COURT OF APPEAL FOR BRITISH COLUMBIA
| Citation: | MacKinnon v. Donauer, |
|
| 2017 BCCA 437 |
Date: 20171214
Docket: CA44366
Between:
Joy MacKinnon
Appellant
(Plaintiff)
And
Michael Donauer and Tina Maria Donauer
Respondents
(Defendants)
| Before: | The Honourable Madam Justice Newbury The Honourable Mr. Justice Frankel The Honourable Mr. Justice Savage |
On appeal from: An order of the Supreme Court of British Columbia, dated
March 15, 2017 (MacKinnon v. Donauer, 2017 BCSC 411, New Westminster Registry Docket 182423).
| Counsel for the Appellant: | R. Dueckman K. Tiwana |
| Counsel for the Respondent: | T. Watkins |
| Place and Date of Hearing: | Vancouver, British Columbia November 3, 2017 |
| Place and Date of Judgment: | Vancouver, British Columbia December 14, 2017 |
| Written Reasons by: |
| The Honourable Madam Justice Newbury |
| Concurred in by: |
| The Honourable Mr. Justice Frankel The Honourable Mr. Justice Savage |
Summary:
Claims in resulting trust and unjust enrichment were advanced by plaintiff who contributed $150,000 to her daughter and son-in-law (the defendants) for the purchase of a new house containing a basement suite. Plaintiff and defendants agreed she could live in the suite rent-free as long as she wished. After nine years passed, plaintiff moved out. She claimed to have invested in the property and sought a declaration of entitlement to a proportionate equitable interest therein, and sale; or a similar remedy for unjust enrichment. Trial judge dismissed both claims.
Held: Appeal allowed. Trial judge had not explained his conclusion that the “family arrangement” constituted a juristic reason for the benefit received by the defendants. On an objective basis, it was not reasonable for the defendants to retain the entire benefit of the plaintiff’s contribution. On the other hand, a declaration of proprietary interest and forced sale would not be reasonable. Monetary judgment ordered in an amount to be determined by court below. Discussion of Nishi v. Rascal Trucking (2013 SCC).
Reasons for Judgment of the Honourable Madam Justice Newbury:
[1] The facts of this case seem to exemplify what in these days is an increasingly common situation. In mid-2005, the plaintiff, then 58 years old, paid $150,000 to her daughter and son-in-law to assist them in purchasing a house with a basement suite. The court below found that the money was provided on the understanding that the plaintiff and her husband could move into the suite and live there indefinitely, rent-free. This in fact occurred, although as time went on, the plaintiff made additional contributions of funds to her daughter and son-in-law to defray various expenses related to the maintenance of the house.
[2] After nine years (by which time the plaintiff’s husband had died), the relationship between the two generations broke down. The plaintiff moved out. She demanded repayment of the funds; the defendants refused. The plaintiff sued, asserting that she had intended to acquire an interest in the property proportionate to her contribution to the purchase price – about 29%. She relied on the doctrine of resulting trust – the rule that a presumptive trust arises in favour of the transferor when property is transferred gratuitously to another. In the alternative, she pleaded that the defendants had been unjustly enriched by her financial contribution to their acquisition of the property. She sought a declaration of trust in her favour in respect of a 29% interest in the property (the market value of which had increased since 2005), together with an order for sale under the Partition Act and repayment of her ‘share’ of the proceeds of sale.
[3] As is usually the case in family arrangements of this kind, none of the parties sought legal advice, and no one seems to have considered various contingencies that could arise in the parties’ lives or in their relationship. In this instance, it was the plaintiff who had elected to leave the home. She did so because of a slight she perceived from the defendants’ inquiry in November 2014 as to how long the plaintiff’s son would be staying in the basement with his mother. (He had moved in in March 2014, supposedly for “only a short time”.) Both the son and the plaintiff took offence at this inquiry, and the plaintiff asserts she has the right to decide who lives her with in the basement suite. The defendants told the plaintiff she was welcome to return (alone) to the suite, but she declined to resume the previous arrangement.
[4] Although there are a few decisions from courts in this province in which declarations of trust have been granted to transferors in positions similar to that of the plaintiff (see Demir v. Payman 2009 BCSC 445; Campbell v. McLelland (1995) 57 A.C.W.S. (3d) 663 (B.C.S.C.), the trial judge’s findings of fact here do not fit easily with the usual analysis of resulting trust or unjust enrichment. I turn to recount in more detail the facts he found, and his reasons for dismissing the plaintiff’s claims, both in trust and unjust enrichment, in respect of the $150,000.
Factual Background
[5] The plaintiff Ms. MacKinnon is the mother of the defendant Tina Donauer (“Tina”), who is married to the defendant Michael Donauer (“Michael”). Ms. MacKinnon’s husband (who had adopted Ms. MacKinnon’s children when they were young) was still alive at the time the subject property was purchased. He had abused alcohol and had a “disordered personality”, from which Tina and her brother Paul MacKinnon (“Paul”) suffered during their teenage years. Both Tina and Paul left home in the late 1980s; Paul left British Columbia for some time and has a criminal record. Tina’s relationship with her parents was not good, and between 1994 and 1999, she did not see them at all. However, around her 30th birthday in 1999, relations were restored, to the extent that cohabitation eventually began to be discussed.
