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The law typically holds that gratuitous transfers of property between individuals are not intended to be gifts. Instead, it presumes a resulting trust, where legal title is held for the benefit of the transferor. The Family Law Act modifies the presumption for spouses. However, in each case, when a question of ownership arises, the court must start from the applicable presumption and consider the available evidence to determine the transferor’s true intentions.
Parties Dispute Whether Funds Were Gifted
Qu v. Zhang discussed the evidence necessary to rebut the presumptions of a resulting trust. That case dealt with an appeal concerning the ownership of a house that the parties held as joint tenants. The parties were married for a little over a year, and before the marriage, the respondent added the applicant to one of his bank accounts. The applicant then transferred $312,342.50 into the account before they were married.
During the marriage, $240,506.07 was used from the account as a down payment on a house. And just before the parties separated, the applicant’s name was removed from the joint account. The applicant resided in China and spent only nine weeks in Canada during the marriage. The applicant argued that she never intended to gift any of the funds used to purchase the house. Instead, she claimed that she wanted to use the funds to invest in real estate in Canada. However, the respondent believed that the funds were a gift and that both of them owned the house.
The judge rejected much of the respondent’s evidence but accepted much of the applicant’s testimony. The judge concluded that the applicant was the 100% beneficial owner of the house by a resulting trust and ordered that title be transferred solely into her name. The respondent claimed that the application judge erred in finding that the applicant was the sole owner of the house.
Presumption of Resulting Trust Can Be Rebutted
The Ontario Court of Appeal first looked at Pecore v. Pecore, and explained that the general rule is that gratuitous transfers between individuals are not intended as gifts. Courts have found this “presumption of resulting trust flows from the principle that equity presumes bargains and not gifts.” Nevertheless, in Pecore, the Supreme Court of Canada was clear that the presumption can be rebutted, on a balance of probabilities, with evidence of the transferor’s intention, by showing that they intended the transfer of property to be a gift. In F.H. v. McDougall, the court also highlighted that this needs to be grounded in “sufficiently clear, convincing and cogent” evidence.
Section 14 of the Family Law Act (FLA) must also be considered. That section states:
The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that:
(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and
(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).
The judge explained that the impact of these provisions is that, if spouses hold property or funds in both their names, that establishes joint ownership, in the absence of contrary evidence. Consequently, in these instances, the presumption is reversed, and “the transferor must rebut the presumption that the property or funds were intended to be a gift”.
Judge Considers the Transferor’s Intentions
Following these principles, the judge originally scrutinized the parties’ financial dealings, looking at the funds deposited into the account before marriage, funds deposited during the marriage, and the purchase of the house from the joint account during the marriage. For the pre-marriage deposit, the judge concluded that section 14 did not apply because the parties were not spouses. Therefore, the respondent had the onus to rebut the presumption of a resulting trust, which he failed to do. The judge found the applicant intended to use the funds to invest in Canadian real estate. For the funds deposited during the marriage and the purchase of the house, the judge also decided that the applicant successfully rebutted the presumption stemming from section 14 of the FLA.
Before the Ontario Court of Appeal, the respondent argued that the judge made several errors. He claimed the judge wrongly reversed the onus of proof when dealing with the funds advanced before the marriage, and that the presumption in section 14 of the FLA applied, because although the parties were not married at the time, they did become spouses. For his argument, the date of the transfers was “irrelevant”. The respondent cited a brief passage in Holtby v. Draper in support of his claim. However, the Court of Appeal did not substantively consider his argument. This was because the judge concluded that the applicant’s intention had never been to transfer funds or property as a gift. Therefore, it did not matter whether the presumption was wrongly reversed. Even if the applicant held the burden of proof, the judge’s findings still led to the conclusion that there was a resulting trust.
Court Weighs Whether Corroborating Evidence Is Required
The respondent further argued that the application judge’s finding that the applicant rebutted the presumption created by section 14 was unreasonable, that she erred in interpreting the evidence, and that the evidence was insufficient to conclude that the applicant did not intend to make a gratuitous transfer. He claimed that the judge made the same mistake described in MacIntyre v. Winter, where the judge focused too heavily on the parties’ credibility and failed to consider the transferor’s actual intention. However, the Court of Appeal disagreed and explained that assessing credibility was critical to resolving the dispute.
The respondent went further and claimed that the judge erred since there was a lack of evidence that corroborated the applicant’s stated intentions. In support of this argument, he pointed to comments in Pecore, where Justice Rothstein stated that the presumption needs to be rebutted by “bringing evidence to support his or her claim”. The respondent suggested that the applicant’s testimony alone was insufficient. The Court admitted that “in a perfect world, at least for litigation purposes, people would more carefully document their financial affairs, especially in relation to important purchases and transfers.” However, the Court acknowledged that “confirmatory evidence may make it easier for a trier of fact to resolve property disputes; however, it is not always available”. The Court did not believe the reference to “bringing evidence” in Pecore meant that testimony of the party carrying the burden would always be deficient.
In any case, it was clear that the judge sought evidence confirming the applicant’s stated intention. She was an investor in real estate in China and had bought and sold 10 properties. Her daughter confirmed that her mother had told her she wanted to buy an investment property in Canada. This evidence also spoke to her intentions when she transferred funds to the purchase of the house. Yet, the respondent characterized her evidence as simply “narrative” and self-serving, which courts should be hesitant about accepting. However, the court explained that evidence is always self-serving in a dispute, and the issue for judges is whether it can be believed. Here, the applicant’s evidence indicated her intentions throughout the series of events that led to the house purchase. The judge believed her evidence was genuine, and this finding was entitled to deference.
Presumptions Can Be Critical When Evidence Is Lacking
In this case, the judge felt that the applicant’s testimony was enough to overturn the presumption under section 14. However, the case also demonstrates the significance of the presumptions in determining ownership, especially in instances when there is a lack of corroborating evidence of the transferor’s intention. These cases may result in uncertain and costly litigation for the parties.
Contact Johnson Miller Family Lawyers in Windsor for Top-Tier Advice in Complex Family Property Disputes
Disputes over property ownership can quickly become complex, especially when presumptions of resulting trust or joint ownership apply. Whether you are transferring property to a family member, separating from a spouse, or involved in a dispute over beneficial ownership, Johnson Miller Family Lawyers can help clarify your rights and protect your interests. Our family and divorce lawyers create innovative legal solutions for high-end asset disputes. To explore your options, please contact us online or call 519-973-1500.
