



COURT OF APPEAL FOR ONTARIO

CITATION: Farkas v. Bedic, 2016 ONCA 82

DATE: 20160128

DOCKET: C58672

Laskin, Pardu and Brown JJ.A.

BETWEEN

Mary Farkas

Plaintiff

(Respondent)

and

Nick Bedic also known as Nikola Bedic

Defendant

(Appellant)

Paul D. Amey, for the appellant

Julie K. Hannaford and D. Clarke, for the respondent

Heard: June 24, 2015

On appeal from the judgment of Justice James W. Sloan of
    the Superior Court of Justice, dated March 13, 2014, with reasons reported at
    2014 ONSC 1638.

Laskin J.A.:

A.

Overview

[1]

The appellant, Nick Bedic, and the respondent, Mary Farkas, met and
    began dating in 1994.  At the time, he was 49 and separated from his wife; she
    was 51 and a widow.  They began living together full-time in mid-1997 and
    co-habited for thirteen and one-half years before separating in early 2011. 
    During the course of their relationship, they acquired and maintained several
    properties.  Each party contributed financially and by physical labour.

[2]

When the relationship ended, Farkas sought a half interest in the
    properties or in the proceeds from their sale.  After a detailed review of the
    evidence, the trial judge found in her favour.  In doing so, he held that
    though many of the key facts were not disputed, where the evidence of Bedic and
    Farkas differed, he preferred her evidence.

[3]

On appeal, Bedic challenges the trial judges findings on two of the
    properties: the Queensway Motel and the Fairview Motel.

[4]

Bedic purchased the Queensway Motel five years before he met Farkas. 
    Later, however, Farkas gave him two loans totalling $125,000 to enable him to
    pay off two mortgages on Queensway.  In exchange for these loans, Bedic gave
    Farkas a half interest in the motel. They signed an agreement in July 1997 to
    reflect their bargain.

[5]

Bedic submits that the trial judge erred by failing to find that Bedics
    transfer of a half interest in Queensway to Farkas created a resulting trust under
    which she held her half interest beneficially for him.  He contends that under
    their agreement, she was only entitled to the repayment of her loans. 
    Alternatively, Bedic submits that the trial judge erred in finding that Farkas
    was entitled to an equal interest in the motel because his capital and labour contributions
    were far greater than hers.

[6]

Bedic purchased the Fairview Motel and took title in his name alone. 
    The trial judge, however, found that Farkas was entitled to half the value of
    Fairview, or, alternatively, a half interest in Fairview because of her contributions
    to a joint family venture. In the trial judges opinion, to hold otherwise
    would unjustly enrich Bedic at Farkas expense. Bedic submits that the trial
    judge erred in finding that Farkas had any interest in the Fairview Motel.

[7]

A final issue on which Bedic appeals is the trial judges finding that
    Bedic withdrew money from the parties joint account and failed to account for
    his withdrawals.  The trial judge awarded Farkas just under $18,000 for these
    unaccounted for withdrawals.  Bedic submits that the trial judge erred in
    making this finding.

[8]

For the reasons that follow, I would not give effect to any of Bedics
    submissions.  I would thus dismiss his appeal.

B.

The Issues

(1)

Did the trial judge err in finding that Farkas had a 50 percent
    beneficial interest in the Queensway Motel?

[9]

Bedic submits that the trial judge erred in finding that Farkas had a 50
    percent beneficial interest in the Queensway Motel.  His submission has two
    branches.  First, he argues that the 50 percent interest he deeded to her in
    1997 should revert to him by resulting trust.  Under the agreement the parties
    signed, Farkas is entitled only to be repaid the $125,000 she advanced to him,
    and, once repaid, she is required to reconvey her half interest in the motel. 
    Second, Bedic argues that if Farkas was entitled to a beneficial interest in Queensway,
    it should be far less than 50 percent as, contrary to the trial judges
    finding, his capital and labour contributions were significantly greater than
    hers.  I do not agree with either branch of Bedics submission.

(i)

Should Farkas one-half interest revert to Bedic by a resulting trust?

[10]

Bedic
    purchased the Queensway Motel in 1989.  It was a 16-room motel in Simcoe,
    Ontario.  The purchase price is in dispute.  At trial, Bedic testified that he
    paid $450,000 plus $45,000 for fixtures.  Farkas testified that Bedic told her
    the purchase price was $450,000.  In this court, Bedic contends that the
    purchase price was actually $495,000, and he relies on his lawyers reporting
    letter.  I will deal with this discrepancy when I discuss the second branch of
    Bedics submission.

