[1]               On the brink of a 10-day trial, Yvette Werenka (Werenka) settled a lawsuit brought against her by Transtrue Vehicle Safety Inc (Transtrue). Twelve days later, she made an assignment into bankruptcy.

[2]               Werenka’s trustee in bankruptcy, Exelby & Partners (Trustee), seeks a declaration that the settlement of the lawsuit (Settlement) is a preference prohibited by s 95 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, as amended (BIA). In turn, Transtrue claims that the money Werenka intended to fund the Settlement is impressed with a trust in its favour, and seeks declaratory relief to that effect.

[3]               Transtrue concedes that if it does not succeed in establishing a trust, the evidence supports the Settlement being declared a prohibited preference.

[4]               Werenka and Terry Booth (Booth) were the indirect shareholders of Transtrue. Werenka was also a director, officer and key employee.

[5]               Werenka and Booth’s relationship soured. Their attempts at exit strategies failed, and they ended up seeking the Court’s help. The result was a Court Ordered sealed bid tender to buy each other’s shares. The Order also contemplated this eventuality if they could not agree on closing adjustments:

[6]               Werenka, Booth submitted bids. Booth’s bid prevailed. Werenka and Booth could not agree on the closing adjustments. Booth claimed that they were $652,807.12 in his favour, $180,000.00 of which he claimed Werenka had misappropriated. They dealt with their stalemate by another Court attendance that resulted in an Order for Booth to pay 25% of the purchase price ($162,571.70) into trust “pending resolution of the matter between the parties or further Order of this Court” (Adjustment Fund).

[7]               Later, Booth claimed to unearth more financial irregularities and Transtrue commenced the lawsuit seeking damages for alleged misappropriation ($565,476.00), additional accounting fees ($25,000.00), other accounting costs ($7,980.00), punitive damages ($500,000.00) and solicitor-client costs (Action). Transtrue also registered a certificate of lis pendens against the title to Werenka’s house (CLP). Werenka defended and counterclaimed adding Booth as a defendant by counterclaim and alleging malicious prosecution. The parties subsequently amended their pleadings, but the thrust of their allegations, the remedies they sought, and their respective denials of wrongdoing remained the same.

[8]               Next, Werenka wanted to sell her house. Transtrue agreed to discharge the CLP on condition that she would pay the net sale proceeds into Court. A Court Order issued which provided for the Clerk of the Court to hold those proceeds “pending further Order of this Court or agreement of the parties”. Werenka deposited $91,084.82 with the Clerk (CLP Fund).

[9]               Five days before the trial of the Action, Werenka offered to settle by having Transtrue take the Adjustment and CLP Funds ($253,656.52), a mutual release (with no admission of fraud by her), and discontinuances of claims. That same day, Transtrue accepted and received the Adjustment Fund ($162,571.70).

[10]           The next day, Transtrue’s counsel sent a form of Settlement Agreement, discontinuances, and a draft Consent Order to pay out the CLP Fund. Werenka’s counsel returned all but the Settlement Agreement, explaining that Werenka was reviewing it and that no changes were expected. Transtrue’s lawyers immediately obtained the Consent Order and deposited the $91,084.82 into its trust account. (I digress to note that the Trustee concedes that want of an executed settlement agreement does not affect Transtrue’s position).

[11]           Transtrue filed separate, mirrored motions styled in the Action and in Werenka’s bankruptcy concerning each of the CLP and Adjustment Funds. Booth is not a party to the motions.

[12]           Transtrue did not file a proof of claim in the bankruptcy (as required by BIA s 81(1)) or move to lift the stay of proceedings (as required by BIA s 69). Consequently, it does not have standing to bring its motions. That said the issue is merely technical since the question of whether Transtrue has a valid trust claim over the Funds can be resolved on the Trustee’s motions.

[13]           The result of this case hinges on the answers to these questions:

[14]           Evidentiary concerns preclude inferring that Werenka’s entering into the Settlement is an admission of the validity of Transtrue’s alleged trust claims.

