Court File and Parties
Court File No.: CV-15-1757-00 Date: 2017-04-07 Superior Court of Justice - Ontario
Re: Sheila Frances Robertson, David Robertson and Kelly Broome-Robertson, Applicants – and – Elizabeth Graham, Respondent
Before: André J.
Counsel: J. David Keith, for the Applicants Ross Earnshaw, for the Respondent
Heard: March 22, 2017, at Brampton
Endorsement
[1] The applicants seek to set aside a transfer of land from Mr. Robert Graham to his daughter, Ms. Elizabeth Graham, for nominal consideration, and to set aside an Order to Continue this application that was obtained by Ms. Graham in January 2017 so that she may take the place of her father as the named respondent.
Background Facts
[2] This dispute revolves around a property located in Caledon (“the Property”) that has been in the applicants’ family since 1844.
[3] Robert (Bob) Graham owned a 1/3 interest in the Property with David Robertson and Kelly Broome-Robertson jointly owning their 1/3 interest and Sheila Frances Robertson owning the remaining 1/3 interest. These individuals own their respective interests as tenants in common.
[4] The ownership of the Property is governed by three agreements, namely:
(a) an agreement dated April 16, 1960 (the First Agreement); (b) an agreement dated October 10, 1960 (the Second Agreement); and (c) an agreement dated September 6, 1965 (the Third Agreement).
[5] These agreements all bind the successors, heirs and assigns of the parties.
[6] On the First Agreement is in issue on this application.
[7] Under the First Agreement, an owner’s interest in the Property can be transferred in one of three ways, namely: devise and bequeath the interest in accordance with conditions set out in the agreement; obtain the consent of the remaining owners to transfer the interest; or sell the interest with a right of first refusal owing to the remaining owners.
[8] In 1960, Dr. Robert Graham, the grandfather of Ms. Graham, acquired a one-third interest in the Property after a consent signed by the remaining owners. He agreed to be bound by the April 16, 1960 agreement.
[9] Dr. Robert Graham died in 1977. In 1978, his widow Mural sought and obtained the consent of the remaining owners for her to transfer her late husband’s share of the property to her son Bob and his sister, Susan Worts.
[10] In October, 1999, David Robertson’s grandfather, Ted Graham, transferred his interest in the property to David’s mother and David’s uncle, who then transferred that interest to the applicants David Robertson and his wife Kelly. Following this transaction, Bob Graham signed a consent for the transfer of the 1/3 interest to David and Kelly.
[11] In October 2013, Ms. Graham unsuccessfully attempted to obtain the applicants’ consent to have her father’s interest in the Property transferred to her.
[12] On April 1, 2015, David Robertson commenced an application seeking partition and sale of the Property, and/or the forced sale of Bob Graham’s one-third interest in the Property to any or all of the applicants.
[13] In September 2015, Ms. Graham produced her father’s limited Power of Attorney that appointed her as his attorney for property, which granted her the authority to sell his interest in the Property.
[14] On September 1, 2016, Bob Graham purported to transfer his interest in the Property to Elizabeth Graham, without obtaining the consent of the remaining owners or providing the remaining owners an opportunity to purchase his interest.
[15] The applicants commenced an application to contest the transfer of Bob Graham’s interest in the Property to Ms. Graham.
[16] After a motion was scheduled to contest the transfer, Ms. Graham obtained an Order to Continue without notice to the applicants.
Positions of the Parties
Applicants’ Position
[17] The applicants submit that:
(1) The Order to Continue should be set aside. (2) The transfer of Robert Graham’s portion of the property to his daughter, Ms. Graham, should be set aside because it violates the terms of the First Agreement and is therefore invalid.
Respondent’s Position
[18] Ms. Graham submits that:
(1) The Order to Continue is valid and enforceable. (2) The transfer of a portion of the Property does not violate the First Agreement because the agreement only applies to the transfer of the Property to third parties as opposed to members of the Property owner’s family. It does not apply to inter vivos transfers from father to daughter for “natural love and affection”.
[19] Ms. Graham submits, in the alternative that:
(1) Any requirement for consent as a condition precedent to the transfer has been vitiated/nullified by actions of the applicant, David Robertson and others since 1960; (2) David Robertson has unreasonably withheld consent to the transfer for ulterior motives that ought not to be supported by this court; and (3) The Agreement is not enforceable because of s. 119(9) of the Land Titles Act, R.S.O. 1990, c. L.5.
