NEWMARKET COURT FILE NO.: FC-17-53900-00
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Eugenia Kofman
Applicant
– and –
Vince Melfi
Respondent
Natalia Denchik, for the Applicant
Vince Melfi, Self-Represented
HEARD: May 23 and 24, 2018
REASONS FOR DECISION
DiTOMASO J.
INTRODUCTION
1The Applicant, Eugenia Kofman (Ms. Kofman), proceeded with this matter by way of Uncontested Trial. The Respondent, Vince Melfi (Mr. Melfi), was noted in default, never having filed an Answer nor any Financial Statement or financial documentation whatsoever.
2Ms. Kofman seeks various relief, primarily involving the matrimonial home, located at 232 Conti Crescent, Vaughan, Ontario. She seeks a declaration that Mr. Melfi holds a 50% interest in that property in trust for her and/or, in the alternative, Mr. Melfi holds a 50% interest in any property traceable to any proceeds of the property in trust for her, registered in the name of Vince Melfi, pursuant to the Doctrines of Resulting Trust, Constructive Trust or as a proprietary award for unjust enrichment.
3In the alternative, or in addition to this relief, she seeks a court order regarding the unequal division of net family property based on Mr. Melfi’s alleged reckless depletion of net family property. She seeks payment of a monetary amount from the sale of the matrimonial home.
4In the further alternative, or in addition thereto, she seeks a court order to lift or remove liens registered against the matrimonial home, being four liens registered against the property by the Canada Revenue Agency (CRA). Ms. Kofman also seeks an order that Mr. Melfi pay her a monetary sum based on quantum meruit and costs. Further, she seeks a divorce order.
BACKGROUND
The Relationship Between the Parties
5Ms. Kofman and Mr. Melfi began their relationship in 1999 and have been cohabiting since 2005. They married on April 10, 2010. There is no marriage contract or cohabitation agreement between the parties.
6Since the relationship began, Ms. Kofman assisted Mr. Melfi with his business, known as Marquis Products Inc. Mr. Melfi owned and controlled this company which manufactured refrigeration units, walk-in coolers and freezers.
7Ms. Kofman never had access to any bank accounts belonging to Mr. Melfi or Mr. Melfi’s business.
8Ms. Kofman and Mr. Melfi never had a joint bank account.
9Ms. Kofman never had knowledge of Mr. Melfi’s personal or business finances until the commencement of these proceedings.
Matrimonial Residence
10Mr. Melfi is the sole registered owner of the property municipally known as 232 Conti Crescent, Vaughan, Ontario, which has been referred to as the matrimonial home.
11He purchased and acquired the matrimonial home on or about December 7, 1988 for approximately $2 as a result of equalization of net family property from his previous marriage.
12Ms. Kofman and Mr. Melfi moved into the matrimonial home in June of 2005. Although there is no valuation produced to evidence the value of the home at that time, Ms. Kofman estimates the value of the matrimonial home then to be in the amount of $450,000. However, she contends that the actual market value of the matrimonial home would have been around $300,000 due to its extreme state of disrepair. In accordance with her Financial Statement, sworn April 26, 2018 (Tab 5 of the Trial Record), the matrimonial home is presently valued in the amount of $1,678,000 and it is listed for sale for that amount.
13As of the date of separation, namely June 1, 2016, the parties have obtained an appraisal report in respect of the matrimonial home. That report was dated February 27, 2017 and the home was valued in the amount of $1,300,000.
14At the time that Ms. Kofman and Mr. Melfi moved into the matrimonial home, it was in a state of extreme disrepair. It was in an unliveable condition. The roof had many big holes. The roof over the master bedroom had completely collapsed. Drywall throughout the home had fallen apart because of water damage. The floors were destroyed by water damage. The matrimonial home was infested with mice, squirrels and rodents. The driveway was destroyed by tree roots and was unusable. The backyard of the home was also unusable and overgrown because of neglect. A number of overgrown trees were removed. The work and cost involved to rehabilitate the matrimonial home both inside and outside was significant.
15Ms. Kofman and Mr. Melfi agreed that she would help him to repair the house. There was a verbal agreement between them that she would contribute all of the money that she earned while working at his business to the matrimonial home and its renovation. Typically, he would pay for the materials and she would do all the work that she could, both inside and outside the home to the extent that the work did not require the services of specialized tradesmen. If tradesmen were required, she would arrange for them to perform the necessary work.
16According to Ms. Kofman, at the outset, it took three or four months in 2005 to make the house liveable. Over the next three years (from the summer of 2005 to 2008) she continued to renovate every room (all 8 rooms) of the home.
17Her contribution towards the renovation work of the matrimonial home over the years consisted of assisting Mr. Melfi in purchasing materials and tools for the renovations. She selected and ordered materials. She laid gravel and placed stones outside and also performed many gardening and landscaping duties which improved the home.
18Inside the home, she learned how to operate a sanding machine and sanded all the doors in the house. As well, she sanded all forty-five windows and other wood parts in the entire home. In addition, she prepared all the walls for painting and painted all of the rooms in the house.
