Severing A Joint Tenancy by Course of Dealing

A case review of Marley v.Salga¹

One of the most important features of a joint tenancy² is the right of survivorship.³ The right of survivorship means that when one of the owners dies, his or her interest in the property passes to the other named owner.  To avoid this result and have an ownership interest pass to an estate, the joint tenancy must be severed so that each ownership interest is converted to a tenancy in common.⁴

The Rules for severing a joint tenancy were summarized by Chief Justice Winkler of the Court of Appeal for Ontario at paragraph 34 of Hansen Estate v. Hansen:

The three modes of severance referred to in Williams v. Hensman⁵ have come to be known as the “three rules” . . . [which] may be summarized as follows:

Rule 1: unilaterally acting on one’s own share, such as selling or encumbering it;

Rule 2: a mutual agreement between the co-owners to sever the joint tenancy; and

Rule 3: any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.⁶

Rule 3

The Hansen case reviewed the constituent elements of Rule 3 referred to above.⁷ Paras. 7,  35 and 36 succinctly summarize the Court of Appeal’s position on Rule 3 as follows:

7. A proper application of the course of dealing test for severing a joint tenancy requires the court to discern whether the parties intended to mutually treat their interests in the property as constituting a tenancy in common. It is not essential that the party requesting a severance establish that the co-owners’ conduct falls into a formulation found to have had the effect of severing a joint tenancy in other cases. The court’s inquiry cannot be limited to matching fact patterns to those in prior cases. Rather, the court must look to the co-owners’ entire course of conduct – in other words the totality of the evidence – in order to determine if they intended that their interests were mutually treated as constituting a tenancy in common. This evidence may manifest itself in different ways. Each case is idiosyncratic and will turn on its own facts.

35…Rule 3 operates so as to prevent a party from asserting a right of survivorship where doing so would not do justice between the parties….the best way to regard matters is to say that equity will intervene to estop the parties, because of their conduct, from attempting to assert a right of survivorship. What is determinative under this rule is the expression of intention by the co-owners as evidenced by their conduct:..

36. Rule 3 governs cases where there is no explicit agreement between the co-owners to sever a joint tenancy. In contrast, rule 2 is engaged where a mutual agreement to sever is claimed to exist. This distinction between rule 2 and rule 3 is significant. What follows from this distinction is that the proof of intention contemplated by rule 3 does not require proof of an explicit intention, communicated by each owner to the other(s), to sever the joint tenancy. If such proof were required, then rule 3 would be rendered redundant because a communicated common intention would be tantamount to an agreement. Instead, the mutuality for the purposes of rule 3 is to be inferred from the course of dealing between the parties and does not require evidence of an agreement.

Subsequent to the Hansen case there were a number cases that analyzed Rule 3. The following principles can be gleaned from the decisions:

In 2016, in MacNeil Estate v. Bower,⁸ Justice Pattillo of the Ontario Superior Court of Justice indicated that the onus of proof rests on the party asserting the severance.

In 2017, the Court of Appeal in Jansen v. Niels Estate, ⁹ stated:

In short, Hansen requires a court to determine, having regard to all of the evidence, whether the parties intended to treat their interests as constituting a tenancy in common. This is a fact-specific inquiry that is subject to deference on appeal.

On June 6, 2019, Justice Reid released reasons in the Marley case.  This decision is not only relevant in its analysis of Rule 3, it also addresses the type of evidence a court will consider when determining if the joint tenants’ course of dealing was sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.

The Marley Case

The facts in Marley are as follows: Leslie divorced his first wife and married Karen in 1999.  From his first marriage he had three children – Suzanne, Michelle and Andrew.  On July 29, 2015, Lesley made a new will. He passed away on August 28 of the same year.  The Will provided a life interest to Karen of his “one-half interest” in 28 Loretta Drive, Niagara-on-The Lake Ontario (“28 Lorretta Drive”).  After Karen’s demise, 29 Loretta would fall into residue and be inherited by his daughters Suzanne and Michelle.

