COURT FILE NO.: FS 70/11

DATE: 20151118

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Kenneth Holtby

William Clayton, for the Applicant

Applicant

• and -

Cheryl Draper

Knapton Farms Ltd.

Glen Carey, for the Respondents

Respondents

HEARD: December 16, 17, 18, 2014; April 20, 21, 22, 27, 28, 29, 2015; June 8, 10, 11, 2015; November 9, 10, 12, 13 and 16, 2015

REASONS FOR JUDGMENT

Conlan J.

I. INTRODUCTION

[1] Every now and then, a family law proceeding meanders its way through what, at times, feels like an interminable path to conclusion.

[2] This is one of those cases. Even the trial itself took seventeen days spread out over just shy of one year to come to an end.

[3] The first stage of the trial of this matter took place before me in Walkerton on December 16, 17 and 18, 2014. At that time, the issue to be decided was the valuation date – the date that the parties separated. The Applicant husband, Kenneth Holtby (“Mr. Holtby”), had suggested a separation date of September 2007. The Respondent wife, Cheryl Draper (“Ms. Draper”), had suggested a separation date of August 1999. Two witnesses testified at that stage of the trial: the parties.

[4] By the time that we resumed the trial on April 20, 2015, the parties had settled the issue that had been the focus of the three days of Court time in December 2014. On consent, August 19, 1999 became the valuation date. Further, by agreement, neither party was to be precluded by a limitation period from advancing any claim raised in the pleadings.

[5] On the remaining issues to be decided, all related to property, the trial continued on April 20, April 21, April 22, April 27, April 28, April 29, June 8, June 10, June 11, November 9, November 10, November 12 and November 13, 2015. Final submissions by counsel were delivered orally in Court on November 16th.

[6] I am indebted to the able assistance of Mr. Clayton and Mr. Carey. They presented the case on each side competently and fairly. They each advanced the interests of their respective clients forcefully yet within the traditions of professional advocacy. Helpful jurisprudence was filed. I have read all of the authorities submitted on both sides.

[7] For the Applicant, I heard testimony from Mr. Holtby, Richard Pickett (a lawyer in Mitchell, Ontario, called to the Bar in 1969, who did some work for the parties starting in 1996), and John King (a local lawyer, called to the Bar in 1974, who acted for Mr. Holtby in the litigation between him and his former spouse, Bonnie, and who was retained to do some real estate work for the parties).

[8] For the Respondent, I heard testimony from Ms. Draper, Marnie Doole (Ms. Draper’s long-time best friend), Denice Couch (Ms. Draper’s sister and a mortgagee with respect to the farm corporation), Paul Zinn (a realtor and appraiser who was qualified, on consent, to give expert opinion evidence in the field of the valuation of residential and agricultural real estate properties including an assessment of the rental market value of such properties), Eian Farrell (a farmer and a neighbour of the parties when they lived together), Susan Cleland (a long-time and close friend of Ms. Draper), John Hardy (a former credit advisor who worked in the Walkerton field office of the Farm Credit Corporation), and Wyatt Wegener (Ms. Draper’s son, who lived and did some work on the farm property).

[9] On consent of both parties, read in to the trial record was the anticipated evidence of one Michael Bolton, who worked at the material time in the financial industry. Mr. Bolton was not available to attend the trial. It was agreed that Mr. Bolton would have testified that “net book value” in the farm corporation’s financial statements equals cost less accumulated depreciation. Further, net book values are not intended to represent market values. Finally, the net book value of any particular item may be but probably does not equal market value, especially regarding real property (net book value for real estate is usually lower than market value, sometimes significantly so).

II. THE BACKGROUND

[10] The parties are both in their sixties. They were married on October 17, 1995. By virtue of the consent reached mid-trial, they separated on August 19, 1999. They were divorced in late March 2011.

[11] The parties have no children together. They each have children from prior relationships (six for the Applicant and three for the Respondent). Those children have nothing to do with the issues to be decided. This case is all about property and money.

[12] Mr. Holtby is a lifelong farmer. Ms. Draper is a veterinarian. Hence, the connection. Other than the agricultural vein, the parties are quite different from each other.

[13] Mr. Holtby has always lived in the Kincardine area. In June 1972, he married his first wife, Bonnie. They separated in May 1991. Protracted litigation ensued, at both the trial level and at the Court of Appeal for Ontario.

[14] Ms. Draper and her children moved up to this area from Burlington in May 1993. She had met and started dating Mr. Holtby in 1991. Ms. Draper, like the Applicant, had been married before. She separated from her first husband in 1984. It was an amicable split.

