Tag: resulting trusts

Resulting Trusts: Parents Successfully Sue Daughter

TLG v KMG 2019 BCSC 1236 involves a dispute between parents and their daughter with respect to the parents advancing $110,000 to assist the daughter in purchasing a home for her use. The parents won the case due to the law of resulting trusts.

The parents advanced $110,000 to their daughter in 2011 to buy a home. The parents stated that it was an investment for their retirement while their daughter said it was a gift. Neither of the party sought legal advice or documented the arrangement.

The property was registered as to an undivided 99/100 interest in the name of the daughter and an undivided 1/100 interest in the names of the parents.

The parents stated that they trusted their daughter, but in hindsight their evidence at trial was that was a mistake.

The parents paid a contractor to renovate the basement suite and paid for the appliances. They used funds from their RRSPs to do so, and thus incurred tax consequences for withdrawing the funds.

The matter came to a head after five years when the parents informed the daughter that they wished to sell the property as they had a large tax bill to pay because of the RRSP withdrawals.

In response, the daughter told her parents ” no, it was her house”.

The court determined that the credibility of the parties was a significant factor in determining the matters in issue.

Credibility

The court recited Demir v Peyman 2009 BCSC 445 which quoted the Court of Appeal decision Paryna v Chorny (1952 ) 2 DLR 354:

“ The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanor of the particular witness carry conviction of the truth. The test must reasonably subject his story to an examination of his consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth story of a witness in such a case must be in harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.”

The court found that the daughter displayed a sense of entitlement and found her to be less credible than her parents.

Resulting Trusts

The parents claim was founded on the doctrine of resulting trust, described by the BC Court of Appeal in MacKinnon v Donauer 2017 BCCA 437 at para. 2 as “ the rule that a presumptive trust arises in favor of the transfer or when property is transferred gratuitously to another”. If the presumption of resulting trust is rebutted, the plaintiffs advance a claim an unjust enrichment arising from their financial contribution to the purchase of the property.

Section 23(2) of the Land Title act gives rise to a statutory presumption that the daughter is the owner of the property because she is the registered owner.

However, as noted in the Demir decision at paragraph 9 “ that statutory presumption is subject to equitable principles, one of which is the enforcement of an agreement between the parties in order to prevent unjust enrichment in the face of the title is upheld “.

Therefore the daughter had to prove on a balance of probabilities that the funds received from her parents were a gift, and were intended as such by them at the time the funds were advanced.

The court must start with the presumption of resulting trust and then weigh the evidence to determine, on the balance of probabilities what the plaintiff’s actual intentions were Pecore v Pecore 2007 SCC 17 at para. 44.

The court found that the parents had been financially supportive of both their children, and in particular the daughter, given her lengthy education and her need for financial support. That history of support, and its nature, weighed against the daughter’s assumption that the funds the plaintiffs advanced for the purchase of the property was a gift.

Accordingly, the court found that the daughter had failed to rebut the presumption of resulting trust, and the court ordered that the property be sold and that the defendant holds her interest in the property as trustee for the plaintiffs.

resulting trusts

Quistclose Trusts: Trusts By Implication

Bentley v Hansen 2018 BCSC 1844 discusses Quistclose trusts that arise by implication and where so found, create a resulting trust.

Quistclose is named after the leadidng case from the House of Lords in 1970- Barclays Bank v Quistclose Trust 1970 AC 567.

The court concluded that the plaintiff had made out his claim for the existence of a Quistclose trust with respect to $100,000 that he deposited with the company for the specific purpose of securing inventory financing.

The funds were impressed with the trust for that purpose.

The plaintiff’s intent at the time of advancing the funds was that the funds would be returned to the plaintiff personally upon the letter of credit no longer being required by the financing company for this purpose.

The court found that the funds were kept separate from the companies operating funds from the time they were there were advanced by the plaintiff. The funds were never drawn down or spent for the original purpose. The fact that the funds were kept separately is legally significant.

The court concluded that the hundred thousand dollar deposit was returnable to the plaintiff on a resulting trust when the financing company released the letter of credit.

The Law

A Quistclose trust arises by implication.

Where it is established, the funds given by A to B must be used to pay C. Should the purpose of the trust fail, that is C no longer requires the funds are they no longer required for their original purpose by C, B may not make use of the funds for any other purpose, and the funds was then be returned to a on a resulting trust.

As with all trusts, and intention of the donor :

a) Must be established with certainty. In order to be established as such a trust, the intention must include that should the object of the trust fail, that the funds would return to A.

b) A, B, and C must be different persons.

c) There must also be the three requirements of certainty of intention, subject and object, as required of trust generally.

A Quistclose is an automatic resulting trust which arises by implication, for which no trust documentation would typically exist.

Its elements were described as follows by the BC Court of Appeal in Bank of Montréal v Milk Marketing Board (1994) 94 BCLR at paragraph 12 as follows:

“12. Where A gives money to B for the specific purpose of paying C, that money is impressed with the trust that may not be appropriated by B. I certainly do not doubt this principle, which — is supported by longevity, authority, consistency and good sense.”

In that case the Court of Appeal found that no such implied trust existed on the basis that the funds at issue were not kept separately from other funds held by the milk marketing board.

