I. Introduction
The concept of who actually owns an asset arises frequently in the areas of both family and estate law. Families often transfer ownership to real estate and other assets without considering the legal consequences of the transfer. The transfer of an asset may be from one spouse to another, from a parent to a child, or even just the promise of a transfer in the future, leading to a course of conduct on the part of the person believing they will be a future owner. Whether the issue of ownership arises upon the dissolution of a marriage, or a marriage like relationship, or the death of a parent, the concept of who is the true beneficial owner of the asset in question depends upon fundamental equitable principles.
This paper examines the equitable principles that apply when issues arise as to the true legal, and beneficial, owner of an asset — including whether a gift was truly intended and effected, the effects of the presumption of advancement and the presumption of resulting trust, and whether an asset is actually held in trust for the beneficial owner.
II. Was a Gift Intended?
A gift is the voluntary transfer of property from one person to another, without full consideration. A gift requires three elements to be legally effective:
(a) an intention to donate;
(b) acceptance; and
(c) delivery.
All three elements must be present in order for a gift to be complete. Once a gift is complete (or “perfected” or “effected”), it is irrevocable. [1]
Courts look to the intention of the donor at the time of transfer to determine if a gift was actually intended. The court must assess the reliability of the evidence of intention, guarding against self-serving evidence that tends to reflect a change in intention. [2] The actual intention of the donor at the time the gift is effected is frequently a contentious issue.
Problems of intention often arise when someone dies and it is discovered that the deceased’s assets were held in joint tenancy. When an asset is owned in joint tenancy, upon death the surviving joint tenant or tenants have the right of survivorship. An asset owned in joint tenancy passes immediately upon death, and does not form part of the estate of the deceased joint tenant.
To achieve the benefits of joint tenancy (right of survivorship, avoidance of probate fees, immunity from challenges under the wills variation statutes, etc.), both legal and beneficial title must be transferred into joint tenancy. However, where the original owner of the property did not have the intention to make a true gift of both beneficial and legal title to the property at the time the owner placed the asset in joint tenancy, the gift is not perfected. [3]
A mere transfer of legal title into joint tenancy does not definitively indicate the transferor’s intention. [4] The courts will look at the intention of the transferor at the time of transfer to determine whether or not the transferor had the requisite intent to make a gift. The court may also consider the transferor’s subsequent actions, to the extent that those actions are relevant to the transferor’s intention at the time of the transfer.
Depending on the transferor’s intention, a transfer of title into joint tenancy has three potential legal consequences:
(a) an immediate gift of both legal and beneficial interest in the property;
(b) a transfer of legal title only so that the transferee holds the property on resulting trust for the transferor’s estate; or
(c) as recognized by the Supreme Court of Canada in Pecore v Pecore, 2007 SCC 17, a transfer of legal title with the right of survivorship in the asset, but a transfer of beneficial title only upon the death of the transferor. [5]
For example, in McKendry v McKendry, 2015 BCSC 2433, an elderly mother with five children transferred title of her house into joint tenancy with her son in 2008. In her 2010 will, she split her estate equally between her other four children. The BC Supreme Court concluded that although she transferred the home into joint title with her son she continued to deal with the property as if she was the sole owner, and at the time of transfer, she did not intend to gratuitously transfer joint title to her son. The Court concluded that the surviving joint tenant (her son) held the property in trust for his mother’s estate. Madam Justice Adair wrote:
[109] The legal principles applicable when considering a gratuitous transfer into joint tenancy are not in dispute. The basic question is whether the transferor intended to make a gift, or whether the transferee holds the property transferred on a resulting trust.
[110] Pecore v. Pecore, 2007 SCC 17, is the leading case.
[111] It is the actual intention of the transferor at the time of the transfer that is relevant: Pecore, at paras. 5, 44 and 59. The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended. See Pecore, at paras. 24 and 43. Rothstein J. also noted (Pecore, at para.44):
[44] As in other civil cases, regardless of the legal burden, both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. Thus, as discussed by Sopinka et al, in The Law of Evidence in Canada, at p. 116, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.
[112] Accordingly, where a gratuitous transfer is being challenged, the trial judge must begin the inquiry by determining the proper presumption to apply and then weigh all the evidence relating to the actual intention of the transferor to determine whether the presumption has been rebutted: Pecore, at para. 55. In
general, evidence of the transferor’s intention at the time of the transfer ought to
be contemporaneous, or nearly so to the transaction: Pecore, at para. 56.
Nevertheless, evidence of intention that arises subsequent to a transfer should not
automatically be excluded. However, such evidence “must be relevant to the
5 Pecore at para 46 (Pecore).
1.1.4
intention of the transferor at the time of the transfer: …The trial judge must assess
the reliability of this evidence and determine what weight it should be given,
guarding against evidence that is self-serving or that tends to reflect a change in
intention.” See Pecore, at para. 59.
Madam Justice Adair concluded that the evidence clearly demonstrated that Mrs. McKendry’s
intent when she added her son as a joint tenant was “to make John a legal owner of W. 48th so that
he could use the equity (subject to Mary’s control) to make an investment or investments in real
estate, without any intention to make a gift to John of the right of survivorship”.6
The Court further concluded that while it was possible, at a subsequent time, for Mary to gift the
survivorship interest in the house to her son, to do so she needed to perfect the gift. Madam Justice
Adair concluded:
[138] Transfers of real property are governed by the Law and Equity Act,
R.S.B.C. 1996, c.253, and the Land Title Act, R.S.B.C. 1996, c. 250, Part 12.
Section 59(3) of the Law and Equity Act requires contracts respecting land to be in
writing to be enforceable.
[139] In order to make a valid gift, the donor must have done everything that
(according to the nature of the property) was necessary to be done to transfer the
property and make the transfer binding on the donor. The court will not act to
complete an incomplete gift, and a mere promise to make a gift is unenforceable.
See Kooner v. Kooner (1979), 100 D.L.R. (3d) 76 (B.C.S.C.), at pp. 79 – 80.
The Court determined that “in order for Mary to make a valid gift to John of the survivorship
interest in W. 48th, Mary would have been required to execute a written deed of gift under seal
(obviating the need for consideration), confirming an immediate gift of the survivorship interest in
W. 48th. Short of this, there was no legally binding gift.”7
As discussed below, even if the court determines that the transferor intended to gratuitously
transfer the property into joint title, the court will not uphold the joint tenancy if the transferor was
unduly influenced.8
III. What Are the Effects of the Presumptions of Advancement and
Resulting Trust?
It is important when analysing transfers of title, to consider the presumption of advancement and
the presumption of resulting trust. These effect the parties’ burden of proof and, where the evidence
of intention is scant, can swing the result one way or another.
