Bradshaw v. Stenner

2010 BCSC 1398 Bradshaw v. Stenner IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Bradshaw v. Stenner, 2010 BCSC 1398 Date: 20101001 Docket: S072722 Registry: Vancouver Between: Lori Noreen Bradshaw Plaintiff/ Defendant by counterclaim And Kimberley Shane Stenner Defendant/ Plaintiff by counterclaim Before: The Honourable Madam Justice Dillon Reasons for Judgment Counsel for the Plaintiff: A.S. Angus Counsel for the Defendant: G. Crickmore and M. Teetaert Place and Date of Trial/Hearing: Vancouver, B.C. September 8-11, 15-19, 25-26, October 20-24 and November 17, 19-21, 2008 February 9-13, March 23-26, April 8, 14-17, 22-24, May 5-8, June 1-3, 29-30, and July 2-3, 2009 Place and Date of Judgment: Vancouver, B.C. October 1, 2010 INDEX Page no. Introduction.. 3 Preliminary Issue ‑ Parol Evidence. 3 Facts. 8 (a) General Background. 8 (b) Relationship Between the Parties. 10 (c) Prelude to the Family Meeting of February 18, 2004. 12 (d) The Family Meeting of February 18, 2004. 18 (e) Implementation of the Plan.. 24 (f) Events of April 24, 2004. 29 (i) The Peachland Contract 29 (ii) The Second Lickman Contract 33 (iii) Conclusions on the Circumstances of the Peachland Contract and Second Lickman Contract 35 (g) The May 2004 emails. 37 (h) Completion of the Second Lickman Contract 38 (i) Finalization of the Peachland Contract 40 (j) Payment of the Deposit 41 (k) The Price Reduction and Completion of the Peachland Contract 45 (l) The Alleged Rental Arrangement and Development Plans. 59 (m) The Relationship from July 2004 - January 2006. 62 (n) Events of 2006. 68 (o) Legal Proceedings. 75 Credibility Assessment 76 The Claim in Trust 82 The Setoff Agreement 84 Conclusion.. 85 Introduction [1] The plaintiff claims for a declaration that the defendant holds certain property described as 4396 Beach Avenue, Peachland, British Columbia, legally described as Parcel Identifier No. 006-264-972, Lot B, District Lot 220, Osoyoos Division, Yale District, Plan 23676 ("Peachland property" or "Peachland") in trust for the benefit of the plaintiff. In the alternative, the plaintiff seeks a declaration of unjust enrichment or that the defendant is a constructive trustee. In further alternative, the plaintiff seeks damages for misrepresentation and breach of contract. The plaintiff also seeks an accounting, punitive damages and costs. The defendant denies the trust and claims, in the alternative, that the plaintiff was party to a fraudulent transaction designed to defraud mortgage lenders. The defendant has counterclaimed for amounts owed from rental of Peachland to the plaintiff since June 2004. [2] The trial of this action was originally set for ten days. In the end, it took 48 days to complete. The trial was unduly lengthened because it became apparent quite quickly that there were substantially different versions of events from both sides of the action and counsel intensely investigated to ascertain the truth. The extent of the conflict in evidence was so large as to astonish even this experienced judge. As a result, fairness required that I proceed slowly through all of the evidence to determine who was telling the truth. Preliminary Issue ‑ Parol Evidence [3] At the outset of trial, the defendant objected to the introduction of parol evidence by the plaintiff to establish the existence of a trust that the defendant said was contrary to the express terms of the written contract for the sale of the property (the "Peachland contract"). This objection extended to all oral discussions that gave rise to the claim of trust, including a meeting that occurred on February 18, 2004 (the "family meeting"). It was agreed and held that the extrinsic evidence could be adduced, subject to a ruling on admissibility at the end of trial. [4] The defendant also gave evidence of an oral agreement contrary to the Peachland contract to reduce the price of the property (the "price reduction agreement"). This evidence was similarly subject to a ruling on admissibility at the end of the trial. [5] The plaintiff sought to have extrinsic evidence introduced in support of her claim that the defendant holds the Peachland property in trust for her. This evidence relates to the family meeting and a telephone call held prior to execution of the Peachland contract, as well as a post contract meeting. The plaintiff alleges that this evidence establishes an oral trust and fraudulent misrepresentation by the defendant in the purchase of the property. The plaintiff says that the contract of purchase and sale and transfer of title from the plaintiff to the defendant form a wider trust arrangement. As such, oral evidence is admissible as an exception to the parol evidence rule to establish the existence of the trust. The plaintiff asserts that, in her claim for fraud, extrinsic evidence is admissible to nullify or rectify any of the words used in the written contract, independent of the parol evidence rule. [6] The defendant submits that extrinsic evidence should not be admitted pursuant to the parol evidence rule. She maintains that the alleged oral trust is an agreement that is directly contrary to the terms of the written contract and therefore, inadmissible. The defendant also relies upon an exclusion or exemption clause in the agreement. [7] The fundamental rule that no extrinsic evidence may be admitted to alter, vary, or interpret the words used in a written contract, or to contradict the written contract, has exceptions. Lambert J.A. stated the rule and its exceptions in Gallen v. Allstate Grain Co. (1984), 9 D.L.R. (4th) 496 at 506-7, 53 B.C.L.R. 38 (C.A.) [Gallen]: The parol evidence rule is not only a rule about the admissibility of evidence. It reaches in to questions of substantive law. But it is a rule of evidence, as well as a body of principles of substantive law, and if the evidence of the oral representation in this case was improperly admitted, the appeal should be allowed. The rule of evidence may be stated in this way: Subject to certain exceptions, when the parties to an agreement have apparently set down all its terms in a document, extrinsic evidence is not admissible to add to, subtract from, vary or contradict those terms. So the rule does not extend to cases where the document may not embody all the terms of the agreement. And even in cases where the document seems to embody all the terms of the agreement, there is a myriad of exceptions to the rule. I will set out some of them. Evidence of an oral statement is relevant and may be admitted, even where its effect may be to add to, subtract from, vary or contradict the document: (a) to show that the contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration, or lack of contracting intention; (b) to dispel ambiguities, to establish a term implied by custom, or to demonstrate the factual matrix of the agreement; (c) in support of a claim for rectification; (d) to establish a condition precedent to the agreement; (e) to establish a collateral agreement; (f) in support of an allegation that the document itself was not intended by the parties to constitute the whole agreement; (g) in support of a claim for an equitable remedy, such as specific performance or rescission, on any ground that supports such a claim in equity, including misrepresentation of any kind, innocent, negligent or fraudulent; (h) in support of a claim in tort that the oral statement was in breach of a duty of care. I do not consider that I am setting out an exhaustive list. I am only showing that appropriate allegations in the pleadings will require that the evidence be admitted. [8] Careful attention must be given to the evidence in a case to determine whether the rule applies. [9] One of the exceptions, support of a claim for an equitable remedy, clearly applies to evidence to establish the existence of a trust. Lord Lindley stated this exception as early as 1896 in Rochefoucauld v. Boustead, [1897] 1 Ch. 196 at 206-7 [Rochefoucauld] as follows: It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself. ... The defence, based on the Statute of Frauds, is met by the plaintiff in two ways. ... [S]he says that ... the case is one of fraud which lets in other evidence, and that with the aid of other evidence the plaintiff's case is established. In our opinion the plaintiff is correct in this contention. ... [T]he other evidence is admissible in order to prevent the statute from being used in order to commit a fraud; and such other evidence proves the plaintiff's case completely. Rochefoucauld was cited in Owchar v. Owchar, [1949] 2 D.L.R. 432 at 438, [1949] 2 W.W.R. 97, for the same principle: The statute, however, is not permitted to be made an instrument of fraud and if a grantee of land knows that he takes it subject to a trust and relies on the form of conveyance and the absence of a written declaration of trust to retain the land for himself, parol evidence is admissible to prove the trust. The absence of writing will not enable a person who knows that land was conveyed to him as a trustee to claim it as his own .... As noted in Waters on the Law of Trusts in Canada (Toronto: The Carswell Company Limited, 1974), as quoted in Woollends v. Woollends (1982), 41 B.C.L.R. 391 at 393 (S.C.), this principle has been applied for more than a century and a great many persons have been held to their obligations in this way. [10] The defendant relied upon Samad v. Samad (2008), 69 R.P.R. (4th) 212 (Ont. S.C.J.), a case described as "strikingly similar". Three brothers purchased real property with title held as tenants in common. When one brother was named in a fraud scam, he removed his name from title by completing a transfer to the other brothers, signing a release, and receiving $60,000. He then claimed that the transfer was "on paper only" and that there had been a secret agreement whereby the other brothers would hold one third of the property in trust for the plaintiff. The other brothers said that the plaintiff desperately needed money and sold the property, his only asset. Archibald J. at 16 found the plaintiff to be "not remotely credible or believable" and did not apply Rochefoucauld because the defendant failed to establish that the alleged trustee knew or had notice at the time of transfer that he would be holding the property in trust for the defendant. [11] The Statute of Frauds discussed in Rochefoucauld contained a provision requiring all grants and assignments of land to be in writing. A similar provision was contained in s. 3 of the British Columbia Statute of Frauds, R.S.B.C. 1979, c. 393 until it was repealed and replaced in 1985 by s. 54 of the Law and Equity Act, R.S.B.C. 1979, c. 224, now s. 59, R.S.B.C. 1996, c. 253. Section 59(1)(a) explicitly excludes trusts from the requirement that contracts respecting land must be in writing. Notwithstanding the change, the principles from Rochefoucauld continue to apply as Lord Lindley expressed that the exception to the parol evidence rule is to apply notwithstanding the statute. [12] In any event, the parol evidence at issue is led to show that the written agreement was only one part of the full agreement that was reached in Wong v. Wong-Koroluk, 2009 BCSC 545. Mr. Justice Sigurdson relied upon the sixth exception from Gallen to allow evidence of both party's versions of an alleged oral contract to answer the question of whether the parents retained an interest in land after it was apparently sold to their children. The parol evidence rule did not operate to prevent evidence of the alleged oral contract since it was not inconsistent with but might complete the written contract. [13] The defendant also relies upon an exclusion or exemption clause in the agreement which says: 18. REPRESENTATIONS AND WARRANTIES: There are no representations, warranties, guarantees, promises or agreements other than those set out in this Contract and the representations contained in the Property Disclosure Statement if incorporated into and forming part of this Contract, all of which survive the completion of the sale. [14] Anderson J.A. in Gallen, at 516-19, stated that the words in exclusion clauses will be narrowly construed and will not be effective to exclude an express warranty unless clearly worded. The question in interpretation of such clauses is whether the clause clearly covers the alleged occurrence or breach in question (Shelanu Inc. v. Print Three Franchising Corp., [2003] O.J. No. 1919 at para. 32). There is no reference to exclusion of trusts here. In this circumstance, I conclude that this clause does not affect admissibility of evidence related to a trust. [15] There remains the issue of extrinsic evidence regarding the defendant's assertion of an alleged oral agreement to reduce the purchase price which occurred after the Peachland contract, but before completion. The plaintiff does not object to this evidence but says that the defendant cannot approbate and reprobate with respect to application of the parol evidence rule. However, oral variation of a contract subsequent to its execution is not subject to the parol evidence rule. Mr. Justice Drost stated the law in Hanley v. Bradley (1993), 33 R.P.R. (2d) 186 (B.C.S.C.) at para. 40: 40 As I understand the law, the parole evidence rule applies to evidence concerning antecedent negotiations, understandings and oral agreements, as well as to collateral agreements which conflict with the terms of a written agreement. But it has no general application in a case such as this, where it is alleged that a subsequent oral agreement was entered into for the express purpose of supplementing or modifying an earlier written agreement. In other words, evidence of the parties' subsequent conduct is admissible for the purpose of proving a new contract, or a variation or rescission of the old (see Waddam's Law of Contracts, 2nd Ed. p. 237). [16] In conclusion on this issue, the parol evidence rule does not apply here to render inadmissible evidence relating to establishment of an oral trust. Nor does it apply to evidence proof that the Peachland contract did not constitute the whole of the agreement between the parties. Facts (a) General Background [17] The plaintiff, Lori Noreen Bradshaw ("Lori"), was the registered owner in 2003 of three real estate properties which, for convenience, are informally described as a rented business premise on Lickman Road in Chilliwack ("Lickman"), the family home in Peachland, and a rented business premise on Railway Avenue in Abbotsford ("Railway"). Lori had acquired the properties through her husband, John Bradshaw ("John"), with whom she had worked in his indoor gardening business since 1995. The Railway property was acquired to house the family business and Lickman was purchased as rental property. Peachland was acquired in 2002, after the Bradshaws moved from Abbotsford. [18] Lori attained a grade 12 education and previously worked as a hairdresser. Lori's husband attained only a grade 7 education due to dyslexia. As confirmed by Kelland Zastowny ("Zastowny"), a friend who worked together with John in a ballast distribution business, John had great difficulty reading such that Lori read most letters and other material to him. She also wrote his letters and emails. He earned a living as a fisherman and raspberry farmer before injury forced him to start the business related to Zastowny's indoor garden supplies. Lori and John had managed well financially, owned a valuable yacht, and had bought and sold several properties together over the years. [19] The defendant, Kimberley Stenner ("Kimberley"), is a 41-year homemaker. After high school graduation, she obtained a diploma in fashion merchandising, worked in a bank, and then became a licensed real estate agent. She practiced as a real estate agent for six years but said that it was a "more social, fun kind of thing". She quit in 1997. In 1995, she married Justyn Stenner ("Justyn") and was working for Justyn at MSA Ford in 1999 when she met John and Lori through Justyn's employment as the lease manager. She also met Joyce Bradshaw, John's mother, around this time. [20] Kimberley described Justyn as a car broker, although it is apparent from public disclosure statements, as well as from work performed for his father and for a national bank, that he had considerable skill in financial and investment dealings since at least 2000. According to filed public disclosure documents on an American securities exchange for a U.S. company of which he was a director, Justyn has "extensive experience in marketing and [specializing] in commercial finance." Justyn failed to mention his employment and eventual termination at the bank during his testimony. He also expanded the period of his employment at MSA Ford beyond 1999, the year that public disclosure documents state that he left that employment to work for an investment company. He said that he did not review the information in the public disclosure document, denied at first that he provided the information, and eventually said that it was inaccurate. Regardless, it is clear that both Stenners had considerable financial savvy, especially when compared to the Bradshaws. They had been involved in real estate investments and business generally together for some time. [21] Hailey Bradshaw ("Hailey") is the Bradshaws' daughter. She was 24 years old at the time of relevant events. She knew Justyn Stenner as a friend of her father's who visited frequently at their house. She said that Kimberley also visited, but not as often. Hailey had never bought or sold land or been involved in any business dealings before February 2004. (b) Relationship Between the Parties [22] John and Justyn met in 1998 when John leased a vehicle from Justyn through MSA Ford. He subsequently referred many clients to Justyn as well as leasing several vehicles himself. Justyn paid John a referral fee for sending clients his way. Over the course of a year, John and Justyn introduced their wives. [23] The extent of the friendship between the Bradshaws and the Stenners is in issue. The Bradshaws testified that they were very good friends of the Stenners. The Stenners said that they were not friends, but mere business acquaintances because John had referred many clients. They said that they did not include the Bradshaws within their group of friends or family and never invited them to their home. [24] Lori testified that she and Justyn and John often dined out together and that Justyn was often at their home between 1999 and February 2003, when the Bradshaws left to live in Mexico. She saw Kimberley less frequently, about every couple of weeks, usually for lunch or coffee or at the pub. They frequently went out on John's boat. She testified that the Stenner children swam in the Bradshaw pool, a detail denied by Justyn who said that his children never came to the Bradshaw home and did not meet the Bradshaws until 2003. Lori said that by February 2003, the Stenners had become close friends. John testified that he and Justyn were very good friends who talked together almost daily over several years. [25] Kimberley denied that she was ever friends with the Bradshaws. She testified that she had been to the Bradshaws' home a couple of times when Justyn brought documents there for them to sign related to cars. At first, she said that she also saw them once at the airport in February 2003 and another time at the store in Abbotsford that John owned, but that was all. However, upon further questioning, she remembered that she had also seen the Bradshaws at John's mother's house in relation to a vehicle one time. She eventually also remembered being in a pub with John sometime before 2003, attending the Bradshaws' anniversary party in 2004, John's yacht in March 2005, and John's birthday party in 2005 at Isabelle Johnson's ("Johnson") Lori's mother's house. When asked, she further remembered that she saw John at his mother's bedside in hospital in 2005. It is clear that Kimberley minimized the extent of her friendship with the Bradshaws. [26] John and Justyn had multiple business dealings, not solely related to vehicle leases. John owned certain distribution rights to a ballast through Zastowny. He planned to start a company to distribute the ballasts in Central and South America. Both he and Justyn were to be shareholders in this company. John testified there were great expectations that the company would be immensely profitable. When John was away in Mexico, Justyn worked with Zastowny developing executive summaries and brochures for the business. He also did the financial planning for John's distribution business. John described Justyn as more "polished" than him and handled the "financial stuff". [27] The different versions of an airport event in February 2003 represent the dichotomy between the Bradshaws and the Stenners when it comes to describing their relationship. Pictures of the event show a happy group of people seated in a restaurant. Justyn and Kimberley are smiling with the Bradshaw family who had gone there to see Lori and John off to Mexico. Whereas Hailey said that the Stenners came to see her parents off to Mexico, Kimberley testified that she was there only to accompany Justyn who had to drop off paperwork related to business with John. From Justyn's testimony, this was vehicle business related to MSA Ford. However, Justyn was no longer employed at MSA Ford at that time. There was no reason why Justyn would be carrying insurance papers on behalf of MSA Ford. Further, this suggestion was not put to John or to Lori. [28] There are many factors that confirm that the Bradshaws and the Stenners were good friends, as described by Lori and John. The tone of emails and cards between the couples from time to time, the extent of their meetings generally, and their attendance at important personal events suggests that they were good friends. The facts that the Stenners purchased the Bradshaws' home in Abbotsford, that Justyn assisted Lori when she purchased both the Lickman and Peachland properties, that Justyn stored his boat at Johnson's house and visited her there, that both Kimberley and Justyn visited John's dying mother in hospital, and that the Stenners took the Bradshaws' dog when they went to Mexico in 2003 all reveal the nature of the relationship. Although it may be quite possible that the Stenners were only in the relationship for financial advantage, this was not the appearance that was given either to the Bradshaws or to others. It was also the case that John and Justyn were the primary friendship, with the ladies following. Despite some protestations to the contrary by the Stenners, at all times, John and Justyn spoke on behalf of their wives, as required. (c) Prelude to the Family Meeting of February 18, 2004 [29] When Lori and John departed to Mexico in February 2003 to start a business, the mortgages on all three properties owned by Lori were in good standing. However, the Business Development Bank put Railway into foreclosure in September 2003. In November 2003, Coast Capital Credit Union ("Coast Capital" or "credit union") petitioned for foreclosure against Lori on the Peachland property for default of the mortgage in the amount of $294,436 and for foreclosure on the Lickman property. The reasons for this situation are not relevant, except to say that an unanticipated and unknown problem in John's family resulted in non-payment of monies due. [30] John testified that when he learned of the three foreclosures, he called Justyn to ask for his advice. He wanted Justyn to arrange for re-financing. Although Justyn said that this would not be a problem at first, he then said that neither John nor Lori would be able to get a mortgage themselves. He told John to get a lawyer, which he did. Justyn also advised John to put Peachland up for sale as a means of slowing the foreclosure process on