Johanson v. Hinde, 2015 ONSC 5878

COURT FILE NO.: 35/38/013355/12

DATE: 2015-09-22

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LYNN ANNE JOHANSON

Applicant

– and –

VIRGINIA ANNE HINDE

Respondent

Mark A. Simpson, Counsel for the Applicant

Virginia Hinde, Self-Represented

HEARD: March 30, 31, April 1, 2, and May 19, 2015

REASONS

OVERVIEW

1Lynn Johanson and Virginia Hinde lived together for approximately 32 months. They were married for 20 of those 32 months. During their time together, they acquired and renovated two houses in addition to the home that Hinde already occupied.

2It is sometimes said that married couples should never wallpaper together; working together on home projects can test even the strongest relationships. In this case, the test proved too much for their marriage. At the end of their relationship, they were left with three properties, debts and the opportunity to turn a tidy profit. Unfortunately, they missed the opportunity to reap the reward from their hard work and investment. Each points the finger at the other as the one responsible for that outcome.

3The trial in this matter focused on two principle issues: whether the parties had entered into a binding settlement agreement and, if not, whether an unequal division of net family property was warranted pursuant to section 5(6) of the Family Law Act.

FACTS

The Parties

4The Applicant, Lynn Johanson (hereafter “Johanson”), was born in 1957. In early 2007, she owned a home in Taos, New Mexico on Beauty Lane. She now resides in New Port Richey, in Florida. She worked for many years in the movie and television industry in the United States from which she managed to accumulate some savings and investments as of early 2007.

5The Respondent, Virginia Hinde (hereafter “Hinde”), was born in 1964. In early 2007, Hinde was a co-owner of a small retail business in Sarnia called “Screen Printz”. She owned and operated that business with Diane Robb with whom she had a romantic relationship between 1996 and approximately 2004. In addition to Screen Printz, Hinde also purchased Internet domain names in the United States and did some web design.

6Neither Johanson nor Hinde were previously married. They met online in the early part of 2007. In April, 2007, Johanson travelled to Sarnia to meet Hinde to further their online relationship. She initially stayed at a hotel in Sarnia but soon began staying with Hinde at her home at 1992 Strathuron Street in Bright’s Grove, Ontario (hereafter “the 1992 property”) when she visited. They began cohabiting in June, 2007 and married on June 20, 2008.

The 1992 Property

7Hinde purchased the 1992 property in 1996 for approximately $83,000. She was then in a relationship with Robb. In 1999, their business was experiencing significant financial difficulties which led Hinde to file for bankruptcy, although Robb did not. Title to the property was transferred to Hinde’s brother, who continued to hold title until 2007. This arrangement permitted Hinde to continue to live in the home. Hinde was responsible for paying the monthly mortgage payments.

8On June 29, 2007, Johanson and Hinde acquired title to the 1992 property from Hinde’s brother. The stated purchase price was $80,100 according to their solicitor’s reporting letter dated July 16, 2007. Johanson advanced the closing funds to the lawyer by wire transfer from her account with People’s Bank. She received a refund of $4,299 from the lawyer as a result of closing adjustments and the exchange on the funds provided by Johanson in U.S dollars.

9The monies advanced for the purchase by Johanson were used to pay off the existing mortgage. Johanson paid the amount required to obtain the discharge so that Hinde’s monthly cash-flow would be improved. This was Johanson’s idea, one which she pursued soon after she moved into the 1992 property.

10Although the stated purchase price was $80,100, there was subsequent recognition by Johanson that the 1992 property was worth more at the time, and that difference was Hinde’s equity. In a December 31, 2012 email to Hinde, Johanson wrote: “…you had $60,000 something in equity in 1992….”

Payment to Diane Robb

11On July 1, 2007, only two days after the transfer of title, Johanson paid $21,500 to Diane Robb by cheque drawn on her People’s Bank account. She did so at Hinde’s request. The memo line of the cheque indicates “pay off”. Johanson testified that she was approached by Hinde who indicated that Hinde owed Robb this amount for a personal loan. She could not recall whether the purpose of the payment was to buy out Robb’s interest in the 1992 property. I note, however, that in the same email dated December 31, 2012 to Hinde, Johanson wrote: “So on 1992, I paid in $80,000 plus $21,500 total $105,500….”

12Robb had resided with Hinde at the 1992 property earlier for several years. Hinde testified that the monies paid to Robb by Johanson were for Robb’s interest in the 1992 property. This is consistent with Johanson’s email dated December 31, 2012 above. The payment to Robb occurred at the same time as the transfer of title from Hinde’s brother to Johanson and Hinde. Accordingly, I find that the monies paid to Robb by Johanson were to purchase any right or interest Robb had in the 1992 property, and not for repayment of a separate personal loan owed by Hinde as suggested by Johanson.

13Thus, as at early July, 2007, Johanson had paid $80,100 less adjustments together with the monies paid to Robb of $21,500, and Hinde had equity of approximately $60,000 in the 1992 property. The estimated value of the 1992 property was then roughly $161,600.

Improvements to 1992 Property

14The premises consisted of what Johanson described as a “cute cottage”. Soon after Johanson started living with Hinde at the 1992 property in 2007, she purchased new appliances for the home. She did this because she found the existing appliances tired and she wanted new ones.

15While she lived at the 1992 property, Johanson paid for various improvements. In July 2008, after the date of their marriage, Johanson paid for a new roof to be put on and for new siding. She testified that she discussed these expenses with Hinde who simply did not have the money to pay for or contribute to them. Johanson testified that the roof was sagging and she was living there: “it was my house”.

16The parties lived together at the 1992 property until sometime in the Spring of 2010 when they moved into the house on the adjoining property at 1988 Strathuron St. (hereafter “the 1988 property”). Johanson had severe allergies to Hinde’s cats which necessitated allergy shots when she was back in the United States. Her allergies and the unexpected availability of the adjoining property led to their purchase of the 1988 property.