Simply put, at common law, where a gift is made by one spouse to another, or from a parent to a
minor child, the presumption of advancement holds that a gift was intended. The evidentiary
burden lies with the party arguing that a gift was not intended and that the recipient holds the gift
on a resulting trust for the transferor.9
6 McKendry at para 129.
7 McKendry at paras 137-140.
8 See Cowper-Smith v Morgan, 2016 BCCA 200.
9 VJF v SKW, 2016 BCCA 186 at para 50 [VJF BCCA].
1.1.5
The presumption has been abolished by legislation in every Canadian jurisdiction except for BC,
Manitoba, and Alberta.10 The provinces that abolished it began with Ontario in 1975, and others
followed suit as each jurisdiction began to adopt comprehensive family property legislation.11 For
provinces where the presumption remains, there is the additional question of whether it applies to
common law spouses. A recent discussion paper published by B.C.’s Ministry of Justice identifies
this as an unresolved issue in the jurisprudence, that has only been addressed in obiter. The
discussion paper summarizes the current state of the law as follows:
In BC, the BCSC decision in J.B. v. S.C., 2015 BCSC 2136, (November 2015),
(decided prior to the BCCA decision in VJF), addressed the issue of whether the
presumption of advancement applies to married and unmarried spouses. Although
the Court did not find it necessary to adjudicate on the issue because it followed
the BCSC cases which held that the presumption did not apply in BC, it
commented that if the presumption did apply it should apply to both married and
non-married spouses in the same way.12
The presumption of resulting trust is a rebuttable presumption that applies to gratuitous transfers of
property. Where a gratuitous transfer of property is made, the presumption is that the transferee
holds legal and beneficial title to the property on a resulting trust for the transferor, unless the
presumption is rebutted.13 So where there has been a gratuitous transfer of property into joint
tenancy, the surviving joint tenant is presumed to hold the property on resulting trust for the estate
of the transferor, unless the transferee is the transferor’s spouse or minor child (and the
presumption of advancement applies).
The presumption of advancement and the presumption of resulting trust are rebuttable evidentiary
presumptions. Where there is sufficient evidence of the transferors actual intent, the presumptions
have no legal effect. However, if the evidence of intent at the time of transfer is less than fulsome,
these presumptions take on significant importance in the litigation.
IV. If a Gift Was Not Intended, What Is the Potential Impact for the Family
Law Act?
A. Resulting Trusts and Excluded Property
It is worth considering the impact of the common law and equitable principles in the context of the
new Family Law Act, SBC 2011, c 25 (the “FLA”) which came into force in 2013. With the new FLA,
gifts between spouses became a significant issue because of the new concept of excluded property.
10 Waters, Gillen and Smith, eds, Waters’ Law of Trusts in Canada, 4th, (Toronto: Carswell, 2012), at p 414
[Waters].
11 Waters at p 415.
12 Civil Policy and Legislation Office, Justice Services Branch, Ministry of Justice, “Discussion Paper: The
Presumption of Advancement and Property division under the Family Law Act” (August 2016) at p 8.
13 Pecore; McKendry at paras 109-111.
1.1.6
When spouses separate, family property is determined as all real property and personal property on
the date of their separation, subject to excluded assets, such as inheritances, or gifts to a spouse from
a third party, pursuant to s. 85(1) of the FLA. Section 85(1) reads:
85 (1) The following is excluded from family property:
(a) property acquired by a spouse before the relationship between the
spouses began;
(b) inheritances to a spouse;
(b.1) gifts to a spouse from a third party;
(c) a settlement or an award of damages to a spouse as compensation for
injury or loss, unless the settlement or award represents compensation
for
(i) loss to both spouses, or
(ii) lost income of a spouse;
(d) money paid or payable under an insurance policy, other than a policy
respecting property, except any portion that represents compensation
(i) loss to both spouses, or
(ii) lost income of a spouse;
(e) property referred to in any of paragraphs (a) to (d) that is held in trust for
the benefit of a spouse;
(f) a spouse’s beneficial interest in property held in a discretionary trust
(i) to which the spouse did not contribute, and
(ii) that is settled by a person other than the spouse;
(g) property derived from property or the disposition of property referred to
in any of paragraphs (a) to (f).
(2) A spouse claiming that property is excluded property is responsible for
demonstrating that the property is excluded property.
While “excluded property” is not a family asset subject to division, any increase in the value of the
property over the duration of the relationship is subject to division, pursuant to s. 84(2)(g) of the
FLA, which reads:
84 (2) Without limiting subsection (1), family property includes the following:
(g) the amount by which the value of excluded property has increased since
the later of the date
(i) the relationship between the spouses began, or
(ii) the excluded property was acquired.
While this paper is not intended to be a comprehensive review of family law, the emergence of this
developing issue is worth noting. Shortly after the FLA came into force, two divergent lines of
authority developed on the issue of whether gifted property from one spouse to another retained its
characterization as “excluded property”. One line of authority held that the FLA was a complete
code and that on marriage breakdown the FLA regime displaced common law and equitable rules.
The other held that the common law and equitable principles continued to apply under the FLA.
This distinction became critical to the characterization of property as either a family asset or
excluded property.
1.1.7
Under the former approach, following the case Remmem v. Remmem, the presumption of
advancement was not applied when dividing property at the end of marriage.14 In PG v. DG, for
example, the husband transferred a house that he had brought into the marriage into joint tenancy
with the wife.15 The court held that the transfer was not a gift. To find that such a transfer was a gift,
the court found, would be contrary to the excluded property regime under the FLA. The comments
of Madam Justice Fenlon illustrate the issue well:
… Recognizing the presumption of advancement when applying Part 5 of the FLA
would generally “extinguish” the right of a spouse who has brought property into
the relationship to retain it on separation whenever the pre-owned property is
mingled with property held by the other spouse. The implications of this are farreaching.
Arguably an inheritance deposited into a joint bank account, a gift from
a parent to one spouse used to pay down the mortgage on a home held as joint
tenants, or an award of damages for pain and suffering used by a spouse as a down
payment on a house placed in both names or placed in the other spouse’s RRSP
would be subject to the presumption of advancement. It would follow that the
spouse who was the original owner of these assets, which are expressly defined
as excluded property under s.85(1) of the FLA, would not be able to claim them
as excluded property at the end of the relationship, unless he or she could
marshal evidence to rebut the presumption of advancement at the time the
transfer occurred.16 [Emphasis added.]
The latter approach is best demonstrated by Wells v. Campbell, and the trial judgment in VJF v.
SKW, where the Court found that when the husband transferred excluded property into joint
tenancy he did in fact make a gift to his spouse. 17
At the date of writing this paper, the BC Court of Appeal has released two decisions which impact
upon the appropriate interpretation of the FLA.
The first Court of Appeal decision was Cabezas v. Maxim, 2016 BCCA 82, which came down a few
months prior to VJF. The Court upheld the trial judge’s finding that payments on a mortgage by
Mr. Maxim’s parents registered against a property held in joint tenancy by the parties did not
render the proceeds on sale excluded property. The trial judge found that the payments were gifts to
both spouses based on the mother’s intention at the time the payments were made. Despite her later
decision to treat the payments as an advance on Mr. Maxim’s inheritance, it was her intent at the
time of the payments that was important.
The Court of Appeal decision in VJF dealt with an inheritance that the husband received from a
third party. The husband used the inheritance to purchase a home that was placed in the wife’s
name alone (to protect the gift from creditors). Upon separation, the husband argued the gift had
been and continued to be an excluded asset under the Family Law Act.
The Court of Appeal found that the presumption of advancement applied. The husband lost his
exclusion when he voluntarily directed that the property (which the inheritance was used to
purchase) be transferred to his wife. Madame Justice Newbury, writing for the Court, held:
14 Remmem v Remmem, 2014 BCSC 1552 [Remmem].
15 PG v DG, 2015 BCSC 1454 [PG].
16 PG at para 75.
17 Wells v Campbell, 2015 BCSC 3; VJF v SKW, 2015 BCSC 593 [VJF (SC)].
1.1.8
[74] With all due respect to the contrary view, I conclude that the new FLA
scheme does not constitute a “complete code” that “descends as between the
spouses” and eliminates common law and equitable principles relating to property.