19In addition to renovation work, which included finishing the windows, installing trim, sanding, painting the inside of window frames, she did all of the cleaning, cooking, washing and care of two family dogs. She repainted the matrimonial home every three to four years, keeping the home looking fresh. She planted and maintained fruit trees, berry bushes and flowers. She maintained the matrimonial home year round, keeping up the grounds in the summer and shovelling snow in the winter.
20She invested funds and countless hours in maintaining and keeping up the matrimonial home and continues to do so at present while she resides in the home.
21In addition to her contribution in respect of the matrimonial home, Ms. Kofman asserts that she helped Mr. Melfi with his business. Soon after they began cohabiting, she cleaned the offices of Mr. Melfi’s business. She also performed basic office work, such as clerical and receptionist duties, including, answering the phone, filing and corresponding with clients.
22Ms. Kofman has been residing at the matrimonial home since separation and currently still resides there.
23Ms. Kofman alleges that there was a $100,000 mortgage with TD Bank on the matrimonial home. She contributed all of her earned income into renovations and paying down the mortgage.
24She claims that Mr. Melfi acknowledged owing her a debt of $181,740.
25The CRA registered four liens against the title of the matrimonial home totalling $1,095,328.18 as at the date of trial. Ms. Kofman alleges that these liens related to Mr. Melfi, both personally and to his business. She alleges that the liens have nothing to do with her. She claims that the liens ought to be lifted in order to permit her to sell the matrimonial home.
26Further, Ms. Kofman claims that on May 13, 2009, Mr. Melfi registered a line of credit in the amount of $221,500 on the title of the matrimonial home through the TD Bank without her knowledge or consent. He had never advised TD Bank about his marital status. She did not have access to the line of credit. By Judgment dated January 13, 2017, Justice Gunsolus ordered Mr. Melfi to pay $282,274.21 plus costs $8,629.02 to the TD Bank.
27By Order dated July 4, 2007, Justice Bird granted an Order for a Certificate of Pending Litigation registered against the matrimonial home in favour of Ms. Kofman.
28By Order dated August 4, 2017, Justice Glass granted an Order for a Writ of Possession in favour of the TD Bank with costs of $4.300 against Mr. Melfi.
29On September 25, 2017, Ms. Kofman was evicted from the matrimonial home.
30By endorsement of Justice Graham dated November 29, 2017, Ms. Kofman was permitted to proceed with this matter by way of uncontested trial (see Rule 23C of the Rules of Family Court).
31By Order of Justice Jarvis, dated January 3, 2018, Ms. Kofman was authorized to enter the matrimonial home for the purpose of listing and selling it. Justice Jarvis ordered that all proceeds of sale, after payment of the Judgment in favour of the TD Bank, and its costs since being in possession of this property, including legal costs and fees associated with the sale be paid from the gross proceeds of sale. Ms. Kofman was entitled, after payment of these items, to be reimbursed from the gross proceeds, an amount not to exceed $10,000. The net proceeds of sale were to be held in trust by the solicitor handling the sale transaction or paid into court.
32Mr. Melfi was noted in default.
33Ms. Kofman claims that she has incurred further expense to put the home in suitable condition for listing and sale.
34Also, at issue is whether there exists a deemed trust claim in favour of CRA in the amount of 3,770.67.
EVIDENCE
35This uncontested trial proceeded over a day and a half. The first day involved hearing the evidence of Ms. Kofman, Mr. Melfi, Ms. Kofman’s friend, Elena Paltseva, and Ms. Kofman’s son, Genadi Poronik.
Eugenia Kofman (also known as Evgenia Kofman)
36Ms. Kofman is 53 years of age and she has lived with Mr. Melfi since 2000. They moved to 232 Conti Crescent in June of 2005. She described the dilapidated condition of the home. There were holes in the roof. The walls and floors were water damaged. There were animals and rodents living in the house. She and Mr. Melfi agreed verbally that they would renovate the house together. She felt that this was their matrimonial home. They married on April 10, 2010. There is no marriage contract or cohabitation agreement between the parties.
37Marked as Exhibit 1 were 17 photographs taken by Ms. Kofman of the home. These photos depicted the condition of the home before and after repairs, both inside and outside. She testified as to the work that she did to restore the home. At first, she spent 6 months taking on all manner of renovation projects involving this 4 bedroom house. She undertook a number of jobs (which I have set out in the INTRODUCTION) in order to make the home liveable. She spent many hours doing renovation work. When she could not do it herself, tradespeople were hired and overseen by her to perform specific repairs.
38Ms. Kofman maintained the matrimonial home inside and outside all year round and she continues to maintain the matrimonial home while she resides there.
39In addition to work that she did in 2005, she has continued to paint the house every 3 or 4 years. The house has been painted at least 3 times since 2005. Further, she also did all of the cleaning, cooking, washing and looking after the two dogs owned by herself and Mr. Melfi.
40Not only did she contribute to the matrimonial home, but also she devoted time and physical labour to assist Mr. Melfi with his business, Marquis Products Inc.
41Soon after they began cohabiting, she cleaned the offices of Mr. Melfi’s business. She also performed basic office work, such as clerical and receptionist duties, including answering the phone, filing and corresponding with clients.
42There is no doubt that Ms. Kofman assisted Mr. Melfi not only in the renovation and operation of the matrimonial home, but also performing various tasks which assisted Mr. Melfi with his business.
