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Posts from the ‘Gifts’ Category

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Broken Engagement: Who Keeps the Ring?

Broken Engagement: Who Keeps the Ring?

We all know that not all relationships are meant to last – indeed, some of them don’t even get out of the starting gate. When an engagement is broken, there is the time-honored question of who gets to keep the ring.

In the older cases, some of which date back a century or more, the courts parse the question by considering who did the “breaking” – i.e. letting the jilted bride keep the ring, or allowing the rejected groom to insist it be returned to him, as the case may be. From a technical legal standpoint, sometimes courts will look at whether the ring was a “conditional gift”, meaning one that that presupposes that the marriage will actually take place.

In a more recent decision in a Small Claims Court case called Mastromatteo v. Dayball, the court takes a pragmatic approach to these kinds of situations:

Defendant [the putative groom] claims $4,000 for the engagement ring which he purchased and gave to plaintiff [the intended bride] when he proposed. …

The gift of an engagement ring to my mind is just that – a gift. The notion that the ring must be returned if the marriage does not occur appears to me to be inconsistent both with the nature of a gift and with the modern law relating to marriage.

The court pointed out that the modern-day provincial Marriage Act precludes actions for a “breach of promise to marry or for any damages resulting therefrom” and requires that any right to recover a gift made “in contemplation or conditional upon their marriage” must consider whether the person giving the gift was at fault for the marriage not happening. In observing that the common-law in this area was murky, the court added:

In the absence of any clear common law rule on whether a ring must be returned, I would incline to the position that a gift is a gift. Once perfected by delivery, it cannot be recovered. Since a promise to marry cannot be enforced, and long after divorce on a no-fault basis became accepted in Canada, the concept of a battle over ownership of the engagement ring appears artificial and anomalous at the very least. At a time when our law makes particular efforts to promote settlement, discourage litigation and narrow the scope of litigation when it is required in family law disputes, permitting ownership of gifted rings to be litigated based on a series of differing rules with no clear result, appears undesirable.

The promise of marriage is unenforceable and was unenforceable at the moment it was made along with the gifted ring. It appears undesirable for the law to permit enforcement in relation to only the gift part of that transaction when the larger transaction is itself unenforceable and in that sense legally faultless. If viewed as a matter of first impression I would find that the ring was a gift perfected by delivery and cannot now be reclaimed, whether as damages or as recovery of possession of the object itself.

The court did acknowledge there were a large number of prior (and often-inconsistent) court decisions, and summarized the upshot this way:

The net effect of the authorities appears to be this: the ring may or may not be recoverable; that decision may or may not turn on who broke off the engagement; and the donor may or may not be too late to claim recovery if he or she does not do so immediately upon breakup. No one could describe that state of the law as a model of clarity.

For the full text of the decision, see:

Mastromatteo v. Dayball, [2011] O.J. No. 1600 (Sm. Cl.)

At Russell Alexander Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

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Think You’re a Gift-Giver? Think Again

Gift Giver
Think You’re a Gift-Giver? Think Again

It seems like a straightforward scenario: Parents, perhaps now in their twilight years, decide to give a substantial gift to their married adult offspring, in the form of a large sum of money, land, a family cottage, or another asset (large or small). There is nothing in writing because – after all – it’s a gift between close family members.

But would it surprise you to know that absent a contract or other clear indication otherwise, the law actually presumes not that a gratuitous gift has been made from parent-to-adult child, but rather that the adult child holds the item/property on the parents’ behalf, unless there is evidence to the contrary?

The law on this perhaps confusing presumption was made clear in a recent Ontario decision called Barber v. Magee.

There, the couple had met in 2000, married in 2002, had a child together, and ultimately divorced in 2011. During the marriage, the husband had received $90,000 from his father toward the purchase of the matrimonial home, and another $67,000 later on. There was never a demand for repayment, nor any attempt to actually repay this $150,000 to the father. Nor were there any documents available: The husband claimed that his mother was the custodian of them, but had destroyed them in a “document purge”. He was thus unable to give the court evidence on the details of the purported loan, including the terms, interest rate, or repayment schedule.

Still, as part of settling their financial affairs during the divorce proceedings the husband claimed that this $150,000 was merely a loan from his father which he still had to repay; from a family law perspective this meant it would still form a liability and be deducted from his net family property.

As part of evaluating the husband’s position, the court revisited the current law on gifts-versus-loans in the context of these sorts of family law proceedings.

