SUPREME
COURT OF CANADA
Citation: Nishi v. Rascal Trucking Ltd., 2013 SCC 33, [2013]
2 S.C.R. 438
|
Date: 20130613
Docket: 34510
|
Between:
Edward
Sumio Nishi
Appellant
and
Rascal
Trucking Ltd.
Respondent
Coram: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell,
Karakatsanis and Wagner JJ.
Reasons
for Judgment:
(paras. 1 to 47)
|
Rothstein J. (McLachlin C.J. and LeBel,
Abella, Cromwell, Karakatsanis and Wagner JJ. concurring)
|
Nishi v. Rascal Trucking Ltd., 2013 SCC 33, [2013] 2 S.C.R.
438
Edward Sumio Nishi Appellant
v.
Rascal Trucking Ltd. Respondent
Indexed as: Nishi v. Rascal Trucking Ltd.
2013 SCC 33
File No.: 34510.
2013: January 16; 2013: June 13.
Present: McLachlin C.J. and LeBel, Abella, Rothstein,
Cromwell, Karakatsanis and Wagner JJ.
on appeal from the court of appeal for british columbia
Trusts — Purchase money
resulting trust — Appellant using funds received from respondent to purchase
property in appellant’s own name — Funds representing disputed monies owed to
third party — Whether purchase money resulting trust should be abolished in
commercial transactions in favour of unjust enrichment principles — Whether a
transfer is gratuitous when it constitutes the discharge of a legal and moral
obligation to a third party — Whether a proportionate interest in the property
is acquired where the transferor attempted, but failed to secure the title
holder’s agreement to an interest in the property — Whether presumption of
resulting trust was rebutted.
In
1996, Kismet Enterprises Ltd. owned approximately two acres of land in Nanaimo,
British Columbia that it leased to Rascal Trucking Ltd. Rascal began operating
a topsoil processing facility on the property that generated significant
complaints from the neighbourhood. As a result, the City passed resolutions
declaring that the facility was a nuisance. The City subsequently removed the
topsoil and lodged the costs incurred of $110,679.74 against the property
as tax arrears. Rascal’s lease included provisions which required it to “hold
harmless” Kismet for “any and all liabilities resulting from Rascal’s
operations on the property”, but at no point did Rascal reimburse Kismet or the
City for the costs of the removal of the topsoil. Kismet determined that, as a
result of the tax arrears and the existing mortgage to CIBC, there was no
equity left in the property. It stopped making mortgage payments. Throughout
the ensuing foreclosure proceedings, Mr. Heringa, the principal of Rascal,
tried in a number of ways to acquire the property, but was unsuccessful. In
May 2001, the property was sold to Mr. Nishi for $237,500. Nishi was
assisted in the purchase by Rascal in the amount of $110,679.74, the exact
amount of the tax arrears. Heringa sent Nishi’s lawyer several faxes
containing offers with different terms, attempting to acquire an interest in
the property. Nishi did not agree. Heringa subsequently sent a fax indicating
that the monies would be advanced “without any conditions or requirements”. In
November 2008, Rascal began this action claiming a one‑half undivided
interest in the property. The trial judge dismissed the action but this
decision was overturned on appeal.
Held: The appeal
should be allowed and the decision of the trial judge should be restored.
There
is no reason to depart from the long-standing doctrine of the purchase money
resulting trust in favour of an approach based on unjust enrichment. While
flexibility is no doubt desirable in certain areas of the law, the purchase
money resulting trust provides certainty and predictability because it relies
on a clear rule for determining who holds the beneficial interest in a
property. When making a gratuitous transfer of property, the person who makes
the transfer must have intended either to pass the beneficial interest (a gift)
or retain it (a trust). A
purchase money resulting trust is a species of gratuitous transfer resulting
trust that arises when a person advances funds to contribute to the purchase
price of property, but does not take legal title to that property. Where the
person advancing the funds is unrelated to the person taking title, the law
presumes that the parties intended for the person who advanced the funds to
hold a beneficial interest in the property in proportion to that person’s
contribution. This presumption can be rebutted if the
recipient of the property proves, on a balance of probabilities, that at the
time of the contribution, the person making the contribution intended to make a
gift to the person taking title. While rebutting the presumption requires
evidence of the intention of the person who advanced the funds at the time
of the advance, after the fact evidence can be admitted so long as the
trier of fact is careful to consider the possibility of self‑serving
changes in intention over time.
