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Contract- unjust enrichment- proprietary estoppel – Constructive trust

Law Offices of Nizam Hashmi > Uncategorized  > Contract- unjust enrichment- proprietary estoppel – Constructive trust

Contract- unjust enrichment- proprietary estoppel – Constructive trust

*TOMEK V. ZABUKOVEC 2020 ONSC 2930

Contracts — Formation — Husband and wife in divorce application seeking remedy regarding property acquired by husband’s father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Wife failing to establish oral agreement for transfer of property from father to husband and wife.

Estoppel — Proprietary estoppel — Husband and wife in divorce application seeking remedy regarding property acquired by husband’s father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Husband establishing proprietary estoppel with respect to house, but not with respect to entire property.

Equity — Unjust enrichment — Husband and wife in divorce application seeking remedy regarding property acquired by husband’s father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Husband and wife establishing entitlement to constructive trust through unjust enrichment.

Family law — Property — Constructive trusts — Husband and wife in divorce application seeking remedy regarding property acquired by husband’s father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Husband and wife establishing entitlement to constructive trust through unjust enrichment.

Limitations — Real property — Husband and wife in divorce application seeking remedy regarding property acquired by husband’s father — Husband and wife building and living in house on property for over 20 years before separation — Wife moving out of house and husband remaining in possession — Claims not statute-barred — Wife’s claim commenced within ten-year limitation period — Limitation period not running against husband while he remained in possession.

The husband and wife were married in 1983. The husband subsequently located a 15-acre property for sale, which was ultimately purchased in the name of his father and financed by both his parents. He then applied for a development permit to construct a single-family dwelling, and he and his wife funded construction of a home. In 1989, the father applied to formally sever a 1.13-acre parcel, where the house was being constructed, with the intention of keeping the remaining 13.87 acres for himself and building another home. The application to sever was dismissed. An application for a development permit to construct a second home on the property was dismissed on the ground that the lot had already been severed to the maximum allowed. The husband and wife moved into the home in 1989 when it was far from complete, and over the next few years made substantial improvements at their own expense. The parties acted as though the house and immediately surrounding area belonged to the husband and wife, and the remaining acreage belonged to the father. The husband believed that he would inherit the property after his father’s death. When the father died intestate in 2004, the husband believed that the property would be conveyed to him on his mother’s death. In the meantime, the husband and wife continued to live on the property, pay all taxes and insurance, and make improvements with the mother’s knowledge. The mother’s will directed that a two-acre parcel of land containing the house be severed and conveyed to the husband, with the husband having an option to purchase his brother’s interest in the remaining land if severance proved impossible. It was subsequently discovered that title to the property did not automatically vest in the mother’s name, but that the rules of intestacy governed. The husband and wife separated in 2011, with the wife moving out of the home in 2018. The wife commenced a divorce application and almost all issues were resolved. Apart from the divorce itself, the only outstanding issues were the interest of the husband and wife in the property, with the husband’s brother added as a party as litigation administrator on behalf of the father’s estate.

Held, the application for divorce should be allowed and the husband and wife awarded joint beneficial ownership of 75 per cent of the property.

The property claims were not statute-barred. The wife commenced her claim for a beneficial interest against both the husband and estate in 2013, within the ten- year limitation period after the father’s death in 2004. Although the husband made no claim until 2015, his continued possession of the land meant that the limitation period against him had not yet commenced.

The wife failed to make out any oral agreement for transfer of the property to the husband and wife. It was difficult to distill, objectively, the intention of the parties. According to the husband, any time the father spoke of leaving the house to him, the wife was never mentioned. There was also insufficient evidence to prove what consideration was required for the land to be conveyed.

The husband and wife established unjust enrichment. There was a benefit to the estate in that the value of the property was significantly enhanced by the construction of a single-family dwelling. There was a corresponding deprivation in that the construction and improvements were fully funded by the husband and wife with no ownership interest on title. There was no juristic reason for the benefit conveyed. Consideration of the circumstances and the reasonable expectations of the parties established that the estate failed to rebut the presumption of unjust enrichment with respect to construction and maintenance of the house, but the estate had rebutted the presumption with respect to the remaining acreage.

