Trust Re: Land Requires Transfer of Title

Trust Re: Land Requires Transfer of Title | Disinherited Estate Litigation

Mehmal v Mehmal 2018 BCSC 2057 discussed an alleged family agreement that certain siblings held property in trust for other siblings, but because the legal and beneficial title was never divided and no property was ever transferred, the court held that without a transfer of title no trust can result and the presumption ( of resulting trust) is not engaged.

The court held that at some point title has to pass from one party to another and relied upon Fuller v Harper 2010 BCCA 421 in which the BC Court of Appeal referred to Pecore v Pecore (2007) 1 SCR 795 said the presumption arises when entitled the property is in one party’s name, but that party, because he or she is a fiduciary, or gave no value for the property, is under an obligation to return it to the original title over.

Without a transfer of title no trust can result in the presumption is not engaged. This point was expressly made by the BC Court of Appeal in Elsen v Elsen 2011 BCCA 313

Elsen stated at paragraph 19:

“first, and most obviously, the principal as stated by Waters regarding the “transfer”of a legal or equitable interest is literally inapplicable because there was no transfer owned in equity. The properties were received by her as trustee for the beneficiaries-she never owned the beneficial interests and never transfer them.

The court noted that one of the key features of a resulting trust is that the claimant must have provided the property or equitable interest vested in the person bound by the trust ie the beneficiaries. Waters cited Baird v Columbia Trust Company (1915) 22 DLR 150 BCSC.

The court found that on the facts that a none of the siblings behaved as if they had any obligations to the trust. No one returned to the ranch or participated in any way and activities of the ranch once they left home. There were no papers drawn to reflect trust. The court found that it made sense for the siblings would all remove the way to begin on their own, to give up their interests in order to ensure that their mother continued to have a place to live along with the two siblings who remained on the ranch. It was a small sacrifice for them, and ensured that the ranch did not need to be broken up and sold to pay their inheritance. For some of the siblings it was no sacrifice at all.

Court Finds Gift Over Resulting Trust

Court Finds Gift Over Resulting Trust | Disinherited Vancouver

Gully v Gully 2018 BCSC 1590 involved in a case where a mother transferred a one half interest in her home in 2015 to her son as joint tenant on title, on the basis of estate planning advice that she received. Her intention was to avoid the payment of inheritance tax on her death, but she did not advise her son that he had been added as a joint tenant to the property.

The son subsequently became indebted in the amount of $800,000 and a judgment was filed against his interest in the said property.

The mother subsequently commenced a court action alleging that the son held his joint tenant interest in the property as a resulting trust for the mother, and alleged that she did not intend to gift the property to her son and that her son maintained no beneficial interest in the property. She argued that accordingly the judgment debtor could not register its judgment against the property.

The judgment creditor challenged the presumption of resulting trust and the court found that the mother did in fact intend to gift the property to her son, particularly by reason that at the same time that she executed the transfer, she signed a declaration stating “ I declare that I contemplate naming my son and others as joint owners of some of my assets, or designated beneficiary of my RRSP, insurance and other investments, it being my intention that upon my death, such to belong to the named beneficiary, at law and in equity, and that such are not to be shared or allocated to other persons”

The mother executed a new will one month after the judgment was registered against the property, stating that she wished to disinherit her son because he had many personal debts.

The court referred to Fuller v Harper 2010 BCCA 421 that discussed how evidence of a transferor’s intention should be considered, and followed other decisions that held that evidence by a party to litigation may be admissible against that party for a limited purpose if it is found to be relevant to the issue of the transferor’s intention at the time of the transfer.

The court followed a more liberal stance on the admissibility of post-transfer conduct and cautioned that 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 the change in intention. The assessment of the reliability of post-transfer conduct admitted into evidence will include an assessment of the reasonableness of any inferences that are sought to be drawn from that conduct, including the inherent probability or in probability of competing explanations as to the transferor’s intent. In short the court must consider if the transferor had any rational purpose for the transfer other than a gift.

The court referred to sections 23 and 29 of the Land Title act to establish the proposition that an unrelated third party is not affected by unregistered changes, and is entitled to rely on the certificate of indefeasible title.

Section 23(2) of the Land Title Act states:

An indefeasible title, as long as it remains in force and on counsel, is conclusive evidence at law and in equity, as against the crown and all other persons, that the person named in the title as registered owner is indefeasible he entitled to an estate in fee simple to the land described in the indefeasible title, subject to the following—

Section 29(2) of the Land Title act states:

2) except in the case of fraud in which he or she has participated, a person contracting are dealing with are taking are proposing to take from a registered owner

a) a transfer of land, or

b) a charge on the land, or transfer assignment or sub charge of the charge, is not, despite the rule of law or equity to the contrary, affected by a notice, express and implied or constructive trust, of an unregistered interest affecting the lander charge other than—

The court conclusively found that the mother did in fact intend to gift the property to her son, and even if the court accepted that she did not intend to gift the property to her son at the time she registered her son’s interests, the argument may have some bearing on a dispute between the family members, but by virtue of the Land Title act and has no bearing on the interests of third parties such as the judgment creditor.

