitor's misdeeds.

56. See below

57. Smith v. Mason (1901), 1 OLR 594 (Ont. H.C.).

58. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 39 reached a similar conclusion.

59. Wagner v. Van Cleeffe and Halifax Insurance Co.(1991), 5 O.R. (3d) 477, 43 E.T.R. 115 (Ont. Div. Ct.)

60. Recommendation 2.12.

61. See for example Re Wilson [1937] OR 769 (Ont. C.A.) in which a clause that exonerated trustees "from any responsibility from any loss or damage which may have been occasioned through the exercising in good faith of the rights and powers hereby conferred on them" was held not to be broad enough to exclude liability for improper delegation of authority by the trustees.

62. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 661.

63. See above

64. Fales v. Canada Permanent Trust Co., [1977] 2 SCR 302.

65. (1983), 6 DLR (4th) 40 (Alta. Surr. Ct.).

66. David Steele, "Exculpatory Clauses in Trust Instruments", (1995) 14Est. & Tr. J. 216

67. National Conference of Commissioners on Uniform State Law, Uniform Probate Code, (1972).

68. N.Y. Estate, Powers & Trusts Law, 11-1.7 (1966).

69. This provision also prohibits exoneration clauses that would relieve a trustee of the consequences of a conflict of interest with the trust. Such exoneration clauses will be discussed below.

70. American law Institute, Restatement of the Law, Second -- Trusts, (1959), p. 516.

71. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), pp. 40-41.

72. Recommendation 2.2.

73. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 604.

74. Trustee Act, 1893 (56 & 57 Vict.) s. 53. This provision adopted in Saskatchewan as s. 44 of The Trustees Act (repealed 998. See below).

75. Speight v. Gaunt (1883), 9 App. Cas. 1 (H.L).

76. Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, pp. 643-644 summarizes the law laid down by English and Canadian courts as follows: "Delegation is permitted . . . (a) if expressly authorized by statute or the trust instrument; (b) if the duties are not required to be performed personally; (c) if it is clearly necessary, that is, there is no other practicable way for the trustee to perform; and (d) if it is common business practice to delegate the particular power or duty."

77. Haslam v. Haslam (1994), 114 DLR (4th) 562 (Ont. Gen. Div.).

78. See for example, the commentary on the delegation rules in Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 42 ff.

79. Uniform Law Conference of Canada, Uniform Trust Investments Act, 1997, s,. 2. See discussion below.

80. S.S. 1998, c. 40.

81. s. 3.3

82. s. 3(1)

83. Recommendation 2.5.

84. (1726), Sel. Cas. Ch. 61, 25 E.R. 223.

85. Gareth Jones, "Unjust enrichment and the fiduciary's duty of loyalty" (1968), 84 L.Q. Rev., p. 472.

86. [1967] 2 AC 46 (H.L.). This formulation of the rule was adopted by the Supreme Court of Canada in Can Aero Service Ltd. v. O'Malley (1973), 40 DLR (3rd) 371.

87. Dean McLean, "The theoretical basis of the trustee's duty of loyalty", (1968-69), 7 Alta. L.R. 218.

88. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 654, citing Holder v. Holder, [1968] Ch. D. 353 (C.A.).

89. The exceptions are summarize and discussed in D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p.623 ff.

90. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p.60, suggested that if all the beneficiaries are not competent, the conflict could be approved under variation of trusts legislation if could be shown that the trustee's proposed dealings with the trust would be in the interests of the beneficiaries. However, the Commission could find no cases in which this had been done.

91. Purchase of trust property by a trustee first seems to have been permitted in Campbell v. Walker (1800), 5 Ves. Jun. 678.

92. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p.60.

93. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p.62.

94. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), Draft Act, s. 9(1).

95. Recommendation 2.3.

96. (1898), 14 Gr. 586.

