COURT FILE NO.: FS-21-00000027-0000 DATE: 2023/02/21

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BARBARA ELAINE BLECK, Applicant AND: WILLIAM MORGAN STEVENSON, Respondent

BEFORE: Justice I.F. Leach

COUNSEL: James Battin, for the Applicant S. Denis Grigoras, for the Respondent

HEARD: February 9, 2023

Endorsement

Endorsement

1Before me is a motion, brought by the respondent to this family law proceeding, seeking an order:

a. declaring that the proceeding is a nullity, and dismissing or alternatively staying the application herein; and

b. discharging and/or vacating a certificate of pending litigation which the applicant obtained on a motion without notice, and registered on title, in relation to property known by its municipal address as 38 Ridout Street West, in the Town of Tillsonburg, Ontario.

2For the reasons that follow, I think it appropriate to adjourn substantive hearing and determination of the motion to the judge hearing the trial of this family law proceeding.

Background and Party Positions

Background and Party Positions

3The affidavit material filed by the parties presents starkly different accounts of the underlying facts giving rise to the present dispute.

4According to the sworn affidavit evidence of the moving respondent:

a. The parties met in the summer of 2019, when the respondent’s son was working at a restaurant operated by the applicant. At the time, the respondent says, the applicant was experiencing financial distress caused by debts faced by the applicant in the wake of her husband committing suicide.

b. In or around January or February of 2019, the applicant is said to have sold her existing restaurant business to purchase a property known by its municipal address as 38 Ridout Street West in the Town of Tillsonburg, Ontario, (hereinafter referred to as “the subject property”), from which the applicant began a new café business operating as “Enchanted Eats”.

c. The respondent says that, shortly after the applicant’s purchase of the subject property, the applicant approached him with indications that she risked going bankrupt because of various debts the applicant’s husband had “left her with shortly before he committed suicide in November of 2018”, and suggested that the respondent purchase the subject property from the applicant in return for the applicant then showing the respondent how to run the “Enchanted Eats” business based on her decades of experience in that regard.

d. The respondent says he viewed the applicant’s suggestion as “a great business opportunity”, in that he would be “able to run the business” in his retirement years. To that end, he says he responded to that business proposition from the applicant by:

i. selling his interest in a personal residence located in the Town of Aylmer, Ontario;

ii. entering into a formal agreement of purchase and sale with the applicant in relation to the subject property, (a business transaction which is said to have closed on April 1, 2020);

iii. entering into a formal lease agreement with the applicant, whereby the applicant would lease commercial space in the subject property to continue operation of “Enchanted Eats” and pay rent to the respondent totalling $1,800.00 per month; and

iv. using $100,000.00 in sale proceeds from his Aylmer residence to “fix up” the subject property, including repairs to its plumbing and wiring, the construction of an external “deck” space for use by the “Enchanted Eats” café business, and other work done in consultation with property inspectors and engineers to make the subject property compliant with requirements set forth in “the Building Code”; i.e., the collection of building regulations set forth in O.Reg.332/12, enacted pursuant to the Building Code Act, 1992, S.O. 1992, c.23.

e. The respondent says that the applicant’s erstwhile friendly personality nevertheless then “changed entirely” when the respondent ran out of money “to fund” the subject property “and the business”, and that the applicant began to unfairly “take her anger out” on the respondent. He says the “Enchanted Eats” business also was not doing well because it opened “right before the COVID-19 pandemic “lockdown, which resulted in a financial hit to the business”.

f. It was indicated and emphasized, in the written and oral submissions tendered on behalf of the respondent, that the applicant’s ensuing initiation of the family proceeding herein, (commenced in October of 2021), took the respondent by surprise. In that regard, the respondent says that he learned of the proceeding’s existence, and the steps taken by the applicant to obtain and register a certificate of pending litigation (“CPL”) against the subject property, only when he was later served after the fact with the motion record relied upon by the applicant to obtain that CPL on an ex parte basis.

g. The respondent also says that many of the fundamental assertions underlying the applicant’s claims and requests for relief are either untrue or tainted by failure to make full and fair disclosure in a timely way, and/or that the applicant otherwise has been engaging in various forms of fabrication and misconduct which the court should not condone. Without limiting the generality of the foregoing:

i. The respondent firmly denies that he was ever in a “spousal relationship” with the applicant, and says that the applicant’s claims to the contrary are a “misrepresentation”. While acknowledging that he and the applicant had “some romantic involvement”, he emphasizes that such involvement occurred “less than a handful of times”, and that the relationship between the respondent and the applicant was instead merely a relationship between “friends and business partners”.

ii. The respondent denies that he ever assaulted and/or unlawfully confined the applicant as alleged in the applicant’s materials and related ongoing criminal proceedings.

iii. Insofar as the applicant now relies on a written agreement ostensibly executed by the applicant and respondent on March 30, 2020, (whereby the parties expressly acknowledged and agreed that the respondent was “assisting” the applicant as she was “financially stressed”, and that the respondent committed to transferring the subject property back to the applicant upon her reimbursing the respondent for all costs that he had or would expend “to acquire, maintain and service the debt and costs to operate the said property”), the respondent says he never “knowingly or voluntarily” signed such an agreement, and that the terms contained therein “were never part” of his agreement with the applicant. He claims that the document instead was “placed among a stack of documents” that the applicant and her realtor had the respondent sign.

iv. The respondent says that the applicant, in the course of bankruptcy proceedings she initiated in the late fall of 2020, (i.e., on or about November 2, 2020), filed a Form 79 “Statement of Affairs” containing a number of representations that were either inaccurate or incomplete, or which are inconsistent with assertions advanced later in the context of this proceeding. For example:

1. The respondent emphasizes that, in response to a question on the standard Form 79 filing asking about the applicant’s “marital status”, the applicant indicated that she was “widowed”. Moreover, the respondent notes, in response to a question on the standard Form 79 filing asking the applicant for the “full name of [her] spouse or common law partner”, the applicant entered no answer whatsoever. The respondent submits that such responses, provided by the applicant on or about November 2, 2020, essentially contradict the applicant’s assertions in this proceeding that she was in a “spousal relationship” with the respondent from approximately January of 2020 to May 23, 2021.

