COURT FILE NOS.: CV-16-126292 and CV-16-125597
DATE: 20190206
ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-16-126292
BETWEEN:
Jiahang Bao
Plaintiff
– and –
Kit Yee Mok, Hip Mok and Wai Ching Tsang
Defendants
AND BETWEEN:
Hip Mok and Wai Ching Tsang
Plaintiffs
– and –
Kit Yee Mok
Defendant
D.B. Prentice, for the Plaintiff
M. Donald, for the Defendant, Kit Yee Mok
W. Murray and L. Gilbert, for the Defendants, Hip Mok and Wai Ching Tsang
COURT FILE NO.: CV-16-125597
W. Murray and L. Gilbert, for the Plaintiffs, Hip Mok and Wai Ching Tsang
M. Donald, for the Defendant, Kit Yee Mok
HEARD: November 26-30 and December 3, 2018
REASONS FOR DECISION
TABLE OF CONTENTS
Page
- Introduction
2
- Facts
3
- Analysis
6
a) Presumption of Resulting Trust
6
b) Evidence of Transferor’s Intent
13
i) Contemporaneous Evidence
13
ii) Subsequent Evidence
15
iii) Evidence Relating to the Sale of the Marydale Property
19
- Conclusion – Resulting Trust
20
- Alternative Analysis
21
- Registration of Caution
24
- Compensation for Registration of Caution
26
- Conclusion
27
CHARNEY J.:
1. Introduction
[1] This case involves two related actions. In the first action, the plaintiff, Jiahang Bao (Bao), entered into an Agreement of Purchase and Sale (APS) for a residential property located on Marydale Avenue in Markham, Ontario (the Marydale property). Bao entered into the APS with the defendant Kit Yee Mok, who is the registered owner of the Marydale property under the Land Titles Act, R.S.O. 1990, c. L.5. (Since there are several witnesses with the surname Mok, Kit Yee Mok will be referred to as Kit in these reasons.)
[2] The transaction did not close because the co-defendants (and plaintiffs in the related action) Hip Mok and Wai Ching Tsang (Hip and Tsang) have asserted that they are the beneficial owners of the Marydale property. Hip and Tsang are Kit’s father and mother. Hip and Tsang allege that Kit was holding the Marydale property in trust for them and that she had no right to sell their house. They have registered a Caution and a Certificate of Pending Litigation (CPL) on the Marydale property.
[3] Bao and Kit take the position that, as the registered owner, Kit had the right to sell the property. Bao brought his action claiming specific performance of the APS, and he is supported in this regard by Kit. Kit alleges that her parents gave her the Marydale property as a gift.
[4] Bao argues that the dispute between Kit and her parents is not his concern. He purchased the Marydale property from the registered owner and is entitled to specific performance. If the Marydale property was being held in trust by Kit, then Hip and Tsang may be entitled to damages from Kit, but cannot prevent the sale of the home.
[5] Bao tried to have his case resolved on a summary judgment motion, but his motion for summary judgment was dismissed by McKelvey J. in a decision released on March 8, 2018 (2018 ONSC 1626). McKelvey J. concluded that there were too many factual disputes to resolve on a motion for summary judgment, and that summary judgment was not appropriate in the Bao action because the issues in the Bao action should not be decided independently of the issues in the Hip/Tsang action.
[6] These cases raise four interrelated issues:
(a) Who owns the Marydale property?
(b) Did Kit have the right to sell the Marydale property?
(c) Do the parents have the right to stop the sale of the Marydale property?
(d) Is Bao entitled to specific performance?
2. Facts
[7] Hip is 97 years old. His wife, Tsang, is 93 years old. They live at the Marydale property with their daughter, Kit, who is 65 years old.
[8] Kit has four brothers. An older brother known as Johnny, and three younger brothers, Jacky, Tsun and Paco. Johnny, Jacky and Tsun are, or have been, married and live in their own homes. Paco also lives at the Marydale property. He is 59 years old. None of the brothers is a party to either of these actions, although Paco, Tsun and Jacky did testify as witnesses.
[9] The family is from Hong Kong. Jacky moved to Canada in 1986, and Tsun moved to Canada in 1987. Hip and Tsang moved to Canada at the end of 1988, and Kit and Paco followed in 1990.
[10] Hip drove a taxi in Hong Kong but has not worked since just before he moved to Canada.
[11] When the family lived in Hong Kong, the children, including Kit, earned money and gave it to Hip and Tsang to save and pay expenses. Kit worked while her three younger brothers were studying abroad, and her income was used by her parents to contribute to their tuition.
[12] Before coming to Canada, the parents provided money to Jacky and Tsun to purchase a home on William Honey Crescent (the Honey property) in Markham, Ontario on April 29, 1988. Some of this money came from Kit’s earnings in Hong Kong. The Honey property was registered under the names of Jacky and Tsun.
[13] As the rest of the family moved to Canada, they all moved into the Honey property.
[14] On October 29, 1990, title to the Honey property was transferred from Jacky and Tsun to Hip and Tsun.
[15] The children, including Kit, worked and contributed to the expenses and mortgage payments of the Honey property.
[16] On September 28, 1995, the house on Marydale was purchased and the family (except Johnny and Jacky) moved in. Title to the property was registered under Kit and Paco’s names as tenants in common, each with a 50% interest. The purchase price was $303,311.64. There was a mortgage of $150,000 to the Royal Bank of Canada, in Kit and Paco’s names. All of the children, including Kit, worked and contributed to the expenses and mortgage at the Marydale property, but there is no accounting that would permit a court to determine what each child contributed over the years.
[17] At the time of the purchase of Marydale in 1995, Paco, Kit and Tsun, together with Tsun’s wife and two children, lived at the Marydale house with Hip and Tsang.
[18] Paco and Tsun lived at the Marydale property until 1997, when Paco moved to Hong Kong with the intention of working and living there, and Tsun moved with his family to Idaho, where he still lives and works.
[19] From 1997, Hip, Tsang and Kit lived together at the Marydale property.
[20] On August 27, 1998, Paco transferred his 50% interest in the Marydale property to Kit. Consideration for Land Transfer Tax purposes is stated as $53,880.79, the balance outstanding on the mortgage, which was assumed by Kit. The transfer document was executed in a lawyer’s office in the presence of Hip, Tsang, Paco, and Kit.
[21] As of August 27, 1998, Kit was the only registered owner of the Marydale property.
[22] On December 17, 1998, the Honey property was sold for $210,000. Prior to its sale it was rented out, and the rent money was declared by Tsun on his income tax return. Tsun testified that the rent money was used to maintain the Marydale property. After the Honey property was sold, at least some of the proceeds from the sale were used to pay down the Marydale property’s mortgage, but the specific amount is not known.
[23] On January 2, 2001 the Mortgage on the Marydale property was discharged.
[24] In 2010, Paco returned to Canada, and moved back into the Marydale property. At the time, only Hip, Tsang and Kit lived there. He returned to help take care of his parents, and he has not worked since his return. Paco owns property in Hong Kong, which he purchased in 2003.
[25] Jacky moved back into the Marydale property sometime in 2010 but moved out in 2013.
[26] The evidence indicates that the relationship between Kit and her mother began to decline around 2010. Kit became increasingly unhappy with the living arrangements at the Marydale property. In 2014 Kit began to assert her belief that her parents had given the house to her, and, as the registered owner of the Marydale property, she had the right to sell it.
