The Pitfalls of Joint Tenancy

This video is about joint tenancy. Many years ago, financial advisors in particular, started to advise people to put their assets in joint tenancy with others, in particular, their spouses or children in order to avoid probate fees. It was a minimal type of estate planning.

Unfortunately, all of those joint accounts have now ended up in litigation in the sense that in many occasions, the deceased did not make it clear if he or she intended to gift the monies to the other joint tenant or if the other joint tenant simply held the assets in trust.

I’ll give you an example. Many parents trust that their children will do the right thing amongst themselves. So the parent might put a condominium or a house in joint tenancy with one child knowing that that child, will upon the parent’s death, do the right thing and share it equally with the other children. In fact, this often doesn’t happen. The deceased child feels entitled and takes it as a gift. The other children end up in years of litigation arguing that mom intended it as a trust. It is essential that the intention be noted or there is a presumption that, or there is a transfer of an asset of significant value for no value per one dollar another consideration, it is a presumption of a trust.

Occupational Rent and “Outsted”

Occupational Rent and "Outsted"

At common laws a claim for occupational rent can be brought where one owner is ousted from the property by another owner  Re Johnston estate 2017 BCSC 272 where the court stated:

At common law, a claim for occupation rent may be brought by a co-tenant who has been ousted from the property. An ouster brings to an end to one of the tenant’s right to share the benefit of occupation: it exposes the remaining tenant to liability to indemnity the ousted tenant for the loss of that benefit. In the absence of ouster there is generally no such liability. It cannot be said that a tenant in possession has been unjustly enriched by sole occupation of premises so long as each tenant has an undivided right to the full use of the property. As long as there is no impediment to the exercise of that right by either tenant , no claim for indemnity arises from the abandonment of the property by one of them. (LMR v JFR 2010 BCSC 363)

17     “It is clear from the case of L.M.R. v. J.F.R., 2010 BCSC 363, that a claim for occupation rent can be brought at common law by a co-tenant who has been ousted from a property, because the ouster brings to an end one tenant’s right to share in the benefit of occupation. There is generally no liability to pay occupation rent where there is no ouster.”

In the case of Kostiuk, Re, 2002 BCCA 410, the BC Court of Appeal addressed the issue of conduct that constitutes ouster and the burden of proving ouster. The court noted that:

43 The fact that a co-owner had sole possession does not prove ouster because on co-owner is entitled to be in possession of the entirety, but if possession is demanded and refused, on the grounds that the co-owner in possession claims the whole property as his own, “such possession is adverse and ouster enough” (Doe v. Prosser (1774) 1 Cowp. 217 [at 218], 98 E.R. 1052 [at 1053]). The co-owner alleging ouster must prove that the other co-owner is in possession with the intention of ousting her.

Re Kostiuk followed Dennis v McDonald affirmed (1981) 2 WLR 275 ( C.A) which adopted the definition of “ousted” as stated in M v H ( 1994) 17 ).R. (3d) at page  133 ” the act of wrongfully putting one out of rightful possession of his or her property”.

Dennis v MacDonald ( 1981) 1 WLR 810 , affirmed (1981) 2 WLR 275 (CA) which held in part”:

–“Only in cases where the tenants in common not in occupation were in a position to enjoy their right to occupy but chose not to do voluntarily , and were not excluded by any relevant factor, would the tenant in common in occupation be entitled to do free of liability to pay an occupation rent”.

Re Kostiuk stated at paragraph 43- ” The fact that a co owner had sole possession does not prove ouster because one co-owner si entitled to be in possession of the entirety, but if possession is demanded and refused , on the grounds that the co-owner in possession claims the whole property as his own, ” such possession is adverse and ouster enough”. The co-owner alleging ouster must prove that the other co-owner is in possession with the intention of ousting her ( Allison v smith) ( 1877) 17 NBR 199 ( C.A)

THE EXCEPTION

There is one exception to that rule: occupation rent may be set off against a claim made by a tenant in occupation for expenses associated with the occupation . It would be inequitable to permit a tenant in possession to enjoy undivided possession while seeking a division of the expenses associated with that possession. LMR v JFR 2010 BCSC 363

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.

