Court File and Parties

BARRIE COURT FILE NO.: CV-13-1101-00 DATE: 20170628 CORRECTED DATE: 20171026

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SVETLANA DANILOVA and PAVEL DANILOV Plaintiffs – and – ALLA NIKITYUK, VALENTIN NIKITYUK, YANA SKYBIN, YOUNG MEN’S CHRISTIAN ASSOCIATION O/A YMCA SIMCOE/MUSKOKA Defendants

Counsel: A. Chapman, for the Plaintiffs E. Bornmann, L. Loader and M. Phan, for the Defendants Alla Nikityuk and Valentin Nikityuk A. Mae and W. Thomson, for the Defendants Young Men’s Christian Association o/a YMCA Simcoe/Muskoka and Yana Skybin

HEARD: May 16, 17, 18, 19, 20, 24, 25, 26, 27, 30, 31, June 1, 2, 3, 9, November 15, 16, 17, 21 and 22, 2016

Corrected Decision: The text of the original Reasons for Decision was corrected on October 26, 2017 and the description of the correction is appended.

REASONS FOR DECISION

MULLIGAN J.

A. INTRODUCTION

[1] The story of immigrants successfully settling into the fabric of Canadian society is a familiar one. The sponsorship of family members to immigrate to Canada is often another success story. This trial was about an unsuccessful sponsorship between family members and the litigation that followed.

[2] In this action the plaintiffs are Pavel Danilov (Pavel) and Svetlana Danilova (Svetlana). They immigrated to Canada in 2003. In 2008 they sponsored the immigration to Canada of Svetlana’s mother, Alla Nikityuk (Alla) and Alla Nikityuk’s spouse, Valentin Nikityuk (Valentin). For reasons that I will explore more fully in this judgment, the relationship broke down, the Nikityuks moved out of the Innisfil home they jointly occupied with the Danilovs in 2011 and they began living in social housing.

[3] When the Nikityuks arrived in Canada in 2008, Alla was 65 and Valentin was 68.They did not speak English. They were dependent on the plaintiffs for all aspects of daily living in Canada. As part of the transition the plaintiffs assisted them in enrolling in English language classes and immigrant support services at the YMCA of Simcoe/Muskoka. Yana Skybin, a YMCA employee, assisted them in her role as a settlement counselor.

[4] After the Nikityuks moved out of a home they occupied with the Danilovs, the plaintiffs commenced an action against Mr. and Mrs. Nikityuk, the YMCA of Simcoe/Muskoka and Ms. Skybin. They claimed against the various parties for inducing breach of contract, negligence, conspiracy, defamation, aggravated and punitive damages and special damages.

[5] The YMCA and Ms. Skybin (the YMCA defendants) oppose the relief sought against them and seek a dismissal of the plaintiffs’ claims and costs.

[6] The Nikityuks also seek a dismissal of the plaintiffs’ claims against them. In addition, they bring a counterclaim against the plaintiffs seeking damages for the loss of their savings placed in the hands of the Danilovs, together with interest on this amount, and punitive damages. As part of their counterclaim, the Nikityuk defendants obtained and registered a Certificate of Pending Litigation dated February 19, 2013, claiming an interest in the jointly occupied property known municipally as 14 Rankin Way, Innisfil, more particularly described in Schedule “A”.

[7] The Danilovs seek an order removing the Certificate of Pending Litigation.

[8] Both the plaintiffs and defendants called numerous witnesses during the course of this trial. Russian interpreters assisted the Nikityuk defendants.

[9] For reasons that follow, the plaintiffs’ claim is dismissed against all defendants and the counterclaim of the Nikityuk defendants against the Danilov plaintiffs is granted.

B. BACKGROUND FACTS

(1) Litigation History

[10] As noted, the Nikityuks obtained a Certificate of Pending Litigation against property owned by the plaintiffs in Innisfil, property once jointly occupied by the Danilovs and the Nikityuks.

[11] The YMCA defendants brought a Summary Judgment Motion before Corkery J. on October 10, 2014, and February 6, 2015. For Reasons issued on July 15, 2015, His Honour struck out some of the claims against the YMCA defendants but determined that there were triable issues with respect to some aspects of the claim, concluding at paragraph 107: “The following claims remain and shall proceed to trial: defamation, inducing breach of contract, the negligence claims against the YMCA and conspiracy”.

[12] The Nikityuks took no position on the summary judgment motion.

(2) Key Dates

[13] The following key dates will provide context for the discussion that follows:

2003 The Danilovs immigrate to Canada 2005 Alla Nikityuk visits the Danilovs in Canada 2007 Alla and Valentin Nikityuk visit the Danilovs in Canada January 2008 Pavel Danilov e-mails the Nikityuks with financial projections to assist with their immigration decision June 2008 The Nikityuks immigrate to Canada August 2008 The Nikityuks move to a newly constructed residence in Innisfil owned by the Danilovs June 2009 The Danilovs move into the residence in Innisfil occupying it jointly with the Nikityuks October 17, 2011 The Nikityuks move out of the Innisfil residence into social housing

(3) The Relationship Between the Parties

[14] Pavel and Svetlana were both born and educated in Russia. After obtaining a Master’s Degree, Pavel found work in the Internet Technology software field. They have a daughter, Anastasi, who is now an adult. She gave evidence at this trial. In 1996 the Danilovs immigrated to Latvia and found employment there. From Latvia they were successful in obtaining permission to immigrate to Canada as working professionals in 2003. Pavel found employment in his chosen field, Internet technology, and has worked for different employers over the years. Svetlana found some employment from time to time.

[15] Svetlana is Alla Nikityuk’s daughter. Prior to the Nikityuks’ immigration to Canada Svetlana remained very close with her mother and her mother’s spouse, Valentin Nikityuk. They spoke on the phone almost daily. Svetlana returned to Russia in February and March of 2005 to assist her mother who was having medical issues. Over the years, while the Nikityuks were still in Russia, the Danilovs transferred money to them, often monthly, to supplement their Russian pensions.

[16] In 2005, the Danilovs sponsored Alla Nikityuk’s visit to Canada. In 2007, they sponsored a visit by both Alla and Valentin. By all accounts these visits were a great experience for the Nikityuks. They travelled and visited a number of locations during these visits.

[17] It seems that the idea of sponsoring the Nikityuks’ immigration to Canada developed fairly soon after the Danilovs arrived in Canada. In 2004, the parties signed a Sponsorship Agreement, but the Nikityuks did not immigrate to Canada until 2008. It was clear at that point the parties were not fully committed to the immigration plan. Before proceeding the Nikityuks had to make a firm decision to immigrate and had to take the necessary steps to liquidate their assets in Russia. They had an apartment which had value. They had a small cottage and a vehicle. By 2008 Pavel’s income in Canada had increased to a level which he felt would make the sponsorship viable. Ultimately the Nikityuks decided to immigrate to Canada. They liquidated their assets and forwarded these assets to Svetlana. As a result of the sale of their apartment, their cottage and their vehicle, they sent the following amounts to Svetlana by wire transfer in US currency:

• $14,117 on April 1, 2008
• $31,000 on May 15, 2008
• $107,841 on May 27, 2008
• $107,884.71 on June 9, 2008

[18] These sums totalled US$260,842.71.

[19] The Nikityuks’ Russian bank marked these transfers with the English word “present”. Whether these funds were a gift to the Danilovs is an issue that will be explored more fully in these reasons.

C. KEY DOCUMENTS

[20] Before reviewing the testimony of the witnesses, a brief explanation of some of the key documents and financial instruments is warranted. Those are:

(i) An e-mail from Pavel to Mr. and Mrs. Nikityuk dated January 27, 2008 which I categorize as an “inducement” e-mail. (ii) The Citizenship and Immigration Canada Sponsorship Agreement signed by the Danilovs and Mrs. Nikityuk on October 27, 2004. (iii) A loan agreement between Pavel and the Nikityuks prepared in 2009 but backdated to the date of their arrival in Canada on June 14, 2008. (iv) Pavel’s 2008 tax return and Notice of Assessment indicating line 150 total income of -$159,777 and yielding a tax refund of $27,149.98.

Transfer of Funds from Russia

[21] Once the Nikityuks made the decision to immigrate to Canada they began the process of liquidating their Russian assets and sending the funds to their daughter, Svetlana, by U.S. money transfer. The amount transferred is not seriously in dispute. In fact, it is memorialized in a loan agreement prepared by Mr. Danilov using the figure CAD $263,586.91. Mr. Nikityuk gave evidence that he brought $15,000 cash with him when he entered the country, having liquidated the final amounts in their bank accounts. His further evidence was that he gave this to Mr. Danilov. I accept Mr. Nikityuk’s evidence. Mr. Danilov denies receiving these funds. I will discuss credibility issues more fully later in these reasons.

(1) The E-mail Sent January 27, 2008

[22] The e-mail sent by Mr. Danilov to the Nikityuks in January 2008, before they liquidated their assets and immigrated to Canada appears to be a budget projection for the Nikityuks’ income and expenses in Canada. It was written in Russian and translated into English. The e-mail opens with the following words, “These are the calculations that look realistic as of today (one percent more or less and the onetime expenses as buying furniture do not change the heart of the matter).”

[23] The next entry shows “brought capital” $200,000 beside it is the figure 10.0% <-growth. The budget shows expenses for a one bedroom apartment, food, car lease and related expenses. Income was shown as “pension (their Russian pensions) $2400 per year, our support (from the Danilovs) $2520 per year.”

[24] The next entry is interest of $20,000 on the capital of $200,000. The total expenditure and income was approximately $24,900, so a break-even budget was forecast. Mr. Danilov made several notations or comments including the following:

• Investment at a 10% annual interest rate is a risk free option.
• A lot of retired people sell their paid-off houses, invest their money and live on the interest on the capital…
• You can just put your money in the bank at four percent per year…
• In 3 of 4 years we might be able to afford a house…

[25] Mr. Danilov concludes: “Think it over, make up your mind. When you get a VISA and your passport on hand I think the decision will be obvious”.

[26] In cross-examination, Mr. Danilov responded to questions about the e-mail and stated:

They understood all the terms. They give us all the money. That money never got back to them and I pay them interest for lifetime support. That’s basically the basic terms…If they want to call it an offer, I don’t care.

[27] I am satisfied that this e-mail was an inducement to Mr. and Mrs. Nikityuk to immigrate to Canada and give effect to the Sponsorship Agreement. As previously noted, they liquidated their assets, transferred the funds to Svetlana Danilova and arrived in Canada in June 2008. The Nikityuks accepted this offer and I am satisfied that a contract was formed by these family members.

(2) The Sponsorship Agreement

[28] Prior to approval by the Government of Canada for immigration by the Nikityuks the parties were required to sign a Sponsorship Agreement on a form provided by Citizenship and Immigration Canada. The parties originally signed the form in 2004 but actual immigration did not occur until 2008. The agreement provides in part:

The sponsor and if applicable the co-sponsor must before a sponsorship undertaking can be approved, enter into a written agreement with the person to be sponsored (i.e. the principle applicant).