97. National Conference of Commissioners on Uniform State Law, Uniform Trustees' Powers Act, 1964, s. 5(b).

98. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), Draft Act, s. 9(2). Section 9(3) expressly provides that an application to approve a conflict may be brought "after the occurrence of the breach of trust". This provision does not appear to us to add anything that is not already clear in section 9(2). Sections 9(4)-9(6) require service of notice of application on interested parties. These are matters we have dealt with elsewhere. Section 9(7) permits variation of an order. We see no purpose for such a provision in this context.

99. Recommendation 2.4.

100. See Recommendation 2.2.

101. See above

102. The Restatement does permit certain apparent conflicts without court approval, and even in the absence of an exoneration clause. However, most of the instances included in the list are uncommon. Thus, for example, a trustee is permitted to purchase the trust's interest in a property if the trustee owns the other interest in the property. In addition, we agree with the Ontario Law Reform Commission, Report on the Law of Trusts, (1984), pp.7-69, that most of the exceptions in the Restatement are problematic. Thus, for example, we do not believe a corporate trustee should be permitted to retain a trust investment in its own shares without court approval. If retention in such a case was permitted under an exoneration clause, the question would arise as to whether the clause was forced on the settlor by the corporate trustee.

103. Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, pp. 622.

104. The Saskatchewan Trustees Act, s. 79, discussed below.

105. See below.

106. National Conference of Commissioners on Uniform State Law, Uniform Trustees' Powers Act, 1964, s. 6. Majority rule applies only if there are more than two trustees, however.

107. Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, pp. 622. The unanimity rule is rarely abandoned in Canada, but some specific powers (e.g. powers of appointment) are not infrequently granted to a named trustee. Such powers are "personal" to the trustee, and are in effect outside the trust proper. See D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p, 613.

108. See e.g. discussion of the issue in Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), pp. 71-73.

109. See D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 853 ff.

110. 56 & 57 Vict., c. 53.

111. Note that the section also authorizes reimbursement of trustees for expenses. This aspect of section 13 will be discussed below.

112. Recommendation 2.11.

113. 26 Eliz. 2, c. 47 (U.K.)

114. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 383.

115. See discussion above.

116. [1977] 2 SCR 302.

117. [1977] 1 WWR 51 (Sask. C.A.).

118. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 381.

119. D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 690-691.

120. [1971] O.R. 584 (Ont. C.A.).

121. (1802), 7 Ves. 137. See D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 694 ff. for a modern statement of the rule.

122. See, for example, Lottman v. Stanford [1980] 1 SCR 1065

123. See below.

124. The Saskatchewan Trustees Act, s. 3(1) (as amended S.S. 1998, c. 40).

125. The Saskatchewan Trustees Act, s. 3(3) (as amended S.S. 1998, c. 40).

126. See the discussion of the impact of investment powers reform on investment strategies in Jeffrey N. Gordon, "The Puzzling Persistence of the Constrained Prudent Man Rule", (1987),62 New York University Law Review, 52.

127. A full review of the law governing allocation of "in comings" and "out goings " is not necessary for our purposes here. For further treatment, see D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 706 ff.

128. Re Fleck, [1952] 2 DLR 657 (Ont..A.).

129. [1956] SCR 889.

130. D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), pp. 709-710.

131. New Zealand Trustee Act, 1956, s. 15.

132. P.E. I. Trustee Act, s. 3.

133. D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 728.

134. Note, however that spousal trusts as defined in the Income Tax Act (Canada) are excluded from the proposed outgoings rules. This is necessary because they would lose their preferred tax status if the proposed rules applied to them. This is the only case at present in which taxation rules would make the proposals inappropriate. It is necessary to make special provision for spousal trusts because we recommend that our proposals apply to existing trusts, which may have been designed as spousal trusts.

135. Recommendations 2.6-2.8.

136. 7 D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 728.

137. R.S.S. 1978,c.T-23, as amended

138. This provision does not impose any special duty on the executor/trustee as trustee. Its purpose is only to ensure that property that is to be held on trust after ordinary administration of the estate has been completed is properly administered by the executor/trustee as executor. When only the trusts established by the will remain, the executor/trustee functions only as trustee. (See D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 732.