Wills Variation-Assets Passing Outside of the Estate

Assets Passing Outside of the Estate

generally speaking, claimants do not have a claim against assets that pass “outside” of the estate in wills variation claims. The exceptions are if the transfer is tainted and legal remedies such  as resulting trust, undue influence and lack of mental capacity are available.

 

Assets Passing – Probably most people in North America die holding assets that pass from their name to others or their estate that pass both ” inside” and “outside” of the estate.

A deceased’s will only distributes assets that were personally owned by the deceased at the time of his or her death, and these assets are said to pass through, under  or “inside” of the deceased’s estate.

Many other assets owned by the deceased may pass “outside” of the deceased’s estate by mechanisms independent of the will.

In a wills variation action brought under section 60 WESA, a claim is limited to assets in British Columbia that pass “inside of the estate” pursuant to the will of the deceased.

If the deceased is not have a will, then there cannot be a wills variation claim and the assets will pass as an intestacy.

Similarly, there is no wills variation claim in the following assets owned by a deceased:

1.       Property owned as a joint tenant with a right of survivorship with someone else;

2.       named beneficiaries under an insurance policy;

3.       proceeds from pension plans with named beneficiaries;

4.       trusts;

5.       gifts made during the lifetime of the deceased; 

The list may not be exhaustive but it includes probably a majority of assets owned by the majority of Americans and Canadians that pass upon a death.

For example, most spousal couples likely own their property in joint tenancy with a right of survivorship, so that upon the first of the owners to pass, the property automatically goes to the survivor and does not form part of the assets that pass under the will.

As previously mentioned, it is not possible to bring a wills variation claim against a proper joint tenancy.

Joint Tenancy Severed By Conduct

Joint Tenancy Severed By Conduct

Lescano v Unlu 2016 BCSC 1535 is a case exemplifying how conduct of joint tenants that is inconsistent with joint tenancy can have the legal effect of severing the joint tenancy into a tenancy in common.

The court found that if the joint tenants ever were a couple that it long ago ended and that at least one of the parties, if not both, did not understand the legal effect of a joint tenancy and did not want it from the outset. A hand written will prepared by one of the joint owners indicated that she wished her share of the property to go to her three children equally in the event of her death.

Was the joint tenancy severed?

[6]             There is no dispute that any discussion of severance of a joint tenancy must begin with the decision of Vice-Chancellor Wood in Williams v. Hensman (1861), 70 E.R. 862, at p. 867.  Vice-Chancellor Wood set out the three ways in which a joint tenancy may be severed.

These ways − often referred to subsequently as “Rules” − were summarized by Chief Justice Winkler, for the Ontario Court of Appeal, in the last sentence of para. 34 of Hansen Estate v. Hansen, 2012 ONCA 112, as follows:

Rule 1:  unilaterally acting on one’s own share, such as selling or encumbering it.

Rule 2:  a mutual agreement between the co-owners to sever the joint tenancy, and,

Rule 3:  any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.

[7]             In Hansen Estate, the Ontario Court of Appeal expressly declined to follow or adopt what may be described as an added pre-requisite enunciated by Justice Southin, writing on behalf of the British Columbia Court of Appeal in Tompkins Estate v. Tompkins, [1993] B.C.J. No. 445 (C.A.).  In Tompkins Estate, Justice Southin stated that Vice-Chancellor Wood’s “Rules” were a species of estoppel.  At para. 17 of her Reasons she wrote:

In my opinion, the Vice-Chancellor was postulating a species of estoppel which might be put thus:  if joint tenants conduct themselves in their legal dealings with one another on a footing consonant only with their interests being several and not joint, one of them may not later resile and assert the interest was joint if a right of survivorship in him would be unjust to his fellow co-tenants who have themselves proceeded on the footing the interests were several.

[8]             Based on this conclusion, Justice Southin stated that the party seeking to assert severance must show that it relied on the acts of a co-tenant, to its detriment.

