When a Gift Isn’t Really a Gift: Resulting Trusts and the Limitation Period in Ontario

In estate and property litigation, one recurring issue is the transfer of property between family members—especially where that transfer is later challenged.

A recent British Columbia decision highlights a critical principle that applies equally in Ontario: when a gratuitous transfer is made without the transferee acting as a true owner, and the beneficial owner retains control, the clock on any limitation period may not begin until the beneficial owner dies.

In other words: ownership without control is not enough to start the countdown.

The Case: Lennox v Lennox, 2019 BCSC 938

In Lennox v. Lennox, a man transferred his share of a jointly owned home to his former spouse in 2006, for no consideration. The stated reason was to help their daughter secure a mortgage, and both parties agreed it was not intended as a gift. Fast-forward more than a decade—after the mortgage had long been discharged—the man sought to reclaim his interest, asserting that the property was held in a resulting trust for his benefit.

The former spouse argued the claim was out of time.

The Court rejected that argument, holding that the limitation period to bring a trust claim did not begin until the trust relationship broke down—when the respondent denied the trust and refused to return the property. Until then, the arrangement operated as a bare trust, and the trust remained intact.

Ontario Law: When Does the Limitation Period Begin?

In Ontario, this issue is governed by s. 38(3) of the Trustee Act, which provides that any claim for breach of trust or to enforce a trust must be brought within two years after the death of the deceased (unless another limitation period applies earlier). If the trustee is still alive and the trust is not repudiated, the limitation period does not begin to run.

As established by Ontario courts and reflected in leading decisions such as Pecore v. Pecore, 2007 SCC 17 (CanLII), [2007] 1 SCR 795,

"A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner: see D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’ Law of Trusts in Canada (3rd ed. 2005), at p. 362.  While the trustee almost always has the legal title, in exceptional circumstances it is also possible that the trustee has equitable title: see Waters’ Law of Trusts, at p. 365, noting the case of Carter v. Carter (1969), 1969 CanLII 756 (BC SC), 70 W.W.R. 237 (B.C.S.C.)".

This is especially relevant when the transferor dies and their estate seeks to reclaim property transferred under a resulting trust theory. In that scenario, the estate has two years from the date of death to file a claim.

Key Takeaways for Ontario Estates and Property Lawyers

While a resulting trust is presumed to arise at the time of transfer, its "crystallization"—meaning, the moment it becomes enforceable or discoverable in a legal sense—may be deferred if the transferor:

1. Retains control or use of the property,

2. Does not call for the return of the asset,

3. And the transferee does not assert inconsistent ownership.

This aligns with Lennox v. Lennox, where the court emphasized that a resulting trust claim does not become discoverable until the transferee denies the trust or the transferor demands return of the property and is refused.

At Judd Law, We Understand the Nuances of Trust Litigation

If you're dealing with a disputed property transfer, a claim of undue influence, or you're unsure whether a gift was truly intended, our team can guide you through the legal framework—including limitation periods, trust law principles, and evidentiary burdens.

This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.