The husband made out a claim for proprietary estoppel with respect to the house, but not with respect to the remaining acreage. The father made an implied and unambiguous representation or assurance to the husband that he would eventually enjoy the benefit of part of the property. It was reasonable for the husband to expect that he would benefit from the work he put in on the house but it was unreasonable for that expectation to extend to the entire property.

The appropriate remedy was a proprietary interest in the form of a constructive trust. A monetary recovery was inappropriate as the elements of proprietary estoppel had been made out. Also, a sufficiently substantial and direct link was established between the couple’s contributions and the property. Further, their contributions were difficult to quantify. Based on expert evidence, the land portion of the valuation was almost equal to the house portion. After accrediting to the estate one-half the value of basic improved land and accrediting the remainder to the husband and wife, the result was a split of 25 per cent and 75 per cent, respectively, with the husband and wife to have carriage of the sale.

III. Analysis

A. Limitation period

  • An action to recover land must be brought within ten years after the right to bring such action first accrued to theperson bringing it: Real Property Limitations Act, R.S.O. 1990, c. L.15 (“RPLA”), s. 4. Section 4 also applies toequitable claims for property based on the remedy of constructive trust, even if the claimant seeks a monetary award in thealternative: McConnell v. Huxtable (2014), 118 O.R. (3d) 561, [2014] O.J. No. 477, 2014 ONCA 86, at paras. 38-40. Giventhat the claim of proprietary estoppel is also a claim for land based in equity, it is reasonable to conclude that this ten-yearlimitation period applies.
  • Joseph Sr. passed away on July 17, 2004. The Wife commenced her claim, seeking a beneficial interest in theProperty vis- à-vis both the Husband and the Estate on June 13, 2013, less than ten years later. The death of Joseph Sr. isthe earliest date from which this limitation period could be calculated. Accordingly, the Wife’s claims are not statute-barred.
  • The Husband initially made no claim of an interest in the Property until February 12, 2015, when he amended hisAnswer to plead the principles of proprietary estoppel. This claim was made more than ten years after the death of JosephSr. From that point also, it appears that the Husband was also claiming a proprietary interest in the Property similar to thatof the Wife, which was formally reflected in an amendment to his Answer made at trial.
  • In the case of the Husband’s claim for proprietary estoppel though, the limitation period has not yet commenced. In Caledon (Town) v. Waterstone Properties Corp., [2017] O.J. No. 4087, 2017 ONCA 623, the Court of Appeal for Ontario explained that, under s. 5(1) of the RPLA, possession can operate to postpone the commencement of the limitation period. If the claimant has been in possession of the land in which it seeks an interest, s. 5(1) postpones the commencement of the limitation period to the time of dispossession or discontinuance. In Waterstone, there was no evidence that the claimant was ever dispossessed of the land in question, and thus the claim was not statute-barred: paras. 33-37. See, state v. Hartfam Holdings Ltd., [2006] O.J. No. 69, 63 D.L.R. (4th) 640 (C.A.), at para. 34.

[29] Accordingly, given that the Husband continues in possession of the land, his claim is not statute-barred.

B. Oral agreement

[30] The Wife alleges that there was an oral agreement between the Husband and Wife on one hand and Joseph Sr. on the other hand, that title to the Property would be transferred to the respondent and the Wife in the future. Given that there is nothing in writing to support this contract regarding land, this claim is prima facie nonactionable: Statute of Frauds, R.S.O. 1990, c. S.19, s. 4.

[31] The Wife argues that the Statute of Frauds does not apply due to part performance by her and the Husband. Beforeconducting that analysis though, it would be useful to determine if an oral contract has been made out on the evidence.