[15]           As the CLP did not give Transtrue an interest in Werenka’s home, it can have no interest in the CLP Fund that stands in its stead. The $91,084.82 from the CLP Fund together with any interest accrued thereon is property of the bankrupt payable to the Trustee.

[16]           The Adjustment Fund is not the subject of an express trust under s 67 of the BIA, because Transtrue did not intend to create a trust when Booth paid the money to Werenka’s lawyer. As such, one of the required certainties is not satisfied. Booth and Werenka are contingent claimants to the Adjustment Fund. The contingency must be resolved to ascertain the extent of their interest(s) in the Adjustment Fund since the Trustee can be in no better position than Werenka would have been but for the bankruptcy.

[17]           A brief discussion of certain fundamental principles provides the backdrop for the assessment of the issues.

[18]           The BIA is a complete code. Its collective action regime is designed to avoid the “free-for-all that would otherwise prevail” if creditors were allowed to exercise their remedies through normal civil processes: R J Wood, Bankruptcy and Insolvency Law (2009) at pp 2-3 cited with approval in Ted Leroy Trucking [Century Services] Ltd, Re, 2010 SCC 60, at para 22 (Century Services).

[19]           The BIA defines a creditor as a person having a “claim provable”. In turn, a “claim provable” includes any claim or liability provable by a creditor: BIA s 2.

[20]           The BIA broadly defines property to include any property whether vested, contingent, or incident to property: BIA s 2. This includes money held by the bankrupt’s solicitor in a trust account at the date of the bankruptcy: Smith, Re (1975), 1975 CanLII 205 (SCC), 20 CBR (NS) 205, [1976] 1 SCR 341 (SCC).

[21]           A trustee in bankruptcy is in no higher position than the bankrupt is at the date of bankruptcy and accordingly, the property that vests in the trustee comes “warts and all”: Saulnier v Royal Bank of Canada, 2008 SCC 58 at para 50.

[22]           Trustees in bankruptcy’s watchwords are fairness and neutrality. While a primary function is to maximize proper recovery for the estate, trustees must maintain a dispassionate approach that is ever mindful of the interests of all stakeholders. As officers of the court, trustees must act in an equitable manner and obey the rules of natural justice. In this regard, they cannot allow a windfall to the general body of creditors by depriving others of their interest in property: Credifinance Securities Ltd at para 38; Re Greenstreet Management Inc (2007), 2007 CanLII 49869 (ON SC), 38 CBR (5th) 307 at para 18 and (2008) 41 CBR (5th) 86 (Ont SCJ) (Greenstreet).

[23]           Section 67(1)(a) of the BIA provides:

[24]           On bankruptcy all of the property, including property held in trust for another, passes to the trustee, who is obliged to hold and administer the subject matter of the trust for the benefit of the beneficiaries: BIA s 67(1)(a); Ramgotra (Trustee of) v North American Life Assurance Co, 1996 CanLII 219 (SCC), [1996] 1 SCR 325; Gough v Gough (1996), 1996 CanLII 988 (ON CA), 41 CBR (3d) 94 (Ont CA).

[25]           A person claiming that a bankrupt holds trust property for their benefit must prove a valid trust at the date of bankruptcy: Kenny, Re (1997) 1997 CanLII 12315 (ON SC), 149 DLR (4th) 508 (ON Ct GD), at para 32. This requires establishing the three certainties of a trust: certainty of intention to create the trust, certainty of the property that is the subject matter of the trust, and certainty of the object for which the trust is created: Century Services.

[26]           Unlike an express trust, a constructive trust is not the result of any party’s intention. Rather, it is a tool of the Court of equity to remedy a legal wrong: Soulos v Korkontzilas, 1997 CanLII 346 (SCC), [1997] 2 SCR 217, 146 DLR (4^th) 214; Donovan WM Waters, Mark R Gillen & Lionel D Smith, Waters Law of Trusts in Canada, 3d ed (Toronto, Thomson Carswell, 2005) at 454 (Waters).

