Giangrande v. Giangrande, 2025 ONSC 1714

COURT FILE NO.: CV-15-180 (Owen Sound)
DATE: 2025-03-17
ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:
JOHN CHARLES GIANGRANDE
Applicant

-and-

DIANE GIANGRANDE and DUNDALK POULTRY PROCESSING
Respondent

Appearances:
E. Treslan, for the Applicant
G. Bent, for the Respondent

Heard: June 12, 13, 14, and 19, 2024, with written submissions received June 26, July 15, and July 31, 2024.

Table of Contents

• Background
• The Farm
• The Giangrandes
• The Insurance Payments
• Issues
• Cross Application
• Issue #1: Was there an agreement to direct the funds from the insurance action to reconstruction?
• Issue #2: What were the terms of the agreement, and did they change when John acquired ownership?
• Issue #3: Were the agreements unconscionable?
• Issue #4: Was there an unjust enrichment?
• Disposition

Background

The Farm

[1] At issue in this application is how to divide $406,000 that has been paid into court. These funds are the net proceeds of a lawsuit over a fire insurance claim. The applicant son and respondent mother each claim entitlement to the full amount.

[2] For many years, the mother and her late husband operated a poultry processing plant (slaughterhouse) on their farm near Dundalk. The son was raised on the farm and assisted with the operation of the plant. He moved away at age 23 or 24 and began another career. He did continue to assist his parents with deliveries and sales at the market, but only occasionally on his days off. In 2009, the father was injured in a fall and his health declined. He stopped being active in the business and the mother took over the full reins operating the business.

[3] In February 2012, the plant was destroyed by fire. The fire insurance policy limits were grossly inadequate. The mother and son wanted to rebuild and hoped that a lawsuit against the insurance broker would succeed and would fund the reconstruction. The mother mortgaged the land, and the son and his wife mortgaged their house and cottage to rebuild. Unfortunately, the parties did not make a written agreement about: (1) funding the reconstruction project; (2) what ownership the son would have in the completed project; or (3) how the insurance proceeds would be applied.

[4] With immense effort and at immense risk, the parties rebuilt the plant. They began operating the plant in December 2013. Sadly, the business quickly failed because they were not able to sell the finished birds. The plant’s former customers had found other suppliers. The parties’ relationship soured.

[5] The parties were able to sell the plant. Just before the sale closed in May 2015, the parties agreed how to divide the sale proceeds. However, the agreement specifically excluded how the proceeds of the insurance settlement would be divided. The insurance lawsuit settled in 2022, and the net insurance settlement is now in dispute.

The Farm

[6] The farm consisted of three adjacent lots. The west lot was 100 acres. The centre lot was also 100 acres. The east lot was 76 acres. The centre lot contained the house (at the southwest corner) and the poultry processing plant (centred at the south end). In these reasons, when I refer to “the farm,” I mean all three lots.

The Giangrandes

[7] Because the parties share the same surname, I will refer to the parties using their first names. The applicant son is John, and the respondent mother is Diane. John’s wife is also Diane, so to distinguish between the two Dianes, I will refer to the respondent mother as Diane Sr. and the son’s wife as Diane Jr.

[8] Diane Sr.’s husband and John’s father was Carmen. Diane Sr. and Carmen also had a daughter, John’s older sister, named Lora.

[9] Carmen and Diane Sr. owned the plant and the farm. When Carmen died in 2013, his interests in the land, the plant, and the cause of action in the insurance action went to Diane Sr. In these reasons, for simplicity, I will sometimes leave Carmen’s name out when I mention things that he and Diane Sr. did or owned together.

[10] When I refer to “the parties,” I am referring only to John and Diane Sr. Again, for simplicity, I sometimes ignore Diane Jr.’s joint actions or joint ownership with John.

The Insurance Payments

[11] According to the proof of loss (exhibit 16), the policy limit on the building was $324,000 and the contents limit was $16,240. The insurer paid the total policy limits ($340,240) shortly after the fire. Going forward, I use the phrase “policy limits” to describe this payment.

[12] As indicated, the limits were grossly inadequate. The lawsuit focussed on a claim of broker negligence. I use the phrase “insurance proceeds” to refer to the anticipated net settlement proceeds of the lawsuit. I use the phrase “insurance settlement” to refer to the actual net settlement proceeds of the lawsuit (approximately $406,000).

Issues

[13] The issues are:

• Issue #1: Did the parties agree to direct the insurance proceeds to reconstruction?
• Issue #2: If so, what were the terms of the agreement, and did the terms change when John acquired ownership?
• Issue #3: Was the agreement unconscionable?
• Issue #4: Was there an unjust enrichment?

Cross Application

[14] Diane Sr. brought a cross application against John. She seeks the opposite declaration that John seeks (para. 1(a)). A request for relief regarding burial plots (para. 1(b)) was resolved by the judgment of Gibson J. dated July 28, 2016. Diane Sr. also seeks an accounting (para. 1(c)). Presumably this request was satisfied through the disclosure/discovery process. The claim for an accounting was not pursued at trial. I dismiss the claim for an accounting but if there are any costs issues arising from that claim, the parties may address them in their costs submissions. At the start of the trial, I was advised that the parties agree that the claims in para. 1(d) through (h) are to be dismissed without costs.

Issue #1: Was there an agreement to direct the funds from the insurance action to reconstruction?

The parties agreed to rebuild

[15] Diane Sr. was 74 when the plant burned to the ground on February 14, 2012. She nevertheless wanted to rebuild and restart the operation. John was 52. He testified that he and Diane Jr. decided they were going to help his mother rebuild. They committed to rebuilding and going after the insurance claim. John researched and found an insurance lawyer, Donald Crabbe. He made an appointment for his mother to meet with Mr. Crabbe on March 5, 2012. John testified that he and Diane Jr. met with Diane Sr. the day before that meeting. He and Diane Jr. agreed that they would assist with financing by putting lines of credit on their home and cottage. His mother and father had savings, but Diane Sr. did not want to use those savings.

