COURT OF APPEAL FOR ONTARIO

CITATION: Palkowski v. Ivancic, 2016 ONCA 762

DATE: 20161017

DOCKET: C61344

Pardu, Benotto and Huscroft JJ.A.

BETWEEN

Jerry Palkowski and Jane Palkowski

Plaintiffs (Respondents)

and

Stipan Ivancic, also known as Steve Ivancic

Defendant (Appellant)

Ronald G. Chapman, for the appellant

Marek Z. Tufman and G.A.P. Tufman, for the respondents

Heard: October 4, 2016

On appeal from the judgment of Justice Sean F. Dunphy of the Superior Court of Justice, October 23, 2015.

ENDORSEMENT

[1] The parties to this appeal signed an agreement of purchase and sale with respect to the respondents’ home at a price that was significantly below market value. The document was signed as part of a joint scheme with the appellant to defraud the respondents’ creditors by tricking them into believing that the respondents could not pay their debts. The trial judge found the agreement of purchase and sale to be a “sham.”

[2] The parties also had an oral agreement that the respondents could live in the house, reimburse the appellant for the carrying costs of the mortgage, real property and taxes, and that the appellant would re-convey the house to the respondents at a later date.

[3] Litigation began between the parties in 2005 when the appellant refused the respondents’ demand that the property be re-conveyed to them. The respondents claimed that the property was held in an express trust for them, and also claimed unjust enrichment and a constructive trust.

[4] The respondents’ claim for an express trust was dismissed on a summary judgment motion because it was an agreement that was not in writing. The Court of Appeal upheld the decision. The remaining claims went to trial. The respondents sought relief for unjust enrichment, and a re-conveyance of the property pursuant to s. 37(1) of the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34 (“CLPA”).

[5] The trial judge granted judgment in the respondents’ favour and ordered a re-conveyance to them, subject to a payment to the appellant to reflect his contributions which included a cash payment to the respondents at the time of the conveyance.

[6] The appellant claims that the trial judge erred by ordering the transfer of the property pursuant to an unjust enrichment analysis; failed to apply the “clean hands” doctrine to the claim for equitable relief; and erred in his application of s. 37(1) of the CLPA.

[7] We do not accept these submissions.

[8] The trial judge found that the appellant had been enriched and that there was a corresponding deprivation on the part of the respondents. He concluded that there was no juristic cause to justify the enrichment. The appellant submits that in this respect the trial judge erred because the existence of a contract can constitute a juristic reason for an enrichment. (See: Garland v. Consumers’ Gas Co. 2004 SCC 25). The existence of the agreement of purchase and sale, they argue, constitutes an absolute bar to a claim for unjust enrichment.

[9] This submission ignores the trial judge’s unchallenged finding with respect to the agreement of purchase and sale. The trial judge found that the agreement was a “sham” transaction. Thus, as between the appellant and respondent, there was no contract to bar the claim for unjust enrichment.

[10] The trial judge correctly applied the doctrine of unjust enrichment. He found that monetary damages were not adequate and that there was a link between the contribution that founds the action and the property in which the constructive trust is claimed. The discretionary remedy was based on the findings of the trial judge which are not challenged by the appellant.

[11] The trial judge’s reasons make it abundantly clear that he was aware of the “clean hands” doctrine. He considered neither party to be blameless and used his discretion to fashion an appropriate remedy.

[12] We need not consider whether the trial judge could have granted the same relief under s. 37(1) of the CLPA.

[13] The appeal is dismissed with costs payable to the respondents in the amount of $17,500 inclusive of disbursements and HST.

“G. Pardu J.A.”

“M.L. Benotto J.A.”

“Grant Huscroft J.A.”