[27]           The standard of proving a constructive trust in a bankruptcy proceeding is very high. It is available in extraordinary cases where finding otherwise would result in a commercial immorality by unjustly enriching the general body of creditors. It also requires that the bankrupt obtained the property through misconduct: Ascent Ltd, Re (2006), 2006 CanLII 528 (ON SC), 18 CBR (5th) 269 (Ont SCJ); Credifinance Securities Ltd, 2011 ONCA 160, 74 CBR (5th) 161 at para 26; Re McKinnon, 2006 NBQB 108.

[28]           In Grant v Ste Marie (Estate of), 2005 ABQB 35 (Grant) Slatter J (as he then was) explains the premise for this high threshold (at para 17):

[29]           Similarly, in Credifinance Securities Ltd, the Court noted that there are other interests to consider besides those of the “defrauder and the defraudee”, and that the exercise of remedial discretion must be informed by additional considerations beyond those in a civil fraud trial (at para 44).

[30]           Again, Grant is instructive. There, the BIA stay was lifted for a trial about who had the right to certain money the plaintiff gave to a serial fraudster that ended up with the fraudster’s trustee in bankruptcy. In finding an express trust on the facts, the Court said in obiter dicta that a constructive trust would likely result in any event because the evidence showed the exact timing of payments made to the bankrupt by the plaintiff and its routing thereafter. Applying the concepts of “following” and “tracing”, the Court found that the money could be “followed” from the plaintiff to the bankrupt to his criminal defence lawyer. The funds could then be “traced” into the lawyer’s trust account and then to the Clerk of the Court, who received the funds from the lawyer as partial restitution (for victims of previous frauds) and finally to the trustee in bankruptcy.

[31]           The evidence in the present case is very different. There are unanswered questions about whether Werenka agreed, or indeed could agree, that the allegedly misappropriated funds can be ‘followed’ or ‘traced’ to the Funds.

[32]           Tracing is a means of identifying a substitute for the original thing claimed. One therefore questions how Werenka could admit tracing when the monies deposited to the Adjustment Fund came from Booth.

[33]           Concerning the CLP Fund, there is evidence that Werenka deposited her pay for four years (which Transtrue alleges she improperly inflated) and from the same account paid $83,388.79 on her mortgage. Alone, this does not satisfy the threshold for proving a constructive trust in this case. Something more is required to defeat the general body of creditor’ legal rights and upset the scheme of the BIA.

[34]           Transtrue’s description of the CLP Fund as a “lien” mischaracterizes its nature. The CLP did not create an interest in property. It was simply notice of a pending lawsuit. Veit J’s overview of the history of the certificate of lis pendens in TRG Developments Corp v Kee Installations Ltd 2014 ABQB 482 at para 23 explains why:

[35]           The CLP gave Transtrue a means of providing notice to the world of the Action. It did not give Transtrue an interest in the land, a right to file a writ, or a right to execute on a judgment. The CLP Fund, which replaced the CLP, is merely a pool of potential recourse money available to Transtrue, if and when it ever proved its case.

[36]           The CLP is property of the bankrupt that the Trustee is entitled to receive.

[37]           Over time, a rather jumbled body of law has developed concerning contests between trustees in bankruptcy and a litigation claimant to money held in a lawyer’s trust account or posted in court pending resolution of a dispute. There are three lines of authority with varying results, sometimes involving factually-like cases.

[38]           The earliest line of authority considers s 70 (and its predecessor, s 50 of the Bankruptcy Act, RSC 1970, c B-3), which gives precedence to a receiving order or assignment in bankruptcy over all but completed execution processes and secured creditors. The result is that the fund (Posted Money) remains the payor’s property until it is paid out under a lawful order.

