B.C. Case Comment: Does the Doctrine of Unconscionable Procurement Apply in B.C.?

The transfer of property into joint ownership with right of survivorship is a common estate planning tool.  But can you take back the transfer after you have made it?  You can make a new will changing the distribution of your estate, but can you undo the transfer of property into joint ownership?

This is what a 91 year old father tried to do (unsuccessfully) in the recent B.C. Supreme Court decision of Sandwell v. Sayers 2022 BCSC 605.  The father tried to argue that the doctrine of unconscionable procurement applied.

The doctrine of unconscionable procurement provides that where there is a transfer of significant benefit that the recipient actively caused to occur, there must be proof of the donor’s full comprehension and understanding of the effects of the transfer for it to be upheld.

The onus is on the party attacking the transaction to prove, on a balance of probabilities, that it was unconscionably procured.  Once the party challenging the transaction has established a significant benefit and the active involvement on the part of the person obtaining the benefit in the procurement or arrangement of the transfer, then there is a presumption that the donor of the gift did not truly understand what she was doing in making the transaction.

Turning to the facts in Sandwell, the plaintiff father had two children, a son and the defendant daughter.  In December 2020, the father transferred an interest in his home in Kelowna to his daughter, making them joint tenants.  He later brought legal proceedings to get the property back into his sole name.

The father lived alone at the property.  The father was in good health.  There was no issue with his capacity at the time of the transfer.

Back in 2008, the father had executed a transfer of his home to his son for $1.00.  The transfer was never registered, and the original documents were retained by the lawyer who drafted them.  The daughter discovered copies of the documents, along with a note that read “this transfer will not be used except with your consent or in the event that your health fails and there is no likelihood of your recovery.”  The daughter brought this to the attention of her father.  The father claimed that his daughter told him that his son could take his property and leave him broke.

The daughter and the father attended the office of a notary.  The daughter claimed that the father made the appointment, because he wanted to sign over half the property to her (and she would get the rest of it when he died).  The father claimed that the daughter told him that she made an appointment with a notary and that he should go with her, and when he arrived, the notary was expecting him and had prepared documents adding the daughter to the title to the property.

The notary was alive to concerns of undue influence, and he recorded these concerns in his notes.  He met with the father alone and reviewed the pros and cons of transferring title into joint tenancy.  He told the father to take some time to think about it (which he did).

After the initial consultation, the father called the notary and said that he did not want to proceed with the transfer.  A few days later he left four voicemail messages for the notary indicating he wanted to proceed with the transfer, and the daughter also emailed the notary to say that her father wanted to proceed with the transfer.  The transfer was registered.

The father now argued that the transfer into joint ownership ought to be set aside under the doctrine of unconscionable procurement – the daughter caused the transaction to occur (to her benefit) and he did not fully understand the effects of the transaction.  The daughter argued that not only were the requirements of the doctrine not met, but the entire doctrine is not good law and should not be applied in B.C.

The Court went through the history of the doctrine of unconscionable procurement, noting that it was popular in the 1800s and early 1900s, but is rarely mentioned in current case law.  It has been referenced in a few recent cases (and I have noticed that lately it is being pled in more claims), but there has been no detailed analysis of whether the doctrine still has any place in British Columbia.  One concern is whether the courts should endorse claims brought beyond such “traditional” grounds of attack on transactions, such as undue influence, incapacity and resulting trust.

In Sandwell, the Court had “real doubt” about the place of the doctrine of unconscionable procurement in British Columbia law.   However, if the doctrine of unconscionable procurement exists and has any place in B.C., it did not assist the father in this case.

First, at best the daughter arranged the appointment with the notary (although that was disputed) and caused him to fear his son might take his home.  This was not enough to satisfy the requirement that there be “active involvement by the person obtaining the benefit in the procurement or arrangement of the transfer.”

Second, the father failed to present any evidence which indicated a misunderstanding of the impact of his actions.  He did not provide evidence that he failed to understand the effect of transferring the property into joint ownership.

The Court also refused to set aside the transfer on the basis of unjust enrichment.