Money Advanced for Stan Smith

17According to Johanson, she was approached by Hinde soon after the purchase of the 1992 property. Hinde told her that she owed $30,000 to Stan Smith. Hinde proposed that they take out a joint line of credit on the 1992 property which Hinde would service and repay. The line of credit had to be a joint line because the 1992 property was to be collateral security for the debt and they were both then registered owners. Johanson agreed to this scheme.

18In her examination in-chief, Johanson was shown a copy of a cheque payable to Paula and Stan Smith in the amount of $15,000. Johanson expressed surprise at the amount because Hinde told her that she owed Smith $30,000, not $15,000. She testified that she simply trusted Hinde who kept the records and statements of their lines of credit at her office. Thereafter, she had no dealings with the line of credit. She was told by Hinde that Hinde would be responsible for that debt.

19Exhibit 2 at trial is a brief filed by Johanson entitled: “Line of Credit Secured Against Jointly Owned Properties and Used Exclusively by Respondent.” At Tab 1, page 1 of Exhibit 2, the deposit account history for the line of credit shows three transactions soon after the line of credit was established as follows:

1. February 4, 2008 - $10,000 transfer to Amex Optim
2. February 4, 2008- $2,000 transfer to 328M44A
3. February 8, 2008 - $15,000 cheque.

20The cheque (item 3 above) corresponds to a cheque to Paula and Stan Smith. The transfer to Amex Optim of $10,000 appears to be payment of a credit card debt owed by Hinde. The transfer of $2,000 is to a TD Waterhouse account owned solely by Hinde (see Exhibit 1, Tab 15 at page 5). Johanson testified that she was ignorant of these transactions; that she relied entirely on Hinde regarding the use of this account.

21Hinde testified that Stan Smith was a Sarnia businessman with whom she had been doing some website work. They started working together in 2006. Smith was paying for expenses with the intent they would profit split. However, Smith approached her to ask for payment of expenses incurred. She understood that he wanted this money in order to purchase something else. They agreed on $20,000 payable by an initial payment of $15,000 and a further $5,000 payment later.

22She testified that she found the timing awkward since she and Johanson had just purchased the 1992 property. Nevertheless, she approached Johanson and explained that she had $10,000 in credit card debt related to her Internet business and owed $20,000 to Smith. Hinde needed Johanson’s cooperation because both were on title and the line of credit would be secured by the 1992 property. She denies that she told Johanson that she owed Smith $30,000. She was upfront that she owed $10,000 for credit card debt and the balance was for Smith.

23With respect to the transaction into the TD Waterhouse account, she acknowledged in cross-examination that that was her personal account. She offered no explanation for the transfer from the line of credit account to her personal account.

24I accept Johanson’s evidence that she was misled by Hinde as to the purpose of the line of credit account secured by the 1992 property. I note, however, that both parties agreed that Hinde was to be responsible for servicing and repaying that $30,000 and interest. Whether Hinde told Johanson she owed Smith $30,000 or $20,000 plus credit card debt, the fact is this loan was for Hinde’s personal benefit. That line of credit debt was understood by both to be Hinde’s responsibility alone even though secured by their jointly owned property.

1988 Strathuron Street Property

25The parties purchased the 1988 property on October 21, 2009. It had a small two bedroom cottage on a double lot. The purchase price was $163,000 of which Johanson advanced $76,780.82 (U.S.) through a wire transfer from Wachovia Bank to the real estate lawyer. Johanson obtained these funds by taking out a line of credit on property she had acquired in Florida (the Pelican property). The balance of the purchase price was funded by a line of credit secured against the 1988 property. Title was taken again in the names of both parties. In cross-examination, Johanson testified that she paid her half of the purchase price and Hinde’s half was paid through the line of credit.

26Where Hinde was content to continue to reside at the 1992 property, Johanson was not. Her allergies were severely affected. According to Hinde, the original plan was to fix up the 1988 property and flip it for a profit. She indicated that Johanson “hounded” her incessantly to keep the 1988 property and lease out the 1992 property. Hinde eventually went along with this plan.

27Soon after closing, the parties made a number of improvements to the home at 1988. Johanson purchased new appliances and replaced the former wall heater. A new heating system was installed including duct work. The floor in the living room had a slope which was levelled. New carpeting was installed. The parties built a new pergola at the rear of the house on the side nearest the 1992 property.

28The parties agree that they each worked on improvements to the 1988 property. Where they disagree is their relative contributions to that effort. Johanson asserts that she paid for most if not all of the out-of-pocket expenses and did an equal amount of the work. Hinde’s evidence is that she did a disproportionate share of the manual labour given Johanson’s work in the United States and her visits to her property in Florida.

29The parties moved into the 1988 property in the Spring of 2010 and entered into a lease with Brent Waterhouse of the 1992 property in May 2010. Waterhouse paid $1,000 monthly during the term of the lease which expired a year later.

30It is not disputed that initially, the rents from the 1992 property went to Johanson alone in recognition that she had funded much of the out-of-pocket costs for the renovations at 1988. Hinde began receiving the rental monies from the 1992 property in January 2011, and continued to receive any rents from tenants of that property thereafter. There were times when the property was not leased. There were also periods when the 1992 property was occupied by Hinde for which she paid no rent.

Waterworks Property

31On August 27, 2010, the parties jointly purchased property municipally known as 6532 Waterworks Rd., Sarnia, Ontario (hereafter “the Waterworks property”) for $130,000. Both parties testified that the purpose of this acquisition was to renovate it and sell for a higher price. There was no intent that either or both would live in the house.

32Johanson testified that they borrowed against both the 1988 and 1992 properties to fund the purchase of the Waterworks property when, in fact, the documents show that the purchase funds were secured only as against the 1992 property and the Waterworks property. The 1988 property was not part of the loan necessary to secure the purchase financing for the Waterworks property. Instead, the parties increased the line of credit on the 1992 property from $30,000 to $100,000. She signed that loan documentation.

