Unconscionable Procurement: Pinsonneault v. Courtney

 

The doctrine of unconscionable procurement is a helpful tool in challenging gratuitous transfers if the person benefiting has been actively involved in procuring property from the transferor. When it applies, the person who receives the benefit has the burden of demonstrating that the transferor had a sufficient level of understanding of the nature and effect of the transfer for it to be upheld. To succeed in a claim of unconscionable procurement, it is not necessary to show that the transferor did not have the mental capacity to make the transfer, or that she was subject to undue influence. This doctrine is not new, but many of the cases are older, and the concept appears to be enjoying a renaissance in Canada. There is heightened awareness among lawyers, which I suspect is largely due to John Poyser’s insightful discussion of unconscionable procurement in his text, Capacity and Undue Influence (now in its second edition; I reviewed the first edition here). If there were any doubt about whether the doctrine still applies in British Columbia—and there shouldn’t have been—the recent decision in Pinsonneault v.Courtney, 2022 BCSC 120, confirms it is alive and well.

Marie Reine Denise Pinsonneault moved to British Columbia in 2010 following a breakdown of her marriage. She has six children, one of whom she believed would try to take whatever he could from her. She settled in the Kootenays, and had a small business. At the time of trial in 2020 and 2021 she was 87. She had very poor eyesight, no longer had a drivers license and was “not physically robust.” On the other hand, Mr. Justice Williams, who heard the trial, described her as a “feisty, active individual.” It is apparent from the decision that her mental functioning was fine.

She became good friends with a contractor she had hired to do some work, Terry Courtney, and also became friends with his wife, Charlene Courtney, and their daughter. Mr. Courtney was 63 at the time of trial, and he characterized their relationship as like mother and son. She disagreed with his characterization of their relationship.

She purchased a lot (“Lot 3”) with a cabin on Kootenay Lake for $150,000 in 2015.

According to Ms. Pinsonneault, in early 2017, Mr. Courtney told her that he and his wife found a way to protect Lot 3, in reference to her concerns that her family and particularly her youngest son might try to take it from her. This was through a power of attorney. He took her to a notary public, where she signed four documents, including a letter explaining that she wanted to add Mr. and Mrs. Courtney to the title of Lot 3, a “Deed of Gift” of Lot 3 to them, pursuant to which she was gifting the property to them, while she would continue to be responsible for the property expenses, a transfer to title into their names and a power of attorney. In the documents, Mr. Courtney was described as Ms. Pinsonneault’s “step-son,” which was, of course, not accurate.

Ms. Pinsonneault’s evidence of what happened at the Notary’s office is set out in the decision as follows:

[129]     The plaintiff testified that when they arrived, initially Mr. Courtney went and spoke privately with the notary, that is, not in Ms. Pinsonneault’s presence. She said that she then met privately with the notary. There were papers present, evidently already prepared. Her recollection is that the notary asked her if she had read the “paper I sign”; she replied that she “cannot read”. “The notary then asked “do you know what you are signing?” and she answered to the effect yes, that “Terry had explained it to her”. Ms. Pinsonneault said she then signed the papers that were presented to her; she paid the bill and left with Mr. Courtney. When they left the notary’s office, she said she had the papers in her hand. Mr. Courtney told her to give them to him, saying “I will put them in your file at my place”, but she refused to do so. She said she took them home and put them in her desk. She did not examine them at that time or until some considerable time later.

The notary gave evidence, but Mr. Justice Williams found that “her testimony was disappointing and inadequate. Her responses were a litany of claims that she did not remember any details or specifics of the transaction, sometimes falling back on her ‘general practice’.” Her “notes and file are of no value to her in providing clear and reliable answers.”

Ms. Pinsonneault and Mr. Courtney later had a falling out over a dispute about the removal trees from Lot 3. She testified that it was after this disagreement that she read the documents and found out that she had transferred Lot 3 to the Courtneys.

She sued to recover Lot 3.

In finding in favour of Ms. Pinsonneault, and awarding her the property back, Mr. Justice Williams applied the presumption of resulting trust, which is a presumption that applies when one person makes a gratuitous transfer to another, there is a presumption that the transferor did not intend to make a gift. If the presumption is applied, the transferee is said to hold the property transferred on a “resulting trust,” for the transferor.

The presumption of resulting trust is just that: a presumption. It may be rebutted by evidence that the transferor did intend to make a gift. The issue boils down to whether the transferor intended to make a gift when at the time of the transfer. The documents Ms. Pinsonneault signed, particularly the Deed of Gift, would on their face lend support for the view that she intended a gift when she signed the transfer. Mr. and Mrs. Courtney argued that she intended to make a gift at the time she signed the transfer, but she changed her mind later.

Mr. Justice Williams found that the Courtneys had not rebutted the presumption of resulting trust. Ms. Pinsonneault did not intend to make a gift nor did she even know she was transferring her property. He wrote:

[207]     That said, the presumption to which I make reference is rebuttable: it is open to the defendants to adduce evidence to displace the presumption. To do so, they must show on a balance of probabilities that the transferor (the plaintiff) intended to make a gift.

[208]     In the matter at hand, as I have explained in my discussion of the evidence, I find that, at the time of the transfer, there is no viable basis to believe that the plaintiff had the intention to gift title to Lot 3 to the defendants. In fact, the evidence provides a strong reason to conclude that the plaintiff did not know that by signing the documents, she had in fact transferred title.

[209]     This is not a situation where it can be argued that, when the plaintiff executed the documents, she understood the consequences of doing so.

[210]     Furthermore, I am satisfied that the plaintiff was unaware that title had been transferred until many months later and, when she realized, she immediately set up a hue and cry, expressing that. In the time that followed, she steadfastly persisted in that position.

