2005 BCSC 11 Taylor Ventures Ltd. (The Vincent Taylor Family Trust)

Before: The Honourable Mr. Justice Burnyeat

Reasons for Judgment
(In Chambers)

Counsel on behalf of Abakhan & Associates Inc., Trustee In Bankruptcy	A. Wade
Appearing on behalf of The Vincent Taylor Family Trust	Vincent Taylor
Date and Place of Hearing:	October 3, 2003 and October 8 and 14, 2004
	Vancouver, B.C.

[1] The Vincent Taylor Family Trust (“Trust”) applies pursuant to s. 81 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“B.I.A.”) for an order setting aside the July 14, 2000 Notice of Disallowance of the Proof of Claim filed, for a declaration that the Proof of Claim filed is valid and binding against the Trustee, and for an order that the Trustee transfer to the Trust an undivided 1/24 interest (“Land Interest”) in a certain property located near Sorrento, British Columbia (“Property”).

[2] Abakhan & Associates Inc. (“Trustee”), the Trustee of the Estate of Taylor Ventures Ltd. (“TVL”) opposes the relief sought on the bases that a Proof of Claim was not filed after a notice pursuant to s. 81(4) of the B.I.A. had been provided to the Trust, that the documentation alleged to have created the Land Interest is a settlement which is not valid and that, in any event, the documentation does not create a valid settlement.

[3] When the application of the Trust first came on for hearing, it was apparent that there was pertinent documentation not before the Court. Mr. Vincent Taylor on behalf of the Trust advised the Court that he would make further documents available. The application of the Trust was adjourned to allow such documentation to be forthcoming.

[4] The filed materials indicate that the original owner of the Property was Sahara Properties Ltd. (“Sahara”). The Property consists of 23 recreational cabins located on approximately 24 acres on the shores of Shuswap Lake near Sorrento. Sahara sold the Property to Sorrento Villas Ltd. (“Sorrento”) on February 14, 1980 and, on August 12, 1992, TVL acquired the Property from Sorrento. The documentation on behalf of Sahara was signed by Ralph D. Taylor, its President. Ralph D. Taylor is the father of Vincent Taylor and husband of Joanne Taylor. While the controlling mind of TVL was Ralph Taylor, the sole director and shareholder of TVL was Joanne Taylor.

[5] Although ownership of the Property is undivided, owners of the Property were allocated particular “lots” on the Property and have been allowed to build recreational cabins on that portion of the Property which has been allocated to them. It is one of those cabins and the Land Interest which is said to have been transferred by TVL to the Trust which is stated to have been created in a November 28, 1995 document.

THE NOVEMBER 28, 1995 DOCUMENT

[6] In his July 29, 2000 affidavit, Mr. Taylor states: “I have been unable to find a signed copy of the trust declaration ... by which the Vincent Taylor Family Trust was established, but I have found an unsigned copy of it.”

[7] In this unsigned Indenture made the 28th day of November, 1995 and stated to be “In the Matter of the “Trustee Act”” and “In the Matter of the “Infants Act””, Helen Matousek as the “Settlor” names Vincent Joseph Taylor as the “Trustee” and the trust created by the Indenture as “The Taylor Family Trust”.

[8] The definition of beneficiaries is divided into “Capital Beneficiaries” and “Income Beneficiaries”. Regarding this Indenture, Mr. Taylor states: “To the best of my recollection, the Family Trust Declaration attached to this my affidavit ... is the same as the copy signed by me”. He also states in his affidavit:

Although the Family Trust Declaration refers to the trust created under it as the “Taylor Family Trust”, I have always referred to it as the Vincent Taylor Family Trust, and this is the name I advised my accountant to use in preparing the Cabin Trust Declaration for the trust to be created by Taylor Ventures Ltd. over the Cabin Property. To the best of my knowledge there is no other trust named the “Vincent Taylor Family Trust” other than the one created by the Family Trust Declaration, and to the best of my knowledge I am not named as trustee under any other trust.

[9] The “Trust Property” is described as consisting of the following:

... two silver coins together with all amounts accumulated by the Trustee and such additional property and assets, whether real, personal or mixed, which the Settlor and any other person or persons, company or companies, trust, or trusts, made at any time and from time to time with the approval of the Trustee pay, transfer, assign or convey to the Trustee, to be held by him on the Trust herein contained, and shall include any and all property and assets, real, personal or mixed, in which the same may be invested by the Trustee, or into which the same may be converted by the Trustee, at any time or from time to time as well as any additions or accretions thereto.

