2005 BCSC 21 Gratsos v. Martin and Canada Trust

Before: The Honourable Madam Justice Allan

Reasons for Judgment

Counsel for the plaintiff:	G.B.Walker
Counsel for the defendant Martin:	W. E. Knutson, Q.C.
Counsel for the Canada Trust Defendants:	D.T. McKnight
Dates and Place of Summary Trial:	November 25 and 26, December 8 and 9, 2004
	Vancouver, B.C.

[1] The plaintiff, Xenia Gratsos, seeks damages for the defendants’ alleged breaches of trust and breaches of fiduciary duty relating to a family trust and an estate.

[2] The defendants seek an order dismissing the plaintiff’s claim pursuant to Rule 18A. At the commencement of this application, on November 25, the defendant Hugh Martin also sought an order cancelling a Certificate of Pending Litigation (“CPL”) before November 30, 2004, on which date the sale of the real property in question was scheduled to complete.

[3] Mr. Walker, counsel for the plaintiff, brought a preliminary application to adjourn the summary trial applications for six weeks. He submitted that there should be cross-examination on certain affidavits; he should be permitted to examine the defendant Hugh Martin for discovery; and the defendants should be obliged to produce additional documents, as well as swear affidavits of documents.

Background

[4] Mr. Martin is 90 years old. He is the step-father of Ms. Gratsos, the plaintiff, who is 62 years of age. Mr. Martin was divorced from his first wife in 1959 and married Ms. Gratsos’ mother (“Mrs. Martin”) in 1960. He has three children from his first marriage.

[5] In 1968, Mr. and Mrs. Martin purchased a large home at 1870 S.W. Marine Drive in Vancouver (the “Property”). The Property was comprised of two lots: Lot 1 and Lot 13. A large home is situated on Lot 1; Lot 13 was undeveloped land. Mr. Martin was active in the construction industry and in business. Mr. Martin was successful, first as an entrepreneur, and then as a realtor and investor. Mrs. Martin had an independent source of wealth. The Property was purchased with joint funds and by mortgage financing. Mr. Martin deposed that, because of the “risky nature” of his construction business, the Property, as well as their previous homes, were all purchased and held in the name of Mrs. Martin alone.

[6] On November 1, 1993, a “Trust Agreement” was executed between Mrs. Martin and the defendant Canada Trust Company (“Canada Trust”) under which Canada Trust accepted legal title to the Property as bare trustee. It was a term of the Trust Agreement that Mrs. Martin could request a transfer of the Property back to her. The transfer was apparently done for income tax reasons. Malcolm King, a solicitor, witnessed Mrs. Martin’s signature on the trust document and other related documents. That Agreement contained a term providing that Canada Trust could “not to do any act or thing … with respect to the lands and premises without first obtaining the written consent of the Settlor.” The market value of the Property was stated to be $2,204,000.

[7] On November 30, 1993, Mrs. Martin (as Settlor) conveyed her residual beneficial interest in the Property to herself and Mr. Martin as Trustees in a “Deed of Settlement” that established the “Martin Family Trust”. The Trust Fund included the Property, money, investments and other property put into the Trust Fund, and accumulated income. The Trustees had an absolute discretion to pay monies from the trust until the Vesting Day, which was defined as either the date when the second Trustee died or an earlier date declared by them to be the Vesting Day. The beneficiaries of the Martin Family Trust were Mr. and Mrs. Martin and their four children (and any grandchild who was the child of a beneficiary who predeceased him or her). On the Vesting Day, the four children (or their issue) would each receive an equal share of the income and capital remaining in the Trust Fund. Until then, the Trustees, who were also beneficiaries, could benefit themselves disproportionately. They had absolute discretion to make investments, sell property, and borrow money.

[8] Mr. King witnessed both Mr. and Mrs. Martin’s signatures on the Deed of Settlement. A Martin Family Trust Account (the “Trust Account”) was opened with Canada Trust.

