Court File and Parties

COURT FILE NO.: CV 22-79398 DATE: 20231016

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Luis Manuel Soares Applicant/Responding Party

AND:

Apolinario Machado Soares Respondent/Moving Party

BEFORE: The Honourable Justice J. Krawchenko

COUNSEL: Marc A. Munro and Daniel Mauer, for the Applicant Kim Ferreira, for the Respondent

HEARD: 11 October 2023

DECISION ON MOTION TO CONVERT TO ACTION AND ON APPLICATION

Introduction

[1] The respondent/moving party seeks to convert this application into an action.

[2] The applicant/responding party opposes this on the basis that there are no material facts in dispute, and further that all the facts required to determine whether the applicant Luis Soares, was the legal and beneficial owner of 205 Ivon Avenue, Hamilton, Ontario (“205 Ivon Ave.”), are uncontroverted. The applicant/responding party seeks a dismissal of the motion and a finding that a trust agreement existed as between the parties and for the release of all funds held in trust from the sale of 205 Ivon Ave.

[3] If the court was to order that the application be converted into an action, both parties seek an order for the partial release of funds held in trust from the sale of 205 Ivon Ave, to each one of them.

[4] For reasons that will follow, this court dismisses the motion and finds that a trust existed and that both applicant and respondent are bound by its terms. The only issue that will need to be determined at a trial of an issue will be the amount(s), if any, to be reimbursed to the respondent/moving party, pursuant to the terms of the trust agreement for expenditures made from the date of the purchase to the date of the sale of 205 Ivon Ave. Accordingly, not all funds may be released to the applicant at this time.

The Issue on the Motion

[5] The sole issue that was to be determined on the motion was whether or not the applications should be converted into an action and proceed to trial.

[6] Pursuant to Rule 38.10(1)(a) and (b) of the Rules, a judge, on the hearing of an application, has the discretion to order that the whole application or any issue proceed to trial and give any directions that are just.

[7] The Factors a Court will consider in deciding whether or not to convert the application to an action were set out in Przysuski v. City Optical Holdings Inc. 2013 ONSC 5709 as follows:

a. Factors for continuing with an application: i. There is no matter in dispute and when the issues to be determined do not go beyond the interpretation of a document; ii. The legislature has stipulated that a proceeding may be brought by application; and iii. There is prima facie right to proceed by application unless there is a good reason to convert it into an action, a good reason includes when a judge who will hear the matter cannot make a proper determination of the issues on the application record.

b. Factors for converting an application: i) The facts in dispute are material to the issues before the court; ii) A judge will not be able to make a proper determination on the application record; iii) The nature conduct entitling a party to punitive damages and the assessment of a punitive damage award, which involves issues of credibility; iv) The issues require expert evidence that is likely to be conflicting on a number of disputed facts; and v) The court needs to make determinations of credibility to resolve material facts in dispute.

[8] In the case at bar, I find that there is no need to convert the entire application to a trial, as only collateral and immaterial issues are in dispute.

[9] The transcripts from cross examinations and the documents put into evidence, provided sufficient clarity to determine the trust issue. However, they were not sufficient to determine what, if anything, was owed to Apolinario pursuant to paragraph 5 of the Trust Agreement for expenses paid by Apolinario, relating to the property from date of purchase to the date of sale. That shall be the subject matter of a trial of an issue.

[10] As was noted earlier, the motion to convert is dismissed. I will now deal with the application based on the record before me.

The Parties and Their History

[11] The applicant (“Luis”) is the son of the respondent (“Apolinario’’).

[12] Luis is the youngest of six children born to Apolinario and his late wife Angelina Sousa (“Angelina”).

[13] After immigrating to Canada from Portugal with his family, Apolinario worked for a short time in construction. He suffered a back injury in 1975, where he has received benefits from Workers Compensation and other social benefits since that time.

[14] Luis has cerebral palsy, he did not finish high school and has been receiving Ontario Disability Support payments (“ODSP”) since he was sixteen years old.

[15] Luis lived with his parents for most of his life, most of which was in housing provided by Halton Community Housing.

[16] In 2006 and 2009, Luis was injured in two separate car accidents. In late 2011 or early 2012, he resolved these claims and received settlement funds of between $130,000 to $140,000.00.

The Purchase of 205 Ivon Ave.

[17] In February 2012, Luis and Apolinario both signed an Agreement of Purchase and sale for the purchase of 205 Ivon Ave with a closing date of 01 March 2012. They retained the law firm of Marcos Associates, in Toronto to assist them with the transaction. They were referred to this firm by family members. This firm provided services in the Portuguese language.

[18] On 29 February 2012, Luis and Apolinario attended at their lawyer’s office to sign closing documents for the purchase. Luis and Apolinario also executed a Trust Agreement at that time. In addition to this, Apolinario and Angelina executed Wills prepared for them.

