Court File and Parties

COURT FILE NO.: CV-19-00612836 DATE: 20190308 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ming Hua Zheng, Applicant AND: Ping Liu, Respondent

BEFORE: Kimmel J.

COUNSEL: Mengdan Li, for the Applicant No one appearing for P. Liu, the Respondent

HEARD: March 4, 2019

Endorsement

[1] The Applicant, Ming Hua Zheng (“Zheng”) and the Respondent Ping Liu (“Liu”) were married on March 18, 2003 in China. They each had been married previously and each had a child from their prior marriage, both of whom are adults now. They have no children together.

[2] Zheng and Liu immigrated to Canada on or about June 26, 2009 and purchased a house at 17 Wishing Well Drive, Toronto, Ontario (the “Property”) on or about May 28, 2010, which they lived in together as their family residence.

[3] Zheng was attending to business in China at the time the purchase of the Property closed, so the Property was put in Liu’s name as a matter of convenience to enable him to sign the necessary closing documents in her absence. The purchase price of the Property was $416,000.00. Title to the Property and the mortgage were taken in Liu’s name. Zheng claims that she contributed to more than half of the combined purchase price and carrying costs of the Property.

[4] They were having marital difficulties and Zheng decided to return to China on or about November 26, 2014. After an initial period of separation, the couple reconciled and lived together in China from June 2016 to March 2017, after which they separated due to unresolvable matrimonial conflicts and Liu returned to Canada. They have remained separated since then. It is believed that Liu has lived at the Property since their separation in March of 2017 with his now adult son.

[5] The application was commenced after Zheng had, on her own initiative sought, and was granted, leave to discontinue a prior action she had commenced under Court File No. CV-18-602064 that dealt with various family law and property claims (the “Prior Action”). Counsel for the applicant was resistant to my initial suggestion that this matter should be moved to a judge presiding on the family list in Toronto. I was advised that neither of the parties at this time are seeking the assistance of the Ontario court with respect to traditional family law matters arising from their marriage and separation such as support or equalization of property, and that they were living in China at the time that they separated in March of 2017.

[6] This application only deals with the Property. According to the affidavits of service in the court file, Liu was served in person with the Application Record, Factum and Brief of Authorities on February 21, 2019, and had been served on two prior occasions with the Notice of Application by leaving a copy with another adult member of Liu’s household at the Property and sending it by mail and email. Further, counsel for the applicant advised that Zheng and Liu were in contact last week about, among other things, this court hearing. Despite having been given notice of the hearing, Liu did not appear and I was advised that he had not responded to messages sent to him on the morning of the hearing. The application thus proceeded on an unopposed basis.

[7] I am satisfied that Zheng, through her counsel, took reasonable steps to put Liu on notice of this application. Although he did not appear on this matter, Liu did appear on January 2, 2019 before Master Short when leave was granted for the discontinuance of the Prior Action. Reference was made in the endorsement from that day to Zheng’s stated intention to proceed with an application under the Partition Act, R.S.O. 1990, c. P.4.

[8] This application seeks an order for partition and sale of the Property pursuant to s. 2 of the Partition Act, and ancillary relief including a declaration of Zheng’s interest in the Property and other mechanics that I understand to be directed to facilitating the sale of the Property and the dissemination of the sale proceeds.

[9] Zheng deposed in her affidavit in support of this application that she needs to deal with the Property before her permanent residency status in Canada expires on October 21, 2019 as this is her primary asset in this jurisdiction. I understand the concern to be that it may become difficult for her to deal with or make claims to the Property when she is living in China and no longer a resident here in Canada.