[9] In December 1993, Mrs. Martin signed an Absolute Assignment assigning her interest in the November 1, 1993 Trust Agreement to herself and Mr. Martin as Trustees of the Martin Family Trust. Thus, her right to the legal interest in the Property, held by Canada Trust, was transferred to the Martin Family Trust. Canada Trust acknowledged receipt of that assignment.

[10] On the instructions of Mr. and Mrs. Martin, Canada Trust registered a strata plan subdividing Lot 13 into three strata lots. They were sold on July 28, 1994 for a total of $1,385,000.

[11] In December 1994, S & U Homes Ltd. paid $450,000 as part of the purchase price for Lot 13 into the Trust Account. On Mr. Martin’s instruction, those funds were then paid into his personal account with Canada Trust.

[12] In July 1995, Mrs. Martin granted a general power of attorney to Mr. Martin. Ms. Reynolds, an experienced wills and estates solicitor, witnessed her signature.

[13] Mr. and Mrs. Martin’s wills and the Martin Family Trust contemplated the ultimate division of their estates and the Trust property in equal shares among the four children. However, those provisions conflicted with the terms of an earlier agreement between Mr. Martin and his first wife. Under a Deed of Separation which they had executed in 1959, he had agreed to ensure that their three children would receive half of his estate at his death.

[14] Accordingly, in July 1995, Ms. Reynolds prepared an agreement permitting a variation of the 1959 Deed of Separation and providing for a division of the residue of Mr. and Mrs. Martin’s estates, after bequests, among their four children. Mr. Walker submits that Ms. Reynolds was Mr. Martin’s solicitor. However, as Mr. Knudson points out, that agreement was favourable to the plaintiff and she was a party to it. Further, she received independent legal advice before signing it. Mr. Martin’s three children also signed the agreement consenting to the alteration, by which they and Ms. Gratsos would each receive a quarter interest in the estate of either Mr. or Mrs. Martin, whoever survived the other.

[15] In February 1997, the balance of the purchase price for Lot 13 – $1,035,000 – was paid by S & U Homes and was transferred by Canada Trust directly to Mr. Martin’s personal account.

[16] In 1998, Mrs. Martin suffered brain damage as a result of a fall and spent the years until her death in August 2003 in a coma. Mr. Martin turned one wing of their large home into a suitable nursing facility and apparently expended approximately $1,342,000 on her health care costs.

[17] Mr. Martin, who was for many years an extremely wealthy man, says that as a result of stock market reversals, his wife’s medical care, and his own expenses, his financial circumstances were drastically reduced in the 1990s.

[18] In December 2000, Mr. Martin sought to borrow $1 million by way of a mortgage on Lot 1. Canada Trust took the position that it could not make the loan because it was a trustee (of the bare legal title). Accordingly, using the Power of Attorney his wife had earlier given him, Mr. Martin transferred Lot 1 from the Martin Family Trust back to Mrs. Martin. The defendant Canada Trustco Mortgage Company (“Canada Trustco”) then granted two mortgages, one in the amount of $900,000 and one of $100,000, both at prime, payable on demand.

[19] Lot 1 was listed for sale in July 2002 and then again in March 2003. Neither listing resulted in a sale. A month after Mrs. Martin died in August 2003, Mr. Martin married his secretary, companion, and care-giver, Ms. Weidman.

[20] On August 23, 2004, Mr. Martin’s three children renounced their interest in the Martin Family Trust in favour of Ms. Weidman, on the condition that she continue to care for their father until his death. At that time, the sole asset of the Martin Family Trust was the Property, the equity in which was estimated to be $1 million. Ms. Gratsos continues to be the beneficiary of a one quarter interest in the Martin Family Trust.

[21] Probate of Mrs. Martin’s estate was granted in January 2004 with Mr. Martin as the sole executor.

These applications

[22] The plaintiff’s action was commenced on March 19, 2004. Pleadings were exchanged in a timely fashion. Mr. Martin’s counsel produced the first list of documents on August 3, 2004 and four supplemental lists of documents between that date and October 26, 2004. On October 29, Mr. Martin brought an application pursuant to Rule 18A to dismiss the plaintiff’s action. On November 10, Canada Trust and Canada Trustco brought a similar application. The Canada Trust defendants served their list of documents on July 26, with a supplemental list on November 16. No trial date is set.