[32] When dealing with contracts which are substantially or wholly oral, the Court of Appeal for Ontario has stated that (i) it is necessary to distill from the words and actions of the parties what they intended; (ii) evidence of the parties’ subjective intentions has no independent place in determining the terms of their bargain;

  • the test of what the parties agreed to requires an objective determination; and (iv) the contract must include therequisite elements of offer, acceptance and consideration (citations omitted): S & J Gareri Trucking Ltd. v. Onyx Corp.,[2016] O.J. No. 3509, 2016 ONCA 505, at para. 7.
  • On the facts, it is difficult to distill, objectively, what the intention of the parties was. By the Husband’s own evidence, the offer of the House was made to him only and not to the Wife. When the severance application was rejected and Joseph Sr. allegedly made assurances to the Husband that it “would all be yours”, the Wife was not mentioned. Accordingly, it does not even appear the offer was made to the Wife. Also, there is insufficient evidence to prove what consideration was required for the land to be conveyed.
  • Accordingly, I do not find on the evidence that an oral contract to convey the Property to the Husband and Wife has been made out. Accordingly, the applicability of the Statute of Frauds is not at issue.

C. Resulting trust

  • The Wife has claimed a proprietary interest in the Property by way of a resulting trust. This is not a tenable position.

[36] A resulting trust occurs when property is put in the name of one party but because they gave no value for thatproperty, it “results” back to the party who originally transferred it. The presumption can be rebutted if the receiving partycan show that at the time of the transfer, the donor intended to gift the property to them: Pecore v. Pecore, [2007] 1 S.C.R. 795, [2007] S.C.J. No. 17, 2007 SCC 17, at paras. 20-24.

[37] All parties concede that the Property was purchased as vacant land. It was purchased with funds from Joseph Sr. and put in his name. There is simply no basis for the argument that ownership of the land should result back to the Husband and Wife. Quite appropriately, this claim was not pursued at trial with any great vigor.

D. Unjust enrichment

[38] The Wife and Husband claim the Estate has been unjustly enriched by the construction of the House and the upkeep of the Property. They claim the remedy of a constructive trust, or in the alternative, monetary compensation.

[39] In order to establish unjust enrichment, the Wife and Husband have to show that there was an enrichment of orbenefit to the Estate, a corresponding deprivation of the Wife and Husband, and the absence of a juristic reason for theenrichment: Kerr v. Baranow (2011), 108 O.R. (3d) 399, [2011] 1 S.C.R. 269, [2011] S.C.J. No. 10, 2011 SCC 10, at para. 32. Once unjust enrichment has been established, the court must determine whether the Husband and Wife are entitled to a constructive trust, being a proprietary remedy, or monetary compensation.

[40] On the facts, I find that there has been a benefit to the estate, in that the value of the Property has been significantly enhanced by the construction of a single-family dwelling. The Wife and the Estate both called experts in real estate valuation. While these two experts disagreed on the value of the Property, both agreed that the addition of the single-family dwelling increased its value.

[41] A corresponding deprivation has also been made out on the facts. The construction of the House was fully funded bythe Husband and the Wife through a loan from Joseph Sr., which was repaid, and their own employment income. Theycontinually added to and improved their home over the last 30 years, all at their expense, and with no ownership interest ontitle. The Husband and Wife also paid for the insurance and the property tax on the entire 15 acres.

[42] The Estate provided expert evidence on the rental value of the Property with a single-family home and compared it to the expenses outlaid by the Husband and the Wife for the time of their occupancy. According to that calculation, the Husband and Wife saved approximately $644,000 during their occupancy by not having to pay rent, even if they are credited for the money they put into the Property. The Estate argues that there was no corresponding deprivation by the Husband and Wife and therefore no unjust enrichment.

[43] This is not the appropriate approach when considering the deprivation suffered by the Husband and Wife. Thiscalculation does not account for the personal labour expended by them throughout the course of their occupation of theHouse, if not the entire Acreage. The value of unpaid labour lies at the heart of the analysis in Pettkus v. Becker, [1980] 2S.C.R. 834, [1980] S.C.J. No. 103, where the court determined that the unpaid labour of Ms. Becker was a“corresponding deprivation” that let to the remedy of a constructive trust. At no time in that analysis was Ms. Becker madeto account for the theoretical savings she amassed because she didn’t have to pay rent to Mr. Pettkus.

