The Estate of Psarros et al. v. Cook
[Indexed as: Psarros Estate v. Cook]
Ontario Reports Ontario Superior Court of Justice, Akbarali J. July 5, 2017 138 O.R. (3d) 545 | 2017 ONSC 3903
Case Summary
Family law — Domestic contracts — Setting aside — Husband and wife purchasing house as tenants in common before marriage — Husband and wife subsequently entering into marriage contract — Wife releasing her claims under Succession Law Reform Act ("SLRA") in contract — Contract mistakenly stating that husband and wife owned house as joint tenants — Mistake not constituting appropriate basis for setting aside release of SLRA claims under s. 56(4) of Family Law Act — Family Law Act, R.S.O. 1990, c. F.3, s. 56(4) — Succession Law Reform Act, R.S.O. 1990, c. S.26.
P and C were married in 1992. Before their marriage, they purchased a house, taking title as tenant in common. They entered into a marriage contract in which C released her claims under the Succession Law Reform Act. The marriage contract mistakenly stated that P and C owned the house as joint tenants. P died without a will. His estate offered to sell, and C agreed to purchase, the estate's interest in the house, but C subsequently changed her position. She challenged whether the house was held jointly or by way of tenancy in common and challenged the validity of her release of claims under the SLRA. The estate brought an action seeking a declaration that C was bound to purchase the estate's interest in the property, occupation rent and other relief.
Held, the action should be allowed.
The mistake in the marriage contract did not constitute an appropriate basis for setting aside C's release of her SLRA claims under s. 56(4) of the Family Law Act. C had clearly not been under the impression that she actually owned the entire house on P's death, and had originally been willing to buy the estate's half interest in the house until the estate took a hard line on other issues. In any event, the error in the marriage contract did not extend to the SLRA release. C had not established that she and P intended for her to have the house on P's death.
While the estate was entitled to occupation rent, the occupation rent that was owing was wholly offset by the estate's share of expenses that C had been paying. [page546]
Cases Applied
Other Cases Referred To
- Canada (Attorney General) v. Fairmont Hotels Inc., [2016] 2 S.C.R. 720, [2016] S.C.J. No. 56, 2016 SCC 56, 404 D.L.R. (4th) 201, [2017] 1 C.T.C. 149, 58 B.L.R. (5th) 171, 2016 D.T.C. 5135, 2016EXP-3860, J.E. 2016-2123, EYB 2016-273668, 272 A.C.W.S. (3d) 525
- LeVan v. LeVan (2008), 90 O.R. (3d) 1, [2008] O.J. No. 1905, 2008 ONCA 388, 51 R.F.L. (6th) 237, 239 O.A.C. 1, 167 A.C.W.S. (3d) 934
Statutes Referred To
- Estates Administration Act, R.S.O. 1990, c. E.22, s. 9
- Family Law Act, R.S.O. 1990, c. F.3, s. 56(4), (c)
- Succession Law Reform Act, R.S.O. 1990, c. S.26
ACTION for a declaration and other relief.
Counsel
- Warren W. Tobias, for plaintiffs.
- Michael Simaan and Alexander Minkin, for defendant.
AKBARALI J. : —
Background
[1] Nikolaos Psarros and the respondent, Lorraine Cook, were married on August 27, 1992. It was her first marriage and his fourth. She had no children. He had one child from each of his previous three marriages.
[2] Mr. Psarros and Ms. Cook entered into a marriage contract before they wed. The thrust of it was aimed at protecting the assets of each party from the other, and in particular, Ms. Cook's pension and Mr. Psarros' business.
[3] About six weeks before their wedding, Mr. Psarros and Ms. Cook bought a house together. They took title as tenants in common, each holding a 50 per cent interest. Although they held title as tenants in common, the marriage contract wrongly records that they owned the house as joint tenants.
[4] Mr. Psarros and Ms. Cook were married more than 20 years when Mr. Psarros died without a will on November 12, 2012. Two of his children, Natalie Psarros and Phaedra Renaud, have been appointed estate trustees.
[5] After his death, the estate offered to sell, and Ms. Cook agreed to purchase, the estate's interest in the property. Since that time, the positions of the parties to this litigation have changed repeatedly, with issues being raised and abandoned.