In March 2012, the parties agreed to apply the insurance proceeds action towards reconstruction

[16] John testified that they had an “absolute agreement” that the insurance proceeds would be used to pay for the reconstruction. He said that he and Diane Jr. wanted to be in charge of the insurance lawsuit and the reconstruction. He said his mother agreed that she would take out a loan on the farm to start the reconstruction.

[17] At the meeting with Mr. Crabbe on March 5, 2012, the parties received advice that the claim was strong. Mr. Crabbe advised that the claim would be even stronger if they rebuilt. John said they agreed that the way they would attack the lawsuit was to rebuild, which Diane Sr. wanted to do.

[18] I accept this testimony. I can infer that the claim against the insurance broker would likely be limited to the actual cash value of the plant if they did not rebuild; however, if they did rebuild, they could argue that the insurance broker ought to have provided them with replacement cost coverage, which would have completely covered the reconstruction costs. This approach had increased risk because once she committed to reconstruction, Diane Sr. accepted not only the risk that the lawsuit might not succeed, but also the risks surrounding reconstruction, including the potential that they would be unable to adequately fund reconstruction.

[19] In cross-examination, Diane Sr. did not dispute that the parties understood and agreed that the insurance proceeds would be directed towards the reconstruction costs. Her position was that this agreement changed when John later received the shares of a corporation created to own the plant.

[20] In her written argument, Diane Sr. submits that through a course of dishonest and predatory conduct towards his mother, John acquired 100% ownership of the plant and 50% ownership of the farm. Her position is that the debt and risk followed the benefit of ownership. She says John is trying to claim “that his entire personal debt incurred to build his plant … is to be fully repaid from his mother’s personal recovery of the insurance proceeds.”

Issue #2: What were the terms of the agreement, and did they change when John acquired ownership?

[21] To understand the arrangements between the parties, it is necessary to review in detail the construction and financing of the project.

[22] In his written submission, at para. 2, John phrases the agreement as follows:

1. John, Diane Jr. and Diane Sr. would combine resources with the mutual aim of rebuilding the plant; and
2. The proceeds of the insurance action would be used to defray the costs of rebuilding the plant.

[23] In contrast, Diane Sr. says John was initially merely a lender to the project. She submits, at para. 41 of her written submissions, that:

On an objective basis, the obvious implicit understanding was that any money lent by non-owners, such as John, would be reimbursed if it became necessary from Insurance Proceeds. Nothing else makes objective sense [emphasis added].

John was never merely a lender

[24] I do not agree that it was implicit from the parties’ dealings in 2012 that John would merely be a lender. At the outset of the project, both sides knew that John and Diane Jr. would be contributing capital. Both sides knew that John would be the driving force behind the reconstruction. Both sides must have expected that John would have an ownership interest in the plant after the reconstruction was finished.

[25] Diane Sr.’s submission fails to address what interest rate John ought to have expected as a lender. Presumably she would say John should be reimbursed for the interest he paid on the lines of credit that he and Diane Jr. obtained. But is that it? It makes no sense that John and Diane Jr. would expend as much effort as they did, and that they would mortgage their home and cottage, if they were to receive no benefit.

[26] I therefore reject Diane Sr.’s submission that at the outset of the project John was to be merely a lender.

Before starting reconstruction, the parties did not adequately discuss eventual ownership of the plant

[27] In his cross-examination, John said that he made it clear to his mother at the outset, and she agreed from the outset, that he and Diane Jr. would only be involved if he had full ownership of the plant when it was finished, and that their personal investment in it would be protected. He adopted a statement from a transcript of his discovery testimony to the effect that his mother agreed and was excited knowing that the business she and Carmen had built would live on with the next generation. He said it was agreed that he would own the business as well as the land.

[28] John was closely cross-examined on this point. He acknowledged that he has no documentation to support that there was such a discussion. The cross-examination questions implied that it made no sense that Diane Sr. would simply give him the plant, the land under the plant, and all the insurance proceeds. All Diane Sr. received, in exchange, was the potential, at age 74, to continue working in a chicken slaughterhouse.

[29] The problem with Diane Sr.’s position, however, is that it makes even less sense that John would merely be a lender. He put a line of credit against his house and his cottage and later personally guaranteed his mother’s mortgage on the farm. Diane Jr. withdrew from her RRSPs to help fund the project. John and Diane Jr. devoted an immense amount of time to the reconstruction project, and they risked financial ruin.

[30] Diane Sr. testified that there were no discussions about any change in ownership of the plant in March of 2012. She acknowledged that after the fire happened, she wanted the plant to be rebuilt. John was enthusiastic about rebuilding. Diane Sr.’s perspective was infused with goodwill towards John at that point and likely included an element of “donative intent” (desire to give a gift or an advance on an inheritance). I find that Diane Sr. wanted John’s help rebuilding and that she knew John would be investing in the rebuild. Had she given any thought to it, she would have agreed it was only rational that John should have an ownership stake in the plant.

[31] I am not persuaded, however, that at the outset of the project there was a meeting of the minds that John would become the sole owner of the plant and the centre lot. I conclude that Diane Sr. had simply not fully addressed this question (among many others) in her mind at the time. I reject John’s evidence that there was, at the beginning, an agreement that he would become full owner of the plant. As I will explain below, this evidence is inconsistent with the parties’ later actions.

[32] I do not need to resolve what precisely was said between the parties. I find that the implicit understanding was that John would own a substantial share of the plant, but I think it unlikely that there was any clear discussion at that point about what share John would own.

