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JOINT ASSET DISPUTES: HOW TO GET TO COURT
AND THE EVIDENCE NEEDED TO BUILD A CASE
by Wendy Griesdorf
Estate Litigation Counsel
Professional Corporation
September, 2007
Gratuitous transfers of assets into joint names are becoming a practical reality as society
ages and as elder parents are needing more assistance from their adult children in
handling their finances. Transfers into joint tenancies are also becoming a common place
method to avoid probate taxes. In cases where there is no beneficial transfer of
ownership but the child’s name is added for administrative convenience or probate
planning, then on the death of the parent, the child holds the joint asset by survivorship
on a resulting trust in favour of the parent’s estate. In law, there is a presumption that
such a transfer into joint names is made on a resulting trust because of the age-old
position that “equity assumes bargains, not gifts” (Pecore, infra, at par. 24)
Disputes relating to these types of joint assets may come before the court through several
avenues. To ascertain the best course for relief, you need to understand who your client
is in relation to the disputed asset and who the proposed defendant/respondent is in
relation to the transferor.
The three broad options are as follows: (1) to commence an action by statement of claim
either under Rule 14 or by the simplified procedure under Rule 76; (2) where the disputed
joint asset is real property, to apply by notice of application under Rule 14.05(3)(e) for a
declaration in an interest in land; or, (3) to compel a passing of accounts under Rule 74.
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Statement of Claim
Where your client is an estate, by its estate trustee, then commencing an action by
statement of claim may be your best and most straightforward vehicle for claiming a
resulting trust against the recipient by survivorship of the deceased’s joint asset. If you
know the value of the joint asset, then you may claim the specific amount in damages in
addition to requesting a declaration that the defendant is holding the joint asset on a
resulting trust for the benefit of the estate. However, in most cases, the date of death
value of the joint asset is unknown when the claim is issued and so your requested relief
will be a declaration of trust with a request for a determination of the value plus interest.
Notice of Application
If the joint asset in dispute is land, then you may wish to bring the matter before the court
by way of a notice of application pursuant to Rule 14.05(3)(e) for a “declaration of an
interest in or charge on land, including the nature and extent of the interest or charge …”.
However, where there are material facts in dispute, which in almost all cases there are in
these types of suits, then the matter will not be able to proceed by a hearing but rather an
interlocutory court will have to grant an order giving directions to a trial of the issue so
that viva voce evidence may be called.
Passing of Accounts
Where the transferee or recipient of the joint asset by right of survivorship is an estate
trustee of the deceased transferor’s estate, and where your client is a disappointed
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beneficiary of that estate having expected the joint asset to be included in the value of the
estate, then your best forum to bring this matter before a court is a passing of accounts
under Rule 74. This way your client can assess the entire activity of the estate’s finances
and frame all of his or her objections to the estate trustee’s dealings as one matter before
the court. When the joint asset does not appear in the accounting because it passed
outside the estate by right of survivorship, your notice of objection to the accounts will
include a demand that the asset be included in the statement of original assets on a
resulting trust basis. A passing of accounts in this manner is also available where the
transferee or recipient of the joint asset was a power of attorney for the deceased
transferor while alive.
Jurisdiction for an audit judge on a passing of accounts to scrutinize a transfer of an asset
into joint names with an attorney or an estate trustee arises from the Estates Act Sections
49(2) and (3) which authorize an audit judge to review the whole of the deceased’s
property and make inquiries into any claim of misconduct or default on the part of the
estate trustee or attorney. Specifically, Sections 49(2) and (3) read as follows:
49(2) The judge, on passing of accounts of an executor, administrator or
trustee under a will of which the trustee is an executor, has jurisdiction to
enter into and make full inquiry and accounting of and concerning the
whole property that the deceased was possessed of or entitled to, and its
administration and disbursement.
(3) The judge, on passing any accounts under this section, has power to
inquire into any complaint or claim by any person interested in the taking
of the accounts of misconduct, neglect, or default on the part of the
executor, administrator or trustee occasioning financial loss to the estate or
trust fund, and the judge, on proof of such claim, may order the executor,
administrator or trustee, to pay such sum by way of damages or otherwise
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as the judge considers proper and just to the estate or trust fund, but any
order made under this subsection is subject to appeal.
