MacKinnon Estate v. MacKinnon, 2010 ONCA 170

CITATION: MacKinnon Estate v. MacKinnon, 2010 ONCA 170

DATE: 20100309

DOCKET: C50866

COURT OF APPEAL FOR ONTARIO

Doherty, Moldaver and Epstein JJ.A.

BETWEEN:

Hubert MacKinnon and Hubert Routley Duncan MacKinnon Executor and Trustee of the Estate of Fanny Elizabeth MacKinnon, also known as Frances Elizabeth MacKinnon

Applicants (Appellants)

and

Charles Douglas Barry MacKinnon Robert Warren MacKinnon

Respondents (Respondents)

Daniel J. Wyjad, for the appellants

Tom Serafimovski, for the respondents

Heard: December 3, 2009

On appeal from the orders of Justice T. M. Wood of the Superior Court of Justice dated April 2l, 2009 and July 6, 2009.

Moldaver J.A.:

[1] The appellant, Hubert MacKinnon, brings this appeal in his dual capacity as the sole beneficiary and as executor and trustee of the estate of his late mother, Fanny MacKinnon. He appeals from two orders of the Superior Court of Justice. The first order under appeal, dated April 21, 2009, dismissed Hubert’s application for a declaration that he, or alternatively his late mother’s estate, is the owner by prescription of a cottage property located in the District Municipality of Muskoka (the possessory title claim). The second order under appeal, dated July 6, 2009, awarded Hubert $1,000 and further awarded $17,000 to the estate of his late father, Duke MacKinnon, for improvements he and Duke made to the property with their own funds, for which neither was compensated (the unjust enrichment claim). In respect of the unjust enrichment claim, Hubert submits that the total award of $18,000 was too low and that it should be increased to $64,758.

[2] The respondents, Charles Douglas Barry MacKinnon and Robert Warren MacKinnon, cross-appeal from the unjust enrichment award. They challenge Hubert’s contention that the award of $18,000 was too low, submitting instead that no award should have been made, or alternatively, that the award should be reduced to $5,000.

[3] For reasons that follow, on the main issue – whether Hubert’s possessory title claim should have succeeded – I would dismiss the appeal, albeit for reasons that differ from those given by the application judge. On the secondary issue – whether damages for unjust enrichment should have been ordered and if so whether the amount awarded was too low or too high – I would dismiss the appeal and cross-appeal, essentially for the reasons given by the application judge.

I. Possessory Title Claim

[4] The claim for possessory title proceeded on a paper record consisting of documentary evidence, affidavit evidence from Hubert MacKinnon and Charles MacKinnon and cross-examinations on those affidavits. Co-respondent Robert Warren MacKinnon (Warren) filed a brief affidavit attesting to the accuracy of Charles’ affidavit.

[5] As is not uncommon in cases of this nature, the protagonists are one generation removed from the parties who had first-hand knowledge of the pertinent events – in this case, the parents and two paternal aunts of Hubert, Charles and Warren – who have since passed on. The missing primary evidence can make it very difficult for a court to determine the nature of the relationship that existed between the original parties and in particular, the basis upon which the original occupiers, through whom the claim for possessory title is made, occupied the property in question. For reasons that will become apparent, I view that as the central issue in this case – and its resolution turns on the intention of those who are no longer with us and who created no formal documentation that might assist. As such, the answer must be found in the conduct of the original parties and any special circumstances that might shed light on their intentions.

(i) The Salient Facts

[6] The Muskoka property in question comprises approximately two acres and forms part of a larger farm that has been in the MacKinnon family for more than a century.

[7] In 1958, Mercy and Flora MacKinnon became the owners of the farm property through an inheritance. Mercy and Flora had a number of siblings including Duke MacKinnon. Duke was married to Fanny and they had a number of children, including the appellant, Hubert, and the respondents, Charles and Warren.

[8] Duke and his family initially lived in the Brantford area. Duke was a carpenter by trade while Fanny looked after the household.

[9] In the mid-1950s, Duke suffered a serious injury that left him incapable of working full time as a carpenter. From then on, he worked mostly for himself and apart from the odd outside job, he had very little earning potential.

[10] Duke’s sisters, Mercy and Flora, remained single throughout their lives and had no children. Both maintained gainful employment at separate locations in Ontario. In the late 1950s or early 1960s, they decided to retire from work and live on the Muskoka farm property, which they now owned. They had the financial means to build a home on the farm but they needed someone to build it. That is where Duke came in.

[11] As mentioned, by the time Mercy and Flora were ready to retire to the farm, Duke was unable to make ends meet. With that in mind, Flora and Mercy proposed that Duke build two homes on the farm property, one for them and one for him and Fanny. Flora and Mercy would pay for the materials and Duke would do the construction. And when the homes were finished, Duke and Fanny would live in one and Flora and Mercy would live in the other. Duke would pay no rent or taxes. His job would be to maintain the properties and drive Flora and Mercy to town as required, since neither one could drive. In return, Flora and Mercy would provide Duke with a small monthly stipend (his only source of income pending receipt of his Old Age Pension).

[12] That arrangement, it seems, met with everyone’s approval. Construction of the first home began in the early 1960s and by all accounts, both homes were completed by 1966. While there is some dispute about when Duke and Fanny took up permanent residence in Muskoka, everyone agrees that this occurred by 1972 at the latest, when Duke and Fanny sold their Brantford-area home. The exact date is immaterial. What is material is that Duke and Fanny lived in the second home from at least 1972 to 1983, when Duke died. During that timeframe, in accordance with the oral arrangement between him and his sisters, Duke maintained both properties and drove his sisters to town. In return, he received a small monthly stipend. He paid no taxes on the property and no rent to his sisters for its use. Although it was not part of the arrangement, Duke constructed a sunroom and some outbuildings on the property in 1972 with funds realized from the sale of his Brantford-area home.

