Secret Trusts

secret trustsSecret trusts likely exist much more than the public believes, as after all, they are secret.

WHAT ARE SECRET TRUSTS?

 In Champoise v. Champoise-Prost Estate, 2000 BCCA 426(B.C. C.A.) at paras. 15-16, the Court of Appeal summarized the fundamental principles which inform the analysis:

 

[15] It is useful to review the basic principles of secret trusts.

A secret trust arises where a person gives property to another, communicating to that person an intention that the property be dealt with in a specific way upon the happening of an event, and the donee accepts the obligation. The essential elements are the intention of the donor, a communication of the intention to the donee and acceptance of the obligation by the donee… [Citation omitted.]

 

[16] In addition to these requirements for an enforceable secret trust, the three certainties necessary for any express trust must be exhibited; the words making the trust must be imperative, the subject of the trust must be certain, and the object or person intended to take the benefit of the trust must be certain. Further, those certainties must be exhibited at the time the trust is created: Re Beardmore Trusts, [1951] 1 D.L.R. 41; D.W.M. Waters, Law of Trusts in Canada, supra at 107.

 

In Anderson v Anderson 2010 BCSC 911, a claim for a secret trust was dismissed.

The deceased prior to his death transferred his interest in a cottage to his second wife for one dollar and other good and valuable consideration.

The plaintiffs were the deceased’s children from his first marriage. For several years following the deceased’s death, the plaintiffs and their families continue to enjoy access to the recreational property.

The defendants second wife however plan to sell the cottage, and the plaintiffs commenced court action for a declaration that the defendant held the property in trust for the plaintiffs, including a secret trust

The action was dismissed as the court found that the deceased intended to make a gift of the cottage to his spouse, and that she did not hold the property on any conditions of trust.

 

166 ” This type of trust, although an express trust, is secret because the donee’s obligations are not referenced on the face of the document under which the property is given to the donee.

 

167 The crux of this case turns on the Deceased’s intention relative to the disposition of the Property when he transferred it to the defendant on September 7, 1999.

 

168 The defendant and the Deceased were married for over 16 years and there is no evidence to suggest that their relationship was anything other than loving and supportive. At the time the Deceased transferred the Property to the defendant it was their only home. They had invested some the proceeds from the sale of their home in Duncan, which they owned jointly, in renovating the Property. The defendant also had purchased some materials from her former employer for those renovations and contributed her own labour to them.

 

169 As of the date of the transfer, the Deceased was 65 years old and he held assets of relatively modest value. The defendant was 57 years old. She was the designated beneficiary on the Deceased’s RRSP which was valued at approximately $100,000. She was the joint account holder on his bank account which had funds of $4,000 to $5,000. Upon his death, she became entitled to his survivor pension payments of $1,900 per month. She also received any vehicles he owned. She was also entitled to repayment of the loan of $35,000 that she and the defendant had made to Ms. Potts and her husband in 1995.

 

170 It is apparent from the manner in which the Deceased arranged his affairs that he clearly intended to benefit his spouse on his death. She had been the sole beneficiary under his will since December 1990. It is a reasonable inference that he believed that his primary obligation was to his younger spouse whom he expected would outlive him by many years.

 

171 Ruth Anderson and Walter Levick were the only disinterested witnesses in this proceeding. Their evidence supports a finding that the Deceased intended to gift the Property to his wife on September 7, 1999. I have accorded their evidence considerable weight.

 

172 It is entirely consistent with the probabilities of the situation that on September 7, 1999 the Deceased intended to give the whole of the legal and beneficial interest in the Property to the defendant. This course was also in keeping with his testamentary intentions expressed in his Will. If the presumption of advancement does apply, I find that, on a balance of probabilities, the plaintiffs have failed to adduce sufficient evidence to rebut it.

 

173 In the event the presumption of advancement is not applicable and the converse presumption of resulting trust governs, the result is no different. In weighing all of the evidence, I am satisfied on a balance of probabilities that on September 7, 1999 the Deceased intended to gift the beneficial ownership of the Property to the defendant absolutely.

 

174 In their final submissions, the plaintiffs did not argue that the Deceased intended that the Property would form part of his estate. For completeness, however I briefly address the claim for resulting trust as it is included in the amended statement of claim.

