BC Estate Lawyer-Loan or Gift?

Loan or Gift?

Trevor Todd and Jackson Todd have over 60 years combined experience in handling contested estates, including the thorny issue of whether an advancement of funds is a loan or a gift.

 

In family environments it is often very difficult or near impossible for third parties such as a court to easily determine if that parental advancement of funds used to buy their child’s new family home was a loan or a gift.

From the parent’s viewpoint, it is usually a “gift for so long as the marriage holds together”- but if it fails, we want our money back.

These transactions are invariably not legally or at least properly  documented and are involving greater sums of monies than before and are being made more frequently, especially with the current  high priced homes.

A word of caution to the financing relatives/parents- legally document the advancement of funds as a loan or risk losing it upon a separation/divorce. I recommend that if assisting buying a home, then document the transaction with a mortgage containing a current interest rate.

Accrued interest can always be forgiven .

The Law: Loan or Gift?

In Byrne v. Byrne, 2015 BCSC 318 (B.C. S.C.), the issue was whether bi-weekly payments of $1,000 made by the claimant’s father to a joint account held by the claimant and the respondent and used to pay for household expenses constituted a gift or loan.

THE  COURT:  On the balance of probabilities and in the absence of evidence described in Kuo concerning parental loans, I am satisfied that the claimant’s parents advanced this money without expectation of repayment of principal or interest and that their current desire for repayment was more likely triggered by the separation of the parties.

( NOT LOAN)

49      As a result, I conclude that the money paid by the Byrnes to their son is not a family debt as described in s. 86 of the FLA

Mr. Justice Armstrong began his analysis at paras. 41 and 42:

[41] Payments from a parent to an adult child are generally not presumed to be gifts; they are presumed to form a resulting trust in which the parent keeps an interest in the property. However it is open to a party claiming the transfer is a gift to rebut the presumption of a resulting trust by providing evidence to that effect:Pecore v. Pecore …
[42] In Pecore, the Supreme Court of Canada addressed how the presumptions operate in the context of transfers from a parent to an adult child:

(a) the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer …

(b) When the transferor’s intent is unavailable or unpersuasive, the presumptions of advancement (a gift) and resulting trust are useful guides and will apply …

(c) gifts from parents to independent adult children are not presumed to be gifts; rather the presumption of a resulting trust applies …

(d) there may be circumstances where a transfer between a parent and an adult child was intended to be a gift and it is open to the party claiming that the transfer is a gift to rebut the presumption of resulting trust by bringing evidence to support that claim …

(e) the burden on the party claiming a gift was made is proof on a balance of probabilities …
40      At para. 43, the court noted that in Kuo v. Chu, 2009 BCCA 405 (B.C. C.A.) at para. 9, the Court of Appeal adopted the following factors from Locke v. Locke, 2000 BCSC 1300 (B.C. S.C.), as applicable to the question of whether a loan or a gift was intended:

