In the recent decision of Johnston v. Song [1], the Ontario Superior Court of Justice considered the consequences of a property’s transfer into joint ownership in advance of a breakdown of a common law relationship.

Facts:

Johnston and Song began living together in November 2005, when Song moved into a home owned by Johnston. Johnston had purchased the home in 2003, for which he paid the down payment and obtained a mortgage to pay the balance. When Song became pregnant with their child, Johnston asked her to marry him and gave her an engagement ring. While she accepted his proposal, they never married. Their son was born in 2007, and the parties lived together for approximately 10 years. In December 2016, Johnston transferred ownership of the home from himself as sole owner, to himself and Song as joint tenants with a right of survivorship. There was no consideration for the transfer, the transfer was “between common-law spouses” for “natural love and affection.” A month after the transfer, in January 2017, Song told Johnston she was leaving him, and she moved out in February 2017.

Evidence at Trial:

At trial, Johnston testified that Song pressured him to transfer title into joint tenancy so that if something happened to him, she and their son would be “protected.” Song claimed that Johnston did not want her and their son to “be on the street” if anything happened to Johnston. Johnston’s evidence was that when he put Song’s name on title as a joint tenant, he did not expect that she would leave him a month later. He had expected that they would marry.

Arguments at Trial:

Song argued that, even if a presumption of resulting trust arose as a result of the transfer, that presumption was fully rebutted if the evidence indicated that Johnston intended to make a gift to her of a joint interest in the house, although he may regret that choice as she had decided to leave him. Johnston maintained that he had always expected to marry Song but that his feelings changed in January 2017 when he learned that Song may have had a boyfriend since July 2016, which Song denied.

Decision:

Justice Sheard found that the evidence plainly led to the conclusion that Johnston intended to make a gift to Song of a joint tenancy at the time he placed title in his and Song’s names as joint tenants.

Under section 14 of the Family Law Act, property held in the name of spouses as joint tenants is proof, absent contrary evidence, that the spouses intend to own the property as joint tenants. However, under that section, a spouse is defined to mean persons who are married to each other. As the parties were not married, the common law presumption of resulting trust applied, meaning that the transferor (Johnston) was presumed to have intended to retain beneficial ownership to the property.

To rebut that properly, and to establish that Johnston intended to make a gift to her of a joint interest in the home, Song had to show that Johnston intended to part with an ownership interest in the property and did not intend to reserve for himself that ultimate right of disposal. The court found that the three elements of a valid gift had been met in this case; namely (1) an intention to make a gift on the part of the donor; (2) an acceptance of the gift by the donee; and (3) a sufficient active delivery or transfer of the property to complete the transfer for a gift to take effect.

The court did not accept Johnston’s argument that he was misled or pressured by Song to transfer title into her name as a joint tenant when she knew she was planning to leave him. There was no evidence that she was unfaithful to Johnston while they were living together, nor was there evidence that Johnston’s transfer to Song was conditional upon their relationship surviving until Johnston’s death, or some other future date. There was no evidence of undue influence or coercion. There was no evidence that Johnston retained any right to permit him to remove or set aside the transfer to Song.

Although Johnston’s intentions may have changed in January 2017 once Song told him she was leaving him, the court affirmed that it was Johnston’s intention at the time of the transfer that governed, unless the gift or transfer had been expressed as conditional. Quoting from Madill v. Leach [2] at paragraph 7, Justice Sheard stated that “the fact that the donor comes to regret the gift based on an unexpected turn of events cannot cause an otherwise absolute gift to morph into a conditional one.”

Lessons Learned:

While perhaps a bitter pill to swallow for Johnston, the court found that subsequent regret was not a basis to set aside an otherwise valid, unconditional property transfer to a common law spouse.  If the transferor wishes to protect his or her interest in a property in the event of a breakdown of the common law relationship with the transferee, that condition must be expressly stated as a basis for the transfer.

[1] 2018 ONSC 1005 (CanLII).

[2] 2010 CarswellOnt 4463.