[9]             In Hansen Estate, Chief Justice Winkler provided cogent and compelling reasons for rejection of these added elements.  In paras. 47 and 49 through 51, Chief Justice Winkler explained the basis of his rejection of Justice Southin’s requirements for proof of reliance and detriment.

[10]         Having carefully considered both the decision in Hansen Estate and the cases cited to me that have applied it; and the decision in Tompkins Estate and the cases cited to me that have applied it: I prefer the reasoning in Hansen Estate.  I am satisfied, however, that even if I am bound to follow Tompkins Estate, the plaintiffs in the case at bar have established that a severance of the joint tenancy between Delma B and Mr. Unlu occurred before Delma B’s death in 2015.

[11]         As discussed in Hansen Estate, and in Tompkins Estate, the primary characteristic distinguishing joint tenancy from tenancy in common is the right of survivorship − that is, that upon the death of one joint tenant, his or her interest passes by operation of law to the other joint tenant or tenants.

 I am satisfied that the facts referred to in the Statement of Agreed Facts, supplemented by the facts set out in these Reasons, establish a course of dealing indicating that Mr. Unlu and Delma B considered themselves to have become tenants in common.

[52]         I have already referred to Mr. Unlu’s testimony indicating that he never wanted joint tenancy and from the outset did not understand or agree that on his death the entire property (the 99% interest he and Delma B held) would become the property of Delma B.  The handwritten “will” prepared by Delma B in December 2000 indicates that she also did not intend that her interest in the property pass to Mr. Unlu by right of survivorship.  She intended her “share” of the property to go to her three children in the event of her death.

[53]         If there was a spousal relationship between Mr. Unlu and Delma B, it ended soon after the purchase of the Richmond home.  Thereafter, the two lived separate and apart in the same home and conducted separate lives.  They did not maintain joint bank accounts or intermingle their finances in any way.  The parties did not maintain any other joint assets.  Delma B moved out of the home temporarily in 2004 and later Mr. Unlu permanently vacated the premises, leaving Delma B in sole possession.

[54]         In 2004, Mr. Unlu attempted to make a will leaving his share of the property to his daughter.  Mr. Unlu’s lawyer, Mr. Ash, wrote to Delma B and asserted on behalf of Mr. Ash that the joint tenancy had been severed at the time the parties separated.  Delma B did not, so far as the evidence indicates, dispute that assertion.  I am of the view that Delma B, who apparently had no legal representation at that time, relied on the representation made by Mr. Ash on behalf of Mr. Unlu, to her detriment.  After December 2005, she paid all of the expenses associated with the home, including the entirety of the mortgage and taxes, without demanding a contribution from Mr. Unlu.  Even after the fire occurred and she could no longer reside in the property, Delma B continued to bear all of the costs of preserving the property.  I conclude she would not have done so had she believed that in the event of her death, the entire benefit of payments made solely by her would go to Mr. Unlu.

[55]         I conclude that the joint tenancy between Mr. Unlu and Delma B was severed prior to the death of Delma B and that at the time of her death, the parties were tenants in common.

Judgement Does Not Sever Joint Tenancy

Judgement Does Not Sever Joint Tenancy

The registration of a judgement against one owner of a jointly owned property does not sever joint tenancy.

If the only asset owned by the judgement debtor is the joint tenancy property, then registration of the judgment against the interest of the debtor will not sever the joint tenancy under the execution proceedings.

Canadian Imperial Bank of Commerce v. Muntain [1985] B.C. J. No. 3075  followed  Re Young [1968] B.C.J. No. 209, 70 D.L.R. (2d) 594 (BCCA) which stated:

28 In my view the registration of a judgment under s. 35 of our Execution Act does not sever a joint tenancy and I revert to the words of the trial Judge in the Power v. Grace case (approved by the Court of Appeal) [[1932] 1 D.L.R. at p. 892]:

The trend of the authorities is that a mere lien or charge on the land, either by a co-tenant or by operation of law, is not sufficient to sever the joint tenancy; there must be something that amounts to an alienation of title.
…

34 Immediately following the death of the debtor it seems to be beyond question that his interest in the joint tenancy existing prior to his death was extinguished. There still remained entered in the register of judgments an entry made under s. 35 of the Execution Act indicating the indebtedness of the deceased debtor. As at that moment the legal representative of the judgment debtor had no interest in the lands in question because of the operation of the jus accrescendi. The question then is whether the registration of the judgment, a first step in an uncompleted execution, constituted an encroachment upon the surviving joint tenant’s rights acquired under the jus accrescendi.

