Karkus v. Cotroneo 2007 – Hull on Estates #93
Listen to Karkus v. Cotroneo 2007
This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss the case of Karkus v. Cotroneo 2007. The case addresses many of the issues that estate lawyers face on a daily basis, such as: proving or disproving gifts, slander of title and the importance of corroborative evidence.
Karkus v. Cotroneo 2007 – Hull on Estates Podcast #93
Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode 93 on Tuesday, January 15th, 2008.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills. Now, here are today’s hosts.
Paul Trudelle: I’m Paul Trudelle.
Diane Vieira: I’m Diana Vieira.
Paul Trudelle: Hi Diane. How are you?
Diane Vieira: I’m good. How are you?
Paul Trudelle: Very good. This is our first podcast together and our first podcast of 2008, so I wish everyone a Happy New Year. And why don’t we get into what we thought we would talk about today.
Diane Vieira: Sure. This is an interesting case that deals with a lot of things that we deal with in our practice.
Paul Trudelle: Yeah, the case is Karkus and Cotroneo. It’s a 2007 case, April 19, 2007, out of the Ontario Superior Court of Justice. It’s a decision of the Honourable Mr. Justice Sheppard. And I thought that it would be great to talk about this case because it deals with a number of issues that we deal with day in and day out. It deals with issues such as gifts, proving a gift or disproving a gift, corroborative evidence required, remedies where there is a finding that there was no gift. It talks about resulting trusts, set-offs, slander of title, costs regarding Certificates of Pending Litigation when those are resorted to early in the litigation, and also costs of the litigation. So there’s a lot in this relatively short case…11 pages…but I thought we would spend a little time going through some of those issues. Perhaps we can talk a bit about the background or the facts of the case.
Diane Vieira: Oh, sure. This is a case where the deceased died without a Will and her daughter was appointed the estate trustee. The deceased was a business woman and near the end of her life, her business had been failing so there was a number of creditors. And her daughter, the estate trustee, who is the plaintiff in this action, was looking through her mother’s financial records and an entry in her bank book showed a $65,000 transfer from her mother to her mother’s boyfriend, who’s the defendant in this case.
Paul Trudelle: Right. And I think just before we go on, I think the fact that the deceased was in some financial difficulty in her business, is an important factor that the Court relies on later on, so that’s important to note.
Diane Vieira: Later on, the defendant admits that he received the $65,000. His position is that this was a gift. The daughter’s position is that this represents money that the defendant was holding on behalf of his mother. A little more explanation to that was that the $65,000 the defendant used to purchase a property. And then on that property, the defendant’s name is listed alone, but the property is listed as registered as being in trust.
Paul Trudelle: That’s right. And I think that’s important as well. The Court deals with the resulting trust claim and looks at that factor, and we’ll talk about that briefly in a second. So in essence the claim was by the estate for the return of the $65,000 and for a claim that the defendant held a property on a resulting trust and the estate had an interest in that property. The Court looked at the evidence with respect to the gift and before doing that, set out the test that is required and what the estate must argue or try to establish in order to show that there was a debt or resulting trust and what the defendant needs to show in order to prove that there was in fact a gift.
Diane Vieira: I just wanted to…another point of fact is where the $65,000 came from and when it was transferred. The deceased had sold her house and she was moving in…she moved in with her boyfriend, who is the defendant. And the $65,000 represents the proceeds of the estate…the proceeds of the sale of the house, excuse me. And the money wasn’t gifted or transferred to the defendant until six or seven months later on, which is something that the Court reflected on.
Paul Trudelle: That’s right. They looked at the fact that the parties had moved in together, the $65,000 was used to, in part, to purchase this house and make renovations that the plaintiff wanted. The Court considered the fact that the onus is on the defendant to prove, or the recipient to prove that this was a gift, there was no presumption that would work in his favour. And in fact, the presumptions which aren’t really referred to, would be the opposite, that there was a resulting trust or the money was owed back to the estate. And the Court found ultimately that the defendant wasn’t successful in proving that this was a gift. His evidence was that the money was used…was given to him to help with the purchase of the house and to pay for expenses and that was contrary to a finding of a gift. Just another point on that – the Court refers to the evidence required in order to establish a claim by or against an estate and dealt with the issue of corroborative evidence. Perhaps we can talk a bit about what corroborative evidence is required and what the rule is there.
