Carroll v. Toronto-Dominion Bank

Ontario Reports Ontario Court of Appeal Tulloch, Miller and Paciocco JJ.A. January 21, 2021 153 O.R. (3d) 385 | 2021 ONCA 38

Case Summary

Civil procedure — Parties — Standing — Compliance manager identifying and reporting regulatory infractions and trust breaches by her employer in the administration of its mutual fund products — After manager's employment terminated, she commenced application against employer to uncover and remedy employer's alleged wrongdoing — Application dismissed for lack of standing — Appeal dismissed — Motion judge did not err by failing to invoke inherent jurisdiction to supervise trusts and did not apply wrong test for standing — Facts as pleaded did not establish prima facie standing.

Courts — Jurisdiction — Compliance manager identifying and reporting regulatory infractions and trust breaches by her employer in the administration of its mutual fund products — After manager's employment terminated, she commenced application against employer to uncover and remedy employer's alleged wrongdoing — Application dismissed for lack of standing — Appeal dismissed — Motion judge did not err by failing to invoke inherent jurisdiction to supervise trusts and did not apply wrong test for standing — Those seeking to invoke inherent jurisdiction had to have an interest in the trusts sought to be enforced.

Trust and trustees — Remedies — Compliance manager identifying and reporting regulatory infractions and trust breaches by her employer in the administration of its mutual fund products — After manager's employment terminated, she commenced application against employer to uncover and remedy employer's alleged wrongdoing — Application dismissed for lack of standing — Appeal dismissed — Motion judge did not err by failing to invoke inherent jurisdiction to supervise trusts and did not apply wrong test for standing — Those seeking to invoke inherent jurisdiction had to have an interest in the trusts sought to be enforced.

The applicant was employed by the respondent as a senior compliance manager. She contended that during her employment she made persistent efforts, despite reprisals, to identify and redress regulatory infractions and trust breaches committed by the respondent in the administration of its mutual fund products. She claimed that her efforts ultimately required the respondent to self-report regulatory breaches to the Ontario Securities Commission (OSC). While the OSC investigation was ongoing, the applicant was dismissed from her employment. Two weeks later, the respondent finalized a settlement of more than $14 millions with the OSC. The applicant maintained that the settlement agreement understated the nature and extent of the respondent's wrongdoing. She sent a whistleblower complaint letter to the respondent and followed that by sending whistleblower material to the OSC, the United States Securities and Exchange Commission, and the Office of the Superintendent of Financial Institutions. She also launched against the respondent a civil proceeding structured to uncover and remedy the wrongdoing she alleged. Her application sought various forms of relief, including a declaration of standing, leave to apply for a passing of accounts, an order compelling the respondent to pass its accounts relating to designated mutual fund trusts, a full independent investigation of the trust accounts, an order indemnifying her from liability relating to any breach of trust found through the passing of accounts, an order for an accounting, and a declaration that the respondent had been unjustly enriched. The respondent brought a motion to dismiss the application. The motion judge granted the motion, ruling that it was plain and obvious that no reasonable cause of action had been pleaded because the applicant had no standing to bring the application. The applicant appealed.

Held, the appeal should be dismissed.

The motion judge did not err by failing to invoke the court's inherent jurisdiction to supervise trusts. The applicant argued that such inherent jurisdiction made standing subordinate, and largely irrelevant, where allegations of fraudulent or improper conduct were made against a trustee. That argument misconceived the true nature of the inherent jurisdiction of courts to supervise or administer trusts and was contrary to basic trust principles. Courts accepted the inherent jurisdiction to assume the administration of trusts where a trustee would not or could not discharge their personal obligations because of refusal or incapacity. It was entirely in keeping with the role of inherent jurisdiction that those who sought to invoke it to supervise or administer trusts had an interest in the trusts they sought to enforce. And, if a beneficiary with capacity did not wish to enjoy the benefits of the personal obligation owed by the trustee, that obligation should not be enforced. The applicant's argument was also contrary to the beneficiary principle that trusts, to be valid, had to have a beneficiary capable of enforcing the trust.

The motion judge did not apply the wrong standing test. The applicant did not seek public interest standing since it was clearly unavailable in her case. However, she argued that public interest standing principles should inform whether she had private interest standing. That argument was rejected as there were good reasons why a flexible, discretionary, purposive approach applied only in public interest litigation, such as justification for use of public resources, the potential widespread effect of public interest litigation, and concerns about immunizing wrongdoing. The motion judge determined that the statutory standing provisions governing standing to pass accounts did not apply, she considered whether the applicant had a personal legal interest in the litigation to support private interest standing, and she rejected the applicant's contention that her status as a knowledgeable whistleblower gave her standing.

