NEWMARKET COURT FILE NO.: CV-14-117643-00
DATE: 20221221
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Gheisar Gheisari
Plaintiff
– and –
Mohamad Reza Gheisary, Massoumeh Mahrouh and 1504696 Ontario Limited
Defendants
Mark A. Klaiman, for the Plaintiff
Richard J. Payne for the Defendant, Massoumeh Mahrouh
HEARD: November 28, 29 and 30, 2022 (virtual hearing)
TRIAL DECISION
sutherland J.:
Introduction
[1] The plaintiff, Gheisar Gheisari (“the plaintiff”) is the brother of the defendant, Mohamad Reza Gheisary (“Mohamad”), and the former brother-in-law of the defendant, Massoumeh Mahrouh (“Massoumeh” or “the defendant”). Mohamad and Massoumeh were previously married to each other.
[2] The plaintiff obtained a default judgment against Mohamad and 1504696 Ontario Limited (“1504696” or the “defendant corporation”) on November 3, 2014, in the amount of $930,328.98[^1] plus costs in the amount of $1,308. Mohamad was petitioned into bankruptcy by the plaintiff in April 2018.
[3] The plaintiff seeks Judgment against Massoumeh in the amount of $732,0508.16 claiming that she held the plaintiff’s interest in the property, municipally known as 38 Steele Valley Road, in the City of Vaughan (the “Property”), in trust jointly and severally with his brother, Mohamad, Massoumeh’s former husband.
[4] The action was commenced on January 30, 2013. The Statement of Defence and Crossclaim of Massoumeh is dated June 23, 2016.
[5] Mohamad and Massoumeh separated in 2011 and were involved in family law proceedings bearing Court file No. FC-12-40337-00. In that proceeding, the Property was sold on August 1, 2013, for $1,851,000. The net proceeds of sale where fully disbursed by various Court orders by July 21, 2016. The plaintiff claims that he received none of the proceeds of sale. He is claiming his interest from Massoumeh who he claims received most of the net proceeds of sale.
[6] For the reasons set out below, I dismiss the plaintiff’s action.
Undisputed Facts
[7] The plaintiff and Mohamad were in numerous business transactions together, involving the buying and selling of real property.
[8] They both had their own businesses selling Persian Rugs. The plaintiff’s business was Solomon Oriental Rugs. Mohamad’s business was Sina Oriental Rugs. They both came to Canada from Iran where their father was a specialist in antiques and rugs.
[9] In the late 1990s and early 2000s, the plaintiff and Mohamad started a series of transactions purchasing and selling real property. They had legal representation for these transactions and utilized corporations in these real estate transactions. During this time, both were married. The plaintiff was married to Fariba Azairi. He and Ms. Azairi divorced in 2004.
[10] The real estate properties which are the subject matter to this proceeding are the Property and 9 Palmer Avenue, in the City of Vaughan (“Palmer”). The plaintiff and Mohamad were involved in transactions concerning other properties. Two such properties were presented in evidence at this trial.
[11] These two properties were:
(a) 53 Observatory Lane, Richmond Hill
(b) 10430 Yonge Street, Richmond Hill
Observatory Lane
[12] The ownership of this property was registered under 1476964 Ontario Inc., a corporation where the plaintiff and Mohamad were fifty-fifty shareholders. The ownership of this property was registered on February 25, 2002. This property was intentionally purchased as an investment for development.
Yonge Street
[13] The ownership of this property was registered under Gheisari Bros Inc., a corporation where the plaintiff and Mohamad were fifty-fifty shareholders. The ownership of this property was registered on April 23, 2002.
Palmer
[14] Palmer was purchased by the plaintiff and Mohamad (“the brothers”) on January 18, 2002. The purchase price was $355,000. Title to the Property was registered under the defendant corporation. The shareholding of this corporation was 60% to the plaintiff and 40% to Mohamad. This agreement was codified by a Partnership Agreement dated January 11, 2002 (“The Agreement”).[^2] The Agreement indicated the percentage of both brothers and “there are no other individuals who hold any interest either as owner or beneficiary in the property” and that:
This agreement constitutes the entire agreement between the parties hereto. There are not and shall not be any verbal statements, representations, warranties, undertakings, or agreements between the parties hereto, and this agreement may not be amended or modified in any respect except by a written instrument by the parties hereto.