The Court expressly stated that it did not intend to make a decision that applies beyond the scope of the facts that were before it.  As a result, the B.C. Courts have not stated that the doctrine of unconscionable procurement does not apply in British Columbia.  However, Sandwell contains a strong analysis and argument in support of why the doctrine should not apply in British Columbia, or should only apply in very limited circumstances.

B.C. Case Comment: What Happens When Two People Want to be Appointed as the Committee of an Incapable Person?

Often, a family will be in agreement that one of their members is incapable, but they will not agree as to who ought to be appointed as committee to handle that person’s affairs. The Court is often asked to decide between competing committeeship petitions – two (or more) people seeking to be appointed to manage the affairs and decision-making for the incapable family member (the “patient”). A very common scenario is one in which two siblings cannot agree as to who ought to be appointed as committee for an elderly parent. The Court will often observe that all parties love and want the best for the patient. They just disagree on what is “best.”

This was the case in the recent decision of the B.C. Supreme Court in Srikureka v. Srikureja 2022 BCSC 514. The patient was 85 years old and suffered from Alzheimer’s disease. She had seven children. Two of the children sought to be appointed as committee in place of the Public Guardian and Trustee (and they opposed each other’s petitions). One applicant child had the support of one other sibling. The other applicant child had the support of three other siblings.

The choice of committee is highly fact specific.  However, the following considerations are often taken into account in the assessment of the patient’s best interests:

  1. whether the appointment reflects the patient’s wishes, when he or she was capable of forming such a wish;
  2. whether immediate family members are in agreement with the appointment;
  3. whether there is any conflict between family members or between the family and the patient, and whether the proposed committee would be likely to consult with immediate family members about the appropriate care of the patient;
  4. the level of previous involvement of the proposed committee with the patient, usually family members are preferred;
  5. the level of understanding of the proposed committee with the patient’s current situation, and will that person be able to cope with future changes of the patient;
  6. whether the proposed committee will provide love and support to the patient;
  7. whether the proposed committee is the best person to deal with the financial affairs and ensure the income and estate are used for the patient’s benefit;
  8. whether a proposed committee has breached a fiduciary duty owed to the patient, or engaged in activity which diminishes confidence in that person’s abilities to properly handle the patient’s affairs;
  9. who is best to advocate for the patient’s medical needs;
  10. whether the proposed committee has an appropriate plan of care and management for the patient and his or her affairs and is best able to carry it out; and
  11. whether a division of responsibilities such as between the patient’s estate and the patient’s person to different persons would serve the best interests of the patient, or would such a division be less than optimal for the patient.

The Court had to consider who should act as the committee of the patient’s estate (i.e. financial affairs) and the patient’s person (other decision-making).

Interestingly, the Court concluded that the Public Guardian and Trustee should remain as the committee of the patient’s estate. This was because neither of the children seeking to be committee had clearly distinguished between their personal funds and assets belonging to the patient. There was the possibility that upon further investigation, one or both of them owe the patient money, which would result in a conflict of interest if one of them was appointed as committee.

With respect to the committee of the patient’s person, the Court went through each applicable factor, and made a decision as to which child ought to be appointed. Certain factors supported each of the two children. One child had the support of more of the other siblings and was a medical doctor, but he lived out of town.  The other had cared for the patient in her home for over four years and was in town and better available to meet in person with doctors and caregivers. Both would have offered love and support to the patient.

Ultimately, the Court appointed the child who lived in town and had more than four years of recent experience caring for the patient in her home. The Court did impose conditions on the appointment, which included consultation and communication with the committee’s siblings.

B.C. Case Comment: Court Again Refuses to Force Elderly Person to Undergo Capacity Assessment

I have previously written about committeeships.  All adults are presumed to have legal capacity over their personal care and finances, unless the contrary is demonstrated.  On hearing an application under the Patients Property Act, the court may declare a person incapable and appoint a committee to manage a person’s care, finances, or both.  The application must be supported by the affidavits of two medical practitioners setting out their opinion that the person is incapable.