35 Appellant admits that if the execution procedure under ss. 33 to 59 of the Execution Act had been carried to a point where an order for sale was made, the jus accrescendi would have been extinguished. It is not necessary to make a finding on this point here.

36 It is my view that following the death of the debtor-joint tenant, the judgment creditor had no more than a “charge” or “encumbrance” against an interest which no longer existed.

Rebutting the Presumption of Resulting Trust

Rebutting the Presumption of Resulting Trust

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

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

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

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

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

See also Schouten Estate para. 5.

[124]     The most persuasive evidence is contemporaneous with the transfer.  Evidence of transactions or statements following the transfer may be taken into account if they explain the intention of the time of the transfer: Harshenin at paras. 45 to 46.  I refer to the following statements of the court in Harshenin:

[44]      The court must weigh all of the relevant evidence, both direct and circumstantial, in an attempt to ascertain on a balance of probabilities the transferor’s actual intention. The assessment may include any reasonable inferences that are sought to be drawn from the evidence, including the “inherent probability or improbability of competing explanations as to the transferor’s intent”: Fuller v. Harper, 2010 BCCA 421 at para. 49. In other words, the court may consider if the transferor had any rational purpose for the transfer, other than as a gift.

[45]      The traditional rule was that evidence adduced to show the evident intention of the transferor “ought to be contemporaneous or nearly so to the transaction”: Pecore at para. 56. However, this rigid rule has lost much of its force, and the Supreme Court of Canada concluded at para. 59 of Pecore:

[59] Similarly, I am of the view that the evidence of intention that arises subsequent to a transfer should not automatically be excluded if it does not comply with the Shephard v. Cartright rule. Such evidence, however, must be relevant to the intention of the transferor at the time of the transfer: Taylor v. Wallbridge (1879), 2 S.C.R. 616. The trial judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention.

[46]      The court therefore must approach any evidence of intention that arises subsequent to the transaction at issue with considerable caution and carefully assess the weight it ought to be accorded.

Consequently, evidence contemporaneous to the transfer relevant to the intention of the transferor, if assessed reliable, may be accepted to determine the transferor’s actual intention

5 Survivorship Rules Under WESA

Survivorship Rules Under WESA

Survivorship is concerned with the factual question of determining the order of death in a common disaster between family members .

Much of estate law is based on a body of law and statutes that govern the law of succession- the transfer of personal wealth after death, and the rules relating to Survivorship  form part of this body of law.

Under estate law a gift in a will to a beneficiary who has predeceased the will maker will causes that gift to lapse and fall into the estate residue, and to  the surviving residual beneficiaries.

Thus the law developed under estate law that the younger person is presumed to have survived the older person and thus the estate of the younger person would inherit.

The difficulty that arose over the years in common fatalities is that under the Insurance Act, the beneficiary is presumed to have predeceased the insured person . This presumption applies today and is found S 83 Insurance Act  and s 130 for accident and sickness insurance.

This obvious conflict in the two approaches gave rise to legal conflict and WESA set out to change it by bringing the law more into conformity with the approach  of the Insurance act.

Survivorship Rules Under WESA:

  1. In situations where it is unclear as to the order of death as to who survived who will be determined as if each deceased person is presumed to have survived the other or others;
  2. The aforesaid presumption may be opted out of by expressing a contrary intention in another document, preferably  a will, but WESA contemplates an expanded definition to include deeds, trusts, insurance policy, pension, power of appointment documents such as Powers of Attorney.;
  3. If joint tenants die simultaneously their joint tenancy will be converted to a tenancy in common so their respective estates will benefit from their shares of the jointly held property;
  4. There is a mandatory 5 day survival; requirement in order to inherit, otherwise the person is presumed to have predeceased the other
  5. The 5 day mandatory also applies to posthumous births ( baby conceived but is born after death of will maker)

Mental Capacity Required to Marry and Separate Incorrect

Mental Capacity Required to Marry and Separate Incorrect

As any of the legions of matrimonial lawyers will tell you, it may be easy to get into this simple contract, but it is not at all that easy to extricate oneself from it.

