Zhou v. Zhao et al, 2024 ONSC 6663

COURT FILE NO.: FC-21-119 DATE: 2024/11/29 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

YANG ZHOU Applicant – and – CHEN ZHAO HUANWEI ZHAO YUANHONG CHEN Respondents

Counsel: Angela Daniels, for the Applicant Haiyan Zhang, for the Respondents

HEARD: November 26 and 27, 2024 at Ottawa

Reasons for Decision

AUDET J.

1This trial focussed on the sole issue of the ownership of two real estate properties and a vehicle.

2For the reasons set out below, I find that the Respondents, Yuanhong Chen and Huanwei Zhao, are the sole beneficial owners of all three assets.

Background

3The Applicant Yang Zhou (“Yang”), and the Respondent Chen Zhao (“Chen”) were married on October 29, 2019, in Gatineau, Quebec, where Yang resided with her parents at the time. In accordance with the families’ Chinese traditions, the marriage was arranged by Yang’s and Chen’s parents. Shortly after the marriage, Chen and his parents returned to China to organize a formal wedding ceremony for Yang and Chen in accordance with Chinese traditions. It was agreed that Yang would not cohabit with Chen until the formal wedding ceremony had taken place.

4The plan was for Yang and her family to join Chen’s family in China for the wedding ceremony, however, due to the Covid pandemic, this was made impossible. Chen and his parents returned to Canada in February 2020, and Yang moved in with Chen and his parents on March 1, 2020. The parties separated seven months later, on November 8, 2020.

5This, therefore, was a one-year marriage with a seven-month cohabitation.

6Chen and his parents are Chinese citizens who do not yet have permanent residency or citizenship in Canada. Chen’s parents funded the cost of their son’s attendance at a school in Halifax, where he studied aircraft repair between 2011 and 2015, after which he returned to China. The family arrived in Canada in May 2019. While Chen speaks and understands some basic English, his parents do not speak or understand French or English. They speak Mandarin, which is the language in which all three testified during this trial.

7The Respondent Yuanhong Chen (“Yuanhong”) is Chen’s mother, and the Respondent Huanwei Zhao (“Huanwei”) is Chen’s father. Yuanhong is a retired college teacher and Huanwei, now retired, was a business owner in China. After about 40 years of hard work, they were able to accumulate some wealth which allowed them to plan to settle in Canada for their retirement. In 2019, they sought to purchase a house or a farm in or near Ottawa as their retirement home since they have some lifelong friends who had happily settled here. They also believed that Chen, their only child who was still financially dependent upon them, might find a career in Ottawa more suited to his college education. As such, they transferred a significant portion of their life-time savings in Canadian bank accounts owned by them and their son over the course of several years, first to pay for Chen’s Canadian education, and then to purchase their retirement farm and immigrate here.

8When they arrived in Canada in May 2019, Chen and his parents found out that they could not purchase farmland in Canada unless they were permanent residents or citizens. As a result, they decided to purchase a home instead and, on July 18, 2019, they bought the property located at 248 McGibbon Drive, in Kanata (the “McGibbon property”). The McGibbon property was registered in Chen’s name, but it is not disputed that Chen, who up until that point had always been financially dependant on his parents, did not contribute any money towards the purchase of this property. The entire purchase price, in the amount of $562,266.88, was paid by Chen’s parents, in cash.

9Chen and his parents resided in the McGibbon Property from July 2019 until they left for China in the Fall of 2019 to organize Yang’ and Chen’s formal wedding ceremony. In January 2020, while in China, Yuanhong and Huanwei decided that as a family, they needed a vehicle in Ottawa. Huanwei looked online and set his mind on a Lincoln Navigator SUV. While in China, he transferred the funds necessary to purchase the vehicle to one of Chen’s Canadian bank accounts. On February 29, 2020, shortly after the family’s return to Ottawa, they attended a car dealership and purchased the vehicle they had selected while in China. The vehicle was purchased for $66,137.07, paid in cash. While the Vehicle Purchase Agreement signed on that day listed Chen as the purchaser, and for reasons that will be explained in more detail below, the agreement was amended on the same day to add Yang as a co-purchaser. The vehicle was subsequently registered in the province of Quebec, under Yang’s sole name.

10On or about March 1, 2020, Yang moved in with Chen and his parents in the McGibbon Property. At that time, Chen’s parents began searching for a property closer to Ottawa. On June 15, 2020, they purchased the property located at 1613 Alta Vista Drive, in Ottawa (the “Alta Vista Property”). Although the entire purchase price, in the amount of $694,796.27, was paid by Chen’s parents, Yuanhong, Chen and Yang were registered as joint tenants of the property.

