Petrick (Trustee) v. Petrick

 

I have always urged caution in using joint tenancies as an estate-planning tool for the transfer of wealth from a parent to a child. One of my earliest blog posts, from September 17, 2005 is entitled “Six PotentialPitfalls Parents Should Consider Before Transferring Real Estate Into a JointTenancy with Their Children.” Jointures, including joint bank accounts, appear to be deceptively simple. On the death of a joint owner, the title to the asset passes by right-of-survivorship to the other joint co-owner (or owners). But it is not really that simple. In many cases, there is a question about whether the survivor is really entitled to keep the property or whether it is held in trust for the now deceased co-owner. There may also be unintended consequences of owning property in a joint tenancy. The nuances and risks are illustrated in the case I am about to discuss.

Dena Chilton and her son Rock Petrick purchased a condominium in New Westminster, British Columbia. Ms. Chilton contributed the down payment for the purchase and she lived in the condominium. Mr. Petrick did not live with her. They were both on the mortgage. There was conflicting evidence as to whether Mr. Petrick made any mortgage payments, but Ms. Chilton paid the bulk of the mortgage payments and other expenses associated with the condominium. Mr. Petrick later had financial problems, and Ms. Chilton asked him to transfer his interest in the title to her. He did so in July 2014.

Mr. Petrick went bankrupt, and following his bankruptcy, his trustee in bankruptcy applied to court to set aside the transfer of his half interest to his mother. The trustee in bankruptcy argued that the transfer was a fraudulent conveyance intended to defeat Mr. Petrick’s creditors.

Both Ms. Chilton and Mr. Petrick argued that he never had a beneficial interest in the condominium. That is, although he had an interest in the title, he held it in trust for his mother. There is a presumption of law, referred to as a resulting trust, that if someone pays the purchase price for property, but puts it in the name of another, who did not contribute to the purchase, the other person who received the tittle gratuitously, holds in trust for the person who paid the purchase price. This presumption applies to the interest in the title of a joint tenant who has received his interest gratuitously. Ms. Chilton’s evidence was that she had her son’s name on the condominium as a joint tenant so that on her death, the condominium would pass to him, without the requirement that he obtain a grant of probate of her will.

If in fact Mr. Petrick held his interest in the title in trust for his mother, then the transfer of title to his mother was not a fraudulent conveyance. His creditors would not have been entitled to a half-interest in the condominium if he did not have a beneficial interest in it.

Madam Justice Francis, in Petrick (Trustee) v. Petrick, 2019 BCSC 1319, held that Mr. Petrick did have a beneficial interest in the condominium and set aside the transfer to his mother as a fraudulent conveyance.

In her reasons for judgement, Madam Justice Francis nicely summarized three alternative possible ownership interests that joint tenants may have in property. She wrote at paragraph 40:

[40]         Not all jointly owned property is subject to a true joint tenancy. Pursuant to the Supreme Court of Canada’s decision in Pecore v. Pecore, 2007 SCC 17 [Pecore], property that is held in joint tenancy can give rise to three potential scenarios in terms of the beneficial interests of the title holders:

a)    A true joint tenancy, in which the joint tenants are each owner of the whole. Each enjoys the full benefit of property ownership and the ultimate survivor will enjoy the whole title for him or herself.

b)    A resulting trust, wherein only one joint tenant has any beneficial interest in the property and the other joint tenant, usually a gratuitous transferee, holds title in trust for the other and has no beneficial interest in the property.

c)     A scenario which is sometimes referred to as a “gift of the right of survivorship,” wherein a joint tenant is gratuitously placed on title and has no beneficial entitlement to the property during the lifetime of the donor, but if the donee survives the donor, the donee will receive the entire property by right of survivorship.  In Bergen v. Bergen, 2013 BCCA 492 at para. 37 [Bergen], Newbury J.A. described a gift of the right of survivorship in a joint account as “an immediate gift of a joint interest consisting of whatever balance exists in the account on the transferor’s death, assuming he or she dies first.”

Madam Justice Francis found that Ms. Chilton and Mr. Petrick were true joint tenants. She found that he did not receive his interest gratuitously. Because he was a co-borrower under the mortgage, he took a financial risk if the mortgage went into default. The presumption of resulting trust only applies when someone on title has acquired his interest gratuitously. The contributions of the co-owners for property do not have to be equal to avoid the presumption of resulting trust. Pledging credit is a contribution, even if Ms. Chilton could have qualified for a mortgage without Mr. Petrick being a co-borrower. As set out in Madam Justice Francis' reasons:

[65]         Ms. Chilton deposed that Mr. Petrick was not required to pledge his credit in order for her to obtain mortgage financing on the Property and that “he was added on the mortgage simply because he was going to be registered on title.”

[66]         I am not persuaded that simply because Ms. Chilton may have been able to purchase the property without Mr. Petrick pledging his credit, Mr. Petrick did not give up something of value when he became a co-borrower. The pledging of credit exposed Mr. Petrick to risk. Irrespective of Ms. Chilton’s means, Mr. Petrick remained jointly and severally liable on the mortgage debt. Further, it appears that from 2006 to 2011, Mr. Petrick may have been in better financial circumstances than his mother. In his affidavit evidence, he deposed that during that period he made cash gifts in the range of $2,000 to $5,000 to his mother, not exceeding $10,000 a year. Therefore, while it may not have been necessary for Mr. Petrick to have been named on the mortgage, he certainly had the means to service the mortgage and indeed, I find it more likely than not that he did make some payments on the mortgage over the years.

[67]         Therefore, I find that Mr. Petrick gave value for his interest in the Property and Ms. Chilton did not gratuitously make Mr. Petrick a joint tenant. As this was not a gratuitous transfer, the presumption of resulting trust does not apply.

Madam Justice Francis also found that Ms. Chilton did intend for her son to have a beneficial interest in the condominium. Ms. Chilton’s argument that she intended for Mr. Petrick to hold his interest in trust for her, and following her death, for her estate, was inconsistent with her evidence that she did not want the condominium to be subject to probate on her death.

Madam Justice Francis did provide some relief to Ms. Chilton from the potential hardship of having the condominium sold while she resides in it. Madam justice Francis ordered that Ms. Chilton could continue to reside in the condominium for her life, but if she ceased to occupy the condominium, or on her death, the condominium would be sold, and the trustee in bankruptcy would be entitled to half of the net sale proceeds.   

How to Properly Document a Transfer into Joint Tenancy

I have preached caution about the use of joint tenancies as an estate-planning tool to transfer wealth often from a parent to a child, or sometimes to some other relative or friend,. One of the first blog posts I wrote back in September, 2005, was entitled “Six PotentialPitfalls Parents Should Consider Before Transferring Real Estate Into a JointTenancy with Their Children.” There are in fact more than six, and I won’trepeat them all here. Instead I want to focus on how to properly document atransfer into a joint tenancy when the transfer is done as part of an estateplan.

Usually when I write about lawsuits concerning either land held in a joint tenancy, or joint bank or investment accounts, the problem is that the person who made the transfer or contributed the funds did not clearly document her intent at the time of the transfer. There is a presumption that when Mary transfers to her house into a joint tenancy with her daughter Jane for free, she does not intend to make a gift, and that Jane holds her interest on trust for Mary, and for Mary’s estate when Mary dies. This is called the presumption of resulting trust. But it is just a presumption, and there may be evidence that Mary intended to make a gift, rebutting the presumption. Disputes may arise in at least a couple of different circumstances. Mary and Jane have a falling out, Mary sues Jane for the title back, and Jane claims ownership of a half interest on the basis that Mary did intend a gift when she transferred the title. The second, and more common, kind of dispute occurs after Mary’s death. Jane claims the house by right of survivorship as the surviving joint tenant. Her brother Mark, who is also a beneficiary of Mary’s will says that Mary intended for Jane to share the house with Mark in accordance with the distribution in Mary’s will. Mark sues, claiming that Jane holds title to the house on trust for Mary’s estate.

The cases come down to a search for Mary’s actual intent. All too often in those cases that go to trial, the lawyer or notary has not documented his or her meeting with Mary very well. This is not to suggest that the majority of lawyers and notaries do a poor job documenting their files, but usually when the file is well documented, the dispute is resolved well before trial. In the case of joint accounts, lawyers are generally not involved in setting up the account, and unfortunately legal advice is sometimes given by well intentioned, but ill-informed employees of financial institutions without legal training. The only documentation is often the financial institution’s forms which do not illuminate the issue well.