This agreement lists the obligations and responsibilities that follow unto the sponsor and, if applicable, the co-sponsor as well as unto the person who being sponsored and his or her family members.

[29] The Agreement further provides:

As sponsor or co-sponsor I promise to provide for the sponsored person and his or her family members basic requirements for a period that begins the day upon which the sponsored person enters Canada…

[30] This Sponsorship Agreement was stipulated to be for a ten year period from their arrival in Canada. It therefore will expire in June 2018.

[31] The agreement provided a definition of basic requirements to be provided by the sponsor, including food, shelter and clothing. As to social assistance it specified: “I promise that the sponsored person and his or her family members will not need to apply for social assistance benefits”. The agreement also provided some obligations on the person sponsored, stating, “As the person to be sponsored, I promise to make reasonable effort to provide for my own basic requirements as well as those of my accompanying family members.”

[32] But there was an exception for elderly persons: “Elderly parents or grandparents who are sponsored are not expected to look for a job or care for themselves”.

[33] The Agreement provided a cautionary note under these circumstances:

Sponsored persons and/or their family members who are being abused or assaulted by their sponsors should seek safety away from their sponsors even if this means that they will have to apply for social assistance benefits.

[34] When Alla Nikityuk came to Canada she was 65. She had prior health issues while living in Russia. When Valentin Nikityuk came to Canada he was 68. He too had prior health issues. They had retired from their jobs in Russia and had small Russian pensions. Clearly there was no expectation that they would find employment in Canada given their age, prior health issues and lack of proficiency in the English language.

[35] I am satisfied that the Sponsorship Agreement signed by the Danilovs and the Nikityuks also became a contract between the parties once the Nikityuks arrived in Canada.

(3) The Loan Agreement Between Family Members

[36] Mr. Danilov prepared a loan agreement in 2009 but it was backdated to June 14, 2008, when the Nikityuks first arrived in Canada. Pavel signed as borrower and Alla and Valentin Nikityuk signed as lenders. Svetlana acted as a witness. The document purports to be loan agreement indicating that Mr. Danilov borrowed $263,586.91 from the Nikityuks. The stated purpose of the loan was:

The borrower shall use the principal sum for the investment purposes at his discretion. The borrower shall provide interest income on the outstanding principal balance of the loan calculated annually to make the lenders’ total taxable income minimal but enough to cover all mandatory living expenses.

Annual interest investment income shall be paid on a schedule verbal agreed between the lenders’ and the borrower in the form of direct deposits to the lenders personal banking account specified below. The schedule must provide cash flow necessary to cover ahead of time all mandatory monthly living expenses.

[37] As to repayment of the principal, the agreement provided at paragraph three: “As to repayment, the repayment of the principal amount of said loan has not been specified in this agreement as the purpose of the above said loan for the lenders is to generate lifetime support income.”

[38] As I will detail further in these Reasons, at the time the loan agreement was actually drawn up Mr. Danilov had already lost all of the Nikityuks’ funds in 2008 through improvident trading in the stock market. In fact, the Nikityuks had no money to lend. Contrary to the loan document, no annual interest was ever paid by direct deposits to the lenders’ bank account.

[39] The loan agreement appears to have been triggered by an audit inquiry by Canada Revenue Agency (CRA) of Mr. Danilov’s tax return. That audit letter dated April 2, 2009, sent in response to Mr. Danilov’s 2008 tax returns, stated in part: “Before we can complete the assessment of your return, we need more information about the following claims”. The largest amount under scrutiny was carrying charges and interest expenses said to be $20,295. With respect to interest expense, the letter asked: “For interest paid on a loan used for investment purposes, provide a statement from the lender which includes all of the following details – the date the loan was granted – the total amount of the loan – total amount of interest you paid during the year; and the principal amount of the loan outstanding on January 1 and December 31 of the year”.

[40] It is evident that Mr. Danilov then prepared the loan agreement and sent it to CRA. He received a further letter dated May 20, 2009, which provided in part,

We have allowed claims for interest and carrying charges as well as caregiver amount based on a limited review of the information we received. These claims may be selected for a more detailed review at a later date.

(4) Pavel Danilov’s Tax Return

[41] In 2008 Mr. Danilov was working for Rogers Communications and had employment earnings of $95,334. The income tax deducted was $25,451. His tax return shows that his income was -$159,777. His evidence was clear that he used the interest on the Nikityuks’ loan and used stock market losses to generate tax losses. The result was that he obtained a net tax refund of $27,149. He repeated this process for several years that followed.

D. THE APARTMENT IN RUSSIA

[42] A substantial portion of the funds transferred by the Nikityuks to Canada was derived from the sale of their apartment in Russia. Ms. Nikityuk’s evidence was that she and Valentin married in 1978, when her daughter, Svetlana, was 14. They had separate apartments, but they acquired together a two-bedroom apartment. When her daughter, Svetlana married Pavel Danilov in 1983, the Danilovs lived with them and their daughter, Anastasia, was born there. Her evidence was that the Danilovs moved out to a separate apartment and Svetlana’s name was deregistered on the apartment as an owner. Her evidence was that Svetlana re-registered on another apartment owned by Pavel. Later, Svetlana and Pavel moved to Latvia. At that time, the Nikityuks registered Svetlana and their granddaughter Anastasia without right of ownership. These occupancy rights enabled Svetlana and Anastasia to have access to medical, educational and banking facilities if they returned from Russia. In fact, Anastasia came to live with the Nikityuks when she was in first-year university in 2003, while her parents were in Latvia. Svetlana lived with them in 2005 for more than a month when Alla needed medical treatment.

[43] Alla’s evidence was that the apartment was privatized in 1993 with Alla and Valentin Nikityuk registered as owners, when properties were privatized after the fall of the Soviet Union.

[44] In cross-examination, Mr. Danilov was taken to an ownership certificate for the Russian apartment, showing that it was registered to the Nikityuks. This registration did not show Svetlana as a registered owner. Mr. Danilov’s evidence was that she had a lifetime right to occupy it. The Danilovs were providing about $100 per month in support to the Nikityuks to assist them with the apartment expenses. They also provided financial assistance for other matters, including medical treatment required by Mrs. Nikityuk. Alla testified that prior to their sale of the apartment, the occupancy rights to the apartment were signed off by Svetlana and her daughter, Anastasia.

[45] No evidence was called by the plaintiffs, expert or otherwise, to indicate what, if any, monetary value this lifetime interest had. On the record before me, I am unable to determine if it had any monetary value. But the Danilovs thought the value of Svetlana’s interest was $50,000.

[46] Fifty thousand dollars was taken by the Danilovs from the assets transferred to Svetlana and used as a down payment on the Innisfil house. The Danilovs reasoned that this was the value of her lifetime interest. However, there was no discussion about this with the Nikityuks and there was no hint of this when Mr. Danilov sent the inducement e-mail about a proposed budget in Canada. If the Danilovs intended to make a deduction from the Nikityuks’ funds for this life interest, or for other funds which they advanced to the Nikityuks years earlier while the Nikityuks were in Russia, he had a perfect opportunity to do so but did not.

[47] In my view, there was never any discussion or agreement that money advanced to support the Nikityuks in Russia or Ms. Danilova’s purported lifetime interest in the apartment would be subject to a deduction when funds were transferred to Canada.

E. THE STOCK MARKET LOSS

[48] It is clear that Mr. Danilov lost all of their capital in the stock market. He blamed the losses on the recession of 2008. He told the court that this loss was a “lesson learned” and that he was leveraging his investments. He said that the money was sent to him as an investment into the family business. Svetlana Danilova did not disagree that the money in the stock market was lost within a matter of days.

[49] Mr. Danilov’s principal occupation was in the internet technology software field. There was no evidence that he had any particular training or expertise with respect to the stock market yet he invested all of the Nikityuks’ money and told the court that he was leveraging these investments.

[50] Prior to receiving the Nikityuks’ money, Mr. Danilov had been investing in stocks and trying to develop some trading automated software. He recognized that trying to earn 10% on stocks might be a difficult achievement, but the automated trading software might produce a better result. In mid-summer of 2008, he transferred all the funds Svetlana had received from the Nikityuks into his brokerage account. In a matter of a few days in August 2008, all of the capital was lost during a stock market decline. He had been purchasing stocks on a margin account.

[51] But he rationalized this by telling the court that he did not consider it to be a loss; it was an expensive lesson. He told the court that the Nikityuks did not notice and he continued to support them. In hindsight, he recognized that it was “not such a good idea”. In cross-examination, he was asked the following question about the use of funds:

Q. You blew it? A. It was a valuable lesson.

[52] I am satisfied that at no time did he ever discuss with the Nikityuks that he intended to invest their money in the stock market or that their money had been lost in the stock market.

[53] The rosy projection of $20,000 from 10% interest each year on the Nikityuks’ “brought capital”, as set out in the “inducement” e-mail, evaporated.

[54] However, he did not hesitate to use this loss and “interest” on the loan from the Nikityuks as a tax loss on his tax return and yield for himself a refund of virtually all the taxes he paid on his salary. According to the evidence of Mr. Danilov, CRA asked questions with respect to the tax returns he had prepared for Mr. and Mrs. Nikityuk. He was showing that they had income of about $20,000 each. This was his calculation of the benefits they were receiving by way of his providing food, clothing, shelter and other amenities. He did this to benefit himself without any disclosure to the Nikityuks. The Nikityuks’ tax returns were prepared by Svetlana without their knowledge.

[55] The Nikityuks thought that they would have their own residence in Canada. Indeed, the “inducement” e-mail showed that they would have a one-bedroom apartment and a car. After living with the Danilovs in an apartment for a short period of time they moved to the new house purchased in Innisfil, a house purchased with $51,640 of money from their funds. The house was registered to Mr. and Mrs. Danilov. The Nikityuks, having had no explanation about funds that they transferred, assumed that it was their home. They treated it as such and lived there independently from August 2008 until June 2009. Suddenly, without warning, the Danilovs arrived and moved in. The reason they moved in is obvious. Mr. Danilov was supporting himself and his wife in their Etobicoke apartment and he was supporting the Nikityuks in the house in Innisfil. He was paying for a leased automobile and a mortgage on the residence.

[56] The Nikityuks only income was a small pension from Russia which varied according to the ruble and currency exchange rates between Russia and Canada. That pension income was not a surprise to Mr. Danilov, he had projected $200 a month in his email budget that he sent them before the Nikityuks decided to immigrate.

[57] When Mr. and Mrs. Danilov moved into the house in 2009, Pavel’s gross income was about $96,000. He acknowledged that money was tight after the stock market loss. I am satisfied that the financial situation that he put himself in strongly influenced his need to move to the house in Innisfil to share with the Nikityuks. He was able to eliminate the costs of paying for an apartment in Etobicoke.

