Mar 20, 2014

Real Property Law; Resulting Trusts; Constructive Trusts

Suen v. Suen, 2013 BCCA 313 (CanLII)
Description: Review of principles for creation resulting and constructive trusts over real property in family contexts.
Discussion: Express, resulting and constructive trusts over family property are important tools in the division of specific assets, especially in the face of claims of unjust enrichment. In this case, the parties, a father and adult son, jointly owned a home in Richmond, and each alleged that the other held his undivided one-half interest in trust for him. A verbal agreement regarding the ownership of the property played a central role. (See Schulz v. Schulz, 2013 BCCA 309 ('Schulz'), for another case illustrating the application of constructive trusts in the context of a mother and adult son, where the mother had never held legal title.) The Court of Appeal reviewed the legal principles governing the application of these trusts, and contractual agreements about equitable interests in real estate.
Regarding contracts, the Court noted that in the context of family relationships, 'communications are often no more than statements of intent or wishes' rather than binding agreements (at paragraph 43). To establish an agreement, there must be certainty and proof of the terms of the bargain. Agreements in respect of land, furthermore, were required to be in writing and signed by the grantor pursuant to the Law and Equity Act, R.S.B.C. 1996, c. 253, s. 59(3).
Trusts, on the other hand, could be established by presumption on the basis of the parties' actions. The Court recognised that being registered as the legal owner of land gave rise to a presumption of indefeasible title as set out in s. 23(2) of the Land Title Act, R.S.B.C. 1996, c. 250. However, this presumption could be rebutted by the operation of a trust, and other equitable considerations such as unjust enrichment, in addition to agreements between the parties: see Bajwa v. Pannu, 2007 BCCA 260, Aujila v. Kaila, 2010 BCSC 1739.
The Court held that a resulting trust arises when an owner transfers title to another without compensation. Where the transferee was a fiduciary or gave no value for the transfer, the law presumed that the grantor intended to create a trust rather than make a gift, and the transferee was therefore 'under an obligation to return it to the original title owner' (Pecore v. Pecore, 2007 SCC 17, at paragraph 20). The onus was on the transferee to rebut this presumption and demonstrate that the transfer was a gift: Kerr v. Baranow, 2011 SCC 10 ('Kerr'). (Schulz, noted above, confirmed that a transfer of ownership is a necessary factor in the creation of a resulting trust.)The Court held that the creation of an express trust had more strenuous requirements, in particular certainty of intention, subject and the objects of the transfer.
Constructive trusts could be created as remedial vehicles to address unjust enrichment, and could be found 'whenever the plaintiff can establish three elements: an enrichment of or benefit to the defendant, a corresponding deprivation of the plaintiff and the absence of a juristic reason for the enrichment': Kerr at paragraph 32; see also Pettkus v. Becker, [1980] 2 S.C.R. 834.
Reversing the finding of the trial judge, the Court held that the verbal agreement between the parties was insufficient to establish a trust over the property, as there was no proof of consensus on the specific terms. Furthermore, it was not a written agreement and so did not comply with the Law and Equity Act. As the trial judge had not ruled on unjust enrichment given the finding of a trust based on the agreement, the matter was remitted to the trial judge on that issue.