COURT FILE NO.: FS-17-90027
DATE: 2021 04 20
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Shawn Morris
and
Tina Nicolaidis and Andy Nicolaidis
BEFORE: McGee J.
COUNSEL: Stephanie Tadeo, for the Applicant
G. Stern, for the Respondent Andy Nicolaidis
Tina Nicolaidis self represented
HEARD: March 8, 2021
ENDORSEMENT
[1] Can a person advance a trust claim on behalf of a spouse, or former spouse in order to increase that spouse’s net family property and consequently, benefit the person’s claim for, or defense to an equalization payment? That question is at the heart of this rather confusing motion brought by a former father-in-law for a final Order on summary judgment dismissing a trust claim brought against him by his daughter’s former spouse.
[2] The applicant does not assert a constructive trust claim against either of the respondents. Specifically, he does not claim that he was economically deprived, or that the joint-titled owners – the father and daughter respondents – were unjustly enriched without juristic reason by any contributions that he made to the acquisition, maintenance or improvement of the property.
[3] Instead, he asks the Court to find that his former father-in-law held a titled half-interest in a condominium in trust for his former spouse, so that the half‑interest is included in her net family property. The facts of this case are therefore distinguished from those in D'Angelo v. Barrett 2016 ONCA 605, in which a non-titled spouse made a claim for constructive trust directly against his former mother-in-law who was a 50% owner of the matrimonial home.
[4] In these reasons, I set out why the applicant’s claim for a declaration that his former father-in-law held a half-interest in a condominium in constructive trust for his daughter must fail; and ultimately why a person cannot advance a trust claim on behalf of a spouse, or a former spouse.
Background
[5] Andy Nicolaidis is an electrical contractor. In 2006, he advanced all the purchase funds for a one-bedroom condominium unit located on Spadina Avenue in Toronto. The purchase closed on November 1, 2006 for $240,500 and title was placed in his and his adult daughter, Tina Nicolaidis’, names as joint tenants. Also registered on title was a joint mortgage for $180,375.
[6] Tina moved into the condo and assumed responsibility for the payment of the joint mortgage, the condo fees and the utilities.
[7] About two years later, Tina and Shawn Morris began dating. Shawn moved into Tina’s and her father’s condo in early 2012[^1] . The young couple married on January 11, 2014 and continued to live in the condo. At one point they established a joint account from which the mortgage, condo fees and the utilities were paid.
[8] Because Shawn makes no trust claim in this Application that he holds a beneficial interest in the condo, I need not address the dispute between the parties as to how much of Shawn’s salaries as a firefighter and a WestJet customer service agent went into the household expenses.
[9] Despite some early troubles in the marriage, Tina and Shawn decided to start a family. Their son was born in April 2015. They spoke to Andy about purchasing his interest in the condo, but Andy insisted that the tenuous couple first have a marriage contract. The troubles continued and Tina and Shawn separated on August 2, 2016 when Tina was pregnant with their second child. Shawn vacated the condo, ending their marriage of 31 months.
[10] Their daughter was born in January 2017 and Tina found herself in trouble. The one-bedroom condo was too small and too far from family supports. It was agreed between Tina and Andy that they would sell the condo and purchase a larger home with the joint proceeds. They made an Offer to Purchase a detached home in Mississauga which was accepted in March of 2017.
[11] The purchase of the Mississauga home and the closing of the sale of the condo occurred on June 2, 2017. The Spadina Avenue condo netted $373,401 in joint sale proceeds after the discharge of the outstanding joint mortgage of $103,544, lawyer’s fees and disbursements. Tina did not declare herself as a spouse when she executed the Transfer of Title for the sale of the condo, so Shawn did not sign as a consenting spouse.
[12] The whole of the net proceeds of sale was placed into the purchase of the Mississauga home, plus an additional $60,000 that Andy advanced from his personal funds. A new joint mortgage was registered in the amount of $360,000. Title to the Mississauga home, where Tina and the children reside to this day, is held by her and Andy in joint tenancy.
[13] Shawn issued this Application on August 9, 2017. He names both Tina and Andy as respondents. Andy asks in his Answer that the claims against him be dismissed.