The plaintiff’s application for an adjournment

[23] Mr. Walker initially sought a 6-week adjournment on the basis that there had been no examinations for discovery and document disclosure was incomplete. With respect to “missing information”, Mr. Walker referred to a mysterious notation apparently made in October 1993 that says “TT Martin – does not increase the risk of discovery”; an absence of documents tracing the $457,000 taken by Mr. Martin for his own use and the disposition of those funds; documents relating to a second Canada Trust account in the name of the Martin Family Trust; documents relating to the transfer of $1,035,525.63 mortgage monies which went directly to Mr. Martin and the disposition of those monies. The defendants responded that there is no need for further documentation to trace those funds. Mr. Martin agrees that he received all of those monies and has deposed as to how he expended them. They say that whether Mr. Martin breached any duty to the plaintiff can be determined on the material that is before the Court. All of the money in question has gone to Mr. Martin, whether properly or improperly. No further documentation or discovery is necessary to trace monies.

[24] The basic issues raised in the initial statement of claim were (1) whether the Martin Family Trust is valid; (2) whether Mr. Martin has breached any of his duties as Trustee or executor; and, if so, (3) whether Mrs. Martin’s estate has been depleted to the detriment of Ms. Gratsos; (4) whether Canada Trust breached its contract with Mrs. Martin by failing to obtain her written consent before subdividing and selling Lot 13; and (5) whether Canada Trust breached its obligations to Mrs. Martin by assisting Mr. Martin to borrow $1 million and granting a mortgage on Lot 1. The defendants assert that all of the documentation necessary to determine those issues is before the Court and that all the relevant transactions were conducted with Mrs. Martin’s consent.

[25] Mr. Walker suggested that there must be additional documentation relating to the issue of whether Mrs. Martin knew of the manner in which Mr. Martin dealt with the Martin Family Trust funds and whether she approved. He sought bank documents that would show, inter alia, whether certain accounts required the signatures of both Mr. and Mrs. Martin or just one signature.

[26] Mr. Walker also sought to cross-examine Ms. Reynolds and Mr. King on their affidavits. They deposed that they acted for both Mr. and Mrs. Martin. Mr. Walker submitted that it was vital that he examine Mr. Martin and the lawyers who drew up the relevant documents on the issues of what Mrs. Martin knew, the advice they gave her, and any alternatives they may have suggested.

[27] Ms. Gratsos has filed an affidavit in these proceedings. She deposed that she is unable to contradict the evidence of Mr. Martin and the lawyers with respect to the relevant transactions because she has no personal knowledge of the transactions. She contradicted some minor points in Mr. Martin’s affidavit that are not material to the main issues in this case.

[28] I think it is settled law that if an affidavit is not contradicted, the Court should refuse to order cross-examination of the deponent: Cadboro Investments Ltd. v. Canada West Insurance Company (1987), 19 B.C.L.R. (2d) 352 at 359, 45 D.L.R. (4th) 470 (C.A.).

[29] It is conceded that, despite the fact that the defendants seek to dismiss the plaintiff’s action, the onus of proving her case continues to rest with the plaintiff. Mr. Walker submitted that, because he has no other means of discovering facts, he is entitled to undertake a fishing expedition to see what he can find. I did not agree. The application to cross-examine Ms. Reynolds, Mr. King and Mr. Woods (the representative of Canada Trust) on their affidavits was dismissed on November 26.

[30] The right to examine Mr. Martin for discovery stood on a different footing. The documentary and affidavit evidence raise serious concerns about actions he took as Trustee and executor of his wife’s estate. I gave permission to Mr. Walker to conduct an examination for discovery of Mr. Martin for one day in the week commencing November 29. I did not consider a six week adjournment necessary. Because Mr. Martin is 90 years old, there is some urgency in trying the case.

[31] The defendants’ summary trial applications were adjourned until December 8 and 9. Mr. Walker was directed to specify the documents that he wished produced.