[6] In early 2005, the Donauers and the MacKinnons began looking for a new home containing a basement suite or secondary accommodation for the MacKinnons and having enough room for a large workshop in which Michael could work. They engaged a real estate agent, who listed the Donauers’ and MacKinnons’ respective properties for sale. He located a suitable house for the two couples on McClure Drive in Maple Ridge. The Donauers agreed to purchase it for $515,000, conditional upon their selling their home and securing financing of $350,000. Eventually they obtained a mortgage loan of some $202,000 and a line of credit for $150,000 and the conditions were removed. (The judge noted that the line of credit was obtained for $150,000 because the plaintiff had agreed to pay the Donauers that amount once her townhouse was sold.)
[7] Ms. MacKinnon sold her townhouse and netted proceeds of about $156,000. (She had also inherited about $350,000 on her mother’s death in 2003.) In July 2005 – one month after the Donauers had moved into the new house – she duly delivered a bank draft for $150,000 to them and she and her husband moved into the basement suite. The Donauers paid off their line of credit with the $150,000. The property (“McClure”) was registered in the names of the Donauers as joint tenants. Mr. Donauer deposed that his mother-in-law had rejected the idea of going on title because she “did not want to be on the mortgage”. Ms. MacKinnon testified at trial that she had not wanted to pay any lawyers’ fees and that she “trusted the kids.”
[8] The trial judge found that during her nine years in the basement suite, the plaintiff contributed to the family both financially and otherwise:
Before she moved in with the Donauers, Ms. MacKinnon had begun driving [their children] to and from school. She continued to drive the children until [the oldest child] obtained her driver’s licence in her grade 12 year. In 2008 or 2009, soon after Ms. MacKinnon stopped shuttling her grandchildren to and from school, Michael asked her to help pay for utilities such as hydro and cable. Ms. MacKinnon began to pay the Donauers $300 per month. In 2009, the municipality learned of the McClure basement suite and increased the Donauers’ property taxes modestly. Michael brought this to Ms. MacKinnon’s attention and she paid the Donauers $400 per year. And, soon after moving in, Ms. MacKinnon began paying a $500 per year contribution to the cost of insurance placed by the Donauers in connection with McClure. Ms. MacKinnon paid a total of $28,500 to the Donauers after she moved into McClure. [At para. 15.]
[9] Ms. MacKinnon continued to live in the suite after her husband died in August 2013. In March 2014, Paul arrived from Ontario and began to live in the suite with her. The judge found that “all concerned” expected him to be living there for only a short time. After some months, Paul began paying $300 per month to the Donauers. In November, Michael asked Paul when he was planning on moving out. Evidently, Paul felt insulted by this question. He moved out shortly thereafter. The plaintiff was unhappy that Paul was no longer welcome at McClure and she also moved out, in early January 2015. She and Paul are now living in a townhouse rented by Ms. MacKinnon, who does not have extensive funds and has health problems.
[10] Ms. MacKinnon commenced her action in August 2016. In her notice of claim, she took the position that she had had an agreement with the Donauers that she would be able to live in the suite in the home “free of charge in exchange for her investment [my emphasis], and in return she would own a portion of the property.” She sought a declaration that she was the beneficial owner of an undivided 29% interest in McClure, and an order for its sale and the distribution to her of her share of the proceeds of sale. In the alternative, she sought a declaration that her “capital investment” created either a constructive or resulting trust in her favour. She also pleaded that the elements of unjust enrichment were met, again seeking a declaration of resulting trust, or general and special damages.
[11] In their response, the daughter and son-in-law pleaded that they had purchased McClure without contribution or assistance from the plaintiff; that none of her funds had been used to acquire it; that she had given them $150,000 “expressed to be ten years’ prepaid rent”; and that during the time she lived with them, she had made “no contribution” to the maintenance of the house or other expenses incidental to home ownership. However, in their Reply to a Notice to Admit, the Donauers conceded they had used the $150,000 to pay off the line of credit they had taken out to buy the house. They said they believed “there was an agreement between the parties that this ‘advance’ had been ‘in the nature of pre-paid rent.’”
[12] The parties were able to have their case heard promptly, in February 2017. On March 15, 2017, the trial judge issued his reasons, from which this appeal is taken.
[13] Beginning at para. 44, the trial judge assessed the conflicting evidence of each of the parties concerning what they had intended and understood at the time Ms. MacKinnon paid the $150,000 to the Donauers. The evidence clearly contradicted the denials made by the defendants in their pleadings, but the judge did not completely accept the evidence of any one witness. He found that Ms. MacKinnon had not intended to acquire “any form of ownership in McClure, legal or beneficial”; nor had she intended to “invest” in the property as claimed. All the parties, he said, had been “well aware of this at all times.” (At para. 50.) Ms. MacKinnon argued that she was unlikely to have gifted such a large amount of money, but the Court found this argument was “sapped away” by the fact she had anticipated “valuable benefits [would] flow her way in exchange for her $150,000”. This “benefit” had been confirmed by Tina to her mother when the MacKinnons moved in, and the benefits were indeed mutual:
Tina confirmed that Ms. MacKinnon would not have to pay anything more, the basement suite was theirs to stay in indefinitely, and the MacKinnons would only have to pay for their own personal expenses. I also think it likely that Ms. MacKinnon said something about an early inheritance during the same conversation. I think it unlikely that anything was said about 10 years’ prepared rent – the evidence led in support of these words having been spoken smacks of reconstruction.