The motion judge did not err in finding that the applicant had not pleaded facts establishing a prima facie case of standing. The motion judge found that the applicant was not a unitholder in the trust and had no financial interest in the outcome of the litigation she commenced. Despite her role as a whistleblower, she lacked a direct personal interest in the litigation. The judge was correct in rejecting the applicant's contention that she could sustain a standing claim based on her potential liability as a constructive trustee. There was no foundation to support the applicant's liability as a knowing assister, and the pleadings did not suggest that she might have been a knowing receiver or trustee de son tort.

The motion judge did not err by failing to consider all aspects of the relief sought in determining the question of standing. The judge's decision responded to the arguments made. The fact that she did not expressly mention some of the specific relief requested did not mean that she failed to consider that relief in coming to her decision. In any event, the holding that the applicant had no statutory or private interest standing was correct so even if the motion judge had failed to consider all the relief requested, that would have made no difference to the outcome.

Cases referred to Air Canada v. M & L Travel Ltd. (1993), 15 O.R. (3d) 804, [1993] 3 S.C.R. 787, [1993] S.C.J. No. 118, 108 D.L.R. (4th) 592, 159 N.R. 1, J.E. 93-1761, 67 O.A.C. 1, 50 E.T.R. 225, 45 A.C.W.S. (3d) 801, 1993 SOACQ para. 10,010; Astors Settlement Trusts (Re), [1952] Ch. 534, [1952] 1 All E.R. 1067 (Eng. Ch.); Australian Conservation Foundation Inc. v. Commonwealth of Australia (1980), 146 C.L.R. 493, 45 LGRA 245, 28 A.L.R. 257, 54 ALJR 176; Campisi v. Ontario (Attorney General) (2018), 144 O.R. (3d) 638, [2018] O.J. No. 5825, 2018 ONCA 869, 85 C.C.L.I. (5th) 183, 2019 OABC para. A-1351 [Leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 52]; Canada (Attorney General) v. Downtown Eastside Sex Workers United Against Violence Society, [2012] 2 S.C.R. 524, [2012] S.C.J. No. 45, 2012 SCC 45, 352 D.L.R. (4th) 587, 434 N.R. 257, [2012] 10 W.W.R. 423, J.E. 2012-1793, 325 B.C.A.C. 1, 34 B.C.L.R. (5th) 1, 290 C.C.C. (3d) 1, 95 C.R. (6th) 1, 267 C.R.R. (2d) 1, 220 A.C.W.S. (3d) 536, 103 W.C.B. (2d) 625, EYB 2012-211411, 2012EXP-3353; Canadian Council of Churches v. Canada (Minister of Employment and Immigration), [1992] 1 S.C.R. 236, [1992] S.C.J. No. 5, 88 D.L.R. (4th) 193, 132 N.R. 241, J.E. 92-198, 2 Admin. L.R. (2d) 229, 5 C.P.C. (3d) 20, 8 C.R.R. (2d) 145, 16 Imm. L.R. (2d) 161, 31 A.C.W.S. (3d) 214; Crociani v. Crociani, [2014] UKPC 40, 17 ITELR 624, [2015] WTLR 975; Finlay v. Canada (Minister of Finance), [1986] 2 S.C.R. 607, [1986] S.C.J. No. 73, 33 D.L.R. (4th) 321, 71 N.R. 338, [1987] 1 W.W.R. 603, J.E. 87-100, 23 Admin. L.R. 197, 17 C.P.C. (2d) 289, 2 A.C.W.S. (3d) 277, 8 CHRR D/3789; Gallant v. Gaudet, [1996] P.E.I.J. No. 124, 149 Nfld. & P.E.I.R. 31, 16 E.T.R. (2d) 202, 68 A.C.W.S. (3d) 55 (S.C.T.D.); Initial Services Ltd. v. Putterill, [1968] 1 Q.B. 396, [1967] 3 All E.R. 145, [1967] 3 W.L.R. 1032, 2 K.I.R. 863 (C.A.); Landau v. Ontario (Attorney General), [2013] O.J. No. 4443, 2013 ONSC 6152, 293 C.R.R. (2d) 257; McLean v. Burns Philp Trustee Co. Pty Ltd. (1985) 2 N.S.W.L.R. 623, 9 ACLR 926 (Aus. S.C.); MF Global UK Ltd. (In Special Administration) (Re), [2013] EWHC 1655, [2013] 1 W.L.R. 3874, [2013] 2 BCLC 426; Miner v. Kings (County), [2017] N.S.J. No. 20, 2017 NSCA 5, 274 A.C.W.S. (3d) 863, 60 M.P.L.R. (5th) 1; Morice v. Bishop of Durham (1805), 32 E.R. 947, 10 Ves. 522 (Ch.), affg (1804), 32 E.R. 656, 9 Ves. 399 (Ch.); Polish National Catholic Church of Canada v. Polish National Catholic Church, [2014] O.J. No. 3750, 2014 ONSC 4501; R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, 335 D.L.R. (4th) 513, 419 N.R. 1, [2011] 11 W.W.R. 215, J.E. 2011-1326, 308 B.C.A.C. 1, 21 B.C.L.R. (5th) 215, 83 C.B.R. (5th) 169, 86 C.C.L.T. (3d) 1, [2011] I.L.R. para. G-2404, 205 A.C.W.S. (3d) 92, 2011 CCLG para. 25-249, 2011EXP-2380, 25 Admin. L.R. (5th) 1

Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 89(3) [as am.] Public Guardian and Trustee Act, R.S.O. 1990, c. P.51 [as am.] Substitute Decisions Act, 1992, S.O. 1992, c. 30 [as am.] Variation of Trusts Act, R.S.O. 1990, c. V.1 [as am.]

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 21.01

Authorities referred to Clarry, Daniel, The Supervisory Jurisdiction Over Trust Administration (Oxford: Oxford University Press, 2019) Gillese, Eileen E., The Law of Trusts, 3rd ed. (Toronto: Irwin Law, 2014) Halsbury's Laws of England, 5th ed., Vol. 98, "Trusts and Powers" (London: LexisNexis, 2019) David Hayton, Paul Matthews & Charles Mitchell, Underhill and Hayton: Law of Trusts and Trustees, 18th ed. (London: LexisNexis Butterworths, 2010) Pettit, Philip H., Equity and the Law of Trusts, 12th ed. (Oxford: Oxford University Press, 2012) Waters, Donovan W.M., Gillen, Mark R. & Smith, Lionel D., Waters' Law of Trusts in Canada, 4th ed. (Toronto: Thomson Reuters, 2012)

APPEAL from an order dismissing an application for lack of standing.

Joseph Groia, David Sischy and Dawit Debssou, for the appellant.

Linda Fuerst and Erika Anschuetz, for the respondents.

The judgment of the court was delivered by

PACIOCCO J.A. : —

Overview

[1] Marion Carroll was formerly employed by the Toronto-Dominion Bank ("TD Bank") as a highly placed manager. She was responsible for the compliance of a group of TD Bank's subsidiaries with legal and regulatory obligations, and internal policies, relating to the management of mutual funds.

[2] In that capacity, Ms. Carroll claims to have exposed regulatory non-compliance and breaches of mutual fund trusts by TD Bank's subsidiaries. She contends that this misconduct unjustly enriched TD Bank as well as its subsidiaries (jointly, "TD"). She claims that TD has succeeded in suppressing the full extent of its wrongdoing and its enrichment, including by wrongfully dismissing her from her employment in 2014.

[3] Within two years of her dismissal, in 2016, Ms. Carroll launched a wrongful dismissal lawsuit which is still pending. In 2018, she began making "whistleblower" complaints to TD officials and to government regulators about the misconduct she allegedly uncovered. In September 2019, approximately five years after her dismissal, Ms. Carroll also launched the civil proceedings that are the subject of this appeal. Specifically, she issued an application seeking orders that would result in the disclosure, discovery, and redress of financial irregularities and misconduct, if any, by TD relating to its role as Trustee of designated mutual funds.

[4] The application was dismissed pursuant to rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The motion judge found that Ms. Carroll's application could not possibly succeed because Ms. Carroll lacks standing to bring the application. Ms. Carroll now appeals that ruling.

[5] For reasons that follow, I would dismiss Ms. Carroll's appeal. I agree with the motion judge that Ms. Carroll required standing to bring the application, notwithstanding that the application relates to an alleged breach of trust. I also agree with the motion judge that Ms. Carroll lacks the standing required to maintain her application for any of the relief she seeks.

Material Facts

[6] Between August 8, 2011 and October 20, 2014, Ms. Carroll was employed by TD as a Senior Manager, Compliance. In this position, she carried primary responsibility for overseeing compliance by certain TD subsidiaries with their legal and regulatory obligations and internal policies relating to the management of mutual funds.

[7] She contends that during her employment she made persistent efforts, despite reprisals, to identify and redress regulatory infractions and trust breaches committed by TD in the administration of TD's mutual fund products. Most significantly, she alleges that she discovered that TD unjustly enriched itself by more than $50 million by purchasing mutual fund units that were not in the best interest of unit holders in order to maximize undisclosed internal fees. She contends that her efforts ultimately required TD to self-report regulatory breaches that it had committed to the Ontario Securities Commission ("OSC").

