Court File and Parties

COURT FILE NO.: CV-12-470005 DATE: 20190301

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MICHEL DRAKOULAKOS Plaintiff/Defendant by Counterclaim

– and –

MARTHA STIRPE A.K.A. MARTHA DRAKOULAKOS AND MARK STIRPE AND 1166504 ONTARIO LIMITED Defendants/Plaintiffs by Counterclaim

COUNSEL: Patrick Summers and Kristina Bezprozvznnykhj, for the Plaintiff/Defendant by Counterclaim Ronald P. Bohm and David Lee, for the Defendants/Plaintiffs by Counterclaim

HEARD: January 7, 8, 9, 10, 11 and 14, 15, 16, 17, 18, 2019

Cavanagh J.

Reasons for Judgment

Introduction

[1] The plaintiff Michel Drakoulakos is the father of the defendant Martha Stirpe née Drakoulakos (“Martha”) and the father-in-law of the defendant Mark Stirpe (“Mark”).

[2] Martha is the president of the defendant 1166054 Ontario Limited (“1166”) and the registered owner of the single share in its capital stock that was issued to her when 1166 was incorporated in 1996. The assets owned by 1166 include two taxis and other investments.

[3] On November 19, 2010 there was a very serious family argument that involved Mr. Drakoulakos, his wife Angelika Drakoulakos, Martha, and Mark. Following this argument, Mr. Drakoulakos and Mrs. Drakoulakos separated, and they are now divorced. Mr. Drakoulakos has become estranged from the other members of his family.

[4] After the family argument, Mr. Drakoulakos retained legal counsel and by letter dated November 30, 2010 from his lawyer, Mr. Drakoulakos claimed that he is the true owner of 1166 and demanded that Martha transfer to him the single share in 1166. Martha, through her lawyer responded on December 9, 2010 that Mr. Drakoulakos never had any ownership interest in 1166.

[5] This action was commenced on December 13, 2012.

[6] In the statement of claim, Mr. Drakoulakos claims a declaration that Martha is the trustee holding for his sole benefit the single share issued to her in 1166 and judgment accordingly. Mr. Drakoulakos also seeks delivery of 1166’s corporate and financial documents and its seal, and judgment upon an accounting of assets and earnings of 1166 from November 2010.

[7] At trial, Mr. Drakoulakos agreed that because the money used to pay the purchase price for the taxis that were owned by 1166 came from a joint bank account of Mr. and Mrs. Drakoulakos, his claim for the beneficial ownership of the single share issued to Martha in 1166 is limited to a claim for the beneficial ownership of a one-half interest in this share.

[8] Mr. Drakoulakos also makes alternative claims based upon principles of unjust enrichment and constructive trust.

[9] In his statement of claim, Mr. Drakoulakos also claimed damages based upon his allegation that Martha and Mark breached a contract by which they agreed to provide to Mr. Drakoulakos the use of an apartment to be built in the basement of the home of Martha and Mark. This claim was abandoned in the closing submissions of Mr. Drakoulakos’ counsel.

[10] Martha counterclaims for damages in the amount of $49,000 based upon her allegation that following the family argument on November 19, 2010. Mr. Drakoulakos made two separate withdrawals in amounts totaling $49,000 from her credit cards in respect of which he was a secondary account holder and Mr. Drakoulakos has not repaid these amounts. In closing submissions, Mr. Drakoulakos’ counsel acknowledged that there was no evidence to support a defence to the counterclaim.

[11] For the following reasons, the action is dismissed and the counterclaim is allowed.

Background Facts

Mr. Drakoulakos immigrates to Canada and begins a new life

[12] Mr. Drakoulakos was born in Greece in 1944. He came to Canada in January 1973. He married Angelika Drakoulakos. Their only child, Martha, was born in October 1973.

Mr. Drakoulakos employment and his workplace accidents

[13] When he came to Canada, Mr. Drakoulakos found work on a full-time basis. Mr. Drakoulakos had two workplace accidents in January and October 1981. After the second accident, he was not able to continue to work as an employee.

[14] Mr. Drakoulakos qualified for and received benefits from the Workplace Insurance Safety Board and disability benefits under the Canada Pension Plan.

Mrs. Drakoulakos’ Employment

[15] Mrs. Drakoulakos began working for a company full time on the night shift at as a machine operator. She continued to work full-time until 2003 when the company moved to Brampton. This was too far for Mrs. Drakoulakos to travel and she accepted a separation package.

The joint bank account

[16] Mr. Drakoulakos’ employment income and his disability benefits were deposited into a joint bank account in the names of Mr. and Mrs. Drakoulakos. Mrs. Drakoulakos’ salary was also deposited into the joint account.

[17] From the time that it was opened, Mr. Drakoulakos managed the joint account. He did all of the banking.

Martha’s education and employment income

[18] Martha attended high school and lived with her parents. During high school, Martha worked on a part-time basis. Her earnings were deposited into the joint account. Mr. Drakoulakos managed the money in the joint account, including Martha’s part-time employment income.

[19] Martha attended university at York University and graduated in April 1996 with a degree in psychology. After her graduation, she attended Seneca College of Applied Arts and Technology and, in August 1997, she graduated with a certificate in human resources.

[20] Following her graduation from Seneca College, Martha obtained full-time employment. Martha was added as an account holder to the joint account in September or October 1996. Her salary from her full-time employment was deposited into the joint account. Mr. Drakoulakos continued to manage the joint account, including Martha’s employment income. Starting in October 1993, Mr. Drakoulakos also paid Martha income from the taxi business as a form of income splitting, and he made RRSP deposits for her. This income was also deposited to the joint account.

[21] Mr. Drakoulakos managed Martha’s income which was deposited to the joint account until her marriage in June 2000.

The taxi business and incorporation of companies to own the taxis

[22] After Mr. Drakoulakos’ workplace accidents in 1981, he started investing in the taxi business in order to earn income. Mr. Drakoulakos purchased the first taxi in 1981 and he purchased additional taxis in the following years until 1991, by which time he had acquired six taxis. These taxis, including the licences, were registered in his wife’s name at her insistence because, according to Mr. Drakoulakos, she did not trust him and wanted the taxis in her name for security. According to Mr. Drakoulakos’ evidence, he and Mrs. Drakoulakos owned the taxis. Mr. Drakoulakos testified that he did all of the work in respect of the taxi business, including buying replacement cars, finding drivers, and dealing with the regulatory requirements. Mr. Drakoulakos did not drive the taxis himself. They were rented to drivers who made monthly rental payments.

[23] Mr. Drakoulakos testified that in 1994 there were changes to the regulations with respect to taxis. The license owner was required to attend at the licensing tribunal and at the Ministry of Transportation when the cars were inspected annually. Mr. Drakoulakos testified that Mrs. Drakoulakos did not speak English well, and it was difficult for her to manage these responsibilities.

[24] In late 1995, Mr. Drakoulakos retained a lawyer to incorporate six companies, and he arranged for one taxi to be owned by each corporation. Mr. Drakoulakos’ wife was the registered owner of the single share of each corporation. Mr. Drakoulakos testified that he caused these corporations to be incorporated because of the restrictions that had been put on owners of taxi licenses. A corporation was able to appoint one of its employees to be the authorized custodian of the taxi who could do all of the things that an owner could do. Mr. Drakoulakos was appointed as the authorized custodian of each of the taxis owned by the six corporations. As a result, Mrs. Drakoulakos did not need to attend at the Ministry of Transportation to deal with inspection issues with respect to the taxis. In addition, Mr. Drakoulakos caused the separate corporations to be incorporated for each taxi license in order to ensure that if the driver of a taxi was in an accident, there would be no liability issues in relation to the other taxis.

[25] The six corporations were incorporated on December 19, 1995.

Incorporation of 1166504 and purchase of taxi number 2302

[26] In January 1996, about one month following the incorporation of the six companies, Mr. Drakoulakos arranged to purchase a seventh taxi for a purchase price of $65,000. Mr. Drakoulakos paid a down payment of $3,000 on January 16, 1996 and then a second down payment in the same amount. These payments were made from the joint account.

[27] Mr. Drakoulakos retained the same lawyer to incorporate a company to become the owner of the seventh taxi as he had used for the incorporations of the companies which owned the other six taxis. 1166 was incorporated on January 29, 1996. In the incorporation documents, Martha is shown to be the sole director, sole shareholder and the president of 1166. The single common share of 1166 was allotted to Martha. A share certificate was issued in her name. Mr. Drakoulakos was shown to be the Treasurer. Mrs. Drakoulakos was shown to be the Manager. The necessary corporate resolutions and related documents including the corporate by-law were prepared by the lawyer and signed by Martha, where required, as president of 1166 and as its sole shareholder.