In March 2013, Diane Sr. agreed John should receive 51% ownership of DPI

[33] Diane Sr. and Carmen had always operated the poultry plant as an unincorporated business called Dundalk Poultry Processors (DPP). Diane Sr. said that “they” (being John and an unspecified person or persons – perhaps Carmen, perhaps Diane Jr., or perhaps one of the involved lawyers) were always discussing incorporating to shield the family from personal liability. Diane Sr. said that in the spring of 2013, she was advised to go to a lawyer’s office (Mr. Stabile’s office) to sign some papers. She was not told in advance what it was about. It turned out to be documents to create Dundalk Poultry Inc. (DPI). John told her he had to own more than 50% because he did not want to risk putting more money into the plant without controlling ownership. She accepted that John should own 51% of the shares. Therefore, on March 8, 2013, she signed resolutions issuing 51 shares to John and 49 shares to her.

[34] There was clearly an understanding that DPI was to own the plant but precisely how this was to be achieved without DPI also owning the land was not addressed initially. DPI later opened a bank account and payments for the reconstruction project started to primarily come out of the DPI account (as opposed to the DPP account) in December 2013 (according to exhibit 10). (As I will explain, by December 2013 John jointly owned a 50% share of the farm (all three lots).)

[35] In cross-examination, Diane Sr. acknowledged that John started to put money into the reconstruction around the spring of 2013. This is confirmed in exhibit 10, which shows that the first financial contribution towards construction expenses from John’s line of credit was on March 5, 2013. The nearly concurrent timing of the share transaction and the first payment towards reconstruction expenses transaction from John’s line of credit supports John’s position that he was not prepared to make a financial contribution without being an owner. However, it is significant that John took only 51% of the shares. This is inconsistent with his position that the parties agreed from the outset that he would receive full ownership of the plant and the land under the plant.

[36] John claimed that he did not understand that shareholding represented ownership of the corporation. John testified that he thought the profit sharing would be 51:49, but that he would be the 100% owner. He said he later came to understand that the shareholding arrangement meant his mother could sell or give 49% of the corporation to someone else, and his concern was that his mother would give the shares to his sister.

[37] I do not accept John’s evidence on this point. First, holding 51% of the shares means control and makes perfect sense for someone in John’s circumstance. Profit sharing on a 51:49 basis, as opposed to equal profit sharing, would be odd. In addition, there is no evidence of follow through regarding the supposed 51:49 profit sharing arrangement. There was nothing in writing at all about that, and no evidence of any actions consistent with that.

[38] Second, while I accept that John was initially naïve about the risk and effort that would be involved in the reconstruction project, I do not accept that he was so uninformed that he would fail to understand the basic concept of ownership through shareholding.

In June 2013, Diane Sr. agreed John should receive 100% ownership of DPI

[39] Diane Sr. testified that in June 2013, John told her they had to go sign some more papers at Mr. Stabile’s office, without indicating anything more than that. She said that she and John met alone in a room at Mr. Stabile’s office and John told her he had to own 100% or he would not put more money into the plant. She felt she did not have a choice but to agree to this because she had agreed to the large mortgage, and she thought she might lose everything. The insurance money wasn’t coming fast enough. On June 25, 2013, Diane Sr. signed the document transferring the remaining shares to John (exhibit 38).

[40] In examination in chief, John testified that he and his wife were putting in a lot of work into the reconstruction project throughout 2013. They were learning more about the magnitude of what was required for this project, which included multiple approvals from various authorities, and planning and oversight of the project. He testified that his mother accepted that the corporation was his and it wouldn’t go to anyone else, given that he and Diane Jr. were the ones that were creating the value in the plant, and they had invested everything they had in it. They were doing all the work.

[41] In cross-examination, John said that his concern was that his mother would give the shares to his sister. His sister had put none of the money or risk into the reconstruction. He spoke with his mother and told her, “We can’t have this,” and they agreed that the corporation would be 100% his, and she provided him with her 49 shares.

[42] John was closely cross-examined about an email he sent to Mr. Stabile on June 25, 2013. John wrote, “I'm wondering when the change in ownership of Dundalk Poultry Corporation papers will be ready. Our bank will only lend us more cash if I am sole owner of the business.” (As an aside, I note here that John said nothing in this email to indicate this change was necessary because he had conflated or misunderstood profit-sharing versus shareholding.) In his cross-examination, Mr. Bent suggested to John that this made no sense, and that the bank would not have cared who owned the corporation. In written argument, Mr. Bent argues that John’s evidence on this point was false, and that there is no documentation supporting this position. He further argues that it was incumbent upon John to call a bank representative to support this proposition, and an adverse inference should be drawn from his failure to call anyone from CIBC to support this.

[43] I do not accept this argument. It was open to Diane Sr. to call the CIBC loans manager to refute this point, and there is no basis to assume a bank representative would be more likely to support John over Diane Sr. in this proceeding. John explained in cross-examination that his mother attended all or most of the meetings he had with the loans manager. This was not challenged in cross-examination or refuted in Diane Sr.’s testimony. He said there were 40 to 50 meetings between the spring and fall of 2013. He said that the bank relied on the business plan and the possibility of the insurance money. He said it was in these meetings that the loans manager suggested that John required more stake, and this was said in front of Diane Sr. I do not find it implausible that the bank would have concerns about succession risks. Diane Sr. has not established that John’s assertion in this regard was false. Regardless, Diane Sr. agreed to transfer her remaining shares in DPI to John.

[44] On July 9, 2013, John Ferris, a lawyer who had acted for Diane Sr. and Carmen in other matters, wrote to Mr. Stabile. He noted that Diane Sr. did not have independent legal advice regarding the incorporation of DPI or the share transfer. However, he said that Diane Sr., “does not really have any objection to what has transpired, although she did not totally understand it nor why it was being done.” Mr. Ferris asked Mr. Stabile to confirm that Diane Sr. had not signed any documents regarding the transfer of the farm.