The court helpfully summarized the principles this way:

• In a scenario involving a gratuitous transfer of property from any one person to another (which for convenience we will still call a “gift”), the law of “resulting trust” applies. The law presumes that the actual intent of the gift-giver is to retain the gift but put in the hands of another person for “safekeeping” (so to speak), and not actually give it away.

• This also applies to gratuitous gifts between parents and adult children: The presumption is not that the parent intends a gift, but rather that the adult child is holding the property in trust for the aging parent. In other words, the assumption is that the gift-giving parents nonetheless hold an interest in the asset, even after placing it in the hands of the adult child.

• However, that presumption is rebuttable by putting forward evidence to the contrary. The burden is placed on the recipient adult child to show that an actual gift was intended, i.e. that he or she gets to keep the item.

• In the case of a dispute, the judge hearing the matter must begin with the presumption, and then weigh all the evidence in an attempt to determine the parents’ actual intent at the time of the transfer. The precise nature of the required evidence will depend on the facts of the case.

• There are various factors to consider:

o Whether there were any contemporaneous documents evidencing a loan;

o Whether the manner for repayment is specified;

o Whether there is security held for the loan;

o Whether there are advances to one child and not others, or advances on equal amounts to various children;

o Where there has been any demand for payment before the separation of the parties;

o Whether there has been any partial repayment; and,

o Whether there was an expectation or likelihood of repayment.

(A court will also take into account the fact that what started off as more of a “gift” to one spouse in a newly-separated couple may prompt the parents to suddenly collude in the claim it was a loan, to help out their son or daughter in the face of threatened litigation. This may be particularly so if the alleged debt is old, the parents do not need the money, and there has been no demand for repayment until after separation).

All of these principles stem from the law of equity, which focuses itself on what is fair. Those principles presume the existence of bargains, not gifts.

Returning to the Barber v. Magee facts, the court found that the $150,000 advanced from the husband’s father were gifts, with no clear intention or expectation that it be returned. Among other things, the court considered the fact that the wife had no idea during the marriage that the money was supposedly a loan; it was never discussed. She never saw or had knowledge of any documentation, and learned of the alleged loan only after she and the husband separated.

For the full text of the decision, see:

Barber v. Magee, 2015 ONSC 8054, 2015 CarswellOnt 19620, [2015] O.J. No. 6818

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com.

Man Gives Woman $130K: Was it a Post-Infidelity Symbol of Commitment? Or Was He Buying an Interest in Her Home?

gift

Man Gives Woman $130K: Was it a Post-Infidelity Symbol of Commitment? Or Was He Buying an Interest in Her Home?

During the course of their 6-year relationship, the man moved into the woman’s home, which she had owned for 10 years. He gave her $130,000, and contributed to her expenses. When the relationship ended due to the man’s infidelity, a dispute arose as to what they each intended the $130,000 payment to represent. Had they agreed that the man was buying half the woman’s home, as he asserted? Or was the money simply a gift, as the woman claimed? This was the main question for the court to decide.

Essentially, this was a “he said/she said” exercise: In assessing the facts and credibility of the party’s evidence – a task the court found “neither simple nor scientific” – the court found that it made no sense that someone with the man’s credentials would ostensibly advance $130,000 to purchase a share in the legal title in the woman’s home and yet fail to document it properly.

The court recounted the man’s self-described achievements this way:

The [man] … describes himself as a highly educated and sophisticated businessman, a recognized pioneer of financial planning in Canada and an offshore private banker.

Wright has a Bachelor of Arts, a Master’s in Business Administration, certifications as a Registered Financial Planner, Certified Planner, and Certified Fraud Examiner and has received a Canadian Forces decoration medal for service in the Canadian Navy. He has authored a book entitled “Demons in the Financial World and How to Spot Them” and was a lecturer at both Seneca College and Centennial College. He states that he has been working on his Ph.D., but that he had to recently withdraw from the course due to what he describes as post-traumatic stress disorder suffered as a result of issues pertaining to this lawsuit.

Yet the man’s version of events was incredible, and the documentation he produced as being all that remained of a massive computer failure was “at times riddled with implausible error”, according to the court. Further, in his dealings with third parties (for example bank employees from whom he was applying for a mortgage), he had self-servingly called his interest in the home “contingent”; conversely he did not declare any interest in the woman’s home in a later application for subsidized housing. In other words, the nature of his professed legal interests in the woman’s home seemed to shift to suit his own needs at any given time.

Similarly, the court pointed out that it did not make sense that the woman, who owns a successful design-services business and had an 11-year old daughter to support, would not want to document the same transaction.

