COURT FILE NO.: CV-20-00640017-00CL DATE: 20210111

ONTARIO SUPERIOR COURT OF JUSTICE (Commercial List)

BETWEEN:

TORONTO ISLANDS COMMUNITY TRUST CORPORATION Applicant

– and –

PETER MCLAUGHLIN and STEVEN WHITFIELD Respondents

COUNSEL: Brendan F. Morrison, Adam H. Kanji for the applicant Robert G. Tanner for the respondents

HEARD: October 23, 2020

Koehnen J.

Overview

[1] The Toronto Islands are situated in Lake Ontario, just a short ferry ride from downtown Toronto. Included amongst the Islands’ parklands is a residential community of 262 homes. The use of those homes has had a somewhat controversial history. At one point it was proposed to expropriate the homes and convert the residential community to parkland. After two inquiries and years of political debate, the issue was resolved by enacting the Toronto Islands Residential Community Stewardship Act, 1993, SO 1993, c. 15 (the “Islands Act” or “the Act”).

[2] The Act creates a regime under which transfers of homes on the island are subject to strict regulation which is administered by a statutory Trust. The Islands Act provides that homes on the island can only be transferred through the Trust to the person first in line on a lengthy waiting list the Trust maintains of people interested in purchasing an island home. Prices are fixed by regulation. There are three exceptions to this regime. Under certain conditions, an owner can transfer a home to a spouse, a joint tenant or a child. The act defines child to include an adopted child.

[3] The issue before me is whether a 90-year-old adult can adopt a 58-year-old adult and then transfer the property on the basis that the transfer is one from a parent to a child under the Islands Act. The Trust says such a transfer is invalid. The respondents say it is valid.

[4] On its face, such a transfer would fall within the letter of the Islands Act. There are, however, many circumstances in which such a transfer would contravene the spirit of the Act even though it fell within its letter. Courts are called on to interpret and apply statutes according to the purpose they were designed to advance.

[5] The Islands Act was clearly designed to restrict the transfer of homes on the Island to limited circumstances. To allow transfers arising out of any adult adoption would, in my view, breach the spirit and purpose of the Islands Act. However, in the circumstances of this case, a transfer would not violate the spirit or the purpose of the Act.

[6] The respondent Peter McLaughlin has acted as a father figure to the respondent Steven Whitfield for approximately 37 years. This is not a case of two adults with little or no prior relationship engineering an adoption to defeat the purpose of transfer restrictions on Island homes. This is an example of a genuine family relationship that stretches back decades and that is amply supported by contemporaneous documentation over the course of 37 years. In those circumstances there is no reason to place any limitation on the definition of child as including an adopted child under the Islands Act.

The Parties

[7] The Applicant, the Toronto Islands Residential Community Trust Corporation (the “Trust”), is a corporation without share capital created pursuant to the Islands Act. It is charged with managing the land and buildings associated with the Island homes for the benefit of Island residents and the general public. All members of the Trust’s Board of Directors are appointed by the Lieutenant Governor in Council and are ultimately accountable to the Legislative Assembly.

[8] The Respondent, Peter McLaughlin, is now 92 and owns a home on the Islands.

[9] The Respondent, Steven Whitfield, is now 61 and also owns a home on the Island.

[10] In March 2017 McLaughlin adopted Mr. Whitfield.

[11] On April 16, 2018 McLaughlin purported to transfer a one half interest in his home to Mr. Whitfield.

The Statutory Scheme Applicable to Island Homes

[12] The Islands Act was enacted after two inquiries into the Island homes, the Swadron Report from 1981 and the Johnston Report from 1991.

[13] The Act adopted some recommendations in the reports but rejected others.

[14] The Act provides that the land on which the Island homes sit, are owned by the Province of Ontario. It also aims to balance the public interest and the interest of Island residents by establishing strict restrictions on the ability to transfer interests in Island homes.

[15] The Act provides that the land on which the homes sit is owned by the Province of Ontario. Ontario leases the land to the Trust. The Trust in has, in turn, granted a 99-year sublease of the land on which each home sits. Residents who wish to own property on the Islands must purchase both the house and an assignment of the underlying land lease. Title to both the house and the land lease must always be owned by the same person(s).

[16] Transfers are strictly regulated. Island home owners cannot be sold on the open market at prices set by the homeowner. Instead, if a homeowner wishes to sell a property, it must do so through the Trust.

