British Columbia Law Institute: Undue Influence Recognition

The British Columbia Law Institute has recently publish Undue Influence Recognition and Prevention: A Guide for Legal Practitioners together with A Reference Aid. 

In 2011, the BCLI published Recommended Practices for Wills Practitioners Relating to Potential Undue Influence: A Guide in contemplation of changes to our succession law that would in some cases make it easier to challenge wills on the grounds of undue influence. The purpose was to assist lawyers and notaries in recognizing indicia of undue influence and forestalling the exercise of undue influence in respect of wills.

This new publication is an important update, and expands the purview of the Guide in two ways. First, it considers the risks of undue influence when wills and other documents may now be signed electronically or in the virtual presence of the witnesses. Secondly, the Guide is broader than will-making and considers undue influence relative to other planning such as powers of attorney and gifts made during one's lifetime.

As with the earlier guide, the new publication was put together by a muli-disiplinary committee comprising of  people with legal, medical, psychiatric, social work and psychological backgrounds. Most of the committee changed from the earlier Guide, with the important exception of BCLI lawyer Greg Blue. 

I encourage all lawyers and notaries public who practice in the area of estate planning to read the Guide and to use the Reference Aid. 

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 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. 

Undue Influence by Inducing False Beliefs: Re: Patterson Estate

Undue influence usually implies coercion. Someone may challenge a will or a benefit in a will on the basis that another procured the will or benefit by applying pressure to the will maker. The pressure may be overt threats of violence, or perhaps subtler forms of pressure such as an implied threat by the will maker’s caregiver to withdraw care.

A recent decision of the Nova Scotia Supreme Court, Re: Patterson Estate, 2017 NSSC 221, identifies as undue influence a child procuring a will by inducing her mother to believe that her other children did not care about her.

Joan Patterson had four children, Reed Patterson, Randall Patterson, Darlene Marriott, and Marlene Patterson. She died on June 13, 2016, the age of 70, and her husband had died four months before. Marlene Patterson had been estranged from both of her parents for about 20 years, but reconciled in 2012. On March 4, 2016, Joan Patterson moved from her home into Marlene Patterson’s home. On May 13, 2016, she made a new will, leaving her estate to Marlene Patterson, disinheriting her other three children.

Mr. Justice Wright found that Joan Patterson’s will was properly signed and witnessed in accordance with Nova Scotia law. She knew and approved of the contents of the will, and she had testamentary capacity.

The decision turned on whether Marlene Patterson procured the will by fraudulently inducing her to disinherit her other children. Mr. Justice Wright quoted from John Poyser’s book Capacity and Undue Influence (which I have reviewed here) in setting out the legal issue:

[17] In pressing their grounds of fraud as a subspecies of undue influence, the applicants rely on the following passage from the text book Capacity and Undue Influence (Carswell 2014) authored by John E.S. Poyser (at pg. 318):

Testamentary undue influence is typically thought of in terms of coercion. There is good reason for that. Dozens of cases have stated that conduct must amount to coercion if it is to amount to testamentary undue influence. Yet there are also abundant comments in the same cases and others that open the door to characterize testamentary fraud as a second type of conduct that can amount to undue influence. Coercion forces a person to do something against his or her will. Fraud operates differently. Testamentary fraud is an effort to fool a person into believing a false state of affairs that is then instrumental in causing that person to make a testamentary gift that otherwise would not have been made. As indicated earlier, persuasion is permitted, but persuasion is not permitted when it is mounted on a foundation of deliberate lies. Testamentary undue influence by coercion is difficult to establish. It is often pled but rarely proved as the facts rarely sustain it. Undue influence by fraud will be more easily sustained. Isolation, falsehood, and ingratiation are a common recipe employed by predatory family and peers in a bid to subvert a vulnerable person’s property at death.

[18] In the pages that follow, the author traces the development of fraud as a subspecies of undue influence in the case law. He refers to the decisions in Anderson v. Walkey, 1961 CarswellOnt 91 and in Timlick v. Crawford, 1965 CarswellBC 86 as instances where Canadian courts have invalidated a Will on the grounds of undue influence, not as the result of coercion, but as the result of manipulation and deceit.

[19] It is also noted (at pg. 324) that the party alleging undue influence has to prove not only the impugned conduct but that it in fact caused the Will-maker to sign the Will.

Marlene Patterson’s sister and brothers alleged that she had manipulated her mother into making the will isolating them from their mother and making false statements about them. Darlene Marriott testified that Marlene Patterson had asked her to assist her in persuading their mother’s disinherit their brothers. It was also evident that Marlene Patterson assisted her mother and making notes for her meeting with the lawyer who drew the will.

Mr. Justice Wright found that Marlene Patterson did in fact induce her mother into making the will she did by manipulation.

[87] It is not only from these suspicious circumstances but rather from the evidence as a whole, including Marlene’s lack of credibility, that the Court is prepared to draw the inference that Joan was induced to form the false beliefs she held about her other childrens’ lack of caring, through manipulation and deceit on the part of Marlene under whose control she remained after the move. Joan then acted on those false beliefs in changing her Will as she did. I therefore find that the actions of Marlene, on a balance of probabilities, crossed the line into the sphere of undue influence. As noted earlier, while persuasion is permitted without legal consequence, persuasion of a testator is not permitted when it is mounted on a foundation of untruths induced by the proponent of a Will.

In the result, the May 13, 2016 will is invalid.

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.

Becker v. Becker Case Comment -- by Kimberly Wallis

[The following guest post was written by Kimberly Wallis also of Sabey Rule LLP.]