[58] Mr. Danilov was never honest with the Nikityuks about the financial strain he placed the family in with respect to the stock market loss. They placed their trust in him. That trust was not rewarded. Mrs. Danilov seems to have fully appreciated the stock loss and supported her husband in what she categorized as the family business, that is, the stock market trading. I am satisfied that she too was not honest with her mother and her mother’s husband. She acted as a witness to the loan agreement signed by her parents. Svetlana prepared and signed the Nikityuks tax returns which showed their income of about $40,000. This was the interest income said to be generated from the loan agreement between Pavel and the Nikityuks. There is no evidence that the Nikityuks were aware of the tax returns being filed on their behalf. I am satisfied that the Nikityuks were not aware of the stock market losses until this action was commenced.

The Credibility of the Danilovs

[59] Because of the immediate stock market loss, an improvident investment, and the lack of candor about the financial circumstances that were created, I find the Danilovs not to be credible witnesses. When there is a dispute about evidence between the Danilovs and the Nikityuks, I prefer to accept the evidence of the Nikityuks. Pavel prepared the inducement e-mail. Svetlana received the money wired from Russia and allowed her husband to access it. She witnessed the loan agreement, and she controlled the Nikityuks’ finances. She became a registered owner of the Innisfil property bought with a down payment from the Nikityuks’ funds.

F. THE INNISFIL RESIDENCE

(1) The Purchase

[60] In 2007, the Danilovs entered into an agreement to purchase a new house to be constructed at 1490 Rankin Way, Innisfil (the Innisfil property). In happier times, the Danilovs had looked at this vacant subdivision with the Nikityuks during the Nikityuks’ 2007 visit to Canada. The purchase of this home was completed in August 2008, and the Nikityuks moved into this house while the Danilovs continued to live in their apartment in Etobicoke. The purchase price was $271,000. Mr. Danilov arranged a mortgage for $217,000 and he told the court he took $51,640 out of the Nikityuks’ funds transferred to his wife as part of the down payment.

[61] The Danilovs’ reasoning for taking $51,640 for a down payment was they felt that Svetlana Danilova had an interest in the Nikityuks’ Russian apartment. She had been an occupant when the property was converted to private ownership upon the collapse of the Soviet regime. However, there was no evidence that this use of the Nikityuks’ capital was ever discussed with the Nikityuks.

[62] In August 2008, the Nikityuks moved into the Innisfil house only a few months after arriving in Canada. They were supplied with a leased vehicle that Mr. Nikityuk was able to drive when he got his Ontario license. The Danilovs came up on the weekends from their Etobicoke apartment to assist them with all aspects of daily living, and the Nikityuks’ new life in Canada. Svetlana took her mother to medical appointments when required.

[63] When the Nikityuks arrived, the Danilovs were still living in an apartment in Etobicoke. Their daughter was attending university. The following year in June 2009, Pavel and Svetlana moved from their apartment into the house in Innisfil without prior notice or discussion with the Nikityuks. They then all resided there together as a family unit. The family bond was still quite strong. However, in my view, the Danilovs were financially strained. Mr. Danilov had been supporting the Nikityuks and himself and his wife in the apartment in Etobicoke and he was carrying all of the costs of the Innisfil house. He was doing so on the basis of his salary only, having lost the Nikityuks’ money and his own money in the stock market.

[64] Mr. Danilov obviously felt that the money he and his wife received was theirs to use as they pleased as long as they honoured the Sponsorship Agreement. As he said in his testimony:

They transferred my, I received this money in my account whatever my mom [mother in-law] put there. She put it – it’s a gift because it’s how she saw this money...but they transferred me but I will put this money into use for their – in their best interest for their actually, but of course in the connection with the entire family situation in Canada. So this money secured the Sponsorship Agreement.

[65] The Nikityuks had no registered ownership in the Innisfil residence. I am satisfied on the evidence before me that there was no discussion about any form of ownership or the use of $51,640 of Nikityuks’ money to purchase a house registered to the Danilovs.

(2) Life Together in the Innisfil Residence

[66] The initial arrangements were that the Nikityuks would live in the house with the Danilovs visiting on the weekend. The house was shared. It had a master bedroom upstairs with an ensuite. This was used by the Danilovs on weekends. The Nikityuks had two bedrooms downstairs.

[67] The relationship continued on a very positive note at first. The Danilovs supplied a leased vehicle for Mr. Nikityuk to use. The Danilovs paid all the bills for the house and did shopping and re-supplying the house when they came on the weekends. On occasion Ms. Danilova would return during the week to assist the Nikityuks with medical appointments as needed.

[68] The Nikityuks were supplied with credit cards for their use, but their finances were controlled, managed and overseen by Svetlana Danilova. She took them to a Russian-speaking lawyer where they executed general Powers of Attorney in her favour. She opened an account at the CIBC in the name of the Nikityuks with her as power of attorney. This account received their Russian pensions and she controlled all withdrawals of these funds. The Nikityuks were required to give her two days’ notice in the event that they required cash. The Russian pensions were as a result of their years of work in Russia.

[69] When the Nikityuks first moved into the house in Innisfil, Pavel used about $15,000 of the Nikityuks’ money to furnish the home for family living.

[70] About nine months after the Nikityuks moved to the Innisfil residence, the Danilovs moved from their apartment into the house. It was obvious that the Danilovs were under financial pressure. They were maintaining the cost of an apartment in Etobicoke and the house in Innisfil. They were also providing household needs for themselves and the Nikityuks, all based on Mr. Danilov’s salary.

[71] In 2009, Mr. Danilov’s gross income from employment was about $96,000. He testified that money was tight after the stock market losses.

[72] In cross-examination Ms. Danilova denied that she told the Nikityuks that Mr. Nikityuk was the owner of the house and denied telling them that the money sent to Canada had been used to buy the house.

[73] Mrs. Nikityuk said it was a surprise to learn that the Danilovs would be moving to the house in Innisfil. Her evidence was that they were told $150,000 of their money was invested to buy the house.

[74] I accept Mr. Nikityuk’s evidence that he gave the Danilovs $15,000 when they first arrived from Russia. These were the funds available to them when they liquidated their final Russian bank account balances before departure. This was in addition to the prior wire transfers.

[75] Both Mr. and Mrs. Nikityuk thought they would be living in a separate residence when they came to Canada. The inducement e-mail showed that they would have a separate one-bedroom apartment. They initially thought that they would have an apartment near the Danilovs in Etobicoke. Mr. Nikityuk’s evidence was that Mr. Danilov told him that the house was bought with the Nikityuks’ money. Mr. Nikityuk thought he was the owner of the house. His evidence was that he was told $150,000 of his money was put into the house. He believed Mr. Danilov and did not pursue financial issues any further. He and his wife had a home, perhaps more than they anticipated, but they were living separately which was always part of the plan when they decided to immigrate to Canada.

[76] The Nikityuks gave evidence about the arrival of the Danilovs to live in the house on a fulltime basis in June 2009. Mr. Nikityuk said there was no advance discussion. They were simply told that the financial situation was bad and the Danilovs could not maintain a house and an apartment. Their arrival on a fulltime basis was unexpected. Alla was told it was a financial crisis and they were not given any choice. They had to accept it.

[77] By the time the Danilovs moved in, the parties had moved a long way from the e-mail that was sent to the Nikityuks in 2008 as an inducement to proceed with their immigration plans. On a positive note, the Nikityuks occupied a house of their own with plenty of family and financial support from the Danilovs. They thought their money was used to buy the house. On a negative note, most of the money that they had sent to the Danilovs was lost by Mr. Danilov by improvident trading in the stock market. I am satisfied that this loss was never discussed with them. As a result, the promised 10% return on their estimated “brought capital” of $200,000 could not be realized. Their ability to support themselves to any extent based on the capital they brought to Canada was taken out from under them. Their only means of support was their modest Russian pensions and support from the Danilovs.

[78] I am satisfied that the financial strain caused by the loss in the stock market caused the Danilovs to move into the house without notice or family discussion in an effort to maintain their obligations under the Sponsorship Agreement.

[79] The Danilovs were obligated to continue mortgage payments on the house but more fundamentally, they were obligated to support the Nikityuks for at least ten years under the terms of the Sponsorship Agreement. One of the primary purposes of the Agreement, in the case of retirees such as the Nikityuks, was to assure that they did not become dependent on social assistance.

[80] As I will explain more fully in these reasons, the Nikityuks did ultimately become dependent on social assistance. They moved out of the Innisfil residence and into social housing with the support of Ontario Works. They also received ongoing but limited support from Mr. and Mrs. Danilov and they regained control of their Russian pensions.

(3) The Deterioration in the Relationship

[81] Over time the relationship between the two families deteriorated. The Nikityuks moved out on October 17, 2011, over two years after the Danilovs moved into the residence on a fulltime basis. They were not allowed to take the leased vehicle that had been provided to them. Svetlana took the keys from them. While on the street, the Nikityuks called friends to get a ride to a place of safety. They left under claims of elder abuse. That claim expedited their ability to access social housing. A few weeks after they left the house they returned to the house with police supervision to remove their personal effects.

[82] When the Danilovs first moved in the relationship was good. Mr. Nikityuk was able to sponsor one of his daughters for a visit to Canada from Russia. The parties took trips and outings together. Ms. Danilova made arrangements for the Nikityuks to take English as a second language classes at the local YMCA. She continued to support them with medical visits and other aspects of daily living. But it is clear that the Nikityuks’ desire to live separately became an ongoing issue. Ms. Danilova acknowledged that her parents did have the right to live separately if they wished to. She denied that the situation got so bad that Mr. Nikityuk wanted to move back to Russia.

[83] The Nikityuks gave evidence about some physical altercations that took place inside the residence. Before I deal with these issues in detail I will briefly review the evidence of Mr. and Mrs. Nikityuk about the atmosphere in the home.

[84] As time went on Alla thought her daughter became a completely different person. Her daughter was irritated and could not speak openly to her. Alla felt that they were being manipulated and controlled. She had to give two days’ notice to ask her daughter for cash. But she acknowledged that they had credit cards that they could use. Her daughter had control of their Russian pensions by way of a power of attorney on their account.

[85] Mrs. Nikityuk’s evidence was that she had no knowledge of the loan agreement tendered as an exhibit. She denied that she was ever provided a Russian translation of this document. Although the Danilovs said that the document was translated into Russian, no such translated copy was tendered as an exhibit by the Danilovs. Alla testified that she trusted her daughter at the time and signed anything that her daughter presented.

[86] Mr. Nikityuk gave evidence that he thought that they would be able to live separately in Canada as he and Alla had gotten used to living together in Russia. The inducement e-mail showed that they would have a separate apartment.

[87] He was taken to the CRA Notice of Assessment with respect to his 2009 income of $20,245. His evidence was that he had never seen this before. He did not have any access to the financial records being kept by Mr. Danilov.

[88] He was not aware that Pavel had opened two TFSA accounts in their names or that Pavel later withdrew these funds on his own.

[89] Life in the house became worse over time. There was unpleasantness and there were arguments. They became more frequent in 2011. Mr. Nikityuk indicated that all financial aspects of their lives were managed by the Danilovs.

(4) The Physical Incidents

[90] The Nikityuks gave evidence that there were some physical incidents that supported their allegation of elder abuse and assisted them in relocating to social housing. The Danilovs deny that these physical altercations occurred.