[27] In November, 2015, Kit invited a real estate agent, Anthony Ma, to the Marydale property to give an appraisal. Mr. Ma was a friend of one of the brothers and knew her father. It became apparent that the rest of the family was opposed to the sale of the house, and Mr. Ma told Kit that he did not want to be involved.
[28] Kit then invited another real estate agent, Gary Wong, to attend the Marydale property and discuss listing it for sale. On November 27, 2015 Kit signed a listing agreement with Mr. Wong, putting the house on the market for $1,179,000.
[29] Kit was aware that her parents and brothers were opposed to the sale, and she requested Mr. Wong suspend the listing agreement. The suspension agreement was signed by Kit on Decmber 7, 2015.
[30] One week later, on December 14, 2015, Kit called Mr. Wong and told him that he could relist the property.
[31] On December 22, 2015, Bao submitted an offer to purchase the Property for $1,080,000. The next day Kit signed the offer back at $1,165,000.
[32] On January 2, 2016, Bao signed the offer back at $1,142,000, and Kit accepted this offer the same day. Bao paid the deposit of $60,000, which is still being held by the real estate agent. The closing was scheduled for March 30, 2016.
[33] Kit posted notes, written in Chinese, on the front door of the home and on the door to her parents’ bedroom, that stated “Closing March 28, 2016”.
[34] On January 7, 2016, Bao delivered his notice of fulfilment of conditions, which was acknowledged by the agent for Kit the same day.
[35] On January 29, 2016, Hip and Tsang registered a Caution on title of the Marydale property.
[36] On February 11, 2016, Hip and Tsang commenced their action against Kit, claiming to be the beneficial owners of the Marydale property, and asking that the Marydale property be conveyed to them and for an injunction to prohibit Kit from selling the property.
[37] On March 9, 2016, after learning of this litigation, Bao registered a Caution on title of the Marydale property.
[38] On March 21, 2016, Hip and Tsang obtained an order and registered a CPL on the Property.
[39] On March 26, 2016, Kit’s lawyer advised Bao that Kit would not be able to close the transaction on March 30, 2016.
[40] On April 18, 2016, Bao issued the Statement of Claim for his action, seeking specific performance.
[41] After obtaining an order on June 2, 2016, on June 20, 2016, Bao registered a CPL on the Marydale property.
3. Analysis
a) Presumption of Resulting Trust
[42] Hip and Tsang argue that although the Marydale property was registered in Kit’s name, she held it in trust for Hip and Tsang, who were the true owners. Hip and Tsang rely on the presumption of resulting trust, which is a general rule that applies to gratuitous transfers, including transfers from parents to adult children.
[43] The Supreme Court of Canada explained the presumption of resulting trust in the case of Pecore v. Pecore, 2007 SCC 17, [2007] 1 SCR 795, at paras. 20 – 25:
A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner…
Advancement is a gift during the transferor’s lifetime to a transferee who, by marriage or parent-child relationship, is financially dependent on the transferor…
In certain circumstances which are discussed below, there will be a presumption of resulting trust or presumption of advancement. Each are rebuttable presumptions of law… A rebuttable presumption of law is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption. The presumption shifts the burden of persuasion to the opposing party who must rebut the presumption...
The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended… This is so because equity presumes bargains, not gifts.
The presumption of resulting trust therefore alters the general practice that a plaintiff (who would be the party challenging the transfer in these cases) bears the legal burden in a civil case. Rather, the onus is on the transferee to rebut the presumption of a resulting trust.
[Footnotes omitted]
[44] In Pecore, the majority of the Supreme Court altered the historical presumption of advancement that applied in cases of gifts between spouses and gifts between a parent and child. Importantly for the purposes of this case, the Court held, at paras. 36 – 41, that the presumption of advancement that historically applied between a parent and a child would no longer apply between a parent and an adult child.
[45] In reaching this conclusion, the Court noted, at para. 36, that “it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs”. The Court concluded:
There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent’s affairs.
[46] While the Supreme Court notes that transfers to adult children are often made in order to enable the adult child to assist with the management of the parent’s financial affairs, it also recognized (at paras. 10 and 47), that such transfers may be made to avoid the payment of probate fees or estate administration taxes or to make after-death disposition less expensive and less cumbersome.
[47] While a transfer intended to enable the adult child to assist with the management of the parent’s financial affairs would be resulting trust, a transfer to avoid the payment of probate fees or to make after-death disposition less expensive may indicate a donative intent. This is complicated by the fact that the two intentions are not mutually exclusive; a parent may transfer the property during his or lifetime both for assistance with management of the property and with the intention that it be a gift to the child (Pecore, at para. 100, per Abella J., dissenting).
[48] The application of the presumption of resulting trust to land transfers has been the subject of considerable debate in western Canada. In Saskatchewan, for example, the Court of Appeal has ruled that the presumption articulated in Pecore was counter to s. 90(1) of the Land Titles Act, 2000, SS 2000, c. L-5.1, which provides that, absent words of limitation, every instrument transferring land operates as an absolute transfer of all such rights and title the transferor has in the land. Based on s. 90(1), the burden of proof is on “the person challenging the title to establish on a balance of probabilities that the transferor lacked a donative intent and, thus, that the title does not accurately reflect legal ownership of the land”: see Hilmoe v. Hilmoe, 2018 SKCA 92, at para. 22, citing Dunnison Estate v. Dunnison, 2017 SKCA 40, at para. 91.
[49] In Hilmoe, the Saskatchewan Court of Appeal concluded, at para. 25:
The logical extension of the aforesaid statement is that, absent any limitation in the instrument, title to land operates to establish the donee’s assertion that the donor intended the transfer to be a gift. Given this, it is not necessary for a trial judge to look behind the title or require further corroborating evidence from the donee. Our conclusion on this point is consistent with this Court’s decision to eliminate the presumption of a resulting trust in the context of inter vivos gifts of land and to place the burden of proving the transferor lacked donative intent squarely on the person challenging title.
[50] It is important to note that Dunnison Estate did not deny the existence of resulting trusts (at para. 80) but concluded that the presumption of resulting trust could not apply to property registered under the Saskatchewan Land Titles Act.
[51] A similar conclusion has been reached in some British Columbia decisions. For example, in Virk v. Pannu, 2006 BCSC 921, aff’d on other grounds sub nom Bajwa v. Pannu, 2007 BCCA 260, Arnold-Bailey J. stated at para. 9:
The common law principle of resulting trust is modified however, by the Torrens land registration system in B.C. and the statutory presumption of indefeasibility. Under the Torrens system, a resulting trust cannot be implied merely by the fact that one registered owner advances the purchase money while another does not. The Torrens system instead places a burden on the party seeking to impugn the existing state of title, to provide evidence that the parties intended that a registered owner hold their interest in trust for another owner or party.
[52] In Pannu, however, the trial judge found that the alleged trustee was actually a joint owner who had contributed equally to the purchase of the property and was not a trustee (BCCA at paras. 13 -15).
[53] This issue does not appear to be finally resolved in British Columbia. In Ruff v. Ruff, 2013 BCSC 169, Johnston J. questioned whether the application of the presumption of resulting trust continues to apply to gratuitous transfers of real property because of (at para. 57) “the problem created by the apparent clash between the application of equity through the presumption on the one hand, and the reasonably clear statutory language of s. 23(2) of the Land Title Act, R.S.B.C. 1996, c. 250, which states:
(2) An indefeasible title, as long as it remains in force and uncancelled, is conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title, … [Emphasis added.]
[54] Johnston J. considered the issue at some length (at paras. 57 – 62) but found it unnecessary to decide this issue in Ruff (at paras. 56 and 62).
