Rattu v. Abreu, 2015 ONSC 129

Court File No. C-1424-11

SUPERIOR COURT OF JUSTICE

HARVEY RATTU

v.

VICTORIA ABREU

REASONS FOR JUDGMENT

BEFORE THE HONOURABLE JUSTICE R. D. CORNELL

on January 8, 2015, at SUDBURY, Ontario.

APPEARANCES:

H. Rattu In Person

V. Abreu In Person

THURSDAY, JANUARY 8, 2015

REASONS FOR JUDGMENT

CORNELL, J. (Orally):

This case involves the very serious consequences that can result when a house is jointly purchased by individuals who are only at the stage of exploring the possibility of a domestic relationship.

The plaintiff seeks a declaration that he is the sole owner of a home purchased jointly by the parties. In accordance with the reasons that follow, I grant that relief.

Preliminary Issue

This matter was originally set for trial to begin on September 10, 2014. By that point in time, both parties were unrepresented.

The plaintiff attended ready for trial along with five witnesses who had been summoned by him. This included a witness who had traveled from British Columbia.

At that time the defendant requested an adjournment based upon the fact that she alleged that she had not received notice of the trial until two days beforehand. The record indicates that the defendant’s failure to provide a current address to the court may have been responsible for the lack of notice of the trial date.

An adjournment was granted at that time, peremptory on the defendant. The matter was adjourned to January 6, 2015 for a three day trial.

The defendant was to pay costs thrown away by reason of the adjournment. These costs were fixed in an amount of $3,000 payable forthwith. In addition, the defendant was to have paid the sum of $1,800 to the plaintiff prior to the trial to cover the anticipated costs associated with the re-attendance of the witness who resides in British Columbia. Neither the costs nor the re-attendance money has been paid by the defendant.

The defendant called the trial coordinator to indicate that if she had difficulty traveling to Sudbury for the trial, she would not be appearing. After this information was communicated to me, I instructed the trial coordinator to advise the defendant that the matter had been marked peremptory and that her attendance was required on January 6, 2015, at which time the trial would proceed with or without her. I note for purposes of the record that there was no winter storms in the Sudbury region on January 5 or January 6, 2015.

When court was convened on January 6, 2015, the defendant was not present. One witness for the defendant was present. She advised the court that the defendant had telephoned her and made it clear that she would not be attending court that day.

Given this information and the fact that the matter was peremptory on the defendant, I proceeded with the trial in the absence of the defendant.

On January 7, 2015, the defendant appeared around 11:30 a.m. She is in attendance today. As all of the evidence was in, the defendant was limited to making submissions. No request for a mistrial was made.

Background

The plaintiff and the defendant had been dating for a period of time. The evidence heard by me indicates that at no point in time did they live together in a domestic relationship.

In the spring of 2010, the plaintiff was interested in acquiring a residence. A friend of his by the name of Ronald Rivers knew of a property in the Webbwood area that was for sale as a result of a domestic separation that had occurred. After some negotiation, the plaintiff was successful in reducing the asking price from $169,000 to $140,000. An agreement of purchase and sale was entered into between the plaintiff and the vendors John Potvin and Lousie Potvin. The transaction was to have been completed on May 2, 2010. A deposit in an amount of $10,000 was provided by the plaintiff. The property was known municipally as 213 Agnew Lake Road, Webbwood, Ontario (“the property”).

At some point in time, the defendant approached the plaintiff expressing an interest in acquiring a one-half interest in the property. The plaintiff testified that after some discussion, he eventually agreed to do this. He reasoned that if the relationship worked out, they could use the property as a home. If the relationship did not progress, he could fix the property up and sell it for a profit. Although he was in a position to pay cash to acquire the property in his name alone, he would have the funds available for other purposes if the defendant purchased one-half of the property.

Although the defendant owned a home in Barrie, she did not have the funds available to pay for her share of the property at the time that it was acquired. An agreement was reached with the plaintiff that he would loan the defendant the sum of $20,000 to be applied towards the purchase price at the time of closing. In addition, a line of credit in an amount of $50,000 would be arranged to provide the balance of the purchase funds. A friend of the plaintiff with some legal background or training prepared a written agreement between the plaintiff and the defendant. The agreement was signed by the plaintiff and the defendant and witnessed by Edgar Dunn. Jake Caldwell was also present at the time that the parties signed the agreement, although he did not formally witness it.