[14] After the Application was issued, Shawn was given copies of two Promissory Notes for monies payable by Tina to Andy. The first is dated December 2, 2006, a month after the joint purchase of the condo, and is in the amount of $120,000. It sets out various terms, including 0% interest and monthly payments of $1,000 starting January 1, 2007. It is particularized as $15,000 for the deposit on the condo, $49,700 for all of the monies due on closing; and further amounts reimbursing Andy for various expenses incurred on Tina’s behalf that are unrelated to the purchase of the condo. It is agreed that Tina has never made a $1,000 monthly payment to her father.
[15] The second promissory note is in the amount of $60,000 and is dated June 2, 2017. It has very similar terms of 0% interest, but with monthly repayments of $500 starting July 1, 2017.
[16] Shawn asserts that both Notes are fraudulent. He does not accept – nor has it been yet evidenced that an amount $37,491 was paid from the condo sale proceeds to Andy on account of the December 2, 2006 Note.
[17] For the purposes of this decision, I can disregard both Promissory Notes. The June 2, 2017 Note relates to a post separation purchase, and the December 2, 2006 Note has no effect on the trust claims in this proceeding because it is agreed that Andy advanced all of the purchase monies for the condo and there is no evidence that he has ever been repaid for those monies.
[18] Considerable conflict has been generated over the validity of the December 2, 2006 Note – on top of high conflict parenting litigation – and I encourage Shawn and Tina to look more closely at the effect, if any, that the Note has on the calculation of an equalization payment in these circumstances.[^2]
Analysis
[19] The August 9, 2017 Application seeks two declarations involving Andy: that Andy held his one-half interest in the condo in constructive trust for Tina, the value of which should be included in Tina’s net family property; and that any money that Andy contributed to the condo was a gift and not a loan.
[20] A declaration is a judgment of the court that is a binding adjudication of the rights of a party or the legal relationship between parties. A judgment of the court can only be made on a claim brought before it by a party.
[21] To begin, I must dismiss the second declaration that is sought by Shawn because the determination of a gift or a loan is a finding, not a claim. Because it is a finding, it cannot result in a declaration.
[22] Findings of a gift or a loan are determined and operate quite differently within different claims. For example, in a claim for an equalization payment, a date of separation asset found to be a gift would be excluded from a party’s net family property if it was received after the date of marriage and was not placed into a matrimonial home. In a resulting trust claim, the finding of a gift would defeat a presumption of resulting trust.
[23] Considerable confusion has resulted in this proceeding from the conflation of Shawn’s claim for an equalization payment from Tina and his claim for a declaration that Andy held his one-half interest in the condo in constructive trust for Tina.
The Claim for an Equalization Payment
[24] On the claim for equalization between these spouses, the question of gift has little utility. Tina rightly includes the value of her one-half titled interest in the condo as at the date of separation in her February 8, 2021 Financial Statement, and the associated debt of one half of the mortgage. She must do so irrespective of whether she originally obtained her one-half interest by loan (the December 2, 2006 Promissory Note) or by gift (as asserted by Shawn) because the condo was the parties’ matrimonial home on the date of separation.
[25] As a result, Shawn fully shares in the equity that Tina held in the condo at the date of separation, even though she alone brought the property into the marriage.
[26] Shawn agrees with this result, but then goes a step further, asking the court to find that Andy’s one-half ownership of the condo should also be part of Tina’s net family property. He advances two theories: that Andy has gifted his titled interest to his daughter, or, that Andy holds his one-half ownership in trust for his daughter.
[27] The first theory fails because a gift requires evidence of delivery and acceptance. While there is evidence of delivery and acceptance of a one-half interest to Tina, there is no evidence of a transfer of sole title to the condo. To the contrary, Andy has maintained his joint ownership not only in the condo, but in the property purchased as its replacement.