Rather, the scheme builds on those principles, preserving concepts such as gifts
and trusts, and evidentiary presumptions such as the presumption of advancement
between spouses. Thus I find that the gift of (slightly less than) $2 million made by
Mr. F. to Ms. W. became her property and was “property owned by at least one
spouse” under s. 84, as opposed to “property derived from the disposition of
[excluded] property” within the meaning of s. 85. At the time the definitions are
applied – the date of separation – the fact Mr. F. had originally received the $2
million as a gift was no longer relevant. He lost the exclusion when he voluntarily
and unreservedly directed that the West 33rd property be transferred to Ms. W.
and ‘derived’ no property from that disposition.
[75] I do not interpret the FLA as reversing the gift or requiring that it be
ignored because of the spouses’ separation. Nor do I agree that the FLA effectively
‘prohibits’ gifts between spouses, as Mr. F. suggested. (See para. 56.) Gifts between
spouses can continue as they have through the ages. It would take much clearer
wording to render them suddenly revocable or null or illegal. (See the comments
of Chief Justice Farris in a slightly different context in Duncan v. Duncan
(No. 2) [1950] B.C.J. No. 50 at para. 13 (S.C.), aff’d [1950] B.C.J. No. 41. (C.A.).)
[76] Contrary to the suggestion made in P.G. [v. D.G., 2015 BCSC 1454],
moreover, the $2 million gift received by Ms. W. does “fall back into the
communal pot” on separation and is divisible as family property in the normal
way. The spouses are presumptively entitled to equal shares as tenants in common.
The fact s. 95 does not list the same set of factors previously listed in s. 65 of the
FRA is, with respect, a choice made by the Legislature. (See Ward v. Ward 2012
ONCA 462 at para. 25). The FLA is not to be interpreted by means of a
comparison of the fairness of its provisions with those of the FRA.
[77] In the absence of a clear statement abolishing the presumption of
advancement, I also conclude that it continues to apply under the FLA (although I
would not necessarily refer to it as a “right” within the meaning of s. 104). Had the
Legislature intended to abolish the presumption, it would have been an easy thing
to so state, as other provinces have done. It would also be an easy matter to
provide, or perhaps clarify, that the presumption applies to common law as well as
formal marriages and even that it should apply to gifts from a wife to her husband,
not just the reverse. (See Donavan Waters, Mark Gillen and Lionel D. Smith,
Waters’ Law of Trusts in Canada (4th ed., 2012) at 413; J.B. v. S.C., supra, at
paras. 85-7; Lawrence v. Mulder, supra, at paras. 66-75; Kerr v. Baranow 2011
SCC 10 at para. 20.)
[78] I acknowledge that judges may in some cases have to determine
whether transfers of excluded property that may have taken place years before,
were gifts or not. This seems likely to occur most often in cases where inherited
property is transferred by the heir to his or her spouse or into joint names. (Of
course, the presumption of advancement was invented as a way of resolving such
questions where the evidence is unclear or equivocal.) That said, there are means
by which the inheriting or recipient spouse can protect against ‘losing’ the
exclusion. Subject to other relevant provisions of the FLA, for example, the
transferor can require the transferee to acknowledge that no gift of the excluded
property (or its value) is intended.
[Emphasis in original.]
1.1.9
Much of the recent uncertainty about the effect of gifting between spouses has been clarified by the
BCCA decision in VJF. The presumption of advancement continues to exist. If the gift occurs
between spouses, the presumption is that it was intended to be a gift and so upon separation, the
gift is family property which is subject to division as a family asset. Of course, it is still open to a
former spouse to claim that equal division would be significantly unfair, pursuant to s. 95 of the
FLA.
If the Court in VJF had endorsed the “once an exclusion, always an exclusion” line of cases, it
would have created a legislative framework where spouses could rarely effectively share their
excluded property with their spouse (absent a marriage or cohabitation agreement). Instead, in light
of VJF, gifts between spouses continue to be effective, and the common law presumption of
advancement continues to assist where evidence of the transferor’s actual intent is not clear.
The Court in VJF also noted that the inheriting or recipient spouse can protect themselves against
“losing” their exclusion for exempt assets — for example, the transferor can require the transferee
to acknowledge that no gift of the excluded property or its value is intended.18 Perhaps most
effectively, if retaining ownership is important, the transferor can keep the asset in their name alone.
In light of VJF, if this “excluded” property is transferred into joint names or the sole name of the
other partner, without evidence to the contrary, it is presumed to be a gift and the exclusion is lost.
B. Constructive Trusts and Excluded Property
Excluded property may also be imposed with a constructive trust where the non-owner spouse
made contributions to that property during the marriage.
For instance, where the excluded property is in the sole name of the spouse who received it from a
third party or brought it into the marriage, and the other spouse contributed to the property in
some way, a constructive trust claim may be made to that property. In a constructive trust claim the
presumptions of advancement and resulting trust are not engaged. Rather, this inquiry rests on the
principles of unjust enrichment, which is addressed in more detail below.
A constructive trust can be plead in addition to sections 95 and 96 of the FLA when attempting to
gain an interest in property that may otherwise be excluded.
V. If a Gift Was Not Intended, Is the Asset Held in Trust?
A trust is a fiduciary arrangement whereby property is held by one party (the trustee) for the
benefit of another (the beneficiary). According to Waters on Trusts, the essential elements of an
express trust are:
(1) the language of the alleged settlor must be imperative; and
(2) the subject-matter or trust property must be certain; and
(3) the objects of the trust must be certain.19
18 VJF BCCA at para 78.
19 Waters at p 140.
1.1.10
The person establishing the trust must use language that clearly shows an intention that the
recipient of the property holds it on trust for someone else. If any one of these three elements is not
satisfied, the trust fails to come into existence, or is void.20
Where title is transferred with no intent to gift the beneficial ownership in the property, the
property is held on trust by the title holder. The remainder of this paper discusses the various forms
of trust which may be advanced.
A. When Should an Implied Trust Be Plead?
An implied trust infers or implies a trust relationship as a result of specific circumstances.
Implied trusts can be divided into resulting trusts and constructive trusts. A resulting trust arises
whenever legal title to property is held by one party, but that party is under an obligation to return
it to the original owner or to the person who paid the purchase money for it.21 With a resulting
trust, the beneficial interest in the property “results”, or goes back to, the transferor.22 A
constructive trust is fundamentally an obligation imposed by the law to hold property for the
benefit of another.23
B. When Should a Resulting Trust Be Plead?
A resulting trust may apply to a transfer of property into the name of another, or into joint tenancy
with the transferor and another individual. A claim for resulting trust should be plead when a party
is alleging that the transferor of the property never intended for the beneficial ownership of the
property to be transferred.
In 2007 the Supreme Court of Canada released two decisions: Pecore v. Pecore and Madsen Estate
v. Saylor,24 which emphasized the need to investigate the intention of the individual who transferred
an asset into joint tenancy on a gratuitous basis. The bulk of the Court’s analysis is contained in the
Pecore judgment. The Supreme Court of Canada confirmed that it is possible that a transferor may
have intended to transfer only legal title into a joint tenancy, while retaining the entire beneficial
interest in the property for his or her own benefit: “In this case, the right of survivorship might not
exist, and the surviving tenant, holding only legal title, would become a trustee, obligated to return the
jointly-held property to the estate, to be distributed according to the terms of the settlor’s will.”25
The presumptions of resulting trust and of advancement are both available to assist the courts in
determining the often unclear intentions of transferors.
20 Waters at p 140.
21 Pecore at para 20.
22 Waters at p 395.
23 Waters at p 478.
24 Pecore; Madsen Estate v Saylor, 2007 SCC 18.
25 For a helpful discussion of Pecore, see “The Trouble with Joint Tenancies: A question of Intention” by
Kimberly-Anne Kuntz (CLE: Estate Litigation Basics for Lawyers, 2008).
