Court File and Parties

COURT FILE NO.: CV-33/20 & CV-991/21

DATE: 20211102

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Douglas William Fonger, Applicant

AND

Maureen Thuss and The Estate of Darryl William Fonger, Deceased, by Its Estate Trustee, Maureen Thuss, Respondents

AND RE: Maureen Thuss and The Estate of Darryl William Fonger Deceased, by Its Estate Trustee Maureen Thuss, Applicants

AND

Douglas William Fonger, Respondent

BEFORE: Justice S. Nicholson

COUNSEL: John McNair and Mavis J. Butkus, for the Applicant/Respondent, Douglas William Fonger

David G. Waites, for the Respondents, Maureen Thuss, and the Estate of Darryl William Fonger

Jane E. Sirdevan, for the Applicants, Maureen Thuss, and the Estate of Darryl William Fonger

HEARD: August 18, 2021

DECISION ON APPLICATION FOR RECTIFICATION

NICHOLSON J.:

[1] At stake in these proceedings is ownership of a 100 acre farm.

[2] The Applicant, Douglas William Fonger, seeks to rectify a Declaration of Trust dated November 9, 2017, between himself and his son, Darryl William Fonger, now deceased. The Respondent, Maureen Thuss, is Darryl Fonger’s widow. She acts in her own capacity and as Estate Trustee on behalf of the estate of her late husband.

[3] There is a cross application by Ms. Thuss and the Estate for a declaration that Darryl William Fonger and Douglas William Fonger held legal title to the property as tenants in common as of October 31, 2018 and that the Land Registry be amended accordingly to delete Douglas William Fonger as Transferor and Transferee on a Transfer registered on November 1, 2018 against the farm property.

[4] Despite the cross application, I will refer to Douglas Fonger as the “Applicant” throughout, and Ms. Thuss and the Estate of Darryl Fonger as the “Respondent(s)”. Given the similarity between the names of the Applicant and his late son, I will refer to the Applicant as “Douglas” and his son as “Darryl”. I intend no disrespect in doing so.

BACKGROUND:

[5] Douglas was the sole owner of a 100 acre farm which he had acquired approximately 45 years ago. He was a farmer and is now retired. As part of his estate planning, Douglas and his son Darryl began to explore options by which the farm could be transferred to Darryl.

[6] Darryl retained a lawyer, Mr. Jonathon Barnett, who recommended that the men could accomplish the transfer by way of a Declaration of Trust. He prepared the Declaration of Trust and arranged for both Douglas and Darryl to attend his office to sign the document. They did so on November 9, 2017.

[7] Pursuant to the terms of the Declaration of Trust, the beneficiary of the trust could demand a “reconveyance” of the lands from the trustee to the beneficiary, immediately upon the request by the beneficiary and without charge to the beneficiary.

[8] The Declaration of Trust designates Douglas as the “Trustee” and Darryl as the “Beneficiaries” (sic). Douglas contends in this application that this was a drafting error and that the intention of both parties was that he would be designated as the Beneficiary, and Darryl as the Trustee. He seeks to rectify the Declaration of Trust accordingly.

[9] Unfortunately, Darryl suffered a very significant accident, leading to his hospitalization and eventual untimely death. Prior to his death, his wife, the Respondent Maureen Thuss, acting under power of attorney for Darryl, registered a transfer from Darryl and Douglas, as joint tenants, to Darryl and Douglas as tenants in common. This severed the joint tenancy. This was done through Ms. Thuss’ lawyer, Mr. George Sinker, on November 1, 2018.

[10] In the transfer document, Mr. Sinker warranted that he had the authority to sign and register the transfer on behalf of all parties to the transfer. Douglas, in fact, had not granted Mr. Sinker the authority to do so on his behalf.

[11] Mr. Sinker also contacted Mr. Barnett to discuss the Declaration of Trust. From that conversation, Mr. Sinker was advised that the Declaration of Trust was accurately drawn up.

[12] On November 1, 2018, Mr. Sinker wrote to Douglas on behalf of Ms. Thuss, as continuing power of attorney for Darryl, requesting that Douglas “reconvey” the lands to Darryl as the beneficial owner of the lands. Douglas took this letter to another lawyer, Mr. Bramwell Lebo. Mr. Lebo telephoned Mr. Sinker and Mr. Barnett to find out what had transpired. From those conversations, Mr. Lebo believed that Mr. Barnett had made an error drafting the Declaration of Trust.

[13] Darryl succumbed to his injuries on November 10 or 11, 2018. I note that there is a discrepancy in the parties’ evidence in this regard.

[14] Accordingly, the outcome of this application will determine ownership of the farm property.

ISSUES:

[15] The issues to be determined on this application are:

(a) Whether the Declaration of Trust dated November 9, 2017 should be rectified such that Douglas is shown as the “Beneficiary” and Darryl as the “Trustee”;

(b) If so, whether the transfer of the property directed by Ms. Thuss acting under power of attorney should be set aside and the subsequent registration of that transfer in the land titles registry should be rectified; and

(c) If not, should the Land Transfer document dated November 1, 2018 against the subject property be amended to delete Douglas as Transferor and as Transferee.

THE DECLARATION OF TRUST:

[16] I set out the relevant provisions of the Declaration of Trust.

[17] As noted, it is dated November 9, 2017. Darryl William Fonger is noted to be the “Beneficiaries” (sic). Douglas William Fonger is the “Trustee”. The recitals read as follows:

WHEREAS the Beneficiary is the beneficial owners of the property municipally known as {address redacted by me}, more particularly described as “{redacted}” (hereinafter called “the Lands”);

AND WHEREAS legal title to the Lands has been registered in the name of the Beneficiary;

AND WHEREAS the Beneficiaries and the Trustee wish to record the terms of the said Transfer in this Agreement.

NOW THEREFORE, the parties agree as follows:

1. The Trustee shall, since the date of purchase of the Lands, be a bare Trustee and as such will have no actual duties to perform.