[28] An agreement of purchase and sale dated February 5, 1996 was made between the seller of taxi 2302 and 1166 as purchaser for the sale and purchase of taxi 2302 for a purchase price of $65,000. Martha signed as president of 1166.

[29] As part of this transaction, Martha signed a negotiable promissory note dated February 5, 1996 for herself and in her capacity as president of 1166. The promissory note provides that for value received, Martha and 1166 promise to pay to Mr. and Mrs. Drakoulakos, jointly, the principal money of $65,000. The promissory note provides that the principal sum is payable on demand. The promissory note was prepared by the lawyer and it was signed at his office.

[30] The balance of the purchase price for the purchase of taxi 2302 was paid by Mr. Drakoulakos through a cheque drawn on the joint account dated February 23, 1996 in the amount of $59,000. Mr. Drakoulakos also paid the legal charges for the transaction and the taxi transfer fees from the joint account. At this time, only Mr. Drakoulakos and his wife were named account holders of the joint account.

[31] Mr. Drakoulakos put into evidence a document that he called his “reconciliation” that is a detailed statement of funds going into and from the joint account. In addition, bank statements for the joint account were put into evidence. It is clear that although some money was put into the joint account by Martha including the income from her employment before her marriage, most of the money that was deposited to and held in the joint account came from Mr. and Mrs. Drakoulakos.

Management of taxi business and affairs of 1166

[32] A bank account was opened at Scotiabank in the name of 1166. The bank statements were sent to Mr. Drakoulakos at his address. The address at which these bank statements were sent did not change after Martha married in June 2000. Mr. Drakoulakos did the banking for 1166 as part of his management of the taxi business. Only Mr. Drakoulakos had signing authority for the bank account of 1166, and he signed all of the cheques, with only a very few exceptions where Martha also signed.

[33] Mr. Drakoulakos testified that he arranged to retain accountants for 1166 and he paid the fees for the accountants, usually from the joint account. The accountant took instructions from him, and not from his daughter. Martha’s evidence is that she selected one of the accountants for 1166 who she found through a work contact. Mr. Drakoulakos testified that he was the one who provided information to the accountant to complete financial statements and tax returns for 1166, and he kept the statements and returns. He did not discuss them with his wife or daughter. According to Mr. Drakoulakos’ evidence, he kept the corporate minute book for 1166 from 2002 until July 2010 when he had to go for an operation in Florida. Before that, they were kept with the lawyer. When he had to go for his operation, Mr. Drakoulakos was not sure whether he would survive the operation and he gave the corporate minute book to his daughter together with his will and other legal documents.

[34] After the incorporation of the companies Mr. Drakoulakos continued to manage the taxi business. The income from the taxi business, including from the taxi owned by 1166, was deposited, either directly or from 1166’s bank account, into the joint account. Mr. Drakoulakos made all of the decisions with respect to the taxi business. He did not treat the taxi owned by 1166 differently from the other taxis.

Engagement of Martha and Mark, the $200,000 gift, and additional advances of $180,000

[35] Martha and Mark became formally engaged in October 1998 and the wedding date was planned for June 24, 2000. Mark’s parents owned property in Richmond Hill and they said that they would give a lot to Mark and Martha to build a house. Mark’s parents estimated that the value of the lot was $200,000. Martha’s parents wanted to match this gift, and they agreed to give Martha and Mark $200,000 to be used for construction of the house. Construction on the house started in approximately 1999.

[36] The $200,000 that Martha’s parents had given was not enough to complete construction of the house. Martha’s parents told her that they would advance additional amounts to fund what was required to build the house. They advanced $150,000 from funds from the joint account and, later, an additional $30,000. Martha and Mark signed two promissory notes in the amounts of $150,000 and $30,000, that were payable on demand to Martha’s parents.

[37] Martha and Mark married on June 24, 2000. After this time, Martha’s salary was no longer deposited into the joint account and she set up a separate joint account with her husband. Mr. Drakoulakos testified that from the time that Martha started full-time employment in August 1997 to the time of her marriage in June 2000, approximately $50,000-$60,000 of her income was deposited to the joint account.

Purchase of taxi number 2903

[38] At the end of 2002, Mr. Drakoulakos decided to purchase another taxi from the estate of a close friend who had died. He kept the same number, 2903. Mr. Drakoulakos retained a lawyer, a different lawyer from the lawyer who had been retained in 1995-96, to assist with the legal documents that were needed to purchase taxi 2903 and put ownership into the name of 1166.

[39] The purchase price was $80,000 and was paid by Mr. Drakoulakos from funds in the joint account. The charges for the taxi license transfer fee were also paid from the joint account.

[40] Mr. Drakoulakos testified that he did all of the negotiations with respect to the purchase of this license. His daughter was not involved, other than attending at the lawyer’s office to sign the necessary documents. Mr. Drakoulakos was designated to be the custodian of the taxi license. He testified that the authorized custodian was able to do everything that the owner of a taxi could do.

[41] Mr. Drakoulakos testified that Martha appeared at the taxi licensing tribunal once in 1996 and on another occasion around the time of the purchase agreement for taxi 2903

[42] Shortly after the taxi license for taxi 2903 was put into the name of 1166, Martha signed another promissory note in which she promised to pay the sum of $80,000, an amount equal to the purchase price for taxi 2903, to Mr. and Mrs. Drakoulakos, on demand.

[43] Mr. Drakoulakos testified that the income from the eight taxis was deposited into the joint account and that this continued until he sold some of the taxis and became involved in other investments. The income from the two taxis owned by 1166 continued to be paid to the joint account (after having been initially deposited to the account of 1166). Expenses for the taxi business were paid from the joint account. Payments for income taxes were made from the joint account.

[44] Martha and Mark did not ask to receive the profits from taxis 2302 or 2903 while these taxis were being managed by Mr. Drakoulakos.

Sale of original six taxis

[45] The six taxis which were owned by separate corporations whose shares were owned by Mrs. Drakoulakos were sold. The first was sold in 2001 and the others were sold in 2003. Mr. Drakoulakos paid commissions on the sales of four of the taxis in the amount of $5,000 for each taxi.

[46] Mr. Drakoulakos testified that after the taxis were sold, he needed to find other investments to provide income for the family because he was not able to work as an employee as a result of physical disabilities from his workplace accidents. He searched for other investment opportunities and decided to invest in mortgages. Mr. Drakoulakos also invested approximately $150,000 in a joint venture, Tanmar, with Mark’s parents.

Martha’s and Mark’s line of credit secured by mortgage on their home

[47] After they were married, Martha and Mark established a line of credit in their names with Scotiabank that was secured by a first mortgage on their home.

[48] Mr. Drakoulakos did not have access to or signing authority for the line of credit account.

Investments made by 1166 using funds from Martha’s and Mark’s line of credit

[49] Martha and Mark testified that they used the line of credit to fund investments that were made through 1166.

[50] Mark gave evidence with respect to the various investments that were made through and owned by 1166 using funds drawn on the line of credit account.

[51] Mr. Drakoulakos evidence is that Martha and Mark agreed when the two amounts totalling $180,000 were advanced that he would have access to a line of credit to make investments that would earn income to pay living expenses for him and Mrs. Drakoulakos. Mr. Drakoulakos testified that he arranged for the line of credit. Mr. Drakoulakos maintained that the investments made by 1166 using funds drawn on the line of credit were intended to be for the benefit of him and his wife.

[52] Mr. Drakoulakos relies on evidence that there were a number of transactions involving payments from the joint account to the account of 1166 or to the line of credit account over the years. He submits that this shows a significant involvement by Mr. Drakoulakos in investments made by 1166 using funds drawn on the line of credit, and that this is evidence that Mr. Drakoulakos was intended to be the beneficial owner of the single share of 1166 registered in Martha’s name. For example, Mr. Drakoulakos relies upon evidence that $75,000 was paid from the joint account to the account of 1166 on May 21, 2010 which was used as part of an investment made by 1166 in the Pickering investment (in the aggregate amount of $448,000). The cheque has the word “loan” written on it. Mr. Drakoulakos’ reconciliation also uses the word “loan” to describe advances made from the joint account to 1166.

[53] Mark testified that there were occasions when short term loans were made by Mr. and Mrs. Drakoulakos through advances deposited to the line of credit account from the joint account, and that all of these short term loans were repaid. Mark points to a one of the line of credit statements that shows a withdrawal of $75,000 that, he testified, was in repayment of the $75,000 advance made from the joint account.

