COURT FILE NO.: FS-20-16662
DATE: 20201221
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lisa London-Shiffman
Applicant
– and –
Leonard Shiffman
Respondent
COUNSEL:
Harold Niman and Meysa Maleki, for the Applicant/Respondent on Appeal
Dani Z. Frodis and Daniel Bernstein, for the Respondent/Appellant on Appeal
HEARD: December 17, 2020
J.T. Akbarali J:
Overview
[1] The appellant appeals from the final award of Arbitrator Mamo, dated April 24, 2020. Although the award deals with several issues, the appeal is restricted to the arbitrator’s dismissal of the appellant’s claim to a 50 percent beneficial ownership interest in the matrimonial home.[^1]
Brief Background
[2] The parties married on June 10, 1984. They separated on September 12, 2016.
[3] In 1987, the parties purchased a home at 24 Lauderdale Drive, Toronto, as joint tenants. They contributed equally to the purchase price.
[4] In 1999, the parties tore down the home and rebuilt it. The appellant funded between $1.0 and $1.1 million in renovations, while the respondent contributed close to $100,000.
[5] The parties moved in to the newly built home in September 2000. About one month later, the appellant transferred his interest in the home to the respondent in order to protect the asset from creditors of a publicly traded American company of which he was a director.
[6] At the arbitration, the appellant argued that the respondent holds 50% of the matrimonial home in trust for him on a resulting trust. The respondent argued that the transfer of the home to her was a gift. In his award, the arbitrator concluded that the transfer of the home to the respondent was a gift.
[7] Under the terms of the arbitration agreement, an appeal may be made on a question of law, a question of fact, and a question of mixed fact and law, without leave. The appellant appeals the arbitrator’s determination that the appellant gifted his interest in the house to the respondent, alleging the arbitrator erred by:
a. failing to apply the presumption of resulting trust, and wrongly shifting the onus to the appellant to demonstrate he intended to create a trust, rather than requiring the respondent to rebut the presumption by proving the appellant intended a gift;
b. failing to consider appellate authority to the effect that a party’s motivation to shield a property from creditors does not rebut the presumption of a resulting trust;
c. finding that the appellant had divested himself of all power and control over the matrimonial home when concluding that all the elements of a gift were present;
d. finding that the appellant’s intention was to gift the property when the evidence was insufficient to reach this conclusion;
e. failing to consider the contradiction between the respondent’s evidence that the appellant was controlling and secretive about the family’s finances, and her legal position that the appellant intended to give her the family’s most significant asset;
f. failing to give appropriate weight to the fact that the majority of the funds put into the home came to the appellant as a gift from his father, and would have constituted excluded property had the gifted funds not been put into the home.
[8] For the reasons below, I find that the arbitrator made no error in his analysis.
Did the arbitrator err by reversing the presumption of resulting trust?
[9] The arbitrator correctly identified the legal principles that apply where a resulting trust is alleged. He directed himself to s. 14 of the Family Law Act, R.S.O. 1990, c. F.3, which codifies the presumption of resulting trust, and requires that it be applied in questions of the ownership of property between spouses: at para. 52. He also noted that, in the calculation of net family property, and the equalization of the value of net family property under the FLA, the court begins with a determination of ownership under s. 10: at para. 30.
[10] The arbitrator reviewed the Supreme Court of Canada’s decisions in Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, and in Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at some length. At para. 46, he directed himself to para. 18 of Cromwell J.’s decision in Kerr, citing Rothstein J. in Pecore at para. 44, about the operation of the presumption:
The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention.
[11] He also made reference to Cromwell J.’s statement, at para. 20 in Kerr, that “the presumption of resulting trust, however, is neither universal nor irrebuttable.”
[12] The appellant argues that, although the arbitrator correctly directed himself as to the law with respect to the presumption, he in fact reversed the onus in his decision, ignoring the presumption, and as such, made an error of law. It is more likely that the alleged error, if it was made, is an error of mixed fact and law, and the appellant’s argument is that the alleged error is an extricable error of law, and as such, the arbitrator’s decision should be reviewed on a correctness standard: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 27, 36. Either way, the appellant contends for review on a correctness standard.