[15] Until late 1994, Ms. Draper and her three sons lived in the old house on Mr. Holtby’s farm property. The Applicant was living in the new house, nearby. Near the end of 1994, Ms. Draper and two of her sons moved in to the new house being occupied by Mr. Holtby and his two boys.

[16] Trouble was brewing. Mr. Holtby was in the midst of continued litigation with his first wife, Bonnie. Further, he was facing potential civil and criminal problems stemming from an allegation that he had been sexually inappropriate with a former foster daughter. All of that was known to Ms. Draper.

[17] In any event, the relationship between the parties continued. On October 11, 1995, to brace themselves for Mr. Holtby possibly going to jail because of the criminal investigation, Ms. Draper accepted a buy-out from her employer, the Canadian Food Inspection Agency. She was needed on the farm. And the couple needed money.

[18] Engulfed in a web of storm activity but, nonetheless, enamored with each other, the parties married.

[19] Faced with financial commitments owing to Mr. Holtby’s first wife, Bonnie, and faced with the spectre of civil and criminal liability involving the former foster child, Ms. W., the parties embarked upon efforts to reorganize their financial affairs. They were assisted by one Mr. Emerson, a disbarred lawyer, and Mr. Pickett, a licensed lawyer. In large part, the reorganization efforts drive the resolution of the issues in this case.

[20] Skipping ahead, by the Fall of 1996, Mr. Holtby was indeed headed to jail. He had pleaded guilty to the criminal charge. The Applicant was a guest of Her Majesty’s correctional facility for four to five months, between late September 1996 and early 1997.

[21] With Mr. Holtby now back on the farm, things continued for another decade or so.

[22] Beginning in 1999, Ms. Draper and her children started living in another house, close-by (“Highfield House”). In 1998, Ms. Draper and her sister had purchased that property as an investment and to operate as a bed and breakfast.

[23] By 2007, the end had come. Frankly, but for the consent agreement between the parties, there stood a good chance that I would have found that the separation date was some time in 2007.

[24] Ever since 2007, despite the parties continuing to this day, on paper at least, to be business partners in the farm operation (“Knapton”), they have had very little contact with each other.

[25] By 2011, the litigation between Mr. Holtby and his first wife and the settlement of the civil suit regarding the sexual impropriety both having concluded previously, Ms. Draper had been completely shut-out of Knapton.

[26] In July 2011, Mr. Holtby commenced his Application. He sought spousal support, equalization of net family properties, exclusive possession of the matrimonial home and its contents, a requirement that he be maintained as a beneficiary under Ms. Draper’s employment benefits and her life insurance policy, an order that the Respondent be compelled to transfer to Mr. Holtby her shares in Knapton, and a declaration that he is the owner of some land, Lot 8 (the “50 acres”) in the name of Ms. Draper (by virtue of a resulting trust).

[27] The spousal support claim has since been withdrawn.

[28] At least on the face of Knapton documentation, the parties each own half of the common shares of the farm corporation. In addition, Mr. Holtby owns 420 special Class B shares, while Ms. Draper owns 400 special Class B shares.

[29] Knapton owns the matrimonial home and its surrounding 156 acres of land.

[30] Ms. Draper is the current registered owner of the 50 acres, adjacent to the home farm. It is alleged by the Applicant that Ms. Draper acquired that parcel in her name alone to help make him judgment-proof.

[31] The 50 acres had previously been in the names of Mr. Holtby and his first wife, Bonnie. It is alleged by the Applicant that the only reason why Bonnie’s name was on title to the said land was for Planning Act purposes (because he owned the adjacent home farm).

[32] When the litigation between Mr. Holtby and Bonnie settled, the 50 acre parcel was titled to Mr. Holtby and Ms. Draper. After Knapton was formed, the said parcel was transferred to the Respondent alone.

[33] Those 50 acres are the subject matter of the resulting trust claim being advanced by Mr. Holtby. Ms. Draper opposes that claim. In a nutshell, the husband disputes that the wife is the legitimate owner of those 50 acres.

[34] Regarding the Applicant’s claim to acquire ownership of Ms. Draper’s shares in the farm corporation, in essence, despite the papered share structure alluded to above, it is alleged by Mr. Holtby that, in reality, he controlled, owned and operated Knapton (an allegation disputed by Ms. Draper).

[35] Essentially, Mr. Holtby advances a resulting trust claim over all of Knapton’s assets, including the real property, as well as a resulting trust claim vis-à-vis the 50 acres.

[36] In her Amended Answer dated June 2014, Ms. Draper sought rent, at fair market value, to be paid by Mr. Holtby since August 1999 on the 50 acres that she alleges was used by the husband as part of his farming operation.

[37] That claim by the wife is opposed by Mr. Holtby.

