Parent Money to Children: Gift or Loan?

Wills Variation Refused-Assets Passing Outside of Estate Sufficient

Dheenshaw v Gill 2017 BCSC 319 deals with an increasingly commonly litigation problem- the advancement of large sums of parents money to their children and the subsequent determination whether  the monies were a gift or a loan when matters go ” sideways”.

The court will look start at attempting to determine  the intention of the parties  when making the advancement of the monies which are usually made gratuitously.

There is  usually a presumption that the advancement of funds was not a gift and that the onus of proving a gift is on the recipient children, who must rebut the presumption that they hold the funds as a resulting trustees. The court will examine a number of criteria in analysing such a scenario.

THE  LAW

In Beaverstock v. Beaverstock, 2011 BCCA 413, the Court addressed the correct approach to the resolution of a dispute about whether a gratuitous advance from a parent to an adult child is a loan or a gift. As the Court held at para. 9:

The correct approach to the resolution of this dispute is not in dispute. It is set out in Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795. Whether the transfer was a loan or a gift depends on the actual intention of the appellant when she made the advance, which is a question of fact. As the advance was gratuitous, the onus was on the respondent to demonstrate that the appellant intended a gift, since equity presumes bargains, not gifts (para. 24). This equitable principle gives rise to a presumption the son received the money on a resulting trust, which is a rebuttable presumption of law. The trial judge was therefore required to presume the advance was not a gift and to determine whether the respondent had satisfied the burden of rebutting the presumption of resulting trust on a balance of probabilities (para. 44).

73      In Byrne v. Byrne, 2015 BCSC 318, 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. 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 . . .

74      At para. 43, the court noted that in Kuo v. Chu, 2009 BCCA 405at para. 9, the Court of Appeal adopted the following factors from Locke v. Locke, 2000 BCSC 1300, 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.

75      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.

76      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.

77      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.

78      In Savost’Yanova v. Chui, 2015 BCSC 516, 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.

79      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 1255at 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.

80      Here, I must determine whether the actual intention of the claimant’s mother was to make a gift or a loan. Because the advance was gratuitous, the claimant bears the onus of demonstrating that her mother intended a gift, “since equity presumes bargains, not gifts”. In determining the transferor’s intention, the court must take into account the Locke factors, along with all of the other evidence.

The Various Types of Trusts

The Various Types of Trusts

Warde v Slater 2017 BCSC 274 contains a discussion about the various types of trusts in deciding who owned the beneficial interest in the shares of a family business.

The decision quotes extensively from Waters on Trusts In Canada.

It is helpful to refer to the definition of a trust adopted as “one of the best” in Waters, Gillen and Smith: Waters’ Law of Trusts in Canada, 4th ed. 2012 (“Waters“) at p 3:

“A trust is the relationship which arises whenever a person (called the trustee) is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one, and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries or other objects of the trust.”

The following passage from Waters at pp 394-395 is a useful comparison of the different kinds of trusts alleged.

The courts and the various legislatures of the common law world have sometimes used interchangeably the terms “implied trust”, “resulting trust” and “constructive trust”, and the terminology is therefore somewhat confusing

But essentially, while express trusts are those which come into existence because settlors have expressed their intention to that effect, constructive trusts arise not because of anyone’s expression of trust intent but because B ought to surrender property to A and this is the machinery the court employs in order to get B to do that. In between the express trust, a product of the settlor’s intention, and the constructive trust, a machinery imposed by law, are the implied trust and the resulting trust.

The term “implied trust” is commonly used for two situations. The first occurs where the intention to create a trust is not clearly expressed, but has to be discovered from indirect and ambiguous language. This is all that distinguishes such an implied trust from the express trust. A second common use is where one person has gratuitously transferred his property to another, or paid for property and had the property put into another’s name. The intention of the transferor or purchaser is implied to be that the transferee is to hold the property on trust for the transferor or purchaser. The implication arises out of the fact that Equity assumes bargains, not gifts, and requires the donee to prove that a gift was intended.

The term “resulting trust”, on the other hand, does not allude in any way to intention; it describes what happens to the property in question. It results or goes back to the person who, for reasons we shall examine, is entitled to call for the property. For example, because Equity does not assume gifts, the transferee holds title for the transferor or the one who provided the purchase money. In other words, in this “implied trust” situation the beneficial interest results, or goes back, to the transferor or purchaser. . . .