[91] Mrs. Nikityuk reported an incident in August 2011 where her daughter Svetlana rushed at her, put her hands on her and shook her. Her daughter said words to the effect that “The house was not yours”. Her daughter then apparently fainted. Mrs. Nikityuk then decided that she wanted to leave the house. She told the court she reported this incident to Yana Skybin, the support worker at the YMCA. Mrs. Nikityuk indicated that she had bruises on her body and showed this to Mr. Nikityuk. She did not report this to the family doctor.

[92] The second incident she reported was about a heated argument between Valentin and Mr. Danilov. Mr. Nikityuk threatened to move back to Russia and her evidence was that Mr. Danilov threw a plate near him, hitting the wall.

[93] Mr. Nikityuk was asked why they left the residence on October 17, 2011. He said the aggressive physical and verbal behaviour had become more frequent. He told the court that Mr. Danilov had thrown a plate at him which hit the wall and feelings became unpleasant.

[94] He told the court he witnessed Ms. Danilova’s aggressive attack on his wife, Alla, with Svetlana then falling to the floor. He noticed the bruises two or three days later. The arguments and unpleasantness in the home became more frequent in 2011.

[95] Ms. Danilova denied that she had a physical altercation with her mother and denied that her husband threw dishes at Mr. Nikityuk. She admitted there was a discussion about social housing a few months before they moved out but she told her mother that social housing was not available because it was for poor people. She could not recall any further disagreement that day. She denied seeing any bruises on her mother.

[96] Mr. Danilov’s daughter, Anastasia, gave evidence at the trial. Her evidence in-chief was introduced by way of affidavit. She was at the home on the August weekend of the altercation in question but denied seeing any bruises on her grandmother. However, her affidavit does speak about the atmosphere in the house. During her visit there was a discussion about social housing between her mother and her grandmother. As she stated in her affidavit at paragraph 15: “Moments later, my step grandfather joined the conversation, he shortly switched to a high and aggressive tone stating that my parents do not let him and Alla live independently, specifically, do not allow to apply for social housing, and this leads to a lot of fights in the house and makes life miserable”.

[97] I accept the evidence of the Nikityuks that life in the house became miserable. Almost every aspect of their financial life was controlled by the Danilovs. I accept that the atmosphere in the house was worsening over time under circumstances where the Nikityuks were being abused financially, if not emotionally, by the Danilovs. The capital that they had built over a lifetime in Russia was lost in improvident trading in the stock market almost immediately after they came to Canada. They did not agree to such investments and were never properly informed about this loss. They had a strong desire to live independently. It was always part of the discussion and it was outlined in Pavel’s e-mail inducement offer. It indicated that they would have a separate apartment. They moved into the Innisfil house by themselves under circumstances where they assumed it was purchased with their money and registered in their name. The Danilovs moved in with them with no notice, offering them no choice in the matter, no explanation about the financial pressure that the Danilovs were under was offered; financial pressure which was created solely by the improvident stock market trading by Mr. Danilov.

(5) The Events of October 17, 2011

[98] By October 17, the Nikityuks had developed a safety plan and had been pre-approved for social housing. They closed out a bank account in their name and in the Danilovs’ name without notifying the Danilovs in advance. This led to what Ms. Nikityuk described as “an unpleasant conversation”. They packed their bags and left the house, but were not allowed to take the leased vehicle that they had been using for two years. Svetlana did not know where her mother went and reported to the police that her mother and Valentin were missing. Eventually she was informed that they were in a place of safety.

[99] A letter written by Svetlana Danilova less than a month later shows the extent of the deterioration of her relationship with her mother. On November 10, she wrote a letter to the Welfare Fraud Hotline at the Ministry of Community and Social Services. In a four-page letter, she set out allegations against the Nikityuks. Among these allegations were the following statements:

(i) Before they came, they transferred a certain amount of money to our bank account after selling property in Russia, based on a verbal agreement to invest money as a long-term no cash-out loan, so we could manage the money for their lifetime support. (ii) “We consider their approach as a pure fraud with a purpose to get the funds for their separate living despite they are not eligible.”

(6) Social Housing

[100] The topic of social housing was much discussed in the evidence of the plaintiffs and the defendants in this proceeding. As noted previously, the Nikityuks moved out of the Innisfil property on October 17, 2011. After temporarily residing in emergency shelter they moved into social housing. They continue to reside in social housing paying subsidised rent of $235 per month. They now have control of their own finances and are in receipt of their Russian pensions. Based on their most recent deposit, Mr. Nikityuk receives $874 per quarter and Mrs. Nikityuk receives $785 per quarter. They also receive $150 a month of support from the Danilovs. Mr. Nikityuk receives a small dividend from a former employer into an account he has in Russia. Up to 2014 he estimated that he received about $2,700 in total. He used this for incidentals in Canada and some of the funds to sponsor his daughter for a trip to Canada. They are obligated to repay Ontario Works about $19,000.

[101] Both Mr. and Mrs. Nikityuk testified that they learned of social housing by visiting friends in Barrie who had friends visiting from Toronto living in social housing. I am satisfied that it is not something they first learned about from the YMCA or Yana Skybin. Ms. Danilova gave similar evidence confirming that her parents first learned about social housing through conversations with a Russian speaking couple from Toronto.

[102] In her testimony Mrs. Nikityuk testified that social housing was a last resort after the issue of a separate condo or apartment was ruled out.

[103] In 2009, the Danilovs entered into an agreement of purchase and sale to buy a condo in the Innisfil area. There was a dispute about whether this condo was to be purchased for the Nikityuks or to be purchased for the benefit of her daughter who was graduating from university. The Danilovs’ position was that the Nikityuks were no longer capable of living independently so they sought and obtained a release of this agreement of purchase and sale.

[104] The Danilov’s daughter, Anastasia, gave evidence about her parents and the Nikityuks looking at apartments. She was asked:

Q. Did you know that Alla and Valentin had, on a number of occasions, spent the day in consultation with your parents, looking for rental apartments in and around Barrie, and on each one of these occasions after they would return home in the evening your parents would advise that on reflection, “No, we cannot proceed with renting you a separate apartment”? A. I actually do recall that that has happened, but I do not know the details of those conversations but this is possible.

[105] I am satisfied that the Nikityuks were aware of the financial pressure that the Danilovs were under when they moved into the Innisfil house. But they were not aware of the loss of their capital by Mr. Danilov’s stock trading. They had a desire to live independently. A desire that was reflected in the original inducement e-mail sent to them by Mr. Danilov. They had enjoyed living independently in the Innisfil house for a number of months.

[106] The discussion about social housing became a matter of consistent argument between the parties. Anastasia testified about the argument she witnessed. The Danilovs resisted it and for good reason. The Sponsorship Agreement that they had with Citizenship and Immigration Canada would be considered breached if the immigrants to Canada became reliant on social assistance during the first ten years of the Sponsorship Agreement. I am satisfied that they did not share this knowledge with the Nikityuks nor did they share the knowledge that the Nikityuks’ “brought capital” had been lost in the stock market days after it had been received by the Danilovs.

G. THE YMCA AND YANA SKYBIN

(1) Background

[107] In the fall of 2009 Ms. Danilova arranged that the Nikityuks would take English as a second language through the local YMCA. The settlement counsellor that provided services to them there was Yana Skybin who was fluent in Russian. They attended the school regularly and met other Russian speaking immigrants. They went on activities to museums and other field trips.

[108] Mrs. Nikityuk testified that their relationship with Yana Skybin developed over time. She felt that Yana was responsive, understanding and met their needs. She assisted them with medical documents and letters and referrals. Over time they shared with Ms. Skybin the difficulties they were encountering at the Danilov residence. Mrs. Nikityuk testified that she talked to Ms. Skybin about bruises in one incident. Mrs. Nikityuk shared that there was constant harassment in the house by the Danilovs.

[109] Ms. Skybin gave evidence at trial, as did a number of other YMCA employees.

[110] The YMCA witnesses included Fiona Cascagnette, who was the YMCA’s Vice-President of Child and Youth Development, Ruth Miller, the YMCA settlement counsellor who was Yana Skybin’s immediate supervisor, Kim Clark, Barrie Victim Services Worker, and Dorothy Archer who worked at the Barrie Women’s Shelter. Friends and acquaintances of the Nikityuks who also took English as a second language at the YMCA also gave evidence.

(2) The Evidence of Yana Skybin

[111] Yana Skybin began work for the YMCA in 2009. She was hired as a Settlement Counsellor. Her resume and job description were filed as exhibits. Her general function was to provide settlement assistance to eligible newcomers in the community. Some of the functions that she was required to perform, as listed on the job description, were:

• Assesses the needs of newcomer clients.
• Assists newcomers and refugees with orientation, translation, interpretation, information needs, counselling needs and employment requirements.
• Refers clients to community resources including training programs.
• Provides liaison between government and community based agencies and newcomer clients.
• Completes written and oral correspondence on behalf of clients on a regular basis.

[112] Yana Skybin continues to work for the YMCA in this capacity. She is now a certified interpreter with respect to the Russian and Ukraine languages.

[113] She first met the Nikityuks in 2009 when they enrolled for English classes. This was based on a referral from their daughter, Svetlana Danilova. The programs were offered free of charge to immigrants and funded by Immigration Canada. The Nikityuks signed a privacy statement in accordance with the YMCA standard form.

[114] In addition to the work with the Nikityuks, Ms. Skybin had a brief social relationship with Svetlana Danilova. Ms. Skybin also thought of the Nikityuks as social friends, attending some functions with them.

[115] She first became aware of the Sponsorship Agreement in August 2011. In October 2011, she began to keep a log of interactions with the Nikityuks and others at the request of her supervisor. She completed entries beginning with August 19, 2011, based on her recollection of events. The following are highlights of some of the entries she made.

(a) August 19, 2011 – Svetlana Danilova calls her to ask if her parents were asking about social housing. (b) August 23, 2011 – The Nikityuks came to see her to ask about subsidized housing so they could live separate from their daughter. She showed me her bruises and [Pavel] threw plates at them… (c) September 30, 2011 – The Nikityuks came to see her again. Things were getting worse at the home. Abuse was ongoing… the daughter had full control of their finances, including pension… (d) October 4, 2011 – She contacted Bev Juneau [a legal advocate at Barrie Women’s Shelter]. (e) October 5, 2011 – She met with Bev Juneau and made a safety plan. (f) October 7, 2011 – She met with Dorothy [Archer from the Barrie Women’s Shelter] and made a housing application and contacted Community Legal Clinic. (g) October 11, 2011 – She met with Dorothy Archer, Kim Clark [Support Link, Victim Services] and Bev Juneau. (h) October 13, 2011 – She met with Suzanne Cooper at Community Legal Clinic. (i) October 14, 2011 – She saw an apartment in Barrie with them. (j) October 17, 2011 – She got a call from the Nikityuks that they were outside of the house due to an argument with their daughter. She called the women’s shelter and the Salvation Army to make arrangements for overnight accommodation. Then the Nikityuks looked at an apartment on Blake Street and accepted an offer. (k) October 24, 2011 – She met the Nikityuks at the apartment. (l) October 27, 2011 – She met with Dorothy Archer and got the names of some Russian speaking lawyers re: Legal Aid Certificate. (m) October 28, 2011 – She received information that Svetlana Danilova was calling the YMCA to find out which social worker was helping her parents. (n) November 1, 2011 – She corresponded with the Community Legal Clinic and prepared letter for Revenue Canada.

