Pelletier v. Pelletier

The case of Pelletier v. Pelletier, 2025 BCSC 43, is about allegations of financial abuse by a granddaughter of her grandfather’s wealth at a time when he was vulnerable and had been diagnosed by both a physician and a geriatric psychiatrist with dementia. The physiatrist wrote a letter in November 2018 opining that he was “no longer capable of making his legal and financial decision.” One of the interesting features of this case is that when this case went to trial about 5 and a half years after the diagnosis of dementia, and the grandfather gave evidence, the trial judge, Madam Justice Whately, found that he “displayed no outward signs of cognitive decline, nor any of the behaviours or symptoms associated with dementia or other mental disorders that featured so prominently in the evidence.”  What happened?

Dora and Claude had three children, two of whom had died. They were close to their granddaughter Brittany Adcock, who was married to Darryl Adcock.

Dora and Claude owned a 48-acre farm as well as a residential property at Graham Road near the farm. By 2018 there was tension between them over whether to continue to farm. Claude wanted to continue. Dora didn’t. They had both retired from their main employments. She was born in 1944 and he in 1938. She wanted to move into the Graham Road property, closer to Brittany and her family. He was buying new equipment for the farm, including a tractor for $45,000, a Power Harrow for $13,000 and an SUV for $40,000, and Dora didn’t think they could afford it.

In 2018, they sold the Graham Road property to Brittany and Darryl for less than fair market value. No claim was made in respect of this sale, nor was there any suggestion that Brittany and Darryl did anything improper in buying the property for the price they paid.

Claude’s mental functioning deteriorated. According to Justice Whately:

[11]         It is true that Claude suffered from serious health issues requiring medication. This medication led to catastrophic effects: his behaviour and personality changed, and I accept that he became cantankerous, less rational, and generally difficult to be around. Claude suffered from symptoms that mimic dementia, such as temporary cognitive and functional impairments, and he also likely suffered from increased impulsivity and paranoia.

In diagnosing Claude with dementia, his doctors and nurses relied in part on collateral reports from his granddaughter Brittany and Dora, which were inaccurate. Justice Whately wrote:

[175]     Brittany made various statements to Claude’s medical professionals later shown to be untrue, exaggerated, or misleading. Some of these include:

a)    As of November 2018, Brittany variously told different health care providers that Claude had spent $300,000, $350,000, or $400,000–$500,000 on farm equipment. She informed one doctor that she had “tallied” the spending, which totalled at least $300,000.

b)    As of November 2018, Claude had gone through all his and Dora’s savings and was starting to dip into their retirement fund. In fact, in November 2018, Dora and Claude were in a financially positive position.

c)     Claude had continued an affair for 37 years with a woman in Ontario.

d)    Claude was making paranoid and obsessive demands about accounting of his money and demanded $30,000 from the family to hire a lawyer to revoke the POA.

Claude had previously made an enduring power of attorney in 2011, appointing Dora as his attorney and Brittany as his alternate. After the diagnosis of dementia, Dora and Brittany effectively took over his affairs, and he lost access to his bank account. He did sell farm equipment and livestock, which he testified totaled over $240,000, and which he gave to Dora.

Dora reactivated a line of credit, which she used for the construction of a house for herself on the Graham Road property. She used the power of attorney to sell the farm in July, 2020, for $999,999. Out of those proceeds, she paid $335,000 owing on the line of credit and transferred $401,611 from her joint account with Claude to a joint account Claude held with Brittany. The same amount was then transferred into Brittany and Darryl’s joint account. Brittany and Dora testified that the funds represented a $200,000 payment to compensate Brittany and Darryl for building a guest suite on their property for Claude’s use and $200,000 was a gift from Claude and Dora for the benefit of the great-grandchildren’s education. Further funds were later transferred from Claude to Brittany and Darryl for further work on the guest suite.

Claude lived in the guest suite for approximately 20 months from April 2020 until October 14, 2021.

In October, 2021, after a dispute in which Claude demanded an accounting of his finances, he was apprehended under the Mental Health Act. While hospitalized, his medication was changed, and following further tests, another psychiatrist, “Dr. Schovanek found that Claude was capable of managing his basic finances, balancing a check book, and making simple meals safely. Dr. Schovanek concluded that “Claude is believed to be capable of re-designating a power of attorney.” Claude was released, and moved in with his son.

Claude signed a revocation of his power of attorney, which he mailed on December 20, 2021 to Brittany, and delivered to Dora on December 23, 2021.

Between October and December 2021, Dora negotiated a separation agreement with Brittany purporting to negotiate on Claude’s behalf as his alternate attorney, on the basis that Dora no longer had authority to act by virtue of their separation. The agreement was signed on December 29, 2021, and contained a provision recognizing a gift of $200,000 to Brittany and Darryl for the guest suite, and another $200,000 to them for their children’s education. Claude did not participate in the negotiations, and Brittany signed on his behalf.

Dora brought a family law claim against her Claude. They had been married for 60 years.  Claude brought a counterclaim in the family law proceeding against their granddaughter, Brittany and her husband Darryl.

The parties agreed that the separation date was November 3, 2021.

In the proceeding, Claude tendered a report by Dr. Passmore, who opined on his capacity to instruct counsel and did a retrospectively to December 2021. As set out in the reasons for judgment:

[90]         Dr. Passmore opined that, as of the date of his examination of him, Claude was capable of managing his financial affairs, instructing legal counsel, making a will, making a POA, and making a representation agreement.

[91]         Dr. Passmore also opined that Claude’s cognitive impairment and below normal MoCa (Montreal Cognitive Assessment) scores which led, in part, to his diagnosis of dementia, were primarily due to the side effects of medication.

Claude’s claims included breach of fiduciary duties, unjust enrichment, and knowing receipt of funds in breach of trust. He also sought to set aside the separation agreement.

Justice Whately found that both Dora and Brittany had fiduciary duties to Claude, and that they breached those duties. In addition to having fiduciary duties by virtue of holding a power of attorney, Brittany was also in an ad hoc fiduciary before she stepped into the role of an attorney following Dora’s separation from Claude.

Justice Whately’s decision includes a useful summary of ad hoc fiduciary relationships:

[200]     An ad hoc fiduciary relationship is one that arises out of the specific circumstances and dynamics of the particular relationship: Sledin Estate v. Rusin, 2011 BCSC 1207 at para. 65.

[201]     In Frame v. Smith, [1987] 2 S.C.R. 99, Justice Wilson (in dissent), identified three characteristics that are common to most relationships in which fiduciary obligations have been imposed:

1.     The fiduciary has scope for the exercise of some discretion or power;

2.     The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests; and

3.     The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power

(the “Frame Factors”).

[202]     The Frame Factors are still widely cited in the case law as “indicia” of an ad hoc fiduciary relationship. However, they are no longer considered to be the complete test for establishment of a fiduciary relationship. In Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, the Supreme Court of Canada restated the test for the existence of an ad hoc fiduciary relationship as follows:

…[F]or an ad hoc fiduciary duty to arise, the claimant must show, in addition to the vulnerability arising from the relationship as described by Wilson J. in Frame:

an undertaking by the alleged fiduciary to act in the best interests of the alleged beneficiary or beneficiaries;

a defined person or class of persons vulnerable to a fiduciary's control (the beneficiary or beneficiaries); and

a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary's exercise of discretion or control.