[55] The issue has also been the subject of consideration in Manitoba. In Hyczkewycz v. Hupe, 2017 MBQB 209, the plaintiff, who was the mother and mother-in-law of the defendants, asserted that she was the sole beneficial owner of a number of properties, and relied on the law of resulting trusts. If the plaintiff was correct, the properties were not part of the marital property accounting in the defendants’ divorce proceedings. One of the legal issues raised in the case was whether a resulting trust and the related presumption of resulting trust exist in respect of real property in Manitoba when The Real Property Act, C.C.S.M. c. R30 (“RPA”), provides that title is conclusive evidence of ownership.
[56] Kroft J. considered the Saskatchewan Court of Appeal’s decision in Dunnison Estate. While the relevant Manitoba legislation is very similar to the Saskatchewan legislation, Kroft J. disagreed with the result in Dunnison, stating, at paras. 143 – 144:
The RPA provisions protect good faith purchasers for value who relied on the register. A resulting trust does not amend the legislation. It exists between immediate parties or volunteers claiming through them, independent of the land titles register. A resulting trust is but one of a number of circumstances in which an interest in land arises by operation of law.
As to the presumption of resulting trust, I am not prepared to find that it does not apply to land in Manitoba. Notwithstanding the learned and cogent reasons of the Saskatchewan Court of Appeal in Dunnison Estate, it is my opinion that once it is accepted that resulting trusts can exist despite the RPA’s certainty of title provisions, the intimately related presumption of resulting trust (which has its own legal history and rationale) cannot simply be hived off absent clear statutory or high court authority. I have seen no such authorities. If resulting trusts or other unregistered interests in land (possibly even express trusts) are posing significant problems for stakeholders in Manitoba, perhaps it is time to reform the legislation.
[57] No argument was made before me that the Ontario Land Titles Act, R.S.O 1990, c. L.5 has the effect of eliminating the presumption of a resulting trust in Ontario, and there is no provision in the Ontario legislation that is identical to s. 90 of the Saskatchewan legislation or s. 23(2) of the British Columbia legislation. As the Ontario Court of Appeal noted in Lawrence v. Maple Trust, 2007 ONCA 74, 84 O.R. (3d) 94 (C.A.) at para. 43, Ontario did not follow the same Torrens land titles legislative model as other provinces.
[58] Previous decisions in Ontario have applied the presumption of resulting trust to gratuitous transfers of land from a parent to adult child; see for example, Reid v. Reid, 2010 ONSC 2320, at para. 132; Lee et al v. Lee et al, 2015 ONSC 954.
[59] A similar argument may be made that the combined effect of s. 62(1) and (2) and s. 78(4) of the Ontario Land Titles Act is to reverse the presumption of resulting trust for transfers registered under that Act. These sections provide:
Trusts not to be entered
62 (1) A notice of an express, implied or constructive trust shall not be entered on the register or received for registration.
Description of owner as a trustee
(2) Describing the owner of freehold or leasehold land or of a charge as a trustee, whether the beneficiary or object of the trust is or is not mentioned, shall be deemed not to be a notice of a trust within the meaning of this section, nor shall such description impose upon any person dealing with the owner the duty of making any inquiry as to the power of the owner in respect of the land or charge or the money secured by the charge, or otherwise, but, subject to the registration of any caution or inhibition, the owner may deal with the land or charge as if such description had not been inserted.
Effect of registration
78 (4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register.
[60] The application of the presumption of resulting trust to a property registered under the Land Titles Act sits uncomfortably with the provisions of that Act that expressly preclude the registration of a trust and could defeat the certainty of title the Act was intended to create. Unregistered interests cannot interfere with the right of a bona fide third party who relies on the register. As noted by Ontario courts on many occasions, the Act embodies the principle that the register is a mirror of the state of the title: see Lawrence v. Maple Trust, at para. 30; HJLJ Investments Limited v. 2305106 Ontario Ltd., 2015 ONSC 6302, at paras. 47 – 49.
[61] The clear intent of s. 62(1) and (2) of the Act is that the existence of a trust relationship does not interfere with the right of the registered owner to deal with the land, since “the owner may deal with the land or charge as if such description had not been inserted”. A registered owner can convey good title regardless of the existence of a trust: see Randvest Inc. v. 741298 Ontario Ltd. (1996), 1996 CanLII 8207 (ON SC), 30 OR (3d) 473 (SC). See also: Victor DiCastri, Registration of Title, Vol. 2, Thomson Reuters, (loose leaf ed.), at para. 750: “The trustee named in the instrument is deemed to be the absolute and beneficial owner of the land for the purposes of the statute”.
[62] On the other hand, s. 90 of the Act (quoted and discussed below at paras. 132 – 137 of these Reasons) confirms that the purpose of the Act is to protect the bona fide purchaser for value who relies on the register, not the trustee as against the beneficial owner. Indefeasibility of title is for the benefit of those who acquire the interest in land as bona fide purchasers for value in reliance on the register: see Kaup v. Imperial Oil Ltd., 1962 CanLII 49 (SCC), [1962] S.C.R. 170, at 182-83; Bezuko v. Supruniuk, 2007 ABQB 204, at para. 30. As such, s. 90 preserves the enforcement of equitable interests through actions for damages. In this regard, the trust interest does not apply to the property itself, but only the proceeds of any sale or charge. In this context, the presumption of resulting trust can continue to operate in an action for breach of trust against an alleged trustee without any apparent inconsistency with the Land Titles Act.
[63] This case was argued before me on the basis that the presumption of resulting trust applied to gratuitous transfers of property registered under the Land Titles Act, and it is not necessary for me to decide this issue.
[64] The facts in this case are somewhat different than the facts that commonly arise in many resulting trust cases, where the property in question – whether a bank account or real property – was, at some point in time, held in the name of the parent, and was transferred either to the parent and the child jointly, or to the child exclusively. For example, in Pecore, the father’s bank account was transferred into a joint account with his adult daughter, and the Court refers, at para. 20, to an obligation to return the property to the “original title owner”.
[65] In this case, Kit (with Paco) was the “original title owner”; the Marydale property was never in either parent’s name, and was never transferred from the parents to Kit. There was a transfer from Paco to Kit, but Paco is not a party to this action, and does not claim to be a beneficial owner. His position is that he held the property in trust for his parents, and when he transferred his interest to Kit, he transferred only a trust interest.
[66] The presumption of resulting trust applies in this case because, it is alleged, the Marydale property was purchased with Hip and Tsang’s money, and Kit contributed only minimal value for it. In Nishi v. Rascal Trucking, 2013 SCC 33, the Supreme Court of Canada explained the concept of a purchase money resulting trust at paras. 1 and 2, stating:
A purchase money resulting trust arises when a person advances funds to contribute to the purchase price of property, but does not take legal title to that property. Where the person advancing the funds is unrelated to the person taking title, the law presumes that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution. This is called the presumption of resulting trust.
The presumption can be rebutted by evidence that at the time of the contribution, the person making the contribution intended to make a gift to the person taking title. While rebutting the presumption requires evidence of the intention of the person who advanced the funds at the time of the advance, after the fact evidence can be admitted so long as the trier of fact is careful to consider the possibility of self-serving changes in intention over time.
[67] The Supreme Court further stated, at para. 29:
In the context of a purchase money resulting trust, the presumption is that the person who advanced purchase money intended to assume the beneficial interest in the property in proportion to his or her contribution to the purchase price.
