Tag: failure of gift

09 Nov

Can Equity Perfect an Imperfect Gift?

Sayuri Kagami Estate & Trust Tags: , 0 Comments

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 thperfect an imperfect giftis 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

 

06 Nov

Teixeira v Markgraf Estate: Can you cash a gifted cheque after the cheque writer dies?

Sayuri Kagami General Interest Tags: , , 0 Comments

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:

  1. an intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
  2. an acceptance of the gift by the donee; and
  3. a sufficient act of delivery or transfer of the property to complete the transaction.
Delivery of cheque is not delivery of gift
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.

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!

Sayuri Kagami

28 Jul

Failure of a Charitable Gift

Hull & Hull LLP Estate & Trust, Wills Tags: , , , , , , 0 Comments

In the recent case of McDougall Estate, 2011 ONSC 4189 (CanLII) the deceased passed away leaving a handwritten will and codicil that together constituted a valid holograph will. The deceased had one surviving relative, his 83-year-old sister who lived in Florida.  

The will did not name an estate trustee and so the deceased’s close friend applied for and obtained a Certificate of Appointment of Estate Trustee with a Will. 

The will left the deceased’s estate to his sister, with a gift-over to “Eye Care research in Glaucoma and Catarach (sic) research”. The codicil said “this shall be expanded after all expenses and encumberances including burial, and the portion to [illegible – the Court determined it was either “expand” or “eye and”] glaucoma … At my death the remainder of my possession shall be bequathed (sic) to my sister Pearl McDougall, now residing in Florida.”

The estate trustee flew to Jamaica at a cost of $859 to deliver a cheque for $9,000 to a clinic for which the deceased had a passion. She delivered the donation herself because she wanted to make sure the charity was legitimate. 

In interpreting a will, the court commented that its function was to determine the true intentions of the testator in light of all the surrounding circumstances. On a reading of the will as a whole, the testator intended to make a charitable gift for eye and glaucoma research and that the bequest to charity was to be paid before the residue would fall to his sister.  This interpretation gave effect to the evidence concerning the deceased’s intentions including his history of making charitable gifts and his desire to benefit eye research because of his own cataract surgery.

However, the charitable bequest failed because no specific amount or share was stated by the testator.

The McDougall decision also dealt with the passing of accounts and contained some instructive discussion regarding trustee compensation, which I will cover in tomorrow’s blog, so stay tuned!

Sharon Davis – Click here for more information on Sharon Davis

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