Knowing Assistance of a Breach of Trust

Knowing Assistance of a Breach of Trust

In Trustees of the IWA v Wade 2019 BCSC 1085 the court successfully sued the defendant for knowingly assisting in the breach of a trust upon the plaintiff.

The leading case with respect to knowing assistance in breach of trust is the Supreme Court of Canada decision in Air Canada v M&L Travel Ltd. (1993) 3 SCR 787.

In that case, a travel agency breached a contractual trust by failing to hold funds it collected from the sale of Air Canada airline tickets in trust for Air Canada as required by contract. The funds were retained in the travel agency’s general operating account rather than in the trust account set up for the purpose of holding such funds.

The directors of the travel agency were found to be personally liable to Air Canada for the amount the of the ticket sales.

The court discussed the general principles regarding personal liability of a third-party, or “ stranger to a trust” for knowingly participating in a breach of trust at 808 – 811.

The court stated “ having found that the relationship between the travel agency and the respondent airline was a trust relationship, there is no question that the travel agency’s actions were in breach of trust. The travel agency failed to account to the respondent for the monies collected through sales of tickets. What remains to be decided is whether the directors of the travel agency should be held personally liable for the breach of trust on the basis they were constructive trustees. Whether personal liabilities is imposed on the stranger to a trust depends on the basic question of whether the stranger’s conscience is sufficiently affected to justify the imposition of personal liability.”

The only basis upon which the directors could be held personally liable as constructive trustees is under the “ knowing assistance “ head of liability. Persons who assist with knowledge in a dishonest, and from the fraudulent design on the part of the trustees will be liable for the breach of trust as constructive trustees. This basis of liability raises two main issues: the nature of the breach of trust and the degree of knowledge required of the stranger.

A stranger to a trust will be liable if he or she knowingly assisted the trustee in a fraudulent and dishonest breach of trust.

Where the trustee is a Corporation, rather than an individual, the inquiry as to whether the breach of trust was dishonest and fraudulent may be more difficult to conceptualize, because the corporation can only act through human agents who are often strangers to the trust twos liability is an issue.

The standard best accords with the basic rationale for the imposition of personal liability on a stranger to a trust, which is whether the stranger’s conscience is sufficiently affected to justify the imposition of personal liability. In that respect, the taking of a knowingly wrongful risk resulting in prejudice to the beneficiaries is sufficient to prove personal liability. To find liability for knowing assistance in a breach of trust, the court described the necessary degree of knowledge of the stranger to a trust as follows:

“the knowledge requirement for this type of liability is actual knowledge; reckless or willful blindness will also suffice. To be held liable the stranger must have had both actual knowledge of the trust existence and actual knowledge that what is being done is improperly in breach of that trust—though, of course, in both cases, a person willfully shutting his eyes to the obvious is no different position than if you’d kept them open.

Whether the trust is created by statute or by contract may have an impact on the question of the stranger’s knowledge of the trust. If the trust was imposed by statute, then he or she will be deemed to have known of it. If the trust was contractually created, then whether the stranger knew the trust will depend in his or her familiarity or involvement with the contract or it.

If the stranger received a benefit as a result of the breach of trust, this may ground an inference that the stranger knew of the breach– the receipt of a benefit will be neither a sufficient nor necessary condition for the drawing of such an inference.

Suing Parents For Breach of Fiduciary Duty

Suing Parents For Breach of Fiduciary Duty

In Hughes v Hughes 2019 BCSC 1109 a daughter sued her parents for breach of fiduciary duty for forcing her to have an abortion when she was 17 years of age.

The claim was dismissed for being outside of the statute of limitations, but the court reviewed the leading case relating to the nature of parental fiduciary duty, as set out in KLB v British Columbia 2003 SCC 51 at paragraphs 48-49:

48. “ What then is the content of the parental fiduciary duty? This question returns us to the cases in the wrong at the heart of breaches of this duty. The traditional focus of breach of fiduciary duty is breach of trust, with the attendant emphasis on disloyalty and promotion of one’s own or others’ interests at the expense of the beneficiary’s interests. Parents stand in a relationship of trust and owe fiduciary duties to their children. But the unique focus of the parental fiduciary duty, as distinguished from other duties imposed on them by the law, is breach of trust. Different legal and equitable duties may arise from the same relationship and circumstances. Equity does not duplicate the common-law causes of action, but supplements them. Where the conduct evinces breach of trust, it may extend liability, but only on that basis. In Norberg v Wynrib (1992) to SCR 226. it was stated in negligence and contract, the parties are taken to be independent and equal actors, concerned primarily with their own self-interest. The essence of the fiduciary relationship, by contrast, is that one party exercises power on behalf of another, and pledges himself or herself to act in the best interests of the other. “

49. “ I have said that concern for the best interests of the child informs the parental fiduciary duty. But the duty imposed is to act loyally, and not to put one’s own or others’ interests ahead of the child’s in a manner that abuses the child’s trust. This explains the cases referred to above. The parent who exercises undue influence over the child in economic matters for his own gain has put his own interests ahead of the child’s, in a manner that abuses the child’s trust in him. The same may be said of the parent or uses a child for his sexual gratification or parent who, wanting to avoid trouble for herself or her household, turns a blind eye to the abuse of a child by her spouse. The parents need not, as the Court of Appeal suggested in the case at bar, be consciously motivated by a desire for profit or personal advantage; nor does it have to be her own interests, rather than those of a third-party, that she puts ahead of the child’s.

