1. Introduction
Cases in which parties claim an interest in property under a presumed purchase money resulting trust are now a dime a dozen. It appears a party who has no other leg to stand on will argue the presumption as a last resort or a hail Mary attempt to get what he wants. That does not mean that all such claims are baseless, but the opposite party has opportunity to rebut the presumption. However, the case law has become unclear about what exactly the opposite party needs to prove. Must he prove an intention to make a gift, or also an intention to prove a loan if he alleges that the claimant lent the money to him? In the recent case, Bradshaw v Hougassian,[1] the Ontario Court of Appeal has clarified the law on this point.
2. Facts
The testator, Violet Hougassian, had three children, Jack, Solina, and Sona. Jack purchased a house in Cambridge in 1980 for $38,500 when he was still a university student. He and Violet both signed the agreement of purchase and sale but only Jack took title. He contributed $8,000 to the purchase price from money saved from summer jobs. Violet contributed $10,000. The remainder was financed by a mortgage in Jack’s name, which Violet signed as guarantor. Soon after the purchase, Violet left her husband and moved into the newly purchased house with her children. From 1992 to 2018, when she died, Violet lived alone in the house. She paid the mortgage payments and the utility bills for the first year, after which Jack took over those payments. He also paid off the mortgage in due course. Eventually, he transferred title to the house into the name of his corporation. In fact, Jack became very successful in business and supported his mother financially during her life. Violet made her will in 2002. She left Jack out of her will because he was financially successful, while his sisters were not. She named Solina her executor and left her residuary estate equally to Solina and Sona. In 2006 Violet made an assignment into bankruptcy but did not declare the house as an asset.
In a 2023 judgment, Justice Sanfilippo held that the estate held a beneficial interest in the house under a resulting trust. Jack, his corporation and Sona appealed on two grounds. First, they argued that Violet advanced the money as a loan to Jack and that he had fully repaid the loan. Second, they argued that the trial judge wrongly held that the corroboration requirement of section 13 of the Evidence Act[2] applied to Jack.
3. Analysis and Judgment
3.1 First Ground of Appeal
Dawe JA wrote the judgment for the court and K van Rensburg and Sossin, JJA agreed. His Honour began his analysis of the first ground of appeal by quoting from paragraph 1 of Nishi v Rascal Trucking Ltd[3] which states that a purchase money resulting trust can arise ‘when a person advances funds to contribute to the purchase price of property but does not take legal title to that property’. He further observed that the paragraph also notes that there is a rebuttable presumption that the parties to the purchase ‘intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution’. And, citing Pecore v Pecore,[4] he noted that this presumption applies to transactions involving parents and adult children.
In their argument on appeal the appellants argued based on a statement by Professor Waters, adopted in a line of cases, that a person who claims a resulting trust ‘must also prove that he or she acted throughout as a purchaser’.[5] However, his Honour disagreed because their argument reflects a misunderstanding of legal principles.
First, the doctrine of purchase money resulting trust focuses on the parties’ intentions at the time the money is advanced.[6] His Honour therefore concluded, ‘to the extent that there can be said to be any requirement that the claimant have [sic, has] “acted … as a purchaser”, this requirement only applies at the point that the purchase money is advanced. It is true that evidence about how the claimant conducts herself later may be relevant, but only to the extent that is illumines what she intended when she contributed the purchase money. Thus, said his Honour, ‘Professor Water’s statement … should be understood as referring only to the time of the transaction itself.’
Second, the requirement that the claimant must have acted as a purchaser means simply that she did not intend to advance the money as either a gift or a loan. And this was clear from the full passage in Waters already referred to.
However, Waters’ formulation of the test raised a further question, namely, whether it imposed a burden on the claimant to prove that the money she advanced was not a loan, or whether the presumption places the onus on the opposing party to prove that the money the claimant advanced was either a loan or a gift. Or, as his Lordship continued, ‘Framed another way, is the presumption of resulting trust merely a presumption that [the] purchase money was not meant as a gift, or is there equally a presumption that the money advanced was not a loan?’
Justice Sanfilippo held that when a person makes a monetary contribution to the purchase price of property, she had no further obligation to prove that she acted as a purchaser. And, as Dawe JA noted, this follows from what Rothstein J said in paragraph 1 of Nishi, quoted above. Hence, as Dawe JA states in paragraph 19:
19 After Nishi, it is no longer necessary to distinguish loans from gifts in the resulting trust analysis. The presumption of resulting trust will be defeated if it is established that the person who contributed the purchase money did not intend to acquire a beneficial interest in the property. This can be established by demonstrating that the money advanced by the contributor was meant as either a loan or as a gift.
