4. Trusts in Quebec

Since the 1994 codification of Quebec civil law came into effect, there has been limited opportunity for the new fiducie to be the subject of interpretative court decisions, either as to its operation within Quebec or vis-à-vis other Canadian or foreign jurisdictions. Its main characteristics are that it can be formed as an express trust for persons or purposes, whether charitable or non-charitable. The courts have confirmed that there are no formalities required to create a trust under Quebec laws, and that a verbal contract is sufficient. Subject to law and public policy, an express trust in Quebec can be created for the benefit of a person, or the furtherance of a commercial, private, or ‘social’ (charitable or non-profit) purpose. The Code distinguishes between ‘personal’, ‘private utility’ and ‘social utility’ trusts. Quebec is the only jurisdiction in Canada that provides for non-charitable ‘purpose’ trusts that are not subject to special restrictions.

Trust property in a fiducie forms part of a distinct autonomous patrimony in which no one has any real rights. The trustee and beneficiary have only personal rights over the property, the former for administration and the latter for enjoyment. The fiducie under the Code is conceptualised as obligations (rights and duties) rather than as property ownership. The duties and powers of the trustee and the rights of beneficiaries as well as third parties are completed by the rules of the administration of property of others.

The Quebec Court of Appeal confirmed that common law in Canada is suppletive when the Code is silent, as long as it is not in conflict with civil law.

The three essential elements for the formation of a trust are (a) appropriation of property for a particular purpose; (b) transfer of property from the patrimony of the settlor to a new patrimony; and (c) acceptance of the transfer by a trustee for the benefit of a person other than the settlor or for the pursuit of the purpose.

The Supreme Court of Canada has held that a trust is not validly constituted under the Code unless the settlor has alienated (divested) to an autonomous and distinct patrimony over which the trustee has exclusive administration. If the settlor retains too much control over the administration of the patrimony and if he can remove some or all of the trust property at will, a trust will not have been created.

Like the fiducie under the former civil code, the Code does not recognise remedial trusts (i.e. resulting and constructive trusts), the codifiers having concluded that Quebec, as a civil law jurisdiction except for the federal association, has no need of them. Trusts are terminated by the expiry of the terms, the fulfilment of the condition, the attainment of the purpose or by the impossibility of attaining it. Trusts are also terminated by the renunciation or lapse of the right of all beneficiaries. The rule in Saunders v Vautier has no application in Quebec.

The Code also provides for testamentary and intestate successions, and the administration (described as ‘liquidation’) of deceased persons’ assets. The Code has introduced new terminology. A testamentary executor is called a liquidator of an estate. The Code is applicable to the administration and termination of all trusts regardless of when created, while the former civil code remains applicable to initial validity of trusts that were settled prior to the coming into force of the Code. Legal advice should be taken with regard not only to trusts and wills governed by the law of Quebec, but all non-Quebec trusts and estates having assets in Quebec. The Code has its own conflict of law rules, as previously mentioned, and should be consulted on all subjects here reviewed under ‘Trusts in Common Law Canada’. Pursuant to Quebec’s conflict of law rules, common law trusts will be recognised in Quebec even though such trusts cannot be created under Quebec law (for example, a declaration of trust).

© 2012 Society of Trust & Estate Practitioners