Rebutting the Presumption of Resulting Trust For Gratuitous Transfers

Rebutting the Presumption of Resulting Trust For Gratuitous Transfers

Rebutting the presumption of a resulting trust for the gratuitous transfer of property was discussed in Wong v Huang 2012 BCSC 975 and Frischnecht v Nowak 2018 BCSC 1430. In both cases the court reviewed the relevant authorities and found that the transfers of property in both cases had rebutted the presumption of a resulting trust.

The presumption of a resulting trust is rebuttable by proof on a balance of probabilities, given that were a transfer of property has been made for no payment, the onus is on the transferee to prove that a gift was intended.

Wong v Huang cited the leading case of Pecore v Pecore 2007 SCC 17 at para. 24. – Only the intention of the transferor is relevant, and intention is determined at the time of the transfer.

Pecore is the leading case on the presumption of resulting trust with respect to gratuitous transfers of property from one individual to another, and the legal decision as to whether the property should be treated as a gift or whether the property is subject to return or repayment as it is held in trust.

Pecore discussed two presumptions namely the presumption of a resulting trust and the presumption of advancement. The court described the nature of these competing presumptions at paragraph 24, and 27 – 28 respectively:

24. The presumption of resulting trust as 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- this is so because equity presumes bargains, not gifts.

27. The presumption of resulting trust is the general rule for gratuitous transfers. However, depending on the nature of the relationship between the transferor of the transferee, the presumption of resulting trust will not arise and there will be a presumption of advancement instead. If the presumption of advancement applies, it will fall on the party challenging the transfer to rebut the presumption of a gift.

28. Historically, the presumption of advancement has been applied in two situations. The first is where at the transfer is a husband and the transfer is his wife ( Hyman v Hyman (1934) 4 DLR 532 (SCC) at para. 538. The second is where the transfer is a father in the transferee as his child, which is at issue in this appeal.

Regardless of which presumption applies, either presumption may be rebutted by evidence on the ordinary civil standard of a balance of probabilities.

Pecore limited the rebuttable presumption of advancement with regard to gratuitous transfers from parent to child and be limited in application to transfers by mothers and fathers to minor children.

In the Wong decision, the transfer was made to the defendant minor child, but the plaintiff was not his mother or father. Thus the presumption of advancement did not apply.

Since the transfer was made without consideration, the presumption of resulting trust applied unless that presumption is rebutted on the balance of probabilities. Therefore the onus of proof was on the minor defendant to prove on a balance of probabilities that the plaintiff’s intention in making the transfer was to complete a gift of a one half interest in the property to the defendant.

It is only the intention of the plaintiff transferor that governs, not the intention or understanding of the transferee or anyone else- Rascal Trucking : Kerr v Baranow 2011 SCC 10.

It is only the transferor’s intention at the time of the transfer that matters. Thus if a transfer later regrets the transfer or changed his mind about his intentions, that does not change the nature of the transaction.

In the Wong decision the plaintiff was an 86-year-old man who transferred a one half interest in his property to his six-year-old great-nephew. At the time of trial the nephew was 12 years old.

The plaintiff and the infant defendant had a close relationship at the time of the transfer of the property, and the plaintiff was estranged from his own children.

The court concluded in Wong that on the balance of probabilities the plaintiff’s intention when he made the transfer six years before the trial date, was to make an unconditional gift to the defendant of the one half interest in the plaintiff’s home.

The court viewed several aspects to the circumstances relating to the transfer, and found that it was not an isolated event, but instead must be viewed in the context of the plaintiffs expressed intentions going back to 2000 when the defendant was born. At that time the plaintiff wrote letters that he signed to transfer to change the ownership of the home to himself of the defendant as co-owners, indicating he would be leaving the remainder of his estate to the defendant as well.

The plaintiff wrote letters indicating that the transfer had been completed, and that the ownership certificate indicated that he and the defendant were co-owners. The plaintiff’s lawyer created a joint tenancy, and not a tenancy in common, with the effect that so long as the joint tenancy was not severed, the entire legal interest in the property would best of the defendant, outside of his will, upon the plaintiff’s death.