Because disputes involving well-documented transfers of title into joint tenancy usually do not make it to trial, it is rare, but refreshing to see a case in which the lawyer handling the transfer did an excellent job of documenting the transaction and the transferor’s intentions.

Carvel Weaver transferred most of his financial assets into joint accounts with his cousin Vivian Storey and transferred title to his home on Hornby Island into a joint tenancy with her. He made a will in which he left his three surviving children, $5000 each, and Ms. Storey the residue of his estate.

After his death on July 24, 2014, two of his children sued to vary his will on the basis that he had not made adequate provision for them. They also made other claims in respect of his assets, including a claim that Ms. Storey holds the Hornby Island property and other assets on a resulting trust for their father’s estate. This is important because if they were successful and the assets form part of his estate, then the court may award them a share if they are successful in their wills variation claim. But if Ms. Storey is entitled to retain the assets as the surviving joint tenant, then British Columbia’s wills variation legislation does not permit the court to vary the disposition of assets that are not part of the estate, and do not pass under the will.

Ms. Storey brought an application to court to determine whether Carvel Weaver intended to make a gift of the right of survivorship of the Hornby property and other assets to her, or whether she does hold these assets on trust for his estate. In Weaver v. Weaver Estate, 2019 BCSC 132, Madam Justice Horsman held that Carvel Weaver did intend to make a gift of the right of survivorship, and that Ms. Storey does not hold the assets in trust for his estate. The key to the decision was the evidence of Carvel Weaver’s estate-planning lawyer, Andrea Rowe, and the documents she created to implement his estate plan.

Ms. Rowe met with Carvel Weaver alone to take his estate-planning instructions. He told her that he wanted to leave each of his children $5000 and the rest of his wealth to Ms. Storey. Ms. Rowe explained to him that his children could apply to vary his will. He decided to use jointures as a method for passing his wealth to Ms. Storey outside of his estate. Ms. Rowe prepared a transfer document to transfer the Hornby property into both Mr. Weaver and Ms. Storey’s names as joint tenants. Ms. Rowe registered the transfer at the Land Title Office. Fortunately for Ms. Storey, Ms. Rowe also created a number of other documents setting out the intention. These include, a Deed of Gift and Statutory Declaration, as well as a power of attorney for Ms. Storey to sign allowing Carvel Weaver to deal with the title to the Hornby property as well as a transfer of the title back to him.

I will quote from some of the documents below, but the essential nature of the plan was that on the one hand, Carvel Weaver retained control over the Horny property during his lifetime. It was clear that for as long as he lived, Ms. Storey’s interest was limited to the title, and the right of survivorship. If he wanted to take back title or sell the property, he could do so without Ms. Storey having to sign anything further. Because her interest was limited, he could change his mind. On the other hand, it was also clear that he intended to give her the right of survivorship so that if he died before her, she became the full owner of the property, and did not hold it on a resulting trust for his estate.

Madam Justice Horseman quoted parts of the Deed of Gift and Statutory Declaration in her decision. The recitals from the Deed of Gift are as follows:

1.         Carvel hereby transfers the Land to himself and Vivian as joint tenants and in so doing makes a gift of the right of survivorship but no transfer of the beneficial ownership. 

2.         Carvel will sign all further documents and instruments as may be required to effect this transfer (including a Form A Transfer and Property Transfer Tax Form). 

3.         Carvel and Vivian will sign a Power of Attorney by Vivian in favour of Carvel so that Carvel may deal with the Land, unilaterally. 

4.         Vivian will sign a Form A Transfer transferring the Land to Carvel to be held by Carvel.

5.         This Deed of Gift constitutes the legal transfer of the Land by Carvel to Carvel and Vivian as joint tenants. By signing this Deed of Gift, Vivian acknowledges the limited interest being transferred to her.

The Statutory Declaration included the following paragraphs:

3.         Prior to making this decision, I was advised about the difference between an outright gift, creating a tenancy in common, creating a joint tenancy to transfer the right of survivorship (only) and making a gift under my Will.

4.         I chose joint tenancy to grant the right of survivorship because I want Vivian to be able to deal with my Home immediately after my death and I do not want my Home to form part of my estate. Still, I do not intend to grant any present beneficial interest in my Home to Vivian (other than the right of survivorship). 

. . . .
6.         I have required, as a condition of the transfers described above, that Vivian:

a.         grant me a limited enduring Power of Attorney so that I may deal with my Home as I decide in my absolute discretion and without interference from Vivian; and

b.         enter into a Bare Trust Agreement setting out that any interest Vivian may have in the home during my lifetime, other than the right of survivorship, is held by Vivian for my benefit.

Ms. Rowe also drafted a provision for Carvel Weaver’s will, further confirming his intent that assets including his bank accounts held jointly with Ms. Storey were to pass absolutely to her, and that she would not hold her interest on trust for his estate. The provision reads:

I declare that I am aware of the legal significance of the Right of Survivorship as it pertains to joint assets. I declare that any real estate or other assets (for instance, bank accounts) which are owned jointly with Vivian are deliberately held as such so that the Right of Survivorship will apply in the event of my death so that if Vivian survives me, she will own such assets, absolutely, and not on any resulting trust for my estate.

There are two other points that I think important. The lawyer met alone with her client in this case, and the evidence indicates that she explained the documents to him. It is important for a lawyer to make sure that the instructions she receives reflect the client’s wishes, which is why it is important to meet alone when taking instructions, and that the client understands the nature and effect of the documents he is signing (even if not all of the technical language).

I still always urge caution in using joint ownership to transfer wealth on death, but when it makes sense to do so, then intent must be clearly documented. There is more than one way of doing so, but with a significant asset such as a house, this level of documentation is often required to protect the client and the estate plan.

I should note that the decision I have discussed only dealt with one aspect of the children’s claims. They have made other claims which were set for trial. It is possible that they may prevail on some other basis.  

Wong v. Chong Estate

The law with respect to joint tenancy in British Columbia is nuanced. The basic idea is that if property is held in a joint tenancy between two people, on the death of one, the title passes to the survivor. But if one of the joint tenants gratuitously transferred the property into a joint tenancy or paid the purchase price to buy the property but puts title in a joint tenancy, then there is a presumption that the other joint tenant holds his or her interest in trust for the person who transferred the property or paid for it. This presumption, called a presumption or resulting trust, is a presumption only, which may be rebutted by evidence that the person who paid for the property intended a gift. When the parties are married spouses, there is a different presumption that the person who paid for the property intended a gift. But it really comes down to what the court finds what the intention was of the person who paid for the property at the time her or she purchased it, or in the case of a transfer, the time of the transfer.

But here’s where it gets more nuanced. Supposing one person buys property and puts title into a joint tenancy with another person, intending to retain control of the property during his or her lifetime, but that on death, the survivor will be entitled to the benefit of the property. In such a case, what if the joint tenancy is severed? This can be done in a number of ways, including either of the joint tenants transferring a half interest to himself or herself. In this case, is the person who did not pay for the party able to retain a half interest, and leave it to someone else in his or her will?

Rick Wong and Julia Chong were married on March 23, 2002. She had a daughter from a previous marriage, Janine Yuen, and he had no children.

Mr. Wong arranged to purchase a duplex in 2005. He contributed a little over $11,000 toward the purchase of the duplex, and borrowed a further $550,000. He mortgaged the new property, and Mr. Wong’s mother also assisted by providing security for the loan. When he signed the contract to purchase the duplex, he told 

Ms. Chong that he wanted to buy the property as a source of rental income for their retirement. He had some health problems and neither Mr. Wong nor Ms. Chong had any private pensions.

Mr. Wong and Ms. Chong took title to the duplex as joint tenants.

After they purchased the duplex, Mr. Wong used the rental income for mortgage payments. He also contributed additional funds to pay down the mortgage and pay other expenses for the duplex. He did work repairing the building, and hired contractors for other work. Ms Chong had little involvement. Most of the funds came from rental income, from Mr. Wong’s accounts or from joint accounts held by Mr. Wong and Ms. Chong during times when Mr. Wong was contributing all of the funds to the joint accounts. Some of the funds also came from joint accounts into which both Mr. Wong and Ms. Chong were contributing.

Ms. Wong died of cancer on May 26, 2013.