2. The respondent emphasizes that, in outlining her “Pledged Assets” on the standard Form 79 filing, the applicant also made no mention of having any existing interest in the subject property, nor any mention of potential claims against the respondent in that regard. The respondent says those indications, or lack thereof, essentially contradict the claims being advanced in this proceeding; i.e., insofar as the applicant now claims that she is entitled to a trust interest in the subject property, and a declaration of constructive trust in particular.

3. The respondent points out that the applicant, in completing the standard Form 79 filing, indicated she had not, “within the 12 months prior to the date of the initial bankruptcy event”, “made payments in excess of the regular payments to creditors”. The respondent says that indication by the applicant is contradicted by her assertion, made in the context of this proceeding, that the applicant, before transferring the subject property to the respondent, personally paid $74,000.00 towards a mortgage registered on title to the subject property.

v. The respondent says that the applicant also did not act with “clean hands” when she obtained and registered a CPL against the subject property, insofar as the material the applicant filed on her ex parte application to obtain the relevant CPL may have failed to make full and fair disclosure. For example:

1. The respondent emphasizes that the application material filed in that regard, (including an affidavit sworn by the applicant on October 15, 2022, and apparently filed with the court on or about November 3, 2022), contained no indication that the applicant was an undischarged bankrupt.

2. The respondent emphasizes that the material filed with the court failed to disclose the Form 79 “Statement of Affairs” filed by the applicant in relation to the bankruptcy proceedings, in which the applicant made no mention, in November of 2020, of the respondent being an alleged “spouse” or “common-law partner” of the applicant.

5Relying on such considerations, and relatively well-known and frequently engaged provisions of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, (“the BIA”), the Respondent argues that the family law proceeding commenced by the applicant should be formally characterized as a nullity, and dismissed or stayed accordingly pursuant to section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 [1] and/or Rules 2.1.01(1) or 21.01(3)(b) and/or (d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 [2].

6In particular, the respondent notes that:

a. Pursuant to section 71 of the BIA, on a bankruptcy order being made or an assignment being filed with an official receiver, “a bankrupt ceases to have any capacity to dispose of or otherwise deal with their property, which shall, subject to [the BIA] and to the rights of secured creditors, immediately pass to and vest in the trustee named in the bankruptcy order or assignment”. [Emphasis added.]

b. Section 2 of the BIA defines “property” broadly, for purposes of the BIA, as “money, goods, things in action, land and every description of property, whether real or personal, legal or equitable, and whether situated in Canada or elsewhere”, which includes “obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property”. [Emphasis added.]

c. Causes of action that otherwise would belong to a bankrupt person generally fall within the definition of property that vests in the trustee in bankruptcy for that person, pursuant to sections 2 and 71 of the BIA [3].

7Having regard to those basic propositions, the respondent argues that, at material times when the applicant purported to commence and/or pursue this proceeding against the respondent, the applicant accordingly had no capacity to assert such claims or things/choses in action based on alleged contractual or equitable obligations owed to her by the respondent, and/or any alleged legal or equitable interest in the subject property.

8The respondent accordingly argues that the applicant was and/or is “without legal capacity to commence or continue” this proceeding, and/or that this proceeding is “frivolous, vexatious or otherwise an abuse of the process of the court”, warranting its stay or dismissal pursuant to Rules 2.1.01(1) or 21.01(3)(b) and/or (d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and/or section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, supra [4].

9In advancing such arguments, the respondent acknowledges:

a. that the applicant’s trustee in bankruptcy, (A. Farber & Partners Inc.), as of March 18, 2022, has authorized continuance of the family law application herein that was issued on October 15, 2021; and

b. that the court has an overarching legal and equitable jurisdiction in the context of bankruptcy proceedings to make orders, (including orders made on a nunc pro tunc basis “regularizing” the commencement of proceedings), to ensure that the purposes of the BIA are not thwarted by formal irregularities and that the interests of creditors are protected [5].

10However, drawing on analogies to what transpired in the case of D’Alimonte v. Porretta, 2010 ONSC 6139, supra, (which counsel for the Respondent suggested was “on all fours” with this case), it was argued that the court should not exercise such a corrective jurisdiction in this case; i.e., so as to “regularize” the applicant’s commencement of the proceeding on a nunc pro tunc basis, insofar as the applicant’s trustee-in-bankruptcy essentially may have authorized the pursuit of the proceeding retroactively [6]. Without limiting the generality of the foregoing, it was suggested that the applicant had engaged in conduct similar to that which the motions judge in D’Alimonte v. Porretta regarded as fraud by deliberate concealment of a substantial asset; something which should not be regarded as a mere irregularity.

11In any event, the respondent says, the CPL obtained and registered by the applicant through her ex parte motion should be discharged, thereby allowing the respondent to encumber and/or sell the subject property; e.g., so that he will have funds to pay legal fees associated with his defence of this proceeding and related criminal proceedings. In that regard, the respondent relies on legislation and legal principles that include the following:

a. Pursuant to Rule 42.02(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and s.103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43, supra, the court has discretionary authority to make an order discharging a CPL on various grounds; grounds which include, pursuant to s.103(6)(c), “any … ground that is considered just”.

b. A party who seeks leave to issue a CPL without notice has an obligation to make full and fair disclosure of all material facts, (including an obligation to call the court’s attention to any weaknesses in the rights being asserted by the party seeking the CPL), and failure to make such disclosure may suffice on its own to justify an order discharging a CPL obtained on an ex parte basis [7]. In that regard, it does not matter whether the CPL may have been granted even with full disclosure of the material facts. The test is whether undisclosed facts were material to the decision to grant the CPL, and not whether such facts were determinative [8].

12In this case, the respondent says, the CPL would not have been granted by Justice Heeney, on the applicant’s ex parte motion, if the applicant had disclosed that she was an undischarged bankrupt; i.e., a would-be litigant whose property, (including causes of action), were vested at the time in the applicant’s trustee in bankruptcy, who had not yet authorized this proceeding. The respondent submits that alone warrants an order discharging the CPL obtained by the applicant and registered against the subject property.

13So far in these reasons, I have focused principally on the respondent’s account of underlying events and his corresponding position in this litigation.

