It is not unusual for romantic partners to provide money transfers as gifts or loans during a relationship. The problem is that when a relationship ends in separation or divorce, tensions can arise over the characterization of these funds, with a donor alleging the money was never meant as a gift and should be repaid. The recipient may have a different view and insist on retaining the transferred funds. While courts can consider the circumstances relating to the transfer, it is likely that parties did not clearly document their intentions of property transfers during their relationship, therefore misunderstandings and disputes can easily arise. Disputes like this are common and the financial consequences to the parties can be significant when determining property division.

Relationship Status Provides Guide as to Whether the Transfer was Intended as a Gift or Loan 

Legal presumptions act as a guide in resolving disputes over transfers of property. Depending on the circumstances, there may be a presumption of a resulting trust or a presumption of advancement. In a resulting trust, a party named on title is obligated to return the property to the original owner unless it can be established that the property was transferred as a gift. 

In Pecore v. Pecore, Justice Rothstein found that the presumption of a resulting trust is the general rule for gratuitous transfers of property. However, the presumption of a resulting trust is a rebuttable presumption. Where a gratuitous transfer is made, the onus is on the recipient to demonstrate that a gift was intended. In certain circumstances, a presumption of advancement can apply in place of the general presumption. Depending on the nature of the relationship between the transferor and the transferee, a presumption of advancement can arise which will shift the burden so that the challenging party must rebut the gift presumption. Justice Rothstein noted that the presumption of advancement normally arises during transfers between spouses, or where the transferor is a parent and the transferee their child. 

Where the burden of proof is on the transferee, it must be established on a balance of probabilities that the money was transferred as a gift. Zachariadis Estate v. Giannopoulos highlights the fact that common law relationships and romantic friendships do not lead to a presumption of a gift. Courts will consider the unique circumstances of a transfer where there is a dispute over the characterization of property. The court in Colangelo v. Amore explained that a gift is a voluntary transfer of property where the transferor does not intend that the property will be returned. Three requirements are necessary for a valid gift: an intention to donate, sufficient act of delivery, and acceptance of the gift. 

The Intention at the Time of Transfer

In cases of gratuitous transfers, the overriding consideration is the transferor’s actual intention regarding the property. Following from the applicable presumption, a court will subsequently evaluate the available evidence to try to determine the transferor’s true intention at the time the transfer took place. Events subsequent to the transfer, such as the relationship breakdown, will not be illustrative of intent at the relevant time frame. 

To establish donative intent, the evidence cannot be consistent with any intention other than that the donor intended to completely divest their interest in the property. When evaluating intent, the court can look to a range of factors, including the donor’s actions and the surrounding circumstances. In Kramer v. Kramer, the court considered:

1. The nature of the relationship between the parties; 
2. The size of the gift as measured against the totality of the donor’s property, and;
3. The importance of the gifted item in relation to the donor’s overall property. 

Objective Factors for the Court to Consider 

In Locke v. Locke, Justice Wilson compiled a list of factors that helped determine whether the advancement of money was a gift or a loan, including: 

1. Whether there were any contemporaneous documents evidencing a loan;
2. Whether the manner for repayment is specified;
3. Whether there is security held for the loan;
4. Whether there are advances to one child and not others or advances on equal amounts to various children;
5. Where there has been any demand for payment before the separation of the parties;
6. Whether there has been any partial repayment; and
7. Whether there was an expectation or likelihood of repayment.

Determining the parties’ intention and weighing credibility of parties can be difficult. In the midst of a relationship, recipients of money cannot simply intend to receive property as a gift rather than a loan. Courts have warned that parties who receive sums of money from friends should take care that if there is no intention to repay that the intention is clearly evidenced. The decision in Simmons v. Clarke stated that “public policy demands that such casual passing of monies should be repayable unless there is satisfactory evidence to show that it was not intended by both parties to be repaid.” 

Did Spouse Intend to Gift Over $500,000 in Property Down Payments? 

The case of MacIntyre v. Winter involved a dispute over the proceeds from the sale of a house. The parties were both joint owners of the home, although the appellant, Winter, contributed most of the money towards the purchase of the home. The respondent, MacIntyre, sought an equal division of the proceeds, while the appellant sought unequal distribution, claiming $480,000 of the proceeds based on the fact that he had personally contributed the deposit and down payment on the purchase of the parties’ first home, and subsequently contributed funds towards the purchase of the home involved in this matter. In total the appellanat’s contributions surpassed $513,000. 

The trial judge found that there never was an intention that the appellant would be repaid the deposit and down payment, therefore ordering an equal division of the proceeds. The trial judge characterized the funds as gifts that the appellant provided as part of the financial arrangements for the couple’s property purchases. The appellant appealed the decision to the Ontario Court of Appeal, arguing that the trial judge misapprehended the evidence and incorrectly found that the funds were intended to be gifts. 

Court of Appeal Finds Certain Factors Not Relevant to Intention

The presumption of a resulting trust applied in the circumstances, however, there were two starkly different stories regarding the money. The appellant stated that he was clear that he would recover the money back in the event the house was sold. Conversely, the respondent alleged there was no mutual understanding that his partner’s financial contribution would be returned to him. The trial judge rejected the appellant’s evidence but did not directly resolve the divergence between the two views. 

The Court of Appeal noted that the central issue revolved around the appellant’s intention at the time advanced the funds, therefore the intention of both parties was not relevant. The trial judge cited a range of factors to support a conclusion the money was a gift, which, upon review by the Court of Appeal, were found to be irrelevant. These factors included the length of time that the parties had cohabitated, who was responsible for home ownership expenses, and the absence of any reference of repayment in estate documents. Though the respondent had a right of survivorship due to the parties being named as joint tenants, that alone did not imply a right of ownership. Without any convincing evidence, the respondent was unable to rebut the presumption of a resulting trust. 

Contact the Experienced Family Law Lawyers at NULaw for Guidance on Loans and Gifts

In the event of a relationship breakdown, parties may have difficulty remembering the particulars regarding certain financial transfers between them and their partner. The experienced family lawyers at NULaw in Toronto can help in family law matters, including property division disputes. Contact us online or at 416-481-5604 to book a confidential consultation today.