COURT FILE NO.: CV-19-613452-0000 DATE: 20220331
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JANICE MAGHAKIAN Plaintiff – and – PHILIP TAKAOKA Defendant
Counsel: Chenyang Li, for the Plaintiff Acting in Person
Heard (By Videoconference): March 22, 23 and 24, 2022
REASONS FOR JUDGMENT
A.A. SANFILIPPO J.
Overview
[1] In the Summer of 2016, the Plaintiff, Janice Maghakian, and the Defendant, Philip Takaoka, began a relationship. By September 2016, Ms. Maghakian and Mr. Takaoka started discussing plans to live together, leading both to register with builders for notification of pre-construction houses. Mr. Takaoka registered with Mattamy (Kleinburg) Limited (“Mattamy Homes”) to receive advance notification of a new housing development called “Kleinburg Summit”.
[2] On November 22, 2016, with Ms. Maghakian’s concurrence, Mr. Takaoka executed an Agreement of Purchase and Sale (“APS”) to purchase from Mattamy Homes a detached residential house that would become known as 17 Saint Anne Way, Vaughan, Ontario (the “Property”). A few days later, on November 30, 2016, Ms. Maghakian signed on as co-purchaser.
[3] The purchase price of the Property was $1,289,990. As the parties bought the Property pre-construction from site plans as part of a new subdivision in the process of development, their purchase was not scheduled to close until some 26 months later, on February 7, 2019.
[4] The APS required that Ms. Maghakian and Mr. Takaoka pay deposits totaling $130,000: about 10% of the purchase price. The deposit was payable in 6 instalments: $30,000 upon execution of the APS; and then five additional instalments over the next 9 months, each by a post-dated cheque in the amount of $20,000. By the time that Mattamy Homes accepted the APS on November 27, 2016, the parties had provided Mattamy Homes with 6 cheques – 3 each – to satisfy the deposit obligation in furtherance, according to Ms. Maghakian, of their commitment to fund all expenses associated with this purchase in equal shares.
[5] But this is not how matters turned out. In the days after acceptance of the APS, Mr. Takaoka notified Ms. Maghakian that he did not have enough money to cover the deposit cheques that he had signed. Ms. Maghakian would provide Mr. Takaoka with money to cover each of his deposit cheques so that they would clear.
[6] The parties’ relationship came to an end in October 2018, a few months before the time came to close their purchase on February 7, 2019. The parties failed to complete their purchase of the Property, with the result that Mattamy Homes re-sold the Property on March 18, 2019 to others, at a lower price than the parties had contracted to pay, and treated the $130,000 in deposit money as forfeited.
[7] This action was not about issues between the parties and Mattamy Homes. Mattamy Homes did not sue the parties. This action was about the responsibility between the parties for the $130,000 in deposit money that was forfeited to Mattamy Homes when Ms. Maghakian and Mr. Takaoka failed to complete the purchase of the Property. Ms. Maghakian lost $130,000. Mr. Takaoka lost nothing because he had paid nothing.
[8] Ms. Maghakian claimed that she and Mr. Takaoka had an agreement to fund equally all costs of the purchase of the Property: including the deposits. Ms. Maghakian submitted that the money that she provided to Mr. Takaoka to cover his three deposit cheques – which otherwise would have been dishonoured due to insufficiency of funds – was a loan. After she demanded repayment and was refused, Ms. Maghakian brought this action for repayment of $65,000 and punitive damages in the amount of $35,000.
[9] Mr. Takaoka denied that he entered into any loan agreement with Ms. Maghakian. He submitted that although the acquisition of the Property began as a joint endeavour, this changed when he notified Ms. Maghakian that he had no money to contribute to the acquisition of the Property. He claimed that Ms. Maghakian agreed to purchase the Property alone, and ought to be held to her oral agreement to buy the Property, and be responsible for all its expenses, alone. Mr. Takaoka advanced a counterclaim for an award of punitive damages.
[10] On the basis of the reasons that follow, I grant Ms. Maghakian judgment in the amount of $65,000, payable by Mr. Takaoka. Ms. Maghakian’s claim for punitive damages is dismissed, as is Mr. Takaoka’s counterclaim for punitive damages.
I. THE EVIDENCE
[11] This trial was conducted in accordance with Rule 76.12 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as a summary trial. Ms. Maghakian tendered an affidavit sworn March 18, 2021, consisting of 92 paragraphs and 37 exhibits. Mr. Takaoka tendered an affidavit sworn March 25, 2021, consisting of 53 paragraphs and 22 exhibits. Each party provided direct testimony to confirm their affidavit evidence and each party was thoroughly cross-examined.
[12] The parties communicated throughout their relationship with heavy use of electronic messaging. The parties filed a Joint Book of Documents on consent and in accordance with a certification agreed upon by them in accordance with the requirements set out by the Court of Appeal in Girao v. Cunningham, 2020 ONCA 260, at paras. 33-34, and Bruno v. Dacosta, 2020 ONCA 602, at para. 53. It contained hundreds of pages of text messages, emails and ‘WhatsApp messages’ that were used to corroborate or impeach the parties’ testimony.
II. THE ISSUES
[13] The Plaintiff claimed repayment of a loan said to have been made to the Defendant in the amount of $65,000 for the purchase of the Property, and punitive damages in the amount of $35,000. The Defendant advanced a Counterclaim for punitive damages in the amount of $35,000, and $2,200 for the value of unreturned personal property. The Defendant withdrew this latter claim at trial. Both parties withdrew at trial their matching claims for an Order that the other be held solely liable for any successful action for damages by Mattamy Homes, as no such action was advanced.
[14] This trial raised the following issues:
(a) What was the agreement between the parties for the purchase of property? (b) Was the transfer of funds from the Plaintiff to the Defendant a gift? (c) If not a gift, was the transfer of funds from the Plaintiff to the Defendant (i) a loan, or (ii) further to a collateral oral agreement to amend the APS whereby the Plaintiff would be the sole purchaser of the Property? (d) Should punitive damages be awarded to either party?
