Saturday, September 14, 2013

Bronson v. Hewitt Appeal Part Two

In my last post, I wrote about the trustee’s successful appeal of a damage award against him in Bronson v. Hewitt, 2013 BCCA 367. In this post, I am going to write about another issue which deals with whether an award to unpaid beneficiaries of the trust should be measured in U.S. dollars or Canadian dollars.

The trustee in Bronson v. Hewitt paid out funds from the sale of shares in Big Nine Outfitters Ltd to some beneficiaries who provided him with a release in 2004, but did not pay other beneficiaries. The payments the trustee did make were made in U.S. dollars, beneficiaries being resident in the United States. The Supreme Court of British Columbia found that the trustee should have paid out all of the beneficiaries, and ordered that the trustee pay the proceeds to the beneficiaries who did not receive a distribution (the “Proceeds Award”).

The trial judge ordered that the award be made in Canadian currency which is of course how awards are usually made in Canada.

The amount payable was the equivalent of $396,000 U.S. At the time when the Court found the distribution should have been made in 2004, that amount was equivalent to $533,649.60 Cdn.

However, in the years since 2004 the Canadian dollar has increased significantly to the point where it is close to the same value as the U.S. dollar.

If the award is measured in Canadian currency as at the time of the distribution to some of the beneficiaries in 2004, then the amount that the trustee has to pay will be significantly more than if measured in U.S. dollars, and the trustee is required to pay the equivalent in Canadian dollars based on the current value of U.S. currency.

The Court of Appeal considered section  1(1) of the Foreign Money Claims Act, R.S.B.C. 1996, c. 155 which says:
If, before making an order for the payment of money arising out of a claim or a loss, the court considers that the person in whose favour the order will be made will be most truly and exactly compensated if all or part of the money payable under the order is measured in a currency other than the currency of Canada, the court must order that the money payable under the order will be that amount of Canadian currency that is necessary to purchase the equivalent amount of the other currency at a chartered bank located in British Columbia at the close of business on the conversion date.
The Court of Appeal allowed the trustee’s appeal, and held that the award should be measured in U.S. dollars, rather than Canadian.

Madam Justice Newbury wrote:

[113]     As I understand it, TRL paid the purchase price for the Big Nine shares in U.S. funds.  Certainly Howard forwarded cheques to Julie and Jennifer in U.S. funds.  I do not read anything sinister into this fact the children all resided in the United States and if they had received Canadian funds, would likely have made the exchange immediately to U.S. funds.  More importantly for our purposes, the Trust Agreement required that the beneficiaries all be treated equally.  Thus if Howard had acted properly, he would not have required an indemnity and release and would have made the payments to Tommy, Lee, Virginia and Davis in U.S. funds.  The purpose of the Proceeds Award is to require him to complete the distribution and thus restore the equality of the beneficiaries’ respective positions.  It follows in my view that the court below erred in concluding that an award in Canadian currency would “most truly and exactly compensate” the plaintiff beneficiaries. 
 [114]     I would allow the appeal on this point and order that the Proceeds Award be the amount of Canadian currency that is necessary to purchase the following amounts of U.S. currency at a chartered bank in British Columbia at the close of business on the conversion date:
and that the Award be paid in Canadian funds to the plaintiff beneficiaries as above.

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