In Wolfman-Stotland v. Stotland, 2011 BCCA 175 (B.C. C.A.), leave to appeal ref’d [2011] S.C.C.A. No. 242 (S.C.C.) the issue was whether Mrs. Stotland had the capacity necessary to form the intention to live separate and apart to support the application for a s. 57 declaration of no possibility of reconciliation, which has the effect of severing their joint assets and crystallizing family assets.

The wife suffered from dementia and her mistaken fear was that her husband’s “ sneaky” nephew would inherit her assets .

Mrs. Stotland suffered from mild to moderate cognitive impairment and was not capable of managing her financial affairs.

She was examined by a doctor, who concluded that she likely had the capacity to instruct counsel on the matter of her divorce.

Her only complaint about her husband of 55 years was that he “falls asleep at bingo” and despite that the court found that she had the mental capacity required to separate ( or conversely to marry) as it is the lowest test required for capacity.

The Court of Appeal dismissed the appeal and found that the wife met the lowest test of mental capacity required to separate under S 57 Family Law act, being the same test as that required to marry:

[23] In A.B. v. C.D., the husband, who opposed the granting of a s. 57 declaration, conceded that his wife had general capacity to manage her affairs and to instruct counsel. The husband sought a medical examination under then Rule 30(1) to establish that his wife suffered from a delusional disorder that informed her intention to live separate and apart. The chambers judge, in reasons indexed as 2008 BCSC 1155, concluded that since the wife had the capacity to conduct her own affairs and to instruct counsel, her adverse mental condition, if it existed, had no bearing on the issues to be determined in the divorce proceeding.

[24] On appeal, this Court upheld the chambers judge and adopted the comments in Professor Robertson’s text, Mental Disability and the Law in Canada, 2d ed. (Toronto: Carswell, 1994) referred to by the chambers judge at paras. 23-24 of his reasons:

[23] The capacity to form the intention to live separate and apart is discussed in Professor Gerald B. Robertson’s Mental Disability and the Law in Canada, 2nd ed., (Toronto: Carswell, 1994) at 272:
Where it is the mentally ill spouse who is alleged to have formed the intention to live separate and apart, the court must be satisfied that that spouse possessed the necessary mental capacity to form that intention. This is probably similar to capacity to marry, and involves an ability to appreciate the nature and consequences of abandoning the martial relationship.

[24] Professor Robertson went on to discuss the capacity to marry at pp. 253-254:
In order to enter into a valid marriage, each party must be capable, at the date of the marriage, of understanding the nature of the contract of marriage and the duties and responsibilities which it creates…. The test does not, of course, require the parties to be capable of understanding all the consequences of marriage; as one English judge aptly noted, few (if any) could satisfy such a test. …the common law test is probably only concerned with the legal consequences and responsibilities which form an essential part of the concept of marriage. Thus, if the parties are capable of understanding that the relationship is legally monogamous, indeterminable except by death or divorce, and involves mutual support and cohabitation, capacity is present. The reported cases indicate that the test is not a particularly demanding one. As was said in the leading English decision, “the contract of marriage is a very simple one, which does not require a high degree of intelligence to comprehend”.

… Capacity to marry may exist despite incapacity in other legal matters. This necessarily follows from the fact that the requirements of legal capacity vary significantly as between different areas of law, and must be applied specifically to the particular act or transaction which is in issue. Thus, for example, a person may lack testamentary capacity yet have capacity to marry. Similarly, a person may be capable of marrying despite having been declared mentally incompetent and having had a property guardian or guardian of the person appointed.

