Claims against the legal title to a cabin, cottage, camp or ranch

By Doug Carroll | August 18 2014 09:00AM
At issue    

Summertime … and the livin’ is easy – or at least that was the hope when the family vacation property was acquired.

Whether it’s the cabin, cottage, camp or ranch, there is emotion tied up in such places.  And as usage rolls through to the next generation and beyond, conflicts can arise, feelings of entitlement can grow, and ultimately property claims may be asserted.

One such type of claim is the doctrine of proprietary estoppel, which could apply to any real estate, though it seems to play out more prominently with vacation properties in the case law. Someone who has made a financial contribution and emotional commitment claims to have rights to the property, despite not being on the legal title.

Willmott v. Barber (1880), 15 Ch. D. 96

The doctrine of proprietary estoppel was recognized in British courts as early as 1866, and by 1880 a formal test had developed. Assuming a male claimant against a female titleholder for illustration, the “five probanda” would have to be proven: 1) he mistakenly thought he had a legal right, 2) he spent money on the property based on that belief, 3) she knew the extent of her own rights, 4) she knew of his mistaken belief, and 5) she encouraged or acquiesced to the expenditure.

The test has been applied in Canada many times in the century and a half since.  

Schwark v. Cutting, 2010 ONCA 61

This Ontario case involved owners of “lakeview cottages” claiming the right to pass across and use the land of a beachfront property owner. The parties had a running dispute over 20 years or more, though the beachfront owner had for a time granted access in exchange for his own family’s use of stairs constructed by the lakeview owners to reach the beach.

For our purposes, the important development is that the Ontario court somewhat simplified the test for proprietary estoppel (as UK courts had done about 30 years back), requiring only that there be:

1. encouragement of the plaintiffs by the defendant owner,

2. detrimental reliance by the plaintiffs to the knowledge of the defendant owner, and

3. the defendant owner now taking unconscionable advantage of the plaintiff.

In the result, the lakeview owners’ claims failed, as they were not under any mistaken belief as to their legal rights. The beachfront owner had granted permission for a time, but there was nothing unconscionable about an owner withdrawing permission.

Clarke v. Johnson, 2014 ONCA 237 

Whereas Schwark and Cutting were arm’s length parties, this most recent case involves a single property with family connections among the litigants.

1n 1971, William and Martha Johnson purchased an island on Lake Panage near Sudbury, Ontario, which was termed ‘the camp’. In 1979, title was transferred to be held as one-third tenants-in-common with William’s two siblings. After William’s death in 2009, Martha continued as sole owner of a one-third interest. 

Donald Clarke was married to the Johnsons’ daughter Victoria when, beginning in 1974, he built a dwelling and later added other buildings and improvements. The couple had two children, Misty in 1976 and Westley in 1977. Donald and Victoria separated in 1991, but Donald continued to use and manage the camp.

Donald’s son Westley returned from western Canada in 2009, desiring to make use of the camp. After some confrontation, Donald prohibited Westley from the property, following which Martha prohibited Donald from the property.

Supported by the other two legal owner families, Donald successfully claimed proprietary estoppel. The court determined that he would have succeeded whether using the formalistic historical test or the simplified test in Schwark v Cutting. Donald was granted a constructive trust to “regulate use during his lifetime or until he could no longer attend at the camp.”

Practice points
  1. Legal title is important, but it should not be assumed to be all encompassing.
  2. While the more formal test expressed in Willmott may not be required in Ontario, even the streamlined test presents a significant hurdle to a would-be claimant. On quick review of case law, it appears that other provinces may also be backing away from the more stringent test, as may be confirmed with one’s own legal advisor. 
  3. Legal disputes can be costly. In the appeal phase alone, $21,800 costs were assessed against the appellant, which would be in addition to her own legal bill.