Funk v Funk, 2016 ABQB 189

Court of Queen’s Bench of Alberta Citation: Funk v Funk, 2016 ABQB 189 Date: 20160330 Docket: 4801 137519 Registry: Calgary Between: Steven Christopher Funk Applicant / Plaintiff - and - Elizabeth Louise Funk Respondent / Defendant - and - Nathan Funk, Trevor Funk and Morgan Funk Third Parties _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice P.R. Jeffrey _______________________________________________________ [ 1 ] Steven Funk and Elizabeth Funk were married for six years, had two children together and accumulated significant wealth.

They were divorced in California but are proceeding in Alberta for division of matrimonial property and corollary relief, specifically spousal support. This application arises in the case management of those actions, which are set for trial together commencing in late April this year. [ 2 ] Long after this litigation was underway, in January 2014, Mr. Funk applied to the Supreme Court of British Columbia for advice and directions in respect of certain of his actions as trustee of the Funk Family Trust (the “ Trust ”) that may have breached duties

to its beneficiaries. [ 3 ] In December 2014 Ms. Funk amended her counterclaim in this litigation by way of Second Amended Counterclaim (the “ Counterclaim ”) and filed a reply (the “ Reply ”) to Mr. Funk’s Amended Amended Statement of Defence (the “ Defence to Counterclaim ”), to allege that Mr. Funk failed to treat the Trust as an existing and valid trust, that he set up the Trust as an illusory trust, that the Trust is void, and that Mr. Funk never intended to create a real trust instead using the Trust for his own personal benefit (the “ Sham Trust Claim ”). Ms. Funk is concerned that Mr.

Funk may suggest that some of the assets in his possession are not matrimonial property available for distribution or that in some other way they are subject to a contingent liability stemming from Mr. Funk’s actions prior to winding up the Trust. By the Sham Trust Claim Ms. Funk seeks a declaration that, in effect, there never was a Trust – that it is all one big sham, among other things. In her Reply, Ms. Funk pleads further and in the alternative the Statute of Elizabeth , 1571 (UK), 13 Eliz I, c 5. [ 4 ] Mr. Funk applies for

summary dismissal of Ms. Funk’s Sham Trust Claim. He says that it has no merit, both substantively and because it is barred by the Limitations Act , RSA 2000, c L-12. Mr. Funk also seeks dismissal of the claim in Ms. Funk’s Reply based on the Statute of Elizabeth . [1] Mr. Funk says that before he met Ms. Funk, he established the Trust in British Columbia and that during their marriage he wound it up, all of which was well known to Ms. Funk. [ 5 ] Ms. Funk argues that the Sham Trust Claim and her reliance on the Statute of Elizabeth are not appropriate for

summary determination, as they are factually and legally intertwined with the remaining issues that will be determined at trial. [ 6 ] The trust issues in Alberta and British Columbia have the potential to affect the treatment of roughly $125 million that Mr. Funk received after winding up the Trust. [ 7 ] For the reasons that follow, I grant Mr. Funk’s Application on the basis that there is no likelihood of success of the Sham Trust Claim or the claim pursuant to the Statute of Elizabeth . I.

Facts [ 8 ] The parties do not differ materially on what happened as it pertains to the background events they refer to in their evidence for this Application, but rather they disagree on the legal effect of those events. The following are my findings of fact, with an indication where the parties’ recollections differ. (

a) The Parties and the Alleged Trust [2] [ 9 ] The Funks met in 1999, were married in September 2002, and had two children (Bennett and Caroline) (the “ Minor Children ”). They separated in July 2008 and were divorced in California. [ 10 ] The Trust now challenged as a sham was purported to be created on December 23, 1998 by way of written trust deed. Mr. Funk was the sole named trustee and an employee reporting to Mr. Funk, Karen Tong, was the settlor. At that time Mr. Funk’s former spouse (Paige Funk) and their three sons (Nathan, Trevor and Morgan) (the “ Sons ”) were the beneficiaries. Mr.

Funk was never a beneficiary of the Trust. Paige Funk ceased to be a beneficiary when she and Mr. Funk separated. [ 11 ] The initial property of the Trust was a silver ingot worth approximately $10. [ 12 ] On January 1, 1999, Grand Marais Investments Inc. (“ Grand Marais ”) issued 153,450 Class “B” common shares to the Trust for $99. At that time, the only significant assets of Grand Marais were shares of CML Global Capital Ltd. (“ CML ”) and Aspen Properties Ltd. (“ Aspen ”). At all material times, Mr. Funk was the sole director and Chief Executive Officer of Grand Marais.

He was also a shareholder with holdings as of September 2004 of 1,550 common shares, 1,450 Class “B” common shares and 1,689 preferred shares. [ 13 ] The Minor Children became beneficiaries of the Trust when they were born and would continue to be beneficiaries as long as the Trust existed. Ms.

Funk became a beneficiary when the parties married and would have ceased to be when they separated in July 2008 had the Trust not already been wound up. [ 14 ] Between September 2004 and May 2005, Grand Marais exchanged the Trust’s holdings in Class “B” common shares of Grand Marais for Class “A” preferred shares of Grand Marais. The Class “B” shares were valued at $2,649,011, which was stated and intended to be equal to the value of the new shares (the “ Trust Exchange ”). Following this transaction Mr. Funk held all the common shares in Grand Marais.

The effect of the Trust Exchange was to fix the value of the Trust’s interest in Grand Marais at $2,649,011, with any future growth in share value to accrue to the shares held personally by Mr. Funk. Ms. Funk alleges in her pleadings that at the time Mr. Funk did this, he was aware that the shares would likely see a significant increase in value in the near future. [ 15 ] Ms. Funk alleges that the Trust is a sham, that it is and always was void. She also alleges that the Trust was created for the unlawful purpose of putting assets beyond the reach of potential creditors and her. Ms. Funk argues that Mr.

Funk is the true owner of all his assets and that he used the ‘Trust assets’ solely for his own personal benefit. Ms. Funk says Mr. Funk’s conduct in orchestrating and carrying out the Trust Exchange is evidence that he treated the Trust assets as his own. [ 16 ] In addition to saying that the Trust Exchange proves Mr. Funk treated Trust assets as his own, Ms. Funk points to a retroactive tender of her shares in CML to demonstrate that Mr. Funk obtained the value of those assets for himself (the “ Retroactive Share Tender ”). CML was a publicly traded company that was privatized in 2005. Ms.

Funk’s evidence was that Mr. Funk requested (in 2006) that she tender all her shares in CML retroactively to the date when CML was privatized. [ 17 ] As a result of the Trust Exchange and the Retroactive Share Tender, Ms. Funk says Mr. Funk grossed between $135,000,000

and $147,000,000 to the Trust beneficiaries’ and her detriment, respectively. Mr. Funk estimates that he and Grand Marais received approximately $125,000,000 after taxes for their respective interests in CML and Aspen. The precise value is not important on this Application; suffice it to say that significant benefit may have flowed from these transactions. [ 18 ] Mr. Funk said he proceeded with the Trust Exchange to ensure the beneficiaries of the Trust were not provided with too much money too early in their lives.