[25] This Court ultimately concluded:

[36] In summary, disordered or delusional thinking which may contribute to an individual’s intention to live separate and apart, does not diminish that individual’s capacity to form that intention, provided it does not reach the level of incapacity that interferes with the ability to manage his or her own affairs and instruct counsel. In this case, there is no probative value to the evidence the husband seeks to obtain by his R. 30(1) application as the wife admittedly has the higher level of capacity to manage her own affairs. As a result, the wife’s mental condition, even if she was found to be suffering from delusional disorder, cannot be an issue in the proceeding.

[26] A useful discussion of the hierarchy of levels of capacity is found in Calvert at paras. 54-56:

[54] Separation is the simplest act, requiring the lowest level of understanding. A person has to know with whom he or she does or does not want to live. Divorce, while still simple, requires a bit more understanding. It requires the desire to remain separate and to be no longer married to one’s spouse. It is the undoing of the contract of marriage.
[55] The contract of marriage has been described as the essence of simplicity, not requiring a high degree of intelligence to comprehend: Park, supra, at p. 1427. If marriage is simple, divorce must be equally simple. The American courts have recognized that the mental capacity required for divorce is the same as required for entering into marriage: re: Kutchins, 136 A. 3d 45 (Ill., 1985).

[56] There is a distinction between the decisions a person makes regarding personal m
matters such as where or with whom to live and decisions regarding financial matters. Financial matters require a higher level of understanding. The capacity to instruct counsel involves the ability to understand financial and legal issues. This puts it significantly higher on the competency hierarchy. It has been said that the highest level of capacity is that required to make a will: Park, supra, at p. 1426. (I note that Mr. Birnbaum felt that, in August 1994, he would have taken instructions for a will but for Dr. Hogan’s concern about her ability to instruct counsel.) While Mrs. Calvert may have lacked the ability to instruct counsel, that did not mean that she could not make the basic personal decision to separate and divorce.

[27] As the authorities make clear, the capacity to form the intention to live separate and apart has been accepted as equivalent to the capacity to enter into a marriage. As the Court stated in Calvert, the intention to separate requires the lowest level of understanding. The requisite capacity is not high, and is lower in the hierarchy than the capacity to manage one’s affairs.
. . .
[31] In my opinion, if, as Dr. Sloan has concluded, Mrs. Stotland has the capacity to instruct counsel, especially on financial matters related to a divorce, the test of capacity to form the intention to live separate and apart was met.
[Underlining added.]

Tenancy in Common – 3 Ways to Sever Joint Tenancy

ConvertingJoint Tenancy into Tenancy in Common

Zeligs Estate v Janes 2016 BCCA 280 contains an excellent review of the law relating to severance of a joint tenancy, thus converting it into a tenancy in common:

[45]        Like any owner, a joint tenant is entitled to deal freely with his or her interest in property.  Accordingly, a joint tenant may sever a joint tenancy, with or without the consent or knowledge of the other joint tenant(s) and subject to contrary statutory provision.  After a joint tenant dies, however, severance is no longer possible because death extinguishes the joint interest.  For this reason, a testamentary disposition cannot sever a joint tenancy:  Bergen v. Bergen, 2013 BCCA 492 (CanLII) at para. 40; Hansen Estate at para. 63; A.J. McClean, “Severance of Joint Tenancies” (1979) 57 Can. Bar Rev 1 at 2, 38-41.

[46]        When a joint tenancy is severed, the joint tenancy is converted into a tenancy in common and the right of survivorship is extinguished.  In consequence, each affected co-owner becomes entitled to a distinct share rather than an undivided interest in the whole: Bergen at para. 40; Flannigan v. Wotherspoon (1952), 7 W.W.R. (N.S.) 660 at 665 (B.C.S.C.).  In joint tenancies composed of more than two persons, a blend of interests may be present.  For example, if A, B and C are joint tenants a severance of A’s interest will convert it into a tenancy in common, however, B and C will continue to be joint tenants with rights of survivorship between themselves: McClean at 6; Law Reform Commission of British Columbia at 5.

[47]        Severance is typically effected in one of three ways: by one person’s acting unilaterally upon his or her own share so as to destroy the four unities (for example, by selling it); by mutual agreement (for example, by written contract); or by “any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common” (for example, by conduct which demonstrates all tenants mutually dealt with their interests as several).  Other possible modes of severance include bankruptcy, partition or an order made under matrimonial property legislation: Williams v. Hensman (1861), 70 E.R. 862 (Eng. Ch.); Tessier Estate v. Tessier, 2001 SKQB 399 (CanLII) at para. 8.

