Saskatchewan Court of Appeal rules presumption of resulting trust does not apply to transfers of land

In a recent decision of the Saskatchewan Court of Appeal, the Court has clarified that the presumption of a resulting trust no longer applies to transfers of land in the province.

When land is voluntarily and gratuitously transferred, and no express trust documents exist, the transfer may be either in the form of a gift or a resulting trust. The determination of whether the transfer was a gift or is a resulting trust turns on the intention of the donor. Unsurprisingly, the intention of the donor may later become the subject of dispute.

The common law doctrine of the presumption of resulting trust assumes bargains not gifts. Therefore where no money has changed hands, a donee of property must prove on a balance of probabilities that the donor intended it to be a gift. Failing this, it will be presumed that the transfer created a resulting trust, and the donor retained beneficial ownership of the land.

Prior to her death, Ms. Dunnison has transferred a cottage property into a joint tenancy with herself and her two sons. After a dispute arose, Ms. Dunnison subsequently wrote one of the two sons out of her will. After Ms. Dunnison passed, her Estate brought an action seeking to clarify whether the transfer had been a gift or a resulting trust, and therefore what interest the two sons had in the cottage as a result.

In Chambers, the judge found that no resulting trust was created by the transfer. The transfer was therefore a gift. The decision was subsequently appealed by the Estate.

While the Court of Appeal acknowledged that equitable and unregistered interests in land, such as trusts, may still be enforceable in Saskatchewan, the Court ultimately ruled that the presumption of resulting trust was inconsistent with the Torrens land registry system in place in the province.

In reaching its decision, the Court of Appeal reviewed jurisprudence from other provinces, finding that available rulings from Alberta and Manitoba did not turn directly on the whether the presumption of resulting trust is compatible with the indefeasibility of title under the Torrens system. The jurisprudence from British Columbia suggests that the presumption of resulting trust applies to real property, however, any potential inconsistency between the presumption and indefeasibility of title has not been addressed by the BC courts.

In Saskatchewan, The Land Titles Act, 1978 (now The Land Titles Act, 2000) provides that a transfer is an absolute transfer of all rights and interests without limitation unless a contrary intention is expressed or words of limitation are used. The presumption of resulting trust, on the other hand, presumes a limited transfer where the transferor retains a beneficial interest in the land. The Court of Appeal held that this was inconsistent with the statutory presumption in favour of absolute transfers.

In addition, the Court held the presumption of resulting trust to be inconsistent with the principle under The Land Titles Act that the certificate of title is conclusive evidence of ownership. That is, the certificate as presumptive proof of ownership imposes the opposite onus from the presumption of resulting trust; the two presumptions are inconsistent. Ultimately, the Court stated that the result of these inconsistencies was that the presumption of resulting trust had been abolished by statute with respect to gratuitous transfers of land.

Voluntary transfers of land are often used for estate planning purposes, as indeed it was in the case at hand. However, estate simplification is only achieved where a right of survivorship is given, that is, where the property does not revert back to the estate on the transferor’s death. The Court therefore noted that presuming a gift rather than presuming a resulting trust may actually enhance the goal of estate simplification.

In application to the facts, the Court found that although Ms. Dunnison had not declared the transfer in her tax return, she had nevertheless intended to give the right of survivorship to her two sons. Given her donative intent, the transfer had been intended as a gift.

The law continues to evolve. Knowledgeable and up-to-date legal advice remains an important tool for managing risk and ensuring the right outcomes is an estate planning context.

Dunnison Estate v Dunnison, 2017 SKCA 40