[15] I will address these issues in order.
III. THE AGREEMENT FOR THE PURCHASE OF PROPERTY
[16] To assess the agreement between the parties for the purchase of the Property, I will analyse the evidence leading to their property acquisition in November 2016.
A. The Parties
[17] Ms. Maghakian is the mother of two young children, who she shares in joint custody with her former spouse. Ms. Maghakian has a Bachelor of Commerce degree in Accounting and Corporate Administration and worked from 2002 to 2008 as a senior accountant and then as a business manager with a major telecommunications company. From 2008 to 2016 she was not employed, caring for her young children, living in a house that she did not own. Ms. Maghakian returned to work in November 2016 as an Accounting Manager.
[18] Mr. Takaoka has university degrees in music and education and has been employed since 2010 as a teacher. Mr. Takaoka and Ms. Maghakian began a relationship in the Summer of 2016. Mr. Takaoka would separate from his spouse on August 14, 2016, eventually moving out of the matrimonial home. Mr. Takaoka initiated divorce proceedings in 2016 seeking, amongst other things, the sale of his matrimonial home as part of the equalization of net family property.
[19] By September 5, 2016, Ms. Maghakian and Mr. Takaoka began a search for a house to live in together.
B. The Planning to Purchase a Property
[20] On September 15, 2016, Mr. Takaoka received by email an advance notification from Mattamy Homes of the release of pre-construction homes at a project known as “Kleinburg Summit”. He forwarded these promotional materials to Ms. Maghakian.
[21] On October 7, 2016, the parties planned to visit the site office at the “Kleinburg Summit” project. However, they both testified that there was a lingering obstacle to the purchase of a home at that time. Mr. Takaoka needed to sell his matrimonial home in order to have money to purchase a property with Ms. Maghakian. Mr. Takaoka testified that he intended to use the funds that he was expecting from the sale of his matrimonial home to put toward the purchase of a house with the Plaintiff.
[22] The parties believed that this issue was resolved on October 18, 2016. Mr. Takaoka admitted that he told Ms. Maghakian that day that he and his estranged spouse had entered into a contract to sell their matrimonial home, which would close on December 12, 2016, at a sale price that was higher than he had expected. Mr. Takaoka later told Ms. Maghakian that this would provide him with between $141,000 to $142,000, after the December closing of the sale.
[23] The evidence established that on Sunday, November 20, 2016, Ms. Maghakian and Mr. Takaoka visited the site office at Mattamy Homes’ Kleinburg Summit development and decided upon a certain model house that was the size, the layout and the price that met their objectives. This model could only be built on two remaining lots in the subdivision.
[24] Ms. Maghakian testified, and Mr. Takaoka agreed in cross-examination that on November 21, 2016, Mr. Takaoka attended at the Mattamy Homes site office with the intention of making an offer to purchase the model of home that the parties had targeted. The parties knew that six cheques were required to fund the deposit, one payable at the time of the offer and five post-dated as deposit instalments over time. Mr. Takaoka took with him 4 cheques drawn on his bank account, and two cheques provided to him by Ms. Maghakian as drawn on her bank account and signed in blank, for use in paying the required deposit. Although he tried, Mr. Takaoka could not purchase a house that day because the desired model was not available.
[25] Later on November 21, 2016, Mattamy Homes notified Mr. Takaoka that a home in the parties’ desired layout had become available, and would be held for his consideration for only one day. The parties’ testimony was consistent that Ms. Maghakian was not able to attend at the Mattamy Homes site office on November 22, 2016 due to other commitments, but that Mr. Takaoka could, and did.
C. The Property Acquisition
[26] The parties testified that on November 22, 2016 Mr. Takaoka and Ms. Maghakian discussed the purchase of the Property, and agreed that Mr. Takaoka would execute an APS to purchase the Property at a purchase price of $1,289,990, which he did. Mattamy accepted the APS on November 27, 2016, making the APS binding.
[27] Ms. Maghakian testified, the evidentiary record established, and I accept that by the time that the APS was accepted by Mattamy Homes, the APS was supported by the following deposit cheques:
(a) Initial deposit cheque of $30,000: Initially tendered in the form of Mr. Takaoka’s cheque #006, dated November 11, 2022, but replaced November 23, 2016 by Ms. Maghakian’s cheque #177, dated November 22, 2016. (b) 2nd Deposit Cheque of $20,000: Ms. Maghakian’s cheque #181, post-dated to December 22, 2016. (c) 3rd Deposit Cheque of $20,000: Ms. Maghakian’s cheque #180, post-dated to January 22, 2017. (d) 4th Deposit Cheque of $20,000: Mr. Takaoka’s cheque #007, post-dated to February 22, 2017. (e) 5th Deposit Cheque of $20,000: Mr. Takaoka’s cheque #008, post-dated to March 22, 2017. (f) 6th Deposit Cheque of $20,000: Mr. Takaoka’s cheque #009, post-dated to August 22, 2017
[28] There are two important points that I find from the process by which the parties provided the deposit cheques to Mattamy Homes. First, although Mr. Takaoka wrote the initial deposit cheque in the amount of $30,000, the parties knew that he would not have sufficient funds to cover this cheque until he received money from his matrimonial litigation. Accordingly, on November 23, 2016, this cheque was swapped with the Plaintiff’s cheque in the identical amount of $30,000. They also agreed that Ms. Maghakian would make the first three payments (1st, 2nd and 3rd deposits) and that Mr. Takaoka would make the last three payments (4th, 5th and 6th deposits) for a reason. Specifically, it was done to allow for time for Mr. Takaoka to receive sufficient money from the sale of his matrimonial home to cover the cheques.
[29] Second, although these deposit cheques resulted in Ms. Maghakian paying deposits totaling $70,000 and Mr. Takaoka paying deposits totaling $60,000, the parties agreed that Mr. Takaoka would reimburse Ms. Maghakian the amount of $5,000 so that their contribution to the deposit was equally at $65,000. I did not see any disagreement on this. What this shows is that, from the very first moment of their joint endeavour to purchase property, there was an accounting reconciliation between the parties in the nature of an agreement by Mr. Takaoka to repay Ms. Maghakian the amount of $5,000 to balance their contributions toward the deposit.
