COURT FILE NO.: CV-21-00662401-0000 DATE: 20220304 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHELLE SHUK-HA NG Applicant
- and – ERIC TSZ KUI TANG a.k.a. ERIC TANG Respondent
Kelli Preston for the Applicant Lawrence S. Wong for the Respondent
Application under the Partition Act, R.S.O 1990, c. P.4
HEARD: February 18, 2022
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] In 2001, Michelle Ng and Eric Tang purchased a condominium unit, 5 Everson Drive, (Block H, Unit 922), for approximately $200,000. They paid 50:50 the down payment of approximately $45,000, and they placed a first mortgage of approximately $155,000 on the property to pay the balance of the purchase price.
[2] Michelle moved into 5 Everson Dr. with her mother and brother. She continues to live there. During her residence, she contributed approximately $350,000 to maintain the property and eventually to discharge the first mortgage. She did not pay rent.
[3] Eric never moved in. Eric lived at his family’s home, and then he successively purchased and lived at his own two residences. But Eric never resided at 5 Everson Dr.
[4] In 2009, Michelle and Eric broke up as a couple. From time to time, between 2009 and 2021, Eric asked Michelle to purchase his interest in 5 Everson Dr., but she could not afford to do so. In the meantime, with Michelle’s consent, Eric placed a mortgage of approximately $180,000 on 5 Everson Dr., and he used the loan proceeds for his own purposes.
[5] Now, both Michelle and Eric apply under the Partition Act to end their joint 50:50 co-ownership of 5 Everson Dr.
[6] Michelle seeks to remain in occupation. She seeks to be allowed to purchase Eric’s interest in the property, which she submits has been reduced to a 10% interest because she made after-purchase contributions to maintain the property and to discharge the first mortgage on the property. She relies on the law of unjust enrichment to support her claim for an unequal distribution of the sale proceeds.
[7] Eric seeks to have 5 Everson Dr. sold. He requests that the proceeds be divided 50:50 after: (a) he pays to remove the mortgage he had placed on the property (likely using his share of the proceeds of the sale of 5 Everson Dr. to do so); and (b) Michelle pays occupation rent of approximately $40,000 (calculated as the difference between (i) one half of the fair market rentals from 2001 to 2022, approximately $215,000 and (ii) one half of Michelle’s after-purchase contributions, approximately $175,000).
[8] For the reasons that follow, it is my view that the claims for partition and sale succeed, but the claims for unjust enrichment and for occupation rent must fail. In the case at bar, a romantic relationship changed into an investment joint venture that saw the joint venturer’s investment in 5 Everson Dr. appreciate in value by the operation of market forces. Eric should pay his overdue share of the after-purchase contributions. And he should discharge the second mortgage on the property, which was not part of the joint venture. With those adjustments, 5 Everson Dr. may be sold. Therefore:
a. I dismiss Michelle’s unjust enrichment claims for an unequal distribution of the proceeds of sale. b. I dismiss Eric’s claims for occupation rent. c. I order that if: (a) Eric pays to discharge the mortgage he placed on 5 Everson Dr.; and (b) Eric pays to Michelle one half of Michelle’s after-purchase contribution, then 5 Everson Dr. should be sold as an unencumbered property pursuant to the Partition Act, with the net proceeds of sale divided 50:50. d. I order that if within 90 days: (a) Eric fails to discharge the second mortgage on 5 Everson Dr.; and (b) if Eric fails to pay one half of Michelle’s after-purchase contribution, then 5 Everson Dr. should be sold pursuant to the Partition Act with: (a) Michelle receiving 50% of the gross proceeds of sale; (b) Michelle receiving one half of her after-purchase contribution from the proceeds of sale; and (c) Eric receiving the balance of the proceeds of sale.
[9] To illustrate the effect of “part d.” of my order. for example, if the gross proceeds of sale were $800,000, Eric, in effect, would receive $225,000 (28%) from having his $180,000 mortgage discharged plus $45,000 from the net proceeds, and Michelle, in effect, would receive $575,000 (72%) from one half of the gross proceeds plus reimbursement of one half of her after-purchase contributions to their joint venture.
B. Facts
[10] Around 2000, when Eric and Michelle were in college, they began dating. At the time, Michelle was living with her mother and brother in a rented home, and in anticipation of their marrying, on October 5, 2001, Eric and Michelle purchased condominium Unit 922 at 5 Everson Drive, Block H, Toronto, Ontario as joint tenants, which is to say that they were 50:50 owners with a right of survivorship.
a. The purchase price was $198,028.00. b. Michelle and Eric each contributed $21,945 towards the purchase price. The balance of the purchase price was financed by a $155,175 mortgage from the CIBC.
