FROM ADVOCATE DAILY: What can happen when a deceased person’s cheque bounces

Ottawa Lawyer Timothy Sullivan article

From AdvocateDaily this week, by our own Timothy N. Sullivan:

One can feel some sympathy for a man who failed in an attempt to cash a $100,000 cheque from his neighbour after she died, Ottawa trusts and estates lawyer Timothy N. Sullivan tells

The man sued the woman’s estate in an attempt to have the cheque honoured, but failed because the woman’s bank account only held about $80,000 at the time of her death.

She had enough funds in other accounts with the same branch to cover the difference, but the Court of Appeal for Ontario ruled the application judge was right to deny the man’s claim on the basis that the gift failed.

“You can’t give what you don’t have,” says Sullivan, principal of SullivanLaw. “I do have sympathy for the neighbour because it seems like everybody acted in good faith and was on board with the gift.

“It’s also a good reminder that a cheque is nothing more than a direction to your bank to pay the person named on it the precise amount indicated. If the money isn’t there, then the bank can’t respect it,” he adds.

According to the decision, the man spent years providing support and assistance to his elderly neighbour without expecting anything in return. However, just before her death, the woman made a new will, including a $100,000 bequest and wrote him a cheque for the same amount.

But when the man brought the cheque to the woman’s bank, he was turned away while it made inquiries. In the meantime, the woman died and her accounts were frozen. The man then tried to deposit the cheque in his own account.

The estate trustee initially said the man would get the money, before changing his mind and arguing it failed to meet all three elements of a valid gift:

  • Intention to make the gift on the part of the donor;
  • Acceptance of the gift by the donee; and
  • Delivery or transfer of the property to complete the transaction.

An application judge found the gift failed in the delivery and the appeal court concurred.

“A gift by cheque is not complete when the cheque is given to the donee. It is only complete when the cheque has been cashed or has cleared,” the unanimous three-judge panel concluded, dismissing the man’s appeal.

Sullivan says the decision highlights the key difference between a gift and a contract, which does not require delivery.

“In this case, there was no contract. It was strictly a gift, so it had to meet all the elements of a gift,” he says. “Unfortunately for the neighbour, in the end it was only the thought that counts.”

However, he says the result may have been different if the woman made her bequest to a charity instead of her neighbour.

“The case law has suggested for some time that a gift to a charity is a binding promise more akin to a contract,” Sullivan explains.

“When you pledge money to a telethon, there’s an expectation that you will follow through on that. If you promised $100,000 and your name scrolled across the bottom of the screen, the charity has more authority to go after that based on promissory estoppel.”

You can read this piece and more by Timothy Sullivan at Advocate Daily.