1.1.11
To repeat, the presumption of resulting trust applies to gratuitous transfers, and operates to assign
the legal burden of proof. Where a transfer of property is made for no consideration, the onus is
placed on the transferee to demonstrate that a gift was intended, and if they are unable to prove a
gift was intended on a balance of probabilities, they are presumed to hold the property on a
resulting trust for the transferor.26 This is a rebuttable presumption.
However, as discussed above, the other relevant presumption is the presumption of advancement
which arises in favour of a spouse whose name has been gratuitously put on title by the
contributing spouse.27 The presumption of advancement holds that if an owner transfers title to a
property to a spouse, the owner is presumed to have intended to make a gift of the beneficial
interest to the spouse. Again, this is a rebuttable presumption. In Pecore, the court modernized the
historical presumption of advancement so that it applies to both fathers and mothers who transfer
property to their minor children.
As noted by the Court in Wong v Chong Estate, 2016 BCSC 953, it is important to remember that
these presumptions are only determinative where there is no evidence to show the intention of the
transferor.28 The trial judge must weigh the evidence to ascertain on a balance of probabilities the
transferor’s actual intention.29
For many years, resulting trusts were used in the context of marriage breakdown and cohabitation
relationships. The common law in Canada developed the “common intention resulting trust,”
which is where the court looks at the words and acts of the parties to determine whether there exists
a common intention between them that the beneficial interest in a property was to be shared.30 The
courts also began to slowly develop the idea of the constructive trust to deal with situations where
common intention could not be presumed and the doctrine of resulting trust could not apply. In
2011, the Supreme Court of Canada stated that the common intention resulting trust idea was
“doctrinally unsound”, and effectively retired this type of resulting trust.31
To prove a resulting trust, the intention of the transferor must be proven. Where a plaintiff is
asserting a beneficial interest in an asset, and title is held by another, the plaintiff must prove on a
balance of probabilities that it was intended for them to have that beneficial interest.32 In marriage
and cohabitation cases, the courts usually look to any understanding, agreement, or common
intention that the parties had, which led the claimant to make a contribution to the acquisition of
property, and the other to receive its benefit. In these cases though, it can be “artificial” to try and
analyze one spouse’s intention in relation to their contribution to the acquisition of a property, as
the parties lived together as spouses.33
26 McKendry at paras 110-112.
27 Schultz v Landry, 2007 BCSC 994 at para 18.
28 Wong v Chong Estate, 2016 BCSC 953 at para 77 [Wong].
29 Wong at para 77.
30 Murdoch v Murdoch, [1975] SCR 423 at p 438; Rathwell v Rathwell, [1978] 2 SCR 436 at pp 452-453.
31 Kerr v Baranow, 2011 SCC 10 at paras 24-25 [Kerr].
32 Waters at p 464.
33 Waters at p 465.
1.1.12
Madam Justice Adair’s comments in McKendry, as cited above, provide a useful summary of the
legal analysis required to prove a resulting trust. It is clear that the mere transfer of title is not
sufficient to prove the intention to transfer the beneficial ownership of the property. Rather, it is
the actual intention of the transferor at the time of the transfer that is critical. If it is determined that
the transferor did not actually intend the transferee to benefit, then the transferee will be found to
hold the property on a resulting trust, regardless of whether a presumption applies in the
circumstances.34
The Courts have clearly held that evidence of intention which arises subsequent to a transfer, if it is
relevant to the intention of a transferor at the time of the transfer can also be considered.
Accordingly, the acts of an owner following the transfer may be considered as evidence (if they
assist in determining the intentions of the individual transferring the property).
The Courts have also clearly rejected the proposition that a mere transfer of legal title with a
corresponding right of survivorship is sufficient to vest both legal and beneficial interest
immediately in the transferee. Again, it is the actual intention of the transferor at the time of the
transfer that is the key factor. In Bergen v. Bergen,35 Madam Justice Newbury rejected the
proposition advanced by counsel for the appellant that when a right of survivorship is conferred, a
corresponding gift of the transferred property itself, including the beneficial interest, vests
immediately in the transferee:
[41] Of course it remains true that once a gift has been made of an interest
in real property or any other type of property, the gift cannot be revoked −
whether the transferee takes as a joint tenant or tenant in common. As stated by
D. Smith J.A. in Fuller v. Harper, “The gift of a joint interest in real property is an
inter vivos rather than a testamentary gift and cannot be retracted by the donor. It
is a ‘complete and perfect inter vivos gift’ …”. (At para. 53.) At the same time, in
cases where the property was provided by the transferor, the transferee must still
prove that a gift was intended − i.e., he or she must rebut the presumption of
resulting trust. Pecore cannot be read as suggesting that the Court intended to do
away with the presumption or the necessity of rebutting it with reference to the
transferor’s intention: that was the crux of the majority’s reasons. …
[42] In the result, I do not accede to the submission of counsel for Robert
that once an interest in land (which A acquired with his own funds) has been
transferred by A to A and B as joint tenants, it follows as a matter of law and
regardless of A’s intention, that B has received an immediate gift of that interest,
including the beneficial ownership thereof in the property. If B wishes to assert
such an interest, whether during A’s lifetime or upon A’s death, he or she must, in
Rothstein J.’s words, “rebut the presumption of resulting trust by bringing
evidence to support his or her claim.” (Para. 41.) Consistent with this, the authors
of Waters in the most recent edition (post-Pecore) state:
If A supplies the purchase money and conveyance is taken in the
joint names of A and B, B during the joint lives will hold his
interest for A, B will also hold his right of survivorship − again by
way of resulting trust for A’s estate, because that right is merely
one aspect of B’s interest. In other words, the starting point is
that B holds all of his interest on resulting trust for A, or A’s
34 Waters at p 464.
35 Bergen v Bergen, 2013 BCCA 492 [Bergen].
1.1.13
estate. However, evidence may show that, while A intended B to
hold his interest for A during the joint lives, it was also A’s
intention that, should he (A) predecease, B should take the benefit
of the property. The presumption of resulting trust would then
be partially rebutted, in relation to the situation that has arisen, so
that B would not hold his interest (now a sole interest and not a
joint tenancy) on resulting trust. He would hold it for his own
benefit. [At 405; emphasis added.]
See also Waters (4th ed.) at 440.
It is common for parents to transfer assets to their children, or into joint names, as a way of
facilitating the management of those assets, without necessarily having any donative intention.36 In
Pecore, the Court observed that transfers to adult children are commonly effected today in order
for the child to assist the parent in managing their financial affairs.37 The Court held that the
appropriate presumption in the case of a child who has reached the age of majority is the
presumption of resulting trust. In that case, it is open to the party claiming that the transfer is a gift
to rebut the presumption by bringing evidence if donative intent to support their claim.38
The courts have also dealt with cases arising out of a party’s “indirect” contributions. These
contributions include cases where one party (often, although not always, a spouse) contributes to
childrearing responsibilities along with managing the household, allowing the other spouse to
advance their career, or situations where one party contributes to the purchase of a property by
paying the down payment, and the other party contributes to the mortgage payments, the carrying
costs of the property, and other bills related to the home. While the courts have found that such
indirect contributions may generate beneficial interests in the property, these cases usually fall to be
decided under the legal analysis for a constructive trust, which is discussed below.39
C. When Should a Constructive Trust Be Plead?
A constructive trust arises when the law imposes an obligation on one person to hold specific
property for the benefit of another.40 In direct contrast to those trusts arising out of the intention of
the transferor, a constructive trust will be imposed despite the intention of the property owner. To
successfully prove a constructive trust, one must establish:
(a) an unjust enrichment on the part of the owner of the property;
(b) a corresponding deprivation on the part of the party alleging the constructive trust;
and
(c) a lack of juristic reason for the unjust enrichment.
