COURT FILE NO.: 60213

DATE: 2012 June 04

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PAUL COWDEROY and MARK COWDEROY

Plaintiffs

• and -

THE ESTATE OF KOSTAS SORKOS, by its Estate Trustee, Tehemton Mirza

Defendant

HEARD: January 16, 17 & 18, 2012

Written Submissions March 7, 2012

TAUSENDFREUND J.

REASONS FOR JUDGMENT

OVERVIEW

[1] The plaintiffs bring this action against the defendant estate (“the estate”) for an interest in certain lands registered in the name of the estate. They rely on a purported arrangement proposed to them in 1985 by the now late Kostas Sorkos (“Gus Sorkos” or “Gus”) that he would leave them, as an inheritance, certain properties he referred to as “the farm” and “the cottage”. In return, the plaintiffs were to assist him with their time and energy in the upkeep, maintenance and preservation of these properties and attend to that end to all tasks he requested of them. They say that Gus Sorkos proposed that arrangement as he regarded them as his grandchildren and they him as their grandfather. In the alternative, the plaintiffs seek a quantum meruit award.

[2] The estate denies the existence of such an arrangement and, in any event, states that it lacks the required corroboration. The estate further denies that the concepts of unjust enrichment and/or proprietary estoppel apply to these facts and states that the plaintiffs at most would be entitled to a modest quantum meruit amount.

FACTS

[3] Paul Cowderoy was born July 13, 1968 and Mark Cowderoy on October 9, 1972. Their parents are Brian and Celeste Cowderoy. Their father Brian died August 2008.

[4] Gus Sorkos was born August 22, 1938 in Greece. He emigrated to Canada as a young man. In or about 1960, he met the plaintiffs’ grandmother, Victoria Cowderoy, Brian’s mother. She was then a waitress and Gus, a short-order cook in a small restaurant in London, Ontario. Soon thereafter, they started a common-law relationship which lasted until Victoria’s death on January 14, 2001.

[5] Although both Victoria and Gus had little formal education to support them, they achieved a reasonable amount of financial success. They operated and later sold more than one restaurant and additionally acquired a number of real estate properties. The subject matter of the plaintiffs’ claim relates to two of these properties. One may be called “the farm” and the other “the cottage”.

[6] Gus and Victoria purchased the farm as tenants-in-common in 1971 for $39,500. It is located just outside of the then boundaries of the City of London and is comprised of about 90 acres in Lot 9, Concession 12 of the then Township of London. The cottage property located near Kincardine in the County of Bruce on Lake Ontario consists of two contiguous parcels. The first was purchased in 1985 by Gus Sorkos and Brian Cowderoy as tenants-in-common for $17,000. It is described as Part 6, Plan 3R-2895. The second parcel was purchased in 1987 by Gus Sorkos for $6,500. It is described as Parts 2, 3, 4, 5, and 7, Plan 3R-2895. Both lots are located in Lot 56, Concession A, Township of Kincardine, in the County of Bruce.

THE “AGREEMENT”

[7] Gus Sorkos had no biological children. As of the late 1970’s and in part, due to the separation of their parents, the plaintiffs began to spend more and more of their free time with Gus, particularly at the farm and cottage. Additionally, Paul as the older of the two, helped Gus with the operation of his restaurant known as the “Barn Restaurant and Tavern” at 1410 Huron Street in London. He started there at age 12 in 1980 as a bus-boy and dishwasher and later worked as a bartender until the restaurant was sold in 1989. He helped there on weekends and two nights during the week. He would generally walk to and from the restaurant, a distance of four kilometers one way.

[8] Over the years, the relationship between Gus Sorkos and the Cowderoy boys became ever closer. There is no doubt that it had all of the appearances and was, in substance, a relationship between a grandfather and his grandchildren.

[9] Mark also became involved in assisting with the restaurant starting at age 8 as a dishwasher and bus-boy. That also continued in various capacities until the restaurant was sold in 1989.

[10] Both plaintiffs recall a breakfast meeting with Gus in 1985. Paul was then 17 and Mark 13 years of age. Both say that they have vivid and clear memories of that discussion which Gus initiated with them. Gus told them that he would be asking a lot of them in the future and that he expected that they assist him with the farm and the cottage properties. They were to be available when needed and when asked. They would not receive any pay for these services. In return, he would leave them in his will both the farm and the cottage and $350,000 each to maintain these properties. The boys agreed. All three shook hands. Both plaintiffs indicated that they did not then grasp the importance of the proposal they had accepted. Nevertheless, they immediately and continuously lived up to their end of the agreement (the “1985 breakfast agreement”).

[11] Paul related a second discussion on that theme which he had with Gus in or about 1988 shortly before the sale by Gus of the restaurant in 1989. Only the two were present. They were busy fixing the urinal in the restaurant washroom. Gus told him that he was getting tired of the restaurant business and was planning to build a house on the farm. He intended to build a house large enough to accommodate two families. It was his plan that Paul and Mark and their families would move into that building upon the death of the survivor of Gus and their grandmother, Victoria. Thereafter, Gus would raise that topic with the boys at least once a year. He indicated to them that he was training them and that he hoped that they appreciated what he was doing for them.

[12] Mark and Paul called Gus and Victoria their “Papa” and “Nana”. Gus treated the boys in all respects as his grandchildren. He instilled in them the notion of hard work and that nothing would be given to them on a silver platter. After the sale of the restaurant where Gus and Victoria lived, they moved to a condominium for two years while Gus arranged for the construction of the house on the farm property. Gus showed the boys the architectural plans for the house and said to them “Here’s your house, boys – that’s what you’ll get after we die, but you will have to work for it”. On one occasion, Mark and his friend Sergio Masciantonio had cleaned the warehouse on the farm. Gus was in the process of paying Sergio for his work when Mark also held out his hand in jest. Gus slapped it away saying, “You’re both going to get this one day and you’ll just have to wait”. Sergio confirmed Mark’s recollection of this incident.