It is rather a question of disloyalty – of putting someone’s interests ahead of the child’s in a manner that abuses the child’s trust. Negligence, even aggravated negligence, will not ground parental fiduciary liability, unless it is associated with breach of trust in this sense.

Settlement Agreement Breached

Settlement Agreement Breached

Stewart v . Stewart 2019 BCSC 985 found a settlement agreement had been breached when one party insisted that mutual releases be signed when such term had not specifically been included in the settlement agreement. The court specifically found that there was no implied term that the plaintiff would provide a mutual release before the defendants had to pay the plaintiff.

Where the alleged contract contemplates further negotiations, the question remains the same: whether the parties reached an agreement on essential terms of the agreement, or simply intended to defer their obligations until a final agreement could be reached. Berthin v Berthin 2016 BC CA at para. 49.

Berthin further stated that when examining the settlement agreement, the court should at the first stage, consider “whether the parties reached consensus ad idem. In making this determination, the court does not consider with the parties subjectively intended, but whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract .”

A contract exists at common law if a reasonable person would understand that a contract formed, and what is essential terms were Salimen v Garvie 2011 BC SC 339 at paragraphs 32 – 33.

There are three ways that terms can be implied into a contract:

1) Based on custom or usage;
2) as legal incident of a particular class or kind of contract;
3) based on the presumed intention of the parties where the implied term must be necessary to give business efficacy to a contract or as otherwise meeting of the “reasonable bystander “test as a term which are the parties would agree they assumed. Canadian Pacific Hotels v. Bank of Montréal (1999) 1 SCR 711

In failing to find an implied term that the plaintiff would provide a mutual release, the court stated that it was following the direction of the BC Court of Appeal in Marquest Industries v Willows Poultry farms LTD (1968) 1 DLR 513 at paragraph 12:

“Every effort should be made by a court to find a meaning, looking at substance and not mere form, and that difficulties in interpretation do not make a clause bad as not being capable of interpretation, so long as a definite meaning can properly be extracted. In other words, every clause in the contract must, if possible, be given effect to.”

The court emphasized the words ”every clause in a contract must, if possible, be given effect to”.

Profanity Doesn’t Terminate Marriage Like Relationship

Profanity Doesn't Terminate Marriage Like Relationship

Re Landriault Estate 2019 BCSC 1089 held that one party calling the other a profanity was insufficient to terminate a long-standing marriage like relationship.

The deceased died intestate and three adult children contested a claim of a spouse asserting a long time marriage like relationship with the deceased.

The court determined the case by way of a summary trial based on affidavits.

The children alleged that the surviving spouse terminated the marriage like relationship in or about 2011, but had scant evidence of any such termination.

The court reviewed the Court of Appeal decision in Robledano v Queano 2019 BCCA 150 that stated that section 2 (2) (b) WESA dealing with a person ceasing to be a spouse under the act when one or both persons terminate the marriage like relationship.

The court stated:

“The question of whether a person has terminated the relationship requires a judge to consider the expressed and implicit intentions of each spouse, as well as the objective evidence concerning the subsistence of the relationship. The determination is a judgment call for the trial judge – the application of a broad legal standard to the factual circumstances of an individual case. It is a question of mixed law and fact.”

The court reviewed the various series of factors from Molodowich v Pentinnen ( 1980) RFL 376 , which are often applied by the courts to determine whether a marriage like relationship exists.
One of the first of several questions is did the parties live under the same roof and what were the  sleeping arrangements. The court found that they did not live under the same roof due to her medical needs, when she was moved into a care home in or about 2011.

With respect to the question of sexual relations the court found that the parties had not had sexual relations since 1997 when the deceased was injured in a motor vehicle accident. The spouse however, spent virtually all day every day with her and ate meals with her and weathered her outbursts.

The court concluded that the only objective evidence that the deceased terminated the spousal or marriage like relationship with the spouse was that she referred to him and derogatory terms, called him profane names, ordered him out of her room and exhibited other outbursts of temper in his general direction.

The deceased, however, was known for such outbursts and was also rude to staff.

The judge specifically stated at paragraph 70 “ I find that calling someone asshole, particularly when the utterer is prone to outbursts, was insufficient to terminate this long-standing marriage like relationship. So are comments like not wanting to see his face , nor caring where he was.”

The court concluded that the marriage like relationship had not been terminated, and the spouse was awarded the estate in accordance with the intestate provisions set out in section 21 of WESA.