2. No value of consideration in any form whatsoever shall pass to or from the said Trustee or to or from the Beneficiaries or between them directly or indirectly.

3. All obligations, including any mortgage obligations, responsibilities, acts or omissions pertaining to the Lands during the period of time it will be vested in the Trustee will be performed or omitted to be performed by the Beneficiaries.

4. The Trustee will be indemnified and saved harmless by the Beneficiaries from all claims, charges, encumbrances, obligations, acts or omissions during the entire period of time that the land will be vested in the said Trustee.

5. The Trustee agrees to reconvey the Lands to the Beneficiary immediately upon request by the Beneficiaries and without charge to the Beneficiaries.

[18] The Declaration of Trust was signed by both of the Fongers, with Douglas signing over a line for “Trustee: Douglas William Fonger” and with Darryl signing over “Beneficiary: Darryl William Fonger”.

EVIDENCE:

[19] I will discuss the evidence in some detail. However, I will only refer to evidence that I deem pertinent to the issues or of an understanding of the case. If I do not refer to evidence, it does not mean that it was not reviewed or considered. I reviewed all the evidence provided in detail.

[20] The Applicant relies on his own affidavit, as well as an affidavit sworn by the lawyer retained to draft the Declaration of Trust, Jonathon Barnett, and an affidavit from Bramwell Lebo. All three were cross-examined on their affidavits. Mr. Barnett’s legal assistant was also cross-examined. The Applicant has also included the documents from the Land Registry Office.

[21] The Respondents rely on two affidavits by Ms. Thuss, an affidavit from Mr. Sinker and an affidavit from Ms. Barbara Stanley.

Jonathon Barnett:

[22] Mr. Barnett states that on August 29, 2017, he spoke with Darryl, who had stopped into his office without an appointment. Darryl wanted to have his name added on title to a property owned by his father, Douglas. Mr. Barnett had never worked for either of these men, although he believes that they had been previous clients of the firm.

[23] Mr. Barnett has included his handwritten notes from that meeting. Those notes contain Darryl’s contact information, the address of the farm property, the full names of both men, Darryl’s date of birth and a couple of notes about the farm being unencumbered and used for share cropping.

[24] The notes also state “Declaration of Trust—re planning. –Accountant—yourselves—spoke with Jason Timmermans”. Mr. Barnett states in his affidavit that this is meant to convey that Darryl informed him that his name was being added to title to the property for succession planning purposes.

[25] Mr. Barnett deposes that when he learned of the reason for the proposed conveyance, he recommended that the men execute a Declaration of Trust. On cross-examination, Mr. Barnett confirmed that he initiated the idea of a Declaration of Trust. He explained to Darryl that the Declaration of Trust would ensure that if anything happened to Darryl, the Declaration of Trust would provide him with a means of getting title to the farm back into Douglas’ name alone. According to Mr. Barnett, Darryl agreed and instructed him to proceed.

[26] Mr. Barnett instructed his clerk, Ms. Heuvel, to prepare the necessary documentation to complete the conveyance to Douglas and Darryl as joint tenants and to prepare a Declaration of Trust. He believes that he instructed Ms. Heuvel to prepare a Declaration of Trust between the father and the son with the son holding his interest in the property as Trustee. He believes that he reviewed the draft Declaration on Ms. Heuvel’s computer screen and told her that the parties were incorrectly described. He did not, however, subsequently review the document to ensure that it had been amended.

[27] Mr. Barnett’s version of this on cross-examination was slightly different. On cross-examination, he first looked at the draft documents right before the meeting. He could not recall whether he asked Ms. Heuvel or another clerk to make the changes. However, he says that he did request the changes. Clearly, there is some confusion in Mr. Barnett’s evidence on this point.

[28] Mr. Barnett met with both Darryl and Douglas on November 9, 2017. The men signed a joint retainer at that time. He believes that he reviewed the draft of the Transfer of Land with both and the Declaration of Trust and confirmed from Douglas that Darryl was being given an interest in land for nominal consideration only. Douglas advised Mr. Barnett that it was his intention in executing the documentation to ensure that the property would go to Darryl upon Douglas’ death, with minimal or no tax consequences.

[29] Mr. Barnett further deposes that he explained to both men that if one of them passed away, the entire property would be vested in the survivor’s name. He additionally reiterated to Darryl that, in the event of his death, title to the property would revert back to his father. According to Mr. Barnett, Darryl assured him that this was the desired outcome.

[30] The Transfer to the Land Registrar was submitted to the Land Registry Office on November 16, 2017.

[31] Mr. Barnett indicates that sometime shortly before Darryl died, Ms. Thuss called the law office and spoke with Mr. Barnett’s partner. She apparently asked him to notarize a Will that Darryl had made from a homemade Will kit. The partner declined to do so.

[32] According to Mr. Barnett, Ms. Thuss later attended the office and made inquiries about the Declaration of Trust. When she was informed that they could not discuss the Declaration with her, they referred her to Mr. George Sinker, whose law office was down the street.

[33] Mr. Sinker telephoned Mr. Barnett, who, according to Mr. Barnett, informed Mr. Barnett that he wished to have an “off the record discussion”. He asked Mr. Barnett if the Declaration of Trust was correct. Mr. Barnett deposes that he replied that it must be correct without actually reviewing the Declaration, assuming it had been done properly. Later, he re-examined the Declaration and discovered the error in the description of the parties. Mr. Barnett indicates that he believes Mr. Sinker recognized that there was an error in the Declaration of Trust, which is why he called to see if it was correct.

[34] Mr. Barnett testified that the errors in the designation of the parties are apparent on the face of the document because in paragraph 5 of the Declaration, the Trustee is to “reconvey” the lands to the Beneficiary on request of the Beneficiary. He states that since title was being conveyed from Douglas to Darryl, only Douglas could “reconvey” the property.

