Month: August 2020

Undue Influence may be Presumed in Certain Circumstances

August 10, 2020

The term “undue influence” often brings to mind overt acts of elder abuse, where a gift is the result of influence expressly used by the recipient (the “donee”) to obtain that gift.

However, the law recognizes a second class of transactions which may be set aside on grounds of undue influence: where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. There are certain relationships with the potential for dominance and dependence,  and if you receive a gift in those circumstances it is presumed that it was procured by undue influence unless proved otherwise.

This second class of undue influence does not depend upon proof of reprehensible conduct. The person receiving the gift may have acted honestly and without ulterior motive. The person may honestly say that the gift was a completely unexpected and unsolicited. However, the courts will intervene as a matter of public policy to prevent the potential for influence that exists in certain relationships from being abused.

As a result, you may receive an unsolicited gift from a vulnerable person, and find that you are placed in the unfortunate position of having to rebut a presumption that you received the gift as a result of influence that you potentially could have exercised over the donor.

The court will first examine the relationship between the donor and donee. Is the nature of the relationship such that the potential for domination exists?

This presumption as it pertains to undue influence in the drafting of a Will can now be found in the Wills, Estates and Succession Act [SBC 2009] Chapter 13. The Act provides that where a person establishes that someone was in a position where the potential for dependence or domination of a will-maker was present, the party seeking to defend the Will has the onus of establishing that the person in that position did not exercise undue influence over the will.

If a relationship of dependency exists, the court will next consider the nature of the transaction. In situations where the donee does not provide consideration (i.e. gifts or bequests), it is enough to establish the existence of a dominant relationship.

Once a plaintiff shows that the relationship between the donor and donee was such that the potential for influence exists, and the transfer is gratuitous, the onus moves to the defendant to rebut the presumption of undue influence. The donee must establish on a balance of probabilities that the donor entered into the transaction of his own “full, free and informed thought”. The defendant may show no actual influence was deployed in the particular transaction (such that the presumption is rebutted), or the donor had no independent legal advice.

A gratuitous transfer from an elderly parent to an adult child does not automatically result in a presumption of undue influence. However, if a parent is vulnerable through age, illness, cognitive decline or heavy reliance on the adult child, the presumption may arise.

A presumption of undue influence may also arise in circumstances where a where a donee is intimately involved with the management of the donor’s assets. However, as discussed in a previous post found here, simply assisting a loved one will not necessarily trigger the presumption.

Bergler v. Odenthal – counsel comments featured in this month’s issue of Take Five

August 4, 2020

We were counsel in Bergler v. Odenthal 2020 BCCA 175.  I discussed this recent decision from the B.C. Court of Appeal in a post found here.

I recently provided my commentary on the case in the July 2020 edition of Take Five, a monthly publication highlighting the most interesting civil cases emerging from the B.C. Court of Appeal.  Here is an excerpt from my comments:

When a deceased person leaves a will, a disappointed beneficiary may have a variety of available claims, including challenges to the validity of the will and, of course, wills variation claims. When a deceased person dies intestate, it may seem at first blush that a disappointed beneficiary has no recourse, as the legislation sets out a non-discretionary scheme as to how the estate is to be distributed.

However, in Bergler v. Odenthal 2020 BCCA 175, there was a remedy available: the secret trust.

As the Court of Appeal notes, secret trusts are “rarely encountered today” and this will likely continue to be the case. There is considerable risk in relying upon a secret trust to carry out your testamentary intentions. The person who would otherwise receive your assets (whether by will or intestacy) will directly benefit from denying the existence of a trust after your death Or, as happened in Bergler, the trustee make seek to add a “clarification” to the terms of the trust, which would postpone his obligation to distribute the assets until his own death.

You can read my comments in their entirety in this month’s issue of Take Five, and the discussion was also featured in an article on Slaw, Canada’s online legal magazine, which can be found here.