The plaintiff, Edgar Dunn and Jake Caldwell all testified that the agreement required the defendant to repay the following amounts at the time that she sold her Barrie property:

1. The sum of $20,000 representing the funds advanced by the plaintiff to the defendant to be applied towards the balance due on closing;

2. $50,000 to be paid to pay off the line of credit;

3. $3,000 to reimburse the plaintiff for mortgage payments made by him on the defendant’s Barrie property; and

4. $2,700 to reimburse the plaintiff for repairs made by him to the defendant’s Barrie residence.

The transaction closed and the property was registered in the name of the plaintiff and defendant as joint tenants on June 1, 2010.

The relationship did not progress as hoped. The plaintiff testified that the defendant continued to reside in her home in Barrie. She would come to the property on weekends from time to time, but would always return to her home in Barrie. The plaintiff testified that the defendant drank heavily during the course of these visits. She would then become verbally abusive and occasionally physically abusive towards him.

A few weeks after the property had been purchased, Jake Caldwell moved in as a boarder and lived in the property from June until the end of August 2010. After he moved out, he continued to return to the property to visit with the plaintiff. He confirmed the evidence provided by the plaintiff that very shortly after she arrived, the defendant would begin to drink wine. After doing so, she would pick fights with the plaintiff. Mr. Caldwell observed that the fights were always initiated by the defendant. He stated that the plaintiff would retreat to another room in order to try and avoid the confrontation. At times, the defendant was physically abusive. Mr. Caldwell indicated that at no point in time did he ever see the plaintiff initiate any disagreements nor was the plaintiff ever physically abusive towards the defendant.

In January 2011, steps were taken to increase the line of credit to $125,000. An advance in an amount of $75,000 was taken to pay off the original line of credit, and to permit the defendant to repay the plaintiff the $20,000 that he had loaned to her at the time of closing. The defendant took the balance of $5,000 to deal with her financial needs at the time. This new charge in support of the line of credit was registered on February 18, 2011.

Within a day or two of the new funds being made available, the defendant advised the police that she had been viciously assaulted by the plaintiff. The plaintiff was arrested and released on a condition that he not communicate with the defendant. He was also prevented from returning to the property as the defendant asserted that it was her residence. The evidence at trial indicates that the charges were eventually resolved by having the plaintiff enter into a peace bond. One of the terms and conditions was that he not associate with the defendant and that he remain away from the residence.

After taking sole possession of the property, I find as a fact that the defendant sold the plaintiff’s tools, disposed of much of his furniture and gave away the meat from five hogs that the plaintiff had raised and paid to have slaughtered.

Ronald Rivers and his wife moved into the property on August 1, 2011. They rented it for the sum of $600 per month pursuant to an agreement reached with the defendant. They vacated the property in December 2011.

During the period of their occupancy, the defendant would attend at the property from time to time. She asked Mr. Rivers to advise the authorities that she was living in the property. He refused to do so as this was not true. He indicated that it was a constant hassle when he tried to deal with the defendant as she was usually drunk. Mr. Rivers cited as one example that after cutting and splitting 30 to 40 cords of wood, she refused to pay him.

After Ronald Rivers and his wife moved from the property, the evidence indicates that it remained vacant except for occasional visits by the defendant.

Helen Goodchild and her granddaughter, Cassandra Goodchild, were present at the trial. They were and are the immediate neighbours. They were called to the stand by the plaintiff.

Cassandra Goodchild testified that following the plaintiff’s arrest, the defendant lived at the property for approximately two weeks. She then vacated the property. She left a key so that they would have access to the property. Cassandra Goodchild testified that she inspected the property weekly. One inspection revealed that the roof was leaking and that the kitchen ceiling had been damaged. In addition, the sump pump has failed and water was ankle deep in the basement. This was duly reported to the defendant who arrived at the property about one week later. When the defendant’s efforts to fix the sump pump failed, the evidence indicates that she made no further efforts to take the steps necessary to repair and secure the property. This evidence was confirmed by Helen Goodchild who attended the trial at the request of the defendant.

When the plaintiff became aware of the damage to the property, he contacted the Crown Attorney’s Office to ask that a change be made to permit him to return to the property in order to make the necessary repairs. The evidence indicates that as a result of the defendant’s continued false assertions that she resided there, this request was denied. The result was that when the plaintiff was eventually able to return to the property in the spring of 2013, it was in a devastated state. The defendant had made no arrangements to heat the home during the winter. The portion of the roof that the defendant had not seen fit to repair was leaking with the result that water was infiltrating the house. The kitchen ceiling had collapsed. As a result of the water damage in the basement, mould had developed with the result that it was necessary to remove all of the improvements that had been made in the basement. An estimate in an amount of $62,000 was obtained from First General in order to repair the damage. As the plaintiff did not have the resources to pay this amount, he has done some of the work himself and incurred additional expenses in an amount of approximately $15,000 to address the worst of the damage. Substantial work remains to be done.