The Certificate of Pending Litigation

[32] The plaintiff filed a CPL against the Property on June 15, 2004, claiming an interest in the Property pursuant to s. 215 of the Land Title Act, R.S.B.C. 1996, c. 250. Mr. Martin sought to have the CPL cancelled under s. 256 of the Act on the basis that he was experiencing hardship and inconvenience as a result of the registration of that charge. A sale of the Property was pending with a completion date of November 30, 2004; Mr. Martin and Ms. Weidman have moved to an apartment in West Vancouver and if the sale did not proceed, Mr. Martin would have had to pay the carrying costs of mortgages that total $1.5 million, as well as insurance, taxes, and other costs.

[33] When Mr. Martin purchased his apartment in West Vancouver, he paid a deposit of $72,750 and took two mortgages, one for $584,000 and one for $147,000. The latter was secured by the Property and had to be repaid from the Property’s sale proceeds. In the result, the net sale proceeds were expected to be between $400,000 and $500,000.

[34] It is common ground that if a defendant establishes grounds for removing a CPL, it is necessary to post security in an amount determined by the Court to be appropriate. Mr. Walker sought an order that the entire sale proceeds be held as security for the plaintiff’s claims.

[35] Section 257 of the Land Title Act provides that, in determining an appropriate amount of security, the Court may consider the probability of the defendant’s success in the action.

[36] Mr. Knudson submitted that there was ample case law to support the proposition that the Court should examine the merits of the action. In this case, Mr. Knudson suggested that the plaintiff’s alleged interest in the Property was based solely upon her contention that the Martin Family Trust was a sham. Because the likelihood of Ms. Gratsos succeeding in proving that allegation is low, he submitted that the security ordered should be a small amount. She is only one of five beneficiaries to the Martin Family Trust and, after Mr. Martin’s death, she could not be entitled to more than 25% of the proceeds of the Martin Family Trust. Until then, Mr. Martin, who is both a Trustee and a beneficiary, has complete discretion to spend the funds as he sees fit. It is apparent that he has no other source of funds to support himself.

[37] In most cases, a judge who hears an application to discharge a CPL, and expresses an opinion on the merits of the action, will not also be the trial judge. Often, the trial date is months or years away and resolution of the issues is necessarily delayed. In those circumstances, it is particularly important that large sums of money not be tied up if there is no realistic claim against them.

[38] In this case, because I was also the summary trial judge, I declined to express an opinion on the merits of the case before hearing full argument. Because the legal issues were to be heard and determined within a short period of time, the sale proceeds would not be unduly tied up for any significant period of time. Based on those circumstances, I directed that the CPL be discharged and that $300,000 from the net sale proceeds be paid into Mr. Knudson’s trust account and the balance paid to Mr. Martin. The sale of the Property completed on the scheduled date.

The relief sought by the plaintiff

[39] When the defendants’ applications resumed on December 8, Mr. Walker sought to amend the statement of claim. The plaintiff withdrew her claim that the Martin Family Trust was void and of no effect. Mr. Walker sought to add claims that both Mr. Martin and Canada Trust had breached their fiduciary duties. I permitted the amendments with respect to Mr. Martin and reserved judgment on the amendments pertaining to Canada Trust. To save time, Mr. McKnight agreed to present full argument as if the amendments had been allowed. I will allow those amendments and deal with the issues on the basis of the amended statement of claim that Mr. Walker put before the Court.

[40] The plaintiff’s amended statement of claim claims the following relief:

· An order that Mr. Martin and Canada Trust account for the proceeds of Lot 13;

· An order against Canada Trust for breach of fiduciary duty in respect of its misconduct while acting as Trustee for Mrs. Martin’s estate and the Martin Family Trust;

· An order that Mr. Martin and Canada Trust account for the proceeds of the mortgage of Lot 1 and return to Mrs. Martin’s estate or the Martin Family Trust any sum found due and owing;

· Judgment against the defendants arising from the circumstances of the $1 million mortgage taken on Lot 1;

· Damages for Mr. Martin’s breach of trust and breach of fiduciary obligations in connection with the sale proceeds from Lot 13, his use of the Power of Attorney, and his administration of Mrs. Martin’s estate;

