COURT FILE NO.: 2011-10(Simcoe)

DATE: 2014-03-13

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mary Farkas

Plaintiff

– and –

Nick Bedic also known as Nikola Bedic

Defendant

Jerome J. Bergart - Counsel for the Plaintiff

Drew L. Bowyer - Counsel for the Defendant

HEARD: February 14, 18, 19, 20 & 21

The Honourable Mr. Justice J. W. Sloan

[1] The main facts of this case are not in dispute.

[2] The parties met in 1994 and the Plaintiff commenced living with the Defendant on weekends until 1997 when she moved in with him full-time. Between 1994 & 1997 the Plaintiff would drive from her home/employment in Hamilton each weekend to be with the Defendant.

THE PLAINTIFF’S EVIDENCE

Queensway Motel

[3] Because the Defendant essentially ran the 16 room Queensway Motel in Simcoe, Ontario by himself they would both spend a significant amount of time each weekend doing whatever had to be done to keep the Motel operational. This included cleaning rooms and all inside and outside maintenance, which the parties did themselves. In addition the Plaintiff would prepare the meals for both of them.

[4] By 1999 because of all the work that was necessary around the Motel and all of the driving back and forth to Hamilton the Plaintiff took early retirement from St. Joseph’s Hospital. She was 57 and earning $25-$26,000 per year. She stated that if she had not lived with the Defendant and worked with him at the Motel she would have stayed at her employment for another eight years. Although no numbers are available to the court, it is acknowledged that she would have received a larger pension if she had worked for eight more years.

[5] In 1994, the Queensway Motel required major renovations inside and out to which the Plaintiff contributed, both money for materials as well as labour.

[6] In 1995 the Defendant asked the Plaintiff for $30,000 so that he could pay off a second mortgage on the Motel because the second mortgagee was demanding payment

[7] The Plaintiff agreed and took out a $30,000 mortgage on her Hamilton home and gave the money to the Defendant.

[8] In 1997 the Defendant asked the Plaintiff for a further $100,000 because a trust company was after him because he was behind on his mortgage and taxes. The Defendant told the Plaintiff that he may lose the Motel. The Defendant offered to transfer a 50% interest in the property to her in return for a payment of the $100,000.

[9] The Plaintiff agreed and took out a mortgage on her Hamilton home for $125,000 which allowed her to pay off her $30,000 mortgage, and transfer $94,951.08 to the Plaintiff in return for a one half interest in the property. The $756 per month payments on the mortgage were all paid by the Plaintiff.

[10] It is the Plaintiff’s recollection that she moved in with the Defendant on a full-time basis, in June of 1997. The mortgage on her home was registered in July of 1997. The deed giving her a one-half interest in the property is set forth at Ex 3 Tab B-13.

[11] To pay off the mortgage on the Motel the Defendant required more money than he could get from the Plaintiff, however because he did not make enough money running the Motel, commercial lenders would not loan money to him. He was therefore forced to borrow $115,000 from a private lender, which mortgage was registered as a first mortgage.

[12] On July 21, 1997, an agreement was entered into between the parties which is set forth at Ex 3 Tab B-5.

[13] The agreement sets forth that the Defendant will transfer one half of the interest in the Queensway Motel property to the Plaintiff in return for the $125,000 that she had given him.

[14] On page 2 of the agreement it states that the parties have agreed as follows: "Should the relationship between Farkas and Bedic end for whatever reason, Bedic agrees to repay to Farkas the sum of $125,000 on demand and Farkas shall in return transfer her one half interest in the property to Bedic.”

[15] The agreement goes on to state: “that if it becomes necessary to sell the property for whatever reason, be it by agreement of the parties, Power of Sale or Partition Application by either Bedic or Farkas, then Farkas shall receive her investment of $125,000 before any monies are dispersed to Bedic.

[16] It was the Plaintiff's understanding that she would essentially get the first $125,000 if the property was sold and if anything was left they would share equally.

[17] The Plaintiff stated that from 1999 onward the parties shared the interior and exterior maintenance and running of the Motel on a 50-50 basis.

[18] The Plaintiff estimated at this point in time that patrons of the Motel paid for their rooms approximately 50% in cash and 50% credit cards. She stated that the Defendant did most if not all of the bank deposits. She stated that the Defendant managed all the finances and she does not recall ever signing a cheque on the Queensway account and she doesn't even know if she had authority to do so.

[19] In October of 1998 the Plaintiff sold her Hamilton property and after paying off the mortgage got approximately $30,000. $17,000 of the $30,000 plus all of the furniture and appliances from her Hamilton property went into the Queensway Motel. She bought a car for herself with the remaining $13,000.

[20] At this time the Motel had four permanent residents.

Clear Creek Property

[21] Sometime in the year 2000, the Defendant persuaded the Plaintiff and/or wore the Plaintiff down against her stated wishes with respect to the purchase of vacant land referred to as the Clear Creek property.

[22] The purchase of the Clear Creek property closed for $45,000 in December of 2000 and the Plaintiff contributed $10,000 with the Queensway Motel supplying the rest of the money. (Ex 6 Tab D)

[23] The Clear Creek property was sold in 2003 and the parties received a joint cheque in the amount of $68,655.55 representing the net proceeds from the sale of the property. (Ex 6 Tab E-5)

Fairview Motel

[24] In 2004, the Defendant told the Plaintiff he wanted to buy the Fairview Motel. The Plaintiff, who was tired, indicated she didn't want any more property and stated that the Defendant kept “bugging her” until she broke down in tears.

[25] The Defendant went ahead and purchased the property for $200,000 and in the Plaintiff’s view, he did so without giving her a final chance to be on the title.

[26] It is the Plaintiff's position that the Defendant financed the purchase price of the Fairview Motel in October of 2004 by taking a mortgage back of $115,000, using all of the net profits of $68,555.55 from the sale of the Clear Creek property and using approximately $20,000 from the Queensway Motel account. There is a $5,000 cheque at Ex 4 Tab A-5 made payable to the Plaintiff’s lawyer, Mr. Stahl, drawn on a Queensway Motel cheque with the re line “deposit motel”.