(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.
41      The Locke factors are items of circumstantial evidence relevant to the transferor’s actual intention. They are not exhaustive and are to be weighed by the trial judge, along with all of the other evidence, in order to determine the transferor’s actual intention as a matter of fact: Beaverstock at para. 11.
42      Whether the opposing spouse was aware of the transaction is not determinative of the question of whether a loan was made: Byrne at para. 47.
43      In Beaverstock, the Court held that the trial judge had erred in law by failing to begin his analysis with the presumption of resulting trust and in failing to make a finding concerning the appellant’s actual intention when she advanced the funds to her son.
44      In Puri v. Puri, 2011 BCSC 1734 (B.C. S.C.), the wife received funds from her mother for the purchase of the family home. The issue was whether the funds were a loan or a gift. The court applied Beaverstock and held that the onus was on the husband to demonstrate the mother intended a gift: Puri at paras. 95 and 96. In the result, the court accepted the mother’s evidence that when she provided the funds to her daughter, she intended a loan. The mother had borrowed the funds from a line of credit she held with her husband and the daughter had signed a promissory note.
45      More recently in Savost’Yanova v. Chui, 2015 BCSC 516 (B.C. S.C.), where the husband’s father had advanced $60,000 to assist with the purchase of the matrimonial home, Mr. Justice Weatherill held that in determining the intent of the person of 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: Chui at para. 77.
46      At para. 75, the court adopted the following summary of the applicable legal principles:
[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.
47      The respondent relies upon a line of authorities that holds that where a parent advances funds to a child for the purchase or maintenance of the family home, there is a rebuttable presumption that the funds are a gift to both the child and his or her spouse: Cabezas v. Maxim, 2014 BCSC 767 (B.C. S.C.) (appeal pending); B. (J.) v. C. (S.), 2015 BCSC 2136 (B.C. S.C.); C. (H.) v. C. (H.P.), 2014 BCSC 1775 (B.C. S.C.); and Madruga v. Madruga, 2015 BCSC 1605 (B.C. S.C.).
48      In Cabezas, the issue was whether funds paid by the respondent’s parents toward the mortgage on the family home were a gift or an inheritance to the respondent, so that any property derived from them might be excluded property under s. 85(1) of the FLA. At para.
49, Chief Justice Hinkson cited Wiens v. Wiens [1991 CarswellBC 511 (B.C. S.C.)] for the principle that:
… where the parents of a married child advance money to facilitate the purchase or the improvement of the matrimonial home, and the spouses later do not agree as to the nature of that advancement, the court must presume that the money advanced is a gift to the child which on a presumption of advancement becomes a gift to the wife.
49      After considering the Locke factors, the court concluded that when the funds were advanced, the respondent’s mother intended them as a gift for the benefit of both the respondent and the claimant: Cabezas at para. 67.
50      At para. 68, Chief Justice Hinkson stated:
[68] Had Mrs. Maxim’s intentions been unclear, I would nonetheless have found that, in keeping with the statement of Harvey J. in Wiens, the funds used to pay off the mortgage on the Madeira Park Property were provided by the respondent’s parents as a gift to avoid the foreclosure of the property, resulting in a presumption of advancement to the claimant. This presumption of advancement is limited in scope, and does not apply to all gifts or inheritances received by a spouse from his or her parents. Generally, such gifts are excluded property under s. 85(1)(b) of the Act, as was the Camaro received by the respondent from his father in this case. However, where a parent chooses to provide funds to a child for the purchase or maintenance of the family residence (to use the language of the Act), those funds are presumed to be a gift to both the child and his or her spouse. Absent evidence rebutting that presumption, the funds and any proceeds derived from them are family property under s. 84 of the Act. None of the evidence presented is capable, in my view, of rebutting that presumption.
51      In cases dealing with issues of excluded property under s. 85 of the FLA, judges of this Court have followed and applied Cabezas in B. (J.) v. C. (S.) at para. 99, C. (H.) v. C. (H.P.) at paras. 69 to 71, and Madruga v. Madruga at paras. 16 to 18.
52      It does not appear that Beaverstock was brought to the attention of the court in Cabezas or the other authorities cited by the respondent.
53      On the case law cited on this application, I conclude that the governing authority is the judgment of the Court of Appeal in Beaverstock. I must determine whether the actual intention of the claimant’s parents was to make a gift or a loan. Because the advance was gratuitous, the respondent bears the onus of demonstrating that the transferors intended a gift, “since equity presumes bargains, not gifts”. In determining the transferors’ intention, the court must take into account the Locke factors, along with all of the other evidence

Breach of Trust: Are You Personally Liable as a Trustee?

Breach of Trust

A breach of trust occurs when the trustee’s duty to act precisely within the terms of his obligations is not fulfilled. If he fails in this, it is of no significance that he or she had no intention of departing from his duty. Trustees have been found in various conditions of blameworthiness — fraudulent, wilfully neglectful, slovenly, and incompetent — but none of these elements needs to be proven in order to establish a breach of trust. If the letter of the trustee’s obligation has not been adhered to for whatever reason, he is liable to his beneficiaries for any loss that has occurred as a result. (Waters On Trusts). The question in law then becomes: is the trustee personally liable in damages for the breach of trust, innocent or otherwise?

