CITATION: Kavanagh v. Lajoie, 2016 ONSC 1706
COURT FILE NO.: 11-51981R
DATE: 2016/03/14
SUPERIOR COURT OF JUSTICE – ONTARIO
In the matter of the Partition Act, R.S.O. 1990, c. P.4
RE: LAURIE KAVANAGH, Plaintiff
AND:
MARK LAJOIE, Defendant
BEFORE: MASTER MACLEOD
COUNSEL: Andrew D. Ferguson, for the Plaintiff
Claude Alain Burdet, for the Defendant
REASONS FOR JUDGMENT
[1] These are my rulings on a reference ordered by The Honourable Mr. Justice Kane under the Partition Act. The dispute concerns property located at 299 Oakdale Avenue in Ottawa (“Oakdale”). The parties are brother and sister and until it was sold they were the registered owners of the property. Justice Kane ordered the plaintiff to account to the court for rents collected between April 15th, 2008 and January 15th, 2013. The accounting and any issues arising from the accounting were referred to the master.[^1]
[2] It is important to understand my limited remit as referee. My only task is to determine if the plaintiff (“Laurie”) has properly accounted for the rental revenue and then to make adjustments to the share of each party in the proceeds of sale. The property has been sold and the court has determined that the net proceeds are jointly owned. I need not concern myself with the allegations of undue influence or lack of capacity which were rejected by Justice Kane. I am not charged with auditing the bank records or the financial affairs of Laurie, her father and her aunt. Only the rental receipts are in issue in this proceeding.
Background Facts - The Oakdale Property
[3] The factual background, the history of the property and the reasons that the defendant (“Mark”) believed he was deprived of part of his inheritance are set out at length in the trial decision and in a decision of the Court of Appeal.[^2] The findings of fact made by Justice Kane are binding on the parties and must be taken as accurate. I will touch on them only to give context to the reasons.
[4] Briefly, the Oakdale house originally belonged to Margaret Hand (referred to throughout the proceeding as “Aunt Nellie”). Aunt Nellie gave the property to Donald Lajoie, the father of Mark and Laurie, in approximately 2003 when she moved into Grace Manor, a senior’s residence. Apparently Mr. Lajoie (“Donald”) viewed the property as security in case Aunt Nellie’s needs should ever exceed her means.
[5] In fact it appears that when Aunt Nellie entered Grace Manor, she gave or entrusted all of her property to Donald. This consisted of the Oakdale property and her bank accounts. I will return to the bank accounts momentarily. In any event the Lajoie parents became the owners of several properties including Oakdale. Those properties are dealt with at length in the Kane reasons but only Oakdale need concern us for purpose of these reasons.
[6] Mark had reason to believe that he would ultimately become the owner of the Oakdale property. At an earlier date, his parents had gifted a different home to Laurie. They had also promised to give Mark a property if he returned to Ottawa and Mark had been given a half interest in Oakdale. As a joint tenant with his father, he had reason to believe he would ultimately inherit the entire property by right of survivorship.
[7] At some point Donald changed his mind. There were various reasons for this discussed in the Kane judgment but it is worth noting that Mark was living in Calgary and had never invested any money in the property. In his later years, Donald was living with Laurie and her husband, Matthew Kavanagh (“Matthew”). Laurie and Matthew assisted Donald in various ways. In any event Donald ultimately took unilateral steps to sever the joint tenancy with Mark and to convey his own half interest to Laurie. Mark was upset and disappointed when he found that upon his father’s death he was only a co-owner of property owned jointly with his sister.
Procedural History – the application and the action
[8] Donald passed away in June of 2010 and Aunt Nellie passed away in January of 2011. Litigation between Laurie and Mark commenced in July of 2011. The procedural history is slightly complicated but I need to sketch it out in order to be make clear the issues that have been stayed, the issues that have been decided and the only issues I am directed to address on the reference.
[9] On July 29th, 2011 Laurie commenced an application under the Partition Act (Court file no. 11-51981) seeking sale of the Oakdale property. On the same day, Mark commenced an action. In the action he accused Laurie of draining the bank accounts of Aunt Nellie and Donald thus diminishing the estate and he sought to annul the transfers by Donald severing the joint tenancy and transferring a half interest in Oakdale to Laurie. (Court file 11-51977).
