Rakunas v. Scenic Associates Limited,


2008 BCSC 444

Date: 20080416
Docket: L052403
Registry: Vancouver


Anne Thompson Rakunas



Scenic Associates Limited and Stephen Murphy


Before: The Honourable Madam Justice Russell

Reasons for Judgment

Counsel for Petitioner

C.N. Mangan

Counsel for Respondent Scenic Associates Limited

 C.L. Anderson-did not appear

Counsel for Respondent Stephen Murphy

C.M. Tribe

Date and Place of Hearing:

March 7, 2008

Vancouver, B.C.


[1]                The petitioner argues that the corporate respondent holds certain property in trust for her and the personal respondent.  She wishes to have this property sold and the proceeds split.  The personal respondent objects, saying that all three parties have but a fleeting connection to this jurisdiction and, thus, the court either has no jurisdiction over the matter or should decline it.  He further objects by saying that the property was never intended to be held in trust, but rather is an investment property held by the corporate respondent for business purposes.


[2]                The following facts provide a background to this dispute.

[3]                The petitioner, Anne Rakunas (“Rakunas”) and the respondent, Stephen Murphy (“Murphy”) were involved in a romantic relationship in the 1990s.  During that time, they resided in Hong Kong, Malaysia and Singapore.  In 1995, they decided to purchase a property in Whistler (the “Property”).  To effect this purchase, they incorporated a British Virgin Islands (“BVI”) corporation, the respondent Scenic Associates Limited (“SAL”), in which they became equal shareholders as well as officers and directors.  SAL had and has no other shareholders, officers or directors.  SAL was registered as an extra-provincial company in British Columbia on June 2, 1995 and acquired the Property on June 5, 1995.  The title to the Property shows SAL as the sole registered owner.  Rakunas and Murphy separated in 1998.  

[4]                Rakunas and Murphy give a somewhat different account of the purpose of incorporating SAL.  In her Amended Outline, Rakunas states that the “sole purpose for incorporating was to avoid tax liabilities that would be incurred if the Petitioner and the Respondent Murphy were to purchase in their own names” and their intention was for SAL to act as their trustee.  In her first affidavit sworn on September 12, 2005, Rakunas deposes that the Property “was purchased for investment purposes” with no intent for either Rakunas or Murphy to live in the Property, although “it was intended from the beginning by both myself and the Respondent Murphy” that SAL would hold legal title to the Property for them as beneficial owners.

[5]                In his affidavit sworn on September 6, 2006, Murphy deposes that the Property was incorporated for a number of business objectives, including:

1)          acquiring income generating assets;

2)          tax and succession planning;

3)          pursuing investment opportunities as they arose;

4)          protecting Rakunas and Murphy against claims against the assets and vice versa; and

5)          conducting business between Rakunas and Murphy so that any investments or assets would not be considered marital assets.

[6]                Murphy emphatically denies that either he or Rakunas had the intention that SAL would hold the Property in trust for anyone.

[7]                SAL purchased the Property using financing provided by a private Hong Kong bank.  Murphy provided the money for the down payment and Rakunas made mortgage payments from August 1995 to November 2001 to “equalize the capital investment” between herself and Murphy.  A key point of disagreement between Rakunas and Murphy is whether she made the mortgage payments directly to the lender or if she provided the funds to SAL by way of shareholder loans and SAL, in turn, made the mortgage payments.  In her second affidavit sworn on February 21, 2008, Rakunas exhibits documents indicating that she made the mortgage payments directly by transferring funds from her personal account to the lender.

[8]                Neither Rakunas nor Murphy spent much time at the Property and it was periodically rented to tourists.  Rakunas deposes that “restrictions on rentals has [sic] essentially eliminated any income generation of the Property” beginning in 1997.  However, exhibits to Murphy’s affidavit, specifically SAL’s income statements for 1995 through 2004 together with annual income and expense statements prepared by SAL’s property management company for 2001 through 2005, indicate that the Property has generated consistent revenue over the years, albeit suffering a net rental loss every year.

[9]                The Property has appreciated in value since its purchase.  Murphy’s “recollection” is that the Property was purchased for $495,000 in 1995.  As of August 4, 2006, the Property was assessed at $1.313 million.

[10]            Since Rakunas and Murphy separated in 1998, they have had little contact with each other.  Rakunas deposes that she has since married and lives in California.  Murphy deposes that he currently lives in Singapore and does not own any assets in British Columbia.

[11]            It appears that any property-related issues in the past several years have been dealt with by Murphy’s brother who resides in Canada.

[12]            Rakunas brings this proceeding by petition seeking the following relief:

6)              a declaration that SAL holds the Property in trust for herself and Murphy;

7)              a declaration that she is entitled to an undivided 50% equitable interest in the Property;

8)              an order that the Property be partitioned and sold, dividing the net proceeds between herself and Murphy; and

9)              an order that she have exclusive conduct of the sale of the Property on specified terms and subject to the Court’s approval unless consented to by all parties.

