Court File and Parties

Court File No.: FC-20-189 Date: 2021-04-06 Superior Court of Justice - Ontario

Re: Paul Matthew Michael Barth, Applicant And: Tara Anne Taylor, Respondent

Before: D.A. Broad Counsel: Barry T. Paquette, for the Applicant Brent C. Balmer, for the Respondent

Heard: March 17, 2021

Endorsement

Background

[1] The applicant and the respondent did not marry but cohabited from November 2014 to February, 2019.

[2] At the time that the parties commenced cohabitation the parties resided at a residence in Bobcaygeon, Ontario owned by the respondent’s parents who had purchased it for her use in 2007. The applicant says that, after he moved into the residence, he paid for all expenses associated with the residence including the mortgage, taxes and insurance. He also says that he paid for renovations totaling approximately $18,000.

[3] The respondent’s parents transferred the residence to the applicant in July, 2018. At the time of the transfer there is a mortgage registered against the property in the sum of approximately $170,000. The mortgage was increased to approximately $235,000. The amount generated by the increase to the mortgage in the sum of $60,000 was paid to the respondent’s parents to retire a loan that they had made to the respondent in the sum of $45,000 and a loan that they had advanced to both the applicant and the respondent in the sum of $15,000.

[4] The same lawyer acted for the applicant, the respondent, and the respondent’s parents on the transfer transaction and also on the implementation of a trust agreement.

[5] The Trust Agreement provided as follows:

“Notwithstanding the title is taken in the name of [the applicant] alone, the parties agree that in the event the property is sold or the parties separated, the equity or net proceeds of any sale or disposition of the property will be divided equally between the parties and that [the applicant] is acting as Trustee for [the respondent] with respect to her above one-half interest. The parties further agree that at such time, [the respondent’s] financial status or credit rating changes which enables her to qualify for a mortgage, [the applicant] will at that time transfer ownership of the above property into both names in equal shares.”

[6] The applicant paid the legal fees for the transfer and to secure the new mortgage. The applicant says that the respondent signed the Trust Agreement voluntarily and indeed was a requirement that she insisted upon. At the time of the transfer the respondent, her parents and the applicant had a conversation wherein respondent and her parents expressed the need for the Trust Agreement to allow everyone to feel comfortable with the applicant’s purchase of the home.

[7] The applicant says that following separation he was unable to obtain the agreement of the respondent for disposition of the residence.

[8] The applicant has continued to pay the mortgage on the residence and the respondent has continued to occupy it.

[9] On May 5, 2020 the applicant commenced an Application seeking, inter alia, that the residence be forthwith listed for sale and sold in a commercially reasonable manner, pursuant to the Partition Act. The Application was served on the respondent on May 8, 2020.

[10] The respondent retained counsel and between June 11, 2020 and November 2, 2027 letters were sent by the applicant’s lawyer to the respondent’s lawyer seeking to have the respondent file court documents.

[11] In the course of the exchange of correspondence the respondent’s counsel delivered to the applicant’s counsel an unsigned Answer and an unsworn/unaffirmed affidavit. However, no signed Answer and sworn/affirmed affidavit were served.

[12] On November 2, 2020 the applicant’s counsel wrote to the respondent’s counsel stating that if the respondent’s responding materials were not received by November 13, 2020, the applicant would proceed without further notice to him.

Default Order

[13] The applicant proceeded with an uncontested trial resulting in the Order of Justice Gordon dated December 11, 2020 which provided, inter alia, as follows:

(a) the residence is to be listed for sale and sold in a commercially reasonable manner;

(b) the applicant will have sole carriage of the sale;

(c) the respondent shall pay the applicant one half of the cost of the mortgage, realty taxes and insurance from February, 2019 to the date of sale;

(d) the respondent shall be responsible for all utility payments from February 2019;

(e) the net proceeds of sale shall otherwise be divided equally between the respondent and the applicant, subject to the respondent paying to the applicant costs of $3,606.96.

[14] The respondent’s unsigned Answer and unsworn/unaffirmed affidavit were disclosed by the applicant to Justice Gordon prior to the making of the Order.

Motion to set aside Default Order

[15] On January 19, 2021 the respondent brought a motion for an order setting aside the Order of Justice Gordon and permitting her to file an Answer.

[16] The respondent’s counsel Mr. Balmer provided an affidavit in which he deposed that Mr. Paquette’s faxed letter of November 2, 2020 was not brought to his attention until January 14, 2021 when Mr. Paquette wrote to him to advise of Justice Gordon’s Order. Mr. Balmer stated that Mr. Paquette’s faxed letter was inadvertently archived in his firm’s email system and did not come to his attention when it was received.

[17] The respondent deposed in her affidavit that she will be seeking to have the Trust Agreement set aside on the basis that she did not sign it voluntarily and did not receive independent legal advice in relation to it. She alleged that her relationship with the applicant was marked by significant physical, sexual, emotional and financial abuse on the part of the applicant and that he was controlling of her. The applicant denies these allegations.

Guiding Principles

[18] Rule 25(19)(d) and (e) provide that the court may, on motion, change an order that was made without notice or was made with notice if the affected party was not present when the order was made because the notice was inadequate or the party was unable, for reasons satisfactory to the court, to be present.

[19] The Court of Appeal made it clear in the case of Gray v. Gray, 2017 ONCA 100 (C.A.) at paras. 26-31 that an interpretation of “change” in rule 25(19)(e) which includes authority to set aside an order is warranted as it best promotes the efficient and just resolution of family law matters.