In October 2013, Diane Sr. agreed John should receive 50% of the farm

[45] At that point, Diane Sr. did maintain sole ownership of the farm – the land upon which the plant was built. During his cross-examination, John said, “I don’t how you can own a business and not own the land under it.” This is a valid point, but at that time John owned 100% of the shares in DPI but not the land on which the plant was being built by DPI.

[46] John and Diane Sr. tried to address this by dividing the land up so that John would own the land under the plant. At this point, Diane Sr. was being assisted by Mr. Ferris. He solely represented Diane Sr. in respect of the intended transfer of the land. John and Diane Sr. continued to work cooperatively at that time. They retained a consultant to assist them to try and sever a one-acre parcel under the house from the centre lot. An invoice from this consultant (exhibit 40) covers work from July 1, 2013 to September 30, 2013, suggesting that the consultant got to work on this immediately after John acquired 100% ownership of DPI on June 25, 2013.

[47] In an email dated September 13, 2013 (exhibit 40), Mr. Ferris told John that his mother agreed with the property being divided as John suggested. The centre lot (minus a one-acre parcel containing the house) would be transferred to John solely and the mortgage registered on that property. His mother would retain the house and the west lot. However, ultimately, CIBC would not agree to this transaction because it wanted to maintain its security over the entire farm.

[48] While the parties explored severing the centre lot, they continued to seek additional financing from CIBC. The many meetings with the CIBC loans manager resulted in additional financing from CIBC, received in October 2013 in the net amount of $235,000 (according to John’s testimony) or $243,418.40 according to the reporting letter of the lawyer who assisted with the transaction (see page 6 of exhibit 41). As part of this transaction, Diane Sr. transferred 50% ownership of the farm (all three lots) to John, as a tenant in common.

[49] Diane Sr.’s amended cross application sought a declaration that these transfers were void “by reason of having been induced by the fraudulent and false misrepresentations of John.” She also sought consequential relief transferring the properties back to her, as well as damages. As indicated above, at the start of the trial, the parties advised me these claims were to be dismissed without costs, on consent.

[50] The fact that John owned 100% of DPI and but did not fully own the land under the plant left him vulnerable in the event of a breakdown in the relationship with his mother or her estate. Regardless, this development tends to confirm that, contrary to John’s evidence, the question of ownership was not thought through at the outset of the reconstruction project. On the other hand, the transaction confirms that Diane Sr. agreed, after receiving legal advice, to John owning 100% of the shares and 50% of the farm. With her continued 50% ownership of the land, Diane Sr. left herself a very large lever in future negotiations. There is no adequate basis to conclude that the transactions that had occurred were inappropriately induced by John or unconscionable. Diane Sr.’s submission that John’s conduct towards his mother was dishonest and predatory is not justified. Furthermore, there is no evidence that Diane Sr. suggested any change in who should recover the insurance proceeds, given the new ownership structure. She ought to have raised this issue at that time if she felt she was now entitled to the full insurance proceeds. She did not do so. And she was represented by counsel at the time.

[51] The additional funding received from CIBC went into the DPI account and payments for the reconstruction project started to primarily come out of the DPI account (as opposed to the DPP account) in December 2013.

Diane Sr. prepared a new will

[52] Although I do not have direct evidence on this point, I infer that:

• the change in share holdings of DPI,
• the change in ownership of the farm,
• Carmen’s death on June 6, 2013; and
• Diane Sr.’s consultations with Mr. Ferris after Carmen’s death and leading up to the October 2013 refinancing,

caused Diane Sr. to focus on the equity, as between her two children, of her financial arrangements. Diane Sr.’s desire to treat her children equitably is apparent from the wills that had been prepared for her and Carmen before Carmen’s death. Diane Sr. testified that under these wills, all their money would go to the survivor between them, and on the death of them both, the money would be divided equally between John and Lora.

[53] Diane Sr. said she made a new will (exhibit 22) on the same day she signed over a 50% interest in the farm to John. (However, she did not sign it until December 2015.) Under the new will, Diane Sr.’s estate goes to Lora. Diane Sr. told John about this the day after she had signed the paperwork giving 50% of the farm to John. John testified that he was “in shock” when he was told this, because he did not think that all the work he had done was “predicated” on his inheritance. He felt he would have been better off doing nothing and sitting back to receive his inheritance in due course.

[54] John’s reaction was not justified. Having given 50% of the farm to John, it makes sense that Diane Sr. would change her will to make her daughter her sole beneficiary. Otherwise, Lora likely would not have received an equitable share of her estate. It is true that John’s efforts were directed at growing value, but if at some point a severance could be achieved, his efforts would grow the value of “his” plant and his land, and Lora would not benefit from this. In addition, Diane Sr.’s capital played a major role in the project. Like John, she also took a major risk. It was not unreasonable for Diane Sr. to think that equity demanded her other child should benefit from the investment and risk that she took.

Plant Opens and Closes

[55] On December 5, 2013, the plant began operation. Construction of the plant was not yet fully complete, but the building was in a state that permitted production to begin.

[56] Unfortunately, the sales were not adequate to support the operation. The business’s former customers had found other suppliers. The last day of operation at the plant was on March 5, 2014. By that point, the parties had 35,000 birds that had been processed and frozen. There was no room to store more frozen birds.

In May 2014, Diane Sr. again agreed that the insurance proceeds would be applied to reconstruction costs

[57] Creditors of the reconstruction remained unpaid. The parties hoped to find a buyer for the newly built plant and worked towards that goal. John tried to assuage the concerns of creditors by maintaining communication with them. One creditor was Jeffrey Mundle. He registered a lien against the property on March 26, 2014.

