Jun 04, 2013 10:38 PM

The WHAT is a TRUST explained, and almost as important, PARTNERSHIP, COMMUNITY OF INTEREST, and QUASI-CORPORATION (think, QUASI-CRIMINAL)- thread.....

a TRUST - a LEGAL ENTITY created by a GRANTOR for a BENEFICIARY whereby the grantor TRANSFERS property to a TRUSTEE to manage for the BENEFIT of the BENEFICIARY

GRANTOR - a person who makes a grant; one who conveys property to another.

BENEFICIARY - a person who is ENTITLED to the benefits of an agreement entered into between two or more other parties.

Under the basic rules of contracts, where a contract confers a BENEFIT on a THIRD-PARTY, and the parties to the agreement are unwilling to enforce it, the third-party is prohibited from enforcing the agreement. The law of trusts developed to deal with this situation.

a TRUST, is the result of a CONTRACT in which property is TRANSFERRED from one person to another for the BENEFIT of a THIRD-PARTY. The law of trusts allows the person who is to RECEIVE the benefit of a contract, the BENEFICIARY, to enforce the contract against the person who is to ADMINISTER the property for his or her benefit, the TRUSTEE. A trust that is DECLARED in clear and unequivocal terms, usually in writing, is called an EXPRESS TRUST.

EXPRESS TRUST - a trust that arises as a result of an agreement, usually in writing, that is created in EXPRESS terms.

EXAMPLE: Tony wants to create a trust for Scott, in case Tony passes away before Scott turns 18 years of age. In Tony's will, he directs that all of his estate is to be invested for the benefit of Scott until he is 18 years old, and Tony names his sister Cari-Lee as the TRUSTEE. After Tony passes away, the property is transferred to Cari-Lee. However, instead of ADMINISTERING the trust for the benefit of Scott, Cari-Lee spends the money on herself. Scott is NOT a party to the trust agreement - Tony and Cari-Lee are the only parties. However, the law of trusts allows Scott to enforce the agreement because he is the BENEFICIARY of the trust.

TRUSTEE - a person who holds property in trust for, or for the benefit of, another person

In other cases, the parties to a contract may create a benefit for a third-party without expressly calling it a trust or without using language in the contract that would allow the third-party to enforce the contract. In those cases, the third-party MUST argue that a trust was created by inference or implication. The courts will examine the terms of the contract and the acts of the parties to determine whether the true intent of the contract was to create a trust. This can be a difficult argument to make because the courts are reluctant to impose a trust unless there is clear evidence that the parties intended to create one. When the courts find that a trust can be inferred from the contract, it is called a CONSTRUCTIVE TRUST. The beneficiary of a constructive trust may ENFORCE the terms of the trust.

CONSTRUCTIVE TRUST - a trust created by the OPERATION-of-LAW, as distinguished from an express trust.

EXAMPLE: Dean and Tony form a PARTNERSHIP. The partnership agreement states that if Tony should pass away, then Tony's share of the profits of the partnership should be paid to his wife, Cari-Lee. Tony passes away, and Dean refuses to pay the profits to Tony's wife, Cari-Lee. Cari-Lee is not a party to the partnership agreement. The partnership agreement did not set up an EXPRESS trust. Cari-Lee would have to argue that it is a CONSTRUCTIVE trust that had been created in her favour. If successful, Cari-Lee would be able to obtain a share of the profits.

PARTNERSHIP: 1. a contractual relationship, an agreement, between two or among more persons to run a BUSINESS together in order to make a PROFIT ("Doing-Business-As"). Only persons who INTEND to, or by their conduct can be seen to have INTENDED to, can become partners. 2. "...there should be some COMMON profit or gain to be derived from it (why Winston Shrout is always saying when he walks into court- "Wheres my cheque...?") Whether or not the element of division or distribution of the common PROFIT or GAIN among the members is an essential, need NOT BE DISCUSSED; but, there must be...a COMMUNITY OF INTERESTS in the BENEFITS accruing from the joint activity of the partners. If that community of interest is lacking, there is NO partnership..." Ottawa Lumbermen's Credit Bureau v. Swan, 1923. The Dictionary of Canadian Law, 3rd-edition.

QUASI PARTNERSHIP: "...analogy with partnership...is convenient but certainly not legally determinative of the outcome...It expresses the reality of situations where shareholders in a company are not mere investors but are participants in its business and rightfully expect that they will continue to play a part in the management of its affairs." Mason v. Intercity Properties Ltd., 1987. The Dictionary of Canadian Law, 3rd-edition.

COMMUNITY OF INTEREST: 1. participation in a joint venture characterized by shared liability and shared OPPORTUNITY for PROFIT. See JOINT VENTURE. Black's Law, 9th.

JOINT VENTURE: a business undertaking by two or more persons engaged in a single defined project. The necessary elements are: (1) an EXPRESS or IMPLIED agreement; (2) a COMMON purpose that the group INTENDS to carry out; (3) SHARED profits and losses; and (4) each member's EQUAL VOICE in controlling the project. - also termed joint adventure; joint enterprise. "There is some difficulty in determining when the legal relationship of joint venture exists, with authorities disagreeing as to the essential elements...The joint venture is not as much of an entity as it is a PARTNERSHIP." Laws of Corporations, 1983.

JOINT-VENTURE CORPORATION: a corporation that has joined with one or more INDIVIDUALS, or corporations, to accomplish some specified project.

QUASI-CORPORATION: an entity that exercises some of the functions of a corporation but that has not been granted corporate status by statute (City of Toronto?); especially a public corporation with LIMITED authority and powers (such as a county or school district). - also sometimes termed QUASI-MUNICIPAL CORPORATION.