Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20211013 DOCKET: C68409

Hourigan, Huscroft and Coroza JJ.A.

BETWEEN

Judith Evelyn Tomek Applicant (Respondent)

and

Joseph Zabukovec, Edward Waters, as Litigation Administrator of the Estate of Joseph Zabukovec, and Mary Zabukovec Respondents (Appellant / Respondent)

Counsel: Dermot Nolan and Heather McKinnon, for the appellant Ronald Sleightholm, for the respondent Judith Tomek W. Ross Milliken, for the respondent Joseph Zabukovec

Heard: October 7, 2021

On appeal from the judgment of Justice Judy Fowler Byrne of the Superior Court of Justice, dated May 8, 2020, with reasons reported at 2020 ONSC 2930.

Reasons for Decision

[1] The subject of this appeal is a 15-acre wooded parcel of land in Caledon (the "Property") registered in the name of Joseph Zabukovec Sr. ("Joseph Sr."). [1] His plan in acquiring the Property was to sever lots and sell them for new home construction. Despite this plan, Joseph Sr. invited his son Joseph Zabukovec Jr. ("Joseph Jr.”) to build a house for his family on a 1.13-acre section of the Property (the "house lot").

[2] Joseph Jr. received the necessary approvals and began constructing a home on the house lot. He and his wife, Judith Tomek ("Judith"), moved into the partially completed home in 1989 and over the years finished the house using their own funds. While Joseph Sr. was a frequent visitor at the Property, he treated the house as the property of his son and daughter-in-law and had no input into the design of the home. Joseph Sr. applied to formally sever the house lot from the Property, with the intention of conveying it to Joseph Jr. However, he was forced to withdraw his application after discovering that the severance was not available.

[3] Joseph Jr. accepted that the house lot would not be conveyed to him during his father's lifetime but hoped that he would formally receive title to it in his father's will. That did not happen as his father died intestate in 2004. Joseph Jr. and Judith continued to reside in the home, pay taxes, and make improvements with the full knowledge of Joseph Sr.'s widow, Mary Zabukovec ("Mary").

[4] In 2011, Judith and Joseph Jr. separated. Prior to the trial below, they were able to resolve most of the issues relating to their marriage and separation in a comprehensive settlement agreement. The only significant remaining issue was their ownership interest in the Property. At trial, Joseph Jr. and Judith maintained that they had a beneficial interest in the Property through an unjust enrichment claim or the principles of proprietary estoppel. Judith also argued that there was an agreement between her and Joseph Jr. on the one hand and Joseph Sr. on the other to convey the house lot to them.

[5] On the consent of all parties, Edward Waters (“Edward”), the son of Joseph Sr. and Mary, was appointed Litigation Administrator of his father’s estate (the "Estate"). At trial, the Estate’s position was that there was no agreement, that Joseph Jr. and Judith did not have a beneficial interest in the Property, and that their claim for a proprietary interest was statute-barred. Mary did not participate in the litigation.

[6] The trial judge ruled in favour of Joseph Jr. and Judith, finding that the Estate had been unjustly enriched with respect to the house's construction, improvement, and maintenance, but not with respect to the remainder of the Property. The trial judge also found that Joseph Jr. successfully made out the elements of proprietary estoppel regarding the house. Regarding remedy, she relied on expert evidence to find that the value of the Property, based on a cost approach that valued the land and the house separately, was $813,000. She granted Joseph Jr. and Judith joint beneficial ownership of 75% of the Property.

[7] The Estate's appeal is restricted to the appropriateness of the trial judge's remedy. Specifically, it argues that the trial judge erred regarding the value of the land and failed to consider the contribution Joseph Sr. made to the construction of the house.

[8] We agree that the trial judge erred in her consideration of the land value. The expert evidence was that the raw land was worth $400,000. In her analysis, the trial judge stated that $400,000 was the value of the improved land (i.e. the land plus the house). She apportioned that value 50% for the Estate and 50% for Joseph Jr. and Judith. The Estate submits that the entirety of the land portion should have been credited to Joseph Sr.

[9] The trial judge apportioned the full value of the house, being $413,000, to Joseph Jr. and Judith. The Estate submits this was an error because it failed to take into account the work that Joseph Sr. put into the construction of the home. It values that contribution at $100,000.

[10] After taking into account Joseph Sr.’s work contributions and the value of the land, the Estate submits that the interest of Joseph Jr. and Judith in the Property is correctly valued at 38.5%. In the alternative, if only the land value is adjusted for, then Joseph Jr. and Judith’s beneficial interest in the Property should be set at 50.8%.

[11] We agree that the error in the treatment of land value impacts the amount that the Estate was unjustly enriched. A similar argument can also be made regarding the work contribution of Joseph Sr. However, we are not persuaded that we should interfere with the order that was made by the trial judge. The difficulty with the Estate’s argument is that it ignores the available remedies where the elements of proprietary estoppel have been proven.

[12] As the Supreme Court has stated, "[w]here a claimant has established proprietary estoppel, the court has considerable discretion in crafting a remedy that suits the circumstances": Cowper-Smith v. Morgan, 2017 SCC 61, [2017] 2 S.C.R. 754, at para. 46. The court also instructed that an "appellate court should not interfere unless the trial judge's decision evinces an error in principle or is plainly wrong": Cowper-Smith v. Morgan, at para. 46.

[13] Although a trial judge does not have unfettered authority in crafting an equitable remedy, we find that the trial judge's remedy, in this case, was appropriate. There was ample evidence to establish that it was always the intention of the parties that Joseph Jr. and Judith would receive both the house lot and the house. Indeed, that was the purpose of Joseph Sr.’s aborted severance application. Had that application been successful, Joseph Jr. and Judith would have been the owners of their home and the house lot. The order of the trial judge is entirely consistent with that intended result. It awards them the value of the house and the house lot. It is, in our view, a just and equitable result in the circumstances. There is, therefore, no basis for this court to interfere with that order.

[14] The appeal is dismissed. Regarding the costs of the appeal, the parties agreed that Joseph Jr. and Judith should each receive $12,500. However, there is a disagreement regarding whether the Estate or Edward should be paying these costs. This court has the discretion to order costs where the Litigation Administrator has acted unreasonably or in their own self interest: Wall v. Shaw, 2019 ONCA 929, 43 ETR (4th) 1, at paras. 54-55. In our view, Edward was acting in his own interest in pursuing this appeal and not in the interests of the Estate. We order that he pay the costs personally.

“C.W. Hourigan J.A.”

“Grant Huscroft J.A.”

“S. Coroza J.A.”

[1] First names are used in these Reasons for Decision for the sake of clarity and with no disrespect intended to the parties.