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The General Rule of Trust Fund Liability

January 26, 2022

Saskatchewan

,

Canada

Issue

Can the beneficiary of a trust sue a third party personally to recover trust property if the trustee has already commenced litigation against the third party?

Conclusion

The general rule is that while beneficiaries have an in personam action against trustees for breach of trust, they cannot sue the debtor of a trust fund. (Stoney First Nation v Imperial Oil Resources Limited)

A beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate. (Price Security Holdings Inc. v. Klompas & Rothwell)

The following special circumstances or possible exceptions to the general rule have been established:

1. Where there is alleged to be fraud or collusion between the trustee and the third person;

2. Where by reason of conflict of interest or duty it is impossible or difficult for the trustees to sue;

3. Where there is a failure by the trustees in performing their duties as trustees to protect the trust estate or to protect the interests of the beneficiary in the trust estate;

4. Where the beneficiaries are suing to recover trust property (as opposed to suing debtors of the trust);

5. Statutory exceptions, such as those in the Business Corporations Act allowing a beneficial owner of securities of a corporation to bring certain actions. (Kwinter v. Metrowest Development Ltd.)

In addition, the courts have identified three prerequisites required for a beneficiary to bring an action against a third party owing money to a trustee: (i) whether the beneficiary asked the trustee to sue the debtor and were refused; (ii) whether the beneficiary named the trustee as a defendant to sue the third party; and (iii) whether the beneficiary exhausted its remedy against the trustee. (Stoney First Nation v Imperial Oil Resources Limited)

In determining whether a beneficiary has exhausted its remedies against the trustee, the beneficiary is not required to pusue its rights against the trustee through judgment and appeals. That would be too onerous a burden on a beneficiary of a fiduciary and trust-like relationship. No authorities go that far in requiring a party to exhaust its remedies. (Stoney Tribal Council v Shell Canada Limited)

It remains an open question whether the third prerequisite (whether the beneficiary has exhausted its remedies against the trustee) is appropriate when "special circumstances" have been established. (Price Security Holdings Inc. v. Klompas & Rothwell)

Law

In Kwinter v. Metrowest Development Ltd., 2007 ABQB 713 (CanLII), the defendants applied to strike the statement of claim for want of standing. The plaintiff was a beneficiary under a family trust which held the common shares of a corporation, and she sued for oppression and breach of trust in respect of a transfer of preferred shares of the corporation to her sister. In holding that it was not plain and obvious that the beneficiary lacked standing, Horner J. described several exceptions to the general proposition that beneficiaries cannot directly sue third parties:

[35] Counsel for the Applicants argue that before Ms. Kwinter can bring the claims she has advanced as a beneficiary of the Trust against non-trustees, she must ask the trustees to bring each of the claims and the trustees must refuse to do so. At that point leave of the Court is required in order for a beneficiary to bring a claim against third parties to the trust. Such a claim should be brought in the name of the trustees. Counsel cited Sharpe v. San Paulo Railway Company (1873), L.R. 8 Ch. App. 597 (C.A.), Halsbury’s Laws of England and Waters’ Law of Trusts in Canada in support of their argument.

[36] The following possible exceptions relevant to the case at bar have been identified:

1. Where there is alleged to be fraud or collusion between the trustee and the third person (Halsbury’s),

2. Where by reason of conflict of interest or duty it is impossible or difficult for the trustees to sue (Halsbury’s),

3. Where there is a failure by the trustees in performing their duties as trustees to protect the trust estate or to protect the interests of the beneficiary in the trust estate (Hayim v. Citibank N.A.)

4. Where the beneficiaries are suing to recover trust property (as opposed to suing debtors of the trust) (Remmers v. Lipinksi (2001), 2001 ABCA 188 (CanLII), 293 A.R. 156 (C.A.), leave to appeal to S.C.C. refused, [2001] S.C.C.A. No. 502).

To this list I would add statutory exceptions, such as those in the BCA allowing a beneficial owner of securities of a corporation to bring certain actions.

