M.K. Shaw

In an addendum to a previous decision, the Court of Appeal for Ontario determined the issue of costs for the application and the appeal.

Agreeing with the submissions of the respondent Director, the court ordered that each party bear its own costs.

A real estate broker became insolvent after its principal misappropriated trust funds for day-to-day operations.

The Director, representing the trust claimants, asserted priority over the broker's assets, including accounts receivable collected by a secured bank and funds remaining in trust accounts.

The Court of Appeal held that the accounts receivable were not impressed with a constructive trust because there was no clear connection between the misappropriated funds and the generated receivables, allowing the bank to realize its security.

Furthermore, the funds remaining in the trust accounts were not restored trust funds, giving the Crown priority over those funds pursuant to the deemed trust provisions of the Income Tax Act.