The existence of a Quistclose trust was most recently used in BC in Alta West Mortgage Capital Corp. v Strege 2016 BC SC 127:

“Barclays bank LTD v Quistclose Trust (1970) AC 567 stands for the proposition that were a party transfers money to another for the specific purpose of paying a third-party, the money is impressed with the trust and cannot be used by the recipient for another purpose. A Quistclose trust only arises where there is an express or implied agreement between the parties that the money is to be kept separate from the recipients other funds.

resulting trusts trusts

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..

estates Gift resulting trusts

Gifts of Cheques

Teixeira v Markgraf 2017 ONCA 819 dealt with the issue of inter vivos gifts of cheques.

In the Teireira case the plaintiff was given a cheque to cash as a gift several days before the death of the bank account holder.

The cheque was for $100,000 but there was only $84,000 in that particular account the cheque was issued on but there were other monies on deposit that the bank refused to transfer to make up the $100,000 without the express permission of the account holder.

The recipient of the cheque sued the bank and lost both at trial and on appeal.

The application judge was correct in holding that that the cheque was a gift inter vivos and that the law of gifts applied to the facts of this case.

37 The absence of consideration is one of the central indicia of a gift at law. By its very nature, a gift is a voluntary transfer of property to another without consideration: McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 23. In Peter v. Beblow, [1993] 1 S.C.R. 980, McLachlin J. (as she was then) described the “central element of a gift at law” as the “intentional giving to another without expectation of remuneration”: at pp. 991-2.

38 The three elements of a legally valid gift identified by the application judge and referred to at para. 10, above, are well established:

(1) an intention to make a gift on the part of the donor, without consideration or expectation of remuneration;

(2) an acceptance of the gift by the donee; and

(3) a sufficient act of delivery or transfer of the property to complete the transaction: McNamee v. McNamee, at para. 24. All three requirements are essential: Mary Jane Mossman & William F. Flanagan, Property Law: Cases and Commentary, 2nd ed. (Toronto: Emond Montgomery Publications Limited, 2004), at p. 441.

39 The first two elements are not at issue on this appeal. The central issue here is whether the delivery of the cheque for $100,000 into the hands of the appellant could be a sufficient act of delivery of the gift. The wrinkle in this case is that there were insufficient funds in Mary’s account.

Delivery

40 The delivery requirement has been a part of the modern law of gifts since the seminal case of Irons v. Smallpiece (1819), 2 B. & A. 551. The delivery requirement is an important distinguishing feature of gifts as compared to other methods of transferring property, such as by contract. As Mossman and Flanagan note in Property Law: Cases and Commentary, at p. 442:

The delivery requirement marks an important difference between contract law and the law of gifts. A contract involves an exchange of promises. A gift, a unilateral promise, does not. Contract law will enforce an exchange of promises (a “bargain” promise) with expectation damages. On the other hand, the law of gifts attaches no significance to a unilateral promise to pay in the absence of delivery.

41 The delivery requirement in the law of gifts continues to serve several important functions. It forces a would-be donor to consider the consequences of their expressed intention to make a gift and it furnishes tangible proof that a gift has in fact been made: see Bruce Ziff, Principles of Property Law, 6th ed. (Toronto, Thomson Reuters, 2014), at pp. 161-2. See also: Philip Mechem, “The Requirement of Delivery in Gifts of Chattels and of Choses in Action Evidenced by Commercial Instruments” (1926) 21 Ill. L. Rev. 341, at pp. 348-352.

Indicia of delivery

42 The most obvious form of delivery is the actual physical transfer of the subject matter of the gift from the donor to the donee such that the gift is literally given away: see Ziff, at p. 161.

43 However, in certain circumstances, such as where the item is unwieldy, courts have acknowledged that constructive delivery will suffice. In these cases, the critical questions have been whether or not the donor retained the means of control and whether all that could be done had been done to divest title in favour of the donee: see Ziff, at p. 165.

44 Ultimately, in order for a gift to be valid and enforceable, the donor must have done everything necessary and in his or her power to effect the transfer of the property: Kavanagh v. Lajoie, 2014 ONCA 187, 317 O.A.C. 274, at para. 13.

Gifts by Cheque

45 A gift of cash can be readily effected by delivery to the donee. But a gift of money by cheque can be problematic, due to the nature of a cheque. A cheque is not money. Nor is it a transfer of property. It is a direction by the drawer (the bank’s customer) to the drawer’s bank to pay a sum of money to the payee: Re Bernard (1911), 2 O.W.N. 716 (Div. Ct.), at p. 717. The direction can be revoked by the drawer at any time â€” for example, by a “stop payment” order, referred to in s. 167 of the BEA as “countermand”. Under s. 167, the bank’s authority to pay the cheque is terminated by countermand or when the bank receives notice of its customer’s death: McLellan v. McLellan (1911), 25 O.L.R. 214 (Div. Ct.), at p. 216; Re Beaumont, [1902] 1 Ch. 889, at p. 894.¹

46 For these reasons, a gift by cheque is not complete when the cheque is given to the donee. It is only complete when the cheque has been cashed or has cleared: see Ziff, at p. 166. Thus, in Campbell v. Fenwick, [1934] O.R. 692 (C.A.), a cheque given to the donee three days before the donor’s death and cashed a day before her death was found to be a valid inter vivos gift of the amount of the cheque.

