You receive a cheque from a loved one who wishes to provide you with a gift. Days later, before you’re able to cash the cheque, your loved one dies. Are you still able to claim your gift? A recent decision of the Court of Appeal for Ontario indicates that in this type of situation, the gift will fail for lack of delivery.
In Teixeira v. Markgraf Estate, the applicant, Mr. Teixeira, brought a claim against the estate of his neighbour Maria Markgraf for payment of a cheque she wrote to him six days before her death. For years, Mr. Teixeira provided support and assistance to his neighbour without any thought of compensation. Shortly before her death, Ms. Markgraf provided a $100,000.00 bequest to Mr. Teixeira in her Will and also wrote him a cheque for $100,000.00. When Mr. Teixeira brought the cheque to Ms. Markgraf’s bank, he was turned away and told the bank would need to make further inquiries. The bank did not tell Mr. Teixera that Ms. Markgraf’s account held insufficient funds to cover the cheque (although she had sufficient funds in her other accounts). Days later, Ms. Markgraf died and the bank, being informed of her death, froze her accounts. Mr. Teixeira unsuccessfully attempted to deposit the cheque at his own financial institution the next day.
The Court of Appeal held that the cheque was subject to the law of gifts and the three elements of a valid gift needed to be met:
- an intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
- an acceptance of the gift by the donee; and
- a sufficient act of delivery or transfer of the property to complete the transaction.
While the first two elements of the test were met, the Court of Appeal grappled with the issue of whether the delivery of the cheque itself was sufficient to constitute delivery of the gift. We’ve previously blogged on the issues that can arise with delivery of inter vivos gifts.
In this case, the Court found that receipt of the cheque did not constitute delivery. The cheque itself was not a transfer of property, but rather a direction by Ms. Markgraf to her bank to pay $100,000.00 to Mr. Teixeira. At any time prior to the cheque being cashed, Ms. Markgraf was able to revoke her direction to the bank. As she retained control over the property to be gifted, the gift was not completed.
Once it received notice of Ms. Markgraf’s death, the bank, pursuant to s. 167 the Bills of Exchange Act, lost all authority to make payment of the cheque and Mr. Teixeira could not oblige the estate to honour the gift. Mr. Teixeira was therefore out of luck in bringing his claim.
Lesson learned: when you receive a gift of cash by way of cheque, cash it ASAP.
On Thursday, I’ll look at when equity might step in to perfect a gift that would otherwise fail (an argument unsuccessfully brought by Mr. Teixeira).
Thanks for reading!