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Thomas v. Wales

The recent Ontario Superior Court decision of Thomas v. Wales illustrates the importance of insuring that all business agreements, including those made with family or friends, are put into writing.

The case concerned a piece of property located in the village of Echo Bay: Barry Thomas, the son of the late James Thomas and his wife Lois, sought to have a property, which was owned by his parents, and on which he and his father had operated an auto repair garage and scrap yard for many years, transferred to him.  Barry had said that his father had promised that he could have the “business” upon his death, which included the property on which it was located.   Barry’s mother, Lois, denied that James had promised the property to Barry.

Barry’s claim was based on a legal concept known as a constructive trust: this is a provision whereby a court will rule that one person was actually holding a property in trust for another person where the second individual had provided some type of enrichment to the first, to his or her own detriment, and there is no other legal reason (such as a written contract) to deprive the second person of his or her interest in the property.  In effect, the court uses a legal fiction to rule that the property was actually being held in trust by the first person as trustee, for the second person as a beneficiary, and can then be transferred accordingly.

The trial judge found that a constructive trust did not exist and that James was not holding the property in trust for his son, Barry.  Several factors led the judge to this finding including the fact that Barry had offered to purchase the property from Lois after James’s death, and that no one had ever heard James promise the property to Barry, including Barry’s own wife with whom James and Lois were very close.

Barry himself stated at trial that his father had promised him the “business” and the judge found that this may have meant only the repair garage and scrap yard, but not the property on which it was located.

I often see circumstances in my practice where people are relying upon verbal representations or agreements to make a claim: whether it is a child claiming as against her siblings that her father promised her an asset after his death, or co-owners of a business who are relying upon agreements that were made when relations between them were good, but have subsequently fallen apart.  In many of these cases, the parties were often, if not always, on good terms with each other at the time when the verbal promises were allegedly made, and where, because of social conventions, a written agreement is not made (no one wants to make it appear that he does not trust a friend with whom he is in business by asking that they sign a written contract).  In most of these cases, it is not that one or the other party is deliberately lying, but that they each have a different understanding as to the nature of the agreement or promise: wanting to put matters into writing does not imply mistrust, but serves to insure that everyone is agreeing to the same thing (although, of course, there can still be disagreements when matters are in writing, but there is less of a chance of this happening).

The statements made on this page are for information purposes only and are not to be relied upon as legal advice, and should not be acted upon as such.  If you believe that you require legal advice on any issue you should consult a duly qualified lawyer or licensed paralegal.