Estate Law Articles

Common Law Partners & Resulting Trusts

What happens if common law spouses purchase property as joint tenants separate where only one partner contributed to the purchase, maintenance and household expenses related to property? Will the property division still honour the joint title held by the parties and divide the property equally on the date of separation?

Unlike married spouses, common law spouses do not have access to any legislative scheme to provide guidance on property division upon the breakdown of their relationship.

In Gaunt v. Woudenberg, 2005 CarswellOnt 3388, 18 R.F.L. (6th) 99, 19 E.T.R. (3d) 87, 74 O.R. (3d) 665 (“Gaunt”), the Ontario Superior Court of Justice ruled that despite holding joint title to the property, where the parties do not expressly or by implication, form a mutual intention at the time the property is purchased that one-half of the equity of the real property is to be gifted, the presumption of resulting trust applies. And, where this presumption of resulting trust is not rebutted by the party claiming the gift, that party is holding his or her share of the equity in the property in trust for the other.

As Chief Baron Eyre in Dyer v. Dyer (1788), 2 Cox Eq. Cas. 92, 30 E.R. 42 stated, “the trust of the legal estate, whether in the names of the purchasers or others “results” to the person who advanced the purchase money.”

So even if title is jointly held, if the parties did not intend for half the equity in the property to be gifted to common law spouse who did not contribute to its purchase at the material time then, title reverts back to the partner who advanced the purchase money. Intention is a question of fact for the trial judge to determine and the analysis is to focus on the transferor’s actual intention at the time of transfer, according to the Supreme Court of Canada in Pecore v. Pecore [2007] 1 S.C.R. 795.

In Gaunt, the defendant made the initial down payment to the property and paid all the mortgage payments before and after separation and other costs to maintain the property save the small amount of funds spent by the plaintiff on the renovations. Also, the parties had cohabited for a short period of time, the plaintiff was found to be cunning and self-interested and the defendant`s assertions that he did not grasp the implications of taking title in joint names were accepted. However, the Court in Gaunt suggested that given the right set of circumstances, joint title may not constitute sufficient proof to rebut the presumption of resulting trust where there is a lack of common intention at the time of acquisition.

In Ontario, since the Supreme Court of Canada decision in Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 (“Kerr”), Courts in both Passmore v. Showell, 2011 ONSC 6090 (“Passmore”) and Mitchell v. Misener, 2011 ONSC 6600 (“Mitchell”) have recognised the existence of “purchase money resulting trusts” in situations where the property was held jointly by the unmarried partners but only one partner had made all the contributions.

In Passmore, the Court recognized that notwithstanding the fact that parties had purchased the matrimonial home jointly, the Applicant held title in trust for the Respondent because the purchase monies were traced to settlement funds that the Respondent had received for injuries sustained in a motor vehicle accident. However, the Court did not use the resulting trust mechanism to assess the competing claims because of an evidentiary shortfall caused by both parties’ unclear recollection of their discussion with the solicitors involved in the purchase and subsequent wills and the Respondent’s difficulty in retaining information.

In Mitchell, the Court held that despite a joint tenancy, the Respondent held the real property in resulting trust for the Applicant for the initial investment that the Applicant provided by selling another real property she owned. The Court found that the Respondent was unable to provide evidence that the Applicant intended to gift half of her initial investment to the Respondent and a resulting trust existed for the investment.

In essence, both Mitchell and Passmore demonstrate that when unmarried partners purchase property as joint tenants but only one partner contributes to the purchase monies, Courts will not fail to recognize that it is only fair for the proceeds of sale to be “equitable” but not receiving equally, divided.

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