ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 15/10
DATE: 20120904
BETWEE N:
CAROL TERENTIAK
P. Muise, for the Applicant
Applicant
- and -
WILLIAM EDWARD REYNOLDS
R. Kostyniuk Q.C., for the Respondent
Respondent
HEARD: June 26 – 29, 2012
REASONS FOR JUDGMENT
SPROAT , J.
OVERVIEW
[ 1 ] The parties agreed during the trial that it was acceptable to refer to each other by their first names. I also do so in these reasons.
[ 2 ] Carol (then 50) and Bill (then 54) met in January 2005. Both had good jobs, Carol with Microsoft and Bill with SNC Lavalin. They purchased a house and acreage in Mono Township and cohabited from June 1, 2005 until their relationship ended in approximately October 2008.
[ 3 ] Carol worked at Microsoft throughout. Bill’s employment was terminated in the spring of 2006. They both devoted considerable time and effort to establishing a vineyard on the Mono acreage. Bill owned a 50 acre Blue Mountain property with a century home from which he severed a 25 acre lot. After losing his employment, Bill worked full time establishing the vineyard and building a chalet on the 25 acre vacant lot. After separation, Carol paid to repair and complete the construction of a drive shed which Bill had been building.
[ 4 ] The central issues, as agreed between the parties, are as follows:
(a) Is Carol entitled to share in the net proceeds of sale of the Blue Mountain chalet built by Bill?
(b) Is Carol entitled to a payment on account of her expenses, time and effort in maintaining the Mono property after separation, or is she obliged to pay occupation rent having remained living on the property?
(c) Is Bill obliged to pay Carol for the cost she incurred after separation in repairing, and completing the construction of the drive shed?
CHRONOLOGY
[ 5 ] Mr. Muise prepared a helpful chronology which I have edited and hereinafter set out as follows:
June 1, 2005 – Mono purchase closes by registration of transfer to parties as tenants in common, each as to a 50% interest. The parties begin to cohabit. Purchase price $553,000. Mortgage $270,000.
Spring 2006 – Bill’s employment terminated
November 1, 2006 – Bill sells first parcel of Blue Mountain property with century house and barn. Net sale proceeds received by Bill $247,119.77.
April 11, 2007 – Collateral mortgage signed by Bill and Carol registered to secure $120,000 credit line required to complete construction of Blue Mountain chalet.
December 20, 2007 – closing date of sale of Blue Mountain chalet.
January 21, 2008 – Registration of discharge of Mono Township mortgage
August 2008 – Bill accepts job in Calgary
October to November 2008 – Separation, Bill moves to Calgary
August 30, 2010 – Order of Seppi J., for listing and sale of Mono property
October 4, 2010 – Listing Agreement with Re/Max at $689,967.00
April 29, 2011 – Closing of sale of Mono property. Each party received $240,434, with $100,244 held in trust.
UNJUST ENRICHMENT – BLUE MOUNTAIN CHALET
[ 6 ] Carol and Bill are both industrious people. Carol is from a farming family. I accept her evidence that during the relationship she performed manual labour including cutting up wood with a chain saw, operating a tractor and baling hay. Bill’s construction ability is demonstrated by the work he did on the chalet.
[ 7 ] Carol and Bill were planning their life together. I accept, as described by Carol and not seriously disputed by Bill, that they planned to develop a vineyard-winery as a means of generating retirement income. Further, the termination of Bill’s employment allowed him to try his hand as a contractor which was a natural progression given his employment background and interests.
[ 8 ] I accept Carol’s evidence that she did work on the century house at Blue Mountain to ready it for sale. I also accept that she did some work on the Blue Mountain chalet consisting of a few visits with Bill acting as a “go-fer”.
[ 9 ] I am also satisfied that there was a joint family venture to establish the vineyard-winery and to build and sell the chalet, taking into account the parties mutual efforts, economic integration, intent and understandings concerning a shared future. ( See Kerr v. Baranow, 2011 SCC 10 , [2011] I S.C.R. 269 . Bill had lost his job and they became engaged prior to the construction of the chalet. The construction of the chalet was Bill’s occupation. This activity was intended to generate income for joint purposes and to position him for a future as a general contractor. Similarly, Carol worked at Microsoft to generate income for joint purposes and also worked on the vineyard-winery project to position her to generate income after retirement. This was their joint plan.
