Re EVTR [1987] BCLC 646 (CA)

Facts

• A parent company advanced funds to its subsidiary specifically for the acquisition of certain assets.
• The subsidiary was unable to complete the acquisition, leaving the funds unused for the intended purpose.
• The parent company requested the return of the funds, asserting they were provided for a particular purpose that had not been achieved.
• The subsidiary argued the funds constituted an outright gift with no return obligation.
• Upon review of the terms and intentions behind the advance, the court found the funds were provided expressly for a particular purpose, not as a gift.

Issues

1. Whether funds advanced for a specific purpose, which later becomes unattainable, should be returned to the provider or retained by the recipient.
2. Whether the funds were held on trust for the defined purpose or constituted an outright gift.
3. Whether the intentions and documentation between the parties established a trust relationship upon failure of purpose.

Decision

• The court held that the funds were advanced for a specific purpose and were not an outright gift.
• It was determined that a trust relationship was created: the funds were held on trust for the specified acquisition.
• As the intended purpose failed, the subsidiary was required to return the funds to the parent company.
• The principle was affirmed that, unless a contrary intention is evident, funds provided for a failed defined purpose must revert to the provider.

Legal Principles

• A trust for a specific purpose is valid only if the purpose is certain and capable of fulfillment.
• If the purpose of a "purpose trust" fails, the funds are to be returned to the settlor unless there is clear evidence of a different intention.
• The intention behind transferring funds is a key factor in distinguishing between outright gifts and trust arrangements.
• Equity requires that, where the purpose of an advance cannot be achieved, funds should revert to the provider to prevent unjust enrichment.
• The decision aligns with established principles in trust law and equitable doctrine.

Conclusion

Re EVTR [1987] BCLC 646 (CA) establishes that funds advanced for a clearly defined purpose are held on trust and must be returned if that purpose fails, reinforcing the importance of intention and certainty in trust arrangements within corporate finance.