that property. [31] Although Justyn testified that he could not recall any conversations between himself and John between the fall of 2003 and late January 2004, it is certain that he knew at least by late January that Lori was selling the three properties. He testified in direct examination to conversations in late January 2004. However, at other times, he contradicted himself and said that he knew nothing about the properties until February 18, 2004. The date of the conversation that he did confirm is also in doubt as he could not recall at first if he knew at the time whether the properties were listed for sale but later said that he thought that the properties were listed for sale. He testified that he did not know why the properties were being sold and that he did not know that they were in foreclosure. He said that John asked him if he knew anyone who would purchase the properties. After a leading question, he said that John told him that he was selling because he planned to stay longer in Mexico, without mention of foreclosure. Based upon the relationship between John and Justyn and the failure to cross-examine John about selling the properties because he was to stay in Mexico, it is highly unlikely that Justyn was not informed about the foreclosures. Justyn also said that Lori called the same day to inform him that the Peachland property was zoned for condominiums, provided the legal descriptions of the various properties, and told Justyn what price she wanted for each property. This is also highly unlikely because Peachland was never zoned for condominiums, a fact discussed further below, and obviously known to the owner. [32] On January 15, 2004, Lori listed the Peachland property for sale with Bill Dupuis ("Dupuis") of the Royal Lepage office in Kelowna at $395,000. The land was zoned "R1". Remarks on the listing included the following: 119 ft. of semi-lakeshore with a 5 bedroom remodelled home. Rezone possible to commercial & apartment possibilities. Representative: Super .309 acre for re-development on Beach Ave. It is clear from this description, and any prudent purchaser could ascertain, that this property was not zoned for condominium development. Lori said that she listed the property because John told her to do so based on Justyn's advice that this would keep the credit union at bay. [33] Discussions with Justyn about the situation continued. Justyn tried to obtain and had numerous prospective purchasers who were interested in the Railway property. He also obtained an offer for Lickman. He denied that he ever relayed this information to the Bradshaws. However, when nothing came to fruition, John and Lori testified that Justyn eventually came forward with a plan to get around John and Lori's inability to refinance the properties. [34] Justyn's plan was to sell the Railway property to a family member. He had a buyer for the Lickman property. Justyn told John not to sell the Peachland property because it was waterfront and valuable for condominium development in the future. He said that Peachland should be transferred to a family member on paper and that if this did not work, then Justyn and Kimberley would put the property into their names. With this plan in mind, John asked Lori to arrange a family meeting to discuss these matters. In the meantime, Justyn moved to arrange for the sale of Lickman to a family member after the proposed sale to a third party did not proceed. [35] Justyn denied all of this and said that he played no role except to introduce John to Rav Pannu ("Pannu"), who had a client interested in purchasing Lickman. He denied that he ever discussed the three properties with John or that he played any other role until he attended a family meeting on February 18, 2004. He again denied that he knew about the foreclosures. However, Justyn contradicted himself several times on this issue and ultimately admitted in cross-examination that he had tried to find buyers for Railway and Lickman as described above. He also admitted that he had spoken with John before January 2004, that he had several conversations with John about all of this, that he had obtained details on all three properties, and that he was to be paid a fee if a property was sold. It was never disclosed to the Bradshaws that Justyn had arranged to receive a fee for his efforts. Justyn had been to the Railway and Lickman properties and was familiar with them. It is not believable that Justyn did not know about the foreclosures if he was actively looking for buyers for the properties. [36] Justyn's role is confirmed at least in part by email correspondence in early February 2004 in which he told John that he had found a third party to buy Lickman and asked whether "$480,000 net" worked for John on the property. In cross-examination of John and Lori, it was suggested that this third party was Pannu and that once it was known who the proposed purchaser was, that John and Lori took over arrangements. This was denied by both John and Lori. Pannu was a mortgage broker friend of Justyn's whose name came up several times during this trial, but who was not called to testify. It was also suggested in cross-examination that after this email, Justyn took no further role in all of this. However, Justyn continued to assist the Bradshaws as revealed by his continued efforts on the Lickman property after nothing came of the "$480,000 net" deal. [37] Justyn prepared a contract of purchase and sale for Lickman from Lori to Johnson, the plaintiff's mother, on February 12, 2004 (the "first Lickman contract"). The offer, also dated February 12, was for $387,000 with deposit of $5,000, to complete on April 16, 2004. The contract named Barbara Lerner ("Lerner"), as the real estate agent for the purchaser, Johnson. Lerner was a close friend and confidante of the Stenners and a former real estate colleague of Kimberley. Lerner had shared undisclosed commission and referral fees with the Stenners regularly since 1997 if they referred a client. There was no agent listed for the vendor, Lori. The document appears to be signed by Johnson but not witnessed and was signed by Hailey Bradshaw as power of attorney but also not witnessed. [38] Hailey said that she signed this document along with her grandmother at her grandmother's house at the request of Justyn who presented the papers to her and to her grandmother. She said that she had been told by her parents to do as Justyn directed. John confirmed this instruction. Hailey did not read the contract and there was no discussion about it. She did not know Lerner. Justyn did not sign as witness. Hailey said that she kept the contract and sent it to the lawyer when told to do so by Justyn. [39] Justyn denied all of this. He said that he requested and received the form of contract from Lerner in blank, except for her name as preparer of the document and as agent for the buyer. Lerner confirmed that she sent Justyn a blank contract of purchase and sale but said that Justyn should have removed her name as preparer of the document. She said that she was never the agent for any proposed buyer at the time and denied that she was to share in a fee. Justyn said that he filled in the rest of the contract except for the name "Isabel Johnson". He also said that he gave the contract to Pannu with the purchaser's name blank and never saw it again. He denied that he sent it to Pannu having already arranged for a fee on any transaction related to the property. However, he knew that the purchase price of $387,000 was less than the value of the property and much less than the $480,000 net that was earlier proposed. He denied that this was to be the first stage in the flip of the property with an eventual sale at $480,000 or higher. He continued to deny that he knew the amount of the mortgage that was the basis for the foreclosure on the property. He said that Hailey must have signed the document after she received power of attorney in March 2004, even though the document is dated February 12. [40] The plaintiff's lawyer for the three transactions testified. Timothy Hordal ("Hordal") said that he was retained about February 18, 2004 as the plaintiff's conveyancing lawyer. However, Hordal's initial communication with the plaintiff was while she was in Mexico and must, therefore, have been before February 18. He described each transaction in turn. Hordal recollected the transactions mostly from documents but had specific recollection of the unusual nature of the statement of adjustments in the Peachland transaction. [41] Hordal said that Hailey Bradshaw brought the first Lickman contract to him, but he did not know when. He subsequently received a copy of the title search of the property by fax from the solicitors for Johnson, Bell Spagnuolo. It confirmed Lori as the owner of the property and showed a judgment in favour of the Business Development Bank related to the Railway property. Coast Capital had also registered its judgments related to the Railway and Peachland properties against the Lickman property. Hordal took steps to clear title to the property. However, the first Lickman contract did not complete. [42] The first Lickman contract is significant for several reasons. First and most certainly, the form of contract was sent to Justyn by Lerner at his request and completed by Justyn. I reject Justyn's testimony that he completed the entire document except for the name of the purchaser "Isabel Johnson", whose name he says was inserted by Pannu. If he did not insert the name, he certainly knew the name of his planned purchaser. I also reject that he did not attend to Hailey and her grandmother to have it signed as Hailey testified. Undisclosed to the Bradshaws, Justyn was to receive a fee for this sale. It is not believable that he sent it to Pannu without a fee arrangement in place or that Justyn remained disinterested as to whether it was ever executed. Second, Hailey did not have actual power of attorney at this time because Lori did not sign a power of attorney until February 25 and it was not sworn until March 4 because Lori was out of the country shortly after February 18. So, Justyn must have figured that Hailey would play this role while her parents were away in Mexico. Third, it reveals the role that Justyn assumed, including the organization of Lerner's assistance and the direction of Hailey prior to February 18, 2004. It is apparent that Justyn was directing Hailey because Justyn did not provide a copy of this document to the Bradshaws and there is no evidence that he talked to them about this. Finally, it confirms that Justyn had a plan and that he moved to put that plan into effect. The plan included Lickman and it was only Justyn, who had drafted and arranged for execution of this contract, who knew the status of Lickman on February 18, 2008, the date of an important event in this litigation. [43] In further background to the February 18, 2004 family meeting, Justyn knew that the Bradshaws' needed to sell the three properties. At first, he acknowledged only that he acted for Lori and John to help them "get rid of some properties" for a period of about three weeks prior to February 18, 2004. While admitting that he was trying to sell the properties, he testified that he would only do so if he was making money for himself. It was made quite clear that Justyn, and Kimberley for that matter, would not do anything unless they were making money. Kimberley testified that she knew nothing about the foreclosures on the properties before February 18. She said that she did not speak to the Bradshaws at all after they went to Mexico, until she attended the family meeting at the home of Bert Price ("Price") on February 18, 2004. [44] Lori testified that John asked her to arrange a family meeting because Justyn had wanted to meet with them and discuss what to do about the three properties. Lori arranged with her family to attend a family meeting on February 18. She asked John to contact Justyn. John advised Justyn of the arrangements and asked Kimberley to attend to help Lori because she was very upset about all of these happenings. John was in Mexico and would not be there. (d) The Family Meeting of February 18, 2004 [45] The family meeting that occurred on February 18, 2004 at the home of Price, Lori's brother-in-law, is the most significant event of this litigation. It is at this meeting that the plaintiff says that the plan to transfer the Peachland property in trust to end the foreclosure was brought into effect. [46] Price testified that the meeting was held at his house after he had got together with Lori the night before and first learned about the foreclosures. He described who was present, including Justyn and Kimberley, whom he had not met before but whom he knew to be friends of John's and Lori's. Price said that the Stenners arrived last with Lori. He said that Justyn led the meeting after Lori introduced everyone. Justyn started by talking about family helping family and that it was time to step up to the plate to help Lori preserve some equity from the properties. He told everyone that the Lickman property had been dealt with, but that a family member should purchase the Railway property. Price asked Justyn directly about the sale details for Railway because he was familiar with the property and was interested in purchasing it. Justyn informed him about the asking price and the income received from the property. There was discussion about the purchase having to be done before the end of the month because of the foreclosure. Price testified the he agreed to purchase the Railway property and said that he would see the realtor the next day. There was discussion that Lori did not want to sell Peachland because it was her home and she hoped to develop it into a 6-plex one day, keeping one unit for herself. According to Price, Justyn said that a family member could transfer the property into their name "on paper" and hold it for Lori until she could transfer it back into her name. Lori said that she would make all the payments, pay all the taxes and look after everything for the property. A question was asked as to whether Lori could make the payments and Justyn replied that if she could not, there was sufficient equity in the home so that it could be sold. Justyn told everyone that there was no risk and that the transfer would just be on paper. A new mortgage would be taken out to pay for the old mortgage, and there was lots of equity left. Price recalled Justyn telling everyone that if they would not do it, he and Kimberley would. Justyn said that he had done this before, that he knew how to do it, and that he would help with the transaction. Price said that Lori's brother and Gail Beaupre both offered to transfer the property into their names and said that they would go to the bank to see what they could do, but were worried because they already had a mortgage. The meeting ended shortly after these arrangements were made. Price indicated that nobody had left during the relatively short meeting. Price made notes of his recollection of this meeting in 2006 when this matter became contested. He was not cross-examined on his recollection of the specific details of the meeting, particularly about what Justyn said and what role he played. Also, he was not asked if Justyn and Kimberley were asked to and did leave the meeting. [47] Gail Beaupre ("Beaupre"), Lori's sister who was also at the family meeting, testified. She also had not met Justyn before, but knew him to be Lori's and John's "financial guy". She testified that the meeting started with Lori introducing Justyn as a good friend who was there to help and who had expertise in property and financial matters. She said that Justyn then ran the meeting and described that there were three properties to deal with. He said that he had a plan to sell Lickman and Railway, but to keep Peachland. Justyn told them that he had taken care of Lickman. Price offered to purchase Railway after that was discussed second. Justyn proposed that Peachland be sold to a family member to hold "on paper", that they could get rid of the existing mortgage and get a new one, and that Lori would pay all of the insurance, mortgage and taxes. Beaupre said that she asked whether one could get a mortgage if the property was held on paper only. Justyn told her that the banks did not care as long as they got their money. She said that another question concerned what if Lori could not pay, and Justyn answered by saying that there was lots of equity in the property. She said that Justyn told them that there was no pressure, that if they could not do it, he and Kimberley would. Beaupre said that she left the meeting with Lori, Hailey and Kimberley and went outside onto the back porch where Lori was crying and Kimberley offered comfort, saying that everything would be okay and that she and Justyn would help. Beaupre was not cross-examined about her recollection of the details of the meeting or about the scene outside afterwards. [48] Lori testified that she began the meeting by introducing Justyn and Kimberley as her friends and that Justyn was their "financial guy" who would explain the three properties to the family. After that, she said that Justyn ran the meeting. He said that Lickman was already looked after, so there was no need to discuss it. He said that Railway was a good rental investment property that some member of the family should buy. Justyn told Price the sale price and Price said that he would buy it. Lori gave Price the number for the Railway real estate agent. Lori testified that Justyn knew that John and Lori wanted to keep Peachland as their home and that he had a plan wherein they could do so. Justyn explained that Lori would transfer Peachland to a family member "on paper" to hold it for her. Lori would pay the mortgage and taxes. Justyn told the gathered family that if they did not purchase the property for Lori, that he and Kimberley would do so. Concern was expressed about what would happen if the mortgage was not paid and Justyn said that this was not a worry because of the equity in the home. There was also a question about whether it was all right for someone else to hold a mortgage for someone else and Justyn said that this was fine. Beaupre and some others said that they would go to the bank and think about this. Lori testified that John called during the meeting and spoke with Justyn and Kimberley. Afterwards, Lori was upset, crying outside on the porch, and was consoled by Kimberley. Lori denied in cross-examination that Justyn knew nothing about the Peachland property prior to the meeting. She also denied that Justyn played no significant role at the meeting and waited outside for most of it. [49] Lori testified that Kimberley called her later that night and told her not to worry, that she could go back to Mexico and everything would be all right. Lori returned to Mexico within a few days. Before she left, she contacted the lawyer, Hordal, to arrange for a power of attorney to be given to her daughter, Hailey. Justyn had advised her that power of attorney was needed if she returned to Mexico. [50] Kimberley denied Lori's version of events during this meeting. Kimberley testified that she had no knowledge of and had no discussions with anyone about the Bradshaws selling Peachland, Railway or Lickman until the family meeting. Although she knew that the Bradshaws lived at the Peachland property and knew the Railway property to be the commercial property where John had his business, she testified that she had never seen either property, even though she regularly visited Peachland and had been looking for property to buy there for two years. She said that she was having dinner with Justyn when John called and asked Justyn to go to a meeting that Lori was having with her family. She said that John told Justyn that he was selling the properties and that Lori's family was going to purchase them. This version is unlikely because Justyn already knew about the sales and had been working to help John for several weeks. Kimberley said that Justyn was asked to be there to provide financing contacts, if needed. Since Kimberley was with Justyn, John told him that it was all right to bring her. Kimberley testified that there was no discussion between her and Justyn about the properties before they arrived at the meeting, about a half hour after the call. [51] Although Kimberley testified initially that she had never met any of the people at the meeting before, she admitted having met Hailey and Lori's sister prior to that meeting. Kimberley said that the meeting had already started when they arrived but also said that she was unsure about that as the others were sitting around. She denied arriving with Lori and Hailey. She said that she took no role at the meeting. According to her, Justyn's sole contribution was to say that he could get financing contacts if needed. Lori told those present that three properties were in foreclosure, that they had good value, and she asked her family to purchase them. The commercial Railway property had an income, the specifics not disclosed, and the Lickman property was thought to be already sold. In discovery, Kimberley testified that there was no discussion of the Lickman property, the one property in which Justyn had already crafted a sale to Lori's mother and for which he was ultimately to get a fee. She said that Justyn had not discussed this with her prior to the meeting or at the meeting. She denied that it was Justyn who reviewed the situation with respect to Lickman at the meeting. Kimberley said that the only thing that Lori said about Peachland was that it was zoned for condominiums. She denied that the amount of the outstanding mortgage was mentioned. She said that she did not learn from the meeting that the Peachland property was for sale, although she acknowledged that she learned that it was in foreclosure. She specifically denied that anything was said about purchasing the property "on paper". She described as "ridiculous" the suggestion that Justyn described his plan for Lori's family or, failing them, Justyn and Kimberley, to purchase the Peachland property "on paper", with a new mortgage to pay out the foreclosure mortgage, and with the transferee to hold title for Lori until it could be transferred back when Lori could assume a mortgage. Kimberley said that, after 15 minutes, Lori's sister asked the Stenners to leave because it was a private meeting. She testified that she and Justyn remained outside for another 15 minutes. Kimberley did not explain why they waited outside when, according to her, they had no interest in the matter, were not friends of Lori's, and knew nobody there. Kimberley said that she was outside when Lori told her that her brother-in-law, Bert Price, was going to purchase the Railway property and that her sister was going to purchase Peachland. Lori was happy with these arrangements and was planning on returning to Mexico. Kimberley testified that she had no further discussion with anyone about the properties, even though the thought of development property in Peachland "perked" her interest. Kimberley testified in direct testimony that her next contact with either Bradshaw was in November 2004, to celebrate Lori and John's anniversary. [52] Justyn testified that John called him on February 18 and asked him to attend a meeting with Lori's family. Justyn said that John wanted him there to arrange or provide contacts if the family wanted financing. He knew that the plan of the meeting was to induce family members to purchase the properties. Justyn said that Lori conducted the meeting and explained the situation concerning all three properties, particularly that Peachland was zoned for condominiums, that Railway had a revenue stream and that there was an offer for Lickman. He added