[13] At Duke’s funeral in 1983, Mercy spoke to Charles and told him that she and Flora wanted the farm to go to him and Warren. It was their wish that the farm remain in the family and they felt that Charles and Warren were financially stable and would not look to sell it.

[14] In 1986, Flora and Mercy formalized their plan. They conveyed the farm to Charles and Warren for $2 and natural love and affection, on the understanding that they (Flora and Mercy) would retain a life interest in it. They also had Charles and Warren promise that their mother Fanny could remain in the second home until she died.

[15] According to Charles, Fanny was initially pleased to learn that he and Warren were now the owners of the Muskoka farm property. In the years that followed, however, Fanny apparently asked Charles and Warren on more than one occasion to convey ownership of the second home to her. Charles and Warren refused to do so, in part because they were concerned that she was being influenced by Hubert who, by 1986, had moved in with her on a more or less permanent basis.

[16] According to Charles and Warren, Hubert was a “n’er do well” who used drugs, had a criminal past, and could not hold down a job. In their opinion, he had chosen to move in with Fanny for selfish reasons, including the fact that he could not afford to support himself. Hubert, on the other hand, maintained that his reason for moving in with Fanny was altruistic. Fanny was alone and he was willing to care for her and help with the upkeep of the property.

[17] Whatever his motivation, Hubert lived with Fanny continuously until 2006 when Fanny, because of illness, moved west to be with her daughter. While Hubert lived with Fanny, he mowed the lawns and did minor chores and maintenance around the property. He also drove Fanny to town and elsewhere as required. Neither he nor Fanny paid rent or taxes and Hubert received no compensation from his aunts.

[18] After Fanny moved west, Hubert lived with one of his children in Brantford during the winters of 2006 and 2007. He lived in Muskoka for the remainder of 2006 and 2007. In the spring of 2006, Charles and Warren told Hubert that he was no longer welcome on the property and they asked him to leave by the end of June 2006. Hubert did not comply.

[19] In April 2008, Fanny died. In her last will and testament, she named Hubert as her executor and trustee and bequeathed all of her assets to him. Shortly thereafter, in May 2008, Warren demanded that Hubert leave the property. Hubert refused to comply, in part because he had several hand-written notes from his mother in which she expressed her “belief” that the home in which she was living and the property surrounding it belonged to her and she wanted Hubert to have it “for coming to live with me and take care of me”.

[20] Armed with those notes and fixed with the belief that either he or his mother’s estate had become the owner of the property, in May 2008, Hubert applied to the Superior Court for a declaration to that effect. In the alternative, he sought compensation for the value by which he and his father Duke had improved the land.

(ii) Decision of the Application Judge

[21] The application was argued on April 6, 2009. On April 21, 2009, the application judge released written reasons in which he dismissed Hubert’s possessory title claim. On May 7, 2009, the application judge released a second set of reasons in which he allowed Hubert’s unjust enrichment claim for the sunroom and outbuildings Duke had built in 1972 and for some minor improvements that Hubert had made. On July 6, 2009, in a third set of reasons, the application judge awarded damages against Charles and Warren for unjust enrichment in the total amount of $18,000.

[22] In his reasons for dismissing Hubert’s possessory title claim, the application judge made the following findings of fact based on the documentary and evidentiary record before him:

• The home on the disputed property was built by Duke with funds supplied by his sisters.
• From 1963 to 1983, Duke maintained the entire property including the “parts occupied by his sisters”.
• Duke provided transportation to his sisters.
• Duke’s sisters paid him a stipend for his services.
• After Duke’s death in 1983, while Fanny remained on the property, minimal maintenance was done. Hubert regularly mowed the lawns “for both the disputed property and the aunts’ property”.
• Neither Duke nor Fanny ever paid taxes on the property. Duke paid some property insurance for a time but stopped when he learned that he had no insurable interest in the property.
• The notes written by Fanny confirmed that “she knew she did not own the property but believed that she should”. Fanny requested a deed from Charles and Warren on more than one occasion but she was refused.

[23] Having made those findings, the application judge reviewed the applicable legal principles, noting that Hubert’s claim for possessory title “is founded under s. 5 of the Real Property Limitations Act, R.S.O. 1990, c. L.15” (the Act) and that the “section requires ten years actual possession or in the case of a tenant at will under subsection (7) ten years plus one year from the commencement of the tenancy to establish possessory title.”

[24] The application judge then outlined the test for possessory title identified by this court in Masidon Investments Ltd. v. Ham (1984), 1984 CanLII 1877 (ON CA), 45 O.R. (2d) 563 at 567 and Keefer v. Arillotta (1976), 1976 CanLII 571 (ON CA), 13 O.R. (2d) 680 at 692, namely: that claimants seeking possessory title must establish that throughout the statutory period, they had actual possession of the disputed property, they intended to exclude the true owner from possession, and they effectively excluded the true owner from possession.

[25] Having outlined the three-pronged test, the application judge identified the issue that in his view was critical to Hubert’s claim, that is, whether Hubert had shown that the true owners were effectively excluded from the property throughout the statutory period. In this regard, the application judge referred again to Masidon, where at pp. 568‑74, Blair J.A. considered the concept of “effective exclusion” under the third prong of the test, noting that it was not every use of land that would support a claim for possessory title; rather, the use must be inconsistent with the form and use of enjoyment the owner intended to make of it. This was especially so in the case of trespassers, against whom the test would be strictly applied.

