CITATION: Batey v. Batey, 2017 ONSC 6768
COURT FILE NO.: FS-14-0381-00
DATE: 2017-11-10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
EMILY BATEY
Applicant
- and -
DAVID THOMAS BATEY
Respondent
Rick Bickhram, for the Applicant
Not appearing
HEARD: May 22, 2017, at Brampton, Ontario
Price J.
Reasons For Order
NATURE OF MOTION
[1] When David Batey gave his wife, Emily, a separation agreement for her to sign, which gave her half the equity in their matrimonial home, he failed to tell her that he and his mother had withdrawn most of the equity four years earlier by giving the bank a mortgage on the home. Emily now applies to set aside the agreement and require David to pay her what should have been her fair share.
[2] David Batey had failed to comply with three court orders requiring him to deliver his Answer and produce financial disclosure. Emily Batey’s Application was served on him on April 8, 2014, and he failed to deliver a proper Answer or make full financial disclosure in the three years that followed, until May 19, 2017, when Wein J. ordered that the trial proceed on an undefended basis.
[3] This court heard the trial of Ms. Emily Batey’s family law claim on May 22, 2017, and reserved judgment until today.
[4] Emily asks the court to set aside a Separation Agreement that the parties signed on September 30, 2011, on the ground that David failed to disclose to her that he had withdrawn most of the equity from the matrimonial home three years earlier by granting a mortgage to the Bank, falsely claiming that he was not a spouse. She asks the court to order David to pay her one half of the equity that there would have been in the home on August 30, 2012, when David sold it, were it not for the mortgage. She additionally seeks an order requiring David to pay her costs on a full indemnity scale, having regard to his deception regarding the mortgage and his repeated delay of the proceeding.
BACKGROUND FACTS
[5] Emily and David Batey were married in Sault Ste. Marie, Ontario, on May 25, 1985. There are two children of the marriage, Sarah and Amanda, who are now adults (30 and 26 years of age, respectively) and self-sufficient.
[6] David Batey began his career as a travel agent and later established a business, Going Global Travel Mark, which provides marketing services to the travel industry. Emily estimates that David earns $60,000 per year from his employment. Emily Batey, in retail management, earns $25,000 to $30,000.
[7] David Batey is the only child of Thomas and Mary Batey. On February 25, 1989, four and a half years after David and Emily Batey were married, Thomas and Mary Batey bought a newly built, as yet unfinished, home at 50 Ansondale Road in London, Ontario, (“the Ansondale property”) for David and Emily. David and Emily Batey began residing in the home soon after its purchase. They invested approximately $30,000 of their own funds to have the home painted and carpeted, install kitchen cabinets and finish the basement.
[8] The Ansondale property was initially registered in the names of Thomas and Mary Batey, apparently to protect it from creditors of David Batey, who was a poor money manager and eventually filed for bankruptcy. There is no evidence that David and Emily Batey were ever indebted to David’s parents or that they ever paid rent to them.
[9] David and Emily Batey resided in the Ansondale home for 23 years, from February 1989 to August 2012. They raised their children there and considered it their own. They jointly contributed to payment of home insurance, utilities, and home repairs, and sometimes to the payment of property taxes, although Thomas and Mary Batey sometimes helped them with expenses when David and Emily were struggling financially. Until David Batey’s bankruptcy, David and Emily paid those expenses from their joint savings account, or from a joint line of credit, which they paid from their savings account. After the bankruptcy, Emily deposited her earnings to her own account, from which she made monthly payments to David, amounting to between $12,000 and $15,000 annually.
[10] In 2005, Thomas Batey died. On May 11, 2005, David Batey, as trustee for Thomas’ Estate, transferred his father’s interest in the matrimonial home to himself.
[11] On July 28, 2008, unbeknownst to Emily Batey, David and Mary Batey each applied to Canada Trust for lines of credit in the amount of $50,000, secured by the equity in 50 Ansondale Road, London, which they both valued at $220,000. In his application, David Batey claimed, as an asset, his residence at 50 Ansondale Road, London, which he valued at $220,000. Mary Batey did not list the property as her asset.
[12] On August 26, 2008, a month after they applied for lines of credit, David and Mary Batey, who owned the Ansondale property as tenants in common, transferred the property to themselves as joint tenants, as appears from the Parcel Register for the property, entered as Exhibit 1 at the trial. On the same day, they granted a mortgage in the amount of $176,000 on the property to the Toronto-Dominion Bank (“the mortgage”). In the mortgage, David Batey falsely stated that he was not a spouse.
[13] On September 30, 2011, the parties separated after 26 years of marriage, owing to repeated marital infidelity by David. On that date, David presented a Separation Agreement to Emily (the “Separation Agreement”). In the Separation Agreement, David claimed ownership of 50% of the Ansondale property, which share he valued at $100,000, and of the parties’ 2008 Ford Edge vehicle, which he valued at $15,000.