[8] On October 20, 2014, while the OSC investigation was ongoing, Ms. Carroll was dismissed from her employment by TD. She attributes her dismissal to her efforts to expose and remedy TD's misconduct relating to its mutual fund products.

[9] Approximately two weeks after her dismissal, TD finalized a settlement of more than $14 million with the OSC. Ms. Carroll maintains that the settlement agreement understates the nature and extent of the wrongdoing, as TD misled the OSC by failing to make full disclosure.

[10] In 2016, Ms. Carroll commenced a lawsuit for wrongful dismissal, which is unrelated to the current appeal. She has also taken steps to expose TD's alleged malfeasance. In November 2018, four years after her dismissal, she sent a "whistleblower" complaint letter to the Chair of the Audit Committee and General Counsel of TD. Then, in September 2019, she sent "whistleblower" material to three bodies carrying regulatory responsibility relating to TD's mutual fund enterprises: the OSC, the United States Securities and Exchange Commission, and the Office of the Superintendent of Financial Institutions. Finally, and of most relevance to this appeal, she launched a civil proceeding against TD, by way of application, that is structured to uncover and remedy the wrongdoing she alleges.

[11] The relief Ms. Carroll claims against TD is set out in her Fresh as Amended Application, issued on October 18, 2019. Specifically, Ms. Carroll:

• sought standing and leave to apply for a passing of accounts pursuant to statute and the common law;
• requested a declaration, if necessary, that she has standing to apply to compel a passing of accounts to remedy the reputational, financial, and personal harm caused to her by TD's misconduct;
• asked for an order compelling TD to pass its accounts relating to designated mutual fund trusts, without notice to the unitholders who are the beneficiaries of those trusts;
• sought the appointment of an independent accounting firm to conduct a full investigation of the trust accounts;
• requested an order directing TD to disclose any breach of trust, financial irregularity or misconduct to beneficiaries and securities regulators relating to its role as trustee;
• asked for an order indemnifying her from liability "relating to any breach of trust found through the passing of accounts";
• sought an order for an accounting and payment to beneficiaries of the trust for amounts equal to TD's wrongful gains; and
• requested a declaration that TD had been unjustly enriched.

[12] In response, TD brought a successful rule 21.01 motion to dismiss the application. The motion judge ruled that it was plain and obvious that no reasonable cause of action had been pleaded because Ms. Carroll did not have standing to bring the application.

The Issues

[13] Ms. Carroll does not appeal the motion judge's decision that she lacks standing to pass accounts pursuant to the Substitute Decisions Act, 1992, S.O. 1992, c. 30, or any of the Rules of Civil Procedure. Nor does she take issue with the motion judge's articulation of the test to be applied under rule 21.01, or with the propriety of dismissing an application under that rule where a proceeding is brought without standing. Her appeal is confined to the motion judge's conclusion that Ms. Carroll clearly lacked standing. I would state the issues that Ms. Carroll raises as follows, and approach them in the following order:

(A) Did the motion judge err by failing to invoke the court's inherent jurisdiction to supervise trusts? (B) Did the motion judge err by applying the wrong standing test? (C) Did the motion judge err by finding that Ms. Carroll had not pleaded facts establishing a prima facie case of standing? (D) Did the motion judge err by failing to consider all aspects of the relief sought when determining Ms. Carroll's standing?

[14] As I conclude that the motion judge made none of these errors, I would dismiss the appeal.

Analysis

A. Did the motion judge err by failing to invoke the court's inherent jurisdiction to supervise trusts?

[15] Ms. Carroll argues that the inherent jurisdiction of courts to administer trusts makes standing "subordinate, and largely irrelevant, where allegations of fraudulent or improper misconduct are made against a trustee". As I understand her argument, Ms. Carroll maintains that once a court receives allegations that a trust has been breached, the role of the courts as the guardian of trusts is triggered, regardless of who initiated the application, thereby obliging the courts to resolve the litigation. Hence, in Ms. Carroll's view, the motion judge erred in requiring her to satisfy legal standing tests.

[16] Relatedly, Ms. Carroll appears to be suggesting that the motion judge also erred by abdicating her judicial responsibility to address the alleged breaches of trust by giving weight to the fact that there are alternative means available for trust breaches to be addressed.

[17] I would firmly reject Ms. Carroll's submissions. There is no support for the claim that the inherent jurisdiction of courts to supervise or administer trusts makes standing a subordinate or largely irrelevant consideration where allegations of fraudulent or improper misconduct are made against a trustee. This claim misconceives the true nature of the inherent jurisdiction of courts to supervise or administer trusts and is contrary to basic trust principles.