[54] Mr. Drakoulakos submits that I do not need to make findings on whether there is or is not any amount owing to Mr. Drakoulakos for loans to 1166 or to Martha and Mark, but that I should consider this evidence as supportive of a finding that Mr. Drakoulakos intended that he was a beneficial owner of an interest in the share of 1166 at the time it was registered in Martha’s name.

The family argument on November 19, 2010

[55] Evidence was given by Mr. Drakoulakos, Martha, Mark, and Mrs. Drakoulakos with respect to a serious family argument that took place on November 19, 2010 at the home of Martha and Mark. The argument was triggered, at least in part, by Mr. Drakoulakos’ wish to sell the condominium that he and his wife owned and move to a rented apartment closer to the home of Mark and Martha and the grandchildren. Mrs. Drakoulakos was strongly opposed selling the condominium. Mr. Drakoulakos was also upset that the basement at the home of Mark and Martha was not finished. He testified that it was expected that he and Mrs. Drakoulakos would move to an apartment in the basement of the home of Martha and Mark.

[56] The argument escalated and Martha called the police. Mr. Drakoulakos was asked to leave, and he did so.

[57] After Mr. Drakoulakos left, his wife stayed behind at her daughter’s home. Mr. and Mrs. Drakoulakos separated that evening, and they are now divorced. Mrs. Drakoulakos lives with her daughter and son-in-law. Martha testified that there were attempts to reconcile the family, but they were not successful. Mr. Drakoulakos is estranged from his family.

Events after November 19, 2010

[58] By letter dated November 30, 2010, a lawyer representing Mr. Drakoulakos wrote to Martha and advised that Mr. Drakoulakos has at all material times been the true owner of 1166, and he requested that the necessary arrangements be made to transfer ownership of 1166 into his name. In this letter, Mr. Drakoulakos’ lawyer advised that Mr. Drakoulakos is willing to pay out the balance owing on the line of credit as a condition of transferring ownership of 1166.

[59] By letter dated December 9, 2010, a lawyer representing Martha responded to Mr. Drakoulakos’ lawyer and advised that he has never had any ownership interest in 1166.

[60] By resolution of the director of 1166 dated April 7, 2011, Mr. Drakoulakos was removed as treasurer of 1166 and Mark was appointed as treasurer of 1166.

[61] This action was commenced by a statement of claim issued on December 13, 2012.

Analysis

[62] The following issues arise in this action:

a. Does a presumption of resulting trust in favour of Mr. Drakoulakos arise in relation to the issuance of the single share of 1166 to Martha as part of a transaction by which 1166 purchased taxi 2302, using funds from the joint account? If so, has Martha rebutted this presumption by proving that Mr. Drakoulakos transferred taxi 2302 to her, through her ownership of the single share of 1166, as a gift? b. Is Mr. Drakoulakos entitled to advance alternative claims (to be quantified following a reference) for (i) an interest in the profits earned by 1166 on its assets, based upon principles of constructive trust and unjust enrichment, and (ii) the quantum meruit value of his efforts with respect to investments made by 1166? c. Is Martha entitled to an award of damages for breach of contract on her counterclaim because Mr. Drakoulakos withdrew $49,000 on her MasterCard without her permission which he did not repay?

[63] I address each issue in turn.

Does a presumption of resulting trust in favour of Mr. Drakoulakos arise in relation to the issuance of the single share of 1166 to Martha as part of a transaction by which 1166 purchased taxi 2302, using funds from the joint account? If so, has Martha rebutted this presumption by proving that Mr. Drakoulakos transferred taxi 2302 to her, through her ownership of the single share of 1166, as a gift?

[64] I first set out the applicable legal principles with respect to resulting trusts.

[65] Where a gratuitous transfer of property from parents to an adult child is challenged, the following principles apply:

a. A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original owner: Pecore v. Pecore, 2007 SCC 17 at para. 20. b. Advancement is a gift during the transferor’s lifetime to a transferee who, by marriage or parent-child relationship, is financially dependent on the transferor. In certain circumstances, there will be a presumption of resulting trust or presumption of advancement. The presumption shifts the burden of persuasion to the opposing party who must rebut the presumption: Pecore at paras. 21-22. c. The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended. This is so because equity presumes bargains, not gifts: Pecore at paras. 24-25 and 27. d. Depending on the nature of the relationship between the transferor and transferee, the presumption of a resulting trust will not arise and there will be a presumption of advancement instead. The rebuttable presumption of advancement with regards to gratuitous transfers from parent to child should be preserved but be limited to application to transfers by mothers and fathers to minor children: Pecore at paras. 40-41. e. Where a gratuitous transfer is being challenged, the trial judge must begin his or her inquiry by determining the proper presumption to apply and then weigh all the evidence relating to the actual intention of the transferor at the time of the transfer to determine whether the presumption has been rebutted. The evidence needed to rebut both presumptions is evidence of the transferor’s contrary intention on the balance of probabilities. Thus, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities: Pecore at paras. 42-44; 55. f. Evidence of intention that arises subsequent to a gratuitous transfer is not automatically excluded. Such evidence, however, must be relevant to the intention of the transferor at the time of the transfer. The trial judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention: Pecore at para. 59. g. The purchase money resulting trust is a species of gratuitous transfer resulting trust where a person advances a contribution to the purchase price of property without taking legal title. A gratuitous transfer resulting trust presumptively arises anytime a person voluntarily transfers property to another unrelated person or purchases property in another’s name. Rascal Trucking Ltd. v. Nishi, 2013 SCC 33 at para. 21. h. In the case of a gratuitous transfer, there is a gift at law when the evidence demonstrates that, at the time of the transfer, the transferor intended the transferee to hold the beneficial interest in the property being purchased: Rascal at para. 37.

[66] The authorities are clear that the presumption of resulting trust arises where the transfer of money or other property from a parent to an adult child was gratuitous, in other words, without valuable consideration. See Pecore at paras. 20, 23, 24, 27, and 55; Kerr v. Baranow, 2011 SCC 10 at paras. 17-19; Rascal Trucking Ltd. v. Nishi, 2013 SCC 33 at para. 21; Andrade v. Andrade, 2016 ONCA 368 at paras. 57, 59-61; Malkov v. Stovichek-Malkov, 2017 ONSC 6822 at paras. 77-81; and Holtby v. Draper, 2017 ONCA 932 at paras. 31-37.

[67] The intention of the transferor is relevant both to whether there was a gratuitous transfer which raises the presumption of resulting trust and to whether the presumption of resulting trust has been rebutted: Malkov, at paras. 79-80.

[68] Mr. Drakoulakos and Martha both submit that the transfer of taxi 2302 to Martha through the issuance of the single share of 1166 (which was to be the owner if this taxi) to Martha as registered shareholder was a gratuitous transfer.

[69] There is no dispute that Mr. Drakoulakos is not precluded from claiming that he is the beneficial owner of the single share of 1166 that is registered in his daughter’s name through the presumption of resulting trust, notwithstanding that this share was issued to Martha by 1166 and it was not transferred directly by Mr. Drakoulakos. The focus of the resulting trust analysis should not be on the form but on the substance of the transaction. See Holtby at para. 43.

[70] I am satisfied that the purchase price for taxi 2302 was paid from the joint account, and that the money on deposit in the joint account at this time was contributed almost entirely by Mr. and Mrs. Drakoulakos. I approach the analysis of the evidence with respect to Mr. Drakoulakos’ claim of a beneficial interest in one-half of the single share of 1166 on this basis.

[71] If I accept that the transfer of taxi 2303 from Mr. Drakoulakos to Martha (through 1166) was a gratuitous transfer, there would be a presumption of resulting trust in favour of Mr. Drakoulakos with respect to a one-half interest in the share of 1166 registered in Martha’s name. The burden of persuasion would shift to Martha to rebut the presumption of resulting trust and prove on the balance of probabilities that Mr. Drakoulakos intended to make a gift to Martha of taxi 2302 through her ownership of the single share of 1166: Pecore at para. 42-44, 55; Malkov, at para. 82.

[72] Mr. Drakoulakos submits that the acquisition by 1166 of taxi 2302 using funds from the joint account was a gratuitous transfer to Martha. Mr. Drakoulakos submits that his intention at the time of the transfer was that he and his wife were the beneficial owners of the single share of 1166 which owned taxi 2302. He submits that this transaction raises the legal presumption of resulting trust. He submits that a one-half interest in the single share of 1166 that was registered in Martha’s name belongs to him as the beneficial owner. He submits that because there is a presumption of resulting trust, the burden of proof shifts to Martha to prove on a balance of probabilities that a gift was intended and that Martha has not discharged this burden.

