1. Introduction
In 2018 I posted a blog[1] in which I criticized two companion Alberta cases, Midtdal v Pohl.[2] and Pohl v Midtal,[3] The cases involved real property transferred by the owners into joint tenancy to themselves and their adult daughter as joint tenants. When relationships between the parties deteriorated, the transferors severed the joint tenancy by transferring their two-thirds interest to themselves. In the first case the court held that the transferee had rebutted the presumption of resulting trust. In the second case the court found that the transferors clearly intended that their daughter would receive the property on their deaths and held that they gave up their right of severance when they made her a joint tenant with them. In other words, the court held that the grantors made an irrevocable gift of the right of survivorship. Justice Khullar stated,[4] ‘based on the reasoning in Pecore,[5] it seems logical to conclude that. by gifting a joint interest in property to his or adult child, a parent can give up his or her right to sever the joint tenancy’. In reaching that holding, the court followed Saskatchewan cases and refused to apply contrary cases from Manitoba and British Columbia. On the appeal of the second case, the Court of Appeal agreed with the trial judge and dismissed the appeal.[6]
The issue was recently revisited by the Ontario Superior Court of Justice in Jackson v Rosenberg.[7] In his reasons, Justice R.E. Charney declined to follow the Alberta and Saskatchewan cases and followed the Manitoba and British Columbia cases instead, so the case is an important one and worth blogging.
2. Facts
The case involved two contrary applications, one by Nigel Jackson and the other by Lori Rosenberg. The court dealt with them as a single application since they were two sides of the same coin.
Mr. Jackson and Bernie Taube were long-time romantic partners. Mr. Taube, who was Ms. Rosenberg’s great uncle, died in 2010. Mr. Taube and Mr. Jackson frequently attended dinners at Lori’s mother’s home. In 2005 Mr. Taub and Mr. Jackson each made a mirror Will that named the other as the sole beneficiary of their respective estates and Ms. Rosenberg as the substitute beneficiary. When Mr. Taube died, his will was not probated because all his assets were held jointly with Mr. Jackson. Then, in 2011, Mr. Jackson purchased a house in Port Hope, using his own funds. Ms. Rosenberg made no contribution to the purchase price. Nor did she ever live in the property. In 2012 Mr Jackson transferred the title to himself and Ms. Rosenberg as joint tenants. However, in 2020 Mr. Jackson instructed his lawyer to sever the joint tenancy, thereby converting the title into a tenancy in common. In his application Mr. Jackson seeks a declaration that Ms. Rosenberg holds title to the property on a resulting trust for himself and that he has a full beneficial interest in the property. In her application Ms. Rosenberg seeks a declaration that she is a beneficial owner of the property.
In his affidavit Mr. Jackson stated that he placed the title to the property into joint tenancy with Ms. Rosenberg because he wanted to leave the interest in his house to her once he died but he did not intend her to have any interest in it until he died. He did this to ensure that his estate would not be liable to pay estate administration tax on the value of the property. He stated that his lawyer did not discuss any implications of adding Ms. Rosenberg to the title as joint tenant, and that he did not explain the transfer documents to him. Ms. Rosenberg claimed that the transfer constituted an unconditional inter vivos gift to her. She also claimed that the transfer was made pursuant to an agreement between her, Mr. Taube, and Mr. Jackson Thus, she claimed that the severance was a breach of fiduciary duty and a breach of contract.
3. Analysis and Judgment
Justice Charney noted that when a person makes a transfer without consideration to a third person who is not his minor child, a presumption of resulting trust arises. He began by considering the law of resulting trust as explained and defined by the Supreme Court of Canada in Pecore v Pecore.[8] He also referred to several cases that followed it. He noted that in deciding such a case the court needs to determine the intention of the transferor and that the ‘common intentions’ of the parties are irrelevant.