[211]     In short, there is no evidence before this Court that can assist the defendants in rebutting the presumption of resulting trust.

Mr. Justice Williams also considered unconscionable procurement. He provides an excellent summary of the doctrine:

[187]     The doctrine of wrongful (or unconscionable) procurement is derived from the principle that where a donee obtains a benefit from a donor that in turn disadvantages that donor, the donee must prove that the donor had the “necessary level of understanding to make a transaction conscionable”: John E.S. Poyser, Capacity and Undue Influence 2^nd ed (Toronto: Carswell, 2019) at 629 in Gefen v. Gaertner, 2019 ONSC 6015 at para.158. It is an equitable principle: Poyser at 628. A finding of wrongful procurement renders a transfer voidable by the court: Gefen at para. 158.

[188]     The Court in Gefen provided that the onus is on the party attacking the transaction to prove on a balance of probabilities that: (1) a significant benefit was provided; and (2) active involvement by the person obtaining the benefit of the procurement: at para. 159. Once these two elements are established, it is presumed that the donor “did not truly understand what they were doing when they made the transaction.” Gefen at para. 159.

[189]     Once the presumption is established, the transaction is voidable and the Court must determine whether it would be unconscionable to let the transaction stand. As stated in Gefen at para. 161, at this stage,

[161]    …Both parties must adduce evidence about the donor's actual understanding of what she was doing. If the evidence does not come down on either side, the attacker will have failed to meet the onus and the transaction will stand: Poyser, at p. 570.

[162]    The attacker must ensure that there is enough evidence before the court in the final weighing to allow the court to conclude, as a finding of fact, that the donor failed to have a conscionable understanding of what she was doing when completing the transaction. This issue turns on whether the donor appreciated the effect, nature, and consequence of the transaction in a manner sufficient to render it fair, just, and reasonable: Poyser, at p. 574.

[190]     The question the court must ask is whether the donor “fully appreciate[d] [the] effect, nature and, and consequence” of providing gift: Kinsella v. Pask, 28 O.L.R. 393 at 400, 12 D.L.R. 522.

Mr. Justice Williams found (at paragraph 217) that “… the doctrine of wrongful procurement is, to my mind, met by the circumstances at hand.”

Land Owner Transparency Reports Must Be Filed By November 30, 2021

[After I wrote this post, the deadline was extended to November 30, 2022.]

Registered owners of land held in trust and corporations and partnerships that own land in British Columbia have until November 30, 2021 to file a report with the Land Owner Transparency Registry. This is a requirement under the Land Owner Transparency Act. There are draconian penalties for failing to comply. Unfortunately, I am finding that most people are unaware of the requirement, and the British Columbia Government has done a poor job explaining the legislation. But there is some information available online here.

If you are holding land in trust, you may have to file a report, but there are some exemptions, such as land held in a trust that qualifies under the Income Tax Act as an alter ego or joint spousal trust. There is also an exemption for testamentary trusts (trusts created in a will). 

If you are a trustee holding land, or if you have company or are in a partnership that owns land, please consult with your lawyer.

Chichak v. Chichak

 

In Chichak v. Chichak, 2021 BCCA 286, the British Columbia Court of Appeal confirmed that a creditor who has registered a judgment against real property held in the name of a debtor cannot enforce the judgement in respect of an interest of another person who has an equitable interest in the property. This is so even when the equable interest is not registered on the title to the land. The creditor may only enforce the judgement to the extent of the debtor’s interest in the land.

Derek Chichak and his wife Jennifer Chichak bought real property together. The title was transferred to Ms. Chichak’s name and then later she transferred the title into Mr. Chichak’s name. Mr. Chichak was sued by two creditors, who registered their judgment against the property. Another creditor had a mortgage against the property and when mortgage went into default, the property was sold in a foreclosure proceeding brought by another creditor. After the amount of the mortgage was paid, there remained surplus funds from the sale of the property, and the two creditors with registered judgements sought to have the funds paid out to them. Ms. Chichak, however, claimed that she had a 50% interest in the equity in the property because of her contribution to the purchase price. When one person pays for or transfers property to another, there is a presumption that the recipient of the property holds the property, or in this case half of it, on a resulting trust for the person who paid the purchase price or transferred the property. Ms. Chichak claimed that because her husband held a half interest in the property in trust for her, his judgment creditors were only entitled to recover one-half of the surplus funds, with Ms. Chichak entitled to the other half.

The Supreme Court of British Columbia did not make any finding as to whether Mr. Chichak held an interest in the property on a resulting trust for Ms. Chichak, but held that even if he did, the judgment creditors were entitled to be paid first. Their judgment on the title took priority to Ms. Chichak’s claim. Ms. Chichak appeal.

Madam Justice Saunders in allowing the appeal held that a judgment creditor who registered the judgment against the title to real property could not enforce the receive a greater interest in the property than that held by the judgment debtor. This principle is referred to in Latin as “nemo dat quod non habet” which loosely translated means “you can’t give what you ain’t got.” If Mr. Chichak was only entitled to a one-half interest in the property, then his creditors can only take his half interest; they are not entitled to the other half interest if he holds it in trust for Ms. Chichak.

This common-law principle that a judgment creditor may only enforce a judgment to the extent of the debtor’s interest in property is supported by the wording of the Court Order Enforcement Act. Section 83 (3) (a) and (7) provides:

(3)   From the time of its registration the judgment forms a lien and charge on the land of the judgment debtor specified in the application referred to in section 88 in the same manner as if charged in writing by the judgment debtor under his or her signature and seal,

(a)     to the extent of his or her beneficial interest in the land,

….