[38] Further, in her Amended Answer, Ms. Draper sought “an Order under s. 248 of the Ontario Business Corporations Act, requiring the Applicant to purchase all of her shares in the corporation known as Knapton Farms Ltd., at their fair market value”.

[39] It should be noted that Knapton is a party to this proceeding.

III. ANALYSIS OF THE ISSUES

A. Who Owns Knapton’s Assets, including the Real Property?

The Positions of the Parties

[40] On paper, everything but Lot 8, the 50 acres, is owned by Knapton, and Knapton is co-owned by the two common shareholders: Mr. Holtby and Ms. Draper.

[41] Mr. Holtby submits that he is the actual owner of Knapton’s assets. He always has been. What was transferred to Ms. Draper was done so gratuitously as part of the orchestrated effort to shield Mr. Holtby from the claims or potential claims of his creditors (specifically, Bonnie Holtby and Ms. W.), and the Respondent has failed to rebut the presumption of a resulting trust.

[42] Ms. Draper submits that she is what the documentation states she is – an equal owner of Knapton and all of its assets. Mr. Emerson, Mr. Pickett, Mr. Holtby and Ms. Draper put together exactly what the parties intended. Knapton was created. All of Mr. Holtby’s farm assets were rolled in to the corporation. And the parties were issued an equal number of common shares in the corporation. Besides, there can be no successful resulting trust argument because no common shares were transferred from Mr. Holtby to Ms. Draper (they were issued to the parties by the treasury of the newly created corporation), and further, Mr. Holtby always intended that Ms. Draper be an owner of Knapton. Finally, as Mr. Holtby does not come to Court with clean hands, he is not entitled to the equitable remedy of a resulting trust (the words of Lord Denning were echoed by Mr. Carey in an effort to illustrate the alleged inequities that would result if Mr. Holtby’s position is adopted by the Court).

[43] If I find that Ms. Draper is an owner of Knapton, the Respondent wants to have the corporation wound-up. The shareholders are clearly deadlocked, it is submitted.

The Law

[44] In the wide sense, a trust exists where property is held or administered by one person on behalf of another. Put another way, it is the equitable right to the beneficial ownership and enjoyment of property to which another person holds the legal title.

[45] A resulting trust is one that is imposed by law when property is transferred under circumstances suggesting that the transferor did not intend for the transferee to have the beneficial interest in the property. A resulting trust has, at times, been referred to as a presumptive trust or as an implied trust. It is not the same as a constructive trust.

[46] Ontario’s Family Law Act, R.S.O. 1990, c.F.3, as amended, at section 14, codifies the common law related to the presumption of a resulting trust.

Presumptions

14. The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that,

(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a). R.S.O. 1990, c. F.3, s. 14; 2005, c. 5, s. 27 (3).

[47] To determine whether the transferee has met her burden to rebut the presumption of a resulting trust, the key finding of fact will be whether the transferor intended to gift the property in question. Launchbury v. Launchbury, 2005 10640 (ON CA), dismissing the appeal from the decision of Van Melle J. reported at 2001 28182 (ON SC).

[48] It is crucial that the onus of proof not be reversed. Once it is found that there was no consideration for the transfer of the property, it is presumed in law that there was a resulting trust, and the onus is on the transferee to demonstrate on a balance of probabilities that a gift of the property was intended by the transferor. Paddock v. Paddock, 2009 ONCA 264, citing Pecore v. Pecore, 2007 SCC 17.

[49] In Holland v. Holland, 2007 47154 (ON SC), Reilly J. concluded that the party advancing the resulting trust claim in that case was estopped from relying upon that equitable remedy because he did not approach the Court with clean hands. The transfer of title was done for an illegal or improper purpose – to defeat a specific creditor, Revenue Canada.

[50] I agree with Justice Reilly that a resulting trust is an equitable remedy. I also agree that one should look at whether the claimant has clean hands. Further, I agree that one must examine the purpose for which the transfer of the property was done.

[51] With respect, I repeat, however, that the onus to rebut the presumption in law is on the transferee. Further, I am not aware of any authority for the proposition that an illegal or improper purpose for the transfer amounts to an automatic bar to the finding of a resulting trust. In fact, Nussbaum v. Nussbaum, 2004 23086 (ON SC), [2004], O.J. No. 3763 (S.C.J., per Karakatsanis J., as Her Honour then was) and Launchbury, supra suggest otherwise.

[52] In any event, two of the factors cited by Reilly J. as being important work against Ms. Draper in the case before me: (i) whether the creditor(s) was/were actually prejudiced by the transfer of title, and (ii) whether the transfer was designed to defeat a specific creditor. I return to this issue below.