that she also said that the properties were in foreclosure. Although Justyn admitted there was a discussion about Peachland, he denied any mention of a purchase "on paper" or about holding a mortgage for someone else. In fact, he claimed to not understand what this could mean. He also denied that he knew the amount of the mortgage that was in foreclosure. He said that he played no role and was asked to leave after 15 minutes. On cross-examination, Justyn admitted that he provided information that Lickman appeared to be sold, but denied that it was intended to "flip" the property. He completely denied participating as described by Price and Beaupre. More specifically, he denied that Lori had ever mentioned a plan to transfer Peachland to a family member to hold "on paper" for Lori to discharge the mortgage in foreclosure. He saw Lori happy and relieved after the meeting. [53] Justyn's and Kimberley's version of this meeting is not believable. Certainly, Justyn knew about the foreclosures before this time. His involvement in the Lickman transaction reveals his true role. His denial of conversations prior to this meeting and his denial of knowledge of the situation set the stage for his denial of events at this meeting. The evidence of Price and Beaupre was unequivocal and not undermined on cross-examination. The defendant's theory that Justyn and Kimberley stayed only a short while at the meeting, that Justyn played no role, and that there never was a plan to hold Peachland for Lori, was not put to Price or Beaupre in cross-examination. Lori was not shaken in her evidence. From observation of Justyn on the stand, he is a man with an answer to everything and is unlikely to have kept quiet at a meeting where he was to make money. Justyn devised a plan to save Peachland for his friend and to eventually make money for himself. Initially, Kimberley merely went along. There is no reason for her to have attended a private, intense, emotional family meeting unless she was a good friend of the Bradshaws. The explanation that they had been dining out and that she went for no reason is not believed. Neither is her evidence that she knew nothing about the situation prior to the meeting. As will be seen, she is the wife who listens in on her husband's business conversations on the phone, attends with him while he transacts business, and plays a key role in the Stenners' combined efforts to undermine their arrangement with the Bradshaws. [54] John testified that he spoke with Justyn immediately after the meeting. Justyn told him that Price was going to buy Railway. Justyn told him that the plan seemed to be proceeding on Peachland and not to worry because if the family did not go ahead with it, he and Kimberley would. John said that he also spoke with Kimberley and she assured John that if the family could not do it, she and Justyn would put Peachland in their names on paper. Oddly, John could not recall this conversation in cross-examination. Kimberley denied that she had such a conversation with John. Justyn said that he did not speak to either Bradshaw after the meeting until April. Given that the Stenners did attend the meeting at John's request, it is more probable that a conversation with Justyn did occur following the meeting. (e) Implementation of the Plan [55] Two days after the family meeting, Price formally offered to purchase Railway. Hordal received an agreement of contract and sale for the Railway property dated February 20, 2004, which provided for the sale to Bert and Jacquie Price or to their company, BP Sales, for $190,000, the amount discussed at the family meeting. This agreement of contract and sale was signed on February 20 by "H. Bradshaw per power of attorney". However, Hordal testified that it was not until February 25, 2004 that Lori sent Hordal a power of attorney for Hailey Bradshaw via fax from Mexico. Hordal attended to its execution by Hailey on March 1 and met with Joyce Bradshaw, John's mother, on March 2 for an affidavit to verify Lori's signature. [56] Hordal knew from a search of the Railway property that it was owned by Lori Bradshaw and subject to judgment in foreclosure proceedings against the interest of the plaintiff in favour of Coast Capital and a mortgage to the Business Development Bank. The lawyer requested the payout figures for the mortgages and judgments registered against the property. The lawyer who acted for the Bradshaws in foreclosure proceedings informed the mortgagor that the property had been sold and that Hordal was acting for the Bradshaws. Hordal was then contacted on March 3, 2004 by solicitors for BP Sales, the company owned by Price, who represented that they acted for BP Sales as purchasers of the Railway property pursuant to an agreement for sale also dated February 20, 2004 and attached transfer forms and a statement of adjustments in the usual form. On March 4, 2004, Hayley Bradshaw executed the Railway transfer documents for sale to BP Sales as power of attorney for her parents for the purchase price of $190,000. The payout of the mortgage did not leave sufficient funds to pay out the judgment to Coast Capital: but, Hordal arranged for the credit union to be paid half of the net proceeds from the sale of Railway, equal to the net amount payable to his clients. This left $10,094.19 to be paid to Lori from the proceeds of the sale of the Railway property. The sale completed on March 9, 2004. [57] In the meantime, Lori's family did not come forward to purchase Peachland as had been hoped for at the family meeting. Lori and John both testified, and Kimberley and Justyn both denied, that a telephone conversation took place between the couples in early March 2004. John said that when the family did not go ahead with the plan, he called Justyn who told him that they would proceed with "Plan B". The plan was for Kimberley and Justyn to transfer the property into their names and when the Bradshaws needed to, it would be transferred back into their names. There was no discussion about how this would be done. John testified that he also spoke with Kimberley in this call. Both he and Lori were in Mexico at this time. Lori recalled that they had to call from a phone booth and that both she and John had crammed into it. She testified that she also spoke with Justyn who told her not to worry; she could keep her home and put the house into their name on paper, just as discussed at the family meeting. Lori would pay the mortgage and maintenance. When Lori asked a second time about the arrangement, Justyn said that she could get the property back at any time. Lori understood that Kimberley and Justyn would obtain a new mortgage to pay off the old one. Lori expressed concern for Hailey but Justyn said that he would get her through this. Lori said that she also spoke with Kimberley who assured her that she could keep the house, they would hold it for her, and she was safe. Lori told Kimberley that she would make sure that all of the mortgage payments were made and Kimberley responded that it was their turn to help the Bradshaws. John said that he was greatly relieved and called Hailey. He told her to do as Justyn directed. In cross-examination, it was not suggested to John that this conversation never took place: instead, it was simply suggested that Lori placed the call. [58] Kimberley said that she learned from Justyn only in the later part of March 2004 that the Peachland property was for sale. She said that, apparently, John had called Justyn to tell him that Lori's sister had not purchased the property and asked Justyn to let his contacts know of the sale. Justyn confirmed the information but said that Lori had told him only that Peachland was still available. How Kimberley could not have known that Peachland was for sale before this is mystifying. [59] Kimberley immediately asked Lerner, her old friend in real estate, now a trusted confidante, to search out the Peachland listing and other listings because it was "zoned for condos". Why she did this then, when she had been looking for property in Peachland for years, was not explained. She did say that, although she was not experienced in condo development, the concept was appealing to her because she could expect to triple her money in a short period of time. Even though she was interested, she said that she never considered or discussed with anyone what the outstanding mortgage was on the Peachland property or the amount of equity held by Lori until this litigation arose. [60] Kimberley said that Lerner produced between 3 and 10 property listings, including one for the Peachland property that had been listed since January 2004. Kimberley was interested in the price and the remark "for re-development". Justyn and Kimberley reviewed the listing with Lerner who told them that accuracy was important in the listing and drew the words "for redevelopment" to the Stenners' attention. Kimberley testified that she did not notice that the property was zoned R1. Justyn said that from this and the remarks of Lori at the family meeting, he concluded that the property was zoned for condos, despite the fact that the listed zoning was R1 and that the remarks said "Rezone possible". Justyn said that he did not know what that zoning meant, but made no inquiry, even from Lerner with whom he said that he had no discussion. Lerner, however, testified that she definitely reviewed the remarks on the listing with the Stenners and knew that it did not say that the property was zoned for condominiums. She told the Stenners that there was only a possibility for rezoning. Although Lerner waffled on this point, she conceded that she knew that it was not zoned for condos at that point but thought only that it could be in the process of rezoning. She said that Kimberley was convinced that it was zoned for condos. Lerner agreed that the R1 designation could have various meanings, but none of them meant condominium development. Upon further cross-examination, Justyn conceded that it was clear that there was only a possibility of re-zoning and agreed that it was not zoned commercial. He knew that the words "rezone possible" meant that it was not zoned for condominiums, but thought that it was "enticing". He testified that he saw the listing but paid no attention to it, choosing to rely upon Lori's "adamant" statement at the family meeting that the property was zoned for condos. He testified that they remained of the view that the property was zoned for condos until May 24 when they learned that the property was not zoned for condos. No further review of the potential for redevelopment was undertaken prior to the Stenner offer. No contact was made with the selling agent, whose remarks included the enticing words "for development". No research was done when the Stenners went to Peachland in early April to look at the property. [61] Eventually, Justyn said that they acted upon Lori's statement alone and did not rely upon the listing document. He said that they relied on everything that they heard at the family meeting. From all of this, I conclude that Kimberley and Justyn knew from the listing prior to their offer to purchase Peachland that the property was not zoned for condominium development. Also, it raises the suspicion that the Stenners were interested in the Peachland property prior to the family meeting, with private ideas to develop the property and eventually make a profit. The Stenners planned to view the property with Lerner in early April 2004. However, the Stenners were also prepared to put in an offer for the Peachland property based upon the listing document alone, without seeing the property. They maintain that the representative's remark "for redevelopment" misrepresented the property and was the basis for the subsequent price reduction of $100,000, a major issue in this case. Nonetheless, they did not retain a copy of the listing document for the Peachland property or any other property in Peachland that they said that they were interested in. [62] The Stenners testified that they travelled to Peachland around April 5, 2004 to look at properties near Beach Avenue in Peachland. Lerner was supposed to go but could not. The Stenners made no arrangements to properly view any property, including Lori's Peachland property. Whether this trip actually took place is in some doubt because the Stenners were ordered to produce any receipts or bills related to this trip and failed to do so. They both testified that they did not view the Peachland property, except to drive by. None of the properties that they said that they looked at were identified in evidence as zoned for condominium development, and Justyn could not remember that they were so zoned. Shortly after, the Stenners advised their financial institution, Coast Capital, the same credit union that held Lori's mortgage in foreclosure, that they were interested in purchasing the Peachland property. The credit union arranged for an appraisal of the property. Kimberley testified that while she was pre-approved to purchase any property in April 2004, it is apparent that arrangements were focused upon the Bradshaw property. No such pre-approval for any property was ever introduced into evidence. While Kimberley testified that she decided to purchase the property after this brief drive-by with the plan to develop it into condos, relying on intuition that she would make money, she denied that she was a sophisticated buyer. [63] Dupuis presented the Bradshaws with an offer to purchase Peachland from a third party on April 13, 2004 for $345,000. The offer was open to April 17 and was to complete on June 14, 2004. This was a legitimate offer from parties unrelated to this action. John testified that Lori turned down this offer because Justyn advised not to sell Peachland, but to stay with the plan. Justyn denied that he discussed this with John. He could, however, think of no reason why Lori would then turn around and sell Peachland to Kimberley for $295,000, the price asserted by the defendants in this action. There was no real pressure on Lori at this time from the foreclosure, as the redemption period had yet to expire. There was ample equity in the property. (f) Events of April 24, 2004 (i) The Peachland Contract [64] Justyn testified that he had no contact or discussion with the Bradshaws whatsoever prior to making an offer to purchase Peachland on April 24, 2004. This is contrary to the suggested chain of events in the cross-examination of Lori. He and Kimberley were planning on going to Hawaii for the month of May. He said that he had no contact with them until late May 2004. Kimberley also testified that she had not spoken to either John or Lori since the family meeting before this offer was made. Lori testified that both she and John spoke regularly with both Stenners after the family meeting, but mostly about general things until she heard from Justyn about the offer to purchase Peachland. [65] April 24, 2004 is a significant date in this litigation. Two major events occurred on that day. It is the day that Kimberley and Justyn offered to purchase the Peachland property for $395,000 and signed a contract of purchase and sale (the "Peachland contract"). It is also the day that Johnson placed another offer to buy the Lickman property, this time for $330,000 (the "second Lickman contract"). How these events came about together further reveals the role played by Justyn Stenner. The events of this day as they relate to both contracts will be considered in turn. It should be remembered that both John and Lori were in Mexico on that date. There is no evidence that either were contacted by anyone at any time during that day. Because of the differing versions of events, it is best to decide what happened for certain and then what happened most probably. [66] Lerner met with Justyn and Kimberley Stenner at their home on the morning of April 24. She testified that she prepared the Peachland contract. Justyn was equivocal in his testimony about who prepared the contract, at first stating that Lerner prepared the document, then saying that he could not remember, and eventually saying that you would have to ask Lerner. The Peachland contract was a standard form of contract of purchase and sale, containing an offer to purchase the property with Kimberley and Justyn as purchasers and Lori as the seller. The purchase price was $395,000, the full asking price. Kimberley testified that she paid the full price "because [she] wanted it". This was based upon one drive-by viewing. There had been no negotiation of price. There had been no building inspection and none was included in the conditions of purchase because Kimberley did not want this included, contrary to Lerner's advice. The offer included the statement that the property had been viewed by the purchasers on April 5, 2004. The offer was subject to a new first mortgage in the amount of $295,000 being made available to the purchasers on specific terms before May 24, 2004. However, this figure had been increased by handwritten change and initialled. Lerner knew and discussed with them that the maximum that could be obtained on a conventional mortgage was 75% of the purchase price, but denied that the mortgage amount was increased to maximize this financial ability. The contract contained the usual term that there were no representations, promises, or agreements except as set out in the contract. A deposit of $5,000 was to be delivered to Sutton Premier Realty, Lerner's firm, and held in trust. No such deposit was paid at the time that the offer was made. The offer was open to April 29 and was to complete on June 30. The seller's realtor was Dupuis at Royal Lepage. Lerner said that the Stenners signed the document in her presence at their home on the morning of April 24. [67] There were several versions of this document in evidence. In all of them, Hailey's signature as power of attorney for the plaintiff is neither dated nor witnessed. Exactly how and when Hailey signed the document is in issue because Hailey testified that she signed the document at Justyn's direction and in his presence without first reading the document. This is denied by Justyn and the defendant, who maintain that Justyn did not play a guiding role in the transaction. [68] Lerner said that, after the Stenners signed the document in her presence at their home on the morning of April 24, she then called Dupuis to advise of the offer. For some reason, she did not send a copy of the offer to Dupuis. Lerner said that she learned from Dupuis that Hailey held Lori's power of attorney. She testified that this was the first time that she had ever heard the name 'Bradshaw'. She said that she then called Hailey to arrange a meeting. Lerner testified that she told Hailey that she needed to be shown the power of attorney. Lerner testified that she met Hailey and a friend of Hailey's around 9:00 p.m. on April 24 at a gas station. She testified that Hailey gave her a copy of the power of attorney. There was no discussion of the terms of the agreement or any other information provided by or given to Lerner. She said that Hailey signed the Peachland agreement without reading it. However, Lerner said that she forgot to witness the signature. She also said that she did not give a copy of the signed agreement to Hailey because Hailey did not want one and said "forget it". She testified that she immediately phoned Hailey back about her failure to witness the document, but Hailey told her not to worry about it, so she never did sign the witness statement. Lerner could not explain why she needed to call Hailey back if she had already actually witnessed her signature. Lerner said that she then advised the Stenners that she had a signed copy of the agreement and that she then sent a copy to Dupuis. However, fax documentation shows that it was not until April 26 that Lerner sent a copy of the agreement to Dupuis and it was signed only by the Stenners. When this fact was put to Lerner, she said that Hailey had refused to sign the second copy of the agreement and that Lerner must have forgetfully sent Dupuis the wrong copy on April 26. Lerner then immediately left to go abroad to care for her dying father. [69] Hailey denied signing the Peachland contract in front of Lerner. Rather, she testified that she was contacted by Justyn on April 24 while she was at her grandmother's house. Justyn asked to meet her at a nearby gas station to sign some documents. Hailey testified that she went to the gas station with her brother, Curtis Bradshaw, and met Justyn there. She remembered that he was driving a red Corvette which she thought was her mother's car. She also recalled that she met Justyn twice that day. She signed a document and was not given a copy. She acknowledged that she signed a document that sold the family home without reading it, calling anyone, or discussing the details, but said that she did so because her father had told her to do whatever Justyn told her to do. She trusted Justyn and did as he told her. In cross-examination, it was suggested to Hailey that she had signed the document on April 26 at a gas station in front of Lerner after being contacted by Dupuis who discussed the contract with her. All of this was denied by Hailey and inconsistent with Lerner's testimony. Hailey said that she had no dealings with Dupuis at any time. In cross-examination, Hailey was uncertain about which documents she signed and when, as she did not read any of them. [70] Curtis Bradshaw, Hailey's brother, testified that he had gone to a gas station with his sister to meet up with Justyn whom he knew well. He said that Hailey had to sign some papers that Justyn gave to her and that she gave the papers back to him. He could not remember when exactly this occurred but said that it was when all the dealings were going on about the house. He was not cross-examined about his recollection of this meeting. [71] Justyn denied that this ever occurred. Justyn said that Lerner advised him and Kimberley that Hailey had power of attorney after Lerner spoke with Dupuis. He denied that he had a conversation at any time with Hailey about her signing as power of attorney or that she signed the contract of purchase and sale of Peachland in his presence. He testified that Lerner advised them that the document had been signed. [72] Lori testified that she learned about the Peachland contract when Justyn called to say that it was done, he was happy and going on vacation. She said that she had not actually seen the Peachland contract until she attended at Hordal's office upon completion and was unaware of the contents of the offer. She testified that none of it was pursuant to her instructions and that Hailey followed the instructions of Justyn throughout. Lori did not speak with her agent, Dupuis. John also did not see the contract and had no conversation with Justyn about it. (ii) The Second Lickman Contract [73] On April 24, 2004, Johnson signed the new offer to buy the Lickman property, this time for $330,000 (the "second Lickman contract"), less than the first Lickman contract. The details of the transaction are again matters of contention. [74] Lerner testified that, on April 24, 2004, in the same telephone conversation regarding the Peachland Contract, Hailey told Lerner that her grandmother wanted to buy another property belonging to her mother, the Lickman property, and asked Lerner to prepare an offer to purchase for her grandmother. Hailey then gave Lerner her grandmother's name and address. She said that Hailey also gave her the subject to financing and completion dates at this time because Lerner told her that she was leaving the country in a few days. Lerner testified that she went home to obtain a blank contract of purchase and sale for this other property rather than run a copy off from her office. She