[203]     Fiduciary duties can arise without formal appointment as attorney, where an individual takes on the role of managing the financial affairs of a relative. For example, the addition of an adult child to an elderly parent’s bank account for the purpose of assisting with their finances may be sufficient to trigger fiduciary duties, regardless of the parent’s capacity and regardless of whether the child was actually acting as power of attorney for their parent: see e.g. Wedemire v. Wedemire, 2017 ONSC 6891, and Miller v. Miller, 2011 ONSC 7239.

Justice Whately found that both Dora and Brittany breached their fiduciary duties, but Dora did not benefit. Both Brittany and Darryl were unjustly enriched by the depletion of Claude’s funds from the sale of the farm and there was no juristic reason for them to retain a benefit.

The Court also held Brittany and Darryl liable for knowing receipt, the principles of which are summarized in the following passage:

[231]     The elements of a claim for knowing receipt have been set out in Citadel General Assurance Co. v. Lloyds Bank of Canada, [1997] 3 SCR 805 [Citadel], as follows:

a.              receipt of trust property for one’s own benefit (as opposed to as an agent for someone else); and

b.              knowledge or constructive knowledge that the property was transferred in breach of trust or fiduciary duty.

[232]     The threshold of knowledge required to satisfy the second element of the test is low. In Citadel, at para. 49, La Forest J. described the knowledge standard as follows:

…relief will be granted where a stranger to the trust, having received trust property for his or her own benefit and having knowledge of facts which would put a reasonable person on inquiry, actually fails to inquire as to the possible misapplication of trust property.

[233]     Liability for knowing assistance is imposed where a third party (1) assists in a breach of fiduciary duty with (2) actual knowledge that the fiduciary is in breach: Air Canada v. M&L Travel Ltd., [1993] 3 S.C.R. 787.

[234]     Brittany and Darryl knowingly received and personally benefitted from Dora’s breach of fiduciary duty.

[235]     Brittany knew, or ought to have known that the property was transferred in breach of Dora’s fiduciary duty. The evidence establishes that Brittany knew that Dora had a fiduciary obligation to Claude pursuant to the POA. Brittany knew, or ought to have known, that a gift of Claude’s money by Dora to Brittany and Darryl was not in not in Claude’s best interest and that he was either not aware or did not consent to such a gift. Alternatively, even if Claude did consent to some form of gift being made during the period of his incapacity, there are safeguards in place to prevent incapable persons from making gifts that are contrary to their best interests. (see s. 60.2 of the Adult Guardianship Act, R.S.B.C. 1996, c. 6 and s. 20 of the PAA and Regulations). Claude’s best interests, specifically with respect to his financial security, were entirely ignored by his fiduciaries in this case.

The separation agreement was set aside, and Justice Whately ordered Brttany and Darryl to pay damages as follows:

[242]     I order that Brittany and Darryl pay damages to Claude in the amount of $437,535.00. For clarity, I notionally base this amount on:

·                 50% of the 200,000 gift for the education fund ($100,000)

·                 50% of the 200,000 gift for the guest suite ($100,000)

·                 50% of the amount paid against Dora and Claude’s LOC from the Farm Sale proceeds,     which was ostensibly used to pay for the construction of Dora’s House on the Graham Road Property ($167,535)

·                 $70,000 to approximate the various amounts taken or used by Brittany during the period of incapacity, including the “extras” or other unexplained withdrawals from Claude’s funds.

Geluch v. Geluch Estate

A recent decision, Geluch v. Geluch Estate, 2019 BCSC 2203, illustrates that a court may find part of a will to be valid and another part invalid. To make a valid will, the will maker must have the capacity to understand the nature and effect of the will, or testamentary capacity, and must know and approve of the contents of the will. I am not aware of any cases in which a will made by someone who is found not to have capacity is found to have some valid gifts, but the court may find that the will-maker with capacity knew and approved of some gifts in the will, but not others.

Jean Geluch signed two wills shortly before she died. She signed a will dated January 12, 2016, in which she appointed her brother Ted Josefowich as her executor, left seven charities $50,000 each, 17 individuals cash gifts in varying amounts and the residue to her niece Carol Wells. The cash gifts to individuals included a $15,000 gift to her daughter Sharon Geluch who had developmental disabilities, $105,000 to Mr. Josefowich and $250,000 to Carol Wells.

Eight days later, on January 20, Jean Geluch signed a new will and a transfer of her home into a joint tenancy with Carol Wells. She again named her brother as her executor, and she left $15,000 to her daughter to be held in trust, $105,000 to brother, and the residue to her niece Carol. On January 20, Carol also signed a declaration of trust declaring that upon Jean Geluch’s death, she will not be entitled to the home, but will hold it for the benefit of beneficiaries listed in two schedules, which set out the same cash gifts to the same beneficiaries as were listed in the January 12, will.

Jean Geluch died four days later, on January 24. She had bank accounts worth approximately $384,000 and the home sold for just over $1,423,000. The total value of the assets subject to the lawsuit was approximately $1.8 million.

The Public Guardian and Trustee of British Columbia, acting as litigation guardian for Sharon Geluch, challenged both of the wills, the transfer of the home into a joint tenancy and the declaration of trusts, alleging that Jean Geluch did not have the capacity to make the wills or transfer, and that she did not know and approve of the estate plan.

Although the wills, transfer and trust declaration were drafted by a lawyer, much of the instructions came from Jean Geluch’s brother and niece rather than directly from her. The lawyer did not have a clear recollection of events, and his notes were sparse and were not dated. He did not ask the questions needed to establish her capacity.

In deciding the case, Madam Justice Francis relied to a significant extent on the email correspondence among Ted Josefowich, Carol Wells and the lawyer.

Madam Justice Francis found that Jean Geluch did have the capacity to make the estate-planning documents. She then considered whether Jean Geluch knew and approved of the planning. She summarized the issue as follows:

[124]     In the recent decision of Halliday v. Halliday Estate, 2019 BCSC 554, at para. 178, Hinkson C.J. cites John Poyser’s text Capacity and Undue Influence (Toronto: Carswell, 2014) and its formulation of the distinction between testamentary capacity and knowledge and approval:

Testamentary capacity includes the ability to make choices, whereas knowledge and approval requires no more than the ability to understand and approve the choices that have already been made.

[125]     While I am satisfied that Jean was capable of making choices with respect to her testamentary dispositions in January 2016, I am not at all satisfied that she knew or approved of the choices that she purportedly made.

[126]     To have knowledge and approval of testamentary dispositions, it is necessary for the will-maker to be aware of the contents of the will she is executing: Johnson v. Pelkey (1997), 36 B.C.L.R. (3d) 40 (S.C.) at paras. 114-116.

[127]     Knowledge and approval requires more than simply knowing the contents of the will. The will-maker must be aware of the magnitude of the residue of her estate and must “appreciate the effect” of the disposition of her estate: Russell v. Fraser (1980), 118 D.L.R. (3d) 733 (B.C.C.A.) [Russell] at para. 12.

[128]     Since the plaintiff has established suspicious circumstances, the burden falls on Ted and Carol to prove that Jean had knowledge and approval of the dispositions she made on January 20, 2016. I find that Ted and Carol have fallen far short of meeting that burden.

