Trust Matters: Requirements for intention to create a trust without a written agreement
February 22nd, 2022
The Ontario Court of Appeal recently confirmed the requirements for “certainty of intention” to create a trust in the absence of formal trust documentation. An objective standard must be applied to determine the intention from the acts of all the parties.
In Corvello v. Colucci, the parties disputed the ownership of a land use permit for a recreational property in Kenora, Ontario. The permit, originally obtained from the provincial government in 1974, was in the name of Arthur Colucci only. At the time, the permit could not be issued in more than one name. The permit allowed holders to build on and use the property for recreational purposes. The permit did not confer ownership rights or interest in the land.
The Facts and Trial Decision
Arthur, his brother Gino Colucci, and brother-in-law Tony Corvello (the “parties”) and their families used the property for years. Gino and Tony never asked Arthur for permission to use the property. The parties contributed to the property, shared costs, and agreed on improvements to the property. The government subsequently changed the name requirements for the permit and the parties agreed to put the permit in their three names. The parties referred to themselves as owners of the property and were named insureds on the property insurance. In 2016 Arthur took the position that the permit belonged to him. He locked Gino, Tony, and their families out of the property. Litigation ensued. Gino and Tony successfully obtained a declaration that Arthur held the permit in trust for himself, Gino, and Tony as beneficial owners.
The Appeal and Requirements for Certainty of Intention
Arthur appealed. Arthur argued that there was no certainty of intention to create a trust. Given there was no written trust agreement and the permit was in Arthur’s name alone, he argued that the trial judge should have considered and accepted his evidence that he never intended to create a trust and he owned the permit.
The requirements for the creation of a valid trust, known as the three certainties, include:
- Certainty of intention to create a trust;
- Certainty of subject matter; and
- Certainty of objects.
The Court of Appeal confirmed that to establish certainty of intention without a written trust agreement the court must look at the surrounding circumstances and evidence of what the parties intended, what was agreed upon, and how the parties conducted themselves. The focus of the inquiry is not limited to the subjective intentions of the settlor. Instead, an objective standard must be applied to establish certainty of intention from the acts of all the parties. The court is entitled to look at the evidence as a whole to infer the intention of the parties. In this case, the trial judge considered the evidence of each of the parties. She accepted the evidence of Gino and Tony and reached the conclusion that the parties intended from the start to be partners or co-owners of the permit. The evidence and trial judge’s findings supported the creation of a valid trust.