Malkov v. Stovichek-Malkov, 2017 ONSC 6822
CITATION: Malkov v. Stovichek-Malkov, 2017 ONSC 6822
NEWMARKET COURT FILE NO.: FC-15-47701-00
DATE: 20171115
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Dmitri Malkov
Applicant
– and –
Natalia Stovichek-Malkov
Respondent
Mikhail Malkov
E. Mourao, Counsel for the Applicant
J. Freeman, Counsel for the Respondent
B. Bowen, Counsel for Respondent
Respondent
HEARD: May 30, 31, June 1, 2, September 18 and September 22, 2017
McGEE J.
Reasons for decision
Issues within this Bifurcated Trial
[1] Three issues are decided in these reasons. Ongoing entitlement to spousal support is found, income for support purposes is determined – with the husband’s income being increased by the receipt of gifts as income; and the respondent Mr. Mikhail Malkov’s claim for a resulting trust is granted, with a declaratory order transferring joint title of a property held by Dmitri Malkov and Natalia Stovichek-Malkov to Mr. Mikhail Malkov.
[2] Custody and access, and the quantum of child and spousal support are to be decided in the other half of this bifurcated trial. The balance of issues, including equalization have been resolved within a Consent attached as Schedule A to these reasons. Order to go accordingly.
Facts Not Really in Dispute
[3] The applicant, Dmitri Malkov (“Dmitri”) and the respondent, Natalia Stovichek-Malkov (“Natalia”) began living together in August 2007. Both were born in Russia and immigrated to Canada as children.
[4] Dmitri is an only child and arrived in Canada in 1998 at the age of 16. At that time neither of his parents spoke any English. They jointly purchased a house located on Brooke Street, in Thornhill, Ontario. His mother continues to reside in that property. His father, the co-respondent Mikhail Malkov (“Mikhail”) was a 50 year old retired businessman when he decided to settle in Canada. He was, and continues to be a man of means.
[5] Like many children of immigrants, Dmitri adapted to Canadian life faster than his parents. He became the go-between his parents and their new community. Mikhail opened up a joint account and a joint Visa with Dmitri so that their son could make family purchases and pay accounts.
[6] The joint account has always been Dmitri’s primary account. He deposits his pay to the joint account, from which he pays the joint Visa. But for another account opened after his marriage and closed shortly thereafter, the joint account has been his only account. The joint Visa has never carried a balance – whether paid from Dmitri or Mikhail’s funds, it is always discharged in full at the end of every statement period.
[7] In 2002, Mikhail "decided to live alone." He purchased a penthouse condominium located at 7300 Yonge Street (the "Condo") and moved out of Brooke Street, which continues to be jointly owned by Mikhail and Dmitri’s mother.
[8] In March 2008 Mikhail purchased a property on Thornhill Woods Drive, in Thornhill, Ontario. He paid the purchase price in full and took title to the house in his name. He paid all costs and expenses associated with owning the property including property taxes, insurance, repairs and maintenance costs.
[9] Dmitri and Natalia were married on May 15, 2008. Dmitri offered them free residence in Thornhill Woods. Dmitri had just turned 26 and was working full time. Natalia was 23 and was working part time as a pharmacy assistant. They did not pay any rent to Mikhail. They made no financial contribution to the home or its carrying costs. Dmitri and Natalia acknowledged that Thornhill Woods was Mikhail's house and that should he decide to sell, they would have to vacate.
[10] Thornhill Woods was a large, detached, single family dwelling of about 2700 square feet consisting of four bedrooms, a living room and a family room. The house was ample to their needs and in a convenient location.
[11] With Dmitri’s support, Natalia returned to school and graduated with a Bachelors of Science nursing degree in 2010. That same year their son was born. Two years later their daughter was born. Both of Dmitri and Natalia’s children are loved dearly by their parents, paternal grandparents and their maternal grandmother. The grandchildren want for nothing. Mikhail pays for private school for both children. They are enrolled in a wide array of activities, the costs of which he also covers.
[12] In 2010, Mikhail decided to take further advantage of a rapidly rising real estate market in the GTA. He decided to sell Thornhill Woods and to purchase at least two luxury properties on larger lots.
[13] Mikhail retained the services of a Russian-speaking real estate agent to assist him in his search for investment properties. He also asked two friends to provide him with guidance and feedback on suitable investment properties.