[10] In his September 19, 2003 Affidavit, Mr. Taylor indicates that he was successful in locating a signed copy of the Trust. The November 28, 1995 Indenture which is attached to that Affidavit is said to be made “In the Matter of the “Trustee Act””, “In the Matter of the “Land (Settled Estate) Act”” and “In the Matter of the “Infants Act””. In the Indenture, Helen Matousek is the “Settlor” and three individuals are named as the “Trustee” (Ms. Matousek, Vincent Taylor, and Katherina Taylor, the wife of Mr. Taylor). The Trust created is stated to be “The Vincent Taylor Family Trust”. The “Beneficiaries” are noted to be the wife of Mr. Taylor as well as his two children and “any further children born to the said Katherina Taylor”. The “Trust Property” is defined in a similar way to the undated Indenture of the same date.

THE JANUARY 1, 1996 AGREEMENT

[11] What is referred to as a “Bare Trust Declaration and Agreement” dated January 1, 1996 is in evidence (“Agreement”). The Agreement is between TVL as “Trustee” and the “The Vincent Taylor Family Trust”. It is stated in one of the recitals that the Trustee was the registered owner of an undivided 1/24 interest in Lot 1 “TWP: 2”. It should be noted that the Property is contained within “Township 22” and not within “TWP: 2”. A further recital states:

Trustee wishes to transfer the Property to the Beneficiary. Trustee now holds title to the Property as bare trustee for Beneficiary and Trustee has agreed to act as bare trustee holding the Property for the sole benefit and subject to the direction of the Beneficiary.

[12] The Agreement further states:

1. Trustee shall hold the Property only as bare trustee for Beneficiary and shall have no duty or responsibility in connection with the Property other than to hold legal title to the Property in trust for Beneficiary and to deal with the same as Beneficiary may direct from time to time whether by way of transfer, assignment, mortgage, lease, encumbrance, charge or otherwise.

2. In dealing with the Property in the manner outlined in the preceding paragraph, Trustee shall be fulfilling its obligations as bare trustee. To the extent necessary, it is recognized that Trustee shall be acting as agent for Beneficiary, but without any discretion with respect to the Property.

3. All obligations, responsibilities, acts or omissions with respect to the Property will be controlled, performed, handled, managed and dealt with solely by the Beneficiary, except in such circumstances as Beneficiary may otherwise direct. Trustee covenants to promptly notify Beneficiary of any and all taxes, assessments, liens, charges, and other matters, both financial and otherwise, which relate to the Property or which could reasonably be construed as having the potential to affect title to or the good repair of the property.

4. The Beneficiary agrees that it shall indemnify and save harmless Trustee from all claims, charges, actions, causes of action, demand, obligations, responsibilities, acts or omissions which occur or the causes of which occur with respect to the Property during the term of this Agreement, except in the case of a breach of duty or obligation by Trustee under this Trust Declaration.

7. This trust shall terminate upon the earlier of:

(a) Beneficiary serving Trustee with written notice to the effect that the trust is to collapse and is terminated; or

(b) the wind-up or bankruptcy of Trustee.

In either case, and upon the termination of the trust, all rights, titles and interest of Trustee in and to the Property shall cease to exist and shall instead be conveyed (both in title and in fact) to Beneficiary, who shall have the right to convey Trustee’s registered interest in the Property to itself.

8. Upon termination of the trust or in the event that Trustee is required to perform any act, deed or service in relation to the Property, Trustee covenants and agrees to do such things and take such steps as are necessary (including the execution of transfer documents) as will facilitate the demands and instructions of Beneficiary or will carry out the terms of this Trust Declaration.

[13] While the Agreement is dated as of January 1, 1996, it was executed on behalf of TVL by Joanne Taylor and signed, sealed and delivered by “Vincent Taylor, Trustee of the Vincent Taylor Family Trust” on January 4, 1996. The Agreement was not executed by "The Vincent Taylor Family Trust", by all of the Trustees under the Trust, or by one of the Trustees on behalf of “The Vincent Taylor Family Trust”.

INSOLVENCY OF TVL (1998)

[14] On January 22, 1998, a Receiving Order was made against TVL. On September 2, 1998, TVL was adjudged bankrupt. Despite paragraph 7 of the Agreement, the Trust has not requested a conveyance of the “Trustee’s registered interest in the Property to itself”.

[15] On March 19, 1998, counsel for Vince Taylor had advised counsel for the Trustee of TVL that it was his position that TVL held the Land Interest in trust for the Trust. On March 31, 1998, counsel for the Trustee requested verification of the “... alleged entitlement of the Trust to the lands”. The letter also stated:

We look forward to a complete and full description of the circumstances together with evidence that proper consideration was paid for the asset. In particular we require a history of the dealing with the lands so that we can satisfy our client that Taylor Ventures Ltd. has no interest in the lands.

