Carevest Capital Inc. v. Leduc (County),

• Judge: Belzil,C,Slatter
• Neutral Citation: 2012 ABCA 161
• Citation: (2012), 524 A.R. 342,2012 ABCA 161,524 AR 342,(2012), 524 AR 342,524 A.R. 342
• Date: 02 May 2012
• Court: Court of Appeal (Alberta)

Carevest Capital Inc. v. Leduc (2012), 524 A.R. 342; 545 W.A.C. 342 (CA)

MLB headnote and full text

Temp. Cite: [2012] A.R. TBEd. MY.125

Carevest Capital Inc. (respondent) v. County of Leduc (appellant)

(1103-0226-AC; 2012 ABCA 161)

Indexed As: Carevest Capital Inc. v. Leduc (County)

Alberta Court of Appeal

Côté and Slatter, JJ.A., and Belzil, J.(ad hoc)

May 25, 2012.

Summary:

A property developer arranged financing with lender Carevest Capital Inc. As security, the developer granted a mortgage and a general security agreement. The developer's agreement with the County of Leduc required that it pay certain levies once they had been set. Solicitors for Carevest direct deposited funds into the trust account of the developer's solicitors, on the condition that the balance of the levies be paid in full. The developer's solicitors drew two cheques payable to the County, for "balance of levy payment". The County did not deposit the cheques, because the exact amount of the levies had not yet been determined. The two trust cheques became "stale dated". On instructions from the developer, its solicitors countermanded payment. The disputed funds were paid into court by a consent order.

A Master of the Alberta Court of Queen's Bench, in a decision reported at [2011] A.R. Uned. 225, concluded that an effective trust had been created and that Carevest was the beneficiary. A Queen's Bench judge, in unreported reasons, affirmed the conclusion. The County appealed.

The Alberta Court of Appeal allowed the appeal and issued a declaration that the County was entitled to the disputed funds.

Barristers and Solicitors - Topic 1549

Relationship with client - Duty to client - General - Trust funds - [See second and third Barristers and Solicitors - Topic 4444 ].

Barristers and Solicitors - Topic 4006

Relations with other lawyers - General - Solicitors' trust conditions - [See second and third Barristers and Solicitors - Topic 4444 ].

Barristers and Solicitors - Topic 4444

Relations with third parties (incl. opposite parties) - Duty to third or opposite parties - Re trust funds - The issue on this appeal was the entitlement to funds that were in a solicitor's trust account, but that were subsequently paid into court by consent order - The appellant (County of Leduc) claimed the funds in payment of development levies - The respondent (lender Carevest Capital Inc.), which originally advanced the funds, claimed them under its security agreements or a trust - The County argued that the funds were advanced for a specific purpose, namely the payment of development levies, and thus subject to a Quistclose trust - The Alberta Court of Appeal held that there was no room for a Quistclose trust in the transaction between the County and the developer's solicitors - The correspondence between the lender's solicitors and the developer's solicitors created an express trust - The County was obliged to use the funds to pay the levies, but that obligation arose from the law of debtor and creditor, not because of any trust - "If the respondent had sent the funds directly to the developer, with the common expectation that they would be used to pay the off-site levies, but without any express trust, nor any stipulation that they could not used in any other manner, there might be room for a Quistclose trust. But any such expectations must yield to the specific terms of the express trust that was created between the solicitors" - See paragraphs 11 to 15.

Barristers and Solicitors - Topic 4444

Relations with third parties (incl. opposite parties) - Duty to third or opposite parties - Re trust funds - The Alberta Court of Appeal stated that "the expectation of a law firm sending a client's funds in trust is that the firm is protecting its client, not any third party. In the absence of an express stipulation, the assumption should be that the beneficiaries of the trusts are the various clients, and not any third parties, even if the trust conditions contemplate the money being used for a specific purpose. ... The identification of a purpose in a solicitor's trust letter does not usually create an obligation enforceable by a third party to have the funds used for that purpose" - See paragraph 16.

