Yared v. Karam

Yared v. Karam
Collection
Supreme Court Judgments
Date
2019-12-12
Neutral citation
2019 SCC 62
Report
[2019] 4 SCR 498
Case number
38089
Judges
Wagner, Richard; Abella, Rosalie Silberman; Karakatsanis, Andromache; Côté, Suzanne; Brown, Russell; Rowe, Malcolm; Martin, Sheilah
On appeal from
Quebec
Subjects
Family law
Notes
Case in Brief
SCC Case Information
Decision Content
SUPREME COURT OF CANADA
Citation: Yared v. Karam, 2019 SCC 62, [2019] 4 S.C.R. 498
Appeal Heard: March 19, 2019 Judgment Rendered: December 12, 2019 Docket: 38089
Between:
Ramy Yared and Rody Yared
Appellants
and
Roger Karam
Respondent
Coram: Wagner C.J. and Abella, Karakatsanis, Côté, Brown, Rowe and Martin JJ.
Reasons for Judgment: (paras. 1 to 72)
Dissenting Reasons: (paras. 73 to 142)
Rowe J. (Wagner C.J. and Abella, Brown and Martin JJ. concurring)
Côté J. (Karakatsanis J. concurring)
yared v. karam
Ramy Yared and
Rody Yared Appellants
v.
Roger Karam Respondent
Indexed as: Yared v. Karam
2019 SCC 62
File No.: 38089.
2019: March 19; 2019: December 12.
Present: Wagner C.J. and Abella, Karakatsanis, Côté, Brown, Rowe and Martin JJ.
on appeal from the court of appeal for quebec
Family law — Family patrimony — Trusts — Partition of family patrimony — Family residence held under trust — Whether residence of family held in trust or rights which confer use of it included in family patrimony — Civil Code of Québec, art. 415.
In 2011, K set up a trust to protect his family’s assets for the benefit of his and his wife T’s four children. In 2012, the trust acquired a residence with funds transferred by the spouses to the trust patrimony and the family moved in. The house was a residence of the family within the meaning of art. 415 C.C.Q., which sets out that the family patrimony includes the residences of the family or the rights which confer use of them. T filed for divorce in 2014 and passed away in 2015. The liquidators of her succession filed for a declaration that the value of the residence held by the trust should be included in the division of the family patrimony, half of which would therefore go to the estate of T. The trial judge decided that the value of the residence ought to be included in the family patrimony despite the fact that it was held under a trust and not owned directly by one of the spouses. The Court of Appeal allowed K’s appeal and declared that no value from the residence ought to be included in the family patrimony.
Held (Karakatsanis and Côté JJ. dissenting): The appeal should be allowed.
Per Wagner C.J. and Abella, Brown, Rowe and Martin JJ.: Family residences held in trust are not, in principle, outside the scope of the composition of the family patrimony set out at art. 415 C.C.Q. By referring to the “rights which confer use” of a family residence at art. 415 C.C.Q., the legislator intended to include in the family patrimony the type of living arrangements where spouses, without being owners in title, nonetheless are in control of the family residence. Wide discretion should be accorded to the trier of fact when making the determination of what may or may not constitute a right which confers use. In this case, absent an overriding and palpable error in the trial judge’s determination that K held “rights which confer use” within the meaning of art. 415 C.C.Q., it was not open to the Court of Appeal to overturn his decision on appeal. His decision should be restored.
When applying art. 415 C.C.Q. to a family residence not directly owned by the spouses, the question is whether the record supports a finding of rights which confer use of the residence. What may or may not constitute a right which confers use within the meaning of art. 415 C.C.Q. is dependent on the circumstances and will generally be determined in relation to the level of control exercised by either spouse with respect to the residence. Simple occupation of a property not owned by the spouses will not automatically give rise to “rights which confer use” within the meaning of art. 415 C.C.Q. However, these rights are not limited to rights of use within the meaning of art. 1172 C.C.Q. or other real rights listed at art. 1119 C.C.Q. If the trial judge is satisfied, based on the evidence before him or her, that the spouses are in control of the residence, not merely by way of exercising control over the entitlement to the value of the assets but by controlling whom may benefit from the use of the property, it is open to him or her to include the value of the residence in the family patrimony based on art. 415 C.C.Q., even when such residence was acquired directly by a trust or a corporation. Prior ownership and occupation of a family residence can be relevant to show that the spouses hold a right which confers use within the meaning of art. 415 C.C.Q.; however, it is not, as a matter of law, a necessary condition.
