1. Introduction
The nature of a trust beneficiary’s interest has been much discussed for many years. The argument raises the question whether a beneficiary has a proprietary interest in the trust property or whether the beneficiary has only a personal right to require the trustee to use its rights in rem in accordance with the terms of the trust. A brief summary of the arguments is appropriate.[1]
There are in fact two views of the beneficiary’s right. Professor Maitland summarized them as follows:[2]
- cestui que trust has rights enforceable against any person who has undertaken the trust, against all who claim through or under him as volunteers (heirs, devisees, personal representatives, donees), against his creditors, and against those who acquire the thing with notice (actual or constructive) of the trust.
- Or (2) cestui que trust has rights enforceable against everyone, except a bona fide purchaser who for value has obtained a legal right in the thing, without notice (actual or constructive) of the trust.
The first approach takes the view that the beneficiary does not have a direct ownership of the trust property. He only has a right against the trustee, who holds title to the property, to manage it for his benefit. But the beneficiary can also assert that right against anyone else who acquires the trust property from the trustee, unless the transferee is a bona fide purchaser of the legal interest, who gives value and has no notice of the trust. Maitland favoured this approach.
Professor Austin drew a distinction between rights in rem and rights in personam The former are proprietary rights which can be asserted against anyone, but the latter are merely personal rights. Austin claimed that a beneficiary has both rights.[3]
So which is to be preferred? It seems that most practitioners favour the second approach, whereas many academics insist that the first approach is the correct one. Their view is based on the fact that equity acts only and always in personam.
When we look at what beneficiaries can and cannot do, it is clear that beneficiaries cannot lay claim to trust property directly but must turn to the trustees to demand that they administer the trust in accordance with its terms. Similarly, beneficiaries do not have the right to make claims against third parties for injury to the trust property. Only the trustees can sue the third parties. Nor can beneficiaries normally direct the trustees what to do. Similarly, while a beneficiary can give away or sell her interest under a trust to another person, she does not thereby transfer the title, which the trustee retains. Indeed, it is incorrect to say that she transfers her interest; rather, she assigns her personal right.
It cannot be denied that the beneficiary does seem to enjoy proprietary rights. Thus, for example, if the trustee sells trust property in breach of trust and the purchaser knows of the breach, the beneficiaries can recover the property. And the same is true if the trustee gives away trust property. However, it can be argued that the beneficiary is still only seeking to have the trust performed. Similarly, while it is often thought that when beneficiaries terminate a trust under the rule in Saunders v Vautier[4] they are exercising a property right, but arguably they are exercising their right against the trustee to convey the property to them. Similar arguments can be made in respect of proceeds of trust property that the trustee has misappropriated.
The recent case, Hipkins v McDonald,[5] was concerned mostly with the right of co-owners to partition or sale of property held in common but the issue of the nature of a trust beneficiary also arose because the interest of some co-owners was held in trust. So the case is interesting for a number of reasons. Full disclosure: the court quoted and relied on views expressed in Oosterhoff on Trusts about the nature of a trust beneficiary’s interest.
2. Facts
A mother, Donna McDonald, (the ‘Testator’) was a lessee of cottage property (the ‘Property’) located in a provincial park. She died in 2018 and was survived by her three children, Carla Hipkins, Brian McDonald, and Roxane Serhan. The Testator’s Will named the three children her executors and trustees and directed them to pay her debts. Next, she directed her trustees to divide the residue of her estate equally among her three children. But she went on to say, ‘IT IS MY WISH AND DESIRE that the cabin that I own be transferred to my children who survive me as joint tenants with right of survivorship’. It was understood and agreed that the ‘cabin’ was the Property.
Ms Serhan died in 2019 before the Estate was fully administered. Under her will, her children (the ‘Serhan Grandchildren’) inherited the residue of their mother’s estate, which included her interest in the Property. Because of this fact and also because the Provincial Government allowed the names of only two people on the land lease, Ms Hipkins, Mr McDonald, and the Serhan Grandchildren, with the assistance of legal counsel, entered into a written agreement (the ‘Contract’) in 2019 to deal with the ownership of the property. Ms Hipkins received independent legal advice before she signed the Contract. The Contract provided that title would be held as tenants in common with Ms Hipkins holding one-third share and Mr McDonald holding a two-thirds share, which he would hold in trust as to a one-third share for the Serhan Grandchildren. In fact, the three children had agreed to the terms of their shared ownership before Ms Serhan died, and Ms Hipkins and Mr McDonald agreed that the Serhan Grandchildren were substituted for their mother.