36 Waters at p 419.
37 Pecore at para 30.
38 Pecore at para 41.
39 See Peter v Beblow, [1993] 1 SCR 980.
40 Waters at p 478.
1.1.14
In Canada, the common law doctrine of constructive trust evolved predominantly in family law
cases. In the Supreme Court of Canada decision in Murdoch v. Murdoch41, the wife and husband
worked on a farm together, and payment for their work was given to the husband. With these
savings, they were able to acquire other properties. On separation, she commenced an action
claiming financial support and a declaration that her husband held an undivided one-half interest in
the properties in trust for her benefit. The majority of the Supreme Court found against her,
holding that she did not directly contribute financially to the property, and was just “doing the
work done by any ranch wife” — therefore, they found no trust in her favour.42
However, in his dissenting judgment, Mr. Justice Laskin found that the wife’s labour contribution
facilitated the acquisition of larger properties, and should not be treated as any less significant than
any direct financial contribution.43 He specifically discussed the propriety of claims for a resulting
or constructive trust, and wrote:
What complicates the application of a presumption of a resulting trust, in its
ordinary signification arising from a contribution of purchase money to the
acquisition of property, is that in the case of husband and wife the contribution
may relate only to a deposit on property which has to be carried on mortgage or
instalment payments for many years; that where the spouses have lived together
for some years after the acquisition, without any thought having been given to
formalizing a division of interests claimed upon the breakdown or dissolution of
the marriage, the presumption (as a mere inference from the fact of payment of
money) is considerably weakened if not entirely dissipated; and that there is no
historical anchorage for it where the contribution of money is indirect or the
contribution consists of physical labour. Attribution of a common intention to the
spouses in such circumstances (where evidence of the existence of such an
intention at the material time is lacking) and resort to the resulting trust to give it
sanction seem to me to be quite artificial.
The appropriate mechanism to give relief to a wife who cannot prove a common
intention or to a wife whose contribution to the acquisition of property is physical
labour rather than purchase money is the constructive trust which does not
depend on evidence of intention. Perhaps the resulting trust should be as readily
available in the case of a contribution of physical labour as in the case of a financial
contribution, but the historical roots of the inference that is raised in the latter case
do not exist in the former. It is unnecessary to bend or adapt them to the desired
end because the constructive trust more easily serves the purpose. As is pointed
out by Scott, Law of Trusts, 3rd. ed., 1967, vol. 5, at p. 3215, “a constructive trust is
imposed where a person holding title to property is subject to an equitable duty to
convey it to another on the ground that he would be unjustly enriched if he were
permitted to retain it …The basis of the constructive trust is the unjust enrichment
which would result if the person having the property were permitted to retain it.
Ordinarily, a constructive trust arises without regard to the intention of the person
who transferred the property”; and, again, at p. 3413, quoting Judge Cardozo “a
constructive trust if the formula through which the conscience of equity finds
expression. When property has been acquired in such circumstances that the
41 Murdoch v Murdoch, [1975] SCR 423 at p 436 [Murdoch].
42 Murdoch at p 436.
43 Murdoch at p 446.
1.1.15
holder of the legal title may not in good conscience retain the beneficial interest,
equity converts him into a trustee.”44
[Emphasis added.]
Mr. Justice Laskin concluded that the basis of the constructive trust is unjust enrichment, and where
property has been acquired in such circumstances that the holder of the legal title cannot in good
conscience retain the beneficial interest, equity converts that person into a trustee of that interest.45
Three years later, in Rathwell v. Rathwell,46 while the majority based their decision on the doctrine
of resulting trust, the dissent relied on the doctrine of constructive trust. In Rathwell, the wife and
husband acquired three properties during the marriage, and the title of all of them were in the
husband’s name. The wife contributed to raising and educating the children, and made extensive
contributions to their farming business. As well, while her husband worked in the fields, she would
sometimes fulfill his contractual obligations and drive a school bus.
Justices Laskin, Spence and Dickson (dissenting in part) concluded that the wife must succeed
whether one applied the doctrine of resulting trust or the doctrine of constructive trust, and that
each was available to her to sustain her claim. In their opinion the essential difference between the
resulting and constructive trust was that with a resulting trust, the divestiture in trust arises out of a
common intention, and with constructive trust, it arises out of inequitable withholding resulting in
an unjust enrichment.47 They held:
The constructive trust, as so envisaged, comprehends the imposition of trust
machinery by the court in order to achieve a result consonant with good
conscience. As a matter of principle, the court will not allow any man unjustly to
appropriate to himself the value earned by the labours of another. That principle is
not defeated by the existence of a matrimonial relationship between the parties:
but, for the principle to succeed, the facts must display an enrichment, a
corresponding deprivation, and the absence of any juristic reason – such as a
contract or disposition of law – for the enrichment. Thus, if the parties have agreed
that the one holding legal title is to take beneficially an action in restitution cannot
succeed: Peter Kieweit Sons’ Co. of Canada v. Easking Construction Ltd. at pp.
368-9; see also Restatement of the Law of Restitution, (1936), s. 160.
The emergence of the constructive trust in matrimonial property disputes reflects a
diminishing preoccupation with the formalities of real property law and individual
property rights and the substitution of an attitude more in keeping with the
realities of contemporary family life. The manner in which title is registered may,
or may not, be of significance in determining beneficial ownership. The state of
legal title may merely reflect conformity with regulatory requirements, such as
those under the Veterans’ Land Act, which stipulate that the veteran must make
the application: it may, on the other hand, be a matter of utmost indifference to the
spouses as to which name appears on the title, so long as happy marriage subsists;
the manner in which title is recorded may simply reflect the conveyancing in
vogue at the time as, for example, the practice in Western Canada of placing title to
44 Murdoch at pp 454-455.
45 Murdoch at p 455.
46 Rathwell v Rathwell, [1978] 2 SCR 436 [Rathwell].
47 Rathwell at p 449.
1.1.16
farmland in the name of the husband. The state of title may be entirely fortuitous:
it should not be taken as decisive against the non-titled party. 48
They found that it was only through the efforts of the wife that the husband was able to acquire the
lands in question, and it would be unjust for the husband to retain the benefits of his wife’s labours,
as the acquisition of legal title was made possible only through their joint efforts.49 They concluded
that the wife would succeed whether under resulting trust (as the presumption of a common intention
from her contribution in money and money’s worth would entitle her) or under constructive trust (as
her husband’s unjust enrichment would entitle her to succeed in constructive trust). 50
In the well-known decision of Pettkus v. Becker,51 [1980] 2 SCR 834 six out of nine judges found
the existence of a constructive trust. In Pettkus, a common law couple had a bee-keeping business
on their farm. Title was in the name of the man, but the woman made money babysitting, which she
put towards the household expenses. They both contributed to the business, but the money they
received went into the man’s account. The money in this account was used to purchase two new
properties, both under the man’s name. Applying the three part test from Rathwell, the Court
found that the man was enriched as he had the benefit of 19 years of unpaid labour, and the woman
was correspondingly deprived as she received little or nothing in return. There was no juristic
reason for the enrichment, and therefore, the man was unjustly enriched and the doctrine of
constructive trust applied. The woman received a half interest in the properties.