His Honour also quoted from Singh v Kaler,[7] which came to the same conclusion:
[P]re-Rascal Trucking and Pecore case law has been overtaken and it is no longer appropriate to require the person advancing the funds to prove he or she was “acting throughout as purchaser”. Once the claimant proves the “basis fact” …, that is, they made a contribution to the purchase price, the legal presumption of resulting trust applies.
This is not to suggest that when a true lender advances funds to assist in the purchase, a resulting trust arises. There are significant differences between a lender and an investor or purchaser. However, when the presumption applies, the onus is on the title holder to rebut the characterization of investor by proving the purchaser was, in fact, a lender.
Accordingly, Justice Sanfilippo placed the onus on Jack to prove that Violet had contributed the money as a loan, and he held that Jack had not met this onus. Justice Dawe held that Justice Sanfilippo, having considered all the evidence, did not commit a reversible error when he concluded that it made no sense to find that Violet lent the money to Jack when she was in financial straits while he had amassed a lot of money.
3.2 Second Ground of Appeal
Section 13 of the Evidence Act provides:
- In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.
The appellants argued that since Jack was not a beneficiary under Violet’s will, he was not being sued as an heir and therefore section 13 did not apply to him. But Justice Dawe held that the appellants’ argument on this point was based on a misunderstanding section 13. It is true that Jack was not being sued as an heir, but Solina sued him in her capacity as executor. That made him ‘an opposite or interested party’ and hence the corroboration requirement of section 13 applied to him. However, Justice Sanfilippo did not ultimately decide the case by applying section 13. Rather, he decided it by refusing to accept Jack’s evidence that Violet had lent him the $10,000 because he found that it was implausible that Violet would have lent the money to Jack when she was in financial difficulties, while he had sufficient moneys to pay the down payment.
—
[1] 2024 ONCA 425.
[2] RSO 1990, c E.23.
[3] 2013 SCC 33.
[4] 2007 SCC 17.
[5] Waters Law Trusts in Canada, 5th ed by DWM Waters, M Gillen, and LD Smith (Toronto: Thomson Reuters 2021), p 421.
[6] Citing Nishi, supra, paras 2, 30, 41, and Andrade v Andrade, 2016 ONCA 368, para 6.
[7] 2017 ABCA 275, paras 26-27.
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Written by: Albert Oosterhoff
Posted on: September 30, 2024
Categories: Commentary, Trusts, WEL Newsletter
1. Introduction
Cases in which parties claim an interest in property under a presumed purchase money resulting trust are now a dime a dozen. It appears a party who has no other leg to stand on will argue the presumption as a last resort or a hail Mary attempt to get what he wants. That does not mean that all such claims are baseless, but the opposite party has opportunity to rebut the presumption. However, the case law has become unclear about what exactly the opposite party needs to prove. Must he prove an intention to make a gift, or also an intention to prove a loan if he alleges that the claimant lent the money to him? In the recent case, Bradshaw v Hougassian,[1] the Ontario Court of Appeal has clarified the law on this point.
2. Facts
The testator, Violet Hougassian, had three children, Jack, Solina, and Sona. Jack purchased a house in Cambridge in 1980 for $38,500 when he was still a university student. He and Violet both signed the agreement of purchase and sale but only Jack took title. He contributed $8,000 to the purchase price from money saved from summer jobs. Violet contributed $10,000. The remainder was financed by a mortgage in Jack’s name, which Violet signed as guarantor. Soon after the purchase, Violet left her husband and moved into the newly purchased house with her children. From 1992 to 2018, when she died, Violet lived alone in the house. She paid the mortgage payments and the utility bills for the first year, after which Jack took over those payments. He also paid off the mortgage in due course. Eventually, he transferred title to the house into the name of his corporation. In fact, Jack became very successful in business and supported his mother financially during her life. Violet made her will in 2002. She left Jack out of her will because he was financially successful, while his sisters were not. She named Solina her executor and left her residuary estate equally to Solina and Sona. In 2006 Violet made an assignment into bankruptcy but did not declare the house as an asset.
In a 2023 judgment, Justice Sanfilippo held that the estate held a beneficial interest in the house under a resulting trust. Jack, his corporation and Sona appealed on two grounds. First, they argued that Violet advanced the money as a loan to Jack and that he had fully repaid the loan. Second, they argued that the trial judge wrongly held that the corroboration requirement of section 13 of the Evidence Act[2] applied to Jack.
