Constructive Trust Remedy and Tracing

Constructive Trust Remedy and Tracing

Li v Li 2017 BCSC 1312 involved a father suing his daughter for the wrongful conversion of monies and the court finding for the father based on the remedy of constructive trust and tracing the monies.

THE  LAW

[225]     Mr. Li seeks a declaration that he is entitled to a constructive trust in respect of the Townhouse. His claim is grounded in both conversion and unjust enrichment. The approach to the remedy is the same.

[226]     A constructive trust is one of several remedies potentially available to Mr. Li. What is the remedy in cases where, as here, it is money as opposed to a tangible asset that has been converted? Where the funds remain with the tortfeasor, judgment is for the dollar amount converted unless a proprietary claim can be made out. The monetary claim is often referred to as one in detinue. In the case at bar, the parties did not distinguish between conversion and detinue, and instead referred to Mr. Li’s claim as one of conversion. The potential proprietary remedy is usually, but not always, looked at from the perspective of the nature of the loss to, and the reasons for recognizing a right of property in, the claimant.

[227]     To establish a proprietary remedy, Mr. Li must prove a direct link between his misappropriated funds and the Townhouse. He must also prove that a monetary award is inadequate, inappropriate, or insufficient: Harraway at paras. 51-52; Kerr v. Baranow, 2011 SCC 10 at para. 50; Peter v. Beblow,  [1993] 1 S.C.R. 980; Tracey v. Instaloans Financial Solution Centres (BC) Ltd., 2008 BCSC 669; Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 at para. 92; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574.

[228]     In Kerr, the Court described the constructive trust remedy as follows:

[50]      The Court has recognized that, in some cases, when a monetary award is inappropriate or insufficient, a proprietary remedy may be required. Pettkus is responsible for an important remedial feature of Canadian law of unjust enrichment: the development of the remedial constructive trust. Imposed without reference to intention to create a trust, the constructive trust is a broad and flexible equitable tool used to determine beneficial entitlement to property (Pettkus, at pp. 843-44 and 847-88). Where the plaintiff can demonstrate a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, a share of the property proportionate to the unjust enrichment can be impressed with a constructive trust in his or her favour (Pettkus, at pp. 852-53); Sorochan, at p. 50).

[Emphasis added]

[229]     Where converted funds have been used to acquire an asset by the tortfeasor, as is the case in this action, another possible remedy may be a tracing order and an equitable lien: see, e.g., B.C. Teachers Credit Union v. Betterly, [1975] B.C.J. No. 1158 (S.C.). In some circumstances, punitive damages are awarded: Kolody v. Neil, 1998 ABQB 1009 at para. 24. Punitive damages have not been pleaded in Mr. Li’s notice of civil claim.

[230]     In B.C. Teachers Credit Union, Mr. Justice Bouck granted an equitable lien to the plaintiff whose funds in the amount of $45,000 were stolen by a Mr. Smith who then used nearly all of those funds to purchase property in the name of a related person (the defendant) in the amount of $45,154.24. The plaintiff sought a declaration that it owns the property and an order conveying title to it, or alternatively a lien to the extent of $45,000. Bouck J. found that Mr. Smith had contributed $1,000 and ordered an equitable lien in favour of the plaintiff in accordance with its interest, i.e., $44,154.42/$45,154.42 or 98% of its value.

[231]     In reaching his decision, Bouck J. made these remarks, which I find of assistance to this case:

[26]      The $1,000 equity paid by Smith has caused me some concern since he had the land conveyed into the name of the defendant. Usually, when a person buys property with his own funds and then has the conveyance registered in the name of a stranger there is a presumption of a resulting trust. The stranger is then presumed to hold the land in trust for the purchaser. The presumption is of course rebuttable. If that principle is applied to Smith and the defendant then I would have to hold there is a presumption of a resulting trust in favour of Smith. …

[27]      But the concept of a resulting trust is an equitable rule. The question then arises whether equity should play any part in assisting Smith to recover his $1,000. I think not. The greater part of the purchase price was made up of stolen money. Without it Smith could not have bought the house. The rules of equity should not be extended in any way to aid a thief in his unlawful intrigues.

[Emphasis added]

[232]     This approach has been considered with approval in this province and others: Ruwenzori Enterprises Ltd. v. Walji, 2006 BCCA 448 at para. 36; Toronto-Dominion Bank v. Storr, 2014 ONSC 4278 at paras. 129-131; Kolody v. Neil, 1998 ABQB 1009 at para. 24.

[233]      Consequential losses suffered by the wronged party may also be recovered, subject to the principles of remoteness: Columere Park Developments Ltd. v. Enviro Custom Homes Inc., 2010 BCSC 1248 at para. 35. For example, where the value of a converted chattel has increased, the claimant is entitled to the increase as consequential damages (which some case authorities have referred to as special damages): Cash v. Georgia Pacific Securities Corp., 1990 BCSC 1052; Asamera Oil Corp. Ltd. v. Sea Oil& General Corp. et. al., [1979] 1 S.C.R. 633.

