COURT FILE NO.: FC-17-2483
DATE: 2021/11/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUSAN FAYE DAVIDSON
Applicant
– and –
JAMES DOUGLAS DAVIDSON
Respondent
Peter S. Mirsky, for the Applicant
Ron Paritzky, for the Respondent
HEARD: In writing.
REASONS FOR JUDGMENT
LABROSSE J.
Overview
[1] The Respondent, James Davidson, brings this motion to amend his pleadings following the conclusion of the trial and while the trial decision is under reserve.
[2] No particulars are included in the Notice of Motion as to the amendment sought.
[3] In his Factum, he identifies the relief sought as follows:
An Order permitting the Respondent to amend Box 50 of his Amended Answer currently claiming a "Constructive Trust" interest in 3115 Paden Road, North Gower, Ontario, either by removing the word "constructive" before the phrase "trust interest", or, in the alternative, by adding the words "and/or Resulting" after the word "constructive" and before the word trust.
[4] The Respondent has filed no evidence as to why the amendment is being sought at this time and why he did not move to claim a resulting trust when he brought a motion and was authorized to amend and to claim a constructive trust in September 2018. There are no details as to how the evidence at trial may have changed in some unforeseen manner to warrant a claim for a resulting trust.
[5] At trial, the Applicant did not lead specific evidence to address the possible reverse onus that could be placed on her in the analysis for a resulting trust to demonstrate that the placement of the property at 3115 Paden Road in her name was intended to be a gift or a bona fide transfer for no consideration. The evidence required to address the presumption of bargain and that the Applicant was holding the Respondent’s interest in to 3115 Paden Road in trust was not directly addressed by either party.
[6] For the reasons set out herein, the Respondent’s motion to amend his Amended Answer after the completion of trial is denied. It is clear that the prejudice to the Applicant goes well beyond the issue of costs or an adjournment. Important evidence would have to be presented and there will be significant issues of delay to re-open the trial, hear evidence of the parties and then further argument is a prejudice that cannot be compensated in costs. Beyond delay, the prejudice to the Applicant is clear that she came to trial with the expectation of having a certain case to meet. To change that at this point to introduce the claim for resulting trust and the necessary evidentiary record to address such a claim would be highly prejudicial. The trial is complete and the Court will now deal with the Respondent’s claim for a constructive trust as pleaded amongst the other trial issues.
Factual Background
[7] The Application was issued on November 30, 2017. The Respondent’s Answer is dated January 3, 2018.
[8] On September 18, 2018, Justice Blishen granted leave to the Respondent to amend his Answer as follows: “The Respondent is given leave to amend his pleadings to claim a constructive trust interest in the 3115 Paden Road, North Gower, Ontario property. If the amendment proves to be unnecessary and results in extra costs to the Applicant, she may at the end of the day claim those costs in compensation.”
[9] On April 4, 2019, the Respondent amended his Answer adding a claim for constructive trust over the property owned by the Applicant at 3115 Paden Road.
[10] The Applicant filed an Amended Reply on May 16, 2019 which included the following:
a. The Applicant denies that the Respondent had or intended to retain any interest in the subject property and he has not pleaded a Resulting Trust in support of this allegation.”
[11] The matter was called for trial on Monday, November 30, 2020. After the parties made their opening statements, the trial was adjourned on consent to the May 2021 trial sittings by Summers J. because as the Respondent’s counsel was unwell.
[12] The second trial began on May 17, 2021. It was initially scheduled for 10 days after I held a Trial Management Conference and directed that the parties provide accurate time estimates for each witness. The trial time was managed to attempt to respect the initial time estimates but this proved impossible given health issues of counsel for the Respondent and challenges in scheduling witnesses as a result of the extended schedule. Argument ended on July 20, 2021, some six weeks after the original end date.