denied that she provided Justyn with another contract in blank. She admitted that she did not normally deal with Chilliwack or Okanagan properties or with properties that she had not seen. [75] The second Lickman contract called for a deposit of $5,000 to be paid directly to the seller and was subject only to suitable financing by April 26. It was to complete on April 30. Barb Lerner was named as the dual agent for both buyer and seller, that is, for both Lori and her mother. Lerner could not remember who gave her the information about purchase price and other details, but testified that it was either Johnson or Hailey. In cross-examination, she agreed that the terms were unusual and not proper, but testified that Hailey instructed her to write the subject to financing clause in that manner and the closing in six days. She was not aware that the premises were rented and agreed that the transaction could not have closed within several days in this circumstance. She did not include reference to the existing tenancy on the property. Nonetheless, she remained adamant that Justyn was not involved with this contract in any way. Lerner testified that she arranged and then attended at Johnson's home for her to sign the document, a process that took just a few minutes because Lerner did not discuss the terms of the agreement including mortgage with Johnson, did not review the document with Johnson, and did not discuss or obtain instructions with respect to Lerner's dual agency status with Johnson. According to the document, Lerner witnessed the signature of Johnson to the contract and the signature of "H. Bradshaw", without the name being printed and without designation as power of attorney. Lerner testified that Hailey, whom she did not know, signed the contract at the gas station at the same time as she signed the Peachland contract of purchase and sale. She could not explain and could not remember why Hailey would not have signed at the Johnson home at the same time as her grandmother. The document is signed by Hailey and witnessed by Lerner but without indication that it was signed as power of attorney, as contained in the Peachland contract. Lerner testified that she asked Hailey to do so, but she refused. [76] Lerner denied at first that her memory was not good about what occurred on April 24-26. However, in cross-examination, Lerner admitted that her memory of over four years ago was not good. She also said that she had not remembered anything about the Lickman contract until she had been recently shown a copy and had been asked how and when she had signed it. She testified that she was under tremendous emotional pressure at the time due to her father's illness and her impending departure to attend at his death. Regardless, she insisted that Hailey was mistaken if she said that she signed the document at the Stenner home. She became testy when it became apparent in cross-examination that she had not performed her duties as a diligent realtor on the transaction but ultimately admitted that she failed to do so. She refused to admit that she so acted because of the possibility of a commission or because of her close relationship with Justyn and Kimberley. She said that she acted as she did because Hailey, a person unknown to her, asked her to do so. [77] Justyn denied that he had any role in the signing of this document or that he had any knowledge about the document until this litigation. He said that Hailey dealt directly with Pannu on this transaction, a suggestion not put to Hailey and rather preposterous given Hailey's youth and inexperience. This is especially so when it is realized that this was the first stage of a "flip" of the property in which both Justyn and Pannu made money, in Pannu's case, up to $90,000. Pannu was not called to testify for the defence. [78] Hailey testified that she signed this document at the kitchen table in the Stenners' house and that Lerner was there. She was introduced to Lerner as the Stenners' real estate agent. She said that this was the first time that she had met Lerner. She testified that she only met with Lerner once. Nobody reviewed the terms of the document with her. Johnson was not present. Hailey said that Justyn advised what to do and she followed his instructions. Hailey said that she never saw Johnson sign the document. She did not receive a copy of the agreement. In cross-examination, Hailey also said that she met Lerner with Justyn once at her grandmother's home because Justyn wanted the grandmother to meet Lerner. But, she had never been with Johnson alone with Lerner and the date of this other meeting with Lerner was not established. [79] One issue that arose is whether Lerner or Justyn prepared the second Lickman contract. Although Lerner testified that she prepared this document, there are significant reasons to conclude that, most probably, Justyn drafted this agreement while he and Lerner were together on the morning of April 24. This is apparent if one compares the second Lickman contract with the Peachland contract that Lerner definitely drafted. The subject to financing clauses are very different with the second Lickman contract saying "subject to suitable financing" but the Peachland contract providing very specific details as to the terms of a mortgage. I reject Lerner's evidence that Hailey just happened to mention that her grandmother wanted to buy a property and asked Lerner to prepare a contract of purchase and sale which provided for Lerner to be a dual agent. (iii) Conclusions on the Circumstances of the Peachland Contract and Second Lickman Contract [80] Justyn and Lerner's version of the events of April 24 is quite unlikely. First, Lerner did not send the Peachland contract to Dupuis until April 26. The copy that she sent on that day was not signed by Hailey. Lerner testified that both documents were signed by Hailey on April 24 but that she forgot to witness Hailey's signature on the Peachland contract. If this is correct, then she forgot both to witness and to date Hailey's signature on 2 pages, highly irregular for a licensed real estate agent. Further, Dupuis did not receive a signed copy until May 7 and was asking for confirmation at that time as to whether Lerner had the deposit monies. Also, April 24 is not the date that was put to Hailey in cross-examination as the signing date and it was not suggested to her that she signed both the Peachland and Lickman contracts at the same time. Second, Hailey would not have signed away the family home without contacting her parents or someone about the details of the transaction, unless she acted under the direction of Justyn whom she trusted as she testified. It is unrealistic that Hailey would have acted as she did on her own. She was not cross-examined about why she did not contact her parents or why she would have sold the family home or the Lickman properties without any discussion with her parents or anyone else. It is highly unlikely that Hailey would have signed to sell the family home without reading the contract, without Dupuis reading the contract, and without consulting her parents unless she relied upon Justyn as she testified. It is also unlikely that Hailey would not have signed the second Lickman contract as power of attorney unless directed. Third, Lerner's recollection of these events was reconstructed after she said that she had no memory of the Lickman transaction until recently. Her described behaviour on both transactions is highly unusual for a licensed real estate agent and only explained by her close friendship with Kimberley and Justyn and the personal stress that she was under at the time. Lerner, however, never found out that this was the start of a flip of the Lickman property in which Justyn and Pannu made significant fees and she did not. She thought that the transaction simply did not close and was not aware that the closing date had been extended to June 3, the same date as set for the closing of the Peachland transaction. She could not explain why Justyn would receive a fee if he was not involved somehow in the transaction. Finally, the terms of the second Lickman contract are not worded in the usual or proper manner as would be expected of a real estate agent and Lerner in particular. It is not realistic and it was not suggested to Hailey that she instructed Lerner on the drafting of specific clauses. The simple wording suggests that the document was prepared by Justyn. In all of the circumstances, Hailey's recollection of events is more specific and most probable. (g) The May 2004 emails [81] There is a controversial chain of emails dated May 1-4, 2004 between Lori and Kimberley. The defendant maintains that the emails were never sent and were fabricated by the plaintiffs. The documents reveal that Lori emailed Kimberley on May 1 to thank her for her "patience...on these property deals..." and to express appreciation "...for all you have done...". She also expressed knowledge through greetings that it was Kimberley and Justyn's anniversary and that they were going on vacation to Hawaii. Justyn acknowledged that the Stenners went to Hawaii shortly after receipt of the email. Kimberley's reply email is revealing. She expressed delight that they were leaving for holiday on Justyn's birthday and thanked the Bradshaws as follows: Dear Lori and John: Thank you guys. We are leaving on Justyn's Birthday so we will celebrate 2 things, yippy!!! I also thank you for understanding and knowing how hard and how much Justyn's been working on these deals for you guys, we both care and so with that he has given it a lot of attention, you guys are worth it. Didn't you guys at one point in your life also have to give up your time for us, now [it's] our turn. On a lighter note I spoke to Nelly (the tea reader) she is concerned with you paying $10.00 a minute, she is so sweet, (I love her) However phone her if you need to. She did read for you for me and she said that Lori is extremely worried, Lori please try not to worry she said. She saw you (John) with young guys, everything okay. She saw some money changing hands. She wants you to tell NO ONE and I mean NO ONE as to when you are coming here, again go with your instincts they are right. She believed that you were safe. Again Tell NO ONE you are coming, not even us. Until you are here. She said that Lori is safe to travel with you. We would love to know when you were coming but please loose lips sinks ships. She saw you paying money out. She didn't see danger. She saw one of the lawyers with dark hair I asked her about him she didn't say much just that he was okay. (meaning an okay person) She told me a long time ago that you had very jealous people around you and to be careful, this was around the time all that crap was happening to us msa crap. If you still wish to call her she is 84 years old and she is no dummy, you want the goods give her the gests [sic] of want you want. (I Love Her) she makes no bones about things. A straight shooter. Call her on Tuesday she will read for free. 604 541-1930 We love you guys, Justyn and Kimberley :) ps I hope we see you. [82] Although Kimberley said that she had emailed to ask for Lori's email address at one time, she did not remember and then denied that she ever sent or received these emails and testified in cross-examination that it was a document created by the plaintiff. This theory was never put to either Lori or John in their cross-examination. No evidence was led as to how such a document could be fabricated or how it would have appeared to have been sent from Kimberley. Justyn denied that the Bradshaw's were thanking them for agreeing to hold Peachland in trust or that he had done very much at all in the property deals and certainly nothing after the February 18 family meeting. He denied that he had ever done anything for the Bradshaws for which he was not paid. In all of the circumstances, including the accuracies of the general social niceties and the unexplained fact that Kimberley asked for and had Lori's email address to use while they were in Mexico, I conclude that the emails were both sent and received. It follows that Lori was indeed thanking Kimberley and Justyn for some beneficent act. (h) Completion of the Second Lickman Contract [83] Hordal was uncertain as to when he received the second Lickman contract. He worked to clear title, but the second Lickman contract did not complete on April 30. Around May 4-6, Hordal was still trying to clear title. The credit union asked questions about the Lickman transaction when it appeared that another third party was involved in the transaction. The credit union wanted payment in full for all of the outstanding judgments against both the Peachland and Lickman properties at the same time. Telephone message slips from Hordal's office confirm that Justyn contacted Hordal directly during this time. Hordal recalled that he had conversations with Justyn about combining the Lickman and Peachland sale. Justyn specifically discussed with Hordal whether the Lickman and Peachland transactions would complete together so that there would be enough funds to pay the credit union. [84] Hordal proposed to Coast Capital on May 10 that they release the Lickman charges upon payment of $327,624, with the balances owing to be paid from the sale of the Peachland property. This was rejected by the credit union on May 13 in an afternoon letter that included the following reasons for the rejection: that it did not appear that the Lickman property was being sold at fair market value based upon the difference between the proposed purchase price of $330,000 and a declared market value of $595,000, and that the Peachland purchase for $395,000 was in excess of the 2003 appraised value. The credit union would not release its judgment against Lickman until it was satisfied that the sale was at fair market value or it received proceeds to pay out the mortgage and judgment in full in the amount of $503,196. [85] The position of the credit union obviously caused anxiety and a flurry of communications. Lori emailed Hordal on the night of May 13 enquiring about the status of things. On the morning of May 14, Justyn called Hordal to enquire about the status of the financing arrangements. Later that night, Lori faxed Hordal, requesting confirmation of information received from Hailey Bradshaw that the credit union would not release funds until after completion of the Peachland sale. [86] The next part of the Lickman transaction is both confusing and unusual. Reference had been made in the credit union letter of May 6, 2004 to a transfer of the Lickman property from Lori to purchasers named VanTongren for $595,000. Lori signed the freehold transfer to VanTongren for consideration and fair market value of $595,000 on June 3, 2004. On the same day, she also signed a statement of adjustments for the property that referred to the Johnson sale for $330,000 that was to have completed on April 30. Hordal testified that the property had been flipped between Johnson and VanTongren and that he chose to reflect this in a single transaction between Lori and VanTongren in order to save transfer tax to Johnson. On June 8, Hordal sent Bell Spagnuolo the documents for transfer, referring to the transaction as the Johnson purchase, although it is apparent that the actual transfer was between Lori and VanTongren. [87] Justyn admitted in cross-examination that he received a referral fee from the sale of Lickman. However, he was vague about who actually paid him or how it was paid. Neither Bradshaw were told about this payment nor was it apparent in any documentation. (i) Finalization of the Peachland Contract [88] Hordal was also the conveyancing lawyer for the contract of purchase and sale for the Peachland property between Lori and Kimberley and Justyn dated April 24, 2004. It provided for the sale of the property for $395,000 with a deposit of $5,000 to be delivered in trust to Sutton Premier Realty with a completion date of June 30, 2004. The offer was subject to approval for a new first mortgage in the amount of $295,000 and an appraisal, both by May 24. Hordal noted in cross-examination that there was no protection built into the agreement to ensure the ability to redevelop into condominiums, as might have been expected if the buyers expected or planned to re-develop the property. Lerner conceded such protection was standard in an agreement and said that she advised the Stenners to have a subject clause dealing with the zoning, but said that Kimberley instructed her not to put such a clause into the agreement. The copy received by Hordal was signed by Kimberley and witnessed by Barb Lerner, but was not signed by the seller. Hordal subsequently received a copy of the agreement signed by "H. Bradshaw P.O.A. Lori Bradshaw", without a witness. Hordal said that the failure to have a witness did not affect the contract completing. [89] On May 7, Hordal faxed Justyn a request and documentation to change the completion date on Peachland to June 3 and to confirm removal of the subject clauses. The documentation appears to have first been drafted and sent by Dupuis to Hordal. Hordal could not recall why he dealt with Justyn directly as opposed to dealing with the conveyancing lawyer with whom Hordal also had contact. John testified that he had a conversation with Justyn about this and the need to change the completion date to reconcile the credit union demands vis-à-vis the Lickman and Peachland properties. He also testified that he had a conversation with Justyn about title going only into Kimberley's name for tax purposes. Justyn denied that such conversations occurred but also did not recall how it came about that he was contacted directly by Hordal, except to say that Lerner was out of town. He denied that the change of dates had anything to do with the Lickman financing situation. Although John could not remember, it is most likely that either John or Justyn directed Dupuis to draft the addendums to change the completion, possession and adjustment dates and to release the subjects because Lerner was away at the time. Kimberley could not remember how the request for the change of dates came about but denied that there had been conversation directly with either Bradshaw. [90] The subject removal and appointment of conveyancer document was signed by Justyn and Kimberley in Hawaii and faxed directly back to Hordal by Justyn on May 9. Justyn testified that they were prepared to remove the subject to financing clause because they already had financing in place. However, the formal approval of the mortgage did not come until May 27. Justyn explained at first that they already had pre-approval from the credit union for $500,000 plus a line of credit. However, there is no documentation to verify that this occurred. The only documentation refers to information given to the credit union in April about the intention to purchase property in Peachland and initiation of the appraisal process by the credit union. When faced with this reality, Justyn admitted that it was not an actual approval. The details of the mortgage approval are discussed below. The documentation appointed the conveyancer for the purchasers, Bell Spagnuolo, specifically naming the conveyancer, Leah Fiddler, whom the Stenners had used before. Justyn said that this had been arranged prior to going to Hawaii. Hailey Bradshaw signed the addendum and subject removal on May 11 with her power of attorney. With the removal of the subject clauses, the Peachland contract was set to go ahead. (j) Payment of the Deposit [91] Whether payment of the $5,000 deposit was intended to be, or was ever, paid is in issue. In cross-examination, Hordal, confirmed that the deposit was originally to be paid to Sutton Realty, the seller's agents, in trust. By addendum of May 20, 2004 signed by the Stenners and witnessed by Lerner, this was changed so that the deposit was to be paid to the seller directly. [92] It should be noted that the Stenners returned from Hawaii around May 18. Also, the Bradshaws returned from Mexico on May 18, as confirmed by Lori's sister, Linda Yallitz ("Yallitz"). A telephone message slip from Hordal's file and an addendum to the Peachland contract signed and witnessed on May 20 supports that Lori was back at least by that date. This is significant because Lori was available after May 18 to deal with all matters, rather than rely upon Hailey. [93] Lerner testified that Hailey contacted her around May 14 and requested that the deposit cheque be paid directly to the seller. Lerner said that she told Hailey that an addendum would have to be drafted. Justyn testified that Lerner told him around May 18 that the sellers requested that the deposit be paid directly to them and not to their real estate agent. A cheque from Kimberley payable to Lori for $5,000 is dated May 18, 2004. On May 20, Kimberley signed an addendum to the contract of purchase and sale, witnessed by Lerner, specifying that the deposit would be paid directly to the seller and not to the agent. There is no evidence that this was signed by the seller plaintiff or by anyone on her behalf. [94] Kimberley testified that Justyn met with Lerner and gave her a deposit cheque for $5,000. Kimberley said that Lerner had somehow been contacted by Hailey to request that the deposit be paid directly to the seller. Kimberley was not present for any of this. A copy of a cheque dated May 18, 2004 drawn on the Stenners' joint account and payable to Lori in the amount of $5,000 is in evidence from the Dupuis file. Lerner identified this cheque and said that she received it from the Stenners at their house. This would have been on the same day that the Stenners returned from Hawaii. Dupuis appears to have received a copy of the cheque around May 21, following his request of May 7 asking for the signed documentation and confirmation of receipt of the deposit monies. There is no evidence that such a cheque was ever cashed. However, Lerner remained under the impression throughout that the deposit had been paid by this cheque. She never obtained a written record of this payment. She also said that Hailey had contacted her to change the deposit so that it was to be paid directly to the seller. [95] Justyn testified that Lerner told him to deal directly with Hailey on this cheque. Why she would have done so when the cheque was sent to Dupuis is not clear. He said that he initiated a call to Hailey to discuss this matter and was told by Hailey that she could not accept a cheque for her mother because she did not have a bank account. Justyn testified that Hailey wanted cash payment. If so, then why would Lerner have obtained a cheque from the Stenners as their agent and forwarded it to Dupuis? He said that he met with Hailey for the first time with respect to the Peachland contract on May 20 at a restaurant in Abbotsford. He said that she was with her brother, Curtis. He said that he gave Hailey $5,000 cash. Kimberley testified that she gave Justyn $5,000 cash from their casino fund held in their home. She also said that she told Justyn to make sure that Hailey signed a receipt. Justyn testified that Hailey signed a piece of paper as a receipt. He testified that Curtis immediately ran to a Money Mart to send the cash to his parents in Mexico. He said that he never discussed payment of the deposit in cash with either John or Lori. In cross-examination, Justyn testified that Lori was still in Mexico at this time and it was for this reason that the cash was required. While Justyn said that he prudently would not have given the cash if an addendum to the Peachland contract had not already been signed by everyone, he later said that the addendum had not been signed when he paid the money and that he took the risk. Kimberley testified in chief that she had two receipts to show that