[6] At various times, the estate has raised issues including whether Ms. Cook made a verbal agreement to give to Mr. Psarros' children and grandchildren the funds from accounts he held jointly with Ms. Cook, whether the estate was entitled to an [page547] accounting of funds spent from the joint accounts, whether the marriage contract applied to Ms. Cook's purchase of the estate's interest in the home, whether the estate had the obligation to repay Ms. Cook for the funeral expenses she incurred, whether the estate is entitled to an equalization of certain expenses it claims were paid by Mr. Psarros, and whether the estate is entitled to occupation rent.
[7] For her part, Ms. Cook challenged whether the house was held jointly or by way of tenancy in common. She also challenged the validity of her release of claims under the Succession Law Reform Act, R.S.O. 1990, c. S.26 ("SLRA"), on the basis of what she claims is a mutual mistake in the marriage contract about how title to the property was held.
[8] The parties also had disagreements about the process for valuing the property. However, by August 2014, both parties had obtained an appraisal of the property from a qualified appraiser.
[9] On May 7, 2014, Ms. Cook commenced an application seeking a declaration that the marriage contract governs the relationship between her and the estate, an order requiring the estate to sell its interest in the property to her in accordance with the contract, and an order requiring the estate to reimburse her for the funeral, cremation and interment expenses that she paid.
[10] On September 5, 2014, the estate brought its own application, seeking a declaration that Ms. Cook was bound to purchase the estate's interest in the property pursuant to the provisions of the marriage contract, and that the purchase price for the property include repayment to the estate for one half of the mortgaged indebtedness which was paid by Mr. Psarros and for property taxes paid solely by Mr. Psarros. The estate also sought occupation rent. The estate sought specific performance of the alleged verbal agreement that it claims Ms. Cook made with Mr. Psarros to distribute all funds in the accounts held jointly by Mr. Psarros and Ms. Cook to Mr. Psarros's children and grandchildren. In addition, the estate sought an accounting in respect of all funds spent from those accounts. It also sought a new and binding appraisal of the property.
[11] Ms. Cook's claims could have been determined on the application, but the claims advanced by the estate required a trial. Accordingly, on October 30, 2014, the plaintiff estate and estate trustees commenced an action to address all the issues between the parties.
[12] By the time the action came to trial before me, the issues had narrowed significantly. What remains are issues that could have been dealt with by way of application three years ago. [page548]
Issues
[13] The parties agree that Ms. Cook will purchase the estate's half interest in the property pursuant to the terms of the marriage contract. In this action, I must determine the following issues:
(a) Was there a mutual mistake in the marriage contract about the manner in which title to the property was held such that Ms. Cook's release of her claims under the SLRA is invalid, or alternatively, that the entire marriage contract is invalid?
(b) How should the purchase price of the estate's interest in the property be calculated? In particular,
(i) Which appraisal or appraisals should be used to determine the purchase price of the estate's interest in the property? Specifically, does the delay in the litigation demand that a recent 2017 appraisal be used? If the appraisals the parties obtained in 2014 are to be used, should the appraisal obtained by Ms. Cook be disregarded because of flaws in it?
(ii) Should the purchase price be adjusted to require Ms. Cook to pay for half of the amounts paid out of Mr. Psarros' personal account to discharge the mortgage in February 2001?
(iii) Should the purchase price be adjusted to account for occupation rent which the estate claims Ms. Cook owes it, and if so, in what amount?
(c) What is the effect of s. 9 of the Estates Administration Act, R.S.O. 1990, c. E.22, which provides that real property of a deceased that has not been disposed of, conveyed, divided or distributed within three years of the deceased's death is vested in the persons beneficially entitled to it?
The Terms of the Contract
[14] The marriage contract includes a section entitled "Background", where a number of recitals are set out. Among other things, the recitals note that Mr. Psarros and Ms. Cook were intending to marry, that Mr. Psarros had been married before and had three children, that Mr. Psarros' main asset apart from his interest in the matrimonial home was his interest in the car dealership he owned, and that Ms. Cook's main asset apart from her interest in the matrimonial home was her pension. The marriage contract also records that "the parties [page549] recently purchased the matrimonial home as joint tenants and are currently living there". This, as I have noted, is incorrect.
