Tag: inter vivos transfer
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
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In the recent decision of McKendry v McKendry, the British Columbia Court of Appeal considered the elements of a valid inter vivos transfer of property, particularly the timing of intention to make a gift. The central issue in the case was whether a written deed of gift under seal was necessary to complete a gift where legal title had previously been transferred into joint ownership.
Mary, a widow, had several adult children. In 2006, Mary’s son, John, moved into her house. He lived with her until her death in 2012. In 2008, Mary transferred legal title to the house to joint tenancy with John. At the time of the 2008 transfer, Mary did not intend to make a gift of the beneficial interest in the house to John; rather, she intended for John to hold the beneficial interest of the house in trust for her estate to be allocated among him and his siblings according to her will.
In 2010, Mary changed her mind in respect to the disposition of the house. Instead of a trust, she decided to leave the property to John outright as surviving joint tenant. She told her lawyer she understood the house would be John’s absolutely on her death and that he was not obligated to share it with his siblings. About a month later, Mary met with her lawyer to sign a new will. It included a provision stating:
I […] confirm that I wish to cancel any trust agreements or other documents imposing an obligation on my son to share the property I own at [the house] with my other children. I want my home to be my son’s property on my death absolutely – no strings attached. I have made this decision after much consideration and I fully understand that this gives my son the majority of my assets. My house constitutes the majority of my assets.
After Mary’s death, three of her daughters commenced two actions against John: one seeking a declaration that he held the house in trust for the estate and the other seeking a variation of Mary’s will.
The Trial Judge found that Mary did not intend to make a gift of the beneficial interest in the house to John when she transferred legal title to him in 2008. The Judge further found that Mary’s intention changed in 2010, when she decided to make a gift of the house to John. She held the transfer, made in 2008 “is not sufficient to perfect a gift of the survivorship interest in [the house] to John, because (as I have found) Mary did not intend at that time to make such a gift to John.” Further, when Mary did form the intention to make a gift of the house to John, Mary made no further steps to perfect the gift. In the absence of a written deed of gift under seal, the Judge held there was no legally binding gift.
The Court of Appeal overturned the trial decision. The Court reviewed the requirements for a valid inter vivos gift: “the donor must have intended to make a gift and must have delivered the subject matter to the donee. The intention of the donor at the time of the transfer is the governing consideration. In addition, the donor must have done everything necessary, according to the nature of the property, to transfer it to the donee and render the settlement legally binding on him or her.”
The court held that in 2008, Mary transferred only legal title to John (as joint tenant) and retained the entire beneficial interest for herself and her estate. In 2010, however, Mary renounced her beneficial interest in the right of survivorship in John’s favour. “In doing so, she clearly intended to make an immediate inter vivos gift of that incident of the joint tenancy to John.” Because she had already transferred legal title to John, she did everything necessary in 2010 to perfect the gift of the beneficial interest, bearing in mind the nature of the interest. The legal title would not have been affected by a deed of gift under seal, given her clear written intention. Mary’s intention was recorded in writing and no other act of delivery was required.
Thank you for reading.
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The Ontario Court of Appeal’s recent decisions in Neuberger v York, 2016 ONCA 191, and Spence v BMO Trust Company, 2016 ONCA 196, have garnered a significant amount of attention. The appellate court’s recent decision in Donis v Georgopoulos, 2016 ONCA 194, would also be of interest to the estates bar.
In Donis, the Deceased made a Will distributing her Estate equally between her three children, Dimitra, Christos and Eleni. After her father passed away in 2005, Dimitra became the Deceased’s primary caregiver so that the Deceased could continue to live independently at her home (the “Home”).
Initially, the Deceased planned to change her Will to leave the Home to Dimitra. However, she ultimately decided to sell the Home to Dimitra for the amount of $100,000.00, which she intended to bequeath to her other children in a new Will.
In 2007, Dimitra and the Deceased signed a Memorandum of Agreement (the “MOA”) drafted by the Deceased’s solicitor, Mr. Shea. Under the MOA, the Deceased transferred her interest in the Home to Dimitra upon the payment of the sum of $100,000.00 from the proceeds of sale. In return, Dimitra agreed to allow the Deceased to continue to live at the Home “for the balance of her lifetime unless she is unable for health reasons to do so.”
