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Caution To Common Law Spouses
Background
Alex and Ron were not married and had no children. They were together from 1994 to 2017 and at the end of their relationship had a house that was worth $1.4 million dollars. There was a dispute as to how the net proceeds from the sale of their house should be divided.
Alex and Ron purchased their first home in 1999, as joint tenants with a joint mortgage. Alex’s mother contributed approximately $100,000.00 to the purchase of that home and Alex paid a $5,000.00 deposit towards the home. In December 2012, the parties purchased a new, more expensive home, using the sale proceeds from their first home, a joint mortgage and an additional $514,333.20, contributed solely by Alex. Unfortunately, the parties were the victims of harassment in their new neighborhood because they were a same-sex couple and both parties’ mental health and the relationship suffered as a result of this. Alex and Ron separated.
Alex’s position was that he should be repaid the funds he and his mother contributed to the purchase and the remaining sale proceeds should be divided equally between the parties. Ron’s position was that the funds from Alex and his mother were intended as a gift and the entirety of the sale proceeds should be divided equally between the parties.
At Trial[i]
The trial judge noted the test from the Supreme Court of Canada case, Pecore v Pecore, for presumptive trust when there is a gratuitous transfer of property between non-married individuals: “The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. The burden of proof is on the transferee to demonstrate that a gift was intended where the transfer is made for no consideration.”[ii]
However, the trial judge went onto extensively consider factors regarding the credibility of both parties and ultimately determined Alex gifted the funds based on: being a sophisticated party and not having a written agreement; depositing the funds into a joint bank account; the length of the cohabitation; the parties’ sharing of expenses associated with the home; absence of reference to repayment in Ron’s will; and, an inference that survivor rights in death also presumes a gift of funds without death, and other related factors.
The court ordered the entirety of the proceeds be divided equally. Alex appealed.
On Appeal
The Court of Appeal confirmed the trial judge noted the test from Pecore v Pecore correctly, but did not apply it in the analysis.
Ron must prove that Alex intended to gift the funds to Ron at the time of the purchases[iii] on a balance of probabilities[iv]. Alex indicated he had always referred to the money as his mother’s money and stated he and Ron discussed that it would be repaid to him should the house sell because the money was intended to provide him with security down the road. Ron, on the other hand, indicated the parties never discussed it.
The Court of Appeal clarified that some of the factors considered by the trial judge were irrelevant. They went on to address the relevant factors. The trial judge erred in failing to distinguish between survivorship rights and a gift. Parties can have different intentions with respect to their property for separation and death. The trial judge also erred in concluding that Alex did not intend to be repaid after the sale proceeds from the first home were paid into the parties’ joint bank account. The Court of Appeal highlighted the parties were in the process of purchasing a new home using the proceeds from the first home and this would not have been possible if Alex had asked for his funds back. Finally, the Court of Appeal indicated the judge erred in expecting parties to secure their repayment arrangements with a document, in writing. The Court of Appeal noted that the absence of contemporaneous documentation is a relevant consideration,[v] but alone does not constitute sufficient evidence of a gift. Alex had other undocumented transactions and the court noted, “our courts are strewn with cases where people in a relationship wound up in litigation because they did not take a commercial approach to their domestic arrangements from the outset.”[vi]
Ron failed to meet the conditions of the test to establish a gift: (1) an intention to make a gift on the part of the donor without consideration or expectation of remuneration; (2) an acceptance of the gift by the donee; and (3) a sufficient act of delivery or transfer of the property to complete the transaction.[vii] Alex indicated he expected to be repaid and that his mother wanted the funds from her to remain with him. Ron did not have a discussion with Alex or his mother about the money and there was no other evidence of their intention.
With respect to the sale proceeds, the Court of Appeal ordered Alex to be repaid what he contributed and the remaining balance divided equally between the parties.
Caution To Common Law Spouses
The parties in this matter did not have a cohabitation agreement that set out their intentions with respect to how the sale proceeds of their property would be divided in the event of separation. As a result of the uncertainty and the parties’ different positions, they chose to engage in expensive and lengthy court proceedings to receive a resolution.
If you and your partner are considering purchasing a home, we recommend you reach out to McKenzie Lake Lawyers LLP prior to your purchase, or as soon as possible, to discuss whether a cohabitation agreement would be appropriate for your circumstances.
This article was written by Family Law Lawyer, Nicole Kucherenko. For additional information, please do not hesitate to contact nicole.kucherenko@mckenzielake.com
[i] MacIntyre v Winter, 2020 ONSC 4376 (CanLII).
[ii] MacIntyre v Winter, 2020 ONSC 4376 (CanLII) at para 140, citing Pecore v Pecore, 2007 SCC 17 (CanLII) at para 24.
[iii] MacIntyre v Winter, 2021 ONCA 516 (CanLII) at para 24, citing Kerr v Baranow, 2011 SCC 10 (CanLII) at para 18, citing Pecore v Pecore, 2007 SCC 17 (CanLII) at paras 43-44.
[iv] MacIntyre v Winter, 2021 ONCA 516 (CanLII) at para 25, citing F.H. v McDougall, 2008 SCC 53 (CanLII) at para 46.
[v] MacIntyre v Winter, 2021 ONCA 516 (CanLII) at para 38, citing Chao v Chao, 2017 ONCA 701 (CanLII) at para 54.
[vi] MacIntyre v Winter, 2021 ONCA 516 (CanLII) at para 38.
[vii] MacIntyre v Winter, 2021 ONCA 516 (CanLII) at para 40, citing McNamee v McNamee, 2011 ONCA 533 (CanLII) at para 24.