[35] On his cross-examination, Mr. Barnett spoke of the telephone conversation(s) that he had with Mr. Lebo. It was at that time that Mr. Barnett realized that the names had been reversed on the Declaration of Trust. He then discussed with Mr. Lebo ways to fix the situation, raising the possibility of mutual mistake. Mr. Barnett testified that when he looked at the Declaration, what had been set out there did not make any sense, since there would be no practical advantage to transferring the beneficial interest entirely to Darryl but keeping Douglas on title. It would trigger tax consequences and reporting requirements.

Douglas Fonger:

[36] Douglas sets out that he was a farmer from 1974 until 2001, farming three separate farm properties, including the subject property. He had two sons, Steven and Darryl, and a daughter, Lori. Originally, Douglas farmed with Steven, Darryl worked for Canadian Tire and Lori moved to Toronto.

[37] He sold one parcel of land to Steven.

[38] When Douglas separated and then divorced his wife, she obtained title to their original farm.

[39] Douglas moved to Haliburton when he retired. Steven continued to operate the farm. Darryl quit his job at Canadian Tire and began farming with Steven. Douglas indicates that Darryl had divorced his first wife and then married Ms. Thuss roughly 6 to 8 years ago.

[40] Douglas deposes that he wished to provide Darryl with some financial stability and decided to share ownership of the subject property with Darryl, after discussing this with both Darryl and Steven. Darryl and Douglas met an accountant for advice, Jason Timmermans. On October 31, 2016, Douglas received an email from Mr. Timmermans setting out four possible scenarios for transferring the property. The four options were:

(a) Do nothing until Douglas died;

(b) Transfer the property to Darryl immediately and pay tax of approximately $50,000;

(c) Transfer the property to Darryl with a note back and record the capital gain over a five year period, resulting in a “cost” of approximately $56,000;

(d) Take a note back and record the gain over a ten year period, resulting in a “cost” of $46,570.

[41] Douglas indicates that none of those options were attractive to him. On cross-examination, he indicated that he did not want to pay taxes or the costs associated with any of those scenarios. Accordingly, he took no action at that time to transfer the property.

[42] However, in the summer of 2017, he and Darryl agreed that they would arrange to add Darryl’s name on title to the property and become co-owners of the property. Darryl contacted a lawyer to arrange for that to occur. Subsequently, Darryl emailed Douglas and asked for his full name, date of birth and current address, which Douglas provided. Douglas provided no instructions to Mr. Barnett directly.

[43] Douglas deposes that it was his understanding and intention that Darryl’s name would be added on title to the property and that they would then become co-owners. Douglas intended that if he died, the property would be conveyed to Darryl and if something were to happen to Darryl, Douglas would remain the sole owner of the property.

[44] Douglas attended with Darryl at Mr. Barnett’s office. He does not recall any specific discussions about a document entitled Declaration of Trust. He did, however, understand that he would remain the owner of the property and that the survivor of he or Darryl would become the sole owner of the Property on the death of the other.

[45] Steven died on September 8, 2018 and Darryl died on November 10, 2018 from a brain aneurysm.

[46] Following Darryl’s death, Douglas learned that Ms. Thuss had taken steps to sever the joint tenancy between he and Darryl and was demanding that he “reconvey” the property to Darryl when he received Mr. Sinker’s letter dated November 1, 2018. He received Mr. Sinker’s letter after Darryl’s death.

[47] On cross-examination, it was put to Douglas that he had done a Declaration of Trust agreement to affect the transfer of the farm property to his ex-wife when they completed their separation and divorce. He denied remembering that they had done it that way.

Bramwell Lebo:

[48] Mr. Lebo became involved in this matter in November 2018 when he was consulted by Douglas. Douglas provided him with the letter from Mr. Sinker dated November 1, 2018.

[49] Mr. Lebo telephoned Mr. Sinker on November 14, 2018 to discuss the matter. Mr. Sinker confirmed that Douglas had not been involved in the severance of the joint tenancy.

[50] The following day, Mr. Lebo telephoned Mr. Barnett. He states that Mr. Barnett confirmed that Douglas had retained an interest in the land to avoid triggering any capital gains tax. Mr. Barnett also referred to his notes and told Mr. Lebo that Douglas had been intended to be the beneficiary of the trust and believed that his clerk had reversed the names. Mr. Lebo was of the belief that Mr. Barnett’s notes stated this explicitly. Mr. Barnett, on cross-examination confirmed that he was using the notes referred to above to arrive at the conclusion he told Mr. Lebo about, which do not explicitly state that Douglas was to be the beneficiary.

[51] Mr. Lebo then wrote to Mr. Barnett confirming the conversation and that there had been mutual mistake. He suggested Mr. Barnett put his insurer on notice.

Ms. Heuvel:

[52] Ms. Heuvel was examined as a witness in these proceedings. She has been a clerk with Mr. Barnett’s firm for 16 years, doing real estate work.

[53] She confirmed that she prepared the transfer document and the Declaration of Trust. When she prepares documents, she prints them off, attaches them to the file and gives the file back to Mr. Barnett.

[54] Ms. Heuvel prepared these documents from a precedent. She would have pulled up the precedent and inserted the names. Thus, the precedent that she used had pluralized “beneficiary”.

[55] Ms. Heuvel has no recollection of the documents coming back to her for revisions. She does not recall making any revisions. She was not involved in the meeting with Mr. Barnett, Douglas, and Darryl.

[56] She did write down the PIN numbers and “Darryl joint tenant with Dad—Declaration of Trust—Estate Purposes”. She thinks she wrote these down when Mr. Barnett was giving her verbal instructions.

Maureen Thuss:

[57] Ms. Thuss and Darryl started living as common law spouses in 2004 and were married on September 1, 2012. It was the second marriage for both of them. She has four children from her first marriage and Darryl has three children from his first marriage.

[58] Since 2009, Ms. Thuss and Darryl farmed together at two separate farm properties. Those farms were owned jointly by Darryl and herself. Although she assisted Darryl on the farm, she was also working as a nurse. She had been raised on a farm and had an undergraduate degree in horticulture.