[116] Numerous other entries followed indicating the contact and support that Ms. Skybin was providing to the Nikityuks.

[117] On August 20, 2011, the Nikityuks were invited to her house because it was her birthday. She said she did not observe any bruising at that time. The Nikityuks provided a small gift to her on that occasion.

[118] She told the court that on August 23, 2011, the Nikityuks met with her in her office and expressed their desire to move out of the house. The atmosphere in the house was bad. She testified that Mrs. Nikityuk showed her bruises on her upper arms which she thought were multiple bruises that looked like finger prints. Mrs. Nikityuk told her that she had been grabbed by her daughter and shaken. As a result she provided the Nikityuks with a pamphlet on elder abuse. This Ontario Government pamphlet, that had been translated into Russian, provided steps that an individual or counsellor could follow if abuse was reported to them. The following are a few of the points from that pamphlet:

• Believe the person
• Do not judge the person
• Do not deny what is going on
• Encourage the person to seek help and assistance

[119] With respect to the October 5, 2011 meeting in her office with Bev Juneau of Barrie Witness Services, she indicated she assisted by translating. An escape plan was prepared both in English and in Russian by Dorothy Archer, the transition worker.

[120] The escape plan in English and translated into Russian provided 15 steps for the Nikityuks to consider, including:

• Closing joint bank accounts
• Consulting a lawyer
• Applying for Legal Aid
• Applying for Ontario Works
• Applying for subsidized housing

H. THE DANILOVS’ DAMAGES CLAIM

(1) Background

[121] In the plaintiffs’ Fresh as Amended Statement of Claim, damages were sought against the Nikityuks and the YMCA defendants under various heads of damages. It is clear that some claims involve just the Nikityuks; others involve some combination of the Nikityuks and the YMCA defendants. Before considering the liability of any of the defendants for any damages, it is important to review the evidence concerning the YMCA defendants and their involvement with the Nikityuks.

[122] As previously mentioned, Corkery J. dealt with a summary judgment motion and dismissed some aspects of the plaintiffs’ claim against the YMCA defendants, but left others for determination at trial. At para. 42 of his decision, Corkery J. considered heads of damage with respect to 12 claims. He dismissed eight, but left four claims for determination at trial. I will now specify the claim and indicate the amount sought by the plaintiffs in their closing submissions:

(i) Defamation - damages sought: $400,000; (ii) Inducing breach of contract - amount sought: $400,000; (iii) and (iv) Negligence and conspiracy – amounts sought: $400,000.

[123] With respect to each of these four areas, Corkery J. provided the following:

(a) Defamation, at para. 55:

The issue is whether she did so [report the information] with malice or indirect motive in a conflict with a duty of the situation…While I am satisfied that the occasion when statements were made is protected by qualified privilege, I am unable to determine on the evidence before me whether it is defeated by malice. …Whether she knew she was not telling the truth in the statements she made or whether she was reckless in that regard is a genuine issue for trial.

(b) Inducing Breach of Contract, at para. 69:

The genuine issue for trial that remains is whether Ms. Skybin knew the allegations of abuse to be false, or was reckless in this regard, and, if false, whether she assisted the Nikityuks in applying for social assistance without regard for whether it would cause a breach of their sponsorship agreements.

(c) Negligence, at para. 82:

It is well-established that employers are vicariously liable for the actions of their employees done in the course of their employment. Apart from vicarious liability, the claims pleaded allege that the YMCA is directly liable for its own negligence in carelessly supervising its employees. On the evidence before me, I cannot determine liability, vicarious or direct, with respect to the YMCA. The vicarious and direct liability of the YMCA remains a genuine issue for trial.

(d) Conspiracy, at para. 86:

In this case, there is no evidence that the predominant purpose of Ms. Skybin’s and the Nikityuks’ conduct was to cause injury to the plaintiffs, thus the first category does not apply. For the second category to apply, the plaintiffs must establish that Ms. Skybin’s and the Nikityuks’ conduct was unlawful…Whether Ms. Skybin and the Nikityuks conspired to fabricate a story of abuse remains an issue for trial.

With that background in mind, I will consider the evidence involving the Nikityuks and the YMCA defendants.

(2) The Summary Judgment Motion Brought by the YMCA Defendants

[124] In the Summary Judgment Motion, Corkery J. reviewed five statements made by Yana Skybin which formed part of the basis for the plaintiffs’ claim against the YMCA defendants. Those five statements are fully addressed in para. 32 of Corkery J.’s Decision. It is not necessary for me to repeat them in full here but a list of the five statements by Yana Skybin will suffice:

(a) October 4, 2011: e-mail to a lawyer at the community legal clinic (b) December 20, 2011: a letter to Whom It May Concern but provided to the County of Simcoe Social Services Division (c) December 6, 2011: e-mail to the lawyer at the community legal clinic (d) January 20, 2012: a letter to the lawyer at the community legal clinic (e) Letter to a paralegal

(3) The Defamation Claim

[125] As Corkery J. framed the discussion at para. 57 of his decision:

I am satisfied that the occasions when statements were made is protected by qualified privilege, I am unable to determine on the evidence before me whether it is defeated by malice. Whether (Yana) knew that she was not telling the truth in the statement she made or whether she was reckless in that regard is a genuine issue for trial.

[126] The issue for determination is whether or not Ms. Skybin acted through malice, was not telling the truth, and was reckless.

[127] In Vanderkooy v. Vanderkooy, 2013 ONSC 4796, Goodman J. reviewed the legal principles with respect to a defence of qualified privilege. As he noted at para. 202:

The defendants’ honest belief in the truth of what is published on an occasion of qualified privilege is presumed, unless the contrary is proven. This is a very strong presumption. As the defence of qualified privilege merely creates a rebuttable presumption in favour of good faith of the defamer, the privilege may be defeated if “the dominant motive for publishing is actual or express malice”. The onus rests on the plaintiff to establish malice by the defendant. [Citations omitted.]

[128] As he continued at para. 205:

To rebut the presumption, the plaintiff must show that the defendants spoke dishonestly or in reckless disregard for the truth. Malice is a state of mind, and requires an inquiry into the motives of the defendant at the time of publication. [Citations omitted.]

[129] In McLoughlin v. Kutasy, 1979 SCC 39, [1979] 2 S.C.R. 311, at p. 325, Ritchie J. wrote on behalf of the majority:

[I]n reference to the defence of qualified privilege…the person employing the language complained of

…will be protected, even though his language should be violent or excessively strong, if, having regard to all the circumstances of the case, he might have honestly and on reasonable grounds believed that what he wrote or said was true...

[130] In her testimony, Ms. Skybin indicated she believed the reports of abuse given to her by the Nikityuks and she had no reason not to believe them. Their reports were consistent. She did not give legal advice but made appropriate referrals on their behalf.

[131] The Nikityuks gave Ms. Skybin limited authorization to contact CRA for the purpose of obtaining their tax returns. Ms. Skybin received the tax returns and forwarded them to the Legal Clinic for the benefit of advice.

[132] In cross-examination Ms. Skybin was taken to her use of the words “financial robbery”. While that type of wording might be inflammatory, it certainly had the ring of truth based on the evidence heard at this trial. Ms. Skybin knew the Nikityuks did not have access to any of their money. The Nikityuks’ pensions were being controlled by Ms. Danilova. They had to ask for cash. When she first wrote to the Legal Clinic using the words “financial robbery” she did not mention the name of the Nikityuks or the Danilovs. She was making general inquiries so that they could get legal advice. I pause to note that Ms. Skybin was not acting alone in assisting the Nikityuks. She wrote to the Legal Clinic on their behalf. She wrote to a specific lawyer conversant in Russian. She referred them to Kim Clark, a Victim Services worker, who met with the Nikityuks and put the safety plan in place. She said as a result of the meeting, Kim Clark made decisions, not Ms. Skybin, in advising the Nikityuks about the safety plan.

[133] Dorothy Archer of the Barrie Women’s Shelter also met with the Nikityuks. She told the court she wrote a letter to Simcoe County regarding social housing. She indicated her role was to believe reports from individuals rather than to conduct her own investigation of allegations of abuse. The Nikityuks had explained to her what things were like in the house and assisted with their application on a special priority basis, providing the verification needed to advance their application over others on a long waiting list.

[134] I am satisfied that there was no malice with respect to Ms. Skybin’s correspondence. She had a genuine belief in the truth of the statements made by her. She reported these in her capacity as a settlement counsellor out of concern for the Nikityuks.

(4) YMCA Witnesses

[135] A number of Ms. Skybin’s supervisors gave evidence at trial. Part of the plaintiffs’ claim against the YMCA is for negligent supervision. Ruth Miller was her immediate supervisor and provided training to Ms. Skybin when she was hired. Their immediate supervisor was Susan Green. The three of them worked in close proximity at their office. She was aware of the Nikityuks’ problems as they became evident to her. She wrote a letter confirming that the Nikityuks were attending classes there. This and other documents indicated that she was involved with various steps the Nikityuks were taking. Her evidence was that she was satisfied with the steps that Ms. Skybin was taking for them. In all her performance reviews she gave Ms. Skybin an excellent rating.

[136] She testified that she thought the Nikityuks’ vulnerability was English but they were capable of making decisions.

[137] Their overall supervisor was Fiona Cascagnette. She was the vice president of child and youth development at the YMCA where she has worked for 26 years. Her area includes the supervision of newcomer services. Ms. Skybin was one of about 1000 employees working for the YMCA of Simcoe/Muskoka. She spoke about the YMCA’s code of confidentiality and code of ethics. She indicated she met the Nikityuks at several events. She was aware of a letter of complaint sent by the Danilovs about the YMCA’s performance. That letter did not mention Ms. Skybin by name. Ms. Cascagnette reviewed the issue with Ms. Skybin’s immediate supervisor and made the determination that nothing improper had been done. No further action was taken.

[138] She confirmed that there was a staff appraisal annual report where goals were set and performance reviewed. She told the court that performance reviews for Ms. Skybin were positive.

(5) Issues for Trial from the Summary Judgment Motion

(i) The Plaintiffs’ Claim in Negligence Against Ms. Skybin

[139] Corkery J. addressed these issues and disposed of them in paras. 79 and 80 of his Summary Judgment Decision. He noted that the plaintiffs made five negligence claims against Ms. Skybin. He noted the first one was not a separate cause of action in negligence. The second one fell within a different category; inducing a breach of contract. He found that the plaintiffs had no claim with respect to the final three claims.

(ii) Claims Against the YMCA in Negligence for Vicarious Liability

[140] Corkery J. noted that employers are vicariously liable for the actions of their employees in the course of their employment. He then noted that the pleading alleged that the YMCA was directly liable for its own negligence in carelessly supervising its employees. He concluded that vicarious and direct liability of the YMCA remained a genuine issue for trial.