[18] Courts assumed inherent jurisdiction to supervise and administer trusts so that trusts could be given legal force: Donovan W.M. Waters, Q.C., Mark R. Gillen & Lionel D. Smith, Waters' Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012), at pp. 1165-66; Daniel Clarry, The Supervisory Jurisdiction Over Trust Administration (Oxford: Oxford University Press, 2019), at para. 2.11. The enforcement of trusts was not achieved by empowering courts to act as roving commissions of inquiry into their proper performance, but by empowering courts to assist those with an interest in trusts in enforcing and compelling the performance of those trusts.

[19] Initially, the inherent jurisdiction to supervise and administer trusts was recognized "primarily to protect the interest of beneficiaries": Crociani v. Crociani, [2014] UKPC 40, 17 ITELR 624, at para. 36. Without the assumption of jurisdiction by courts, beneficiaries would lack legal authority to enforce trusts because trustees are the legal owners of trust property, and therefore hold the bundle of enforceable legal rights that property enjoyment entails. The only way to ensure that beneficiaries can enjoy trust property they do not own is for courts to take jurisdiction and impose personal obligations on trustees to use the legal rights they hold for the benefit of the beneficiaries, according to the terms of the trust: McLean v. Burns Philp Trustee Co. Pty. Ltd. (1985), 2 N.S.W.L.R. 623, 9 ACLR 926 (Aus. S.C.), at p. 933 ACLR.

[20] Given that trusts are enforced by imposing personal obligations on trustees, if courts did not intervene, a trust would fail where a trustee would not or could not discharge their personal obligations because of refusal or incapacity. Courts therefore accepted the inherent jurisdiction to assume the administration of such trusts, based on the maxim of equity that no trust should fail for want of a trustee: Clarry, at para. 1.04.

[21] In this way, courts of equity claimed the inherent jurisdiction at the behest of beneficiaries "to supervise, and where appropriate intervene in, the administration of a trust where there is no trustee to carry it on, or where the trustee wrongfully declines to act or refuses to disclose trust accounts and supporting information or is otherwise acting improperly": Halsbury's Laws of England, 5th ed., Vol. 98, "Trusts and Powers" (London: LexisNexis, 2019), at para. 626.

[22] Given the significant obligations that courts impose on trustees and the desire to "enable practical effect to be given to a trust", courts have also recognized the inherent jurisdiction to assist trustees in the administration of trusts where such assistance is required: MF Global UK Ltd. (In Special Administration) (Re), [2013] EWHC 1655, [2013] 1 W.L.R. 3874 (Ch.), at paras. 26, 32. For example, there is inherent jurisdiction to assist trustees "where difficulties have arisen which cannot be removed without the assistance of the court, or where the decision of the court on a doubtful question connected with the trust or on its proper administration is sought by the trustee": Halsbury's, Vol. 98, at para. 626; Waters' Law of Trusts, at pp. 1165-66.

[23] To be sure, on occasion access to the inherent jurisdiction of courts has been extended to others who have an interest in a trust, such as creditors or those with contingent interests, particularly where that jurisdiction is supported by statute: see McLean v. Burns Philp; Waters' Law of Trusts, at p. 1122. However, it can readily be seen that the inherent jurisdiction to supervise and administer trusts exists to assist the parties to the trust relationship or those who are interested in the trusts. As such, the inherent jurisdiction of courts to supervise and administer trusts is not inconsistent with the imposition of standing requirements. To the contrary, it is entirely in keeping with the role inherent jurisdiction performs to ensure that those who seek to invoke the inherent jurisdiction to supervise or administer trusts have an interest in the trusts they seek to enforce.

[24] The position advanced by Ms. Carroll during the oral hearing, that courts of equity have liberated the inherent jurisdiction from standing requirements in order to protect the interests of incapacitated beneficiaries who cannot effectively sue to enforce trust obligations, is also inaccurate.

[25] In fact, courts of equity have done the opposite. They have protected the interests of the incapacitated through the conventional means of granting standing to others to enforce trusts on their behalf, including guardians and personal representatives. There are now appointed officials who have also been given statutory authority to enforce trusts. For example, the Children's Lawyer can enforce trusts: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 89(3). So, too, can the Public Guardian and Trustee: Substitute Decisions Act, 1992; Public Guardian and Trustee Act, R.S.O. 1990, c. P.51; and see Waters' Law of Trusts, at p. 133; and Eileen E. Gillese, The Law of Trusts, 3rd ed. (Toronto: Irwin Law, 2014), at p. 40. There is a narrow statutory exception that dispenses with private interest standing by enabling anybody to propose an arrangement for the variation of a trust for an incapacitated beneficiary: Variation of Trusts Act, R.S.O. 1990, c. V.1; Gillese, at p. 99. But this exception proves the rule. Simply put, the methods used to protect incapacitated beneficiaries do not support Ms. Carroll's position. They contradict it.

