F. Joint Accounts

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 235-242

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Many different types of bank accounts are and have been available over the years, distinguished by the special features associated with them. These include accounts that are strictly for savings without chequing or other transactions access and that have higher interest rates, often varying with the minimum balance in the account; accounts that are

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partly for savings and partly for chequing and other transactions, with lower interest rates; and accounts without interest for transactions only. The mix of savings or no savings, interest or no interest, transactions or no transactions, minimum balance or no minimum balance changes from bank to bank and from time to time as banks compete with one another for customers and assess what is profitable for them. With the exception of the provisions introduced in the 2001 Bank Act relating to low-fee and no-minimum-deposit or no-minimum-balance accounts for low-income customers,⁶⁴the way in which banks structure accounts is a matter for each bank to decide within the context of the marketplace in which they operate.

Accounts are also available to a variety of potential customers individually or jointly, with one or more other persons in law, whether other individuals, corporate bodies, trusts, partnerships, or estates. Two of these categories of accounts have attracted a considerable volume of case law over the years: joint accounts and trust accounts.⁶⁵

Typically, joint account agreements are the same agreements as for any other account opened by an individual alone, with several clauses in the agreement making specific provision for the account where more than one customer are executing it in relation to a single account. These clauses typically provide for joint authorization to instruct the bank as to the funds in the account by one account holder only or more than one; joint and several liability for liabilities arising from the use of the account; designation for survivorship in the event that an account holder dies; and a prohibition on use of the account in the event that one of the account holders is declared bankrupt or insolvent.

These clauses reflect the older common law in relation to signature, joint liability, survivorship, and loss of legal capacity by operation of law, and the courts have extensively considered these clauses in turn. The law relating to joint accounts evolved by analogy to joint tenancies in real property law. Thus, they are distinguished by the right of survivorship, as well as by the four unities of a joint tenancy: possession, interest, title, and time. The real property analogy continues to be a useful guide to the legal nature of joint accounts.

Five specific issues have arisen in relation to joint accounts: (i) the nature of the legal rights enjoyed by joint account holders; (ii) the operation of the right of survivorship where the joint account is used as a means of estate planning; (iii) the nature of the legal liability among joint account holders and the bank; (iv) the application of rights of set-

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off and appropriation to funds in the joint account; and (v) the garnishment of joint accounts.⁶⁶

A joint account is a debt owed by the bank to the joint account holders jointly,⁶⁷that is, each holder has the same right to possession, interest, and title for the same time in that debt as the other joint account holders. When the account is opened, each holder acquires the same right to draw on the funds in relation to the bank regardless of whether the bank is required to act on the signature of one account holder only or more than one.⁶⁸

However, the legal nature of the relationship in the debt between the joint account holders on the one hand and the bank on the other is not necessarily conclusive of ownership of the debt as among the joint account holders. Thus, courts have looked beyond the formality of the account agreement to find that joint accounts have been opened for the convenience of the holder who deposited the funds in the account so as to deprive the other account holders of any interest in those funds where the circumstances showed this to be the intention of the depositor.⁶⁹

Even where the account agreement provided for survivorship, courts have found no necessary inference of an intention to convey the debt to the survivor.⁷⁰

A joint account agreement defines the legal nature of the account in relation to the parties to the agreement but not necessarily the legal entitlement of the joint account holders among themselves to the debt

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represented in the account. A bank that deals with the funds in a joint account does so at its own risk when it has received notice that one holder claims those funds and may be liable to that holder if it deals with the funds so as to affect the claim.⁷¹

The legal nature of a joint account as between the parties to the agreement is further clarified by the bank’s liability when it has honoured a mandate without the requisite signatures or a forged signature on a cheque; in such cases, the bank is in breach of contract in relation to all the other joint account holders because its duty is owed to each account holder in any joint account contract and liable in damages to each.⁷²

The purpose of requiring more than one signature was to prevent one joint account holder from acting to the detriment of the other.⁷³

Where the funds withdrawn by means of a forged signature were used for the benefit of the complainant, equity would preclude that person from succeeding in damages against the bank because they were used for the complainant’s benefit.⁷⁴

Where the funds are withdrawn by one joint account holder to purchase property in that person’s own name only, a court will not order the property to be held in the names of the other joint account holder or holders,⁷⁵in the absence of evidence to the contrary.⁷⁶

It might be that a bank could be a constructive trustee in appropriate circumstances, but there would appear to be no cases on this point.

The second issue in relation to joint accounts, of survivorship, is resolved using the same general principles as ownership inter vivos. Account agreement clauses typically state that there is a right of survivor-ship in the account when one of the joint account holders dies, and this applies in relation to the bank. However, disputes may arise as between the remaining joint account holders and the estate of the deceased as to legal title in those funds where the beneficiary under the estate is not a joint account holder. There may also be an issue of taxation where the survivor is also a beneficiary under the estate, and the characterization of the legal means by which...