[44] The enrichment must correspond to the deprivation that the plaintiff has suffered: Kerr, at para. 39. The analysis startswith determining if there was a benefit conveyed and then looks at the corresponding deprivation of that benefit. As statedin Rathwell v. Rathwell, [1978] 2 S.C.R. 436, [1978] S.C.J. No. 14, at p. 455 S.C.R., and cited in Pettkus, at p. 844 S.C.R., “Asa matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours ofanother.” Accordingly, at this stage of the analysis, the focus is not on whether the Husband and Wife were able to save moremoney by not paying rent, or even if Joseph Sr. could have made more money by charging rent, but whether the fruits ofthe Husband and Wife’s labours — the construction of the house and the maintenance of the grounds, which theyperformed and paid for out of their own pocket — benefited the Estate. It has never been suggested otherwise.

[45] In addition, even if there was a mutual conferral of benefits between the Husband and Wife on one hand and the Estateon the other, it is not to be considered at this stage of the analysis. It is considered at the defence or remedy stage. Inlimited circumstances, it can be taken into account at the juristic reason stage of the analysis, but only to the extent that itprovides relevant evidence of the existence of a juristic reason for the enrichment: Granger v. Granger (2016), 133 O.R.(3d) 641, [2016] O.J. No. 6472, 2016 ONCA 945, at paras. 38-42; Kerr, at paras. 109-115.

[46] With respect to the third element, if there is no reason in law or justice for the Estate to retain the benefit conferredby the Husband and Wife, that benefit would be “unjust”: Kerr, at para. 40. First, it must be determined whether there is a juristic reason within the established categories that would deny recovery, such as a contract or the intention to make a gift. According to the analysis set out in Kerr, relying on Garland v. Consumers’ Gas Co. (2004), 72 O.R. (3d) 80, [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 2004 SCC 25, at paras. 44-46, once the Husband and Wife have shown that there is no juristic reason for the benefit conveyed from within the established categories of juristic reasons, they have made out their prima facie case of unjust enrichment. The burden then reverts to the Estate to establish that there is another reason to deny the relief. In determining if another reason has been established, the court should look at all the circumstances of the transaction, having regard to the reasonable expectations of the parties and public policy considerations: Kerr, at para. 43.

[47] On the evidence, there was no contract between the Husband and Wife and Joseph Sr. that would deny the Husband and Wife any benefit or compensation for their contributions to the Property, and none was suggested. Nor was any evidence led to support the finding that the Husband and Wife intended that their expenditures and labour were a gift to Joseph Sr. so that he alone could benefit from it. Again, no party even suggested that this was the case. Accordingly, on a prima facie basis, the Husband and Wife have satisfied their burden to prove that there is no juristic reason for the benefit they conveyed. Accordingly, the burden now shifts to the Estate to show that in all the circumstances, having regard to the reasonable expectations of the parties and public policy considerations, there is another reason that a finding of unjust enrichment should not be made.

[48]  It is reasonable for the Husband and Wife to expect to receive some benefit for their ongoing improvement and upkeep of the Property. It is true that they were able to live on the Property at a lower cost than if they had purchased the Property themselves. However, the Husband and Wife were both clear that they would have never expended the time and money that they did on the Property had they believed they would not receive an interest in it.

[49] There is no evidence of Mary’s expectations. While a copy of her will was made an exhibit, it is hearsay and will not berelied on.

[50] There is some evidence of Edward’s expectations. He knew that the property was owned by Joseph Sr., and he knew that the Husband and Wife had built on the Property. On at least two or three occasions, Joseph Sr. raised the idea that Edward build a house on the Property as well. In each instance, Edward declined because, in his words at the questioning: “It was a mess . . . That whole situation . . . this is a mess here today. The whole situation is a mess.” At this point, everyone knew that no severance was possible. From this I infer that Edward was aware that the Husband’s ownership claim in the Property was probable, if not inevitable. He also knew that the Husband objected to the proposal that Edward build on the Property for the same reason.