Shortly before she died, at a time when she knew she was terminally ill, she made her last will, dated March 21, 2013, in which she left her estate to her daughter. On April 5, she severed the joint tenancy on the duplex, without telling her husband.  Because she severed the joint tenancy, the title to the duplex did not pass to Mr. Wong by right of survivorship.

It should be noted that on the death of Ms. Chong, her daughter received other assets outside of the estate with a value of approximately $400,000 including life insurance and an investment account. Mr. Wong, on the other hand received about $32,000 outside of the estate on his wife’s death.

Ms. Chong’s daughter, Ms. Yuen, maintained that she was entitled to the half-interest in the duplex as the beneficiary of her mother’s will, the joint tenancy having been severed, and her mother having title to a half interest as a tenant in common.

Ms. Wong sued. He alleged among other things that there was a contract between his wife and him that the survivor would receive the duplex by right of survivorship. He also claimed that because he paid the purchase price, and as between his wife and him, he contributed most of the funds, that Ms. Chong’s estate held title to the half interest in trust for him.

In her decision in Wong v. Chong Estate, 2016 BCSC 953, Madam Justice Burke found that there was insufficient evidence that Mr. Wong and Ms. Chong had a contractually binding agreement that Ms. Chong could not sever the joint tenancy.  She held that the presumption of resulting trust did apply. She found that when Mr. Wong bought the duplex and put the title into a joint tenancy with his wife, he intended to confer the right of survivorship only. Unless he died first, and until his death, she had no other beneficial interest in the duplex.

Madam Justice Burke wrote:

[85]         Considering all of the details as set out in the agreed statement of facts and the evidence before the Court, I am of the opinion that a resulting trust should be found in this case and that all the beneficial interest in the Ewart Property [the duplex] remains with Mr. Wong.

[86]         Mr. Wong testified that he purchased the property with the intention that it serve as a source of retirement income for both him and Ms. Chong. He said that if he pre-deceased Ms. Chong, she would receive the interest in the property, but not before then. This testimony was corroborated by the plaintiff’s two sisters, who discussed this plan with the plaintiff at the time of purchase, and by the plaintiff’s friend Len Collard. None of the testimony in this regard was challenged on cross-examination.

[87]         Importantly, Mr. Wong’s testimony is also corroborated in several ways:

(a)            Mr. Wong does not receive a pension through his employment; it therefore makes sense that he would make efforts to secure retirement income through other means, such as acquiring the Ewart Property;

(b)            Mr. Wong had serious health concerns and had reason to believe he would predecease Ms. Chong;

(c)            Mr. Wong paid the vast majority of money (and all of the effort) toward the Ewart Property, including several large lump-sum payments, despite the fact that Ms. Chong had an income;

(d)            Ms. Chong severed the joint tenancy secretly and continued to keep that information from Mr. Wong even when questioned about her retirement planning in the later stages of her life; and

(e)            As the defendants stated, Mr. Wong was a real estate agent who would likely have been familiar with the concepts of joint tenancy and beneficial interest.

[88]         All of the above, whether arising at the time of the transfer or years later, indicate or are consistent with the evidence that Mr. Wong had no intention at the time of the transfer of gifting Ms. Chong the beneficial interest in the property.

[89]         Clearly, it was Mr. Wong’s intention that, should he predecease Ms. Chong, she would take the benefit of the property. It is clear from the evidence, though, that Mr. Wong did not intend to make an inter vivos gift of the beneficial interest in the Ewart Property for Ms. Chong to make use of as she pleased. On a balance of probabilities, Mr. Wong has proved that there was no donative intent. Ms. Chong’s deliberate concealment of the severance, as noted, shows she was very much aware of that. She held the beneficial interest for Mr. Wong.

[90]         In my opinion, Mr. Wong has rebutted the presumptions of advancement and indefeasible title. His testimony, consistent with the available evidence, indicates an intention at the time of transfer that Ms. Chong would take a beneficial interest only on the death of Mr. Wong. Ms. Chong, and subsequently Ms. Yuen, held her interest subject to a resulting trust in favour of the plaintiff; the beneficial title to the Ewart Property remains with him.

In the result, Mr. Wong owns the full interest in the duplex. 

McKendry v. McKendry

[Since I posted this post, the B.C. Court of Appeal has overturned the trial judge's decision. You may read the reasons for judgment in the Court of Appeal here.]


The presumption of resulting trust is a presumption that arises when someone gratuitously transfers property to another. The presumption is that the person making the transfer did not intend a gift, and the person receiving the property holds it in trust for the transferor. This presumption applies both to a transfer into the sole name of another or into a joint tenancy with another. Because it is a presumption, it is open to the person receiving the assets to prove that the transferor did intend a gift, in which case the presumption is rebutted.

The court will generally attempt to determine what the transferor’s actual intention was at the time of the transfer. If it cannot be determined then the presumption applies to most relationships, including a transfer from a parent to her adult child. Although the court may consider things that either the transferor or the recipient say or do after the date of the transfer in determining the transferor’s intent, the court will need to be satisfied that the evidence is sufficient to determine the transferor’s intention at the time of the transfer.

There are cases where the court finds that a parent has transferred property to a child intending to make a gift to the child, but the parent later changes her mind. In such a case the gift still stands, because it was completed at the time of the transfer.

But what if a parent transfers land into a joint tenancy with one of her children without intending to make a gift (or more precisely the court does not find that sufficient evidence of an intention to make a gift), and the parent later decides that she wishes the child to receive the land as a gift on her death by right of survivorship?

This is what occurred in McKendry v. McKendry, 2015 BCSC 2433.

When Mary Alice McKendry died on February 23, 2012, she left surviving her five children, a son and four daughters.  

Mary McKendry had transferred title to her home on W 48^th Avenue in Vancouver into a joint tenancy with her son, John McKendry in 2008. At her death, the home was worth over $1.9 million. There were mortgages registered against the home, which John McKendry had used to finance the purchase of an investment property. Apart from the home, her estate was worth about $465,000.

Her last will, made on December 16. 2010 contained the following paragraph:

7.         I wish to advise my Trustee/s that I have registered my home civically known as [W. 48th] (hereinafter called the “Home”) in Joint Tenancy with my son, John Alexander McKendry.  My son shall receive the Home subject to the Mortgages registered against [the] Home and shall be responsible for payment of the Mortgages as he was the recipient of the mortgage proceeds.

In her will, she left the residue of her estate to her four daughters.

She also signed a letter at the time of her will, stating

I, Mary Alice McKendry, confirm that I wish to cancel any trust agreements or other documents imposing an obligation on my son to share the property I own at [W. 48th] with my other children.  I want my home to be my son’s property on my death absolutely – no strings attached.  I have made this decision after much consideration and I fully understand that this gives my son the majority of my assets.  My house constitutes the majority of my assets.

Following Mary McKendry’s death three her daughters claimed that their brother held his interest in the home in trust for their mother’s estate. He made a counterclaim, seeking to vary the will under the Wills Variation Act in the event that the court found that he held the home in trust for the estate.

At first glance, it might appear that John McKendry had a pretty strong case that he should be entitled to keep the home, and that he did not hold it in trust for his mother’s estate. She had transferred title, and she very clearly expressed in her will and her letter that it was her intention that he receive the home to the exclusion of her daughters.

But there is more to the facts (otherwise, this would be a rather dull post). On two occasions before making her last will, Mary McKendry had instructed lawyers to draw up trust declarations in respect of the home. The first declaration stated that her son held title in trust, and on her death he would receive a third, one of her daughters would receive a third, and the other three daughters would share a one third interest. She signed the declaration, but John McKendry did not. The second trust declaration made in February 2010 provided that on Mary McKendry’s death, each child would be entitled to an equal interest in the home. Again, Mary McKendry signed the trust declaration, but her son did not.

Madam Justice Adair, who heard the trial, found that John McKendry had not rebutted the presumption of resulting trust arising at the time of the transfer of title. In instructing lawyers to prepare, and in signing the trust declarations, Mary McKendry was dealing with the home on the basis that she was able to determine who would be entitled to the home on her death. This was evidence that she considered that she had not made a gift of an interest in the home when she transferred it into a joint tenancy with her son. Madam Justice Adair also found that John McKendry’s testimony did not rebut the presumption.

Madam Justice Adair found that Mary McKendry’s last will and the letter of December 16, 2010 did not reflect her intentions at the time of the transfer, but rather reflected a change in intentions after the transfer.