[58] To assuage creditors, John created a document called “Agreement to Direct Settlement Money from Current Insurance Lawsuit.” On May 17, 2014, John and Diane Sr. signed this document. Mr. Mundle witnessed the document, although it was not for his benefit because he got paid that day from DPI’s available funds. He happened to be present repairing a boiler leak when the document was signed. The document indicates that the insurance proceeds “will initially pay off all lines of credit, loans, mortgages and outstanding costs incurred from the construction costs of the current structure known as Dundalk Poultry Inc.” The agreement goes on to state, “All lawsuit settlement money that exceeds these building costs will be disbursed under agreement between Diane Giangrande and John Giangrande.” John submits that this document does nothing more than confirm the arrangement he and his mother had agreed to in March of 2012 when they decided to rebuild and to proceed with the insurance lawsuit.

[59] The document does not assist John in his position that his mother had agreed he would own 100% of the plant and that he would also receive all the insurance proceeds. If that were the case, there would be no need to state how any excess funds would be disbursed. At the same time, the document does not assist Diane Sr. in her position that the changes in ownership of DPI and the farm meant the insurance proceeds were now rightfully hers alone. Diane Sr. signed the agreement and did not say, for instance, that things had changed, or that the document was not correct.

Sale of the Plant

[60] Both parties tried to find a buyer for the plant. The eventual buyer provided a draft APS to John’s lawyer in the transaction, and John’s lawyer sent it to Diane Sr.’s lawyer under cover of a letter dated December 5, 2014. That letter (exhibit 47) explains that the buyer offered $3.7M for the plant and the centre lot. (Again, this lot included the house.) In the letter, John’s lawyer tells Diane Sr.’s lawyer that John believes the offer was fair. The letter sets out liabilities totalling $2.245M related to the construction, operation, and sale of the plant. It sets out John’s position on the insurance claim by referring to the May 17, 2014 document and saying, “the proceeds of the settlement are to be directed towards the payment of liabilities associated with the construction of the new facility, with any excess to be divided as agreed by the parties.” I treat this statement, and the offers the parties exchanged during the negotiations leading up to the sale as “without prejudice offers of compromise” made in an effort to resolve their issues.

[61] On January 30, 2015, the parties concluded the APS with the buyer (exhibit 27). Under the terms of the agreement, the sale price was $3.7M and there was a $1.6M vendor takeback (VTB) mortgage. John and Diane Sr. signed the agreement on January 28 and January 30, 2015 respectively. Before signing the APS, John and Diane Sr. did not conclude an agreement on how the proceeds from the sale would be divided.

[62] After the late-January agreement, there was a change in the deal such that the VTB mortgage changed from a first mortgage to a second mortgage. This change required Diane Sr.’s consent. I infer from the evidence that she did not give her consent to this, prior to closing. I also infer that this change, and perhaps other negotiations, delayed the closing. However, the sale was set to close in late May 2015.

[63] In the lead up to closing, John understood that outstanding creditors would be paid from the sale proceeds and the parties would then negotiate how the remaining proceeds of sale would be divided. However, on the day of closing Diane Sr. demanded $800,000 of the proceeds and wanted nothing to do with the VTB mortgage. John says he was “forced to concede to [Diane Sr.’s] demands, failing which the transaction would have failed.” I am quoting here from the reporting letter John’s lawyer sent him after the transaction (exhibit 43), but in his testimony at trial, John used similar language to describe the circumstances. I will return to this point about John being “forced” to concede to Diane Sr.’s demands.

[64] The agreement the parties reached is set out in substance in exhibit 47, although the fully executed agreement is not in evidence. The parties agreed that Diane Sr. would receive $800,000 from the sale proceeds. John would receive the VTB mortgage for his sole benefit and at his sole risk. John’s lines of credit did not get fully paid off. Diane Sr. agreed to sign a release (exhibit 29). The parties also agreed, “The issues of the ownership of the remaining 176 acres, and the sharing of the insurance litigation claim will be resolved later” [emphasis added].

[65] In the release Diane Sr. signed, she released John from claims she may have had for losses “by me sustained in relation to the Agreement of Purchase and Sale dated January 30, 2015 … for the sale of lands and the corporation, Dundalk Poultry Inc. …” [sic]. This release does not bar Diane Sr. from claiming entitlement to the insurance proceeds.

The Purchaser Defaulted

[66] In total, John received monthly interest payments under the VTB mortgage of $294,201.16. He received no payments from the vendor after 2020. In 2021, he did receive a net amount of $154,570.18 on the power of sale.

Continued Prosecution of the Insurance Action

[67] After the sale, the insurance lawsuit continued. Diane Sr. needed Diane Jr.’s help with it. In April 2018, Diane Jr. attended further examinations for discovery regarding the damages claimed. The lawsuit ultimately settled in 2022. The parties agreed that the insurance settlement would be paid into court, subject to Mr. Crabbe’s fees and Diane Sr.’s expenses being paid from these proceeds.

Diane Sr. has no legal basis to say the agreement regarding the insurance proceeds changed when John acquired the shares and 50% of the farm

[68] The foregoing discussion about the evolution of ownership of the shares of DPI and of the three lots is important because Diane Sr. says that the change in ownership changed who should get the insurance proceeds. She testified in cross-examination that initially, the insurance proceeds were going to be used to rebuild, but then things changed when John got the shares of DPI. She submitted in her written argument that “it was the changed fact of ownership that made the intention no longer applicable.”

[69] I do not agree with Diane Sr. that the change in ownership of the shares of DPI entitled her to redirect how the insurance money could be used. It was not open to Diane Sr. to change her position on how the insurance money would be used when John became the 100% owner of DPI. As I already mentioned, Diane Sr. admitted in cross-examination that when the shares went to John, she did not say to John that this changed who got the insurance money.

[70] John could not be assured that the insurance action would be successful. In that sense, he could not rely on receiving the money. However, in his assessment of the overall risk he faced by mortgaging his house and his cottage and devoting an immense amount of time to the reconstruction project, John was entitled to rely on the agreement he had with his mother that the insurance proceeds would be applied to the construction costs.

