Supreme Court Judgments

Supreme Court of Canada

Goodfriend v. Goodfriend, [1972] S.C.R. 640

Date: 1971-12-20

Vivian Goodfriend (Plaintiff) Appellant;

and

Carl Goodfriend (Defendant) Respondent.

1971: June 2; 1971: December 20.

Present: Judson, Hall, Spence, Pigeon and Laskin JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Real property—Gifts—Husband’s neighbour threatening to bring suit against him for “alienation of affections”—Wife persuading husband to transfer farm to her because of her belief that he might be successfully sued—Husband in fact in no such jeopardy—Husband not precluded from rebutting presumption of advancement.

The respondent owned a large and prosperous farm where he lived with his wife, the appellant. This couple formed an association with a neighbouring couple and that association developed into a relationship which involved the exchange of spouses from time to time over a period of years for sexual purposes. Some time prior to October 1966, a solicitor wrote on behalf of the neighbouring husband to the respondent threatening to bring suit against him for damages for “alienation of affections”. The appellant kept urging the respondent to

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consult a solicitor and finally the respondent consented to the appellant consulting such a solicitor. Acting on the advice that the appellant received from the solicitor, the respondent transferred the farm property to the appellant. The conveyance was dated October 13, 1966, and the appellant and respondent continued to reside together on the farm until February 1968 when the appellant left the matrimonial home and took up separate residence.

Subsequently, the respondent issued a writ for an order declaring that he was the true and beneficial owner of the property conveyed to the appellant and a reconveyance of the said property. His action was dismissed, but, on appeal, the Court of Appeal granted the appeal and made the requested declaration. The appellant appealed to this Court.

Held: The appeal should be dismissed.

Per Judson, Hall and Laskin JJ.: This was a case where the wife had persuaded her husband that he should make the gratuitous transfer to her because she, rather than he, thought that he might be sued successfully to judgment, but in fact he was in no such jeopardy. On this view of the facts, the wife could not rely on the presumption of advancement to retain the land.

Per Spence and Pigeon JJ.: As in Krys v. Krys, [1929] S.C.R. 153, there was no proof that the plaintiff, here respondent, had creditors or that any creditor was defeated, hindered or delayed by the transfer. Accordingly, the husband could adduce evidence to rebut the presumption of advancement.

[Scheuerman v. Scheuerman (1916), 52 S.C.R. 625, distinguished; Kiriri Cotton Co. Ltd. v. Dewani, [1960] A.C. 192; Tinker v. Tinker, [1970] 1 All E.R. 540; Martin v. Martin (1959), 33 A.L.J.R. 362, referred to.]

APPEAL from a judgment of the Court of Appeal for Ontario[1], reversing a judgment of Smith Co. Ct. J. and granting a declaration that the respondent was the beneficial owner of certain lands. Appeal dismissed.

Miss Katherine E.B. Cartwright, for the appellant.

B.A. Crane, for the respondent.

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The judgment of Judson, Hall and Laskin JJ. was delivered by

LASKIN J.—On one view of the facts herein, which have been fully stated by my brother Spence, this is a case where a husband has made a gratuitous transfer of land to his wife to defeat anticipated creditors but later, when it has become evident that his apprehension was groundless, he has sought to regain title. On another view of the facts, which I consider to be the preferable one, this is a case where the wife has persuaded her husband that he should make the gratuitous transfer to her because she, rather than he, thought that he might be sued successfully to judgment, but in fact he was in no such jeopardy.

On the preferred second view, I think it obvious that the wife cannot rely on the presumption of advancement to retain the land. Short of laches or later other confirmatory evidence that the husband was content to let his wife have the beneficial interest—and there is nothing to this effect in the present case—the husband is entitled to say that he was misled by his wife in making the transfer and that there is no basis in any principles of illegality to taint him into forfeiture of his land.