[16] In an August 13, 1999 letter to Mr. Taylor, the Trustee wrote:

A review of the files of TVL indicates that you are claiming that a one twenty-fourth interest in and to Lot 1 of Section 15, Township 22, Range 11, West of the 6th Meridian, Plan 10984 (Sorrento Cabin) is being held in trust by TVL for the Vince Taylor Family Trust. We note that to date, you have not filed a Proof of Claim with the Trustee.

Please find attached a Proof of Claim for you to execute and return. We would appreciate an immediate response.

[17] Nothing in that letter drew the attention of Mr. Taylor to s. 81(4) of the B.I.A. As well, the letter is directed to Mr. Vince Taylor rather than to the Trust.

[18] In an August 31, 1999 letter from the Trustee to Mr. Taylor with a copy to his solicitor and to the solicitor for the Trustee, Mr. Taylor was advised as follows:

We are in receipt of your Proof of Claim in the bankruptcy of TVL and note that the wrong Proof of Claim form was forwarded to you. As you are making a claim for property, we attach the appropriate form for your execution and request that you prepare and file with us at your earliest convenience. Please ensure that all documentation to support your claim is included.

[19] In September 21, 1999 letter to Mr. Taylor with a copy to the solicitor for Mr. Taylor and to the solicitor for the Trustee, Mr. Taylor was advised as follows by the Trustee:

On August 31, 1999, Abakhan & Associates Inc. in its capacity as Trustee in bankruptcy of TVL, gave notice to you to prove the claim of the Vincent Taylor Family Trust (the “Trust”) to property in possession of the Trustee, namely a one twenty-fourth interest in and to Lot 1 of Section 15, Township 22, Range 11, West of the 6th Meridian, Plan 10984 (the “Property”). To date the Trustee is not in receipt of your claim.

As fifteen days have passed since said notice, pursuant to Section 81(4) of the Bankruptcy & Insolvency Act, the Trustee will be proceeding to obtain the leave of the court to sell the Property free and clear of any interest the Trust may claim to the Property.

[20] In a March 4, 2000 letter, the solicitor for the Trustee advised the solicitor for Mr. Taylor as follows:

I write to give you notice that Abakahn & Associates Inc, the Trustee in Bankruptcy of the Estate of Taylor Ventures Ltd., hereby gives your client notice that your client having failed to file a proof of claim (property) within 15 days of the Trustee giving notice to you and your client of the requirement to file the same; the said Trustee takes the position that your client is no longer able to prove any claim to that property legally described as: .... My client will now rely upon its right to dispose of that property with leave of the court pursuant to section 81(4) of the Bankruptcy and Insolvency Act.

[21] No application has ever been made by the Trustee to obtain leave of the Court to sell the Land Interest.

[22] The March 9, 2000 response from the solicitor for the Trust was that the Trustee had not given notice pursuant to s. 81(4) of the B.I.A. and that the Trustee was not entitled to rely on that section to take the position that the Trust no longer had a claim to the Land Interest. The letter also stated:

If the trustee wished to take such a position, it was required to make that position clear up front so that our client could have governed its actions accordingly. This is especially the case given there is other correspondence in this matter and the various discussions between our office, your office, and the trustee.

[23] In view of the March 9, 2000 letter, it is surprising that a Proof of Claim was not forwarded until May 11, 2000. In a May 11, 2000 letter enclosing a Proof of Claim, the solicitors for the Trust stated:

Our instructions are that the cabin property has been owned by the Taylor family since 1970, long before Taylor Ventures Ltd. was even incorporated. The property was originally part of a larger resort operation, which in the mid-1970’s was converted into co-ownership units. The other co-ownership units were sold, with the cabin property being retained by the Taylor family for their personal use. The property was transferred from another Taylor company [Sorrento] to Taylor Ventures Ltd. in 1992, so Taylor Ventures Ltd.’s ownership of the property was only for four years. Taylor Ventures Ltd. was financially sound and able to pay its debts at this time. It had always been the intention of Vincent Taylor’s parents that the cabin property be kept “in the family”, and the transfer in January of 1996 to Mr. Taylor’s family trust was intended to accomplish this. The transaction was structured as a trust arrangement primarily to avoid payment of Property Transfer Tax.

PROOF OF CLAIM

[24] As the “Trustee of the Vincent Taylor Family Trust”, Mr. Taylor swore a Proof of Claim on May 11, 2000 claiming that the Trust had an interest in property by virtue of a “Bare Trust Declaration and Agreement dated as of the 1st day of January, 1996”. He stated that the Land Interest after January 4, 1996 was to be held by TVL: “... as Trustee in trust for the Vincent Taylor Family Trust as beneficiary;”. He further stated that the Trust was created on November 28, 1995 and that the beneficiaries under the Trust were his wife, his children and “any future offspring”.