[14] Mikhail gave the agent specific instructions regarding the type of investment property he was seeking, lot size, and location. The agent had no direct discussions with Natalia about Mikhail’s search for investment homes,[^1] although she was kept up to date with the search. On many evenings Mikhail would drop by Thornhill Woods to visit with his grandchildren and provide updates on the search.
[15] Two years later his efforts culminated in two prospective investments: 41 Arnold Avenue and 99 Thornridge Drive, both in Thornhill, Ontario.
[16] Mikhail made two offers to purchase 41 Arnold Avenue. The first offer was made in his name alone and was conditional on a home inspection. It was signed back. Prior to making a second offer, Mikhail told Dmitri in a car ride, when Natalia was not present, that he had decided to convey title into their joint names.
[17] He later told Dmitri and Natalia that they could live at 41 Arnold Avenue, and that they would need to sign the next offer. He instructed the agent accordingly. The agent cautioned him to obtain legal advice before conveying title to his son and daughter-in-law. Mikhail ignored the advice. He often repeated during this trial that he trusted Dmitri and Natalia, and would not have placed title in their names if he did not.
[18] Natalia and Dmitri inspected 41 Arnold Avenue, signed the second offer, and later, went to the real estate lawyer’s office to sign all the necessary documents.
[19] The purchase transactions for both 41 Arnold Avenue and Thornridge Drive closed at or around the same time in September of 2012. Mikhail used the proceeds of sale from Thornhill Woods, net of a capital gain of approximately $200,000, to purchase the two properties. He took title to Thornridge Drive in his own name.
[20] All purchase monies for both homes, as well as legal fees and closing adjustments were paid by Mikhail. Mikhail then supervised and paid for extensive renovations to 41 Arnold Avenue at a cost of approximately $300,000. The renovations included adding a 400 square foot smoking room to the house to allow Mikhail to smoke when he visited Dmitri and Natalia. Mikhail also paid for all furniture and appliances for 41 Arnold Avenue.
[21] Dmitri and Natalia moved into 41 Arnold Avenue. The home was quite a step up for a 28 and a 26 year old who had no savings. Each agree that they could not have afforded to either purchase, or to manage all of the carrying costs of the home. Mikhail paid all the costs of operating 41 Arnold Avenue, from the property taxes and insurance to snow removal and gardening. He still does.
[22] In March 2014 Natalia returned to work. She started working in community health care. She chose to do so because it allowed her to balance her work with the demands of early years parenting. Unlike hospital shifts, community care positions tend to have more regular, modified work weeks. Natalia is amply qualified for hospital work – a more remunerative calling – but has remained in community care nursing since separation.
[23] The parties separated on August 20, 2014.
[24] Initially, Dmitri and Natalia lived separate and apart at 41 Arnold Avenue. But by June or July 2015, Dmitri was spending most evenings with his girlfriend at his father’s condo. Mikhail travels extensively and is often out of the country. By October 2016, Dmitri no longer spent any time at 41 Arnold Avenue, and spent all of his evenings in the condo. He now lives there with his new partner exclusively. Mikhail lives at Thornridge Drive.
[25] Natalia and the children continue to reside at 41 Arnold Avenue. Mikhail pays all its expenses without any contribution by Natalia. It has been agreed that whatever the outcome of this trial, she and the children may reside in the home, expenses paid, for a further six months.
[26] Dmitri does not pay his father any rent or other maintenance costs for the penthouse condominium unit. He drives an expensive automobile purchased by his father. Dmitri and his father continue to operate the joint bank account and joint Visa established upon their arrival in Canada.
[27] The use of the joint bank account and the joint Visa has expanded over the years. During his marriage to Natalia, Dmitri used the Visa to pay many of the expenses for his young family as well as continuing to pay his personal expenses and certain of his parents’ expenses.
[28] Dmitri’s payroll deposits to the joint account have never been sufficient to cover the joint Visa and are supplemented by Mikhail. The monthly amount varies, depending on the total of expenses incurred by Dmitri on his behalf, his former wife’s expenses managed by Dmitri and those that he counts as gifts to Dmitri, Natalia and the grandchildren. The deposits are often large amounts, sometimes in excess of $10,000.
