Ontario (Minister of Training, Colleges and Universities) v. Two Feathers Forest Products LP et al., (2013) 311 O.A.C. 147 (CA)

• Judge: Feldman, Lauwers and Strathy, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 04, 2013
• Jurisdiction: Ontario
• Citations: (2013), 311 O.A.C. 147 (CA);2013 ONCA 598

Ont. v. Two Feathers Forest (2013), 311 O.A.C. 147 (CA)

MLB headnote and full text

Temp. Cite: [2013] O.A.C. TBEd. OC.011

Her Majesty the Queen in Right of Ontario as Represented by the Minister of Training, Colleges and Universities (applicant/respondent) v. Two Feathers Forest Products LP, Pikangikum First Nation, Eagle Lake First Nation, 1670761 Ontario Inc., Wabigoon Lake Ojibway First Nation and PricewaterhouseCoopers Inc. (respondents/ appellant )

(C56138; 2013 ONCA 598)

Indexed As: Ontario (Minister of Training, Colleges and Universities) v. Two Feathers Forest Products LP et al.

Ontario Court of Appeal

Feldman, Lauwers and Strathy, JJ.A.

October 2, 2013.

Summary:

Grant monies were advanced by Ontario's Minister of Training Colleges and Universities (the Ministry), to a First Nations limited partnership in northern Ontario, but not spent before the partnership sought to dissolve and appoint an interim receiver. The Ministry applied for an order that the grant monies were subject to a "Quistclose trust" for the benefit of the Ministry.

The Ontario Superior Court, in a decision reported at [2012] O.T.C. Uned. 5077, held that they were trust monies and that the receiver should therefore pay the monies to the Ministry. The receiver appealed.

The Ontario Court of Appeal allowed the appeal. The monies were not subject to a Quistclose trust and were therefore available to be distributed in the receivership. A close examination of the terms of the funding agreement showed that the parties did not intend that Two Feathers would hold the funds in trust for the Ministry. The funding agreement specifically provided that any unused funds constituted a debt owing to the Ministry, not trust funds, and that Two Feathers had significant freedom to use the majority of the funds.

Trusts - Topic 375

Creation of trust - Purpose or object - "Quistclose" trust - Grant monies were advanced by Ontario's Minister of Training Colleges and Universities (the Ministry), to a First Nations limited partnership in northern Ontario, but not spent before the partnership sought to dissolve and appoint an interim receiver - The Ministry applied for an order that the grant monies were subject to a "Quistclose trust" for the benefit of the Ministry - The application judge concluded, based on his review of the entire funding agreement, that the funds advanced and not yet spent by Two Feathers were held subject to a Quistclose trust for the benefit of the Ministry and had to be returned to the Ministry by the interim receiver - He found that: (1) the funds were to be used only for the specific purpose of carrying out the project; and (2) the three certainties of a trust (certainty of intention, of subject-matter and of object) had been established - The Ontario Court of Appeal held that the judge erred in law in finding that the funds were held on a Quistclose trust - "First, the funding agreement specifically identified the nature of the relationship between the parties respecting the funds while they are in the hands of Two Feathers but not yet expended - the critical time - as one not of trust, but of debtor/creditor ... The second error is the application judge's conclusion that the funds were not at the free disposal of Two Feathers, and it arose from an examination of Schedule 'B' to the funding agreement. ... [A]lthough the funding agreement requires that Two Feathers spend the grant money on the project, in fact, the budget in Schedule 'B' gives Two Feathers significant discretion to spend the largest part of those monies. Contrary to the conclusion reached by the application judge, those monies were essentially 'at the free disposal' of Two Feathers." - See paragraphs 24 to 40.

Trusts - Topic 445

Creation of trust - Notice to and acceptance by trustee - "Quistclose" trust - [See Trusts - Topic 375 ].

Cases Noticed:

Barclays Bank Ltd. v. Quistclose Investments Ltd., [1970] A.C. 567, refd to. [para. 1, footnote 1].

Toovey v. Milne (1819), 2 B. & A. 683, refd to. [para. 13].

Edwards v. Glyn (1859), 2 E. and E. 29, refd to. [para. 13].

