Court File and Parties

COURT FILE NO.: CV15-022 DATE: 20170407

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Kim Victor Pearson and Renuka Bhansingh Applicants

John D. Middlebro’, for the Applicants

and -

John Eugene Corcoran Respondent

Roderic T.J. Hinton, for the Respondent

HEARD: March 30 & 31, April 3 & 5, 2017

REASONS FOR JUDGMENT

Conlan J.

I. Introduction

[1] Financial dealings between friends, even close ones, can turn sour. That is what has happened here.

The Facts

[2] The background facts, many of them at least, are undisputed. The litigation history has been relatively brief. The issues are well-defined. The lawyers have done a splendid job presenting the case for both sides.

[3] In January 2015, Kim Pearson (“Kim”) and his common-law partner, Renuka Bhansingh (“Renuka”), the Applicants, issued their Notice of Application.

[4] What led up to that?

[5] In September 1999, the Respondent, John Corcoran (“John”), put a home in Caledon, Ontario (“Heritage”) in his name, along with the mortgage, in trust for his long-time friend, Kim.

[6] Kim and John had known each other for decades. Kim testified that he trusted John like a brother.

[7] What happened with Heritage was done at Kim’s request, as he could not qualify for financing because of limited employment. He had been injured at work with Ontario Hydro in 1988 and had been in receipt of worker’s compensation benefits ever since. Other than some music lessons that he gave and playing in bands, his income was fairly limited.

[8] A similar arrangement between Kim and John had been in place before with a home in Mississauga, Ontario. Although that home was lived in by Kim, the title was held by John, and John was the mortgagor. The down-payment had been made by Kim, and Kim gave post-dated cheques to John to make the mortgage payments.

[9] After selling the Mississauga home in October 1999, the general idea was that the same thing would occur with Heritage.

[10] In fact, Heritage was purchased before the Mississauga property was sold, thus, short-term bridge financing was arranged.

[11] Heritage was, by then, more attractive to Kim as it was more in the country and more suitable for him and Renuka.

[12] Heritage was bought for $300,000.00. Once the bridge financing period was over, on the face of the mortgage document the monthly amount was $1224.00. The Applicants testified that John was actually paid more than that, $1422.00 monthly, to cover property taxes.

[13] Kim and Renuka lived at Heritage from the Fall of 1999 until it was sold.

[14] It was sold in 2005 for the price of $515,000.00.

[15] By then, Kim considered Renuka to be an equal owner of Heritage. They were common-law partners.

[16] The net proceeds of sale were $324,029.11.

[17] Those funds were paid to John and, at Kim’s request, were placed into an ING (later Tangerine) interest-earning savings account (“savings account”). Kim did not need the money right away as he was occupied with caring for his ailing parents and was not sure where he would end up.

[18] It may seem odd to the reader that Kim would have been financially able to forego the immediate receipt of any of the net proceeds of sale. It should be noted that both Kim and Renuka are from wealthy families and had very generous parents. It was not unusual, for example, for Kim to receive regular gifts from his mother by way of cheques for thousands of dollars.

[19] From time to time, monies were paid out of the savings account by John, at the request of Kim and/or Renuka.

[20] At some point, Kim and Renuka started to get worried. They say that John was acting weird and eventually “disappeared”.

[21] Litigation ensued.

[22] A sizeable amount of money, $170,000.00, was then paid out by John to counsel for Kim and Renuka.

[23] More is still owing, according to the Applicants. Just how much more is in dispute.

The Issues

[24] This file was case managed by Justice Thompson. A trial was directed.

[25] By Order made on November 12, 2015, it was held that a trust exists between Kim and John. Issues for trial were identified as (i) what amounts, if anything, are owed to Kim and Renuka, and (ii) what amount of compensation, if any, is owed to John for his role as trustee.

[26] Now having heard the evidence, the areas of dispute can be more particularized as follows.

[27] First, is there a valid trust claim at all by Renuka? Or should the Judgment, if any, be in favour of Kim alone?

[28] Second, after Heritage sold, how much money in total was paid out of the savings account by John, as authorized by Kim and/or Renuka? The resolution of that question depends on several things including whether John made authorized cash (rather than cheque) payments, and whether John made the mortgage payments without contribution/reimbursement from the Applicants.

[29] Third, did John pay income taxes on the interest earned in the savings account, and if so, how much, and should he be credited for those payments?

[30] The cross-examination of Kim at trial essentially resolved the questions outlined immediately above. Kim admitted that John paid $25,510.79 in income tax on the interest earned. Kim agreed further that John should be credited for that total amount.

[31] Fourth, just exactly how much is owing to Kim and/or Renuka, including interest earned on the net proceeds of sale that were deposited into the savings account?