Madam Justice Francis found that they had not met the burden of proof that Jean Geluch knew and approved of the January 20 will, property transfer or declaration of trust. There was no evidence that the instructions for the changes, which came from Mr. Josefowich and Carol Wells, were confirmed with Jean Geluch. Madam Justice Francis emphasized that these changes were significant:

[130]     There was a wholesale change in the structure of Jean’s estate plan between January 12, 2016 and January 20, 2016. Jean went from having a conventional will that disposed of all her property on death to transferring her primary asset, the Home, to Carol on trust terms that even Jean’s lawyer did not appear to fully understand. The notion that Jean, without ever talking to her lawyer prior to the January 20, 2016 execution date, could have known and approved of the change in plan that would have her most significant asset pass outside her estate, pursuant to a declaration of trust that was signed by Carol and not Jean (and which Jean may never have seen), is simply not plausible.

Madam Justice Francis rejected the argument that the January 20 will could be upheld even if the property transfer and declaration of trust were invalid. The effect would be to disinherit beneficiaries of cash gifts and there was not evidence that Jean Geluch wished to do so.

She then turned to the January 12 will, and her evaluation of the evidence was nuanced. There was evidence that Jean Geluch gave significant consideration to the cash gifts, making changes requiring numerous drafts, which contrasted with the residue clause. Madam Justice Francis wrote at paragraph 157:

It is evident that Jean agonized over the list of Charitable Bequests and Individual Bequests, in terms of whom she wished to benefit, in what amount, and in some cases what trust terms to attach to certain gifts. For example, at one point she considered making the $5,000 gift to Michael Geluch conditional on his marital status. The level of detailed consideration given to these small bequests is completely inconsistent with Carol’s evidence that Jean simply announced one day that Carol was to inherit the residue without further discussion.

In contrast, although the residue clause disposed of approximately $900,000, Madam Justice Francis found it “more probably than Jean did not turn her mind to the residue because no one…pointed out to her that the Charitable Bequests and the Individual Bequests would dispose of less than half of her estate….The only credible explanation for Jean’s scrupulous attention to the Charitable Bequests and Individual Bequests, and her lack of attention to her residue, is that she had no idea of the magnitude of the residue of her estate.

The result is that the cash gifts to charities and individuals in the January 12 will is upheld. The residue was not effectively disposed of in the will, and will go on an intestacy to Sharon Geluch.

Part 3 of the Health Care (Consent) and Care Facility (Admission) Act is Now in Force

Part 3 of the Health Care (Consent) and Care Facility (Admission) Act came into effect on November 4, 2019. Part 3 sets out the criteria for an adult to be admitted into a care facility.

There are three ways that a person may be admitted into a care facility. The person may consent if she is capable. Second, if she is not capable, an application may be made on her behalf by a substitute decision maker. Third, she may be admitted on an emergence basis, for example, if it is necessary to preserve her life or prevent serious physical or mental harm to her, or serious physical harm to any person.

If the person is incapable, section 22 sets out who may act as the substitute decision maker, in order of priority, beginning with the person’s guardian, followed by a representative under a representation agreement. Section 22 (1) and (2) provide:

22   (1)A manager may admit an adult to a care facility without the adult's consent if consent is given by

(a)a personal guardian who has authority to consent to the admission and is capable of giving or refusing consent, or

(b)a person listed in subsection (2) of this section, if the manager has made every reasonable effort to obtain consent from the adult but the adult is determined under section 26 to be incapable of giving or refusing consent.

(2)Subject to subsection (3), substitute consent to an adult's admission to a care facility may be given or refused by the first, in listed order, of the following who is available and qualifies under subsection (4):

(a)the adult's representative, if the representative has authority to consent to the admission;

(b)the adult's spouse;

(c)the adult's child;

(d)the adult's parent;

(e)the adult's brother or sister;

(f)the adult's grandparent;

(g)the adult's grandchild;

(h)anyone else related by birth or adoption to the adult;

(i)a close friend of the adult;

(j)a person immediately related to the adult by marriage.

Order Declaring Person Incapable of Managing Her Person Revokes Power of Attorney

[This guest post is written by Taeya Fitzpatrick of our firm, Sabey Rule LLP. She discusses the impact of an order declaring someone incapable of managing her person in British Columbia on a power of attorney.]

I have recently come across an interesting issue with respect to the Patients Property Act and, perhaps, an unintended consequence in the way section 19 was drafted.

Under the Patients Property Act, a person can be declared a patient by reason of being unable to care for their person, their finances, or both. Another person can then be appointed as the committee of the estate of the patient, committee of the person of the patient, or both.

However, even if the application before the Court only concerns the person, the effect of being declared a patient results in any and all power of attorney agreements being terminated from the date of the order:

Effect on power of attorney or representation agreement of person becoming a patient by court order

19  On a person becoming a patient as defined in paragraph (b) of the definition of "patient" in section 1,

(a) every power of attorney given by the person is terminated, and

(b) unless the court orders otherwise, every representation agreement made by the person is terminated.

Section 1 part b provides the definition of “Patient” relevant to section 19:

(b)          a person who is declared under this Act by a judge to be

(i) incapable of managing his or her affairs,

(ii) incapable of managing himself or herself, or

(iii) incapable of managing himself or herself or his or her affairs;

Therefore, once a person is declared incapable, if no one applies to be committee of the patient’s finances, the Public Guardian and Trustee becomes committee by default. At issue in Re Clay, 2016 BCSC 261, was whether the declaration of incompetence severed the representation agreement. Unlike a power of attorney, a representation agreement can be preserved by the court in appointing someone as a committee of the estate of a person.

In a recent case that I was personally involved in, the daughter of the patient applied for, and was granted, committeeship of the person of her mother. The daughter did so as the previous personal representative of the mother was no longer able to continue the job and no one had been appointed as an alternate. The daughter had only intended to take over her mother’s person and had no intention to disturb the power of attorney which had been granted to a trust company. Regardless of those intentions, the Patients Property Act operated to sever the power of attorney and the Public Guardian and Trustee became the acting committee of the estate of the mother.

I then, on behalf of the trust company applied to the court to resume the trust company’s handling of the mother’s finances. The application was successful, but as a result of the Ac, the mother was put to unnecessary expense. This should operate as a cautionary tale to counsel to make sure that their applications will not have unfortunate, unintended consequences.

Report on Vulnerable Investors

The Canadian Foundation for Advancement of Investor Rights and the Canadian Centre for Elder Law have published their Report on Vulnerable Investors: Elder Abuse, Financial Exploitation, Undue Influence and Diminished Mental Capacity.  The report is co-authored by Marian Passmore and Laura Tamblyn Watts. 

As set out in the Executive Summary:

The report focuses on two main areas of specific challenge for vulnerable investors: 

i. Elder financial abuse and undue influence: A person or persons may be trying to financially exploit the investor through a variety of forms of elder abuse, which can include abuse of a power of attorney or other legal authority, fraud, theft, threats, misuse of funds, coercion, abuse of trust, physical threats or by other means. Additionally, a client may exhibit behaviour or provide instructions to a financial services representative that the representative believes to be unduly influenced by a person close to the client.  

ii. Diminished capacity: A client may lose the capacity to provide instructions to a representative, due to dementia, a psycho-social or developmental disability or health reasons such as episodic delirium or medication use. The representative, staff member or compliance officer may be concerned that trades are radically different than previously, or that the client is exhibiting erratic behaviour or is forgetful. If the client does not have a functioning enduring power of attorney on file, this situation can become very complex and delicate.  

A representative or staff member who observes signs of elder financial abuse or undue influence, or diminished mental capacity, may want to assist and/or take protective action, but be unsure about whom to contact, his or her authority to act, and the legal ramifications of notifying others or not following the client’s disbursement instructions. 