In Winslaw v Richter and Munro Crawford 1989 BCJ 1659 the court dealt with the situation of a lawyer  who paid out excessive funds to a wrong party and was sued for that breach of trust:
33      This view, I believe, conforms to that expressed by Professor Waters in Law of Trusts in Canada, 2nd ed. (1984), at p. 401, where, after describing the two different types of constructive trustee under discussion here, he writes:
Both are constructive trustees in the generic sense, and the knowledge that each must have before liability can attach to him is the same. It is what he actually knows or ought as an honest, reasonable man to have known. Though he does not have actual or imputed knowledge (and such knowledge would, of course, bind him), an honest, reasonable man would make enquiries if there are suspicious circumstances surrounding property which is proffered to him, whether or not in the course of trade.
34      I conclude that in Canada honest negligence will not serve to render a solicitor, who acts as agent of a trustee, liable as a constructive trustee if, by reason thereof, he unwittingly assists in a breach of trust, but wilful blindness or actual knowledge will.

The trustee is obliged to follow the terms of the trust.

 

The principle is so basic that it does not need authority; however, it is described succinctly in Merrill Petroleum Ltd. v. Seaboard Oil Co. (1957), 22 W.W.R. 529 at 557 (Alta. S.C):

…While it is also true that there are certain general obligations imposed by law on any trustee (e.g.. the duty not to profit from the trust at the expense of the beneficiaries) the more specific obligations and duties of a trustee are set forth in the instrument creating the trust – in other words, except for those general duties imposed by law on all trustees, the terms of a trust are to be found within the four comers of the trust instrument…. In other words, the first duty of this trustee (as of all trustees) was to follow implicitly the terms of the trust instrument, and, secondly, to observe those general principles of trustee law which did not run counter to the express terms of the trust.

Gratuitous Land Transfer is a Trust

Gratuitous Land Transfer Is a Trust

McKendry v McKendry 2015 BCSC 2433 dealt with a very common fact pattern in estate disputes- where a parent puts the property in joint names with one child and excludes the other children, thus disinheriting them.

In McKendy the transfer was held to be a trust and the property thus was an estate asset that was subsequently varied in a wills variation action at the same time and each child received an equal share.

It is significant that both the resulting trust claim and the wills variation claims were heard at the same time by the court. Many defence counsel have long argued that this should not occur, but it frequently does and I submit it is entirely appropriate.

The Law of Resulting Trusts

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:  . . . 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.

[113]     In Fuller v. Harper, 2010 BCCA 421, D. Smith J.A. elaborated on how the presumption of resulting trust should be applied to a gratuitous transfer of real property.  After reviewing Pecore, she wrote (at para. 47):

[47]      The effect of the presumption only becomes evident after all the evidence, both direct and circumstantial, on the surrounding circumstances in which the transfer was made, has been weighed. Only if the trial judge is unable to reach a conclusion about the transferor’s actual intention at the time of the transfer, will the presumption be applied to tip the scales in favour of the transferor or his estate: Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 3d ed. (Markham, ON: LexisNexis Canada, 2009) at page 159, § 4.60.

[114]     D. Smith J.A. also discussed the concept of the right of survivorship that is inherent in the creation of a joint tenancy, and wrote (at para. 53):

[53]      . . . [T]he legal and equitable title (the right of survivorship) of a joint tenancy vests at the time the joint tenancy is created.  Therefore, 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” (Pecore at para. 49 referring to Ferguson J.A.’s comments in Reid, Re (1921), 64 D.L.R. 598, 50 O.L.R. 595 (Ont. C.A.) at 608).

[115]     I note that Madam Justice Smith’s comments in this paragraph assume sufficient proof that a gift has been made.

[116]     The Court of Appeal again discussed these matters, also in the context of a joint tenancy in land, in Bergen v. Bergen, 2013 BCCA 492.

[117]     Newbury J.A. rejected the proposition advanced by counsel for the appellant (the defendant Robert Bergen) that, once a right of survivorship is conferred, a “complete and perfect” inter vivos gift of the transferred property itself, including the beneficial interest therein, vests immediately in the transferee:  Bergen, at para. 36.  She confirmed (citing Pecore and Kerr v. Baranow, 2011 SCC 10) that the actual intention of the transferor is the key factor:  Bergen, at para. 38.  Newbury J.A. contrasted a joint bank account with a joint tenancy in land, and wrote (at paras. 40-42):

[40]      Where a joint tenancy in land is concerned, on the other hand, 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” (and counsel for Robert contends, of the property itself).  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.  (Under s. 18(3) of the Property Law Act, R.S.B.C. 1996, c. 377, a joint tenant may sever the joint tenancy—and thus the “survivorship” – by transferring the property to himself and need not even notify the co-owner.  See generally Law Reform Cm’n., supra, at 5-9 and 33-44; and A.J. McClean, “Severance of Joint Tenancies” (1979) 57 Can. B. Rev. 1.)  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. . . .