[13]            Murphy opposes Rakunas’ petition and brings an application to dismiss the proceeding on the following grounds:

10)          the Court lacks jurisdiction simpliciter over this matter;

11)          British Columbia is forum non conveniens;

12)          Rakunas lacks standing for the petition under the Partition of Property Act, R.S.B.C. 1996, c. 347 [the “PPA”]; and

13)          SAL does not hold the Property in trust for himself and Rakunas.

[14]            Murphy’s Notice of Motion dated April 18, 2006 indicates that his jurisdiction simpliciter argument relies on R. 14(6)(b) of the Rules of Court.

[15]            SAL has not filed any documents except a Response dated May 1, 2006.


[16]            As the jurisdiction issues present a threshold for Rakunas’ petition, I will deal with them first.


Murphy’s Submissions

[17]            Murphy argues that the Court lacks jurisdiction simpliciter over this matter because there is no real and substantial connection between British Columbia and the parties to or the subject matter of the proceeding and that Rakunas has tendered no evidence to prove otherwise: Cook v. Parcel, Mauro, Hultin & Spaanstra P.C. (1997), 31 B.C.L.R. (3d) 24 ¶20-22 (C.A.).  Murphy says that once he has challenged the ex juris service on him under R. 13(1), the burden rests on Rakunas to present a good an arguable case that ex juris service “falls within the appropriate subsections of R. 13(1)”: GWL Properties v. W.R. Grace & Co. (1990), 50 B.C.L.R. (2d) 260 ¶7 (C.A.)

[18]            Murphy further argues that even if Rakunas proves that the ex juris service is valid under R. 13(1), the court nevertheless lacks jurisdiction simpliciter because of a lack of real and substantial connection: Global Light Telecommunications Inc. v. GST Telecommunications Inc. (1999), 33 C.P.C. (4th) 206 ¶21 (B.C.S.C.). Specifically, Murphy argues that the following factors demonstrate a lack of real and substantial connection:

·         none of the parties is ordinarily resident in British Columbia;

·         SAL is a BVI corporation with only a “nominal presence in British Columbia for the sole purpose of conducting business in British Columbia” and extra-provincial registration does not “necessarily mean” real and substantial connection: Procon Mining and Tunnelling Ltd. v. Wady Lake Resources Ltd., 2002 BCSC 129 ¶35; and

·         the proceeding is a shareholder dispute – a matter of corporate governance within SAL, a foreign company.

[19]            Murphy then relies on Procon for the definition of forum non conveniens and the relevant factors.  He argues that British Columbia is not the best forum to adjudicate this dispute for the following reasons:

·         neither he nor Rakunas resides in British Columbia and SAL has only a “nominal” presence here;

·         SAL’s corporate affairs are governed by BVI law;

·         SAL’s articles provide for arbitration of corporate disputes under BVI law; and

·         the bulk of documentary evidence is located in California where Rakunas, SAL’s secretary, resides.

[20]            Notably, Murphy does not suggest a forum conveniens for this proceeding.

[21]            In an alternative not raised in its pleadings, Murphy also argues that the Court lacks jurisdiction because disputes between him and Rakunas, as shareholders of SAL, are subject to a mandatory arbitration clause in SAL’s articles.

Rakunas’ Submissions

[22]            Rakunas argues that this Court has jurisdiction simpliciter and British Columbia is the most appropriate forum.  In particular, she argues that although the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (the “CJPTA”) came into force in May 2006 after the pleadings were filed, it is applicable to this action because the Court of Appeal held in Lombard General Insurance Co. of Canada v. Cominco Ltd., 2007 BCCA 249, leave to appeal all’d [2007] S.C.C.A. No. 322, that the CJPTA provides guidance reconcilable with the common law principles.

[23]            Rakunas argues that the fact the remedy she seeks concerns real property in British Columbia prima facie gives this Court jurisdiction simpliciter under both the common law principles and s. 10(a) of the CJPTA.  She relies on Hormandinger v. Bender-Hormandinger, 2007 BCSC 949 ¶22-23 and 28, where the court found that the CJPTA gave it jurisdiction simpliciter over a constructive trust claim concerning real property located in British Columbia, even though the parties themselves were resident and obtained a divorce in Germany.  She also cites Lauser v. Lauser (1993), 2 E.T.R. (2d) 243 ¶8 (B.C.S.C.), where the court referred to the following “general rule”:

The general rule is that the courts of a country have no jurisdiction to adjudicate on the right and title to lands not situate within its borders. Only the courts of the jurisdiction in which lands are situate may adjudicate on the right and title to such lands: Duke v. Andler, [1932] S.C.R. 734, [1932] 4 D.L.R. 529 [B.C.]. The rule is not confined to the formalities of transfer of title, but extends to all disputes touching the land, including debt, trust or tort ...

