The Second Opinion: Does it take Two to Tango? When a Party Can (and Cannot) Contract with Herself
At common law, a party is generally unable to contract with itself, or to transfer property to itself. In some provinces, these limitations have been overcome through explicit legislation. In a recent ruling, Penny v. DeLong Estate, 2013 NSCA 74, the Nova Scotia court confirmed that, in the absence of statutory intervention, equity will not intercede to overcome this common law prohibition.
The case involved a joint tenancy over a parcel of land. One of the co-owners wished to sever the joint tenancy to create a tenancy in common. One of the ways in which this can be done is by the joint tenant conveying her interest in the land to a third party. Instead of following this well-accepted strategy, the co-owner of the parcel sought to sever the joint tenancy by conveying her interest in the property to herself.
At common law, such a "self-conveyance" is ineffective. In certain provinces, the Legislature has statutorily authorized such mechanisms (see, e.g., s. 41 of the Ontario Conveyancing and Law of Property Act, which permits a party to convey property to itself, and s. 6 of the Ontario Mercantile Law Amendment Act, which permits a party to contract with itself, provided a second party is also privy to the contract).
No such legislative provision exists in Nova Scotia. The co-owner sought to convince the court that her "self-conveyance" -- while ineffective in law -- should be recognized and given effect in equity. It was acknowledged that this was a novel position.
The Court of Appeal provided a useful discussion of joint tenancies, the severance of such tenancies, and the legitimate means by which equity can intervene to achieve an effect which is impossible as a matter of common law. At the end of the day, however, the Court concurred with the judge below, and found that -- as a matter of common law or equity -- the purported conveyance by the co-owner to herself was ineffective.
The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions. The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.
contracts Conveyancing and Law of Property Act Real Property