Rogers, In re; Ex parte Holland and Hannen (1891), 8 Morr. B.C. 243, refd to. [para. 13].

Drucker (No. 1), In re, [1902] 2 K.B. 237, refd to. [para. 13].

Hooley, In re; Ex parte Trustee, [1915] H.B.R. 181, refd to. [para. 13].

Twinsectra Ltd. v. Yardley et al., [2002] 2 A.C. 164; 287 N.R. 33 (H.L.), refd to. [para. 15].

Ernst & Young Inc. v. Central Guaranty Trust Co. (2004), 283 A.R. 325; 29 Alta. L.R.(4th) 269; 2004 ABQB, revsd. (2006), 397 A.R. 225; 384 W.A.C. 225; 2006 ABCA 337, leave to appeal refused (2007), 369 N.R. 61; 432 A.R. 397; 424 W.A.C. 397 (S.C.C.), refd to. [para. 20, footnote 4].

Ventas Inc. et al. v. Sunrise Senior Living Real Estate Investment Trust et al. (2007), 222 O.A.C. 102; 2007 ONCA 205, refd to. [para. 32].

Venture Capital USA Inc. et al. v. Yorkton Securities Inc. (2005), 197 O.A.C. 264; 75 O.R.(3d) 325 (C.A.), leave to appeal refused (2005), 366 N.R. 398; 215 O.A.C. 400 (S.C.C.), refd to. [para. 32].

Del Grande v. McCleery et al. (1998), 70 O.T.C. 127; E.T.R.(2d) 30 (Gen. Div.), affd. (2000), 127 O.A.C. 394; 31 E.T.R.(2d) 50 (C.A.), refd to. [para. 38, footnote 6].

Niedner Ltd. v. Lloyds Bank Canada (1990), 74 O.R.(2d) 574 (H.C.), refd to. [para. 38, footnote 6].

Ling v. Chinavision Canada Corp. (1992), 10 O.R.(3d) 79 (Gen. Div.), refd to. [para. 38, footnote 6].

Continental Bank of Canada v. Boekamp Manufacturing Inc., [1990] O.J. No. 143 (H.C.), refd to. [para. 38, footnote 6].

Cummings Estate v. Peopledge HR Services Inc., 2013 ONSC 2781, refd to. [para. 38, footnote 6].

Teperman v. Teperman, [2000] O.T.C. Uned. B24 (Sup. Ct.), refd to. [para. 38, footnote 6].

Triax Resource Limited Partnership v. Research Capital Corp. et al. (1999), 96 O.T.C. 290 (Sup. Ct.), refd to. [para. 38, footnote 6].

Smith v. Gold Key Construction Ltd., [1993] O.J. No. 147 (Gen. Div.), refd to. [para. 38, footnote 6].

Abulyha v. Montemurro, [1984] O.J. No. 962 (H.C.), refd to. [para. 38, footnote 6].

Ontario Securities Commission v. Consortium Construction Inc. et al. (1992), 57 O.A.C. 241; 1 C.C.L.S. 117 (Gen. Div.), refd to. [para. 38, footnote 6].

Gignac, Sutts v. National Bank of Canada (1987), 5 C.B.R.(4th) 44 (Ont. H.C.), refd to. [para. 38, footnote 6].

Cliffs Over Maple Bay Investments Ltd., Re (2011), 304 B.C.A.C. 116; 513 W.A.C. 116; 17 B.C.L.R.(5th) 60; 2011 BCCA 180, refd to. [para. 38].

Authors and Works Noticed:

Bridge, Michael G. et al., Formalism, Functionalism, and Understanding the Law of Secured Transactions (1999), 44 McGill L.J. 567, pp. 610 to 614 [para. 23, footnote 5].

Counsel:

Richard W. Schwartz, for the appellant;

Ronald E. Carr and Eric Wagner, for the respondent.

This appeal was heard on June 4, 2013, before Feldman, Lauwers and Strathy, JJ.A., of the Ontario Court of Appeal. In reasons written by Feldman, J.A., the Court delivered the following judgment, dated October 2, 2013.