[51] The expectation of Joseph Sr. is less straight forward. The Husband’s evidence about what Joseph Sr. told him is hearsay. The Husband and Wife’s case is further complicated by the necessity of corroboration by some other material evidence: Evidence Act, R.S.O. 1990, c. E.23, s. 13. The Estate maintains there has been no corroboration, and therefore the court has no evidence of what Joseph Sr. intended, making it more difficult to make a finding of unjust enrichment.

[52] The corroboration required by s. 13 of the Evidence Act must be evidence independent of the evidence of theHusband and Wife which shows that their evidence on a material issue is true. This corroborating evidence can bedirect or circumstantial, a single piece of evidence or several pieces of evidence considered cumulatively: Burns Estatev. Mellon (2000), 48 O.R. (3d) 641, [2000] O.J. No. 2130, 188 D.L.R. (4th) 665 (C.A.), at para. 29. Not everyparticular of the party’s evidence need be corroborated but the material evidence in corroboration must beindependent of the opposite or adverse party and must appreciably help the judicial mind to accept one or more ofthe material facts deposed to. It must materially enhance the probability of the truth of the adverse party’s statement:Orfus Estate v. Samuel and Bessie Orfus Family Foundation, [2011] O.J. No. 4301, 2011 ONSC 3043 (S.C.J.), at para.16, affd at [2013] O.J. No. 1626, 2013 ONCA 225.

[53] It is the position of the Husband and Wife that Joseph Sr. intended to give them the entire Property when he died. After reviewing the entirety of the evidence, I find that the intention of Joseph Sr. to convey to the Husband the House was corroborated. However, there is insufficient evidence to corroborate that Joseph Sr. intended to give the entire Property to the Husband. In so finding, I rely on the following corroborating evidence:

(a) With respect to the house,

(1) on February 10, 1989, Joseph Sr. signed an Application for Consent to sever the Property. In that Application, JosephSr. asked for permission to sever a lot of 1.13 acres, which was to be conveyed to his son, the Husband;

(2) after learning that the severance would not occur, Joseph Sr. still facilitated a loan to the Husband of $80,000 in order to construct the home, the repayment of which Joseph Sr. accepted;

 (3) after learning the severance would not occur, no steps were taken to sell the land;

(4) Joseph Sr. was aware that the home was constructed nonetheless and then improved without any expense to Joseph Sr.;

(5) the construction costs and continued improvements were at the sole expense of the Husband and Wife;

(6) the property taxes and insurance were paid by the Husband and Wife, to the knowledge of Joseph Sr.;

(7) Joseph Sr. respected the privacy of the Husband and Wife at the House; he did not intrude or act like it was his; and

(8) Joseph Sr. never asked for rent.

(b) With respect to the Acreage,

(1) in his application in 1989 to sever a lot, he indicated that he intended to keep the remaining acreage for himself;

(2) Joseph Sr. offered to allow Edward to build on the Property;

(3) Joseph Sr. mortgaged the Property in order to loan money to Edward, without the consent or involvement of theHusband;

(4) Joseph Sr. came and went on the Acreage, without notification to the Husband or without seeking his permission; and

(5) there is no evidence that Joseph Sr. ever intended to disinherit his wife or Edward from his entire Estate.

[54] Accordingly, after considering all the circumstances and the reasonable expectations of the parties, the Estate has failedto rebut the presumption that it was unjustly enriched by the construction and ongoing maintenance of the House. However,the Estate has rebutted this presumption with respect to Acreage.

[55] Accordingly, I find that the Estate has been unjustly enriched by the Husband and Wife with respect to theconstruction, improvement and maintenance of the House, but not with respect to the Acreage. The appropriateremedy will be addressed below.

E. Proprietary estoppel

[56] The Husband relies on the principles of proprietary estoppel in support of his position that he is entitled to the entireProperty.

[57] The Supreme Court of Canada has recently stated that an equity arises when (1) an implied or express representationor assurance is made to the claimant on the basis of which the claimant expects that he or she will enjoy some right orbenefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something and theirreliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of their reasonable reliance,such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on their word:Cowper-Smith v. Morgan, [2017] 2 S.C.R. 754, [2017] S.C.J. No. 61, 2017 SCC 61, at para. 15.