14The evidence filed by the applicant, (which includes affidavits sworn by the applicant herself, and an affidavit sworn by Ms Pauline Krygsman, a real estate broker of record who has been involved in Elgin County real estate matters for approximately 45 years), paints a very different picture. According to that sworn affidavit evidence:

a. From February of 2017 to April of 2020, the applicant was the sole owner of a property known by its municipal address as 99 Talbot Street West, in the Town of Aylmer, Ontario. During that period:

i. The applicant operated a restaurant business at that Aylmer location, and was solely responsible for payment of all mortgage instalments, taxes and insurance premiums relating to that property.

ii. The applicant’s husband, Gary Scrivens, died on December 4, 2018, (not from suicide), without leaving the applicant any debts. To the contrary, the applicant’s husband left her a number of properties.

iii. In the wake of her husband’s death, the applicant decided to sell a number of her existing properties, and to locate and acquire a new property from which to operate a new food business. She asked Ms Krygsman to provide professional real estate assistance in that regard.

b. The parties met in June of 2019, (through the respondent’s son working as an employee in the kitchen of the applicant’s Aylmer restaurant), and began dating.

c. On January 31, 2020, the applicant purchased the subject property from St Paul’s United Church Tillsonburg, and says she did so without any advice, participation or financial contribution from the respondent. In that regard:

i. The relevant purchase price was $339,000. However, once the applicant had paid all associated legal fees and disbursements, the total cost paid by the applicant to purchase the subject property came to $344,524.57. Title to the subject property was conveyed to the applicant alone.

ii. To finance her purchase of the subject property, the applicant borrowed $341,000.00 from G.M.S. Mortgage Investment Corporation, secured by a promissory note dated January 31, 2020, obliging the applicant to repay the principal along with interest thereon at the rate of 12 percent per annum, payable in equal, consecutive, monthly instalments of $3,591.49.

iii. On the same date, (i.e., January 31, 2020), the aforesaid promissory note was converted to a Charge in the amount of $341,000.00, (owed by the applicant to G.M.S. Mortgage Investment Corporation), that was registered against title to the subject property.

iv. The plaintiff thereafter began living and working at the subject property, where she opened and operated another restaurant/café business called “Enchanted Eats”. To that end, she renovated and painted the building, and paid for those renovations, (as well as all payments on the relevant charge or promissory note, insurance premiums and property taxes), without any financial assistance from the respondent [9].

d. Contrary to the denials or attempts at minimization made by the respondent, the parties developed a close relationship that was intimate, significant and sustained, and progressed to a spousal relationship wherein the respondent resided with the plaintiff from February of 2020, (when he moved into a shared residence with the applicant at the subject property), until May 23, 2021, at which time the respondent was criminally charged with four counts of assault and one count of unlawful confinement, all directed towards the applicant. As evidence of that relationship, the applicant filed evidence which included:

i. flight and insurance documentation showing that the parties travelled to Arizona together from December 28, 2019, to January 12, 2020;

ii. the affidavit sworn by Ms Krygsman, indicating that Ms Krygsman knows both parties, and that the parties were living together as common-law spouses in March of 2020;

iii. further documentation showing that the parties, as of July 2020, were jointly insured under a common policy of automobile insurance in relation to a number of vehicles;

iv. a “Family Camping Seasonal Site Contract”, signed by both parties on July 20, 2020, indicating a common “home address” at the subject property, and confirming that they had jointly rented a residential trailer site near the village of Eden, Ontario;

v. correspondence from a solicitor in the Town of Aylmer, dated August 16, 2020, and sent to both parties at the subject property address, indicating that the parties had used the same lawyer to prepare power of attorney documents, mutual wills and mutual will agreements, and were jointly responsible for payment of the solicitor’s fees in that regard;

vi. a typed “patient identification label”, apparently issued to the respondent by his family physician, indicating an initial appointment date of December 2, 2020, (crossed out and changed to “February 10”), and the subject property as the respondent’s address; and

vii. a print out of text messages exchanged between the parties in January of 2021, wherein the respondent indicates that he preferred to sleep with the applicant.

e. The applicant never told the respondent that her husband had committed suicide, leaving her with debts, or that she would have to go bankrupt. The applicant also never initiated any suggestion or request that the subject property be transferred in any way to the respondent. To the contrary, the sworn evidence of the applicant and Ms Krygsman indicates the following:

i. Prior to any transfer of the subject property from the applicant to the respondent in March of 2020, the applicant independently had succeeded in paying down the G.M.S. mortgage on the property by approximately $74,000.00, leaving an outstanding balance on the mortgage of approximately $263,000.00.

ii. It was in fact the respondent who, (between a time shortly after moving into the applicant’s residence in February of 2020 and the signing of legal documents in March of 2020), proposed a transfer of title to the subject property into the respondent’s name, on the stated basis that doing so would enable the applicant to benefit from the respondent’s superior credit rating and effectively pay a charge/mortgage interest late lower than the 12 percent interest rate the applicant then was paying. The respondent was confident in particular about his ability to obtain a mortgage through Scotiabank at a lower interest rate, (as he was still working at the time), and urged the applicant to agree to his suggested transfer of title to the subject property because the parties had entered into a “long term relationship” that would continue.

iii. The applicant eventually agreed with the respondent’s suggestion regarding a formal transfer of title to the subject property, while rejecting the respondent’s other suggestion/request that he be permitted to jointly operate the applicant’s “Enchanted Eats” café [10].

f. The parties thereafter took further steps to discuss, finalize and document arrangements associated with a transfer of the subject property from the applicant to the respondent. In particular:

i. On March 10, 2020, the parties attended at the real estate office of Ms Krygsman in Aylmer, Ontario.

ii. The parties signed a formal Agreement of Purchase and Sale, indicating that the respondent would be purchasing the subject property from the applicant, paying the applicant a purchase price of $339,000.00 and assuming responsibility for the existing G.M.S. mortgage registered against the subject property. According to the agreement, the transaction therein would have a closing date of March 31, 2020.

iii. Ms Krygsman knew the parties were living together as common-law spouses, and expressly raised the matter of what would happen if the parties’ relationship broke down or one of the parties died. The three individuals had a discussion in that regard, and Ms Krygsman indicated that she would produce a potential agreement addressing such issues in relation to the subject property in time for the scheduled closing of the transaction. Ms Krygsman also advised the parties that she would add to that agreement if any further issues developed in relation to the subject property. A further meeting between the parties and Ms Krygsman, to have the parties discuss and sign that further agreement, was scheduled for March 30, 2020; i.e., a date before the scheduled closing of the parties’ Agreement of Purchase and Sale, but also a date chosen to give both parties time to consult legal counsel.

iv. At approximately 1:00pm on March 30, 2020, both parties once again attended at the real estate office of Ms Krygsman for the purpose of signing that additional agreement. In that regard:

1. Both parties read through the text of the agreement and indicated their ability and willingness to sign the agreement.

