COURT FILE NO. CV-23-00004477-0000 DATE: 2024 11 06

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

MARILYN BRUNTON Applicant

Ted R. Laan, for the Applicant

- and -

A. J. LANZAROTTA WHOLESALE FRUITS AND VEGETABLES LTD. AND JANET MICHELLE BRUNTON Respondent

Tyler H. McLean, for the Respondent A.J. Lanzarotta Wholesale Fruits and Vegetables Ltd. No one appeared for Janet Brunton

HEARD: July 17, 2024

REASONS FOR JUDGMENT

D.E. Harris J.

1The applicant, Marilyn Brunton, and her late husband, Dr. James Brunton, without any consideration, added Janet Brunton, Marilyn’s daughter from a previous marriage, to the title of three of their properties (the “properties”) in 2016 and 2017. The Parcel Register indicates that each transfer is from Marilyn and James Brunton to themselves and Janet Brunton. The corresponding Land Transfer Tax affidavits state, “Transfer from parents to themselves and their daughter for natural love and affection.” Janet was also added to several bank accounts. Marilyn Brunton is now 77 years old. Dr. Brunton died in 2020.

2In 2023, the respondent A. J. Lanzarotta Wholesale Fruits and Vegetables Ltd. (hereafter “Lanzarotta”) obtained judgment against Janet in the amount of $1,793,732.90. There is a Mareva injunction in place as well. In an uncontested trial, Justice Daley found that Janet and two other defendants had made false representations to Lanzarotta: see the reasons for judgment at 2024 ONSC 1780, 12 C.B.R. (7th) 371. On the basis of these misrepresentations, Lanzarotta forwarded food products on credit to the defendants. The defendants fell into serious arrears and then failed to pay for the food that had been delivered to them. A finding of fraud was made against the defendants, including Janet Brunton.

3Marilyn, in order to protect her assets from Lanzarotta, brings this application for a declaration that the property and the bank accounts are held by Janet in trust or in a resulting trust for her, Marilyn.

4The issues are:

i. Was the transfer of assets to Janet intended to be a gift or was it done to avoid probate fees in the event of the death of Janet and James? If it was a gift, Lanzarotta ought to be permitted to satisfy its judgment against Janet based on the properties. If, on the other hand, a resulting trust was created, no title passed to Janet and Lanzarotta cannot succeed in enforcing its judgment against the properties; and

ii. Does the Parcel Register adding Janet to title lead to the conclusion that she has an ownership interest upon which the respondent Lanzarotta may enforce its judgment?

ISSUE 1: WAS THE TRANSFER A GIFT OR DID IT LEAD TO A RESULTING TRUST?

5Marilyn has filed an affidavit and she also testified on the Lanzarotta fraud action. At the time of the transactions in 2016 and 2017, it seems reasonably clear that James was the moving force behind adding Janet to the properties. In her affidavit filed on this application, Marilyn deposes that at the time of the transfers, she did not direct her mind to the meaning of “natural love and affection” in the land transfer documentation. In fact, she does not recall reading these words in any document. Her understanding was that Janet was put on title so that upon the death of the survivor of her and James, Janet would be in immediate control of the properties.

6The real estate lawyer who conducted all three of the real estate transactions was Maureen Galea. She testified pursuant to discovery Rule 39.03(1) that,

…they wanted to add Janet to title basically because he was getting older and they wanted to make sure that the properties would transfer to Mrs. Brunton when he passed away and also transferred to Janet after Mrs. Brunton passed away, without having to worry about probate. (Emphasis added)

7Ms. Galea testified that she had no notes of her instructions. All she did was transfer title. She testified that she told the Bruntons to get the appropriate tax, accounting and legal advice from their experts. She said this a number of times to Dr. Brunton alone and to both he and Marilyn together. Ms. Galea never had a conversation with them about whether the transfer to Janet was meant to be in trust or whether it was intended that Janet have a full beneficial interest.