[30] On November 30, 2016, the Plaintiff and the Defendant attended together at the Mattamy Homes site office and signed an amendment to the APS (the “Amendment”, and together with the APS, the “Amended APS”) whereby Ms. Maghakian was added as a purchaser under the Amended APS alongside Mr. Takaoka.
D. Analysis - The Parties’ Agreement for the Purchase of Property
[31] Ms. Maghakian testified that from the time that she and Mr. Takaoka first began discussing the purchase of a home together, they agreed that each would contribute financially to the purchase of the property in equal shares. Ms. Maghakian stated that she was a single parent who had not been employed for eight years, without means to pay for a house on her own. She testified that Mr. Takaoka expressly agreed to pay for one-half the expenses, including one-half of the deposit.
[32] Mr. Takaoka deposed that he and the Plaintiff “did not have any discussion as to the financial details of purchasing any house.” In cross-examination, Mr. Takaoka corrected this evidence and admitted that the parties’ plan was to each pay half of the deposit in relation to the purchase of the Property and to purchase the Property together.
[33] I found that no other conclusion was plausible, or possible on the evidence. On September 5, 2016, Mr. Takaoka responded to messages by Ms. Maghakian about property searches by writing that he would “go in on it” with her. From September 2016 to November 22, 2016, Mr. Takaoka was active in the investigation of a home for purchase. He reviewed and conveyed to Ms. Maghakian the promotional materials on the Kleinburg Summit development and wrote to her that he thought that this was a good subdivision built by a good builder. Mr. Takaoka drove to the site office on three consecutive days prior to signing the APS and he planned for, and took with him his own cheques as well as those provided to him by the Plaintiff to facilitate the purchase of the Property.
[34] Further, the parties both testified that the objective of purchasing a property together had been suspended until Mr. Takaoka and his estranged spouse sold their matrimonial home and he received his share of the proceeds. They agreed that Mr. Takaoka’s deposit cheques would be post-dated to latest in time to allow for the funds to be received from the matrimonial litigation. Why would the parties delay in pursuing their objective of property acquisition except to wait until Mr. Takaoka was in a position to provide his financial commitment, and why sequence Mr. Takaoka’s deposit payments to last in time except to coordinate with the timing of his receipt of his share of proceeds from the sale of his matrimonial home?
[35] And last, I find that it is not plausible that the parties, both of whom presented as astute and knowledgeable, could have analysed, investigated, and then acted upon the purchase of a property valued at $1,289,990 without having discussed how to pay for it.
[36] Although Mr. Takaoka corrected his affidavit evidence, sworn and tendered for the purpose of this trial, that he “did not have any discussion as to the financial details of purchasing any house,” I took into consideration in my assessment of credibility that Mr. Takaoka only conceded this point in cross-examination. I will explain that now.
E. Credibility Assessment
[37] I assessed the evidence provided by the parties for its credibility, reliability and plausibility. I am guided by the statement of McLachlin J. in R. v. Marquard, [1993] 4 S.C.R. 223, at p. 248: “Credibility must always be the product of the judge or jury’s view of the diverse ingredients it has perceived at trial, combined with experience, logic and an intuitive sense of the matter”. In R. v. White, [1947] S.C.R. 268, at p. 272, the Supreme Court explained factors that are pertinent to weighing a witness’s credibility: “The general integrity and intelligence of the witness, his powers to observe, his capacity to remember and his accuracy in statement are important. It is also important to determine whether he is honestly endeavouring to tell the truth, whether he is sincere and frank or whether he is biased, reticent and evasive.”
[38] Mr. Takaoka represented himself. He is highly educated, was able to express his evidence clearly and conducted a thorough cross-examination of the Plaintiff. He established in cross-examination that Ms. Maghakian had taken positions in her pleadings that were shown to be without any basis in the evidence. Ms. Maghakian pleaded in her Statement of Claim that Mr. Takaoka “acted on his own” when he signed the APS, and repeated this in her Reply when she pleaded that Mr. Takaoka attended the Mattamy Homes sales office without consulting Ms. Maghakian. In her Statement of Claim, and in her Reply, Ms. Maghakian pleaded that Mr. Takaoka “induced” her to join him as a co-investor in the Property.
[39] Ms. Maghakian admitted that these pleadings were not correct. She submitted that they were the innocent by-product of constructing a pleading before full documentary production had been completed, and before studying the mountain of electronic messages. I found that the incorrect positions taken by Ms. Maghakian cannot readily be ascribed to lack of precision in pleading because they pertain to evidence that is at the core of the case. There was no evidence to suggest that Mr. Takaoka embarked upon the purchase of this Property on his own, or that Ms. Maghasian was induced to participate. The evidence showed that they set upon this objective of property purchase together and equally.
[40] While Ms. Maghakian’s exaggerated position was based in a pleading drafted by counsel at the inception of this litigation, the inconsistencies in Mr. Takaoka’s evidence were more troubling. Mr. Takaoka’s sworn statement, made in his affidavit sworn on March 25, 2021, specifically for the purpose of this summary trial, that the parties “did not have any discussion as to the financial details of purchasing any house” was shown to be incorrect. Additionally, as I will explain in these Reasons, Mr. Takaoka testified at trial that he had no recollection of certain key discussions with Ms. Maghakian – specifically on December 6, 2016 and January 27, 2017 – only to concede, when confronted with the documentary record, certain critical points that occurred in these discussions.
[41] All matters considered, I had concerns of the credibility of the evidence provided by both parties. However, I preferred the evidence of Ms. Maghakian on material points because I found her evidence more plausible as it was more supported by a fair reading of the documentary record. I will explain this more fully in my assessment of the factual narrative that emerged from the evidence.