When the constitution of a trust conflicts with the operation of the family patrimony, a court should resolve the matter by relying on the rules pertaining to both of these institutions rather than by lifting the trust veil by analogy with art. 317 C.C.Q. In Quebec law, trusts are not legal persons endowed with juridical personality. Contrary to a corporation, there is in the case of a trust no veil to lift nor any mastermind hiding behind a distinct juridical personality. In the case of a family residence, issues arising from indirect ownership or de facto control of the property can be resolved with the notion of “rights which confer use” set out in art. 415 C.C.Q. For this category of property, there is therefore no need to rely on art. 317 C.C.Q. by analogy so as to order an equitable partition of the family patrimony. Furthermore, more generally when property listed in art. 415 C.C.Q. is held in trust, arts. 421 and 422 C.C.Q. may allow the court to correct a potential inequity created by the operation of the trust. Again, it is not necessary to rely on an analogy with art. 317 C.C.Q. to reach an equitable result in these circumstances.
As a remedial set of rules that aims to foster economic equality between spouses, rules relating to family patrimony should be given a generous and liberal interpretation to favour the inclusion of property in the value to be partitioned between the spouses. This principle should guide the interpretation of art. 415 C.C.Q. and its application, even if the record does not demonstrate that one of the spouses was in a position of economic vulnerability. Care should be taken not to adopt an interpretation of the rules governing the family patrimony that would create a breach in the protection guaranteed by the law to vulnerable spouses.
Furthermore, the fact that the spouses were pursuing a legitimate objective in organizing their affairs the way they did is not a bar to inclusion of a residence not directly owned by them in the partition of the family patrimony. In so far as the intention to use a property as a residence of the family has been established, art. 415 C.C.Q. does not require any further demonstration of intention to avoid the rules of the family patrimony. These rules are protective public order rules, in that they are imposed by the legislature to safeguard the interests of vulnerable parties and to insure a certain equity within the institution of marriage. Accordingly, the operation of these rules will not depend on the behaviour, intention or good faith of the parties during their contractual relationship. This does not mean that the intention of the spouses is never relevant when applying art. 415 C.C.Q. to a family residence. The intention of the spouses is essential to characterize a property as a residence of the family within the meaning of art. 415 C.C.Q.
The public order character of the rules governing the family patrimony does not eliminate the freedom of spouses to acquire, sell or choose never to own the property included in the family patrimony per art. 415 C.C.Q. Neither the constitution of the family patrimony nor its partition alters the rights of ownership held by each spouse in relation to their property. Spouses generally remain free to manage and dispose of their property included in the family patrimony, although certain specific rules will nonetheless limit their freedom to do so. Spouses also need not acquire property falling under the family patrimony provisions, and neither spouse is obligated to own the property enumerated in s. 415 C.C.Q.
Per Karakatsanis and Côté JJ. (dissenting): The appeal should be dismissed. While family patrimony provisions are intended to protect economically disadvantaged spouses, spouses are free to acquire and dispose of property as they wish, even if this means that they do not acquire property falling within the family patrimony. Included in the spouses’ freedom to choose how they arrange their affairs is the option to live in a residence held by a trust. Where spouses opt for the various advantages and disadvantages associated with the legal institution of the trust, it may be that they will not acquire property that is subject to the family patrimony.
Where spouses reside in a property owned by a trust, there may be situations in which this arrangement gives rise to “rights which confer use” of the property under art. 415 C.C.Q. When such questions arise, the situation must be analyzed on the basis of the legislative provisions governing both the institutions of the trust and the family patrimony. There is agreement with the majority’s rejection of the reliance on an analogy with the lifting of the corporate veil under art. 317 C.C.Q. To determine whether a right which confers use exists where a residence is owned by a trust, courts must consider the circumstances surrounding the establishment of the trust, its intended purpose, and the rights and obligations of the trustees and beneficiaries under the terms of the trust deed.
There is disagreement with the majority, which would hold that the level of control attributed to a trustee will determine whether there is a right which confers use. As a general rule, though the powers with which the trustee is charged under the Civil Code of Québec are significant, they do not constitute a right which confers use. The trustee has the control and exclusive administration of the trust patrimony but such a role imposes duties and obligations. These powers must be exercised in the best interest of the beneficiaries and in keeping with the purpose of the trust. Powers must not be conflated with rights. It is rather the interests of the beneficiary that are more likely to give rise to a right which confers use under art. 415 C.C.Q. It is important to look both to the trust deed and to the Civil Code of Québec in order to gain a full picture of the protections afforded to the beneficiaries. The interpretation of the trust deed pursuant to the rules of contractual interpretation must include an analysis of the parties’ objectives in establishing the trust, along with the trustee’s obligations and the rights of beneficiaries under the terms of the deed. While a deed may entrust a trustee with significant powers, these are circumscribed by the trust provisions of the Civil Code of Québec. For instance, a trustee must perform his or her duties in keeping with the purpose of the trust and cannot do so for his or her own benefit or in an arbitrary manner.