[13] In respect of the property at 3115 Paden Road, the evidence at trial was as follows (see Exhibit #40):
a. On June 19, 1998, the parties acquired 3161 Paden Road as joint tenants. There was a residential home on the property and the parties moved into that home and occupied it as their matrimonial home;
b. On April 3, 2003, the parties created 4 new lots by way of severance – 3125, 3135, 3145 and 3155 Paden Road (see Exhibit #19). The four new lots were placed in the name of the Respondent for zero consideration. The retained parcel kept the municipal address of 3161 Paden Road and was in joint names. The new lot created as 3155 Paden Road included the then matrimonial home.
c. On May 5, 2005, 3155 Paden Road (with the then matrimonial home) was transferred from the Respondent to the Applicant for zero consideration. The rear portion of 3155 Paden Road was severed from the front portion where the then matrimonial home was located. That rear portion of 3155 Paden Road merged with the larger parcel 3161 Paden Road (see Exhibit #19).
d. The parties built a new matrimonial home on 3161 Paden Road as joint owners at some point prior to September 1, 2005 and occupied it as a matrimonial home.
e. On September 1, 2005, 3155 Paden Road was sold to a third party by the Applicant.
f. In September 2005, mortgage instructions were obtained to place a new mortgage on 3161 Paden Road with the Applicant as the sole owner and borrower. 3161 Paden Road was therefore transferred from joint names to sole name of the Applicant for zero consideration. 3161 Paden Road was then approximately 136 acres.
g. In 2017, the Applicant applied for a severance of the 3161 Paden Road property but all the leg-work was done by the Respondent on her behalf. The property was severed creating two properties which included the then matrimonial home at 3161 Paden Road (approx. 7 acres) and the balance became 3115 Paden Road (approx. 129 acres) – see Exhibit #20. The Applicant continued to own both properties.
[14] During argument, the Respondent’s counsel made a casual comment that the evidence in respect of the property at 3115 Paden Road justified a finding of resulting trust rather than a constructive trust and that the ownership of the property should be in joint names. The Respondent relied on caselaw for a resulting trust as part of the cases he provided to the Court at the conclusion of the trial but no actual submissions were made in respect of the evidence surrounding a resulting trust and the applicable law.
[15] Following the end of trial, the Court wrote to the parties on July 23, 2021, and then again on August 12, 2021 indicating that the Respondent’s approach to arguing for a declaration of resulting trust was inappropriate in the circumstances that it is not part of the pleadings. If the Respondent was seeking to make a claim for resulting trust, the Respondent needed to seek to amend its Amended Answer to properly make such a claim. The Respondent presented that motion to amend on August 17, 2021 by filing a Notice of Motion and a Factum. There was no affidavit filed in support of the motion to amend.
[16] The Applicant’s responding Factum was filed on August 19, 2021.
[17] On October 14, 2021, I wrote to parties to clarify if they wished to make oral submissions or if they wished to proceed with the documentation provided to the Court. Both parties confirmed that they wished to proceed with the motion to amend based on written materials.
Applicable Law
Amending a Pleading
[18] Rule 11(3) of the Family Law Rules[^1] provides that "On motion, the court shall give permission to a party to amend an application, answer or reply, unless the amendment would disadvantage another party in a way for which costs or an adjournment could not compensate".
[19] Rule 2(2) of the Family Law Rules provides that "The primary objective of these rules is to enable the court to deal with cases justly".
[20] Rule 2(3) of the Family Law Rules provides that "Dealing with a case justly includes ensuring that the procedure is fair to all parties and saving time and expense ... ".
[21] In the context of Rule 26.11 of the Rules of Civil Procedure[^2], the rule requires the court to grant leave to amend pleadings unless the Respondents can demonstrate that they will suffer non-compensable prejudice.[^3]
[22] There is a high threshold to be met for the court to deny an amendment of the pleadings, as leave to amend should only be denied in the clearest of cases, especially where the deficiencies in the pleading can be cured by an appropriate amendment.[^4]
[23] To meet the threshold mentioned above, the onus lies with the Applicant to prove actual prejudice.[^5]
[24] The Court of Appeal has demonstrated that the issue of the application of Rule 11(3) is fact specific.[^6] In Greenglass, the Court of Appeal noted that the Divorce proceedings were undeniably protracted, Mr. Greenglass had ample opportunity during the proceedings (years) to seek an amendment to advance his claim of an unequal division of assets. He made application to amend at the start and at the end of the trial, and an adjournment would clearly prejudice Ms. Greenglass which costs could not compensate. The trial judge noted that Mr. Greenglass had made no attempt to amend his pleadings in a timely fashion.