[29] The specifics of expenses covered by the joint Visa were generally unknown to Natalia until she took steps to investigate.
[30] Mikhail only started this action against his son and former daughter-in-law when Natalia took the position that 41 Arnold Avenue was a gift to her and Dmitri. Her pleadings assert a beneficial interest in the property equal to her registered joint tenancy. Natalia does not agree to transfer legal title back to Mikhail.
[31] Dmitri is prepared to transfer legal title of 41 Arnold Avenue back to his father. He asserts that 41 Arnold Avenue is just another investment property for his father. He testifies that he never considered the property to be his, and that the only benefit to title being placed in his name, is that it makes managing the property for his father a bit more convenient.
[32] Natalia’s claim for a beneficial interest in 41 Arnold Avenue created some confusion in the early stages of this proceeding. Were she to be successful, the value of her interest would form part of her net family property, with no corresponding value held by Dmitri – he makes no such claim. As the trial progressed, it became clear that beneficial interest was not the appropriate claim for Natalia to assert, as she acknowledges having never made any contribution to its acquisition or maintenance.
[33] Rather, she asserts that Mikhail intended to gift the property to her and Dmitri, thus defeating a presumption of resulting trust favouring Mikhail. She wishes the property sold, and the net proceeds divided equally between her and Dmitri.
Support Issues:
Entitlement to Spousal Support
[34] This was a relatively short relationship of seven years. The parties were 32 and 30 at the time of separation. They have two school age children for whom Dmitri pays a section 9 amount of child support pursuant to the temporary Order of April 25, 2016.
[35] During trial, Dmitri’s counsel made much of Natalia’s failure to maximize her income and the benefits of extensive family support – including Dmitri’s workplace flexibility - that would allow her to thrive in a full time hospital position. Were she to do so, argues Dmitri, she would have no need for spousal support. Natalia is a registered nurse, a level beyond a practical nurse. Natalia’s mother is a foreign trained physician.
[36] Natalia has been quite successful in her chosen field of study. She was awarded her choice of placements upon completing her practicums at Princess Margaret Cancer Centre, SouthLake Regional Health Centre and Sunnybrook Health Sciences Centre. The children are in a shared living arrangement. Natalia has enviable assistance from her mother for the periods in which the children are in her care, including overnights.
[37] Parents have a fundamental obligation to strive towards self-sufficiency. Section 15.2(6) of the Divorce Act provides that,
Objectives of Spousal Support Order
(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[38] It is not seriously contested that Natalia has had an entitlement to spousal support. It is argued by Dmitri’s counsel that going forward she has either lost that entitlement, or has no ongoing need for spousal support based on her ability to earn income.
[39] I do not find that Natalia’s entitlement to spousal support has come to an end.
[40] Three years post separation, the financial consequences to Natalia arising from the marriage breakdown are not yet known. None of the primary economic benefits of this marriage, such as housing, vehicle and certain child expenses have been removed, and yet they are clearly not durable: they do not derive from her former spouse. When they are removed, Natalia will suffer economic disadvantage arising from the marriage disproportionate to that which will be experienced by Dmitri.
[41] Specifically, Natalia will share parenting responsibilities with a co-parent who bears no personal responsibility for the costs of his lifestyle, or child related care expenses over and above a section 9 obligation for child support. Her housing circumstances are temporary. She has no savings. If the children are to continue to benefit from a shared parenting schedule she will be hard pressed to afford suitable housing within proximity to Dmitri’s condo without the availability of spousal support - even if it proves to be a modest amount.
[42] In such circumstances I decline to dismiss Natalia’s claim for spousal support.
Natalia’s Income for Support Purposes
[43] It was learned during trial that Natalia has now increased her hours to full time, so that her 2016 income of $59,021 will be higher in 2017.
[44] I find that Natalia’s income for support purposes is her full time employment income at her present community care nursing position. Order to go accordingly.
[45] I do not find that Natalia is intentionally underemployed. Although I agree with Dmitri’s counsel that Natalia failed to demonstrate that her responsibilities to the children preclude her from working full time in a hospital setting; I accept that her reasons for remaining in community nursing are sound. Both she and Dmitri’s parenting responsibilities are at a high point. Each benefit the children and each other by having flexible positions.
