Imagine a standard trust arrangement: Party A (“the Settlor”) gives assets to Party B (“the Trustee”) to hold for the benefit of, Party C. What happens if Party A mistakenly transfers more assets than it intended to? Assume for the moment, that the trustee and the beneficiary refuse to give the money back – would you say that Party A simply ran out of luck? Or is it unfair to prevent Party A from receiving its money back?
Simple question? Well, it took 25 years in Chevron Canada Resources v Canada, 2022 ABCA 108 (“Chevron“) to resolve it.
“Party A” was Chevron Canada Resources producing oil, gas and associated products from the Pigeon Lake Reserve and a gas cap unit in Bonnie Glen area in Alberta. “Party B” was the Government of Canada who received royalty payments on behalf of the First Nations based on the oil, gas and natural gas produced by Chevron. “Party C” was, collectively, the beneficiaries: the four First Nations Bands, Ermineskin Indian Band, the Louis Bull Indian Band, the Montana Indian Band and the Samson Indian Band (“Four Nations”). Chevron paid Canada. Canada in turn held the money in trust and paid it out to the Four Nations.
Chevron discovered it overpaid approximately $10 million between 1991 and 1996 (“overpayment“) and the Four Nations refused to pay it back. On May 23, 1997, Chevron decided to sue Canada and the Four Nations.
At trial, Justice Hall ordered Canada and Four Nations to pay back the overpayment with interest. The Court held that Chevron satisfied the legal test for unjust enrichment as against both the Crown and Four Nations.
On appeal, the Alberta Court of Appeal held that Chevron could only ask for the overpayment from the trustee (Canada), but not the beneficiaries (Four Nations). However, Canada was entitled to indemnify itself from the trust funds for the amounts it paid to Chevron.
A critical fact was the existence of significant sums in the two trust accounts at the time the mistaken payments were discovered. At the time Canada advised the Louis Bull Band of Chevron’s claim, there was approximately $24 million in its Capital Account. At that same time, there was over $410 million in the Samson Band’s Capital Account. The Alberta Court of Appeal emphasized that the substantial amounts in the trusts were more than sufficient to satisfy Chevron’s claim. The judgment at trial was given against Canada, in its capacity as trustee, and Canada should have paid the judgment out of the trust funds. Generally, if a trustee overpays a beneficiary and there are still funds in the trust, the trustee can adjust the accounts (see: In Re Robinson, [1911] 1 Ch 502 at p. 513).
Simple? Well, hindsight is 20/20. However, this case is an excellent illustration resolving a complicated trust fund dispute with simple estate principles.