Co Written by: Kim Gale and Palak Mahajan
Gifts through the Lens of Doherty v. Doherty, Part Two
In the first article in this two-part series, we discussed the law regarding gifts in Ontario and how the court in Doherty v. Doherty, 2023 ONSC 1536 (Doherty) reinstated the law on inter vivas gifts. This article delves into the decision itself.
Analysis in Doherty
The dispute was about the property owned by the deceased, Molly Marie Doherty (Molly). The dispute was between Molly's daughter and the applicant, Kathleen Marie Doherty (Kathleen) and the respondents, Molly's son, Terrence Doherty (Terrence), Terrence's spouse, Sylvia Joan Kurkowski Doherty (Sylvia) and their son, Liam Alexander Doherty (Liam).
Molly executed a power of attorney for property dated Nov. 29, 2017, appointing Terrence as her attorney for property and his daughter, Meaghan Marie Doherty (Meaghan) as the alternative attorney. Meaghan was not a part of the proceedings before the court.
During the proceedings, Terrence admitted that while he was acting as Molly's attorney for property $370,822.63 was withdrawn from Molly's bank accounts. Terrence also admitted that this amount $329,745.02 (transferred amount) was transferred into accounts held directly or indirectly by each of Sylvia, Liam and himself.
The court observed that to prove that the funds comprising the transferred amount were gifts, Terrence and Liam ought to show that Molly intended to make the gifts without consideration or expectation of remuneration; that the donee accepted the gift; and that Molly delivered or transferred the funds to complete the transaction.
1. Molly intended to make the gifts without consideration
The court opined that there was no documentary evidence presented to evidence Molly's intention to make a gift or a payment of $23,000 to Liam to repay any loans.
The court also stated that there was no evidence of Molly's intention to make a gift of $55,000 to Liam. Both Terrence and Liam referred to the transfer of $55,000 as a loan and as such, this amount cannot now be claimed to be a gift.
Neither Terrence nor Liam had shown that Molly had an intention to make a gift of $55,000 to Liam. At best, she had a loan in mind.
The court also observed that any assertion of the transferred amount being a gift was in contradiction to the capacity assessment report of Molly. The court found that there was no evidence on record showcasing Molly's intention to gift the transferred amount to Terrence or Sylvia.
2. Terrence and Liam accepted the gift
Terrence claimed that he was the joint bank account holder of Molly's bank accounts and was given access to the funds.
The court was not able to find that Molly intended to make Terrence a joint account holder of her bank accounts with full access to the accounts for his own purpose and Terrence accepted the gift. Similarly, there was nothing to show the acceptance of the amount transferred to Liam being a valid acceptance for the purposes of a gift.
3. Molly delivered or transferred the funds to complete the transaction
The court observed that even if it could be shown that Molly had intended to make the gift of $23,000 to repay the loan for Liam, there is no evidence that Molly, herself, delivered or transferred the funds to complete the transaction, or that she specifically directed or authorized Terrence to make the gift on her behalf from her CIBC account.
The court also found that Molly did not make a sufficient act of delivery or transfer of the CIBC bank accounts to Terrence to complete the transaction. Molly could have added Terrence as a joint owner with a beneficial interest in the CIBC accounts, or she could have written a cheque to him in the amount of the transferred amount.
As a result, the court found that the sum of $78,000 transferred to Liam and the sum of $246,745.02 comprising the transferred amount, which Terrence removed from Molly's CIBC bank accounts, the bulk of which was transferred to bank accounts registered to Sylvia, was not an inter vivas gift to Terrence or Sylvia.
Judgment in Doherty
The court made the following declarations:
- Declaring that $329,745.02 (the transferred amount) that Terrence removed from Molly's CIBC accounts was not an inter vivas gift in whole or in part to Terrence or Liam, or both.
- Directing Liam to make restitution by repaying $78,000 of the transferred amount to Molly's estate within 30 days.
- Declaring that Terrence is in breach of his fiduciary duties, and Sylvia knowingly assisted Terrence in the breach of his fiduciary duties, and they are jointly and severally liable for $329,745.02.
- Directing the respondents to pay the applicant's full indemnity costs of the application.
Court of Appeal proceedings
Terrence and Sylvia challenged the judgment of the Superior Court before the Court of Appeal for Ontario. The judgment was challenged on the limited ground that the application materials filed before the Superior Court were not properly served upon Terrence and Sylvia.
The Court of Appeal in Doherty v. Doherty, 2023 ONCA 763 rejected the appeal and noted the following:
Instead of engaging with the merits of the application judge's decision, the appellants have focused their appeal on the issue of the service of the notice of application. This position is without merit [...]
[...]
The appeal is dismissed. The appellants shall pay the respondent her costs of the appeal, which we fix in the all-inclusive sum of $24,000.
The judgment of the Superior Court which has not been interfered with by the Court of Appeal, the law on inter vivas gifts has been clarified and set in stone. The three necessary elements to prove a gift are: (1) Intention; (2) Acceptance; and (3) delivery.
If these three tests are met with, a gift will be a valid inter vivas gift.
This is the second of a two-part series. Read the first article: Gifts through the lens of Doherty v. Doherty, part one.
This article was originally published by Law360 Canada part of LexisNexis Canada Inc.