Trusts, Property and Citizenship

Week 8

Find these slides online: https://webslides.baxterlab.ca/slides/property2025-26/08/
Category: Property 2025-26

Agenda

Exam Logistics / Questions
Recap: Estates and Restraints on Alienation
Weekly Problem
Historical Development of the Trust
Roles of the Trustee and Beneficiaries
Dispossession of Japanese Canadians

X devises: “to T and her heirs in trust for A and his heirs”

The Use

Court of Chancery in the reign of King George I. Source: Wikimedia

X devises: “to T and their heirs to the use of A and her heirs”

Works around limitations on making testamentary bequests
Origin of equitable interests in land

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The Use

BASIC IDEA: transfer of title in land to a “TRUSTED FRIEND” as a means to hide the “true owner” from the common law courts

ASK: why would a landowner want to do this?

want someone else to have legal rights to manage your land (e.g. knight off to war)
avoid feudal taxes (applied at time of inheritance) – e.g. “O grants: To F and G and their heirs to the use of O for life, then to the use of O’s oldest daughter and her heirs” = legal title remains in F and G, even though equitable interest passes to O’s heirs
want to “devise” property but can’t make a will

BUT, KEY PROBLEM for equitable estate holder: common law courts would not enforce the “use” (this was the point - not visible to law).

So people went to the Chancellor (courts of equity) to get enforcement:

Courts of Equity emerge as a pragmatic response to RIGIDITY of the common law (e.g. common law writs; “To A in fee simple”)

Theory of chancery’s enforcement based on CONSCIENCE (link to Tulk v Moxhay)

RESULT = “legal estate” is visible to common law courts; “equitable estate” is visible to the courts of equity

Statute of Uses collapses the use

Eventually “use” gets very popular … Henry VIII not pleased (avoiding feudal incidents, i.e. royal taxes)

Statute of Uses (1535): DID NOT abolish uses … ingenious device to divest feoffee to uses of LEGAL estate and vest that estate in the cestui que use (i.e. convert beneficiary’s interest from equitable to legal)

Called “EXECUTING the use”

AVOIDING the Statute of Uses

Active trusts (feoffee has active duties, e.g. collecting rents, etc)
Leasehold (not freehold)
Corporation seised of land

The Modern Trust

Tenures Abolition Act (1660) = does away with most onerous feudal incidents

Crown’s interest in defeating the “use” as a way to avoid these incidents has dissipated
Eventually courts of equity find new ways to avoid the Statute of Uses (“use upon a use”), thereby giving rise to the modern trust

X devises: “to T in trust for A”

How would “X” create a trust to bequeath property to A while they are alive, then give the remained to B?

X devises: “to T in trust for A for life, then in trust for B”

Duthie v Gallagher & Duthie

“I direct my trustees to sell and convert into money such of my real and personal estate as soon after my demise as they may deem expedient and to invest the said sums of money thus arising in the names of my trustees in real estate or real estate securities, and to vary the investments from time to time if any there are of a like nature; it is my wishes that my real estate be not sold unless my trustees consider it necessary.”

Duthie v Gallagher & Duthie

How would you describe the respective rights and/or obligations of the beneficiaries and the trustee in this case?

Why did the court find that the trustee was in breach of trust?

Dispossession and Internment of Japanese Canadians

In September 1939, after Germany attacked Poland, Canadian government invoked the War Measures Act, which gave the federal Cabinet sweeping powers to issue orders deemed necessary or advisable “for the security, peace, order and welfare of Canada”, including specifically “appropriation, control, forfeiture and disposition of property”
US attack on Pearl Harbour Dec 7, 1941; Canada declares war on Japan
Widespread racism, intensified after Pearl Harbour – belief that all Japanese Canadians would aid Japan in the war (“enemy aliens”) – sole BC member of federal cabinet at the time, Ian Mackenzie, advocated relocation to Japan
Series of Executive Orders under WMA over ensuing months in Winter 1942 that enabled the uprooting and dispossession of over 21,000 Japanese Canadians in BC – most (60%) of whom were born in Canada
Orders drew a 100 mile “protected area” in BC and required all persons of Japanese descent to leave this area, overseen by British Columbia Security Commission
Many uprooted Japanese Canadians were interned in settlement camps in the BC interior, while others (men 18-45) were sent to road camps to build the trans-canada highway or to other labour camps working in industry; others fled east to Ontario and elsewhere. Wealthier families could qualify for “self-supporting camps, in which they paid for their own provisions and shelter.
Spring 1943: Secretary of State took custody of the seized property of Japanese Canadians through the office of the Custodian of Enemy Property

Order in Council 1665

12 (1) As a protective measure only, all property situated in any protected area of British Columbia belonging to any person of the Japanese race resident in such area … shall be vested in and subject to the control and management of the Custodian as defined in the Regulations respecting Trading with the Enemy, 1939; provided, however, that no commission shall be charged by the Custodian in respect of such control and management.

