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TRUSTS - Termination, revocation and variation - Rights to early termination

Tuesday, August 22, 2017 @ 8:28 AM  


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Appeal by Pallot from a decision dismissing his application for partition and sale of his leasehold interest on the basis that he lacked standing to bring the application. The appellant and respondent were brother and sister. The respondent sister was the sole leaseholder of the property which was subject to an agreement titled “Declaration of trust” (Trust). The property had been used as a recreational property for the parties’ families and was owned by the Convention of Baptist Churches of British Columbia (Landlord). Although the Trust described the respondent as a bare trustee for herself and the respondent, the Trust outlined the respondent’s duties, which included a requirement to manage the property in a just manner and to oversee the use and occupation of the property in accordance with the terms of the Lease. The parties agreed to share the costs of maintaining the property, and indemnify each other from other liabilities and expenses arising out of their respective uses of the property. After a falling out over maintenance and expenses, the appellant decided he wanted the sell his interest in the property, while the respondent wanted the property to remain in the family, which both parties agreed was their parents’ original intention. Until 2013, both parties regularly used the property. The application judge found that the appellant’s beneficial interest in the lease was an interest in land for the purposes of the Partition of Property Act (PPA), but not a possessory interest which would give him standing in a partition proceeding. The judge found that the language of the Trust applied to the question of costs such that the respondent was entitled to be indemnified as trustee for her costs on a full indemnity basis. The appellant argued that his beneficial interest under the Trust equated to a one half beneficial leasehold interest, which gave him standing to apply for partition and sale. The brother also appealed the order indemnifying the sister for her costs, submitting that the relevant Trust provision did not apply to claims brought against the respondent in her capacity as co-owner of the leasehold interest.

HELD: Appeal on the standing issue dismissed. Appeal on the issue of costs allowed in part. The appellant’s beneficial interest in the land did not include an immediate right to possession, which was a requirement for standing under the PPA. His interest under the Trust was the right to claim that the trust be performed in accordance with its terms. It was not an immediate right to possession of the trust property. The appellant’s entitlement to use the trust property was not immediate, but was subject to the limitations imposed by the Trust, such as an allocation of time by the respondent as trustee. The PPA was not intended to expand the scope of persons entitled to seek partition, but rather to provide greater flexibility than the former law as to the nature of the remedy and the availability of the remedy. The PPA did not broaden the rule in Saunders v. Vautier to allow for the collapse of trusts where one or more, but not all beneficiaries, were not satisfied with the manner of enjoyment dictated by the terms of the trust. As a result, the appellant’s interest remained that of a beneficiary of a trust holding a leasehold estate, and was not a possessory interest in the leasehold estate itself. Pursuant to the Trust and consistent with the common law, the indemnity of the Bare Trustee/Lessee was to be borne equally by the parties as the beneficiaries of the Trust.

Pallot v. Douglas, [2017] B.C.J. No. 1300, British Columbia Court of Appeal, D.M. Smith, J.E.D. Savage and G.J. Fitch JJ.A., July 6, 2017. Digest No. TLD-August212017004