the money was paid, but reduced that to one on cross-examination. However, no receipts were ever produced by the Stenners. [96] Hailey testified that she never arranged with or met with Justyn to receive payment of a deposit. She denied receiving any cash. She did, however, say that her parents were experiencing banking difficulties that did not allow them to withdraw cash from monies deposited into accounts. She denied that she ever arranged for monies to be paid directly to her. She also denied that money was sent to her parents through the Money Mart in May 2004. John testified that, while there were problems with the credit union accounts, he had other accounts such that there were no problems receiving money if that was the issue. He denied that he ever received $5,000 wired to him in Mexico. [97] Lori testified that there was never intended to be payment of a deposit and there was none. She said further that she never requested payment of a deposit to her directly. She said that their bank accounts were not frozen in May 2004 such that they could not have received funds. Lori was available in British Columbia to receive a deposit if it was to be paid. John said that Justyn had set the purchase price to show that a deposit had been paid, with no intent on either side to actually pay the deposit. Certainly, it was not paid upon offer of the contract of purchase and sale because in May, Dupuis had sought confirmation that Lerner held the deposit. [98] An addendum to the Peachland contract dated May 20 provided that the deposit was to be paid directly to the seller. It is signed by Justyn and Kimberley, witnessed by Lerner. It is also signed by both Lori and Hailey as power of attorney, witnessed by Yallitz. Hailey had no memory of signing this document. However, both Lori and Yallitz recalled that Justyn brought the addendum to Johnson's house where Lori, Hailey and Yallitz were present. Yallitz said that she witnessed Lori and Hailey's signatures while Justyn was there. She was not cross-examined on this point. Justyn denied that this ever occurred. Also, the defendant maintains that the plaintiff must have signed the document around May 25 because copies received by Dupuis were unsigned by the plaintiff prior to that date. Justyn, however, did not know when the addendum was signed by either Hailey or Lori and the suggestion that it was signed later remains speculative. [99] It is most probable that no deposit was paid by cash as alleged by the defendant. Lori testified that there was never intended to be payment of a deposit. It does not make professional sense that Lerner would have sent Dupuis a copy of a cheque, representative of a deposit, without arranging herself to provide the original to the seller's agent. The suggestion that Lerner told Justyn, a third party, to deal directly with Hailey on this without establishing the terms on which the deposit would be held or released and without confirming that payment was received is not believable. The allegation that money was paid directly in cash to Hailey with Curtis present and that he immediately sent the money via Money Mart to his parents in Mexico was not put to Curtis. No questions were asked in cross-examination of Hailey, Lori, or Curtis or on direct examination of Justyn about a receipt. There was inconsistency between the cross-examination of Hailey, which came first in the trial, and the direct examination of Justyn, as to what had occurred. In cross-examination of Hailey, it was suggested that she met with Justyn twice: the first time when Justyn offered the cheque and she asked for cash, and the second time the next day when the cash was paid. Hailey denied both scenarios. Justyn did not testify that he met with Hailey twice for this purpose. Furthermore, Lori was home from Mexico when this is said to have occurred. It is therefore not conceivable that Hailey would have taken a cash deposit when her mother was home from Mexico and available in the Lower Mainland to do so herself. It is also highly unlikely that Justyn would have contacted Hailey, and not either Bradshaw, about this matter in the circumstances. Finally, the mortgage instructions eventually sent to the Stenners' solicitor from the financing credit union required the solicitor to report to the credit union any deposits paid directly from the purchaser to the vendor and to report any allowances or credits in favour of the purchaser of an unusual nature. There is no evidence that the Stenners' lawyers ever informed the credit union of a direct payment in cash of the deposit. Nor is there evidence that the lawyers themselves were ever so informed. (k) The Price Reduction and Completion of the Peachland Contract [100] With the addendums of May 7 to change the completion date and May 20 to pay the deposit directly to the seller, Justyn testified that the contract of purchase and sale represented the entire agreement between the parties, except for a price change that followed. He said that there had been no conversation with the Bradshaws to May 24. Kimberley also testified that the contract of purchase and sale represented the whole of the agreement, until a leading question in direct examination clarified that it failed to include the change in price and the rental agreement alleged by the Stenners. Lerner said that there were no other arrangements or deals made with the sellers other than represented in the contract of purchase and sale of April 24, 2004. Notably, the change in completion date did not result in a change of the responsibility for utilities and taxes in the statement of adjustments at completion, which, as will be seen, remained the responsibility of the seller throughout 2004. There was no provision anywhere for vacant possession not to be given, as stated, on completion. [101] Kimberley and Justyn applied for the mortgage with the credit union on May 20, 2004. They sought a loan of $296,250 for a stated purpose to "purchase a summer home and rental Peachland." They provided a copy of the contract of purchase and sale which included the purchase price of $395,000. The mortgage was approved on May 27, well after removal of the subject to financing clause that had occurred on May 9. This circumstance indicates that this was not an arm's length transaction and that the Stenners were not concerned about whether Lori would sue if the transaction did not complete. The credit union was never informed of any change to the purchase price. Although Kimberley stated on discovery that Justyn had subsequently informed the credit union of a change in the purchase price, she resiled from that position at trial. [102] Kimberley testified that she had no direct telephone conversations with either Lori or John prior to closing the Peachland sale. Then, in a leading question in direct examination, she qualified her answer to say that there had been no other conversations about arrangements other than the change in price and rental. At no time did either Kimberley or Justyn suggest that there had been an agreement for the adjustments in favour of the purchaser that were finally made to the agreement. [103] Around May 21 or 22, Kimberley and Justyn arranged to view the Peachland property with Dupuis. Kimberley testified that she planned to rent it until she decided to develop it. She testified that during the viewing, she learned for the first time that it was not zoned for condos. She said that she phoned the district to confirm this information. Kimberley testified that she was very upset and decided that the purchase price of $395,000 was unfair because she would have to pay for re-zoning. She said that Lerner told her that she would be putting her deposit at risk and suggested negotiating a lower price. Kimberley testified that, around May 26, she told Justyn that she would only purchase the property if the price was $295,000. [104] Kimberley and Justyn testified that the next event was on either May 25, 26 or 27 when John called Justyn from Mexico asking to rent the Peachland property. Justyn said that he had not spoken with John since February 18. He said that John asked to rent Peachland because they planned to move to Mexico full time. Kimberley said that she listened to the conversation on another phone. She testified that Justyn told John that she was not prepared to pay $395,000, but only $295,000 because Kimberley had been "deceived" into thinking it was zoned for condos. [105] John denied that he ever inquired about renting the Peachland property, that there was ever a conversation with Justyn about reduction of the listed purchase price, or that there had been an argument about whether the property was zoned for condos. He also said that he was not planning on staying in Mexico at this time, but was going to open a new business related to rental of water sports equipment in Peachland. [106] Kimberley testified that there was another call later the same day, this time from Lori in Mexico. Justyn recalled that the call came the next day. Kimberley testified that she also listened in on this call. Kimberley said that Justyn told Lori that the property was not zoned for condos, but Lori said that it was. Justyn told Lori that Kimberley was upset and would only pay $295,000. Kimberley testified that 'after a bit, Lori accepted the price reduction', but asked if Lerner would accept a 1% fee reduction. Kimberley testified that Lori also said that she wanted to rent the property back and Justyn told her that this was not a problem. Kimberley testified that Justyn offered to rent it for $2,100 per month, but Lori wanted to pay $1,700. Kimberley said that they settled on $1,900 per month. Kimberley listened to all of this conversation but did not reveal that she was on the line. Later in direct examination, Kimberley said that Lori accepted the price reduction but only if the completion date was still June 3. She also testified that Justyn had said that the Stenners would do an addendum for the price reduction. Kimberley testified that Lori said, no, there was not enough time because she was in Mexico and Hailey was not available. Kimberley said that Lori also said that it could be done through the lawyers. Justyn said that they did not know the monthly payment amount for the mortgage at this time. [107] Lerner testified that Kimberley contacted her about a reduction in the purchase price and that Lerner told Kimberley that an addendum was required. She said that Kimberley told her that they could not do an addendum because Lori was in Mexico. Lerner could not explain in cross-examination why this would have been a particular problem, except to say that Kimberley told her not to draft an addendum. Lerner testified that she warned Kimberley that any price reduction had to be expressed in the sales documents and that Kimberley insisted the lawyers would make sure of it. Lerner said at first that she heard nothing further about this, and then said that she discussed it with Dupuis by phone but never confirmed anything in writing. She said that in any other case that she had dealt with, if there was a price reduction, there would have been an agreement expressed in an addendum that she would have drafted and sent to the seller's agent. The only other alternative would be to delay the closing. [108] Kimberley testified that there were no other conversations prior to the closing but then added that there had been discussion that the rental was to be for a short term on a month to month basis. In cross-examination of John, it was suggested that Lori called Justyn the next day to again request a rental back and that it was agreed that the rental would be $1,900 per month. There was also the suggestion that there was a fourth call when Lori called Kimberley because Kimberley insisted that the price change be by written addendum. This cross-examination did not accord with Kimberley's evidence and was not otherwise established in evidence. [109] Both Lori and John denied that any of these conversations occurred. They denied that there was ever a conversation about reduction of the purchase price or renting. They were in Vancouver at the time and not in Mexico. They also denied that there was ever a price reduction or that they requested to rent the property. On balance, as decided below, the facts as found favour the Bradshaw recollection. [110] Kimberley testified that she phoned Carmen Smith, the conveyancing secretary at Bell Spagnuolo, to advise of the price change to $295,000. She also advised Lerner who indicated that she would write up an addendum. Lerner also agreed to reduce her commission by 1%. Kimberley said that she would not close if the addendum was not there, and would not close on the sale if the price was not $295,000. Justyn was emphatic that the lawyers had been informed of the price reduction and also said that the lawyers undertook to inform the credit union. He testified that his wife informed the lawyers of the price reduction: however, responses to the examination for discovery of Kimberley identified Justyn as the person who informed the lawyers. Mortgage instructions from the credit union dated May 27, which were sent to the Stenners' lawyer on June 3, show a purchase price of $395,000 and a conventional mortgage of $296,250, representing the standard conventional mortgage percentage of purchase price at 75%. There was no change to this financing arrangement and no evidence that the credit union was ever informed about a reduction in purchase price. Interestingly, the mortgage amount is almost exactly the amount of the foreclosed mortgage against Lori on the Peachland property. [111] In fact, there was never an addendum prepared that reflected a price reduction. There was not a single written statement or document that confirms a price reduction. It is fanciful to suggest that an experienced arms length purchaser would not obtain written confirmation of such a significant change in purchase price. It is fatuous to suggest that, with three real estate agents, at least two lawyers, and a credit union involved, there was some mistake made in the documentation or that lawyers did not follow instructions. As the transaction is described below, it becomes an inescapable conclusion that both Kimberley and Justyn Stenner completely contrived this evidence. [112] Hordal received the transfer documents for sale of Peachland from the purchaser defendant's solicitors, Bell Spagnuolo, on May 31, 2004. At the same time, purchaser's copies of these documents were sent to Kimberley. Justyn confirmed that Kimberley received them, but said that they did not keep any copies because he thought that they could always get a copy from Bell Spagnuolo, even though the covering letter clearly said that Bell would not retain copies after a year. Although Kimberley testified that she did not see the documents prior to signing, the Stenners certainly received copies of these documents before they attended the next day to execute the documents. [113] The transfer documents included a Vendor's Statement of Adjustments as follows: Debit Credit By Sale Price $395,000.00 To: Vendors' Portion of 2004 Property Taxes paid by Purchaser; Gross Taxes: $3,105.80, Debit Vendor Jan to Jun 3, 2004. 154/366 x $3,105.80 $1,306.81 To: Vendor's Portion of annual utilities paid by Purchaser Utilities: $454.47 Credit Purchaser January 1, 2004 to June 3, 2004 154/366 x $454.47 $191.23 To: Purchaser's closing costs to be paid by Vendor (PPT $5,900.00 Purchase Account $955.60 Corporate Account $1,200.00 Insurance Binder $35.00 Appraisal Fee $312.00) $8,402.60 To: Deposit paid directly to Vendor $5,000.00 To: Balance of monies required to complete to come from Vendor $92,251.96 To: Balance due on completion payable to Timothy J. Hordal in trust $270,887.90 Totals $395,000.00 $395,000.00 The initial vendor's statement of adjustments did not include a debit for real estate commission in the amount of $16,959.50. The Freehold Transfer Form A and the General Property Transfer Tax Return both referred to a market value and sale price of $395,000. [114] Hordal testified that that the statement of adjustments was unusual for the number of disbursements that were paid by the vendor. The usual practice is that these costs are borne by the purchaser. These included: the property purchase tax, the purchaser's lawyer's fees for the transaction, the insurance binder required by the mortgage lender, an amount to incorporate a development company for the defendant, and the appraisal fee. In addition, Hordal testified that he was unsure about the intent of the adjustment for $92,251 described as: "Balance of monies required to complete to come from Vendor". [115] Lori and John testified that they met with Justyn and Kimberley shortly before the Peachland transaction was to close. Lori said that this occurred at John's mother's house in the downstairs kitchen. She testified that the couples recapped everything because Justyn wanted to make sure that the Bradshaws were okay with the sale proceeding in Kimberley's name only, and that Lori understood what "on paper" meant. Lori stated that it was discussed that this meant that Kimberley would hold the property for Lori. Justyn denied that there was ever such a meeting. [116] The Stenners attended to Bell Spagnuolo as represented by the solicitor, Amarjeet Dhindsa ("Dhindsa"), to sign the transfer documents on June 1st. Dhindsa was at a satellite office of Bell Spagnuolo to execute the transfer documents. Dhindsa testified that he had never spoken with or met either of the Stenners before. However, Justyn said that he had one conversation with Dhindsa previously and possibly Kimberley had as well to set up the meeting. All instructions would have been given by Kimberley or Justyn to the lawyer or conveyancing personnel at head office. Dhindsa had no involvement with the file except to attend at this meeting to execute documents that were provided by head office. Dhindsa said that the purchaser's statement of adjustments from this transaction would have included the same adjustments as the vendor's statement of adjustments above and that he would have reviewed these with the Stenners on June 1. No calculation or figure in the adjustments equalled $100,000. Yet, Kimberley testified that Dhindsa showed her two adjustments that totalled $100,000. The mortgage to Coast Capital was for the amount of $296,250 with monthly payment of $1,524 and was signed by both Justyn and Kimberley as borrowers. [117] Dhindsa testified that he would not have witnessed Justyn's signature or affixed his stamp to the mortgage document or to the authorization to pay if he was not also representing Justyn on the transaction. There was, therefore, no need to prepare a waiver of legal advice. Justyn, however, testified that he had been advised to obtain independent legal advice and had signed a waiver of same. Such a document was never produced. [118] The documentation that was produced included acknowledgment of the proceeds of the mortgage in the amount of $296,250 and authorized the amount to be paid towards purchase of the property. The Stenners acknowledged in the authority to pay that Bell Spagnuolo acted for both themselves and the credit union and that there was no confidentiality as between them. Kimberley certified that the information in the property purchase tax return was complete and correct in all respects. This included a gross purchase price of $395,000 composed of cash ($98,750) plus the new first mortgage of $296,250. This document indicated that 100% interest in the property was transferred. On direct examination, Kimberley testified that, although the 100% interest transferring was correct, she did not pay $98,750 in cash and denied that the purchase price was $395,000. The freehold transfer form also indicated consideration and market value of $395,000. Finally, the Stenners received a copy of the mortgage instructions which also indicated a purchase price of $395,000 and mortgage of $296,250. The meeting with Dhindsa was brief, about 15 minutes. [119] Also on June 1, Justyn testified that Kimberley signed documents to incorporate a company. I conclude that this was not at the same time as they signed the conveyancing documents before Dhindsa because he was not asked about the incorporation documentation and his role appears to be limited to attendance for execution of conveyancing documentation. Subsequently, on June 2, 2004, 0696601 B.C.Ltd., a company with Kimberley as the sole director, was incorporated. Kimberley testified that she planned to use the company for development purposes. Justyn said that this was to develop Peachland but could not adequately explain why he would have continued with the incorporation if he already knew that the property was not zoned for condos. Also on June 2, Carmen Smith, the conveyancing secretary at Bell Spagnuolo whom Kimberley had first contacted about this transaction, sent Hordal a revised vendor's statement of adjustments. It included more unusual purchaser's costs that were now also to be borne by the vendor, plaintiff, including: property and utility taxes for the full year not pro-rated to completion date and increased fire insurance costs. The balance required to come from the vendor was reduced to $89,239. It is not known which lawyer authored the changes but they would certainly have been authorized by the client, Kimberley Stenner. [120] Evidence established that the Stenners had a relationship with Bell Spagnuolo further than this single transaction. They had appointed Leah Fiddler, an experienced conveyancer at Bell Spagnuolo, as the conveyancer on the Peachland transaction when the subjects were removed on May 7, 2004. Although she was not a lawyer, she did head a conveyancing team at the firm. [121] The revised vendor's statement of adjustments is reflected in the revised purchaser's statement of adjustments. The revised purchaser's version, noted as adjusted on June 3, 2004, said: Debit Credit To Purchase Price $395,000.00 By: Estimated mortgage proceeds from Coast Capital Savings, Central Lending Administration $296,250.00 To: Property Transfer Tax $5,900.00 To: Insurance Binder Fee (to be reimbursed if not required) $35.00 To: Coast Capital Savings Credit Union Appraisal Fee $312.00 To: Bell Spagnuolo Legal Offices Payment of Account for Incorporation of Company $1,200.00 By: Purchaser's closing costs to be paid by Vendor (PPT $5,900.00 Purchase Account $955.60) Corporate Account $1,200.00 Insurance Binder $35.00 Appraisal Fee $312.00 & Fire Insurance $950.00) $9,352.60 By: Deposit paid directly to Vendor $5,000.00 By: Balance of monies required to complete to come from Vendor $89,239.73 By: 2004 Property Tax Credit due to Purchaser by Vendor $3,105.80 By: 2004 Utilities due to Purchaser by Vendor $454.47 To: Legal Fees and Disbursements $880.00 To: Taxes on Legal Fees and Disbursements $75.60 By: Balance required to complete by certified cheque or bank draft made payable to Bell Spagnuolo Legal Offices In Trust $0.00 Totals $403,402.60 $403,402.60 [122] The $1,200 described for "Corporate Account" was the cost to incorporate Kimberley's numbered company. An addition to be paid by the vendor included fire insurance for the next year, when the purchaser was to have possession. No notation is made here of the debit for real estate commission which is usually paid by the purchaser. A notation of debit of $16,959.50 was handwritten onto the final signed revised vendor statement of adjustments. The calculations had been correct but the commission amount had not been separately identified. All of these adjustments were included in the final vendor's statement of adjustments and represent the nature of the final transaction. The revised vendor's statement of adjustments dated June 3 was sent to Hordal and signed by