Court of Appeal for Ontario

Date: June 22, 2017 Docket: C62993 Judges: Rouleau, Trotter and Paciocco JJ.A.

Between

Pamela Lesenko Plaintiff (Respondent)

and

Victoria (Vickie) Guerette and Ralph MacEachran Defendants (Appellants)

Counsel

Kyle A. MacLean, for the appellants Suzy Johal, for the respondent

Heard: May 15, 2017

On appeal from: The judgment of Justice Pamela L. Hebner of the Superior Court of Justice, dated October 27, 2016.

Reasons for Decision

Rouleau J.A.:

Introduction

[1] The respondent brought a claim for unjust enrichment to recover money she paid to acquire and renovate a house registered in the appellants' names. On a motion for summary judgment, the motion judge accepted the respondent's evidence and rejected the version of events advanced by the appellants. The motion judge concluded that the respondent was entitled to the return of the $221,914.11 that the respondent alleges was invested by her to acquire and renovate the property.

[2] On appeal, the appellants argue that this was not an appropriate case for summary judgment in that, at a minimum, some form of an oral hearing was required in order to make the required credibility findings. Further, the appellants submit that the motion judge's reasons are insufficient and provide no analysis of or basis for the finding of unjust enrichment and for fixing $221,914.11 as the measure of the unjust enrichment.

[3] In my view, the appeal must be allowed and the order set aside.

Facts

[4] The appellants Victoria Guerette and Ralph MacEachern[1] are husband and wife and the respondent Pamela Lesenko is Ms. Guerette's sister. In 2009, the parties agreed to sell their homes and purchase a home together. That year the respondent sold her house for a net amount of $260,676.66. A portion of the proceeds then were used to purchase the subject property at 7710 Clayton Street in Port Franks, Ontario (the "Property"). The appellants and the respondent had agreed that they would jointly occupy the Property. Although the appellants were identified in the agreement of purchase and sale as buyers of the Property, the whole of the purchase price of $189,900, as well as the land transfer tax and the solicitor's fees and disbursements, were paid out of the proceeds of sale of the respondent's property. The respondent's name did not appear in the agreement of purchase and sale nor on title.

[5] The respondent moved into the Property in September of 2009 and in July of 2010, the appellants sold their home and also moved into the Property.

[6] The Property was in need of renovations and according to the respondent, she paid a total of $34,240.76 towards these renovations between September 2009 and 2012. The appellants dispute the amount allegedly spent and, in addition, stated that of the amount allegedly paid by the respondent, $10,000 was in repayment of a past loan they had made to the respondent.

[7] For their part, the appellants claim that they paid $198,203.25 for materials and labour for the renovations and carried out work themselves that they value at $50,000. The appellants also maintain that, from the date of purchase, they paid all of the utilities, municipal taxes and insurance for the Property.

[8] In April 2012, the respondent moved out of the Property claiming that the appellants had made it impossible for her to remain. After moving out, the respondent brought the present claim alleging unjust enrichment and seeking a return of the money she had invested in the Property. She claimed that the funds were advanced pursuant to an oral agreement she had with the appellants. That agreement provided that each of the three parties would have a one-third ownership interest in the Property. Although the respondent had paid the full purchase price, the agreement was that two-thirds of this amount was a loan to the appellants. The respondent claimed that despite several requests for repayment, the appellants have yet to repay that loan.

[9] The appellants presented a totally different picture. They maintain that their agreement was to the effect that the respondent would pay for the purchase of the Property in exchange for the entitlement to live on the Property for the rest of her life. This arrangement was on the further understanding that the appellants would pay for the bulk of the renovations to the Property and all future ownership costs. If the appellants died before the respondent, the respondent would be entitled to continue living on the Property for her lifetime. If the respondent moved out after both the appellants died, the respondent would be entitled to one-third of the net proceeds from the sale of the Property.

[10] Ms. Guerette's affidavit also set out that she and her husband had revised their wills to incorporate the grant to the respondent of the life interest in the Property. She appended an unsigned version of those wills to her affidavit.

[11] In the course of preparing the materials responding to the motion for summary judgment, the appellants obtained an appraisal of the Property. Despite it having been purchased for in excess of $188,000, and $230,000 to $280,000 spent on renovations and labour, the appraised value had only risen to $252,000. This, the appellants submit, shows that both the appellants and the respondent have suffered a loss of part of their investment in the Property.

