Court File and Parties

COURT FILE NO.: CV-23-00091697-00ES DATE: 2023/06/13 ONTARIO SUPERIOR COURT OF JUSTICE

IN THE ESTATE OF TRACEY IRENE JUNEAU, deceased APPLICATION UNDER section 60 of the Trustee Act, R.S.O. c. T.23 and Rules 9.01, 14.05(2), 14.05(3)(a) and 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194

Counsel: Cheryl Letourneau for the Estate Trustee

HEARD: May 23, 2023

Reasons for Decision

REES J.

I. Overview

[1] Nathan Juneau, as Estate Trustee Without a Will for the Estate of Tracey Irene Juneau, applies under s. 60 of the Trustee Act, R.S.O. c. T.23, seeking the court’s opinion, advice or direction in the management of trust property. Specifically, Nathan seeks a determination that he and Tracey, who were married but separated at the time of her death, were joint tenants in the matrimonial home and in the proceeds from its sale.

[2] $220,000 in undistributed proceeds of sale were paid into court by the spouses’ real estate lawyer following Tracey’s death. Therefore, Nathan also seeks an order paying the total funds out of court to him in his personal capacity.

[3] The principal issue is whether the joint tenancy in the property was severed before Tracey’s death. If the joint tenancy existed at the time of Tracey’s death, Nathan would be entitled through survivorship to the total funds paid into court. If, however, the joint tenancy was severed, the funds would be split between Nathan and Tracey’s estate. Because Tracey died intestate, her estate’s portion would be distributed according to the rules of intestate succession under the Succession Law Reform Act, R.S.O. 1990, c. S.26. Tracey had five children. They were not parties to this application. I am nonetheless mindful of their potential interests.

II. Facts

[4] Nathan and Tracey Juneau met in 2010 and married in 2013. Tracey had three children by her previous relationship. Nathan and Tracey had two children together.

[5] Nathan and Tracey bought a four-bedroom home in Nepean (the Property), which became their matrimonial home.

[6] In the fall of 2018, Tracey starting drinking alcohol regularly. Over time, her alcohol dependency impacted the family and Tracey’s ability to take care of herself, and eventually led to her admission to hospital to treat pancreatitis. After her discharge from hospital, Tracey’s dependence on alcohol increased. She behaved threateningly towards Nathan and her ability to safely supervise her children was in question.

[7] In February 2022, Nathan moved out of the Property with the children.

[8] On April 2, 2022, with the assistance of their respective lawyers, Nathan and Tracey agreed to a document entitled “Memorandum of Understanding”. Under the MOU, Tracey and Nathan agreed to sell the Property and to divide the net proceeds from the sale equally between them.

[9] Nathan and Tracey entered into an Agreement of Purchase and Sale for the Property in April 2022, with a closing date of July 15, 2022. Following the closing, Tracey and Nathan received an equal interim distribution of the proceeds of sale, leaving $225,000 in the trust account of their real estate lawyer.

[10] Tragically, on September 19, 2022, Tracey died following a heart attack. She died intestate and is survived by Nathan and her five children. When she died, Tracey and Nathan were living apart but had not divorced.

[11] In October 2022, Nathan was appointed Estate Trustee Without a Will for Tracey’s Estate.

[12] In January 2023, the couple’s real estate lawyer brought an interpleader application for an order to pay into court the remaining proceeds from the sale of the Property, which remained in his trust account. The application was granted and $220,000 ($225,000 less $5,000 in legal fees) was paid into court.

III. Analysis

[13] Nathan argues that he and Tracey owned the Property as joint tenants and the proceeds from the sale of that Property remain money on deposit as joint tenants. He contends that he and Tracey were living apart temporarily to protect the children from Tracey’s alcoholism while she sought treatment, and that the MOU was intended to be temporary until Tracey was well enough to resume parenting.

[14] Consistent with this position, Nathan maintains that he and Tracey were not separated at the time of her death within the meaning of s. 43.1 of the Succession Law Reform Act. But at the hearing of the application, counsel for Nathan clarified that I was not being asked to decide this question under the Succession Law Reform Act.

[15] Nathan also relies on the presumption of a resulting trust in s. 14 of the Family Law Act, R.S.O. 1990, c. F.4:

14 The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that,

(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).

[16] Nathan says that the proceeds deposited into court are a jointly held asset that flow to Nathan in his personal capacity through his right of survivorship as a joint tenant. He says that at no time did he and Tracey contemplate severing the joint tenancy and neither of them took intentional steps to do so.