· An order that Mr. Martin pay to the plaintiff or Heffel Gallery sufficient money to recover the Greek paintings from the Gallery;

· An order that the paintings and antique silver be placed in the possession of the plaintiff for safekeeping;

· An injunction restraining Mr. Martin from any further act with respect to the Estate;

· An accounting by the defendants for sums paid to Mr. Martin from Mrs. Martin’s estate and the Martin Family Trust and an order that any sums due and owing be returned to the estate or the Trust; and

· Orders that Mr. Martin be removed as executor and trustee, and that an Administrator with Will Annexed be appointed in his stead.

The plaintiff’s claims against Mr. Martin

[41] The plaintiff alleges that Mr. Martin dealt improperly with property belonging to the Martin Family Trust and to Mrs. Martin. Specifically, she claims that Lot 13 was sold in 1994 without Mrs. Martin’s authority and that Mr. Martin must account for the $1,385,000 proceeds. Further, the plaintiff alleges that Mr. Martin improperly took out a mortgage against Lot 1 in December 2000 when Mrs. Martin was comatose.

[42] It is common ground that both Mr. and Mrs. Martin were heavy drinkers and that Mrs. Martin was catastrophically injured when she fell down a set of stairs while she was intoxicated. For that reason, Mr. Walker suggested that Mrs. Martin may have signed certain documents, including the Absolute Assignment, and numerous Letters of Directions relating to the subdivision and sale of Lot 13, while she was intoxicated. Mr. Walker also suggested that Mr. Martin may have transferred monies, properly belonging to the Martin Family Trust, to his own account and imprudently invested monies without Mrs. Martin’s knowledge or consent.

[43] There is no evidence to support those suspicions. It is more likely, in my view, that Mrs. Martin, who was 76 years old when the Martin Family Trust was created, relied upon her husband, an experienced businessman, to manage all of their business affairs. I accept Mr. Martin’s evidence that during their long marriage, they merged their financial assets and he managed them. By late 1993, they had a combined net worth of approximately $5 million, comprised of the Property and a valuable stock portfolio. Money in Mr. Martin’s personal Canada Trust account was routinely used for their joint expenses. There is nothing to suggest that Mr. Martin did not have his wife’s authority in all of his financial dealings.

[44] The November 30 Deed of Settlement provided that if either Trustee (the Settlor or Mr. Martin) died, their executors or administrators became additional trustees as of the date of the death; after that, any vacancy in the trustees would be filled by an appointment made by the remaining trustees; and there would be at least three trustees from the date of either Trustee’s death.

[45] Mr. Walker complains that after Mrs. Martin died, no further trustees were appointed. In my opinion, nothing of significance flows from that fact. First, the executors of Mrs. Martin’s estate, other than Mr. Martin, renounced their positions. Second, by the time Mrs. Martin died in August 2003, the Martin Family Trust had been depleted but for the heavily mortgaged Property and there are no impugned transactions after that date. I do not agree with Mr. Walker that the requirement for additional trustees “kicked in” when Mrs. Martin became “non compos mentis.”

[46] Mr. Walker notes that Mrs. Martin signed the Absolute Assignment in Hawaii (conveying her interest in the November 1 Trust Agreement between herself and Canada Trust to herself and Mr. Martin as trustees of the Martin Family Trust) without independent legal advice and may not have understood its terms. He suggests that she may have been intoxicated when she signed it.

[47] In my opinion, the fact that Mrs. Martin did not receive independent legal advice with respect to any of the documents she executed in November 1993 is irrelevant. She and Mr. Martin were clearly ad idem with respect to wishing to create the Martin Family Trust from which their children might eventually benefit. All of the documents in question advanced the creation of the Trust. Mr. King commenced acting for Mr. and Mrs. Martin in late 1993. He witnessed Mrs. Martin’s signature on most of the documents relating to the establishment of the Martin Family Trust and the subdivision and sale of Lot 13. Mr. King deposed that he discussed the content and effect of those documents with Mrs. Martin and that she understood and approved of the establishment of the Martin Family Trust and the subdivision and sale of Lot 13. She specifically indicated to him that she did not wish to obtain independent legal advice before signing the documents.

