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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.

Footnotes
  1.  Marley v. Salga, 2019 ONSC 3527, 2019 CarswellOnt 9115, 306 A.C.W.S. (3d) 311, 47 E.T.R. (4th) 265 (“Marley”)
     
  2.   For definitions of joint tenancy see Widdifield on Executors and Trustees, 6th Edition, 18 — WORDS AND PHRASES, Contributing Editor: Ian Hull, Editor: Carmen S. Thériault.  Here is one definition provided:

     “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 & SunAlliance Insurance Co. v. Muir, 2011 ONSC 2273, 2011 CarswellOnt 6852 (Ont. S.C.J.).
     

  3.   See FN 1.
     
  4.   For a definition of “tenancy in common” see section 169.6 of “Estate Litigation Words and Phrases” Brian A. Schnurr

    Under a tenancy in common, the co-owners are called tenants in common. The only unity is the unity of possession. The distribution of ownership of tenants in common need not be equal. In other words, one tenant in common might have a 75% interest over the whole and the other co-tenant would have a 25% interest over the whole. The interest of each is “undivided” in the sense that it is an ownership in all of the property.” (Per Perell, J. at para. 24.): Royal & SunAlliance Insurance Co. v. Muir, 2011 ONSC 2273, 2011 CarswellOnt 6852 (Ont. S.C.J.).
     

  5.   Williams v. Hensman (1861), 70 E.R. 862 (Eng. V.-C.), at p. 867:
     
  6.   Hansen Estate v. Hansen (2012), 2012 ONCA 112, 2012 CarswellOnt 2051, 75 E.T.R. (3d) 19, 109 O.R. (3d) 241, 9 R.F.L. (7th) 251, 16 R.P.R. (5th) 1, 288 O.A.C. 116, 347 D.L.R. (4th) 491 (Ont. C.A.) (“Hansen”)
     
  7.   For a fuller analysis of the Hansen case see

    • WeirFoulds Estates & Trusts Newsletter, EST. L. Nws. 2012-05
    • Phil Epstein, Epstein’s This Week in Family Law, Fam. L. Nws. 2019-30
    • Under what circumstances will a joint tenancy of property, CARS2MEMO-ONM,


     

  8.   2016 ONSC 6644, 2016 CarswellOnt 18160, (2017) W.D.F.L. 219, (2017) W.D.F.L. 221
     
  9.   See paragraph 34 of Jansen v. Niels Estate, 2017 ONCA 312, 2017 CarswellOnt 5545, 137 O.R. (3d) 709, 278 A.C.W.S. (3d) 418
     
  10.   This was set out in paragraph 7 of Hansen and paragraph 23 of Marley.
     
  11.   See paragraph 40 of Marley:

    The substance of the conversation makes clear reference to the terms of a will in which Ms. Marley was to receive a life interest in the Loretta Drive property. She also clearly indicates her understanding that the estate will receive the remaining half interest in the property at the end of the life interest. Both Ms. Marley and Mr. Salga indicated an expectation of a 50-50 sharing of the property proceeds in due course. Ms. Marley seems to take some credit for encouraging preparation of the will, the terms of which benefited the Salga applicants. Ms. Marley does not deny the content of the conversation as recorded. In my view, even if she and Mr. Salga were trying to appease the Salga applicants as alleged, their mutual intention appears clear.
     

  12.   See paragraph 37.  The judge included a transcript of the recording which clearly showed Leslie and his wife discussing what would happen with the property after his demise.  It was clear that they agreed she would have a life interest.

    37      I have listened carefully to the audio recording of the conversation. In general, it reflects concerns on the part of Ms. Marley that Mr. Salga’s daughters were attempting to minimize her personal and financial connection with Mr. Salga. As to his will and the disposition of the house, the conversation was transcribed as follows:

    Karen: Okay. The will is already done, Lasco. It says right in the will. Whe-, I can stay in the house, uh, as long as I want with all the contents. And at the time that I can’t keep it up anymore and it gets sold, or I die, then your 50 percent of the house goes-, and whatever-, goes to the estate. Minus all exp-, your expenses. But in mine, mi-, mine’s all my expenses of my side. And what’s ever left on your side gets divided between the girls. That’s simply what it (inaudible), Lasco, and I have no problems (inaudible). If I had not tried to get you to get the will done, if you had died without a will, the girls would only have gotten a quarter of that, and I wanted them to get what you’re saying.

    Leslie: Yeah, okay, so, so, so the fact is, the fact is . . .

    Karen: (inaudible).

    Leslie: . . . that everybody’s getting 50, 50, okay? Fifty-fifty.

    Karen: You and I are?

    Leslie: Yea-, yeah, yeah-, yes, 50, 50 minus your . . .

    Karen: Yes.

    Leslie: . . . whatever.

    Karen: Yes, yes, yes.

    Leslie: And that’s the final number.

    Karen: It already says that.

    Leslie: So I’m not gonna say, oh . . .

    Karen: Yeah

    Leslie: . . . (Inaudible)-, 50-50.

    Karen: Oh, yes, yes, yes, yes.

    Leslie: All this is gonna be written.

    Karen: Yes.

    Leslie: And I’m going to (inaudible) because I am, I am (inaudible) . . .

    Karen: I know you are.

    Leslie: . . . so I have to be very careful (inaudible).

    Karen: Yes, you do.

    Leslie: Okay? So, so, I-, so everything is gonna be written.

    Karen: Yes.

    Leslie: And everything is gonna be like, like it should.

    Karen: Yes.

    Leslie: Okay, and no more hysteria. Okay, so we have . . .

    Karen: yeah.

    Leslie: . . . deal, Karen?

    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.
     

  13.   See paragraph 39 Marley.
     
  14.   Paragraph 70 Marley
     
  15.   See paras 55-61 of Marley
     

Gregory Sidlofsky, David Wagner and Charles Wagner

The authors of this blog are Gregory Sidlofsky, David Wagner and Charles Wagner. Gregory is a Certified Specialist in Litigation by The Law Society of Upper Canada and partner at Wagner Sidlofsky LLP. David is a member of the firm’s Estate and Commercial Litigation Groups. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP.

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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