Reviewing the trial judge’s
reasons in their full context confirms that he understood that Rascal’s
intention at the time of the advance was to contribute to the purchase price
without taking a beneficial interest in the property because Rascal was
motivated by recognition of the costs that it had imposed on Kismet. This
intention, to make good on Rascal’s obligations to Kismet by way of a payment
to Mr. Nishi, is not inconsistent with a finding of a legal gift. Moreover,
Rascal’s stated intention was to make the advance without any conditions and its contribution towards the mortgage on the property was the
amount of the tax arrears ($110,679.74) down to the penny. It was open to the
trial judge to conclude that the presumption of resulting trust had been
rebutted and it was well supported by the evidence.
Cases Cited
Applied:
Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269; Pecore v.
Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795; referred to: Nanaimo
(City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342; R. v.
Henry, 2005 SCC 76, [2005] 3 S.C.R. 609; Ontario (Attorney General) v.
Fraser, 2011 SCC 20, [2011] 2 S.C.R. 3; Canada v. Craig, 2012 SCC 43,
[2012] 2 S.C.R. 489; R. v. B. (K.G.), [1993] 1 S.C.R. 740.
Authors Cited
Oosterhoff on Trusts: Text, Commentary and Materials, 7th ed. by A. H. Oosterhoff et al. Toronto: Carswell, 2009.
Snell’s Equity, 32nd ed. by John
McGhee. London: Sweet & Maxwell, 2010.
Waters’ Law of Trusts in Canada, 4th ed.
by Donovan W. M. Waters, Mark R. Gillen and Lionel D. Smith.
Toronto: Thomson Carswell, 2012.
APPEAL
from a judgment of the British Columbia Court of Appeal (Kirkpatrick, Frankel
and Smith JJ.A.), 2011 BCCA 348, 21 B.C.L.R. (5th) 330, 309 B.C.A.C. 182,
523 W.A.C. 182, 340 D.L.R. (4th) 284, [2011] B.C.J. No. 1561 (QL), 2011
CarswellBC 2154, reversing a decision of Dley J., 2010 BCSC 649, [2010]
B.C.J. No. 840 (QL), 2010 CarswellBC 1454. Appeal allowed.
D. Geoffrey
G. Cowper, Q.C., and Joel Payne,
for the appellant.
Craig P. Dennis and Owen J. James, for the respondent.
The
judgment of the Court was delivered by
Rothstein J. —
I. Introduction
[1]
A purchase money resulting trust arises when a
person advances funds to contribute to the purchase price of property, but does
not take legal title to that property. Where the person advancing the funds is
unrelated to the person taking title, the law presumes that the parties
intended for the person who advanced the funds to hold a beneficial interest in
the property in proportion to that person’s contribution. This is called the
presumption of resulting trust.
[2]
The presumption can be rebutted by evidence that
at the time of the contribution, the person making the contribution intended to
make a gift to the person taking title. While rebutting the presumption
requires evidence of the intention of the person who advanced the funds at
the time of the advance, after the fact evidence can be admitted so long as
the trier of fact is careful to consider the possibility of self-serving
changes in intention over time.
[3]
Edward Sumio Nishi has legal title to property.
Rascal Trucking Ltd., which advanced funds to assist in the purchase of the
property, claims a beneficial interest in that property. The trial judge found
that the presumption of resulting trust had been rebutted. That finding was
overturned on appeal.
[4]
Mr. Nishi now asks this Court to restore the
decision of the trial judge by replacing the doctrine of purchase money
resulting trust with the doctrine of unjust enrichment and finding that Mr.
Nishi was not unjustly enriched. Alternatively, Mr. Nishi says that the
presumption of resulting trust was rebutted. I see no reason to disturb the
long settled doctrine of resulting trust in favour of unjust enrichment.
Rather, I would allow the appeal based on the factual findings of the trial
judge that no resulting trust was created in this case.
