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TRUSTS - The trustee - Duties of

Thursday, September 09, 2021 @ 5:31 AM  

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Appeal by the plaintiff from the dismissal of her actions brought in her personal capacity and as executor of her mother’s estate against the family lawyers, her brother’s estate and his company. In 1962, the appellant’s parents settled a parcel of land into a Trust. The mother was the income beneficiary during her lifetime and the appellant was the contingent capital beneficiary, inheriting upon the mother’s death in 2007. In addition to the Trust property, there were three contiguous parcels owned by the mother, the brother’s development company and the brother’s wife. Since the 1970s, the appellant’s father and her brother tried to have the properties rezoned so that the value would be maximized by subdivision and the sale of individual lots. The brother and Klassen, a lawyer with the respondent law firm, were the trustees. The rezoning was completed by 1994. Carved out of the Trust property was a parcel for Parkland, which was sold to the Province. The proceeds were used to further the development. As part of the development process, a Mutual Co-operation Agreement and a Development Agreement were executed. The appellant argued that the Trust assets would have been worth more had a more favourable development agreement been entered and had the trust assets been managed appropriately. She further alleged that the solicitors failed to advise her and her mother that they should seek independent legal advice when entering into the agreements and failed to disclose material information in relation to the developer’s fees. The appellant also complained that monies received from the sale of the Parkland portion should have been invested. The trial judge dismissed the mother’s claim in its entirety and dismissed the appellant’s claim, except with respect to Klassen. That issue remained outstanding pending the passing of accounts. The trial judge found that the law firm was in a fiduciary relationship with the appellant and breached its fiduciary duties by acting in situations of clear conflict by acting for multiple parties at times. However, the trial judge found that the close involvement of the appellant’s husband and her son, both lawyers, in the entire process relating to the properties was such that their legal advice constituted independent legal advice to the appellant, thus rendering the firm’s breach irrelevant. The trial judge found the law firm rebutted the presumption that non-disclosure invalidated the appellant’s consent. The trial judge concluded that the failure to generate the anticipated return on the property investment was a problem attributable to the market, not to the defendants. The trial judge found the mother received independent legal advice from another solicitor. The trial judge found Klassen, who took over the role of trustee from Peg in 2003, made little effort to discharge his obligations as trustee or to ensure proper management of the trust and ordered that a proper accounting take place.

HELD: Appeals dismissed. The trial judge did not err in finding that the appellant received independent legal advice from her husband and son in relation to the property development agreements. While the respondent law firm failed to properly deal with the conflicts at play, the trial judge’s conclusion that the appellant received proper legal advice when she signed the Development Agreement was supported by the evidence. While the trial judge erred in his conclusion that the quotes from other developers were not material, the judge did not base his ultimate conclusion solely on the basis that the quotes were not material. His finding that the appellant would have agreed to the terms of the Development Agreement even with the other quotes was well-supported by the evidence. The trial judge’s conclusion that, at the time the agreements were made, the conflicts of interest were apparent to everyone, and no one complained, was supported by the evidence. Given the trial judge’s finding regarding the breach allegations against the law firm, a similar disposition regarding the allegations against the brother and his company must follow. The trial judge’s conclusion that the mother received independent legal advice was supported by the evidence. He did not err in finding that the law firm proved that the mother would have suffered the same loss regardless of the breach.

Hutchison v. Moore Estate, [2021] B.C.J. No. 1693, British Columbia Court of Appeal, E.A. Bennett, G.J. Fitch and B. Fisher JJ.A., August 4, 2021. Digest No. TLD-September62021006