2017 ONCA 932, 2017 ONCA 932

Holtby v. Draper et al. [Indexed as: Holtby v. Draper] Ontario Reports Court of Appeal for Ontario, Weiler, van Rensburg and Huscroft JJ.A. December 1, 2017 138 O.R. (3d) 481 | 2017 ONCA 932 Case

Summary Trusts and trustees — Resulting trust — Parties incorporating company to hold husband's farm property to shelter farm from husband's creditors — Husband and wife each paying nominal consideration for 50 per cent of common shares of company — Trial judge not erring in finding that husband gratuitously transferred shares to wife and that husband was beneficial owner of those shares by way of resulting trust — Husband's objective of avoiding creditors not defeating his claim to resulting trust — Husband transferring adjoining lot first to wife as joint owner and then to wife as sole owner — Trial judge erring in finding that husband was beneficial owner of wife's 100 per cent interest in lot by way of resulting trust — Husband making out claim to resulting trust for only 50 per cent of lot.

The husband and wife began living together in 1994, at a time when the husband was engaged in matrimonial litigation with his first wife, B. They were married in 1995 and separated in 1999. In 1994, the husband owned a dairy farm, and B and he were joint owners of an adjoining lot (lot 8). He was facing potential charges of sexually assaulting his foster daughter W and a potential civil claim by W. In partial settlement of the matrimonial litigation with B, lot 8 was transferred from the husband and B to the husband and the wife as joint tenants. The wife went on title for Planning Act , R.S.O. 1990, c.

P.13 purposes. In 1996, the spectre of criminal and civil liability led the husband and wife to reorganize their financial affairs. Lot 8 was transferred from the parties jointly to the wife as the sole registered owner "for natural love and affection". The parties incorporated K Ltd. and each paid nominal consideration for 50 per cent of the common shares. K Ltd. purchased the husband's farm property and business.

In subsequent matrimonial proceedings, the trial judge found that the wife's 50 per cent of the common shares in K Ltd. and 100 per cent interest in lot 8 were beneficially owned by the husband by way of resulting trust. The wife appealed. Held , the appeal should be allowed in part.

The trial judge did not err in concluding that the transfer of the K Ltd. shares to the wife, which was the vehicle for the husband's transfer to her of 50 per cent of his interest in the farm, was gratuitous; that the husband's intention in making the transfers, namely, to defeat or delay creditors, did not determine the issue of intention as between the parties; and that the wife had not rebutted the presumption of resulting trust.

The trial judge correctly rejected the argument that there could be no resulting trust applied to K Ltd.'s assets simply because the shares were issued directly to each of the parties rather than transferred from the husband to the wife. Although the shares themselves were not transferred, the farm assets were transferred gratuitously through K Ltd. The trial judge's conclusion that the husband did not intend to confer a beneficial interest in the farm property and assets on the wife through K Ltd. was open to him on the evidence.

A motive to shield property from creditors does not itself rebut the presumption of resulting trust. The issue is always the intention of the transferor in relation to the transferee. [page482] As for lot 8, the husband had made out his claim to a resulting trust but only for 50 per cent of that property. In relation to the initial transfer to the wife as joint owner, the trial judge erred in placing the onus on the wife to rebut the presumption of resulting trust when lot 8 was registered in the parties' joint names.

Section 14 of the Family Law Act , R.S.O. 1990, c. F.3 provides that the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses intended to own the property as joint tenants. The trial judge erred in concluding that the wife received a gratuitous transfer as he failed to consider that the interest was acquired by payment to B, with funds raised on a mortgage that was mostly serviced by the wife.

Finally, the trial judge erred in failing to consider that the husband's Planning Act purpose for holding lot 8 in joint names was consistent with an intention to make the wife a joint beneficial owner. The trial judge did not err in finding that the subsequent transfer of lot 8 from the parties jointly to the wife as sole registered owner was gratuitous and that the wife had not rebutted the presumption of resulting trust. The husband's

motive for the transfer -- defeating or delaying creditors -- did not preclude his claim of resulting trust. Nussbaum v. Nussbaum, (ON SC), [2004] O.J. No. 3763, [2004] O.T.C. 805, 10 C.B.R. (5th) 54, 10 E.T.R. (3d) 223,9 R.F.L. (6th) 455 (S.C.J.); Paddock v. Paddock, [2009] O.J. No. 1258, 2009 ONCA 264, 78 R.F.L. (6th) 69, affg [2008] O.J. No. 5746,78 R.F.L. (6th) 54 (S.C.J.); Pecore v. Pecore, [2007] 1 S.C.R. 795, [2007] S.C.J.

No. 17, 2007 SCC 17, 279 D.L.R. (4th) 513, 361 N.R.1, J.E. 2007-874, 224 O.A.C. 330, 32 E.T.R. (3d) 1, 37 R.F.L. (6th) 237, EYB 2007-118938, 156 A.C.W.S. (3d) 502, consd Other cases referred to Andrade v. Andrade (2016), 131 O.R. (3d) 532, [2016] O.J. No. 2553, 2016 ONCA 368, 17 E.T.R. (4th) 173, 349 O.A.C. 330, 266A.C.W.S. (3d) 770; Cortina v. Cortina (2015), 128 O.R. (3d) 452, [2015] O.J. No. 5789, 2015 ONCA 750, 69 R.F.L. (7th) 299, 260A.C.W.S. (3d) 107; Galla v. Galla, [2015] O.J. No. 9, 2015 ONSC 37, 7 E.T.R. (4th) 216, 248 A.C.W.S. (3d) 391 (S.C.J.); Korman v.Korman (2015), 126 O.R. (3d) 561, [2015] O.J.

