S.46 WESA: When Gifts Cannot Take Effect

S.46 WESA: When Gifts Cannot Take Effect

S.46 WESA applied to the following simple fact pattern that I recently met:

A will left everything to my children in equal shares, share and share alike. One child had predeceased the will-maker, leaving two children.

Applying the provisions of S46 WESA effected that the predeceased child’s share went to his two children, ie the grandchildren of the deceased.

S.46 WESA states:

46.(1) if a gift in a will cannot take effect for any reason, including because a beneficiary dies before the will-maker, the property that is the subject of the gift must, subject to a contrary intention appearing in the will be distributed according to the following priorities:

A) to the alternative beneficiary of the gift, if any, named or described by the will-maker, whether the gift fails for a reason specifically contemplated by the will-maker or for any other reason;

B) if the beneficiary was the brother, sister or a descendant of the will-maker, to their descendants, determined at the date of the will-maker’s death, in accordance with section 42(4) ( meaning of particular words in a will)

C) to the surviving residuary beneficiaries, if any, named in the will, in proportion to their interests.

(2) If a gift cannot take effect because a beneficiary dies before the will-maker, subsection 1 applies whether the beneficiary’s death occurs before or after the will is made.

Terezakis Estate 2018 BCSC 805 discusses section 46 of WESA relating to an interpretation of the residue of a will that dealt with its interpretation with respect to two of five children who had predeceased the will maker.

The two children who had predeceased the will maker also left children.

The residue clause of the will was confusing as to whether it was the intention of the will maker to leave the share of any child who might have predeceased the testator to the children of the predeceased children ie to the grandchildren of the deceased.

The court applied the armchair rule of construction that requires the court to put itself in the position of the testator at the time when the will was made and to construe the language from the vantage point in order to determine the actual or subjective intent of the testator –Re Burke (1960) O.R. 26 (C.A.).

The court noted that the will information sheet reflected that the testator presumed wishes to ensure that her grandchildren receive a share of the residue of her estate in the event that any of her children predeceased her. This was the expressed intention of the testator at the time the will was drafted, and the court applying the rule armchair rule, stated that it was the best evidence upon which the will should be interpreted by the court.

The court referred to both sections 42 and 46 of WESA.

Section 42 WESA states:

42. This section is subject to a contrary intention appearing in a will.

42(4)  gifts of property to a class of persons that:

a) is described as a will makers issue or descendants, or by a similar word and
b) b) encompasses more than one generation of beneficiaries, must be distributed as if it were part of an intestate estate to be distributed to descendants.

The court was also mindful of the presumption that a testator does not intend to create an intestacy- Milwarde-Yates v Sipila 2009 BCSC 277 at para. 49.

S.46 WESA states:

1) if gifts in a will cannot take effect for any reason, including, because of beneficiary dies before the will maker, the property that is subject of the gifts must, subject to a contrary intention appearing in the will, be distributed to the following priorities:

a) to the alternative beneficiary of the gifts, if any, named are described by the will maker, whether the gifts fail for a reason specifically contemplated by the will maker, or for any other reason;

b) if the beneficiary was the brother, sister, or a descendent of the will maker, to their descendants, determined that the date of the will maker’s death, in accordance with section 42(4) WESA (that refers to the particular words in a will);

S 46(2) states:

2) if gifts cannot take effect because of beneficiary dies before the will maker, subsection(1) applies whether the beneficiary’s death occurs before or after the will is made.

The court accordingly ordered that the distribution of the estate be made equally among her children and grandchildren, being the grandchildren of the predeceased children.

Resulting Trust Applies to Joint Tenancy Survivorship

Bergen v Bergen 2013 BCCA 492 at paragraph 42 states that when a property is purchased by one party, but held in joint tenancy, there is a presumption that the transferor intended to retain the entire beneficial interest, including the right of survivorship, unless there is evidence to the contrary.

Either joint tenant in land is at liberty to sever the joint tenancy at any time, thus undermining the notion that as a matter of law, a joint tenant receives of full and perfect inter vivos gift of the survivorship.

Severance, which occurs automatically upon the destruction of the four unities, results that each owner becomes entitled to a distinct share in the land, rather than an undivided interest in the whole.

