Tag: presumption of resulting trust
I previously blogged about the Calmusky v. Calmusky decision here, in which decision the court concluded that resulting trust presumptions apply to the beneficiary designation under a Registered Income Fund (RIF). As such, the onus was put on the named beneficiary of the RIF to rebut the presumption that he was holding the RIF in trust for his late father’s estate. The decision was not appealed.
The Ontario Bar Association (OBA), and primarily the OBA’s Trusts and Estates section, has considered the impacts of the case and has delivered a Submission to the Attorney General of Ontario and Minister of Finance with proposed remedies.
The potential effects cited by the OBA are worrying, and include that (i) it may compel financial advisors to provide what amounts to legal advice when such designations are being made, (ii) it may increase litigation where the named beneficiaries of plans, funds and policies are not the same residuary beneficiaries of an estate, (iii) it may create uncertainty in contracts (e.g. cohabitation and/or separation agreements) that use beneficiary designations as a way to secure support payments, and (iv) it may defeat the testamentary intentions of Ontarians who previously made their beneficiary designations and cannot make new ones.
The OBA Submission proposes legislative amendments with retroactive effect to remedy the issue. Such proposed amendments are to add a subsection to each of the Succession Law Reform Act (s. 51) and Insurance Act (s. 190) clarifying that when a designation is made, no presumption of resulting trust in favour of the estate is created.
We will provide an update once we know more.
Thanks for reading and have a great day,
Natalia R. Angelini
Consider the fact that a resulting trust will not apply just because you later change your mind.
In the recent decision of Hertendy v Gault, 2020 ONSC 7555, the Superior Court of Justice confirmed that in a situation where a parent transfers property to an adult child, the principles of a resulting trust do not apply in cases where the transfer is a true gift.
In this case, the mother, Ms. Hertendy, was seeking summary judgement against the daughter, Ms. Gault, to recover legal ownership of land in Smiths Falls (the “Property”). The Court found that the mother had agreed to and did transfer the Property as a gift to the daughter in April 2012, with the stipulation that the mother would retain a life interest in the Property and that the daughter and her husband would help pay for the on-going household expenses of the Property.
While the mother argued that there was no payment or consideration for this transfer (among other things), the daughter argued that the transfer was done for consideration, namely, the promise to help pay for the on-going expenses when requested to do so by the mother.
Among other things, the Court considered the fact that in the mother’s Will, dated 2011, the Property was to be transferred to the daughter after her death. In 2017, the mother removed her daughter from the Will and stated to Mr. Greenall (her other daughter) that she “changed her mind about transferring the home”.
The Court confirmed that the presumption of a resulting trust will apply to gratuitous transfers and where a transfer is made for no consideration, the onus is on the transferee to demonstrate that the gift was intended. Quoting Pecore v Pecore, 2007 SCC 17, the Court noted that “the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer…The presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.”
As such, the issue in this case was whether, at the material time the mother intended the transfer. The Court considered whether any person would gift their home to someone (even family) in return for a vague pledge of assistance for payment of expenses. The Court found that in this case, the fact that the mother signed the transfer document, she intended to sign the document, she received a benefit from signing the document (even though the benefit was modest compared to the value of the Property), and she paid the lawyer for the transfer, was sufficient to uphold the gift. The court also pointed out that the mother made no complaints about the transfer until at least three years later and her explanation for doing so was that “in hindsight [she] should have asked more questions.”
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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.
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.
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