Either party may register this agreement on the title of the Property at any time, and the signature below shall constitute consent for such registration.
[15] The Agreement was executed by the brothers at the home of the plaintiff and Ms. Azairi. Ms. Azairi witnessed the plaintiff’s signature, and the older brother of Mohamad and the plaintiff, Kiumars Gheisari, witnessed Mohamad’s signature.
[16] A vendor-take-back mortgage was provided on the purchase in the amount of $130,000. The remainder of the closing funds were substantially paid by the plaintiff. The plaintiff provided $208,000. Mohamad indicates that he provided the remaining $17,000. There was no documentation on how the $17,000 was paid or that it was paid by Mohamad. The plaintiff has no recollection if he paid the full amount but believes that he did not, and that Mohamad paid the $17,000.
[17] A second mortgage was registered on Palmer in favour of Gerald Rosenberg in the amount of $70,000. A third mortgage was registered on Palmer in favour of the to-be purchaser, Seyed Ebrahim Zaeem (“Zaeem”) in the amount of $110,000. The plaintiff and Mohamad testified that these sums were advanced to Mohamad.
[18] Palmer was sold on July 29, 2008, for $1,050,000.
[19] Palmer was sold through a property swap with Zaeem. Zaeem owned the Property and became the registered owner of Palmer.
The Property
[20] The purchase price of the Property was 1.4 million dollars. The Property was purchased from Zaeem on July 25, 2008.
[21] The Property was purchased in the name of Mohamad and Massoumeh. The plaintiff testified that this was necessary as further financing was going to be required to purchase the Property given the price difference, and he was unable to obtain further financing himself; he was at his maximum for financing due to other property purchases. The plaintiff testified that Mohamad and Massoumeh agreed to this arrangement. Mohamad and Massoumeh secured financing from HSBC in the amount of one million dollars through an on-demand secured line of credit. $590,000 was used to purchase the Property.
[22] The encumbrances from Palmer, being the charge in favour of Gerald Rosenberg and Zaeem, were transferred to and registered on the title of the Property.
[23] Massoumeh testified that she probably received the reporting letter from the real estate lawyer, Mr. Rosenberg, on the purchase of the Property along with his trust ledger. She did not dispute that she did not put monies toward the purchase of the Property. She testified that a mortgage of one million dollars was registered on the Property which she and Mohamad were responsible to pay, and those monies were used to close the purchase of the Property.
[24] There was no written trust agreement or other like agreement produced at this trial concerning the Property. The plaintiff testified that no such agreement was drafted and thus one was never executed by the plaintiff, Mohamad, or Massoumeh.
[25] Mohamad testified that he wrote a letter in Farsi, in which he set out that he held the plaintiff’s interest in the Property in trust. Mohamad testified that the only copy of this letter was put in the safe box in the matrimonial home he had with Massoumeh. He also testified later that this letter was given to the plaintiff. This letter was never produced in this proceeding or provided at the trial.
[26] The Property was sold on July 31, 2013, for the sum of 1.851 million dollars.
The Family Law Proceedings
[27] In 2012, Massoumeh commenced family law proceedings.
[28] On April 24, 2013, McGee J. granted a Final Order that Mohamad’s consent for the sale of the Property and a cottage property in Collingwood was dispensed with, and the net proceeds of sale be held in trust pending further Order of the Court. Massoumeh was granted the sum of $115,521.94 from the net proceeds of sale of the Property.
[29] On January 15, 2015, Nelson J. struck Mohamad’s pleadings.
[30] On July 21, 2016, Gunsolus J. granted a Final Order from an uncontested trial. In that Final Order, the Court ordered an equalization payment owing to Massoumeh in the amount of $6,504,735.55 payable forthwith. Gunsolus J. also granted Massoumeh, among other relief, exclusive possession of the matrimonial home located at 23 Crestwood Road, Thornhill, Ontario, and that the title to the matrimonial home be registered solely in her name.
