Henderson v. Wright, 2015 ONSC 3124

ONTARIO

SUPERIOR COURT OF JUSTICE

CITATION: Henderson v. Wright, 2015 ONSC 3124

COURT FILE NO.: CV-13-1045

DATE: May 19, 2015

B E T W E E N:

JOHN ROY HENDERSON

Clinton H. Culic for the Plaintiff

Plaintiff

• and -

MURIEL EVELYN WRIGHT

Robert D. Hammond, for the Defendant

Defendant

HEARD: March 10, 11 and 17, 2015

REASONS FOR DECISION

James J.

1This case involves a determination of the proper character of monthly payments by the plaintiff and his wife to the plaintiff’s mother in law, the registered owner of the home in which the plaintiff and his family lived and whether the doctrine of proprietary estoppel is applicable in the circumstances.

2The plaintiff married the defendant’s daughter, Delores, in 1988. They have two children, Brad and Laura. They separated in 2013. Sometimes I will refer to the plaintiff and his wife Delores collectively as the Hendersons.

3The defendant in this case is a retired assessment clerk who worked for the provincial government. She has another daughter, Diane, two children in all. She separated from her husband when the girls were in their teens, shortly before Diane went away to college. In or about 1990, the defendant’s father died and left her an inheritance of about $42,000.

4In 1991, when Brad was a baby, the Hendersons lived in an apartment.

5The defendant purchased a house at 1351 Alwington St. in Brockville for them to live in. It was registered in the defendant’s name alone.

6The purchase price was $108,000 which composed of a down payment of $55,000 and a mortgage of $53,000. The monthly mortgage payments were $465.20.

7The terms of the arrangement between the plaintiff and the defendant relating to the purchase and ownership of the property are disputed. The plaintiff says that although the house was initially placed in the defendant’s name, it was supposed to be transferred to the plaintiff and his wife when the mortgage was paid off. The defendant says it was always a pure rental situation.

8From the beginning, the Hendersons made regular monthly payments to the defendant. The plaintiff said they were paying the mortgage, taxes and insurance in the guise of rent. The defendant says the Hendersons knew they were paying rent. Whatever you call these monthly payments, the parties agree that they were composed of the aggregate of the mortgage payment, realty taxes and fire insurance, calculated monthly.

9Initially the payment was $650 per month.

10The mortgage holder was paid by way of payments from the defendant, that is, they came from an account in the sole name of the defendant at the Royal Bank. The evidence disclosed that the monthly payments by the Hendersons were deposited into this Royal Bank account. The account may have changed over time but the same basic arrangement remained in place. The Hendersons paid the defendant and the defendant paid the mortgage, taxes and insurance.

11The defendant made several large annual lump sum mortgage payments totalling about $38,000. These payments were in addition to the regular monthly payments.

12The mortgage was paid off in 1998, seven years after the property was purchased.

13The “rent” was reduced after the mortgage debt was paid in 1998 by an amount approximately equal to the previous monthly mortgage amount. This meant that after the mortgage debt was paid off, the monthly rent in subsequent years was quite low, something like $350 per month.

14The plaintiff said he was not aware that the mortgage had been paid off until 2004. He said that he learned this fact by inquiring of Delores as to when the mortgage would be paid off. She told him that it had been paid off in 1998. He was upset to learn this fact because he said he had been providing $500 per week cash to his wife to cover the mortgage payments, taxes and insurance. He said his employment income was paid in cash and he gave $500 per week to his wife who looked after paying all the bills. The plaintiff emphasized that his weekly payments were dedicated to paying for the house. Ms. Henderson acknowledges that the plaintiff gave her $500 each week but said that the money was for living expenses, not just housing costs.

15The plaintiff does not seem to have been aware of the amount paid monthly to the defendant. It was Ms. Henderson, not the plaintiff, who looked after the family finances.

16The Hendersons separated in 2013 but their relationship had been in difficulty for at least a few years before that.

17At the time of separation, the Hendersons had been making monthly payments to the defendant for over 20 years.

18Ms. Henderson moved out of the family home on Alwington St. and into a home purchased for her by the defendant who is the registered owner. Ms. Henderson said she is a tenant and pays rent to her mother.

19The plaintiff refused to vacate the Alwington St. house. His position was that while title is in the defendant’s name, the Hendersons are the actual owners. For about ten months after Ms. Henderson moved out, the plaintiff did not make any payments to the defendant. The defendant says there is $3,750 owing in unpaid rent.

20This action was precipitated by a landlord-tenant application by the defendant to evict the plaintiff.