[13] The boys stated that they, at the expense of their personal relationships and their own priorities in life, devoted themselves to all of the requests Gus made of them. These were often in the nature of commands to assist Gus with whatever was required at the farm and the cottage. They remained true to their commitment to Gus until his death in 2009.

[14] The particulars of the work Paul and Mark performed over the years at the request of Gus included:

Farm

• Planting at least 100 trees

• Cleaning and maintenance of the pond on Farm property

• Digging trenches along the driveway for electrical cables

• Cultivating and ploughing the fields

• Staining the large deck on an annual basis

• Cutting grass on the entire Property (this job would take approximately 1 full and long day to complete or two shorter days)

• Gardening, weeding, planting grass seed, “bush work”

• Snow ploughing in the winter months

• Moving large items/implements from one place to another

• Repair of water pumps, furnace, drains and other appliances

• General house maintenance

• Painting of the house, including the walls and trim

• Replacement of pillars in front of the house, including priming, painting and installation

• Miscellaneous farm labour

Cottage

• Grass cutting (it took approximately 4-6 hours to cut the grass on the Cottage Property)

• Building the deck

• Demolition of the cottage

• Painting

• Planting grass seed, gardening, weeding

• Raking, shoveling and filling in marina with dirt

• Digging out trenches

• Opening and closing the cottage each year.

[15] In addition to their work at the farm and cottage properties, the boys assisted Gus in his business ventures. Gus operated Bryanston Liquidation. This involved refurbishment and repair of used restaurant and farm equipment. The boys assisted in cleaning, repairing and refurbishing the equipment for resale.

[16] Gus became involved in the operation of a “worm business”. This venture unfortunately was a financial disaster for Gus. Mark stepped in to attempt to recover his “grandfather’s” capital investment. In addition to his then full-time employment at the Children’s Aid Society in London, Mark worked in the worm business daily until midnight and on weekends for over 18 months. He logged an estimated 2000 hours, all without pay. Not only were his efforts in vain, but it also caused a temporary rift in his relationship with Gus who placed the reason for the loss of his investment entirely on Mark’s shoulders. I find this to be a misguided notion. Mark’s efforts were driven entirely by his attempt to recover a lost investment for his grandfather. Fortunately, both put the matter behind them within a year or two.

[17] The boys’ grandmother, Victoria, died January 14, 2001. By then, Gus had become physically compromised as a result of an earlier stroke. He could not care for himself on his own. On October 30, 2002, Gus married Eirini Sorkos who looked after Gus until his death on September 14, 2008.

WILLS OF GUS SORKOS

[18] After Gus died, the boys learned of a number of Wills which he had made. The dates and relevant particulars of these Wills are:

1. March 7, 2001

a) Gus left the farm and cottage equally to Paul and Mark and $500,000.00 to each of them.

2. December 17, 2003

a) $250,000.00 to his wife Eirini Sorkos;

b) $50,000.00 to Paul;

c) $1,000.00 to Mark;

d) Residue of his estate to his five siblings in Greece.

3. June 7, 2008 Codicil

a) The specific bequest of $1,000.00 to Mark was increased to $25,000.00.

[19] The plaintiffs called several witnesses to confirm the evidence of their relationship with Gus Sorkos.

Waltraud Botaitis

[20] She and her husband had known Gus since the early 1960s when both were then involved in the restaurant business. She also knew Paul and Mark as of their childhood years.

[21] After Victoria’s death in 2001 and shortly after her funeral, Gus told them that he wanted to sign some documents to leave the farm and cottage to Paul and Mark. He referred to them as “his boys.” She and her husband were the witnesses to the 2001 Will. Gus told them that the greatest happiness in his life were “his boys.”

Joanne Thompson

[22] She had worked for Gus for over 20 years as a waitress and as his property manager. She stated that Gus treated Paul and Mark as his children. In her presence, Gus reaffirmed his intention on many occasions to give the farm and cottage to Paul and Mark. Referencing these properties, Gus said to the boys on many occasions that “if you want to own this one day, you have to work for me.”

[23] Paul and Mark were like sons to him. Over the years, they dutifully attended to all requests he made of them.

Sergio Masciantonio

[24] He had been Mark’s friend for more than 20 years and met Paul through that relationship. Mark took him to visit Gus on many occasions. He recalled two incidents, in addition to the one already noted:

[25] In the mid 1990s, he visited Mark, Paul and Gus at the cottage. All three were then in the process of dumping rocks into water. After dinner, he heard Gus say that Paul and Mark could do with the cottage what they wanted after he was gone.

[26] In June 2008, he visited Gus in the hospital. Mark was present. During that visit and referring to the farm, Gus said to Mark, “Enjoy it and keep it in the family.”

Ruben Barahona

[27] He, Paul and Mark were childhood friends. He spoke of two occasions he recalled from the early 1990s:

a) Gus and Mark were working in the field at the farm. He heard Gus say to Mark that he was teaching him about hard work, as the farm and cottage would be his one day.

b) He visited Paul and Mark at the farm while they were in the process of cleaning various items of used restaurant equipment which Gus had purchased for resale purposes. Mark complained about having to clean these pieces. Gus said to him that he was teaching him how to take care of things as it would be Mark’s one day.

Len Kushnier

[28] He was Mark’s supervisor at the CAS in London in the late 1990s. While visiting Mark, he heard Gus refer to the farm property with some pride and that it would belong to the boys one day. Based on those comments, it was clear to him that if the boys continued to work hard for Gus, they would inherit the farm one day.

Mervyn Carter

[29] Mr. Carter had known Gus for over 40 years. They would regularly visit with each other on a weekly basis. He stated that Mark and Paul appeared very loyal to Gus and worked hard for him. On one occasion when he asked Gus about what his plans were for the farm and cottage, Gus replied that these would go to Paul and Mark.