[10] On November 29th, 2011 the matter came before Justice Kane for the first time. It was apparent that the Partition Act application could not proceed until the validity of Laurie’s interest as co-owner was determined. At the same time there was some urgency to the matter because the property was vacant and had ongoing carrying costs. In the view of the judge, it was neither just nor efficient to postpone determination of that question until all of the issues raised by Mark in his action were determined. Consequently, Justice Kane stayed much of the action including the portion of the action dealing with misappropriation of Aunt Nellie’s and Donald’s bank accounts. He directed trial of the ownership issue with the Partition Act relief to be considered thereafter.[^3] He also made certain costs awards.
[11] The order for trial of an issue made Laurie the plaintiff and Mark the defendant. Although the order stayed overlapping portions of Mark’s action, there is no doubt that the issues to be tried were the allegations in Mark’s action which were the basis for challenging Laurie’s ownership of half the property.[^4]
[12] The trial of those issues ultimately took place before Justice Kane over several dates in 2011 and 2012. Judgment was given in January 2013.[^5] The result was that all allegations by Mark in connection with enforceability of an inter vivos promise, undue influence or lack of capacity were dismissed. Justice Kane found that Donald had full mental capacity at the material time and that Laurie did not exercise undue influence over him. However justified Mark may have been in expecting he would receive full ownership of Oakdale, his expectation did not become a legal right. He was entitled only to his 50% interest in the property as a tenant in common with Laurie who was confirmed as owning the other 50%.
[13] Kane J. then went on to make a finding about the manner in which Laurie had managed the property without consulting her brother and he ordered her to account for the rental revenue before the master.
[14] It should be noted that this was an order to account to the court for the rental revenue and the expenses based on his finding that despite Mark’s ownership interest, she never “considered it necessary to consult him or account to him regarding the property”. In doing so he did not make any finding that the parties were in a fiduciary relationship. To the contrary, he held that simply being joint tenants did not constitute parties as fiduciaries.[^6] The duty to account in this case flows simply from the fact that Laurie was in control of the rent cheques. Unless the rents were used for legitimate expenses as defined by Justice Kane, Mark was and remains entitled to half of the rental revenue.
[15] At the first hearing, Justice Kane had ordered Laurie to continue paying the carrying costs of Oakdale but he had also ordered Mark to pay 50% of the estimated costs into trust. Those carrying costs and Mark’s contribution are also to be addressed in the reference.
[16] Despite Mark’s initial objection to a court ordered sale, perhaps because of the ongoing carrying costs, the parties had agreed to list and sell the property. By the time of the trial, the sale had closed and net proceeds of $388,753.00 were frozen. Justice Kane held that subject to certain adjustments to be made following this accounting, those proceeds were to be equally divided.[^7]
[17] A formal order directing the reference and dated April 25th, 2013 was taken out in October of 2013. In the meantime however, an appeal had been launched. The appeal was heard and dismissed in March of 2014.[^8]
Procedural History - The Reference
[18] Because of the appeal, the reference did not get under way until July of 2014 when the parties appeared before me for a Hearing for Directions pursuant to Rule 55.02. Ultimately after a number of hearings for directions, all evidence was received and final argument was made before me on August 7th, 2015.
[19] On an accounting, the normal procedure is for the person with the duty to prepare a set of accounts. Those accounts should show what revenues were received and how the funds were disbursed. The opposing party will then be invited to accept the accounts or to make a particularized objection.[^9] If that party remains unsatisfied then a hearing is held. The procedure I adopted was a simplified version of that set out in the rule.
[20] In this reference no evidence was presented by Mark or anyone other than Laurie. Laurie prepared an accounting of revenue and an accounting of expenses. In response to questions and objections by Mr. Burdet she then prepared a further accounting for expenses and an affidavit dated July 16th, 2015. At the hearing in August she gave oral evidence and she was cross examined. So there is no competing evidence as such. Laurie’s evidence, documentation and explanation must simply be assessed to see if it is wanting.
[21] It is worth noting that in paragraphs 73 and 74 of his judgment, Justice Kane found that Mark had no evidence that any of the Oakdale rental income was used for anything other than the Oakdale property costs and Aunt Nellie. He also found that Mark had never paid anything towards Oakdale expenses since moving to Regina and had left the maintenance and cost issues to his father and Laurie.