F. Conclusion – The Parties’ Agreed to Share Equally in the Costs Associated with the Purchase of the Property
[42] I accept Ms. Maghakian’s evidence that the parties agreed to contribute equally to the purchase of the Property, including the payment of an equal share of the $130,000 deposit. I find that when Mr. Takaoka provided Mattamy Homes with his three deposit cheques, his intention was to pay one-half of the $130,000 deposit.
IV. WAS THE TRANSFER OF FUNDS FROM THE PLAINTIFF TO THE DEFENDANT A GIFT?
[43] The parties do not dispute that on December 6, 2016, mere days after the Amended APS had become binding, Mr. Takaoka wrote to Ms. Maghakian, in a text message, that he was not going to receive sufficient funds from the sale of his matrimonial home to pay for the deposit instalments for which he had written cheques. Mr. Takaoka wrote as follows:
Bad news. After paying back the mortgage and all the fees and dividing the proceeds in half, $143,517 is my share, but then I have to pay her the equalization amount. That amount is yet to be confirmed since the number she listed as her insurance payout seems wrong. … Owed back over $351K on the mortgage. … Sorry babe. We were expecting more. Plus any outstanding legal fees. Won’t be anything left. Really sorry.
[44] Mr. Takaoka referred to the development as “bad news” for the parties. He confirmed that this was the first time that he told Ms. Maghakian that he would not have sufficient funds to contribute to the purchase of the Property. Ms. Maghakian responded moments later by text message to convey to Mr. Takaoka the following thoughts: (i) “That’s really bad”; (ii) We now need to sell the Property; (iii) “I’ll have to let my mum know that I need her help” … “I don’t know how to tell her I need $60K from her”; (iv) “We can’t make the deposit on my money alone”.
[45] There is no dispute that to solve the problem caused by Mr. Takaoka’s lack of funds to support his deposit payments, Ms. Maghakian provided money to Mr. Takoaka before each of his deposit cheques became due. Specifically, there was no dispute that Ms. Maghakian provided Mr. Takaoka with $60,000 through the following cheques (collectively, the “Deposit Replacement Funds”):
(a) A cheque #185 dated February 10, 2017, drawn on Ms. Maghakian’s bank account and payable to Mr. Takaoka, in the amount of $20,000, to enable Mr. Takaoka to have sufficient funds to support his cheque #007, which was the 4th deposit cheque and would be negotiated by Mattamy on February 22, 2017. (b) A cheque #189 dated March 7, 2017, drawn on Ms. Maghakian’s bank account and payable to Mr. Takaoka, in the amount of $20,000, to enable Mr. Takaoka to have sufficient funds to support his cheque #008, which was the 5th deposit cheque and would be negotiated by Mattamy on March 22, 2017. (c) A cheque #195 dated August 9, 2017, drawn on Ms. Maghakian’s bank account and payable to Mr. Takaoka, in the amount of $20,000, to enable Mr. Takaoka to have sufficient funds to support his cheque #009, which was the 6th deposit cheque and would be negotiated by Mattamy on August 22, 2017.
[46] Mr. Takaoka does not dispute that:
(a) He received each of these three cheques from the Plaintiff. (b) He deposited each of the three cheques into his bank account. (c) By reason of having these Deposit Replacement Funds, the deposit cheques that he had provided to Mattamy Homes for the 4th, 5th and 6th deposits cleared without issue.
[47] Ms. Maghakian was adamant that these advances totaling $60,000, together with the $5,000 adjustment necessary to provide for equal contribution to the deposit funds, constituted loans by her to Mr. Takaoka.
[48] The parties’ dispute is whether Ms. Maghakian’s provision of $60,000 to Mr. Takaoka required him to pay the funds back to the Plaintiff. I will shortly analyse the parties’ evidence in the period from December 2016 to February 2019 to determine whether the Plaintiff is correct in contending that the Deposit Replacement Funds were a loan, or whether the Defendant is correct that these funds were advanced by Ms. Maghakian as part of her oral agreement to take responsibility for the APS. But first, I will address whether the advance of $60,000 by Ms. Maghakian to Mr. Takaoka was a gift.
[49] Mr. Takaoka’s evidence, taken at its highest, was that Ms. Maghakian never told him, and he never agreed, that the Deposit Replacement Funds constituted a loan that he had to repay. He submitted that he never signed a loan agreement to repay Ms. Maghakian, and that she only claimed that the Deposit Replacement Funds were a loan after their relationship ended. Mr. Takaoka’s theory was that the Deposit Replacement Funds were provided by the Plaintiff to him as part of her objective of proceeding with the APS alone.
[50] This evidence is not sufficient to establish that the Deposit Replacement Funds constituted a gift. In Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at paras. 24-25, the Supreme Court explained that a rebuttable presumption of a loan arises once a plaintiff proves that a gratuitous transfer of funds has taken place, and the onus then shifts to the transferee, in this case Mr. Takaoka, to prove that the transfer was a gift. In MacIntyre v. Winter, 2021 ONCA 516, 158 O.R. (3d) 321, at para. 24, the Court of Appeal, relying on Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, stated that the party asserting the existence of a gift must establish an intention on the part of the transferor to provide a gift: “the actual intention of the grantor is the governing consideration”. It is the transferor’s actual intention that matters: Chechui v. Nieman, 2017 ONCA 669, 136 O.R. (3d) 705, at para. 59. The evidence must be “clear, convincing and cogent” that the transferor intended a gift: MacIntyre, at para. 41.
[51] Here, the Defendant failed to establish any intention on the part of the Plaintiff that the Deposit Replacement Funds were a gift. There is not, in the extensive evidentiary record, a single reference by either party to the Deposit Replacement Funds as a gift. Ms. Maghakian did not refer to the Deposit Replacement Funds as gifts, and Mr. Takaoka did not confirm receipt of them as such. Further, I find that it is implausible that the Plaintiff, a single mother with young children, unemployed and with no real estate of her own, would gift $60,000 to the Defendant to remedy his inability to financially support their joint purchase of property after she relied on his commitment to do so. The fact that the Deposit Replacement Funds were provided by the Plaintiff to the Defendant without a loan agreement being reduced to writing is a relevant consideration in the assessment of the character of the Deposit Replacement Funds but is not sufficient evidence to establish a gift: MacIntyre, at para. 38.