Findings and Conclusion

[53] Although a resulting trust claim was not specifically pleaded by Mr. Holtby, except regarding the 50 acres, Mr. Carey quite responsibly did not ask that the claim be dismissed on that basis. It was clearly an issue from at least the outset of the trial, almost one year ago. There was absolutely no prejudice to Ms. Draper.

[54] I reject the argument by Mr. Carey that there can be no resulting trust applied to Knapton’s assets because there was no transfer of common shares from Mr. Holtby to Ms. Draper. The transfer of ownership of the farm’s assets from Mr. Holtby alone to Mr. Holtby and Ms. Draper was effected through a device – the creation of the farm corporation. The corporation was the conduit through which title/ownership of the farm’s assets was conferred on Ms. Draper, through common shares. That is no different than the common shares being formerly owned by Mr. Holtby and then some of them transferred to Ms. Draper. The manner in which the shares were issued in this case is similar to what happened in Paddock, supra, and both the trial judge and the Court of Appeal for Ontario in that case found that the resulting trust claim could be made.

[55] I reject the argument by Mr. Carey that Mr. Holtby is estopped from relying upon a resulting trust because he does not come to Court with clean hands. The Respondent relies primarily on the decision of Justice Reilly in Holland, supra. The judge in that case cited as an important factor to consider whether the creditor was actually prejudiced. Here, there is no evidence that any of Mr. Holtby’s creditors never got paid what they were owed as a result of the corporate reorganization. Reilly J. also cited as an important factor to consider whether the transfer of title was designed to defeat a specific creditor. Here, even Mr. Carey in final submissions stated that the corporate reorganization was designed to defeat the claims of Mr. Holtby’s creditors generally, including but not necessarily limited to Bonnie Holtby and Ms. W.

[56] Although it is debatable whether Ms. Draper paid money for the transfers of special Class B shares from Mr. Holtby to her, it is not debatable whether consideration was paid for the issuance of the common shares to the Respondent. There was no consideration for that. And those are the only shares that count towards ownership.

[57] Thus, the common shares of Knapton were issued to Ms. Draper gratuitously, in circumstances where it appears that the transferor, Mr. Holtby, did not intend for the transferee, Ms. Draper, to have a beneficial interest in Knapton’s assets. The presumption of a resulting trust, therefore, applies. The onus is on Ms. Draper to rebut that presumption on balance.

[58] She has failed to rebut the presumption. I have no doubt that Mr. Holtby never intended for a moment to actually confer on Ms. Draper beneficial interest or actual ownership of any of Knapton’s assets.

[59] Mr. Carey took me in final submissions to the transcript of Mr. Holtby’s cross-examination on April 22, 2015 (pages 8 through 11). I agree that, in isolation, that excerpt is capable of being interpreted as an acknowledgement by the Applicant that he thought at the time of the issuance of the common shares to Ms. Draper that those shares had some value.

[60] Evidence cannot be looked at piece-meal, however. The trial transcripts of Mr. Holtby’s testimony, both in answering questions from Mr. Clayton and in cross-examination by Mr. Carey, are replete with consistent and unequivocal references to him believing at the time that Ms. Draper was not becoming a true owner of anything. It was all a scam. In fact, Mr. Carey in closing submissions highlighted one of those very references – page 115 of the April 21, 2015 transcript.

[61] On the very first day of this protracted trial proceeding, on December 16, 2014, when we were not even dealing with anything except for the date of separation of the parties, Mr. Holtby testified that Mr. Emerson and Mr. Pickett were approached to roll Mr. Holtby’s personal farm assets in to a new corporation in order to judgment-proof Mr. Holtby and protect the farm from his creditors. He had no intention, he testified, to make Ms. Draper a “real” owner. He was never really shaken from that evidence.

[62] That evidence from Mr. Holtby, which evidence I accept, is consistent with how he had dealt with the farm with his first wife, Bonnie. And it is consistent with the primary objective of the corporate reorganization as identified in the handwritten notes of Mr. Pickett.

[63] It is true that Ms. Draper testified otherwise. She may have thought that she was becoming a beneficial owner of Knapton, but that mistaken belief, in my view, was not based on anything that Mr. Holtby told her, expressly or by implication. Her mistaken belief does not rebut the presumption of a resulting trust.

[64] It is also true that there was other evidence adduced at trial that Ms. Draper contributed money and manual labour to the household and to the farm operation. Further, in the words of Mr. Hardy, the parties were acting as a “team” and were behaving “cooperatively”. Again, that evidence does not rebut the presumption of a resulting trust.

B. Who Owns Lot 8, the 50 Acres?

The Positions of the Parties

[65] On paper, Ms. Draper is the sole owner of the 50 acres. Lot 8 was transferred from Mr. Holtby and Bonnie Holtby to Mr. Holtby and Ms. Draper, and then later from Mr. Holtby and Ms. Draper to Ms. Draper alone.