[32] Fifth, should John be compensated for his role as trustee, and if so, how much?

[33] Sixth and finally, should there be any ancillary relief awarded in favour of the Applicants or either one of them, such as an injunction or some kind of equitable charge against John’s property?

The Trial

[34] This trial was held in Owen Sound over 4 days starting on March 30, 2017. Numerous documents were filed on consent. Each side read-in some excerpts from the other’s out-of-court examinations.

[35] For the Applicants, I heard testimony from Kim, Sean Abbott (a friend of Kim’s who was called to testify that he did not receive any cash payments from John on behalf of the Applicants), Renuka, and Nicholas Lovell (a lawyer who works with counsel for the Applicants and who prepared a spreadsheet showing deposits, withdrawals, interest rates, interest paid and balances in the savings account).

[36] For the Respondent, I heard testimony from John.

II. Analysis

[37] Memories fade over time. Documents get lost or destroyed. Bank records become unavailable.

[38] Those are all realities in this case. What the Court is left with is largely an assessment of credibility and reliability of the witnesses who testified at trial. That assessment will drive the answers to the questions identified above.

[39] Of course, I may accept all, some or none of what any witness says.

The Credibility and Reliability of the Witnesses

Kim

[40] Kim was not a good witness at trial.

[41] In examination-in-chief, he had to be led rather extensively by his counsel. That was likely due to his relatively poor memory of what transpired during the time period between the acquisition of the home in Mississauga and the sale of Heritage.

[42] Kim acknowledged in his testimony that his memory is “very sketchy” with regard to the time period that his parents were in ill health and he had a spinal cord injury, and that time period is crucial as it falls shortly before Heritage was sold.

[43] In cross-examination, there were occasions when Kim failed to answer rather simple questions posed to him. Again, I do not think that he was being deliberately coy. Rather, I suspect that he could not remember much. An example is when Mr. Hinton asked how it could be that he paid $80,000.00 as a down-payment on Heritage when the sale of the Mississauga home yielded just $63,750.00. Kim retorted that Mr. Hinton should ask John, but that makes no sense because John had nothing to do with the down-payment to purchase Heritage.

[44] Further, there were times when it appeared that Kim was guessing at his evidence. Guessing is dangerous and often leads to inconsistencies. For example, on the issue of why there were many years when he did not file any income tax returns, Kim testified that he did not make that much money. He also seemed to adopt prior out-of-court evidence that one does not have to file income tax returns if one makes less than a certain amount of money, perhaps seven or ten thousand dollars. Yet he made admissions in cross-examination at trial that would demonstrate earnings of as high as $20,000.00 per year as a musician/music instructor.

[45] In addition, I found some of Kim’s evidence at trial to be careless. For example, in cross-examination he testified that Mr. Abbott never issued him an invoice for services rendered on his behalf, but then almost immediately thereafter Kim stated that he really does not remember whether an invoice was rendered.

[46] As another example, at trial Kim testified that his admission to Mr. Hinton during an earlier out-of-court examination that John did make cash payments on his behalf after Heritage was sold was the consequence of him having been bullied and yelled at repeatedly by Mr. Hinton during the examination. I very much doubt that happened. It is a gross exaggeration, and it would have been preferable to simply say that he was wrong when he gave that earlier answer, and that he corrected it through his counsel very shortly thereafter (both of which I accept).

John

[47] Similarly, John was not a good witness at trial.

[48] He may be the only person who has a memory worse than that of Kim.

[49] In fact, his memory is so bad that he testified, repeatedly, that he has no recollection whatsoever of anything to do with the Mississauga property. This is a property that was owned, mortgaged and then sold by John. And it was not sold when John was a child or when he was otherwise preoccupied with his wife’s illness or anything else – it was sold less than twenty years ago, in 1999.

[50] Mr. Hinton, a very able and experienced counsel, was confronted with a comment made by his client, John, not long after the direct examination commenced at trial, a comment that must have surprised everyone except perhaps John. John stated that he did not recall anything about Heritage either, with one exception: the mortgage payments being automatically debited from his CIBC bank account.

[51] It is far too convenient for John’s only recollection about anything to do with Heritage to be related to the major factual item in dispute – who made the mortgage payments.

Renuka

[52] Of the three parties who testified at trial, Renuka was the most credible and reliable witness. Where her evidence conflicts with that of anyone else, I prefer her evidence.

[53] There are a few reasons for that.

[54] First, her memory at trial of the material events was unquestionably clearer than that of either Kim or John.

[55] Second, she was quick to make concessions at trial that were against her own interest, often a hallmark of an honest witness. For example, when asked by Mr. Hinton whether it was possible to determine if the cheques that she wrote to John were on her own money, or money from Kim, or money from her father, or a combination of those, she readily answered that it was not possible to determine that.