[15] In a section entitled "Purpose of Contract", the parties agree that by the contract, they intend to avoid any rights and obligations relating to property which arise or which may arise except as provided by the contract, to elect that none of the property of either of them would be divided except according to ownership unless specifically provided for in the contract, and to provide for support for Ms. Cook on marriage breakdown. "Breakdown of marriage" is a defined term in the contract and does not include death.
[16] With respect to the matrimonial home, the contract provides that each party is "equally responsible for all expenses . . . including expenses relating to the mortgage, utilities, repairs, maintenance upkeep and any other household expenses".
[17] The contract also sets out terms relevant to the disposition of a party's interest in the home. These include that "if there is a breakdown of the marriage each party has the right to purchase the interest of the other party at such price as may be agreed upon between the parties and if either party should wish to sell his or her interest in the matrimonial home then the other party will have the right to buy that interest".
[18] In the event of marriage breakdown or in the event one party wishes to sell his or her interest in the home, within two weeks "the other party shall indicate whether or not he or she is interested in purchasing the other party's interest in it".
[19] The contract also provides that "[t]he purchasing party shall be entitled to purchase the interest of the selling party in the matrimonial home at such price as may be agreed upon between the parties failing which the purchase price shall be 90% of the net equity of the selling party in the matrimonial home". Net equity is the amount of proceeds the selling party would receive after deducting any debts outstanding from the fair market value of the home and by making any other adjustments in connection with unequal payments made with respect to the home. Fair market value is the price the parties agree upon, or "the average price of a property appraisal obtained by each party from a properly qualified and experienced property appraiser".
[20] These provisions do not speak directly to the sale of one party's interest to the other on death. One would not expect them to, given the error in the contract that presumes the home was held in joint tenancy. However, the provisions of the contract are binding on each party's estate.
[21] The contract also sets out provisions relevant to ownership. In a section entitled "Deemed Ownership", the contract [page550] provides that the presumption of resulting trust shall not apply in questions of ownership of property between the parties. It also provides that "property transferred from one party to the other party shall be deemed to be owned by the party to whom the property is transferred".
[22] There are numerous provisions in the contract by which the parties provide various releases with respect to property, including under the Family Law Act, R.S.O. 1990, c. F.3 ("FLA"), the SLRA and at equity.
[23] The contract also includes a severability clause providing that the terms of the contract are severable and will survive the invalidity of any other term of the contract.
What is the effect of the error in the marriage contract?
[24] Ms. Cook argues that because of the error in the marriage contract, her release of claims arising under the SLRA is invalid such that she is entitled to a preferential share of the estate pursuant to the terms of the legislation. She argues that I can set aside a provision in a domestic contract in accordance with the law of contract pursuant to s. 56(4) of the Family Law Act. She argues that the SLRA release and the term in the agreement that contemplates the house being held in joint tenancy are linked, and she relies on the estate's admission of mutual mistake in its statement of claim. I note that my ability to set aside only the SLRA release is not only expressly provided for by statute, but is consistent with the severability provision of the marriage contract.
[25] Section 56(4)(c) of the FLA provides that a court "may" set aside a provision of a domestic contract in accordance with the law of contract. The estate argues that the Court of Appeal has made clear that even if s. 56(4) of the FLA is engaged, the contract is not automatically rendered a nullity, but the trial judge must determine whether it is appropriate to set aside the contract in the circumstances. This is an exercise of discretion: LeVan v. LeVan (2008), 90 O.R. (3d) 1, [2008] O.J. No. 1905, 2008 ONCA 388, at para. 33. The estate also argues that if I set aside the SLRA waiver, I must set aside the entire contract.
[26] It is obvious that there is an error in the marriage contract. The home was held as a tenancy in common, not a joint tenancy. The estate's pleading admits this was a mutual mistake.
[27] Mr. Psarros' lawyer drafted the contract. Ms. Cook got independent legal advice from a lawyer, Paul Mitchell, on the day of her wedding -- about six weeks after she and Mr. Psarros bought the house. She does not recall what Mr. Mitchell told her about what would happen should Mr. Psarros die during their [page551] marriage. Mr. Mitchell had no recollection of the meeting with Ms. Cook, but gave evidence that he would have told her that, by releasing her claims under the SLRA, she would only get the house, because he would have understood from the contract that the house was jointly owned. There is no evidence before me about the advice Ms. Cook received on the purchase of the home, if any, including whether she received any advice about the effect of taking title to the home as a tenant in common.