43Ms. Kofman also testified that she approached her friend, Elena Paltseva, because Mr. Melfi needed money to operate his business. Marked as Exhibit 2 is a Promissory Note between Elena Paltseva and Vincenzo Melfi and V. Melfi Holdings Inc., dated November 24, 2016. Ms. Paltseva loaned them the sum of $50,000 (Exhibit 2). By way of a second Promissory Note, dated February 7, 2017, Ms. Paltseva also loaned them the sum of $35,000.
44Also, Ms. Paltseva loaned Ms. Kofman $15,000, as evidenced by Promissory Note, dated May 29, 2017 (Exhibit 4).
45Ms. Kofman testified that Victoria Efanova loaned her $30,000 in cash by way of small sums, but there was no evidence to support such payments.
46Ms. Kofman testified she never was advised by Mr. Melfi about the financial side of his business. Mr. Melfi arranging financing by way of a line of credit was a complete surprise to her. She testified that Mr. Melfi never discussed his financial difficulties with her.
47It came as a surprise to her when Justice Gunsolus awarded judgment in favour of the TD Bank against Mr. Melfi. Mr. Melfi never discussed this matter with her and she found out about the judgment by accident. Further, Mr. Melfi did not tell Ms. Kofman about the Order of Justice Glass, granting a Writ of Possession involving the matrimonial home.
48Ms. Kofman testified that on September 23, 2017, pursuant to the notice demanding possession, she was evicted from the matrimonial home, which also came as a surprise.
49After the Order of Justice Jarvis, she returned to the matrimonial home where she was permitted to list and sell the property.
50From January to April 2018, she expended the sum of $15,327.93. The receipts in respect of these expenses can be found in the Book of Exhibits, Part C, at tab 25. There are no receipts or any statements which set out the numerous hours spent by her to put the house in sellable condition.
51Ms. Kofman testified that Mr. Melfi did nothing to prepare the house for listing or sale. He provided no financial assistance. She borrowed money from a friend (Victoria Efanova) to pay for the storage of Mr. Melfi’s possessions when he moved out of the matrimonial home. Unfortunately, there was no evidence in respect of monies loaned or paid for such storage.
52Ms. Kofman testified that Mr. Melfi never told her that he had problems with the CRA.
Vincent Melfi (also known as Vincenzo Melfi)
53Mr. Melfi testified at trial. He has known Ms. Kofman for approximately 18 years and they have lived together for approximately 17 years.
54He did testify that at one point he had discussions about his financial issues with Ms. Kofman because the TD Bank took the home back.
55Mr. Melfi described Ms. Kofman’s help during their cohabitation and marriage. He testified that they worked together. He did agree that she helped in the business and also helped to renovate the house.
56He described how he had increasing problems with his business from 2007 onwards.
57While he could not put a figure the services provided by Ms. Kofman, he did admit that for the kind of work that Ms. Kofman did at the business, he normally would have had to hire someone on an hourly basis. He came to an arbitrary figure of between $35,000 and $40,000 or even more, as an estimate to retain someone to assist him in his business as a secretary or assistant.
58He testified that Ms. Kofman did all of the housekeeping work – all of the cleaning, cooking and looking after the dogs.
59He was served with a Request to Admit (see Trial Record at tab 7). He replied with his Response to Request to Admit (see Trial Record at tab 8), where he agreed with all of the facts listed in the Request to Admit. He testified that all of the facts listed in the Request to Admit were true and correct. He admitted that he owed Ms. Kofman around $180,000 for loans and approximately $30,000 which he borrowed by way of utilizing Ms. Kofman’s credit cards. He testified that the credit cards were used 99% for the business. He agreed that Ms. Kofman incurred $150,000 by way of loans. He testified about how his business declined despite his efforts to keep his business alive. He has filed no financial information in respect of this dispute. He has no bank account. He holds a 50% interest in a condominium property in Toronto. This interest was to have been transferred to his daughter, who is now 30 years of age. He never got around to doing so. He also owns a property in Longueil, Quebec.
60Insofar as the TD Bank line of credit was concerned, he needed money and so he borrowed by way of line of credit. He did not tell Ms. Kofman about the line of credit secured against the matrimonial home. He borrowed money and testified that he would pay it back. He did not think that it was like a mortgage.
61Insofar as Ms. Kofman incurring expenses from January to April 2018 to put the matrimonial home in proper condition for sale, he testified that he did not provide any financial help.
Elena Paltseva
62Ms. Paltseva is a friend of Ms. Kofman. She testified about loaning money to Mr. Melfi to assist him in his business. She identified the two bank drafts and Promissory Notes marked as Exhibits 2 ($50,000) and 3 ($35,000). These notes were not guaranteed by Ms. Kofman. Mr. Melfi and/or his business were responsible for payment.
63However, she did loan $15,000 in cash to Ms. Kofman (Exhibit 4) in May of 2017 to help her friend.
Genadi Poronik
64Mr. Poronik is the son of Ms. Kofman. He lived for a time at 232 Conti Crescent in 2005. He described the terrible condition of the house when he moved in. His evidence substantiated the evidence of his mother. In this regard, the place looked like it had not been lived in for years.
