Chechui v. Nieman 2016 ONSC 1905
In this case, the decision of Justice Hood of the Ontario Superior Court of Justice provides a brief analysis of the law on resulting trusts versus gifts, and the importance of the parties’ intentions, as they can be ascertained, when making this determination.
This case serves as a reminder that parties must be extremely cautious when placing any property under joint ownership or title. This becomes particularly relevant when the parties have not entered into a prenuptial or cohabitation agreement outlining their intentions with respect to jointly held property, as were the circumstances in this case.
Background
The parties met and began a relationship in 2009, and began cohabiting in 2010. Most of the bills and expenses were paid for by the Applicant. The parties were engaged, but never married. The parties did not have a cohabitation agreement.
In March, 2013, the parties purchased a home together in Toronto, Ontario, as joint tenants, where they continued to live until their separation. The Respondent’s mother, who had received a large inheritance in recent years, provided $1.7 million towards the purchase of the property. The Respondent was employed in the music industry at the time the home was purchased, earning minimal income. The Applicant, who earned a good income, agreed to obtain a mortgage of $1 million for the balance of the purchase price.
Shortly after the home was purchased, the Respondent’s mother passed away, leaving many of her own assets, and assets she owned jointly with the Respondent, to him. Upon disposition of some of these assets, the Respondent used the proceeds of sale to pay off the $1 million mortgage.
In October 2013, the parties opened a joint investment account. The Respondent deposited $1 million into the account, also from the proceeds of sale of the assets he had owned jointly with his mother.
The parties separated in January of 2014.
Upon separation, the Applicant claimed 50% ownership of the jointly owned home and 50% ownership of the joint investment account.
In response, the Respondent claimed that the Applicant held her interest in the home and the investment account in resulting trust for him.
Analysis
Much of the evidence provided by the parties was with respect to the characterization of the $1.7 million that the Respondent’s mother provided towards the purchase of the home, specifically if it were a gift from the mother to the Respondent alone, or to both parties.
With regards to the home, Justice Hood begins his analysis by concluding that no resulting trust claim could be made with respect to the $1.7 million gift provided by the Respondents mother. On review of evidence received from witnesses, particularly a gift letter to both parties from the Respondent’s mother, and the RBC mortgage which, though given on the strength of the Applicant’s income, is registered under both parties names, Justice Hood concluded that the $1.7 million was a gift. He noted that the Respondent did not provide any of his personal funds towards the purchase of the home, as the funds came from the Respondent’s mother and from the mortgage registered in both parties’ names.
Though the Respondent did use $1 million of his own funds to pay off the mortgage, this also does not lead to a presumption of a resulting trust because as Justice Hood states, in Hamilton v. Hamilton, (1996) 92 O.A.C. 103, the Ontario Court of Appeal limits the presumption of resulting trust to the purchase of property.
Further, in Dale v. Salvo, (2005) O.j. No. 3111, the Ontario Superior Court of Justice held that mortgage payments made after purchase are irrelevant in the context of a resulting trust. Justice Hood notes that although the Supreme Court of Canada decision in Kerr v. Baranow, 2011 1 SCR 269, does not refer to these two aforementioned cases, the Court did suggest in that case that resulting trusts will only arise upon the acquisition or the transfer of property.
Justice Hood continued his analysis and held that even if he was able to find a presumption of a resulting trust in the Respondent’s favour, this presumption would be rebutted by evidence which showed it was the intention of the parties to own the property jointly, regardless of their unequal contributions to its purchase. This applies both to the $1.7 million initially used to purchase the home, and the $1 million payment made by the Respondent later. A crucial aspect of Justice Hood’s analysis is his characterization of the Respondent’s payment of the mortgage as a gift.
With regards to the investment account, Justice Hood reminds us that equity presumes bargains, not gifts, and the onus was on the Applicant to rebut the Respondent’s position that he did not intend to gift her half of the account. As Justice Hood provides, all evidence must be weighed when determining a transferor of property’s actual intention, including the source, control, and use of the funds, as well as the tax treatment and banking documents.
The funds were provided by the Respondent, though control over the funds and tax treatment of the funds was joint. The effect of the banking documents was to make the Applicant the beneficial owner of the funds contained in the account. Based on evidence from the financial adviser who had advised the Respondent during the process of setting up the account, Justice Hood was satisfied that the Respondent did not intend to gift the funds, but rather, to gift their beneficial ownership via the right of survivorship.
Based on an analysis of the intentions of the parties, Justice Hood found in favour of the Applicant with regards to the home, and for the Respondent with regards to the investment account.