Waters' Law of Trusts in Canada

I have recently completed reading Waters, Gillen and Smith, Waters’ Law of Trusts in Canada Third Edition (Toronto: Thompson Carswell, 2005).

Professors Waters, Gillen and Smith provide a comprehensive treatment of Canadian trust law. This book is remarkable both for its breadth and depth. Although focused on Canadian law, the book cites the older English authorities, as well as other Commonwealth and American cases. They analyze trust law in its historical context, but they are forward looking, suggesting areas in need of reform.

This book is divided into thirty chapters. It covers how express trusts are created, and how they may arise by operation of law. There is an excellent chapter on charitable trusts. The book deals with such mundane, practical issues as appointing successor trustees, and trustees’ duties to account to beneficiaries. It also deals with fascinating, but more esoteric, issues such as whether The Hague Convention on the Law Applicable to Trusts and on their Recognition allows a resident of a jurisdictions that has implemented the convention to avoid domestic restrictions on trust law by choosing the laws of foreign jurisdictions even if the trust, assets and beneficiaries do not have any other connection to the foreign jurisdictions.

Waters’ Law of Trusts in Canada also has an interesting discussion on the evolution of trustee investment powers in Canada. The authors look at the historical relationship between the types of investments trustees were permitted to make, and the rules requiring trustees to keep an even hand between income and capital beneficiaries. Certain types of investments were once seen as both safe, and as providing a fair return to income beneficiaries, while preserving capital. With changes in the economy, and modern portfolio investment theory, trust law in most Canadian provinces has moved to a more flexible prudent investor standard. But, the types of investments a prudent investor might invest in to maximize the total return to the trust may change the balance between income and capital beneficiaries. The authors suggest investment decisions could be divorced from even hand considerations by creating “unitrusts” or “percentage trusts.” In other words, instead of income, some beneficiaries get a percentage of the trust funds each year.

How influential is Waters’ Law of Trusts in Canada? I searched “Waters” and “law of trusts” on the Canlii website, and got 435 cases. The Canlii website contains relatively recent cases only (it goes back to about 1990 for B.C. cases). The Supreme Court of Canada cited the 3rd edition in its decision in Buschau v. Rogers Communications Inc., 2006 SCC 28, [2006] 1 S.C.R. 973. I found about 15 Supreme Court of Canada cases in which the court cited the 2nd edition, which came out in 1984. I cannot think of any Supreme Court of Canada cases dealing with trust law since 1984 that have not cited either the 2nd or 3rd edition.

Waters’ Law of Trusts in Canada is my starting point for research into trust law issues.