



COURT OF APPEAL FOR ONTARIO

CITATION: Spencer v. Riesberry, 2012
    ONCA 418

DATE: 20120619

DOCKET: C54366

MacPherson, Gillese and Ducharme JJ.A.

BETWEEN

Sandra Lynn Spencer

Applicant
    (Respondent in Appeal)

and

Derek Lawrence Riesberry

Respondent
    (Appellant in Appeal)

and

Linda Spencer and the Spencer Family Realty Trust

Added
    Respondents (Respondents in Appeal)

Robert Ballance, for the appellant

Jean Marentette, for the respondent Sandra Spencer

Marcela Aroca and Thomas MacKay, for the respondents Linda
    Spencer and the Spencer Family Realty Trust

Heard: May 11, 2012

On appeal from the order of Justice Scott K. Campbell of
    the Superior Court of Justice, dated August 10, 2011, with reasons reported at
    2011 ONSC 3222.

Gillese
    J.A.:

[1]

A woman bought a house (the property) and settled it on trust for
    herself and her four children.  She later settled an additional three
    properties on the trust (the other trust properties).  One of her daughters
    married and had two children.  During the marriage, the daughter and her family
    lived in the property.  Each of the other three children and their families
    were treated similarly by being permitted to live in one of the other trust
    properties.

[2]

Section 18(1) of the
Family Law Act
, R.S.O. 1990, c. F.3 (the 
FLA
)
    reads as follows:

18.(1)  Every property in which a person has an
    interest and that is or, if the spouses have separated, was at the time of
    separation ordinarily occupied by the person and his or her spouse as their
    family residence is their matrimonial home.

[3]

Does the daughter have an interest in the property within the meaning of
    s. 18(1) of the
FLA
?  The trial judge held that the answer to that
    question is no.

[4]

The court agrees with the trial judge.  After hearing the appellant, the
    court dismissed the appeal and promised that reasons would follow.  These are the
    promised reasons.

OVERVIEW

[5]

Linda Spencer has four children, one of whom is Sandra Lynn Spencer, the
    respondent in this appeal.

[6]

On March 18, 1993, Linda Spencer bought the property, 14146 Riverside
    Drive in St. Clair Beach, Ontario.  That same day, she executed a trust
    agreement (the Trust Agreement) in which she established the Spencer Family
    Realty Trust (SFRT) in favour of herself and her four children.  She was the
    named trustee.  The preamble to the Trust Agreement stated that Linda Spencer
    bought the property in trust for the benefit of herself and her four children. 
    Article 1.1 defined the trust property as the property plus any additional
    property that might be contributed to the SFRT.  It also provided that any distribution
    pursuant to the Trust Agreement was not to form part of the recipients net
    family property (the Proviso to art. 1.1).

[7]

The respondent married Derek Lawrence Riesberry (the appellant) in
    1994.  They had two children.  After the property was purchased in 1993, the
    parties resided in it, apart from a two-year period during which a new house
    was built on the property.  They did not pay rent during the time they resided
    in the property but they did pay expenses associated with it, such as taxes,
    insurance, utilities and maintenance.

[8]

On December 1, 2005, the Trust Agreement was amended to change the
    trustee from Linda Spencer to her daughters, Lori Fisher and the respondent. 
    At various times, Linda Spencer purchased three other properties and made them
    part of the subject-matter of the SFRT.  Just as the respondent and her family
    were permitted to live in the property, so too each of the respondents three
    siblings and their families were permitted to live in one of the other trust
    properties.

[9]

After the appellant and respondent separated in August of 2010, Linda
    Spencer gave notice to vacate, as she intended to take possession of the
    property.  The respondent and one child vacated but the appellant and the other
    child remained in the property.

[10]

The
    respondent began divorce proceedings.  Questions about the Trust Agreement and
    the respondents interest in the property arose in the course of those
    proceedings.  The appellant added Linda Spencer and the SFRT as respondents in
    the matrimonial proceedings (the SFRT respondents).

[11]

In
    April of 2011, in the course of two endorsements, Quinn J. directed the trial
    of an issue to determine whether the Trust Agreement excluded the property from
    the respondents net family property (the Quinn J. endorsements).

[12]

Justice
    Scott K. Campbell (the trial judge) conducted the trial on May 24, 2011.  By
    order dated August 10, 2011, he ordered that: (1) the property is not a
    matrimonial home within the meaning of the
FLA
; (2) the Proviso to
    art. 1.1 is a condition subsequent that is void for uncertainty; (3) the
    respondents interest in the SFRT is an asset within the meaning of the
FLA
;
    and, (4) evaluations of the respondents interest in the SFRT shall be
    undertaken as part of the equalization calculation.