11It is not disputed that Chen’s parents used their own funds as well as money borrowed from relatives to purchase the Alta Vista Property. As Chen’s parents did not have access to their own funds or the funds to be lent by their family members at the time the Purchase and Sale Agreement was signed, which required a downpayment of $20,000, Yang’s father, Mr. Zhou, provided them with the funds necessary to pay the initial downpayment. It is not disputed that the sum of $20,000 was paid back to Yang’s father by Chen’s father three days later, although why this payment was made is disputed.

12Chen, Yang and Chen’s parents moved into the Alta Vista Property around that date, and the McGibbon Property was rented out to tenants.

13Throughout the parties’ relationship, Yang was employed although she earned a very modest income. Because he is not yet a permanent resident, Chen could not engage in remunerated work and as a result, he continued to be completely dependant on his parents financially. It is not disputed that throughout the time that Chen and Yang resided with Chen’s parents, whether in the McGibbon Property or the Alta Vista Property, neither contributed in any way to their carrying costs (including municipal taxes, insurance, utilities, maintenance and repairs) or to the carrying costs of the Lincoln SUV (gas, insurance, maintenance costs and repairs), except perhaps for a handful of times when Yang might have put some gas in it.

14It is not disputed that neither Chen or Yang paid rent to Chen’s parents or contributed in any way to the payment of any of the family’s day-to-day living costs (groceries, household supplies, etc.), except for random small purchases (such as running to the store to purchase a bottle of dish soap, for example). In summary, Chen and Yang lived for free in a home paid for by Chen’s parents, and all their day-to-day expenses were paid for by Chen’s parents.

15Since Yang and Chen separated on November 8, 2020, and to this day, Chen and his parents have remained in the Alta Vista Property. They sold the McGibbon Property at some point in 2022. The Lincoln SUV remained in the possession of Chen and his parents until February 24, 2023, when Yang’s father, accompanied by three other men, attended the Alta Vista Property and removed the vehicle without notice to, or the consent of, Chen and his parents. He subsequently sold the vehicle for $40,000, which he and Yang kept.

Legal Proceedings

16In January 2021, two months after the parties separated, Yang initiated this proceeding seeking (only) the annulment of her marriage to Chen. In response, Chen filed an Answer in which he sought a divorce, spousal support, and the unequal division of the parties’ net family property. After receiving Chen’s Answer, Yang amended her Application and is now seeking the equalization of the parties’ net family property, spousal support, and a restraining order. She withdrew her claim for an annulment of the marriage and has since consented to a divorce.

17Chen’s parents initiated a civil claim against Yang seeking declarations in relation to the Alta Vista Property and the Lincoln SUV, but this civil action was consolidated with this family law application by order of Justice Engelking.

18Chen and his parents take the position that Chen’s parents are the sole beneficial owners of the McGibbon Property, the Alta Vista Property, and the Lincoln SUV by way of a resulting trust. Yang takes the position that she is the rightful owner of the Lincoln SUV because Chen intended to gift the vehicle to her. Similarly, she takes the position that she is the rightful owner of a one third interest in the Alta Vista Property because Chen and his parents intended to gift it to her at the time of its purchase.

19Because the issue of the ownership of these assets will significantly impact the parties’ claims in relation to the equalization of Chen’s and Yang’s net family property, Justice Engelking ordered a focussed trial on this issue.

Legal Framework

20The presumption of resulting trust arises when title to property is in one party's name, but that party, because he or she "is a fiduciary or gave no value for the property", holds the property in trust for the other party and is under an obligation to return the property to the other party (Pecore v. Pecore, 2007 SCC 17 at para. 20). The effect of a resulting trust is that the title to the property reverts back to the beneficiary.

21The presumption of resulting trust is a rebuttable presumption of law and of the general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended. This is so because equity presumes bargains, not gifts (Pecore v. Pecore, 2007 SCC 17, at paras. 24 and 25). This presumption applies to gratuitous transfers between parents and an adult child and between spouses as well, subject to the exceptions set out in s. 14(a) of the Family Law Act in relation to property registered in joint tenancy and money in deposit in joint bank accounts. According to s. 14, the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants. In those cases, the burden to prove that the parties did not intend to be joint owners would be on the spouse claiming a beneficial interest in a greater interest in same.

22The party having the onus of rebutting the presumption of resulting trust must prove on a balance of probabilities based on clear, convincing, and cogent evidence that a gift was intended. To do so, the three elements of a gift must be proven, namely:

• That the transferor intended to gift the property to the transferee;
• That the transferee accepted the gift, and;
• That a sufficient act of transfer to the property occurred to complete the transaction (Falsetto v. Falsetto, 2022 ONSC 3701 at paras 127-128).

