Paddock v. Paddock, 2009 ONCA 264

CITATION: Paddock v. Paddock, 2009 ONCA 264

DATE: 20090327

DOCKET: C48715

COURT OF APPEAL FOR ONTARIO

Goudge, Simmons and Juriansz JJ.A.

BETWEEN:

Rita Paddock

Applicant (Respondent)

and

Brian Robert Paddock

Respondent (Appellant)

William R. Clayton for the appellant

Alfred A. Mamo for the respondent

Heard: March 13, 2009

On appeal from the judgment of Justice Mary E. Marshman of the Superior Court of Justice dated April 4, 2008.

ENDORSEMENT

[1] Mr. Paddock appeals from the terms of a divorce judgment that deal with property issues. He raises three main issues on appeal. First, he claims that the trial judge erred in finding that Mr. Paddock holds his shares in Cerro Stables Inc. and most of his interest in a shareholders’ loan to that company in trust for Mrs. Paddock.

[2] We do not accept this submission. The trial judge’s findings that all of the consideration for the acquisition of these assets flowed from Mrs. Paddock was available on the evidence. Accordingly, the trial judge was correct in holding that the presumption of resulting trust applies and that the onus was on Mr. Paddock to demonstrate that a gift of the shares and shareholders’ loan was intended. See s. 14 of the Family Law Act, R.S.O. 1990, c. F.3, and Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795.

[3] Further, in our view, the trial judge made no error in declining to apply the parole evidence rule and in considering the whole of the evidence relating to the question of whether a gift was intended. As was noted by the trial judge, the presenting issue was the ownership of property and not simply the interpretation of a contract. Although the unanimous shareholders’ agreement and other corporate records are relevant to determining the ownership of the property in question, they do not govern the ownership issue. This is particularly the case since the unanimous shareholders’ agreement post-dates the acquisition of the shares and since the presumption of resulting trust applies.

[4] After considering the whole of the evidence, the trial judge determined that Mr. Paddock had not satisfied the onus of proof. The trial judge considered the relevant documents and records but found they were not conclusive for reasons she explained. In the end, the trial judge accepted Mrs. Paddock’s evidence that she did not intend to give up her inheritance. On the record before her, it was open to the trial judge to make these findings and we see no basis on which to interfere with them. Accordingly, we would not give effect to this ground of appeal.

[5] The second issue raised by Mr. Paddock is that the trial judge erred in holding that Mrs. Paddock was entitled to trace her inheritance into her shares in Cerro Stables Inc. and therefore to exclude a portion of her shareholdings from her net family property under s. 4(2) of the Family Law Act. We do not accept this submission.

[6] Mrs. Paddock inherited a share of the businesses operated by her parents. The effect of the May 29, 1998 and December 31, 1998 transactions was to transfer the underlying assets of those businesses to Cerro Stables Inc. Those same assets formed the underlying value of the shares in Cerro Stables Inc. on the date of separation. Moreover, contrary to Mr. Paddock’s submissions, Mrs. Paddock paid for her shares in 1288891 Ontario Inc., which were converted into shares of Cerro Stables Inc., with the proceeds of her inheritance.

[7] As was noted by the trial judge, this case is distinguishable from Rosenthal v. Rosenthal (1986), 1986 6320 (ON SC), 3 R.F.L. (3d) 126 (Ont. S.C.), and Goodyer v. Goodyer (1999), 1999 20759 (ON SCDC), 168 D.L.R. (4th) 453 (Ont. S.C.), because Mrs. Paddock had received her inheritance when she subscribed for the shares in 1288891 Ontario Inc. and because there was no separate loan that was later forgiven. Although the financial records of 1288891 Ontario Inc. reflected a receivable in relation to the share subscription for a period of time and the adjustment to the shareholders’ loan account was not made until later, these were merely the accounting entries through which Mrs. Paddock paid for the shares with the proceeds of her inheritance.

[8] The effect of the May 29, 1998 transaction was to convert Mrs. Paddock’s inheritance to a different form consisting of both shares and a shareholders’ loan account in 1288891 Ontario Inc. These became interests in Cerro Stables Inc. by virtue of the amalgamation agreement. No issue was raised on this appeal concerning what portion of her shares Mrs. Paddock was entitled to exclude. In the circumstances, we see no error in the trial judge’s conclusion and we would not give effect to this ground of appeal.

[9] The third issue raised by Mr. Paddock is that the trial judge erred in finding that Mrs. Paddock was entitled to trace her inheritance into her investment account. Mr. Paddock did not pursue this issue in oral argument. In our view, it was open to the trial judge to find as she did that Mrs. Paddock’s inheritance “did not lose its character simply because it was parked in the joint account for a period of four days.” We would not give effect to this ground of appeal.

[10] Accordingly, the appeal is dismissed with costs to the respondent fixed in the amount of $10,000 inclusive of disbursements and G.S.T.

“S. T. Goudge J.A.”

“Janet Simmons J.A.”

“R. G. Juriansz J.A.”