B.C. Supreme Court Holds Presumption of Resulting Trust Applies to Land

In a previous post, I asked the question “Does the Presumption of Resulting Trust Apply to Land in British Columbia?”

The answer according to the recent decision in Fuller v. Fuller Estate, 2008 BCSC 702, is “yes.”

Frederick Fuller disinherited his son. In his will, he made his friend Geramy Harper his executor, and left his entire estate to Geramy Harper’s wife, Lynn Robertson. He also signed a transfer of real estate he owned transferring the real estate into a joint tenancy with Mr. Harper. (Although the Land Title Office incorrectly registered the real estate as tenants in common, the court ordered rectification of the title to reflect the joint tenancy.)

After Frederick Fuller’s death on April 19, 2003, his only child, Steven Fuller, applied to vary Frederick Fuller’s will under the Wills Variation Act. That Act allows a court to vary a will to make such provision as the court considers adequate, just and equitable for a child out of the deceased’s estate, but does not apply to assets given to beneficiaries outside of the estate.

Steven Fuller argued that Geramy Harper really held the real estate in trust for Frederick Fuller’s estate. The law assumes bargains, rather than gifts. If one person transfers property to another gratuitously, British Columbia courts apply a presumption that the recipient holds the property as a trustee for the transferor. This is the presumption of resulting trust. The recipient has the onus of satisfying the court that the transferor intended to give the recipient the property as a gift.

But, as discussed in my previous post, there is another presumption under section 23 of the Land Title Act, that title reflects the beneficial ownership of the real estate. Therefore, there appears to be two presumptions that are often contrary to one another.

Mr. Harper argued that because of the presumption under the Land Title Act that title reflects the beneficial ownership of real estate, the presumption of resulting trust does not apply to real estate. He argued that the real estate passed to him by right of survivorship for his benefit.

The issue of whether Mr. Harper held the real estate on a resulting trust for the estate was important to the case; because if he did not, Steven Fuller’s claim would be limited to a share of his father’s other assets, which were worth only about $90,000.

Madam Justice Beames held that the presumption of resulting trust applied to real property in British Columbia. She wrote at paragraphs 21 and 22:

[21] In this case, the defendant was clearly a gratuitous transferee, and I find that the presumption of resulting trust applies. Even if the onus was not on the defendant, the result would be the same. It is clear on the defendant's own evidence that the deceased did not intend, at the time of the transfer, to gift to Mr. Harper a one-half interest in the property. He effected the transfer for estate planning purposes and to attempt to get the property out of the reach of his son. Had the parties had a falling out or had the deceased, who was clearly a man worried about his financial security, fallen on hard times, I have no doubt that he would have demanded, and considered that he was entitled to demand, a transfer back of the half-interest, just as he had done with regard to the plaintiff and the plaintiff's wife with respect to the same property.

[22] In addition, the defendant's own conduct in treating the property, or at least half of the property, as an estate asset, including by using estate funds to pay
taxes and utilities for the property, is further evidence that the property was not and was never intended to be an outright gift to the defendant.

Madam Justice Beames then considered Steven Fuller’s claim under the Wills Variation Act. Frederick Fuller had limited contact with his son for most of their lives, having separated from Steven Fuller’s mother when Steven Fuller was a child. Frederick Fuller had contributed funds to allow his son to purchase a house, and lived in a basement suite making rental payments to assist with the mortgage. But, Steven Fuller lost the house after Frederick Fuller moved out and stopped making the rental payments.

The court held that Frederick Fuller’s reasons for disinheriting his son—that he had made gifts to his son during his lifetime, and that Steven Fuller was estranged from him—were not rational and valid reasons for the disinheritance. The gifts were modest, and Frederick Fuller initiated the estrangement.

Madam Justice Beames awarded Steven Fuller two-thirds of the estate, which includes the real estate.

[Since I wrote about this decision, it has been overturned by the Court of Appeal. Although the Court of Appeal did not interfere with Madam Justice Beames' holding that the presumption of resulting trust applies to land, the Court of Appeal held that the evidence rebutted the presumption. Frederick Fuller intended to make a gift. See my post on the Court of Appeal decision here.]