[12] The motion was brought before any discoveries had been held and neither party cross-examined on the affidavits filed. The appellants explained that once they obtained the appraisal, it became apparent that they would have to amend their pleadings. Specifically, in their defence, the appellants had pleaded that the respondent should receive a reimbursement of $191,914.77, less a reasonable and equitable contribution for living on the Property. This figure, however, was based on their expectation at the time that the value of the Property was substantially in excess of the recently obtained appraisal of $252,000.

Judgment Below

[13] Relying heavily on the fact that the respondent had been left destitute after making the investment in the Property, the motion judge reasoned that the respondent would not have agreed to pay the whole of the purchase price on the terms alleged by the appellants. The motion judge therefore accepted the respondent's version that, although she paid the whole of the purchase price, this was pursuant to an agreement whereby she was to acquire a one-third interest in the property, and two-thirds of the payment was a loan to the appellants.

[14] The motion judge rejected the appellants' version and found that the appellants had orchestrated the purchase of the Property in their name using the respondent's funds. The appellants were therefore enriched to the detriment of the respondent. The motion judge saw no reason why a trial was required and, despite the appellants' request, determined that she did not require viva voce evidence to make credibility findings.

[15] The motion judge then referred to the case law establishing that when a person purchases a property in the name of another without consideration, it is presumed that the recipient holds the property in trust for the transferor. Although that presumption can be rebutted with evidence of the purchaser's actual intention, the appellants had not succeeded in doing so. The motion judge therefore found that the respondent had an interest in the Property and determined the amount of that interest to be in the amount of $221,914.11. The appellant had therefore been unjustly enriched by the same amount.

[16] The $221,914.11 figure was arrived at by adding the purchase price of $191,914.11 (made up of the purchase price and costs related to the acquisition of the property) and $30,000, which is the amount the motion judge found was contributed by the respondent for renovations to the Property.

Analysis

[17] The appeal must be allowed. In my view, the motion judge's reasons do not adequately explain how she resolved the conflicts in the evidence, nor do they support the conclusion that she reached.

[18] The motion judge was presented with two very different versions of what the parties had agreed to. Faced with this conflict in the evidence, the judge determined that the respondent's version of events should be preferred over the version advanced by the appellants. There is little explanation as to why she rejected the appellants' version other than her finding that, because of the respondent's limited means, it made little sense for her to have invested all of her money in the Property.

[19] There was, however, substantial affidavit evidence supporting the appellants' version of events, including their evidence that their wills were amended to give effect to the respondent's life interest and the fact that they paid all of the Property's expenses from the outset. The motion judge's reasons do not explain why this evidence was rejected nor does the motion judge make and explain credibility findings. Given the important issues which turn on credibility in this case, the failure to make such findings was an error. If credibility cannot be assessed on a written record, that should indicate that oral evidence or a trial is required: Trotter Estate, 2014 ONCA 841, 122 O.R. (3d) 625, at para. 55. Care must be taken "to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantial unfairness enters": Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 44.

[20] Further, having accepted the respondent's version of events to the effect that the parties had agreed that the money advanced by the respondent was to acquire a one-third interest in the Property and that the balance was a loan, the motion judge does not explain why she did not give effect to that agreement. According to the respondent, she should have a one-third interest in the Property and be owed two-thirds of the $191,914.11 paid to acquire the Property.

[21] A possible explanation is that, because there does not appear to be any documentation confirming the agreement, the Statute of Frauds, R.S.O. 1990, c. S.19 operates to prevent enforcement of an oral agreement respecting land. This, however, is simply speculation as there is no indication either in the pleadings or the reasons of the motion judge that the Statute of Frauds was considered.

[22] In apparent contradiction to her acceptance of the respondent's evidence as to the terms of the agreement regarding the purchase of the Property, the motion judge found that the appellants held the whole of the Property in trust for the respondent. She did so in reliance on the presumption of resulting trust, as set out in Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795. Under that case, where a property is purchased in the name of another without consideration, it is presumed, as a general rule, that the property is held in trust for the person who advanced the funds. Despite the motion judge's finding that the funds were advanced pursuant to the oral agreement alleged by the respondent, the motion judge nonetheless ruled that the presumption of resulting trust had not been rebutted "with evidence of the [respondent's] actual intention" at the time of the purchase. This inconsistency is not explained.