[68] See also, Andrade v. Andrade, 2016 ONCA 368, at para. 59:
Except where title is taken in the name of a minor child, where property is acquired with one person’s money and title is put in the name of another, there is a presumption of resulting trust.
[69] For the presumption of a purchase money resulting trust to apply, the person claiming to be the beneficial owner must first show that he was the one who advanced the purchase money: see Donovan W.M. Waters, Mark R. Gillen and Lionel D. Smith, Waters’ Law of Trusts in Canada, 4th ed., (Toronto: Carswell, 2012) at 401. The evidence in this case is that the family pooled their money and gave it to Hip and Tsang to spend as Hip thought best.
[70] The Affidavit of Residence and Value for Consideration attached to the deed for the Honey property indicates that it was purchased for $215,900. Of that amount, $78,725 was paid in cash and $137,175 in assumed mortgages. While most of the money for the original purchase of the Honey property likely came from Hip’s savings in Hong Kong, all of the children, including Kit, contributed to that money and to the payments once they moved to Canada. Each child contributed according to his or her means. No child knew how much another child contributed, nor could the parents recall how much each child contributed over time. It is fair to say that the funds were all pooled, and treated as “family funds” under the direction and control of Hip and Tsang.
[71] There was no evidence of any kind of accounting that would permit the court to decide how much each child contributed, or what proportion of the purchase price of either home came from Hip or any particular child. If the amount contributed by each party is determinable, the transferee holds on a proportionate resulting trust (Waters’ Law of Trusts in Canada, at 403). In this case it is impossible to determine how much was contributed by each.
[72] There is evidence that Kit sent a bank draft for $30,000 to her father on November 14, 1988, soon after Hip arrived in Canada in October 1988, and before Kit joined her parents here. Kit testified that this $30,000 was money from her earnings, and was in addition to money that she gave her father before he came to Canada. This money could not, however, have been used for the initial purchase of the Honey property on April 29, 1988, because that purchase predated both Hip’s arrival in Canada in October 1988 and the November 14, 1988 bank draft.
[73] I am satisfied that the evidence demonstrates that the Marydale property was purchased primarily with “family funds”, and that the parents and all of the children contributed to those funds. Since the funds were treated as family funds rather than Kit’s own money, I am prepared to accept that the presumption of a purchase money resulting trust applies and there is a rebuttable presumption that Kit is holding the property in trust for Hip and Tsang.
[74] The Supreme Court in Pecore confirms, at paras. 43 – 44, that the applicable onus to rebut the presumption of resulting trust is the civil standard of balance of probabilities. The onus is therefore on Kit to demonstrate on a balance of probabilities that Hip and Tsang intended to give her the Marydale property as a gift.
[75] In Pecore the Court noted, at para. 56, that the most important evidence of intention will generally be evidence that is contemporaneous to the transfer:
[E]vidence adduced to show the intention of the transferor at the time of the transfer “ought to be contemporaneous, or nearly so”, to the transaction…The reason that subsequent acts and declarations have been viewed with mistrust by courts is because a transferor could have changed his or her mind subsequent to the transfer and because donors are not allowed to retract gifts.
[76] That said, the Court concluded, at para. 59, that evidence of intention that arises subsequent to a transfer should not automatically be excluded; “the trial judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention”.
[77] In Andrade, the Ontario Court of Appeal held, at para. 63, that the question for the court to determine is the intention of the grantor or contributor, and not the “common intention” of the parties:
The trial judge referred on multiple occasions to “the parties’ intentions”, stating that he could find “no real evidence of a commonly shared intention to purchase and hold the [house] in trust for Luisa.” Common intention, however, is not the issue. The intention of the grantor or contributor alone counts, as the point of the resulting trust is that the claimant is asking for his or her own property back. [Emphasis added]
b) Evidence of Transferor’s Intent
i) Contemporaneous Evidence
[78] In the present case, there is little by way of documentary evidence contemporaneous to the purchase of the Marydale property in 1995. But what little evidence there is does support Kit’s position.
[79] The 1995 Transfer/Deed of Land placed the Marydale property into the names of Chun Hung Mok (Paco) and Kit Yee Mok (Kit), each having a “50% undivided interest as tenants in common in equal shares”. Kit and Paco signed an Affidavit of Residence and of Value of the Consideration for the purposes of Land Transfer Tax. The prescribed form contains a multiple choice section that includes several choices for describing the purchaser. One choice is “I am a person in trust for whom the land conveyed in the above described conveyance is being conveyed”. A second choice is “I am a transferee named in the above conveyance”. The second choice was checked off, and the document was signed by Paco and Kit. In other words, when describing the manner in which Kit and Paco were receiving their interests in the Marydale property, an express choice was made to indicate that each was receiving their interest as “transferee” rather than as a “person in trust”.
[80] The Transfer and the Affidavit were signed by Paco and Kit in the presence of Hip, and the family solicitor, Amy Yao. Kit and Paco both testified that Amy Yao provided legal advice with respect to the transfer.
[81] Regrettably, neither party called Amy Yao as a witness, and I can only infer her instructions and advice from the documents themselves.
[82] Kit argues that if her father’s intention had been to transfer the property to her and Paco as trustees, the “I am a person in trust…” box would have been checked. It was not checked because this was not his intention.
[83] The same analysis applies to the 1998 transfer from Paco to Kit. The evidence of Paco is that he transferred the property to Kit on the instructions of his father. As before, the documentation was prepared by the family’s solicitor, Amy Yao. The Transfer indicates that the property was being transferred for consideration of $53,880. As in 1995, the “I am a transferee” box is checked, not the “I am a person in trust” box.
[84] Further, the affidavit states that the total consideration of $53,880 was a mortgage assumed by Kit, and the value of the land subject to land transfer tax was $53,880. This amount represented the balance outstanding on the mortgage, which was assumed by Kit. Finally, para. 5 of the Affidavit asks the parties to state the purpose of the conveyance:
If consideration is nominal, describe the relationship between the transferor and the transferee and state purpose of conveyance:
In response, the parties indicate the following purpose:
Transfer of ½ of undivided interest from brother to sister for natural love and affection. The property is subject to a mortgage in favour of Royal Bank of Canada.
[85] The statement that the transfer was for “natural love and affection” appears to contradict the earlier statement that the property was transferred for consideration of $53,880. In any event, there is no statement that the purpose of the transfer was to hold the property in trust. A reference to “natural love and affection” also infers a donative intent. To the extent that intent can be derived from this statement, it indicates that the transfer from Paco to Kit was intended as a gift, and not a trust.
[86] In 1998, the land transfer tax on amounts up to and including $55,000 was 0.5%.
[87] Kit argues that if Paco and Kit were trustees, no land transfer tax would have been payable, and the consideration would have been listed as zero, not $53,888. This is because land transfer tax applies only to the transfer of a beneficial interest in land. If the transfer is from one trustee to another, no land transfer tax is payable. This is clear from the Ontario Ministry of Finance Land Transfer Tax Bulletin “Conveyances Involving Trusts”, which states:
Provided there has been no change in beneficial ownership since the transferor obtained registered title, the “Value of the Consideration” (as defined in the Act) for a subsequent trust conveyance will be NIL. As a result, there is no land transfer tax payable.
[88] This law is unchanged since 1998: Land Transfer Tax Act, R.S.O. 1990, c. L.6, ss. 1(f), 3.
