Court of Appeal of Quebec

Karam c. Succession de Yared

March 01, 2018


St-Pierre, Mainville, Gagné

Appeal from a judgment of the Superior Court allowing in part an application for declaratory judgment. Allowed.

In 2011, the appellant and his spouse established a family trust. Under the agreement, the wife and the couple’s children were the beneficiaries. In 2012, the family moved into a residential and commercial building purchased by the trust. In 2014, the wife petitioned for divorce. She died the following year. The respondents, the liquidators of the wife’s estate, believe that the building’s value should be taken into account when partitioning the family patrimony and, in turn, settling the deceased’s succession. According to the trial judge, even though the residence did not belong to either spouse, it nonetheless formed part of the assets and its value should be considered when partitioning the family patrimony. The judge based his decision on the case law finding that neither spouse can avoid the family patrimony rules through a corporation they control, thereby remedying the issue of ownership by applying, by analogy, the rule on lifting the corporate veil. Last, the judge ruled on the portion to consider at the time of partition, stating that it amounted to the building’s total market value.

The judgment has the effect of depriving the parties of the characteristics and advantages of instituting the trust, a legal institution that they had freely and in good faith chosen to use when things were going well. Establishing a trust creates a patrimony by appropriation that is separate from that of the spouses, albeit one without any juridical personality. Drawing inspiration from art. 317 of the Civil Code of Québec (S.Q. 1991, c. 64) (C.C.Q.) to lift the fiduciary veil in matters involving trusts raises many difficulties. First, a trust is not a legal person and has no juridical personality. Second, contrary to a legal person, a trust is not a monolithic organization and involves the interaction of several persons concerned regarding a single separate patrimony by appropriation. Moreover, the Code already contains all the tools needed to analyze and resolve any problems likely to arise with respect to trusts. Even if such an analogy was possible, it is not supported by the evidence because the trust was not established or invoked against a person in good faith to dissemble fraud, abuse of right or even to contravene a rule of public order by the appellant, by hiding behind the trust to escape liability. Regarding the application of art. 415 C.C.Q., the judge should have ruled that, if there were any “rights which confer use”, they were joint rights that cancelled each other out at the time of partition, and there was no need to determine the building’s value. Last, the judge should not have ruled on the value to be taken into consideration as this was not one of the issues for debate as agreed at the outset of the hearing.

*Summary by SOQUIJ
Text of the decision: Http:// This link open an external website in a new window.



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