The implicit understanding was that the insurance proceeds would be divided in proportion to the parties’ respective financial contributions to the reconstruction costs

[71] It is instructive to consider what the parties would have said if they had been asked at the outset about the possibility they might change their minds regarding reconstruction. For instance, during the early phase of construction, most of the larger expenditures were paid out of the DPP account. That is, they were paid out of an account owned by Diane Sr. What if something happened, before John made any significant financial contribution to the reconstruction costs, that made the parties decide reconstruction was not viable and that they should stop? No one could reasonably suggest that, in that event, the insurance proceeds would be paid to John under the agreement parties had reached. The only reasonable outcome in such a scenario would be that Diane Sr. would recover the insurance proceeds.

[72] Recall that it was not until March 8, 2013 that John made the first payment towards construction costs from his lines of credit. Before that, the project was funded entirely or primarily from the insurance policy limits (Diane Sr.’s money) and a $500,000 mortgage obtained in December 2012 and secured against the farm (Diane Sr.’s farm). I estimate from exhibit 10 that, by March 8, 2013, roughly $675,000 had been paid towards reconstruction expenses from the DPP bank account. Yet on March 8, 2013, John acquired 51% ownership of DPP. Virtually none of his money had been used at that point to fund reconstruction. What if something happened on March 9, 2013 to make the project non-viable and the parties stopped construction? Again, no one could reasonably suggest John should be entitled to all of the insurance proceeds, even though he owned 51% of DPI.

[73] On June 25, 2013, John acquired 100% ownership of the plant. From my analysis of exhibit 10, I estimate that, at that point, the total amount spent on the reconstruction project was roughly $990,000. About $723,000 of this amount came from Diane Sr.’s sources and $267,000 came from John’s line of credit. Again, no one could reasonably suggest John should then be entitled to 100% of the insurance proceeds if reconstruction stopped at that point. Similarly, no one could suggest that Diane Sr. would be entitled to 100% of the insurance proceeds.

[74] Terms may be implied in a contract “based on the presumed intention of the parties where the implied term must be necessary ‘to give business efficacy to a contract or as otherwise meeting the ‘officious bystander’ test as a term which the parties would say, if questioned, that they had obviously assumed’”: M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., para 27. An implied term that the insurance proceeds should be divided in proportion to the parties’ respective financial contributions to the project meets the “officious bystander” test described in Shirlaw v. Southern Foundries (1926) Ltd., [1939] 2 K.B. 206, at p. 227, [1939] 2 All E.R. 113, at p. 124 (C.A.), as modernized in Attorney General of Belize v. Belize Telecom Ltd., [2009] UKPC 10, [2009] 2 All E.R. 1127.

[75] I am aware that courts cannot “embark on a reconstruction of [the parties’] agreement on equitable principles”: Brixham Investments Ltd. v. Hansink, [1971] 2 O.R. 589, 18 D.L.R. (3d) 533, citing Luxor (Eastbourne), Ltd. v. Cooper, [1941] A.C. 108, at p. 137. Courts do not imply terms simply on the grounds of “fairness”: J.W. Neyers, Fridman’s The Law of Contract in Canada, 7th ed. (Toronto: Thomson Reuters, 2024), at §14.9. Discerning the parties’ intentions is appropriate; making the parties’ contract for them is not. However, “[i]mplication of a contractual term does not require a finding that a party actually thought about a term or expressly agreed to it. Often terms are implied to fill gaps to which the parties did not turn their minds”: Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514, para 35.

[76] Applying these concepts to the circumstances here, I conclude that the parties must have intended that the insurance proceeds should be divided in proportion to the parties’ respective financial contributions to the project.

[77] This approach also respects the agreement the parties reached regarding the sale proceeds. John has said he had “no choice” but to accept his mother’s demand for $800,000 in cash, leaving him primarily with the VTB mortgage that turned out to have little value. I reject John’s position in this regard. He did not have to accept his mother’s position. He agreed to it. Yes, his mother had leverage in the negotiations because her consent was required to subordinate the VTB to a second mortgage, and because she jointly owned 50% of the land, but John agreed to it. John has not suggested that Diane Sr. must be forced to disgorge the $800,000 she received, or that the agreement the parties reached just before closing is unenforceable. If it had transpired that the purchaser had fully paid the $1.6M VTB mortgage, John would have done very well under the agreement. He would have been rewarded for his risk. But it was a risk he accepted. He cannot now avoid the consequences of taking that risk by complaining, as he does in his written submission, that his mother is “ahead” because she received the $800,000 and he is “behind” because he did not recover everything he invested.

[78] John would no doubt argue that his contribution to reconstruction went far beyond his financial contributions, because of the extent of effort he and Diane Jr. put into the project. While I agree that John and Diane Jr. were the driving forces behind the reconstruction project and the insurance lawsuit, there is no room to credit John for his time and effort. He did not have an agreement with this mother that he would be compensated for his time and effort, and the circumstances do not meet the requirements set out in M.J.B. Enterprises Ltd., at para. 27, for finding an implied term to this effect.

[79] With this resolved, I will now determine the parties’ respective financial contributions to the reconstruction project.

The Parties’ Respective Contributions to Reconstruction

[80] Trial exhibit 31 lists the amounts paid towards reconstruction (including the financing costs associated with reconstruction) and the source of the funds. This exhibit summarizes a spreadsheet created for the insurance lawsuit (exhibit 10). Exhibits 31 and 10 were not the focus of much testimony at trial. The amounts were not seriously disputed. The total reconstruction and financing costs were about $2,036,000.

[81] However, Diane Jr. prepared exhibit 10 to show the total reconstruction cost, not to show the original sources of funding. More specifically, the spreadsheet and summary do not show who provided the “funding” for “capitalization” of the reconstruction.