But what if the proposed patient disputes that they are incapable and opposes the application?  What if they refuse to submit to medical examinations and so the person making the application cannot obtain the two affidavits that are required?

This issue is arising with greater frequency.  I have previously written about the issue of attempting to force a person to undergo a medical assessment here.

The B.C. Court of Appeal recently considered this issue again in Cepuran v. Carlton 2022 BCSC 76.

The respondent (Sheri) was the only surviving child of the appellant (Ana).  When Ana’s husband died, Sheri became concerned about her mother’s health.  She observed strange and inconsistent behavior.  Ana became concerned that Sheri was becoming too controlling over the management of her affairs.  Sheri took steps to protect her mother’s interests using a power of attorney, including transferring her mother’s interests in certain properties into a trust.  Ana signed a revocation of the power of attorney.

Sheri applied to be appointed as committee to manage Ana’s affairs.  Ana opposed this.

Sheri relied on two affidavits from medical practitioners.  Neither of the doctors actually met Ana.  Instead, they were instructed to accept as true the descriptions of Ana’s behaviour, as provided by Sheri and other witnesses.

The chambers judge ordered that:

  1. there be a trial of the issue of whether Ana is incapable of managing her affairs; and
  2. Ana be required  to submit to examinations of her capacity by two geriatric psychiatrists.

Ana successfully appealed both of these orders.  As a result, the petition to appoint a committee of her affairs was dismissed.

The Court of Appeal held that it was not enough that the judge was of the view the evidence raised a “serious issue” as to capacity.  Sheri failed to provide the required two medical affidavits (a “threshold” requirement for a committeeship order), and so there was no basis for making the order.

The Court was also asked to consider whether the requirement for two affidavits from medical practitioners carries an implicit requirement that the physicians providing the opinions must in all cases personally meet with and assess the person whose capacity is being questioned.  In the Court’s view, it is best to leave the admissibility and weight of the medical opinions to be determined by judges on a case by case basis.  This leaves open the possibility that an applicant may successfully rely upon an affidavit sworn by a medical practitioner who hasn’t actually met the patient.

This is another recent example of a court recognizing personal autonomy and the intrusive nature of compelling an individual to undergo a medical examination against their will.  The courts fully prepared to enforce the strict requirements for a committeeship order.

B.C. Case Comment Update: Alleged Victim of Elder Abuse Still Not Forced to Undergo Further Mental Capacity Assessment

I previously wrote about the B.C. Supreme Court decision in Hambleton (Litigation Guardian of) v. Hambleton 2021 BCSC 1155. In Hambleton, the Court refused to grant an order sought by a daughter that her mother attend a more extensive medical capacity evaluation. My previous post on the decision can be found here: https://www.bcestatelitigation.ca/case-comment/b-c-case-comment-alleged-victim-of-elder-abuse-not-forced-to-undergo-further-mental-capacity-assessment/

The daughter took the position that her mother suffered from severe dementia, and that she lacked capacity to make decisions regarding her financial affairs and was subject to undue influence by her other daughter. The mother retained her own lawyer and applied to strike the action which was brought in her name by her daughter (and to remove her daughter as litigation guardian).

The Court was satisfied that a less extensive assessment of the mother was adequate. It is an invasion of an individual’s rights to require them to undergo a mental capacity assessment, and the court should not make such an order without sufficient evidentiary basis for doing so. In this case, the mother had obtained an assessment to address the Court’s concern about capacity, and requiring her to undergo a further mental capacity assessment would not be appropriate.

The daughter appealed the result. The appeal has not yet been heard. However, pending the appeal the daughter applied for a stay of proceedings – an order that nothing happen in the underlying litigation until the appeal has been heard.

The Court of Appeal dismissed the application for a stay of proceeding.  The reasons can be found here: https://www.bccourts.ca/jdb-txt/ca/21/03/2021BCCA0377.htm.

The Court observed that the merits of appeal were “extremely low.” The order of the court below was a discretionary one, entitled to deference. It also would not bind the judge who ultimately would hear the application to remove the daughter as litigation guardian.

