( Disponible en anglais seulement )
In our July 9, 2019, issue of Wealth Matters[1] we discussed the decision of the Ontario Supreme Court in Marley v. Salga.[2]
In that lower court decision, the application judge, Mr. Justice Reid, held that an otherwise valid joint tenancy in respect of a matrimonial home had been severed prior to the death of one of the joint tenants by applying the “course of dealings” rule for effecting such a severance. Many commentators have since questioned the correctness of that decision and whether the decision would have any weight given the limited factual circumstances relied on by the application judge.
In the now-released decision of the Ontario Court of Appeal,[3] the court summarily dismissed the surviving spouse’s appeal, stating that:
“The application judge set out the proper test for determining whether a joint tenancy has been severed. This is a fact-specific inquiry. We see no basis on which to interfere with the application judge’s decision.”
In short, the appeal court has shown deference towards the application judge’s factual inquiry and analysis and found no errors of law. Thus, the “course of dealings” rule for severing a joint tenancy is alive and well, in Ontario at least. Estate and trust planners will need to expand the scope of their due diligence inquiries to determine when, what appears to be an otherwise valid joint tenancy, may have been severed without an express act of severance.
In our earlier article, we argued that the factual basis upon which the lower court relied would set an unusually low bar for finding that a severance had occurred. To refresh, there were two key facts the lower court relied on as evidence supporting the severance:
- The first was the last will of the deceased joint tenant, the terms of which the court found to be “inconsistent with the right of survivorship in joint tenancy”;
- The second was a recorded deathbed conversation between the deceased and his surviving spouse, which the court found made clear that the deceased and his surviving spouse “were in agreement as to how the property should be handled on his death”.
(As an aside, in the appeal the surviving spouse appears to have argued that the recording was inadmissible but was unsuccessful on this ground as well.)
It is well settled that one cannot sever a joint tenancy by will.[4] But the lower court found that by its terms the will evidenced an “assumption” by the testator that he owned one-half interest in the subject property that he could dispose of by his will, and went on to state that, “the provision in a will is a piece of evidence that can be used to help discern whether there was a common intention to treat the joint tenancy as severed, particularly if the provision in the will was known to the other party”. But, if one is to consider the “totality” of the evidence favouring a severance the court should have considered the will as a whole. If the will had only purported to deal with the testator’s undivided one-half interest on the assumption that the right of survivorship had been severed that would be one thing. But the will goes even beyond that and purports, not only to deal with and restrict the applicant’s possessory rights to a property in which as a minimum she holds a one-half interest, but also to compel a sale “whereupon the said dwelling house or residence shall be sold and the net proceeds shall be added to the residue of my estate …” That statement alone should be sufficient to evidence the extent of the testator’s misapprehension of the nature and extent of his property interest.
The (arguably) more compelling evidence relied upon by the lower court was a recorded deathbed conversation between the testator and the applicant, wherein the two were heard to discuss the testator’s wishes for the jointly held property and the applicant, surviving spouse, was heard agreeing with and confirming the testator’s wishes. In this case, the court was prepared to accept that the applicant intended to effect a significant diminution in her property rights on the basis of soothing words spoken to her husband on his deathbed without fully understanding her rights, without the benefit of any legal advice as to the consequences that would result to her and without any compensation or consideration for the loss of those rights.
The “totality” of the evidence before the lower court still appears to fall far short of the evidence relied upon in the leading case of Hanson Estate v. Hanson:[5]
“the respondent moved out of the matrimonial home; the spouses were negotiating the equal division of their family assets, the most significant of which was the matrimonial home; the respondent took steps towards valuing her half-interest in the home; the deceased rewrote his will in a way that was inconsistent with the operation of a right of survivorship; and the spouses opened separate bank accounts.”
It is unfortunate that the appeal court chose not to conduct a more thorough legal analysis of this potentially problematic and far-reaching rule for effecting a severance of a joint tenancy and it now appears likely that more challenges to the supposed sanctity of joint tenancy can be expected.
[1] Severing a Joint Tenancy by Will; Marley v. Salga, 2019 ONSC 3527
[2] Marley v. Salga, 2019 ONSC 3527, released June 6, 2019.
[3] Marley v. Salga: 2020 ONCA 104, released February 10, 2020.
[4] « [t]he right of survivorship takes precedence over any disposition made by a joint tenant’s will »: Sorensen’s Estate, at p. 35 D.L.R., citing Megarry and Wade, The Law of Real Property (London: Stevens & Sons Ltd., 1957), at p. 369.
[5] Hansen Estate v. Hansen, 2012 ONCA 112.