[37] The first two claims brought by Ms. Kwinter fall under statutory exceptions and as such the claims for oppression and dissolution brought under the BCA are not subject to the common law procedural rule advanced by the applicants. If I am incorrect, it is at least not plain and obvious in any case that Ms. Kwinter’s situation does not fall under one of the exceptions listed above. For example, she alleges in her Statement of Claim that the current trustees were selected by Ms. Myron’s financial advisors. This would potentially bring the first and second exceptions into play. In addition, it is not plain and obvious that Ms. Kwinter is not suing to recover trust property, triggering the fourth exception. Finally the allegations in the Statement of Claim relating to improper conduct by the directors of Metrowest potentially give rise to the third exception.

[38] We are left to consider Ms. Kwinter’s claim for breach of trust by Mr. Schwartz, and the resulting claims for constructive trust against the Estate and Ms. Myron. These are in personam actions against trustees for breaches of trust. Beneficiaries are entitled to bring such actions directly (Remmers). In any case, even if it can be argued that Ms. Kwinter is making constructive trust claims as a beneficiary against a third party to the Trust, it is again not clear that these claims do not fall under one of the exceptions listed above.

[39] In the result, Ms. Kwinter’s claim will not be struck under Rule 129 as it is not plain and obvious that she lacks standing under the common law of trusts.

In Stoney First Nation v Imperial Oil Resources Limited, 2014 ABQB 408 (CanLII), the Court heard an appeal from a Master’s decision, dismissing an application by the applicant, Stoney Tribal Council, to continue a royalties compensation claim against the respondent, Imperial Oil Resources Limited. The claim concerned royalty payments made by the respondent to Canada for petroleum and natural gas mining rights on Stoney lands. The respondent sought summary dismissal of the applicant's claim before the Master, arguing that the applicant had no standing to bring the action. On appeal, Mahoney J. held that the applicant did not adduce any reliable evidence establishing a special circumstance, such as an alleged fraud or collusion between Canada and the respondent, a conflict of interest or duty on the part of Canada that made it impossible or difficult for Canada to sue the respondent, or a failure by Canada in performing its duties as trustee to protect the interests of the applicant. The applicant also failed to meet the three prerequisites required for a beneficiary to bring an action against a third party owing money to a trustee and, as such, did not have standing to bring the action:

[53] I also agree with the Master that the Stoney do not have standing to pursue their claim against Imperial. The Master correctly identified the general rule set out in Remmers v Lipinski, 2001 ABCA 188 at para 57 that while beneficiaries have an in personam action against trustees for breach of trust, they cannot sue the debtor of a trust fund. The Master also correctly identified the exceptions to this legal rule set out in Kwinter v Metrowest Development Ltd, 2007 ABQB 713, which require that the beneficiary first meet certain prerequisites and that there be special circumstances for a beneficiary to sue a third party.

1. Kwinter Exceptions

[54] The exceptions set out in Kwinter at para 36 are:

The following possible exceptions relevant to the case at bar have been identified:

1. Where there is alleged to be fraud or collusion between the trustee and the third person (Halsbury’s),

2. Where by reason of conflict of interest or duty it is impossible or difficult for the trustees to sue (Halsbury’s),

3. Where there is a failure by the trustees in performing their duties as trustees to protect the trust estate or to protect the interests of the beneficiary in the trust estate (Hayim v. Citibank N.A.)

4. Where the beneficiaries are suing to recover trust property (as opposed to suing debtors of the trust) (Remmers v. Lipinksi (2001), 2001 ABCA 188 (CanLII), 293 A.R. 156 (C.A.), leave to appeal to S.C.C. refused, [2001] S.C.C.A. No. 502).

To this list I would add statutory exceptions, such as those in the BCA allowing a beneficial owner of securities of a corporation to bring certain actions. [Paragraph number omitted.]

[55] The Stoney argued that they satisfy certain of the Kwinter exceptions and therefore should be allowed to sue Imperial. In relation to Kwinter exceptions 1, 3 and 5, the Stoney submitted that they have standing because they did not approve Imperial’s 2005 settlement payment to Canada in trust for the Stoney of $149,956.10.

[56] In effect, the Stoney argued that the royalty calculation and payment from Imperial to Canada was reduced from $3,530,328.80 to $149,956.10 without their consent, that Canada failed to obtain their consent in accepting that 2005 settlement payment, and that the Stoney therefore meet the Kwinter exceptions #1 and #3. In essence, this argument is an allegation by the Stoney that the conduct of Canada in entering into the release with Imperial proves fraud, collusion or a failure of Canada to act in the Stoney’s best interests. I do not accept this argument. The fact that no accounting was provided to the Stoney or the royalties paid are disputed once again may provide them with a claim against Canada, but not against Imperial.

