“In the words of Lord Denning M.R. in Burgess v. Rawnsley, [1975] 3 All E.R. 142, [1975] Ch. 429 (Eng. C.A.), at p. 146 All E.R.: “Nowadays everyone starts with the judgment of Page Wood V-C in Williams v. Hensman“. This is likewise true of Canadian courts, which have long recognized the vice-chancellor’s statement as the starting point for assessing severance of a joint tenancy: see, e.g., Clark v. Clark (1890), 17 S.C.R. 376, [1890] S.C.J. No. 13, at p. 383 S.C.R. (Gwynne J., dissenting); Ginn v. Armstrong, 1969 CanLII 830 (BC SC), [1969] B.C.J. No. 400, 3 D.L.R. (3d) 285 (S.C.), at p. 286 D.L.R.; Walters and Walters (Re) (1977), 1977 CanLII 1835 (ON SC), 16 O.R. (2d) 702, [1977] O.J. No. 1731 (H.C.J.), at p. 705 O.R., affd (1978), 1978 CanLII 1691 (ON CA), 17 O.R (2d) 592n, [1978] O.J. No. 3214 (C.A.); Sorensen’s Estate v. Sorensen, 1977 CanLII 1648 (AB CA), [1977] A.J. No. 742, 90 D.L.R. (3d) 26 (C.A.), at p. 32 D.L.R.; Tompkins Estate v. Tompkins, 1993 CanLII 1119 (BC CA), [1993] B.C.J. No. 445, 99 D.L.R. (4th) 193 (C.A.), at pp. 196-99 D.L.R. [See Note 5 below]
The three modes of severance referred to in Williams v. Hensman have come to be known as the “three rules”: see Burgess, at pp. 152-53 All E.R.; Robichaud v. Watson (1983), 1983 CanLII 1701 (ON SC), 42 O.R. (2d) 38, [1983] O.J. No. 3046 (H.C.J.), at p. 44 O.R.; Bruce Ziff, Principles of Property Law, 5th ed. (Toronto: Carswell, 2010), at pp. 342 and 345. The three rules may be summarized as follows: [page252] Rule 1: unilaterally acting on one’s own share, such as selling or encumbering it; Rule 2: a mutual agreement between the co-owners to sever the joint tenancy; and Rule 3: any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.
The apposite rule in the present case is rule 3, or the course of dealing rule. As explained by Professor Ziff in Principles of Property Law, at p. 345, severance under this rule operates in equity. Rule 3 operates so as to prevent a party from asserting a right of survivorship where doing so would not do justice between the parties. In the words of Professor Ziff, at p. 345, “the best way to regard matters is to say that equity will intervene to estop the parties, because of their conduct, from attempting to assert a right of survivorship”. What is determinative under this rule is the expression of intention by the co-owners as evidenced by their conduct: see Robichaud, at p. 45 O.R.
Rule 3 governs cases where there is no explicit agreement between the co-owners to sever a joint tenancy. In contrast, rule 2 is engaged where a mutual agreement to sever is claimed to exist. This distinction between rule 2 and rule 3 is significant. What follows from this distinction is that the proof of intention contemplated by rule 3 does not require proof of an explicit intention, communicated by each owner to the other(s), to sever the joint tenancy. If such proof were required, then rule 3 would be rendered redundant because a communicated common intention would be tantamount to an agreement. Instead, the mutuality for the purposes of rule 3 is to be inferred from the course of dealing between the parties and does not require evidence of an agreement.”