He said the Trust was created as an estate planning tool on the basis of legal and professional advice to benefit the Trust beneficiaries. He says his intention was to put assets aside for the future benefit and use of his children. It was not created to avoid, defeat or put assets beyond the reach of any creditor, potential creditor, Mr. Funk’s spouse or any future spouse. In questioning on May 9, 2011, Mr. Funk explained that the reason for creating the trust was to put assets in his children’s names “and also create creditor protection, liability protection”.

He also indicated in questioning that he originally decided to set up the trust because he was being advised about estate planning, asset protection and probate. There was no evidence before me of any creditors or liabilities, either existing, pending or contingent at that time. [ 19 ] The Trust funds were distributed as a return of capital on December 19, 2007, and the Trust was wound up soon after. [ 20 ] Ms. Funk says the Sham Trust Claim is clearly interwoven with the issues that will be determined at the ultimate trial of this matter.

She also argues that the Court should consider the need to address all matters at the same time to reach a fair and just adjudication. (

b) Events Relevant to the Trust Issues [ 21 ] The following are events relevant to the Trust issues and this application: • December 23, 1998 – Steps were taken to form the Trust. At the time, Mr. Funk was still in a relationship with Paige Funk, the mother of the Sons. • January 1, 1999 – Grand Marais issued shares to the Trust. • May 1999 – Mr. Funk and Ms. Funk first met. • February 12, 2001 – Ms. Funk first learned of the existence of the Trust no later than this date or very shortly thereafter. Mr.

Funk shared with her a letter of that date that discussed the income tax consequences of establishing a personal residence outside of Canada and which referred to details about the Trust. • September 14, 2002 – Mr. Funk and Ms. Funk were married. • September 2004 – May 2005 – The Trust Exchange occurred, fixing the value of the Trust at $2,649,011. • 2007 – Mr. Funk received legal and professional advice to wind up the Trust and distribute its assets. It is not known what questions Mr. and/or Ms. Funk asked to elicit that advice or what objectives Mr.

Funk or both of them said they wanted to pursue that elicited that advice. Ms. Funk was present at meetings discussing this plan. • December 19, 2007 – The Trust distributed $882,970 to each of the Sons and education funds were set up for the Minor Children. The distribution was made as a return of capital and to wind up the Trust. It was wound up in early 2008. • July 10, 2008 – The parties ceased cohabiting. • April 29, 2011 – A letter was sent from Ms. Funk’s previous counsel to Mr. Funk’s matrimonial counsel that recognized limitations issues and suggested Ms.

Funk may commence an action against the trustees of the family trusts (the Trust and a subsequent family trust that was created). Ms. Funk objects to the admission of this letter as evidence on this application because it was not appended as an exhibit to an affidavit. Mr. Funk relies on the Alberta Rules of Court , Alta Reg 124/2014 (the “ Rules ”), r 6.11 (1)(

b) and (d), which permit the Court to rely on evidence disclosed in an affidavit of records or a transcript of questioning. He advises that this letter was produced in the Affidavit of Records of Morgan Funk in this action and was identified by Ms. Funk on her cross examination. I conclude this letter forms part of the evidentiary record before me. It was authored by Ms. Funk’s previous counsel. • August 22, 2011 – Mr. Funk’s counsel wrote to Ms. Funk’s then new counsel on matrimonial issues advising that there may be issues with the Trust Exchange and that the Sons were seeking legal advice.

Further, counsel indicated the advice sought may have some bearing on the Minor Children and on Mr. Funk’s net assets. He suggested the issue may be resolved in British Columbia and asked Ms. Funk to advise him if she wished to be kept informed. • September 2, 2011 – On receiving no response from Ms. Funk, Mr. Funk’s counsel wrote again to Ms. Funk’s counsel confirming his assumption that neither she nor Ms. Funk desired notice of any steps or proceedings dealing with the Trust. (

c) The Litigation [ 22 ] There are two actions between the parties, in California and Alberta. Ms. Funk commenced proceedings in California in August 2008 to terminate the marriage. In September 2008, Mr. Funk commenced an action for Divorce and Division of Matrimonial Property in Alberta. A decree of divorce was granted in the California action. The Superior Court of California then granted a Stipulation and Order for Partial Stay of Proceeding based on the parties’ agreement and stipulation, directing that the matrimonial property issues should be addressed in Alberta.

[ 23 ] In addition to these two actions, in January 2014, Mr. Funk filed a petition in British Columbia for advice and directions regarding the Trust (the “ Petition ”). Although Ms. Funk was given notice of this proceeding, to date she is not participating formally. In their pleading as third parties in this Action, the Sons say that they filed a second action in British Columbia on October 21, 2015. [ 24 ] Pleadings were amended in the Alberta action several times from 2009 to 2011 and particulars were provided. Ms. Funk amended her pleading further in December 2014, adding the Sham Trust Claim, and Mr.

Funk amended his pleading in response. Ms. Funk also filed a Reply in March 2015 containing some of the allegations in issue on this Application. Ms. Funk’s evidence on cross examination was that she chose to challenge the validity of the Trust shortly before her pleadings were amended after she became concerned that Mr. Funk may take steps to return the value of the assets in his hands back to the Trust. Aside from pleadings filed by the Sons as beneficiaries and Mr.

Funk as Trustee, it appears the British Columbia action is not progressing. [ 25 ] The divorce having already been granted in the California proceedings, in this Alberta action remain the spousal support claim, the matrimonial property action, the Sham Trust Claim and the unjust enrichment action: all are pleaded in the Alberta action in the Counterclaim filed December 2, 2014 and the Defence to Counterclaim filed March 18, 2015. On March 20, 2015, Ms.

Funk filed her Reply addressing the limitation period argument raised in the Defence to Counterclaim and pleading the Statute of Elizabeth . [ 26 ] On December 12, 2014, Mr. Funk brought an application in the context of ongoing Case Management, for a trial of an issue with respect to: 1. Whether Mr. Funk and Ms. Funk agreed to and did maintain separate property throughout the course of their marriage; 2. Whether either party is entitled to any property held in the name of the other as a consequence of their relationship; and 3. Whether Ms.

Funk is barred from pursuing her allegations in respect of a sham trust by virtue of the Limitations Act . [ 27 ] I dismissed the application, without prejudice to the third issue “being re-asserted after pleadings close”. [ 28 ] Mr. Funk in this Application now revives the limitations issue, though not by an application for trial of an issue but by requesting

summary dismissal. He seeks

summary judgment on the parts of Ms. Funk’s Counterclaim and Reply that allege the Trust is a sham, or is otherwise void, and of the Statute of Elizabeth claim. [ 29 ] The trial is scheduled to commence April 25, 2016. II. Parties’ Positions (

a) Applicant’s Position [ 30 ] Mr. Funk applies for

summary judgment dismissing the Sham Trust Claim on the following grounds: 1. There was no intention to mislead third parties in the creation of the Trust. It was created for a legal and proper purpose and benefitted the beneficiaries. It was not a sham trust. 2. The Sham Trust Claim is barred by the Limitations Act because a remedial order is sought and was not brought within two years of the alleged injury or within the ultimate ten-year limitation period. 3. There is no merit to the Sham Trust Claim and there is no evidence to support the claims based on the Statute of Elizabeth and fraudulent concealment. (

b) Respondent’s Position [ 31 ] Ms. Funk pleads that Mr. Funk never intended to create a real trust, never intended that the Trust property be used for the exclusive benefit of the beneficiaries and used Trust assets for his own personal benefit. In addition, Ms. Funk pleads that the Trust was set up as an illusory trust in order to put assets beyond the reach of potential creditors, including her. [ 32 ] The specific forms of relief Ms. Funk seeks at trial regarding the Sham Trust Claim are: 1. A declaration that the Trust is a sham and is void ab initio or otherwise void at law or in equity; 2.