139. See The Trustees Act, s. 87, discussed below.

140. See sections 80-84, discussed below.

141. D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 730.

142. Trustee Act, R.S.O.1990, c. T-23, s. 23.

143. Trustee Act, R.S.M., 1970, c. T-160, s. 86.

144. s. 23(1)

145. (1924), 27 OWN 361 (Ont.)

146. D. W. M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 735

147. s. 87 (11)

148. Underhill, p. 358.

149. Recommendation 2.9.

150. Recommendation 2.15.

151. Jones v. Shipping Federation of B.C. (1963), 41 WWR 636 (B.C.).

152. Trustee Act, R.S.M., 1970, c. T-160, s. 87(2).

153. Trustee Act, R.S.B.C. 1979, c. 414, s. 101(2).

154. Underhill

155. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p. 254. The doubts are based on the Commission's interpretation of Re Smith (see below).

156. (1889), 16 O.A.R. 565.

157. [1952] OWN 62, reversed on other grounds, [1952] OWN 170 (Ont. C.A.).

158. Recommendation 2.10.

159. Trustees Relief Amendment Act, 1859 , s.30. Prior to the legislation, trustees could obtain direction from the court only upon paying the trust funds into court. See Underhill, p. 361.

160. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p.753.

161. Oosterhoff and Gillese, Text, Commentary and Cases on Trusts, Toronto : Carswell, 1998, pp. 622.

162. Saskatchewan Rules of the Court of Queen's Bench, r. 452.

163. Underhill, p. 360.

164. e.g. Re Warden (1928), 34 OWN 225 (Ont.). However, if a trustee has failed to exercise a discretion, the court may direct him to do so (Re Poche Estate (1983), 50 A.R. 264 (Alta. Surr. Ct.).

165. Re Collins, [1927] 4 DLR 770 (Ont. H.C.)

166. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p.755-56 identifies and discusses this problem.

167. [1931] DLR 538 (Ont. C.A.).

168. Recommendation 2.13.

169. 3(a)

170. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p.254.

171. Underhill on Trusts and Trustees, 6th ed., 1904, p. 361ff.

172. Underhill on Trusts and Trustees, 6th ed., 1904, p. 363.

173. 56& 57 Vict., c. 53, s. 42.

174. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 805.

175. An Act to Amend the Law in Relation to Surrogate Courts in Upper Canada, (1858).

176. (1850), 1 Mac. 8 G. 664.

177. Re Molesky (1984), 37 Sask.R. 292(Surr. Ct) .

178. Thompson b. Freeman (1868), 15 GR. 384; O"Kelly v. Canada Permanent Trust Company, [1972]1WWR 41 (Sask.C.A.).

179. Recommendation 2.14 (1)(2)

180. The British Columbia Institute of Law Reform, Report on Statutory Remuneration of Trustees and Executors Accounts, 2000, Recommendation 7.

181. Recommendation 2.14(3).

182. Re William George King Estate (1994), 113 DLR (4th) 701 (Ont.Gen.Div.).

183. Re Welbourn (1979), 96DLLK (3rd) 76 (Alta. Surr. Ct.).

184. D. W.M. Waters, Law of Trusts in Canada, Toronto: Carswell (1974), p. 807.

185. Law Reform Commission of Ontario, Report on the Law of Trusts, (1984), p.260-261.

186. The British Columbia Institute of Law Reform, Report on Statutory Remuneration of Trustees and Executors Accounts, 2000, Recommendation 3.

187. Recommendation 2.15.

188. This provision has been discussed elsewhere in this report.

189. Re Fisherman's Benefit Fund Inc. v. U.F.C.W. (1991), 83 DLR 4TH 527 (Nfld. C.A.).

190. Thompson v. Lampert, [1945] SCR 343.

191. Recommendation 2.16.

192. D. Waters, The Law of Trusts in Canada, p. 739

193. D. Waters, The Law of Trusts in Canada, p. 740.

194. On the history of Saskatchewan trusts legislation, see above.

195. See above

196. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 234.