No. 4399, 2015 ONCA 578, 337 O.A.C. 379, 63 R.F.L. (7th) 1, 387 D.L.R. (4th) 579,256 A.C.W.S. (3d) 372; Lorenzen v. Desjardins, [2017] O.J. No. 1550, 2017 ONSC 1932 (S.C.J.); Martin v. Sansome (2014), 118 O.R.(3d) 522, [2014] O.J. No. 279, 2014 ONCA 14, 314 O.A.C. 375, 372 D.L.R. (4th) 408, 43 R.F.L. (7th) 306, 237 A.C.W.S. (3d) 452;McNamee v. McNamee (2011), 106 O.R. (3d) 401, [2011] O.J. No. 3396, 2011 ONCA 533, 69 E.T.R. (3d) 38, 280 O.A.C. 372, 335D.L.R. (4th) 704, 4 R.F.L. (7th) 13, 204 A.C.W.S. (3d) 857; Nishi v. Rascal Trucking Ltd., [2013] 2 S.C.R. 438, [2013] S.C.J.

No. 33,2013 SCC 33, 336 B.C.A.C. 50, 445 N.R. 293, 2013EXP-1994, J.E. 2013-1066, EYB 2013-223112, [2013] 8 W.W.R. 419, 88 E.T.R.(3d) 1, 45 B.C.L.R. (5th) 1, 16 B.L.R. (5th) 1, 359 D.L.R. (4th) 575, 228 A.C.W.S. (3d) 276; Rumboldt v. Cwalino, [2011] O.J. No.5830, 2011 ONSC 7487 (S.C.J.); Schwartz v. Schwartz, [2012] O.J. No. 1680, 2012 ONCA 239, 290 O.A.C. 30, 349 D.L.R. (4th) 326,214 A.C.W.S. (3d) 498; Zheng v. Jiang, [2012] O.J. No. 5024, 2012 ONSC 6043 (S.C.J.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, s. 14 [as am.] Partition Act, R.S.O. 1990, c. P.4 Planning Act, R.S.O. 1990, c.

P.13 APPEAL from the final orders of Conlan J., [2015] O.J. No. 6064, 2015 ONSC 7160 (S.C.J.) and [2016] O.J. No. 2934, 2016 ONSC3698 (S.C.J.); [page483] and the costs order, [2016] O.J. No. 4595, 2016 ONSC 5050 (S.C.J.). Aaron M. Franks and Michael Zalev, for appellant. William R. Clayton, for respondent. The judgment of the court was delivered by [1] VAN RENSBURG J.A.: — This is an appeal from final orders made after trial in matrimonial proceedings between the appellant,Cheryl Draper, and the respondent, her former husband, Ken Holtby.

The central issue in their lengthy trial, which lasted 17 days overthe course of a year, was ownership of property. [2] The trial judge concluded that Ms. Draper's 50 per cent of the common shares in Knapton Farms Ltd. ("Knapton"), a corporationholding a farm and other property, and her 100 per cent interest in 50 acres of land adjoining the farm property ("lot 8"), werebeneficially owned by Mr. Holtby by way of resulting trust. [3] Ms. Draper seeks to set aside the orders for ownership of property, and to confirm her beneficial ownership of 50 per cent of thecommon shares in Knapton and the entirety of lot 8.

She also seeks an order for the sale of lot 8, an order for Mr. Holtby's purchase ofher shares in Knapton, occupation rent for lot 8, a recalculation of the equalization payment and correction of the trial judge's valuationof the Knapton land, and an adjustment to pre-judgment interest on equalization. [4] For the reasons that follow, I would allow the appeal to the extent of declaring Ms. Draper the joint owner, together with Mr. Holtby,of lot 8, and to grant the consequential relief that flows from that finding.

I would also correct the value of the Knapton land, and direct anew calculation of equalization. [5] Briefly, I conclude that the trial judge did not err in concluding (

i) that the transfer of the Knapton shares to Ms. Draper, which wasthe vehicle for Mr. Holtby's transfer to her of 50 per cent of his interest in the farm, was gratuitous; (ii) that Mr. Holtby's intention inmaking the transfers, namely, to defeat or delay specific creditors, did not determine the issue of intention as between the parties; and(iii) that Ms. Draper had not rebutted the presumption of resulting trust. [6] As for lot 8, I conclude that Mr. Holtby has made out his claim to a resulting trust, but only for 50 per cent of this property. In relation

to the initial transfer to Ms. Draper as joint owner, the trial judge erred (

i) in placing the onus on her to rebut the presumption of resultingtrust when lot 8 was registered in the parties' joint names; (ii) in concluding that [page484] Ms. Draper received a "gratuitous" transfer,after failing to consider how the interest was acquired (by payment to Mr. Holtby's first wife, with moneys raised on a mortgage that wasmostly serviced by Ms. Draper); and (iii) in failing to consider that Mr. Holtby's Planning Act, R.S.O. 1990, c. P.13 purpose for holdingthe property in joint names was consistent with an intention to make Ms.

Draper a joint beneficial owner. [7] As for the subsequent transfer of lot 8 from Ms. Draper and Mr. Holtby jointly to Ms. Draper as sole registered owner, I agree withthe trial judge's conclusion that the transfer of Mr. Holtby's half interest was gratuitous, and that Ms. Draper did not rebut thepresumption of resulting trust. I also agree with the trial judge that Mr. Holtby's motive for this transfer, which was to defeat or delayspecific creditors, does not preclude his claim of resulting trust in the particular circumstances of this case. Background in Brief [8] Here, I will set out a brief

summary of the relevant background facts. Where additional facts are relevant, they will be addressed inthe context of the issues to which they relate. [9] Ken Holtby was a lifelong farmer, Cheryl Draper a veterinarian. They started dating in 1991, living together in 1994 and weremarried in October 1995. It was a second marriage for both parties. Mr. Holtby and Ms. Draper separated in August 1999, after fouryears of marriage. However, they continued to live near one another in separate but adjacent houses. [10] Mr.

Holtby came into the relationship with a dairy farm he purchased from his father in 1973, and his interest in lot 8, a property of50 acres that abutted the farm property and which was used in the farming operation. Lot 8 was purchased in 1982 in the joint names ofMr. Holtby and his first wife, Bonnie Holtby. [11] By 1994, Mr. Holtby was engaged in matrimonial litigation with Bonnie (from whom he had separated in 1991).