Scheuerman v. Scheuerman[2], even on the farthest reach of the principles of illegality, as exhibited in the reasons of Fitzpatrick C.J.C, does not stand in the way of the conclusion I would reach on the preferred view of the facts that I have set out. It cannot be said, in applying the standard expressed by the Chief Justice, that the respondent husband in the present case had any intent to violate the law as against any judgment creditor. Even if he could be said to be tarnished in giving way to his wife, I am of opinion the spouses were not in pari delicto, and that no social interest would be served in permitting the wife to retain the land: see Kiriri Cotton Co. Ltd. v. Dewani[3], at p. 204.

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I reserve my opinion as to the proper result of this case on the first view of the facts that I posed. It would become material in this connection to consider the applicability of the statement of principle, already alluded to, by Fitzpatrick C.J.C. in the Scheuerman case which, in its entirety, is as follows (at p. 627 of 52 S.C.R.):

I am prepared to hold that a plaintiff is not entitled to come into Court and ask to be relieved of the consequences of his actions done with intent to violate the law, and that though they did not and even could not succeed in such purpose.

Equally relevant would be the position taken in Tinker v. Tinker[4], where, on comparable facts (it being a case where a husband purchased a matrimonial home and put it in his wife’s name against the contingency of creditors’ claims if his business failed) the English Court of Appeal held that the husband, although he acted honestly on a solicitor’s advice, could not rebut the presumption of advancement by showing that he put the title in his wife’s name to defeat creditors.

Another useful reference on the problem is the judgment of the High Court of Australia in Martin v. Martin[5], which bears a kinship to the Tinker case but where a contrary conclusion was reached in reliance on the trial judge’s findings on the question of the husband’s intention. Its importance lies in a suggested difference between the Australian and the English law which it is unnecessary to pursue in the present case.

I would dismiss the appeal but without costs.

The judgment of Spence and Pigeon JJ. was delivered by

SPENCE J.—This is an appeal from the judgment of the Court of Appeal for Ontario pronounced on November 9, 1970.[6] By that judgment the Court of Appeal for Ontario reversed

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the judgment of Smith Co.Ct.J. pronounced on February 13, 1970, and granted a declaration that the plaintiff, here respondent, was the true and beneficial owner of the lands which were the subject-matter of the action.

The litigation arose under circumstances which surely are unusual. The respondent owned a large and prosperous farm on Howe Island near Kingston, Ontario, where he lived with his wife, the appellant. This couple formed an association with one Vince Cox and his wife, Theresa Cox, who also resided on the same island, and that association developed into a relationship which involved the exchange of spouses from time to time over a period of years for sexual purposes. The husband admitted the existence of this relationship and the wife did not deny it.

Some time prior to October 1966, a solicitor wrote on behalf of Vince Cox to the respondent threatening to bring suit against him for damages for “alienation of affections”. It is regrettable that the respondent took this threat so casually that he threw the letter into a garbage can and therefore it could not be produced. It would have been interesting reading and perhaps it would have revealed whether the solicitor had gone so far as to have regard for the decision of this Court in Kungl v. Schiefer[7], where this Court held that no action lay for alienation of affections but that alienation was merely in support of the claim for damages in an enticement action. Under the unusual circumstances in the present case, no possible basis could be imagined for an action for enticement. The appellant, however, looked more seriously upon the threat of suit and kept urging the respondent to consult a solicitor; finally the respondent consented to the appellant consulting such a solicitor. She returned from that mission to inform her husband, the respondent, that the solicitor had advised that the farm property on which the couple resided should be transferred to the wife, the appellant, in order to protect the property from execution resulting from a judgment in favour of Cox and that the respondent transfer his securities for money to the United States so that they also would be beyond the reach of Cox.

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It is not revealed what view the respondent took of the ineffectiveness of such feeble attempts to protect his property from a judgment which never would be granted but he was remarkably slow in following the advice and finally consented to his wife instructing the solicitor to draw up the necessary conveyance of the farm property. He testified that when he went to the solicitor’s office to execute the deeds he was not given any advice at all by the solicitor and he was simply instructed to sign the deeds of land in the usual places, i.e., at the foot of the actual conveyance and as a declaror in the affidavits as to legal age and marital status and as to land transfer tax. The latter affidavit would seem to confirm the evidence of the respondent which has, moreover, not been denied by the appellant, as the two lines of the said affidavit which read:

4. If consideration is nominal, is the transfer for natural love and affection?…

5. If so, what is the relationship between Grantor and Grantee?…

had been struck out and opposite line 6 reading “other remarks and explanations, if necessary” are typed in the words “Husband transferring to wife”. The total consideration was $1 and there is no indication that any land transfer tax was assessed upon the registration of the deed.