[28] I conclude that, notwithstanding the error in the marriage contract, it is not appropriate to set aside Ms. Cook's release of her claims under the SLRA. I reach this conclusion for several reasons.
[29] First, after Mr. Psarros' death, Ms. Cook's counsel repeatedly took the position that Ms. Cook "own[ed] half the house". When the estate broached the topic of selling its interest in the house, Ms. Cook engaged in those discussions without asserting that the house had been jointly held and passed to her on Mr. Psarros' death. Ms. Cook deposed that, after Mr. Psarros' death, she was willing to pay the estate for one half of the property even though according to the marriage contract, it had been jointly owned. I find that she was willing to pay the estate for its interest because she understood that the estate owned half the house. Thus, while the contract contains an error, I find that Ms. Cook was not under the mistaken impression that she actually owned the entire house on Mr. Psarros' death. This was a position she adopted later in the litigation when the estate took a hard line on other issues.
[30] Second, in my view, when the parties entered into their marriage contract, Mr. Psarros, having had three previous divorces, was concerned about protecting his assets should this fourth marriage also fail. However, the marriage did not fail. Mr. Psarros and Ms. Cook remained married until his death over 20 years later. During the marriage, Mr. Psarros sold his interest in his business. Shortly afterwards, he opened investment accounts jointly with Ms. Cook. A month after he learned of his terminal diagnosis, he made his bank accounts joint with Ms. Cook. I find that over time, he came to the view that it was appropriate to share his assets with Ms. Cook on his death. The marriage contract, with its deemed ownership provisions, contemplated that by placing assets in joint ownership, he could provide for Ms. Cook on his death. He did so.
[31] However, I also find that he knew the matrimonial home was held as a tenancy in common and intended his interest in the home to benefit his children. Natalie Psarros deposed that she had conversations about the manner in which the house was [page552] held with her father during his lifetime, and that he understood that his interest in the house was held as a tenancy in common, and as a result would pass to his estate and be available (at least in part) to his children on his death. Ms. Psarros' evidence of her father's statements and understanding is corroborated by the fact that the house actually was held as a tenancy in common, as established by the parcel register. It is also corroborated by evidence from Mr. Psarros' friend, Mr. Ampatzis, that Mr. Psarros had experience selling real estate earlier in his life. I accept the estate's argument that this experience would have given him an understanding of the key difference between tenancy in common and joint tenancy -- the right of survivorship.
[32] Finally, I note that I am not satisfied in any event that the error in the marriage contract extends to the SLRA release. Ms. Cook has not established that she and Mr. Psarros intended for her to have the house on Mr. Psarros' death. In effect, she is asking the court to rectify her and Mr. Psarros' agreement, not simply the instrument recording it. It is not the court's role to rewrite their contract: Canada (Attorney General) v. Fairmont Hotels Inc., [2016] 2 S.C.R. 720, [2016] S.C.J. No. 56, 2016 SCC 56, at paras. 13 and 38.
How should the purchase price of the estate's interest in the property be calculated?
[33] I have reviewed above the provisions of the marriage contract that deal with the sale of one party's interest in the property to the other. The parties agree that the marriage contract governs the sale of the estate's interest to Ms. Cook but they have not been able to agree on a price for the property.
[34] When the parties cannot agree, the contract provides that the parties each obtain an appraisal from a qualified and experienced appraiser and average the appraised values of the property. The purchasing party then pays the selling party 90 per cent of 50 per cent of the net value of the property (i.e., the fair market value less deduction for debts). It also provides that adjustments be made with respect to unequal payments made by the parties with respect to the home.
Which appraisal(s) should be used to determine the purchase price for the property?
[35] Ms. Cook obtained an appraisal from a qualified appraiser, Lakhbir Makkar, in January 2014 in the amount of $600,000. The estate obtained an appraisal from a qualified appraiser, Jim Parthenis, in August 2014 in the amount of $700,000. The average of these amounts, before adjustments (which I will deal [page553] with below) is $650,000, thus valuing the estate's half interest at $325,000.