Section 49(4) authorizes the court to make an order giving directions to a trial of the issue
so that viva voce evidence of the deceased’s intention made be called and adjudicated.
Evidence of Intention
This spring, the Supreme Court of Canada released two decisions that have an impact on
the estates bar. These cases, Pecore v. Pecore (2007) CarswellOnt 2752 (SCC) and
Madsen Estate v. Saylor (2007) CarswellOnt 2754 (SCC), attempt to shed light on the
issue of ownership of joint accounts following the death of one of the account holders.
Unfortunately, when read together, these decisions appear to provide conflicting
conclusions about the evidence needed to establish the intention of the transferor and
have the effect of muddying the waters for practitioners who need to advise clients on
their likelihood of success when considering challenging joint asset transfers.
In Pecore, a deceased father transferred the bulk of his assets into a joint account with his
daughter who was one of three children. The daughter did not make any contribution to
the accounts but rather the father controlled the accounts, paid taxes on the income
earned on the assets, and even wrote a letter to the bank declaring that the transfer into
joint tenancy in favour of his daughter was not a gift to his daughter but rather that he
retained ownership of the assets. The claim in Pecore was brought by the daughter’s
husband, from whom the daughter was divorced but who was a residuary beneficiary in
equal shares with his ex-wife under his ex-father-in-law’s will. He claimed that his exwife held the joint assets in trust for her father’s estate to be distributed equally to them
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as residuary beneficiaries. The trial judge found that the joint assets were gifted to the
daughter and therefore did not form part of the father’s estate. The daughter’s exhusband appealed to the Ontario Court of Appeal, where the appeal was dismissed. He
then appealed to the Supreme Court of Canada, where his appeal was dismissed yet
again.
In Madsen Estate v. Saylor, the deceased, also a father, opened a joint account with one
of his daughters. Like Pecore, the funds in the account came entirely from the father who
maintained control of the account during his lifetime, and the account was used solely for
his benefit during his life. As in Pecore, the father paid all taxes on the income earned.
In Madsen, it was the daughter’s siblings who claimed that the funds in the account
formed part of the deceased’s estate on a resulting trust basis. In Madsen, the trial judge
applied the presumption of resulting trust and found that indeed the daughter held the
funds in trust for her and her siblings as equal residuary beneficiaries of the estate. The
trial judge concluded that the presumption of advancement should be abandoned except
in the most limited circumstances. As with Pecore, there was an appeal to the Court of
Appeal, and then to the Supreme Court of Canada. Both appeals were dismissed.
The focus for all the courts in both cases was the relevance and applicability of the
competing presumption trust and presumption of advancement, including how and in
what circumstances these presumptions were to be applied. In both cases, the majority
for the Supreme Court of Canada clarified the role of the presumptions, preferring the
presumption of resulting trust and limiting the presumption of advancement to transfers
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from parents to minor children with a significant dissenting opinion in both cases by
Abella J. As articulated by Rothstein J. for the majority, “… the long-standing common
law presumptions continue to have a role in disputes over gratuitous transfers. The
presumptions provide a guide for courts in resolving disputes over transfers where
evidence as to the transferor’s intent in making the transfer is unavailable or unpersuasive
(Pecore at par. 23).”
Most important to remember is that this presumptions are rebuttable on a balance of
probabilities (Pecore at par. 43) by evidence showing the transferor’s actual intention.
This evidence of intention may include the wording of the banking documents, who
accessed and used the funds in the account, whether there was a power of attorney
granted, who paid the tax on the assets, and conversations the deceased had with third
parties or advisors such as accountants, bankers, or lawyers. In addition, dependency of a
child on the parent may be considered in rebutting the presumption of resulting trust but
is not to be considered in the application of the presumption of advancement where the
child is an adult.
