In its ordinary operation, the principal characteristic of joint tenancy is the right of survivorship. When one joint tenant dies, their interest is extinguished, and the surviving joint tenant takes full ownership of the property.
However, this outcome is not absolute. In estates law, we are familiar with the line of cases epitomized by the Supreme Court of Canada in Pecore which provides that a presumption of resulting trust applies where a parent transfers property into joint tenancy with an adult child.
A similar presumption arises where property is jointly owned by business partners. Absent compelling evidence to the contrary, a surviving partner holds legal title to the property held in joint tenancy on trust for the surviving partner and the estate of the deceased partner.
For the latinophiles, the maxim is ius accrescendi inter mercatores locum non habet, or the right of survivorship has no place among merchants.
The presumption that partnership property is held for the benefit of the partners, notwithstanding joint tenancy and the right of survivorship is discussed in Agro Estate v. CIBC Trust Corp., [1999] O.J. No. 1714. There, two brothers ran a cattle semen business. Together, they owned a farm as joint tenants. Upon the death of one of the brothers, an issue arose as to whether the farm passed in its entirety to the surviving brother, or whether half went to the surviving brother and half to the deceased brother’s estate.
The court concluded that half of the property was held by the surviving brother in trust for the deceased’s brother’s estate. In so finding, the court considered s. 21 of the Partnership Act, which provides:
21.(1) All property and rights and interests in property originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act “partnership property”, and must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement.
(2) The legal estate or interest in land that belongs to a partnership devolves according to the nature and tenure thereof and the general rules of law thereto applicable, but in trust, so far as necessary, for the persons beneficially interested in the land under this section.
In determining the question of ownership, the courts will first consider whether the property is partnership property, and second, if partnership property, whether there is evidence to rebut the presumption of a trust.
The presumption of a trust for partnership property was most recently applied in Garland v. Newhouse, 2021 BCSC 11292 (CanLII).
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