[14] The Separation Agreement provided that Emily Batey would own the parties’ 2010 Ford Focus vehicle, valued at $20,000, and would assume sole responsibility for a $15,000 car loan in relation to it. She would continue to reside in the Ansondale property until the end of October 2012, the month when the parties’ daughter, Sarah, was to be married, or so soon thereafter as the home was sold. She would then be entitled to 50% of David Batey’s 50% share of the home, and an additional cash settlement of $15,000. Emily explained in her testimony at trial that the $15,000 represented her half share of the $30,000 which the parties had invested in the property when they first moved in.
[15] At the time when the parties signed the Separation Agreement, David Batey did not disclose to Emily that he and his mother had withdrawn $176,000 of their equity in the Ansondale property four years earlier, by granting the mortgage to the Bank.
[16] On June 27, 2012, David introduced his new partner to his youngest daughter, Amanda, who refused to greet her. Later the same day, David sent a text message to Emily, Sarah, and Amanda, in which he complained that Amanda had been rude to his partner and notified them that they must vacate the home by July 31, 2012. Soon after, he erected a “For Sale” sign on the front lawn of the Ansondale property.
[17] Upon receipt of David’s message, Emily Batey consulted a lawyer, who searched the title of the Ansondale property and discovered the mortgage that David Batey and his mother had registered on the property four years earlier.
[18] On July 23, 2012, David notified Emily that he had received and accepted an Offer to Purchase the Ansondale property on favourable terms. He asked her to vacate the property by August 27, 2012, as the sale was to close on August 30. Emily consulted her lawyer and, on his advice, and to avoid potential litigation with the purchaser, she acceded to David’s request.
[19] On August 25, 2012, Emily entered into a short term lease of a property in London, Ontario, at a cost of $1,500 per month for two and a half months, beginning August 15, 2012. She thereby incurred a total cost of $3,750, in addition to moving costs, by vacating the Ansondale property two months earlier than the date provided for in the Separation Agreement.
[20] The sale of the Ansondale property closed on August 30, 2012. The lawyer David retained to assist him with the sale remitted the total net proceeds of $48,001.90 to Emily. This amount represented the sale price of $225,000, less $175,817.94 to discharge the mortgage to the Toronto-Dominion Bank, and $1,545.95 in legal fees and disbursements. David sold the property without a realtor, so no real estate commission was paid. David pre-paid property taxes of $6,419.03, which resulted in $365.79 being credited to him as an over-payment on closing.
[21] Mary Batey died in 2013. David Batey, who had managed her property for several years before her death pursuant to a general Power of Attorney, became the representative of her Estate.
[22] Emily Batey began the present proceeding on January 27, 2014 by issuing an Application in which she claims the following:
(a) An Order setting aside the Separation Agreement;
(b) An Order for unequal division of family property or, in the alternative, an equalization of net family property, pursuant to s. 5(1) of the Family Law Act;
(c) Payment to her of an amount equal to one-half the value of the Ansondale property on the basis of unjust enrichment and/or proprietary estoppel;
(d) In the alternative, a declaration that Mary Batey held her 50% interest in the Ansondale property in a constructive trust for Emily Batey and/or that Emily Batey had a beneficial interest in the 50% interest in the Ansondale property that was held by Mary Batey.
[23] Emily’s lawyer made multiple attempts to serve the Application on David, but was unsuccessful. Finally, Lemon J. made an Order on March 19, 2014 for substitutional service of the Application on David Batey by sending it by ordinary mail to his last known addresses in Oakville and Cambridge, Ontario, and at his place of employment in Toronto. The Application was served in that manner on April 8, 2014.
[24] David Batey did not deliver an Answer and Financial Statement within the time prescribed by the Family Law Rules. On August 1, 2014, a Case Conference was held at which Barnes J. ordered, with the consent of the parties, that they produce the following to each other, by September 20, 2014:
a) Their full income tax returns for 2010 through 2012;
b) Monthly statements for their Canadian and foreign bank accounts or investments for those years;
c) The valuation of any business interests along with corporate documents;
d) A list of properties they had owned, or in which they had held an equitable interest, from the date of marriage to November 16, 2012;
e) An Equifax credit report that would include a complete history of credit cards and ratings from 2010 to the date of the Order; and
f) All documents relating to the mortgaging and sale of the Ansondale property.
[25] On March 11, 2015, a Settlement Conference took place before Conlan J., who adjourned the proceeding to July 2, 2015, for Trial Management Conference. On July 2, 2015, the Trial Management Conference took place before André J., who directed that the trial proceed at the trial sitting in January 2016. On November 9, 2015, Van Melle J. noted that a Trial Record had not been filed and ordered that one be filed by December 15, 2015, failing which the proceeding would be struck from the list.
[26] On November 17, 2016, Emily made a motion before Coroza J. for an undefended trial. David asked that Emily’s Application be dismissed. Justice Coroza noted that there was a dispute as to whether financial disclosure had been made. He directed that the trial be adjourned to the May trial sitting, and that any motions to deal with the financial disclosure that Barnes J. had ordered be brought within 30 days. He ordered David to provide to the court and to Emily’s counsel an address for service.
[27] On December 20, 2016, LeMay J. heard Emily Batey’s motion for an undefended trial. He noted that David Batey still had not filed his material and sought an adjournment. Emily opposed the adjournment on the ground that David had not filed any material. Justice LeMay stated, in his endorsement, “I am not yet prepared to hear this matter without the Respondent being present.” He adjourned the motion to January 24, 2017, and ordered David to comply with all disclosure requests by January 6, 2017.