47 In Re Swinburne, above, a case strikingly similar to this one, the Court of Appeal for England and Wales held that the death of the donor ruins a gift inter vivos by way of cheque if the cheque is not deposited before the donor dies. There, the donor had given the defendant a cheque shortly before her death. The bank refused to honour the cheque because of concerns about the validity of the signature. Before anything else could be done, the donor died. On the date the cheque was presented, the donor had insufficient funds in her current account, on which the cheque was drawn, but sufficient money to cover the cheque in her deposit account. In light of evidence given by the bank that it might honour a cheque in such circumstances, the court considered the case as though the whole amount was in the current account.

48 Nonetheless, the court held that a gift inter vivos was not made out. In reaching this conclusion, Warrington L.J. wrote, at p. 44:

[I]n order to make an effectual gift inter vivos there must be an actual transfer of the subject of the gift or of the indicia of title thereto. A cheque is not money. It is not the indicia of title to money. A cheque is nothing more than an order directed to the person who has the custody of the money of the [donor] requiring him to pay so much to the person in whose favour the cheque is drawn.

49 Similarly, in Re Bernard, above, the deceased had written a cheque for $1,000 payable to her sister and put it in her “cash box” with a note that her sister should present the cheque one month after her death. She gave the key to the box to her niece, with instructions to give it to her solicitor after her death. The box was duly opened after her death and the cheque was discovered. Chief Justice Mulock held that the donee could not enforce her claim, stating, at p. 717:

A cheque is not a chose in action, but merely a direction to some one, who may or may not have in his possession funds of the drawer authorising him to pay to the payee a certain sum of money. Death of the drawer before presentation revokes such authority. Thus in this case the claimant is met with two difficulties, each fatal to her claim: one being that the cheque not having been acted upon by acceptance or payment, never lost its primary character of a mere cheque, which is not a chose in action, and is not the subject of donatio mortis causa; and the other being that the testatrix’s death revoked the banker’s authority to pay the cheque.

50 The appellant argues that death only terminates the bank’s authority to pay on a cheque, not the drawer’s duty to pay, citing Crawford’s The Law of Banking and Payment in Canada. While this statement of the law is correct with respect to the authority of the bank, there must still be some independent duty to pay in order for the payee to be able to enforce a claim against the estate. As Crawford goes on to state, in the same passage cited by the appellant, at p. 34-54.1:

However, since the bank has no duty to anyone but its customer to pay, unless it has certified the cheque . . . , the only recourse available to the holder is action against the estate, assuming that the liability continues under the applicable provincial law dealing with successions. If the holder is not a holder for value, as where a gift or donatio mortis causa has been attempted, he may retain proceeds collected before the bank learned of its customer’s death, but will be unable to compel completion by payment thereafter, at least in any common law province. [Footnotes omitted.]

51 The appellant also cites Campbell v. Fenwick, above, in support of the contention that death terminates any power of revocation of a cheque by the estate of the donor and leaves the original gift in full vigour and effect. However, in Campbell v. Fenwick, the donee had successfully deposited the cheque the day before the death of the donor and the estate was trying to recover the funds. The gift inter vivos was therefore complete and death did not intervene. Indeed, the donee in that case had learned that a cheque would be revoked by death and knew the importance of having the cheque cashed during the donor’s lifetime. She deposited the cheque the day after she received it for this reason.

52 I conclude that the application judge was correct. The purported gift of $100,000 by way of cheque failed because it was not delivered before the bank received notice of Mary’s death.

Gift or Estate Asset Legal Procedures resulting trusts Trial Procedures

The Presumption of Advancement In BC May Be Dead

HCF v DTF 2017 BCSC 1226, a divorce case, traces the historical roots of the presumption of advancement and finds that it is an outmoded and “dead” legal principle in today’s BC society.

Times have changed because women are no longer economically vulnerable and same sex marriages mean that no one would ever really know who would get the benefit of the presumption. This is because the presumption applied for transfers from husbands to wives but not from wives to husbands (in which case it was held by the husband on resulting trust).

The decision would apply to estate cases as well as matrimonial cases.

The Court Stated: What is the Legal Nature of the Presumption of Advancement?

[109] The presumption of advancement is simply a rebuttable common law evidentiary presumption; see Pecore v. Pecore, 2007 SCC 17 at paras. 24-25 and 27; D. Waters, M. Gill & L. Smith, Waters Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012) at 421, [Waters]. The presumption of advancement is neither, for example, a cause of action nor a remedy.

The Ambit of the Presumption of Advancement

[110] It is necessary at the outset to understand that the presumption of advancement only pertains to gifts made by a husband to a wife and not to gratuitous transfers made by a wife to a husband. The authors of Waters at 413 explain that the origins of the presumption between husband and wife is to be found in the eighteenth century, and, prior to World War l in particular, it reflected very much the course of affairs in the average middle-class or aristocratic family. Waters further observes that the transfer of property from a husband to a wife is regarded as an advance of what might be expected on the transferor husbands death; see Waters at 412.

[111] Gifts made from a wife to a husband, however, are governed by the presumption of resulting trust and the onus would lie on a husband to establish that a gratuitous transfer made to him was intended as a gift. In this case these competing presumptions have direct relevance. It is to be remembered that when the parties bought the Connaught Property Mr. F. and Mrs. F. contributed $50,000 and $45,000 respectively to that purchase. In the absence of evidence to the contrary Mr. F. contribution is presumed to have been gifted to Mrs. F. while Mrs. F.s contribution is presumed to remain her money.