. . .
The Donauers received the significant benefit of the $150,000, but took on the long-term responsibility of housing and looking out for aging family members with significant health problems in prospect. I accept that Tina experienced serious abuse from her adoptive father when growing up and having him living in the same home was for her a very real sacrifice. [At paras. 49, 54.]
The judge characterized the parties’ arrangement as a “reasonable family arrangement”: in exchange for the plaintiff’s contribution to the funds used by the Donauers to purchase the home, the MacKinnons would be “welcome to live in the new home indefinitely without paying rent or other charges.” (At para. 53.)
[14] Beginning at para. 56 of his reasons, the trial judge addressed the issue of whether Ms. MacKinnon was entitled to a (presumptive) resulting trust consequent upon her transfer to the defendants of the $150,000 used in the purchase of McClure. He described the nature of the presumption with reference to Pecore v. Pecore 2007 SCC 17, where Rothstein J. stated for the Court:
As in other civil cases, regardless of the legal burden, both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. Thus, as discussed by Sopinka et al. in The Law of Evidence in Canada, at p. 116, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities. [At para. 44; emphasis added.]
[15] The judge noted that the presumption of resulting trust that arises upon a gratuitous transfer can be rebutted by evidence that establishes on a balance of probabilities that at the time he or she made the contribution, the transferor did not intend to “hold” a beneficial interest in the property. (At para. 57.) In this case, he observed:
… both sides have brought evidence to support their positions. Beginning with the presumption of resulting trust and weighing all of the evidence, I conclude that the Donauers have established that Ms. MacKinnon transferred her $150,000 to them without intention on her part to acquire a beneficial interest in McClure. Ms. MacKinnon’s intention was to acquire a benefit as part of a family arrangement, but no aspect of that benefit involved legal or beneficial ownership in any part or portion of McClure.
As a postscript, I think it is arguable that the transfer of the $150,000 to the Donauers was not a “gratuitous transfer”; if so, then the doctrine of resulting trust has no application. However, I prefer to say no more on this subject. The parties’ submissions are not focused on this issue. And it is unnecessary to pursue the point because of my finding that the presumption of resulting trust is rebutted in any event. [At paras. 60–1; emphasis added.]
[16] Moving next to Ms. MacKinnon’s claim in unjust enrichment, the trial judge recited the three elements of the cause of action, citing Kerr v. Baranow 2011 SCC 10 at paras. 31–2. The receipt of a benefit by the defendants and a corresponding deprivation by Ms. MacKinnon had been shown. With respect to the third element – the absence of juristic reason for the enrichment – he noted that “juristic reason” could include a contract, an intention to make a gift, or disposition of law. Indeed, he observed, the categories are not closed, allowing for “flexibility” to reflect factors such as the parties’ legitimate expectations and “moral and policy-based arguments about whether particular enrichments are unjust”. He observed, correctly, that a plaintiff has the burden of establishing a prima facie unjust enrichment; but once she has shown the defendant benefitted, that she has been correspondingly deprived, and that there is no juristic reason within the recognized categories for the defendant to retain the benefit, the burden shifts to the defendant to establish a juristic reason outside the established categories. (Citing Garland v. Consumers’ Gas Co. 2004 SCC 25 at paras. 44–5; see also Kerr at para. 43.)
[17] As for the juristic reason in the case at bar, the trial judge found that the only two possible reasons falling within the recognized categories were gift and contract. (At para. 65.) He found that Ms. MacKinnon had not established that either category applied. With respect to the existence of a gift, he noted that in Peter v. Beblow [1993] 1 S.C.R. 980, a majority of the Court had defined the required “donative motivation” as the “intentional giving to another without expectation of remuneration”. (At 991–2.) In this case, the fact the MacKinnons had expected they would be able to live with the Donauers indefinitely and that the Donauers would be there to assist them in their old age, was found to preclude a finding of gift.
[18] With respect to contract, the trial judge noted that in Wilson v. Fotsch 2010 BCCA 226, Huddart J.A. for the majority had said she was “not persuaded that ‘casual family arrangements’ between spouses or extended family members provide a contractual reason to retain an enrichment”. (My emphasis.) On this point, she cited the reasons of Mr. Justice Lambert in dissent in Bruyninckx v. Bruyninckx (1995) 4 B.C.L.R. (3d) 341 at paras. 87–9 and 92. In that case, Lambert J.A. had reasoned:
The fact that a family arrangement is made and that the benefit is conferred under that family arrangement does not bar a claim for unjust enrichment unless the arrangement is such that it has the force of a binding contract and so provides a juristic reason for the enrichment. There was an arrangement which fell through in McLean v. Grandmont but it did not prevent the plaintiff from succeeding on his claim. Mr. and Mrs. Rathwell had an arrangement that their land would be purchased under the Veteran’s Land Act and that they would work together as husband and wife on that land in the family farming business. Mary Sorochan often did all the farm chores herself under an arrangement which permitted Alex Sorochan to work for extended periods as a travelling salesman. In none of those cases did the arrangement prevent recovery. In my opinion a family arrangement under which the benefit is conferred and received does not bar a claim for unjust enrichment unless the arrangement has the force of law and so provides a juristic reason for the conferral of the benefit through a legal compulsion requiring the conferral of the benefit. [Emphasis added.]