[31] The sale proceeds from the Property were disbursed by the Court orders. After paying the encumbrances, lawyers, and real estate commissions, the net proceeds were $851,521. That amount was disbursed through the Court orders of: McGee J. dated April 24, 2013, Corkery J. dated August 7, 2013, Magda J. dated December 3, 2013, and Nicholson J. dated June 11, 2014. These Orders included payment of costs, support orders, and legal fees.
[32] By July 21, 2016, there were no monies remaining from the net proceeds of sale.
[33] From the evidence presented at trial, it does not appear that the plaintiff attempted to be included as a party in the family law proceeding concerning his claimed interest in the Property.
[34] Nor did Mohamad make any claim that the Property was not owned by him or Massoumeh but was held in trust for the plaintiff. Mohamad, from the family law documents presented at trial, indicated that he and Massoumeh held the Property as joint tenants.
Bankruptcy of Mohamad
[35] Mohamad was petitioned into bankruptcy by the plaintiff. The documents presented as evidence indicate that the June 19, 2019, discharge hearing was adjourned sine die. Evidence showed that Mohamad’s five per cent interest in 1476964 Ontario Inc. was sold for $125,000; these monies were used by the Trustee in Bankruptcy and no monies seemed to be paid to any of the creditors, which included the plaintiff. As of the date of declaration, May 3, 2022, the claims against Mohamad totaled $9,212,474.92 which included the family law orders and a Final Order for equalization. It is not known from the evidence presented at trial whether this amount included the default judgment of the plaintiff.
Disputed Evidence
The Signing of The Agreement for Palmer and Trustee for the Plaintiff
[36] The plaintiff testified that Massoumeh was present in his home when The Agreement was executed on January 11, 2002. He testified that she was aware of the contents of The Agreement.
[37] He also testified that he directly spoke with Massoumeh many times and received an assurance that she was holding his interest in the Property in Trust. He testified that she told him that she understood that it was not her property and that there was an agreement between him and her that she was holding his interest in the Property in trust.
[38] The witnesses to The Agreement, Fariba Azari and Kiumars Gheisari, both testified that it was usual that the families have a get together every two weeks or so. Both testified that they each witnessed the signatures and saw all parties sign The Agreement. They both also testified that at the time The Agreement was signed, neither can be certain that Massoumeh was present in the home of the plaintiff and Ms. Asairi. It was a family gathering with children present that took place twenty years ago. Both agreed that it could be possible that Massoumeh may not have been at the family gathering when The Agreement was signed.
[39] Mohamad testified that Massoumeh was present when The Agreement was signed. He testified that she sat right beside him when The Agreement was signed. He testified that she did not want to witness The Agreement because she was not involved, and her name was not on The Agreement. He also testified that all family members were in the house. The children were in and out of the family room where The Agreement was signed. He indicated that Massoumeh was aware of the contents of The Agreement. He showed her The Agreement. He told her the contents of The Agreement and discussed the transaction on Palmer with her.
[40] Massoumeh testified that she was not present at the home when The Agreement was signed. The first time she saw The Agreement was in this proceeding. She also testified that at no time did she have any agreement or discussion with the plaintiff that she was a trustee for him. The plaintiff and Mohamad had many real estate transactions and business dealings. She testified that she was not provided information from Mohamad on all their dealings. She was aware that companies were used in the various business dealings. There were bank accounts for the companies. She was not involved in or had any access to any of these bank accounts. This was all between Mohamad and the plaintiff.
The Intention with the Property
[41] The plaintiff and Mohamad testified that the reason for purchasing the Property was to demolish the present home on the Property and build a large one. There was an intention for development.
[42] Massoumeh testified that the purchase of the Property was to build a large home that would become the matrimonial home of her and Mohamad. She testified that an architect was retained by her and Mohamad to prepare the necessary drawings and deal with the city to obtain a building permit. She testified that $50,000 was paid to this individual, but he did not complete the drawings because he had a disagreement with Mohamad. This individual terminated their relationship and returned $35,000 to her and Mohamad.