[141] There is no doubt that an employer can be held vicariously liable for the acts of its employee: Bazley v. Curry, 1999 SCC 692, [1999] 2 S.C.R. 534, at para. 10.

[142] I have already determined that there was no malice in connection with any correspondence undertaken by Ms. Skybin. The YMCA defendants state in their closing submissions at para. 269:

The doctrine of merger provides that the plaintiffs cannot seek or obtain damages for the same act under two separate heads of tort law as that would be double recovery. Where two torts are pleaded which claim the same head of damages, the plaintiff cannot recover separate damages with respect to those torts.

[143] After consideration of the evidence that I have heard from Ms. Skybin and her supervisors, I am satisfied that there is no liability on the part of the YMCA with respect to the supervision of its employee, Ms. Skybin. Ms. Skybin was open and transparent about what she was doing. She shared an office with her supervisor. There was a sharing of information. The supervisors were well aware of the unfolding of the events with respect to the Nikityuks. There was no wrongful conduct by Ms. Skybin to ground any vicarious liability claim against the YMCA. The plaintiffs’ claim is dismissed with respect to this vicarious liability claim.

(iii) Conspiracy

[144] In determining that there was a genuine issue for trial with respect to the conspiracy, Corkery J. framed the discussion as follows:

[68] In my view, where a sponsor abuses a sponsored person, the sponsor has breached the agreement. Where the sponsored person falsely alleges abuse and claims social assistance, the sponsored person has breached the agreement. If a third party knowingly or recklessly assists the sponsored person in falsely claiming abuse and obtaining social assistance, then that person may be found to have intended to induce breach of the agreement. Turning a blind eye to whether a false allegation of abuse would breach a Sponsorship Agreement will be no excuse. The genuine issue for trial that remains is whether Ms. Skybin knew the allegations of abuse to be false, or was reckless in this regard, and, if false, that she assisted the Nikityuks applying for social assistance without regard to whether it would cause a breach of their sponsorship agreement.

[145] In relying on Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460, Corkery J. noted at para. 88:

For the second category to apply the plaintiffs must establish that Ms. Skybin’s and the Nikityuks conduct was unlawful.

Whether Ms. Skybin and the Nikityuks conspired to fabricate a story of abuse remains to be an issue for trial.

[146] I pause to note that Corkery J. did not have the benefit of evidence from the Nikityuks. They were not participants in the Summary Judgment Motion involving the plaintiffs and the YMCA defendants.

[147] In Ontario Consumers Home Services Inc. v. EnerCare Inc., 2014 ONSC 4154, O’Marra J. provided a helpful summary of the elements of the offence. As he stated at para. 21:

To allege unlawful conspiracy material facts must be pleaded in support of the following elements:

a. The defendants must act in combination, that is, in concert, by agreement or with a common design; b. Each defendant’s conduct must be unlawful and in furtherance of the conspiracy; c. The defendants’ acts must be directed towards the plaintiff; d. The defendants should have known that in the circumstances injury to the plaintiff would likely result; and e. Each defendant’s conduct causes injury to the plaintiff.

Ms. Skybin’s Role

[148] I am satisfied that Ms. Skybin proceeded in good faith. She accepted the evidence of the Nikityuks about the deteriorating life they lived in the Danilov home. She was aware of the financial abuse. The Nikityuks had no access to any of their money and had to ask their daughter in advance for cash. The Nikityuks learned of social housing not from Ms. Skybin but from other Russian speaking individuals who had obtained social housing. Social housing was not the Nikityuks’ first choice, it was their last resort. The Nikityuks were well aware that they had no money, having transferred all of the funds to their daughter. They had no access to any money whatsoever for market-based rental housing. They did not deceive Ms. Skybin. I am satisfied that Ms. Skybin’s role was to assist the Nikityuks in removing themselves from an abusive situation. I am not satisfied that there was any intention on her part or on the part of the YMCA to cause the contract to be breached. Although a breach of the contract may have been the consequence of the Nikityuks moving out, there is no evidence that that was Ms. Skybin’s intention.

The YMCA’s Role

[149] Corkery J. considered the issue of conspiracy in his ruling and made a reference to Agribrands Purina Canada Inc. v. Kasamekas. Corkery J. considered the two categories of conspiracy in that case and found that the first category does not apply. The second category as set out in Agribrands is stated as: “where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result.” Corkery J. further stated at para. 88:

For the second category to apply, the plaintiffs must establish that Ms. Skybin’s and the Nikityuks’ conduct was unlawful.

Whether Ms. Skybin and the Nikityuks conspired to fabricate a story of abuse remains an issue for trial.

[150] For the reasons previously noted, I find that no such fabrication occurred. The Nikityuks were being abused financially, an abuse that started immediately after their arrival in Canada. The deteriorating relationship at the Danilov residence is evidence from the Nikityuks that I accept. There is no basis that any such conspiracy to fabricate abuse occurred between Ms. Skybin and the Nikityuks which would cause any injury to the plaintiffs.

[151] At the time Ms. Skybin wrote the letters or e-mails she was employed as a settlement counsellor for the YMCA. She became aware of the financial abuse inflicted upon the Nikityuks. I accept her evidence that she honestly believed that they were also subject to physical and emotional abuse. As a settlement counsellor, she was not obligated to conduct an investigation. She acted upon what she felt were her duties to write to appropriate individuals including legal counsel on behalf of the Nikityuks. Her letters and e-mails were not widely disseminated. The individuals receiving the letters or e-mails were entitled to make their own inquiries as to how to proceed with the matter.

[152] I see no basis for the plaintiffs’ claim against the defendants for conspiracy. There was nothing unlawful about the acts taken by Ms. Skybin in reporting what she understood to be elder abuse, financial and physical, to lawyers for Mr. and Mrs. Nikityuk and to the social housing authority. The YMCA defendants were seeking to have the Nikityuks removed from an abusive situation. There was simply no evidence before the court that the predominant purpose of each defendant was to inflict harm on the plaintiff; see Harris v. Glaxosmithkline Inc., 2010 ONCA 872, at para. 39.

[153] The plaintiffs’ claim for conspiracy against the defendants is dismissed.

(iv) Inducing Breach of Contract

[154] There is no doubt that the contract between the parties was the Sponsorship Agreement executed by the parties on the form provided by Citizenship and Immigration Canada. That form required the Danilovs to support the Nikityuks for their first ten years in Canada. But the Nikityuks signed the Sponsorship Agreement and sent all their funds to the Danilovs based on the inducement e-mail from Mr. Danilov. They accepted his offer and another contract was formed. They fully expected that they would have their own apartment, a vehicle and sundry items based on a budget which forecasted a 10% return on their “brought capital”. In fact there was no return on their investments because Mr. Danilov lost essentially all their money in the stock market shortly after they arrived from Canada. The only exception was the $51,640 that he used from their money to put a down payment on his own house together with the $15,000 he used from their funds to furnish the home. Svetlana Danilova received their funds in trust knowing that these monies were an essential part of the Danilovs’ ability to sponsor them in Canada.

[155] In my view, the improvident stock loss amounted to a breach of trust and a breach of the contract between the parties. Although the Danilovs continued to support the Nikityuks the financial strain was obvious. The Danilovs moved into the same residence with the Nikityuks after the Nikityuks had resided there for nine months as the sole occupants. Ms. Danilova controlled every aspect of their financial life. Svetlana had a power of attorney over a bank account that received their Russian pensions. Although they had credit cards, Svetlana had the ability to pay balances from their pension income using their power of attorney. The Nikityuks were required to give her two days’ notice if they wanted cash.

[156] In my view the YMCA did nothing to induce a breach of contract. The breach of contract occurred years earlier but did not manifest itself until the Nikityuks obtained social housing and moved into premises on their own. It then became clear to Citizenship and Immigration Canada that the Danilovs were in breach of their sponsorship agreement. On March 12, 2013, Citizenship and Immigration Canada wrote to the Danilovs with respect to their breach of contract and stated:

This office has been advised by the Provincial/Municipal Social Services Authorities that Alla and Valentin are in receipt of social assistance benefits that will accrue under the Ontario Works/Ontario Disability Support Program. Under the terms of the sponsorship undertaking, you promised the Minister of Citizenship and Immigration that you would provide for the basic needs of your family member during the validity period of the undertaking, and you promised that they would not need to apply for social assistance… As social assistance benefits have been issued within the timeframe, you are considered in default of the undertaking and are subject to the following consequences…

I. THE DANILOVS’ DAMAGES CLAIM

[157] I therefore dismiss the plaintiffs’ claims for inducing breach of contract, negligence, conspiracy and defamation against all defendants. In addition, the plaintiffs claimed $200,000 for aggravated and punitive damages. In view of the dismissal of their claims as above noted there is no basis for aggravated and punitive damages against any of the defendants.

[158] The plaintiffs also claim $119,311.81 for special damages in their closing submissions. Although not specified in detail there, the Statement of Claim refers to the Danilovs’ losses based on the Nikityuks’ breach of the agreement between them. Items covered in the Statement of Claim include past losses for support of the Nikityuks in Russia, vehicle payments, household expenses and future losses, including second household expenses. For the reasons above noted, I am satisfied that the Nikityuks did not breach the contract with the Danilovs, therefore the claim for special damages must be dismissed.

The Counterclaim by the Nikityuks

A. INTRODUCTION

[159] The Nikityuk defendants bring a counterclaim against the plaintiffs for damages for fraud and misrepresentation, for conversion, for unjust enrichment, breach of contract and for breach of fiduciary duty. That counterclaim can be broken down as follows:

(i) $277,318 in damages, representing the loss of capital sent to Svetlana Danilova from their Russian assets, and $15,000 delivered to the plaintiffs when the Nikityuks arrived in Canada in 2008; (ii) $97,321.58 in damages, representing unpaid interest on the capital at 10% per annum for the period after the Nikityuks moved out of the Innisfil property in 2011 until the commencement of trial, after deduction of an amount actually paid by the Danilovs to support the Nikityuks after they moved to social housing; (iii) With respect to part of the capital, $66,650, they seek a constructive trust. $51,650 of their funds was used to purchase the Innisfil house, and $15,000 was used to furnish the house. They seek a declaration that the plaintiffs hold the house in trust for them; (iv) $100,000 in aggravated and punitive damages; (v) Pre-judgment and post-judgment interest in accordance with the Courts of Justice Act, R.S.O. 1990, c. C.43; and (vi) Costs on a substantial indemnity basis.

[160] The Danilovs, defendants by counterclaim, oppose the relief sought on the basis that there has been no breach of contract between the parties and no fraudulent conduct on the part of the plaintiffs. The essence of the Danilovs’ defence is captured in para. 254 of their closing submissions:

It is respectfully submitted that this claim should fail. The Russian assets were a gift, and if they were not found to be a gift, then the Russian assets were transferred as a conditional precedent to the execution of the Sponsorship Agreement.

B. GIFT OR LOAN

[161] Before making a decision as to whether the funds transferred were a gift to the Danilovs or a loan, it is important to review again the documents and the testimony of the witnesses.

