Court of Appeal for Ontario
Date: September 12, 2017
Docket: C63275
Panel: Hoy A.C.J.O., van Rensburg and Roberts JJ.A.
Parties
Between
Anne Elizabeth Chao Applicant (Respondent)
and
David Chih Ching Chao Respondent (Appellant)
Counsel
For the Appellant: Alex Toolsie
For the Respondent: Glenda D. McLeod
Hearing
Heard: June 23, 2017
On appeal from: The order of Justice D. A. Broad of the Superior Court of Justice at Kitchener, Ontario, dated December 20, 2016, with reasons reported at 2016 ONSC 7911.
Reasons for Decision
van Rensburg J.A.:
A. Overview
[1] A husband and wife dispute property ownership following marriage breakdown. The parties were married in 1974. They separated in 2011 after 37 years of marriage. There were four children of the marriage who are independent adults. The husband, who had worked in the computer industry, stopped working after losing his job in 1994. The wife worked full-time until 1978, after which she had some part-time work as a piano teacher.
[2] The main issue in the matrimonial proceedings is how to characterize the more than $1.3 million in investments derived from money the husband's parents provided during the parties' marriage. The disputed funds constituted the bulk of the parties' assets. Some of the disputed funds were used to purchase two successive matrimonial homes. The larger part was invested and the income generated was used to pay the majority of the family's expenses. Some of the investments were in the husband's name, some were in the wife's name, and others were in the husband and wife's names jointly. Some accounts were in the joint names of one or both of the parties and one or more of their children.[1] On or about the time of separation, and without the wife's consent, the husband transferred more than $1 million of the investments to his mother or to accounts maintained by him with his mother or other family members (in some cases after forging the wife's signature). The husband contends that this occurred after the wife withdrew $32,000 from a jointly-held investment.
[3] The husband argues that all the disputed investments were held in resulting trust for his parents or were loans that must be repaid to his mother (since his father is deceased). The wife argues that all of the advances were gifts to both parties and that there was no expectation of repayment.
[4] On summary judgment the husband was ordered to pay the wife the sum of $592,308 in equalization, as well as spousal support arrears and pre-judgment interest. The wife was also granted a charge over the former matrimonial home to secure payment of the equalization amount. The motion judge dismissed both parties' claims for ongoing or lump sum spousal support.
[5] The husband's appeal challenges the following: (1) the suitability of summary judgment; (2) the striking of portions of his affidavit dated August 11, 2016; (3) the counting of dissipated assets and double counting; (4) the characterization of the investment monies; and (5) the appropriateness of granting security against the former matrimonial home.
[6] For the reasons that follow, I would dismiss the appeal.
B. Decision of the Motion Judge
[7] The evidence before the motion judge consisted of affidavits of the parties and the affidavit of Lillian Chao, the husband's mother. The wife brought the summary judgment motion after the litigation had been outstanding for four years. The wife had filed a net family property statement, which she amended. The husband had made some financial disclosure, including in an affidavit of documents, but had not produced a net family property statement. Orders had been made against the husband compelling further financial disclosure as well as answers to undertakings and refusals on his questioning.
[8] The wife moved to strike certain paragraphs of one of the husband's affidavits in which he sought to "correct errors" in the wife's net family property statement respecting the investment accounts. This was argued as a preliminary matter and addressed in the motion judge's summary judgment reasons. The motion judge struck some, but not all, of the impugned paragraphs, on the basis that the husband had failed to provide full and complete disclosure of relevant documents as required by the Family Law Rules, O. Reg. 114/99, as amended.
