Court of Appeal for Ontario
Date: 2025-04-16
Docket: COA-23-CV-1286
Coram: Paciocco, Wilson and Pomerance JJ.A.
Between:
Terrence Chapman
Applicant/Appellant
and
Sandra Ing
Respondent/Respondent in Appeal
Appearances:
Michael Stangarone and Tiffany Guo, for the appellant
Jonathan Kline, for the respondent
Heard: December 13, 2024
On appeal from the judgment of Justice Susan Vella of the Superior Court of Justice, dated October 3, 2023.
Pomerance J.A.:
Introduction
[1] The appellant and respondent were involved in an “on-again, off-again” relationship for several years. They were also business partners. They set up a trucking business and then used various corporate structures to buy and sell properties. However, over time, the personal relationship soured. So too did the business relationship. The parties came to disagree about the extent of their respective entitlements. This prompted the litigation in the court below.
[2] The appellant sought an order winding up all of the parties’ mutual real estate and corporate assets, and the appointment of a receiver, arguing that he was entitled to 50 percent of the proceeds. He argued that the parties were involved in a joint family venture and that he owned the properties on a “50/50 basis”, regardless of title.
[3] The trial judge disagreed. She found that the parties were not involved in a joint family venture but instead were business partners who, from time to time, cohabited in a conjugal relationship. The trial judge further found that to split the proceeds on a “50/50 basis” would cause the appellant to be unjustly enriched. The value of one of the properties had substantially increased due to the respondent’s investment of time and money. The appellant, having contributed nothing to the improvements, was not entitled to share in the increased value. The trial judge awarded the respondent a 100 percent interest in the property at issue (the “Wyandotte property”) in exchange for payment to the appellant of $39,000, which was 50 percent of the purchase price of the building less the amount of the first mortgage.
[4] The appellant challenges the trial judge’s ruling, arguing on appeal that there was a juristic reason for his enrichment, namely, s. 22(3)(b) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”). The appellant says that s. 22(3)(b) entitles him, as an equal shareholder in the corporation that owns the Wyandotte property, to an equal share in the property. The appellant also complains that the trial judge erred in granting a proprietary award when a monetary award would have sufficed. Finally, he says that the trial judge erred in ordering a remedy on a value survived basis given her finding that the parties were not involved in a joint family venture.
[5] We dismissed the appeal at the conclusion of the hearing with reasons to follow. These are those reasons.
A. Background
(1) Facts
[6] The parties’ personal relationship spanned from November 1998 to November 2016. They have one child together, while the respondent has two adult children from a prior relationship.
[7] The parties first went into business together around 2007 and created a small construction trucking company. They incorporated their business as TAC Enterprises Inc. (“TAC Enterprises”) in 2008, and they grew the company and its fleet of trucks. In 2013, they incorporated another company, T.A.C. Canada Inc. (“T.A.C. Canada”). Their trucking business became lucrative, with its value peaking in 2015 because of demand generated by the Pan American Games. Its success prompted them to look into buying tax sale properties together. In 2015 and 2016, they used the profits of T.A.C. Canada Inc. to purchase five such properties.
[8] The Wyandotte property, a 10-unit rental property, was one of them. In 2016, the parties incorporated 1961160 Ontario Inc. (“196”) and used it as a holding company to purchase the Wyandotte property. At the time of the purchase, the property was vacant and marred by significant fire damage. The parties intended to turn the property into a viable business operation, but their relationship ended less than three months after the purchase.
[9] After the separation, the appellant took steps that diminished the value of T.A.C. Canada. He sold trucks to an acquaintance for prices well under market value without the respondent’s consent. The respondent, by contrast, transformed the Wyandotte property into a viable commercial enterprise. At the time of trial, the respondent was actively managing the building as an apartment complex with some office and retail space. Ten of the rental units were occupied. The respondent suffered personal financial detriment as a result of financing improvements to the Wyandotte property.
(2) The Trial Judge’s Decision
[10] The relevant findings of the trial judge, as she summarized them, are set out below:
- (a) the parties were in a conjugal relationship that became predominantly focussed on their business relationship;
- (b) the parties were not involved in a joint family venture with respect to the various business and property interests;
- (d) Chapman is unjustly enriched by Ing’s monetary and non-monetary contributions to the renovation and operation of the Wyandotte Property as a going concern;
- (e) The appropriate equitable remedy is to require Ing to buy out Chapman’s shares in 196 Ontario Inc. as existed on the date of separation, before Wyandotte became a revenue generating asset.