(1) The Inducement E-mail

[162] I have already reviewed the inducement e-mail sent by Mr. Danilov to the Nikityuks in January 2008. I am satisfied that this was an offer which encouraged the Nikityuks to get their documents in order in furtherance of the Sponsorship Agreement, allowing them to immigrate to Canada. By their actions, the Nikityuks accepted the offer. They then sold their apartment, their car and their cottage. They transferred all of the proceeds to Svetlana Danilova. The transfer documents originating from the Russian bank used the word “present”. There is no evidence that this wording was discussed with the Nikityuks. It originated in the Russian banking documents. The Nikityuks had no input into that document.

(2) The Sponsorship Agreement

[163] I have already reviewed the Sponsorship Agreement. It was first signed in 2004, but the Nikityuks had not made a final decision about immigration. Nor had Mr. Danilov achieved a salary that he felt was sufficient to assist the Nikityuks in supporting them in Canada. The Danilovs were taking on an obligation to support the Nikityuks in all aspects of their life in Canada for a ten-year period. In addition, the Sponsorship Agreement made it clear that the Nikityuks were not required to find employment in Canada, given their age at the time of immigration. As previously noted, the Sponsorship Agreement with Canada required the sponsor to promise that the sponsored persons would not apply for social assistance benefits. But the Agreement provided an exception allowing the sponsored persons to seek social assistance if they were abused or assaulted by their sponsors.

(3) The Loan Agreement

[164] Almost immediately after the Nikityuks arrived in Canada in 2008, Mr. Danilov lost the Nikityuks entire capital by improvident stock market trading. He did not discuss with them his plan to use their funds in this fashion, nor did he ever disclose the almost instant loss that he suffered. In 2009, he drew up a document which indicated that these funds transferred were “a loan”. The Nikityuks signed this document written in English as lenders, not knowing their capital was lost. There was no money to loan. Mr. Danilov was the borrower, and Mrs. Danilova acted as a witness. This is the document Pavel used to assist him with an audit he was undergoing by CRA.

(4) Implementation of the Sponsorship Agreement

[165] The Danilovs were not wealthy, but by 2008, Mr. Danilov was achieving a salary which he felt would allow them to assist the Nikityuks to live in Canada. But it was not a burden that they were taking on on their own. As the inducement e-mail suggests, the Nikityuks could balance their budget in Canada by reason of 10% interest on their “brought capital” supplemented by modest support from the Danilovs and the Nikityuks’ Russian pensions. Of course, no interest was ever achieved on any of the “brought capital”. The Danilovs used a part to purchase a house in their own name in Innisfil. Mr. Danilov lost the rest of the funds almost immediately in the stock market. Although he was employed in the internet technology field, both he and Svetlana described the stock market trading as the family business. There was no basis in the evidence whatsoever to indicate that the stock market trading activity was a family business. Even if it was a family business involving the Danilovs’ own money, it was never something that the Nikityuks knew about or consented to.

[166] In my view, the Nikityuks were vulnerable financially in the hands of the Danilovs. When they arrived in Canada, they spoke no English. They had no knowledge about Canadian banking operations. The only document they had was the inducement e-mail sent to them before they decided to proceed with the sponsorship. The e-mail was an offer and they accepted it and acted on it.

[167] When they arrived in Canada, almost every aspect of their financial life was controlled by the Danilovs. They signed general powers of attorney appointing Svetlana. They also signed a specific power of attorney for Svetlana for the bank account that received their Russian pensions. When they required cash, they had to ask Svetlana on two days’ notice.

[168] When they moved to the house in Innisfil and lived there on their own they thought that things were proceeding as planned. They had their own residence, they had a leased vehicle, and their day-to-day needs were looked after by the Danilovs. But what they did not know was significant. They did not know that over $50,000 of their money was used to purchase a house that was not registered in their name. They did not know that $15,000 of their money was used to furnish the house. They did not know that their “brought capital” was lost in the stock market, so the projected 10% interest was not available to support their budget.

[169] When the Danilovs moved in with them, they understood there was a financial crisis but they did not know that that crisis involved the loss of their money.

[170] I am satisfied that the Nikityuks were financially abused from the time they arrived in Canada. They wanted to live separately. That was the plan in the inducement e-mail. Social housing was not their first choice, but it seemed to them that it became their only choice. The Danilovs discouraged any talk of social housing and for good reason. They knew that if the Nikityuks moved to social housing, it would constitute a breach of their Sponsorship Agreement with the Government of Canada. The continual discussion about moving out and social housing became an irritant and led to emotional arguments. I am satisfied that there was a physical altercation as well, some pushing by Svetlana of her mother. But even if I am wrong on that finding, it is clear that financial abuse and emotional abuse had already occurred.

C. ANALYSIS

[171] The Nikityuks advanced funds to Svetlana prior to their immigration to Canada. In Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, the Supreme Court of Canada clarified the previously confusing state of the law as to whether funds transferred from a parent were gifts or a resulting trust. As Rothstein J. stated at para. 27:

The presumption of resulting trust is the general rule for gratuitous transfers…. If the presumption of advancement applies, it will fall on the party challenging the transfer to rebut the presumption of a gift.

[172] In Sawdon Estate v. Watch Tower Bible and Tract Society of Canada, 2014 ONCA 101, the Ontario Court of Appeal restated the Pecore principles. As Gillese J.A. restated those principles at para. 56:

Justice Rothstein, writing for the Majority in Pecore, cleared away much of the confusion that has beset the common law presumptions of resulting trust and advancement. He stated that the presumptions continue to play a role in resolving disputes over gratuitous transfers, with the presumption of resulting trust being the general rule for gratuitous transfers. He made it clear that the presumption of resulting trust applies to gratuitous transfers made from a parent to an adult child… [Citations Omitted.]

[173] Gillese J.A. made reference to evidence to be considered by a court and stated at para. 58:

Justice Rothstein explained that the court may consider the following types of evidence when determining the transferor’s actual intention:

• Evidence of the transferor’s intention subsequent to the transfer;
• The wording of the bank/financial institution documents;
• Control and use of the funds in the accounts;
• The terms of any power of attorney granted to the transferee; and
• The tax treatment of the accounts. [Citations Omitted.]

[174] It is disingenuous for Mr. Danilov to state that this transfer was a gift when he prepared a document calling this transfer a loan, whereby he was the borrower and the Nikityuks were the lenders. This is a document that he had them execute before forwarding it on to CRA in response to audit inquiries in 2009, long after the Nikityuks’ capital was lost.

[175] In my view, it is plain and obvious that the funds transferred were not a gift to Svetlana. They were sent in trust to support the Sponsorship Agreement and the inducement e-mail. Svetlana Danilova said as much in her testimony. As she stated:

They transferred money, I received this money in my account, whatever, my mom put there, she put it – it’s a gift because it’s how she saw this money. Actually, the agreement was just – it give this money to me…I will put this money in to use for their – in their best interest…so this money secured this Sponsorship Agreement.

[176] I am satisfied that the doctrine of resulting trust applies here. The transfers were not gifts. They were sent in furtherance of the Sponsorship Agreement and the Nikityuks’ ability to achieve a balanced budget in Canada based on their projected interest income together with limited support from the Danilovs and their own modest Russian pensions.

(1) Constructive Trust

[177] In Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660, Rothstein J. speaking for the court, stated at para. 149:

In order to prove a claim in unjust enrichment, the plaintiff must establish:

(i) an enrichment of the defendant; (ii) a corresponding deprivation of the plaintiff; and (iii) an absence of juristic reason for the enrichment.

Where these elements are satisfied, the remedy of constructive trust may be available if:

(i) monetary damages are inadequate, and (ii) there is a link between the contribution that founds the action and the property in which the constructive trust is claimed. [Citations Omitted.]

[178] In my view, the Nikityuks are entitled to a constructive trust claim against the Innisfil property to the extent that their money was used for the down payment and to furnish the house. The down payment was $51,640 and the furnishings were $15,000, for a total constructive trust against the real property, in the amount of $66,640, together with interest at 10% per annum from the time they vacated the property in October 2011 to commencement of trial. I limit the constructive trust to this amount because the Danilovs entered into a mortgage for the balance of funds. They continue to remain responsibility for this mortgage which secures the subject property. There is no information before the court as to the current value of the property or whether or not the Danilovs’ equity in the property may have increased. Although the Nikityuks may have thought the house was registered to them and purchased with $150,000 of their funds, that was not the case. I am therefore satisfied that the constructive trust should be limited as indicated. For reasons that follow, and based on the inducement e-mail, I allow interest at 10% per annum on $66,640.

(2) Breach of Contract

[179] After considering the evidence, I am satisfied that the Danilovs breached their contract with the Nikityuks. The contract was the Sponsorship Agreement with Canada. But it was more than that. After liquidation, all of the Nikityuks’ Russian assets were sent to Svetlana Danilova in trust. The purpose of the trust was to enable the Danilovs to support the Nikityuks in Canada for at least ten years without them becoming dependent on public assistance. The inducement e-mail led the Nikityuks to believe that they would be living alone in their own apartment. For a number of months, they were the sole occupants of the Innisfil house. But that all changed when the Danilovs moved in without notice or discussion. The reason for the move was clear, the Danilovs were under financial pressure because the Nikityuks’ money had been lost in the stock market by Mr. Danilov’s improvident trading. After two years in the house, the Nikityuks could no longer accept the financial and emotional abuse inflicted by the Danilovs. Social housing was not their first choice. In fact, they had looked at some apartments with Svetlana Danilova prior to their focus on social housing. They understood, and it was obvious, that the Danilovs could not afford to maintain the Innisfil house and a separate apartment for the Nikityuks. The Danilovs breached their contract with the Nikityuks in two ways. First, they did not honour their offer, accepted by the Nikityuks, to provide 10% annual interest on their “brought capital” to balance their budget. Second, the actions of the Danilovs caused the breach of the Sponsorship Agreement. The Nikityuks did not breach the Sponsorship Agreement. The Sponsorship Agreement entitled them to seek social assistance in the event of abuse.

(3) Breach of Fiduciary Duty

[180] As part of their claim for damages, the Nikityuks claim in their closing submissions that the Danilovs breached their fiduciary duties to them. The points can be illustrated by referring to para. 144 of the Nikityuks’ closing factum:

(a) The Danilovs used $50,000 of the savings to purchase the house in their own name while telling the Nikityuks it was purchased in Valentin’s name; (b) The Danilovs transferred the savings into their brokerage account and chose to risk the savings in an automated trading software prototype that they had designed as part of their business; (c) The Danilovs failed to monitor the software in order to ensure that the savings were preserved; (d) The Danilovs lost most of the savings in a week or so in August 2008. Although it was, perhaps, a “valuable lesson” for the Danilovs about their business, it was a disaster for the Nikityuks; (e) The Danilovs then hid the loss from the Nikityuks; (f) Danilov attributed the losses to the Nikityuks and then claimed the tax benefit of the loss for himself; (g) The Danilovs all but emptied the Nikityuks’ TFSAs using the power of attorney.