33Throughout her evidence, Johanson indicated that she could not recall exact figures or her memory was bad especially when it came to financial details concerning the properties. She testified that Hinde withheld bank statements from her; Hinde kept her in the dark; and, that she was just the “worker bee” with Hinde managing their finances.

34Johanson also indicated that she did not really understand lines of credit and how the money was obtained. Exhibit 2, Tab 2 is a statement for a line of credit account relating to the 1988 property which shows at page 6 of 10 that the sum of $26,116.30 was deposited to that account on August 27, 2010. Johanson testified that she had never seen that before and had no idea what it related to.

35I found Johanson’s evidence in this regard to be disingenuous and unreliable. Johanson could recall financial details when it suited her, but not otherwise. She managed her own finances from her U.S. accounts without Hinde’s involvement and she could readily have obtained copies of bank statements if Hinde was withholding them from her given these were joint accounts/lines of credit.

36Hinde testified and put to Johanson (who said she could not recall) that the parties actually borrowed $160,000 as against the two properties. The extra $30,000 was to cover renovation costs. After adjustments on closing, the balance of $26,116.30 was deposited to the 1988 line of credit to reduce the interest accruing on that account. Funds were then drawn from that line of credit to fund renovation costs for the Waterworks property as they proceeded which is what is reflected in the statements for that line of credit. It seemed to me that Johanson was less than forthright when she claimed ignorance of these arrangements. I had the impression that Johanson was trying to make it appear that Hinde had mismanaged their funds and perhaps even misappropriated same for her own use, which I find is not the case.

37The Waterworks property was extensively renovated by the parties soon after it was acquired. Both worked on the renovations doing heavy work. Hinde complained that she tried to tell Johanson that she had a bad back and could not devote the same effort to the renovations. She was also concerned that the renovations were keeping her from the Screen Printz business and her Internet endeavours. According to Hinde, they undertook this project because movie work was slow for Johanson whose employment insurance benefits were running out.

38Johanson denies that she forced Hinde to do work that she was not physically able to do. Johanson was not sure of the amount of work she was getting in the film industry between 2008 and 2010, nor the status of her employment insurance.

39Again, it seemed to me that Johanson was less than forthright in her recollection. Johanson was not working steadily on film or television projects in this period. Her monies had been used for the 1988 and 1992 properties including furnishings. She was anxious to do something that would generate income and the Waterworks property was the means to achieve that goal. Whatever the motivation, the Waterworks project and/or financial issues produced significant stress between the parties in the Fall of 2010.

40Both parties agreed that the Waterworks property was substantially renovated in the Fall of 2010. It was a joint effort. Hinde had a credit card for the line of credit which she used to purchase needed supplies. Johanson had no use of that card which remained in Hinde’s control. Johanson denied any discussions with Hinde about the expenditures as they were made, nor did Hinde provide any ledgers or spreadsheets of the costs as they were incurred.

41I find that the renovation costs were paid either from the funds borrowed for that purpose or were paid principally by Johanson. In this relationship, Hinde had no significant source of income. Her Screen Printz business was a marginal operation which was even more stressed by her time devoted to renovations at the three properties. Her Internet business was not a big money-maker, if it made money at all. Simply put, the funds necessary to renovate the three properties during their period of cohabitation had to come primarily from Johanson or the Bank.

Separation

42Johanson testified that in October, 2010, their relationship changed; Hinde was more distant to her. They stopped being intimate. There was a definite chill in the relationship. They were residing at the 1988 property which was then the matrimonial home. On February 21, 2011, Johanson permanently separated from Hinde. She moved from 1988 to her home in Florida. Hinde told her that she was not welcome to return. The parties have lived separate and apart since then. There is no prospect of reconciliation. There are no children of the marriage.

43Counsel for Johanson agreed with Hinde that February 21, 2011 is the date of separation for purposes of calculating net family property.

Property Rentals

44Following separation in February 2011, Hinde continued to receive rents from Waterhouse for the 1992 property until his lease expired and he vacated the premises. She then leased the property to someone named Pauline and her husband. All rents received from Pauline were paid to Hinde.

45Hinde moved into the Waterworks property and began to lease the 1988 property on an intermittent basis to workers looking for short-term rentals in the Sarnia area. Again, those rents were paid only to Hinde.

46Hinde did not account to Johanson for the rents she received from the three properties after separation. She continued to service the lines of credit and to pay for some, but not all of the damage done by tenants. However, at some point, there simply was not enough cash-flow to service the debt and Hinde began using monies from one line of credit to service the others. This recycling of the Bank’s own funds did not go unnoticed by the Bank who contacted Johanson.

Sale of Waterworks Property

47Johanson commenced this proceeding by Application issued June 11, 2012. She sought, inter alia, an order directing that the three properties be listed for sale; that Hinde be responsible to pay the ongoing carrying costs of the properties from rents received; an accounting of rents received by Hinde; payment of occupation rent by Hinde; repayment of the Robb and Smith loans; and a greater than 50% equalisation payment under s. 5(6) of the Family Law Act.

48In her Answer filed July 12, 2012, Hinde sought, inter alia, spousal support from Johanson and a greater than 50% equalisation payment from Johanson. Hinde was then represented by counsel.

49Following separation and during this proceeding, the parties continued to have contact through email. For her part, Johanson urged Hinde to sell the properties. Their email exchanges contain extensive references to various agents some of whom were engaged to sell one or more of the properties. Each accuses the other of frustrating or prolonging the efforts to sell the properties.

50The Waterworks property sold first in October, 2012 for $177,998.68 after adjustments on closing. According to the Statement of Trust Monies from the real estate lawyer (Exhibit 8, Tab 3), the line of credit on that property was paid out to TD Canada Trust in the amount of $80,345.65. Each of the parties received credit for $43,935.86 from which various credits or further adjustments were made.