Analysis

23Yang has not met her burden to establish, on a balance of probabilities, that a gift was intended in relation to the interest she received in the Alta Vista Property and the Lincoln SUV. Further, the evidence before me convinces me that Chen’s parents never intended to gift their son an interest in the McGibbon Property or in the Lincoln SUV. There were very clear and practical reasons for Chen’s parents to put the title of these assets in Cheng’s or Yang’s names the way they did. It is clear, on the evidence before me, that Chen’s parents never had any intention to gift any of these assets to Chen or to Yang.

24I come to this conclusion based on the following findings of facts.

The McGibbon Property

25It is important to reiterate that Chen and his parents are not Canadian citizens. Before moving to Canada in February 2019, Chen’s parents had never lived here. They do not speak French or English, only Mandarin. They have little to no knowledge of how our legal system works, or how things such as buying a car or a property, obtaining insurance coverage, or getting a valid car registration is done here. For these reasons, they relied heavily on their son, who has a very basic understanding of English, and on the members of the Ottawa Chinese community to guide them and assist them in completing these tasks.

26I accept that Chen’ parents purchased the McGibbon Property with the intent of residing there with their son. I also accept Chen’s parents’ testimony that the reason why they put the title of that property in Chen’s sole name was at the suggestion of their real estate agent (Lucy Hua), because Huanwei and Yuanhong did not speak English and, therefore, could not read the terms of the contract they were signing.

27Chen’s parents did not seek independent legal advice at the time they signed the Purchase and Sale Agreement and I accept that they did not understand the legal consequences that might flow from title being registered in their son’s sole name. Efficiency and practical considerations are what motivated this. However, for all intents and purposes, this home was purchased by Chen’s parents with their own money and for their own use, although it was always their intention that Chen would also reside there with them.

28Although some of the money used to purchase this property came, in part, from bank accounts held in Chen’s name, there is no dispute that whatever money Chen had in his own Canadian bank accounts at the relevant times had been deposited there by his father over a lengthy period of time and in anticipation of the family’s permanent move to Canada. Other than minimum wages that Chen earned in China between 2015 and 2019 before he returned to Canada, it is not disputed that Chen never achieved self-sufficiency and that he continued to be completely dependant financially on his parents (with whom he always resided except when he was studying in Canada).

29In other words, there is no dispute that the funds held in Chen’s Canadian bank accounts which were used by his parents to purchase the McGibbon Property were his parents’ money, not his. Chen and his parents all testified to the fact that Huanwei had control over all these bank accounts (his, his wife’s and his son’s). The reason why Chen’s parents’ money was divided into various Canadian bank accounts in the names of all three family members was to comply with the Chinese government’s restrictions on individual foreign currency purchases.

30I find on the evidence before me that the Respondent’s parents never intended to gift the McGibbon Property to their son when they purchase that home. Chen was an owner in name only, for practical reasons, and he held the property in trust for his parents who are its beneficial owners.

The Lincoln SUV

31I accept the following evidence provided by Chen’s parents in this trial.

32For the same reasons as set out above, namely, Chen’s parents’ inability to speak or read English, Chen was named as the purchaser of the Lincoln SUV on the original Vehicle Purchase Agreement signed at the dealership on February 29, 2020. In addition, Chen had a valid Canadian driver’s licence and therefore could immediately get insured.

33Yang’s father, Mr. Zhou, also attended the dealership with Chen and his parents on that day. While the parties were waiting for the paperwork to get completed, Mr. Zhou suggested that they should have the vehicle insured in Quebec because it was a lot cheaper than in Ontario. He then explained that to be able to get insurance in Quebec, the owner of the car needed to be a Quebec resident. Since Yang at the time was still residing with her parents in Quebec, and was therefore a Quebec resident, Chen’s parents agreed to add her name as a purchaser (along with Chen) on an amended Vehicle Purchase Agreement which was signed shortly after. Yang was not present at that time, and she did not sign the amended Purchase Agreement although she is shown on it as a co-purchaser with Chen.

34When the time came to register the car in the province of Quebec, the parties found out that any registered owner had to be a Quebec resident. As a result, the car was registered in the province of Quebec in Yang’s name only and insured there. Chen’s parents paid for all the costs related to its registration and paid the insurance. At all relevant time, the car insurance was in the names of both Chen and Yang, but the insurance costs were all covered, throughout, by Chen’s parents.

35As stated earlier, the vehicle was used by Chen, Yang and Chen’s parents until the parties separated, but was driven mainly by Chen. When the parties separated in November 2020, the vehicle was left in the possession of Chen and his parents, until Mr. Zhou, with three men in tow, surreptitiously attended their home on February 24, 2023, while the parties were participating in a family Case Management Conference in this matter, and forcefully removed the vehicle.

36I find, based on the evidence before me, that Huanwei and Yuanghong never intended to gift the Lincoln SUV to Chen, or to Yang. Title to this vehicle was placed in their joint names, and then in Yang’s sole name, purely for practical reasons and to obtain the most advantageous price on the car’s insurance.

