In McLeod Estate v. Cole et al, 2022 MBCA 73, the Manitoba Court of Appeal upheld the dismissal of a challenge by two brothers to the sale of their father’s properties at what was alleged to have been at less than fair market value.
The father, Edward, was a retired farmer diagnosed with dementia. Real estate agents and a lawyer assisted Edward with selling his real estate holdings shortly before his death.
Greg and James, Edward’s sons and estate administrators, sued the real estate agents and lawyer for damages and legal fees. The brothers alleged that the agents and lawyer failed to ensure that Edward had sufficient mental capacity to sell his properties.
Edward Was Capable
The Court of Appeal upheld the trial judge’s determination that Edward was capable of selling his properties and that he did so at fair market value.
The trial judge found that Greg and James had failed to rebut the presumption that Edward had the requisite mental capacity to sell his properties, found no evidence that Edward was vulnerable and exploited, and determined that Edward’s knowledge of the properties was sound at the time of the sales.
This case serves as an important reminder that a dementia diagnosis does not automatically make one incapable of managing their own property.
Doctrine of Suspicious Circumstances Not Applicable
Despite upholding the trial decision, the Court of Appeal did find that the trial judge was incorrect to proceed on the basis that the doctrine of suspicious circumstances could apply to the determination of capacity to enter into a contract.
The doctrine states that once suspicious circumstances surrounding a will are shown to exist, the burden of proving testamentary capacity shifts to the propounder.
The Court of Appeal reasoned that a contract entered into by an incapable individual may become voidable at the option of the incapable person or their representative, while a will made by an incapable person is invalid.
The Court gave additional policy reasons for rejecting the use of the doctrine. It stated that a mutually beneficial contract should not necessarily become invalid due to one party’s incapacity. On the other hand, since a will is purely donative, its validity faces a higher level of scrutiny.
Notwithstanding that the trial judge misapplied the doctrine of suspicious circumstances, his approach was found to have had no effect on the outcome of the decision and the appeal was ultimately dismissed.
Enjoy the rest of your day.
Suzana Popovic-Montag and James Macfarlane.
Source: Jason Tan, “Man had capacity to sell property despite dementia diagnosis: Manitoba Court of Appeal”, Lawyer Magazine (18 October 2022), online.