[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 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.

[118]     These paragraphs from Bergen confirm that the mere fact that the transferor has transferred title to real property into the names of the transferor and transferee as joint tenants tells us nothing about the transferor’s actual intention.  The transferee must still prove that, at the time of the transfer, the transferor intended to make a gift.  Otherwise, there is a resulting trust.

Fiduciary Cannot Avoid Liability By Delegating

The Sas Law Society reasons for judgment re unprofessional solicitor conduct, repeated a basic rule of trusts-( 2015 LSBC 19, April 20,2015  at paragraph 220)- a trustee cannot avoid liability by using the defence of having delegated core authority  to an employee.

The exception would only be if the employee was fraudulent where it couldn’t be reasonably for-seen or determined by the employer using proper Supervision.

The judgment cited as authority for the proposition a one line reference at paragraph 140 of  Rowland v. Vancouver College Ltd., 2001 BCCA 527  at paragraph  140 that states” Nor is delegation of core authority permissible under trust law.

Equity Protects Unpaid Vendor’s Liens

Unpaid Vendor's Liens

Unpaid Vendor’s Liens

Hall v Hall 2015 BCCA 96 reviews the law of equitable vendor’s liens, which is similar to the law of resulting trusts, in that if you receive a significant benefit or gift, equity intervenes to scrutinize the transaction, based on the presumption in equity that one should pay for one’s benefits.

 

A great number of cases on the topic are incorporated into Chu v Chen 2004 BCCA 209

 

In Chu v. Chen, 2004 BCCA 209, Southin J.A., at paras. 46-66, traced and analyzed the law of equitable vendor’s liens. She quoted at length from Storeys Equity Jurisprudence, which she described as one of the great legal texts of all time. As set out in that text, the origin of the doctrine can, with high probability, be traced back to Roman law, from which it was imported into the equity jurisprudence of England. The leading English authorities begin with Hearn v. Botelers (1604) Cary 25, 21 E.R. 14 and include subsequent decisions such as Hughes v. Kearney (1803), 1 Sch. & Lef 132, Mackreth v. Symmons (1808), 15 Ves. Jun 329, 33 E.R. 778, Rice v. Rice, 2 Drewry 73, 61 E.R. 646, In re Albert Life Assur. Co. (1870), L.R. 11 Eq. 164at 178; Lysaght v. Edwards (1876), 2 Ch.D. 499, at 506, 45 L.J. Ch. 554; Kettlewell v. Watson (1882) 21 Ch.D. 685, 51 L.J. Ch. 281, at 283, aff’d 26 Ch.D. 501, 53 L.J. Ch. 717, and Allen v. Inland Revenue Commrs., [1914] 2 K.B. 327, 83 L.J.K.B. 649.

 

29      The foundation of the equitable vendor’s lien is that a person who has received the estate of another ought not, in conscience as between them, be allowed to keep it and not to pay the full consideration. The equitable lien secures the sum for which the property was sold rather than capturing any interest in the property. Unlike the situation of a resulting trust, the lien holder does not receive the benefit of any appreciation in the value of the property after it is sold.

 

From Chu v Chen aforesaid, Southin stated: 47] The short point is that yes, a vendor’s lien arises by operation of law, but the ultimate issue is whether in all the circumstances the Court will exercise its equitable jurisdiction and enforce such a lien: Freeborn et al v. Goodman, 6 D.L.R. (3d) 384 (S.C.C. 1969) at 409-410.

 

 

What Evidence Courts Examine to Determine Gift or Not

What Evidence Courts Examine to Determine Gift or Not

Schouten Estate v Swagerman-Schouten 2014 BCSC 2320 examines the range of evidence and its significance when attempting to determine the intention of the donor when he transferred title to his farm to himself and one of his 6 children as joint tenants in 1995.