[39]           A review of BIA s 70 and its predecessor, s 50 sets the framework for the reasoning of the first line of authority:

[40]           In Tradmor Investments Ltd v Valdi Foods (1987), 1995 CanLII 7377 (ON SC), 33 CBR (3d) 244 (Ont GD); upheld on appeal 1997 CanLII 14518 (ON CA), 43 CBR (3d) 135 (Ont CA) (Tradmor), the plaintiff argued that the payment of money into court by a defendant prior to bankruptcy as a condition of proceeding with litigation elevated its status to that of secured creditor. The Court concluded that payment did not bring the plaintiff within the definition of a secured creditor. Accordingly, the money remained the bankrupt’s property that vested in the trustee on assignment. The Court specifically noted (at para 19):

[41]           In Meridian Construction Inc, Re, 2006 NSSC 17 the defendant/bankrupt was ordered by an arbitrator to pay money into his trust account as security for costs. The Court noted that in seeking to have the fund paid out to the other party in the arbitration, the potential creditor was seeking priority for its costs over the claims of both secured and other unsecured creditors. The Court cited Tradmor and then relied on Canadian Freight Assembly Ltd v Garden Grove Distribution (1998) Ltd, 2005 MBQB 246 (QL) at paras 22-23 to explain the discrepancy between Tradmor and Acepharm Inc (Re) (a case detailed below):

[42]           Re McDermott, 54 CBR (NS) 37 concerned money paid into court pending appeal. Under the Ontario Rules of procedure, execution of the judgment was stayed pending appeal. When the creditor learned that the debtor was attempting to sell some property, she sought an order lifting the stay. The Court continued the stay and ordered the defendant to pay the sale proceeds into court “until the disposition of the defendant's appeal subject to any other order that may be made in the meantime by reason of unforeseen circumstances.” The defendant was unsuccessful on appeal and made an assignment in bankruptcy before the creditor applied to have the money paid out of court.

[43]           Rejecting agency and trust notions, Catzman J, (as he then was) ruled that money paid into court remained property of the bankrupt because s 50(1) created a clear statutory preference over any judgment creditor in favour of the trustee in bankruptcy.

[44]           Similarly, in Laker (Trustee of) v Colby, 66 CBR (NS) 71 (Que SC), the Court rejected trust and agency arguments. There, money paid into court as a condition of an appeal that was not paid out to the successful party before the payor became bankrupt was held to be property of the bankrupt. The Court noted that the general principle that an assignment in bankruptcy takes precedence over all judgment and executions unless the execution procedure is completed before the assignment. In the result, the deposit continued to belong to the payor debtor.  

[45]           In MJ Roofing & Supply Ltd v Guay, 1981 CanLII 2670 (MB KB), 40 CBR (NS) 88 (Man QB), the defendant to a debt action paid money to the plaintiff’s solicitors to buy a term deposit in both parties’ names rather than paying money into court to the credit of the action. Hewak J (as he then was) explained (at para 22):

[46]           Justice Hewak found that there was no difference between the Posted Money and the garnishment fund at issue in the seminal decision, Can Credit Men's Trust v Beaver Trucking Ltd (1959), 1959 CanLII 58 (SCC), 38 CBR 1. Although the payor bankrupt’s interest in the fund was contingent on his success in the litigation, the money nevertheless remained his property because of the operation of s 50 (now s 70).

[47]           In Bank of Montreal v Faclaris, 1984 CanLII 1992 (ON SC), 48 OR (2d) 348 (Ont HCJ), a trustee in bankruptcy claimed entitlement to money held by Order “to the credit of the action” where the creditor had obtained default judgment in one of two actions against the bankrupt. The funds were held in trust by the lawyers representing one of the plaintiffs. The Court found a difference between funds held in court and funds held in trust by a lawyer, ruling that in either case, they were not the absolute property of the plaintiff. The Court found that the creditor was not a secured creditor, the money paid into court was not the creditor’s money, and the creditor’s interest at the date of bankruptcy was contingent on the results of the litigation. The trustee prevailed despite the bankrupt having only a contingent right to the money (at para 14).

