1. Introduction

The recent case, May v Alsousi et al^[1] raises questions about the requirements for creating an express inter vivos trust and for the existence of a purchase money resulting trust. It also raises the interesting issue of the ‘clean hands’ doctrine.

2. Facts

Mr. Qasem Mahmud signed a declaration of trust on 14 September 1988, which declared that he ‘will be holding in my name’ an identified condominium unit (the ‘Property’) it Nepean, Ontario, ‘on behalf of the Islamic School of Ottawa’ (the ‘School’). He did not own the Property on that date but purchased it two weeks later. The deed indicates that he held the property ‘in trust’ but without any reference to the beneficiary. When he purchased the property, Mr. Mahmud did not sign a new declaration of trust, but he did take out a mortgage. He renewed it in 1993, and it was discharged in 2007. In 2007 the Islamic School of Ottawa changed its name to the Arabic and Islamic Education Foundation of Ottawa (the ‘Foundation’). Mr. Mahmud dies intestate in June 2017. Otessa May was appointed the Administrator of the estate and brought this Application to determine whether Mr. Mahmud held title to the property for the Foundation. The Foundation and two individuals were the respondents. The Respondents occupied the property since Mr. Mahmud’s death.

3. Analysis and Judgment

3.1 Issues

Justice M. Flaherty noted that the Application raises three issues:

1. Whether there is an express inter vivos trust in favour of the Foundation.
2. Whether there is a purchase money resulting trust in favour of the Foundation.
3. Whether the respondents were precluded from relying on equitable remedies because they lacked clean hands.

3.2 Express Inter Vivos Trust

Her Honour described the four requirements of an express trust by reference to Rubner v Bistricer:^[2]

1. the parties must have capacity;
2. three certainties must be satisfied, namely. intention to create a trust, certainty of subject matter, and certainty of objects;
3. the trust must be constituted; and
4. the prescribed formalities must be satisfied.

Her Honour held first, again by reference to Bistricer,^[3] that there was no trust because when Mr. Mahmud signed the declaration of trust, he did not own the Property and it is impossible to settle future property, i.e., property that the settlor does not yet own, in a trust.

She held further that since the subject matter of the trust was land, section 9 of the Statute of Frauds^[4] applies. It requires that all declarations of trusts of land must be proved by a writing signed by the party entitled by law to declare the trust. The documents submitted by the Respondents merely identified Mr. Mahmud as holding the Property in trust and did not satisfy section 9.

Moreover, the documents failed to identify the object of the trust, that is, the Foundation. so that the requirement of certainty of objects was not satisfied. And while the documents often refer to the Property, they do not clearly identify it as the subject of the trust.

Accordingly, her Honour found that there was no valid inter vivos trust because the prescribed formalities were not satisfied.

3.3 Purchase Money Resulting Trust

The law is clear that when a person pays money to contribute to the purchase price of property but does not take title to the property, equity presumes that the person who advanced the funds has a beneficial interest in the property in proportion to the contribution under a resulting trust.^[5] The presumption can be rebutted if it is shown on a balance of probabilities that the person making the contribution intended at the time the funds were advanced to make a gift to the person who takes the title, the time in italicised clause being of the essence.^[6]

Justice Flaherty noted that the Respondents failed to establish that they contributed to the purchase price when it was acquired, the italicised words being of the essence. The Respondents submitted a number of documents, such as bank statements which indicated that once in 1991 and between 1995 and 2007 the respondents paid amounts equal to the monthly mortgage payments. However, those payments cannot give rise to a purchase money resulting trust. Only payments made toward the purchase price as the time of the purchase can do so. Thus, while the Respondents might perhaps be able to raise other claims with respect to those payments, they did not raise a presumption of resulting trust.

3.4 Clean Hands Doctrine

If a party is guilty of misconduct or wrongdoing, a court of equity may conclude that the party does not come to court with ‘clean hands’ and deny it equitable remedies otherwise available to it.

Since Justice Flaherty had found against the Respondents, it was not really necessary to consider this issue, but she did so briefly.

The Applicant alleged that the Respondents failed to make complete financial disclosure because they did not provide complete bank statements, However, Justice Flaherty found that they provided all financial information available to them. Thus, their failure to supply complete bank statements did not mean that they came to court with unclean hands. The applicant also argued that the action of one of the individual Respondents who changed the locks on the Property because he believed that the Applicant intended to sell the Property was objectionable behaviour. Her Honour found, however that in the circumstances this action was not sufficient to deny equitable remedies to the Respondents if they had established a beneficial interest in the Property.

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[1]  2025 ONSC 795.

[2]  2019 ONCA 733, para 49.

[3]  Ibid., para 58.

[4]  RSO 1990, c S.19.

[5]  Nishi v Rascal Trucking Ltd, 2013 SCC 33, [2-13] 2 SCR 438, para 1.

[6]  Andrade v Andrade, 2016 ONCA 368, para 63.