51On March 6, 2013, Justice Desotti made a consent order on the basis of minutes of settlement and consents filed by which:

1. Certain defined expenses were ordered to paid from the sale proceeds;
2. Hinde was to pay all outstanding utilities, property taxes, mortgage payments and late charges for the Waterworks property, failing which they would be deducted from her one-half share of the net proceeds of sale
3. $10,000 of Hinde’s share of net proceeds were to be withheld and paid on account of any outstanding lines of credit payments owing for 1988 or 1992 as well as any outstanding utility, property tax or property insurance premiums for those two properties;
4. Subject to (3) above, Hinde would receive her one-half share of the net proceeds of sale; and,
5. Johanson would likewise receive her one-half share of net proceeds subject to a couple of credits and withholding tax applicable to her as a non-resident.

52The Order expressly provided that the division was without prejudice to either party later arguing an entitlement to greater than one-half of the net proceeds.

Settlement Agreement

53Soon after the Order of Justice Desotti, Hinde approached Johanson to suggest that they put the litigation on hold to try to work out a resolution since both parties were expending significant monies on legal fees. In May, 2013, Hinde proposed that they resolve all outstanding issues on the following basis:

1. Hinde would apply to the City of Sarnia to sever 20 feet from the 1988 property which would be added to the 1992 property;
2. If the severance was granted, Hinde would get the 1992 property together with $15,000 from the sale of the 1988 property; and,
3. Johanson would receive the proceeds of sale of the 1988 property less the $15,000 payable to Hinde.

54Johanson agreed to this arrangement “provided it was legal.” In an email to Hinde dated May 15, 2013, Johanson wrote:

“Yes I want to sell hse [sic] for 200,000 yes sever it yes move pergola as long as it is legal u can use this as ok to proceed I will copy this to mark but if we can’t sell for 200,000 then less $ for u maybe $10,000 k?” (Exhibit 11, Tab 8)

55Later on May 23, 2013, Johanson wrote to Hinde:

“Yes, we have agreed between us! Let’s do this so we can sell at this good time” (Exhibit 11, Tab 8).

56There are additional emails between May and August 2013 from Johanson which confirm her agreement to settle. In cross-examination, Johanson confirmed that she told Hinde to go ahead with the severance as long as it was legal.

57It was understood that Hinde would be responsible for dealing with the City on the severance and she had Johanson’s authority to do so. Hinde was to look after it. Hinde indicated that she asked when she applied whether she needed Johanson’s signature on the application to sever and was told “no”. She later had Johanson sign a blank authorisation with respect to the severance just in case.

58Hinde applied to the City of Sarnia for the severance. On August 13, 2013, the City wrote to Hinde to advise that the severance had been provisionally granted subject to conditions which had to be fulfilled on or before July 25, 2014.

59It was understood by the parties that the fence between the two properties and the pergola on 1988 would have to be moved by Hinde to accommodate the severance and new boundary. Soon after the application was made to the City, Hinde moved the pergola at 1988 and removed the fence in anticipation of the severance being grantedd. Hinde was then residing at the 1992 property where she was dealing with significant water damage from the previous tenants. Hinde advised Johanson of this damage and her efforts. She expended monies and her labour to repair and renovate 1992 which she intended to keep as part of the settlement. Hinde’s uncontradicted evidence was that she did this work and incurred these expenses in reliance upon the settlement agreement she had worked out directly with Johanson.

60Johanson testified that she contacted the City in April, 2014 and that is when she first learned that the severance application had to be in the name of both registered owners. However, I note that on December 18, 2013, Johanson sent an email to Hinde in which she apparently knew that fact by then. She wrote:

“Waaaaaaa Waaaaaaa ummmmmmmm I know u r for a FACT!!!!! Commiting fraud to the city with a document that u were the only owner….hoe hoe….I already talked with them stupid….. See ya soon!!!” (Exhibit 25, Tab 8)

61Johanson indicated that she contacted the City of Sarnia for an update on the status of the severance in April 2014 and was told that the City was unaware that she was a co-owner of the 1988 and 1992 properties; the application to sever was made by Hinde alone. Johanson also indicated that the City advised her that the application had to be made by both owners and, as a result, the severance was not valid. Johanson then took the position that the severance was “illegal” and she was no longer bound by the agreement to settle. Johanson told Hinde to do nothing more, “it’s off.”

62I note that no evidence was called by either party from the City of Sarnia with respect to the severance. The evidence provided by Johanson of her telephone call with the City is hearsay and is not admissible for the truth of its content; i.e. that the severance granted was invalid. At most, it is admissible as to Johanson’s state of mind – as to what she believed and why she acted as she did. The same applies to Hinde’s evidence of her conversation with someone from the City when she applied for the severance.

63On April 13, 2014, Johanson sent the following email to Hinde:

“OHHH AND THE CITY WANTS TO TALK WITH YOU TOO..LOL BAD BAD LOL DON’T EVER SCREW WITH THE CITY YOU LIVE IN!!! LOL HA

LOL YOUR IN DEEP SHIT NOW…..I WOULDN’T WANT TO BE YOU…HA I HOPE FOR YOUR SAKE YOU ARE READY TO MOVE..HA HA HA HA OUT OF SARNIA HA HA UNLESS YOUR WANT TO LET CRAIG DO HIS JOB, U ARE FUCKED!!! LOL LMAO OHHHHH ITS TOO LATE..LOL”

64Thus, by April 2014, Johanson believed that Hinde had acted improperly in making the severance application, that Johanson was no longer bound by their agreement and that Hinde was in some trouble with the City to Johanson’s delight. Johanson was not willing to follow through with the settlement.

Sale of 1988 and 1992 Properties

65Johanson forced the parties to return to the litigation process. On June 11, 2014, Justice Garson ordered that the 1992 property be listed for sale forthwith. The parties were required to cooperate with the listing agent. The property was ordered to be listed for sale at $195,000 and was to remain vacant until sold.

66On August 7, 2014, Justice Mitchell ordered the 1988 property to be listed for sale at a listing price of $170,000. Johanson was authorised to sign the listing agreement for both parties. The price was to be reduced by $5,000 every 15 days until sold. Hinde was permitted to reside in the 1988 property until sold and was required to cooperate with the listing agent. She was also required to pay all carrying costs for the 1988 property without prejudice to any claim she may make later for contribution from Johanson. Finally, the order required that the proceeds of sale be held in trust pending agreement between the parties or further court order.