The next question is whether Mary McKendry gave her son the beneficial interest in the home by right of survivorship in December 2010 when she made her will and signed the letter. Madam Justice Adair held that the will and letter were insufficient to make a gift of the home to John McKendry. She reasoned as follows:

[137]     I will assume that, as of December 16, 2010, Mary intended to make a gift to John of the survivorship interest in W. 48th.  This is what she communicated to Ms. Richter [Mary McKendry’s lawyer who drafted the will] and it is reflected in the December 2010 Will and the December 16 Letter.  However, even if this assumption was correct, I do not agree with Ms. Ducey [John McKendry’s lawyer] that, in the circumstances, nothing more needed to be done to perfect the gift.  Rather, I agree with the submissions of Mr. Lee (for the plaintiffs) on this point.

[138]     Transfers of real property are governed by the Law and Equity Act, R.S.B.C. 1996, c. 253, and the Land Title Act, R.S.B.C. 1996, c. 250, Part 12.  Section 59(3) of the Law and Equity Act requires contracts respecting land to be in writing to be enforceable.

[139]     In order to make a valid gift, the donor must have done everything that (according to the nature of the property) was necessary to be done to transfer the property and make the transfer binding on the donor.  The court will not act to complete an incomplete gift, and a mere promise to make a gift is unenforceable.  See Kooner v. Kooner(1979), 100 D.L.R. (3d) 76 (B.C.S.C.), at pp. 79-80. 

[140]     In my opinion, the Form A transfer, signed by Mary on January 28, 2008, is not sufficient to perfect a gift of the survivorship interest in W. 48th to John, because (as I have found) Mary did not intend at that time to make such a gift to John.  Assuming that, as of December 2010, Mary did intend to make such a gift to John, she did not take the necessary steps to perfect the gift.  The statements in the December 2010 Will and the December 16 Letter are insufficient to create any legal obligation; they are (at best) mere promises to make a gift to John.  I agree with Mr.  Lee [the lawyer for the Plaintiff daughters] that, in order for Mary to make a valid gift to John of the survivorship interest in W. 48th, Mary would have been required to execute a written deed of gift under seal (obviating the need for consideration), confirming an immediate gift of the survivorship interest in W. 48th.  Short of this, there was no legally binding gift, and I so find.

[141]     In summary, I find that John has failed to discharge the burden on him to show that, on January 28, 2008, Mary intended to make an immediate gift to him of the survivorship interest in W. 48th.  If, on December 16, 2010, Mary intended to make such a gift, she failed to take the steps necessary to make a valid, legally binding gift.

[142]     The result is the plaintiffs are, accordingly, entitled to a declaration that John holds W. 48th in trust for Mary’s estate.

Madam Justice Adair then considered John McKindry’s claim to vary the will. She did vary the will, and awarded him a one-fifth share of the estate, from which the amount of the mortgage taken out for his benefit will be set off.

Zeligs v. Janes

Contests between siblings following the death of a parent over houses and bank accounts that were held jointly between the parent and one of the parent’s children are all too common. What happens is that a parent who was the sole owner her own house or bank or investment account transfers the house or account into a joint tenancy with one of her children. After death, the child takes the title by right of survivorship, but the other child or children protest. One issue that may arise is whether the parent intended a gift to the child taking an interest in the title, or whether that child holds the house or account in trust for the now deceased parent’s estate. Sometimes, another child (or other beneficiary of the parent’s will) argues that the child benefiting from the joint tenancy exercised undue influence over the parent, or that there is a presumption of undue influence that has not been rebutted.

Zeligs v. Janes, 2015 BCSC 7 is such a case, but with an interesting twist. The result ultimately turned on whether a joint tenancy was severed by the child on title before the parent died.

Dorothy Burnett lived to be 103. When she died, on April 9, 2010, she had two daughters, Barbara Zeligs, and Diana Janes.

Following the death of her husband in 1990, Ms. Burnett lived independently in her house on Knox Road in Vancouver, until July, 2001 when her daughter Diana Janes and Ms. Janes’ husband moved into the Knox Road property to assist her. Ms. Burnett wrote the following note:

July 10, 2001

I Doroty Burnett - wish to stay in my home 1757 Knox Road as long as I live & to make sure I can I asked Diana Janes to move in and stay with me as long as I live, and to be fair to Diana I made her joint owner as long as I live & full owner when I die.

Dorothy Burnett

In 2002, Ms. Burnett met with a lawyer, and transferred the title to her house, which was by far her most valuable asset, into a joint tenancy with her daughter Ms. Janes.

Ms. Burnett’s health declined, and in 2008 she moved into a long-term care facility. Ms. Janes sold the Knox Road property for $2.7 million in January 2010. By that time, Ms. Burnett was incapable of managing her own affairs, and Ms. Janes signed on Ms. Burnett’s behalf using an enduring power of attorney. She initially deposited the net sale proceeds of a little under $1.8 million (after paying off mortgages that had been placed on the title) into a joint bank account, joint with her mother.

But on the day she deposited the funds into the joint account, Ms. Janes took about $700,000 out of the joint account to buy a house, the title to which was registered in her name and that of her husband. Later, while her mother was still alive, she took out the balance of the sale proceeds from the joint account and for investments in her sole name.

Ms. Burnett’s last will, which she signed in 2003, left the residue of her estate to be divided equally between her two daughters.

Barbara Zeligs died after her mother. Ms. Zeligs’ husband, Joseph Zeligs, as her executor claimed that the proceeds of the sale of the Knox Road property belong to Ms.Burnett’s estate, and pursuant to Ms. Burnett’s will, Ms. Zelig’s estate is entitled to half.

There were three main grounds for the challenge. I mentioned two of them at the outset. There is a presumption that when one person transfers title to property gratuitously into the name of another (including into a joint tenancy) the transfer is not a gift, but the person receiving an interest in the title gratuitously, holds the title in trust (known as a resulting trust) for the transferor during her lifetime, and for her estate after death. Mr. Zeligs alleged that the transfer was not a gift, and Ms. Janes received an interest in the title and ultimately the proceeds of sale, subject to a resulting trust for her mother’s estate.

Mr. Zeligs also alleged that because of Ms. Burnett’s age, health problems and dependency on Ms. Janes, there is a presumption that Ms. Janes procured an interest in the by the exercise of undue influence. Where the presumption of undue influence arises, it is not necessary to prove that the beneficiary of the transfer actually exercised undue influence. Rather the burden shifts to the person receiving a benefit to show that it was given voluntarily, often by showing that the person conferring the benefit received independent advice.

Mr. Justice Steeves agreed with Mr. Zeligs that both the presumption of resulting trust and a presumption of undue influence applied to the transfer of the Knox Road property into a joint tenancy, but found that Ms. Janes had rebutted both presumptions. Key evidence included that July 10, 2001 note in which Ms. Burnett expressed her intention that Ms. Janes would be a joint owner during Ms. Burnett’s lifetime and sole owner after her death, and the evidence of Edward Bowes, the lawyer who handled the transfer of the title into the joint tenancy. Mr. Bowes acted for Ms. Burnett, met with her alone, and gave her legal advice. Mr. Bowes considered that she was mentally competent and acting voluntarily when she signed the transfer.

Given Mr. Justice Steeves findings, had the title to the Knox Road house remained in the joint tenancy until Ms. Burnett’s death, Ms. Janes would be entitled to the whole interest in the property by right of survivorship. The nature of a joint tenancy is such that, if one of two owners die, the interest of the first to die comes to an end, and the survivor holds title solely to the exclusion of the estate of deceased former joint owner. This is contrasted with a tenancy in common, where if one co-owner dies, her interest forms part of her estate, to be distributed to the beneficiaries of her will.

It is possible to change a joint tenancy into a tenancy in common, by severing the joint tenancy.

This brings us to the next ground asserted on behalf of Mr. Zeligs, and the one that is key to Mr. Justice Steeve’s decision.

Mr. Zeligs argued that the joint tenancy was severed either when the house was mortgaged (the proceeds of which were used to benefit Ms. Janes and her husband), when it was sold, or when Ms. Janes removed the proceeds from the joint account.

To hold property in a joint tenancy, there must be the four unities of interest, title, time and possession. Either or both joint tenants may sever the joint tenancies by ending the four unities. Mr. Justice Steeves set out the law as follows:

[162]     Beginning with first principles, it is axiomatic that four “unities” must exist before there is a joint tenancy and these describe the “need for virtually perfect equality” as between joint tenants. Any act that destroys one of the unities will bring the joint tenancy to an end. (A. J. McClean, “Severance of Joint Tenancies” (1979) 57 The Canadian Bar Review, 5; Bruce Ziff, Principles of Property Law, 5th ed. (Toronto: Thomson Reuters Canada Ltd., 2010), at pp. 336 and 342).

