Giver's Remorse Litigation Ends In Failure
What happens if you have a change of heart after a particularly generous gift? Are there circumstances when a court will allow "giver's remorse." The short answer is that a litigant to attempts to take back a gift will likely be unsuccessful as a recent Ontario Superior Court decision illustrates.
In the case, the father created a corporation and made his daughter the sole officer, director and shareholder. He then advanced monies and assisted his daughter in buying a commercial property for approximately 1.9 million dollars. The property was held in the corporation. About twelve years later, the daughter sold the property for 2.98 million dollars with the corporation retaining a little more than 1 million of the proceeds.
As luck would have it, the father's fortunes had changed and he caused the corporation to advance him 1.07 million. He did not repay the funds. The daughter caused the corporation to sue for repayment.
The father defended claiming that the monies advanced had been a gift and that the property had been held in trust for his benefit. Before the case could advance to trial, the father died and his estate proceeded with the litigation.
The court accepted the daughter's argument that the father had a history of being generous with his children. The court further noted that there was no evidence at all that the property was to be held in trust. None of the documents related to any of the transactions reflected a trust agreement. Additionally, the family treated the property as the daughters. At one point, one of her brothers had advised the father "you gave it to her, you can't just take it back." Had the father listened to this statement, he, and his estate, might have saved significant legal costs.
The Lesson: When transferring assets to others, it is important to be clear who precisely is the owner. If the asset is intended as a gift, documents should clearly state the same. Similarly, if the asset is to be held in trust, a proper Trust Declaration should be created. Failure to properly set out what the transaction is, whether gift or trust, will increase litigation costs, hard feelings between the parties and may result in being unable to retain ownership of the property.
1268223 Ontario Limited v Fung Estate, 2016 ONSC 8020 (ONSC) https://www.canlii.org/en/on/onsc/doc/2016/2016onsc8020/2016onsc8020.pdf
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