[19] The trial judge also referred to a passage from Wald v. Horning 2001 BCSC 1643, in which Mr. Justice Oppal had written:
The courts have historically treated agreements between family members differently from agreements entered into between strangers. To put it succinctly, they are not strictly speaking interpreted as contracts because it is said that persons who enter into family arrangements do not do so with the intention that legal consequences ought to flow from such agreements. That is not to suggest that in appropriate cases courts will not enforce agreements between family members. Perhaps the case that is most often cited in this area is Balfour v. Balfour, [1919] 2 K.B. 571. In discussing the difficulties that arise in enforcing such agreements, Atkin, L.J. at p. 579, made the following comments:
The common law does not regulate the form of agreements between spouses. Their promises are not sealed with seals and sealing wax. The consideration that really obtains for them is that natural love and affection which counts for so little in these cold Courts. The terms may be repudiated, varied or renewed as performance proceeds or as disagreements develop, and the principles of the common law as to exoneration and discharge and accord and satisfaction are such as find no place in the domestic code. The parties themselves are advocates, judges, Courts, sheriff’s officer and reporter. In respect of these promises each house is a domain into which the King’s writ does not seek to run, and to which his officers do not seek to be admitted. [At para. 31; emphasis added.]
Applying these comments to the case at bar, the Court found it unlikely that any of the parties had intended their family arrangement to give rise to legal consequences. Following Wilson, the judge concluded “at this stage” that the parties’ arrangement was not a “contractual reason” (and thus not within an established category of juristic reason) for the defendants to retain the benefit they had received from the plaintiff. (At para. 69.)
[20] This left the more difficult question of whether the family arrangement constituted a juristic reason outside the established categories. It will be recalled that in Kerr, the Court stated:
… However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as “the legitimate expectation of the parties, the right of parties to order their affairs by contract” (Peel, at p. 803). [At para. 41.]
In this case, the judge found there was no reason to question the autonomy of the parties. They had freely entered into the arrangement, which had called for an “exchange of benefits that were important on each side of the bargain” and reflected reasonable mutual expectations. He found that it constituted a “residual juristic reason” that justified the Donauers’ retaining the $150,000 received from Ms. MacKinnon, as well as any increase in the value of McClure that might be associated with that amount. In the result, her claim under the rubric of unjust enrichment failed in respect of the $150,000.
[21] The Court reached a different conclusion with respect to the monies, totalling $28,500, that Ms. MacKinnon had paid to her daughter and son-in-law between 2005 and 2014 to assist with utilities, insurance and property taxes on McClure. This had been paid ‘over and above’ the arrangement discussed above and the Donauers were found to have been unjustly enriched to that extent. In the result, the Court granted Ms. MacKinnon a monetary judgment against the defendants for $28,500. Her claim to a proprietary interest in McClure was dismissed.
On Appeal
[22] In this court, Ms. MacKinnon asserted that the trial judge had erred as follows:
i. by misapplying the law with respect to a finding of resulting trust, and in failing to find that the defendants held Ms. MacKinnon’s interest in McClure in a resulting trust;
ii. by misapplying the presumption of resulting trust and misconstruing the evidence on this point;
iii. by misapprehending the evidence with respect to Ms. MacKinnon’s intention to obtain an interest in McClure;
iv. by misapplying the proper test for unjust enrichment at the second part of the two-step “juristic reason” analysis and finding that a casual family relationship was a juristic reason for the Donauers’ retention of the $150,000 benefit; and
v. by ordering a monetary award on a “value received” basis equivalent to repayment of the monies paid by Ms. MacKinnon, and not including the $150,000 contribution in the award on a similar basis, thus accounting for all monies paid by Ms. MacKinnon to the Donauers.
Pleadings Ignored?
[23] Ms. MacKinnon’s first argument is that in their pleading, the Donauers’ only defence was that the $150,000 “was expressed to be ten years’ prepaid rent”. No plea was made based on contract, gift or family arrangement, but the Donauers were nevertheless permitted to argue at trial that the $150,000 had been either a gift or paid under a contract. Ms. MacKinnon submits that this was the first time those arguments had been advanced. Further, she contends that an admission made in a pleading can be withdrawn only by consent or with leave of the court and that only in exceptional circumstances will the court grant a final order “in the absence of a pleading”. I am not aware that the defendants sought to withdraw any admission made before or at trial, and the factum provides no assistance.