In the recent British Columbia Supreme Court case of Becker v Becker, 2016 BCSC 487, the executor of the will of Ann Andrews sought to prove her will in solemn form after its validity was formally challenged by those who would benefit under a previous will. 

There were a number of red flags raised surrounding the circumstances of the execution of Ms. Andrews last will and testament.  These were:

·         She made not one but two new wills in the last six weeks of her life;

·         She had been diagnosed with an inoperable brain tumor at the time;

·         Her long time companion gave instructions directly to her lawyer, indicating that the first new will had errors in it that had to be corrected;

·         The ultimate residuary beneficiaries departed from an estate plan that Ms. Andrews had in place for at least a decade.

Despite these red flags, Mr. Justice Smith found that the last will executed by Ms. Andrews (“the Final Will”)  was valid and the will would thus govern the ultimate distribution of her estate.

Ms. Andrews emigrated from the UK to Canada in 1974, with her husband Mr. Andrews, who died a few years later.  Ms. Andrews met and lived with Hendrik Becker for 27 years prior to her death, but neither relationship led to children and she died without issue.  Mr. Becker, however, had three sons from a previous relationship.

Accordingly, Ms. Andrews was survived by her common-law husband, his children and Mr. Becker’s four grandchildren who were Ms. Andrews step-grandchildren (‘the grandchildren”) in Canada.

Ms. Andrews was also survived by an assortment of six nieces and godchildren in England (“the godchildren”).

Under earlier wills, the residue of Ms. Andrews estate, (after a life interest for Hendrick in her West Vancouver condominium) would have been divided among the godchildren, whereas under the final will, the residue would be divided ten ways among the grandchildren as well as the godchildren.

After being admitted to Lions Gate hospital on December 28^th, 2011, Ms. Andrews was told of the inoperable brain tumor and she remained in the hospital in palliative care until her death some six weeks later.  On her behalf, Hendrick contacted the law firm that had drawn up her previous will, and shortly thereafter a solicitor from that firm attended upon Ms. Andrews.

Ms. Andrews gave instructions on January 10^th and executed a new will on January 13^th.  Like her old will, the first new will provided that the godchildren would be the residuary beneficiaries.

However, Mr. Becker contacted the solicitor, one Ms. Rockandel, on January 12^th, indicating that he believed his own grandchildren were the residuary beneficiaries.  On the 16^th of January, he told her that his grandchildren were to be included, along with the godchildren as residuary beneficiaries.  On the 17^th Ms. Rockandel took instructions from Ms. Andrews to that effect, and on the 18^th Ms. Andrews executed the Final Will, which did indeed provide for ten way distribution of the residue and included both the godchildren and the grandchildren.

In coming to the conclusion that Ms. Andrews had mental capacity to execute her will and further that Mr. Becker did not exert undue influence upon her, Mr. Justice Smith looked at the following factors:

WARMTH AND CLOSENESS OF RELATIONSHIP WITH BENEFICIARIES

·         Although close to her godchildren, the court also considered that Ms. Andrews had known the grandchildren their whole lives, and as such, that while not blood relatives they were natural objects of her bounty. 

·         Although the godchildren attempted to portray Ms. Andrew’s relationship with Mr. Becker as one of convenience, the fact remains that they spent three decades together and were together at her death.

SOLICITOR’S INSTRUCTIONS

·         The solicitor spent a significant amount of time taking instructions, although Mr. Hendrick was there for the first two thirds on January 10^th.

·         Ms. Rockandel was quite properly “keenly aware” when Mr. Hendrick told her to include his grandchildren as residuary beneficiaries that she had to hear this from Ms. Andrews directly.

·         Ms. Rockandel was blunt and told Ms. Andrews flatly that she did not have to change her will; Ms. Andrews told her she had seen the grandchildren grow up and did not wish to leave them out. 

MEDICAL EVIDENCE

·         Ms. Andrew’s doctor testified she was “bright and alert” on the 13^th, the day she executed the first new will.  While he testified she was emotional about her diagnosis, the judge emphasizes that one should not confuse the disturbed emotions that are to be expected of one who learns “that death is imminent, with the question of mental capacity” [66].

With respect to the involvement of Mr. Becker in the creation of Ms. Andrews estate plan, Mr. Justice Smith cited Madam Justice Dardi in Chang Estate vChang, 2013 BCSC 976, for the proposition that merely making one’s wishes known does not amount to undue influence:

…The undue influence must constitute coercion which could not be resisted by the will-maker and which destroyed his or her free agency.  It is well-established on the authorities that if the will-maker remains able to act freely, the exercise of significant advice or persuasion on the will-maker or an attempt to appeal to the will-maker to gratify the wishes of another, will not amount to undue influence….[35]

Historically, in British Columbia, it has fallen on a person alleging undue influence to prove it.  However, one of the changes brought in by the new Wills, Estates and Successions Act ("WESA") is a switch to this burden of proof – going forward, for those wills adjudicated under WESA, the burden of proof will fall upon the person who is in a position of trust and who benefits in the will to prove that they did NOT unduly influence the will-maker.

Interestingly, Mr. Justice Smith states that while in this case the will-maker died before that provision became law, even if the burden of proof had rested upon Mr. Becker to refute, the evidence would have fallen short of establishing a case of undue influence.

With regard to Ms. Rockandel’s actions, the judge stated that while it is of some concern that Hendrick was present for part of the January 10^th meeting, he was not present on the 13^th, 17^th, or 18^th of January.  Further, Ms. Rockandel took the time to talk with Ms. Andrews at length and comfort herself that Ms. Andrews was acting freely, albeit possibly with some coaxing from her husband of 30 years.  As Mr. Justice Smith states, “Nothing in the case law prevents suggestions or persuasion by a spouse, provided that there is no coercion and the testator remains free to make his or her own decision” [70].