[26] In contrast to claims made by trespassers, the application judge observed that courts had taken a somewhat more flexible approach to claims made by persons with “some colour of right” to the property, citing by way of example two cases in which the claims for possessory title of family members living on a family compound under a “loose family arrangement” had “received a sympathetic reception”. See Train v. Metzger (1974), 1974 CanLII 456 (ON SC), 5 O.R. (2d) 540 (H.C.) and Horne v. Grant, 2003 CanLII 44731 (Ont. Sup. Ct.).

[27] Applying those principles to the case at hand, the application judge observed that there were two distinct periods within which “the limitations period could have run its course”: – the first, when Duke lived on the property from 1963 (or 1972 at the latest) until his death in 1983; the second while Fanny lived on the property from “1983 – 2002” [sic 2006] when she moved west to live with her daughter.

[28] Turning to the second and third tests identified in Masidon – whether in the first time frame, Duke showed an intention to exclude his sisters from possession and whether he effectively did so – the application judge reviewed the circumstances under which Duke and Fanny moved to the property and, in particular, the arrangement between him and his sisters, noting that “he [Duke] honoured his side of the bargain and his sisters honoured theirs”. He then explained, at paras. 35-37, why in his view, Duke’s occupation of the property satisfied the second test for possessory title, but not the third:

The questions are therefore does his occupation of the property in these circumstances:

(a) show an intention to exclude the registered owners from the property and

(b) effectively exclude those owners from the property.

I believe the answer to the first question is yes. His position was that of a tenant at will. He built the house for himself and treated it as his property, improving it on one occasion and maintaining its lawn and garden separate from those of his sisters. Although there was no doubt visiting back and forth neither he nor his sisters ever doubted that he was the occupier of the property and they had no right to enter or make use of it at will.

The answer to the second question however is no. His sisters had a clearly defined use for the property. It was to provide a home for their brother to keep him at their beck and call. Not only was he there with their permission, they actually paid him to remain. It cannot be said that his presence on the land in any way interfered with the use they wished to make of it. His presence there was exactly the use they wished to make of that part of their property.

[29] Turning to the second timeframe, when Fanny occupied the property after Duke’s death from 1983 to 2006, the application judge noted that the circumstances of her occupation differed from those that existed when Duke was alive. Fanny had no “handyman skills” and “she could not drive”. Nonetheless, Flora and Mercy were content that she stay on the property until her death and they made this known to Charles and Warren, who respected their wishes. Fanny knew that she did not own the property and Charles and Warren refused her request for a deed on more than one occasion.

[30] Having outlined the circumstances under which Fanny occupied the property, the application judge considered the two questions he had posed in relation to Duke and explained, at paras. 40-42, why in his view, Fanny’s occupation satisfied the second test for possessory title, but not the third:

If the questions set out in paragraph 35 above, are applied to this scenario I would answer them as follows. The answer to the first question is again yes. Fanny clearly demonstrated an intention to exclude the registered owners of the property and all others from possession. The fact that the respondents visited the property to see their mother or effect repairs, in no way diminishes her position that she occupied the property and they were there on her permission.

However the answer to the third question must again be no. Once again the intended use of the land by the registered owners coincided with the use being made of it. Mercy and Flora wished their sister-in-law to remain on the land during her lifetime. The respondents also wished their mother to remain in the home both to honour their aunt’s wishes and to ensure she had a place to live.

No expression of disagreement by Fanny with the level of ownership she exercised could alter the fact that her presence in the house was the very use the registered owners wished to be made of the property. The third part of the test cannot be met in those circumstances.

[31] Finally, with respect to Hubert’s personal claim, the application judge rejected it on the basis that Hubert had not been in possession of the property for ten years “since his mother’s death” and therefore, he could not meet the first test for possessory title.

(iii) Did the Application Judge Apply the Correct Test?

[32] Hubert submits that the application judge applied the wrong test in rejecting the possessory title claim. In particular, he contends that the “inconsistent use” test, which the application judge applied in holding that Duke and Fanny’s use and occupation of the property did not effectively exclude the true owners from possession, is inapplicable where, as here, the claim to possessory title is based on a combination of sections 5(7) and 15 of the Act. Those sections read as follows:

5(7) Where a person is in possession or in receipt of the profits of any land, or in receipt of any rent, as tenant at will, the right of the person entitled subject thereto, or of the person through whom that person claims, to make an entry or distress, or to bring an action to recover the land or rent, shall be deemed to have first accrued either at the determination of the tenancy, or at the expiration of one year next after the commencement of the tenancy, at which time the tenancy shall be deemed to have determined.

15 At the determination of the period limited by this Act to any person for making an entry or distress or bringing any action, the right and title of such person to the land or rent, for the recovery whereof such entry, distress or action, respectively, might have been made or brought within such period, is extinguished.

[33] Hubert submits that his claim is to be distinguished from an adverse possession claim made by a trespasser, who relies on ss. 4 and 15 of the Act to defend against the true owner’s right of recovery in order to extinguish his or her title. Section 4 reads as follows:

4 No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[34] In short, Hubert’s claim to possessory title rests on his contention that Duke and Fanny occupied the property as tenants at will throughout the statutory period. He submits that for purposes of s. 5(7) of the Act, that period began to run on the notional termination of the tenancy one year after it had commenced, notwithstanding the permissive character of the occupation. See Ocean Harvesters Ltd. v. Quinlan Brothers Ltd., 1974 CanLII 149 (SCC), [1975] 1 S.C.R. 684 at 686. Hubert further submits that once it is accepted that Duke and Fanny occupied the property as tenants at will, the “inconsistent use” doctrine cannot be invoked to defeat a claim made through them for possessory title. To hold otherwise would render s. 5(7) meaningless. Manifestly, as tenants at will, Duke and Fanny’s use of the property would always be consistent with the use the true owner intended to make of it. Valuable as the “inconsistent use” doctrine might be in defeating adverse possession claims brought by trespassers who have used the property in a manner not inconsistent with the owner’s intended use of it, the doctrine could play no part in a claim for possessory title based on s. 5(7) of the Act.