Depending on the circumstances, these situations may warrant protective action. A representative may want to notify a person close to the client, report a suspected abuser to the authorities, or prevent the disbursement of funds from a client’s account. Currently, Canada’s securities regulatory regime does not equip representatives to protect vulnerable investors in these ways. There are many reasons for this, spanning from inadequate training on mental capacity and undue influence, to unclear reporting requirements and processes, to insufficient regulatory guidance and protection for representatives who want to take protective action. As a result, many representatives are unfamiliar with the warning signs of vulnerability, unsure of how to escalate issues when they do notice them, and unclear of their authority to act.

The report comprehensively sets out the problems, practices and in Canada, and other jurisdictions, and sets out several specific recommendations.

Banton v. Banton (Part 2)

In my post last week, I wrote about Mr. Justice Cullity’s decision in Banton v. Banton, 1998 CanLII 1496 finding that two wills made by George Banton, one dated December 21, 1994 and the other dated May 4, 1995 were invalid. In both wills, Mr. Banton had left his estate to Muna Yassin, whom he met after he moved into a retirement home, disinheriting his five children, who were his beneficiaries under his previous will. He and Ms. Yassin were married on a few days before he made the December 21, 1994 will, when he was 88 years of age, and she, 31. Mr. Justice Cullity found that Mr. Banton was suffering from delusions about his children when he made the wills, and he did not have the requisite capacity to make them, and that Ms. Yassin exercised undue influence to obtain the benefit of the wills. Accordingly, she did not benefit under the wills.

But I indicated that there were some twists. Today I will write about one.

Under Ontario law, when Mr. Banton married Ms. Yassin, a marriage revoked a will unless the will was made in contemplation of the marriage. If the marriage was valid, then the effect of the marriage was to revoke Mr. Banton’s previous will leaving the residue of his estate to his children. Because Mr. Justice Cullity found that the wills he made after his marriage were invalid, then a significant portion of his estate would go to Ms. Yassin as his spouse pursuant to Ontario’s laws governing intestate heirs. On the other hand, if the marriage were not valid then Mr. Banton’s previous will leaving the residue of his estate to his five children would still be in effect.

Mr. Justice Cullity considered two issue in respect of the marriage. First, whether Mr. Banton consented to the marriage. Second, whether Mr. Banton’s had the mental capacity to marry.

With respect to the first issue, Mr. Justice Cullity found that Mr. Banton did consent to the marriage. He wrote:

[134]      Marriage is, of course, a legal contract and, to some extent, it is governed by the laws applicable to contracts in general. I am satisfied, however, that it is not subject to the operation or application of the presumptions and principles which determine whether contracts may be avoided on the ground of undue influence. Fraud, of course, is another matter but the evidence in this case does not support such a finding. To that extent authorities such as Countess of Portsmouth v. Earl of Portsmouth (1828), 1 Hagg. Ecc. 355, 162 E.R. 611, are distinguishable.

[135]      A marriage can be set aside on the ground of duress or coercion of a degree sufficient to negative consent. Although I am in respectful agreement with Mendes da Costa J. in A.S. v. A.S. (1988), 1988 CanLII 4713 (ON SC), 15 R.F.L. (3d) 443 (U.F.C.) at pp. 453-6, that fear need not be proven, the evidence does not warrant a conclusion that there was duress in this case with respect to George Banton’s participation in the marriage.

[136]      In late September and early October 1994 George Banton had tried to resist Muna’s attempts to seduce him into marriage but, in November, he capitulated and consented to it. Although I have also found that marriage was part of Muna’s carefully planned and tenaciously implemented scheme to obtain control and, ultimately, the ownership of his property, as far as the marriage was concerned he was, at the end, a willing victim. Shortly thereafter he told Victor [one of Mr. Banton’s children] that he had wanted “one last fling”.

As noted above, Mr. Justice Cullity found that Mr. Banton did not have capacity to make a will a few days after the marriage. He also found after considering conflicting expert opinions that Mr. Banton did not have capacity to manage his financial affairs at the time of the marriage. But these findings of incapacity are not determinative of Mr. Banton’s capacity to marry. Legal capacity is transaction specific. Someone who might not be able to meet the legal criteria to make a valid will, may still have the capacity to enter into a marriage.

Mr. Justice Cullity found that Mr. Banton did have the ability to understand the nature of a marriage relationship and its obligations. He wrote:

[142]      It is well established that an individual will not have capacity to marry unless he or she is capable of understanding the nature of the relationship and the obligations and responsibilities it involves. The burden of proof on this question is on those attacking the validity of the marriage and, in my judgment, it has not been discharged in this case. There is virtually nothing in the evidence to suggest that George Banton’s mental deterioration had progressed to the extent that he was no longer able to pass this not particularly rigorous test. The medical evidence indicates his acceptance of the marriage and even in the last months of his life when he was at Village Park, he spoke of his wish to return to his wife—albeit along with his then caregiver and companion, Ms. Yolanda Miranda.

[143]      The only matter that raises any doubt in my mind with respect to George Banton’s understanding of the responsibilities of marriage are the fact that he permitted Muna to return him to Lifestyles the day after the marriage, and that he remained there until the beginning of April 1995 when he moved to Muna’s apartment. I do not believe I would be justified in concluding from this that he did not appreciate that the duty to cohabit is inherent in the marriage relationship. I believe it is far more likely that he would have preferred to cohabit with Muna but that this was not part of her plan until the commencement of the guardianship proceedings made it desirable, from her point of view, that he be continuously under her control, and not accessible to his family. We do not know what reason Muna gave him for returning him to Lifestyles on December 18 but, as I have already indicated, I am satisfied that he was, by then, completely under her domination and quite incapable of insisting on his right to cohabit with her.

[144]      George Banton had been married twice before his marriage to Muna and I find that, despite his weakened mental condition, he had sufficient memory and understanding to continue to appreciate the nature and the responsibilities of the relationship to satisfy what I have described as the first requirement of the test of mental capacity to marry.

Mr. Justice Cullity rejected the argument that in order to have capacity to marry, Mr. Banton was also have the capacity to manage his finances. There is a distinction between the capacity to make financial decisions and the capacity to make personal decisions. The fact that someone no longer has the ability to make financial decisions does not preclude them from marrying if he is still capable of making personal decisions. Mr. Justice Cullity wrote:

[157]      While I believe that it may well be the case that a person who is incapable both with respect to personal care and with respect to property may be incapable of contracting marriage, I do not believe that incapacity of the latter kind should, by itself, have this effect. Marriage does, of course, have an effect on property rights and obligations, but to treat the ability to manage property as essential to the relationship would. I believe, be to attribute inordinate weight to the proprietary aspects of marriage and would be unfortunate. Elderly married couples whose property is administered for them under a continuing power of attorney, or by a statutory guardian, may continue to live comfortably together. They may have capacity to make wills and give powers of attorney. I see no reason why this state of affairs should be confined to those who married before incapacity to manage property supervened.

[158]      George Banton was found by Dr. Chung to have capacity as far as personal care was concerned. Moreover, despite his physical problems, his weakened mental condition and his loss of memory, he was able to carry on more or less normal discourse on simple everyday matters. Strangers, like Carol Davis and Mr. Allen, who met him briefly did not notice anything abnormal about his mental state. On the basis of a one-hour examination Dr. Silberfeld concluded that he had capacity to manage his property. Obviously he was still capable of presenting a brave face to the world. The more thorough examination by Dr. Chung revealed what those close to him already knew: that his judgment was severely impaired and his contact with reality tenuous. Despite these problems, I have no doubt that, with care and attention and avoidance of stress, he was capable of coping with the more mundane problems of everyday living and I do not see why the right to marry should be withheld from persons in his position.