He was also facingpotential criminal charges, and, as it transpired, a civil claim, relating to his former foster child, L.W. [12] On November 30, 1994, in partial settlement of the matrimonial litigation with Bonnie, lot 8 was transferred from Mr. Holtby andBonnie to Mr. Holtby and Ms. Draper as joint tenants. The property was mortgaged for $34,200 and Bonnie was paid $26,500 (whichwas one half the market value of lot 8 at the time) from the mortgage proceeds. Ms.

Draper made most of the mortgage and property taxpayments on lot 8, including all payments after May 1996. [page485] [13] The remaining disputed issues in the Holtbys' matrimonial litigation went to trial and resulted in a judgment dated July 24, 1995.The trial judgment required Mr. Holtby to pay Bonnie an equalization payment of $175,000 plus pre-judgment interest of $23,000 (with$123,000 to be paid within 90 days and the balance on the earlier of 60 days after the last child of the marriage stopped receiving supportand seven years). Mr. Holtby appealed this judgment. [14] In October 1995, Ms.

Draper accepted a buyout from her employer. The trial judge noted that the couple were bracing themselvesfor Mr. Holtby's potential incarceration as a result of the criminal investigation, that Ms. Draper was needed on the farm and that thecouple needed money. The parties borrowed money from the Farm Credit Corporation to repay certain of Mr. Holtby's loans to provideliquidity. Mr. Holtby also sold his milk quota and some cattle. Later that month Mr. Holtby was arrested and charged with sexualoffences in relation to L.W.

He eventually pleaded guilty to one offence and was sentenced to one year in prison. [15] The trial judge found (at para. 19 [of [ 2015 ONSC 7160 , [2015] O.J. No. 6064 (S.C.J.)]), and it is not seriously disputedon appeal, that the financial commitments owing to Bonnie and the spectre of civil and criminal liability involving L.W. led to theparties' efforts to reorganize their financial affairs. They were assisted in these efforts by a lawyer and a management consultant. [16] As part of the reorganization, in May 1996, lot 8 was transferred from Mr. Holtby and Ms. Draper jointly to Ms.

Draper as the soleregistered owner "for natural love and affection". The parties also incorporated the company that later became Knapton, and by the endof August 1996 each owned 100 common shares. Knapton entered into an agreement to purchase Mr. Holtby's farm property and otherassets for various consideration. The agreement was amended and the sale closed in February 1997, after Mr. Holtby's release fromprison on parole. [17] The Holtbys' matrimonial litigation was settled on May 21, 1997 on terms that delayed the timing of the payments Mr.

Holtby wasrequired to make to Bonnie, secured by a mortgage provided by Knapton. [18] On October 1, 1997, L.W. commenced a civil action seeking $1,150,000 in damages against Mr. Holtby and an order against Ms.Draper setting aside the 1996 transfer of lot 8 as a fraudulent conveyance. In 2010, the action was settled by payment of the sum of$75,000 by Mr. Holtby and a payment of $100,000 by the Children's Aid Society of the County of Bruce, an added defendant to theaction. [page486] [19] In May 1997, Mr. Holtby transferred 400 of his class B shares in Knapton to Ms.

Draper, after she made payments to him totalling$40,000. [20] In August 1999, Ms. Draper moved to a house nearby. The parties remained close friends and took no legal action to end themarriage or resolve their financial issues in the ensuing years. By 2007, they had little to do with one another, and by 2011 Ms. Draperhad been shut out of Knapton. [21] In March 2011, the parties were divorced. In July 2011, Mr. Holtby commenced an application in the Superior Court claimingvarious relief, including equalization, an order requiring Ms.

Draper to sell her shares in Knapton to him, and a declaration that he wasthe beneficial owner of lot 8. Although not pleaded by him, by the time the trial proceeded it was clear he was asserting a claim ofresulting trust with respect to both Ms. Draper's Knapton shares and lot 8. (As an aside, I would echo this court's comments in McNameev. McNamee (2011), 106 O.R. (3d) 401, [2011] O.J. No. 3396, 2011 ONCA 533 and Martin v. Sansome (2014), 118 O.R. (3d) 522,

[2014] O.J. No. 279, 2014 ONCA 14 that in the vast majority of cases, any unjust enrichment claims that result after marriagebreakdown will be fully resolved through the application of the equalization provisions of the Family Law Act, R.S.O. 1990, c. F.3. Thiswas an unusual case in that the parties waited until long after the valuation date to resolve their financial affairs.) [22] In a decision released in November 2015, the trial judge concluded that Mr. Holtby was the beneficial owner by way of resultingtrust of Knapton (and all of its assets) and lot 8. He accepted that Mr.

Holtby had been unjustly enriched by the mortgage and propertytax payments Ms. Draper made on lot 8. He dismissed her claim for occupation rent. Finally, he invited the parties to agree onequalization, Ms. Draper's claim for payment for her class B shares in Knapton, the value of the unjust enrichment claim in respect of lot8, and costs, failing which they could re-attend. [23] The parties did not agree on any of these issues, and the trial judge, after hearing further argument, released additional reasons onJune 3, 2016. He (

i) determined the value of the farm property and certain other assets for the purpose of the parties' equalizationcalculation; (ii) fixed the payment owing to Ms. Draper in respect of Lot 8 at $61,577.02, including interest; and (iii) awarded her thesum of $49,847 including interest, in respect of her class B shares in Knapton. [24] In a decision dated August 8, 2016, the trial judge awarded costs of $100,000 in favour of Mr. Holtby. [page487] Issues and Analysis Issue 1: Did the trial judge err in concluding that Mr. Holtby was the beneficial owner of Knapton? [25] The trial judge held that Mr.

Holtby was the legal and beneficial owner of Knapton and the assets owned by that corporation. Hefound that the common shares were issued to Ms. Draper gratuitously, and that Mr. Holtby did not intend for Ms. Draper to have abeneficial interest in the assets that Knapton acquired. The presumption of resulting trust applied and Ms. Draper failed to rebut thatpresumption. [26] The trial judge concluded that, although Ms. Draper did not receive her interest in Knapton by way of a direct transfer from Mr.Holtby (she was issued the shares), a resulting trust still arose. He stated [2015 ONSC 7160 , [2015] O.J.