[35] In my view, Hubert’s position is correct, both for the reason he offers and for the more basic reason that a finding of tenancy necessarily entails a right of exclusive possession. Dickson J. put the matter succinctly in Ocean Harvesters at pp. 686-87:

While exclusive possession may not always give rise to tenancy (Errington v. Errington [[1952] 1 All E.R. 149], Cobb v. Lane [[1952] 1 All E.R. 1199]), I think it beyond question that a tenancy cannot be created in the absence of exclusive possession. Exclusive possession by the tenant is essential to the demise and the statute [the Limitation of Actions (Realty) Act (of Newfoundland), R.S.N. 1952, c. 145 (the equivalent of the Ontario Act)] will not operate to bar the owner unless the owner is out of possession.

[36] If there were nothing more to the case, I would allow the appeal and give Hubert the declaration he seeks. But there is more, and it stems from what Dickson J. said in Ocean Harvesters at pp. 686-67, namely: “exclusive possession may not always give rise to a tenancy”.

[37] In my discussion so far, I have assumed that Duke and Fanny occupied the property as tenants at will throughout the requisite statutory period. The application judge found that to be the case. With respect, I believe he erred.

[38] Access to s. 5(7) of the Act is restricted to claims involving persons who have occupied the property as tenants at will. Hence, to succeed in this case, Hubert bore the onus of establishing, on balance, that Duke and Fanny occupied the property as tenants at will.

[39] In my view, the evidence does not support such a finding. On the contrary, it supports a finding that Duke and Fanny occupied the property as licensees. To the extent the application judge found otherwise, I am respectfully of the view that his finding is not entitled to the deference it would normally attract for two reasons.

[40] First, the application judge did not address the issue. The word “licensee” does not appear in his reasons and he provides no explanation for finding a tenancy relationship as opposed to a licensee relationship. In fairness, it would appear that the parties did not raise that issue with him. They were, however, asked to address it on appeal.

[41] Second, the application judge’s conclusion that Duke and Fanny occupied the property as tenants at will rests almost entirely on his finding that they enjoyed sole occupation of the property during the years they inhabited it. While I do not quarrel with that finding, it does not, by itself, determine the status of their occupation. As will be seen, the critical question in that regard is not whether Duke and Fanny were allowed to enjoy sole occupation of the property in fact, but whether they were given a right of exclusive possession to it in law. See Radaich v. Smith, [1959] 101 C.L.R. (High Court of Australia) per Windeyer J. at p. 223.

(iv) Tenancy Relationship v. Licensee Relationship

[42] I begin my analysis with something the application judge did not mention, perhaps because he felt that nothing much turned on it. Be that as it may, I observe that in Hubert’s affidavit filed on the application, he states on two occasions that neither he nor his mother ever occupied the property as tenants. Paragraphs 22 and 35 of his affidavit read as follows:

22. No acknowledgment or statement or act was made, stated or done by either my mother or I to the effect that my mother and I were occupying the property as mere tenants or as persons occupying the property at the will of my aunts.

23. No acknowledgement or statement or act has been made, stated or done by either my mother or I to the effect that my mother and I were occupying the property as mere tenants or as persons occupying the property at the will of my brothers. At all times we occupied the property and treated it as if we were the owners, planting gardens, maintaining the house and grounds and paying all the costs of operating the property except municipal taxes.

[43] If nothing more, the concessions that neither he nor his mother ever occupied the property as tenants at will are somewhat surprising given that Hubert’s case for possessory title rests on just such a finding – more accurately, that Duke and Fanny occupied the property in that capacity.

[44] Hubert’s “slip” cannot, however, be taken as dispositive. Perhaps he was simply trying to say that at all times, he and his mother acted under the belief that they were the rightful owners of the property and no one advised them differently.

[45] Be that as it may, to succeed in his claim for possessory title, Hubert had to bring the case within s. 5(7) of the Act. It follows, with respect, that the application judge erred in structuring his analysis on the Masidon model. He should instead have asked whether Duke and Fanny were tenants at will and, if so, whether their occupation of the property in that capacity was continuous and uninterrupted for a period of ten years following the notional termination of the tenancy one year after its commencement.

[46] In the end, as I see it, this case turns on the first of those questions, namely, whether Duke and Fanny occupied the property as tenants at will. The answer to that question lies in the nature of the relationship that existed between Duke and his sisters, Mercy and Flora, under the original arrangement by which Duke occupied the property and thereafter, the nature of the relationship that existed between Fanny and her sons, Charles and Warren, under the arrangement by which Fanny occupied the property.

[47] Did Duke and Fanny occupy the property as tenants at will or as licensees? The distinction between the two legal concepts is important in possessory title claims because a tenancy at will creates an estate or interest in the land, whereas a licence to use the land does not, although it may give rise to contractual rights (see Street v. Mountford, [1985] 2 All E.R. 289 at 291 and Errington at p. 154).

[48] For present purposes, s. 5(7) of the Act only comes into play if Duke and Fanny occupied the property as tenants at will. The right of recovery contemplated by that provision carries with it the notion that either the person or persons seeking recovery, or their predecessors, have conveyed an estate or interest in the land. If no such estate has passed, as is the case where the property is occupied pursuant to a licence, there is nothing to be reclaimed.