[11] Applying the factors set out in Molodowich v. Penttinen, the trial judge found that the parties were involved in a conjugal relationship, albeit one that was “hanging by a thread” for much of its duration:
It is true that a strict application of many of the Molodowich factors does not favour a finding of a conventional conjugal relationship, and that the emphasis and perhaps main reason for the ongoing nature of the relationship became financial focussing on property investments and businesses they ran together, particularly after Ing was laid off from Citibank in 2013 and had to find a new source of income. Nonetheless, the relationship was a conjugal one even if it was hanging by a thread for much of its duration. Chapman was a presence in Ing’s and the children’s life albeit a very sporadic and often uncommitted one.
[12] The trial judge went on to conclude that the parties were not engaged in a joint family venture. Here she considered factors such as mutual effort, economic integration, actual intent, and priority of the family.
[13] On the question of enrichment, the trial judge found that the appellant was enriched “as a result of [the respondent’s] monetary investment, services and efforts which each have improved the value of the Wyandotte property (and therefore 196 Ontario Inc.)”. The respondent suffered a corresponding deprivation because she was not compensated for the money, time, and effort directed at the Wyandotte property. The trial judge found no juristic reason for the enrichment. Her reasons include the following:
Central to Ing’s claim is her assertion that she contributed the entire sum to 196 Ontario Inc. to purchase the Wyandotte Property. On August 30, 2016, 196 Ontario Inc. was incorporated. 196 Ontario Inc. is the registered title holder of this property. She states that she refinanced her house, the Osborne Property, in order to make this purchase. First, she transferred $10,000 to 196 Ontario Inc. on August 31, 2016, and then she deposited a further $101,062.03 to 196 Ontario Inc. on September 2, 2016. The latter funds came from placing a second mortgage on the Osborne Property. As of the date of the second mortgage, Chapman was no longer on title of Osborne and is not a mortgagor.
She also testified that she paid the resulting interest on the second mortgage from August 31, 2016, to May 24, 2018, in the sum of $26,949.93 entirely herself, since it will be recalled that T.A.C. Canada is no longer a viable business.
The evidence overwhelmingly supports Ing’s claim of unjust enrichment in relation to 196 Ontario Inc. and the Wyandotte Property. Chapman has been enriched as a result of Ing’s monetary investment, services and efforts which have improved the value of the Wyandotte Property (and therefore 196 Ontario Inc.) from the purchase price of $390,000 as a vacant uninhabitable property to being worth about $1,275,000, largely tenanted and a going concern. Ing has suffered a corresponding deprivation as she has not been compensated for the money, time and effort she has devoted to developing and maintaining the Wyandotte Property as a going concern. There is no juristic reason that would permit Chapman to retain this benefit. Chapman’s submission that his and Ing’s expectation was that they would divide all of their assets equally consistent with a joint family venture has been rejected.
[14] The trial judge observed that, upon separation, the appellant “acted in a way that was intended to, and did, run T.A.C. Canada into the ground by selling three trucks in June 2017 to his acquaintance, Farhan Remtulla, for admittedly under market amounts ($30,000) without Ing’s consent and which was not disclosed until 2018”. The appellant also set out to undermine the value of the company by transferring customers to another similarly named business that he incorporated post-separation.
[15] The trial judge provided the respondent a proprietary remedy on a “value survived” basis. She directed that the appellant’s shares be transferred to the respondent, upon payment to him of $39,000, which was half the purchase price of the building less the amount of the first mortgage.
B. Analysis
[16] The appellant challenges the trial judge’s conclusion that he was unjustly enriched. He says that there is a juristic reason for his enrichment: as a shareholder in 196, which owned the Wyandotte property, he was entitled to share in its increased value. In this regard, he relies on s. 22(3)(b) of the OBCA, which provides that “[w]here a corporation has only one class of shares, the rights of the holders thereof are equal in all respects and include the rights[] … to receive the remaining property of the corporation upon dissolution”.
(1) New Argument on Appeal
[17] The appellant did not argue that the OBCA was a juristic reason in the court below. Principles of fairness usually militate against hearing new issues on appeal. The responding party may be at a disadvantage, having not led evidence on the issue in the court below. A related concern is that the record may not be sufficiently robust to permit appellate adjudication. Finally, new arguments on appeal do violence to the principle of finality. The appellate court is not a forum for revisiting tactical decisions that were unsuccessful at trial.
