The case of Gully v Gully, 2018 BCSC 1590 provides useful insight on a peril of putting property into joint tenancy. The decision illustrates the importance of considering the financial status and debt obligations of the recipient before making such a gift.
Generally, when property is gifted (transferred gratuitously and without consideration) by adding a joint tenant, the law presumes the recipient to hold the property in resulting trust for the transferor, subject to exceptions where there is a “presumption of advancement”. The key element to determining whether a gift occurred is the transferor’s intention at the time the alleged gift was made. A complication with determining intention is that the transferor is typically deceased when the litigation is taking place. This makes the Gully decision unusual, as the court was asked to determine the intentions of an individual who was before the court as a party.
Ms. Chan Kui Tina Gully purchased a home in Burnaby in 1999. In 2015, Ms. Gully gratuitously added her son Steven Gully as a joint tenant on the title of the Burnaby property. This transfer was based on estate planning advice, and was intended to avoid probate fees due on her death.
Ms. Gully may have been unaware of Mr. Gully’s financial troubles at the time of the transfer. Mr. Gully and his company consented to a judgment in favour of the defendant, Ledcor Construction Limited (“Ledcor”), in August 2017 in the amount of $800,000. As of that time, it was found that Mr. Gully did not know that he was on title to the Burnaby property.
In October 2017, Ledcor registered a certificate of judgment on the undivided half interest of Mr. Gully in the Burnaby property. This led to Ms. Gully’s application for a declaratory order that Mr. Gully held his half interest in the Burnaby property on a resulting trust in her favour, as she argued that she did not intend to gift the property to her son.
Was there sufficient evidence of a gift?
Ms. Gully gave evidence that when she had made the transfer of the Burnaby property in 2015, that she had no intention of gifting an interest in the property to her son. She said that the registration of joint tenancy was made to facilitate the transfer of the property to her grandchildren on her death.
The judge took into consideration statements by the British Columbia Court of Appeal in Fuller v. Harper, 2010 BCCA 421, which drew from the Supreme Court of Canada’s statements in the seminal case on the presumption of resulting trusts, Pecore v Pecore, 2007 SCC 17. In Pecore, the Supreme Court of Canada opened the door to allow evidence of a transferor’s intention from after the transfer. Previously, such evidence was generally considered inadmissible. With respect to such evidence, the Supreme Court of Canada in Pecore cautioned that a trial judge “must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention” (Pecore v. Pecore, 2007 SCC 17 at para 59).
Both Pecore and Fuller were situations where the court was attempting to determine the intentions of a deceased person. In Gully, the court was able to consider an affidavit from the transferor stating her intentions. Nevertheless, the court found that, contrary to Ms. Gully’s evidence, Ms. Gully had intended to gift an interest in the Burnaby property in favour of Mr. Gully in 2015. The main evidence relied on by the judge in this respect was a will that Ms. Gully had executed at the same time as the transfer. The will stated Ms. Gully’s intention that assets that she had put into joint tenancy are to belong to the joint tenant upon her death. Further, in November 2017, after Ledcor had registered its judgment, Mr. Gully executed a new will which disinherited Mr. Gully because of his personal debts.
In any event, the court also found that even if Ms. Gully had not intended to gift the Burnaby property and the property was held in resulting trust, based on sections 23(2) and 29(2) of the Land Title Act, RSBC 1996, c. 250, Ledcor was entitled to rely on the registration of title to register its judgment. As stated by the judge, “…once [Ms. Gully] made the decision to register an interest in the Burnaby Property in Mr. Gully’s name, third party creditors of Mr. Gully became entitled to register judgments against Mr. Gully’s interest in the Burnaby property.” (Gully v Gully, 2018 BCSC 1590, at para 24)
It is interesting to note that the judge did not appear to consider the possibility that Ms. Gully intended to gift the right of survivorship to the Burnaby property to her son, but not a beneficial interest in the property during her lifetime. Such a gift is permitted pursuant to the Supreme Court of Canada’s decision in Pecore. However, due to the judge’s finding that a third-party creditor was entitled to rely on the registration of title despite the existence of a trust, such an argument may not have won the day.
The case is a clear demonstration of a pitfall of transferring assets gratuitously and without proper legal advice. For anyone considering making such a transfer, it is important to be aware of the risks presented by the debts and potential debts of the joint owner. Gully is a helpful reminder of those risks.