[234]     Mr. Li’s claim that he suffered a consequential loss due to rising property values since 2015 might also be considered within the realm of consequential loss. According to Columere Park, at paras. 31-32, a broad interpretation consequential loss is warranted:

[31]      Conversion usually results in what can essentially be characterized as a forced sale of the chattel. The remedy of forced sale is an exceptional one, this confines the tort of conversion to major interferences which are serious enough to warrant the recovery of the full value of the goods. Typically, the value of the chattel is assessed at the time of conversion. This is different from the tort of detinue which is a continuing wrong for which the cause of action may be defeated by a return of the chattel any time before judgment. Damages for detinue are thus assessed at the time of trial. When conversion occurs, however, plaintiffs are expected to mitigate by replacing the chattel promptly.

[32]      This remedial distinction between detinue and conversion is the subject of some debate and has led to the recent support for bridging the gap by awarding in conversion any increase in the value of goods as consequential damages which, ideally, would lessen the evil of having remedies dependant on procedural technicalities: The Law of Torts at 292; see also the words of Estey J. in obiter in Asamera Oil Corp. Ltd. v. Sea Oil & General Corp. [citation omitted]. With respect to acts of conversion, consequential loss typically refers to the change in value of the chattel(s) at issue, however, where funds are at issue, the valuation is simple. A somewhat broader characterization of consequential loss is appropriate in this case, and such an interpretation accords generally with the remedial principle of compensatory damages in tort law.

[Emphasis added]

[235]     Damages for conversion are also subject to a plaintiffs duty to mitigate: Columere Park at para. 35. Mitigation does not arise in this case. Mr. Li acted promptly to recover the funds converted by his daughter. His counsel also conducted a title search at the early stages of the litigation to determine if she had purchased any real property with the funds. The search results were negative.

[236]     Keeping those possible remedies in mind, it was only through cross-examination of Ms. Li at trial, after Mr. Li had closed his case, that he learned of Ms. Li’s purchase of the Townhouse. During closing argument, Mr. Li sought and obtained an order amending his notice of civil claim to allege a constructive remedy in respect of the Townhouse. Even without that amendment, the decision of the Court of Appeal in BNSF Railway Co. v. Teck Metals Ltd., 2016 BCCA 350 makes it clear at para. 83 that the availability of constructive trust remedy need not be decided on the basis of the pleadings:

[83] 6. Contrary to the plaintiff’s submission, all constructive trusts (whether remedial or institutional) require that the plaintiff show a monetary award would be inadequate or inappropriate, and identify property or proceeds thereof to which the plaintiff’s labour or money contributed. The process of tracing is available to enable a plaintiff to determine whether the second condition can be met.

7. There is clear authority for the proposition that the availability of a constructive trust need not be decided on the basis of pleadings. Being dependent on facts found at trial, the issue can be resolved once the plaintiff is able to make an informed choice prior to final judgment being pronounced: Tracy; Waxman; Lac Minerals.

Revocation of Wills Post WESA

Revocation of Wills Post WESA - Disinherited

The introduction of the Wills Estates and Succession act (WESA) on March 31,2014 made a few  significant changes to the law relating to the revocation of wills.

Probably the most significant change was that marriage after the execution of a will no longer revokes a will. This largely unknown fact had created much hardship in estate law over a long period of time.

The other significant change is the insertion of section 58 WESA known as the curative provision for  otherwise defective wills.

Section 55 of WESA provides as follows:

55 (1) A will or part of a will is revoked only in one or more of the following circumstances:

  • by another will made by the will-maker in accordance with this Act;
  • by a written declaration of the will-maker that revokes all or part of a will made in accordance with section 37 ;
  • by the will-maker, or a person in the presence of the will-maker and by the will-maker’s direction, burning, tearing or destroying all or part of the will in some manner with the intention of revoking all or part of it;
  • by any other act of the will-maker, or another person in the presence of the will-maker and by the will-maker’s direction, if the court determines under section 58 that

(i)     the consequence of the act of the will-maker or the other person is apparent on the face of the will, and

(ii)     the act was done with the intent of the will-maker to revoke the will in whole or in part.

(2) A will is not revoked in whole or in part by presuming an intention to revoke it because of a change in circumstances.

VOLUNTARY REVOCATION

It should be stated at the outset that section 58 WESA which is discussed later in this paper may well alter the common law stated hereafter quite dramatically if it is applied in the same sweeping effect that the courts have used that section to cure defective wills. To date there have been no reported cases on how the courts will apply section 58 WESA to remedy defective revocations, but I anticipate that the effects will be dramatic.

