Joint Tenancy Dispute Strikes Again: Severed? Gift? Residue?

The Ontario Court of Appeal just looked again at the difficulties that can arise when a parent dies while holding title in joint tenancy, a major asset with only one her children. The case of Jansen v. Niels 2017 ONCA 312 looks at the issue of severance of joint tenancies, inter vivos gifts between parents and adult children, and undue influence.

Background Facts

This story is not uncommon. A mother made a Will that divided her estate equally between her three children. One of the children, her daughter, had a strained relationship with her mother and one of her brothers. Things came to a head when the daughter saw that her mother was selling her house. She wrote an unkind letter to her mother claiming that the mother had always said the house belonged to her and her brothers and it was wrong for the mother to sell her house. Understandably, the mother was upset and the mother and daughter never spoke again. The mother executed a new Will removing her daughter as an executor but continued to leave one-third of her estate to her. The mother purchased a new house solely in her name. Then a few months later she transferred title to herself and her son in joint tenancy. Then a few years later, they transferred title to the mother, son and the son’s wife as joint tenants. They built an addition onto the house and the son and daughter-in-law lived in the addition.

Subsequently, the son and daughter-in-law signed a separation agreement they found on the internet (without legal advice). In it, the son agreed to transfer his interest in the property to his wife following the death of the mother.

After the mother became ill, she called her lawyer’s legal assistant seeking assurance that the house would go to her son and daughter-in-law when she died. She was assured this was true. After her mother died, the daughter brought an application seeking a declaration that the property formed part of the mother’s estate.

The Application

The application judge concluded that the mother intended to gift the property to her son and daughter-in-law. The presumption of resulting trust that arises when a parent makes a gratuitous transfer to an adult child was rebutted.

The application’s judge “flatly rejected” the daughter’s allegation that the daughter-in-law had taken advantage of the mother and as such, deprived the daughter of her inheritance.[1] While the mother did not say specifically that she was gifting the property, the mother clearly intended to do so and completed her gift in accordance with the requirements set out in McNamee v. McNamee[2]: i.e., the evidence indicated an intention to donate, sufficient delivery of the gift, and acceptance of the gift. The application judge found that the presumption of undue influence was rebutted and that the mother was “cognitively engaged, unfettered by persuasion and did what she wanted. The evidence is clear on this point. There is simply no evidence to suggest otherwise.”[3] Also, the mother had legal advice when creating the joint tenancy. Furthermore, the judge concluded that the joint tenancy was not severed by the separation agreement as alleged by the daughter. The application judge’s decision was summarized as follows:

“[T]his case [concerns] an inter vivos gift meant to be accomplished outside of the estate stream, and, I am completely satisfied that the gifting and the intent of the testatrix make for bona fide ownership of the property . . .”[4]

Appeal

Severance of Joint Tenancy

First the daughter argued that the application judge erred by concluding that the joint tenancy was not severed by the separation agreement. The Court of Appeal summarized the “three rules” in Hansen Estate v. Hansen[5] on how joint tenancies may be severed:

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]

In this case, assuming that the separation agreement was valid, it did no more than express an intention to convey the son’s interest in the property in the future. The Court of Appeal noted that: “It is not clear that an expression of intention is sufficient to achieve severance”.[7]

Furthermore, the submission that the conveyance of the son’s interest, and the grant of exclusive possession, severed the joint tenancy failed in any event. Where there are three joint tenants the conveyance of one joint tenant’s interest to another or the grant of exclusive possession by one to another, severs only the interest of the joint tenant making the conveyance or granting the exclusive possession. It does not sever the whole joint tenancy.

Hansen requires a court to determine, having considered all of the evidence, whether the parties intended to treat their interests as constituting a tenancy in common. This was fact-specific and subject to deference on appeal. The application judge found “not one scintilla of evidence” that the parties intended to mutually treat the tenancy as a tenancy in common. He also found that the separation agreement did not evidence a course of conduct to sever the bona fide joint tenancy.[8]

Valid Gift?

The Court of Appeal agreed with the application judge that it was not necessary for the mother to state that she was gifting the property. The Court found that her intention to gift was evident “from her instructions to her solicitor and his assistant and the executed documents”.[9] The following was specifically relied on to show intention of a gift:

• Her advice to her solicitor that she would take title alone and add [her son] to the deed later;

• The codicil to her will, making it clear that the home would not form part of her estate;

• Her request that the joint tenancy between herself and [her son] be created on his return to Canada;

• The absence of any request to revert the title to tenancy in common; and

• Her call to [her lawyer’s assistant] seeking assurance that her home would pass to [her son and daughter-in-law] on her death.[10]

Furthermore, she received legal advice from a lawyer who knew her well; she understood the consequences of joint tenancy as opposed to tenancy in common; and she was “mentally engaged and cognitive until her death”.[11]

Undue Influence

The Court of Appeal also agreed that the presumption of undue influence was rebutted.  The application judge emphasized the independence of the mother. He found that her advanced age was not a trigger for domination. This was not a case in which a totally new estate plan had been entered into by a person facing a terminal illness. She was “pursuing an intention to gift the property that she developed in 2004 and never wavered from. She was cognitively engaged and unfettered by persuasion.”[12]

Costs

Finally, on the costs issues, the daughter argued that “the Estate was a party to the proceedings and the application judge erred in concluding otherwise.” She also argued that the mother was at fault for failing to spell out her intentions and that public policy considerations require that the Estate pay costs.

The Court of Appeal disagreed:

The Estate had minimal involvement in the proceedings and was not represented at the hearing. The litigation was brought by [the daughter] in an attempt to undo arrangements [the mother] had made in order to ensure that no part of the Flos Road property would pass to her. [The daughter’s] submissions were rejected comprehensively by the application judge and her application was dismissed. We see no public policy considerations that warrant relieving her of the responsibility to pay costs normally borne by the losing party: see McDougald Estate v. Gooderham (2005), 2005 CanLII 21091 (ON CA), 255 D.L.R. (4th) 435 (Ont. C.A.).[13]

Conclusion

This decision, yet another example of a dispute over assets held in joint tenancy between a parent and adult child. The mother tried her best to ensure that the property would pass to her son and daughter-in-law upon her death. However, this case demonstrates that even if you take all of the proper steps (seeking legal advice, executing proper documents, etc.) this may still not stop a family member from commencing litigation based on (founded or unfounded) feelings of unfair treatment.