[26] Not surprisingly, Ms. Carroll produced no authority to support her position that standing is subordinate and largely irrelevant in breach of trust cases. To the contrary, the authorities put before this court include illustrations of courts considering whether litigants have the standing required to raise such claims: McLean v. Burns Philp; and see Gallant v. Gaudet, [1996] P.E.I.J. No. 124, 149 Nfld. & P.E.I.R. 31 (S.C.T.D.), at para. 25.

[27] The position advanced by Ms. Carroll not only lacks support, it is also contrary to basic trusts principles. The logical implication of her position is that even if capacitated beneficiaries choose not to enforce the trust benefits that they are entitled to, strangers to the trust may do so. This outcome is not only unwarranted, it is contrary to the essential character of a trust, namely, an enforceable personal obligation owed by a trustee to the beneficiary, respecting property: see David Hayton, Paul Matthews & Charles Mitchell, Underhill and Hayton: Law of Trusts and Trustees, 18th ed. (London: LexisNexis Butterworths, 2010), at p. 2; Gillese, at p. 5. Simply put, if a beneficiary with capacity does not wish to enjoy the benefits of the personal obligation owed by the trustee, that obligation should not be enforced.

[28] It is also contrary to the "beneficiary principle", that, subject to exception, to be valid, trusts must have a beneficiary capable of enforcing the trust: Morice v. Bishop of Durham (1804), 32 E.R. 656, 9 Ves. 399 (Ch.), affd (1805), 32 E.R. 947, 10 Ves. 522 (Eng. Ch.); Astors Settlement Trusts (Re), [1952] Ch. 534, [1952] 1 All E.R. 1067 (Eng. Ch.). The theory underlying the beneficiary principle is that trusts are, by definition, enforceable equitable obligations, and, without a beneficiary, there would be no-one with the standing to enforce the trust, thereby defeating the very existence of a trust: see Astors, at pp. 546-47, 549 Ch.; Philip H. Pettit, Equity and the Law of Trusts, 12th ed. (Oxford: Oxford University Press, 2012), at pp. 59-60. If non-beneficiaries could enforce trusts, the beneficiary principle would not have developed. It would also be possible to create enforceable, non-charitable, impersonal purpose trusts, something the law in fact disallows.

[29] The motion judge was therefore correct in not accepting Ms. Carroll's claim that standing is a secondary, if not irrelevant, consideration in trust litigation. Standing is required to sue for breaches of trust.

B. Did the motion judge err by applying the wrong standing test?

[30] Ms. Carroll argues that if standing is required, the motion judge was obliged to apply a flexible, discretionary, purposive approach to standing that asks whether there is a "real and legitimate basis for asking the court to adjudicate legal issues". Ms. Carroll contends that the motion judge erred by not applying this test, and that, had she done so, Ms. Carroll would have been found to have standing given that she is a whistleblower who has sacrificed a great deal, thereby acquiring a "genuine interest and real stake in the outcome of the proceedings".

[31] I do not agree with Ms. Carroll's conception of the test to be used in determining her standing. As I will explain, where legislation does not provide standing, there are two paths to securing standing to initiate proceedings, "private interest standing" and "public interest standing". These paths are distinct. Ms. Carroll does not seek public interest standing since it is clearly unavailable in her case. Instead, she argues that public interest standing principles should inform whether she has private interest standing. I do not agree with this proposition. Public interest standing principles do not apply where the private interest standing test governs. The motion judge would have erred had she applied the standing test Ms. Carroll proposes.

[32] I will begin by describing the tests for private interest and public interest standing.

[33] To have private interest standing, a person must have a personal and direct interest in the issue being litigated: Campisi v. Ontario (Attorney General) (2018), 144 O.R. (3d) 638, 2018 ONCA 869, at para. 4, leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 52. They must themselves be "specifically affected by the issue": Canada (Attorney General) v. Downtown Eastside Sex Workers United Against Violence Society, [2012] 2 S.C.R. 524, 2012 SCC 45, at para. 1. It is not enough that the person has a "sense of grievance" or will gain "the satisfaction of righting a wrong" or is "upholding a principle or winning a contest": Finlay v. Canada (Minister of Finance), [1986] 2 S.C.R. 607, at para. 21, citing Australian Conservation Foundation Inc. v. Commonwealth of Australia (1980), 28 A.L.R. 257, 146 C.L.R. 493 (H.C.A.), at p. 270 A.L.R. As it is sometimes put, to have private interest standing, a person must have a "personal legal interest" in the outcome: Landau v. Ontario (Attorney General), 2013 ONSC 6152, 293 C.R.R. (2d) 257, at para. 16. Where the party initiating the litigation has a personal legal interest in the outcome, standing exists as of right: Landau, at para. 21. An appeal of a private interest standing decision is therefore evaluated using a correctness standard: Miner v. Kings (County), 2017 NSCA 5, 60 M.P.L.R. (5th) 1, at para. 23.

