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Can you create a trust with an undelivered letter?

 A case review of Rubner v. Bistricer

In Rubner v. Bistricer, Justice Myers of the Ontario Superior Court of Justice found that a simple letter created from the settlor was sufficient to create a trust.1

But, this is the end of the story – let’s start at the beginning.

As we explained in our first blog about this case, Justice Myers’ decision is instructive concerning a number of issues in Trusts and Estates. We have written three blogs highlighting different aspects of the case that are of interest to readers. This second blog reviews how and why His Honour went about determining whether a 1972 letter created a trust.

Let’s first review the facts of the case that are relevant to this blog to give some context to Justice Myer’s analysis. In the late 1960s, Karl Rubner, Eda’s late husband, purchased a 10% interest in a joint venture to develop land in Oakville. It was called “Lower Fourth”. The Rubner family ownership interest was put in the name of Eda Rubner Realty.

The November 22, 1972 Letter

Eda Rubner (“Eda”) wrote a letter dated November 22, 1972 to a Mr. Jon Wagner2 of Ismor Investments Limited (“Ismor”). Ismor was a manager of the joint venture at the time. In her own handwriting, Eda wrote:

‘I would like to inform you that the one tenth that is in Eda Rubner Realty’s name in the above mentioned venture is being held in trust for her three children, one-third for Brenda Rubner, one-third for Marvin Rubner, one-third for Joseph Rubner.3

Marvin Rubner sold his 1/3 interest to Mattamy Homes, which became the managing partner of the Lower Fourth Joint Venture. As part of the documents produced to the manager over the years, Marvin Rubner forwarded the November 22, 1972 letter to Mattamy Homes.

The July 20, 1981 Family Trust

In paragraphs 53 and 54 of his decision, His Honour addressed the creation of a family trust. He stated:

“By deed dated July 30, 1981 Karl Rubner settled the Bistricer/Rubner Family Trust. The trustees of the trust were Karl Rubner, Marvin Rubner, Eda Rubner, and Simon Rosenfeld. The beneficiaries are Brenda Bistricer, Michelle Bistricer (daughter of Brenda, whose married name is now Michelle Levinson) and the children of Brenda Bistricer. Brenda Bistricer has no other children…. Brenda acknowledges that her parents’ desire for the trust was related to difficulties that resulted from her prior marriage.”

The February 17, 1992 Letter

Almost 11 years later, Eda’s husband wrote a letter dated February 17, 1992 addressed to Mr. Wagner, as follows:

“Dear Mr. Wagner,

Eda Rubner Realty hereby transfers its entire interest in Lower Fourth on its own behalf and beneficial owners to 975273 Ontario Limited.

975273 Ontario Limited hereby agrees that it is holding title to the aforesaid interest and agrees to assume all obligations and is entitled to all benefits of all joint venture agreements related in the place of Eda Rubner Realty.

Please make sure you change your records to reflect the foregoing.”

This letter was accompanied by a declaration signed by Karl Rubner stating that the numbered company holds the Lower Fourth interest in trust for the benefit of:

  1. Bistricer-Rubner Trust 1/3 interest
  2. Marvin Rubner 1/3 interest
  3. Joseph Rubner 1/3 interest

Brenda’s Renunciation or disclaimer of Beneficial Interest

Brenda Rubner’s first marriage ended in divorce. In her second marriage she married a US citizen residing in the United States by the name of Alex Bistricer. After Brenda became a US person4 she became aware that owning a beneficial interest in the Lower Fourth Joint Venture gave rise to potential US tax problems. So Brenda denied owning her one-third interest in Lower Fourth. Instead whatever revenues Eda received from that one-third interest was gifted to Eda. There is much more to the story, but that suffices for the purpose of our blog which is to delve into the creation of the trust.

What was the dispute regarding the creation of the trust?

If Eda absolutely owned the 1/3 family interest in Lower Fourth that was originally intended for Brenda, then upon her demise, according to the terms of Eda’s first will, it falls into the residue. Since Brenda only receives 1/3 of the residue she will only receive a third of what was originally her beneficial interest in the Rubner family’s 10% of the Lower Fourth Joint Venture. The other two thirds will go to her brothers.