[27] The Fairview Motel needed substantial renovations which were carried out by the Defendant and his brother for approximately a year and a half. While the renovations were being carried out, it was the Plaintiff alone who looked after almost everything at the Queensway Motel. In addition the Plaintiff did all the domestic chores such as cooking and making lunches.

[28] The parties moved into the Fairview Motel in 2006 before the renovations were completed.

[29] Sometime after the purchase of the Fairview Motel the Defendant had business cards printed up for the Motel which state “Your Hosts: Nick & Mary”. Based on these cards the Plaintiff felt she was a half owner of the Fairview Motel. (Ex 9)

[30] The Queensway Motel was sold for $728,000, with a closing in February of 2006. The parties jointly took a first mortgage back for $400,000 and received a joint cheque for $273,304.68 along with joint post-dated cheques for the monthly mortgage payments.

[31] Although all of the mortgage cheques were made payable to both parties, the Plaintiff never endorsed any of them and on about November 2010 she found out that the cheques were not being deposited into the parties joint account but rather were going into the Fairview Motel account.

[32] When the Plaintiff found this out she approached RBC who in December advised the Defendant that they could no longer deposit the mortgage cheques without the Plaintiff's endorsement. When the Defendant approached her with respect to this situation and she ended up endorsing the cheque which the Defendant promptly put into the Fairview Motel account. In response to being asked why she would endorse the cheque, he simply indicated because she was still living there.

[33] The parties separated in January of 2011 and at that point in time there were only two $2,000 post-dated cheques left and arrangements were made with RBC such that $1000 went into the Plaintiff's account and the other $1000 went into the Fairview Motel account. (Ex 4 Tab F-1)

[34] After the sale of the Queensway Motel in 2006 there was no discussion between the parties about their agreement. (Ex 3 Tab B-5) The Plaintiff did not ask for the $125,000 that she had invested into the Queensway Motel and the Defendant did not offer nor pay her the $125,000.

[35] The Plaintiff felt they were both entitled to the money from the Queensway Motel and that they both owned the Fairview Motel.

[36] Ex 7 Tab A-1 is a printout of the parties joint RBC account in Simcoe from January 12, 2006 to March 10, 2010. The Plaintiff states that she did not write any Cheques on this account and that she did not get any of the following monies which were removed from the account. These monies include a cheque for $3000 on June 27, 2007, a cash withdrawal of $2000 on July 3, 2007, a debit memo for $20,372.60 on August 15, 2007, a debit memo for $109,000 on April 18, 2008, two cash withdrawals on February 6, 2009 for $91,274.41 and $16,725.59, a transfer on April 6, 2009 for $48,146.36 and a cash withdrawal on May 1, 2009 for $20,000.

[37] It is the Plaintiff's evidence that the $109,000 removed from the account on April 18, 2008 went to pay off the mortgage on the Fairview Motel. At Ex 4 Tab B-2 there is a copy of a RBC Bank draft dated April 18, 2008 in the amount of $116,140.39, with a reline “Bedic: Nick/Mary”. This bank draft was given to the Defendants lawyer to pay off the mortgage on the Fairview motel

[38] It is further the Plaintiff's evidence that the withdrawal of $91,274.41 on February 6, 2009 was money used to purchase the Hillcrest property.

[39] It is also the Plaintiff's evidence that all of the money she got out of the joint account she got on March 18, 2010 in the amount of $29,660.63.

[40] While the parties were operating the Fairview Motel the Plaintiff would ask the Defendant what they made operating the motel and he would never tell her.

[41] As a result of this the Plaintiff started keeping records for 2009 and 2010. These records are set out at Ex 4 Tab D and show that in 2009 their gross profit was $35,979.81 of which $22,460.14 was cash and $13,519.67 was from credit card. In 2010 their gross profit was $45,508.52 being $26,340.14 in cash and $19,168.38 from credit cards. She testified that the Defendant did all the banking and she could not recall if the above monies included the $500 per month which would have been paid by a long-time resident client by the name of Kordic.

[42] Prior to this litigation the Plaintiff stated that she had only seen one bank statement in their office and it was the April 2009 statement showing a transfer on April 6, 2009 for $48,146.36. Although she asked the Defendant what this transfer was for, she never got an answer from him.

[43] Although the Fairview Motel was smaller than the Queensway Motel, having only eight room rather than 16, all of the eight rooms had a kitchenette. As they had at the Queensway Motel, both parties worked more or less equally to operate and maintain the Motel. The Plaintiff estimates that she worked approximately 5 hours every day, but was never paid for her work.

Hillcrest Property

[44] In late 2008 or early 2009 the Defendant wanted to purchase four cottages. The Plaintiff did not like the idea and thought that the cottages were in rough enough shape that they should be torn down. Shortly thereafter, the Defendant met with his brother and asked him if he wanted to be a partner in the purchase of the Hillcrest property to which the brother replied that he only had $50,000 to invest.

[45] The Plaintiff finally acquiesced in the purchase of the property because she did not want to be left off the title like she had been with the Fairview Motel. When she attended the lawyer’s office she met with a female assistant and not the lawyer himself and it is the Plaintiff's evidence that nothing was explained to her at the meeting. She was just told to sign papers.

[46] Because she and the Defendant were investing more than twice as much as the Defendant's brother and his wife (Ex 5 Tab A-10) being $110,000 versus $50,000, she thought that they would own three quarters of the property, but found out later that she and the Defendant owned 50% and the Defendant’s brother and his wife owned 50%.

[47] The two cash withdrawals on February 6, 2009 for $91,274.41 and $16,725.59 from their joint RBC account went in to help purchase the Hillcrest property. (Ex 5 Tab A-10)

[48] The Plaintiff also found out later that there was some type of a partnership agreement between the Defendant and his brother.(Ex 5 Tab A-8)

[49] As the Defendant and his brother commenced renovations on the Hillcrest property she was left doing all of the work to run and maintain the Fairview Motel by herself. The situation was essentially identical to the work that she did on the Queensway Motel while the Defendant and his brother renovated the Fairview Motel.