2. Ms Krygsman also read the agreement out loud to the parties, and discussed it with them, to make sure both understood what was in the agreement.

3. Neither party requested any changes to the agreement, apart from a request for the inclusion of a provision essentially creating a “mutual wills” obligation; i.e., whereby each party would agree to execute a full and binding amendment to his or her last will and testament so as to leave the subject property “and anything associated with it” to the other. Ms Krygsman added that provision as requested, and the addition was initialled by both parties, who both then signed the agreement [11].

4. The full text of the agreement, bearing the parties’ signatures and dated March 30, 2020, forms an exhibit to Ms Krygsman’s affidavit. However, it includes the following provisions: “It is agreed between the parties that William is assisting Barbara as she is financially stressed and that the property at 38 Ridout St. Tillsonburg, Ontario, may be transferred back to Barbara upon William being reimbursed all costs that he has or will expend to acquire, maintain and service the debt and costs to operate the said property.”

5. Contrary to the respondent’s claim that he had no awareness or understanding of the agreement in question, (e.g., as he now swears that it was simply “placed among a stack of documents” he was asked to sign, thinking it was part of the purchase and sale arrangements), Ms Krygsman is adamant that the respondent fully understood the contents of the agreement he was signing, as it was “read line by line” and “discussed line by line” with him, and the respondent “never indicated any disagreement with the contents”.

g. On April 1, 2020, title to the subject property was formally transferred from the applicant to the respondent, pursuant to the Agreement of Purchase and Sale noted above. However, no monies actually were exchanged between the parties, despite the provisions of that agreement. In particular, the respondent contributed no funds to the purchase price, (despite the formal transfer), the applicant paid all legal fees associated with the transaction. Moreover, the applicant alone continued to pay all monthly payments required in relation to the outstanding G.M.S. mortgage, as well as all insurance premiums, monthly utility charges, and (until June of 2021) taxes relating to the subject property [12].

h. Contrary to the rationale he originally put forward for the transfer arrangement, the respondent never took any steps to obtain a lower interest rate in relation to the mortgage debt registered against the property [13], and the applicant now believes the respondent misled her into transferring the subject property into the respondent’s name alone. In that regard, the applicant says the “true character” of the respondent became evident only after he had secured formal title to the subject property, following which the respondent began to yell and scream at the applicant, hold her up against walls by the throat, and threaten to kill her by punching her in the head. According to the applicant, the respondent also then used his formal title to the subject property as a basis for continual threats to eject her from the residence there and close down her “Enchanted Eats” business.

i. The applicant acknowledges that the respondent did pay for certain capital improvements to the property, (including some electrician bills and construction costs relating to a ramp and deck for customers patronizing “Enchanted Eats” business), and says those expenditures came to at least $29,462.40. However, the applicant also says those expenditures primarily were directed to work done on the aforesaid ramp and deck; work necessitated by the respondent’s unilateral and senseless destruction of the existing ramp and deck that had come with the property when it was purchased by the applicant, simply because the respondent “disliked” them and felt he could do whatever he wished in relation to the subject property as his was the name registered on title. The respondent’s actions in that regard nevertheless prompted the municipal building inspector to threaten closure of the business unless the ramp was replaced, which in turn necessitated not only construction expenditure but the applicant’s payment of a further $1,500.00 for required engineer drawings.

j. The respondent’s alcohol consumption thereafter increased significantly, such that he became more unreasonable and physically abusive; e.g., confining the applicant to a basement, and physically assaulting the applicant through incidents that included further episodes of choking and throwing the applicant across the floor of the aforesaid trailer, which resulted in the applicant’s hospitalization.

k. The parties finally separated on or about May 23, 2021, because the respondent was criminally charged with four counts of assault and one count of unlawful confinement, all relating his alleged abuse of the applicant. As noted above, those criminal proceedings are ongoing.

l. The applicant does not deny that she filed an assignment in bankruptcy on or around November 17, 2020, but disputes the respondent’s assertions that her “Enchanted Eats” business was not doing well before the COVID-19 pandemic, which hurt the business further. She says her business actually was doing well, and did so despite the pandemic. She attributes her bankruptcy to the respondent’s failure to secure a lower mortgage interest rate, (which was the promised rationale for title to the subject property being transferred gratuitously into the respondent’s name), and the respondent’s failure to pay any appropriate share of expenses related to the subject property, which was the couple’s shared residence.

m. According to the supporting affidavit sworn by the applicant on October 15, 2021, (i.e., the date she commenced her application herein), she was still operating her “Enchanted Eats” café business at the time, and still paying the monthly mortgage payments, insurance premiums and utilities associated with the subject property [14].