[46] Whether Natalia ought to have worked full time, rather than part time in prior years is not relevant to this decision, as there is no retroactive claim for support. There is no evidence to persuade me that her present remuneration is less than had she been working full time since separation.
[47] Finally, I do not find that this is a case for compensatory support. Natalia lost no ability to earn income during the marriage, or more specifically, while she stayed at home from 2010 to 2014 to care for the children. To the contrary, she increased her earning potential by completing a challenging degree during the marriage, the costs of which were paid by her spouse and/or his father.
Dmitri’s Income for Support Purposes
[48] Dmitri’s 2016 employment income was $103,385. His employment income for 2017 will be known shortly.
[49] Natalia claims that Dmitri’s income for support purposes is the sum of his employment income plus an amount representing benefits provided to him by his father.
[50] Section 19(1) of the Federal Child Support Guidelines provides the authority to impute income.
Imputing income
19 (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:
(a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;
(b) the spouse is exempt from paying federal or provincial income tax;
(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
(e) the spouse’s property is not reasonably utilized to generate income;
(f) the spouse has failed to provide income information when under a legal obligation to do so;
(g) the spouse unreasonably deducts expenses from income;
(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
[51] The onus lies on the person requesting the imputation of income to establish an evidentiary basis for such a finding.[^2]
[52] Much evidence was led on this issue. Dmitri was anxious to assure the court that he only uses the joint Visa, or money from the joint account that originates from his father, for his father’s expenses, or purchases for which he has received express authority.
[53] Mikhail resides out of the country for much of the year, and his Canadian investments are significant. Dmitri is often called upon to arrange for repairs, purchase supplies for his mother and to pick up gifts for he, Natalia and the children. He is his father’s agent.
[54] Father and son have strong reason to accord their recollection of finances. During earlier periods – when not under the scrutiny of an approaching trial – it is clear that Dmitri’s use of the Visa was unfettered: everything from diapers to personal services. The extra responsibility of managing his parents’ affairs is not without its benefits.
[55] The question for this court is whether such generosity constitutes gifts that ought to be included in income for support purposes. It is a question that is challenging courts across Canada with renewed complexity. A spouse’s departure from an extended family structure is often the real cause of financial destitution, rather than the separation itself.
[56] When should gifts be included as income? The starting point is section 16 of the Federal Child Support Guidelines which provides that gifts are not included in a spouse's presumptive income, and in the ordinary course, will not be included as income.
[57] This accords with the common meaning of a gift: a one-time indulgence to mark a special occasion, or limited assistance in a time of crisis. There is a significant distinction between gifts received from family members on an inconsistent basis - particularly post-separation-than a stream of income or benefits used to support the family over a lengthy period.
[58] For example, Mikhail’s payment of the couple’s honeymoon, a vehicle for Natalia, jewelry and the children’s toys; and the maternal grandmother giving the couple free child care, and a lump sum of cash with which to start their new life, are clearly gifts that are not part of income. As the maternal grandmother testified: “this is what grandparents do.”
[59] Gifts can be included in a spouse’s income under subsection 19(1) of the Guidelines. The considerations are not exhaustive. Early cases in which gifts were found to be income tended to be corrections for mischief, such as when a payor received below market income for services to a family company, supplemented by “gifts” from the controlling family members.[^3]
[60] In 2006 Justice MacKinnon organized a principled approach to including gifts as income in Whelan v. O’Connor.[^4] Although the facts before her are distinguishable to these,[^5] her caution bears repeating: courts should be careful not to impute income from gifts, when so doing would have the effect of transferring a support obligation. It is not a paternal grandparent’s responsibility to provide child support, to augment a grandchild’s education and activities, or to provide spousal support for an adult child’s former spouse.
[61] In 2007 Justice Lang’s reasons in the Ontario Court of Appeal decision of Bak v. Dobell[^6] consolidated the factors to consider when determining whether it is appropriate to include gifts as income:
“the regularity of the gifts; the duration of their receipt; whether the gifts were part of the family’s income during cohabitation that entrenched a particular lifestyle; the circumstances of the gifts that earmark them as exceptional; whether the gifts do more than provide a basic standard of living; the income generated by the gifts in proportion to the payor’s entire income; whether they are paid to support an adult child through a crisis or period of disability; whether the gifts are likely to continue; and the true purpose and nature of the gifts.”
