Trust Litigation

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Vancouver estate lawyers and trust litigation lawyers protect trust assets and property for the beneficiaries or real owners. A trust is when one person holds an asset for another person. The person who has control of the asset is not the real owner. If you lend your car to a friend, your friend is a trustee of your car because you are still the real owner. There are standalone trusts and will trusts. Many wills set up a trust such as the trustee holding money for the benefit of beneficiaries who are still children. The children are the beneficiaries or real owners of the money. The trustee holds the money for the children until they become adults.

The most common claims in trust litigation are breach of trust, constructive trust and resulting trust. A trustee must obey trust law and the terms of the trust. A breach of trust claim arises when a trustee chooses to not obey trust law or the terms of the trust. The beneficiaries or real owners have the right to hold the trustee accountable for any loss to the trust. A constructive trust claim is one remedy to hold the owner of property accountable to another person for a benefit received. The basic requirements for a constructive trust are an enrichment, a deprivation and no legal reason justifying the enrichment or deprivation. A resulting trust claim is when one person transfers an asset to another person for no consideration or money. A common example is a father or mother transferring a house, cottage or bank account into the name of a daughter, friend of son for free. In most cases, the law presumes that the real owner is still the original owner.

Breach of trust. In Langley v. Brownjohn, Judge Ballance says, “A breach of trust occurs when a trustee fails to carry out his obligations under the terms of the trust, under the rules of equity or imposed by statute. It may take the form of neglect, performing below the requisite standard of care in other ways or acting contrary to a trust obligation.” Examples of basic trust obligations are set out in the cases and the Trustee Act including,

  1. A trustee must follow the terms of the trust,
  2. A trustee must preserve the capital of the estate,
  3. A trustee must treat capital and income beneficiaries with an even hand,
  4. A trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments, and
  5. A trustee must always be ready to account and must pass his accounts within 2 years from the date of his appointment.

Trust litigation lawyers can claim damages for breach of trust when trustees break these rules, breach the terms of the trust and cause loss to the estate. There are provisions for the court to excuse a breach of trust, but the basic rule is the trustee is responsible to make good the loss. It is not uncommon for estate litigation lawyers to claim damages for breach of trust even when the trustee thought he was acting properly

Constructive trust. Over the last 50 years, Canadian courts began using the concept of unjust enrichment to address those situations where one person makes a substantial contribution to the property of another without getting paid for it. This was first developed in the area of family law with the Pettkus, Sorochan and Peter trilogy to help common-law spouses. Until recently, a common-law spouse only had a claim in unjust enrichment to gain a share of the property of the other spouse even after a 30 year relationship. The remedy for a claim in unjust enrichment is either money or a constructive trust over the other spouse’s property. For example, the court could impose a constructive trust to award a common-law wife a 50% interest in the husband’s property. While the Family Law Act now treats common law spouses and married spouses the same, constructive trust can still be used in any situation where one person makes a substantial contribution to another’s property without compensation.

In Wilson v. Fotsch, BC Court of Appeal Judge Huddart outlined the approach to a constructive trust/unjust enrichment claim,

  1. Benefit or an enrichment on a straightforward economic approach,
  2. Corresponding detriment which usually follows if there was a benefit or an enrichment, and
  3. Absence of a juristic reason for the enrichment, including under established categories such as contract and gift, and reasons to deny recovery such as public policy and legitimate expectations.

Judge Huddart also set out the defences to a finding of unjust enrichment, such as change of position, estoppel and delay. The 2 remedies for unjust enrichment are money if money alone is sufficient. If it is not sufficient, then a constructive trust over the property may be required. Next is how to quantify the remedy, whether on the basis of value received or value survived. And the last thing is whether there is any set off such as from a mutual receipt of benefits.

Trust litigation lawyers can bring an unjust enrichment claim seeking a constructive trust over property when acting for a child, helper or relative who made a substantial unpaid contribution to another by maintaining a home, renovating a home or taking care of an older person in his home.

Resulting trust. Trust litigation lawyers use the concept of resulting trust in those situations where one person gratuitously transfers property to another. In most cases, the law presumes that the recipient is holding the property in trust for the original owner. Resulting trust situations include 100% transfers and 50% transfers into joint tenancy. Property held in joint tenancy usually passes to the survivor on the death of the other party.

In Pecore v. Pecore, an aging father gratuitously put his bank account, income trusts and mutual funds into joint names with his adult daughter Paula. Upon his death, the accounts passed to Paula by right of survivorship. Paula’s separating husband tried to set these aside. The Supreme Court of Canada confirmed that the most important question in a gratuitous transfer is the actual intention of the transferor at the time of the transfer. The court also confirmed that the presumption of resulting trust applies to all gratuitous transfers except when the transfer is by a father or mother to a minor son or daughter. In British Columbia, a minor is a person under the age of 19. The presumption of resulting trust puts the onus on the recipient of the gift to prove on a balance of probabilities that it was a gift.

In determining intent, trust litigation attorneys and lawyers consider such evidence as any formal deed of gift and/or statutory declaration, post-transfer conduct and statements, bank documents, the control and use of the funds in the account, the granting of any power of attorney and the tax treatment of the joint accounts. Similar types of evidence are appropriate for the gratuitous transfer of real estate.

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