[25] In Stefureak v. Chambers[^7], the Court considered an amendment to a pleading to claim sole custody rather than joint custody. In that case, the motion was brought mid-trial after 20 days of trial (spread out over 10 months) at a point where the last witness for the Applicant was testifying. The Respondent had yet to call his case and the amendment was allowed.
Resulting Trust
[26] A traditional resulting trust claim may be made in a family law case where there has been a financial contribution to the initial purchase of a property, and then a gratuitous transfer of title to the property.[^8]
[27] In such circumstances, s. 14 of the Family Law Act provides that: "The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married ....".
[28] The Supreme Court of Canada in Pecore v. Pecore, at para. 24, stated:
“The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters' Law of Trusts, at p. 375, and E. E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts.”[^9]
[29] The analysis for a resulting trust requires an evidentiary basis in order to establish intent. In Pecore v. Pecore[^10], the Court of Appeal for Ontario set out some factors the court should consider when determining intent:
- Documents;
- The quantum of the transfer and its timing;
- The statements and conduct of the transferor referable to the transfer;
- The state of the relationship between the transferor and the transferee;
- Any pattern of conduct on the part of the transferor relevant to the issue;
- The exclusion of any obvious recipient from the transfer;
Analysis
[30] The Respondent relies principally on the Stefureak decision to support his request for a last-minute amendment. However, in that case, counsel for the Applicant admitted that the amendment would not have changed the manner in which his client’s case would have been presented. The amendment was brought following the release of the Court of Appeal for Ontario’s decision in Kaplanis v. Kaplanis[^11], which made relevant findings with respect to the appropriateness of joint custody claims.
[31] In Stefureak, the prejudice requirement was not met as the Respondent had yet to call his case in chief and the amendment would not have a significant impact on the balance of the trial.
[32] In the present case, the Respondent has not provided timely notice of this change in approach vis-a-vis the 3115 Paden Road property. The evidence at trial was not focussed on the Applicant’s onus of rebutting the presumption that Ms. Davidson was holding the 3115 Paden Road property in trust for Mr. Davidson.
[33] The evidence filed about those transfers is found at Exhibit #40 being the letter from the lawyer who acted on the severances in 2003 and 2017. Of note, when describing the various transfers between the parties, the lawyer states: “As is common for inter-spousal transfers, these were completed for zero consideration (“natural love and affection”)”.
[34] Furthermore, a decision was made during the trial not to call the lawyer who acted on the severances. Thus, except for the limited evidence of the parties and Exhibit #40, there was little evidence presented on the circumstances of those transfers. Such evidence will likely be required if the trial were re-opened. The Applicant’s evidence at trial was focussed on the claim for constructive trust. More particularly, the focus was on the fact that the value of the property was jointly agreed to at $450,000 being the higher of the two appraised values. As such, the claim for constructive trust was impacted by the fact that the Respondent has obtained full value for this property in the equalization of net family property. The evidence was that the original property was purchased jointly. Initially, the four severed lots were placed in the name of the Respondent for zero consideration. The Applicant’s evidence was that the property at 3161 Paden Road was put in her sole name in 2005 to allow for mortgage financing in the name of the Applicant. Exhibit #40 certainly suggests that there was a gift between spouses as the lawyer uses the term “for natural love and affection”. There is certainly no indication that the Applicant was holding the property in trust for the Respondent.
[35] The evidence surrounding the transfer of 3161 Paden Road to the Applicant’s sole name does suggest that there was a juristic reason for the transfer. The Applicant says that it was in order to obtain mortgage financing. The Respondent says that it was to avoid merger as part of the severances. Also, the higher value of $450,000 is equalized in the Net Family Property Statement filed as Exhibit “C”. Thus, the constructive trust claim is tenuous at best.