This lack of documentation not only supported the woman’s version of events, but made even more sense in light of the more personal side of her story: She claimed the $130,000 was a gift representing a symbol of the man’s commitment to the relationship, since he had recently proposed to her after being unfaithful. (The man denied any infidelity, but the court found that the evidence showed otherwise). The court elaborated:

I accept the evidence of [the woman] that she did not tell her family and friends because she was embarrassed; embarrassed by the infidelity in February 2007, embarrassed that she forgave [the man] for it and accepted his proposal, embarrassed that he paid her a large sum of money as an apology and a symbol of commitment. I also accept the submissions of [the woman’s] counsel that if [the woman] was going to make up a story that the $130,000 was a gift she would also have made up the details surrounding her receipt of the money.

The court found the man had effectively used the money and a marriage promise to “secure” the woman in a relationship that he felt would be financially beneficial to him: He knew the woman’s parents had given her financial gifts in the past, and he had concluded that they were wealthy.

The court accordingly declared that the woman remained the sole owner of the home, and accepted her evidence that the $130,000 was a gift. It also dismissed the man’s claim for expenses during the time they lived together, and in fact ordered him to pay the woman $3,000 for damage he had caused to the property.

For the full text of the decision, see:

Wright v. Holmstrom, 2015 ONSC 1906

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?

recurring gift

Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?

In a recent decision called Horowitz v. Nightingale, the key question for the court was whether, in calculating the husband’s annual “income” for equalization purposes, the total should include a regular gift of $50,000 he received each year from his wealthy parents.

The couple had been married about 16 years when they separated. They had three children together, each of whom had special needs. The wife was looking for about $35,000 per month in spousal and child support, based on the husband’s income which her experts estimated was about $1.7 million for 2013, and over $3 million for 2014, including certain withdrawals the husband made from his RRSP. The husband, in contrast, claimed that his overall income for 2013 was under $600,000, and that his support obligation should be adjusted downwards accordingly.

As part of the task of ascertaining the husband’s true income for these purposes, the court was accordingly asked to characterize the $50,000. The parties were at odds on whether the annual cash gifts were regular enough to be counted: The wife claimed that they had been consistently given in the past, and could be counted on to recur in the future. To bolster her position, she produced an excerpt from an e-mail she received from the husband in which he confirmed that the gift was regularly given each year. It read:

It’s a good thing my father gave me $50,000 each year to help with all your expenses (my parents have the cancelled cheques). Don’t expect to see that anymore. And the money many years I had to take out of my RRSP to pay for everything. Don’t expect that to happen anymore.

The husband refuted that the gifts were regular; moreover he pointed out that his father had had passed away recently. Since the gifts had come from both parents (rather than from either of them individually) there were no guarantees, he said, that his widowed mother would keep up the generosity now that the father was gone.

The court started the examination by pointing out that in law, both child and spousal support was governed by the provisions of sections 15.1 and 15.2 of the federal Divorce Act. Those sections provides a list of factors that the court must consider whether ordering the amount of temporary support the husband had to pay the wife in this case. One of them was the consideration of the husband’s means, and his corresponding ability pay support in all the circumstances.

Next, the court observed that for child support purposes, gifts received by a parent are not presumed to be part of part of his or her presumptive annual income; however, under the Child Support Guidelines, the court had discretion to impute income if it was considered appropriate in the circumstances. However, “gifts” was not among the non-exhaustive list of amounts/items a court could impute.

The court then considered prior law on this issue, which confirmed the receipt of gifts was not generally an appropriate circumstances in which to impute income to the recipient. However, that precedent also established a list of other factors, all of which could be considered in this case, including: how regular the gifts are (or whether there were circumstances that made them exceptional); how many years they had been given by the parents to the husband; whether they were part of the family’s income and lifestyle while the couple was together; the income generated by the gifts relative to the husband’s entire income; their true purpose and nature; and whether they are likely to continue.

With this in mind, the court turned to the present facts: The $50,000 gift had been given by the husband’s parents in each of the prior 8 years, since 2006, as confirmed in the husband’s e-mail. He testified that “every dollar” had been used for family purposes, which meant the funds were part of the family’s overall income, and contributed to the lifestyle they came to enjoy. Finally – while conceding that there was no obligation on the husband’s mother to continue making the gifts at all, in the same amount, or with the same regularly – the court concluded that they were likely to continue in the immediately foreseeable future. (Incidentally, the husband had given no specific evidence as to how his father’s death might affect whether there would be future gifts, nor had he presented to the court any copies of the cashed cheques, even though they were available to him. The court drew a particularly negative inference from this latter omission on the husband’s part).