A declaration that Mr. Funk personally is the true owner of all of the assets purportedly owned by the Trust; 3. An accounting of distributions from the Trust or from entities or assets owned or controlled by the Trust; and 4. An interim and interlocutory order restraining Mr. Funk from making any distributions from, or otherwise disposing of Trust property until an accounting is completed. [ 33 ] In response to this Application, Ms. Funk argues that the limitation period has not expired.

Further, she submits that the Sham Trust Claim should be considered with all of the other issues at the trial of this matter and that these issues are not appropriate for

summary disposition. III. Issues

[34] The issues for determination are: 1. What is the test for

summary judgment? 2. Which jurisdiction’s trust law applies? 3. What is the “Sham Trust Claim”? 4. Is the Sham Trust Claim without merit: a. procedurally, based on the Limitations Act? b. substantively, based on the evidence adduced? 5. Is the Statute of Elizabeth claim without merit? IV. Analysis and Decision (

a) Test for

Summary Judgment [35] Pursuant to Rule 7.3(1) of the Rules, a defendant may apply to the Court for

summary judgment in respect of all or part of aclaim on the ground that there is no merit to it. [36] On an application for

summary judgment, the court is to examine the record to see if a disposition that is fair and just can bemade on the existing record: Windsor v Canadian Pacific Railway Ltd, 2014 ABCA 108 at paras 12-13. A respondent must put its bestfoot forward; it is not sufficient to speculate that evidence might be available at trial to establish a genuine issue requiring a trial:Windsor at para 21. [37]

Summary judgment is often appropriate where the dispute primarily turns on issues of law and where facts underlying thedispute are not seriously in issue: Windsor at para 16. [38] Where there are issues of fact or where findings of credibility are necessary,

summary judgment will likely not be appropriate.Contested facts must relate to the issues to be determined: a controversy over non-material facts is irrelevant: Access MortgageCorporation

(2004) Limited v Arres Capital Inc, 2014 ABCA 280 at para 45, citing Beier v Proper Cat Construction Ltd, 2013 ABQB351 at para 68. [39] Where the law is unclear, unsettled, complex or intertwined with the facts, it is sometimes necessary to have a full trial toprovide a proper foundation for the decision: Amack v Wishewan, 2015 ABCA 147 at paras 35-36, citing Tottrup v Clearwater(Municipal District) No 99, 2006 ABCA 380 at para 11. [40] Issues of law regarding discoverability under the Limitations Act are largely questions of fact: Amack at para 34. Ms.

Funkargues that where a limitations defence is intertwined with issues of law, such as when there is an issue as to when a party knew or oughtto have known there was a cause of action, the case will not be appropriate for

summary judgment. Here, however, the underlying factsas to what happened and on when certain information became known are not seriously in dispute. There are letters that neither partydenies were exchanged between the individuals named and meetings that occurred at the times and among the people indicated. Thesereveal the timing as to when Ms. Funk learned or ought to have learned certain information. Whether on the basis of that information Ms.Funk ought to have been informed that she had a claim against Mr.

Funk, that she now advances, is a matter in dispute. [41] Therefore, questions of fact are not in issue relating to the limitations defence; it is the application of those facts to the law thatis in issue here. Specifically, the issue is whether the undisputed information Ms. Funk had about the Trust is sufficient to establish thatshe knew or ought to have known she had a cause of action outside the prescription period.

Summary dismissal of a claim is available inthese circumstances. [42] While

summary judgment is available, it remains necessary to examine the record and decide whether a disposition that is fairand just to both parties can be made summarily. In this case,

summary judgment ought to be granted if, on the uncontested facts beforethe Court, the essential elements required to establish the Trust is a sham are not established, or if the Sham Trust Claim was broughtafter the expiry of a limitation period. (

b) Which jurisdiction’s trust law applies? [43] The alleged Trust was purportedly formed in British Columbia. It appears designed to be subject to the laws of BritishColumbia. Activities pursuant to the Trust appear to have occurred in British Columbia.

The Petition was filed in British Columbia.Neither party has adduced evidence on the applicable British Columbia trust law with respect to its disputed validity or with respect towhether for some other reason the Trust is a sham. [44] If the law of another jurisdiction is neither pleaded nor provided, then the court applies lex fori, the laws of the forum:Canadian National Steamships Co v Watson, (SCC), [1939] SCR 11 at 14; Arnold v Fleming et al,(AB KB), [1923] 1 WWR 706 at 719 (ABQB); Janet Walker, Castel and Walker: Canadian Conflict of Laws, loose-leaf, 6th ed(Markham, Ontario: LexisNexis Canada Inc, 2005) at 7.4. [45] Therefore, for purposes of determining whether there is no merit to the Sham Trust Claim substantively, I apply Alberta trust

law. (

c) What is the “Sham Trust Claim”? [ 46 ] The question of just what is the Sham Trust Claim is a critical threshold issue on this Application. At times the parties were not aligned in their explanations of what comprised the Sham Trust Claim. [ 47 ] The primary issues between the parties for resolution at trial are whether (

i) Mr. Funk was unjustly enriched to Ms. Funk’s detriment prior to the marriage; (ii) whether either party is due anything from the other on distribution of matrimonial property from the duration of the marriage; and (iii) whether Ms. Funk is entitled to spousal support following the marriage (the “ Primary Causes of Action ”). [ 48 ] The Sham Trust Claim was more recently added to the pleadings of the parties. Ms. Funk has framed it as if it is an additional separate cause of action.

She amended her “Remedy Sought” to seek, as the Sham Trust Claim, two declarations and an accounting, plus an injunction pending completion of that accounting. [ 49 ] Ms. Funk requests declarations that the Trust was void ab initio and that Mr. Funk owns personally all of the assets that he may assert at trial are subject to ongoing prior obligations because of the Trust. But she does not want the declarations simpliciter . Ms. Funk seeks these declarations as a means to an end. She seeks the declarations to overcome what she anticipates Mr. Funk will argue at trial on the Primary Causes of Action. [ 50 ] Ms.

Funk did not name as parties any of the other persons or interests that might be affected by seeking these declarations. She resisted their participation in any capacity. This confirms that her interest in adding the Sham Trust Claim relates to the approach she anticipates Mr. Funk will take at trial to some or all of the assets in his possession, not to affect the rights any other person or interest may have as a consequence of succeeding in having the Trust declared to be a sham. Consistent with that understanding, Ms. Funk’s counsel stated during oral argument: [...]Ms.

