Tag: independent legal advice

11 May

When Does the Presumption of Undue Influence Arise?

Umair Estate & Trust, Estate Planning, Litigation, Wills Tags: , , , , 0 Comments

The equitable doctrine of undue influence is one way in which inter vivos transfers or the terms of a testator’s Will can be challenged. The Court has the ability to set aside a gift or transfer if it concludes that influence was being exerted on the grantor. Undue influence can be difficult to prove, and the onus is on the challenger of the transaction to prove that the grantor or testator was unduly influenced.

However, in certain circumstances, the Court may conclude that a presumption of undue influence arises. In the recent decision of Morreale v Romanino, 2017 ONCA 359, the Ontario Court of Appeal further clarified the test to be met in order to trigger the presumption of undue influence.

But First, Some Background

Mr. and Mrs. Ruccia had two children, Giustina (the “Appellant”) and Elisabeth (the “Respondent”). The Appellant’s husband had a falling out with Mr. Ruccia, and they remained estranged until Mr. Ruccia’s death. In contrast, the Respondent lived with her parents for her entire life and contributed to their care as they became older.

Upon their deaths in 2009, the Appellant discovered that her parents had made an inter vivos gift of their most significant capital asset to the Respondent, being the equity in the home that they had lived in with the Respondent and her husband. The evidence showed that the same solicitor acted on the sale of the parents’ property and subsequently acted for the Respondent and her husband with respect to the purchase of a new home.

The Appellant commenced a legal proceeding, alleging that the parents were unduly influenced into gifting their equity in the home to the Respondent. At trial, the Appellant’s action was dismissed.

After reviewing the relevant legal principles, the trial judge concluded that the Respondent’s relationship with her parents did have the capacity to create undue influence, but found that the presumption of undue influence did not arise because it was impossible to find “any specific act of coercion or domination.” In any event, the trial judge concluded that if the presumption did arise, the presumption was rebutted.

The Presumption of Undue Influence

In Geffen v Goodman, the Supreme Court of Canada set out the test to be met in order for a plaintiff to establish a presumption of undue influence. The first enquiry is “whether the potential for domination inheres in the nature of the relationship itself.” If such a relationship exists, the next enquiry is an examination of the nature of the transaction.

On appeal, the Appellant submitted that the trial judge erred in law by concluding that the presumption did not arise because there was no “specific act of domination or coercion.” Justice Gillese, writing for a unanimous Court of Appeal, agreed with this submission and distinguished between the presumption of undue influence and actual undue influence.

Justice Gillese held that the test “requires the trial judge to consider the whole of the relationship between the parties to see if there is the potential for domination, rather than looking for a specific act of coercion or domination.”

However, the Court of Appeal concluded that the trial judge had carefully examined the family dynamic, including Mr. Ruccia’s strong-willed personality, his relationship with the Appellant and her husband, and his control over financial decisions.

In the circumstances, although the Ruccias and the Respondent were in a relationship of dependence, the Court of Appeal held that the trial judge had not erred in concluding the presumption of undue influence did not arise.

Thank you for reading,

Umair Abdul Qadir

Other Articles You Might Be Interested In

The High Hurdle of Undue Influence

Inter Vivos Transfers, Undue Influence and Independent Legal Advice

The Validity of an Inter Vivos Gift

21 Apr

Sufficiency of Independent Legal Advice

Hull & Hull LLP Estate & Trust, Litigation Tags: , , , , , 0 Comments

Yesterday we discussed Modonese v. Delac Estate, 2011 BCSC 82 (CanLII), which considered when there is a presumption of undue influence and the factors that tend to rebut that presumption. 

One important factor is the presence of independent legal advice. But what are the considerations that come into play in assessing the kind of legal advice required to rebut the presumption? 

The function of independent legal advice is to remove a taint that, if not removed, might invalidate a transaction. There are two types of independent legal advice (See Cope v. Hill, 2005 ABQB 625):

a)      Advice as to understanding and voluntariness; and

b)      Advice as to the merits of a transaction.

Some of the factors to be considered in determining whether legal advice given to the granting party is sufficient to rebut the presumption include:

a)      Whether the person benefiting is present at the time the advice is given and/or at the time the documents are executed;

b)      Whether the lawyer was engaged by and took instructions from the person alleged to be exercising the influence;

c)      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;

d)      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; and

e)      Whether the solicitor discussed with the grantor other options whereby she could achieve her objective with less risk to her.

Ultimately, the adequacy of independent legal advice will always be a situation-specific inquiry and so it is important to consider all the surrounding circumstances in relation to one another.

Sharon Davis – Click here for more information on Sharon Davis. 

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