[48]        Vice-Chancellor Wood described the three primary modes of severance, now known as the “three rules”, in Williams at 867:

3 Ways to Sever Joint Tenancy:

  1. In the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share.  The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi.  Each one is at liberty to dispose of his own interest in such a manner as to sever it from the joint fund – losing, of course, at the same time, his own right to survivorship. 
  2. Secondly, a joint-tenancy may be severed by mutual agreement. 
  3. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.  When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the persons interested. You must find in this class of cases a course of dealing by which the shares of all the parties to the contest have been effected, as happened in the cases of Wilson v. Bell [(1843), 5 IR. Eq. 501 (Eng. Eq. Exch.)] and Jackson v. Jackson [(1804), 9 Ves. 591 (Eng. Ch.)]   

[49]        Rule 1 concerns the destruction of an essential unity by a joint tenant’s unilateral action.  As a matter of law, any such act automatically severs a joint tenancy: Bergen at para. 40.  Rules 2 and 3 concern the joint tenants’ common intention and operate in equity.  Where it would be unjust to permit parties to assert survivorship rights because of their conduct, equity intervenes to prevent them from doing so: Hansen Estate at para. 39; Ziff at 345.

[50]        Vice-Chancellor Wood’s judgment in Williams is the usual starting point in a severance analysis, although some jurists and commentators disagree on its meaning.  In particular, the extent to which rule 2 and rule 3 differ is controversial, as is the role, if any, that estoppel doctrine plays.  For example, in Tompkins Estate v. Tompkins (1993), 1993 CanLII 1119 (BC CA), 99 D.L.R. (4th) 193 (B.C.C.A.) Southin J.A. opined that Vice-Chancellor Wood was postulating a species of estoppel in rule 3 and disagreed with the trial judge’s view that severance requires either alienation or agreement, preferring to say it requires “… either alienation or agreement or facts which preclude one of the parties from asserting that there was no agreement” (199).  However, to the extent she interpreted rule 3 as a species of estoppel requiring proof of detrimental reliance, Winkler C.J.O disagreed in Hansen Estate, observing that a course of dealing sufficient to sever requires only that the co-owners knew of the other’s position and mutually treated their interests as several (at paras. 46-51).  In addition, some commentators question whether rules 2 and 3 are truly distinguishable: McClean at 16; Ziff at 345-347.

[51]        This case is primarily concerned with rule 1, the unilateral destruction of an essential unity.  As in Farley v. Pearlson, 2003 BCCA 37 (CanLII), it is thus unnecessary to analyse the full reach and meaning of Williams with respect to rules 2 and 3.  Nevertheless, at trial Mr. Zeligs argued that there was a rule 3 severance based on the parties’ course of conduct and the judge considered both rules 1 and 3, noting the diverging authorities.  In these circumstances, I think it prudent to comment on certain factors that may contribute to the controversy and suggest a possible route to its resolution.

[52]        The leading English authorities on severance are Williams and Burgess v. Rawnsley [1975] Ch. 429 (Eng. C.A.).  The reasons for judgment in both state that rules 2 and 3 cover separate methods of severing a joint tenancy, with severance by mutual agreement covered by rule 2.  However, in undertaking a rule 3 analysis courts sometimes focus on whether there was an implied agreement between the parties.  In other words, the parties’ course of dealings is sometimes analysed under rule 3 as evidence of facts from which an agreement to sever is inferred rather than as a separate method of severance: see, for example, Flannigan.  In my view, this approach blurs the line between rules 2 and 3.

[53]        I agree with Winkler C.J.O. in Hansen Estate that rule 3 is a conceptually distinct method of severance which does not encompass implied agreement.  I also agree with Wright J. in Tessier that the parties’ conduct may provide an evidentiary basis from which agreement can be inferred (at para. 12).  Nevertheless, mutual agreement, express or implied, is captured by rule 2 and should be analysed accordingly. The question under rule 3 is whether, in the absence of agreement, it would be unjust to permit a party to assert survivorship rights because of the parties’ mutual treatment of their interests.