The Court also looked at irreparable harm and the balance of convenience. These factors favored the mother. She was currently a party to litigation that she wanted no part of, brought ostensibly on her behalf of by her daughter, who she does not want to represent her as litigation guardian. The mother’s personal autonomy was in the balance, and she was over 90 years old. To order a stay and keep the mother in the ligation until this issue was determined would cause her “much harm.”

This decision is another example of the courts protecting personal autonomy and the presumption of capability.

B.C. Case Comment: Alleged Victim of Elder Abuse Not Forced to Undergo Further Mental Capacity Assessment

In B.C., a proceeding brought by a person under legal disability must be started by his or her litigation guardian. This often arises in the context of alleged elder abuse. A loved one may seek to remedy an incident of elder abuse (for example, undue influence), by bringing an action on behalf of the victim. However, what if the alleged victim of elder abuse denies the undue influence or other abuse, and does not want a claim to be brought on their behalf? This can be further complicated when the loved one bringing the claim on behalf of the victim ultimately benefits if that claim is successful (for example, by receiving part of the victim’s estate upon their death).

If the alleged victim insists that they have capacity to decide whether they want/need to bring a claim, and the loved one insists that they lack capacity, can the court order a medical assessment?

This was recently considered by the B.C. Supreme Court in Hambleton (Litigation Guardian of) v. Hambleton 2021 BCSC 1155.  In Hambleton, a daughter took the position that her mother suffered from severe dementia, and that she lacked capacity to make decisions regarding her financial affairs and was subject to undue influence by her other daughter (Alice).

The mother transferred title to her property to herself and Alice, and took out a reverse mortgage. Her daughter started an action, on behalf of her mother, seeking to challenge and set aside the transfer. The mother said she was capable of making her own decisions, and said that the transfer was consistent with the terms of her will made back in 2010 (where there was no suggestion of lack of capacity). The mother retained her own lawyer and applied to strike the action which was brought in her name by her daughter (and to remove her daughter as litigation guardian).

The Court had previously ordered that the mother attend a mental capacity examination at a time and place to be arranged by her care center, before any further steps were taken in the litigation. While there is a presumption that a person is capable, there was some medical evidence from 2015-2016, which indicated that the mother suffered a mental health event and was involuntarily committed to a facility. There was a gap in the evidence as to whether the mother was capable, which needed to be addressed with a medical assessment.

The mother did not arrange with her care facility to attend a medical assessment as ordered. Eventually, she was discharged from that facility. Instead, the mother unilaterally attended an assessment with a geriatric psychiatrist. The doctor concluded that the mother had mild cognitive impairment but was capable of personal financial decision making, and had testamentary capacity to sign legal documents.

The daughter took the position that the doctor’s assessment was inadequate, and sought an order that her mother undergo a more extensive medical capacity evaluation.

The Court was satisfied that the assessment was adequate. It is an invasion of an individual’s rights to require them to undergo a mental capacity assessment, and the court should not make such an order without sufficient evidentiary basis for doing so. In this case, the mother had obtained an assessment to address the Court’s concern about capacity, and requiring her to undergo a further mental capacity assessment would not be appropriate. It would be stretching the court’s parens patriae jurisdiction (the Court’s powers to make orders protecting persons under disability or potential disability) too far.

As a result, the mother had established that she had the requisite capacity, and she could proceed with her application to remove her daughter as litigation guardian (and presumably with her application to strike the claim that her daughter brought on her behalf).

A competent adult can deal with their assets during their lifetime as they see fit, and there is a presumption of competency. A court will only order a mental capacity assessment in extraordinary circumstances. A court will certainly not order an assessment as a matter of course when there are allegations of undue influence or elder abuse. This case also serves as a reminder that care needs to be taken to ensure someone is actually under a legal disability before a claim is brought on their behalf (especially when they are opposed to taking the action).

