The Purchase Money Resulting Trust
The concept of the purchase money resulting trust was considered by the Supreme Court of Canada in Nishi v Rascal Trucking Ltd, 2013 SCC 33.
Rascal Trucking Ltd. leased land from Kismet Enterprises Inc. There was a prior dispute between the companies, which resulted in an order being granted requiring Rascal to remove topsoil from the land. Due to non-compliance with the order granted, the City of Nanaimo added the amount of $110,679.74 to Kismet’s tax bill. After this, Kismet stopped making its mortgage payments to CIBC, and as such, CIBC began paying the mortgage payments and added the amount to the mortgage debt. CIBC eventually sold the land to a principal at Kismet. Rascal contributed the amount of $110,679.74 to the purchase of the property, equal to the debt it owed Kismet. In 2008, Rascal sued Kismet’s principal claiming a resulting trust. Rascal lost at trial, won in the Court of Appeal, and lost at the Supreme Court of Canada.
As defined in the decision at paragraphs 1 and 2:
A purchase money resulting trust arises when a person advances funds to contribute to the purchase price of property, but does not take legal title to that property. Where the person advancing the funds is unrelated to the person taking title, the law presumes that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution. This is called the presumption of resulting trust.
The presumption can be rebutted by evidence that at the time of the contribution, the person making the contribution intended to make a gift to the person taking title. While rebutting the presumption requires evidence of the intention of the person who advanced the funds at the time of the advance, after the fact evidence can be admitted so long as the trier of fact is careful to consider the possibility of self-serving changes in intention over time.
The Supreme Court of Canada concluded that Rascal intended to make a substantial gift by repaying the cost of the debt. This intention was strong enough to rebut the presumption of a resulting trust, and as such, there was no resulting trust and Rascal did not hold a beneficial interest in the property.
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