[49] What then is a tenant at will and what distinguishes a tenancy from a licensee? In Ocean Harvesters, at p. 686 Dickson J. explained that “[A] tenancy at will is created when one person permits another to occupy lands on the agreement, express or implied, that the tenancy is determinable at the will of either”. He further observed at p. 687 that “[E]xclusive possession by the tenant is essential to the demise and the statute will not bar the owner unless the owner is out of possession”.

[50] As for the distinction between a tenant and licensee, at pp. 687-88 Dickson J. adopted as correct the following statement of law expressed by Windeyer J. in Radiach at p. 222:

What then is the fundamental right which a tenant has that distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant. [Emphasis in original.]

[51] With that in mind, one of the first questions that comes to mind is whether, under the original arrangement, Duke and his sisters intended to create a legally binding landlord and tenant relationship under which an estate in the property passed to Duke, along with the mutual rights and obligations that accompany it – including, at least theoretically, a right in Duke to sublet the property to a complete stranger.

[52] Absent formal documentation, of which there is none, and absent first-hand evidence from the original parties, I have difficulty accepting that Duke and his sisters intended to enter into any legal relationship at all, much less one that gave rise to the special relationship of landlord and tenant. On the contrary, it seems far more likely that they intended a loose family arrangement of convenience under which Flora and Mercy conferred personal privileges upon Duke, without giving any interest in the land.

[53] Flora and Mercy were looking to retire on the family farm which they had recently inherited. They needed someone to build a home for them and maintain the property. And since neither one could drive, they needed someone with a car who could take them to town.

[54] Duke proved to be the perfect choice. Unable to work fulltime as a carpenter due to injury, he was short of money. Flora and Mercy could afford the building materials needed for their home and a second one for Duke and Fanny. Duke would provide the labour. After the homes were built, Duke and Fanny would live rent free in the second one and Flora and Mercy would pay the taxes on both properties. They would also pay Duke a small monthly stipend to maintain the properties and drive them to town as required.

[55] In my view, the facts and circumstances of this case take it out of the mainstream and place it in a special category of cases under which the occupation of the property by Duke and Fanny, though exclusive, was that of a licensee, not a tenant at will. Put simply, Duke was allowed to enjoy sole occupation of the property in fact, but he was not given a right of exclusive possession in law.

[56] The special category of cases of which I speak has been identified in a number of English authorities, including Street v. Mountford; Heslop v. Burns, [1974] 1 W.L.R. 1241 (C.A.); Errington v. Errington; Cobb v. Lane and Facchini v. Bryson, [1952] 1 T.L.R. 1386 (C.A.), where at pp. 1389-90 Denning L.J. said:

In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy.

[57] In Errington v. Errington at pp. 154-55, Denning L.J. referred to a number of cases in which “occupiers in exclusive possession” had “been held to be not tenants, but only licensees”. He explained the rationale as follows:

The result of all these cases is that, although a person who is let into exclusive possession is, prima facie, to be considered to be a tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy. Words alone may not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege with no interest in the land, he will be held only to be a licensee. [Emphasis added.]

[58] Cobb v. Lane, decided after Errington, is one such example. The case is useful for present purposes because it is factually similar to the case at hand and it traces the development and refinement of the law that has led to the modern-day distinction between tenancies and licensees.

[59] The facts in Cobb are straightforward. As a result of discussions at a family gathering, Agatha Lane purchased a house in her name. She permitted her brother and his wife and young daughter to live in it. Shortly after the brother and his family moved in, he became ill and could not afford to pay the taxes. He and his sister then agreed that he could remain in the house rent-free and she would pay the taxes; in return, he was to “keep the house intact.”

[60] For the next 13 years, until his sister’s death in 1950, the brother lived in the house in accordance with the arrangement. At her death, Agatha left the house to others and her executors claimed possession of it, contending that her brother was a mere licensee. The brother, on the other hand, claimed that because he had had exclusive possession of the house for an indefinite period of time, a tenancy at will should be implied so as to bar the action and extinguish Agatha’s title under statutory provisions similar to those found in ss. 5(7) and 15 of the Ontario Act.

[61] On these facts, the trial judge rejected the defendant brother’s contention and concluded as follows:

I think it is fair to infer that the defendant’s occupation of the premises in the present case was a consequence of the family discussion which took place at Christmas, 1935. It was a method of providing financial assistance to the defendant and his wife and infant daughter by means of a convenient family arrangement. I do not think that there was any intention on the part of any of the parties concerned of creating any legal relationship or of assuming any legal obligations. [Emphasis added.]

[62] In the Court of Appeal, Somervell L.J. delivered the primary set of reasons. He found at p. 1201 that the trial judge had “applied the proper principles” to the facts and had come “to the same conclusion as I would myself have come to.” In so holding, Somervell L.J. did not “very much quarrel” with the proposition, put forward on behalf of the brother, that “where there is exclusive occupation for an indefinite period a tenancy at will must be implied unless there is something in the facts to prevent that conclusion” (at p. 1200). That said, he noted that “[t]he modern cases establish that, if there is evidence of the circumstances in which the person claiming to be a tenant at will went into occupation, those circumstances must be considered in deciding what the intention of the parties was (at p. 1200).” In this regard, Somervell L.J. quoted with approval the following observations of Lord Greene M.R. in Booker v. Palmer, [1942] 2 All E.R. 674 at 676-77:

Whether or not parties intend to create as between themselves the relationship of landlord and tenant, under which an estate is created in the tenant and certain mutual obligations arise by implication of law, must in the last resort be a question of intention... There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationships where the circumstances and the conduct of the parties negative any intention of the kind.