[59] Darryl died on November 11, 2018 as a result of complications arising from a brain aneurysm diagnosed after he fell off a hay wagon in June of 2018.

[60] Ms. Thuss deposes that she and Darryl planned that commencing the Fall of 2018, she would stop working as a nurse and devote all of her time working with Darryl on the farms, including the subject farm property.

[61] Ms. Thuss testified that she and Darryl had spoken about Douglas’ succession planning since at least 2016. Her understanding was that Steven had already received the farm equipment and was to receive an additional 50 acres, Lori was to receive the house on the lake in Haliburton and Darryl was to receive the subject farm property. Ms. Thuss further states that these plans were common knowledge within the family and spoken openly about at family gatherings. On cross-examination, Ms. Thuss indicated that she was not part of the family discussions about succession planning but overheard them at family gatherings.

[62] Ms. Thuss deposes that Darryl advised her that the delay in transferring the subject property to Darryl was because of ongoing discussion between he and Douglas in regard to costs. Douglas did not want to have to pay any costs or incur any expenses to transfer the property to Darryl, including legal and accounting fees and taxes.

[63] Ms. Thuss was aware that Darryl and Douglas had sought advice from Mr. Timmermans about how the property could be transferred. She points out that all of these options would have transferred the property to Darryl “completely”. In other words, Douglas would not have retained any rights with respect to the property.

[64] Ms. Thuss repeats that Douglas was very adverse to paying any costs.

[65] In late 2017, Darryl advised Ms. Thuss that Douglas was now going to transfer title to the property to Darryl. Thus, they attended Mr. Barnett’s office on November 9, 2017. She did not attend. After the meeting, Darryl advised her that the property had been transferred to him as a co-owner. They were now joint tenants. She deposes that Darryl was able to call on Douglas to transfer his joint interest to him when he wanted. Darryl did not tell her at any time that he understood that Douglas would be able to “call back” Darryl’s joint interest. During her cross examination, however, Ms. Thuss said that this part of the conversation did not happen when Darryl returned from Mr. Barnett’s office.

[66] Thus, Ms. Thuss states that the Declaration of Trust was written as it currently reads on purpose so that Darryl could continue to expand their farming operations. Darryl was to continue to pay for all of the expenses associated with the transfer, including the lawyers’ fees, accountants’ fees, land transfer tax, property taxes and assessments, farm insurance, repairs and improvements.

[67] In 2018, Ms. Thuss and Darryl worked the subject property during the growing season, paying for all input costs and expecting to receive 100% of the proceeds from the harvest.

[68] Ms. Thuss recounts a telephone call that she received from Douglas on September 17, 2018 after Darryl’s fall. Douglas told her that until Darryl could climb into the combine, he was not getting the farm to work. He also told her to return to nursing. She later relayed this conversation to Darryl when she visited him in hospital. Darryl responded to her, “my Dad is being an ass. Get the farm put into my name”. On cross-examination, Ms. Thuss indicated that it was after he instructed her to go get the farm, that she first became aware of the Declaration of Trust. Darryl did not explain to Ms. Thuss how she could go about getting the farm put into his name.

[69] Thus, Ms. Thuss went to Mr. Barnett’s office with the Declaration of Trust to call for Doug’s interest to be transferred to Darryl. She was not granted an audience with Mr. Barnett but did speak to Mr. Barnett’s partner, who reviewed the Declaration and confirmed her understanding of Darryl’s rights under the document. She was told to attend with a lawyer down the street, Mr. Sinker as there was a conflict if he acted for her.

[70] She then met with Mr. Sinker who confirmed her understanding of the Declaration of Trust. Mr. Sinker then called Mr. Barnett. On cross-examination, Ms. Thuss indicated that Mr. Sinker told her that he wanted to contact Mr. Barnett because “normally it (the Declaration of Trust) would have been written differently”. After Mr. Sinker spoke to Mr. Barnett, she then instructed Mr. Sinker to request Douglas to transfer his interest in the property to Darryl.

[71] Darryl took a turn for the worse in hospital and it was not clear he would survive. Douglas had not responded to Mr. Sinker’s letter. Thus, she instructed Mr. Sinker to transfer Darryl’s interest in the property to himself to sever the joint tenancy such that if Darryl did not survive, his estate would receive his half interest in the farm. She also had Mr. Sinker transfer the properties that she owned jointly with Darryl into her name alone, using the power of attorney.

[72] Ms. Thuss states that she and Darryl would not have invested monies into the subject property unless Darryl was able to call upon his father to convey his interest to Darryl.

George Sinker:

[73] Mr. Sinker’s legal practice has a focus on servicing clients in the agricultural industry. He has been practicing law since 1975. On cross-examination, he confirmed that he had frequent occasion to deal with the transition of farm properties from parents to children. In doing so, he had done Declarations of Trust before, perhaps once or twice per year. He agreed that, in most cases, the transferor of the property would be the beneficial owner, but not in all cases.

[74] Mr. Sinker deposes that upon being consulted by Ms. Thuss on October 18, 2018, he contacted Mr. Barnett to confirm that Darryl could call on Douglas to convey Douglas’ interest in the property to Darryl. Mr. Barnett confirmed that the intention of Douglas and Darryl was to convey the property to Darryl and that Douglas’ name was left on title for tax or capital gain purposes. Mr. Barnett confirmed that the Declaration of Trust was accurately worded. Mr. Sinker took notes from that telephone call.

[75] Mr. Sinker, on cross-examination, indicated that he called Mr. Barnett because there were some obvious errors on the face of the Declaration of Trust. There were inaccuracies in spellings and “there is issue about what was the intent, what, who was to be the trustee, who was to be the beneficiary.” In his view, the Declaration of Trust was “sloppy”.

[76] Mr. Sinker agreed that the telephone call with Mr. Barnett was not pre-arranged. Thus, Mr. Barnett had not gone to review the file prior to the conversation. Mr. Sinker denied that he told Mr. Barnett that the call was “off the record”. He has no idea if Mr. Barnett reviewed the file during their conversation. Mr. Barnett never contacted Mr. Sinker to tell him that he was wrong and that there was an error in the Declaration of Trust.

