1. Introduction
Testators are notoriously imprecise when they give real property in their wills for a limited period. If they were to say, ‘I devise Blackacre to A for life’ full stop, the devise is clear and is unlikely to be questioned. It undoubtedly creates a life interest. But often they will say something like, ‘I give Blackacre to A for her use and occupation during her lifetime but when she ceases to live on the property, it will pass to B’. Does this gift create a life estate or a licence? And do the terms create an interest that is determinable or one that is given upon a condition subsequent? What if, in either case, the determining event or condition subsequent is uncertain? These kinds of questions can be difficult to resolve.
2. Facts
Such problems arose in Barsoski Estate v Wesley.[1] The testator, Ms Barsoski, was a close friend for many years of the appellant, Mr Wesley, but they were never romantic partners. He frequently visited her in her house in London. She died in 2017. She wanted to make provision for him and so her will granted her house and contents to the respondent, her executor (and trustee?), to hold it in trust ‘as a home for [the appellant] during his lifetime or for such shorter period as [he] desires’. The will went on the provide:
Upon the earlier of [the appellant] advising my Trustees that he no longer wishes to live in the House, [the appellant] no longer living in the house, and [the appellant’s] death, the House shall be sold and the proceeds shall be delivered to St. Stephen’s Community House to be used by the highest priority needs as determined by the board of directors.
The will also provided that the executor would hold $500,000 in trust for the maintenance of the house and, if the appellant ‘is no longer able’ or no longer wishes to live in the house, the money is to be used for his living expenses, nursing or retirement home expenses, or all funeral expenses. Any amount left over after his death was to be paid to St Stephen’s Community House.
The evidence showed that the appellant intended to live in the house after his retirement, anticipated in 2021, but to the testator’s knowledge he needed to continue to work for the time being to maintain an income. He worked in Toronto at the time of the testator’s death and began a full-time job in Sault Ste Marie in 2019. However, he regarded the home as his primary residence for his driver’s licence and income tax and spent weekends there once or twice a month. St Stephens conducted a private inquiry into the matter and uncovered these facts. It took the view that the appellant was not living in the house and that therefore it should be sold and the proceeds paid to it. The executor then brought an application to determine the interest in the property held by the appellant and whether it was valid.
3. Reasons of the Application Judge
The application judge held: (a) that the appellant’s interest was a licence and not a life estate; and (b) that the ‘condition’ that the appellant live in the house was uncertain. That meant that the licence was uncertain and therefore the entire gift failed. Her Honour rightly defined a licence as a privilege to enter premises for a specific purpose but does not give the licencee any title or estate in the property. On the other hand, a life tenant does hold title to the property for his life (or such shorter period as prescribed in the gift). She recognized that the cases that seek to distinguish between the two rights go both ways and are irreconcilable. She also held that the court must interpret the will in light of surrounding circumstances. After construing the will, she concluded that the gift created a licence, not a life estate, mainly on the ground that the gift was to a friend. This distinguished the case from others which made gifts to a spouse or common law partner and interpreted the gift as a life estate. She also held that the fact that the property vested in the trustee rather than in the appellant favoured the interpretation of the gift as a licence. For this purpose she relied on Moore v Royal Trust Co,[2] which is the only Supreme Court of Canada case that distinguishes between a life estate and a licence on this ground. Her Honour then went on to find that the condition imposed on the gift (no longer living in the home) was void for uncertainty, because it was ‘impossible to define … what it means to “live” in the house’. She acknowledged that if the estate were a life estate, it would be an estate upon condition subsequent and the condition, being void, would be struck and the life estate would become absolute. However, since she had held that Mr Wesley’s interest was a licence, the licence failed along with the void condition. Mr Wesley appealed.
