In the context this rule, whether a trustee has met that obligation will depend on the factual circumstances of each case, and what the trustee ought to have known.
Firstly, the standard by which trustees must be measured is that of honesty, and reasonable skill and prudence. Having given birth to this new duty by trustees, Justice Brown puts flesh on its bones and outlines the content of the duty. He states that a beneficiary would rarely be able to prove that it suffered from unreasonable disadvantage if uniformed of the trust if: the likelihood of vesting is "most unlikely" or if the potential abuse of the discretion on the part of the trustee is "equally unlikely". Justice Brown limits the application of the rule to cases where the beneficiary interest is too remote from the trust. This is the exact language adopted by Justice Brown and will likely now be the yardstick for determining whether a trustee owes a duty to disclose a trust to a beneficiary. Waters' further expands on this that the emerging test could be whether the beneficiary would suffer "unreasonable disadvantage" if uninformed of the existence of the trust. Waters' admits that there may be recent some development in this area throughout the commonwealth, but that the silence of the courts generally has led many to believe that there was no positive obligation on trustees to seek out and supply knowledge to beneficiaries. Reading Waters' Law of Trusts (3rd Edition), before Valard there was no defined rule on whether a trustee owed a duty of disclosure of the existence of the trust to beneficiaries. This is the first time the Supreme Court of Canada has been asked to decide the obligations of trustees to notify beneficiaries of a trust. To Justice Brown, the fact that these type of bonds were uncommon in the oilfield industry was fatal to Bird's defense, while to Justice Karakatsanis the fact that labour and material bonds were ubiquitous in the construction industry meant that Valard should have played a more active role in confirming the existence of the bond. Valard commenced a second action, this time against Bird, for breach of trust and Valard's case before the Court turned on whether Bird, as the trustee, had an obligation to inform Valard, as beneficiary, of the bond's existence.Ī critical finding of fact for the Court was how common the issuance of labour and material nonpayment bonds were in the industry and for the projects that the parties were engaged in. When Valard inquired about the existence of a bond on the previous project, Bird confirmed the existence of Langford's L&M bond but when Valard attempted to recover the amount of the judgment from the issuer, Guarantee Company, they were denied recovery because notice of the claim had been issued outside the 120 day limitation period. On a subsequent oilfield construction project, Valard learned that Bird had been requiring its subcontractors to post L&M bonds. Valard sued Langford and obtained default judgment for the amount outstanding. In the course of the construction project, Langford became insolvent and was unable to pay certain invoices for work completed on the construction site. By virtue of the fact that Bird held the right to claim against the bond fund in trust for all potential claimants against the bond and because the bond itself specifically contemplated Bird as trustee, Bird found itself in a fiduciary relationship with respect to all contractors further down the chain from Langford. As a standard term of Bird's contract with its subcontractors, Bird required its subcontractors to post a labour and material payment bond to cover nonpayment.
This case arose out of a construction dispute between Valard Construction, who acted as a sub-subcontractor to Langford Electric, and Bird Construction, who had subcontracted some of its work to Langford in the scope of acting as the general contractor for Suncor.
In specific, this case established that trustees, in a commercial setting, may be liable to beneficiaries should they fail to take steps to ensure that the beneficiaries are aware of the trust if the failure to do so would cause unreasonable disadvantage to the beneficiary. In a recently decided case by the Supreme Court of Canada, Justice Brown clarified what duty a trustee owes to a beneficiary with respect to notifying them of the existence of a trust.
0 kommentar(er)