 

175 The evidence does not support a finding that when the Deceased transferred the Property to his wife in September 1999, he intended to retain the beneficial interest. Although Jeffrey in his testimony made some vague references to “tax planning”, there was no cogent explanation for the Deceased retaining the beneficial interest in the Property when he knew he was terminally ill.

 

176 In any case, such an assertion contradicts the plaintiffs’ primary submission that their father transferred the Property to the defendant on certain express trust terms: in essence, that the defendant could have the “unfettered use” of the Property for her lifetime, but when she “was done with it” she would transfer the Property to the three Anderson children.

 

177 I have considered all of the cases submitted by both parties on the secret trust claim. While I found the authorities instructive, I do not propose to review them as each case turns on its own unique facts.

 

178 I have, however, considered all of the evidence in light of the test enunciated in Champoise. For the reasons set out below, the evidence does not support a finding that the defendant holds the Property in trust for the Anderson children.

 

179 There was no direct evidence adduced at trial to support the allegation that when the Deceased transferred the Property to the defendant, he communicated to her his intention that she could have the use of the Property for her lifetime or as long as she wished, but thereafter the Property was to devolve to his three children. There was no evidence that she accepted such an obligation. Nor can this Court, upon careful consideration, reasonably infer that these essential requirements for an enforceable secret trust have been established on the evidence.

 

180 Moreover, the plaintiffs have not satisfied the Court of the existence of the three certainties required to prove any express trust. The subject of the trust was clearly the Property. However, insofar as the certainty of intention, as discussed above, the evidence does not establish that the Deceased intended to impose any trust condition on the defendant when he transferred the Property to her. This is fatal to the plaintiffs’ trust claim.

 

181 The preponderance of the probabilities that emerge from the totality of the evidence does not support a finding that prior to the Deceased’s death, the plaintiffs understood that the Property would eventually devolve to the three Anderson children. The plaintiffs’ own evidence is somewhat conflicting as to whether the intended ultimate beneficiary of the alleged trust was Darin alone or the three children. I find the plaintiffs have failed to demonstrate certainty of the objects of the trust at the time the trust was allegedly created.

 

182 I am satisfied that the plaintiffs in September 1999 were fully aware that their father had gifted the Property to the defendant and that is why it was not a source of dispute at the time of the Deceased’s death. Rather what lies at the heart of their case is their profound disappointment in the defendant’s decision in 2006 to dispose of the Property.

Presumption of Resulting Trust Rebutted By Evidence of Love and Affection

IN the Spirit of ThingsThere is a presumption of resulting trust over a gift when a substantial asset is transferred for little or no consideration,-here the presumption was overcome by evidence of love and affection.

Oord v Oord 2012 BCSC 1857 is the classic scenario where a well-intentioned family ended up in litigation concerning the ownership to the home which the plaintiff and her deceased husband purchased with their son and his wife and two children. The purchase price for the home came entirely from the parents but title was registered in the names of both parents and both the son and daughter-in-law as joint tenants. After the death of the husband, his interest was transferred to the remaining three joint tenants in equal shares. The son and the daughter-in-law subsequently separated.

The mother plaintiff brought this action for a declaration that the son and daughter in law held part of their interest in the property in trust for the mother, for an order for partition and sale of the property, and for division of the proceeds in accordance with the beneficial interest. The court dismissed the action and found that as the monies used to purchase the property came entirely from the parents, the registration of title to the property and all four names amounted to a gratuitous transfer in favor of the son and daughter-in-law.

The presumption of advancement could not apply, and the presumption of resulting trust applied, but was rebutted by the sun with regard to the initial payment to purchase the lot. The existence of love and affection and desire on the part of the parents to assist their children was relevant in the courts determination as to whether the presumption of resulting trust was rebutted. The court found that the living arrangement was intended to be a permanent situation, and that the parents intended to make a gift of one half of the purchase price of the property, because they knew it was the only way such an arrangement would be possible. The court ordered partition and sale of the property, finding that sale was the only method for division of the parties interests.