[36] Much trial time was taken up with the estate's complaint that, prior to obtaining the appraisal, Ms. Cook had obtained three letters of opinion from real estate agents as to the value of the home, and then refused to allow the estate to obtain its own opinion from a real estate agent. While there was no doubt some posturing from each side on the appraisal issue, this complaint is irrelevant for the purposes of determining the appropriate sale price in this case. The contract contemplates that where the parties cannot agree, each will obtain an appraisal "from a properly qualified and experienced property appraiser" and that those appraisals will be averaged to establish the fair market value of the property (as a first step to determining purchase price). It does not contemplate letters of opinion from real estate agents. That the parties could have chosen a different process is beside the point; they did not, nor were they obliged to.
[37] The original appraisals were obtained in 2014. The estate obtained an updated appraisal from Mr. Parthenis dated March 29, 2017. The updated appraisal concludes that the appraised value of the property is $932,000. In updating the appraisal, Mr. Parthenis did not inspect the property again, but relied on his previous inspection. ^1
[38] The estate argues that the 2017 appraisal should be used to calculate the value of the estate's interest in the home because Ms. Cook delayed this litigation, and in the interim, property values have risen substantially. The estate argues it is unfair for Ms. Cook to solely benefit from this increase.
[39] The estate points to a motion Ms. Cook brought, but which was never heard, to disqualify the estate's counsel which it claims delayed the litigation by a year. It argues Ms. Cook took seven months to consent to Ms. Psarros' and Ms. Renaud's appointment as estate trustees and to renounce any entitlement that she had to be estate trustee. ^2 The estate also points to Ms. Cook's changing positions over the course of the litigation. [page554]
[40] Ms. Cook argues that the estate's positions also changed repeatedly over the course of the litigation. It argues that the estate has not led convincing evidence that its motion to disqualify counsel contributed to any significant delay. It argues that the delay in consenting to the appointment of Mr. Psarros' daughters as estate trustees was significantly less than seven months, and that the estate delayed months in advising Ms. Cook that the estate trustees had been appointed.
[41] Much trial time was taken up with each side trying to assign blame for the lack of progress of the action to the other. Undoubtedly, each side's changing positions, at different times, contributed to some delay. However, in my view, there is only one reason of significance for the delay: the estate's claim in its notice of application that there was a verbal agreement between Mr. Psarros and Ms. Cook that Ms. Cook would distribute the funds in their jointly held accounts to Mr. Psarros' children and grandchildren. It was this claim that required that the applications be converted to an action. As I noted at the outset of these reasons, over time, claims -- including the claim to the funds in the joint account -- have been abandoned such that what remains could have been heard by way of application back in 2014.
[42] Accordingly, I find that the significant delay in this litigation was caused by the estate. To the extent that either side's positions taken since the applications were converted to this action contributed to delay, the blame for that is equally shared. None of that delay would have been incurred had the applications been heard in 2014.
[43] I thus conclude that the delay in the litigation does not justify using a current appraised value of the property.
[44] The estate also argued that, in the event I conclude the 2014 appraised value of the property should be used, I should disregard Mr. Makkar's appraisal and rely solely on Mr. Parthenis' appraisal because Mr. Makkar's appraisal is deficient.
[45] The estate called Mr. Parthenis to testify as to his criticisms of Mr. Makkar's report. Although it had Mr. Makkar's appraisal in 2014, it only disclosed that it wanted to raise issues about Mr. Makkar's appraisal during trial. In the middle of the trial, it produced a letter from Mr. Parthenis dated May 29, 2017, the day before the commencement of the trial, in which Mr. Parthenis recorded his criticisms of Mr. Makkar's report. After argument on the issue, I admitted the evidence but indicated that I would consider the weight to be accorded to it in these circumstances.
[46] I have concluded that Mr. Parthenis' criticisms of Mr. Makkar's appraisal are entitled to no weight. I am troubled [page555] by the late disclosure of these criticisms, which left Ms. Cook unable to properly respond. There was no reason for such late disclosure when the appraisal had been in the estate's possession for over three years.