Also important is the fact that the Becker grandchildren had been part of Ms. Andrew’s life for decades and she had watched them grow up.  Mr. Justice Smith contrasts this with those wills made at the end of a life to benefit someone “who had only recently come into the testator’s life” [60].  Presumably the courts may regard such a change with more suspicion.

This case, like many before, establishes that very solid evidence must be available in order to succeed in a claim of undue influence in the courts of British Columbia, and that this will possibly remain the case even with the new reversal of the burden of proof.

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.

British Columbia Law Institute’s Recommended Practices for Wills Practitioners Relating to Potential Undue Influence: A Guide

The British Columbia Law Institute has published “Recommended Practices for Wills Practitioners Relating to Potential Undue Influence: A Guide.”

The impetus for this Guide is a change to the legislation in British Columbia that will come into effect when the new Wills, Estates and Succession Act is brought into force. Section 52 of the new Act will shift the burden of proof when a claim is made that a will has been procured by undue influence in some circumstances. Under the common law in British Columbia, the burden of proof was on the person alleging that the will was procured by undue influence. When the new legislation comes into effect, if the challenger can establish that the person whom is alleged to have procured the will or a provision in the will by undue influence was in “a position where the potential for dependence or domination of the will-maker was present,” then the onus will be on the person defending the will from the allegation of undue influence to establish “that the person in the position where the potential for dependence or domination of the will-maker was present did not exercise undue influence over the will-maker with respect to the will or the provision of it that is challenged.”

As set out in the Executive Summary, the aim of the Guide is to:

• raise awareness of undue influence as a potential cause of estate litigation and invalidity of a will; 

• assist will drafters to recognize red flags of undue influence;

• enable will drafters to interact tactfully but effectively with will-makers to elicit information necessary for them to properly assess the will-makers’ individual situations and ability to act independently; and

• insulate wills they prepare against successful challenges based on undue influence.

The Guide is divided into five chapters. Chapter I sets out the background including a discussion of practitioners’ responsibilities of vigilance in respect of undue influence. Chapter II contains a summary of the law of undue influence, including leading authorities in British Columbia as well as other jurisdictions. Chapter III has a discussion of how undue influence operates in fact, and includes models developed by psychologists and other researchers to describe the dynamics of undue influence. Chapter III also sets out three undue influence scenarios as illustrations of the kinds of fact patterns practitioners may encounter. Chapter IV outlines various “red flags” to assist practitioners in identifying when further inquiry into the potential for undue influence may be warranted. Chapter V provides recommended practices in screening for undue influence.

Chapter IV of the Guide identifies an extensive list of “red flags,” which are subdivided into categories relating to:

“Someone in whom the will-maker invests significant trust and confidence is – or is connected to – a beneficiary”

“Physical, psychological and behavioural characteristics of the will-maker”

“Isolation resulting in dependence on another person to meet physical, emotional, financial, and other needs”

“Circumstances relating to the making of the will and the terms of the will”

“Characteristics of influencer in testator’s family or circle of acquaintances”

“One’s ‘gut feeling’ that undue influence is going on.”

The authors of the Guide indicate that a single “red flag,” may not be significant. The likelihood of undue influence increases with the number of risk factors.

Chapter V sets out the basic rule that the will-maker should be interviewed alone, without any interested parties present, and explanations that a practitioner may give to a person who accompanies the will-maker to the appointment on why the practitioner needs to meet alone with the will-maker. This is followed by a discussion of open-ended questions the practitioner may ask if “red flags” are present, as well as some specific questions probing the relationship between the will-maker and others who may be in a position where there is the potential for dependence or dominance, and probing whether the will-maker may be a victim in other contexts. The report contains a discussion of obtaining information from third parties, including the will-maker’s physician, and the types of notes and records the practitioner should make and keep irrespective of whether the practitioner drafts a will, or declines to do so.

The Guide concludes that if the index of suspicion of undue influence remains high after the practitioner has done a reasonable investigation, the practitioner should decline to draft the will.

The Guide was prepared by a multi-disciplinary project committee comprised of professionals from the fields of medicine and social work, as well as notaries public and lawyers. The project committee was chaired by D. Peter Ramsay Q.C. and the project manager was Greg Blue Q.C.

I had the privilege of being a member of the committee.

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.

Hearsay and Estate Litigation

If I testify in court that Jill told me that Jack fell down and broke his crown in order to prove that Jack did, in fact, fall down and broke his crown, then my evidence is hearsay. Testimony about an out of court statement by someone else to prove the truth of the matter asserted by that other person is hearsay. In British Columbia, hearsay is generally not admissible in court.

But my testimony about what Jill told me about Jack may be admissible in some circumstances. For example, I may be relating what Jill told me, not to prove that Jack fell down and broke his crown, but for the non-hearsay purpose of explaining why I called an ambulance. Or, the court might admit my testimony, even to prove that Jack fell down and broke his crown, if the court finds that the evidence is necessary and it is sufficiently reliable to consider despite the fact that it is hearsay.

In estate litigation, the courts often consider statements about what the deceased person had said. Often the court receives such evidence without objection. On what basis are these statements admitted? Most reported estate litigation judgments in British Columbia do not contain discussions about the admissibility of statements about what the deceased said. Mr. Justice Groves’ decision in the recent case of Modonese v. Delac Estate, 2011 BCSC 82, is an exception.

Regina Delac died on August 20, 2005. She had two children: a son, Marko Delac, and a daughter, Helena Modonese. With the exception of a three-year period beginning in 1989, Marko Delac lived with his mother in her home on Royal Oak Avenue in Burnaby. His wife and, while they were growing up, his children, also lived in the Royal Oak Avenue home.