[77] At Ms. Thuss’ instruction, the joint tenancy was severed to ensure that, at a minimum, Darryl’s interest in the property was protected.

[78] In a subsequent affidavit, Mr. Sinker confirms that he was never retained, at any time, to act on behalf of Douglas and that the Transfer and the Land Transfer Tax Affidavit erroneously describes Douglas and Darryl, as opposed to only Darryl, as the transferors and transferees. Those documents should have indicated that only Darryl was the transferor, transferee and that Mr. Sinker was only submitting the document on behalf of Darryl.

Barbara Stanley:

[79] Ms. Stanley was Douglas’ girlfriend from late 2016 until the late summer of 2018. They lived together until late summer of 2018.

[80] She deposes that in the fall of 2017, she and Douglas were staying with Steven. They had come to the area so that Douglas could attend with Darryl to go to the lawyer’s office to sign papers to transfer the 100 acre farm to Darryl. Douglas told her that the transfer of the 100 acre farm to Darryl was part of his estate planning. When Douglas returned from the lawyer’s office, he told her that the matter was settled and that he had signed the farm over to Darryl.

Other Evidence to Consider:

[81] I note that in an email to Mr. Barnett dated October 31, 2017, Darryl wrote “We spoke in August about putting a second name on a piece on land that was given to me by my father. He is planning a trip down here in the next week so we can start the paper work. …”.

[82] In a holographic will signed by Darryl on August 7, 2018 (I express no opinion with respect to its validity), Darryl wrote “all my assets, including the farm are to be left to Maureen Thuss to be able to continue operating the farm such as machinery tools and tractors on the {redacted addresses}” The subject property is not referenced.

[83] There is a Trust Agreement dated November 20, 2007 where Douglas, as the registered owner of lands, transfers the lands to Darryl as his trustee. This is in relation to Douglas’ property settlement with his former spouse.

[84] Douglas did not receive Mr. Sinker’s letter dated November 1, 2018 until November 10th. Accordingly, Douglas takes the position that he did not receive the demand for the transfer prior to Darryl’s death.

LEGAL PRINCIPLES:

Rectification:

[85] The parties agree that the leading case on rectification is Canada (Attorney General) v. Fairmont Hotels, 2016 SCC 56, [2016] 2 SCR 720.

[86] In Fairmont Hotels, the Supreme Court refused to rectify the parties’ agreement. The parties had sought to reach a financing arrangement that would be tax-neutral. Due to the financing mechanism chosen, an unanticipated tax liability was incurred. The lower courts permitted the parties to rectify their agreement to accord with their intention of achieving a tax neutral arrangement. The Supreme Court, however, held that rectification is limited to cases where the agreement between the parties was not correctly recorded in the instrument that became the final expression of their agreement. Rectification does not operate to undo unanticipated effects of the agreement that the parties intended to make. While a court may rectify an instrument which inaccurately records a party’s agreement respecting what was to be done, it may not change the agreement in order to salvage what a party hoped to achieve (para. 3).

[87] Brown J., for the majority, described the purpose of rectification at para. 12, as follows:

[12] If by mistake a legal instrument does not accord with the true agreement it was intended to record—because a term has been omitted, an unwanted term included, or a term incorrectly expresses the parties’ agreement—a court may exercise its equitable jurisdiction to rectify the instrument so as to make it accord with the parties’ true agreement. Alternatively put, rectification allows a court to achieve correspondence between the parties’ agreement and the substance of a legal instrument intended to record that agreement, when there is a discrepancy between the two. Its purpose is to give effect to the parties’ true intentions, rather than to an erroneous transcription of those intentions (Swan and Adamski, at SS8.229).

[88] Further, Brown J., in para. 13, reiterated:

[13] …In short rectification is unavailable where the basis for seeking it is that one or both of the parties wish to amend not the instrument recording their agreement, but the agreement itself. More to the point of this appeal, and as this Court said in Performance Industries (at para. 31), “[t]he court’s task in a rectification case is…to restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other”.

[89] The Supreme Court of Canada confirmed, at para. 14, that two types of error may support a grant of rectification. Rectification is available where an error has resulted from a mistake common to both or all parties to an agreement if:

(a) The court is satisfied that there was a prior agreement whose terms are definite and ascertainable;

(b) The agreement was still in effect at the time the instrument was executed;

(c) The instrument fails to accurately record the agreement; and

(d) The instrument, if rectified, would carry out the parties’ prior agreement.

[90] Rectification is also available where the claimed mistake is unilateral. In this situation, one party says that the instrument accurately reflects their agreement but the other party says it does not. In the case of unilateral mistake, the court must also be satisfied that the party resisting rectification knew or ought to have known about the mistake and that permitting that party to take advantage of the mistake would amount to fraud or the equivalent of fraud.

[91] Brown J. described at para. 36, that the standard of proof in rectification cases remains on the balance of probabilities. However, he further described the quality of the evidence that is required, as follows:

[36] …A party seeking rectification faces a difficult task in meeting this standard, because the evidence must satisfy a court that the true substance of its unilateral intention or agreement with another party was not accurately recorded in the instrument to which it nonetheless subscribed. A court will typically require evidence exhibiting a high degree of clarity, persuasiveness and cogency before substituting the terms of a written instrument with those said to form the party’s true, if only orally expressed, intended course of action….

[92] Ordinarily, parol evidence at odds with the terms of a written agreement is inadmissible. However, evidence relevant to claims for rectification is an exception to this rule. A court may admit parol evidence to determine whether to rectify the terms of a written agreement to conform to the real intention of the parties (see: Royal Bank of Canada v. El-Bris Limited, 2008 ONCA 601).