There is also disagreement with the majority that the intention of the spouses in setting up a trust should have no bearing on the determination of whether there are any rights which confer use. The intention in establishing a trust will be relevant insofar as it informs the purpose of the trust. Where a trust has no legitimate purpose beyond evading the family patrimony rules, the powers actually exercised by the trustee might exceptionally be construed, on the facts of that case, as a right which confers use. For instance, where a residence owned by a trust previously belonged to one of the spouses and there has been no change in circumstances in the intervening years apart from the transfer to the trust, a right which confers use may exist under art. 415 C.C.Q. Such a situation may indicate that the transfer to the trust had the purpose of evading the family patrimony provisions. However, where the trust has a valid purpose and acquires the residence directly, a closer analysis of the terms of the trust deed and the surrounding circumstances will be necessary.
The arrangement in the instant case is anything but artificial as the record discloses no intention to evade the family patrimony provisions and there is unchallenged evidence that the trust was established for the long‑term benefit of the children. The trial judge was content with a literal reading of the trust deed and conflated powers with rights. As such, the trial judge erred in finding that K alone held a right which conferred use. If such a right existed, it was held only by T as beneficiary of the trust or was jointly held by both spouses as a result of a tacit agreement between them and the trust.
Cases Cited
By Rowe J.
Referred to: G.B. v. Si.B., 2015 QCCA 1223; Miller (Succession de), 2013 QCCS 5184; Droit de la famille — 977, [1991] R.J.Q. 904; M.T. v. J.‑Y.T., 2008 SCC 50, [2008] 2 S.C.R. 781; Droit de la famille — 112948, 2011 QCCA 1744, [2011] R.J.Q. 1729; Droit de la famille — 172765, 2017 QCCA 1844; Droit de la famille — 1463, [1991] R.J.Q. 2514; Droit de la famille — 121301, 2012 QCCA 1018, aff’g Droit de la famille — 112467, 2011 QCCS 4229; Droit de la famille — 162780, 2016 QCCS 5562; D.L. v. L.G., 2006 QCCA 1125; Droit de la famille — 142245, 2014 QCCA 1660, aff’g Droit de la famille — 133443, 2013 QCCS 6099; Droit de la famille — 1931, [1994] R.J.Q. 378, aff’d [1996] R.D.F. 6; Droit de la famille — 10174, 2010 QCCS 312, aff’d Droit de la famille — 102269, 2010 QCCA 1586; Droit de la famille — 071938, 2007 QCCS 3792, [2007] R.D.F. 711; Droit de la famille — 10977, 2010 QCCA 892; Droit de la famille — 3511, [2000] R.D.F. 93, aff’d 2000 CanLII 2002; Droit de la famille — 2225, [1995] R.D.F. 465; J.‑Y.H. v. C.B., 2005 CanLII 14832; Droit de la famille — 171064, 2017 QCCS 2076; Droit de la famille — 2420, [1996] R.D.F. 363; Droit de la famille — 13681, 2013 QCCA 501; Garcia Transport Ltée v. Royal Trust Co., [1992] 2 S.C.R. 499; Droit de la famille — 19582, 2019 QCCA 647; Droit de la famille — 131166, 2013 QCCS 2194, aff’d Droit de la famille — 1487, 2014 QCCA 123; Droit de la famille — 121905, 2012 QCCS 3977; L.G. v. D.L., 2005 CanLII 22738; J. (Y.) v. B. (M.), 1999 CanLII 10838, aff’d 2000 CanLII 10021; Poulin v. Dumas, 2014 QCCA 676.
By Côté J. (dissenting)
Droit de la famille — 071938, 2007 QCCS 3792, [2007] R.D.F. 711; Trust général du Canada v. Service alimentaire exclusif inc., [1984] C.A. 145; Québec (Curateur public) v. A.N. (Succession de), 2014 QCCS 616; Miller (Succession de), 2013 QCCS 5184; Droit de la famille — 3511, [2000] R.D.F. 93; D.L. v. L.G., 2006 QCCA 1125; Droit de la famille — 2225, [1995] R.D.F. 465; Droit de la famille — 1646, [1992] R.D.F. 463; N.R. v. R.P., [2003] R.D.F. 831; Droit de la famille — 13681, 2013 QCCA 501; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Van de Perre v. Edwards, 2001 SCC 60, [2001] 2 S.C.R. 1014.