67In her endorsement of August 7, 2014, Justice Mitchell wrote:

“The Respondent alleges an agreement was reached with the Applicant with regards to the Property and the Listed Property. The Applicant denies any agreement was reached although attempts were made to negotiate an agreement. On the written record I am unable to conclude an agreement was reached.…”

68On September 11, 2014, Justice Gorman ordered that Johanson be permitted to solely negotiate the sale price for each of the 1988 and 1992 properties, and to sign any and all documentation required to complete the sales. The proceeds from the sale of 1992 were ordered to be held in trust by the vendor’s lawyer by Justice Rogin on September 18, 2014.

69The two properties were sold and closed on September 30, 2014 albeit to different purchasers. The 1992 property was sold for $154, 574.81 after adjustments from which the mortgage balance, arrears of taxes, utilities, real estate commission and legal fees for the sale were deducted. The balance held in trust was $32,106.76 and remains in trust pending the outcome of this proceeding.

70The 1988 property was sold for $162,652.63 after adjustments from which the mortgage balance, tax arrears, utility arrears, legal fees etc. were deducted. The vendors’ lawyer also paid legal fees to Johanson’s lawyer as permitted by court order. Both parties received $5,000 and the balance of $52,002.56 remains held in trust.

POSITIONS OF PARTIES

71Johanson takes the following positions:

1. A divorce should be granted;
2. An unequal division of net family property is warranted under section 5(6) of the Family Law Act in favour of Johanson;
3. Hinde should pay Johanson $7429 for carrying costs and expenses paid by Johanson for the 1988 and 1992 properties;
4. Hinde should pay Johanson $18,900 which represents 50% of the rental income received less expenses paid from February 2011 to September 2014, from her share of the net sale proceeds;
5. Hinde should bear any expenses incurred for damage or loss to the properties by tenants or by Hinde’s own occupation;
6. Hinde should pay Johanson $22,200 as occupation rent out of her share of the net sale proceeds as an alternative to an accounting for rental income less allowable expenses;
7. Hinde should pay Johanson $21,500 from her share of the net sale proceeds, which amount represents the monies paid by Johanson to Robb;
8. Hinde should pay Johanson $30,000 from her share of the net sale proceeds which represents the monies borrowed on the 1992 line of credit to pay her debt to Stan Smith; and,
9. There was no binding agreement to settle the litigation or at least not one which affected Johanson’s claims to an unequal division of the net family property.

72Hinde was self-represented at the trial in this matter. She agrees that a divorce should be granted. She asserts, however, that a settlement of all issues was reached. Johanson frustrated the implementation of that settlement by her communications with the City and refusal to abide by their agreement. Johanson only wanted to avoid the settlement agreement when she realised that Hinde had substantially improved the value of 1992. Hinde carried the costs of the properties after separation at considerable hardship. The rents were inadequate to cover expenses. She did the best she could given that Johanson advanced no further funds to assist. She seeks $25,000 from Johanson for “caretaker services”.

ANALYSIS

Divorce

73This is the one area where the parties do agree. The evidence supports that the parties have been separated for more than one year. There is no prospect of reconciliation. There are no children of the marriage whose needs have to be considered. The clearance certificate was filed together with the marriage certificate. There is no intent to deceive the court. Accordingly, I grant a divorce effective 31 days from the date hereof.

Balance of the Issues

74The following issues arise on the facts of this case:

1. Did the parties enter into a settlement agreement by which they settled all or some of the issues?
2. If so, why was the settlement agreement not completed?
3. What are the consequences, if any, which flow from the non-performance of the settlement agreement?
4. Is an unequal division of net family property warranted pursuant to section 5(6) of the Family Law Act?
5. If so, what is the appropriate division?

Did the parties enter into a settlement agreement?

75I note that Hinde referred to the alleged settlement agreement in her opening statement. Counsel for Johanson did not object and, in fact, he adduced evidence from Johanson in-chief with respect to the agreement to sever the 1988 property. Hinde cross-examined Johanson extensively on their agreement and testified herself to same, all without objection by counsel for Johanson.

76At the outset of closing argument, I observed that Hinde had raised the issue of a settlement but had not amended her Answer. Hinde confirmed that she wished to amend her Answer accordingly, and counsel for Johanson consented to that oral motion. Hinde then amended her Answer on May 20, 2015. The amended Answer states:

“63. The Applicant and the Respondent entered into an agreement in May 2013 between themselves and both lawyers were notified they would be working it out themselves during this time.

64. The Applicant was to receive the sale proceeds of 1988 Strathuron Avenue less $15,000 to be paid to the Respondent at the time of sale.

65. The Respondent was to receive the damaged property 1992 Strathuron, a 20 x 80 pc of severed lot from 1988 Strathuron and the $15,000 at the time of the sale of 1988 Strathuron.

66. The Respondent spent significant time and money refurbishing 1992 Strathuron and preparing for the final conditions of the sever to be fulfilled.

67. The Applicant breached the Respondent’s trust in April 2014 and broke the agreement by voiding the sever in a vexatious manner.

68. Both parties returned to the services of their prior counsel following this action.

69. The Applicant’s counsel returned to the court with the Applicant’s vexatious intent, the Court was misled and manipulated regarding various facts.

70. The Respondent has suffered catastrophic financial damage as a result of the Applicant’s actions, and the net family property has been significantly diminished.”

77Johanson urges me to find that there was no settlement agreement as:

1. The parties did not enter into a written agreement with respect to the property as required by the Statute of Frauds;
2. Justice Mitchell already concluded that there was no settlement agreement in her endorsement dated August 7, 2014;
3. Whatever discussions they had between them did not rise to the level of a settlement. There was no discussion, for example, as to what would happen to the lines of credit on the properties on which they were jointly liable; and,
4. The alleged agreement does not comply with section 55 of the Family Law Act which deals with domestic contracts of which this agreement would be one.