[52] I conclude that the Plaintiff’s provision of the Deposit Replacement Funds to the Defendant did not constitute a gift.
V. WERE THE DEPOSIT REPLACEMENT FUNDS A LOAN, OR WERE THEY PROVIDED TO THE DEFENDANT FURTHER TO A COLLATERAL ORAL AGREEMENT?
[53] The Plaintiff’s assertion that the Deposit Replacement Funds were a loan is founded on the basis that (i) they constituted a gratuitous transfer of funds, (ii) admittedly received by the Defendant, (iii) applied for the purpose of supporting the Defendant’s obligation to Mattamy Homes as set out in the 4th, 5th and 6th deposit cheques, (iv) with the intention that the funds would be repaid to the Plaintiff. The Plaintiff relied on the principles set out in Pecore and MacIntyre in submitting that since the Deposit Replacement Funds were not a gift, they were a loan.
[54] The Defendant denied that the Deposit Replacement Funds were a loan, and contended that they were paid by the Plaintiff as part of a collateral oral agreement. I will now assess this issue.
A. The Alleged Oral Contract
[55] In the aftermath of the Defendant’s communication to the Plaintiff on December 6, 2016 that he had insufficient money to even pay the deposit on the purchase of the Property, the Plaintiff was both anxious and disappointed. She testified that she had two immediate thoughts: (i) that the parties needed to ask Mattamy Homes to be released from the APS; and (ii) if they could not get out of the deal, she needed to consult with her mother to see if she could assist with the monetary shortfall.
[56] Ms. Maghakian testified that she and Mr. Takaoka met on the evening of December 6, 2016. Mr. Takaoka denied that he had any specific recollection of discussions that evening but admitted in cross-examination that the text messages show that he was remorseful about not coming through with his contribution to the purchase, that he offered to meet with Ms. Maghakian that evening, and that she accepted.
[57] Ms. Maghakian testified that Mr. Takaoka rejected her proposal that they ask Mattamy Homes to be let out of the APS, promising that he would come up with a way to pay for his share. In the absence of any contrary evidence by Mr. Takaoka of this discussion, and on my finding that the discussion took place, based on the documentary record, I accept Ms. Maghakian’s evidence that Mr. Takaoka rejected the proposal that the parties approach Mattamy Homes to ask to be released from the APS and stated that he would come up with a way to pay his share.
[58] This finding is supported as well by a text message sent by Mr. Takaoka to Ms. Maghakian on December 17, 2016 that his father could support their joint purchase of the Property, as he had done with Mr. Takaoka’s purchase of his matrimonial home, by taking title as a joint owner/mortgagor. Mr. Takaoka wrote as follows: “Yes, my dad can go on title again for a small percentage. He’d be ok with the same arrangement as my last house”.
[59] This supports Ms. Maghakian’s testimony, initially refused by Mr. Takaoka but later conceded in cross-examination, that in the period from December 16, 2016 to January 2017, Ms. Maghakian asked her mother for financial support and that Mr. Takaoka told her that he would seek financial assistance from his parents.
[60] A text message exchange between the parties on January 1, 2017 showed their joint commitment to the acquisition of the Property. Ms. Maghakian reminded Mr. Takaoka that the February 22, 2017 deposit cheque would soon be cashed by Mattamy Homes. She reminded the Defendant to be sure to obtain the supporting cheque from her by February 10, 2017, to allow time for the funds to clear before they were required on February 22, 2017, stating: “We are in this together”.
[61] The evidentiary foundation of the Defendant’s position that there was a collateral oral agreement is the parties’ communications on January 27, 2017, initially by text message and subsequently in person. The written communication began with Ms. Maghakian stating to Mr. Takaoka that she “was thinking of going to the builder … to see if there is anything they can do to change the ownership title so you don’t need to worry about it (sic) asking your dad.” She wrote, further, that she had spoken to her mother and would have to “figure out with her the funds”.
[62] The Defendant asked why Ms. Maghakian felt that she needed to change the ownership. Ms. Maghakian responded that there were two reasons: (i) potential complications in the Defendant’s ongoing matrimonial litigation; (ii) and, that the only way that her mother would provide funds to support the purchase of the Property was if Mr. Takaoka was removed from the APS: “Plus, I told my mum I am going to do this alone. Only way I can get help.”
[63] This text message exchange concluded with Mr. Takaoka’s insistence that the parties speak directly as opposed to through the text messaging. Ms. Maghasian testified that the parties spoke by telephone on January 22, 2017, and that she told Mr. Takaoka that her mother would only provide her with financial assistance if she purchased the Property alone. The Plaintiff stated that her mother would not advance money toward purchasing a home with someone she did not know, which meant that she would only advance funds if Mr. Takaoka was removed from the APS.
[64] Ms. Maghakian testified that Mr. Takaoka “reacted negatively” to her mother’s proposal, stating that they would purchase the Property together, and that he would not agree to be removed from the APS. The Plaintiff testified that she emphasized that she could not obtain money from her mother so long as he remained on title, and that Mr. Takaoka said that he would be responsible for his share of the purchase and that his father “could go on title for 1%” to help in obtaining mortgage financing.
[65] Mr. Takaoka denied having a specific recollection of the telephone discussions with Ms. Maghakian on January 27, 2017. Considering the importance of the discussion and considering Mr. Takaoka’s admission that the parties’ text messages of that day concluded with his invitation for Ms. Maghakian to call him, and considering that Mr. Takaoka testified to a clear recollection of other discussions around this time, this gap in recollection stood out.
[66] In cross-examination, Mr. Takaoka conceded that he did not agree to Ms. Maghakian’s proposal on January 27, 2017 that he be removed from the APS or from any role in the purchase of the Property.