The court therefore concluded that the annual $50,000 annual gift should indeed be considered part of the husband’s income, for the purposes of calculating both spousal support and child support.

For the full text of the decision, see:

Horowitz v. Nightingale, 2015 ONSC 190

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

If You Give Something Twice, Was it Really a “Gift” in the First Place?

 house gift

If You Give Something Twice, Was it Really a “Gift” in the First Place?

In a recent Ontario property-division case called Nadendla v. Nadendla, the court grappled with whether to believe a husband’s testimony pertaining to an apartment in India allegedly he bought for his mother.

The couple married in 1993, had two children, and separated in 2011. As part of their subsequent divorce litigation, the husband testified that in 2007 after his father’s death he and his brother decided to purchase a $70,000 three-bedroom apartment in India for their mother. He claimed that at the time of purchase it was always intended by them to be the mother’s home upon completion, and provided details to the court about the alleged payment arrangements.

The wife, in contrast, claimed that it was not bought for the husband’s mother at all; rather, she understood it was merely bought as a real estate investment to be used when the couple went to India on family trips. (And this did take place on one occasion, and the husband’s mother was not there at the time). The wife said she was aware of family finances, and that the husband’s after-the-fact claim to the contrary was merely his attempt to keep the apartment out of the family property division process upon the couple’s subsequent separation and divorce.

The court looked at the evidence, and despite the husband’s assertions to the contrary found that he was actually the 100% owner of the apartment. The court noted certain evidentiary inconsistencies, such as the fact that: 1) on certain travel documents and a settlement deed the mother’s address was listed as the family home, not the apartment; and 2) there was no corroborating evidence that the husband’s brother invested any money as claimed. The court also noted that the husband had first claimed he gifted his share of the property to the mother in 2012, but this contradicted earlier testimony that he had given her a cash gift in 2008 and bought the apartment himself.

But most tellingly, the court pointed out that the husband’s claim to have transferred the apartment in 2012 (allegedly to placate certain people in India who had questioned his mother’s legal right to it) would not have been necessary if he had made an outright gift to her in 2008. In other words, if the husband bought his mother the apartment as a gift in 2008, then it was not his to give her a second time in 2012.

In short, the court rejected the husband’s evidence on the apartment in India, and concluded that the wife was a more credible and reliable witness. It accordingly made a factual finding that the couple’s funds were used to buy the apartment in India, in the name of husband, as a real estate investment. The apartment was therefore to be included in the Net Family Property division and equalization process in the normal course.

For the full text of the decision, see:

Nadendla v. Nadendla, 2014 ONSC 3796

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Russell Alexander’s #IceBucketChallenge for ALS Canada – video


 

Wednesday’s Video Clip: Russell Alexander’s #IceBucketChallenge for ALS Canada

Accepting the challenge from Janie Alexander, Russell completed his ice bucket challenge and threw down the gauntlet challenging Jamie Alexander at ESG, Lee Rosen in North Carolina and the lawyers at Russell Alexander, Collaborative Family Lawyers.

The Globe and Mail has recently reported:

Until late last month, the ice bucket challenge existed for months on the Internet as a silly social media dare with no connection to any charity. Then, on July 29th, a Boston man with ALS filmed himself dumping ice on his head, and challenged viewers to do the same or give to ALS research. Before that moment, ALS was a tiny voice in the loud world of big attention-grabbing causes like breast cancer and AIDS.

….

The donations are unlike anything the ALS Society of Canada has seen before. Due to overwhelming traffic, it has taken down its regular website and directed all visitors to its Ice Bucket Challenge page. While the campaign started in the United States, Canadian participants helped to direct roughly $400,000 in donations to the organization (and its provincial affiliates) on Tuesday alone. In total, the campaign has raised almost $800,000. As a comparison, in the entire summer period last year, “we’re talking just thousands of dollars,” said Interim CEO Tammy Moore.

In the U.S., the numbers are massive: $31.5-million (U.S.) in donations compared with just $1.9-million in the same period – July 29 to Aug. 20 – last year.

What it’s all about? Amyotrophic lateral sclerosis (ALS), sometimes known as Lou Gehrig’s disease, is a neurological disease that attacks the nerve cells we use to control our muscles. It can start with tightness or weakness in certain muscles, and eventually progresses until a person loses the ability to walk, speak, swallow and even breathe. While these functions deteriorate, the disease leaves cognitive functions mostly intact: a person with ALS is aware of what is happening to them. There is no cure.