[63] In a concurring opinion, Denning L.J., after reviewing the facts, made the following apposite observations at p. 1202:

The question in all these cases is one of intention: Did the circumstances and the conduct of the parties show that all that was intended was that the occupier should have a personal privilege with no interest in the land? It seems to me that the [trial] judge has so found. The defendant had only a personal privilege with no interest in the land, which he could assign or sub-let, and he could not part with the possession to another. He was only a licensee, and he cannot pray in aid the provisions of the Limitation Act, 1939. [Emphasis added.]

[64] Heslop v. Burns is another case where the rightful owner of a cottage allowed a husband and his wife and daughter to live in the cottage rent free from 1954 until the owner’s death in 1970. In his will, the owner left the property to others. His estate sued for possession, contending that the family had acquired a personal licence to occupy the premises without payment of rent and that the licence terminated upon the owner’s death. The family resisted, maintaining that they had occupied the cottage as tenants at will for more than 12 years and that the deceased’s right of action had accordingly become statute-barred under the Limitation Act, 1939.

[65] The trial judge accepted the family’s submissions and refused to make an order for possession. He found that the deceased, who had formed a romantic relationship with the wife, had meant to provide a home for the family and intended that they continue to live there. At no time did the deceased require the family to pay rent or taxes or any other expenses relating to the property. Until he became ill in 1968, the deceased would visit the family regularly, sometimes twice a day, and often have dinner with them. As well, he became the child’s godfather and paid for her education and provided her with money and gifts. In those circumstances, the trial judge found that the family had occupied the cottage as tenants at will of the deceased and accordingly, he found in their favour.

[66] The English Court of Appeal unanimously overturned that finding, concluding instead that the family occupied the cottage as licensees. All three justices (Stamp, Roskill and Scarman L.J.J.) adopted the principles enunciated some 20 years earlier in Cobb v. Lane and concluded that the trial judge erred in finding that there was an intention to create an interest in land in the family. Roskill L.J. put the matter succinctly at p. 1249 as follows:

For my part, like Stamp L.J., I am quite unable to infer any intention in the present case to create legal relations at all, let alone an intention to create in the defendants [the family] any interest in the land in these premises... Indeed, with all respect to the county court judge, who reached the opposite conclusion, I think the whole weight of the evidence is the other way.

[67] In separate reasons, Scarman L.J. considered the modern-day approach by which courts are to analyze cases of this nature. On the facts before him, the new approach meant that even if the family had the right to exclude the deceased from the property under the terms of their occupation, that would not, in itself, necessarily result in a tenancy at will. Citing Cobb v. Lane, Scarman L.J. observed at p. 1252 that exclusive occupation of property for an indefinite period of time is no longer inconsistent with the occupier being a licensee and not a tenant at will.

[68] Returning to the modern-day approach, Scarman L.J. explained, at p. 1252, that what had “happened between 1899 and 1952” was not a function of impermissible “judicial legislation”, but a reflection of changes in society:

What has happened, of course, is not that the law has changed but that society has. To deal with changed social conditions, the Rent Restrictions Acts since 1914-1915 have introduced a new dimension to the law of landlord and tenant, and there has also emerged into prominence the licence to occupy.

[69] According to Scarman L.J., changes in society had led the courts to engage in a “more subtle investigation ... in answering the two questions: ‘What is the intention of the parties?’ and ‘Are there circumstances negativing the inference of a tenancy at will?’” He quoted with approval Denning L.J.’s statement in Facchini v. Bryson, set out above at para. 56, which, according to Scarman L.J., provides “helpful guidance as to the sort of circumstances that now have to be examined and assessed in determining whether or not a tenancy has been created” (at p. 1252). For convenience, the pertinent quote from Facchini is reproduced again:

In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy.

[70] Applying those guidelines to the case before him, Scarman L.J. found the situation to be “akin to a family relationship”, “a whole course of dealing within the realm of friendship”, and “very great generosity shown over a long number of years” by the deceased to the family. In the end, he could not see how the case before him could be distinguished in principle from Cobb v. Lane. Scarman L.J. concluded at p. 1253 that the “social changes” to which he had alluded “seem to show that less and less will the courts be inclined to infer a tenancy at will from an exclusive occupation of indefinite duration.”

[71] I have referred at some length to Heslop v. Burns and in particular Scarman L.J.’s reasons because, in my view, the approach taken in that case reflects the approach that courts should be taking when s. 5(7) of the Act is set up as a bar to a claim for possession brought by or on behalf of the owner. In this regard, I note that Heslop was referred to with apparent approval by the House of Lords in its 1985 decision in Street v. Mountford at p. 298.

[72] In Street v. Mountford, at p. 298, Templeman L.J. writing for the court (of which Lord Scarman was now a member) made specific reference to Denning L.J.’s statement in Facchini v. Bryson that Scarman L.J. had approved in Heslop v. Burns. Templeman L.J. also referred, at p. 300, to the Radaich decision from Australia and, like Dickson J. in Ocean Harvesters, he too adopted as correct Windeyer J.’s statement about the features of a tenancy that distinguish it from a licence.

[73] For present purposes, it is important to note that Windeyer J.’s discussion of the features that distinguish a tenant from a licensee occurred in the context of a broader discussion of the “modern day” approach that the English Court of Appeal had been applying in cases such as Errington v. Errington, Cobb v. Lane and Facchini v. Bryson. Without referring to specific cases, Windeyer J. explained at pp. 222-23 the rationale behind these decisions and the principle for which they stand:

Recently some transactions from which in the past tenancies at will would have been inferred have been somewhat readily treated as creating only licences. And it has been said – especially in connection with family relationships, charity or hospitality – that allowing a person to have the exclusive possession of premises does not necessarily indicate a tenancy as distinct from a licence. These decisions are largely a by-product of rent restriction statutes and other legislation here and in England. They are all explicable if they mean, as I think they all do, that persons who are allowed to enjoy sole occupation in fact are not necessarily to be taken to have been given a right of exclusive possession in law. If there be any decision which goes further and states positively that a person legally entitled to exclusive possession for a term is a licensee and not a tenant, it should be disregarded, for it is self-contradictory and meaningless. [Emphasis added.]