[24]            Rakunas notes that pursuant to ss. 3(e) and 7 of the CJPTA, this court has jurisdiction over a company with a registered office in British Columbia.  She also notes that Global Telecommunications, cited by Murphy, indicates that companies registered in British Columbia are considered to be resident here.  Thus, she argues, both are arguing about the status of the Property’s registered owner, SAL, which is resident in British Columbia.

[25]            She then argues the following reasons why British Columbia is the most convenient forum:

·             remedies obtained in other jurisdictions would not be enforceable against the Property;

·             the law of British Columbia applies to the Property and to SAL as a registered extra-provincial corporation;

·             there is no other forum with a connection to the Property;

·             neither of the jurisdictions where Rakunas or Murphy resides has a connection to the Property or provides a better forum; and

·             any jurisdiction will require travel and expenses.

[26]            She also notes that because there are no parallel proceedings, issues of comity do not arise.  Thus, she argues, Murphy has not fulfilled the burden to show that British Columbia is an inappropriate jurisdiction and that “there is another forum which is clearly or distinctly more appropriate”: Lombard, ¶56.


Jurisdiction Simpliciter

[27]            At the outset, I note that Lombard, relied on by Rakunas, does not really address the general question of applicability of the CJPTA to actions commenced before it came into force.  While Newbury J.A. commented at ¶55 that the CJPTA simply codified, rather than substantially changed, forum non conveniens rules, she also noted that it effected some “substantive” changes to jurisdiction simpliciter rules.  As the case did not involve jurisdiction simpliciter, she did not comment on the retroactive applicability of those changed rules.  However, the same question was addressed by Melnick J. in Courcelles Estate v. Investors Group Financial Services Inc., 2006 BCSC 882, where he held that CJPTA has an immediate application:

22        Since the application was based upon the jurisdiction of the court and not Rule 19(24), I feel it is necessary to comment further. I have determined the disposition of this matter with the recent enactment of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (the "CJPTA"), in mind. The CJPTA came into force after the hearing of this matter and therefore the parties did not make submissions on its application in argument before me. In my view, the CJPTA is of immediate application (as the term is described by Ruth Sullivan in Sullivan and Dreidger on the Construction of Statutes, 4th ed. (Markham: Butterworths, 2002) at 550 and 582-591), and it applies to the disposition of this matter notwithstanding the fact that it was enacted after the action was commenced.

[Emphasis added]

[28]            This conclusion was followed by Shabbits J. in Tecnet Canada Inc. v. Unisys Canada Inc., 2006 BCSC 1321 ¶11, and cited with implicit approval by Tysoe J.A. in MTU Maintenance Canada Ltd. v. Kuehne & Nagel International Ltd., 2007 BCCA 552 ¶10.  Therefore, in this proceeding I will decide the jurisdictional questions in accordance with the provisions of the CJPTA.  For the reasons set out below, I find that this Court has jurisdiction simpliciter (or territorial competence in the parlance of the CJPTA) over this proceeding.

[29]            First and foremost, this proceeding concerns an interest in real property situated in British Columbia.  While it may be that the proceeding involves a dispute between shareholders of an extra-provincial company, the ultimate subject matter of the dispute is the Property.  Under the well-established common law principles cited by Rakunas, this fact gives this Court jurisdiction simpliciter over the proceeding.  Moreover, as argued by Rakunas, the same result follows from ss. 3(e) and 10(a) of the CJPTA, which read:

3          A court has territorial competence in a proceeding that is brought against a person only if

(e)        there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based.

10        Without limiting the right of the plaintiff to prove other circumstances that constitute a real and substantial connection between British Columbia and the facts on which a proceeding is based, a real and substantial connection between British Columbia and those facts is presumed to exist if the proceeding

(a)        is brought to enforce, assert, declare or determine proprietary or possessory rights or a security interest in property in British Columbia that is immovable or movable property…

[30]            While s. 10 establishes a rebuttable presumption of real and substantial connection, neither Murphy nor SAL has rebutted this presumption.

[31]            Second, the court has jurisdiction over this proceeding because it has jurisdiction over SAL under ss. 3(d) and 7 of the CJPTA, which read:

3          A court has territorial competence in a proceeding that is brought against a person only if

(d) that person is ordinarily resident in British Columbia at the time of the commencement of the proceeding, or

7          A corporation is ordinarily resident in British Columbia, for the purposes of this Part, only if

(a)  the corporation has or is required by law to have a registered office in British Columbia,

(b)  pursuant to law, it

(i)     has registered an address in British Columbia at which process may be served generally, or

(ii)    has nominated an agent in British Columbia upon whom process may be served generally,

(c)  it has a place of business in British Columbia, or

(d)  its central management is exercised in British Columbia

[32]            On the facts of this case, SAL falls under paragraphs (a), (b)(i) and (c) of s. 7: (a) – it is registered in British Columbia; (b)(i) – it has a registered address in British Columbia at which it may be served; and (c) – it has a place of business in British Columbia, namely, its chief business asset – the Property.  Thus, it is ordinarily resident in British Columbia and subject to the territorial competence (jurisdiction simpliciter) of this Court pursuant to s. 3(d) of the CJPTA.