In the Frischknecht decision the plaintiff and the defendant were unrelated but had a relationship akin to that of mother and son. The plaintiff signed over her share of the property to the defendant at a time when she was suffering from diminishing mental capacity.

Her biological children who lived in Europe challenged the transfer.

In May 2001, the plaintiff and the defendant executed a co- ownership agreement, which when read by the court, was evidence of an intention by the plaintiff to transfer the property as a gratuitous gift to the defendant.

Despite the plaintiffs diminishing mental capacity, the lawyer who handled the transfer testified that the plaintiff clearly understood what she was doing and wanted to gift her half of the property to the defendant.

The court was impressed with the evidence of the experienced, careful and diligent solicitor, who testified that there were no issues relating to undue influence or mental competency.

The court concluded that the gift was unconditional and that the plaintiff intended to gift her interest in the property without any conditions attached, and specifically without any conditions relating to the repayment of mortgage funds. The plaintiff intended that the property be transferred to the defendant without consideration.

In both cases the court found evidence sufficient to rebut the presumption of resulting trust.

Loan or Gift In the Family Context?

Loan or Gift In the Family Context?

It is often very difficult to distinguish between loans and gifts in the family context.

This has become a particularly common problem in recent years with the dramatic increase in the value of properties, and parents attempting to this assist their child and partner in the financing of a residence.

The problem arises, typically when the child and his or her partner separate and dispute whether monies advanced by parents were loans or gifts. The parents typically never gave it a moments thought when the monies were advanced, other than in the back of their minds, they likely expected to be repaid if their child and partner separated.

Rarely are such transactions properly documented, and thus litigation can arise as to whether the monies advanced were a loan or a gift.

Several factors were addressed in Kuo v Chu 2009 BCCA 405 at paragraph 9, where the Court of Appeal adopted the factors described in Locke v Locke 2000 BCSC 1300 as applicable to the question of whether a loan or gift was intended:

1) Whether there were any contemporaneous documents evidencing a loan;
2) whether the manner for repayment is specified;
3) whether there is security held for the loan;
4) whether there are advances to one child and not others, or advances of unequal amounts to various children;
5) whether there are has been any demand for payment before the separation of the parties;
6) whether there was any expectation, or likelihood of repayment.

The two aforesaid cases were recently followed in Zellweger v Zellweger 2018 BCSC 1227.

In R.(MF) v R (BP) 2010 BCSC 1063 , the court concluded that no loan was made in circumstances where there was no contemporaneous documents are promissory notes produce to explain why money had been advanced. The repayment was never discussed with the wife, no security was given, no demand was ever made before separation, and no money was repaid to the husband’s father.

Was it a Gift?

Was it a Gift?

A good deal of estate litigation revolves around the issue of whether a transfer of real or personal property from one party to another was a gift or if the property is held on a presumed resulting trust.

The BC Court of Appeal case of McKendry v. McKendry 2017 BCCA 48 provides a useful summary as to the law of gifts at paragraphs 31 – 35 of the judgment.

31. A gift is a gratuitous transfer made without consideration. Two requirements must be met for an inter vivos gift to be legally binding:

a) the donor must of intended to make a gift;

b) the gift must of been delivered

The intention of the donor at the time of the transfer is the governing consideration. In addition, the donor must have done everything necessary according to the nature of the property, to transfer it to the donee and render the settlement legally binding on him or her- Pecore v. Pecore 2007 SCC 17.

32. A gift may be delivered in various manners: for example, a donor may choose to transfer property directly to a donee or a trustee, or may retain possession and make a declaration of trust. Once a gift is given, the donor cannot retract it. If it is incomplete however, the court will not perfect a gift. Accordingly, where the gift rests merely in a promise or unfulfilled intention, the court will not compel an intending donor to follow through with making the gift –Pecore at para 56

33. The standard for proving the gift is the usual civil standard of a balance of probabilities Singh Estate v Shandil 2007 BCCA 303 at paras. 224-27

35. The judge commences the inquiry with the presumption of a resulting trust, weighs all of the evidence, and attempts to ascertain the actual intention of the transferor. The governing consideration is the transferor’s actual intention. The presumption of resulting trust determines the result only where there is insufficient evidence to rebut the presumption on the balance of probabilities –Pecore at paras 20, 222-225.

Court cases involving gifts versus resulting trusts are inherently risky cases where the evidence can often be interpreted either way, leading to unpredictable results.

The fact that the governing presumption at law is the presumption of resulting trust, and not the presumption of a gift however, has direct implications as to how and whether the case can be settled given the litigation risk of taking these actions to trial..

Parental Monies to Children: Loan or Gift?

Parental Monies to Children: Loan or Gift?