[67] After January 27, 2017, Ms. Maghakian provided Mr. Takaoka with the money necessary to fund the post-dated cheques that he had provided to Mattamy Homes for the 4th, 5th and 6th deposits, through the cheques defined earlier as the Deposit Replacement Funds.
[68] In an email written on April 29, 2017, Ms. Maghakian expressed to Mr. Takaoka her frustration and disappointment in what she perceived as his lack of transparency in the funds available to him for the purchase of the Property, and procrastination in addressing her concerns. The parties decided that they would no longer plan to co-habit but would continue to explore options to address the purchase of the Property.
B. Efforts to Secure Removal from the APS
[69] On August 11, 2017, Mr. Takaoka sent an email to Mattamy Homes asking whether he could be removed from the APS. Mattamy Homes rejected this request. He deposed that he discussed this response with the Plaintiff, but conceded in cross-examination that there was no documentary evidence of copying the Plaintiff, or otherwise notifying her of the email from Mattamy Homes on August 11, 2017 stating that “Mattamy does not remove names off title”.
[70] The Plaintiff testified that she had no knowledge in August 2017 that Mr. Takaoka had been told by Mattamy Homes that he must stay on the APS as a co-purchaser. Based on the lack of corroborating evidence in the extensive documentary record of any evidence of the Plaintiff’s involvement in this approach to Mattamy, I accept the Plaintiff’s evidence that the Defendant attempted to remove himself from the APS and did not share with the Plaintiff the details of the response from Mattamy Homes.
C. The Demand for Repayment
[71] The parties both testified that their relationship, which had been managing the ongoing financial strain of their pending property purchase, ended on October 18, 2018. Mr. Takaoka deposed that on October 21, 2018, Ms. Maghakian called to demand that he immediately repay the Deposit Replacement Funds.
[72] On October 24, 2018, Ms. Maghakian forwarded a text message to the Defendant demanding repayment for the Deposit Replacement Funds: “You always said to me that you don’t take money that is not yours so why are you not going to pay me back the loan”. The Plaintiff sent a similar demand on October 25, 2018: “The $65,000 that I loaned you was her [my mother’s] money. This came from our joint account. I asked to borrow the money to cover your share of the deposit since the settlement was delayed. I hope you will take this seriously and do the right and honourable thing.”
[73] Mr. Takaoka emphasized that the Plaintiff had not referred to the amounts provided to him as a “loan” in any of the multitude of electronic messages prior to the termination of their relationship and the cheques constituting the Deposit Replacement Funds did not say “loan” in their reference line. I accept this submission. The Plaintiff emphasized that in each of the messages sent on October 21-25, 2018 by which Ms. Maghakian demanded payment of her “loan”, Mr. Takaoka did not deny in writing the existence of an obligation to repay the Plaintiff the amount of $65,000. I accept this submission.
[74] The first time that the Defendant denied an obligation to repay Ms. Maghakian the Deposit Replacement Funds, was during a meeting that the Plaintiff requested on November 4, 2018, which took place at a coffee shop. At this time, Mr. Takaoka also told the Plaintiff that she had entered into an oral agreement to purchase the Property alone.
[75] Mr. Takaoka recorded the parties’ meeting without Ms. Maghakian’s knowledge or consent. While surreptitious audio and video recordings are strongly discouraged, this does not translate into inadmissibility: Fiorito v. Wiggins, 2015 ONCA 729, at para. 22. Rather, it is subject to the Court’s general discretion to exclude otherwise admissible evidence where its prejudicial effect outweighs its probative value: Rudin-Brown v. Brown, 2021 ONSC 3366, 155 O.R. (3d) 750, at paras. 28-30; R. v. Cyr, 2012 ONCA 919, 294 C.C.C. (3d) 421, at paras. 96-97.
[76] Here, Mr. Takaoka submitted that the audio recording showed that Ms. Maghakian admitted that she had offered to proceed with the purchase of the Property alone. This does not assist the Defendant as the Plaintiff conceded that she made this offer to the Defendant in January 2017, but that he did not accept. Further, Mr. Takaoka submitted that the audio recording showed that Ms. Maghakian stated that she needed Mr. Takaoka to admit that he had borrowed $65,000 from her. Even though there was some issue regarding whether these words were discernible from the audio recording (or the reporter’s transcription of it), I see no significance in Mr. Takaoka’s recording of this request. By November 4, 2018, the Plaintiff had told the Defendant several times that she needed him to repay the amounts that she provided to him.
[77] Ms. Maghakian took with her to the meeting of November 4, 2018, a “Loan Agreement” that she had prepared for Mr. Takaoka to sign. He declined to do so. After the meeting, Ms. Maghakian sent Mr. Takaoka by email a document that she titled “Agreement of Purchase and Sale” but which was effectively (i) an Acknowledgement that Ms. Maghakian had paid the entirety of the $130,000 deposit, (ii) and a declaration that Mr. Takaoka had “no personal or beneficial interest in the Deposit” such that any distribution of the deposit funds was entirely to the benefit of Ms. Maghakian. Mr. Takaoka declined to sign this document.
[78] Through counsel, Ms. Maghakian demanded on December 6, 2018, that Mr. Takaoka acknowledge a loan obligation to her in the amount of $65,000 and repay the loan. Mr. Takaoka denied the existence of any such obligation.
D. The Failed Closing
[79] In the months leading to the scheduled closing date of February 7, 2019, the parties investigated, with a mortgage broker known to the Defendant, whether they could meet the financial obligations necessary to close the APS. On October 21-22, 2018, Ms. Maghakian investigated whether she could borrow sufficient funds to close the purchase of the Property on her own, only to find that she did not qualify for a sufficient mortgage loan on her own income.
[80] On October 21, 2018, the Defendant wrote to the Plaintiff that the mortgage broker told him that “with both our incomes we should be able to get enough, but need to put down 20%.” The parties admitted that they knew that to complete the APS, they would need a further $130,000, additional to the deposit funds, and a mortgage loan of approximately $1.1 million.