[11] Michelle and her mother and brother moved into 5 Everson Drive. But as events transpired Eric never moved into the premises.
[12] The initial plan of the couple was that after marriage, Eric would move into the premises, but in the meantime, the arrangement was that Michelle and her family could live in the premises without paying rent but with the responsibility of paying: (a) the mortgage; (b) realty taxes; (c) the condominium common elements fees; (d) for maintenance; and (e) utilities.
[13] On January 30, 2008, Michelle and Eric became engaged.
[14] On May 15, 2009, the romantic relationship ended.
[15] In 2012, Eric asked Michelle to buy his 50% interest in 5 Everson Dr. because he had purchased a condominium of his own in Markham with a purchase price of $528,660 with an anticipated closing in December 2012. Michelle did not have the financial resources to purchase Eric’s interest, and so with her consent, Eric obtained a $180,000 loan, which was secured as a mortgage on 5 Everson Drive. Eric has made the monthly payments on the bank loan until the present time.
[16] During the period of her occupation of 5 Everson Drive, Michelle made the following after-purchase contributions to maintaining the couple’s equity in the property as follows:
a. $219,415.44 for the first mortgage, which was discharged in 2019; b. $29,851.59 for realty taxes; c. $88,442.92 for common expenses; d. $4,742.03 for home insurance; e. $5,715.30 for roof repair.
[17] In 2013 and again in 2021, Eric attempted to negotiate a sale of his interest in the property to Michelle, but these attempts proved futile.
[18] Relying on two market analyses (one from Avion Realty Inc. and the other from Remax Excel Realty both dated August 27, 2021), Eric believes that the current market value of 5 Everson Dr. is between $735,000.00 to $755,000.00.
[19] In his Partition Act application, Eric claims occupation rent for the eighteen years. He submits that she but not he enjoyed the benefits of occupying 5 Everson Dr.
[20] Relying on two market analyses (one from Remax Centrepoint Realty and the second from Remax Excel Realty), Eric claims $212,400 for occupation rent, which is one half of the rental income from 2003 to 2021.
[21] Michelle denies that she has any obligation to pay occupation rent. She submits that because she made all the after-purchase contributions, Eric would be unjustly enriched unless his ownership interest in 5 Everson Dr. were reduced to a 10% interest.
C. Requests for Relief
[22] Michelle and Eric make the following requests for relief.
Michelle’s Request for Relief
a. an Order for the partition of the property at 5 Everson Drive, Unit 922, Toronto, legally described […]; b. an Order that a Judge of the Superior Court of Justice act as referee in respect of the partition of 5 Everson Dr.; c. an Order that the determined value of 5 Everson Dr. be divided between Michelle and Eric, after adjustment and allowance for payments, and contributions made by the parties for the Property’s purchase and maintenance, subject to partition; d. an Order that Eric accept payment from Michelle for his interest in 5 Everson Dr., based on the value and partition determined by this Honourable Court, and an Order to permit the transfer of ownership of 5 Everson Dr. to Michelle only; e. an Order that Eric takes all steps necessary to have the Line of Credit discharged from 5 Everson Dr.; f. in the alternative, an Order that Michelle pay into Court for Eric’s interest in 5 Everson Dr., based on the value and partition determined by this Honourable Court, with such monies to be distributed to the respondent as the Court directs; and g. an Order for costs of the Application payable to Michelle on a substantial indemnity basis, together with applicable tax.
Eric’s Request for Relief
a. an Order requiring the jointly owned property located at 5 Everson Drive, Block H, Unit 922, Toronto, Ontario, be listed for sale forthwith on the following terms: g. The parties shall instruct their real estate lawyer to pay from the proceeds of the sale all sale adjustments including encumbrances, real estate commission, property taxes, utilities or municipal fees that are outstanding, legal fees and disbursements associated with the sale, and the balance of the sale proceeds shall be divided equally. h. The Applicant shall pay the Respondent an occupation rent in the amount of $40,680.00; i. The Respondent shall discharge the line of credit registered as a mortgage on the Property at his own costs on the closing of the sale of the Property. j. Costs of the application and counter-application.
[23] To summarize, Michelle’s request is that: (a) the court order partition of the property; (b) the court determine the value of 5 Everson Dr.; (c) after determining the value of the property, the court should fairly distribute the value after taking into account the contributions made by the parties; and (d) the court should order Eric to accept Michelle’s payment for Eric’s share so that she could remain in the premises.
