A Cautionary Tale on Trustee Liability
Acting as a Trustee is not only an onerous task but comes with a significant exposure to personal liability.
A trust can be established where three certainties are present: (a) certainty of intention – the Trustee knows that he or she will hold property for the benefit of another; (b) certainty of the subject matter – the property to be held by the Trustee is clearly identified; and (c) certain of objects – the beneficiary of the trust is clearly established.
In Ahmed v. Ibrahim, 2016 ONSC 6430 (ONSC Div. Court), the mother of the plaintiff (Amina) received a settlement payment from a motor vehicle accident. The settlement funds totalling $27,335.03 were deposited into Amal’s bank account. At the time of the deposit, Amal had $19,656.00 in her account. Upon receiving the settlement funds and on Amina’s request, Amal transferred the balance of her bank account (i.e. $46,996.03) to her mother. Amina in turn transferred the funds to a bank account owned by Mohamed (the “Trust Funds”). Believing the Trust Funds belonged to Amina, Mohamed agreed to hold the funds in trust. When Amal demanded her share of the Trust Funds, Mohamed advised that he had already disbursed all of the Trust Funds to Amina in accordance with Amina’s instructions.
Amal sued Mohamed and Amina. At trial, Amina argued that the Trust Funds belonged solely to her and that Amal had no entitlement to the Trust Funds. Amal, however, presented sufficient evidence to show that $19,656.00 of the Trust Funds belonged to her and that none of the funds disbursed by Mohamed had been used for her (Amal’s) benefit. It was Mohamed’s evidence that he believed the Trust Funds belonged solely to Amina and that, in any event, Amina told him the Trust Funds withdrawn by him were used for Amal’s benefit. The judge preferred Amal’s version of the events over Amina and ordered Mohamed, to pay $19,656.00 to Amal.
On appeal Mohamed argued that the trial judge’s decision against him should be reversed because he acted properly in withdrawing the funds, on Amina’s instructions, because he believed the Trust Funds belonged to solely to Amina. In upholding the trial judge’s decision, the Divisional Court held that the trial judge’s findings of fact were owed deference since he had the opportunity to assess the credibility of the parties and accordingly the decision should stand.
This decision is a good example of how easily a trust can be created and a Trustee can attract personal liability even when acting honestly upon mistaken facts.
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