3. Analysis and Judgment
3.1 First Ground of Appeal
Dawe JA wrote the judgment for the court and K van Rensburg and Sossin, JJA agreed. His Honour began his analysis of the first ground of appeal by quoting from paragraph 1 of Nishi v Rascal Trucking Ltd[3] which states that a purchase money resulting trust can arise ‘when a person advances funds to contribute to the purchase price of property but does not take legal title to that property’. He further observed that the paragraph also notes that there is a rebuttable presumption that the parties to the purchase ‘intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution’. And, citing Pecore v Pecore,[4] he noted that this presumption applies to transactions involving parents and adult children.
In their argument on appeal the appellants argued based on a statement by Professor Waters, adopted in a line of cases, that a person who claims a resulting trust ‘must also prove that he or she acted throughout as a purchaser’.[5] However, his Honour disagreed because their argument reflects a misunderstanding of legal principles.
First, the doctrine of purchase money resulting trust focuses on the parties’ intentions at the time the money is advanced.[6] His Honour therefore concluded, ‘to the extent that there can be said to be any requirement that the claimant have [sic, has] “acted … as a purchaser”, this requirement only applies at the point that the purchase money is advanced. It is true that evidence about how the claimant conducts herself later may be relevant, but only to the extent that is illumines what she intended when she contributed the purchase money. Thus, said his Honour, ‘Professor Water’s statement … should be understood as referring only to the time of the transaction itself.’
Second, the requirement that the claimant must have acted as a purchaser means simply that she did not intend to advance the money as either a gift or a loan. And this was clear from the full passage in Waters already referred to.
However, Waters’ formulation of the test raised a further question, namely, whether it imposed a burden on the claimant to prove that the money she advanced was not a loan, or whether the presumption places the onus on the opposing party to prove that the money the claimant advanced was either a loan or a gift. Or, as his Lordship continued, ‘Framed another way, is the presumption of resulting trust merely a presumption that [the] purchase money was not meant as a gift, or is there equally a presumption that the money advanced was not a loan?’
Justice Sanfilippo held that when a person makes a monetary contribution to the purchase price of property, she had no further obligation to prove that she acted as a purchaser. And, as Dawe JA noted, this follows from what Rothstein J said in paragraph 1 of Nishi, quoted above. Hence, as Dawe JA states in paragraph 19:
19 After Nishi, it is no longer necessary to distinguish loans from gifts in the resulting trust analysis. The presumption of resulting trust will be defeated if it is established that the person who contributed the purchase money did not intend to acquire a beneficial interest in the property. This can be established by demonstrating that the money advanced by the contributor was meant as either a loan or as a gift.
His Honour also quoted from Singh v Kaler,[7] which came to the same conclusion:
[P]re-Rascal Trucking and Pecore case law has been overtaken and it is no longer appropriate to require the person advancing the funds to prove he or she was “acting throughout as purchaser”. Once the claimant proves the “basis fact” …, that is, they made a contribution to the purchase price, the legal presumption of resulting trust applies.
This is not to suggest that when a true lender advances funds to assist in the purchase, a resulting trust arises. There are significant differences between a lender and an investor or purchaser. However, when the presumption applies, the onus is on the title holder to rebut the characterization of investor by proving the purchaser was, in fact, a lender.
Accordingly, Justice Sanfilippo placed the onus on Jack to prove that Violet had contributed the money as a loan, and he held that Jack had not met this onus. Justice Dawe held that Justice Sanfilippo, having considered all the evidence, did not commit a reversible error when he concluded that it made no sense to find that Violet lent the money to Jack when she was in financial straits while he had amassed a lot of money.
3.2 Second Ground of Appeal
Section 13 of the Evidence Act provides:
The appellants argued that since Jack was not a beneficiary under Violet’s will, he was not being sued as an heir and therefore section 13 did not apply to him. But Justice Dawe held that the appellants’ argument on this point was based on a misunderstanding section 13. It is true that Jack was not being sued as an heir, but Solina sued him in her capacity as executor. That made him ‘an opposite or interested party’ and hence the corroboration requirement of section 13 applied to him. However, Justice Sanfilippo did not ultimately decide the case by applying section 13. Rather, he decided it by refusing to accept Jack’s evidence that Violet had lent him the $10,000 because he found that it was implausible that Violet would have lent the money to Jack when she was in financial difficulties, while he had sufficient moneys to pay the down payment.
—
[1] 2024 ONCA 425.
[2] RSO 1990, c E.23.
[3] 2013 SCC 33.
[4] 2007 SCC 17.
[5] Waters Law Trusts in Canada, 5th ed by DWM Waters, M Gillen, and LD Smith (Toronto: Thomson Reuters 2021), p 421.
[6] Citing Nishi, supra, paras 2, 30, 41, and Andrade v Andrade, 2016 ONCA 368, para 6.
[7] 2017 ABCA 275, paras 26-27.
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