The Rural Voice, 2019-07, Page 63transferee, on the basis of a
“resulting trust”.
Canadian law presumes that the
transfer of ownership results from a
fair bargain, not a gift. If a transfer is
made without proper consideration in
return (i.e. a gratuitous transfer), the
law normally presumes a resulting
trust in favour of the transferor. The
transferee is presumed to be holding
legal title in trust for the transferor’s
benefit – the transferee may be
registered as legal owner of a certain
interest on title to a property, but the
transferor remains the beneficial
owner of that interest, which is to be
returned to the transferor on demand.
The presumption is rebuttable by the
transferee, who may show on a
balance of probabilities that the
transferor had an intention to gift the
ownership interest outright. The
transferee might also show that the
transfer was not in fact gratuitous at
all – that there was an exchange of
consideration and a “fair bargain”.
If persuaded that a transfer of
ownership was gratuitous, and that
the transferor did not intend to make
a gift, the Court may make an order
setting aside the original transfer and
restoring full legal ownership to the
transferor. Although the presumption
of resulting trust is a legal tool of
general application, the Court’s
analysis is heavily fact-driven, and
the outcome of each case will depend
on its particular circumstances.
Ontario’s Court of Appeal has
found that the resulting trust
continues to apply where assets are
held within a corporation, and the
transferee receives shares in the
corporation without proper
consideration; the focus of the
analysis should be on the substance
of the transaction, not the form. The
transferee’s interest in the assets as a
shareholder in the corporation would
be subject to the presumption of
resulting trust, rebuttable by showing
that there was an intention to gift the
interest in the assets to the transferee.
Where the resulting trust is found to
apply, the Court could order that
legal ownership of the shares be
restored to the transferor.
A resulting trust can also be
presumed in situations where two
parties acquire property jointly, but
only one of the parties puts up the
consideration paid in the transaction.
Depending on the circumstances, the
party who paid the consideration may
be entitled to the beneficial
ownership of the entire property
while the other non-contributing
owner holds his or her legal
ownership interest in trust for the
other.
Claims based on a resulting trust
argument sometimes arise in the
context of estate proceedings, after
the transferor parent has passed
away. As noted above, a surviving
joint tenant will become the full
owner of a jointly-owned property
where the other joint tenant dies; the
jointly-owned property does not
become part of the estate of the
deceased available for distribution to
beneficiaries under a will or
otherwise. Those beneficiaries may
argue that a jointly held property
should nevertheless form part of the
estate of a deceased parent on
account of a resulting trust.
Similarly, in bankruptcy
proceedings, creditors of a bankrupt
may argue that a certain property
legally owned by another party forms
part of the bankrupt’s estate (for
purposes of satisfying the bankrupt’s
debts) by way of a resulting trust.
And the opposite situation can occur
as well, with creditors of an alleged
beneficial owner of a property
arguing against the inclusion of the
property in the estate of the bankrupt
legal owner so as to keep it out of the
hands of the bankrupt’s creditors.◊
______________________________
John D. Goudy’s law practice
includes real property and
environmental litigation,
expropriation law, energy regulation,
and regulatory offences. Agrilaw
provides information of interest to
the farming community, not legal
advice. Readers should consult a
legal professional about their
particular circumstances.
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