[54]        Further, I see no reason to limit Southin J.A.’s rule 3 requirement of “facts which preclude one of the parties from asserting that there was no agreement” to cases involving detrimental reliance, nor do I think she necessarily did so.  Rather, in my view, on the facts of Tompkins Estate Southin J.A. considered it just to permit the respondent to assert survivorship rights, given the matrimonial context and the parties’ conduct, which, unlike the conduct at issue in Williams, included no element of reliance.  However, on different facts it might well be unjust to do so where co-owners have mutually demonstrated a common intention to treat their interests as several.  Depending on the circumstances, this may be true regardless of whether detrimental reliance can be shown: Hansen Estate at paras. 35-51.

[55]        Ascertaining whether a joint tenancy has been severed is a factual question, often determined on the basis of reasonable inference(s).  It requires the application of a legal standard to the facts as found by the trial judge.  Accordingly, on appeal the standard of palpable and overriding error applies to the judge’s finding that a severance has been effected:  Fuller at paras. 36-38; Flannigan at 666; Tessier at para. 12.

Rule 1 – Severance by Unilateral Action

[56]        When a joint tenant transfers his or her property interest the unity of title is broken and severance follows, subject to contrary statutory provision. For example, in some systems of title registration a transfer must be registered or the co-owner’s consent obtained before a severance takes effect: see, Land Titles Act, 2000, S.S. 2000, c. L-5.1, s. 156.  In British Columbia, however, s. 18(3) of the Property Law Act, R.S.B.C. 1996, c. 377 provides that a joint tenant may sever a joint tenancy by transferring property to himself or herself without requiring that the co-owner(s) be notified and s. 30 of the Law and Equity Act, R.S.B.C. 1996, c. 253 allows for severance by transfer of personal property to oneself and another.  In addition, s. 20 of the LTA provides that an instrument purporting to transfer an interest in land does not pass a legal or equitable interest unless the instrument is registered, except as against the person making the instrument.

[57]        In Stonehouse v. British Columbia (Attorney General), 1961 CanLII 48 (SCC), [1962] S.C.R. 103 the Supreme Court of Canada considered a predecessor provision similar to s. 20 of the LTA.  Based on the exception for the maker of the instrument, the court held an unregistered transfer deed executed by a joint tenant severed the joint tenancy.  This result followed because, without purporting to pass the other tenant’s interest, by dealing with her own, the transferring joint tenant changed the character of the other into a tenancy in common by operation of law.  In effect, the exception embedded within the statutory provision preserved the common law rule. 

[58]        Unlike transfers, mortgages do not usually take effect by way of conveyance; they operate by way of security as a charge against title.  In British Columbia, s. 231 of the LTA provides that a mortgage operates to charge the mortgagor’s estate or interest in land.  In consequence, the four unities are not broken when a mortgage is granted and a joint tenancy is not severed: Ziff at 344.  Nor does a unilateral statement of intention to sever effect a severance.  Some form of action or mutual agreement is required to sever a joint tenancy: Walker v. Dubord (1992), 1992 CanLII 2095 (BC CA), 67 B.C.L.R. (2d) 302 (C.A.) at para. 23.

[59]        Property can be converted from one form to another without effecting a severance, but not by unilateral action.  For example, it is possible to convert land into money or vice versa without necessarily severing the joint tenancy.  The law permits joint tenancy in personal property no less than in realty, thus a joint tenancy may carry on following a land sale by all joint owners because joint ownership may continue in relation to the sale proceeds: Allingham v. Allingham, [1932] VLR 469; Walker at para. 41.  However, if the sale proceeds are divided the four unities are destroyed and, in consequence, the joint tenancy is severed: Flannigan at 665-666; Tessier at paras. 11-12; Ziff at 345.

Further reading on tenancy in common

Joint Tenancy vs. Tenancy in Common

Joint Tenancy, Tenancy in Common and the Right of Survivorship

The Nature of a Joint Tenancy