For example, a joint tenant may sever the joint tenancy, and thus the survivorship, by transferring the property to himself or herself and need not even notify the co-owner.

In Simcoff v Simcoff 2009 MBCA 80 , a case involving land, stated the fact that a complete a gift included a writer 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, nothing remains of the right of survivorship.

Bergen went on to state that 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 transfer retakes is a joint tenant or a tenant in common.

As stated in Fuller v . Fuller  2010 BCCA 421 the gift of a joint interest in real property is in inter vivos rather than a testamentary gift and cannot be retracted by the donor is a “complete and perfect” inter vivos gift. (Paragraph 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.

At paragraph 53 of the leading case on resulting trust Pecorev Pecore 2007 SCC 17 , the court stated, of course, the presumption of a resulting trust means that it will fall to the surviving joint account holder to prove that the transfer or intended to gift the right of survivorship to what it ever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will.

Loan or Gift Amongst Families

Loan or Gift Amongst Families - Disinherited

Zellweger v Zellweger 2018 BCSC 1227 discussed inter alia the criteria for determining if monies advanced within the family context are a loan or a gift.

Zellweger cited Byrne v Byrne 2015 BCSC 318 at para. 43 in which the court sets out the relevant factors for determining whether funds advanced in a family law context are loans or gifts:

“These were addressed in Kuo v Chu 2009 BCCA 405 at para. 9 , where the Court of Appeal adopted the factors described in Locke v Locke 2000 BCSC 1300 as applicable to the question of whether alone or gift was intended:

• Whether there were any contemporaneous documents evidencing a loan;
• whether the manner for repayment is specified;
• whether there is security held for the loan;
• whether there are advances to one child and not others, or advances of on equal amounts to various children;
• whether there has been any demand for payment before the separation of the parties;
• whether there has been any partial repayment; and, whether there was any expectation, or likelihood of repayment.

After reviewing the facts of the case, the judge in the Zellweger decision held that the funds were properly characterized as loans.

In Berry v. Page (1989) 38 BCLR (2d) 244 BCCA the appeal court discussed the importance of properly characterizing the nature of alone in order to determine when the limitation period under the previous Limitation Act begins to run:

“the characterization of the loan as either a contingent loan or demand loan determines whether or not the action is statute barred under the Limitation act. It is well-established of the cause of action accrues, and the statute of limitation runs, from the earliest time at which repayment can be required. For demand loan, the statute of limitations runs as of the date of the advancement of the funds, and not from the date of the demand. No demand is necessary in order for the cause of action to arise.”

S.46 WESA: Priorities of Distribution When Gifts Fail

S.46 WESA: Priorities of Distribution When Gifts Fail | Disinherited

Terezakis Estate 2018 BCSC 805 discusses section 46 of WESA relating to an interpretation of the residue of a will that dealt with its interpretation with respect to two of five children who had predeceased the will maker.

The two children who had predeceased the will maker also left children.

The residue clause of the will was confusing as to whether it was the intention of the will maker to leave the share of any child who might have predeceased the testator to the children of the predeceased children ie to the grandchildren of the deceased.

The court applied the armchair rule of construction that requires the court to put itself in the position of the testator at the time when the will was made and to construe the language from the vantage point in order to determine the actual or subjective intent of the testator –Re Burke (1960) O.R. 26 (C.A.).

The court noted that the will information sheet reflected that the testator presumed wishes to ensure that her grandchildren receive a share of the residue of her estate in the event that any of her children predeceased her. This was the expressed intention of the testator at the time the will was drafted, and the court applying the rule armchair rule, stated that it was the best evidence upon which the will should be interpreted by the court.

The court referred to both sections 42 and 46 of WESA.

Section 42 WESA states:

42. This section is subject to a contrary intention appearing in a will.

42(4)  gifts of property to a class of persons that:

a) is described as a will makers issue or descendants, or by a similar word and
b) b) encompasses more than one generation of beneficiaries, must be distributed as if it were part of an intestate estate to be distributed to descendants.

The court was also mindful of the presumption that a testator does not intend to create an intestacy- Milwarde-Yates v Sipila 2009 BCSC 277 at para. 49.

