1. Introduction
Persons often enter into dubious understandings about rights to property and eschew seeking legal advice to record their understandings in writing. Heaven forfend that they should do so! In the end the parties usually have to resort to the courts to have their rights determined. That was the case in Meehan v Swartzentruber.[1] It was a case in which the intended purchaser was unable to obtain mortgage financing and arranged to have title taken in his brother-in-law’s name on the understanding that the brother-in law would hold the title in trust for him. The brother-in-law ultimately denied the alleged trust.
The case raised issues about the formalities of a trust of land and about the principle that one may not use a statute as an instrument of fraud.
2. Facts
The applicant, Mr Meehan, made an offer to purchase a parcel of real property for $187,000 in 2012 but was unable to qualify for a mortgage. He asked the respondent, his brother-in-law, Mr Swarzentruber, to acquire the property for him and take on the mortgage. His sister encouraged her husband to do this. The applicant’s parents provided the down payment of $47,000. The respondent did not pay any of the expenses of the purchase, and the applicant was to pay all ongoing expenses. It was understood that when the property was sold the applicant would receive the net proceeds. Alternatively, the property would be transferred to the applicant when he or his children became eligible for a mortgage. Meanwhile, the applicant lived on the property and made all payments associated with it, either directly or by reimbursement to the respondent.
The applicant’s sister died in 2017, and the respondent then no longer wanted to hold title to the property for the applicant. Therefore, the applicant arranged to have the property transferred from the respondent to two friends, who we were to hold the beneficial interest for him, just as the respondent had done. The purchase price was $180,000 and the respondent received none of the proceeds. In August 2018 the applicant asked his friends to re-transfer the property to the respondent for $197,000. The respondent paid the downpayment of $42,512.03 and again became the mortgagor. The applicant understood that the agreement between them was the same as during the respondent’s first period of ownership. But the respondent deposed that he no longer wanted to hold the property for the applicant and instead intended to own the property outright. Because he lived on the property, the lender required the applicant to sigh a tenancy agreement with the respondent, as well as a tenant acknowledgement. The documentation required the applicant to pay future rental payments to the respondent. The applicant deposed that the documents did not reflect the true relationship between himself and the respondent, but the latter alleged later that it was a true tenancy agreement. Meanwhile, the applicant made substantial improvements to the property. In 2023 the parties discussed renewal of the mortgage, but it was only in August 2024 that the respondent told the applicant that he intended to sell the property and retain the proceeds of sale. He took the position that the applicant was merely a tenant with no equity position in the property.
The applicant then brought these proceedings to determine who was entitled to the equity in the property. He brought an application in which he sought a declaration that the respondent held title to the property in trust for him, as well as an order for subsidiary relief. In the alternative, he sought damages based on unjust enrichment or breach of contract.
3. Analysis and Judgment
3.1 Factual Dispute
Justice Reid first considered the factual dispute and found that the parties understood that during the first period of ownership by the respondent, he held title in trust for the applicant. And he found that the facts surrounding the transfer to and from the applicant’s friends were also consistent with their holding title in trust for him. He found that a similar set of facts existed during the respondent’s second period of ownership and that, until August 2024, the correspondence between the parties was consistent with the understanding that a trust relationship existed between them. Therefore, his Honour did not accept the respondent’s evidence that he always intended to have full legal and beneficial ownership in the property. He also held that the tenancy agreement and tenant acknowledgement did not indicate the applicant’s true status but that they were made solely at the demand of the lender. That conclusion was supported by the fact that the applicant did not pay a fixed rent to the respondent. Accordingly, his Honour found that the relationship between the parties during both the first and second periods of the respondent’s ownership was not that of a landlord and tenant. Instead, there was an oral agreement between the parties that the applicant was the beneficial owner of the property even though the respondent held the legal title.
3.2 Legal Dispute
Justice Reid first considered the requirements of an express trust. He found that the parties had capacity and that the three certainties for an express trust were satisfied. However, he agreed with the respondent that the formalities for establishing an express trust had not been met because the trust was not made in writing or signed by the party making or assigning it. Thus, that requirement of section 11 of the Statute of Frauds[2] was not met.
However, section 10 of the statute provides that section 11 does not apply to trusts that arise by operation of law. And therefore, it was possible to argue that the trust between the parties was a constructive trust. His Honour referred to Soulos v Korkontzilas.[3] At paragraph 39 of that case the court seems to suggest that a constructive trust is available to redress only the wrongful acquisition of property and unjust enrichment. However, by reference to Oosterhoff on Trusts,[4] his Honour noted that in commenting on Soulos this text states:
Those two categories sometimes are said to exhaust the topic, but in truth, a great deal remains. Constructive trusts also arise in connection with specifically performable contracts of sale, oral trusts of land, incomplete gifts, proprietary estoppel, secret trusts and mutual wills. . . .