Accordingly, the marriage was valid, and Ms. Yassin was entitled to a large share of Mr. Banton’s estate under Ontario law governing the disposition of an estate when someone dies without a will.

But there is still more to this story. 

To be continued. 

Banton v. Banton (Part 1)

I have recently reread the case of Banton v. Banton, 1998 CanLII 14926, a decision of Mr. Justice Cullity of the Ontario Supreme Court. This case may be referred to as a predatory-marriage case. What interests me most, though, is the interplay of legal issues. Mr. Justice Cullity considers in his decision the capacity to make a will, and the impact of delusions on capacity, undue influence, the capacity to marry, the validity of a residence trust, and the use of a power of attorney to settle a trust. I think this case is well worth a few blog posts. I will start with the challenges to the validity of two wills.

Until a couple years before his death, George Banton had a loving, trusting relationship with his five children. He had made a will in 1991, in which he left the residue of his estate to be divided equally among his children. He had appointed his two sons, Victor and George Jr. as attorneys under an enduring power of attorney.

In 1990, he was diagnosed with prostate cancer, and then had several operations, including surgery to remove his testicles in November 1993, after which his mental functioning deteriorated. He also had significant hearing problems. In 1994, while in a retirement home he met a waitress, somewhat younger than he (she was 31, and he, 88). Her name is Muna Yassin. They married on December 17, 1994. He left his new wife his estate by will dated December 21, 1994, and then he made an identical will on May 4, 1995.

He and Ms Yassin met with a solicitor on December 19, 20 and 21. On the first meeting the solicitor was concerned about the age difference and asked for a marriage certificate, which they brought in the next day. The solicitor testified that his recollection was that on Dec 20, he met with Mr. Banton alone in the boardroom and that was his practice. Mr. Banton instructions were that he wished to leave everything to Ms. Yassin, and if she predeceased him to the Salvation Army.

When he made the 1994 will, in reply to his solicitor’s question about why he was not leaving anything to his children, Mr. Banton said that they were not interested in him, were only interested in his money, and only paid attention to him after he became involved with Muna Yassin. He made similar statements to others, and later in a guardianship proceeding he made allegations of abuse against his sons.

There was little evidence about the 1995 will, which was made in the context of the guardianship proceedings, and was identical to the 1994 will.

The children challenged the wills, alleging that their father did not have capacity to make the wills, and that Ms. Yassin procured the wills by the exercise of undue influence.

Mr. Justice Cullity set out the legal criteria of capacity to make a valid will:

[55]           The principles for determining testamentary capacity were summarized in the celebrated passage from Banks v. Goodfellow (1870), L.R. 5 Q.B. 549 (Q.B.) as follows:

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties—that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not been made [at p. 565].

Mr. Banton was able to describe his assets to his solicitor, and Mr. Justice Cullity found that he knew the nature and effect of wills and had a sufficient understanding of his assets to make a will.

The validity of the wills turned on the question of whether he was able to “comprehend and appreciate” the claims of his children, or whether he was influenced in making the wills by insane delusions.

Mr. Justice Cullity described insane delusions in the following paragraphs of his decision:

[61]           I have already held that virtually all of these allegations of George Banton about his children’s motives and behaviour were unfounded. The additional statement to Muna about his poor relationship with his children prior to the marriage was quite extraordinary but, given his other allegations and despite my findings with respect to Muna’s credibility which I will refer to later in these reasons, I cannot exclude the possibility that it was made. The question is whether his allegations about his children should be characterized as “insane delusions” in the sense in which that term has been used traditionally in this area of the law. The reported decisions contain many attempts at definition of which the following have often been cited with approval:

Delusion is insanity where one persistently believes supposed facts (which have no real existence except in his perverted imagination) against all evidence and probability and conducts himself however logically upon the assumption of their existence. [Am. & Eng. Cycl., Vol. 9, p. 195, cited by Sedgewick J. in Skinner v. Farquharson (1902), 1902 CanLII 87 (SCC), 32 S.C.R. 58 at p. 76.]

… insane delusions are of two kinds; the belief in things impossible; the belief in things possible, but so improbable, under the surrounding circumstances, that no man of sound mind would give them credit; to which we may add, the carrying to an insane extent impressions not in their nature irrational. [Prinsep v. Dyce Sombre (1856), 10 Moo. P.C. 232 at p. 247, 14 E.R. 480.]

[62]           As the second of these passages indicates, “insane” delusions are not limited to beliefs that are so bizarre that their content, by itself, evidences mental disorder. The precise connotations of the language employed in 19th Century cases—many of them involving instructions to juries—may not be entirely consistent with modern linguistic usage. Such delusions include beliefs whose extreme improbability is apparent only when the surrounding facts are known. These are obviously the more difficult cases. Delusions with respect to the behaviour and attitudes of the deceased’s relatives are relatively common in the reported cases and they often fall into this category. Dr. Silberfeld acknowledged that George Banton’s allegations about his children could be delusions. In all cases where delusions of this kind are alleged to exist there will be a question whether the belief should be characterized merely as quite unreasonable, on the one hand, or as something that, in the particular circumstances, no one “in their senses” could believe: Macdonell, Sheard and Hull on Probate Practice (4th ed., by Rodney Hull, Q.C., and Ian Hull, 1996) at pp. 33-34. Cases on either side of the line include Royal Trust Co. v. Ford (1971), 1971 CanLII 139 (SCC), 20 D.L.R. (3d) 348 (S.C.C.), where the will was upheld, and Harwood v. Baker (1840), 3 Moo. P.C. 282, 13 E.R. 117, and Re Zabudny, [1958] O.W.N. 68 (H.C.), in which wills were set aside. The correct approach to the question is, I believe, accurately stated in Atkinson on Wills (2nd ed. 1953):

The nature of the belief is not necessarily the turning point, or even the apparent lack of a basis for such belief. Rather the question is whether, considering all the facts and circumstances, it is fairly shown that the will proceeded from and on account of a deranged mind [at p. 246].

Mr. Justice Cullity found that Mr. Banton’s beliefs about his children were delusions, and these delusional beliefs were the basis of Mr. Banton’s decision to exclude them. Accordingly, the wills were invalid.  

He also found that Ms. Yassin unduly influence him. This finding was based on circumstantial evidence of her behavior when contrasted with her testimony. Although she portrayed herself as passive, there was evidence of her actively trying to get his bank to allow him to make large withdrawals, of her isolating him from his children and grandchildren during a time period he was living with her, and of providing most of the instructions on his behalf when he was contesting guardianship proceedings by the Public Guardian and Trustee.

Ms. Yassin did not benefit under the wills. But there are twists in this story.

To be continued. 

Capacity to Marry: Devore-Thompson v. Poulain

Marriage has significant legal implications on the succession of property. Yet, I don’t come across either in my practice or my reading, that many cases where a marriage is challenged on the basis that someone did not have the mental capacity to marry. I certainly don’t see as many cases challenging the validity of a marriage as I do challenging the validity of a will or transfer of property.