[25] It should be noted that the Proof of Claim is filed by Mr. Taylor as Trustee of the "Vincent Taylor Family Trust” and not as the Trustee of “The Vincent Taylor Family Trust”. It should also be noted that the Proof of Claim is sworn by “Vincent Taylor” and not by “Vincent Taylor, a Trustee of The Vincent Taylor Family Trust” or "Vincent Taylor on behalf of The Vincent Taylor Family Trust".

[26] Mr. Taylor further stated in the Proof of Claim:

10. The Property has been owned by my parents, through various companies, since 1970.

11. My parents told me that they wished the Property to remain in the Taylor family, handed down to me and my children. I suggested to my father that the Property be transferred to the Vincent Taylor Family Trust rather than to me personally, following tax and estate planning advice.

12. I obtained advice that Property Transfer Tax, which would normally be payable on the transfer of the Property, would not be payable if Taylor Ventures Ltd. instead held the Property in trust for the Vincent Taylor Family Trust.... It was for this reason that the transfer of the Property to the Vincent Taylor Family Trust was done by way of a trust instead of an immediate outright transfer.

[27] The Proof of Claim was disallowed and this appeal from the Notice of Disallowance is the subject of the application by the Trust.

NOTICE OF DISALLOWANCE

[28] The July 14, 2000 Notice of Disallowance sets out the following reasons for the Disallowance of the claim of the Trust:

1. The Trustee has received no evidence that the Trust is an entity created by law or known to law, it is not a lawful Trust, that Vince Taylor and/or the Trust has no interest in the property, and the property forms part of the Estate.

2. The Trustee has received no evidence that a properly constituted meeting of Directors of TVL was held, and a resolution passed, to transfer the Property to the Trust.

3. There is no evidence that the investors and creditors of TVL were advised that TVL intended to transfer the Property from TVL to another entity.

4. In the event that the Trust is a legal entity, TVL received no consideration for the Property from the Trust. Furthermore, the Trust, since the purported transfer from TVL, has incurred no expenses to maintain the Property, including the payment of property taxes, maintenance expense and other expenses.

5. Since the purported transfer of the Property, TVL continued to pay all expenses relating to the maintenance of the Property, including property taxes and other expenses, and TVL therefore claims an interest in the Property.

6. Since the purported transfer of the Property, the Property has been used almost exclusively by Ralph and Joanne Taylor, and little if at all by the Vince Taylor family.

7. Vince Taylor knew, or should have known, that at the time the Property was purportedly transferred to the Trust in January 1996, TVL was insolvent, and that the interest was acquired from TVL to defeat and hinder creditors, and as such the transfer is not valid and the purported interest in the Property is not lawful. It is the Trustee’s understanding that the Property is currently worth between $135,000 and $250,000.

[29] In his October 1, 2003 Affidavit, Mr. Abakhan on behalf of the Trustee states that he reviewed the reasons contained in the Notice of Disallowance and confirmed: “... that those are the reasons which form the basis for the Trustee’s decision to disallow the claim.”

EVIDENCE OF JOANNE AND VINCENT TAYLOR

[30] Joanne Taylor was examined under oath on August 16, 2000. The Trustee relies on the following questions and answers to support the submission that Ms. Taylor as the former sole director and shareholder of TVL and on behalf of TVL acknowledges that the Land Interest was not transferred to the Trust and that neither the Trust nor Vincent Taylor have an interest in the Property:

Q When did you buy a cottage in Sorrento?

A No. What we did was -– there was a resort that we took over and ran.

Q Was that called Sahara Properties?

A Yeah. Sahara Resort, actually.

Q 27 little cottages. You still have a little cottage there, don’t you?

A A little one.

Q Because that piece of property at Sorrento is divided into 24 parcels?

A I understand that to be true.

Q Okay. And one-twenty-fourth is held by Taylor Ventures, correct?

A By our –- by us, yes.

Q Okay. Would any business of Taylor Ventures ever have been conducted at that cottage?

A Oh God, I hope not.

Q So he [Vincent Taylor] doesn’t have a cottage at Sorrento?

A He doesn’t own a cottage at Sorrento. Here’s the story there: My sister has no children. She’s been married, but she never had any children.

A And one day she said to me, I would like to leave -- when I die I would like to leave my cottage to Vincent in my Will, and I said that would be nice. Then she found out that the laws of our land are such that if you leave an inheritance, you pay, as you know, what –- death taxes, or NDP taxes, or whatever they’re called these days. You know what I’m talking about. It would cost my son a great deal of money to “inherit” a piece of property, right?

Q Yes.

A So she didn’t –- so she talked to some friends about this. So she said the only way that I can make sure that I have my Last Will and Testament the way I want it, that I want Vince to have a place to be, and his children, is to be in partnership with him.

Q Okay. So they own a cottage in partnership?

