All About Estates

Resulting Trusts and Summary Judgment Motions

With its sandy beaches, hiking trails, canoe routes, and wildlife, the Town of Wasaga Beach is a well-loved Ontario vacation destination. However, no town, however idyllic, is immune to lengthy property disputes, especially when the two people fighting are related to each other.

Brother A and Brother B were at odds with each other over the beneficial ownership of a house in Wasaga Beach. Brother A was on title to the house and the mortgage. Brother B lived in the house with his common law spouse and, until recently, paid all expenses related to the house (including the mortgage payments, insurance premiums, and property tax). When Brother A tried to sell the house, Brother B commenced a claim against Brother A for breach of trust. Brother B then brought a motion for summary judgment, the results of which were reported in Syrnyk v Syrnyk, 2019 ONSC 225.

As a preliminary matter, the Court was asked whether this was an appropriate case for partial summary judgment. The Court held that it was: although the parties took diametrically opposed positions on virtually all issues, the Court found there were few material facts in dispute. In addition, there was a substantial record available to the Court (affidavits, transcribed examinations, answers to undertakings, and documentary evidence). Finally, credibility was not a central issue. As a result, following the principles laid out in Hryniak v Mauldin, 2014 SCC 7, the Court held that the interests of justice would be served by the summary judgment process by offering the parties a proportionate, efficient, and cost-effective resolution of the dispute.

The Court then turned its attention to the substantive issues in dispute. First: did Brother A hold title to the property in trust for Brother B? In reaching its conclusion, the Court summarized the undisputed facts:

  • Brother B entered into an agreement to buy the Wasaga property in August 2006. However, after paying a $6,000 deposit, Brother B could not raise the funds to pay the full $237,500 sale price.
  • Brother B asked Brother A for help. Brother A agreed: Brother A would pay the seller $22,900 on closing and obtain a mortgage to pay the remaining sale price. The mortgage and house would be registered in Brother A’s name, but Brother B would be responsible for repaying the $22,900 loan to Brother A and Brother B would assume responsibility for paying all costs of the house (including the mortgage payments).
  • In 2009, Brother B repaid Brother A the $22,900 loan. Pursuant to their oral agreement, Brother B also paid the mortgage and all other property expenses.
  • Brother B occasionally had difficulty paying the mortgage, property tax, or insurance. In those cases, Brother A would step in for the sake of protecting his credit rating. However, Brother B would later reimburse Brother A.
  • In 2011, Brother A renewed the mortgage. He increased the principal amount by $10,000, which he kept for himself.
  • In 2016, tensions between the brothers reached its peak. Brother B stopped making payments on the house and mortgage, forcing Brother A to step in once again. Brother A then tried to sell the house, claiming he bought it as an investment property. This sparked the present litigation.
  • There were two issues that prevented the brothers from settling this matter on their own: Brother A wanted (i) to be compensated for the assistance he provided to Brother B, and (ii) to be indemnified for any capital gains tax he would owe on the sale of the property. Brother B refused.

Although there was no written trust agreement, it was clear that Brother A made no financial contribution to the purchase or maintenance of the house (until recently, Brother B always repaid Brother A when he helped cover the costs of the property). Based on this fact, the Court found that there existed a resulting trust which arose when Brother B gratuitously directed that title to the house be registered in Brother A’s name.

The next question was whether Brother A had committed a breach of trust when he unilaterally increased the mortgage principal by $10,000 and kept the proceeds for himself. The Court found that he had: by extracting $10,000 from the property, Brother A acted in his own self-interest rather than the best interest of Brother B. In the result, Brother A was ordered to pay $10,000 to Brother B (the amount would be set off against expenses Brother B owed him).

Despite this breach of trust, the Court held that this was not a situation which warranted punitive damages. Brother B did not come to court with clean hands: he too had breached the trust agreement when he stopped paying home insurance, property taxes, and the mortgage. In addition, Brother A’s actions were not so reprehensible that they constituted bad faith.

Finally, Brother A was unsuccessful in his arguments that he be awarded “compensation” or an indemnity for capital gains on the sale of the property. Rather, the Court held that Brother A was only entitled to be reimbursed for the insurance, property tax, and mortgage payments he had paid. Brother A was also entitled to be reimbursed all costs of selling or transferring the property. (In other words, the Court agreed that, while Brother A could not derive any benefit from his position as fiduciary, he should not be out of pocket for acting in that capacity.) After Brother A was reimbursed for all his expenses, the remaining funds from the sale of the property would be paid to Brother B as the beneficial owner.

Once the trust agreement was entered into, both sides were required to abide by its terms. However, what was supposed to be a short-term arrangement lasted more than a decade and led to building resentment between the brothers. By allowing the matter to be heard on a summary judgment motion, no more time would be lost to this dispute.

About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation. gfournie@devrieslitigation.com

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