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It All Comes Down to Intent

A recent decision of the Ontario Court of Appeal deals with the question of intent regarding a gratuitous transfer in the context of the presumption of resulting trust.

In Chechui v Nieman, Ian and Victoria purchased a house for $2.6 million (the “House”).  Title was taken in both Ian and Victoria’s names as joint tenants. To finance the purchase, Victoria obtained a $1 million mortgage in the parties’ joint names. The mortgage was later converted into a line of credit.

In October 2013, the parties sold a property they earlier had purchased as tenants in common for $2.325 million. Ian deposited his share of the sale proceeds in his bank account, repaid the $1 million RBC line of credit on the House in full, and deposited $800,000.00 into an investment account, held jointly with Victoria.

In January 2014, the parties ended their three and a half year common-law relationship and a partition and sale application ensued relating to the House.

The issue on appeal was whether Ian was entitled to a credit in his favour on the sale of the house to reflect the fact that he had paid down the line of credit with his own funds.

The trial judge found that Ian had gifted to Victoria the repayment of the parties’ debt under the joint line of credit.

In contrast, the Court found no evidence that Ian intended to gift Victoria the equivalent of $500,000.00 by reason of his repayment of her share of the indebtedness under the line of credit. The Court disagreed with the trial judge’s conclusion that the parties’ intention to hold title to the House jointly rebutted the presumption of a resulting trust in respect of Ian’s repayment of Victoria’s debt under the line of credit. The Court stated that the relevant question should have been what Ian intended at the time of repaying the line of credit – not what the parties commonly intended concerning the ownership of the property.

Ian’s repayment of Victoria’s share of the parties’ debt under the line of credit was gratuitous, and directly linked to the house. The Court stated that Victoria bore the onus to establish that Ian intended to gift her the sum of $500,000.00 by repayment of her share of the parties’ joint indebtedness under the line of credit. There was no independent evidence of such an intention by Ian. The Court found that Ian’s repayment of Victoria’s share of the parties’ joint debt under the line of credit was impressed with a resulting trust.

The Court relied on Pecore v Pecore, 2007 SCC 17, Andrade v Andrade, 2016 ONCA 368, and Nishi v Rascal Trucking LTD, 2013 SCC 33.

In particular, the Court referred to Justice Rothstein in Pecore at para 44:

[44]      The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention.  [Emphasis added.]

Thanks for reading,

David Morgan Smith, and Jacqui Palef (Articling Student)

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