Danny Bikos

[30] His father, Tom Bikos, was friends with Gus. He occasionally visited the farm property with his father where he met Paul and Mark. He witnessed the boys working the farm property. They attended to various necessary chores including the cleaning of used restaurant equipment. He recalled that on two occasions Gus said to Paul and Mark that the properties would become theirs one day.

Ann McMaster

[31] She is 86 years old and still resides in the Kincardine area near the Sorkos cottage. She had known Gus and the boys for about 20 years. Referring to Paul and Mark, she testified that Gus “worked them so hard.” When she asked Gus about that, he told her several times that the cottage would be their property one day. She last spoke to Gus about six months before he died. He was then quite feeble and irritable, yet he told her again as he had before, that he was leaving the farm and cottage to the boys.

George Bloschinsky

[32] He was a neighbour of Gus at the farm. On one occasion when he visited Gus, Paul and Mark wanted to leave rather than continue to work, Gus objected and said to Mark “You’re getting the place. You can’t go until the work is done.”

[33] The Defendant called a number of witnesses who spoke about their memories of Gus and his relationship with the plaintiffs:

Jacques Terzis

[34] He and Gus became friends as of the late 1990s. They vacationed together throughout Canada and Greece and visited each other at their respective homes. He met and saw Gus on some of his visits to the farm. He met Paul for the first time at Victoria’s funeral in 2001.

[35] He drove Gus to Mark’s graduation from Police College. It was a happy occasion for Gus. He was moved to tears. Some years later, Gus was upset with Mark’s decision to resign from police service. Gus told Mr. Terzis that he would not leave anything in his Will for Mark.

[36] Mr. Terzis did not know anything about the particulars of the work Paul or Mark did for Gus over the years.

Peter Mitsopoulos

[37] He first met Gus in 2003 and assisted him with changes to his financial portfolio and with the paperwork to permit for the future Eirini Sorkos to immigrate to Canada from Greece.

[38] Gus was concerned that his financial affairs were not in order and that his estate was “not well set.”

Tom Mirza

[39] He acted as bookkeeper/accountant to Gus from 1987 forward.

Peter Alafoyannis

[40] As of 1997, he had rented space from Gus in the industrial building on the farm where he operated a worm business. Gus then started his own worm business in the same building. During the course of operating his worm business, he saw Mark there a few times assisting Gus with the business. He rarely saw Paul work at the farm. At that time, Mark lived with Gus at the farm on a full-time basis and assisted him with the worm business.

John Karaouzos

[41] He met Gus in or about 2004 when he attended at the farm to inquire about the purchase of a used cooler. He and Gus became friends. Thereafter, he saw him once or twice a week until Gus died. During that time, he met Paul and Mark on several occasions.

ANALYSIS

Was there an agreement?

[42] The plaintiffs rely on what they say was an agreement they reached with their “grandfather” Gus, in 1985 as detailed above. If there was an agreement, the plaintiffs cannot rely upon its term, absent corroboration.

[43] Section 13 of the Evidence Act, R.S.O. 1990, Chapter E.23 states:

13 In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.

[44] Helpful are these comments of the Ontario Court of Appeal in Robinson Estate v. Robinson (2011) 2011 ONCA 493, O.J. 3084 on the question of what constitutes corroboration of the intentions of a testator:

24 … The trend in Canadian jurisprudence is that extrinsic evidence of the testator's circumstances and those surrounding the making of the will may be considered, even if the language of the will appears clear and unambiguous …

27 The law properly regards the direct evidence of third parties about the testator's intentions to be inadmissible. There would be much uncertainty and estate litigation if disappointed beneficiaries … could challenge a will based on their belief that the testator had different intentions than those manifested in the will.

[45] I also note the observation of Brown J. in Re: Kaptyn Estate (2010) 2010 ONSC 4293, 102 O.R. (3d) 1 (S.C.) at para. 36:

36 The rationale for this principle of admissibility rests in preserving the role of the written will as the primary evidence of the testator's intention and avoiding displacing the written will with an "oral will" gleaned from evidence of the testator's declarations of intent. …

[46] The evidence here from numerous witnesses is not “evidence of the testator’s intention”, but evidence of his actions. I find that this evidence is corroborative of the “1985 breakfast agreement” during which Gus laid out his plan for the farm and the cottage by way of the proposal he put to the plaintiffs. That proposal, I find, was accepted by Paul and Mark who, for almost 25 years, acted on it in furtherance of its terms.

[47] I also find that the Last Will and Testament of Gus Sorkos of March 7, 2001 which left the farm and cottage to the plaintiffs further corroborates the existence of the agreement. That is so, despite the changes Gus made in his later Will and Codicil.

[48] I accept, without reservation, the evidence of the Plaintiffs. They testified in a clear, forthright and measured manner, in the absence of any attempt to colour or exaggerate. My finding of the corroboration I noted further supports that conclusion.

Is the agreement “void” or “voidable”?

[49] Neither plaintiff had attained the age of majority at the time of their “1985 breakfast agreement” with Gus.

[50] It has been long established that contracts for a minor must be for his benefit. Otherwise, they are void. Contracts for the benefit of a minor are voidable at the instance of the minor: R. v. Rash [1923] O.J. 127 at para.53 and Toronto Marlboro Major Junior “A” Hockey Club v. Tonelli [1979] O.J. 4054 at para.23.

[51] The plaintiffs acted on the agreement which they now seek to enforce. The agreement is clearly for their benefit, as they seek to be compensated for their years of service to Gus Sorkos. The agreement will not be set aside based only on the fact that both plaintiffs had not attained the age of majority at the time the agreement was struck in 1985.