In the leading case, Pecore v. Pecore, [2007] 1 S.C.R. 795 [Pecore], Mr. Justice Rothstein, writing for the majority, discussed the principles to be applied by the court when dealing with gratuitous transfers and determining whether a resulting trust was created or whether the transfer was a gift. He began by defining the competing notions of resulting trust and advancement at paras. 20 – 21:

20 A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner … .

21 Advancement is a gift during the transferor’s lifetime to a transferee who, by marriage or parent-child relationship, is financially dependent on the transferor.

[28] While it is the actual intention of the transferor at the time of the transfer that determines how a dispute concerning a gratuitous transfer should be determined, the law has developed certain rebuttable presumptions that will arise, depending on the circumstances. Rothstein J. referred to these presumptions at para. 22, as follows:

22 In certain circumstances which are discussed below, there will be a presumption of resulting trust or presumption of advancement. Each are rebuttable presumptions of law: see e.g. Re Mailman Estate, [1941] S.C.R. 368, at p. 374; Niles v. Lake, [1947] S.C.R. 291; Rathwell v. Rathwell, [1978] 2 S.C.R. 436, at p. 451; J. Sopinka, S. N. Lederman and A. W. Bryant, The Law of Evidence in Canada (2nd ed. 1999), at p. 115. A rebuttable presumption of law is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption. The presumption shifts the burden of persuasion to the opposing party who must rebut the presumption: see Sopinka et al., at pp. 105 – 6.

[29] With regard to gratuitous transfers, it is the presumption of a resulting trust that generally applies to gratuitous transfers as stated at para. 24 of Pecore:

24 The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters’ Law of Trusts, at p. 375, and E. E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts.

[30] The rebuttable presumption of advancement was restricted in Pecore to gratuitous transfers from a parent to a minor child (para. 40).

[31] As Rothstein J. remarked at para. 41:

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

[32] If the particular circumstances give rise to the presumption of a resulting trust, the burden of proof falls upon the party challenging the formation of a resulting trust to establish that the transfer was a gift. The standard of proof that is applicable to rebut the presumption is the balance of probabilities (Pecore at para. 43). The approach to be taken by the trial judge in examining this rebuttal is set out at para. 44 of Pecore:

44 As in other civil cases, regardless of the legal burden, both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. Thus, as discussed by Sopinka et al. in The Law of Evidence in Canada, at p. 116, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.

[33] The evidence that a court may consider in determining the intent of the transferor includes evidence that arises subsequent to a transfer provided that the evidence is relevant to the intention of the transferor at the time of the transfer (Pecore at para. 59).

Court Finds Transfer of House from Mother to Son a Valid Gift, Subject to a Life Interest of Financial Support For Mother

Transfer of House

Ruff v Ruff 2013 BCSC 169 is a very interesting and creative judgment relating to the thorny question of how do the courts treat a gift of real property from a parent to an adult child, when the parent subsequently changes his or her mind and demands the return of title to the property.

In this particular case the court found that the adult did intend to get the house to the son, and thus allowed the sun to keep the home, but found that the adult also expected that she would remain in the house, and thus a trust was created such that the sale proceeds from the home would be held in trust for the adults lifetime, and the income would be available for the adults reasonable maintenance and support.

The plaintiff adult, transferred title to her house to her son, the defendant in 2005.

The adult remained in the house alone until 2008 when the son and his wife moved in with her, when she was then 88 years of age.

After approximately 2 years friction had developed between the parties to the extent that litigation was commenced by the mother, who sought a declaration claiming that the title to her house was held in trust for her by her son. The litigation was commenced after the defendant had taken steps to sell the property.

The court allowed the property to be sold, but found that the proceeds should be held in trust for the plaintiffs lifetime, and the income used for her support.

 

Transfer of House

The following quotes of law are taken from the decision:

 63]         I repeat that the relevant time to determine the intent of Freida Ruff was the time of the transfer: see Farrell Estate v. Turner Estate, 2002 BCSC 165 at para. 26, and Hamilton Estate, supra, at para. 74.

[64]         It is Freida Ruff’s intent, and hers alone, that is relevant: see Kerr v. Baranow, 2011 SCC 10 at para. 25.