In the will of the deceased 14 years later, he showed an intention to gift the same property to the same child.

The Court reviewed the type of evidence it will consider when determining whether the defendant has rebutted the presumption that he held the property as a resulting trustee for the estate:

5. “What type of evidence may be considered to determine the transferor’s intention? Once the court has determined the proper presumption to apply, all of the relevant evidence should be weighed, depending on the facts of the case (Pecore at para. 55). The type of evidence that may be considered was discussed in Pecore at paras. 56-70. The Supreme Court of Canada at para. 59 expanded the traditional rule that evidence of intention ought to be contemporaneous with the transaction and said that evidence of intention subsequent to a transfer that is relevant to intention at the time of transfer should be assessed for reliability and weighed. Generally, the types of evidence germane to ascertaining intention include declarations and conduct contemporaneous with the transfer, evidence subsequent to the transfer, the documentary record as it relates to the asset, subsequent control and use of the property, other legal instruments, and tax treatment (Pecore at paras. 56-70; Doucette v. Doucette Estate, 2009 BCCA 393 (B.C. C.A.) at paras. 56-64; Fuller at paras. 48-50, 66-67; Chung at para. 49; Anderson v. Anderson, 2010 BCSC 911 (B.C. S.C.) at para. 161 [Anderson]). The grant of a power of attorney at the same time as a grant of joint ownership may indicate that the transferor intended to give more than management control of property (Pecore at para. 67). A Property Transfer Tax Return filed in relation to a transfer is a factor to consider in relation to intention and may suggest the intention of gift if the presumption of advancement was the applicable presumption at the time of transfer (Chung at paras. 52-54). Evidence of intention that arises subsequent to a transfer must be relevant to the intention of the transferor at the time of transfer (Pecore at para. 59; Turner v. Turner, 2010 BCSC 49 (B.C. S.C.) at para. 57). Continuing control and use of property after the transfer by the transferor may not be conclusive because it may not be inconsistent with a gift (Pecore at paras. 62-66; Fuller at paras. 66-67; Zukanovic v. Malkoc Estate, 2011 BCSC 625 (B.C. S.C.) at paras. 134-135).

6      Care must be taken to guard against after the fact evidence that may be self-serving (Pecore at para. 59; Fuller at para. 49; Chung at para. 51; Anderson at para. 164). The credibility of a witness should be gauged by its harmony with the preponderance of probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions (Faryna v. Chorny (1951), [1952] 2 D.L.R. 354 (B.C. C.A.), at 357, Aujla at para. 36). Care must also be taken not to treat any single type of evidence as determinative but to weigh all of the evidence (Pecore at paras. 55, 68-69). D. Smith J.A. for the court in Fuller at para. 49 put it in a nutshell: “In short, the court must consider if the transferor had any rational purpose for the transfer other than a gift”.

Credibility in Gift vs Resulting Trust Actions

credibility

Credibility in Gift vs Resulting Trust Actions

One of the most common types of estate litigation is the conflicting stories of one party testifying that the asset was gifted to him or her, while others in the family argue resulting trust, and the Judge must decide who to believe.

Examples of such findings and determination of the case are found in the following examples:

It is clear that many cases where a transferee seeks to persuade a court that a gratuitous transfer was intended to be a gift turn on questions of credibility;

. Madsen Estate v. Saylor, 2007 SCC 18at para. 18,

Aujla v. Kaila, 2010 BCSC 1739at paras. 42, 62, 104, aff’d 2013 BCCA 158;

Modonese v. Delac Estate, 2011 BCSC 82at para. 69, aff’d 2011 BCCA 501;

Bakken Estate v. Bakken, 2014 BCSC 1540at paras. 33-35.

Resulting Trust Presumption Applies to Real Property

Presumtion and ignoranceResulting Trust Presumption

 

The decision Schouten Estate v Swagerman- Schouten  2014 BCSC 2320 confirmed the case law that the law relating to resulting trust presumption law also apply to real property (land).

 

There had been some issue in law at one time due to the provisions of the Land Title Act.

