The Ontario Superior Court of Justice decided in Citi Financial Ltd.v. Zaidi that the transfer of a residential property from a husband to his wife was void for fraudulent conveyance according to section 2 of the Fraudulent Conveyances Act.
It was stated by Mrs. Zaidi that the transfer by her husband was not a fraudulent conveyance because he never acquired a beneficial interest in the property even though he acquired a title to it in joint tenancy with Mrs. Zaidi. She had paid the deposit and all of the mortgage payments since the time the property was purchased. She had included her husband’s name on the offer and they were named as joint tenants when the transfer of the property was registered. She asserted that her only intention in placing her husband’s name on the offer was to show respect for his position as head of the family and that she was not aware of the legal consequences of naming her and Mr. Zaidi as joint tenants. She added that she had done so to merely indicate that the two would be living together in the home.
The Court, while deliberating on the issue that Mr. Zaidi did not acquire beneficial interest in the home, stated in paragraph 107, [T]he effect of section 14(a) of the Family Law Act in the present case is to impose on the putative donor, Mrs. Zaidi, the burden to show that her intention was other than to make a gift. Upon reviewing case law dealing with resulting trusts, the Court ruled that the evidence Mrs. Zaidi provided did not show that she wanted to give her husband a beneficial interest in the property by the original acquisition in 1996 and, therefore, he did not acquire a beneficial interest in the property. The matter was dismissed.
Presumption of Advancement Between Parent and Child
Traditionally, the approach to the presumption of advancement between parent and child had been that the presumption arose only between father and child, or where a male placed himself in loco parentis to a child. That was modified in Pecore v. Pecore, when Rothstein J., writing for the majority of the Court, ruled that the presumption of advancement, while applicable to both mothers and fathers, was limited to gratuitous transfers to minor children only since the principle justification for the presumption is the parental obligation to support dependent children. Deliberating on the issue whether the presumption applied to adult dependent children, the Court found that it did not and concluded that: “ …It is open to the party claiming that the transfer is a gift to rebut the presumption of resulting trust by bringing evidence to support his or her claim.
In addition, while dependency will not be the basis on which to apply the presumption of advancement, evidence to the degree of dependency of an adult transferee child on the transferor parent may provide strong evidence to rebut the presumption of a resulting trust. The Court therefore dismissed the appeal finding that Paula had succeeded in rebutting the presumption of resulting trust. That Paula’s father had not included the accounts in his will was viewed by the Court as a strong indication that he did not intend them to be part of his estate and that the balance in the accounts would go to Paula through the right of survivorship. To reach this conclusion, the Court considered the evidence given at trial by the father’s solicitor…. “The lawyer had nothing to gain from his testimony… I agree with the trial judge that “if [the father’s] intention was to have his jointly held assets devolve through the estate, they were of such magnitude that he would have at least discussed that matter with his solicitor since they constituted a substantial proportion of what he owned” particularly after the lawyer asked him about life insurance policies, RRIFs and other assets.”
The lone dissenting opinion came from Honourable Madame Justice Abella. She agreed that the application of presumption should be extended to mothers along with fathers, but she saw no reason to limit its application to non-adult children. In paragraph 102, she reasoned that the presumption of advancement emerged no less from affection than from dependency, and since parental affection flows from the inherent nature of the relationship and not of the dependency, the presumption of advancement should also apply to all gratuitous transfers from parents to any of their children, regardless of the age or dependency of the child or the parent. The natural affection parents supposedly have for their adult children when both were younger do not diminish with age.
The Supreme Court of British Columbia voided a gratuitous transfer by a mother to her son in 1996 because the son was a resulting trustee for the property, and even otherwise the Court would have set aside the transfer on a finding of undue influence. When Mrs. Turner died in 2007 at age 84, she was survived by her three sons, Richard, John, and James, as well as her third husband, Ed Guertin. A will was executed by her in 2006 granting a life interest in favour of her husband, providing that if Mr. Guertin did not want to use and occupy the home, then it was to be sold and the proceeds of the sale divided equally between her two sons, John and James. It was drafted ignoring the fact that Mrs.Turner had already transferred the home into joint tenancy between herself and James in 1996. For a brief interval after Mrs. Turner’s death, Mr. Guertin went to live with his family and James sold the property for $405,000 obtaining all the proceeds of the sale through the right of survivorship.
The plaintiff, John, said that it was not Mrs. Turner’s intention to gift the property to James and that her only reason for transferring to him an interest in the property was to guard against a possible claim against her estate by her other son Richard and his wife from whom she was estranged. He also claimed that James held the property in a resulting trust and that the plaintiff was entitled to one half of the proceeds of the sale according to the will. Otherwise, the plaintiff maintained that if the deceased made the gift of the interest in the property to James in 1996, his relationship with their mother was such that a presumption of undue influence was in order. The Court referred to Pecore and stated at paragraph 57 that, subsequent acts and declarations were viewed with mistrust by the courts because the transferor could have changed his or her mind subsequent to the transfer and donors were not allowed to retract gifts. But, in Pecore, it was decided that evidence of intention arising subsequent to a transfer should not automatically be excluded, provided such evidence was relevant to the intention of the transferor at the time of the transfer.
To reach the conclusion that the 1996 transfer constituted a resulting trust and that Mrs. Turner’s will was valid, the Court once more examined the role of the lawyer. James had taken his mother to see Mr. Johnson, a lawyer who had previously arranged for a small mortgage against the property in favour of James. James said that he escorted Mrs. Turner to the law office, but was not present when she spoke to Mr. Johnson and executed the transfer. Mr. Johnson no longer practiced law and could not be located to testify at the trial. Therefore, James had to rely on the contents of Mr. Johnson’s file as contemporaneous evidence of Mrs. Turner’s intention when she made the transfer, which contained a letter sent to both James and Mrs. Turner, a state of title certificate and account, and four brief sticky notes attached to the file. There was no fee for services; the account was for disbursements only. It was clear from the contents of the file that the time spent on it was minimal. Mr. Johnson had only one appointment with Mrs. Turner, obtained little information from her and did not review any documents. Nor was there any reference in the notes to any discussion Mr. Johnson had with Mrs. Turner on the meaning of the effect of a joint tenancy. The trial judge’s conclusion in paragraph 92 is that, “…[E]ven if Mr. Johnson had been available to testify at the trial I could not have given much weight to such scanty records.”