Voluntary Revocation can be accomplished by any of the following:

  • by executing a subsequent will or codicil that typically contains a revocation clause of the previous will;
  • a written declaration declaring an intention to revoke a will and duly executed in the same prescribed manner as a will;
  • by burning, tearing or otherwise destroying the will by the testator or by someone in the presence and by the direction of the testator

The execution of a subsequent will or codicil is by far the most common method of revoking a will.

In fact, when a testamentary document is valid and contains a revocation clause , there is a very heavy onus on anyone attacking the will attempting to argue that the revocation clause was not intended to be operative. McCarthy v Fawcett ( 1945) 1 W.W.R. 70 ( B.C.C.A)

Drawing a line through the signature and adding the words  I hereby revoke this will was held to be of no legal effect in Bell v. Matthewman ( 1920) 49 O.L.R 364.

A letter properly attested by two witnesses and addressed to the bank manager who held the original will on deposit stating “ will you please destroy the will already made out was held to have effectively revoked the will in Re Spracklan ( 1938) 2 All E.R. 730.

With respect to the destruction of a will, there must be both the act of destruction as well as the intention to destroy the will and any symbolic destruction will not suffice. Partial tearing of the will which leaves the words legible does not necessarily show an intention to revoke. There must be such an injury with intent to revoke that it destroys the entirety of the will to have an effective revocation. Re Shafner ( 1956) 2 D.L.R. ( 2d) 593 ( N.S.C.A.)

The Common Law Presumption of Destruction

Very often in estate disputes the original or a will cannot be found and an attempt is made to probate a copy, giving rise to the legal issue as to whether the will had been destroyed or simply lost.

If an original duly executed will that was in the possession of the testator is not propounded upon death and the executor fails to prove that the original was not merely lost and not destroyed, then there is a common law presumption that is rebuttable by sufficient evidence that the will was destroyed by the testator, that the testator destroyed the will for the purpose of revoking it. Sigurdson v Sigurdson (1935) 4 DLR 529 ( S.C.C.)  and Kumar v Kumari ( 1993) BCJ No. 108.

The evidence necessary to rebut the presumption of revocation need not be such as to amount to a positive certainty , but only such as to produce moral conviction. Re Matt estate ( 1954) 11 WWR ( NS) 28 ( Man.C.A).

The Sigurdson case ibid stated that the evidence to rebut the presumption of revocation must be clear and convincing to satisfy the court that the will had in fact been lost and not destroyed by the testator with an intention of revoking the will.

Various Factors of Consideration by the Court Whether the Presumption Applies

Haider v Kalugin  2008 BCSC 930 enumerated some of the factors the court will consider in deciding whether the presumption of revocation applies, and if so, whether it has been rebutted:

  • whether the testator continued to have good relations with the named beneficiaries in the copy of the will up to the date of death;
  • whether the terms of the will were reasonable
  • the nature and character of the deceased in taking care of personal effects- ie orderly vs hoarding;
  • statements made by the testator to either confirm or contradict the terms of the will copy;
  • whether the deceased understood the consequences of having a will and the effects of an intestacy;
  • were personal papers stored carefully or haphazardly;

The presumption of revocation does not apply where the original will cannot be traced to the possession of the testator. Brimicombe v Brimicombe Estate  (2001) NSJ No. 157 (N.S.C.A). For example if the original was stored at the drafting lawyers office and the will was lost while there, the presumption would not apply.

SECTION 58  WESA

Section 58 of WESA, reads as follows:

58 (1) In this section, record includes data that

(a)   is recorded or stored electronically,

(b)   can be read by a person, and

(c)    is capable of reproduction in a visible form.

(2) On application, the court may make an order under subsection (3) if the court determines that a record, document or writing or marking on a will or document represents

(a)   the testamentary intentions of a deceased person,

(b)   the intention of a deceased person to revoke, alter or revive a will or testamentary disposition of the deceased person, or

(c)    the intention of a deceased person to revoke, alter or revive a testamentary disposition contained in a document other than a will.

(3) Even though the making, revocation, alteration or revival of a will does not comply with this Act, the court may, as the circumstances require, order that a record or document or writing or marking on a will or document be fully effective as though it had been made

(a)   as the will or part of the will of the deceased person,

(b)   as a revocation, alteration or revival of a will of the deceased person, or

(c)    as the testamentary intention of the deceased person.

(4) If an alteration to a will makes a word or provision illegible and the court is satisfied that the alteration was not made in accordance with this Act, the court may reinstate the original word or provision if there is evidence to establish what the original word or provision was.

Section 58 WESA is a dramatic change to the law of revocation given that even if the document attempting to revoke a will is defective, if the court finds that the intention of the testator was to revoke the will, then under Section 58 (3) the court can cure the defect so as to give legal effect to the intention of the testator.