Weinhaupt v Paracy 2017 BCSC 1662 deals with an increasing phenomena- the advancement of funds by parents to children in order to assist in the financing of the purchase of a home, and whether the advancement of funds was a gift or a loan when the marriage terminates.

Weinhaupt  reviews  the law and came to the conclusion in that case that the funds were a loan and not a gift.

In T.J.M. v. C.R.M., 2009 BCSC 1122, at para. 81, for example, Joyce J. found that an advance from a spouse’s mother that was used as a down-payment to purchase a family home was in fact a loan, despite the provision of a similar gift letter in that case. Joyce J. relied on the presence of a written promissory note (as apparently exists in this case) as well as the fact that several payments had been made in repayment of the alleged loan (a fact not present in this case) to reach that conclusion.

[55] A similar issue arose in Savost’Yanova v. Chui, 2015 BCSC 516. In that case, Weatherill J. described the issue as follows (at paras. 38-39):

[38] In order for the parties to qualify for mortgage financing for the purchase of the matrimonial home, Mr. and Mrs. Chui signed a letter, drafted by the respondent, indicating that the $60,000 they provided towards the purchase price was not a loan but rather a gift by them to the parties (“Gift Letter”). Mr. Chui testified that, without the Gift Letter, the parties would have had to purchase mortgage insurance, which was expensive. He and the respondent testified that, despite what had been represented in the Gift Letter, the $60,000 advance was always intended and understood to be a loan.

[39] The claimant testified that she knew nothing of any of this. Rather, she testified that the respondent told her that his parents had gifted an additional $25,000 to them for the purchase of the house. As had been the case with the apartment purchase, the claimant had no knowledge of how the balance of the purchase price was financed other than she knew there was mortgage financing. She testified that she had no knowledge of the Gift Letter until it was produced during this litigation.

[56] In concluding, like Joyce J., that the gift letter before him did not negate the intention to grant a loan, Weatherill J. elaborated on the elements of the legal test to be applied in making that determination (at paras. 75-77):

[75] The law regarding whether a transfer made by a parent to an adult child is a loan or a gift was summed up by Madam Justice Brown in Hawley v. Paradis, 2008 BCSC 1255 at para. 30, after a review of the applicable authorities:

[30] Based on the case law presented to me, I conclude:

1. that the presumption of advancement no longer applies between adult children and their parents;
2. that as between adult children and their parents, the presumption is a resulting trust when the parents make gratuitous transfers to children;
3. that the court must consider all of the evidence in determining whether the parent intended the transfer as a gift or a loan;
4. that the factors considered in Wiens and Locke will assist the court in determining whether the advance was a loan or a gift.

[76] A determination of whether funds were advanced as a loan or a gift turns on the unique facts of each case. However, the following factors referred to above have been identified in the case authorities as those that should be considered when the advance occurs in a family context:

a) whether there were any contemporaneous documents evidencing a loan;
b) whether the manner for repayment is specified;
c) whether there is security held for the loan;
d) whether there are advances to one child and not to others, or advances of unequal amounts to various children;
e) whether there has been any demand for payment before the separation of the parties;
f) whether there has been any partial repayment; and
g) whether there was any expectation, or likelihood, of repayment.

See Wiens v. Wiens (1991), 31 R.F.L. (3d) 265; Locke v. Locke, 2000 BCSC 1300 at para. 20; Gill v. Jaspal, 2010 BCSC 698 at para. 9.

[77] In determining the intent of the person who advances money in a family context, the court must weigh all of the evidence to determine whether the presumption of resulting trust has been rebutted; it will depend on the facts of each case: Pecore v. Pecore, 2007 SCC 17 at para. 55.

I therefore find that both Ms. Paracy and Mr. Weinhaupl signed the promissory note on December 16, 2006 intending the debt to be a joint obligation. I am unable to find that Mr. Weinhaupl told Ms. Paracy that the down-payment was a gift from his mother. The only evidence suggesting that the down-payment was a gift is the Gift Letter and I accept Mr. and Ms. Weinhaupl’s explanation for it.

[64] Applying the test set out in Savost’Yanova in light of the facts as I have found them, I note the following:

a. there is contemporaneous documentary evidence of a loan, i.e., the promissory note and the mortgage;
b. the manner of repayment is specified, inasmuch as the promissory note states on its face that “Upon the sale of this condo, $60,000.00 is due and payable to my mother”;
c. there is security held for the loan (i.e., the mortgage);
d. there has been no partial payment because none has been called for until now; and
e. there was a reasonable expectation, or likelihood of repayment once the property was sold.

[65] In light of those considerations, along with all of the other evidence before me, I find that Ms. Weinhaupl’s advance of the down-payment was a loan, not a gift.