The Deceased was fluent in Greek and Macedonian, and her lawyer communicated with the Deceased in English with Dimitra’s assistance. Although Dimitra attended meetings with the Deceased, the lawyer would confirm the Deceased’s instructions with Dimitra out of the room. The Deceased also saw a Macedonian-speaking lawyer, Mr. Petrovski, who did not review the MOA with the Deceased but did confirm that she intended to transfer the Home to Dimitra.
Upon the Deceased’s death, the agreement to transfer the Home to Dimitra reduced the inheritance of the Deceased’s other children. The Deceased’s son Christos challenged the transfer on the basis that the Deceased lacked the capacity and understanding to sign the MOA and that the Deceased was unduly influenced by Dimitra.
At trial, the trial judge held that the Deceased was mentally capable of entering into the MOA and understood the contents of the MOA. The trial judge also concluded that the Deceased’s dependence on Dimitra gave rise to a presumption of undue influence, but that Dimitra had rebutted the presumption. Christos appealed the trial judge’s decision on a number of grounds.
On the issue of undue influence, Christos argued that the advice the Deceased received from Mr. Shea was deficient and insufficient to rebut the presumption of undue influence. He asserted that Mr. Shea was in a conflict of interest because Dimitra was present at his meetings with the Deceased, and that Mr. Petrovski did not remedy this conflict because Mr. Petrovski did not explain the MOA to the Deceased. Christos also argued that Mr. Shea did not adequately explain the risks of the MOA.
In dismissing Christos’s appeal, the Court of Appeal rejected his arguments regarding the trial judge’s findings on the issue of undue influence. The Court affirmed the trial judge’s finding that Mr. Shea was not in a conflict of interest. He had been retained by the Deceased, and had a practice of confirming her instructions in Dimitra’s absence even though Dimitra was present at meetings. The legal advice provided to the Deceased ensured that she understood the nature and the risks of the inter vivos transfer.
Thank you for reading,
Umair Abdul Qadir
In Mroz v. Mroz, 2015 ONCA 171 (Ont. C.A.), the Court of Appeal returned to the issue of rebutting the presumption of resulting trust that arises upon a gratuitous transfer from the owner of the property to another or into joint tenancy with another. Here, the testatrix transferred her home to one child in joint tenancy and made a Will at the same time that provided for gifts and referred to the home. In one sense the issues were ones of interpretation of the Will (essentially were the gifts charges against the home) and in another were ones of beneficial ownership (whether the inter vivos transfer of the home was a gift). In writing for the Court, Justice Gillese made three points:
First, the transfer to the daughter inter vivos firmly engaged the presumption of resulting trust as set out in the seminal case of Pecore v. Pecore,  1 SCR 795 (S.C.C.).
Second, the onus was on the daughter who held title to the which passed to her by survivorship on her mother’s death to rebut the presumption. As set out in Sawdon Estate v. Sawdon, 2014 ONCA 101 (Ont. C.A.) the onus is discharged by rebutting the presumption on a balance of probabilities with respect to the transferor’s actual intention at the time of the gratuitous transfer.
Third, the presumption cannot be rebutted while at the same time allowing the asset to be dealt with as part of the Estate. Here the trial judge had erred in both finding that the transferor wished “to gift… [the daughter] full title to the house upon Kay’s death” and at the same time to pay out bequests set our in the Will out of proceeds of the sale of the same house. Justice Gillese held that “once the trial judge found that the sale of the Property after… [the mother’s] death was to be the source of funds for bequests under the 2004 Will, she could not find that the presumption had been rebutted.” In other words, the fact that the Will provided for gifts out of or against the house, it was clear that the presumption was correct rather than rebutted – the house was part of the Estate, not the sole property of the daughter.
It is clear that evidence and common sense respecting the intention of the transferor remains key to resolving these sorts of disputes. In Mroz v. Mroz, 2015 ONCA 171 (Ont. C.A.), it would make no sense that the read the Will as placing an obligation on the Estate Trustee (pay out bequests from the sale of the house) and at the same time put that asset beyond his or her control. The presumption of resulting trust is just that; a presumption of probable intent. Where that presumption is said to be wrong in the circumstances, it must be proved to be so.
This week on Hull on Estate and Succession Planning Ian and Suzana look at the more complex solutions to the transfer of a cottage. The discuss the inter vivos transfer – putting the cottage in trust for your children while you are living.
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