[50] In addition she assisted with some of the renovations and as the cottages were renovated she cleaned them so they could be rented.

[51] In March of 2011, the mortgage the parties jointly held on the Queensway Motel was paid off and $382,650.71 was paid into Mr. Bowyer's trust account pending the outcome this case.

[52] The Plaintiff filed as Exhibit 10 a financial statement sworn December 30, 2013. In it, she shows a deficit of approximately $13,000 per year and after stating that she had cashed in an investment worth approximately $10,000 it would still have left her in a deficit position of approximately $8000 for each of 2011 and 2012.

[53] In her 2011 tax return, she shows net rental income of $2,553.57 and in 2012, she shows net rental income of $4,244.21. (EX 8 Tab A-3&4) she stated that the accountant who prepared her tax return is the same accountant used by the Defendant and that she did not receive any of this money and was never told why.

[54] She testified that despite her repeated requests to the Defendant to show her how much money was in the safe, and her attempt to break the safe open with a hammer when he would not show her, she was unsuccessful in ever finding out how much money was ever in the safe at any time.

[55] The Defendant ordered her to leave the residence on January 19, 2011 after he had been served with some papers from a Mr. Cvetkovic who was a lawyer previously used by the Plaintiff to put mortgages on her property. The Defendant apparently returned home from working at Hillcrest, had been drinking and simply told her to get out or he would call the police. It appears that the police did come and they suggested that the Plaintiff may want to go to a shelter. At this time of year, there was snow on the ground and the Plaintiff ended up calling her son who came got her.

[56] It was evident from her cross examination that the Plaintiff has obvious problems in understanding some English questions from the Defendant's lawyer. However, on her first mortgage for $30,000 she acknowledged receiving from the Defendant 23 payments of $500 each which totals $11,500. It is obvious from her testimony and the exhibit of the $30,000 mortgage which was registered on her house that it was costing her $367.67 a month to service the mortgage. She was therefore getting $131.33 per month in excess of what it was costing her although from her testimony some of the $500 monthly payments were NSF and later replaced. From a mathematical point of view the Plaintiff received approximately $3,020.59 (23 months x $131.33) more than it cost her to make the monthly payments. However, this does not take into account whatever other fees including legal fees the Plaintiff would have incurred to register and discharge the mortgage.

[57] Although the Plaintiff's understanding of some questions and her answers made it difficult to follow, when her evidence is distilled down she indicated that she felt her and the Defendant were 50-50 partners in their relationship.

[58] She has no evidence as to what the value of the Queensway Motel may have been in 1997 other than being told by the Defendant that when he bought the Motel several years earlier he paid $450,000 for it.

[59] At the time that the Plaintiff invested her $125,000 in the Queensway Motel, there was a mortgage owing to a trust company in the amount of $193,391.99. Assuming that the motel was still worth $450,000 this would mean in general terms that each party in July of 2009 had contributed $125,000 to the motel business.

[60] The Plaintiff confirmed on numerous occasions that there was a verbal agreement that she and the Defendant were 50-50 partners. She stated that she stayed because she loved the Defendant and thought that they were both working for the both of them for the entire relationship and for all properties on a 50-50 basis.

[61] When asked why the agreement at Ex 3 Tab B-5 does not say that she gets half, she stated: “I'm not a lawyer I don't know”. She went on to say that: “she loves the guy (Defendant) and thought that the guy would be honest as I was”.

[62] She admitted that while she may understand some bank documents she signs, she generally does not understand what she signs in accountant’s or lawyer's offices.

[63] The Plaintiff testified that at one point in time she lent the Defendant a further $2,600 to pay his taxes. It was not a gift.

[64] Other than both parties benefiting from living at either motel, the Plaintiff stated she never got any money directly from the motel. She did admit however that the Defendant did a lot of grocery shopping and that her capital gains tax from the sale of the Queensway Motel of approximately $14,000 was paid out of the motel bank account.

[65] The Plaintiff during this time had her widower's & HOOP pension and was not aware whether or not the Defendant had any sources of income other than from the motel. She stated that from her own funds she would also buy groceries, clothes for the Defendant and things the motel needed.

[66] Although it appears obvious that the parties and mostly the Defendant did not share financial information that is not unlike a great number of marriage or common law relationships where one person looks after the “family” finances or is secretive.

[67] In response to the fact that the Plaintiff did not show any rental income or expenses between 2006 and 2010 she stated that her tax returns were completed by the same accountant that does the Defendant's work and that the Defendant would have given the accountant all the information. She simply signed the return. (Ex 8 Tab B-2) She went on to say that the accountant told her that the rental income goes by the registered name only and the property was registered in the name of the Defendant.

[68] In any event it is the Plaintiff’s testimony that the Defendant kept saying that they had no income and he looked after all other business dealings.

[69] In 2013, some two years after separation, the Defendant paid the Plaintiff $100 on each of two occasions that she cleaned at the Hillcrest property. However she wondered why the Defendant had not asked his brother and sister-in-law to help so they could all do it for free.

[70] The Plaintiff stated that since the Defendant took care of all of their business dealings she did not know what the expenses were for Hillcrest and Fairview and she has never received any information from the Defendant.

[71] She stated that the Defendant's brother was a carpenter by trade and that if he had not agreed to work with the Defendant to renovate the Hillcrest property it's unlikely that the Defendant would have bought it. She also stated that there was never any conversation as to whether or not the Defendant's brother should be paid for his work on the Hillcrest property.

[72] The Plaintiff admitted that since January of 2011, other than being paid on two occasions to clean at the Hillcrest property, she had not worked at either the Fairview or Hillcrest property. In fact, she did not work at all. She admitted that the Defendant would still likely to be working full-time at the Fairview property.

[73] The Plaintiff stated she used the $29,660.63, which she took from the joint bank account on March 18, 2010, for her own purposes including buying everything she needed to set up her new apartment in Hamilton. She confirmed that she never told the Defendant that she was going to take the money but knew that he would see the bank statement.