[56] Third, she was quick to make concessions at trial that she must have known might hurt her partner, Kim’s position. For instance, when questioned by Mr. Hinton about how frequently Kim dealt in cash, she readily admitted that he often did so.

[57] Fourth and finally, Renuka is the only witness who testified at trial whose evidence on the critical issue of who made the mortgage payments for Heritage is corroborated by an independent, documentary source. Her bank records at Exhibit 1, starting at page 183, are not perfect but do provide corroborative evidence of her making regular monthly payments of $1422.00, which is what she testified she paid to John for the mortgage and property taxes.

The Collateral Witnesses

[58] Mr. Abbott is a good friend of Kim, however, that by itself is no reason to disbelieve his emphatic evidence at trial that he never received any cash from John. I believe him.

[59] Regarding Mr. Lovell, he acknowledged that his spreadsheet is no longer accurate, and further, he had not (at the time of his testimony) prepared a new one.

[60] That is the end of the matter. Mr. Hinton is correct; the Court cannot rely upon admitted inaccurate evidence.

[61] The updated version of the spreadsheet at tab 5 of the Applicants’ Factum is not properly before the Court and will not be considered.

[62] There is nothing wrong with counsel submitting calculations to help the Court, but that cannot be done when the very witness who prepared the calculations just testified and could not be cross-examined on what he had not yet prepared.

Is There a Valid Trust Claim at all by Renuka? Or Should the Judgment, if any, be in Favour of Kim Alone?

[63] There is no valid trust claim on the part of Renuka. Any Judgment shall be in favour of Kim alone.

[64] The evidence is clear that Renuka had nothing to do with the purchase of Heritage. She contributed nothing towards the down-payment. She never had any agreement with John about her having any ownership interest in that home. She cannot say for certain how much, if any, of the money that she gave to John, by post-dated monthly cheques, was hers.

[65] The essence of the Applicants’ argument, as submitted by their counsel at the close of the trial, is that Heritage would not have increased in value but for Renuka’s contributions.

[66] Assuming without deciding that the said argument, if true, would ground a successful claim for a resulting or constructive trust, the evidence at trial falls short of establishing that Renuka contributed to the increase in the home’s value.

[67] As an honest witness, Renuka testified only that she and Kim shared some of the expenses for Heritage. Although she spoke about improvements like landscaping and painting, as examples, she never stated whether or how she contributed to those.

[68] Besides, we are talking about $20,000.00 or so, maximum, in improvements. To make Renuka a co-creditor of any Judgment would amount to a windfall for her.

After Heritage Sold, How Much Money in Total was Paid out of the Savings Account by John, as Authorized by Kim and/or Renuka?

[69] The resolution of this issue depends on several things including whether John made authorized cash (rather than cheque) payments, and whether John made mortgage payments that were not covered by funds given to him by Kim/Renuka.

[70] Those questions, in turn, are resolved entirely on the basis of the credibility and reliability assessment outlined above in these Reasons.

[71] I believe Renuka and find that she made the mortgage payments in the post-dated monthly cheques that she provided to John. John is not out any money regarding the automatic debits that were made from his bank account as the mortgagor.

[72] I believe Renuka that she is not aware of any cash payments having been made by John to anyone, including her and Kim.

[73] I believe Mr. Abbott that he never received any cash payment(s) from John.

[74] I doubt that either Kim or John would remember whether John made cash payments to Kim. If that had been done, Renuka would have known.

[75] I doubt that John would remember making any cash payment(s) to some store in Toronto, “Petite Amsterdam”.

[76] In summary, I find that no cash payments were made by John at the request of Kim and/or Renuka, whether before or after Heritage was sold.

[77] Thus far in the analysis, that makes $123,285.61 the total amount of money paid out by John, post-sale of Heritage, as authorized by Kim and/or Renuka.

[78] The only remaining item is whether $7000.00 ought to be added to that figure. I agree with Mr. Hinton that it should.

[79] The Applicants’ original Statement of Issues had the total being $130,285.61, and the spreadsheet completed by Mr. Lovell (Exhibit 4) has a $7000.00 authorized withdrawal listed on the second last page that does not, on balance, appear to be accounted for in the figure of $123,285.61.

[80] Thus, I find that, after Heritage sold, the total amount of money that was paid out of the savings account by John, as authorized by Kim and/or Renuka, was $130,285.61.

Did John Pay Income Taxes on the Interest Earned in the Savings Account, and if so, How Much, and Should he be Credited for Those Payments?

[81] Now undisputed, I find that John paid $25,510.79 in income tax on the interest earned, and further, John shall be credited for that total amount.