[33]            Finally, this Court has jurisdiction over this proceeding under s. 3(b) of the CJPTA, which reads:

3          A court has territorial competence in a proceeding that is brought against a person only if

(b)    during the course of the proceeding that person submits to the court’s jurisdiction,

[34]            Under the common law, participation in the court’s process may be sufficient for a party to submit (attorn) to the court’s jurisdiction.  As was explained by Cumming J.A. in Jordan v. Schatz, 2000 BCCA 409 ¶16-17, merely accepting ex juris service or filing an appearance does not always have this effect:

16        Conduct by the defendant may certainly clothe the court with jurisdiction that it would not otherwise have. The question of attornment is fact-driven, and a defendant may attorn without even intending to: see First National Bank of Houston v. Houston E & C Inc., [1990] 5 W.W.R. 719 (B.C. C.A.).

17      However, in the circumstances of this case, I conclude that mere acceptance of service ex juris does not amount to conduct amounting to submission to this forum. The authorities are clear that a defendant may be served out of the jurisdiction and even enter an appearance without necessarily attorning. In Church of Scientology of California v. World Federation for Mental Health Inc., [1981] 5 W.W.R. 74 (B.C. C.A.) this Court rejected the plaintiff's argument that the defendant attorned because it delayed applying to have service set aside after being served and entering an appearance. The Court noted, at p. 76, that:

The appellant does not contend that simply by entering an appearance that the defendant attorned to the jurisdiction, but says that the defendant must be considered to have done so by virtue of the fact that it did not move at an early stage to seek a declaration open to it pursuant to the provisions of R. 14(6)...

While in many circumstances it may be desirable that an application be made on the one side or the other at an early stage, I am not prepared to conclude that in the circumstances of the present case the defendant should be held to have attorned to the jurisdiction by virtue of the fact that no application was made prior to the trial.

[35]            However, since the decision in Jordan , R. 14(6.4) was enacted by B.C. Reg. 198/2003, s. 3, establishing specific rules for when a party does not submit to the court’s jurisdiction despite entering an appearance:

(6.4)     If, within 30 days after entering an appearance in a proceeding, a party of record delivers a notice of motion under subrule (6) (a) or (b) or (6.2) to the other parties of record or files a pleading referred to in subrule (6) (c),

(a) the party does not submit to the jurisdiction of the court in relation to the proceeding merely by filing or delivering any or all of the following:

(i)         the appearance;

(ii)        a pleading under subrule (6) (c);

(iii)       a notice of motion and supporting affidavits under subrule (6) (a) or (b), and

(b) until the court has decided the application or the issue raised by the pleading, the party may, without submitting to the jurisdiction of the court,

(i)         apply for, enforce or obey an order of the court, and

(ii)        defend the action on its merits.

[36]            In this proceeding, SAL entered an Appearance on October 28, 2005, but did not take any other steps in this proceeding.  It did not avail itself of R. 14(6) and (6.4) to dispute the court’s jurisdiction.  In other words, it has submitted to the court’s jurisdiction pursuant to s. 3(b) of the CJPTA.  Therefore, not only does this Court have jurisdiction simpliciter over the immovable property that is the subject matter of this claim – the Property, but it also has jurisdiction over the registered owner of the Property – SAL.

[37]            With respect to Murphy, the question of attornment is somewhat more complex.  Murphy entered an Appearance on March 17, 2006.  On April 18, 2006, he filed a Notice of Motion relying on R. 14(6)(b), which provides:

(6)        A party who has been served with an originating process in a proceeding, whether served with the originating process in that proceeding in or outside of British Columbia, may, after entering an appearance,

(b) apply to dismiss or stay the proceeding on the ground that the court does not have jurisdiction over that party in respect of the claim made against that party in the proceeding, or

[Emphasis added]

[38]            Prima facie, Murphy has complied with R. 14(6.4) and has not submitted to the jurisdiction of this Court by defending the action on its merits.  However, I question the extent to which R. 14(6)(b) is truly applicable to Murphy’s situation.  Specifically, I question whether this proceeding involves a “claim made against” Murphy.  Rakunas alleges that SAL is a bare trustee holding the Property in trust for Murphy and Rakunas, each of whom holds an equal beneficial interest in the Property.  Thus, this proceeding is really brought against SAL qua trustee and not against Murphy, who is alleged to be a beneficiary of the same sort as Rakunas and from whom no relief is sought.  In fact, as provided by R. 5(17) and (18), in the absence of a court order Murphy did not even have to be included in this proceeding.