The Basis for the Presumption

[112] The historical and jurisprudential underpinnings of the presumption are not entirely clear. Nevertheless it appears that the presumption, as between husband and wife, does not operate, as one might expect, based on an assumption of love or respect as between spouses or on the view that what is given by one spouse to another ought presumptively to be viewed as a gift. Instead, it arises out of a now anachronistic view of the economic competency of women. Thus, nearly fifty years ago, in Pettitt v. Pettitt, [1969] 2 All ER 385, Lord Reid, at 388-389 said:

I do not know how this presumption first arose, but it would seem that the judges who first gave effect to it must have thought either that husbands so commonly intended to make gifts in the circumstances in which the presumption arises that it was proper to assume this when there was no evidence, or that wives economic dependence on their husbands made it necessary as a matter of public policy to give them this advantage. I can see no other reasonable basis for the presumption.

[113] In Pecore, Rothstein J., at para. 21, observes that advancement is a gift during the transferors lifetime to a transferee who is financially dependent on the transferor In dealing with the application of the presumption as between parents and their adult children, Rothstein J. said:

37 Some commentators and courts have argued that while an adult, independent child is no longer financially dependent, the presumption of advancement should apply on the basis of parental affection for their children: see e.g. Madsen Estate, at para. 21; Dagle; Christmas Estate v. Tuck (1995), 10 E.T.R. (2d) 47 (Ont. Ct. (Gen. Div.)); and Cho Ki Yau Trust (Trustees of) v. Yau Estate (1999), 29 E.T.R. (2d) 204 (Ont. S.C.J.). I do not agree that affection is a basis upon which to apply the presumption of advancement to the transfer. Indeed, the factor of affection applies in other relationships as well, such as between siblings, yet the presumption of advancement would not apply in those circumstances. However, I see no reason why courts cannot consider evidence relating to the quality of the relationship between the transferor and transferee in order to determine whether the presumption of a resulting trust has been rebutted.

[114] Thus, it is a theory or premise of gendered economic dependence that underlies the evidential rule.

The Status of the Presumption

[115] For nearly fifty years the presumption of advancement, as between husbands and wives, has been consistently questioned and steadily eroded.

[116] In Pettitt, Lord Reid, at 389 observed that the social and economic conditions for women were changing, transforming a wifes traditional status as an economic dependent to an independent economic agent. To the extent that economic dependence made it necessary, as a matter of public policy, to give wives the advantage of the presumption of advancement, Lord Diplock wrote that the presumption belonged to a different social era; see 414.

[117] Waters, at 414, notes that the presumption in Canada has largely disappeared and, at 413, observed that even the word advancemen is archaic.

[118] In Rathwell v. Rathwell, [1978] 2 S.C.R. 436, Chief Justice Dickson, at para. 31 said: in present social conditions the old presumption of advancement has ceased to embody any credible inference of intention. Those comments, in this province, had been referred to, for example, in Hofmann v. Hofmann (1979), 12 B.C.L.R. 319 (C.A.) at para. 15. In Alexsich v. Konradson (1995), 5 B.C.L.R. (3d) 240 (C.A.), Prowse J.A., said, in obiter, at para. 24, that though the presumption of advancement still existed it no longer has the significance it once enjoyed.

[119] Recently in Zhu v. Li, 2009 BCCA 128, Neilson J.A. said:

[51] First, there is considerable support for the view that the presumption of advancement has lost its force in the contemporary matrimonial context. The editors of Waters Law of Trusts describe its origins in the 18^th century, rooted in the assumption that when a husband or father transfers an asset to his wife or child, his intention is to make a gift due to the donees financial dependence on him and the reasonable expectation that the donee would share in his estate. They observe that this premise has lost its persuasiveness in contemporary society, to the point that the presumption of advancement has been eliminated by express legislation in the majority of Canadian provinces and territories. While it has not been abolished in British Columbia, they say that legislation dealing with the division of matrimonial property has €œreduced the presumption to no significance: [citations omitted.]

Zhu was referred to at para. 36 of F. (V.J.).

[120] In addition, as early as 1975, provincial legislators began to recognize the disconnect between the presumption of advancement and the reality of modern family dynamics. Currently, s. 36 of Albertas Matrimonial Property Act, R.S.A. 2000 c. M-8; s. 50 of Saskatchewans Family Property Act, S.S. 1997, c. F-6.3; and s. 14 of Ontarios Family Law Act, R.S.O. 1990, c. F.3, have eliminated or abolished the presumption of advancement within their respective property division regimes. That said, each statute provides that a property placed in the names of both spouses as joint owners is proof, in the absence of evidence to the contrary, that joint ownership is intended; see also F. (V.J.) at paras.12-14.

Further Difficulties with the Presumption of Advancement

[121] The relevance and usefulness of the presumption has been further eroded by ongoing changes in the nature of the unions between individuals. I have said that the presumption only applies to gifts from husbands to wives and not from wives to husbands. In Kerr. v. Baranow, 2011 SCC 10, Cromwell J. said:

20 The presumption of resulting trust, however, is neither universal nor irrebuttable. So, for example, in the case of transfers between persons in certain relationships (such as from a parent to a minor child), a presumption of advancement â€” that is, a presumption that the grantor intended to make a gift â€” rather than a presumption of resulting trust applies: see Pecore, at paras. 27-41. The presumption of advancement traditionally applied to grants from husband to wife, but the presumption of resulting trust traditionally applied to grants from wife to husband. â€¦

See also Waters at 413; Donnelly v. Weekley, 2017 BCSC 529 at para. 145.

