Fales et al. v. Canada Permanent Trust Co., (1976) 11 N.R. 487 (SCC)
Judge | Martland, Ritchie, Spence, Dickson and Beetz, JJ. |
Court | Supreme Court (Canada) |
Case Date | October 05, 1976 |
Jurisdiction | Canada (Federal) |
Citations | (1976), 11 N.R. 487 (SCC);[1976] SCJ No 72 (QL);[1976] 6 WWR 10;[1976] CarswellBC 240;11 NR 487;[1977] 2 SCR 302;1976 CanLII 14 (SCC);70 DLR (3d) 257 |
Fales v. Can. Permanent Trust (1976), 11 N.R. 487 (SCC)
MLB headnote and full text
Fales et al. v. Canada Permanent Trust Company
Indexed As: Fales et al. v. Canada Permanent Trust Co.
Supreme Court of Canada
Martland, Ritchie, Spence, Dickson and Beetz, JJ.
October 5, 1976.
Summary:
This case arose out of a claim by the beneficiaries of an estate against the co-trustees of the estate for breach of fiduciary duty. A businessman died in 1955 and left a large estate with his widow, who was a young housewife with four children, and a trust company as co-trustee. In December, 1966, on the advice of the trust company shares in a company which made up 60 per cent of the estate were traded for shares in a company with an insecure financial background. The company's performance gradually worsened, culminating in its bankruptcy in December, 1969 and the worthlessness of the shares held by the estate. There had been ample opportunity to dispose of the shares and ample warning of disaster, which the trust company did not act upon and failed to warn the co-trustee about. The residuary beneficiaries of the estate brought an action against the trust company for damages. The trust company brought an action against the co-trustee for indemnity and contribution. The co-trustee brought an action against the trust company for loss of income on her life interest in the estate resulting from the mismanagement by the trust company. The British Columbia Supreme Court in a judgment reported [1974] 3 W.W.R. 84; 44 D.L.R.(3d) 242, allowed the action of the beneficiaries and dismissed the actions of the trust company and the co-trustee.
On appeal the British Columbia Court of Appeal, in a judgment reported, [1975] 3 W.W.R. 400; 55 D.L.R.(3d) 239, reduced the damages awarded by the trial court from $250,408.00 to $206,398.80 and ordered that the co-trustee contribute $31,127.52 to the damages payable by the trust company.
On appeal to the Supreme Court of Canada the decision of the trial court was restored. The Supreme Court of Canada held that there was a duty on both trustees to act with ordinary prudence. The Supreme Court of Canada held that the trust company was in breach of its fiduciary duty by its imprudent conduct and that it was liable for damages - see paragraphs 29 to 37. The Supreme Court of Canada held that the widow was in breach of her fiduciary duty in failing to see that the shares were sold, but granted the widow relief from her liability for breach of trust pursuant to s. 98 of the Trustee Act - see paragraphs 43 to 44. Because the widow was relieved from liability, the Court held that she was not liable to contribute to the damages payable by the trust company - see paragraphs 43 to 44. The Supreme Court of Canada refused to grant relief to the trust company because its inactivity in the circumstances was unreasonable - see paragraph 38.
Damages - Topic 4009
Interference with economic relations - Breach of fiduciary relationship - Trustee - Breach of duty of prudence by failure to sell shares at a prudent time when company later went bankrupt - The Supreme Court of Canada held that the measure of damages is the actual loss which the acts or omission of the trustee caused to the trust estate - The Supreme Court of Canada affirmed the trial judge's calculation of the average price of the shares during a base period from the month after the acquisition of the shares to the date when adventitious disposition of the shares became impossible - See paragraphs 39 to 42.
Trusts - Topic 4150
Administration of trust - Liability of trustee - Relief from liability for reasonable and honest acts - Trustee Act, R.S.B.C. 1960, c. 390, s. 98 - A businessman died in 1955 and left a large estate with his widow, who was a housewife, and a trust company as co-trustees - In 1966 on the advice of the trust company shares in a company which made up 60 per cent of the estate were traded for shares in a company with an insecure financial background - The company's performance worsened over the next three years, culminating in bankruptcy in 1969 and worthlessness of the shares held by the estate - There was ample opportunity to dispose of the shares and ample warning of disaster, which the trust company did not act upon and failed to inform the co-trustee about - The beneficiaries brought an action for damages to recover the loss - The Supreme Court of Canada held that there was a duty on both of the trustees to act with ordinary prudence - The Supreme Court of Canada held that the trust company was in breach of its fiduciary duty by its imprudent conduct - The trust company asked for relief from liability under s. 98 of the Trustee Act - The Supreme Court of Canada reviewed the circumstances to be taken into account in considering relief - The Supreme Court of Canada refused to relieve the trust company because its inactivity in the circumstances was unreasonable - See paragraph 38.
Trusts - Topic 4150
Administration of trust - Liability of trustee - Relief from liability for reasonable and honest acts - Trustee Act, R.S.B.C. 1960, c. 390, s. 98 - A businessman died in 1955 and left a large estate with his widow, who was a housewife, and a trust company as co-trustees - In 1966 on the advice of the trust company shares in a company which made up 60 per cent of the estate were traded for shares in a company with an insecure financial background - The company's performance worsened over the next three years, culminating in bankruptcy in 1969 and worthlessness of the shares held by the estate - There was ample opportunity to dispose of the shares and ample warning of disaster, which the trust company did not act upon and failed to inform the co-trustee about - The widow was a young woman with four children at her husband's death and had no business experience - The widow attempted to keep informed, but the trust company failed to give her pertinent information essential to her informed opinion - The Supreme Court of Canada held that the widow was in breach of trust in failing to see that the shares were sold - The widow asked for relief from liability under s. 98 of the Trustee Act - The Supreme Court of Canada reviewed the circumstances to be taken into account in considering relief - See paragraph 38 - The Supreme Court of Canada granted the widow relief from her liability for breach of trust - See paragraphs 43 to 44.