[74] She admits that the Defendant was very mad, however she pointed out that he took money out of the joint bank account on several occasions without ever telling her. She admits that the relationship was over on March 18, 2010 or shortly thereafter.

[75] When asked, the Defendant stated that she never checked the bank accounts because she trusted the Defendant.

[76] Other than money, which the Plaintiff thinks should be in the safe, she is not aware of any other assets that the Defendant owns, purchased with money generated by the Motels.

Evidence of Rosemary Farkas

[77] Rosemary is the Plaintiff’s daughter & confirmed what the Plaintiff said about her and the Defendant sharing tasks to operate motels.

[78] She said between 1995 and 1997 the Queensway Motel looked rundown from the outside. She said the inside of the living quarters was stuffed full of things and she described it as a "hoarder-house".

[79] She stated that the parties started to renovate in 1997 and that the Plaintiff started to organize the living space before she brought her furniture from Hamilton. She said the renovations included a new washroom and kitchen and that even a wall had to be taken down. The work for the renovation was done by her brother, a friend of hers, the Defendant and the Defendant's son.

[80] She knew there was a safe but did not know what was in it. One time in 2010 she knew that the Plaintiff was very upset and wanted the Defendant to open the safe to which he replied why do we have to talk about money and the safe now and walked out of the room.

[81] She confirmed that after her father died she was very close to the Plaintiff and that the Plaintiff was able to take care of things such as her own banking. She indicated that the Plaintiff required an interpreter when it was time to invest the RRSPs she had inherited from her late husband.

[82] She did not know what improvements were made to the Queensway motel before 1994.

[83] She described the Defendant as middle-class and indicated that he did not do anything that would make her think that he has access to a significant amount of money.

[84] She confirmed that the Plaintiff did not discuss the business with her, however she indicated that the Plaintiff had told her that she wasn't getting paid any money from the motel business. At the time of this discussion, the Plaintiff did not seem stressed out about it.

[85] She stated that she was not currently concerned about her mother's ability to pay her expenses but indicated that she gave her approximately hundred dollars every month as a gift. She also stated that she did not see any real reason yet for the Plaintiff to use her RRSP investments.

[86] In closing the Plaintiff's case she filed Ex 12, which is the valuation of the Fairview Motel showing its value as of August 27, 2013 as $225,000. She also filed Ex 13, which is a valuation of the Hillcrest property showing its value as of August 27, 2013 at $250,000. Both parties agree that the valuations are accurate.

THE DEFENDANTS EVIDENCE

[87] The Defendant emigrated from Croatia to Canada in 1966 as a single person. He married in 1971 and had two children a daughter and a son who unfortunately passed away in 2000.

[88] Sometime before 1989 his brother owned a motel in Hamilton and this inspired him to buy the Queensway Motel in 1989. He described the motel as rundown so he painted all of the rooms, put in new carpet, put on a new roof, and he did most of the work himself with some help from his children. His wife at the time looked after a B&B and a donut shop.

[89] The purchase price for the Queensway Motel was $450,000 plus $45,000 for fixtures making a total of $495,000. He put in $115,000 in cash and had a mortgage from income trust for $250,000. He gave no evidence of where the other purchase money came from.

[90] He said before 1994 he had replaced the roof, painted rooms, put in new carpets, done a lot of landscaping including clearing the trees, paved the driveway and done some cosmetic things most of which were paid for in cash.

[91] He described the motel as a middle end motel that was clean and quiet and friendly. He moved into the motel after he bought it and later his son moved in. He became separated from his wife in 1989 or 1990.

[92] Before the Plaintiff joined him, he said he did everything himself with some help from his son except that he sent the laundry out to be done by a third-party.

[93] When the Plaintiff came on weekends, they worked at the motel but also went for drives. In addition, they attended weddings, community picnics and while together took five trips, two to Europe, two cruises and one trip to Cuba. He stated that he paid for all of these trips.

[94] Between 1997 and 1999 while the Plaintiff was still working in Hamilton, he said she didn't do too much work at night after she returned because it had been a long day for her. He confirmed that they had discussed returning to Hamilton after the sale of the Queensway Motel so they could semi-retire.

[95] He said the Plaintiff’s decision to retire was hers alone. He stated she had cataracts which made driving more difficult.

[96] The Defendant felt he did more work on the outside of the motel then the Defendant did which is likely true, however he essentially confirmed what the Plaintiff said and that is, that they both did whatever needed to be done and they work together doing it.

[97] The Defendant did not take any formal wages from the motel, but his personal expenses were paid for by the motel. He said he did not have a personal bank account because the motel was not a big business and he put most of the money back into the business.

[98] He said when he started in the motel business most of receipts were cash, but now there is almost no cash and it is almost all credit card. He said cash would now only account for about 1% with the rest being credit cards or interact. He said in 1996 receipts would have been about 50% cash and 50% credit.

[99] He indicated that if he was given cash, his procedure always was that he would give a receipt and then every one to three days he would take the cash to the bank. He indicated almost all of the money except for grocery money went to the bank however he also indicated he also bought furniture and appliances for the motel for cash because he would get a better deal when buying things for cash.

[100] He does not know whether the Plaintiff ever took money from the business and he cannot remember her paying for anything except for some groceries when her children came to visit.

[101] He indicated that before he and the Plaintiff got together he worked on construction, part time at a bakery and running his motel. He stated that after she moved in, he continued working part-time as a baker at night for approximately one year.

[102] He initially stated that he told the Plaintiff he needed money for a mortgage when she lent him the first $30,000. He stated that he paid her $367 per month, for approximately 8 months, which was the amount that she would have to pay on the $30,000 mortgage that she took out on her Hamilton home.

[103] He acknowledged that the Income Trust was in receivership and that they would not renew his mortgage. He indicated he talked to the Plaintiff about it and she offered to help. He did not agree that he was in tight financial circumstances. He confirmed that he never tried to borrow the money from any other source.

[104] He said at the time, he knew that he had to pay the money back to the Plaintiff and stated that there was never any discussion about a partnership, notwithstanding that the Plaintiff says there was a 50-50 partnership.