[89] Another consideration relates to the registration of the Honey property. When Hip moved to Canada, the Honey property was transferred from Jacky and Tsun to Tsun and Hip. Placing Hip on title as a registered owner is consistent with an intention to have Hip as the beneficial owner and Tsun as the trustee to assist with his parents’ management of affairs. The fact that Hip was not included as a registered owner when the Marydale property was purchased only five years later, or when Paco moved to Hong Kong in 1998, suggests a different intention.
[90] No explanation was put forward as to why, if Hip and Tsang were intended to be owners of the Marydale property, neither Hip nor Tsang were placed on title along with Kit and Paco when the Marydale property was first purchased in 1995. If management of the property was the purpose of putting Kit and Paco on title, they could have been made co-owners with Hip, as was done with title to the Honey property.
[91] Accordingly, to the extent that any intention can be gleaned from the documents themselves, the transfer documents suggest that the transfers were not intended as a trust, but were intended to be a family gift, first to Kit and Paco, and then to Kit alone. Given the evidence that these documents were prepared by and with the advice of the family’s solicitor on the instruction of Hip, this evidence does support Kit’s position that the intention was to give the property to Kit as a gift.
ii) Subsequent Evidence
[92] Hip testified that he believed that he and Tsang owned the Marydale property. Tsang testified that she thought that the property belonged to Hip. They agree that it was their decision to purchase the property and the property was purchased with their money. The expenses and mortgage were paid with financial contributions from their children, including Kit, since neither Hip nor Tsang were working when the Marydale property was purchased.
[93] Hip and Tsang were clear that they do not want to be forced out of their house, and believe that Kit had no right to sell it. They both testified that they were not aware of Kit’s intention to sell the home, and neither consented to the sale. Neither could recall getting into an argument with Kit about the sale of the house.
[94] Hip testified that the house was originally registered in Kit and Paco’s names because “they were younger so that is why I have their name down”. When asked if he considered Kit and Paco the owners he answered: “On the surface maybe, but in fact we [Hip and Tsang] bought it”. When asked if he ever gave the Property to Kit as a gift, he replied “No”.
[95] When Tsang was asked why the house was placed in Kit and Paco’s name, she also stated “Because they were younger and we were getting old”.
[96] Hip and Tsang’s testimony regarding their intention when the house was originally purchased and put into Kit’s name is unreliable, not only for the reasons given by the Supreme Court at paras. 56 and 59 of Pecore, but because they both exhibited failing memories.
[97] For example, when Hip was asked his age, he answered that he was “50 something”, and could not remember the year that he was born. He could not remember how long he had been married, and testified that he had four children. He could not remember which of his children were the youngest and stated that none of his children were married. He did not know that Kit had sold the house. He could not remember being examined for discovery in September 2016.
[98] Hip could not recall having any discussions with Paco or Kit about the Marydale property when Paco returned to Hong Kong, stating: “No, the house belonged to us, why should I discuss it with him?” He did not know that Paco had transferred his interest in the property to Kit, saying that Paco had never mentioned this to him.
[99] Hip’s testimony in this regard was inconsistent with the evidence of both Paco and Kit, who testified that Hip instructed Paco to transfer his interest in the Marydale property to Kit, and that Paco did so on Hip’s instructions.
[100] When asked if he ever discussed ownership of the house with Kit and Paco when the Marydale property was first purchased, Hip replied that he did not, stating: “It was ours, it had nothing to do with them, they only lived with us”. He did not know that after Paco moved to Hong Kong, Kit became the only registered owner. On cross-examination he could not remember in whose name the Marydale property was registered when it was first purchased. He could not remember any of the documents with his signature that were put to him or why he signed them.
[101] Similarly, when Tsang was asked her age she answered “82”, and does not remember when she was born. She could not recall how long she has been married. She did not know her address until prompted by her counsel. She also could not recall being examined for discovery in September 2016.
[102] Tsang testified that she did not have any conversations with Paco about the Marydale property when he moved to Hong Kong in 1998. Paco did not tell her that he was transferring the property to Kit, and she did not know that the house was registered in Kit’s name alone. She testified that she never had any conversations with Kit about the Marydale property and never heard her husband have any conversations with Kit about the property.
[103] Even taken at face value, the answer that the house was put in Kit and Paco’s names “because they were younger and we were getting old” is, at best, ambiguous. It is consistent with an intention to enable the adult child to assist with the management of an aging parent’s financial affairs, but it also consistent with an intention to give the property as a gift during their lifetime in order to avoid the payment of probate fees and taxes on death.
[104] Another possibility is that the parents intended to give the Marydale property to Kit as a gift, but retain a life interest in the property.
[105] In their Amended Statement of Claim, Hip and Tsang plead that they are the “sole and legal beneficial owners” of the Marydale property, and seek a declaration that the property is held in trust for them and that title should be transferred from Kit to them. This was the basis upon which their case proceeded. Hip and Tsang did not claim a life interest in the property, even as an alternative argument. No submissions were made, and no remedy was sought, with regard to a possible life interest. Since the issue of life interest was neither pled nor argued, it would not be fair for the court to make any findings in this regard: Rodaro v. Royal Bank of Canada (2002), 2002 CanLII 41834 (ON CA), 59 O.R. (3d) 74 (C.A.), at paras. 60 – 63; Labatt Brewing Company Limited v. NHL Enterprises Canada, L.P., 2011 ONCA 511; 106 O.R. (3d) 677, at paras. 5 – 7.
[106] Kit and Paco were the only children to testify regarding their parents’ intentions with regard to ownership of the Marydale property. While Jacky and Tsun testified, neither had any direct knowledge of their parents’ intentions in 1995 or 1998. Jacky was living in Hong Kong at this time. Tsun testified that he did not know who the registered owner of the Marydale property was, he only knew that it was not him and he did not care. Jacky testified that he never knew anything about the title to the Marydale property or in whose name it was registered. Neither knew about the change to the name on title in 1998.
[107] Jacky and Tsun did testify that even though the Honey property was originally in their names in 1988, they understood that the property was really owned by their parents.
[108] Paco testified that the family started to look for a new house when the Honey property became too crowded. They found the house on Marydale, and Paco signed the original Agreement of Purchase and Sale (APS) for the Marydale property on April 23, 1995. The deposit money was given to him by his father. He explained that he signed the APS because his parents did not read or write English. Kit was not present when the APS was signed.
[109] Paco testified that the property was put in his and Kit’s name in 1995 because his parents did not speak English and they needed the children’s help to manage the house. Since their older brothers had taken care of the Honey property, it was his and Kit’s turn to manage the house for their parents. Also, at the time, his income was sufficient to qualify for a mortgage from the bank. He did not consider himself to be an owner of the house because his father had made it clear to him that he gave him the money to purchase the house for his father. He went to the bank with his father and his sister to arrange for the mortgage, which was under his and Kit’s name.
[110] Paco and Tsun both testified that Kit did not manage the Marydale property, but the Property was managed, and the expenses paid, by Paco and Tsun. Paco testified that he never saw Kit give money to his parents for the maintenance of the Marydale property. That said, Paco lived in Hong Kong from 1997 to 2010, and Tsun has lived in Idaho since 1997. As such, their evidence of what they “saw” is of little value.
[111] The evidence does confirm that Kit paid at least some of the utilities directly. She testified that she was reimbursed for these payments by her father until 2012, and has made these payment without reimbursement since 2013.