In Peter v. Beblow,52 the Court further expanded and clarified the doctrine. This case involved a 12
year common law relationship, and the woman brought an action seeking compensation for the
domestic services she had provided over the years. The Supreme Court of Canada held that the
three part test from Rathwell was met; the husband was enriched as he obtained the wife’s services
as a housekeeper, homemaker, and stepmother without compensation, the wife was deprived of any
compensation for her labour as she devoted the majority of her time and energy to those tasks, and
there was no juristic reason for the man’s enrichment. The Court held that in a family relationship,
the work and contributions provided by one of the parties need not be clearly and directly linked to
a specific property — as long as there was no compensation paid for the work and services, their
provision permitted the other party to acquire lands and improve them.53
In Peter v. Beblow the Court also discussed the appropriate remedy when a claim for constructive
trust has been proven — damages or an interest in the property. Mr. Justice Cory held:
It follows that in a quasi-marital relationship in those situations where the rights of
third parties are not involved, the choice between a monetary award and a
constructive trust will be discretionary and should be exercised
flexibly. Ordinarily both partners will have an interest in the property acquired,
improved or maintained during the course of the relationship. The decision as to
which property, if there is more than one, should be made the subject of a
48 Rathwell at pp 454-455.
49 Rathwell at p 461.
50 Rathwell at p 456.
51 Pettkus v Becker, [1980] 2 SCR 834 [Pettkus].
52 Peter v Beblow, [1993] 1 SCR 980 [Peter].
53 Peter at p 1080.
1.1.17
constructive trust is also a discretionary one. It too should be based on common
sense and a desire to achieve a fair result for both parties.
There will of course be situations where an award for a monetary sum may be the
most appropriate remedy. For example where the relationship is of short duration
or where there are no assets surviving its dissolution, a monetary award should be
made. Professors Berend Hovius and Timothy G. Youdan (The Law of Family
Property, supra, at p. 147) provide the following list of factors which I think are
helpful in determining that a monetary distribution may be more appropriate than
a constructive trust:
(a) is the “plaintiff’s entitlement …relatively small compared to
the value of the whole property in question”;
(b) is the “defendant …able to satisfy the plaintiff’s claim without
a sale of the property” in question;
(c) does “the plaintiff [have any] special attachment to the
property in question”;
(d) What “hardship might be caused to the defendant if the
plaintiff obtained the rights flowing from [the award] of an
interest in the property”.54
Before Kerr v. Baranow was decided by the Supreme Court of Canada, Madam Justice Huddart
engaged in a thoughtful analysis of the appropriate analysis by which to consider a claim for unjust
enrichment, and to considered whether the appropriate remedy is a constructive trust of a
monetary award, in Wilson v. Fotsch.55
Finally, in Kerr v. Baranow, the Supreme Court of Canada further clarified the doctrine and
introduced the concept of the Joint Family Venture.56 The Court rejected the dichotomy between a
constructive trust and a money award, and held that in the case of a Joint Family Venture, it is
possible to make a money award as well as impose a constructive trust.57 The parties in Kerr were in
a common law relationship for 26 years, and the wife had entered into the relationship in a state of
financial crisis. The husband paid off her debts and mortgage, and her house and vehicle were
transferred into his name. She moved into his house where they lived for the rest of the relationship.
During the relationship, she paid the utilities for both properties, the insurance, her share of the
grocery bill, and performed household tasks such as housekeeping and cooking. The matter was
sent back to trial, but it was found that a Joint Family Venture existed.
Under the former Family Relations Act, a claimant was not a spouse for the purpose of property
division if they were in a common law relationship. The “new” FLA applies equally to married and
unmarried couples, including the provisions on property division. As the property division scheme
has been extended to unmarried couples, this obviates the need for some constructive trust claims.
Section 95 of the FLA also applies to unmarried couples. Section 95 operates to allow the court to
order an unequal division of family property for a number of reasons, including the length of the
54 Peter at pp 1023-1024.
55 Wilson v Fotsch, 2010 BCCA 226.
56 Kerr v Baranow, 2011 SCC 10.
57 Waters at p 495.
1.1.18
relationship, and a spouse’s contribution to the career or career potential of the other spouse. This
section can further be used to rectify issues that perhaps previously may have warranted a
constructive trust claim.
Section 95 provides:
95 (1) The Supreme Court may order an unequal division of family property or
family debt, or both, if it would be significantly unfair to
(a) equally divide family property or family debt, or both, or
(b) divide family property as required under Part 6 [Pension Division].
(2) For the purposes of subsection (1), the Supreme Court may consider one or
more of the following:
(a) the duration of the
relationship between the spouses;
(b) the terms of any agreement between the spouses, other than an agreement
described in section 93 (1) [setting aside agreements respecting property
division];
(c) a spouse’s contribution to the career or career potential of the other
spouse;
(d) whether family debt was incurred in the normal course of the
relationship between the spouses;
(e) if the amount of family debt exceeds the value of family property, the
ability of each spouse to pay a share of the family debt;
(f) whether a spouse, after the date of separation, caused a significant
decrease or increase in the value of family property or family debt
beyond market trends;
(g) the fact that a spouse, other than a spouse acting in good faith,
(i) substantially reduced the value of family property, or
(ii) disposed of, transferred or converted property that is or would have
been family property, or exchanged property that is or would have
been family property into another form, causing the other
spouse’s interest in the property or family property to be defeated
or adversely affected;
(h) a tax liability that may be incurred by a spouse as a result of a transfer or
sale of property or as a result of an order;
(i) any other factor, other than the consideration referred to in subsection
(3), that may lead to significant unfairness.
(3) The Supreme Court may consider also the extent to which the financial means
and earning capacity of a spouse have been affected by the responsibilities and other
circumstances of the relationship between the spouses if, on making a determination
respecting spousal support, the objectives of spousal support under section 161
[objectives of spousal support] have not been met.
Section 96 of the FLA goes on to provide for the potential division of excluded property:
96 The Supreme Court must not order a division of excluded property unless
(a) family property or family debt located outside British Columbia cannot
practically be divided, or
(b) it would be significantly unfair not to divide excluded property on
consideration of
(i) the duration of the relationship between the spouses, and
(ii) a spouse’s direct contribution to the preservation, maintenance,
improvement, operation or management of excluded property.
1.1.19
As recently noted by the Court in Walburger v Lindsay, 2015 BCSC 341, many of the factors in s.
95 are similar to those that point to Kerr’s Joint Family Venture.58 Therefore, the implementation of
these provisions and the extension of the FLA to unmarried couples has opened up the matrimonial
property provisions to be in line with modern relationships, reflecting the solutions historically
offered by constructive trusts. However, constructive trusts will undoubtedly continue to be useful
under the FLA and in situations involving family members other than spouses.
VI. Review of Recent Case Law
This section reviews recent Court of Appeal decisions which illustrate the interplay among the
various trust concepts discussed in this paper, as well as other equitable doctrines.
A. Sabey v. Rommel, 2014 BCCA 360
This recent Court of Appeal case arose as a claim by Mr. Sabey, an employee and friend of the
deceased Mrs. von Hopffgarten (“Kim”). Beginning in 2001 Mr. Sabey had worked and studied
dressage on the von Hopffgartens’ farm, and had received assurances from both Mr. von
Hopffgarten (“Dietrich”) and Kim that he would eventually inherit their farm.
The trial judge found that Mr. Sabey worked on the farm for approximately 37 hours per week, and
for his work he received a room, a weekly bag of groceries, one dressage lesson from Dietrich,
about $100 in gas money per month, and the use of a horse. He also found that both Dietrich and
Kim made statements to Mr. Sabey that implied he would inherit the farm at some time in the
future. Further, when Dietrich passed away in February of 2006, Kim again told Mr. Sabey that “it
was always her and Dietrich’s intention that he would inherit the farm”.59
When Kim passed away in 2011, her will (of 1998) left the family farm to a neighbour, Ms. Rommel.