4. Appeal Decision
The judgment was written by A Harvison Young JA. Janet Simmons and B Zarnett JJA concurred. Justice Harvison Young acknowledged that the case law is of limited assistance in cases such as this one because in each case the court must pay attention to the testator’s intentions and the surrounding circumstances at the time she made her will. Her Honour discounted Moore v Royal Trust Co that was relied on by the application judge. In my opinion she was right to do so, for other cases which she cites reached the opposite conclusion. Moreover, in my view and with great respect, the distinction lacks a sound basis. It seems to imply that only a common law grant to a beneficiary can support a life estate and a beneficial interest under a trust cannot. Our law does not support such a conclusion, for it regularly recognizes beneficial life interests. Harvison Young JA also disagreed, rightly in my view, with the application judge’s view that the $500,000 fund for the maintenance of the house supported the interpretation of a licence rather than a life estate. Her Honour also disagreed with the application judge’s view that since the grant was to a friend rather than to a spouse or common law spouse the construction favoured a licence. I think this correct too. The evidence was clear that the testator and the appellant enjoyed a close relationship and suggested that she regarded the appellant as family.
That left the question whether the terms of the gift conferred a determinable life estate or a life estate upon condition subsequent. Her Honour adverts to the distinction in paragraphs 51-54, which outline the parties’ views on the issue. But it is unfortunate that she does not discuss the differences in greater detail. The respondent rightly, although somewhat superficially, outlines the differences. A determinable interest arises when the terminating evening is part of the words of limitation of the grant itself so that it is an integral part of the gift. It gives the testator’s estate a possibility of reverter. Further, words of duration, such as ‘during’, ‘while’, until, and ‘so long as’, suggest a determinable interest. In contrast, a gift upon condition subsequent involves a gift that can come to an end if what amounts to a superadded condition comes to pass. It cuts the estate short. In other words, the condition is not part of the limitation of the gift. It gives the testator’s estate a right of re-entry. Further, words of condition, such as, ‘but if’, ‘on condition that’, ‘provided that’, and ‘if it should happen that’, suggest a condition subsequent.[3]
Moreover, if the determining event happens in the case of a determinable interest, the interest ends automatically. In contrast, in the case of an interest on condition subsequent, the interest ends only when the grantor or the testator’s estate exercises the right of re-entry.
What kind of interest was created by this will? At first blush it looks like a determinable interest since the will speaks of holding the house in trust for the appellant during his lifetime. Moreover, the clause that follows does not contain words of condition. The clause does not say, for example, ‘but if Mr Wesley no longer lives in the house … the house shall be sold’.
Unfortunately, the problem is that if the determining event of a determinable interest is uncertain (or otherwise void), the entire gift is void because as we saw, the determining event is part of the words of limitation. In that respect a determinable interest is as vulnerable as a licence. But if the gift is of an estate upon condition subsequent and the condition is void, the condition is struck, and the gift becomes absolute. The drastic consequence of calling a determinable interest void may motivate courts to treat the determining event as a condition subsequent instead. Thus, Ziff suggests[4] that this may have motivated the Privy Council in Sifton v Sifton,[5] to hold that a gift of payments to the testator’s daughter should continue ‘only so long as she shall continue to reside in Canada’, created a condition subsequent that was void for uncertainty. And frankly that is not untoward, since the language used is often capable of being interpreted as either. It is unfortunate that Justice Harvison Young does not discuss these differences but simply agrees with the application judge that the words in question were ‘external to the gift’ and that this interpretation was supported by contextual considerations. She agreed with the application judge that the condition was void for uncertainty and should be struck. Thus, she allowed the appeal in part.
The determinable interest finds its origin in feudal law and we have no sound reason for retaining it today. Indeed, an Irish judge once called the distinction between determinable interests and interests upon conditions subsequent as ‘little short of disgraceful in our jurisprudence’,[6] and others have also excoriated the distinction.
