In the recently released decision Neville v National Foundation for Christian
Leadership, 2014 BCCA 38 [Neville], the British
Columbia Court of Appeal considered whether a failed tax receipt
constitutes unjust enrichment. The Nevilles participated in a
program whereby they made a "donation" to the National
Foundation for Christian Leadership (the "Foundation")
and received a receipt for tax deductions purposes. The Foundation
warned donors that the receipt may not be accepted by Canada
Revenue Agency ("CRA") as a valid deduction. CRA
subsequently assessed the Nevilles and others who had participated
in the program and found the receipt was not a valid deduction. The
Nevilles commenced legal action.
The Foundation ran a program for the purpose of facilitating
Christian post-secondary education. Students would solicit
donations for the Foundation. The Nevilles' child participated
in this program. The fundraising effort of the participating
students was reciprocated with bursaries or scholarships from the
Foundation to offset the cost of their education. The value of the
bursary or the scholarship would not exceed the amount of the
Although the donation could not be specifically earmarked for a
particular student, it was submitted along with a form detailing
the names of the student and the donor. The Court found that donors
knew or ought to have known based on the information provided by
the Foundation that in return for a donation, their child would
receive a bursary or scholarship.
The Tax Court and the Federal Court of Appeal, in disallowing
the deduction, held that a gift was a "gratuitous transfer of
property owned by the donor in return for which no benefit flows to
the donor" (The Queen v Friedberg, 92 DTC 6031, 6032
(FCA)). The Courts found the bursary was a clear benefit to the
donor's family member and as a result the gift was not a
taxable deduction within the meaning of the Income Tax
The Supreme Court of British Columbia decided the donation was a
gift at common law. The definition of a gift at common law is: one
gives a gift, the gift is delivered and the person to whom the gift
has been made accepts it. At issue was whether the failure of the
gift to attract a tax benefit vitiates the gift or whether the gift
was impressed with an implied trust justifying its repayment upon
the failure of the tax receipt.
The Court considered whether a "trust can be grafted upon
an absolute gift" and the short answer was "no." The
Supreme Court of British Columbia held that no constructive trust
was created as the requisite three elements were not met. The three
elements of a constructive trust include an enrichment of the
defendant, a corresponding deprivation of the plaintiffs and the
absence of any juristic reason for the enrichment (Pettkus v
Becker,  2 SCR 845 at 835). The Court held that there
was no enrichment of the Foundation and therefore no constructive
The result is that a failed tax receipt does not vitiate a gift.
No trust can be grafted onto an absolute gift. The participants of
the Foundation's program knew of the possibility the tax
receipt may fail and had received what they bargained for.
All of the reasons of the Supreme Court of British Columbia were
endorsed by the British Columbia Court of Appeal.
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