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CORPORATIONS - Duties and powers of directors

Wednesday, May 27, 2020 @ 6:14 AM  

Lexis Advance® Quicklaw®
Appeal by the Martins from the trial judgment finding the appellant wife breached her obligation as a fiduciary not to allow a conflict of her duty as a director of ALPC with her own interests and was liable to ALPC under the corporate opportunity doctrine. The appellants were in the business of building and selling homes. They resided in the home they built. ALPC was incorporated to manage and finance a lottery to raise funds for a charity. The wife agreed to offer her home as the main prize. The charity purchased the appellants’ home for $1,075,000. The wife indicated she would be willing to repurchase the home from the winner. The winner agreed to sell the house to the appellants for $621,500. The trial judge determined that the husband received property subject to a trust, failed to make inquiries when he had knowledge of facts which would put a reasonable person on inquiry, and so was personally liable for involvement in the wife’s breach of her fiduciary duty as a director of ALPC. 

HELD: Appeal allowed. There was no evidence to support the judge’s characterization of the house as property that was held in trust for ALPC. There was no evidence that any of those who held title to the property in the relevant period ever intended to create a trust of the property in favour of ALPC. None of the purchase and sale transactions pertaining to the property in connection with the lottery suggested it was ever trust property. The record did not indicate how the husband could ever have been a constructive trustee for ALPC. The trial judge also erred in finding that the wife breached her fiduciary duty under the corporate opportunity doctrine by purchasing the house from the winner. The evidence did not permit a finding that ALPC had met the requirement that it was actively pursuing the possibility of purchasing the property from the lottery winners. ALPC never expressed any interest in purchasing the property. ALPC was not in the real estate business, so that opportunity was not in its line of business. It also had no funds for such a purpose, and the judge did not find that it could likely have obtained financing.

ALPC Housing Solutions Inc. v. Martin, [2020] N.S.J. No. 139, Nova Scotia Court of Appeal, D.P.S. Farrar, L.L. Oland and P. Bryson JJ.A., April 2, 2020. Digest No. TLD-May252020005