II. Facts
[5]
In 1996, Kismet Enterprises Ltd. owned
approximately two acres of land in Nanaimo, British Columbia. In April 1996,
Kismet leased the property to Rascal. Rascal began operating a topsoil
processing facility on the property.
[6]
Rascal’s topsoil operation generated significant
complaints from the neighbourhood. As a result, the City of Nanaimo (the
“City”) passed resolutions, declaring that the facility was a nuisance and
authorizing the City to remove the topsoil in the event that neither Kismet nor
Rascal did so. The City subsequently removed the topsoil and lodged the costs
incurred, amounting to $110,679.74, against the property as tax arrears. Rascal
brought an action challenging the City’s authority to pass these resolutions,
but this Court ruled in favour of the City in 2000 (Nanaimo (City) v. Rascal
Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342).
[7]
Rascal’s lease included provisions which
required it to “hold harmless” Kismet for “any and all liabilities resulting from
Rascal’s operations on the property”, but at no point did Rascal reimburse
Kismet or the City for the costs of the removal of the topsoil.
[8]
Kismet determined that, as a result of the tax
arrears and the existing mortgage to CIBC, there was no equity left in the
property. It stopped making mortgage payments and in December 1997, CIBC began
foreclosure proceedings. Throughout the foreclosure proceedings, Hans Heringa,
the principal of Rascal, tried in a number of ways to acquire the property, but
was rebuffed or ignored by CIBC.
[9]
Upon completion of the foreclosure proceedings,
in May 2001, the property was sold to Mr. Nishi for $237,500. Before selling
the property to Mr. Nishi, CIBC paid the tax arrears owing to the City.
[10]
Mr. Nishi was assisted in the purchase by Rascal
who provided $85,000 in cash and assumed responsibility for paying $25,000 on
the mortgage. Mr. Heringa acted as guarantor on the mortgage. Subsequent to the
purchase of the property, Mr. Heringa instructed his staff that the total contribution
to the mortgage should be $25,679.74. As a result, Rascal’s total contribution
towards the purchase of the property was $110,679.74, the exact amount of the
tax arrears lodged on the property due to Rascal’s topsoil activities.
[11]
With respect to this financial support, Mr.
Heringa sent Mr. Nishi’s lawyer several faxes containing offers with different
terms. On May 25, 2001, Mr. Heringa made an offer to contribute $85,000 in cash
and to assume $25,000 in mortgage payments in exchange for a second mortgage to
secure Rascal’s interest in the property and for the bottom half of the
property. Part of the text of the May 25, 2001 fax is reproduced below:
(1) To advise that $85,000.00
can be applied to a purchase of this property for $232,500.00 plus Legal and
Land Title costs, to be in the name of Edward Nishi.
(2) Royal Bank (Colleen
Tourout) is to advance a First Mortgage. We are taking a 25 year amortization,
5 yr Term, with payments to include Taxes. H. Heringa will act as a Guarantor.
(3) Rascal Trucking Ltd. will
be responsible for the payments on $25,000.00 of the Mortgage.
(4) We would like Edward
Nishi to sign Registrable Form documentation for a Second Mortgage for
$110,000, no interest, to secure Rascal’s interest in this land. This Second
will not be Registered as yet, and only at some later date perhaps, with
the consent of both of us.
(5) There should be an
Agreement that Edward Nishi will apply for, transfer & convey the bottom
1/2 of the property to Rascal Trucking Ltd., after completion of the Sale, and
that it is the intent that Rascal can use, and later own the bottom
portion of the property, commencing at the halfway point of the upper driveway,
as per the attached Plan. [Emphasis in original; A.R., at pp. 113-14.]
[12]
There is no evidence that Mr. Nishi accepted
this offer.
[13]
On May 28, 2001, Mr. Heringa sent a fax
modifying his earlier offer and stating that “the $85,000.00 is to be applied
to the purchase without any conditions or requirements, and these instructions
are irrevocable” (A.R., at p. 117). He stated that the request for a second
mortgage and for the bottom half of the property to be conveyed to Rascal were
“just possibilities, for future reference [and] consideration, and that’s all”
(ibid. (emphasis in original)). The text of this second fax is
reproduced below:
(1) So there is no confusion,
Instruction #1, is a stand alone instruction, and the $85,000.00 is to be
applied to the purchase without any conditions or requirements, and these
instructions are irrevocable. The sale must complete, in the name of Edward
Nishi. Items 2 & 3 are only to confirm what is to occur.