Funk is not looking to set aside prior transactions and I think one of the ways to look at this, is to say contrary to what my friend said earlier in his submissions about unwinding all these prior transactions and people who’ve relied on the trust and leaving matters in peace after a long period of time has passed and so on; contrary to all of that, this action is an action between Steven Funk and Elizabeth Funk. It’s an in personam action between the two of them. Mr. Funk has not been sued as a trustee. And also in oral argument Ms.

Funk’s counsel stated: [...] We haven’t sued the trust; we’ve made it very clear from the beginning that that wasn’t our position that we would be suing the trust. The claim is a matrimonial property claim as between Steven Funk and Elizabeth Funk. [ 51 ] Therefore, the declarations are in the nature of findings she wants the trial judge to reach, that there never was a Trust and never were obligations owed by Mr. Funk because of the Trust that take priority over his obligations to her, such that all the property in Mr.

Funk’s possession will not be treated as unavailable on or for purposes of the Primary Causes of Action. [ 52 ] The accounting she separately requests is an accounting “of distributions from the Trust or from entities or assets owned or controlled by the Trust”, which could be construed as either a stand-alone legal or equitable remedy, or as the process of perfecting a remedy. In the context of this case I find that it means the latter, that if the trial judge finds the Trust to be a sham then Ms. Funk wants an accounting undertaken to discover and reconcile what of Mr.

Funk’s possessions are not subject to any obligations to third parties as a consequence of the Trust. In argument her counsel clarified the implications of the accounting requested, saying: [...] the accounting needs to include all the funds that Mr. Funk currently holds as part of his assets, so there can be a proper accounting done in the matrimonial property action. That’s the accounting that’s looking at to be done. [ 53 ] Thus Ms.

Funk is not seeking an accounting as a stand-alone legal remedy but as a process of quantification or perfection of the remedies sought by the Primary Causes of Action, for full recovery of any success she might have on one of the Primary Causes of Action. [ 54 ] This is different from an accounting of Trust activities, to perfect a trust remedy, which would start at the time the Trust purported to have arisen and go forward in time, for example in ascertaining whether trust assets could be traced. Instead, Ms. Funk’s request seems to seek an ‘accounting’ of everything Mr.

Funk currently owns, perhaps by then going back in time to identify its source. That is not really an accounting in either of the usual senses, as a stand-alone remedy or as a means for perfecting, reckoning or quantifying a remedy. It certainly would not be a complete accounting of either kind. If the Trust never existed and Ms. Funk does not seek to set aside any prior transaction that at the time purported to be a Trust transaction, the role of a standard accounting remains unclear. The “accounting” requested seems more akin to asking the Court to require Mr.

Funk to account for all that he possesses even if he received it by distribution from the Trust or the assets the Trust controlled, just as would be done in the normal course in adjudicating a matrimonial property dispute in the process of determining what is and is not matrimonial property, but after his ability to rely in any way on the Trust. [ 55 ] Mr. Funk argues the Sham Trust Claim is a distinct cause of action raised for the purpose of challenging the Trust from its inception, years after the Trust was wound up.

He says this challenge is being advanced in the Alberta action without naming the beneficiaries as parties (although they have been given notice of these proceedings and the Sons have since been added as third parties) and would more properly be framed as a breach of trust claim in the context of the Petition in British Columbia. [ 56 ] Mr. Funk says that if this Application is granted, the four forms of relief claimed, together with the associated allegations in the amended pleading, would be dismissed. He says Ms.

Funk would not be able to lead evidence to challenge the validity and legal constitution of the Trust. He says Ms. Funk still would be permitted at trial to adduce evidence regarding his use and possession of the

property connected to Grand Marais or the Trust in support of her positions on the Primary Causes of Action. [ 57 ] Ms. Funk argues that if the Sham Trust Claim is dismissed summarily, it would permit Mr. Funk to claim that the vast majority of the assets he currently owns may be beneficially owned by the Trust, and there would be little matrimonial property available for distribution to her. Ms. Funk believes that granting this application may preclude her from relying on certain factual allegations regarding Mr. Funk’s trust obligations. It could result in Mr.

Funk being permitted to maintain without possibility of challenge that funds in his hands are properly Trust funds, precluding her from raising certain facts at trial and from arguing the Trust never was valid. [ 58 ] I will return to these disparate views, in an attempt to clarify the implications of any dismissal, after I address the grounds advanced for the requested

summary dismissal. (

d) Is the Sham Trust Claim without Merit? (

i) Was the Sham Trust Claim commenced after the expiry of the applicable Limitation period? What is the applicable limitation period? [ 59 ] The Limitations Act applies to remedial orders. “Remedial Order” is defined in

section 1(

i) as: a judgment or an order made by a court in a civil proceeding requiring a defendant to comply with a duty or to pay damages for the violation of a right, but excludes (

i) a declaration of rights and duties, legal relations or personal status, (ii) the enforcement of a remedial order, (iii) judicial review of the decision, act or omission of a person, board, commission, tribunal or other body in the exercise of a power conferred by statute or regulation, or (iv) a writ of habeas corpus. [ 60 ] Ms. Funk says the Limitations Act does not apply in this case, since she seeks declaratory relief. Mr. Funk argues that Ms.

Funk seeks a remedial order that has been disguised as declaratory relief. [ 61 ] In Yellowbird v Samson Cree Nation No 444 , 2006 ABQB 434 , aff’d 2008 ABCA 270 , the court outlined a test to determine whether the relief sought is truly declaratory, or only declaratory in form, at para 35: [...]A helpful test to determine if the relief is truly declaratory, or only declaratory in form, is: If the Court granted the declaration, and the defendant resisted the implementation of the declaration, could the plaintiff “leave the court in peace” and enjoy the benefits of the declaration “without further resort to the judicial process”? [...]If the fruits of the “declaration” cannot be enjoyed without further legal execution or intervention (by garnishee, seizure, appointment of a receiver, or other enforcement mechanism), then the supposed declaratory order is really remedial in nature. [ 62 ] Ms.

Funk submits that Yellowbird must be distinguished on its facts; she relies instead on McLean v Alberta , 2009 ABQB 102 , where Justice Ouellette held at paras 47 and 50: The declaration of rights and duties was defined as follows: The Act does not apply where the claimant seeks a declaration of rights and duties based on contract, trust, restitution, property or statute, e.g. the

interpretation of a legal document such as a mortgage, a lease, a contract, a will or a trust; or a declaration of the priority of interests in land under the Land Titles Act . Rights and duties based on contract, trust, restitution, property and statute. [...]It is my view that it was the intent of the Court in Yellowbird to state the test as follows: If further recourse to the judicial process is a “must,” not an option, then the relief sought is remedial in nature.

The Court in Yellowbird did not intend that if there was a possibility of a non-compliance with a declaration which could result in future judicial process, that this would automatically make the nature of the relief remedial. If that were the case, then the exclusion provided in s. 1(

a) of the Limitation Act would be meaningless because there is always a possibility that a party will not follow the terms of a declaration. [ 63 ] In distinguishing Yellowbird , Ms. Funk notes that in that case the claimants were seeking the immediate transfer of certain assets or funds under the guise of a declaration. Ms. Funk argues that in this case she is seeking to maintain the status quo. There are no assets left in the Trust; it was dissolved in 2008. She says a declaration that the Trust is a sham would prevent Mr.