[43] The plaintiff called David Marks who is a contractor with his own company. Mr. Marks testified that he had a long-term relationship, around 20 years, with the plaintiff and Mohamad. They used him on many of their properties for construction, repair, and renovations. He testified that he was told that the home on the Property was going to be demolished and a large home built. He was told that he was going to get this work. He asked many times about the work but was never told that the work was going to ever commence. He eventually gave up with the idea that his company was going to be given a contract for that work. He also testified that he was at the Property many times doing repair work, which included plumbing and flooring. He was mostly instructed by the plaintiff but was also instructed by Mohamad on work to do at the Property.
[44] Neither the plaintiff nor Mohamad were asked questions concerning Massoumeh’s evidence that the intention was to build a large home to serve as the matrimonial home. The plaintiff was given the opportunity to recall Mohamad to deal with that issue. The plaintiff elected not to recall Mohamad or provide any evidence in reply concerning that issue, except for that of Mr. Marks.
Issues
[45] The issues for this Court to decide are:
(a) Did the Plaintiff’s claims merge on the granting of the default judgment against Mohamad and 1504696?
(b) Was the defendant a trustee in favour of the plaintiff by either express trust, resulting trust, or constructive trust?
(c) If the defendant was a trustee, what is the remedy to the plaintiff?
A. Did the Claims of the Plaintiff Merge?
[46] Massoumeh contends that the plaintiff’s claims against her merged when he elected to obtain default judgment against Mohamad and 1504696. The principle of merger is enunciated in Nigro v. Agnew-Surpass Shoe Stores:
The first species, which I will call 'cause of action estoppel', is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a Court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e., judgment was given on it, it is said to be merged in the judgment, or, for those who prefer Latin, transit in rem judicatam.[^3]
[47] Massoumeh further contends that the Statement of Claim does not explicitly indicate that the claims against the defendants were joint and several. The Statement of Claim does not explicitly claim joint liability against the defendants. Massoumeh contends that section 139(1) of the Courts of Justice Act [^4] (the Act) does not apply. Section 139(1) reads:
139(1) Where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or separate proceeding.
[48] Massoumeh argues that the plaintiff has a no joint liability claim and, as such, once he elected to obtain default judgment against Mohamad and 1504696, he elected his relief. The relief against her merges in that judgment and he is prevented from seeking relief against her.
[49] The plaintiff argues that this is a misinterpretation of the Act and the Statement of Claim. He argues that if the Statement of Claim is read as a whole, he has made a trust claim against all the defendants. By the nature of the trust claim, any of the defendants that are trustees are jointly and severally liable for any breach of trust found by the Court. Though not explicit in the paragraphs of the Statement of Claim, the relief of liability is for joint and several liability. He further contends that merger is, in effect, cause of action estoppel. There is no separate action. It is all in one proceeding. Thus, the principle does not apply in the circumstances of this proceeding.
Analysis
[50] Section 139(1) concerns parties who are “jointly liable in respect of the same cause of action.” Cause of action has been interpreted as meaning the entire set of facts.[^5] It is my view this means the entire factual matrix that gives foundation for the proceeding is to be considered.
[51] In the circumstances, the entire factual matrix is that of trust, that is, whether Massoumeh and Mohamad are trustees of the plaintiff’s claim in the Property. Though the Statement of Claim does not explicitly state joint or several, it is my view that the factual matrix of the action is there is a claim that jointly, the then husband and wife, are trustees to the plaintiff’s interest in the Property.
[52] In Westar Aluminum & Glass Ltd. v. Brenner,[^6] the Court considered a situation where a defendant argued that where the plaintiff obtained default judgment against another defendant based on contract, they could not then seek a second judgment on the same contract against another party, unless there was an intention for joint liability. The Court dismissed the action, determining that since the plaintiff’s cause of action did not entail a joint liability claim, the plaintiff could not pursue its claim against the defendant that was not named in the default judgment.
[53] In this case, I conclude that the reverse is correct. The cause of action against the defendants, Massoumeh and Mohamad, does involve joint liability, and thus, section 139(1) does apply. The section clearly mandates that in such situations, the principle of merger does not apply. I agree with the plaintiff that notwithstanding his default judgment against Mohamad and 1504696, his action against Massoumeh may continue.