[82] The evidence I do have about the parties’ respective financial contributions is as follows.

DPP account

[83] This is the original bank account used by Diane Sr. and Carmen for many years when they operated the business. I do not know the balance in it at the time of the fire, but I do know from exhibit 10 that certain early reconstruction expenses were withdrawn from it, such as a demolition permit and a building permit. I cannot determine the precise amount, but I can infer that the cash in this account at the time of the fire was likely the source of a relatively small amount of reconstruction funding. As this was Diane Sr.’s money, this must be considered a financial contribution by her towards reconstruction. However, the amount is unknown.

The Insurance Policy Limits

[84] The parties agree that the $340,240 policy limits that Diane Sr. received from the insurer was used towards funding reconstruction. As it was Diane Sr.’s policy and she had paid the premiums on it, this must be considered a financial contribution by her towards reconstruction.

The Mortgage

[85] With John’s and Diane Jr.’s help, Diane Sr. obtained a $500,000 mortgage (mentioned in para. [72] above). This mortgage was advanced by CIBC in December 2012 and was secured by the farm. I do not recall any evidence that John signed as a guarantor on this loan. Regardless, the primary security for this mortgage was Diane Sr.’s farm, and it must be considered a financial contribution by her towards reconstruction.

John and Diane Jr.’s lines of credit on their home and cottage

[86] I explained above that John and Diane Jr. took out a line of credit on their home and cottage. The amounts of these lines of credit were $480,000 and $240,000 respectively. Approximately these full amounts were used to fund reconstruction (subject to the $170,000 amount discussed below). These amounts must be considered a financial contribution by John towards reconstruction.

Transfer of $170,000 from DPP to John’s Line of Credit

[87] John acknowledged in cross examination that on December 19, 2012, the parties arranged to transfer $170,103.66 from the DPP account to his line of credit. This reduced his line of credit balance. To that point, the balance on his line of credit arose from personal expenses not related to reconstruction. The reason for transferring the money was that the $500,000 mortgage loan was incurring interest, and the interest could not be avoided. John and Diane Jr.’s line of credit was also incurring interest but by paying it down, that interest could be avoided. The $170,000 transfer would have the effect of reducing the overall interest paid by the parties.

[88] This transfer is important for two reasons. First, it shows how at that point the parties seemed to be pooling resources towards the reconstruction. Second, it suggests that $170,000 of the $480,000 in credit available to John was used towards things other than the reconstruction project.

Diane Jr.’s RRSP

[89] John testified that he and Diane Jr. took $62,288 out of Diane Jr.’s RRSPs (see exhibit 23) which, after withholding tax, yielded $43,036.18 (see exhibit 32). These funds were deposited into the DPI bank account and used towards funding reconstruction. The $43,000 amount must be considered a financial contribution by John towards reconstruction. The withholding tax muddies the waters slightly. The after-tax amount should be considered John’s contribution, but Diane Jr. faced a tax penalty that arguably could be considered part of the cost of financing the project. At the same time, she likely would have had to pay tax on that amount someday.

The Second Financing from CIBC

[90] The second round of financing from CIBC, received by DPI in October 2013 and in the approximate net amount of $240,000, was secured by the farm. As Mr. Bent pointed out in his cross-examination of John, the only additional security the bank received was the personal guarantee of John, as he had now signed on as a guarantor for the CIBC financing. The farm was already secured under the $500,000 mortgage.

[91] Regardless, at the point where this additional financing was provided, John was the 100% owner of DPI and John and Diane Sr. each owned 50% of the farm. The parties deserve roughly equal credit for this amount when considering the financial contributions each party made towards reconstruction.

Credit Cards and Other Sources

[92] John testified that he and Diane Jr. had maxed out their Mastercard. The credit they had from their credit cards and the interest payments could perhaps be considered contributions towards the reconstruction costs. The problem is that the evidence on the amounts is limited. Exhibits 10 and 31 show that $37,237 of reconstruction expenses were charged to the Mastercard. More were charged to the DPI Visa, and $500 was paid by Interac (presumably from one of John and Diane Jr.’s accounts). However, what I do not know is whether the credit card bills were ultimately paid from another source of funding, such as from one of the lines of credit or the DPI account. I note that the listing at page 3 of exhibit 47 does not mention credit card debt among the debts owing on account of the reconstruction. However, I do accept that John and Diane Jr.’s credit cards were likely a source of some amount of reconstruction funding.

Vehicle Purchase

[93] John and Diane Jr. used $40,587 from the $100,000 deposit on the 2015 sale to purchase a vehicle. This is irrelevant in that it was not a contribution towards reconstruction, but rather was part of the sale proceeds of the plant.

Rent

[94] The purchaser of the plant paid $5,000 per month in rent for five months prior to closing, and John received this amount. Again, this is irrelevant in that it was part of the 2015 sale proceeds and not part of the reconstruction costs.

Conclusion on Financial Contributions to Reconstruction

[95] Tallying the numbers from the foregoing analysis, the respective contributions of the parties to reconstruction are as follows:

Source	Diane Sr	John	Joint	Total
Insurance policy limits	340,000
Loan / mortgage against farm	500,000
Line of credit against John's house		480,000
Less amount used for John and Diane Jr.'s personal expenses		-170,000
Line of credit against John's cottage		240,000
Further loan against land and plant			240,000
From Diane Jr's RRSP		43,000
Totals	840,000	593,000	240,000	1,673,000
Credit each with half of joint contribution	120,000	120,000
Total Contribution of Each Party	960,000	713,000
Percentage Contribution of Each Party	57%	43%

[96] As is apparent from the discussion above, on the available evidence it is not possible to be precise in this analysis. As further proof of the imprecision involved in this exercise, the total contributions I have identified in the evidence is $1,673,000, whereas exhibits 10 and 31 identify the total reconstruction costs to be $2,036,000, a discrepancy of $363,000.