[10] Zheng has provided evidence about the source of the monies used to pay the $15,000 deposit and the balance of the $104,000 down payment for the purchase of the Property on the closing, stating that they came from her personal savings that she brought to Canada with her from China. She also states that the mortgage payments and other carrying costs for the Property were paid from Zheng and Liu’s joint bank account (although the complete period of time over which this occurred and the source of the contributions to that account over the relevant time period are not fully addressed in the record). Using simple math, based on the purchase price of $416,000 she claims to be entitled to an interest in the property calculated based on her contribution of the entire up-front payment of $104,000, plus half of the balance of the original investment cost ($416,000 - $104,000 = $312,000 x 50% = $156,000). Zheng claims her interest in the Property to be $104,000 + $156,000 = $260,000, which she translates into a 62.5% [^1] interest in the Property.

[11] Zheng discovered last year when she was preparing for the sale of the Property (at a time when she had been led to believe that the sale would proceed with Liu’s co-operation) that back in March of 2012, unbeknownst to her and when they were still co-habiting, Liu applied for and was granted a line of credit from Manulife Bank of Canada that was secured by a mortgage in the amount of $416,000 that appears on the title registry of the Property. Despite the fact that Zheng and Liu were married at that time, Liu represented on the mortgage registration form that he was single. There is no evidence in the record before me about the status or current indebtedness under that line of credit.

[12] There is also no evidence before me as to the status of the mortgage Zheng was aware of that was taken out to finance the balance of the original purchase for the Property. I expect that there may be some need for an accounting and reconciliation of that mortgage and the other carrying costs of the Property since the time of purchase. Concerns were also noted about the possibility of Liu having received rental income from the Property over the years that has not been accounted for, and the need to account for the cost to Zheng of the delays in the sale of the Property due to Liu’s lack of co-operation, while he has continued to use and enjoy the Property for his own benefit. None of this can be resolved based on the current record.

[13] Although not part of the evidence in the record, counsel for the applicant advised that Liu has recently changed the locks on the Property so Zheng no longer has access to it.

[14] The applicant claims: a. that she has an interest in the Property by virtue of a resulting trust; b. that interest entitles her to an order for the sale of the Property under the Partition Act; c. if the Property is sold, she claims entitlement to 62.5% of the net sale proceeds; and d. that her name be added to the title of the Property.

Resulting Trust

[15] I am satisfied, based on the record before me, that Zheng does have an interest in the Property by virtue of a resulting trust. She contributed all of the up-front monies paid on behalf of the purchaser (Liu) when it was acquired (and contributed a share of the carrying costs of the mortgage, taxes, etc. for at least some period of time). This gave rise to a purchase money resulting trust when Zheng purchased the Property in Liu’s name: Drakoulakos v. Stirpe, 2019 ONSC 1430, at para. 65 (g). There is no evidence in the record to rebut the presumption of this trust, and Zheng deposed that it was her intention and understanding when she contributed funds towards the purchase and maintenance of the Property that they would both own the Property, irrespective of whose name was on title. She clearly did not intend to gift the Property to Liu even though legal title was in his name alone: Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, at paras. 27 and 32; see also Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at paras. 20 and 59.

[16] The Family Law Act, R.S.O. 1990, c. F.3 expressly contemplates in s. 14 that where a presumption of resulting trust arises, it can lead to a finding of beneficial ownership in the context of a gratuitous property transfer between spouses.

[17] I find that Zheng does have a beneficial interest in, and entitlement to, the Property arising from the presumption of a resulting trust based on her monetary contributions to the Property.

Sale of the Property under the Partition Act

[18] Since I have found Zheng to have an interest in the Property (which is land situated in Ontario) she is entitled, under s. 3 of the Partition Act, to bring an application for the partition of the Property, or for the sale of the Property under the directions of the court if such sale is considered by the court to be more advantageous to the parties interested. Based on the record before me, it does not appear that Liu has any greater right of possession to the Property than Zheng. The fact that Liu is currently in physical possession of the Property and has been living there does not take away any rights of possession that Zheng has as a co-owner.

[19] Based on the record before me, I do consider the sale of the Property to be more advantageous to the parties, in the circumstances, particularly given their history of dealings and the clock that is ticking against Zheng on her permanent residency status and the need for her to tie up her affairs in Canada. I have not been made aware of any serious hardship to Liu or any others if the Property is sold. Any procedure for the sale of the Property should not foreclose the possibility of Liu purchasing Zheng’s interest in the Property at fair market value if he does indicate a desire to continue to own and live at the Property.