A couple of years before she died, Regina Delac signed a transfer form, transferring her house into a joint tenancy with her son. She signed the transfer in front of a notary public, whom her son had contacted, while sitting in Marko Delac’s car. Mr. Delac was either in the car or standing nearby when she signed the transfer.

On Regina Delac’s death, title to the house at Royal Oak Avenue passed to her son by right of survivorship. Her only other financially valuable asset was her bank account which held about $35,000.

In her will, Regina Delac said that her estate was to be divided equally between her son and daughter. But if the house passes to Marko Delac by right of survivorship, there would only be $35,000 less estate liabilities to be divided between Regina Delac’s two children.

Helena Modonese challenged the transfer of her mother’s house into a joint tenancy with her brother on the grounds of undue influence and resulting trust.

To establish undue influence, Ms. Modonese relied on a presumption that arises when the nature of the relationship between the person who makes a gratuitous transfer (in this case Regina Delac) and the recipient (her son) is such that the recipient s in a position to dominate the transferor. When the presumption arises, then the recipient must prove that he did not exercise any undue influence, often by showing that the transferor acted spontaneously and received independent advice.

A resulting trust is a presumption that arises when one person gratuitously transfers property to another. The presumption is that the transferor did not make a gift, but rather that the recipient holds the property in trust for the transferor, and after the transferor’s death, for his or her estate. The recipient may rebut the presumption of resulting trust by proving that the transferor intended to make a gift of the property.

Ms. Modonese relied on statements her mother made to her, to daughter Linda Modonese, and to Regina Delac’s sister Helen Uzelak, to challenge the transfer of the house into a joint tenancy with her brother. For example, Regina Delac told her sister that Marko Delac had slapped and choked her in 1989 or 1990. After this incident the police came, and Marko Delac and his family moved out of the home for three years. Mr. Justice Groves summarized the evidence objected as hearsay at paragraphs 73 and 74:

[73] In their written submissions, the parties highlight a number of statements made by the deceased, which the defendant asserts are inadmissible hearsay. The most important of these for the present purposes appear to be:
(a) A statement to Linda Modonese regarding a physical altercation between Marko and Regina;
(b) A statement to Helena and Linda Modonese to the effect that it was Regina’s intention for Helena and Marko to share equally in the estate and more specifically in the house;
(c) A statement to Helen and Helena wherein Regina told them that she was afraid of upsetting Marko;
(d) A statement to Helen and Helena wherein Regina told them that she was afraid of Marko;
(e) Most importantly, Helen’s evidence that prior to her death, Regina told her that she had signed something and that she did not know what she signed. The defendant had told her to sign. She did not like this. She wondered how the defendant’s name was on the municipal tax notice.  

[74] An out of court statement tendered for the truth of its contents is presumptively inadmissible. The hearsay rule has been traditionally regarded as an absolute rule, and acts as an exception to the general principle that all relevant evidence is admissible.

Mr. Justice Groves considered whether the evidence fell within a tradition category of hearsay exceptions. These are certain categories of out-of-court statements that the courts have developed over many years. He then considered whether those statements that do not fall within a traditional category should be admitted under the principled approach of considering the necessity and reliability of the evidence.

Statements Regina Delac made to others that she was afraid of her son, and that she intended for her children to share her house and bank accounts equally, fall within the traditional hearsay exceptions for statements made to prove a person’s intention, mental or emotional state. Mr. Justice Groves wrote at paragraphs 82 through 86:

[82] In Pasko v. Pasko, 2002 BCSC 435, 100 B.C.L.R. (3d) 354 [Pasko], a dispute arose as to the admissibility of statements made by deceased parents to their children in connection with a dispute over whether property had been gifted to certain of the children. Halfyard J. noted at para. 10 that there is an “exception to the hearsay rule which permits evidence to be given of statements made by deceased persons as to their present state of mind (including intention), which statements need not be against interest, provided that the deceased person's state of mind is relevant to an issue in the case.” 

[83] Pursuant to this exception, Mr. Justice Halfyard admitted statements relating to the deceased parents’ intentions to confer a gift, made before and at the time of the two transactions in question.

[84] Following Pasko, if I am wrong in concluding that the statements concerning Regina’s intention to divide her assets equally are not admissible pursuant to s. 5 of the WVA, they ought to be admitted pursuant to this exception to the hearsay rule.

[85] Declarations of mental or emotional state are also an established exception to the rule against hearsay. In R. v. Smith, [1992] 2 S.C.R. 915, 94 D.L.R. (4th) 590 [Smith cited to S.C.R.], the Court held that the state of mind exception to the hearsay rule permits reception of evidence to prove the declarant’s state of mind, but not the truth of the factual assertion which may be contained in it. Statements attributed to a deceased declarant tending to show her state of mind, namely a fear of the defendant, are admissible under this exception to the hearsay rule: R. v. Evans, 2002 BCSC 1674 at para. 35, [2002] B.C.J. No. 3100. 

[86] Accordingly, the statements attributed to Regina concerning her fear of the defendant and her fear of upsetting him are admissible pursuant to this exception.

Mr. Justice Groves admitted Regina Delac’s statements of physical violence, and that she signed something her son told her to sign but did not know what she signed under the principled exception, which he explained as follows:

[88] The statements referred to above under headings “a” and “e” (the physical altercation and the evidence that Regina did not know what Marko had asked her to sign) do not appear to neatly fit under any of the established exceptions to the hearsay rule. I now turn to a consideration of the “principled approach” to hearsay.

