Sep 6, 2017

ONTARIO COURT OF APPEAL SUMMARIES (AUGUST 28 – SEPTEMBER 1)

Chechui v. Nieman, 2017 ONCA 669 (CanLII)

Chechui v. Nieman, 2017 ONCA 669

[Cronk J.A.]

Counsel:
Earl A. Cherniak, Q.C., Zohar R. Levy and Valois P. Ambrosino, for the appellant

Harold Niman and Chloe van Wirdum, for the respondent

Keywords: Family Law, Property Law, Joint Tenancies, Gratuitous Transfers, Gifts, Presumption of Resulting Trust, Unjust Enrichment, , Pecore v. Pecore, 2007 SCC 17, Kerr v. Baranow, 2011 SCC 10

Facts:

The appellant, Ian Jamieson Nieman (“Ian”), and the respondent, Victoria Chechui (“Victoria”), met in October 2009. In July 2010, the parties began living together at Victoria’s house in Toronto. Ian’s mother, Dianne, then received a $4 million inheritance and decided to invest part of it in a home on Austin Terrace in Toronto for Ian and Victoria’s use. Ian and Dianne owned the house as tenants in common, with Ian owning 99 per cent and Dianne owning 1 per cent. In December 2010, Victoria sold her house and moved with Ian into the Austin Terrace property.

In December 2012, Dianne suffered a series of strokes and the parties agreed to have Dianne live with them. Dianne would require the use of a wheelchair, so the parties and Dianne decided to look for a new, wheelchair-accessible home in Toronto to accommodate Dianne’s needs.

On March 16, 2013, Ian and Victoria entered into an agreement of purchase and sale to buy a house on Brookdale Avenue in Toronto for $2.6 million (the “Brookdale Property”).

To finance the purchase of the Brookdale Property, Victoria obtained a $1 million mortgage in the parties’ joint names from RBC Dominion Securities Inc. (“RBC”). The mortgage was later converted to a line of credit in the same amount. In addition, after obtaining independent legal advice, Dianne executed a gift letter, required by RBC, gifting $1.7 million to both Ian and Victoria.

On closing, title to the Brookdale Property was taken in both Ian and Victoria’s names, as joint tenants. The parties moved into the Brookdale Property in April 2013. About one month later, Dianne passed away.

The Austin Terrace property was listed for sale after Dianne’s death and eventually sold in October 2013 for $2.325 million. Ian deposited his share of the sale proceeds in his bank account, repaid the $1 million RBC line of credit on the Brookdale Property in full, and deposited $800,000 into an investment account with RBC, held jointly with Victoria.

Approximately two and a half months later, in January 2014, the parties separated. Their separation precipitated a dispute regarding Victoria’s entitlement to a 50 per cent interest in the Brookdale Property and in the funds held in the RBC investment account.

Issues:

  1. Is the respondent entitled to a 50 percent interest in the Brookdale Property?
  2. Is the appellant entitled to a credit regarding the funds used by him to repay the joint line of credit?

Holding: Appeal allowed, in part.

Reasoning:

  1. Yes. The respondent is entitled to a 50 percent interest in the Brookdale Property.

First, title to the Brookdale Property was taken in the parties’ joint names. In addition, the Brookdale agreement of purchase and sale was in both Ian and Victoria’s names.

The application judge expressly rejected Ian’s claims that he did not know what the term “joint tenancy” meant, that he did not direct that title to the Brookdale Property be put in joint names, and that he did not read the real estate closing documents when he signed them. These findings were open to the application judge on the evidentiary record. His assessment of the credibility of Ian’s evidence on these issues attracted deference from the court.

Second, there was the significant factor of Dianne’s $1.7 million gift to both Ian and Victoria to assist in the acquisition of the Brookdale Property. There was ample evidence before the application judge to support his conclusion that this gift, to Ian’s knowledge, was to both Ian and Victoria, and not to Ian alone.

Specifically, the application judge relied on: i) the terms of the gift letter itself; ii) the evidence from Dianne’s wills and estates lawyer regarding her intended gift, evidence from the lawyer providing independent legal advice to Dianne regarding the gift letter, and the RBC mortgage specialist’s testimony that all persons who were going to be on title to the Brookdale Property were to be named as mortgagors on the mortgage security, and iii) the application judge’s rejection of Ian’s testimony that Dianne’s gift was to him alone. The court found no error in the application judge’s approach to or assessment of the whole of the evidence on this issue.

Third, Ian’s argument that Victoria was unjustly enriched when she received an interest in the Brookdale Property was considered and properly dismissed by the application judge.

While Ian mentioned unjust enrichment in his Answer, he failed to plead it with any specificity. When Ian was given an opportunity by a case conference judge to address deficiencies in his pleading by submitting an Amended Answer, he did not plead any further facts in support of an unjust enrichment claim.

Regardless, the application judge’s factual finding that Dianne gifted $1.7 million to Ian and Victoria jointly is fatal to Ian’s unjust enrichment claim regarding the Brookdale Property. The joint gift furnishes a juristic reason for Victoria’s enrichment in respect of the Brookdale Property. The absence of a juristic reason for the enrichment in question is a necessary pre-requisite to any finding of unjust enrichment.

  1. Yes. The applicant is entitled to a credit in respect of funds used by him to repay the joint line of credit.

The court found that the application judge’s finding that Ian “gifted the payment of [$1 million] to pay off the line of credit” was tainted by palpable and overriding error.

There is no dispute that the debt incurred under the line of credit was joint. Thus, Ian was responsible for payment of at least 50 per cent of the funds owed under the line of credit; this defeats his claim for the repayment of the full $1 million debt under the joint line of credit.

The issue, therefore, is whether, on the future division of the proceeds of sale from the disposition of the Brookdale Property, Ian is entitled to credit for his repayment of Victoria’s $500,000 share of the parties’ joint debt under the line of credit.

The court found that there was no affirmative evidence that Ian intended to gift Victoria the equivalent of $500,000 by reason of his repayment of her share of the line of credit. The application judge’s ruling rested on Victoria’s evidence that the parties always intended to own the Brookdale Property “jointly and equally regardless of their contributions to the purchase”. The court did not agree that the parties’ intention to hold joint title to the Brookdale Property necessarily rebuts the presumption of a resulting trust in respect of Ian’s repayment of Victoria’s debt under the line of credit.

First, Ian’s repayment of the $1 million line of credit, established to facilitate the purchase of the Brookdale Property, was gratuitous and directly linked to the acquisition of the house. The Supreme Court emphasized in Kerr and in Pecore that in situations involving gratuitous transfers, as in this case, the governing consideration is the transferor’s actual intention.

In these circumstances, the relevant question was what Ian intended at the time of repaying the line of credit – not what the parties commonly intended concerning ownership of the Brookdale Property. By focusing on the latter question, rather than the former, the application judge erred.

Accordingly, Ian’s repayment of Victoria’s share of the parties’ debt under the line of credit was gratuitous, and directly linked to the purchase of the Brookdale Property. Victoria bore the onus of establishing that Ian intended to gift her the sum of $500,000. There was no independent evidence of such an intention by Ian. It follows that Victoria failed to meet her burden to prove that Ian intended to gift the repayment of the line of credit to her, in whole or in part.

A resulting trust therefore arises in relation to Ian’s repayment of Victoria’s share of the joint debt under the line of credit. Thus, the court found that the appropriate remedy was for Ian to be credited with the amount of $500,000 on division of the proceeds of sale of the Brookdale Property.

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