B. Was the Defendant a Trustee?
[54] The plaintiff argues that the defendant was an express trustee. If not an express trustee, then she was either a trustee by resulting trust or constructive trust. I will deal with each claim separately.
Express Trust
[55] An express trust may be created intentionally by the act of the settlor.[^7] It is a trust that is created intentionally and purposefully instead of one imposed by law. This intention or purpose may be indicated through a written instrument which sets out the intent and purpose of the trust by the settlor. The intention is expressed.
[56] The plaintiff contends that he indicated to Massoumeh his intention that the defendants would hold his interest in the Property in trust for him. There is no written instrument to support such an intention. In addition, no emails or documents have been presented at this trial that supports the plaintiff’s contention that he created an intentional and purposeful trust, an express trust.
[57] Massoumeh disputes that such an intention existed and was conveyed to her. Her evidence is that she was not advised at all of such an intention. Mohamad’s evidence on this point is questionable. He stated that he agreed to hold his brother’s interest in trust, but his conduct indicates otherwise. He also testified that he drafted a letter in Farsi that supports his intention, as agreed with his brother, to hold the plaintiff’s interest in the Property in trust. No such letter was produced. The plaintiff in his evidence did not indicate that such a letter existed. In the family law proceeding, Mohamad did not indicate that his brother was a beneficiary interest in the Property. He indicated in his family law proceeding that he and Massoumeh were joint owners of the Property.
[58] On the evidence presented, I prefer Massoumeh’s evidence on this point. Mohamad’s evidence is not credible. He appears to provide evidence that will be against any claim of Massoumeh. His conduct, as illustrated above, does not support his testimony. Also, it is not disputed that the plaintiff is an experienced businessperson. The evidence at the trial is undisputed that he and Mohamad have had numerous business dealings together and such dealings were all codified in writing, be it through The Agreement or the shareholdings in the various corporations. However, in this transaction, there is no written agreement, email, or any indication in writing to support the plaintiff’s testimony that he told Massoumeh that she held his interest in the Property in trust and that she agreed to the same.
[59] It is not logically consistent given the past conduct of both the plaintiff and Mohamad that there is no written documentation indicating that an express trust was created at the time of the purchase of the Property or later.
[60] Hence, I cannot find that the plaintiff, at the time of the purchase of the Property, created an intention or purpose that clearly indicated his intention to create an express trust whereby his brother, Mohamad, and/or Massoumeh are trustees.
[61] Accordingly, I am not satisfied that the plaintiff created an express trust.
Constructive Trust
Legal Principles
[62] Constructive trust is an equitable principle imposed by law to not only remedy unjust enrichment but to also hold individuals “in different situations to high standards of trust and probity and prevent them from retaining property which in ‘good conscience’ they should not be permitted to retain.”[^8]
[63] In Soulos v. Korkontzilas, the Supreme Court of Canada concluded:
- I conclude that in Canada under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of loyalty, as well as to remedy unjust enrichment and corresponding deprivation. While cases often involve both a wrongful act and unjust enrichment, constructive trusts may be imposed on either ground: where there is a wrongful act but no unjust enrichment and corresponding deprivation; or where there is an unconscionable unjust enrichment in the absence of a wrong act, as in Petkus v. Becker, supra. Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attend, as time experience may dictate.[^9]
[64] In addition, there must be “a close link between the property over which the constructive trust is sought and the improper benefit bestowed on the defendant, or the corresponding detriment suffered by the plaintiff. Absent that close and direct connection, I see no basis, regardless of the nature of the restitutionary claim, for granting a remedy that gives the plaintiff important property-related rights over specific property. A constructive trust remedy only makes sense where the property that becomes the subject of the trust is closely connected to the loss suffered by the plaintiff and/or the benefit gained by the defendant.”[^10]
[65] The plaintiff contends that Massoumeh has violated both good conscience and unjust enrichment to mandate this Court to impose a constructive trust on the monies paid by the plaintiff into the Property.
[66] Under the good conscience branch, four conditions must generally be satisfied. These conditions are:
(i) The defendant must have been under an equitable obligation that is, an obligation of the type that courts of equity have enforced, in relation to activities giving rise to the assets in his hands;
(ii) The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;
(iii) The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties and;
(iv) There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g., the interests of intervening creditors must be protected.
