Another Presumed Resulting Trust Case: Wiffen V Lau
Wiffen V Lau https://canlii.ca/t/k258g
1. Introduction
Litigation about the consequences of a gratuitous transfer in joint tenancy of the title to property is now commonplace, which raises a presumption of resulting trust if made in favour of an adult child.[1] The litigation is sometimes commenced by the transferor himself but more often it is brought by other beneficiaries of the grantor’s estate. The transfer is almost universally made to avoid the imposition of estate administration tax on the transferor’s estate under the Estate Administration Tax Act, 1998.[2] But in fact the cost of the ensuing litigation is likely to be much higher than the cost of the tax. Lawyers acting for putative transferors need to caution them about this danger and advise against such a transfer. A transferor can perhaps avoid subsequent litigation by completing a document contemporaneous with the transfer that expresses her intention that either (a) upon the transferor’s death the transferee will hold the property in trust for the estate, or (b) that by making the transfer she intends to make a gift to the transferee. In the recent case, Wiffen v Lau,[3] the parties had to engage in litigation to determine the effect of a couple of transfers. The transferor also sought to limit the effect of the transfers by severing the joint tenancies.
2. Facts
The testator, Albert, was predeceased by his first wife, Louise in 2005. He was survived by his only child, Sharon, who is married to Tom. After Louise’s death, Albert named Sharon his executor and sole beneficiary. Albert and Louise owned a property in Kitchener, 125 Whitney Place (‘Whitney’) and Albert also owned the adjacent property at 115 Whitney Place where his business, Ed Lau Ironworks was located. Tom and Sharon took over operation of the business after Albert retired. Albert also owned a property at 37 Reid’s Point Road in the Bruce Peninsula (‘Reid’s’), and Sharon paid all the funds to buy property adjacent to it with the intention to have the two properties merge so that title would be held jointly by all the parties, which is what happened. Tom and Sharon also built an apartment at Whitney at their own cost, and they lived in it for more than 20 years while they operated the business. Between 1993 and 2003 Albert and Louise added first Sharon and later Tom to the title to Whitney and Reid’s for no consideration.
Albert married his second wife, Liza in 2019 without telling Sharon and Tom. After Albert married Liza, he changed his will a couple of times. The second time he made Liza his sole beneficiary and removed Sharon as beneficiary of his estate. In 2019, three months after Albert married Liza, he severed the joint tenancy of Reid’s, so that he then held a one-third interest in that property as tenant in common with Sharon and Tom. In 2020 Albert also severed the joint tenancy of Whitney, so that he then held a one-third interest in that property as tenant in common with Sharon and Tom. Albert did not tell Sharon and Tom about the severances. The three owners then sold Whitney and the proceeds of sale are being held in trust.
Albert then brought this action against Sharon and Tom for a declaration that they held the properties upon a resulting trust for Albert because they had been added to the title for no consideration. Sharon and Tom asked the court to direct payment to them of two-thirds of the net proceeds of sale of Whitney and to declare that they are the legal and beneficial owners of a two-thirds interest in Reid’s. Albert died during the proceedings, which were continued by his executor. Liza survives him.
3. Analysis and Judgment
Justice Antoniani reviewed the by now well-known law that when a parent transfers title to real property into the joint name of himself and an adult child for no consideration, equity raises a presumption of resulting trust in favour of the transferor. The onus is then on the transferee to rebut the presumption. The law regards the transfer to be inter vivos in nature and therefore the rights of survivorship, both legal and equitable, vest when the transfer takes effect. And, if the transferee rebuts the presumption, the transfer confers a complete inter vivos gift. To determine whether the transfer results in a gift the court looks only to the transferor’s intention at the time of the transfer.
Although her Honour discusses the transfers of title of Reid to Sharon and later also to Tom separately, and then also the transfer of Whitney to Sharon and Tom, it is convenient to consider the transfers together in this blog, since her Honour finds that Albert intended an inter vivos gift to Sharon and Tom in each case. She concluded that the changes Albert made in his will and in unilaterally severing the joint tenancies were evidence of his regret at having earlier made gifts to Sharon and Tom. There was no reason for Albert (and Louise) to have made the transfers other than to make a gift to their only child, and they, together with Tom, all worked together in the family business. Further, Albert testified in his cross-examination that he made Sharon and Tom joint tenants to save taxes, i.e., estate administration tax, and that intention supports a rebuttal of resulting trust.[4] Thus, her Honour concluded that Sharon and Tom had rebutted the presumption of resulting trust with respect to all the properties. This meant that, as joint tenants of Reid’s, Sharon and Tom each had a legal and beneficial one-third interest in that property and no further order was necessary. Further, Sharon and Tom were each entitled to one-third of the net proceeds of sale of Whitney. Sharon and Tom had made an alternative claim for a constructive trust in their favour for labour and financial contributions made by them to the properties, but it was not necessary to address that argument, since her Honour found that they have a legal and beneficial interest in Reid’s and were entitled to two-thirds of the net proceeds of sale of Whitney.
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[1] Pecore v Pecore, 2007 SCC 17; Fuller v Fuller Estate, 2010 BCCA 421, para 53.
[2] SO 1998, c 34, Sched.
[3] 2024 ONSC 224.
[4] See Holtby v Draper, 2017 ONCA 932, para 69; Zacher v Zacher, 2019 ONSC 1450, para 87.
