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Rebutting the Presumption of Resulting Trust


Can a parent make a gift of property to some adult children but not others? Is mere suspicion that the transfer is “out of character” sufficient to challenge such a gift?

In Hegel Estate v. Logan, 2014 BCSC 1026 the Supreme Court of British Columbia addressed allegations of undue influence and affirmed the framework for analyzing the gratuitous transfer of property from a parent to adult children (i.e., application of the presumption of resulting trust).

The Facts: Five of Eight Children Excluded from a Share of Parent’s Property

This action arose from the inter vivos gift of Mrs. Hegel’s family home (the “Property”) to three of her eight adult children. Although Mrs. Hegel’s original intention was to distribute the Property equally among her eight children, she later decided to leave the Property to the three children in the most financial need. Mrs. Hegel executed the gratuitous transfer in 2011 and died the following year.

Ronald Hegel, the executor of Mrs. Hegel’s estate and one of the five children excluded from a share in the Property, brought an action against the three siblings who held title to the Property (the “Defendants”). The plaintiff argued that his mother would not have transferred the Property to only three of her children unless she was under some pressure or was otherwise unduly influenced. He further alleged that the signature on the property transfer documents must have been forged and suggested that the solicitor who prepared the documents was involved in some misconduct. He sought an order that the Defendants held the Property on resulting trust and were thus obligated to return it to the original owner (in this case, Mrs. Hegel’s estate).

The Decision

The Defendants applied for summary dismissal under Rule 9‑7 of the Civil Rules. The summary trial rested on two key issues:

  1. Whether undue influence arose, and
  2. Whether the Defendants could rebut the presumption of resulting trust.

Weatherill J. granted the Defendants’ application, concluding that on the evidence the transfer of ownership did not occur because of any exercise of undue influence. Moreover, he found that the Defendants rebutted the presumption of resulting trust in connection with Mrs. Hegel’s transfer of the Property. The effect of the decision is that the three Defendants retained title to the Property; it did not form part of Mrs. Hegel’s estate and was thus not covered by her will.

Analysis of the Decision

No Evidence of Undue Influence

Weatherill J. concluded that the allegation of undue influence was completely without evidentiary foundation. Ronald Hegel could only assert suspicion and suggest that the transfer was out of his mother’s character. He was unable to identify any evidence from potential witnesses that would buttress his case. Indeed, he was reduced to speculating that his mother’s signature was forged and that the lawyer who had taken instructions had participated in a fraud. There was “not a shred of evidence capable of supporting this scurrilous and unfounded allegation.”

Rather, the evidence demonstrated that Mrs. Hegel was lucid and mentally aware when she made the transfer and that the solicitor who obtained instructions from Mrs. Hegel in relation to the transfer satisfied himself that she was of the correct state of mind and not subjected to any outside pressures.

In reaching that conclusion, Weatherill J. was mindful of the new shift in onus for allegations of undue influence pursuant to s. 52 of the Wills, Estates and Succession Act, S.B.C. 2009, c. 13.  However, as Mrs. Hegel died before WESA came into force, the new onus was not applicable.  

 

Presumption of Advancement Not Applicable

Weatherill J. affirmed that Pecore v. Pecore, 2007 SCC 17 restricts the application of the rebuttable presumption of advancement to gratuitous transfers from a parent to a minor child or children. On the facts, the presumption of advancement did not apply because the Defendants were not minors.

 

Presumption of Resulting Trust Applied, but was Rebutted

Where property is gratuitously transferred from a parent to an adult child, the presumption of resulting trust applies. A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner.

There will of course be situations where a transfer between a parent and an adult child was intended to be a gift. The court must analyze the evidence of the transferor’s intention to determine whether:

A. A resulting trust was created (i.e., presumption of resulting trust stands), or

B. The transfer was indeed a gift (i.e., presumption of resulting trust is rebutted).

Weatherill J. set out the framework to be used in determining the matter (at para. 41, citing Oord v. Oord, 2012 BCSC 1857):

[32] If the particular circumstances give rise to the presumption of a resulting trust, the burden of proof falls upon the party challenging the formation of a resulting trust to establish that the transfer was a gift. The standard of proof that is applicable to rebut the presumption is the balance of probabilities (Pecore at para. 43). The approach to be taken by the trial judge in examining this rebuttal is set out at para. 44 of Pecore:

44 As in other civil cases, regardless of the legal burden, both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. Thus, as discussed by Sopinka et al. in The Law of Evidence in Canada, at p. 116, the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities.

Thus, intention in gratuitous transfer cases is a question of fact. Evidence introduced to support or rebut a resulting trust may only concern the intention of the transferor at the time of the transfer (para. 44).

In this case, the evidence clearly established Mrs. Hegel’s intent with respect to the transfer, thereby rebutting the presumption that the Defendants held the Property on resulting trust for the estate (at para. 114):

In the circumstances of a family of eight adult children, some of whom the evidence discloses are better off financially than others and some of whom have benefitted from the Hegel parents more than others, that a mother would consider assisting a subset of the family who she thought were in need makes perfect sense.

In rendering his decision, Weatherill J. made note of a fact which provided subtext to the decision as a whole: over the years, Mrs. Hegel assisted the plaintiff much more than her other children, including loans that resulted in disparity and unhappiness. Weatherill J. found that the litigation was motivated by the plaintiff’s desire to secure more financial assets for himself and perhaps his jealousy that other children were receiving assets that he thought were his. This very evident desire “seriously compromises his credibility and reliability.” (at para. 102).

Special Costs

In a subsequent ruling, the plaintiff was ordered to pay special costs personally.  His allegations had no merit and the court found that his choice to proceed was worthy of sanction: see Hegel Estate v. Logan, 2015 BCSC 527, citing Hegel Estate v. Logan, July 23, 2014, Kamloops Registry Action No. 48567.

Unsuccessful Appeal from Summary Dismissal

Ronald Hegel challenged the summary dismissal of his case, alleging a variety of errors by the trial judge in concluding that the matter was suitable for summary determination and suggesting that he had not, as a self-represented person, received a fair trial. Harris J.A. dismissed the appeal, finding that Weatherill J. conducted the hearing fairly and was entitled to find the facts necessary to decide the case on a summary basis: see Hegel Estate v. Logan, 2015 BCCA 197.

 

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