[112] Paco testified that he moved to Hong Kong in 1997 to find a job. He returned briefly in 1998 to visit his parents. His father, Hip, spoke with an accountant, who told Hip that Paco’s name should be removed from the Marydale property and it should be put into Kit’s name so that Paco could become a non-resident of Canada for tax purposes. Paco did not receive this advice from the accountant directly, but indirectly through his father. Paco followed his father’s instructions and transferred his share of the Marydale property to Kit on August 27, 1998. This transfer was executed at the lawyer’s office with his parents and Kit.
[113] The accountant who allegedly gave this advice to Hip was not identified and did not testify at the trial. I heard no expert evidence or legal analysis to support Paco’s assertion that having his name registered on title as a trustee would jeopardize his non-resident status. In the absence of such evidence, I have great difficulty accepting this as a legitimate explanation for the transfer of property from Paco to Kit.
[114] Following the transfer, the family went to the bank and had Paco’s name removed from the mortgage, and the mortgage was assumed by Kit. Paco also closed his bank account in Ontario and surrendered his health card and SIN card to the government.
[115] Kit testified that the Property was initially put in her and Paco’s name in 1995 because they were the only two children who were not married. When her parents purchased the house, they told her that the new house would have her name on the title because she had given money to pay for her brothers’ education, and because she was still unmarried. The other half would belong to Paco, because he was also unmarried.
[116] Kit testified that Paco transferred his 50% share of the Marydale property to her in 1998 because her parents wanted her to own the entire house. She asked them why they did not transfer Paco’s share to Tsun, and her mother told her that it had nothing to do with Tsun. Kit testified that the transfer from Paco to Kit was prepared by the family’s lawyer, and signed in the presence of Paco, Kit, Hip and Tsang. The lawyer asked the family whether there were any conditions to be placed on the transfer, and her parents told the lawyer that there were no conditions, the property was to be transferred from Paco to Kit. The lawyer asked if the property was to be transferred as a gift, and was told it was a gift. She testified that her parents did not mention anything about Kit acting as a trustee for the property.
[117] Kit also testified that both in 1995 and in 1998, she did not expect to sell the property while her parents were alive. As the unmarried daughter, she understood that it was her responsibility to live with her parents and look after them. But after her brothers left the house in 1998, her mother started to get agitated and they began to argue. When her brother Paco returned to Canada in 2010, matters became worse, and the arguments increased. In 2013 Jacky also returned to the house, and her mother became even less happy, and there were arguments every day. In 2014 Kit finally told everyone that she planned to sell the house so that she could buy a smaller house and live on her own. To this end she paid to have the house painted and the garage door fixed in June, 2015, to prepare for the sale. No one objected to these renovations.
[118] Her plan was to sell the house and give some of the money to her parents so that they could also buy a smaller house and live with Paco. She estimated that she would keep $800,000, and give the surplus (approximately $300,000) to her parents. She testified that she told these plans to Paco and her parents, and they said nothing. She believes that her parents would be happier living with Paco, either in Hong Kong or in Canada, and Paco could sell his Hong Kong property and buy a home in Canada if necessary.
[119] Kit argues that the evidence demonstrates her parents’ intention to give the house to her as a gift. She has four brothers. Her parents paid for each brother to attend university in different locations around the world. Paco obtained his economics and computer science degree in 1986 at the University of Oregon. Tsun received his B.Sc. degree in civil engineering at the University of Hawaii. Jacky received a college education in graphic design in Canada. All were paid for by the parents, with some unspecified contribution from Kit’s earnings.
[120] Kit wanted to study economics or accounting, but her parents would not pay for Kit to attend university, and she has no university degree. Kit did obtain a bookkeeping certificate in Hong Kong after taking a one year course following high school.
[121] Kit’s brothers all had careers and three were married with families. All the brothers were able to purchase their own properties as a result of their education and careers. In contrast, Kit never married, and was expected to remain at home to care for her parents. She began working in Hong Kong when she was 21 years old and worked full time in Canada from 1991 to 1999. Any income that she received from employment, both in Hong Kong and Canada, was given to her parents. As such, she testified, her father intended to give her the Marydale property to compensate her for her financial and social insecurity.
[122] Kit’s limited education and correspondingly limited career mean that she is far more dependent on her parents than are her brothers. She is the only one of five siblings who did not own their own property. This relative dependence is a factor that I can consider in deciding whether Kit has met her onus to prove that the transfer was a gift. In Lee Dunphy J. stated, at para. 43:
While the court in Pecore rejected any survival of the presumption of advancement in the case of transfers even to dependent adult children, Rothstein J. did find (at para. 41) that “while dependency will not be a basis on which to apply the presumption of advancement, evidence as to the degree of dependency of an adult transferee child on the transferor parent may provide strong evidence to rebut the presumption of a resulting trust”.
[123] Kit argues that Hip’s initial decision to put the Marydale property in her and Paco’s name was based on the fact that they were the only two unmarried siblings and both lived with their parents. When Paco moved to Hong Kong to work in 1998, he became independent, and Hip instructed Paco to transfer his 50% share of the property to Kit. Paco complied.
[124] The testimony of both Kit and Paco must be viewed with suspicion since it is likely to be self-serving. It is also likely to be more reflective of their respective understandings than of Hip and Tsang’s actual intention. Much of their evidence is hearsay, and Hip and Tsang are unable to confirm what they said in 1995 or 1998. That said, Kit’s position is more consistent with the documentary record. Kit’s position explains why the Marydale property was registered in her name alone in 1998, and not her and Hip’s names.
iii) Evidence Relating to the Sale of the Marydale Property
[125] There was considerable evidence about what transpired at the house when Kit decided to sell the Marydale property in November and December of 2015, and whether Hip and Tsang knew that a real estate agent was at the home, or knew or consented to the house being sold.
[126] This evidence is not, in my view, relevant to the intention of Hip and Tsang when they transferred the Marydale property in 1995 or 1998. Whatever their intention in 1995 and 1998, there is no doubt that they do not now want to leave the house. Given their lack of memory, however, I cannot know whether this position reflects a change of mind or their original intent. Given Kit’s own testimony, however, it is likely that their expectation was that the Marydale property would not be sold by Kit while they continued to live there.
[127] If, as Kit asserts, she is the beneficial owner, her parents’ consent to the sale was not necessary.
[128] If, however, her parents are the beneficial owners, I find that her parents did not consent to the sale of the home. Even if Hip and Tsang knew that the house was being painted and the garage door repaired, this did not mean that they consented to the sale of the house. While Kit’s father was home when one of the real estate agents came to inspect the house, the evidence demonstrates that Hip did not understand why the agent was there or discuss with the agent the proposed sale. Kit testified that her father did not voice any objection to the proposed sale; I am not persuaded that he understood what was being discussed or that his silence constituted consent. Neither Hip nor Tsang were present when the listing agreement was signed. Neither Hip nor Tsang were involved in the sale negotiations or were present when Mr. Bao’s offer was accepted by Kit. Kit acknowledged that she avoided discussing the sale with her mother because she knew her mother was opposed to the sale and that she and her mother argued about the sale.
[129] I find that neither Hip nor Tsang consented to the sale of the Marydale property, and Kit knew this. Kit proceeded with the sale, not because she thought that she had her parents’ consent to sell the property, but because she believed that she had the legal right to sell the property without their consent.
4. Conclusion – Resulting Trust
[130] Based on the evidence reviewed, I conclude that Kit has met her onus and proven, on a balance of probabilities, that the intention of Hip and Tsang, in 1998, was to give the Marydale property to Kit as a gift.
[131] As such, the four questions asked at the outset can be answered as follows:
i. Who owns the Marydale property?
Kit Yee Mok
ii. Did Kit have the right to sell the Marydale property?
