



COURT OF APPEAL FOR ONTARIO

CITATION: Holtby v. Draper, 2017 ONCA 932

DATE: 20171201

DOCKET: C61476

Weiler, van Rensburg and Huscroft JJ.A.

BETWEEN

Kenneth Holtby

Applicant/Respondent

and

Cheryl Draper
and
    Knapton Farms Ltd.

Respondents/
Appellant

Aaron M. Franks and Michael Zalev, for the appellant

William R. Clayton, for the respondent

Heard: June 7, 2017

On appeal from the final orders of Justice Clayton Conlan
    of the Superior Court of Justice, dated November 18, 2015, reported at 2015
    ONSC 7160 and June 3, 2016, reported at 2016 ONSC 3698, and the costs order
    dated August 8, 2016, reported at 2016 ONSC 5050.

van Rensburg J.A.:

[1]

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 over the course of a year, was ownership of property.

[2]

The trial judge concluded that Ms. Drapers 50% of the common shares in
    Knapton Farms Ltd. (Knapton), a corporation holding a farm and other
    property, and her 100% interest in 50 acres of land adjoining the farm property
    (Lot 8), were beneficially 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% of the common shares in Knapton and
    the entirety of Lot 8. She also seeks an order for the sale of Lot 8, an order
    for Mr. Holtbys purchase of her shares in Knapton, occupation rent for Lot 8,
    a recalculation of the equalization payment and correction of the trial judges
    valuation of the Knapton land, and an adjustment to prejudgment 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 a new 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 was the vehicle
    for Mr. Holtbys transfer to her of 50% of his interest in the farm, was
    gratuitous; (ii) that Mr. Holtbys intention in making 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% 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 resulting trust when Lot 8 was
    registered in the parties joint names; (ii) in concluding that Ms. Draper
    received a gratuitous transfer, after failing to consider how the interest
    was acquired (by payment to Mr. Holtbys first wife, with monies raised on a
    mortgage that was mostly serviced by Ms. Draper); and (iii) in failing to
    consider that Mr. Holtbys
Planning Act
, R.S.O. 1990, c P.13

purpose
    for holding the 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 with the trial judges
    conclusion that the transfer of Mr. Holtbys half interest was gratuitous, and
    that Ms. Draper did not rebut the presumption of resulting trust. I also agree
    with the trial judge that Mr. Holtbys motive for this transfer, which was to
    defeat or delay specific 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 in the 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 were married in October
    1995. It was a second marriage for both parties. Mr. Holtby and Ms. Draper
    separated in August 1999, after four years 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 of 50 acres that
    abutted the farm property and which was used in the farming operation. Lot 8
    was purchased in 1982 in the joint names of Mr. 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 facing potential 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 and Bonnie to Mr.
    Holtby and Ms. Draper as joint tenants. The property was mortgaged for $34,200
    and Bonnie was paid $26,500 (which was one half the market value of Lot 8 at
    the time) from the mortgage proceeds. Ms. Draper made most of the mortgage and
    property tax payments on Lot 8, including all payments after May 1996.

[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 prejudgment 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 support and seven years). Mr. Holtby appealed this judgment.

[14]

In October 1995 Ms. Draper accepted a buy-out from her employer. The
    trial judge noted that the couple were bracing themselves for Mr. Holtbys
    potential incarceration as a result of the criminal investigation, that Ms.
    Draper was needed on the farm, and that the couple needed money. The parties borrowed
    money from the Farm Credit Corporation to repay certain of Mr. Holtbys loans
    to provide liquidity. Mr. Holtby also sold his milk quota and some cattle.
    Later that month Mr. Holtby was arrested and charged with sexual offences 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), and it is not seriously disputed on
    appeal, that the financial commitments owing to Bonnie and the spectre of civil
    and criminal liability involving L.W. led to the parties 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 sole registered owner
    for natural love and affection. The parties also incorporated the company
    that later became Knapton, and by the end of August 1996 each owned 100 common
    shares. Knapton entered into an agreement to purchase Mr. Holtbys farm
    property and other assets for various consideration. The agreement was amended
    and the sale closed in February 1997, after Mr. Holtbys release from prison on
    parole.

[17]

The Holtbys matrimonial litigation was settled on May 21, 1997 on terms
    that delayed the timing of the payments Mr. Holtby was required 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 Childrens Aid Society of the County of Bruce, an added defendant
    to the action.