[13] I agree that if the arbitrator reversed the presumption, he would have committed an extricable error of law. However, I do not accept the argument that the arbitrator did not properly apply the presumption. In his analysis of the evidence on the arbitration, the arbitrator referred on other occasions to the presumption of resulting trust. For example, at para. 68, he wrote:
With respect to the characterization of the transfer of Mr. Shiffman’s 50 percent interest to his wife, the starting point in law is that the presumption of resulting trust applies unless it is rebutted by evidence to the contrary, and as such, Ms. London has since the transaction held one-half of the beneficial interest in the property in trust for Mr. Shiffman.
[14] At para. 73, after having reviewed some of the evidence from the hearing, the arbitrator again referred to the presumption, writing “Ms. London maintains that the presumption of resulting trust is rebutted in this case by virtue of the fact that Mr. Shiffman intended to part with his 50 percent interest and convey it to his wife, as such bestowing a gift on her.”
[15] There is no question the arbitrator was alive to the presumption, correctly directed himself to its operation, and correctly applied it. The appellant has not been able to point to any aspect of the arbitrator’s decision that supports a conclusion that, having properly directed himself to the presumption on multiple occasions, the arbitrator did not apply it when assessing the evidence. The argument that the arbitrator, in fact, displaced the presumption is really an argument that the evidence did not justify the arbitrator’s conclusion that the transfer was a gift. I address this argument below.
Did the arbitrator err by failing to consider appellate authority?
[16] The appellant argues that the arbitrator erred in law by failing to consider binding authority from the Court of Appeal that establishes that an intention to shield a property from creditor’s does not, in itself, rebut the presumption of a resulting trust. The appellant relies on the Court of Appeal’s decisions in Schwartz v. Schwartz, 2012 ONCA 239, 394 D.L.R. (4th) 326, Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, and Holtby v. Draper, 2017 ONCA 932, 138 O.R. (3d) 481.
[17] The appellant argues that these cases establish that a transfer of property to protect it from creditors is not a bar to finding a resulting trust. He argues that the arbitrator found that the appellant’s gratuitous transfer of his interest in the home to the respondent was compelling evidence of a gift, despite overwhelming evidence that it was not. He states that, by so finding, the arbitrator’s decision was inconsistent with the appellate jurisprudence which bound him.
[18] The appellant’s recitation of the principles arising out of the appellate jurisprudence is correct, insofar as it goes. However, the cases upon which he relies do not stand for the proposition that a desire to protect property from creditors is irrelevant to the question of the transferor’s intention at the time of the transfer.
[19] In Schwartz, the trial judge found that the wife did not intend to gift her interest in the matrimonial home to the husband. The Court of Appeal found no palpable and overriding error in his determination. It held that, on the facts of the case, the presumption of resulting trust was not rebutted: at para. 40. It also held, at para. 43, quoting Nussbaum v. Nussbaum, (2004), 2004 CanLII 23086 (ON SC), 9 R.F.L. (6th) 455, that “’[w]hile evidence that someone intended to fully evade creditors can be evidence that they intended to gift their entire interest in the property’, a party’s actual intention remains a question of fact to be determined based on the whole of the evidence.”
[20] In Korman, the Court of Appeal overturned the trial judge’s finding that the husband had gifted his interest in the matrimonial home to the wife. In that case, the wife had admitted that the husband had a full interest in the matrimonial home, and that the assets held during the marriage were to be shared equally: at para. 35. The Court of Appeal thus found that, even absent the presumption, the evidence at trial did not ground a finding of a clear intention to gift. The Court of Appeal went on to quote itself in Schwartz, quoting Nussbaum, as described above, recognizing that evidence that someone intended to full evade creditors can be evidence that they intended to gift their entire interest in the property: at para. 38.