[74] I agree with Windeyer J.’s statement of the law and would only add that in general, cases in which persons are allowed to enjoy sole occupation in fact, but not as of right in law, will more likely than not come within the class of cases envisioned by Denning L.J. in Facchini, such as family arrangements, acts of friendship or generosity, or the like. Occupancy pursuant to a contract of employment will also fall into the licensee category where the employee requires the premises to better perform his duties. See Street v. Mountford at p. 300.

[75] I believe the modern approach makes good sense as a matter of policy. Specifically, I see no reason why persons who have been permitted to occupy land pursuant to a family arrangement motivated by natural affection and generosity should be able to turn around years later and repay their benefactor with a claim for possessory title. Consider the case of parents who, out of natural love and affection, permit an impecunious child to occupy and treat as his or her own, a second home free of charge, only to wake up 11 years later and find that the second home now belongs to the child and they can no longer deal with it as they see fit.

[76] As a matter of policy, I see no reason why the path to acquiring possessory title should be made easy in such circumstances; on the contrary, I believe it should be made difficult. In the context of a claim for possessory title involving s. 5(7) of the Act, this can be achieved by looking carefully at the intention of the parties and the circumstances surrounding the occupation and requiring clear evidence upon which a court can be satisfied, on balance, that a tenancy at will was truly created. Strict adherence to the burden of proof should be demanded.

[77] The case at hand is not so dramatic as the example involving the parents; however, in my view, the facts and circumstances surrounding Duke’s initial occupation of the property and Fanny’s occupation of it following his death, favour a finding that Duke and Fanny occupied the property as licensees and not as tenants at will. This was a family arrangement initiated by Flora and Mercy out of concern for Duke and his ability to earn a living. Under the arrangement, Duke would build homes for his sisters and for him and his family to live in rent-free, while retaining his sense of self-worth by doing maintenance work around the properties and driving his sisters to town. In return, he would receive a small amount of spending money. In some respects, Duke’s role might be equated to that of an employee responsible for maintenance – a role he could best fulfill by living next door to his sisters.

[78] In sum, Duke’s occupation of the property was attributable to sibling affection, generosity and employment considerations. In my view, the arrangement initiated by Flora and Mercy was clearly personal to him and his wife Fanny. In the words of Denning L.J. in Errington at p. 155 and Cobb v. Lane at p. 1202, the resulting arrangement and “the circumstances and the conduct of the parties show that all that was intended was that the occupier [Duke] should be granted a personal privilege with no interest in the land” and certainly none “which he could assign or sub-let, and he could not part with the possession to another.” The same holds true for Fanny in the years that she occupied the property.

[79] In support of his position that Duke and Fanny occupied the property as tenants at will, Hubert makes much of the fact that Flora and Mercy permitted a second brother, Charles (not the respondent on this appeal), to build a third home on the farm property and upon Charles’ death, they conveyed the third home to his wife at her request. Hubert also points out that when the province expropriated a strip of land from the property occupied by Duke and Fanny, Duke received the proceeds of the expropriation. Hubert relies on that payment to show that Duke had an interest in the property and that his occupation surpassed that of a mere licensee.

[80] In my view, neither factor carries any weight. The record is silent as to the circumstances surrounding the transfer of the third home to Charles’ widow and for that reason, it is unhelpful. In particular, it tells us nothing about the nature of Duke’s occupation – except perhaps to demonstrate that Flora and Mercy never intended to convey a legal interest in the property to Duke and thus felt free to convey his property to whomever they chose.

[81] As for the compensation paid to Duke for the expropriation of a strip of land from the property he and Fanny occupied, the evidence relating to that transaction is second-hand hearsay and the inference that Hubert seeks to draw from it is purely speculative. To the extent that the hearsay evidence has any value (a matter not free from doubt), it supports the respondents’ contention that the compensation was paid to Flora and Mercy who, in turn, used it to pay Duke his monthly stipend.

[82] As I have already mentioned, in finding that Duke and Fanny were tenants at will, the application judge focused almost entirely on the fact that they enjoyed sole occupation of the property during the relevant timeframes. Admittedly, in Duke’s case, he also found that Duke “built the house for himself and treated it as his property, improving it on one occasion and maintaining its lawn and garden separate from those of his sisters.”

[83] While I do not quarrel with those findings, they are, in my respectful view, either incomplete or inconsequential in deciding the status of Duke’s occupation. Unquestionably, Duke built the second home for himself and Fanny, but he did so with funds provided by his sisters, and he was permitted to live in the home rent free and paid no taxes.

[84] As for treating the property as his own, there is no evidence one way or the other whether Duke sought permission from his sisters before making improvements to the property in 1972. The fact that he maintained his lawn and garden separate from his sisters says little. It formed part of the arrangement with his sisters and, in any event, it simply went to show that he enjoyed sole occupation of the property in fact, a finding with which I do not quarrel. But, as I have attempted to show, that occupation by itself is not enough to create a tenancy at will in the special circumstances of this case.

[85] As for the “family arrangement” cases cited by the application judge in which claims for possessory title proved successful, I do not see them as helping Hubert. In Train v. Metzger, Holland J. found the occupants to be tenants at will, but he provided no analysis for that finding and made no attempt to distinguish a tenancy relationship from a licensee relationship. In Horne v. Grant, no such analysis was undertaken because s. 5(7) of the Act played no part in the decision. The case was decided under s. 4 of the Act. (For a case in which the tenancy at will/licensee distinction is discussed, see Lehr v. St. Mary River Irrigation District, [1993] A.J. No. 1411 (Q.B.) where McBain J. applied the modern-day approach and dismissed a possessory title claim on the basis that the claimants were licensees, not tenants at will. The case contains a helpful review of the factors that give rise to a licence.)