Just Exactly How Much is Owing to Kim and/or Renuka, Including Interest Earned on the Net Proceeds of Sale that were Deposited into the Savings Account?

[82] There is nothing owing to Renuka as her trust claim is dismissed, for the reasons outlined above.

[83] With regard to how much total is owing to Kim, before accounting for trustee compensation, if any, it is simple arithmetic:

$324,029.11 (the net proceeds of sale), minus $130,285.61 (payments made by John before litigation), minus $170,000.00 (payment made by John after litigation), plus $57,756.46 (interest actually accrued on the net proceeds of sale), minus $25,510.79 (income taxes on interest income paid by John), equals $55,989.17.

[84] Why is that lower than the $71,122.73 as calculated by the Applicants? For two reasons – the Applicants did not include the $7000.00 authorized payment referred to above, and the Applicants sought an additional $8133.56 in interest income on the net proceeds of sale.

[85] That $8133.56 depends on the updated spreadsheet prepared by Mr. Lovell and contained at tab 5 of the Applicants’ Factum. I am not considering that document, for the reasons stated above.

Should John be Compensated for his Role as Trustee, and if so, How Much?

[86] Yes, in the amount of $5000.00.

[87] That amount is consistent with what Kim testified he would have been happy to give to John as a thank-you for what he was doing.

[88] The nearly $30,000.00 being sought by John is unreasonably high in that it does not take into account the clear improper use of the funds by John. There is no question that he conducted transactions with the money in the savings account that were unauthorized and, in fact, completely unknown by the Applicants.

[89] Nil, as suggested by the Applicants, is not fair either. It is argued that John deserves nothing because he failed in his duties as a trustee. Technically, that is true, although it overstates the nature of the arrangement here.

[90] I am sure that if someone asked any of the three parties, before litigation, what relationship they had with regard to the net proceeds of sale from Heritage, none of them would have articulated any formal “trustee” role for John.

[91] Ignorance is no excuse, Mr. Middlebro’ is correct, but a modicum of fairness that is not at all inconsistent with what Kim himself would have been perfectly happy with at the time is called for.

[92] After all, but for John’s help, Kim would have never been able to purchase Heritage, live there with Renuka and then sell it for a handsome profit.

Should there be any Ancillary Relief Awarded in Favour of the Applicants?

[93] No.

[94] In closing submissions, Mr. Middlebro’ was candid in conceding that these remedies are extraordinary and depend on a finding of fact that the home currently owned by John was purchased, at least in part, with funds taken from the savings account.

[95] John denied that suggestion during his cross-examination at trial.

[96] Although I am suspicious about the timing of the purchase of John’s home and the $40,000.00 withdrawal from the savings account just beforehand, I am not satisfied on balance that the said withdrawal is connected to the purchase of the home. At the time, I doubt that John needed those Tangerine funds to buy the property.

[97] Having declined to make the finding of fact admitted by counsel for the Applicants as being necessary to ground either the equitable charge or the injunction sought, it necessarily follows that those requests must be denied, regardless of whether the legal tests for them have been satisfied.

One Last Item – Property Taxes on Heritage

[98] I have not forgotten about the document handed up by Mr. Hinton during closing submissions.

[99] That document estimates that the Applicants may have underpaid the property taxes on Heritage by as much as $7096.68.

[100] I decline to entertain that issue. First, it was not pleaded in John’s Amended Statement of Issues. Second, I am not sure why it matters because, on his own evidence, John did not pay the property taxes on Heritage and, thus, he cannot expect to be reimbursed for any shortfall in the post-dated monthly cheques written to him by Renuka. Third, there are simply too many assumptions which underlie that document to make it reliable evidence.

III. Conclusion

[101] Judgment shall issue in favour of Kim in the amount of $155,629.92 ($104,640.75, the amount of money currently being held in trust with counsel for the Applicants, leftover from the $170,000.00 payment made by John after litigation, plus the $55,989.17 identified above, minus $5000.00 for trustee compensation).

[102] For clarity, the principal balance left to be paid by John is the $50,989.17.

[103] The claim advanced by Renuka is dismissed.

[104] The other relief sought by the Applicants is denied, except that I may be spoken to about costs if the parties cannot settle that issue between themselves.

[105] If necessary, I will give direction as to how costs submissions will be handled. If the Court is not contacted by the end of April 2017, it will be assumed that costs have been settled.

[106] I wish to thank Mr. Middlebro’ and Mr. Hinton for their able assistance throughout the trial.

[107] Their presentation of the evidence, their submissions, and the Factum/Memorandum of Law and Books of Authorities that were filed were all helpful.

[108] The absence of caselaw citations in these Reasons should not be taken as a sign otherwise. That is simply a function of what both counsel readily conceded – the issues are fact-driven.