Mr. Sabey commenced a claim for an equitable interest in the farm based upon the doctrine of
proprietary estoppel, or alternatively, based on unjust enrichment or an express or implied trust.
The trial judge concluded that the evidence satisfied the requirements of proprietary estoppel and
that “the equity must be satisfied by giving him the farm.”60 The alternative claims of unjust
enrichment and an express or implied trust were not addressed.
A Majority of the Court of Appeal allowed Ms. Rommel’s appeal and concluded that the judge
erred in his analysis of proprietary estoppel. The Court held:
[24] For the reasons I give below, I conclude that while Mr. Sabey was
assured and genuinely believed he would inherit the farm, the extent of his
detrimental reliance was far less than that assessed by the trial judge. Awarding
him the farm was far out of proportion to the detriment he suffered and, in all the
circumstances, would not do justice between the parties.
58 Walburger v Lindsay, 2015 BCSC 341 at paras 93-95.
59 Sabey v Rommel, 2014 BCCA 360 at para 9 [Sabey].
60 Sabey at para 19.
1.1.20
After engaging in a fulsome analysis of the law of proprietary estoppel, the majority of the Court
remitted the case back to the trial judge to assess the outstanding claims of unjust enrichment and
express or implied trust, as well as the issue of proportionality as it relates to the claim of
proprietary estoppel.
This case demonstrates that trust claims frequently overlap with other equitable doctrines and
causes of action. And even where an issue can be resolve on another basis, parties should ensure that
the trust claims are fully explored at the trial level so as to avoid finding themselves back at square
one after an appeal.
B. Suen v. Suen, 2016 BCCA 107
This was a recent decision of the Court of Appeal arising out of a disagreement about the beneficial
ownership of a home owned as joint tenants by a father (“Albert”) and his son (“Andy”). The
purchase of the Richmond home had been financed from the proceeds of sale of a home previously
owned by the father, but on which the son had made the mortgage payments. The balance of the
purchase price for the new home was made by way of a small cash payment by Andy, and a
mortgage for which Andy assumed sole liability. In addition, Andy paid all household and family
expenses and some of the father’s debts.
The trial judge ordered the home sold, and divided the proceeds equally, subject to a requirement
that each party pay certain amounts on a line of credit secured by the property. He also ordered a
large payment from the father to the son to compensate him for unjust enrichment in relation to
mortgage, tax, utility, debt, and household payments. Both parties appealed.
The appeal was allowed in part. The Court of Appeal determined that the trial judge’s task was not
to analyze all of the financial dealings between the parties, but only to determine their respective
beneficial entitlements to the home — everything else fell outside the scope of the parties’ claims.
With respect to unjust enrichment, the Court of Appeal concluded as follows:
[56] The parties do not disagree on the fundamental principles governing
claims for unjust enrichment. There are three elements: an enrichment or benefit to
the defendant, a corresponding deprivation of the claimant, and the absence of
juristic reason for the enrichment: Kerr v. Baranow, 2011 SCC 10 at para. 32.
[57] In analyzing any claim, the court must be cognizant of the scope of the
issues before it. The claim and counterclaim that were before the court in this case
concerned the parties’ contributions to the Richmond property.
[58] The parties seem to have forgotten that this litigation concerns their
equitable interests in a piece of property rather than the totality of their financial
and social dealings with one another. It is for that reason that the issue remitted by
this Court to the Supreme Court was confined to issues of unjust enrichment
connected with the preservation and maintenance of the Burnaby home and the
acquisition, preservation and maintenance of the Richmond home.
[59] The parties led the judge astray when they led evidence and presented
argument concerning expenditures by Andy for such things as cable TV, gas,
electricity, security services, Internet, groceries and personal debts. Whether or not
Albert was unjustly enriched by Andy’s payments for those items, they were
factually (except as I shall indicate) unrelated to their equity interests in the
Richmond home. Those expenditures, in short, have nothing to do with the
present litigation.
1.1.21
This case highlights the importance of properly pleading your case of unjust enrichment and
constructive trust. Although the “concept of unjust enrichment is a flexible one”, litigants are
limited by the scope of their pleadings.61 The Court of Appeal was clear — a claim for a
constructive trust over a certain property will not open the door to a limitless examination of every
benefit and detriment that has ever passed between the parties.
C. Cowper-Smith v. Morgan, 2016 BCCA 200
A recent Court of Appeal decision highlights the issues discussed in this paper, and provides a
cautionary tale for legal counsel asked to provided independent legal advice.
The deceased, Elizabeth Cowper-Smith, died leaving three children: her daughter Gloria, and her
sons Max and Nathan. Prior to her death in 2010, the deceased transferred legal title to her home
into joint tenancy with Gloria, and made her home and her investments subject to a “Declaration of
Trust”, with Gloria as the bare trustee and the deceased as the beneficiary. This Declaration of Trust
provided that upon her death, the home and the investments became Gloria’s property “absolutely”.
The deceased not only had independent legal advice on these transfers, but her lawyer sent her for
independent legal advice as a result of the lawyer’s concern about the possibility of future litigation.
Max and Nathan learned of the transfer of the home into joint tenancy before their mother’s death,
but were assured by their sister “that the transfer was done simply to provide her with greater ease
in the management of their mother’s affairs and eventually her estate”.62 They were not aware of the
Declaration of Trust. At her death, the deceased’s estate has no significant assets.
At trial, Nathan testified that both his mother and sister had reassured the brothers on several
occasions that the mother’s estate would be divided equally among all three siblings. Max also
testified that Gloria had promised him on several occasions that he could acquire Gloria’s one-third
interest in the home upon their mother’s death in recognition of the fact that he had returned from
England to care for their mother in the years before her death. The trial judge found that a
presumption of undue influence arose from the relationship between the deceased and Gloria and
that the presumption of resulting trust was not rebutted by Gloria. The judge concluded that Gloria
held the assets on a resulting trust for the estate, and further that the doctrine of proprietary
estoppel entitled Max to purchase Gloria’s one-third interest in the home.
On appeal, the central issue was whether the deceased had been unduly influenced to transfer her
property to Gloria during her lifetime. As part of this inquiry the Court assessed whether the legal
advice given to the deceased was adequate to rebut the presumption of undue influence. If it was
not, it followed that Gloria would not be able to rebut the presumption of resulting trust. The
Court upheld the trial judge’s findings with respect to undue influence and the resulting trust (and
overturned the finding of proprietary estoppel). The Court provided the following analysis of the
relationship between undue influence and legal advice:
[49] A presumption of undue influence is established when the nature of
the relationship between the parties demonstrates the potential for domination. To
rebut the presumption, the donor must be shown to have entered into the
61 Suen v Suen, 2016 BCCA 107 at para 54.
62 Cowper-Smith v Morgan, 2016 BCCA 200 at para 3 [Cowper-Smith].
1.1.22
transaction of her own “full, free and informed thought”. See Geffen at 378 – 379,
381.
[50] Factors to be considered in determining whether the donor acted of
her own “full, free and informed thought” in entering the transaction include: (i)
the lack of actual influence or opportunity to influence the donor; (ii) the receipt
of or opportunity to obtain independent legal advice; (iii) the donor’s ability to
resist any such influence; and (iv) the donor’s knowledge and appreciation about
what she was doing. See Stewart v. McLean, 2010 BCSC 64 at para. 97.
