Trustee/Executor De Son Tort: Recognizing And Avoiding The Traps Of Unintended Fiduciary Obligations

From time to time, a person will take it upon themselves to hold and administer property for the benefit of another, without having been formally appointed as a trustee. This might occur with full knowledge that the person has no legal authority to deal with the property; or the person might unintentionally deal with property that is impressed with a trust. This person is known as a trustee or executor de son tort.

A person who takes on the responsibilities of an executor or trustee without proper authority may be held personally liable as a trustee for any loss or damage to the trust property. This makes it critically important to understand when a person's actions might attract fiduciary obligations, particularly when they have not knowingly or deliberately taken on a fiduciary role.

Constructive Trust and Constructive Trustee

Constructive trusts have been used for centuries by the English courts of equity to describe certain situations and relationships. More recently, the common law provinces of Canada have used constructive trusts as a remedy to address unjust enrichment.1 Imposing a constructive trust can give rise to personal liability on the part of the "constructive trustee". This can be confusing since there is not necessarily any property actually held in the trust. For example, a constructive trust may be applied to estate assets which have not yet been distributed.2 Nonetheless, a person may be liable to account as a constructive trustee, just as any other trustee. This personal liability can arise in one or more of three situations: acting as a trustee de son tort; knowing assistance in the breach of trust by another person; or knowing receipt of trust property transferred in breach.3 This article will focus on the first of these situations.

The Supreme Court of Canada clarified that personal liability will only arise where there has been some misconduct on the part of the trustee which would normally expose him to liability for breach of trust. The person is not liable simply from taking up the role of a trustee, but rather because he has taken possession of and administered trust property contrary to the terms of the trust, of which he is or should be aware. As Iacobucci JA said in Air Canada v. M & L Travel Ltd;4

"...a trustee de son tort will not be personally liable simply for the assumption of the duties of a trustee, but only if he or she commits a breach of trust while acting as a trustee." The trustee de son tort will...