Law360 Canada (May 6, 2026, 11:09 AM EDT) --
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| Balvinder Kumar |
A recent Ontario Court of Appeal case revolves around a resulting trust claim. The issue before the court was whether the funds transferred by parents to their son and daughter-in-law for the purchase of a property constituted a gift, loan or were held on a resulting trust focusing on the intention of the parents.
A resulting trust concept applies to where a title to a property is held by one person, but it is presumed by law that the beneficial owner is another person who provided funds in full or in part for the purchase of the property. In this case,
Lalli v. Lalli, [2026] O.J. No. 731, the law relating to and the governing legal principle of resulting trust is summarized very categorically. Let’s look at the brief facts of the case.
On facts, it is a case of dispute over the ownership interests in three properties, property 1 (Farewell), property 2 and property 3 (two condominium units). The properties were acquired in 2006 and were registered in the names of one or both of the defendants/respondents, Sukhvinder Lalli (Sukhvinder) and his wife, Samardeep Lalli (Samardeep). Notwithstanding paper title, the plaintiffs/appellants, Satnam Lalli (Satnam) and Jaswinder Lalli (Jaswinder) claim an equal interest in the properties.
The plaintiffs/appellants claim that, whether by a joint venture agreement and/or by way of a trust, they have a 50 per cent ownership interest in the properties. They submit that the properties were put into one or both of the defendant’s/respondent’s names for tax and/or mortgage purposes.
With respect to property 1, the plaintiffs/appellants submitted that they contributed 50 per cent ($55,000) of the funds needed to complete the transaction (over and above the mortgage monies). The defendants argue that these funds were payment of a debt owed to the defendants/respondents by the plaintiffs/appellants. In regard to properties 2 and 3, the plaintiffs/appellants submitted that they contributed $10,000 to each of the units (for a total of $20,000), the funds required to complete the purchases.
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All four parties resided together in property 1 while properties 2 and 3 were investment properties. In 2016, the defendants/respondents sold investment properties 2 and 3.
The plaintiffs/appellants commenced an action seeking an equal share of the net proceeds of sale from the two condominium units and with respect to the property 1, they seek an order for the sale of property 1 and an equal share in the equity. The defendants/respondents deny the claim of the plaintiffs/ appellants. The question before the court was, “What was the intention at the time the funds were transferred to purchase the property 1?” The plaintiffs/appellants were successful with respect to their claim for beneficial ownership in the properties 2 and 3 on the basis of joint venture but not with respect to their claim for property 1. The trial court concluded that the transfer of funds by the plaintiff was the satisfaction of a debt paid to the defendant and that the plaintiffs never had any intention of taking a beneficial ownership interest in property 1. Hence the appeal.
This appeal establishes purchase money resulting trust — a trust created when a transferor contributes purchase money towards the purchase of an asset without taking legal title and with the intention to take a beneficial interest. To establish the purchase money resulting trust, the plaintiffs/appellants ask the court to apply a presumption of resulting trust, a presumption that where a person pays the whole or a part of the purchase price of property, that person is presumed to have declared a trust over the property. The Court of Appeal analyzed the common law doctrine of resulting trust and set a few basic governing legal principles and its application on resulting trust. The trial judge also applied these principles in the following manner:
1. The presumption of resulting trust arises in cases of gratuitous transfers. A presumption of a resulting trust arises where one person voluntarily transfers property to a second person or when two parties contribute to the purchase of a property and only one of them takes title to it, referred to as a “purchase money resulting trust.” The trial judge indicated that there was no dispute between the parties over the applicable law regarding resulting trusts, including the fact that “the presumption of resulting trust arises where a person transfers [their] property in another’s name and does so gratuitously.” On this basis, the trial judge found that the appellants were entitled to a beneficial interest in the condominium units, since their contributions to those units had been gratuitous, they had the intention of acquiring investment property at the time, and the respondents did not rebut the presumption of a resulting trust. The trial judge relied on evidence and the testimony of the realtor. However, the trial judge came to a different conclusion regarding property 1.
2. Rebutting the presumption. If a transfer is gratuitous and the presumption of a resulting trust is engaged, it can be rebutted if the transferee provides evidence, on the civil standard of a balance of probabilities, of the transferor’s contrary intention at the time the transfer was made. The central issue in dispute in the resulting trust analysis was whether the appellants had received consideration for plaintiff/appellant’s $55,000 transfer to the defendants/respondents that formed part of the down payment for the property 1. The trial judge relied on the calculations submitted by the defendants/respondents showing that the amount paid by the plaintiffs/appellants was a debt owed by the plaintiffs/appellants and that the contribution was not gratuitous and does not rise to a resulting trust. The factual findings were sufficient to rebut the presumption of a resulting trust as these facts establish that $55,000 were paid to discharge the debt liability. The appellate court re-determined this. Appeal allowed. The court found that there was unexplained discrepancy in the debt amount, the evidence of the realtor and the fact that the amount of $55,000 exactly matched the down payment and the closing costs, which demonstrated that the plaintiff/appellants advanced the funds intending to acquire a 50 per cent beneficial interest and not to repay a debt. Thus, the court found plaintiffs entitled to a 50 per cent interest in property 1 and remitted the issues of sale and accounting to the Superior Court.
Balvinder Kumar practises real estate law (residential and commercial) and is a freelance writer and author with LexisNexis.
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