Donor’s Intention -Evidence After Transfer Admissible

Evidence of Donor's Intention After Gratuitous Transfer Admissable

Evidence of a donor’s intention after a gratuitous transfer as to whether a gift or a trust was intended  may be admissable if relevant as per  Wong v Chong 2016 BCSC 953

Evidence Subsequent to the Transfer

[56] The traditional rule is that evidence adduced to show the intention of the transferor at the time of the transfer “ought to be contemporaneous, or nearly so”, to the transaction: see Clemens v. Clemens Estate, [1956] S.C.R. 286, at p. 294, citing Jeans v. Cooke (1857), 24 Beav. 513, 53 E.R. 456. Whether evidence subsequent to a transfer is admissible has often been a question of whether it complies with the Viscount Simonds’ rule in Shephard v. Cartwright, [1955] A.C. 431 (H.L.), at p. 445, citing Snell’s Principles of Equity (24th ed. 1954), at p. 153:

The acts and declarations of the parties before or at the time of the purchase, [or of the transfer] or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration . . . . But subsequent declarations are admissible as evidence only against the party who made them . . . .

The reason that subsequent acts and declarations have been viewed with mistrust by courts is because a transferor could have changed his or her mind subsequent to the transfer and because donors are not allowed to retract gifts. As noted by Huband J.A. in Dreger, at para. 33: “Self-serving statements after the event are too easily fabricated in order to bring about a desired result.”
…

[59] … I am of the view that the evidence of intention that arises subsequent to a transfer should not automatically be excluded if it does not comply with the Shephard v. Cartright rule. Such evidence, however, must be relevant to the intention of the transferor at the time of the transfer: Taylor v. Wallbridge (1879), 2 S.C.R. 616. 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.
[Emphasis added.]

[73] In Schultz v. Landry, 2007 BCSC 994 at para. 18, the B.C. Supreme Court noted three potential presumptions that can arise when a spouse gratuitously transfers property into joint tenancy:

  1. The presumption of resulting trust. This would arise in favour of the spouse who provided all of the funds for the purchase of a property.
  2. The presumption of advancement. This would arise in favour of the spouse whose name has been gratuitously put on title by the contributing spouse.
  3. The presumption of indefeasibility, i.e. that the holder of legal title is presumed to hold both legal and equitable interest in the property. This presumption arises by virtue of the doctrine of indefeasible title within the Land Title Act, R.S.B.C. 1996, c. 250. Sub-section 23(2) of that act establishes that registration of an indefeasible title is conclusive evidence at law and in equity that the person named is indefeasibly entitled to an estate in fee simple. Thus, the burden is on the party seeking to challenge the state of title to prove otherwise (see Bajwa v. Pannu (2006), 57 B.C.L.R. (4th) 161, 2006 BCSC 921 at ¶ 11-12).
    [Emphasis added.]

[74] The trial judge is obliged to examine the totality of the evidence, both direct and circumstantial, for the purpose of determining, if possible, the intention of the parties at the time of the purchase: Fuller v. Harper, 2010 BCCA 421 at para. 42.

[75] The Supreme Court of Canada in Pecore was addressing the issue of resulting trust in relation to a joint bank account. The Court noted, at para. 48, that “the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature.”

[76] More recently, in Bergen v. Bergen, 2013 BCCA 492, the B.C. Court of Appeal applied Pecore to joint tenancy in land. In that case, a couple transferred one-third of a property to their son in joint tenancy, saying they wanted to bypass probate when they died. They supplied all funds for the purchase of the property and toward the construction of a house. When the relationship deteriorated, the couple severed the joint tenancy and brought a claim that the son held his one-third interest in trust for them. The Court discussedPecore and then stated:

[40] Where a joint tenancy in land is concerned … either of the joint tenants is at liberty to sever the joint tenancy at any time – a fact that clearly undermines the notion that as a matter of law, a joint tenant receives a “full and perfect” inter vivos gift of the “survivorship”…. Severance, which occurs automatically upon the destruction of the four unities, ends the jus accrescendi, with the result that each co-owner becomes entitled to a distinct share in the land rather than an undivided interest in the whole…. As observed by Steel J.A. in Simcoff v. Simcoff, 2009 MBCA 80, a case involving land, “the fact that a ‘complete gift’ … included a right of survivorship does not, prima facie, prevent a donor from dealing with the retained interest while alive. The right of survivorship is only to what is left.” In the case of real property (and personalty, for that matter) nothing remains of the right of survivorship./

[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. To quote again para. 53 of Pecore:

Of course, the presumption of a resulting trust means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will.