Court File and Parties

CITATION: Duca Financial Services Credit Union Ltd. v. Bozzo, 2011 ONCA 455

DATE: 20110615

DOCKET: C52323

COURT OF APPEAL FOR ONTARIO

Winkler C.J.O., Simmons and Armstrong JJ.A.

BETWEEN

Duca Financial Services Credit Union Ltd.

Plaintiff (Appellant)

and

Albert Bozzo and Maria Louisa Bozzo

Defendants (Respondents)

Counsel: Anthony E. Bak (appearing for Robert J. van Kessel) and Edwin G. Upenieks, for the appellant Duncan C. Boswell and Mark Crane, for the respondents

Heard and released orally: June 2, 2011

On appeal from the judgment of Justice Peter A. Cumming of the Superior Court of Justice dated May 27, 2010.

ENDORSEMENT

[1] The trial judge dismissed the appellant’s action to declare a trust declaration void either as a sham or as a fraudulent conveyance.

[2] Concerning the validity of the trust declaration, at paras. 41-2 of his reasons, the trial judge correctly set out the requirements for a valid trust and referred to some of the circumstances in which a trust may be found to be a sham and therefore void:

To establish a valid trust, there must be three certainties: the certainty of intention, the certainty of subject matter and the certainty of objects. [Citations omitted.]

A purported trust may be held to be a “sham” and void where a trust instrument sets out the persons who are to benefit but does not represent the settler’s true intent which is simply to create the appearance of a disposition of assets through the purported trust. The actual intent, in such cases, is to retain control of the assets purportedly held in trust. In such an instance, there is no true intention to create a trust and one of the three certainties is missing; hence, the purported trust is void.

[3] At paras. 45 and 46 of his reasons the trial judge explained his conclusion that, in making the trust declaration, the respondent, Mr. Bozzo, intended to separate himself from the beneficial interest in the shares of the Abbas Group:

While [the respondent, Mr. Bozzo] maintained operational control of Abbas Group as an employee thereof, his intent was to separate himself from the beneficial interest of the shares in the Abbas Group.

While there are suspicious circumstances, I find on a consideration of all the evidence, that there was a true intent on the part of [the respondent] to establish the trust in issue through the January 29, 1988 trust declaration. [Emphasis added.]

[4] However, in our view, in reaching this conclusion the trial judge erred because he failed to consider the following evidence effectively volunteered by Mr. Bozzo:

Q. You had voting control of Abbas as of January 26, 1988?

A. Yes sir, I had voting control even after that. Even after the Trust Declaration.

Q. That’s what you believe?

A. Yes.

Q. So, again, you’re saying in your mind the control of the company didn’t change either before the Trust Declaration or after the Trust Declaration?

A. No sir. [Emphasis added.]

[5] In our view, this evidence conclusively demonstrates that the respondent, Mr. Bozzo, considered himself to have retained control of the assets purportedly held in trust. In his own mind, he had not separated himself from the beneficial interest in the shares. Accordingly, there was no intention to create a valid trust as one of the three certainties was missing and the trust is therefore void.

[6] In the circumstances, the appeal is allowed, the judgment below is set aside and judgment is granted in the form requested by the appellant.

[7] The cross-appeal is dismissed.

[8] Costs of the appeal are to the appellants fixed at $25,000 for the appeal and $5,000 for the cross-appeal, as agreed upon by the parties, both sums inclusive of disbursements and applicable taxes. The issue of the costs of the proceeding below is remitted to the trial judge.

Signed: “Winkler C.J.O.”

“Janet Simmons J.A.”

“Robert P. Armstrong J.A.”