[13]

In
    this appeal, the appellant challenged only the first determination, namely,
    that the property is not a matrimonial home within the meaning of the
FLA
.

[14]

The
    court dismissed the appeal.

THE QUINN J. ENDORSEMENTS

[15]

The
    appellant challenged the jurisdiction of the trial judge to make the first
    determination in the order under appeal.  Thus, it is necessary to carefully
    consider the Quinn J. endorsements.

[16]

On
    April 14, 2011, Quinn J. directed the trial of an issue to determine whether
    the Trust Agreement excluded the property from the net family property
    definition of the
FLA
.  Paragraph 8 of his reasons contains his ruling
    on this matter.  It reads as follows.

Counsel for the [respondent] and Linda Spencer and the Spencer
    Family Realty Trust have argued that the trust agreement and its amendment
    excludes the trust property from the net family property definition of the
Family
    Law Act
. The [appellant], Derek Riesberry, has argued that the trust
    agreement and its amendment does not exclude the trust property (family
    residence or interest in trust) from the net family property definition of the
Family
    Law Act
. This application will not move forward until this court rules on
    the trust agreement. The
Family Law Rules
(16(1)) provide for a motion
    for summary judgment on part of a claim.
The Family Law Rules
16(8)
    and (9) provide for the court deciding a question of law and giving directions
    if necessary. In my judgment, the trust agreement interpretation is a pure
    question of law. The trust agreement and the amendment should be all that is
    necessary for the interpretation. The question to be answered by the court is
    set out in Article 1.1 of the trust agreement. Once this court makes a ruling
    on the trust, valuations, if necessary, can be conducted and any other motions
    flowing from the courts ruling can be launched.

[17]

In
    reasons dated April 29, 2011, Quinn J. reiterated that the trial was to resolve
    whether the Trust Agreement excludes the property from the provisions of the
FLA
and whether the respondent had a property interest in the SFRT that should be
    included in her net family property.

THE TRIAL DECISION

[18]

The
    trial judge first considered the Quinn J. endorsements.  He stated that the
    trial had begun with a discussion of what issues were to be decided by it.  He
    noted that the parties factums all stated the issues differently.

[19]

The
    trial judge concluded that there were two issues to be resolved, namely:

i.

Does the Trust Agreement exclude the property from the provisions of
    the
FLA
?

ii.

Does the respondent have a property interest in the SFRT that should be
    included in her net family property?

[20]

In
    deciding the first issue, the trial judge focussed on s. 18(1) of the
FLA
.  
    He noted that there is no question that the property was a family residence: it
    was regularly occupied by the appellant and the respondent and their children,
    and it was their home at the time of their separation.  There was no suggestion
    that they occupied any other residence as their family home.  Thus, the issue
    was whether the respondent had an interest in the property within the meaning
    of s. 18(1).

[21]

The
    trial judge held that the respondent has a contingent beneficial interest in
    the SFRT, whatever that might be on the death of Linda Spencer.  She has,
    however, no interest in any specific property held by the SFRT.  Therefore, he
    concluded, she did not have an interest in the property within the meaning of
    s. 18(1) of the
FLA
.  In reaching this conclusion, the trial judge
    relied on the decision of Panet J. in
Clarke v. Read Estate

(2000),
    12 R.F.L. (5th) 305 (Ont. S.C.J.).

[22]

The
    trial judge then considered the second issue, namely, whether the respondents
    interest in the SFRT is to be included in her net family property.  In
    concluding that it is, he relied on s. 4(1) of the
FLA
, which defines
    net family property, and caselaw in which the courts have held that a beneficial
    interest in a trust, whether vested or contingent, is property and to be
    included when determining a persons net family property.

[23]

Thereafter,
    the trial judge ruled on the nature of the Proviso to art. 1.1 of the Trust
    Agreement.  This part of the order below has not been appealed, so there is no need
    to recount the trial judges reasoning on this point.

[24]

The
    trial judge concluded by stating that the property is not a matrimonial home
    within the meaning of the
FLA
.

THE ISSUES

[25]

This
    appeal raises two issues:

1.

Did the trial
    judge err in finding that, at the date of separation, the respondent did not
    have an interest in the property within the meaning of s. 18(1) of the
FLA
?

2.

In determining
    that the property was not a matrimonial home within the meaning of the
FLA
,
    did the trial judge exceed the scope of the issue to be decided?