[48]           In Re Charisma Fashions Ltd (1971), 15 CBR (NS) 207, money was paid into court with an admission that it was owing to the plaintiff. Logically, given the admission of liability, the trustee lost out to the plaintiff.

[49]           This line of authority applies trust principles. The logic is that Posted Money is impressed with a trust in the non-bankrupt litigant’s favour as the parties intended it to be held for the benefit of the successful litigant.

[50]           Ferguson Gifford v British Columbia (Director of Employment Standards) (1997), 1997 CanLII 4200 (BC SC), 47 CBR (3d) 226 (BCSC) (Ferguson Gifford) involved a contest between an employer’s lawyer, claiming a solicitor’s lien, and the Director of Employment Standards who was successful in obtaining an award against the lawyer’s client. The client posted the full amount of the award into the lawyer’s trust account pending appeal, but the client’s bankruptcy intervened before the appeal concluded. The Court found the money was impressed with a trust arising on the agreement of counsel. Noting that although certainty of object generally requires an identifiable person as beneficiary, Boyle J ruled (at para 12): “...it would be too narrow a conclusion to decide that, when created, it was uncertain pending the appeal, which of two persons would benefit. Its purpose was clear”.

[51]           Justice Boyle rejected the contention of a failed trust (arising from a moot appeal) attributable to the bankruptcy, finding instead that if the appeal was abandoned or unsuccessful, the monies would go to the Director. Under s 15 of British Columbia’s Employment Standards Act, the certificate granted in the hearing gave the Director a “lien, charge and secured debt”. Boyle J held that “The trust fund, although held pending appeal, unless and until the Court rules otherwise is money collected and held in trust for the Director” (at para 15) and “In simplest terms, it’s his money. There is no “operational conflict” with the Bankruptcy Act” (at para 18).

[52]           Re Anderson (Bankrupt), 1999 ABQB 398 (Registrar) applied Ferguson Gifford. To open up a default judgment, the defendant debtor paid the net sale proceeds from the sale of a house into a lawyer’s trust account “pending resolution of the subject legal proceedings”. Some nineteen months later the plaintiff obtained judgment. Between the judgment and month that passed when another creditor filed a petition for the debtor’s bankruptcy, the creditor had twice asked for the money. In his very brief analysis, the Registrar determined that the parties understood the sale proceeds were to be held for the benefit of the creditor if it won its lawsuit, and “once successful” the bankrupt and agent lawyer held the money in trust for the creditor.

[53]           The third line of authority is a hybrid form of reasoning that combines the notion of trust law with contingent interests in property on other grounds. This reasoning requires that the trustee is successful in the litigation before it has a right to the money. Section 70 does not factor in the reasoning.

[54]           Re Acepharm, [1999] OJ No 2353 (CA) concerned a contest between the trustee and a litigant to disputed rents held under an agreement permitting the defendant occupier of premises to retain occupation until trial. The plaintiff claimed that the defendant was a tenant while the defendant claimed ownership of the premises. The Ontario Court of Appeal found the chambers judge erred in relying on Tradmor to find that the fund should be handed to the trustee rather than the appellant/plaintiff.

[55]           Noting that money paid into court (as in Tradmor) and money in a law firm’s trust account (as in Re Acepharm) have the same practical consequence, Carthy JA commented that but for s 67 it would be logically tempting to assume that the legal consequences of bankruptcy would be the same (at para 7). Justice Carthy went on to observe that an Accountant of the Ontario Superior Court [equivalent to the Alberta Clerk of the Court] is simply “...a repository that responds not to terms of a trust but to the rules of court and court orders” (at para 9).

[56]           Ultimately, the Court determined (at para 12):

[57]           In his concluding words, Carthy JA said that he would set aside the lower court’s order “and in its place declare that the funds in question are not property of the bankrupt divisible amongst its creditors at this time” (Emphasis added). What happened subsequent to the decision is unknown.