No. 6064 (S.C.J.)], atpara. 54: I reject the argument by [Ms. Draper's lawyer] that there can be no resulting trust applied to Knapton's assets because there was notransfer of common shares from Mr. Holtby to Ms. Draper. The transfer of ownership of the farm's assets from Mr. Holtby alone to Mr.Holtby and Ms. Draper was effected through a device -- the creation of the farm corporation. The corporation was the conduit throughwhich title/ownership of the farm's assets was conferred on Ms. Draper, through common shares. That is no different than the commonshares being formerly owned by Mr.

Holtby and then some of them transferred to Ms. Draper. The manner in which the shares wereissued in this case is similar to what happened in Paddock, supra, and both the trial judge and the Court of Appeal for Ontario in thatcase found that the resulting trust claim could be made. [27] The trial judge also accepted Mr. Holtby's evidence that he never intended to make Ms. Draper a "real" owner of the farm property,and that any mistaken belief she had was not based on anything Mr.

Holtby told her, and did not rebut the presumption of resulting trust.The trial judge also found that the incorporation of Knapton and the transfer of Mr. Holtby's assets to that corporation was a "scam" inwhich both Ms. Draper and Mr. Holtby participated, for the predominant purpose of keeping Bonnie and L.W. at bay. He observed thatboth parties benefitted from the scam: Mr. Holtby delayed recovery by his creditors temporarily, and Ms. Draper "kept her life with herhusband, on the farm" (at para. 120). [28] The trial judge rejected Ms. Draper's argument that Mr.

Holtby's intention to defeat creditors was a bar to his claim of resulting trust. [29] Ms. Draper asserts that the trial judge erred in his application of the doctrine of resulting trust to the ownership of Knapton. First,she says that there was no gratuitous transfer of property from Mr. Holtby to Ms. Draper, so the presumption of [page488] resulting trustdoes not apply. Second, she argues that Mr. Holtby's objective of avoiding claims by Bonnie and L.W. means that he came to the court"without clean hands", which defeats his claim of resulting trust. [30] I will deal with these arguments in turn.

(1) The corporate structure was a device, and there is no error in the trial judge's conclusion that the transfer to Ms. Draper wasgratuitous and without the intent to gift [31] Ms. Draper contends that there was no "transfer" of property by Mr. Holtby to her, as both parties participated in the incorporation ofKnapton, so the doctrine of resulting trust does not apply.

She further asserts that her receipt of the Knapton shares was not gratuitous:first, because she gave consideration, when she paid the $100 subscription for her shares; and second, because Knapton (in which shewas already a 50 per cent shareholder) gave fair market consideration to Mr. Holtby when it purchased the farm property and other assetsfrom him. In this sense, Mr. Holtby did not make any gratuitous transfer of property to Knapton. She contests the trial judge's reliance onPaddock v. Paddock, [2008] O.J. No. 5746, 78 R.F.L. (6th) 54 (S.C.J.), affd [2009] O.J.

No. 1258, 2009 ONCA 264, 78 R.F.L. (6th) 69. [32] In Pecore v. Pecore, [2007] 1 S.C.R. 795, [2007] S.C.J. No. 17, 2007 SCC 17, at para. 44, Rothstein J. explained that the trial judgemust commence his or her inquiry with the applicable presumption and weigh all the evidence in an attempt to ascertain, on a balance ofprobabilities, the transferor's actual intention. When a gratuitous transfer is made, the transferee has the onus to demonstrate a gift wasintended, to rebut the presumption of resulting trust: Pecore, at para. 24.

The presumption of resulting trust applies to married spouses,except that where property is held in joint ownership, the presumption is that they intended to each own one half, in the absence ofevidence to the contrary: Family Law Act, s. 14. The transferor's intention at the time of the transfer is the critical consideration: Nishi v.

Rascal Trucking Ltd . , [2013] 2 S.C.R. 438 , [2013] S.C.J. No. 33 , 2013 SCC 33 , at paras. 2 , 30 and 41. Evidence of intention that arises subsequent to a transfer must be relevant to the intention of the transferor at the time of the transfer. Its reliability must be assessed to determine weight, guarding against evidence that is self-serving or reflects a change in intention: Pecore , at para. 59 ; Andrade v. Andrade (2016), 131 O.R. (3d) 532 , [2016] O.J. No. 2553 , 2016 ONCA 368 , at para. 63 . [page489] (

i) There was no consideration [ 33 ] The first issue in a resulting trust analysis is whether the transferee gave consideration for the transfer: here, whether Ms. Draper gave consideration for the half interest she received in the farm property, through the vehicle of the corporation she and Mr. Holtby jointly owned. [ 34 ] The undisputed evidence was that (

i) Knapton was incorporated to hold Mr. Holtby's farm property and business; (ii) this was precipitated by a desire to shelter the farm assets from claims by Mr. Holtby's creditors; and (iii) Ms. Draper provided only nominal consideration of $100 for the shares she received. The fact that Ms. Draper paid the same amount as Mr. Holtby for her common shares in Knapton, $100, is immaterial in this case. This was payment for the shares, not the farm property and related assets. [ 35 ] Nor is it relevant that Knapton (not Ms. Draper) paid fair value for the farm property and other assets that were purchased from Mr.

Holtby. Mr. Holtby received consideration for the transfer of the farm assets, but this consideration did not come from Ms. Draper. Rather, the assumption of certain debts by Knapton, and the issuance of class B shares and promissory notes, were simply a restructuring of Mr. Holtby's own obligations. [ 36 ] To be sure, there was evidence that Ms. Draper's participation contributed to Mr. Holtby's financial survival. The evidence indicates that her employment income and expertise helped them to borrow money from the Farm Credit Corporation.