In a recent decision, Devore-Thompson v. Poulain, 2017 BCSC 1289, Madam Justice Griffin found that Donna Walker did not have the capacity to marry on June 14, 2010, when she went through a marriage ceremony with Floyd Poulain. The validity of the marriage was challenged by Ms. Walker’s niece Donna Devore-Thompson, who was an executor named in a will Ms. Walker made before her marriage ceremony, and who was close with her.

The question of whether Ms. Walker had the capacity to marry is significant, because if she did have capacity and the marriage were valid, pursuant to the Wills Act, the marriage would have revoked all of her previous wills. Because she had no descendants, Mr. Poulain would be entitled to her estate as her surviving spouse on the basis that she died without a valid will. I should add that the Wills Act was revoked and replaced by the Wills, Estates and Succession Act on March 31, 2014. Although the new legislation no longer has a provision that says that a marriage revokes previous wills, the Wills Act still applies to revoke prior wills on marriage if the marriage took place before March 31, 2014 (unless the will was made in contemplation of the marriage).

The court also found that Ms. Walker did not have the mental capacity to make her will on July 2, 2009, or a previous will in February, 2007, but I will focus this post on her capacity to marry.

Madam Justice Griffin sets out in some detail the evidence of family, friends and others as well as expert evidence concerning Ms. Walker’s mental functioning. This is a sad story of Ms. Walker’s decline over several years to the point where she could no longer use eating utensils properly, didn’t appear to know how to use stairs, she had difficulty using a telephone and her grooming declined significantly. She became paranoid that family were trying to take her money, when there was no basis for such a suspicion.

The law on capacity to marry is set out in the decision as follows:

[43]         The starting point for understanding the test for capacity to marry is the notion that a marriage is a contract. Similar to entering into any other type of contract, the contracting parties must possess the requisite legal capacity to enter the contract.

[44]         That said, the common law has developed a low threshold of capacity necessary for the formation of a marriage contract. The capacity to marry is a lower threshold than the capacity to manage one’s own affairs, make a will, or instruct counsel: see Wolfman-Stotland v. Stotland, 2011 BCCA 175 at para. 26, leave to appeal ref’d [2011] S.C.C.A. No 242 (S.C.C.), [Wolfman-Stotland]; and A.B. v. C.D., 2009 BCCA 200 at para. 27 [A.B.].

[45]         In Hart v. Cooper, [1994] B.C.J. No. 159 (B.C.S.C.) at para. 30, Lowry J. described the prerequisites for marriage in the following manner, “a person is mentally capable of entering into a marriage contract only if he or she has the capacity to understand the nature of the contract and the duties and responsibilities it creates”.

[46]         In A.B., the Court of Appeal addressed the issue of marriage capacity. The Court accepted the characterization of capacity to enter a marriage as being equivalent to the capacity to form an intention to live separate and apart, which was restated in Wolfman-Stotland. In Wolfman-Stotland, the Court remarked that the capacity to marry requires “the lowest level of understanding” in the hierarchy of legal capacities.

[47]         In Wolfman-Stotland, the Court referred to Calvert (Litigation Guardian of) v. Calvert (1997), 32 O.R. (3d) 281 (Ont. Gen. Div.), aff’d (1998), 37 O.R. (3d) 221 (Ont. C.A.), leave to appeal ref’d [1998] S.C.C.A. No. 161 (S.C.C.), which contains a useful discussion of the hierarchy of capacities:

[54] Separation is the simplest act, requiring the lowest level of understanding. A person has to know with whom he or she does or does not want to live. Divorce, while still simple, requires a bit more understanding. It requires the desire to remain separate and to be no longer married to one’s spouse. It is the undoing of the contract of marriage.

[55] The contract of marriage has been described as the essence of simplicity, not requiring a high degree of intelligence to comprehend: Park, supra, at p. 1427. If marriage is simple, divorce must be equally simple. The American courts have recognized that the mental capacity required for divorce is the same as required for entering into marriage: re: Kutchins, 136 A. 3d 45 (Ill., 1985).

[56] There is a distinction between the decisions a person makes regarding personal matters such as where or with whom to live and decisions regarding financial matters. Financial matters require a higher level of understanding. The capacity to instruct counsel involves the ability to understand financial and legal issues. This puts it significantly higher on the competency hierarchy. It has been said that the highest level of capacity is that required to make a will: Park, supra, at p. 1426. …

[48]         The authorities suggest that the capacity to marry must involve some understanding of with whom a person wants to live and some understanding that it will have an effect on one’s future in that it will be an exclusive mutually supportive relationship until death or divorce.

[49]         I leave open the possibility that in some cases a marriage can take place without an immediate plan to live together, such as in a situation where two people work in different cities. But there is no suggestion in this case that the alleged Marriage was a long-distance one. Here Mr. Poulain claimed that he and Ms. Walker were living together.

[50]         A lack of capacity to marry will render a marriage void ab initio: Ross-Scottv. Potvin, 2014 BCSC 435 at para. 39.

Madam Justice Griffin, in finding that Ms. Walker did not have capacity at the time of the marriage ceremony, considered the types of factors a person entering into a marriage should be able to understand. She wrote:

[343]     As of the date of the marriage ceremony, Ms. Walker was at a stage of her illness where she was highly vulnerable to others. She had no insight or understanding that she was impaired, did not recognize her reliance on Ms. Devore-Thompson and Ms. Devore-Thompson’s assistance, and was not capable of weighing the implications of marriage to Mr. Poulain even at the emotional level.

[344]     The fact that Ms. Walker told some people that she had married Floyd Poulain does not overcome all of the evidence as to her disordered thinking. This does not mean she had any understanding of what it means to be married.

[345]     It is also clear that Ms. Walker’s mental capacity had diminished to such an extent that by 2010 she could not have formed an intention to live with Mr. Poulain, or to form a lifetime bond. She did not understand, at that stage, what it meant to live together with another person, nor could she understand the concept of a lifetime bond.

[346]     Ms. Walker did not have a grip on the reality of her own existence and so could not grip the reality of a future lifetime with another person through marriage.

[347]     I find on the whole of the evidence, given her state of dementia, Ms. Walker could not know even the most basic meaning of marriage or understand any of its implications at the time of the Marriage including: who she was marrying in the sense of what kind of person he was; what their emotional attachment was; where they would be living and whether he would be living with her; and fundamentally, how marriage would affect her life on a day to day basis and in future.

[348]     I conclude that Ms. Walker did not have the capacity to enter the Marriage.

[349]     Since I have concluded that Ms. Walker did not have the capacity to enter the Marriage, the Marriage is void ab initio. Because the Marriage is void ab initio, s. 15 of the Wills Act does not apply and, therefore, the Marriage does not revoke the prior wills.

In British Columbia, a person who has lived in a marriage-like relationship with another for at least two years immediately before the other’s death has the same rights to property if the other dies without a will, and the same rights to apply to vary a will. There are quite a few cases dealing with whether there was in fact a marriage-like relationship, but I am not aware of any where a marriage-like relationship has been challenged on the basis that a person did not have the mental capacity to enter into a marriage-like relationship. It would be interesting to see how the factors the courts consider in determining whether a person has capacity to marry might be applied to a marriage-like relationship. One difference is that a legal marriage takes place at a certain time, while a marriage-like relationship develops over time. What if when two people begin cohabiting in a marriage-like relationship they both have capacity to marry, but one declines to the point where she would not have capacity to marry before they have been in a marriage-like relationship for two years? 

