Court File and Parties

Barrie Court File No.: FC-11-247 Date: 2012-11-06 Superior Court of Justice - Ontario

Re: Joanne Betty Davies, Applicant And: John William White, Respondent

Before: Eberhard, J.

Counsel: J.R.J. Herbert, Counsel, for the Applicant D. Wyjad, Counsel, for the Respondent

Heard: November 1, 2012

Endorsement

[1] The Applicant seeks:

(a) An Order that the Applicant be granted leave to add the Respondent’s wife – Donna White – as a party respondent to these proceedings.

(b) An Order that the Applicant be granted leave to conduct questioning of Donna White.

(c) An Order that the Applicant be granted leave to amend her Application to include a claim for a constructive and /or equitable trust claim for joint economic enterprise.

[2] The Respondent resists adding a party and adding a claim on the basis of Limitations Act 2002; on the basis that there is no property that could be subject of a trust claim and that questioning and adding the spouse of the Respondent is unnecessary and without foundation.

[3] The Applicant is claiming property interests against the Respondent with whom she has had personal relationship for many years, who is the father of their two now adult children and with whom she shared 3 successive residences. All the while the Respondent continued in matrimonial relationship with Donna White. There is dispute whether the Applicant knew he continued in this marriage. The effect of granting the relief sought today would be to inform the Respondent’s spouse of the existence of the long personal relationship and family that the Respondent maintained in a double life scenario.

[4] The parties had already adjourned the trial fixed for the November 2012 sittings and intend questioning of the parties. The Applicant asserts that if the order is granted adding the spouse and permitting questioning of the spouse that the trial can proceed as adjourned in the May 2013 sittings.

[5] The Applicant relies, for adding a claim and a party, on Rule 11(3)[^1] which provides that the motion shall be granted unless adjournment or costs would not remedy any disadvantage. The Applicant argues it would be unfair to the Applicant to proceed without the amendment adding the spouse as a party because the spouse will have information about the Respondent’s assets and he is otherwise judgment proof because he has put property into his spouse’s name. Had she known, the Applicant asserts the spouse would have been named in the claim, when first brought, as a necessary party under Rule 7.[^2]

[6] The Applicant argues that she did not know she had a claim in trust until November 1, 2011 when she learned through counsel that the Respondent has been all the while married. A subsequent title search revealed that before any dispute arose between herself and the Respondent, he had already put his matrimonial home in his spouse’s name. She reasons that the spouse holds the Respondent’s profits from various investments he pursued over the years. She asserts that those investments were funded by mortgages on the three homes she shared with the Respondent, giving rise to a claim of constructive trust which she wishes to amend her claim to pursue.

[7] The Applicant argues that the Limitations Act 2002 time does not start to run until she knew the Respondent has a spouse even though their personal relationship ended some time ago; the Respondent bought out the Applicant’s interest in the last of the shared residences April 1, 2010 and she signed a release relating to those properties.

[8] The Applicant argues, and the conceded facts speak for themselves, that the Respondent is deceitful. She therefore doubts his answers on questioning will be true.

[9] The Applicant argues that joining the spouse is expeditious, will not cause delay and avoids inconsistent verdicts.

[10] At issue is whether the spouse is necessary for a fair adjudication between the parties. This invokes two concerns:

[11] The Applicant has the opportunity to question the Respondent but wants the spouse’s information to test the Respondent’s answers concerning the property he owns or has owned or has put into his spouse’s name. This could potentially shine light on what, if any, profits the Respondent realized from the various investments that the Applicant argues were funded by mortgaging the joint residences.

[12] The second relevance is for enforcement should the Applicant succeed in obtaining judgment.

[13] I am not persuaded that the enforcement relevance is grounds for joining the spouse. There is no evidence that she is aware of the existence of the Applicant or potential claims against the Respondent. There is no evidence she has conspired with the Respondent to put his assets out of reach of any judgment creditor.

[14] The Applicant relies on Coulstring v. Lacroix [2001] O.J. No. 1826 and Gifford v. Gifford [2010] O.J. No. 30 but in each of those cases there was an element of the proposed party’s knowledge and intent to put assets beyond reach of creditors.

