I have previously discussed that gifts are irrevocable, and so a donor cannot change their mind and seek to take back property that they have gifted. However, the Court may set aside a gratuitous transfer if it was procured by undue influence, whether that be intentional influence or unintentional influence.
In Sandu v. Sandu 2023 BCSC 323, the Court considered the transfer of property in 2016 from a husband and wife to their youngest son. The property was the parents’ only substantial asset. The transfer was purportedly a gift, and no consideration was paid by the son. The parents later requested that their son transfer title to the property back into their names, and he refused to do so.
In this case, the Court ordered that the transfer be set aside, and title be restored to the parents.
At the time of the transfer, the father was 91 years old and the mother was 88 years old. Neither of them received any formal education, neither of them spoke or read English, and both of them were functionally illiterate in their mother tongue of Punjabi. They had always been completely dependent on family members for assistance with written transactions. In fact, their eldest son was appointed as their litigation guardian for the trial of the action.
Equity presumes bargains over gifts. Where property is transferred to another without consideration, the presumption of resulting trust applies. The onus is on the transferee to rebut the presumption by demonstrating that a gift was intended.
In B.C., section 23(2) of the Land Title Act provides for a statutory presumption of indefeasibility – the idea that registration of title is conclusive evidence at law and in equity that the person named on title is indefeasibly entitled to an estate in fee simple in the land. In other words, the registered owner is presumed to be the true beneficial owner of the property.
However, the presumption of indefeasibility can be rebutted, including by the existence of a resulting trust, and also if the registered owner took their interest by the exercise of undue influence. There can be no gift where the transfer was made under undue influence.
There are two branches of undue influence for inter vivos transfers:
- intentional or actual undue influence; and
- unintentional or presumed influence.
The first branch is characterized by the influencer’s conduct, and may include:
- “overt and violent threats (give me the house or I’ll beat you…);
- “subtle forms of persuasion (give me the house or I don’t know if I’ll be able to look after you anymore…)”;
- persistent requests for the property ultimately disposed of; or
- exploitation of the donor’s desire to keep the family peace.
The second branch recognizes unintentional undue influence, which is to be presumed if:
- there is a “potential for domination” given the nature of the relationship between the parties (this includes solicitor/client, parent/child, and guardian/ward relationships);
- the defendant unduly benefited or the plaintiff was unduly disadvantaged, but only if the transaction is commercial.
- If the plaintiff establishes circumstances that trigger the presumption of undue influence, the defendant has the onus of rebutting it. To rebut the presumption, the defendant must show that the plaintiff entered into the transaction with full, free and informed thought.
The receipt of independent legal advice may be a critical factor.
In Sandu, the Court observed that in the context of intergenerational relationships involving care, undue influence is a particular concern.
The Court held that it did not need to determine whether their was actual undue influence (the first branch), as there was a presumption of undue influence (the second branch) which had not been rebutted. The Court considered whether the parents received independent legal advice, and determined that what limited advice they received did not constitute adequate legal advice. The mere presence of legal advice is insufficient.
Finally, the presence of undue influence meant that the limitation period to bring the claim had not expired. In cases of undue influence, the time does not begin to run to bring a claim until the donor can be said to have been freed from the sphere of undue influence. As a result, while more then two years had passed since the transfer, in effect the limitation period was extended while the parents remained under the influence of their son.