(7)   A judgment creditor is not a bona fide purchaser for value.

 [emphasis in decision]

The creditors pointed to section 23 (2) of the Land Title Act, which provides that subject to certain specific exceptions the title “is conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title….” In other words, people dealing with the registered owner of real property are entitled to rely on the owner’s title. This protects, for example, buyers of property from the owner on title form others later claiming that the seller did not in fact own the property.

However, Madam Justice Saunders, noting the distinction between a judgment creditor and a purchaser, held that section 23 (2) of the Land Title Act does not apply:

[14]         By the registration system, all interests in the property that will affect a prospective purchaser for value are recorded in the register, with the intention that the true state of the title – of all the interests pertaining to the property – will be evident, subject to these few statutory exceptions, and a bona fide purchaser for value will take priority over the holder of an unregistered interest. Section 86(7) of the Court Order Enforcement Act, of course, explicitly provides that a judgment creditor is not a bona fide purchaser for value.

[15]         In my respectful view, the judge misapplied the Land Title Act by effectively equating a judgment creditor, a person who seeks to collect on a judgment in likely unrelated litigation, to the position of a person who has relied on the register in acquiring their indefeasible interest in the land. This would allow a judgment creditor to obtain greater recovery from the land than even the judgment debtor could derive. This result could be legislated, no doubt. However, in my view, it has not; the current legislation does not reach this far. The result, in my view, is contrary to decided authority presented to us but, it appears, not to the judge of first instance.

The Court Appeal ordered that the case be remitted to the Supreme Court of British Columbia to determine whether Ms. Chichak in fact had a beneficial interest in the property.  If she can establish her resulting trust claim, the judgment creditors will not be entitled to the funds representing Ms. Chichak’s share of the surplus proceeds from the sale.

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.  

MacKinnon v. Donauer

There is no shortage of court cases in British Columbia of informal family arrangements going awry. A parent may assist a child and the child’s spouse in purchasing a home with the expectation of sharing the home. The idea may make good sense. Unfortunately, neither side may consider what will happen if the arrangement doesn’t work out. In the case I am about to write about, MacKinnonv. Donauer, 2017 BCCA 437, for example, Madam Justice Newbury, noted at paragraph 3,

As is usually the case in family arrangements of this kind, none of the parties sought legal advice, and no one seems to have considered various contingencies that could arise in the parties’ lives or in their relationship.

Fortunately, the courts do have a fair amount of flexibility in fashioning a remedy consistent with what the parties may have reasonably expected had they turned their minds to the potential problems that might arise. Unfortunately, by the time the matter gets to court, the parties may spend a hundred times as much in legal expense than what they would have spent if each had received independent advice and entered into a formal agreement.

Joy MacKinnon paid $150,000 to her daughter, Tina Maria Donauer, and her daughter’s husband, Michael Donauer, toward the purchase of a home. In return the Ms. MacKinnon and her husband (who later died in 2013), moved in to the new home to live in the basement suite. The understanding among the parties was that Ms. MacKinnon would be entitled to live in the suite indefinitely without paying rent. She was 58 years old when she contributed the funds toward the purchase and moved into the suite,

She lived in the suite for about 9 years. She contributed $28,500 towards some of the property expenses. Following a disagreement with her daughter and son-in-law, Ms. MacKinnon moved out of the suite in January, 2015.

Ms. MacKinnon sued her daughter and son-in-law, claiming a 29 percent interest in the home on that basis that she contributed 29 percent of the purchase price. She claimed the interest on a resulting trust, or, alternatively, unjust enrichment. The trial judge dismissed her claim for an interest in the home, but awarded her $28,500 for the funds she contributed to the expenses. The trial judge found that she did not prove her claim in either resulting trust or unjust enrichment.

Ms. MacKinnon appealed to the British Columbia Court of Appeal, which overturned the trial judge’s decision in respect of the initial contribution of $150,000. Madam Justice Newbury held that on the facts, Mr. and Mrs. Donauer would be unjustly enriched if they were allowed to retain the full benefit of Ms. MacKinnon’s initial $150,000 contribution. They were enriched by her contribution, she suffered a corresponding deprivation, and there was no juristic reason for the enrichment. Madam Justice Newbury held that the family arrangement did not constitute a juristic reason for the enrichment as the trial judge had found, However, Ms. MacKinnon also received the benefit of living in the suite for nine years, without contributing to the full rental value.

Madam Justice Newbury wrote:

[45]         It seems to me that the appropriate analysis emerges if one imagines a situation in which after a short period of living with Ms. MacKinnon under the family arrangement, the Donauers had expelled her from their home. In that event, I suspect a court would have little difficulty in finding that the defendants had been unjustly enriched – i.e., that it would be unjust for them to retain the full $150,000. Ms. MacKinnon would be found to have a reasonable expectation of some remedy – despite the existence of a family arrangement. It was, of course, Ms. MacKinnon who chose to leave – and not, if I may say so, for any reason that would withstand objective scrutiny. Was it reasonable for her to expect she could unilaterally bring the arrangement to an end and claim a proprietary interest in McClure, with the resulting disruption of a forced sale? It is difficult to say she was “prejudiced” by her own decision to leave. On the other hand, would it be reasonable for the defendants to expect to retain the entire benefit of the funds and their appreciation in the real estate market?

