Focus On

TRUSTS - Express trusts - Requirements

Thursday, October 24, 2019 @ 9:08 AM  

Lexis Advance® Quicklaw®
Appeal by Brenda and others from a determination of legal and beneficial entitlement to income distributions from a real estate investment. The underlying litigation arose from a financial dispute between three adult siblings over a 10 per cent ownership interest in a large residential development acquired by their father, now deceased, in the 1960s. A development company held the remainder. The parties' ownership interest was always held by the mother in trust for the siblings in equal shares. One sibling, Brenda, disclaimed her interest in the investment for tax reasons, but continued to pay cash calls on her shares on behalf of her mother, with the understanding that she would eventually inherit the one-third interest and be gifted proceeds of income distributions. One brother, Marvin, sold his share to the development company. The other brother, Joseph, claimed he received his share from the mother. Distributions from the development company were paid to the mother and deposited in two bank accounts. The mother lacked capacity, and appointed Marvin and Joseph as her property attorneys. It was undisputed that Joseph held a beneficial interest in half of the funds. At issue was whether the other half of the funds belonged beneficially to the mother or to Brenda. Joseph and Marvin applied for directions. The application judge found that Brenda's beneficial interest resulted back to the mother by virtue of her disclaimer, with the mother being the sole legal and beneficial owner of the remaining disputed interest. The judge rejected Brenda's claim to the disputed funds predicated on gift. Brenda appealed.

HELD: Appeal allowed. The mother held the disputed funds as bare trustee for the benefit of Brenda. There was no issue that Brenda originally held the beneficial interest in a one-third share. She disclaimed a proprietary interest in the joint venture, but not her share of future distributions. The problems with the legal mechanism for an effective gift of the future distributions from the mother to Brenda did not preclude the possibility of a bare trust over the contents of the bank accounts. The only characterization of the legal relationship regarding the dispute that reflected the actual conduct and stated understanding of all of the parties, in particular the mother, was a bare trust held for the benefit of Joseph and Brenda. The three certainties were clearly met, the trust was duly constituted, and there was no issue as to formalities. No liability flowed to the trustee for breach of trust or conversion, as Brenda was entitled to receive the funds when asked on the terms and purpose of the trust, and Joseph had already taken his share. The actions of the parties did not give rise to a trust in respect of future distributions.

Rubner v. Bistricer, [2019] O.J. No. 4713, Ontario Court of Appeal, K.N. Feldman, S.E. Pepall and B. Miller JJ.A., September 19, 2019. Digest No. TLD-October212019009