78In my view, there was a binding settlement agreement between the parties in May, 2013 by which they agreed to resolve all outstanding issues between them which were extant in the litigation, including issues related to the division of net family property. Johanson’s emails to Hinde evidence her agreement. There is ample case law that a settlement of litigation made during the course of the litigation need not strictly comply with section 55 of the Family Law Act: Geropoulos v. Geropoulos, [1982] O.J. No. 3179 (Ont. C.A.); Barker Estate v. Walsh, [2012] O.J. No. 1655 (Ont. S.C.J.); Nigris v. Nigris, [1999] O.J. No. 1541. Just as lawyers can exchange settlement correspondence which will suffice to evidence a settlement, so too can parties exchange communications via email to the same effect.

79The evidence indicates that the parties were tired of the litigation and certainly tired of the expense of the litigation. There was no duress or unconscionable behaviour by Hinde. The parties had just sold the Waterworks property and received funds from that sale. Johanson was in Florida; Hinde was in Sarnia. The proposed deal made economic sense and would allow the parties to move forward.

80I reject the argument that the agreement fails to satisfy the Statute of Frauds. First, the agreement is one which resolves litigation. It is not strictly speaking an agreement for the sale of land. Second, the emails exchanged between the parties provide written evidence of their intent to dispose of the lands as between them in the manner agreed upon and, as such, are sufficient for the purposes of the Statute of Frauds if that requirement applies at all.

81Dealing with the finding made by Justice Mitchell on August 7, 2014, it is clear that Justice Mitchell rendered her decision on the basis of the written materials which were before her. She did not have the benefit of viva voce evidence as I did at trial. She did not hear the admission made by Johansson that there was an agreement with Hinde albeit qualified by the words “so long as it’s legal”.

82As mentioned, Johanson qualified her agreement with Hinde with the words “so long as it’s legal”. I can certainly appreciate that Johanson was unfamiliar with land severance issues in Canada. She would not want to bind herself to something that was improper. However, there is nothing improper per se in the agreement that they reached. If the City granted the severance, it would allow for a legal transfer of part of the lands at 1988 to 1992. The boundary between the two lots would be effectively redrawn. This is not uncommon, nor illegal.

83I concur that the joint lines of credit on the 1988 and 1992 properties needed to be addressed in implementing the settlement, but there is no evidence from either party or the Bank that that would prove to be an obstacle. The settlement agreement was between Hinde and Johanson and was not made conditional on Bank approval. Even if the Bank was unwilling to continue to lend to Hinde on the 1992 property (and there was no evidence of that position), that would not render the agreement “illegal”. Rather, Hinde would have to seek replacement financing elsewhere. The absence of reference to the Bank lines of credit does not invalidate the settlement agreement reached between them.

84In summary, I find that the parties entered into an agreement in May, 2013 to settle all issues between them in the litigation on the following terms:

1. Hinde would apply on their behalf for a severance from the City of Sarnia of 20 feet of land on the 1988 property which, if granted, would become part of the 1992 property;
2. Hinde would receive ownership of the 1992 property including the additional severed parcel and would receive $15,000 of the sale proceeds from the 1988 property; and,
3. Johanson would receive the sale proceeds for the 1988 property less $15,000 payable to Hinde as above.

85I exercise my discretion to allow technical non-compliance with section 55, if such exercise of discretion is required. The parties here reached a point where they agreed to resolve the issues without counsel. They reached an agreement on which Hinde acted and relied to her detriment. It would be inequitable to Hinde and would reward Johanson for her inappropriate conduct to strictly apply section 55 in these circumstances.

Why was the settlement agreement not completed?

86Hinde applied to the City of Sarnia for the severance as agreed. It is not disputed that when she applied, she did so solely in her own name. The conditional approval was given on the basis of her application which, on its face, implied that she was the sole owner of the two properties. I do not believe that she did so intentionally so as to mislead the city. At that point in time, she had Johanson’s agreement and presumably Johanson would have signed any necessary paperwork if so requested.

87When it became known that there was a potential problem with the severance because the application was made solely in Hinde’s name, Johanson took no steps to seek to remedy that error. She did not offer her cooperation to Hinde. She did not offer or inquire of the City as to what could be done to remedy the issue. She did not suggest that they renew the application, if need be. Instead, Johanson took perverse delight in Hinde’s mistake and treated the agreement as cancelled. She concluded that it was “illegal”. She resiled from the agreement and thereafter pursued sale of the properties through the courts.

88I find that Johanson breached the settlement agreement and thereby frustrated its implementation. Upon determining that there was a mix-up or potential problem with the severance application, she seized upon that fact as an excuse not to continue with the settlement agreement that she had made. I find that by then, she was well aware of the work done by Hinde both at 1988 and more particularly at 1992. The latter work significantly improved the condition of the property thereby making it far more valuable. I accept Hinde’s evidence that Johanson only withdrew from the agreement when she realized that Hinde had improved the value of the 1992 property.

89I do not mean by this finding to gloss over the error made by Hinde on the application. If she had not filed an incorrect application to sever, Johanson would not have been in a position to seize upon that excuse to refuse to continue. However, I find that Hinde’s mistake was inadvertent. She had Johanson’s permission to make the application. She did not intend to mislead the City with whom she did some business at Screen Printz.

What are the consequences of the breach of the settlement agreement?

90I find that it is likely that the City of Sarnia would have agreed to the severance if a new or amended application had been brought jointly by Hinde and Johanson. In that regard, I note that the City had already approved the severance when it was believed that there was a single owner of both properties. There is no evidence to suggest that the presence of a co-owner would have affected the outcome.

91If Johanson had acted in good faith to support Hinde in remedying the severance issue, the parties could then have completed the settlement agreement as originally intended. Instead, Johanson took steps to obtain orders through the court to force the listing and sale of both properties without a severance, and did so denying what she admitted at trial: that there had been a settlement reached.