65He described the work that she did to put the house in a liveable condition. He described the work that she did both inside and outside the house. He testified that she did most of the work with Mr. Poronik helping a little bit. He testified that Mr. Melfi did not help in the renovation of the house. Rather, he worked at the business. In making the home liveable, Mr. Melfi was not involved.
66Not only did his mother perform work in 2005, she also kept the home in good condition by repainting it every few years.
67He testified that his mother shared some information with him about the $180,000 extended to Mr. Melfi in order to run his business. Mr. Poronik knew that some loans had been made to Mr. Melfi.
68He testified about how his mother was evicted on September 25, 2017. He also testified as to his mother moving back into the home in January 2018 to prepare the place for sale. Once again, it was cluttered and needed renovation. He testified that over a period of 3 to 4 months, he helped his mother de-clutter the place and also do some work in order to prepare the home for sale. Mr. Melfi only assisted to de-clutter his own possessions. He had nothing to do with the renovations. Mr. Poronik testified that between January 2018 and April 2018, Mr. Melfi never helped to prepare the place for sale.
ISSUES
69A number of issues were raised at trial and through the submissions by counsel for Ms. Kofman as follows:
(a) Does Ms. Kofman have a claim in equity to a trust interest in the matrimonial home?
(b) Is Ms. Kofman entitled to payment from Mr. Melfi of the credit card debt and loans from Elena Paltseva?
(c) Is Ms. Kofman entitled to payment by Mr. Melfi of the sum of $15,327.93 for the cost of repairs to the matrimonial home from January to April 2018?
(d) Who is responsible to pay the Canada Revenue Agency liens (and how are they to be paid)?
(e) Whether the Canada Revenue Agency is entitled to be paid the Deemed Trust claim in the amount of $3,770.67?
(a) Does Ms. Kofman have a claim in equity to a trust interest in the matrimonial home?
70At the heart of the issue is ownership of the matrimonial home and what remedy is available to Ms. Kofman. As a married couple, their separation is governed by the Family Law Act (FLA). Under the statute, Ms. Kofman is entitled to the equalization of property. This includes the value of the matrimonial home. The FLA does not preclude the operation of claims of unjust enrichment alongside equalization payments. However, in order to assert a trust interest in the home by way of unjust enrichment, the Court must determine first whether Mr. Melfi was unjustly enriched, and second, whether a monetary award would suffice to remedy the injustice.
71In Cerenzia v. Cerenzia, 2015 ONSC 7305, McDermot, J. states at para. 32:
32The fact that parties in this case are married and entitled to equalization of property does not preclude a finding of unjust enrichment or a constructive trust remedy: see Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70. In Martin, however, the Court of Appeal made it clear that the equalization scheme under the FLA generally addresses issues of unjust enrichment arising from a marriage relationship, and that this was, in fact, the purpose of the equalization scheme. Generally, an equalization payment under the FLA suffices to address equitable issues. Only in extraordinary circumstances where such an award would be unconscionable should a court go beyond that remedy to provide for a proprietary remedy: Martin at para. 66 and Straub v. Straub, 2012 ONSC 3819, 32 R.F.L. (7th) 415, aff’d 2013 ONCA 721, 2013 CarswellOnt 16102 at para. 107.
72In Martin v. Sansome, 2014 ONCA 14, Hoy A.C.J.O. provided the framework for determining these types of questions. At paragraph 48, she stated the following:
[W]here unjust enrichment is established, the first remedy to consider is always a monetary award. A court will impress a proprietary remedy – normally a constructive trust on property – only if the plaintiff satisfies it that a monetary award would be insufficient in the circumstances and that there is a sufficiently substantial and direct link between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property. See Cerenzia, supra, at para. 33; Peter v. Beblow, 1993 CanLII 126 (SCC), [1993] 1 S.C.R. 980.
73In this case, the matrimonial home is registered in the name of Mr. Melfi. According to Martin, I must engage in a two-part analysis of Ms. Kofman’s claim to an interest the home:
(a) I must first determine whether the evidence supports a claim for unjust enrichment in favour of Ms. Kofman. This may be based upon a joint family venture within the meaning of Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, or pursuant to the doctrine of constructive trust.
(b) Once this finding is made, I must determine whether a monetary award would be sufficient to remedy the claim of unjust enrichment. In doing so, I must quantify the equalization payment owing to the claimant spouse (Ms. Kofman), taking into account her right to an unequal division of net family property within the meaning of s. 5(6) of the FLA (Martin at para. 66). Only if I find that a monetary award under the applicable legislation does not address Ms. Kofman’s claim for unjust enrichment should I go beyond her right to an equalization payment, and declare an actual ownership interest in the matrimonial home. See Cerenzia, supra, at para. 34.
(i) Was Mr. Melfi Unjustly Enriched Concerning Title to the Matrimonial Home?
74The principles of unjust enrichment were set out and determined in Kerr. At para. 32 of that case, Cromwell J. stated, “Canadian law ... permits recovery whenever the plaintiff can establish three elements: an enrichment of or benefit to the defendant, a corresponding deprivation of the plaintiff, and the absence of a juristic reason for the enrichment”. At the heart of the matter is the fact that the court is intent upon “restoring a benefit which justice does not permit one to retain”. Cerenzia, supra, at para. 35.
