In the tug-of-war match between unmarried cohabitants, equitable trust principles step in as referee. Equipped with the motto, ‘nothing comes for free’, equitable trust principles will award interest in a property to the part(ies) that ‘paid’ for it, with few exceptions. In the recent decision, Walters v Nusseiri,[i] the Court of Appeal for Ontario clarified how the doctrines of resulting trust and advancement are (or are not) applied to unmarried cohabitants.
Background
Mr. Walters and Ms. Nusseiri started cohabitating in 2002. In July 2005, Ms. Nusseiri purchased a home solely in her name (the “Property”). Two months later in September 2005, title to the Property was transferred to both parties as joint tenants. Their relationship ended in 2009, at which time Mr. Walters moved out. In 2016, the Property was sold and Ms. Nusseiri retained half of the proceeds of disposition. Entitlement to the other half was the issue in dispute at trial.
Mr. Walters argued he was entitled to half of the proceeds because he was the registered owner of 50% of the Property. He claimed he was a common law spouse who financially contributed to the acquisition, mortgage payments, property taxes, and utilities from 2005 to 2009. In contrast, Ms. Nusseiri argued that Mr. Walters did not contribute to the acquisition of the Property, and therefore held his 50% interest for her benefit based on the doctrine of resulting trust.[ii] She further disputed Mr. Walters’ characterization of the relationship, claiming that he controlled and exploited her as a sex worker, took her earnings, and lived off of them.
Trial and Appeal Decisions
In what the court described as “very detailed and comprehensive reasons”, the trial judge, Justice Cynthia Peterson, awarded the other half of the Property’s proceeds to Ms. Nusseiri. First, Peterson J held that a presumptive resulting trust arose because Mr. Walters did not, in fact, contribute to the Property’s purchase price. In other words, there was a gratuitous transfer. Since there was no evidence that the transfer was intended to be a gift, the presumption was not rebutted. Second, although not raised by Mr. Walters, Peterson J held that a constructive trust did not apply because there was no unjust enrichment. She found that there was no evidence that Mr. Walters’ renovation work enhanced the value of the property. Further, Mr. Walters was a “domineering and parasitic partner” who financially exploited Ms. Nusseiri, and did not contribute to the Property’s expenses.[iii]
Mr. Walters appealed the trial judge’s ruling on six grounds, arguing that she erred by misapprehending the law and mishandling the evidence. The appeal was dismissed.
Similar to last week’s blog post, Fettes v Clark: Leave the Snowflake Undisturbed, the court made it clear that it is not the role of an appellate court to “retry the case”. Rather, “careful factual findings by the trial judge” are owed deference. In this case, the court found that Peterson J applied the correct jurisprudence, and made conclusions that were open to her based on her careful assessment of the evidence presented.[iv]
Application of the Presumptions of Resulting Trust and Advancement
Importantly, if there was any uncertainty before, Walters affirmed that the presumption of resulting trust applies to unmarried cohabitants, but the presumption of advancement does not. This conclusion by Peterson J was affirmed by the court: “[h]er reasons carefully track the jurisprudence…from the Supreme Court of Canada [in Kerr v Baranow and Pecore v Pecore] … [and] [w]e have not been directed to any error in the trial judge’s review of the principles”.[v]
Peterson J explained that it is established jurisprudence that the presumption of resulting trust applies to gratuitous property conveyances.[vi] She held that section 14 of the Family Law Act can be reasonably interpreted to apply the presumption of resulting trust to unmarried spouses: “[t]he rule of law applying a presumption of resulting trust shall be applied…as if they were not married” (emphasis added).[vii] Further, although section 14 provides a rebuttal to the presumption if the spouses are joint tenants, this rebuttal only applies to married spouses.[viii]
The grantee bears the onus of rebutting the presumptive resulting trust. Peterson J relied on Kerr v Baranow to explain: “it is only the grantor’s intention at the time of gratuitous conveyance that counts”.[ix] The grantee must prove on a balance of probabilities that the grantor intended to gift the interest in property. In this case, the presumption was not rebutted because Mr. Walters led no evidence that Ms. Nusseiri intended a gift in September 2005.[x] This holding was consistent with the 2017 decision, Chechui v Nieman,[xi] where the Court of Appeal for Ontario similarly dealt with a property dispute between unmarried parties. In Chechui, the court held that rebutting a presumptive resulting trust requires a focus on the grantor’s intention at the time of transfer.
With respect to the presumption of advancement, Peterson J observed: “[t]he Supreme Court of Canada has expressly refrained from commenting on whether the presumption of advancement applies to unmarried couples, noting that the issue “may be…controversial””.[xii] However, she found that lower courts have indeed ruled on this issue, declining to apply the presumption of advancement to unmarried partners.[xiii] She agreed: “there is no basis in the jurisprudence to find that common law spousal relationships should be treated as a type of relationship of dependency that historically gave rise to the presumption of advancement”.[xiv]
Walters is an important reminder that in the absence of an Ontario statute, we must turn to and rely on equitable trust principles to resolve property disputes between unmarried cohabitants. This decision promotes the fair allocation of property in common law relationships characterized by a power imbalance and financial exploitation, emphasizing that registration to title does not automatically result in ownership. Simply put, if you didn’t pay for it, it may not be yours to keep.
[i] 2020 ONCA 615 [Walters (ONCA)].
[ii] Ibid at paras 4–5. Note: The argument of a presumptive resulting trust was pleaded in the alternative. Ms. Nusseiri’s primary argument was that the transfer of title to Mr. Walters was invalid due to duress or undue influence; however, the trial judge found it unnecessary to deal with this argument once she found that the presumption of resulting trust applied.
[iii] Ibid at paras 5–8; Walters v Nusseiri, 2019 ONSC 22 at paras 80–103 [Walters (ONSC)].
[iv] Walters (ONCA), supra at paras 10–15.
[v] Ibid at para 11, citing Kerr v Baranow, 2011 SCC 10; Pecore v Pecore, 2007 SCC 17.
[vi] Ibid at para 11, citing Family Law Act, RSO 1990, c F3, s 14; Walters (ONSC) at paras 70–73.
[vii] Walters (ONSC), supra at paras 78–79.
[viii] Ibid at para 76; Walters (ONCA), supra at para 11.
[ix] Walters (ONSC), supra at para 95, citing Kerr v Baranow, supra at para 25.
[x] Ibid at para 96.
[xi] 2017 ONCA 669.
[xii] Walters (ONSC), supra at para 77.
[xiii] Ibid at para 78, citing Lazier v Mackey, 2020 ONSC 3182 at para 62; Gaunt v Woudenberg, [2005] OJ No 2413 at para 15.
[xiv] Ibid at para 78.