Diana Vieira: With respect to corroborative evidence, Section 13 of the Evidence Act requires that there be some corroboration of the material evidence. And the onus is the civil litigation onus, but with corroboration. And in this case, the judge and the Court had problems with the defendant and the plaintiff’s evidence. He called that evidence unreliable.
Paul Trudelle: Right. He felt that the evidence of the parties was of questionable credibility and in the absence of any corroborative evidence, he wasn’t able to find that there was in fact a gift. And as you mentioned, the Court referred to the burden on the defendant to prove it but said that there was also what he said was a healthy scepticism in addition to that. Now there’s other cases that talk about whether there’s a higher burden on a party. The burden is still the civil burden but the Courts will look at these claims with some scepticism.
So the result of the defendant’s failure to prove that it was a gift meant that money was owing to the estate. The Court went on to deal with the issue of whether the estate had a trust claim against the defendant. And the Court dismissed the trust claim for a number of reasons. The first reason, or one of the reasons was that in establishing a trust, there is case law to the effect that evidence of an illegal scheme will not be received to support a resulting trust. And the illegal scheme that the Court referred to here was the fact that the monies were transferred by the deceased to the plaintiff probably for the purpose of avoiding creditors. And as a result, they had…the Court had a difficult time in finding that the estate could rely on the doctrine of resulting trust in these circumstances. So how did the Court deal with the money owing to the estate then?
Diane Vieira: The Court goes on to find that the defendant does owe money to the estate. It’s a debt to the estate. And he then goes on to discuss the concept of unjust enrichment.
Paul Trudelle: Yeah, and the Court found that the money was owing to the estate and I guess the defendant had assets here. The Court felt that it wasn’t necessary, in fact, to rely on the concept of trust or impose a trust over the property owned by the defendant. A judgment, a monetary judgment, was sufficient. You mentioned the unjust enrichment part of it and the Court talked a bit there about when they will find unjust enrichment in order to bring in the equitable remedy.
Diane Vieira: Yes, the Court refers to the Supreme Court of Canada case, Peter vs. Bellow and the three steps that are needed for a finding of unjust enrichment. And all three were here in this case. There was an enrichment on behalf of the defendant receiving the $65,000 and a corresponding deprivation to the deceased, now the estate of the deceased, and then an absence for the reason of this enrichment.
Paul Trudelle: Yeah, but having found all of those circumstances present, the Court still goes on to say that they won’t impose the equitable remedy of a constructive trust. The Court refers to that Supreme Court of Canada decision and extracts a point to the effect that a monetary award would be the appropriate remedy in many cases, and that was the case here. And the Court concludes that a monetary award is appropriate and makes an Order that the defendant pay back the $65,000 to the estate. However, he doesn’t end there.
Diane Vieira: No, it’s…the Court goes on to find that the estate is not entitled to that full $65,000 because the defendant did provide something in the excess of $20,000 in renovations to the house. And if the deceased’s $65,000 was in a gift to the defendant, then the money that he contributed to the relationship was also not a gift.
Paul Trudelle: That’s right. So in effect, they awarded the defendant…they made an award in favour of the defendant with respect to his Counterclaim for money that he said he spent on behalf of the plaintiff, and that reduced the recovery by the estate. There is also the issue of a claim by the defendant for slander of title. The defendant alleged that a Certificate of Pending Litigation put on his property was slander of title, and the Court dealt with that in very short order.
Diane Vieira: Yes, the Court found that the plaintiffs did not…didn’t have a credible position to have had that Certificate of Pending Litigation registered. And consequently they awarded the money that the defendant had spent on removing that Certificate, credited back to the defendant.
Paul Trudelle: That’s right. And finally, on the issue of costs of the action itself, the Court considered the fact that the plaintiff had some success, made recovery for the estate. However, it didn’t establish its claim for resulting trust. The Court also felt that the evidence of the witnesses was unreliable to a certain extent and in fact in some parts the judge said that in some parts, the evidence was fabricated. And as a consequence of that he ordered that there be no order as to costs, and each party had to bear its own costs.
Well, I think that’s an interesting case on a number of grounds. We’ve touched on a few of the points that the case deals with. I recommend the case highly to anyone dealing with those types of situations where there are gifts, where you’re considering a claim for a resulting trust, an interesting counterclaim where you’re faced with a claim for the return of a gift or money advanced on the basis of benefits provided to the deceased, and also considerations for dealing with Certificates of Pending Litigation and the costs that may be involved in that.
Well thank you very much, Diane.
Diane Vieira: Thanks Paul.
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