[22] The sole task of the court on this reference is to determine whether or not Laurie has met the burden of accounting for the collection and disbursement of the rents. I must take into account her evidence, the documents and the objections raised on behalf of Mark.
[23] Before turning to my findings, some additional facts are necessary
Background – the rental of Oakdale
[24] The Oakdale property was vacant during some of the relevant period of time and Mark had been pressuring his father to sell it. Donald did not want to sell but he ultimately decided to put in tenants.[^10] It was rented to tenants from April 15th, 2008 more or less continually until April 30th, 2011. The rent was originally $1100 per month and rose to $1200. Laurie was responsible for collecting the rents and depositing the funds into the bank.
[25] As ultimately found by Justice Kane, Donald’s purpose in renting Oakdale was to generate cash flow to defray the costs of Oakdale, a van loan and the expenses of Aunt Nellie. Justice Kane found that these were legitimate expenses to charge against the rents. To the extent that the rent was not used for these purposes, Mark (as joint owner) would be entitled to 50% of the rent. This is the basis for the accounting. No funds were ever paid to Mark prior to February of 2011.
[26] Justice Kane found that the rents were handled with complete disregard for the fact that Mark was a half owner of the property. He found that Laurie was oblivious to such a duty and never thought it necessary to consult Mark or to account to him. It might be said that the same was true of Donald when he was alive. Donald decided to rent out Oakdale to defray his expenses. He did not consult Mark. On the other hand Mark was never asked to contribute to the expenses and will have nothing to complain about if the expenses were more than the rent.
[27] In fact the expenses identified by Justice Kane did exceed the rent by a considerable amount. During the period in question Aunt Nellie’s cost of care in Grace Manor alone was over $2,100.00 per month and she had other expenses as well. The van payments were $519.00 per month. Laurie’s calculation of the expenses of Oakdale during the relevant period totals $26,684.49. There can be no doubt that if all of the rents had been deposited into one bank account and if all of these expenses were drawn from that bank account, the expenses would exceed the rent and there would be no surplus. But that is not what was done.
Background – the Banking Arrangements
[28] The banking arrangements between Laurie and her father are important. They form an important part of the narrative and are key to understanding the argument advanced by Mark’s lawyer that Laurie appropriated the rents.
[29] Laurie had a power of attorney for Donald though it is not clear that the power of attorney was ever used or activated because Donald remained competent until his death in June of 2010. As parents often do, rather than going through the formalities of acting under a power of attorney, Donald simply made his bank account a joint account. He did the same with Aunt Nellie’s bank accounts. Thus Laurie had signing authority on Donald’s bank account and also on at least two of Aunt Nellie’s accounts.
[30] Donald had access to three main bank accounts which were referred to by Laurie in her evidence as accounts #1, #2 and #3. Those accounts were as follows.
[31] “Account #1” was Donald’s own chequing account at the Bank of Montreal, no. 3056-3124-107. Ultimately this was a joint account in the name of Donald and Laurie. Into that account each month went Donald’s OAS, CPP, OMERS pension and payments from a RIF. There may have been other sources of income but those four deposits appear to have totaled roughly $1,400.00 per month. Rent cheques were also deposited here.
[32] “Account #2” was Aunt Nellie’s account at the Bank of Montreal. In fact there were two accounts there, a chequing account, no. 0356-8059-180 and a savings account, no. 0356-8074-006. These became joint accounts in the name of Margaret (Nellie), Donald and Laurie. Aunt Nellie’s OAS and CPP went into the chequing account each month. The total of those two deposits was roughly $930.00. One rent cheque went into that account and the van payments came out of that account.
[33] “Account #3” was Aunt Nellie’s account at CIBC, account no. 77-02337. Into that went Aunt Nellie’s cheque from the Bank of Canada; shown as salary but I presume it was a pension. In any event there was a monthly deposit of roughly $1,127.00. That account is also important because the monthly fee to Grace Manor of $2,166.58 came out of that account. Though it is not shown as a joint account, Donald and Laurie could access it. Several rent cheques were deposited to that account.
[34] In addition to these accounts, Laurie’s had her own chequing account at PC Financial (CIBC). As I will discuss, two rent cheques went into Laurie’s account. Matthew and Laurie also had credit cards. Matthew had a visa and perhaps a mastercard. Laurie also had a mastercard. I will refer to these simply as “Laurie’s bank account” and the “Kavanagh credit cards”.