[19] The purchase closed on 01 March 2012 and Luis, Apolinario and Angelina moved into 205 Ivon Ave.

[20] The source of funds used to purchase 205 Ivon Ave came from the settlement funds received by Luis.

[21] Apolinario made no financial contribution towards this purchase, but was engrossed on title as a joint tenant with Luis. A mortgage was also taken out and Apolinario and Luis were also both chargors on that charge.

[22] The real estate lawyers prepared a reporting letter dated 30 March 2012, which was addressed to both the applicant and respondent, care of that new address. The letter noted the Trust Agreement as one of its enclosures.

The Solicitors File

[23] The application record contained the solicitors file from Marcos Associates.

[24] Contained with the file were the initial solicitor notes, the closing documents, Apolinario’s Will, the Trust Agreement and the real estate reporting letter. [1]

[25] Of great significance in this case, is the note from lawyer, Michel G Bouchard (of Marcos Associates), which set out the following three points relating to the purchase of 205 Ivon Ave. which I reproduce below:

“1) Property to go into joint names of father & son as joint tenants. 2) Father to sign Trust Declaration in which he declares that he hold his interest in the property in trust for his son. 3) Father & mother to do Wills confirming the above and confirming that it is their his intention that the property shall pass to his son by right of survivorship upon his death. (Other terms of Will on H & W will to be determined)” [2]

The Trust Agreement

[26] The terms of the trust agreement signed by both Luis and Apolinario were not complex.

[27] The trust agreement set out the following:

a. Apolinario was the Trustee. b. Luis was the Beneficial Owner. c. The Trustee was registered as the legal owner of 50% interest in 205 Ivon Ave. d. When Ivon Ave. was transferred to Apolinario, he agreed to take title of the property as bare trustee for Luis, on the terms and conditions set out in the agreement. e. The above referenced terms are summarized as follows: I. Apolinario held Ivon Ave. for and on behalf of Luis as nominee and bare trustee. II. Apolinario would not have any active duties to perform with respect to Ivon Ave. III. Luis would at all times remain the beneficial owner of Ivon Ave. IV. On written request from Luis, Apolinario would convey his interest to Luis at which point his duties as Trustee would cease. V. For so long as Apolinario was the Trustee, all obligations, including any mortgage obligations, responsibilities, acts or omission pertaining to Ivon Ave. would either be performed or omitted to be performed by him, as directed by Luis, from time to time, in writing, including the signing of mortgages, instruments and other documents relating to Ivon Ave. VI. “All costs, expenses obligations and liabilities arising in the Property shall be the responsibility of” Luis and further that Luis “exonerates the Trustee from all responsibility with respect to the management, development and use of the Property.” Luis also agreed to “indemnify and save harmless” Apolinario from “ all claims, charges, encumbrances, obligations, responsibilities, acts or omissions, the collections of rents, the payment of taxes, rates and assessments and all incidents arising at all times in the Property”. VII. Luis was liable for the payment of all moneys and the performance of all covenants under any mortgage registered against the Property. Luis was also liable for all obligations, responsibilities, acts and omissions pertaining to the Property during the time that Apolinario was vested with title and Luis would bear all losses. VIII. Luis was permitted to modify or revoke the trust agreement in whole or in part, by instrument singed and delivered to Apolinario. IX. Apolinario was prohibited from encumbering Ivon Ave. without Luis’ consent. X. Luis was “ … entitled to the benefit of all profits and advantages to be derived from the Property”.

The Will

[28] The Will prepared by Marcos Associates for Apolinario, dealt specifically with 205 Ivon Ave. At paragraph 5(b) of the Will, it stated that any interest Apolinario might have had in Ivon Ave., was to be transferred to and be for the absolute use of Luis. It went further to provide for a transfer of that same interest in Ivon Ave. if Luis predeceased Apoliniario wherein the interest would pass to the issue of Luis, surviving him.

Trust Agreement as a Valid Express Trust

[29] It is important to note that the Trust Agreement signed by Luis and Apolinario, satisfied the four requirements as set out in Serbian League of Canada v Mihalo Stojanovich et al. 2020 ONSC 105, that is to say;

a. Luis (the settlor) and Apolinario (the trustee) both had capacity, b. The three certainties existed: intention – as evidenced in part by the lawyer’s notes and the actions taken by the parties; certainty as to subject matter – Ivor Ave.; and, certainty as to the object - which was the preservation of an interest in land given Luis mistaken understanding of the ODSP rules, c. The trust was constituted, and d. The trust was in writing, given that it dealt with an interest in land.