[73] Martha submits that she is the beneficial owner of the single share of 1166 because it was issued to her to complete her parents’ gift to her of a taxi. She submits that her parents made this gift to show their pride in her, to celebrate her upcoming graduation from university, and to help her with the beginning of her adult life. Martha submits that her evidence and the evidence of her husband and her mother should be accepted, and that she has discharged her burden of proving that she received a gift of taxi 2302 through her beneficial ownership of the single share of 1166.

[74] The evidence that is needed to determine whether there was a gratuitous transfer that raises a presumption of resulting trust and, if so, to rebut the presumption of resulting trust is evidence of Mr. Drakoulakos’ intention at the relevant time, that is, the time of the incorporation of 1166 and the purchase by 1166 of taxi 2302. The parties tendered evidence with respect to events before, at the time of, and after, the relevant time. I have considered all of this evidence insofar as it may be relevant to Mr. Drakoulakos’ intention at this time.

(a) The reason for the purchase of taxi 2302

[75] Mr. Drakoulakos testified that since as early as 1991 he intended to sell the six taxis that he had purchased when taxi prices were more favourable. He testified that when this happened, he and his wife would not have a source of income. Mr. Drakoulakos testified that he discussed this with all of the family members including his wife and Martha, as well as with her then serious boyfriend, Mark. Mr. Drakoulakos testified that he suggested to his daughter that he would create a corporation in her name, buy a taxi to be put into this company, and he would become the custodian of the taxi. In this way, income would be earned from this taxi, the seventh taxi, which would provide a monthly income for him and his wife that would exceed the modest amounts that can be earned from savings through a guaranteed investment certificate.

[76] Mr. Drakoulakos testified that he explained to Martha that there would be a benefit to her by putting the share of the company into her name because, when he died, she would not need to pay inheritance tax. Mr. Drakoulakos testified that Martha agreed. According to Mr. Drakoulakos’ evidence, Mark and Martha persuaded his wife to sell the other six taxi licenses on the understanding that a seventh taxi license would be purchased to provide monthly income for Mr. Drakoulakos and Mrs. Drakoulakos.

[77] Martha disputed the evidence of Mr. Drakoulakos with respect to the reason for the purchase of the seventh taxi. She testified that in late 1995 and early 1996, she was doing well in her studies at York University and expected to graduate in the spring of 1996. She testified that her parents were very proud of her and that they wanted to do something for her to celebrate her graduation from university and help her to build her life. She testified that her parents explained that the taxi business had been very good for the family and that they wanted to purchase a taxi for her that would be held in a corporation. Martha explained that she expressed concern about how she would manage the taxi and that her father responded that she should not worry, he would take care of the management of the taxi. Martha testified that she was very grateful for her parents’ generous gift.

[78] Mrs. Drakoulakos also testified about the reason for the purchase of the seventh taxi and her evidence supported Martha’s evidence. She testified that Martha was a good student and she and her husband were very proud of her. Mrs. Drakoulakos testified that she discussed with her husband that they should do something special for Martha’s graduation and he agreed. She testified that Mr. Drakoulakos suggested giving Martha a taxi plate. She testified that Mr. Drakoulakos found a taxi that was for sale and he made arrangements with the lawyer to prepare the necessary documents. Mrs. Drakoulakos was clear in her evidence that this was to be a gift to Martha.

[79] Mark also testified about the reason for the purchase of the seventh taxi. Mark testified that he and Martha started dating in September 1990 and that the relationship became serious over the next two to three years. They knew what they wanted to do with their lives and were talking about their futures together. Mark testified that before their marriage in June 2000, Martha told him that her parents had given her a taxi cab that was held in a company that she owned. He testified that he also heard from Mr. and Mrs. Drakoulakos that they had given their daughter a taxi cab that went with a corporation that was Martha’s.

(b) The decision to make Martha the registered owner of the share of 1166

[80] When taxi 2302 was purchased through 1166, Mr. Drakoulakos had recently completed transactions that involved the incorporation of six companies and the transfer of ownership of each of the six taxis to these companies. The single share of each company was put into the name of Mrs. Drakoulakos because, according to Mr. Drakoulakos’ evidence, his wife did not trust him. Mr. Drakoulakos used the same lawyer for the legal work in connection with the incorporation of 1166 and the purchase of taxi 2302 as he had used the previous month for the other transactions.

[81] Mr. Drakoulakos was asked why the share in 1166 was issued to Martha in January 1996 instead of to Mrs. Drakoulakos who was the owner of the shares of the other six companies. These other companies had been incorporated in December 1995 using the same lawyer. In response, Mr. Drakoulakos explained that because of changes that had been made to the rules governing ownership of taxis, his wife was not qualified to be an owner because she did not speak English well enough. He explained that Martha was qualified and that the only easy way to purchase a taxi was to register the company in Martha’s name.

[82] Mr. Drakoulakos was clear in his evidence that one of the benefits of using a corporation to own a taxi was that the corporation could nominate one of its employees to be the authorized custodian of the taxi, and that this employee could do anything that an owner could do. Mr. Drakoulakos was nominated to be the authorized custodian of each of the taxis that was owned by the six companies owned by his wife.

[83] Mr. Drakoulakos also gave evidence that there would be a benefit to Martha if the single share of 1166 were to be registered in her name because she would avoid taxes when her parents died. He did not explain why, if this was a significant motivating factor, Martha was not the registered shareholder of the single share of each of the other six companies that were incorporated the previous month.

(c) The first promissory note

[84] Mr. Drakoulakos testified that the promissory note was his idea and created a legally binding obligation on Martha’s part to pay the amount of $65,000 on demand, as shown by documents that were filed with the licensing commission. Mr. Drakoulakos testified that he told Martha in a meeting at the lawyer’s office that she had to sign the promissory note and that she and the company owed him the money. He testified that Martha did not say one word in response. Mr. Drakoulakos testified that he intended to be the beneficial owner of the share of 1166 that was registered in Martha’s name, and that Martha knew that the purchase of taxi 2302 by 1166 was not a gift to her because he paid the purchase price (jointly with Mrs. Drakoulakos) and Martha signed the demand promissory note.

[85] Mr. Drakoulakos relied upon his evidence that Martha knew that she owed him the money to support his contention that Martha knew that taxi 2302 was not a gift. The same approach was taken by Mr. Drakoulakos’ counsel in his cross-examination of Martha. Counsel for Mr. Drakoulakos put to Martha that the promissory note was a legally binding demand obligation and he suggested that, given this, the transfer of the taxi 2302 to a company that Martha owned could not be a gift.

[86] Martha’s evidence with respect to the reason for the promissory note was starkly different from her father’s evidence. Martha testified that she attended with her parents at the lawyer’s office to review and sign documents with respect to the incorporation of a company. She said that the lawyer carefully went through each and every document with her and that she signed the documents with respect to the incorporation of 1166. She testified that she knew going into this meeting that she would be the owner of 1166, and she was very grateful. Martha testified that at the end of this meeting, her parents met privately with the lawyer and they then spoke to her. She testified that her parents told her that the lawyer had explained that they might think about protection for Martha if she married and became divorced from her husband. According to Martha’s evidence, they told her that the lawyer suggested that she sign a promissory note in an amount equal to the purchase price of the taxi, $65,000, which could be enforced by her parents if Martha were to divorce from her husband. The money that was repaid could then be re-gifted to Martha without her husband sharing in the value of the taxi. Martha testified that she thought that this was a good idea and she agreed. At this time, Martha was in a serious relationship with Mark, and they had discussed marriage.

[87] Martha testified that she was asked to return to the lawyer’s office about a week later to sign other documents, including the promissory note. She testified that the lawyer had prepared a promissory note and that she signed it. The promissory note shows that Martha signed it in her personal capacity and as president of 1166. She testified that her parents were there and that the lawyer explained again what the promissory note was for, and his explanation matched the explanation that she had been given by her parents.

[88] Mrs. Drakoulakos also testified about the reason for the promissory note and her evidence supported Martha’s evidence. Mrs. Drakoulakos testified that Martha was there when she and her husband met with the lawyer to discuss incorporation of the company. He explained that 1166 was for Martha. Martha would be the president and her husband would be the treasurer. With respect to the promissory note, Mrs. Drakoulakos testified that Martha had gone out of the room, and she and her husband were asked to come back and speak with the lawyer. She testified that he said that they were giving a good present to their daughter and one day she is going to marry. The lawyer explained that if Martha divorced, she would have to share her property, and he suggested a promissory note to protect their daughter. After a divorce, the money would come back to them, and they could give it back to their daughter. Mrs. Drakoulakos testified that she liked this idea very much because it protected her daughter.

[89] I next consider the evidence of events that arose subsequent to the purchase of taxi 2302 that may be relevant to Mr. Drakoulakos’ intention at the time of this purchase.

