The recent case of Zapata v Zapata, 2024 ONSC 3677 (CanLII) provides a useful refresher on the doctrine of resulting trust. In Zapata, the applicant sought a declaration that she was entitled to the proceeds of sale of a house in Toronto. The house was previously owned by the applicant and her husband as joint tenants. The applicant wanted to sell the house but her husband refused. On the advice of her lawyer, the applicant transferred her share of the house to her two sons, “C” and “V”, and brought an action for partition and sale. The action was successful and the house was sold. The husband received his half of the sale proceeds. The other half remained in trust with the lawyer who conducted the sale. Because the applicant had transferred the house to her sons prior to the sale, both “C” and “V” had control over the remaining sale proceeds. “C” wanted the lawyer to transfer the remaining funds to their mother. “V”, however, did not consent to the transfer.

The Court found that the applicant was entitled to the remaining sale proceeds. This was because “C” and “V” held the remaining funds on behalf of the applicant by way of resulting trust. As set out in Pecore v Pecore, 2007 SCC 17, a resulting trust arises when one party makes a gratuitous transfer of property to another party with the intention of retaining a beneficial interest therein. What matters is the transferor’s actual intention at the time of the transfer. If, at the time of the transfer, the transferor’s actual intention is to transfer legal title while retaining a beneficial interest in the property, then the transferee holds the property for the transferor on a resulting trust. However, if the transferor’s actual intention is to gift the property to the transferee, then the transferee owns the property outright. Importantly, when a parent gratuitously transfers property to an independent child, the law presumes that the child holds the property for the parent on a resulting trust. It is then up to the child to rebut that presumption.

In Zapata, it was obvious that “C” and “V” held the sale proceeds on behalf of their mother by way of resulting trust. The applicant had gratuitously transferred the house to her two sons without receiving any consideration in return (i.e., neither “C” nor “V” had paid anything for the house). Moreover, the evidence demonstrated that the applicant had made the transfer only to facilitate the action for partition and sale.