Distinguishing the resulting trust from the constructive trust is also not easy because the lines have been blurred. Sometimes the same facts allow both a constructive trust theory and a resulting trust theory to be deployed. . . .

There is even more overlap between resulting trusts and those constructive trusts which arise to reverse unjust enrichment. The reason is that both kinds of trusts typically perform the same function: they return property to the person from whom it came.

In Fulton v. Gunn [2008 BCSC 1159] for example, an interest in land was acquired by a son using purchase money that came from his mother. It was held that this created a resulting trust for the benefit of the mother; and it was also held in the alternative that the son had been unjustly enriched at the expense of the mother, and so held the property on constructive trust for her. To the extent that resulting trusts are seen as arising by operation of law, they are really just a sub- species of constructive trust. The distinction between resulting and constructive trusts is perhaps best put in this way – while constructive trusts have nothing to do with intention, express or implied, resulting trusts can be explained either on the basis of intention or imposition of law. . . .

10      As Waters makes clear (see also pp. 19-21), the terms “express” and “implied” refer to the intention of the alleged settlor. Intention may also be relevant to a resulting trust, but is irrelevant to a constructive trust. A constructive trust is one constructed by the law to enforce an obligation. It arises out of unjust enrichment and “good conscience”: Waters at p 23; Petkus v Becker, [1980] 2 SCR 834.

Thus, there can be only two sources of a trust obligation: the intention of a property owner to create a trust; or the imposition by the law of a trust obligation upon persons: Waters at p 478.

11      In my view, a resulting trust can be quickly eliminated from contention in this case. An essential characteristic is that the claimant, the would-be beneficiary, must have provided the property or equitable interest vested in the person bound by the trust: Waters at p 399. Neither Elaine nor Brian provided the property here in issue, the shares of (or proprietary interest in) Slatter Holdings, to Fern. If Fern holds that property in trust for either or both of Elaine or Brian, it must be because of an express or implied trust (intention), or because in the absence of such a trust, unjust enrichment and good conscience require that the law constructs a trust in order to enforce an obligation.

12      To demonstrate the creation of an intentional trust, the evidence must establish three certainties: certainty of intention to create the trust, certainty of the subject of the trust, and certainty of the trust object: Waters at p 140 and following; Tozer v Bank of Nova Scotia, 2012 NBCA 57 at paras 10-12. It is not necessary that the trust be set out fully in a document. It may be construed from conduct, or from documents and conduct taken together. See, for instance, Elliott (Litigation Guardian of) v Elliott Estate, [2008] OJ No 4941 (SCJ):

[30] This Court must consider all of the circumstances, including the words and conduct of Robert Elliott and Jean Elliott [the alleged settlors] to determine if certainty of intention exists.

13      Technical words are not required. As Waters put it at p 141:

There is no need for any technical words or expressions for the creation of the trust. Equity is concerned with discovering the intention to create a trust; provided it can be established that the transferor had such an intention, a trust is set up.

14      This is so whether the intentional trust is created by the settlement of property upon a trustee, or by declaration by the owner of property of an intention to constitute himself or herself a trustee of that property. Again, it is not necessary that the donor use the words, “I declare myself a trustee”. Words of any kind and even conduct are sufficient provided it is satisfactorily shown that the donor did in fact intend to constitute himself or herself a trustee: Waters at p 204.

Misfeasance of Public Officials

Misfeasance of Public Officials

It occasionally occurs in estate litigation that a party has complaints about the misfeasance of  public officials, (usually  against the Public Guardian and Trustee), as a result of perceived deliberate  unlawful actions on the part of the public official against the complainant

The tort of misfeasance  is the legal remedy when appropriate to seek compensation for such unlawful conduct on the part of the public official.

In my experience, such actions  rarely succeed except in the most egregious instances where it is proved that the official abused his or her powers to the detriment of the ordinary citizen.

The Supreme Court of Canada has set out the elements of the tort of misfeasance in public office in Odhavji Estate v. Woodhouse 2003 SCC 69, [2003] 3 S.C.R. 263 (S.C.C.), at para. 23, and in St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, 319 D.L.R. (4th) 74 (Ont. C.A.), at para. 20, as follows:

(a) that a public officer, acting in his or her capacity as a public officer, engages in deliberate and unlawful conduct;

(b) the public officer is aware both that the conduct is unlawful and that it is likely to harm the plaintiff;

(c) the public officer’s tortious conduct was the legal cause of the plaintiff’s injuries; and

(d) the injuries suffered are compensable in law.