The Rubner brothers argued that Eda owns absolutely the remaining 1/3 share originally intended for Brenda. In support of that proposition they relied on the letter dated November 22, 1972 to Mr. Wagner where Eda declared her intention to hold the 10 per cent interest in Lower Fourth in trust for each sibling in equal one-third shares. They argued that when Brenda disclaimed or renunciated her beneficial interest it reverted back to Eda.

On the issue of the trust, the questions differentiating the parties were:

  • whether the 1972 letter establishes Eda Rubner’s certainty of intention to create a trust; and
  • whether the trust was sufficiently constituted.5 Brenda argued that there is no proof that the letter was ever delivered and therefore the certainty of intention cannot be satisfied.6

Why did Brenda Care Whether there was a trust – it made no difference as to the ultimate entitlement of the property

At first glance it did not make sense to argue whether a trust was created. It made no difference as to who was ultimately entitled to this property. As of the date of the hearing all parties agreed that Eda owned what was at one point Brenda’s 1/3 beneficial interest in the Rubner Family’s 10 % interest in the Lower Fourth Joint Venture. Ultimate ownership hinged on determining which testamentary document was valid.

The determination of the validity of the wills was the subject matter of our first blog. So why did Brenda care if there was a judicial determination that Eda transferred Brenda’s equitable interest into a trust? Why did Brenda care if a court found that Eda only came to own Brenda’s equitable interest in the joint venture by way of a later renunciation/ disclaimer by Brenda? The answer – the IRS.

Justice Myers explained:

“After a brief first marriage (that becomes marginally relevant below) Brenda Rubner married sophisticated American businessman Alex Bistricer and moved to New York. For US tax reasons, it seems to be important to Brenda and Alex Bistricer that Brenda Bistricer is not seen to own or control assets in Canada. It has been to her advantage to keep assets and funds in the name of her family trust or in her mother’s name until such time as she needs to use the funds7….. Brenda Bistricer’s US tax problems were affected by issues involving the ownership of her one-third share of the family’s interest in Lower Fourth. The tax problems have been of sufficient importance to her that she has taken positions in relation to her Lower Fourth interest and the income derived on that interest that drive the outcome of these proceedings.8…Since Brenda Bistricer realized the scope of her US tax problem and obtained advice, she has denied that she owns the one-third of the family’s interest in Lower Fourth that had been earmarked for her by her parents. As a result, it is agreed by all members of the Rubner family that Eda Rubner now owns that joint venture interest both legally and beneficially.9

 Why the 1972 Letter Created a Trust

Justice Myers dealt with this issue in paragraphs 109-125 of his judgement. That analysis provides both to lawyers and students who deal with trusts an excellent summary of the law. His Honour explained that for a trust to have been created there must be evidence of the three certainties:

  1. certainty of intention to create a trust;
  2. certainty of subject matter (the property held on trust); and
  3. certainty of objects (the beneficiaries of the trust).

In addition, to be actually constituted the brothers had to show that the trust property (the Rubner Family 10% interest in Lower Fourth) was transferred by Eda (as the settlor) to Eda in her role as trustee10 and that the wording of the 1972 letter had to be sufficiently clear to show that the settlor (Eda) intended to create a trust.11

Brenda Argued undelivered draft letters, by definition, demonstrates a lack of certainty of intention – no certainty means no trust.

There was no evidence presented to prove that the 1972 letter was ever delivered to Mr. Jon Wagner. Brenda argued that the certainty of intention necessary to create a trust therefore could not be satisfied where the 1972 letter declaring the trust was never delivered to its intended recipient. She argued that the 1972 letter should be treated like a draft email that was never sent. Brenda suggested that “certainty of intention is not satisfied where the trust document allows the would-be settlor or the beneficiary to make unilateral changes to the trust without notice to the other party.”

Justice Myers rejected this argument. He found both the wording of the letter along with what later transpired led to the inescapable conclusion – and hence the certainty- that Eda intended to hold 1/3 in the family’s 10 per cent joint venture investment in trust for Brenda.

Brenda Argued that the Trust was not properly constituted.

Brenda’s argued that the trust was not properly constituted based on Milroy v.