(d) Mr. Drakoulakos managed the taxi 2302, controlled the income, and paid the expenses; Martha did not ask for payment of profits

[90] Mr. Drakoulakos relies upon the unchallenged evidence that from the time that taxi 2302 was purchased, he took responsibility for complying with the regulatory requirements and managing the income and expenses from this license. The income was deposited to the joint account and expenses, including payments for income taxes, were paid from the joint account. Mr. Drakoulakos testified that Martha and Mark never asked him for any of the profits from taxi 2302.

[91] Martha’s evidence is that her father was managing the other six taxis, and he assured her that he would also manage taxi 2302 which was a gift from her parents. According to Martha, Mr. Drakoulakos insisted on maintaining control over all of the financial affairs of the family. She testified that she was grateful for her parents’ gift and she willingly accepted that her father would manage the taxi business. This made sense to her because he had experience with the rules governing taxis and he was managing the other six taxis. Martha testified that she trusted her father to manage taxi 2302.

[92] In cross-examination, it was suggested to Martha that the fact that she did not ask for payment of profits from taxi 2302 conflicts with her position in this litigation that it was a gift to her. Martha responded that she trusted her father to manage the taxi business, and that she had no need to sell the taxi that had been given to her or to insist on receiving profits from it. Martha testified that her parents were very generous, and that they had given money and other gifts to her family that exceeded what she would receive from the taxi business. Martha testified that her relationship with her father would not allow her to ask for money from the taxi business, and that she would not have done so because the money came back in greater amounts by many times, through her parents’ generous gifts.

[93] It is clear based upon the evidence of all witnesses that Mr. Drakoulakos insisted on managing the financial affairs of the family. He managed the banking. He managed the taxi business. Even after Martha started to work full time, her salary was deposited into the joint account that was managed exclusively by Mr. Drakoulakos until Martha’s marriage. The evidence is also clear that Mr. and Mrs. Drakoulakos made many generous gifts to Martha and her family over the years, including through large cash payments. Mr. Drakoulakos’ “reconciliation” includes detailed records of these payments.

(e) Mr. Drakoulakos had sole signing authority for 1166’s bank account

[94] In support of his position that he always intended to be the beneficial owner of the share of 1166, Mr. Drakoulakos also relies upon the evidence that he had signing authority for 1166’s bank account, and Martha did not. Martha’s evidence is that her father was the treasurer of 1166, and that she was content to leave management of the bank account for 1166 with him. Mark’s evidence was that Mr. Drakoulakos signed cheques for 1166 as treasurer, but that there were relatively few cheques written in a given year.

[95] The rental amounts were initially deposited to and then transferred to the joint account. It is clear that Martha was content to have her father manage the taxi business, including the income and expenses from the two taxis owned by 1166.

(f) Advances of $180,000 by Mr. and Mrs. Drakoulakos to Martha and Mark for construction of their home; promissory notes given;

[96] Mr. Drakoulakos testified that there was no promissory note for the $200,000 that was advanced to Martha and Mark because this was a gift to celebrate their marriage.

[97] Mr. Drakoulakos testified that Martha and Mark asked him for additional money for construction of their home. He responded that he would lend them the additional money, but they would have to sign a promissory note and give him access to a line of credit so that he could pay living expenses. Mr. Drakoulakos testified that he discussed with Martha and Mark that unless they gave him access to a line of credit, he would not lend them the additional money. He testified that he agreed to lend $150,000 and an additional $30,000 to Martha and Mark so that they could complete construction on the house without taking a mortgage. They signed two promissory notes in the amounts of $150,000 and $30,000 that were payable, on demand, to Mr. and Mrs. Drakoulakos. Mr. Drakoulakos testified that the promissory notes were his idea.

[98] Mr. Drakoulakos testified that he was responsible for arranging the line of credit through his contact at Scotiabank, and that he dealt with the bank when the line of credit was increased from $650,000 to $880,000.

[99] Martha testified that the reason for these two promissory notes was the same reason as the first promissory note, that is, that they were signed in order to protect her in case she and Mark were to divorce. Martha testified that she discussed the reason for the promissory notes with Mark and that he thought this was fair, and he agreed to sign them. Martha testified that there was no discussion at this time about a line of credit, and that she and Mark were not considering obtaining a line of credit at this time.

[100] Mark testified that he discussed the promissory notes for the additional $180,000 with Martha and her parents. He testified that the reason for the notes was to protect Martha if she and Mark were to separate. Mr. and Mrs. Drakoulakos wanted to protect their daughter, and he had no problem signing the promissory notes under those terms. Mark testified that the additional advances of $150,000 and $30,000 were given as gifts to allow them to finish building their home.

[101] Mrs. Drakoulakos also testified with respect to these promissory notes. Her evidence supported the evidence given by Martha and Mark. Mrs. Drakoulakos testified that she discussed with her husband giving an additional $150,000 to help Martha and that the promissory note was to be given for the same reason - to protect Martha in case she were to divorce. Mrs. Drakoulakos testified that she discussed this with Mark and he said okay. Mrs. Drakoulakos testified that there was no discussion with Mr. Drakoulakos at this time about him having access to a line of credit secured by a mortgage on the home of Mark and Martha, or anything like that.

[102] Mr. Drakoulakos’ evidence in relation to the advances to Martha and Mark of $150,000 and $30,000 supported by promissory notes, and their connection to the line of credit that was obtained later, was to show that he intended that investments made later by 1166 using funds drawn on the line of credit would be beneficially owned by him (and his wife), and that this evidence supports a finding that he intended in 1996 when 1166 was incorporated that he (and his wife) would be the beneficial owners of the share of 1166.

(g) The line of credit and investments made by 1166 using funds drawn on the line of credit

[103] The line of credit was obtained in 2003. There were two accounts in the names of Martha and Mark. Initially, each had a limit of $325,000. In November 2009 the total of the available credit was increased to $880,000 over three accounts. The line of credit was secured by a mortgage on the family home of Martha and Mark. Mr. Drakoulakos did not have access to the line of credit.

[104] Mark testified that he would make regular deposits to the line of credit account from his and Martha’s employment income to pay down the line of credit. This increased the amount that would be available for investments. Over the period of time from 2005 (when the first statements are available) until November 19, 2010 (the date of the family argument) Mark and Martha made deposits to reduce the balance of the line of credit account from their after-tax employment income in an aggregate amount in excess of $500,000. Bank statements for the line of credit are not available before 2005, although Mark testified that he made deposits to reduce the line of credit for about 18 months before statements are available, and that the deposits were, on average, $80,000 per year. Mr. Drakoulakos does not challenge that these deposits were made.

[105] Investments were made by 1166 and held in that company. In his evidence, Mr. Drakoulakos said that he was responsible for obtaining the line of credit through a bank employee at Scotiabank that he introduced to Martha and Mark. He testified that Martha and Mark would not have obtained the line of credit without his influence. Mr. Drakoulakos testified that the investments that were made by 1166 using funds from the line of credit were intended to be investments that he would own through his beneficial ownership of the single share of 1166. Martha and Mark, in their evidence, categorically refuted this suggestion. Both of them said they would never have considered allowing Mr. Drakoulakos to use funds drawn on their line of credit that was secured by a mortgage against their home, to make investments for his personal benefit.

[106] I heard considerable evidence from Mr. Drakoulakos and from Mark about the investments that were made by 1166 using funds drawn on the line of credit. Mark and Martha vigorously denied that they allowed Mr. Drakoulakos make investments through 1166 using money drawn on their line of credit. They denied that the investments made by 1166 using funds drawn on the line of credit were beneficially owned by Mr. Drakoulakos.

[107] Mark gave extensive evidence concerning the investments that were made by 1166, mainly in mortgages, and his evidence was clear that these investments were made for the benefit of Mark and Martha and were made through 1166 because Martha was the owner of the single share of 1166.

(h) Purchase of taxi 2903 and promissory note given by Martha

[108] Mr. Drakoulakos testified that in early 2003 he was preparing to sell the taxis that were owned by the six companies of which his wife was the registered owner of the single share. He testified that his close friend had died and that he was helping with the estate of his friend. He decided to purchase taxi 2903 that had been owned by his friend. Mr. Drakoulakos retained a lawyer, a different lawyer from the one who had acted on the first seven incorporations, to assist with this purchase. Mr. Drakoulakos testified that he and his wife were the beneficial owners of taxi 2903 and that he needed the income from this taxi to pay for their living expenses.