[35] There was no Oakdale bank account and no formal system of record keeping for the property. Notwithstanding it being rented for three years, it does not appear to have been set up along business lines. I am not aware of who if anyone accounted for the income and expenses on his or her tax returns. Money was sometimes transferred between accounts 1, 2 & 3 and between those accounts and the Kavanagh credit cards. This does not necessarily mean anything sinister but it does raise significant difficulties for Laurie attempting to account for the rents years after the fact.
[36] An example of this is the van that Donald purchased for himself using money from Aunt Nellie’s account. The regular van payments came out of Account no. 2 ($519.00 per month). When Donald lost his driver’s licence he transferred the van to Laurie. Justice Kane held that the van loan was a legitimate expense and until Donald’s death it would be considered an appropriate use of the rental revenue. Apart from one cheque however, rent cheques were not deposited into account number 2 and so they were not used directly for the van expenses.
The amounts in dispute
[37] The parties were able to narrow the issues somewhat. It is undisputed that rent was collected between April of 2008 and May of 2011 and the total amount of the rent was $41,450.00. Of that amount, three cheques totaling $3600.00 between February of 2011 and May of 2011 were divided between Laurie and Mark and Mark was paid $1,800.00. So the amount to be accounted for is $37,850.00. It is important to bear that in mind. The most that Mark can be entitled to is one half of this amount or $18,925.00 and that only if none of the rents were used for expenses.
[38] In the period after Donald and Nellie died, Laurie claims to have incurred expenses of $9,946.37 for which she has not been reimbursed. These are for carrying costs of the property incurred by Laurie up until the time of sale. She was ordered to front these costs from the date the application was returnable in December of 2011 but Mark was ordered to pay half of the estimated costs into trust with the plaintiff’s lawyers. They continue to hold $4,117.00 paid by Mark. Thus if Mark is required to pay half of the $9,946.37, he is only short by $856.19.
[39] It is important to keep these modest amounts in perspective. Rule 55.01 requires that the referee devise and adopt the simplest, least expensive and most expeditious manner of proceeding having regard to the issues and amounts in dispute and the directions contained in the order directing the reference.
[40] Justice Kane ordered Laurie to account for all of the money she collected in rents. Against those rents she is entitled to charge any amounts disbursed for the expenses of Oakdale, van payments incurred up to the date of Donald Lajoie’s death and any expenses incurred for Aunt Nellie. Any rental income received and not accounted for is to be the responsibility of Laurie and constitute a debit against her share of the proceeds of sale. Justice Kane further provided that any disbursements for the benefit of either Laurie or Mark or their families would form a credit in favour of the other and finally that Laurie was entitled to a credit for any unreimbursed costs of Oakdale she had paid personally.[^11]
Accounting
I – The revenue
[41] As outlined above, it is undisputed that the total amount of the rent collected during the period was $41,450.00. I am satisfied that the index to the “Accounting of Revenue” (Exhibit B) reflects the receipt of these funds and accurately reflects the accounts into which the rent cheques were deposited. Three of those cheques totaling $3,600.00 were divided between Mark and Laurie and need not factor into the accounting. This leaves a total of $37,850.00 to be accounted for.
[42] The schedule is supported by the bank records and it shows that with four exceptions all of the rental receipts were deposited to Donald’s account (#1) until May of 2010 then to Aunt Nellie’s CIBC account (#3) until January of 2011. One exception was the rent cheque for June of 2010 which was deposited to Aunt Nellie’s BMO account (#2). I consider that revenue sufficiently accounted for. That leaves three rent cheques totaling $3,600.00 which Laurie did not deposit directly to accounts 1, 2 or 3.
[43] It is Laurie’s evidence that she used the rent for May 2011 to pay towards the property taxes. She also acknowledges that on two occasions the rent cheques went into her own bank account. She says this was by accident.
[44] With respect to the September 2010 payment, it is Laurie’s evidence supported by the bank records that she transferred $679.40 into Aunt Nellie’s account (#3) and withdrew $500.00 in cash from her account. She believes she put the $500.00 in Aunt Nellie’s petty cash envelope. In the case of the November deposit, it is her evidence that she withdrew $1,000 in cash and believes she used it to pay for Aunt Nellie’s wheelchair.