Statutes and Regulations Cited
Civil Code of Lower Canada, art. 981e.
Civil Code of Québec, S.Q. 1980, c. 39, arts. 454, 462.2.
Civil Code of Québec, arts. 9, 317, 391, 404, 405, 406, 414, 415, 416, 421, 422, 423, 516, 911, 912, 1119, 1121, 1172, 1260, 1261, 1262, 1265, 1278, 1282 para. 1, 1283, 1284, 1294, 1295, 1306, 1307, 1310, 1425, 1426.
Authors Cited
Beaulne, Jacques. Droit des fiducies, 3e éd. mise à jour par André J. Barette. Montréal: Wilson & Lafleur, 2015.
Brierley, John E. C. “Powers of Appointment in Quebec Civil Law” (1992), 95 R. du N. 131.
Bruneau, Diane. “La fiducie et le droit civil” (1996), 18 R.P.F.S. 755.
Cantin Cumyn, Madeleine. Les droits des bénéficiaires d’un usufruit, d’une substitution et d’une fiducie. Montréal: Wilson & Lafleur, 1980.
Côté, Pierre‑André, in collaboration with Stéphane Beaulac and Mathieu Devinat. The Interpretation of Legislation in Canada, 4th ed. Toronto: Carswell, 2011.
Dubreuil, Christianne, et Brigitte Lefebvre. “L’ordre public et les rapports patrimoniaux dans les relations de couple” (1999), 40 C. de D. 345.
Karim, Vincent. Les obligations, vol. 1, 4e éd. Montréal: Wilson & Lafleur, 2015.
Labonté, Christian. “Le patrimoine familial”, mise à jour par Christiane Lalonde, dans Droit de la famille québécois, vol. 3, par Jean‑Pierre Senécal, dir. Farnham, Que.: Éditions FM, 1985 (feuilles mobiles mises à jour mai 2019, envoi no 454).
Lamontagne, Denys‑Claude. Biens et propriété, 8e éd. Cowansville, Que.: Yvon Blais, 2018.
Lefebvre, Brigitte. “Les droits qui confèrent l’usage des résidences familiales: quelques difficultés lors de la liquidation du patrimoine familial” (2014), 116 R. du N. 389.
Loranger, Julie. “Le fiduciaire: entre le tyran et le serviteur”, dans Service de la formation continue — Barreau du Québec, vol. 324, Développements récents en successions et fiducies. Cowansville, Que.: Yvon Blais, 2010, 69.
Normand, Sylvio. Introduction au droit des biens, 2e éd. Montréal: Wilson & Lafleur, 2014.
Private Law Dictionary and Bilingual Lexicons: Property, by France Allard et al., eds., Cowansville, Que.: Yvon Blais, 2012, “jus ad rem”.
Quebec. Ministère de la Justice. Commentaires du ministre de la Justice, t. I, Le Code civil du Québec — Un mouvement de société. Québec: Publications du Québec, 1993.
Roland, Henri, et Laurent Boyer. Locutions latines du droit français, 4e éd. Paris: Litec, 1998.
Senécal, Jean‑Pierre. Le partage du patrimoine familial et les autres réformes du Projet de loi 146. Montréal: Wilson & Lafleur, 1989.
APPEAL from a judgment of the Quebec Court of Appeal (St‑Pierre, Mainville and Gagné JJ.A.), 2018 QCCA 320, [2018] J.Q. no 1465 (QL), 2018 CarswellQue 1400 (WL Can.), setting aside a decision of Gaudet J., 2016 QCCS 5581, [2016] J.Q. no 16001 (QL), 2016 CarswellQue 10844 (WL Can.). Appeal allowed, Côté and Karakatsanis JJ. dissenting.
Stewart Litvack and Louis Dessureault, for the appellants.
Antoine Aylwin and Michael Adams, for the respondent.
The judgment of Wagner C.J. and Abella, Brown, Rowe and Martin JJ. was delivered by
[1] Rowe J. — The appellants, Mr. Ramy and Rody Yared, are the liquidators of the succession of their sister, Ms. Taky Yared, who passed away in April 2015. In July 2016, they sought a declaration in Superior Court that the value of the family residence should be included in the division of the family patrimony. At the time of Ms. Yared’s death, this residence was held under a trust controlled by her husband, the respondent Mr. Roger Karam.
