Tag: Beneficial Ownership

15 Apr

Legal vs. Beneficial Ownership: British Columbia’s New Registry

Kira Domratchev Estate & Trust, In the News, News & Events Tags: , , 0 Comments

Any estate litigator will tell you that many of the cases that we deal with on a daily bases involve disputes regarding the beneficial ownership of assets, being jointly held assets or assets that are wholly owned by one party and alleged to be beneficially owned by another.

For reference, legal ownership or legal title refers to property held in the name of a person or persons. In contrast, beneficial ownership is what is referred to as “actual” ownership even though the property is registered in someone else’s name.

Without a clear trust agreement, it is often very difficult to argue that beneficial ownership exists and the parties to the dispute will resort to arguments over things like, who is paying taxes for the property, who is collecting rental income and other evidence that relates to the parties’ intention.

The Province of British Columbia appears to have come up with a solution to the question of whether the specific property truly belongs to the person in whose name it is registered.

The Land Owner Transparency Act has been introduced to create a public registry of property owners in the province. Notably, this is the first legislation of its kind in Canada and is aimed towards ending the use of trusts, corporations and partnerships to shield transactions from public view.

The new legislation was positively received at Transparency International Canada whose executive director, James Cohen, noted that Canada has been criticized globally for our apparently lax beneficial ownership legislation.

In accordance with this legislation, corporations, trusts and partnerships that buy land would have to disclose their beneficial owners in the registry. It is interesting to note that failure to do so will result in fines of up to $100,000.00 or 15% of the assessed value of the property, whichever is greater.

The Society of Trust and Estate Practitioners (Canada) submitted certain concerns to the province such as questions of how the new framework is to work with other relevant legislation and raised questions of privacy.

Will Ontario follow suit? Stay tuned.

To learn more about this new initiative, check out this Globe and Mail article on the topic.

Thanks for reading!

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

Legal vs. Beneficial Ownership – Not so easily distinguished?

The Beneficial Ownership of Shares in a Corporation

House Explosion Leading to Questions or Ownership and Ultimately, Responsibility Under the Law

29 Jan

House Explosion Leading to Questions of Ownership and Ultimately, Responsibility Under the Law

Kira Domratchev Litigation, Uncategorized Tags: , , , , , , , , 0 Comments

Paul Zigomanis (“Paul”) died on April 20, 2015 as a result of an explosion that destroyed the home he lived in for 24 years (the “Brimley House”). At the time of Paul’s death, title to the Brimley House was in the name of Paul’s parents, John Zigomanis (“John”) and Mary Zigomanis (“Mary”).

A passerby who was driving by the Brimley House at the time of the explosion, and impacted by it, brought an action for negligence and under the Occupiers’ Liability Act as against Paul’s Estate and John’s Estate (Zambri v Cooperman, 2018 ONSC 7679). A motion was brought by the Estate Trustee During Litigation of Paul’s Estate, Jonathan Cooperman, (the “ETDL”) to determine whether the Brimley House was an asset of Paul’s Estate or John’s Estate, as this was an important issue that had to be determined before the litigation could proceed (Zigomanis Estate, 2017 ONSC 6855).

As there were more assets in John’s Estate, than in Paul’s Estate, the interested parties in the litigation would suffer an adverse consequence were it determined that the Brimley House properly belonged in Paul’s Estate.

The primary position of the ETDL was that a trust relationship was established between Paul’s parents and Paul, whereby a resulting trust arose between John and Mary and Paul and that title to the Brimley House “resulted back” to Paul upon John’s death on December 31, 2014.

Facts

On December 31, 1990, John and Mary took title as joint tenants to the property where the Brimley House was eventually built on, for $270,000.00, as joint owners. In May, 1991, Mary and John signed a deed transferring the Brimley House to Paul for “natural love and affection”. The Court found that Paul ultimately paid John and Mary $140,000.00 for the Brimley House. It was further held by the Court that the family understood that John and Mary were always going to help Paul to purchase a home.

After moving into the Brimley House, Paul developed a drug addiction. Thereafter, on August 1, 1996, Paul transferred the Brimley House to Mary and John for $2.00. Mary and John put all the insurance, taxes and utility bills into their names and had the bills sent to their own home, however, Paul would transfer $500.00 per month to them for the payment of these expenses. It was understood by the family that this was done in order to protect the Brimley House from the potential repercussion of Paul’s substance abuse problems.

Mary died on March 23, 2013, leaving her Estate to John, who at the time suffered from dementia. Shortly thereafter, Gail MacDonald (“Gail”) and Violet Cooper (“Violet”), Paul’s sisters, who were managing John’s affairs, realized that Paul stopped making regular payments to their parents towards the Brimley House and offered to have the Brimley House transferred to Paul, immediately. Importantly, this letter was written well before the explosion giving rise to the litigation, took place.

John died on December 31, 2014, leaving his Estate to Gail, Violet and Paul, equally. Gail was named as the Estate Trustee of John’s Estate. Before Paul’s death, Gail, through her counsel, and Paul, through his counsel, were engaged in settlement negotiations with respect to the Brimley House. The draft minutes of settlement exchanged included the following: “AND WHEREAS Mr. Zigomanis asserts that the Brimley Road property was transferred to the Deceased to be held in trust for the benefit of Mr. Zigomanis”. The Court held that this particular piece of evidence was indicative of the fact that it was always understood by the family that Paul was the beneficial owner of the Brimley House.