[122] Thus, the often expressed view that the presumption of advancement operates as between spouses or that it relates to spousal gifts is both incorrect and misleading. So too is the use of the expression donor spouse. Each of these expressions is incorrect because the only potential donor spouse is a husband and a spousal gift can only be made to a wife. These statements are misleading because discussions about fairness and consistency in relation to spousal gifts take on a different complexion when it is recognized that the presumption only operates in one direction.

[123] In the present case how the presumption actually operates is important because any recognition of its limited scope is wholly absent from each of G. (P.), Remmem and Wells. These three cases, in turn, were the decisions that identified and addressed the conflict in the case law that was then brought to a head in F. (V.J.). In F. (V.J.) itself, however, the court was clearly aware that the presumption operated in this limited manner and it referred to this fact, albeit in passing; see paras. 50 and 77.

[124] It is also worth recalling that in Pecore, at para. 40, the court narrowed the doctrine, as it applied to the parent-child relationship, so that it now only applies to transfers from parents to minor children.

[125] These are then only two circumstances where the common law in Canada, in some provinces, recognizes the ongoing existence of the doctrine. The legal parallels, in a contemporary society, between gifts made to wives and gifts made to minor children, are jarring and further highlight the outdated foundation of the presumption as it applies to a gift made by a husband to his wife.

[126] The application of the presumption is further confounded by additional considerations. Though there is some inconsistency in the authorities, the better view appears to be that the presumption has no relevance to common law relationships. In Kerr, at para. 20, Cromwell J. said whether the application of the presumption of advancement applies to unmarried couples may be more controversial.

[127] In Fumich v. Babic, 2005 BCCA 552, citing McDonald v. Eckert et al, 2004 BCSC 323 at para. 33 the court said:

[27] the presumption has not been broadly recognized where the relationship in question is a common law relationship and it has been held that it does not arise in respect of a relationship of that kind. [citations omitted.]

[128] In Ng v. Ng, 2012 BCCA 195, a parent/child case, the court said:

[29] The law is clear that the presumption can also be displaced by the operation of a presumption of advancement (which applies only between parents and children or married spouses) or where an agreement exists under which one party would be unjustly enriched if the titleholder were held to be the beneficial owner. [citations omitted.]

See also Remmem at para. 50 and F. (V.J.) at paras. 34 and 77.

[129] If one considers both that the presumption operates only from a husband to his wife and that the presumption is grounded on the theory that a wife is economically dependent on her husband extending the presumption to common law relationships would make little sense. It would cause a dated and now largely inaccurate view of marital relationships to be superimposed on a contemporary form of marital union; see Waters at 414.

[130] These same considerations extend to both same-sex marriages and same-sex common law relationships. Under the Definition of Spouse Amendment Act, S.B.C. 1999, c. 29 and the Definition of Spouse Amendment Act, 2000, the definition of spouse was expanded to include persons in a marriage-like relationship, including marriage-like relationships between persons of the same sex. In 2003 the British Columbia Court of Appeal in Barbeau v. British Columbia (Attorney General), 2003 BCCA 251, ruled that the common law bar to same-sex marriage contravenes s. 15 of the Charter. Two years later the federal government enacted the Civil Marriage Act, S.C. 2005, c. 33, which allowed same-sex partners to marry across the country.

[131] The FLA was clearly intended to extend the division of property regime to same-sex relationships. During the debates concerning the FLA one speaker said, I think most Canadians, regardless of whether they want the benefit of marriage or a common law relationship or a gay or lesbian relationship or whatever kind of relationship they want, expect that at the end of the day, if that relationship fails, there will be some fundamental fairness; see B.C., Legislative Assembly, Official Report of Debates (Hansard), 39th Parl., 4th Sess., No. 2 (17 November 2011) at 1015.

[132] The operation of the presumption poses pragmatic and conceptual difficulties in the same-sex context. As a practical matter, if the presumption only arises when property moves from husband to wife, when would it arise between spouses of the same sex? On a conceptual level, if the presumption was historically designed to ameliorate a wifeâ€™s legal and socially engineered economic dependence on her husband, does such a relationship exist between two men or two women?

[133] If, as it appears, the presumption of advancement does not function between same-sex partners then, contrary to legislative intent, same-sex couples would be treated differently than traditional couples for the purposes of property division under the FLA.

[134] These defining attributes of and limitations on the presumption of advancement have important consequences for whether the presumption has any ongoing existence under the FLA.

[135] One final reality is relevant. Today many people enter two or more marriages throughout the course of their lives. The excluded property regime in the FLA assists parties to maintain some financial continuity as they move between marriages or common law relationships.

[136] This effect is not incidental. During the second reading of Bill 16, one speaker observed: the old joke is that a second marriage is the triumph of hope over experience, but many seem to be prepared to do that. As you divide assets more and more, the complications that arise from that and who brought what and the age at which you enter into those relationships become incredibly complex; see B.C., Legislative Assembly, Official Report of Debates (Hansard), 39th Parl., 4th Sess., No. 2 (17 November 2011) at 1010. Read in the context of the debate as a whole, one of the intended effects of the excluded property regime was to bring some financial certainty to persons who enter multiple marriages over the course of their lifetime.