[34] "In public law cases, however, Canadian courts have relaxed these limitations on standing and have taken a flexible, discretionary approach to public interest standing, guided by the purposes which underlie the traditional limitations" (emphasis added): Downtown Eastside, at paras. 1, 22. This more flexible approach is warranted "to ensure that legislation is not immunized from challenge": Downtown Eastside, at para. 33, citing Canadian Council of Churches v. Canada (Minister of Employment and Immigration), [1992] 1 S.C.R. 236, [1992] S.C.J. No. 5, at p. 256 S.C.R. As Cromwell J. explained in Downtown Eastside, at para. 37:

In exercising the discretion to grant public interest standing, the court must consider three factors: (1) whether there is a serious justiciable issue raised; (2) whether the plaintiff has a real stake or a genuine interest in it; and (3) whether, in all the circumstances, the proposed suit is a reasonable and effective way to bring the issue before the courts. The plaintiff seeking public interest standing must persuade the court that these factors, applied purposively and flexibly, favour granting standing.

(Emphasis added; citations omitted)

[35] I have added emphasis to the above passages from Downtown Eastside to reinforce that the flexible, discretionary, purposive approach that has been adopted applies only in public interest litigation. Similar developments have not occurred in private law proceedings. There are good reasons why this is so.

[36] First, the reasons for liberating standing requirements in public interest litigation do not apply in the same degree to private litigation. For example, there will invariably be greater justification for using public legal resources to address matters of public interest than there will be for using public legal resources to vindicate private interests that the parties affected are not seeking to vindicate.

[37] As well, public interest litigation tends to affect the interests of many, particularly where laws are being challenged. In contrast, the outcome of private litigation has a unique impact on those whose legal interests are directly affected by the litigation. They are therefore the ones who should carry out the litigation so that they can make decisions relating to the protection of their interests.

[38] Ms. Carroll's proposed action illustrates the point. She is suing for an investigation and for the passing of accounts without notice to the unitholders and has requested that unitholders be compensated. If she were to be granted standing, the private information of unitholders would be accessed for the lawsuit without their input. Further, if she were to be given standing to litigate, she would not only control the tactical choices made during litigation but would also have standing to settle the litigation. Despite her lack of personal legal interest in the outcome, she would be empowered to manage the litigation in ways that could potentially compromise the financial interests of the unitholders, who hold the personal legal interests in question.

[39] Finally, and most profoundly, the driving consideration in using flexible standing standards in public interest litigation does not apply to private litigation. Specifically, there is not the same concern that, without a flexible standing test, wrongdoing will effectively be immunized. In private law cases, if the parties with a personal legal interest that is affected by wrongdoing forego their right to sue or raise an issue, thereby immunizing the wrongdoing, this is a private matter, not one of public concern.

[40] Of course, where the private wrongdoing occurs in a regulated enterprise and contravenes the law, there will be a public interest in intervening, but that public interest is to be protected by regulatory enforcement, not through the surrogacy of civil suits initiated by strangers to the private rights at stake.

[41] Ms. Carroll has provided us with no authority applying the public interest standing principles articulated in Downtown Eastside to private interest standing. For the reasons I have provided, I am not persuaded that such crosspollination should start here. In my view, the refinement of the public interest standing principles in Downtown Eastside has not altered the law of private interest standing.

[42] If Ms. Carroll's position is the more modest one that the principles from Downtown Eastside should be applied exceptionally where a knowledgeable whistleblower seeks to launch a lawsuit to expose wrongdoing in a private institution, I am equally unpersuaded. I appreciate that it has long been recognized that there is a public interest in exempting whistleblowers from confidentiality obligations, so that they can expose misconduct that should be exposed in the public interest: Initial Services Ltd. v. Putterill, [1968] 1 Q.B. 396, [1967] 3 All E.R. 145 (C.A.). However, there is a difference between suppressing confidentiality obligations in the public interest, and empowering whistleblowers who have no legal interest in the outcome of litigation to initiate such litigation. There is good reason for the former but no reason for the latter. A whistleblower can expose misconduct without commencing private litigation involving the legal rights of others. As TD noted before us, subject to the law of privilege, nothing prevented Ms. Carroll from sharing her inside information with regulators, and there is nothing preventing her from sharing her intelligence with unitholders, or from appearing as a witness should the unitholders choose to sue.