Paul died intestate and he did not have a spouse or any children. His beneficiaries were Gail and Violet, and the sole beneficiaries of his Estate.

Analysis and Decision

 

The Court was satisfied that, on a balance of probabilities, and in considering all of the evidence, John and Mary transferred both legal and beneficial title to the Brimley House to Paul in 1991, for valuable consideration. As such, no presumption of a resulting trust applied to this transaction.

The Court further held that the nominal consideration for which Paul transferred the Brimley House to John and Mary triggered the presumption of a resulting trust, such that the Court had to determine what Paul intended at the time of the 1996 transfer.

Based on the evidence considered, the Court found that the presumption of a resulting trust could not be rebutted, such that Paul was the true owner of the Brimley House, because John and Mary intended to transfer the legal title back to Paul, once they were reassured in his ability to control ownership. As a result, the Brimley House was ordered to be returned to the trustee of Paul’s Estate, effective January 1, 2015, being the following day after the death of John.

John’s Estate’s Liability in the Litigation Related to the Explosion

Following the Court’s finding regarding the ownership of the Brimley House, Gail, as trustee of John’s Estate brought a motion for an order that John’s Estate did not owe a duty of care to the Plaintiff and was not liable under the Occupiers’ Liability Act.

The Court held that a relationship between the Plaintiff, a passerby, and John’s Estate, a non-owner of property, is not one in which a duty of care had previously been recognized. The Court further held that although John had some involvement with the Brimley House, it would not be a sufficient basis to find a relationship of proximity with the Plaintiff that would give rise to a duty of care.

Based on the above findings, the Court held that John’s Estate did not owe a duty of care to the Plaintiff and there was no other legal or equitable basis to find that John’s Estate had an obligation to manage the Brimley House on behalf of or to supervise Paul’s behaviour, including any liability under the Occupiers’ Liability Act.

Thanks for reading!

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

Legal vs. Beneficial Ownership – Not so easily distinguished?

The Beneficial Ownership of Shares in a Corporation

It All Comes Down to Intent

25 May

Where is the Trust?

Suzana Popovic-Montag Estate & Trust Tags: , , , , , , 0 Comments

In a decision released last week, the Ontario Court of Appeal in Andrade v Andrade set aside a judgment and issued a decision that established sole beneficial ownership in a house by way of resulting trust. This decision provides an interesting analysis of the source of funds used to purchase property and the effect this can have on a resulting trust claim. It also provides an interpretation of the public policy principle that prevents a party from taking one position for tax purposes and another in respect of a claim in litigation.

Luisa Andrade (“Luisa”), a widow and mother of seven children, immigrated to Canada in 1969. Luisa’s children each left school as teenagers and began working to support the family. The children continued to contribute their wages to the family until they left the family home.

9BHIKXDFSUThe family home was purchased in 1974. Luisa signed the offer to purchase and borrowed a cash deposit of $1,000. The bulk of the purchase was financed with two mortgages. Legal title was initially placed under the names of two of Luisa’s children, Henry and Maria, because Luisa was not employed and could not obtain the mortgage on her own. Five years later, legal title was transferred to Henry and another one of Luisa’s children, Joseph. Joseph died in 2014 and his widow, Manuela, commenced a claim seeking a declaration that she was the beneficial owner of the house. Manuela was successful at trial.

The Court of Appeal held that the trial judge committed a palpable and overriding error in concluding that Luisa had no money of her own as it caused him to ignore the evidence of Luisa’s intention to remain the beneficial owner. This caused him to ultimately reject the resulting trust claim. The Court of Appeal noted that the trial judge confused the question of whether Luisa had money with the source of her money. This resulted in a mistaken characterization of the money that was given to Luisa by her children and used by Luisa to pay for the house as the children’s money. However, in accordance with the legal principles of a gift, once the money the children earned was given to Luisa, it became Luisa’s money, “even if it was expected to be used, and was in fact used, for the support of the family, including to pay the mortgages”. The Court of Appeal observed that there was no evidence that Luisa’s bank account was a trust account nor that the money was earmarked for a specific purpose. Furthermore, it was the testimony of all the children that the money they gave to Luisa was her’s to use as she saw fit.

Once the Court of Appeal found that Luisa did have money of her own, it went on to find that her intention was not to benefit the legal title holders to the exclusion of her other children.

On another note, the trial judge found that this was not an appropriate case to impose a trust due to public policy concerns. At various times, Luisa rented out the upstairs apartments of the house. Although Joseph and Henry never received any rent from the house, they declared the rental income and claimed expenses. Luisa, on the other hand, never paid rent yet she claimed a rental tax credit. Specifically, the trial judge was concerned that it would be against public policy to recognize Luisa’s estate (as Luisa had since died) as the beneficial owner of the house when she had received tax credits claiming that she was not the beneficial owner.

The Court of Appeal found that while the “clean hands” doctrine and considerations of illegal purposes may bar a claim, actions unrelated to a claim will not necessarily bar a remedy. In the case at hand, the evidence was not that Luisa placed the house in her children’s names for strategic tax purposes. Rather, Luisa had done so because she was unable to obtain the mortgage on her own. As the equitable relief sought by Luisa’s estate was in relation to Luisa’s interest in the family home, the Court of Appeal found that her tax filings were not fundamental to that cause of action.

Thank you for reading.

Suzana Popovic-Montag

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