In both cases, the court emphasized that the focus of the inquiry is on the actual intention
of the transferor and that the presumption is to be applied when the evidence of intention
is unavailable or unpersuasive. In both cases, the court found evidence that the two
fathers maintained control over the assets, that these fathers used the joint assets solely
for their benefit during their lives, and that these fathers declared and paid all taxes on the
assets. Nevertheless, in Madsen the court held that the presumption of resulting trust was
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not rebutted on this evidence but in Pecore, the same evidence was used to conclude that
the presumption of resulting trust was in fact rebutted. Somewhat more surprising, in
Pecore, the court held that the transfer was a gift to the daughter despite a letter the father
wrote to the bank stating that the transfer of the assets into his daughter’s name jointly
was not a gift and that he remained the sole beneficial owner of the assets.
This seemingly contradictory application of the evidence of intention between the two
cases leads to the question whether these decisions are most result oriented than logically
reasoned. Both decisions emphasize that each case turns on its facts but it is little help to
practitioners in advising clients if the same facts lead to different conclusions.
Rather, if we look at the “equities” of the cases, and particularly the relationship between
the disputing parties, we may learn more about the application the presumption of
resulting trust and the likelihood of success at court. In Madsen, the dispute was between
siblings. In this light, it makes logical sense to apply a resulting trust if there was no
evidence that the father loved the transferee of the joint assets any differently than her
other siblings. However, in Pecore, the dispute was between a child of the transferor and
an ex-son-in-law. By holding that the presumption of resulting trust was rebutted on the
evidence in Pecore, the effect of the court’s decision was that the joint asset would stay
“within the family”. Therefore, I suggest that it is helpful in taking on these joint asset
cases to determine your client’s likelihood of success by looking both at the evidence as
well as the sibling relationship between the parties. If there is no evidence of
estrangement between the parent and any of the siblings, then it may be difficult to rebut
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a presumption of resulting trust where the will treats the siblings as equal beneficiaries.
Arguably, the testamentary instructions of an equal division among siblings could be
used as evidence to rebut the presumption of resulting trust.
Presumption of Undue Influence
Not discussed in either Madsen or Pecore, was the presumption of undue influence
articulated in the 1991 Supreme Court of Canada case Geffen v. Goodman Estate (1991)
81 DLR (4th) 211 (SCC). This presumption arises when a fiduciary accepts an inter vivos
gift from a donee and may apply to situations where an aging parent makes a gratuitous
transfer of an asset into joint names with a child who is caregiving for that parent and/or
who is acting on a power of attorney for that parent. In Geffen, the court explained that it
is concerned with “relationships of dependency” (at page 227) and therefore “the process
leading upto the gifting should be subject to the judicial scrutiny because there is
something so completely repugnant about the judicial enforcement of coerced or
fraudulently induced generosity” (at page 226). The overall concern for the court is that
the “acts of beneficence not be tainted” (at page 228) and therefore, the presumption of
undue influence will be triggered simply on the “establishment of the presence of a
dominant relationship” (at page 228).
Fraudulent Conveyance Act
Less frequent but relevant to this discussion are cases where a gratuitous transfer of assets
into joint names has the effect of diminishing the estate such that creditor claims may be
defeated. In such a situation, the Fraudulent Conveyance Act may apply if it can be
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established that the intention of the transfer into joint tenancy was made to defeat
creditors of the transferor’s estate. In such circumstances, even if there is evidence of an
intention to gift the joint asset such that the presumption of resulting trust may be
rebutted, a resulting trust may nevertheless be declared on the basis that there was also an
intention contrary to Section 2 of the FCA to defeat a creditor of the estate.
It is worthwhile noting as well that the Court of Appeal decision in Stone v. Stone (2001)
CarswellOnt 2781 (CA) held that spouses may meet the definition of “creditors or others”
under the FCA where transfers to children of assets are designed to defeat a spouse’s
equalization right. In Stone the transfer of assets to the children from a first marriage of a
dying father were outright transfers and not into joint tenancy. Nevertheless, gratuitous
transfers made from an aging parent to children of a first marriage into joint names may
be held to be a fraudulent conveyance if the intention of that transfer was to defeat the
equalization rights of a second spouse.