15Relying on that factual account, the applicant says it would be fundamentally unfair and inequitable to grant the relief sought by the respondent; i.e., summarily dismissing or staying the applicant’s application herein, and vacating the CPL obtained and registered against the subject property. In that regard:

a. It was argued that the applicant made no misrepresentations or non-closures, and certainly nothing that could be characterized as deliberate in that regard, when completing her Form 79 “Statement of Affairs” now being relied upon by the respondent. For example, it was suggested:

i. that when completing the form, the applicant was focused in lay fashion on her formal marital status as a spouse, (i.e., which had changed from being married to being a widow upon the death of her husband), and not on whether her interactions with the respondent eventually might be characterized as a “spousal relationship” in the context of this proceeding [15]; and

ii. that the applicant was right in thinking she had no interest in the subject property when she made her assignment in bankruptcy, and would have no such interest unless and until the court made a remedial order in that regard [16].

b. It similarly was argued that, even if the applicant neglected to mention her status as an undischarged bankrupt when commencing the proceeding herein, or when seeking and obtaining the CPL registered against the subject property, any defect in that regard should not result in a dismissal or stay of this proceeding or a lifting of the CPL because the applicant’s trustee-in-bankruptcy now has prospectively and retroactively authorized this proceeding on a nunc pro tunc basis [17].

c. It was submitted that this case is not “on all fours” with that considered in D’Alimonte v. Porretta, 2010 ONSC 6139, supra, but one with significant and fundamental differences; e.g., insofar as the applicant in this case did not believe she had a present interest in the subject property when she made her assignment in bankruptcy, and is now primarily asking the court to create such an interest by imposing a remedial constructive trust in relation to the subject property to address unjust enrichment.

d. More fundamentally, it was argued that allowing the respondent to defeat the applicant’s claim herein and evade the protections of the registered CPL, based on such alleged failings by the applicant, would be horrendously unfair and unjust; e.g., insofar as it would allow the respondent to “forthwith sell the property, pocket the proceeds and disappear, leaving the applicant’s constructive trust claim to be ignored”, despite the underlying facts.

Analysis

Analysis

16I have summarized the parties’ competing factual allegations and positions at length in part for the assistance of any other judge approaching this matter hereafter, but also to highlight the basis for my view, indicated to counsel during the hearing before me:

a. that key factual disputes in this litigation, (e.g., as to the nature of the parties’ relationship, and the nature of alleged agreements and understandings mutually arrived upon by the parties), are not matters likely to be the subject of honest mistake, forgetfulness or inadvertent error; and

b. that someone participating in this litigation therefore unfortunately seems to be lying deliberately under oath.

17For example, while the intensity of relationships is obviously a matter of degree and interpretation, there is in my view a stark and irreconcilable difference between:

a. the respondent’s sworn indication that the parties were merely “friends and business partners”, with “some romantic involvement” occurring “less than a handful of times”; and

b. the sworn indications of the applicant and Ms Krygsman that the parties actually lived together in a spousal relationship on a long-term basis; i.e., between February of 2020 and May of 2021, or approximately one year and three months.

18Nor does it seem likely to me that either of the parties could be genuinely mistaken about whether the respondent genuinely purchased the subject property from the applicant, (e.g., paying the applicant the sum required by the signed Agreement of Purchase and Sale), or whether title to the property was simply transferred without any payment by the respondent of the nominally required purchase price.

19Similarly, in my view, it seems difficult or impossible to reconcile, through honest mistake, forgetfulness or inadvertent error:

a. the respondent’s sworn indication that he had no contemporaneous knowledge or understanding of the ostensible written agreement apparently signed by both parties on March 30, 2020, (i.e., the agreement obliging the respondent to reconvey the subject property to the applicant upon his being reimbursed for any actual expenditures he may have made in relation to the subject property), the terms of which were “never part” of his agreement with the applicant, and which he “would never have signed” had the document not been “placed among a stack of documents” he was asked to sign; and

b. the sworn indications of the applicant and Ms Krygsman that the relevant written agreement was discussed separately and expressly at considerable length, and indeed read out loud line by line in the presence of both parties, at a meeting expressly scheduled for that purpose, with both parties requesting and actively initialling desired amendments before both then voluntarily signed the document with a clear understanding of its contents.

20Moreover, to the extent such lies under oath are being tendered for the purpose of depriving one party or the other of an interest in the subject property to which he or she may be justly entitled, such falsehoods and deceit may very well constitute fraud [18].

21However, although it seems reasonably clear to me that someone is lying under oath, and thereby arguably attempting to perpetrate a fraud in relation to the subject property, in my view it would not be appropriate to attempt any summary determination as to who that might be, based solely on the conflicting affidavit evidence that has been filed. To the contrary, (and for reasons outlined in further detail below), in my view these are clearly triable issues; i.e., serious issues warranting a trial for their resolution, so that the court will be fully equipped to make required determinations resolving obvious questions of credibility and reliability.

22Without limiting the generality of the foregoing, (and without in any way deciding or attempting to suggest who may be lying under oath and/or attempting to perpetrate a fraud in relation to the subject property), for present purposes I think it sufficient to indicate my view that it would not be appropriate to determine whether or not the relief currently sought by the respondent should be granted until such underlying issues have been resolved. In that regard:

a. As noted above, the respondent essentially relies on previously identified provisions of the BIA, Courts of Justice Act, R.S.O. 1990, c. C.43, supra, and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to request an order dismissing or staying this proceeding, and/or and order lifting the CPL which the applicant has obtained and registered against the subject property.

b. I have no doubt that the aforesaid provisions of the BIA and Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as interpreted by our courts, provide the court with authority to grant such relief. However, I also have no doubt that the exercise of that authority is discretionary, with that discretion to be exercised in accordance with equitable principles [19].

c. In my view, among those equitable principles to be considered are the important maxims that “equity will not permit a statute to be used as an instrument of fraud” and that “fraud unravels all” [20]; principles which seemed relied upon in effect, (if not by name), by counsel for the applicant in this case.

d. Having regard to such principles, I think it would be inappropriate to grant the respondent the relief he is seeking on this motion if he is deliberately lying under oath about the parties’ relationship and agreements in order to unjustly enrich himself and effectively defraud the applicant of her rightful interest in the subject property. In such circumstances, the court effectively would be condoning respondent use of the specified provisions of the BIA, Courts of Justice Act, R.S.O. 1990, c. C.43 and Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to shield the respondent from the efforts being made through this proceeding to expose and address such misconduct. In other words, the court should not exercise its discretion so as to permit the respondent to use the various provions of that primary and subordinate legislation as an instrument of fraud.

e. On the other hand, if the respondent is not guilty of such misconduct, and it actually is the applicant and Ms Krygsman who are lying under oath, in support of an effort by the applicant to fabricate a non-existent relationship and/or unintended agreement to defraud the respondent of his rightful interest in the subject property, I think it would be inappropriate to assist the applicant by dismissing the respondent’s motion, thereby effectively depriving the respondent of further defences to which he legitimately may be entitled. If “fraud unravels all”, it not only should prevent the applicant’s assertion of a constructive (or resulting) trust claim, but also render any ostensible agreement procured through fraud unenforceable. In other words, the court should not exercise its discretion in a manner that effectively would assist the applicant in pursuing her fraudulent claims.

f. In short, I think it would be inappropriate to exercise the court’s discretion, so as to determine the respondent’s motion one way or the other, without first addressing and resolving significant factual disputes concerning the nature of the parties’ relationship, the circumstances in which the respondent acquired legal title to the subject property from the applicant, and whether the parties voluntarily entered into any specific agreements in that regard.