21There are two basic issues. Firstly, was there an agreement between the plaintiff and the defendant when the property was purchased, as alleged by the plaintiff, that the defendant would provide the down payment, the Hendersons would pay the mortgage and the expenses of occupancy and when the mortgage was paid in full, the property would be theirs. Implicit in this position is the contention that the defendant intended to make a gift to the Hendersons of the amount paid as a down payment.

22Secondly, even if there was no explicit agreement, do the particular circumstances present here make it unjust for the defendant to keep the property without any right, interest or compensation accruing in favour of the Hendersons, or more particularly, the plaintiff.

23The determination of these issues will require that I make factual findings based on conflicting testimony. I have to determine what allegations I will accept and what allegations I am not prepared to accept. Fact finding in the face of contradictory evidence involves assessing the credibility of witnesses. Generally speaking, the assessment of credibility involves observing witnesses as they give their evidence, considering conflicting evidence in relation to known facts, determining the presence or absence of inconsistencies and determining the presence or absence of corroborating evidence. This is not a complete list of factors to be taken into account. I may accept some, none or all of a witness’s testimony. The standard of proof is on a balance of probabilities.

24I will now turn to a consideration of the first issue—was there an explicit agreement?

25The plaintiff says that he and his wife were interested in purchasing a home after the arrival of their first child. He thought their price range was under $100,000. They became aware of the house on Alwington Street. Ms. Henderson liked the house; the plaintiff was reluctant because at $108,000, he thought it was more than they could afford. He was prepared to defer purchasing a house at that time and to continue saving for another year so they could afford a more expensive house.

26The plaintiff said that the defendant offered to help them purchase the Alwington property. He said they discussed the details of the proposed transaction outside the lawyer’s office in July, 1991 where they were to sign the offer to purchase. This was a private sale and the lawyer acting on the purchase, Mr. Hain, had prepared an offer for signature. The plaintiff told the defendant that he had $15,000 to contribute to the down payment. The defendant said he could pay $5,000 towards the down payment and use the remaining $10,000 for improvements once the property was purchased. The plaintiff said it was clear that the defendant intended to make a gift of the down payment amount and that when the mortgage was paid, the house would belong to the plaintiff and his wife. He was apprehensive about the title being only in the defendant’s name. When they finished their discussion outside the lawyer’s office, the defendant asked the plaintiff if he was going to come in with her to see the lawyer, to which the plaintiff responded that if he didn’t have to sign anything, he didn’t need to participate in the meeting and he didn’t go in with her. It appears that Ms. Henderson accompanied the defendant to the appointment with Mr. Hain because her signature appears on the offer as a witness to the signature of the defendant but the plaintiff says she was not present for the discussion outside the lawyer’s office.

27The defendant’s version of this sequence of events is substantially different. She testified that in 1991 she was still working at the assessment office. She received an inheritance around this time of about $42,000. She had invested in real estate before and had made a profit on the transaction. She was open to the possibility of making another real estate investment.

28The house purchase in question here was initiated when the defendant’s daughter asked her to consider buying a property that the Hendersons could live in.

29The two women looked at a few properties together.

30Ms. Henderson located a property at 1351 Awlington that looked like a good prospect. She went through the property more than once, maybe several times. It was a private sale.

31The defendant never viewed the interior but she checked the records for this property in the assessment office and spoke with some friends who knew the house and its owners.

32The defendant had Mr. Hain prepare an offer and she signed it in July, 1991. Her daughter went to the lawyer’s office with her and signed as the witness. The offer was accepted and the deal was scheduled to close in September. Contrary to the evidence of the plaintiff, the defendant said that the plaintiff did not accompany them to Mr. Hain’s office that day.

33Delores Henderson said that the plaintiff never viewed the property prior to closing.

34The defendant said her intention was to make a real estate investment that offered the possibility of making a profitable return and that would provide the Hendersons with a nice place to live at a favourable rent.

35The defendant established what the rent would be--namely the monthly mortgage payment of about $465 plus realty taxes and insurance.

36The defendant specifically denied ever suggesting to the plaintiff that she intended to make a gift of the amount she paid as a down payment, or that she ever promised or even discussed transferring the property to the Hendersons when the mortgage was paid. On the issue of the $5,000 contribution from the Hendersons, the defendant said she accepted this payment as a way of reducing the monthly mortgage payments and thus the rent. She said she spoke with her brother, who worked as an auditor, respecting the impact of this contribution on the amount of the monthly mortgage payments and he told her that an additional $5,000 towards the down payment would have the effect of reducing the mortgage payments by about $85 monthly. It seemed like a worthwhile step to take.