Joint Retainers in Estate Disputes

Joint Retainers in Estate Disputes

Sales v Fisher 2019 BCSC 1050 dealt with a common situation in estate disputes, namely where two or more clients retain the same lawyer in what is known as a joint retainer.

Before entering such a relationship, the lawyer must canvass with the prospective clients that they are all of the same interest, and in agreement as to how to divide litigation wins or losses.

Each province has a professional conduct handbook governing the legal profession in that province that basically codifies the law, as set out in Phipson On Evidence  as follows:

“A joint retainer is when two parties (or more) employ the same solicitor, the rule is that communications passing between either of them, and the solicitor, in his or her joint capacity, must be disclosed in favor of the other.e.g. , a proposition made by one, to be communicated to the other; or instructions given to the solicitor in the presence of the other; though is otherwise as to communications made to the solicitor in his exclusive capacity.

The court stated that this is trite law.

In other words, when a lawyer is acting for two or more clients at the same time, all communications must be disclosed to all parties, which makes it near impossible for one  client to have a confidential talk with the lawyer without the lawyer being ethically bound by the joint retainer to communicate that communication to the other clients.

Mental Capacity and Medical Records

Mental Capacity and Medical Records

Re Singh Estate 2019 BCSC 272 reviewed the law of both mental capacity as well as the admissibility of medical records under s. 42 Evidence Act and supporting case law.

The court admitted the medical records as business records for the fact that the statements therein were made.

The direct observations of the various medical practitioners in the hospital records are admissible and relevant to the issue of suspicious circumstances.

Hospital records, including nurses notes, made, contemporaneously by someone having a personal knowledge of the matters then being recorded and under a duty to make the entry or record should be received in evidence as prima facie proof of the facts stated therein.

The principles were stated in McTavish v . McGillivary (1997) 38 BCLR (3d) 306 at 311 – 12:

1) the notes taken must be made, contemporaneously;
2) the notes must be made by someone having a personal knowledge of the matters being recorded;
3) the notes must be made by someone who has a duty himself or herself to record the notes or to communicate the notes to someone else to record as part of the usual and ordinary course of their business;
4) the matters which are being recorded must be of the kind that would ordinarily be recorded in the usual and ordinary course of that business;
5) a statement in the records of the fact that a certain diagnosis was made will be admissible;
6) recorded observations, diagnosis and opinions will be admissible providing they are recorded in accordance with points 1 through 4;
7) the fact that the referring Dr. relied upon another Dr.’s opinion to assist in coming to his or her own diagnosis and opinion is only evidence of that fact, so that the other opinion does not become evidence unless it is otherwise admissible. Accordingly, it is only evidence of the fact that the referring Dr. wished or required that opinion to be received before forming his or her own opinion;
8) statements made by parties or by experts which are recorded in the usual and ordinary course of business, but which lie outside the exception to the hearsay rule are hearsay and will not be admitted into evidence unless they can be brought within section 14 of the evidence act, which allows for the admissibility of such statements. If it can be shown that they are proof of a prior inconsistent statement.

Cambie Surgeries Corp. v BC (AG) 2018 BCSC 859 held that any statement by the patient or any third party that is not within the observation of the doctor or person who has a duty to record such observations in the ordinary course of business is not admissible for any purpose and will be ignored by the trier of fact.

S. 58 WESA: Fixed Intention of Asset Disposal Required

S. 58 WESA: Fixed Intention of Asset Disposal Required

Re Cook Estate 2019 BCSC 417 applied Hadley Estate 2017 BCCA 311 that the applicable test under section 58 WESA has two main parts:

1) whether the record, document or writing is authentic and,

2) whether the record, document or writing represents the deliberate or fixed and final intention of the deceased person.

Section 58 of WESA is a broad curative provision that allows the court to have the discretion to validate a document that is not been made in compliance with the formalities of will making as found in section 37 WESA, and allows the document to be admitted to probate, if satisfied that the document represents the testamentary intentions of the will maker.

The purpose of the remedial provision is to avoid the defeat of a will makers genuine intentions due to some technical defect.

The Court of Appeal in Hadley Estate approved of the following passage from the Estate of Young 2015 BCSC 182:

“Testamentary intention means much more than the expression of how a person would like his or her property to be disposed of after death. The key question is whether the document records a deliberate or fixed and final expression of intention as to the disposal of the deceased property on death. A deliberate or fixed and final intention is not the equivalent of an irrevocable intention, given that a will, by its nature is revocable until the death of its maker. Rather, the intention must be fixed and final at the material time, which will vary depending on the circumstances.

The Young Estate ibid. at paragraph 36 listed relevant factors to consider:

“ A wide range of factors may be relevant to establishing the deceased testamentary intentions in the particular case. Although context specific, these factors may include the presence of the deceased signature, the deceased’s handwriting, witness signatures, revocation of previous wills, funeral arrangements, specific bequests, and the title of the document.

Other factors identified in the authorities also include whether the language in the document connotes a sense of finality, or is precatory ( non binding words such as “wish” or “hope for”) in nature. Lane Estate 2015 BCSC 2162