[66] Mr. Holtby submits that he is the actual owner of the 50 acres. He always has been. The property was formerly in the names of Mr. Holtby and Bonnie Holtby only for planning purposes (to avoid any merger with the adjacent land in the name of Mr. Holtby alone). Initially, Ms. Draper simply took the place of Bonnie. Ms. Draper then went on title alone as part of the same scheme to make things difficult for Mr. Holtby’s creditors. There was no consideration for that. The presumption of a resulting trust has not been rebutted by the Respondent.

[67] Ms. Draper submits that she paid consideration for her ownership interests in the 50 acres, both when she became a co-owner and later when she became the sole owner, therefore, there can be no successful resulting trust claim by Mr. Holtby. In addition, the Applicant does not come to Court on this issue with clean hands; he is, thus, disentitled to the equitable remedy of a resulting trust.

The Law

[68] There is no need to repeat here what is outlined above in terms of the legal principles applicable to a resulting trust. The discussion above applies equally to the 50 acres (Lot 8).

Findings and Conclusion

[69] The resolution of this issue largely mirrors that of Knapton’s assets.

[70] There is no question that nil consideration was paid for the transfer of the 50 acres from Mr. Holtby and Ms. Draper to Ms. Draper alone. The documents make that clear on their face. The property was transferred for nil consideration (“natural love and affection”).

[71] The onus is on Ms. Draper to rebut, on balance, the presumption of a resulting trust. She has failed to do so.

[72] I accept Mr. Holtby’s evidence that Lot 8 was transferred in to the name of Ms. Draper alone as part of the judgment-proofing scheme orchestrated by the parties. I accept Mr. Holtby’s evidence that he never intended to gift that property to the Respondent. He never intended for her to be the “real” owner of it. He never intended for her to acquire a beneficial interest in the 50 acres.

[73] The only thing that makes the 50 acres a little different than Knapton’s assets is that the initial transfer from Mr. Holtby and Bonnie Holtby to Mr. Holtby and Ms. Draper was for consideration.

[74] I find that Bonnie Holtby was on title to Lot 8 only for planning purposes – to avoid any merger with the adjacent farmland in the name of the Applicant alone. I accept the evidence of Mr. Holtby in that regard.

[75] I find, further, that Ms. Draper simply replaced Bonnie Holtby. Mr. Holtby went from being a joint owner of Lot 8 with his first wife to being a joint owner of Lot 8 with his new partner.

[76] I accept the evidence of John King, barrister and solicitor, that Ms. Draper went on title as a joint owner of the 50 acres for planning purposes.

[77] Finally, what consideration was paid for the transfer of the 50 acres to Mr. Holtby and Ms. Draper was not paid by Ms. Draper. On day nine of the trial (April 29, 2015), near the start of Ms. Draper’s evidence in chief, she testified that Mr. Holtby was the one who, in 1994, bought-out the half interest of Bonnie Holtby.

[78] Ms. Draper did not testify that she contributed any money for the transfer of Lot 8 from Bonnie Holtby and Mr. Holtby to Mr. Holtby and Ms. Draper. The Respondent’s only involvement was that she went on the mortgage with Farm Credit Corporation. She was not even sure that her net worth statement was necessary to obtain that mortgage. Because she was on the mortgage, she thought that she should also be on the title.

[79] I accept all of that evidence from Ms. Draper. None of it rebuts the presumption of a resulting trust. None of it is inconsistent with Mr. Holtby’s evidence that he never intended Ms. Draper to actually be an owner of Lot 8.

[80] Thus, even considering the first transfer of the 50 acres to Mr. Holtby and Ms. Draper, it was gratuitous vis a vis the Respondent. And the presumption of a resulting trust has not been rebutted by the Respondent.

[81] I accept that Ms. Draper paid the mortgage on Lot 8. That does not displace the finding of a resulting trust. It will, however, be accounted for as part of the analysis of Ms. Draper’s constructive trust claim.

C. Occupation Rent on the Matrimonial Home and Rent on the 50 Acres

The Positions of the Parties

[82] There is no serious dispute that, but for the resulting trust claims advanced by Mr. Holtby, Ms. Draper would be entitled to some compensation for the fact that Mr. Holtby (i) exclusively possessed the matrimonial home after separation in August 1999, and (ii) had exclusive use of the 50 acres for many years.

[83] In other words, Mr. Holtby’s submissions are twofold: (i) it is unnecessary for the Court to address the issues of rent because Mr. Holtby is and always has been the sole actual owner of the matrimonial home and the 50 acres, and (ii) if the Court does make an award in favour of Ms. Draper for occupation rent and/or rent on the 50 acres, it ought to be cautious about relying upon the opinion evidence of Mr. Zinn and arrive at lower, more reasonable amounts.