37If this testimony is true, then from the time of purchase in 1991 until the mortgage was paid off in 1998, the total benefit derived from an $85 reduction in the monthly payment would have been around $7,000. This evidence leads to another consideration. With interest rates at 9%, investing the $5,000 in a GIC would have generated a similar return, so maybe there was no advantage to the plaintiff in contributing the $5000 as suggested by the defendant. However, the plaintiff, who was paid “under the table”, said he kept his money in a safe at home, so investing the money may not have been a realistic alternative.

38I have concluded that there was never a discussion between the plaintiff and the defendant as alleged by the plaintiff where the defendant promised to make a gift of her portion of the down payment and to transfer the property to the Hendersons when the mortgage was paid.

39I come to this conclusion for the following reasons.

40There is an unexplained question as to why, in his version of events, the defendant didn’t just give the Hendersons a cheque for the down payment and let them complete the purchase in their names. Why was it necessary for the property to go into the defendant’s name if all subsequent payments were to be paid by the Hendersons? It seems unusual that the defendant would make such a generous gift to her daughter and son-in-law yet keep the property in her name if she never intended to be the owner. After all, being obligated under the mortgage brought an element of risk. She would have to pay the mortgage debt even if the Henderson’s defaulted on their payments. Why assume this risk if you never intended to own the property?

41I question why the plaintiff did not go with the defendant into the lawyer’s office the day they were there for the defendant to sign the offer on the house. He had misgivings about the property going into her name. He said she talked him into allowing that to happen. They were there with her outside the lawyer’s office when they made the deal he described. It would be reasonable for him to accompany her to the meeting, if only to get their agreement on the record in the presence of the lawyer who was looking after the transaction. He had nothing in writing. This would be a good opportunity to have a witness.

42I note that as a student, the plaintiff attended the business program at St. Lawrence College although there was no evidence detailing the specific course he took or whether he completed the program. He grew up in a family that owned a printing business. I infer that he has at least a basic education and some familiarity with business principles and transactions.

43In addition, he did not prepare a memorandum or send a confirming letter to the defendant as to what the deal was. There was no evidence of any contemporaneous documentation to support his allegations.

44If the transaction was as described by the plaintiff, it is puzzling that when the plaintiff learned that the mortgage had been paid, why did he not confront the defendant or make an issue of the fact that the property was supposed to be transferred as previously agreed. The evidence is that the plaintiff did nothing when he found out the mortgage had been paid off. This inaction on his part is inconsistent with his version of events.

45Also, if the defendant actually intended to make a gift of the down payment, approximately $48,000, did she also intend to make additional gifts each time she made a lump sum payment on the mortgage? These payments amount to an extra $38,000. If the property was supposed to be transferred to the Hendersons when the mortgage was paid off, the implication is that these additional payments were gifts too, making the new total something in excess of $80,000. The plaintiff failed to explain how these extra payments were consistent with his version of events.

46I will now turn to an assessment of the defendant’s evidence in relation to the conflicting evidence of the plaintiff.

47I begin by noting that the defendant had previously owned an investment property and her purchase of 1351 Awlington was not the first time she had bought a house as an investment.

48In 1991 the defendant was still working. There was no evidence that the defendant enjoyed substantial wealth which would help explain the large financial gift asserted by the plaintiff.

49The plaintiff suggested the defendant wanted to make a gift of the down payment as a way of compensating for the fact that the defendant paid for a university education for Diane Moore, the defendant’s other daughter. Ms. Moore was called as a witness. She testified that she obtained a BEd degree and now works as an elementary school teacher. She said her parents did not make a substantial financial contribution to her post-secondary education costs.

50The documentary record is consistent with the defendant’s evidence. The Hendersons claimed an Ontario tax credit annually for the rental payments. The defendant reported the payments by the Hendersons as rental income on her tax return as well.

51I acknowledge that it is unusual for a renter to make a $5,000 payment to help his landlord with the purchase price yet everyone agrees that the Hendersons paid $5,000 to the defendant as a contribution to the down payment. This undisputed fact is an important element of the plaintiff’s case. He says it corroborates the contention that this was no ordinary rental arrangement. The defendant said she accepted this payment as a contribution to keeping the rent low. She said it had the effect of reducing the mortgage debt and therefore the monthly payments.

52The fact that this payment was made is insufficient to persuade me that I should accept the plaintiff’s evidence in preference to that of the defendant. The defendant’s explanation for accepting the payment is plausible and the connection between this payment and the reduction in the monthly mortgage payments was demonstrably beneficial to the plaintiff.