[67] Under the unjust enrichment branch, three elements generally must be present:
(i) The enrichment of the defendant;
(ii) The corresponding deprivation of the plaintiff; and
(iii) The absence of a juristic reason for the enrichment.[^11]
[68] For the reasons to follow, I do not find that the plaintiff has satisfied the elements required for the Court to impose constructive trust under either branch.
Analysis
[69] First, I am satisfied that there is a sufficient connection between the monies advanced by the plaintiff to Palmer, the increase in value of Palmer and the use of the monies to purchase the Property. I am satisfied that the plaintiff has shown, on the balance of probabilities, that the monies he deposited to purchase Palmer, the $208,000 and the increase in value in Palmer, and his 60% interest in those monies as between him and Mohamad, was used to purchase the Property. I am also satisfied that the remainder of the monies to purchase the Property were obtained from the HSBC line of credit.
[70] However, on the good conscience branch, I am not convinced that Massoumeh was under an equitable obligation in favour of the plaintiff, or that there existed an agency relationship with the plaintiff in which Massoumeh is in breach of an equitable obligation. In effect, I do not find that there is a “wrong” committed by Massoumeh.
[71] The evidence at the trial indicates that The Agreement was between the plaintiff and Mohamad. Massoumeh was not a signatory to that Agreement. Further, I am not persuaded that Massoumeh had either actual or deemed knowledge of the specifics of the relationship between the two brothers as it pertains to Palmer and the Property.
[72] I find Massoumeh’s evidence that she thought the line of credit paid for the purchase of the Property dubious. She would have known when the Property was purchased, that monies from Palmer were utilized in the purchase of the Property. She admitted to receiving the real estate lawyer reporting letter and trust ledger dealing with the purchase of the Property. She knew that she did not contribute monies to the purchase of the Property. However, knowing that monies were used and whose monies they were is a different matter.
[73] As indicated previously, I find both the plaintiff and Mohamad’s evidence on Massoumeh’s knowledge of the monies paid by the plaintiff as opposed to monies paid by Mohamad to purchase the Property less than credible. As already indicated, I find Mohamad’s testimony not credible or reliable. His testimony was fanciful. His testimony changed concerning the alleged letter. No letter was produced. The plaintiff never testified about such a letter. The letter, I determine, was Mohamad’s fiction to assist his brother’s claim and attempt to hurt Massoumeh’s defence. Moreover, Mohamad, from the evidence presented at this trial, never indicated in the family law proceeding that the plaintiff had an interest in the Property that he and Massoumeh were holding in trust. All this taken together makes Mohamad’s evidence unreliable and not credible.
[74] As for the plaintiff, I find incredible that an experienced businessman like him, who took steps to protect his interest in dealings with his brother, did not do so when it pertained to the Property. No agreement was drafted. No letter or email was presented at trial indicating that he had an interest in the Property. No civil action was commenced seeking a caution or certificate of pending litigation to protect his interest. No actions were taken to intervene in the family law proceeding to protect his alleged interest in the Property.
[75] Given the recitations above, I am not persuaded that Massoumeh knew that monies were that of the plaintiff and that she was aware that such monies where being held in trust by her. I find it reasonable that Massoumeh would have had no knowledge of the plaintiff’s claim that he had an interest in the Property and that she was an alleged trustee, or that monies from Palmer were that of her former husband and the plaintiff.
[76] On the unjust enrichment branch, the plaintiff must prove the enrichment to Massoumeh and the absence of a juristic reason for the enrichment. I am not satisfied that the plaintiff has proven either.
[77] It is not disputed that, further to the family litigation, the monies from the sale of the Property were paid into trust pursuant to a Court Order, and that those monies were disbursed from the trust as authorized by a Court Order. It is also not in dispute that Mohamad obtained, either directly or indirectly, a benefit from the monies paid into trust. A vehicle of his was paid for. Court ordered support was paid from the trust monies. Expenses that he was ordered to pay were paid from the trust monies. Legal fees that he incurred were paid from the trust monies. Orders for costs against Mohamad were paid from the trust monies.