THE RELEVANT PROVISIONS OF THE TRUST AGREEMENT

[26]

The
    preamble to the Trust Agreement reads as follows:

WHEREAS the Settlor has acquired certain real property in trust
    for the benefit of herself and her children, WILLIAM GREGORY SPENCER of the
    Town of St. Clair Beach, in the County of Essex and Province of Ontario and
    SANDRA SPENCER of the Town of St. Clair Beach, in the County of Essex and
    Province of Ontario and LORI SOROKOPAS of the Town of LaSalle, in the County of
    Essex and Province of Ontario and CONNIE JEFFERY of the Municipality of
    Metropolitan Toronto, in the Province of Ontario, (hereinafter called the
    Beneficiaries), and has taken title to the real property listed in Schedule
    A annexed hereto, and may hereafter transfer or cause to be transferred to
    the Trustee other real or personal property, all of which is to be held by the
    Trustee, upon the trusts, and subject to the powers and provisions hereinafter
    declared and contained.

[27]

Article
    1.1 of the Trust Agreement defines the subject matter of the trust as the property
    and any other property vested in the trustee.  The Proviso to art. 1.1 states
    that any distribution shall not form part of the recipients net family property
    for the purposes of the
FLA
.  Article 1.1 reads as follows:

1.1  Trust Property shall [be] the land [and] premises
    described in Schedule A annexed hereto and form a part of this Declaration of
    Trust, and any further or additional real or personal property which the
    Settlor, or any other person may donate to or vest or cause to be vested in the
    Trustees, to be held upon the trusts, and with and subject to the powers and
    provisions hereof and any property substituted therefor. PROVIDED however, that
    any benefit whether as to income or capital or both, or income from capital or
    proceeds to which any person shall become entitled in accordance with the
    provisions of this Trust Agreement shall not fall into any community of
    property which may exist between any such person and his or her spouse, and
    shall not form part of his or her net family property for the purpose or
    purposes of the
Family Law Act
(Ontario), and any amendments thereto
    or any successor legislation thereto, but shall only be paid by the Trustee to
    such person on the condition that the same shall remain separate property of
    such person, free from the control of his or her spouse and the separate
    receipt of such person shall be a discharge to the Trustee of such payment.

[28]

Article
    3.1 stipulates that: the trust property is to be held in trust for the benefit
    of Linda Spencer and her four children; Linda Spencer has the right to use the
    trust property during her lifetime; and, on Linda Spencers death, the trust
    property is to be divided into equal shares for the children alive at her
    death.  It reads as follows:

3.1  The Settlor gives the Trust Property to the Trustee upon
    the following trust:

(a)

The Trustee shall hold the Trust
    Property in trust for the Beneficiaries subject to a life interest in favour of
    Linda Spencer to use the Trust Property during her lifetime;

(b)

Upon the death of Linda Spencer,
    the Trustee shall divide the Trust Property into a number of equal parts so
    that there is one part for each Beneficiary living at the death of Linda Spencer.

[29]

Article
    6.1 makes the trust irrevocable.  It reads as follows:

6.1 The Settlement hereby made shall be irrevocable by the
    Settlor and notwithstanding anything herein expressed or implied, no part of
    the capital or income of the Trust Property shall be paid or lent or applied
    for the benefit of the Settlor in any manner or in any circumstances
    whatsoever.

A PRELIMINARY COMMENT

[30]

As
    has been noted, the trial judge interpreted the Proviso to art. 1.1 of the
    Trust Agreement as having created a condition subsequent whose intent was to
    defeat the effect of the
FLA
.  He struck down the condition subsequent
    as being void for uncertainty.

[31]

This
    aspect of the order below has not been appealed.  Nothing in these reasons is
    to be taken as approving this aspect of the decision below.

AT THE DATE OF SEPARATION, DID THE
    RESPONDENT HAVE AN INTEREST IN THE PROPERTY WITHIN THE MEANING OF S. 18(1) OF
    THE
FLA
?

[32]

The
    appellant submits that the trial judge erred in finding that the respondent did
    not have an interest in the property within the meaning of s. 18(1) of the
FLA
. 
    He makes the following three arguments in support of this submission:

(1)

the respondents interest as a
    beneficiary of the SFRT was sufficient to establish an interest in the property
    within the meaning of s. 18(1);

(2)

the respondents role as a trustee
    of the SFRT, combined with her beneficial interest in the SFRT, was sufficient
    to establish an interest in the property within the meaning of s. 18(1); and

(3)

enforcing the notion of the separate
    entities of trustee and beneficiary will defeat the desired effect of the
FLA
and the special treatment afforded a matrimonial home in that legislation.

[33]

As
    I will explain, I do not accept this submission or any of the arguments
    advanced in support of it.

