Is it a Loan or a Gift?

BarristerA classic problem that frequently occurs in family law disputes is whether the funds given to a married adult child are a gift or a loan. In Rivas v. Milionis 2018 ONCA 845 the Ontario Court of Appeal upheld a judge’s order that found that a mortgage placed by parents on their married daughter’s home did not secure a legitimate debt to the parents, as the monies advanced to the couple were a gift.

The couple purchased their family home in 2000, financing the purchase with a bank mortgage. In 2004 they encountered financial problems and the wife’s parents provided financial assistance and later agreed to pay off their mortgage, thus alleviating their tight financial circumstances. Discussions between the wife and her parents took place in 2004. The mortgage was discharged in February 2005 and in July 2005 the wife’s parents placed a new mortgage on the family home.

The husband testified that he was baffled when his wife’s parents asked them to execute a mortgage in their favour, but he realized that resisting their overture would cause conflict in the family, so he signed the mortgage documents. He also said that he cooperated to keep his wife happy and relied on her assurance that the house would always be theirs.

All was well until ten years later, when the couple separated and the wife’s parents sought to enforce their mortgage security. The court referred to the presumption of a resulting trust in a situation where there is a transfer of property from a parent to an adult child. The presumption is that property transferred from a parent to an adult child is not a gift but is held in trust by the adult child for his or her parent. Pecore v. Pecore, 2007 SCC 17. That presumption can, of course, be rebutted.

It is noteworthy that the court at first instance did not hear oral evidence, thus, none of the parties were cross-examined. The judge ruled:

“I do not accept Tasos’ [the wife’s father] evidence that the many transfers of money were loans. He stated that each of the transfers constituted a loan however, as noted earlier, there was no evidence that the parents at the very least told their daughter and son-in-law that those transfers were loans or that he communicated the loan terms of each transfer to them. I accept the husband’s evidence that the parents never suggested to him until June or July 2005 that the transfers made from 2000 to 2005 were loans.”

An important factor in the judge’s decision was the “mortgage-freedom” celebration that the parties testified about when the conventional mortgage was paid off by the wife’s parents in 2005.

Parents who generously support their adult children must understand that it is too late after the fact to suggest that monies provided are a loan, unless there is evidence, such as a promissory note, signed by the parties at the time of the advance of funds, with each party having independent legal advice.

Lawdiva aka Georgialee Lang

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Appeal Court Says Judges Cannot Avoid Determinations of Grave Risk of Harm in Hague Convention Cases

GEO CASUALThe Ontario Court of Appeal recently reversed a Hague Convention order that a mother from England must return to England with her two children, failing which her British husband would have custody of their children. (Zafar v. Saiyid (2018) ONCA 352)

As is becoming typical in Hague cases, the mother and her two young children who had Canadian citizenship,travelled to Canada for a summer holiday, with the permission of her spouse, and the intention of returning to England by a prescribed date.

On August 23, the mother advised the children’s father that their marriage was over and that she would remain in Ontario with the children. He promptly filed a Hague Convention application seeking the return of the children.

At the court hearing the mother conceded that the children’s habitual residence was England, which is the primary question when a Hague application is brought. The law is very clear that children must be returned to their habitual residence where the question of their residence will be determined.

However, Article 13 (b) of the Hague Convention permits a removing parent to argue that the child should not be returned where the other parent poses a grave risk of physical or psychological harm to the child or the spouse. Ms. Saiyid alleged that her husband was “threatening, verbally abusive, financially controlling” and presented “intolerable behaviour towards the mother, smoke and drank”, which reflected an inability to create ” a safe environment free of danger for the children.”

The hearing judge ordered the mother to return the children to England by December 1, failing which the children’s father would have sole custody of the children. He said:

“In a Hague application, I am not to determine the best interests of the children, only jurisdiction. In any event, on affidavits I cannot determine who is telling the truth about Mr. Zafar’s conduct.”

On November 27 the mother obtained a stay of the judge’s order, however, shortly thereafter she voluntarily returned to England with the children and brought an application to the British court seeking orders that she may relocate to Canada with the children.