Ms Hipkins and Mr McDonald then entered into the lease of the Property with the Government in accordance with the terms of the Contract,
However, the parties’ shared ownership did not work out and factions developed, with Ms Hipkins on one side and Mr McDonald with the Sirhan Grandchildren on the other. The disagreement was mostly about the use that each branch of the family would be able to have of the Property.
Mr McDonald and the Serhan Grandchildren brought an action or an order entitling them to purchase Ms Hipkins’ one-third interest in the Property for fair market value. Ms Hipkins counterclaimed for a similar order to purchase Mr McDonald’s one-half interest (she was of opinion that the Serhan Grandchildren had no interest in the Property).
After the close of pleadings, both parties brought applications for summary judgment. The Parties agreed that their shared ownership could not continue, that the property should stay in the family and not be sold to a stranger, and that its value was $430,000.
The Chambers Judge held first that the testator’s ‘wish and desire’ regarding a joint tenancy for the Property did not impose an obligation on the executors to transfer it in that way because it was not a mandatory direction but was couched in predatory language. She also dismissed Ms Hipkins’s argument that the parties entered into the Contract under the common mistake that the Serhan Grandchildren had an interest in the Property. She went on to hold (1) that a joint tenancy could not be created in the circumstances because the four unities were not present; (2) that if there was a common mistake, Ms Hipkins shared in it and could therefore not rely on the mistake to avoid the Contract; and (3) the doctrine of estoppel by convention applied to prevent Ms Hipkins from resiling from the Contract, since Mr McDonald and the Serhan Grandchildren relied on to their detriment. Finally, the Chambers Judge concluded that a sale was appropriate and held that Mr McDonald should be allowed to purchase Ms Hipkins’ one-third interest. Hence, she made an order allowing Mr McDonald to pay one-third of the agreed value of the Property to Ms Hipkins. Ms Hipkins appealed the decision.
3. Analysis and Judgment
Chief Justice Robert W Leurer wrote the reasons for the Court of Appeal. The court agreed with the Chambers Judge’s reasons and dismissed the appeal.
The court held that the Chambers Judge did not err when she held that on a proper interpretation of the Will, the executors were not required to transfer the Property to the Testator’s three children. The Court referred to modern cases which hold that wills (just like contracts) must be interpreted in the context of their factual matrix, that is, in the context of the surrounding circumstances when the will is made. The interpretation thus involves a question of mixed fact and law. And therefore the modern standard of review of a judge’s interpretation of a will is palpable and overriding error.[6] The court reviewed the Chambers Judge’s reasons and held that she had not erred in her interpretation of the will. This meant also that the Contract was enforceable.
The court held further that the Chambers Judge did not err in holding that Mr McDonald was entitled to purchase Ms Hipkins interest in the Property. She applied the Imperial statutes on partition that were received in the Northwest Territories and Saskatchewan and remain the law in the Province. The statutes empower a court to partition or sell land held by co-tenants. The Chambers Judge concluded that a majority vote for making a decision is a reasonable manner of proceeding and found that Mr McDonald and the Serhan Grandchildren had not acted with malice or intimidation. She concluded that partitioning the property was unworkable and that a sale to Mr McDonald was appropriate since he holds the majority interest in the Property, undertook to purchase Ms Hipkins’ interest, paid more than his proportionate share of expenses, and was the first to seek relief. Accordingly, she held that there was no good reason to refuse his application for an order for sale to him.
The Court of Appeal held that since the Chambers Judge’s decision was discretionary, the standard of review is palpable and overriding error in the assessment of the facts.[7] The court found no basis for interfering with the decision of the Chambers Judge.