[65]         Evidence tendered to show Freida Ruff’s intent at the time of the transfer should be contemporaneous to the time of transfer: Pecore at para. 56. Evidence of intention that arises after the transfer may be admitted if it can be shown to be relevant to the intention of the transferor at the time of the transfer: Pecore at para. 59. Evidence arising after a transfer may be unreliable for a variety of reasons, not the least of which can be remorse on the part of the transferor, or self-interested justification on the part of the transferee, and its relevance to actual intent at the time of transfer is questionable: see Fuller at para. 65.

[66]         Freida Ruff’s intention at the time of the transfer is not the same as her reasons for the transfer, although her motives shed some light on her intention. Thus, her desire to minimize the opportunities for her sons to quarrel over the portion of her estate represented by the property is relevant to the determination of her intention, but not determinative

Freida Ruff would not fare any better on the basis of unjust enrichment. The requirements are:

1.       An enrichment of the defendant;

2.       A corresponding deprivation of the plaintiff; and

3        An absence of juristic reason for the enrichment: Garland v. Consumer’s Gas Co., 2004 SCC 25 at para. 30.

Mrs. Ruff has established that she conferred a benefit on Robert through the transfer of title, with the corresponding detriment to her of giving up title. She would not succeed in a claim based in unjust enrichment because her intent to gift the land to Robert would constitute a juristic reason for the benefit/detriment result.

[80]         Had Freida Ruff succeeded in having the property restored to her, Robert and Denise Ruff would have had a valid claim in unjust enrichment. In that case, the money and labour they put into improvements to 140 South Petersen Road would have benefited Freida Ruff, to their corresponding detriment, and there would be no juristic reason to support that benefit/detriment result. As to remedy, however, they have not gone much further than a rough estimate of the money they have spent on improving the property, and have not attempted to quantify the amount or value of their labour.

Resulting Trust Upheld Transfer to One Child When Will Left Estate Equally

Resulting Trust Upheld Transfer to One Child When Will Left Estate Equally

Van De Keere v. Turner 81 ETR (3d) 175 , Manitoba Court of Appeal is important in that the court clearly recognizes that is is usually inconsistent for a parent who treats his children equally thorughout life, and his will, would have gifted %90 of his assets to just one of five children.

The deceased had five children, applicants J, R, G, I, and defendant D, with whom he had good relationships.

In August 2000, the deceased executed a new will, which divided his property equally to children and named D as executrix .

Between 2003 and 2007, the deceased transferred approximately $408,000 and camper van to D and her husband, B .

Applicants successfully claimed that deceased’s transfers to D and B were subject to resulting trust .

The trial judge held that deceased intended to gift camper to D and B , but the  Trial judge held that D did not rebut presumption of resulting trust with respect to the transfer of $408,000.

The trial judge found that gifting D over 90 per cent of his estate was inconsistent with deceased’s behaviour that showed intention to treat children equally

The trial judge found that there was no explanation why deceased would strip himself of almost all of his assets at time when he was still in relatively good health

D appealed but the appeal was dismissed holding that the trial judge did not introduce new test or place additional onus on D in determining whether presumption of resulting trust was rebutted, but rather, looked at evidence from common sense perspective

” The law states that, where a parent makes a gratuitous transfer of assets to an adult child, there is a presumption of a resulting trust, such that the child is presumed not to be the beneficial owner, but rather to hold the assets as a trustee for the parent. This is a rebuttable presumption, so the child claiming that the transfer was a valid gift can rebut it by bringing evidence to support his or her claim. The evidence required to rebut the presumption is evidence of the parent’s intention to make a gift, which must be proved on a balance of probabilities. (See Pecore v. Pecore.2001 SCC 17 (S.C.C.) at paras. 19-44, {2007]J_ S.C.R. 795fS.C.C.Ut paras. 19-44.)

Transfer of Land to Minor Nephew For No Consideration Upheld as Valid Gift

Transfer of Land

Wong v Huang 2012 BCSC 975  involves a case where the court upheld the transfer of a haft interest in a house as joint tenants between an elderly man and his 6 year old great nephew, the grandson of the plaintiff’s brother.

