Today’s blog was written by Jonathon Vander Zee, student-at-law at de VRIES LITIGATION LLP

What happens when the right of survivorship in a property is gifted, but the donor then severs the joint tenancy of that same property? This was exactly the case in Jackson v. Rosenberg, 2023 ONSC 4403. The answer is quite riveting: the severance of the joint tenancy only eliminated the right of survivorship in the donor’s interest in the property, while the right of survivorship in the donee’s interest remained.

Facts

The applicant and his partner were in a romantic relationship for over 50 years. On November 2, 2005, the applicant and his partner signed mirror wills in which they left each other their estate and named the respondent, who was the partner’s great-niece, as the alternate beneficiary. The applicant’s partner died in 2010, leaving his estate to the applicant. However, the estate was minimal as most assets were jointly owned. The applicant and his partner also jointly owned a condo in Yorkville (the “Yorkville Condo”) that was never part of the partner’s estate, but which passed to the applicant through the right of survivorship.

In 2011, the applicant sold the Yorkville Condo and purchased a new property for which he was sole registered owner (the “Port Hope Property”). Early in 2012, the applicant then transferred the Port Hope Property to himself and the respondent as joint tenants with the right of survivorship. It was a gratuitous transfer to the respondent. The applicant and the respondent signed an Acknowledgment and Direction to allow the applicant’s lawyer to transfer the Port Hope Property. The document read as follows:

We further instruct you to effect such Transfer as a GIFT on the basis that no consideration is passing between the parties in any manner whatsoever.

In the court application, the applicant explained that he added the respondent as a joint tenant so that the Port Hope Property would pass to her by right of survivorship when he dies and without the respondent having to pay probate fees. He had no intention of the respondent receiving the Port Hope Property before his death.

Things went awry when, in August 2020, the respondent and her husband went to visit the applicant. The respondent’s husband told the applicant that they planned to renovate and sell the Port Hope Property with plans to purchase a new property where the applicant, the respondent, and her husband could live together. This plan horrified the applicant and he became worried that he might be forced out of his home. As a result of that conversation, the applicant severed the joint tenancy.

The respondent argued that the severance by the applicant was a breach of his fiduciary duty as trustee of the property and that it was also a breach of contract between the applicant and the respondent’s great uncle. The latter argument was premised on the respondent’s claim that the mirror wills were in fact mutual wills.

The respondent took the position that her interest in the Port Hope Property was gifted to her by the applicant and that the gift could not be revoked. However, the applicant argued that the transfer was not a gift but a resulting trust with beneficial ownership being retained by the applicant alone.

A Gift or Resulting Trust?

The court found that the joint tenancy created by the applicant was a gratuitous transfer to the respondent, and the presumption of a resulting trust applied. The respondent had to demonstrate that the transfer was intended as a gift by establishing that there was (1) an intention to make a gift on the part of the donor, without consideration or expectation of remuneration; (2) an acceptance of the gift by the donee; and (3) a sufficient act of delivery or transfer of the property to complete the transaction, in order to establish a gift.[i]

The last two steps were easily satisfied, and the focus was on the applicant’s intention. When inquiring about the applicant’s intention, the court emphasized that it was the intention of the applicant at the time of the transfer, and the object was to “weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention”.[ii] The wording of the Acknowledgment and Direction signed at the time of the transfer was evidence in favour that the transfer was a gift to the respondent. However, the court found that it was a gift that was not intended to take effect until after the applicant’s death. Further, the transfer was done to avoid probate fees and estate administrative taxes when the applicant died, which was consistent with the applicant’s will in which the respondent was the sole beneficiary. Therefore, the court found that the applicant’s intention at the time of the transfer was to gift the right of survivorship in the Port Hope Property to the respondent. What the respondent will actually receive after the applicant’s death is whatever is remaining in the equity in the Port Hope Property.

Although the applicant did not intend the gift to take effect while he was alive, the court concluded that this did not change the fact that the gift of the right of survivorship was an inter vivos and immediate gift. The presumption of a resulting trust had been partially rebutted because while it was the applicant’s intention that the respondent hold her interest in the property in trust for him during his lifetime, it was also his intention that the respondent would receive the property through the right of survivorship should he predecease her.

The Applicant’s Right to Sever of Joint Tenancy

The court accepted that an inter vivos transfer of the right of survivorship in a property “was properly characterized as a gift, even though there was a possibility that severance of the joint tenancy could rob the gift of any value”.[iii]  The applicant could not revoke his gift of the right of survivorship to the respondent, but until he died, he was still able to manage the property in any way he saw fit. This included severing the joint tenancy, which the applicant accomplished by transferring his share in the joint tenancy back to himself in September 2020.

Conclusion

The court held that the applicant intended to gift the right of survivorship in the Port Hope Property to the respondent. The applicant did not intend for the respondent to have any beneficial interest in the Port Hope Property until he died, at which time she would receive the remaining equity in the Port Hope Property. The court held that the applicant could not revoke the gift of the right of survivorship to the respondent. However, when the applicant severed the joint tenancy, only the applicant’s 50% interest was affected, and respondent’s 50% interest in the Port Hope Property was left unaffected. On the death of the applicant, the respondent’s 50% interest will pass to her by right of survivorship while the applicant’s 50% interest will pass to his estate. Until the applicant’s death, the respondent holds her 50% interest on a resulting trust in favour of the applicant. While the applicant is alive, he retains all remaining rights and interests in the Port Hope Property and is free to encumber or sell it.

[i] McNamee v. McNamee, 2011 ONCA 533, para 24.

[ii] Pecore v. Pecore, 2007 SCC 17, para 44.

[iii] McKendry v. McKendry, 2017 BCCA 48, paras 28-30.