Retroactive Jurisdictional Rules and Inter-jurisdictional Trusts

As the title says, the recent decision of BCSC in Rakunas v. SAL, 2008 BCSC 444, briefly addresses both of the above issues. The case concerned an alleged trust, in which the defendant British Virgin Islands corporation, extra-provincially registered in BC, was alleged to be a bare trustee holding a property in Whistler in trust for its shareholders, the plaintiff, and the personal defendant Murphy, neither of whom were resident in BC Rakunas and Murphy were the sole and equal shareholders in SAL, as well as its officers and directors. Rakunas launched the action in 2005, seeking to wind up the alleged trust and sell of the property. Murphy argued that the court lacked jurisdiction simpliciter and that BC was forum non conveniens because the dispute was ultimately a shareholder dispute within a BVI corporation and had nothing to do with BC. SAL entered a response, but did not file any pleadings.

The first issue was whether the jurisdictional questions had to be determined in accordance with common law or the CJPTA, which came into force after the action was commenced. Murphy relied on common law for the argument since none of the parties are resident in BC and that the matter is essentially a shareholder dispute, the court lacked jurisdiction simpliciter. Rakunas argued that the CJPTA applied retroactively, but only because Lloyd’s Underwriters v. Cominco Ltd. held that it was “reconcilable with the common law principles.” Russell J. ultimately decided this issue by relying on Courcelles Estate v. IGSFS Inc., where Melnick J. held that the CJPTA had an “immediate application” and thus applied to all actions adjudicated after its coming into force (also followed in Tecnet Canada Inc. v. Unisys Canada Inc. and MTU Maintenance Canada Ltd. v. Kuehne & Nagel International Ltd.). Courcelles was not really applicable as it only dealt with the interrelationship between the forum non conveniens factors set out in s. 11 of the CJPTA and the previous common law.

Since the CJPTA was applicable, the court readily found jurisdiction simpliciter on several factors:

• s. 10(a) – the action related to real property in BC;
• ss. 3(d) – SAL was a corporation deemed to be ordinarily resident in BC under s. 7; and
• s. 3(b) – SAL submitted to the court’s jurisdiction by filing an appearance and a response and not objecting to the court’s jurisdiction within the time frame set out in R. 14(6.4).

The latter reason is particularly interesting because it prima facie only applied to SAL, since Murphy did in fact object to the court’s jurisdiction in accordance with R. 14(6.4). While holding that this ground was not determinative, Russell J. held that it was likely not relevant as the matter concerned a trust and thus was really only “against” SAL:

[38] … I question whether this proceeding involves a “claim made against” Murphy. Rakunas alleges that SAL is a bare trustee holding the Property in trust for Murphy and Rakunas, each of whom holds an equal beneficial interest in the Property. Thus, this proceeding is really brought against SAL qua trustee and not against Murphy, who is alleged to be a beneficiary of the same sort as Rakunas and from whom no relief is sought. In fact, as provided by R. 5(17) and (18), in the absence of a court order Murphy did not even have to be included in this proceeding.

(17). proceeding may be brought by or against trustees or personal representatives without joining a person having a beneficial interest in the trust or estate and, unless the court otherwise orders on the ground that the trustees or personal representatives could not or did not represent the interest of that person, an order granted or made in the proceeding is binding on that person.

(18). Subrule (17) does not limit the power of the court to order a person having an interest to be made a party or to make an order under subrule (14).

[39] Thus, the court’s jurisdiction over this proceeding is unaffected by the question of whether it has jurisdiction over Murphy personally. If Rakunas succeeds in her claim, any order made against SAL as a trustee (if it is found to be a trustee) will be binding on Murphy irrespective of whether he has submitted to the court’s jurisdiction.

Not discussed was a related practical question: what would be the result if the court had jurisdiction over SAL, but not Murphy? For example, if the only factor giving the court jurisdiction simpliciter was s. 3(b), jurisdiction over one of two defendants because of his or her (or its) ordinary residence in BC?

Murphy’s forum non conveniens argument was a non-starter since he failed to argue a key aspect of this doctrine: a better forum in which to litigate this action.

Murphy’s argument that an arbitration provision in SAL’s articles precluded this action in BC was also rejected. As one of the three reasons for rejecting this argument, Russell J. held that the clause was not an exclusive jurisdiction clause, within the principles expressed in Old North State Brewing Co. v. Newlands Services Inc. and BC Rail Partnership v. Standard Car Truck Co. (discussed in a previous post), because it did not indicate the forum in which arbitration would take place:

Whenever any difference arises between the Company on the one hand and any of the members or their executors, administrators or assigns on the other hand, touching the true intent and construction or the incidence or consequences of these Articles or of the Act, touching anything done or executed, omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to 2 arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering on the reference appoint an umpire.

All in all, the decision is not groundbreaking, but is useful to confirm several basic principles:

(1) The CJPTA applies to all currently litigated actions, irrespective of when they commenced.

(2) Disputes relating to real property in BC can be litigated in BC, even if none of the parties reside here.

(3) When arguing forum non conveniens, don’t forget to argue which forum is in fact forum conveniens.