The defendant was born in 2000 and shortly after his birth the plaintiff executed a will leaving all his assets to the defendant instead of the plaintiff’s own children.

In September 2006 the plaintiff executed a transfer of an undivided one half interest in his home to the defendant as joint tenant. The defendant was six years old at the time and did not provide any consideration for the transfer.

The plaintiff signed an affidavit stating that the transfer was the”less expensive than giving ownership of the house to the defendant in my will”.

The plaintiffs reasoning for the transfer was that he wanted to be part of a larger family but the family bond that he had hoped for did not materialize, so he unsuccessfully requested the return of the half interest in property from the infant defendant which was refused.

The transferor then brought a court application for a declaration that the defendant held the property in trust for the transferor.

The court dismissed the claim and held that the effect of the transfer was to make a completed gift.

Because the transfer was made without consideration, the presumption of resulting trust did apply, but that presumption was rebutted by the evidence.

The court found that on the balance of probabilities, the transfers intention when he made the transfer was to make an unconditional gift to the transferee of one half interest in the property.

While the transfers wish that the property would become the family home and that may have been the motive for the gift, the gift was not conditional upon that wish becoming a reality.

The court further held that since the defendant is a minor child and the plaintiff is not his mother or father, then in that event the presumption of advancement should not apply.

Accordingly since the transfer was made without consideration, the presumption of resulting trust applies unless the presumption is rebutted on a balance of probabilities.

The onus is on the defendant to prove on a balance of probabilities that the plaintiffs intention in making the transfer was to complete a gift of one half interest in the property to the defendant.

The court found that the transfer of the property in 2006 was not an isolated event, but instead should be viewed in the context of the plaintiffs expressed intentions going back to 2000 when the defendant was born. The court in fact found five reasons in total to support the rum bottle of the presumption of resulting trust.

The Court quoted from the leading case Pecore v Pecore 2007 SCC 17:

 

[20]    Regardless of which presumption applies, either presumption may be rebutted by evidence on the ordinary civil standard of a balance of probabilities. The Court explained at paras. 42-44:

[42]     There has been some debate amongst courts and commentators over what amount of evidence is [page814] required to rebut a presumption. With regard to the presumption of resulting trust, some cases appear to suggest that the criminal standard, or at least a standard higher than the civil standard, is applicable: see e.g. Bayley v. Trusts and Guarantee Co., [1931] 1 D.L.R. 500 (Ont. S.C., App. Div.), at p. 505; Johnstone v. Johnstone (1913), 12 D.L.R. 537 (Ont. S.C., App. Div.), at p. 539. As for the presumption of advancement, some cases seem to suggest that only slight evidence will be required to rebut the presumptions: see e.g. Pettitt v. Pettitt, [1970] A.C. 777 (H.L), at p. 814; McGrath v. Wallis, [1995] 2 F.LR. 114 (Eng. C.A.), at pp. 115 and 122; Dreger (Litigation Guardian of) v. Dreger (1994), 5 E.T.R. (2d) 250 (Man. C.A.), at para. 31.

[43]     The weight of recent authority, however, suggests that the civil standard, the balance of probabilities, is applicable to rebut the presumptions: Burns Estate v. Mellon (2000), 48 O.R. (3d) 641 (C.A.), at paras. 5-21; Lohia v. Lohia, [2001] EWCA Civ 1691 (BAILII), at paras. 19-21; Dagle, at p. 210; Re Wilson, at para. 52. See also Sopinka et al., at p. 116. This is also my view. I see no reason to depart from the normal civil standard of proof. The evidence required to rebut both presumptions, therefore, is evidence of the transferor’s contrary intention on the balance of probabilities.

[44]     As in other civil cases, regardless of the legal burden, both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. Thus, as discussed by Sopinka et al. in The Law of Evidence in Canada, at p. 116, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.

[21]    In Pecore, the Court considered whether the presumption of advancement should be expanded to apply to a wider class of family relationships, including dependant adult children. The Court concluded at para. 40:

I am therefore of the opinion that the rebuttable presumption of advancement with regard to gratuitous transfers from parent to child should be preserved but be limited in application to transfers by mothers and fathers to minor children.

