Reasons for Decision

Introduction

This case is about a condominium unit (the “Property”) owned by Mr. Qasem Mahmud, who died in June 2017 without a will. The main issue is whether Mr. Mahmud held the Property in trust for one of the Respondents, the Arabic and Islamic Education Foundation of Ottawa (“Foundation”).

The matter proceeded by way of Application. The Applicant, Otessa May, filed an affidavit in her capacity as Estate Trustee for the Estate of Qasem Mahmud and was cross-examined. The Respondents provided evidence from two affiants, Taysir Alsousi (a personal respondent and member of the Board of the Foundation) and Monzer Zimmo. Each was cross-examined.

For the reasons that follow, the Application is allowed. There is neither an express trust nor a purchase money resulting trust in favour of the Foundation. Therefore, the Foundation does not have a beneficial interest in the Property.

Overview

On September 14, 1988, Mr. Mahmud signed a declaration of trust, which states:

I QASEM H. MAHMUD, hereby declare that I will be holding in my name the condominium unit described as Suite 201, 3730 Richmond Road, Nepean, Ontario K2H 5B9, on behalf of the Islamic School of Ottawa.

The parties agree that Mr. Mahmud was not the legal owner of the Property when he signed the declaration of trust. He purchased the Property for $109,161 about two weeks later, on October 3, 1988. The agreement of purchase and sale was not in evidence. The deed indicates that the Property was transferred to Qasem Mahmud “in trust,” but without any reference to the Foundation or its predecessor, the Islamic School of Ottawa (“School”).

At no point did Mr. Mahmud sign a new declaration of trust or transfer the title of the Property to the Foundation or its predecessor, the School.

When he purchased the Property in 1988, Mr. Mahmud took out a mortgage. The mortgage was renewed in 1993 and fully discharged in 2007. As I describe in more detail below, there is a dispute between the parties as to who paid the mortgage.

In 2007, the Islamic School of Ottawa changed its name to the Arabic and Islamic Education Foundation of Ottawa. Other than COVID-related interruptions, the Respondents state that the organization’s activities and operations continued as before and were not affected by the name change. The Applicant disagrees. She submits that there is no evidence the Foundation continues to operate a school.

Mr. Mahmud died in June 2017. The Respondents have continued to occupy the Property since that time. Mr. Alsousi testified that one of Mr. Mahmud’s children “walked in and decided to put the place [up] for sale.” In September 2017, Mr. Alsousi changed the locks on the door of the Property.

Issues

The Application raises the following issues:

1. Is there an express inter vivos trust in favour of the Foundation?
2. In the alternative, is there a purchase money resulting trust in favour of the Foundation?
3. Are the Respondents precluded from relying on equitable remedies because they do not have clean hands?

Neither party made arguments based on unjust enrichment.

Is there an Express Inter Vivos Trust?

Four requirements must be satisfied before a court will find an express trust:

1. The parties must have capacity;
2. Three certainties must be satisfied, namely: certainty of intention to create a trust, certainty of the subject matter of the trust, and certainty of the object or persons intended to be the beneficiaries;
3. The trust must be constituted; and
4. The requisite formalities must be met.

See Rubner v. Bistricer, 2019 ONCA 733, para 49.

The Applicant submits that the trust fails on three fronts. First, the conditions for the construction of a trust were not met because Mr. Mahmud did not own the Property when he signed the declaration of trust. Second, because the School ceased to exist in 2007, there is no certainty as to the object or beneficiary of the trust. Third, the requisite formalities were not met at s. 9 of the Statute of Frauds, RSO 1990, c S.19 (the “Act”).

The other aspects of the tests are not in dispute.

Because the written declaration of trust was signed before Mr. Mahmud had ownership of the Property, he was not legally enabled to declare a trust in September 1988, when he signed the declaration. As the Court of Appeal explained in Rubner, supra, at para. 58:

Any type of property can be the subject-matter of a trust, save for "future property", that is, property that the settlor does not yet own.

The Respondents submit that Mr. Mahmud, as a layperson, simply signed the declaration of trust when he was asked to do so by the bank. He would not have known it would be insufficient to create a trust. Over the years, Mr. Mahmud continued to sign and receive documents referring to the Property as being “in trust.” The Respondents state that, through these documents, Mr. Mahmud effectively declared himself to be a trustee.

In support of this position, the Respondents referred to documents including:

• A mortgage renewal agreement dated October 5, 1993 and signed by Mr. Mahmud. The signature line refers to “Qasem Mahmud In Trust;”
• A tax reminder notice dated April 2019, which the City of Ottawa sent to Mr. Mahmud, in trust;
• Tax bills and tax reminders from the City of Ottawa in 2001, 2007, 2017 and 2018, addressed to Mr. Mahmud, in trust; and
• A letter from the Ontario Property Assessment Corporation, dated August 1999 and addressed to Mr. Mahmud, in trust.

The Respondents rely on Elliott Estate (Re), para 39, where the court held that a trust may be constituted through a declaration of self as trustee and that it is not necessary to use technical or legal terms to do so. It is sufficient that the individual or organization demonstrate the intention to become a trustee.