A Well, I guess it would be. I don’t know what the legalese is for that; but in order for him to have it for our children –-

Q So that’s Vincent cottage?

A It’s not Vincent’s cottage. It’s my sister’s cottage.

Q I see. Vincent uses it?

A She allows him to use it, yes.

[31] Mr. Vincent Taylor was examined under oath on June 28, 2000. During that examination, Mr. Taylor confirmed that he had not attended any of the meetings of owners, he did not get copies of the Minutes from meetings of the owners, and he did not know whether he had provided any notice to the “Strata Council” that the Trust claimed any ownership of the Property. While he indicated that he thought that tax returns had been filed for the Trust, they were not produced at his Discovery and they have not been produced since.

[32] At this examination, Mr. Taylor also confirmed that the Trust had never paid any of the property taxes relating to the Property, that the property taxes were paid by TVL and that the Trust “... has never paid any monies to Taylor Ventures Ltd. for the Sorrento cabin ...”. Mr. Taylor was also asked whether the Trust had ever paid any monies towards the maintenance of the cabin and he answered: “Nothing significant, correct.”

[33] In his November 28, 2003 affidavit, Mr. Taylor attaches a copy of a March 20, 1996 statement from Revenue Canada Taxation advising that an “account number” had been assigned to the “Taylor Family Trust”. Despite the twelve months given to Mr. Taylor to produce further information relating to the registration of the Trust with Revenue Canada or the Province, no such information was forthcoming.

[34] In the same affidavit, Mr. Taylor states that some taxes and other expenses owing relating to the Land Interest had actually been paid. Attached as exhibits are cancelled cheques dated June 16, 2001 and July 2, 2002 issued to the Minister of Finance relating to the Property. The June 16, 2001 cheque is written on an account maintained by: “The Vincent Taylor Family Trust” and the July 2, 2002 cheque is written on an account maintained by “Vincent Taylor Family Trust”.

[35] In his December 11, 2003 Affidavit, Ralph Taylor states that the Property was “gifted” to “Vincent Taylor Family Trust” and that, after the transfer:

... and by mutual agreement with the [Trust] ..., TVL assisted with cabin expenses in return for partial use of the cabin for myself and my wife, Joanne Taylor. TVL was not insolvent at the time of entering into the Bare Trust Agreement with ... [the Trust]. I personally had an intimate knowledge of the financial affairs of TVL and know for certain that the company was fully solvent at that time.

EVIDENCE OF MS. GUILBEAULT AND THE TRUSTEE

[36] Sabine Guilbeault was examined before a Court Reporter pursuant to s. 163 of the B.I.A. Ms. Guilbeault is an “owner” of a cabin on part of the Property adjacent to the cabin on the Land Interest. Ms. Guilbeault stated that she had rented out the particular cabin once or twice in the summers of 2000 through 2003; she was aware that Doreen Fearon was the sister of Joanne Taylor; either she or Ms. Fearon rented out the cabin; when she rented out the cabin she received money and gave it to Ms. Fearon; she had no contact with Joanne Taylor regarding the rental of the cabin; she had never spoken to either Ralph Taylor or Joanne Taylor; she was not aware of what Ms. Fearon did with the rental monies that were given to her; and that Ms. Fearon referred to the cabin as her “sister’s cabin”.

[37] Mr. Abakhan on behalf of the Trustee notes that TVL has continued to pay expenses relating to the Land Interest including property taxes, hydro electricity charges, and telephone services. Mr. Abakhan also states that enquiries made on behalf of the Trustee indicate that Mr. Ralph Taylor is listed in a local telephone directory as having the same address as the Land Interest and that the list of the owners of the respective cabins on the Property indicates that the particular cabin is owned by “Joanne and Ralph Taylor” and there is no indication that the particular cabin is owned by the Trust or Vincent Taylor.

[38] From his examination of the financial records of TVL, Mr. Abakhan on behalf of the Trustee is able to state that TVL paid all expenses, property taxes and maintenance for the 24 cabins including the Land Interest totalling $135,853.28 for the period from May 26, 1980 to the date of the Bankruptcy of TVL. The statement of expenses since July, 1995 indicates payments by TVL relating to the Land Interest totalling $4,053.67 to B.C. Hydro, $4,782.52 to B.C. Telephone and $3,295.43 to the Minister of Finance, with that amount being attributed to the property taxes owing for the Land Interest.

[39] The Trustee has searched the records of TVL and states that it has received no evidence that a properly constituted meeting of the Directors of TVL was held or a resolution passed to declare that the Land Interest was held in trust for the Trust or to transfer the Land Interest or any part of the Property to the Trust.

RELEVANT PROVISIONS OF THE B.I.A.