[11]

When
    Bedic and Farkas first began dating, she owned her own home in Hamilton but
    stayed with him at the motel on weekends.  By mid-1997, they began co-habiting
    at the motel, and, a year later, she sold her Hamilton home.

[12]

The
    agreement on which Bedic relies was signed by the parties in July 1997.  It
    reflected Farkas two loans to Bedic.  In 1995, Bedic asked Farkas to loan him
    $30,000 to pay off his second mortgage on the motel.  She did so by increasing
    the mortgage on her own home in Hamilton.

[13]

Then,
    in 1997, Bedic told Farkas that he needed more money or he would lose
    everything.  Specifically, he asked Farkas for $100,000 to discharge the first
    mortgage on Queensway held by Income Trust, as Income Trust would not renew its
    mortgage.  Bedic said that, in exchange, he would transfer to Farkas a one-half
    interest in the motel.  Farkas agreed to give him the money.  She took out a
    $125,000 mortgage on her own home.  She used part of the proceeds to pay off
    her $30,000 mortgage and advanced to Bedic the sum of $94,951.08.  The total of
    her loans to Bedic thus amounted to about $125,000.  In July 1997, the parties
    entered into an agreement, which in its relevant terms provides as follows:

Should the relationship between Farkas and Bedic end for
    whatever reason, Bedic agrees to repay to Farkas the sum of $125,000.00 on
    demand and Farkas shall in return transfer her one half interest in the
    property to Bedic.

THE PARTIES FURTHER AGREE that if it becomes necessary to sell
    the property for whatever reason, be it by agreement of the parties, Power of
    Sale or Partition Application by either Bedic or Farkas, then Farkas shall
    receive her investment of $125,000.00 before any monies are disbursed to Bedic.

[14]

Bedic
    formally transferred a one-half interest in the motel to Farkas and a deed of
    transfer was registered on title.  In 2006, the parties sold the Queensway
    Motel for $728,000.

[15]

Bedic
    submits the agreement contemplated that he would repay Farkas loans and that
    she would reconvey her half interest to him.  In other words, she held her half
    interest for the benefit of Bedic and thus it would result to him.  I do not
    agree with this submission for three reasons.

[16]

First,
    the parties did not rely on the agreement.  At trial, Bedics lawyer admitted
    that he was not relying on  on the contents of it so much as the intention at
    the time.  At the end of the day, I dont, our case really doesnt rise and
    fall on the agreement.  And the trial judge expressly found, at para. 139,
    that Bedic himself treated the agreement as if it did not exist:

When it was suggested to [Bedic] that both parties treated the
    agreement if it didnt exist he denied that this was the case, however at
    questions 266 & 267 of his examination for discovery he indicates that they
    did treat the agreement at Ex 3 Tab B-5 as if did not exist.  When this was
    pointed out to the Defendant, he said that he probably didnt understand the
    Plaintiffs lawyer when he asked the question.  I find this answer
    disingenuous.

[17]

Indeed,
    when the motel was sold in 2006, neither party relied on the agreement.  Bedic
    did not offer to pay Farkas $125,000, and Farkas did not ask Bedic for the
    money.

[18]

Second, the facts do not support the existence of a resulting
    trust. A resulting trust is an arrangement where one person holds property for
    the benefit of another and typically is created or implied when title to the
    property is transferred to a party who did not provide any value for it.  Unless
    the transfer is held to be a gift, the party is required to return the property
    to the true owner.
Legally, the

beneficial
interest
    in

the property
    results

to the

person who

transferred legal title: see
Pecore v. Pecore
, 2007 SCC 17, [2007] 1
    S.C.R. 795, at para. 24.

[19]

Here,
    however, Farkas provided value in exchange for the equity interest in Queensway
    transferred to her. She loaned Bedic $125,000 to enable him to pay off the two
    mortgages on the motel.

[20]

Third,
    Bedics conduct does not demonstrate an intention to create a resulting trust.
    Whether a resulting trust is created or implied depends on the intent of the
    transferor at the time of transfer.  Although the transferor gives another
    person legal title to the property, the transferor does not intend the other
    person to have a beneficial interest in the property.  Thus, the other person
    holds the beneficial interest in trust for the transferor:
Pecore v. Pecore
at para. 5.