Case Comment: Estate Recovers Assets Misappropriated by Power of Attorney

Clients often contact us following the death of a family member, when they are surprised to discover how little is left in the deceased’s estate. While a capable independent adult is entitled to deplete their estate during their lifetime as they see fit, there may be concerns with elderly, incapable or otherwise vulnerable persons and “missing” assets. In the most egregious cases, there may be misappropriation of funds by a person in a position of trust, such as a person named in a power of attorney or committeeship order. After death, an estate can recover assets that are misappropriated from the deceased during their lifetime.

This was the case in the recent decision of the B.C. Supreme Court in Sarzynick v. Skwarchuk 2021 BCSC 443. In Sarzynick, the court considered a dispute between two siblings over the estate of their mother. In 2007, the mother and father made wills and also executed powers of attorney authorizing their son to act on their behalf. The father died first. When the mother died four years later, most of her assets had been depleted. The daughter argued that her brother had misappropriated large sums of money for his own use which belonged to his mother (and should form part of her estate).  The son denied this, but the court ultimately found that he was not a credible witness.

The court held that the son owed fiduciary duties as (1) executor of his father’s estate, and (2) his mother’s attorney. As attorney, he had an obligation to act in good faith in his mother’s best interests, to avoid personal gain from her property, and to account for all property.  The court held that he breached his fiduciary duties. He failed to keep (or disclose) financial records. This breach went to “the core” of the fiduciary relationship as attorney. He also breached his fiduciary duty of loyalty when he misappropriated funds for his own benefit.

The court went on to consider the appropriate remedies. This included a constructive trust over certain assets which properly belonged to the estate, and disgorgement of profits. Fortunately in this case many of the assets (monies) were held in trust, and so there was not the added complication of having to collect upon a judgment against an impecunious defendant who may have spent or hidden all of the assets that he took. The estate was entitled to recover over $440,000 from the son. The estate was also entitled to the appreciation in value of certain real property. Finally, the estate was entitled to special costs due to the son’s behavior during the litigation, which included a flagrant disregard for his disclosure obligations.

Misconduct by Person Holding Power of Attorney may Constitute a Criminal Offence

We are often contacted by clients with concerns about misconduct by a person holding a power of attorney. We may be contacted by the person who granted the power of attorney (the “donor”) or a family member of the donor who has discovered the abuse under the power of attorney (either during the donor’s lifetime, or after their death).

These clients are upset when they discover what has happened, and often they ask the same questions:

  • “Isn’t this criminal?”
  • “Should I also go to the police?”
  • “Shouldn’t this person be in jail for what they’ve done?”

We assist with obtaining civil remedies against the attorney, including recovery of property that has been taken and damages for breach of fiduciary duty. However, it should be kept in mind that theft by a person holding a power of attorney is also an offence under the Criminal Code of Canada.

Section 331 provides as follows:

Theft by person holding power of attorney

331 Every one commits theft who, being entrusted, whether solely or jointly with another person, with a power of attorney for the sale, mortgage, pledge or other disposition of real or personal property, fraudulently sells, mortgages, pledges or otherwise disposes of the property or any part of it, or fraudulently converts the proceeds of a sale, mortgage, pledge or other disposition of the property, or any part of the proceeds, to a purpose other than that for which he was entrusted by the power of attorney.

Misconduct by a person holding a power of attorney may also fall within general Criminal Code provisions relating to theft and fraud.

There are key differences between moving forward with civil proceedings and criminal proceedings. In a civil claim for breach of fiduciary duty you must prove your claim on a balance of probabilities, while a criminal conviction must be established on the higher standard of beyond reasonable doubt. In civil proceedings, a plaintiff may also be able to rely upon rules which reverse the onus of proof for breach of fiduciary duty in certain circumstances.

People have been convicted and imprisoned for misconduct using a power of attorney. Here are few examples:

In R. v. Kaziuk 2011 ONCJ 851, the victim was 86 years of age at the time of the offences. The accused was her son, who she named as her power of attorney. At one point, the victim was “well off financially”, she owned her own properties mortgage-free and she had significant savings in her account. Then she signed a power of attorney naming her son as her attorney. The son used the power of attorney to register mortgages on his mother’s properties, as collateral for his own personal loan (to cover his own mortgage against his own home).