Nonetheless, she wished to continue with her appeal in Ontario on the basis that the judge’s alleged errors of law could be used against her in the new British proceeding.

The appeal court agreed that her appeal was not moot for the reason she identified and held that the hearing judge erred in stating that he could not determine whether the children were at grave risk of serious harm, delegating that issue to the English courts. The court held that the hearing judge ought to have made a decision based on the record; or considered whether it was appropriate to hear oral evidence from the parties. The hearing judge’s decision to explicitly decline to consider the matter was an error in law.

While the task is enormous, where conduct allegations are thrown back and forth haphazardly, it is a judge’s duty to sift the wheat from the chaff. Oral evidence, with cross-examination is often the best way of doing that. These cases are the most difficult, particularly when young children are involved, when the question becomes “which parent is most believable?”

Lawdiva aka Georgialee Lang

Divorce Drives Litigant into Depression and Bankruptcy

DSC00275_1You may have heard of the “good divorce”, a concept explored by Psychology Today in 2009 where they suggested that “it is possible if you know how to do it”. Unfortunately, as a divorce lawyer I rarely see the good ones, only the tragically destructive ones.

In worst case scenarios, divorce can be the trigger for personal bankruptcy as it was for Miroslaw Kuczera from Ontario. (Kuczera (Re), 2018 ONCA 322 CanLII)

In an Ontario Court of Appeal decision we read that Mr. Kuczera was a happy family man with two children, employed as an electrician, until his marriage ended in 2007, leading to an acrimonious divorce that included allegations that he was an abusive spouse.

As is typical in high conflict divorces, he had no access to his property and when his legal fees overwhelmed his financial resources he took to using credit cards and borrowed $16,000 from his brother. The loan was to be paid back in 2009 failing which a property owned by Mr. Kuczera in Poland would be forfeited to his brother.

By May 2009 bankruptcy was inevitable and he retained a bankruptcy trustee, made the required monthly payments and was discharged from bankruptcy in October 2010.

Meanwhile the family law litigation continued unabated and his discharge was revoked when the bankruptcy trustee alleged that he had not disclosed the Poland property. He then made a consumer proposal to escape the bankruptcy proceedings which required him to pay $66,0000 over 5 years.

By this time his mental health sadly deteriorated with the combination of soul-destroying family litigation and the exhausting bankruptcy proceedings. His psychiatrist diagnosed him as clinically depressed and suffering from “Dissociative Identity Disorder”.

In January 2012 the family home issue was finally resolved and he received $72,000, but when asked where the money went he had little to say, except that his teenage daughter, who lived with him, was a drug addict, and that he purchased expensive Chinese medicines for his ill son. He said that he always carried cash and that quite likely the children had helped themselves as well. His mental and emotional state left him unable to cope.

The bankruptcy registrar refused to grant an immediate discharge to Mr. Kuczera, delaying it by six months and ordering that he pay the sum of $61,000, writing:

“I appreciate that the bankrupt will find an order of payment of this magnitude difficult in light of the circumstances present at the date of the hearing. However, it is my view that this situation could have been avoided had the bankrupt acted reasonably with his creditors. He clearly did not wish to pay his creditors under the proposal when he received significant funds in 2012. His current situation is his own doing.”

Mr. Kuczera’s appeal from the registrar was dismissed with the court refusing to admit updated psychiatric reports. But then the case came to the Ontario Court of Appeal, who took an entirely different view of his situation.

To begin, the highest court admitted the psychiatric report and affirmed that even though it was only filed after the registrar’s initial hearing and that it came from the bankrupt’s personal therapist, it met the legal test for admission, contrary to the registrar and first appeal court’s views.

While the missing funds were problematic, the Ontario Court of Appeal accepted that Mr. Kuczera’s mental condition affected both his “thinking and his actions”. The Court also found there was no evidence that he had benefitted personally from the sale proceeds. The finding that he had not disclosed the property in Poland was found to be erroneous. The Court said:

“The condition imposed by the Registrar that the appellant pay $61,000 as a condition of his discharge, given his personal history, was more than just “difficult” for the appellant. It was crushing.It does not reflect the rehabilitative objective of the”…(bankruptcy legislation).