Despite the fact that the respondent had acted on the indirect advice given by the solicitor as to the transfer of the property, he took no other steps to protect his property and retained in his own name and in Canada securities to the value of $17,000, bank accounts totalling $3,000, and a large herd of dairy cattle. Up to the time of the trial, at any rate, the respondent remained in occupation of the farm property and had, of course, not been subjected to any litigation whatsoever by Cox. The conveyance was dated October 13, 1966, and the appellant and respondent continued to reside together on the farm until February 1968 when the appellant left the matrimonial home and took up separate residence. Proceedings were taken in the Juvenile and Fam-

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ily Court where the appellant was awarded the custody of the three children of the marriage and a monthly allowance for their maintenance.

On March 20, 1968, the respondent issued a writ for an order declaring that he was the true and beneficial owner of the property conveyed to the appellant and a reconveyance of the said property. The learned County Court judge in the judgment aforesaid refused to the respondent any relief but the Court of Appeal for Ontario, in reasons delivered by Schroeder J.A., and concurred in by other members of the Court, granted the respondent’s appeal and made the requested declaration. The appellant appealed to this Court.

It is, of course, trite law, and has been since Dyer v. Dyer[8], that where a person transfers his property into another’s name gratuitously a resulting trust in favour of the grantor is created and the transferee must prove, in order to retain title, that a gift was intended by the transferor. The matter was neatly put by Professor Waters in an article entitled The Doctrine of Resulting Trusts, 16 McGill L. Jo., at p. 199:

Where a person transfers his property into another’s name, or into the names of himself and another, and does so gratuitously, the principle underlying Dyer v. Dyer would seem logically to apply to this situation also. Since Equity assumes bargains, and not gifts, he who has title gratuitously put into his name must prove that a gift was intended. In the case of purchase by one person taking title in the name of another, the resulting trust produces this effect, namely, of putting the onus of proof of a gift upon the transferee. It is not enough for the transferee to show that the transfer was “complete and perfect”, in the sense that the transferee is fully vested with title to the property, he must also show that a gift was intended.

When, however, the relationship between the transferor and transferee is husband and wife, or

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father and child, there is a presumption of advancement, that is, that the transferor intended to make a gift of the subject-matter of the transfer to the transferee. Many cases may be cited for such a proposition, including in this Court Jackman v. Jackman[9], particularly Locke J. at p. 708 and Cartwright J. at p. 712. The presumption of advancement in the case of such a conveyance from husband to wife may be defeated upon the evidence and the resulting trust restored. Schroeder J., as he then was, in Walsh v. Walsh[10], said at p. 94:

It is abundantly clear that whatever presumptions may arise from the circumstances of any particular case, the Court is under a duty to go into the actual facts, and to consider all the circumstances of the case, so as to arrive at the real intention of the transferor, giving due weight to the presumptions that are raised by the circumstances.

and most of the cases on the subject had been concerned with whether or not the transferor in an action to recover the property of the subject of the transfer was successful in rebutting the presumption of advancement.

Evidence of an illegal contract or scheme will not be received to rebut the presumption of advancement, the Court enforcing the equitable doctrine that the plaintiff must come into Court with clean hands: Gascoigne v. Gascoigne[11]; Walsh v. Walsh, supra; Tinker v. Tinker[12]; Scheuerman v. Scheuerman[13]. I am, however, of the opinion that the three latter cases are subject to the comment that they are really cases in which the main ratio decidendi was that the plaintiff did not succeed in rebutting the presumption of advancement. The problem in the present case is whether this rule prohibiting the adducing as evidence to rebut the presumption of a contract or scheme to defeat, hinder or delay creditors will apply to bar such evidence when the scheme was never carried out by actual defeat or delay