[17] To effect such transfers, the Trust maintains a list of people interested in purchasing an Island home. The list can accommodate up to 500 names at a time. Names are added only when space permits — usually once every two years. Members are added by drawing names at random from applications from the public at large. Members pay a fee of approximately $40 per year to maintain their names on the purchaser list.

[18] When a home comes up for sale, the Trust sends an offer to purchase to the first 150 names. A buyer is normally found within the first 100 names. On average, the Trust sells one to two homes through the purchasers’ list per year. Since the establishment of the purchasers’ list in February 1993, approximately 66 homes have been sold.

[19] Homes are sold, not at market value, but at prices established by regulation. The prices are substantially below market prices for residential real estate in Toronto. A person may own an interest in only one Island home at a time.

[20] The transfer restrictions exist to reflect the fact that the lands are publicly owned and to maintain the unique character of the Island community for the benefit of residents and the public at large.

[21] Under section 21 of the Act, transfers of Island homes must be effected through this regime with three exceptions: transfers to spouses, joint tenants and children.

[22] Transfers to a spouse can occur by devise or inter vivos transfer with or without consideration.

[23] Under section 21 (4) of the Act, an owner may devise an Island home to his or her child. Under section 21 (5) an owner may sell an Island home to his or her child at a price determined in accordance with the regulations. Transfers to a joint tenant are subject to similar rules.

[24] An owner may not transfer title in a home to a child inter vivos without payment.

[25] Child is defined in the Islands Act as including an “adopted child”.

The Transactions at Issue

[26] As noted above, on April 16, 2018 Mr. McLaughlin purported to transfer a half interest in his house to Mr. Whitfield. There were a number of deficiencies associated with that transfer:

(a) To facilitate the transfer of the McLaughlin home to Mr. Whitfield, Mr. Whitfield transferred his half interest in his own home to his wife so that he would not impermissibly own two Islands properties. In doing so, however, he failed to register an assignment of Mr. Whitfield’s interest in the land lease, thereby severing title to the home from title to the land contrary to section 21(11) of the Islands Act.

(b) When Mr. McLaughlin transferred a half interest in his home to Mr. Whitfield, he also failed to register an assignment of the land lease on title to the property thereby severing title to the home from title to the land contrary to section 21(11) of the Islands Act.

(c) The transfer of both interest was done without providing notice to the Trust.

(d) The transfer of the one half interest in the McLaughlin home to Mr. Whitfield occurred without paying funds to the Trust (which would in turn remit the funds to the owner).

[27] After the Trust brought these deficiencies to the attention of the respondents, the purported transfers were unwound. The respondents’ real estate lawyer took responsibility for the technical deficiencies in the transfer.

[28] Even though the transfers were unwound, the Trust nevertheless brings this application for declaratory relief. It is concerned that there are now rumours among Island residents that adult adoptions are one way of avoiding at least some of the restrictions on transfers of Island homes. The Trust seeks the following relief:

(a) A declaration that the adult adoption of Mr. Whitfield by Mr. McLaughlin bestows no legal right to Mr. Whitfield to obtain title to the McLaughlin home;

(b) A permanent injunction prohibiting Mr. Whitfield from obtaining title to the McLaughlin home;

(c) Fines of $5,000 against each of Mr. Whitfield and Mr. McLaughlin for their improper transfers of interest in their homes; and

(d) Costs of this Application.

Analysis

[29] The Trust relies heavily on the fact that there is no evidence from Mr. McLaughlin about the purpose for which he adopted Mr. Whitfield. Mr. McLaughlin has not sworn an affidavit in these proceedings and did not attend a rule 39 examination that the applicant sought to conduct. The reasons for both defaults are understandable. Mr. McLaughlin is 92, he is under the care of a geriatrician at Saint Michael’s Hospital who has diagnosed him with dementia and has expressed the view that subjecting him to examination could imperil his health.

[30] Since suffering a fall, Mr. McLaughlin has been living at a retirement home off of the Island. The evidence before me is that he will move back into his Island home once Mr. Whitfield has completed certain renovations to that property which will make it easier for a person with Mr. McLachlan’s current challenges to live there.

[31] The Trust urges me to take a purposive approach to the interpretation of the Act in order to prohibit the proposed transfer and to prohibit generally transfers between a homeowner and an adopted adult child. The Trust submits that allowing transfers of homes to adult adoptees would subvert the transfer restrictions under the Act and would violate the interests of the 500 members of the purchasers list.