Yes
iii. Do the parents have the right to stop the sale of the Marydale property?
No
iv. Is Bao entitled to specific performance?
An order for specific performance is appropriate only in cases in which the vendor is refusing to complete the sale of the property. Given that the answers to the three questions above, and the fact that the registered owner of the house who agreed to the sale has indicated her intention to complete the sale, an order for specific performance is unnecessary.
5. Alternative Analysis
[132] If I am wrong in the answer to the first question above, and Hip and Tsang are the beneficial owners of the Marydale property, the answer to the next three questions would remain the same. As the registered owner of the Marydale property, Kit had the right to sell it, the parents could sue Kit for damages for breach of trust, but have no right to stop the sale, and as a bona fide purchaser for value, Bao would be entitled to purchase the property.
[133] There is no dispute that as of August 1998, Kit was the only registered owner of the Marydale property. There are no allegations of fraud. As such, pursuant to s. 68(1) and 86(1) of the Land Titles Act, Kit, and only Kit, had the right to sell the Marydale property. Those sections provide:
Dealings with registered land
68 (1) No person, other than the registered owner, is entitled to transfer or charge registered freehold or leasehold land by a registered disposition.
Transfer of land
86 (1) A registered owner may transfer land or any part thereof in the prescribed manner.
[134] Moreover, if the 1998 transfer to Kit was made without valuable consideration, and Kit was acting as trustee for her parents, the transfer would be subject to s. 90 of the Land Titles Act, which provides:
Estate of voluntary transferee of land
90 A transfer of registered land, made without valuable consideration, is subject, so far as the transferee is concerned, to any unregistered estates, rights, interests or equities subject to which the transferor held the same, but otherwise, when registered, in all respects, and in particular as respects any registered dealings on the part of the transferee, has the same effect as a transfer of the same land for valuable consideration.
[135] In Registration of Title to Land, DiCastri provides the following explanation of this provision, at para. 875:
A volunteer is a person who claims an interest in property under a transfer for which he has not given valuable consideration. He is not a bona fide purchaser for value…
While the statutory declaration of indefeasibility does not expressly exclude the volunteer, the declaration must be considered in the context of the scheme of the Act as a whole and, in particular, in relation to those sections of the Act that reaffirm the protection given the bona fide purchaser for value. The latter and the volunteer have equal access to the Act, but not equal protection.
The volunteer does not rely on the register. Neither does he look to the register to decide whether or not he will accept the gift. He gives no valuable consideration and is happy to receive whatever interest the registered owner has to give...
The fact that the defeasibility of a volunteer’s registered title appears to be more extensive than that of the bona fide purchaser for valuable consideration suggests that the doctrine of resulting (or implied) trust is not dead. Whether or not the doctrine ever applied to a statutory transfer which does not provide for a habendum, and thus for no declaration of use in favour of the transferee, is doubtful. In some jurisdictions the doubt has been resolved by legislation.
[136] DiCastri then quotes s. 90 of the Ontario legislation, and concludes:
This enactment appears to reflect the position of the registered volunteer under the Torrens system.
[137] As I understand this provision, and DiCastri’s explanation, s. 90 means that the Act protects the bona fide purchaser for value, but does not protect the volunteer. Once the volunteer sells the land to a bona fide purchaser for value, the title is indefeasible, and the beneficial owner can enforce the equitable interest only through an action for damages against the volunteer. In the absence of a bona fide purchaser for value, the title remains defeasible, and the beneficial owner can seek to have the title rectified. Indefeasibility of title is for the benefit of those who acquire the interest in land as bona fide purchasers for value in reliance on the register.
[138] This means that if Kit were a “volunteer” under s. 90 of the Act, and the transfer of the Marydale property to Kit was made without valuable consideration, with the intention that Hip and Tsang retain beneficial ownership, Kit could be liable to Hip and Tsang for damages for breach of trust. As the registered owner, however, Kit would have the same right to sell the property to a bona fide purchaser for value as any other registered owner. The Land Titles Act protects Mr. Bao because he is a bona fide purchaser for value from the registered owner.
[139] In this regard, the Ontario Court of Appeal’s decision in Di Michele v. Di Michele, 2014 ONCA 261 is instructive. In that case three brothers were jointly beneficiaries of a property, each brother owning a one-third share in accordance with their mother’s will. One brother, Antonio, held the property as estate trustee after his mother’s death. As the estate trustee, the property was registered only under Antonio’s name. Without the knowledge of his other brothers, Antonio registered a $350,000 mortgage against the property to pay his own debts, thereby exhausting the equity in the property. One issue for the Court of Appeal was the validity of the mortgage. The Court of Appeal concluded that even though Antonio owned only one-third of the property, as the registered owner under the Land Titles Act he had the legal right to grant the mortgage (see para. 58).
[140] The brothers also argued that the mortgagee was not a bona fide purchaser for value without notice, because the property register showed Antonio as holding the property as a trustee with a will. As such, it was argued that the mortgagee had actual notice that the property was being held in trust, and should not have accepted the mortgage as security without inquiring whether Antonio could lawfully mortgage the property.
[141] The Court of Appeal rejected this argument on the basis of s. 62(2) of the Land Titles Act (quoted above at para. 59), which provides that describing the owner of land as a trustee shall be deemed not to be notice of a trust, or impose any duty on the person dealing with the owner to make inquiries as to the power of the owner in respect of the land.
[142] The Court concluded that the brothers may have an action against Antonio for breach of trust, but they could not invalidate the mortgage. The Court stated, at para. 72:
In this regard, the appellant has confused the notion of a fraudulent transaction with a valid transaction that might amount to a breach of trust. The former may invalidate the transaction. The latter does not. Rather, it gives rise to an action by the beneficiaries against the trustee.
[143] Another example of the operation of the principle of indefeasibility of title can be seen in the recent British Columbia case of Gully v. Gully, 2018 BCSC 1590. In Gully, Ms. Gully transferred a half interest in her Burnaby home to her adult son for estate planning purposes. She registered that transfer on title but did not tell her son. Unaware of the transfer, the son consented to judgment against him in favour of a creditor. The creditor then registered the certificate of judgment on title. Ms. Gully sought to protect her home from the creditor’s claim by arguing that her son was actually holding his half interest in the property on a resulting trust for her. In dismissing her claim, Baker J. stated, at paras. 19, 20 and 24:
The operation of the registration of indefeasible title in our title system requires certainty. If third parties could be affected by unregistered interests, that would throw chaos into all systems which rely on certainty of title, including the operation of our lending systems.
Ms. Gully submitted that she did not intend to gift the Burnaby Property to her son. I have found that she did intend to gift the Burnaby property to her son; however, even if I accepted that she did not intend the gift to her son at the time she registered [her son’s] interest, this argument may have some bearing on a dispute between the family members, but by virtue of the Land Title Act it has no bearing on the interests of third parties such as [the creditor].
Ms. Gully took a risk in registering her son as a joint tenant on her property. Whether she was properly advised of that risk is not before me. However, once she made the decision to register an interest in the Burnaby Property in [her son’s] name, third party creditors of [her son] became entitled to register judgments against [her son’s] interest in the Burnaby property.
[144] The same analysis would apply in this case. If Kit were acting as trustee on behalf of her parents, the sale of the Marydale property may amount to a breach of trust, and give rise to an action for damages by the beneficiaries against the trustee, but would not invalidate the sale of the property by the registered owner to a bona fide purchaser for value.