(i) Necessity

[89] The principle of necessity does not mean that the hearsay evidence must be necessary in order for a party to prove his or her case. As described by the Court in Smith at 933, the criterion of “necessity” refers to the necessity of the hearsay evidence to prove a fact in issue. To satisfy necessity, the party adducing the evidence must prove that hearsay is the only available means of putting that evidence before the court. Necessity is obviously made out in this case. If Regina’s statements are to be adduced at all, they can only be presented in hearsay form because of her death.

(ii) Reliability

[90] When assessing the reliability of a hearsay statement, the court should adopt a functional approach. Starting from the premise that hearsay statements are presumptively inadmissible, it should then search for indicia of trustworthiness sufficient to displace the general exclusionary rule. In each case, the focus of the inquiry must be on the particular dangers arising from the hearsay nature of the evidence: R. v. Blackman, 2008 SCC 37 at para. 42, [2008] 2 S.C.R. 298. 

[91] This requirement can be satisfied in one of two ways: First, where there is an absence of any real concern about the truth of the statement because of the circumstances in which the statement was made; and second, where the truth and accuracy of the evidence can be sufficiently tested by means other than contemporaneous cross examination: Khelawon at paras. 62-63.

[92] All relevant factors and the context should be considered, including the presence of supporting or contradictory evidence in appropriate cases.

[93] In Anderson v. Anderson, 2010 BCSC 911, 58 E.T.R. (3d) 291 [Anderson], the pivotal issue in the trial was similar to that raised in the present case: Did the deceased gift the defendant the legal and beneficial interest in property absolutely through an inter vivos transfer? Accordingly, the actual intention of the deceased at the time of the transfer was of fundamental importance. On the issue of hearsay pertaining to this issue, Dardi J. held:

57 The reporting of some of the Deceased's statements by interested parties raises a concern regarding the reliability of those statements. This evidence must be carefully scrutinized. Adopting the approach in Stephens v. Austin, 2003 BCSC 341, I have nevertheless determined that the Deceased's statements adduced in evidence meet the threshold requirement of reliability. I conclude that the fact that some of the witnesses relating the statements are interested parties may be adequately dealt with in the determination of the weight to be attributed to any particular statement.

58 In my view, the real issue with some of the evidence and the weight to be accorded to it is whether the statements were in fact made by the Deceased. The Court must first find on a balance of probabilities that the statement was made before it goes on to determine the treatment and weight of such evidence: Creutz v. Winther Estate, 2007 BCSC 1463. In essence, this assessment turns on the reliability of the various witnesses: Halfpenny v. Holien (1997), 37 B.C.L.R. (3d) 186 (S.C.).

[94] Regina had no motive to fabricate the two statements attributed to her. They were not self-serving. The statements at issue were made in the context of everyday intimate conversations between close relatives and friends, which is an accepted indicator of reliability: R. v. Pasqualino, 2008 ONCA 554 at para. 43, 233 C.C.C. (3d) 319. The defendant has pointed to no evidence that would contradict these statements. Accordingly, the statements possess sufficient hallmarks of threshold reliability to justify admission under the principled exception.

[95] As Dardi J. noted in Anderson, the real issue in this case is whether or not Regina actually made the alleged statements at issue to Helen and Linda Modonese, which requires an assessment of these witnesses’ credibility. I find them both to be credible witnesses.

(I think that the statement that Regina Delac did not know what she signed could also have been admitted under the state of mind exception.)

Mr Justice Groves found that the presumption of undue influence applied because there was a potential for domination in the relationship between Marko Delac and Regina Delac. In making that finding, he considered:

1. Regina’s statements that she feared Marko and did not want to upset him;
2. Marko’s physical abuse of his mother;
3. Regina’s statement to Helen that she signed documents at Marko’s direction and that she did not appreciate the nature and consequences of these documents;
4. Marko was granted an enduring power of attorney, which he used over the plaintiff’s assets, granting him control over her affairs and subjecting him to fiduciary obligations (On the fiduciary relationship between an attorney and donor, see Egli v. Egli, 2004 BCSC 529 at paras. 76-79, 28 B.C.L.R. (4th) 375, aff'd 2005 BCCA 627, 48 B.C.L.R. (4th) 90.);
5. Marko’s attempts to prevent his mother from having contact with the plaintiff, isolating her from other family members;
6. Regina’s reliance upon Marko for companionship, help around her home, and in dealing with her general affairs.

Marko Delac did not rebut the presumption of undue influence. The notary did not provide any independent advice to Regina Delac.

Furthermore, the transfer into a joint tenancy was subject to the presumption of resulting trust, and Marko Delac was unable to prove that his mother intended to make a gift of the house to him.

In the result, Helena Modonese was successful, and the house will be divided equally between Regina Delac’s two children under her will.

I should note that although I have focused this post on the hearsay issues, Mr. Justice Groves’ reasons for judgment in Modonese v. Delac Estate also contain thorough analyses of the law of undue influence, the requirements for independent legal advice, and the presumption of undue influence in British Columbia.

Hix v. Ewachniuk

In June, the British Columbia Court of Appeal upheld a trial decision that a former lawyer, Alexander Theodore Ewachniuk exercised undue influence over his mother to procure a will in which she effectively left him her estate to the exclusion of her other children. The case is Hix v. Ewachniuk, 2010 BCCA 317.

Mr. Ewachniuk drew a will for his mother, Sophia Ewachniuk, which she signed in January 2004. In the will she appointed Mr. Ewachniuk as her executor. She gave him and his two sisters each one-third of her estate on condition that Mr. Ewachniuk’s sisters transfer their shares in a family business to Mr. Ewachniuk. Otherwise, each of Mr. Ewachniuk’s sisters would receive $5000, and the rest of the estate would go to Mr. Ewachniuk. The sister’s shares were worth more than what they would receive out of the estate if they gave Mr. Ewachniuk’s their shares.