[32] The Trust notes that, although the Act defines “child” as including an adopted child, it does not include an adopted adult within that definition. I do not find that submission particularly persuasive. The Oxford Dictionary of English, third edition defines child as including “a son or daughter of any age.” When the Act was passed, the law permitted adult adoptions. As a result, when defining child to include an adopted child in the Islands Act, the legislature must be presumed to have known about the possibility of adult adoptions. Despite that imputed knowledge, the legislature did not limit the definition of child to biological children or children adopted beneath a certain age. The law continues to permit adult adoptions.

[33] Moreover, adult adoptions are not available on demand. They are subject to a court process whereby a judge hears both the adopter and the adult adoptee and satisfies him or herself about four criteria, namely that:

a. The adoption would create an actual (not just legal) change in the relationship between the applicant and the proposed adoptee;

b. Both parties are aware of the legal incidents of adoption, and intend those incidents to govern their new relationship;

c. The application is motivated by the psychological and emotional need of the proposed adoptee for a new parent or for a parent to "fill the gap" in the parenting of the proposed adoptee; and,

d. The relationship between the applicant and the proposed adoptee would be "enhanced and strengthened" by the adoption order. [See Adoption of M.O.M. (Re), 2013 ONSC 3252 at para 12]

[34] The respondents submit that the restrictions on the availability of adult adoption are far greater than the restrictions on the availability of marriage. As a result, the respondents submit that the court should not be overly concerned about adult adoptions undermining the purpose of the Island Act.

[35] In addition, the respondents pointed to s. 216 (1) of the Child, Youth and Family Services Act, 2017, SO 2017, c 14, Sch 1 s 199(3) which provides that:

“An adoption order under section 199 is final and irrevocable, subject only to section 215 (appeals), and shall not be questioned or reviewed in any court by way of injunction, declaratory judgment, certiorari, mandamus, prohibition, habeas corpus or application for judicial review.”

[36] Section 217 (1) of the Child, Youth and Family Services Act, 2017, SO 2017, c 14, Sch 1 s 199(3) is to the same effect and provides that:

For all purposes of law, as of the date of the making of an adoption order,

(a) the adopted child becomes the child of the adoptive parent and the adoptive parent becomes the parent of the adopted child; (emphasis added).

[37] The respondents submit that the applicant’s position effectively amounts to a collateral attack on the adoption order because it would be ignoring the adoption order for certain purposes of law when the Child and Family Services Act specifically provides that an adoption makes the adult adoptee the child of the adopter for all purposes law.

[38] The respondents submit that there is no discretion whatsoever in the court to depart from the clear language of the statute. The Island Act allows clearly allows a homeowner to transfer or devise a home to an adopted child provided they comply with the other provisions of the Act. That, say the respondents, should be the end of the analysis.

[39] I do not believe the position of either side fully captures the nuances of a court’s role in interpreting statutes.

[40] The court’s role in interpreting a statute is well-established. Statutory interpretation is not based solely on applying the literal word in a statute. Rather, as the Supreme Court of Canada explained in Rizzo & Rizzo Shoes (Re), [1998] 1 SCR 27 at para 21:

Today, there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

[41] The interpretation of a statute must produce harmony amongst the various internal provisions of the statute itself. [See Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42 at para 27]. Ruth Sullivan, in her leading text, Sullivan on Construction of Statutes, states that:

It is presumed that the provisions of legislation are meant to work together, both logically and teleologically, as parts of a functioning whole. The parts are presumed to fit together logically to form a rational, internally consistent framework; and because the framework has a purpose, the parts are also presumed to work together dynamically, each contributing something toward accomplishing the intended goal.

[42] Adopting a purely literal approach to statutory interpretation runs the risk of subverting the legislature’s intention and allowing the mischief the legislature intended to prevent. [See Oakville (Town) v Clublink Corporation ULC, 2019 ONCA 826 at para 41]. By way of example, if courts were to permit a transfer of an Island home between two adults strangers with no prior relationship in circumstances where one had adopted the other to transfer an Island home, courts would be allowing the mischief the legislature intended to prevent and would be doing violence to the principle that provisions of legislation are meant to work together. In that circumstance the court would be giving precedence to the definition of child and would be ignoring the underlying purpose of the legislation which is to establish a fair scheme to make Island homes available to the public at large.

[43] The preferred approach is one that recognizes the context, purpose, and legislative history of the statute when interpreting its language. [See Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42 at paras 26-27].