[163]     First there must be a unity of interest whereby the holdings of each tenant must be equal in nature, extent and duration. The second unity is that the holdings of each tenant must arise from the same instrument or act. This is the unity of title. Third, there is the unity of time that requires that the interests of the joint tenants arise at the same time. Finally, there is the unity of possession which requires that the rights of the tenants relate to the same property (Ziff, at p. 336; citing Sir William Blackstone, Commentaries on the Laws of England, vol. 2 (Chicago: Univ. of Chicago Press, 1979), ed 1979, at pp.180-2).

[164]     The parties agree that the specific test for determining whether a joint tenancy has been severed is set out in Williams v. Hensman (1861), 70 E.R. 862 (applied in Hansen Estate v. Hansen, 2012 ONCA 112). The statement of Vice-Chancellor Wood is often quoted and it refers to what are called the three “Rules” (Williams at 867, cited in Hansen Estate at para. 32):

A joint-tenancy may be severed in three ways: 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 manner as to sever it from the joint fund--losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. 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 other 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. R. 501 (Eng. Eq. Exch.)] and Jackson v. Jackson [(1804), 9 Ves. 591 (Eng. Chancellor)]. …

[emphasis added by Ontario Court of Appeal in Hansen Estate]

In this case, Mr. Justice Steeves found that registering a mortgage did not sever the joint tenancy. In British Columbia, a mortgage is a charge on title, rather than a transfer of title. Nor did selling the Knox Road property and placing the sale proceeds into a joint account sever the joint tenancy. Because Ms. Janes transferred the funds into a joint account, the character of the joint tenancy did not change.

But, when Ms. Janes took the funds out of the joint account, she severed the joint tenancy. By taking the funds and using them to buy a house with her husband, and making investments in her own name, she destroyed the unity of possession. As set out by Mr. Justice Steeves:

[187]     By way of a conclusion, I find that the funds from the sale of the Knox Road property continued to be a joint asset owned by Dorothy and Diana from the point of sale and included the time they were in the joint account of Dorothy and Diana. However, once they were withdrawn from the joint account for the sole benefit of the defendants, to the exclusion of Dorothy, the unity of possession was destroyed and the joint tenancy was severed.

Accordingly, Ms. Burnett’s estate is entitled to half of the sale proceeds of the Knox Road property, to be distributed in accordance with her will (half to Ms. Janes and half to Ms. Zelig’s estate). If Ms. Janes had left the sale proceeds in the joint account until her mother’s death, she would have been entitled to all of the proceeds as the surviving joint tenant.

Oord v. Oord

In British Columbia, when real estate or other assets are held in a joint tenancy by two or more people, when one dies, his or her interest is extinguished and the surviving joint owner or owners receive the deceased’s interest by right of survivorship. It is more common for two people to own property in a joint tenancy, for example two spouses, than for there to be three or four joint owners, but the principle applies whatever the number. If four own property as joint tenants, and one dies, then the remaining three will each have a one-third interest in the property.

Careful thought should be given to the implications of several people owning property as joint tenants. Too often little thought is given to what can go wrong when the decision is made to hold property in a joint tenancy among family.

Wiebe and Tina Oord purchased bare land with their son, William Oord, and his wife Jacqueline Oord in 2003 in Rosedale, British Columbia. The title went into all four names as joint tenants. Wiebe and Tina Oord contributed the whole of the purchase price of $98,000 for the land. All four then took out a mortgage, originally in an amount just shy of $236,000 to construct a house on the land. When the house was completed, all four as well as William and Jacqueline Oord’s two children moved into the house. Wiebe, Tina, William and Jacqueline Oord all contributed to the mortgage as well as other household expenses and improvements.

Wiebe Oord died on February 7, 2010. In November, 2010, William and Jacqueline Oord separated, and Jacqueline and their two children moved out of the house.

Tina Oord applied to the Supreme Court of British Columbia, in Oord v. Oord, 2012 BCSC 1857, seeking an order that she be entitled to the first $98,000 in the equity in the property, reflecting the initial purchase price she and her husband paid, as well as half of the rest of the equity. She wanted the opportunity to buy out her son and daughter in law.

The property was worth in the neighbourhood of $450,000 to $480,000. The mortgage was just under $208,000, which reflected some additional funds taken out after the house was built for William and Jacqueline Oord to pay off some debts. All parties agreed that William and Jacqueline Oord were responsible for repaying the additional funds they borrowed. 

Jacqueline Oord maintained that she was entitled to one-third of the equity, and sought an order that the property be sold.

The first question was whether William and Jacqueline Oord held their interests in the property on a resulting trust for Tina Oord. When one person pays the entire purchase price of the property and puts it in the names of others, there is a presumption that the others hold their interest in trust for the person who paid the purchase price. In this case, because the original purchase price was paid by Wiebe and Tina Oord, the presumption applies.

But the presumption of resulting trust is just a presumption, which may be rebutted if it is shown that the person who paid the purchase price intended to make a gift.

Mr. Justice Joyce, who heard the case, considered the purchase in the context of the family relationships. Although there was no clear arrangement, the family was very close, and Tina Oord’s own evidence is that when they decided to buy the land, she considered it to be of benefit to all four of them. Mr. Justice Joyce found that Tina Oord and Wiebe Oord did intend to make a gift of a half interest in the land to their son and daughter-in-law.

The next question was whether Tina Oord was entitled to a half-interest in the property or a one-third interest. After her husband’s death Tina Oord paid half of the mortgage and property taxes.

Mr. Justice Joyce held that each of the three surviving co-owners was entitled to a one-third interest, essentially because that is how joint tenancies work. He wrote:

[50]         Apart from the issue of whether Bill and Jackie hold their interests upon a resulting trust in favour of her on account of the initial payment, as to which I have found against Tina, she further suggests that the beneficial interest in the Property should be divided one-half in her favour and one-half, collectively, in favour of Bill and Jackie, even though title is currently registered in the three parties’ names as tenants in common. In my view, that position cannot be sustained. Probably one of the most important characteristics of joint tenancy is the right of survivorship. When a joint tenant dies his or her interest is extinguished, increasing the holding of the surviving joint tenants. When Wiebe died, his interest was extinguished and those of the surviving joint tenants, including Tina, were increased, by operation of law. 

 [51]         Tina suggests that Wiebe’s interest was transferred gratuitously to Bill and Jackie with his death and that the principle of resulting trust can be invoked to say that Bill and Jackie hold their increased interest in trust. In my view, there are at least two problems with this proposition. Firstly, the increase in interest of Bill and Jackie (and Tina) did not result from a transfer from Wiebe, in the true sense. It resulted by operation of law in which Wiebe’s interest was extinguished. Secondly, in a resulting trust, the transferee holds in trust for the transferor. Here there is no transferor. 

 [52]         Tina suggests, in the alternative, that Bill and Wiebe were unjustly enriched not only by the benefit received when Wiebe and Tina paid the initial purchase price, but also when they received Wiebe’s interest upon his death. As for the initial payment of the purchase price, I have already held that to be a gift, so there can be no unjust enrichment from a perfected gift, which constitutes a juristic reason for the enrichment. As for the transmission of Wiebe’s interest on death, there can be no unjust enrichment by any of the three surviving joint tenants because the principle of survivorship provides a juristic reason for the increase in their interests. 

 [53]         I conclude therefore that, subject to the agreement regarding the increase in the mortgage in 2006, each of the remaining survivors is entitled to an equal one-third interest in the Property unless they can establish unjust enrichment on some other basis. I am satisfied that up until the death of Wiebe, all of the co-owners contributed equally to the arrangement and I can see no basis for a claim for unjust enrichment prior to that time. 

 [54]         However, after Wiebe died, Tina paid one-half of the mortgage payments and other expenses associated with the Property, when she was only obliged to pay one-third. Bill and Jackie collectively were responsible for two-thirds of the expenses. To this extent, Bill and Jackie were unjustly enriched at the expense of Tina and she is entitled to receive from Bill and Jackie the difference between one-half and one-third of the expenses. I assume that counsel will be able to agree on the precise figure. If they cannot, they may apply for further decision on that point.