[46]         Considering objectively what the parties could have reasonably expected in light of all the circumstances when they entered into the family arrangement, I believe the trial judge erred in ruling that it constituted a juristic reason that justified the Donauers’ retaining the entire benefit of Ms. MacKinnon’s funds. At the same time, the fact the Donauers accommodated her in their home for over nine years and thus provided a benefit to her must be taken into account in fashioning the appropriate remedy for the enrichment. (As the Court stated in Kerr [v. Baranow, 2011 SCC 10], ‘mutual benefit conferral’ is generally to be taken into account at this “remedy stage” of the analysis: see para. 109.)

Madam Justice Newbury considered that a financial award would be appropriate in the circumstances. In arriving at a formula for calculating the award, she took into account the nine years Ms. MacKinnon lived in the suite by directing that the value of a 29 percent interest as at the date of trial, be reduced by a fraction representing the nine years she was in the suite over her life expectancy when the home was purchased. Madam Justice Newbury wrote:

[48]         In normal circumstances, I would calculate a money judgment with reference to Ms. MacKinnon’s life expectancy when she was 58 years old. I would multiply 29% of the fair market value of the house at the date of trial by a fraction the denominator of which would be the number of years the Donauers could have expected Ms. MacKinnon to be in the house from 2005 on, and the numerator of which would be that number minus nine. I would then adjust for contingencies arising on the evidence that was before the Court at trial, including the contingency she would have left the suite during her lifetime – for health reasons, for example. 

[49]         Unfortunately, there is no evidence before us of the life expectancy of women of the plaintiff’s age in 2005, nor of the market value of McClure as at the date of trial. I would therefore allow the appeal and direct counsel to attempt to determine that market value as at the trial date and Ms. MacKinnon’s life expectancy in 2005, and then to calculate the amount of a judgment in accordance with the foregoing – or to settle upon some other amount. If they are unable to determine or agree upon a figure within 60 days of the date of this court’s order, either party shall be at liberty to return to the Supreme Court of British Columbia, which shall determine an amount in accordance with these reasons.

I have tried working through the formula using made-up values. Say the house was worth $1 million at trial. The value of a 29 percent interest would be $290,000. If her life expectancy in 2005 were 27 years, then she would receive two-thirds of $290,000, which is $193,333. Again, I made these values up, and I don’t know what Ms. MacKinnon will receive in addition to the $28,500, which the Court of Appeal did not disturb. 

Supreme Court of Canada Decision on Proprietary Estoppel in Cowper-Smith v. Morgan

The Supreme Court of Canada rendered it judgment in Cowper-Smith v. Morgan, 2017 SCC 61, this last Thursday, December 14, 2017. The main legal issue is whether a person who relies on a promise that he will receive property to his detriment may become entitled to the property even if the person who made the promise did not own the property at the time she made the promise. Let me explain.

Elizabeth Flora Cowper-Smith died in 2010. She had three children: Gloria Morgan, Max Cowper-Smith and Nathan Cowper-Smith. In her will, she named her daughter as her executor and she provided that after payment of debts, her estate would be divided equally among her three children. She had investments and her family home in Victoria, British Columbia.

In 2005, Max Cowper-Smith visited Victoria from England, where he had been living and working as a lawyer. Gloria told Max that their mother could no longer care for herself in her own home. Gloria and Max agreed that he would leave England and move in with their mother, and care for her and the family home, after Gloria agreed that he would be able to live in the home permanently, and that he would be able to acquire Gloria’s one-third interest after their mother’s death. On the basis of his sister’s promises, Max moved back to Victoria, and cared for his mother.

After her mother’s death, Gloria said she was going to put the house on the market.

Nathan and Max sued their sister.

As an aside, there is more to this story. Elizabeth Cowper-Smith had transferred title to her house and investments into joint tenancy with Gloria, and they signed a trust declaration pursuant to which Gloria held her interest in the title to the house and investments for her mother during her mother’s lifetime, but would receive these assets on her mother’s death. The Supreme Court of British Columbia trial judge set aside the transfers into joint tenancies and the trust declaration on the basis that Gloria had exercised undue influence over her mother and that Gloria had not rebutted the presumption that the gratuitous transfer is not a gift, but is held on a resulting trust for her mother and her mother’s estate. The Court of Appeal upheld this aspect of the trial judge’s decision, and it was not part of the appeal to the Supreme Court of Canada.

On finding that the family home was part of Elizabeth’s estate, the trial judge, Madam Justice Brown considered Max’s claim to the right to purchase Gloria’s interest in the home from Gloria on the basis of what is known as proprietary estoppel. In her reasons reported at 2015 BCSC 1170, she summarized the law as follows:

[116]     The claim for proprietary estoppel begins with an assurance or representation in relation to an interest in land. The assurance can be made through words or conduct and does not have to be as precise as it would need to be in order to give rise to a binding contract. The claimant's belief in the assurance must be reasonable. A finding of reliance does not necessarily lead to a finding of detriment and the court must be satisfied that there has been detriment because this is what gives rise to an unfairness. Reliance is a change in a person's conduct as a result of the assurance. Detriment does not flow automatically from reliance and detriment must be assessed on a holistic basis, looking at the overall benefits gained and losses suffered by the claimant. Once inequity has been established, the court must determine the extent of the inequity and the relief needed to satisfy it.

Madam Justice Brown found that Max had established the necessary evidence to support his claim. She wrote at paragraph 118 and 119,

[118]     I am satisfied that Max acted to his detriment in moving from England to Victoria, giving up employment income, the long-term lease of a cottage, his contacts with his children, and his social life to look after his aged dementing mother. He did so relying on Gloria’s agreement to his conditions for the move. In doing so, he acted reasonably. His discussions with Gloria were not done in a moment, they covered several months.