– See more at: http://www.disinherited.com/blog/transfer-land-minor-nephew-no-consideration-upheld-valid-gift#sthash.UvOcsxrJ.dpuf

The Doctrine of Knowing Receipt of Trust Assets

Knowing receiptThe doctrine of knowing receipt of trust assets is a principle of law that governs situations when a third party receives a trust property that itself has been realized through a  breach of  trust.

 Simply put, a party cannot, with knowledge of a trust, receive trust property in breach of that trust: see Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805 (S.C.C.).

 

The elements of the doctrine of knowing receipt were summarized by the Ontario Court of Appeal in Waxman v. Waxman (2004), 186 O.A.C. 201 (Ont. C.A.), leave to appeal refused [2004] S.C.C.A. No. 291 (S.C.C.), at paras. 553 as follows:

“The elements of the doctrine of knowing receipt are set out in the Perell article, supra, at 110: a trust or fiduciary relationship; the third party receiving property from the trust or fiduciary relationship in his or her own personal capacity; and the third party having actual or constructive knowledge that the property was transferred in breach of trust or fiduciary duty. Thus liability for knowing receipt does not extend beyond the property which the third party knows (or is deemed to know) has been received in breach of trust or fiduciary duty.”

 

This doctrine was also discussed by the Supreme Court of Canada in Gold v. Rosenberg, [1997] 3 S.C.R. 767, [1997] S.C.J. No. 93 (S.C.C.) 22     In Gold v. Rosenberg , Iacobucci J. explained:

“26 A person who has not been appointed as a trustee may, under certain circumstances, attract the liabilities of trusteeship. In Barnes v. Addy (1874), L.R. 9 Ch. App. 244, Lord Selborne L.C. explained that there are three situations in which a breach of trust may give rise to liability in a person who is a stranger to the trust.

First, a person may be liable as a trustee de son tort. The facts of this case do not require consideration of this category of liability.

Second, a person will be liable if he or she knowingly assisted in a fraudulent and dishonest breach of trust. This type of liability is referred to as “knowing assistance”.

And third, depending upon considerations of notice, equity may impose liability if the defendant received, in his or her own right, property obtained through breach of trust. This last category of liability is referred to as “knowing receipt”…

41 The essence of a knowing receipt claim is that, by receiving the trust property, the defendant has been enriched. Because the property was subject to a trust in favour of the plaintiff, the defendant’s enrichment was at the plaintiff’s expense. The claim, accordingly, falls within the law of restitution. As Denning J. said in Nelson v. Larholt, [1948] 1 K.B. 339, at p. 343:”

 

In Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805 (S.C.C.)  the court outlines a two-part test for liability:

liability under the doctrine of “knowing receipt” requires a stranger to have received monies for his own use or benefit and requires the stranger to have knowledge or constructive knowledge — i.e. the stranger knew or should have known — that the funds were received by him unlawfully. In order for Lloyd to be liable in “knowing receipt” for the amount of monies directed to his invoices, the plaintiff has to establish that Lloyd knew, or ought to have known that the monies paid against his account were owing to Nash.

What Is an Express Trust?

What Is an Express Trust?

Chambers v Chambers 2012 BCSC 81 involves  litigation between a 90-year-old brother and his younger 79-year-old brother regarding the percentage of ownership in a house that the older brother  (A)  purchased so that the younger brother ( B)  could live in.

The house was purchased in 2005 by A with his own money.

The idea was that brother B would have a place to live until he died.

A  had initially told B that he would register the house in joints tenancy, but after meeting with a lawyer, he subsequently told B that he would give him 1% interest on title as a tenant in common, which he did.

In 2010 the house was sold over the objections of B who refused to sign the sale documents because he objected to receiving only 1% of the sale proceeds.

By agreement one half of the sale proceeds were held by a lawyer while B brought an application to court for a finding that 50% of the sale proceeds of the home were held in trust for him.

His application was dismissed and he was only entitled to 1%.

His first argument was that of  Express Trust, and this was dismissed on the basis of no evidence of such a trust:

 

An express trust requires a settlor, a beneficiary, a trust corpus, words of settlement, certainty of object and certainty of obligation.