 

3) in gratuitous transfer situations, the actual intention of the transferor is the governing consideration (Pecore at paras. 43-44; Kerr v. Baranow, 2011 SCC 10 at para. 18; Bergen at para. 38). In the case of an interest in land as joint tenants, it does not follow as a matter of law that an immediate irrevocable gift was given: the transferee must still rebut the presumption of resulting trust by bringing evidence of intention (Bergen at para. 22).

[4]             It appears settled now in British Columbia that the equitable presumptions established in Pecore apply to real property transfers (Fuller at paras. 41-45; Chung v. La, 2011 BCSC 1547, at paras. 45-46, 55 [Chung]; Aujla v. Kaila, 2010 BCSC 1739 at paras. 31-37 [Aujla]; Modonese v. Delac Estate, 2011 BCSC 82 at paras. 141-142; Suen v. Suen, 2013 BCCA 313 at paras. 35-38). Thus, the presumption of title in s. 23(2) of the Land Title Act, R.S.B.C. 1996, c. 250 as conclusive proof of title may be displaced by equitable presumptions that take into account the equitable interests between the parties in certain circumstances (Chung at para. 47; Aujla at para. 32). This is so even though title to the property in question may have been settled before 2007 when Pecore was decided (Kuo v. Kuo, 2014 BCSC 519 at paras. 225-227).

Transferor’s Intention Is Key to “Right of Survivorship”

Intention

The Transferor’s Intention when the “gift” in dispute was created is the key indicator as to whether a right of survivorship is valid or not as 2013 BCCA 492 Bergen v. Bergen reviews leading case law confirms.

the case involved a dispute between respondents and their son (‘R’) regarding proceeds of sale of property purchased by respondents for their retirement home.

The son R constructed a house on the property (for which the parents paid) and expected they intended for him to own it. At one point, they made him a one-third owner as joint tenant, but later severed the joint tenancy.

The trial judge accepted the evidence of the mother (the father having died by the time of trial) that the parents had put the property into joint tenancy thinking it would become R ‘s “eventually”, but that they had not intended to give him a beneficial interest in the property during their lifetimes. The property was sold pursuant to court order prior to trial.

Trial judge found that the parents have not intended to “gift ” the property to R and thus that the presumption of resulting trust had not been rebutted. The Court did not refer to Pecore v. Pecore 2007 SCC17.

The  BC appeal Court dismissed the appeal and found that the “gift” was not valid

CA did not agree with R ‘s submission that once the right of survivorship  is conferred (through the setting up of a joint account, or placing a party of title as a joint tenant) a “complete and perfect” inter vivos gift has been made both with respect to the legal title as well as immediate beneficial interest.

Leading authorities, including Pecore, indicate that the transferor’s intention is the key factor. Discussion of right of survivorship  in respect of bank accounts, contrasted with joint tenancy in personalty or realty. In the latter context, any joint tenant may sever the joint tenancy at any time – a fact that undermined R ‘s argument that as a matter of law, a joint tenant receives a “full and perfect” inter vivos gift of the survivorship as well as the property itself. When severance occurs, nothing remains of the right of survivorship.

The presumption of resulting trust not having been rebutted, the respondents had not made an immediate gift of the beneficial interest in the property itself and the mother was entitled to the entire proceeds of sale.

The trial judge had not erred in fact in finding that no gift was intended.

The Appeal Court determined that Pecore SCC would not have changed the decision of the trial Judge despite the fact that it was not argued at the trial level and quoted inter alia:

7]       It is the third major holding in Pecore, however, with which we are concerned in the case at bar. Under the heading “How Should Courts Treat Survivorship in the Context of a Joint Account?”, Rothstein J. considered the operation of the presumption of resulting trust in the context of joint bank accounts. He began as follows:

In cases where the transferor’s proven intention in opening the joint account was to gift withdrawal rights to the transferee during his or her lifetime (regardless of whether or not the transferee chose to exercise that right) and also to gift the balance of the account to the transferee alone on his or her death through survivorship, courts have had no difficulty finding that the presumption of a resulting trust has been rebutted and the transferee alone is entitled to the balance of the account on the transferor’s death.

