Jul 10, 2020

The Kent Family's Gord(on)ian Knot

Kent v. Kent, 2020 ONCA 390 (CanLII)

Kent is an interesting decision by the court of appeal. While it contains somewhat unique facts, it is always helpful when the court of appeal clarifies issues in family law relating to a resulting trust. This case is particularly interesting because of its intersection with estates law.

To summarize the facts in as short a way as possible, in 1996 a person named Marian transferred a property which she solely owned herself to BOTH her daughter Janice and her in joint tenancy. Only nominal consideration was provided. Janice was an adult at the time.

Janice died on July 22, 2014 with her husband Gordon has beneficiary of her estate. Gordon continued to live on the property with Marian. Marian then moved to a long-term care home and Gordon continued to reside on the property.

Marian ultimately made a new will on July 14, 2015 which provided that on her death her interest in the property would go to Gordon and his children (who were also Janice's children).

On Marian's death, Gordon claimed he owned 2/3 of the property. The respondents (who are sadly Gordon's children) claimed that he owned 1/3 and they each owned 1/3.

The court of appeal affirmed the trial judge's decision that in fact each of Gordon and his 2 children owned 1/3 of the property. The 1996 transfer was NOT a gift and thus created a resulting trust, whereby Marian continued to own 100% of the property beneficially. Therefore, Marian's death resulted in the distribution of 1/3, 1/3, 1/3 as per her will. Gordon did not receive 1/2 on the basis of his beneficial entitlement in Janice's will.

Interestingly, Gordon tried to argue that the property was a "matrimonial home" when Marian allowed Janice and Gordon to live at the property. He wanted to take advantage of s. 26 of the Family Law Act which deems a joint tenancy severed immediately before death if a spouse owns a matrimonial home with a third party. The purpose of this section is to protect a surviving spouse, by ensuring the "family home" does not become 100% solely owned by a stranger, and thus the surviving family potentially evicted, not to mention the deceased spouse's share of equity lost.

The court of appeal found that, as a trustee, Janet in any case did not have an "interest" in the property and thus it was not a "matrimonial home". Gordon could not rely on this provision.

In taking a big picture view of this case, Gordon seems to have taken his children to court over the value of 1/3 of this property. Despite the fact that this property was never Gordon's to begin with, and he is still receiving a 1/3 share, and he wanted more to the detriment of his own children. These optics could not have played well at either the trial level or the court of appeal. Neither could it have played well that Marian was the one who paid all the expenses on the property until her death; therefore, Gordon was not even contributing. It would be interesting how a case like this would have been decided had the children of the original owner paid all the expenses and contributed to the value of the property increasing (i.e. thus leading to an unjust enrichment claim being made as well).

While this decision is correct, the resulting trust doctrine continues to have unintended applications, in my view. If Marian made the conscious effort to put Janice's name on title, surely her intentions, unless expressed otherwise, were to make her daughter a 50% legal and beneficial owner of the property. Had Janice outlived her mother, she certainly would have expected to receive 100% of the property by right of survivorship from the joint tenancy.

Therefore, Gordon's argument that it was a matrimonial home and that Janice's interest ought to have passed to him on her death by virtue of s.26 of the FLA is compelling. However, having found that the resulting trust applied, the court of appeal was certainly correct that, having found that Janice had no interest, it was not a matrimonial home.

The resulting trust doctrine was applied properly based on current law. But in reality, it needs an update from the Supreme Court. After all, the average person who transfers a property from a sole name to joint names is usually doing it with the intention that the transferee receives an actual beneficial interest as well, especially if that person is a family member. In such cases, there would be no consideration because the person is doing it for a person like a child, even if the child is an adult. It seems logical that in these narrow cases it should be a rebuttable presumption that it is a gift, as opposed to the opposite.

In Kent, finding a resulting trust was probably a more “just” result because the real complainer in this case was Gordon, not Janice. But had Janice survived, and had there been competing beneficiaries, Janice would be right to be pretty upset about a result her mother likely never intended: that she was only a trustee of 1/2 interest in the house, as opposed to the beneficial owner of that 1/2.

Kent reminds both lawyers and the public that extreme caution is needed with gratuitous property transfers, to make sure the intended result occurs.

Michael H. Tweyman is a partner at Modern Family Law LLP