23However, I also think it impossible to address and resolve those significant factual disputes on the basis of the conflicting affidavits filed by the parties in relation to the respondent’s motion.

24In that regard, I note that the respondent’s motion was not framed as a motion for summary judgment brought pursuant to Rule 16 of the Family Law Rules, O. Reg. 114/99, thereby formally engaging the enhanced powers of the court, under Rule 16(6.1) of those rules, to weigh evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence, unless it is in the interests of justice for such powers to be exercised only at a trial.

25However, even if the respondent’s motion had been framed in such a way, I think it is in the interests of justice for such powers to be exercised only at a trial. Without limiting the generality of the foregoing:

a. On anyone’s view of the underlying facts, the parties were not formally married, had no children together, and did not cohabit for three years or longer. In the circumstances, (and as confirmed by the Form 8 Application filed herein by the applicant), this dispute is entirely focused on whether the respondent or the applicant, (or her trustee-in-bankruptcy for the benefit of the applicant’s creditors and possibly the applicant, if she has any residual interest after the claims of her creditors have been addressed), should be regarded as the proper beneficial owner of the subject property, based on the relationship, interactions and agreements (if any) between the parties in that regard. In other words, the issues in dispute in relation to the respondent’s motion essentially coincide entirely with the central issues raised by this proceeding. While that obviously is true of many motions for summary judgment, it underscores the figurative “high stakes”, from both perspectives, of having the matter decided solely on the basis of affidavit evidence.

b. As noted above, this is not a case where the factual disagreements in the tendered affidavits are minor or easily reconciled through honest mistake, genuine forgetfulness or inadvertent error. Nor is it a case where one party effectively rests on little more than simple denials of an account presented by the other. In this case, the parties emphatically have put forward competing versions of events that are fundamentally at odds with each other, including purported explanations as to why contemporaneous documentation in relation to ostensible real estate transactions and agreements should not be taken at face value.

c. In my view, this accordingly is a case where the fundamental conflicts in the affidavit evidence presented on the motion must be addressed and resolved through a trial, at which time the court will be provided with a proper and fulsome opportunity to assess credibility and reliability.

26As the underlying factual issues raised by the motion do largely coincide with those to be addressed in this proceeding, I see little point in directing a separate trial of those issues, with the making of detailed special directions in that regard. The simple fact of the matter is that a fulsome and detailed procedure already exists to steer this matter effectively and efficiently to trial; i.e., the Family Law Rules, O. Reg. 114/99 governing this proceeding.

27For all these reasons, in my view the most appropriate course of action is to adjourn the substantive hearing and determination of the respondent’s motion to the judge presiding over the trial of this proceeding; a judge who will be in a position, after hearing the evidence presented at trial and resolving the underlying factual conflicts, to determine the appropriate application of the legislative provisions and legal principles outlined above.

Order

Order

28For the reasons outline herein, a formal order shall go:

a. adjourning the respondent’s motion herein to the judge presiding over the trial of this proceeding for substantive hearing and determination; and

b. reserving the costs of the proceedings before me to that trial judge.

Justice I.F. Leach Date: February 21, 2023

Footnotes

Footnotes

1Pursuant to section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, supra, “A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.”

[2] In that regard:

• Pursuant to Rule 2.1.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, “The court may, on its own initiative, stay or dismiss a proceeding if the proceeding appears on its face to be frivolous or vexatious or otherwise an abuse of the process of the court”.
• Pursuant to Rule 21.01(3)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, “A defendant may move before a judge to have an action stayed or dismissed on the ground that … the plaintiff is without legal capacity to commence or continue the action”.
• Pursuant to Rule 21.01(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, “A defendant may move before a judge to have an action stayed or dismissed on the ground that … the action is frivolous or vexatious or is otherwise an abuse of the process of the court.”

3See, for example: Caisse Populaire Vanier Ltee v. Bales, [1991] O.J. No. 308 (Gen.Div.), at paragraphs 49-50; and Watt v. Beallor Beallor Burns Inc., [2004] O.J. No. 450 (S.C.J.), at paragraph 2.

4In the hearing before me, it was not disputed that this proceeding generally is governed by the Family Law Rules, O. Reg. 114/99, having regard to the allegations made by the applicant. In that regard, I note in particular that Rule 1(2)(c) of those rules indicates that they “apply to all family law cases in … the Superior Court of Justice … for a constructive or resulting trust or a monetary award as compensation for unjust enrichment between persons who have co-habited”. However, insofar as the Family Law Rules, O. Reg. 114/99 may lack provisions expressly addressing the question of stays and dismissals in circumstances such as those alleged herein, the respondent relies on Rule 1(7) of the Family Law Rules, O. Reg. 114/99. Pursuant to those provisions, if the Family Law Rules, O. Reg. 114/99 do not cover a matter adequately, the court may give directions, and the practice shall be decided by analogy to the Family Law Rules, O. Reg. 114/99, by reference to the Courts of Justice Act, R.S.O. 1990, c. C.43, supra, legislation governing the case and, if the court considers it appropriate, by reference to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

5See, for example: Murphy v. Stefaniak (2007), 2007 ONCA 819, 37 C.B.R. (5th) 6 (Ont.C.A.); and D’Alimonte v. Porretta, [2010] O.J. No. 6139 (S.C.J.), affirmed 2011 ONCA 307.