In its Report on the Basic Principles of Land Law the Ontario Law Reform Commission recommended[7] ‘that the continuing distinction between a determinable interest and an interest subject to a condition subsequent should be abrogated … by providing that language that at common law would create a determinable interest will instead create an interest subject to a condition subsequent’. Sadly, that recommendation along with many other useful suggestions for reform was never acted upon. On the other hand, in the Commission’s earlier Report on Perpetuities[8] it also addressed the distinction which, in the case of perpetuities meant that a possibility of reverter was not subject to the rule, whereas a condition subsequent was. The Commission recommended that a possibility of reverter should be treated in the same way as condition subsequent. And that recommendation was implemented in s. 15(1) of the Perpetuities Act,[9] which however reduced the perpetuity period for such interests to 40 years.[10]
—
[1] 2022 ONCA 399, 76 ETR 4th 1, reversing in part Barsoski v Wesley, 2020 ONSC 7407.
[2] 1954 CarswellBC 85, [1955] 4 DLR 313 (CA).
[3] For a clear description of the differences between determinable interests and estates upon conditions subsequent and what happens if the determining event in either case is void, I refer the reader to Bruce Ziff, Principles of the Law of Property, 7th ed (Thomson Reuters, 2018), pp. 280-285 and 289-291.
[4] Ibid, p 282.
[5] 1938 CarswellOnt 99, [1938] AC 656 (PC).
[6] Re King’s Trusts (1892), 29 LR Ir 401 at 410.
[7] Ontario Law Reform Commission, Report on the Basic Principles of Land Law (1996), p 64.
[8] Ontario Law Reform Commission, Report on the Rule Against Perpetuities, Report No 1 (1965), p 33.
[9] RSO 1990, c P-9 (first enacted 1966, c 113, s 15(1).
[10] Other jurisdictions adopted this approach, although their perpetuities periods for these interests vary. See Perpetuities Act, RSA 2000, c P-5, s 19; RSNWT 1988, c P-3, s 16; RSNWT (Nu) 1988, c P-3, s 16; RSY 2002, c 168, s 19; Perpetuity Act, RSBC 1996, c 385, s 23.
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Written by: Albert Oosterhoff
Posted on: October 3, 2022
Categories: Commentary, WEL Newsletter
1. Introduction
Testators are notoriously imprecise when they give real property in their wills for a limited period. If they were to say, ‘I devise Blackacre to A for life’ full stop, the devise is clear and is unlikely to be questioned. It undoubtedly creates a life interest. But often they will say something like, ‘I give Blackacre to A for her use and occupation during her lifetime but when she ceases to live on the property, it will pass to B’. Does this gift create a life estate or a licence? And do the terms create an interest that is determinable or one that is given upon a condition subsequent? What if, in either case, the determining event or condition subsequent is uncertain? These kinds of questions can be difficult to resolve.
2. Facts
Such problems arose in Barsoski Estate v Wesley.[1] The testator, Ms Barsoski, was a close friend for many years of the appellant, Mr Wesley, but they were never romantic partners. He frequently visited her in her house in London. She died in 2017. She wanted to make provision for him and so her will granted her house and contents to the respondent, her executor (and trustee?), to hold it in trust ‘as a home for [the appellant] during his lifetime or for such shorter period as [he] desires’. The will went on the provide:
Upon the earlier of [the appellant] advising my Trustees that he no longer wishes to live in the House, [the appellant] no longer living in the house, and [the appellant’s] death, the House shall be sold and the proceeds shall be delivered to St. Stephen’s Community House to be used by the highest priority needs as determined by the board of directors.
The will also provided that the executor would hold $500,000 in trust for the maintenance of the house and, if the appellant ‘is no longer able’ or no longer wishes to live in the house, the money is to be used for his living expenses, nursing or retirement home expenses, or all funeral expenses. Any amount left over after his death was to be paid to St Stephen’s Community House.