S.46 WESA states:

1) if gifts in a will cannot take effect for any reason, including, because of beneficiary dies before the will maker, the property that is subject of the gifts must, subject to a contrary intention appearing in the will, be distributed to the following priorities:

a) to the alternative beneficiary of the gifts, if any, named are described by the will maker, whether the gifts fail for a reason specifically contemplated by the will maker, or for any other reason;

b) if the beneficiary was the brother, sister, or a descendent of the will maker, to their descendants, determined that the date of the will maker’s death, in accordance with section 42(4) WESA (that refers to the particular words in a will);

S 46(2) states:

2) if gifts cannot take effect because of beneficiary dies before the will maker, subsection(1) applies whether the beneficiary’s death occurs before or after the will is made.

The court accordingly ordered that the distribution of the estate be made equally among her children and grandchildren, being the grandchildren of the predeceased children.

No Ademption of Gift in Will

No Ademption of Gift in Will | Disinherited Vancouver Estate Litigation

Re Wood Estate 2004 BCCA 556 at para. 1 describes the doctrine of ademption as

“ a rule of the law of wills, whereby a specific bequests “adeems” or fails, if at the testator’s death the specified property is not found among his or her assets – either because the testator has parted with it, or because the property has ceased to conform with to the description of it in the will, or because the property has been wholly or partially destroyed — the doctrine applies as a matter of law, irrespective of the testator’s intentions in the matter, although his or her intentions are clearly relevant to the anterior question of whether the gift is in question is a specific legacy (and therefore subject to ademption or a general one (not subject to ademption). The doctrine is also subject to the qualification that even if the gift in question is a specific legacy, it may be saved in some circumstances of the property has changed “ in name or form only “and still forms part of the testator’s property of the date of death ”.

A specific legacy was defined in Re Wood as being of something or interest, forming part of the testator’s estate, identifiable by a sufficient description is separated from the general mass of the estate in favor of a particular legatee.

A general legacy was described as a gift of something, which of the testator leaves sufficient assets, must be raised by the executors of his general estate.

The court described demonstrative legacies as a kind of hybrid between specific and general legacies. By their nature they are a general legacy, usually pecuniary, directed to be satisfied, primarily, but not solely, out of the specified fund or a specified part of the testator’s property.

In Re Thorne Estate 2018 BCSC 934 the testator under his 1997 will, bequeathed the proceeds of the sale of his home to his Goddaughter. The will also provided that if the Goddaughter so wished, she could retain title to the property, in which case she was to be responsible for paying out the reverse mortgage on the property or arranging refinancing.

The testator developed dementia 10 years later, and was placed in a special care facility costing in excess of $8000 per month.

There were virtually no other assets in his estate other than the house, and his power of attorney sold the house, paid off the substantial reverse mortgage and other charges, and set aside $50,000 for the testator’s ongoing care, with the balance being placed in an investment.

After the deceased’s death, the executors of his estate sought the court’s direction as to whether the gift to the God daughter of the sale proceeds of the house failed by reason of ademption, or if it formed part of his estate as a demonstrative legacy that was not subject to ademption so long as the sale proceeds were, as the were here, traceable and identifiable.

The court held that the gift was not a specific legacy, but instead was a demonstrative legacy and not subject to ademption as the sale proceeds were clearly identifiable.

The court applied the basic principle governing the interpretation of wills, as set out in National Trust Company, LTD v Fleury (1965) SCR 817 at 829:

“ In the construction of wills, the primary purpose is to determine the intention of the testator, and it is only when such intention cannot be arrived at with reasonable certainty by giving the natural and ordinary meaning to the words which he has use that resort is to be had to the rules of construction which have been developed by the courts in the interpretation of other wills. It is to be remembered that such rules of construction are not rules of law and that if their application results in attributing to the testator an intention which appears inconsistent with the scheme of the will as a whole, then they are not to prevail”

The court found that the deceased’s intentions were clear and that the natural and ordinary meaning of the words were sufficient to intend a gift to the Goddaughter of his residence, together with the option of retaining ownership of the residence under certain conditions.
The court found that the bequest was a demonstrative legacy and not subject to ademption so long as the sale proceeds were traceable and identifiable.

The court further stated that even if it was incorrect, and the bequest was specific in nature, the specific property in question had been changed “in name or form only, so that it exists as substantially the same thing, although in a different shape”.