[45] Clearly Laurie collected the full amount of the rent. Of the $37,850.00 she must account for, $2,920.60 ($3,600.00 - $679.40 transferred to Aunt Nellie’s account) was deposited to Laurie’s account rather than one of the others. $1,200.00 which was the final rent cheque was taken by Laurie to apply to property taxes. This is $4,120.60 in revenue which did not go into one of the three joint bank accounts.
II - Expenses
[46] The second question is whether all of the claimed expenses were incurred for one of the purposes described by Justice Kane. Those are expenses of Oakdale, expenses of Aunt Nellie and the van expenses until Donald’s death.
Oakdale Expenses
[47] In her accounting for expenses, Laurie has produced records showing expenditures for Oakdale totaling $26,684.49. Many of these are not contested by Mark at all. He is satisfied that the expenses were necessary and were incurred from a bank account into which the rent cheques were deposited. The contested amounts total $10,732.67 and are summarized in the notice of objection.
[48] There was no set of books for Oakdale or for Aunt Nellie’s expenses. Laurie did keep some “ledgers” or notes which she has been able to produce but these are neither continuous nor are they verifiable. They certainly do not meet any kind of recognized bookkeeping standards. In that regard, I do not think it reasonable ex post facto to hold Laurie to professional accounting standards since the parties were not operating a business and Mark never made any demand for information while all this was going on. Nevertheless it is Laurie who has been ordered to account and if she is not able to satisfactorily demonstrate the purpose for which an expense was incurred, any doubt must be resolved in favour of Mark.
[49] Dealing only with the Oakdale expenses, I am satisfied that they were all incurred for the benefit of the property. In the books of documents entitled accounting of expenses and supplementary documents, Exhibits C, D, H & I together with Laurie’s affidavit and her oral evidence, there is proof that the contested expenses were paid. She has produced credit card statements, cheques, invoices and other source documents to show that expenses such as taxes, insurance and utilities were owing and were paid either directly out of one of the three bank accounts or were paid out of Laurie’s account or using one of the Kavanagh credit cards.
[50] Some of the items claimed such as payment of utilities or taxes are rejected on the basis that Laurie’s evidence was the tenants paid the utilities and the taxes were paid from Aunt Nellie’s account. Laurie has attempted to answer these objections in her affidavit. For example there were months in which there were no tenants. The property taxes when they were due exceeded the rent for that month and so the funds had to come from other sources. Clearly it is not necessary for there to be a temporal match between the revenue stream and the incurred expenses. The question is whether or not the expenses were legitimately incurred and can be properly charged against the rents.
[51] Notwithstanding the level of disorganization that originally existed, I am satisfied on the evidence that the expenses as listed were paid. I include in this total, the two contested expenses for an appraisal of the property and to change the tax rolls. These are legitimate expenses of preparing Oakdale for sale. Thus I accept that $26,684.49 was required for the upkeep of Oakdale during the period in question.
Aunt Nellie’s Expenses
[52] There is no doubt that there was a monthly expense for Aunt Nellie’s upkeep in Grace Manor. This was $2,161.71 per month. As noted above, this was debited directly from account no. 3. From June of 2010 to January of 2011 the total of those expenses was $15,131.97. Laurie has also shown that she paid $930.98 for a wheelchair and associated expenses for Aunt Nellie.
[53] Laurie also testified that she provided Aunt Nellie with “petty cash” in petty cash envelopes. I do not doubt that Aunt Nellie had incidental expenses but there is no clear record of what amount was spent let alone the source of the funds. At tab 23 of Exhibit I is a photocopy of a handwritten set of notes entitled “Aunt Nellie”. It purports to show over $2,000.00 “to envelope” in the space of three months. In addition there are amounts shown as Grace Manor “trust” which presumably are funds paid to a Grace Manor petty cash account for Aunt Nellie. Even without regard to the credibility findings made by Justice Kane and without applying s. 13 of the Ontario Evidence Act, this is not adequate to account for cash withdrawals. While I do not doubt that money was spent for Aunt Nellie for incidentals, Laurie has failed to prove the amounts with any degree of precision and I am not entitled to simply make an allowance or a guess.
[54] The evidence substantiates $16,062.95 paid on behalf of Aunt Nellie after the rents began to be deposited into her accounts. Obviously the amount would be far greater if I considered Aunt Nellie’s expenses back to April of 2008. It appears however that prior to June of 2010 she was covering her expenses from her own resources and not the rents.