While not all family litigants suffer from the dire consequences recounted here, there can be no doubt that family litigation, particularly in high conflict cases and proceedings that carry on for many years after the initial separation, are the cause of mental and physical impairment, financial devastation, and even suicide.

There is a better way and that is to move family law cases out of the courtroom and into Family Law Centres with dedicated judges, lawyers, counsellors, financial experts and other professionals, with a focus on negotiation, mediation and arbitration. Will any government dedicate the funds to try this better way? Don’t hold your breath!

Lawdiva aka Georgialee Lang

Family Law Practice Points from the Ontario Court of Appeal

GEO CASUALIn a case from Ontario, Perri v. Perri 2017 ONCA 1001, the Court of Appeal considered the husband’s arguments that an order for lump sum spousal support for his wife constituted an error in law. The parties had been married for 22 years and had 2 children.

The appeal court noted that the parties had agreed that lump sum support was preferable to monthly payments as their post-marital relationship was marked by animosity.

While the Court dismissed the husband’s appeal, finding that compensatory factors were in play, it did correct two legal errors. The first was the lower court’s order that the wife be designated as the sole irrevocable beneficiary of the husband’s life insurance policy. The error was that there was no indication of an end date with respect to the beneficiary designation. The appeal court inserted the following language to that order:

“until the lump sum spousal support is paid and as security for lump sum spousal
support.”

The second legal error was as a result of the Brampton court registry insisting that counsel include a paragraph in the order that the husband was under a continuing obligation to provide annual updated financial information to his wife. The appeal court confirmed that such disclosure was not required where the order for support was lump sum.

Two practice points arise from this case:

1. The first is that a life insurance designation in a support order is intended to provide security to a receipient spouse or parent in the event of the untimely death of a payor. It is not intended to be a transfer of wealth upon a payor’s death.

2. The second is that while court registry staff are typically very knowledgable and helpful, they are not infallible. The notion of an ongoing disclosure requirement initiated by clerks, where no such order was made, is a stark example of why counsel should remember that it is their responsibility to enter an order that mirrors the court’s judgment or the court clerk’s notes.

Lawdiva aka Georgialee Lang

Toronto Lawyer’s $2 Million Dollar Fraud Conviction Upheld

GEO#1Yesterday the Ontario Court of Appeal dismissed Toronto corporate lawyer, Remy Boghossian’s appeal from his 2015 conviction for an almost $2 million dollar fraud on the Royal Bank of Canada. (R. v. Boghossian, 2017 ONCA 870 CanLII)

The scam involved Mr. Boghossian and two co-accused acquiring a forged TD Canada Trust bank draft for $1,895,751 in February 2011 from an unidentified bank insider at the Mississauga branch of the TD bank. The funds were then deposited into Mr. Boghossian’s trust account, whereafter he purchased, in two separate transactions, Australian-minted gold bullion from a company in Montreal.

Mr. Boghossian’s lawyer argued that his client purchased the gold on behalf of a client, Omar Ali, who was a real estate developer going through a divorce who wanted to hide the money from his wife. He asserted that his client was a victim of the scam and had been duped into participating. The trial judge found that Mr. Ali did not exist and was created to advance the fraud. He held that a strong circumstantial case had been established and that the three accused acted together to knowingly defraud the Royal Bank by presenting a forged TD bank draft.

The court heard that Boghossian’s two accomplices tried to sell some of the gold bars, but a wary gold dealer recognized the “kangaroo” logo on the bars and contacted the police.

What remains a mystery is who the insider at the TD Bank is and where the gold bars are now. Media reports indicate that the police have discontinued their investigation of these two matters.

Mr. Boghossian also appealed his 3 1/2 year sentence, arguing that as his co-accused only received 3 years each, his sentence should be reduced to three years. The Court of Appeal dismissed the sentence appeal saying:

“In our view, the extra six months awarded the appellant does not raise parity concerns. The appellant was a lawyer. His status as a lawyer and the role his status as a lawyer played in the commission of the offence justified treating this as an aggravating factor, warranting a somewhat higher sentence for the appellant. We see no error in the sentence imposed.”

It is expected that the Law Society of Ontario will disbar Mr. Boghossian.

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