Promise to sell property subject to future conditions triggers constructive trust: B.C. court

The British Columbia Court of Appeal has found that a party showed no clear intention to create an express trust in another party’s favour – whether express or implied, or whether by words or by acts.

In Virk v. Singh, 2022 BCCA 153, the appellant was a high priest’s assistant at a Sikh temple in India. In 1993, the respondent became the appellant’s “religious sister” due to her mental health struggles.

In 1998, the respondent and her former husband bought property in Surrey, BC. According to the appellant, he loaned the couple donation money to build their house, which which was to be paid back with interest. In 2001, the appellant purchased property neighbouring the couple’s Surrey home, which became the subject of the present appeal.

In 2003, the appellant and the respondent’s ex-husband had a falling-out. The appellant resolved to recover money that the former husband allegedly owed him. To this end, the appellant made false allegations and statements and forged documents, the court found. The appellant manipulated the respondent, who was emotionally vulnerable, into issuing false allegations and statements to assist him in his goal.

In 2004, the respondent and her spouse separated. The former husband brought a debt action to recover money that he allegedly loaned for the appellant to buy the next-door property. In 2005, the appellant urged the respondent to initiate a matrimonial action against her ex-husband.

In 2006, the appellant offered to give the respondent the subject property in exchange for $236,000 and her commitment to assist him in the debt action. The appellant and the respondent then signed wills that left all their property to each other. Upon the matrimonial action’s settlement in 2010, the respondent received approximately $230,000 after legal fees.

The respondent upheld her side of the agreement. For many years, she lived in the subject property, paid some of its expenses, maintained it, and improved it. However, the appellant never transferred the property to the respondent in line with their agreement.

The BC Supreme Court granted the respondent a constructive trust amounting to 70 percent of the subject property’s value increase from the time of the appellant’s false promise to her. The judge made the following findings:

• There was insufficient evidence that the appellant intended to part with his beneficial interest in the property
• There was no express trust because of this lack of certainty of intention
• The appellant was unjustly enriched.

The appellant appealed from the judge’s finding of unjust enrichment, the appropriateness of a constructive trust, and the quantification of that remedy. On cross appeal, the respondent argued that there was an express trust and, alternatively, that the constructive trust’s quantification was too low. She also made a claim of proprietary estoppel.

The BC Court of Appeal, dismissing the appeal and the cross appeal, found that the appellant demonstrated no clear intention to create an express trust for the respondent’s benefit. Rather, he promised to sell or transfer the subject property upon her fulfillment of future conditions.

Second, the judge was entitled to find that the tenancy agreement that the appellant presented was invalid and that the respondent’s occupation and use of the subject property did not constitute a juristic reason for enrichment, the appellate court ruled.

Third, the appellate court agreed with the trial judge’s conclusion that the parties used the respondent’s settlement money in the matrimonial action for the subject property. There was a sufficient connection between the amount of $230,000 and the property to justify the remedy of a constructive trust.

Fourth, the judge was entitled to impose a constructive trust instead of a monetary award, considering circumstances such as the appellant’s dishonest and litigious nature, the parties’ relationship, and the respondent’s close personal connection to the subject property, the appellate court held.

Fifth, the appellate court acknowledged that the judge’s reasons did not explain how she ended up quantifying the constructive trust at 70 percent of the property’s value increase, but found that the judge did the best she could. The remedy was equitable and was intended to do justice between the parties.

Lastly, the appellate court refused to consider the respondent’s claim of proprietary estoppel as she raised it for the first time on appeal. There were no exceptional circumstances to justify the appellate court’s exercise of discretion to address a new issue on appeal.