[44] The fact that courts are required to apply certain tests when approving adult adoptions, is not, in my view, the end of the analysis. Those tests are applied with a view to the purposes fostered by the Child, Youth and Family Services Act. The purposes of the Islands Act are completely different. Moreover, when considering an adult adoption, courts usually do not have the benefit of a party adverse in interest. While it may make abundant sense to provide that an adoption creates a parent-child relationship for all purposes in law and that an adoption cannot be subsequently attacked when dealing with the adoption of a minor, it might be appropriate to give different weight to that principle when dealing with an adult adoption that is intended to undermine a statutory scheme.

[45] To my mind, the history of the relationship between Mr. McLaughlin and Mr. Whitfield is the primary mechanism by which I can assess whether a transfer to Mr. Whitfield would defeat the purpose of the Islands Act. That history demonstrates that there is a long-standing, deep, family-like relationship between Mr. McLaughlin and Mr. Whitfield.

[46] Mr. Whitfield came to Toronto as a young man approximately 37 years ago. His biological father suffered from alcohol and drug addiction and which him to abandon his family while Mr. Whitfield was a teenager.

[47] The respondents met when Mr. Whitfield was 25 and Mr. McLaughlin was 56. Mr. Whitfield left school after grade 7 and had little life experience. At the time, Mr. McLaughlin was a teacher at Ryerson College and had no spouse or children. Mr. McLaughlin soon assumed a father role in Mr. Whitfield’s life:

(a) Mr. McLaughlin introduced Mr. Whitfield to literature and music, engaged Mr. Whitfield in discussions of philosophy and politics, in which he previously had little interest or knowledge.

(b) Mr. McLaughlin took Mr. Whitfield on a tour of England and Europe in 1992, acting as a guide and tutor.

(c) After Mr. Whitfield married, Mr. McLaughlin became a grandfather figure to Mr. Whitfield’s son and stepsons, taking them on canoeing trips and other adventures.

(d) Mr. McLaughlin helped Mr. Whitfield apply to become a registered builder under the Ontario New Home Warranty Program in 1995.

(e) Mr. McLaughlin accompanied Mr. Whitfield’s family on family vacations.

(f) Mr. McLaughlin vacationed with Mr. Whitfield’s parents in law.

(g) Mr. McLaughlin housed Mr. Whitfield’s 12-year-old godson for several weeks in 1996.

(h) Mr. McLaughlin was a regular participant in family events, including birthdays, Christmas and weekly pizza and games nights.

(i) More recently, after Mr. McLaughlin’s capabilities became more limited; Mr. Whitfield began driving Mr. McLaughlin to visits, medical and other appointments.

(j) Mr. Whitfield and his wife served as attorneys under Mr. McLaughlin’s power of attorney.

(k) Mr. Whitfield and one of his sons took turns living in Mr. McLaughlin’s home with him after his fall before Mr. McLaughlin found space in a care home.

(l) Mr. Whitfield visits with Mr. McLaughlin almost daily at the retirement residence where he is now temporarily living pending the completion of renovations to his home.

(m) Mr. Whitfield provides Mr. McLaughlin with groceries and physical care.

(n) Mr. Whitfield is renovating Mr. McLaughlin’s home to accommodate his increasing disabilities and to create full-time living quarters for caregivers (Mr. Whitfield and/or his wife) with the intention that Mr. McLaughlin should never have to go into a long-term care facility.

[48] In all of this, Mr. Whitfield is in effect fulfilling his obligation as a son under section 32 of the Family Law Act which requires

Every child who is not a minor has an obligation to provide support, in accordance with need, for his or her parent who has cared for or provided support for the child, to the extent that the child is capable of doing so.

[49] This relationship is amply supported by photographs and other documents throughout the course of the last 37 years. This is not a case of two adult strangers or even good friends engineering an adoption to circumvent restrictions on property transfers under the Islands Act. Indeed, the parent-child relationship between Mr. McLaughlin and Mr. Whitfield and his family is substantially closer than a large number (perhaps even a majority) of biological family relationships.

[50] The Trust relies heavily on the absence the court adoption file which might shed light on the reasons that Messrs. McLaughlin and Whitfield gave the court when it approved the adoption. I note, however, that the Trust did not ask for production of that file when it examined Mr. Whitfield. In those circumstances I am not prepared to draw an adverse inference from the absence of the court file.

