Saturday, February 24, 2007

Undue Influence: A Case Study

Christine Katzensteiner never married, and had no children. She was very close to her niece Maria Nietsche’s four children: Rita Nietsche, Linda Nietsche, Christine Nietsche and Roy Nietsche. In 1988, she made a will leaving most of her estate to be divided into five equal shares among Maria’s four children and another great nephew.

Ms. Katzensteiner had vision problems, and by 1986 she was considered legally blind. She needed help writing cheques and cards. Her health deteriorated further when she developed hip problems and anaemia. At times she became confused. In 1997, she moved out of her home, and into a care facility.

After Ms. Katzensteiner sold her home in 1997 for $270,000, she wrote five cheques to her great nephew Roy totaling about $207,000 between February 5, 1998 and July 6, 2001. Roy used the funds from the largest cheque of $150,000 for a down payment on a house.

Ms. Katzensteiner died at the age of 87 on May 6, 2002.

Roy’s siblings sued Roy, alleging that he had unduly influenced their great aunt to obtain the cheques from her.

To succeed in their claim, Roy’s siblings could either prove that Roy actually exercised undue influence over Ms. Katzensteiner, or that Roy's relationship with her and the circumstances were such that she was vulnerable to undue influence. If the court found that Ms. Katzensteiner was vulnerable, then the court would presume undue influence. But if Roy could show that despite his great aunt’s vulnerability, she acted freely, and spontaneously, the gifts would be upheld.

Madam Justice Allan, in Nietsche v. Nietsche, 2007 BCSC 172, found that the relationship between Roy and his great aunt gave rise to a presumption of undue influence. She considered the following circumstances:

· Roy’s secrecy with respect to those gifts and the purchase of his house;
· The size of the alleged gifts to Roy which represented 2/3 of her estate;
· The fact that he received an additional $37,000 that he did not apparently require for the down payment for his house;
· Roy’s actions in assisting the Testatrix [Ms. Katzensteiner] revoke her Power of Attorney naming Maria and Rita;
· Roy’s purported ability to influence her to keep Rita in the Will;
· Roy’s failure to ensure that the Testatrix received any advice before giving him the cheques;
· Roy’s preparation of a letter purportedly on instructions of the Testatrix asserting that the cheques were gifts;
· Roy’s evidence that he talked his great aunt out of going to a lawyer or notary when she indicated that she wanted to formally document her intention to give him the cheques;
· Roy’s efforts to ensure that his mother and sisters had no access to the Testatrix’s bank statements before and after her death;
· Roy’s steps to cancel the Testatrix’s authorization for Maria to access her bank statements;
· Roy’s failure to advise his sisters and mother that the Testatrix had been taken to hospital days before she died;
· The Testatrix’s poor eye sight and reliance on Roy, in her later years, to fill out all of her cheques for her;
· The Testatrix’s statements after 1998 that she had no money and that Roy had taken her money;
· Roy’s inability to account for the items for which he says he received reimbursement of more than $20,000.
Madam Justice Allan also considered the fact that Roy had more access to Ms. Katzensteiner. He procured groceries and liquor for his great aunt, and he took her out shopping. His great aunt trusted Roy totally. Ms. Katzensteiner may have thought she would benefit from one cheque of $35,000 she gave to Roy, because he had said that he was building a basement suite in his house, which she could use.

After considering all of the evidence the court held that Roy Nietsche had not rebutted the presumption of undue influence arising from his relationship with his great aunt. He is required to repay the sum of $207,000 plus interest and court costs.

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