[105] The Defendant confirmed that between 1989 and 1994 the motel was not much different from when he purchased it.

[106] The Defendant either directly or through his solicitor confirmed that the Defendant is not relying on whether or not the agreement dated July 21, 1997 is valid, but the Defendant does rely on it to show the intentions of the parties in 1997.( Ext 3 Tab B-5)

[107] The Defendant stated he believed the value of the motel went up between 1989 and 1994 because he had received approval to increase the size of the motel from 16 to 24 rooms. This addition was never built and the Defendant did not offer any evidence whatsoever, other than his own belief, with respect to the value of a Queensway Motel at any time other than at the sale date.

[108] The Defendant stated that his business bookkeeping consisted of keeping copies of the receipts for each client, adding them up at the end of the month and keeping them in separate monthly envelopes. He stated he would do the same for expenses. The monthly statements for expenses from 2008 to 2012 for the Fairview Motel are set out at Ex 4 Tab C-1-5.

[109] He said he used this system both before and after his relationship with the Plaintiff and further stated that the Plaintiff never expressed any concern with his bookkeeping although she did not have much involvement with the business.

[110] He stated that he has used the same accountant for the last 10 years and that usually he and the Plaintiff would go in separately to sign their tax returns.

[111] He confirmed that the money to purchase the Clear Creek property came from the motel business. Although it was vacant land, the Defendant indicated that he had to maintain it by cutting grass and doing something with fruit trees. He stated that the Defendant did not do any work at the property and that he did not receive any remuneration for his maintenance work. He did not give any evidence as to why he had to cut the grass on vacant property, how often he cut the grass, how long it took him to cut the grass or why any maintenance on the property was required over and above cutting the grass.

[112] He indicated that there had been discussions between the parties about selling the Queensway Motel and moving to Hamilton. He said that then the opportunity to purchase the Fairview motel came up. He confirmed that the Defendant indicated she did not want to purchase the Fairview motel because she wanted to go to Hamilton.

[113] When he purchased the Fairview Motel, it had four rooms and living quarters and a restaurant area which he and his brother renovated into four more rooms with kitchenettes.

[114] He confirmed that while the renovations were going on at the Fairview Motel, the Defendant stayed and worked at the Queensway Motel and she did not help with the renovations. He stated that the materials for the renovations or the Fairview Motel came from money earned at the Queensway Motel and loans from relatives. No evidence was produced with respect to these alleged loans. He stated that it took approximately a year and a half to complete the renovations on the Fairview Motel.

[115] He confirmed that at the Fairview Motel both parties helped and did essentially the same work that they had done at the Queensway Motel.

[116] He said when he became aware that the Hillcrest property was for sale he approached his brother, who is a professional carpenter, and asked him if he wanted to go into partnership with him. He indicated that each of the four parties were to be 25% owners. He said his brother and sister-in-law did not put in as much money because his brother was going to do the carpentry work. He never explained why his brother would be paid for doing renovation work by getting a larger percentage of the ownership when he was also doing work and spending the same amount of time renovating the property.

[117] He also never explained why his sister-in-law would receive a larger share since there is no evidence of her helping at the property.

[118] He confirmed that the materials that went into the Hillcrest property were paid for with money from the Queensway Motel which would have increased the parties investment in the property.

[119] He said the Plaintiff never indicated that she didn't understand what was happening with respect to the purchase of the Hillcrest property or that all four of them were responsible for the mortgage. Prior to 2014, the Plaintiff never said to him that she didn't owe any money on the mortgage which was due February 6, 2014.

[120] He gave evidence about his purchase of the 2003 truck, which he bought in 2005 with money from the Queensway Motel. He stated that the truck was used partly for personal use but also to allow him to renovate the various properties that were purchased.

[121] He also bought a 24 foot boat in approximately 2003 for $11,000. The boat was approximately 13 years old on the date of purchase and he said that the money came partly from the motel business and partly from a Camaro that he sold. He never directly said how much money came from the Camaro for the purchase of the boat but did say that on one occasion he had put $3,000 into his safe from the sale of the Camaro. It appears that the Defendant was hopeful that the boat would be used for family purposes but the Plaintiff did not want to go out on the water in the boat.

[122] Other than admitting that there was $3,000 in the safe from the sale of the Camaro one time, he also stated that there was never any money from the motel business in the safe and that the safe only contained documents such as passports and mortgage and insurance papers. He stated that he opened it approximately once per year. He further stated that all times at the Fairview motel the safe was unlocked and he testified that he thought the Defendant knew this.

[123] He confirmed that since 2011 the Plaintiff has been paid for two days of cleaning at the Hillcrest property. He said that he does all the work at Hillcrest and that his brother and sister-in-law did not do any work. He said he has never received any salary or any wages for Hillcrest for the work that he does.

[124] With respect to his tax returns from 2002 - 2012 (Ex 8 Tab 2-11) he says he trusts his bookkeeper, however his evidence is that he simply gives his monthly statements, all of which are calculated by himself, to his bookkeeper or accountant for that person to complete his tax return.

[125] His Financial Statement dated June 27, 2012, was made Exhibit 15. To say the least it is not well done. On page 3, it shows utility expenses for water, heat and electricity when the Defendant has testified that all utilities are paid for by the motel. He sets out his interest in the Hillcrest property at 33.3% rather than 25%. He shows no money owing to him, notwithstanding his first wife owes him a mortgage for $60,000 with 4% interest compounded semi-annually and upon which she apparently has made no payments. Without doing a precise calculation and assuming that the mortgage is still valid she would mathematically owe the Defendant in excess of $100,000.

[126] He confirmed he had this mortgage after stating to the Plaintiff's lawyer that he had no other significant assets that were not set out on his financial statement. He tried to say he didn't include this because he doesn't think she would ever pay him however he confirmed that he had not discussed his options of trying to collect this money with a lawyer despite having sufficient funds to do so on several occasions. It makes no sense that he wouldn't discuss these options with a lawyer, particularly when he uses lawyers from time to time and particularly during this court action. Later in the Defendant's evidence he confirmed that approximately 4 months after his separation from the Plaintiff he signed a postponement letter, postponing his $60,000 mortgage on his first wife's home so that she could refinance. (Ex 6 Tab C-4) Therefore, there is absolutely no doubt that the Defendant knew he had rights with respect to the $60,000 mortgage.

