Inter-Family Money Transfers
Barber v Magee, 2017 ONCA 558
This case helps clarify the evidentiary burden necessary for determining if the inter-family transfers of money may be categorized as a gift or a loan.
During the parties’ marriage, the Appellant’s father, K, advanced two lump sums, in the amounts of $90,414.39 and $67,000, to his son, the Appellant. All the money was invested in the matrimonial home held in the Appellant’s name.
At trial, the Appellant argued that the advancements were loans that remained owing on the date of separation and thus should be considered a liability when calculating his net family property. The Respondent argued that the advancements were gifts that should be included in the Appellant’s net family property.
The trial judge held the advancements as gifts. The Appellant appealed to the Ontario Court of Appeal on the grounds that the trial judge erred by reversing the evidentiary onus of proof by expecting the Appellant to prove that the advancements were loans.
The Court of Appeal held that the trial judge applied the law correctly. As per Pecore v Pecore, the trial judge successfully weighed all of the evidence prior to deciding the father’s actual intention at the time of the transaction.
The Court of Appeal explained that there are objective indicators that can assist in determining whether an advancement is a gift or a loan. The court explained that “a gift is a transfer in which the absence of an expectation of repayment tends to be reflected in the absence of security, recording, payments or efforts to collect payments or efforts to collect payments. A loan often involves a formal, recorded transfer in which terms are set out and in which repayment is made or sought” (para 4).
The Court of Appeal explained that the trial judge was not reversing the onus or burden of proof when he commented on what was not present by way of indicia of loans. Rather, the Court of Appeal held that the burden of proof remained on the Respondent to prove that the advancements were gifts. Yet, they held that “it is quite appropriate for a trial judge to notice the failure of the party who would be in control of documents and records of a loan to produce such documents” (para 5). The court continued to explain that in the absence of indicia of a loan, it is a reasonable inference to conclude that the advancement was a gift. To this end, the Court of Appeal held that the trial judge did not err.