How to Defeat a Testamentary Gift: Beneficiary Fraud

How to Defeat a Testamentary Gift- Beneficiary Fraud - Disinherited

“Fraudulent beneficiaries”  has arisen in a claim that I am aware of currently before the courts, where it is alleged that the deceased was fooled to leave his entire estate to someone who he believed was his natural son from a long-ago relationship, but the son actually knew he was not the progeny of the deceased, yet played along with the deceased to allow him to believe that he was.

The estate has been challenged on the basis that the testamentary gift to the purported son should be invalidated as a result of the beneficiary perpetrating a fraud on the testator in obtaining the legacy by virtue of that fraud.

The facts are contentious yet there is a long established principle in law that “ where a legacy is given to a person under a particular character which he has falsely assumed for the purposes obtaining the bounty, and which alone is shown or is inferred to have deceived the testator, and to have been the motive of the bounty, the law on the ground of fraud does not permit the donee to avail himself of the legacy; but a false reason given for the legacy is not in itself sufficient to destroy it.”

Halsbury’s Laws of England , fourth edition, volume 17(2) at 326:

Kennell v Abbott (1799) 4 Ves.802, ER 416 is a leading case on the treatment of legacies obtained through fraud. In this decision, a woman died, leaving a legacy to my husband. The two were allegedly married but unknown to the woman, the man when she assumed was her husband was married to another woman. The master of the rules ruled that the husband was not entitled to his legacy by reason of the fraud that he had perpetrated.

How to defeat a testamentary gift:

In order to defeat a testamentary gift in these circumstances, the following must be shown:

1) A legacy given to a person of a character which the legatee does not fill and

2) There was a fraudulent assumption of that character, and

3) The testator must have been deceived by that fraud

 

Posner v Miller (1953) 1 All E.R. 1123

A testamentary gift to a purported son would only be invalid if there is proof of fraudulent and intentional misrepresentations that motivated the deceased to dispose of property in a manner contrary to his true intention. It is not sufficient to show innocent misrepresentation. Even if fraud is proven, the law requires proof that the false character was the sole motive for the bounty Kennell, Re Isaacs (1954) OR 942 C.A.

If there is evidence that the testator may have been motivated by other factors, then the gift is valid, despite the fraud. For example, the bequest to illegitimate children that the testator thinks are his own should stand, because it can be said that the love and affection must also have affected the testator’s intention to provide for the children and the fraud was not the sole motive or inducement for the legacy. Feeney, The Canadian Law of Wills at 3.18

The subsequent English case of Re Boddington: (1883) 22 Ch.D 597 at 112 applied the authority in the Kennell decision and held:

“where a legacy is given to a person under a particular character which she has falsely assume, and which alone can be presumed to be the motive of the bounty, the law will not permit him to avail himself of it, and therefore he cannot demand his legacy. In order, therefore, that the rule from Kennell may come into operation. There must be two things (1) there must be of the false assumption of the character of the legatee, and secondly, there must be evidence that the false character was the motive of the bounty, or a presumption or inference to that effect.

A misrepresentation can be made by silence in the following circumstances, as adopted by the Court of Appeal in Sidhu estate v. Bains (1996)  25 BCLR (3d) 41 BCCA at 101:

“A misrepresentation may be made by silence, when either the represented , or a third person in his presence, or to his knowledge, state something false, which indicates to the represented that the represented either as being, or will be, misled, unless the necessary correction be made. Silence under such circumstances is either a tacit adoption by the party of another’s misrepresentation as his own, or tacit confirmation of another’s error as truth“

When The Presumption of Undue Influence Arises

When The Presumption of Undue Influence Arises

Burkett v Burkett Estate 2018 BCSC 320 held that the presumption of undue influence in gifts arises in circumstances where the relationship between the parties gives rise to the potential domination of one party by another, and once established that the potential for undue influence exists, the onus then shifts to the defendant to rebutt and show that the plaintiff entered into a transaction favoring the dominating party as a result of his own “free, full and informed thought.”

The Burkett decision set aside a transfer of land on the basis of resulting trust and undue influence.

Undue influence is generally not found by the courts unless the transferor had diminished mental capacity, but this is not always required as in the situation of a cult for example, where one person is in a position to dominate others who are not mentally incompetent.

In this decision the elderly mother of three sons in 2010 executed a transfer of her property to son A, and made a codicil to her will removing son C as co-executor.