[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 the marriage or resolve their
    financial issues in the ensuing years. By 2007, they had little to do with one
    another, and by 2011 Ms. Draper had 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 claiming various relief,
    including equalization, an order requiring Ms. Draper to sell her shares in
    Knapton to him, and a declaration that he was the beneficial owner of Lot 8.
    Although not pleaded by him, by the time the trial proceeded it was clear he
    was asserting a claim of resulting trust with respect to both Ms. Drapers
    Knapton shares and Lot 8. (As an aside, I would echo this courts comments in
McNamee
    v. McNamee
, 2011 ONCA 533 and
Martin v. Sansome
, 2014 ONCA 14
    that in the vast majority of cases, any unjust enrichment claims that result
    after marriage breakdown will be fully resolved through the application of the
    equalization provisions of the
Family Law Act
, R.S.O. 1990, c. F.3
.
This was 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 resulting trust of Knapton (and
    all of its assets) and Lot 8. He accepted that Mr. Holtby had been unjustly
    enriched by the mortgage and property tax payments Ms. Draper made on Lot 8. He
    dismissed her claim for occupation rent. Finally, he invited the parties to
    agree on equalization, Ms. Drapers claim for payment for her Class B shares in
    Knapton, the value of the unjust enrichment claim in respect of Lot 8, 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 on June 3, 2016. He
    (i) determined the value of the farm property and certain other assets for the
    purpose of the parties equalization calculation; (ii) fixed the payment owing
    to Ms. Draper in respect of Lot 8 at $61,577.02, including interest; and (iii)
    awarded her the sum 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.

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. He found that the common
    shares were issued to Ms. Draper gratuitously, and that Mr. Holtby did not
    intend for Ms. Draper to have a beneficial interest in the assets that Knapton
    acquired. The presumption of resulting trust applied and Ms. Draper failed to
    rebut that presumption.

[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, at para. 54:

I reject the argument by [Ms. Drapers lawyer] that there can
    be no resulting trust applied to Knapton's assets because there was no transfer
    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 through which title/ownership of the farm's assets
    was conferred on Ms. Draper, through common shares. That is no different than
    the common shares being formerly owned by Mr. Holtby and then some of them
    transferred to Ms. Draper. The manner in which the shares were issued in this
    case is similar to what happened in
Paddock
,
supra
, and both
    the trial judge and the Court of Appeal for Ontario in that case found that the
    resulting trust claim could be made.

[27]

The trial judge also accepted Mr. Holtbys 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. Holtbys assets to that
    corporation was a scam in which both Ms. Draper and Mr. Holtby participated,
    for the predominant purpose of keeping Bonnie and L.W. at bay. He observed that
    both parties benefitted from the scam: Mr. Holtby delayed recovery by his
    creditors temporarily, and Ms. Draper kept her life with her husband, on the
    farm (at para. 120).

[28]

The trial judge rejected Ms. Drapers argument that Mr. Holtbys
    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 resulting trust does not apply. Second, she argues that Mr.
    Holtbys 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
    judges conclusion that the transfer to Ms. Draper was gratuitous 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 of Knapton, 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 she was already a 50% shareholder) gave fair market
    consideration to Mr. Holtby when it purchased the farm property and other assets
    from him. In this sense, Mr. Holtby did not make any gratuitous transfer of
    property to Knapton. She contests the trial judges reliance on
Paddock v.
    Paddock
(2008)
,
78 R.F.L. (6th) 54 (Ont. S.C.), affd 2009 ONCA
    264, 78 R.F.L. (6th) 69.

[32]

In
Pecore v. Pecore
, 2007 SCC 17, [2007] 1 S.C.R. 795, at para.
    44, Rothstein J. explained that the trial judge must commence his or her
    inquiry with the applicable presumption and weigh all the evidence in an
    attempt to ascertain, on a balance of probabilities, the transferors actual
    intention. When a gratuitous transfer is made, the transferee has the onus to
    demonstrate a gift was intended, 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 of evidence to the contrary:
Family Law Act
, s. 14. The transferors intention at the time of the
    transfer is the critical consideration:
Nishi v. Rascal Trucking Ltd
.,
    2013 SCC 33, [2013] 2 S.C.R. 438, 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 ONCA 368, 131 O.R. (3d) 532, at para. 63.

(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. Holtbys farm property and business; (ii) this was precipitated by a desire
    to shelter the farm assets from claims by Mr. Holtbys 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. Holtbys own obligations.

[36]

To be sure, there was evidence that Ms. Drapers participation
    contributed to Mr. Holtbys 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 predated 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.

[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 husbands 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 husbands 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.

[42]

On appeal this court held that the trial judges 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. Drapers 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. Drapers 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. Holtbys farm and other assets from
    Mr. Holtby to the couple, to be held jointly in a corporation. Ms. Drapers
    argument would require the court to examine the incorporation of Knapton and
    the transfer of Mr. Holtbys 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 farms 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 important evidence
    of the parties intentions. The trial judge considered and rejected as evidence
    rebutting the presumption of resulting trust, the contributions of money and
    manual labour Ms. Draper provided to the household and farm (at para. 64). He
    also considered excerpts from Mr. Holtbys cross-examination relied on by Ms.
    Draper, but concluded that Mr. Holtbys evidence as a whole made it clear that
    he had no intention to make Ms. Draper a real owner. This was consistent with
    how Mr. Holtby had dealt with the farm with his first wife (at paras. 60-62).
    Ms. Draper says the trial judge overlooked notes from the parties meeting with
    the lawyer and consultant before Knapton was incorporated, suggesting that one
    of the goals (in addition to judgment-proofing Mr. Holtby) was to protect
    Cheryls 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 a financial
    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. Drapers investment during the course of the
    parties marriage, what was at issue was the intention of the transferor (Mr.
    Holtby) at the time the transfer was made.