[109] The documents in relation to this purchase include a purchase agreement dated November 7, 2002 between 1166 as purchaser and the estate as vendor for a purchase price of $80,000. Martha signed the relevant documents on behalf of 1166, as president. Mr. Drakoulakos was designated to be the designated custodian for taxi 2903. The purchase price for this taxi was paid from the joint account. Mr. Drakoulakos testified that the amount that had been accumulated in the joint account consisted of investments owned by him and his wife and wages paid to him and to his wife.

[110] Mr. Drakoulakos testified that Martha was not involved in the purchase of this taxi and that she did nothing but sign the documents. He testified that Martha appeared once at a taxi tribunal in 1996 and on another occasion around the time of the purchase of taxi 2903 but, other than those two appearances, he was responsible for the management of the taxis in his capacity as the designated custodian.

[111] As part of this transaction, Martha signed a promissory note in the principal amount of $80,000 dated February 13, 2003 by which she promised to pay to Mr. and Mrs. Drakoulakos this sum on demand. Mr. Drakoulakos testified that the promissory note was signed by Martha because he had a discussion with her and told her that she had to sign because she owes him the money for the taxi plate that was bought. He testified that Martha knew that he was in the process of selling the other taxis and that he and his wife needed cash flow every month to pay for living expenses. He testified that the promissory note was his idea.

[112] Martha testified that she was expecting her first child in April 2007. This would be her parents’ first grandchild. She testified that, for this occasion, her parents wanted to give her a gift of another taxi. Martha testified that the reason for the promissory note was exactly the same as the other notes, that is, to provide protection to her if she were to divorce from her husband. She said that she had no problem signing the note in the circumstances. Martha testified that she knew that her father would be managing this taxi, together with the other taxis, and that the income would be paid to the joint account and expenses would be paid from the joint account.

[113] Martha’s evidence was supported by the evidence of Mrs. Drakoulakos. She testified that she and Mr. Drakoulakos were very happy when they learned that Martha was expecting their first grandchild and that she spoke with him about giving another taxi to Martha as a present for this occasion. With respect to the promissory note, Mrs. Drakoulakos testified that it was given for the same reason, to protect Martha in case she divorced. She testified that this was discussed with Mark, and that he also agreed.

(i) The family argument on November 19, 2010

[114] Mr. Drakoulakos, Martha, Mark and Mrs. Drakoulakos each gave evidence with respect to a serious family argument that occurred at the home of Martha and Mark on November 19, 2010.

[115] During this heated argument, Mr. Drakoulakos became very agitated and angry. The argument escalated. At one point, Martha started to call the police and Mr. Drakoulakos tried to stop her. This resulted in Mr. Drakoulakos being asked to leave, and he left. There is a dispute in the evidence concerning his parting words.

[116] The evidence in relation to this argument may be relevant to determining Mr. Drakoulakos’ intention with respect to beneficial ownership of the share of 1166 at the time this share was issued and put into Martha’s name as beneficial owner because, according to the evidence of Martha, Mark, and Mrs. Drakoulakos, Mr. Drakoulakos said to them as he was leaving “I’ll fix you. You’ll see”.

[117] The letter from Mr. Drakoulakos’ lawyer asserting beneficial ownership of the share of 1166 was sent on November 30, 2010. Martha testified that before she received this letter, her father had never referred to a trust agreement by which she held ownership of 1166 in trust for him.

[118] The defendants submit that Mr. Drakoulakos commenced this litigation in order to carry out this threat.

Assessment of the evidence of Mr. Drakoulakos’ intention when taxi 2302 was purchased

[119] The most important evidence that bears upon Mr. Drakoulakos’ intention at the time of the purchase by 1166 of taxi 2302 and the issuance of the single share of 1166 to Martha is evidence of the witnesses concerning the events at that time and the relevant documents at the time of this purchase. I accept, however, that evidence in relation to subsequent events may be relevant to Mr. Drakoulakos’ intention when 1166 was incorporated, and I have considered the evidence as a whole.

[120] Mr. Drakoulakos’ evidence concerning the reason for the purchase of taxi 2302 conflicts with his evidence that, at this time, he intended to sell the other taxis. If Mr. Drakoulakos had decided to get out of the taxi business, one must question why he would purchase another taxi. If Mr. Drakoulakos had decided by late 1995 or early 1996 to sell the six taxis that he and his wife had acquired over a number of years because he did not consider them to be investments worth keeping, and he needed the income from one taxi to fund living expenses, why would not he simply wait for the right time to sell five of the taxis and keep one of them? This would have avoided the transaction costs associated with the purchase of taxi 2302 and the costs associated with the sale of six taxis instead of five taxis. The purchase of taxi 2302 does not make sense under the circumstances that Mr. Drakoulakos described. I do not find Mr. Drakoulakos’ evidence of his reason for the purchase of taxi 2302 to be credible.

[121] I also do not find Mr. Drakoulakos’ evidence explaining why the single share of 1166 was registered in Martha’s name, instead of in the name of his wife, to be credible. Mr. Drakoulakos’ evidence is that he and his wife were to be the beneficial owners of taxi 2302. One month before taxi 2302 was purchased, Mr. Drakoulakos had caused six companies to be incorporated to be the owners of the six taxis, and the single share of each of these companies was registered in Mrs. Drakoulakos’ name. Mr. Drakoulakos was the designated custodian for each of these taxis. Mr. Drakoulakos’ evidence that the single share of 1166 was put into Martha’s name because Mrs. Drakoulakos lacked sufficient proficiency in English to perform the obligations of a taxi owner is contradicted by his own evidence that a designated custodian could do all of the things that a taxi owner could do. If this was really a problem, he would not have put the single share of each of the first six companies into his wife’s name. I reject Mr. Drakoulakos’ evidence in this regard. There was clearly another reason why Mr. Drakoulakos did not follow the same ownership structure with respect to the seventh taxi as he had followed for the first six taxis. Martha’s evidence that taxi 2302 was a gift explains why the single share of 1166 was issued to her, instead of to her mother.

[122] Mr. Drakoulakos’ evidence with respect to the purpose for the first promissory note that Martha and 1166 signed is inconsistent with his evidence that he discussed with his wife and Martha that she would hold the share in 1166 for his benefit. Before Mr. Drakoulakos testified about the promissory note, he had testified that taxi 2302 was put into Martha’s name, through her registered ownership of the single share of 1166, because Martha was English speaking and could carry out the duties of a taxi owner under the new regulations. He said that he had discussed this with Martha. If this was true, and Martha had agreed to simply hold the taxi in trust for her parents, there would be no need for a promissory note. On its face, this note is enforceable on demand. Mr. Drakoulakos testified that this was a real debt; Martha owed him the money. He relied heavily on his evidence in this respect as showing that there was no gift to Martha.

[123] If Martha were called upon to pay this debt, then, according to Mr. Drakoulakos’ evidence that he and his wife were to be the beneficial owners of the single share of 1166, Martha would still be holding the share of 1166 in trust for him and his wife. This does not make sense. No reasonable person in Martha’s position would have signed a promissory note in these circumstances. The fact that a promissory note was part of the transaction conflicts with Mr. Drakoulakos’ evidence that he discussed with Martha, Mark, and Mrs. Drakoulakos that taxi 2302 was to be held in Martha’s name, through 1166, for the benefit of him and his wife.

[124] On the other hand, the explanation that Martha gave for why the note was signed makes sense in the context of the objective evidence in relation to the purchase of taxi 2302. Martha’s evidence is that the idea of a promissory note originated with the lawyer who was providing advice on the taxi purchase transaction, and that it was intended to be used only to protect Martha’s interests in the event that she were to separate and divorce from a future husband. Martha’s evidence in this respect was supported by Mrs. Drakoulakos’ evidence and by Mark’s evidence.

[125] I do not accept Mr. Drakoulakos’ evidence in relation to the reason for the first promissory note. His explanation does not make sense given the circumstances in which taxi 2302 was purchased. I accept the evidence of Martha and Mrs. Drakoulakos and find that the promissory note was given for the purpose of protecting Martha if her marriage failed and she were to divorce.

[126] I regard the evidence concerning subsequent events, to the extent that it informs my analysis of the evidence as a whole, to have far less importance than the evidence at the time of the issuance of the share of 1166 to Martha. In assessing the reliability of this evidence of intention and determining what weight it should be given, I have followed the direction given in Pecore to guard against evidence that is self-serving or that tends to reflect a change in intention.

[127] I do not regard the evidence that Mr. Drakoulakos managed the two taxis that were owned by 1166, that he was the signing officer for the bank account of 1166, or that Martha did not ask for or receive profits from these two taxis to be reliable evidence of Mr. Drakoulakos’ intention at the time that taxi 2302 was purchased. Martha explained the dynamics in the family under which Mr. Drakoulakos insisted on managing the family finances and the taxi business. There was ample evidence showing that Martha’s parents were very generous in making gifts to her family that exceeded the amounts earned by the two taxis. Further, the fact that Martha signed another demand promissory note in respect of the purchase by 1166 of the second taxi conflicts with Mr. Drakoulakos’ evidence that his intention from the beginning was that he and his wife owned 1166 beneficially. There would be no reason for Martha to sign a promissory note as part of a transaction in which she had no beneficial interest.