(2) The rest (Items 4 & 5)
are just possibilities, for future reference & consideration, and that’s all.
(3) However, if you think that
a Second Mortgage or anything else makes sense, to properly protect Nishi,
Kismet & Rascal, in the future, from demands from the City or from future
Nuisance charges, etc., please advise . . . . Also, Rascal doesn’t want
to lose its legal non-conforming status in regard to topsoil processing at this
site. [Emphasis in original; A.R., at p. 117.]
[14]
In November 2008, Rascal began this action
claiming a one-half undivided interest in the property.
[15]
For reasons that will become apparent, it is
relevant that Mr. Heringa and Cidalia Plavetic, the principal of Kismet, had
had a long-standing business and personal relationship. It is also relevant
that Ms. Plavetic and Mr. Nishi are common law partners and have lived on the
property since 1997.
III. Judicial History
A. Supreme Court of British Columbia
[16]
Rascal advanced three arguments before the trial
judge. First, Rascal argued that there was an agreement between the parties
that half of the property would belong to Rascal. The trial judge rejected this
argument but noted that “[Mr. Heringa’s] intention and desire to secure an
interest was obvious, but Mr. Nishi would not agree” (2010 BCSC 649 (CanLII),
at para. 39).
[17]
Second, Rascal argued that since it had
contributed to the purchase price of the property but did not take title, a
resulting trust arose such that Rascal was entitled to a share of the property
in proportion to its contribution to the purchase price. The trial judge
rejected this argument, finding that while there was “no issue of a gift”, Mr.
Nishi’s evidence was that there was no intention for Rascal to have an interest
in the land (paras. 42 and 47). The trial judge found that the purpose of the
payment was to satisfy the debt from Rascal to Kismet as a result of the tax
arrears for which Rascal acknowledged responsibility due to the “hold harmless”
undertaking by Rascal in its lease with Kismet. The trial judge also relied on
the fact that the amount of the contribution ($110,679.74) was equal to the tax
arrears caused by Rascal.
[18]
Third, the trial judge rejected Rascal’s claim
for a constructive trust on the basis of unjust enrichment, finding that the
purpose of the contribution was simply to place Ms. Plavetic, Mr. Nishi and
Kismet in the same position as if the nuisance and resulting tax arrears had
never been caused by Rascal.
B. Court of Appeal for British Columbia
[19]
The Court of Appeal allowed Rascal’s appeal
(2011 BCCA 348, 21 B.C.L.R. (5th) 330). That court held that a presumption of
resulting trust arose because of a gratuitous transfer between unrelated
parties. This presumption was not rebutted because the trial judge had found
that there was “no issue of a gift”. The trial judge had erred in finding that
the presumption had been rebutted because that finding was based on Mr. Nishi’s
intention and not Rascal’s intention. The Court of Appeal observed that it is
the intention of the person who advances the funds and not the intention of the
recipient that is relevant. The trial judge had concluded that “[Mr. Heringa’s]
intention and desire to secure an interest was obvious”. The fact that Rascal
had an obligation to indemnify Kismet for the tax arrears could not serve to
rebut the presumption because Mr. Nishi, to whom the payment was made, was a
legal stranger to Kismet.
IV. Analysis
[20]
Mr. Nishi appealed to this Court on two grounds.
First, he argued that the purchase money resulting trust doctrine should be
abandoned in favour of an approach based on unjust enrichment and that no
unjust enrichment occurred here. Alternatively, he argued that if the purchase
money resulting trust is to be retained, it would not apply in this case. I
would not give effect to the first ground of appeal. In my view, there is no
reason to depart from the long-standing doctrine of the purchase money
resulting trust. However, I would allow Mr. Nishi’s appeal because there was no
resulting trust arising on the facts as found by the trial judge.