The Claim for a Trust
[28] The second theory must also fail because no claim of trust has been made that could result in Andy holding his titled interest in trust for his daughter. These are not the circumstances of a sham trust, that is, a case in which a spouse has placed or transferred property into a trust without consideration in order to shield it from calculation within her net family property.[^3]
[29] Neither are these circumstances in which Tina could successfully make a trust claim. She cannot assert a resulting trust because she advanced no purchase monies for the condo.[^4] To make a claim for constructive trust she must show that she has been economically deprived by her father’s continued ownership of half of the condo, that her father has been unjustifiably enriched and that there is no juristic reason for the enrichment.
[30] Shawn argues this point, stating that Tina has been economically deprived, and Andy unjustifiably enriched because Tina alone, and later, she and Shawn together, paid the mortgage, condo fees and the utilities. What Shawn ignores in his submission is that Tina, and then later he and Tina had the exclusive use of the whole of the condo. He provides no evidence that what Tina alone or they together paid was in excess of the market value of her/their occupation.
[31] Similarly, there is no evidence that any of the minor improvements that Tina or Shawn made to the condo increased its market value.
Can Shawn advance a trust claim on behalf of Tina?
[32] At the heart of this motion is an interesting question. Can a person advance a trust claim on behalf of a former spouse in order to increase that spouse’s net family property and consequently, benefit the person’s claim for, or defense to an equalization payment?
[33] A claim for a constructive trust is a claim in equity that is privately held. It is not a public interest claim. The common law principle relating to private interest standing states that “one cannot sue upon an interest that one does not have.” (Watson, McKay & McGowan, Ontario Civil Procedure, at §11 Standing to Sue).
[34] The Court of Appeal for Ontario outlined the legal tests for private and public interest standing in Carroll v. Toronto-Dominion Bank, 2021 ONCA 38, a case in which a bank employee brought a civil suit against her employer because she believed that she had uncovered wrongdoing on the part of the bank against a third party. The Court of Appeal upheld the motion judge’s dismissal of the case under Rule 21.01 (1), agreeing with the trial judge’s analysis that the appellant lacked private interest standing because she did not have any financial interest in the outcome of the litigation, and had not pled any facts that demonstrated a direct personal legal interest in the trusts that were allegedly breached by the Bank.
[35] Carroll supra sets out that “…to have private interest standing, a person must have a direct personal legal interest in the issue,” and later, that the person must be “specifically affected by the issue,” reemphasizing at paragraph 33 that standing requires that the claimant have a “personal legal interest” in the outcome of the litigation.
[36] Can an equalization claim create a direct personal legal interest that confers standing to make a trust claim on behalf of a spouse or a former spouse?
[37] I find that it cannot. An equalization payment cannot change the titled or beneficial ownership of property between spouses. The equalization scheme in Ontario is not based upon a division of property, but rather, it recognizes a spouse’s non-financial contributions to a marriage by equalizing the increase in value in each party's net family property between the date of marriage and the date of separation, subject to variation per section 5(6) of the Family Law Act.
[38] A claim that a third person holds property in trust for a non-titled spouse, or that a non-titled spouse has a beneficial interest in property, or a monetary claim arising from the acquisition, maintenance or use of that property can only arise from the personal, direct deprivation of the non-titled spouse. An equalization claim is, at best, an indirect legal interest. It is therefore insufficient to confer standing to a person to make a trust claim on behalf of a non-titled spouse or former spouse.
[39] Even trust claims between married persons are exceptional because "[i]n the vast majority of cases any unjust enrichment that arises as a result of the marriage will be fully addressed through the operation of the equalization provisions of the Family Law Act," see Martin v. Sansome, 2014 CarswellOnt 759 (ONCA.) Writing for a unanimous court, Justice Hoy envisions in Martin, supra, that it will be a rare case in which monetary damages for unjust enrichment cannot be adequately addressed by an equalization payment; and in those cases, a variation of share per section 5(6) of the Family Law Act, should be invoked before consideration of a trust claim.
[40] Although not in evidence here, there may be a situation in which a meritorious trust claim is not advanced by a non-titled spouse. In such a case, the other spouse cannot step into the non-titled spouse’s shoes and advance the claim himself because he has no direct personal legal interest in the trust claim; but he could seek to vary the equalization between he and the non-titled spouse if the resulting payment is found to be unconscionable per section 5(6) of the Family Law Act.