[62] These factors have been applied in a number of subsequent decisions. In Yunger v. Zolty[^7] Justice Herman declined to include gifts as income on a motion in which a young family had been primarily supported by the husband's father. When the marriage ended, the grandfather cut off support, leaving the mother in significantly reduced circumstances. Justice Herman’s application of the tests in Bak v. Dobell satisfied her that the grandfather’s gifts were neither consistent, nor in the father’s control. Interestingly, she observed that, “[w]hile the grandfather's reasons for his decision to stop providing funds to his son may be distasteful, the fact remains that the court cannot require the grandfather to continue to provide support.”
[63] In A.L. v. J.N.,[^8] the New Brunswick Court of Appeal applied the tests in Bak v. Dobell to decline including gifts as income. On the facts of that case, the gifts came from the wife's family members mostly after the marriage had broken down, and were given to assist her through a difficult period. There was no indication that the gifts would continue.
[64] Natalia’s counsel offers no Bak v. Dobell analysis. Until his closing submissions – for which the court required a Divorcemate calculation – counsel had not even proposed an amount to be included in Dmitri’s income. In the final hours of trial that number appeared: $133,385 calculated as employment income of $103,385 and an additional $2,500 a month of benefits, not grossed up.
[65] Dmitri’s counsel asks that the claim to supplement his employment income be dismissed.
[66] His counsel asserts that Natalia has not met her onus, and in any event, that the claim fails within the Bak v. Dobell analysis because he has no control over the gifts. Evidence on this point is Mikhail’s testimony that “no one can push him.” But a careful reading of that section of the transcript shows that Mikhail’s phrase was uttered in response to a line of questions on the purchase of gifts for Natalia, Dmitri and the children. He was clear that he bought those on special occasions, or as an indulgence, as he pleased.
[67] A finding that gifts constitute income is fact specific. It is made more challenging in this case as no evidence was tendered on the fair market value of Dmitri’s penthouse apartment, or the use of an expensive automobile. The supplementing of Dmitri’s personal expenses through the joint Visa alone is insufficient to anchor an amount – the intermingling of funds changes every month. And to be fair, Dmitri’s use of moneys deposited by Mikhail appears to have declined since separation.
[68] Natalia does not seek imputation of the costs of private school for the children or their activities, as was the case in Korman v. Korman.[^9]
[69] In reviewing the tests in Bak v. Dobell I am struck by the analogy to section 19(1) (i) of the Guidelines. In my view, when gifts take on the appearance of a long term subsidy for the pre and post separation family, as if the spouse was a beneficiary of income or benefits from an unwritten trust, the advances bend towards income.
[70] Dmitri has never paid for housing, or utilities, insurance, condo fees or realty taxes. He has never paid for any renovations. He has been free to organize his finances without regard to the significant costs of accommodation in the Greater Toronto Area.[^10] There is no evidence to suggest that he ever will pay for housing or housing related expenses. These are benefits that he has enjoyed all his life, irrespective of whether or not he was married.
[71] Dmitri has a measure of control over the housing, vehicle and his monthly payment of expenses. He is his father’s agent. His father travels extensively and relies on him to manage his investments.
[72] I find that these benefits, particularly the housing benefits fall into the class of gifts constituting income as contemplated by the Ontario Court of Appeal in Bak v. Dobell. The value of such benefits is unknown to me, but on the available evidence I am satisfied, at a minimum, that it accords with the $30,000 proposed by Natalia’s counsel.
[73] Order to go that Dmitri’s income for support purposes is the total of his present annual employment income, and $30,000 per annum (pre-tax).
Final Support Not Determined at this Time
[74] Natalia does not seek a final order for spousal support or child support at this time. There is no claim for support during prior periods.
[75] So long as Natalia continues to live at 41 Arnold Avenue, the cost of the property (realty taxes, insurance, repairs and maintenance, and utilities) are paid by Mikhail. Her counsel concedes that in these circumstances, her need for support does not exceed that which is provided in the temporary Order of April 25, 2016.
[76] The temporary Order of April 25, 2016 shall continue until agreed, or ordered otherwise.