Pending the sale of her Barrie residence, the defendant was to have paid the monthly interest payments on the line of credit. Although she made such payments initially, she stopped making the payments in late 2012 or early in 2013. As a result of this, the plaintiff received written notice that unless he brought the mortgage into good standing within 10 days, and maintained the mortgage in good standing, the bank would repossess and sell the property. The plaintiff paid the arrears. Since that time, he has made the required monthly payments. The plaintiff currently makes monthly payments of $500. The balance outstanding under the line of credit as of January 2015 is $72,691.

An opinion of value was obtained in April 2014. The estimated value of the property at that time in “as is” condition was $110,000.

The plaintiff believes that the defendant sold her Barrie property approximately two years ago. The defendant has made no effort to provide the plaintiff with any of the sale proceeds.

After the plaintiff had recovered possession of the property, he was contacted by the Crown Attorney’s Office to see if the defendant could attend at the property to pick up her personal effects provided the defendant attended with a police escort. The plaintiff agreed. The defendant attended unannounced and without a police escort. As it happens, at least one independent witness was present. As a result of comments made by the defendant at that time, she was charged with uttering a death threat directed at the plaintiff.

The plaintiff was recently served with a notice of application returnable on January 13, 2015, in the Superior Court of Justice in Brampton, Ontario. The application seeks an order for the sale of the property pursuant to the provisions of the Partition Act, R.S.O. 1990, Chapter P.4.

It is against this factual background that the matter is to be decided.

Analysis

The plaintiff seeks to obtain a declaration that he is the sole beneficial owner of the property free of any claim by the defendant. He makes this request based upon the fact that the defendant has effectively contributed nothing towards the acquisition, maintenance, or improvement of the property. Beyond this, the defendant’s efforts to exclude the plaintiff from the property and her failure to maintain it as any reasonable person would do, have resulted in significant damage to the property with the result that it is now worth substantially less than the amount that was paid to acquire it.

Resulting Trust

Equity will impose a resulting trust in circumstances where the purchase proceeds are provided by one party, but title to the property is taken in the name of another. The presumption of resulting trust does not arise in circumstances where it is clear that a gift was intended. The presumption of resulting trust is rebuttable on an appropriate set of facts. In such case, the donor’s intention at the time of the conveyance is a question and fact to be determined based on the whole of the evidence.

In this particular case, the plaintiff says that he provided all of the purchase proceeds. This is true to the extent that the amounts that were not borrowed at the time of closing came from the plaintiff’s funds, but it ignores the fact that the balance of the purchase price to be paid by the defendant was provided by way of a $20,000 loan from the plaintiff and a $50,000 loan from a line of credit.

The issue remains to be determined in accordance with the agreement that was reached and reduced to writing by the parties. The plaintiff asserts that he does not have a copy of this agreement as the defendant took or destroyed all his personal papers when she had sole possession of the property following his arrest. The spoliation of this agreement, that is to say, its destruction or concealment by the defendant, permits the court to assume that such evidence in this case would be unfavourable to the defendant.

The agreement was prepared by a friend of the plaintiff who, although she may have had some legal training, was not a lawyer. Although the agreement specified the amounts to be paid by the defendant and the timing of such payments, the plaintiff conceded that the agreement was silent on any remedy that would exist if the defendant failed to honour the agreement.

The plaintiff had sufficient funds to pay cash at the time of closing, so it was not as a matter of financial need that he entered into this arrangement with the defendant.

The plaintiff is an unsophisticated individual who did not have the benefit of proper legal advice at the time that the written agreement was entered into. After careful consideration of all of the evidence, I am satisfied that the parties did not have an expectation or intention that the defendant would have a beneficial ownership interest in the property until such time as she had paid for her share.

The defendant has not done this. Apart from a few interest payments that she made on the line of credit, and perhaps some very limited occupancy costs, the defendant has contributed nothing towards the acquisition, maintenance or improvement of the property. As previously stated, her actions are such that she failed to take reasonable steps to protect the property with the result that repair costs in excess of $62,000 now need to be incurred.

After the line of credit was increased to $75,000, it is true that the $20,000 loan from the plaintiff to the defendant has now been satisfied, but the plaintiff is now responsible for repayment of this amount as it comprises part of the $75,000 line of credit that he is now responsible for. It is also true that the plaintiff is now responsible for the additional $5,000 that was obtained and used by the defendant.

