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Joint Accounts – Rebutting the Presumption of a Resulting Trust

Two people own a bank account in joint tenancy. In the ordinary course, when a joint tenant dies, the surviving joint tenant is entitled to the deceased’s share1. Does this situation change because it is an elderly parent and child? Maybe.

In Canada our courts have considered the social reality that it is dangerous to presume that the elderly parent is making a gift each time he or she puts the name of the assisting child on an asset. Often the ageing parent just wants his/her child to help manage that parent’s affairs. So while the account is technically a joint account, what that parent intended was that the child would take that money from the joint account in accordance with that parent’s will. This issue was addressed by the Supreme Court of Canada in Pecore v Pecore2(“Pecore”).

The purpose of this blog is to review the recent case of Swiderski v Wash3(Swiderksi) and see how one Ontario Superior Court judge decided that issue based on its understanding of the Supreme Court of Canada’s decision in Pecore. To really understand Swiderski we have to start with some background.

As people age they often transfer assets to their children. Sometimes it’s meant to be a gift (a “gratuitous transfer”) and sometimes it’s not. When deciding whether to treat the transfer as a gift or a trust, the courts want to carry out the intention of the deceased4. Elderly people in Ontario often make their bank accounts joint with an adult child. Sometimes it’s because they want to make a gift and use the bank account as a vehicle for that gift, while at other times they need their child’s name on the bank account so that the child can help pay the bills. In the ordinary course when there is a jointly held asset and one of the owners died the survivor is legally entitled to 100% of that asset by right of survivorship. Sometimes, the elderly parent has no intention to make any free gift. The only reason for making the bank account joint is for that child to help the parent manage finances. Obviously, the dead person cannot come to the stand and give testimony about their intention. So what happens when there is no evidence or equally compelling conflicting evidence of that parent’s intention? The answer is that the court relies on a rebuttable presumption. What are those? This is how the Supreme Court of Canada defined it in Pecore,

“A rebuttable presumption of law is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption. The presumption shifts the burden of persuasion to the opposing party who must rebut the presumption.”

In common law there were two presumptions relevant to this discussion. One is the presumption of advancement. As explained in paragraph 21 of Pecore,

“Advancement is a gift during the transferor’s lifetime to a transferee who, by marriage or parent-child relationship, is financially dependent on the transferor: see Waters’ Law of Trusts, at p. 378. In the context of the parent-child relationship, the term has also been used because “the father was under a moral duty to advance his children in the world”: A.H. Oosterhoff et al., Oosterhoff on Trusts: Text, Commentary and Materials (6th ed. 2004), at p. 573 (emphasis added).”

It is beyond the scope of this article to fully address the history of this presumption and the applicability to adult children. Suffice to say that the Supreme Court decision in Pecore accepted that in certain circumstances, when a gift is made there is a gratuitous transfer from a parent to a child, and the presumption of advancement will apply.5

The second presumption relevant to this discussion is the presumption of a resulting trust.

In one case called McLear6 a judge of Ontario’s Superior Court explained it this way:

“Given these social conditions, it seems to me that it is dangerous to presume that the elderly parent is making a gift each time he or she puts the name of the assisting child on an asset. The presumption that accords with this social reality is that the child is holding the property in trust for the ageing parent, to facilitate the free and efficient management of that parent’s affairs. The presumption that accords with this social reality is, in other words, the presumption of resulting trust.”

So which presumption applies when an elderly person and one of his/her children holds as asset jointly, and there is insufficient evidence to determine whether the deceased intended for that asset to be held in trust or to be a gift?

In summary, the majority of the Supreme Court in Pecore held:

  • The presumption of advancement does not apply to gratuitous transfers by parents to independent adult children.
  • The presumption of resulting trust applies when adult children receive an asset gratuitously.
  • The presumption is rebuttable and the onus is on the transferee to demonstrate that a gift was intended.
  • The appropriate standard of proof is the civil standard of a balance of probabilities;
  • The evidence regarding the transferor’s intention when opening a joint account depends on the facts of each case, but may include bank documents, the control and use of account funds, the granting of a power of attorney by the transferor to the transferee and the tax treatment of such accounts. Also, the court may consider evidence arising subsequent to the transfer if it is relevant to the intention of the transferor at the time of the transfer.

So now we have the background to take a look at Swiderski. In this case two children were fighting over their mother’s money. The mother’s name was Stella. Richard was her oldest and Carol was her youngest. In her last will and testament, Stella named Carol as her executrix and divided the residue equally between her two children. Sometime after Stella made her will, she opened two bank accounts with the Royal Bank of Canada in the joint names of Stella and Carol. Richard was not included. According to Pecore, the presumption of a resulting trust applied. But, remember – it is a rebuttable presumption.

The judge in Swiderski, based on Pecore, concluded that the common law presumption of a resulting trust applied. He noted that the burden was on Carol to rebut that presumption. She had to do so on “a balance of probabilities”. What does that mean? There does not seem to be any precise formula. Both judges and academics use terms like “preponderance of evidence” or a version of the facts that was “… more likely than not to have been true”7. To apply a common baseball saying – “a tie goes to the runner”- to these circumstances, then a tie goes to the presumption. How much evidence is needed to overcome the presumption? It seems just enough so that there is not a tie.