He ordered that the property be sold.

Although I can’t fault the reasoning in this case, I can’t help but thinking that when they bought the property had the Oords had put their minds to the possibility that Wiebe would pass away, and then William and Jacqueline separate, they would not have contemplated that Tina Oord would end up with only a one-third interest in the property. Ideally, the Oords would have entered into a co-ownership agreement setting out their respective rights and obligations in case of a separation or death. Short of that, it might have made sense for Tina and Wiebe Oord to have held a half interest together as joint tenants, and William and Jacqueline to own the other half interest as joint tenants, but with the two half interests held as tenant’s in common. Then if Wiebe or Tina died, the survivor would still have a half interest, which he or she could leave by will.

Joint Tenancy Risks: Re: Eng

One of my earliest posts, back in 2005, was about the potential pitfalls of a parent transferring his or her home into a joint tenancy with a child. A parent may have all sorts of reasons for putting her home, or bank account into a joint tenancy with a child. The one I have heard most often is that it will save probate fees. It might, but as I wrote almost seven years ago, the risks to the parent often outweigh any benefit.

I don’t know why when she bought a house in 1976, Ms. Eng put the title into the names of herself and her then 21 year old son Davie Eng as joint tenants. There was some suggestion that she put it into a joint tenancy for estate planning so that her son would receive it on her death. She held other real estate in joint tenancies with her other children. Perhaps it was done in recognition of his contribution to the family through his work in the restaurant she owned. Or she did so in order for him to establish credit.

Whatever the reason, fortunately for Ms. Eng, Master Scarth found after a 10 day hearing in Re Eng, 2012 BCSC 1096, that the evidence did not establish that she made a gift of an interest in the house to Davie Eng, or that she made a gift to him in 2008 when she put $184,000 into a joint account with him.

In October 2010, Davie Eng filed for bankruptcy. His trustee in bankruptcy claimed a half-interest in both the house and in the bank account for the benefit of Mr. Eng’s creditors.

Ms. Eng immigrated to Canada in 1955 from China. She was married, and had four children. Her husband had another child from a previous relationship. In 1972, she moved to Vancouver and opened a restaurant on property she bought in the 60s. Her children, including Davie, worked in the restaurant.

In 1976, she bought a house on Beatrice Street in Vancouver where she and three of her children lived. She put the title into a joint tenancy with Davie Eng. Eventually, two of the children moved out, and Davie Eng continued to live with her. The court found that she made all of the down payment to buy the house, and financed the rest of it with a mortgage. She did not need Davie Eng, who was 21 with no significant assets, on title to qualify for the mortgage.

Over the years Davie Eng made some payments to her, but she said it was only when he had funds, and that it was generally in the neighbourhood of $200 or $300 per month.

Ms. Eng denied that she intended to make a gift of an interest in the house to her son. She testified that she expected all of her children to receive an equal share from the house on her death (her husband had passed away).

Ms. Eng held other real estate with her other children, and shared the proceeds of sales with them, but in each case the other children contributed some funds to the purchase.

After she sold her restaurant, she put $183,000 out of the last installment of the proceeds into a joint bank account with Davie Eng. She denied that she made a gift, and testified that she did put it into a joint account so that her son could assist her with her banking. It should be noted that she spoke very little English, her first language being Cantonese, and that she claimed all of the interest on the account on her income tax.

The trustee in bankruptcy argued that Davie had made contributions to the house and the restaurant. The trustee in bankruptcy maintained that he did not receive his interest in the house or bank accounts gratuitously. He worked for her in the restaurant and finding and dealing with tenants for her on properties she owned. She intended to giver her son a beneficial interest in these assets. He also listed an interest in the house on various credit applications.

But, Master Scarth found that Ms. Eng had paid the purchase price on the house, and that the funds in the joint account came from the sale of the restaurant, which Ms. Eng had also purchased. She had gratuitously put title of the house into joint names with Davie Eng, and put the funds into a joint account with him. Accordingly, there is a presumption of resulting trust, which is a presumption that Ms. Eng was not conferring a gift on Davie Eng. Master Scarth found that the trustee in bankruptcy had not rebutted that presumption.

In the result, although Davie Eng was on title to the house, and was on the joint account, the beneficial interest in the house and the funds in the joint account belong to his mother. The real ownership is with her. Because the trustee in bankruptcy can have no great rights to the assets than Davie Eng, it is not entitled to take half of the joint account, or to have the house sold and half of the proceeds used to pay Davie Eng’s creditors.

Had Master Scarth found that Ms. Eng had intended a gift, the result would have been quite different.

I cannot stress the risk to a parent in a similar situation. Although Ms. Eng successfully resisted the trustee in bankruptcy’s claim, she did so after 10 days of hearings. A ten-day hearing is a very expensive proposition.

I also wonder if a creditor might successfully argue in a similar case that in extending credit to the son, the creditor relied on the fact that the son had a half-interest in the title to the house. Even if as between mother and son, the property belonged to the mother, by putting her son on the title she made a representation to anyone who searched the title that he was an owner of the property. If a creditor relied on the title, could the creditor say she is estopped, in other words prevented because of her representation, from denying her son’s interest?

What if the son had severed the joint tenancy and granted a creditor a mortgage of his half-interest. Then on default, the creditor could apply to court for an order selling the house if the debt were not repaid.

B.C. Law Institute Consultation Paper on Joint Tenancy

The British Columbia Law Institute has published a Consultation Paper on Joint Tenancy in June, 2011. The paper was prepared by the Real Property Reform Project Committee.

If two or more people own land as joint tenants, when one joint tenant dies, his or her interest ends, and the surviving owners continue to own the property. The title of the first-to-die does not pass under his or her will.

In contrast, when two or more people own land as tenants in common, when one dies, his or her interest forms part of his or her estate. An owner as a tenant in common may leave his or her interest in the land by will to a beneficiary.

To create a joint tenancy, there must be four unities which are summarized in the paper as follows:

Unity of title: The interests of the co-owners must be created by the same act or instrument, such as a transfer of land or a will.

Unity of time: The interests of the co-owners must be created at the same time.

Unity of interest: The interests of the co-owners must be of equal nature, size, and duration. For example, one cannot be a life interest and another an interest in fee simple. If there are three co-owners, one cannot have a half-interest and two others one-fourth each. Each must have a one-third interest.

Unity of possession: Each co-owner is entitled to possession of the whole of the land and none is entitled to any part of it to the exclusion of the other co-owners. (This is actually a characteristic of both joint tenants and tenants in common. For this reason, the respective interests of both kinds of co-owners are said to be “undivided.”)

One of the key recommendations set out in the paper is to allow joint tenancies to be created without all four unities: only unity of possession would be required. Accordingly, if the recommendation were implemented, two owners could acquire property with one owner having say a 65% interest and the other a 35% interest, and hold title so that on the death of one, the survivor will hold the entire interest by right of survivorship.

The terms “joint tenancy” and “tenancy and common” are perhaps not well understood by people not trained in the law. The report recommends that these terms be replaced by “co-ownership with survivorship” for joint tenancies, and “co-ownership without survivorship” for tenancies in common.

In British Columbia it is possible for one co-owner to sever a joint tenancy secretly, without the knowledge of the other co-owner or co-owners. If the joint tenancy is severed by one joint tenant, then he or she becomes a tenant in common and can leave his or her interest by will. The report contains a recommendation that to sever a joint tenancy (or co-ownership with survivorship) the severing owner must give notice to the other owner or owners.

The British Columbia Law Institute is asking for comments on these tentative recommendations before publishing a final report. You may comment by September 1, 2011, as follows:

By mail: British Columbia Law Institute
1822 East Mall
University of British Columbia
Vancouver, BC
V6T 1Z1

Attention: Gregory G. Blue, Q.C.

By fax: (604) 822-0144

By email: gblue@bcli.org

Stewart v. McLean

In British Columbia, if you act as an attorney under a power of attorney, you have a fiduciary duty (or duty of loyalty) to the person who appointed you, and on whose behalf you are acting. But the mere fact that someone makes a power of attorney does not in-and-of-itself make the person named as the attorney a fiduciary.

This issue is discussed in a Supreme Court of British Columbia decision released last January. The case is Stewart v. McLean, 2010 BCSC 64.