Mr. Ewachniuk’s sisters, Neeva Gayle Hix and Marry Anne Runnalls sued their brother, alleging that the will is invalid because he procured it through the exercise of undue influence. Sophia Ewachniuk’s previous will had left her estate to be divided equally among her children, without any requirement that her daughters transfer their shares in the family business to their brother.

Claims that a will is procured through undue influence in British Columbia can be difficult to prove. The burden of proof is on the person alleging undue influence (although new legislation will modify this presumption where the person benefiting was in a position to dominate the will maker; see section 52, Wills, Estates and Succession Act, which is not yet in effect as of the date of this post). There are rarely independent witnesses to the exercise of undue influence, and the person exercising such influence is not too likely to admit it.

But in Hix v. Ewachniuk, the court found sufficient circumstantial evidence of undue influence to make a finding that Mr. Ewachniuk did unduly influence his mother. Mr. Justice Lowry in the Court of Appeal wrote at paragraphs 21 and 22:

[21] The new will was drawn by Mr. Ewachniuk. By it, he stood to receive the whole of his mother’s estate while his sisters received virtually none, unless they both agreed to give to him shares worth remarkably more in value than what they would receive from the estate. Ms. Ewachniuk had become vulnerable and depen¬dent on her son for all aspects of her life. He was clearly in a position to influence her, it would certainly have served his interests to do so, and, as the judge found, he has an aggressive and domineering personality. He did not have his mother consult a solicitor as, in the circumstances, he would have known was essential. As between Mr. Ewachniuk and his sisters, only Mr. Ewachniuk knew anything about their mother changing her will. She had never asked her daughters to give up their shares in Regent, but she changed her will to require them to do just that if they were to have any share of her estate, even though there is no reason they could have been expected to exercise the “option” the will affords them in that regard.

[22] Once Mr. Ewachniuk’s evidence is put to one side, it appears to me the judge was entitled to conclude the most probable explanation for Ms. Ewachniuk changing her will to effectively leave to her son the whole of her estate is that he must have unduly influenced her to do so. It is said there is no evidence Mr. Ewachniuk ever attempted to take unfair advantage of his mother before and no evidence that she complained to her daughters or anyone else that she was being made to change her will when she did not want to do so. But then the arrangement between Ms. Ewachniuk and her son was that the change was to be kept a secret. In my view, there is little basis in the evidence on which it could be concluded that an equally plausible explanation for Ms. Ewachniuk executing the new will in January 2004 lay in her having decided, apparently without being prompted by anything happening in the later part of 2003 apart from discussions with her son, to favour him over her daughters so much that she changed her will to benefit him and deprive them to the extent to which the will provides.

Stewart v. McLean

In British Columbia, if you act as an attorney under a power of attorney, you have a fiduciary duty (or duty of loyalty) to the person who appointed you, and on whose behalf you are acting. But the mere fact that someone makes a power of attorney does not in-and-of-itself make the person named as the attorney a fiduciary.

This issue is discussed in a Supreme Court of British Columbia decision released last January. The case is Stewart v. McLean, 2010 BCSC 64.

Mona Stewart sued her brother, Donald McLean, his wife, and his two children. Her mother, Ellen McLean, had transferred her house into a joint tenancy with her brother, Donald McLean, she had forgiven a $50,000 debt he owed to her, and she had given each of Donald McLean, his wife and two children $70,000.

After Ellen McLean’s death on February 4, 2005, Mona Steward claimed that her brother had unduly influenced their mother to benefit his family. She also argued that he and his family held the benefits on a resulting trust for Ellen McLean’s estate.

Mr. Justice Punnett rejected Mona Stewart’s claims, and held that Ellen Stewart had freely made valid gifts to her son and son’s family.

A key factor in this decision was that when Mona Stewart and Donald McLean’s uncle Hilarious West died, he had left most of his wealth to Mona Stewart and her children. Donald McLean unsuccessfully sought to have his uncle’s will declared invalid in Alberta.

Mr. Justice Punnett found that Ellen McLean had conferred substantial benefits on her son and his family in order to balance the benefits Mona Stewart received from her uncle.

In finding that there was no undue influence, Mr. Justice Punnett first considered whether there was a presumption that arose that Donald McLean unduly influenced his mother, by virtue either that Ellen McLean had appointed her son as an attorney under a power of attorney, or that their relationship was one of dominance.

Ellen McLean had made a power of attorney, in which she named her son as her attorney. But she never delivered it to him, and he did not exercise it. Accordingly, Mr. Justice Punnett found that the power of attorney did not give rise to a fiduciary duty in the circumstances.

Mr. Justice Punnett also found that Donald McLean was not in a position to dominate his mother. He wrote:

[87] I find that the deceased, up until her death, was mentally acute, independent, and strong-willed. There is no evidence that she was vulnerable in her relationship with her son nor that he controlled her in any way. She was not dependent on him. While she relied upon him to take her to appointments and stores and to assist around her home, had he been unable to do so, she was capable of making alternate arrangements as evidenced by the various third parties she hired to attend to matters that were beyond her abilities.

[88] Because of the Deceased’s independence and strong-will, Donald would have been unable to exercise any power over his mother. Even if he had some discretion or power, he would not have been able to unilaterally exercise it. I find that the relationship between Donald and his mother was not a fiduciary relationship.

Mr. Justice Punnett further held that if a presumption of undue influence arose, it had been rebutted. Ellen McLean had received independent advice from a lawyer when she transferred her house into a joint tenancy with her son, and from her financial advisor when she made the $70,000 gifts to each of her son, his wife and their children.

