CEF: Higgerty Law Statement of Claim Section M (a) – Liability of ABC District, LCC and LCCFM

This article is part of the series from the Higgerty Law statement of claim. You can read what a statement of claim and a Quistclose Trust is in the first article in this series.

Section “M” of this document is pretty long so I’ll be posting it by subsection.

Section “M” (a) discsses /alleges:

  • ABC District / CEF had a duty to the depositors to use their money in a certain, safe manner,
  • They failed to do that and examples are given how District / CEF used the funds contrary to the trust they’d been given,
  • Some of the actions that District / CEF took were fraudulent with the intent to hide the actual state of the fund or to benefit parties other than the depositors,
  • LCC / LCCFM knew of and approved this or they were wilfully ignorant about what was going on, and they benefited from the proceeds of this action.

Please note that these are allegations only and this case has not been adjudicated in a court of law. As always, if you have any legal questions or need legal advice please consult appropriate legal counsel.


From Higgerty Law Statement of Claim

M. Liability of ABC District, LCC and LCCFM
(a) Breach of Trust: ABC District/LCC/LCCFM

146. The funds on deposit in the CEF were impressed with an express or implied trust in favour of the Plaintiffs and the putative Class and Sub-class members (the “CEF Trust”).

147. As trustee of the CEF Trust, ABC District had a duty to utilize those monies in accordance with the terms of the CEF Trust, which required it to invest the funds in accordance with the ABC District Church Extension Program mandate, policies and procedures.

148. The ABC District failed to utilize the assets of the CEF Trust in accordance with the terms of the Trust, as follows:

(a) Utilizing the CEF Trust funds to develop the POP Village Lands on its own account or in partnership with the POP Congregation through the POP Village Advances as set out in paras. 43 – 49, 52, 55 – 56 and 59 herein;
(b) Transferring the POP Village Lands to ECHS as set out in paras. 64 – 68 herein;
(c) Authorizing the POP Village CEF Mortgage Loan and the POP Village CEF Unsecured Loans to ECHS as set out in paras. 61 – 81 herein;
(d) Authorizing the Prince of Peace Congregation Loan as set out in paras. 82 – 87 herein;
(e) Entering into the POP Congregation Land Sale Proceeds Assignment Agreement as set out in paras. 88 – 90 herein;
(f) Authorizing and extinguishing the Strathmore Loan to ECHS in exchange for title to the Strathmore Lands for its own use as set out in paras. 91 – 95 herein;
(g) Authorizing and forgiving the Shepherd’s Village CEF Loans as set out in paras. 97 – 108 herein.
(h) Lending monies on deposit to the CEF to the LCC to fund the LCC’s unfunded pension liabilities.

149. Further, or in the alternative, the funds deposited to the ABC District’s CEF were impressed with an express or implied resulting trust in favour of the Plaintiffs and the putative Class and Sub-Class members, the CEF Quistclose Trust.

150. As trustee of the CEF Quistclose Trust, ABC District had a duty to utilize those moniesin accordance with the terms of the CEF Quistclose Trust for the benefit of the CEF depositors.

151. The ABC District failed to utilize the assets of the CEF Quistclose Trust in accordance with the terms of the Trust, as follows:

a. Using funds on deposit to the CEF for purposes of speculative real estate development of the POP Village on its own account, and not for the purpose of providing assistance to congregations and agencies of the Lutheran Church-Canada;
b. Utilizing the CEF Quistclose Trust funds to develop the POP Village Lands on its
own account through the POP Village Advances as set out in paras. 43 – 58 and 60 herein;
c. Transferring the POP Village Lands to ECHS as set out in paras. 64 – 68 herein;
d. Authorizing the POP Village CEF Mortgage Loan and the POP Village CEF Unsecured Loans to ECHS as set out in paras. 61 – 81 herein;
e. Authorizing the Prince of Peace Congregation Loan as set out in paras. 82 – 87 herein;
f. Entering into the POP Congregation Land Sale Proceeds Assignment Agreement as set out in paras. 88 – 90 herein;
g. Authorizing and extinguishing the Strathmore Loan to ECHS in exchange for title to the Strathmore Lands for its own use as set out in para. 91 – 95 herein; and
h. Authorizing and forgiving the Shepherd’s Village CEF Loans as set out in paras. 97 – 108 herein.