[40] The following sections of the B.I.A. are relevant to these matters:

2. “Settlement” includes a contract, covenant, transfer, gift and designation of beneficiary in an insurance contract, to the extent that the contract, covenant, transfer, gift or designation is gratuitous or made for merely nominal consideration.

81(1) Where a person claims any property, or interest therein, in the possession of a bankrupt at the time of the bankruptcy, he shall file with the trustee a proof of claim verified by affidavit giving the grounds on which the claim is based and sufficient particulars to enable the property to be identified.

(2) The trustee with whom a proof of claim is filed under subsection (1) shall within fifteen days thereafter or within fifteen days after the first meeting of creditors, whichever is the later, either admit the claim and deliver possession of the property to the claimant or give notice in writing to the claimant that the claim is disputed with his reasons therefore, and, unless the claimant appeals therefrom to the court within fifteen days after the mailing of the notice of dispute, he shall be deemed to have abandoned or relinquished all his right to or interest in the property to the trustee who thereupon may sell or dispose of the property free of any lien, right, title or interest of the claimant.

(3) The onus of establishing a claim to or in property under this section is on the claimant.

(4) The trustee may give notice in writing to any person to prove his claim to or in property under this section, and, unless that person files with the trustee a proof of claim in the prescribed form within fifteen days after the mailing of the notice, the trustee may thereupon with the leave of the court sell or dispose of the property free of any lien, right, title or interest of that person.

91.(2) Any settlement of property made within the period beginning on the day that is five years before the date of the initial bankruptcy event in respect of the settlor and ending on the date that the settlor became bankrupt, both dates included, is void against the trustee if the trustee can prove that the settlor was, at the time of making the settlement, unable to pay all the settlor’s debts without the aid of the property comprised in the settlement or that the interests of the settlor in the property did not pass on the execution thereof.

(3) This section does not extend to any settlement made in favour of a purchaser or incumbrancer in good faith and for valuable consideration.

187(11) Where by this Act the time for doing any act or thing is limited, the court may extend the time either before or after the expiration thereof on such terms, if any, as it thinks fit to impose.

WAS THERE A FAILURE TO FILE A PROOF OF CLAIM WITHIN THE TIME LIMITED BY S. 81(4) OF THE B.I.A?

[41] In its September 21, 1999 and March 4, 2000 letters to the solicitor for Mr. Taylor and in the submissions made by counsel on behalf of the Trustee, the Trustee takes the position that a Proof of Claim was not filed within 15 days so that the Proof of Claim which was filed out of time. I am satisfied that this objection raised by the Trustee must fail. First, even if I could conclude that the March 31, 1998 and August 13, 1999 letters qualified as appropriate notices under s. 81(4) of the B.I.A., those letters were directed to Mr. Taylor and not to the Trust. Second, no notice was provided to either Mr. Taylor or the Trust within the 15 days set out in s. 81(4) of the B.I.A. Accordingly, after the Proof of Claim was received, the Trustee did not provide notice within 15 days disputing the claim and setting out the reasons why the claim against property was being disputed. Third, the March 31, 1998 and August 13 and August 31, 1999 letters do not purport to be pursuant to s. 81(4) of the B.I.A..

[42] Unfortunately, there is no statutory Form for a notice under s. 81(4) of the B.I.A. unlike the statutory forms relating to a Proof of Claim, a Notice of Disallowance, or a “Notice Requiring Persons to Prove Claims” (Form 65) (where a dividend is to be declared, where a Proof of Claim has not been received, and where a trustee wishes to be in a position to proceed to pay the dividend “without regard to claims which have not been filed.”)

[43] There is no reason why a form similar to Form 65 could not have been used by the Trustee. In any event, there is nothing in the letters to draw to the attention of the Trust or Vincent Taylor that a failure to file a Proof of Claim within 15 days would result in the Trustee being in a position to apply to the Court for an Order that the Trustee could sell or dispose of the property “... free of any lien, right, title or interest” exerted on behalf of the Trust.

[44] The procedure which should have been followed by the Trustee was set out in Re Sykes (1998), 48 B.C.L.R. (3d) 169 (B.C.C.A.) where, after quoting s. 81(4) of the B.I.A., the Court stated:

By letter dated November 8, 1992, counsel for the Trustee provided Mrs. Sykes with a “Notice by Trustee to Prove Claim” pursuant to s. 81(4) of the Bankruptcy Act, together with a form of affidavit which she could use in support of any claim she alleged. (at para. 77)

[45] I am satisfied that the failure to draw to the attention of Mr. Taylor or the Trust that the letters were meant to constitute Notices under s. 81(4) of the B.I.A, the failure of the Trustee to forward a form of affidavit that could be used in support of any claim to property, and the fact that the letters were directed to Mr. Taylor rather than to the Trust removes the argument available to the Trustee that a Proof of Claim was not filed within the 15 days set out in s. 81(4) of the B.I.A., so that the Proof of Claim that was filed was filed out of time.