The “curative” provisions of Section 58 was illustrated in Horton v Bruce 2017 BCSC 712 where the court remedied only the revocation clause and not the distributive clauses of a subsequent  draft will that had been signed by the testator but not witnessed by two witnesses in the presence of each other. The legal effect of the imposition of Section 58 (3) was to cause the deceased to die intestate.

Horton v. Bruce relied upon  a Supreme Court of Canada decision Bell Express Vu Limited Partnership v Rex 2002 SCC 42 for the authority to interpret Section 58 to give the courts the power to cure only a part of a document or a writing deemed to be a will, and not the entire document.

CONCLUSION

The effects of WESA will be dramatic upon the law of revocation of wills. Section 55 WESA abolished the revocation of a will by any marriage that takes place after March 31, 2014.

The effect of Section 58 WESA has yet to be recognized but the application of that section in the Horton v Bruce decision leads me to believe that Section 58 will be liberally applied to remedy any defective revocation if the court concludes that it was the intention of a testator to revoke a will but failed to do so in a  manner that the common law previously demanded.

Same Sex Partnership

Same Sex Partnership: The Civil Marriage Act

Hinks v Gallardo 20114 ONCA 494 held that a British same sex partnership was a valid spousal marriage in Ontario and presumably also in British Columbia.

A Canadian and a British citizen entered into a civil partnership under the Civil Partnership Act (UK) which created a parallel regime to marriage that provided same sex couples with the same legal financial and practical benefits and burdens as married spouses in England.

When the parties moved back to Ontario and sought a divorce the court was asked to determine if the civil partnership created spouses as defined by the Divorce act of Canada and both the trial and appeal court held that it did.

The court held that the terms spouses and marriage was consistent with modern approach to statutory interpretation  and that one of the fundamental purposes of the Divorce act was to provide parties with equitable and certain process for resolving economic issues arising our of breakdown of the relationship.

This interpretation was consistent with the values set out in the Canadian Charter of Rights and Freedoms.

The motion judge first considered the very different constitutional and legislative frameworks in Canada and the U.K. regarding marriage. She stated, at paras. 27-30 and 36:

The issue of whether the former common law definition of marriage as “the voluntary union for life of one man and one woman, to the exclusion of all others” was discriminatory against same-sex couples came before the Ontario Court of Appeal in Halpern v. Canada (Attorney General) (2003), 65 O.R. (3d) 161. There, the court expressly held that “separate but equal” partnership legislation that fell short of marriage was contrary to Canada’s public policy, was discriminatory and violated the equality guarantees of our Charter.

The court in Halpern specifically found that same-sex couples were excluded from the fundamental societal institution called marriage, saying:

Based on the foregoing analysis, it is our view that the dignity of persons, in same-sex relationships is violated by the exclusion of same-sex couples from the institution of marriage. Accordingly, we conclude that the common-law definition of marriage as “the voluntary union for life of one man and one woman to the exclusion of all others” violates s. 15(1) of the Charter.

As a result, the court struck down the former definition of marriage and reformulated it as “the voluntary union for life of two persons to the exclusion of all others”. This new definition of marriage has effectively been codified in the Civil Marriage Act, which also codifies in the Preamble the policy statements the courts have enunciated in Halpern and elsewhere.

To the contrary, the United Kingdom has followed a different policy path. There, a civil partnership is the only method by which gay people can change their legal status from single to something different. They are not permitted to marry; instead, the U.K. has developed a parallel but equal system exclusively for the gay community. In the U.K., a civil partnership and a marriage are legally equal. They are considered substantively equal. This was confirmed by the High Court of Justice, Family Division in the U.K. in Wilkinson v. Kitzinger

Re-Opening a Trial: New Evidence

Re-Opening a Trial: New Evidence

Lambert v Peachman 2017 ONSC 4270 outlined the law relating to what is necessary in the form of new evidence to re-open a trial.

Analysis

26      The principles and authority to re-open evidence of a trial are well established and noted by the Supreme Court of Canada in Sagaz Industries Canada Inc., Sagaz Industries Inc. and Joseph Kavana v. 671122 Ont Limited, formerly Design Dynamics Limited [2001] 2 R.C.S. to fall within the trial judge’s discretion but to be used “sparingly and with the greatest care”.

27      The Court is concerned with never ending litigation. The competing tensions are between finality to the hearing process and the need to prevent unduly protracted legal proceedings against the need to ensure that important and relevant evidence is not ignored, since doing so might lead to a substantial injustice (See Justice P. Lauwers at par. 16 in Jackson v. Corp. of the City of Vaughan, 2009 CanLII 717 (ONSC).

Test to Admit New Evidence

28      The test to re-open evidence of a trial to admit new evidence, is a two-prong test, both parts of which must be satisfied by the moving party:

  1. First, could the evidence have been obtained before trial by the exercise of reasonable diligence?
  2. Second, would the evidence, if presented at trial, probably have changed the result?