[58]           Re Acepharm was considered in Re Greenstreet. While the facts are distinguishable as there was an unequivocal contractual trust in play, the discussion of contingent interests warrants mention.

[59]           The facts are straightforward. Greenstreet Management Inc entered into an agreement for the purchase and sale of a property pursuant to which it paid two deposits to the vendor’s solicitor. The agreement for purchase and sale provided that the deposits would be held in trust pending closing or termination, and credited to the purchase price on completion. The deal did not close. Greenstreet sued the vendor for misrepresentation and refused to close the sale. The vendor counterclaimed for breach of contract. Later, the deposits were ordered to be paid into court “pending further order of the court of the final adjudication of the herein action”. Bankruptcy intervened before the litigation was adjudicated.

[60]           Morowetz J found that the deposits were trust funds when they were initially paid to the vendor’s lawyer to which the bankrupt had only a contingent interest. Mindful of the observation in Re Acepharm that the Accountant of the Ontario Superior Court Justice is merely a “repository” which responds to the rules of court and court orders, not trusts (at para 9), Morowetz J found that the payment into court merely substituted the Court’s Accountant for the lawyers’ trust account. The characterization of the deposits as trust money and the parties’ contingent interests in it was therefore unaffected. In the result, the trustee could only get at the money by winning the lawsuit (at para 29).

[61]           Resolving the conflicting logic applied in the authorities requires consideration of the principles underlying the BIA and the principles of statutory interpretation.

[62]           It is trite that in interpreting legislation, the Court must give effect to the purpose and overall intention of the legislation, in keeping with the definitive formulation: “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.”: Rizzo & Rizzo Shoes Ltd (Re), 1998 CanLII 837 (SCC), [1998] 1 SCR 27 at para 21. This means that provisions must be read to work harmoniously together and that no provision “trumps” another, unless expressly stated with language like “subject to”. Context is important and there is a presumption of “harmony, coherence, and consistency”: Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42 (CanLII), [2002] 2 SCR 559 at para 27.

[63]           Principles of statutory interpretation also provide that the legislature does not intend to produce absurd consequences and that an absurd interpretation includes interpretations that are “incompatible with other provisions or with the object of the legislative enactment” or “which defeat the purpose of a statute or render some aspect of it pointless or futile”: Rizzo Shoes at para 27.

[64]           Section 70 provides that an unsecured judgment creditor is only entitled to the judgment amount if the judgment has been fully executed by the time of the bankruptcy. An assignment into bankruptcy takes precedence over any unexecuted judgment or order.

[65]           Section 67 provides that the Bankrupt’s estate does not include any property the bankrupt holds in trust for another. The intent of this provision is relatively apparent when the bankrupt is a traditional trustee holding, for example a real estate vendor holding a deposit from a purchaser or a broker holding stocks for her client. It becomes less clear when the property is paid into court or a lawyer’s trust fund pending the resolution of a dispute or litigation.

[66]           Read contextually and harmoniously, s 67 and s 70 must be interpreted to work together rationally to achieve these legislative objectives:

[67]           When Posted Money is held by a lawyer, it is clearly a trust fund in the lawyer’s hands: Re Acepharm at para 12. The question is: Does the simple fact of deposit with a lawyer automatically mean that there is a “trust” for the purposes of s 67 of the BIA?

[68]           According to Re Acepharm and Re Greenstreet, Posted Money deposited with the Clerk of the Court is treated differently, depending on its initial characterization. If it was simply deposited with the Clerk of the Court pursuant to a Court Order, the Clerk is a “mere repository”, not a trustee. However, if it was initially deposited with a lawyer as true trust money, that characteristic continues if it is later transferred to the Clerk of the Court.

[69]           The authorities ruling that ownership of Posted Money must be determined by resolution of the litigation on the basis of it being s 67(a) “trust” for whoever the ultimate victor might be run afoul of s 70.

