Gratuitous Gifts – Application of Pecore Principle Beyond Family Ties – Part 1 of 2

By of Merovitz Potechin LLP on Tuesday April 16, 2024.

The legal landscape is often complex, with principles that seem specific in scope. However, sometimes these principles have far-reaching implications that extend beyond their initial context. One such example is a well-established principle from the Supreme Court of Canada’s 2007 decision, Pecore v Pecore, that there is a presumption of a resulting trust where a person makes a gratuitous transfer of property. Although this principle often involves parent-child relationships, particularly when it comes to adult children, it has proven to be applicable to various situations involving gratuitous gifts. In this blog post, we’ll explore how the principle in Pecore has broader applications beyond family dynamics.

The Pecore Principle – A Recap
In 2007, the Supreme Court of Canada delivered a landmark decision in the case of Pecore v Pecore. This decision established a fundamental presumption: when there is a gratuitous transfer of property, a presumption of resulting trust arises. This presumption means that the recipient of the property is presumed to hold it in trust for the estate of the donor (the person who made the gift) unless clear and convincing evidence suggests otherwise. This is a rebuttable presumption. The legal burden lies with the recipient of the gift to provide clear evidence of the gifting intention and rebut the presumption.

Traditionally, the principle in Pecore has been closely associated with situations involving adult children and their parents. For instance, if a parent transfers property (like a house or a bank account) into joint names with an adult child without any consideration, there’s a presumption that the property isn’t a gift to the child but rather held in trust for the parent’s estate. However, the implications of this principle have expanded over time.

Expanding Boundaries: Cherneyko and Waters Estate
The principle in Pecore was initially perceived as a tool to navigate relationships between parents and adult children. However, subsequent legal developments have shown that it applies to a wider range of scenarios, including those involving unrelated adults.

One significant expansion of the principle can be observed in the case of Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107. This case extended the principle’s application to inter vivos gifts between unrelated adults, marking a significant shift from its traditional parent-child context.

Another noteworthy case, Waters Estate v Henry, 2022 ONSC 5485, further emphasizes the principle’s reach. In this case, the court examined a situation where gratuitous transfers were made by an individual to an unrelated personal support worker. The court found that the presumption of resulting trust applied to these transfers as well, reinforcing the notion that the principle extends beyond familial relationships.

The implications of the Pecore principle’s broader application are significant. It underscores the importance of intention when making gratuitous transfers, regardless of the relationship between the parties involved. It’s crucial to remember that such transfers can lead to legal complexities down the road, especially if the intentions aren’t clearly and properly documented.

When considering transfers, whether between family members or unrelated parties, it’s vital to assess the intention behind the transfer.

In the ever-evolving legal landscape, established principles can often hold broader implications than initially anticipated. The principle in Pecore, initially associated with parent-child relationships, serves as a prime example. As demonstrated by cases like Cherneyko and Waters Estate, the principle’s scope has expanded to encompass gratuitous gifts between unrelated adults. This serves as a reminder that legal principles are adaptable and can apply to various situations, shaping the way we understand relationships, gifts, and the responsibilities that come with them. Whether familial or not, it’s crucial to consider the Pecore principle’s implications and take proactive steps to ensure clarity and fairness in all financial transactions.

Stay tuned for the second part in this blog post series, where I will discuss the intricacies of a recent decision from the Ontario Court of Appeal, Falsetto v Falsetto, 2023 ONCA 469.