[119]     The relief that Max seeks is the right to purchase Gloria’s one-third interest in the house. I consider the relief sought by Max to be the minimum required to satisfy the equity. In a sense it will cost Gloria nothing. That Gloria now would rather not sell to Max for personal reasons has no bearing on the equity, or the reasonableness, of the relief sought.

Gloria appealed. In the British Columbia Court of Appeal, reported at 2016 BCCA 200, the majority held that because Gloria did not own an interest in the family home when she made the promises to Max, and it was uncertain whether she would receive an interest in the family home, Max could not rely on Gloria’s promises to assert a claim based on proprietary estoppel. Mr. Justice Willcock for the majority (Madam Justice D. Smith dissented on this issue) wrote at paragraphs 106 though 108,

[106]     Even assuming there to be some basis for the view that proprietary estoppel might arise as a result of an assurance given by one about to be the owner of property, I would not expand that class of persons so far as to include a potential beneficiary who gives an assurance to another, years before the death of a testator, with respect to what she will do with an inheritance that she merely anticipates receiving, if the person receiving the assurance acts as requested in the meantime. Not only is there uncertainty, in such a case, with respect to the promisor’s ability to deliver a proprietary interest to the promisee at the time the assurance is given, the uncertainty is not resolved when the promisee acts in reliance upon the promise.

[107]     Leaving aside, for the moment, the question whether Gloria was in a position to exert undue influence upon her mother, there was uncertainty with respect to the property interest Max was being promised. First, there was uncertainty whether Gloria would inherit anything from her mother. She might have predeceased her mother. Her mother might have changed her will and left Gloria more or less than a one‑third interest in the property. Her mother might have sold the house and moved into accommodation more suited to her declining health. Simply by liquidating her property Elizabeth Cowper-Smith would have precluded Max from asserting a right to buy anything from Gloria. Certainly it is not suggested that Elizabeth was in any way restricted in her dealings with the property simply because her daughter made assurances to Max about what she would do on Elizabeth’s death.

[108]     Without exerting undue influence upon her mother, Gloria was not in a position to determine what property interest Max would receive in exchange for his move to Victoria. The fulfilment of Gloria’s promise was entirely conditional on her mother’s actions, which were outside her control.

Max appealed to the Supreme Court of Canada.

Writing for the majority, Chief Justice McLachlin held that Max was entitled to require Gloria to sell him her interest in their mother’s home based on the principles of proprietary estoppel. She rejected the majority’s reasoning in the Court of Appeal. Although Max could not have enforced the promise if Gloria had not acquired an interest in the property, it can be enforced if she later does receive an interest in the home. After summarizing the majority decision in the Court of Appeal, the Chief Justice wrote at paragraphs 35 and 36:

[35]                          I cannot agree. With respect, the conclusion reached by the Court of Appeal majority conflates proprietary estoppel with the equity to which it gives effect. That Gloria did not own an interest in her mother’s property at the time of Max’s reliance is not dispositive in itself: see MacDougall, at p. 456; see also Thorner, at para. 61, per Lord Walker; Re Basham (deceased), [1987] 1 All E.R. 405 (Ch.), at p. 415. An equity arises when the claimant reasonably relies to his detriment on the expectation that he will enjoy a right or benefit over property, whether or not the party responsible for that expectation owns an interest in the property at the time of the claimant’s reliance. Proprietary estoppel may not protect that equity immediately. It may not protect the equity until considerable time has passed. If the party responsible for the expectation never acquires a sufficient interest in the property, proprietary estoppel may not arise at all; where there is proprietary estoppel, there must be an equity, but not vice versa. When the party responsible for the expectation has or acquires a sufficient interest in the property, however, proprietary estoppel attaches to that interest and protects the equity: see MacDougall, at p. 458; Wilken and Ghaly, at pp. 265-66; see also Watson v. Goldsbrough, [1986] 1 E.G.L.R. 265 (C.A.), at p. 267. Ownership at the time the representation or assurance was relied on is not a requirement of a proprietary estoppel claim.

[36]                           An equity arose in Max’s favour when he reasonably relied to his detriment on the expectation that he would be able to acquire Gloria’s one-third interest in their mother’s house. That equity could not have been protected by proprietary estoppel at the time it arose, because Gloria did not then own an interest in the property. But that does not mean that proprietary estoppel cannot attach to Gloria’s share of the house once she receives it. I conclude that it can.

There were a couple of other important issues remaining. First, Elizabeth Cowper-Smith did not give her children the family home in the will. Rather she gave her children a one-third interest in the residue of the estate. Gloria would only acquire an interest in the home if she distributed the home itself to the three beneficiaries, rather than selling it and distributing the proceeds. As an executor she had discretion to sell the house.

In this case, the Chief Justice held that Gloria had a conflict of interest as executor, on the one hand, and as a beneficiary. The court could order her to distribute the home in order to allow Max to be able to purchase Gloria’s interest in the home, and the majority of the Supreme Court of Canada did just that.

Secondly, the question arose as to when Gloria’s interest would be valued. Elizabeth Cowper-Smith had died in 2010 and this decision came out seven years later. The value of the home has likely increased significantly, given the changes in the Victoria real estate market. Chief Justice McLachlin held that the appropriate time for determining the purchase price was the time Max may have reasonably have expected to have purchased Gloria’s interest. The majority used an appraisal as of February 2, 2011.   The Chief Justice wrote at paragraphs 52 through 54,

[53]                          Neither Max nor Gloria could reasonably have expected to wait the better part of a decade to exchange Max’s cash for Gloria’s interest in the property. It is safe to assume that, had Gloria not sought to escape her promise, Max’s equity would have been satisfied and Gloria’s share of the house sold to him not long after February 2, 2011, which is when, in the course of administering their mother’s estate, the property was in fact appraised for $670,000.00. Rather than sell her interest in the house to Max at that point — that is, roughly when both she and he originally contemplated she would — Gloria took the position that she was under no obligation to do so at all. This litigation was the result. In the years since, Max has had the benefit of the money he would have had to pay Gloria in 2011 for her share of the house, Elizabeth’s estate has incurred expenses associated with the upkeep of the property, and the property, the parties agree, has increased in value.