[47] Moreover, during cross-examination, there were many criticisms raised about Mr. Parthenis' evidence. For example, Ms. Cook's counsel noted that Mr. Parthenis' opinions have been repeatedly criticized by other courts.
[48] In the end, the criticisms of each appraiser make little difference. The marriage contract contemplates that the parties will obtain appraisals from qualified appraisers. Despite the criticisms levied against each appraiser, neither side argued the other's appraiser was not properly qualified.
[49] By operation of the terms of the marriage contract, the appraisers' values are to be averaged. The marriage contract does not provide for one appraisal to be preferred over the other.
[50] The estate argued that I am not bound to accept a ridiculous appraisal. I need not decide that point, because neither appraisal has been shown to be ridiculous. Even Mr. Parthenis' evidence was that the eight-month time lag between appraisals accounted for a good portion of the spread between the values each appraiser reached. Mr. Parthenis testified that had he appraised the property in January 2014 when Mr. Makkar did, he would have concluded its value was $665,000. He also testified that a 5 per cent difference between appraised values is acceptable. That amounts to $32,500 of $665,000, suggesting that the difference in the values reached by Mr. Parthenis and Mr. Makkar are not as significant as the estate seeks to portray.
[51] Although the contract does not specify when the appraisals should be conducted, I conclude that it is an implied term that the appraisals be carried out within a reasonable time of the decision to sell one party's interest to the other. The estate offered to sell its interest in the property to Ms. Cook on November 1, 2013, and she agreed to buy it on November 7, 2013. The 2014 appraisals are also preferable to the 2017 appraisal because they are closer in time to the decision to sell the estate's interest in the home to Ms. Cook.
[52] Thus, the fair market value of the estate's interest should be determined by averaging the 2014 appraisals obtained by the parties. This leads to a fair market value of the estate's 50 per cent interest in the amount of $325,000. [page556]
Should there be an equalization of the payment made to discharge the mortgage?
[53] The estate argues that the amount Ms. Cook owes for its half interest in the property should be adjusted upwards to account for the payments Mr. Psarros made in February 2001 to discharge the outstanding mortgage. The estate argues that these payments came from Mr. Psarros' account and consisted of proceeds from the sale of his business.
[54] Ms. Cook argues that the estate has not proven what each party contributed to their joint expenses, and that equalization of a single payment is not appropriate when their marriage contract identified many obligations that were joint. Ms. Cook argues that she put $1,500 into a joint account monthly towards household expenses, and this amount did not decrease after the mortgage was paid off. Ms. Cook also argues that, while the marriage contract provides the parties will be equally responsible for expenses, payment of mortgage principal is not an "expense" contemplated by the contract.
[55] The contract provides that the parties will share equally "in all expenses with respect to their matrimonial home . . . including expenses relating to the mortgage, utilities, repairs, maintenance upkeep and any other household expenses".
[56] I disagree with Ms. Cook that this language limits equalization to mortgage interest payments and not principal repayments. The language of the section is broad, and includes "expenses relating to the mortgage". In my view, this includes repayment of principal as well as interest.
[57] However, I agree with Ms. Cook that I cannot equalize only the payments made to discharge the mortgage without considering the other expenses that were the joint responsibility of the parties.
[58] The evidence before me as to the payment of Mr. Psarros' and Ms. Cook's joint expenses is not clear. They were married for over 20 years. The estate obtained about seven years of bank records but did no analysis as to what contributions each made to their joint accounts or to each other's personal accounts. The estate suggested, first, that it had not done the analysis because it was a significant job; and second (and inconsistently), that I could easily do the analysis myself. However, it is not the court's role to conduct an in-depth analysis of banking records after the parties have closed their cases and in the absence of evidence about those records having been led by the parties. I decline to undertake an exhaustive analysis attempting to trace the various [page557] deposits and withdrawals. It is not even clear to me that I would have all the bank statements necessary to do so.
[59] During argument at trial, it became apparent that the records disclose transfers from Mr. Psarros' and Ms. Cook's joint account into the personal account from which Mr. Psarros later discharged the mortgage. Ms. Cook's evidence is that her $1,500 monthly contribution continued even after discharge of the mortgage. The evidence also suggests the parties may not have contributed equally to the down payment for the property, although I have no evidence as to what their respective contributions were, or even who contributed more. In view of this evidence, I cannot conclude that Mr. Psarros' payment to discharge the mortgage should be equalized. There is simply not a sufficient evidentiary basis to do so.