A. Does the record support Nathan’s position?

[17] In my view, however, Nathan’s evidence and position are inconsistent with the contemporaneous record.

[18] Turning first to the MOU. Nathan and Tracey agreed to the MOU following a mediation session and with the assistance of their lawyers. Paragraphs 1.8 and 1.9 of the MOU indicate that the parties agreed to divide equally the net proceeds from the sale of the Property and to negotiate the division of the household contents between them:

1.8 After paying the amounts outlined in Paragraph 1.7 of this M of U, above, the parties shall direct their real estate lawyer on the sale to divide the net proceeds equally.

1.9 The parties will take all reasonable steps to negotiate the division of household contents to their mutual satisfaction, failing which they will rely upon the dispute resolution section that will be included in their separation agreement. [Emphasis added.]

[19] Although I am not being asked to determine whether Nathan and Tracey were separated at the time of her death for the purpose of s. 43.1 of the Succession Law Reform Act, I must address Nathan’s contention that he and Tracey were not separated at the time of her death because it is relevant to their intention to sever the joint tenancy.

[20] Contrary to Nathan’s evidence, the MOU includes various terms that indicate that he and Tracey were separated and intended to deal independently with their assets. First, it included terms contemplating the equalization of net family property:

Equalization of Net Family Property

3. The parties will immediately contact the Pension Centre to obtain pension statements confirming estimate value of pensionable benefits accumulated during the marriage that will be provided to actuary Guy Martel upon receipt. The parties shall share the cost of Guy Martel's reports, coordinating efforts to provide the pension estimates to him together (with assistance from their mediator if necessary).

3.1 As soon as possible, the parties will provide to their counsel necessary documents and information to enable counsel and/or the mediator to prepare their net family property statement.

The equalization of net family property under the Family Law Act occurs following separation or divorce.

[21] A second indication of their separation is found in the MOU’s terms relating to child and spousal support, which are to be calculated “as of the date of their date of separation”:

Child Support /Spousal Support

4. As soon as possible, the parties will provide to their counsel necessary documents and information to enable counsel and/or the mediator to prepare the appropriate child/spousal support calculations, as of the date of their date of separation and shall negotiate through counsel a reconciliation of their mutual obligation up to closing date for the sale home regarding support and to confirm terms of child and spousal support to commence at the time moving forward. [Emphasis added.]

[22] A third indication of their separation is their agreement under the MOU that the mediator would prepare a separation agreement as soon as possible:

Drafting of Agreement

5. The parties have agreed that the Mediator shall prepare a Separation Agreement, with input from counsel outlining terms set out in this MofU as soon as possible. [Emphasis added.]

There is, however, no evidence on the record that a separation agreement was prepared before Tracey’s death.

[23] Finally, on Nathan’s own evidence, he and Tracey had lived apart from February 2022 until her death. Although Nathan’s evidence is that the MOU was intended to be temporary until Tracey was well enough to resume parenting, the MOU does not support this overall. Nathan also maintains that following the execution of the MOU and its implementation, Nathan and Tracey agreed that they would eventually reconcile once Tracey had made progress with her sobriety. Even if this is so, there is no evidence that Tracey made progress with her sobriety or that they ultimately reconciled before Tracey’s death. I find the contemporaneous evidence more persuasive than Nathan’s after-the-fact account.

[24] Apart from the MOU, there is further evidence that Tracey and Nathan intended to sever their joint tenancy in the Property. Tracey and Nathan certified to the purchasers of the Property in paragraph 11 of the Vendor’s Closing Certificate that: “FAMILY LAW: The Transfer delivered in this transaction correctly shows each Vendor's spousal status and address for service”. And the Transfer stated for both Tracey and Nathan: “My spouse has released all rights under the Family Law Act by a separation agreement.”

[25] The final piece of contemporaneous evidence of their intentions is that Tracey and Nathan’s real estate lawyer made an interim distribution of the proceeds of sale equally to Tracey and Nathan, consistent with the MOU’s terms.

B. Legal test for severing a joint tenancy

[26] A joint tenancy may be severed according to any one of the following three rules:

• Rule 1: by 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; or
• Rule 3: any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common: Hansen Estate v Hansen, 2012 ONCA 112 at para. 34.

[27] The sale of a property, without more, does not sever a joint tenancy. Joint tenancy continues in the proceeds of sale or in newly acquired property purchased with the proceeds. But a joint tenancy is severed when – as here – there is an agreement to sell and then divide the proceeds of sale: Perry v Perry Estate, 2001 ABQB 100 at para. 8, quoting B. Ziff, Principles of Property Law (Scarborough: Carswell, 1993) at 261.