Decision
[41] This is Andy’s motion to dismiss by way of summary judgment the two claims made against him in Shawn’s Application.
[42] I need not consider whether there is a genuine issue for trial pursuant to Rule 16 of the Family Law Rules, because a lack of standing brings this inquiry into Rule 21.01 of the Rules of Civil Procedure, which reads:
21.01 (1) A party may move before a judge,
(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or
(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,
and the judge may make an order or grant judgment accordingly. R.R.O. 1990, Reg. 194, r. 21.01 (1).
and may be considered by me in a family law matter per Rule 1(7) of the Family Law Rules:
MATTERS NOT COVERED IN RULES
(7) If these rules do not cover a matter adequately, the court may give directions, and the practice shall be decided by analogy to these rules, by reference to the Courts of Justice Act and the Act governing the case and, if the court considers it appropriate, by reference to the Rules of Civil Procedure. O. Reg. 114/99, r. 1 (7).
[43] The declaratory relief sought by Shawn in his August 9, 2017 Application is dismissed pursuant to Rule 21.01 of the Rules of Civil Procedure, specifically,
a) a declaration that Andy Nicolaidis held his portion of the title of 9 Spadina Avenue, Suite 715, Toronto, Ontario of which proceeds are traceable to 2464 Padstow Crescent, Mississauga, in constructive trust for the Respondent and the interest shall be included in the Respondent Mother’s net family property, and
b) A declaration that any monies contributed to 9 Spadina Avenue, Suite 715, Toronto, Ontario were gifts and not loans
because I find that it discloses no reasonable cause of action, as no claim has been made that could result in the relief sought, and Shawn lacks standing to assert a constructive claim on behalf of Tina.
Costs
[44] Andy has been the successful party on this Motion. If the parties are unable to resolve the issue of costs, Andy and Tina are to make written submissions to me through my judicial assistant by May 4, 2021, response by Shawn is to be received by May 18, 2021 and reply is due by May 25, 2021. Submissions are limited to three pages exclusive of a Bill of Costs and any Offers to Settle.
McGee J.
DATE: April 20, 2021
COURT FILE NO.: FS-17-90027
DATE: 2021 04 20
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Shawn Morris
and
Tina Nicolaidis and Andy Nicolaidis
BEFORE: McGee J.
COUNSEL: Stephanie Tadeo, for the Applicant
G. Stern, for the Respondent, Andy Nicolaidis
Tina Nicolaidis, self-represented
ENDORSEMENT
McGee J.
DATE: April 20, 2021
[^1]: Although Shawn’s Factum states October 2011 as the start of cohabitation, his Affidavit sworn March 13, 2020 states at paragraph 5 that they began living together in early 2012.
[^2]: A debt held in the same amount on both the date of marriage and the date of separation, provided that neither spouse’s net family property is a negative value, has no effect on the amount of equalization to be paid. However, in these circumstances, $64,700 of the $120,000 in funds purportedly secured by the Note was for the purpose of acquiring the matrimonial home. See section 4(1)(b) of the Family Law Act which provides that the value of the matrimonial home and any debts and liabilities directly related to the acquisition or significant improvement of a matrimonial home as of the date of marriage are not deducted.
[^3]: Or to avoid taxes, the more common purpose of a sham trust.
[^4]: Interestingly, Andy could assert a resulting trust claim against Tina because he did advance the purchase monies for Tina’s one-half interest in the condo. In Pecore v Pecore 2007 SCC 17 the Supreme Court of Canada created a presumption of resulting trust when a parent gratuitously transfers an asset to an adult child. On a resulting trust, Tina’s share would “result back” to Andy unless it was found that he gifted one half of the condo to his daughter. If Andy were to successfully make a claim for resulting trust, Tina would have no titled interest in the condo on the date of separation instead of her half-interest. In those circumstances, Tina could argue that her one-half interest was a gift and, if she were successful, it would leave her in the same position as she is in presently, with one-half of the equity in the condo being included in her net family property on the date of separation, but not deducted on the date of marriage.