Canadian Court case highlights the importance of formalising a separation when property is involved.
The Canadian Supreme Court recently made a property ruling which involved an estranged separated couple. In the case the judge awarded Mr David Johnston a half share of a property that he hadn’t lived in nor contributed to in nearly 50 years.
Mr. Johnston had purchased the home with his wife, Ms Sharon Johnston in 1968 for a mere $37,500 but moved out around three years later. Today, the property is valued at more than $1 million.
Mr. Johnston had, at one point after the couple separated, offered to transfer his share of the property to Ms. Johnston for the amount of $10,000. However, Ms. Johnston did not take any action to accept the offer or otherwise settle the matter. This inaction has cost her son in the vicinity of half a million dollars 50 years (and a protracted court case) later.
After the couple separated in 1971, Ms Johnston continued to live in the home and paid off the balance of the mortgage (approximately $15,000). Shortly after the separation, her new partner Ezra Lucas moved in and they raised their son together there, Philip Lucas born in 1980. The mortgage was paid off in full by Ms. Johnston in 1974.
After Ms Johnston’s death in 2009, Mr Johnston petitioned the court asking for the property to be sold and the proceeds divided between himself and Ms Johnston’s estate of whom her son, Philip Lucas, was the beneficiary. The Court agreed.
The son argued that there was a verbal separation agreement between Mr. and Mrs. Johnston, and as a result of that agreement, Mr. Johnston held his share of the property in trust in favour of the Estate. The son sought an order transferring Mr. Johnston’s half share of the property to him. However there was little evidence to support this claim and it was not accepted by the court.
The son’s claim was rejected
The main reasons for the undoing of the son’s claim to full ownership to the property were twofold:
Firstly, Mr. Johnston’s name remained on the Title to the property making him a valid co-owner at law; and secondly, the fact that Mr. Johnston was still legally married to Ms. Johnston (the parties had never divorced) and the parties had not finalised a separation agreement, in which they had agreed to anything other than the ownership arrangement recorded on the title deed.
The judge ruled that without a separation agreement, Mr. Johnston’s half interest in the property was legitimate, despite him not contributing to the property in nearly 50 years.
However, the judge did make an adjustment in favour of the son for the mortgage repayments made by his mother, Ms. Johnston, in the years following the separation. Considering those repayments where in the vicinity of $15,000, the adjustment will not represent a substantial proportion of the end sale price which is expected to be over $1 million.
However harsh the judgement may seem at face value, the fact remains that the title was registered in both Mr. and Mrs. Johnston’s name as tenants in common in undivided half shares. By law, if you are registered as the owner of a property on the title deed, you are presumed to hold the legal and beneficial interest in the land. This presumption can be rebutted, the burden of proving otherwise resting on the party who is seeking to challenge the title. In this instance, Mr. Lucas failed to establish sufficient evidence to rebut Mr. Johnston’s interest in the land as recorded on the title.
The Court considered the fact that the parties had paid approximately $22,500 of the purchase price together. And whilst Ms. Johnston did pay off the remainder of the mortgage of approximately $15,000 after separation, she also enjoyed the substantial benefit of living in the property.
Compounding matters further was the fact that Ms. Johnston did not leave a Will. However, even if she did have a valid Will, she would only have the power to bequeath her half share interest to her son.
What do you think about the result of this case?
One thing that is apparent is the importance of finalising a property division promptly after separation or divorce. Taking a pro-active approach to finalising legalities after separation (as opposed to the ‘bury your head in the sand’ approach taken by Ms. Johnston) will prevent issues such as these arising in your lifetime, and even after your death. This can be done by a simple separation agreement, in Australia referred to as a binding financial agreement.
You can read the full details of this case here.
More information
Help with relationship and family issues: mediation and counselling services
How to handle property settlement after separation
Delaying a property settlement could end up costing you more