[ 10 ] The parties had a joint bank account. Carol made a disproportionate contribution to the vineyard-winery expenses. Carol expended approximately $8,000 on vineyard equipment. She paid the cost of incorporation and she paid for vines to plant 10 acres of grapes. Bill testified, and I accept, that he also made some purchases related to the vineyard. They both contributed labour.
[ 11 ] Carol testified if the vineyard-winery was a success she expected Bill would have a share of it. She agreed he did a lot of manual labour and it became his dream as well as hers.
[ 12 ] The chalet construction costs were kept separate. This, however, made sense as the chalet expenses were substantial, to be incurred over a relatively short time, and to be repaid on sale. Borrowing costs would be deductible.
[ 13 ] Carol and Bill each worked hard. Carol at Microsoft, the vineyard and incidentally the chalet. Bill on the chalet and, as required, on the vineyard. Each was fully committed to the joint family enterprise.
[ 14 ] Carol co-signed for the $120,000 line of credit required to complete construction of the chalet. I accept that this is a contribution although I do not place a high value on it. There was little or no risk given the value of the land. Further, I accept Bill’s evidence that he could probably have obtained a builder’s loan. As such Carol’s signature really saved him the cost associated with structuring and obtaining the progress draws under a builder’s loan.
[ 15 ] The vineyard-winery failed and resulted in a loss. The chalet was completed and sold for a profit. This was a joint enterprise. Carol is entitled to share in the profit on the chalet. I find that Bill would be unjustly enriched if she does not. No juristic reason was suggested for the enrichment.
[ 16 ] I now turn to consider what profit was realized on the sale of the chalet.
[ 17 ] Two items require some analysis. First, what was Bill’s cost of construction prior to obtaining the secured line of credit financing in April 2007?
[ 18 ] Bill indicates that by April 2007 the framing was completed and the windows were in. He did not produce any banking records to quantify his costs. On this point he blamed Carol claiming that she had thrown them out. While he had tried to obtain copies of banking records, he hit a “brick wall.” As a matter of common sense I do not accept that Bill, obviously able to provide the bank with his date of birth and social insurance number, could not have obtained these records.
[ 19 ] Bill did testify that he used a good portion of the proceeds of sale of the century home and property to fund construction. We know he netted $247,119 from this sale and on his evidence paid $50,000 to Carol, $9,500 for a motorcycle (or ring) and $139,768 to pay off the Mono mortgage. This would leave, from the proceeds of sale, approximately $48,000 to spend on construction. (I appreciate that there was also evidence Bill had additional funds from the sale of a condominium in Bronte and his mother’s estate).
[ 20 ] Carol also refers to a document entitled Global House Plans Cost-to-Build which states it was prepared for Bill Reynolds and which estimates the total construction cost as $186,384. (Bill acknowledges this document was one of the sources for the chalet design). She suggests, therefore, that the costs incurred prior to the line of credit would total approximately $66,000.
[ 21 ] While recognizing it is a rough estimate, I find that the construction costs incurred prior to line of credit costs were $66,000. This finds some support in the cost-to-build estimate, and Bill has failed to adduce banking records to support higher costs. After the line of credit was obtained, it was used to pay approximately $120,000 in construction costs. I accept the line of credit balance as a reliable indication of subsequent costs.
[ 22 ] Secondly, we need to know the value of the 25 acre lot at the outset of the relationship in order to calculate enrichment during the relationship. Bill purchased the 50 acre Blue Mountain property, in 1995, for $150,000. There was no expert evidence as to what the value of the 25 acre vacant lot was in 2005-2006. Bill testified he listed it, before deciding to build, for $225,000. The listing price he selected is not, however, a reliable indication of value. An RBC document related to the line of credit application indicates a bank employee believed the land to be worth $195,000. This is hearsay and we have no information as to the basis for this estimate.
[ 23 ] Carol has the onus to prove the damages. Because the value of the 25 acre lot as of June 2005 is not something peculiarly within the knowledge of Bill, he is not obliged to prove it. While neither party introduced specific evidence of the value of the land in 2005, in my opinion there is sufficient evidence to make a finding. (The alternative would be to simply dismiss the claim).