[The] constructive trusts in question are perfectionary. They arise because, in some circumstances, equity wants to ensure the perfection, or fulfilment, of stated intentions. Constructive trust is a means by which people are held to their words. [Emphasis in the original.]
Thus, the reach of the constructive trust is quite broad.
Justice Reid then went on to refer to the well-recognized exception to the requirement of the Statute of Frauds that trusts of land must be in writing, which is that the Statute itself may not be used as an instrument of fraud. He noted that this means:
It would be inequitable if a party who acquires legal ownership in a property, with knowledge of the intended trust of the beneficial interest in another, could deny the existence of the trust based on the Statute of Frauds. [para 46]
His Honour then referred to and applied Wai-Keung Kwan v Kalsang,[5] which recognized the exception. He also referred to and followed Pahara v Pahara,[6] in which the Supreme Court of Canada also recognized the exception, and which relied on the leading case on point, Rochefoucauld v Boustead.[7]
Thus, his Honour concluded that it would be inequitable for the respondent, who knew that the legal title was being transferred to him on a trust for the applicant, to permit him to rely on the Statute of Frauds. Therefore, he concluded that the conditions for the imposition of a constructive trust on the property had been established and granted a declaration that the applicant is the beneficial owner of the property. He also granted a further declaration that the applicant is entitled to require that the property be transferred to him on demand. At that time the applicant must pay the respondent any costs or debt obligations incurred by him arising from holding the legal title, including the costs of transfer and the down payment made by the respondent plus interest. It followed that it was not necessary to consider the applicant’s alternative claim of damages for unjust enrichment.
—
[1] 2026 ONSC 736.
[2] RSO 1990, c S.19.
[3] 1997 CarswellOnt 1489, [1997] 2 SCR 217.
[4] 9th ed by Albert H Oosterhoff, Robert Chambers, and Mitchell McInnes (Toronto: Thomson Reuters, 2019), pp 811-812. See now 10th ed (2024), pp 855-856.
[5] 2025 ONSC 124, paras 145-151.
[6] [1946] SCR 89, para 30.
[7] [1897] 1 ChD 196 (CA). For further discussion of this point see Oosterhoff on Trusts 10th ed, footnote 4, supra, §12:5 Oral Trusts of Land.
Written by: Albert Oosterhoff
Posted on: June 30, 2026
Categories: Commentary, WEL Newsletter
1. Introduction
Persons often enter into dubious understandings about rights to property and eschew seeking legal advice to record their understandings in writing. Heaven forfend that they should do so! In the end the parties usually have to resort to the courts to have their rights determined. That was the case in Meehan v Swartzentruber.[1] It was a case in which the intended purchaser was unable to obtain mortgage financing and arranged to have title taken in his brother-in-law’s name on the understanding that the brother-in law would hold the title in trust for him. The brother-in-law ultimately denied the alleged trust.
The case raised issues about the formalities of a trust of land and about the principle that one may not use a statute as an instrument of fraud.
2. Facts
The applicant, Mr Meehan, made an offer to purchase a parcel of real property for $187,000 in 2012 but was unable to qualify for a mortgage. He asked the respondent, his brother-in-law, Mr Swarzentruber, to acquire the property for him and take on the mortgage. His sister encouraged her husband to do this. The applicant’s parents provided the down payment of $47,000. The respondent did not pay any of the expenses of the purchase, and the applicant was to pay all ongoing expenses. It was understood that when the property was sold the applicant would receive the net proceeds. Alternatively, the property would be transferred to the applicant when he or his children became eligible for a mortgage. Meanwhile, the applicant lived on the property and made all payments associated with it, either directly or by reimbursement to the respondent.
The applicant’s sister died in 2017, and the respondent then no longer wanted to hold title to the property for the applicant. Therefore, the applicant arranged to have the property transferred from the respondent to two friends, who we were to hold the beneficial interest for him, just as the respondent had done. The purchase price was $180,000 and the respondent received none of the proceeds. In August 2018 the applicant asked his friends to re-transfer the property to the respondent for $197,000. The respondent paid the downpayment of $42,512.03 and again became the mortgagor. The applicant understood that the agreement between them was the same as during the respondent’s first period of ownership. But the respondent deposed that he no longer wanted to hold the property for the applicant and instead intended to own the property outright. Because he lived on the property, the lender required the applicant to sigh a tenancy agreement with the respondent, as well as a tenant acknowledgement. The documentation required the applicant to pay future rental payments to the respondent. The applicant deposed that the documents did not reflect the true relationship between himself and the respondent, but the latter alleged later that it was a true tenancy agreement. Meanwhile, the applicant made substantial improvements to the property. In 2023 the parties discussed renewal of the mortgage, but it was only in August 2024 that the respondent told the applicant that he intended to sell the property and retain the proceeds of sale. He took the position that the applicant was merely a tenant with no equity position in the property.