[54]                          February 2, 2011 is a reasonable approximation of when Max expected to be able to purchase Gloria’s one-third interest in the property. That expectation reflects the defined right that Gloria promised Max in exchange for his returning to Victoria to care for their mother. In these circumstances, the claimant’s expectation must be the court’s guide in exercising its remedial discretion. This is because, as Walker L.J. put it in Jennings, at para. 45:

. . . the consensual element of what has happened suggests that the claimant and the benefactor probably regarded the expected benefit and the accepted detriment as being (in a general, imprecise way) equivalent, or at any rate not obviously disproportionate.

The majority of the Supreme Court of Canada also recognized that because of the delay Max has had the benefit of the use of the funds he would have used to purchase Gloria’s interest in 2011, and that estate assets were used to maintain the property. According, Max is required to pay Gloria interest on the purchase price at post-judgement interest rates from February 2, 2011, and also to account to the estate for any expenses paid out of estate funds to maintain the property since February 2, 2011.

This decision was released the day before Chief Justice McLachlin’s retirement on December 15, 2017. She was the longest serving Chief Justice of Canada. Here is a biography from the Canadian Encyclopedia. 

Amendments to Strata Property Act Facilitating Termination of Strata Corporations in Effect

It is now easier to terminate a strata corporation in British Columbia. The Strata Property Act used to require the consent of all of the owners to terminate a strata corporation (although the court could allow termination with less than unanimous consent in some circumstances).

Amendments to the Strata Property Act allowing a strata corporation to be terminate by a vote of 80 percent of eligible voters came into effect on July 28, 2016. The threshold remains high, but easier to acheive than unanimity. The amendments are based on the recommendations of the British Columbia Law Institute Strata Property Law Project Committee in its Report on Terminating a Strata. 

Why terminate a strata corporation? Older buildings may deteriorate to the point where it is uneconomical to retain them in a good state of repair, and it may make more sense to terminate the strata corporation and sell the land to a developer for redevelopment.  

The amendments are summarized by the British Columbia Law Institute as follows: 

The Strata Property Act amendments are found in sections 37 to 55 of the new act. These amendments achieve two important reforms to the law: (1) they lower the voting threshold required to terminate a strata from unanimity to 80 percent of the strata’s eligible voters and (2) they require a strata to apply to court for an order confirming a resolution to terminate—a requirement that is intended to afford some protection to dissenting owners and registered chargeholders.

The amendments begin by defining this new 80-percent voting threshold, making it clear that it requires 80 percent of all eligible voters, not simply 80 percent of the eligible voters who turn up at a meeting. This new voting threshold applies to a new category of resolution, which the amendments call a “winding-up resolution,” and define as a resolution to cancel a strata plan and become tenants in common (i.e,. to terminate the strata) or to appoint a liquidator for the strata.

A special notice period of at least four weeks’ written notice will apply when a strata wants to consider a winding-up resolution at an annual general meeting or a special general meeting.

If a winding-up resolution is passed by an 80-percent vote, then in most cases the strata will be required to apply to the Supreme Court of British Columbia for an order confirming the decision to terminate. An exception applies for very small stratas. If a strata has fewer than five strata lots, then it will have the option to proceed without the necessity of applying to court. Notice that, for stratas of this size, unanimity will effectively be required to terminate, because one eligible voter will have the power to prevent the strata from reaching the 80-percent voting threshold.

Strata-lot owners and registered chargeholders must receive notice of the application. If any of them opposes termination, they will have the opportunity to make their case to the court.

In considering whether to make the order, the court is directed to consider the following:

• the best interests of the owners; and

• the probability and extent, if the winding-up resolution is confirmed or not confirmed, of

• significant unfairness to one or more

• owners, or

• holders of registered charges against land shown on the strata plan or land held in the name of or on behalf of the strata corporation, but not shown on the strata plan, and

• significant confusion and uncertainty in the affairs of the strata corporation or of the owners.

New Requirement that Bare Trusts be Disclosed on Property Transfer Tax Returns

The Government of British Columbia has amended the Property Transfer Tax Return to require more information on the purchase of land, effective June 10, 2016. The requirement that a purchaser who is not a Canadian citizen or permanent resident identify his or her citizenship has received some press coverage. Although I don’t like it at all, I am writing about another change: the requirement that the person taking title disclose whether he or she, or it (if a corporation) holds the title in a bare trust.

The question on the Property Transfer Tax Return is “Is this a transfer of a bare trust?” I am not sure how one transfers a bare trust, but the question is intended to elicit whether the person acquiring title will hold title as a bare trustee. To hold land in a bare trust means that although you have title, you hold it for someone else, who is the true owner. Because the title holder has no management powers and is subject to the direction of the true owner, the title holder is an agent of the owner (rather than a trustee in the sense I often write about with significant powers and responsibilities).

If the answer to the question is “yes,” then the Return has a number of other questions. As set out in the Land Title & Survey Authority website here, if the transfer is to register a bare trust,

... an additional page will be created to enter information for the Settlors and Beneficiaries.
Select whether they are an Individual, Corporation or Other.

If Individual is selected, answer Yes or No to the question “On the date of registration, are you a Canadian citizen or a permanent resident as defined in the Immigration and Refugee Protection Act (Canada)?”