Having considered the evidence as a whole Justice Charney was satisfied that, at the time of the transfer, Mr. Jackson intended to give the right of survivorship in the property to Ms. Rosenberg, so that whatever equity remained on his death would pass to Ms. Rosenberg. He did not intend to give the property to her during his lifetime but wanted to retain control of it while he lived. Thus, he intended that Ms. Rosenberg’s beneficial interest would arise only when he died. As made clear by Pecore,[9] this does not preclude a conclusion that he intended to give the right of survivorship to Ms. Rosenberg.
Further, the fact that Mr. Rosenberg later regretted making the gift of the right of survivorship does not change his intention at the time of the transfer. Thus, his Honour concluded that Mr. Jackson intended Ms. Rosenberg to hold her interest in the property upon resulting trust for Mr. Jackson during their joint lives, but that if he died first, she would become entitled to the property. Hence, the presumption of resulting trust was rebutted in part.
Having reached this conclusion, Justice Charney considered the nature of the right of survivorship. He noted that the gift of the right of survivorship is an inter vivos gift and while it is therefore immediate, the gift is only of whatever remains when the transferor dies. With respect, this is not entirely correct. The statement is true on the facts of this case, but it depends entirely on the transferor’s intention. If he intends that the transferee have an immediate beneficial interest when the transfer is made, that will be effective, and in that case the presumption of resulting trust is rebutted entirely.
His Honour then turned to the case law. In particular, he considered Simcoff v Simcoff,[10] in which the Manitoba Court of Appeal concluded that the right to sever a joint tenancy exists even though the joint tenancy includes the right of survivorship. In Pohl v Midthal[11] the court declined to follow Simcoff on the ground that these remarks were clearly obiter. It also refused to follow British Columbia cases, some of which are mentioned below, to the same effect. Justice Charney considered one of them, Bergen v Bergen,[12] which reached a similar conclusion. Thus, although a transfer of property into joint tenancy by way of gift cannot be revoked, prima facie it does not prevent the transferor from dealing with the property while alive. And that means that he can sever the joint tenancy.[13] Further, as the British Columbia Court of Appeal said in Zeligs v Janes:[14]
The principal and distinguishing characteristic of joint tenancy is the right of survivorship, the jus accrescendi. When one joint tenant dies, his or her interest in the property is extinguished and passes to the surviving joint tenant(s). The right of survivorship is, however, a revocable expectancy that manifests only upon success in the so-called “ultimate gamble” — survival — and then only if the joint estate has not been previously destroyed by an act of severance.
Justice Charney then considered and applied Kennedy v Smith,[15] the facts of which were virtually identical to those in the Jackson case. Based on the analysis Pecore, at paragraph 80 in Kennedy the court summarized the three potential scenarios that can arise when a gratuitous transfer of property into joint tenancy is made:
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,[16] 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.”
Just as Francis J held in Kennedy, Justice Charney concluded that the facts in this case fell into the third category and as a result Ms. Rosenberg ‘was only ever entitled to what was left of the donor’s interest in the property’ on Mr. Jackson’s death’. Hence. he stated. ‘Mr. Jackson gifted the right of survivorship to Ms. Rosenberg. He cannot revoke that gift, but, until he dies, Mr. Jackson retains all rights and interests in the Port Hope property during his lifetime and is free to encumber or sell the property should he choose’.
His Honour further stated that Mr. Jackson was free to sever the joint tenancy as he wished and as he in fact did. That is what the Manitoba and British Columbia cases held and while the Saskatchewan and Alberta cases reached a different conclusion, he preferred the conclusion of the Manitoba and British Columbia cases. He made the following persuasive statements in paragraphs 84-88:
84 Thus, severance is not taking back a gift, but the exercise of an inherent power of all joint tenants to transform a joint tenancy into a tenancy in common …
85 In this case, the severance was accomplished by Mr. Jackson transferring his share in the joint tenancy to himself. Section 41 of the Conveyancing and Law of Property Act[17] expressly authorizes a person to convey property to themselves …
86 I agree with the Manitoba and British Columbia Courts of Appeal that the law relating the severance of joint tenancies continues to apply after Pecore. The right of survivorship is the same whether the joint tenancy was the result of a bargain or a gift, and there is no reason why the former can be severed but not the latter.