92At this stage, it is impossible to have specific performance of the settlement agreement. At best, I can try to put the parties in roughly the same position they would have been had the settlement agreement been performed while recognizing that the properties have been sold.

93I cannot give back to Hinde the 1992 property. However, I find that she is entitled to the monies held in trust from the sale of the 1992 property and to receive $15,000 payable from the monies held in trust from the sale proceeds for the 1988 property, less the $5,000 already received from the sale of that property. In addition, the 1992 property would have had an extra 20 feet of property which would presumably have increased its value somewhat. I have no evidence with respect to that increase in value and, accordingly, can make no award with respect to same. I will address the costs which were incurred by Hinde for the trial and for steps taken prior to trial where costs were awarded against her as part of the costs submissions to follow.

94In short, I conclude that the parties entered into a binding settlement agreement which the Applicant, Johanson, breached to the prejudice of the Respondent, Hinde. Given the passage of time and events which have intervened, the best that can be done at this stage is to utilize the funds held in trust from the sale of the two properties to try to put the parties back into the position they would have been in but for the Applicant’s breach.

95With respect to the funds held in trust by the real estate lawyer in respect of the 1988 and 1992 sales, those funds shall remain in trust pending the outcome of my decision with respect to costs and any orders flowing from same.

Is an unequal division of net family property warranted?

96Given my findings with respect to settlement above, it is not necessary to determine the remaining issues. Nevertheless, I will do so in order to provide a full analysis to the parties.

97Equalization of net family property is governed by s. 5 of the Family Law Act. The general rule embodied in s. 5(1) is that the spouse with the lesser net family property as calculated in s. 4 of the Act is entitled to one-half of the difference. There is a statutory presumption of equal contribution, whether financial or otherwise, subject only to the equitable considerations in s. 5(6).

98Section 5(6) of the Act states:

“The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,

(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;

(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;

(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;

(d) a spouse’s intentional or reckless depletion of his or her net family property;

(e) the fact that the amount a spouse would otherwise receive under (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;

(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;

(g) a written agreement between the parties that is not a domestic contract; or

(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.”

99The policy underlying the division of family property provisions in the Family Law Act encourages finality, predictability and certainty, and minimizes the exercise of judicial discretion. Thus, the threshold that an applicant must cross to obtain an unequal division is a high one: Serra v. Serra, 2009 ONCA 105 at paragraphs 56 and 57. The word “unconscionable” in section 5(6) is not limited to circumstances arising from fault – based conduct on the part of one spouse. The focus is on whether equalizing the net family properties leads to an unconscionable result, whether that result flows from fault – based conduct or not: Serra v. Serra, supra at paragraph 58.

100The discretion to make an unequal division pursuant to section 5(6) is strictly limited. It is not the intent of the section to alleviate every situation that may be viewed as in some ways unfair or inequitable, because equal sharing should occur in most cases: Ward v. Ward, 2012 ONCA 462.

101In Merklinger v. Merklinger, 1996 642 (ON CA), [1996] O.J. No. 4080 (Ont. C.A.), affirming 1992 7539 (ON SC), [1992] O.J. No. 2201 (Ont. Gen. Div.), the court found that post – separation conduct which has a detrimental economic effect on a spouse is relevant in determining whether an equal division is unconscionable. Likewise, deliberate acts by a party post-separation may be considered in making an unequal property division: Tamitegama v. Tamitegama, [1993] O.J. No. 803 (Ont. Gen. Div.).

102The case law on equalization of net family property dictates a three-step process be followed:

1. The court determines the ownership of property under section 4;
2. The court must then calculate the equalisation payment under section 5(1); and,
3. The court considers lastly whether to exercise its discretion under section 5(6) to make an unequal division having regard to the principles set out above: Von Czieslik v. Ayuso, 2007 ONCA 305 at paragraphs 28-30.

Determination of Ownership/Calculation of Payment

103I accept the Financial Statement of Johanson sworn March 10, 2015 (see Tab 14 of Trial Record) as accurately reflecting her assets and the values of same as at the Date of Marriage, save as indicated below. According to that Financial Statement, Johanson had assets in the United States and Canada having a value in Canadian dollars of $466,627.17. None of those assets listed were challenged by Hinde, nor were the values except for the alleged debt for monies paid to Robb (see above) which impacts the value of Johanson’s interest in the 1992 property.

104I found earlier that the monies paid to Robb were not in the nature of a personal loan to Hinde; rather, Johanson acquired Robb’s interest in that property giving her a greater ownership interest in the 1992 property. This change does not affect the aggregate value of her assets on that date. It merely results in the reallocation of that amount from a debt owing to a different category of asset, her interest in the 1992 property. Her liabilities as of the Date of Marriage are $17,822.78 which yields a net Date of Marriage value of $448,804.39.

105I also accept the values shown on Johanson’s Financial Statement as at the Valuation Date with the same adjustment to be consistent with my finding for the monies paid to Robb. According to her Financial Statement, Johanson’s estimated market value on the Valuation Date is $496,989.74. However, her liabilities are significantly higher on the Valuation Date because of the lines of credit for the properties. Her liabilities total $169,097.22. Her net Valuation Date figure is less than the Date of Marriage figure which, in turn, produces a negative net family property value which must be considered to be nil.

106Hinde’s Financial Statements are problematic. The most recent statements were prepared without the benefit of counsel. In her Financial Statement sworn March 26, 2015 (see Tab 19 of the Trial Record), Hinde sets her share of the estimated value of the 1992 property as $95,000. That presumably reflects a 50% share of the value. That is clearly wrong on two bases: (1) it fails to take into account the amount paid by Johanson to Robb for Robb’s interest, thereby giving Johanson a greater than 50% stake prior to marriage; and, (2) the estimated value of the property would be $190,000 for which there is no evidence.

107Johanson emailed Hinde on December, 2012 indicating that Hinde had equity of $60,000. Hinde did not dispute the aggregate value that would produce for the property. She did not respond, for example, to say the property was worth more than $161,600. Her interest in the property on the Date of Marriage cannot be more than $60,000.