8Ed Olkovich was also examined. He was the estates and wills lawyer for the Bruntons. He changed their wills to add Janet as the primary beneficiary for the properties in 2016 before Janet was added as co-owner of the properties. He was not consulted with respect to the real estate transactions adding Janet taken care of by Ms. Galea in 2017. If he had been, it was his evidence that because of the significant dangers of placing a parent’s property into joint ownership with adult children, he would have refused to do so as he has in the past with respect to other clients.

9The nub of the issue is whether adding Janet to title on the real estate properties and to the bank accounts was a gift or created a resulting trust. The leading case is Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795. In Pecore, the Supreme Court held that a transfer of property from a parent to an adult independent child without consideration should lead to a rebuttable presumption of a resulting trust for the benefit of the parent. The onus to prove it was a gift is on the opposing party, in this case Lanzarotta.

10In the final analysis, I agree with the respondent that the determination of this issue depends on findings of fact that can only be made after a mini-trial. There are credibility and reliability assessments that require viva voce evidence from those privy to the transactions adding Janet to the properties and the bank accounts. In an action by Lanzarotta to continue the Mareva injunction, Justice Fowler Byrne came to the same conclusion with respect to this issue: A.J. Lanzarotta Wholesale Fruits & Vegetables Ltd. v. United Farmers, 2022 ONSC 1147 at paras. 72-77. Credibility findings of the importance and nature of those required here can only be made after observing and listening to the testimony of the pertinent witnesses in court.

ISSUE #2: DOES THE LAND TRANSFER REGISTRATION IN JANET’S NAME NECESSARILY RESULT IN HER HAVING A BENEFICIAL INTEREST IN THE REAL ESTATE PROPERTIES?

INTRODUCTION

11The respondent argues that the notations on the land titles system listing Janet as co-owner along with her parents on each of the three properties fix her irrevocably as a co-owner, whatever the intention of the parties or the presumption that applies. Lanzarotta has the right to enforce judgment against the properties. That is the case whether or not adding Janet to the properties constituted a gift or a resulting trust.

12If correct, this argument supersedes the first issue and renders it moot. There would be no reason to have a trial. The intention of the Brunton parents would be irrelevant. For that reason, this issue must be considered preliminary to ordering a trial.

13The respondent relies on Bao v. Mok, 2019 ONSC 915, 4 R.P.R. (6th) 141, for the proposition that the Parcel Register is definitive and renders Janet a beneficial owner. In that case, Bao entered into an Agreement of Purchase and Sale to buy real estate from Kit Yee Mok. The transaction did not close because Kit Yee Mok’s parents claimed that they were the actual beneficial owners of the property and that Kit was merely holding it in a resulting trust for them. After examining the evidence and considering the case law, including Pecore, Charney J. held that the intention of the parents was to gift the property to Kit. She therefore had the legal interest necessary to sell the property to third-party Bao. As stated above, in this case, this is an issue upon which there must be a trial. Any conclusion in this regard must turn on its own facts.

14The important part of the judgment for present purposes is Charney J.’s alternative conclusion. He found that even if Kit received the property as a resulting trust in favour of her parents, the importance of certainty in the land titles system required that as a result of Kit being the registered owner on title, she could deal with the property as she saw fit. Her title was indefeasible.

15Charney J. found that the Ontario Land Titles Act, R.S.O 1990, c. L.5, protected Bao as a bona fide purchaser for value without notice. He cited s. 90 of the Act:

Estate of voluntary transferee of land

90 A transfer of registered land, made without valuable consideration, is subject, so far as the transferee is concerned, to any unregistered estates, rights, interests or equities subject to which the transferor held the same, but otherwise, when registered, in all respects, and in particular as respects any registered dealings on the part of the transferee, has the same effect as a transfer of the same land for valuable consideration.

16Justice Charney then concluded,

137 As I understand this provision, and DiCastri’s explanation, s. 90 means that the Act protects the bona fide purchaser for value, but does not protect the volunteer. Once the volunteer sells the land to a bona fide purchaser for value, the title is indefeasible, and the beneficial owner can enforce the equitable interest only through an action for damages against the volunteer. In the absence of a bona fide purchaser for value, the title remains defeasible, and the beneficial owner can seek to have the title rectified. Indefeasibility of title is for the benefit of those who acquire the interest in land as bona fide purchasers for value in reliance on the register.

