ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 07-CV-341065SR

DATE: 20140902

ONTARIO SUPERIOR COURT OF JUSTICE

RE: Royal Bank of Canada, Responding Party

AND:

Robert William Mason, Moving Party

BEFORE: R. F. Goldstein J.

APPEARANCE: Heather Paterson, for Clydell Mason, Interpleader, Moving Party

G. Bowden, for Royal Bank of Canada, Plaintiff, Responding Party

Allyson Fox, for Bank of Montreal, Intervener

ENDORSEMENT

[1] Who is the beneficial owner of 1184 Imperial Road in Windsor? 1184 Imperial is a house in Windsor. In 1999 Clydell Mason purchased it. In 2005 she was having financial difficulties. She needed to consolidate some loans in order to obtain a new mortgage. As a result, she transferred title of the house to Robert. Unfortunately, Robert acquired some judgment debts. Writs were registered on title. The property was transferred back to Ms. Mason from Robert in 2008. Ms. Mason took back title to the property even though the writs had not been discharged.

[2] The Royal Bank of Canada is one Robert’s judgment creditors. RBC has instructed the Sheriff to commence a sale action on 1184 Imperial in order to satisfy its judgment against Robert.

[3] Not so fast, says Ms. Mason. She says that she has always been the beneficial owner. She says that in 2005 she only transferred the property in trust to her son Robert Mason. She brings this interpleader motion under Rule 43.01(2) for a declaration that she is, and always has been, the beneficial owner and that Robert was only ever a bare trustee. She has produced a trust document to that effect. As a result, she says that RBC cannot execute against the property.

[4] Bank of Montreal, which seeks to intervene, also has a judgment against Robert Mason. BMO registered a writ. That writ expired. BMO seeks to intervene in this motion. RBC opposes BMO’s motion. Yet a third judgment creditor, Motor City Credit Union, also has a judgment debt against Robert Mason but is not taking part in the motion.

[5] RBC concedes that if, indeed, Robert Mason only held the property in trust for his mother, that trust would defeat an execution creditor. In looking at the evidence, however, RBC says that there was no evidence of a trust and no intention to create a trust. RBC says that there must be some doubt cast on the authenticity of the 2005 declaration of trust. RBC asks me to dismiss the motion. In the alternative, RBC asks that I direct the trial of an issue.

[6] In my view, there is compelling evidence to suggest that Ms. Mason did not create a valid trust. That said, there is also just enough evidence to raise the possibility that she did. For the reasons that follow, the motion is dismissed and a trial of an issue is directed.

FACTS

[7] In 1999 Ms. Mason purchased 1184 Imperial. She had a job and took out a mortgage on the property. Between 1999 and 2005 Ms. Mason’s financial situation deteriorated. She had been working full time but retired. She had earned extra money as a personal support care worker with the Ministry of Community and Social Services. That arrangement was discontinued. By 2005, she says, she incurred a significant amount of personal debt. She decided to try and consolidate her debts and take out a new mortgage. She asked her son Robert to assist her. According to her affidavit, Robert told her that he had asked various mortgage lenders for assistance but based on her income she would not be able to obtain a new loan. As a result, she says, he offered to take title himself as borrower.

[8] It should be noted that Robert’s statements to Ms. Mason are hearsay. Robert has not filed an affidavit. His statements are admissible to show that he told Ms. Mason that she could not obtain a mortgage in order to show that she acted on those statements. Robert’s statements are not admissible for the truth of their contents, namely to show that Ms. Mason could not, in fact, obtain a mortgage. This may be an important distinction when the issue is tried.

[9] On August 9 2005 Ms. Mason executed documents transferring title to her son. The deed was registered in the Land Titles office in Windsor. On the same day, Ms. Mason says that she and Robert executed a Declaration of Trust indicating that he took title only as a bare trustee. A new mortgage in favour of CIBC for $165,000.00 was registered. The consideration for the transfer was $220,000.00. Land transfer tax of $1,925.00 plus the $60.00 registration fee was paid.

[10] Ms. Mason subsequently became concerned that Robert’s financial situation was deteriorating. In fact, Robert acquired judgment debts. On November 6 2006 BMO secured judgment is for $88,161.19 plus interests and costs. BMO’s claim was a mortgage collection action in relation to a property in London, Ontario. Mr. Mason did not defend and a default judgment was obtained. BMO registered a writ of execution on November 11 2007.

[11] On November 27 2007 RBC secured judgment against Robert Mason for $20,926.27 plus interest and costs. RBC registered a writ of execution on December 7 2007. RBC’s action was based on unpaid Visa credit card bills. Robert Mason did not defend the action. RBC obtained a default judgment.