197. D. Waters, The Law of Trusts in Canada, p. 742-43.

198. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 236.

199. Recommendation 3.1

200. See generally Smith v Robertson (1909), 4 N.B. Eq. 139. Under the well-known rules in Howe v. Dartmouth (1802), 7 Ves. 137, trustees are usually under a duty to convert the residue of a testamentary trust even in the absence of an express power to sell. . See below.

201. D. Waters, The Law of Trusts in Canada, p. 740.

202. Re Barwick (1884), 5 O.R. 710.

203. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 240. See generally, D. Waters, The Law of Trusts in Canada, p. 747 on interpretation of powers of sale..

204. Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35.

205. See Recommendation 3.2(a)(b)(c).

206. See Underhill on Trusts and Trustees (6th ed.), (1904), p. 284.

207. Section 25(4)(5).

208. S. 27.

209. S. 22.

210. Recommendation 3.2(e)

211. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 241.

212. Section 43 places additional restrictions on grants of mineral rights:
 

43.- Subject to the instrument creating the trust, where a trustee leases, grants a profit a prendre in respect of or grants an easement, right or privilege of any kind over or in relation to mines and minerals or sand and gravel forming part of the trust estate there shall be set aside by the trustee from the rents and royalties as capital one fourth part thereof where the person or persons for the time being entitled to the benefit of the trust is or are entitled to work the mines and minerals or sand and gravel for his or their own benefit and in other cases three fourth parts thereof, and the remaining three fourth parts or one fourth part thereof respectively shall be payable to the person or persons for the time being entitled to the benefit of the trust.
 

This section is another example of caution in the face of novelty. We do not believe any convincing case for retention can be made for retaining it..

213. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 242.

214. Recommendation 3.2(d). Note that some of the powers with respect to interests listed in sections 27 and 28 of the Manitoba Act can be exercised only by trustees with a power of sale. Thus the authority to deal with these interests is a statutory extension of the power of sale. Since we recommend that a statutory power of sale be conferred on trustees, this approach is unnecessary in our Recommendation.

215. Howe v. Dartmouth (1802), 7 Ves. 137. See below.

216. D. Waters, The Law of Trusts in Canada, p. 749.

217. Recommendation 3.2(f) . Since we believe that statutory powers should be stated as succinctly as possible, we recommend a less detailed prescription than the Manitoba Act provides. Questions liability should be left to the general law, and it is hardly necessary to expressly provide that postponement of sale does not permit postponement of distribution of trust funds. Note also that Section 33 of the Manitoba Trustees Act includes, in addition to the subsections set out above, express permission to postpone sale of trust property in "unauthorized investments", and protection from liability for trustees who do so. Since the Saskatchewan Trustees Act no longer stipulates a list of "authorized investments", this aspect of the Manitoba provision is unnecessary in our Recommendation.

218. See above

219. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 243.

220. Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35.

221. Recommendation 3.2(g).

222. Re Courtier 34 Ch.D. 136.

223. e.g. B.C. Trustee Act, s. 11.

224. Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35. The part of the Ontario provision omitted above relates to granting of easements and profits a prendre. See above.

225. Recommendation 3.2(h).

226. See The Trustees Act, s.3, discussed above.

227. In re Power, [1947] 1 Ch. 572.

228. English Law Reform Committee Report, The Powers and Duties of Trustees, (1982), p.63.

229. Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35.

230. Recommendation 3.2(i).

231. Unless the will provides otherwise, conversion of personal property in the residue is required by the rule in Howe v. Dartmouth (1802), 7 Ves. 137 . In Ontario at least, the rule has been extended to real property: Re Rutherford [1933] O.R. 707. The rule may now have been ameliorated by liberalization of trustees' investment powers (see above), since property that was not formerly an authorized investment may now be retained as an investment. But even if the rule is excluded, it does not follow that the trustees are required to hold property in specie.