[2] The question raised by this case concerns the proper interaction between these two institutions of Quebec civil law: the family patrimony created by art. 414 of the Civil Code of Québec (‟C.C.Q. or Civil Code”) and the trust under art. 1260 C.C.Q. In substance, this Court must decide if the value of a family residence held under a trust controlled by one of the spouses is included in the family patrimony, even in the absence of fraud or bad faith. The trial judge declared that the value of the residence was to be included in the family patrimony, relying on an analogy with the lifting of the corporate veil at art. 317 C.C.Q. and on the “rights which confer use” of art. 415 C.C.Q. The Court of Appeal reversed that decision and declared that no value from the family residence ought to be included in the family patrimony.
[3] The trial judge did not err in his conclusion. Although I would not rely on art. 317 C.C.Q. by analogy, in my view the “rights which confer use” of the family residence at art. 415 C.C.Q. provided a sound basis for him to declare that the value of the residence ought to be included in the family patrimony. Absent an overriding and palpable error in his determination that Mr. Karam held “rights which confer use” within the meaning of art. 415 C.C.Q., it was not open to the Court of Appeal to overturn this decision on appeal. I would therefore set aside the decision of the Court of Appeal and reinstate the declaratory relief granted by the trial judge.
I. Facts
[4] The respondent, Mr. Karam and Ms. Yared were married in 1998. They had four children, born between 2001 and 2010. In August 2011, the Karam family moved to Montreal following the announcement of tragic news. Ms. Yared was diagnosed with an incurable cancer and her days were numbered. In light of this, Mr. Karam set up a trust to protect the family assets for the benefit of the four children. It is not contested that at the time, Mr. Karam acted in good faith and had no intention to avoid the rules of family patrimony.
[5] The [translation] “Taki Family Trust” (“the trust”) was constituted before a notary on October 4, 2011 (Exhibit A‑1, A.R., vol. II, at p. 110). The settlor is Ms. Tammie Dion, the wife of one of the appellants and sister‑in‑law of Mr. Karam. The trustees are Mr. Karam himself and his mother, Ms. Amal Hanache‑Karam. The trust deed also conferred extensive powers of “Appointer” on Mr. Karam, providing for him inter alia to name new beneficiaries, including himself. The initial beneficiaries were Ms. Yared and the four children.
[6] Upon the constitution of the trust, the settlor transferred a silver ingot valued at $45 to the trust patrimony. In June 2012, the trust acquired a residence on Docteur‑Penfield Avenue in Montreal for $2,350,000 with funds transferred by the spouses to the trust patrimony. Mr. Karam stated that his intention was to acquire a house that would serve both as the family residence and as an investment protected under the trust for the benefit of his children. The family moved in and it is not contested that at the relevant times, this house was a residence of the family within the meaning of art. 415 C.C.Q. Indeed, regardless of the potential investment value of the property, if either of the spouses had been owner in title there would be no dispute that the house would be part of the family patrimony. In fact, Mr. Karam conceded that the furniture in the residence was included in the family patrimony as movable property furnishing or decorating the family residence.
[7] Two years later, in June 2014, Ms. Yared left the residence and filed for divorce. In August of the same year, she divided her estate by notarial will by way of four trusts established for the benefit of each of the four children. In April 2015, Ms. Yared died without having obtained a divorce.
[8] Following Ms. Yared’s death, Mr. Karam commenced proceedings to contest the validity of her will. A few months later, he unilaterally renounced his powers to elect new beneficiaries under art. 4.2 of the trust deed in a notarized document, the [translation] “Act of Renunciation and Cancellation by the Appointer Concerning the ‘Taki Family Trust’”. According to his testimony, Mr. Karam proceeded to this renunciation after the appellants expressed some concerns about the children’s interest in the trust. In July 2016, the appellants filed for a declaration that the value of the residence held by the trust should be included in the division of the family patrimony, half of which would therefore go to the estate of Ms. Yared. If the appellants do not obtain such a declaration, the estate of Ms. Yared will be of little value.
II. Decisions Below
A. Superior Court of Quebec (Gaudet J., 2016 QCCS 5581)
[9] The trial judge decided that the value of the residence ought to be included in the family patrimony despite the fact that it was held under a trust and not owned directly by one of the spouses. In his view, this follows from the fact that spouses cannot contract out of the public order rules regarding the family patrimony, regardless of their intentions (para. 55 (CanLII)). If one of them has effective control of a family residence even where that is through a trust or a corporation, its value must be divided as part of the patrimony upon dissolution of the marriage (paras. 52‑53).