Nevertheless, the trial judge found that this and other contributions to the farm operations were not consideration from Ms. Draper for the Knapton transactions. 1 I also note that the Farm Credit Corporation loan pre-dated the Knapton reorganization by several months. Since the trial judge applied the correct legal test, his conclusion that no consideration flowed from Ms. Draper to Mr. Holtby ultimately relied on factual findings. And in my view, Ms. Draper has not succeeded in demonstrating any palpable and overriding error. [page490] [ 37 ] The absence of any consideration flowing from Ms.

Draper at the time Mr. Holtby entered into the agreement to transfer his farm to the corporation in which she was a co-owner of the shares is what makes the transfer gratuitous. And a gratuitous transfer creates the rebuttable presumption of a resulting trust in favour of the transferor. (ii) The intervening corporation does not interfere with the presumption of resulting trust [ 38 ] The trial judge correctly rejected the argument that there can be no resulting trust applied to Knapton's assets simply because the shares themselves were not transferred directly from Mr. Holtby to Ms. Draper.

Although the common shares themselves were not transferred, the farm assets were transferred gratuitously through Knapton. Knapton acted as a conduit through which ownership of the farm's assets was conferred on Ms. Draper, through common shares. A similar device was used in Paddock . [ 39 ] In Paddock , the issue was whether a husband's one-sixth share in a farm corporation was held in resulting trust for his wife. The wife and her three sisters inherited a farm property and related business from their parents.

When two of the sisters wanted to sell their interests, they contracted with the wife and the remaining sister and an uncle, who incorporated a numbered company to purchase the farm and shares in the related business. The shareholders in the numbered company were the wife, her sister and uncle and their respective spouses. [ 40 ] The husband gave no consideration for his interest in the shares of the numbered company, although he and the other shareholders were shown as having subscribed for $100 worth of shares.

Although the husband signed, with the wife, as a joint guarantor of a loan to the business, the trial judge concluded there was no possibility he would be called on the guarantee and that he had not given consideration for his interest. [ 41 ] At trial, the wife claimed her husband held his one-sixth interest in the numbered company in trust for her, and that she never intended to give her husband an interest in her inheritance.

The trial judge held that the fact that the shares were placed in the husband's name when all the consideration flowed from the wife, created a presumption that the husband held his common shares in trust for the wife. The presumption of resulting trust was not rebutted, as the trial judge was not satisfied that the wife intended, at the time of the transfer, to grant the husband a beneficial interest. [page491] [ 42 ] On appeal, this court held that the trial judge's finding that all of the consideration for the acquisition flowed from the wife was available on the evidence.

Therefore, the trial judge was correct in holding that the presumption of resulting trust applied and that the onus was on the husband to demonstrate that a gift of the shares was intended. [ 43 ] I reject Ms. Draper's submission that Paddock is distinguishable and ought not to have been relied on by the trial judge. Here, as in Paddock ,a corporation held the property in question. Although there was no transfer of shares from one spouse to another, the consideration for the transfer of property to the corporation came entirely from Mr. Holtby. It cannot be seriously suggested that Ms.

Draper's nominal payment of $100 for her shares in Knapton alters that conclusion. The focus of the resulting trust analysis should be not on the form but on the substance of the transaction. In this case, the substance was the transfer of Mr. Holtby's farm and other assets from Mr. Holtby to the couple, to be held jointly in a corporation. Ms. Draper's argument would require the court to examine the incorporation of Knapton and the transfer of Mr. Holtby's property to Knapton as two isolated events, rather than as parts of a single scheme.

Knapton was, as the trial judge observed, a "device", the "conduit through which title/ownership of the farm's assets was conferred on Ms. Draper through common shares" (at para. 54). [ 44 ] Therefore, in my opinion, the trial judge did not err in concluding that this case is similar to Paddock , and that there was a gratuitous transfer of the farm assets from Mr. Holtby to Ms. Draper through Knapton. The onus accordingly shifted to Ms. Draper to rebut the presumption of resulting trust and to establish on a balance of probabilities that Mr.

Holtby intended a gift to her of one half of the farm and other property he owned at the time of its transfer.

(iii) There was no error in the assessment of the evidence of intent [45] Ms. Draper argues that, in finding that she had not rebutted the presumption of resulting trust, the trial judge overlooked importantevidence of the parties' intentions. The trial judge considered and rejected as evidence rebutting the presumption of resulting trust, thecontributions of money and manual labour Ms. Draper provided to the household and farm (at para. 64). He also considered excerptsfrom Mr. Holtby's cross-examination relied on by Ms. Draper, but concluded that Mr.

Holtby's evidence as a whole made it clear that hehad no intention to make Ms. Draper a "real" owner. This was [page492] consistent with how Mr. Holtby had dealt with the farm with hisfirst wife (at paras. 60-62). Ms. Draper says the trial judge overlooked notes from the parties' meeting with the lawyer and consultantbefore Knapton was incorporated, suggesting that one of the goals (in addition to judgment-proofing Mr. Holtby) was to "protectCheryl's investment". [46] I am not persuaded that this evidence was overlooked (see para. 62). There was also no evidence that Ms.

Draper had in fact made afinancial investment that required protection at the time Knapton was formed and Mr. Holtby transferred his property into the company.Although Knapton might well have become a vehicle for Ms. Draper's investment during the course of the parties' marriage, what was atissue was the intention of the transferor (Mr. Holtby) at the time the transfer was made. [47] The trial judge's conclusion that Mr. Holtby did not intend to confer a beneficial interest in the farm property and assets on Ms.Draper through Knapton was open to him on the evidence. He accepted Mr.

Holtby's testimony about his intention, which was consistentwith how he dealt with the farm with his first wife, Bonnie. He also accepted that Mr. Holtby's primary objective was to protect hisassets from creditors. While Ms. Draper may have contributed some money and manual labour to the household and farm operation, thetrial judge concluded that in the circumstances this was insufficient to rebut the presumption of resulting trust. There is no basis onwhich to interfere with the trial judge's conclusion.