C. Was the joint tenancy severed?

[28] In my view, the MOU, sale, and interim distribution show that Nathan and Tracey severed the joint tenancy and created a tenancy in common under Rule 3.

[29] I am supported in this conclusion by the leading authorities. In Schofield v. Graham, the Alberta Supreme Court held that “the agreement between the parties that the property be sold and the proceeds divided between them constituted a course of dealing ‘sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common’” ((1969), , 6 D.L.R. (3d) 88 (T.D.) at p. 91). The fact that the parties’ marriage had dissolved was only a supporting factor, not the determinative one in the court’s analysis of the parties’ dealings with the property. As in Schofield, the MOU between Nathan and Tracey constituted an agreement that the Property be sold and the proceeds divided between them.

[30] Similarly, in Ginn v. Armstrong, the British Columbia Supreme Court held that the correspondence between spouses who had separated and who were seeking a divorce evidenced an intention to sever the joint tenancy: (1969), , 3 D.L.R. (3d) 285. In Ginn, the correspondence showed that the wife “wanted a sale of the premises ‘and the payment of one-half of the proceeds to her’” (at p. 286). Again, this is analogous to the intention evidenced by Nathan and Tracey in the MOU to sell the Property and “divide the net proceeds equally” (MOU at para. 1.8).

[31] The Ontario Court of Appeal applied Ginn and came to the same conclusion in Re McKee and National Trust Co. Ltd. et al. (1975), 7 O.R. (2d) 614. As in the present case, the agreement in Re McKee provided that the property would be sold and the proceeds after expenses would be equally divided between the spouses. The Court of Appeal held that the terms of the separation agreement were “wholly inconsistent with the notion that a beneficial joint tenancy in the property was to continue” (at p. 620).

[32] These principles were applied more recently in Sampaio Estate v. Sampaio, [1992] O.J. No. 771 (Ont. Gen. Div.) (held that the joint tenancy was severed by the parties entering into a separation agreement to sell the jointly-held home and to divide the proceeds equally); Belbin Estate v. Belbin Estate (Guardian of), 2005 NLTD 81 at para. 11 (held that the joint tenancy was severed by the parties deciding that the matrimonial home would be sold and the sale proceeds divided equally between them); and Corbett Estate v. Corbett Estate, 2015 MBQB 181 (held that the joint tenancy was severed by the agreement between the parties to sell a condominium and split the proceeds of the sale equally between them).

[33] Although there is no record of a separation agreement in the present case, the label “separation agreement” is not what is important. What matters is Nathan and Tracey’s agreement in the MOU to sell the Property and divide the proceeds of sale. Dividing the proceeds of sale for their own, independent use is not consistent with a continuing joint tenancy.

[34] Nathan argues that the remaining proceeds from the sale of the Property were in the nature of “money on deposit in the name of both spouses” and the proceeds are thus subject to the presumption under paragraph 14(b) of the Family Law Act. I disagree. The remaining proceeds from the sale of the Property were held in trust by Tracey and Nathan’s real estate lawyer. No joint tenancy in the proceeds continued or arose following the sale of the Property. In any event, Nathan’s position is contradicted by the lawyer’s interim distribution of the proceeds of sale: the proceeds were distributed equally between Nathan and Tracey for their own individual use. As discussed above, the interim division of the proceeds is not consistent with a joint tenancy; rather, it indicates that they were, by then, tenants in common.

D. How should the proceeds be divided?

[35] Given my conclusion that the joint tenancy in the Property was severed and that Nathan and Tracey’s interest in the proceeds of sale were as tenants in common, who receives Tracey’s portion of the remaining proceeds from the sale of the Property? There is no right of survivorship in property held as tenants in common; thus, the deceased’s interest passes to her Estate: Hansen Estate at para. 31.

IV. Disposition

[36] Accordingly, I declare that the joint tenancy in the Property was severed by the agreement between the parties to sell the Property and “divide the net proceeds equally”. The MOU ought to be honored, and the balance of the proceeds distributed according to its terms. Thus, the remaining proceeds from the sale of the Property ought to be distributed equally between the estate of Tracey Juneau and Nathan Juneau in his personal capacity.

[37] I direct that the funds be paid out of court as follows:

a. $110,000 payable to Nathan in his personal capacity; and b. $110,000 payable to Tracey’s estate.

Justice Owen Rees

Date: June 13, 2023