[70]           If the litigation is pursued to judgment and the Posted Money paid without fully executing on the judgment, that creditor is bootstrapped to a better position than a pre-bankruptcy judgment creditor holding an unexecuted judgment. The effect operates to the detriment of the other creditors and violates the BIA’s foundational principles of creditor equality and rateable distribution of a bankrupt’s property. I therefore conclude that if bankruptcy intervenes before the matter is adjudicated and the judgement is executed, s 70 applies and the trustee in bankruptcy should prevail. Perhaps facially harsh to the solvent litigant, the result is consistent with the principles of statutory interpretation and the context of ss 67 and 70.

[71]           In this scenario, the answer is not dependent upon where the Posted Money is held. As noted in Re Acepharm, if held by a lawyer, such funds are, in every sense, trust funds in her hands. However, this does not equate to the funds automatically qualifying as “trust” property for the purpose of s 67(a). The lawyer is a repository like the Clerk of the Court. The difference is that unlike the Clerk of the Court, the lawyer has professional and fiduciary obligations to her client. Accordingly, it makes no difference whether the fund is on deposit with a lawyer or the Clerk of the Court.

[72]           Respectfully, the reasoning in Re Anderson and Ferguson Gifford is wanting given the reliance on trust principles without considering s 70 or the germane decisions in Re McDermott and Re Laker.

[73]           While one might try to rationalize the trust logic in Ferguson Gifford as being consistent with the underlying principles of ss 67 and 70 by arguing that the Director was successful and the award was effectively “executed” by payment into trust, the Director could not access it until the appeal was resolved in its favour or was abandoned.

[74]           As interesting as dissection of the three lines of authority is (or is not, depending on one’s perspective), the question of how Posted Money is to be treated is mainly a red herring in this case.

[75]           The Adjustment Fund was a hold back of 25% of Booth’s payment to Werenka to buy her shares of Transtrue. The purchase value of those shares is contingent on the resolution of the value of the closing adjustments. Transtrue did not intend that Werenka would hold the Adjustment Fund for its benefit. Rather, Booth’s intention was that the hold back would not be released to Werenka until the closing adjustments were resolved.

[76]           Simply put, the Adjustment Fund is not the subject of an express trust under s 67 of the BIA, because Transtrue did not intend to create a trust when the money was paid to Werenka’s lawyer. As such, one of the required certainties for a valid trust is unsatisfied. However, the Trustee can be in no better position than Werenka would have been, but for the bankruptcy.

[77]           Werenka had a contingent claim upon the Adjustment Fund at the date of her bankruptcy. She could only claim ownership if she was successful in resolving the closing adjustments in her favour or with Booth’s agreement. It is this contingent interest that vested in the Trustee, and consequently the value of the closing adjustments must be resolved.

[78]           Transtrue concedes that absent a trust in its favour, the evidence establishes that the Settlement constitutes a preference. I agree with its conclusion.

[79]           Having found that there is no trust affecting the CLP Fund and that the interest(s) to the Adjustment Fund are contingent on resolution of the closing adjustments for the purchase of Werenka’s shares, the Settlement is void as against the Trustee.

[80]           Evidentiary concerns preclude the Court from inferring that the Settlement constitutes an admission by Werenka of the validity of Transtrue’s constructive trust claim.

[81]           The CLP did not give Transtrue an interest in Werenka’s home. Accordingly, it does not give Transtrue an interest in the CLP Fund, which stands in its stead. The CLP Fund was and remains Werenka’s property, and hence the Trustee’s.

[82]           The Adjustment Fund is not the subject of an express trust under s 67 of the BIA, but the Trustee can be in no better position than Werenka would have been but for the bankruptcy. The interest(s) in the Adjustment Fund must be determined by resolving the closing adjustments on the share sale.

[83]           The Settlement is a preference under s 95(1) (a) of the BIA.