[43] In my view, the motion judge considered the correct standing tests in determining whether Ms. Carroll had standing. She determined that the statutory standing provisions that govern standing to pass accounts do not apply, and she considered whether Ms. Carroll had a personal legal interest in the litigation that could support private interest standing. She also considered and correctly rejected Ms. Carroll's contention that her status as a knowledgeable whistleblower gave her standing to bring the application, or that more generous standing rules apply in breach of trust cases. I would therefore reject this ground of appeal.

C. Did the motion judge err by finding that Ms. Carroll had not pleaded facts establishing a prima facie case of standing?

[44] The party initiating civil proceedings has the burden of establishing their standing by pleading facts that would support standing: Polish National Catholic Church of Canada v. Polish National Catholic Church, 2014 ONSC 4501, at para. 41. Ms. Carroll has not pled facts that could disclose a prima facie case that the application she initiated would affect her personal legal interests. I would therefore dismiss this ground of appeal.

[45] As the motion judge found, Ms. Carroll was not a unitholder in the trust and had no financial interest in the outcome of the litigation she commenced, and despite her role as a whistleblower, she lacked a direct personal interest in the litigation. She pleaded no facts that could disclose a personal legal interest in the trusts that were allegedly breached.

[46] The motion judge was also correct in rejecting Ms. Carroll's contention that she could sustain a standing claim based on her potential liability as a constructive trustee. There are three possible avenues to personal liability as a constructive trustee:

• As a "knowing assister", who knowingly or wilfully blindly encouraged or assisted in a dishonest and fraudulent breach of trust: Air Canada v. M & L Travel Ltd. (1993), 15 O.R. (3d) 804, [1993] 3 S.C.R. 787, [1993] S.C.J. No. 118, at pp. 809-11 S.C.R.;
• As a "knowing receiver", who knowingly, or wilfully blindly, or with knowledge of facts which would put an honest person on inquiry, received trust property in their own capacity in breach of trust: Air Canada, at pp. 810-13 S.C.R.; or
• As a trustee de son tort, who assumed the role of trustee without proper appointment and then breached the trust: Air Canada, at pp. 808-809 S.C.R.

[47] The motion judge addressed the first avenue of potential liability, "knowing assistance", and dismissed it because there was no evidence before her that Ms. Carroll participated in any breaches of trust. Indeed, the pleadings before the motion judge maintained that Ms. Carroll made efforts to prevent and remedy any alleged wrongdoing.

[48] Ms. Carroll argues on appeal that, despite this, it is not plain and obvious that she would not be exposed to personal liability as a constructive trustee, given her role as a corporate officer of the Trustee at the time the maladministration occurred. I disagree. The motion judge was correct in finding that there was no foundation that could support Ms. Carroll's liability as a knowing assister. There was no need for the motion judge to address knowing receiver or trustee de son tort liability, as neither form of liability is even hinted at in the pleadings. Absolutely no suggestion is made that Ms. Carroll received trust property, and there is no indication that she assumed the role of trustee.

[49] In these circumstances, the fact that Ms. Carroll sought indemnity in her application does not provide a path for her standing. "It is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim": R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, 2011 SCC 42, at para. 22. Ms. Carroll has pled no facts that could support such relief.

[50] I would therefore reject Ms. Carroll's contention that the motion judge erred in finding that she had not pleaded facts establishing a prima facie case of standing. That decision was correct.

D. Did the motion judge err by failing to consider all aspects of the relief sought when determining Ms. Carroll's standing?

[51] Ms. Carroll argues that the motion judge erred by focusing entirely on whether she had standing to pass accounts, disregarding the other relief she requested. I would not give effect to this ground of appeal, either.

[52] First, I am not persuaded that the motion judge considered only the relief related to the passing of accounts. As just described, the motion judge considered the relief Ms. Carroll claimed in relation to her potential liability as a constructive trustee. The motion judge's careful decision is responsive to the arguments made. I would not be prepared to find that because the motion judge did not expressly mention some of the specific relief requested, she must have failed to consider that relief in coming to the decision that she did.

[53] In any event, the motion judge's holding that Ms. Carroll did not have statutory or private interest standing was correct and prevents Ms. Carroll from seeking any of the relief she claims. Even had the motion judge failed to consider all the relief requested, it would have made no difference to the outcome.

Conclusion

[54] I would dismiss the appeal. If agreement is not reached as to costs, I would invite the parties to provide costs submissions of no more than three pages, accompanied by bills of costs. The respondent is to provide their costs documentation within ten business days following the release of this decision. I would require the appellant to respond within five business days.

Appeal dismissed.

End of Document