[18] However, like most rules, the rule against new arguments on appeal has exceptions. Exceptions arise where the concerns that animate the rule can be adequately addressed. This is one such case. There is no missing evidence. The appellant has advanced a new theory, but it hinges on the evidence that was adduced in the court below. When asked, the respondent could not identify any additional evidence that she would have led on the issue. Therefore, the respondent is not at any discernable disadvantage, and this court has what it needs to adjudicate the issue on the merits.
[19] Having considered the merits, I reject the appellant’s new argument. Section 22(3)(b) of the OBCA does not provide a juristic reason for the appellant’s enrichment. I will turn to that now.
(2) Unjust Enrichment
[20] The first step in the unjust enrichment analysis asks whether the defendant has been enriched by the plaintiff. The second step asks whether the plaintiff has suffered a corresponding deprivation: Moore v. Sweet, 2018 SCC 52, para 41; Kerr v. Baranow, 2011 SCC 10, para 36. Those steps are readily satisfied in this case.
[21] The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. This means that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case: Kerr, at para. 40.
[22] Kerr elaborates further on the meaning of a “juristic reason”, at para. 41:
Juristic reasons to deny recovery may be the intention to make a gift (referred to as a “donative intent”), a contract, or a disposition of law. The latter category generally includes circumstances where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery. However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as “the legitimate expectation of the parties, the right of parties to order their affairs by contract”. [Internal citations omitted.]
[23] In this case, s. 22(3)(b) of the OBCA does not offer a juristic reason for the appellant’s enrichment. By its terms s. 22(3)(b) addresses the relative rights of shareholders of the same class vis-à-vis the corporation. It does not purport to allocate the family law or equitable claims that one shareholder may have against the shares registered to another shareholder. There is therefore nothing in s. 22(3)(b) that can account for the enrichment of one shareholder to the detriment of another, even if linked to their corporate dealings. The provision is immaterial.
[24] This is not a situation in which the statute contemplates the very enrichment that is said to be unjust. Consider, for example, the operation of the Excise Tax Act, R.S.C. 1985, c. E-15, considered in Reference re Goods and Services Tax [“GST Reference”]. It required suppliers to collect and remit taxes and to incur expenses in the process. This requirement placed a burden on suppliers and conferred a benefit on the federal government. But since it was “precisely the burden contemplated by the statute”, the Act was a juristic reason that permitted the federal government to retain the benefit unless the statute itself was ultra vires: GST Reference, at pp. 476-77.
[25] This case is more like Moore v. Sweet. In that case, the deceased had named his wife the beneficiary of his life insurance policy. They agreed that the wife would pay the insurance premiums, and in exchange, the deceased would designate her as beneficiary of the policy. Unbeknownst to the wife, the deceased named his new common law spouse as the beneficiary before he died. The wife argued that the new spouse would be unjustly enriched if she retained the insurance proceeds. The common law spouse argued that the Insurance Act, R.S.O. 1990, c. I.8, entitled her to the proceeds and that this was a juristic reason for her enrichment.
[26] The Supreme Court disagreed, explaining at para. 70 that the Insurance Act would have to be much more explicit to deprive the wife of her common law entitlements:
Nothing in the Insurance Act can be read as ousting the common law or equitable rights that persons other than the designated beneficiary may have in policy proceeds. As this Court explained in Rawluk v. Rawluk, at p. 90, the “legislature is presumed not to depart from prevailing law ‘without expressing its intentions to do so with irresistible clearness’”.
[27] And further, at para. 73:
Accepting that contractual rights to claim policy proceeds can exist outside of the Insurance Act, can an irrevocable designation under the Insurance Act nonetheless constitute a juristic reason for Michelle’s deprivation? In my view, it cannot. This is because the applicable statutory provisions do not require, either expressly or implicitly, that a beneficiary keep the proceeds as against a plaintiff, in an unjust enrichment claim, who stands deprived of his or her prior contractual entitlement to claim such proceeds upon the insured’s death. [Emphasis in the original.]
[28] The facts of this case are obviously distinguishable from Moore. The point to be made is that a statutory entitlement may have to yield to equitable considerations.
[29] This is particularly so when the context involves family law litigation. In Wildman v. Wildman, MacPherson J.A. was willing to pierce the corporate veil in a family law dispute, commenting that: “[t]his is matrimonial litigation, not commercial litigation”, at para. 48. He went on to note that “although a business person is entitled to create corporate structures and relationships for valid business, tax and other reasons, the law must be vigilant to ensure that permissible corporate arrangements do not work an injustice in the realm of family law”: Wildman, at para. 49.