[21] In Holtby, the trial judge found that the wife did not rebut the presumption of resulting trust with respect to the common shares of a corporation that had been issued gratuitously to her. In this case, the wife argued that the husband had intended to defeat creditors through the transfer, and that this intention was a bar to his claim of resulting trust, because the transaction was entered into for an illegal purpose. The Court of Appeal found the trial judge did not err in law by concluding that the intention to defeat creditors did not defeat the husband’s resulting trust claim. It wrote, “[w]hile evidence of an intention to defeat creditors can be evidence of a gift, it is not conclusive.” The court held that a motive to shield property from creditors does not “in itself” rebut the presumption of resulting trust. “The issue is always the intention of the transferor in relation to the transferee”: at paras. 53-56.
[22] While the arbitrator did not explicitly refer to Schwartz, Korman, or Holtby, neither did the arbitrator misdirect himself with respect to the import of an intention to defeat creditors when considering whether the appellant intended to gift his interest in the home to the respondent. There is no indication that the arbitrator relied solely on the appellant’s intention to defeat creditors by transferring his interest in the matrimonial home to the respondent when the arbitrator concluded that the transfer was a gift. Moreover, as the jurisprudence reviewed above makes clear, the appellant’s desire to protect the property from creditors was relevant evidence for the arbitrator to consider. The appellant’s dispute is with the arbitrator’s conclusion on the totality of the evidence – a conclusion reviewable on a palpable and overriding error standard, and which I address below.
Did the arbitrator err in concluding that the appellant had not divested himself of control over the matrimonial home?
[23] In finding that the appellant had gifted his interest in the matrimonial home to the respondent, the arbitrator, at para. 94, relied on the Court of Appeal’s decision in McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at paras. 23-24, which identified three elements that are required for a gift to be made: (i) an intention to make a gift on the part of the donor, without consideration or expectation of remuneration, (ii) an acceptance of the gift by the donee, and (iii) a sufficient act of delivery or transfer of the property to complete the transaction.
[24] At para. 95 of the award, with respect to the first element of the test, the arbitrator directed himself that to constitute a gift, a donor must divest himself or herself of all power and control over the property and transfer such control to the donee: see McNamee, at para. 25. The arbitrator found that the appellant “did just that when he signed his interest in the property over to [the respondent].”
[25] The appellant argues that the arbitrator erred in finding that he had transferred all control over the property to the respondent. He cites Colivas v. Colivas, 2017 ONSC 4730 in support of his argument. In Colivas, the parties agreed the husband had controlled the finances during the marriage, and was responsible for the payments relating to the matrimonial home, including the mortgage. Douglas J. concluded, at para. 47(d), that the husband had not divested himself of all power and control of the property, because, “[i]f he was in sole control of the finances then he continued to be in control of the disposition of the matrimonial home as to withhold payments against the mortgage, or the taxes for that matter, could trigger the rights of third parties regarding possible disposition of the matrimonial home.”
[26] The appellant argues that he continued to maintain control over the parties’ home because the parties held a joint line of credit secured by the home, in the amount of $300,000. The respondent testified that the line of credit was meant to be used for emergencies only. She stated she was unaware that the appellant had used the line of credit in connection with his investments related to his business. The appellant thus had use of, and made payments on, the line of credit. As a result, the appellant argues that, like the husband in Colivas, he had the ability to trigger the rights of third parties regarding possible disposition of the matrimonial home, and so had not divested himself of all power and control of the property. This alleged error is an error of fact, reviewable on a palpable and overriding error standard: Housen, at para. 10.
[27] The arbitrator found that the parties led fairly independent economic lives: at para. 386. The home was unencumbered. The respondent paid for the property taxes and utilities. The appellant’s evidence was that, after he transferred his interest in the home to the respondent, he paid for some capital repairs and improvements on the home, but there is no evidence he paid for ongoing expenses. The appellant’s evidence established that, after separation, he paid no expenses related to the home.