75In Cerenzia at paragraph 36, McDermot J. made the following observation regarding unjust enrichment:
36A common situation of unjust enrichment in family law cases occurs where one spouse leaves the partnership with a markedly greater share of the value of the assets generated by way of a joint family venture. Such an unjust enrichment is defined by Cromwell J. in Kerr as occurring where the “contributions of both parties over time have resulted in an accumulation of wealth … when one party retains a disproportionate share of the assets which are the product of their joint efforts” (para. 60).
76There are a number of hallmarks of a joint family venture. Cromwell J. suggested a joint family venture may be found where there can be found:
a) Mutual effort;
b) Economic Integration;
c) Actual Intent;
d) Priority of the family
77In this case, the matrimonial home is the only asset in issue. It is held solely by Mr. Melfi and it was acquired by him on December 7, 1988 for approximately $2 as a result of equalization of net family property from his previous marriage.
78Ms. Kofman and Mr. Melfi moved into the matrimonial home in June of 2005. When they did so, the home was in an extreme state of disrepair. There is no doubt that the parties worked together towards making the matrimonial home liveable. Mr. Melfi contributed some monies in this regard. However, there is also no question from the evidence that Ms. Kofman made direct and indirect contributions to the improvement of the home. Since 2005, it was Ms. Kofman that would do all of the work that she could, both inside and outside the home, to the extent that work did not require the services of specialized tradespeople. Ms. Kofman’s evidence was that there was a verbal agreement between herself and Mr. Melfi that Ms. Kofman would contribute all of the money that she earned while working at Mr. Melfi’s business towards the matrimonial home and its renovation.
79I accept Ms. Kofman’s evidence that for a number of months in 2005, she worked to make the house liveable. I have set out in the BACKGROUND section of these reasons the work she contributed inside and outside of the matrimonial home. Outside the home she did major landscaping and gardening. Inside the home, she did considerable painting and finishing work. In addition, she did all the cleaning, cooking, washing and care of two family dogs. Her contribution towards the matrimonial home did not end there. She repainted the matrimonial home every three to four years, keeping the home looking fresh. In addition, she maintained the matrimonial home year round, keeping up the grounds in the summer and shovelling snow in the winter.
80I find that she invested funds and countless hours in maintaining and keeping up the matrimonial home and she continues to do so at present while she is residing in the home. Ms. Kofman has been residing in the matrimonial home since the date of separation, namely June 1, 2016. She was not in residence from September 25, 2017 to January 3, 2018, during which time she was evicted due to a Writ of Possession obtained by the TD Bank against Mr. Melfi. She returned to reside in the home pursuant to the Order of Justice Jarvis, dated January 3, 2018.
81From January 2018 to April 2018, Ms. Kofman spent approximately $15,000 and provided hours of her labour to put the home in a suitable condition for listing and sale.
82I accept her evidence, the evidence of her son and Mr. Melfi that he did not contribute anything towards putting the home in a suitable condition for listing and sale.
83I also accept the evidence that Ms. Kofman’s contribution towards both the renovation and maintenance of the matrimonial home, the cooking, cleaning, washing and looking after the two family pets, fell entirely upon her shoulders. Mr. Melfi’s efforts were directed towards the operation of his business, which had been experiencing much difficulty, decline and eventual demise after 2008.
84I find that Ms. Kofman not only contributed toward the renovation and running of the matrimonial home, she also assisted Mr. Melfi with his business. Soon after they began cohabiting, she cleaned the offices of Mr. Melfi’s business. She also performed basic office functions, such as clerical and receptionist duties, including answering the phone, filing and corresponding with clients. She did this to assist Mr. Melfi by way of mutual effort and their actual intention to work together at home and with the business.
85I find, on all of the evidence, that there was an enrichment of or benefit to Mr. Melfi. He benefitted from all of Ms. Kofman’s contributions with regard to the matrimonial home and with regard to his business. There is no doubt that he would have had to hire persons and pay them to perform the work that Ms. Kofman significantly performed at home and at the business. He did not have to hire any such person or persons or expend any such monies in this regard. Rather, the evidence establishes that he benefitted from Ms. Kofman’s labours where the home was not only put in liveable condition, but appreciated in value. I also find that there was a corresponding deprivation to Ms. Kofman. I find she channelled all of her energies and whatever funds she had to improving the matrimonial home and, in addition, assisting Mr. Melfi with his business. All of her energies were focused and committed toward the family and their intention to improve their situation as a married couple and working towards a common goal. I should note that Ms. Kofman and Mr. Melfi married on April 10, 2010. In all, they had a sixteen year relationship, during which time Ms. Kofman was totally devoted to making contributions towards the matrimonial home and Mr. Melfi’s business.
86When they moved into the matrimonial home in 2005, the market value of the home would have been in the range of $300,000, due to its extreme state of disrepair. Over the course of time, the home has appreciated in value, not entirely because of the work that Ms. Kofman performed. Nevertheless, the home is now listed for sale in the amount of $1,678,000. She claims to have a 50% interest in this property, held in trust by Mr. Melfi, who is the registered owner. She claims that her 50% interest in the matrimonial home is valued in the amount of $839,000 (Financial Statement for property and support claims of Ms. Kofman, sworn April 26, 2018 – Trial Record at Tab 5).
87I also find that there exists the absence of a juristic reason for the enrichment.