[28] On January 24, 2017, David attended and asked for more time to provide documents and respond to the disclosure orders. LeMay J. noted that David sought to explain his non-compliance with the court’s earlier orders, and for not responding to Ms. Batey’s affidavit, by asserting that he had been called out of the country because of a colleague’s wife’s illness, and that his condominium was having problems with registered mail and he had not received the endorsement from December 20, 2016, until recently.
[29] Justice LeMay stated that he was not yet prepared to grant an order for an undefended trial, but was imposing terms on David requiring him to respond to the disclosure orders within 14 days, and to file his Form 10 Answer and associated documents within a further 14 days, and that if he did not comply, Emily Batey could move for an undefended trial. He ordered David to pay Emily’s costs in the amount of $750 within 60 days.
[30] On May 10, 2017, Bielby J. held a pre-trial conference in the proceeding, which was on the trial list for that month. Both Mr. and Ms. Batey were present. Justice Bielby noted that Emily would likely bring a motion at the opening of trial regarding uncompleted disclosure and costs not paid in compliance with LeMay J.’s Order dated January 24, 2017.
[31] On May 19, 2017, Wein J. heard Emily’s motion. Both David and Emily Batey were present. Justice Wein noted that David stated that he was unable to file in compliance with LeMay J.’s Order. She noted that his Answer, in full, reads:
I dispute the allegations made by the Applicant in her initial application dated December 5, 2013, and in most recent court filings dated Dec. 7, 2016.
[32] Justice Wein noted that this was not an Answer, and that David had served on Emily only selective materials, despite three court orders requiring him to file all necessary material. Justice Wein ordered that the action proceed to an undefended trial.
ISSUES
[33] The court is asked to determine the following issues:
Should the Separation Agreement be set aside?
Is Emily Batey entitled to an unequal division of family property?
Did Emily Batey have a trust claim to the interests of David Batey and his mother, Mary Batey, in the Ansondale property and is she entitled to a payment from David on that ground?
POSITIONS OF THE PARTIES
[34] This is an undefended trial, with the result that David’s position is not before the court beyond what can be gleaned from the filed materials.
[35] Emily Batey submits that the Separation Agreement should be set aside on the ground that David Batey made a material misrepresentation as to his liabilities by failing to disclose that he and his mother had withdrawn most of the equity from the Ansondale property in 2008 by granting the $176,000 mortgage to the Toronto-Dominion Bank. Additionally, David had demanded that Emily vacate the Ansondale property by July 31, 2012, and then by August 27, 2012, contrary to the term of the Separation Agreement that permitted her to reside there until October 31, 2012. Finally, he failed to pay Emily the full amount owed to her under the Separation Agreement, being half of his 50% interest in the property, and an additional $15,000.
[36] Emily Batey submits that she is entitled to an unequal division of family property by reason of the following:
a) David Batey failed to disclose his assets, thereby preventing her from accurately calculating an equalization of the parties’ net family property;
b) David Batey made a material misrepresentation as to his marital status in order to mortgage the Ansondale property without her knowledge or consent;
c) David Batey failed to account for the $176,000 that he and his mother derived from the mortgage financing in 2008;
d) In the absence of an explanation, the $176,000 mortgage amounted to a reckless depletion of family property; and
e) Emily Batey contributed equally to the parties’ initial $30,000 investment in the Ansondale property, and to the $12,000 to $15,000 per year that they paid to maintain the property during the 23 years they lived there. Emily additionally invested labour in the property during the 23 years, and staged the property for its sale in 2012. It would be unfair to deprive her of her equal share of its unencumbered value.
[37] Emily submits that she is entitled to a constructive trust interest in the Ansondale property on the basis that she made a substantial investment of her money and labour in the property, which enriched David when he surreptitiously and dishonestly withdrew most of the equity from the property, in the absence of any juridical reason for the enrichment.
ANALYSIS AND EVIDENCE
a) Should the Separation Agreement dated September 30, 2011, be set aside?
Legislative framework
[38] The court derives its jurisdiction to set aside a Separation Agreement from s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3. It provides:
56(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) If a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) If a party did not understand the nature or consequences of the domestic contract; or
(c) Otherwise in accordance with the law of contract.
[Emphasis added.]
Jurisprudence
[39] In LeVan v. LeVan (2008), the Court of Appeal applied a two-part test when determining whether to set aside a domestic contract under s. 56(4):
a) The court must determine if the party seeking to set aside the agreement can demonstrate that one or more of the circumstances in subsections (a) to (c) have been engaged; and
b) If the moving party has fulfilled the first part, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.[^1]
[40] The onus is on the party seeking to set aside the Separation Agreement to prove his or her case.[^2]
[41] In exercising its discretion as to whether to set aside the Separation Agreement, the court should take the following factors into account:
a) Whether there was concealment of the asset or liability, or a material misrepresentation;
b) Whether there was duress or unconscionable circumstances;
c) Whether the petitioning party:
i) neglected to pursue full legal disclosure;
ii) moved expeditiously to have the agreement set aside;
iii) received substantial benefits under the agreement;
d) Whether the other party fulfilled his/her obligations under the agreement.[^3]
Applying the legal principles to the facts of this case
[42] Emily has proved that David failed to disclose the Toronto-Dominion Bank mortgage to her when the parties signed the Separation Agreement. The mortgage was for $176,000, which represented the majority of the equity in the Ansondale property. David’s failure to disclose the mortgage on the property was a failure to disclose a significant debt and clearly fulfills the first step of the test set out in LeVan.