232. See D. Waters, The Law of Trusts in Canada, p. 694 ff.

233. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 248-49. Note, however, that the Ontario Commission appears to have mistakenly interpreted the power to convert trust property as a prohibition on distribution in specie, even when the latter can conveniently be done. Perhaps because it thought it was recommending a more significant change in the law than we believe to be the case, the Ontario Commission also recommended creating a right to apply to court for review of any valuation or appropriation for the purpose of distribution in specie. We are content to leave it to the general law to provide a remedy if a distribution in specie violates the responsibility of the trustees to maintain an even hand between the beneficiaries.

234. Recommendation 3.2(j).

235. Manitoba Trustees Act, s. 39.

236. Re Gamble, [1925] 4 D.L.R. 768 (Ont.)

237. D. Waters, The Law of Trusts in Canada, p. 750.

238. Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35

239. Recommendation 3.2(k).

240. In this, as in other Trustees Act provisions applying to executors and administrators, it is uncertain whether a person named "trustee and executor" is included when acting as trustee rather than as executor. In this case, however, since payment of debts and legacies is the responsibility of the executor, there is little scope for application of the provision to administration of trusts established under a will.

241. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 246.

242. Recommendation 3.2(l).

243. See above. Note that under the "legal list" approach to trustees' investments, investment was permitted in term deposit certificates of trust companies, but not other financial institutions.

244. Underhill on Trusts and Trustees (6th ed.), (1904), p. 254.

245. Luke v. South Kensington Hotel Company, 11 Ch. D. 121.

246. See above

247. The Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35(a)

248. Recommendation 3.2(m).

249. Underhill on Trusts and Trustees (6th ed.), (1904), p. 289.

250. Re Brogden 38 Ch. D. 546.

251. Underhill on Trusts and Trustees (6th ed.), (1904), p. 197.

252. Law Reform Commission of Ontario, Report on the Law of Trusts, p. 244.

253. Law Reform Commission of Ontario, Report on the Law of Trusts, Draft Act, s. 35

254. Recommendation 3.2(n)(o)(p).

255. Underhill on Trusts and Trustees (6th ed.), (1904), p. 287.

256. Recommendation 3.3

257. S.S. 1998, c. A-4.1.

258. Recommendation 3.8.

259. D. Waters, The Law of Trusts in Canada, p. 765.

260. See the Commissions report. The Rule in Saunders v. Vautier and the Variation of Trusts Act, 1994, for discussion of the utility of the discretionary trust.

261. D. Waters, The Law of Trusts in Canada, 769.

262. Recommendations 3.4-3.6.

263. Trustee Act, R.S.A. 1980, c. T-10, ss. 33-37; Trustee Act, R.S. P.E.I., c. T-8, ss. 39-40.

264. See the Commission's report, Ensuring Continuity, 1992.

265. D. Waters, The Law of Trusts in Canada, p. 785.

266. S. 32.

267. R.S.M., c. T160, s. 32.

268. Law Reform Commission of Ontario, Report on the Law of Trusts, p 317-318.

269. The most common type of non-commercial trust in Saskatchewan is a trust created by will to provide for minor children until they reach the age of majority, and thus will last for only a few years. On the other hand, a trust that postpones vesting of property in a beneficiary until a decade or more after the age of majority, or an accumulation trust to benefit grandchildren when they reach the age of majority, may have a very long life.

270. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 86.

271. Non-judicial replacement of trustees under Section 15 is very rare in Saskatchewan. However, it appears that Section 20 is occasionally used to discharge a retiring trustee.

272. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 86.

273. Warburton v. Sandys , 14 Simm. 622

274. E.g. B.C. Trustees Act s. 12; Ont. Trustee Act, s. 3; Manitoba Trustees Act, s. 6.

275. See Recommendation 4.3

276. The devolution rule was changed in part by the Inheritance Act, 1833, but the process was not complete until the Conveyancing and Law of Property Act, 1881.. In Saskatchewan, the reforms were adopted in territorial enactments. See now The Devolution of Estates Act.

277. Underhill on Trusts and Trustees, 6th ed., 1904, p. 306.

278. An addition provision relating to death of a trustee in contained section 39:
 

39.- Upon the death of a bare trustee of corporeal or incorporeal hereditaments of which that trustee was seized in fee simple, the hereditaments shall vest in his legal personal representative.
 

