As a law student, my trust law professor brought in a “dead hand” to help us remember the rule against perpetuities. The prop was effective: I have not forgotten that the rule stops trust property from being governed indefinitely from “beyond the grave.” While principles of trust law helpfully prevent the living from being controlled by the dead, they also apply to govern the living in charge of the dead. Such was the case of Cataraqui Cemetery Company v Cyr, 2017 ONSC 2268.
The historic Cataraqui Cemetery in Kingston, Ontario, was established in 1850. Its permanent residents include Sir John A. Macdonald and Sir Alexander Campbell, which has contributed to the cemetery’s designation as a National Historic Site. The Cataraqui Cemetery Company (the “Company”), a non-profit corporation, holds the cemetery in perpetual trust for individuals who have and will acquire interment rights.
The Company is run by a five-person board of trustees comprised of volunteers who are nominated and elected by interment rights holders. Litigation arose between the Company and two former board members, Mr. and Mrs. Cyr.
The main allegations of the Company were that the Cyrs had breached their obligations and responsibilities as trustees by:
- “exchanging” six grave plots previously purchased by Mr. Cyr (one of which already contained Mr. Cyr’s father) for six new grave plots at a discounted price; and
- purchasing a “family garden” adjacent to the six new grave plots at an inappropriately low price.
The total amount alleged to be owed by the Cyrs to the Company was $43,824.80.
In the events leading up to the litigation, Mr. Cyr’s father passed away in 1998. Mr. Cyr purchase a plot for his father so he could be buried at the cemetery. Shortly thereafter, Mr. Cyr purchased five adjacent grave plots (the purchase was “pre-need”).
In 2003, Mr. Cyr’s wife was appointed to the board of directors of the Company. The following year, Mr. Cyr joined Mrs. Cyr on the board. As part of his duties, Mr. Cyr worked with the cemetery’s sales team and came up with a new system of valuing and marketing grave plots.
In 2006, Mr. Cyr’s mother passed away. Mr. Cyr was unhappy with the location of his family’s plots and sought to “exchange” them for six new plots. Mr. Cyr worked with one of his sales managers to determine the credit he would receive for the old plots. They decided that the Company would repurchase his old plots for their current fair market value ($2,525/each) as opposed to original sales price ($640/each). The credit (after deducting a fee for care and maintenance) was then applied against Mr. Cyr’s purchase of six new plots. Mr. Cyr appeared to set his own price for the new plots, as the price he paid did not match any of the prices listed in the price book provided to prospective customers.
The Court found that there was no fixed procedure for repurchasing unused grave plots (however, it was highly unusual for used grave plots to be repurchased). Nevertheless, the Court held that while there may not have been a contractual breach, there was a breach of trust.
The Court found that the Cyrs received a benefit from their position as trustees, namely the sale of their old grave plots for a high price and the purchase of new plots for a low price (a benefit not available to the general public). As trustees of the not-for-profit Company, the Cyrs were fiduciaries and were required to disclose to the rest of the board any “self-dealings.” They failed to do so.
While the usual remedy for breach of trust is disgorgement of any profit, no order was made against the Cyrs. An anonymous letter had been sent to the board in 2007 which raised the same allegations of misconduct as was eventually advanced in the Company’s action. After receiving the anonymous letter, the board, which included the Cyrs, held an informal meeting to discuss the allegations. However, no actions were taken at that time. The Court held that the anonymous letter and the meeting of the board was evidence that the Company “discovered” the claim against the Cyrs in 2007. Since the Company waited to bring its claim until 2010, the two-year limitation period imposed by the Limitations Act applied and the action was statute barred.*
The Limitations Act imposes a stringent two year limitation period on the living to commence their claims. In this respect, the dead may have the last laugh. The rule against perpetuities, which regulates the “dead hand” of a testator, allows for the control of trust property for 21 years after the death of the last person living at the time the will was created.
* While the Limitations Act was applied in this case, note that limitation periods in estates and trusts matters are not always straightforward.