104      In Freeman-Maloy v. York University (2006), 79 O.R. (3d) 401 (Ont. C.A.), (sub nom Freeman-Maloy v. Marsden) 2006 CanLII 9693, at para. 10, leave to appeal refused, [2006] S.C.C.A. No. 201 (S.C.C.), Sharpe J.A. writing for the Court stated that “[t]he tort of misfeasance in a public office is founded on the fundamental rule of law principle that those who hold public office and exercise public functions are subject to the law and must not abuse their powers to the detriment of the ordinary citizen.”

Joint Tenancy and the Right of Survivorship

Joint Tenancy and the Right of Survivorship

McKendry v McKendry 2017 BCCA 48 sets out a good analysis of what a joint tenancy is and the right of survivorship associated with it.

The real property in question was the mother of four children’s home in Vancouver. In 2008, she transferred legal title to the property into joint tenancy with one son John, although it is clear that he was to hold the property in trust.

In 2010, the mother  decided to remove the trust conditions so that John would receive the property absolutely on her death. She informed her lawyer in writing accordingly.

The central issue on appeal was whether the trial judge erred in finding that the mother  was required to execute a written Deed of Gift under seal for the son John to take beneficial ownership when she died. 

The Court of Appeal held that a Deed of Gift was not necessary for the son to take the beneficial interest when the mother died and allowed the appeal.

The appeal court held that the son John held the property in trust for the other siblings.

Joint Tenancy and the Right of Survivorship 

27      Joint tenancy is a form of concurrent property ownership. When the “four unities” of title, interest, time and possession are present, co-owners hold an equal interest in property as a unified whole: Zeligs v. Janes 2016 BCCA 280at para. 38. However, parties may hold legal title to property as joint tenants while beneficial ownership is held differently. For example, a mother and son may own real property as joint tenants in law while the mother alone owns the beneficial interest. In such circumstances, as Rothstein J. noted in Pecore v. Pecore 2007 SCC 17at para. 4:

. . . The beneficial owner of property has been described as “the real owner of property even though it is in someone else’s name”: [citation omitted] . . .

28      The principal characteristic of joint tenancy is the right of survivorship. When a joint tenant dies, his or her interest in property is extinguished. If there is more than one surviving joint tenant, they continue to hold the property as joint tenants. The last surviving joint tenant takes full ownership of the property.

29      So long as the requirements of a binding gift are met, the owner of property may, during his or her lifetime, make an immediate gift of a joint tenancy, including the right of survivorship. This is so regardless of whether the donee of the gift is to hold it for the benefit of the donor while he or she is alive. When gifted inter vivos, the right of survivorship is a form of expectancy regarding the future. It is a right to what is left of the jointly-held interest, if anything, when the donor dies: Simcoff v. Simcoff 2009 MBCA 80at para. 64; Bergen v. Bergen2013 BCCA 492 at para. 37; Pecore at paras. 45-53.

30      A donor may gift the right of survivorship, but continue to deal freely with property throughout his or her lifetime. In Simcoff, Steel J.A. explained why:

64 Simply, and conceptually, the fact that a “complete gift” may have been given and that this gift included a right of survivorship does not, prima facie, prevent a donor from dealing with the retained joint interest while alive. The right of survivorship is only to what is left. Accordingly, if one joint owner drains a bank account (in the case of personal property) or severs a joint tenancy (in the case of real property), there is nothing in the right of survivorship itself that somehow prevents this. In commenting on the issue of survivorship in Pecore, Rothstein J. wrote (at para. 50):

Some judges have found that a gift of survivorship cannot be a complete and perfect inter vivos gift because of the ability of the transferor to drain a joint account prior to his or her death: see e.g. Hodgins J.A.’s dissent in Re Reid [(1921), 64 D.L.R. 598 (Ont. C.A.)]. Like the Ontario Court of Appeal in Re Reid, at p. 608, and Edwards v. Bradley, [[1956] O.R. 225] at p. 234, I would reject this view. The nature of a joint account is that the balance will fluctuate over time. The gift in these circumstances is the transferee’s survivorship interest in the account balance – whatever it may be – at the time of the transferor’s death, not to any particular amount.

Gift of House Upheld Trust

Gift of House Upheld Trust

Franklin v Cooper 2016 BCCA 447 upheld a decision of the Supreme Court that the presumption of resulting trust applied and that the defendant daughter who received gift of house by her mother in joint tenancy, instead held the house in trust for the estate of their mother.

