Estate Dispute Case:Transferring Property: gift or ‘resulting trust’?

Transferring land or property into the names of the existing owner and another can be fraught with difficulties, as a recent estate dispute case demonstrates.  Unless great care is taken, litigation can follow – even after the death of one of the parties. 

What’s the background?

The mother, in this case, transferred her property into the joint names of herself and her daughter.  The property was the family home and her only valuable asset.

At around the same time, she made a will – drawn up by a lawyer – leaving bequests to various family members, naming the daughter and her nephew as executors of the will.  The bequests included leaving her nephew and his family the sum of $50,000.  The will also left her share of the property to her daughter, on the condition that within a year of her death, she would pay $70,000 to each of her mother’s two grandchildren.

A dispute arose because the daughter sold the property shortly after her mother’s death, without the executor nephew’s knowledge, meaning the property did not actually form part of the estate.   Later, when the nephew discovered what she had done and protested about it, the daughter argued that she was solely entitled to the property.

The value of her mother’s estate without the property was only worth around $3,200.  The two grandchildren, therefore, questioned the validity of the will and, in addition, challenged the daughter’s conduct as to the sale of the property.

What did the Court decide?

The Court of Appeal of Ontario agreed with the trial judge who found that the mother did have testamentary capacity to make a will, and the daughter had not exerted undue influence on her – there was no evidence to suggest otherwise.

In addition, the Court found that the daughter held the property on ‘resulting trust’.   A resulting trust arises where a property is transferred to someone who pays nothing for it; and then is implied to have held the property for benefit of another person.  This meant that in law when the mother died the property ‘resulted back’ to form part of the deceased estate and should have been dealt with in accordance with the terms of the will.

The trial judge had made various key findings on the facts, including that the mother had wanted her daughter to have legal title to the property on her death and wanted her two grandchildren and her nephew and his family to receive the bequests out of the proceeds of the sale of the property.

Breach of trust

As for the grandchildren, the daughter was liable to pay $70,000 each to them (plus interest).  Her failure to do so amounted to a breach of trust.   The judge expressed harsh criticism of the daughter for her conduct, described in terms such as “odious”, “despicable” and deceitful.  However, no punitive damages were awarded against her: although the Statement of Claim did include a claim for punitive and exemplary damages, it was not pursued. But the judge made clear that her conduct “is worthy of an order for these types of damages as it is egregious and worthy of censure”.

A warning, indeed, for potential litigants.

How can we help?

If you are involved in an estate dispute involving a deceased estate, or if you believe you have a claim against an estate, contact the expert estate litigation lawyers at Rogerson Law Group for urgent advice and representation.  We have years of experience successfully representing clients in wills and estates litigation.

Contact us now for urgent advice.

Rogerson Law Group is an experienced trust & estate lawyer in Toronto serving the entire GTA including Toronto, Scarborough, Mississauga, Vaughan, Brampton, Richmond Hill, Etobicoke, and Barrie and surrounding areas with offices located in downtown Toronto, Barrie, and associated offices in Ottawa.

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1Mroz v. Mroz, 2015 ONCA 171