The Supreme Court has issued its decision in the case of Nishi v. Rascal Trucking Ltd., 2013 SCC 33, clarifying the scope of the resulting trust doctrine, in the commercial context. The Court reaffirmed its own precedent and refused to abolish well-established doctrine in the absence of a “compelling” reason for doing so, strong dissents in prior decisions or other inconsistent appellate jurisprudence.

Background

We have previously discussed the decision here.

Briefly, the action arose out of a purchase of land by two business partners. Hans Heringa, a successful civil engineer and owner of Rascal Trucking Ltd. (“Rascal”) developed a property located in Nanaimo, British Columbia, with Cidalia Plavetic, a realtor. Ms. Plavetic was the principal of Kismet Enterprises Ltd., the owner of the land, which it leased to Rascal.

As a result of nuisance complaints due to Rascal’s operations (soil processing), the city changed the zoning on the property. Rascal then ceased carrying on business on the property. The City liened the property in order to secure the cost of the removal of topsoil placed on it by Rascal. At that point, Ms. Plavetic concluded that there was no equity left in the property, and Kismet ceased making payments on the mortgage placed upon the property.

The lending institution foreclosed on the property. Ms. Plavetic’s partner, Mr. Nishi, placed a bid, to buy the property following the foreclosure. Rascal then advanced Mr. Nishi a portion of the funds for the bid. The issue to be determined at trial was whether Rascal Trucking had an interest in the property by virtue of advancing a portion of the funds for its purchase. The trial court rejected Rascal’s claims of both constructive and resulting trust, finding that the money paid by Rascal was not intended to create a beneficial interest in favour of Rascal in the land, and that Mr. Nishi had not been unjustly enriched by the funds paid by Rascal. The decision was overturned on appeal.

The Supreme Court’s decision, delivered by Rothstein J., first reviewed the principles of law in respect of resulting trusts. Rothstein J. summarized the principles as follows:

“Where the person advancing the funds is unrelated to the person taking title, the law presumes that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution. This is called the presumption of resulting trust.

The presumption can be rebutted by evidence that at the time of the contribution, the person making the contribution intended to make a gift to the person taking title. While rebutting the presumption requires evidence of the intention of the person who advanced the funds at the time of the advance, after the fact evidence can be admitted so long as the trier of fact is careful to consider the possibility of self-serving changes in intention over time.”

On appeal, Mr. Nishi urged the court to overrule its own precedent and abolish the doctrine of purchase money resulting trust. The Court refused to do so. Having cited a number of recent decisions in which the Court did overrule its prior precedent including, most recently, Canada v. Craig, 2012 SCC 43, reviewed in Brendan Brammall’s excellent post, Rothstein J. stated that “it is best not to depart from precedent unless there are compelling reasons to do so.” In this case, there was no evidence that the doctrine of purchase money resulting trust has become “attenuated or undermined by other decisions” of the Supreme Court or other appellate courts or has otherwise become unworkable. There were no strong dissenting opinions on this topic in the Court’s prior judgments – another factor mitigating against overruling the Court’s jurisprudence on the topic.

Applying the well-established doctrine of purchase money resulting trust to the facts, Rothstein J. found that Rascal’s contribution to the purchase price was motivated not by the intention to acquire an interest in the property, but rather by the recognition of the costs it had imposed on Kismet, the company owned by Ms. Plavetic, Ms. Heringa’s friend. The written communications between the parties supported the finding of an absence of intention to create an interest in the property in favour of Rascal.

Significance of the Decision

The decision reaffirms the validity of the doctrine of purchase money resulting trust and restates its principles. At the same time, it signifies the court’s willingness to look beyond the formalities of the transaction to determine the true intent of the parties. Even in the ostensibly commercial context, the Court was willing to consider details such as relationships among the principals of the various entities involved, to ascertain whether all had intended that a resulting trust be created.

Furthermore, the decision, similarly to Canada v. Craig, is the latest comment by the Court on the appropriateness of overruling its own precedent, and the importance of adhering to its precedents absent a “compelling” reason for such departure.

Case Information

Nishi v. Rascal Trucking Ltd., 2013 SCC 33

SCC Court File: 34510

Date of Decision: June 13, 2013