C. FINDINGS OF THE COURT
1. Pledge lacks consideration
In its decision, the court reaffirmed that
Canadian courts follow English common law concerning pledges,
namely that a promise to subscribe to a charity is not
enforceable in the absence of consideration. It was the
hospital foundation's submission that their commitment
to name the entirety of the new unit in honour of Dr.
and Mrs. Marquis constituted bona fide consideration.
The court did not accept this position. While the court
found clear evidence that Mrs. Marquis was adamant that
Dr. Marquis' recognition in the coronary care portion
of the unit be retained, including his name and picture,
it did not find the larger naming opportunity to be of
vital importance to Mrs. Marquis in her decision to pledge
the funds as it was at the suggestion of the hospital.
It was further found that as the decision to name the
unit in honour of the Marquis's was still subject to board
approval, it was difficult to say that this constituted
bona fide consideration. In reaching this conclusion,
the court distinguished the New York Court of Appeals'
decision in Allegheny College v. National Chautauqua
County Bank of Jamestown,2
in which the court found a naming right attached to a
pledge to be sufficient consideration to create a bilateral
agreement. However, the court distinguished this case
as the donor clearly stipulated that the naming of the
fund was a condition to making the subscription, which
was not the situation in the case under consideration.
2. Outside evidence
The plaintiffs further submitted that the court consider
the circumstances leading up to the signing of the pledge,
including all of the meetings and formal proposal documents,
to ascertain whether, in fact, appropriate consideration
may be found. This would be in accordance with the Supreme
Court of Canada's decision in Dalhousie College v.
Boutilier Estate, where it was held that the court
may consider "… circumstances proved by evidence,
outside the subscription paper itself, from which such
a reciprocal promise on the part of the promisee may well
be implied."3 Although
the court accepted this submission, it was unable to conclude
on the evidence that Mrs. Marquis either expressly requested
the foundation, as promisee, to undertake a specific project
or personally participated in the proposed project in
order to infer such a request. Absent an enforceable binding
contract, the court was unable to enforce Mrs. Marquis'
intentions.
3. Part performance and estoppel
Plaintiff's counsel made the alternative
argument that the estate was estopped from denying the
existence of a contract given the partial performance
of the pledge as witnessed by the receipted payment of
$200,000 prior to Mrs. Marquis' death. In so doing, the
court was asked to consider whether the doctrine of estoppel
could be used as a sword rather than a shield. Based on
the precedent set in Reclamation Systems Inc. v. Rae,4
the court stated that the testator's intentions aside,
the doctrine of estoppel can only succeed if there is
a pre-existing legal relationship between the parties.
In this regard, the court reiterated that no such legal
or contractual relationship existed between the hospital
foundation and Mrs. Marquis. Further, it was the view
of the court that the plaintiffs failed to establish that
they acted to their detriment in reliance on the promise
of Mrs. Marquis. While the hospital foundation clearly
relied upon the pledge in calculating the funds raised
to date for the purpose of the campaign kick-off and in
its representations to the provincial government in their
quest to achieve further approvals, this phase of the
project had not yet commenced, and they were unable to
prove that they relied to their detriment on this incomplete
pledge. Further, the court heard the foundation would
proceed with the project regardless; the hospital would
merely need to raise additional funds over and above that
which had previously been anticipated.
D. IMPLICATIONS OF THIS CASE
Two implications can be drawn from the decision
of the court in the Brantford General Hospital Foundation
case. First, there should be a correlation between
testamentary and inter vivos gifts. In drafting
a will, it is important that counsel ensure the testamentary
gift will continue to honour the inter vivos gift
and allow for the testator's wishes to be fulfilled. In
the Brantford General Hospital Foundation case,
the court acknowledged that Mrs. Marquis clearly intended
to provide the hospital foundation with the $1-million
gift at the time of the pledge, in addition to her substantial
bequest amounting to $800,000, but the court was unable
to enforce her intentions in the absence of an enforceable
binding contract.
Secondly, with regards to an enforceable
contract, can there be consideration and still be a gift?
The case reinforces that a pledge is not a binding contract.
Query whether a charity, desiring to enforce a pledge,
would be able to structure the pledge as a contract, with
the charity giving nominal consideration to the donor,
and calling the pledge document a "pledge contract."
The giving of nominal consideration would
in turn necessitate reference to the proposed new definition
of a gift under the Income Tax Act (the "Act"),
announced December 20, 2002, and the corresponding proposed
rules regarding split-receipting, announced December 24,
2002.5 Whereas a gift at common
law is defined as a voluntary transfer of property for
which the donor receives nothing of value in return for
having made the gift, the proposed amendments will create
a new concept of "gift" for tax purposes which
will permit a donor to have a tax benefit under the Act
even though the donor (or a person not dealing at arm's
length with the donor) received a benefit, provided that
the value of the property exceeds the benefit received
by the donor.
Under the proposed split-receipting rules,
for a donation to be considered a gift, the following
four key elements must be satisfied:
a)
First, there must be a voluntary transfer of property
with a clearly ascertainable value;
b)
Second, any advantage received or obtained by the donor
must be clearly identified and its value
ascertainable;
c)
Third, there must be a clear donative intent by the donor
to give property to the donee;
d)
Fourth, the eligible amount of the gift, calculated at
FMV, must exceed the amount of the advantage
provided to the donor.
Presumably, entering into a pledge contract
involving nominal consideration of $2 should not defeat
the first requirement that there be a voluntary transfer
of property, given the voluntary intent involved in signing
the pledge. Reference should also be made to Canada Revenue
Agency's ("CRA") de minimis threshold
which provides that the amount of the advantage received
by the donor that does not exceed the lesser of 10% of
the value of the property transferred to the charity and
$75 will not be regarded as an advantage for purposes
of determining the eligible amount of the donation. This,
however, does not apply to cash or near cash advantages
(e.g., this may include redeemable gift certificates,
vouchers, coupons). The nominal consideration of $2 should
also not defeat the third requirement for split-receipting
that there be a clear donative intent by the donor to
give property to the donee. However, these issues have
not yet been specifically addressed by CRA, and until
they are, the option of using an enforceable pledge contract
remains uncertain.