In certain cases, however, courts have found that the transferor gratuitously placed his or her assets into a joint account with the transferee with the intention of retaining exclusive control of the account until his or her death, at which time the transferee alone would take the balance through survivorship. …

There may be a number of reasons why an individual would gratuitously transfer assets into a joint account having this intention. A typical reason is that the transferor wishes to have the assistance of the transferee with the management of his or her financial affairs, often because the transferor is ageing or disabled. At the same time, the transferor may wish to avoid probate fees and/or make after-death disposition to the transferee less cumbersome and time consuming. [At paras. 45-7.]

Executor Ordered to Repay Monies

Executor Ordered to Repay Monies Back to Estate

Executor Ordered to Repay Monies Back to Estate Paid Out Before Expiration of 6 Month Limitation

Stevens v. Wood Estate (Re), 2013 BCSC 2380. Until six months have passed from the issuance of probate of a will, s. 12 of the Wills Variation Act, R.S.B.C. 1996, c. 490 (the “WVA”) prohibits, absent consent or court order, the distribution of any portion of an estate to its beneficiaries.

The question for determination on this application is the appropriate remedy when such a distribution has been made.

However, the case of Etches v. Stephens (1994), 99 B.C.L.R. (2d) 171 (S.C.) [Etches] assists with determining the purpose of s. 12(1) of the WVA.  Etches deals with the precursor to what is now s. 3(1) of the WVA which requires that an action under this Act must be brought within six months from the date of the issue or resealing of probate.  The court stated that this provision must be read alongside the precursor to what is now s. 12(1) which has the same time-limited language.  When the two sections are read together, the reason for the limits become clear (see paras. 9-12, and 15):

  1. The “main aim” of the WVA is “adequate, just and equitable provision for the spouses and children of testators” when a will does not provide for this: see Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807 at 815.  As such, it must allow those falling within these groups to apply to the court to have the will varied.
  2. If those affected were allowed to apply to court for a variation without any time limit on the action, then there would be the danger that the distribution of the assets would remain uncertain for a prolonged period of time.  Thus there is a limitation period of six months on the action.
  3. On the other hand, if there was not a rule against distributing the assets before the limitation period to challenge the will was expired, then there would be the danger that a legitimate action could be started but the assets would already have been distributed.  This would deprive those affected of an effective remedy and potentially result in an injustice.
  4. Furthermore, without the restriction placed on the administrator of the estate by s. 12(1), it would be possible for that administrator to attempt to thwart a legitimate claim by the dependents under s. 2 of the Act by distributing the assets before an action is brought.

[29]         The purpose of s. 12(1) is to keep the estate intact to ensure that a successful plaintiff is able to recover that to which they may become entitled. A breach of this statutory provision is a serious matter.  It goes to the heart of the legislative scheme.

[30]         Until the six-month limitation period has passed, a beneficiary’s entitlement to a share in the estate is not absolute. It is subject to variation if a successful action is brought under the WVA. Unless consents are obtained, the beneficiaries are not entitled to receive and benefit from their share of the estate until the WVA claims have been resolved or a court order has been obtained.

[31]         Similarly the plaintiff in a WVA action is entitled to have the assets in the estate preserved pending the outcome of their claim. They should not be put in the position of having to pursue after the executor or other beneficiaries to reap the benefits of a successful action.

[32]         Where there is a breach of the statutory provision and funds are distributed contrary to the legislation, the remedy of a claim against the executor or other beneficiaries, after the completion of the WVA action, does not sufficiently protect the successful WVA claimant. Those parties may, by then, be without assets or have taken steps that make it difficult to locate their assets.

[33]         It is the party who has breached the provisions of the statue who must make matters right. This application is not the forum to determine the strength or otherwise of a WVA claim. The WVA claimant is entitled to have the estate reconstituted to its state prior to the wrongful distribution.

[34]         I find that the appropriate remedy for a breach of s. 12 of the WVA is for the party who has breached the provisions to either repay the estate or to post security in the entire amount which has been wrongfully disbursed.

[35]         The Executrix in this matter must make matters right. She must, within 30 days of the date of these reasons, repay the estate or post security in the amount of $202,000, being the amount which she has improperly advanced to the beneficiaries. If the security is not posted within 30 days the plaintiff will be at liberty to seek further relief.