The requirements for what constitutes a valid gift are clearly established in case law. The Court of Appeal in McNamee v McNamee stated that to be a valid gift, the following criteria must be met:

1. The donor must intend to make a gift and not expect consideration or compensation in return;
2. The gift must be delivered to the recipient; and
3. The recipient must accept the gift.

Generally, these are relatively straightforward criteria. However, what happens when it’s not clear when the delivery of a gift has occurred?

This question was examined in Deziel v Deziel, 2024 ONSC 5279. My colleague, Shawnee Matinnia, blogged on the estate trustee removal aspect of that decision here. I will discuss specifically the issue of a gift made by way of cheque.

Delivery of a gift via cheque is not as simple as delivery of most gifts. Merely giving the physical cheque to the donee does not satisfy delivery of the gift. This is because a cheque is just the donor’s instructions to the bank to provide the money to the donee. After giving the donee the cheque, the donor could tell the bank not to cash the cheque or there may be insufficient funds in the account, in which case the funds would never be delivered and the gift would fail. The Court of Appeal in Teixera v. Markgraf Estate stated that the delivery of a gift by cheque is not completed until the cheque is cashed.

This is all well and good when a cheque is provided by the donor to the donee (with the intent for it to be a gift) and the donee cashes the cheque while the donor is still alive. However, the situation is further complicated when the donor dies before the donee cashes the cheque.

As per Section 167 of the Bills of Exchange Act, the bank cannot cash a cheque once they have been notified of the customer’s death. If the bank learns of the customer’s death before the donee cashes the cheque, they will be unable to cash the cheque, and the gift will fail.

Deziel once again raises the question as to whether cashing a cheque after the donor’s death but before the bank has notice of the death will still constitute a valid gift. In Kendrick v Dominion Bank and Bownas, the appellate court agreed that the gift was valid even though the cheque had been cashed after the donor’s death, but before the bank had notice of the death. The appellate court did not want to overturn the finding of the lower court, but did note that they questioned whether the gift should have been found invalid because it was cashed after the deceased’s death, even though the bank didn’t have notice of the death.

The Court in Deziel did not technically need to answer this question, as they found that because the donee was also an Estate Trustee, she should have notified the bank of the donor’s death before she attempted to cash the cheque. However, they stated that they believed Teixeira stands for the principle that the death of the donor revokes the bank’s authority to pay a cheque regardless of when they are notified that the donor has died. This is also in line with the Bills of Exchange Act which prohibits banks from passing cheques through a deceased’s person’s account. Importantly, the Court in Deziel found that the cheque was not a valid gift, because it had not been properly delivered, and required the donee to repay the cheque (even though the bank cashed it).

As we can see, if there are questions as to whether a gift by cheque was validly given, it is crucial to consider the timing of when the cheque was actually cashed. However, an important note is that this issue would not apply to a certified cheque. In that case, the bank has already confirmed that the funds are available so there would be no concern that the donee would be unable to cash the cheque, and therefore the question as to the timing of delivery is not relevant.

Thanks for reading!

Darien Murray