Availability of Evidence at Trial and Reasonable Diligence

29      The reasonable diligence requirement may be “relaxed in exceptional circumstances where necessary to avoid a miscarriage of justice” (See Degroote v. Canadian Imperial Bank of Commerce, [1999] O.J. No. 2313 (C.A.) at p. 2.). To avoid a miscarriage of justice a “trial judge has the discretion to permit a matter to be reopened and new evidence to be admitted even if the evidence could have been placed before the Court in the first instance” (See 130734 Ontario Inc. v. 1243058 Ontario Inc., [2001] O.J. No. 257).

30      Nordheimer J. noted at p. 3 – 4 in 1307347 Ontario Inc.:

It is also my view that a miscarriage of justice involves more than just a finding that a different result might have occurred. It involves a finding that, absent the reopening of the matter and the reversal of the original determination, a fraud would be perpetrated or the giving of perjured evidence or the deliberate misleading of the court would be countenanced.

31      In Qit Fer et Titane Inc. v. Upper Lakes Shipping Ltd. (1991), 3 O.R. (3D) 165, at p. 168, Gravely J. suggested that fraud was the usual requirement, but it may not be the only basis to find a miscarriage of justice:

Where justice demands it and particularly where fraud is involved or the court may have been deliberately misled, a judge is justified in departing from the diligence requirement in order to prevent a miscarriage of justice.

Validity vs. Administration of a Trust

Validity vs. Administration of a Trust

Tyrell v Tyrell 2017 ONSC 4063 dealt with a jurisdictional case as to whether the  Supreme Court of Ontario had jurisdiction to deal with the administration of a trust as opposed to the validity of a trust. The court found that the test is whether there was a “substantial connection” with Ontario in the administration of the trust and found that since there was, the Ontario court had jurisdiction as  the address of the administrating trustee was in Ontario even though the trust assets were elsewhere.

Analysis

12      I conclude that this Court has jurisdiction over matters affecting the administration of the Will. The issue of jurisdiction is resolved on the basis of the distinction between the “validity” of a trust and the “administration” of a trust.

13      The Respondents did not provide any cogent submissions or any authority for the submission that different common law choice of law (jurisdictional) rules apply to inter vivos trusts versus testamentary trusts. The same rules apply in resolving choice of law issues. Choice of law questions are resolved on the basis of the correct characterization of the issue under consideration. Trust issues may be characterized as one of formal or essential validity; capacity; revocation; construction; administration; procedure or succession etc.: See Ian M. Hull & Suzana Popovic-Montag, Macdonell, Sheard and Hull on Probate Practice, 5th ed (Toronto: Carswell, 2016), at 407. Canadian courts have drawn a distinction between the validity and administration of a trust: Re Nanton Estate (1948), 56 Man. R. 71 (Man. K.B.) and Jewish National Fund.

14      Validity of the trust refers to all matters concerned with a determination of whether a trust is valid. There are two components: a) formal validity and b) essential validity. Formal validity is concerned with matters of form required to create a valid trust. It encompasses such matters as writing, witnesses, validity of signatures, etc. Essential validity refers to validity of the provisions of the trust: for example, capacity of the testator or the settlor and whether the provisions of the trust are permissible in law: see Donovan W.M. Waters, Mark Gillen & Lionel Smith, Waters’ Law of Trusts in Canada, 3rd ed (Toronto: Carswell, 2005), at 1379.

15      Administration of the trust refers to all matters relating to the administration or management of the trust. These include powers and obligations of the estate trustee, the distribution of assets, dealing with creditors, etc.: see Waters’ Law of Trusts in Canada, at 1380; Probate Practice, at 410.

16      The analytical framework for resolving choice of law issues can be summarized as follows: a) determine the correct characterization of the issue; b) determine the jurisdiction that is most “intimately or rationally connected” to the issue; c) determine applicable law of the jurisdiction most “intimately or rationally connected” to the issue; and d) apply the applicable law to resolve the issue or dispute: see Waters’, at 1373-1379; Probate Practice, at 407-410.

17      The remedies the Applicants seek are premised on allegations of the failure of the estate trustee to distribute assets of the estate in accordance with the provisions of the Will, failure to provide a proper account for the assets of the estate, including assets that form the residue of the estate, improper management and management of the estate for an improper purpose. All of these matters are correctly characterized as matters relating to the administration of the trust.

19      A determination of which law applies to matters relating to the administration of the trust is resolved by determining the jurisdiction with the most “substantial connection” to the trust: see Waters’, at 191-192. The “substantial connection” analysis is fact driven and factors such as the location of the assets, the testator domicile, location of the beneficiaries and the location of the trustees are all relevant considerations.