[20] There is nothing in the record before me to indicate that Zheng’s intention in seeking to compel the sale of the Property is vexatious, oppressive or malicious: see Davis v. Davis (1953), [1954] O.R. 23 (C.A.) and Naqvi v. Adil, 2018 ONSC 857, 39 E.T.R. (4th) 322, at para. 23 (h). To the contrary, she has been trying to achieve this outcome on a co-operative basis since 2015 and she travelled to Canada in 2018 to try to complete a sale that she thought had been agreed to, which Liu resisted. She only commenced litigation after that.

[21] Further, there is nothing in the record before me to suggest that a sale of the Property would prejudice the rights of Liu under the Family Law Act. First, he has not sought to avail himself of any rights under that statute in the approximately two years since the parties separated. Second, Zheng submits that the Property is not a matrimonial home within the definition of s. 18 of the Family Law Act because the parties were not cohabiting there at the time of their separation in March of 2017 (they were living in China at the time).

[22] A sale of the Property under the Partition Act is governed by Rule 66 and the form of judgment shall be in Form 66A. As part of that, I am directing that the mechanics of the procedure for the sale and the entitlements and priorities to distributions out of the sale proceeds (as between the parties and any third parties, including those who have registered encumbrances) be determined on a reference to a master. This procedure will include the provision of notices to Liu and any other occupants of the Property and all necessary and appropriate steps to deal with any rights that they may have, and also access to the Property in order to facilitate the sale. It will also include the provision of notices to all parties with registered encumbrances or notices on title to the Property.

Entitlement to Sale Proceeds

[23] The record before me is not sufficient for me to make a determination of the percentage entitlement of Zheng to the net sale proceeds. At a minimum, more evidence is required about the contributions to the carrying costs over time and to the present date. The issue of the parties’ respective entitlements (interests) in the Property is being referred to the master to determine in the context of the sale process, on notice to Liu. The applicant is at liberty to file additional evidence on this, as is Liu and any other party who may claim to have an interest in the Property.

[24] Any concerns about the improvident or undisclosed depletion of the equity in the Property, or accounting for rental revenues or for Liu’s use of the Property, can be raised on the reference before the master in the context of the determination of the parties’ respective entitlements (interests), with a proper evidentiary foundation.

[25] If the factual and legal issues become too complicated to deal with on a reference, the master may direct a trial of an issue to determine this. While I expect that most, if not all, of the matters to be decided are within the jurisdiction of a master, if any matters arise that fall outside of the master’s jurisdiction they may be referred back to be decided by a judge.

Title to the Property

[26] I am not making any order to add Zheng to the title to the Property. Zheng may be able to register my judgment on title. She also may have other recourse under s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5, to put a notice on title of her unregistered interest in the Property, based on my decision and judgment.

Disposition

[27] Applicant’s counsel is directed to send to me a draft judgment that is in Form 66A with any necessary amendments and additions to give full effect to this decision. I will sign it, after making any revisions I deem necessary so that I am satisfied that it does so. Since the respondent did not appear at the hearing it is not necessary for him to approve the form of judgment that is sent to me. It should be sent to my assistant by email in Microsoft Word format so that I am able to revise it.

[28] The applicant may at the same time provide me with a costs outline in support of any request for costs of this application and include a provision in the draft judgment for costs payable on a partial indemnity basis by the respondent to the applicant with the amount left blank and I will fill the amount in once I have reviewed the costs outline and decided on the appropriate amount of costs to award in the exercise of my discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[29] Once the judgment has been issued and entered, the applicant is directed to serve it, together with a copy of these reasons, on Liu by regular mail at the Property and also electronically at the last known email address that the applicant has for him.

KIMMEL J. Date: March 8, 2019

[^1]: $260,000 divided by $416,000 = 62.5%.