[57] Imperial responded that the inability of the Stoney to determine how the royalties were calculated and paid by Imperial to Canada in respect of the resolution of the Canada-Imperial Action is not a sufficient basis to maintain this action. It is not appropriate to commence an action of this nature simply for disclosure purposes argued Imperial. I agree.

[58] On this point, the Master’s statement at para 20 is relevant:

The Stoney say that Imperial “has refused to verify the values of the specified royalties” attributed to it. While Imperial has apparently never provided this calculation to the Stoney, Canada has provided an estimate of $3,530,328.80, plus interest for the period 1977 to 1994. The Stoney say that an accounting could show that funds are still owing, and this action is to collect those funds. [Paragraph number omitted.]

[59] The mere fact that Canada entered into the release with Imperial is not sufficient to establish fraud or collusion between Canada and Imperial, nor does it establish a failure by Canada in performing its duties as a trustee. In fact, as Canada ultimately initiated the Canada-Imperial Action against Imperial, it clearly cannot be said that it is “impossible or difficult for the trustee to sue”. I therefore reject this argument. It does not qualify as one of the Kwinter exceptions.

[60] The Stoney also submitted that the facts in this case satisfy the Kwinter exception 2 (conflict of interest or duty). I accept as a general principle the Supreme Court of Canada’s statement in Wewaykum Indian Band v Canada, 2002 SCC 79 at para 96 that: “The Crown can be no ordinary fiduciary; it wears many hats and represents many interests, some of which cannot help but be conflicting: Samson Indian Nation and Band v. Canada, 1995 CanLII 3602 (FCA), [1995] 2 F.C. 762 (C.A.).” However, it does not automatically follow from that statement that an “inherent conflict” exists between the Stoney and Canada, as the Stoney argued, nor have the Stoney offered any evidence that could establish such an “inherent conflict” in this case.

[61] The Stoney submitted at para 76 of their brief: “One must ask whether the Canada [sic] declined to assert the [Stoney-Canada] Action because Canada has other alleged public interests arising from its “inherent” conflicts or if Canada refused to assert the [Stoney-Canada] Action to its full extent due to a more immediate conflict of interest that Canada as trustee finds itself in.” As already stated, the Stoney offered no evidence that Canada had either an “inherent conflict” or a “more immediate conflict of interest”, whatever that more immediate conflict may be.

[...]

[74] I find that the Stoney’s argument does not provide any basis that gives them standing in this action. As the Supreme Court of Canada stated in Canada (Attorney General) v Lameman, 2008 SCC 14 at para 11:

If the defendant does prove [the test for summary judgment], the plaintiff must either refute or counter the defendant’s evidence, or risk summary dismissal: Murphy Oil Co. v. Predator Corp. (2004), 365 A.R. 326, 2004 ABQB 688, at p. 331, aff’d (2006), 55 Alta. L.R. (4th) 1, 2006 ABCA 69. Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried: Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 CanLII 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), at p. 434; Goudie v. Ottawa (City), [2003] 1 S.C.R. 141, 2003 SCC 14, at para. 32. [Emphasis added. Paragraph number omitted.]

[75] In this application, the Stoney must put their best case forward as well as they can. I have not seen the necessary coherent evidence with an organized set of facts showing a real issue to be tried between the Stoney and Imperial. Having said that, the Stoney are free to bring their action against Canada, if it is the case that they are owed funds that Canada should have collected on their behalf from Imperial.

[76] The Stoney’s argument does not establish the existence of any of the Kwinter exceptions.

[77] The Stoney did not adduce any reliable evidence establishing an issue of merit requiring a trial on the following potential issues in relation to their standing to sue Imperial in this action: an alleged fraud or collusion between Canada and Imperial; a conflict of interest or duty on the part of Canada that made it impossible or difficult for Canada to sue Imperial; a failure by Canada in performing its duties as trustee to protect the interests of the Stoney; possible standing granted to the Stoney by virtue of section 4(2) of the Act; potential outstanding royalties owing to the Stoney; or the settlement agreement between Canada and the Stoney.