Lord12 which provided that in order for the trust to be properly constituted the settlor (Eda) must have done everything to transfer the property and render the settlement binding upon her.

Justice Myers reviewed the case law and found authority that supported the proposition that when the settlor names herself as the trustee she may satisfy this criterion with a simple declaration. That, according to Justice Myers, is exactly what Eda did in the 1972 Letter. Accordingly, Justice Myers rejected this argument as well. The trust was properly constituted.

Brenda Argued subsequent events corroborate that the trust asset always belonged to Eda

Brenda argued that “…Eda and Karl Rubner’s subsequent conduct, including not delivering the original letter, drafting the 1992 partnership papers, the incorporation of the numbered company, and Eda Rubner declaring the distribution proceeds as her own income for tax purposes from 2014 onwards, all demonstrate that Eda Rubner never intended to divest herself of beneficial ownership.”

Justice Myers felt that Eda Rubner did treat the trust as binding. He rejected Brenda’s “subsequent behaviour corroboration argument” for a number of reasons, namely:

  1. the 1992 memorandum refers to transfers “on its own behalf and beneficial owners.” The document recognized expressly the separation of legal and beneficial title;
  2. All other documents authored by Karl and Eda Rubner show that they always treated the interests as being held in trust;
  3. The evidence shows that the 1972 letter was sent to Mattamy Homes in 2003 while Karl Rubner was still alive and Eda Rubner had full capacity. In other words, there is nothing to any of the impugned actions that show that Karl or
  4. Eda Rubner acted in a manner inconsistent with the interest being held in trust. Rather, the entire line of evidence shows that as settlor Eda Rubner intended to hold the joint venture interests in trust.

Conclusion

In paragraph 10 of his decision, Justice Myers stated that “…Since Brenda Bistricer realized the scope of her US tax problem and obtained advice, she has denied that she owns the one-third of the family’s interest in Lower Fourth that had been earmarked for her by her parents.” It appears as if tax planning was the driving motivation for Brenda’s attempt to dispute the existence of the trust. Whatever the reason this case is useful in determining what establishes “certainty of intention” and the “constituting of a trust”.

Justice Myers found that the 1972 declaration of trust created valid trust interests under which Eda Rubner held as trustee undivided interests in one-third of the family’s 10 per cent interest in Lower Fourth Joint Venture for each of the three children. His Honour decided that an arguable non-delivery of a letter did not undermine the certainty of intention to create a trust when all the evidence that followed demonstrated that Karl and Eda Rubner intended for the family’s interest in the joint venture be held in trust for their children in equal shares. He also found that when Eda, as settlor, simply declared that the property interest was transferred that was enough.

Footnotes
  1.   See paragraph 125 Rubner.
     
  2.   As an interesting tangent and point of trivia, the party to whom the letter was sent was “Morris Wagner” not “Jon Wagner”.
     
  3.   See paragraph 51 of Rubner. Brenda, Marvin and Joseph were Eda and Karl Rubner’s three children.
     
  4.   See https://www.irs.gov/individuals/international-taxpayers/classification-of-taxpayers-for-us-tax-purposes According to the IRS, “U.S. law treats U.S. persons and foreign persons differently for tax purposes. Therefore, it is important to be able to distinguish between these two types of taxpayers.

    United States Persons

    The term ”United States person” means:

    • A citizen or resident of the United States
    • A domestic partnership
    • A domestic corporation
    • Any estate other than a foreign estate
    • Any trust if:
      • A court within the United States is able to exercise primary supervision over the administration of the trust, and
      • One or more United States persons have the authority to control all substantial decisions of the trust
    • Any other person that is not a foreign person.


     

  5.   See paragraph 111 Rubner.
     
  6.   See paragraph 113 Rubner.
     
  7.   Paragraph 7 Rubner;
     
  8.   Paragraph 9 Rubner;
     
  9.   See paragraph 10 Rubner;
     
  10.   See paragraph 110 Rubner
     
  11.   See paragraph 111 Rubner
     
  12.   Milroy v. Lord (1862), 45 E.R. 1185 (Eng. Ch. Div.)
     

Charles Wagner

The author of this blog is Charles B. Wagner. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.

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