Van expense
[55] Laurie does not address the van expense in her affidavit. Justice Kane held that the van expense was a legitimate expense to be funded by the rents up until the death of Donald in June of 2010 and not thereafter. The bank statements show that $519.00 per month came out of Aunt Nellie’s account (no.2) each month to “DCSERVICESCANADA” – that is Daimler Chrysler Services Canada. That amount from the time when the rents began to be collected would have been $13,494.00. Apart from the one time that a rent cheque went into this account in June of 2010, no rents went into account no. 2 so it does not appear the rents went directly to van expenses. But there is no doubt the van expenses were paid from Account no. 2.
III – Source of Funds
[56] Mark alleges that Laurie has been enriched by draining the bank accounts and this is part of the litigation that was stayed by Justice Kane. It is to be the subject of an upcoming pre-trial. In the meantime, it is not my task to audit the bank accounts nor to trace funds withdrawn by Laurie or transferred to her by her father.
[57] Mark’s challenge to the accounting is a variation on this theme. He argues that expenses were paid from Aunt Nellie’s account while rents were deposited into Donald’s account and then withdrawn by Laurie. Thus he argues that the rents were not used for the expenses but to enrich Laurie while Aunt Nellie’s bank account was drained. In other words the expenses do not match the revenues. They were paid by Aunt Nellie and not out of the rents.
[58] It is evident that the expenses for Oakdale and the proven expenses for Aunt Nellie even without considering the van payments exceed the amount collected for the rents. Of course there were also other funds flowing into these accounts and in some cases transfers of funds between the accounts. It would be a forensic exercise of some complexity not to say a fool’s errand to try to show definitively whether a particular source of funds was used for a particular expenditure. It is not necessary to do so. With respect to the accounting, we know where the rent cheques went. All Laurie has to show is that the expenses coming out of each account exceeded the amount of the rent going into that account.
[59] For purposes of this exercise, on the revenue side, I am prepared to conclude that Laurie cannot account for $2,920.60 deposited into her account by accident and she cannot show clearly that she used the final rent cheque of $1,200.00 to pay taxes.
[60] With respect to Account no. 2, one cheque of $1,200.00 was deposited into that account and all of the van payments came out of that account. I therefore conclude that that cheque was used for van payments and none of the other van payments came out of the rent.
[61] With regard to Aunt Nellie’s expenses, the rent deposited into Account no. 3 was $7,879.40 and Aunt Nellie’s expenses during that period exceed that amount. Thus those rent cheques are fully accounted for as well.
[62] This leaves the amount of $27,050.00 which was deposited into Donald’s bank account. Here is the nub of the problem. Money moved constantly from Donald’s account to the Kavanagh credit cards but as pointed out by Mr. Burdet occasionally funds also moved from Account no. 2 or Account no. 3 and expenses were definitely paid from time to time from the other accounts. In particular the property taxes were paid from Account no. 3.
[63] Mr. Burdet prepared a summary document in which he attempted to analyze the evidence about expenses that were paid and monies transferred between Donald’s account and the two Aunt Nellie accounts. In that analysis he attempts to show that Laurie enriched herself to the tune of approximately $28,000.00 through amounts transferred from the accounts of Donald Lajoie and Margaret Hand. There are two problems with this.
[64] Firstly, as I have repeatedly pointed out, I am not seized with the question of whether it was legitimate to treat the three accounts as a common pool of funds. Secondly if we start down that road, it seems to me it would have to work both ways. To the extent that an expense was paid out of Aunt Nellies’ accounts and not out of the rents then surely the account could be legitimately reimbursed from the account into which the rents were paid. As the total expenses exceeded the total of the rents, this is a bit like a dog chasing its tail.
[65] In any event the Burdet analysis fails to consider that in each of these accounts there were other sources of funds besides the rents and fails to consider that Donald made his own decisions and gave his own directions. He transferred funds to his daughter for other purposes than these expenses and he had expenses of his own. Donald was living with the Kavanaghs and was not paying rent. It is Laurie’s evidence that he sometimes paid for expenses or made gifts to her.
[66] Justice Kane has already found that the plaintiff did not exercise undue influence over her father. The plaintiff testified that she and her father did not keep accounts but if he felt she had incurred an expense he thought should be reimbursed he did so generously. Importantly, it is her evidence that her father was at all times competent and he either wrote cheques himself or instructed her to do so. It was her evidence that none of the transfers of funds were spontaneously done by her and if funds were transferred, it was on the specific instructions of her father.