Mona Stewart also sought to rely on the presumption of resulting trust. She argued that because her mother made the transfer of title to the house into a joint tenancy, the cash to Donald McLean and his family, and the forgiveness of debt were all made gratuitously, there is a presumption the Donald McLean and his family held the assets they received in trust for his mother’s estate.

Mr. Justice Punnett agreed that the presumption of resulting trust arose, but found that it had been rebutted by the evidence that Ellen McLean had intended to make gifts.

Mr. Justice Punnett found that there was no basis for Mona Stewart’s allegations, in particular her allegations of undue influence. He wrote:

[120] The plaintiff’s pursuit of this lawsuit in light of the facts and her complete lack of evidence appears to have been motivated by greed and retaliation directed towards her brother for opposing probate of their late uncle’s will. It is one thing to pursue litigation based on suspicious conduct grounded in facts, which may or may not be accepted by the trier of fact; it is another to pursue it and provide no substantive evidence in support. Her allegations were unfounded and her motive improper.

The court ordered Mona Stewart to pay the defendant’s costs on a special costs basis. The usually rule in British Columbia lawsuits is that the unsuccessful party must pay costs to the successful party, but these costs generally represent only a portion of the successful party’s legal expenses. The court may award special costs, which approach or equal actual legal expenses, as a way of punishing a party for its conduct in the lawsuit.

Vancouver Sun Article on the Wills, Estates and Succession Act

I was pleased to see that the Vancouver Sun had an article on British Columbia’s new Wills, Estates and Succession Act, which has been passed by the Legislative Assembly, but is not yet in effect. The commercial press doesn’t give a lot of coverage to succession law reform.

I was pleased, I should say, until I actually read the article by Vancouver Sun reporter Ian Mulgrew, entitled “Where there’s a will, there will soon be an end to archaic laws.”

In the Sun article Mr. Mulgrew focused on one aspect of new Act: a change in the burden of proof of undue influence in disputes over wills. It is probably not the change I would pick to write about, if I were writing just one article on British Columbia’s succession law reform. Other changes will affect far more people. But Mr. Mulgrew’s choice of topic is not what bothers me about the article.

I will give you a little background on the change. The common law rule in British Columbia is that if you are challenging a will on the basis that someone exercised undue influence on the maker, that is influence of such a nature that the will does not truly reflect the testator’s intentions, you must prove the undue influence. This follows the usual rule that if you accuse someone of doing something wrong, you must prove it. In practice, it is very difficult to prove that someone procured a will by undue influence.

But the common law has a different burden of proof in cases where a vulnerable person makes gifts during his lifetime to a person who is in a position to dominate that vulnerable person. If you attack the transaction and are able to show that the beneficiary of the assets was in a position to dominate, then the burden is on the beneficiary to prove that the gift was made freely. Usually the beneficiary must then show that the vulnerable person had some independent advice before making the gift.

The Wills, Estates and Succession Act will change the burden of proof of undue influence in wills so that if the person challenging the will can show the beneficiary was in a position to dominate the maker, then the beneficiary will have to show that he or she did not exercise undue influence. This is set out in section 52:

52 In an action, if a person claims that a will or any provision of it resulted from another person
(a) being in a position where the potential for dependence or domination of the will-maker was present, and
(b) using that position to unduly influence the will-maker to make the will or the provision of it that is challenged,
and establishes that the other person was in a position where the potential for dependence or domination of the will-maker was present, the party seeking to defend the will or the provision of it that is challenged or to uphold the gift has the onus of establishing that the person in the position where the potential for dependence or domination of the will-maker was present did not exercise undue influence over the will-maker with respect to the will or the provision of it that is challenged.

Mr. Mulgrew believes that the change is a good one. But that is not the problem I have with the article. I too support the change. When the Ministry of the Attorney General requested comments from the public on the proposed change, I wrote a letter in support (which I have published on my blog here).

The difficulty I have with the Sun article is that Mr. Mulgrew presents the change as one that is needed because lawyers and doctors are going around unduly influencing their clients and patients to put them in their wills. He writes:

I think one of the most important anomalies the government is moving to fix is the law governing what is known as "undue influence." That's when your doctor, lawyer, would-be pal or suddenly loving relative has you sign away property or cash while you're on your deathbed, non compos mentis or too weak to resist.

How often does this happen? According to Mr. Mulgrew, “Happens regularly.”

What examples of cases close to home does Mr. Mulgrew give of lawyers unduly influencing their clients?

Lawyers in New York last year were caught drawing up wills for wealthy clients and inserting each other’s names for multi-million-dollar bequests of art, apartments and cash.

New York is a little ways away. How about some cases in British Columbia?

There are ugly rumours in the legal community that a couple of B.C. lawyers have engaged in the same legerdemain.

I have never heard these rumours, but I have no reason to disbelieve Mr. Mulgrew that there are rumours. I don’t put a lot of stock in rumours, but they could be true. There are thousands of lawyers in British Columbia, and every year the Law Society of British Columbia has to suspend or disbar a handful of them.

But, contrary to what Mr. Mulgrew implies, lawyers unduly influencing their clients to leave them inheritance does not happen regularly. It would hardly be noteworthy that lawyers in New York (about 4000 km away from Vancouver) were caught in such schemes if it happened regularly. It doesn’t happen regularly, either here or in New York for that matter.

How about examples of doctors taking advantage of their patients to get inheritances? Thankfully, Mr. Mulgrew does not try to give any.

The implications against lawyers and other professionals in the article are unfair, and unsupported.