[21]

Here,
    Bedic is the transferor and it is his intent that is relevant.  His conduct,
    however, shows no intent to create a resulting trust.  Quite the contrary.  He
    treated the equity from the sale of the motel as belonging beneficially to both
    him and Farkas.  The vendor take back mortgage was registered in both their
    names.  The monthly mortgage payments were made out to both of them.  The
    cheque for the proceeds due on closing was also made out in both their names. 
    And the proceeds were deposited into a joint bank account.  The trial judge
    thus held, at para. 172:

Following the sale of the Queensway Motel, the parties treated
    the equity from the sale as belonging to each of them equally. The mortgage
    back was registered in both their names, the monthly mortgage payments were
    made out to both their names, the cheque for the net equity due to them on
    closing was made out in both their names and that cheque was deposited by the
    Defendant, into a joint bank account.

[22]

I
    would not give effect to this branch of Bedics submission.

(ii)

Did the trial judge err in finding that the parties contributed more or
    less equal amounts of capital to the Queensway Motel?

[23]

The
    trial judge found, at para. 171:

The evidence is clear that both parties put significant sweat
    equity into their first property at Queensway Motel and contributed more or
    less equal amounts of capital based on the evidence presented at this trial.

[24]

And
    he concluded, at para. 173:

Therefore, the court cannot come to any other conclusion than
    the equity from the Queensway Motel belonged to the parties equally.

[25]

In
    making this finding, the trial judge held that Bedic bought the Queensway Motel
    for $450,000 in 1989 and that the value of the motel had not changed between
    1989 and 1997, when Farkas became part-owner, as neither party presented
    evidence to the contrary. Bedic submits that both holdings are in error.

[26]

Other
    than filing his lawyers reporting letter on the purchase of the motel, Bedic
    led no evidence of the value of the motel when he had purchased it. The
    reporting letter states that the purchase price was $495,000, but it does not
    break down that amount between property and fixtures. And the trial judge had
    evidence from Farkas and even Bedic that the purchase price for the motel alone
    was $450,000.

[27]

Also,
    and importantly, Bedic led no evidence of the value of the motel in 1997. When
    asked what he thought the motel was worth in 1997, he admitted candidly that he
    did not know. Moreover, I do not think one can infer that the motel had
    increased in value between 1989 and 1997 simply because nearly a decade later
    it sold for $728,000. Without any evidence of value, the trial judge can hardly
    be faulted for assuming that the motel had not changed in value between 1989
    and 1997.

[28]

However,
    even assuming that the value of the motel was $495,000 in 1997, that value
    would not undermine the trial judges finding that the parties capital
    contributions were roughly equal. Farkas loaned Bedic $125,000 to permit him to
    discharge the two mortgages against the property. She also gave Bedic $7,000 in
    1997 to help him renovate the motel and a further $17,000 for renovations out
    of the sale of her Hamilton house in 1998. Thus her capital contributions were
    roughly $150,000. Bedics capital contributions in 1997, even assuming the motel
    was worth $495,000, were not significantly different from Farkas. In 1997, Income
    Trust held an approximately $193,000 mortgage on the motel. Bedic was
    responsible for debts of $53,500 associated with the motel. And at the time,
    his former wife still had an interest in the property. The math may not be
    exact, but however one looks at the debits and credits, the math reasonably
    supports the trial judges finding that Bedic and Farkas contributed more or
    less equal amounts of capital.

[29]

I
    would not give effect to Bedics submission on the Queensway Motel.

(2)

Did the trial judge err in finding that Bedic holds title to the
    Fairview Motel in trust for himself and Farkas equally?

[30]

Bedic
    bought the Fairview Motel in 2004 for $200,000. The motel had four rooms, when
    he bought it, and eight rooms after he renovated it.  Each room was equipped
    with a kitchenette. Bedic took title to the motel in his name alone and said
    that he bought it over Farkas objection.

[31]

The
    trial judge, however, found that Bedic holds title to Fairview in trust for
    himself and Farkas equally. He found a joint family venture in connection with
    the motel and he found that Bedic and Farkas had contributed jointly to its
    acquisition, maintenance, and improvement. To remedy what would otherwise be
    Bedics unjust enrichment, the trial judge effectively found that Farkas had a
    beneficial one-half interest in Fairview by a constructive trust. Bedic, as
    constructive trustee, was obligated to convey that one-half interest to her or
    to pay her one half the value of Fairview. The parties agreed that her one-half
    interest was valued at $112,500.

[32]

After
    referring to
Kerr v. Baranow
, 2011 SCC 10, [2011] 1 S.C.R. 269, the
    Supreme Courts seminal judgment on joint family ventures and unjust enrichment,
    the trial judge summarized his finding, at para. 177:

I therefore find that the Defendant holds the title of the
    Fairview Motel in trust for himself and the Plaintiff on an equal basis. To
    hold otherwise would allow the Defendant to be enriched where there is no
    juristic reason for such enrichment and the Plaintiff would be accordingly
    deprived.