However, it addressed Ms Hipkins’ argument that the Chambers Judge erred in basing her decision on anything other than Mr McDonald’s interest was equivalent to her own, that is, a one-third interest, in some detail. She relied on a British Columbia case, Pallott v Douglas.[8] Ms Douglas held a lease to recreational property. She entered into a trust agreement for sharing use of the property with her brother, Mr Pallott. When the parties had a falling out, Mr Pallott brought an application for an order for partition or sale. The court denied the application, holding that under the British Columbia Partition of Property Act[9] only persons who have an immediate right to possession have standing to apply for partition or sale. Mr Pallott, as a beneficiary under a trust did not, since his interest was personal in nature only or, as the court in that case put it, Mr Pallott’s ‘entitlement to use the trust property is not immediate, but is rather subject to the limitations imposed by the Trust, namely, an allocation of time by Ms Douglas as trustee’.[10]
The Saskatchewan Court of Appeal considered the argument on this point in Pallott. That case referred to Oosterhoff on Trusts, accepted its position that a trust beneficiary has only a personal right against the trustee to have the terms of the trust carried out, and therefore concluded that the trust beneficiary lacked standing to seek partition or sale. While the Saskatchewan Court of Appeal appears to accept this premise and discussed it, the court distinguished the BC case. Chief Justice Leurer stated in paragraph 88:
Ultimately, I see no need to decide if the Serhan Grandchildren could, in their own name, seek an order for partition and sale. Pallot may be authority for the proposition that trust beneficiaries, such as the Serhan Grandchildren, may lack standing in their own right to seek to enforce rights that may only be maintained by the legal owner. However, I read nothing in that decision that would lead to the conclusion that a trustee – such as Mr McDonald – who holds the legal interest cannot seek partition and sale on behalf of the person or persons who hold a beneficial interest – such as the Serhan Grandchildren. (emphasis supplied)
Consequently, the Chief Justice agreed that the Serhan Grandchildren might have lacked standing to seek partition or sale, but said in paragraph 90:
However, I do not accept that their interest in the Property should have been ignored be the judge [as claimed by Ms Hipkins] when she considered who should ultimately be entitled to purchase it, given that the Serhan Grandchildren supported Mr McDonald in his request to acquire Ms Hipkins’ share of the Property. In these circumstances the facts were exactly as the judge found them to be, namely, that the competition in this case was between a party who held a one-third interest in the Property, on the one hand, and a party who held a two-thirds interest in the Property (with one-third being held in trust), on the other hand.
The court then addressed the Chambers Judge’s consideration of Ms Hipkins’ historical use of the Property and her sentimental attachment to it. It found that the Chambers Judge took the view that these factors ‘did not weigh in her favour against the claims of Mr McDonald and the Serhan Grandchildren’. The court held that this assessment of the facts by the Chambers Judge was within the permissible scope of her discretion. The court went on to hold that the Chambers Judge did not commit a reversable error in considering the fact that Mr McDonald had offered to pay Ms Hipkins for her share, that Mr McDonald had paid more than his proportionate share of the expenses, and other factors. Finally, the court concluded that the Chambers Judge’s decision to prefer Mr McDonald as purchaser was appropriate, since, all things being equal, ‘the law should favour a result that least disrupts the current ownership of the Property itself and respects the wishes of the majority over those of the minority interest holder’ (paragraph 114).
—
[1] For greater detail, see Oosterhoff on Trusts, 10th ed by Albert H Oosterhoff, Robert Chambers, and Mitchell McInnes (Toronto: Thomson Reuters, 2024), §1.13.
[2] FW Maitland, Equity: A Course of Lectures, rev ed by John Brunyate (Cambridge: Cambridge University Press, 1936), p 115.
[3] John Austin, Lectures on Jurisprudence, 4th ed by Robert Campbell (London: John Murray, 1873(, vol 1, at 388.
[4] (1841) 4 Beav 115, 49 ER 282 (Rolls Ct), affirmed (1841), 1 Cr & Ph 240, 41 ER 482 (Ch Div).
[5] 2025 SKCA 34.
[6] Citing Zindler v The Salvation Army, 2015 MBCA 33; Hicklin Estate v Hicklin, 2019 ABCA 136; Ross v Canada Trust Company, 2021 ONCA 161.
[7] Citing Kot v Kot, 2021 SKCA 4.
