Does a promise to transfer property create an express trust?

July 6, 2022 | Stephen Hsia, Kaitlynd Hiller

The British Columbia Court of Appeal recently dealt with whether a promise to transfer property created an express trust in Virk v. Singh, 2022 BCCA 153.

Background

Mr. and Mrs. Virk married in India in 1977, where they met Mr. Singh. They remained close with Mr. Singh after moving to Canada. The Virks purchased a house in 1993. Mr. Singh purchased the neighbouring house eight years later (the “Property”).

Mr. and Mrs. Virk separated in 2004, and Ms. Virk remained close to Mr. Singh. The relationships turned litigious—Mr. Virk sued Mr. Singh for an alleged debt, and Ms. Virk started a matrimonial action against Mr. Virk (on the advice of Mr. Singh).

In 2006, Mr. Singh promised he would give Ms. Virk the Property in exchange for some money and a commitment to help Mr. Singh in the debt action brought by her ex-husband.

Ms. Virk complied. She swore false affidavits in support of (and at the request of) Mr. Singh in the debt action. She also received $230,000 in the matrimonial action which she then paid to Mr. Singh and towards the Property. She moved into the Property and used all her money and contributed extensive personal labour to maintain it.

By 2015, Ms. Virk and Mr. Singh’s relationship broke down. Mr. Singh wanted to sell the Property that Ms. Virk had been inhabiting for seven years.

Ms. Virk brought a claim for ownership of the Property, alleging Mr. Singh’s promise to give her the Property created an express trust. Alternatively, she argued Mr. Singh had been unjustly enriched by her contributions to the Property.

Trial Court decision

The trial judge indicated that, in order to find an express trust, there must be certainty of the subject (property) of the trust, certainty of the beneficiary of the trust, and certainty of intention to create the trust. At issue at trial was whether Mr. Singh had the requisite certainty of intention to create a trust. The law of trusts allows a court to find certainty of intention in the absence of a formal agreement by considering what a reasonable person would discern from the words and conduct of the parties, and the surrounding circumstances.

The trial judge found that Mr. Singh’s actions after making the promise did not demonstrate an intention to give up his interest in the Property. Although he did promise the Property to Ms. Virk, this was a “false promise,” and he never intended to create a trust for her.

However, the trial judge found that Mr. Singh had been unjustly enriched, and awarded Ms. Virk a constructive trust.

Appeal Court decision

The Court of Appeal criticized the trial judge’s analysis with respect to Mr. Singh’s intention.

They emphasized that ascertaining the intention of a settlor is an objective inquiry. They found the trial judge erred in law by failing to assess certainty of intention based on what a reasonable person would have discerned from Mr. Singh’s words and conduct, and focusing instead on what he subjectively intended.

Further, they found the Judge erred by not limiting her consideration of the surrounding circumstances to the time of the promise. The Court warned that if it’s necessary to consider post-transaction conduct, courts must carefully assess credibility and reliability. Since the Judge did not find Mr. Singh to be a credible witness, it was an error to give his conduct after the promise significant weight.

Despite these errors, the Court of Appeal unanimously upheld the finding that no express trust existed. They determined that although a reasonable person at the time of the promise would likely conclude Mr. Singh intended to benefit Ms. Virk, they would not necessarily conclude he intended to benefit her on trust. His promise may have been to give, sell, or transfer the Property on certain conditions, but the evidence did not establish a clear intention to transfer his beneficial interest in the Property.

The finding of unjust enrichment was upheld and the appeal dismissed.

Lessons

Virk v. Singh is a reminder that a court will not find an express trust where the promise or intention of the settlor does not create a trust-like arrangement. The reasonable person must be able to conclude objectively that the settlor intended to hold the property for the benefit of another person based upon the words, conduct, and surrounding circumstances of the settlor at the time of the promise.

Virk v. Singh also serves as a reminder that, even if a litigant cannot establish an express trust, they might find success establishing a constructive trust arising from unjust enrichment.

As an appellate court decision, Virk v. Singh is now persuasive authority to courts throughout Canada. Canadians seeking to create a trust or enforce an alleged trust should speak to a member of Miller Thomson’s Private Client Services team for professional advice.

Disclaimer

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