[81] Ms. Maghakian urged Mr. Takaoka to “come up with $130,000 for your share to close the house”. I find that the evidence is clear that the parties understood, and discussed, that to complete the APS they needed to do the following: (i) assemble a down payment totaling $260,000 (20% of the purchase price); (ii) to do so, Mr. Takaoka would have to pay $130,000 to supplement the existing deposits of $130,000 already funded by Ms. Maghakian; (iii) jointly borrow about $1,100,000, which they stood a chance of qualifying for as co-borrowers on both their incomes. Mr. Takaoka did not assemble any funds to contribute to the purchase, and the parties could not obtain financing to complete the purchase of the Property.
[82] There was no dispute that the purchase of the Property failed to complete on February 7, 2019. There was no dispute that as a result of the failed closing, the deposit funds totalling $130,000 were forfeited to Mattamy Homes, which later sold the Property to another purchaser at a lower price than the parties had contracted to pay. There was also no dispute that neither party was sued by Mattamy Homes for any issue arising from their failure to complete the purchase of the Property.
E. Analysis – No Collateral Oral Contract Was Established
[83] In my view, the Defendant did not establish that an oral agreement was formed on January 27, 2017, or at any time, by which Ms. Maghakian agreed to purchase the Property alone and thereby be solely responsible for the amounts owing under the APS. I will explain why.
[84] I accept the parties’ evidence that on January 27, 2017 Ms. Maghakian presented Mr. Takaoka with the proposal that her mother would support her purchase of the Property provided that Mr. Takaoka divested his interest in the APS. However, I also accept Ms. Maghakian’s testimony, ultimately conceded by Mr. Takaoka in cross-examination, that Mr. Takaoka did not accept. Specifically, Mr. Takaoka did not agree to be removed from the APS. Accordingly, the offer extended by the Plaintiff was not, in my determination, accepted by the Defendant.
[85] Further, my assessment of the parties’ conduct after January 27, 2017 supports my finding that the parties did not agree that Ms. Maghakian would alone be responsible for the amounts due under the APS, including the deposits, including as follows:
(a) In an exchange of text messages on February 13, 2017, the Plaintiff advised the Defendant that reports indicated that property values would increase some 20% that year. Mr. Takaoka wrote: “That’s good for us then. … Hopefully it keeps going up so that if there is a correction, it won’t go down below what it is today.” (b) Mr. Takaoka acted as the primary contact with Mattamy Homes, throughout. (c) Mr. Takaoka signed the addendum to the APS required to select the final finishes for the Property. (d) Mr. Takaoka’s efforts, in August 2017, to ask Mattamy Homes to remove him from the APS are inconsistent with his evidence that he had no remaining role in the APS after January 2017 as, according to the Defendant, he had at that time concluded with the Plaintiff an agreement for her to purchase the Property alone. (e) Upon the Plaintiff demanding the repayment of the amount of $65,000 in October 2018, the Defendant did not deny that he was obligated to repay the Deposit Replacement Funds. (f) The parties’ joint efforts to obtain mortgage financing in October 2018, in anticipation of the scheduled closing date for acquisition of the Property, demonstrates, in my view, that the Defendant continued to recognize that he had financial obligations in relation to the purchase of the Property.
[86] Having found that the parties did not form an oral agreement, it is not necessary to determine whether any such oral agreement would have been a valid collateral oral agreement, as contended by the Defendant. Had it been necessary to do so, I would have determined that the collateral oral agreement was invalid for two reasons. First, the alleged collateral oral agreement is bilateral, involving only the parties, whereas the main contract to which it is said to be collateral is tri-partite, also involving Mattamy Homes. To be a valid collateral oral agreement, it would require the agreement of all parties to the main contract. As McLachlin J.A. (as she then was) stated in Ahone v. Holloway (1988), 30 B.C.L.R. (2d) 368 (B.C.C.A.), “[a] collateral contract is an oral agreement ancillary to a written agreement. As with any contract, the party alleging it must establish the agreement of all parties to its terms”. Here, Mattamy Homes did not, at any time, agree to Mr. Takaoka being released from his financial obligations as co-purchaser under the APS. The parties’ alleged collateral oral agreement could not change this.
[87] Second, the Supreme Court has stated that a collateral oral agreement between parties that is inconsistent with, or contradicts the written agreement, in this case the APS, is invalid: Hawrish v. Bank of Montreal, [1969] S.C.R. 515, at pp. 519-20; MacNamara v. MacNamara, 2010 ONSC 3785, 87 R.F.L. (6th) 330, at para. 12. Here, even if Mattamy Homes had been a party to the alleged collateral agreement, the agreement would have been inconsistent with the parties’ shared obligations as co-purchasers under the APS.
[88] The two decisions relied on by Mr. Takaoka, Tam v. Arlotta, 2018 ONSC 2832 and Rosseel v. Molson, 2020 ONSC 2100, do not support his position. In Tam, the Court’ applied the Mercantile Law Amendment Act, R.S.O. 1990, c. M.10, which is not relevant to this case. Further, the Court found, on a reasonable construction of the evidence in that case, that one co-debtor had accepted sole responsibility for financing their business. As I have explained, the evidence in this case did not support a finding that one co-purchaser agreed to assume sole responsibility for the APS. In Rosseel, the Court assessed whether an oral agreement had been established, stating that the Court must examine the parties’ conduct to assess whether an oral agreement has been formed but cannot make a contract for the parties if they have not agreed on its material terms: Rosseel, at para. 7, citing Picavet v. Clute, 2012 ONSC 2221, paras. 9-13. I agree with these principles. In Rosseel, like here, the Court declined to find that an oral agreement had been established.
[89] Considering these findings, it is not necessary to determine whether the alleged collateral oral agreement would have been invalid by reason of contravening the Statute of Frauds, R.S.O. 1990, c. S.19, as urged by the Plaintiff. Had it been necessary to decide this issue, I would have found that the alleged collateral oral agreement was contrary to s. 1 of the Statute of Frauds, which requires that any agreement with respect to an interest in land must be “made or created by a writing signed by the parties”: Kooner v. Augustin, 2018 ONSC 7064. The agreement between the parties to co-purchase the Property derives from the APS where they are named as co-purchasers. Any modification of their status as co-purchasers of the Property was required, in my view, to be in writing in order to be valid and would have required the agreement of Mattamy Homes to discharge Mr. Takaoka of his liability under the APS.