[30] In support of his position, Apolinario advanced a number of arguments regarding the invalidity of the trust. The first argument was that Luis came to court with unclean hands because the purpose of the trust was an attempt to circumvent the ODSP rules. This clean hands argument fails as this was an express, as opposed to a constructive trust scenario. Here, Luis is not seeking an equitable remedy where the doctrine would not apply. Even if it did apply, the record supports that the entire Soares family, including Apolinario wanted to maximize the benefits that Luis could obtain from ODSP and this was beneficial for all of them. It would be odd that Apolinario could then point to this doctrine as a reason to set aside a trust and himself benefit from the consequences of same.

[31] Another argument advanced by Apolinario was that the trust was invalid from the start (void av initio), because he is illiterate, speaks only Portuguese and did not have a consenting mind to enter into the agreement, having been misled by misrepresentation as to the fact that he was a trustee as opposed to an owner. In support of this proposition, Apolinario cited the Supreme Court of Canada decision in Prudential Trust Company Ltd. v Cugnet (1956) Can LII 90 (SCC). In that case, the non est factum plea was reviewed and the court stated that an agreement is not binding on an illiterate person if it is either “falsely read” or “the sense declared differently from the truth”. There is no evidence that this was the case here. The Prudential Trust decision went further to hold that “if the party executes without desiring it to be read, the deed is binding.” The evidence in this case supports the finding that, from the outset, the Soares family had a plan to assist Luis, by using the funds he had received in order to buy a house, where they could continue living together while taking necessary steps to secure it for Luis in the future, through legal means. They sought out a law firm, to complete this purchase, to prepare a trust and wills consistent with same. Further, in order to ensure that they could understand the process and be able to seek clarifications in their native tongue, they retained a law firm that could provide services in the Portuguese language. The solicitor’s notes, referenced earlier in these reasons, clearly set out these objectives.

[32] Apolinario also suggested that Luis repudiated the Trust Agreement through his conduct. The suggested markers of repudiation were that the payments of the mortgage and expenses were not in accord with section 5 and 6 of the trust and that Luis allowed Apolinario to encumber the property contrary to section 7. The final marker or repudiation advanced was that Luis did not mention the trust until a decade later when he insisted on its performance.

[33] Dealing first with the marker relating to the payments of money over time, this will be a matter to be sorted out during the trial of the issue. The parties will have an opportunity to lead evidence as to what if any funds were expended, by whom, and for what purpose. That evidence will determine whether or not Luis must reimburse Apolinario for any overpayments or mistaken payments. In this case there is some confusion about what money was advanced and for what reason, however this confusion does not equate to a repudiation of the trust.

[34] With regards to the encumbrance argument, as was noted earlier, the trust allowed for this to occur with the consent of Luis. Consent was clearly granted as both Luis and Apolinario were both signatories to the charge. This charge was paid out on the closing of the sale and Apolinario was not called upon to pay it from his own pocket.

[35] The final marker of a repudiation argued was that Luis did not raise the trust or its terms for 10 years. This argument presupposes a duty to discuss a trust on a regular basis. There was no authority to suggest that such a duty exists and in this case, it was not necessary to do so as Apolinario knew the trust existed from as far back as 29 February 2012 when he signed the agreement.

[36] The argument of estoppel is without merit as is the unjust enrichment argument. The trust agreement was clear that any increase in value to the asset was for Luis alone, or for his issue (if he was to predecease Apolinario, as per the Will). If Apolinario paid an amount(s) that he ought not to have paid, he will be made whole, after the trial of that issue.

[37] The final head of damages sought by Apolinario was that of punitive damages. There is some irony in seeking such a remedy, as it is really the conduct of the father against the legitimate trust rights of the son, that are troubling. Simply put, a claim for punitive damages is without merit.

Conclusion

[38] For the foregoing reasons, this court declares that the Trust Agreement of 29 February 2012 between Luis and Apolinario, is valid and enforceable. 70% the net proceeds from the sale of 205 Ivon Ave., shall be released from trust and shall be paid to Luis or as he may further direct in writing. The remaining 30% shall remain in trust pending the conclusion of the trial, or pursuant to an agreement of both parties in writing, or by further order of this court.

[39] A trial is ordered to determine what if any money is owed by Luis to Apolinario from the date of purchase to date of sale of 205 Ivon Ave., pursuant to the terms of the Trust Agreement, reviewed above.

[40] Costs of this motion and the application to date, shall be reserved to the trial judge.

Justice J. Krawchenko

Released: 13 October 2023

Footnotes:

[1] It should be noted that the real estate reporting letter was addressed to both Luis and Apolinario, c/o 205 Ivon Ave and noted in the enclosure reference at the end of the letter that a Trust Agreement was attached.

[2] I have made the deletions to the text, as were done in the handwritten solicitor notes.