The law presumes bargains not gifts

When a person receives money or property without giving something in return, the law presumes he or she has an obligation to return it to the person from whom he or she received it. This presumption, known as the presumption of “resulting trust”, may be rebutted by showing that the money or property was intended to be a gift. The person who received the gratuitous transfer of money or property has the onus of proving it was a gift.[1]

Lawsuits involving alleged gifts often take place in the context of unmarried, romantic partners splitting up. One ex-partner will demand repayment from the other of money given during their relationship. The reasons for paying the money in the first place may not be documented. The payee may not have even promised to repay the money. Nevertheless, unless the payee can prove that the payor intended at the time of payment that the money is a gift, the doctrine of resulting trust will require the payee to reimburse the payor.[2]

The recent Ontario Superior Court decision Walker v. Farsijani, 2021 ONSC 5571 (“Walker”) demonstrates that proving a transfer of money between romantic partners was a gift is not as easy as it may seem. Walker involved a plaintiff’s lawsuit to recover money from the defendant, his ex-lover. The plaintiff had transferred approximately $96,000 to the defendant over the course of their four-month relationship. The plaintiff alleged that he intended to loan the money to the defendant. The defendant alleged the money was a gift.

The plaintiff in Walker could not prove that the $96,000 he transferred to the defendant was a loan.  He could not produce a written loan agreement. He could not produce evidence of an agreed rate of interest. He could not produce evidence of a repayment plan. There was no evidence, other than the plaintiff’s own testimony, that he told the plaintiff she must repay the $96,000. Justice Leibovich indicated that the plaintiff’s evidence was not sufficient to prove he loaned the money to the defendant. “But”, His Honour noted, “the onus is on the defendant to show that the transfers were gifts.”

Justice Leibovich’s reasons then considered whether the defendant could meet her onus of proving that the plaintiff intended to gift her the $96,000. The defendant testified that the money was a gift. And she produced text messages between her and the plaintiff, which she argued evidenced an intention to gift. This evidence however was not sufficient to persuade Justice Leibovich that the plaintiff intended his payments to be a gift. Justice Leibovich found the defendant not to be a credible witness due to inconsistencies in her testimony and evidence that she had a penchant for lying in her personal life. As a result, His Honour rejected much of the defendant’s testimony. The text messages produced by the defendant were also ambiguous and did not clearly corroborate her testimony that the monies she received from the plaintiff were gifts.

Ultimately, Justice Leibovich decided the defendant had not met her onus of proving the plaintiff intended to gift the monies he paid her. As a result, the court ordered the defendant to repay the full $96,000 she received from the plaintiff over the course of their relationship.

This decision stands for the well-established principle that “the law presumes bargains, not gifts.” [3] Absent a contractual relationship, transferees of money who give nothing in return will generally be liable to repay the money to the transferor – that is, unless the transferee can present persuasive evidence that the transferor intended the money to be a gift.

[1] Pecore v. Pecore, 2007 SCC 17, par. 25.

[2] Walker v Farsijian, 2021 ONSC 5571, par. 20.

[3] Pecore v. Pecore, 2007 SCC 17, par. 24.