[78] I agree with the Master’s conclusion that the Stoney have not met the three prerequisites required for a beneficiary to bring an action against a third party owing money to a trustee, (see paras 70-84). Those three prerequisites identified and considered by the Master were: (i) whether the Stoney asked Canada to sue Imperial and were refused; (ii) whether the beneficiary named the trustee as a defendant to sue the third party; and (iii) whether the beneficiary exhausted its remedy against the trustee.

[79] The Stoney also failed to cure the deficiencies, namely to add Canada to their action as a defendant or to first exhaust their remedy against Canada.

[80] I agree with the Master that the Stoney’s submission at para 45 of their brief (which argument was made both to the Master and again on appeal) that “Imperial is suggesting that the taxpayers of Canada compensate the [Stoney] for royalties that Imperial unlawfully refuses to pay” puts the cart before the horse. This consideration is simply irrelevant for the purposes of determining whether the Stoney have standing to bring the current action.

In Stoney Tribal Council v Shell Canada Limited, 2017 ABQB 314 (CanLII), Shell Canada Limited produced and sold gas from lands set aside as reserves for the Bearspaw, Chiniki and Wesley Bands. The mineral leases permitting production were between Shell and Her Majesty the Queen in Right of Canada and required Shell to pay royalties to Canada in trust for the bands. In 1997, Shell changed how it sold the gas. The Stoney Tribal Council (“Stoney”) took the position that it was underpaying royalties and, in any event, did not provide adequate information for accurate calculations of the royalties by Canada and the bands. Canada did not take action against Shell in a way satisfactory to the Stoney, nor did it sue Shell. As a result, in 2001, the Stoney sued Canada and Shell for the royalties. Canada denied liability to the Stoney, and issued a third party notice to Shell. Shell sought summary judgment dismissing the Stoney’s claim against it as a defendant, on the basis that only Canada had standing to sue on matters arising from the lease. Poelman J. found that the the facts in this case were distinguishable from those in Stoney First Nation v Imperial Oil Resources Limited, 2014 ABQB 408 (CanLII) and the Stoney had standing in this case as they fell within one of the exceptions to the general rule that a beneficiary cannot sue a debtor of the trust, specifically that there was a demonstrated failure by the trustee in performing its duties:

[37] The main precondition for a beneficiary suing a stranger to a trust is that it has exhausted its remedies against its trustee. The Stoney argue that if the trust principle that generally precludes beneficiaries from suing a stranger to a trust applies, then:

a) it meets the preconditions for suing under the Kwinter exceptions and

b) it comes within the exceptions.

[38] Shell argues that Stoney has failed to exhaust its remedies against Canada and until that occurs it has no remedy against Shell. Its argument is based on a finding in Imperial that if the Stoney had any claims for amounts that remained unpaid, “[t]hey have shown no reason why the trustee could not or cannot be held responsible for any monies owing” (Master, para. 82) and “they have shown no reason why they could not or did not exhaust their remedy against the Crown” (para. 84). Mahoney J. agreed with that conclusion (paras. 73 and 78).

[39] Shell is in this action as a defendant at the Stoney’s instance, and as a third party at Canada’s. Its application would remove it as a defendant but leave it as a third party. (In oral argument, Shell indicated it may have defences to all or some of Canada’s third party notice, even if Canada is liable to the Stoney.)

[40] Consideration of the preconditions raises the following important distinctions between this case and Imperial:

a) Canada was not a defendant in Imperial. Stoney sued it alone in an earlier action, which was partially settled.

b) Canada had sued Imperial, and recovered funds from it on the Stoney’s behalf.

c) The court had been shown no reason why Canada could not be held responsible for the amounts alleged to be still owed.

d) In this action, Canada is a defendant. It has taken no action against Shell except by claim over. In the Stoney’s affidavit (unchallenged), the evidence is that before commencing the action legal counsel for the Stoney unsuccessfully requested Canada to, among other things, determine the selling price of the royalty gas and deem Shell to be in default of its leases. While Shell did pay additional royalties to Canada, since 2001 they have remained in a suspense/escrow account pending final agreement between Shell and Canada. None of the monies have been paid to the Stoney, and they have not received the information they claim is necessary to determine adequacy of the payment.

e) In its statement of defence, Canada “denies that in the circumstances of this case, the Crown owed or owes at any time any fiduciary duties to the bands as alleged. The Crown further denies she was under any statutory or trust duty as alleged by the Plaintiffs” (para. 6). Further, Canada states that if there was a duty, it has been fulfilled and any breach is denied (para. 8). Finally, the Crown pleads in the further alternative “that if there has been an under-valuation of gas prices, which is denied, any damages, loss or interest charges flowing therefrom are the liability of Defendant, Shell Canada Limited or Coral Energy Canada Inc., or both of them” (para. 10).

f) In 2015, Canada applied to have the Stoney’s action against it dismissed for delay. It was unsuccessful.