Lori. The purchaser's revised statement of adjustments that is in evidence does not include the signature page for Kimberley. However, Dhindsa testified that it was highly unusual for it not to be there and that the revised statement of adjustments would have been signed by either the purchaser or her lawyer. [123] Kimberley testified at first that she did not recall this document. Later, she said that she never saw this document and that the one that she signed included two credits that equalled $100,000. Although she was adamant that there were only two credits that added to $100,000, no document of that description was ever produced. She denied that the same credits were on the previous statement of adjustments and denied that the credits as reflected on the revised purchaser's statement of adjustments "ever happened". This is strange testimony because she testified in direct evidence that all of the adjustments on the revised vendor's statement, which reflects the same adjustments, were paid by her. More importantly, Kimberley testified that this statement of adjustments did not reflect the instructions that she gave to her solicitor. [124] Justyn agreed that the adjustments on the revised vendor's statement are usually paid by the purchaser. He acknowledged that Kimberley had received credits for 2004 property taxes, costs of incorporation, conveyancing costs, and other credits. He acknowledged that there was never an agreement with the seller to pay for the purchaser's fire insurance, incorporation, and other purchaser costs. In direct examination, he stated he really did not know how these disbursements had worked: but, in cross-examination, he denied that they had received the information or that he saw any of this. He said that he had "no clue" as to how this happened, inferring that the lawyers drafted this without instruction. He agreed that Kimberley would have to have paid $403,402 if the purchase price and adjustments were paid normally. He also agreed that Kimberley did not pay that amount and that none of the unusual adjustments were reflected in the Peachland contract. Kimberley paid only $301,250 including mortgage money and the deposit, assuming that the deposit was paid. He explained that the lawyers handled it and said that the adjustments were supposed to reflect the price reduction. He testified that there was no time to do an addendum to the contract to reflect the price reduction because both Lori and Hailey were not available, so the lawyers decided to do it by credits. He said that neither he nor Kimberley instructed the lawyers to revise the adjustments. He evaded questions related to instructions given for other transfer documentation. He testified that the stated purchase price of $395,000 on all of the documentation was a matter for the lawyers. [125] Lerner testified that changes to property taxes and other adjustments would normally have to be written up in an addendum and agreed to prior to the transfer. She was unaware of many of the significant changes that occurred in this transaction. [126] Dhindsa said that he would have ensured that the credits totalled $100,000 if the matter had come up and said that he would have done the math if the figures did not add up, as here. Dhindsa testified that any changes to the statement of adjustments could only have been made upon instructions from the purchaser. The Stenners gave conflicting evidence here: Kimberley testified that she gave no such instructions but Justyn said that he understood that the lawyers were going to reflect the price reduction in credits. The only reasonable inference to be drawn from all of this is that, first, there were never any instructions given to the lawyers to reduce the purchase price and, second, this was because there was never an agreement to reduce the purchase price. [127] The plaintiff signed all transfer documents for both the Lickman and Peachland properties, including the revised vendor statement of adjustments for the Peachland sale on June 3, 2004. This was the first time that she had seen either of the two contracts of purchase and sale. Hordal said that he explained to Lori that the documents transferred ownership of the property to Kimberley. He did not recall any mention of a trust or any other arrangement, including rental back. Lori testified that Hordal had remarked about the unusual nature of the adjustments when she signed, and that she told him not to be concerned because she had reached an agreement with Kimberley. Lori testified that there was absolutely no discussion of a price reduction. [128] The $395,000 purchase price for Peachland was more than the September 2003 appraised value or the 2003 assessed value of $273,700, but met the listed purchase price. The appraised value obtained by the Stenners' mortgagor is unknown. However, a mortgage was granted and registered for $296,250. This is more than the purchase price asserted by the Stenners after the asserted price reduction. It is certain that the credit union would not have advanced more than 100% of the purchase price in a conventional mortgage. [129] Hordal testified that no documentation or information came to him at any time suggesting a price reduction for the Peachland transaction of $100,000 to reflect a purchase price of $295,000. He said that if the purchase price had been amended prior to completion, the usual practice is to have an amendment signed by the parties, although it could also infrequently be accomplished by correspondence between solicitors. Documentation sent directly between Hordal and the Stenners in early May confirms that a written addendum would have been readily facilitated if there was to be a price change. Hordal also said that buyers expecting to redevelop property after purchase usually research the property before purchase and have protection built into the agreement. As a result, only occasionally is a mistake made such that the property is not suitable for redevelopment. [130] Dhindsa testified that a price reduction is usually documented by a written addendum but could also occur by solicitor letter. If a $100,000 price reduction was not documented by an addendum, a red flag would have been raised requiring a lawyer's intervention in the usual work of the conveyancing assistant at Bell Spagnuolo. Such a reduction is always reflected in the transfer documents. All transfer documents were reviewed by a lawyer at the head office of Bell Spagnuolo before being sent to the lawyer at a satellite office who attended to the execution of the documents, in this case, Dhindsa. If the client indicated that the price was inaccurate at his meeting, he would either have initiated handwritten changes to the documents or instructed head office to revise the documents. A document change could have been made at head office and faxed back to the satellite office for execution. If the price had been reduced by $100,000, Dhindsa also said that someone at head office would have brought this to the attention of the credit union. None of that happened. Dhindsa testified that at no time would substantive changes ever be made to the transfer documents without instructions from the client. Furthermore, he had never experienced a mortgagor advancing more than the purchase price on a mortgage. He also said that at no time did he telephone or speak to either Justyn or Kimberley Stenner before or after the June 1 meeting to discuss a price reduction or any other matter. Neither did he speak to the other lawyer on the transaction or to any financial institution representatives. This is consistent with his limited role at the Bell Spagnuolo firm as a satellite lawyer attending only to the execution of documents. Not a single document from Bell Spagnuolo including letter, fax or e-mail references a $100,000 price reduction in any way. No document to or from the credit union references a $100,000 price reduction. [131] At first, Justyn acknowledged that if there had been a price reduction, the credit union would not have advanced $296,250 by way of a mortgage. But, he ultimately concluded that it would not have mattered at all because they would have used the line of credit. He could not explain why property transfer tax was paid based upon a sale price of $395,000 if there had been a price reduction and tried to focus attention on the statement in the return of transfer of 100% interest. He acknowledged that Kimberley did not pay $98,750 cash in the transaction. [132] Lerner testified that the documentation of sale, including the property transfer tax return, showed a sale price of $395,000. She could not explain how this could have occurred if she had been instructed by Kimberley that the purchase price was $295,000 and if she had informed Dupuis of the price reduction. Nor could she explain why Kimberley would have certified that this was the purchase price or why Kimberley would have paid tax on this purchase price. She eventually responded: "you will have to ask her". Lerner then denied any knowledge of the property transfer tax return. [133] Hordal received $328,215 from Bell Spagnuolo from the proceeds of sale of the Lickman property on June 11, 2004. Hordal received $270,922 from Bell Spagnuolo for the proceeds of sale of the Peachland property on June 10, 2004. This was slightly more than the balance due from the revised statement of adjustments. From these amounts, he paid $507,706 to release the credit union from both properties, other amounts in payment of outstanding taxes on the Peachland and Lickman properties, and his fees, leaving a balance payable to the plaintiff of $80,882.74. Lori testified that she netted $80,000 from the two transactions, which was paid into an account in her mother's name and paid out to Lori and John over time. [134] Hordal paid real estate commission directly to the seller's agent in the amount of $16,959 for the Peachland transaction. This represented commission based upon the purchase price of $395,000. The seller's agent split this commission with Lerner. Although Lerner attempted to deny that the commission was based upon the purchase price of $395,000, it is clear that it was. The inference is made that Lerner knowingly accepted the commission on this basis. [135] Kimberley testified in direct examination that she paid $301,250 for Peachland, composed of the mortgage proceeds of $296,250 plus the $5,000 deposit. She also said that she paid $2,000 in property taxes. In fact, the final revised statement of adjustment shows that she paid nothing for property taxes or utilities for the year 2004, after the changes. She paid nothing in cash at any time. Leaving aside the alleged payment of $5,000 deposit, this all adds up to Kimberley paying nothing for the property except for her indebtedness on the mortgage. [136] The Stenners received copies of all of the transfer documentation from their lawyer after the transaction, with notice to retain the documents because their file at the lawyer's office would be destroyed after one year. Justyn, however, testified that neither he nor Kimberley retained any of it because it was not significant to them. None of the transfer documentation was produced by the defendants, including the receipt that was allegedly retained from the $5,000 cash deposit. (l) The Alleged Rental Arrangement and Development Plans [137] There was never any documentation to support a residential tenancy. In particular, no reference was made in the Peachland contract or transfer documents to a residential tenancy. Lerner said that if the seller is to remain as tenant, standard practice was to include reference to a tenancy in the written agreement, including the amount of the rent and any other details. If it was decided to rent to the seller after the agreement was made, an addendum would have to be prepared. [138] Hailey testified that no mention was ever made to her about renting and absolutely no thought was given to moving from Peachland. The Bradshaws continued to reside at the Peachland property after the transaction was registered and the possession date had passed. Kimberley, who was familiar with residential tenancies, testified that Justyn dealt with the Bradshaws on all "rental issues". The Stenners never received keys to the property, notwithstanding Kimberley's assertion that they had lost them. [139] Throughout all of this, there is not one email that mentions a price reduction, changes to the statement of adjustments, or a tenancy. This is unusual because it was contrary to Justyn's stated personal and business practice. However, he said that he did not do so in this case because he did not require a "paper trail". [140] Justyn testified in direct examination that he met with Lori on June 3, 2004 and picked up a $950 damage deposit plus $1,900 rental in cash for June 2004. He could not explain why the June rent was not pro-rated for the three days into June. He also could not explain why the tenancy was not dealt with in the statement of adjustments, except to confirm that neither he nor Kimberley had ever informed their lawyer about a tenancy. The Bradshaws continued to pay for all expenses related to the home, including repairs that would normally be undertaken by a landlord. John denied that there was ever any discussion of this with Justyn. John said that he paid $1,900 cash per month following discussion with Justyn that this amount covered the mortgage, but did not include taxes. He said that he requested to see a copy of the mortgage several times but that Justyn never provided it. He knew that it was a one year mortgage and that when the taxes became due, the Stenners wanted a lump sum payment. He knew that the Stenners were paying insurance on the house but did not know the details after the statement of adjustments. [141] Kimberley paid the mortgage initially in the monthly amount of $1,524, but then changed it to a bi-weekly payment of $762 to reduce the amortization period. She denied that she ever discussed the mortgage amount or any arrangement for payment with the Bradshaws. [142] Justyn and the Bradshaws began discussions about development of the property in mid-June 2004. Justyn met with John, Lori, a realtor, and a lawyer to present a proposal that he had prepared for redevelopment of the property. It involved purchase of the adjacent lot and rezoning the property. I accept John's and Lori's testimony that the proposal called for Lori to participate by putting up the Peachland property and Justyn arranging the balance of the financing as needed. Justyn's testimony that John was to purchase the adjacent property and put up $100,000, representing the cost of redevelopment, while Kimberley put up the Peachland property itself, does not weigh in when it is realized that the Stenners paid nothing for the property. After a few meetings about this, John decided that there was no advantage to him in the deal and he told Justyn that they were not going to go through with it. Justyn disagreed and testified that John did not proceed because he found out that the property was not zoned for condos. I find this to be an unlikely reason, since John always knew the zoning situation. [143] Lori testified that she had a discussion with Kimberley about this and said that Kimberley asked her to reconsider the proposed redevelopment. Kimberley, however, denied that she ever discussed redevelopment of the property with the Bradshaws, although she acknowledged that Justyn did have discussions and went to Peachland to meet with the Bradshaws for this purpose after the sale. She could not explain why he would have done so if the Bradshaws had no interest in the property. She also denied that she ever saw drawings of a plan for redevelopment that Justyn prepared and presented to the Bradshaws. She denied that she ever saw a detailed budget and project summary for redevelopment with estimated expenses of $100,000 that was produced by the defendant in this litigation. [144] The documentation in evidence about this belies Kimberley's assertions and renders inconceivable her evidence that Justyn did not discuss this with her at all. Furthermore, the budget and project summary is the only document that references $100,000 in relation to Peachland. As such, it is not unreasonable to infer that the $100,000 price reduction was actually in reference to the projected cost of the Stenner plan for redevelopment of Peachland through the company that Kimberley had just incorporated for this purpose. [145] The $100,000 had nothing to do with a contrived reduction of the purchase price in the statement of adjustments. The redevelopment plans confirm, along with the transfer documents, that the Stenners did not plan to rent the property after they learned that it was not zoned for condominiums. Instead, they hoped all along to develop the property with the Bradshaws consent and share the profit. It was in this way that the Stenners would eventually financially benefit from the transfer, as was their expectation. [146] All of this leads me to the conclusion that the statement of adjustments reflects the true arrangement between the parties, wherein Lori was to pay for all of the transfer and other costs in keeping with the arrangements reached at the family meeting. The statement of adjustments does not reflect an oral agreement for a price reduction of $100,000 in consideration of a misrepresentation about the zoning for the property which resulted in a reduction in fair market value at the time of the transfer. The zoning was apparent and known by Kimberley, a former real estate agent, at all material times. There was never a price reduction and there was no agreement to reduce the price at any time in a bona fide sale to Kimberley Stenner. After the transaction completed, the Stenners devised ways that they could benefit from the transaction, beginning with plans to redevelop the property with the Bradshaws. (m) The Relationship from July 2004 - January 2006 [147] The Bradshaws and Stenners maintained friendly relations throughout 2004 and 2005, with the Stenners attending the Bradshaws' 25th wedding anniversary party and both of Lori's and John's birthday parties. Kimberley testified that the friendship was not mutual, as the Stenners never invited the Bradshaws into their home. [148] John and Justyn remained involved together in the development and marketing of the ballast business in the spring of 2005. Investors were sought. In one investor agreement dated September 2005, signed both by Justyn and John, John was identified as having contributed $450,000 to a company, yet to be created, and as owning over 50% of the shares. Justyn was stated as owning 8% of the shares. John testified that Justyn did not have to put any money into the company initially, but it was understood that $100,000 would eventually be paid to John for the shares. Justyn testified that he was to pay nothing for his shares because of the time and effort that he had put into the company. Later, he said that the shares were to be for his efforts in marketing in Mexico, an occurrence that had yet to take place. He admitted that John had put his money into the company, as well as his time and effort. Although it does not appear that the company was ever formed, discussions about the business were reflected in this investor agreement. Both Justyn and Kimberley denied that Justyn owed John any money, and certainly not $100,000, related to this project. There was never a written agreement to this effect and another proposed equal shareholder to Justyn, Rod McNeill ("McNeill"), was not expected to pay anything for his shares. [149] By June 2005, the taxes had not been paid on the property for 2004 or 2005, leaving a balance owing of $7,325.33. The balance for 2004 had not been paid upon closing. Utilities were also unpaid for 2006 and owing in the amount of $475.13. Kimberley said that she paid $8,280 in satisfaction of these amounts, leaving a credit of $479.54. Kimberley testified that she also paid property taxes on the property in 2007 and 2008. 2009 property taxes had yet to be paid. [150] Kimberley said that she paid for dwelling insurance from June 3, 2004 to June 2005 in the amount of $989, in 2005 in the amount of $1,029, in 2006 in the amount of $1,649, and in 2007 in the amount of $1,706. She could not, however, actually remember paying the bills and guessed that she had paid in full. However, Lori testified that she paid all amounts as Justyn requested and this could have been included. Justyn agreed that the 2004 insurance for the period from June 3, 2004 to June 3, 2005 was paid by Lori in the statement of adjustments as "fire insurance" in the amount of $950. Kimberley was unaware of whether either Bradshaw had conversations with Justyn about this. Although not indicated in earlier documentation, this insurance was stated to be for rental premises in December 2006, after this litigation started. [151] Although only Justyn dealt with the Bradshaws on rental matters, Kimberley testified that Justyn gave her the cash and informed her of the date that it was received. Kimberley testified that she recorded the rental payments received from the Bradshaws on a sheet of paper, noting the date, amount, and whether it was paid in cash or direct deposit to the Stenner bank account. She never deposited the money received from Justyn into her bank account. Justyn testified that he chatted with John each month and that he collected the rent in cash each month, usually through an intermediary, McNeill. [152] Kimberley said that cash was paid each month "for awhile". However, by April 2005, rent had been only partially paid in December 2004 in the amount of $450 and no rent had been paid for February, March and April 2005. Lori denied that only these amounts were paid. [153] Lori testified that she made a direct deposit to the Stenners' joint account in March 2005. Lori was adamant in cross-examination that she made this deposit because it was a loan from a friend. A deposit record to the Stenners' joint account shows that a cash payment was made to the account on March 21, 2005 in the amount of $2,000. Justyn testified that this amount was deposited to this account in cash by either Zastowny or McNeill, for his work on the ballast company. John denied this in cross-examination. Certainly, it would have been unusual for the company to have paid for any work in cash in this manner. Zastowny was not asked about this. Finally, the deposit slip was produced by the plaintiff as a document in her possession. Kimberley tried to explain this circumstance by suggesting that Lori obtained the deposit slip from Zastowny or McNeill. However, this was not put to either Lori or Zastowny in cross-examination. The Stenners obtained a copy of the deposit slip from their bank in 2008 and requested confirmation of initials on the slip, an obvious effort to determine who had made the deposit. There were no initials, contrary to what Justyn testified was their common practice if they had made the deposit themselves. All of these circumstances lead to the conclusion that the $2,000 was indeed paid by Lori. [154] Justyn testified that he sent the Bradshaws a letter dated April 15, 2005, that stated that arrears were owing in the amount of $7,150 for non-payment of rent in February, March and April 2005 and for part of December 2004. The letter stated that the rent would increase from $1,900 per month to $2,300 per month as of July 1, 2005. Kimberley said that the increase was because the rental was to be short term initially and she now wanted more to cover for the summer months when she could have rented for more. There is disagreement as to when this letter was written and whether it was ever sent. [155] The plaintiff claimed that the letter was a "forgery", drafted after events to further the case for