[127] His Financial Statement also shows income of $22,000 in expenses of $31,500 without any corresponding debt which should be accumulating at approximately $9,500 per year. (Ex 6 Tab C-1)

[128] He said that he did not know why the amount of net rental income appears on the Plaintiff's tax returns because all he does is give information to the accountant who does the rest. He said that in 2013, money from the Hillcrest property paid for the Plaintiff’s car insurance in the amount of $1,200 because she asked for it.

[129] After the parties got together he said it was the Plaintiff who had an RBC account and put his name on it to make it joint. He put $5,500 into it, which he received from a motor vehicle accident and some of his pension checks but he did not give any amount.

[130] On cross examination the Defendant indicated that he did not know initially that the Plaintiff had put a mortgage on her home to raise the initial $30,000 or $125,000. Although his examination for discovery seems to indicate that he was aware the Plaintiff had mortgaged her home it is not entirely clear given that his first language is not English. However there is no doubt in my mind that he knew the Plaintiff put a mortgage on her home, because he stated that he made payments to her on a monthly basis for the $30,000 loan and more importantly I find it absolutely unbelievable that parties in a close relationship would not have talked about and understood fully where the Plaintiff was getting the money from, to loan to the Defendant.

[131] Although he made some payments with respect to the initial $30,000 loan the Defendant confirmed that he did not make any payments to assist the Plaintiff to pay for $125,000 loan.

[132] Although the court is skeptical that the Plaintiff would have been able to arrange new financing from a commercial source, little turns on it.

[133] The Defendant admits that in addition to the $193,391.99 that he needed to pay out the income trust mortgage he also owed a further $53,500 to family members and the Town of Simcoe for business taxes. In fact in 1995 the Plaintiff gave him a check for $2,429 to pay for taxes. ( Ex11)

[134] The Plaintiff suggested that during the Defendant’s divorce proceedings he had valued the Queensway Motel at $400,000. Although no net family property or other statements from the Defendants divorce were produced, if one assumed that in 1997 the motel was worth $400,000 the total equity would be approximately $125,945 after deducting the approximately $193000 owing to Income Trust, $27000 owing to the Plaintiff and the over $53,000 owing to other creditors.

[135] However, at this time the Queensway Motel was owned equally by the Defendant and his first wife which would leave the Defendant’s equity in the property at $62,972.

[136] Notwithstanding the deed at Ex 3 Tab B-13, the Defendant states that he did not understand that he transferred one half of the Queensway Motel property to the Plaintiff.

[137] It is Defendant's stated position that all that he owes to the Plaintiff is $125,000 plus a fair rate of interest and nothing more.

[138] He admits that when the Queensway Motel was sold in February of 2006, he did not pay the Plaintiff $125,000. He says he offered her $125,000 sometime in 2013 but that has no bearing on this trial.

[139] When it was suggested to the Plaintiff that both parties treated the agreement if it didn't exist he denied that this was the case, however at questions 266 & 267 of his examination for discovery he indicates that they did treat the agreement at Ex 3 Tab B-5 as if did not exist. When this was pointed out to the Defendant, he said that he probably didn't understand the Plaintiff's lawyer when he asked the question. I find this answer disingenuous.

[140] The Defendant did acknowledge that both of them worked hard at the motel but stated that he probably did more work than she did. He denied that there was any joint venture and it's unclear whether or not the Defendant understands what a joint venture is.

[141] From the approximately $273,000 that the Defendant acknowledged was paid to both of them from the sale of the Queensway Motel he indicated that he bought an Avalanche truck for approximately $23,000 and he opened a joint account # 5093943 at RBC and deposited $250,000 into the joint account. (Ex 7 Tab A-1)

[142] He was unable to give any reason as to why he would open and/or deposit the $250,000 into a joint bank account rather than into his own personal account if he thought that all the money was his. The bank would have required both parties to sign documents in order to have the joint bank account opened.

[143] Not only did the Defendant deposit the money into a joint bank account, when he invested some of the money he bought joint GICs from time to time as investments.

[144] The joint account shows several withdrawals, which should be attributable to the Defendant. He could not explain why he withdrew $3,000 in June of 2007, $2,000 in July 2007, $20,372.60 in August of 2007 and $48,146.36 in April of 2009.

[145] He withdrew $109,000 in April of 2008 to pay off the vendor take back mortgage on the Fairview Motel. He withdrew $16,725.29 in February of 2009 and $20,000 in May of 2009 that he said, was probably used for the Hillcrest property.

[146] Despite the Plaintiff's evidence that she got upset at the Defendant when she found out that he withdrew the $48,146.36 in April of 2009, he maintained that he had no recollection about taking the money and no recollection about the Plaintiff getting upset about his taking the money.

[147] Although he did not have any exact recollection he stated that some of the money probably went into the renovations at the Fairview Motel.

[148] He acknowledged depositing all of the cheques from the joint mortgage from the sale of the Queensway Motel into the Fairview Motel account except for the last two cheques, which were split equally between himself and the Plaintiff.

[149] He was unable to confirm after the lunch break on February 20, 2014 whether or not he had deposited $115,100.38 from the Queensway monthly mortgage receipts into the Fairview Motel account.

[150] His stated position at the trial was that he owes the Plaintiff $125,000 plus a fair rate of interest and that she is entitled to a 25% share of the Hillcrest property.

[151] He confirmed that the agreement of purchase and sale and the deed on the Clear Creek property were in both names. (Ex 6 Tab D) He confirmed that the Plaintiff contributed $10,000 of her own money to this purchase and that the remainder came from the Queensway Motel account.

[152] When the Clear Creek property was sold in April 2003, the parties received a joint check, in the amount of $68,655.55.