[36] The Respondent now changes his approach to this asset and claims a resulting trust after all the evidence has been heard. He now takes the position that the Applicant is holding 3115 Paden Road in trust for him. As previously noted, the Applicant put the issue of a resulting trust on the table in the Amended Reply back in May 2019 by denying any intention on the part of the Respondent to retain any interest in the 3115 Paden Road property. The Respondent clearly gave notice that the Applicant was relying on the fact that the Respondent was not making a claim for a resulting trust. It is apparent that only in the aftermath of the tenuous constructive trust claim is the Respondent now advancing the resulting trust claim despite the fact that the value of this asset is being equalized. He had ample opportunity to seek the amendment for two years prior to the commencement of trial.
[37] Also, the Respondent made it clear at the outset of the trial that his trust claim (then alleged to be by constructive trust) was only for a 50% ownership despite the fact that his Net Family Property Statement placed the property on his side of the ledger. The proposed amendment makes no mention of the percentage of interest that the Respondent claims by way of resulting trust but given that the property was never in the Respondent’s sole name, the Court presumes that he seeks a 50% interest by resulting trust. There was an objection at the commencement of the trial that the Respondent seemed to have waited until the last minute to confirm that his constructive trust claim was limited to a 50% interest. He now seems to be doing the same thing again in making this post-trial change to his case. Regardless, to leave them as tenants in common will surely have the effect of prolonging the litigation and create more conflict arising from their co-ownership.
[38] During the trial, the Applicant presented evidence on her difficult financial situation. As the trial schedule was delayed, the Court made it clear to the parties that if the trial could not be completed before the summer break, there was a risk that the Court could not provide a decision for some time. This reality still exists however the proposed amendment will further delay the Court’s adjudicative process. Consideration will have to be given to reconvening the trial to hear evidence. Although the Respondent has not requested to present more evidence on the issue of intent and the presumption against a gift, the Applicant has made it very clear that she will want to present evidence on rebutting the presumption that the Respondent intended to place his interest in the property in trust with the Applicant. It is therefore difficult to imagine that the Respondent will not want to reply to the Applicant’s evidence. This will increase the time required for further evidence.
[39] During the trial, it was very clear that the ongoing delays due to the Respondent’s counsel’s health were of a significant concern for the Applicant who has limited financial resources. These delays caused significant frustrations throughout the trial and the Applicant expressed emotional difficulties with the delays. I accept that the amendment to the Respondent’s pleading at this late date will cause emotional prejudice to the Applicant that cannot be compensated in costs or an adjournment. I am actually of the view that the emotional prejudice caused to the Applicant by further delay will be significant.
[40] Further, a claim for a resulting trust is greatly impacted by the evidentiary record and particularly the intentions of the parties. The Applicant’s case was presented as a claim for constructive trust. To change the legal approach on a significant asset owned by the Applicant after the end of the trial is very prejudicial. The Applicant was entitled to know the case she had to meet at the commencement of trial and the Respondent was very clear that the claim against 3115 Paden Road was limited to a 50% interest by way of constructive trust.
[41] The Court is also influenced by the caselaw for re-opening a trial. While the Respondent has not included a request to file additional evidence, his request has the same effect given that the onus is on the Applicant to lead evidence to defeat the presumption of resulting trust. The test for re-opening a trial was summarized by the Ontario Court of Justice authority established in Hughes v. Roy[^12]:
- whether the evidence, if presented at trial, could affect the outcome of the trial or could have changed the result if judgment has already been rendered;
- whether the evidence could have been obtained before the trial by the exercise of reasonable diligence;
- whether the evidence is relevant, necessary, and reliable;
- what, if any, is the prejudicial effect of the new evidence;
- the importance of the integrity of the trial process;
- whether it would cause a miscarriage of justice if the new evidence were not accepted;…
[42] The Court in Hughes concluded that the overarching factor was one of fairness, and I agree. While the analysis in Hughes is not clearly applicable as the Respondent only seeks to amend his pleading, the criteria is instructive.