[43] While there was no duress in the present case, it was unconscionable for David to take advantage of Emily’s vulnerability, knowing that she had a strong desire to remain in possession of the Ansondale property until after Sarah’s wedding in October 2012, and that she was at a distinct disadvantage, having no knowledge of the mortgage on the property, which would greatly influence the value of the principal benefit which the Separation Agreement purported to give her.
[44] Emily applied to set aside the Separation Agreement in January 2014, one year and three months after receiving the payment from David’s lawyer on October 12, 2012, following the sale of the Ansondale property. Her delay was not extensive, caused no apparent prejudice to David, and should not disentitle her to a remedy.
[45] David’s concealment of the mortgage that he and his mother had taken out on the Ansondale property amounts to a material misrepresentation of his debts or liabilities, as contemplated by s. 56(4)(a) of the Family Law Act.
[46] In the Separation Agreement, David represented his 50% share of the value of the Ansondale property to be $100,000, thus implying that the total value of the property was $200,000. David did not disclose any liabilities or debts of any kind in the Separation Agreement. Emily Batey made a decision to sign the Separation Agreement in the belief that there were no encumbrances on the equity of the home, which was by far the parties’ largest asset. Unbeknownst to her, there was a significant encumbrance on the home which ultimately depleted its equity by over 75%.
[47] Without having full disclosure of David’s assets and liabilities, it was not possible for Emily Batey to make an informed decision as to whether she should sign the Separation Agreement. David’s failure to disclose the mortgage on the home amounts to a material misrepresentation of his assets in accordance with the law of contract under s. 56(4)(c) of the Family Law Act.[^4] That fact alone would justify setting the Separation Agreement aside.
[48] The Separation Agreement should have resulted in a payment of half of David’s interest in the full value of the property, which was sold for $225,000, plus an additional payment of $15,000. That is, Emily should have received $127,500. She received less than half that amount from the net proceeds of sale, which amounted to $48,001.90.
[49] David did not comply with his obligations under the Separation Agreement. He demanded that Emily vacate the Ansondale property three months early, causing her to incur additional $3,750 in rent costs associated with her short-term lease, as well as extra moving expenses. Additionally, he failed to pay her the amounts owed under the Separation Agreement.
[50] For the foregoing reasons, I conclude that the Separation Agreement should be set aside.
b) Is Ms. Batey entitled to an unequal division of family property?
Legislative framework
[51] The court’s determination as to the division of family property is governed by s. 5 of the Family Law Act. It provides, in part:
5(6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,
(a) A spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;
(b) The fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;
(c) The part of a spouse’s net family property that consists of gifts made by the other spouse;
(d) a spouse’s intentional or reckless depletion of his or her net family property;
(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;
(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;
(g) a written agreement between the spouses that is not a domestic contract; or
(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.
[Emphasis added.]
Jurisprudence
[52] The Court of Appeal set out the analysis required by s. 5 of the FLA in von Czieslik v. Ayuso (2007). Lang J.A., speaking for the Court, stated:
Property is equalized under the FLA through the three-step process set out by Cory J. in Rawluk v. Rawluk, 1990 152 (SCC), [1990] 1 S.C.R. 70. First, a court determines the ownership of property under s. 4. Second, it calculates the equalization payment under s. 5(1). Third, and only after a determination of the first two steps, will a court turn its mind to what Cory J. described as “a last avenue of judicial discretion” provided by s. 5(6) to award an amount having regard to a spouse’s unconscionable conduct. This approach of determining ownership, equalization, and unconscionability, in that order, was confirmed in Berdette v. Berdette (1991), 1991 7061 (ON CA), 3 O.R. (3d) 513 (C.A.).[^5] [Emphasis added]
[53] The Court in von Czieslik held that s. 5(5) permits an award of up to 100% of a party’s net family property to the other spouse.[^6]
[54] In Williamson v. Williamson (2016), Mitrow J. awarded the wife an unequal division of net family property on the ground that, following the parties’ separation, the husband had withdrawn substantial sums from the parties’ joint line of credit, secured by the matrimonial home, and provided no accounting of those funds to the wife. Justice Mitrow stated:
The respondent’s lack of financial disclosure, and his reckless financial conduct in eroding the equity in the matrimonial home, has exacted a significant emotional toll on the applicant who is struggling to make ends meet and doing her best to maintain the matrimonial home as a residence for herself and the children.
I have little hesitation in concluding that the respondent’s reckless erosion of the applicant’s equity in the matrimonial home post-separation, without the applicant’s concurrence, renders it unconscionable to equalize the parties’ net family properties.[^7]
[Emphasis added.]