[9] In dealing with the property issues, after setting out the relevant legal principles, the motion judge endorsed the idea that the same factors and principles could be used to determine whether advances made by a parent were subject to a resulting trust or were loan advances. That is, he framed the issue as "whether the parent intended to retain a hold on the amounts advanced" (at para. 77). He then considered the following facts as relevant:
the husband managed the investments without any consultation with his parents;
the parties declared the associated interest and capital gains for income tax purposes;
there were no contemporaneous documents evidencing a loan or any other hold on the amounts advanced by the husband's parents;
there was no evidence of any statement or representation characterizing the advances at any time prior to separation;
there was no demand for return of capital or income by Lillian Chao until after the separation;
the demand for repayment was triggered by the wife withdrawing funds following separation;
there was no evidence of any partial repayment at any time prior to separation;
none of the income or capital gains earned on the investments was paid to the parents;
there was no evidence of the parents' inquiring about the investments;
the monies were advanced by the husband's parents to help the parties out; and
the amounts comprising the sum of $99,582, which the husband characterized as an outstanding loan, had been advanced long ago and there was no evidence of any realistic expectation of repayment on the part of Lillian Chao.
[10] The motion judge concluded that there were no issues of credibility requiring a trial since there was no real disagreement between the parties about "what anyone said or did in relation to the advances and the investments." Rather, the disagreement between the parties related to their subjective beliefs and assumptions, which were largely irrelevant and did not require a trial to resolve (at para. 82).
[11] The motion judge found that the presumption of resulting trust in favour of Lillian Chao had been rebutted. The various advances made by the husband's parents could not be characterized as held in resulting trust for the parents, or loans.
[12] He also found that the monies from the husband's parents that went into the matrimonial homes, even if the advances were made to the husband, would in any event have lost their status as excluded assets under s. 4(2)(5) of the Family Law Act, R.S.O. 1990, c. F.3.
[13] The motion judge found that, contrary to the wife's claim, the husband no longer had any beneficial interest in a property in Waterloo, accepting the husband's evidence that he had transferred his interest to his children who, over time, had transferred their interests back to their paternal grandmother. With respect to the husband's silver and gold interests, the motion judge accepted the silver had been gifted to the parties equally and was not satisfied that the gold was still in existence and in the possession of the husband.
[14] The motion judge ordered the husband to pay the wife the sum of $592,308 in equalization, spousal support arrears of $27,680, and pre-judgment interest totalling $34,795.28. He also granted the wife security over the former matrimonial home to secure payment of the equalization sum pursuant to s. 9(1)(b) of the Family Law Act. The motion judge dismissed the parties' claims for ongoing and lump sum spousal support.
C. Analysis
(1) Suitability of the Summary Judgment Procedure
[15] Rule 16(6) of the Family Law Rules provides that, on a summary judgment motion, if there is no genuine issue requiring a trial of a claim or defence, the court shall make a final order.
[16] The moving party bears the onus of showing there is no genuine issue requiring a trial. The responding party may not rest solely on mere allegations or denials, but shall "set out, in an affidavit or other evidence, specific facts showing that there is a genuine issue for trial": r. 16(4.1).
[17] The husband makes three related arguments disputing the appropriateness of summary judgment in this case.
[18] First, the husband argues that a decision should not have been made without Lillian Chao's oral testimony, since her rights were affected by the judgment.
[19] Lillian Chao swore an affidavit dated March 7, 2013 that was appended as an exhibit to the husband's affidavit. The affidavit asserts continuing ownership of the monies given to the parties. Lillian Chao says that she and her husband provided monies for the purchase price of both matrimonial homes on the understanding that when the house was sold they would receive half of the proceeds. She also says that during 1986-1988 and from 1994 until the parties' separation, she and her husband supported the parties' living expenses by having the husband manage their investments and by gifting only the dividends, capital gains and interest to the husband. As evidence of a continuing interest in the monies, she asserts that she and her husband continued to include the investment income on the disputed funds in calculating the 10% of their annual income that they donated to charity. Her affidavit also states she and her husband made loans totalling $99,582.40 to the parties, which remain outstanding.
[20] The husband asserts that the judgment effectively (if not legally) extinguishes Lillian Chao's entitlement to repayment of the disputed funds. While Lillian Chao as a non-party is not bound by the judgment and can still pursue a claim (a position endorsed by the wife on appeal), given his mother's advanced age, it would be practically difficult for her to proceed with a claim. He also asserts that an independent claim by his mother would be inconsistent with the overall purpose of summary judgment, which is to reduce, and not to promote, litigation.