Select the country of citizenship. If there is more than one country of citizenship, select all that apply using the “ADD” button.

The address for each of the Settlors and Beneficiaries must be filled in.

If Company is selected, an additional page will be created. Fill in the “Total number of directors”

Fill in the names of all directors, their country of citizenship (all that applies) and address.

I am not clear on why the Government is collecting information on bare trusts. It may be intended to ensure that the Government is able to collect information on the whether the true owners are not Canadian citizens or permanent resident. Otherwise, someone who is neither a  permanent resident or Canadian could avoid disclosing his or her citizenship by using a permanent resident or Canadian citizen as a bare trustee.

Alternatively, the Government may also be considering whether bare trusts are being used to avoid paying property transfer tax. I came across a story on CTV with the headline “Real estate loophole lets wealthy buyers save millions in taxes.” The story was about how people can avoid paying property transfer tax by having a company hold bare title. Instead of transferring title to the land, the land stays in the company, but the control of the company is transferred to the purchaser.

The fact is, though, that anytime a company owns land (whether as the true owner or as a bare trustee), and someone buys the shares of the company rather than the land from the company, title to the land does not change hands, and there is no property transfer tax payable.

If the motive for adding information about bare trust to the Return is related to “loss” of revenue through the use of bare trusts, then I doubt it will be very helpful to the Government. As set out above, it is only when the title is transferred that purchaser is required to file the Return. If a bare trust is used to avoid the property transfer tax, the provincial Government will not know about the subsequent sale. Nor, is it necessary to file a Return, if after purchasing land, the owner later decides to declare that the owner holds title as a bare trustee. I don’t know what mechanism the Government could use to even gather information about changes in beneficial ownership without a change in title, let alone tax those changes. Such a mechanism would no doubt be intrusive and difficult to enforce.

I do use bare trusts to avoid property transfer tax, but in a different context. If I have a client who wishes to transfer real estate into a trust for estate planning, then we have to consider whether to register the trust with the Land Title Office. In some cases, there is an exemption available from property transfer tax. For example, if the property meets the requirements of the Property Transfer Tax Act for a principal residence (which are different from the Income Tax Act, Canada requirements), and if the trustee is a “related individual,” for example a spouse or child, then the land can be transferred to the trustee without paying property transfer tax. But there are plenty of traps for the unwary. For example, if my client wishes to be the trustee of her own trust, and we transfer title to her as trustee, property transfer tax is triggered even if it is her principal residence. Why? Under the legislation, she is not a “related individual” to herself.

When property transfer tax will be triggered by transferring title to the trustee, one option is for the owner, who is settling the trust, to sign a bare trust agreement declaring herself a bare trustee for the trustee of the trust. Some might see this as a loophole from tax. But consider the fact that in most of the trusts created for estate planning, for practical purposes little changes for the person settling the trust. Often she is the sole beneficiary during her lifetime, and it’s only upon her death that her beneficiaries, often children and grandchildren benefit. It is different from a sale of land to an unrelated purchaser, but in many cases, this type of estate planning is caught by the legislation.

Instead of making the Property Transfer Tax Return more intrusive, it would be preferable to scrap the property transfer tax, which is becoming more complex, likely increases the cost of real estate, and collect revenue from some other source. This will involve raising other taxes, but next to probate fees, the property transfer tax is probably the most flawed tax British Columbia has. 

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.

British Columbia Law Institute Report on Terminating a Strata

The British Columbia Law Institute  has just published its Report on Terminating a Strata recommending reform of the Strata Property Act provisions allowing a strata to wind up its strata corporation and cancel the strata plan.

Under current legislation, there are very stringent requirements that must be met before a strata may be terminated. The Strata Property Act requires a unanimous vote to terminate a strata, which effectively requires that all owners consent. On an application authorized by three-quarters of the votes, the court may allow a termination in very limited circumstances despite dissenting votes. Pursuant to section 52 of the Strata Property Act, if a strata corporation is comprised of 10 or more strata lots, and the vote in respect of one strata lot, or if more than one strata lot, “the court may, if satisfied that the passage of the resolution is in the best interests of the strata corporation and would not unfairly prejudice the dissenting voter or voters, make an order providing that the vote proceed as if the dissenting voter or voters had no vote.”

For most termination applications, the consent of the mortgagees and other registered charge holders is also required.

Why would the owners want to terminate their strata? One of the reasons is that as buildings age, they may become obsolete. The cost of repairs and maintenance of apartments and other buildings may become disproportionately high in comparison to what the owners might be able to receive if the strata is terminated and the property sold for redevelopment.

If the threshold for terminating a strata is too high, there is a risk that a small minority may unreasonably withhold consent to termination in circumstances where it is clearly in the best interest of the owners as a whole to terminate.

On the other hand, too low a threshold may be unfair to those who disagree with the majority, particularly for the owners of residential strata lots who occupy their units, for whom termination will require finding a new residence.

In the Report, the Strata Property Law (Phase Two) Project Committee, chaired by Patrick Williams of the law firm Clark Wilson LLP, sought to balance the collective interests of a strata, with the need to provide safeguards for minority dissenting owners and charge holders.

The Report recommends that the threshold for terminating a strata be lowered to 80% of the eligible votes. The consents of charge-holders would not be required. On the other hand, unless the strata consists of fewer than five strata lots (in which case the 80% threshold would effectively require unanimity), the strata corporation would also require court approval to terminate the strata. The requirement for court approval would give any dissenting owners, and holders of charges registered against the land the opportunity to oppose the termination. The court would then have to determine whether the termination is in the best interests of the strata corporation.