Analysis
[20] This motion raises the following issues:
- Should the Order to Continue be set aside because of non-compliance with Clause 3(ii) of the First Agreement?
- Should the transfer be upheld because David Robertson unreasonably withheld consent for ulterior motives?
- Is the First Agreement unenforceable because of s. 119(9) of the Land Titles Act?
Issue No. One: Should the Order to Continue be set aside?
[21] Rules 11.01 and 11.02(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provide as follows:
11.01 Where at any stage of a proceeding the interest or liability of a party is transferred or transmitted to another person by assignment, bankruptcy, death or other means, the proceeding shall be stayed with respect to the party whose interest or liability has been transferred or transmitted until an order to continue the proceeding by or against the other person has been obtained.
11.02 (1) Where a transfer or transmission of the interest or liability of a party takes place while a proceeding is pending, any interested person may, on filing an affidavit verifying the transfer or transmission of interest or liability, obtain on requisition from the registrar an order to continue (Form 11A), without notice to any other party.
(2) An order to continue shall be served forthwith on every other party.
[22] Rule 37.14 states that:
37.14 (1) A party or other person who,
(a) is affected by an order obtained on motion without notice; (b) fails to appear on a motion through accident, mistake or insufficient notice; or (c) is affected by an order of a registrar,
may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion.
(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.
[23] The applicants submit that Robert Graham failed to fulfill the conditions in the Agreement before transferring his interest in the Property in that he did not receive written consent from the applicants in order to transfer his share of the Property to his daughter.
Analysis
[24] A resolution of the parties’ dispute requires the proper interpretation of the provisions of the First Agreement that relate to the transfer of an owner’s share of his or her property. The ultimate question will be whether consent is required to all transfers of an owner’s share, or whether consent is only required if the transfer is to an unrelated third party.
The First Agreement
[25] Clauses 1 and 2 of the First Agreement provide as follows:
- Definitions:
(a) “farm” means that certain parcel and tract of land held by us as tenants in common and described in that certain Deed dated the 16 day of April, 1960 and registered to the Registry Office of the County of Peel for Caledon as No. 26106. (b) “share” means one of the undivided one-third interests in the farm owned by any one of us, (c) “owner” means one of us, (d) “building lot” means a portion of the farm approximately one acre in area as may from time to time be agreed to by us, (e) “family” means an owner’s husband or wife and issue.
- An owner and his family have the following rights:
(i) The sole and exclusive right to the use, occupation, possession and benefit of one building lot subject to the terms and conditions herein contained; and (ii) The right to the use and benefit of all the rest and remainder of the farm, other than the building lots, equally and jointly with the other owners, subject to the terms and conditions herein contained.
[26] Clauses 3 and 4 provide that:
- An owner shall not:
(i) permit any buildings or other structures of any kind or nature whatsoever to be erected on his building lot other than one single family dwelling unit, and the usual appurtenances thereto; (ii) sell, lease, license or in any other manner or form alienate or allow any other person to have or enjoy his share and any of the rights and privileges appurtenant thereto without the prior written consent of the other owners, except that in the event of an owner desiring to sell his share and the owners of all the other shares refusing to give that consent then the following shall be followed: the owner desiring to sell his share shall first offer to all of the other owners, in writing, to sell his share to all or any one or more of the owners of all the other shares, on the same terms and conditions as those on which he proposes to sell, and the owners of the other shares, or any one or more of them, shall have thirty days in which to accept that offer. In the event of the owner not selling his share on these terms and conditions, then he shall not sell his share on any other terms or conditions without first repeating the procedure aforesaid; the intent and purpose of this clause being to insure that before any share is sold to a person other than one who is already an owner of a share, the owners of all the other shares shall be afforded an opportunity of purchasing the share to be sold on exactly the same terms and conditions as those on which the share is to be sold. In the event of a share being sold to a person other than one who is presently an owner of a share, then the owner selling the share shall only sell subject to the purchaser covenanting and agreeing with the other owners to abide by the terms of this agreement; (iii) permit any building on or take any action with respect to his building lot or his share unless and until he has complied with all the statutes, by-laws, rules and regulations and other requirements of any Dominion, Provincial, Municipal or other competent authority or any of their departments.