138 This means that if Kit were a “volunteer” under s. 90 of the Act, and the transfer of the Marydale property to Kit was made without valuable consideration, with the intention that Hip and Tsang retain beneficial ownership, Kit could be liable to Hip and Tsang for damages for breach of trust. As the registered owner, however, Kit would have the same right to sell the property to a bona fide purchaser for value as any other registered owner. The Land Titles Act protects Mr. Bao because he is a bona fide purchaser for value from the registered owner.

17Lastly, the respondent sums their argument up in this way in their factum:

In addition or in the alternative, this Respondent relies upon paragraph 30 of Lawrence v. Maple Trust Company, 2007 ONCA 74. It is respectfully submitted that parties shall not be permitted, when it is convenient for them to so do, assert an actual ownership interest that is contrary to that registered on title. This would put our Ministry of Transportation records in jeopardy. This would put the records of our chartered banks in jeopardy. This is putting the veracity of our land titles records into disrepute. This would cause chaos to our legal system [citing Lawrence]

CONCLUSION

18I do not agree with the respondent’s doomsday argument that the sky will fall if the land titles registration indicating that Janet was a co-owner does not necessarily allow Lanzarotta to succeed and enforce its judgment against Janet’s ownership interest in the properties. In my view, Bao and other similar cases relied upon by the respondent are distinguishable. The key feature which separates this situation from those is that this is not a conveyancing case in which there is a bona fide purchaser for value without notice. This puts it outside the stringency of the land titles system, the purpose of which is to safeguard the integrity of the conveyancing process. In Durrani v. Augier (2000), 50 O.R. (3d) 353 (Ont. S.C.) at paras. 41-42, Epstein J. summarized the purpose of the land titles system:

41The essential purpose of land titles legislation is to provide the public with security of title and facility of transfer: Di Castri, Registration of Title to Land, vol. 2 looseleaf (Toronto: Carswell, 1987) at p. 17-32. The notion of title registration establishes title by setting up a register and guaranteeing that a person named as the owner has perfect title, subject only to registered encumbrances and enumerated statutory exceptions.

42The philosophy of a land titles system embodies three principles, namely, the mirror principle, where the register is a perfect mirror of the state of title; the curtain principle, which holds that a purchaser need not investigate the history of past dealings with the land, or search behind the title as depicted on the register; and the insurance principle, where the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy. These principles form the doctrine of indefeasibility of title and [are] the essence of the land titles system. ...

19The policy justification behind the land titles system allows for exceptions, namely for fraud: Lawrence v. Wright, 2007 ONCA 74, 84 O.R. (3d) 94. It is not without significance that in Lawrence, the Court of Appeal opted for a position of deferred indefeasibility as opposed to the absolutist position of immediate indefeasibility. Immediate indefeasibility ensures that the register must prevail in all circumstances. Its authority is absolute. Deferred indefeasibility is much more flexible. As Justice Gillese explained,

57 Further and most importantly, in my view, deferred indefeasibility is also preferable for policy reasons. Under the theory of immediate indefeasibility, the innocent homeowner has no defence to a mortgagee’s action for possession. The homeowner is exposed to the loss of her home through eviction with the only available remedy being to make a claim for loss of value of the property from the Fund. The idea that a person who buys a specific parcel of land with a specific house on it should be compensated in damages runs contrary to the notion that real property, in such circumstances, is not fungible. To see a lender compensated in damages does not offend that same notion.

20The policy of deferred indefeasibility tolls against the respondent’s strict position that the land titles registry must necessarily govern land ownership. Another indication demonstrating why the respondent’s strict position ought not to be followed is that there has been no actual or potential loss to Lanzarotta. The third and last principle articulated by Epstein J. embodying the philosophy behind the land titles system – the insurance policy compensating for loss and guaranteeing the accuracy of the system – cannot apply to a fact situation like that in this case. The respondent is simply pursuing assets held by Janet to enforce their judgment and has not relied upon the registry to their detriment.