37I find that Huanwei and Yuanghong are the beneficial owners of the Lincoln SUV.

The Alta Vista Property

38In early 2020, Chen’s parents began discussing purchasing another property closer to Ottawa. They eventually located a home at 1613 Alta Vista, and after attending the home for a visit, made an offer to purchase the property under Yuanhong’s sole name, for $679,000. The offer was accepted by the vendor on March 28, 2020. Chen’s parents did not use their own real estate agent. Instead, they relied on the assistance of Mr. Zhou, who was present with them on that day to assist with communication, and they used the seller’s agent for the preparation of the real estate documents.

39Under the Agreement of Purchase and Sale, Chen’s parents were required to pay a deposit of $20,000.00 by cheque to the Sellers' agent. As they did not have a cheque book, and as the bank had already closed by the time the agreement was received, Chen’s parents asked Yang's father to write a cheque on their behalf, on the promise that the money would be repaid to him shortly thereafter. Mr. Zhou did provide a cheque in the amount of $20,000 on March 28, 2020, which was delivered to the real estate agent on that day to seal the transaction. Chen’s parents repaid the $20,000.00 to Mr. Zhou with a bank draft three days later, on March 30, 2020.

40Mr. Zhou testified during this trial. At para. 53 of his affidavit, he states:

53. Chen's parents did pay me $20,000, but it has nothing to do with the down payment I paid. Chen's parents owed me a lot of the amount I stated earlier which they did not pay yet but promised to pay me later. Their payment of $20,000 covered some of the amount they owed me. Their payment of $20,000 goes towards money they owe me for my time and expenses to drive my SUV Lexus RX350 for them to hunt and visiting over 100 farms in ON and QC. Each visit took me several hours since I had to pick up them in their Kanata house, drive them to the farm and back; it was at least 100- 200 KM each visit. Plus my time, usage my Lexus RX350, and a lots of gas I paid for. The total amount for the costs of me hunting/visiting 100 farms for those 10 months (August 2019- May 2020) including my time, my use of my SUV, my gas is $80,000.

41I accept that Mr. Zhou gave Chen’s parents much assistance when they were settling here in Canada, including by driving them to and from places when they were hunting for a farm and then a home. However, his allegation that the $20,000 repaid by Chen’s parents three days after it was lent was to repay him some $80,000 of expenses related to the use of his vehicle is simply ludicrous. This is simply, and utterly, not credible.

42On June 15, 2020, Chen and his parents attended the bank to obtain a bank draft to cover the entire purchase price, and then they attended their real estate lawyer’s office to sign the closing documents. I accept Huanwei’s evidence that prior to this meeting, the immigration consultant engaged by Yang and Chen to apply for Chen’s permanent residency had suggested that it would be looked on favourably for Chen’s application if he and Yang owned assets together in Canada. He testified that it is for this sole purpose that Chen and Yang were added as joint owners on the title of the Alta Vista Property, along with Yuanhong.

43The real estate lawyer in charge of the closing transaction represented all three joint owners. I accept that Huanwei and Yuanhong were not aware of the consequences that would flow from this decision if Chen and Yang separated.

44The entire purchase price was paid for by Chen’s parents, without any contribution whatsoever by Chen or by Yang (or by Mr. Zhou). Based on the evidence before me, it is clear that Chen’s parents had no intention to gift Yang or Chen a one third ownership interest in this property. They were added to the title simply to enhance Chen’s application for permanent residency, and for no other reason.

45As a result, I conclude that Huanwei and Yuanhong are the beneficial owners of the Alta Vista Property by way of resulting trust.

Order

46It is hereby declared that:

1. The Respondents, Yuanhong Chen and Huanwei Zhao, are the sole beneficial owners of the residential property known municipally as 1613 Alta Vista Drive, Ottawa, ON K1G 0G4.
2. The Respondents, Yuanhong Chen and Huanwei Zhao, are the sole beneficial owners of the residential property known municipally as 248 McGibbon Drive, Kanata, ON K2L 3Y6.
3. The Respondents, Yuanhong Chen and Huanwei Zhao, are the sole beneficial owners of the 2020 Lincoln Nautilus sport utility vehicle.

Costs

47The Respondents, Chen and Chen’s parents, are the successful parties in this matter. If the parties are unable to agree on costs, I will accept written submissions on costs not exceeding five (5) pages, double-spaced, with relevant Offers to Settle and proper Bills of Costs in accordance with the following timelines:

1. The successful parties to serve and file within 15 days.
2. The Applicant to serve and file within 15 days thereafter.
3. Any reply, not exceeding two pages, shall be served, and filed within 5 days thereafter.