(17)      A proceeding may be brought by or against trustees or personal representatives without joining a person having a beneficial interest in the trust or estate and, unless the court otherwise orders on the ground that the trustees or personal representatives could not or did not represent the interest of that person, an order granted or made in the proceeding is binding on that person.

(18)      Subrule (17) does not limit the power of the court to order a person having an interest to be made a party or to make an order under subrule (14).

[39]            Thus, the court’s jurisdiction over this proceeding is unaffected by the question of whether it has jurisdiction over Murphy personally.  If Rakunas succeeds in her claim, any order made against SAL as a trustee (if it is found to be a trustee) will be binding on Murphy irrespective of whether he has submitted to the court’s jurisdiction.  As this issue was not specifically raised by the parties, I do not rely on it to establish jurisdiction simpliciter.  However, it further militates towards the conclusion that numerous factors establish a real and substantial connection between British Columbia and the parties to, and the subject matter of, this proceeding.

[40]            To summarize, I find that that this Court has jurisdiction simpliciter over this proceeding.  Murphy’s application to dismiss or stay the proceeding under R. 14(6)(b) is dismissed.

Forum Non Conveniens

[41]            Rakunas correctly points out that Murphy has not argued a key aspect of the forum non conveniens: a better forum in which to litigate this action. This is clearly required under s. 11(1) of the CJPTA, which reads:

11  (1)  After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.

[42]            Also, under common law, as discussed by Newbury J.A. at ¶56 of Lombard:

56        Section 11(1) requires the court to consider whether the court of another state is "a more appropriate forum" for the proceedings and s. 11(2) refers to whether the domestic or foreign court is "the more appropriate forum". This conforms broadly to the common law of forum non conveniens as adopted (from Scottish law) by the House of Lords in the seminal 1986 decision of Spiliada Maritime Corp. v. Cansulex Ltd., [1986] 3 All E.R. 843 (U.K. H.L.). There, their Lordships reviewed the Scottish authorities and summarized the law with respect to the granting of a stay on that ground as follows:

(c) The question being whether there is some other forum which is the appropriate forum for the trial of the action, it is pertinent to ask whether the fact that the plaintiff has, ex hypothesi, founded jurisdiction as of right in accordance with the law of this country, of itself gives the plaintiff an advantage in the sense that the English court will not lightly disturb jurisdiction so established ...

...  In my opinion, the burden resting on the defendant is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum. In this way, proper regard is paid to the fact that that jurisdiction has been founded in England as of right ...; and there is the further advantage that on a subject where comity is of importance it appears that there will be a broad consensus among major common law jurisdictions. ...

[Emphasis in Lombard]

[43]            Therefore, Murphy’s application to stay or dismiss the proceeding on the grounds that British Columbia is forum non conveniens is dismissed.

Mandatory Arbitration Clause

[44]            The issue of a mandatory arbitration clause contained in SAL’s articles was not pled by Murphy in his Notice of Claim dated April 18, 2006 or in Part III of his Outline dated March 1, 2008.  As it appears, the first time this argument was raised was in Murphy’s written submissions dated March 7, 2008.  As it was not raised in the pleadings, Murphy cannot rely on this argument.

[45]            However, I also note that even if the arbitration issue were raised in the pleadings, it would not have changed the outcome of Murphy’s application.  The relevant provision reads as follows:

151      Whenever any difference arises between the Company on the one hand and any of the members or their executors, administrators or assigns on the other hand, touching the true intent and construction or the incidence or consequences of these Articles or of the Act, touching anything done or executed, omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to 2 arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering on the reference appoint an umpire.

[46]            First, I question whether the claim brought by Rakunas against SAL qua trustee really concerns a difference between Rakunas and SAL “touching the true intent and construction or the incidence or consequences of these Articles or of the Act, touching anything done or executed, omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company.”  It is my view that since Rakunas is alleging the existence of a trust between her and SAL, her rights qua beneficiary to sue the company qua trustee are entirely separate from her rights and obligations qua shareholder, to which the above provision would apply.

[47]            Second, under the principles elucidated by our Court of Appeal in Old North State Brewing Co. v. Newlands Services Inc. (1998), 58 B.C.L.R. (3d) 144 (C.A.), BC Rail Partnership v. Standard Car Truck Co., 2003 BCCA 597, the above provision is not an exclusive forum selection clause that would lead this Court to decline jurisdiction and stay this proceeding.  While the above provision may have an air of exclusivity, it is missing the same essential element as Murphy’s forum non conveniens argument: a reference to a forum where the issue is to be litigated.