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Written by: Albert Oosterhoff
Posted on: May 28, 2024
Categories: Commentary, WEL Newsletter
Wiffen V Lau https://canlii.ca/t/k258g
1. Introduction
Litigation about the consequences of a gratuitous transfer in joint tenancy of the title to property is now commonplace, which raises a presumption of resulting trust if made in favour of an adult child.[1] The litigation is sometimes commenced by the transferor himself but more often it is brought by other beneficiaries of the grantor’s estate. The transfer is almost universally made to avoid the imposition of estate administration tax on the transferor’s estate under the Estate Administration Tax Act, 1998.[2] But in fact the cost of the ensuing litigation is likely to be much higher than the cost of the tax. Lawyers acting for putative transferors need to caution them about this danger and advise against such a transfer. A transferor can perhaps avoid subsequent litigation by completing a document contemporaneous with the transfer that expresses her intention that either (a) upon the transferor’s death the transferee will hold the property in trust for the estate, or (b) that by making the transfer she intends to make a gift to the transferee. In the recent case, Wiffen v Lau,[3] the parties had to engage in litigation to determine the effect of a couple of transfers. The transferor also sought to limit the effect of the transfers by severing the joint tenancies.
2. Facts
The testator, Albert, was predeceased by his first wife, Louise in 2005. He was survived by his only child, Sharon, who is married to Tom. After Louise’s death, Albert named Sharon his executor and sole beneficiary. Albert and Louise owned a property in Kitchener, 125 Whitney Place (‘Whitney’) and Albert also owned the adjacent property at 115 Whitney Place where his business, Ed Lau Ironworks was located. Tom and Sharon took over operation of the business after Albert retired. Albert also owned a property at 37 Reid’s Point Road in the Bruce Peninsula (‘Reid’s’), and Sharon paid all the funds to buy property adjacent to it with the intention to have the two properties merge so that title would be held jointly by all the parties, which is what happened. Tom and Sharon also built an apartment at Whitney at their own cost, and they lived in it for more than 20 years while they operated the business. Between 1993 and 2003 Albert and Louise added first Sharon and later Tom to the title to Whitney and Reid’s for no consideration.
Albert married his second wife, Liza in 2019 without telling Sharon and Tom. After Albert married Liza, he changed his will a couple of times. The second time he made Liza his sole beneficiary and removed Sharon as beneficiary of his estate. In 2019, three months after Albert married Liza, he severed the joint tenancy of Reid’s, so that he then held a one-third interest in that property as tenant in common with Sharon and Tom. In 2020 Albert also severed the joint tenancy of Whitney, so that he then held a one-third interest in that property as tenant in common with Sharon and Tom. Albert did not tell Sharon and Tom about the severances. The three owners then sold Whitney and the proceeds of sale are being held in trust.
Albert then brought this action against Sharon and Tom for a declaration that they held the properties upon a resulting trust for Albert because they had been added to the title for no consideration. Sharon and Tom asked the court to direct payment to them of two-thirds of the net proceeds of sale of Whitney and to declare that they are the legal and beneficial owners of a two-thirds interest in Reid’s. Albert died during the proceedings, which were continued by his executor. Liza survives him.
3. Analysis and Judgment
Justice Antoniani reviewed the by now well-known law that when a parent transfers title to real property into the joint name of himself and an adult child for no consideration, equity raises a presumption of resulting trust in favour of the transferor. The onus is then on the transferee to rebut the presumption. The law regards the transfer to be inter vivos in nature and therefore the rights of survivorship, both legal and equitable, vest when the transfer takes effect. And, if the transferee rebuts the presumption, the transfer confers a complete inter vivos gift. To determine whether the transfer results in a gift the court looks only to the transferor’s intention at the time of the transfer.
Although her Honour discusses the transfers of title of Reid to Sharon and later also to Tom separately, and then also the transfer of Whitney to Sharon and Tom, it is convenient to consider the transfers together in this blog, since her Honour finds that Albert intended an inter vivos gift to Sharon and Tom in each case. She concluded that the changes Albert made in his will and in unilaterally severing the joint tenancies were evidence of his regret at having earlier made gifts to Sharon and Tom. There was no reason for Albert (and Louise) to have made the transfers other than to make a gift to their only child, and they, together with Tom, all worked together in the family business. Further, Albert testified in his cross-examination that he made Sharon and Tom joint tenants to save taxes, i.e., estate administration tax, and that intention supports a rebuttal of resulting trust.[4] Thus, her Honour concluded that Sharon and Tom had rebutted the presumption of resulting trust with respect to all the properties. This meant that, as joint tenants of Reid’s, Sharon and Tom each had a legal and beneficial one-third interest in that property and no further order was necessary. Further, Sharon and Tom were each entitled to one-third of the net proceeds of sale of Whitney. Sharon and Tom had made an alternative claim for a constructive trust in their favour for labour and financial contributions made by them to the properties, but it was not necessary to address that argument, since her Honour found that they have a legal and beneficial interest in Reid’s and were entitled to two-thirds of the net proceeds of sale of Whitney.
—
[1] Pecore v Pecore, 2007 SCC 17; Fuller v Fuller Estate, 2010 BCCA 421, para 53.
[2] SO 1998, c 34, Sched.
[3] 2024 ONSC 224.
[4] See Holtby v Draper, 2017 ONCA 932, para 69; Zacher v Zacher, 2019 ONSC 1450, para 87.
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