20      The residence or place of business of the estate trustee (administrator) is usually the most important factor in the “substantial connection” analysis because it is the trustee who carries out the business of administering the trust: see Waters’, at 191-192; Branco, at paras. 19-22.

21      All the substantial assets of the estate are located in Nevis. A few bank accounts are located in Ontario. The testator was domiciled in Nevis. The beneficiaries are resident in Nevis, Ontario and New York. The estate trustee is resident in Ontario. Only the estate trustee is authorized to administer the Will. The estate trustee administers the Will from the province of Ontario. For the purpose of administering the Will, the most significant connecting factor is the residence of the estate trustee. Therefore, the Will is most substantially connected to the province of Ontario and the applicable law on matters relating to the administration of the Will is the law of Ontario. Thus, the Courts of Ontario have jurisdiction over matters relating to the administration of the Will. Therefore, the estate trustee, Janet Tyrell, shall comply with the order previously described.

Trustee Personally Liable For Trust Contract

Trustee Personally Liable For Trust Contract

In Johnson v North Shore Yacht Works Corp. 2017 BCSC 1229 the court held that a trustee of a trust was personally liable for a contractual debt that was entered into by the trust.

 The case concerned responsibility for the costs of repairs carried out to a yacht that was an asset of the Chester Allison Johnson Alter Ego Trust (the “trust”). The plaintiffs are the trustees of that trust.
They claimed that the defendant had undertaken to complete the repairs for a fixed-price amount of $80,000, and claimed damages for wrongful seizure and negligent storage.
The defendant counterclaimed for all of its parts and labour charges and storage costs.
 Reasons for Judgment released November 3, 2014, indexed as Johnson v North Shore Yacht Works Corp., 2014 BCSC 2057, awarded net damages of $118,219 plus costs on the counterclaim against the plaintiff trustees.
Information obtained on an examination in aid of execution  indicated that substantially all of the assets of the trust had been transferred to its sole beneficiary, and that the trust was insolvent.
The defendant then registered a certificate of judgment against two parcels of land owned in whole or in part by Mr. Johnson,
It is a long-standing principle of trust law that a trustee is personally liable on contracts into which it enters on behalf of the trust. The trustee’s remedy is to seek indemnity from the trust for that liability. The only exception to the trustee being personally liable is where he has specifically contracted to limit his liability to the assets of the trust.
The authorities bear this out: see, for instance, Benett v Wyndham (1862), 4 DeG F & J 259 (CA); Muir v City of Glasgow Bank (1879), 4 App Cas 337 (HL); Davis v Sawkiw (1983), 38 OR (2d) 466 (H Ct J); Pettit, Equity and the Law of Trusts, 12th ed (2012) at pp 413-414; and Underhill and Hayton, Law Relating to Trusts and Trustees, 18th ed (2010), p. 1066, para 81.5.
 In Hall v MacIntyre, [1934] 2 WWR 145 (BCCA), Chief Justice Macdonald put it this way:
It is well-understood law that an executor or trustee who makes a contract in relation to his trust is personally liable to the contractor for the price agreed upon.

Dysfunctional Families: Financial Control

Dysfunctional Families: Financial Control

Financial abuse in dysfunctional families is a common tactic to gain power and control within the family.

I was reminded about this fact when reading an article in the British Telegraph today about a large divorce settlement between  the long time spousal owners of Laura Ashley. One of the daughters of the family was  asked why such a wealthy family would undergo such a long bitter divorce proceeding, and she responded that it was not about the money, but was really about control. She related how her father was absent throughout much of her life and manipulated the family through financial control.

This financial abuse is one of the most powerful methods of keeping family members to toe the line or risk financial disinheritance or worse. Research indicates that financial abuse is experienced in 98% of abusive relationships. The victims  indicate that their lack of ability to provide financially for themselves was the main reason for staying in our returning to such a battering relationship.

Financial control/abuse occurs across all socio-economic, educational, ethnic and racial groups. It applies to both elder  and domestic abuse.

As with other forms of abuse, financial abuse may begin subtly and progress over time. The manipulation is often hidden amongst the family while the abuser publicly appears charming and the epitome of a good family provider.

Typically what  ultimately results is the concept of an “allowance” for good behavior and  deprivation of monies for perceived bad behavior.

The adult child in the Laura Ashley family for example, was disowned by the financially abusive father for marrying someone she loved, but whom the father did not approve. One can easily understand the untenable position that the daughter was put in between having to choose between marrying the person she loved or being disowned by her wealthy father.