[24] Michelle submitted that taking into account the contributions made by the parties, Eric’s share of the value of the property would be around 10% because all he contributed was a share of the down payment when the property was purchased. Michelle disputed that Eric had any claim for occupation rent. Michelle submitted that the court could make this order pursuant to the Partition Act and the law of unjust enrichment and constructive trusts.
a. To summarize, Eric’s request is that: (a) the court order a judicial sale of 5 Everson Dr.; (b) he would be responsible for discharging the mortgage he had placed on the property on the closing of the sale of 5 Everson Dr.; (c) the court order Michelle to pay occupation rent of $40,680.00; and (d) the proceeds of the sale be divided 50:50. b. Eric submitted that he was entitled to occupation rent but acknowledged that he was responsible for half of the carrying costs and expenses that had been paid by Michelle. Setting his share of the expenses against her liability for occupation rent yielded the difference of $40,680.00. Eric disputed that there should be any adjustment to the 50:50 ownership of the property.
D. Discussion and Analysis
[25] Michelle and Eric bring competing Partition Act applications.
[26] Section 2 of the Partition Act states that a joint tenant or tenant in common may be compelled to make or suffer partition or sale. The general principles to determine when partition and sale should be granted were laid down in Davis v. Davis, where the Court of Appeal stated:
There continues to be a prima facie right of a joint tenant to partition or sale of lands. There is a corresponding obligation on a joint tenant to permit partition or sale, and finally the Court should compel such partition or sale if no sufficient reason appears why such an order should not be made.
[27] In cases after Davis, the Partition Act has been interpreted to mean that the court has a very limited discretion to refuse an application for partition or sale. Only in exceptional circumstances will a joint tenant or tenant in common be denied his or her request that the property be partitioned or sold. The court's discretion to refuse partition and sale is narrow, and there must be malicious, vexatious or oppressive conduct in relation to the request for partition or sale to justify the refusal to grant partition and sale, and specifically the reasonableness of the positions taken by the parties as they relate to the partition and sale. Steele v. Doucet, 2019 ONSC 544; Garfella Apartments Inc. v. Chouduri, 2010 ONSC 3413; Akman v. Burshtein; Osborne v. Myette; Latcham v. Latcham, affg. [2001] O.J. No. 5291 (Div. Ct.); Gartree Investments Ltd. v. Cartree Enterprises Ltd.; Gartree Investments Ltd. v. Cartree Enterprises Ltd., affd. [2001] O.J. No. 1184 (Div. Ct.); Fellows v. Lunkenheimer; Kalita v. Freskiw Estate; Jakubiszyn v. Tekielak; Silva v. Silva; Hay v. Gooderham.
[28] In Greenbanktree Power Corp. v. Coinamatic Canada Inc., the Court of Appeal confirmed that the court's discretion to refuse to grant partition or sale is limited to circumstances of malice, oppression, and vexatious intent. The court stated that a narrow interpretation of the discretion makes commercial sense by enhancing predictability. However, the court added that hardship might rise to oppression. The case law shows that malicious, vexatious, or oppressive conduct that would bar a remedy is more than unreasonably refusing to accommodate the wishes of the other co-owner. Cogan v. Cogan; Peters v. Peters; Wilson v. Brown; Glick v. Carr.
[29] The onus is on the party resisting partition or sale to demonstrate sufficient reasons for refusal. Afolabi v. Fala, 2014 ONSC 401; Silva v. Bettencourt; Davis v. Davis, [1954] O.R. 23 (C.A.).
[30] In the immediate case, each party seeks partition or sale. Each party qualifies for an order under the Partition Act, and there are not sufficient reasons to refuse their claims for a partition and sale. Therefore, there shall be a partition and sale of 5 Everson Dr.
[31] Michelle, however, seeks that Eric be compelled to sell his interest in 5 Everson Dr. to her. The court, however, has no jurisdiction to do so. The court does not have the jurisdiction to compel one co-owner to sell to the other, although the co-owners may participate in the court-ordered sale of the property in the open market. Osborne v. Myette; Legg v. Draper-Legg; Greenbanktree Power Corp. v. Coinamatic Canada Inc.. The court does not have the jurisdiction under the Partition Act to grant a right of first refusal to either co-owner. Dibattista v. Menecola. In Silva v. Silva, the court noted, however, that where a sale is ordered, the respondent may bid in the sale. Glick v. Carr.
[32] Rule 55.06 (5) of the Rules of Civil Procedure provides:
55.06 (5) All parties may bid except the party having carriage of the sale and any trustee or agent for the party or other person in a fiduciary relationship to the party.
