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Constructive Trusts, Retroactive Vesting Orders and Third-Party Creditors

The doctrine of constructive trust continues to play an interesting role in the treatment of matrimonial property. In the case of Stevens v. Stevens, 2006 CarswellOnt 4148 (Ont. C.A.), the trial judge’s decision vesting title to the parties’ matrimonial home retroactive to the date of separation, by virtue of a constructive trust to the wife, was upheld on appeal and the creditor bank, which had registered writs of seizure and sale against the husband, was unsuccessful in its claim to have the retroactive vesting order set aside. The constructive trust in favour of the wife was based in her execution of an agreement between herself and her husband whereby she would assume her husband’s debts in return for the husband’s agreement to transfer title and all his interest in the matrimonial home to her; the husband reneged and refused to execute the transfer document after the wife had done her part. Notably, despite the wife’s warnings, the bank proceeded to lend money to the husband. This decision strikes a cautionary note for third-party lenders and their counsel as it demonstrates how secured claims may be defeated by the intervention of the doctrine of constructive trust. Thus, the wife was given priority over a secured creditor

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