- The owner of a share may devise and bequeath his share to such member of his family or of the family of another owner as he may see fit. In the event of the beneficial ownership of a share devolving upon or passing to any person other than a member of the deceased owner’s family or the family of another owner, then the other owners may require that the deceased owner’s share be valued by a single arbitrator to be appointed by mutual agreement, and failing such agreement by the Judge of the County Court of the County of Peel, and following such valuation be offered for sale to the other owners and each of them at the valuation so determined.
[27] Clause 1 of the First Agreement defines the words “owner” and “family”, among others. Clause 2 sets out the rights of an owner and his family regarding the use and enjoyment of their respective building lots and the remaining areas of the farm. Clause 3 sets out limitations on an owner either to erect a building or other structure on his building lot, other than a dwelling house, and his right to “sell, lease, license or in any other manner or form alienate or allow any other person to have or enjoy his share … (emphasis added).” Clause 4 sets out limits with respect to how the property may be disposed of by Will. Since the transfer from Robert Graham to Elizabeth Graham was not by Will, Clause 3 is of particular concern.
[28] Does Clause 3 of the First Agreement apply to restrict an owner’s ability to transfer his interest by way of an inter vivos gift?
[29] A valid inter vivos gift is one that is intended to take effect during the lifetime of the donor. It consists of a voluntary transfer of property to another person with the full intention that the property will not be returned. To establish a gift, one must show an intention to donate, sufficient delivery of the gift, and acceptance of the gift: see Re Foley, 2015 ONCA 382, at para. 25. Consideration is not required to constitute a valid inter vivos gift: see Thorsteinson Estate v. Olson, 2016 SKCA 134, at para. 29.
[30] Clause 3 (ii) of the First Agreement, specifically the first part which states “sell, lease, license or in any other manner or form alienate or allow any other person to have or enjoy his share”, applies to an inter vivos gift. Such a gift necessarily involves an alienation of a share of property. The phrase “or in any other manner or form” after the phrase “sell, lease, license” suggests that the clause would include gifts of “nominal consideration”. To that extent, an inter vivos gift is covered by Clause 3 (ii) of the agreement.
[31] The real issue is whether Clause 3 (ii) applies to an inter vivos gift given to a family member.
[32] In my view, it does. Clause 3 (ii) prohibits the owner from selling, leasing or alienating his share of the Property to “any other person” without first obtaining their consent, or offering to sell the property to the other owners. There is no “family” limitation to the phrase “any other person” in the clause. To the contrary, the clause indicates the following:
[T]he intent and purpose of this clause being to insure that before any share is sold to a person other than one who is already an owner of a share, the owners of all the other shares shall be afforded an opportunity of purchasing the share to be sold on exactly the same terms and conditions as those on which the share is to be sold. (Emphasis added)
[33] If the signatories to the First Agreement had intended to exclude a family member from Clause 3 (ii), they could have included a phrase similar to that contained in Clause 4. This clause reads, inter alia:
In the event of the beneficial ownership of a share devolving upon or passing to any person other than a member of the deceased owner’s family or the family of another owner… (emphasis added)
[34] In order to interpret the meaning of the First Agreement, the overarching concern is to determine “the intent of the parties and the scope of their understanding”: see Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, at para. 47.
[35] In my view, the parties clearly intended that no owner would sell, or transfer their interest in the property during their lifetime without complying with Clause 3 (ii) of the Agreement. Clause 4 provides an exception to Clause 3 by permitting an owner to devise and bequeath his share of the property to a family member or to a family member of another owner without seeking the consent of the other owners. If the signatories wanted an exception to the requirement to obtain the consent of the other owners, such as that in Clause 4, they would have stated so explicitly.
[36] The post-agreement conduct of the owners provides additional evidence that Bob Graham required the other owners’ consent before transferring his one-third interest in the Property to his daughter. In 1977, Muriel Graham, Bob’s mother, sought and obtained the consent of the other owners’ when she transferred her husband’s interest in the Property to the couple’s own children, Bob Graham and Susan Worts. Similarly in October 1999, Ted Graham obtained consent from the other owners to transfer his interest in the Property to his children, which included David Robertson’s mother. She then transferred her interest to her son, the applicant David Robertson and his wife. Bob Graham signed a consent after the transfer to permit the transfer to not only Kelly, who I acknowledge would certainly need express consent, but also to David. The fact that Bob Graham signed a consent, albeit after the transfer, suggests that he recognized that under the First Agreement, his consent was necessary to a valid transfer.