A. Should the Purchase Money Resulting Trust Be Abandoned?
[21]
The purchase money resulting trust is a species
of gratuitous transfer resulting trust, where a person advances a contribution
to the purchase price of property without taking legal title. Gratuitous
transfer resulting trusts presumptively arise any time a person voluntarily
transfers property to another unrelated person or purchases property in another
person’s name (D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’
Law of Trusts in Canada (4th ed. 2012), at p. 397).
[22]
As Cromwell J. noted in Kerr v. Baranow,
2011 SCC 10, [2011] 1 S.C.R. 269, at para. 12, it has been “settled law since
at least 1788 in England (and likely long before) that the trust of a legal
estate, whether in the names of the purchaser or others, ‘results’ to the
person who advances the purchase money”. Despite this recent endorsement of the
purchase money resulting trust, Mr. Nishi argues that it should be abandoned in
favour of the doctrine of unjust enrichment. The purchase money resulting trust
provides certainty and predictability. Mr. Nishi has not advanced arguments
that would support overruling the Court’s jurisprudence in this area.
[23]
This Court has recently considered under what
circumstances it should overrule a prior decision of the Court (R. v. Henry,
2005 SCC 76, [2005] 3 S.C.R. 609; Ontario (Attorney General) v. Fraser,
2011 SCC 20, [2011] 2 S.C.R. 3; Canada v. Craig, 2012 SCC 43, [2012] 2
S.C.R. 489). It is best not to depart from precedent unless there are
compelling reasons to do so (Henry, at para. 44). The Court will
exercise caution in overturning decisions of firm majorities, particularly when
those decisions are recent (Fraser, at para. 57).
[24]
In this case, Mr. Nishi is asking this Court to
depart from both Kerr and Pecore v. Pecore, 2007 SCC 17, [2007] 1
S.C.R. 795, two recent appeals decided unanimously or by firm majorities. These
decisions represent just the most recent endorsements of long-standing
doctrine. There is no concrete evidence that the purchase money resulting trust
is unworkable or has lead to untenable results (Fraser, at para.
83). Nor has Mr. Nishi shown that the purchase money resulting trust has been
“attenuated or undermined by other decisions of this or other appellate courts”
(R. v. B. (K.G.), [1993] 1 S.C.R. 740, at p. 778).
[25]
Mr. Nishi advances four reasons for abandoning
the purchase money resulting trust and gratuitous transfer resulting trusts
more generally: overlap with the doctrine of unjust enrichment in terms of purpose;
overly restrictive framework for the types of intention that motivate
transactions; absence of remedial flexibility; and overall lack of flexibility
in terms of what can be considered relative to unjust enrichment.
[26]
Mr. Nishi’s first argument is that since the
purchase money resulting trust essentially responds to unjust enrichment, it is
unnecessary to retain it as a separate doctrine. Even if the purchase money
resulting trust is considered to be an inherently restitutionary concept, I
would still not give effect to this argument. The argument appears to have been
summarily made and in the absence of harm, confusion or other disadvantage, I
am not satisfied that conceptual overlap is a sufficient reason to abandon the
purchase money resulting trust. This is particularly true in light of the fact
that the purchase money resulting trust has been a feature of the common law
since at least 1788 and provides certainty and predictability in situations
where a person has made a gratuitous advance.
[27]
Mr. Nishi’s second argument — that purchase
money resulting trusts provide an overly restrictive framework for the types of
intention that motivate transactions — must fail because it is based on too
narrow an understanding of the scope of gifts in law. The concerns that Mr.
Nishi raised in how the Court of Appeal applied this test to the facts here can
be resolved more appropriately by considering the legal meaning of the word “gift”.
As will be discussed in more detail below, the legal concept of a gift is broad
enough to include the type of advance made in this case. Legal gifts do not
require philanthropic motivations. The trust-gift dichotomy, as Mr. Nishi
describes it, is not restrictive. Rather it reflects the fact that when making
a gratuitous transfer of property, the person who makes the transfer must have
intended either to pass the beneficial interest (a gift) or retain it (a
trust).
[28]
Mr. Nishi’s third and fourth arguments can be
considered together. In essence, Mr. Nishi argues that the doctrine of unjust enrichment
is preferable because of its flexibility in terms of factors to be considered,
overall focus on justice between the parties and broader remedial options.