87 While joint tenants can agree by contract that they will not sever the joint tenancy, no such agreement exists in this case, and I am not prepared to infer (as was the trial judge in Pohl v. Midtdal …)[18] that such a restriction should be implied. There is nothing in Pecore that would compel such a result.
88 Indeed, Pecore expressly finds — in the context of a joint bank account – that even though the gift of the right of survivorship is immediate and inter vivos, it does not stop the transferor from draining the account and leaving the transferee with nothing of value. It is a gift of whatever remains at the death of the transferor, not what existed at the date of the transfer. There is no principled reason why this analysis should not apply to joint tenancies as it does to joint accounts.
Justice Charney also stated that the Alberta and Saskatchewan cases were heavily influenced by provisions in their Land Titles Acts that prevent registration of a severance of a joint tenancy without consent or approval. And he noted that there are no similar provisions in the Ontario Act.
In consequence of the severance Ms. Rosenberg has a 50% interest in the property. However, since the severing transfer was a gratuitous transfer the presumption of resulting trust also applied to it and thus Ms. Rosenberg holds her 50% interest on resulting trust for Mr Jackson. But Mr. Jackson could not and did not revoke the right of survivorship with respect to that 50% share. Thus, when Mr. Jackson dies his 50% interest in the property will become part of his estate, whereas Ms. Rosenberg’s 50% share will pass to her if she survives Mr Jackson in accordance with the intention of the 2012 transfer.
Ms. Rosenberg raised a further issue, namely that there was an agreement between her, Mr. Jackson, and Mr. Taube that she would be the sole beneficiary of Mr. Jackson’s estate when he died. She argued that this was because Mr. Jackson and Mr. Taube agreed to execute mutual wills. However, Justice Charney that Ms. Rosenberg failed to prove the existence of mutual wills, the onus being on her to prove the existence of a binding agreement to make such wills. Nor was her evidence corroborated as required by section 13 of the Evidence Act.[19] The wills were indeed mirror wills, but they were not subject to an agreement that they could not be changed.
In my earlier blog, I mentioned that although the right to sever is an inherent right of a joint tenancy that is not lost when the owner of property transfers it into a joint tenancy, the owner and the transferee can enter into an agreement that the transferor gives up his right to sever. Such an agreement will be valid if proved, provided that if it is with respect to land, it is evidenced by writing,[20] unless statutory or equitable exceptions can be applied to circumvent the writing requirement. One such agreement, which I also mentioned in my earlier blog, is a mutual wills agreement. But its existence must also be proved. And as we have just seen, in this case Justice Charney held that the parties had not entered into a mutual wills agreement.
—
[1] http://welpartners.com/blog/2018/02/an-irrevocable-right-of-survivorship/
[2] 2014 ABQB 646.
[3] 2017 ABQB 711.
[4] Ibid, para 50.
[5] Pecore v Pecore, 2007 SCC 17,
[6] 2018 ABCA 403.
[7] 2023 ONSC 4403.
[8] Footnote 5, supra.
[9] Ibid., paras 63 and 66.
[10] 2009 MBCA 80.
[11] Footnote 3, supra.
[12] 2013 BCCA 492.
[13] See AJ McLean, ‘Severance of Joint Tenancies’ (1979), 57 Can. Bar Rev. 1, p 2.
[14] 2016 BCCA 280, para 41.
[15] 2022 BCSC 1622.
[16] 2013 BCCA 492 at para. 37.
[17] RSO 1990, c C.34.
[18] Footnote 3, supra, paras 42 and 63.
[19] RSO 1990, c E.23.
[20] See Statute of Frauds, RSO 1990, c S.19, ss 4 and 9 and comparable statutory provisions in other provinces and territories.