[8] 2007 BCCA 254.
[9] RSBC 1996, c 347.
[10] Pallott v Douglas, supra, para 35.
Menu
Written by: Albert Oosterhoff
Posted on: July 2, 2025
Categories: Commentary, WEL Newsletter
1. Introduction
The nature of a trust beneficiary’s interest has been much discussed for many years. The argument raises the question whether a beneficiary has a proprietary interest in the trust property or whether the beneficiary has only a personal right to require the trustee to use its rights in rem in accordance with the terms of the trust. A brief summary of the arguments is appropriate.[1]
There are in fact two views of the beneficiary’s right. Professor Maitland summarized them as follows:[2]
The first approach takes the view that the beneficiary does not have a direct ownership of the trust property. He only has a right against the trustee, who holds title to the property, to manage it for his benefit. But the beneficiary can also assert that right against anyone else who acquires the trust property from the trustee, unless the transferee is a bona fide purchaser of the legal interest, who gives value and has no notice of the trust. Maitland favoured this approach.
Professor Austin drew a distinction between rights in rem and rights in personam The former are proprietary rights which can be asserted against anyone, but the latter are merely personal rights. Austin claimed that a beneficiary has both rights.[3]
So which is to be preferred? It seems that most practitioners favour the second approach, whereas many academics insist that the first approach is the correct one. Their view is based on the fact that equity acts only and always in personam.
When we look at what beneficiaries can and cannot do, it is clear that beneficiaries cannot lay claim to trust property directly but must turn to the trustees to demand that they administer the trust in accordance with its terms. Similarly, beneficiaries do not have the right to make claims against third parties for injury to the trust property. Only the trustees can sue the third parties. Nor can beneficiaries normally direct the trustees what to do. Similarly, while a beneficiary can give away or sell her interest under a trust to another person, she does not thereby transfer the title, which the trustee retains. Indeed, it is incorrect to say that she transfers her interest; rather, she assigns her personal right.
It cannot be denied that the beneficiary does seem to enjoy proprietary rights. Thus, for example, if the trustee sells trust property in breach of trust and the purchaser knows of the breach, the beneficiaries can recover the property. And the same is true if the trustee gives away trust property. However, it can be argued that the beneficiary is still only seeking to have the trust performed. Similarly, while it is often thought that when beneficiaries terminate a trust under the rule in Saunders v Vautier[4] they are exercising a property right, but arguably they are exercising their right against the trustee to convey the property to them. Similar arguments can be made in respect of proceeds of trust property that the trustee has misappropriated.
The recent case, Hipkins v McDonald,[5] was concerned mostly with the right of co-owners to partition or sale of property held in common but the issue of the nature of a trust beneficiary also arose because the interest of some co-owners was held in trust. So the case is interesting for a number of reasons. Full disclosure: the court quoted and relied on views expressed in Oosterhoff on Trusts about the nature of a trust beneficiary’s interest.
2. Facts
A mother, Donna McDonald, (the ‘Testator’) was a lessee of cottage property (the ‘Property’) located in a provincial park. She died in 2018 and was survived by her three children, Carla Hipkins, Brian McDonald, and Roxane Serhan. The Testator’s Will named the three children her executors and trustees and directed them to pay her debts. Next, she directed her trustees to divide the residue of her estate equally among her three children. But she went on to say, ‘IT IS MY WISH AND DESIRE that the cabin that I own be transferred to my children who survive me as joint tenants with right of survivorship’. It was understood and agreed that the ‘cabin’ was the Property.
Ms Serhan died in 2019 before the Estate was fully administered. Under her will, her children (the ‘Serhan Grandchildren’) inherited the residue of their mother’s estate, which included her interest in the Property. Because of this fact and also because the Provincial Government allowed the names of only two people on the land lease, Ms Hipkins, Mr McDonald, and the Serhan Grandchildren, with the assistance of legal counsel, entered into a written agreement (the ‘Contract’) in 2019 to deal with the ownership of the property. Ms Hipkins received independent legal advice before she signed the Contract. The Contract provided that title would be held as tenants in common with Ms Hipkins holding one-third share and Mr McDonald holding a two-thirds share, which he would hold in trust as to a one-third share for the Serhan Grandchildren. In fact, the three children had agreed to the terms of their shared ownership before Ms Serhan died, and Ms Hipkins and Mr McDonald agreed that the Serhan Grandchildren were substituted for their mother.