[181] In Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, [2013] 1 S.C.R. 623, Chief Justice McLachlin and Karakatsanis J. speaking for the majority, stated at para. 47:

Fiduciary duty is an equitable doctrine originating in trust. Generally speaking, a fiduciary is required to act in the best interests of the person on whose behalf he is acting, to avoid all conflicts of interest, and to strictly account for all property held or administered on behalf of that person. [Citations omitted.]

[182] By receiving the Nikityuks’ funds from Russia, using part of the funds to purchase a house in their own name, preparing a loan agreement after the funds were no longer available to support such a loan, acting as their power of attorney for their monthly pensions, as well as preparing and filing tax returns on their behalf, the Danilovs assumed the role of fiduciary to the Nikityuks. They then breached their fiduciary duty by using the Nikityuks’ funds entrusted to them for their own benefit.

(4) Civil Fraud

[183] As part of their counterclaim for fraud and fraudulent misrepresentation, the Nikityuks allege at para. 116 of their factum, “The Danilovs knowingly or recklessly made false representations upon which the Nikityuks then acted. As a result, the Nikityuks were deprived of their savings.”

[184] The Danilovs deny that they committed the tort of fraud.

[185] Both parties made reference to the Supreme Court of Canada’s decision in Bruno Appliance and Furniture Inc. v. Hyrniak, 2014 SCC 8, [2014] 1 S.C.R. 126. As Karakatsanis J. stated for the court at para. 21:

From this jurisprudential history, I summarize the following four elements of the tort of civil fraud:

(i) a false representation made by the defendant; (ii) some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); (iii) the false representation caused the plaintiff to act; and (iv) the plaintiff’s actions resulted in a loss.

[186] At the core of the Nikityuks’ claim for civil fraud is the inducement e-mail which they received in January 2008. An e-mail offer that they accepted caused them to proceed with the Sponsorship Agreement, liquidate all their assets and move to Canada with the assurance that they would have a comfortable lifestyle supported in large measure by interest from their own capital.

[187] The following points in the inducement e-mail bear repeating. The e-mail suggested that the Nikityuks would have “brought capital” of $200,000. In fact, after they liquidated their assets, they wired $263,000. What is of greater concern is the interest on the capital that Mr. Danilov projected the Nikityuks would earn. He indicated that they would earn 10% or $20,000 of interest annually. That sum made up a substantial portion of the projected income that the Nikityuks needed to balance their budget. Their only other source of income was their modest Russian pensions and similarly modest support from the Danilovs.

[188] Mr. Danilov’s notes to the e-mail’s budget reinforced the Nikityuks’ understanding that they could earn 10%. As he stated in Note 2, “Investments at 10% annual interest rate is a risk-free option.” At Note 6 he stated, “In a case when you get more than ten percent, you will have money for something pleasant like a trip to the seaside, for example.” At Note 3, he stated, “You can just put your money in the bank at four percent a year, it’s 100 percent safe but the car does not fit into the expenses, as you can easily see from the chart.”

[189] There was not one shred of evidence from Mr. Danilov to support his assurance that investments were available at 10% annual interest as a risk-free option in the economic climate in Canada in 2008. I am satisfied that Mr. Danilov was not naïve about financial matters. He was well educated and working in internet technology. He began stock trading using a margin account with his own funds and rolled over almost all of the Nikityuks’ money for the same purpose. His e-mail clearly caused the Nikityuks to act. The Nikityuks proceeded to obtain the necessary documents to support their immigration to Canada pursuant to the Sponsorship Agreement. They liquidated all of their assets in Russia and sent them to Svetlana Danilova. Substantially all of the funds were lost in improvident stock market trading, except for that portion of their money that was used to purchase the Innisfil house registered to the Danilovs.

[190] I am satisfied that the Nikityuks have made out the essential elements of the tort of civil fraud. The Danilovs made a false representation that the Nikityuks’ capital could earn 10%. They knew that the representation was false. The representation caused the Nikityuks to act. The Danilovs’ actions resulted in a corresponding loss to the Nikityuks. Not only was there no interest, there was no capital left after the improvident trading.

D. NIKITYUKS’ DAMAGES

(1) Introduction

[191] Since the Nikityuks have proven their claim against the Danilovs, it now falls to the court to determine the appropriate measure of damages flowing from the breach of contract, the breach of fiduciary duty, the constructive trust, civil fraud, and aggravated and punitive damages.

[192] The Nikityuks claim the sum of $277,318 in damages, the sum wired to Svetlana together with $15,000 brought with them and given to the Danilovs on arrival in Canada.

[193] The second category of damages is the Nikityuks’ claim for interest on their capital of $277,318. The amount claimed is $97,321.58, based on 10% of the “brought capital” from November 2011 (when they moved out of the Innisfil property) to April 2016 (the commencement of trial). This figure equals $124,793.10. The Nikityuks submit that this interest claimed should be reduced by the amount of support actually paid by the Danilovs after the Nikityuks moved out, in the amount of $27,471.52, yielding a net figure of $97,321.58.

[194] Finally, the Nikityuks claim aggravated and punitive damages in the amount of $100,000.

(2) The “Brought Capital”

[195] The brought capital of $277,318 was reduced by $67,640 when the Danilovs placed a down payment on the Innisfil house of $51,640 and furnished the house at a cost of $15,000. I am satisfied that the Nikityuks are entitled to a constructive trust for $66,640 together with 10% interest on this sum as against the Innisfil property. The Innisfil property is subject to a Certificate of Pending Litigation, which they obtained and registered as part of their counterclaim and more particularly described in Schedule “A” of these Reasons.

[196] When that figure is reduced from the $277,318, that leaves $210,678 to be examined. The inducement e-mail sent to the Nikityuks before they made their final decision to immigrate, projected a break-even budget with almost all of the funds necessary derived from interest on their “brought capital” at the rate of 10%. The e-mail showed no encroachment on capital. Note 1 on that e-mail bears repeating:

A lot of retired people sell their paid off houses, invest their money, and live on the interest on the capital. It is completely normal here and it fully matches your situation. You would live here just like 85% of retired Canadians.

[197] The Nikityuks put their trust and faith into the Danilovs’ hands when they transferred all of their assets to the Danilovs. That trust had been built up over years. The Danilovs had sent them funds to help them with their living expenses in Russia. They also provided funds to assist with Alla Nikityuk’s medical expenses. That trust was broken immediately upon immigration by the Nikityuks.

[198] I am satisfied that the Nikityuks were entitled to assume that their capital would not be eroded when they sent their funds to Canada. I am satisfied that they are entitled to judgment for the full amount of their capital of $277,318, broken down as follows:

(i) $66,640 by way of a constructive trust against the Innisfil property; and (ii) $210,678 in damages with respect to the balance of their capital.

(3) Interest on Brought Capital

[199] The Nikityuks seek $97,321.58 as net interest on their capital at the rate of 10% from November 2011 to April 2016. This net figure is arrived at because they have made a deduction for actual payments made by the Danilovs on an ongoing basis after the Nikityuks moved out of the house. They are not claiming interest on the capital for the period June 2008 to October 2011, a period of time within which they were residing with the Danilovs, either in their apartment in Etobicoke or later in the house in Innisfil.

[200] When the Nikityuks moved out, they moved into social housing. They received substantial benefits from Ontario Works and now live in rent geared to income housing. They receive their modest Russian pensions and modest support from the Danilovs on an ongoing basis. In my view, they are entitled to be credited with $20,000 per year as interest on their brought capital. They have been forced to seek social assistance. They thought they would live independently on a forcasted budget of about $25,000.

[201] They are entitled to $97,321 for interest on their capital at 10% for the period in question. A portion of this interest is attributable to their constructive trust claim on $66,640 used to purchase the Innisfil house.

(4) Aggravated Damages

[202] Aggravated damages are often awarded when general damages are insufficient to fully and properly compensate the plaintiff. In my view, aggravated damages are not warranted here. The Nikityuks have received a substantial judgment against the Danilovs.

(5) Punitive Damages

[203] In Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, the Supreme Court of Canada clarified the purpose and factors that a court should consider before awarding punitive damages. As Binnie J. stated at para. 94:

(1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just dessert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient.

[204] Binnie J. also noted at para. 111, “Retribution, denunciation and deterrence are the recognized justification for punitive damages, and the means must be rationally proportionate to the end sought to be achieved.”

[205] In assessing punitive damages, the factors in forming my decision are as follows:

• The inducement e-mail sent to the Nikityuks was misleading and contained the hallmarks of civil fraud.
• The Nikityuks put their complete trust in the Danilovs. By sending virtually all of their liquidated assets to Canada, they accepted the inducement e-mail offer.
• The Nikityuks suffered financial abuse immediately upon their arrival in Canada. A portion of their money was used for a down payment to buy a house registered to the Danilovs. The balance of their funds was lost by improvident trading by Mr. Danilov without any consultation about his plan or discussion about the subsequent losses.
• The Danilovs controlled every financial aspect of the Nikityuks’ lives. Through power of attorney, they even controlled their modest Russian pensions.

[206] The Nikityuks were vulnerable people when they arrived in Canada. They spoke no English and they trusted the Danilovs. Clearly, this was a case of elder abuse. My findings about the Danilovs’ reprehensible conduct should serve to deter not only the Danilovs, but others who may consider similar misconduct in the future if they gain control of the finances of elderly and vulnerable people.

[207] I am satisfied that punitive damages in the amount of $25,000 serves the purpose intended and is proportionate to what is sought to be achieved in this case.

E. CONCLUSION

[208] The plaintiffs’ claim against all of the defendants is dismissed. The counterclaim brought by the Nikityuks is granted. The damages awarded to the Nikityuks are as follows:

(a) $277,318, which includes the constructive trust claim as against the Innisfil property for $66,640. (b) Punitive damages in the amount of $25,000. (c) $97,321 in interest at 10% on the Nikityuks’ capital, apportioned between the constructive trust award of $66,640 and the remaining balance. (d) Interest on the judgment in accordance with the Courts of Justice Act.

F. COSTS

[209] All of the defendants have been successful with respect to this action. The Nikityuk defendants have been successful with their counterclaim. The defendants will have 30 days after the release of this judgment to make submissions on costs, not exceeding six pages in length, together with a Bill of Costs.

[210] The plaintiffs will then have a further 15 days to respond to costs submissions, with submissions not exceeding six pages. All submissions are to be sent to my Judicial Assistant at the Court House in Barrie.

MULLIGAN J.

Released: October 26, 2017

SCHEDULE “A”

Legal Description for

1490 Rankin Way Innisfil, Ontario

The lands and premises municipally known as 1490 Rankin Way, Innisfil, Ontario and legally described as “LT 57, PL 51M892, S/T EASEMENT FOR ENTRY UNTIL 2013/08/15 AS IN SC672893; INNISFIL, PIN 58075-0631 (LT)”

October 26, 2017 – Correction:

Para. 206 now reads:

[206] The Nikityuks were vulnerable people when they arrived in Canada. They spoke no English and they trusted the Danilovs. Clearly, this was a case of elder abuse. My findings about the Danilovs’ reprehensible conduct should serve to deter not only the Danilovs, but others who may consider similar misconduct in the future if they gain control of the finances of elderly and vulnerable people.