On Monday, I blogged about the recent decision of the Court of Appeal for Ontario in Teixeira v. Markgraf Estate where the Court held that delivery of a cheque for funds to be gifted was not sufficient to constitute delivery of the gift itself.  The case also raises the issue of whether equity can step in to perfect a gift that might otherwise fail.

In the final portion of the decision, the Court adverted to the seemingly contradictory principles that “equity will not assist a volunteer” and “equity will not strive officiously to defeat a gift”.

The principle that “equity will not assist a volunteer” captures the notion that where a person receives a benefit for no consideration, equity will not impose an obligation in order to ensure the benefit is received. This leads, in the context of gifts, to the well-accepted principle that “equity will not perfect an imperfect gift”. On its face, this seems to indicate a requirement that all three elements of a valid gift be strictly met. Over time, however, case law has provided exceptions to the sometimes onerous third requirement that gifts be delivered to the recipient of the gift.

Exceptions to this rule can be found in cases such as Re Rose where the requirement of delivery of a gift was relaxed such that the requirement would be satisfied where the donor took all steps that could be expected of him to transfer legal title. In that case, the donor intended to transfer shares to the donee. The donor provided share transfer documents and the share certificates to the donee. However, the transfer of the shares required the corporation to consent to the transfer and register the shares, which occurred only after the donor’s death. The English Court of Appeal held that the shares were gifted at the point at which the shares were given to the donee, despite the fact that the transfer of title had not occurred (and could still be refused by the corporation).

In a more recent decision, Pennington v. Waine, the English Court of Appeal considered the exceptions to the rule that equity will not perfect an imperfect gift. The Court, citing the principle that “equity will not strive officiously to defeat a gift”, greatly expanded the situations in which equity may, in fact, perfect imperfect gifts. In that case, the Court held that equity could intervene to give effect to a gift if it would be unconscionable for the donor to change his or her mind.

The Court of Appeal for Ontario, in Teixeira v. Markgraf Estate, did not foreclose the possibility that in some cases, the principle established in Pennington v. Waine may be applied. Any application of the principle, however, would need to be applied on a principled basis and only where it would not conflict with settled law. Where the gift failed for lack of delivery as the gifted cheque was not cashed before death, the Court refused to intervene given the already settled case law that such a gift would fail.

All told, Teixeira v. Markgraf Estate rejects the wide-sweeping changes to the law on gifts set out in Pennington v Waine and affirms that equity will not, generally, step in to perfect an otherwise imperfect gift.

Thanks for reading!

Sayuri Kagami