(2) Does Mr. Holtby's intention to delay his creditors defeat his claim of resulting trust? [48] Ms. Draper also asserts that Mr. Holtby's motive in transferring his assets to Knapton, which was to defeat or delay creditors, is a barto his resulting trust claim. She argues that Mr. Holtby is not entitled to the intervention of equity when he comes to the court without"clean hands", that is, when he entered into the transaction for an "illegal" purpose. [49] This argument was rejected at trial.

The trial judge stated that he was not aware of any authority for the proposition that an illegal orimproper purpose for a gratuitous transfer amounts to an automatic bar to the finding of a resulting trust. He referred to case law,including Nussbaum v. Nussbaum, (ON SC), [2004] O.J. No. 3763, 9 R.F.L. (6th) 455 (S.C.J.), as suggestingotherwise. [50] I agree with Ms. Draper's submission that the transfer was designed to defeat specific creditors.

However, I disagree [page493] that,read as a whole, the trial judge's reasons failed to recognize this fact and its implications for the issue of intent. [51] The timing of the incorporation of Knapton and Mr. Holtby's transfer of his property to that corporation demonstrate that he wasattempting to obtain an advantage in his matrimonial litigation, by reducing the amount he was to pay to his former wife or delayingpayment to her. He was also facing imminent claims from L.W. Although the trial judge stated that the transfer was to judgment-proofMr.

Holtby, in the same paragraph he said that the "predominant purpose" was to keep Bonnie and Ms. W. "at bay" and "to frustrate theclaims of Mr. Holtby's creditors generally, including those already materialized on the part of Bonnie, and even more important, thoseabout to be launched by . . . Ms. W." (at para. 115).

While he may have suggested otherwise at one point in his judgment, the trial judgerecognized that the transfer was designed to frustrate specific creditors, and the evidence amply supports this conclusion. [52] The trial judge suggested that it was relevant that no creditor was actually prejudiced by the transfer (at para. 52). This appears to bebased on the fact that money was paid by Mr. Holtby to each of these creditors. Assuming, without deciding, that actual prejudice to acreditor may be relevant, it existed here.

The Knapton transaction was undertaken to delay specific creditors and they were in factdelayed. Mr. Holtby appealed his matrimonial judgment and ultimately delayed the payments owing to Bonnie. He settled with L.W.more than a decade after she commenced her action, in the course of which he swore that Ms. Draper had bought into, and was hisbeneficial partner in Knapton. [53] That said, there is no error in the trial judge's conclusion that as a matter of law, the intention to defeat creditors did not defeat Mr.Holtby's resulting trust claim.

Although the general rule is that a party cannot rely on his or her own "illegality" in claiming a resultingtrust or other equitable remedy, the intention of the parties is always a question of fact to be determined from the evidence.

Whileevidence of an intention to defeat creditors can be evidence of a gift, it is not conclusive. [54] This was explained in Nussbaum by Karakatsanis J. (as she then was), at para. 32, as follows: Even following the amendment of the Family Law Act to provide for a presumption of resulting trust between spouses, there is a line ofcases . . . where the court has found that the specific intention to evade creditors means an implied intention to deprive oneself ofbeneficial ownership. . . . The intent to gift defeats the presumption of resulting trust.

In my view these cases do not undermine theprinciple that an illegal purpose is not a bar where the claimant may rely upon the resulting trust to establish his claim. [page494] Aswell these cases do not override the principle that the parties' intentions at the time of the conveyance are a question of fact to bedetermined upon the evidence. The cases do not purport to impose a "constructive" intention of gift where there is an illegal purpose todefraud creditors.

While evidence that someone intended to fully evade creditors can be evidence that they intended to gift their entireinterest in the property, the intention of the parties is a question of fact to be determined from all of the evidence. (Citations omitted) [55] This passage has been followed and approved of in a number of cases: see Schwartz v. Schwartz, [2012] O.J. No. 1680, 2012 ONCA239, 349 D.L.R. (4th) 326, at para. 43; Korman v. Korman (2015), 126 O.R. (3d) 561, [2015] O.J. No. 4399, 2015 ONCA 578, 387D.L.R. (4th) 579, at paras. 26 and 38; and Andrade, at paras. 93 and 94.

A motive to shield property from creditors does not itself rebut

the resulting trust presumption. The issue is always the intention of the transferor in relation to the transferee. [ 56 ] For these reasons, I would not interfere with the trial judge's conclusion that the purpose of the Knapton structure (to avoid or delay the claims of specific creditors) did not rebut the presumption of resulting trust on the specific facts of this case. Issue 2: Did the trial judge err in concluding that Mr. Holtby was the beneficial owner of lot 8? [ 57 ] The 50 acres comprising lot 8 were originally held by Mr. Holtby and his first wife Bonnie in their joint names.

In November 1994, lot 8 was transferred from Mr. Holtby and Bonnie as joint owners to Mr. Holtby and Ms. Draper as joint owners, for consideration of $26,500. Then in May 1996, Mr. Holtby transferred his interest in lot 8 to Ms. Draper "for natural love and affection", making her the sole registered owner of the property. [ 58 ] The trial judge accepted Mr. Holtby's argument that Bonnie's 50 per cent interest in lot 8 had been transferred to Ms. Draper without consideration to avoid merger with the adjacent farmland under the Planning Act . He stated that the only reason Mr.

Holtby had placed first Bonnie and then Ms. Draper on title was to avoid "any merger with the adjacent farmland in the name of [Mr. Holtby] alone" (para. 74). The trial judge found that the remaining interest was transferred to Ms. Draper alone to judgment-proof Mr. Holtby. The trial judge held that Ms. Draper did not pay anything for the transfer of lot 8 and he accepted Mr. Holtby's evidence that he did not intend to gift the property to Ms. Draper. As such, the trial judge concluded that Mr.

Holtby was the sole beneficial owner of lot 8. [ 59 ] The trial judge accepted and described as an "uncontested reality" that Ms. Draper paid the mortgage on lot 8 (paras. 81 and 92) [page495] but held that this did not displace the presumption of resulting trust. Instead, he accounted for her payments by allowing her unjust enrichment claim, valued at $61,577.02 including interest. [ 60 ] Ms. Draper contends that the trial judge made a number of errors in concluding that the transfers in relation to lot 8 were gratuitous. She relies here too on Mr.