[21] I would not give effect to this argument. The summary judgment procedure was invoked by the wife at a time when all of the evidence she had been able to marshal about the investments was available, and when it was apparent that the husband would not provide any further disclosure. The wife's position was that the investments belonged to the parties, and not to the husband's parents, who had made advances as gifts to the family without expectation of repayment. The husband and mother's position was to the contrary, and it was up to them to ensure that her position was before the court, and to join her as a party to the extent her interests were implicated.
[22] The appropriateness of adding a party to litigation cannot determine the suitability of summary judgment. While it may well have been preferable for Lillian Chao to have been a party to the proceeding, on a summary judgment motion, the court must decide the claims presented in the litigation on the evidence before it. The fact that the husband chose to put Lillian Chao's position before the court by affidavit without seeking to join her as a party, was not a basis for refusing summary judgment.
[23] The husband's second and related argument is that summary judgment should not have been granted without requiring oral evidence from Lillian Chao either under r. 16(6.2) or in a directed trial. He argued that her affidavit did not provide complete information. However, the husband did not ask for his mother to provide oral evidence at the summary judgment motion. Instead he asserted, before the motion judge and on appeal, that his mother would be willing to attend at a trial to provide a complete account of the various advances that were made.
[24] This argument ignores the requirement in summary judgment for each party to "put its best foot forward": Ramdial v. Davis, 2015 ONCA 726, [2015] O.J. No. 5630 at para. 27. The husband cannot succeed on summary judgment by saying that further or better evidence would be available in the future. The motion judge was entitled to assume, as he did at para. 83 of his reasons, that the evidence before him was the best evidence available.
[25] Lastly, the husband argues that it was an error to grant summary judgment since there were material facts in dispute. The husband relies on the statement articulated by this court and referred to in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 48, that summary judgment is most often appropriate in document driven cases, with few witnesses and limited contentious factual issues.
[26] I disagree. The decision in Hryniak clearly states that these articulated circumstances "are helpful observations but…should not be taken as delineating firm categories of cases where summary judgment is and is not appropriate" (at para. 48).
[27] Hryniak establishes, at para. 49, that there will be no genuine issue requiring a trial when:
[T]he judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[28] Similar principles apply to summary judgment motions under the Family Law Rules: Ramdial v. Davis, at para. 29.
[29] Considering these goals, I see no error in the motion judge's decision to grant summary judgment. He concluded that "there are no issues of credibility which would require a trial relating to the proper characterization of the advances made by the respondent's parents" (at para. 82). He noted:
There is no real disagreement between the parties, or between the applicant and Lillian Chao, on what anyone said or did in relation to the advances and the investments. The disagreement between the parties relates to their subjective beliefs and assumptions which are largely irrelevant. A trial is not necessary to resolve the dispute about the parties' subjective beliefs and assumptions.
[30] Contrary to the husband's assertion, the motion judge found that there were no material facts in dispute. It is not that he disbelieved Lillian Chao's evidence about her subjective belief at the time she swore her affidavit, that she retained some interest in the monies. Rather, he concluded that the objective evidence – the absence of any contemporaneous documents evidencing a loan, of any specified manner of repayment, of any security held for the loan, of any partial repayment, of any demand for payment prior to separation or evidence of expectation or likelihood of repayment, and the presence of advances to their other children – together outweighed the evidence of her personal assumptions.
[31] I will say more later on the appropriateness of considering these factors in distinguishing between a gift and loan. For the present purposes, absent an error in his approach to the legal question, the motion judge was entitled to find that there was no issue requiring a trial and to award summary judgment. I see no such error.