[86] In the end, I am satisfied that Duke and Fanny occupied the property at all times as licensees and not as tenants at will. At the very least, Hubert has not met his onus of showing that a tenancy at will was created. The application judge’s finding to the contrary is not entitled to deference for the reasons set out above at paras. 40 and 41. Accordingly, 5(7) of the Act has no application and there is no other basis upon which Hubert’s claim for possessory title can succeed. I would thus reject this aspect of the appeal.

II. Unjust Enrichment Claim

[87] Following the release of his reasons on the possessory title claim, the application judge addressed the alternate relief sought by Hubert which was identified in his Notice of Application as follows:

(3) Alternate relief: value of the improvement:

(a) Conveyancing and Law of Property Act, R.S.O. 1990, c. C. 34, s. 37(1), as amended.

[88] As can be seen, the claim as pleaded was not for unjust enrichment, but for the value of the improvements made to the property pursuant to s. 37(1) of the Conveyancing and Law of Property Act.

[89] In oral argument, it was pointed out to counsel for Hubert that the claim as pleaded could not succeed because under s. 37(1) the Conveyancing and Law of Property Act, the lasting improvements to the land had to be made by a person “under the belief that [the land] is the person’s own.” Here, there is no evidence that Duke ever believed he owned the land. The same holds true for Hubert.

[90] That said, the relief as pleaded was apparently recast before the application judge as a claim for unjust enrichment and the respondents do not allege prejudice. Accordingly, we felt it appropriate to hear the appeal and cross-appeal from the unjust enrichment claim.

[91] As I understand the unjust enrichment claim, it comprises two components. First, Hubert contends that his father, Duke, should be compensated for the time and effort he spent building the second home in which he and Fanny lived. In support of that contention, Hubert filed an affidavit from a realtor, Mr. Kelneck, in which the value of Duke’s labour was estimated to be $40,242 (representing one-half of the current value of the property).

[92] Second, Hubert contends that Duke should be compensated for the increase in value to the property attributable to the outbuildings Duke constructed in 1972 with his own funds. Hubert also claims a small amount for a new shed that he constructed on the property while living there with Fanny. Hubert again relies on the Kelneck affidavit in which the outbuildings are said to have increased the value of the property by $24,566.

[93] The application judge rejected the unjust enrichment claim as it related to Duke’s labour. He did so on the basis that Duke and Fanny were allowed to live in their home rent free, and Duke received a stipend for assisting his sisters and caring for their property. According to the application judge, “since [Duke] was paid for this work both in kind and in specie, no claim for unjust enrichment attaches to the construction of the original house.” I agree with the application judge’s analysis and conclusion as it relates to Duke’s labour in building the home, and would dismiss this aspect of the appeal.

[94] As for the increased value of the property attributable to the outbuildings built by Duke in 1972 and the shed built by Hubert, the application judge accepted that the claims for unjust enrichment had been made out and he valued them as follows:

I find that the value of the land in question has been increased by $18,000 by the addition of the four outbuildings identified in the Kelneck report. The Duke/MacKinnon estate should receive $17,000 of this and Hubert MacKinnon $1,000 for the new shed.

[95] Hubert submits that the application judge should have awarded the full amount of $24,566 identified by Mr. Kelneck as the improved value from the outbuildings. Charles and Warren disagree. They cross-appeal and submit that no award for unjust enrichment should have been made. Alternatively, if an award was justified, it should have been in the amount of $5,000, the amount by which the property had been improved according to their expert witness.

[96] I would not give effect to the appeal or cross-appeal on the issue of unjust enrichment. The application judge found that the outbuildings built by Duke “did not form a part of the arrangement between Duke and his sisters” and that the sisters “made no contribution to the projects either by supplying material or by paying Duke for his labour as they had with the house.” It followed that “Mercy and Flora and through them the present owners of the property [had] been enriched by the present value of those improvements” and “there has been an unjust enrichment of the present owners of the property.”

[97] In my view, it was open to the application judge to make those findings. I see no basis for interfering with them, and they support the application judge’s conclusion that a claim for unjust enrichment has been made out.

[98] Moreover, I see no basis for interfering with the award of $18,000. The application judge was faced with conflicting expert opinions as to the increased value of the land attributable to the outbuildings and the figure he arrived at was reasonable in the circumstances.

[99] Accordingly, I would dismiss the appeal and cross-appeal, subject to one minor variation in the order under appeal.

[100] Paragraph 2 of the July 6, 2009 order requires the respondents Charles and Warren “to pay the estate of Duke MacKinnon the sum of $17,000” in respect of the increased value of the land. This creates a problem in that the estate of Duke MacKinnon is not a party to the application. I would accordingly grant leave to amend the order and substitute the estate of Fanny Elizabeth MacKinnon for that of Duke MacKinnon. In all other respects, as indicated, I would dismiss the appeal and cross-appeal.

Conclusion

[101] In the result, I would dismiss Hubert’s appeal both in relation to the possessory title claim and the unjust enrichment claim. I would dismiss Charles’ and Warren’s cross-appeal on the unjust enrichment claim.

Costs

[102] If the parties cannot agree on the costs of the appeal, they may submit brief written submissions not exceeding three pages, double-spaced, within ten days of release of these reasons.

Signed: “M.J. Moldaver J.A.”

“I agree Doherty J.A.”

“I agree G. Epstein J.A.”

RELEASED: “DD” March 9, 2010