Trusts - Topic 4525
Administration of trust - Contribution between trustees - When not available - A widow and a trust company were the co-trustees of the estate of the husband and the widow - Through the neglect of the trust company, the trustees failed to dispose of shares held by the estate at a prudent time with a resulting total loss of the value of the shares - The trustees were found to be in breach of trust and liable for damages - The trust company was refused relief from its liability under s. 98 of the Trustee Act, but the widow was granted relief - The trust company sought contribution from the widow - The Supreme Court of Canada held that the trust company could not look to the widow for contribution, because she was relieved from her liability to the beneficiaries under s. 98 of the Trustee Act - The Supreme Court of Canada held that the trust company must bear the whole loss - See paragraphs 43 to 44.
Trusts - Topic 5943
Trustee - Duties of trustee - Prudence - A businessman died in 1955 and left a large estate with his widow, who was a housewife, and a trust company as co-trustees - In 1966 on the advice of the trust company shares in a company which made up 60 per cent of the estate were traded for shares in a company with an insecure financial background - The company's performance worsened over the next three years, culminating in bankruptcy in 1969 and worthlessness of the shares held by the estate - There was ample opportunity to dispose of the shares and ample warning of disaster, which the trust company did not act upon and failed to inform the co-trustee about - The beneficiaries brought an action for damages to recover the loss - The Supreme Court of Canada held that there was a duty on both trustees to act with ordinary prudence - The Supreme Court of Canada held that the trust company was in breach of its fiduciary duty by its imprudent conduct - The Supreme Court of Canada held that the widow was in breach of her fiduciary duty in failing to see that the shares were sold, but was relieved from liability under s. 98 of the Trustee Act - See paragraphs 29 to 37 and 43 to 44.
Trusts - Topic 6224
Trustee - Duty to act jointly - Duty of trustee to keep co-trustee informed - The widow of a businessman and a trust company were the co-trustees of the man's estate - Through the neglect of the trust company, the trustees failed to dispose of shares held by the estate at a prudent time with a resulting total loss of the value of the shares - The trust company failed to keep the widow informed of the precarious status of the company in which the shares were held - The Supreme Court of Canada held that the trust company had a duty to keep its co-trustee fully informed of the status of the company - See paragraph 34.
Cases Noticed:
Learoyd v. Whiteley (1887), L.R. 12 A.C. 727, appld. [para. 29].
In re Waterman's Will Trusts, [1952] 2 All E.R. 1054, refd to. [para. 29].
National Trustees Co. of Australasia v. General Finance Co. of Australasia, [1905] A.C. 373, dist. [para. 29].
Inman v. Inman, [1915] 1 Ch. 187, appld. [para. 32].
Royal Trust Co. and McMurray v. Crawford, [1955] S.C.R. 184, appld. [para. 32].
In re Windsor Steam Coal Company (1901), Limited, [1929] 1 Ch. 151, appld. [para. 38].
Mickleburgh v. Parker (1870), 17 Gr. 503, appld. [para. 43].
Statutes Noticed:
Trustee Act, R.S.B.C. 1960, c. 390, sect. 97 [para. 43]; sect. s. 98 [para. 3].
Authors and Works Noticed:
Restatement of the Law on Trusts (2nd Ed.), para. 174 [para. 29].
Trustee's Duty of Skill and Care (1973), 37 The Conveyance and Property Lawyer (N.S.) 48 [para. 44].
Underhill's Law of Trusts and Trustees (12th Ed.), Art. 49 [para. 29].
Waters, Law of Trusts in Canada, p. 855 [para. 43].
Counsel:
B.W.F. McLoughlin, Q.C., for the appellants, Fales et al.;
T.R. Braidwood, Q.C. and R. Sugden, for the appellant Wohlleben;
C.C. Locke, Q.C., for the respondent, Canada Permanent Trust Company.
This Case was heard on February 9,10, and 11, 1976, at Ottawa, Ontario, before Martland, Ritchie, Spence, Dickson and Beetz, JJ., of the Supreme Court of Canada.
On October 5, 1976, Dickson, J., delivered the following judgment of the Supreme Court of Canada:
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............................................................................................ 589 Fales v Canada Permanent Trust Co (1976), [1977] 2 SCR 302, 70 DLR (3d) 257, [1976] SCJ No 72 ..................................................... 329, 330 Farm Credit Corp v Pipe (1993), 16 OR (3......
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...114 Ernst & Young Inc v Central Guaranty Trust Co, 2004 ABQB 389 ........ 72, 75–76 Fales v Canada Permanent Trust Co (1976), [1977] 2 SCR 302, 70 DLR (3d) 257, [1976] SCJ No 72........................156, 191 FH v McDougall, 2008 SCC 53 ...........................................................
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Table of Cases
...No 441 ..................................................................................... 558–59 Fales v Canada Permanent Trust Co, [1977] 2 SCR 302 ........................................403 Falkiner v Ontario (Ministry of Community and Social Services) (2002), 59 OR (3d) 481 (CA) ..........
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Table of Cases
...LR 76 (CA) ...................................................................................... 135 Fales v Canada Permanent Trust Co, [1977] 2 SCR 302, 70 DLR (3d) 257......... 75 Farquharson Brothers & Co v King & Co, [1902] AC 325 (HL) ........237, 242, 243 Fields of Athenry Resort Cor......