[47]

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

(2)

Does Mr. Holtbys intention to delay his
    creditors defeat his claim of resulting trust?

[48]

Ms. Draper also asserts that Mr. Holtbys motive in transferring his
    assets to Knapton, which was to defeat or delay creditors, is a bar to 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 or improper
    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
(2004)
, 9 R.F.L. (6th) 455 (Ont. S.C.),
    as suggesting otherwise.

[50]

I agree with Ms. Drapers submission that the transfer was designed to
    defeat specific creditors. However, I disagree that, read as a whole, the trial
    judges reasons failed to recognize this fact and its implications for the
    issue of intent.

[51]

The timing of the incorporation of Knapton and Mr. Holtbys transfer of
    his property to that corporation demonstrate that he was attempting to obtain
    an advantage in his matrimonial litigation, by reducing the amount he was to
    pay to his former wife or delaying payment to her. He was also facing imminent
    claims from L.W. Although the trial judge stated that the transfer was to
    judgment-proof Mr. Holtby, in the same paragraph he said that the predominant
    purpose was to keep Bonnie and Ms. W. at bay and to frustrate the claims of
    Mr. Holtbys creditors generally,
including those already materialized on
    the part of Bonnie, and even more important, those about to be launched byMs.
    W.
(at para. 115). While he may have suggested otherwise at one point in
    his judgment, the trial judge recognized 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 be based on
    the fact that money was paid by Mr. Holtby to each of these creditors.
    Assuming, without deciding, that actual prejudice to a creditor may be
    relevant, it existed here. The Knapton transaction was undertaken to delay
    specific creditors and they were in fact delayed. 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 his
    beneficial partner in Knapton.

[53]

That said, there is no error in the trial judges conclusion that as a
    matter of law, the intention to defeat creditors did not defeat Mr. Holtbys
    resulting trust claim. Although the general rule is that a party cannot rely on
    his or her own illegality in claiming a resulting trust or other equitable
    remedy, the intention of the parties is always a question of fact to be
    determined from the evidence. While evidence 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 of caseswhere the court has found that
    the specific intention to evade creditors means an implied intention to deprive
    oneself of beneficial ownership.The intent to gift defeats the presumption of
    resulting trust. In my view these cases do not undermine the principle that an
    illegal purpose is not a bar where the claimant may rely upon the resulting
    trust to establish his claim. As well these cases do not override the principle
    that the parties intentions at the time of the conveyance are a question of
    fact to be determined upon the evidence. The cases do not purport to impose a
    constructive intention of gift where there is an illegal purpose to defraud
    creditors. While evidence that someone intended to fully evade creditors can be
    evidence that they intended to gift their entire interest 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 ONCA 239, 349 D.L.R. (4th) 326, at para.
    43;
Korman v. Korman
, 2015 ONCA 578, 387 D.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 judges
    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. Holtbys argument that Bonnies 50%
    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. Holtbys
    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) 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. Holtbys 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. Drapers 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. Holtbys 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 judges 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 ONCA 750, 128 O.R. (3d) 452, at para. 18. See also:
Rumboldt
    v. Cwalino
, 2011 ONSC 7487, at para. 64;
Zheng v. Jiang
, 2012
    ONSC 6043, at paras 16-17;
Galla v. Galla
, 2015 ONSC 37; and
Lorenzen
    v. Desjardins
, 2017 ONSC 1932, 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 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 judges 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. Holtbys 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. Holtbys 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 judges 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 judges 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.

(2)

Lot 8: The Second Transfer

[71]

The second transfer occurred in 1996, as part of the parties efforts to
    protect Mr. Holtbys 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. Holtbys 50% 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. Holtbys half
    interest was gratuitous. While it was for natural love and affection, the
    trial judge found that Mr. Holtbys 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. Holtbys 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 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. Holtbys 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. Holtbys 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 prejudgment
    interest.

[77]

In their submissions on appeal the parties did not address what would
    happen to the trial judges award of damages for unjust enrichment for payments
    Ms. Draper made in relation to Lot 8, that were premised on Mr. Holtbys sole
    ownership of the property. Given this courts 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.
    Drapers interest in Lot 8. All of the trial judges 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 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. Holtbys 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)

Prejudgment Interest

[82]

The trial judge determined that prejudgment 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 prejudgment 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 judges determination that
    prejudgment 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 prejudgment 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 judges order respecting trial costs. Given that no argument on costs was
    asserted in the factum or in oral argument, it appears that Ms. Drapers
    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. Drapers 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. Drapers costs submissions, with reply
    submissions, if any, within ten days thereafter. In the absence of agreement on
    the amount of prejudgment interest on the occupation rent, and reimbursement
    for payments toward Lot 8 made by Ms. Draper, the parties may provide with
    their costs submissions, their respective positions on these issues for this
    court to determine.

K. van Rensburg
    J.A.

I agree K.M. Weiler
    J.A.

I agree Grant
    Huscroft J.A.

Released: December 01, 2017





[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.