Sections 159 and 160 of the Land Titles Act:

[93] Sections 159 and 160 of the Land Titles Act, R.S.O. 1990, c. L. 5, read as follows:

159. Subject to any estates or rights acquired by registration under this Act, where a court of competent jurisdiction has decided that a person is entitled to an estate, right or interest in or to registered land or a charge and as a consequence of the decision the court is of the opinion that a rectification of the register is required, the court may make an order directing the register to be rectified in such a manner as is considered just.

160. Subject to any estates or rights acquired by registration under this Act, if a person is aggrieved by an entry made, or by the omission of any entry from the register, or if default is made or unnecessary delay takes place in making an entry in the register, the person aggrieved by the entry, omission, default or delay may apply to the court for an order that the register be rectified, and the court may either refuse the application with or without costs to be paid by the applicant, or may, if satisfied of the justice of the case, make an order for the rectification of the register.

[94] Courts may rely upon ss. 159 and 160 to rectify inadvertent errors in registered documents where the document does not reflect the intention of the party or parties. (Armstrong v. Armstrong, 1978 CanLII 1368 (ONSC); 719083 Ontario Limited v. 2174112 Ontario Inc., 2012 ONSC 3815, aff’d 2013 ONCA 11; TD Bank v. Rehmtulla, 2017 ONSC 4237).

Severing Joint Tenancies:

[95] MacLeod-Beliveau J., in Thompson v. Elliott Estate, 2020 ONSC 1004 summarized the law with respect to severing joint tenancies at paras. 48-51, as follows:

[48] There is no issue that a person can unilaterally sever a joint tenancy upon the execution of a transfer in land. It has been held that it must however be done before the person dies and cannot be done in a will or testamentary disposition, as by then, it is too late. The right of survivorship in those circumstances has already vested the property in the surviving tenant (see Royal and Sun Alliance Insurance Company v. Muir, 2011 ONSC 2273 at para 25, Perell, J).

[49] The Ontario Court of Appeal has reviewed the common law in this area and has held in Hansen Estate v. Hansen, 2012 ONCA 112, at paras 32, 34, that there are three ways for someone to sever a joint tenancy during their lifetime:

1. By an act of any one of the persons interested operating on his or her own share;

2. By mutual agreement; and

3. Any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.

[50] It is the first way of severing a joint tenancy that is relevant and at issue in this case. A joint tenancy can be severed by transferring an interest jointly held with another from oneself to oneself. The property is then considered to be held as tenants in common with the former co-tenant. The joint tenancy is considered effectively destroyed. (see section 42 of the Conveyancing and Law of Property Act, R.S.O. 1990, c. C. 34; Murdoch v. Barry, 1975 CanLII 360 (ON SC), 10 O.R. (2d) 626 at paras. 19, 22, Goodman J. (Ontario S.C.)

[51] The law in Ontario, I find, is settled and clear in that it is the delivery, and not the actual registration of the deed/transfer that determines if a joint tenancy has been severed. Whether or not a joint tenancy has been severed is a question of fact based on the evidence. (See Re McKee and National Trust Co. Ltd. et al (1975), 1975 CanLII 442 (ON CA), 7 O.R. (2d) 614 (C.A.), at p. 616). The onus is on the party seeking to establish the severance. In a disputed situation, the issues that are related to the ability to register a transfer severing a joint tenancy in the Land Titles system, and to provide notice to third parties, are secondary issues to be dealt with only after the ownership interest in land has been determined based on the evidence surrounding the execution of the transfer of severance.

Hearsay Evidence:

[96] Rule 39.01(5) of the Rules of Civil Procedure permits, on an application, an affidavit to contain statements of the deponent’s information and belief with respect to facts that are not contentious, if the source of the information and the fact of the belief are specified in the affidavit. Thus, hearsay evidence can be adduced on non-contentious issues, so long as the source of information and the fact of the belief are specified.

[97] The respondent, Ms. Thuss, in her factum states that “Rectification is an exception to the hearsay rule” and relies upon RBC v. El-Bris Limited, supra. RBC v. El-Bris Limited does provide that rectification is an exception to the inadmissibility of parol evidence. However, parol evidence is not to be confused with hearsay evidence. Parol evidence is not limited to oral evidence. It excludes extrinsic evidence to add to, subtract from, vary or contradict a written contract. Hearsay evidence is an out of court statement that is tendered for the truth of its contents. I do not accept that in rectification cases hearsay evidence is automatically admissible.

[98] Hearsay evidence is generally inadmissible unless it falls within a traditional hearsay exception, or unless it meets the twin criteria of necessity and reliability (see: R. v. Khelawon, 2006 SCC 57, [2006] S.C.J. No. 57). Where a declarant has died, the test of necessity is met. However, the evidence is nonetheless inadmissible unless it is also reliable. Reliability can be established if it is given in circumstances that make it inherently likely to be true and accurate. A statement’s reliability can also be established if it is corroborated by other sufficiently reliable evidence.

[99] During oral arguments, I raised concerns with both parties’ reliance on statements purportedly made by Darryl, given that he has died.

ANALYSIS:

(a) Whether the Declaration of Trust dated November 9, 2017 should be rectified

[100] I start by noting the similarity between the names “Douglas William Fonger” and “Darryl William Fonger”. It is not hard to fathom how Mr. Barnett and/or Ms. Heuvel could have reversed these names on the Declaration of Trust. That does not mean that they did. It simply means that it is believable that that is what occurred.

[101] I also do not accept that either of Douglas or Darryl would have, or should have, recognized that their names were reversed on the Declaration of Trust when they were signing the document. It is unlikely, even if Douglas had used a Declaration of Trust in the past to transfer property, that they would recognize which of them was supposed to be the “Beneficiary” and which party was to be the “Trustee”. The Respondents’ arguments relating to due diligence are rejected. I do not accept that Douglas’ claim fails on the basis that he failed to exercise due diligence by recognizing that the Declaration of Trust did not accord with the agreement that he and his son had reached. Both of Douglas and Darryl were entitled to rely on Mr. Barnett accurately drawing up the documents in the circumstances of this case.