[128] Mr. Drakoulakos’ evidence with respect to the line of credit and the investments made by 1166 using funds drawn on the line of credit is also not credible. Mr. Drakoulakos’ evidence is that he was to be given access to the line of credit in exchange for lending $180,000 to Martha and Mark, and that investments made by 1166 using funds drawn on this line of credit were to be beneficially owned by him and his wife. At the times of these advances there was no line of credit. It was not obtained until later. I do not accept Mr. Drakoulakos’ evidence that he made the advances of $150,000 and $30,000 to be used to complete construction of Martha’s and Mark’s home in exchange for access to a future line of credit to be obtained by Martha and Mark and secured by a mortgage on their home. Mr. Drakoulakos’ evidence in this respect was credibly refuted by Martha and Mark.

[129] The line of credit was obtained by Martha and Mark, and secured by a mortgage on their home. Mark arranged for regular payments to be made from the employment income that he and his wife received to pay down the line of credit, so that more money would be available for investments. It is simply not credible that Martha and Mark would allow their personal incomes and their family home to be used to fund investments to be owned beneficially by Mr. Drakoulakos and his wife. I reject Mr. Drakoulakos’ evidence with respect to the line of credit and his claim that he intended to have beneficial ownership of investments made by 1166 using funds drawn on Martha’s and Mark’s line of credit. I accept the evidence of Martha and Mark and find that they never agreed to allow Mr. Drakoulakos to use funds drawn on their line of credit to make investments that he would beneficially own. I regard Mr. Drakoulakos’ evidence in this regard to reflect a change in his position (after the serious family argument) and to be self-serving.

[130] I do not regard the evidence that Mr. Drakoulakos was involved in the investment business that was carried on by 1166 by providing his input into investment decisions or providing loans from time to time through the joint account to fund investments shows that he intended in February 1997 that he would have an ownership interest in the single share of 1166 that was registered in Martha’s name. This is evidence that I regard with caution.

[131] The fact that Mr. Drakoulakos knew that investments were made by 1166 using funds from Martha’s and Mark’s line of credit supports my finding that Mr. Drakoulakos knew and understood at the relevant time, when the share in 1166 was issued to Martha, that 1166 was Martha’s company, and that she was the beneficial owner of its single share.

[132] In making these findings, I have also taken into account the manner in which Mr. Drakoulakos gave his evidence. Mr. Drakoulakos’ was consistently evasive and he repeatedly refused to give responsive answers to direct questions. His evidence that his daughter and son-in-law allowed him to use funds drawn on their line of credit to make investments for his benefit was, in my view, so far-fetched that it undermined his evidence as a whole. It seemed to me that throughout his evidence, Mr. Drakoulakos was straining to fit the facts into a narrative that was consistent with his ownership of 1166 and, through 1166, his ownership of its assets, including the two taxis and the other investments.

[133] On the other hand, Martha testified in a clear way. She explained the family dynamic by which her father insisted on managing the family finances and the taxi business. Martha’s evidence in relation to the circumstances surrounding the purchase of taxi 2302, the issuance of the single share of 1166 to her, and her signing of a promissory note, was consistent with the objective circumstances at the time of this transaction. Martha’s evidence was not undermined in any way on cross-examination. I accept Martha’s evidence and, where it conflicts with evidence given by Mr. Drakoulakos, I prefer Martha’s evidence.

[134] Mrs. Drakoulakos’ answered questions clearly and credibly. She is divorced from her husband, and there was reference in the evidence to ongoing divorce proceedings that remain contentious. Nevertheless, I did not perceive that Mrs. Drakoulakos’ evidence was affected by any personal animus towards her ex-husband. Her evidence was not challenged in any significant way on cross-examination. I accept the evidence given by Mrs. Drakoulakos where it conflicts with the evidence of her husband in relation to Mr. Drakoulakos’ intention at the relevant time, when taxi 2302 was purchased by 1166.

[135] Mark explained the circumstances surrounding the purchase of the family home, the financial assistance that was provided by his parents and by Martha’s parents, the circumstances surrounding the line of credit, and the investments made by 1166 using funds drawn on the line of credit in a clear and straightforward way. His evidence in respect of one of the investments, that he performed due diligence through a virtual data room, was contradicted by another witness, Mr. Carlucci. Otherwise, Mark’s evidence was not effectively challenged through cross-examination, and it was consistent with the evidence given by Martha and by Mrs. Drakoulakos.

[136] For these reasons, I accept Martha’s evidence and find that, at the time that 1166 was incorporated, she was told by her father and her mother that they wanted to make a gift to her of a taxi to recognize her upcoming graduation from university and to help her to start on her adult life. I also accept the supporting evidence given by Mrs. Drakoulakos and Mark in relation to the purchase of taxi 2302. I also accept Martha’s evidence and find that the promissory note was intended only to protect her if she were to separate and divorce, and that Mr. Drakoulakos and Mrs. Drakoulakos did not intend to ever call on this note except in such circumstances, where, if they arose, they intended to re-gift to Martha the money that was repaid. As a result of this finding, I conclude that the purchase of taxi 2302 by 1166 using funds from the joint account and the issuance of the single share of 1166 to Martha were parts of a gratuitous transfer. In so concluding, I note that in other cases, courts have looked at whether the transferee incurred obligations that were formally given but not expected to be honoured in order to determine whether a transfer was gratuitous. See Andrade at para. 64; Hu v. Li, 2016 BCSC 2131, at paras. 45-54.

[137] As a result of my conclusion that the transaction was a gratuitous transfer from parents (through payment of the purchase price from the joint account) to Martha, their adult child, of taxi 2302 through beneficial ownership of the single share of 1166, a presumption of resulting trust arises. The burden rests with Martha to prove on a balance of probabilities that at the time of the transfer, Mr. Drakoulakos intended to make a gift to her of taxi 2302 through her ownership of the single share of 1166.

[138] For the reasons I have given, I do not accept the evidence given by Mr. Drakoulakos that he told Martha that he intended to put taxi 2302 in her name, to be held for his benefit, or his evidence that he told Martha when she signed the first promissory note that she owed him the money.

[139] Martha has discharged her burden of proving that the transaction whereby the sole share of 1166 was issued to Martha, and 1166 purchased taxi 2302, was one by which Mr. Drakoulakos and Mrs. Drakoulakos made a gift to Martha of taxi 2302 through her ownership of the share of 1166. The evidence given by Martha, Mrs. Drakoulakos, and Mark in relation to this transaction, which I accept, demonstrates that at the time of this transaction, Mr. Drakoulakos intended Martha to hold the beneficial interest in the single share of 1166 which owned taxi 2302. The presumption of resulting trust has been rebutted.

[140] If I had accepted Mr. Drakoulakos’ evidence in relation to the promissory note that Martha signed as part of the transaction whereby 1166 acquired taxi 2302 (that she owed him the money), my conclusion that Martha is the beneficial owner of the share of 1166 would not change. This is because if Martha had truly incurred a personal obligation to pay the principal amount of the note to her parents, on demand, in consideration for the issuance of the share to her, the transfer would not have been a gratuitous transfer, and no presumption of resulting trust would arise. In these circumstances, Mr. and Mrs. Drakoulakos would have had rights against their daughter under the note, and not as beneficial owners of the share of 1166 through a presumption of resulting trust. Martha would still be the beneficial owner of this share of 1166.

[141] In his closing submissions, counsel for Mr. Drakoulakos submitted that if I were to conclude that the presumption of resulting trust in respect of Mr. Drakoulakos’ claim to a beneficial interest in one half of the single share of 1166 has been rebutted, it is open to me to apply principles of resulting trust to an alternative claim by Mr. Drakoulakos to a beneficial interest in assets acquired by 1166 (including the second taxi and two other investments) on each occasion that 1166 acquired these other assets. Under this approach, counsel submitted that I should consider the intention of Mr. Drakoulakos at different times, on each occasion when 1166 acquired an interest in these other assets.

[142] I disagree that Mr. Drakoulakos is entitled to claim an interest through a resulting trust in assets acquired by 1166 at various times after it was incorporated. This claim was not made in the statement of claim, and it was raised for the first time in the closing submissions made by Mr. Drakoulakos’ counsel.

