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TRUSTS - Purpose trusts - Non-charitable purpose trusts

Thursday, August 24, 2017 @ 8:38 AM  

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Appeal by the Municipality of Port Hope from the finding that it had breached its duties as trustee. Cross-appeal by a ratepayer from the finding that an agreement between the Government of Canada (Canada) and several municipalities created a non-charitable purpose trust. In 2000, Canada agreed to pay each of the municipalities of the Town of Port Hope (Port Hope), the Township of Hope and the Municipality of Clarington $10 million in exchange for each of the municipalities storing low-level radioactive waste at safe sites within their respective communities. Under the agreement, the municipalities agreed to hold the payment in trust for the exclusive benefit of its ratepayers. The agreement also empowered the municipalities to invest the payment and to expend any income earned from investing it. At the time the deal was struck, the necessary regulatory approvals for the new Waste management facilities had not been obtained. In 2001, Hope and Port Hope amalgamated into the Municipality of Port Hope. Shortly thereafter, Port Hope received a $10 million cheque from Canada, which was the payment due to Hope under the agreement. In 2003, the money was invested. Council had treated the payment as a legacy asset and had not encroached on it. Income earned on the payment had been used for various public purposes, including contributions to building and equipment reserves, investments in roads and community facilities, and the reduction of lower-tier municipal taxes for ratepayers. In 2014, a ratepayer of Port Hope brought an application alleging that Port Hope had misused the income earned on the payment because it had failed to apply that income exclusively to defray the lower-tier municipal taxes of levies of ratepayers of the former Hope Township. The judge granted the application. He interpreted the agreement as having created a non-charitable purpose trust. He also found that Port Hope had breached its duties as trustee because it failed to use the power to appoint in accordance with the strict terms of the trust. On appeal, Port Hope submitted that the relevant portion of the agreement, Schedule 8, was a contract and did not establish a trust over the $10 million payment. The ratepayer contended that Schedule 8 created a charitable trust, rather than a non-charitable purpose trust, as the application judge had found.

HELD: Appeal allowed and cross-appeal dismissed. The judge made a number of extricable legal errors. Consequently, his interpretation of the agreement was not owed deference. The agreement did not create a trust. The agreement was a contract. The agreement was the written expression of the mutually beneficial commercial bargain struck between Canada and the municipalities. It set out the parties’ legal obligations and there was no doubt that it was intended to create legal relations. There was no intention to create a trust and there was uncertainty as to the subject matter of the purported trust. Canada’s payment to Port Hope was the discharge of its contractual obligation. Canada did not make the payment as the settlor of a trust and did not settle the payment on a trust. As a result, Port Hope did not become a trustee nor did it breach its obligations in respect of the use of the fund or the income earned.

Angus v. Port Hope (Municipality), [2017] O.J. No. 3481, Ontario Court of Appeal, G.R. Strathy C.J.O., E.E. Gillese and G.I. Pardu JJ.A., July 4, 2017. Digest No. TLD-August212017009