Order 1665

was immediately criticized by John Erskine Read, legal advisor for the Department of External Affairs, and former Dean of Dalhousie Law School.
Read wrote the first drafts of the order, which had been silent on the issue of property: he saw this final version as basically taking away the property of Japanese Canadians and handing it over to the Custodian
Notably, Read had drafted the provisions that dealt with the displacement and internment (which he justified on security grounds) – but saw no such rationale here for property
Likely the objection to confiscating property would hamper the broader objective of the “evacuation’ – to “absorb” the Japanese Canadian population into other parts of the country (no intention that they would return to BC)
Presumably in recognition of the trust concept, officials tried to justify sales as benefitting Japanese Canadians

Order in Council 2483, amending P.C. 1665

12 (2) The Custodian may, notwithstanding anything contained in this Regulation, order that all or any property whatsoever, situated in any protected area of British Columbia, belonging to any person of the Japanese race shall, for the purpose of protecting the interests of the owner or any other person, be vested in the Custodian, and the Custodian shall have full power to administer such property for the benefit of all such interested persons, and shall release such property upon being satisfied that the interests aforesaid will not be prejudiced thereby.

12 (3) … [The] property, rights and interests so vested in and subject to the control and management of the Custodian … shall be dealt with in such manner as the Governor in Council may direct.

Order in Council 469

… the Custodian has been vested with the power and responsibility of controlling and managing any property of persons of the Japanese race evacuated from the protected areas, such power and responsibility shall be deemed to include and to have included from the date of the vesting of such property in the Custodian, the power to liquidate, sell, or otherwise dispose of such property.

Iwasaki v R (1968)

“By s. 21(2) [the Custodian] may deal with the interest of the enemy; by s. 23 he may have the property transferred to his name; by s. 38 he may liquidate; by s. 40 he may dispose of the property publicly or privately. Further by s. 49 the property is free from attachment or execution; by s. 50 the Custodian is not liable for any charge; by ss. 42 to 44 he may set up an office and engage a staff, have full control over his funds and may deposit in any bank and may pay office expenses therefrom. Those powers, and particularly the discretionary powers of the Custodian are inconsistent with any trust.”

Earlier Nakashima case: several representative plaintiffs challenged the orders to seize and sell Japanese-Canadian-owned property

Key claim: relies on Orders 1665 and 2483 to assert that the Custodian acquired Japanese-Canadian-owned property “upon Trust requiring him to hold same in Trust for the protection of the Suppliant and under his management and control upon a condition requiring the Custodian to return to the Suppliant the said property… upon expiration of the existing war"
Long delays in getting the case before the Exchequer court in Ottawa; after trial the judge took 3 years to issue a decision – by that time, all of the property in the Custodian’s control had been sold.
Court never answered the question of the trust – ended up resolving it in favour of the gov on a procedural matter (Custodian’s wide discretion meant it couldn’t be characterized as the Crown or its servant)

Iawasaki:

Torazo Iwasaki brings claim against the Custodian for breach of trust in selling his land on Salt Spring Island
Land was listed for sale by the Custodian and sold for $5,250; subsequent Commission established to examine the terms of some sales, which found that fair market value was actually $12,000
Court denies Iwasaki’s claim for recession based on fact that purchaser is not a party to the action
But court can still call the Custodian to “account” as Trustee (similar to damages) – this turns on whether there is a legal trust in existence
Court finds no trust BECAUSE: the “discretionary powers of the Custodian are inconsistent with a trust”
Drawing on findings in Nakashima case: (1) “very wide free discretionary powers in the field of control and management” and (2) Custodian has “the lawful right to liquidate, sell, or otherwise dispose of the property vested in him”

ASK: how does the court here appear to misunderstand the nature of a trust?

Issue isn’t whether Custodian has broad discretion or the specific power to sell the property (this much seems clear from the orders)
Issue is whether the Custodian acted in the interests of the beneficiaries (rather than for some other interests – who might these be?)

Property and Citizenship

What connection does Toyo Takahashi’s letter draw between the ideas of property ownership and good citizenship?

How might this connection be relevant to the argument that the Canada held the property of dispossessed Japanese Canadians in trust?

Seems somewhat remarkable that Takahashi’s letter is not a protest against the taking of property but about the liquidation of that property.

Consider the “Lockean” rationale here: not just labour as the basis for property, but labour as the basis of good citizenship.

As Findlay et al describe, Takahashi’s letter also contains a heavily racialized dimension: the “performance” of property is also the performance of whiteness “synonymous with national belonging” (78)

This signals something of a shift from “property rights” to “property obligations”, i.e. the obligations of property owners to the state as a condition of citizenship (and the reciprocal obligations of the state to protect that property): e.g. rise of urban planning to “discipline property owners” into good land use practices as the basis of good citizenship (Findlay et all 2023, 77)

Property and Citizenship

To what extent do you think property is seen as a basis for “good citizenship” in Canada today? Can you think of any examples?

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