Claim for Resulting Trust
[77] A resulting trust arises whenever one person buys a property or contributes purchase money, and the property is gratuitously conveyed into another person’s name. In such circumstances, the title holder is placed under a legal obligation to return the property to the person who paid the purchase money for it, unless the title holder can prove that the buyer intended to make a gift of the property. Thus, the property “results” or goes back to the person who provided the purchase funds.[^11]
[78] In Pecore v. Pecore [^12] the Supreme Court of Canada held that when a gratuitous transfer is being challenged, the trial judge must begin his or her inquiry by determining the proper presumption to apply. This has come to be known as the modern approach to resulting trust:[^13]
The modern approach is that the courts will commence the inquiry with the applicable presumption and weigh all the evidence to ascertain, on a balance of probabilities, the transferor’s actual intent. Where there is insufficient evidence to rebut the presumption on a balance of probabilities, the presumption will determine the outcome.[^14]
[79] The presumptions will apply even when the transferor is alive, and available to testify directly regarding his or her intentions, because the purpose of a presumption is to allocate the burden of proof.[^15] The normal civil standard – the balance of probabilities – applies, but if the trier of fact is left uncertain, then the party who bears the burden of persuasion will lose the issue.[^16] Equity presumes bargains, not gifts.
[80] The actual intention of a transferor also assists the court in determining whether the transfer was in fact gratuitous[^17] – a determination that is not always self-evident. Consideration may not be in the form of money, but rather services or other forms of mutual benefit. The transfer may take the form of a debt payment linked to the acquisition of a property.[^18]
[81] Only with a finding that a transfer is gratuitous does the presumption of resulting trust arise. For example, in Farkas v. Bedic,[^19] the Court of Appeal was asked to determine whether a common-law wife held a half interest in a hotel, in trust for her common-law husband.[^20] The Court examined the intention of the transferor at the time of the transfer and found that a resulting trust did not arise because a gratuitous transfer had not occurred.
[82] Once a gratuitous transfer has been found, the onus shifts to the recipient to rebut the presumption by demonstrating on the balance of probabilities that the gratuitous transfer was a gift. In Barber v. Magee,[^21] the Ontario Court of Appeal confirmed this modern approach in circumstances in which a respondent’s father, who was alive to testify at trial, advanced to the respondent and his wife money to help fund the down payment of a matrimonial home. The question before the trial judge was whether the advance was a gift, or a loan that should be recognized as a liability in calculating the respondent’s net family property. Fitzpatrick J. relied on Pecore and prima facie applied the presumption of resulting trust. He then found that the applicant wife had rebutted the presumption by demonstrating that the respondent’s father intended the monies to be a gift.
Was 41 Arnold Avenue a Gratuitous Transfer to Dmitri and Natalia?
[83] I find that it was a gratuitous transfer. No moneys, services, benefits or debt reductions were provided to Mikhail by the young couple as consideration for the transfer.
[84] Dmitri and Natalia received the benefit of free housing, just as they had during their tenure at Thornhill Woods.
[85] Mikhail testified that at all times he made it clear that 41 Arnold Avenue was his property and that “when there be the right moment, I will sell this property.” He testified that Natalia understood the terms and assured him that there would be no problems:
“ [i]n the evening…, Dmitri and Natalia and I asked, okay, I doing it for you because I am old and everything could happen with me but until I am alive, I would like to – it is my property until I'm alive. After I dead, it doesn't matter what happen after me. And Dmitri was okay. She said to me, Mikhail, we trust you, you do for us everything. It is your decision. You and if it sign of you, it is okay. We live to Thornhill Woods without problems. If you sign of us, I trust you, you never will have any problems when you will sell – when you would like to sell it, we know that you will do for us the best. It was the conversation. It was my proposal. They didn't ask me to sign of them.”
[86] Natalia did not disagree with the nature and content of these conversations. Instead, she presented a number of disparate theories as to why she ought to be able to keep her joint tenancy interest in 41 Arnold Avenue. As referenced above, some were initially fashioned as a claim for a beneficial interest; but it is agreed that Natalia and Dmitri have never financially contributed to 41 Arnold Avenue.[^22] Everything has been paid by Mikhail, “but for maybe a light bulb[^23].”
Has Natalia Rebutted the Presumption of Resulting Trust?
[87] Natalia advocates that it was always Mikhail’s intent to gift the home to them. Her evidence settles into two broad themes.