[12] As a result of Robert’s financial difficulties, Ms. Mason took the property back. On January 24 2008 a new transfer was registered. The deed indicated that title was transferred from Robert Mason to Clydell Mason for consideration of $1.00. Although the consideration was nominal, land transfer tax of $1,325.00 plus the registration fee of $60.00 was paid.

[13] Ms. Mason took title notwithstanding the writs. In her affidavit she says that she retained counsel to clear the writs from title. She prepared a draft application and a statutory declaration. The draft application is attached to her affidavit but not an executed one. She says that her lawyer informed her that the Registrar had refused to clear the writs without consent from the creditors. Again, the comments from her lawyer are hearsay.

[14] In April 2013 RBC instructed the Sherriff to commence power of sale proceedings against 1184 Imperial. Ms. Mason has brought this motion for a declaration that she is the beneficial owner to prevent that sale.

ANALYSIS

[15] The only real issue before the court is whether the declaration of trust is valid and Clydell Mason is the beneficial owner of 1184 Imperial.

[16] There is no question that an unregistered trust agreement takes priority over an execution creditor where the trust agreement was prior in time to the writ. This is so even if the trustee misrepresents the state of affairs to a third party: Colantonio v. Don Park L.P. et. al., 2013 ONSC 1059.

[17] At the end of the day, it is a question of fact whether Ms. Mason intended to create a valid trust. In my view the question cannot be resolved on the basis of the paper record before me, as the evidence cuts both ways. As well, there is certainly an important issue of credibility here. If I were required to make a decision solely on the record I would dismiss the motion. Fortunately for Ms. Mason, the Rules allow me direct the trial of an issue where there is a real evidentiary question. I will mention some of the factual problems that both support and detract from her claim.

[18] There are some real deficiencies with the declaration of trust: there is no affidavit from the witness, whose signature is an illegible scrawl. Robert Mason simply signed his name “Rob”, which seems unusual, although there are no other documents signed by him in the record. In fact, there is no evidence at all about the circumstances under which the declaration of trust was signed. As noted, there is no evidence on this motion from Robert Mason.

[19] There is also no evidence from the solicitors who prepared the transfers in 2005 and 2008 or the declaration of trust. Given that Ms. Mason has, in effect, waived privilege by recounting some of the advice given to her by her lawyers, and given the importance of establishing the trust, I might have expected to see this evidence.

[20] I also note that when the deed was registered in 2005 it indicated that it was a transfer for consideration of $220,000.00. The transfer could have indicated that it was in trust. It did not. Furthermore, land transfer tax was paid. No land transfer tax would have been paid had the transfer been in trust.

[21] On the other hand, there is evidence that supports an intention by Ms. Mason to retain beneficial ownership: most importantly, there is the deed itself. Although there are doubts about its validity, there is no evidence that it is fraudulent or was created after the fact. Furthermore, there is evidence that Ms. Mason paid all of the expenses associated with transferring the property, including transfers and registrations. Ms. Mason has also produced documents indicating that she paid the CIBC mortgage after the 2005 transfer, along with the property taxes. She has also produced documents indicating that she paid expenses such as gas and hydro. The fact that Ms. Mason paid the utilities is consistent with the fact that she remained in the house, possibly as Robert’s tenant (if the trust is not valid). The fact that she paid the mortgage cuts both ways.

[22] Finally, in Land Titles, unlike in Land Registry, there is no provision for registering a trust document on title.

BMO’S POSITION

[23] BMO’s writ was filed on November 6 2007 and expired on November 6 2013. BMO obtained an order on January 7 2014 permitting it leave to “renew and replace” the expired writ. BMO filed the order and renewed the writ on January 17 2014. BMO has asked to intervene on the basis that it never intended to allow the writ to expire.

[24] BMO argues that it has essentially obtained an “alias writ” that does not affect any third party interests between the expiry of the old writ and the registration of the new writ. RBC is obviously opposed.

[25] What turns on the BMO intervention is priority. The original BMO writ was placed on the property ahead of the RBC writ. If BMO is right, it retains its priority. If RBC is right, it ranks ahead of BMO.

[26] In my view, this issue is also properly dealt with as part of the trial of the issue. There is also a factual issue here, namely BMO’s intention in terms of dealing with the expired writ.

DISPOSITION

[27] A trial of an issue is ordered in accordance with the timetable proposed by RBC, namely this:

• Clydell Mason is to serve a statement of claim within 30 days of the date of this judgment;

• Statements of defence are to be served within 50 days of this judgment;

• Affidavits of documents and other productions are to be delivered within 75 days of the date of this judgment;

• Examinations for discovery are to be held within 120 days of the date of this judgment;

• Motions arising out of the discoveries and mediation are to both take place within 180 days of the date of this judgment;

• The action is to be set down for trial within 210 days of the date of this judgment.

[28] Costs of this motion are reserved to the judge hearing the trial of the issue.

R.F. Goldstein J.

Released: September 2, 2014