[33]

Bedic
    submits that the trial judge erred in this finding and that he alone owns the
    Fairview Motel. I do not agree. The trial judges finding of a joint family
    venture and his award of a half interest in the motel as a remedy for Farkas
    claim of unjust enrichment are reasonably supported by the evidence. In
Kerr
    v. Baranow
, Cromwell J. wrote, at para. 85:

I conclude, therefore, that the common law of unjust enrichment
    should recognize and respond to the reality that there are unmarried domestic
    arrangements that are partnerships; the remedy in such cases should address the
    disproportionate retention of assets acquired through joint efforts with
    another person.

[34]

As
    I will discuss, on the record before him, the trial judge had ample evidence to
    find that Bedic and Farkas had a domestic partnership, a partnership in which
    they acquired, maintained, and improved several properties over the course of
    their thirteen and one-half years together. Although the trial judge expressly
    applied the concepts of joint family venture and unjust enrichment to the
    Fairview Motel alone, his reasons and his order make it evident that the
    parties joint family venture extended to the Queensway Motel and to the other
    two properties that the parties acquired jointly, Hillcrest and Clear Creek. I
    have already dealt with the Queensway Motel and Bedic has not challenged
    Farkas equal ownership of Hillcrest or Clear Creek. I turn then to the
    evidence and the trial judges findings on the Fairview Motel.

[35]

To
    obtain an award for unjust enrichment arising from a joint family venture, a
    claimant must show two things: first, a joint family venture; and second, a
    link between the claimants contribution to the venture and the accumulation of
    assets or wealth: see
Kerr v. Baranow
, at para. 87.

(i)

Joint family venture

[36]

In
    deciding whether an unmarried couple has organized their life in a domestic
    partnership or a joint family venture, Cromwell J. suggested a trial judge consider
    four factors, which, he acknowledged, overlap to some extent: mutual effort,
    economic integration, actual intent, and priority of the family:
Kerr v.
    Baranow
, at para. 89. Although the trial judge here did not expressly
    review the evidence under these factors, the evidence and his findings do show
    a joint family venture between Bedic and Farkas.

[37]

Mutual
    effort
. This factor asks whether the parties worked collaboratively
    toward common goals. Did they pool their efforts? Here, the answer is unquestionably
    yes. After Bedic bought the Fairview Motel, it needed to be substantially
    renovated. He and his brother did the renovations over the course of 18 months.
    During that time, Farkas alone ran and took care of the Queensway Motel. When
    the renovations were completed, Bedic and Farkas moved into the Fairview Motel
    and worked more or less equally to run it. Both cleaned the rooms, made the
    beds, did the laundry, and washed the floors and bathrooms. Farkas alone cooked
    the meals. She estimated that she spent five hours a day working at the motel,
    for which she was not paid.

[38]

Economic
    integration
.
This factor asks whether the parties economic
    interests were intertwined. Was there mutuality and interdependence in their
    economic relationship  for example, through the use of joint accounts  that
    prevailed over their individual interests? Again, here the answer is yes. The
    bulk of the down payment for the Fairview Motel came from the sale of the Clear
    Creek property, which Bedic and Farkas held as joint tenants. Mortgage payments
    on the vendor take back mortgage were made from the Queensway Motel account.
    Bedic discharged that mortgage in 2008, using funds from the parties joint
    account at the Royal Bank of Canada. The trial judge found, at para. 174:

There is no doubt that the Fairview Motel was purchased,
    maintained, renovated and had its mortgage discharged using joint monies which
    originated from the Queensway Motel, the vendor take back mortgage on the
    Queensway Motel and the joint cheque the parties received on closing.

That finding is fully supported by the evidence.

[39]

Actual
    intent
. The parties intent may be expressed or inferred. Bedics own
    trial counsel expressly acknowledged that Farkas was entitled to half the value
    of the Fairview Motel. Although Bedic disagrees with what his counsel said,
    that acknowledgement was before the trial judge. Moreover, the parties intent
    to maintain a domestic partnership can be inferred from their conduct. For
    example, they had business cards printed for the motel that said Your Hosts:
    Nick & Mary.

[40]

Priority
    of the family
. Bedic and Farkas did not have children together. But the
    evidence showed that throughout their relationship they gave priority to working
    together and sharing responsibilities. A telling piece of evidence showing the
    priority Farkas gave to her partnership with Bedic over her own interests was
    her decision to retire early, in 1999, from her job at the hospital, and to
    move from Hamilton to Simcoe to work alongside him in the motel business. By
    retiring early, she gave up the larger pension she would have received if she
    had continued working.