[84] There were two other arguments advanced by counsel for Mr. Holtby, both less serious and both highly technical in nature, to the effect that (i) Ms. Draper has no standing to assert her claim for occupation rent because the matrimonial home is, on paper, owner by Knapton, and there is no resolution of the directors of the corporation (the parties to this litigation) to authorize the bringing of the claim, and (ii) Ms. Draper waited too long to assert the claims for rent (the doctrine of laches).

[85] Ms. Draper’s counsel has calculated her claim for occupation rent on the matrimonial home at a total of $95,100.00, from 1999 to 2015, and the claim for rent on the 50 acres at a total of $80,626.50, from 1999 to 2015. The submissions made by Mr. Holtby against those claims are all rubbish (my word).

The Law

[86] Broadly speaking, occupation rent is a compensatory claim that applies in certain circumstances where property is matrimonial or a joint tenancy. The claim is based on an allegation that one spouse or joint tenant ought to be debited the value of his or her exclusive possession/occupation of the family or jointly-held home.

[87] The notion is that a straight division of the equity in the home would be unfair because one spouse has had the benefit of occupation of the home while the other was forced to vacate the home and pay for alternate accommodation.

[88] A claim for occupation rent is rarely advanced where the spouse who was in exclusive possession/occupation of the home foregoes any claim to be compensated for expenditures made to maintain the property post-separation.

Findings and Conclusion

[89] There is no basis for Ms. Draper’s claim for rent on the 50 acres because of my findings above. The Respondent has never been a true owner of Lot 8. She was never entitled to rental income.

[90] In addition, the application of the doctrine of resulting trust means that the matrimonial home, as with all of Knapton’s assets and the 50 acres, has always been, since the parties met, owned solely by Mr. Holtby. There is, thus, no basis for the claim for occupation rent regarding the matrimonial home. The Respondent had a right of possession in but has never been a true owner of the matrimonial home. She was never entitled to charge for occupation rent.

[91] Further, as Mr. Holtby is not claiming any reimbursement for the expenditures that he has made to maintain the matrimonial home since separation, Ms. Draper’s claim for occupation rent is not a reasonable one. The same applies to the 50 acres.

[92] I will deal with the uncontested reality that Ms. Draper paid the mortgage on Lot 8 under the discussion regarding constructive trust. The Respondent will be fairly compensated for that.

D. Equalization Payment

The Positions of the Parties

[93] Each party has prepared his/her version of a net family property statement (or equalization schedule, as Ms. Draper’s counsel labels it). I also have the benefit of a comparative (side-by-side) chart.

[94] Many of the values are agreed upon. A few are not. And much of the end result depends on whether Ms. Draper is an actual owner of Knapton’s assets and the 50 acres.

[95] According to Mr. Holtby’s figures, neither party owes anything to the other.

[96] According to Ms. Draper’s calculations, Mr. Holtby owes her the sum of $94,876.86.

The Law

[97] Subsections 5(1) and 5(7) of the Family Law Act provide as follows.

Equalization of net family properties

Divorce, etc.

5. (1) When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them. R.S.O. 1990, c. F.3, s. 5 (1).

Purpose

5. (7) The purpose of this section is to recognize that child care, household management and financial provision are the joint responsibilities of the spouses and that inherent in the marital relationship there is equal contribution, whether financial or otherwise, by the spouses to the assumption of these responsibilities, entitling each spouse to the equalization of the net family properties, subject only to the equitable considerations set out in subsection (6). R.S.O. 1990, c. F.3, s. 5 (7).

[98] Subsection 5(7) is consistent with the preamble of the legislation, reproduced below.

Preamble

Whereas it is desirable to encourage and strengthen the role of the family; and whereas for that purpose it is necessary to recognize the equal position of spouses as individuals within marriage and to recognize marriage as a form of partnership; and whereas in support of such recognition it is necessary to provide in law for the orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership, and to provide for other mutual obligations in family relationships, including the equitable sharing by parents of responsibility for their children;

Findings and Conclusion

[99] No treatise is required here.

[100] In my view, where the net family property statements of the parties differ, but for the ownership of the assets dealt with above, I prefer the calculations submitted by Ms. Draper. They are more in accordance with the evidence at trial.

[101] Except for the ownership of the assets dealt with above, I adopt the comments made by Mr. Carey in his document submitted during final submissions – the checklist of differences between the statement filed by the Applicant and that filed by the Respondent and the reasons why the latter ought to be preferred.