(2) Striking Parts of the Husband's Affidavit
[32] The husband asserts that the motion judge erred in striking parts of his affidavit dated August 11, 2016, delivered in response to the summary judgment motion. The decision to strike was based primarily on the husband's failure to disclose documents and to answer undertakings and refusals on his questioning.
[33] The husband contests the striking out of passages in which he pointed out errors in the wife's assumptions and calculations relating to the investment accounts. He says that striking these passages ought to have been reserved as a "last resort" and deprived the court of important evidence relevant to the equalization issue. The husband also contends that the motion judge erred in concluding that the husband had failed to comply with earlier disclosure orders, as this contradicted the findings of Flynn J., when on June 13, 2016 he dismissed the wife's motion to strike the husband's pleadings.
[34] I disagree.
[35] The "last resort" principle is relevant to an order striking a party's pleading – in effect, permitting the matter to proceed on an unopposed basis, without the participation of the defaulting party. This sanction should only be imposed "in exceptional circumstances and where no other remedy would suffice": Chiaramonte v. Chiaramonte, 2013 ONCA 641, [2013] O.J. No. 4790, at para. 31; Carpenter v. Carpenter, 2016 ONCA 313 (C.A., in chambers), at para. 19.
[36] Flynn J. was not prepared to strike out the husband's pleadings. He dismissed the wife's motion to strike the husband's pleadings for failure to comply with disclosure orders on the basis that the orders only required best efforts, and therefore were not mandatory, precise and capable of enforcement to a degree that would justify striking the pleadings for non-compliance.
[37] By contrast, the motion judge on summary judgment did not strike the husband's pleadings, and his order did not prevent the husband's participation in the motion. Rather, the motion judge struck paragraphs from the husband's affidavit containing evidence of the husband, which ought to have been supported by documents he failed to disclose.
[38] Rule 19 of the Family Law Rules provides that where a party does not follow the disclosure rule, the court may order that a document favourable to the party's case may not be used: r. 19(10)(b). More generally, r. 1(8.1) permits the court to deal with any failure to follow the rules by invoking the sanctions set out in r. 1(8) for failure to obey an order. These sanctions include "an order striking out any…other document filed by a party" and "an order that all or part of a document that was required to be provided but was not, may not be used in the case": rr. 1(8)(c) and (d).
[39] The husband did not file his own net family property statement. He failed to comply with orders to provide documents respecting his investments, and with an order requiring his answers to undertakings and refusals on examination. In refusing an order to strike the husband's pleadings, Flynn J. did not find that the husband had made full disclosure. There was no inconsistency between Flynn J.'s findings and those of the motion judge.
[40] The motion judge noted that it was evident from the husband's "corrections" to the wife's figures that he possessed information that he failed to disclose. In response to the "errors" pointed out in the husband's affidavit, the wife made certain corrections which were reflected in her amended net family property statement and in her subsequent affidavit. Where she continued to contest the "corrections" she explained why. The motion judge did not err in striking these paragraphs of the husband's affidavit.
[41] Finally, I note that the husband on appeal asserted that the "corrections" in his affidavit were based on his review of accounts that were transferred pre-separation and others that were opened post-separation, and that because the accounts were not in existence at the valuation date, they were not caught by his disclosure obligations. He also says that his health issues ought to have been taken into consideration when the motion judge concluded he had a history of non-compliance with court orders.
[42] These arguments are without merit. Without seeking to delineate the full scope of disclosure the husband was required to make, it is without question that he was required to produce the documents he referred to in making the "corrections" outlined in his affidavit, if he expected the court to accept this evidence. Further, the husband's health concerns did not excuse his failure to produce the relevant documents. His affidavit asserts that he spent "many hours" verifying the wife's lists of the investments and identifying "errors". The order striking paragraphs from his affidavit simply prevented the husband from relying on evidence derived from documents he had obviously consulted in identifying the errors, but had not disclosed.
[43] In my view, the motion judge's decision was reasonable. It was a fair and appropriate response to the husband's failure to produce financial information.