Funk from putting funds back into the Trust. [ 64 ] That may be, but the requested declarations would also have immediate effect within the Primary Causes of Action. As indicated above, I find the declarations are in the nature of requested findings (of mixed law and fact) ancillary to or in the normal course of a matrimonial property dispute. The requested declarations will be relevant to, if not play significantly in, the trial judge’s determination of whether certain of the assets in Mr. Funk’s possession are matrimonial property and subject to distribution between the parties.

They are advanced within the context of remedial requests. Ms. Funk is seeking a monetary judgment to have assets currently in Mr. Funk’s hands available in the division of matrimonial property, which is remedial.

[65] Further, when taken as a whole with the accounting requested, they are remedial. The accounting request was added inconjunction with the declarations and I find collectively they constitute a “remedial order” for purposes of the Limitations Act. Has the applicable limitation period expired? [66] I conclude that the applicable limitation expired in respect of the Sham Trust Claim as a cause of action.[3] Pursuant to section3(1) of the Limitations Act, the limitation period expires two years after: [...]the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to the conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, Alternatively, it expires 10 years after the claim arose, if that period expires first. [67] Cases cited by the parties establish the following principles regarding when a party knew or ought to have known they had aclaim: • the discoverability principle does not require perfect knowledge or certainty: De Shazo v Nations Energy Company Ltd,2005 ABCA 241 at para 31; • lack of knowledge regarding the extent or type of damage will not prevent the limitation period from running: Peixeiro vHaberman, (SCC), [1997] 3 SCR 549 at para 18; and • time begins to run when, “in light of the plaintiff’s particular situation, the bringing of the suit is reasonably possible, notwhen it would be ideal from the plaintiff’s perspective to do so”: Novak v Bond, (SCC), [1999] 1 SCR 808 at para 84;see also Nipshank v Trimble, 2014 ABQB 120 at para 10. [68] Mr.

Funk argues that Ms. Funk knew or ought to have known that she had suffered an injury caused by his conduct, and that itwarranted bringing a proceeding, more than two years before she advanced the Sham Trust Claim. [69] Mr. Funk argues that the two-year limitation period began on one of the following dates: (

a) December 19, 2007 – when the distribution was made from the Trust to the Sons. Ms. Funk knew about the Trust since 2001,and knew she was a beneficiary since 2005, if not earlier. The Trust Exchange was initiated in September 2004, and Ms. Funk did notraise any concerns about the transaction at that time. Between 2001 and 2007, Ms. Funk was also aware of Mr. Funk’s use of GrandMarais assets. In this case, the limitation period expired for Ms. Funk on December 19, 2009. As she first asserted the Sham Trust Claim on December2, 2014, she is outside the limitation period. (

b) July 10, 2008 – when the parties separated. Ms. Funk knew our ought to have known that by virtue of the Trust Deed, she wouldno longer be a beneficiary of the Trust on separation, and that she had suffered an injury if the Trust was a sham and distributions hadbeen made to sham beneficiaries in 2007. The limitation period under this alternative expired on July 10, 2010, also taking the Sham Trust Claim outside the limitation period. (

c) April 29, 2011– when Ms. Funk was put on notice through her counsel that there had been a potential breach of the Trust by Mr.Funk that might have a material effect on the net assets of Mr. Funk. There was further correspondence on this issue from Mr. Funk’scounsel on August 22, 2011. The limitation period under this alternative expired on April 29, 2013 (or earlier, if it can be established when Ms. Funk was advised ofthe issues in the letter by her counsel). [70] Using the date of Mr. Funk’s counsel’s letter of August 22, 2011, Mr.

Funk argues that by August 2011 at the very latest, Ms.Funk: • knew or ought to have known that she had suffered an injury by virtue of the fact that her claim on matrimonial assets hadbeen compromised by the 2007 distribution of funds to the beneficiaries, and furthermore, would be severely impacted by anydeclaration that assets held by Mr. Funk were beneficially owned by the Trust beneficiaries and therefore unavailable in a division ofmatrimonial property; • knew or ought to have known that her injury was clearly attributable to Mr. Funk; and • knew a proceeding was warranted.

In other words, it was reasonably possible for her to commence an action at that timeagainst the Trust. Further, given the August 2011 responding letter, Ms. Funk’s possible damages cannot be referred to as minimal orspeculative. [71] As a result, Mr. Funk says Ms. Funk ought to have commenced her action by August 22, 2013 at the latest. She did not assertthe Sham Trust Claim until her Second Amended Counterclaim filed December 2, 2014.

He says there are no circumstances justifyingdelay, such as where the costs and strains of litigation would overwhelm the plaintiff (the parties were already in litigation), the prospectfor recovery is minimal or speculative (the possible damages are not minimal or speculative), or other personal circumstances made it

unfeasible, citing in support Nipshank at paras 9-12 . [ 72 ] In response, Ms. Funk argues that the earliest the limitation period could have started to run is January 23, 2014, when Mr. Funk filed the Petition in British Columbia regarding the Trust. She states that the creation of the Trust does not give rise to her claim. Further, Mr. Funk’s conduct in administering the Trust and her knowledge of transactions including the Trust Exchange, while they may warrant a breach of trust claim, did not give rise to a civil proceeding in which she seeks a remedial order. Ms.

Funk says that the relevant fact for the purpose of the limitation period is the risk that the millions of dollars that Mr. Funk has treated as his own go into the Trust and are no longer available for the purpose of determining matrimonial property. This is the relief sought in the Petition filed in British Columbia. [ 73 ] At the same time, Ms. Funk agreed on cross-examination that in or about the time the letter from her former counsel, Ms. Allen, was issued on April 29, 2011, she understood the trust issues raised by Mr.

Funk’s counsel could possibly affect the ultimate pool of matrimonial property that was available for division in the divorce proceedings. She also confirmed on cross-examination that by the time of Mr. Funk’s counsel’s letter on August 22, 2011, she was aware that the affect a breach of trust would have on the available pool of property divisible in the divorce action was becoming a concern for Mr. Funk’s counsel. She said at that time she had not yet determined whether it was a concern of hers. [ 74 ] As discussed above, Ms. Funk asserts that the need to advance the Sham Trust Claim first came to light when Mr.

Funk brought the Petition in British Columbia and she first became aware that he might take the position that he had a significant contingent liability to the Trust that could impact on her matrimonial property claim. [ 75 ] I agree that the date when the limitation period commenced was when Ms. Funk first became aware that Mr. Funk might have a significant contingent liability to the Trust that could impact on her matrimonial property claim. I disagree that this occurred when Mr. Funk brought the Petition in British Columbia. Ms.

Funk knew or ought to have known of the Sham Trust Claim when she reviewed and instructed counsel on the correspondence exchanged in April and August 2011. [ 76 ] The latest the limitation period for the Sham Trust Claim as a cause of action started to run, therefore, was shortly after Mr. Funk’s counsels’ letter dated August 22, 2011. I conclude that the two-year limitation period expired before Ms. Funk advanced her Sham Trust Claim in December 2014. [ 77 ] In so finding, as I allude to in footnote 3 above, I note that Ms.