[58] The reasonableness of the claimant’s reliance may be circumstantial. The relevant assurance or promise must be unambiguous and appear to have been intended to be taken seriously. Equity also allows the court to look backwards from when the promise is due to be fulfilled and to ask whether, in the circumstances of what actually happened, it would be unconscionable for the promise not to be kept: Cowper-Smith, at paras. 26-28.

[59] If the elements of proprietary estoppel are made out, the court has considerable discretion in crafting a remedy that suits the circumstances of the case. That being said, the court is to use a principled approach and is not to exercise completely unfettered discretion according to what the judge considers fair in any particular case. There must be proportionality between the remedy and the detriment it aims to avoid. The reasonableness of the expectations must be assessed in light of, amongst other things, the detriment the claimant has actually suffered. The court must strike a balance between vindicating the claimants’ subjective expectations and correcting the detriment, which may be difficult or even impossible to measure: Cowper-Smith, at paras. 46-48.

[60] Irrespective of whether Joseph Sr. made an express representation, I find that he made an implied and unambiguous representation or assurance to the Husband that the Husband would eventually enjoy the benefit of part of the Property. As indicated above, and based on the same factors set out in the unjust enrichment analysis, this representation referred only to the House that the Husband and Wife built and maintained and not to the Acreage.

[61] It is also clear that the Husband relied on this expectation. I find that it was reasonable for the Husband to expectthat he would benefit from the work he put into designing and constructing a house specific to his family and that hewould benefit from the constant improvements and maintenance to the House, both before and after Joseph Sr.’s death.This is especially so given that the construction was funded with Joseph Sr.’s assistance and then the funding repaid to him,even after they knew the severance was not possible. It is clear that the Husband relied on his father’s implied assurances, as he never sought to leave or purchase property elsewhere.

[62] However, it would be unreasonable for the Husband’s expectation to extend to the entire Property, including the Acreage. Given Joseph Sr.’s numerous offers to Edward to build on the land (of which the Husband was aware), the mortgage of the Property to benefit Edward and Joseph Sr.’s continual occupation of the Acreage, it would not be reasonable for the Husband to rely on Joseph Sr.’s alleged promise of inheriting “it all”.

[63] I also find on the evidence that the Husband suffered a detriment as a result of his reasonable reliance. As indicated, both theHusband and Wife gave evidence that they would have invested their time and money elsewhere if they did not believe they wouldhave an interest in the House they constructed. As a result, it would now be unjust to find that they are unable to rely on theimplied assurances of Joseph Sr. that at least the House would be theirs.

[64] Accordingly, I find that the Husband has made out the elements of proprietary estoppel with respect to the House only.

IV. Remedy

[65] I have found that the Estate has been unjustly enriched by the contributions of the Husband and Wife with respect to the House and that the Husband has established proprietary estoppel with respect to the House. It is now the role of the court to determine the appropriate remedy.

[66] Once unjust enrichment has been established, the court is first to consider a monetary remedy prior to granting aproprietary remedy such as a constructive trust. If a monetary remedy is considered appropriate, I am to consider the mutualbenefit conferred on each party and use it as a “set-off” when ascertaining a monetary remedy: Granger, at para. 50; Kerr,at paras. 109-115.

[67] Before making a proprietary award, the court must be satisfied that a monetary award is insufficient in thecircumstances. In so determining, the court should consider the probability of recovery and whether the Husband and Wifeshould be granted the additional rights that flow from owning property: Kerr, at para. 52.

[68] After considering the circumstance of this case, I find that a monetary recovery would not be appropriate and that theHusband and Wife should receive a proprietary interest in the Property.

[69] I make this finding for several reasons. First, the elements of proprietary estoppel have been made out. In that circumstance, the only appropriate remedy is an interest in land. Second, a sufficiently substantial and direct link has been established between the contributions of the Husband and Wife and the Property so as to justify a proprietary remedy: Kerr, at para.