Common examples of financial control or abuse are:

  • Forbidding family members to work or have their own funds;
  • controlling how money is spent
  • hiding assets
  • forcing family members to work in a family business without pay
  • withholding funds for basic needs and care
  • withholding money or giving meager allowances
  • the abuser spending money lavishly on him or herself while depriving the family
  • refusing to pay child or spousal support or manipulating court proceedings by hiding or not disclosing assets
  • threatening family members with homelessness and other forms  of insecurity
  • denying education or employment opportunities
  • intentionally squandering or misusing family resources
  • controlling telephone, vehicle, and other forms of isolation
  • blaming the victim for inability to manage money
  • destruction of personal property belonging to the victim
  • forging signatures for financial transactions

Sworn Financial Disclosure

Sworn Financial Disclosure

Shinder v Shinder 2017 ONSC 4177  sets out the importance of how sworn financial disclosure in family (and estate) court actions must be honest and complete as it is a “bedrock principle” that the parties are entitled to rely upon.

The Supreme Court of Canada has confirmed that honest, complete financial disclosure is a bedrock principle in family law disputes. In Rick v. Brandsema, 2009 SCC 10, 303 D.L.R. (4th) 193, Abella J. states, at para. 47:
a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances.
The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation.
30  I adopt the comments of Aitken J. in Buttrum v. Buttrum (2001), 15 R.F.L. (5th) 250, at para. 68 (Ont. S.C.) that the obligation to disclose requires completeness, clarity, and simplicity in disclosure made in sworn Financial Statements:
Complete, honest and on-going financial disclosure is required during the course of a family law case. That is the very purpose of r. 13. [ . . . ] The purpose of financial statements is to ensure disclosure is made quickly and repeatedly as circumstances change, and in a manner that is consistent and easy to follow. [Emphasis added.]
31 Disclosure cannot be selective or misleading. Understanding the assets and debts at marriage and separation is not meant to be a costly game, requiring parties to read the fine print seeking clarification and ferreting out information.
32 Parties are entitled to, and do rely on sworn Financial Statements to accurately set out the assets and interests and values the property of a party as a basis for settling their cases. Accurate and complete Financial Statements are crucially important

The Presumption of Resulting Trust

Rebutting the Presumption of Resulting Trust

The BC Appeal Court in Winstanley v Winstanley 2017 BCCA 265 ordered a new trial on the basis that the trial Judge erred in his determination as to whether the evidence at trial had rebutted the presumption of a resulting trust that arises when a parent transfers an asset for little or no consideration to an adult child. The Court stated very clearly that there is no longer any presumption of advancement from a parent to an adult child as per the decision of Pecore v Pecore 2007 SCC 17.

Analysis

29      I begin my analysis by reviewing Pecore v. Pecore 2007 SCC 17, which is authority for the proposition that there is no longer a presumption of advancement between parents and their adult children. The Court decided that in modern social conditions the reverse is true: there is a presumption of a resulting trust where a parent makes a gratuitous transfer to an adult child, such as placing funds in a jointly-held bank account.

30      The facts in Pecore involved joint accounts held by a father and his adult daughter. The father transferred the majority of his assets to these joint accounts before he died. The terms of the accounts included a right of survivorship upon his death. At trial, the judge held that the presumption of advancement applied and the daughter was entitled to the legal and beneficial ownership of the assets. The question on appeal was whether the presumption of advancement as between a parent and child had continuing relevance under present social conditions. Rothstein J. for the majority held at paras. 4, 5 and 6:

[4] It is not disputed that the daughter took legal ownership of the balance in the accounts through the right of survivorship. Equity, however, recognizes a distinction between legal and beneficial ownership. The beneficial owner of property has been described as “[t]he real owner of property even though it is in someone else’s name”: Csak v. Aumon (1990), 69 D.L.R. (4th) 567 (Ont. H.C.J.), at p. 570. The question is whether the father intended to make a gift of the beneficial interest in the accounts upon his death to his daughter alone or whether he intended that his daughter hold the assets in the accounts in trust for the benefit of his estate to be distributed according to his will.

[5] While the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer, intention is often difficult to ascertain, especially where the transferor is deceased. Common law rules have developed to guide a court’s inquiry. This appeal raises the following issues:

  1. Do the presumptions of resulting trust and advancement continue to apply in modern times?
  2. If so, on what standard will the presumptions be rebutted?
  3. How should courts treat survivorship in the context of a joint account?
  4. What evidence may courts consider in determining the intent of a transferor?

[6] In this case, the trial judge found that the father actually intended a gift and held that his daughter may retain the assets in the accounts. The Court of Appeal dismissed the appeal of the daughter’s ex-husband.

31      Rothstein J. noted that the rebuttable presumption of law “is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption” (at para. 22). The presumptions of advancement and resulting trust apply to gratuitous transfers “where evidence as to the transferor’s intent in making the transfer is unavailable or unpersuasive” (at para. 23).

32      The effect of the majority’s decision in Pecore is that an adult child  whether independent or dependent  who receives a gratuitous transfer from a parent is now presumed to hold the transferred property on resulting trust for the parent, whereas formerly the parent was presumed to have advanced the property to the child as a gift.