53I would also like to refer to the emails sent by Delores Henderson to the plaintiff as their relationship was coming to an end in 2012. In several emails Ms. Henderson refers to the possibility of selling the house or paying the plaintiff to get him to agree to leave. Firstly and most importantly, these emails were not authored by the defendant. They are not binding on the defendant. There is no evidence that the defendant was party to, or in agreement with, what was being discussed or proposed.

54The plaintiff points to these emails as evidence that his wife knew they were supposed to get the house and that she has changed her evidence now that they have separated and she is living in a house that she rents from the defendant.

55Ms. Henderson said that the difficulties in the marriage and in communicating with the plaintiff prompted her in the emails to try to get a position or response from him on the terms of separation. She said she was desperate to get the plaintiff’s input or some sort of reaction from him. She proposed various possibilities to the plaintiff, including a payment for the house, none of which she said she had discussed with the defendant. She said the plaintiff never responded. I accept this evidence.

56The plaintiff also relies upon his wife’s statement to their son who, upon inquiry about the ownership of the house, was told words to the effect that “it’s complicated, it’s our house but it’s in gramma’s name.”

57It does not take a great leap on the available evidence to infer that there was a distinct possibility that the Hendersons would inherit the house. They had lived there for over 20 years. They had contributed all the money necessary to cover the monthly mortgage payments. They spent money improving the property, for example, installing a backyard pool and performing landscaping. The plaintiff was married to the defendant’s daughter and the defendant’s grandchildren had grown up in this house.

58Relevant to this issue is the defendant’s evidence that in or about 1991 she made a will giving all her property to her two daughters, Delores and Diane. The defendant testified that she had specifically discussed this with the plaintiff not long after they had moved into the Alwington St. house. She said she recalled being in the backyard with the plaintiff. She mentioned to him that someday the house would belong to Delores. The plaintiff asked when “someday” was. She replied that “someday” would be after she died.

59The important point here is that these possibilities were in the future. I reject the contention that there was a firm agreement between the plaintiff and the defendant granting the plaintiff an interest in the property beyond that of a tenant.

60I will now turn to a consideration of the second issue. The plaintiff frames this claim on the equitable remedy of proprietary estoppel. Three elements must be established:

(1) the owner of the land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the property;

(2) in reliance upon his belief, the claimant acts to his detriment to the knowledge of the owner; and

(3) the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive;

61In determining whether a party has suffered a detriment, any countervailing benefits may also be considered. Reliance may be express or inferred. Where the doctrine is successfully argued, the court has a broad discretion to fashion an appropriate remedy.

62Did the defendant encourage or induce the plaintiff to act to his detriment? The plaintiff points to the disputed evidence that the defendant promised him that she would transfer the property when the mortgage was paid. I have already made a finding that I do not accept the plaintiff’s evidence on this point. I accept the defendant’s evidence that she wanted to make an investment and help her daughter and her daughter’s family at the same time.

63But the inquiry does not end there. Is there something in the circumstances here that allowed the plaintiff to reasonably conclude that he has a compensable interest in the house, even where no direct promise was made by the defendant? For example, what about the plaintiff’s evidence regarding the $10,000 he had at the time the property was purchased and that he says he used to make upgrades to the property immediately after the defendant purchased the property. Also the plaintiff said that they made several subsequent expenditures including a pool and landscaping over the years they occupied the house. Ms. Henderson confirmed that they paid for the pool and landscaping although there was no evidence of the actual cost of these upgrades.

64The plaintiff said that even though an invoice may be in the name of the defendant or that there is evidence that the defendant paid an invoice, the defendant was re-imbursed in cash. As for the defendant, she had detailed records of the amounts she said she spent including the cheque register for all the payments she made, complete with date, amount and payee. She said that with respect to her list of expenditures, on occasion the Hendersons may have paid for an item initially but the defendant re-imbursed her daughter in each case but the reverse was not true. She did not receive cash re-imbursement for items that she wrote a cheque for.

65The plaintiff has little by way of corroboration respecting money he said he paid. On the issue of the funds that the plaintiff says he had available in 1991, about $15,000, there is no conclusive documentary evidence that he had that amount of money at that time. The plaintiff and his father testified that these funds came from a loan that was repaid by the plaintiff’s father to the plaintiff in 1987 or 1988. This was three or four years before the house purchase. Everyone agrees the Hendersons had $5,000 to contribute to the purchase of the Awlington St. house in 1991 but Ms. Henderson disputed the plaintiff’s evidence that they made immediate substantial expenditures after they moved in.