The applicant then brought these proceedings to determine who was entitled to the equity in the property. He brought an application in which he sought a declaration that the respondent held title to the property in trust for him, as well as an order for subsidiary relief. In the alternative, he sought damages based on unjust enrichment or breach of contract.
3. Analysis and Judgment
3.1 Factual Dispute
Justice Reid first considered the factual dispute and found that the parties understood that during the first period of ownership by the respondent, he held title in trust for the applicant. And he found that the facts surrounding the transfer to and from the applicant’s friends were also consistent with their holding title in trust for him. He found that a similar set of facts existed during the respondent’s second period of ownership and that, until August 2024, the correspondence between the parties was consistent with the understanding that a trust relationship existed between them. Therefore, his Honour did not accept the respondent’s evidence that he always intended to have full legal and beneficial ownership in the property. He also held that the tenancy agreement and tenant acknowledgement did not indicate the applicant’s true status but that they were made solely at the demand of the lender. That conclusion was supported by the fact that the applicant did not pay a fixed rent to the respondent. Accordingly, his Honour found that the relationship between the parties during both the first and second periods of the respondent’s ownership was not that of a landlord and tenant. Instead, there was an oral agreement between the parties that the applicant was the beneficial owner of the property even though the respondent held the legal title.
3.2 Legal Dispute
Justice Reid first considered the requirements of an express trust. He found that the parties had capacity and that the three certainties for an express trust were satisfied. However, he agreed with the respondent that the formalities for establishing an express trust had not been met because the trust was not made in writing or signed by the party making or assigning it. Thus, that requirement of section 11 of the Statute of Frauds[2] was not met.
However, section 10 of the statute provides that section 11 does not apply to trusts that arise by operation of law. And therefore, it was possible to argue that the trust between the parties was a constructive trust. His Honour referred to Soulos v Korkontzilas.[3] At paragraph 39 of that case the court seems to suggest that a constructive trust is available to redress only the wrongful acquisition of property and unjust enrichment. However, by reference to Oosterhoff on Trusts,[4] his Honour noted that in commenting on Soulos this text states:
Those two categories sometimes are said to exhaust the topic, but in truth, a great deal remains. Constructive trusts also arise in connection with specifically performable contracts of sale, oral trusts of land, incomplete gifts, proprietary estoppel, secret trusts and mutual wills. . . .
[The] constructive trusts in question are perfectionary. They arise because, in some circumstances, equity wants to ensure the perfection, or fulfilment, of stated intentions. Constructive trust is a means by which people are held to their words. [Emphasis in the original.]
Thus, the reach of the constructive trust is quite broad.
Justice Reid then went on to refer to the well-recognized exception to the requirement of the Statute of Frauds that trusts of land must be in writing, which is that the Statute itself may not be used as an instrument of fraud. He noted that this means:
It would be inequitable if a party who acquires legal ownership in a property, with knowledge of the intended trust of the beneficial interest in another, could deny the existence of the trust based on the Statute of Frauds. [para 46]
His Honour then referred to and applied Wai-Keung Kwan v Kalsang,[5] which recognized the exception. He also referred to and followed Pahara v Pahara,[6] in which the Supreme Court of Canada also recognized the exception, and which relied on the leading case on point, Rochefoucauld v Boustead.[7]
Thus, his Honour concluded that it would be inequitable for the respondent, who knew that the legal title was being transferred to him on a trust for the applicant, to permit him to rely on the Statute of Frauds. Therefore, he concluded that the conditions for the imposition of a constructive trust on the property had been established and granted a declaration that the applicant is the beneficial owner of the property. He also granted a further declaration that the applicant is entitled to require that the property be transferred to him on demand. At that time the applicant must pay the respondent any costs or debt obligations incurred by him arising from holding the legal title, including the costs of transfer and the down payment made by the respondent plus interest. It followed that it was not necessary to consider the applicant’s alternative claim of damages for unjust enrichment.
—
[1] 2026 ONSC 736.
[2] RSO 1990, c S.19.
[3] 1997 CarswellOnt 1489, [1997] 2 SCR 217.
[4] 9th ed by Albert H Oosterhoff, Robert Chambers, and Mitchell McInnes (Toronto: Thomson Reuters, 2019), pp 811-812. See now 10th ed (2024), pp 855-856.
[5] 2025 ONSC 124, paras 145-151.
[6] [1946] SCR 89, para 30.
[7] [1897] 1 ChD 196 (CA). For further discussion of this point see Oosterhoff on Trusts 10th ed, footnote 4, supra, §12:5 Oral Trusts of Land.
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