Importantly, a self-declaration alone is not sufficient to establish an express trust. As the court also explained in Elliott, supra, all of the other requirements of an express trust must be met: see para. 42.

The important factual distinction between Elliott, supra, and the present case is that this matter involves land. As a result, the formality requirements in the Act are engaged. Section 9 of the Act requires that all declarations of trust of lands be proved by a writing signed by the party who is by law enabled to declare such trust.

I have considered the documents referred to by the Respondents, many of which contain the words “in trust” or “trust.” At least one of these documents is signed by Mr. Mahmud, who appears to identify himself as a trustee.

While these documents may be evidence of Mr. Mahmud’s (undisputed) intention to hold the Property in trust, they do not otherwise meet the requirements for establishing an express trust. This is because they do not identify the beneficiary and they provide no certainty that the Foundation or School is the object of the trust. Moreover, while many of the documents refer to the Property, they do not clearly identify it as the subject of the trust.

In sum, the requirements for establishing an express trust have not been met. There is no valid written declaration of trust. While certain documents suggest that Mr. Mahmud intended to hold the Property in trust, those documents do not satisfy the three certainties or otherwise meet the test for establishing a trust.

Is there a Purchase Money Resulting Trust in Favour of the Foundation?

The Respondents’ alternative argument is that there is a resulting trust in favour of the Foundation, based on its financial contributions to the purchase of the Property.

A purchase money trust is a type of gratuitous transfer resulting trust, which arises when a person advances funds to contribute to the purchase price of the property, but does not take legal title to that property. As the Supreme Court explained in Nishi v. Rascal Trucking Ltd., 2013 SCC 33, para 1:

Where the person advancing the funds is unrelated to the person taking title, the law presumes that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution. This is called the presumption of resulting trust.

This presumption can be rebutted if the recipient of the property proves, on a balance of probabilities, that the person making the contribution (in this case, the Foundation) intended to make a gift to the person taking title (in this case, Mr. Mahmud). The relevant time for ascertaining intention is the time of the acquisition of the property, when the funds were advanced: Andrade v. Andrade, 2016 ONCA 368, para 63.

According to the Applicant, the Respondents have not met their onus of showing that they contributed to the purchase of the Property at the time it was acquired. First, there is no evidence showing that the Foundation contributed to the down payment of the Property when it was purchased or that it assisted with the closing costs, legal fees, or any other expenses related to the acquisition of the Property at the time it was purchased. Second, any evidence about the Foundation’s contribution to the Property is sporadic and insufficient. The bank statements are mainly addressed to Mr. Mahmud. To the extent any mortgage payments were made, the Respondents have not shown that these were made by the Foundation or the School (rather than by Mr. Mahmud in his personal capacity). Finally, while the Respondents undertook to provide information about their financial contribution, they have failed to fully do so.

The Respondents state that they have provided all available information. The organization has simply not maintained more detailed records. According to the Respondents, the available evidence shows that they made mortgage payments and received invoices related to the Property, subsequent to its acquisition. While the Respondents acknowledge that they have the burden of establishing a contribution to the purchase money, they note that the Applicant has provided no evidence to show that Mr. Mahmud made any contributions in his personal capacity.

It is helpful to break down the evidence and consider it over three periods: (a) from the date of purchase in 1988 to December 1991; (b) from December 1991 to January 1995; and (c) from February 1995 until the mortgage was paid off in 2007.

1988 to 1991

The Respondents have not established that they contributed to the purchase price of the Property at the time it was acquired or that they made mortgage payments from 1988 until at least December 1991. There is very limited evidence for that period and none that establishes the Respondents made payments towards the purchase of the Property. Specifically:

• There is no evidence the Respondents made or contributed to any downpayment;
• There are no bank statements to show that the Respondents made mortgage payments before December 1991;
• The Respondents’ affiants state that the Foundation made every mortgage payment, however, they do not profess to have direct knowledge of what occurred before 1991 and there is no documentary evidence to support their bald statements;
• The Respondents provided a “statement of receipts and disbursements” dated 1988. This statement refers to mortgage payments, but there is no evidence about who prepared this statement or on what basis;
• The Respondents provided copies of annual mortgage statements from the bank for 1991 and 1997. These statements list upcoming payments, but they do not show that the Respondents made these payments; and
• The Respondents identify the Property as an asset in certain statements and income tax returns. However, this does not establish that they made any contributions to the Property or its purchase price over this period.

As discussed at para. 17, the Respondents rely on a number of other documents that contain the words “trust” or “in trust.” Significantly, none of these documents show that any mortgage or other payment in respect of the Property was made by the Foundation or the School.

1991 to January 1995

For this period of time, the Respondents again rely on the documents listed above. They also provided a bank statement dated December 1991. This statement shows a debit labelled “MTG/HYP,” which corresponds to the monthly mortgage for the Property at that time.

I accept that the Respondent made a payment in December 1991 in the amount of the monthly mortgage for the Property. As I discuss in more detail below, based on Mr. Zimmo’s evidence, I am satisfied that this payment was made from the Foundation’s bank account, not by Mr. Mahmud personally.