[24] As for the Donauers’ pleading, although it did refer to “ten years’ prepaid rent” (as did their Reply to the Notice to Admit), it also stated that the defendants had agreed the MacKinnons “could reside rent-free in the basement suite indefinitely”. This was essentially the “family arrangement” found by the trial judge. It is true the defendants’ Response to Civil Claim denied facts that were easily proven by the plaintiff, and presumably this fact may be reflected in the ultimate costs award in this case. As it is, however, I am not persuaded that Ms. MacKinnon or her counsel should have been taken by surprise at trial by the defendants’ arguments that the presumption of resulting trust was rebutted, or that a remedy for unjust enrichment was precluded by the existence of a juristic reason for their enrichment. I would not accede to this ground of appeal.
Resulting Trust
[25] Turning to the second and third grounds of appeal, Ms. MacKinnon submits that the trial judge approached the issue of resulting trust as requiring a determination, on the balance of probabilities, as to whether Ms. MacKinnon had intended to acquire a beneficial interest in McClure, rather than a determination of whether the defendants had rebutted the presumption of resulting trust. I see no merit in this ground: the trial judge correctly stated where the onus lay, and expressly referred to the presumption in the key paragraph (para. 60) of his decision on resulting trust.
[26] The plaintiff also submits that the only evidence that could have rebutted the presumption was that the transfer of the funds was intended as a gift. In counsel’s submission, because Ms. MacKinnon had not intended to “hold” a beneficial interest in McClure, she had intended – indeed, must be taken to have intended – a gift. On this point, counsel relied on para. 37 of Nishi v. Rascal Trucking Ltd. 2013 SCC 33. Para. 37 needs to be placed in context, however. At para. 34, Rothstein J. for the Court noted that the trial judge in Nishi had stated “there was no issue of a gift” and then that “the presumption of a resulting trust is rebuttable by the titleholder showing that the payment was not intended to create a beneficial interest”. Rothstein J. continued:
This demonstrates that the trial judge understood the test for rebutting the presumption to be based on the absence of intention to create a beneficial interest for the transferor. There would have been no need for the trial judge to continue his analysis beyond his statement about there being no issue of a gift, if the trial judge had not been of the opinion that an intention to create a beneficial interest in the transferor was the test for determining whether the presumption of resulting trust had not been rebutted.
The conclusion of the trial judge was that Mr. Nishi had satisfied the burden on him of rebutting the presumption of resulting trust. In so concluding, the reasons of the trial judge appear to suggest that he distinguished between a gift and absence of an intention by the transferor to hold a beneficial interest after the advance. Although he made such a distinction, his conclusion that there was no intention to create a beneficial interest in the property for Rascal is legally the same as saying that there was an intention to make a gift to Nishi. The trial judge erred in distinguishing between a gift and intention to create a beneficial interest for the transferee but that error was inconsequential.
Indeed, the trial judge’s error may well be explained by reference to the academic authorities as some authorities have phrased the test for rebutting the presumption of resulting trust using language about intention not to hold the beneficial interest in the property. For example, Snell’s Equity describes the type of evidence required to rebut the presumption as “any evidence tending to indicate that A’s intention was that B should take the beneficial interest in the property acquired with A’s purchase money” (J. McGhee, ed., Snell’s Equity (32nd ed. 2010), at para. 25-012). Similarly, Oosterhoff on Trusts describes the presumption of resulting trust as “a presumption that the apparent donor did not intend to give the beneficial ownership of the assets to the recipient” (A. H. Oosterhoff et al., eds., Oosterhoff on Trusts: Text, Commentary and Materials (7th ed. 2009), at p. 640).
. . .
In my view, these formulations are simply another way of describing whether the transferor’s intention was to create a legal gift. There is no second category of intention that rebuts the presumption. Pecore and Kerr did not recognize a different category of intention, other than intention to make a gift, that would rebut the presumption. [At paras. 34–6, 37; emphasis added.]
[27] The Court in Nishi, then, equated a “gift” with an intention not to hold (or acquire) an interest in the property at issue. But the trial judge here found that Ms. MacKinnon had not intended a gift because she intended to receive a benefit – not an interest in McClure, but the expectation of being permitted to stay in the basement suite, rent-free, for as long as she wished. (At para. 67.) The judge mused that perhaps this meant she had not in fact made a “gratuitous” transfer (of the $150,000) in the first place (see para. 61), but he declined to take that possibility further since “the parties’ submissions [were] not focussed on this issue.” Despite the suggestion in Nishi that there is no “second category of intention [aside from the intention to create a legal gift] that rebuts the presumption”, in this case there was a third possibility that in fact was found—the plaintiff’s intention to “acquire a [different] benefit as part of a family arrangement”. (At para. 60.) (I note parenthetically that this does not equate to a life interest in the property, as the expectation was apparently that Ms. MacKinnon’s entitlement would come to an end if, for example, she had to move out for health reasons.)