This is a hold-over from pre-1893 trusts legislation. It adds nothing to section 22, and in now unnecessary.

279. Waters, The Law of Trusts in Canada, p 585.

280. Underhill on Trusts and Trustees, 6th ed., 1904, p. 306.

281. s. 39.

282. See Recommendation 4.4

283. Eyre v. Countess of Shaftsbury , 2 P. Wms. 102.

284. Halsbury's Laws of England, 1st ed. (1910), Vol. 14, p. 141.

285. See Recommendation 4.1

286. See Recommendation 4.2

287. s. 27

288. See Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, pp. 87-88.

289. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 86. The Ontario Commission notes that part of the concern has to do with he vesting trust property in the new trustees. This problem will be discussed later in this report. Consultation with members of the Saskatchewan bar confirms that non-judicial appointment is as little used in this province as in Ontario.

290. s. 36.

291. Halsbury's Laws of England, 1st ed. (1910), Vol. 14, p. 141.

292. Halsbury's Laws of England, 1st ed. (1910), Vol. 14, p. 141.

293. See Recommendation 4.1

294. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 107.

295. Underhill on Trusts and Trustees, 6th ed., 1904, p. 317.

296. Underhill on Trusts and Trustees, 6th ed., 1904, p. 318. Part of the uncertainty recorded by Underhill results from the fact that the provision in the Trustee Acts authorizing removal of a trustee by the court expressly identifies "recent bankruptcy" and commission of a felony as grounds for removal. This may be construed as ousting authority to remove a trustee without court approval on these grounds..

297. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 492 (Draft Act, s. 19).

298. See Recommendation 4.5 (1)(a)

299. Re Tallatire, [1885] W.N. 191.

300. Underhill on Trusts and Trustees, 6th ed., 1904, p. 318.

301. See Recommendation 4.5 (1)(a)(iv)

302. Trustee Act RSO 1990, c. T.23, s. 3(1).

303. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 109.

304. See Recommendation 4.5 (4)

305. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, pp. 100-101.

306. See Recommendation 4.5 (3)

307. [1952] 2 All E.R. 694.

308. See Recommendation 4.5 (3)

309. See below

310. Section 8(2)

311. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 112.

312. See Recommendation 4.5 (1).

313. Note that s. 16 appears to apply to any appointment of a new trustee, including presumably appointment by the court, though the powers set out in the section are no doubt within the inherent jurisdiction of the court in any event.

314. See Recommendation 4.5 (1)(d)(e)

315. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 120.

316. See above.

317. Forshaw v. Higginson 91855), 20 Beav. 485.

318. Even a sole trustee has the right to retire by passing accounts and obtaining a discharge. If necessary, the court will assume responsibility for administration of the trust. See section 87 of the Trustees Act.

319. Scott, The Law of Trusts (3rd ed.), 837.

320. See Recommendation 4.5 (2).

321. Letterstedt v. Broers (1884), 9 A.C. 371.

322. Letterstedt v. Broers (1884), 9 A.C. 371; Conroy v. Stokes, [1952] 4 DLR 124 (BCCA).

323. See above. Note, however, that section 14 merely confirms the court's jurisdiction in these cases, while section 15 does not expressly exclude these cases from the scope of the non-judicial authority.

324. Underhill on Trusts and Trustees, 6th ed., 1904, p. 315.

325. See Recommendation 4.6

326. Trustee Act RSM 1987, c. T-160, s. 9(2)

327. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 119.

328. Consiglio Trusts [1973] 3 OR 326.

329. Forster v. Davies 91861), 45 ER 1134.

330. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 118.

331. Recommendation 4.6 (2). The procedural detail now contained in section 34 (2)(3) should be left to the Rules of Court.