[48] The amended statement of claim alleges that by July 21, 1994, Canada Trust had subdivided Lot 13 into three strata lots which were sold that day for a total of $1,385,000 – without the written consent of Mrs. Martin that was required by the November 1, 1993 Trust Agreement. The plaintiff asserts that Mr. Martin alone provided instructions to Canada Trust and that Mrs. Martin had no knowledge of what happened to the proceeds of that sale. In fact, there are numerous documents signed by both Mr. and Mrs. Martin that authorize the proceedings relating to the subdivision and sale of Lot 13. The proceeds were used to finance their extravagant lifestyle.

[49] Mr. Walker submits that there is no evidence, or only incomplete evidence, as to where the proceeds of one million dollars from the mortgage went. In my opinion, the evidence, which is voluminous, supports Mr. Martin’s argument that his stock portfolio and savings, which were worth several million dollars in the late 1990s, were depleted by bad investments and stock market reversals, Mrs. Martin’s medical care, and his own living expenses. The documented costs of Mrs. Martin’s medical care between August 1998 and December 2003 exceeded $1.34 million. The $1 million mortgage secured a $900,000 line of credit and a $100,000 line of credit. Mr. Martin’s counsel has provided documentation that demonstrates the advances between December 14, 2000 and July 16, 2001 against those lines of credit. The funds were used primarily to pay the property taxes, which exceeded $200,000, and to pay Mr. Martin’s obligations to Canada Trust that had been secured by his stock portfolio.

[50] The plaintiff claims damages arising from Mr. Martin’s alleged breach of trust and breach of fiduciary obligation in relation to the sale proceeds from the sale of Lot 13; the use of the Power of Attorney Mrs. Martin granted to him; and the administration of Mrs. Martin’s estate. I will deal with the issues relating to the administration of Mrs. Martin’s estate separately.

[51] The basic flaw in the Mr. Walker’s argument is that it focuses on facts that relate to Mr. Martin’s duties to Mrs. Martin, rather than to the plaintiff. Mr. Knudson properly concedes that as a Trustee, Mr. Martin owed a fiduciary duty to the plaintiff, who was and is a beneficiary of the Martin Family Trust. However, both Trustees had full discretion to favour themselves as beneficiaries over the plaintiff. Accordingly, there is no basis for the plaintiff’s claim for breach of trust or breach of fiduciary duty.

Mrs. Martin’s Will

[52] In March 1991, Mr. and Mrs. Martin executed wills that were largely reciprocal. After certain bequests, the residue of each spouse was left to the other spouse, with the residuary estate remaining after the death of the surviving spouse to be divided equally among the four children.

[53] Mr. Walker points out that Mrs. Martin’s will of March 7, 1991, provided that Mr. Martin was only entitled to receive income from the capital of her residuary estate with the approval of the Trustees of her will, other than Mr. Martin. However, when she died in August 1993, there were no income-producing assets in her estate.

[54] Letters probate were issued to Mr. Martin on January 30, 2004 as sole executor of the estate of Mrs. Martin. His affidavit, prepared for probate, indicates that the gross value of Mrs. Martin’s estate was $141,940.31. That consisted of six Greek paintings valued at $119,000; approximately 30 pieces of silver valued at $21,030; and a Bank Account containing the sum of $1,910.31. Debts and liabilities totalled $18,928.10.

The paintings and the silver

[55] Mrs. Martin also bequeathed a life interest to Mr. Martin in six paintings by Greek artists and a silver collection consisting of approximately 30 pieces. Those items are to pass to Ms. Gratsos on Mr. Martin’s death. Unfortunately, Mr. Martin has taken the position that those chattels properly belong to him and he recently attempted to sell the paintings. The plaintiff obtained an injunction to prevent their sale and the paintings are presently held by Heffel Gallery. Heffel Gallery requires payment for the services they have rendered before they will release the paintings.