[28] Whether one takes the view that the transfer was not a gratuitous one such that the issue of resulting trust was not engaged at all, or one simply accepts the trial judge’s factual finding – which has not been shown to be wrong – that Ms. MacKinnon did not intend to retain or hold an interest in the property, I am not persuaded the judge erred in rejecting the claim in resulting trust. In particular, I am not persuaded that once he found that the transfer of the $150,000 was not intended as a gift, the only finding properly open to him was that she had “intended to retain a right to benefit from the money transferred, and that therefore the beneficial interest should be restored to her pursuant to a resulting trust”, as the plaintiff contends. As the trial judge found, “no aspect” of the benefit she expected to receive involved legal or beneficial ownership of an interest in McClure. (At para. 60.) This finding was supported by Ms. MacKinnon’s own testimony.
[29] It was also argued on behalf of the plaintiff that the trial judge failed to recognize the “social reality” behind the phenomenon of aging people who, making the transition from having their own accommodation, place their property in trust in their children’s names so that the children may assist them in managing their affairs. On this point, counsel referred to McLear v. McLear Estate (2000) 33 E.T.R. (2d) 272 (Ont. S.C.J.), where the Court observed:
The presumption that accords with this social reality is that the child is holding the property in trust for the ageing parent, to facilitate the free and efficient management of that parent’s affairs. The presumption that accords with this social reality is, in other words, the presumption of resulting trust. [At para. 41; emphasis added.]
The facts of McLear were very different from those at the case at bar. The Court was concerned with an elderly parent’s transfer of certain securities into the name of herself and her daughter. There was no evidence about the transfer. Although the daughter claimed it had been intended as “compensation” to her, the Court concluded that the presumption of resulting trust “stood unrebutted”. (At para. 48.)
[30] In the case at bar, the property in question – McClure – never belonged to the plaintiff, and it was not put into the names of the defendants to facilitate their dealing with it on her behalf. I do not read McLear, or any other case to which we were referred, as establishing a rule of law that an aging parent who makes a financial contribution to his or her children to facilitate their purchase of a property in which the parent will reside, will always be entitled to an interest in that property on the basis of resulting trust. Certainly the presumptive trust will arise on a gratuitous transfer; but the question will then be whether on the particular facts before the court, the transferee is able to show that the transferor intended to make a gift or – what the Court in Nishi said was ‘legally’ the same thing – an intention “not to hold a beneficial interest” in the transferred property or property substituted therefor. Pecore and Kerr make it clear that this is a matter of fact. As stated in Pecore at para. 44 and affirmed in Kerr at para. 18, the court “will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention.” (My emphasis.)
[31] Here, the Court found that Ms. MacKinnon’s intention was to benefit by living in the basement suite of McClure, without paying rent, as long as she wished. The arrangement, then, was one of “mutual” or “reciprocal” benefits (and in that sense, might not properly be seen as a “gratuitous” one from which a presumption of trust even arises) and in any event, the benefit intended to accrue to the plaintiff did not include an interest in the property. Again, the trial judge’s findings of fact have not been shown to be wrong.
Unjust Enrichment
[32] This brings us to the second main question in this appeal – whether the trial judge erred in ruling that the “casual family arrangement” he found between the parties constituted a juristic reason for the Donauers to retain the benefit they received. Ms. MacKinnon submits that it was unfair and “doctrinally unsound” for the judge to reject the existence of a contract as a juristic reason for the enrichment in this case while at the same time relying on the family arrangement to “deny an equitable remedy” to her. The result was that the Donauers were able to retain the full benefit of the $150,000 while at the same time, the plaintiff did not receive the full measure of the benefits she was expecting.
[33] Counsel for the plaintiff referred us to Hussey v. Palmer [1972] EWCA Civ. 1, 1 W.L.R. 1286 (C.A.) and Campbell v. McClelland, supra. The facts of Hussey, which was not brought under the rubric of unjust enrichment, were somewhat similar to those of the case at bar. Mrs. Hussey, a woman “well over 70”, had a daughter who was married to a Mr. Palmer. When Mrs. Hussey had to sell her house because it was condemned, Mr. and Mrs. Palmer invited her to go to their house and live with them. Since it was too small, Mrs. Hussey paid £607 for an extension which included a bedroom. All went well at first, but after about 15 months, they could not live in harmony any longer and Mrs. Hussey went and lived elsewhere. Finding she was in need of money, she eventually wrote to her son-in-law asking for financial assistance, but received no reply.
[34] Mrs. Hussey brought a legal action against Mr. Palmer, claiming she had lent the £607 to the Palmers. Mr. Palmer defended on the basis that he had assumed the payments Mrs. Hussey had made to the builder were “in effect a gift”. Mrs. Hussey’s first application for judgment came before a registrar, who suggested there had been a “family arrangement” rather than a loan. The plaintiff’s advisors took up this theme and started a fresh action claiming an interest in the house on the basis of resulting trust. Mrs. Hussey did not succeed at trial and appealed.