6In the hearing before me, counsel for the applicant certainly argued, in his written and oral submissions, that the authorization received from the applicant’s trustee-in-bankruptcy, in relation to this proceeding, “is both retrospective and prospective”. I nevertheless note that, to date at least, it seems the applicant has not yet taken any formal steps to have this proceeding “regularized” in that regard; e.g., by seeking and obtaining an order formally recognizing and declaring that the applicant has been authorized to bring those aspects of her claim which may be affected by her bankruptcy in the name of her trustee in bankruptcy, and to pursue that part of her action on behalf of her creditors. That such relief should be granted was inherent in the applicant’s position, but it was not relief formally requested, as yet, by any motion or cross-motion brought on the applicant’s behalf.

7See, for example: Aztec Investments Ltd. v. Wynston (1988), 64 O.R. (2nd) 733 (Master); Cimaroli v. Pugliese (1988), 25 C.P.C. (2d) 10 (Ont.H.C.), leave to appeal to the Divisional Court refused 12 W.D.C.P. 123 (Div.Ct); Bank of Nova Scotia v. Rawifilm Inc., [1994] O.J. No. 4474 (Master); Proctor & Gamble Inc. v. John Doe, [2000] F.C.J. No. 61 (T.D.); Hunter’s Square Developments Inc. v. 351658 Ontario Ltd. (2002), 60 O.R. (3d) 264 (S.C.J.), affirmed , [2002] O.J. No. 4694 (C.A.); and Allen v. Process Matters Inc., [2006] O.J. No. 964 (S.C.J.).

8See, for example: 547CC Investments Inc. v. Colozza, [2009] O.J. No. 5390 (S.C.).

9If the affidavit evidence filed by the applicant is accurate, it seems her ability to finance such further expenditures would have been enhanced by her decision to sell her Aylmer property in April of 2020.

10According to the applicant, she rejected that suggestion not only because the respondent had no business or restaurant experience, but because the respondent did have a criminal record involving convictions for impaired driving; something which would jeopardize the applicant’s ability to retain her liquor licence if the respondent was allowed to take any part in operating the business. (The applicant says that, during the parties’ relationship, the applicant was still required to use an “interlock” breathalyzer system to activate his car, and forced a fearful applicant to blow into that system on a number of occasions so that the respondent could drive.)

11I note that this assertion arguably finds a degree of written corroboration in the solicitor correspondence dated August 16, 2020, (noted above), indicating that the parties subsequently did jointly retain a solicitor to assist them with estate arrangements that included the making of mutual wills and mutual will agreements.

12The applicant acknowledges that the respondent began paying taxes on the subject property in June of 2021.

13Indeed, the applicant says the respondent actually increased the mortgage debt owed to G.M.S. by $20,000.00, using the additional borrowed funds to purchase a trailer in his name alone; a trailer that the applicant in turn assumed responsibility for financing monthly, as she alone continued to make payments in relation to the G.M.S. mortgage on the subject property.

14As noted above, the applicant acknowledges that the respondent has been paying the relevant taxes on the subject property since June of 2021; i.e., since the parties’ separation.

15In that regard, I note that the relevant Form 79 “Statement of Affairs” completed by the applicant did not simply call for an indication of “Marital status” under “INFORMATION RELATING TO THE AFFAIRS OF THE APPLICANT” and sub-heading “A”, entitled “PERSONAL DATA”. (See item number 4 thereunder.) It also called for those completing the form to provide, (under item number 5 thereunder), the “Full name of spouse or common law partner”. Moreover, while many in Ontario might regard the concept of “common-law partner” as a relationship status effective defined by section 29 of the Family Law Act, R.S.O. 1990, c.F.3, which broadens the concept of “spouse” for support obligation purposes to include not only those who are married but also those who not married to each other who nevertheless have cohabited “continuously for a period of not less than three years” or in a relationship of some permanence resulting in the birth of a child, (emphasis added), the term “common-law partner” is expressly defined in section 2 of the BIA as meaning “a person who is cohabiting with the individual in a conjugal relationship, having so cohabited for a period of at least one year”. [Emphasis added.] In the circumstances, it seems clear that, on the applicant’s own factual account of the parties’ relationship, the respondent was her “common-law partner” for purposes of the BIA at the time the applicant was completing her Form 79 “Statement of Affairs”, and that the applicant therefore properly should have included the full name of the respondent when called upon to indicate the “Full name of [her] spouse or common-law partner”. However, whether the applicant may have made a genuine and honest mistake in that regard when completing her Form 79 “Statement of Affairs” as a lay person, (e.g., because she and the respondent had lived together for more than one year but less than three years at that point, according to the applicant), remains open for determination.

16On that point, I note that considerable academic and judicial ink has been devoted to discussion of the nature of trusts created by operation of law, (such as “resulting” trusts and “constructive” trusts), and the time at which beneficial interests owned pursuant to such trusts come into existence in the eyes of the law. Moreover, the answer in relation to the latter question now diverges, depending on whether a court regards the situation as giving rise to a resulting trust or a construction trust. In particular, our courts now generally regard beneficial interests pursuant to resulting trusts as having come into existence immediately when the underlying circumstances giving rise to such a trust occurred; i.e., with such interests being recognized, rather than created, at the time of a court’s later declarations in that regard. Conversely, our courts now regard the beneficial interests pursuant to remedial constructive trusts as having come into existence only as the result of a proprietary remedy granted when the court makes its later declarations in that regard; i.e., such that court declarations of a remedial constructive trust create property rights where none existed before. See, for example, A.H. Oosterhoff and E.E. Gillese, Text, Commentary and Cases on Trusts, Fifth Edition, (Toronto: Carswell – Thomson Professional Publishing, 1998), at pp.285-294 and pp.401-405. In this case, whether the applicant had any existing beneficial interest in the subject property when she was completing her Form 79 “Statement of Affairs” therefore may very well turn on whether a court decides whether to grant a declaration recognizing “implied” or “resulting trust” rights the applicant asserts in this proceeding, (at pp.4-5 of her Form 8 Application herein), or decides instead to grant the remedy of a “constructive trust” for “unjust enrichment”, as simultaneously requested by the applicant, (at pp.4-5 of her Form 8 Application), as an alternative form of relief. Of course, as already noted, (and as emphasized by the respondent), the broad definition of “property” in section 2 of the BIA, for the purposes of that legislation, includes not only existing property rights in real estate, but also “things in action” (a modern translation of the older legal term “choses in action”), and every “personal, legal or equitable” interest in land, including “obligations” and “every description” of “estate” or “interest” in land, whether “present or future, vested or contingent in, arising out of or incident to property”. Even if the applicant’s potential or contemplated claim to an interest in the subject property was one involving a claim for equitable relief, to be advanced in legal proceedings at some future date, and one which only would create applicant rights in the subject property if and when a court decided to grant a remedial constructive trust remedy to address unjust enrichment), it seems clear that such a claim falls within the broad definition of “property” for purposes of the BIA, and therefore should have been included in the “Assets” listed on page 1 of the Form 79 “Statement of Affairs” she completed when making her assignment in bankruptcy. That certainly seems to have been the view of her trustee-in-bankruptcy, when the existence of the applicant’s claim against the respondent was brought to that trustee’s attention. (See the email sent by Colleen Feen to the applicant’s lawyer on Friday, March 18, 2022, at 2:58pm.) On the other hand, whether the applicant may have made a genuine and honest mistake as to whether she had any proprietary interest or asset relating to the subject property when completing her Form 79 “Statement of Affairs” as a lay person, (e.g., based on a lack of understanding of what constituted existing “property” for purposes of the BIA), remains open for determination.