Just like in Pecore, the judge in Swiderski pointed out that pursuant to section 13 of the Evidence Act, R.S.O. 1990, c. E.23 there must be corroborative evidence. Section 13 states,

“In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.” (emphasis added)

Brian Schnurr, a senior member of the estates bar and prolific author, noted that in these circumstances

“Corroborative evidence must be material evidence independent of the interested party. It need not corroborate every detail of the case or even the essential portion of the evidence. However, in applying s. 13, it has been held that “the court should always have present to its mind the danger of relying too implicitly upon the evidence of the living in establishing a claim against the dead.” Accordingly, bold assertions of the parties, when the transferor is deceased, are likely insufficient to overcome the presumption.”8 (emphasis added)

In Swiderski the judge found that there was sufficient evidence, on the balance of probabilities, to rebut the presumption of a resulting trust. I must say that in reviewing the case, I was underwhelmed with the evidence that tipped the balance of probabilities in favour of Carol and that, on the balance of probabilities, rebutted the presumption of the resulting trust. Let’s review the evidence relied upon by the judge:

  • The accounts were held jointly for 25 years. This undisputed fact demonstrated certainty of intention and presumably showed that it was not a matter of Stella needing Carol’s help to manage her finances because Stella did not need help over 25 years ago.
  • Carol (not Richard) was named as both the executor and as the power of attorney for property. Not only was Carol named as executor, but her husband was named as the alternate executor – not Richard. The judge commented that both these factors “tends to militate against the conclusions that Stella intended to treat her children equally.”
  • In her RRIF Stella named her daughter as beneficiary.

There was no smoking gun in this case – No single piece of evidence that conclusively and strongly rebutted the presumption of a resulting trust. In this judge’s view, there did not have to be. Based on Pecore one only needed sufficient corroborative evidence, on the balance of probabilities, to successfully rebut the presumption of a resulting trust.

My takeaway from Swiderski is that notwithstanding the presumption of a resulting trust, the litigant who is challenging the joint tenancy must lead trump. It can be a huge mistake to only rely on the difficulty an adverse party may have in garnering sufficient evidence to rebut the presumption of a resulting trust and ensuring that the evidence complies with section 13 of the Evidence Act, R.S.O. 1990, c. E.23. After all, as Swiderski shows (and to use another baseball analogy), sometimes it does not require a homerun to tip the balance and rebut the presumption.

Footnotes
  1.   Widdifield on Executors and Trustees, 6th Ed. Defines Joint Tenancy as follows:

    “A joint tenancy is distinguished by what are known as four unities: (1) unity of title, the co-owners take under the same instrument; (2) unity of interest, the co-owners take an equivalent interest; (3) unity of possession; and (4) unity of time, the interest of all the co-owners vests at the same time. Joint tenants have identical undivided interests in the same property. Each joint tenant holds “totum tenet et nihil tenet” or “per mie et per tout” which means each holds everything and yet holds nothing. The most important feature of a joint tenancy is the jus accrescendi, the right of survivorship. When a joint tenant dies, unless he or she is the last surviving owner, his or her share accrues to the other co-owners . . . A joint tenancy can be converted into a tenancy in common.” (Per Perell, J. at paras. 23 and 25.): Royal & Sun Alliance Insurance Co. v. Muir, 2011 ONSC 2273, 2011 CarswellOnt 6852 (Ont. S.C.J.).

    “The two distinguishing features of a joint tenancy are the right of survivorship and the four unities of title, interest, possession and time.” (Per Wright, J. at p. 103 (W.W.R.).)

    Tessier Estate v. Tessier, (2002) 1 W.W.R. 98, 2001 CarswellSask 551, 2001 SKQB 399, 44 R.P.R. (3d) 126, 211 Sask. R. 50 (Sask. Q.B.).

    “A joint tenancy arises by the act of the person who creates the estate (in this case the testator). It is distinguished by what are known as the four unities: unity of title, unity of interest, unity of possession and unity of time. The defining essential of a joint tenancy is the right of survivorship.” (Per Glennie, J. at pp. 7-8 (R.P.R. (3d)).)

    Winchester v. McCullough (2000), 30 R.P.R. (3d) 5, 31 E.T.R. (2d) 321 (N.B. Q.B.).
     

  2.   2007 CarswellOnt 2752, 2007 CarswellOnt 2753, 2007 SCC 17, (2007) 1 S.C.R. 795, (2007) W.D.F.L. 1902, (2007) S.C.J. No. 17, 156 A.C.W.S. (3d) 502, 224 O.A.C. 330, 279 D.L.R. (4th) 513, 32 E.T.R. (3d) 1, 361 N.R. 1, 37 R.F.L. (6th) 237, J.E. 2007-874.
     
  3.   2015 ONSC 3443
     
  4.   See paragraph 5 of Pecore.
     
  5.   See paragraph 22 of Pecore.
     
  6.   See paragraph 41 in McLear v. McLear Estate 2000 CarswellOnt 2410, (2000) O.J. No. 2570, (2000) O.T.C. 505, 33 E.T.R. (2d) 272, 98 A.C.W.S. (3d) 243.
     
  7.   See paragraphs 115- 120 in Canadian Encyclopedic Digest, Evidence, II — Burdens of Proof and Presumptions, 2 — Legal Burden of Proof (c) — Ultimate Burden of Proof.
     
  8.   Schnurr, Estate Litigation, 2nd Ed.26 — Challenging “Joint With Right Of Survivorship” Entitlement
     

Charles Wagner

The author of this blog is Charles B. Wagner. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.

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