[10] The trial judge relied on two provisions of the Civil Code to arrive at this conclusion. First, he considered that the lifting of the corporate veil codified at art. 317 C.C.Q. could be applied by analogy when the constitution of a trust would have the effect of trumping or displacing the rules of the family patrimony (paras. 30‑36). Second, he relied on the wording of art. 415 C.C.Q., which provides that “the residences of the family or the rights which confer use of them” are included in the family patrimony. In his view, these rights are not strictly limited to the rights of use defined by art. 1172 C.C.Q. and can include any arrangement by which the spouses can occupy a residence as if they are the owners (paras. 39‑41).
[11] Critical to his conclusion was the trial judge’s factual finding that Mr. Karam had effective, almost complete control of the family residence as the trustee and appointer of the trust under which it was held (para. 51). This finding was based on the following discretionary powers granted to Mr. Karam under the trust deed: (1) the power to appoint new beneficiaries, including himself; (2) the power to destitute any beneficiaries; and (3) the power to decide to which beneficiaries and in what proportion the revenues and capital of the trust would be paid (paras. 44‑47). In this regard, the trial judge further held that Mr. Karam’s subsequent renunciation of his power to elect new beneficiaries under art. 4.2 of the trust deed was immaterial as this was invalid per art. 1294 C.C.Q., as well as because it had been done after the dissolution of the marriage and, in any case, it left unaffected the other important powers granted to Mr. Karam (paras. 58‑60).
B. Court of Appeal of Quebec (2018 QCCA 320)
[12] Writing for a unanimous court, St‑Pierre J.A. allowed the appeal and declared that no value from the residence on Docteur‑Penfield Avenue ought to be included in the family patrimony of Ms. Yared and Mr. Karam. In her view, in the absence of an intention to avoid the rules of the family patrimony, the contractual freedom of spouses who decide to reside in a property held in a trust for investment purposes ought to be respected (paras. 51‑59 (CanLII)).
[13] In this regard, St‑Pierre J.A. concluded that the trial judge committed various reviewable errors (para. 50). In her reasons, she focused on three issues: (1) the analogy with art. 317 C.C.Q.; (2) the application of existing rules governing both the family patrimony and the trust, including “rights which confer use” per art. 415 C.C.Q.; and (3) the determination that the value of these rights was equal to the value of the house.
[14] With regards to the “lifting of the trust veil” based on art. 317 C.C.Q., St‑Pierre J.A. expressed the view that this analogy was [translation] “problematic, unsound and inappropriate” (at para. 74) and that the concept ought to be rejected from the outset (para. 75). In her view, the fact that a trust is not endowed with juridical personality and that it involves a relationship between different parties — the settlor, trustee and beneficiary — is a bar to the application, by analogy, of art. 317 C.C.Q. to a trust (paras. 71‑73).
[15] Rather than relying on this analogy, St‑Pierre J.A. held that the trial judge was required to apply existing rules governing the family patrimony and trusts. In her view, the value of a family residence held under a trust that is legally constituted should not be included in the family patrimony, unless it belonged to one of the spouses prior to the constitution of the trust. In this case, it is possible that the “rights which confer use” of the residence may be included in the family patrimony per art. 415 C.C.Q. when constitution of the trust had no impact on the living arrangements of the family (paras. 90‑91). Furthermore, St‑Pierre J.A. noted that arts. 421 and 422 C.C.Q. already allowed for corrective measures in the division of the family patrimony where there has been misappropriation or some other injustice (para. 92).
[16] On this basis, St‑Pierre J.A. determined that the record did not provide a basis for the trial judge to conclude that Mr. Karam held “rights which confer use” of the residence, let alone that he was the sole holder of these rights (paras. 103‑4). Although it was not necessary to dispose of the appeal, St‑Pierre J.A. further held that the trial judge ruled beyond the conclusions sought in the application when he determined that the value of the rights of use was equal to the full value of the residence (para. 108).
III. Analysis
A. The Trust in Quebec Civil Law
[17] The Civil Code defines a trust as a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary and in which none of them has any real right (art. 1261 C.C.Q.). The concept of a patrimony without a holder was introduced in Quebec law following the adoption of the Civil Code, in an effort to adapt the common law trust to the framework of civil law (see S. Normand, Introduction au droit des biens (2nd ed. 2014) at pp. 26‑28). In short, contrary to a common law trust, the trust in Quebec civil law does not result from the division of ownership but rather from the transfer of property in a patrimony created for a particular purpose and not held by anyone. The transferred property is administered by the trustee for this purpose, yet neither the trustee, the beneficiary nor the settlor own what has been transferred into the trust patrimony.
