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Notice of Trust Ordered Removed from Title

In McLeod v. Walker, the issue was whether a Notice, registered on title, should be removed by court order.

Randal and Laurie were siblings. Randal had always lived with his mother on property that she owned, and assisted her with the farming operations. His sister Laurie had moved away. In 2002, the mother transferred title to the property to herself and Randal jointly, in order to ensure that he would become the sole owner upon her death.

However, at the mother’s behest they both signed an Agreement in 2009, providing that Randal could continue to live on and use the farm as long as he wished, but should he decide to sell it, he would receive 85 percent of the net proceeds, while Laurie was to receive 15 percent. It also clarified that upon a sale, Randal was considered to be merely holding Laurie’s 15 percent of the net proceeds in trust, and was required to pay his sister her share immediately.

In legal terms, this immediately created a trust for 15 percent of the future proceeds, in favour of Laurie as the beneficiary. The problem was that such trusts – which relate to sale proceeds and not “interests in land” – normally cannot be registered on title, pursuant to the provisions of the Ontario Land Titles Act. Furthermore, a specific section of that Act expressly forecloses trusts from being registered.

Yet this is precisely what Laurie did. She registered a notice of her trust-based interest in the land, to the extent of her 15 percent interest in the net sale proceeds. Randal then succeeded in having a court order the removal of Laurie’s notice of interest from title. In doing so, the court examined the effect of the wording of the Agreement between Randal and his mother that gave rise to Laurie’s rights in the first place.

One clause required Randall to acknowledge Laurie’s interest in the land, while still giving him unfettered decision-making powers on its use and sale. Another clarified that Laurie’s 15 percent interest in net sale proceeds arose only once the land was sold. However, a third clause converted that 15 percent interest in sale proceeds into a trust-based interest in land; under the Act, those kinds of interests were expressly prohibited from being registered on title.

Thus, the court directed that Laurie’s notice of her trust interest was to be deleted from title, with Randal remaining free to deal with the land or sell it as he saw fit. However, the court also directed that should Randal decide to sell, any net proceeds were to be paid immediately and simultaneously to them both as initially allocated in the Agreement. See: McLeod v. Walker, [2015] O.J. No. 4993 (S.C.J.).