[41] Shell submits that the Stoney has not exhausted its remedies against Canada until its action has been unsuccessfully pursued through judgment and appeals. That is, in my view, too onerous a burden on a beneficiary of a fiduciary and trust-like relationship. No authority of which I am aware goes that far in requiring a party to exhaust its remedies.

[42] The passage in Waters relied upon (although not quoted) by Master Hanebury for part of her decision states (in the current edition):

What if the trustee cannot or will not enforce this claim for the benefit of the trust? A recalcitrant trustee who has rights against a third party but will not enforce them can simply be joined as a defendant to the beneficiary’s action which also names the third party as a defendant. [Waters, 1265, notes omitted.]

Hayim v Citibank NA, [1987] A.C. 730 (Eng. Prob. Ct.), cited by Master Hanebury and quoted in Waters, holds “that a beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate” (at 748, quoted in Waters at 1265).

[43] I am persuaded that in this case, the Stoney have shown its remedies against Canada have been exhausted to the degree necessary to allow an action against Shell. In pursuing relief against Shell on behalf of the Stoney, on the only evidence before me Canada has been at least a “recalcitrant trustee” and has failed, excusably or otherwise, to perform its duty in securing additional royalties. The Stoney did not get the relief it sought before commencing an action, and in commencing an action has been met with Canada denying any remedy, and saying Shell is the responsible party for any shortfalls. Even the funds held in the account, obviously intended for the Stoney, remain unpaid. By contrast, in Imperial, Canada was not a defendant and in the action in which it was a defendant had partially paid the claim.

[44] As a matter of economy, nothing is gained by requiring the Stoney to sue only Canada through judgment and appeals and then, if unsuccessful, starting new proceedings against Shell. Doing so would, to the contrary, be highly inefficient if the suit against Shell ultimately had to be pursued and would be prejudicial to the Stoney.

[45] Shell also argued that it should be entitled to deal only with its contracting party, and not be subjected to dealings with the beneficiary at the same time. But any prejudice to Shell is the type that can be compensated in costs, and would in any event, be minimal as it remains in the action as a third party. Further, the leases and the capital Regulations they incorporate are replete with situations where Shell must deal with the Stoney as well as with Canada.

[46] It remains to consider whether one of the Kwinter exceptions apply. The Stoney rely principally on the one based on Hayim v Citibank NA, paraphrased in Kwinter as “where there is a failure by the trustees in performing their duties as trustees to protect the trust of the estate or to protect the interests of the beneficiary in the trust estate” (para. 36, quoted in Mahoney J.’s judgment in Imperial at para. 54).

[47] In my view, the Stoney’s claim falls within that exception. It is essentially the same as the requirement that a beneficiary exhausts its remedies against the trustee or fiduciary.

In Price Security Holdings Inc. v. Klompas & Rothwell, 2019 BCCA 36 (CanLII), the respondent was the beneficiary of a trust that owned a commercial building and the appellant was a tenant of some space in the building. After the tenant had stopped paying its rent, the respondent transferred its beneficial interest in the building, together with the shares in the corporate trustee in whose name the building was registered, to a third party. The respondent beneficiary brought an action in its own name against the tenant seeking judgment for the rent arrears, and the matter proceeded by summary trial. The judge concluded the respondent beneficiary had satisfied the three prerequisites permitting a departure from the general rule that a beneficiary of a trust cannot directly sue a third party debtor of the trust. The judge awarded judgment for the rent arrears. Tysoe J.A., for the Court of Appeal, held that the trial judge erred by failing to consider, in addition to the three prerequisites, whether "special circumstances" existed and ordered a new trial:

[48] I wish to make two points before reviewing the case authorities. The first point is that this topic engages both trust and privity of contract principles. It is a general principle of the privity doctrine that only a party to the contract may sue on the contract. It is a general trust principle that it is the trustee of the trust, and not its beneficiaries, who is the appropriate party to sue to enforce rights of the trust. Both of these principles were involved in the cases discussed in Greenwood Shopping Plaza as illustrations of the trust exception to the privity doctrine.