[23] Having thus determined that the appellants held the Property in trust for the respondent, the motion judge decided, again without explanation, that the appropriate remedy was not to transfer the Property to the respondent but rather to return to the respondent her investment in the Property on the basis that the appellants were unjustly enriched. The investment to be returned was determined to be the $191,914.11 paid to acquire the Property as well as the $30,000 the respondent alleges she spent on renovations.

[24] The difficulty with this conclusion is that the motion judge carried out no analysis of the equities and specifically, made no findings as to the parties' understanding regarding all of the monies invested by them in renovating a property the motion judge concluded was owned by the respondent. Why, for example, would the appellants invest close to $200,000 in expenditures and $50,000 in labour to renovate someone else's property?

[25] The understanding of the parties as to those renovation costs may well have an impact on the decision as to who should bear the apparent loss in the investments made to buy and renovate the Property. As set out earlier, the value of the Property is now substantially less than the sum of the purchase price and renovation costs.

[26] There is also no explanation as to why the motion judge accepted that the respondent is entitled to repayment of $30,000 in alleged renovations. I can only assume that the motion judge rejected the appellants' statement that $10,000 of this sum was in repayment of a loan they had advanced to the respondent. The finding and the basis for the rejection of the evidence are, however, absent.

[27] In the end, the motion judge determined the motion on the basis of unjust enrichment. Where a remedy is granted for unjust enrichment, courts must take into account the mutual exchange of benefits between the parties: Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 109-111. For example, the amount awarded may be reduced to reflect reciprocal benefits. As explained in Kerr, the mutual conferral of benefits should be considered at the defence and/or remedy stages of the analysis and may, in certain cases, also provide evidence of a juristic reason for the enrichment.

[28] In this case, considering the mutual conferral of benefits would include determining the understanding of the parties when they entered into the arrangement, as well as calculating the amounts advanced by both parties to purchase the Property and to renovate and maintain the Property. It would also be important to understand whether the renovations were for the benefit and at the request of one or other or both of the parties. Finally, the court should take into account the usage made by the parties of the Property over the course of three years of joint occupation as well as the value of the renovated property. The necessary findings were not made by the motion judge and it is not possible for this court to make them on the record before us.

[29] Let me add two further notes. In the course of submissions, the appellants appear to have conceded that the respondent was entitled to recover $112,021.63 of the amounts she invested. According to the appellants' calculations, this would be the equitable result if each party absorbed its share of the loss of the money invested in the Property. I have considered making an order that the respondent be granted partial summary judgment in that amount and that the issue as to whether the respondent was entitled to receive additional sums proceed to trial. To make such an order, however, I would have to make the findings necessary to support the payment of that amount. In other words, this court would have to decide whether the $112,021.63 payment is ordered pursuant to the parties' agreement (and outline the terms of the agreement), or ordered as an equitable remedy, or on some other basis. The record does not allow me to make the necessary credibility and other findings, and doing so would limit the discretion of the judge ultimately charged with deciding the case. I therefore concluded that it is best to leave it to the parties to address the possibility of such a payment in the course of the litigation.

[30] Used appropriately, summary judgment motions are an important tool for enhancing access to justice and achieving proportionate, timely and cost-effective adjudication: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. In my view, this motion for summary judgment was premature and should not have been brought until the positions of the parties and the issues were well defined. It was unclear from the pleadings and submissions whether the respondent's claim sounded in contract or unjust enrichment. Further, as noted earlier, the appellants had indicated that their pleading required amendment with respect to the payment they were prepared to make. Moreover, the legal basis for the payment remains unclear. Faced with such a motion, where the record is clearly inadequate, a judge should be reluctant to attempt to resolve the case. Substantial costs are thereby incurred, and further delay caused, with little being achieved. As stated in Baywood, at para. 45, "sometimes … it will simply not be possible to salvage something dispositive from an expensive and time-consuming, but eventually abortive, summary judgment process."

Conclusion

[31] For these reasons, I would allow the appeal and set aside the judgment. I would also award the appellants their costs in this court and for the motion in the agreed upon amounts. The parties agreed that the successful party should be awarded $9,000 inclusive of disbursements and applicable taxes and, if the appeal were allowed, the appellants would be entitled to their costs of the original motion fixed in the amount of $7,276.07 inclusive of disbursements and applicable taxes.

"Paul Rouleau J.A."

"I agree G.T. Trotter J.A."

"I agree David M. Paciocco J.A."

Released: June 22, 2017

Footnote

[1] This appears to be the correct spelling of Mr. MacEachern's name, which was misspelled in the order and judgment under appeal.