[102] Reasons for judgment are written largely for the benefit of the unsuccessful side. I doubt that Mr. Holtby takes much issue with the calculations put forward by Ms. Draper (except of course the ownership of the assets dealt with above). In closing submissions, quite properly, Mr. Clayton spent virtually no time on the equalization payment issue.

[103] I need say nothing more. Counsel can do the calculations. They will result in Mr. Holtby owing money to Ms. Draper. An Order will issue that he pay to her the sum that is calculated by counsel.

E. Constructive Trust

The Positions of the Parties

[104] This issue was not addressed explicitly by Ms. Draper’s counsel in closing submissions, however, it was dealt with by Mr. Clayton and was treated as a live issue throughout the trial (essentially as an alternative argument made by Ms. Draper in the event that the Court accepted the resulting trust submissions made by Mr. Holtby).

[105] Presumably, the position of Ms. Draper is that she enriched Mr. Holtby’s farm operation and ought to be compensated, by a monetary payment, for those contributions, financially and in labour.

[106] Mr. Holtby asserts simply that the test for unjust enrichment has not been met by Ms. Draper.

The Law

[107] In essence, a constructive trust is an equitable remedy that is designed to prevent a situation where the wrongful holder of property is unjustly enriched. By “wrongful”, I simply mean that there are circumstances existing which cause one to conclude that it would be unfair for that person to be considered the sole legal and beneficial owner of the property in question.

[108] To ground a constructive trust claim, the party advancing the argument must prove on balance that the other person has been unjustly enriched – enrichment of the other person, coupled with a corresponding deprivation suffered by the claimant, all in the absence of a juristic reason. If that is made out, monetary damages will most often be sufficient. Otherwise, in relatively rare instances, it may be necessary to attach a constructive trust interest in favour of the claimant against the property itself. Martin v. Sansome, 2014 ONCA 14, citing Kerr v. Baranow, 2011 SCC 10.

Findings and Conclusion

[109] Ms. Draper must be compensated for what she paid against the mortgage on Lot 8, the 50 acres. That is only fair. Mr. Holtby does not dispute that.

[110] That compensation can be awarded on the basis of unjust enrichment. By making those mortgage payments in the absence of being an actual owner of the property, Ms. Draper clearly is out of pocket and clearly benefitted the Applicant. She was under no obligation to make those payments.

[111] Counsel can calculate the total amount paid by Ms. Draper. Whatever that sum is, an Order will issue that Mr. Holtby pay that amount to Ms. Draper.

[112] Further, both in cross-examination and in re-examination at trial, Mr. Holtby admitted that, besides mortgage payments, Ms. Draper made several payments from her own money towards property taxes on Lot 8. Those payments are no different than the mortgage payments, and the total sum of those amounts (to be calculated by counsel) shall be added to the Order referred to in the immediately preceding paragraph herein.

[113] Otherwise, any claim by Ms. Draper to be reimbursed money for expenses that she paid or contributed to while in a relationship with Mr. Holtby, such as those documented throughout Exhibit 8 at trial, cannot be realized through some version of a constructive trust. To her credit and that of Mr. Carey, no express argument on that vein was made at trial by or on behalf of the Respondent.

[114] Simply put, there was no unjust enrichment. This was a blended family. Ms. Draper paid for certain things. Mr. Holtby paid for certain things. It is “a wash”.

IV. SUMMARY

[115] What happened here was a scam from the very start. Both parties knew full well that the whole point of the transfer of the 50 acres to Ms. Draper alone, the creation of the farm corporation and the issuance of the shares was to try to judgment-proof Mr. Holtby. Those things were done for the predominant purpose of keeping Bonnie Holtby and Ms. W. at bay. They were done to frustrate the claims of Mr. Holtby’s creditors generally, including those already materialized on the part of Bonnie and, even more important, those about to be launched by the victim of Mr. Holtby’s sexual impropriety, Ms. W.

[116] Why in the world would this Court effectively endorse such conduct? I refuse to do so. The plot needs to be undone.

[117] It would likely be different if I found that the common shares were issued to Ms. Draper for some consideration. They were not.

[118] It would likely be different if I found that Mr. Holtby intended for Ms. Draper to become an actual owner of Knapton. He did not.

[119] Ms. Draper was not duped by Mr. Holtby. And he was not duped by her. They both participated, equally, to concoct the scheme that was put in to place by Mr. Emerson and Mr. Pickett. Why else would the parties go to Mr. Emerson, a disbarred lawyer? Because they knew that what they were doing was, let us say, distasteful. It was distasteful not so much because they were trying to defeat the barbarians at the gate, Bonnie Holtby and Ms. W. and anyone else who was owed money by Mr. Holtby, but because none of the scheme would have even been contemplated but for that objective.