[51] Given the depth of evidence of a long-standing familial relationship between Mr. McLaughlin and Mr. Whitfield, I am inclined to apply the words of the Islands Act, literally and find that Mr. Whitfield is a child of Mr. McLaughlin for purposes of that Act. It is highly unlikely that two other adults would engage in a 37 year relationship involving their immediate and extended family to engineer a transfer of an Island home to circumvent the restrictions contained in the Act.

Trust’s Request to Impose Fine

[52] The penalty for violating sections 21(5) and 21(11) is prescribed by section 31 of the Islands Act, which provides for a monetary penalty not exceeding $5,000.

[53] The Trust asks me to impose a fine on each of Mr. McLaughlin Mr. Whitfield in the amount of $5,000.

[54] Section 31 of the Act provides:

Any individual who contravenes subsection 21(1), (9) or (11) or 24 (2) or (3) or who fails to comply with subsection 24(4) or 27(2) is guilty of an offence and is liable on conviction to a fine not exceeding $5,000.

[55] I dismiss the Trust’s request to impose a fine for two reasons. First, I was given no authority to suggest that I have the jurisdiction to convict the respondents of and impose a fine in the context of a civil proceeding. I am not prepared to do so without being directed to specific authority to that effect. While I have not looked into the issue, when s. 31 of the Act speaks of a “conviction”, it suggests to me that the process involved is one to which the Provincial Offences Act, RSO 1990, c P.33 applies. Second, even if I have jurisdiction to impose a fine, I would not be inclined to do so on the facts of this case. The respondents were acting on legal advice with respect to the purported transfer. The lawyer who advised them has confirmed that he gave them what appears to be incorrect advice and has taken responsibility for that. The transaction was unwound shortly after the Trust brought the defects to the respondents’ attention. Those are not appropriate circumstances for a conviction or fine.

Costs

[56] Each side seeks costs in respect of two proceedings. The first was a motion by the respondents that I heard on July 22, 2020 and dismissed.

[57] The Trust seeks $5,000 in costs for that motion. That strikes me as a reasonable amount. I fix costs at $5,000 including disbursements and HST in favour of the applicant.

[58] With respect to the current application, the Trust seeks costs of $20,000 regardless of whether it is successful or unsuccessful. The Trust submits that it is a public-interest litigant and was required to bring the application given the issues that arose.

[59] The respondents seek costs on a full indemnity scale in the amount of $63,261.08.

[60] In my view, the respondents are entitled to their full indemnity costs of this application but not of the motion in July. It is unclear to me from the respondents’ costs outline whether the amount of $63,261.08 includes their costs of the July motion. If it does, the respondents should remove costs of the July motion from the $63,261.08. If counsel are unable to agree on the amount of that deduction, they can schedule a case conference before me to resolve the issue.

[61] Even if the applicant is a public-interest litigant, it does not mean that the cost of resolving issues of interest to them can be imposed on other parties.

[62] Although the applicant submits that it was “required” to bring this application, I do not share that view. After the transfer of Mr. McLaughlin’s home occurred, counsel for the applicant wrote to counsel for the respondents pointing out the defects in the transfer and demanding that the transfers be reversed. In doing so they wrote:

The Trust wanted to provide you with this notice and an unissued form of the Notice of Application in the hope that a lawsuit will be unnecessary. The Trust is hopeful that these transfers can be reversed in a timely manner and without the need for a public and costly proceeding.

If the Trust is ultimately required to commence legal proceedings to reverse these improper transactions, it will seek monetary penalties against both of you pursuant to section 31 of the Islands Act, as well as its legal costs.

[63] Respondents’ counsel replied indicating that the respondents would reverse the property transfers as demanded and did so. Following receipt of the reversal of the property transfers, the applicant made further demands. It then threatened to issue an application unless the respondents agreed that the McLaughlin home would pass to the Trust on Mr. McLachlan’s death. That was an entirely new demand made after the respondents had fully complied with the applicant first demand.

[64] If the Trust believed that the circumstances were such that it would be helpful to have clarity on the point, they have that option. The respondents should not, however, be saddled with the cost of the applicant’s desire to resolve potentially theoretical issues before they arise.

[65] The $5,000 cost award that I have issued in favour of the applicant will be satisfied by permitting the applicant to deduct $5,000 from the costs that they pay to the respondents pursuant to these reasons.

Koehnen J. Released: January 11, 2021