Adequacy of Legal Advice and the Presumption of Undue Influence

Last week I wrote here about the evidentiary issues in Modonese v. Delac Estate, 2011 BCSC 82, concerning the admissibility of out-of-court statements made Regina Delac. The case was a dispute between her two children about whether her son was entitled to keep his mother’s house as the surviving joint tenant or whether the house formed part of her estate to be dividing equally between her son and daughter in accordance with her will. A couple of years before her death, Regina Delac had signed a transfer which when registered at the Land Title Office, transferred the title to her house from her sole name into a joint tenancy with her son, Marko Delac. Mr. Justice Groves declared that the house is an estate asset.

Today I am writing about a different aspect of this decision: Mr. Justice Groves’ discussion of independent legal advice.

In Modonese, Mr. Justice Groves found that the nature of the relationship between Regina Delac and her son was such that her son was in a position to dominate his mother. There was evidence that he had been violent with her, that she was afraid of him and did not want to upset him, and that she wasn’t sure what she had signed. Because of the dominating nature of their relationship, the court applied a presumption that Marko Delac had obtained an interest in the title to the house by undue influence.

The presumption of undue influence is only a presumption. It may be rebutted, but the burden is on the person who benefited from the transaction, in this case Marko Delac, to show that the transfer was made voluntarily, without undue influence.

One way to rebut the presumption of undue influence is to show that the person who made the transfer received independent legal advice.

Regina Delac signed the transfer document in front of a notary public. Mr. Justice Groves summarized the notary public’s evidence as follows:

[39] Michael Tin, a notary public, gave evidence for the defence. He indicates that on the 23rd of May 2003, following instructions received, he arranged for the signing of a transfer for the Royal Oak property, which was previously in the name of Regina Delac alone, to be transferred into the name of Regina Delac and Marko Delac, as joint tenants. He testified that Marko Delac is a long time client of his and that Marko approached him about doing the transfer. He indicated that he would have had to receive instructions from Regina to effect the transfer; he further indicated that between the 19th of May 2003 and the 23rd of May 2003, he spoke to Regina two or three times.

[40] He testified that he arranged with Marko to have his mother brought to his office. Marko drove Regina and called from downstairs. Michael Tin was clear that he asked Marko to wait outside and that she spoke to Regina alone with just himself in the car. He indicated that he went over joint tenancy and tenancy-in-common with Regina and explained the difference between the two. He said that Regina had indicated that she wanted a joint tenancy arrangement.

[41] Michael Tin was clear that Marko was not present and not visible during this signing. Michael Tin indicated that he felt Regina was capable of providing instructions and that she knew what she was doing. In cross examination it became clear that Michael Tin had, for the most part, relied on information he received from Marko to draw up the transfer. It was further clear that the appointment with Regina was arranged through Marko that Marko had brought Regina to his office and that Marko had arranged for Michael Tin to go downstairs to meet them.

[42] In cross examination he confirmed that issues which never came up included a general discussion of assets, a discussion of debts, a discussion of estates, Regina’s level of health, other funds advanced by Regina, or any inquiry as to Regina and Marko’s personal relationship.

[43] The fee for services was also discussed in cross examination. The total bill was approximately $200, of which only $32.93 was for fees. Michael Tin indicated that that was the price he charged for a transfer at the time. Michael Tin confirmed that Marko paid the account.

[44] Michael Tin’s evidence stands alone in regards to who was present during the transfer.

Mr. Justice Groves found that Marko Delac was either in the car or close by when his mother signed the transfer.

What advice is required from a lawyer or notary public to rebut a presumption of undue influence? Did the notary public take sufficient steps to see that Regina Delac was acting voluntarily, free of any undue influence?

Mr. Justice Groves quoted from a Newfoundland Court of Appeal decision on the requirements for independent legal advice as follows:

[121] In Stewart [v. McLean, 2010 BCSC 64], Punnett J. followed Coish v. Walsh, 2001 NFCA 41, 203 Nfld. & P.E.I.R. 226 [Coish], where Wells C.J.N. addressed the issue of whether independent advice rebuts the presumption of undue influence as follows:

[23] The trial judge also correctly set forth the law respecting the manner in which such a presumption may be rebutted. In particular, he identified, from the comments of Green J., in [Fowler Estate], factors to be taken into account in considering whether or not evidence of legal advice given to the granting party is sufficient to rebut the presumption. At paragraph 24 of [Fowler Estate], Green J. identified factors which may affect the character of legal advice to be as follows:
1. Whether the party benefiting from the transaction is also present at the time the advice is given and/or at the time the documents are executed.
2. Whether, though technically acting for the grantor, the lawyer was engaged by and took instructions from the person alleged to be exercising the influence.
3. In a situation where the proposed transaction involves the transfer of all or substantially all of a person’s assets, whether the lawyer was aware of that fact and discussed the financial implications with the grantor.
4. Whether the lawyer enquired as to whether the donor discussed the proposed transaction with other family members who might otherwise have benefited if the transaction did not take place.
5. Whether the solicitor discussed with the grantor other options whereby she could achieve her objective with less risk to her.

What advice is adequate to rebut the presumption of undue influence will depend on the circumstances of the case. The lawyer or notary must give sufficient advice to be satisfied that the client understands the nature and effect of the transaction and is acting voluntarily. The lawyer or notary may also need to give advice on the merits of the transfer.

Mr. Justice Groves found that the advice the notary public gave to Regina Delac was inadequate to rebut the presumption of undue influence. He wrote:

[125] In this case, each of the 5 factors from Coish suggests that the advice Mr. Tin provided to Regina was completely inadequate and insufficient to rebut the presumption of undue influence. Marko was either nearby or in the car at the time the advice was given. He orchestrated and oversaw the entire process. Mr. Tin asked very few questions, did not know Regina had a daughter or a will, and provided no “objective advice” on the merits of the transaction. He did not inform himself of the circumstances in which the transaction was taking place nor of the motivations behind it.