The facts found by the court of appeal were:

In 1989, the deceased transferred title to her home to herself and Ms. Cooper as joint tenants. The deceased died on June 30, 2012, and Ms. Cooper took sole title to the property by survivorship. Ms. Cooper took the position that the 1989 transfer was under an agreement. She claimed that it was in consideration of expenses Ms. Cooper had paid for in the past, and also in consideration of a promise to pay for expenses in the future. Ms. Cooper says that she agreed to support her mother, and to ensure that she was never placed in a nursing home.

[3] Ms. Franklin denied the existence of any such agreement. She contended that her mother’s decision to place the property in joint title was primarily to prevent her mother from being defrauded into transferring title away to a third party. She gave evidence to the effect that she had been offered the opportunity to go on title, herself, but that the offer was contingent upon her dissolving her marriage, as her mother also wanted to ensure that Ms. Franklin’s husband would not gain any matrimonial interest in the property.

[4] There were a number of issues at trial. The trial judge ultimately found that the 1989 agreement contended for by Ms. Cooper did not exist. She found the transfer of the home into joint tenancy to be a gratuitous transfer, and applied Pecore v. Pecore, [2007] 1 S.C.R. 795, holding that there was a presumption that the transfer was not a gift, and that Ms. Cooper held her interest in trust for her mother during her mother’s life, and now holds it in trust for her mother’s estate.

[5] The judge recognized that the issues before her turned largely on findings of credibility:

[6] The evidence of Ms. Franklin and Ms. Cooper is conflicting in virtually every aspect. Both present diametrically opposing pictures of their mother’s life, her needs and wants, and their relationships with their mother and each other. Accordingly, the resolution of this case will depend largely on findings of credibility.

Gifts In Contemplation of Death

Gifts In Contemplation of Death

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

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

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

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

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

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

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

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

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

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

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

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

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

1. Bank Accounts

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

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

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

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

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

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

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

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

2. Safety Deposit Box Keys

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

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

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

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

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

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

This decision was upheld on appeal.

3. Furniture and Personal Effects

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

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

4. Forgiveness of a Debt

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

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

5. Real Property

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

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

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

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

Conclusion

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

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

Value of Contribution

Value of Contribution

The Value of Contribution of a parties to the acquisition or improvement of  an asset does not have to be in money and can take  various individual forms as was discussed in Mac v Mak 2016 BCSC 1140.

The Courts have to scrutinize the relationship and history of the parties and come to a conclusion on a case by case basis as to what if anything each party contributed little or no monies but instead did other things like free  labour in expectation of being put on title.

Mac v Mak was a dispute over ownership of a home that was previously held in joint tenancy by Sau Har Mak and her two daughters.

Sau Har Mak died in August 2012, and full title of the home passed to her daughters on her death.

Two of Sau Har Mak’s sons sought  a declaration that their sisters hold the property on resulting trust for Sau Har Mak’s estate and do not have beneficial ownership of the home.

[92]        The central issue before the Court is whether a joint tenancy was created between Sally Mak, Mary Mak and Sau Har Mak when the Mahon property was purchased on June 17, 1993.

Specifically, the Court must determine whether the transfer was gratuitous, and therefore the presumption of a resulting trust applies, or whether beneficial ownership is governed by the presumption of indefeasible title in favour of Sally and Mary Mak.

 

VALUE

[119]     In Virk v. Pannu, 2006 BCSC 921, aff’d Bajwa v. Pannu, 2007 BCCA 260, Baljit Kaur Bajwa and her mother, Balwant Kaur Virk, together with the defendant, Rupinder Pannu, purchased a property as joint tenants for $249,000.  Ms. Bajwa and Ms. Virk as plaintiffs had provided the down payment of $35,000, and the balance of the purchase price came from a mortgage with their financial institution.  Mr. Pannu did not contribute any money towards the purchase, but became a covenanter on the mortgage.  He assisted in searching for the property and engaging a realtor.  The court held that the onus was on the plaintiffs seeking to displace the presumption of indefeasible title created by s. 23(2) of the Land Title Act and there was no cogent evidence doing so.  The court held that the presumption of resulting trust did not apply because Mr. Pannu had given “value” for his interest, and he was not unjustly enriched if he retained a one-third interest in the property.