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of creditors; in short, whether the intent to do so alone is sufficient to bar the evidence. It would appear that here the Courts have divided the problem and have dealt with two categories of cases: firstly, in Tappenden v. Randall[14]; Symes v. Hughes[15]; Taylor v. Bowers[16], and in a series of cases following these authorities it was held that when the transferor resiled from his illegal intention to defeat creditors he may recover title to the property transferred for such illegal purpose. However, in other cases, where the creditors were not in fact defeated because the illegal scheme failed in its effect, the plaintiff was denied his locus poenitentiae and failed to recover. These cases may be typified by Alexander v. Rayson[17]; Berg v. Sadler & Moore[18], and Bigos v. Boustead[19].

The problem is whether in such a case as the present where there is no evidence whatsoever that any creditor was defeated, hindered or delayed, the plaintiff, here respondent, should be barred from recovering all the lands transferred to his wife to escape a feared execution which he thought might have been issued against them in an action the cause for which does not exist in law and despite the fact that he retained other assets much more easily subject to execution throughout the whole transaction. This Court has dealt with a related situation in Scheuerman v. Scheuerman, supra, where the plaintiff had agreed to purchase certain lands and with the intention of protecting them from action by a judgment creditor had caused them to be conveyed to his wife on a parol agreement with her that the title should remain in her name until the judgment debt had been satisfied. That debt was subsequently paid by the plaintiff and upon discovering that his wife had sold the lands he brought suit claiming the unpaid balance was his as she held the lands in trust for him. In fact, the lands being homestead lands, in the Province of Alberta under the legislation then in effect in that province,

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were protected from execution up to the value of $1,500. Sir Charles Fitzpatrick C.J.C. said at pp. 626‑7:

But if it were necessary to hold that there was a resulting trust, in favour of the respondent, I do not think he is in a position to ask the court to enforce it. He can only make out his case by alleging his own unlawful intentions in making the conveyance to his wife.

* * *

I am prepared to hold that a plaintiff is not entitled to come into court and ask to be relieved of the consequences of his actions done with intent to violate the law, and that though they did not and even could not succeed in such purpose,

(The italics are my own.)

Idington J. wrote concurring reasons as did Brodeur J. Duff J. concurred but at p. 634 said:

I do not find it necessary for the purpose of deciding this appeal to pass upon the question whether a proper application of the principle stated above to the facts of this case would be to hold that no part of the illegal purpose had been carried out notwithstanding the fact that the conveyance had been taken in the name of his wife. This case must, I think, be approached from a slightly different point of view. The object, as I have said, of taking the transfer in the name of the wife was that her ex facie title should protect the property from pursuit by the husband’s creditor, the design being that so long as the debt remained unpaid she should hold the title. Whether or not they had in mind a possible advance in value the scheme necessarily involved the hindering of the creditor in the exercise of his rights in the event of the value of the property reaching a point at which the surplus would become properly exigible… In these circumstances it is impossible to say that the creditor was not prejudiced. Indeed, having regard to the fact that the respondent must have known the precise date when the debt was paid and offered no information about it there is some presumption of fact the other way. The conclusion I have come to, however, is this:

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Accepting the rule in the form in which it is stated in Symes v. Hughes, L.R. 9 Eq. 475, and Taylor v. Bowers, 1 Q.B.D. 291, I think the onus in the circumstances of this case was on the respondent to shew that the creditor had not been delayed.

Anglin J., as he then was, dissented, and at p. 638, said:

The law condemns and penalizes the fraudulent act, not the fraudulent intent. The act must be one which at least may be injurious to persons whom the law protects against it… The plaintiff’s intent was fraudulent; his act was not…