[20] The parties were in agreement that the applicable factors for consideration by the court on a motion to set aside an order obtained without notice were set forth by Madsen, J. in the case of Irons v. Irons, 2020 ONSC 1471 (S.C.J.) at para. 110 as follows:

a) whether the motion was brought promptly after the defendant/respondent learned of the default judgment;

b) whether there is a plausible excuse or explanation for the defendant's/respondent’s default in complying with the Rules;

c) whether the facts establish that the defendant/respondent has an arguable defence on the merits;

d) the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the responding party should the motion be allowed; and

e) the effect of any order the court might make on the overall integrity of the administration of justice.

Analysis

[21] There is no dispute that the respondent moved promptly after learning of the default Order.

[22] With respect to whether a plausible excuse or explanation for the respondent’s default has been given, the applicant submits that, despite seven letters being sent by counsel for the applicant, the respondent’s counsel did nothing to file responding material.

[23] Balanced against this assertion is the fact that Mr. Balmer wrote to Mr. Paquette enclosing a draft Answer and draft supporting affidavit, explaining that the materials had been sent to the respondent for execution. Mr. Balmer’s letter summarized the position of the respondent on the merits. It is evident from this correspondence that the respondent was not ignoring the Application and intended to defend it. The affidavit of Mr. Balmer explained how Mr. Paquette’s letter of November 2, 2020 did not come to his attention until January 14, 2021. In my view there has been a plausible explanation for the respondent’s default in complying with the rules.

[24] With respect to the question of whether the facts establish that the respondent has an arguable defence on the merits, the comments of Madsen, J. in Irons at para. 116 are instructive:

116 An "arguable defence" means whether the party seeking to set aside the order can show that his defence has an "air of reality," not whether the defence will necessarily succeed: Mountain View Farms Ltd., at para. 51. The Ontario Superior Court has described this as: whether the outcome of the trial "could well have been materially different" if the respondent's evidence had been heard and found credible by the trial judge: Steckly v. Steckly, 2016 ONSC 3385, 2016 CarswellOnt 8406 (Ont. S.C.J.), at para. 41; whether the misinformation resulted in a different order than that which would otherwise have been made: Shore, at para. 8; and, whether there is a "serious issue to be adjudicated": Lemieux, at para. 25. In the latter case, the respondent's evidence of his income raised a serious issue about the appropriate support order.

[25] In my view the respondent’s position that the Trust Agreement should be set aside based upon what she has alleged to have been a power imbalance in the parties’ relationship such that she did not enter into it voluntarily, and that there was no reason for the applicant to have acquired a one half interest in the property, is “arguable” in the sense that it has an “air of reality.” As indicated, the question is not whether the defence will necessarily succeed.

[26] Should the respondent succeed at trial in setting the trust agreement aside, the parties’ respective entitlement to the residence and the proceeds of its sale will arguably be determined according to the principles of constructive trust. It has been held that the remedy of constructive trust is not based exclusively on unjust enrichment but is available to prevent persons from retaining property which in good conscience they should not be permitted to retain (see Ginoogaming First Nation v. Beamish, 2007 CarswellOnt 1926 (S.C.J.) at para. 22).

[27] On the question of prejudice, it is recognized that the applicant has continued to pay the mortgage, taxes and insurance on the residence without contribution from the respondent by way of the payment of occupation rent or otherwise. Setting aside the Order would also delay the applicant in realizing his interest in the property. However, these factors would also been present had the respondent delivered her properly completed responding materials within the time provided by the rules. The appropriate time to address these issues is at a case conference, and if not resolved then, on a motion following a case conference.

[28] If the Order is not set aside, the respondent would suffer prejudice by being denied the opportunity to have her arguable defence determined on its merits.

[29] As noted by Madsen, J. in Irons at para. 118, in considering the effect an order may have on the integrity of the administration of justice the court is to take into account all of the factors and to weigh them in the context of the facts of the case.

[30] Rule 2(2) of the Family Law Rules provides that the primary objective of the rules is to enable the court to deal with cases justly.

[31] In my view, in considering all the relevant factors in the context of the facts of the case, enabling the court to deal with this case justly would call for the order of Justice Gordon to be set aside.

Disposition

[32] For the foregoing reasons, it is ordered as follows:

(a) the Order of Justice Gordon dated December 11, 2020 is set aside;

(b) the respondent shall be permitted to file an Answer;

(c) the respondent shall serve and file her Answer and required supporting materials within twenty (20) days hereof.

Costs

(a) Costs thrown away

[33] The respondent does not dispute that the applicant should be entitled to his costs thrown away associated with obtaining the order of Justice Gordon. It is ordered that the respondent pay to the applicant costs thrown away associated with the default Order of Justice Gordon dated December 11, 2020 fixed in the sum of $2,750.

(b) Costs of the motion

[34] On a preliminary basis, and without having the benefit of submissions, it would appear that the motion was necessitated by the default of the respondent and that she should be responsible for the costs associated with it.

[35] The parties are strongly urged to settle the issue of the costs of the motion.

[36] If the parties are unable to do so, the applicant may make written submissions as to the costs of the motion within 14 days of the release of this Endorsement. The respondent has 10 days after receipt of the applicant’s submissions to respond. The written submissions shall not exceed four (4) double-spaced pages exclusive of Bills of Costs or Costs Outlines, offers to settle and authorities. All such written submissions are to be forwarded to me via email to the Trial Coordinator at Brantford at the same email address as utilized for the release of this Endorsement.

[37] If the parties are able to settle the question of costs, counsel are requested to advise the court accordingly.

D.A. Broad, J.

Date: April 6, 2021