[78] In addition, Massoumeh obtained an award of 6.5 million dollars for equalization of net family property. Any monies that remained in trust would have been disbursed to assist in paying that award.
[79] Thus, all monies that Massoumeh received from the proceeds of sale of the Property were paid to her pursuant to a Court Order, which was based on findings of the Court that Mohamad owed money to her through the family proceeding.
[80] Consequently, I am not satisfied that Massoumeh received a benefit that she was not entitled to pursuant to the family law proceeding. Plus, all monies were paid to her by Court Order in the family law proceeding which translates, in my view, to a juristic reason for Massoumeh receiving the proceeds from the sale of the Property.
[81] Therefore, I am not convinced that I should impose a constructive trust in favour of the plaintiff and refuse to do so.
Resulting Trust and Advancement
Legal Principles
[82] The presumption of resulting trust is another equitable remedy the Court may impose in circumstances where there is a gratuitous transfer. The Supreme Court of Canada in Pecore v. Pecore described the presumption as follows:
The presumption of resulting trust is a rebuttable presumption of law and general rule that applied in 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 a gift was intended [citation omitted]. This is so because equity presumes bargains, not gifts.[^12]
[83] The rebuttable presumption of advancement may apply when the presumption of the resulting trust does not apply, depending on the nature of the relationships between the transferor and transferee. If the presumption of advancement applies, it will then fall on the party challenging the transfer to rebut the presumption of a gift.[^13]
[84] The presumption of advancement has generally applied when the relationship is that of one between husband and wife or parent and minor children.[^14]
[85] In these circumstances, neither of the litigants argued that the presumption of advancement applies and given the nature of the relationship between the litigants, I find, in any event, that it does not apply. The relationship here is that of one between a brother and brother, and brother-in-law and sister-in-law. It is not a relationship between a parent and a minor child. Hence, there is no legal or evidentiary basis that the presumption of advancement applies.
[86] Does the presumption of resulting trust apply as between the plaintiff and Massoumeh?
[87] On the facts of this matter, I do not find that the presumption of resulting trust applies.
[88] The presumption of resulting trust applies in circumstances that the intention of the transferor on the transfer of property is not ascertainable generally due to the death of the transferor. These are found in cases similar to Pecore, where a father gratuitously placed the bulk of his assets in joint accounts to his daughter who, upon the death of the father, would receive the assets through the right of survivorship. In Pecore, the dispute arose when the daughter and her husband divorced. The husband claimed that the assets in the joint accounts were held in trust for the benefit of the father’s estate, which should be divided between the daughter and him pursuant to the father’s will. The trial judge dismissed the husband’s claim finding the father’s intention was to leave the assets in the joint accounts. The Court of Appeal and Supreme Court of Canada agreed with the trial judge and dismissed the appeals. The Supreme Court of Canada held that the presumption did not apply because there was ample evidence to determine on the balance of probabilities the father’s intention.
[89] In this case, the plaintiff provided testimony that he did not intend that Massoumeh, or his brother retain his share of the net proceeds of sale of Palmer, which were used to purchase the Property. He gave evidence that he intended an express trust. However, at the time of the transfer, that is the purchase of the Property, was this the ascertainable intention of the plaintiff? I have already determined that there was insufficient evidence to persuade me on the balance of probabilities that an express trust was created. I come to a similar conclusion that there is sufficient evidence that persuades me that the presumption of resulting trust does not apply.
[90] The factual basis for this conclusion is similar as with the constructive trust. The plaintiff did not, at the time of the transfer, indicate by a written agreement or by any documentary proof that the 60% interest he had in Palmer applied to the Property. There is insufficient credible evidence that persuades me that Massoumeh had knowledge of the specifics of The Agreement between the plaintiff and Mohamad regarding Palmer. Further, no claim was brought in the family law proceeding to indicate that the Property was not jointly held between Mohamad and Massoumeh. The plaintiff did not bring any proceeding making such a claim until this action was commenced. It should be noted that there was no evidence provided indicating when Massoumeh was served with the Statement of Claim in this proceeding; the only evidence presented is that the Statement of Defence and Crossclaim is dated June 23, 2016.