Mona Stewart sued her brother, Donald McLean, his wife, and his two children. Her mother, Ellen McLean, had transferred her house into a joint tenancy with her brother, Donald McLean, she had forgiven a $50,000 debt he owed to her, and she had given each of Donald McLean, his wife and two children $70,000.

After Ellen McLean’s death on February 4, 2005, Mona Steward claimed that her brother had unduly influenced their mother to benefit his family. She also argued that he and his family held the benefits on a resulting trust for Ellen McLean’s estate.

Mr. Justice Punnett rejected Mona Stewart’s claims, and held that Ellen Stewart had freely made valid gifts to her son and son’s family.

A key factor in this decision was that when Mona Stewart and Donald McLean’s uncle Hilarious West died, he had left most of his wealth to Mona Stewart and her children. Donald McLean unsuccessfully sought to have his uncle’s will declared invalid in Alberta.

Mr. Justice Punnett found that Ellen McLean had conferred substantial benefits on her son and his family in order to balance the benefits Mona Stewart received from her uncle.

In finding that there was no undue influence, Mr. Justice Punnett first considered whether there was a presumption that arose that Donald McLean unduly influenced his mother, by virtue either that Ellen McLean had appointed her son as an attorney under a power of attorney, or that their relationship was one of dominance.

Ellen McLean had made a power of attorney, in which she named her son as her attorney. But she never delivered it to him, and he did not exercise it. Accordingly, Mr. Justice Punnett found that the power of attorney did not give rise to a fiduciary duty in the circumstances.

Mr. Justice Punnett also found that Donald McLean was not in a position to dominate his mother. He wrote:

[87] I find that the deceased, up until her death, was mentally acute, independent, and strong-willed. There is no evidence that she was vulnerable in her relationship with her son nor that he controlled her in any way. She was not dependent on him. While she relied upon him to take her to appointments and stores and to assist around her home, had he been unable to do so, she was capable of making alternate arrangements as evidenced by the various third parties she hired to attend to matters that were beyond her abilities.

[88] Because of the Deceased’s independence and strong-will, Donald would have been unable to exercise any power over his mother. Even if he had some discretion or power, he would not have been able to unilaterally exercise it. I find that the relationship between Donald and his mother was not a fiduciary relationship.

Mr. Justice Punnett further held that if a presumption of undue influence arose, it had been rebutted. Ellen McLean had received independent advice from a lawyer when she transferred her house into a joint tenancy with her son, and from her financial advisor when she made the $70,000 gifts to each of her son, his wife and their children.

Mona Stewart also sought to rely on the presumption of resulting trust. She argued that because her mother made the transfer of title to the house into a joint tenancy, the cash to Donald McLean and his family, and the forgiveness of debt were all made gratuitously, there is a presumption the Donald McLean and his family held the assets they received in trust for his mother’s estate.

Mr. Justice Punnett agreed that the presumption of resulting trust arose, but found that it had been rebutted by the evidence that Ellen McLean had intended to make gifts.

Mr. Justice Punnett found that there was no basis for Mona Stewart’s allegations, in particular her allegations of undue influence. He wrote:

[120] The plaintiff’s pursuit of this lawsuit in light of the facts and her complete lack of evidence appears to have been motivated by greed and retaliation directed towards her brother for opposing probate of their late uncle’s will. It is one thing to pursue litigation based on suspicious conduct grounded in facts, which may or may not be accepted by the trier of fact; it is another to pursue it and provide no substantive evidence in support. Her allegations were unfounded and her motive improper.

The court ordered Mona Stewart to pay the defendant’s costs on a special costs basis. The usually rule in British Columbia lawsuits is that the unsuccessful party must pay costs to the successful party, but these costs generally represent only a portion of the successful party’s legal expenses. The court may award special costs, which approach or equal actual legal expenses, as a way of punishing a party for its conduct in the lawsuit.

Capacity to Make A Gift: Re: Elsie Jones

In British Columbia, if the court finds that someone is incapable of managing their affairs and appoints a committee (in other words, a guardian), there is a presumption that gratuitous transfers made by the incapable person are invalid. This presumption is set out in section 20 of the Patients Property Act. The presumption applies to certain transfers made before the court declares the person incapable.

Section 20 says:

Every gift, grant, alienation, conveyance or transfer of property made by a person who is or becomes a patient is deemed to be fraudulent and void as against the committee if
(a) the gift, grant, alienation, conveyance or transfer is not made for full and valuable consideration actually paid or sufficiently secured to the person, or
(b) the donee, grantee, transferee or person to whom the property was alienated or conveyed had notice at the time of the gift, grant, alienation, conveyance or transfer of the mental condition of the person.

Section 20 creates a presumption, which may be rebutted by evidence of capacity at the time of the transfer.

The Supreme Court of British Columbia recently applied the presumption in section 20 in Re: Elsie Jones, 2009 BCSC 1723.

Elsie Jones has three children: Maureen Ringrose, Ronald Jones and Marvin Jones. In May 2003, Dr. Leslie Sheldon, a geriatric psychiatrist diagnosed her with vascular dementia. In June, 2004, Elsie Jones transferred her home into a joint tenancy with her daughter, Maureen Ringrose. On July 27, 2006, the Supreme Court of British Columbia declared Elsie Jones to be incapable of managing herself or her affairs.

The Canada Trust Company as committee of Elsie Jones’ estate asked the court to decide if the transfer was valid. Elsie Jones’ two sons argued it was not.

Before the transfer, Elsie Jones had made several calls to the police, saying her house had been broken into. She also accused one of her sons of stealing from her, and taking large amounts of money from her investments. The court found that there was no basis for these allegations.

Maureen Ringrose argued if her mother to have understood generally the nature and effect of the transfer, that was sufficient to prove her capacity. Elsie Jones had an experienced lawyer advise her on the transfer. The lawyer believed she had capacity.

Elsie Jones’ sons, on the other hand, argued that Maureen Ringrose needed to prove that their mother had a capacity equivalent to that necessary to make a will. One of the criteria for capacity to make a will is the absence of any delusions that affect the maker’s decisions.

Mr. Justice Savage held that Elsie Jones did not have capacity to make a transfer of her home into a joint tenancy. Maureen Ringrose failed to rebut the presumption of invalidity in section 20 of the Patients Property Act. She transferred the property under delusions that undermined her capacity.

He wrote:

[99] In my opinion, in a case such as this, it makes no sense to say that an inter vivos transfer is valid if the donor “understands” the nature and the effect of the transaction but is under an unfounded or insane delusion that influenced or precipitated the transfer. In other words, in a case where there are unfounded or insane delusions, it is not sufficient for a court to find merely that the donor understands the nature and the effect of the transaction in some abstract sense.

[100] The court must also be satisfied that the donor was not operating under the unfounded or insane delusion at the time. This particularly so when a donor acts late in life to dispose of a substantial amount of their estate: Re: Beaney [1979] 2 All E.R. 595 (Ch.) at 601; Halsbury’s Law of England, 4th ed., Vol. 20(1), at 10-11; see also Re Rogers, (1963) 42 W.W.R. 200, 39 D.L.R. (2d) 141, [1963] B.C.J. No. 133 at para. 31 (C.A.).

[101] While I do not think it necessary for this decision, the observation of Wilson J.A., as he then was, concurred in by Davey J.A., as he then was, in Rogers seems apposite:
30 Having concluded that the testamentary test is the right one to apply, I cannot see that, so far as degree of understanding or capacity is concerned, there is any real difference. I do not think that a man requires any higher or lower degree of capacity to consider his own interest than he needs to consider the interests of other persons. Nor do I think that the degree of capacity required differs in respect to any disposition by gift or otherwise.

[102] In my opinion the evidence adduced falls short of meeting either standard. Firstly, there was a variety of delusions under which Elsie Jones was operating over an extended period of time, both before and after the Transfer. She was of the view that persons were breaking into her home and stealing things. At various times she accused her own children of doing this. Not only Ronald but also Maureen. There is no evidence at all to support this. At various times she called the police over these allegations who attended at her residence both before and after the Transfer.

Turner v. Turner

I have previously written about my concerns about using joint tenancies as an estate plan to transfer houses and other assets to children. Too often this is seen as a low cost, simple way to leave children an inheritance. In many cases people do this without really understanding the consequences of what they are doing.

The problems of using joint tenancies with children are again illustrated in a recent British Columbia case, Turner v. Turner, 2010 BCSC 49.

