One hundred dollars today, is worth more than a hundred dollars next year. If you give me a hundred dollars today, I can invest it, and use it to earn more money, so that it will be worth more next year. Granted it doesn’t always work out that way, particularly not recently, but if I invest conservatively my investments will grow more often than not over time. This is the time-value of money.
Although I think of this as an economic principle, rather than a legal one, it is a principle that may inform the duties of trustees when administering trust funds for beneficiaries.
In 1998, the Blueberry First Nations Band received a large settlement from the Government of Canada, as a result of a court decision in which the Government was found liable for breaching its duties to the Blueberry Band in respect of a sale of mineral rights.
The settlement was made to the band members collectively. The Band Council set up trusts to hold the settlement proceeds, and the Band Council was proposing to transfer funds to further trusts for distribution.
The Band Council was proposing distributions totalling $125,000 to each adult member. Minors, those under 19 in British Columbia, would not receive payments until they attained the age of majority. The trustees were to hold funds in trust for the minors, and then pay them out later.
The Band Council proposed that each member would receive the same dollar amount, $125,000, whether they received the funds now as adults, or, in the case of minors, later when they became adults. The minors would not receive any interest on the $125,000.
The trustees of one of the trusts holding the settlement funds asked the Supreme Court of British Columbia for directions on whether the trustees had to pay the minors interest in addition to the $125,000.
The Public Guardian and Trustee of British Columbia, acting on behalf of the minors argued that because the minors would have to wait to receive their funds, they should get interest to reflect the fact that they were going to get the funds later.
Mr. Justice Bowden, in
Re: the Blueberry Interim Trust, 2011 BCSC 769, found that the Band Council intended to treat the members equally. He found that they were mistaken in their view that the proposed distribution treated the members equally. After quoting testimony from a Band Council member, he wrote at paragraph 13:
I find as a fact that in not making provision for interest payments to minors, the Band Council considered that was necessary to ensure that the adult and minor members of the Band were treated equally and did not take into consideration the time value of money which would have necessitated an interest payment to minors to achieve the objective of equality.
Mr. Justice Bowden held that from the time the Band Council received the settlement funds, the Council had a fiduciary duty (duty of loyalty) to the band members including minors. He wrote at paragraph 46:
[46] In my view, there is no question that the Band Council stood in a fiduciary relationship with respect to the minors of the Blueberry Band. The Band Council, acting as elected officials, undertook to act in the best interests of its members, including the minors. This duty extended to the manner of its control over the interests and assets of the Band, and in particular the Settlement Funds which it eventually undertook to distribute. As band members, the minors held an entitlement at law to the Settlement Funds. The Band Council was in a position to decide how to administer those funds. When the Band Council exercised its power over the Settlement Funds in a manner that affected the legal interests of the minors, it was obligated to do so in accordance with its fiduciary duties.
Mr. Justice Bowden found that if interest were not paid to the minors, they would effectively be receiving less than the adults. Accordingly, the Band Council and the trustees had a duty to pay interest to the minor band members. He wrote further at paragraph 62:
[62] As indicated above, it is my view that the Band Council and Chief owe a fiduciary duty to all band members, including minors, with respect to their exercise of discretion over the distribution of the Settlement Funds. This obligation arose either at the time the settlement funds were received by the Band from the Government of Canada and placed in the Joint Trust for the benefit of the Bands, or, at the latest, when the Band Council undertook to distribute the settlement funds. In either case, this duty pre-existed the settling of the Interim Trust. I also conclude that this duty required the Band Council and Chief to treat all beneficiaries fairly and equally. It is clear on the evidence that the non-payment of interest has resulted or will result in the minors receiving a lesser amount of money upon each distribution than the other members. It is therefore my view that the duty required the payment of interest on any amounts paid to minors upon their reaching the age of 19 in order to achieve equality. The settling of provisions of the Interim Trust, Distribution Trust and Permanent Trust to the contrary did not alter that obligation.
The court approved of a hold-back fund that would be used to pay interest to the minors.
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