[18] Upon the trust’s creation, the trustee has control and exclusive administration of the patrimony (art. 1278 para. 1 C.C.Q.). He or she is charged with the full administration of the property held in the trust (art. 1278 para. 2 C.C.Q.). By virtue of this, the trustee is vested with extensive powers that he is required to use to secure appropriation of the patrimony, as defined by the trust deed (arts. 1260, 1278 and 1306 C.C.Q.). He may inter alia sell the property, charge it with a real right or change its destination in order to perform his obligations as administrator of the trust (art. 1307 C.C.Q.). Hence, although the trustee is not the owner of the property, his control over the trust patrimony is similar to ownership, as the Minister of Justice explained upon the adoption of art. 1261 C.C.Q.:
[translation] Moreover, the property making up the trust patrimony is not property without an owner that can be appropriated by simple occupation, since the trustee has control and detention of it. Nor is the property liable to be paralyzed as a result of having no owner. The broad powers of the trustee, acting in that capacity, will in fact allow the trustee to ensure not only the preservation of the property, but also its free movement, as if he or she were its owner. These powers will also allow the trustee to perform any kind of act relating to the managed property, including exercising the rights attached to it.
(Ministère de la Justice, Commentaires du ministre de la Justice, vol. I, Le Code civil du Québec — Un mouvement de société (1993), at p. 750)
[19] If provided by the trust deed, the trustee may also have the power to appoint beneficiaries and determine what they receive from the trust (art. 1282 para. 1 C.C.Q.). This power of appointment is exercised as the trustee (or settlor) sees fits; however, he may not do so in a completely arbitrary manner or in a way that runs counter to purpose or stipulations of the trust deed (J. Beaulne, Droit des fiducies (3rd ed. 2015), at p. 229; G.B. v. Si.B., 2015 QCCA 1223, at para. 53 (CanLII)). Furthermore, art. 1283 C.C.Q. provides that the person having the power to appoint the beneficiaries or determine their shares cannot exercise this power for his or her own benefit, which would normally preclude him from electing himself as a beneficiary (Miller (Succession de), 2013 QCCS 5184, at para. 88 (CanLII)). Authors are of the view that this limitation at art. 1283 C.C.Q. can however be set aside when a trustee having the power to appoint is himself a beneficiary under the trust deed (Beaulne, at pp. 229‑30; D. Bruneau, “La fiducie et le droit civil” (1996), 18 R.P.F.S. 755, at p. 776; J. E. C. Brierley, “Powers of Appointment in Quebec Civil Law” (1992), 95 R. du N. 131, at p. 161-62).
B. The Family Patrimony
[20] Per art. 414 C.C.Q., marriage results in the establishment of a family patrimony, which consists of property described in art. 415 C.C.Q. and owned by one or the other spouses. Upon dissolution of marriage, the value of this family patrimony is divided in equal shares between the spouses (art. 416 C.C.Q.), unless the court exercises the remedial power provided by art. 422 C.C.Q. to order unequal partition. As Baudouin J.A. explained in Droit de la famille — 977, [1991] R.J.Q. 904, at p. 909, we must bear in mind that the family patrimony entails the creation, upon dissolution of marriage, of a personal claim against the other spouse rather than a competing right of ownership.
[21] Article 415 C.C.Q. provides that residences of the family owned by one of the spouses or the rights which confer use of them are included in the value of the family patrimony. As explained in the above section, neither a beneficiary nor a trustee owns the property held under a trust. In my view, the question before this Court is in what circumstances a family residence held under a trust can nonetheless be included in the value of the family patrimony on the basis of the “rights which confer use” within the meaning of art. 415 C.C.Q. Before turning to this matter, I find it necessary to restate two core principles of law on the family patrimony.
[22] The first relates to the approach that a court should take when interpreting and applying the rules relating to the family patrimony in ambiguous cases. As LeBel J. wrote for a unanimous court in M.T. v. J.‑Y.T., 2008 SCC 50, [2008] 2 S.C.R. 781, at para. 16, the introduction of the family patrimony in Quebec family law is “consistent with a general trend in Canada to protect vulnerable spouses”. As a remedial set of rules that aims to foster economic equality between spouses, it should therefore be given a generous and liberal interpretation to favour the inclusion of property in the value to be partitioned between the spouses (Droit de la famille — 112948, 2011 QCCA 1744, [2011] R.J.Q. 1729, at para. 60; Droit de la famille — 977, at p. 909; Droit de la famille — 172765, 2017 QCCA 1844, at paras. 102‑13 (CanLII)).