[ 24 ] Bill estimates the total severance cost as $60,000 which he attributed to surveyors and legal services. No receipts were provided. This seems high, but it was not seriously challenged at trial. Mr. Muise used it in his calculations and so do I. Construction cost of $186,000 plus severance cost of $30,000 totals $216,000. We know that the chalet and land sold in December 2007 for $455,000. The sale price, however, also reflects the value of the Bill’s labour. On an admittedly rough basis I find that Bill devoted 2/3 of his time for approximately one year on construction. Valuing his time at $25 per hour, I find his labour contribution to be worth $35,000. This would suggest a land value of $204,000 in December 2007. I, therefore, find that the value of the land in June 2005 was $200,000. (I have deducted a small amount to reflect that land values tend to appreciate over time.)
[ 25 ] I have no evidence as to whether, and to what extent, the land value may have increased from June, 2005 to December, 2007. In the absence of evidence I deduct only a small amount to reflect that land values tend to appreciate over time. I, therefore, find the value of the land in 2005 was $200,000.
[ 26 ] As such my calculation of the profit is:
Sale price of chalet - December 2007 $455,000.00
Line of credit (construction costs) $119,881.71
Real Estate Commission and legal costs of sale $ 29,631.24
Proceeds of sale $ 305,487.05
Value of Land – June 2005 ($200,000.00)
Other construction costs ($ 66,000.00)
One half of cost of severing lot ( $ 30,000.00)
Profit $ 19,487.05
[ 27 ] Mr. Kostyniuk suggests I should step back, look at the assets of each going into and out of the relationship and conclude that Bill was not unjustly enriched and that it would not be fair to require any payment from him on account of the chalet or otherwise. Assuming this was a valid approach, I do not have the evidence to do this. I do not have records as to all that the parties spent money on during the relationship, nor do I have documented details of their assets at the time of separation. In other words, the case was not presented with a view to establishing assets in and assets out. Further, as but one example, Carol testified that Bill acquired a Mercedes worth approximately $50,000. She believed he purchased it but acknowledged it could be leased. Bill gave no evidence on this point.
[ 28 ] This was a joint enterprise. Carol paid, and therefore lost, a disproportionate share of the vineyard-winery expenses, I therefore, award her damages of $9,750 based upon 50% of the net profit on the sale of the chalet.
COST TO REPAIR-COMPLETE DRIVE SHED
[ 29 ] Carol testified there was a simple agreement. She would pay for the materials and Bill would construct the drive shed. Bill testified that there was no such agreement. A number of aspects of the evidence, however, support the conclusion that there was such an agreement.
[ 30 ] First, at discovery it was put to Bill that there was such an agreement and he agreed, “It started out as a similar agreement to that”, and then went on to say that he in fact paid for items such as the foundation, walls, sand and gravel, equipment, and replacement materials after the shed was damaged by a storm during construction.
[ 31 ] Secondly, on a Home Hardware statement dated November 30, 2008 Bill made a note, “This bill is yours – materials for barn – not replacement material”. This supports that Carol was to pay for materials.
[ 32 ] Finally, at trial, Bill was asked about why he thought Carol should pay the Home Hardware bill and he said:
A. Because, that was the [hesitation] She was paying for the other rough-in material as per your previous question, up until the point where it fell down, she was paying a – the majority of the – the building materials costs.
Q. Yeah. It sounded like you were going to say that was the agreement, but you decided to change your terminology there. No?
A. I don’t know. It was a nervous reaction, maybe.
[ 33 ] I agree that, at the point of hesitation, Bill was on the verge of saying “agreement” and caught himself.
[ 34 ] As such I find there was an agreement as testified to by Carol. The fact of this agreement supports her further testimony. I find that she purchased the materials. Bill should, therefore, be held to his agreement to construct the drive shed.
[ 35 ] Jack Watson testified that when he was hired by Carol in January 2009 the drive shed had shifted off the foundation at one end and was unsafe. It required immediate attention. He testified he did not re-design the building but simply fixed and completed the drive shed as designed. Mr. Watson impressed me as an experienced contractor and a straight-forward witness and I accept his evidence. Carol paid him $20,158 for the work he did.
[ 36 ] Given her investment in materials and the precarious state of the building it was reasonable for Carol to refuse to entrust the job to Bill’s friend who was not in the business of constructing buildings of this nature. Bill is, therefore, obliged to pay Carol for this repair-completion work in the amount of $20,158.