[33] Thus, in the immediate case, a normal judicial sale is appropriate for both applications, and the real issue in the immediate case is not about whether 5 Everson Dr. should be sold pursuant to the Partition Act. The real issue in the immediate case is how should the proceeds of sale be distributed.
[34] In the normal course, the distribution of the proceeds of sale on a Partition Act application would involve putting the property up for sale and then dividing the proceeds of sale in accordance with the adjustments between the co-owners. An Associate Judge would direct the judicial sale and also act as a referee to balance the accounts between the co-owners and manage the distribution of the sale proceeds.
[35] In the immediate case, proceeding in the normal course would entail the Associate Judge managing the judicial sale but there is no need to adjust the accounts. The adjustment to the accounts between Eric and Michelle, rather involves Eric paying to discharge the mortgage that he placed on the property solely for his own benefit (worth approximately ($180,000) and his paying Michelle his share of the after-purchase contribution she made toward maintaining the property, paying the realty taxes etc. and discharging the mortgage on the property.
[36] The balancing of accounts would require Eric to pay approximately $175,000 to Michelle to reimburse her for her payment of his share of the after-purchase contribution. After these payments were made, the property would be sold, and the proceeds would be distributed 50:50.
[37] In my opinion, there is no reason in the immediate case to depart from the normal course of a successful Partition Act application. In other words, there is no merit to (or need for) Michelle’s unjust enrichment claim and there is no merit to Eric’s claim for an occupation rent, both of which are discretionary remedies that are not called for in the circumstances of the immediate case.
[38] I shall deal first with Michelle’s unjust enrichment claim, which I would dismiss.
[39] The court determines if there has been an unjust enrichment, by determining (a) whether the defendant has been enriched; (b) whether the plaintiff has suffered a corresponding deprivation; and if so (c) whether there is a juristic reason for the defendant being enriched at the expense of the plaintiff. Kerr v. Baranow, 2011 SCC 10.
[40] In the immediate case, provided that Eric removes the mortgage he had placed against the property, which he is prepared to do, and provided that he pays his share of the after-purchase contribution to the expenses of carrying the property, there is no unjust enrichment. The parties made an investment in real property, and it appreciated because of the increase in prices for real estate in Toronto. Once Eric restores the equilibrium of their investment, he is equally entitled to share in that increase in the value of their mutual investment.
[41] I shall deal next with Eric’s claim for an occupation rent, which I would dismiss.
[42] The right to claim an occupation rent is a common law and equitable discretionary remedy that is an incident of the co-ownership of property where co-owners have an equal right to the totality of the property. As between co-owners the remedy of an occupation rent is normally not available simply because one co-owner has enjoyed exclusive possession but may be available in circumstances where: (a) a co-owner is excluded or ejected from possession or forced to leave the co-owned property; (b) a co-owner in exclusive possession in a partition application makes a claim for reimbursement of expenses and is met with a counterclaim for occupation rent; or (c) where there is an unjust enrichment by the co-owner in possession. Cormpilas v. Ioannidis, 2020 ONSC 4831; Wawzonek v. Page, 2015 ONSC 43764; Withers v. Withers, 2013 ONSC 1665; Busenius v. Busenius, 2006 ABQB 162; Dagarsho Holdings Ltd. v. Bluestone. (Occupation rent is also a remedy in a landlord and tenant situation against an overholding tenant.)
[43] In the immediate case, there is no unjust enrichment by Michelle’s exclusive possession of 5 Everson Drive. Between 2001 and the couple’s breakup in 2009, there was an agreement that Michelle would exclusively occupy the premises pending their marriage. After the breakup, it was obvious that they were not going to live together and between 2009 and 2022, the agreement that she might occupy the premises exclusively simply continued. During that period, while Eric did not take possession, he enjoyed his property rights when Michelle consented to what was a second mortgage on the property entirely for Eric’s benefit. In the immediate Partition Act applications, Eric acknowledges that he should pay to remove the mortgage and he acknowledges that he should pay his share of the after-purchase contributions made to, among other things, discharge the mortgage he placed on the property. In these circumstances, Michelle has no claim for the unjust enrichment and Eric has no claim for the extraordinary discretionary remedy of an occupation rent.
E. Conclusion
[44] For the above reasons, I make the orders set out in the introduction to these Reasons for Decision.
[45] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Michelle’s submissions within twenty days of the release of these Reasons for Decision followed by Eric’s submissions with a further twenty days.
Perell, J.
Released: March 4, 2022