(3) Counting Dissipated Assets and Double Counting
[44] The wife's amended net family property statement lists the total current value of accounts and savings as $83,499.77 in her name and $1,234,804.93 in the husband's name. These figures were based on information that the wife says was available to her, including accounts transferred, disposed of or dissipated by the husband prior to and after separation.
[45] The husband asserts that the motion judge erred in accepting the wife's figures, which included investments that no longer existed or had been transferred into new accounts.
[46] The motion judge found at para. 93 that "[t]he evidence with respect to the bank and investment accounts [was] far from satisfactory." He further found that this was "primarily due to the [husband's failure] to provide full and proper documentary disclosure of the details of the accounts as required by the Family Law Rules."
[47] This disposes of the husband's "dissipated assets and double counting" argument. The husband cannot fail to provide a full accounting of the investments he managed, controlled, and ultimately liquidated and transferred, and then complain that the judgment was based on incomplete information.
(4) Characterizing the Investment Monies
a. Gifts vs. Loans
[48] I now come to the central issue in this case: whether the motion judge erred in his characterization of the monies advanced to the husband and wife by the husband's parents as gifts, as opposed to property of the parents that the husband managed on their behalf, or loans.
[49] The motion judge found that the presumption of resulting trust had been rebutted, and that the various advances made by the husband's parents to the husband and wife could not be characterized as loans.
[50] The husband argues that the motion judge erred in concluding that all of the advances of his parents were by way of gift, in treating all the advances in the same way, and in failing to find that at least some of the monies were advanced as loans or with the intention that they remain the parents' monies. The husband says that the evidence did not rebut the presumption of resulting trust.
[51] I would not give effect to any of these arguments.
[52] First, with the exception of the sum of $99,582 (which the husband characterized as a loan), all of the other monies advanced were described by the husband as advances that were invested by the husband on behalf of his parents, with the income used for the parties' living expenses. There was little evidence of the circumstances of the advances, other than the following: that the parents contributed an unspecified amount as half of the purchase price of the parties' first matrimonial home in 1975; that when that home was sold one half the proceeds ($130,000) was the parents' share of the second home in 1983; and that in 2003 the parents provided the majority of the sum of $457,000 from the sale of their own home. There was little to distinguish the circumstances of the various advances, which in any event were all characterized in the same manner by the husband and his mother.
[53] In concluding that the advances were by way of gift, the motion judge applied the correct legal test and considered the relevant factors. He began his inquiry with the presumption of resulting trust and then weighed all the evidence to determine the parents' actual intent at the time of the transfer: Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at paras. 5 and 44.
[54] Here the motion judge considered factors listed as relevant in a number of cases concerning monies advanced by parents. These include the following factors identified in the context of a loan vs. gift analysis in Locke v. Locke, 2000 BCSC 1300, [2000] B.C.J. No. 1850 at para. 21, and Kuo v. Chu, 2008 BCSC 504 at para. 78, aff'd 2009 BCCA 405, 97 B.C.L.R. (4th) 203, at para. 9:
whether there [are] any contemporaneous documents evidencing a loan;
whether the manner for repayment is specified;
whether there is security held for the loan;
whether there are advances to one child and not others, or advances of unequal amounts to various children;
whether there has been any demand for payment before the separation of the parties;
whether there has been any partial repayment; and
whether there was any expectation, or likelihood, of repayment.
See also Barber v. Magee, 2017 ONCA 558, at para. 4.
[55] The motion judge observed, in my view correctly, that "[f]rom the standpoint of attempting to ascertain the intention of the parent making the advances, the issue is whether the parent intended to retain a hold on the amounts advanced, regardless of whether that be by way of a resulting trust or a debt obligation" (at para. 77). Considering the relevant factors, the motion judge found that the evidence supported the conclusion that the monies were provided by way of gift by the husband's parents. He concluded that "the reality of the situation [was] that there never was any expectation, prior to the parties' separation, on the part of Lillian Chao that the respondent and the applicant would be required to repay any portion of the funds advanced by her and her husband" (at para. 85).