the defendant. Justyn testified that he sent the letter on April 15 because he was frustrated that the Bradshaws were behind in their rent. He testified that he had several conversations with John about this. Justyn testified that after the letter was sent, he had another conversation with John who told him that he had financial difficulty but promised to get caught up on arrears and agreed to the rental increase. Justyn denied in cross-examination that he never sent the letter or that it was first produced at the tenancy hearing. He also denied that he agreed with Lori to a rental increase because she did not want to scramble for money to pay taxes every year. He agreed that this and a letter dated June 20, 2006 were the only letters sent concerning Peachland, an unusual manner of communication for Justyn who had explained that he generally dealt via email because it provided a record of receipt. Kimberley testified that she was aware of the letter and had discussed it with Justyn prior to it being sent. However, she testified in direct examination that nothing had been said about the rental increase apart from the letter of April 15, 2005. [156] Lori testified that she first saw this letter at a residential tenancy hearing in December 2006. She also said that there had been no assertion of any arrears prior to tenancy issues arising in 2006. She said that, up to that point, the only discussions surrounded renewal of the mortgage in June 2005. She testified that Justyn called her at her mother's house in Abbotsford to tell her that the mortgage was up for renewal and that outstanding amounts had to be paid. He gave her the amounts to be covered. Lori said that it was a scramble to come up with the $11,050 that Justyn requested. She asked him if the taxes could be paid monthly so that this did not happen again. She testified that it was for this reason that the monthly payment was agreed to be increased to $2,300 from $1,900. John confirmed on cross-examination that they received the letter, but was not asked when this occurred. Nor was he asked about any conversations that he may have had with Justyn about this letter or about rent arrears or increase. [157] On April 28, 2005, Justyn emailed John his account number for deposit at the credit union. He alleges that he did so because John needed the number for direct deposit. However, Lori already had this information as she had made a direct deposit in cash to this account as confirmed by the March 21, 2005 deposit. [158] Lori deposited $1,900 to the Stenner account on May 5 and June 1, 2005. She also deposited a further $2,000 to the account on June 1, 2005. Lori made two further deposits to the account on June 3, 2005 as follows: $5,050 composed of $4,040 cash and a cheque for $1,000, plus $2,100 cash. The deposit slips were sent to Justyn by Lori's nephew who had helped her out with one of the payments. There are deposit slips for the June 3 deposits but not for the June 1 deposits. The record of the June 1 deposits comes from a 2008 account statement obtained by the Stenners. According to Lori, the total paid to the Stenners in June 2005 was $11,050. [159] Lori testified that $1,900 was for the mortgage payment, $2,000 was towards taxes, $5,050 plus $2,100 was for taxes, septic and other outstanding costs. The $2,100 was paid for her by her nephew. John confirmed that the deposit amounts were paid in June but denied that they represented rent. He testified that this was payment for taxes, insurance, and remortgage costs. Kimberley characterized the deposits as payment of rental arrears. [160] On June 7, 2005, Justyn and John, now back in Mexico, exchanged friendly emails. They were also continuing with the ballast business as late as September 2005 as shown by the investor agreement, with the continuing expectation that this business would make both of them money. It is unlikely that these associations would have continued in this manner if the April 2005 letter had been sent and received. [161] On June 9, 2005, Kimberley paid $8,280 for property taxes for 2004 and 2005 and for utilities. Kimberley said that the Bradshaws paid the increased rent of $2,300 per month from July 1, 2005 until December 2005. John agreed that the increase was paid. [162] Kimberley testified that, while she decided to sell Peachland in December 2005, nothing was said to the Bradshaws until spring 2006. However, in cross-examination of John, it was suggested and denied that, in a conversation on December 5, 2005, Justyn had told John that Kimberley was going to sell the property in the spring, that the Bradshaws would have to find new accommodation, and that John and Lori could re-purchase if they paid fair market value. Justyn was asked in direct whether a conversation took place on December 9 about sale of Peachland. Justyn said that John told him to go ahead and that he would buy the property if he could. [163] Payments from the Bradshaws stopped after December 2005. Although there was some controversy as to whether the December 2005 payment was made, the evidence that it was paid in cash through McNeill is reasonable according to past practice and is accepted. John said that there were no further payments because he and Justyn had agreed to offset payments for Peachland from the amounts payable by Justyn for the ballast business until Peachland was transferred back to the Bradshaws. This timing is believable because the investment agreement called for the investor to pay a significant sum before March 31, 2006. This was denied by Justyn, who stated emphatically that he never owed any money to John. (n) Events of 2006 [164] Kimberley testified that, about January 2006, she prepared a series of monthly receipts for rental paid. These were back dated from June 3, 2004 through to December 2005. Kimberley testified that she based the receipts upon her ongoing ledger, but could not remember how long it took to do so. She said that she sent the original receipts by mail to Lori and kept duplicates in the receipt book, which she kept and eventually gave to her first counsel. Not all of the receipts are numbered sequentially, but Kimberley could not explain why, as she said that she only used the receipt book for this purpose. Justyn said that Kimberley prepared the receipts from notes that she kept of rental payments. Neither the receipt book nor the handwritten ledger was produced in evidence. The defendant explained that the documents must have been lost by her first solicitor, who was not called to testify. However, she had not given this explanation initially on discovery. [165] Each receipt is for a cash payment from Lori and John Bradshaw for "rent." These show payments on varying dates for each month as follows: $1,900 on June 1, July 4, August 7, September 3, October 10, and November 7, 2004 and January 7, May 5, June 1, 2005 for "rent"; $950 for "damage deposit" on June 3, 2004; $450 on December 14, 2004 for "rent"; $5,050 on June 3, 2005 for "rent that was owed for past rent"; $2,100 on June 3, 2005 for "rent past due for previous months"; $2,300 on July 6, August 3, September 16,and October 3, 2005 for "rent"; $2,000 on November 5, 2005 for "rent"; and $1,700 on December 9, 2005 for "rent". Each one of these were noted to be payment in cash, except for a notation of "direct deposit into our account" of $1,900 on each of January 7, May 5 and June 1, 2005, and of $5,050 on June 3, 2005. According to Kimberley, these receipts represent the total amounts received, except for $10,000 that was ordered to be paid into court in July 2008. [166] Kimberley testified that she prepared these receipts when Justyn told her that either Lori or John had requested them. Presumably, then, this request had come in January 2006. However, Justyn testified that when John paid the rent in December 2005, he requested receipts for tax purposes. Lori denied that she had ever requested such receipts and testified that the first time that she saw any of the receipts was at the tenancy hearing. She denied that she requested the receipts for tax purposes after a demand by Revenue Canada for details of any real estate held. In fact, the information provided to Revenue Canada indicates the Peachland property as owned by the plaintiff as at December 2004. She also denied that she paid cash rent or a damage deposit of $950 in June 2004. [167] By May 2006, tension was building between the parties. There had been fraught demands for return of the property. There was some evidence of an altercation between John and Justyn in a parking lot and that John demanded payment of $10,000 in May 2006. Kimberley and Justyn both said that Justyn paid John $10,000 cash from the stash of cash that they kept in their home, apparently in extortion. It is not exactly clear what this was all about, except to suggest that John and Justyn had more business dealings together than was described in evidence. John, however, said in direct examination that he had given Justyn the cash at the casino and was to be repaid. In cross-examination, he denied that he ever received $10,000 cash from Justyn, but said that Justyn repaid $5,000. Although there are differing stories about all of this, there was cash exchanged. [168] Zastowny testified that he met with Kimberley and Justyn in May or early June 2006, after he had learned of problems arising over the Peachland property. He asked the Stenners what was going on because he had heard that they would not give back the property. Zastowny said that either one or both Stenners told him that they had title on paper and that this was part of a bigger deal to develop the property. They could not figure out why John would not go ahead with whatever the agreement was with respect to the development. In cross-examination, he was uncertain about the precise words used. Zastowny tried to broker a settlement and proposed a meeting the next morning at his office. The next morning, John arrived and then Kimberley, screaming in an obvious distressed state. In cross-examination, Zastowny explained that Kimberley was upset because John would not go through with whatever deal they had. Zastowny asked Kimberley to leave and the meeting went nowhere. [169] Justyn discussed sale of Peachland with a realtor who suggested a listing price in the $800,000's. John said that Justyn told him about the suggested listing price in the $800,000 range and, excited about the increase in value, asked John whether he would sell. Justyn denied that this conversation occurred, except to discuss listing prices. John further testified that when he met with Justyn, he asked that the property be transferred back to Lori. He said that Justyn agreed in principle, but told him that the deal would have to be arranged so that no "red flags" went up with Revenue Canada for the Stenners. Justyn said that he agreed to sell the property to John for fair market value and asked John to get an appraisal of the property. But, he also said that there was discussion at this time about a sale price of $600,000. [170] After this, there were various machinations undertaken to accomplish a sale following this plan. In the meantime, Lerner faxed Kimberley copies of the original contract of purchase and sale that she retained in her file. John said that the plan was devised to transfer the property to Lori's sister, Yallitz. The independent mortgage broker known to Justyn, the mysterious Pannu, was to arrange the financing. Lori relayed information to the broker about Yallitz in furtherance of this plan. [171] Near the end of May, 2006, a meeting ensued at the offices of another mortgage broker with the plan to transfer the property to Yallitz. Yallitz, who testified that she was present with John, Justyn, and Pannu at the meeting, said that Justyn suggested a transfer of the property to her without a bill of sale, so as not to attract tax. Justyn was left to figure out the details. After the meeting, Lori said that John advised her that she would have to obtain a new mortgage to pay out the Stenner mortgage and that she would have to pay all property taxes and closing costs. Although Justyn expressed some knowledge about such a meeting, he denied that he was ever there. It was not suggested to Yallitz in cross-examination that Justyn was not at this meeting: she was questioned only about the words that Justyn had used at the meeting. Since Pannu was involved, and given that Pannu and Justyn worked deals together, and accepting Yallitz's testimony as most likely, it is most probable that Justyn was indeed at this meeting and that he was planning a transfer back to the Bradshaws either directly or through a family member. [172] Meanwhile, John had contacted another mortgage broker and devised a plan to back-date a contract of purchase and sale from Kimberley to John as of June 1, 2004. John met with Justyn to show him the documents. This plan went no further because, as explained by Justyn, the proposed purchase price was $395,000. Kimberley testified that she ignored this proposal, but retained the document. She also said that John mentioned something at this time about a trust. However, it appears that the Stenners now wanted to share in the increased value of the property. John heard that Kimberley wanted to share 50/50 in the increased value of the property. This was confirmed by Yallitz who could not understand why nothing happened after the meeting. [173] Then, on June 20, 2006, Kimberley and Justyn delivered a letter to John stating that he had failed to complete his purchase of Peachland as agreed by June 5, 2006, and that they "agreed to extend our agreement until the close of business, Friday June 23, 2006". John testified that there was never an agreement and that this letter "came out of left field". Justyn testified that he drafted the letter out of frustration and acknowledged that any agreement was an oral "understanding" made between himself and John. Kimberley acknowledged that Justyn could enter into such an agreement on her behalf. The letter contained no mention of a purchase price, arrears of rent, or any amounts owing to the Stenners. Justyn denied that this was because nothing was owed at the time, due to the aforementioned business dealing related to the ballast company. He explained that he had paid $10,000 so the issue never came up, a difficult explanation to understand in the circumstance of the Bradshaws allegedly owing the Stenners money and not vice versa, according to the Stenners. The letter demonstrates at least that the parties were dealing together informally. [174] Justyn, Lori, and John met immediately after the Bradshaws received this letter. John and Lori testified that Justyn told them to ignore the letter. They also testified that Justyn said that he would transfer the property back, provided that all capital gains taxes and lawyer costs were paid by the Bradshaws. John and Lori agreed. The plan was to transfer the property back to a Bradshaw family member, much the same as the original plan in February 2004. The plan called for the Stenner mortgage, taxes, and capital gains to be paid off, with the balance going to Lori who would pay back the amount to the family member over time. Justyn was to let John know the amount of capital gain. Justyn said that only a purchase price of $600,000 was discussed at this meeting and stated that he always insisted the full market value be paid to Kimberley to transfer the property back to Lori. There had been no discussion of offsetting any amounts to be paid to the Stenners with a debt due for shares in the ballast company. [175] In late June 2006, a real estate agent had reported to Lori that $600,000 could be obtained for the property. Subsequently, a document with a capital gain calculation based upon a sale price of $600,000 was prepared which showed that $38,950 was to be paid for capital gain based upon an initial purchase price of $395,000. Attached was a draft irrevocable direction from Kimberley to pay the proceeds of sale minus $38,950 to the intended purchaser, Lori's sister. Lori said that this document came from Justyn. It confirms the Bradshaw version of the conversation and supports later proposals for sale of the property to Lori's family that conform with a $600,000 purchase price. It also reveals the shifting arrangements sought by the Stenners. John testified that he met with Kimberley after this and reassured her that he would pay the capital gains when the property was transferred. Kimberley denied that such a meeting took place. All of this occurred before the Stenners received an appraisal of the property which valued Peachland at $725,000. [176] Upon receiving this appraisal, Kimberley listed the property for sale for $725,000 with a real estate agent known to her on an exclusive listing agreement. Justyn arranged with the agent for a short term listing whereby no commission would be payable if John purchased the property. Kimberley stated that she was prepared to sell for $690,000. There was never a sign posted on the property. Nonetheless, a valid offer for $695,000 came in from a third party on July 1, 2006. Kimberley did not accept that offer. Justyn explained that they were waiting for an offer from John. [177] Then, on July 3, 2006, a form of contract of purchase and sale, described as a "private sale" without agents, from Kimberley to Yallitz was prepared. It is not known who drafted this document but, most likely, it was Justyn because it was his proposal to have a sale of the property to a Bradshaw family member, it was he who suggested the $600,000 purchase price, and it was his demand that capital gains be paid. Yallitz did not recall seeing it and it was not signed. Kimberley, however, recalled the document and said that she rejected it. A valid offer came from Yallitz on July 23, 2006, for a purchase price of $600,000 with a deposit of $1. It was subject to financing by August 2, 2006, and was to close on August 4, 2006. There was no mention of a residential tenancy on the property. Yallitz said that there was deposit of $1 because the arrangement was between friends, a detail denied by Justyn. However, the lack of a deposit indicated that it was not likely that the transfer would complete. [178] Justyn's mortgage broker assisted Yallitz to obtain a mortgage. Lori said that it had been agreed between Justyn and John, and she had concurred, that she would pay $38,000 in capital gains tax, which had been calculated by Justyn based upon the $600,000 purchase price. Kimberley consulted with Lerner, even though she had her own real estate agent involved in the offer. Lerner could not adequately explain why no mention was made about a residential tenancy if one existed when the offer was to complete in 11 days with vacant possession. She testified that the $1 deposit was "silly". Kimberley accepted the offer, even though it was $125,000 less than the listed purchase price and even though the offer had expired. Kimberley changed the date to extend the offer, a matter of no significance to anyone at the time. Neither Kimberley nor Justyn could adequately explain why they would have accepted this lower offer. Lerner could not explain why the extension was never approved by the proposed purchaser. However, the agreement did not complete. [179] There were differing reasons given for the failure. It appears that, although Yallitz had obtained financing, there were timing difficulties so that the monies were not to be advanced until after the completion date. It also appears from concurrent email correspondence between the Bradshaws that the sale was intended to comply with the plan for Lori's family to purchase the property in exchange for payment to the Stenners of capital gains and other costs. However, as mentioned in email correspondence, Kimberley now wanted $60,000 from the transaction, still considered to be payment for potential capital gains tax for the Stenners. Lori was prepared to pay this larger amount and fully expected that an extension would be given. For this reason, it appears that Lori's family continued with financing arrangements. However, Kimberley denied that this was the case and treated the sale as at an end. Justyn also denied that there had been a conversation between himself and John in which he had agreed to the increased payment. The Stenners also balked at paying the net proceeds from the sale, after payment of the capital gains, to Lori, a plan confirmed by Justyn as having been discussed but which he described as "ridiculous." [180] On August 11, 2006, Kimberley applied for another mortgage on the Peachland property for $1.2 million, with an attached line of credit from which she could withdraw. She denied that this was intended to soak up the equity in the property before Lori Bradshaw sued her for return of the property. No asset was indicated on the application form suggesting that an account was receivable for rent owed from the Peachland property. Kimberley used the appraisal to obtain immediate approval for an advance of $260,000. This was the maximum that the credit union would advance based upon the appraisal. Justyn denied that they had ever requested $1.2 million from the bank. However, mortgage instructions from the bank, as well as the mortgage document signed by Kimberley and Justyn, confirm this arrangement. The mortgage was registered on August 18, 2006, just days before Lori filed a caveat against the property to protect her claim that Kimberley held the property in trust. (o) Legal Proceedings [181] Kimberley filed a notice to force Lori, as caveator, to sue. As a result, Lori commenced this action on October 12, 2006. Kimberley began proceedings to collect unpaid rent. Kimberley testified that she supplied the rent receipts and ledger book to her counsel to prepare for a residential tenancy hearing. She said that she gave him the documents in October 2006. A notice to end tenancy for unpaid rent was signed by Kimberley's counsel on October 18, 2006, claiming $33,900 arrears in rent to October 1, 2006. This was the first time that a claim for arrears in rent had been made in any form by the Stenners, other than the alleged letter of April 15, 2005. Lori testified that there had never been a discussion about rent not being paid until this notice was received. The amount claimed did not accord with Kimberley's receipts. Kimberley testified that there was an error on the notice because this was not the amount of arrears that she had instructed her lawyer. Kimberley further explained that "the girl" made an error which was rectified at the hearing. She continued to explain that this was the same type of error made by assistants for Bell Spagnuolo with respect to the purchase price for Peachland. She testified that the assistant had made copies of the documents, leading to the conclusion that two copies of the documents were lost. There was no explanation offered for the statement on the notice to end tenancy that the tenants were both Lori and John Bradshaw or that the landlords were both Kimberley and Justyn Stenner. In her reply documents, Lori claimed that she was the lawful owner of the property. The matter came before a dispute resolution officer under the Residential Tenancy Act, S.B.C. 2002, c. 78 on December 13, 2006. The officer declined to hear the matter because it was not appropriate in view of the claim in the Supreme Court of British Columbia. [182] Subsequently, the plaintiff was ordered and did pay $40,000 into court to the credit of this action when the first trial date was adjourned upon application of the plaintiff. The amount remains in court. A further $10,000 was paid directly to Kimberley when a second trial date was adjourned due to illness of the plaintiff's counsel and is to be taken into account in any accounting in this matter. [183] Kimberley never declared rental income or expenses on a filed income tax return. Although she was ordered to produce her income tax returns in June and again in September 2008, she did not produce any returns until late in the trial and those were unfiled drafts. Prior to this time, she had left at least the impression that she had filed returns. [184] The Stenners did not pay any money for purchase of the Peachland property. There was no cash deposit paid. They were indebted for the mortgage. Neither paid any monies for maintenance at any time before December 2005. Neither ever received a set of keys, although Kimberley attempted to explain that they lost them. Kimberley stated that it was her intention at all times to acquire absolute interest in the property, regardless of what events had transpired. She said that she would never have agreed to hold a property in trust for anyone. Credibility Assessment [185] Credibility is a key issue in this case. Based upon the factual analysis above, it is apparent that the credibility of the plaintiff and defendant, as well as their witnesses, has been severely tested in the evidence. Because credibility was so much at issue throughout this trial, I requested counsel to thoroughly review the law with respect to assessment of credibility for me. Both counsel did an excellent job of drawing relevant principles to my attention. It was with these principles in mind that I approached the factual analysis. [186] Credibility involves an assessment of the trustworthiness of a witness' testimony based upon the veracity or sincerity of a witness and the accuracy of the evidence that the witness provides (Raymond v. Bosanquet (Township) (1919), 59 S.C.R. 452, 50 D.L.R. 560 (S.C.C.)). The art of assessment involves examination of various factors such as the ability and opportunity to observe events, the firmness of his memory, the ability to resist the influence of interest to modify his recollection, whether the witness' evidence harmonizes with independent evidence that has been accepted, whether the witness changes his testimony during direct and cross-examination, whether the witness' testimony seems unreasonable, impossible, or unlikely, whether a witness has a motive to lie, and the demeanour of a witness generally (Wallace v. Davis, [1926] 31 O.W.N. 202 (Ont.H.C.); Farnya v. Chorny, [1952] 2 D.L.R. 152 (B.C.C.A.) [Farnya]; R. v. S.