WERE THERE SUFFICIENT ACTS OF PART PERFORMANCE TO TAKE THE “1985 breakfast agreement” OUTSIDE s.4 OF THE STATUTE OF FRAUDS?

[52] The “1985 breakfast agreement” was entirely verbal. As this agreement proposed an eventual transfer of land to the Plaintiffs, s. 4 of the Statute of Frauds requires that the agreement be in writing and signed, in this case, by Gus. S.4 reads as follows:

4. No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor's or administrator's own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party. (Emphasis added)

[53] Commenting on the application of s. 4 of the Statute of Frauds, the Court of Appeal in Erie Sand and Gravel Ltd. v. Seres’ Farms Ltd., 2009 ONCA 709 noted:

49 The purpose of s. 4 of the Statute of Frauds is to prevent fraudulent dealings in land based on perjured evidence. However, Equity will not allow the Statute of Frauds to be used as an "engine of fraud". It created the doctrine of part performance to prevent the Statute of Frauds from being used as a variant of the unconscionable dealing which it was designed to remedy: see Hill v. Nova Scotia (Attorney General), 1997 401 (SCC), [1997] 1 S.C.R. 69 at para. 10. The requirements in s. 4 of the Statute of Frauds must give way in the face of part performance because the acts of part performance fulfill the very purpose of the written document -- that is, they diminish the opportunity for fraudulent dealings with land based on perjured evidence.

[54] Addressing the notion that part performance in certain instances may prevent the application of s. 4 of the Statute of Frauds, Anson’s Law of Contract, 24th ed. (Oxford, Clarendon Press, 1975) states at p.84:

Under the equitable doctrine of part performance, the Courts will in certain cases allow a contract, even though of a kind required to be proved by writing, to be proved by oral evidence, when the party seeking to enforce the contract has done acts in performance of his obligations under it. The doctrine, however, is strictly limited, and certain requirements must be satisfied before it can apply.

[55] The requirements of such part performance, as noted in Taylor v. Rawana, 1990 6916 (ON SC), [1990] O.J. No. 1363 at para. 23-27 and Palkowski v. Ivancic, [2006] O.J. No. 3322 at para.16 are:

a) the performance must be referable to the alleged contract which deals with the subject lands;

b) the acts of part performance relied upon must have been performed by the Plaintiff(s);

c) the contract must be one which, if it were properly evidenced by writing, would have been specifically enforceable; and

d) there must be clear and proper evidence, either oral or written, of the existence of the contract.

[56] Each of these four requirements must be satisfied: Palkowski v. Ivancic, ibid. at para.16. I have already found that requirements (b) and (d) have been proven by the Plaintiffs. I will now address the remaining two requirements.

Is the work performed by the Plaintiffs referable to the “1985 breakfast agreement”?

[57] As did the Court of Appeal in Erie Sand and Gravel Ltd., supra, I will address this question in two parts:

Is the doctrine of part performance limited to a consideration of the acts of the Plaintiffs?

[58] The evidence of the Plaintiffs is that for more than 25 years, they worked for and assisted Gus on the farm and at the cottage, as and when Gus asked. The work they performed in and of itself is equivocal on the question of the existence of the contract. Their efforts and work over the years at the farm and cottage are connected to the “1985 breakfast agreement” only by virtue of the corroborative evidence. That evidence comes entirely from Gus himself in what he said over the years to the various witnesses about his intention to leave these properties to “his boys” and from his 2001 Last Will and Testament. As noted in Erie Sand and Gravel Ltd., supra at para.75,

75 … it is now settled law in Canada that the acts of both parties to an alleged oral agreement may be considered when a court is called on to determine if sufficient acts of part performance take an alleged agreement outside the operation of the Statute of Frauds. …

Are the acts of part performance unequivocally referable to the “1985 breakfast agreement”?

[59] Writing for the Court of Appeal in Erie Sand and Gravel Ltd., supra, Gillese J. reviewed in detail at paras.85-98 the principles laid out by the Supreme Court in Deglman v. Brunet Estate, 1954 2 (SCC), [1954] S.C.R. 725. Gillese J. initially reviewed the Deglman test:

83 …The facts of Deglman are these. Both George Constantineau and his aunt lived in Ottawa. When he was about 20 years of age, he attended a technical school and, for approximately six months of the school year, lived with his aunt, Laura … Brunet, at No. 550 Besserer Street. Ms. Brunet owned both No. 550 and the adjoining property, No. 548. While Mr. Constantineau lived with his aunt, he did chores on both properties. He claimed that during this period, his aunt promised to leave him No. 548 in her will if he would do the things she asked of him from time to time.

84 When the school term ended, Mr. Constantineau returned to his mother's home. He never again lived at No. 550 and at no time did he live at No. 548. He did continue to help his aunt, however, by taking her on trips to Montreal and elsewhere, doing odd jobs at the two houses and running her personal errands.

85 Ms. Brunet died intestate. Mr. Constantineau brought an action against the estate in which he sought title to No. 548 based on the alleged oral agreement. The trial judge ordered that the oral agreement be enforced. That judgment was affirmed on appeal. On further appeal, however, the Supreme Court of Canada set aside the judgment and, instead, awarded him damages on a quantum meruit basis.

86 Two judgments were rendered by the Supreme Court of Canada in Deglman. Rand J., writing on behalf of himself, Rinfret C.J. and Taschereau J., would have allowed the appeal because he viewed Mr. Constantineau's acts as "wholly neutral" in that they were not connected to either property. He observed that there must be a connection between the acts of performance and a dealing with the land, stating that the acts must be "referable only to the contract alleged" (the "Rand test").