[91] In effect, neither at the time of the purchase of the Property in 2008, or after the purchase until the commencement of this proceeding in 2013, is there any indication that the monies transferred from the sale of Palmer to the purchase of the Property, registered in the names of Mohmad and Massoumeh, was not gratuitous, as it applies to Massoumeh.
[92] There may very well have been an agreement or understanding between Mohamad and the plaintiff that Mohamad would hold his brother’s interest in trust. Notwithstanding the terms of the default judgment of November 3, 2014, Mohamad made no such trust claim in the family proceeding. If he did, at minimum, it would have been made clear to the Court that as far as Mohamad was concerned, there was a trust obligation in the Property. Moreover, the plaintiff did petition Mohamad into bankruptcy and $125,000 was paid to the trustee in bankruptcy, but no evidence has been provided that any of those monies were paid to the plaintiff as a creditor or that the monies owed on the default judgment were used as a set off on the plaintiff’s purchase of Mohamad’s interest in 1504696. Lastly, in the petition for bankruptcy the plaintiff made no claim that the default judgment was based on trust assets, which could have been precluded thew trust claim from the bankruptcy.
[93] Finally, even if I am incorrect on my conclusion on the viability of the plaintiff’s claim in resulting trust, in the circumstances outlined, I would not have been inclined to exercise the Court’s equitable discretion and impose such a trust. The relationship between the plaintiff and Massoumeh, along with the questionable ongoings between the two brothers, does not compel the Court to exercise its equitable discretion in favour of the plaintiff against the former wife of the plaintiff’s brother.
C. What is the remedy to the plaintiff?
[94] Having determined that Massoumeh is not a trustee, I need not deal with this question.
Disposition
[95] I therefore determine that the plaintiff has no claim based on trust against the defendant, Massoumeh, and I dismiss the action against her.
[96] If the parties cannot resolve costs, the Court will accept written submissions. The defendant is to serve and file her submissions within 30 days from the date of this Decision, and the plaintiff will have 21 days thereafter to serve and file his submissions. The submission is to be no more than four pages, double-spaced, exclusive of any cost outline, case law and offers to settle. All case law to be hyperlinked in the submissions. Submissions are to be filed with the Court. There is no right for reply. If no submissions are received within the time set out herein, an order will be made that there will be no costs.
Justice P.W. Sutherland
Released: December 21, 2022
Gheisari v. Gheisary 2022 ONSC 7236
NEWMARKET COURT FILE NO.: CV-14-117643-00
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Gheisar Gheisari
Plaintiff
– and –
Mohamad Reza Gheisary, Massoumeh Mahrouh and 1504696 Ontario Limited
Defendants
TRIAL DECISION
Justice P.W. Sutherland
Released: December 21, 2022
[^1]: The default judgment was signed by the Registrar. The default judgment does not indicate that it was based on trust but was given as a debt or liquidated demand. [^2]: The plaintiff indicates that The Agreement improperly typed the name as Polamer Avenue. It is not disputed that the proper name is Palmer Avenue, and this was a typographical error. [^3]: (1977), 1977 CanLII 3406 (ON SC), 18 O.R. (2d) 215 (S.C. (H. Ct. J.)). [^4]: R.S.O. 1990, c. C.43. [^5]: Royal Bank v. Metcalfe (1985), 1985 CarswellOnt 425 (Dist. Ct.). [^6]: [1993] O.J. No. 699 (C.J. (Gen. Div.)). [^7]: Rathwell v. Rathwell, 1978 CanLII 3 (SCC), [1978] 2 S.C.R. 436, at p. 449. [^8]: 1997 CanLII 346 (SCC), [1997] 2 S.C.R. 217, at para. 17. [^9]: Soulos, at para. 43. [^10]: 302440 Ontario Ltd. v. 782127 Ontario Ltd (Alrange Container Services), 2014 ONCA 548, 384 D.L.R. (4th) 278, at para. 26. [^11]: Soulos, at para. 20. [^12]: 2007 SCC 17, [2007] 1 S.C.R. 795, at para. 24. [^13]: Pecore, at para. 27. [^14]: Pecore, at paras. 28-33, 38-41.