Holtby's "illegal purpose" of attempting to defeat his creditors as a bar to his claim in respect of the 1996 transfer. [ 61 ] I would give effect to Ms. Draper's claim that the initial transfer in 1994 was not a gratuitous transfer of a half interest in lot 8 from Mr. Holtby, and I accept that the intent at that time was that she become a beneficial half-owner. As for the transfer in 1996 of Mr. Holtby's half interest in the property, I agree with the trial judge that this was gratuitous and that Ms. Draper has not rebutted the presumption of resulting trust.

(1) Lot 8: The first transfer [ 62 ] The first transfer, in 1994, took place when Ms. Draper stepped into the shoes of Bonnie and became a registered owner of lot 8 in joint ownership with Mr. Holtby. The transfer was stated on the deed to have been for the sum of $26,500, which was one half of the appraised market value of lot 8. The entire amount was paid to Bonnie, from the proceeds of a loan secured by a mortgage against lot 8 that was serviced by Ms. Draper. [ 63 ] There were three errors in the trial judge's analysis. [ 64 ] First, the trial judge reversed the presumption under s. 14 of the Family Law Act in dealing with the initial lot 8 transfer.

Section 14 provides that the fact that property is held in the name of spouses as joint tenants is proof, " in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants " (emphasis added). Joint tenancy creates a rebuttable presumption of joint beneficial ownership, subject to a consideration of "evidence to the contrary": Cortina v. Cortina (2015), 128 O.R. (3d) 452 , [2015] O.J. No. 5789 , 2015 ONCA 750 , at para. 18 . See, also, Rumboldt v. Cwalino , [2011] O.J. No. 5830 , 2011 ONSC 7487 (S.C.J.) , at para. 64 ; Zheng v. Jiang , [2012] O.J.

No. 5024 , 2012 ONSC 6043 (S.C.J.) , at paras. 16-17 ; Galla v. Galla , [2015] O.J. No. 9 , 2015 ONSC 37 (S.C.J.) ; and Lorenzen v. Desjardins , [2017] O.J. No. 1550 , 2017 ONSC 1932 (S.C.J.) , at para. 172 . [ 65 ] The point of departure in considering the initial transfer to Ms. Draper is that the parties became joint registered owners of lot 8, which, once they married in October 1995, created [page496] a rebuttable presumption in favour of joint tenancy. As such, Mr.

Holtby was not entitled to rely on a presumption of resulting trust, and he had the onus of establishing, by evidence to the contrary, that his intention was not to transfer a beneficial interest to Ms. Draper. [ 66 ] Second, there are problems with the trial judge's conclusion that the transfer to Ms. Draper was gratuitous. The trial judge characterized the transfer as gratuitous because it was Mr. Holtby and not Ms. Draper who paid Bonnie for her interest. This is not supported by the evidence. While the payment was made to Bonnie to satisfy Mr.

Holtby's obligations in the matrimonial proceedings, the source of the payment was the proceeds of a loan secured by a mortgage on lot 8. Ms. Draper was on the mortgage with Mr. Holtby, and she made the mortgage payments. Far from "evidence to the contrary" to rebut a presumption of joint ownership, this is evidence that supports joint ownership. [ 67 ] Mr. Holtby's contention that he had always been the beneficial owner of lot 8, even when he and Bonnie initially acquired the property as joint owners is also not "evidence to the contrary".

Although accepted by the trial judge, as evidence of intention, this is actually inconsistent with the fact that Bonnie was paid fair market value for her half interest in lot 8 as part of the matrimonial proceedings. [ 68 ] Finally, I turn to the trial judge's conclusion about the reason for putting lot 8 into the parties' joint names. Unlike with Knapton, here the motive was not to defeat creditors. Rather, the trial judge accepted that, just as Bonnie was on title for Planning Act purposes, so was Ms. Draper. He specifically accepted the evidence of the solicitor who effected the conveyance that Ms.

Draper went on title as a joint owner of the 50 acres for Planning Act purposes. [ 69 ] Ms. Draper argues that the Planning Act argument does not assist any finding of resulting trust and if anything contradicts it. I agree. To achieve the intended goal under the Planning Act , it was necessary for beneficial ownership of lot 8 to be different from the beneficial ownership of the farm property. This is consistent with the presumption of joint ownership and in no way refutes it.

[ 70 ] For these reasons, I disagree with the trial judge's conclusion that Mr. Holtby was the beneficial owner of lot 8 by way of resulting trust at the time of the initial transfer of the property from Bonnie and Mr. Holtby to Ms. Draper and Mr. Holtby in 1994. [page497]

(2) Lot 8: The second transfer [ 71 ] The second transfer occurred in 1996, as part of the parties' efforts to protect Mr. Holtby's property from the claims of specific creditors. This finding is not challenged by Ms. Draper, nor does she assert that she gave consideration for her receipt of Mr. Holtby's 50 per cent interest in lot 8. [ 72 ] The presumption of resulting trust applies to this transfer. The effect of the transfer was to make Ms. Draper the registered owner of the entire property, for no additional consideration. The transfer of Mr. Holtby's half interest was gratuitous.

While it was "for natural love and affection", the trial judge found that Mr. Holtby's actual intent was to defeat creditors. Ms. Draper does not disagree with this but rather argues that Mr. Holtby should not be able to rely on the doctrine of resulting trust because of his "illegal" purpose of defeating creditors. This is answered by the discussion at paras. 53 to 55 of these reasons. Because Mr. Holtby relies on the presumption of resulting trust, which has not been rebutted by Ms. Draper, there is no impediment to the intervention of equity and the success of his claim.

(3) Lot 8: Sale, occupation rent and other payments [ 73 ] It follows from the conclusion that the parties are joint owners of lot 8 that Ms. Draper is entitled to an order for the sale of this property under the Partition Act , R.S.O. 1990, c. P.4. Lot 8 shall be listed for sale and sold with the net proceeds divided equally between the parties. It is expected that the parties will co-operate in the sale process so that it can be effected without delay. Any issues that arise in the sale process that the parties are unable to resolve, shall be addressed before the Superior Court. [ 74 ] Ms.

