Executive Summary: Key Legal and Evidentiary Issues

• The defendants Dentons Canada LLP and Trustee Jordan Schultz sought to strike the notice of civil claim on the basis that it disclosed no reasonable cause of action.

• The plaintiff’s claim centered on an alleged breach of trust regarding a $300,000 bank draft delivered for a business acquisition.

• The sufficiency of the plaintiff’s pleadings, specifically whether facts were pleaded to show the defendants had actual or constructive knowledge of specific trust terms, was at issue.

• The court examined whether the words “in trust” and the plaintiff’s address on the bank draft were enough to establish a trust or trustee obligations.

• Legal principles from Green Light Solutions Corp. v. Baker were applied to assess whether lawyers can be liable as trustees for non-clients’ funds.

• The court considered if professional standards or “suspicious circumstances” could impose trustee liability on the defendants.

Facts and outcome of the case

Background and facts

Yunjing Lu, the plaintiff, filed a notice of civil claim against Dentons Canada LLP, Trustee Jordan Schultz, Polycan Health Center Canada Inc., Wei Dong Zhu, Walter Carl Yackel Jr., and Hong Peng Yang. The claim arose from an agreement Lu alleged she had with Wei Dong Zhu for the acquisition of a business. Lu claimed she delivered a bank draft for $300,000, payable to Dentons Canada LLP “in trust,” to be held subject to explicit trust conditions and pending further agreement with Zhu. She alleged the funds were not to be paid out unless she consented, and until an investment agreement was finalized, she could request the funds be returned or reinvested.

The defendants Dentons Canada LLP and Trustee Jordan Schultz stated they were retained by Mr. Zhu for a business acquisition and received the bank draft as a deposit for a bidding process related to a business in receivership. They asserted that Mr. Zhu did not inform them of any agreement with Lu. On February 7, 2024, Mr. Zhu instructed Dentons to remit the funds to the receiver, and his bid was successful. The transaction closed shortly after the Supreme Court approved the bid on February 26, 2024. Lu first contacted Schultz in November 2024 regarding the funds, learning they had already been released.

Legal arguments and issues

Dentons Canada LLP and Trustee Jordan Schultz applied to strike the amended notice of civil claim under Rule 9-5(1)(a) of the Supreme Court Civil Rules, arguing the pleadings did not establish a cause of action for breach of trust. They contended there were no facts pleaded to show they had actual or constructive knowledge of any trust terms in favor of Lu. The plaintiff relied on the words “in trust” and her address on the bank draft to support her claim that the funds were held in trust for her and that the defendants had knowledge of the trust’s terms.

The court considered whether these facts were sufficient to establish that the defendants were trustees for Lu or had knowledge of specific trust terms. The court referenced Green Light Solutions Corp. v. Baker, where it was held that the mere transfer of funds into a lawyer’s trust account, without more, is insufficient to make the lawyer a trustee for the transferor.

Outcome of the case

The court found that the amended notice of civil claim did not plead facts sufficient to show that Dentons Canada LLP and Trustee Jordan Schultz had actual or constructive knowledge of the alleged trust terms. The court determined that the words “in trust” and the plaintiff’s address on the bank draft were not enough to establish actual knowledge of specific trust conditions or to impose trustee obligations. The pleadings did not allege that the defendants were informed of any agreement or trust terms between Lu and Zhu, nor did they show any conduct by the defendants that would amount to implied acceptance of a trustee role.

The court granted the application to strike the amended notice of civil claim as against Dentons Canada LLP and Trustee Jordan Schultz. The claim against these defendants was struck. The judgment did not mention any award of costs or damages. The order was limited to these defendants, and the entire claim was not struck.