66The plaintiff also points to the surrender of an insurance policy as a source of about $20,000 in or about 2003. Ms. Henderson said she thought the amount involved was about $12,000. The 2013 email from an investment planner and attached circular from Canada Life tendered by the plaintiff as documentary corroboration provides little insight into the amount actually received. In the email the investment planner noted that the entire amount would be subject to capital gains because the shares had a zero cost base. Ms. Henderson testified she recalled a reassessment by CRA a few years later because the gain had not been declared. I do not find the plaintiff’s evidence very persuasive on either how much he says he had available to spend on household improvements and how much was actually spent.

67Was there an inducement or some form of encouragement flowing from the defendant that led the plaintiff to reasonably expect some benefit accruing to him beyond that of a mere tenant? I would say no. I find that there were no dealings, representations or inducements on the part of the defendant that satisfy the first requirement of the remedy. In my view, the statement by the defendant that someday the house would belong to Ms. Henderson after the defendant died falls far short of what is required to be proved to satisfy the first element of proprietary estoppel.

68Moreover, the fact that the Hendersons paid rent for twenty years plus does not itself create a right or benefit. Should the situation be different if the landlord is a relative? Over the years the plaintiff developed an expectation that the Hendersons should own the property. It appears to me that a combination of a) money contributed to the deposit, b) money spent on the property (whatever the amount) in the ensuing years following the purchase, c) monthly payments over a long period of time, and d) the relationship of the parties, came together in the plaintiff’s mind as the basis of a compensable interest.

69I will now turn to a consideration of the second element for proprietary estoppel, that is, a detriment to the claimant. I would hold that the Hendersons got value for their $5,000 contribution because the rent was lower as a result. In addition, especially after the mortgage was paid, the rent charged by the defendant appears to have been significantly below market rates. I would add here that the evidence showed that the market rent in recent years was in excess of $1,000 monthly but the actual monthly amount paid by the Hendersons was hundreds of dollars less. In my view this qualifies as a countervailing benefit.

70Also, it is not clear to me the Hendersons would ever have been able to purchase a similar home on their own. The evidence disclosed that the plaintiff often worked for cash, with little or no proof of income, and that there were periods of unemployment and underemployment for both the plaintiff and Ms. Henderson. Obtaining mortgage financing without steady, fulltime employment and demonstrated income can be challenging.

71In addition, as indicated previously, the evidence is not clear respecting how much the Hendersons actually spent on maintenance and upgrades over the years although I acknowledge that the Hendersons spent some amount on the house. Even in an arm’s length landlord/tenant relationship, it would not be unusual for a tenant to make expenditures for the better enjoyment of property where the arrangement is long term and the rent is significantly below market rates.

72Lastly, where the plaintiff’s evidence conflicts with the defendant on who actually paid for particular items, I prefer and accept the evidence of the defendant. The defendant’s evidence is better documented and is corroborated by Ms. Henderson.

73The third necessary element is the presence of an “unconscionable taking advantage” by the defendant. If one removes from consideration the allegations of a promise by the defendant to make a gift of the down payment and to transfer the house after the mortgage was paid, allegations I have rejected as not credible, I see nothing unconscionable in the circumstances here. On the facts as I have found them, what is left is a grandmother who wanted to make an investment and help her daughter and son-in-law acquire a nice place to live at a favourable rental rate.

74There is cross-examination evidence that the defendant has given consideration to the possibility of making a compensating payment to the plaintiff in the unfortunate circumstances that have come to pass on the facts of this case. After contributing $5,000 to the purchase price and twenty years of monthly payments, the Hendersons’ marriage broke down and the family split apart. Ms. Henderson lives elsewhere in a house purchased by the defendant. The plaintiff has nothing to show for the lengthy period of time the Hendersons lived in the Alwington St. house while at the same time the defendant’s investment in the property has increased in value. This is counterbalanced to some extent by the difficulties experienced by the defendant due to the plaintiff’s non-cooperation when she tried to sell the house, together with the evidence of deferred maintenance subsequent to Ms. Henderson moving out. If the defendant believes some compensation to the plaintiff is warranted, it is a personal choice, not a legal requirement.

Disposition

75The plaintiff’s claims are dismissed.

76This court declares that the relationship between the plaintiff and the defendant in relation to the Alwington Street property is that of tenant and landlord.

77The defendant shall have judgment against the plaintiff for the sum of $3,750 for unpaid rent.

78Regarding costs, the defendant shall deliver a costs outline and bill of costs within two weeks and the plaintiff shall have two weeks to respond.