[56] The legal test is intent at the time of the transfer. Evidence of intention that arises subsequent to a transfer must be relevant to the intention of the transferor at the time of the transfer. The court must assess the reliability of such evidence and determine what weight it should be given, guarding against evidence that is self-serving or tends to reflect a change in intention: Pecore, at paras. 44 and 59; Andrade v. Andrade, 2016 ONCA 368, 131 O.R. (3d) 532, at para. 63.
[57] In my view, the conclusion that the monies advanced to the parties were given with the intent to make a gift was amply supported by the objective evidence in this case. There was no error in principle.
b. Gifts to Whom
[58] I note that, although not raised directly by the husband as a ground of appeal, the remaining question of whether the gifts were to the husband alone or to both parties jointly, was not explicitly addressed by the motion judge.
[59] The motion judge correctly noted that the monies that went into the parties' matrimonial homes early in the marriage, even if advanced to the husband alone, lost their status as excluded assets under s. 4(2)(5) of the Family Law Act.
[60] The treatment of the remaining gifted monies does however depend on how they were received and then how they were invested. In this case some of the investment accounts were in the husband's name, some were in the wife's name, and the majority were in the parties' names jointly. As this court held in Townshend v. Townshend, 2012 ONCA 868, 113 O.R. (3d) 321, at paras. 32-33, it is not the case that all gift monies lose their excluded character when deposited into a joint account with a spouse. In Townshend, the court allowed the husband an exclusion for one half of the monies deposited into a joint account where he received the monies as a third party gift.
[61] When the motion judge's reasons in this case are read as a whole, however, his finding that the monies were gifted to the husband and wife jointly is implicit. It is on this basis that he brought into equalization the entirety of the investment accounts and ordered the husband to pay the wife the sum of $592,308.
[62] I would also note that the payment the motion judge required the husband to make "in respect of equalization under sections 5 and 7 of the Family Law Act" primarily reflects the return of monies he determined were already owned by the wife. In her amended net family property statement dated August 26, 2016, the wife attributed to the husband the full value of monies in which she at the same time asserted an ownership interest. This was likely to reflect the fact that those monies were no longer in the wife's possession. The nature of her entitlement to the monies in which she had an ownership interest at the valuation date, however, is as part-owner rather than as the recipient of an equalization payment arising from marriage breakdown.
(5) Order for Charge Against Matrimonial Home
[63] Sometime after separation, the parties agreed on the value of the matrimonial home and consented to an order dated January 22, 2016, transferring the wife's interest in the home to the husband for $390,000. The motion judge ordered a charge on the former matrimonial home, now fully owned by the husband, as security for payments he owed to her under the judgment.
[64] The husband says that the January 2016 consent order prohibits the charge. This is because the consent order provides that "[n]either party shall make any further claim with respect to the former matrimonial home once the property is transferred."
[65] I would not give effect to this argument. Properly interpreted, the consent order prohibits any further claims of the wife for an interest in the matrimonial home, since she has received one half of its value as agreed between the parties. However, the charge is not in respect of a claim to the property, but rather secures "the performance of an obligation imposed by the order" against property that now belongs to the husband: Family Law Act, s. 9(1)(b), s. 10(1)(d).
[66] As there is nothing in the prior order that precluded the charge, there is no basis to interfere with this part of the judgment.
Disposition
[67] For these reasons, I would dismiss the appeal with costs to the wife in the sum of $7,000, inclusive of HST and disbursements. Paragraph 1 of the order of Broad J. dated December 20, 2016 is replaced by the following: The respondent shall pay to the applicant the sum of $592,308 to reflect her ownership interest as well as equalization.
"K. van Rensburg J.A."
"I agree Alexandra Hoy A.C.J.O."
"I agree L.B. Roberts J.A."
Released: September 12, 2017
Footnote
[1] There is no dispute that the children have a beneficial interest in the monies held jointly in their names. These are not included in the disputed funds.