Trust Claim

Rakunas’ Submissions

[48]            The crux of Rakunas’ submissions is that she and Murphy are the beneficiaries of the resulting trust in the Property. The resulting trust arose because she and Murphy made contributions to the purchase of the Property without corresponding compensation.

[49]            As an example of a situation where a court found a resulting trust in a property held in a corporate name, Rakunas cites Sandor v. Hamilton, [1991] B.C.J. No. 4075 ¶15-16 (S.C.):

15        It would appear that s. 4 (supra) of the Partition of Property Act is broad enough to give the court power to make the declaration if it is "with a view to an order for partition."

16      While I refuse to grant partition at this time, it could well be sought later and thus it would be unfortunate to send the parties away without making such a declaration if justified. Alternatively the parties would have to commence a separate action claiming such a declaration. I conclude it is in the interest of the parties that I declare that the evidence clearly demonstrates that such a declaration is justified. The partners' original contribution to the purchase price of the lands and premises and their subsequent maintenance of a bank account and shared expenses and distribution of rents according to their respective interests clearly demonstrates their intention. It is trite law that a contribution to the purchase price will generally cause the court to find a resulting trust.

[Emphasis added]

[50]            Rakunas also cites Carlton v. Goodman, [2002] EWCA Civ 545 ¶22(ii)-(iii) and 36-37, where the law of resulting trusts was “comprehensively canvassed”:

22      … I turn to the fundamental principles described from over 200 years of case law (including the above cases) and apply them to the facts of this case.

ii)           As there was no express declaration of the trusts of the beneficial interests, either in the Transfer or in any other document, it is necessary to ascertain whether beneficial interests have been created in an informal way allowed by equity, such as a resulting, implied or constructive trust…

iii)           The beneficial interests under a resulting trust are ascertained by the process of identifying the person who provided the purchase money to acquire the property and, if more than one person is identified as having done so, by ascertaining the respective amounts provided. As held in Dyer v. Dyer (1788) 2 Cox 92 at p. 93, “the trust of a legal estate results to the man who advances the purchase-money…It is the established doctrine of a Court of equity, that this resulting trust may be rebutted by circumstances in evidence.” See also Walker v. Hall [[1984] FLR 126 ] …

. . .

36      I start with Pettitt v Pettitt [1970] A.C. 777. Lord Upjohn said at pp. 813-4 that:-

“. . .

In the first place, the beneficial ownership of the property in question must depend upon the agreement of the parties determined at the time of its acquisition. If the property in question is land there must be some lease or conveyance which shows how it was acquired...

But the document may be silent as to the beneficial title. The property may be conveyed into the name of one or other or into the names of both spouses jointly in which case parol evidence is admissible as to the beneficial ownership that was intended by them at the time of acquisition and if, as very frequently happens as between husband and wife, such evidence is not forthcoming, the court may be able to draw an inference as to their intentions from their conduct. If there is no such available evidence then what are called the presumptions come into play. …

… It is far more likely to be solved by the doctrine of resulting trust, namely, that in the absence of evidence to the contrary if the property be conveyed into the name of a stranger he will hold it as trustee for the person putting up the purchase money and if the purchase money has been provided by two or more persons the property is held for those persons in proportion to the purchase money that they have provided.

My Lords, all this is trite law but I make no apology for citing the judgment of Eyre C.B. in 1788 in the leading case of Dyer v Dyer (1788) 2 Cox, Eq Cas 92, 93, 94 set out in full in White and Tudor’s Leading Cases in Equity 9th Ed. (1928), Vol. 2, 749 –

“The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successive – results to the man who advances the purchase-money. That is the general proposition, supported by all the cases, and there is nothing to contradict it; and it goes on a strict analogy to the rule of the common law, that where a feoffement is made without consideration, the use results to the feoffor. It is the established doctrine of a Court of Equity, that this resulting trust may be rebutted by circumstances in evidence.

. . .”

37      Next I move to Westdeutsche Bank where Lord Browne-Wilkinson said at p.708A:-

“Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contribution. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer: see Underhill and Hayton, Law of Trust and Trustees pp.317 et seq.; Vandervell v Inland Revenue Commission [1967] 2 A.C. 291, 312 et seq. In Re Vandervell’s Trusts (No. 2) [1974] Ch. 269, 288 et seq. …

[51]            Rakunas argues that because she advanced her own funds to purchase the property, the presumption of resulting trust arises.  Moreover, she advances a number of factors which she claims prevent rebuttal of this presumption:

·             SAL has made no contribution to the Property;

·             SAL operates at a loss and is not engaged in active business; and

·             the Property was purchased for personal reasons rather than as a business investment, as is supported by:

o            the Property was purchased by the parties while in a romantic relationship;

o            the purchase required the parties’ personal guarantees;

o            members of Murphy’s family who have no connection to SAL made contributions to the Property; and

o            references to the Property by members of Murphy’s family indicate that they considered it to be the parties’ personal rather than business property.