Luella Turner had three children: Richard Mastel, John Turner, and James Turner. In her later years, she was not close to Richard Mastel. She did not like his wife. In contrast, she had a very close relationship with her youngest son, James Turner, who lived with her until he was 39.

In 1996, she transferred her house into a joint tenancy with James Turner. This came about after she told him she was concerned that Richard’s wife might get her hands on the house, apparently referring to the Wills Variation Act. James Turner, who was a lawyer, told her that she could transfer her house into a joint tenancy, allowing it to pass outside of her estate, avoiding a challenge.

She saw a lawyer, Mr. Johnson, who handled the transfer. He did not testify at trial.

In 2006, after she had remarried, Luella Turner made a new will. In the will she provided that her husband could live in the house for life. If her husband didn’t want to use the house, or on his death, the will directed that the house be sold with the proceeds divided equally between James Turner and John Turner.

Luella Turner died on April 23, 2007. Her husband moved out of the home. James Turner then transferred the title into his sole name as the surviving joint tenant, and sold the house.

John Turner then sued James Turner for his share of the sale proceeds under the will. He alleged that James Turner held the house on a resulting trust for their mother’s estate. Accordingly, the house should pass under the will, not outside of the estate.

Mr. Justice Verhoeven held that James Turner did indeed hold the house on a resulting trust for the estate. The law in British Columbia is that when a parent transfers assets gratuitously to an adult child, there is a presumption that the child holds the assets in trust for the parent and the parent’s estate. This is a presumption only, and may be rebutted if the child can show that the parent intended a gift.

In this case, Mr. Justice Verhoeven found that both Luella Turner and James Turner treated the house as if it were still solely Luella Turner’s property. Although Luella Turner sometimes referred to the house as their house, this was consistent with the fact that James Turner lived with her. When she made her later will in 2006, she treated the house as her own. She told James Turner of her plans to leave the house to both John Turner and himself in the 2006 will, and he expressed disappointment, which is consistent with the view that he recognized that the house was still hers to leave in the will.

Mr. Justice Verhoeven’s comments are instructive of the type of advice Luella Turner should have received, but did not, when transferring the house into a joint tenancy with one of her children:

[89] Mr. Johnson charged no fees for his services. The account was for disbursements only. The defendant denies that Mr. Johnson waived fees as a courtesy to him. From the nature of the file and from the account, I infer that the time spent by Mr Johnson on the matter was very minimal. He met Mrs. Turner only once. He obtained scant information from her, and reviewed no documents.

[90] The four sticky notes, which I must assume to be in the handwriting of Mr. Johnson, appear to indicate that a very brief discussion took place between Mr. Johnson and the deceased about the transfer. They appear to include the words “strictly client’s idea” and to make cryptic reference to the three sons, noting that the oldest son is well off, the second son has received $18,000 and “all wills have said house to Jim” and “Jim being the one who has done everything”. Some parts of the notes are not capable of interpretation.

[91] In fact on the evidence there was only one prior will, the 1976 will.

[92] Even if Mr. Johnson had been available to testify at the trial I could not have given much weight to such scanty records.

[93] There is no reference in the notes relating to any discussion by Mr. Johnson with the deceased concerning the meaning and effect of joint tenancy.

[94] James Turner acknowledges that he did not provide any legal advice to his mother concerning the transaction, other than telling her that by means of putting the property in joint tenancy, a challenge under the Wills Variation Act could be avoided. He discussed no alternative courses of action with her. He says that he was not a wills and estates lawyer and did not know of any alternative courses of action.

[95] He acknowledges that he did not discuss with her anything about what she could or could not do with the property once it was in joint tenancy. He did not tell her that she would have to consult him in future regarding any major decisions about the property. On cross-examination he frankly conceded that while in his mind she “appeared to understand everything” he really could not say that she was fully informed and had a full understanding of the consequences to her of the transaction.

[96] A gift cannot be revoked, whereas a testamentary disposition such as a will can be altered at any time. There is no evidence that this critical difference was explained to Mrs. Turner or that she understood it. Specifically, it was not explained to her that by placing the title in joint tenancy with her son James, she could never change her mind, and that she could no longer deal with the property through her will.

[97] The potential consequences of making a gift of a joint tenancy interest in the property were profound. As a joint tenant, James Turner could have moved for a partition and sale of the property, whereupon Mrs. Turner would have been obliged to purchase his interest in the property, which she was not in a position to do. She had no assets, and minimal income. She could have been forced out of her own home, and would have received only one-half of the sale proceeds. Her share of the proceeds might have been insufficient for her to find alternative accommodation. There is no evidence that any of this was explained to her.

[98] On the defendant’s own evidence, the deceased did not offer any reason for making a gift of the interest in the property to him. There is no evidence for example that he agreed to remain with her or to take care of her in future.

[99] The only clear evidence of the deceased’s motivation for the transfer is that of her concern about a potential claim under the Wills Variation Act.

[100] There was no advice given to her as to how substantial that concern would be in the circumstances. There was no advice as to whether there might be other means to deal with her concern.

[101] As I interpret Mr. Johnson’s file and the circumstances relating to the dealings with Mr. Johnson, the deceased got no meaningful legal advice from Mr. Johnson. Essentially, he simply carried out the transaction as the deceased and James Turner asked.

In the result, JamesTurner is required to share the proceeds of the sale of the house with his brother John Turner.

Joint Tenancy Dilemma: Martinson v. Anniko

Here’s a dilemma. You own your house with your husband as joint tenants so that on the death of either of you, the survivor will become the sole owner of the house. Although your husband intends for you to receive the house by right of survivorship if you outlive him, he has made a will leaving his estate mainly to his other relatives. This is your second marriage. You have children from your first marriage. Ultimately, you would like to leave something to your children. But your main asset is your interest in the house. If your husband outlives you, he will ultimately leave the house mainly to his relatives and not to your children.

In British Columbia you could sever the joint tenancy by transferring a half-interest in the house to yourself. Then if you go first, you could provide for your children in your will (perhaps with a provision allowing your husband to live in it during his lifetime.) But, if he dies first, you will only have your half-interest in the house.

In the case of your husband dying first, you would be better off leaving the house in a joint tenancy. But if you die first, your children will not receive anything out of the house. Do you sever or not?

With a well thought out, and coordinated plan, nobody should face this dilemma. But people do.

This appears to be what happened in a recent British Columbia Supreme Court decision, Martinson v. Anniko, 2009 BCSC 1104.

Asta Martinson and Hans Martinson married in 1985. Both were 67 years old. They signed a marriage agreement before the marriage, which as amended provided that neither would make any claim to the other’s estate, including any claims under the Wills Variation Act.

Hans Martinson used his assets to buy a home for them in Victoria, which was registered in both of their names as joint tenants. He also put some investments into joint accounts with her.

In his last will dated July 8, 2005, Hans Martinson, left $50,000 to one of Mrs. Martinson’s grandchildren, and the rest of his estate to his nephew and the nephew’s family. His will recites as his reasons for not leaving Mrs. Martinson anything that he had the house in joint tenancy with her, as well as $205,000 investments registered in joint accounts. He also said in his will that he had recently given her a gift of $70,000.

Asta Martinson knew he was making a will that excluded her children. She was concerned that if she died before her husband, her children would not receive much of an inheritance from her. She severed the joint tenancy.

Hans Martinson died before his Asta Martinson. Because she severed the joint tenancy, she only had a half-interest in the house, for which she received $334,000 in 2009.

After he husband’s death, Mrs. Martinson made an application to court to vary her husband’s will under the Wills Variation Act.

When the case went to trial, in addition to the proceeds from the sale of her half-interest in the house, she had $63,000 in a Manulife account, and Registered Income Funds of $33,000. She had spent some of her capital on caregivers and living expenses, but had also given funds to her children.

Mrs. Martinson was 91, and in poor health. She had cared for her husband during his illness, and he was a difficult patient.

Hans Martinson’s estate was worth $476,000.

Mr. Justice Truscott declined to vary Mr. Martinson’s will. Although Mrs. Martinson’s marriage agreement did not bar the court from varying the will, it was taken into consideration in assessing Hans Martinson’s legal and moral obligations to his wife. Mr. Justice Truscott found that the gifts made by Hans Martinson to his wife, as set out in the will, satisfied Mr. Martinson’s obligations. He had rational and valid reasons for making the will he did.

Although the full interest in the house did not go to Mrs. Martinson, as her husband had contemplated in the will, that was caused by Mrs. Martinson’s decision to sever the joint tenancy.