The Report contains a detailed analysis of the relevant provisions of the Strata Property Act and earlier British Columbia legislation, a comparison of the law in other jurisdictions, a discussion of the policy implications, and 21 specific recommendations. 

Dempsey v. British Columbia

British Columbia's Property Transfer Tax Act is an incoherent, and at times absurd, taxation statute. Apart from the dubious economic and social policy of a tax that adds to the cost of housing in the province with the least affordable housing in Canada, there is little rhyme or reason to the types of transactions that are taxed, and those that are exempt.

In very broad strokes, the Property Transfer Tax Act taxes transfers of real estate based on the value of the property, with the first $200,000 of the fair market value taxed at one per cent and the value above $200,000 at two per cent. In many cases the tax will reflect the sale price of real estate between a buyer and seller of a piece of real estate.

But title to real estate may also be changed in circumstances other than a sale, for example as a gift between family members, or to a trustee as part of an estate plan. The Property Transfer Tax Act does have a variety of exemptions from the tax, including some that facilitate transfers between family members either as gifts or for estate planning. The problem is that these exemptions are tightly pigeon holed, and unless a transfer falls squarely within a pigeon hole, the transferee in a non-market transaction may be caught by a significant tax. The narrowness of the exemptions demonstrates little understanding of the nuances of estate planning on the part of the legislators.

The provisions considered in the recent decision of the Supreme Court of British Columbia in Dempsey v. British Columbia, 2014 BCSC 1977, illustrate my point. I should say at the outset that I do not take issue with the reasoning of the Court in this decision, but rather with the absurdity of the legislation when viewed in light of the facts of this case.

Ms. Rita Dempsey settled a trust, which held title to her residence in Victoria. She was also the trustee and a beneficiary of the trust. She later resigned as trustee, replaced by her daughter. She transferred title to the residence from her name to her daughter’s name as trustee. The transfer was exempt under section 14(4) (q) as a transfer from one trustee to another without a change of beneficiaries. 

Later Ms. Dempsey’s daughter as trustee transferred the residence into Ms. Dempsey’s name as beneficiary of the trust. The decision does not set out the reasons for the transfer, but there are many good reasons why a trustee might transfer the title out of the trust to a beneficiary including perhaps to facilitate a change in the estate plan or to allow the residence to qualify for a deferral of property taxes. Whatever the reason for the transfer in this case, no funds change hands, and Ms. Dempsey continues to live in the residence that is now again in her name, but no longer in trust.

Unfortunately, and unfairly, the Government of British Columbia seized the opportunity to charge Ms. Dempsey $7300 in property transfer tax.

Ms. Dempsey through her lawyer argues that this transaction falls within an exemption, section 14(3)(b) which says:

14 (3) If a taxable transaction entitles the transferee, on compliance with the Land Title Act, to registration in a land title office, that transferee is exempt from the payment of tax if the taxable transaction is a transfer within any of the following descriptions:
…

(b) a transfer from a transferor who is not a trustee referred to in paragraph (c), (d) or (e), to a transferee who is a related individual, if the land transferred has been the principal residence of either the transferor for a continuous period of at least 6 months immediately before the date of transfer or of the transferee for that period;

If the section appears to you to be confusing, that is because it is.

If the trust had not been registered, and the transfer had simply been from Ms. Dempsey’s daughter to Ms. Dempsey, the transfer would have been exempt as a transfer of a principal residence to a related individual. (As an aside, be careful with these terms, as a principal residence under this statute is not the same thing as a principal residence under the Income Tax Act, Canada.)

But Ms. Dempsey was on title as a trustee, so the question was how to interpret the phrase “not a trustee referred to in paragraph (c), (d) or (e)….” Those subsections are themselves exemptions, with (c) an exemption for certain transfers of property from the trust of an estate or trust to beneficiary who is a related individual to the will maker, (d) an exemption for certain transfers of property from a trustee to a beneficiary if the beneficiary is a related individual to the settlor of the trust, and (e) another exemption for certain transfers from a trustee to a beneficiary of a trust who is a related individual of the settlor.

Section (d), for example, exempts,

(d) a transfer from a transferor who is a trustee of a trust that is settled during the lifetime of the settlor and who is registered in that capacity under the Land Title Act as the trustee of the land transferred, if

(i)     the transferee is a beneficiary of the trust,
(ii)    the transferee beneficiary is a related individual of the settlor of the trust, and
(iii)  the land transferred is a recreational residence or was the principal residence of either the settlor for a continuous period of at least 6 months immediately before the date of transfer or of the transferee beneficiary for that period;

Ms. Dempsey argued that because the transaction did not meet all of the criteria in any of the three subsections (c ), (d) or (e), her daughter was not a trustee referred to in those subsections, and accordingly, the trustee exception to the exemption did not apply. The Province argued that only words in each of those sections describing a trustee applied. For example, in (d) the words “a trustee of a trust that is settled during the lifetime of the settlor and who is registered in that capacity under the Land Title Act as the trustee of the land transferred” are to be read into the definition of trustee in 14(3)(b), but not the rest of the subsection set out in (i), (ii) and (iii).

Madam Justice Gray held that the Province of British Columbia’s interpretation is correct, and accordingly, the transaction is subject to the property transfer tax. 

She wrote at paragraph 46:

[46]         I am left with the lingering question of why this kind of transaction would be taxed, but in my view I must apply the words of the statute if they are clear and unambiguous. In my view, they are clear and unambiguous.

Ms. Dempsey was both the settlor of the trust, and the beneficiary. You might wonder why this transfer is not exempt under subsection 14(3)(d). Very simply, under the Property Transfer Tax Act, Ms. Dempsey is not related to herself.