[137] As Madam Justice Fenlon, as she then was, pointed out in G. (P.) the presumption of advancement creates uncertainty in the excluded property regime. This reality was acknowledged in F. (V.J.) at para. 33. This uncertainty disproportionately impacts people who enter multiple marriages throughout their lifetime, working against the legislative objective.

gifts resulting trusts

Loan or Gift Within the Family?

ABP v KGW 2017 BCSC 977 provides a template of the criteria a court will examine in determining if a gratuitous advance of monies or property within a family from parents to children will be a loan or a gift.

5 The topic of gratuitous transfers between parents and adult children was covered in Pecore v. Pecore, [2007] 1 S.C.R. 795, in which it was held that these come freighted with a rebuttable presumption of resulting trust putting the transferee to the onus of demonstrating that a gift was intended. What matters is the intention of the transferor at the time of handing over the property.

6 A template for evaluating whether the presumption has been rebutted was set up in Locke v. Locke, 2000 BCSC 1300, and applied and approved in Kuo v. Chu, 2009 BCCA 405 at para. 9, where the questions to be considered on the loan/gift issue in a family law context were said to include:

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 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.

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Intention to Gift: The Legal Requirements

A gift requires three elements to be legally effected, namely an intention to donate, an acceptance of the gift, and delivery of the gift. All three elements must be present for the gift to be complete, and it is then irrevocable.

The gift is the voluntary transfer of property from one person to another without full consideration.

It is well settled law, as confirmed by the Supreme Court of Canada in the Pecore v Pecore 2007 SCC 17 that the courts look to the intention of the donor at the time of the transfer in order to determine if a gift was actually intended.

Anyone who intends to make a gift of property for little or no consideration must ensure that the intention of the donor is well documented. A Deed of gift given under seal, along with the statutory declaration of the intention to gift is probably the best evidence that the courts will rely upon.

The problem however is that a minority of purported gifts are not substantiated at all as to the intention of the donor, which then forces, the court to assess the reliability of the evidence, if any of intention to gift.

Probably the most common form of contentious gifts are the use of joint tenancy in both real property and investments. By reason of the nature of the joint tenancy, upon the death of a joint tenant, the surviving joint tenant automatically becomes the registered owner of the property by right of survivorship. This happens immediately upon death, and does not form part of the estate of the deceased or attract probate fees.

Common reasons for putting property in joint tenancy is to avoid probate fees or avoid a claim under the wills variation statutes, which are inconsistent with an intention to gift and will typically result in a claim of resulting trust being made against the surviving joint tenant.

Accordingly, a mere transfer of the legal title into joint tenancy is not conclusive as to the transfers intention as the beneficial interest may belong to the estate of the deceased and not the surviving joint tenant unless there was a clear indication of the transfers intention to gift.

While the courts will primarily look at the time of the transfer as to the intention of the deceased as to whether a gift was intended, the courts may also consider the donors subsequent actions to the extent that those actions are relevant to the donors intention of the time of transfer.

Accordingly, a transfer of title into joint tenancy has three potential legal consequences:

A) an immediate gift of both legal and beneficial title;

B) a transfer of the legal title only, so that the transferee holds the property on a resulting trust for the transferor’s estate;

C) as recognized in the Pecore decision, a transfer of the legal title with a right of survivorship in the asset, but a transfer of beneficial title only upon the death of the transferor.

McKendry v McKendry 2015 BCSC 2433 followed the Pecore case and stated inter alia:

[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 intention of the transferor at the time of the transfer

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Gifts In Contemplation of Death

Deathbed gifts happen surprisingly often. It is relatively common for people, during their last days, to make sizable gifts to caregivers and loved ones. Frequently the purported gift is at odds with the will of the dying person. Like deathbed wills, deathbed gifts’ often result in estate litigation. In fact they occur with such frequency that section 18 of Community Care and Assisted Living Act, RSBC 2002, prohibits agents, designates and employees of licensed community care facilities from receiving any gifts or inheritances. The ethical code of nurses similarly prohibits same.

The law recognizes that a person may, in contemplation of his or her imminent death, make a gift transferring the ownership of property. Such a gift will take effect only upon the death of the donor and otherwise may be revoked. The legal expression for a gift made in contemplation of death is donatio mortis causa.

For a donatio mortis causa to be an effective gift in law, there are three requirements, namely:

1) The gift must have been in contemplation of death;

2)The donor must ensure there is delivery of the subject matter of the gift to the donee (recipient of the gift);

3)The gift must be made under such circumstances that show that gift may be revoked should the donor recover.

These principles were set out in the seminal case of Cain v. Moon (1896) 2 Q.B. 283. Although this was an English decision, it has been adopted by Canadian courts and is thus part of Canadian law.

Accordingly a donatio mortis causa is a gift made by a person inter vivos (during his or her life) with the intention that the gift should take effect only upon death. The gift is therefore conditional upon death. Once death occurs, however, the gift takes effect retrospectively and is effective from the date that the gift was initially made. Such gifts are a recognized exception to the general rule requiring all testamentary gifts conform with the provisions of the Wills Act.

The origins of donatio mortis causa are found in Roman law, where they were used to avoid the formal requirements of the law relating to the valid execution of wills.