Is the estate entitled to occupation rent?
[60] The estate claims a credit for occupation rent that it states Ms. Cook owes to it. It relies on a "report" from Mr. Parthenis dated August 21, 2014 wherein Mr. Parthenis concludes that the property could have been rented on a monthly basis for $2,300 in 2013, $2,358 in 2014 and $2,377 in 2015. The estate suggests I carry the 2015 amount forward unchanged to reflect an appropriate rent for 2016 and 2017.
[61] Ms. Cook argues that I should not accept Mr. Parthenis' opinion because it does not comply with the requirements for an expert report, and because her questions about the analysis Mr. Parthenis undertook were refused on discovery. She also argues that she has been paying the estate's share of property taxes and insurance, and that the estate has failed to establish that those amounts do not exceed its entitlement to 50 per cent of the occupation rent.
[62] I am troubled by Mr. Parthenis' "report". This report is a letter, the text of which is about a page long. It does not disclose Mr. Parthenis' analysis in any detail. It states simply that that the "first step" in calculating occupation rent is to conduct a search of properties that were listed and rented "within the general subject area". Then the "first requirement" is to establish the rent for the base year. In a conclusory manner, the report then states: [u]pon analysis of similar properties that were rented in the area, the rent is estimated to have been $2,300 per month in 2012. Then, using the Ontario Consumer Price Index, "a measure of inflation calculated monthly by Statistics Canada", Mr. Parthenis concludes that the same occupant renting the property "would be faced with government approved rental increases" of 2.5 per cent in 2013 and 0.8 per cent in 2014. [page558]
[63] The report does not identify the "general subject area", nor any of the "properties that were listed and rented within the general subject area". It does not explain why a rent increase is justified as of January 2013 when this hypothetical rental began in November 2012. It does not explain why "government approved rental increases" or the Ontario Consumer Price Index are the appropriate measure. The report was not updated for 2016 or 2017.
[64] I am extremely troubled by the fact that all questions about Mr. Parthenis' "analysis" of occupation rent were refused on discovery when the report was deficient in the manner I have described. The parties argued about the admissibility of this evidence. I admitted it but indicated that the concerns surrounding it would be relevant to its weight. In the circumstances, I assign this evidence no weight. Even during his evidence at trial, Mr. Parthenis did not explain his opinion. He did not give evidence about any comparable rental properties. He did not explain why an increase in rent was justified, in his view, two months into this hypothetical rental.
[65] While I accept that the estate is entitled to occupation rent, being 50 per cent of the monthly rental rate, ^3 the evidentiary record is not sufficient to allow me to conclude what the monthly rental rate is. Moreover, I cannot determine whether 50 per cent of the monthly rental rate is more or less than the estate's share of the property taxes and insurance expenses that Ms. Cook has paid. Neither party led that evidence. While the information is in Ms. Cook's knowledge, the estate is making its claim for occupation rent and it bears the burden of proof. Ms. Cook testified that the estate never asked her about her expenses. It could have done so. It was the estate's burden to prove its claim.
[66] In the circumstances, I adopt the approach of McSweeney J. in Fray v. Evans (2017), 137 O.R. (3d) 280, [2017] O.J. No. 1307, 2017 ONSC 1528 (S.C.J.), at paras. 44-45:
The record contained some evidence of Mr. Fray's living expenses and of rental prices for homes in the area. I note that neither party's evidence was as clear or comprehensive as it could be . . . All parties have had ample time to put their best foot forward to substantiate their position. The goals of proportionality and finality in litigation both favour my reaching a final determination, to the extent that the evidence enables me to do so, which is fair to the parties and assists them in moving forward with their affairs. [page559]
On the evidence filed, I find that 60% of Carlton Fray's claim for monthly living expenses is wholly offset by a notional occupation rent payable by Carlton Fray to the Evans brothers for his enjoyment of their share of the house. That is, the living expenses and the occupation rent categories, each of would potentially be barred by a range of doctrines, are in the circumstances of this case, "a wash".