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Written by: Albert Oosterhoff
Posted on: November 30, 2023
Categories: Commentary, WEL Newsletter
1. Introduction
In 2018 I posted a blog[1] in which I criticized two companion Alberta cases, Midtdal v Pohl.[2] and Pohl v Midtal,[3] The cases involved real property transferred by the owners into joint tenancy to themselves and their adult daughter as joint tenants. When relationships between the parties deteriorated, the transferors severed the joint tenancy by transferring their two-thirds interest to themselves. In the first case the court held that the transferee had rebutted the presumption of resulting trust. In the second case the court found that the transferors clearly intended that their daughter would receive the property on their deaths and held that they gave up their right of severance when they made her a joint tenant with them. In other words, the court held that the grantors made an irrevocable gift of the right of survivorship. Justice Khullar stated,[4] ‘based on the reasoning in Pecore,[5] it seems logical to conclude that. by gifting a joint interest in property to his or adult child, a parent can give up his or her right to sever the joint tenancy’. In reaching that holding, the court followed Saskatchewan cases and refused to apply contrary cases from Manitoba and British Columbia. On the appeal of the second case, the Court of Appeal agreed with the trial judge and dismissed the appeal.[6]
The issue was recently revisited by the Ontario Superior Court of Justice in Jackson v Rosenberg.[7] In his reasons, Justice R.E. Charney declined to follow the Alberta and Saskatchewan cases and followed the Manitoba and British Columbia cases instead, so the case is an important one and worth blogging.
2. Facts
The case involved two contrary applications, one by Nigel Jackson and the other by Lori Rosenberg. The court dealt with them as a single application since they were two sides of the same coin.
Mr. Jackson and Bernie Taube were long-time romantic partners. Mr. Taube, who was Ms. Rosenberg’s great uncle, died in 2010. Mr. Taube and Mr. Jackson frequently attended dinners at Lori’s mother’s home. In 2005 Mr. Taub and Mr. Jackson each made a mirror Will that named the other as the sole beneficiary of their respective estates and Ms. Rosenberg as the substitute beneficiary. When Mr. Taube died, his will was not probated because all his assets were held jointly with Mr. Jackson. Then, in 2011, Mr. Jackson purchased a house in Port Hope, using his own funds. Ms. Rosenberg made no contribution to the purchase price. Nor did she ever live in the property. In 2012 Mr Jackson transferred the title to himself and Ms. Rosenberg as joint tenants. However, in 2020 Mr. Jackson instructed his lawyer to sever the joint tenancy, thereby converting the title into a tenancy in common. In his application Mr. Jackson seeks a declaration that Ms. Rosenberg holds title to the property on a resulting trust for himself and that he has a full beneficial interest in the property. In her application Ms. Rosenberg seeks a declaration that she is a beneficial owner of the property.
In his affidavit Mr. Jackson stated that he placed the title to the property into joint tenancy with Ms. Rosenberg because he wanted to leave the interest in his house to her once he died but he did not intend her to have any interest in it until he died. He did this to ensure that his estate would not be liable to pay estate administration tax on the value of the property. He stated that his lawyer did not discuss any implications of adding Ms. Rosenberg to the title as joint tenant, and that he did not explain the transfer documents to him. Ms. Rosenberg claimed that the transfer constituted an unconditional inter vivos gift to her. She also claimed that the transfer was made pursuant to an agreement between her, Mr. Taube, and Mr. Jackson Thus, she claimed that the severance was a breach of fiduciary duty and a breach of contract.
3. Analysis and Judgment
Justice Charney noted that when a person makes a transfer without consideration to a third person who is not his minor child, a presumption of resulting trust arises. He began by considering the law of resulting trust as explained and defined by the Supreme Court of Canada in Pecore v Pecore.[8] He also referred to several cases that followed it. He noted that in deciding such a case the court needs to determine the intention of the transferor and that the ‘common intentions’ of the parties are irrelevant.