In order for an express trust to arise there must be certainty of intention, subject matter and object. There must also be a transfer of property to the trustee

In order to create an express trust in circumstances such as these, the three requisite certainties must be present.

In Saugestad v. Saugestad, 2006 BCSC 1839, the Court said the following at para. 82:

The requirements for the creation of an express trust include the three certainties:

1) the language of the settlor must be imperative,

2) the subject matter or trust property must be certain,

3) and the objects of the trust must be certain

Purported Gift Set Aside – Resulting Trust Found

NO gift wrappedPurported Gift Set Aside

Resulting Trust Found

Sutherland, Committee of Fountain v Dorland and Rendell 2012 BCSC 615 involves a plaintiff, as committee of her deceased mother’s estate, seeking to recover funds transferred by her mother in the last years of her life to the defendants, the plaintiff’s sister and nephew.

The plaintiff alleged that the deceased lacked mental capacity when she purportedly signed 35 cheques amounting to more than $153,000.

The deceased died shortly thereafter at the age of 90 years.

The plaintiff  also alleged that there was no consideration for any of the cheques the defendants  received, and consequently , the monies were impressed by a resulting trust in favor of the deceased estate.

The defendants asserted that the monies were gifts, but were l;argely unable to explain why or much about why they were gifts, especially at a time when the defendants were financially in need.

The court awarded judgment for the plaintiff for the amount of $131,000, and allowed a claim of $29,000 for services rendered, finding that at the time the services were rendered, the deceased had capacity.
The Court reviewed the law of resulting trusts from the most recent Supreme Court of Canada case on the topic:

[62]    The first legal concept relevant to the analysis is that of the resulting trust. As explained by Rothstein J. in Pecore v. Pecore, 2007 SCC 17 at paragraph 20:

A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner…

The law presumes a resulting trust in certain situations. Again, as explained by Rothstein J. at paragraph 24 of Pecore:
The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended…

To rebut the presumption, the transferee must show on a balance of probabilities that the transferor had an intention contrary to or inconsistent with the intention the law presumes in relation to gratuitous transfers (Pecore at paragraph 43).

disinherited.com is pleased that a perceptible trend seems to be developing that the trial court’s are now more willing to rely upon the presumption of resulting trust more strongly than perhaps they have in the past, despite the fact that the presumption has existed for hundreds of years in various forms.

The courts appear to be more willing to impose the existing law in these types of circumstances, to say that if a party receives a substantial gift without consideration, then the onus of proof is on the recipient of the gift to discharge the presumption of law and to prove that a gift was intended

What Are Trusts and Where Do They Come From

What Are Trusts?

It is not always easy to define exactly what a trust is.

Essentially a trust is an equitable obligation binding a person called a trustee, to deal with property over which he or she has control (the trust property), for the benefit of others who are called the beneficiaries.

The trustee may also be a beneficiary, and any one of the beneficiaries may enforce the obligation.

In law, a trust is not a separate legal entity( such as a corporation), except for specific purposes such as for income tax.

Simply put, it is a relationship where one party ( the settlor or testator in a will ) holds and administers  property on certain terms ( the trusts) for the benefit of another ( the beneficiary).

Where Did They Come From?

Trusts developed in England from the times of the crusades, and continue to do so  up to the present.

The law of trusts initially developed through co-operation between English barristers and the Courts, in order to avoid exorbitant taxes and to protect property for the benefit of widows and infants.

Trust settlements primary purpose then was to preserve capital, and Victorian trusts often obliged the eldest son the obligation to maintain widows, educate younger sons, and provide financial inducements for the marriage of sisters.

The entire system of trusts depended very much upon the incorruptibility of the trustee, usually the eldest son.

The Courts of Chancery gradually developed the concepts of “equity” and many of the legal principles relating to trusts were developed to protect beneficiaries against exploitation

For example,  two principal rules developed very early by the Courts of Chancery  were that the trustee must not profit from being trustee, and must not put him or herself in a position in which his or her interests conflict with his or her duty.

There was historical friction between the King’s representative and the Lord Chancellor who established the Courts of Equity.

The Courts of equity began to over rule the King as they had the discretion to declare that the real owner of property, in equity , ( fairness), was another person than found by the King.

