In summertime cottages are the delight of everyone. But that dreamy cottage can turn into an estate litigation nightmare, as one family discovered in Donaldson v. Braybrook, 2020 ONCA 66.

Margaret had four children: Wendy, Susan, Thomas and Barry. She allowed them all generous access to her cottage. In fact, Margaret was so committed to providing this access to the cottage that she moved into the apartment over its garage so her children could use the cottage.

In 1995, Margaret secretly transferred the cottage into joint names with Susan and Thomas (“As joint tenants and not as tenants in common as to the remainder in fee”) with Wendy and Barry being given a life estate. The same day as this transfer, Margaret also made a will that held the residue in trust for five years to pay the cottage expenses (after which it would be distributed equally amongst her children). Margaret would tinker with her will over the years, eventually removing reference to using the residue of her estate to pay cottage expenses.

Margaret died in 2007. Susan and Thomas severed the joint tenancy and paid all cottage expenses (unknown to Wendy). The children – except for Barry for reasons that remain unexplained – continued to use the cottage as they had before.

This situation could not last forever. By 2013, the cottage’s expenses had increased and Thomas had moved out west. As such, Thomas and Susan decided to sell the cottage. They asked Barry and Wendy to release their life interests. While Barry immediately did so (without compensation), Wendy would not agree. Instead she commenced the litigation, claiming that the cottage was held equally by all four children. After Barry died, it appears Wendy amended her claim to include an alternative claim for exclusive use to the cottage during her life interest.

The lower court judge ruled in Wendy’s favour, stating that that Wendy had exclusive use of the cottage during her life. His Honour also found that Wendy had been unduly enriched but never fixed the quantum of damages. Thomas and Susan appealed to the Court of Appeal.

The Court of Appeal reversed the lower court decision. The language in the transfer was ambiguous so the Court of Appeal found it needed to seek evidence of Margaret’s actual intentions. Given the evidence as a whole, there was only one reasonable conclusion: Margaret wanted to allow all of her children to continue to enjoy the shared use of the cottage after her death as they had during her life. This was inconsistent with Wendy being given exclusive use. If the lower court judge was correct, the Court of Appeal held, then Margaret would have had no right to use the cottage during her lifetime which should have by itself, the Court of Appeal noted, “caused the motion judge to question his conclusion.”

The Court of Appeal held that the presumption of resulting trust (that when a transfer is made from a parent to an adult child, the recipient holds the property in trust) had limited effect here. In the court’s view this presumption only becomes relevant if the court cannot draw a conclusion about the transferor’s intention. As the evidence of actual intention in this case was clear, the presumption of resulting trust was irrelevant.

As such, the Court of Appeal found that Wendy’s had a non-exclusive use of the cottage for her life. It is not clear what will ultimately happen with the cottage: as, e.g., Thomas will likely balk at continuing to fund a cottage he cannot use.

This case is a reminder that clarity in implementing an estate plan is important. Had the cottage transfer been done correctly in 1995, the entire mess may have been avoided.