[23] This principle should guide our interpretation of art. 415 C.C.Q. and its application in this and similar cases, even if the record does not demonstrate that one of the spouses was in a position of economic vulnerability. Contrary to what counsel for Mr. Karam suggested in his oral submissions (transcript, at pp. 55‑58), the fact that this case does not raise issues of inequality between spouses is immaterial for the resolution of the larger question raised by the appeal. Indeed, we should be careful not to adopt an interpretation of the rules governing the family patrimony that would create a breach in the protection guaranteed by the law to vulnerable spouses.
[24] The second principle relates to the public order character of the rules governing the family patrimony. The Civil Code is clear: spouses cannot contract out of these rules. Article 391 C.C.Q. provides that spouses cannot derogate from the provisions of chapter IV on the effect of marriage, which includes the provisions on the family patrimony. Article 423 C.C.Q. further specifies that spouses may not renounce in advance, by contract of marriage or otherwise, their rights in the family patrimony, while allowing them to do so in certain circumstances, notably upon the dissolution of marriage, and under stringent conditions. On this basis, Quebec courts have consistently held that the rules of the family patrimony are of public order and cannot be avoided by spouses through various kinds of contractual arrangements (see, for example, Droit de la famille — 977, at p. 908; Droit de la famille — 1463, [1991] R.J.Q. 2514 (C.A.), at pp. 2516‑17; Droit de la famille — 121301, 2012 QCCA 1018, at para. 46 (CanLII); Droit de la famille — 162780, 2016 QCCS 5562, at paras. 54‑55 (CanLII)). This well‑settled principle is not disputed by the parties. Rather, it is the scope and the effect of these public order rules that is at the heart of the debate.
[25] Mr. Karam correctly points out that the public order character of the rules governing the family patrimony does not eliminate the freedom of spouses to acquire, sell or choose never to own the property included in the family patrimony per art. 415 C.C.Q. (R.F., at paras. 23‑29). Indeed, neither the constitution of the family patrimony nor its partition alters the rights of ownership held by each spouse in relation to their property. It follows that spouses generally remain free to manage and dispose of their property included in the family patrimony, keeping in mind that certain specific rules will nonetheless limit their freedom to do so (Droit de la famille — 977, at p. 908).
[26] As pointed out by Justice Côté, spouses are free to arrange their personal affairs as they see fit; they need not acquire property falling under the family patrimony provisions. Thus, as St‑Pierre J.A. remarked, neither spouse is obligated to own the property enumerated in art. 415 C.C.Q. (para. 58). A married couple can lease rather than own their family residence or their car. It is trite that such living arrangements do not per se offend the public order rules of family patrimony. The question raised by this appeal is whether this logic extends to a family residence acquired by way of a trust controlled by one or both spouses. Because the legislator included the “rights which confer use” of a family residence in addition to direct ownership, in my view it does not.
[27] Before discussing the “rights which confer use” per art. 415 C.C.Q., I wish to make a few comments on the “lifting of the trust veil” by analogy with art. 317 C.C.Q., since the trial judge and the Court of Appeal disagreed on the applicability of this notion. First, I agree with St‑Pierre J.A. that the analogy with art. 317 C.C.Q. is, on its face, tenuous (para. 74). As she explains, this provision [translation] “is intended to prevent a person from making improper use of a legal person, of which he or she is in fact the directing mind, in such a way as to interpose the existence of that legal person as a defence to try to avoid personal liability” (para. 69). But in Quebec law, trusts are not legal persons endowed with juridical personality. Rather, they are the result of a relationship among three actors — the settlor, trustee and beneficiary — who gravitate around a distinct and autonomous patrimony. It follows that, contrary to a corporation, there is in the case of a trust no veil to lift nor any mastermind hiding behind a distinct juridical personality. In this regard, I agree with the general proposition set out by St‑Pierre J.A. that when the constitution of a trust conflicts with the operation of the family patrimony, the court should resolve the matter by relying on the rules pertaining to both of these institutions rather than by analogy with art. 317 C.C.Q. (paras. 50, 76 and 87).
[28] In the case of a family residence, issues arising from indirect ownership or de facto control of the property can, as I will explain in the section below, be resolved with the notion of “rights which confer use” set out in art. 415 C.C.Q. For this category of property, there is therefore no need to rely on art. 317 C.C.Q. by analogy so as to order an equitable partition of the family patrimony.
[29] Also, more generally when property listed in art. 415 C.C.Q. is held in trust, arts. 421 and 422 C.C.Q. may allow t