[97] As Diane Sr. maintained from the outset that she did not want to use her money towards the reconstruction project, and based on the evidence as a whole, it is fair to infer that the source of that unaccounted for $357,000 is likely primarily John rather than Diane Sr.

[98] In light of the uncertainties and imprecision involved in this exercise, it is appropriate to conclude that each party contributed a roughly equal amount of capital to the reconstruction project. For that reason, the insurance settlement should be divided equally.

Issue #3: Were the agreements unconscionable?

[99] Diane Sr. submitted that if there was an oral agreement in March 2012 that John would own 100% of the plant and the property under it, and as well he would be entitled to all the insurance proceeds, this would be unconscionable. I have found that the agreement was that the insurance proceeds would be directed towards the reconstruction costs. I do not understand Diane Sr. to argue that this would be unconscionable.

[100] Diane Sr. also submits that the May 17, 2014 agreement is unenforceable because it is unconscionable. She says that at the time, “John owned 100% of the plant and business, Diane Sr. was paying all legal costs for the insurance action herself, and Diane Sr. was fearful [of the potential actions of creditors].”

[101] I do not accept this submission. First, the agreement does not provide that 100% of the insurance proceeds go to John. It specifically indicates that if the insurance proceeds exceed the building costs, the excess “will be disbursed under agreement between [John and Diane Sr.]” As there was no agreement at that point on how the insurance proceeds would be divided, I take this to mean that John and Diane Sr. still had to agree on this. Because the agreement does not address allocation of the insurance proceeds between the parties, there can be nothing improvident or unfair about the agreement.

[102] At the time of this agreement:

• John owned 100% of the shares of DPI.
• John and Diane Sr. each owned 50% of the land under the plant.
• The business had failed.
• The plant was shut down.
• The parties were actively trying to sell the plant.
• The parties were trying to assuage the concerns of their creditors.
• Both parties had creditors that needed to be paid and faced economic ruin if they could not achieve favourable terms in a sale of the plant.
• The parties had each contributed to the construction costs.

[103] Applying the factors listed in Uber Technologies Inc. v. Heller, 2020 SCC 16, paras 54-85:

• I do accept that Diane Sr. was a vulnerable person; however, she was not unduly disadvantaged by the agreement.
• I do not accept that there was an inequality of bargaining power. Diane Sr. owned a 50% interest in the land under the plant and had to consent to the sale. She negotiated a favourable resolution in the agreement she reached with John just prior to the closing of the sale. Also, at the time, both parties were in weak positions vis a vis their creditors.
• Both parties were capable of understanding what the contract meant. (Although the language does contain ambiguities. For example, it is not fully clear if the word “structure” refers to the building that was built or the structure/composition of the business, i.e., a corporation versus the prior unincorporated business.)
• Diane Sr. was able to adequately protect her interests.

[104] I therefore do not accept that the May 17, 2014 agreement is unconscionable.

Issue #4: Was there an unjust enrichment?

[105] John submitted that the reconstruction project “constituted a joint family venture (‘JFV’) and that an equitable accounting of the JFV requires that the full proceeds of the Insurance Action be paid to John.”

[106] “Joint family venture” is not a cause of action on its own. Rather, evidence of a joint family venture may be considered when a court determines if it should grant a remedy for unjust enrichment. If the court characterizes a relationship, or the parties’ actions or conduct during a relationship, as a joint family venture, upon dissolution of the relationship the parties can claim a share of the wealth they jointly created during the relationship. The party making the claim must still establish the elements of unjust enrichment, which are:

1. An enrichment of the defendant by the plaintiff;
2. A corresponding deprivation of the plaintiff; and
3. The absence of a juristic reason for the enrichment.

[107] In this case, John would have to establish that Diane Sr. would be enriched if she receives the insurance settlement. Corresponding deprivation would naturally follow in the facts of this case. John would also have to show that there is no juristic reason for the enrichment.

[108] While the focus is on the insurance settlement, one must examine the whole relationship between the parties to assess the elements of unjust enrichment. It would be wrong to consider only the insurance settlement as the enrichment because that would not reflect the full picture of the parties’ relationship. In addition, in this case, it is necessary to consider whether any of the agreements between the parties are a juristic reason for the enrichment. It is also necessary to consider whether there was any donative intent on the part of Diane Sr. at various points since the fire.

[109] The agreement the parties reached on May 28, 2015 interferes with any unjust enrichment claim. The agreement resolved most of the issues between the parties. Although it did not resolve who should receive the insurance proceeds, the agreement is a juristic reason that explains why Diane Sr. received $800,000 and John received the VTB. Diane Sr. can easily point to the possibility that John stood to recover $1.6M under the VTB mortgage and he accepted the risk associated with it. Had the purchaser succeeded and paid the mortgage, John could not claim Diane Sr. was unjustly enriched, or that he suffered a corresponding deprivation. He would have been “ahead,” and Diane Sr. would have been “behind.”

[110] I therefore do not accept John’s claim based on joint family venture.

Disposition

[111] An order shall issue as follows.

1. This court declares that John and Diane Sr. share an equal interest in the insurance settlement.
2. This court orders that: a) Subject to the resolution or adjudication of the claims for costs, the funds being held by the accountant of the Ontario Superior Court of Justice shall be divided and paid out in equal shares to John and Diane Sr. b) The claims in paragraph 1(a) and (c) of the amended cross application are dismissed. c) On consent, the claims in paragraphs 1(d) through (h) of the amended cross application are dismissed without costs. d) If the parties cannot resolve the issue of costs, they may file written submissions on costs, consisting of not more than two pages, plus bills of costs or costs outlines, offers to settle, dockets, or other supporting documents. John’s submissions shall be delivered by April 7, 2025. Diane Sr.’s submissions shall be delivered by April 25, 2025. No reply without leave.

R. Chown