[88] First, that Mikhail is an experienced, generous and successful business person who does things deliberately, and with considerable thought. She views with suspicion the fact that Mikhail only made this claim after she separated from Dmitri. Her counsel proposes that Mikhail intended to gift the property at the time of purchase and cannot now assert a self-serving contradiction.
[89] There are a number of difficulties with this proposal. The most obvious is that 41 Arnold Avenue was not a gift that Natalia and Dmitri could have accepted. Natalia conceded during her testimony that the family did not need a bigger house, they could not afford to carry 41 Arnold Avenue and they certainly could not have been able to afford the $300,000 renovation, some of which was necessary to restructure it into a family home.
[90] Natalia made other allegations that the property had been gifted, but none survived scrutiny. For example, she testified that she had no conversations whatsoever with Mikhail about whether he intended to pay the carrying costs for 41 Arnold Avenue or for how long. She testified that she told her parents in 2010 that Mikhail had offered to "gift" the couple a house, but her mother testified that the subject did not come up until 2012. She did not disagree with Dmitri’s evidence they were promised by Mikhail that should he sell 41 Arnold Avenue, he would provide them with alternative housing, or funds from the sale from which they could purchase their own home.
[91] The maternal grandmother, Dr. Stovichek, was presented as a witness who would corroborative Mikhail’s intention to gift the home. Despite being well intentioned, there were several problems with her testimony.
[92] Dr. Stovichek testified that on certain occasions when she was babysitting her grandson, each of Natalia and Dmitri had told her that Mikhail was going to buy them a house as a gift. Dmitri unequivocally denies that he ever had that conversation with his mother-in-law. He denies that they would have even been there if she was babysitting. Dr. Stovichek also testified that Mikhail told her directly that he was going to buy a house for the kids. Mikhail denies that he ever spent time alone with Dr. Stovichek, and his denial is consistent with the whole of the evidence.
[93] At one point Natalia suggested in her testimony that 41 Arnold Avenue was placed in her and Dmitri’s name because she and Dmitri "needed a home of our own" around the time of the birth of their second child. Natalia testified that the phrase "we needed a home of our own" meant that she and Dmitri needed to feel that the house in which they were living was their house. Natalia conceded however, that the only difference between the couple's situation at Thornhill Woods and 41 Arnold Avenue was that she and Dmitri had legal title to 41 Arnold Avenue. In all other respects the situations were identical. Mikhail paid for both houses and all the carrying costs. She also concedes that she did not know that Mikhail intended to convey legal title to her and Dmitri until "after we purchased the property." The uncontested timing of events better accords with Mikhail's testimony that his decision to convey legal title to Dmitri and Natalia arose at the "last moment."
[94] Ultimately, Natalia could offer no explanation as to why she was not involved with the realtor if the plan was for Mikhail to purchase a home for them as a gift, or why he would purchase a home that was beyond their means, selected solely for its potential as an investment, or why she and Dmitri would not have paid at least some of the carrying costs if the home was intended to be theirs.
[95] The second broad theme of Natalia’s assertions is that Mikhail intended to bequeath 41 Arnold Avenue to her and Dmitri. In his Answer, Mikhail admits that he placed 41 Arnold Avenue in the names of Dmitri and Natalia to prevent any probate issues upon his death.
[96] I find that what Mikhail gifted to Natalia was a conditional right of survivorship. While he intended his son and daughter-in-law to be title holders, it was conditional on the investment increasing in value, (if it did not, he would sell it) not finding a superior investment, and the house being in good hands.
[97] In September of 2012 Mikhail trusted Natalia and Dmitri, and believed that there was no impediment to his dealing with the property as he saw fit. He knew that if he died having not dealt with the property that title would rest with them. But while he was alive, if he decided that it was the right time to sell it, “there would be no problem.[^24]”
[98] When Natalia asserted in the divorce proceedings that half the property was hers, there was a problem. Mikhail’s trust was broken and he called for the return of his property.
[99] I find that the evidence as a whole supports a finding that at all times, Natalia, Dmitri and Mikhail conducted themselves in a manner that supports a finding that Mikhail is the owner of 41 Arnold Avenue.
[100] I find that Natalia has failed to rebut the presumption of resulting trust.