(R.D.), [1997] 3 S.C.R. 484 at para.128 (S.C.C.)). Ultimately, the validity of the evidence depends on whether the evidence is consistent with the probabilities affecting the case as a whole and shown to be in existence at the time (Farnya at para. 356). [187] It has been suggested that a methodology to adopt is to first consider the testimony of a witness on a 'stand alone' basis, followed by an analysis of whether the witness' story is inherently believable. Then, if the witness testimony has survived relatively intact, the testimony should be evaluated based upon the consistency with other witnesses and with documentary evidence. The testimony of non-party, disinterested witnesses may provide a reliable yardstick for comparison. Finally, the court should determine which version of events is the most consistent with the "preponderance of probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions" (Overseas Investments (1986) Ltd. v. Cornwall Developments Ltd. (1993), 12 Alta. L.R. (3d) 298 at para. 13 (Alta. Q.B.)). I have found this approach useful. [188] Most helpful in this case has been the documents created at the time of events, particularly the statements of adjustments. These provide the most accurate reflection of what occurred, rather than memories that have aged with the passage of time, hardened through this litigation, or been reconstructed. It should also be remembered that the parties used documentation to accomplish undisclosed purposes here, particularly in the Peachland contract. The inability to produce relevant documents to support one's case is also a relevant factor that negatively affects credibility. As well, I have relied upon the evidence of the two lawyers involved, Dhindsa and Hordal, who were independent, professional witnesses who gave their evidence in a fair and objective manner and whose evidence forms a reasonable base for analysis. [189] The inescapable conclusion reached after consideration of all of the evidence is that Kimberley and Justyn Stenner lied consistently throughout their testimony. Both of them lied with respect to the price reduction, as clearly demonstrated by the testimony of the lawyers and the statements of adjustments. The explanation that the property was suddenly found not to be zoned for condominiums does not bear further scrutiny. The suggestion that lawyers did not follow instructions is preposterous in the circumstance of both Kimberley and Justyn signing all of the transfer documents. It was necessary for them to come up with the price reduction theory to legitimize the fact that they paid nothing for Peachland, with Lori assuming all the costs of the transfer. Fabrication is also demonstrated by their failure to document a residential tenancy at any time before this litigation arose. It is also apparent from the fact that the subject to financing clause in the Peachland contract was removed 15 days before the Stenners applied for mortgage approval on May 20, 2004, something that a prudent purchaser would not have done. The testimony of the defendant and Justyn was contradictory because, on the one hand, they maintained that the Peachland contract contained all the terms of the agreement as it suited the defendant, and then relied upon what both testified was a verbal understanding to reduce the purchase price and establish a residential tenancy. I reject that the "rent" ledger or receipts were prepared concurrently with payments by the Bradshaws. [190] Most significantly, I accept the testimony of Price and Beaupre about what occurred at the family meeting, as corroborated by Lori. They gave their evidence in a straightforward manner and were not contradicted in cross-examination. The fact that they admitted to discussing what happened at the meeting after 2006, when the plan came apart, does not taint their evidence in the absence of evidence of collusion or concoction, especially when Price testified that he immediately wrote out his recollection of events so that his testimony would not be affected by others. The financial circumstance of Lori at the time and her reluctance to give up the family home would most probably lead to a plan to refinance the foreclosed mortgage through someone who could obtain financing. There was no need, really, to have the family meeting otherwise, as the properties were already listed for sale and could have been sold to third parties at any time. The fact that a third party offer in April 2004 to purchase Peachland was turned down without a counter-offer supports that a plan was in the works to keep the home for the Bradshaws. Furthermore, for the reasons described above, I have concluded that there was no cash payment to Hailey for the deposit. Both Justyn and Kimberley contrived this evidence to hide the glaring fact that no deposit was ever paid. All of this, plus consideration of the testimony of each separately, leads to the conclusion that the evidence of Justyn and Kimberley Stenner cannot be accepted generally. [191] Justyn was long winded, evasive and argumentative in his answers. He clearly had command of the situation and shifted his answers as the questions developed. He is a shrewd calculator who was clearly able to devise and carry out the plan that is attributed to him. He downplayed his financial skills and experience to the point of denying public disclosure statements made about him in security exchange documents. Yet, he clearly had financial connections as he blamed the mysterious Pannu for any detail that he could not explain. He expanded the period that he was employed at MSA Ford in order to contrive business as a reason for attendance at John's home and their continuing friendship. There is no reason for John to have sought Justyn's financial advice about the properties if his only intent was to sell the properties to third parties. Justyn denied the breadth of his involvement throughout. But, he was a main player and, I conclude, took certain satisfaction in coming up with a plan and carrying it out. That is, until it became apparent that he was not going to make the profit that he expected. He downplayed his role in the Lickman transactions, admitting to drafting the first Lickman contract but then denying involvement in the second Lickman contract. He never disclosed the fee that he obtained on the sale of the Lickman property to the Bradshaws and was evasive about it in evidence. He contacted Hordal directly to give instructions and effectively directed Hailey's conduct. He could not explain the statement of adjustments and eventually said that the lawyers did it. Furthermore, I conclude that the April 15, 2005 rental letter was prepared by Justyn for the residential tenancy hearing and not before, notwithstanding John's evidence on this point. [192] Kimberley did not fare much better. She frequently requested to have questions repeated and feigned misunderstanding to obtain more time to answer. She remained contorted forward with her head raised for most of her testimony, a most unusual position that, while certainly not determinative, attracted further attention to her demeanour. She blamed her lawyers for alleged errors in the statements of adjustments whilst certifying in documents that the purchase price was true. She obviously must have instructed her lawyers to change the adjustments in her further favour after the first version. She blamed her lawyer for errors in the residential tenancy notice, as well as for losing the receipt book and original handwritten ledger. She testified that she was misled by Lori at a meeting, that she apparently did not care about, concerning zoning for Peachland. Yet, she was a professional real estate agent, the listing was clear, she had been told by Lerner that the property was not zoned for condos, and Hordal testified that such a mistake would be rare. She accepted mortgage proceeds in excess of her stated purchase price and could not explain why the credit union would have done so if informed about a price reduction. She failed to produce the purchaser's statement of adjustments in any version, the original listing of Peachland that she reviewed in 2004, and the receipt for $5,000 cash that she testified that Hailey signed when she received these funds. She minimized her friendship with the Bradshaws to the extent of denying that she wrote the email of May 1, 2004, testifying that it was fabricated by the plaintiff, a serious allegation that was not proven. Finally, Kimberley said in her testimony that she thought that she could triple her money on Peachland once it was developed into condos and had either reviewed or herself undertaken an estimate of the costs of developing the property. I conclude that the real reason why Kimberley was prepared to hold the property on paper for Lori was to eventually make money on this transaction, one way or the other. [193] Lerner is difficult to understand. She jeopardized her professional reputation through these transactions, not for financial gain, but to assist her close friends, the Stenners, with whom she had shared referral fees many times over the years. She was prepared to provide blank documents and act as a dual agent without express consent. She did not obtain a deposit on the Peachland transaction or ascertain the terms of its release. She failed to properly document adjustments and tenancies. According to her, she dealt directly with another agent's client, Lori, or her representative, without providing the agent, Dupuis, with a copy of an offer. She denied that Justyn drafted either the Peachland contract or the second Lickman contract: however, the difference between the contracts and the unusual wording lead to the conclusion that Justyn most likely drafted the second Lickman contract and instructed Lerner on the Peachland contract. She testified that she sent fully signed copies of the Peachland agreement to Dupuis on April 24, but the fax request from Dupuis on May 7 shows that this was not the case. She admitted that she reconstructed her evidence from information that could have been given only by the defendant or Justyn. She failed to produce her personal file. Lerner denied sending Kimberley copies of documents in 2006. However, fax correspondence in May, 2006 shows that Lerner sent Kimberley a copy of the Peachland contract as well as her correspondences with Dupuis from 2004. At that time, there must have been some discussion about the situation. Lerner's evidence is simply not reliable. At best, I conclude that she was mistaken about events, particularly as it relates to involvement with Hailey. [194] Hailey gave her evidence in a forthright manner. She did not tailor her evidence. For example, she could not recall what was said at the family meeting but specifically recalled the scene on the porch with her upset mother afterwards. Although she was confused about certain events, this is not surprising since she did not read anything that she signed and merely followed Justyn's direction. She would have had no reason at the time to suspect that anything was amiss. While what exactly happened at certain times, particularly the signing of the Peachland and second Lickman contracts, may still be in some doubt, the preponderance of the circumstances support Hailey's testimony about what happened. She did not appear foolish or cavalier, as suggested by Lerner, and to suggest that she would simply sign away the family home without regard is mistaken. [195] Lori was remarkably consistent throughout her evidence. She remained calm and answered questions clearly. Her evidence about the plan for someone to hold Peachland in trust for her, as discussed at the family meeting in terms of holding it 'on paper', was consistent with events and documents afterwards, particularly the statement of adjustments and failure to document a residential tenancy. While she did not have her flight documentation to confirm when she returned to British Columbia in May 2004, other documentation, such as the telephone message in the Hordal file and the signed addendum, confirm her testimony and enhance the reliability of her memory. Of course, she would have had a lawyer represent her in the foreclosures; but, this does not mean that Justyn did not play the financial role that he undertook. [196] John was clearly mistaken about certain facts, particularly as it related to receipt of the April 2005 letter and the origin of the foreclosure on the Railway property. He displayed poor conduct in aggressively demanding return of the property and in contriving to back-date a transfer. However, he was honest in his mistakes and candidly admitted to them. The fact that he worked with Pannu to arrange a transfer back of the property in 2006, or that he may have been mistaken about a children's party, does not undermine his veracity as both are relatively minor points. Generally, his evidence is supported by the documentation and the preponderance of the evidence as a whole. The Claim in Trust [197] The plaintiff claims that execution of Justyn's plan for Peachland created an express trust wherein Lori as settlor transferred legal title to the property to Kimberley. She submits that Kimberley accepted the transfer as an express trustee for Lori, and Kimberley has held the beneficial interest as an express trustee for Lori since June 2004. The defendant denies there ever being a transfer in trust. Even if there were, the defendant argues there was no certainty of terms and none of the essential elements are proven with respect to an alleged oral trust. [198] As established through the factual analysis and assessment of credibility, an arrangement was made at the family meeting, which was subsequently reaffirmed in the conversation of March 2004 and the pre-completion meeting in May 2004. I accept that these events occurred as described by the plaintiff and corroborated by other witnesses for the plaintiff. The arrangement was for someone, at first a family member and then the Stenners, to hold the Peachland property 'on paper' and to obtain a mortgage to pay out the foreclosed mortgage which Lori would pay along with other expenses related to the property until she could re-finance the property on her own. The subsequent transfer to Kimberley was execution of this arrangement. The only question is whether these arrangements constitute an express trust in law. [199] A trust is created intentionally by a person where she transfers legal title to a property and uses words that indicate that the transferee is to hold title for the benefit of the beneficiary. It is well established that for a trust to be created, there must be certainty of intention, certainty of subject matter, and certainty of beneficiaries/objects (see D.W.M. Waters, M.R. Gillen and L.D. Smith, eds., Waters' Law of Trusts in Canada, (3rd ed. 2005), at 132) (Waters)). In this case, there is no controversy about the applicable law, but only whether a trust is established on the facts. [200] Certainty of subject matter and object is readily dealt with. The Peachland property is the subject matter of the trust. The object of the trust was to preserve Lori's beneficial ownership in the property and to re-mortgage it for her benefit. This object is similar to that in Fleck v. Stewart (1991) 80 Alta. L.R. (2d) 334 (Alta. Q.B.), to transfer a house for the purpose of obtaining financing. A trust was declared in that case even though the parties did not specifically express that the house was to be held by the plaintiff in trust. [201] Certainty of intention refers to the clear communication that the settlor intends that the recipient hold the subject matter in trust (Waters at 132). In Sutherland Estate v. Nicoll Estate, [1944] S.C.R. 253 at 263, Kerwin J. said that it is necessary to show that the communication was clear and that it was made in circumstances in which an obligation was imposed upon and accepted by the trustee. Newbury J. (as she then was) said in Bank of Montreal v. British Columbia Milk Marketing Board (1994), 94 B.C.L.R. (2d) 281 (B.C.S.C.), [1994] B.C.J. No. 1606 at para. 10: "there must be sufficient evidence of an intention on the payor's part that the funds or property received by the trustee are not to become part of his own property but are to be or remain the property of the beneficiary." If an alleged settlor clearly says that certain property is to be held on trust, then an express trust is created (Gill v. Grant (1988), 30 E.T.R. 255, [1988] B.C.J. No. 1705 (B.C.S.C.)). [202] In this case, it is accepted that Lori stated that the transferee was to take title to the property "on paper" in execution of the plan as described. There is no need for Lori to have used technical words or expressions when the trust was created (Brown v. Storoschuk (1946), 3 W.W.R. 641 at 652 (B.C.C.A.)). The transfer was for the specific purpose of ending the foreclosure, with the plan for Lori to pay for the property until she could assume another mortgage. This special purpose impressed the property with a trust and Peachland never became the property of Kimberley. [203] There is ample evidence that Kimberley acquired and held the Peachland property in trust for Lori, quite apart from Lori's testimony and the findings against Kimberley on credibility. Kimberley paid nothing for the property. Lori paid for all of the costs of transfer and for all of the costs related to the property in the following years until 2006, when she considered that the costs were offset by the payments due for the ballast company. Lori remained in possession of the property and there never was a residential tenancy declared until problems arose over this arrangement. Machinations to pay the Stenners' capital gains costs, which might be attributed to them upon further transfer back of the property, also support the trust. The Setoff Agreement [204] The plaintiff alleges that Justyn was indebted to John for $100,000 for shares in the proposed ballast company and that this debt was used to setoff payment owing for the Peachland property after December 2005. The September 2005 investor agreement for the proposed ballast company showed that Justyn was to receive 8% of the shares. No price was affixed to the shares and there is no indication as to what value would have been placed on each share when the company was established. John testified and Justyn denied that John established the $100,000 figure with Justyn in the spring of 2006 and that it was agreed to offset this amount with the payments due for Peachland. The other proposed 8% shareholder, McNeill, was not expected to pay for his shares. There is evidence that Justyn had done some work for the company. Justyn's testimony, that he was paid $2,000 for this work and that this amount was deposited into his joint bank account, was not accepted. The value placed upon his work, or John's for that matter, was not otherwise established. There is no evidence that shares were ever issued or that the company was ever formed. [205] In these circumstances, I do not find that the plaintiff has established that a debt was payable to John. If the amount was for shares, it would have been owed to the company. There is no evidence that John ever personally advanced Justyn this amount. The evidence of a discussion in the spring of 2006 is scant and not sufficiently detailed to establish a personal amount owing to John. [206] There is also insufficient evidence of a $10,000 cash debt owing to John. While there was certainly cash going between John and Justyn regularly, including payments for Peachland which were usually paid in cash, it is not identified exactly what this alleged debt was for or the terms of it. An alleged debt 'at the casino' is not enough. Conclusion [207] It is declared that the defendant obtained the Peachland property as trustee for the plaintiff and holds the property in that capacity. The plaintiff is entitled to register this trust against title after the first Coast Capital mortgage. Upon the plaintiff discharging the credit union mortgage, including principal and interest on the initial amount, she shall have title registered in her name. The defendant shall assume sole responsibility and liability for all amounts and interest advanced under the mortgage or its successor in excess of any amounts advanced pursuant to the transfer of June 3, 2004. The defendant shall cause to be removed any mortgage security in excess of the first mortgage amount plus interest at the time of discharge by the plaintiff of the first mortgage amount. Based upon the accounting that is before me, and having rejected the claim for setoff, the plaintiff owes the defendant amounts paid for the benefit of the property since December 2005, particularly for taxes, insurance, and mortgage principal plus interest based upon the mortgage of June 2004. [208] The counterclaim is dismissed. [209] Amounts held in court shall not be released until a final accounting is agreed or established and the matters of costs and punitive damages decided. The matters of further accounting, punitive damages and costs have been requested to be subject to further submissions and are, therefore, adjourned generally. However, it is apparent that the plaintiff will be entitled to costs throughout except for the application and order of June 26, 2008, in which costs were ordered for the defendant in any event of the cause. "Dillon J." ________________________________ The Honourable Madam Justice Dillon