Barristers and Solicitors - Topic 4444

Relations with third parties (incl. opposite parties) - Duty to third or opposite parties - Re trust funds - A property developer arranged financing with the respondent lender - As security, the developer granted a mortgage and a general security agreement - The developer's agreement with the appellant County required that it pay certain levies once they had been set - Solicitors for the lender direct deposited funds into the trust account of the developer's solicitors, on the condition that the balance of the levies be paid in full - The developer's solicitors drew two cheques payable to the County, for "balance of levy payment" - The County did not deposit the cheques, because the exact amount of the levies had not yet been determined - The two trust cheques became "stale dated" - On instructions from the developer, its solicitors countermanded payment - The disputed funds were ultimately paid into court by consent order - The Alberta Court of Appeal held that the County was entitled to the funds - The developer's solicitors drew two cheques in favour of the County to discharge valid obligations of its developer client, in full compliance with the trust conditions over the funds - The immediate tendering of the cheques was not only in compliance with the trust conditions, it created a legal obligation in the developer's solicitors to honour those cheques - While the County did not negotiate the cheques, it continued to have a right to enforce payment against the developer's solicitors - The stale dating and countermanding of the cheques did not affect that right - The developer's solicitor was entitled to discharge its obligation to the County on the cheques by issuing replacement cheques - The disputed funds paid into court were available to discharge that obligation - See paragraphs 23 to 34.

Trusts - Topic 5

Definitions - Express trust defined - [See first Barristers and Solicitors - Topic 4444 ].

Trusts - Topic 375

Creation of trust - Purpose or object - "Quistclose" trust - [See first Barristers and Solicitors - Topic 4444 ].

Cases Noticed:

Carevest Capital Inc. v. 1262459 Alberta Ltd. et al., [2011] A.R. Uned. 225; 45 Alta. L.R.(5th) 79; 2011 ABQB 148 (Master), refd to. [para. 9].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 10].

Barclays Bank Ltd. v. Quistclose Investments Ltd., [1970] A.C. 567 (H.L.), consd. [para. 11].

Carling Development Inc. et al. v. Aurora River Tower Inc. et al. (2005), 371 A.R. 152; 354 W.A.C. 152; 46 Alta. L.R.(4th) 40; 2005 ABCA 267, appld. [para. 13].

Cory Brothers & Co. v. Owners of Turkish Steamship Mecca, [1897] A.C. 286 (H.L.), refd to. [para. 14].

Waisman, Ross & Associates v. Crown Trust Co., [1970] S.C.R. 553, refd to. [para. 14].

B.M.P. Global Distribution Inc. et al. v. Bank of Nova Scotia et al., [2009] 1 S.C.R. 504; 386 N.R. 296; 268 B.C.A.C. 1; 452 W.A.C. 1; 2009 SCC 15, refd to. [para. 26].

Elliott v. Crutchley, [1904] 1 K.B. 565 (C.A.), affd. [1906] A.C. 7 (H.L.), refd to. [para. 30].

Gaynor v. McDyer, [1968] I.R. 295 (S.C.), refd to. [para. 30].

Curley v. Briggs, [1920] 2 W.W.R. 1025; 13 Sask. L.R. 346 (C.A.), refd to. [para. 30].

Pollway Ltd. v. Abdullah, [1974] 1 W.L.R. 493 (C.A.), refd to. [para. 30].

Barclay's Bank Ltd. v. Simms (W.J.) Son & Cooke (Southern) Ltd., [1980] 1 Q.B. 677, refd to. [para. 30].

Galco Enterprises Ltd. v. Hatty, Mills and Maritime Life Assurance Co. (1979), 27 N.B.R.(2d) 608; 60 A.P.R. 608, refd to. [para. 31].

Authors and Works Noticed:

Crawford, B., Payment, Clearing and Settlement in Canada, vol. 1 (2002), §7:05.2, p. 169 [para. 26].

Reynolds, J., Countermand of Cheques (1981), 15 U.B.C. Law Rev. 341, pp. 365 to 368 [para. 29].

Counsel:

D.T. Madsen, for the respondent;

D.R. Peskett and M.T. Coombs, for the appellant.

This appeal was heard on May 2, 2012, before Côté and Slatter, JJ.A., and Belzil, J.(ad hoc), of the Alberta Court of Appeal. In reasons written by Slatter, J.A., the Court delivered the following judgment, filed at Edmonton, Alberta, on May 25, 2012.