[46] In any event, the July 14, 2000 Notice of Disallowance which should have set out the reasons for the disallowance did not set out as one of the reasons that the Proof of Claim was filed more than 15 days after a purported Notice under s. 81(4) of the B.I.A was sent. A trustee must set out the reasons why a Proof of Claim has been disallowed. A claimant can then only be called upon to deal with the reasons set out in the Notice of Disallowance rather than reasons that may occur to the trustee or counsel for the trustee after a Notice of Disallowance has been forwarded.

[47] If I am incorrect in coming to the conclusion that the time available to the Trust to file a Proof of Claim had not expired, then I am satisfied that it is appropriate to extend the time available to the Trust pursuant to s. 187(11) of the B.I.A.

[48] While the Court has the power to extend the time either before or after the expiry of some time requirement under the B.I.A., it is incumbent upon the applicant to establish a bona fide intention to appeal, the circumstances surrounding the reason why the act was not done, and an arguable appeal: Re Gigault (1979), 32 C.B.R. (n.s.) 190 (Ont. S.C.).

[49] I am satisfied that the Trust always had an arguable appeal. The fact that none of the letters purported to be pursuant to s. 81(4) of the B.I.A. and the fact that there was confusion as to the appropriate form of Proof of Claim to be forwarded are circumstances which satisfactorily explain why the Proof of Claim was not filed. As well, as early as March 19, 1998, Vincent Taylor had advised the Trustee that it was his position that the Property was held in trust for the Trust. In those circumstances, I am satisfied that it is appropriate to extend the time to file a Proof of Claim and I find that the Proof of Claim filed on May 11, 2000 was filed within the extended time available.

DID THE VINCENT TAYLOR FAMILY TRUST HAVE THE CAPACITY TO HOLD PROPERTY?

[50] In Waters, The Law of Trusts in Canada, 2nd Ed. (The Carswell Company Limited, Toronto), 1984, the learned author states:

It should be noted that an unincorporated association, like a golf club or play-reading society, cannot itself be the recipient of a property interest under a trust. Having no legal personality, the unincorporated association has no capacity to receive property. It is only the sum of its members. They are the recipients of the beneficial interest under the trust, and unless it is clear that the trust interest is for the members as persons, the trust for the association will be void. (at p. 106)

[51] In Gillese, The Law of Trusts, 1997, the learned author states:

Anyone capable of holding property in her own right is capable of holding property as a trustee. Thus, any capacitated individual or limited company can be a trustee. Because unincorporated associations have no separate legal personality, they are incapable of holding title to property and are incapable of acting as trustees. (at ch. 3(b))

[52] If the transfer of the interest of TVL had been to Vincent Taylor as trustee of the Trust, it would be clear that Vincent Taylor could have held the Land Interest as trustee for The Vincent Taylor Family Trust. However, the transfer of the beneficial interest by TVL was directly to the Trust. I am satisfied that the Trust did not have the capacity to hold the Land Interest and, accordingly, I am satisfied that the attempt to declare a trust by the Agreement was unsuccessful and that no trust was actually created.

[53] A trust does not have the status and capacity to commence proceedings: United Services Funds v. Richards and Greenshields of Canada Ltd. (1987), 16 B.C.L.R. (2d) 187 (B.C.S.C.); Robinson Engineering Co. v. Wasabi Resources Ltd., [1988] A.J. (Q.L.) No. 1118 (Alta. Q.B.). In this regard, Gibbs J., as he then was, in United Services Funds stated:

At common law a trust can only commence and conduct proceedings in the name of the trustees. Except as changed by statute or rule or caselaw that is still the case, and it is the case in this jurisdiction. (at p. 192).

[54] Similarly, Hutchinson J. in Robinson stated:

It is conceded at the outset that the plaintiffs as presently named in the statement of claim are not legal entities capable of commencing an action in this court. As presently described the plaintiffs are trusts. They are described as such in paragraph 1 of the plaintiffs’ statement of claim. A trust is not a legal entity per se. It is a description of a fiduciary relationship which exists between parties. Counsel for the respondents referred the court to the definition of a trust containing in Black’s Law Dictionary 5th ed. P. 1352 as follows:

A right of property, real or personal, held by one party for the benefit of another, ... A confidence reposed in one person, who is termed trustee, for the benefit of another,...

Counsel for the respondents also quoted from Halsbury’s Law of England 4th ed. Vol. 48 p. 272 paragraph 501 which states that a trust is a purely equitable obligation. (at p. 4).