[143] In the statement of claim, Mr. Drakoulakos pleads (with respect to his trust claim):

1. The Plaintiff claims: (a) a declaration of this court that the defendant Martha Stirpe a.k.a. Martha Drakoulakos (“Martha”) is the Trustee holding for the sole benefit of the plaintiff the single share issued to her in the defendant 1166504 Ontario Limited (“1166”) and judgment accordingly. (b) For an order of this court requiring that the share be transferred to the plaintiff and all corporate documentation of 1166, its corporate seal and financial documentation of 1166 be delivered to the plaintiff. (c) an accounting of the dealing of every description of the assets owned by 1166 from November 2010 to the present including the earnings of 1166 and the funds obtained by the disposition of these assets including earnings on these funds if any arising from their use and judgment of the court for the recovery of such earnings and proceeds from the disposition of these assets and the earnings arising from these dispositions that have been paid out to Martha and Mark Stirpe (“Mark”) or other payees as may be disclosed;

2. Prior to the incorporation of 1166 the plaintiff brought into existence other corporations and then financed them for the purchase of taxicab plates. The sole shareholder was the plaintiff’s wife, the mother of Martha. The plaintiff had sole control and made all decisions as to the operations of these corporations and the use of earnings and disposition of their assets. About the time of the incorporation of 1166 the licensing commission required purchasers of taxicab plates to complete application forms and to be responsive to queries. Since the wife of the plaintiff had limited knowledge of English the plaintiff requested Martha to become the sole shareholder of 1166 and she agreed with the knowledge that the share would be held in trust for the benefit of the plaintiff and that he alone would have sole control as to all of the decisions of the business of the corporation and she would have no input in any aspect of the corporation including the funding required and any decisions as to disposition of assets and the plaintiff would be the sole signing officer.

3. The plaintiff states that there was no intention for Martha to have the beneficial ownership of this share.

4. Since incorporation of 1166 it was used as a purchaser of taxicab licenses and as an investor in a variety of mortgage securities and all required funds for obtaining of these assets were provided by the plaintiff or from the earnings of 1166 from prior investments.

5. The plaintiff sought out these investments and bargained for them and decisions as to their acquisition and as to their use and dispositions of the funds acquired by the earnings and dispositions of these assets were solely determined by the plaintiff.

6. Martha did not provide funds or participated in seeking out the required investments, managing these investments or disposing of these investment and did not have any decision or input of the use of these assets and funds obtained from that use.

7. Martha has taken wrongly possession of corporate records of 1166 now located at her place of residence 52 Ellsworth Ave., Richmond Hill, Ontario and there has been no compliance to the demands to transfer the said share to the plaintiff and the corporate records and seal and she has caused to the plaintiff to be removed as the signing officer of 1166.

8. The assets held by 1166 as of November 2010 are as follows: (a) Taxi cab licenses plate number 2302 and plate number 2903 (b) 49.9% interest in mortgage secured by 34 Homes in Orangeville, Ontario (c) 52.37% interest in the mortgage secured on property of Isaac Parvaiz, 3050 Concession Road, Pickering, Ontario;

[144] The statement of claim is clear that the only claim made by Mr. Drakoulakos based upon trust principles is a claim that Martha is the trustee holding for his sole benefit the single share issued to her in 1166. Mr. Drakoulakos made no claim, based upon trust principles or otherwise, to a beneficial interest in any assets owned by 1166. The evidence given by witnesses in relation to events after the acquisition of taxi 2302 by 1166 in February 1996 is relevant to determination of the intention of Mr. Drakoulakos (and Mrs. Drakoulakos) at the relevant time, February 1996, and I have taken this evidence into consideration for this purpose. I do not analyze this evidence in relation to the alternative claim by Mr. Drakoulakos, which was made for the first time in closing submissions, to a beneficial interest in assets owned by 1166, based upon resulting trust principles. This claim was not pleaded.

Is Mr. Drakoulakos able to advance alternative claims (to be quantified following a reference) to (i) interests in the profits earned by 1166 on its assets, based upon principles of constructive trust and unjust enrichment, and (ii) the quantum meruit value of his efforts with respect to investments made by 1166?

[145] In the closing submissions of his counsel, Mr. Drakoulakos requested:

a. As alternative relief, based upon principles of constructive trust, an order for payment (following a reference for an accounting of all profits made by 1166 since November 19, 2010) in an amount equal to 50% of the profits from two investments made by 1166 (the “Orangeville” investment and the “Pickering” investment) and an accounting of the quantum meruit value of Mr. Drakoulakos’ efforts with respect to all investments made by 1166 (except the investment described as the “Desbrima” investment). b. In the further alternative, based upon principles of constructive trust, payment of an amount equal to 50% of the profits made with respect to these two investments by 1166 (the “Orangeville” investment and the “Pickering” investment) resulting from all amounts paid by Mr. Drakoulakos to 1166 or to Martha or her husband, Mark or to their line of credit that were used to fund those investments, in proportion to the parties’ investments in those investments, after an accounting.

[146] The basis given for these alternative claims was that Mr. Drakoulakos gave evidence that he advanced money (based on his belief that he owned 1166) to the line of credit that was used to fund the “Orangeville” investment and the “Pickering” investment (which advances were not repaid, or not fully repaid), and that he devoted considerable time to assisting Martha and Mark with choosing and managing these investments. Mr. Drakoulakos relies upon principles of unjust enrichment to found his alternative claims.

[147] As I have addressed above, Mr. Drakoulakos does not make a claim in the statement of claim that he has the beneficial interest in any assets of 1166 based upon trust principles. This is a claim that would need to have been pleaded, and it was not. I conclude that Mr. Drakoulakos is not able to make this unpleaded claim.

[148] In any event, even if this claim had been pleaded, the evidence does not support it. In his reconciliation (and on some cheques) Mr. Drakoulakos described the advances made from the joint account to 1166 or to the line of credit accounts to be loans. He has not made a claim against 1166 or against Martha or Mark for repayment of any unpaid loans. If it were the case (and this has not been proven) that loan advances were made by Mr. and Mrs. Drakoulakos from the joint account to 1166 or to Martha and Mark that were not repaid, there could be a claim for damages for breach of contract. There would not be a claim for a constructive trust over assets of 1166 based upon principles of unjust enrichment because Mr. Drakoulakos would not have satisfied the requirement of showing that there was an absence of any juristic reason for the enrichment. One of the established categories of juristic reason is a contract: Jedfro Investments v. Jacyk, 2007 SCC 55 at paras. 30-36.

[149] There is also no claim in the statement of claim for damages based upon quantum meruit. The statement of claim, even if read broadly, does not include such a claim. I conclude that Mr. Drakoulakos is not able to make this unpleaded claim.

[150] In any event, in my view, the evidence given would not support such a claim, even if it had been pleaded. The evidence shows that before the family argument on November 19, 2010, this was a close family, and Mr. Drakoulakos was very generous with his time, and with his financial resources, to help Martha, Mark and their children. I would not find on the evidence given at trial that Mr. Drakoulakos would be entitled to a reference to show amounts to which he would be entitled from the defendants based upon principles of quantum meruit.

Is Martha entitled to an award of damages for breach of contract on her counterclaim because Mr. Drakoulakos withdrew $49,000 on her MasterCard without her permission which he did not repay?

[151] In her counterclaim, Martha claims damages in the amount of $49,000. Martha claims that on or about January 14, 2011, Mr. Drakoulakos withdrew a $30,000 cash advance and a $19,000 cash advance from her MasterCard credit cards in respect of which Mr. Drakoulakos was a secondary cardholder. These amounts were never repaid.

[152] In his evidence of trial, Mr. Drakoulakos defended his decision not to repay these amounts on the basis that he had made advances to Martha and her family that exceeded the $49,000 that was withdrawn.

[153] In closing submissions of his counsel, Mr. Drakoulakos conceded that there was no defence to this counterclaim.

[154] I find that the amounts advanced by Mr. Drakoulakos to Martha and her family were gifts that he and his wife generously made over the years. There was never any expectation that these amounts would be repaid. In my view, the concession made by Mr. Drakoulakos in the closing submissions of his counsel was proper. There is no defence to the counterclaim.

Disposition

[155] For these reasons:

a. The action is dismissed. b. The counterclaim is allowed, and Mr. Drakoulakos is ordered and adjudged to pay to Martha Stirpe damages in the amount of $49,000 together with applicable prejudgment interest under the Courts of Justice Act.

[156] If the parties are unable to reach agreement on costs, the defendants may make written submissions within 30 days. Mr. Drakoulakos may make responding submissions within 30 days thereafter. The defendants may make brief written reply submissions, if so advised, within 10 days thereafter.

Cavanagh J.

Released: March 1, 2019