The evidence showed that the appellant intended to live in the house after his retirement, anticipated in 2021, but to the testator’s knowledge he needed to continue to work for the time being to maintain an income. He worked in Toronto at the time of the testator’s death and began a full-time job in Sault Ste Marie in 2019. However, he regarded the home as his primary residence for his driver’s licence and income tax and spent weekends there once or twice a month. St Stephens conducted a private inquiry into the matter and uncovered these facts. It took the view that the appellant was not living in the house and that therefore it should be sold and the proceeds paid to it. The executor then brought an application to determine the interest in the property held by the appellant and whether it was valid.
3. Reasons of the Application Judge
The application judge held: (a) that the appellant’s interest was a licence and not a life estate; and (b) that the ‘condition’ that the appellant live in the house was uncertain. That meant that the licence was uncertain and therefore the entire gift failed. Her Honour rightly defined a licence as a privilege to enter premises for a specific purpose but does not give the licencee any title or estate in the property. On the other hand, a life tenant does hold title to the property for his life (or such shorter period as prescribed in the gift). She recognized that the cases that seek to distinguish between the two rights go both ways and are irreconcilable. She also held that the court must interpret the will in light of surrounding circumstances. After construing the will, she concluded that the gift created a licence, not a life estate, mainly on the ground that the gift was to a friend. This distinguished the case from others which made gifts to a spouse or common law partner and interpreted the gift as a life estate. She also held that the fact that the property vested in the trustee rather than in the appellant favoured the interpretation of the gift as a licence. For this purpose she relied on Moore v Royal Trust Co,[2] which is the only Supreme Court of Canada case that distinguishes between a life estate and a licence on this ground. Her Honour then went on to find that the condition imposed on the gift (no longer living in the home) was void for uncertainty, because it was ‘impossible to define … what it means to “live” in the house’. She acknowledged that if the estate were a life estate, it would be an estate upon condition subsequent and the condition, being void, would be struck and the life estate would become absolute. However, since she had held that Mr Wesley’s interest was a licence, the licence failed along with the void condition. Mr Wesley appealed.
4. Appeal Decision
The judgment was written by A Harvison Young JA. Janet Simmons and B Zarnett JJA concurred. Justice Harvison Young acknowledged that the case law is of limited assistance in cases such as this one because in each case the court must pay attention to the testator’s intentions and the surrounding circumstances at the time she made her will. Her Honour discounted Moore v Royal Trust Co that was relied on by the application judge. In my opinion she was right to do so, for other cases which she cites reached the opposite conclusion. Moreover, in my view and with great respect, the distinction lacks a sound basis. It seems to imply that only a common law grant to a beneficiary can support a life estate and a beneficial interest under a trust cannot. Our law does not support such a conclusion, for it regularly recognizes beneficial life interests. Harvison Young JA also disagreed, rightly in my view, with the application judge’s view that the $500,000 fund for the maintenance of the house supported the interpretation of a licence rather than a life estate. Her Honour also disagreed with the application judge’s view that since the grant was to a friend rather than to a spouse or common law spouse the construction favoured a licence. I think this correct too. The evidence was clear that the testator and the appellant enjoyed a close relationship and suggested that she regarded the appellant as family.
That left the question whether the terms of the gift conferred a determinable life estate or a life estate upon condition subsequent. Her Honour adverts to the distinction in paragraphs 51-54, which outline the parties’ views on the issue. But it is unfortunate that she does not discuss the differences in greater detail. The respondent rightly, although somewhat superficially, outlines the differences. A determinable interest arises when the terminating evening is part of the words of limitation of the grant itself so that it is an integral part of the gift. It gives the testator’s estate a possibility of reverter. Further, words of duration, such as ‘during’, ‘while’, until, and ‘so long as’, suggest a determinable interest. In contrast, a gift upon condition subsequent involves a gift that can come to an end if what amounts to a superadded condition comes to pass. It cuts the estate short. In other words, the condition is not part of the limitation of the gift. It gives the testator’s estate a right of re-entry. Further, words of condition, such as, ‘but if’, ‘on condition that’, ‘provided that’, and ‘if it should happen that’, suggest a condition subsequent.[3]
Moreover, if the determining event happens in the case of a determinable interest, the interest ends automatically. In contrast, in the case of an interest on condition subsequent, the interest ends only when the grantor or the testator’s estate exercises the right of re-entry.