However, desire for flexibility does not constitute a compelling reason for
departing from the unanimous decision of this Court in Kerr, which was
issued just two years ago. While flexibility is no doubt desirable in certain
areas of the law, the purchase money resulting trust provides certainty and
predictability because it relies on a clear rule for determining who holds the
beneficial interest in a property. Absent strong dissenting opinions in this
Court, contrary decisions in provincial appellate courts or significant
negative academic commentary that would justify disturbing such a settled area
of the law, there is no reason to abandon the purchase money resulting trust.
B. Did a Resulting Trust Arise for the Benefit of Rascal?
[29]
Rascal’s contribution to the purchase of the
property was made without consideration and Rascal and Mr. Nishi are not
related. Therefore, the legal presumption of resulting trust applies (Pecore,
at paras. 24 and 27). This is because in such circumstances equity presumes
bargains rather than gifts (Pecore, at para. 24). In the context of a
purchase money resulting trust, the presumption is that the person who advanced
purchase money intended to assume the beneficial interest in the property in
proportion to his or her contribution to the purchase price (see Waters’ Law
of Trusts in Canada, at p. 401).
[30]
However, the presumption of resulting trust can
be rebutted if the recipient of the property proves, on a balance of
probabilities, that the person who advanced the funds intended a gift (Pecore,
at paras. 24 and 44). The relevant intention is the intention of the person who
advanced the funds at the time of the contribution to the purchase price (Pecore,
at para. 59). Therefore, for Mr. Nishi to rebut the presumption in this case,
he must prove that Rascal intended to make a gift at the time that Rascal made
a contribution to the purchase price, in May 2001.
[31]
In my view, the trial judge was correct to
conclude that the presumption was rebutted in this case. In his May 28, 2001
fax, Mr. Heringa indicated that the contribution to the purchase price and his
intention to pay $25,000 of the mortgage was made “without any conditions or
requirements, and these instructions are irrevocable” (A.R., at p. 117). As
will be discussed below, a contribution to the purchase price without any
intention to impose conditions or requirements is a legal gift. While Mr.
Heringa argued that there was either an agreement to transfer a portion of the
land to him or an intention for him to hold a beneficial interest, the trial
judge preferred the evidence of Mr. Nishi (para. 40).
[32]
The Court of Appeal held that the trial judge’s
findings (1) that there was no issue of a gift and (2) that Mr. Heringa’s
intention to obtain an interest in the property was obvious, meant that the
presumption of resulting trust had not been rebutted. In my view, the Court of
Appeal erred in the inferences it drew from the trial judge’s reasons on these
two key issues.
(1) The Meaning of “Gift”
[33]
The trial judge found that there was “no issue
of a gift” (para. 42). The Court of Appeal took this statement to mean that the
presumption of resulting trust was therefore not rebutted, because to rebut it
would require Mr. Nishi to prove that the contribution was a gift. In my
respectful view, the Court of Appeal erred by taking this statement in
isolation as conclusive of the trial judge’s reasoning.
[34]
In the trial judge’s
reasons, immediately following his statement about there being “no issue of a
gift”, he states: “The presumption of a resulting trust is rebuttable by the
title holder showing that the payment was not intended to create a beneficial
interest” (para. 42). This demonstrates that the trial judge understood the
test for rebutting the presumption to be based on the absence of intention to
create a beneficial interest for the transferor. There would have been no need
for the trial judge to continue his analysis beyond his statement about there
being no issue of a gift, if the trial judge had not been of the opinion that
an intention to create a beneficial interest in the transferor was the test for
determining whether the presumption of resulting trust had not been rebutted.
[35]
The conclusion of the
trial judge was that Mr. Nishi had satisfied the burden on him of rebutting the
presumption of resulting trust. In so concluding, the reasons of the trial
judge appear to suggest that he distinguished between a gift and absence of an
intention by the transferor to hold a beneficial interest after the advance.
Although he made such a distinction, his conclusion that there was no intention
to create a beneficial interest in the property for Rascal is legally the same
as saying that there was an intention to make a gift to Nishi. The trial judge
erred in distinguishing between a gift and intention to create a beneficial
interest for the transferee but that error was inconsequential.