21The respondent relied heavily in support of its position on a case examined in Bao, Gully v. Gully, 2018 BCSC 1590, 15 B.C.L.R. (6th) 424. Charney J. in Bao relied on Gully as demonstrating his alternate conclusion that the bona fide purchaser ought to be protected by the land titles legislation. In that case, Ms. Gully transferred a half interest to her adult son for estate planning purposes. When the son consented to a judgment against him without knowing of the interest he had acquired, the creditor registered the judgment on title. Ms. Gully argued that her son held the half interest by way of resulting trust for her. Justice Baker disagreed on the facts and found the transfer to be a gift. But for our purposes, Justice Baker’s alternate conclusion as quoted and approved of by Charney J. (paras 143-144 of Bao), is of central importance here:

19 …The operation of the registration of indefeasible title in our title system requires certainty. If third parties could be affected by unregistered interests, that would throw chaos into all systems which rely on certainty of title, including the operation of our lending systems.

20 Ms. Gully submitted that she did not intend to gift the Burnaby Property to her son. I have found that she did intend to gift the Burnaby property to her son; however, even if I accepted that she did not intend the gift to her son at the time she registered [her son’s] interest, this argument may have some bearing on a dispute between the family members, but by virtue of the Land Title Act it has no bearing on the interests of third parties such as [the creditor].

24 Ms. Gully took a risk in registering her son as a joint tenant on her property. Whether she was properly advised of that risk is not before me. However, once she made the decision to register an interest in the Burnaby Property in [her son’s] name, third party creditors of [her son] became entitled to register judgments against [her son’s] interest in the Burnaby property. (Emphasis added)

22The facts of the Gully case are identical to the case at hand but occur in the context of the different legislative regime in British Columbia. Gully deals, as the case at hand does, with a third-party creditor. The legislative scheme which accounts for the alternative result in Gully was in large part a result of s. 23(2) of the Land Title Act, R.S.B.C. 1996, c. 250, a provision unlike any in the Ontario legislation: see Gully at paras. 14-18. It appears on its face to be unequivocal. The provision states:

S. 23(2): An indefeasible title, as long as it remains in force and uncancelled, is conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title. . (Emphasis added)

23For a brief discussion of the implications of the lack of such a provision in Ontario, see Bao at para. 57. There is no provision in Ontario declaring the registry to be conclusive evidence of ownership.

24More importantly, the British Columbia Court of Appeal has specifically disavowed the alternate ratio of Gully in Chichak v. Chichak, 2021 BCCA 286, 51 B.C.L.R. (6th) 82, as it applies to a third-party creditor like Lanzarotta. In Chichak, the contest was also between a third-party creditor and a debtor. The issue was who was entitled to surplus funds after a foreclosure sale of property was taken against Derek Chichak. The litigation was a contest between Mr. Chichak’s wife, who was argued to hold a one half unregistered beneficial interest, and two judgment creditors of Mr. Chichak’s, Cardero Capital and First West Credit Union, whose judgments were registered against title to the property.

25The judge at first instance found that the principle of indefeasible title, and the statutory presumption of indefeasibility found in s. 23(2) of the Act, was not subject to the common law principle that a judgment creditor’s interest can be no greater than the debtor’s interest. The judge relied on Gully for this proposition. Ms. Chichak appealed the order, saying that a judgment creditor can take no more than the interest of the judgment debtor, a principle referred to as nemo dat quod non habet.

26The appeal judgment considers the interest of a third-party creditor against the title on the register. The Court was careful to make a distinction between a land titles transaction and a third party attempting to enforce a judgment as is the case here:

7… [the trial judge] applied instead Gully v. Gully, 2018 BCSC 1590. In Gully, a one-half interest in property was transferred by the owner into the name of her son. Unaware of the transfer, the son consented to judgment in favour of a creditor, who then registered a certificate of judgment on title. The judge in Gully first found that the transfer was a gift, thereby negating the transferor’s claim to a beneficial interest in the son’s legal share, and second, found that the registered judgment would prevail in any event.