When all is said and done, not only did the defendant not pay anything for the acquisition, maintenance or improvement of the property, she withdrew $5,000 of the equity from it and reduced the value of the property by approximately $62,000, the estimated amount required to repair the damage caused by the defendant’s neglect.

Given this background, I am satisfied and find as a fact that the plaintiff has provided and is responsible for the entire purchase price (and beyond, given my previous comments). Accordingly, it is appropriate that I apply the doctrine of resulting trust and declare that the plaintiff is the sole beneficial owner of the property.

Constructive Trust

If I am wrong in the application of the doctrine of resulting trust, I now turn to a consideration of the imposition of a constructive trust.

Black’s Law Dictionary, 9th Edition, defines “constructive trust” as follows:

An equitable remedy that a court imposes against one who has obtained property by wrongdoing. • A constructive trust, imposed to prevent unjust enrichment creates no fiduciary relationship.

The doctrine had its origin in circumstances where property was obtained by a wrongful act of the defendant, such as a breach of a fiduciary obligation or breach of a duty of loyalty. This is the approach that has traditionally been taken in England.

The doctrine has been expanded in the United States and Canada to also be imposed in situations where a defendant would be unjustly enriched if a constructive trust were not to be imposed. In Soulos v. Korkontzilas, 1997 346 (SCC), [1997] 2 S.C.R. 217, the majority found that constructive trusts may be imposed “where good conscience so requires”. McLachlin J. described the “good conscience” requirement for the imposition of constructive trusts as follows:

[34] It thus emerges that a constructive trust may be imposed where good conscience so requires. The inquiry into good conscience is informed by the situations where constructive trusts have been recognized in the past. It is also informed by the dual reasons for which constructive trusts have traditionally been imposed: to do justice between the parties and to maintain the integrity of institutions dependent on trust-like relationships. Finally, it is informed by the absence of an indication that a constructive trust would have an unfair or unjust effect on the defendant or third parties, matters which equity has always taken into account. Equitable remedies are flexible; their award is based on what is just in all the circumstances of the case.

[35] Good conscience as a common concept unifying the various instances in which a constructive trust may be found has the disadvantage of being very general. But any concept capable of embracing the diverse circumstances in which a constructive trust may be imposed must, of necessity, be general. Particularity is found in the situations in which judges in the past have found constructive trusts. A judge faced with a claim for a constructive trust will have regard not merely to what might seem “fair” in a general sense, but to other situations where courts have found a constructive trust. The goal is but a reasoned, incremental development of the law on a case-by-case basis.

[36] The situations which the judge may consider in deciding whether good conscience requires imposition of a constructive trust may be seen as falling into two general categories. The first category concerns property obtained by a wrongful act of the defendant, notably breach of fiduciary obligation or breach of duty of loyalty. The traditional English institutional trusts largely fall under but may not exhaust (at least in Canada) this category. The second category concerns situations where the defendant has not acted wrongfully in obtaining the property, but where he would be unjustly enriched to the plaintiff’s detriment by being permitted to keep the property for himself. The two categories are not mutually exclusive. Often wrongful acquisition of property will be associated with unjust enrichment, and vice versa. However, either situation alone may be sufficient to justify imposition of a constructive trust.

[39] Canadian courts also recognize the availability of constructive trusts for both wrongful acquisition of property and unjust enrichment. Applying the English law, they have long found constructive trusts as a consequence of wrongful acquisition of property, for example by fraud or breach of fiduciary duty. More recently, Canadian courts have recognized the availability of the American-style remedial constructive trust in cases of unjust enrichment: Pettkus v. Becker, supra. However, since Pettkus v. Becker Canadian courts have continued to find constructive trusts where property has been wrongfully acquired, even in the absence of unjust enrichment. While such cases appear infrequently since few choose to litigate absent pecuniary loss, they are not rare.

[43] I conclude that in Canada, under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation. While cases often involve both a wrongful act and unjust enrichment, constructive trusts may be imposed on either ground: where there is a wrongful act but no unjust enrichment and corresponding deprivation; or where there is an unconscionable unjust enrichment in the absence of a wrongful act, as in Pettkus v. Becker, supra. Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attained, as time and experience may dictate.

According to Halsbury’s Laws of Canada, “institutional trusts are frequently employed to deter wrongful behavior, and remedial trusts are more frequently employed to return property to its rightful owner.” See Halsbury’s Laws of Canada, “Trusts”, 1st ed. (Markham: Lexis Nexis 2011 at HTR-52.