[36]
Indeed, the trial
judge’s error may well be explained by reference to the academic authorities as
some authorities have phrased the test for rebutting the presumption of
resulting trust using language about intention not to hold the beneficial
interest in the property. For example, Snell’s Equity describes the type
of evidence required to rebut the presumption as “any evidence tending to
indicate that A’s intention was that B should take the beneficial interest in
the property acquired with A’s purchase money” (J. McGhee, ed., Snell’s
Equity (32nd ed. 2010), at para. 25-012). Similarly, Oosterhoff on
Trusts describes the presumption of resulting trust as “a presumption that
the apparent donor did not intend to give the beneficial ownership of the
assets to the recipient” (A. H. Oosterhoff et al., eds., Oosterhoff on
Trusts: Text, Commentary and Materials (7th ed. 2009), at p. 640).
[37]
In my view, these
formulations are simply another way of describing whether the transferor’s
intention was to create a legal gift. There is no second category of intention
that rebuts the presumption. Pecore and Kerr did not recognize a
different category of intention, other than intention to make a gift, that
would rebut the presumption. This is consistent with other authorities such as Waters’ Law of Trusts in Canada where
the proof required to rebut the presumption is intention “to make a gift of the
property” (p. 401; see also pp. 406 and 409). In Canada, our jurisprudence is that there is no
difference between the intention to make a gift and the intention that the
transferor not hold a beneficial interest. In other words, in the case of a
gratuitous transfer, there is a gift at law when the evidence demonstrates
that, at the time of the transfer, the transferor intended the transferee to
hold the beneficial interest in the property being purchased.
[38]
Reviewing the trial
judge’s reasons in their full context confirms that he understood that Rascal’s
intention at the time of the advance was to make a legal gift — i.e. to
contribute to the purchase price without taking a beneficial interest in the
property. As the trial judge found, Rascal’s contribution to the purchase price
was motivated by recognition of the costs that it had imposed on Kismet, the
company owned by Ms. Plavetic, Mr. Heringa’s friend. As I will explain, this
intention, to make good on Rascal’s obligations to Kismet by way of a payment
to Mr. Nishi, is not inconsistent with a finding of a legal gift. Moreover, as
was clear from the May 28, 2001 fax, Rascal’s stated intention was to make the
advance without any conditions such as obtaining a beneficial interest in any
portion of the land.
[39]
The trial judge’s
comment that there was “no issue of a gift” was made in the context of
reviewing Mr. Nishi and Ms. Plavetic’s perspective on the purpose of the
payment:
In this case, there is no issue of a
gift. Neither Mr. Nishi nor Ms. Plavetic considered the plaintiff’s
contribution to be a gift. [para. 42]
Mr. Nishi and Ms.
Plavetic did not see the payment as a gift, because as the trial judge went on
to describe, Rascal acknowledged its responsibility for a debt to Kismet
related to the tax arrears arising from Rascal’s topsoil operation. However, it
made no sense for Rascal to make that payment directly to Kismet since Kismet
was subject to other liabilities and was essentially defunct. If Rascal had
made the payment to Kismet, it would not have assisted Mr. Heringa’s friends to
obtain title to the property. Making the contribution to the purchase price,
therefore, enabled Rascal to live up to its moral commitment in a way that
practically benefited Mr. Heringa’s friends. It also left open the possibility
that in the future they might agree to a second mortgage or a transfer of a
portion of the property to Rascal.
[40]
Indeed, Mr. Heringa’s instructions to his staff
on payment of his contribution towards the mortgage on the property refer to
the amount of the tax arrears ($110,679.74) down to the penny. The necessary
implication is that Mr. Heringa viewed the payments as connected with that
moral obligation. If Mr. Heringa’s intention at that time was for Rascal to
take a beneficial interest in the property, the moral obligation would not have
been fulfilled since Rascal would have used the payment to obtain a corresponding
interest in the land and not to make good on its moral obligation. In other
words, for these parties, one payment cannot be used both to discharge the
moral obligation and to obtain a beneficial interest in the land. The two
intentions are incompatible.