[35] The majority of the Court of Appeal allowed the appeal. In the course of his reasons, Lord Denning, M.R. described the problem before the Court:
Mr. Owen on [Mrs. Hussey’s] behalf, rests her case on a resulting trust. He says that, despite Mrs. Hussey’s own evidence, there was no loan. I agree that Mrs. Hussey did not lend the £607 to Mr. Palmer. Test it this way: Suppose that, a week or two later, Mrs. Hussey had demanded from Mr. Palmer repayment of the £607, and he had refused. Could she recover it as money lent? And have the house sold up again to regain it? Clearly not. The Court would indoubtedly have said – as the Registrar said here – that it was a family arrangement. There was no intention that it should be repaid on demand. Again, if she had stayed on in the house, making use of the bedroom, could she have sued Mr. Palmer for money lent? Clearly not. There was no intention that it should be repaid whilst she had the benefit of the bedroom. Suppose that she had stayed there until she died, could her executors have sued Mr. Palmer for money lent? Clearly not. There was no intention that it should be repaid after her death.
If there was no loan, was there a resulting trust? and, if so, what were the terms of the trust?
Although the plaintiff alleged that there was resulting trust, I should have thought that the trust in this case, if there was one, was more in the nature of a constructive trust: but this is more a pattern of words than anything else. The two run together. By whatever name it is described, it is a trust imposed by law whenever justice and good conscience require it. It is a liberal process, founded upon large principles of equity, to be applied in cases where the defendant cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or the benefit of it or a share in it. [At 1289–90; emphasis added.]
[36] His Lordship cited various cases in which a trust has been imputed or imposed for the benefit of a person who has contributed towards the purchase of a house in the absence of an agreement between the parties and in the absence of any evidence of an intention to create a trust. (At 1290.) He found that this case fell within the principle of those cases. It would, he said, be “entirely against conscience” if Mr. Palmer were to retain beneficial ownership of the entire house and not allow Mrs. Hussey any interest in it, or any charge upon it.
[37] Phillimore, L.J. agreed with Lord Denning; Cairns, L.J. dissented, taking the view that as she herself had testified, Mrs. Hussey had lent the £607 to the Palmers without express terms of repayment. The loan was therefore repayable on demand. (At 1292.) I emphasize that their Lordships said nothing about unjust enrichment in Hussey v. Palmer; nor did they discuss the rebuttal of a resulting trust, if such arose. The case is therefore of little assistance to us in the present context and in terms of Canadian law may have been overtaken by the evolution of the law of unjust enrichment.
[38] In Campbell, the plaintiff gave funds totalling over $60,000 to her granddaughter and granddaughter’s husband, Mrs. and Mr. McLelland, between 1988 and 1991. The grandmother asserted she had made the advances to allow the McLellands to pay the mortgage on their house and renovate a basement suite in the expectation that she would have a permanent home there. Mrs. Campbell indeed moved into the home in May 1991. As in this and many other cases, the parties did not discuss what would happen if the shared living arrangements did not work out.
[39] Unfortunately, the McLellands decided in 1991 to separate, and Mr. McLelland moved out. Mrs. Campbell then became unhappy with her living situation, especially after a burglar attempted to enter her suite. In April 1992, she moved out of the home. Eventually the McLellands divorced and Ms. McLelland sought an unequal division of the family home in her favour. In the divorce proceeding, she filed an affidavit deposing that her grandmother had given her two-thirds of the purchase money for the house – an assertion Mrs. Campbell denied in an affidavit. She swore that she had intended the funds to be a gift to both the McLellands. (At para. 34.) When cross-examined on her affidavit, she denied giving the money to her granddaughter and insisted it was not intended as an inheritance.
[40] The trial judge, Madam Justice Baker, found that Mrs. Campbell had expected the funds would eventually be returned to her. (At para. 43.) As well, she found Mrs. Campbell had made certain advances on the understanding that she would move in with the McLellands and live with them permanently. (At para. 50.) The magnitude of the gifts in comparison to the size of her estate was found to make the allegation of a gift untenable. Ultimately, Baker J. found that no juristic reason for the enrichment of the McLellands and the corresponding deprivation of Mrs. Campbell had been shown. In the Court’s analysis:
The test is an objective one. Objectively, it cannot be said that there was a legitimate expectation that the McLellands should benefit financially to Mrs. Campbell’s detriment … I do not accept that the parties’ expectations were that Mrs. Campbell would relinquish forever a major portion of her limited resources with no expectation that the funds should be repaid or that she would receive something of equal value to her, namely a secure and permanent home. [At para. 61; emphasis added.]
Unjust enrichment having been made out, the Court awarded judgment against the McLellands for $49,000, being the portion of the $60,000 that was found not to have been a gift.
[41] Returning to the case at bar, Mr. Dueckman on behalf of Ms. MacKinnnon acknowledges that the trial judge set out the correct test for “juristic reason” at the second stage of the two-stage analysis mandated by cases such as Pecore and Kerr. He contends, however, that the test was not correctly applied, and that the trial judge failed to consider the legitimate expectations of both parties as contemplated by the Court in Kerr:
It is the mutual or legitimate expectations of both parties that must be considered, and not simply the expectations of either the claimant or the defendant. The question is whether the parties’ expectations show that retention of the benefits is just. [At para. 124.]