The Supreme Court of Canada has described donatio mortis causa as a sort of “amphibious gift, between a gift made inter vivos and a legacy left in a testator’s will”. This description is found in McDonald v. McDonald (1903) S.C.R. 145 at page 161.

A donatio mortis causa is similar to a will in that it remains revocable up until the donor’s death renders it absolute. The donee’s title only becomes absolute at the moment of the donor’s death. It is also at the moment of death that the personal representative of the deceased acquires title to all of the deceased’s assets except, naturally, those which are the subject of a valid donatio mortis causa. Thus where disputes arise, the conflict is usually between the beneficiaries under the will and the claimant of any purported donatio mortis causa.

Donatio mortis causa need not be proved as testamentary gifts under the deceased’s estate i.e. there are no formal requirements for execution as there are for a will. Nevertheless any person claiming to benefit from such a gift bears a heavy onus of proof. In order to give effect to the purported gift, the courts will require clear and unmistakable proof that the deceased intended to give the property donatio mortis causa. Often the courts will specifically require evidence to corroborate the deceased’s intention.

In this paper I will review some of the leading Canadian cases dealing with the doctrine of donatio mortis causa.

1. Bank Accounts

In the 1993 B.C. Supreme Court case Slagboom Estate v. Kirby (1993) 48 E.T.R. 219 the deceased was 88 years old when he died. His health had declined rapidly in the last year of his life and he had suffered many illnesses requiring frequent doctors’ visits.

About five weeks prior to his death, the deceased had deposited $42,500 in the defendant’s bank account. She was a longterm friend who provided companionship and assistance in his declining years. Shortly before the deposit, the deceased told her he wanted her to keep the money so that she could do his banking for him. At the time of the deposit, the deceased told her that he did not want his brother to have his money and that if something should happen to him, the money remaining in the account was to be hers.

A couple of weeks later, the deceased made a will leaving his entire estate to his brother, however there remained only $4500 in the estate.

In this action, the plaintiff brother sought recovery of the $42,500 alleging there was insufficient evidence that the gift was made in contemplation of death. The plaintiff claimed the deceased only intended to deposit his money with the defendant so that she could assist him with his banking.

The court awarded the funds to the defendant, however, ruling there had indeed been a valid gift made in contemplation of death. The court found that the phrase “if something happens to me” had been used euphemistically and on the facts of this case indicated a genuine and reasonable contemplation of death.

In Morton v. Dafoe (1926) 30 O.W.N.193, the deceased was hospitalized a few days before her death. She asked for certain documents to be brought to her including money and her bank passbook. She put the passbook into a bag which she handed to the

defendant, an old and trusted friend. As she did so, the deceased said to her friend, in the presence of witnesses “keep it; it is yours if I do not come back.”

On these facts, the Court held that there had been a valid gift. The court ruled that the gift had been made in contemplation of death in circumstances showing the gift was conditional upon that death. The defendant was thus entitled to the monies on deposit with the bank as represented by the passbook.

2. Safety Deposit Box Keys

In Costiniukv. British Columbia (Official Administrator), 34 E.T.R. (2d) 199, the plaintiffs claimed the contents to a safety deposit box as a gift donatio mortis causa.

The deceased died intestate with no next of kin. She left an estate worth nearly $1 million. During the last few years of her life, the deceased had lived alone and was frequently ill. The plaintiffs, who had known her for many years, had greatly assisted her. Before the deceased went into the hospital for the last time, she gave the keys to her safety deposit boxes to the plaintiffs saying that if she ever needed them back she would ask for them.

The day before she died, in the presence of medical technicians, the deceased told the plaintiffs they were to have everything in the boxes.

The safety deposit box contained stamps worth $2300, an RRSP receipt and the state of title certificate for her home. The plaintiffs brought an action claiming entitlement to all of these assets.

The official administrator defended the action claiming there was no effective donatio mortis causa because there had been no delivery to the plaintiffs of the subject matter of the gift.

The court found that handing over the keys to the safety deposit boxes did constitute effective delivery because the keys were essential in order to get possession of the contents of the boxes. Thus the contents of the box passed to the plaintiff as a valid donatio mortis causa. Only the stamps, however, passed in title to the plaintiffs. The court held that neither the RRSP receipt nor the state of title certificate was a valid means of effecting transfer of those assets. Therefore they ruled there was no delivery to the plaintiffs of either the land or the RRSP.

This decision was upheld on appeal.

3. Furniture and Personal Effects

In Re Rosemergey, 49 B.C.R.93, the deceased had employed her housekeeper for many years. When she became ill and learned that her condition was terminal the deceased had signed and delivered a paper giving her housekeeper all the furniture and personal effects in the house. None of the articles mentioned in the written memorandum were mentioned in the deceased’s will.

The court held that there was a valid gift in contemplation of death even though there was no actual physical change of possession. The court reasoned that the deceased, so far as possible, had abandoned possession of the furniture and personal effects, while the donee housekeeper had taken and maintained possession of them to the same degree.

