Resulting Trusts & Credible Witnesses – A remedy for unmarried spouses’ property disputes

This article was written by Cristina P. Baer of Henderson Heinrichs LLP.

 

Unmarried people in domestic relationships are not afforded the same statutory property rights as are married spouses. The property consequences of the breakdown of common law relationships are instead governed by the common law- namely the principles of resulting trusts and remedial constructive trusts.

The recent case of Chechui v Nieman, 2016 ONSC 1905 dealt with resulting trust claims to a jointly owned home and a joint investment account, brought by the respondent. The applicant claimed half interest in both. While both assets were held jointly, Justice Hood found that equal ownership only applied to one – the home.

Equity presumes bargains, not gifts.  The applicant did not rebut the presumption that the respondent did not intend to gift half the value of the $800,000 transferred into an investment account jointly held by the parties. This investment came from the net proceeds the respondent received from the sale of the couple’s previous home, owned by him and his late mother. Importantly, citing Pecore v Pecore, 2007 SCC 17, the Court emphasized that the transferor’s actual intention is the only consideration in the analysis. In Kerr v. Baranow, 2011 SCC 10, the SCC declared that the “common intention resulting trust” was doctrinally unsound and that it should have no continuing role in the resolution of domestic property disputes. The SCC did not, however, preclude “traditional resulting trust principles” from having a role in the resolution of property disputes.

It followed in this case then, that  Justice Hood only analyzed the evidence that pointed to the transferor’s actual intention behind the investment account, rather than the irrelevant evidence) surrounding the common intention of both parties. So, no more confusing use of “common intention resulting trust” doctrine.

Ascertaining the transferor’s intention, on a balance of probabilities, was challenging for Justice Hood who made clear that he had difficulty in accepting the respondent’s evidence as credible and reliable.  In sum, he saw through the respondent’s evidence and found him to be more of an argumentative advocate than a forthcoming, balanced witness. He did not buy the respondent’s assertions that he signed the investment account documentation without understanding what it meant or without reading it because he trusted an investment advisor. However, just because he didn’t believe the respondent, the credibility of the evidence given by his investment advisor was, fortunately for the respondent, not harmed. Relying on this evidence only, the Court was satisfied that the main objective in setting up the investment account as it was, jointly, was to benefit the applicant as a beneficiary should something happen to the transferor respondent.  The intention to gift 50% of the investment account was not found and the presumption was not rebutted.

In contrast, a trust claim could not be made against the home held in joint tenancy. Again, third party evidence (the real estate agent, real estate lawyer, and the applicant) was relied upon to ascertain the intention of the respondent, rather than his own evidence.  The Court found that the presumption of resulting trust did not apply to the payment of a million dollar line of credit towards the house by the respondent. Citing Dale v Salvo, (2005) OJ No 3111 (SC), mortgage payments after purchase are irrelevant to resulting trust claims. However, even if it were to apply to the payment, the Court found that he had gifted this amount. The home was ordered to be sold and divided.

Chechui v Nieman is a useful case for illustrating when resulting trust claims can succeed, and when they cannot, as a remedy for property disputes between common law spouses.

Cristina P. Baer

 

 

 

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