33      Rothstein J. noted that the presumption of resulting trust may be rebutted with sufficient evidence:

[41] There will of course be situations where a transfer between a parent and an adult child was intended to be a gift. It is open to the party claiming that the transfer is a gift to rebut the presumption of resulting trust by bringing evidence to support his or her claim. In addition, while dependency will not be a basis on which to apply the presumption of advancement, evidence as to the degree of dependency of an adult transferee child on the transferor parent may provide strong evidence to rebut the presumption of a resulting trust.

[Emphasis added.]

34      Rothstein J. also considered the interaction between the right of survivorship in a joint account and the presumption of resulting trust at law. He concluded at para. 48:

[48] Courts have understandably struggled with whether they are permitted to give effect to the transferor’s intention in this situation. One of the difficulties in these circumstances is that the beneficial interest of the transferee appears to arise only on the death of the transferor. This has led some judges to conclude that the gift of survivorship is testamentary in nature and must fail as a result of not being in proper testamentary form: see e.g. Hill v. Hill (1904), 8 O.L.R. 710 (H.C.), at p. 711; Larondeau v. Laurendeau [1954] O.W.N. 722 (H.C.); Hodgins J.A.’s dissent in Re Reid (1921), 64 D.L.R. 598 (Ont. S.C., App. Div.). For the reasons that follow, however, I am of the view that the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature. This has also been the conclusion of the weight of judicial opinion in recent times: see e.g. Mordo v. Nitting, [2006] B.C.J. No. 3081 (QL), 2006 BCSC 1761, at paras. 233-38; Shaw v. MacKenzie Estate (1994), 4 E.T.R. (2d) 306 (N.S.S.C.), at para. 49; and Reber v. Reber (1988), 48 D.L.R. (4th) 376 (B.C.S.C.); see also Waters’ Law of Trusts, at p. 406.

. . .

[53] Of course, the presumption of a resulting trust means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will.

[Emphasis added.]

35      Despite finding that the trial judge had erred by applying the presumption of advancement, the majority in Pecore affirmed the judge’s disposition because there was strong evidence showing the father intended to gift the daughter the right of survivorship to the joint accounts, thus rebutting the presumption of resulting trust.

36      I now turn to the application of the principles emerging from Pecore to the facts of this case.

37      The correct legal analysis in the present case required the judge to first instruct himself that there is no presumption of advancement as between a parent and an adult child and to apply a presumption of resulting trust in regard to any gratuitous transfers of Jessie’s property to Carl. The burden of proof would then rest on Carl to rebut the presumption with respect to each transfer.

B.C. Case Transferred to Alberta

B.C. Court Case Transferred to Alberta

In subsequent reasons for judgement Cresswell v Cresswell 2017 BCSC 1183 a BC Court ordered a court action transferred to Alberta after finding that the plaintiff did not have standing to bring the action in BC as she was ordinarily resident in Alberta, did not have real or substantial connections to BC and that Alberta was the more appropriate forum for the court action..

The Court:

In reasons for judgment indexed at 2017 BCSC 178, I found that, at the time of her death, Barbara Edith Cresswell was ordinarily resident in Alberta and did not have any real and substantial connections to British Columbia, and that Alberta is the more appropriate forum in which to hear these proceedings. Pursuant to that decision, I received further submissions from the parties about transferring this proceeding to Alberta. These are my reasons concerning that transfer.

The plaintiff says that this Court can impose conditions on a transfer, even when this Court lacks territorial jurisdiction, as a result of ss. 14(2) and 15 of the Court Jurisdiction And Proceedings Transfer Act, S.B.C. 2003, c. 28 [CJPTA]. Those sections state:

14(2) The Supreme Court by order may request a court outside British Columbia to accept a transfer of a proceeding, in which the Supreme Court lacks territorial or subject matter competence if the Supreme Court is satisfied that the receiving court has both territorial and subject matter competence in the proceeding.

. . .

15 (1) In an order requesting a court outside British Columbia to accept a transfer of a proceeding, the Supreme Court must state the reasons for the request.

(2) The order may

(a) be made on application of a party to the proceeding,

(b) impose conditions precedent to the transfer,

(c) contain terms concerning the further conduct of the proceeding, and

(d) provide for the return of the proceeding to the Supreme Court on the occurrence of specified events.

. . .

5      In my view, these sections empower this Court to impose conditions on the parties, not the receiving court. In addition, I am of the view that it would be rather presumptuous and inappropriate of this Court to attempt to impose conditions on the Alberta court’s conduct of this proceeding, particularly when it is that court, not this one, which has jurisdiction over this proceeding.

8      I therefore order that the file be transferred for all further purposes to Alberta and request that the Alberta court accept the transfer. Otherwise, counsel can make further submissions.