The Respondents are effectively asking the court to infer, from a single bank statement in 1991, that the Foundation consistently paid the mortgage or otherwise contributed to the purchase of the Property, including from 1991 to 1995. In my view, the Respondents have not met the burden of proof and a single bank statement is not sufficient to establish that the Foundation made multiple mortgage payments. Not only is the documentary evidence insufficient to support this inference on a balance of probabilities, there is also no direct evidence to support the Respondents’ position over this period.

1995 to 2007

On a balance of probabilities, the evidence shows that the Foundation paid an amount equivalent to the mortgage from February 1995 to September 2007. This conclusion is supported by the 16 bank statements provided by the Respondents, for sporadic dates through 1995, 1996, 1997, 1998, and 2007. Each statement has a debit entry labelled “MTG/HYP.” It was not disputed that the amounts debited correspond to the monthly mortgage of the Property at the relevant time. While more complete financial records would have been helpful, the information provided shows that the Foundation made payments equivalent to the amount of the mortgage at various points in time between 1995 and 1998. There is also one statement from 2007. When the 16 bank statements are considered on a balance of probabilities, I find it is more likely than not that the Foundation made monthly mortgage payments from February 1995 to December 1998.

This is substantiated by Mr. Zimmo, who testified that he was involved in preparing annual financial statements for the Foundation or its predecessor from 1998 to 2007. Each statement identifies mortgage payments made by the Foundation during the course of the year in question. Each statement also identifies the Foundation’s bank account number, which corresponds to the number that appears on the bank statements relied on by the Respondents. Mr. Zimmo was cross-examined about his credentials and alleged financial expertise, but he was not questioned about the accuracy of the statements he helped prepare. His evidence establishes that the Foundation made payments equivalent to the mortgage on the Property from at least 1998 to 2007. It also identifies the Foundation’s bank account number, confirming that the payments came from the Foundation’s account (and not from Mr. Mahmud, personally).

Analysis

Importantly, there is no evidence to show that the Foundation or its predecessor contributed to the purchase price of the Property at the time of its acquisition. However, based on the 16 bank statements and Mr. Zimmo’s evidence, I find that the Foundation or its predecessor made payments in the amount of the monthly mortgage of the Property in December 1991 and then from February 1995 until the mortgage was discharged in September 2007.

Can these payments give rise to a purchase money resulting trust? In my view, they cannot. This is because, at law, the relevant time for assessment of a claim for a proprietary interest through a purchase money resulting trust is at the time of the property acquisition. The presumption of a resulting trust applies only if contributions were made at the time of purchase: Andrade v. Andrade, 2016 ONCA 368, para 63.

The payments proven in evidence were made years after the Property was acquired. Moreover, it is not clear that those payments contributed to the purchase of the Property. While the mortgage was in Mr. Mahmud’s name, the Foundation or its predecessor occupied and had the use of the Property.

The Foundation’s subsequent mortgage payments might be relevant to other types of claims, but they do not establish a purchase price resulting trust.

Should Remedy Be Denied Because the Respondents Do Not Have Clean Hands?

Given my conclusion that the Foundation does not have a beneficial interest in the Property, it is not strictly necessary for me to address this argument. However, I will do so briefly.

According to the Applicant, the Respondents have not come to the litigation with clean hands because: (a) the Respondents provided incomplete financial disclosure and, in particular, failed to comply with their undertaking to provide complete bank statements from 1998 to 2007; and (b) Mr. Alsousi changed the locks to the Property and prevented the Applicant from accessing it.

While more complete financial information would have been helpful, I cannot conclude that the Respondents’ failure to provide more information in answer to their undertakings is clear evidence of misconduct or wrongdoing. The Respondents submit that they answered their undertakings by providing all available financial information. I have been given no reason to conclude otherwise. The disclosure the Respondents provided does not support their assertion that the Foundation made all the mortgage payments for the Property. However, the fact that their position was not fully supported by the documents they disclosed is not the same as coming to the litigation with unclean hands.

It is regrettable that one of the personal Respondents resorted to changing the locks on the Property. Mr. Alsousi’s evidence is that he believed the Applicant would attempt to sell the Property. There was a clear dispute about who owned or had an interest in the Property and both parties appear to have taken steps to assert their position. There were certainly better options available to both parties. The actions in question were unfortunate and not behaviour the court wishes to condone. However, in the circumstances, it would not be a basis to exercise my discretion to deny equitable remedies to the Foundation, had they successfully established a beneficial interest in the Property.

The Applicant’s Other Argument

The Applicant argues that, because the express trust failed, the Property is the subject to resulting trust in favour of the Estate. Importantly, the deed to the Property was held by Mr. Mahmud. Because the Respondents’ express and resulting trust arguments have failed, the Estate simply owns the Property. Nothing in these circumstances gives rise to a resulting trust in favour of the Estate.

Disposition

For the reasons provided, the Application is allowed.

If the parties are unable to agree on costs, they may each submit a cost outline, attaching a draft bill of costs and any authorities, within 20 days of the release of these reasons. The cost outline submitted by each party shall not exceed three pages in length.

Justice M. Flaherty
Date: February 25, 2025