[51] The following considerations have also been identified as relevant to
the assessment of the legal advice provided to the donor (Fowler Estate v. Barnes
(1996), 142 Nfld. & P.E.I.R. 223, Green J., adopted in Coish v. Walsh, 2001 NFCA
41 at para. 23):
1. Whether the party benefiting from the transaction is also
present at the time the advice is given and/or at the time the
documents are executed;
2. Whether, though technically acting for the grantor, the lawyer
was engaged by and took instructions from the person alleged to
be exercising the influence;
3. In a situation where the proposed transaction involved the
transfer of all or substantially all of a person’s assets, whether the
lawyer was aware of that fact and discussed the financial
implications with the grantor;
4. Whether the lawyer enquired as to whether the donor
discussed the proposed transaction with other family members
who might otherwise have benefited if the transaction did not
take place; and
5. Whether the solicitor discussed other options whereby she
could achieve her objective with less risk to her.
[The “Coish” factors; citations omitted.]
Although the deceased had consulted two different lawyers, in the circumstances this was not
sufficient to rebut the presumption of undue influence since both lawyers at least partially from
family members without questioning the information that was provided.63 The Court went on
length regarding the inadequacy of the independent legal advice:
[65] Moreover, neither lawyer reviewed with Elizabeth: (i) any concerns
she may have had in giving an equal share of her estate to Max or Nathan; (ii) her
reasons for taking such drastic steps that would effectively disinherit her sons
(surprisingly neither lawyer recorded any reasons given by Elizabeth for making
this decision); and, most significantly, (iii) the merits or wisdom of her doing so
when other options might have better alleviated the risk of future litigation if she
was intent to give more of her estate to Gloria. It appears neither lawyer gave
Elizabeth the type of “informed advice” that is required when there is a
concern about undue influence, namely that Elizabeth should have carefully
considered proceeding with this course of action, which in the absence of any
rational reasons, might be found after her death not to be just and fair to the
respondents.
63 Cowper-Smith at para 64.
1.1.23
[Emphasis added.]
Accordingly, the majority of the Court of Appeal concluded that the Deceased had not received the
type of “informed advice” required in all of the circumstances, that the presumption of undue
influence was not rebutted, and that Gloria held the assets on resulting trust for the estate.
This case demonstrates that counsel should approach inter-vivos transfers with caution, especially
where they may have the effect of disinheriting certain family members. Even where there is a
written record of the transferor’s intent and legal advice has been obtained, this may not be
sufficient to rebut the presumption of resulting trust.
D. Zeligs v. Janes, 2016 BCCA 280
As with many other cases, this case involves the gratuitous transfer of a property from mother to
adult child in joint tenancy. . However, this case has an interesting twist, since it involves the
question of whether the adult child later severed the joint tenancy.
In this case, the co-owners of the property were a mother (Dorothy) and one of her two adult
daughters (Diana). Dorothy gratuitously added Diana as joint tenant to her home, and made her a
joint-holder of her chequing account and her enduring power of attorney. A few years later, Diana
granted mortgages registered against title to the property and used the mortgage funds for her
benefit, and that of her husband. Later, while her mother was alive but mentally incapable, she sold
the property, and directed that the sale proceeds payout the mortgages, and deposited the remaining
sale proceeds into the joint account with her mother. However, within weeks she withdrew the sale
proceeds and used them to purchase real property and investments for herself and her husband.
The trial judge found that both the presumption of resulting trust and the presumption of undue
influence applied, but that Diana had rebutted both presumptions. The issue before the Court of
Appeal was whether Diana had severed the joint tenancy during Dorothy’s lifetime and thereby
deprived herself of the right of survivorship. The Court of Appeal clarified that there are three ways
to sever a joint tenancy:
(1) Destruction of one of the four essential unities by the unilateral action of one of the
tenants;
(2) Severance by mutual agreement; or
(3) Severance by a course of dealing “sufficient to intimate that the interests of all were
mutually treated as constituting a tenancy in common”.
The Court of Appeal concluded that when Diana transferred the sale proceeds to herself and her
husband, she destroyed the unity of title and severed the joint fund and so extinguished her right of
survivorship. Diana was ordered to hold one-half of the sale proceeds on a resulting trust for her
mother’s estate. If Diana had left the sale proceeds in the joint account until her mother’s death, she
would have been entitled to all of the proceeds as the surviving joint tenant.
This case shows that even where a donative intention is established, a transferee’s subsequent
actions can give rise to a resulting trust.
1.1.24
VII. Practical Considerations
It is clear that the concepts of implied trusts continue to evolve and to be applied to the financial
dealings among family members. Given the evolving case law, it appears that the best way with which
to deal with gratuitous transfers, or with beneficial ownership being “earned” over time, is to ensure:
(1) The intent of the parties is clearly and appropriately documented;
(2) The parties receive appropriate independent legal advice at the time the intent and/or
transfers are documented; and
(3) Parties behave in a manner consistent with their intent after the transfer of title.
When there is a disagreement about the true intent of the transferor, while the appropriate legal
framework is obviously important, these cases are always finally adjudicated upon their individual
factual matrix. In files such as these, the most important preliminary step is gather as much relevant
information as possible, to properly advise clients, and to plead the applicable legal framework.
VIII.Conclusion
It is clear that now, more than ever, a person’s intention when transferring property is of
fundamental importance, whether it is full transfer, or simply adding someone as a joint tenant . The
actual intention of the transferor will govern how the transfer is characterized at a later date. As
Lord Denning stated in Tinker v. Tinker: 64
Accepting that in the present case the husband was honest – he acted, he said, on
the advice of his solicitor – nevertheless I do not think that he can claim that the
house belongs to him. The solicitor did not give evidence. But the only proper
advice that he could give was: ‘In order to avoid the house being taken by your
creditors, you can put it into your wife’s name; but remember that, if you do, it is
your wife’s and you cannot go back on it.’
But, whether the solicitor gave that advice or not, I am quite clear that the husband
cannot have it both ways. So he is on the horns of a dilemma. He cannot say that
the house is his own and, at one and the same time, say that it is his wife’s. As
against his wife, he wants to say that it belong to him. As against his creditors, that
it belongs to her. That simply will not do. Either it was conveyed to her for her
own use absolutely; or it was conveyed to her as trustee. It must be one or
other. The presumption is that it was conveyed to her for her own use; and he
does not rebut that presumption by saying that he only did it to defeat his
creditors. I think that it belongs to her.
[Emphasis added.]
As gratuitous transfers of property become more and more common, it is wise to educate clients
that the best defence to future claims is careful consideration of the potential consequences of their
transfer — whether they be issues raised upon the dissolution of a marriage, or potential issues
raised by children upon death. Clients can choose to gratuitously give property to other individuals,
but should be educated about the best mechanisms by which to do so, and the consequences and
complications that arise when such a gift is neither truly intended nor effected.
[1] Whereas acceptance is generally straightforward, delivery can be a contentious issue. The delivery requirement provides for tangible proof of the gift. In certain cases delivery can be effected by constructive delivery, where a tangible item allowing access to the gift (such as a key to a house, or a passbook to a bank account) are delivered instead of the actual gift.
[2] Bakken Estate v Bakken, 2014 BCSC 1540 at para 74, citing Pecore v Pecore, 2007 SCC 17 at para 59 [Pecore].
[3] For an interesting academic discussion of gifts see Kimberley A. Whaley, “Attacking and Defending Gifts”, 35 Estates Trusts & Pensions Journal, No. 3 at p 269.
[4] See McKendry v McKendry, 2015 BCSC 2433 [McKendry] (appeal scheduled to be heard at the BC Court of Appeal on November 4, 2016).