332. D. Waters, The Law of Trusts in Canada, p. 94.

333. Underhill on Trusts and Trustees, 6th ed., 1904, p. 369.

334. Halsbury's Laws of England, 1st ed., Vol. 14, p. 141.

335. Section 86 of the Saskatchewan Act provides that when the Public Trustee is appointed administrator of an estate "under the Act of the Imperial Parliament 6 Edward VII, chapter 55", no security shall be required. The Act referred to is the Judicial Trustees Act,1896. The reference to the English Act is a drafting oversight.

336. D. Waters, The Law of Trusts in Canada, p. 95.

337. D. Waters, The Law of Trusts in Canada, p. 94.

338. Note that under section 85, all trustees can be replaced by a single judicial trustee. This not possible under section 14, but would be possible under the Recommendations.

339. See Recommendation 4.6 (3).

340. See Recommendation 4.7

341. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 127.

342. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, Draft Act, s. 27(1).

343. Recommendation 4.8

344. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 130.

345. See below

346. Note, however that section 20 does refer to "discharge" of a retiring trustee. This terminology should be avoided in any reformulation of removal and appointment provisions. However, it is unlikely that 19th Century practitioners would have been misled by use of the term "discharge" section 20. In the 19th C., discharge was more frequently used than today, and was often resorted to by trustees in response to allegations of impropriety. See below.

347. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 114

348. 5 This provision was originally adopted as the Conveyancing and Law of Property Act, 1881, s. 34.

349. Manitoba Trustees Act, s. 14-23.

350. Section 13(1)(b) applies to appointments. Section 13(2)(b) is identical, but applies to retirements.

351. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, Draft Act, s. 28(1).

352. See Recommendation 4.9 (1)

353. Section 13(1)(b) applies to appointments. Section 13(2)(b) is identical, but applies to retirements.

354. See Recommendation 4.9 (2).

355. Re Bowden [1936] Ch. 71. See generally, D. Waters, The Law of Trusts in Canada, p. 121 ff.

356. Section 15(2) of the Saskatchewan Act, adopted from the Trustee Act, 1893 does however impliedly equate "vest" with "convey" when the old practice of actual conveyance of trust property to new trustees is employed. The subsection directs that the property be "conveyed . . . so that it may be legally and effectually vested in the new trustee or trustees".

357. Section 27. This section is discussed below.

358. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p.137.

359. See Recommendation 4.9 (3).

360. Manitoba Trustees Act, s. 13(3).

361. See Recommendation 4.9 (3).

362. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, Draft Act, s. 29(2)(3)(4).

363. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 143.

364. Milroy v. Lord (1862), 45 E.R. 1185.

365. However, in Re Amland (1975), 10 N.B.R.(2nd) 285, the New Brunswick S.C. held in a different context that a share certificate signed in blank by the owner and handed to the donee constituted a completed gift.

366. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 143 reaches a similar conclusion, but without noting the parallel between registration of securities and registration of land under land titles systems.

367. Underhill on Trusts and Trustees, 6th ed., 1904, p. 333.

368. Doe d. Goodbehere v. Bevan (1815), 105 E.R. 644.

369. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 146.

370. Underhill on Trusts and Trustees, 6th ed., 1904, p. 334.

371. See comments of the Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, p. 151. The vesting order provisions in respect to land were adopted in the Trustee Act, 1850.

372. S. 14 ff.

373. s. 82

374. It should be noted that the list in section 30 deals extensively with transfer of corporate securities. Special rules apply to transfer of securities, which the drafters of section 30 thought had to be taken into account. These rules were discussed above. We concluded there that modern corporations legislation requires no special treatment of securities in regard to vesting orders.

375. Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, Draft Act, s.58

376. See Recommendation 4.10

377. See above

378. See Recommendation 4.11. Compare Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, Draft Act, s. 60.

379. See Recommendation 4.13

380. Note that this power in included in the Ontario draft vesting order provision set out above.

381. On the cy-pres doctrine and the function of section 32, see D. Waters, The Law of Trusts in Canada, p. 761.

382. Recommendation 4.14 .Compare Law Reform Commission of Ontario, Report on the Law of Trusts, 1984, Draft Act, s. 78.

383. Recommendation 2.15.