Background: Westpoint Investment Trust (WIT), a mutual fund trust, invested in mortgage and real estate assets. BDO Canada Limited was appointed as the Judicial Trustee in 2019.
Issue: The Judicial Trustee proposed a distribution of Trust funds, opposed by various noteholders, including Roberts and other Contesting Noteholders.
Arguments:
- Roberts (Redeeming Shareholder):
- Claimed his Redemption Note should be prioritized as he sought redemption before the trust’s reorganization.
- Alternatively, supported the proposed distribution if under the Amended and Restated Declaration of Trust (A&R Declaration).
- Argued that other claims were statute-barred under the Limitations Act.
- Contesting Noteholders:
- Argued the distribution violated the pari passu principle (equal treatment of creditors in insolvency).
- Claimed the Trust was insolvent and in liquidation, requiring pro rata distribution.
Decision:
- The court found Roberts' Redemption Note subject to the A&R Declaration and dismissed the Limitations Act defense.
- Recognized that the Trust was in liquidation and ruled that all Trust Notes must rank pari passu, requiring equal treatment among all Trust Noteholders regardless of issue dates.
- No amount specified for costs/award.
Conclusion: The Judicial Trustee must distribute funds equally among all Trust Noteholders as per the A&R Declaration.