What kind of interest was created by this will? At first blush it looks like a determinable interest since the will speaks of holding the house in trust for the appellant during his lifetime. Moreover, the clause that follows does not contain words of condition. The clause does not say, for example, ‘but if Mr Wesley no longer lives in the house … the house shall be sold’.
Unfortunately, the problem is that if the determining event of a determinable interest is uncertain (or otherwise void), the entire gift is void because as we saw, the determining event is part of the words of limitation. In that respect a determinable interest is as vulnerable as a licence. But if the gift is of an estate upon condition subsequent and the condition is void, the condition is struck, and the gift becomes absolute. The drastic consequence of calling a determinable interest void may motivate courts to treat the determining event as a condition subsequent instead. Thus, Ziff suggests[4] that this may have motivated the Privy Council in Sifton v Sifton,[5] to hold that a gift of payments to the testator’s daughter should continue ‘only so long as she shall continue to reside in Canada’, created a condition subsequent that was void for uncertainty. And frankly that is not untoward, since the language used is often capable of being interpreted as either. It is unfortunate that Justice Harvison Young does not discuss these differences but simply agrees with the application judge that the words in question were ‘external to the gift’ and that this interpretation was supported by contextual considerations. She agreed with the application judge that the condition was void for uncertainty and should be struck. Thus, she allowed the appeal in part.
The determinable interest finds its origin in feudal law and we have no sound reason for retaining it today. Indeed, an Irish judge once called the distinction between determinable interests and interests upon conditions subsequent as ‘little short of disgraceful in our jurisprudence’,[6] and others have also excoriated the distinction.
In its Report on the Basic Principles of Land Law the Ontario Law Reform Commission recommended[7] ‘that the continuing distinction between a determinable interest and an interest subject to a condition subsequent should be abrogated … by providing that language that at common law would create a determinable interest will instead create an interest subject to a condition subsequent’. Sadly, that recommendation along with many other useful suggestions for reform was never acted upon. On the other hand, in the Commission’s earlier Report on Perpetuities[8] it also addressed the distinction which, in the case of perpetuities meant that a possibility of reverter was not subject to the rule, whereas a condition subsequent was. The Commission recommended that a possibility of reverter should be treated in the same way as condition subsequent. And that recommendation was implemented in s. 15(1) of the Perpetuities Act,[9] which however reduced the perpetuity period for such interests to 40 years.[10]
—
[1] 2022 ONCA 399, 76 ETR 4th 1, reversing in part Barsoski v Wesley, 2020 ONSC 7407.
[2] 1954 CarswellBC 85, [1955] 4 DLR 313 (CA).
[3] For a clear description of the differences between determinable interests and estates upon conditions subsequent and what happens if the determining event in either case is void, I refer the reader to Bruce Ziff, Principles of the Law of Property, 7th ed (Thomson Reuters, 2018), pp. 280-285 and 289-291.
[4] Ibid, p 282.
[5] 1938 CarswellOnt 99, [1938] AC 656 (PC).
[6] Re King’s Trusts (1892), 29 LR Ir 401 at 410.
[7] Ontario Law Reform Commission, Report on the Basic Principles of Land Law (1996), p 64.
[8] Ontario Law Reform Commission, Report on the Rule Against Perpetuities, Report No 1 (1965), p 33.
[9] RSO 1990, c P-9 (first enacted 1966, c 113, s 15(1).
[10] Other jurisdictions adopted this approach, although their perpetuities periods for these interests vary. See Perpetuities Act, RSA 2000, c P-5, s 19; RSNWT 1988, c P-3, s 16; RSNWT (Nu) 1988, c P-3, s 16; RSY 2002, c 168, s 19; Perpetuity Act, RSBC 1996, c 385, s 23.
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