Parker v. Felgate

My friend and colleague John Poyser sent these photographs of Upper Gloucester Place, Dorset Square, to me.

This building was the home of Georgina Annie Stephens Compton, who died on September 2, 1882.

Mary Ann Flack, signed Georgina Compton’s will on her behalf, three days earlier on August 29, 1882. Georgina Compton had become ill with Bright’s disease earlier that year. She had met with her solicitor, Mr. Parker, on various occasions to discuss making her will. She instructed him that she wished to leave 500 pounds to her father, and 250 pounds to her brother, with the residue of her estate Hospital for Sick Children in Great Ormond Street.

While Mr. Parker was away on holidays, Georgina Compton’s condition took a turn for the worse. She was in and out of consciousness. Dr. Hickman said that she "was capable of being roused and could speak, and did talk about her will." He also said that he "could hardly say she was perfectly rational."

Mr. Parker’s partner, Mr. Ponsford, drafted Georgina Compton’s will on the basis of Mr. Parker’s notes. The circumstances of the signing of the will were as follows:

On the 29^th Dr. Tanner was called in that a fresh opinion might be taken the time when it was proposed to have the will executed. He stated that she opened her eyes, put out her hand, and smiled; that he consulted Dr. Palmer, rustled the will in front of her face, and thus roused her; that he said “This is your will. Do you wish this lady (Mrs. Flack) to sign it?” And that she replied, “Yes” Dr. Tanner added, “I have no doubt about it;” and he further added, “As far as I could judge, she understood what she did.”

The issue to be decided by a jury in Parker v. Felgate (1883), L.R. 8 P. D. 171 (Eng P.D.A.), was whether Georgina Compton was competent to make her will. There was no question that Georgina Compton had capacity to make a will when she gave her instructions to Mr. Parker. In light of her capacity when she gave instructions, what level of functioning was required for her to make a valid will at the time she answered "yes" when asked if she wished Mrs. Flack to sign on her behalf?

Sir J. Hannen, in his charge to the jury, set out the law on this point as follows:

This being the material evidence, the law applicable to the case is this: If a person has given instructions to a solicitor to make a will, and the solicitor prepares it in accordance with those instructions, all that is necessary to make it a goodwill, if executed by the testator, is that he should be able to think thus far, “I gave my solicitor instructions to prepare a will making a certain disposition of my property. I have no doubt that he has given effect to my intention, and I accept the document which is put before me as carrying it out.”

Further in his charge, Sir J Hannen said:

A person might no longer have capacity to go over the whole transaction, and take up the threat of business from beginning to the end, and think it all over again, but if he is able to say to himself, “I have settled that business with my solicitor. I rely upon his having embodied it in proper words, and I accept the paper which is put before me as embodying it;” it is not, of course, necessary that he should use those words, but if he is capable of that train of thought in my judgement that is sufficient.

The jury found that although Georgina Compton did not remember and understand the instruction she gave to Mr. Parker, nor could she have understood each clause of the will if it had been put to her, she was “capable of understanding, and did understand, that she was engaged in executing the will for which he had given instructions to Mr. Parker.”

Accordingly, the will was valid.

Mr. Poyser writes about Parker v. Felgate and the law of capacity to make a will in depth in his textbook Capacity and Undue Influence, published by Carswell in 2014.

I Will be Speaking at the Legal Education Society of Alberta Capacity and Influence Course

I have the honour of being included in the faculty for a course on Capacity and Influence, which will be held in both Edmonton and Calgary, presented by the Legal Education Society of Alberta.

The course is chaired by John Poyser, author of the text Capacity and Undue Influence, Carswell, 2014. The other speakers are:

Dr. Arlin Pachet, Ph.D, R. Psych, ABPP-CN
Pachet Assessment
and Rehabilitation Services
Calgary, Alberta

Shelley E. Waite, TEP
McLeod Law LLP
Calgary, Alberta

Helen R. Ward
Duncan Craig LLP
Edmonton, Alberta

Kimberly A. Whaley, CS, TEP, LLM
WEL Partners
Toronto, Ontario

The topics cover undue influence and capacity in respect of both lifetime transfers and wills, approached from both a litigation perspective, and a planning perspective. I will be speaking the planning side of  undue influence including steps a lawyer may take to recognize risk factors for undue influence, what steps a lawyer may take if it appears likely that his or her client is being unduly influenced, and how the file should be documented in order to provide evidence in case a transaction or will that the lawyer has been involved with is later challenged as having been obtained by undue influence.

The dates and places of the course are as follows:

EDMONTON
March 1, 2017
Chateau Louis Hotel
& Conference Centre
11727 Kingsway NW

CALGARY
March 8, 2017
Glenmore Inn
& Convention Centre
2720 Glenmore Trail SE
9:00 AM–4:30 PM

Registration information is available in the brochure.

On March 15, 2017, I will also be speaking on my topic at the Canadian Bar Association, Okanagan Wills and Trusts section meeting.

Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers

Lawyers are required to make assessments of their clients’ capacity to make legal decisions, and sign legal documents. This is especially true in a wills and estates practice, which will often include incapacity planning, such as making enduring powers of attorney, and applications to court for guardianship of adults.

In my experience, assessing capacity is one of the most difficult challenges estate-planning lawyers face. Few of us lawyers have any training in medicine, psychiatry or psychology. We may often fail to identify significant cognitive or other disability, or fail to understand the implications of signs of diminished capacity. On the other hand, lawyers can’t delegate the decision about whether or how to proceed with a legal transaction to those who do have clinical training and experience. The criteria for capacity are legal, and few physicians or psychologists have legal training. Furthermore, in the end, it is the lawyer who has to exercise his or her judgment. For example, the lawyer must decide whether to draft and witness the will if the lawyer has questions about the client’s capacity.

I have just finished reading Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers, published by the American Bar Association Commission on Law and Aging and the American Psychological Association in 2005. It is a useful resource for Canadian estate-planning lawyers as well as American. The Handbook is available online here.

The Handbook offers practical guidance for lawyers faced with questions about clients’ capacity. The Handbook considers the following questions:

1.   What are legal standards of diminished capacity?

2.   What are clinical models of capacity?

3.   What signs of diminished capacity should a lawyer be observing?

4.   What mitigating factors should a lawyer take into account?

5.   What legal elements should a lawyer consider?

6.   What factors from ethical rules should lawyer consider?

7.   How might a lawyer categorize judgments about client capacity?

8.   Should a lawyer use formal clinical assessment instruments?

9.   What techniques can lawyers use to enhance client capacity?

10. What are the pros and cons of seeking an opinion of a clinician?

11. What if the client’s ability to consent to a referral is unclear?

12. What are the benefits for the lawyer of a private consultation with a clinician?

13. How can a lawyer identify an appropriate clinician to make a capacity assessment?

14. What information should a lawyer provide to a clinician in making a referral?

15. What information should the lawyer look for in an assessment report?

16. How does a clinical capacity evaluation relate to the lawyer’s judgment of capacity?

The appendices include a capacity assessment algorithm for lawyers, two case studies, a guide to psychological and neuropsychological instruments, and an overview of dementia.

The American Bar Association Commission on Law and Aging and the American Psychological Association has also published a companion paper (which I have not read) entitled, Assessment of Older Adults with DiminishedCapacity: A Handbook for Psychologist.

