In an unusual decision of the Ontario Superior Court of Justice (Marley v. Salga, 2019 ONSC 3527, released June 6, 2019), Mr. Justice Reid may have opened a Pandora’s Box with respect to the sanctity of the holding of property in joint tenancy with right of survivorship, challenging estate planners’ accepted understandings of property law, the extent of a person’s estate upon death and the rights of a testator to deal with his or her interests in jointly-held property.
The testator, Leslie Salga, died in or about August 2015. He was divorced from his first wife with whom he had three children: Suzanna, Michelle and Andrew. In 1999, he married Karen Marley, the applicant, and was still married to her at the time of his death. In 2004, the testator and the applicant purchased the subject property (the “Loretta Drive Property”) as joint tenants. The Loretta Drive Property was occupied by the testator and the applicant as their matrimonial home and was held as such at the date of the testator’s death.
The testator died testate, having made his last will July 29, 2015, approximately one month prior to his death. The validity of the will was not contested as part of the applications. The will named Helmet Klassen as estate trustee. In the will, the testator purported to deal with his undivided one-half interest in the Loretta Drive Property as follows:
To allow my wife, KAREN ANNE MARLEY, if she survives me, the use, occupation and enjoyment of my one-half (1/2) interest in the house and lot municipally known as 28 LORETTA DRIVE, NIAGARA-ON-THE-LAKE, ONTARIO, on the following terms:
(i) KAREN ANNE MARLEY’s right to occupy such premises is conditional upon her continuing to pay all taxes, insurance premiums, mortgage interest (if any), repairs and maintenance, and any other charges relating to the said residence. In the event that, in the judgment of my Trustee, KAREN ANNE MARLEY is in default of her obligations hereunder, my Trustee may, in my Trustee’s sole discretion, give KAREN ANNE MARLEY sixty (60) days’ notice to remedy the default to my Trustee’s satisfaction, failing which, my Trustee will have the right to recover possession of the premises; and
(ii) KAREN ANNE MARLEY’s rights with respect to the premises will cease, and her right to occupy the premises will end in any event when:
A. She dies;
B. She shall in writing advise my Trustee that she no longer desires to have such property held for her;
C. She no longer personally makes her home in said premises;
D. My Trustee decides to exercise my Trustee’s right to recover possession of the premises in accordance with the terms and conditions of subclause (i) hereof;
E. She is absent from the said real property for an extended period of time with no reasonable expectation of her return to the said property; or
F. She becomes a spouse or co-habits within the meaning of the Family Law Act, R.S.O. 1990, c.F3, as amended,
whichever event shall first occur, whereupon the said dwelling house or residence shall be sold and the net proceeds shall be added to the residue of my estate and dealt with as part thereof.
The issue in the applications was whether the joint tenancy was severed such that the testator and the applicant held the property as tenants-in-common at the date of the testator’s death. The remaining issues in the applications were only relevant if the answer to that first question was “yes”.
By way of background, the decision makes clear that the surviving children of the testator, including the applicants, did not accept the applicant in their father’s life and certainly the applicant believed that the children were intent on minimizing her personal and financial connections with the testator. It also appears that the feeling was mutual and that the applicant, if not fearful of, was certainly distrustful of, the testator’s children.
Notwithstanding the express manner in which the title to the Loretta Drive Property was held, the respondents tendered affidavits, most of the content of which was held to be hearsay and inadmissible, as to the testator’s intention to leave his one-half interest in the property to his daughters. But the most remarkable and compelling piece of evidence tendered was a deathbed conversation between the testator and the applicant, surreptitiously recorded by one of the respondents, in which the testator’s wishes for his interest in the property were discussed. In that recording, the applicant can be heard to be acknowledging the testator’s wishes as set out in his will and acknowledging that:
“… at the time that I can’t keep it up anymore and it gets sold, or I die, then your 50 percent of the house goes-, and whatever-, goes to the estate. Minus all exp-, your expenses. But in mine, mi-, mine’s all my expenses of my side. And what’s ever left on your side gets divided between the girls. That’s simply what it (inaudible), Lasco, and I have no problems (inaudible). If I had not tried to get you to get the will done, if you had died without a will, the girls would only have gotten a quarter of that, and I wanted them to get what you’re saying.”
In considering the law on the severance of joint tenancies, Mr. Justice Reid refers to the case of Hansen Estate v. Hansen. Writing for the Court in Hansen Estate, Chief Justice Winkler, referring to and paraphrasing Williams v. Hensman, set out the “three rules” by which a joint tenancy may be severed, as follows:
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. (emphasis added).