Ms Hipkins and Mr McDonald then entered into the lease of the Property with the Government in accordance with the terms of the Contract,
However, the parties’ shared ownership did not work out and factions developed, with Ms Hipkins on one side and Mr McDonald with the Sirhan Grandchildren on the other. The disagreement was mostly about the use that each branch of the family would be able to have of the Property.
Mr McDonald and the Serhan Grandchildren brought an action or an order entitling them to purchase Ms Hipkins’ one-third interest in the Property for fair market value. Ms Hipkins counterclaimed for a similar order to purchase Mr McDonald’s one-half interest (she was of opinion that the Serhan Grandchildren had no interest in the Property).
After the close of pleadings, both parties brought applications for summary judgment. The Parties agreed that their shared ownership could not continue, that the property should stay in the family and not be sold to a stranger, and that its value was $430,000.
The Chambers Judge held first that the testator’s ‘wish and desire’ regarding a joint tenancy for the Property did not impose an obligation on the executors to transfer it in that way because it was not a mandatory direction but was couched in predatory language. She also dismissed Ms Hipkins’s argument that the parties entered into the Contract under the common mistake that the Serhan Grandchildren had an interest in the Property. She went on to hold (1) that a joint tenancy could not be created in the circumstances because the four unities were not present; (2) that if there was a common mistake, Ms Hipkins shared in it and could therefore not rely on the mistake to avoid the Contract; and (3) the doctrine of estoppel by convention applied to prevent Ms Hipkins from resiling from the Contract, since Mr McDonald and the Serhan Grandchildren relied on to their detriment. Finally, the Chambers Judge concluded that a sale was appropriate and held that Mr McDonald should be allowed to purchase Ms Hipkins’ one-third interest. Hence, she made an order allowing Mr McDonald to pay one-third of the agreed value of the Property to Ms Hipkins. Ms Hipkins appealed the decision.
3. Analysis and Judgment
Chief Justice Robert W Leurer wrote the reasons for the Court of Appeal. The court agreed with the Chambers Judge’s reasons and dismissed the appeal.
The court held that the Chambers Judge did not err when she held that on a proper interpretation of the Will, the executors were not required to transfer the Property to the Testator’s three children. The Court referred to modern cases which hold that wills (just like contracts) must be interpreted in the context of their factual matrix, that is, in the context of the surrounding circumstances when the will is made. The interpretation thus involves a question of mixed fact and law. And therefore the modern standard of review of a judge’s interpretation of a will is palpable and overriding error.[6] The court reviewed the Chambers Judge’s reasons and held that she had not erred in her interpretation of the will. This meant also that the Contract was enforceable.
The court held further that the Chambers Judge did not err in holding that Mr McDonald was entitled to purchase Ms Hipkins interest in the Property. She applied the Imperial statutes on partition that were received in the Northwest Territories and Saskatchewan and remain the law in the Province. The statutes empower a court to partition or sell land held by co-tenants. The Chambers Judge concluded that a majority vote for making a decision is a reasonable manner of proceeding and found that Mr McDonald and the Serhan Grandchildren had not acted with malice or intimidation. She concluded that partitioning the property was unworkable and that a sale to Mr McDonald was appropriate since he holds the majority interest in the Property, undertook to purchase Ms Hipkins’ interest, paid more than his proportionate share of expenses, and was the first to seek relief. Accordingly, she held that there was no good reason to refuse his application for an order for sale to him.
The Court of Appeal held that since the Chambers Judge’s decision was discretionary, the standard of review is palpable and overriding error in the assessment of the facts.[7] The court found no basis for interfering with the decision of the Chambers Judge.