[28] Thus, the only evidence of any payments the appellant made that could affect the rights of third parties regarding possible disposition of the matrimonial home related to the line of credit. The value of credit available on the line of credit was minor compared to the value of the home, which had undergone a renovation worth over a million dollars, and which the appellant deposed was a $6 million home.[^2] Moreover, the respondent testified that her recollection was the line of credit was intended to be available for an emergency, but it would not otherwise be used.
[29] There was thus evidence on the record that would have allowed the arbitrator to conclude that the appellant’s use of the line of credit was inconsistent with the parties’ agreement, according to which the existence of the line of credit would not imperil the property. Moreover, the available credit was only a small portion of the home’s equity. It is not realistic to think that non-payment of the line of credit would create a problem resulting in third parties stepping in to dispose of the matrimonial home. Moreover, as I review next, there was evidence before the arbitrator to allow him to conclude that the appellant intended to transfer his legal and beneficial ownership in the home to the respondent. In my view, the arbitrator did not make a palpable and overriding error when he found that the appellant had divested himself of power and control over the house when he transferred his interest in it to the respondent.
Did the arbitrator err in in his assessment of the evidence?
[30] The appellant argues that the arbitrator erred in his assessment of the evidence. Specifically, he argues that the arbitrator erred by finding it was his intention to gift the property on insufficient evidence, by failing to consider the contradiction between the respondent’s evidence that the appellant was controlling and secretive about the family’s finances, and her legal position that the appellant intended to give her the family’s most significant asset, and by failing to give appropriate weight to the fact that the majority of the funds put into the home came to the appellant as a gift from his father, and would have constituted excluded property had the gifted funds not been put into the home.
[31] The arbitrator is entitled to significant deference with respect to his findings of fact. Findings of fact, and inferences of fact, are reviewable on a palpable and overriding error standard: Housen, at paras. 10, 19, 25.
[32] The arbitrator clearly understood that the appellant was claiming a 50 percent beneficial ownership in the home by way of a resulting trust arising out of his substantial, almost exclusive, contribution to the rebuilding of the house, and his gratuitous transfer of his one-half interest in the property to the respondent in October 2000.
[33] In determining that the appellant’s intention was to gift his interest in the property to the respondent, the arbitrator carefully reviewed the evidence that was before him at the arbitration. This included:
a. the evidence that both parties contributed to the purchase of the house, which was placed in joint tenancy;
b. the evidence that the appellant funded almost the entirety of the renovation to the home while the parties were joint owners, through funds gifted to him by his father. The arbitrator found, in reliance on Adams v. Adams, 2001 CanLII 8527, 15 R.F.L. (5th) 1 (Ont. C.A.),[^3] that where title to property is held jointly, without an agreement to the contrary, it is reasonable to assume that the appellant intended to benefit both parties when expending funds for the reconstruction of the matrimonial home;
c. the evidence that the appellant was a director on the board of an American public company facing liquidity issues and that he was concerned about creditors of the company, and personal liability. He wanted to place the matrimonial home - the family’s most significant asset (as he describes it) – out of the reach of creditors. He was so stressed about potential creditors that he was having trouble sleeping;
d. the evidence that the transfer of title was made totally on the appellant’s initiative, and completed by his brother, who is a lawyer, but whose reporting letter makes clear that he did not advise on the transaction;
e. the evidence that, according to the land transfer tax affidavit, the transfer was for $2.00 and natural love and affection;
f. the appellant’s “categorical” evidence that he did not intend to gift his interest in the home to the respondent, and that they had talked about her holding it for him on a resulting trust, although he acknowledged that they “didn’t use those exact words”;
g. the respondent’s evidence that the parties never discussed her holding the appellant’s interest in the house in trust for him, or his desire to transfer his interest to her for “credit proof protection purposes”;
h. the appellant’s admission on cross-examination that he transferred legal and beneficial ownership to the respondent. He confirmed he knew what legal ownership and beneficial ownership means. He also confirmed he would not later take the position with a creditor that half the ownership in the house was his, being held in trust for him by the respondent; and
i. the evidence that there was no trust document with respect to the house.