Funk is not out of time to argue anything about matrimonial property that was placed in issue long before she became aware that Mr. Funk might have a significant contingent liability to the Trust that could impact on her matrimonial property claim. (ii) Is the Sham Trust Claim without substantive merit? [ 78 ] The term “sham” is discussed in Donovan WM Waters, QC, Mark R Gillen & Lionel D Smith, Waters’ Law of Trusts in Canada , 4th ed (Toronto: Thomson Reuters Canada Limited, 2012) at 154-155 as follows: The term “sham” in English and other offshore parlance, adopted in Canada, is not a precise term.

It is more a turn of speech; its meaning has been given as “something that is not what it seems; a counterfeit.” … Used in the trust law setting, now a practice in Canada as elsewhere, it describes a trust that the courts will declare void because the provisions in the trust instrument do not represent the settlor’s true intent as to the terms upon which the trustee is to hold the trust asset(s).

Though the trust instrument sets out the persons or purposes that are to benefit, the settlor’s true intent is to retain control of the assets purportedly held in trust because the true intent, for instance, is to appear to have disposed of the assets and so to evade tax, to defeat personal creditors, or prejudice the claims of an estranged spouse or the children of the relationship. … When the trustee is another person, any false misrepresentation the settlor intends to make does not, of course, affect the trustee, who is expected to act honestly and in good faith.

But another as trustee who agrees to assist the falsity, or who is indifferent to whether, in fact, he merely implements the settlor’s decisions, will enable the assertion to be made that the trust is but a “sham”, a deception, and consequently void. [ 79 ] The Sham Trust Claim asserts that the Trust was a sham from its inception, that the way the Trust was structured was so that Mr. Funk could maintain control over the assets, and that his post-trust conduct establishes a sham. Specifically, Ms. Funk argues that the Trust is a sham because: 1. There is no certainty of intention; 2.

The Trust agreement is not reflective of the actual arrangement; and 3. Post-trust conduct is indicative of a sham. [ 80 ] Mr. Funk relies on a

summary in Waters’ Law of Trusts in Canada at 155-156, wherein the authors state that trusts can be attacked as shams on two grounds: 1. A trust may be a sham where the settlor had no intention to create the trust at all, and the settlor’s true intention was to retain control of the assets held by the trust. This may be to create the appearance that assets have been disposed of and are not available to creditors. 2.

A trust may be a sham even where there was the requisite certainty of intention to create the trust if the settlor, as trustee or through a compliant trustee, acted as the absolute owner of the trust property. In this case, the trust is “illusory”. Validity of Trust at Inception [ 81 ] A trust is created when a settlor transfers trust property to a trustee to hold for the benefit of a beneficiary. Four specific requirements must be observed for an express private trust to be properly created:

1. The settlor must have sufficient capacity; 2. The trust must meet the three certainties: certainty of intention, subject matter (trust property) and objects; 3. The trust must be constituted by transferring property to the trustee(s); and 4. All formalities must be met: Mark R Gillen & Faye Woodman, The Law of Trusts: A Contextual Approach, 2d ed (Toronto:Emond Montgomery Publications Limited, 2008) at 75. [82] Mr. Funk argues that the Trust has been a valid and legal trust since its inception and that there is no evidence to suggestotherwise. Mr.

Funk submits that the four requirements were met in this case when the Trust was formed. Specifically: 1. Ms. Tong is the settlor and Mr. Funk is the trustee; there have been no allegations about their capacity. Further, the Trustwas formed with legal and professional advice. 2. The Trust meets the three certainties: a. Mr. Funk intended to create the Trust as an estate planning tool to put assets aside for the future benefit of the named beneficiaries.There was no intention to operate as a sham or illusory trust.

He argues that the intention can be inferred from all of the circumstancessurrounding the disposition of the property. Mr. Funk notes that once a trust is created, it can act as a shield and protect trust propertyfrom any future claims. He argues this should not be confused with his intentions at the time the Trust was created. At the time the Trustwas created and thereafter, Mr. Funk has never been in the position of being unable to pay creditors. b. There is certainty of property. The Trust property at the time it was created was a silver ingot. c. There is certainty of object.

The beneficiaries of the Trust are identified in the Trust Agreement. 3. The valid constitution of the Trust requires that the trustee must have acquired title to the initial Trust property. Mr. Funkhad title to the silver ingot. 4. The Trust was settled in accordance with the requisite formalities required in British Columbia. [83] Ms. Funk argues that there was no certainty of intention when the Trust was created. To establish that there was, there mustbe an intention on the part of the settlor to impose enforceable trust obligations on the trustee. She points out that Ms.

Tong has providedno evidence to this Court regarding settling the Trust. [84] I agree with Mr. Funk. The evidence establishes with certainty that the requirements of a valid trust are satisfied. With respectto the certainty of intention, the relevant intention is that of the settlor Ms. Tong, not Mr. Funk, to create the Trust. Intention can besupported by words in a written document: Gillen & Woodman at 79. In this case, the settlor’s intentions are set out in the recitals to theTrust Agreement: WHEREAS: A. The Settlor desires to benefit and make provision for certain persons as herein provided; B.

The Settlor desires to appoint the Original Trustee to be the first Trustee hereunder, and the Original Trustee has agreed toaccept such appointment subject to the trusts, terms and provisions herein provided; C. The Settlor desires to transfer and make over certain assets to the Trustee to be held by the Trustee irrevocably and foreverfor the persons and on and subject to the trusts herein provided. [85] There is no suggestion in any of the documentation produced on this Application that the settlor had any intentions other thanthose expressed in the Trust Agreement. While Ms.

Funk argues she needs a trial on the Sham Trust Claim to be able to examine Ms.Tong, there is nothing in the record to suggest Ms. Tong would have any knowledge other than what is contained in thecontemporaneous documents already produced. Further, Ms. Funk does not challenge the settlor’s capacity. Ms. Tong fulfilled the role ofsettlor, apparently at Mr. Funk’s request, but that is not at all uncommon for such trusts. Among other reasons, it can reduce the risk oflater attribution of income for tax purposes to Mr.

Funk. [86] For a trust to be found a sham, there must be some element of deceit: Stubart Investments Ltd v The Queen,(SCC), [1984] 1 SCR 536 at 572-573.

A sham is found where acts were done or documents were executed “to give to third parties or tothe court the appearance of creating between the parties legal rights and obligations different from the actual rights and obligations (ifany) which the parties intend to create”: Snook v London & West Riding Investments Ltd, [1967] 1 All ER 518 at 528 (Eng CA), asadopted by the Supreme Court of Canada in Minister of National Revenue v Cameron, (SCC), [1974] SCR 1062 at1068 and Stubart Investments at 572. [87] Here there is no evidence that the Trust was created for a deceitful purpose or that there was deceit; nor was theredemonstrated any intention to mislead as to the nature of the Trust.

There is no evidence whatsoever that the settlor was deceptive ormisleading in her intention in settling the Trust. [88] In these circumstances, that is, absent any prima facie basis to bring those intentions into doubt, it does not matter that I didnot hear from Ms. Tong regarding her intentions at the time the Trust was created. Here the evidence on the initial and subsequentbehaviours, actions or omissions of the settlor and Mr. Funk do nothing to make me doubt that either the settlor or Mr. Funk intendedanything other than the purpose of the Trust as it appears on its face.