[120]     As noted by the Court of Appeal in Bajwa, “[w]hether value is given is a question of fact to be determined on the evidence in each case”: para. 16.  As the facts in Bajwa indicate, value does not necessarily involve the contribution of money: para 16.  The court stated:

[16]      The Virks rely on Professor Waters’ text, Law of Trusts in Canada, 2d. ed. (Toronto: Carswell, 1984) at 299. The passage on that page of the text says that for a resulting trust to be inferred the person said to be a trustee must have given no value for his legal interest. It follows that if it is found as a fact that the person whose equitable interest is challenged did give value, there can be no resulting trust. Whether value was given is a question of fact to be determined on the evidence in each case. …

See also Chuang, paras. 10 and 11:

[10]      Whether a transfer is found to be gratuitous, and therefore whether the presumption of resulting trust arises, is a question of fact, and even the exchange of money is not determinative (Modonese) [Modonese v. Delac Estate, 2011 BCSC 82]. In this case, although the Claimant did pay some money towards the purchase of the Property, the registration as a 50% owner, as opposed to the 15% she contributed, was based on the parties’ intention to have a life together. There may be cases where unequal contributions leading to equal ownership will not be gratuitous (if for example the deal could not be completed without the lesser contributing party’s contacts), but those would seem to be different from the present case. In Miller v. Walker, 2006 ABQB 424 [Miller], the court found that unequal contributions to a property that was immediately registered as a joint tenancy raised the presumption of resulting trust (although the presumption was rebutted in that case). Further, the Claimant herself argues (and not merely in the alternative) that the presumption of advancement applies, and since the presumption of advancement only arises on gratuitous transfers, her position would seem to implicitly concede that the transfer was gratuitous.

[11]      The presumption of resulting trust can itself be rebutted by the presumption of advancement, and either presumption can be defeated by evidence of a contrary intention on the part of the donor.

See also Klein v. Wolbeck, 2016 ABQB 28 at para. 176:

Put aside the difficulty that Mr Klein did not transfer the Lands to Ms Wolbeck since the transferors were Mr Klein’s parents. The doctrine of resulting trust has no purchase because Ms Wolbeck did provide value. She was also a mortgagor. Her acquisition of her joint interest was not a gratuitous transaction: Lutz v Lutz, 2013 ABCA 159 at para 12. Mr Klein did not put up the entire down payment himself and gratuitously cause the certificate of title to reflect a joint interest for Ms Wolbeck.

[121]     The courts have occasionally found that unequal contributions leading to equal ownership may be considered a gratuitous transfer: Chuang at paras. 10 and 11.

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

Watch Out For Phony Joint Tenancies

Watch Out For Phony Joint Tenancies

One of the problems with joint tenancy ownership is that while the registered title might reflect joint ownership, the true beneficial owner might be one of the registered owners are in fact another unregistered owner in trust– as such, watch out for phony joint tenancies.

For many years estate planners have advised their clients to transfer their assets into joint tenancy ownership with loved ones so they may inherit by right of survivorship and avoid paying legal and probate fees.

The rationale has been that the surviving joint owner, by right of survivorship automatically becomes sole owner of the entire property including the deceased’s share. Thus the asset does not fall into the deceased’s estate but instead passes to the surviving joint owner. As a result, legal costs and probate fees are avoided.

The thinking has been: No muss, no fuss and, what is more, no delays!

Better yet- no lawyers. (Wrong)

Indeed for many years, joint tenancy arrangements have been used by families and very close friends. Most often they are used for home ownership or for financial assets such as bank accounts and investment accounts. Indeed, other than a will, this type of arrangement is probably the commonest form of estate planning.

It is very important to understand, however, that such ownership can lead to hotly contested legal disputes. This is particularly the case where only one of the joint owners has contributed most or all of the funds to the investment account or to the purchase of the property.

Fortunately such disputes rarely arise in cases where both of the joint owners have made substantial contributions to the acquisition of the assets –for example in the case of joint ownership by spouses who have been long married.

A relatively common fact pattern, however, involves an elderly parent, let us suppose a mother, who transfers her home into joint tenancy with only one of her children. She may well think that she is being prudent in avoiding the payment of probate fees upon her death and believe that the one “favoured” child will do the right thing and share the home with the other siblings.

By the time this mother dies, however, the favoured child has convinced himself or herself that the other siblings have no claim to the home because mother intended to leave it for him or her alone- after all, “mom always loved him best”.

The legal remedy is called Resulting Trusts and there are several blogs about iit on this website.

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.