152. Further, as trustee of the CEF Trust and the CEF Quistclose Trust, the ABC District owed a legal duty to the CEF depositors, pursuant to s. 3(2) of the Trustee Act, RSA 2000 c T-8, to invest the trust funds with a view to obtaining a reasonable return while avoiding undue risks, having regard to the nature of the trust. For the reasons stated herein, the ABC District breached its duties under the Trustee Act, as a result of which the Plaintiffs and the Class and Sub-class members have suffered damages and loss.

153. The POP Village CEF Loans were fraudulent and dishonest schemes, in that they were knowingly advanced by the ABC District to ECHS for the purpose of divesting the ABC District of the failing POP Village Development and its associated financial liabilities, and instead recording the POP Village CEF Mortgage Loan as an asset in the CEF mortgage portfolio, for the benefit of ECHS and not for the benefit of the beneficiaries of the CEF and CEF Quistclose Trusts, and constituted a risk and prejudice to the interests of the beneficiaries of the CEF and CEF Quistclose Trusts that the ABC District knew it was not entitled to take.

154. The POP Congregation Loan was a fraudulent and dishonest scheme, in that it was advanced by the ABC District to the POP Congregation for the purpose of enabling the POP Congregation to pay for its operating deficits, and to meet its debt obligations to the ABC District under a previous mortgage which was in default, for the benefit of the POP Congregation and not for the benefit of the beneficiaries of the CEF and CEF Quistclose Trusts, and constituted a risk and prejudice to the interests of the beneficiaries of the CEF and CEF Quistclose Trusts that the ABC District knew it was not entitled to take.

155. The POP Congregation Land Sale Proceeds Assignment Agreement was a knowingly fraudulent and dishonest scheme, in that the forgiveness of $6 million of the POP Congregation Loan in exchange for the right to receive proceeds from the future sale of land owned by the POP Congregation was wholly inadequate consideration for the ABC District’s forgiveness of the debt, and it deprived the CEF of a $6 million loan receivable. The Sale Proceeds Assignment Agreement was for the benefit of the POP Congregation and not for the benefit of the beneficiaries of the CEF and CEF Quistclose Trusts, and constituted a risk and prejudice to the interests of the beneficiaries of the CEF and CEF Quistclose Trusts that the ABC District knew it was not entitled to take.

156. The transfer of the Strathmore Lands to the ABC District for $1.00, and the extinguishment of the Strathmore Loan payable by ECHS to the CEF, was a knowingly fraudulent and dishonest scheme, in that it deprived the CEF of the Strathmore Loan receivable, it was for the benefit of ECHA and not for the benefit of the beneficiaries of the CEF and CEF Quistclose Trusts, and it constituted a risk and prejudice to the interests of the beneficiaries of the CEF and CEF Quistclose Trusts that the ABC District knew it was not entitled to take.

157. The forgiveness of the Shepherd’s Village CEF Loans by the ABC District was a fraudulent and dishonest scheme, in that it deprived the CEF Trust or the CEF Quistclose Trust of those funds, it was for the benefit of SVML and not for the benefit of the beneficiaries of the CEF and CEF Quistclose Trusts, and constituted a risk and prejudice to the interests of the beneficiaries of the CEF and CEF Quistclose Trusts that the ABC District knew it was not entitled to take.

158. By reason of the foregoing, the ABC District breached the CEF Trust and the CEF Quistclose Trust, causing damages to the Plaintiffs and the putative Class and Sub-class members.

159. As participants in the joint enterprise that is the ABC District’s Church Extension program, LCC and/or LCCFM are jointly and severally liable to the Plaintiffs and putative class and Sub-class members for ABC District’s breaches of the CEF Trust and CEF Quistclose Trust as set out herein.

160. In the alternative, LCC and/or LCCFM knowingly assisted ABC District to breach the CEF Trust and the CEF Quistclose Trust and are therefore jointly and severally liable to the Plaintiffs and the putative Class and Sub-class members for rendering knowing assistance to a breach of trust.

161. Further, or in the alternative, LCC and/or LCCFM knowingly received proceeds from the CEF Trust as a result of ABC District’s breach of trust by way of payments made by District to the LCC and/or LCCFM. Accordingly, LCC and/or LCCFM are jointly and severally liable to the Plaintiffs and Class and Sub-class members and are constructive trustees of those monies for the benefit of the Plaintiffs and the putative Class and Sub-class members.

 

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