88In this case, there is compelling evidence that the contributions by Ms. Kofman, and to a much lesser extent by Mr. Melfi, over time have resulted in an accumulation of wealth where Mr. Melfi retains a disproportionate share of the asset which was the product of their joint efforts.
89Ultimately, I find that Mr. Melfi was unjustly enriched by retaining sole title to the matrimonial home.
90However, a finding of unjust enrichment in favour of Ms. Kofman does not end the matter. It does not give rise to an automatic constructive trust in her favour. I must go on to determine whether a monetary award would serve the interests of justice or whether extraordinary circumstances exists that warrant granting a proprietary award in favour of Ms. Kofman.
(ii) Is a Monetary Award Adequate in this Case to Address the Unjust Enrichment in Mr. Melfi’s Favour?
91The short answer to this question is no, for the following reasons.
92In dealing with this issue, I must first determine Ms. Kofman’s equalization entitlement under s. 5 of the FLA.
93Mr. Melfi did not file an Answer in this case. Neither did he file a Financial Statement or any documentation that would assist in determining the question of equalization of net family property. While Ms. Kofman filed a Financial Statement, apart from disclosing some debt, the only asset in play here is the matrimonial home. While there is some evidence that Mr. Melfi holds a 50% interest in trust for his daughter, regarding a condominium property in Toronto, he testified that at all times, that interest belonged to his daughter. He testified that he just did not get around to transferring his interest to her for title purposes. I do not know the value of that property or the value of his interest in it. There is some evidence that Mr. Melfi also owns a property in Quebec. I do not have sufficient information in respect of that property either to come to any determination of its value.
94What is clear is that Mr. Melfi’s business has failed and according to his evidence, he does not have a bank account anywhere. Title to the matrimonial home is heavily encumbered with a number of CRA liens and a Judgment and mortgage in favour of the TD Bank. Altogether, those encumbrances come close to offsetting the value of the matrimonial home.
95I am of the view that a monetary award in this case would not suffice to remedy the injustice where Mr. Melfi has been found to be unjustly enriched. An equalization payment under the FLA would not suffice to address the equitable issues. In this case, a monetary award would be unconscionable. In this case, a monetary award would be a totally empty gesture where, I find the equalization of net family property essentially amounts to zero.
96Having found there was unjust enrichment arising from the disproportionate retention of the sole asset (the matrimonial home) by Mr. Melfi upon the breakdown of the marriage, I further come to the finding that a monetary award would not be adequate in this case to address the unjust enrichment in Mr. Melfi’s favour.
97I have considered the issue of an unequal division of net family property under s. 5(6) of the FLA. I find that Mr. Melfi had failed to disclose his financial situation while the parties lived together. He and his business incurred a disproportionately larger amount of debt or other liability than did Ms. Kofman. I find that in all the circumstances, a monetary award is inappropriate. To deprive Ms. Kofman with an interest in the matrimonial home would not be fair, considering the totality of her contributions to the home and to Mr. Melfi’s business. I find that a proprietary award is appropriate in this matter. I find that any claims made by Ms. Kofman by way of unjust enrichment would not be satisfied by the equalization provisions of the statute.
98Rather, I find that Mr. Melfi holds a 50% in the matrimonial home in trust for Ms. Kofman, pursuant to the finding of a constructive trust in her favour and as a proprietary award for unjust enrichment. In this case, I have found the unconscionable circumstances to support this conclusion.
(b) Is Ms. Kofman Entitled to Payment from Mr. Melfi of the Credit Card Debt and Loans from Elena Paltseva?
99Ms. Kofman claimed that Mr. Melfi owes her the sum of $181,740. This amount was acknowledged by Mr. Melfi.
100However, the evidence does not support that the debt in this amount is owing by Mr. Melfi to Ms. Kofman. The evidence at trial does not support the amount being claimed.
101Ms. Kofman testified that her friend, Ms. Paltseva, loaned Mr. Melfi and his company funds totalling $100,000. The only evidence to support loans from Ms. Paltseva to Mr. Melfi and V. Melfi Holdings Inc., was a loan of $50,000 (Exhibit 2) and $35,000 (Exhibit 3). These debts are between Mr. Melfi and his company, V. Melfi Holdings Inc., and Ms. Paltseva. The indebtedness is between these parties and not between Ms. Paltseva and Ms. Kofman. While it is true that Ms. Kofman introduced her friend to Mr. Melfi and that these loans were made to assist Mr. Melfi and his business, the debt totalling $85,000 has nothing to do with the state of indebtedness as between Ms. Kofman and Mr. Melfi.
102Ms. Kofman also testified that she borrowed cash from her friend, Victoria Efanova, in the sum of $30,000. There is no evidence to support this loan. There is no evidence to support that it had anything to do with Mr. Melfi.
103There was evidence that Ms. Paltseva loaned Ms. Kofman the sum of $15,000 (Exhibit 4). While Ms. Kofman testified that the loans of $50,000 and $35,000 were loaned to Mr. Melfi and his company for the purposes of reopening his business, she testified that the loan of $15,000 was for herself.
104Ms. Paltseva, in her evidence, confirmed that Ms. Kofman was not “formally” a guarantor for the loans made to Mr. Melfi and his company. She testified that he was responsible for these loans and that Ms. Paltseva was only asked by Ms. Kofman for her assistance.