The Fairmont Hotel Test:

[102] The starting point is determining whether there was a prior agreement whose terms are definite and ascertainable. As described in Fairmont, this entails inquiring into the nature and particularity of the terms which the parties intended to record in the instrument.

[103] In 2016, the parties sought the advice of an accountant on how to transfer the subject property from Douglas to Darryl. All of the proposals put forth by the accountant entailed triggering tax consequences and “costs” on the transfer of the land. Douglas’ evidence on this point is clear. He did not wish to trigger any tax liability or costs and therefore did not proceed with any of these proposals. Indeed, Ms. Thuss makes clear in her affidavit that it was also her understanding that Douglas did not wish to trigger those liabilities. The evidence is clear in that regard.

[104] I pause here to indicate that, much like the Fairmont Hotel case, Douglas’ intention not to create a tax liability would not permit rectification simply because the agreement that was actually reached resulted in unintended tax consequences. Instead, I rely upon that intention, objectively established by the evidence, to determine which of the two possible versions of the Declarations of Trust was more likely than not to have been agreed upon. If, as Beneficiary, there would be no tax consequences to Douglas, and if, as Trustee, there would be tax consequences, the objective intention of Douglas and Darryl to transfer the property without tax consequences is clearly relevant to the task at hand.

[105] I turn next to the evidence of Mr. Barnett. First of all, the Declaration of Trust was his idea. He deposed that he was aware that one of the goals of the parties was for Douglas to transfer the property with minimal or no tax consequences. In cross-examination, Mr. Barnett testified that when he looked at the Declaration, what had been set out there did not make any sense, since there would be no practical advantage to transferring the beneficial interest entirely to Darryl but keeping Douglas on title. It would trigger tax consequences and reporting requirements.

[106] There is no question that if the names were reversed on the Declaration of Trust, Mr. Barnett was “sloppy”, as Mr. Sinker, somewhat ironically, described. The position taken by Mr. Barnett in his evidence is credible because it is against his own interest. It would have been easy for Mr. Barnett to simply indicate that the Declaration of Trust as drafted accurately reflects what the parties instructed him to do. While I agree with the Respondents’ submission that this does not necessarily exonerate him due to his failure to recommend independent legal advice, I would still expect Mr. Barnett to dispute that he had made a mistake, unless he honestly believes that he had made an error.

[107] Mr. Barnett indicates that he confirmed with Darryl that the desired outcome was that, in the event of his death, title to the property would revert back to his father. This statement, however, gives rise to concerns about hearsay evidence, and I give it no weight. However, the explanation as to why Mr. Barnett recommended a Declaration of Trust is that he was told by Darryl what the parties wanted to accomplish in advance of the meeting involving Douglas. That statement is not admissible for the truth of its contents but is admissible to explain why Mr. Barnett chose a Declaration of Trust to implement the parties’ agreement.

[108] It matters not, for the purpose of rectification, how the error occurred. It only matters that there was a mistake. Thus, the fact that Mr. Barnett’s evidence is inconsistent in respect of how he asked Mr. Heuvel to amend the document is not germane to the issue. If this court is satisfied on the balance of probabilities that, by way of error, the Declaration of Trust does not reflect the parties’ agreement, the reason for that error, in my view, is simply not important.

[109] From the evidence of Ms. Thuss and Mr. Sinker, I find that Mr. Sinker, upon review of the Declaration of Trust, at the very least suspected that the two names had been reversed. He was well versed in Declarations of Trust. He informed Ms. Thuss that “normally the Declaration would have been written differently”. If this had simply been a concern about the pluralization of “beneficiaries”, I doubt a call would have been necessary. He specifically, in cross-examination, raised the issue of which Fonger was supposed to be the Beneficiary and which was to be the Trustee. It obviously occurred to him that the names had been reversed.

[110] Unfortunately, Mr. Barnett, who did not have any advance warning of the telephone call with Mr. Sinker, did not take the time to carefully review the situation when Mr. Sinker called, compounding his earlier error. Again, if I accept that there was a mistake and that the names were reversed, a further error by Mr. Barnett in suggesting that the agreement was correctly drafted ought not to prejudice his clients. It would have been far more consequential if Mr. Barnett had taken the time to actually review the document, and/or his file. It would have been far more consequential if Mr. Sinker had said to him, “is it possible that the names were reversed?”. I am not suggesting that Mr. Sinker had any obligation to do so. I am however indicating that Mr. Barnett’s confirmation of the correctness of the Declaration is not determinative.

[111] Ms. Thuss’ evidence that Darryl told her “my Dad is being an ass. Get the farm put into my name” falls into the category of impermissible hearsay, in my opinion, if it is tendered for the purpose of establishing that Darryl was meant to be the beneficiary under the Declaration of Trust. If it is tendered for the limited purpose of explaining why Ms. Thuss went through her papers, it can be admitted for that purpose. The statement was only apparently made in front of Ms. Thuss, an interested party, and no other witnesses. It is an ambiguous statement that does not necessarily mean that Darryl was telling her that he knew that he was entitled to call on his father to “reconvey” the property to him. It was made at a time when Darryl’s state of mind was suspect. In short, this statement is unreliable.

[112] I accept Ms. Thuss’ evidence about the family discussing the plan of succession and that the plan included that Darryl would eventually receive the subject property. That, however, does not necessarily mean that Douglas and Darryl agreed that the subject property would go to Darryl prior to Douglas’ death. Accordingly, those discussions do not assist Ms. Thuss.

[113] Ms. Stanley’s evidence is also of no assistance. Douglas’ statements to her are consistent with both possible Declarations of Trust. Douglas may have simply been reporting that he had made the necessary arrangements for Darryl to get the property upon Douglas’ death.

[114] I do find that Darryl’s August 7, 2018 Will is probative. There is a witness to his signature, so I can accept that those are his words. It is noteworthy that he does not list the subject property as one of his assets to be distributed.