Mr. Justice Reid states that, for the purpose of the applications, the parties had agreed that “the potentially relevant mode of severance is by a “course of dealings”. And, without citing any authority, went on to state the following: “the equitable principle underlying the rule is to prevent a party from asserting a right of survivorship where doing so would not do justice between the parties in cases where there is no explicit agreement to sever the joint tenancy.”
There was no evidence presented that the testator took unilateral steps to sever the joint tenancy. And there was no evidence presented of a mutual agreement to sever the joint tenancy.
The Court went on to state that, in deciding whether there was a “course of dealings” sufficient to sever the joint tenancy, the Court must consider “the totality of the evidence so as to discern whether the parties shared a common intention to treat their interests in the property as constituting a tenancy-in-common.” Furthermore, the Court confirmed that the respondents bore the burden of proving on a balance of probabilities the existence and sufficiency of the “course of dealings”.
In the words of the Court, the starting point of the analysis is the manner in which title to the Loretta Drive Property was purchased. The Court states: “Clearly the title was taken in joint tenancy.” The Court then went on to note that “many of the factors found in Hansen Estate to support the common intention to create a tenancy-in-common do not exist in this case.” Notwithstanding this (and so as not to keep the reader in suspense), the Court held that there was a course of dealings “on the part of Mr. Salga in which Ms. Marley shared” sufficient to show that the interests of both parties was mutually to be treated as constituting a tenancy-in-common; and on that basis, the Court held that the estate of the testator was entitled to an undivided one-half interest in the Loretta Drive Property as tenants-in-common with the applicant.
What then, was the evidence on which the Court did rely? The first key piece of evidence relied on by the Court was the will, the terms of which the Court found to be “inconsistent with the right of survivorship in joint tenancy.” The second was the recorded deathbed conversation between the testator and the applicant, which the Court found made clear that the testator and the applicant “were in agreement as to how the property should be handled on his death.”
If this is the “totality” of the evidence on which the Court relied, it seems thin indeed and the legal analysis highly questionable.
Consider first the Court’s reliance on the will. The Court acknowledges that, by its terms, the will evidenced an “assumption” by the testator that he owned a one-half interest in the Loretta Drive Property that he could dispose of by his will. But this assumption was an obvious misapprehension on the part of the testator and one that can be attributed to a lay person’s lack of understanding and sophistication with respect to property law matters (this despite the Court’s express finding that the will was prepared for the testator by a lawyer). Furthermore, the Court acknowledges that the will is an expression of the testator’s intent; it cannot possibly be relied upon as evidence of a mutual intent even if we accept that the applicant had knowledge of the contents of the will. The Court states: “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.” That is a remarkable statement. Surely something more than knowledge of the contents of another’s will must be required to bring about so significant a consequence to a person’s legal property rights as a loss of a right of survivorship. Finally, consider the provisions of the will itself that purport to deal with the Loretta Drive Property. 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. However, the will goes beyond even 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 Court places great weight on the recorded deathbed conversation between the testator and the applicant. But consider the context in which this conversation took place and the respondent’s role in recording it. The applicant was administering to her husband on his deathbed. It is entirely natural that she should attempt to soothe his worries and put his mind at ease. It is also perfectly natural that she should be wary of her step-daughters and their animus towards her. The applicant’s evidence was that her husband, the testator, did not intend to sever the joint tenancy and only made statements to that effect to appease his daughters. That evidence is self-serving and the Court was right to discount it. Even if the Court accepted that the testator formed an intention to sever (and that, in itself, is subject to a determination that the testator understood the nature of his property rights sufficiently to form such an intent), that only gets the Court half-way to where it needs to be. If the applicant did not believe the testator formed an intention to sever the joint tenancy, then it is nearly impossible for the Court to infer a corresponding intention on the part of the applicant. As was the case with her husband the applicant, a lay person, would have been unsophisticated with respect to property law matters and may well have been under the same misapprehensions as her husband as to the nature and extent of their respective interests in the Loretta Drive Property. 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 advice as to the consequences that would result to her and without any compensation or consideration for the loss of those rights.
This decision represents a significant and worrisome expansion of the scope of the “course of dealings” rule for severing a joint tenancy and has the potential to introduce significant uncertainty to the law of property. At this point, it would be wise to return to the words of Vice-Chancellor Wood as expressed in Williams v. Hensman, speaking of the third branch of the rule:
When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. You must find in this class of cases a course of dealing by which the shares of all the parties to the contest have been effected …
That is a caution to which Mr. Justice Reid, in the present case, appears to have given little weight.
It is to be hoped that an appeal court will be given an opportunity to revisit this important issue.