[67] In her affidavit Laurie has explained that she and her husband frequently used their credit cards or their personal funds to pay expenses of Oakdale or for the needs of her father when he was living with them. Donald would then provide her with money but they never maintained any kind of books of account. As Laurie deposes, “my father and I did not keep track of what expenses were being “re-paid” or “reimbursed”. She adds “we did not behave in that manner and did not rely on any accounting method to determine what was paid.” It is her evidence that her father would often provide her with money. He would direct her in general terms what to use the money for. “My family looked after my father and provided the normal upkeep of Oakdale when my father was unable to do so.
[68] Of course the problem with this is that it is all very well for Donald and Laurie to have adopted a loose and flexible arrangement but it ignores any duty to account to Mark. What is clear from the evidence is that there was a co-mingling of the rent money with the funds owned by Donald and a co-mingling of expenses for Donald and for Oakdale with Laurie’s own household expenses. For example the property insurance for Oakdale which shows Laurie and Mark as the insured persons was mailed to Laurie at her home address and was billed to “Matthew and Laurie Kavanagh”. It was paid on Matthew’s mastercard. There is no specific repayment to Matthew of that exact amount but there are several payments of at least that amount to one of the Kavanagh credit cards
[69] There are also cash withdrawals from Donald’s account. This causes Mark great concern because on various occasions rent proceeds were deposited to Donald’s account and then there are cash withdrawals in excess of the rent. But of course the rent revenue is not the only source of funds in the account. Furthermore, there is no way to tell from the bank statement whether those withdrawals were made by Laurie or by her father himself. Laurie testifies that her father actively managed his own money. This shows the difficulty in co-mingling funds and of course Donald is no longer available to give evidence. But it is important to remember that Laurie has not been ordered to account for Donald’s bank account but only for the rents.
[70] Laurie’s claimed expenses for Oakdale are $26,684.49. As noted above, Mark accepts all but $10,732.67 of this amount. I have concluded that the evidence supports the direct or indirect payment of many of these expenses. The clear exception is the property taxes and one utility bill paid from Aunt Nellie’s account no. 2. That totals $8,308.42 which was not paid directly or indirectly from the rents.
[71] As a result Laurie has shown expenses of $18,376.07 which may be charged against the $27,050.00 deposited into Donald’s account. This leaves $8,673.93 unaccounted for.
Conclusion
[72] The $8,673.93 in unaccounted expenses together with the $4,120.60 in unaccounted revenue totals $12,794.53. Mark would be entitled to 50% of that amount or $6,397.27.
[73] I accept that Laurie spent $9,946.37 on Oakdale after the property was no longer tenanted and she is therefore entitled to the $4,117.00 paid into trust by Mark. This means Mark owes her an additional $856.19 which may be set off against the amount shown above.
[74] In summary, Mark is entitled to an adjustment of $5,541.08 out of Laurie’s share of the net proceeds of sale. Laurie is entitled to the $4,117.00 paid by Mark and held in trust. A report may issue accordingly.
[75] No doubt the parties will have arguments to make concerning costs and there may be offers to settle that must be considered. I may be spoken to. The issue of costs will have to be resolved before the remaining funds can be released.
March 14th, 2016
Master C. MacLeod
[^1]: Kavanagh v. Lajoie 2013 ONSC 7 @ para. 153 and paragraphs 2 & 3 of the formal order.
[^2]: 2013 ONSC 7, supra; affirmed Kavanagh v. Lajoie 2014 ONCA 187
[^3]: Kavanagh v. Lajoie, 2011 ONSC 7692
[^4]: Ibid, see paragraph 14 (b) of the decision defining the issues for trial.
[^5]: Kavanagh v. Lajoie 2013 ONSC 7
[^6]: Ibid, para. 127
[^7]: Ibid, para. 151. I have subsequently authorized a portion of the funds to be released.
[^8]: Kavanagh v. Lajoie 2014 ONCA 187
[^9]: See Rule 55.04 as well as pp 86 – 87, Peppiatt & Linton, Practice on Motions and References, Butterworths, 1988
[^10]: Kavanagh v. Lajoie, 2011 ONSC 7692, para 67
[^11]: Paras. 153 – 155, 2013 ONSC 7