108Hinde also indicates on her Financial Statement that the value of her interest in the Screen Printz business was $94,000. She has provided no evidence to support that figure which seems a generous estimate given her evidence as to the fledgling nature of that enterprise as of 2008. She also estimated the value of her Websites at $35,422. Again, no evidence was provided as to the income generated by that business nor its value. This figure, like the Screen Printz figure, is an unsupported guess. Those businesses undoubtedly had some value but exactly what value is unknown.

109Hinde was clearly earning some income from her businesses before she began to cohabit with Johanson and as of the day they married. I conclude that it is appropriate to discount Hinde’s estimated values for her businesses and value same at 75% of the value estimated by Hinde which is $97,066.50. There is a corresponding reduction in her family property calculation on the date of marriage. That figure becomes $165,305 .

110As at the Valuation Date, Hinde had a 50% interest in the 1988 property and the Waterworks property. Using the figures provided by Johanson for which there is some evidentiary support, Hinde’s gross interest in those two properties has a value of $171,500 ($82,500 plus $89,000). Adding in Hinde’s reduced interest in the 1992 property ($60,000) yields a gross land asset value of $231,500. The only other assets valued and included in Hinde’s Financial Statement as of the Valuation Date are the businesses for which, again, there is little evidence. They are valued in the same amount as at the Date of Marriage. For the same reason, I discount those figures by the same percentage to arrive at an aggregate Valuation Date value of assets of $328,566.50 ($231,500 plus $97,066.50).

111Again, I apply the amounts owing by the parties to the three properties as of the Valuation Date in order to get to Hinde’s net value as of the Valuation Date. The amounts owing are those shown in Johanson’s Financial Statement and amount to $131,493.72 ($36,495.90 plus $54,997.82 and $40,000). Hinde’s net Valuation Date figure is $197,072.78 ($328,566.50 less $131,493.82).

112Thus, Hinde had an increase in value between the Date of Marriage and Valuation Date of $31,766.50 ($165,305.50 less $197,072.78). Pursuant to section 5(1), Johanson would be entitled to one-half of the $31,766.50 which amounts to $15,883.25.

113I next turn to whether, but for the settlement between the parties, I would have exercised my discretion under section 5(6).

Unequal Division

114Had I found that there was no settlement agreement between the parties and/or no breach of that agreement by Johanson, then I agree that an unequal division of net family property in Johanson’s favour is warranted in this case for the following reasons:

1. The period of cohabitation between the parties was less than five years;
2. Hinde lived in one or other of the properties after separation and did not pay rent;
3. Hinde did not properly account to Johanson with respect to monies received and expenditures incurred post-separation. There is some dispute between the parties as to whether the receipts for the Waterworks renovations were kept by Johanson. Even allowing for that possibility, Hinde did not keep detailed records post-separation when she knew that Johanson was residing remote from the properties and was relying on Hinde; and,
4. Hinde incurred $30,000 of debt by way of the initial line of credit on the 1992 property to pay out monies owing to Stan Smith and her credit card debt. She promised to be responsible for that debt which was entirely unrelated to the house in which they were residing or their relationship. It was prior personal business debt. I find that it would be unconscionable and inequitable to ignore that obligation to Johanson’s prejudice.

115Johanson did not contribute ongoing funds to pay the debt servicing costs for the lines of credit or the carrying costs for the properties after separation. She assumed that those debts would be paid by Hinde from rental monies that she was generating. Johanson wanted the properties sold as soon as possible after separation. She did not want tenants at all since the presence of tenants could adversely impact the marketability of the properties. Whether Hinde entered into these leases out of necessity or spite is unknown. Nevertheless, I find that she failed to properly account to Johanson for revenues and expenses.

116Hinde lived in the 1988 property upon separation. She also resided at the Waterworks property prior to its sale, and the 1992 property and eventually the 1988 property. She paid no rent while residing in those properties to her benefit and Johanson’s prejudice.

117In summary, I find that Johanson has met the high bar necessary to engage section 5(6). Hinde’s post-separation conduct, the loan to pay Smith and the brief tenure of their period of cohabitation leads me to conclude that an equal division of property in these circumstances would give rise to an inequitable result.

118I reject Hinde’s submission that she is entitled to payment for “caretaker services”. Although the tenants at the 1992 property after Brent Waterhouse did damage to that property and, as a result, Hinde spent a lot of time and money making repairs, she did so as she expected to retain the 1992 property as part of the settlement. This was not altruism.

What is the appropriate division?

119It is not possible for me to determine the allocation of net family property between the parties with mathematical exactitude given the extent of the material and the manner in which it was presented. There are gaps in the evidence with respect to values and revenues etc.. In addition, as I have indicated above, the division cannot be parsed neatly along purely out-of-pocket lines given the non-cash contributions made by the parties to the improvements to the properties.

120Accordingly, in the event my conclusion with respect to the settlement, breach and approach to resolution of those issues is incorrect, I would have found that Hinde should pay the amount of $15,883.25 pursuant to section 5(1) and, Hinde should pay an additional amount to Johanson in the amount of $50,000 pursuant to section 5(6).

CONCLUSION

121In summary, I order as follows:

1. A Divorce is hereby granted effective 31 days from this date;
2. The Application by Johanson is otherwise dismissed;
3. Hinde shall be paid the proceeds of sale held in trust from the sale of the 1992 property together with $10,000 from the proceeds of sale held in trust from the sale of the 1988 property;
4. The monies held in trust from the proceeds of sale of the properties shall continue to be held in trust pending further order following the determination of costs herein; and,
5. The parties shall re-attend before me to address the issue of costs on a date to be arranged with the Trial Coordinator.

“Justice R. Raikes”

The Honourable Mr. Justice Russell Raikes

Released: September 23, 2015

COURT FILE NO.: 35/38/013355/12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LYNN ANNE JOHANSON
Applicant

– and –

VIRGINIA ANNE HINDE
Respondent

REASONS FOR JUDGMENT

RAIKES, J.

Released: September 23, 2015