However, it addressed Ms Hipkins’ argument that the Chambers Judge erred in basing her decision on anything other than Mr McDonald’s interest was equivalent to her own, that is, a one-third interest, in some detail. She relied on a British Columbia case, Pallott v Douglas.[8] Ms Douglas held a lease to recreational property. She entered into a trust agreement for sharing use of the property with her brother, Mr Pallott. When the parties had a falling out, Mr Pallott brought an application for an order for partition or sale. The court denied the application, holding that under the British Columbia Partition of Property Act[9] only persons who have an immediate right to possession have standing to apply for partition or sale. Mr Pallott, as a beneficiary under a trust did not, since his interest was personal in nature only or, as the court in that case put it, Mr Pallott’s ‘entitlement to use the trust property is not immediate, but is rather subject to the limitations imposed by the Trust, namely, an allocation of time by Ms Douglas as trustee’.[10]
The Saskatchewan Court of Appeal considered the argument on this point in Pallott. That case referred to Oosterhoff on Trusts, accepted its position that a trust beneficiary has only a personal right against the trustee to have the terms of the trust carried out, and therefore concluded that the trust beneficiary lacked standing to seek partition or sale. While the Saskatchewan Court of Appeal appears to accept this premise and discussed it, the court distinguished the BC case. Chief Justice Leurer stated in paragraph 88:
Ultimately, I see no need to decide if the Serhan Grandchildren could, in their own name, seek an order for partition and sale. Pallot may be authority for the proposition that trust beneficiaries, such as the Serhan Grandchildren, may lack standing in their own right to seek to enforce rights that may only be maintained by the legal owner. However, I read nothing in that decision that would lead to the conclusion that a trustee – such as Mr McDonald – who holds the legal interest cannot seek partition and sale on behalf of the person or persons who hold a beneficial interest – such as the Serhan Grandchildren. (emphasis supplied)
Consequently, the Chief Justice agreed that the Serhan Grandchildren might have lacked standing to seek partition or sale, but said in paragraph 90:
However, I do not accept that their interest in the Property should have been ignored be the judge [as claimed by Ms Hipkins] when she considered who should ultimately be entitled to purchase it, given that the Serhan Grandchildren supported Mr McDonald in his request to acquire Ms Hipkins’ share of the Property. In these circumstances the facts were exactly as the judge found them to be, namely, that the competition in this case was between a party who held a one-third interest in the Property, on the one hand, and a party who held a two-thirds interest in the Property (with one-third being held in trust), on the other hand.
The court then addressed the Chambers Judge’s consideration of Ms Hipkins’ historical use of the Property and her sentimental attachment to it. It found that the Chambers Judge took the view that these factors ‘did not weigh in her favour against the claims of Mr McDonald and the Serhan Grandchildren’. The court held that this assessment of the facts by the Chambers Judge was within the permissible scope of her discretion. The court went on to hold that the Chambers Judge did not commit a reversable error in considering the fact that Mr McDonald had offered to pay Ms Hipkins for her share, that Mr McDonald had paid more than his proportionate share of the expenses, and other factors. Finally, the court concluded that the Chambers Judge’s decision to prefer Mr McDonald as purchaser was appropriate, since, all things being equal, ‘the law should favour a result that least disrupts the current ownership of the Property itself and respects the wishes of the majority over those of the minority interest holder’ (paragraph 114).
—
[1] For greater detail, see Oosterhoff on Trusts, 10th ed by Albert H Oosterhoff, Robert Chambers, and Mitchell McInnes (Toronto: Thomson Reuters, 2024), §1.13.
[2] FW Maitland, Equity: A Course of Lectures, rev ed by John Brunyate (Cambridge: Cambridge University Press, 1936), p 115.
[3] John Austin, Lectures on Jurisprudence, 4th ed by Robert Campbell (London: John Murray, 1873(, vol 1, at 388.
[4] (1841) 4 Beav 115, 49 ER 282 (Rolls Ct), affirmed (1841), 1 Cr & Ph 240, 41 ER 482 (Ch Div).
[5] 2025 SKCA 34.
[6] Citing Zindler v The Salvation Army, 2015 MBCA 33; Hicklin Estate v Hicklin, 2019 ABCA 136; Ross v Canada Trust Company, 2021 ONCA 161.
[7] Citing Kot v Kot, 2021 SKCA 4.
[8] 2007 BCCA 254.
[9] RSBC 1996, c 347.
[10] Pallott v Douglas, supra, para 35.
Author
View all posts