Validity of Trust during its existence and post-Trust

[89] Ms. Funk says the Trust was a sham because of Mr. Funk’s conduct during and after its alleged existence. Ms. Funk notes thatthe determination of a sham trust based on post-trust conduct is fact-specific. She points to Sangha v Reliance Investment Group Ltd,2011 BCSC 1324, where Court noted at paras 352-353: Sham trusts are often created for illegal purposes, such as evading taxes, avoiding creditors, or defeating family claimants. ... There is ample authority for the proposition that post-declaration conduct can be evidence that a trust is a sham. ... [90] She points to many examples of Mr. Funk treating the Trust property as his own, including: (

a) Mr. Funk used Grand Marais to provide for his own personal expenses, which conflicts with his obligations as trustee. (

b) The Trust Exchange indicates that Mr. Funk used the Trust assets as his own. In that regard, Ms. Funk points to excerptsfrom legal advice Mr. Funk received in 2005 that the first objective, protecting his net worth, would best be achieved by completing afreeze of the Trust’s investment in Grand Marais. (

c) The Retroactive Share Tender indicates a sham trust. (

d) The fact the Sons were not informed of the Trust until 2011, well after the creation and winding up of the Trust, suggests asham trust. (

e) Mr. Funk’s efforts to “breathe life” into the Trust through the British Columbia Petition is indicative of a sham trust. (

f) Finally, Ms. Funk says that Mr. Funk is still spending the money “potentially subject to a contingent liability” as though itwas his own money. [91] Mr. Funk responds that the Trust only had a beneficial interest in Grand Marais shares and, in any event, by the time thealleged misuse of Grand Marais assets occurred, the Trust had been settled and constituted.

He argues that the subsequent misuse ofTrust property cannot turn an otherwise valid trust into a sham; rather, it gives rise to a claim of breach of trust: A v A, [2007] EWHC 99(UK HCJ Fam Div) at para 42; Sagl v Sagl, (ON SC), [1997] OJ No 2837 (Gen Div) (ON SC) at paras 35-36. [92] Mr.

Funk points to an “overwhelming number of undisputed facts evidencing the validity of the Trust from its inception” thatare transparent about the actual rights and obligations, including: • The Trust was completed on the basis of legal and professional advice, and was fully documented; • A bank account for the Trust was opened on December 23, 1998; • Annual tax returns were filed when required; • Mr.

Funk disclosed the existence of the Trust as a separate entity as necessary in his third party dealings and to hisprofessional advisors; and • Several transactions involving the Trust took place between 1999 and 2008. [93] I find that the manner in which the Trust evolved and was managed also bear the indicia of a valid, real trust, as opposed to asham. Further, there was no hint of any intention to mislead Ms. Funk about the Trust, during its existence. Finally, Mr.

Funk’s post-Trust conduct does not establish the Trust as a sham. [94] Typical examples of a sham trust include lack of documentation, inactivity of the trust, the trust created for the sole benefit ofthe settlor, failure to disclose the existence of a trust when required to do so, or where child beneficiaries do not know of the trust’sexistence until they become adults: Bayerische Landesbank Girozentrale v Sieber Estate (Trustee of), 2015 ONSC 27 at paras 83-87; ReForsyth, 2010 BCSC 1720 at para 25; and Orenstein v Gold Coast Investments Inc, [1997] OJ No 1957 (Gen Div) at para 6.

Most ofthese examples are not present here. [95] The only indicator potentially present in this case of those typical indicia of sham trusts relates to the Sons not being informedof the Trust. I find that the existence of the Trust was disclosed to the Sons early on, but not discussed with them in any meaningful wayuntil 2011, on the basis of legal advice then received. In Orenstein the Court concluded that the Trust Agreement and Declaration ofTrust were nothing more than shams to defeat creditors.

The Court noted, at para 6: “The evidence is quite clear the beneficiaries of thetrust never knew anything about the trust until the oldest became an adult and got involved in the second piece of litigation before me.”In this case, however, I do not find the fact the Sons were not meaningfully informed about the Trust during its existence to bedispositive evidence that the Trust was a sham since its inception. The Sons were minors at the time the Trust was created and it isreasonable that they would not be fully informed about it. I infer they were informed when it was wound up and they received itsproceeds.

Upon receiving advice to inform the Sons Mr. Funk did so. Given the proven original purpose for establishing the Trust and allthe other compelling indicia of its validity, I do not consider this isolated fact to offset all the others to render the Trust invalid. [96] Ms. Funk admitted having knowledge about the Trust sometime after February 2001 and produced a letter from her recordsdated February 12, 2001, between Mr. Funk and his counsel that mentioned the Trust. Mr.

Funk submits the facts in this case cannot becompared with instances where a trust is only acted on to defeat matrimonial property claims or claims of other creditors. [97] Mr. Funk’s conduct as trustee of the Trust may later be found suspect, regardless of whether it was with or without thecomplicity of Ms. Funk, and regardless of whether Ms. Funk has a paramount claim to the same assets pursuant to any of the PrimaryCauses of Action, but I am satisfied that his conduct as Trustee was not motivated to defeat existing or anticipated matrimonial propertyclaims or creditor claims.

If anything, the economic effect of his actions as Trustee advantaged the position of such claimants, increasingnot imperiling his creditworthiness.

[ 98 ] The examples Ms. Funk provides regarding post-trust conduct rely upon a determination that the trust was a sham from the outset; the examples do not set out circumstances where a validly established trust subsequently “becomes” a sham trust because of post- trust conduct. Post-trust conduct can provide evidence that a trust is a sham from its inception; it cannot invalidate an otherwise validly constituted trust. [ 99 ] For example, in Dynamic Properties Co v Self , 2013 NSSC 71 , the Court concluded a trust was a sham, noting that: “At the time the Trust was established it is clear Mr.

Self never intended to part with his beneficial interest in these assets”: at para 21. In that case, Mr. Self was the settlor, and a lawyer was the trustee. The Court relied upon Mr. Self’s conduct after the trust was settled as evidence of his intention at the time the trust was created. [ 100 ] Post-trust conduct has been held to be evidence that a trust is a sham where a settlor treats the trust property as his or her own. Ms.

Funk cites a number of cases as examples of the impact of this conduct, including Re Forsyth , where the British Columbia Supreme Court held at para 25: [...] Forsyth acted as if he as the settler and he as the trustee were one and the same. He failed to disclose the existence of the trust when obligated to do so. He encumbered the property without proper instruction or authority from [the beneficiary]. He failed to disclose the existence of the trust to relevant government agencies.

Upon a review of the evidence, I conclude Forsyth's actions are consistent with an intention to retain full control over the trust property, and demonstrate that the Declaration did not actually create the legal rights and obligations which it appeared and purported to create. [ 101 ] Forsyth was the settlor and the trustee.

At paras 16 and 17, the Court held that in order to succeed on the ground that the trust is a sham, the challenger “must demonstrate that all of the parties to the sham had a common intention that the acts done or documents executed not create the legal rights and obligations which they give the appearance of creating”.