Having considered the evidence as a whole Justice Charney was satisfied that, at the time of the transfer, Mr. Jackson intended to give the right of survivorship in the property to Ms. Rosenberg, so that whatever equity remained on his death would pass to Ms. Rosenberg. He did not intend to give the property to her during his lifetime but wanted to retain control of it while he lived. Thus, he intended that Ms. Rosenberg’s beneficial interest would arise only when he died. As made clear by Pecore,[9] this does not preclude a conclusion that he intended to give the right of survivorship to Ms. Rosenberg.
Further, the fact that Mr. Rosenberg later regretted making the gift of the right of survivorship does not change his intention at the time of the transfer. Thus, his Honour concluded that Mr. Jackson intended Ms. Rosenberg to hold her interest in the property upon resulting trust for Mr. Jackson during their joint lives, but that if he died first, she would become entitled to the property. Hence, the presumption of resulting trust was rebutted in part.
Having reached this conclusion, Justice Charney considered the nature of the right of survivorship. He noted that the gift of the right of survivorship is an inter vivos gift and while it is therefore immediate, the gift is only of whatever remains when the transferor dies. With respect, this is not entirely correct. The statement is true on the facts of this case, but it depends entirely on the transferor’s intention. If he intends that the transferee have an immediate beneficial interest when the transfer is made, that will be effective, and in that case the presumption of resulting trust is rebutted entirely.
His Honour then turned to the case law. In particular, he considered Simcoff v Simcoff,[10] in which the Manitoba Court of Appeal concluded that the right to sever a joint tenancy exists even though the joint tenancy includes the right of survivorship. In Pohl v Midthal[11] the court declined to follow Simcoff on the ground that these remarks were clearly obiter. It also refused to follow British Columbia cases, some of which are mentioned below, to the same effect. Justice Charney considered one of them, Bergen v Bergen,[12] which reached a similar conclusion. Thus, although a transfer of property into joint tenancy by way of gift cannot be revoked, prima facie it does not prevent the transferor from dealing with the property while alive. And that means that he can sever the joint tenancy.[13] Further, as the British Columbia Court of Appeal said in Zeligs v Janes:[14]
The principal and distinguishing characteristic of joint tenancy is the right of survivorship, the jus accrescendi. When one joint tenant dies, his or her interest in the property is extinguished and passes to the surviving joint tenant(s). The right of survivorship is, however, a revocable expectancy that manifests only upon success in the so-called “ultimate gamble” — survival — and then only if the joint estate has not been previously destroyed by an act of severance.
Justice Charney then considered and applied Kennedy v Smith,[15] the facts of which were virtually identical to those in the Jackson case. Based on the analysis Pecore, at paragraph 80 in Kennedy the court summarized the three potential scenarios that can arise when a gratuitous transfer of property into joint tenancy is made:
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,[16] 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.”
Just as Francis J held in Kennedy, Justice Charney concluded that the facts in this case fell into the third category and as a result Ms. Rosenberg ‘was only ever entitled to what was left of the donor’s interest in the property’ on Mr. Jackson’s death’. Hence. he stated. ‘Mr. Jackson gifted the right of survivorship to Ms. Rosenberg. He cannot revoke that gift, but, until he dies, Mr. Jackson retains all rights and interests in the Port Hope property during his lifetime and is free to encumber or sell the property should he choose’.
His Honour further stated that Mr. Jackson was free to sever the joint tenancy as he wished and as he in fact did. That is what the Manitoba and British Columbia cases held and while the Saskatchewan and Alberta cases reached a different conclusion, he preferred the conclusion of the Manitoba and British Columbia cases. He made the following persuasive statements in paragraphs 84-88:
84 Thus, severance is not taking back a gift, but the exercise of an inherent power of all joint tenants to transform a joint tenancy into a tenancy in common …
85 In this case, the severance was accomplished by Mr. Jackson transferring his share in the joint tenancy to himself. Section 41 of the Conveyancing and Law of Property Act[17] expressly authorizes a person to convey property to themselves …
86 I agree with the Manitoba and British Columbia Courts of Appeal that the law relating the severance of joint tenancies continues to apply after Pecore. The right of survivorship is the same whether the joint tenancy was the result of a bargain or a gift, and there is no reason why the former can be severed but not the latter.