The mother suffered from dementia in 2010, a condition which she attempted to mask.

The son did not register the transfer until 2013 when the mothers dementia had become apparent and significantly worse.

The court found that the mother lacked capacity to affect changes in her estate, and declared that son a held the property in trust for the mothers estate and removed him as executor.

The mothers previous 1997 will left all of her property to her three sons equally, and the plaintiffs were the children of one son who had predeceased his mother and who were entitled to their late father’s share.

The court found that by the fall of 2011 the deceased was in precipitous and noticeable mental decline and had become paranoid and obsessive. When she was interviewed by a medical doctor in 2012, she did not know that she had executed a transfer of the property the previous year.

The court found that in all likelihood the deceased signed the transfer of land to avoid the payment of probate fees, which under the law of resulting trust would find that her intention was not to gift the property, but alternatively that it was to be held in trust.

The Law of Presumption of Undue Influence

In Loriintt v. Boda 20114 BCCA 354, the BC Court of Appeal explained the presumption of undue influence at paragraph 75 and 76:

75. The presumption of undue influence arises in circumstances where the relationship between the parties gives rise to the potential domination of one party by another. Once a dominant relationship has been established, such that potential for influence exists, the onus moves to the defendant to rebutt and show that the plaintiff entered into the transaction as a result of his own ” free, full and informed thought”.

This law was first pronounced by the Supreme Court of Canada in the decision Geffen v. Goodman (1991) 2 SCR 353 at paragraphs 42 – 45 .

76. As another 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 the balance of probabilities, the transferor’s actual intention. As discussed by Sopinka in the Law of Evidence in Canada, at page 116, the presumption will only determine the result where there is insufficient evidence to rebut on the balance of probabilities.

Some case law has identified relationships between an old and sick parent and a child to be one of dominance and dependency: Petrowski v . Petrowski 2009 A.B.QB 196 at paragraph 382.

After examining the relationship between the transferor and the transferee, the court then examined the transaction in question. The presumption of undue influence can be rebutted by evidence of independent legal advice

In Mondonese v Delac estate 2011 BCSC 82, affirmed at 2011 BCCA 501,at parapgraph 122, the court stated: the function of independent legal advice is to remove the taint that, if not removed, might invalidate a transaction. The nature and circumstances will dictate what constitutes adequate independent legal advice for the purposes of a given situation. Cope v Hill 2—5 ABQB 625 at para. 209.

The remedy for an unrebutted finding of undue influence is described in Geffen, at paragraph 23:

“the equitable doctrine of undue influence was developed as was pointed out by the House of Lords in Allcard v. Skinner (1887) , 36Ch. D. 145, not to save people from the consequences of their own folly, but to save them from being victimized by other people. In the context of gifts and other transactions, equity will intervene and set aside such arrangements. If procured by undue influence.”

The Presumption of Advancement In BC May Be Dead

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 18th 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 — that is, a presumption that the grantor intended to make a gift — 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. …

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 wife’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.

The Presumption of Resulting Trust

Rebutting the Presumption of Resulting Trust

The BC Appeal Court in Winstanley v Winstanley 2017 BCCA 265 ordered a new trial on the basis that the trial Judge erred in his determination as to whether the evidence at trial had rebutted the presumption of a resulting trust that arises when a parent transfers an asset for little or no consideration to an adult child. The Court stated very clearly that there is no longer any presumption of advancement from a parent to an adult child as per the decision of Pecore v Pecore 2007 SCC 17.

Analysis

29      I begin my analysis by reviewing Pecore v. Pecore 2007 SCC 17, which is authority for the proposition that there is no longer a presumption of advancement between parents and their adult children. The Court decided that in modern social conditions the reverse is true: there is a presumption of a resulting trust where a parent makes a gratuitous transfer to an adult child, such as placing funds in a jointly-held bank account.