[145] Accepting the position advanced by Hip and Tsang would mean that the sale of a property by the registered owner could be set aside on the basis that the registered owner had an undisclosed obligation to a family member. As Baker J. stated in Gully: “If third parties could be affected by unregistered interests, that would throw chaos into all systems which rely on certainty of title”. Accordingly, even if Hip and Tsang were the beneficial owners of the Marydale property, their claim would be restricted to a claim against Kit for the proceeds of the sale.
[146] As indicated above, the intent of s. 62(1) and (2) of the Act is that the existence of a trust relationship – even if noted in the description of the property - does not interfere with the right of the registered owner to deal with the land, since “the owner may deal with the land or charge as if such description had not been inserted”. A registered owner can convey good title regardless of the existence of a trust.
6. Registration of Caution
[147] On January 29, 2016, Hip and Tsang registered a Caution on title of the Property pursuant to s. 71 of the Land Titles Act, which provides:
71 (1) Any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by any act of the registered owner by entering on the register such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the Director of Titles.
[148] The Caution states that Hip and Tsang’s interest in the property is that “the property was registered in the name of Kit Yee Mok as a result of constructive trust.”
[149] Mr. Bao argues that since a trust interest cannot be registered under s. 62 of the Land Titles Act, registration of a trust interest is not “authorized by this Act”, as required by s. 71. In other words, if you can’t register a trust you can’t register a caution based on a trust. Section 62(2) of the Act would be rendered meaningless if the trust interest could be registered as a caution.
[150] In addition, a breach of trust gives rise to an action by the beneficiaries against the trustee for damages, and does not create an interest in the land. Accordingly, the caution must be removed because even if Kit held the property in trust for Hip and Tsang, Hip and Tsang, by virtue of the above referenced provisions of the Land Titles Act, do not have an interest in the property, only in the proceeds of sale.
[151] Mr. Bao relies on the decision of this court in McLeod v. Walker, 2015 ONSC 5984, which dealt with a notice of interest filed under s. 71 of the Land Titles Act. The case concerned a brother and sister who were left a farm property on the death of their mother. Before their mother died, the mother and brother signed an agreement that when the brother sold the property, the sale proceeds would be divided between the brother (85%) and the sister (15%). Upon the mother’s death, the property was registered solely in the brother’s name. To protect her interest in the net proceeds from any eventual sale of the property, Ms. Walker decided to register a notice pursuant to s. 71 of the Land Titles Act.
[152] The court concluded that the agreement created a trust of 15% of the net proceeds from the sale of the property, so that when the brother sold the property he would owe 15% of the net proceeds of sale to the sister. While 15% of the property was held in trust for the sister, s. 62(1) of the Land Titles Act did not permit the sister to register the trust on title.
[153] The court held that, since s. 62(1) of the Land Titles Act expressly precludes the registration of a trust, the registration of a caution or interest based on a trust is not authorized by the Act or the Director as required by s. 71(1). The Court held, at paras. 38 and 39:
This case involves a Trust, the registration of which is expressly prohibited by s. 62(1) of the Land Titles Act.
Section 71(1) of the Land Titles Act permits the registration of “such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the Director of Titles.” The registration of the interest created by the Trust is not authorised by the Land Titles Act or by the Director of Titles. Therefore, the notice on title is unauthorised: see also Claireville Holdings Limited v. Botiuk, 2014 ONSC 6505, at paras. 14-19. The unauthorised notice shall be removed.
[154] As indicated above, the same result was reached in the Claireville Holdings case. This case involved both allegations of a trust and allegations of fraud. Corbett J. stated, at paras. 16 – 21:
Mr Botiuk’s claims fall into two categories: claims to a trust interest in land, and claims of fraudulent conveyance. Trust claims may not be registered: that is the clear meaning of s.62…
Mr Botiuk takes the position that the broad language of s.71(1) is sufficient to authorize registration of his claims. I do not agree. The phrase “as are authorized by this Act” must, of necessity, refer to authorization found outside of s.71(1) itself. Where registration of an interest described in s.71(1) cannot be registered under the authority of some provision of the Act outside s.71(1), then a claimant may obtain authorization from the Director of Titles.
Mr Botiuk’s only legal basis for the impugned notices is s.71(1) itself: he does not identify any other provision of the Act that authorizes the impugned notices, and he concedes that the Director did not authorize the impugned notices…
This reading of the Act is sufficient to dispose of this issue. It also fits within the broader policy of the Act. Where the Act expressly authorizes registration, then it may be done. Where there is no express authority in the Act, the Director may authorize registration. But where there is no authorization either by the Act or by the Director, a person is not free to register unilaterally.
For these reasons I find that the impugned notices were not registered validly and that they should be expunged from title. It is so ordered, pursuant to the court’s authority under s.160 of the Land Titles Act, subject to the other terms of this decision.
[155] Based on all of these factors, I would conclude that, even if Kit held the property in trust for Hip and Tsang, she had the statutory authority to transfer the property to Mr. Bao, who is a bona fide purchaser for value from the registered owner. As such, Hip and Tsang have no power to stop the sale of the property to Mr. Bao. Since Kit and Mr. Bao agree that the sale should proceed, an order for specific performance is unnecessary.
7. Compensation for Registration of Caution
[156] Mr. Bao also claims compensation or damages against Hip and Tsang under s. 132 of the Land Titles Act, which provides:
Liability where caution improperly registered
132 A person who registers a caution without reasonable cause is liable to make to any person who may sustain damage by its registration such compensation as is just, and the compensation shall be deemed to be a debt due from the person who has registered the caution to the person who has sustained damage.
[157] In my view, this is not a case in which the Court should exercise its discretion to award compensation under s. 132 of the Act. While Hip and Tsang were not successful in their claim, I cannot find that their claim was made “without reasonable cause”. No one questioned the bona fides of their claim. Moreover, the fact that Bao was not successful in his motion for summary judgment before McKelvey J. confirms that there was a “genuine issue requiring a trial”, and, in my view, this precludes a finding that the caution was registered without reasonable cause.
8. Conclusion
[158] In the result, the plaintiffs’, Hip Mok and Wai Ching Tsang, claim against the defendant, Kit Yee Mok, is dismissed.
[159] I find that the defendant, Kit Yee Mok, is the beneficial owner of the Marydale property, and is entitled to transfer the property to the plaintiff, Jiahang Bao, pursuant to the APS dated December 22, 2015. If the parties need assistance as to the scheduling of the closing, I may be spoken to.
[160] This Court further orders that, pursuant to s. 160 of the Land Titles Act, Caution YR2423407 and Certificate of Pending Litigation YR2446479 registered on title to the Marydale property by or on behalf of the defendants Hip Mok and Wai Ching Tsang be deleted.
[161] If the parties are unable to agree on costs, the plaintiff Jiahang Bao may serve and file costs submissions of no more than 3 pages, plus costs outline and any offers to settle, within 25 days of the release of this decision. The defendant Kit Yee Mok may file her submissions on the same terms within 15 days thereafter, and the plaintiffs/defendants Hip Mok and Wai Ching Tsang may file their submissions on the same terms within 15 days after Kit’s submissions.
Justice R.E. Charney
Released: February 6, 2019
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jiahang Bao
Plaintiff
– and –
Kit Yee Mok, Hip Mok and Wai Ching Tsang
Defendants
AND BETWEEN:
Hip Mok and Wai Ching Tsang
Plaintiffs
– and –
Kit Yee Mok
Defendant
REASONS FOR DECISION
Justice R.E. Charney
Released: February 6, 2019