[153] The Defendant told the court that this money was used for five holidays, two to Europe, one to Cuba and two cruises. He could not tell the court when these trips were taken and there was certainly no indication that this money was put into a separate vacation account so it is unlikely in the extreme that the profit from the Clear Creek property was only used for the five vacations.

[154] The Plaintiff suggests that is far more likely that the money from the Clear Creek property was used to come up with the $80,227.71 bank draft to allow the Defendant to purchase the Fairview motel in October of 2004. (Ex 4 Tab A) The Defendant was unable to show the court where the $80,227.71 came from if not from in part the Clear Creek profits.

[155] At this extremely late stage of the proceedings the Defendant attempted to say on more than one occasion that he would have to check his records. He also told the court that he had borrowed approximately $30,000 from his brother over five or six years before 2006 and, that this money is still owing. He asked the court to believe that this money was still owing to his married brother with two children even though he sold the Queensway motel for $728,000. He produced no record whatsoever in an attempt to prove these borrowing from his brother, nor was his brother called as a witness.

[156] The Defendant also asked the court to believe that his daughter gives him $500 per week in cash. Again the Defendant did not produce any records whatsoever to prove these loans or gifts and his daughter was not called as a witness.

[157] The vendor take back mortgage on the Fairview Motel was paid off in the approximate amount of $115,000 in April of 2008 (Ex4 Tab B-1), at the same time the Plaintiff removed $109,000 from the parties’ joint RBC bank account.

[158] Although the Defendant denied that any of the monthly mortgage payments for the vendor back mortgage on the Fairview motel came from the Queensway account he has not produced any documentation to show how those payments were made other than if they were made from the Queensway account.

[159] With respect to the business cards, Ex 9 the Defendant stated that his daughter ordered these cards and that he did not ask her to order them. She was not called as a witness to verify this. He further stated he did not mind the cards.

[160] Although the Defendant received the Plaintiff calculations of cash versus credit cards received by the motel for 2009 and 2010 the Defendant did not produce a similar calculation to support his contention that there is very little cash received by the Fairview motel. (Ex 4 Tab D-1&2) There do not appear to be any cash deposits recorded in the Motel bank account for the years 2009 to 2013 inclusive.

[161] He did state however, that Mr. Kordic used to pay by cheque but now because of some trouble with his cheques he pays his rent in cash in the amount of $500 per month.

[162] The Defendant said that last year he put a roof on the Fairview Motel, which cost him $17,000.

[163] Ex 8 Tab A shows losses for the motel business, for 2006 – ($6,980), for 2007- ($26,584), for 2008 – ($10,294), for 2009 – ($9,982), for 2010 – ($3,411), for 2011 – ($2,784) with finally a profit in 2012 of $4,244. This is a cumulative loss during this period of time, of, $55,791.

[164] In addition he shows a loss of net rental income, in 2009 - $4,772, for 2010 - $1,861, for 2011 a profit of $2,553 and a profit in 2012 of $4,244.

[165] So, from 2009 to 2012 he has lost $11,769 on his motel and rental business.

[166] Based on these figures and the evidence that he has presented to this court the only way that the Defendant could have survived economically would be if there were significant cash payments in his motel business or property rental business that have not been accounted for. The financial statement that he has filed with the court also supports the theory that he must have received significant cash payments in his motel business. In addition to the expenses he has admitted to in court, he said he also sent his mother in Croatia $500 a month but that he gets this money from his daughter. As set out earlier in these reasons, the daughter was not called to testify. The court also notes that on his examination for discovery questions 736 he stated that the money he gives to his mother comes out of the Fairview account.

Findings

[167] Although many of the crucial facts of this case are not in dispute where the evidence differs between the Plaintiff and Defendant I prefer the evidence of the Plaintiff.

[168] I do so for the following reasons:

A. It makes absolutely no sense whatsoever for the Defendant to say that the safe was unlocked and that the only thing in the safe work papers such as passports. It is the Plaintiff’s evidence that they got into at least one huge fight over the fact that would not open the safe so she could see what was in it. This evidence is backed up by her daughter. He said, he didn't use the safe because he didn't want the Plaintiff to think he was hiding something. This statement is ludicrous. He also contradicted himself on at least one occasion when he said that he would open the safe approximately once every year.

B. With respect to his business, he keeps the poorest accounting records I have ever seen. He does not appear to use a ledger, one write system or a computer. He did not produce any records whatsoever to the court to show receipts for the hotel and whether or not payments were made by cash or electronically.

C. Although showing substantial losses for his business, and a large monthly deficit on his latest financial statement the Defendant did not offer any credible evidence as to how he is making ends meet.

D. Although he said his procedure for dealing with cash from clients was to give a receipt and deposit it in the bank, he was unable to show any bank deposits that were made in cash.

E. He offered no proof by way of documentary evidence, oral evidence or bank deposits of alleged loans he received from family members.

F. His allegedly sworn financial statement dated June 27, 2012 shows expenses for utilities when he testified that all utilities were paid for by the motel. He said out his interest in the Hillcrest property at 33.3% rather than 25%. He did not show any money owing to him from his first wife yet acknowledges she owes him a mortgage with a face amount of $60,000. In addition he shows expenses which are $9,500 per year greater than his stated income but he does not show any corresponding debt.

G. He testified that he did not know that the Plaintiff put a mortgage on her home although his examination for discovery would seem to indicate otherwise and it is simply unbelievable, that, given in the close relationship that the parties were in he would not have known.

[169] The Defendant’s lawyer indicated that they were not relying on the validity of the agreement at Ex 3 Tab B-5 except to show the intentions of the parties as of July 21, 1997. The Defendant himself however states to this court that all he owes to the Plaintiff is $125,000 plus some interest.

[170] The two different positions do not matter. Even if the agreement had some validity in 1997, neither party referred to it or relied on it again until this lawsuit started.

[171] The evidence is clear that both parties put significant sweat equity into their first property at Queensway Motel and contributed more or less equal amounts of capital based on the evidence presented at this trial.

