Easy Loan Corp. v. Base Mortgage & Investments Ltd.

Alberta Court of Queen's Bench

2016 CarswellAlta 174; 2016 ABQB 77

Bankruptcy and insolvency --  Property of bankrupt -- Trust property -- Tracing

Applicants invested funds to defendant BF Ltd, allegedly in Ponzi scheme — Alberta Securities Commission issued order freezing BF Ltd.'s bank account in which funds were deposited — BF Ltd. went into receivership — Applicants applied for order that funds in frozen bank account were held in trust for them — Application granted — Constructive trust was imposed over funds in bank account for benefit of applicants and other defrauded investors who did not take part in application — Logical, just, equitable and convenient approach for distributing bank account was pro rata sharing based on tracing or lowest intermediate balance rule (LIBR) was approach to be used when distributing bank account — LIBR approach provided that claimant could not claim amount in excess of lowest balance in fund subsequent to their investment but before next claimant made investment — LIBR approach did not permit investor to receive more than what could be traced from their contribution — LIBR approach was workable, as calculations were not complex — Parties would start from last deposit, allowing distribution of most recently deposited amounts that could be specifically traced, and working backwards to date of opening of bank account — Starting at earlier time would be arbitrary and would likely deplete funds available for those who deposited later — Any funds remaining after application of LIBR calculations would be given to receiver to be dealt with as part of BF Ltd.'s property — Claims bar order was not necessary with LIBR approach, as each investor's deposit could be easily traced — It would add level of complexity and unfairness to LIBR approach to require those who received funds to account for funds received.