87 While joint tenants can agree by contract that they will not sever the joint tenancy, no such agreement exists in this case, and I am not prepared to infer (as was the trial judge in Pohl v. Midtdal …)[18] that such a restriction should be implied. There is nothing in Pecore that would compel such a result.
88 Indeed, Pecore expressly finds — in the context of a joint bank account – that even though the gift of the right of survivorship is immediate and inter vivos, it does not stop the transferor from draining the account and leaving the transferee with nothing of value. It is a gift of whatever remains at the death of the transferor, not what existed at the date of the transfer. There is no principled reason why this analysis should not apply to joint tenancies as it does to joint accounts.
Justice Charney also stated that the Alberta and Saskatchewan cases were heavily influenced by provisions in their Land Titles Acts that prevent registration of a severance of a joint tenancy without consent or approval. And he noted that there are no similar provisions in the Ontario Act.
In consequence of the severance Ms. Rosenberg has a 50% interest in the property. However, since the severing transfer was a gratuitous transfer the presumption of resulting trust also applied to it and thus Ms. Rosenberg holds her 50% interest on resulting trust for Mr Jackson. But Mr. Jackson could not and did not revoke the right of survivorship with respect to that 50% share. Thus, when Mr. Jackson dies his 50% interest in the property will become part of his estate, whereas Ms. Rosenberg’s 50% share will pass to her if she survives Mr Jackson in accordance with the intention of the 2012 transfer.
Ms. Rosenberg raised a further issue, namely that there was an agreement between her, Mr. Jackson, and Mr. Taube that she would be the sole beneficiary of Mr. Jackson’s estate when he died. She argued that this was because Mr. Jackson and Mr. Taube agreed to execute mutual wills. However, Justice Charney that Ms. Rosenberg failed to prove the existence of mutual wills, the onus being on her to prove the existence of a binding agreement to make such wills. Nor was her evidence corroborated as required by section 13 of the Evidence Act.[19] The wills were indeed mirror wills, but they were not subject to an agreement that they could not be changed.
In my earlier blog, I mentioned that although the right to sever is an inherent right of a joint tenancy that is not lost when the owner of property transfers it into a joint tenancy, the owner and the transferee can enter into an agreement that the transferor gives up his right to sever. Such an agreement will be valid if proved, provided that if it is with respect to land, it is evidenced by writing,[20] unless statutory or equitable exceptions can be applied to circumvent the writing requirement. One such agreement, which I also mentioned in my earlier blog, is a mutual wills agreement. But its existence must also be proved. And as we have just seen, in this case Justice Charney held that the parties had not entered into a mutual wills agreement.
—
[1] http://welpartners.com/blog/2018/02/an-irrevocable-right-of-survivorship/
[2] 2014 ABQB 646.
[3] 2017 ABQB 711.
[4] Ibid, para 50.
[5] Pecore v Pecore, 2007 SCC 17,
[6] 2018 ABCA 403.
[7] 2023 ONSC 4403.
[8] Footnote 5, supra.
[9] Ibid., paras 63 and 66.
[10] 2009 MBCA 80.
[11] Footnote 3, supra.
[12] 2013 BCCA 492.
[13] See AJ McLean, ‘Severance of Joint Tenancies’ (1979), 57 Can. Bar Rev. 1, p 2.
[14] 2016 BCCA 280, para 41.
[15] 2022 BCSC 1622.
[16] 2013 BCCA 492 at para. 37.
[17] RSO 1990, c C.34.
[18] Footnote 3, supra, paras 42 and 63.
[19] RSO 1990, c E.23.
[20] See Statute of Frauds, RSO 1990, c S.19, ss 4 and 9 and comparable statutory provisions in other provinces and territories.
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