87 Cartwright J. delivered the majority judgment. Like Rand J., he found that none of Mr. Constantineau's acts had a connection to No. 548 Besserer Street or to any dealing with that land. However, he took a different view of what connection had to exist between the acts of part performance and the alleged oral agreement. Where Rand J. would have required the conduct to be referable only to the specific contract that had been alleged, Cartwright J. held that it was sufficient if the acts were "unequivocally referable in their own nature to some dealing with the land" (the "Deglman test"). In reaching this view, he relied on the following quotation from Duff J. in McNeil v. Corbett (1907), 1907 45 (SCC), 39 S.C.R. 608, at pp. 611-612:

[A] plaintiff who relies upon acts of part performance to excuse the non-production of a note or memorandum under the Statute of Frauds, should first prove the acts relied upon; it is only after such acts unequivocally referable in their own nature to some dealing with the land which is alleged to have been the subject of the agreement sued upon have been proved that evidence of the oral agreement becomes admissible for the purpose of explaining those acts. [Emphasis added.]

88 Thus, the question becomes: are the acts of part performance as found by the trial judge "unequivocally referable in their own nature to some dealing with the [farm and cottage]"?

90 … it is not sufficient that the conduct is unequivocally referable to the property in question; the conduct must also, in and of itself, indicate that there had been "some dealing with the land".

91 While there are a number of cases which make reference to this requirement,little guidance can be found on the analytical approach to be taken to this aspect of the requirement. Haskett v. O'Neil, 1939 310 (ON CA), [1939] 4 D.L.R. 598, [1939] O.W.N. 573 (C.A.) pre-dates Deglman but, nonetheless, provides some assistance in this regard.

93 In applying the more stringent Rand test [the Acts must be “referable only to the contract alleged”] in Haskett, Robertson C.J.O., on behalf of the court, stated, at p. 601:

To determine whether or not the acts relied upon in any particular case are within this description, one must have regard to all relevant circumstances in order to determine their true character.

…one must have regard to the way in which reasonable people carry on their affairs and if the acts relied on are of such a character that, judged by the standards in accordance with which reasonable people commonly act, they would not be done except in part performance of a contract such as is alleged, that is sufficient part performance to avoid the operation of the statute.

94 There is much to be said for the commonsensical approach taken in Haskett. Based on that, but modified to reflect the less stringent Deglman test, in my view, the proper approach to making such a determination is this. Begin by determining the context (or the "relevant circumstances" to use Haskett terminology). Then consider the acts of part performance having regard to the way in which reasonable people carry on their affairs. …

[60] Applying the Deglman test, as modified by Erie Sand and Gravel, I note the following:

a) Gus looked upon the Plaintiffs as his “grandchildren” He referred to them as “his boys”;

b) I take from the evidence that Gus was a “no nonsense” direct type of person. When he asked or requested, it was in fact a demand. Gus felt comfortable in looking to “his boys” for assistance as he, in return, had made a commitment to leave them the farm and cottage; and

c) Although Paul and Mark may initially not have grasped the significance of the “1985 breakfast agreement”, they were periodically reminded of it by Gus and abided by the terms of that arrangement without fail or compromise.

[61] Applying the Deglman test, as modified by Erie Sand and Gravel, I find that for more than 25 years, with Gus on the one hand and the Plaintiffs on the other, they unequivocally ordered their affairs with each other on the basis of the “1985 breakfast agreement”.

[62] I note that the doctrine of part performance to enforce an oral promise to leave a legacy of real property was also applied in Thompson v. Copithorne Estate, 1973 161 (SCC), [1974] S.C.R. 1023, O’Neil v. Lynn Estate, [2000] O.J. No. 2698 at para. 26 (SCJ), and Sheldrake v. Sheldrake, [2008] O.J. No. 150; aff’d 2009 ONCA 58.

If the contract were in writing, would it have been enforceable?

[63] To answer that question, I must assess whether the doctrine of proprietary estoppel would apply to these facts.

[64] The Defendants state that the concept of proprietary estoppel was not pleaded and for that reason, the Plaintiffs should not be permitted to rely on this legal doctrine. The Defendants point to Rodaro v. Royal Bank of Canada et al, 2002 41834 (ON CA), [2002] O.J. No. 1365 (C.A.) at para.60:

60 It is fundamental to the litigation process that lawsuits be decided within the boundaries of the pleadings. As Labrosse J.A. said in 460635 Ontario Limited v. 1002953 Ontario Inc., 1999 789 (ON CA), [1999] O.J. No. 4071 at para. 9 (C.A.) (QL):

... The parties to a legal suit are entitled to have a resolution of their differences on the basis of the issues joined in the pleadings. A finding of liability and resulting damages against the defendant on a basis that was not pleaded in the Statement of Claim cannot stand. It deprives the defendant of the opportunity to address that issue in the evidence at trial. ...

61 By stepping outside of the pleadings and the case as developed by the parties to find liability, Spence J. denied RBC and Barbican the right to know the case they had to meet and the right to a fair opportunity to meet that case. The injection of a novel theory of liability into the case via the reasons for judgment was fundamentally unfair to RBC and Barbican.

[65] Although the words “proprietary estoppel” do not appear in the Statement of Claim, I find that all the necessary allegations to support a finding of proprietary estoppel were pleaded: see paras. 44-46 of the Amended Statement of Claim:

44. The Plaintiffs plead that the Plaintiffs expended time, energy, and money on maintenance, construction, preservations, and improvements to the Cottage and Farm properties as well as work relating to the business operations carried on at the Farm property. These efforts were spent on the expectation that they owned an equitable interest in the cottage and farm.

45. The Plaintiffs plead that the improvements made to the Cottage and Farm substantially enhanced the value of the Cottage and Farm, and as a result, the Cottage and Farm is the subject of a constructive trust in favour of the Plaintiffs.