As a result of the son’s conduct, his mother lost her car and her savings, and she was evicted from her property when the banks seized her properties as a result of the fraudulent mortgages registered against title without her consent and knowledge. She lost everything and ended up living in a homeless shelter.

The son was 57 years old, and blamed his “financial misfortunes” and depression. He was convicted of theft exceeding $5,000 and fraud exceeding $5,000. The judge also held that the offence under s. 331 (theft by person holding power of attorney) had been proven. The judge described this as a “despicable breach of [his mother’s] love and trust. The son was sentenced to 10 years’ imprisonment, which was reduced to 8 years on appeal. There were aggravating factors, including a finding that the son was incapable of feeling empathy and had no conscience.

In R. v. Hooyer 2016 ONCA 44, the victim suffered from dementia and resided in a long-term care facility. The accused had known the victim since the accused was a child. After the victim’s wife died, the accused assumed control over the victim’s property, moving into his home, dissipating his assets, and diverting nearly $400,000 for his own use. He did not attend to the victim’s care, and did not see the victim for several years. He failed to pay the bill for the care facility, which resulted in a downgrade of the victim’s accommodation. The accused argued that he honestly believed he was authorized to use the money for his own purposes. At trial we was convicted of fraud and theft, and he was sentenced to imprisonment of two years less a day and six months to be served concurrently, and restitution of the monies that he took.

Finally, in R. v. Banoub 2019 ONCJ 681, the offender was the power of attorney for her mother, who suffered form dementia and lived in a care facility. Over a period of four years, the offender depleted the monies in the mother’s bank accounts and investments by $161,000. She spent the monies on gambling, living expenses, and a trip. The offender was sentenced to six months’ imprisonment and three years’ probation.

The above cases confirm that misconduct under a power of attorney is a serious matter and may amount to a criminal offense resulting in imprisonment.

B.C. Court Orders Medical Assessment to Determine Capacity of Elderly Person who Opposes Elder Abuse Lawsuit Brought on his Behalf

When cases of elder abuse arise, it is often a loved one who discovers alleged financial abuse, improprieties, or undue influence. But the loved one does not have standing to bring their own claim to recover assets for the rightful owner. The elderly person (the victim) must bring their own claim. Sometimes this creates difficulties. This person may lack capacity, or they may still be under the influence of the perpetrator of the fraud or otherwise unwilling to bring legal proceedings. What if a person is unable or unwilling to bring a proper and valid claim to recover their own property?

A proceeding can be filed and pursued on the person’s behalf by a litigation guardian, but only if the person is under a legal disability. A proceeding brought by or against a person under a legal disability must be started or defended by a litigation guardian – someone who agrees to conduct the litigation on behalf of the person with the legal disability. The test for a “legal disability” is whether the person is capable to instruct counsel and to exercise judgment in relation to the claims in issue and possible settlement as reasonable person would be expected to do. A person is presumed capable unless proven otherwise. If the person is capable, then they are the appropriate person to bring their own legal proceedings, unless there is a power of attorney or some other authority that would permit a third party to handle proceedings on their behalf.

What if you have knowledge of a case of financial abuse against a person under a legal disability, but the “victim”  does not want to bring a claim, and does not agree that they suffer from a legal disability? This was the issue in Stanford v. Murad 2021 BCSC 130, a decision of the B.C. Supreme Court released last week.

Mr. Stanford is 89 years old, and has two adult children who are the primary persons who will inherit their father’s estate upon his death. Mr. Stanford suffered from psychiatric disorders, including depression, for decades. He also suffers from other serious health issues and is unable to care for himself. In 2013, Mr. Stanford appointed his son-in-law as attorney-in-fact and executor of his will, and asked him to manage his affairs.

Mr. Stanford met the defendant in 2015, and they eventually moved in together. It is unclear whether they actually married, but Mr. Stanford was very dependent on the defendant. His daughter and her husband (Mr. Stanford’s son-in-law) allege that the defendant isolates Mr. Stanford and prevents them from seeing and communicating with him, that she is abusive, and that she is taking financial advantage of him. They allege that Mr. Stanford lacked capacity to take various steps, including appointing the defendant as his new power of attorney, adding her as a joint owner of various assets (including real property) and transferring monies to the defendant.

