Trust Declaration Severs Joint Tenancy

Til Death Do Us PartPublic Trustee v Mee ( 1972) 2 WWR 424, is a BC Court of Appeal decision that held that an unregistered declaration of trust signed by one parent in trust for the infant child born between a former husband and wife, had the effect of severing the joint tenancy into a tenancy in common.

One spouse then died and the other who did not sign the trust declaration, was denied right of survivorship of the joint tenancy as it was severed by the trust declaration.

The appeal court held that a declaration of trust had the same binding effect as a transfer to a trustee and could as effectively sever a joint tenancy as a transfer made to a trustee.

The trust created by the father in the case was completely constituted and was binding on his heirs, executors, administrators and assigns. It followed that a severance of the joint tenancy was effected.

The Supreme Court of Canada has reiterated a relevant portion of the law as to the severance of joint tenancies in Stonehouse v. Attorney General of British Columbia, [1962] S.C.R. 103, 37 W.W.R. 62, 31 D.L.R. (2d) 118, a decision dealing with an unregistered deed by one joint tenant to her daughter, wherein Ritchie J. in giving the judgment of the Court said [p. 107]:

 

It is, therefore, apparent that the deed here in question operated as an alienation of the interest of Mrs. Stonehouse, and the very fact of her interest being transferred to a stranger of itself destroyed the unity of title without which a joint tenancy cannot exist at common law.

 

The effect at common law of a conveyance by one joint tenant to a stranger in title is accurately stated in Cheshire’s Modern Real Property, 8th ed., at p. 308, in the following terms:

 

… it has long been the law that one joint tenant can alienate his share to a stranger. The effect of such alienation is to convert the joint tenancy into a tenancy in common, since the alienee and the remaining tenant or tenants hold by virtue of different title and not under that one common title which is essential to the existence of a joint tenancy.

 

The following passage from the decision of Vice-Chancellor Sir Page Wood in Williams v. Hensman (1861), 1 J. & H. 546 at 557, 70 E.R. 862, is to the same effect. He there says:

 

A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested in operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi.

 

There is nothing in the Land Registry Act which changes the effect of the common law in this regard as between the two joint tenants in the present case, and it follows that because the unregistered deed was operative against the share of Mrs. Stonehouse it had the effect of severing the joint tenancy. As Davey J.A. has said in the course of his decision in the Court of Appeal: ‘It is the binding effect upon himself of an owner’s dealings with his own property that effects a severance of the joint tenancy.’

 

9        The sentence from the judgment of Davey J.A., as he then was, in this Court [(1960), 33 W.W.R. 625, 26 D.L.R. (2d) 391], quoted and approved above by Ritchie J., was preceded by the following at p. 629:

 

One owner may destroy the joint tenancy at will independently of the co-owner, who is affected only incidentally through the operation of law by the owner’s dealings with his own interest: Williams v. Hensman [supra]; 27 Halsbury, 2nd ed., p. 663, note (m).

 

10        I fail to see any distinction in a case where a joint tenant alienated his interest in a property direct to the person he wishes to benefit from one where he alienated it to a trustee to hold and deal with for the benefit or interest of that person. If the first be inconsistent with the maintenance of the joint tenancy and destroys one basis upon which that title can only exist, then, in my respectful opinion, so also is and does the second. Both would effect a severance of the tenancy so long as the owner of the interest binds himself by his dealings and therein, in my opinion, lies the main factor as to whether or not a severance is effected, as indicated in the quotations above. Of course, equity will not enforce an imperfect voluntary trust but it will enforce a voluntary one if it is “completely constituted”. A trust can be so “completely constituted” when a settlor declares himself to be a trustee: vide Snell’s Principles of Equity, 26th ed., pp. 129-132, 134. Also the law is clear that a settlor cannot revoke a completely constituted trust unless a power of revocation is reserved, unless, of course, the settlement was obtained by fraud, undue influence, fundamental mistake or the like. It is my view that the trust set up by the father by the declaration of trust (although due to inept drafting it contains terms difficult of construction) effected a completely constituted trust which the father obviously considered, and specifically expressed, to be binding on him, his “heirs, executors, administrators and assigns”. It was, therefore, a binding trust enforceable against him and his successors. It follows that, as those dealings with his undivided one-half interest were completely inconsistent with the maintenance of his joint tenancy with his former wife, a severance of that tenancy was effected.

 

11        I come now to the short reason which the learned Judge gave for holding that the declaration of trust did not effect severance. As indicated, it was that the infant could not compel the father to convey and transfer to him the undivided one-half interest. I agree that that is so, but only because the terms of the trust do not entitle the infant to such title, at least during his minority. The situation would be the same had the interest been conveyed to a trustee  — the infant could not have compelled a transfer of title. Accordingly, with deference, I think the reason given was essentially irrelevant. What is relevant is whether the father had bound himself by the trust instrument to carry out its terms, and I have no doubt that he could have been compelled so to do had he lived, and his successors in the trust can be compelled so to do in the future. Because the terms of a trust have difficulties in interpretation, as this trust has, the trust is not therefor invalid or any less binding on the settlor.

 

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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