Two recent decisions from the Supreme Court of British Columbia illustrate the importance, and difficulty, of determining the intentions someone who transfers property when ownership of that property is later challenged. In Pavlovich v Danilovic, 2019 BCSC 153, Justice Iyer found that she could not determine the intentions of a deceased father, concluding that his son held the properties on resulting trust for the estate. In contrast, in Iberg v. Claridge, 2019 BCSC 165, Justice Grauer was able to determine the plaintiff mother’s intentions, holding that she did not intend to make a gift of certain funds to her son and declaring that a property registered in his name was impressed with a constructive trust.
Pavlovich v Danilovic, 2019 BCSC 153
Pavlovich involved a dispute between two adult children regarding properties owned by their late father, Dragomir. Before he died, Dragomir transferred two properties into joint tenancy with his son, Alexander, one for $1 and the other for $1 and “Natural Love and Affection”. Dragomir’s daughter, Ljuba, claimed that Alexander held the properties in trust. Alexander opposed her action, saying that Dragomir intended to gift both properties to him.
Transfers from Dragomir to Alexander
Ljuba’s claim required the judge to ascertain Dragomir’s intention when he created the joint tenancies. This was difficult, however, as the dispute divided the family, and none of the witnesses were disinterested or objective.
For his part, Alexander testified that his father created the first joint tenancy to carry on the family’s culture and traditions. He also said, however, that Dragomir referred to the principal residence income tax exemption, which the transfer would allow Alexander to claim, and testified that Dragomir later stated he did not want Ljuba to get anything from his estate. In contrast, Ljuba testified that Alexander told her that he had been placed on title for tax purposes. She also said that Dragomir confirmed that nothing would change with his Will—the transfer would save on taxes and everything was for both of Alexander and Ljuba.
Regarding the second transfer, carried out by Alexander using Dragomir’s Power of Attorney, Alexander testified that he made the transaction at Dragomir’s direction. Ljuba testified that she understood only Alexander would be on title after Dragomir’s death, but that this was okay because the Will provided that she and Alexander would inherit equally. She was also confident that her brother would “do the right thing”.
Determining Dragomir’s Intentions
Because the transfers had been made for nominal value, the presumption of resulting trust applied: Alexander was presumed to hold only legal title to the properties and to hold the beneficial interest in trust for Dragomir’s estate. To defeat Ljuba’s claim, Alexander was required to prove that Dragomir intended that Alexander hold both legal and beneficial title to the properties. The governing consideration, however, was Dragomir’s actual intention. The court would only resort to the presumption if there was insufficient evidence of Dragomir’s intention or the evidence was unpersuasive.
Here, there were significant difficulties with the evidence. It was just as likely that the joint tenancies reflected a financial strategy aimed at saving the family money (both in taxes during Dragomir’s lifetime and in probate on his death) as they did an intention for Alexander to hold the properties to the exclusion of Ljuba on Dragomir’s death. Similarly, the fact that Dragomir had granted Alexander a Power of Attorney that included the power to gift himself Dragomir’s assets could reflect an intention to gift, but could also reflect an intention for Alexander to manage Dragomir’s affairs for the benefit of both children. Finally, each side painted a picture of their relationship with Dragomir that supported the outcome they sought, bolstering their relationship with Dragomir and downplaying that of the other.
The judge was unable to determine Dragomir’s intention on the evidence. As a result, “this [was] one of those rare cases where the outcome must be decided based on the burden of proof”: para. 55. Alexander had not displaced the presumption by establishing that Dragomir intended to gift the properties to him. By operation of the presumption, Alexander held the properties on resulting trust for Dragomir’s estate.
Iberg v. Claridge, 2019 BCSC 165
In contrast, in Iberg, Justice Grauer was able to determine the plaintiff mother’s intentions and found that she had not intended to gift certain funds to her son.
Acquisition of the Property
In 2008, Ms. Iberg paid over $100,000 towards the purchase of a house to live in with her son, Mr. Claridge. Later, she contributed significant sums for furniture, appliances, and landscaping. Mr. Claridge did not contribute any money to the purchase, but paid equally towards the mortgage, for which he was the sole mortgagor, and towards other expenses.
In 2018, Mr. Claridge served his mother with a notice to end tenancy. Ms. Iberg claimed that it was in these circumstances that she discovered she had signed documents resulting in a registration of the property in her son’s name alone, and making her a tenant and her son a landlord.
Ms. Iberg claimed a beneficial interest in the property by way of constructive trust, alleging that Mr. Claridge had been unjustly enriched. Mr. Claridge resisted the claim, arguing that there was a legal reason for his benefit: Ms. Iberg intended to gift the money to him. As equity presumes bargains, not gifts, Mr. Iberg bore the onus of proving his mother intended a gift.
An Intention to Gift?
At the outset, Justice Grauer observed that while Ms. Iberg was a highly credible witness, Mr. Claridge was more combative. Further, his evidence “made little sense except when viewed through the lens of an elevated sense of entitlement”: para. 15.
Mr. Claridge pointed to three documents to support his claim of a gift: (1) an Assignment of Purchase Contract, by which Ms. Iberg assigned her interest under the purchase contract to Mr. Claridge; (2) a Gift Letter; and (3) a residential tenancy agreement. However, the judge held that these documents did not support a gift to Mr. Claridge, in part because of evidence provided by the mortgage broker, Mr. Ingram.
Mr. Ingram testified that Ms. Iberg had contacted him to obtain mortgage financing. He determined that although she had money for a down payment, she was not likely to qualify for a mortgage. They discussed Mr. Claridge, who had a decent income but no capital, and came up with a solution. Because of Ms. Iberg’s poor credit, the mortgage application would be in Mr. Claridge’s name alone. Ms. Iberg would be cast as a tenant to enhance Mr. Claridge’s income, and her funds would be designated as a gift. Notwithstanding these events, Mr. Ingram understood that both parties would be buyers.
The judge concluded that the documents evidenced what the parties needed to do to qualify for financing, not what they intended as between themselves. As such, Mr. Claridge failed to prove that the funds were a gift to him. The parties intended that they would both be purchasers and would both live in the house. They would share the expenses, including payments on the mortgage that required Mr. Claridge’s participation to obtain. The property was therefore impressed with a constructive trust in Ms. Iberg’s favour, proportionate to the unjust enrichment of Mr. Claridge.
The Importance of Intention
Both Pavlovich and Iberg demonstrate the significance of intention in determining true ownership of property, and the importance of leading credible evidence of this intention. In each case, the plaintiff succeeded in establishing a trust of property because the defendant failed to prove a gift to him. In Pavlovich, the judge could not ascertain Dragomir’s intentions such that the presumption of resulting trust determined the outcome. Dragomir was not available to provide evidence regarding his intentions, and none of the witnesses was objective. In Iberg, the evidence established that Ms. Iberg did not intend a gift. Ms. Iberg was present to give evidence about her intentions, and this was supported by the evidence of an objective witness, Mr. Ingram.
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