105Ms. Kofman asked Ms. Paltseva for help in May of 2017. This resulted in the loan of $15,000 in cash to Ms. Kofman by Ms. Paltseva. Ms. Kofman did not ask for any more money from her friend.
106I find that the loan of $15,000 cash from Ms. Paltseva to Ms. Kofman evidenced by Exhibit 4 was a personal borrowing between Ms. Kofman and her friend. I find there is no evidence to support any connection regarding this loan to any of the debt claimed owing to Ms. Kofman by Mr. Melfi. It is Ms. Kofman who is responsible to repay this loan to Ms. Paltseva. As with the other two loans, for $50,000 and $35,000, it is the individual borrower, in this case, Ms. Kofman and not Mr. Melfi and his company who is responsible to repay the sum of $15,000 to her friend. I find that the loans made by Elena Paltseva to Mr. Melfi, his company and Ms. Kofman are the responsibility of the individual borrowers for repayment. Mr. Melfi is not responsible to repay any of these loans to Ms. Kofman.
107In respect of the credit card debt, I come to a different conclusion.
108It was Mr. Melfi’s evidence that he had exhausted his own means to borrow on credit cards. As a result, he borrowed money on Ms. Kofman’s credit cards. Ms. Kofman also confirmed this evidence, which I accept.
109I had asked counsel for Ms. Kofman to produce evidence confirming the amount owing for credit card debt. Counsel produced three statements which I have marked as lettered Exhibits A, B and C. They can be found with the other exhibits. They were provided to me by Ms. Kofman’s counsel during closing submissions.
110Exhibit A is a statement from BMO, dated January 20, 2018. It represents a borrowing on Ms. Kofman’s US account credit card in the amount of $3,915.84. Marked Exhibit B is a statement dated January 20, 2018 representing the balance as of that day on Ms. Kofman’s BMO Mastercard in the amount of $15,293.98. Exhibit C represents Ms. Kofman’s credit card with RBC Visa with a limit of $11,900. I accept Ms. Kofman’s evidence that this limit was fully exhausted.
111The total amount outstanding for Exhibits A, B and C is the sum of $31,109.82.
112Counsel advised that she made inquiries with BMO and RBC and was advised that the current outstanding balances of the credit card debt as of May 24, 2018, was the sum of $33,109.82. I was not presented with a current statement from these banks as of May 24, 2018. However, and I do not doubt, that there is interest which continues to accrue in respect of each of these outstanding credit card accounts.
113I am satisfied that Ms. Kofman is entitled to repayment from Mr. Melfi of credit card debt in the amount of $31,109.82, plus accrued interest on each of those credit card accounts at the rate of interest applicable to those accounts. These amounts shall be paid to Ms. Kofman from the gross proceeds of the sale of the matrimonial home.
(c) Is Ms. Kofman Entitled to Payment by Mr. Melfi the Sum of $15,327.93 for the Cost of Repairs to the Matrimonial Home from January to April 2018?
114I accept Ms. Kofman’s evidence that when she returned to the matrimonial home pursuant to the Order of Justice Jarvis, dated January 3, 2018, she and her son set about putting the home in condition for listing and sale. Once again, the matrimonial home required renovation and the clearing out of clutter. Ms. Melfi contributed no money towards the required work. All that he did was clear out and remove some of his own possessions and nothing more. The rest needed to be put into storage by Ms. Kofman on borrowed money. The entire responsibility to put the property in such a condition suitable for listing and sale rested on the shoulders of Ms. Kofman. She spent all the money to further this end and she did all the work, along with the assistance of her son.
115Ms. Kofman proved the amount that she spent in the amount of $15,327.93, during the period between January to April 2018 (Book of Exhibits, Part C, Tab 25). I am satisfied that these costs have been proven with supporting invoices and statements.
116Further, Justice Jarvis, in his Order, dated January 3, 2018, at paragraph 4 ordered the following:
The Applicant Wife shall be entitled after payment of the items set out (3) above to be reimbursed from the gross proceeds in an amount not to exceed $10,000 (ten thousand dollars).
117Paragraph 4 of this Order relates to the reimbursement to Ms. Kofman for monies spent by her to prepare the matrimonial home for listing and sale.
118I am satisfied on the evidence given by Ms. Kofman at trial that these expenses increased above $10,000 and that the cost of those repairs, quite apart from any physical labour performed by Ms. Kofman and her son, amounted to $15,327.93.
119It is hereby ordered that paragraph 4 of the Order of Justice Jarvis, dated January 3, 2018, is hereby amended to provide for reimbursement to Ms. Kofman in the amount of $15,327.93 to be paid from the gross proceeds of sale, after payment of the judgment in favour of the TD Bank and its costs since being in possession of the property, including legal costs and fees associated with the sale, all of which are to be paid from the gross proceeds of sale. (See para. 3, Order of Justice Jarvis, dated January 3, 2018.)
(d) Who is Responsible to Pay the Canada Revenue Agency Liens (and how are they to be paid)?
120Ms. Fozia Chaudary, counsel for the CRA attended at trial. The CRA is not a party to these proceedings. She conducted a watching brief on behalf of the CRA and provided some information at the request of the Court and also advised as to the position of the CRA.