(2) Evidence of Rascal’s Intention
[41]
Evidence that arises subsequent to a gratuitous
transfer can be admissible to show the true intention of the transferor (Pecore,
at para. 59). However, it is the intention of the transferor at the time of
transfer that is determinative. The difficulty with subsequent evidence is
that it may well be self-serving or the product of a change in intention on the
part of the transferor (Pecore, at para. 59).
[42]
The trial judge commented on Rascal’s intention
twice in his reasons. When discussing whether there was an agreement between
Rascal and Mr. Nishi to convey part of the property to Rascal, the trial judge
stated that “[Mr. Heringa’s] intention and desire to secure an interest was
obvious, but Mr. Nishi would not agree” (para. 39). Later in his reasons, the
trial judge stated that he “specifically accepted the evidence of Mr. Nishi
that there was no intention to have any interest in favour of Rascal created in
the land” (para. 47). In my view, neither of these statements is inconsistent
with the trial judge’s conclusion that the presumption of resulting trust was
rebutted.
[43]
The trial judge’s first statement was made in
the context of discussing whether Mr. Heringa and Mr. Nishi had formed a
contract that conveyed an interest in the land to Mr. Heringa. The trial judge
stated:
His
intention and desire to secure an interest was obvious, but Mr. Nishi would
not agree. As a result, I conclude that there was no agreement
whereby Mr. Heringa was to be given an interest or ownership position in the
land. [Emphasis added; para. 39.]
Mr. Heringa’s desire to
obtain an agreement whereby half of the property would be conveyed to him was
clear from the content of the May 25, 2001 fax in which he asked for an
agreement to transfer and convey the bottom portion of the land to Rascal.
However, Mr. Heringa withdrew this request in his May 28, 2001 fax by stating
that there were to be no conditions or requirements attached to the financial
support.
[44]
Rascal argued before this Court that the trial
judge’s finding that Mr. Heringa’s “intention and desire to secure an interest
was obvious” constitutes a finding of fact as to Rascal’s intention to hold a
beneficial interest in the property as a result of the advance. However, the
trial judge’s findings with respect to the presence of an intention and desire
to enter a contract should not be applied to the issue of resulting trust, when
the trial judge did not choose to do so. The trial judge obviously did not
consider his finding of an intention to contract to be determinative of
intention for the purpose of the resulting trust analysis. Mr. Heringa withdrew
this request in his May 28, 2001 fax by stating that there were to be no
conditions or requirements attached to the financial support. It was open for
the trial judge to organize his factual findings in this manner.
[45]
With respect to the trial judge’s second
statement — that he “accepted the evidence of Mr. Nishi that there was no
intention to have any interest in favour of Rascal created in the land” — the
trial judge was speaking not just of Mr. Nishi’s evidence as to his own
intention at the time but also Mr. Nishi’s evidence as to Mr. Heringa and
Rascal’s intention at that time. This follows from his discussion of Rascal’s
acknowledgement of its responsibility for the debt (paras. 45 and 47).
[46]
At trial, it was Rascal’s position that at the
time of the contribution to the purchase price, Mr. Heringa and Rascal’s
intention was for Rascal to retain the beneficial interest in proportion to
that contribution. The trial judge essentially concluded that Mr. Heringa’s
evidence at trial about Rascal’s intention at the time of the transfer could
not be relied upon. Consistent with the caution of this Court in Pecore,
this is a quintessential example of why after-the-fact evidence should be
viewed with skepticism, because it often demonstrates a change in intention,
not the intention at the time of the advance. It was open to the trial judge to
reach this conclusion and it was well supported by the evidence, particularly
Mr. Heringa’s May 28, 2001 fax. The trial judge’s decision is not in error and
ought to be restored.
V. Disposition
[47]
The finding of the trial judge that the
presumption of resulting trust was rebutted is sound. I would allow the appeal and
restore the decision of the trial judge with costs to Mr. Nishi throughout.
Appeal
allowed with costs throughout.
Solicitors for the
appellant: Fasken Martineau DuMoulin, Vancouver.
Solicitors for the
respondent: Dentons Canada, Vancouver.