Declaration
[101] In Andrade v. Andrade,[^25] the Ontario Court of Appeal ordered that the mother's estate was the beneficial owner of the property in question and declared that the legal title holder held the property as trustee for the mother's estate. The court ordered the legal title holder to "forthwith transfer all of her right, title of interest in the property" to the estate as beneficial title owner.[^26]
[102] Order to go declaring that Mikhail is the sole beneficial owner of 41 Arnold Avenue, Thornhill, Ontario and that Dmitri and Natalia hold registered title to 41 Arnold Avenue in trust for Mikhail. Further Order to issue that Dmitri and Natalia forthwith transfer all of their right, title and interest in 41 Arnold Avenue to Mikhail.
Trial on the Balance of Issues
[103] The quantum and duration of spousal support, and the balance of issues were originally contemplated to be heard during the November 2017 trial sittings. Because this trial did not conclude until September 22, 2017, with reasons now released; proceeding on the November sittings may not be realistic.
[104] Order to go as follows: counsels for Dmitri and Natalia may schedule through the trial coordinator a further attendance before the case management judge, or with his permission, a telephone conference to explore opportunities to resolve the balance of issues, including costs, and alternatively, to schedule the second half of this trial.
Costs
[105] On the claim for a resulting trust, the respondent Mikhail Malkov has been the successful party. His claim for costs are to be served and filed in the Continuing Record on or before December 1, 2017, response by the respondent Natalia Stovichek-Malkov and the applicant Dmitri Malkov by December 22, 2017. Reply, if necessary by January 5, 2018.
[106] On the balance of claims, success must first be determined. Costs submissions as to the issues between Dmitri Malkov and Natalia Stovichek-Malkov are to be served and filed by the applicant Dmitri by December 1, 2017, response by the respondent Natalia by December 22, 2017. The applicant’s reply is due by January 5, 2018.
Justice H. McGee
Date: November 15, 2017
[^1]: Mikhail testified that “maybe” Natalia accompanied him once when he was looking at properties. Natalia’s recollection was even less clear. In any event, she had no direct or instructing relationship with the realtor. [^2]: Berta v. Berta 2015 ONCA 91 [^3]: For example, De Zen v. De Zen, 2001 CanLII 28139 (ON SC), 20 R.F.L. (5th) 326, S.C.J. and later, Lo v. Mang, [2011] O.J. No. 390 [^4]: 2006 CanLII 13554 (ON SC), 28 R.F.L. (6th) 433 [^5]: In that case, gifts were not found to be income. [^6]: 2007 ONCA 304 [^7]: 2011 CarswellOnt 10343 Ont. S.C.J. [^8]: 2017 CarswellNB 254 (N.B.C.A.) [^9]: 2015 ONCA 578, 63 R.F.L. (7th) 1 (ONCA) [^10]: I also considered whether the provision of housing over the years could be considered a non-taxable benefit for managing certain properties while Mikhail travels outside the country. No evidence was led on this point, but if so, it would be a form of non-taxable benefit that would be added to income per section 19(1) of the Guidelines. [^11]: Donovan W.M. Waters, Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012) 394 to 401. [^12]: 2007 SCC 17 [^13]: Sydney N. Lederman, Alan W. Bryant & Michelle K. Fuerst, The Law of Evidence in Canada, 4th ed. (Markham, Ontario: LexisNexis Canada, 2014), at p. 163. [^14]: Lederman, supra note 13, at p. 163. [^15]: Ibid, at para. 25. [^16]: Donovan W.M. Waters, Q.C., Mark R. Gillen & Lionel D. Smith, eds., Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Thomson Reuters Canada Limited, 2012), at p. 421. [^17]: Nishi v. Rascal Trucking Ltd 2013 SCC 33 [^18]: Chechui v. Nieman 2017 ONCA 669 [^19]: 2016 ONCA 368 [^20]: 2016 ONCA 82, 395 D.L.R. (4th) 562 [^21]: 2017 ONCA 558 [^22]: The insurance on 41 Arnold Avenue was in the name of Dmitri and Natalia – but it was paid by Mikhail. [^23]: This was Dmitri’s evidence, not contested by Natalia. [^24]: The words that Mikhail testified were stated to him by Natalia, see paragraph 25. [^25]: 2016 ONCA 368 [^26]: Andrade, supra paras. 5 and 108```