4. Forgiveness of a Debt

The case of Re Calaiezzi Estate, 1993 Carswell Ont 2724 from Ontario illustrates the successful foregiveness of a mortgage debt. Six months before his death, the deceased had loaned the sum of $130,000 to the defendant. This debt was secured by an unregistered mortgage. Payments were made on the loan, however the deceased was heard to tell the defendant to tear up the loan agreement and that she no longer owed the deceased any money. The deceased specifically said that he was dying and the money wasn’t any good to him. The deceased directed witnesses to this conversation to find the loan agreement and destroy it, however were unable to carry out these instructions because they could not find it.

The deceased’s executors brought an action claiming the balance owing on the loan. The defendant successfully argued that the deceased had forgiven the loan as a donatio mortis causa. The court ruled the deceased knew he was dying when the gift was made and it was so closely to time of the death that the gift was conditional upon that death. The court also found delivery had occurred when the deceased instructed the witness to find and destroy the agreement.

5. Real Property

As noted above in the Costiniuk case it appears that delivery of the state of title certificate was not sufficient delivery to be a valid donatio mortis causa.

Similarly, in Dyck v. Cardon 17 E. T. R. 54, the Alberta Court of Appeal held that delivery of keys to a house was not sufficient to complete a gift.

In fact, it would appear that the weight of Canadian judicial opinion is that real property cannot be the subject of a donatio mortis causa.

The English Court of Appeal, however, has ruled otherwise. In Sen v. Headley (1991) 2 All ER 636 the deceased handed over the keys of a steel box containing the title deeds to the deceased’s real property. The court found that in doing so “the deceased had indisputably made a gift of the house to the plaintiff in contemplation of his death to be effective on his death and his parting with the dominion over the title deeds to the house was sufficient to satisfy the third of the requirements necessary to establish a valid donatio mortis causa”

Conclusion

From a review of the caselaw, it is clear that the courts are open to upholding donatio mortis causa in appropriate circumstances where they are satisfied, by credible witnesses, that the three essential criteria have been proven.

Gravely ill people frequently mention such things as the forgiveness of debts or the gift of various assets. These declarations are so frequently at odds with the contents of the will it is surprising there is so little litigation involving claims of donatio mortis causa.

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Gift or Loan?

It is often difficult for the court to determine if advancements of funds from one party to another done orally and without witnesses is a gift or loan.

Rosas v. Toca 2016 BCSC 1754 dealt with such a situation. The plaintiff won over $4 million in a lottery and advanced over $600,000 to the defendant to buy a house.

The plaintiff demanded repayment and the defendant asserted the funds were a gift. Alternatively the defendant asserted the claim was statute barred as out of time and succeeded on this point.

The court did however find that the funds were intended as a gift and not a loan largely relying on the corroboration of the bank manager who handled the bank draft.

It was not necessary to resort to the law of resulting trusts as the court determined that the intention of the plaintiff was to make a loan and not a gift.

The Court stated:

As set out in the case of Clifford v. Flores 2004 BCSC 358, the Court must decide whose version of events is most reliable in order to decide the issues. Mr. Justice Cohen noted at paragraph 39 in that case:
[39] The credibility of the witnesses must be tested against those facts that are not seriously in dispute, and the preponderance of the evidence and the probabilities surrounding the events.

[40] Although this task is primarily one of fact finding, some legal principles submitted by defence counsel are of assistance:

a) First, the plaintiff carries both the legal and evidentiary burden of proving on a balance of probabilities, that the alleged oral contract was made.
b) Second, the basic contractual principles of offer and acceptance, and certainty of terms are applicable. These principles are summarized in Friedman, The Law of Contract in Canada (4th ed.). at pp. 16-17, and 20, as follows:
Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law is concerned not with the party’s intentions but with their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other parties said or did that is the criterion of agreement; it is whether a reasonable man in the situation of that party would have believed and understood that the other party was consenting to the identical terms.
…
Sometimes it is a simple matter to decide what the parties have manifested to each other, and consequently, whether they have agreed, and if so, upon what. This is especially true where a document containing their agreement has been prepared and signed by the parties. If the plain wording of the document reveals a clear and unambiguous intent, it is not necessary to go further.
…
It is different, however, where the language is not unambiguous but vague and uncertain. In the absence of the requisite certainty and clarity the courts will not declare that a contract exists.

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Rebutting the Presumption of Resulting Trust

Rebutting the Presumption of Resulting Trust discussed in Mac v Mak 2016 BCSC 1140.

[122] If the presumption of resulting trust arises, it may be rebutted by evidence of the transferor’s intention at the time of transfer to grant beneficial ownership to the recipient of the gratuitous transfer. However, if the court cannot conclude the transferor’s actual intent was to create joint tenancy on the evidence before it, this presumption will “tip the scales” in favour of the presumption of resulting trust: Schouten Estate at para. 2. If the evidence is insufficient to establish actual intent, the trial judge may rely on the presumption of resulting trust: see Fuller v. Harper, 2010 BCCA 421 at para. 42:

[42] Even though the presumption was engaged, the trial judge was obliged to examine the totality of the evidence, both direct and circumstantial, for the purpose of determining, if possible, Mr. Fuller’s actual intention at the time he executed the 2002 transfer. The trial judge could only rely on the presumption of resulting trust if the evidence was insufficient to establish Mr. Fuller’s actual intent at the time of the transfer: Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795.

[123] The types of evidence that may be reviewed by the court to determine the transfer’s intention were canvassed in Pecore. Those include:

evidence subsequent to the transfer;
documentary evidence relating to the asset;
control and use of the property;
any other legal instruments; and
tax treatment.