[115] I am asked to consider the use of the word “reconvey”. It is argued by the Applicant that only he could have had the property “reconveyed” to him, since he was the one that had “conveyed” the property in the first place. The difficulty with accepting that argument is that the Declaration of Trust has been so poorly drafted that it is difficult to ascribe any one word with too much meaning. The Declaration of Trust was clearly drafted using a precedent and many of the words of the precedent were clearly not altered to adapt to the particular situation facing Douglas and Darryl. I do, however, accept that the use of the word “reconvey” is some evidence that it is the beneficiary who is more often than not the party who was the original outright owner of the property in question.

[116] Finally, it is noteworthy, in my opinion, that at no time after the Declaration of Trust did Darryl personally call upon his father to “reconvey” the property to him.

[117] The onus is on the party seeking rectification. I am persuaded on a balance of probabilities that both Douglas and Darryl intended that Douglas was to be the “Beneficiary” and Darryl was to be the “Trustee” as it was their belief that this would result in a transfer of the property from Douglas to Darryl with no tax consequences to Douglas. I have arrived at this conclusion relying heavily on the evidence of Mr. Barnett that the Declaration of Trust was his proposal and that it would make no sense for Douglas to have been the “Trustee” because it would not have accomplished what the parties wanted to do whereas if Douglas had been the “Beneficiary” it would have. Mr. Barnett’s evidence is contrary to his own interests, as it is an admission of having made a mistake.

[118] Following through on the Fairmont Hotel analysis, there is no reason for me to believe that this agreement was no longer in effect at the time that the Declaration of Trust was executed.

[119] Furthermore, I am satisfied that the instrument, in this case the Declaration of Trust, contains an error in that the names of the two men were reversed and that it was agreed upon by both men that Douglas would be the “Beneficiary” and Darryl would be the “Trustee”.

[120] Finally, rectifying the Declaration of Trust so that Douglas is the “Beneficiary” and Darryl the “Trustee” has the desired effect of carrying out the parties’ agreement.

[121] From my analysis, I have concluded that this is a case of mutual mistake, i.e. that Darryl too thought that he was to occupy the role of the “Trustee” because Mr. Barnett would not have suggested the Declaration of Trust unless tax avoidance was the predominant goal. This is not a case such as 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, where the resisting party admitted that it was aware at all relevant times that the agreement signed could not, as drafted, give effect to the agreement reached.

[122] In determining that this case involves a mutual mistake, I do not mean to say either of Douglas or Darryl, if asked, would be able to, at any relevant time, say whether they were properly labelled as the “Trustee” or “Beneficiary”. Both knew what they wanted to do, that is, transfer Douglas’ property to Darryl with no tax consequences to Douglas and trusted that Mr. Barnett’s idea of a Declaration of Trust would accomplish that goal.

[123] I therefore do not have to determine whether the Applicant has shown that the other party knew or ought to have known about the mistake and that permitting the defendant to take advantage of the erroneously drafted agreement would amount to fraud or the equivalent of fraud.

[124] While I reiterate that it is likely that Mr. Sinker knew that an error had been made in the Declaration of Trust, the relevant time to consider must be the time that the instrument is signed. In other words, if at that time I had found Darryl knew that he was being mislabelled as “Beneficiary” but did not correct it, fraud or the equivalent of fraud would have to be shown.

[125] For those reasons, I conclude that on the balance of probabilities both Douglas and Darryl had agreed to implement a Declaration of Trust in which Douglas was the “Beneficiary” and Darryl was the “Trustee”. I have further concluded that this is an appropriate case to order rectification of the Declaration of Trust to accord with that agreement.

(b) If so, whether the transfer of the property directed by Ms. Thuss acting under power of attorney should be set aside and the subsequent registration of that transfer in the land titles registry should be rectified

[126] Having determined that the Declaration of Trust ought to be rectified, it is clear that the registration in the Land Titles Registry should be amended.

[127] As Darryl was properly the “Trustee”, he did not have any duty to perform except to convey the property to the beneficiary upon demand. He could not unilaterally sever the joint tenancy and create a tenancy-in-common as “Trustee”. It stands that if Darryl could not do so, neither could his power of attorney. The severance of the joint tenancy must be set aside.

[128] If the joint tenancy was not severed, upon Darryl’s death the property would pass to Douglas by right of survivorship.

[129] Section 159 of the Land Titles Act authorize the court to order the rectification of the registry where it has determined that a person is entitled to “an estate, right or interest in or to registered land or a charge and as a consequence of the decision the court is of the opinion that a rectification of the register is required”.

[130] Accordingly, having made the determination that the severance of the joint tenancy could not have been made by Ms. Thuss acting as power of attorney for Darryl, I direct the register to be rectified to show Douglas William Fonger as the sole owner of the subject property.

(c) If not, should the Land Transfer document dated November 1, 2018 against the subject property be amended to delete Douglas as Transferor and as Transferee.

[131] Having determined that rectification is appropriate in this case, I need not address this issue.

DISPOSITION:

[132] For the foregoing reasons, this Court Orders that:

(1) The Declaration of Trust dated November 9, 2017 shall be rectified so that Douglas William Fonger is shown as the “Beneficiary” and Darryl William Fonger as the “Trustee”;

(2) The transfer dated November 1, 2018 registered on Instrument No. ER1202095 in the Registry Office of the County of Middlesex transferring title in the subject property from Darryl William Fonger and Douglas William Fonger as joint tenants to Darryl William Fonger and Douglas William Fonger as tenants in common, shall be set aside;

(3) The parcel register for the subject property in the Registry Office of the County of Middlesex shall be amended to reflect that Douglas William Fonger is the sole owner of the subject property.

[133] If the parties are unable to agree upon the issue of costs, the Applicant may serve and file through the trial coordinator written submissions not to exceed three pages in length by November 26, 2021 and the Respondents may serve and file responding submissions within the same parameters by December 8, 2021. The submissions must include a separate Bill of Costs with each. There shall be no reply.

“Justice S. Nicholson”

Justice Spencer Nicholson

Date: November 2, 2021