Water Street Pictures Ltd. v. Forefront Releasing Inc.

Water Street Pictures Ltd. v. Forefront Releasing Inc.

On a plain reading of the distribution agreements, the parties did not create a trust in respect of Edgemont Road distribution revenues; the agreements permitted Forefront to receive and deal with revenues and to commingle and use funds subject only to semi-annual accounting and payment, so no trust arose and extrinsic evidence of post-contract conduct was not admissible to create a trust where the contractual wording was not truly ambiguous; accordingly the Banks' security and priority were not defeated and the action against them was dismissed.

Citation
2006 BCCA 459
Parties
Plaintiff/respondent: Water Street Pictures Ltd.; Defendant/appellant: Forefront Releasing Inc.; Defendant/appellant: VanCity Capital Corporation; Defendant/appellant: Business Development Bank of Canada
Court
British Columbia Court of Appeal
Jurisdiction
Canada
Judgment Date
13 October 2006
Procedural Posture
Civil Appeal / Court of Appeal Decision on Appeal From Trial Judgment
Outcome
Appeal allowed in favour of VanCity and BDC; action against VanCity Capital Corporation and Business Development Bank of Canada dismissed; Water Street's cross-appeal dismissed
Legal Topics
Creation of Trust, Fiduciary Duty, Contract Interpretation, Extrinsic Evidence, Commingling of Funds, Bank Put on Inquiry, Priority of Security Interest, Damages, Interest, Amendment of Pleadings
Source Language
English
Contract Law Trusts and Fiduciary Obligations Commercial Law Insolvency and Secured Lending Equity Creation of Trust Fiduciary Duty Contract Interpretation +7 more

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Parties

Water Street Pictures Ltd.

Plaintiff/respondent

Forefront Releasing Inc.

Defendant/appellant

VanCity Capital Corporation

Defendant/appellant

Business Development Bank of Canada

Defendant/appellant

Procedural Posture

Civil Appeal / Court of Appeal Decision on Appeal From Trial Judgment

Legal Issues

  1. 1 Whether distribution revenues were held in trust by distributor for producer under the distribution agreements
  2. 2 Whether the banks that seized distributor accounts were put on inquiry or had actual knowledge that funds were trust monies
  3. 3 Whether extrinsic evidence of parties' conduct was admissible to interpret the agreements

Ratio Decidendi

On a plain reading of the distribution agreements, the parties did not create a trust in respect of Edgemont Road distribution revenues; the agreements permitted Forefront to receive and deal with revenues and to commingle and use funds subject only to semi-annual accounting and payment, so no trust arose and extrinsic evidence of post-contract conduct was not admissible to create a trust where the contractual wording was not truly ambiguous; accordingly the Banks' security and priority were not defeated and the action against them was dismissed.

Court Disposition

Appeal allowed in favour of VanCity and BDC; action against VanCity Capital Corporation and Business Development Bank of Canada dismissed; Water Street's cross-appeal dismissed

Orders

  • Allow appeal of VanCity Capital Corporation and Business Development Bank of Canada
  • Dismiss claim against VanCity Capital Corporation and Business Development Bank of Canada