The daughter and son-in-law caused a lawsuit to be filed on behalf of Mr. Stanford, with the son-in-law as litigation guardian, seeking an accounting and tracing of all property transferred to the defendant.

Mr. Stanford sought to set the appointment of his son-in-law as litigation guardian. He does not agree that he is under a legal disability, and he does not want his son-in-law challenging the transfers and other arrangements that he has made with the defendant.  In other words, he denies that he is a victim of elder abuse, and he says that he has the capacity to make that decision.

The Court held that the evidence raised significant concerns about whether Mr. Stanford is under a legal disability. The Court ordered that Mr. Stanford attend a medical examination conducted by a doctor chosen by the son-in-law for the purpose of providing an opinion to the Court regarding whether Mr. Stanford is capable of instructing counsel and exercising judgment in relation to the claims and possible settlement.

If upon reviewing the medical opinion the Court determines that Mr. Stanford has the requisite level of capacity, then he can make the decision not to move forward with court proceedings against the defendant.  While Mr. Stanford remains capable, his daughter and son-in-law will not have standing to advocate and protect his assets by way of court proceedings brought on his behalf.

Undue Influence may be Presumed in Certain Circumstances

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.

Undue Influence, or Simply a Caring and Involved Loved One?

We are often contacted by clients who feel very strongly that a loved one, usually a parent or spouse, has been unduly influenced to make an estate plan that does not reflect their actual intentions.  For example, a person may be unduly influenced in the making of their will, a transfer of property into joint ownership, or a large gift made during the person’s lifetime. Undue influence is a serious allegation, and there is a high threshold to establish it.

Undue influence certainly does happen. Elder abuse unfortunately happens. However, some clients’ concerns of undue influence arise simply from the fact that the alleged influencer was heavily involved in the life of the person alleged to have been influenced.

Consider the example of a mother and her children. As the mother ages, she requires more assistance. Perhaps she is no longer able to drive or has other mobility issues or physical limitations. It is not unusual for one child to step up and provide more assistance than the other siblings. This sibling may live closer to her mother, or her work schedule and other obligations may offer more flexibility such that she is able to provide a greater level of assistance. This assistance may include taking her mother to doctors’ appointments, or to the bank (where some bank accounts are transferred into joint names?), or to meetings with lawyers (where some changes are made to the mother’s will?). It will certainly mean that this child will have more face time with her mother than her siblings.

When the more-involved child ends up receiving greater benefits during the mother’s lifetime, or a larger share of the estate after the mother’s death, the other siblings may look back at all the time that their sister spent with their mother, and in some cases they will speculate or assume that their sister was influencing their mother. It is not uncommon for disappointed beneficiaries to look for some explanation for perceived unequal treatment or favoritism.

Stewart v. McLean 2010 BCSC 64 is a case that I always keep in mind as an example of conduct that does not reach the level of undue influence. In that case, the Court observed as follows:

[108]   In general, the plaintiff’s allegations of undue influence are unfounded suspicions and are based on an unfair view of the relationship between Donald and their mother. At best, the plaintiff’s case is that Donald, by his presence in Victoria, his driving his mother to appointments, his working around her house, his visiting her frequently, and his receiving a benefit from his mother leads to the conclusion that he unduly influenced her.

And after observing that objectively viewed this was a loving and caring mother-son relationship in which the son did what most mothers would expect:

[110]    There is no evidence that Donald dominated the Deceased. In fact, all of the evidence is to the contrary. The evidence consistently establishes that the Deceased was competent, “sharp”, and independent until her death. Certainly when it came to financial matters, she exercised a mind of her own. While she may have depended somewhat on Donald and his family due to her physical limitations, given her financial and intellectual independence, she could have made alternate arrangements.

Other cases have made similar observations. Some people require assistance in being mobile, and a family member is a logical person to provide this assistance. There must be something more to establish undue influence.