1.
The Respondents Interest as a Beneficiary of the SFRT

[34]

The
    trial judge held that the respondent has a contingent beneficial interest in
    the SFRT trust property as a whole, whatever that might be on the death of
    Linda Spencer.  While the four residences are currently the subject matter of
    the SFRT, the respondent as a beneficiary has no property interest in any
    specific trust asset.  Therefore, she has no specific legal interest in the
    property within the meaning of s. 18(1) of the
FLA
.

[35]

I
    agree with the trial judge.

[36]

The
    Preamble to the Trust Agreement defines the beneficiaries as Linda Spencer and
    her four children.  Article 3.1 of the Trust Agreement provides that on the
    death of Linda Spencer, those of her children who are alive will be entitled to
    equal shares in the trust property.  As the respondents entitlement under the
    SFRT is conditional on her being alive at the time of her mothers death, the
    trial judge correctly found that the respondent has a contingent beneficial
    interest in the assets of the SFRT.

[37]

Unless
    the terms of the trust expressly provide otherwise, a beneficiary has no
    property interest in any specific asset of the trust, prior to or absent an
    appropriation of such asset to the beneficiary by the trustee: see
Gennaro v
.
Gennaro
(1994), 111 D.L.R. (4th) 379 (Ont. Unif. Fam. Ct.).

[38]

In
Gennaro
, Vita Gennaro owned a house on Case Street.  Under her will, she
    named her son Angelo the trustee of her estate.  As trustee, Angelo was given
    wide powers of sale and administration.  Angelo and his two siblings were the
    residuary beneficiaries of their mothers testamentary trust.  After Ms. Gennaro
    died, Angelo and his wife lived in the Case Street property until they
    separated.

[39]

Justice
    Steinberg held that the will did not vest any specific property in any of the
    heirs. No beneficiary under the trust, including Angelo, could rely on
    receiving a conveyance of any interest in the Case Street property. 
    Accordingly, Angelo did not have an interest in the Case Street property within
    the meaning of s. 18(1) of the
FLA
.

[40]

Justice
    Panet reached the same result in
Clarke
.  In
C
larke
,
    prior to her marriage, a woman conveyed title to her personal residence to a
    trust of which she and her daughter were beneficiaries.  Her intent was to
    ensure that ownership of the home and her ability to transfer it to her
    daughter would be unaffected by her marriage.  The terms of the trust provided
    that on her death, all the trust property would go to her daughter.

[41]

The
    woman and her husband occupied the residence.  After she died, her husband
    claimed an equalization payment, alleging that the family residence was a
    matrimonial home within the meaning of s. 18(1) of the
FLA
or,
    alternatively
,
a property owned by the wife at the time of her death.

[42]

At
    para. 37 of his reasons, Panet J. held that the family residence was an asset
    of the trust throughout the marriage and that the wife did not have an interest
    in the home within the meaning of s. 18(1) of the
FLA
.

[43]

In
    the present case, the Trust Agreement gives the trustees broad powers to manage
    and administer the trust property.  There is no provision in the Trust
    Agreement giving the respondent or any of her siblings the right to call for
    the transfer or delivery of any particular item of property held by the SFRT,
    either prior to or following the death of Linda Spencer.  The Trust Agreement
    places no obligation on the trustees to transfer any asset
in specie
. 
    Indeed, we cannot even know what the trust property will consist of at Linda
    Spencers death.  There will be no automatic conveyance of one property to each
    of the four children on the death of Linda Spencer, as the appellant contends.

[44]

The
    respondents interest as a beneficiary of the SFRT is not an interest in the property
    within the meaning of s. 18(1) of the
FLA
.

2.
The Respondents Role as a Trustee of the SFRT

[45]

The
    respondent and her sister, Lori Fisher, are co-trustees of the SFRT.  As such,
    they have joint legal control of, and authority over, the subject matter of the
    SFRT.  As trustee, the respondent has the powers and duties given to her by the
    Trust Agreement and legislation.  It is self-evident that the respondents duties
    and powers as trustee are not an interest in the property within the meaning of
    s. 18(1) of the
FLA
.  How could they be?  She possesses those powers and
    duties not in her personal capacity but in her fiduciary role as trustee, a
    role that requires her to act solely in the best interests of the
    beneficiaries.

[46]

Moreover,
    the court cannot combine or conflate the respondents powers and duties as
    trustee with her position as a contingent beneficiary under the SFRT, as the
    appellant contends, to create an interest in the property within the meaning of
    s. 18(1).  As I explain more fully below, the roles of trustee and beneficiary
    are distinct and must be maintained as separate and distinct in order for the
    trust to be workable.