For the purpose of this blog we are focusing on the joint tenancy issue dealt with by the court – which was whether the joint tenancy was severed such that Leslie and Karen held the property as tenants in common at the date of his death.

Suzanne and Michelle took the position, as residuary beneficiaries of their father’s estate, that they were entitled to a 50% interest in 28 Loretta Drive.  Their father’s widow, Karen, claimed that she was the sole legal owner because she and her late husband owned the property as joint tenants. She therefore argued that upon his demise his interest was transferred to her by right of survivorship.

No change was made to title during the lifetime of the deceased.  On title, Leslie and Karen were listed as owning the property as joint tenants.  The court reviewed the Hansen case and determined that the mode of severance, if any, was “a course of dealing” under Rule 3.

There are a number of interesting aspects to this decision.  We will focus on the evidence considered by the court as well as its analysis of “a course of dealing”.

The Evidence Considered by the Court

The Court of Appeal in Hansen indicated that courts need to consider the “totality of evidence so as to discern whether the parties shared a common intention to treat their interest in the property as constituting a tenancy in common. Was there communication or conduct to support the inference that the parties shared that common intention?”.¹⁰ There were two key pieces of evidence in this case, the Will and a recorded conversation.

The Will clearly demonstrated that Leslie believed his 50% interest was his to bequeath.  Otherwise, he would not have given a life interest in it to his wife.  But, that only showed his belief.  The Will was evidence that he and his wife had that common intention.¹¹ It was the recorded conversation that made the difference.¹²

During the latter stages of his illness, Suzanne recorded a conversation between her father and his wife.  It demonstrated that Leslie and Karen had a common intention to treat their interests in 28 Loretta Drive as tenants in common not joint tenants.  It ended with the following exchange:

Karen: Yes, it is a deal. And I told the girls many, many times Lasco, I’m not cheating them of anything. (Inaudible) and they get 50 percent of-, I said, if it wasn’t for the will, and me forcing your dad to go and sign the will, you girls would have only gotten a quarter of that.

Leslie: Yeah.

Karen: I said, I went and got you the whole 50 percent.

Leslie: Yeah.

Karen: Okay? They got the whole 50 percent minus my expenses, of course.

The judge acknowledged that the recording may have been made surreptitiously, but still considered it as evidence.  This is the court’s explanation of why it did so:

It may well be that Suzanne Salga made the recording surreptitiously. She is alleged to have done that from time to time and she had a clear ongoing concern about the personal and financial relationship between her father and Ms. Marley. However, the unauthorized recording of a conversation does not make the evidence inadmissible, regardless of whether it was legal to do so. Therefore, I will consider it as part of the evidence of a course of dealing as a whole (emphasis added)¹³.

The Course of Dealing

The judge concluded:

 “I am satisfied that there was a course of dealing on the part of Mr. Salga in which Ms. Marley shared sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. I come to that conclusion based on the totality of the evidence, including both the positive evidence offered by the Salga applicants and the equivocal denials made by Ms. Marley to which I have referred.”¹⁴

We have referred to a portion of the recording above.  The full transcript is included in the footnotes.  At one point in the conversation Leslie says “deal Karen?”  She replies “Yes, it is a deal”.  Query why this did not fall under Rule 2.  Would this not have been evidence that the parties made an agreement to sever the joint tenancy?

Conclusion

This case is a reminder that estate litigation is a nuanced area of the law.  When considering whether a joint tenancy was actually severed courts may consider evidence that might surprise you.  In this case, in an effort to review the “totality of evidence” the judge considered a recording that may have been made surreptitiously, but nonetheless was evidence of the parties’ intentions. Also considered were three affidavits that were hearsay.  The judge accepted the hearsay evidence under the principled approach to hearsay exceptions based on the requirements of necessity and threshold reliability being met.¹⁵  When litigating a case such as this, parties and their lawyers are well advised to carefully review all evidence and potential evidence, as well as the legal principles involved.