Ernst & Young Inc. v. Central Guaranty Trust Co., 2001 ABQB 92

• Judge: Wilson, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: May 11, 2000
• Citations: 2001 ABQB 92;(2001), 283 A.R. 325 (QB)

Ernst & Young v. Central Guaranty (2001), 283 A.R. 325 (QB)

MLB headnote and full text

Temp. Cite: [2001] A.R. TBEd. FE.087

Ernst & Young Inc. (plaintiff) v. Central Guaranty Trust Company (defendant)

(Action No. 9203-20725; 2001 ABQB 92)

Indexed As: Ernst & Young Inc. v. Central Guaranty Trust Co.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Wilson, J.

February 8, 2001.

Summary:

International Warranty Co. (IW) entered into agreements with several car manufacturers to enable IW to sell extended warranties on the manufacturer's new and some used vehicles. IW went into receivership. IW's receiver commenced an action against Central Guaranty Trust Co. (Central) in 1992. The receiver alleged that IW had entered into agreements with Central whereby trusts were set up with Central as trustee and that Central withdrew monies from the trusts and improperly dispersed those monies. The trial was held in two parts. The issue in this first part was whether IW's agreements with Central resulted in trust obligations. As a preliminary matter, the receiver argued that Central was estopped from arguing that the agreements did not give rise to trusts.

The Alberta Court of Queen's Bench held that Central was not estopped from questioning the validity of the alleged trusts. The court held that, with the exception of one agreement, no trust was established by the agreements. Further, Central was not negligent and owed no fiduciary duty in the circumstances.

Equity - Topic 3607

Fiduciary or confidential relationships -Relationships which are not fiduciary - International Warranty Co. (IW) entered into agreements with car manufacturers to enable IW to sell extended vehicle warranties - IW's receiver sued Central Guaranty Trust Co. (Central) alleging that IW had entered into agreements with Central whereby trusts were set up with Central as trustee and that Central withdrew monies from the trusts and improperly dispersed those monies - Under the agreements, if a vehicle owner covered by the warranty made a claim which IW approved, IW paid the claim and then requested reimbursement from Central from the trust funds - The Alberta Court of Queen's Bench rejected the receiver's argument that there was a fiduciary relationship in the circumstances of this case - There was no reliance and Central did not give the warranty holders any guidance or advice - See paragraphs 126 to 129.

Estoppel - Topic 379

Res judicata - As a bar to subsequent proceedings - Cause of action - International Warranty Co. (IW) went into receivership - It's receiver commenced an action against the defendant in 1992 alleging, inter alia, that IW entered into agreements with the defendant whereby trusts were set up with the defendant as trustee - The litigation proceeded for eight years on the basis that the agreements were trusts - Just before trial, the defendant moved to amend its statement of defence to allege that the agreements did not give rise to trusts - The receiver argued that the matter was res judicata - The matter of trusts had been brought into issue over the long course of the receivership proceedings, there had been prior court orders, agreements made, positions changed and payments made on that basis - The Alberta Court of Queen's Bench held that Central was not estopped by issue estoppel or cause of action estoppel from questioning the validity of the alleged trusts - The trust issue was not settled in the earlier proceedings - Alternatively, this was a special case where res judicata should not be applied - The court should not be called on to administer a trust which potentially was not certain - See paragraphs 4 to 24.

Estoppel - Topic 380

Res judicata - As a bar to subsequent proceedings - Matters in issue - [See Estoppel - Topic 379 ].

Estoppel - Topic 386

Res judicata - As a bar to subsequent proceedings - Issues decided in prior proceedings - [See Estoppel - Topic 379 ].

Estoppel - Topic 398

Res judicata - As a bar to subsequent proceedings - Exceptions - Special circumstances - [See Estoppel - Topic 379 ].

Trusts - Topic 345

Creation of trust - Requirements of - Certainty of subject matter of trust - International Warranty Co. (IW) entered into agreements with car manufacturers to enable IW to sell extended vehicle warranties - IW's receiver sued Central Guaranty Trust Co. (Central) alleging that IW had entered into agreements with Central whereby trusts were set up with Central as trustee and that Central withdrew monies from the trusts and improperly dispersed those monies - Under the agreements, if a vehicle owner covered by the warranty made a claim which IW approved, IW paid the claim and then requested reimbursement from Central from the trust funds - The Alberta Court of Queen's Bench held that, with the exception of one agreement, no trusts were established by the agreements - The agreements were not certain as to subject matter as they were an assignment into trust of an anticipation and it was impossible to say what each putative beneficiary's share of the funds would be -The agreements were also not certain as to object - See paragraphs 25 to 119.

Trusts - Topic 372

Creation of trust - Purpose or object - Certainty of objects - [See Trusts - Topic 345 ].

Trusts - Topic 661

Creation of trust - Transactions not creating trusts - General - [See Trusts - Topic 345 ].