46. The Plaintiffs submit in the alternative, should this Honourable Court find that they are not entitled to an Order of specific performance and/or constructive trust, that the Estate of Sorkos has been unjustly enriched by the Plaintiffs’ full performance of the services referred to above, and that they should thus be compensated for their services rendered on a quantum meruit basis. Toward this end, the Plaintiffs state that:

a. The Plaintiffs rendered valuable services for the Cottage and Farm;

b. Sorkos benefitted from the work performed by the Plaintiffs on the Cottage and Farm;

c. The Plaintiffs rendered the services in such circumstances that put Sorkos on notice that they expected to be compensated by Sorkos for the services so rendered; and

d. The Plaintiff were induced to provide the services by Sorkos’ promise to them.

[66] Accordingly, I distinguish Rodaro from the case before me. I will allow the Plaintiffs to rely on the legal concept of proprietary estoppel. In support of that position, I note that the Defendants did not object at trial to any evidence led by the Plaintiffs in support of their position that the concept of proprietary estoppel might apply to these facts. I do not accept the position that the Defendants were deprived of the opportunity to fully and adequately address the application to these facts of the doctrine of proprietary estoppel.

[67] To adequately assess whether the doctrine of proprietary estoppel might apply here, a brief historical overview of the development of this doctrine would assist.

[68] The modern doctrine of proprietary estoppel has its roots in two types of cases: encouragement and acquiescence. In the first, one party encourages the other in the expenditure of money or in doing something to their detriment in anticipation of having a right over certain land. In the second, one party, who knows the true situation, stands by while the other spends money on land over which the latter mistakenly believes to have a right. More on that distinction below. Another important aspect of modern proprietary estoppel is that it can be used as a cause of action, rather than just a defense: see Crabb v. Arun, [1975] Ch. 179 (C.A.) and Eberts v. Carleton Condominium Corp. No. 396 (2000) 2000 16889 (ON CA), 136 O.A.C. 317. This is contrary to the well known mantra that estoppel may be used as a shield, but not a sword.

[69] The foundation of modern proprietary estoppel is the House of Lords decision in Ramsden v. Dyson (1866), L.R. 1 H.L. 129. In that case, it was alleged that a landlord had encouraged the belief in his tenants that if they took his land and built on it they would be entitled to a sixty year lease, renewable every twenty years. Two classic statements of the principle of proprietary estoppel have been extracted from the judgments in this case of Lord Cranworth, for the majority, and Lord Kingsdown, in dissent.

[70] Lord Cranworth focused on the requirement of mistake:

pp6-7 If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake to which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented.

But it will be observed that to raise such an equity, two things are required, first, that the person expending the money supposes himself to be building on his own land; and, secondly, that the real owner knows that the land belongs to him and not to the person expending the money in the belief that he is the owner.

[71] On the other hand, Lord Kingsdown took a broader approach, saying:

P21 The rule of law applicable to the case appears to me to be this: If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation.

[72] These two statements, one requiring mistake and the other not, illustrate the two branches from which proprietary estoppel arose: acquiescence and encouragement. Both statements were considered by the Privy Council in Plimmer v. Wellington Corporation (1883-84) L.R. 9 App.Cas. 699. In that case, the plaintiff had erected a wharf and jetty on Government land with the Government’s permission. The Government then encouraged the plaintiff to extend the jetty and erect a warehouse, which the plaintiff did at his own expense. After some time, the Government took the position that the plaintiff was trespassing on Government land. In considering Ramsden v. Dyson, the Privy Council stated that there was actually no disagreement on the principles in law in that case. The two judges merely placed different interpretations on the facts before them, and therefore arrived at different legal conclusions. The Court appeared to take Lord Cransworth’s statement as relating to acquiescence and Lord Kingsdown’s as relating to encouragement. Following Lord Kingsdown’s statement of the law, the Court held that the instant case was not one where the landowner stood silently by while the plaintiff mistakenly improved the landowners land. Rather, it was a case where the landowner had encouraged the plaintiff’s improvement. The court held that it would therefore be unjust of the Government to later seek to deprive the plaintiff of his use of the land.

[73] Willmott v. Barber, (1880) L.R. 15 Ch.D.96 laid down what came to be known as the “five probanda” required to establish the “fraudulent conduct” necessary to ground proprietary estoppel:

p.5 A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff’s mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. Where all these elements exist, there is fraud of such a nature as will entitle the Court to restrain the possessor of the legal right from exercising it, but in my judgment, nothing short of this will do.

[74] In the English jurisprudence, at least, there appears to have been movement away from the strict application of the five probanda in favour of asking whether it would be unconscionable to allow the Defendant to rely on a strict application of his or her legal right. The English Court of Appeal in Shaw v Applegate, [1977] 1 W.L.R. 970 after citing the above statement from Willmott v. Barber, noted at p.6-7 that while it was doubtful that it was necessary to comply strictly with the five probanda, if they were established, then unconscionability was likely proven.

[75] A similar determination was reached in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. [1982] Q.B. 133. In that case, an important question was whether, at the time when A’s expectation is created and encouraged, B had to know of A’s expectation and also of B’s true rights. The court noted that the strict application of the five probanda might be necessary in a bare acquiescence case (where all that has happened is that B has stood by and allowed A to act to his detriment). However, the court went on to state that at p.13:

I am not at all convinced that it is desirable or possible to lay down hard and fast rules which seek to dictate, in every combination of circumstances, the considerations which will persuade the court that a departure by the acquiescing party from the previously supposed state of law or fact is so unconscionable that a court of equity will interfere.

[76] And at p.15:

...the application of the Ramsden v. Dyson L.R. 1 H.L. 129 principle -whether you call it proprietary estoppel, estoppel by acquiescence or estoppel by encouragement is really immaterial- requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour.