[67] As in the Fray case, the record here establishes that Ms. Cook is paying expenses associated with the house, including the estate's share of expenses, although there is no evidence before me as to quantum. Similarly, some occupation rent is due, but I do not accept the only evidence that is before me as to amount, in view of the deficiencies in that evidence. The parties had ample time to put a proper record before me on these issues; they chose not to. Yet, it is important that some finality be brought to this litigation and the parties be able to move forward with their affairs.
[68] Accordingly, I conclude that the occupation rent that is owing is wholly offset by the estate's share of expenses that Ms. Cook has been paying. Neither the estate's expenses related to the property nor the occupation rent justify an adjustment to the purchase price.
What is the effect of s. 9 of the Estates Administration Act?
[69] The estate raised s. 9 of the Estates Administration Act, which provides that real property which has not been disposed of, conveyed, divided or distributed within three years after the death of the deceased is vested in the persons beneficially entitled thereto upon the intestacy of the deceased. Thus, the estate's half interest in the property vested in the beneficiaries three years after Mr. Psarros' death. ^4
[70] Since Mr. Psarros died intestate, his beneficiaries include Ms. Cook and his three children, one of whom is not a party to this action and the other two of whom are parties in their capacity as estate trustees.
[71] I asked the parties for further written submissions to determine if s. 9 of the Estates Administration Act requires an order dealing with the sale of the estate's interest in the home to Ms. Cook to be issued nunc pro tunc. The parties agree that no such order is necessary. Rather, in its written submissions, the estate states that the beneficiaries are bound by the marriage contract, such that s. 9 of the Estates Administration Act is [page560] not an impediment to Ms. Cook's purchase of the estate's interest in the home.
Funeral Expenses
[72] Ms. Cook has also claimed from the estate the expenses she incurred in respect of Mr. Psarros' funeral, cremation and interment. These total $11,268.70. Although it disputed Ms. Cook's entitlement to reimbursement at the outset of the litigation, the estate now agrees she is entitled to be paid back these amounts. Accordingly, this amount should be deducted from Ms. Cook's payment owing to the estate for its interest in the property. Ms. Cook thus owes $281,231.30 ($325,000 x 90 per cent = $11,268.70).
[73] The parties did not ask that Ms. Cook's payment to the estate be reduced by the value of her entitlement to her share of the estate as a beneficiary. Accordingly, I make no such order. The parties are of course free to agree on a further adjustment to the purchase to reflect Ms. Cook's interest in the estate.
Conclusion
[74] In the result, I conclude that the fair market value of the estate's interest is $325,000. The estate has not proven that any adjustment should be made for the payments Mr. Psarros made to discharge the mortgage, nor that any adjustment should be made for occupation rent. Accordingly, Ms. Cook owes the estate 90 per cent of its interest in the house, or $292,500. From this amount must be deducted the reimbursement for funeral, cremation and interment expenses Ms. Cook incurred, or $11,268.70. Ms. Cook thus owes $281,231.30 to the estate in exchange for its half interest in the property.
Costs
[75] If the parties cannot agree on costs, Ms. Cook may deliver costs submissions of no more than three pages plus relevant attachments to me within two weeks of the date of these reasons. The estate may deliver costs submissions of no more than three pages plus relevant attachments to me within one week of receipt of Ms. Cook's submissions. Ms. Cook may deliver a reply of no more than two pages plus relevant attachments within three days of receipt of the estate's submissions. Submissions may be delivered to my attention at Judges' Administration, 361 University Avenue.
Action allowed.
Notes
1 Mr. Parthenis admitted in cross-examination that the appraised value of the property would be affected by necessary repairs, such as roof repairs, but he did not factor any such repairs into the 2017 appraisal, nor did he inquire as to whether any repairs were required. Ms. Cook testified that the roof of the property requires repairs.
2 Ms. Cook gave up her right to be estate trustee in the marriage contract, but Ms. Psarros' counsel wanted Ms. Cook to explicitly renounce any entitlement to be estate trustee.
3 Since Ms. Cook already owned 50 per cent of the property, she is notionally entitled to the other 50 per cent of the rental rate.
4 I have referred to the "estate's interest" in the property throughout these reasons for ease of reference.