April 22, 2014

The recent Ontario Court of Appeal decision in Kavanagh v. Lajoie serves as a reminder to folks on the receiving end of a promise not to count their chickens before they are hatched.

In 2005, Mark Lajoie’s father promised to gift him a house in Ottawa.  The father then transferred title to the house to himself and his son as joint tenants.  (At the same time, the father also gifted a different residence to his daughter.)

In 2006, the father’s health deteriorated and he moved in with his daughter and her family.  The son moved to Saskatchewan in 2007.  Following the move, the son attempted to persuade his father to rent or sell their jointly owned house in order to generate cash for himself.  Again, during a visit to Ottawa in 2009, the son renewed his efforts (without success) to convince his father to allow him to access the equity in the house.

Within hours of his son’s departure back home to Saskatchewan, the father instructed his lawyer to sever the joint tenancy, convert it to a tenancy in common, and transfer the father’s 50% interest to his daughter.  The father explained to his lawyer that (a) he had lost patience with his son’s repeated requests to access the equity in the house and (b) he wanted to show his appreciation for the support his daughter had given him.

It appears Mr. Lajoie did not tell his son what he had done.  The son said that he was very surprised to learn on his father’s death that instead of inheriting the entire interest in the house as a surviving joint tenant, the son held only a 50% interest in the house and his sister held the other 50%.

The son argued that the house was his, as it had been gifted to him by the deceased.  The trial judge disagreed, finding that the deceased’s promise to the son, coupled with the creation of the joint tenancy, did not, in law, create an inter vivos gift.  This finding was upheld on appeal.  “For a gift to be valid and enforceable”, the Court of Appeal found, “it must be perfected.  In other words, the donor must have done everything necessary and in his power to effect the transfer of the property.  An incomplete gift is nothing more than an intention to gift.  The donor is free to change his mind.”

The Court of Appeal found that the act of creating a joint tenancy with his son was antithetical to an intention by the father to gift the house because joint tenancy comes with the right by one owner to deprive the other owner of half of the property by severing the joint tenancy.  In other words, by leaving himself on title as a joint tenant, the father’s actions were inconsistent with an intention to irrevocably divest himself of the house.  Accordingly, his promise to his son was not one that could be legally enforced.

Thanks for reading.