​Can one owner of a joint bank account withdraw all of the funds for their own purposes? Does the other joint accountholder have any right to claim against the withdrawn funds? The British Columbia Court of Appeal tackled such questions, as well as many others, in the recent decision of Zeligs Estate v. Janes, released on 29 June 2016.

This case involved a house on the University of British Columbia Endowment Lands owned by Mrs. Burnett and her daughter Diana as joint tenants. In 2010, when Mrs. Burnett was 102 years old and living in a care facility, Diana used her authority as co-owner and as Mrs. Burnett’s attorney (pursuant to an enduring power of attorney) to sell the UBC house for $2.7 million. Mrs. Burnett was mentally incapable at the time. Diana deposited the net sale proceeds into a bank account at CIBC, held in the joint names of herself and Mrs. Burnett. Within a few weeks, Diana withdrew the entire sum for her own purposes.

Mrs. Burnett died later that year, leaving a will that divided her estate equally between her daughters Diana and Barbara. Diana, as executor, took the position that the sale proceeds from the UBC house belonged to her by right of survivorship, and did not form part of the estate. According to Diana, all that remained in the estate was a balance of $126,000. She sent Barbara a cheque for $63,000.

Barbara died a year later, but her husband continued this claim on her behalf. At trial, the BC Supreme Court held that Diana severed any joint tenancy by selling the UBC house and taking possession of the entirety of the sale proceeds. Mrs. Burnett’s estate was therefore entitled to 50% of the net sale proceeds ($1,300,000), and Barbara would be entitled to half of that. Diana was also required to discharge the mortgages taken out on the property.

The B.C. Court of Appeal dismissed Diana’s appeal of these findings. In a significant judgment, the Court clarified the basic principles surrounding joint tenancies and the right of survivorship, and specifically considered the complexities of a joint bank account. The Court noted that equitable or beneficial ownership of a joint bank account may be different than legal ownership. Although it is difficult to apply the rules about joint tenancy to bank accounts (such as the requirement of the “four unities” of title, interest, time and possession), modern banking forms typically use the language of joint tenancy, and joint accounts include a right of survivorship. The equitable or beneficial share of each accountholder depends upon their intentions and, in some circumstances, one joint owner may have a claim in equity to withdrawn funds or any property purchased with the funds. Quoting the 1978 Supreme Court of Canada decision in Rathwell v. Rathwell, Madam Justice Dickson noted that ownership of the funds does not come down to which accountholder “reaches the bank first”.

The Court of Appeal rejected Diana’s arguments that she was entitled to withdraw all of the UBC sale proceeds from the joint account, and that any withdrawn funds became her exclusive property. When Diana transferred the sale proceeds to herself and her husband Jerry, she destroyed one of the “four unities” required for a joint tenancy – the unity of title. Diana’s unilateral actions effected a severance of the joint tenancy, so that 50% of the sale proceeds became Mrs. Burnett’s exclusive property and, shortly thereafter, part of Mrs. Burnett’s estate.

The Zeligs decision provides a careful summary of many vexing questions arising from the law of joint tenancy and the right of survivorship, and provides considerable guidance on how these questions may be determined. It is a reminder that joint bank accountholders may have the legal right to withdraw funds, but may not be the beneficial owners of the funds in the account.