[43] In the present case, the Respondent chose not to claim a resulting trust although put on notice by the Applicant two years prior to the commencement of the second trial. It was clearly available to the Respondent to seek out such an amendment and prior to trial and he chose not to go in that direction.
[44] The prejudice on the Applicant is not only one of delay. The Applicant has gone to trial on the basis of the case she was required to address. There are many factors that go into a decision to proceed with a trial or to settle a case. In a family law case, Net Family Property Statement is an essential element to determine the chances of success at trial. The Applicant would have assessed the merits of a constructive trust case that was tenuous at best. The onus was on the Respondent to make out that claim. Conversely, the claim for resulting trust comes with a reverse onus and the Applicant would have had to evaluate her ability to overcome the reverse onus. The Applicant has lost the right to evaluate her evidence and determine if it continued to be in her best interest to proceed to trial. This is a significant prejudice which cannot be compensated by costs.
[45] When considering the integrity of the trial, the assessment again falls in favour of the Applicant. In the present case, the notion of resulting trust was proposed by the Respondent as almost an afterthought once the claim for constructive trust seemed to be an uphill battle. This is not the way that trials are supposed to be litigated. To allow a party to change directions after the trial when the chosen approach is looking doubtful is not respectful of the trial process.
[46] In terms of necessity, the Respondent chose to make his claim to 3115 Paden Road by firstly seeking a 100% interest by constructive trust. He then changed his position to only seek a 50% interest in that property. The result would be for the parties to become tenants in common. I am unable to see an advantage to having these two parties, who have been embroiled in highly conflictual litigation to end up sharing the ownership of this property despite its obvious sentimental value. In such a case, the necessity factor favours the Applicant because the parties have already agreed to the higher value of the property and the equalization of this asset means that the Respondent has obtained his share of the value. As such, the amendment is not necessary for the Respondent to be compensated for his interest in the property.
[47] Finally, there would be no miscarriage of justice. The Respondent had every opportunity to present his case as he saw fit. The issues surrounding the ownership of 3115 Paden Road were well known by the parties. This was a property with emotional attachment for both parties given their hunting activities on the property and the presence of the hunt camp. The Respondent has had the full benefit if higher market value which has been equalized. There is no benefit in having the parties share in the ownership of this property and simply keep on fighting at tenants in common.
[48] For all the above reasons, the motion to amend the Respondent’s Amended Answer is denied. I will now proceed with my trial decision.
Justice Marc R. Labrosse
Released: November 10, 2021
COURT FILE NO.: FC-17-2483
DATE: 2021/11/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUSAN FAYE DAVIDSON
Applicant
– and –
JAMES DOUGLAS DAVIDSON
Respondent
REASONS FOR JUDGMENT
Labrosse J.
Released: November 10, 2021
[^1]: Family Law Rules, O. Reg. 114/99. [^2]: Rules of Civil Procedure, R.R.O. 1990, Reg 194. [^3]: 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, 135 O.R. (3d) 681, at para. 25. [^4]: Tran v. University of Western Ontario, 2015 ONCA 295, at para. 26 [^5]: Haikola v. Arasenau (1996), 1996 36 (ON CA), 27 O.R. (3d) 576 (C.A.), at paras. 3-4 [^6]: Greenglass v. Greenglass, 2010 ONCA 675. [^7]: 2005 16090 (ON SC), [2005] O.J. No. 1949. [^8]: Korman v. Korman, 2015 ONCA 578, at para. 27. [^9]: 2007 SCC 17, [2007] 1 S.C.R. 795, at para. 24. [^10]: 2005 31576 (Ont. CA), at para. 26. [^11]: (2005) 2005 1625 (ON CA), 249 D.L.R. (4th) 620 (Ont. C.A.). [^12]: 2016 ONCJ 65, at para. 9.