Were it not for the presumption of an intention to make a gift by way of an advancement, which ordinarily arises where property belonging to a husband is without consideration transferred to or placed in the name of a wife, proof of the absence of consideration would establish a resulting trust in favour of the plaintiff. The presumption of advancement is, however, readily rebuttable, the sole question being the intent with which the transaction took place, (Marshal v. Crutwell, L.R. 20 Eq. 328; In re Young, 28 Ch. D. 705), and but for the objection to its admissibility, based on section 7 of the Statute of Frauds, the evidence of the understanding of both husband and wife that the latter should hold as trustee for the former would clearly establish such a trust. That objection cannot prevail, for equity deems it a fraud on the part of a trustee to attempt to withold trust property from his cestui qui trust for his own benefit, and will not permit the statute to be made the instrument for committing such a fraud. McCormick v. Grogan, L.R. 4 H.L. 82, at p. 97 per Lord Westbury; Rochefoucauld v. Boustead [1897] 1 Ch. 196; In re Duke of Marlborough; Davis v. Whitehead [1894] 2 Ch. 133; Haigh v. Kaye, 7 Ch. App. 469; Davies v. Otty, 35 Beav. 208.

However, in Krys v. Krys[20], the Court again considered the situation and commented on its previous decision in Scheuerman v. Scheuerman. In Krys v. Krys, the plaintiff had conveyed his homestead to his son and claimed to be entitled to a reconveyance on the basis that the title had been put in the name of the son only in trust for the plaintiff. The plaintiff was successful at trial but lost in the Appellate Division. This Court restored the trial judgment. The case was concerned with a duty cast upon the son because of the re-

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lationship between father and son, the father’s illiteracy, and the form and contents of a later document which might have removed the resulting trust created in the earlier one, to convince the Court that the plaintiff father realized what he was doing and acted as a voluntary agent. The decision, however, is of interest in the present case as to the issue of whether the intention to defeat creditors would prevent the father from recovering the property. Newcombe J. gave the unanimous judgment for the Court and said at p. 164:

There was an appeal, and a cross appeal, to the Appellate Division, and upon the hearing, the appeal was allowed and the cross appeal was dismissed, without reasons. There is nothing in the record to suggest why this was done, but it is said that the Court considered that, at least with respect to the homestead and the chattels, it was bound by the decision of this Court in Scheuerman v. Scheuerman, (1916) 52 S.C.R. 625, and that the plaintiff was disentitled to relief, because the conveyance by Wasyl to his son evidenced an attempt to defeat creditors, and was fraudulent and void as against them under the statute of 13 Eliz., Ch. 5, and that to give effect to the claim would be a breach of the principle that the court will not assist a suiter to obtain relief from the consequence of his own unlawful act. The facts in the Scheuerman case were special; that decision depends upon its own facts, and there does not seem to be that unanimity in the reasons handed down by the judges constituting the majority that is necessary for a ruling case. I need not, however, review the judgments, because the present facts are entirely different. Here there are no pleadings and no proof of intent to defraud creditors, and that question was not raised or suggested at the trial.

He continued at p. 165:

The impression which this evidence left with the trial judge was, as already shewn, that the plaintiff consulted with his son, “and decided that he would have his son hide away his property from the wife so as to see that she did not get it.” There was obviously trouble between the plaintiff and his wife at the time, the particulars of which were not investigated; but there was no proof that he had creditors or that any creditor was defeated, hindered or delayed by the transfer; and a judicial inference, in

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these circumstances, that the conveyance was unlawful under the Statute of 13 Eliz., Ch. 5, is, in my opinion, not only unjustified, but seems directly to conflict with the venerable principle propounded in the Year-Books by Brian C.J., that

Having in your mind is nothing, for it is common learning that the thought of man is not triable; for even the Devil has not knowledge of man’s thoughts.

That is said by Lord Macnaghten, in Keighley, Maxted & Co. v. Durant, [1901] A.C. 240, at p. 247, to be a sound maxim, at least in its legal aspect.

I am of the opinion that the judgment of this Court in Krys v. Krys confines the decision in Scheuerman v. Scheuerman to the exact facts in that case and that the judgment in Krys v. Krys states the law applicable to the present case. Here as there,

there was no proof that he had creditors or that any creditor was defeated, hindered or delayed by the transfer;

For these reasons, I would dismiss the appeal. Adopting the same procedure as the Court of Appeal for Ontario, I would make no award of costs.

Appeal dismissed without costs.

Solicitors for the appellant: Cartwright and Cartwright, Kingston.

Solicitor for the respondent: L.H. Tepper, Kingston.