Mother’s Advancement to Son Found to Be Loan and Not Gift On Appeal

Mother's Advancement of ,000 to Son , Found to Be Loan and Not Gift

Mother’s Advancement of $50,000 to Son Who Died Found to Be a Loan and Not a Gift By Appeal Court

It is often difficult to determine the intention of the grantor when monies are advanced for no consideration from one party to another and it is not properly.

This is often the case where one parent for exaple advances significant monnies to a child without stipulataing properly whether the moneis were a GIFT or a  LOAN.

This was the situation in the Beaverstock appeal decision Beaverstock v Beaverstock 2011 BCCA 413

In May, 2005, the appellant advanced $50,000 to her son Dan Beaverstock which he applied to refinancing the purchase of some property in Alberta. Dan Beaverstock subsequently died in December 2007. The respondent is his widow and is the executrix and sole beneficiary of his estate.

The appellant pleaded the $50,000 was a loan to her son and the respondent jointly, repayable on demand. Alternatively, she pleaded it was a loan to her son and that the respondent, as executrix, had improperly distributed the proceeds of the estate to herself without first paying this debt from the estate. She sought judgment for $50,000 against the respondent personally and in her capacity as executrix and a declaration that the respondent held all sums received from the estate in trust for her pending satisfaction of her claim. The respondent denied the advance was a loan to her and her husband and pleaded it was a gift to him. It was common ground that the appellant had demanded payment before action and that the respondent had refused to pay.

The parties agreed the action should be resolved on a summary trial pursuant to Rule 18A, summary trial

The appellant deposed that her son asked to borrow $50,000 to help him refinance the purchase of property that he had purchased in Alberta, since he was having difficulty meeting the mortgage payments. She said he “was very clear that he wanted to ‘borrow’ the money from me and that he was seeking a ‘loan’.” She said she agreed to lend him the money and that she caused it to be deposited in the joint account of her son and the respondent. She said she did not discuss the loan again with him until a few weeks before his death when he told her he was going into business with a friend and was optimistic that he “should be able to repay the loan very soon.” The appellant also filed affidavits of three persons who said her son had told them he had borrowed the money from the appellant and that he owed her the money.

The respondent deposed that she was Dan Beaverstock’s wife at the material times and that they had separated about two weeks before his death. She said she had no knowledge, at the time, of the transaction between her husband and his mother and did not know that $50,000 had been deposited in their joint account. She said, as well, that her husband told her prior to their separation that the appellant had given him $50,000 and that he believed this amount to be an advance on his inheritance and that he would never have to repay it. She also asserted facts calculated to cast doubt on the reliability of the evidence of the witnesses who deposed that Dan Beaverstock told them he had borrowed the money from his mother. The respondent also filed the affidavit of her mother, who deposed that the appellant told her “on numerous occasions” that Dan Beaverstock and the respondent “owed her $50,000 relating to money provided to assist with the Alberta property.” She said she told the appellant to talk to Dan Beaverstock about it and leave her out of it.

There was also conflicting evidence concerning whether the respondent had acknowledged to the appellant and others that the advance was a loan and had admitted an obligation to repay it.

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).

The trial judge made no mention of the presumption. Further, he made no finding of fact as to the appellant’s actual intention. Indeed, it appears he did not consider that question. Rather, it appears he considered the burden was on the appellant to establish certain specified things and that, since she failed to do so, her claim was unsustainable as a matter of law

The factors to which the trial judge referred are not substantive elements of a claim that a gratuitous transfer was a loan and not a gift. Rather, they are items of circumstantial evidence relevant to the transferor’s actual intention. Moreover, they are not exhaustive of the evidence that may be considered in determining the transferor’s intention. They are to be weighed by the trial judge along with all of the other evidence in determining the transferor’s actual intention as a matter of fact, which is the pivotal fact on which the action turned. It is not evident from the trial judge’s reasons that he turned his mind to this question.

In failing to begin his analysis with the presumption of resulting trust and in failing to make a finding as to the critical fact – the appellant’s actual intention – the trial judge erred in law.

 

Appeal Allowed- Mother Wins back the $50,000.