[37] For the above reasons, the transfer of Robert Graham’s interest in the Property to his daughter Elizabeth Graham was contrary to the terms of the First Agreement. Accordingly, the assignment was invalid and did not convey any interest in the subject property: see L.M. Rosen Realty Ltd. v. D’Amore et al., p. 16; 1984 CarswellOnt 1368, para. 35.
Issue No. Two: Should the transfer be upheld because David Robertson unreasonably withheld consent for ulterior motives?
[38] Ms. Graham’s counsel submits that David Robertson cynically withheld consent of the transfer to be able to obtain Bob Graham’s share of the Property for the same “nominal consideration” that Elizabeth Graham provided.
[39] I do not agree with this submission. Clause 3 (ii) does not contemplate a situation where an owner who seeks to make an inter vivos gift to a child or transfer that interest to a family member for nominal consideration is obliged to first make a similar offer to the other owners. Clause 3 (ii) only contemplates a situation where the owner desires to sell that share, not a transfer by way of gift.
[40] Second, with regard to the argument that David Robertson unreasonably withheld consent, the 2013 request for a consent to the transfer was not made by the owner; rather, it was made by the transferee. This is not what is contemplated by Clause 3 (ii) of the First Agreement. David Robertson deposed that Robert Graham never contacted the other owners regarding the transfer of his interest in the Property.
[41] David Robertson deposed that Ms. Graham’s siblings raised concerns about her actions and that that was an additional reason why he did not consent to the proposed transfer.
[42] In my view, based on the evidence before me, David Robertson’s consent was not unreasonably denied. To that extent, the impugned transfer cannot be upheld because David Robertson did not consent to it.
Issue No. Three: Is the First Agreement unenforceable because of s. 119(9) of the Land Titles Act?
[43] Section 119(9) of the Land Titles Act provides that:
Where a condition, restriction or covenant has been registered as annexed to or running with the land and no period or date was fixed for its expiry, the condition, restriction or covenant is deemed to have expired forty years after the condition, restriction or covenant was registered, and may be deleted from the register by the land registrar.
[44] Ms. Graham’s counsel submits that the First Agreement has not been registered and is therefore unenforceable and, further, even if it had been registered, it would have expired forty years later.
[45] To be enforceable, the First Agreement was not required to be registered under the Land Titles Act. Indeed, s 118(1) of the Act provides that:
Where the registered owner of freehold or leasehold land or of a charge desires to impose restrictions on transferring or charging the land or charge, the registered owner MAY apply to the land registrar to make an entry on the register that no transfer shall be made or charge created unless the following things, or such of them as the owner determines, are done… (emphasis added)
[46] Two observations can be made of this section. First registration is discretionary rather than mandatory. Second, given that the First Agreement was not registered, it did not expire after forty years.
[47] Furthermore, Clause 10 of the First Agreement provides that:
This agreement shall be binding upon and enure to the benefit of the parties hereto, their respective heirs, administrators and assigns.
[48] There is therefore no time limitation set out in the Agreement.
[49] For the above reasons, Clause 3 (ii) of the First Agreement is not deemed to have expired, as Ms. Graham’s counsel suggests.
Conclusion
[50] The applicants’ motion is granted.
[51] I therefore declare that:
- Robert H. Graham breached the agreement dated April 16, 1960 by transferring the subject property to Elizabeth Graham.
- The transfer of the subject property to Elizabeth Graham is invalid.
[52] Order to go that:
- The relevant Land Registrar delete Instrument Number PR2982438 showing ownership in the name of Elizabeth Graham, and to rectify the register to show the same ownership which existed immediately prior to that instrument’s registration.
- The Order to Continue issued by the Registrar, dated January 5, 2017, is set aside.
Costs
[53] The applicants seek costs in the amount of $6,406.81 on a partial indemnity basis.
[54] The respondent suggests that costs in the amount of $6,500 should be awarded to the successful party.
[55] Costs fixed in the amount of $6,500 inclusive is payable by Elizabeth Graham to the applicants within ninety (90) days of today’s date.