[52]            In an apparent alternative, Rakunas argues that SAL holds the property upon a constructive trust for the benefit of herself and Murphy.  She argues that this constructive trust arises because of an unjust enrichment of SAL at her expense without a corresponding juristic reason: Schnogl v. Balzicevic, 2005 BCCA 575.  She argues that a constructive trust over the Property is appropriate because the contributions relate directly to the Property.

[53]            Rakunas argues that the PPA allows the court to make an order to compel the sale of the Property.  She argues that because she has a beneficial interest in the Property upon a resulting or constructive trust, she and Murphy are both “interested in … land” pursuant to s. 2 of the PPA which reads:

2    (1)  All joint tenants, tenants in common, coparceners, mortgagees or other creditors who have liens on, and all parties interested in any land may be compelled to partition or sell the land, or a part of it as provided in this Act.

(2)        Subsection (1) applies whether the estate is legal or equitable or equitable only.

[54]            She argues that the circumstances of this case fall within s. 7 of the PPA, which reads:

7    In a proceeding for partition where, if this Act had not been passed, an order for partition might have been made, and if it appears to the court that because of the nature of the property involved, or of the number of parties interested or presumptively interested in it, or of the absence or disability of some of those parties, or of any other circumstance, a sale of the property and a distribution of the proceeds would be more beneficial for the interested parties than a division of the property, the court may

(a) on the request of any of the interested parties and despite the dissent or disability of any other interested party, order a sale of the property, and

(b) give directions.

[55]            In particular, she notes the following factors supporting a sale:

·         the Property fails to generate any income;

·         the Property is not inhabited by either party; and

·         she remains personally liable for the property via the personal guarantee provided to the mortgagee despite the termination of her romantic relationship with Murphy, her inability to contact him and his apparent failure to make the mortgage payments.

[56]            She further argues that s. 8 of the PPA also provides an appropriate remedy in this case, ordering the sale of the Property unless Murphy offers to purchase her interest:

8  (1)    In a proceeding for partition where, if this Act had not been passed, an order for partition might have been made, then if any party interested in the property involved requests the court to order a sale of the property and a distribution of the proceeds instead of a division of the property, the court may order a sale of the property and give directions.

(2)        The court may not make an order under subsection (1) if the other parties interested in the property, or some of them, undertake to purchase the share of a party requesting a sale.

(3)        If an undertaking is given, the court may order a valuation of the share of the party requesting a sale in the manner the court thinks fit, and may give directions.

[57]            Rakunas notes that in Sandor, the court refused to grant a partition and sale order because it was unable to ascertain the full effect of the sale on the business.

[58]            Rakunas also argues that R. 43 gives this Court the power to order the sale of the Property because it is necessary or expedient, independently of other statutes: Reilly v. Reilly (1992), 74 B.C.L.R. (2d) 101 ¶24-31 (C.A.).  She notes that the rule provides a wide scope of authority for the court and can supplement the PPA: Sun Life Savings & Mortgage Corp. v. Sampson (1991), 59 B.C.L.R. (2d) 355.

[59]            Rakunas argues that expedience, resulting advantage to all parties, dictates that the Property should be sold.  In particular, she argues that the following factors support her request:

·             no other jurisdiction is able to make this order;

·             she no longer wishes to be responsible for mortgage payments on the Property;

·             Murphy has failed to make the mortgage payments;

·             SAL is operating at a loss and has no funds to maintain the property;

·             selling the property would conclusively and expediently sever connection between the parties, which was practically severed many years ago; and

·             it is necessary for a third party (the court) to intervene because of Murphy’s unreasonable actions and refusal to communicate with her.

Murphy’s Submissions

[60]            The crux of Murphy’s argument is that Rakunas is a shareholder of SAL and has no standing to seek relief under the PPA; and that SAL is not a bare trustee under a resulting or constructive trust.

[61]            Murphy argues that when a corporation owns land, its shareholders are not parties interested in land under s. 2 of the PPA: Sherk v. Smith, 2007 BCSC 1309.  He further states that referring to basic corporate law principles, all property transferred to a corporation becomes its assets and shareholders lose any interest in that property: Salomon v. Salomon & Co, [1897] A.C. 22 (H.L.); Kosmopoulos v. Constitution Insurance Co., and [1987] 1 S.C.R. 2; and Seville Properties Ltd. v. Coutre, 2005 BCSC 1105.

[62]            Thus, he argues that Rakunas has no standing to bring the application for the sale of the Property under the PPA or R. 43.