[41]

Against
    this overwhelming evidence of a joint family venture, there is scant, if any,
    evidence to suggest that while living together the parties pursued their own
    individual interests. The trial judge thus did not err in finding that Bedic
    and Farkas had a joint family venture, which included the operation of the
    Fairview Motel.

(ii)

Link between the joint family venture and the accumulation of wealth

[42]

In
Kerr v. Baranow
, Cromwell J. said that to be entitled to a remedy for
    unjust enrichment arising from a joint family venture, the claimant must show
    a link between his or her contributions to it and the accumulation of assets
    and/or wealth (at para. 100). In other words, the familys accumulation of
    wealth must have resulted from the parties mutual efforts. Cromwell J. wrote,
    at para. 102:

Once the claimant has established his or her contribution to a
    joint family venture, and a link between that contribution and the accumulation
    of wealth, the respective contributions of the parties are taken into account
    in determining the claimants proportionate share.

[43]

The
    evidence supports a link between Farkas contribution to her partnership with
    Bedic and their accumulation of wealth. And the evidence supports the trial
    judges finding that each partys proportionate share in the Fairview Motel
    should be equal. I repeat the trial judges finding, at para. 174:

There is no doubt that the Fairview Motel was purchased, maintained,
    renovated and had its mortgage discharged using joint monies which originated
    from the Queensway Motel, the vendor take back mortgage on the Queensway Motel
    and the joint cheque the parties received on closing.

[44]

And
    the trial judge added, at para. 175:

In addition, the evidence is uncontroverted that while the
    Defendant was spending his time renovating the Fairview Motel, the Plaintiff
    was essentially running the Queensway Motel on her own. The evidence is also
    clear that after the parties moved into the Fairview Motel both parties worked
    more or less equally to maintain and run the motel. No wages were paid, to
    either party.

[45]

I
    see no error in the remedy ordered by the trial judge.  I would not give effect
    to this ground of appeal.

(3)

Did the trial judge err in finding that Bedic had failed to account for
    money he withdrew from the parties joint account?

[46]

The
    trial judge found that Bedic had improperly taken money from the parties joint
    account with the Royal Bank of Canada. He said that Farkas was entitled to one-half
    the amount Bedic had taken and had not accounted for less two withdrawals she
    had benefited from. Following the trial judges calculations, Farkas was
    entitled to $17,929.48. Bedic submits that the trial judge erred in his
    finding. He maintains that the parties banking records show the money he took
    was properly accounted for. I do not accept his submission.

[47]

The
    money in question represented part of the net proceeds of sale from the
    Queensway Motel. Those proceeds had been deposited in the parties joint
    account with the Royal Bank of Canada and invested in guaranteed investment
    certificates. The trial judge recognized that Farkas had withdrawn $29,660 from
    that account in March 2010 and that she had taken another $14,000 to pay her
    capital gains tax.

[48]

The
    trial judge also found that between 2007 and 2009, Bedic had made several
    withdrawals from the joint account, which Farkas was not aware of and which
    Bedic could not satisfactorily account for at trial. The trial judge quantified
    these unaccounted for withdrawals in the amount of $93,518.96. He then deducted
    from that amount the money Farkas withdrew in March 2010, leaving withdrawals
    by Bedic exceeding those by Farkas of $63,858.96, entitling her to one half
    that amount or $31,929.48.  He gave further credit to Bedic for $14,000 he had
    paid on account of Farkass capital gains tax, for a balance owing to her of
    $17,929.48. The trial judge ordered that Bedic pay Farkas this amount.

[49]

I
    do not think it falls on this court to redo the trial judges forensic
    accounting, which led him to make the order he did. He had evidence to support
    his finding and his order. Although Bedic might be able to point to other
    evidence to support his submission, the trial judges finding was not
    unreasonable. Thus I would not give effect to this ground of appeal.

C.

Conclusion

[50]

I
    am not persuaded that the trial judge erred in his findings that Farkas was
    entitled to one-half interest in both the Queensway Motel and the Fairview
    Motel or in his finding that Bedic had failed to account for money he had
    withdrawn from the parties joint account with the Royal Bank of Canada.
    Accordingly, I would dismiss Bedics appeal. Farkas is entitled to her costs of
    the appeal, which I would fix in the amount of $25,000, inclusive of
    disbursements and applicable taxes.

Released: January 28, 2016 (J.L.)

John Laskin J.A.

I agree. G. Pardu J.A.

I agree. David Brown J.A.