17Having regard to the authorities mentioned above, I think the submission is more properly construed as one suggesting that the court should exercise its equitable jurisdiction to “regularize” the proceeding on a nunc pro tunc basis, notwithstanding the fact the application originally purported to assert rights that had been vested by law in her trustee-in-bankruptcy; i.e., insofar as the trustee-in-bankruptcy seems to lack any authority to effect such a legal regularization unilaterally. As noted above, however, the applicant has not yet formally advanced any request for such relief.

18As noted by the Supreme Court of Canada in R. v. Olan, [1972] 2 S.C.R. 1175, at p.1182, our courts have been loath to attempt anything in the nature of an exhaustive definition of fraud or what it means to “defraud” another, but one may safely say, upon the authorities, that two elements are essential; i.e., dishonesty and deprivation, with the element of “deprivation” being established by proof or detriment, prejudice or risk of prejudice to the economic interests of the intended victim. See also the offence of fraud defined by Parliament in section 380 of the Criminal Code, R.S.C. 1985, c.C-46.

19In D’Alimonte v. Porretta, 2010 ONSC 6139, supra, our Court of Appeal indicated that the motions judge had appropriately recognized the discretionary nature of the court’s jurisdiction in this area; a jurisdiction which the motions judge described as an “overarching legal and equitable jurisdiction to make … orders in bankruptcy and other proceedings to ensure that the purposes of the [BIA] are not thwarted by mere formal irregularities and that the interests of the creditors are protected”. See paragraphs 15, 18-20, and 24 of the Court of Appeal’s decision in that regard. Without taking the time here to reiterate the full text of sections 103(6) and 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, supra, and the full text of Rule 2.1.01(1), Rule 21.01(3)(b), Rule 21.01(3)(d) and Rule 42.02(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, I note that they are all expressed in permissive rather than mandatory terms; i.e., the court “may” grant the formal relief addressed by those provisions, but is not obliged to do so.

[20] This is not the place for any detailed or extended discussion of those principles and their application throughout our legal history. For present purposes, I simply note the following:

• Courts of equity have, from a very early period, decided that even an Act of Parliament shall not be used as an instrument of fraud. In situations where a statute might operate in such a manner, by providing effective assistance to the would-be perpetrator of a fraud, a court of equity will intervene. In some cases, such intervention takes the form of equity stepping in, after initial operation of the legislation in question, (e.g., the Statute of Frauds, R.S.O. 1990, c.S.19, the Succession Law Reform Act, R.S.O. 1990, c.S.26, and their historical antecedents), to fasten or impose a personal obligation on the person who would benefit from the fraud; i.e., because he or she employed or sought to employ the relevant statute as an instrument for accomplishing a fraud. However, there self-evidently is no need to “undo” a fraud that would be perpetrated through operation of a statute if the legislation itself confers a discretion that enables a court to prevent such a result from the outset. See McCormick v. Grogan (1869), L.R. 4 H.L. 82 (U.K.H.L.) at p.97, and Oosterhoff and Gillese, supra, at p.556. Though dating back to antiquity, the principle that equity will not permit a statute to be used as an instrument of fraud has survived into modern times as a “well-established principle”, and is still enforced and employed if and when necessary to prevent injustice. See, for example: Re Goldin, [2003] O.J. No. 2778 (C.A.), at paragraph 35; and Giroux Estate v. Trillium Health Centre, [2005] O.J. No. 724 (C.A.), at paragraph 28. In that regard, I note in particular that, in Re Goldin, supra, our Court of Appeal applied the principle to alter the outcome that might otherwise have resulted from a strict application of the BIA; i.e., in order to prevent unconscionable use of the BIA as an instrument of equitable fraud.
• As Lord Justice Denning put it in Lazaris Estates Ltd. v. Beasley, [1956] 1 Q.B. 702, at p.712: “No court in this land will allow a person to keep an advantage which he has obtained by fraud … Fraud unravels everything.” That too is an equitable principle which still survives, not only in the “land” to which Lord Denning was referring, as emphasized in the recent case of Takhar v. Gracefield Developments Ltd. & Ors, [2019] UKSC 13, but also in Canada. See, for example: Zelezniak v. Senkiw (1983), 2 D.L.R. (4 TH ) 321 (Man.C.A.), which described the maxim “fraud unravels all” as a “well-established equitable rule”; and R. v. Skanes (1988), 220 A.P.R. 248 (Nfld.C.A.), which at paragraph 23 described the maxim as a “firm immutable principle”. See also various decisions of this court recognizing the principle, such as: 885676 Ontario Ltd. (Trustee of) v. Frasmet Holdings Ltd., [1993] O.J. No. 113 (S.C.J.), at paragraph 37; Fiorello v. Krispy Kreme Doughnuts Inc., [2009] O.J. No. 2430 (S.C.J.), at paragraph 108; Caja Paraguaya De Jubilaciones Y Pensiones Del Personal De Itaipu Binacional v. Garcia, 2018 ONSC 5379, at paragraph 434; and Justice for Children and Youth v. Clegg, 2021 ONSC 8515, at paragraph 85.