3.
The Separate Entities Argument

[47]

The
    appellant argues that the court should not enforce the separate entities of
    trustee and beneficiary. He points to
Debora v. Debora
(2006), 83 O.R.
    (3d) 81, a decision of this court, in which the corporate veil was pierced to
    find that a cottage owned by the appellants company was the parties
    matrimonial home for the purposes of equalization.  The separate entities of
    corporation and shareholder were not maintained in
Debora
because, in
    the words of the court at para. 24 of the reasons, it would yield a result too
    flagrantly opposed to justice, convenience or would defeat the desired effect
    of [the] legislation.  The appellant contends that maintaining the separate
    entities of trustee and beneficiary in the present case would similarly
    undermine the intent of the
FLA
and the special treatment it affords a
    matrimonial home.

[48]

Two
    significant distinctions between
Debora
and the present case are a
    complete answer to this argument.

[49]

The
    first relates to s. 18(2) of the
FLA
, which reads as follows:

18(2)  The
    ownership of a share or shares, or of an interest in a share or shares, of a
    corporation entitling the owner to occupy a housing unit owned by the
    corporation shall be deemed to be an interest in the unit for the purposes of
    subsection (1).

[50]

In
Debora
, title to the property in question was held by a corporation. 
    The appellant was described as the corporations alter ego.  He was its sole shareholder;
    he controlled it.  He had provided all of the funds for the purchase,
    maintenance and repair of the property.  Based on s. 18(2), the court pierced
    the corporate veil, saying that the appellant could not hide behind the
    corporate veil to defeat his wifes legitimate claim.

[51]

It
    was s. 18(2) of the
FLA
that gave the court the power to pierce the
    corporate veil in
Debora
.  There is no comparable provision in the
FLA
in respect of trusts.

[52]

Second,
    to ignore or conflate the separate roles of trustee and beneficiary would be contrary
    to the fundamental nature of a trust and would render the trust unworkable.

[53]

A
    trust is a form of property holding.  It is not a legal entity or person.  A
    trust does not hold title to property nor can it.  It is the trustee who holds
    legal title to the trust property.

[54]

A
    trust is also a type of relationship, namely, the fiduciary relationship that
    exists between trustee and beneficiary.  The foundation of the trust relationship
    is the separation of roles between the trustee and beneficiary with the trustee
    being the legal owner of the trust property and the beneficiary being the
    equitable owner of the trust property.  The trustee holds legal title to the
    trust property so that it can manage, invest and dispose of the trust property
    solely for the benefit of the beneficiaries.  A trust can only exist when there
    is a separation between legal ownership in the trustee and equitable ownership
    in the beneficiaries.

[55]

If
    the court were to ignore or conflate the separate entities, it would destroy
    the foundation of the trust relationship.  Put another way, absent the separate
    entities, there is no trust relationship and, therefore, no trust.  That is not
    the case when the corporate veil is pierced.  In that situation, the corporation
    as a separate legal entity remains  it is simply that the court can look
    through the veil, in very limited circumstances, to attribute ownership to the corporations
    alter ego.

DID THE TRIAL JUDGE EXCEED THE SCOPE OF THE ISSUE TO BE DECIDED
    AT TRIAL?

[56]

In
    a word, the answer to this question is no.

[57]

In
    para. 61 of his reasons, the trial judge states that the property is not a
    matrimonial home within the meaning of the
FLA
.  This sentence is
    repeated as para. 1 of the order under appeal.  It follows the trial judges analysis
    of why the respondents interest in the SFRT is not an interest within the
    meaning of s. 18(1).

[58]

There
    are two conditions in s. 18(1) that must be satisfied for a property to be a
    matrimonial home: (1) a person must have an interest in the property; and (2)
    at the time of separation, the property must be ordinarily occupied by the
    person and his or her spouse as their family residence.  The trial judge recognized
    that the second condition had been met because the parties had used the
    property as their family residence.  However, as has already been explained, he
    held that the first condition had not been met because the respondents
    interest is in the SFRT, not the property.

[59]

Therefore,
    when the trial judge stated that the property was not a matrimonial home within
    the meaning of the
FLA
, he was simply saying that it was not a
    matrimonial home within the meaning of s. 18(1) of the
FLA
. Understood
    in this way, the trial judge did not exceed the scope of the issue to be
    decided.


DISPOSITION

[60]

It
    is for these reasons that I would dismiss the appeal with costs to the respondent
    fixed at $10,000 and to the SFRT respondents fixed at

$20,000,
    disbursements and all applicable taxes included.

Released: June 19, 2012 (E.E.G.)

E.E. Gillese J.A.

I
    agree. J.C. MacPherson J.A.

I
    agree. Ducharme J.A.