[63]            Furthermore, he argues that SAL is not a trustee for the Property because there is nothing in writing to comply with s. 59(3) of the Law and Equity Act, R.S.B.C. 1996, c. 253 (the “LEA”), which reads:

(3)        A contract respecting land or a disposition of land is not enforceable unless

(a) there is, in a writing signed by the party to be charged or by that party's agent, both an indication that it has been made and a reasonable indication of the subject matter,

(b) the party to be charged has done an act, or acquiesced in an act of the party alleging the contract or disposition, that indicates that a contract or disposition not inconsistent with that alleged has been made, or

(c) the person alleging the contract or disposition has, in reasonable reliance on it, so changed the person's position that an inequitable result, having regard to both parties' interests, can be avoided only by enforcing the contract or disposition.

[64]            Murphy argues that Rakunas has provided no “evidence of any kind that there is an express or resulting trust”.  Specifically, he argues that there are no written documents evidencing the creation of the alleged trust or the powers or responsibilities as SAL qua trustee.

[65]            Murphy further argues that there is no evidence proving elements of unjust enrichment.  He argues that SAL acquired the property using financing it obtained from an arms’ length lender and from its shareholders via shareholder loans.

[66]            Murphy also suggests that the “evidence is clear and unrefuted that the parties have acted in a manner inconsistent with there being a trust”, because all contributions were made only by way of purchasing SAL shares or by way of shareholder loans.  He further states that SAL and its shareholders have not acted as a single economic unit and the funds used to acquire the Property were recorded as shareholder loans.  He argues that the evidence of distinct economic units negates the allegation that the Property is held in trust: Meditrust Healthcare Inc. v. Shoppers Drug Mart (2002), 61 O.R. (3d) 786 ¶31 (C.A.) and Davies, Gower and Davies’ principles of Modern Company Law, 7th ed. (Carswell, London: 2003) at 184.


[67]            At the outset, I make two conclusions with respect to Murphy’s submissions.  First, his argument that Rakunas lacks standing under the PPA because she is a shareholder of SAL is predicated on his second argument, that SAL is not a trustee holding the Property in trust for him and Rakunas.  If the Property is, in fact, held by SAL in trust for Murphy and Rakunas, then she brings this application qua beneficiary rather than qua shareholder and, thus, has prima facie standing.  Second, there is no merit in Murphy’s argument based on s. 59(3) of the LEA as it fails to consider s-s. (1) of the same section, which reads:

59  (1)  In this section, "disposition" does not include

(a) the creation, assignment or renunciation of an interest under a trust, or

(b) a testamentary disposition.

[Emphasis added]

[68]            Because Rakunas is claiming an existence of a beneficial interest in the Property, i.e. an “interest under a trust”, s. 59(1) excludes the creation of this interest from the requirements of s. 59(3).

[69]            It is clear from the parties’ submissions that the key issue in this case is whether or not the purchase of the Property was financed by way of shareholder loans.  If it was, then Rakunas’ argument for a resulting or constructive trust is prima facie unsupportable in the face of what looks like a regular corporate transaction.  However, if the Property was acquired by way of payments made by Rakunas and Murphy to SAL or the mortgagee without corresponding compensation, promissory notes or timely documentation of shareholder’s loans, then the resulting trust and unjust enrichment arguments are likely to have significant merit.  Having said that, I cannot make any findings on this subject on the evidence before me because of conflicts and uncertainties in the parties’ affidavits.  For example:

·         Murphy alleges in his affidavit that he does not have access to important documents, such as “documents regarding the acquisition of the Property” and “documents regarding the accounts of the Company”, because they are “held by the Petitioner, as secretary of the Company”.  Although Rakunas has not expressly denied these assertions, they are at least impliedly contradicted by the fact that Murphy apparently has access to some of SAL’s detailed financial records, including its tax returns exhibited in the affidavit of Bill Cox, SAL’s accountant, but there may be other relevant documents not currently available to him.

·         While Murphy claims that Rakunas has not made any payments to SAL or third parties on behalf of SAL since 2001, he does not contradict her evidence that she made payments directly to the mortgagee until at least February 2001.

·         Mr. Cox acknowledged in his affidavit that he has been hired by SAL on a “compilation engagement” and does not “audit, review or

otherwise verify the information” provided to him.  His only evidence of shareholder loans was that they were recorded in SAL’s tax returns.  I also note that his engagement began in 1999, after the parties had ceased to be romantically involved.

[70]            All in all, I cannot evaluate credibility and make the necessary findings of fact on the conflicting and incomplete affidavit evidence before me.  If the parties wish to continue this matter, they will have to do so by placing it on the trial list to deal with the remaining and central issues.  Rights of discovery may assist the parties in narrowing the issues between them.

[71]            In summary, I find that this court has jurisdiction simpliciter.  Murphy’s application to stay or dismiss the proceeding on the grounds that British Columbia is forum non conveniens is dismissed.  I dismiss as well that part of Murphy’s application in which he asserts that the mandatory arbitration clause is an exclusive forum selection clause that would lead this Court to decline jurisdiction and stay this proceeding.

[71]      Costs will be in the cause.


Madam Justice Loryl D. Russell