[77] In Ontario, the Court of Appeal in Eberts v. Carleton Condominium Corp No. 396, supra, at para. 23 accepted the following test for proprietary estoppel:

23 Proprietary estoppel is a form of promissory estoppel. It is commonly supposed that estoppel cannot give rise to a cause of action, but proprietary estoppel appears to be an exception to that rule: see Lord Denning in Crabb v. Arun District Council, [1976] 1 Ch. 179 at 187-188 (C.A.). But there must be an estoppel. The basic tenets of proprietary estoppel are described in McGee, Snell's Equity, 13 ed. (2000) at pp. 727-28:

Without attempting to provide a precise or comprehensive definition, it is possible to summarize the essential elements of proprietary estoppel as follows:

(i) An equity arises where:

(a) the owner of land (O) induces, encourages or allows the claimant (C) to believe that he has or will enjoy some right or benefit over O's property;

(b) in reliance upon this belief, C acts to his detriment to the knowledge of O; and

(c) O then seeks to take unconscionable advantage of C by denying him the right or benefit which he expected to receive.

(iv) The relief which the court may give may be either negative, in the form of an order restraining O from asserting his legal rights, or positive, by ordering O to either grant or convey to C some estate, right or interest in or over his land, to pay C appropriate compensation, or to act in some other way.

[78] The Ontario Court of Appeal recently considered the application of the doctrine of proprietary estoppel to the facts in Schwark Estate v. Cutting 2010 ONCA 61, 316 D.L.R. (4th) 105.

[79] In Schwark, ibid, the dispute was over access to a beach from cottages. The defendant owners of vacant beach front lots had granted permission to the plaintiffs to access the lakefront over their waterfront lots in return for permission to use stairs the plaintiffs had constructed to access the beach. That arrangement continued for more than 30 years over which period the defendants acquiesced the use the plaintiffs made of the defendant’s beachfront lots to gain access to the waterfront.

[80] When the defendants withdrew their permission for access to the waterfront, the plaintiffs started the action claiming that they had obtained a right based on proprietary estoppel for access to the waterfront.

[81] The Court of Appeal in Schwark, ibid, noted at para.16:

16 The law with respect to proprietary estoppel is well-settled. This court has accepted that Snell's Equity properly discloses the elements necessary to establish proprietary estoppel as:

1. encouragement of the plaintiffs by the defendant owner,

2. detrimental reliance by the plaintiffs to the knowledge of the defendant owner, and

3. the defendant owner now seeks to take unconscionable advantage of the plaintiff by reneging on an earlier promise.

[82] In allowing the appeal in favour of the defendant owners of the waterfront lots, the Court stated:

35 The facts established in this case fall far short of what is required to establish proprietary estoppel.

36 …the respondents knew they had no legal right to use the water lots. …

37 There was no evidence of any holding out or inducement … which could be said to have caused the respondents to believe they had some right or benefit over …the water lots. They were merely granted permission to use it for a time. There is no evidence that they acted to their detriment in any way by relying on a belief that they had such a right. …

38 Lastly, there is nothing unconscionable about a property owner, who, having permitted his neighbor to use his property for a time, withdraws that permission.

[83] In considering whether the doctrine of proprietary estoppel applied to the facts in Schwark, supra, the Court of Appeal reviewed Willmott v. Barber, supra and Crabb v. Arun District Council, supra. The court noted the separate reasons of Scarman L.J. in Crabb v. Arun District Council where he considered the judgment of Fry J. in Willmott v. Barber, supra at pages 105-6 of that judgment in which he identified what came to be known as the “five probanda” required to establish the “fraudulent conduct” for a finding of proprietary estoppel. The Ontario Court of Appeal in Schwark, supra, stated:

29 I take from this that in order to establish unconscionability one must meet the five-part test laid out by Fry J. in Willmott.

[84] I note that the court Willmott v. Barber, supra, was faced with acquiescence, rather than encouragement, the two branches of proprietary estoppel as developed in the reasons of Lord Carnworth and Lord Kingsdown respectively, in Ramsden v. Dyson, supra. In my view, the five probanda, as developed in Willmott v. Barber, supra, apply to the acquiescence branch of proprietary estoppel. Not all five are necessarily required to support the application for proprietary estoppel founded on encouragement. In support of that position, I rely in part on this prefix of the outline of the five probanda by Fry J. in Willmott v. Barber, supra:

… What, then, are the elements or requisites necessary to constitute fraud of that description?

It is clear from the development of the doctrine of proprietary estoppel that a finding of fraud may, in some instances, be a necessary element, but is not required in others. The latter instance would appear to apply to Schwark Estate v. Cutting, supra. As the Court of Appeal in Schwark held that the elements necessary to establish a proprietary estoppel were not made out in that case, I note that the observation by the court that “to establish unconscionability”, one must meet the five-part test laid out by Fry J. in Willmott v. Barber, supra, is obiter to its decision.

[85] I also note that the British Columbia Court of Appeal in Erickson v. Jones, 2008 BCCA 379 at pp.10-11, adopted the statement in the concurring judgment of Newbury J.A. in Tretheway-Edge Dyking (District) v. Conigagas Ranches Ltd., 2003 BCCA 197 that “the five elements or ‘probanda’ famously cited by Fry J. in Willmott v. Barber ...have now been overtaken by a broader and less literal approach to proprietary estoppel.”

[86] A brief view of the development of testamentary cases in English jurisprudence may now be in order.

[87] Perhaps the earliest case involving the roots of proprietary estoppel and testamentary dispositions is Dillwyn v. Llewelyn (1862), 45 E.R. 1285. The Court found that the son was entitled to the property, because the father had given the son the land in order for him to build a house, and the son had expended a large amount of money in doing so.