[34] The arbitrator found the appellant was motivated to transfer his interest to the respondent to put the property out of the reach of potential creditors, to alleviate his stress that he could potentially be sued as a result of his directorship of the US corporation. He found, based on the appellant’s cross-examination, that the appellant was “well aware” that, in order to protect the asset, “he needed to transfer both the beneficial and legal title to [the respondent].”
[35] The arbitrator also expressed concerns related to the appellant’s credibility. For example, he set out an exchange between the appellant and his counsel in examination-in-chief, during which the appellant indicated that the nature of the transaction was “supposed to be that [he] was going to transfer [his] interest to her and she would be holding [his] interest in trust, as a result in trust [sic].” The arbitrator made reference to the appellant’s inability to assist with evidence of facts relating to the discussions between the parties with respect to his intention at the time of the transfer. He concluded, “I find that [the appellant’s] answers were based on a legal argument or position and not on an evidentiary foundation on which the law should be applied. Rather than providing facts, [the appellant] gave us conclusions of law.”
[36] The appellant argues that the arbitrator did not reference the times the respondent referred to the home as “our home.” The arbitrator is not required to reference every piece of contradictory evidence in his reasons. Moreover, the respondent points out that her statements to that effect were not included in the appellant’s closing argument at the arbitration, which gives some indication of the importance accorded to them by the appellant at that hearing.
[37] The appellant also argues that the arbitrator did not grapple with the contradiction between the respondent’s evidence that the appellant was controlling and secretive about the family’s finances and the conclusion that the appellant intended to gift his interest in the family’s most significant asset to the respondent. I am not satisfied that there was a contradiction to grapple with. The respondent testified that the appellant controlled the decision to transfer his interest in the home to her, without much discussion.
[38] The appellant states that the arbitrator erred in failing to give appropriate weight to the fact that the majority of the funds put into the home came to the appellant as a gift from his father, and would have constituted excluded property had the gifted funds not been put into the home. The arbitrator was clearly aware of the origin of the funds. What else the appellant might have done with them was irrelevant. The fact is that the appellant put the funds into the jointly owned property, and subsequently transferred his interest in the property to the respondent. The arbitrator had to deal with the facts before him, not speculate on what might have been had the appellant made different choices.
[39] The question is not whether there was some evidence that could have supported a conclusion different than the one reached by the arbitrator. The question is whether there was a basis in the record on which the arbitrator could reach the conclusions he did.
[40] In my view, there was ample evidence – not least of which was the appellant’s own admission – that the appellant deliberately transferred his legal and beneficial interest in the property to the respondent. I cannot find that the arbitrator made a palpable and overriding error in determining that the appellant had gifted his interest in the home to the respondent.
Conclusion
[41] For the foregoing reasons, the appellant’s appeal is dismissed.
[42] The parties have already delivered their bills of cost to me. If the parties are unable to agree on costs, I will receive submissions as follows:
a. The respondent shall deliver her costs submissions by January 11, 2021, limited to three pages and any relevant offers;
b. The appellant shall deliver his responding costs submissions by January 18, 2021, limited to three pages and any relevant offers;
c. The respondent may deliver reply submissions, limited to two pages, by January 22, 2021.
d. Submissions may be delivered via email to my assistant at Yomattie.evans@ontario.ca.
J.T. Akbarali J.
Released: December 21, 2020
COURT FILE NO.: FS-20-16662
DATE: 20201221
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lisa London-Shiffman
Applicant
– and –
Leonard Shiffman
Respondent
REASONS FOR JUDGMENT
J.T. Akbarali J.
Released: December 21, 2020
[^1]: If successful on the appeal, the appellant also seeks to appeal the costs decision of the arbitrator. [^2]: The appellant gave this evidence in an affidavit that was put to him on cross-examination at the arbitration. [^3]: The appellant alleges no error of law in the arbitrator’s application of Adams.