Legal Blog

Sever

Joint tenancy is often a very useful and economic way to ensure that, on death, a joint tenant’s interest passes directly to the other joint tenant regardless of what a will might say. It also has the benefit that probate taxes do not apply to the transfer. However, sometimes, what initially seemed to be a good idea ultimately may no longer be advisable. Thus the question, “How does one sever a joint tenancy?” One situation was discussed in Hansen Estate v. Hansen, 2012 ONCA 112.

 Split

 A couple married in 1983, each having children from previous marriages. By 2001, husband became ill and was confined to a wheelchair. By 2006, wife had a series of heart attacks and was hospitalized for a number of months. On a bleak day in February 2010, both husband and wife were hospitalized overnight. When wife returned home, she was met by husband’s daughters, who accused her of mistreating their father. Welcome back.

 Wife moved out of the matrimonial home in March, but told husband that she would continue to look after their bills and their joint bank accounts. Husband made a new will in April, cutting out wife and leaving everything to his daughters. Coincidentally, on the very same day, wife’s lawyer sent a letter to husband stating that the parties had separated and that wife wanted to negotiate a separation agreement. The lawyer noted that there should be an uncomplicated equalization of property and incomes. He listed the parties’ assets as the jointly owned matrimonial home, which would have to be valued, two joint bank accounts, and an automobile in each person’s name. He stated further that wife was content for husband to remain in the home, if he bought her interest in it; otherwise, the home would be sold.

 Husband’s lawyer replied promptly stating that he was in the process of having a financial statement prepared and that, once the statements were exchanged, the lawyers could meet and resolve the matter.

 Shortly thereafter, wife moved into a senior’s complex, wife closed one joint account and transferred the proceeds to her name, and husband did the same for the other joint account.

 What Next

 Can you guess what happened? Yes, husband died before the parties even exchanged their financial statements. Wife then claimed husband’s share of the home by survivorship and husband’s daughters begged to disagree.

 The daughters brought an application for a declaration that husband’s share in the home passed under his will. The application judge dismissed the application. She decided that the evidence disclosed an expression of interest, but did not establish a pattern of conduct. She distinguished other cases on their facts.

 The daughters appealed to the Court of Appeal.

 Means

 The Court recounted the means by which a joint tenancy could be severed.

 “Rule 1:  unilaterally acting on one’s own share, such as selling or encumbering it;

Rule 2:  a mutual agreement between the co-owners to sever the joint tenancy; and,

Rule 3:  any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.”

Since the parties never managed to complete their separation agreement, the daughters had to rely on Rule 3, which the Court interpreted as follows: “Rule 3 governs cases where there is no explicit agreement between the co-owners to sever a joint tenancy.  In contrast, rule 2 is engaged where a mutual agreement to sever is claimed to exist. This distinction between rule 2 and rule 3 is significant. What follows from this distinction is that the proof of intention contemplated by rule 3 does not require proof of an explicit intention, communicated by each owner to the other(s), to sever the joint tenancy. If such proof were required, then rule 3 would be rendered redundant because a communicated common intention would be tantamount to an agreement. Instead, the mutuality for the purposes of rule 3 is to be inferred from the course of dealing between the parties and does not require evidence of an agreement.”

 Conduct

               The Court acknowledged that the application judge knew the appropriate test, but criticised her application of it. She had looked to previous cases where a severance was found to have occurred through a course of dealing, but, the Court stated, erred by treating these cases as if they created recognized categories that restricted the course of dealing analysis to established patterns of conduct. The Court noted, “The court’s inquiry cannot be limited to matching fact patterns to those in prior cases. Rather, the court must look to the co-owners’ entire course of conduct – in other words the totality of the evidence – in order to determine if they intended that their interests were mutually treated as constituting a tenancy in common. This evidence may manifest itself in different ways. Each case is idiosyncratic and will turn on its own facts.”

 The Court then parsed the letters that the two lawyers exchanged, reviewed the course of dealing that we have already discussed, and concluded that it was difficult to see what more the parties could have done, other than sign an agreement, to show their intention to separate their lives and divide their assets. The Court held that the requisite course of dealing evinced an intention to sever the joint tenancy.

 The Court therefore allowed the appeal and held that the daughters took husband’s half interest in the matrimonial home.

 ***

PER STIRPES

 One would think that the definition of per stirpes is well known. However, every 25 years or so, some enterprising barrister attempts to turn a sow’s ear into a silk purse. Such was the case in Mansell v. Milkeraitis 2011 CarswellOnt 4257 (S.C.J.).

 Phrase

 The will drafter said “divide the residue of my estate … among my issue then alive in equal shares per stirpes.” The testatrix had two children, both alive; one child had two children, the deceased’s grandchildren. The question for the court was whether the addition of the words “then alive” means that the residue is divided between the four claimants or whether, because their parent is still alive, the grandchildren receive nothing and the two children receive everything.

 The Ontario Court of Appeal in 1986 had interpreted the same words by effectively ignoring them. However, a B.C. trial division decision had later interpreted these words to mean a per capita distribution.

 The judge in this case felt bound to follow the Ontario Court of Appeal decision and divided the residue equally between the two children; the grandchildren got nothing. However, because there was some authority for the other interpretation, no matter how silly it was, the judge awarded costs of the application out of the estate. We recall an Ontario decision about 25 years ago that botched the interpretation and therefore the wills we draft refer to a definition and an explanation in a specifically cited legal textbook.