15 In my respectful view, the judge misapplied the Land Title Act by effectively equating a judgment creditor, a person who seeks to collect on a judgment in likely unrelated litigation, to the position of a person who has relied on the register in acquiring their indefeasible interest in the land. This would allow a judgment creditor to obtain greater recovery from the land than even the judgment debtor could derive. This result could be legislated, no doubt. However, in my view, it has not; the current legislation does not reach this far. The result, in my view, is contrary to decided authority presented to us but, it appears, not to the judge of first instance. (Emphasis added)

27Later on in the judgment, the Court of Appeal explicitly overruled the second alternate aspect of Gully relied upon by the judge at first instance and by the respondent here:

23 Cardero Capital and First West Credit Union contend that the approach in Gully applies. … I consider Gully is correctly decided on the basis the transfer was a gift, that is, the transferor did not retain a beneficial interest in the property she transferred to her son. I do not agree, however, that the character of the judgment creditor as a third-party non-family member bears on the priority given by registration of a judgment. Distinguishing the application of statutory provisions by reference to such unlegislated personal characteristics, in my view, is arbitrary and sets the jurisprudence adrift from the legislated scheme.

26 In her reasons for judgment, the judge echoed concerns expressed in Gully commenting on the potential mischief that may be created by subordinating a registered judgment debt to an unregistered beneficial interest, allowing baseless claims to frustrate judgment creditors. It seems to me this potential has long existed, and has not materialized. Nor is there, in a case of a valid resulting trust (an issue yet to be resolved in this case), an inherent unfairness in the result. One may ask why a beneficiary’s interest should be seized by a judgment creditor to satisfy the trustee’s debt. This question is particularly germane, remembering that a judgment creditor generally has not acquired an interest in the property in reliance on the state of title, but rather holds an unsatisfied judgment obtained in other court proceedings.

(Emphasis added)

28The point to be taken from Chichak is that land registry indefeasibility does not pertain to third-party creditors like Lanzarotta outside of the context of a real estate transaction. Following this authority, Lanzarotta did not acquire a property interest in reliance on the registry and stands in an inferior position. The purpose of the registry to regulate and ensure consistency in real estate matters between buyers and sellers is not germane to third parties in the position of Lanzarotta.

29The respondent also argues that proprietary estoppel disentitles the applicant Marilyn Brunton to a vesting order. It relies on this passage from Madi v. King, 2023 ONCA 443:

25 The leading case governing proprietary estoppel is the Supreme Court’s decision in Cowper-Smith v. Morgan. That decision, which was not a family law case, set out the following test, at para. 15:

An equity arises when (1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over the property; (2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and (3) the claimant suffers detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word. [Citations omitted.]

30The respondent asserts that the representation in this situation was the land titles registration listing Janet as a co-owner. According to the respondent, under the second step of the test, the detrimental reliance placed on this representation occurred “when [Lanzarotta] elect[ed] its litigation strategy which was wholly reasonable in the circumstances.” This refers to the respondent’s claim in this application that the registry noting Janet as co-owner ought to be conclusive of the issue.

31This argument must be rejected. The detrimental reliance referred to in Madi must be transactional in nature, not something to do with the means selected to enforce a judgment against a third party. This is plain when inputting the values for step 3 of the test. Following the course required by that step, the claimant, Lanzarotta, must have suffered detriment from its choice of litigation strategy, “such that it would be unfair or unjust for Marilyn Brunton to go back on her word.” By this reasoning, Lanzarotta’s detrimental reliance on its choice of litigation strategy would dictate the result, an obviously untenable proposition.

32In fact, there was no pertinent detrimental reliance by the respondent in this instance. It was searching for Janet’s assets and found the three properties registered in her name. The land titles legislation does not necessitate that Janet, listed as co-owner, is in law a co-owner. Paraphrasing the guidance from Madi, the equity does not favour the respondent but rather the applicant.

33In the result, I dismiss the respondent’s argument premised on the indefeasibility of the Land Titles system. Therefore, it is necessary to hold a trial to resolve the issue of whether the transfer to Janet was a gift or created a resulting trust. Arrangements should be made with the court administration for a Zoom call before me for the purposes of scheduling the trial.