Cases Noticed:

420093 B.C. Ltd. v. Bank of Montreal (1995), 174 A.R. 214; 102 W.A.C. 214; 34 Alta. L.R.(3d) 269 (C.A.), refd to. [para. 6].

Ernst & Young Inc. v. Royal Trust Corp. of Canada (1997), 208 A.R. 244 (Q.B.), refd to. [para. 10].

Avco Delta Corporation Canada Ltd. v. MacKay (1977), 76 D.L.R.(3d) 541 (Alta. C.A.), refd to. [para. 12].

Tudhope v. Henderson, [1930] 3 D.L.R. 245 (Ont. C.A.), refd to. [para. 15].

Bodnar v. Stuart, [1922] 1 W.W.R. 933, refd to. [para. 15].

Highley v. Canadian Pacific Railroad, [1930] 1 D.L.R.(3d) 630, refd to. [para. 15].

Prudential Trust Co. v. National Trust Co. (1965), 55 D.L.R.(3d) 272 (Alta. C.A.), refd to. [para. 15].

Stearns Catalytic Pension Plans, Re, [1994] 2 S.C.R. 611; 168 N.R. 81; 155 A.R. 81; 73 W.A.C. 81; [1994] 8 W.W.R. 305; 20 Alta. L.R.(3d) 225; 4 C.C.E.L.(2d) 1; 3 E.T.R.(2d) 1, refd to. [para. 78].

Kadar Estate, Re (1997), 17 E.T.R.(2d) 171 (B.C.S.C.), refd to. [para. 78].

Citadel General Life Assurance Co. et al. v. Lloyd's Bank of Canada et al., [1997] 2 S.C.R. 805; 219 N.R. 323; 206 A.R. 321; 156 W.A.C. 321, dist. [para. 79].

Boyce v. Boyce (1849), 16 Sim. 476; 60 E.R. 959, refd to. [para. 81].

Arkay Casino Management and Equipment (1985) Ltd. v. Alberta (Attorney General) (1998), 227 A.R. 280 (Q.B.), dist. [para. 82].

Connor Estate, Re (1970), 72 W.W.R.(N.S.) 388 (Alta. C.A.), reving. (1969), 69 W.W.R.(N.S.) 241 (Alta. T.D.), refd to. [para. 85].

Bethel, Re, [1971] 2 O.R. 316; 17 D.L.R.(3d) 652 (C.A.), refd to. [para. 86].

McPhail v. Doulton, [1971] A.C. 424 (H.L.), refd to. [para. 87].

Bathgate v. National Hockey League Pension Society (1992), 98 D.L.R.(4th) 326 (Ont. Gen. Div.), dist. [para. 91].

LeHave Equipment Ltd. v. Superintendent of Pensions (N.S.) et al. (1994), 137 N.S.R.(2d) 11; 391 A.P.R. 11; 121 D.L.R.(4th) 67 (C.A.), dist. [para. 96].

Cargill Ltd. v. Compton Agro Inc. - see Compton Agro Inc. (Bankrupt), Re.

Compton Agro Inc. (Bankrupt), Re, [2000] 3 W.W.R. 189; 142 Man.R.(2d) 130; 212 W.A.C. 130 (Man. C.A.), refd to. [para. 101].

Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; 208 N.R. 161; 193 A.R. 321; 135 W.A.C. 321, refd to. [para. 101].

Scurry-Rainbow Oil Ltd. v. Kasha (1996), 184 A.R. 177; 122 W.A.C. 177; 135 D.L.R.(4th) 1 (C.A.), leave to appeal denied (1997), 215 N.R. 158 (S.C.C.), refd to. [para. 101].

Beardmore Trusts, Re, [1952] 1 D.L.R. 41 (Ont. H.C.), refd to. [para. 101].

Terra Energy Ltd. v. Kilborn Engineering Alberta Ltd. et al. (1999), 232 A.R. 101; 195 W.A.C. 101; 170 D.L.R.(4th) 405 (C.A.), refd to. [para. 124].

Soulos v. Korkontzilas et al., [1997] 2 S.C.R. 217; 212 N.R. 1; 100 O.A.C. 241; 146 D.L.R.(4th) 214, refd to. [para. 24].

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; [1994] 9 W.W.R. 609, refd to. [para. 126].

Authors and Works Noticed:

Ford and Lee, Principles of the Law of Trusts (3rd Ed.), ch. 4, paras. 4070, 4130 [para. 101].

Waters, D.W.M., Laws of Trusts in Canada (2nd Ed.), pp. 117 [para. 73]; 119 [para. 77]; 121 [para. 104]; 122 [para. 83]; 125 [para. 85]; 126 [para. 87].

Counsel:

Donald R. Cranston, Q.C., and Susan L. Bercov, for the plaintiff;

Robert B. White, Q.C., Kent H. Davidson and Jamie Dee Larkam, for the defendant.

This action was heard on May 11, 2000, before Wilson, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on February 8, 2001.