[15] As to the use of her information to test the Respondent’s answers on questioning I find that the Applicant has not yet drawn an identifiable link between any enrichment or benefit that resulted from any deprivation to or conduct of the Applicant, to property the Respondent may own or have placed in his spouse’s name. In questioning the Respondent there is opportunity to seek information about any funds to which the Applicant actually or notionally contributed which might have been used to obtain property. At present, the assertion that the Respondent used moneys from financing the three homes for gain may raise a claim for reimbursement but I see no link to an interest in property. The questioning about assets for enforcement of a money judgment does not bring into the action every person who may have knowledge of the Respondent’s assets.

[16] In the face of the rather tenuous relevance to disclosure or enforcement I find significant reasons to deny the motion to join or question the spouse:

(a) Joining the spouse will inevitably change the focus of the litigation and cause delay. It is entirely forseeable that bringing her into this litigation will result in litigation between the Respondent and his spouse. Preparatory procedures will begin. The already set for trial claim between the Applicant and Respondent will have to wait for the dispute between the spouses to mature.

(b) The potential for inconsistent verdicts does not arise in the circumstances before me. If the Applicant achieves judgment she will look to what the Respondent has. It is not a competition between the Applicant and the spouse. The Respondent will then be put to proof that he has not hidden his assets and the spouse may then be interested in the dispute. If the spouse is joined now it will predictably become a competition between the Applicant and the spouse unecessarily involving the spouse in the question of whether the Applicant has a trust claim against the Respondent at all.

(c) I have not been disabused of my concern that the litigation goal of moving to join the spouse is to place pressure on the Respondent to settle or concede in order to avoid disclosure of his profound duplicity to his spouse. It is certainly injurious information. The Respondent deserves no help from the adminstration of justice in prolonging his deceit, but the Applicant is aware of the spouse and her residence so disclosure of the information is not controlled by this court. However, neither does the Applicant deserve help in finessing an improvident settlement. Until the link between the claims of the Applicant to the total assets of the Respondent has been at least tentatively drawn I do not intend to alter the balance of the litigation by handing the Applicant the sword of Damocles.

[17] As to the adding of a claim I note that to make out a constructive trust, three elements are necessary. As set out in Kerr v. Baranow,[^3] at paragraph 32, “Canadian law... permits recovery whenever the plaintiff can establish three elements: an enrichment of or benefit to the defendant, a corresponding deprivation of the plaintiff, and the absence of a juristic reason for the enrichment”.

[18] The Applicant must lay a foundation of a claim for constructive trust against the Respondent first before we get to a consideration of his putting property in wife’s name.

[19] In Peter v Beblow[^4] we find the core principles in head note form:

The appropriate remedy--a monetary award or the imposition of a constructive trust--must only be decided once an unjust enrichment giving rise to restitution is established. The constructive trust is available where monetary damages are inadequate and where there is a link between the contribution that founds the action and the property in which the constructive trust is claimed.

A direct link between the contribution and the property is essential for a constructive trust to arise, whether the situation be commercial or family. Unjust enrichment cases need not be categorized as commercial and family; no special rule exists for family cases. Clarity and doctrinal integrity mandate that the basic principles governing the rights and remedies for unjust enrichment remain the same for all cases. Even in a family situation, dispensing with the link between the services rendered and the property claimed to be subject to the trust would be inconsistent with the proprietary nature of the constructive trust. Insufficiency of a monetary award in a family situation, however, is usually linked to the fact the claimant's efforts have given him or her a special link to the property and give rise to a constructive trust. Although a minor or indirect contribution is insufficient to give rise to a constructive trust, the amount of the contribution governs the extent of the constructive trust once the threshold amount is met.

[20] Had there been dispute, the domestic services and child rearing responsibilities would have raised a link to the Muskoka residences.

[21] But with respect to the three Muskoka residences the Applicant’s interest in the proceeds has already been agreed, paid out to the Applicant and she has signed a release. Her claim that the Respondent was enriched, as argued, was that he siphoned off money over the years through financing on these properties which he invested and made profits in which the Applicant is entitled to share.