COST OF MAINTAINING MONO HOME – OCCUPATION RENT
[ 37 ] After Bill moved to Calgary Carol lived in the Mono home for approximately 30 months (November 2008 to April 2011).
[ 38 ] Carol claims $6,580.95 in insurance premiums and $28,382 for what I generally categorize as maintenance over the 30 months. The maintenance includes $7,200 per annum for Carol’s, and $600 per annum for her son’s, time and effort. When I back out these amounts the out of pocket maintenance costs are reduced to approximately $10,000. As such, maintenance plus insurance total $16,580, or approximately $550 per month for 30 months.
[ 39 ] I do accept that Carol did work to maintain the property. I also accept that if Carol had not remained on the property it would have been necessary to pay to have someone to monitor the property regularly.
[ 40 ] I view Carol’s costs, her labour contribution and the avoided cost of having to pay for monitoring the property to be worth at least $1,000 per month.
[ 41 ] I do not think that an overly technical or onerous test should be applied in determining whether occupancy rent should be paid. The relationship had failed. It was no longer tenable for both to live there. Carol needed accommodation not only for herself but her horses. As stated by Hourigan J, in Hollaway v. Devenish, 2009 64833 (Ont. Sup. Ct.) at para. 94 :
Our courts recognize that it would be inequitable not to charge occupation rent where the party who remains at the property seeks reimbursement for expenses.
[ 42 ] Carol should pay a reasonable amount for her accommodation. I am not prepared to fault Bill with unduly delaying the sale and to deny the claim for occupation rent on that basis. He held out for a higher listing price but based upon his view of the real value. Unfortunately the market did not agree.
[ 43 ] I was not provided with any information as to market rental rates for property comparable to the Mono home, or suitable alternative accommodation which Carol might otherwise have rented pending sale of the Mono property.
[ 44 ] In my opinion, Carol’s costs and contributions in remaining on the property are roughly equal to and offset any occupation rent that might reasonably be awarded. As such I dismiss Carol’s claim to contributions to her expenses, and I dismiss Bill’s claim that Carol pay occupation rent.
ENGAGEMENT RING
[ 45 ] Carol testified that in 2006-2007 Bill gave her an engagement ring and asked her to marry him. After the relationship failed, she tried to sell it back to the store it had been purchased from, but that store did not want it. She eventually sold it for $1,800. She testified that there was an insurance slip valuing the ring at $10,000 but that this was obviously inflated.
[ 46 ] Carol had every interest in maximizing the sale price of the ring and I am satisfied she did so. While she did not produce any documentation, this is a case in which documentation on many issues that could have been produced was not produced on both sides.
[ 47 ] Bill did not ask for a damage award in relation to the ring but asked that Carol’s conduct, and the fact she retained the ring, should be taken into account in considering the overall equities. I do so, however, the best evidence is that the ring had a value of approximately $2,000 so it is of relatively little consequence.
MONO MORTGAGE PRE-PAYMENT PENALTY
[ 48 ] There was no clear evidence as to who paid this penalty, which the parties agreed was approximately $3,000. Like many other expenditures by the parties, not unusual in a common law or marital relation, there was no clear delineation of who was obliged to pay for what. This claim has not, therefore, been proven.
CREDIT FOR KUBOTA TRACTOR
[ 49 ] Carol sold this jointly owned tractor and netted $17,000. Bill is entitled to $8,500 being one-half of this amount.
SUMMARY AND CONCLUSION
[ 50 ] Bill shall pay Carol:
(a) Unjust enrichment $ 9,750
(b) Drive Shed $20,158
(c) Credit for Kubota ($ 8,500)
Net Payable by Bill $21,408
[ 51 ] Mr. Muise shall provide me with his written cost submissions within 14 days. Mr. Kostyniuk shall respond within a further ten days, and Mr. Muise shall provide his reply, if any, within a further five days.
Sproat, J.
Released: September 4, 2012
COURT FILE NO.: 15/10
DATE: 20120904
ONTARIO SUPERIOR COURT OF JUSTICE BETWEE N: Carol Terentiak Applicant - and - William Edward Reynolds Respondent REASONS FOR JUDGMENT Sproat, J.
Released: September 4, 2012