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Vancouver Estate Litigation and Resulting Trust Claim Lawyers

As Vancouver high net worth divorce lawyers and Wills Variation Act and estate litigation lawyers we often see the interplay between how family gifts or loans are characterized in disputed marriage breakdown cases as well as on the death of a parent or spouse in estate litigation cases.

In many family cases what might initially appear to have been a loan to both spouses when the couple is together during happy times at the start or during their marriage may be re-characterized as a gift to only one spouse or rather a loan to both spouses but suddenly needs to be repaid.

Until recently a fairly strict test for determining whether the initial advance of funds by a parent to their child and their spouses which placed an onus on the advancing parent to show several criteria for proving it to be alone has been replaced with by the concept that there is no free ride or free money presumed and that evidence of the advance for being a gift needs to be advanced to replace the presumption that the recipient holds the money for the benefit of the advancing parent on what is called a resulting trust. These cases can be emotional and complex and having a good lawyer to guide you through this tricky area is recommended. Call us at 604 602 9000 in Vancouver or at any of our other 3 offices in BC. Call toll free across the province at 1 877 602 9900.

The BC Appeal Court decision in Beaverstock v Beaverstock Estate decision involved a $50,000 advance from the mother to her son who later died. When the mother sought repayment of what she said was a loan from the deceased spouse and executor of his estate she was refused repayment. There was disputed evidence that the son said the monies were an advance on his inheritance and he would not need to repay it but in contrast that he would have to repay this loan.

The trial judge applied the well-known decision in Locke and noted that there were no documents evidencing the loan, no schedule for repayment was specified and no security was provided for the loan. Further the court found that the appellant mother had not demanded repayment of the loan prior to her son’s death, that there had been no repayment of the loan and that there was no reasonable expectation of repayment of loan.

While all of these factors were routinely applied to determine whether monies advanced were gifts or loans with the decision of the Supreme Court of Canada in Pecore and Madsen establish a critical new test which has changed the law for determining whether monies advanced our loans for and repayable or gifts that are not repayable.

Here is the critical part of the judgement that resulted in the mother winning her Appeal claim for repayment of the loan:

[9] The correct approach to the resolution of this dispute is not in dispute. It is set out in Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795. Whether the transfer was a loan or a gift depends on the actual intention of the appellant when she made the advance, which is a question of fact. As the advance was gratuitous, the onus was on the respondent to demonstrate that the appellant intended a gift, since equity presumes bargains, not gifts (para. 24). This equitable principle gives rise to a presumption the son received the money on a resulting trust, which is a rebuttable presumption of law. The trial judge was therefore required to presume the advance was not a gift and to determine whether the respondent had satisfied the burden of rebutting the presumption of resulting trust on a balance of probabilities (para. 44).

[10] The trial judge made no mention of the presumption. Further, he made no finding of fact as to the appellant’s actual intention. Indeed, it appears he did not consider that question. Rather, it appears he considered the burden was on the appellant to establish certain specified things and that, since she failed to do so, her claim was unsustainable as a matter of law. This appears from his reasons where, after referring briefly to the appellant’s evidence, he said:

[5] The case for the widow and executrix was made by her counsel essentially relying on law, and in particular the case of Locke v. Locke, [2000] B.C.J. No. 1850, a decision of a judge of this Court, which, because of Re Hansard Spruce Mills, [1954] 4 D.L.R. 590 (B.C.S.C.), I am bound by. Mr. Justice Wilson, in Locke v. Locke, dealing with a similar problem, enumerated seven factors to be examined when deciding whether transfers of this kind are loans or gifts, and those seven factors are these:

1. whether there were any contemporaneous documents evidencing a loan;

2. whether the manner for repayment is specified;

3. whether there is security held for the loan;

4. whether there are advances to one child and not others, or advances of unequal amounts to various children;

5. whether there has been any demand for payment –

(He was dealing with a divorce so he said “before the separation of the parties”. For our purposes, I am going to read that, “before the death of Mr. Daniel Beaverstock”.)

6. whether there has been any partial repayment, and

7. whether there was any expectation, or likelihood, of repayment.

[6] Now, my view of these seven factors are as follows:

1. There were no contemporaneous documents evidencing the loan.

2. No manner for repayment was specified then or indeed is claimed to have been specified at any later time.

3. There is no security held for the loan.

4. Whether there are advances to one child and not others or advances of unequal amounts to various children.

There is a dispute about the facts relating to number 4. Both parties are anxious that I resolve this matter using 18A, and at their joint entreaty I am now doing so. In my view, it is not possible for me to resolve item number 4. If I had to resolve it now, I would resolve it in favour of the mother and against the widow.

5. Whether there has been any demand for payment before the death, and in this case, as far as I know, there has not.

6. Whether there has been any partial repayment, and of course there has not.

7. Whether there was any expectation or likelihood of repayment is perhaps the second most difficult one to resolve on the evidence before me.

It is my view, after careful consideration and deciding this only on the balance of probabilities, that there was not, at least, any reasonable expectation of repayment. There may have been an expectation that was not reasonable.

[7] When I analyze those factors, it seems to me that if Locke v. Locke is good law, Ms. Lynda May Beaverstock, the widow and executrix, is entitled to victory today on this 18A, and, consequently, I dismiss the plaintiff’s claim against Lynda Beaverstock, both as executrix, in her personal capacity; I think those are the only bases.

[11] The factors to which the trial judge referred are not substantive elements of a claim that a gratuitous transfer was a loan and not a gift. Rather, they are items of circumstantial evidence relevant to the transferor’s actual intention. Moreover, they are not exhaustive of the evidence that may be considered in determining the transferor’s intention. They are to be weighed by the trial judge along with all of the other evidence in determining the transferor’s actual intention as a matter of fact, which is the pivotal fact on which the action turned. It is not evident from the trial judge’s reasons that he turned his mind to this question.

[12] In failing to begin his analysis with the presumption of resulting trust and in failing to make a finding as to the critical fact – the appellant’s actual intention – the trial judge erred in law.

[13] Accordingly, I would allow the appeal and set aside the judge’s order.

[14] The appellant asks that judgment be granted in her favour. The respondent led no evidence that would rebut the presumption of resulting trust. Moreover, in my view, despite the fact that the items of circumstantial evidence mentioned in Locke were not present, the other evidence leaves open no other reasonable conclusion than that the appellant’s actual intention at the material time was to lend her son the $50,000 in question. Further, it is not apparent that there could be any further evidence on the issue should the case be remitted to the Supreme Court. Accordingly, I would grant judgment in favour of the appellant.

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