[56] At his examination for discovery, Mr. Martin testified that the antique silver was safely stored.

[57] It is obvious that Mr. Martin, who has only a life interest in the paintings and the silver, cannot legally sell those chattels. They were to be kept and passed on to Ms. Gratsos, should she survive him. Mr. Walker submits that those articles should be given to Ms. Gratsos and that Mr. Martin should be removed as executor and trustee of Mrs. Martin’s will.

The plaintiff’s claims against Canada Trust

[58] In my opinion, the claims against Canada Trust are without foundation and can be dealt with summarily.

[59] In her amended statement of claim, Ms. Gratsos concedes that Canada Trust received written instructions with respect to the subdivision and sale of Lot 13. However, she alleges that Canada Trust must account for the proceeds from the sale of Lot 13 and mortgage of Lot 1 and return to Mrs. Martin’s estate or the Martin Family Trust “any sum found due and owing”.

[60] The statement of claim alleges that the Canada Trust defendants acted to give money to Mr. Martin, “reckless whether they were assisting and conspiring” with him through the mortgage transactions on Lot 1, from which “both would profit and from which both were precluded generally” because (1) Canada Trust was a trustee for Mrs. Martin under the Trust Agreement; (2) Mrs. Martin did not provide written consent or instructions; and (3) “by their knowledge or wilful ignorance of the breach of fiduciary duty in which [Mr. Martin] was engaged with respect to [the Deed of Trust] or [the Deed of Settlement] or both”.

[61] I agree with Mr. McKnight that there is no evidence that Canada Trust acted in a reckless or inappropriate manner and there were no facts that would have put them on a course of inquiry of improper motives. Mr. Martin, who was a sophisticated businessman, had been a client of Canada Trust since 1959, and Mrs. Martin since shortly after that. Both Mr. and Mrs. Martin consented to all transactions dealing with the creation of the Martin Family Trust and the sale of Lot 13. They had legal representation throughout. The transactions involving Lots 1 and 13 were not uncommon or of a suspicious nature. Canada Trust learned that Mrs. Martin was badly injured and required costly medical care. The Deed of Settlement conferred very broad powers on the Trustees, who were also beneficiaries of the Trust. On March 15, 1994, Mr. and Mrs. Martin instructed Canada Trust in writing that, despite the terms of the Deed of Settlement, they should accept directions from Mr. or Mrs. Martin or their respective personal representatives (including lawyers). The Power of Attorney, executed by Mrs. Martin in favour of her husband was properly executed and witnessed and contained no restrictions. In any event, the impugned transactions were all permitted under the Deed of Settlement.

[62] The plaintiff seeks damages from Canada Trust for breach of fiduciary duty in respect of its conduct while acting as Trustee for Mrs. Martin’s estate and the Martin Family Trust. Although the plaintiff was a beneficiary under Mrs. Martin’s estate and the Martin Family Trust Canada Trust, Canada Trust was never a trustee under either instrument. It was a bare trustee of the Property under the Trust Agreement of November 1, 1993. It opened the Trust Account to hold the Property. Once the Property was conveyed, its duties as trustee terminated. In a “bare trust”, the trustee holds property without any further duty to perform except to convey it to the beneficiary on demand: Donovan Waters, The Law of Trusts in Canada, 2^nd ed. (Toronto: Carswell, 1984) at 27. In this case, the Trust Agreement did not impose any additional duties on Canada Trust.

[63] On the instructions of Mr. and Mrs. Martin, Canada Trust conveyed the title in Lot 13 on July 28, 1994 for a total sale price of $1,385,000. Canada Trust was not, as Mr. Walker suggests, a trustee of the sale proceeds that were paid into an account held in the name of the Martin Family Trust. Similarly, it breached no duty to the plaintiff (or at all) when followed Mr. Martin’s direction that those funds be transferred to his personal account with Canada Trust without Mrs. Martin’s written consent.