But what bothers me most about the article is that it may tend to frighten vulnerable people away from the very people who may be able to protect them best against undue influence and other types of abuse.

A careful estate planning lawyer will meet alone with a client preparing a will so that the client can speak in confidence. A lawyer will question his or her client about finances and family. If the client says he or she wishes to leave a large gift to someone you would not ordinarily expect the client to benefit, the lawyer can ask why. With appropriate questioning lawyers can often (not always) ferret out undue influence, and find out what the client really wants.

If an estate planning lawyer has concerns about his or her client’s mental capacity to make a will, or to make a large gift, then a careful lawyer will get the client’s permission to speak with his or her doctor to get further insight.

Lawyers can and do refuse to draw wills or handle transactions for people who are not competent, or who do not appear to be acting freely and voluntarily.

Sadly, vulnerable people are much more likely to be victimized by people who are close to them, than by independent professionals. It is far easier for the unscrupulous to benefit by unduly influencing a vulnerable person to make a homemade will, than when a lawyer is involved in the process, and the lawyer insists on meeting alone with the vulnerable person before the will is drawn.

Suspicious Circumstances in Disputed Wills

Clarence Hay was murdered on June 26, 1988. He was 81 years old, single, and had no children.

His friend 29 year old Sandra Vout had nothing to do with his murder, but the police interviewed her as part of their investigation.

Mr. Hay had made a will on July 11, 1985 in which he left a farm to Ms. Vout, another farm to one of his nephews, some cash gifts to other relatives, and the rest of his $320,000 estate to Ms. Vout.

The circumstances concerning how the will came about are not entirely clear.

It is clear that the will was drawn by a legal secretary and signed at a lawyer’s office. Ms. Vout recommended the lawyer’s office. No lawyer was involved in preparing or signing the will. Mr. Hay signed the will in the presence of two legal secretaries, both of whom signed the will as his witnesses. It is also clear that Ms. Vout was present when Mr. Hay signed his will, and that she paid the bill.

Other aspects are less clear. The secretary who prepared the will said that Ms. Vout had told her what Mr. Hay wanted in the will. Ms. Vout denied that she was involved in giving any instructions to the secretary. Ms. Vout had told the police that she drove Mr. Hay to the appointment at the lawyer’s office to sign the will. At trial Ms. Vout said that she met him at the office.

The secretary who prepared the will said that she read the will to Mr. Hay in front of Ms. Vout. At one point, Mr. Hay hesitated, and Ms. Vout said, “Yes, that’s what we discussed. That’s what you decided….”

After Mr. Hay’s death, some of his relatives were unhappy with the will. They challenged the will, arguing that he did not have capacity to make a will, or that Ms. Vout had unduly influenced him.

After considering all of the evidence, Mr. Justice Byers concluded that the will was valid. He found that Mr. Hay “was old and eccentric, but alert, smart, independent, determined, and most important, not easily influenced.” He found that Mr. Hay had capacity, and was not unduly influenced.

Mr. Hay’s relatives appealed to the Ontario Court of Appeal, and the appeals court set aside Mr. Justice Byers’ decision.

Ms. Vout appealed to the Supreme Court of Canada.

Mr. Justice Sopinka, wrote the judgment of the Supreme Court of Canada, in Vout v. Hay, [1995] 2 S.C.R. 876. In doing so, he discussed the burden of proof in contested wills cases, and how courts should deal with suspicious circumstances.

In a contested will case, the burden of proof is on the person propounding the will (usually the executor). He or she must prove that the testator (in this case Mr. Hay) signed the will according to the formal requirements of provincial legislation, knew and approved of the contents of the will, and had capacity to make the will.

If the person propounding the will shows that the testator signed the will according to the formal requirements of a valid will, and that the testator read the will (or that someone read the will over to him), and he appeared understand it, the court may generally presume that the will is valid.

But if there are suspicious circumstances, then the person propounding the will must provide further evidence that the testator knew and approved of the contents of the will, and had capacity to make a will, to overcome the suspicious circumstances. The evidence required will be proportionate to the gravity of suspicion raised by the circumstances.

Suspicious circumstances may relate to the preparation of the will, to the capacity of the testator, or to whether the testator’s decision making was overborne by coercion or fraud.

But the onus of proving that someone procured the will by undue influence always rests with the person alleging undue influence.

In this case there were suspicious circumstances surrounding the preparation of the will, including the evidence that Ms. Vout instructed the secretary on what Mr. Hay wanted in his will, that her evidence was not believable, and that she stayed with Mr. Hay and coached him before he signed the will.

Mr. Justice Sopinka held that Mr. Justice Byers’ found facts that overcame the suspicious circumstances. The trial judge expressly found on all of the evidence that Mr. Hay knew what he wanted to do in his will, and had the capacity to make a will. Mr. Justice Byers’ also found that Ms. Vout did not unduly influence Mr. Hay.

The Supreme Court of Canada restored Mr. Justice Byers’ decision that the will was valid. Ms. Vout was entitled to keep her share of Mr. Hay’s estate.

When I first read this case years ago, I was surprised by the result. The lawyer's office did not take any precautions to make sure that the will did indeed reflect Mr. Hay's intentions. A lawyer should have met with Mr. Hay, taken the instructions from him, and Ms. Vout should not have been present when Mr. Hay gave the instructions or signed the will. Someone making a will may talk more freely when meeting alone with his lawyer, than when a potential beneficiary is present.

But the Supreme Court of Canada, as an appeals court, will defer to a trial judge's decision, unless the trial judge made a palpable and overriding error. I don't think that this decision should be interpreted as in anyway endorsing the manner in which the lawyer's office handled Mr. Hay's will.