[55] The Legislature has not passed legislation which would designate a trust as an entity capable either of commencing proceedings or holding an interest in property. Accordingly, the Agreement merely sets out a description of the fiduciary relationship which exists between the parties to the Agreement. The Trust is not a legal entity capable of holding title to the Land Interest or capable of acting as a trustee. That being the case, the Agreement fails as a trust and the Trustee of TVL was correct in providing the Notice of Disallowance.

[56] Even if I am incorrect in coming to that conclusion, I am satisfied that the purported transfer of the Property was not a settlement which is valid against the Trustee.

WAS THE TRANSFER FROM TVL TO THE TRUST A SETTLEMENT?

[57] The term “settlement” is defined under s. 2 of the B.I.A. to include a: “... transfer, gift ... to the extent that the ... transfer, gift ... is gratuitous or made for merely nominal consideration;”. In Re Dowswell (1999), 11 C.B.R. (4th) 23 (Ont. C.A.), the Court cites with approval the following passage from Houlden and Morawetz, Bankruptcy and Insolvency Law of Canada, 3rd ed., rev., (Toronto: Carswell, 1998) (looseleaf, Vol. 2) where the learned authors state at p. 4-7:

It is important to distinguish between a settlement and a fraudulent preference. A settlement involves a gift to a stranger to the bankruptcy. A preference involves a transaction with a creditor whereby the creditor is preferred over other creditors. A settlement involves the idea of a clear gift or a situation where provision is made for a trust of some sort; it does not include a business transaction between a debtor and creditor.

[58] If there had been a final disposition of property by TVL, the transfer of the interest in the Property would be a settlement. The Trust was not and is not a creditor of TVL. No consideration was paid by the Trust to TVL when the Agreement was made. However, I can not conclude that there was a final disposition of the Land Interest by TVL to the Trust.

[59] First, a transfer of the Land Interest was not undertaken and a transfer was never demanded despite the Bankruptcy of TVL. Second, I have concluded that there was no outright disposition of the Land Interest.

[60] Assuming that the Land Interest was the one that TVL held for the benefit of Joanne and/or Ralph Taylor, it is clear that they and/or TVL continued to use the cabin, that TVL continued to pay most if not all of the expenses associated with the Property and the Land Interest, and the other owners were not advised that part of the Property was now held in trust for The Vincent Taylor Family Trust. I am also satisfied that income from the rental of the cabin on the Land Interest went directly or indirectly to either TVL or Joanne and/or Ralph Taylor. There is nothing in evidence and nothing uncovered by the Trustee which would allow me to conclude that the appropriate steps were taken by the Officers and/or Directors of TVL to transfer the Land Interest to the Trust. Similarly, there is nothing in evidence and nothing uncovered by the Trustee which would allow me to conclude that TVL had previously agreed to hold the Land Interest as a bare trustee and that the Agreement was merely declaring that this was already the case. From the two cheques that were written to pay the property taxes relating to the Land Interest, it is clear that there was considerable confusion in the mind of Vincent Taylor whether the trust was the “The Taylor Family Trust” or “The Vincent Taylor Family Trust”. This uncertainty is illustrative of the confusion in the minds of Joanne Taylor and Vincent Taylor and the uncertainty about whether TVL had actually settled the Land Interest on the Trust. As well, as no attempt has been made to seek rectification of the Agreement, I must conclude that the attempt to transfer the Land Interest deals not with this Property but with a property having a similarly legal description within Township 22 within the Kamloops Land District.

[61] In these regards, I am satisfied that I should give the greatest weight to the answers of Joanne Taylor when she was examined under oath on August 16, 2000 in order to conclude that the cabin and the Land Interest was not transferred to The Vincent Taylor Family Trust, The Taylor Family Trust, Vincent Taylor, or members of Vincent Taylor’s family.

[62] On the assumption that the 1/24 undivided interest in the Property was previously held by TVL for the benefit of the sister of Joanne Taylor, there is nothing in evidence to indicate that Ms. Fearon transferred the beneficial interest that TVL held for her to the Trust or that TVL acknowledged that, while it had previously held the beneficial interest for Ms. Fearon, it was now declaring that it was holding that beneficial interest for the Trust.

DECISION

[63] The July 14, 2000 Notice of Disallowance of the Proof of Claim filed on behalf of The Vincent Taylor Family Trust is not set aside and there will be no declaration that the Proof of Claim filed is valid and binding against the Trustee in Bankruptcy of Taylor Ventures Ltd. The Trustee of the Estate of Taylor Ventures Ltd. will be entitled to costs on the Party and Party (Scale 3) basis against Vincent Taylor in his personal capacity.

“G.D. Burnyeat, J.”
The Honourable Mr. Justice G.D. Burnyeat

Citation:	Taylor Ventures Ltd. (The Vincent Taylor Family Trust),
	2005 BCSC 11