[55] Emily seeks an “unequal division of net family property” based on unconscionability, consisting of David’s improvident depletion of the equity in the Ansondale property by granting a mortgage on the property, and failing to account for the funds he derived from the financing. This approach is precluded by the Supreme Court’s analysis in Rawluk and Berdette, which requires that the court determine equalization before applying s. 5(6) based on unconscionability. In the present case, the court is unable to determine the net family property of each of the parties and, hence, the equalization amount, by reason of David’s intentional non-disclosure.
[56] Section 5(6) is not the exclusive means available to the court to achieve an equitable distribution of family property upon the parties’ separation, and Ms. Batey has, in the alternative, claimed a constructive trust interest in the Ansondale property. In Rawluk, Cory J. made the following statement regarding how ownership of property is to be determined under the Family Law Act:
The Family Law Act, 1986 does not constitute an exclusive code for determining the ownership of matrimonial property. The legislators must have been aware of the existence and effect of the constructive trust remedy in matrimonial cases when the Act was proposed. Yet neither by direct reference nor by necessary implication does the Act prohibit the use of the constructive trust remedy.[^8]
[Emphasis added.]
[57] David cannot hold Emily Batey’s claim to an equitable share of the parties’ assets hostage by his intentional non-disclosure. Emily’s claim for a payment of an amount equal to one-half the value of the Ansondale property on the basis of unjust enrichment and/or proprietary estoppel, and a constructive trust interest in Mary Batey’s 50% interest in the property does not depend on the application to s. 5(6) of the Family Law Act.
c) Did Emily Batey have a trust claim to the interests of David and his mother in the Ansondale property and is she entitled to a payment from David on that ground?
Jurisprudence
[58] The Supreme Court of Canada gave guidance on the appropriate approach to claims for resulting and constructive trust interests in Rathwell v. Rathwell (1978).[^9] In that case, the parties married in 1944 and began to engage in farming. They opened a joint bank account in which they deposited their savings. During their married life, all monies received and paid out came from their joint account. They used the monies from the account to make a down payment on a farm. The farm was registered in Mr. Rathwell’s name. There was no discussion between him and his wife concerning the beneficial ownership of the property, apart from the statements that the lands were “ours”. Mr. Rathwell acknowledged that they worked together as husband and wife in the farming business. Mrs. Rathwell did the chores, looked after the garden, canned produce, milked cows, sold cream, drove machinery, bailed hay, provided meals and transportation for hired help, kept records and raised and educated four children.
[59] The Supreme Court of Canada held that Mrs. Rathwell must succeed, whether one applies the doctrine of resulting trust or the doctrine of constructive trust. The Court made a distinction between the two forms of trusts. In resulting trusts, courts require a common intention manifested by words or acts that property is acquired as a trustee whereas, in constructive trusts, no intention is required.
[60] Justice Dickson noted in Rathwell that resulting trusts are as firmly grounded in the settlor’s intent as are express trusts, but with the difference that the intent is inferred or is presumed as a matter of law from the circumstances of the case.[^10]
[61] In Rathwell, Dickson J. held that a constructive trust is imposed irrespective of intention:
Where a common intention is clearly lacking and cannot be presumed, but a spouse does contribute to family life, the court has the difficult task of deciding whether there is any causal connection between the contribution and the disputed asset. It has to assess whether the contribution was such as enabled the spouse with title to acquire the asset in dispute. That will be a question of fact to be found in the circumstances of the particular case. If the answer is affirmative, then the spouse with title becomes accountable as a constructive trustee. The court will assess the contributions made by each spouse and make a fair, equitable distribution having regard to the respective contributions. The relief is part of the equitable jurisdiction of the court and does not depend on evidence of intention.
The constructive trust, as so envisaged, comprehends the imposition of trust machinery by the court in order to achieve a result consonant with good conscience. As a matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours of another. That principle is not defeated by the existence of a matrimonial relationship between the parties; but, for the principle to succeed, the facts must display an enrichment, a corresponding deprivation, and the absence of any juristic reason such as a contract or disposition of law for the enrichment. [Emphasis added.]
[62] The Supreme Court of Canada dealt with trusts again in Becker v. Pettkus (1980).[^11] In that case, a man and woman, although unmarried, lived together as man and wife for 20 years. The woman supported the couple for the first five years while the man saved to acquire a farm. The woman helped the man to obtain and maintain a beekeeping business and helped with farm work. The man later bought additional land and built a home on it with the profits from the beekeeping business. The woman sought a declaration that she was entitled to a half interest in the real property and assets acquired by them through their joint efforts. Justice Dickson, writing for the majority, noted the difficulty in discerning evidence of common intention in these cases.
…The sought-for “common intention” is rarely, if ever, express; the courts must glean “phantom intent” from the conduct of the parties. The most relevant conduct is that pertaining to the financial arrangements in the acquisition of property. Failing evidence of direct contribution by a spouse, there may be evidence of indirect benefits conferred: where, for example, one partner pays for the necessaries while the other retires the mortgage loan over a period of years, Fibrance v. Fibrance, [1957] 1 All E.R. 357.