[42] Ms. MacKinnon emphasizes that at the time she handed over the cheque for $150,000 – which she says was equivalent to about half her net worth at the time – to the Donauers, she had a reasonable expectation that she would be able to live in the basement suite for the rest of her life, with her daughter nearby. Having moved out, she now has to pay rent and has no income other than a modest pension and government assistance for health as and when it becomes necessary. As for the Donauers, they received not only the $150,000 but stand to enjoy all increases in property value associated with it, and are now earning an additional $900 per month in rental income from the basement suite. Essentially, Mr. Dueckman says, the Donauers have received a ‘windfall’ and Ms. MacKinnon has been deprived of a home. In his submission, the trial judge failed to turn his mind to the fact that the plaintiff could not receive what she had ‘bargained’ for and legitimately expected because the family arrangement was “frustrated” by the breakdown of the parties’ relationship – even though the breakdown was the result of the plaintiff’s own choice.
[43] The trial judge did not make specific findings about the parties’ expectations. He simply stated that the family arrangement and the “reasonable mutual expectations” of the parties about it constituted a juristic reason that justified the Donauers’ retaining the $150,000. He did not explain whether he had reached his conclusion as a matter of law or legal authority, or on the basis of the particular factual circumstances before the Court. If he felt himself bound as a matter of law to reach this result, he was, in my respectful view, in error: as we have seen, there were mutually beneficial family arrangements in the cases to which we were referred, but they did not bar recovery by plaintiffs who had proven the other elements of unjust enrichment: see Campbell at para. 61; Guertin v. Guertin, 2015 ONSC 1239 at para. 58.
[44] If on the other hand, the trial judge was making a determination based on the factual circumstances of this case, his reasons are unclear given the absence of an analysis of the parties’ expectations and how they support the conclusion that the enrichment of the defendants and deprivation of the plaintiff were just. They also, in my respectful view, leave open the possibility that the trial judge failed to consider all potential remedies open in the circumstances: see Cory v. Cory 2016 BCCA 409 at para. 14.
[45] It seems to me that the appropriate analysis emerges if one imagines a situation in which after a short period of living with Ms. MacKinnon under the family arrangement, the Donauers had expelled her from their home. In that event, I suspect a court would have little difficulty in finding that the defendants had been unjustly enriched – i.e., that it would be unjust for them to retain the full $150,000. Ms. MacKinnon would be found to have a reasonable expectation of some remedy – despite the existence of a family arrangement. It was, of course, Ms. MacKinnon who chose to leave – and not, if I may say so, for any reason that would withstand objective scrutiny. Was it reasonable for her to expect she could unilaterally bring the arrangement to an end and claim a proprietary interest in McClure, with the resulting disruption of a forced sale? It is difficult to say she was “prejudiced” by her own decision to leave. On the other hand, would it be reasonable for the defendants to expect to retain the entire benefit of the funds and their appreciation in the real estate market?
[46] Considering objectively what the parties could have reasonably expected in light of all the circumstances when they entered into the family arrangement, I believe the trial judge erred in ruling that it constituted a juristic reason that justified the Donauers’ retaining the entire benefit of Ms. MacKinnon’s funds. At the same time, the fact the Donauers accommodated her in their home for over nine years and thus provided a benefit to her must be taken into account in fashioning the appropriate remedy for the enrichment. (As the Court stated in Kerr, ‘mutual benefit conferral’ is generally to be taken into account at this “remedy stage” of the analysis: see para. 109.)
[47] It is trite law that a proprietary remedy should not be granted unless a monetary judgment would for some reason be inadequate: see Peter v. Beblow at 997. Here, there is no indication the defendants would be unable to satisfy a monetary judgment. They own McClure; as indicated by a 2015 tax assessment, its value has appreciated; and they are presumably in a position to borrow funds if necessary. In my view, an appropriate remedy would be a money judgment that would reflect the benefit Ms. MacKinnon received in her nine years of residence in the basement suite rent-free. On the other hand, the forced sale of the property would not be a just result.
[48] In normal circumstances, I would calculate a money judgment with reference to Ms. MacKinnon’s life expectancy when she was 58 years old. I would multiply 29% of the fair market value of the house at the date of trial by a fraction the denominator of which would be the number of years the Donauers could have expected Ms. MacKinnon to be in the house from 2005 on, and the numerator of which would be that number minus nine. I would then adjust for contingencies arising on the evidence that was before the Court at trial, including the contingency she would have left the suite during her lifetime – for health reasons, for example.
[49] Unfortunately, there is no evidence before us of the life expectancy of women of the plaintiff’s age in 2005, nor of the market value of McClure as at the date of trial. I would therefore allow the appeal and direct counsel to attempt to determine that market value as at the trial date and Ms. MacKinnon’s life expectancy in 2005, and then to calculate the amount of a judgment in accordance with the foregoing – or to settle upon some other amount. If they are unable to determine or agree upon a figure within 60 days of the date of this court’s order, either party shall be at liberty to return to the Supreme Court of British Columbia, which shall determine an amount in accordance with these reasons.
[50] I would leave undisturbed the terms of the trial judge’s order regarding the $28,500.
“The Honourable Madam Justice Newbury”
I AGREE:
“The Honourable Mr. Justice Frankel”
I AGREE:
“The Honourable Mr. Justice Savage”
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