[64] With respect to Lot 1, Canada Trust transferred title to Mrs. Martin on December 13, 2000 on the instructions of Mr. Martin pursuant to the Power of Attorney she had granted to him. Its position as bare trustee then terminated. The transfer of title was made in order for Mr. Martin to obtain a $1 million mortgage on Lot 1, which was then granted by Canada Trustco. There is no evidence to suggest that Canada Trust breached any obligation to the plaintiff (or, indeed, to Mrs. Martin) by facilitating Mr. Martin’s placing a mortgage on Lot 1.

[65] The enduring Power of Attorney, prepared by a solicitor and executed by Mrs. Martin in 1995, complied with the Power of Attorney Act, R.S.B.C. 1996, c. 370 and was valid during her subsequent mental incapacity. Mr. Martin was entitled to use the power of Attorney and Canada Trust was obliged to accept it.

[66] Mr. Walker raised a number of issues relating to whether or not Mrs. Martin signed a signatory card with respect to the Martin Family Trust accounts. There is no evidence as to whether signatory cards were required or what the applicable standard of care is governing Canada Trust’s responsibility to its customers. Certainly, there can be no responsibility to the plaintiff, a stranger to any of these accounts. In any event, there is no evidence that Mrs. Martin did not consent to any of the financial transactions involving Canada Trust and the Martin Family Trust. The evidence is overwhelming that, before she was comatose, Mrs. Martin impliedly authorized Mr. Martin’s expenditure of the monies from the sale of the Property to finance their living expenses and investments.

[67] Similarly, I disagree with the plaintiff that anything arises from the fact that there were two Trust Accounts. Both were authorized by Mr. and Mrs. Martin. In any event, Mr. Martin does not dispute the fact that he controlled the disposition of all of the funds in question. Canada Trust was authorized to accept the instructions of Mr. Martin, Mrs. Martin, or Mr. King, their counsel, with respect to the proceeds of both Accounts. Canada Trust was not a trustee of the Trust Accounts. It was a custodian of the funds in the Trust Accounts and stood in the normal relationship of banker towards its customer.

[68] In summary, the plaintiff’s claim against Canada Trust for damages for breach of fiduciary duty cannot succeed. There is no fiduciary relationship between the parties. No fiduciary duty by Canada Trust to Ms. Gratsos arises under the Trust Agreement, the Deed of Settlement, or Mrs. Martin’s will. Ms. Gratsos is not a beneficiary under the Trust Agreement. Canada Trust is not a trustee under the Deed of Settlement or the will.

Conclusion

[69] There is no question that Mr. Martin, in his role as executor of Mrs. Martin’s estate, has improperly dealt with the silver and the Greek paintings. He has a mere life estate in those chattels and holds them in trust for Ms. Gratsos. Instead, by dealing with them as if he owned them, he has proved himself to be an unreliable trustee and forfeited his right to possession of them. I conclude that Ms. Gratsos is entitled to immediate possession of those chattels. Mr. Martin is liable for any fees payable to Heffel Gallery to retrieve the paintings. If he has sold any of the silver, he is to reimburse Ms. Gratsos accordingly. As there are no additional assets in Mrs. Martin’s estate, there is no further need for a trustee or executor.

[70] The monies held in trust to secure the CPL are not to be paid out to Mr. Martin until he has done the following: paid Heffel Gallery the amount they require to release the Greek paintings and obtained a written release of indebtedness from them; signed a consent that allows Ms. Gratsos or her lawyer to retrieve the Greek paintings from Heffel Gallery; delivered the silver to Ms. Gratsos or her lawyer; and compensated her for any silver that he has disposed of.

[71] The remaining claims of the plaintiff are dismissed. The Canada Trust defendants are entitled to 100% of their costs against the plaintiff. Having committed an egregious breach of his duties as executor of his wife’s estate, I conclude that Mr. Martin is not entitled to his costs. The plaintiff is entitled to one third of her costs against Mr. Martin. A relatively small amount of time and argument was devoted to the estate issues. There could be no defence to her claim in that regard. On the other hand, the remaining claims advanced by the plaintiff, which occupied the bulk of the proceedings and argument, were frivolous.

“M.J. Allan, J.”
The Honourable Madam Justice M.J. Allan