Although the resulting trust approach will often afford a wife the relief she seeks, the resulting trust is not available, as Professor Waters points out, at p. 374: “where the imputation of intention is impossible or unreasonable”. One cannot imply an intention that the wife should have an interest if her conduct before or after the acquisition of the property is “wholly ambiguous”, or its association with the alleged agreement “altogether tenuous”. Where evidence is inconsistent with resulting trust, the court has the choice of denying a remedy or accepting the constructive trust.[^12]
[Emphasis added.]
[63] Justice Dickson would not infer or presume a common intention where the trial judge had found that there was no common intention, either express or implied, so the woman’s claim based on resulting trust failed. However, Dickson J. held that the wife’s claim based on constructive trust should succeed. In Rathwell, the Supreme Court held that three requirements must be satisfied for an unjust enrichment to exist: an enrichment, a corresponding deprivation, and an absence of any juristic reason for the enrichment. If these three elements are proven, the right to relief is made out.[^13] Justice Dickson re-affirmed these elements in Becker:
How then does one approach the question of unjust enrichment in matrimonial causes? In Rathwell I ventured to suggest there are three requirements to be satisfied before an unjust enrichment can be said to exist: an enrichment, a corresponding deprivation and absence of any juristic reason for the enrichment. This approach, it seems to me, is supported by general principles of equity that have been fashioned by the courts for centuries, though, admittedly, not in the context of matrimonial property controversies.[^14]
[Emphasis added.]
[64] The Supreme Court of Canada, in Becker, set out the approach to be taken when applying the principle of constructive trust. Dickson J. stated:
The principle of unjust enrichment lies at the heart of the constructive trust. “Unjust enrichment” has played a role in Anglo-American legal writing for centuries. Lord Mansfield, in the case of Moses v. Macferlan, put the matter in these words: “… the gist of this kind of action is that the defendant, in the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money”. It would be undesirable, and indeed impossible, to attempt to define all the circumstances in which an unjust enrichment might arise… The great advantage of ancient principles of equity is their flexibility: the judiciary is thus able to shape these malleable principles so as to accommodate the changing needs and mores of society, in order to achieve justice. The constructive trust has proven to be a useful tool in the judicial armoury.[^15]
[Emphasis added.]
[65] In Peter v. Beblow (1993), the Supreme Court considered a claim for constructive trust again in the context of a common law relationship. Justice Cory noted that the test for the absence of a juristic reason for enrichment is an objective one:
The parties entering a marriage or a common law relationship, will rarely have considered the question of compensation for benefits. If asked, they might say that because they loved their partner, each worked to achieve the common goal of creating a home and establishing a good life for themselves. It is just and reasonable that the situation be viewed objectively and that an inference be made that, in the absence of evidence establishing a contrary intention, the parties expected to share in the assets created in a matrimonial or quasi-matrimonial relationship, should it end.[^16]
[Emphasis added.]
[66] Where the court finds that there has been an unjust enrichment in relation to the acquisition or preservation of property, it exercises discretion as to whether to order a payment of money to the aggrieved party, or an actual interest in the property. A constructive trust interest in the property itself is available only when a monetary remedy is inadequate and where there is a link between the services rendered and the property in which the trust is claimed.[^17] A constructive trust is appropriate, for example, where there is a finding of fraud in relation to the particular property.[^18]
[67] In Peter, the Supreme Court restored the judgment of the trial judge who had awarded the common law wife the property, which she had expended her labour to improve, as restitution for her contribution over the course of the parties’ 12 year relationship. The court held that monetary damages would not be sufficient to compensate the common law wife, and that there was a sufficient link between the property and her contribution.
[68] In Sorochan v. Sorochan (1986), the Supreme Court held that the constructive trust remedy should not be confined to cases where the plaintiff contributed to the acquisition of the property; it was enough if the plaintiff contributed to the "preservation, maintenance, or improvement of the property," so long as the services rendered have a "clear proprietary relationship." That relationship was established on the factual footing that the contributions of the plaintiff prevented the property in question from deteriorating in value.[^19]
[69] In Morningstar v. Holley (2007), Henderson J. rejected the common law husband’s argument that his common law spouse, if successful, would not acquire an interest in the property, but would be entitled only to a share of the equity, and would be fully protected if the property were sold and the proceeds of sale held in trust to satisfy any judgment in her favour. Justice Henderson held that it would be open to the trial judge to grant the common law wife an actual interest in the property. He stated:
I do not agree with the applicant’s position on that point. If a trial Judge finds that there has been unjust enrichment of the applicant, it is open to the trial Judge to choose an appropriate remedy. The trial Judge may simply choose to order that the applicant pay a sum of money to the respondent, or the trial Judge may grant an interest in the property to the respondent in the form of a constructive trust. See the case of Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980, at para. 21.[^20]
[70] In Serra v. Serra (2007), the elements of a gift were described as follows, at para. 92:
A gift is the voluntary transfer of property without consideration (Birce v. Birce (2001), 2001 8607 (ON CA), 56 O.R. (3d) 226 (Ont. C.A.) at para. 17). It has the following elements: intention to transfer property; certainty as to the property to be transferred; certainty as to the recipient of the gift; and delivery and perfection of the gift by doing everything necessary to effect an irrevocable transfer (Ruwenzori Enterprises Ltd. v. Walji, [2004] B.C.J. No. 1147 (B.C. S.C.)).[^21]
[Emphasis added.]