[22] There is no link to a particular property to be shared.

[23] Questioning is scheduled. I direct that questioning related to these theories should not be prohibited on the basis that there is no claim. Questions as to where such profits may be traced may be explored. If, and only if, there is an air of reality to such claim should this court consider expanding the boundaries of the claim. At that point some link to the Respondent’s spousal assets could be possible. Moreover, the date of the loss could be pinpointed for the purpose of analyzing whether the claim is outside the Limitations Act 2002.

[24] I see little point, having directed that questioning as to the tracing may be explored, in adding a claim for constructive trust at this juncture which, as it now appears, must necessarily be outside the 2 year limitation period set out in the Limitations Act 2002.

[25] The Respondent correctly argues that the claim arises, analogous to a claim for equalization if the parties were married, on the date of separation. There is disagreement about that factual element. Most certainly by the time they settled the payout for the proceeds of the Muskoka residence they were separated. The date when a claim arises, if any, is the date of enrichment/benefit and deprivation. At the latest that would correspond with the valuation date in property disputes between spouses under the Family Law Act. It is not connected to a date when the Applicant subsequently learns the Respondent has a spouse that she did not know of. That personal shock which redefines the nature of their long relationship is irrelevant to whether there was an enrichment and deprivation. It goes to trust certainly, but not constructive trust.

[26] There is no discoverability issue about when the Applicant knew the Respondent was enriched or benefitted by funds from financing on the Muskoka properties. That is unaffected by learning that the Respondent has a spouse. There is no discoverability issue about such deprivation as she asserts. That is unaffected by learning that the Respondent has a spouse. The evidence points to the date of separation, April 2010 at the latest, as the date when the claim arose.

[27] The Family Law Act extends the limitation period for spouses claiming equalization.[^5] This does not assist the Applicant. Absent a discoverability issue or statutory relief from the Limitations Act 2002 limitation period, the Applicant’s claim cannot be brought more than 2 years after it arose.[^6]

[28] In summary therefore I dismiss the motion to add the spouse as a party or to question her. I direct that questions may be put that go to any link between funds, which benefitted the Respondent to the deprivation of the Applicant, to property in which the Respondent has or had an interest. This will permit a consideration of whether and when a constructive trust may have arisen. If, after questioning there is a link and it is not statute –barred, the Applicant may renew her motion to add a claim as if it were now being done (so as to avoid a limitations argument between now and that date). As of now, the motion to add the claim is not granted.

[29] As indicated, the parties may address costs by submitting, through the judicial secretary in Barrie, a cost submission of no more than 2 pages, together with a bill of costs and any offer: Respondent by Nov 20; Applicant by Nov 30 and reply by Dec 5.

EBERHARD J.

Date: November 6, 2012

[^1]: AMENDING APPLICATION OR ANSWER WITH COURT'S PERMISSION 11(3) On motion, the court shall give permission to a party to amend an application, answer or reply, unless the amendment would disadvantage another party in a way for which costs or an adjournment could not compensate. O. Reg. 114/99, r. 11 (3).

[^2]: PERSONS WHO MUST BE NAMED AS PARTIES 7(3) A person starting a case shall name, (b) as a respondent, (i) every person against whom a claim is made, and (ii) every other person who should be a party to enable the court to decide all the issues in the case. O. Reg. 114/99, r. 7 (3). PARTY ADDED BY COURT ORDER (5) The court may order that any person who should be a party shall be added as a party, and may give directions for service on that person. O. Reg. 114/99, r. 7 (5).

[^3]: 2011 SCC 10, [2011] 1 S.C.R. 269

[^4]: 1993 CanLII 126 (SCC), [1993] 1 S.C.R. 980

[^5]: Under subsection 7(3), an application cannot be brought after the earliest of: (a) two years after the day the marriage is terminated by divorce or judgment of nullity; (b) six years after the day the spouses separate and there is no reasonable prospect that they will resume cohabitation; and (c) six months after the first spouse’s death.

[^6]: Joseph V. Paramount Canada’s Wonderland