[88] Later cases did not require that the claiming party build or expend money on the land. It was sufficient if they behaved in a way that was to their detriment. In Greasley v. Cooke, [1980] 1 W.L.R. 1306 (C.A.), the plaintiffs claimed possession of a house occupied by the defendant. The defendant had entered into the home of Arthur Greasley, a widower with four children, as a housekeeper. She later lived in that house with one of his sons, Kenneth, as husband and wife. During this period, the defendant ran the household and cared for his mentally ill younger sister. As a result of his father’s death, Kenneth had a half share in the house, which on his death went to his brother. The remaining family sought to turn the defendant out of the house. The defendant claimed that Kenneth and other members of the family had led her to believe that she could stay in the home for the rest of her life. The trial judge found that the claim of proprietary estoppel could not succeed because the defendant had not acted to her detriment.

[89] On appeal, Lord Denning concluded that expenditure of money was not a necessary element of proprietary estoppel. He stated at p.5:

[i]t is sufficient if the party, to whom the assurance is given, acts on the faith of it- in such circumstances that it would be unjust and inequitable for the party making the assurance to go back on it.

[90] In Gillett v. Holt [2001] Ch. 210, the plaintiff Gillett spent his life working as a farm manager and as a friend to the defendant Holt. When Gillett was 15, Holt asked him to leave school and work full time at Holt’s farm, which he did. Over the years, Holt made several statements to Gillett that he would have the farm when he died. Holt had also made a will, leaving the entire estate to Gillett absolutely.

[91] However, there was a falling out between the parties which occurred when a Mr. Wood appeared on the scene. Mr. Wood and Holt quickly developed a strong attachment and Mr. Wood replaced Gillett as the principal beneficiary in Holt’s will. Gillett brought a claim in proprietary estoppel.

[92] The Court reviewed Taylor v. Dickens [1998] 1 FLR 806 which required that the defendant not only encourage a belief in the plaintiff that he will be given a right over the defendant’s property, but must also encourage the belief that the defendant will not exercise his right to change his mind. The Court in Gillett v. Holt, supra, disagreed with this statement of the law, noting at p.14:

the inherent revocability of testamentary dispositions...is irrelevant to a promise or assurance that ‘all this will be yours’”. …even when the promise or assurance is in terms linked to the making of a Will … the circumstances may make clear that the assurance is more than a mere statement of present(revocable) intention, and is tantamount to a promise.

[93] The Court found that Holt repeated his assurances over a long period of time, in front of other family members and usually in relatively unambiguous language. The Court held that Gillett relied on these promises to his detriment and subordinated his wishes to those of Mr. Holt. The Court held that Gillett had satisfied the requirements of proprietary estoppel.

[94] The House of Lords considered the issue of proprietary estoppel in the setting of a testamentary disposition in Thorner v. Major [2009] UKHL 18. In that case, the claimant had helped the deceased (his uncle) on his farm until the latter’s death, with no payment for his services. The uncle had made various remarks which led the claimant to hope and later, to expect that he would inherit the farm on his uncle’s death. The uncle had also made a Will leaving his estate to the claimant, but destroyed it after falling out with one of the other beneficiaries. The court held that it was a necessary element of proprietary estoppel that the assurances given to the claimant should relate to identified property and that there had been assurances made by the uncle to the claimant that the latter would inherit the farm. As there was sufficient certainty of the subject matter to found proprietary estoppel, the court held for the claimant

[95] On the question of the application of proprietary estoppel to testamentary dispositions, I reviewed the Canadian decisions of Tarling v. Tarling 2008 38264 (ON SC), [2008] O.J. No. 3009, Anderson v. Anderson 2010 BCSC 911 and Belvedere v. Brittain Estates 2009 ONCA 1. These cases, in my view, do not apply in a helpful way to this question.

[96] I now turn to the application of proprietary estoppel to the present facts, which in summary form, I find to be as follows:

a) At the “1985 breakfast meeting”, Gus laid out a proposal to the Plaintiffs that his estate would convey to them the farm and cottage provided that they assist him, when and however he asked, until his death.

b) As he had no children of his own, Gus looked upon and treated the Plaintiffs as his grandchildren. They were “his boys”.

c) Gus asked and expected the Plaintiffs to attend to all tasks, if and when he asked. His requests to them were in the nature of demands.

d) The Plaintiffs accepted the proposition Gus had put to them at the “1985 breakfast meeting”. Without fail, they were present when asked. Not only did they give of their time and energy to Gus for more than 25 years, but more importantly, on many occasions, they inferentially placed their commitment to Gus first, at the expense of their priorities.

[97] There is no question that the Plaintiffs had relied to their detriment on the representations Gus had made to them in 1985. That representation was “clear and unequivocal.” It related at all times to the farm and cottage properties.

[98] As the court did in Gillett v. Holt, supra, I find that Gus had repeated his assurances for many years in front of third parties in relatively unambiguous language and that the Plaintiffs relied on these promises to their detriment subordinating their lives to the wishes and demands Gus put to them.

[99] In my view, when making out his December 17, 2003 Last Will and Testament purporting to leave the farm and cottage properties to his residuary beneficiaries, Gus was no longer legally in a position to do so. To hold otherwise would be unconscionable to these Plaintiffs who had partially altered their lives for more than 25 years to Gus’ benefit and to their detriment. The degree to which they had so altered their lives is akin to “putting Humpty Dumpty back together again.” It is impossible. For that reason alone, compensation on a quantum meruit basis on these facts cannot adequately compensate these Plaintiffs.

[100] Based on the doctrine of proprietary estoppel, the Defendant estate shall convey to the Plaintiffs the farm and the two cottage properties described in paragraph 6 above. The Defendant estate shall be responsible for all related transfer expenses including any related income tax obligations. On the basis that the intent to transfer these properties had been repeated by Gus over the years in front of third parties without any reference to a bequest of $350,000.00 to each of the two Plaintiffs, I decline to make such an award. The purported promise of the transfer of these funds lacked the necessary corroboration. For that reason, it fails.

[101] If the parties are unable to resolve the matter of costs, they may address me by written submissions within 45 days.

Justice W. U. Tausendfreund

Released: June 4, 2012