[172] Following the sale of the Queensway Motel, the parties treated the equity from the sale as belonging to each of them equally. The mortgage back was registered in both their names, the monthly mortgage payments were made out to both their names, the cheque for the net equity due to them on closing was made out in both their names and that cheque was deposited by the Defendant, into a joint bank account.

[173] Therefore, the court cannot come to any other conclusion than the equity from the Queensway Motel belonged to the parties equally.

[174] There is no doubt that the Fairview Motel was purchased, maintained, renovated and had its mortgage discharged using joint monies which originated from the Queensway Motel, the vendor take back mortgage on the Queensway Motel and the joint cheque the parties received on closing.

[175] In addition, the evidence is uncontroverted that while the Defendant was spending his time renovating the Fairview Motel, the Plaintiff was essentially running the Queensway Motel on her own. The evidence is also clear that after the parties moved into the Fairview Motel both parties worked more or less equally to maintain and run the motel. No wages were paid, to either party.

[176] Both parties relied on their interpretation of Kerr v Baranow 2011 SCC 10, [2011] 1 S.C.R. 269. At paragraph 85 the court states: "I conclude, therefore, that the common law of unjust enrichment should recognize and respond to the reality that there are unmarried domestic arrangements that are partnerships; the remedy in such cases should address the disproportionate retention of assets acquired through joint efforts with another person."

[177] I therefore find that the Defendant holds the title of the Fairview Motel in trust for himself and the Plaintiff on an equal basis. To hold otherwise would allow the Defendant to be enriched where there is no juristic reason for such enrichment and the Plaintiff would be accordingly deprived.

[178] It is also clear that joint monies were used to purchase the Clear Creek and Hillcrest properties.

[179] At the end of trial and the Plaintiff requested the following relief:

A. payment of one half of the monies held in Mr. Bowyer's trust account from the payment of the joint mortgage back from the Queensway Motel

B. payment of one half of the value of the Fairview motel which both parties agree is valued at $225,000.

C. payment of one half of the monthly payments during the life of the joint mortgage back from the Queensway motel the total of which was $113,100.

D. payment to her of the net rental receipts from the Hillcrest property which she paid tax on in the years 2011 in the amount of $ 2,553.57 and in 2012 in the amount of $4,244.21.

E. determination of her percentage ownership in the Hillcrest properties and whether it is 25 or 33.3%.

F. reimbursement for one half of the monies taken by the Defendant from the joint bank account that he cannot account for, less one half of the $29,660 which the Plaintiff removed from the joint bank account on March 18, 2010 and less $14,000 which money was used to pay the Plaintiff capital gains tax. These monies were removed from the joint account as follows: June 27/07 - $3,000, July 3/07 - $2,000, August 15/07 $20,372.60, April 6/09 - $48,146.36 and May 1/09 - $20,000 for a total of $93,518.96.

G. one half the value of the Avalanche truck which was purchased for $23,000.

H. lump sum spousal support and

I. prejudgment interest from January 19, 2011 being the day that the statement of claim was served.

[180] The Plaintiff is entitled to the following order relief:

A. one half of the monies held in Mr. Bowyer's trust account

B. one half of the value of the Fairview motel which equals $112,500 or alternatively a one-half interest in the property

C. I am unable to conclude that the Plaintiff is entitled to one-half of the receipts from the monthly payments on the Queensway Motel mortgage. Although the money appears to have been deposited into either the Queensway or Fairview Motel accounts, the money was in part used for family purposes and to fund purchases of and renovate other properties which the Plaintiff is entitled to share in in accordance with this judgment.

D. payment to her of the net rental receipts from the Hillcrest property for 2011 and 2012 less the $1,200 she received in the form of her car insurance payment. This totals $5,597.78 (6,797.78-1200). In addition she is entitled to 25% of the net rental receipts for 2013 and beyond.

E. in this action the Plaintiff is entitled to 25% of the Hillcrest property investment. I have determined this for many reasons including the fact that the registered documentation gives her 25% and two of the owners of the property are not parties to this litigation. In this action, I could not make a judgment which would affect the rights of the other two owners. In addition while the Plaintiff argues that she and the Defendant should get more than 50% because of the money they invested into the property, there is no evidence before me as to whether or not the Defendant's brother did the bulk of the renovations on the Hillcrest property and no evidence before me as to whether or not the division of percentages in the Hillcrest property took into account the work that the Defendant's brother did on the Fairview Motel.

F. she is entitled to reimbursement of one-half of the amount of money which the Defendant removed from the joint bank accounts and cannot account for. The Defendant was aware or should have been well aware that these monies were joint monies and not his alone. He must bear the responsibility for his lack being able to account for monies belong to the Plaintiff. She is therefore entitled to $17,929.48. [.5(93,518.96-29,660) – 14,000]

G. the Plaintiff paid for her own automobile out of her own funds and there is no reason why the Defendant should be able to use her funds for half of purchase of his truck. She is therefore entitled and to be reimbursed for $11,500.

H. on the evidence before me, I am not prepared to award spousal support on either a periodic or lump-sum basis. Using the Plaintiff's evidence of the motels profitability in 2009 and 2010 the Defendant may be earning in the area of $45,000. The Plaintiff's earnings when she starts drawing from her RRSP's which she has to do within the next year and her investments from her judgment in this law suit would give her an income not significantly different from the Defendants. In addition there is evidence from the Plaintiff's daughter that the Plaintiff lifestyle is essentially the same where she lives now, as it was when she was living with the Defendant.

I. the Plaintiff is entitled to prejudgment interest from January 19, 2011 and costs.

[181] If the parties are unable to agree on costs Mr. Bergart shall forward his brief submissions on costs to me by March 19, 2014. Mr. Brower shall forward his brief response to me by March 25, 2014. Mr. Bergart shall then forward her/his reply, if any, to me by March 28, 2014. Cost submissions may be sent to my attention by email, care of Kitchener.Superior.Court@ontario.ca

J. W. Sloan J.

Released: March 13, 2014

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mary Farkas

Plaintiff

– and –

Nick Bedic also known as Nikola Bedic

Defendant

REASONS FOR JUDGMENT

J. W. Sloan J.

Released: March 13, 2014