There, the Court was “satisfied that the trust created here meets that definition of ‘sham’” and concluded that the post-trust conduct was inconsistent with a genuine trust. [ 102 ] A material difference between those cases and this one is that in this one there was an extended period of time, years in fact, in which the Trust operated consistent with the demonstrated original intention to establish a valid trust. Later contrary conduct by Mr. Funk as trustee may well have other legal effects or consequences, but does not serve to invalidate the Trust that was validly created.

In all the above cases, the impugned conduct was that of the settlor, and the trust was found to be a sham from the outset. Here there is some evidence of questionable conduct at and after the Trust Exchange and, perhaps, in respect of the Retroactive Share Tender and around Mr. Funk perhaps acting as the absolute owner of the trust property. But these were well after its valid creation. [ 103 ] Therefore, I dismiss the claim that the Trust was a sham from its inception or was a sham as a result of Mr. Funk’s later conduct.

There are no material facts in dispute between the parties as they relate to these determinations. (

e) The Statute of Elizabeth Claim [ 104 ] Ms. Funk relies upon the Statute of Elizabeth , in addition and in the alternative to the Trust being a sham, saying that Mr. Funk created the Trust for an improper purpose, namely, to put assets beyond the reach of creditors. If the Statute of Elizabeth is engaged, the issue arises as to whether the creation of the Trust should be reversed. [ 105 ] Mr. Funk says that Ms. Funk’s allegations are not adequately pleaded. But in any event, he says the evidence is overwhelming that Mr. Funk had no intention to delay or defeat creditors in setting up the Trust. As a result, he says, this claim should also be dismissed. [ 106 ] On an application for

summary judgment, both parties are required to put their best foot forward. In this case, there is no evidence that an intention in the creation of the Trust was to delay or defeat creditors, and none from which such an intent could reasonably be inferred. Mr. Funk acknowledged in questioning that he created the Trust “[t]o put the assets in [his kids’ names] and also create creditor protection.” He also deposed in his affidavit filed in support of this Application that he intended to create the Trust “to protect the trust assets gifted to the beneficiaries from potential tax or estate consequences”.

He stated that he had no outstanding debts owing to existing creditors and did not foresee being unable to pay any existing or future creditors. Mr. Funk’s understanding that one of many benefits of establishing a trust may be a degree of creditor protection in the future is not the same as intentionally proceeding to set up a trust in order to defeat existing or even known imminent creditors. I find there to be no fraudulent intent of either the settlor or Mr. Funk, not even through indirect or circumstantial evidence. There is no merit to the claim under the Statute of Elizabeth .

I therefore dismiss the Statute of Elizabeth claim. There is no useful purpose to the parties spending any more litigation resources on prosecuting and defending this claim. [ 107 ] In so finding, I am aware of the recent decision of this Court in Milavsky v Milavsky , 2015 ABQB 395 , where Mahoney J. noted at para 65: [...] Not only does the evidence before me disclose that material facts and the credibility of key witnesses are in serious dispute, the

interpretation and the application of the Statute of Elizabeth , the concept of a joint family venture, the use of trusts in matrimonial property division and the limitations defence require a fulsome review upon solid fact-finding in respect of these issues.

There are genuine issues of law, which should be answered only in the context of findings of fact based on evidence presented at trial. [ 108 ] I take Justice Mahoney’s comments to be specific to the case before him, even though as worded his comments might be taken (improperly in my view) to have broader application to all Statute of Elizabeth cases and all cases involving “the use of trusts in matrimonial property division and the limitations defence”. Pleading the Statute of Elizabeth does not automatically preclude

summary disposition in matrimonial property division litigation. The presence of trust issues does not automatically preclude

summary disposition in matrimonial property division litigation. The two arising within the same litigation also does not automatically preclude

summary disposition.

IV. Conclusion and Implications [ 109 ] In the result, the Statute of Elizabeth claim and the Sham Trust Claim, as described above, are dismissed summarily. This decision removes from the issues for trial: 1. Whether the Trust was invalid or illegally constituted; 2. Whether Ms. Funk is out of time to challenge the Trust as a sham; and 3. Whether Ms. Funk can recover for a claim under the Statute of Elizabeth . [ 110 ] The relief sought by Ms. Funk for a declaration that Mr.

Funk personally is the true owner of all of the assets purportedly owned by the Trust is dismissed only to the extent it would require a finding that the Trust was a sham. Ms. Funk is not precluded from still trying to prove that Mr. Funk is the true owner of any property he may possess, including property he may suggest is subject to a priority obligation as a result of the Trust’s existence, but in so doing she cannot challenge the validity or legal constitution of the Trust at its creation.

The Court should not, and the parties should not, expend any further resources on whether the Trust was not valid and remained valid. [ 111 ] The relief sought for an accounting of Trust distributions, and injunctive relief while that accounting would be undertaken, are also dismissed to the extent they were tied to the Sham Trust Claim. This does not limit the trial judge from embarking on or directing any such comparable accounting process on any other issue then before the Court.

It is dismissed as a stand-alone remedy for the Trust being a sham and also as a process to reconcile the economic effects of the Trust being a sham, since I have found that it was not a sham. This dismissal does not restrict any remedies available to the trial judge in the context of the Primary Causes of Action. [ 112 ] I am not prepared to conclude that Mr. Funk can assert that some of the property in his possession is or may be subject to a priority claim as a consequence of the Trust, but that Ms. Funk cannot oppose that.

She only cannot oppose that on the basis the Trust was invalid, not legally constituted, in some other way was a sham, or that it was designed to defeat creditors. She can present evidence that the assets in Mr. Funk’s possession are not Trust assets for any other reason. This decision does not preclude Ms. Funk from relying on factual allegations regarding Mr. Funk’s trust obligations for any other purpose, just not in respect of the issues listed above no longer requiring trial. Further, Ms.

Funk is not precluded by this decision from leading evidence relevant to any other issues at trial, simply because that evidence may also have been relevant to the aspects of the Sham Trust Claim that I am now dismissing, such as about (without limitation) the management of the Trust, Mr. Funk’s conduct regarding the Trust, the assets that were transferred to or from the Trust, or the winding up of the Trust. Of course, these comments on evidence that may be adduced at trial are ultimately subject to the trial judge’s discretion. [ 113 ] In the event Ms.

Funk amends her pleading to reflect this decision, I would suggest with respect to the Remedy Sought in the Sham Trust Action (repeated at para 31 above) that the first requested declaration would be deleted and the remaining three items read down so as to exclude any such relief sought on the basis of the Trust being found to be a sham or in violation of the Statute of Elizabeth .

Regarding the additional allegations of fact prior to the Remedy Sought, I would err on the side of caution and make no changes, so nothing is removed that may be relevant to some other issue between the parties to be determined at trial. She will not be able to say those assets are not Trust assets because the Trust was a sham. [ 114 ] Each party shall bear their own costs of this application. Heard on the 18 th day of January, 2016. Dated at the City of Calgary, Alberta this 30 th day of March, 2016 . P.R. Jeffrey J.C.Q.B.A. Appearances: Michael E.

Mestinsek and Gloria Moore Stikeman Elliott LLP for the Applicant (Defendant)

Carsten Jensen, QC, FCIArb and Stacy Petriuk JSS Barristers LLP for the Respondent (Plaintiff) Robert Calvert, QC and Tina L. Mihoc DLA Piper (Canada) LLP for the Third Parties