In Pettkus v. Becker, 1980 22 (SCC), [1980] 2 S.C.R. 834, the Supreme Court of Canada indicated that unjust enrichment is the principle lying at the heart of the constructive trust. The requirements to establish unjust enrichment are:

1. an enrichment;

2. a corresponding deprivation; and

3. the absence of any juristic reason for the enrichment.

In this particular case, the enrichment consists of the defendant’s one-half ownership interest in the property.

The corresponding deprivation involves the defendant’s failure to honour her obligations to pay for her interest in the property. Beyond this, she was enriched in an amount of $5,000 for her own use when the line of credit was increased. The plaintiff remains entirely responsible for the amounts to have been paid by the defendant to acquire an interest in the property by virtue of the fact that the line of credit is secured by way of the charge against the property. The plaintiff’s responsibility to now fulfill the defendant’s financial obligations constitutes the corresponding deprivation.

The plaintiff is currently paying the sum of $500 per month to reduce the line of credit. With each and every payment made by the plaintiff on the line of credit, the defendant is unjustly enriched and the plaintiff suffers a corresponding deprivation to the extent of such payment absent the imposition of a constructive trust.

The situation is compounded by the fact the defendant failed to act as a reasonable and prudent owner or occupier would do by failing to take steps to keep the property in good repair and, the property having fallen into disrepair, taking the appropriate steps to protect the property. As previously mentioned, the repair costs are estimated to exceed $62,000. To the extent that the plaintiff has been and will be, called upon to pay the costs of repair and remediation, there would be a further enrichment on the part of the defendant to the corresponding deprivation of the plaintiff.

There is no juristic reason for the enrichment in this case.

I am satisfied that the requirements to establish unjust enrichment of the defendant exists and that the appropriate remedy is to impose a constructive trust on the defendant in favour of the plaintiff for the defendant’s entire ownership interest in the property.

Conclusion

I declare that the plaintiff is the sole beneficial owner of the property know municipally as 213 Agnew Lake Road, Webbwood, Ontario, and legally described as follows:

PIN 73390-0095(LT)

PCL 29826 SEC SWS SRO; PT LT 8 CON 1 SHAKESPEARE PT 1 & 2

53R13896; S/T LT249191; SABLES–SPANISH RIVERS.

Existing Encumbrances

REG. NUM.

DATE

INSTRUMENT TYPE

PARTIES TO

SD193089

2011/02/18

Charge

The Toronto-Dominion Bank

SD257780

2013/08/27

Lien

Legal Aid Ontario

SD258526

2013/09/06

Charge

Arseneau Poulson, Arseneau, Leo Paul

SD278567

2014/08/15

Lien

Legal Aid Ontario

This declaration in no way currently affects the validity or enforceability of these encumbrances. Having said that, this decision is without prejudice to the plaintiff’s ability to bring an action or application seeking a determination as to the validity and enforceability of the various encumbrances.

In accordance with oral reasons rendered, order to go:

1. I declare that the plaintiff is the sole beneficial owner of the property known municipally as 213 Agnew Lake Road, Webbwood, Ontario, and legally described in Property Identifier Number 73390-0095 (LT) for land registry office # 53 as follows: PCL 29826 SEC SWS SRO; PT LT 8 CON 1 SHAKESPEARE PT 1 & 2, 53R13896; S/T LT249191; SABLES-SPANISH RIVERS, free from any right, title or interest of the defendant;

Costs

2. The defendant shall pay to the plaintiff partial indemnity costs fixed in an amount of $14,000, inclusive of disbursements and HST. This amount includes the sum of $3,000 ordered to be paid by Poupore J. on September 10, 2014;

3. This declaration does not affect the validity or enforceability of the following encumbrances registered against the property as follows:

SD193098 – charge – to Toronto-Dominion Bank

SD257780 - lien - Legal Aid Ontario

SD258526 - charge - Arseneau Poulson

SD278567 – lien - Legal Aid Ontario

4. This judgment is without prejudice to the plaintiff bringing an action or application to challenge the validity and enforceability of the liens and encumbrances detailed in the preceding paragraph, or any other lien or encumbrance created by the defendant;

5. Approval of the order by the defendant is hereby dispensed with.

FORM 2

Certificate of Transcript

Evidence Act, Subsection 5(2)

I, Margaret Graham, certify that this document is a true and accurate transcription of the recording of Rattu v. Abreu in the Superior Court of Justice held at 155 Elm Street, Sudbury, Ontario taken from Recording No. 4099_CrtRmJ_20150108_094113__10_CORNELD.dcr which has been certified in Form 1.

March 28, 2015 “Margaret Graham”

(Date) (Signature of authorized person)