F. Conclusion – The Deposit Replacement Funds were a Loan
[90] Ms. Maghakian funded $65,000 of the $130,000 deposit in her capacity as co-purchaser of the Property, and provided the remaining $65,000 to Mr. Takaoka because he did not have the funds necessary to support the cheques that he had written for these payments. The funds provided by Ms. Maghakian to Mr. Takaoka were not a gift, and they were not advanced pursuant to any oral agreement to assume full responsibility for the APS.
[91] Mr. Takaoka submitted that the Deposit Replacement Funds could not have been a loan because he received no benefit from receipt of these funds. I do not accept this submission. Mr. Takaoka had a contractual obligation under the APS to co-purchase the Property. Had the $130,000 not been paid, this amount could have formed part of a damage claim by Mattamy Homes against the parties arising from their failure to complete the purchase of the Property. The payment of the $130,000 by Ms. Maghakian benefitted Mr. Takaoka because it reduced his potential liability to Mattamy Homes but did not, in my determination, discharge Mr. Takaoka’s obligations to Ms. Maghakian as a co-purchaser of the Property.
[92] A rebuttable presumption of a loan arose once Ms. Maghakian transferred the Deposit Replacement Funds to Mr. Takaoka. Mr. Takaoka did not prove that Ms. Maghakian intended that the transfer of funds be gratuitous, as was his onus on a balance of probabilities: Colangelo v. Amore, 2010 ONSC 5657, at paras. 55-62; Walker v. Farsijani, 2021 ONSC 5571, 61 R.F.L. (8th) 123, at paras. 16-21. Having assessed and weighed the evidence, I am satisfied that Mr. Takaoka, as the recipient of the Deposit Replacement Funds, failed to establish, on a balance of probabilities, that the transfer of funds was gratuitous. I am satisfied that Ms. Maghakian intended, throughout, that her transfer to Mr. Takaoka of the Deposit Replacement Funds was subject to his obligation to repay the funds.
[93] I conclude that the Deposit Replacement Funds ($60,000) were a loan from Ms. Maghakian to Mr. Takaoka that was not repaid. As stated earlier, I found that the parties agreed that they would share equally in the payment of the deposits which required that Mr. Takaoka would pay $5,000 to Ms. Maghakian even had his deposit cheques cleared without her provision of the Deposit Replacement Funds.
[94] Ms. Maghakian has thereby established entitlement to judgment against Mr. Takaoka in the amount of $65,000, plus pre-judgment and post-judgment interest, under the Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 128-29.
VI. THE CLAIMS FOR PUNITIVE DAMAGES
[95] The Plaintiff sought an award of punitive damages against the Defendant on the basis that he had no legitimate reason to refuse to pay the $65,000 owed to the Plaintiff. The Plaintiff contends that Mr. Takaoka defended this action solely to exhaust the Plaintiff’s will to pursue her claims in the civil litigation process. The Defendant sought an award of punitive damages on the basis that the Plaintiff’s claim was frivolous and vexatious.
[96] The positions advanced by both parties misunderstands the role of punitive damages, as set out by the Supreme Court in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595. Punitive damages are awarded against a party in exceptional cases for “malicious, oppressive and high-handed” misconduct that “offends the court’s sense of decency”: Whiten, at para. 36, citing Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, at para. 196. The two basic requirements underlying an award of punitive damages are that: (i) the party’s conduct must be reprehensible; and (ii) apart from any compensatory award, punitive damages must be rationally required to punish the offending party and to meet the objectives of retribution, deterrence and denunciation: Whiten, at paras. 36, 43; Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, 120 O.R. (3d) 481, at para. 79.
[97] I see no evidence in this case that would support a punitive damage claim in favour of the Plaintiff against the Defendant. The Defendant failed to establish his defence and will now be required to pay pre-judgment interest in addition to the damages. And he is exposed to the Plaintiff’s claim for costs. There is no basis for the Plaintiff’s claim for punitive damages, which is dismissed.
[98] The Defendant did not succeed in his defence. Accordingly, the basis for the Defendant’s claim for punitive damages – that the Plaintiff’s claim was frivolous and vexatious – was not established. The Defendant’s counterclaim for punitive damages is thereby dismissed.
VII. DISPOSITION
[99] On the basis of the reasons set out herein, I order and adjudge as follows:
(a) The Plaintiff, Janice Maghakian, is awarded judgment in the amount of $65,000, payable by the Defendant, Philip Takaoka. (b) The Plaintiff, Janice Maghakian, is awarded pre-judgment interest and post-judgment interest on the amount adjudged payable by the Defendant, Philip Takaoka, in accordance with ss. 128 and 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43. (c) The claim by the Plaintiff, Janice Maghakian, for punitive damages is dismissed. (d) The Counterclaim is dismissed. (e) The issue of costs shall be determined by written submissions.
VIII. COSTS
[100] I encourage the parties to discuss and agree on the issue of costs.
[101] If the parties are not able to agree on the issue of costs by April 8, 2022, I will determine the issue of costs in writing, on the basis of Rule 57.01(7), in accordance with the following timetable. The Plaintiff may serve on the Defendant and deliver to me, by email to my judicial assistant, no later than April 22, 2022, written submissions on costs of no more than 4 pages in length (hyperlinked to authorities), plus their Bill of Costs (Rule 57.01(5), any offer to settle and any authorities incapable of being accessed by hyperlink. The Defendant shall then serve on the Plaintiff and deliver to me by May 6, 2022, by email to my judicial assistant, his written submissions on costs of a similar length.
[102] If neither party delivers written costs submissions by May 6, 2022, I will deem the issue of costs to have been settled.
A.A. Sanfilippo J.
Released: March 31, 2022