Under the common law, it is well-established that a debt owed to the deceased will be extinguished if the debtor is appointed to serve as the executor of the deceased’s estate. The reason for this rule, referred to as the rule in Strong v. Bird, is that an executor cannot sue themselves to recover a debt on behalf of the estate. In recent years, the rule in Strong v. Bird has been expanded by the courts in Canada to also permit imperfect gifts to be saved, so long as the deceased intended to give a specific chattel to their executor up to the time of death. However, the circumstances under which an imperfect gift may be “saved” by an estate trustee’s appointment are limited, as demonstrated by the Ontario Court of Appeal’s recent decision in Hugginson v Hugginson, 2025 ONCA 902.
Background Facts
The estate trustee in this case transferred $400,000 to herself from the estate of her late stepfather, asserting that he had intended to make an inter vivos gift to her before he died.
In the months leading up to his death, the stepfather discussed the possibility of making a lifetime gift to the estate trustee with both his lawyer and his investment advisor. His lawyer even prepared a letter on behalf of the stepfather, stating that he may leave her a gift of money during his lifetime as a thank you for everything she had done for him, and that if he “did end up” making such a gift, he did not want her share of his estate to be reduced. The letter, however, did not make an actual gift to her.
After receiving the letter, the investment advisor advised the estate trustee, who was also the stepfather’s attorney for property, that further instructions would be required to make the gift. Four days later, however, the stepfather died without meeting the advisor again or providing any specific direction. No transfer occurred during his lifetime.
More than six months after his death, the investment advisor facilitated a $400,000 transfer to the estate trustee from the stepfather’s investments on the condition that she sign a release. The transfer was subsequently challenged by the estate trustee’s sister, who was also named as a beneficiary under the stepfather’s will.
The Application Judge’s Decision
Justice Gibson heard the original application, reported at Hugginson v Hugginson, 2025 ONSC 1797, and ordered the estate trustee to return the $400,000 to the estate. He found that there was no valid inter vivos gift and that the rule in Strong v. Bird did not apply. The court also declined to admit notes taken by the investment advisor into evidence.
With respect to the alleged gift of $400,000, the court found that the estate trustee failed to establish that the stepfather had formed the necessary settled and specific intention to make an inter vivos gift of the funds. Moreover, there was no evidence which proved a continuing intention to make a specific gift up to the time of death, which, according to the Supreme Court of Canada’s decision in Morton v Brighouse, 1927 CanLII 37, is necessary to save an imperfect gift using the rule in Strong v Bird. The evidence did not even establish a specific amount that the stepfather intended to give the estate trustee – at best, the letter drafted by the lawyer reflected that the gift was only a “contingent possibility.” Since the rule in Strong v Bird was inapplicable, the appointment of the estate trustee did not perfect and complete the gift.
The Court of Appeal’s Ruling
The Ontario Court of Appeal upheld Justice Gibson’s decision, confirming that the rule in Strong v. Bird was inapplicable because the estate trustee could not prove that the stepfather intended to make a specific gift of specific property while alive, or that any such intention continued until death. Given the application judge’s “unassailable findings” on the absence of the requisite intention, the appeal was dismissed.
The Court of Appeal’s decision is also noteworthy in explaining why notes taken by the stepfather’s investment advisor were inadmissible. While the estate trustee argued that the notes supported her position that the stepfather intended to make a lifetime gift and were admissible on several bases, the Court of Appeal disagreed. The notes were not admissible as business records under section 35 of the Evidence Act because the estate trustee failed to satisfy requisite statutory preconditions – she did not call the investment advisor who authored the notes, nor any other witness capable of attesting that they were made in the ordinary course of business.
The notes also could not be admitted under the principled exception to the hearsay rule. The Court of Appeal held that the necessity requirement was not met, as there was no evidence that the investment advisor could not be called to testify. The reliability requirement also was not satisfied, as the notes constituted double hearsay.
Even if the notes had been admitted, the Court observed that the outcome of the case would have been the same, since the notes did not establish a specific intention to gift $400,000, nor did they show that the stepfather authorized the advisor to make the transfer. Similarly, the Court held that the advisor’s post-death letter facilitating the transfer was not evidence of the stepfather’s intention to make the gift, particularly given that the transfer was conditional on the estate trustee signing a release.
Takeaways for Estate Trustees and Advisors
Hugginson v. Hugginson confirms that the circumstances under which an incomplete gift can be saved using the rule in Strong v. Bird are limited. To perfect an imperfect lifetime gift through an estate trustee’s appointment, the evidence must clearly establish a specific and continuing intention to gift identifiable property during the testator’s lifetime, up to the time of death. Vague discussions, conditional language, or post-death efforts to “complete” a gift will not suffice.
The decision also serves as a potent reminder of the importance of laying the proper evidentiary foundations when relying on third-party notes to establish testamentary or donative intent.
Thank you for reading and for following our firm blog in 2025. We look forward to keeping you informed of significant case law and legal developments in the year ahead!