121She advised that there were four liens registered on title to the matrimonial home and their outstanding balances as at May 23, 2018 as follows:
(a) Mr. Melfi’s personal income tax lien – YR1606006, in the amount of $123,928.90;
(b) Mr. Melfi’s sole proprietorship GST account – YR2390065, in the amount of $328,206.77;
(c) Mr. Melfi’s payroll account (presumably for his business) – YR2390054, in the amount of $283,719.14; and,
(d) Marquis Products Inc. company sales tax account – YR1602464, in the amount of $359,473.37.
All of which total $1,095,328.18.
122The Court was advised that there was no priority issue as between the CRA and the TD Bank. To be more specific, the TD Bank has first priority.
123Ms. Chaudary also advised the court that should the court find that Mr. Melfi holds a 50% interest in the matrimonial home, then the CRA will be pursuing Mr. Melfi in respect of payment of the outstanding lien claims.
124I find that all of the CRA liens relate to either Mr. Melfi personally or to his company and business. They do not relate to Ms. Kofman. These debts were not incurred by Ms. Kofman. Mr. Melfi is responsible to pay the CRA liens. Those liens are to be paid out of his 50% share of the net proceeds on the sale of the matrimonial home, after the TD Bank claims have been paid and except for the payment of the CRA Deemed Trust claim.
125The CRA and Ms. Kofman shall agree on the necessary terms to lift the CRA liens in order to permit the sale of the matrimonial home.
(e) Whether The Canada Revenue Agency is Entitled to be Paid the Deemed Trust Claim in the Amount of $3,770.67?
126The CRA takes the position that there exists a deemed trust debt in the amount of $3,770.67. All parties agree that this is the outstanding amount. This amount relates to, and is a small component of, the CRA lien registered as YR2390054 on November 17, 2015, regarding payroll deduction arrears from 2009 to 2014. The CRA takes the position that this small amount forms a valid deemed trust claim that would be paid out to CRA from the gross proceeds of sale prior to payments to the TD Bank.
127Ms. Chaudary stated that this amount is held in trust for the CRA.
128Counsel for Ms. Kofman takes the position that the sum of $3,770.67 ought to be paid from Mr. Melfi’s share of the proceeds of sale.
129The TD Bank agrees that the sum of the Deemed Trust amount totalling $3,770.67 is to be paid from the gross proceeds of sale in priority to TD Bank’s claim.
130I find that the CRA has a valid Deemed Trust claim. The sum of $3,770.67 is held in trust by the CRA regarding the payroll source deductions of Mr. Melfi’s company. I find that these monies are not to be paid out of Mr. Melfi’s share of the net proceeds on the sale of the matrimonial home. Rather, these monies held in trust by the CRA are to be paid to the CRA from the gross proceeds of the sale in priority to any payments to the TD Bank. These amounts are impressed with a trust, in favour of the CRA. The sum of $3,770.67 is payable to the CRA and takes priority to payment of TD Bank’s claims and Ms. Kofman’s claim to her share of the proceeds of the sale of the matrimonial home.
DISPOSITION
131For these reasons given, this Court orders the following:
(a) The Applicant, Eugenia Kofman (also known as Evenia Kofman), is entitled to a declaration that the Respondent, Vince Melfi (also known as Vincenzo Melfi), holds a 50% interest in the following property, being the matrimonial home, in trust for Eugenia Kofman (also known as Evgenia Kofman) from June 2005:
Property having a legal description PCL 71-1 Sec 65M2404; BLK 71 PL 65M2404; S/TLT385306: Vaughan, municipally known as 232 Conti Crescent, Vaughan.
(b) Eugenia Kofman (also known as Evgenia Kofman) is entitled to payment from Vince Melfi (also known as Vincenzo Melfi) in the amount of $31,109.82, plus accrued interest from the gross proceeds of the sale of the matrimonial home;
(c) Eugenia Kofman (also known as Evgenia Kofman) is entitled to payment from Vince Melfi (also known as Vincenzo Melfi) in the amount of $15,327.93, for the cost of repairs to the matrimonial home from January 2018 to April 2018, to be paid from the gross proceeds of the sale of the matrimonial home;
(d) Pursuant to the Order of the Honourable Justice David Jarvis, dated January 3, 2018, all proceeds of sale, after payment of the Judgment in favour of the TD Bank and its costs since being in possession of the property, including legal costs and fees associated with the sale shall be paid from the gross proceeds of sale;
(e) All Canada Revenue Agency liens are to be paid from Mr. Melfi’s share of the net proceeds of sale of the matrimonial home, with the exception of the Canada Revenue Agency’s Deemed Trust claim;
(f) Canada Revenue Agency’s Deemed Trust claim in the amount of $3,770.67 shall be paid out of the gross proceeds of the sale of the matrimonial home, in priority to the claims of the TD Bank.
(g) Ms. Kofman shall apply for a Divorce Order in the ordinary and usual course.
132As for costs, counsel for Ms. Kofman shall deliver written submissions, including a costs outline, draft bill of costs and supporting documentation within fourteen days from the date of this Judgment. Said written submissions shall be delivered to my judicial assistant at Barrie.
DiTOMASO, J.
Released: June 21, 2018