Draper claims occupation rent for Mr. Holtby's exclusive use of lot 8 since separation. The amount claimed at trial was $80,626.50, covering a period from 1999 to 2015, based on expert opinion evidence, and assuming that Ms. Draper was the sole owner of lot 8. The trial judge stated that "[t] here is no serious dispute that, but for the resulting trust claims advanced by Mr. Holtby, Ms. Draper would be entitled to some compensation for the fact that Mr. Holtby . . . had exclusive use of the 50 acres for many years" (at para. 82). [ 75 ] Ms.

Draper contends that, if she is the owner of one half of lot 8, then she has made out a claim for occupation rent of one half of the amount claimed at trial, which is $40,313.25. The [page498] only argument advanced by Mr. Holtby in opposition to the claim is that she delayed in making the claim. [ 76 ] In my view, Ms. Draper should be entitled to occupation rent to reflect Mr. Holtby's sole use of lot 8 between the date of separation and trial. The amount she seeks is reasonable and fully supported by the evidence she tendered at trial.

The trial judge apparently accepted the validity of the claim, but for the resulting trust finding. The delay argument is rebutted by the evidence that Ms. Draper raised the issue of compensation for Mr. Holtby's use of lot 8 post-separation, and he accepted her claim by agreeing to pay "some rent". Accordingly, I would award Ms. Draper $40,313.25 for occupation rent, plus pre-judgment interest. [ 77 ] In their submissions on appeal, the parties did not address what would happen to the trial judge's award of damages for unjust enrichment for payments Ms. Draper made in relation to lot 8, that were premised on Mr.

Holtby's sole ownership of the property. Given this court's conclusion that Ms. Draper is a joint owner of lot 8, that award of damages cannot be sustained. However, Ms. Draper may be entitled to reimbursement from Mr. Holtby for certain payments she made. If the parties are unable to agree, they may provide submissions to this court, as directed below. Other issues on appeal

(1) Equalization [ 78 ] The equalization payment will need to be recalculated to reflect Ms. Draper's interest in lot 8. All of the trial judge's other findings in relation to equalization continue to bind the parties. There is, however, one exception. The parties recognize that the trial judge erred in calculating the valuation date value of the farm real estate owned by Knapton for the purpose of equalization. [ 79 ] The trial judge found that the value of the farm when the parties married in 1995 was $217,000.

He determined that the value would have increased by 16 per cent, bringing the value of the real estate to $252,000 on the date of separation. Noting that the property was worth more than $285,000 on the date of separation, the trial judge added $48,000 to the figure of $252,000, for a total value on the date of separation of $300,000. [ 80 ] It is clear from the record, and the parties agree, that the trial judge erroneously selected $217,000 as the value of the Knapton real estate at the time of marriage, because it does not include the matrimonial home.

The value of the matrimonial [page499] home was $68,000 in 1995, bringing the true value of the real estate in 1995 to $285,000. Adding 16 per cent brings the value of the real estate owned by Knapton to $330,600 on the date of separation. [ 81 ] Ms. Draper says a further $48,000 should be added to this amount. I agree with Mr. Holtby that there is no reason to do so. The trial judge added the sum of $48,000 to account for the difference between his calculation that the real estate was worth $252,000 on the date of separation (which as noted above was a mistake), and Mr.

Holtby's testimony that the value of the property on the date of separation was more than $285,000 -- that is, more than it was in 1995. The value of the property on the date of separation, using the correct value of the property in 1995 and the 16 per cent increase in value, is $330,600. This is the correct value that is to be used in the new equalization calculation.

(2) Pre-judgment interest [ 82 ] The trial judge determined that pre-judgment interest would run from the date of separation (in August 1999) on the amounts Mr. Holtby was required to pay Ms. Draper for her class B shares in Knapton, and for his unjust enrichment in respect of lot 8. He determined

that pre-judgment interest on the equalization payment, however, should run from August 1, 2007. Ms. Draper submits that it was an error for the trial judge to select a different commencement date for equalization, which ought to have run from the date of separation. [ 83 ] I would not interfere with the trial judge's determination that pre-judgment interest on equalization would run from August 1, 2007.

Although the parties ultimately agreed on a separation date of August 19, 1999, the trial judge noted that, but for that agreement, there was a good chance he would have found that the parties had separated sometime in 2007 (at para. 23). The litigation was commenced in 2011. The parties had waived any applicable limitation period defences (at para. 4). In the circumstances of this case, it was a reasonable exercise of discretion to order that pre-judgment interest on equalization would run from August 1, 2007.

Conclusion and Disposition [ 84 ] For these reasons, I would allow the appeal in the terms set out herein. [ 85 ] In her amended amended notice of appeal, Ms. Draper sought to appeal the trial judge's order respecting trial costs. Given that no argument on costs was asserted in the factum or [page500] in oral argument, it appears that Ms. Draper's position is that the trial costs award should be revisited if her appeal is allowed. [ 86 ] If the parties are unable to agree on recalculating the equalization payment to reflect Ms.

Draper's interest in lot 8 and the adjusted value of Knapton, or on costs of the appeal and in the court below, they may make written submissions, limited to five pages each, not including any costs outlines, as follows: Ms. Draper within 20 days of these reasons, Mr. Holtby within 15 days of receipt of Ms. Draper's costs submissions, with reply submissions, if any, within ten days thereafter. In the absence of agreement on the amount of pre-judgment interest on the occupation rent, and reimbursement for payments toward lot 8 made by Ms.

Draper, the parties may provide with their costs submission their respective positions on these issues for this court to determine. Appeal allowed in part. Notes 1 The trial judge also noted that, although a claim for constructive trust was originally asserted by Ms. Draper in relation to her contributions to the farm operation and household, she did not press this claim at trial. The trial judge held that there was no unjust enrichment, as each party paid for certain things. See paras. 105, 113 and 114. No such claim is asserted on appeal. End of Document