Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20241007 DOCKET: COA-23-CV-0780

Hourigan, Trotter and Gomery JJ.A.

BETWEEN

Rosetta Conte Plaintiff (Appellant)

and

Gerald Pettle (a/k/a Gerry Pettle), and Michael Pettle, Ruthie Pettle, and Richard Pettle, as estate trustees of the Estate of Susan Pettle (a/k/a Susan Bidula a/k/a Susan Jane Allain), deceased Defendants (Respondents)

Counsel: Wade Morris and Efemena Oghenejakpor, for the appellant Michael Cohen, for the respondents, Michael Pettle, Ruthie Pettle, and Richard Pettle, as estate trustees of the Estate of Susan Pettle (a/k/a Susan Bidula a/k/a Susan Jane Allain), deceased Gerald Sternberg, for the respondent, Gerald Pettle

Heard: September 25, 2024

On appeal from the judgment of Justice Robert Charney of the Superior Court of Justice, dated June 29, 2023, with reasons reported at 2023 ONSC 3881.

Reasons for Decision

[1] On April 16, 2010, the appellant obtained a default judgment against the respondent, Gerald Pettle, for $268,920. The claim was based on Mr. Pettle’s failure to repay loans advanced by the appellant.

[2] The appellant conducted two examinations in aid of execution (July 2010 and September 2017). Mr. Pettle claimed to have no assets to pay the judgment, and said he kept no business records, dealt only in cash, and explained that he loses all his money gambling. The family house where he resided and a cottage (the “Properties”) were registered in his wife’s name, Susan Pettle. Mr. Pettle testified that he made no contribution toward the purchase of the Properties, claimed Ms. Pettle made all the mortgage payments for the Properties from her part-time work, and explained that he would give any money he had to his wife who would make payments for expenses or the mortgages.

[3] On May 24, 2018, the appellant commenced a new action against Mr. Pettle and Ms. Pettle, claiming that Mr. Pettle holds a beneficial interest in the Properties. The appellant sought a declaration that the 2010 judgment could be enforced against the Properties and also alleged that placing the Properties in Ms. Pettle’s name was a fraudulent conveyance.

[4] Ms. Pettle died on June 3, 2022, and the Properties were left to her children, as estate trustees. The house has since been sold and the net proceeds from the sale were paid into court. Ms. Pettle’s evidence was set out in an affidavit, on which she was cross-examined. She testified that she and her husband agreed that she would be the sole owner of the Properties due to Mr. Pettle’s gambling habit in an effort to protect the Properties from future potential debts.

[5] Ms. Pettle disclosed heavily redacted banking records from January 1, 2010, to May 2019, in an attempt to demonstrate how she paid for the mortgages for the Properties without contributions from her husband. Due to the bank’s retention practice, the earliest date of the records is from March 2013. During this period, Ms. Pettle’s total income, reflected in the bank records, was $15,471 and mortgage payments for the Properties were paid out of the account of more than $4,000 a month. The records showed total debits to her account of $449,668 but the source of these funds was redacted, and her counsel did not identify the source.

[6] In support of her claim to the Properties, the appellant relied on Ms. Pettle’s admission that she would “purchase the Properties on her own and would be the sole owner of the Properties due to Gerald’s gambling habit … in an effort to protect the Properties from future potential debts.” The trial judge found there was no evidence that Mr. Pettle was the source of any of the original purchase funds for the Properties. Accordingly, the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 claim in relation to the Properties failed because at no time did Mr. Pettle own the Properties or transfer them to his wife.

[7] The trial judge found that Ms. Pettle received approximately $434,000 from unidentified sources. He reached this amount by deducting Ms. Pettle’s employment income from the unidentified debits totaling $449,668. He drew the following adverse inference, “it is open to the court to draw an adverse inference against Susan for failing to disclose the source of these funds, and I draw such an inference. I reject Susan’s evidence that Gerald made no financial contribution to the mortgages or to the family finances generally.”

[8] Given the trial judge’s conclusion that Mr. Pettle transferred money to Ms. Pettle, which was used to pay for the mortgages on the Properties, the trial judge concluded that Mr. Pettle had a beneficial interest in the transferred cash, traceable to the Properties. As explained above, the trial judge found that Ms. Pettle received approximately $434,000 from unidentified sources. He cited Cambone v. Okoakih, 2016 ONSC 792, where two spouses contributed to the purchase of a property that was placed in the name of one of them, and it was not possible to determine the proportions each had contributed. In Cambone, Gray J. concluded that a fair result would be that “each party is entitled to an equal share.” The trial judge relied on the Cambone principle and attributed half of the amount from unidentified sources ($217,000) to Mr. Pettle’s fraudulent conveyances.

[9] The appellant raises three grounds of appeal: (1) the trial judge erred in not attributing a 50% beneficial interest in the Properties to Mr. Pettle; (2) the trial judge erred in his analysis and computation of the amount of cash to be awarded to the appellant; and (3) the trial judge erred in failing to extrapolate the amount of fraudulently conveyed cash. We reject the first and third grounds of appeal. However, we agree with the appellant that the trial judge erred in attributing only $217,000 as fraudulent conveyances.

[10] The trial judge’s factual finding that there was no evidence that Mr. Pettle was the source of any of the original purchase funds for the Properties was available to him on the evidence. It follows that the legal conclusion he made as a result of this finding – that there was no fraudulent conveyance of real property – was free from error.

[11] Regarding the issue of the fraudulent conveyances of cash, the parties’ positions come down to different interpretations of the trial judge’s adverse inference. The appellant submits that the trial judge inferred that the entire $434,000 in unexplained deposits was attributable to Mr. Pettle. The respondents argue that the trial judge never specified where the unaccounted funds came from and, because it was impossible to determine the relative contributions made by Mr. Pettle and Ms. Pettle, he correctly attributed 50 percent to each of them.

[12] It is unfortunate that the scope of the trial judge’s inference is not clearer. When a trial judge draws an adverse inference, it is important that they make clear the nature and details of the inference drawn. In our view, the appellant’s interpretation of the adverse inference is correct. It must be recalled that the inference was made in circumstances where Ms. Pettle produced limited bank records, which showed that her total income was only $15,471. Other than her employment income, Ms. Pettle failed to establish the sources of the deposits. There is nothing in the trial judge’s analysis that suggests that he believed that Ms. Pettle was the source of any deposits other than her employment income. Therefore, the trial judge erred in crediting her with 50 percent of the unaccounted-for deposits.

[13] Regarding the extrapolation argument, the trial judge properly recognized that Ms. Pettle’s bank records did not capture the period between 2010 and 2013. The trial judge accepted the appellant’s position at trial that $434,000 was the total extent of the fraudulent conveyance. The appellant did not argue that the bank records should be extrapolated to estimate the total amount of cash fraudulently conveyed between 2010 and 2022. It follows that there was no error in the trial judge’s calculation of the amount of cash fraudulently conveyed.

[14] The appeal is allowed. In paragraphs 1 and 2 of the trial judge’s judgment, the figure $217,000 is deleted and replaced by the figure $434,000. The respondent estate trustees shall pay the appellant her costs of the appeal fixed and payable in the all-inclusive amount of $5,000.

“C.W. Hourigan J.A.”

“Gary Trotter J.A.”

“S. Gomery J.A.”