Cosway et al. v. McInnes Cooper & Robertson et al., (2000) 191 N.S.R.(2d) 47 (SC)

• Judge: Stewart, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: November 16, 2000
• Jurisdiction: Nova Scotia
• Citations: (2000), 191 N.S.R.(2d) 47 (SC)

Cosway v. McInnes Cooper (2000), 191 N.S.R.(2d) 47 (SC);

 596 A.P.R. 47

MLB headnote and full text

Temp. Cite: [2000] N.S.R.(2d) TBEd. NO.022

Mark Cosway, Dr. Guy Moreau, Paul Fiander and Dr. Donald Joyce (plaintiffs) v. McInnes Cooper & Robertson and Roy Redgrave (defendants)

(S.H. 82899)

Indexed As: Cosway et al. v. McInnes Cooper & Robertson et al.

Nova Scotia Supreme Court

Stewart, J.

November 16, 2000.

Summary:

The four plaintiffs subscribed for limited partnership units pursuant to an amended offering memorandum. The memorandum provided that all subscription funds would be held in trust by a law firm until the closing of the offering. The memorandum provided that the offering would be completed only if, inter alia, all 25 units were subscribed by a specific date. The general partner did not turn the plaintiff's subscription funds over to the firm. The limited partnership failed and the plaintiffs lost their investments. They sued the firm and a lawyer who prepared the memorandum for breach of fiduciary duty, negligence and breach of the Securities Act.

The Nova Scotia Supreme Court allowed the plaintiffs' claim for breach of fiduciary duty. The court held that it was not neces­sary to determine negligence or whether there was a breach of the Securities Act.

Trusts - Topic 5924.1

The trustee - Duties - General - Duty to protect beneficiaries' interests - Four plain­tiffs subscribed for limited partnership units pursuant to an amended offering memorandum - The memorandum provided that a law firm would hold all subscription funds in trust until the closing of the offer­ing - The memorandum provided that the offering would be completed only if, inter alia, all 25 units sold - The general partner did not turn the plaintiffs' subscription funds over to the firm - The limited part­nership failed and the plaintiffs lost their investments - They sued the firm and a lawyer who prepared the memorandum for, inter alia, breach of fiduciary duties - The Nova Scotia Supreme Court held that the plaintiffs would reasonably have believed that the firm, by allowing its name to be included in the offering memorandum, would fulfil its obligation to hold the funds in trust until the offering closed, i.e., when all 25 units were subscribed - Upon the funds not being delivered, the firm was obligated to either seek the funds from the general partner or advise the subscribers - The firm breached its fiduciary duties as trustee by not complying with the trust terms and failing to avoid a conflict of interest - An escrow agreement, of which the plaintiffs were unaware, did not negate the trust obligations.

Trusts - Topic 6143

The trustee - Breach of trust - Conflict of interest - [See Trusts - Topic 5924.1 ].

Cases Noticed:

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 6 R.P.R.(2d) 1, refd to. [para. 13].

Dutton v. Bognar Regis Urban District Council, [1972] 1 Q.B. 373; [1972] 1 All E.R. 462 (C.A.), refd to. [para. 24].

Midland Mortgage Corp. v. Jawl & Bundon et al., [1999] 8 W.W.R. 535; 120 B.C.A.C. 254; 196 W.A.C. 254 (C.A.), leave to appeal refused (2000), 260 N.R. 392 (S.C.C.), refd to. [para. 33].

MacDonell v. M & M Developments Ltd. et al. (1998), 165 N.S.R.(2d) 115; 495 A.P.R. 115 (C.A.), refd to. [para. 38].

Bristol & West Building Society v. Mothew, [1996] 4 All E.R. 698, refd to. [para. 38].

Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), refd to. [para. 46].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1, refd to. [para. 46].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 46].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 48].

MacDonald v. Wedderburn (1998), 169 N.S.R.(2d) 389; 508 A.P.R. 389 (C.A.), refd to. [para. 50].

Authors and Works Noticed:

Beck, Stanley, The Role and Responsibility of a Lawyer in the Securities Law Con­text (1980), Canadian Bar Association article, generally [para. 20].

Jacobsen, Karen, California Escrow Agents; A Duty to Disclose Known Fraud? 17 Pacific Law Journal 16, gen­erally [para. 34].

Counsel:

Douglas A. Caldwell, Q.C., and Dennis James, for the plaintiffs;

Michael Ryan, Q.C., and David Greener (article clerk), for the defendants.

This action was heard at Halifax, Nova Scotia, on September 11 to 15, 2000, by Stewart, J., of the Nova Scotia Supreme Court, who delivered the following decision on November 16, 2000.