[70] Finally, the Husband and Wife’s contributions are difficult to quantify. While a useful Cost/Benefit analysis was submitted by the Estate, it does not take into consideration all the expenses incurred by the Husband and Wife (which was their obligation to provide). It also does not take into consideration the value of their “sweat equity” expended in the 30 years that at least one of them has resided there. Also, it is difficult to quantify the contributions of the Husband and Wife to the House separate from the contributions to the Acreage.

[71]  The court has been asked by the parties to value a portion of a non-severable property as if it was severed. The exercise of valuation is theoretical at best. Nonetheless, a principled approach must be followed. Proportionality is required between the actual detriment suffered, which may be difficult to measure, and the remedy granted. In order to give effect to a principled remedy I will quantify the Husband and Wife’s beneficial interest in the Property as a percentage of its entire value.

[72] Two experts provided helpful opinion evidence on the value of the Property. The expertise of both experts was undisputed. Ms. Vaughan was jointly retained by all parties. She was asked to provide a market value for the Propertyin two ways. First, she was asked to value the 15-acre lot with the House, being built in 1989, having two storeys,2,809 square feet (excluding basement), and five bedrooms. Second, she was asked to value the same House on a two-acre lot. Her valuations were current as of May 9, 2016. Her opinion was that the larger parcel had a market value of$810,000 and the smaller parcel had a market value of $771,000, which is 95 per cent of the entire value of theProperty. When asked what her valuation would be if the House was on a 1.1-acre parcel, she opined that it could be up to $25,000 less which is up to 92 per cent of the value.

[73] It became clear during Ms. Vaughan’s evidence that the value of vacant land ready for development was muchhigher than vacant land that has no further use. Once a home is built, the accompanying acreage added only 5 to 8 percent to the value of the land. That being said, she was clear that the conclusion of her two valuations is not that thevalue of the undevelopable 13 acres is only $39,000, or that the undevelopable 13.9 acres is $64,000.

[74] Ms. Vaughan opined that the most appropriate manner in which to value the Property, and the approach she used, was the direct comparison approach. She used the cost approach only to check the results of the direct comparison approach. The cost approach starts with a value of the land, assumed already to be improved by a home, and then adds to that value based on the particularities of the home, such as its size and features. appropriately depreciated. The result is that the land portion of the valuation, being $400,000, is almost equal to the House portion, being $413,000. She also agreed that in general, land values increase over time and the values of homes depreciate.

[75] Mr. Kormann was hired by the Estate to provide a value of the Property assuming that no house was built and itremained a vacant lot. Mr. Kormann determined that vacant land in this area, if available for development, was worth$44,000 per acre, using the direct comparison approach. Given that the Property is 15 acres, the value as ofOctober 23, 2018 was $660,000. Mr. Kormann agreed that if the land was not available for development, the value of the Property would be a fraction of the value, although no value was given.

[76] He indicated that if asked to value the Property as it actually was with a home, he would start with the value ofthe land and then add on any improvements to the land, such as a house.

[77] The only reliable and tangible evidence given to the court is the value of the entire Property — 15 acres with a largehome. Unfortunately, no opinion was provided on the value of undevelopable acreage in Caledon. The value of a house ontwo acres, or 1.1 acres, and the value of developable vacant land, though, can provide some assistance to the court to craft a principled equitable remedy.

[78] In crafting an equitable remedy, I accept that Joseph Sr. purchased the land at a cost of $160,000 with his own fundsin 1988. I also accept that between 1988 and 1989, the Husband and Wife expended their own money and labour to dig afoundation, bring in the services and frame the house to its roof, following which in July 1989 they borrowed an additional $80,000 from Joseph Sr. for more construction. Accordingly, in the first few years, I find that the financialcontribution of Joseph Sr. on one hand and financial and labour contributions of the Husband and Wife on the other hand,were roughly equal.

[79] After that, the situation changed. Joseph Sr. knew that the land could not be severed and that the remaining undeveloped land would always remain so. Joseph Sr.’s financial contribution to the Property all but halted. From that point, the Husband and the Wife paid the property taxes and insurance premiums for the entire Property. The Husband also took the necessary steps to have the land designated as a managed forest and he became responsible for planting trees. He was responsible for that expense, but he also benefitted from a lower property tax rate. Any improvements from approximately 1990 onwards were all at the expense of the Husband and Wife alone.