[...]

[53] The next important decision is Hayim v. Citibank N.A., [1987] A.C. 730 (P.C.), which may have led to some confusion in the jurisprudence. It involved two trusts, referred to as the Hong Kong trust and the American trust, with the beneficiary of the Hong Kong trust being the trustee of the American trust. The Hong Kong trust owned a property and the provisions of the American trust provided that the trustee had no obligation to require the sale of the Hong Kong property until two named persons had died. The beneficiaries under the American trust sued the trustee of the Hong Kong trust for breach of trust in delaying the sale of the property until those two persons had died. The Privy Council dismissed an appeal from the Court of Appeal of Hong Kong holding that there had not been a breach of trust by the trustee of the Hong Kong trust. The Privy Council relied on a provision in the American trust stating that its trustee had no responsibility in respect of the Hong Kong property while either of those two persons were alive, and held that this provision meant that the trustee under the American trust owed no duty to the beneficiaries of the trust and was entitled to have instructed the trustee of the Hong Kong trust to delay the sale of the property.

[54] Although the Privy Council reviewed authorities involving the issue of whether a beneficiary of a trust could sue a third party, the case did not involve that issue and the Privy Council was not bringing about a change in the law on the issue. Rather, the issue was whether the beneficiaries of the trust had greater rights than the trustee, and the comments by the Privy Council about the authorities were obiter dicta. This is clear from the statement made by Lord Templeman immediately prior to his review of the authorities (at 747):

The authorities cited by [counsel for the beneficiaries under the American trust] only demonstrate that when a trustee commits a breach of trust or is involved in a conflict of interest and duty or in other exceptional circumstances a beneficiary may be allowed to sue a third party in the place of the trustee. …

[Emphasis added.]

[55] Lord Templeman then reviewed several authorities, including Sharpe and two other decisions stating that a mere refusal by the trustee to sue did not entitle a beneficiary to sue a third party in his own name (Yeatman v. Yeatman (1877), 7 Ch.D. 210, and Meldrum v. Scorer (1887), 56 L.T. 471 (Ch.)). He also referred to Travis v. Milne (1851), 9 Hare 141 at 150, 68 E.R. 449 (Ch.), where it was held that beneficiaries under a will of a deceased partner could only sue the surviving partners in “special circumstances … where the relation between the executors and the surviving partners is such as to present a substantial impediment to the prosecution by the executors of the rights of the parties interested in the estate against the surviving partners”. Special circumstances were found in that case because the executors were accused of breach of trust in carrying on business with the surviving partners.

[56] Lord Templeman summarized the authorities as follows (at 748):

These authorities demonstrate that a beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty [owed] by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate.

[Emphasis added.]

In my view, Lord Templeman was not endeavouring to say anything different in this passage than he said in the passage preceding his review of the authorities; namely, a beneficiary of a trustee is not permitted to directly sue a third party except in special circumstances. Given Lord Templeman’s reference to Sharpe, Yeatman and Meldrum, he cannot be taken to have meant that a refusal of the trustee to sue the third party constitutes a special circumstance.

[57] Interestingly, all the other relevant authorities are decisions of the Alberta courts. In Vogel v. Hall, 2001 ABCA 188 (sub nom. Remmers v. Lipinski) (“Remmers”), leave to appeal ref’d [2001] S.C.C.A. No. 502, the Alberta Court of Appeal summarized the law as follows:

[57] … Generally, while beneficiaries have an in personam action against trustees for breach of trust, they cannot sue the debtor of a trust fund. Sharpe v. San Paulo Railway (1873), L.R. 8 Ch. 597. Although beneficiaries may sue to recover trust property, this is not a trust property action but a claim for damages based on gross negligence. D.W.M. Waters, The Law of Trusts in Canada, 2nd ed. (Toronto: Carswell, 1984) at 984. …

[58] In Kwinter v. Metrowest Development Ltd., 2007 ABQB 713, the defendants applied to strike the statement of claim for want of standing. The plaintiff was a beneficiary under a family trust which held the common shares of a corporation, and she sued for oppression and breach of trust in respect of a transfer of preferred shares of the corporation to her sister. In holding that it was not plain an

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