Applying the legal principles to the facts of this case
(i) Resulting trust
[71] For the reasons that follow, I find that Thomas and Mary Batey held title to the Ansondale property in a resulting trust for David and Emily Batey.
[72] In this case, the onus was on Emily Batey, as the transferee, to demonstrate that a gift was intended by Thomas and Mary Batey at the time that they purchased the Ansondale property for Emily and David. I accept Emily’s evidence that Thomas and Mary Batey intended to gift the Ansondale property to them. Thomas and Mary never resided in the property. Immediately after buying the property, they permitted David and Emily Batey to reside there. David and Emily Batey never paid rent to Thomas or Mary, and there is no evidence that Thomas and Mary ever claimed repayment or rent from them.
[73] The house was a shell when David and Emily began residing there, and they expended a substantial sum in finishing it and making it habitable. They expended additional amounts over the years to preserve the home, paying the cost of insurance, utilities, and, perhaps, property tax. They resided in the property for 23 years and treated it as their home.
[74] I accept Emily Batey’s evidence that Thomas and Marty retained title to the property in order to protect it from David Batey’s creditors. This conclusion is supported by the fact that David Batey was self-employed, was poor at managing his business, and eventually declared bankruptcy.
[75] Based on these findings, I conclude that Thomas and Mary Batey held the Ansondale property in trust for David and Emily Batey.
[76] When David Batey acquired his interest in the Ansondale property from his father upon his father’s death in 2005, the property continued to be subject to the trust under which Thomas and Mary Batey had held the property for David and Emily. David and Emily continued to live in the property as their matrimonial home.
(ii) Constructive trust
[77] When David Batey acquired title to the Ansondale property in 2005, he held it subject to his parents’ resulting trust in favour of himself and Emily Batey. The transfer of legal interest in the property to David did not affect the beneficial interest, which was jointly held by David and Emily.
[78] When David and his mother granted a mortgage on the property in favour of Toronto-Dominion Bank, their act constituted an intentional and reckless depletion of net family property as contemplated by s. 5(6)(d) of the Family Law Act. As a result, an unequal division of family property is appropriate in this case.
[79] The elements of a constructive trust are established in this case:
a) David Batey was enriched by Emily Batey’s initial investment of approximately $15,000 in finishing the property when they first resided there. He continued to be enriched by her contributions to maintaining the premises from the parties’ joint bank account and, after David Batey’s bankruptcy, from Emily’s payments to him. He was also enriched by Emily’s contribution of her labour to maintaining the property and staging it for sale.
b) Emily suffered a corresponding deprivation by her financial investment in finishing the property and by her contributions of money and labour in maintaining it.
c) There was no juristic reason for David to be enriched at her expense.
[80] When David and Mary Batey mortgaged the property to the Toronto-Dominion Bank without Emily’s knowledge or consent, they did so in breach of their trust obligations to act in Emily’s best interest. David dishonestly deprived Emily of equity in the property in which she had a constructive trust, by falsely informing the Bank that he was not a spouse. David and Mary Batey therefore held the proceeds of the financing in trust for Emily.
[81] As the Ansondale property has been sold, and the mortgage to the Toronto-Dominion Bank was repaid with the proceeds of sale, a payment of money by David Batey to Emily Batey is the most appropriate remedy. Emily is entitled to a half interest in the proceeds of the Bank financing, and a half of the net proceeds of sale. That is, she is entitled to $64,498.10, representing $112,500, being half of the $225,000 proceeds of sale before deducting the mortgage, less the $48,001.90 she received.
[82] The money David Batey pre-paid in property taxes on the property is off-set by the expense Emily Batey incurred for short-term accommodation when she was required to leave the property on August 27, 2016, two months earlier than the date the parties had agreed, in their Separation Agreement, she could remain.
d) Is Emily Batey entitled to payment of her costs by David Batey and, if so, in what amount?
[83] Emily Batey has been successful in her application and is presumptively entitled to her costs. David Batey acted unreasonably, by dishonestly depriving her of her share of the equity in the Ansondale property, in which she had a constructive trust interest, and by his repeated non-compliance with disclosure orders by this court. Emily is therefore entitled to her costs on a full recovery basis.
[84] In Berta v. Berta (2015), the Court of Appeal stated:
In Biant v. Sagoo (2001), 2001 28137 (ON SC), 20 R.F.L. (5th) 284 (Ont. S.C.), the court considered the costs award scheme under the rules and commented, at para. 20:
[T]he preferable approach in family law cases is to have costs recovery generally approach full recovery, so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the result. There remains, I believe a discretion under Rule 24(1) to award the amount of costs that appears just in all the circumstances, while giving effect to the rules’ preeminent presumption, and subject always to the rules that require full recovery or that require or suggest a reduction or an apportionment.