[80]  While the comparison approach is the appropriate approach to use to value this land as a parcel, equity demandsthat we value it differently so that each party’s respective contribution and detriment be balanced. Therefore, the most principled approach that could be taken on the evidence before the court is to use the cost approach as a foundation andthen adjust it for the realities of this case.

[81] I start with the valuation of basic improved land at $400,000 provided by Ms. Vaughan. I infer that this means a barbones improvement — just a residence. That value should be divided between Joseph Sr. on one hand and the Husband and Wife on the other hand because they both started this venture with equal contributions: Joseph Sr. contributed the land and the Husband and Wife contributed the construction.

[82] After that, the additional improvements were all at the expense of time and effort by the Husband and Wife. Giventhat the building depreciates and the land appreciates in value, any depreciation in the House should be accredited tothe Husband and Wife. According to the cost approach of valuation, the depreciated value of the home plus thecontributory value of the site improvements was $413,000. Accordingly, one-half of the value of basic improvedland, $200,000, shall be accredited to the Estate, and the remaining $613,000, being one-half the value of basicimproved land, plus the value associated with the house, shall be accredited to the Husband and Wife. For ease, thiswill be averaged to a 25 per cent and 75 per cent share in the value of the Property, respectively.

(v) Sale of the Property

[83] Given that ownership of the Property has been divided in percentages, the Husband and Wife, as well as the Estate,are all equally motivated to sell the Property for the highest price possible. That being said, there is little utility inhaving three parties involved in the sale of the property, as long as the Property is sold for a fair value.

[84] Given that the Husband and Wife are most familiar with the Property, it makes sense that they have carriage of the sale, with full disclosure to the Estate.

(vi) Conclusion

[85] The parties have advised that the Property will be sold. Accordingly, the issue for the court to decide is how to divide the

proceeds of the sale. Accordingly, for the foregoing reasons, I make the following orders:

(a) Joseph Zabukovec and Judith Evelyn Tomek, who were married at Toronto, Ontario, on January 8, 1983, shallbe divorced and the divorce shall take effect 31 days after the date of this Order;

(b) the Husband and Wife have a joint beneficial ownership of 75 per cent of the Property through a constructive trustand proprietary estoppel;

(c) the Estate of Joseph Sr. retains the remaining 25 per cent interest in the Property to be distributed in accordance with the rules of intestacy as set out in the Succession Law Reform Act, R.S.O. 1990, c. S.26;

(d) the Husband and Wife shall have the joint and sole authority to retain a real estate agent, set or reset a listing price, instruct the real estate agent, negotiate offers and otherwise ready the Property for sale;

(e) the Husband and Wife have the joint and sole authority to enter into a binding agreement of purchase and sale aslong as the purchase price does not go below $810,000; a copy of any accepted agreement of purchase and sale for$810,000 or more shall be forwarded to the Estate forthwith;

(f) in the event that the Husband and Wife are only able to secure a sale price of less than $810,000, the Estate must also be a party to any Agreement of Purchase and Sale;

(g) the signatures of the Husband, the Wife and the Estate are required on all closing documentations; the Estate shall be represented by Edward Waters;

(h) the parties are encouraged to resolve the issue of costs themselves. If they are unable to do so, the Husband and Wife shallserve and file their written submissions, restricted to two pages, single-sided and double spaced, exclusive of costs outline andoffers to settle, no later than 4:30 p.m. on May 22, 2020; the Estate shall serve and file its responding submissions, with the samerestrictions, no later than 4:30 p.m. on June 5, 2020; any reply submissions by the Husband and Wife, with the same sizerestrictions, shall be served and filed no later than 4:30 p.m. on June 12, 2020; if no submissions are received by May 22,2020, there shall be no costs. All costs submissions shall be e-mailed scjtrialofficebrampton@ontario.ca, directed to myattention. No submissions may exceed 10MB;

(i) all other claims are dismissed.

Application allowed.

*Source: Ontario Reports

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