[30] Relying on Wildman in Lynch v. Segal, this court affirmed the need for a flexible approach to corporate issues raised in the family law context. Blair J.A. noted this approach to be particularly important where “the corporations in question are completely controlled by one spouse, for that spouse's benefit and no third parties are involved”: at para. 36.
[31] This case does not turn on piercing the corporate veil in the traditional sense. It does, however, call for the same degree of flexibility. If the court can pierce the corporate veil to avoid injustice in the family law context, it must also be at liberty to reorder shareholders’ rights. The OBCA contemplates that a court can reorder the ownership of shares through the statutory remedies of oppression and winding-up: see, e.g. BCE Inc. v. 1976 Debentureholders, 2008 SCC 69. Shareholders’ rights under s. 22(3)(b) are “equal” only until a court orders otherwise.
[32] Nor did the trial judge err in her consideration of the reasonable expectations of the parties. It was not reasonable for the appellant to expect to share in the value of the Wyandotte property, given the disintegration of the parties’ relationship, the appellant’s failure to contribute to the betterment of the property, and his own deliberate efforts to undermine the commercial viability of T.A.C. Canada.
[33] For all of these reasons, I conclude that s. 22(3)(b) of the OBCA is not a juristic reason for the appellant’s enrichment vis-à-vis the Wyandotte property.
(3) Market Forces
[34] The appellant argued before the trial judge, and on appeal, that the Wyandotte property’s increased value flowed from market forces rather than the respondent’s efforts. The trial judge rejected this argument and so would I. Market forces obviously have some impact on valuation, but they were of secondary import in this case. Were it not for the respondent’s investments, there would have been scant value for the market to influence. As the trial judge put it, the Wyandotte property “has been transformed from a vacant, damaged building to a largely tenanted habitable building and going concern”.
[35] Nor was it incumbent upon the trial judge to parse the increased value to determine how much was attributable to the respondent’s efforts and how much to the normal operation of market forces. The authorities do not command this exercise. Property value is, by its nature, a holistic measurement. This argument cannot succeed.
(4) Proprietary Remedy
[36] Finally, the appellant contends that the trial judge erred in ordering a proprietary remedy on a “value survived” basis, in the absence of a joint family venture. While the reference to “value survived” was arguably erroneous, it does not invalidate the reasons and conclusions of the trial judge, which are otherwise unassailable.
[37] It was open to the trial judge to find that a monetary award would not adequately reflect the respondent’s contributions to, and interest in, the Wyandotte property. As noted by the trial judge, “Ing has invested much time, effort and money into transforming the Wyandotte Property into a going concern. She continues to actively manage this property and has developed relationships with the tenants”.
[38] The property had increased in value by about 70 percent, from the purchase price of $390,000 to the market value of about $1,275,000. It was, at the time of trial, a lucrative source of revenue as a rental property. The respondent had a valid claim to ownership. A monetary award would not have captured her entitlement to future proceeds flowing from the business operation that she single-handedly established.
(5) Vesting Order
[39] The respondent requested that this court issue a vesting order transferring her title in the Wyandotte property. A vesting order is essentially an equitable remedy designed to work as an enforcement mechanism. The court has a broad discretion, and the determination of whether such an order should issue depends on the factual matrix before it.
[40] Here, the respondent has already established her entitlement to the property, conditional upon payment of $39,000 to the appellant. The trial judge ordered that “[t]he effective date of the transfer of shares from Chapman to Ing will be deemed to be the date of separation (November 27, 2016), and the payment shall occur as soon as practicable, and no later than 60 days from the release of this decision”. In her later costs decision, the trial judge awarded costs to the respondent in the amount of $193,381.13, all-inclusive. The costs award was offset by, among other things, the $39,000 to be paid by the respondent to the appellant. Therefore, the condition precedent for the transfer of the appellant’s shares has been satisfied and a vesting order should properly issue.
C. Disposition
[41] The appellant has failed to establish any basis for appellate intervention. The trial judge gave careful, comprehensive reasons in support of her conclusions. Those conclusions were amply supported by the evidence and by the governing legal principles. The appeal is dismissed. A vesting order shall issue vesting the appellant’s shares in 1961160 Ontario in the respondent, effective immediately.
[42] Pursuant to the parties’ agreement, I would award $10,000 in costs to the respondent.
Released: April 16, 2025
“D.M.P.”
“R. Pomerance J.A.”
“I agree. David M. Paciocco J.A.”
“I agree. D.A. Wilson J.A.”