June 30, 2020

When a parent transfers property to a capable adult child without getting anything in return, the law does not assume this is a gift. Instead there is a (rebuttable) presumption that the child holds this property in trust for the parent (called a resulting trust). But what happens when that property is a matrimonial home that the child lives in with their spouse (as spouses have certain rights with respect to their matrimonial home). The Court of Appeal had to untangle this tricky intersection of family law and trust law in Kent v. Kent, 2020 ONCA 390.

The facts in this matter involve three generations. Marian, the matriarch, owned a property in Fenelon Falls for many years. Marian had one child: Janice. Janice married Gordon and they had two children: Elissa and Graham. Marian put the property in joint name with Janice for no consideration.

In 2008, the entire family moved into the property. They did not pay rent; Marian paid for everything. Tragically, Janice passed away. Marian made a new will where she left the property to Gordon, Elissa and Graham (i.e. her son-in-law and grandchildren) and put the property in joint names with her and them. As such, the property would pass equally to Gordon, Elissa and Graham outside of the estate by survivorship. However, the will did speak to Marian’s intentions.

After Marian died, Gordon sued his children. He claimed that he was entitled to two thirds of the property. Gordon’s view was that the property was a matrimonial home, as he and Janice lived in it together and Janice was a joint owner. Under the Family Law Act, if a spouse has an interest in a matrimonial home jointly with a third party and then dies that joint tenancy is severed before death. As such, Gordon claimed, when Janice died the joint tenancy was severed and one half of the property went to Janice’s estate (he was the sole beneficiary). When Marian put the property jointly in the names of Gordon, Elissa and Graham what she was really doing was putting her remaining half in joint names. As such, Gordon owned one half of the property from Janice and one third of one half from Marian or two thirds in total (an easy way to visualize this is three sixths plus one sixth equals four sixths).

Gordon’s children argued that Janice never had a beneficial interest in the property. When Marian put the house in joint name with Janice she did not receive any consideration. As such, the legal presumption was that Janice held the property in trust for Marian unless evidence could be provided to prove that the transfer was a gift. Gordon was unsuccessful at the Superior Court and appealed the Court of Appeal.

The Court of Appeal agreed with the lower court that Gordon’s attempt to rebut the presumption of resulting trust was unsuccessful. There was no contemporaneous evidence of Marian’s intention when she put the property in joint name. Marian’s subsequent conduct indicated that she believed she owned the entirety of the property.

Next, the Court of Appeal rejected Gordon’s argument that the property was a matrimonial home. As it had concluded that there was a resulting trust, Janice did not have an “interest” in the property under the Family Law Act. Holding legal title to a property as a trustee was not sufficient; the interest had to be beneficial. This is common sense, the Family Law Act is concerned with people’s personal interests; not when they hold property as a fiduciary for someone else.

The Court of Appeal therefore dismissed the appeal. Gordon may have lived in the property for a long time with his spouse. But that alone was not sufficient to make it a matrimonial home. Ultimately, Gordon was not left penniless as he still inherited one third of the property.