30      The facts in Pecore involved joint accounts held by a father and his adult daughter. The father transferred the majority of his assets to these joint accounts before he died. The terms of the accounts included a right of survivorship upon his death. At trial, the judge held that the presumption of advancement applied and the daughter was entitled to the legal and beneficial ownership of the assets. The question on appeal was whether the presumption of advancement as between a parent and child had continuing relevance under present social conditions. Rothstein J. for the majority held at paras. 4, 5 and 6:

[4] It is not disputed that the daughter took legal ownership of the balance in the accounts through the right of survivorship. Equity, however, recognizes a distinction between legal and beneficial ownership. The beneficial owner of property has been described as “[t]he real owner of property even though it is in someone else’s name”: Csak v. Aumon (1990), 69 D.L.R. (4th) 567 (Ont. H.C.J.), at p. 570. The question is whether the father intended to make a gift of the beneficial interest in the accounts upon his death to his daughter alone or whether he intended that his daughter hold the assets in the accounts in trust for the benefit of his estate to be distributed according to his will.

[5] While the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer, intention is often difficult to ascertain, especially where the transferor is deceased. Common law rules have developed to guide a court’s inquiry. This appeal raises the following issues:

  1. Do the presumptions of resulting trust and advancement continue to apply in modern times?
  2. If so, on what standard will the presumptions be rebutted?
  3. How should courts treat survivorship in the context of a joint account?
  4. What evidence may courts consider in determining the intent of a transferor?

[6] In this case, the trial judge found that the father actually intended a gift and held that his daughter may retain the assets in the accounts. The Court of Appeal dismissed the appeal of the daughter’s ex-husband.

31      Rothstein J. noted that the rebuttable presumption of law “is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption” (at para. 22). The presumptions of advancement and resulting trust apply to gratuitous transfers “where evidence as to the transferor’s intent in making the transfer is unavailable or unpersuasive” (at para. 23).

32      The effect of the majority’s decision in Pecore is that an adult child  whether independent or dependent  who receives a gratuitous transfer from a parent is now presumed to hold the transferred property on resulting trust for the parent, whereas formerly the parent was presumed to have advanced the property to the child as a gift.

33      Rothstein J. noted that the presumption of resulting trust may be rebutted with sufficient evidence:

[41] There will of course be situations where a transfer between a parent and an adult child was intended to be a gift. 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 his or her claim. In addition, while dependency will not be a basis on which to apply the presumption of advancement, evidence as to the degree of dependency of an adult transferee child on the transferor parent may provide strong evidence to rebut the presumption of a resulting trust.

[Emphasis added.]

34      Rothstein J. also considered the interaction between the right of survivorship in a joint account and the presumption of resulting trust at law. He concluded at para. 48:

[48] Courts have understandably struggled with whether they are permitted to give effect to the transferor’s intention in this situation. One of the difficulties in these circumstances is that the beneficial interest of the transferee appears to arise only on the death of the transferor. This has led some judges to conclude that the gift of survivorship is testamentary in nature and must fail as a result of not being in proper testamentary form: see e.g. Hill v. Hill (1904), 8 O.L.R. 710 (H.C.), at p. 711; Larondeau v. Laurendeau [1954] O.W.N. 722 (H.C.); Hodgins J.A.’s dissent in Re Reid (1921), 64 D.L.R. 598 (Ont. S.C., App. Div.). For the reasons that follow, however, I am of the view that the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature. This has also been the conclusion of the weight of judicial opinion in recent times: see e.g. Mordo v. Nitting, [2006] B.C.J. No. 3081 (QL), 2006 BCSC 1761, at paras. 233-38; Shaw v. MacKenzie Estate (1994), 4 E.T.R. (2d) 306 (N.S.S.C.), at para. 49; and Reber v. Reber (1988), 48 D.L.R. (4th) 376 (B.C.S.C.); see also Waters’ Law of Trusts, at p. 406.

. . .

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

[Emphasis added.]

35      Despite finding that the trial judge had erred by applying the presumption of advancement, the majority in Pecore affirmed the judge’s disposition because there was strong evidence showing the father intended to gift the daughter the right of survivorship to the joint accounts, thus rebutting the presumption of resulting trust.

36      I now turn to the application of the principles emerging from Pecore to the facts of this case.

37      The correct legal analysis in the present case required the judge to first instruct himself that there is no presumption of advancement as between a parent and an adult child and to apply a presumption of resulting trust in regard to any gratuitous transfers of Jessie’s property to Carl. The burden of proof would then rest on Carl to rebut the presumption with respect to each transfer.

Loan or Gift Within the Family?

s it a 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.