This court has repeatedly endorsed the Biant court’s approach to the determination of costs in family law disputes: see for example, Ruffudeen-Coutts v. Coutts, 2012 ONCA 263, 15 R.F.L. (7th) 35, at para. 4; Sordi v Sordi, 2011 ONCA 665, 134 R.F.L. (7th) 197, at para. 21; M. (A.C.) v. M. (D.), 23003), 2003 18880 (ON CA), 67 O.R. (3d) 181 (C.A.), at para. 40. [^22]
[85] Emily Batey made an informal Offer to Settle by letter dated May 9, 2017. She achieved an outcome which is better than the one she would have derived if David had accepted the Offer, as the present Judgment will include pre-judgment interest from August 29, 2016, when the sale of the Ansondale property closed and she was entitled to payment, and a greater amount for costs than the Offer required. Emily Batey is therefore entitled to her costs on a full recovery basis.
[86] I have reviewed the Bill of Costs submitted by Emily Batey’s lawyer, Rick Bickhram, who was called to the Bar in 2007. According to the Costs Bulletin of 2005, he was entitled to claim a maximum hourly rate of $225 in 2005 on a partial indemnity scale. Adjusted for inflation, this is equivalent to approximately $275 today. That hourly rate, on a substantial indemnity scale, translates to $412.50 ($275 x 1.5). He claims an hourly rate of $240 on a substantial indemnity scale, which is conservative.
[87] I have reviewed the time spent and find it to be reasonable. The costs claimed, in the amount of $46,185.36, is proportional to the amount at stake and the difficulty and delay Emily Batey endured as a result of the way in which David responded to her Application. Stepping back and viewing the case as a whole, I find that David should reasonably have expected to pay the amount of costs claimed in the event he was unsuccessful in the outcome.
CONCLUSION AND ORDER
[88] For the foregoing reasons, it is ordered that:
The Separation Agreement dated September 30, 2011, between the Respondent, David Batey, and the Applicant, Emily Batey, is hereby set aside.
The Respondent, David Batey, shall pay to the Applicant, Emily Batey, the sum of $64,498.10.
The Respondent, David Batey, shall pay to the Applicant, Emily Batey, pre-judgment interest on $64,498.10 from August 29, 2016, at the rate of 1.3% annually.
The Respondent, David Batey, shall pay Emily Batey’s costs of this action, fixed at $46,185.36, to Bickhram Litigation P.C., in trust for Emily Batey.
The Respondent, David Batey, shall pay post-judgment interest on the amounts payable under this Order at the rate of 2%.
Price J.
Released: November 10, 2017
CITATION: Batey v. Batey, 2017 ONSC 6768
COURT FILE NO.: FS-14-0381-00
DATE: 2017-11-10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
EMILY BATEY
Applicant
- and –
DAVID THOMAS BATEY
Respondent
REASONS FOR ORDER
Price J.
Released: November 10, 2017
[^1]: LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 51 [^2]: Dougherty v. Dougherty, 2008 ONCA 302, 89 O.R. (3d) 760, at para. 11; see also Bruni v. Bruni, 2010 ONSC 6568, 104 O.R. (3d) 254, at para. 97. [^3]: Turk v. Turk, 2015 ONSC 5845, 68 R.F.L. (7th) 106, at para. 55; Dochuk v. Dochuk (1999), 1999 14971 (ON SC), 44 R.F.L. (4th) 97; Quinn v. Epstein Cole LLP, 2008 ONCA 662, 92 O.R. (3d) 1; Toscano v. Toscano, 2015 ONSC 487, 57 R.F.L. (7th) 234. [^4]: Virc v. Blair, 2017 ONCA 394, at para. 55. [^5]: von Czieslik v. Ayuso, 2007 ONCA 305, 86 O.R. (3d) 88, at para. 28. [^6]: von Czieslik, at para. 58. [^7]: Williamson v. Williamson, 2016 ONSC 1180, at para. 25. [^8]: Rawluk v. Rawluk, 1990 152 (SCC), [1990] 1 S.C.R. 70, at 97; See also, Stone v. Stone, 2001 ONCA 24110, paras. 42 to 44 [^9]: Rathwell v. Rathwell, 1978 3 (SCC), [1978] 2 S.C.R. 436. [^10]: Rathwell, supra, at 451. [^11]: Becker v. Pettkus, 1980 22 (SCC), [1980] 2 S.C.R. 834. [^12]: Becker, supra, at paras. 22 and 26 [^13]: Rathwell, supra. [^14]: Becker, supra, at para. 38. [^15]: Becker v. Petkus, 1980 22 (SCC), [1980] 2 S.C.R. 834, per Dickson J., at 847-48. [^16]: Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980, per Cory J., at para. 84. [^17]: Peter, supra, at para. 26. [^18]: Soulos v. Korkontzilas, 1997 346 (SCC), [1997] 2 SCR 217, at paras. 20, 43. [^19]: Sorochan v. Sorochan, 1986 23 (SCC), [1986] 2 S.C.R. 38, at paras. 31-32. [^20]: Morningstar v. Holley, 2007 2359 (ON SC), at paras. 5-7, 9. [^21]: Serra v. Serra, 2007 CarswellOnt 665 (W.L. Can.), rev’d on different grounds 2009 ONCA 105, 93 O.R. (3d) 161, additional reasons 2009 ONCA 395, 66 R.F.L. (6th) 40. [^22]: Berta v. Berta, 2015 ONCA 918, at paras. 92-93.