John Poyser’s Capacity and Undue Influence

John E. S. Poyser has written a remarkable textbook, Capacity and Undue Influence, published this year by Thomas Reuters Canada Limited. The book is about gratuitous wealth transfers including by will, beneficiary designations, through jointures, inter vivos trusts and gifts directly to beneficiaries. Mr. Poyser does not deal with (or purport to deal with) capacity for other legal transactions, such as contracts, except peripherally to assist in explaining capacity to make testamentary and inter vivos gifts.

If, by focusing on gratuitous wealth transfers, the topic is narrower than the book’s title might imply, it is also much richer. In addition to discussing the criteria for capacity to make a will, Mr. Poyser also discusses the requirements of knowledge of approval of the contents of a will, including the doctrine of righteousness, in considerable depth. Estate litigators will be familiar with challenges to inter vivos gifts on the basis of undue influence, including claims founded on relationships of dependence or potential dominance, but how about challenges based on unconscionable bargains and unconscionable procurement? Although unconscionable bargains may be more closely associated with contracts, Mr. Poyser explains the principles and their applicability to gratuitous gifts. Unconscionable procurement? I had never heard of it before. Although perhaps the doctrine is a bit dusty, Mr. Poyser makes a good case that unconscionable procurement is applicable in modern times.

Estate disputes are chock-full of presumptions: of capacity, of knowledge and approval, of undue influence. What are they really, and what are their implications? Mr. Poyser offers common-sense explanations that they are usually evidentiary in nature, that they do not change the legal burden, and that they are indeed founded on common sense (I think the expression “common sense” appears more often in the book than any other). To paraphrase, the presumption that a person has capacity to make a will reflects that most people do in fact have that capacity. It is only if there is other evidence that comes to light of suspicious circumstances, such as that the will maker was diagnosed with dementia, that the court needs to look further.

Mr. Poyser articulates a coherent analysis of capacity to make gratuitous wealth transfers, whether by will, beneficiary designation, or inter vivos transfer. In its broadest the test is as set out in Ball v. Mannin, (1829) 4 E.R. 1241, that a person must be “ capable of understanding what he did by executing the deed in question when its general purport was fully explain to him.”

The courts have developed more detailed criteria for making a will, following the famous words of Chief Justice Cockburn, in Banks v. Goodfellow, (1870), L.R. 5 Q.B. 549 at 565:  

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties — that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not been made.

Mr. Poyser neatly dissects the criteria set out in the above-quoted passage. He also makes the case that the level of capacity to make a will or codicil may vary depending on the specific document. A very complex will may require a higher level of functioning than a simple one. Making a codicil that only changes the executors, or that makes a small gift relative to the will-maker’s wealth, might not require that the will maker fully meet the criteria in Banks v. Goodfellow.

In reading the cases, I have always found it difficult to find a clear articulation of the criteria for capacity to make inter vivos gifts. Some courts have said that the level of capacity is lower than the capacity to make a will, which I have never found very satisfactory.

Mr. Poyser’s makes an overwhelming case that the requisite capacity is not related to whether a gift is inter vivos or by will, but rather capacity is transaction specific. Someone who wishes to make a gift of all or most of his assets during his lifetime, effectively depriving the beneficiaries of his will of his estate, needs to meet the full Banks v. Goodfellow criteria. Indeed, the donor would also have to appreciate the effect of giving away his property on his own future financial security to have capacity to make the gift. On the other hand, someone making a trifling gift need only have a limited capacity to understand that she was giving something of small value to the beneficiary. Because of the small impact on the donor and her estate plan, she would not have to have the same level of comprehension as making a will disposing of everything. Intermediate gifts require intermediate levels of mental functioning.

In light of the recent change in legislation in British Columbia affecting challenges to wills in which undue influence is alleged, by creating a presumption of undue influence if it is shown that the person alleged to have exercised undue influence was in a position where the potential for dependence or domination of the will maker was present, I was particularly interested in Mr. Poyser’s discussion of the difference between undue influence in will challenges and undue influence in respect of inter vivos gifts.

Mr. Poyser considers inter vivos undue influence as a separate doctrine from testamentary undue influence. The presumption, which was recently changed in British Columbia, is but one of the differences between challenging a will and challenging an inter vivos gift on the basis of undue influence.

To successfully challenge a will, or gift in a will, on the basis of undue influence, the attacker must prove on a balance of probabilities that someone exercised undue influence over the will maker, the result of which was that the will maker made a will or gift in the will against his or her own true wishes. Undue influence in this context is a form of coercion. It may be proven by circumstantial evidence, but actual undue influence must be shown. If proven, the will or gift in the will is void. 

Mr. Poyser traces the development of inter vivos undue influence, which, in contrast, to undue influence in the wills context, flows out of equity. Where the person who has received a significant inter vivos gift was in a relationship with the donor where he or she was in a position to dominate the donor, then a presumption of undue influence arises. Furthermore, where such a relationship is present, the type of pressure required to set aside the gift on the basis of undue influence may be milder, particularly if the donor is vulnerable.  The underlying premise of inter vivos undue influence is to protect donors from victimization. If the person attacking the transfer succeeds on the basis of equitable undue influence, the transfer is voidable, rather than void, and the person benefiting may raise equitable defences to the claim such as those based on unreasonable delay in pursing a claim.

This may have implications for British Columbia’s new provision in section 52 of the Wills, Estates, and Succession Act, mentioned above, which imports the burden of proof in will challenges from inter vivos undue influence where there is a potential for dependence or domination. However, section 52 does not expressly import the full equitable doctrine. Apart from the burden on the person found to be in a special relationship to show that he or she did not exercise undue influence over the will maker, what relevance will the principles of inter vivos undue influence have in British Columbia to will challenges based on undue influence? Section 52 just came into effect this spring, but perhaps there will be cases considering section 52 to provide fodder for Mr. Poyser’s next edition.

Mr. Poyser thoroughly canvasses the Canadian cases on wealth transfers, including leading appellate and illustrative trial decisions. He also has included analysis of leading English cases, including fairly recent decisions, as well as some leading cases from other common law jurisdictions, particularly Australia and New Zealand. For estate litigation lawyers, the book provides an easy source for broadening research beyond their own jurisdictions.

For solicitors, I particularly recommend Chapters 12 and 13, “Controlling for Capacity During Planning,” and “Controlling for Other Types of Challenges.”  These chapters offer analysis of a solicitor’s role when capacity may be in doubt or there are concerns about possible undue influence or other challenges. Mr. Poyser offers some interesting ideas about what a solicitor ought to do when there may be doubts about capacity. Of course, conduct a thorough interview, without potential beneficiaries present, and make good notes. But Mr. Poyser’s suggestions go well beyond that. He has some suggested questions. Consider a separate retainer to assess capacity. He provides some sample letters to physicians, some of which are quite extensive, requesting opinions on capacity. 

Mr. Poyser has an insightful and provocative discussion about whether the solicitor should go ahead with a will for a client whose capacity is in a grey area, and what further steps the solicitor might take to identify any concerns about capacity.

Great legal textbooks both reflect the law and affect its development. Capacity and Undue Influence reflects the law well. In time it seems quite likely that it will, as my other favourite legal textbook, Waters’ Law of Trusts in Canada (now in its fourth edition) has done, affect the future development of the law as well.

John Poyser is both a partner in the Winnipeg law firm Tradition Law LLP and a principal of the Wealth and Estate Law Group in Calgary. He is also a co-author with Larry H. Frostiak and Grace Chow of Taxation of Trusts and Estates: APractitioner's Guide 2014, Carswell.