ALS in Canada: 3,000: the rough number of people currently living with ALS in Canada; 1,000: the estimated number who will be diagnosed in Canada this year; roughly the same number of people will die from the disease this year; 90 per cent: the proportion of ALS cases where there is no hereditary link to the disease. ALS is indiscriminate, and strikes regardless of age, ethnicity, gender – or family history.

Top countries by participation in the ice bucket challenge: 

1. United States
2. Australia
3. New Zealand
4. Canada
5. Mexico
6. Brazil
7. Germany
8. Philippines
9. Puerto Rico
10. India

To lean more or to donate visit the ALS Society of Canada.

Know the Law When Accepting Gifts

Know the Law When Structuring – and Accepting – Gifts

A recent Ontario Court of Appeal case illustrates the treatment of gifts for family law purposes, and highlights the importance of getting competent legal advice when structuring gifts by way of estate freezes and other complex legal mechanisms.

The decision in McNamee v. McNamee involved a husband named Clayton and a wife named Connie.  They separated in 2007, after being married for almost 20 years in what was an equal partnership in all respects.  They had two children.   Clayton worked for his father’s very successful concrete trucking company as head of a construction division.

The issue for the court was whether 500 shares in the trucking company that Clayton received from his father were properly considered a “gift” – and therefore exempt from being included in his Net Family Property (NFP) upon separation from Connie, in accordance with Ontario family law.  The shares were worth more than $400,000.

The father’s share transfer had been accomplished in a complicated and unusual manner using an estate freeze, and was done reluctantly on the advice of his accountant and lawyer.  Its main purpose was to protect his business from creditors and to limit the tax impact upon his death.   It involved folding the business into a holding company, fixing its value, accruing that value back to himself, using a second holding company, then undertaking a series of share transfers.  The end result was that Clayton and his brother were each directly transferred 500 shares of their father’s trucking company, but the father expressly retained control (by retaining voting shares and the discretion to take unlimited dividends, both of which are unusual features in an estate freeze).  

The father also signed a Declaration of Gift for the purposes of documenting the transaction.  However – unbeknownst to Clayton – the father intended the shares to be excluded under Ontario family law from both of his sons’ NFPs, in the event either of them separated from their spouses.  The Declaration of Gift therefore specified that the shares (and any increase in their value or income) were expressly excluded from NFPs, and that they were to remain the sons’ separate property, free from either of their wives’ control.

Needless to say, when Clayton and Connie separated, the treatment of $400,000 in shares became an issue, and Connie ended up taking the matter to court.  She disputed Clayton’s position that the shares should be excluded from his NFP as a “gift” after marriage, like his father intended.    The trial judge found in Connie’s favour, included them in Clayton’s NFP, and awarded Connie half their value upon equalization.

Clayton appealed that decision to the Ontario Court of Appeal.  He was successful in having a new trial ordered on the specific question of whether a constructive trust was in existence (since this issue was not dealt with at trial in light of the trial judge’s findings on the NFP exemption question).

The Court of Appeal began its analysis by observing:  

The trial judge found as a fact that “[if] Clayton and Connie had been asked as to their intention with regard to the shares [prior to separation], they both would have readily confirmed their intention to share in that benefit equally.” This finding is supported in the evidence.  The legal effect of the transfer of the shares in the marital breakdown context is not that simple, however.

In this case, Clayton had clearly received these shares as a “gift: from his father; the trial judge had erred in finding otherwise.  Although “gift” is not defined by the Family Law Act, it consists of a voluntary transfer of property without consideration, and is a gratuitous, unilateral transaction.   Here, all the necessary legal elements were present, specifically:

1) an intent by the father to make a gift to Clayton, without expecting remuneration in exchange;

2) acceptance of the gift by Clayton; and

3) a sufficient act of delivery or transfer to complete the transaction.  

The signed Declaration of Gift was further proof of the father’s intentions.

The Court of Appeal also pointed out that the trial judge was wrong in concluding that this could not be a “gift” because the father’s intention was not inspired by affection, respect or charity.  That was not the correct test.   Also, the mere fact that Clayton did not know that conditions were attached to the gift did not serve to invalidate the effectiveness of it.   There is a distinction between the father’s “motives” and his “intent”:   Simply put, the father’s intent was to give Clayton a gift, and Clayton was aware of the gift and had accepted it.  

In the end, the Court of Appeal sent the matter back for trial on the issue of whether a constructive trust existed over these shares; unless Connie could show that she had a beneficial interest in them at trial, they would be excluded from Clayton’s NFP.

Russell Alexander, Family Lawyers focus exclusively on family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit www.RussellAlexander.com.

For the full text of the decision, see:

McNamee v. McNamee, 2011 ONCA 533 (CanLII)

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