[120] They both benefitted from the scam. Mr. Holtby delayed recovery by his creditors, temporarily. And Ms. Draper kept her life with her husband, on the farm.

[121] Mr. Holtby did not intend for a second that Ms. Draper would end up owning half of everything that he had. He had already spent years protecting his assets from Bonnie Holtby, both while they were together and afterwards.

[122] This case does not turn on credibility findings. Both parties have warts on their credibility. For example, Mr. Holtby deliberately understated the work that Ms. Draper contributed to the farm. Ms. Draper had great difficulty explaining two affidavits that were sworn in support of transactions involving the 50 acres and Highfield House.

[123] I may accept all, some or none of what a witness says. I certainly do not accept everything that Mr. Holtby stated in his evidence at trial. Some of it, like the assertion that Ms. Draper worked about as much on the farm as the milkman (my expression), is absurd. But I accept, without reservation, his evidence that he never intended for Ms. Draper to own his assets. That is Ken Holtby. That is consistent with the extrinsic evidence. Even Mr. Pickett was concerned about these transfers being attacked as fraudulent conveyances. That concern was not just because they were being done to defeat the claims of creditors but because there did not seem to be any bona fide intention on Mr. Holtby’s part to actually confer any real ownership on Ms. Draper.

[124] Yes, it is true that Mr. Pickett’s handwritten notes show that there were other objectives to the corporate reorganization. And yes it is true that he did not testify that the goals were recorded in any particular hierarchy of importance. I do not accept that evidence. Further, the goal of protecting Ms. Draper’s investment makes no sense. What investment? Most of the money that she contributed to the household was expended after the parties approached Emerson and Pickett.

[125] Mr. Carey argues that the Court should not give a windfall to Mr. Holtby. More important, I ought not to turn a blind eye to what was done here. Besides, there would have been a windfall the other way if the Court accepted the arguments advanced by the Respondent. After a relatively short marriage, she would have ended up with sole ownership of the 50 acres, half of everything else and a great deal on Highfield House.

[126] The resulting trust claims by Mr. Holtby must succeed.

[127] I conclude that Mr. Holtby is and (since before meeting Ms. Draper) always has been the sole owner of all of Knapton’s assets and of Lot 8, the 50 acres.

[128] Consequently, Ms. Draper’s claims for rent are dismissed. She was never entitled to any rent on the matrimonial home and/or on the 50 acres because Mr. Holtby was then, and is now, the sole owner of those pieces of real property.

[129] Mr. Holtby shall pay to Ms. Draper an equalization payment in the amount calculated by counsel in accordance with these Reasons for Judgment.

[130] Ms. Draper’s claim for a constructive trust is allowed in part, in accordance with these Reasons for Judgment.

[131] Upon receipt of these Reasons for Judgment, counsel shall contact the Trial Coordinator in Owen Sound, Ms. Maura Reilly, to schedule a teleconference to discuss any outstanding issues, costs (presumed to be in favour of Mr. Holtby as the largely successful party) and interest.

[132] One issue has come to my mind which I did not hear any direct submissions on by counsel and about which I am prepared to hear further from Mr. Clayton and Mr. Carey, unless of course the matter is resolved between the parties. It is the fact that Ms. Draper appears on the evidence to have paid money for the transfer of special Class B shares in the farm corporation from Mr. Holtby to her. I recognize that Mr. Holtby takes the position that the monies advanced from Ms. Draper to him around the times of those transfers were not specifically for the shares, however, I have some difficulty accepting that evidence. Although I agree with Mr. Clayton that we have to be cautious about placing too much reliance on the dates of various documents related to the corporate reorganization (because some things plainly on the evidence did not happen when the documents state on their faces they happened, and further because some of the documentation was not intended to be acted upon at all, such as Exhibit 36), it appears to me to be far too coincidental that Ms. Draper just happened to advance funds to Mr. Holtby at or around the times of those transfers of the special Class B shares and in amounts equal to or very close to the amounts that are consistent with what would have been paid for the transfers. If it is accepted that the funds were paid by the Respondent specifically for those transfers, which I think makes sense, then it would seem that Ms. Draper, given my conclusion that she was never an actual owner of Knapton’s assets, ought to be paid back those amounts by Mr. Holtby. I would entertain further submissions from counsel on that distinct issue.

[133] In the event that the parties settle those matters on their own, which I encourage them to do, the teleconference will be unnecessary. If it is not scheduled by the end of this year, I will assume that the remaining issues have been resolved.

[134] If there is any dispute about the form and/or content of the Final Order to be issued as per these Reasons for Judgment, I may be spoken to.

[135] I thank both counsel for their assistance throughout. And I commend the parties for being patient, polite and respectful with the lawyers and with the Court during our time together.

Conlan J.

Released: November 18, 2015