Posted on April 29^th, 2008 by Hull & Hull LLP

Diane Vieira: Hello and welcome to Hull on Estates. You’re listening to Episode #108 on Tuesday, April 29^th, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

Diane Vieira: Hi and welcome to another episode on Hull on Estates, I am Diane Vieira.

Paul Trudelle:  And I’m Paul Trudelle. Hi Diane, how are you today?

Diane Vieira: I’m good, how are you?

Paul Trudelle: Very good, thank you for filling in.  You are filling in for Megan Connelly, who was going to be podcasting with me this week, but she ran off to South America.

Diane Vieira: Yes.

Paul Trudelle: She got out of it.

Diane Vieira: Yes

Paul Trudelle: She didn’t take any trust funds, and she is coming back so there’s nothing  wrong with her going. We hope she has a very good time, and I thank you for joining me today. You have a busy week.  In addition to podcasting, you are also blogging this week.

Diane Vieira: Yes I am. So it is…I will be featured heavily on the website this week.

Paul Trudelle: Yes. Today we thought we would spend some time and talk about a situation that arises in a lot of matters that we see.  It is the type of situation where there is an elderly person with two or three adult children.  The elderly person wants to provide for all of them, however the elderly person is often closer to one of the children.  And prior to death, a property gets transferred to that one child to the exclusion of the other children and they are not able to share in that other property, once the estate falls into place.  And that causes them much concern and leads to a lot of litigation.  So we thought we would talk a little bit about that today.

Diane Vieira: And we are going to discuss a case that you actually wrote a blog on last week, its Bale vs Bale.  And the facts in that case is similar a situation as you just pointed out.  There is a mom who, in her Will, leaves her estate to her three sons equally.  But prior to her death, she conveys her farm to one of the sons.  The son being the child who is taking care of her and the other two sons in the situation were actually not very much part of her life and didn’t provide any care for her and where the applicant’s position was that they were estranged from her.

Paul Trudelle: Right.  There was a bit of an issue is to how close these other children were and that usually is the case and there was evidence heard from both sides as to how close they were.  But I think for the purposes of discussion today, we can just presume that the one child was significantly closer to the mother than the other two.

Diane Vieira: So, just a bit of a background on what happened here was a few years prior to her death, the main asset of the estate was a farm.  And the mother gave the farm to the applicant.  And there was testimony as to the capacity of the mother to make this gift with respect, because the other two sons challenged her…challenged this gift and said it was given to the other son under undue influence.

Paul Trudelle: That’s right and there was actually some fairly extensive evidence from the solicitor who acted on the transaction and also from her family doctor as to her capacity and both the solicitor and her two family doctors felt that while she was elderly and frail, she did have capacity and she understood what she was doing when she gifted this farm to her one son.  Then the mother passed away and the one son brought an application to get a declaration that the gift was valid.  The other two children brought a cross-application to say that the gift was not valid and was a result of undue influence.

Diane Vieira: In the situation the mother, at the time of the gift, was ninety-three years old and a dependant of the applicant.

Paul Trudelle: I think that is quite important that evidence with respect to dependency. The mother was living with the son, she was quite adamant that she didn’t want to be moved into a nursing home and by living with the one son, she was able to avoid having to move into a nursing home, although she was found to be quite, you know, vulnerable and dependant and relied on that one son for essentially all of her care

Diane Vieira: The judge in this case noted that even though the mother likely did have capacity, she was very vulnerable at the time the gift was made in terms of she was just coming out of the hospital and didn’t want to go to a nursing home.  So that point came out in determining whether or not this was under undue influence

Paul Trudelle: That’s right and I think that is very important.  In looking at undue influence, we see undue influence with respect to gifts.  We also see it with respect to Wills that are often said to be the result of undue influence.  And the case law often states that undue influence is beyond influence, it must be undue and it must amount to arm twisting or coercion in the normal course.  If you are making an allegation of undue influence, however, that is quite different where there’s a relationship of dependency or vulnerability.

Diane Vieira: In this case, the judge did see a relationship of dependency and suggested that it was up to the applicant to rebut the presumption of undue influence.

Paul Trudelle: That’s right, and it’s because of that presumption that the onus shifts onto the receiver of the gift.  Presumption of undue influence doesn’t apply in every relationship, although it does apply in certain relationships such as a solicitor and client relationship, parent-child,  guardian and ward, and we are seeing it more and more in other relationships of dependency such as an elderly parent and an adult child.  And in this case, the judge found that there was a presumption of undue influence and in his analysis went through the cases in which you would find a presumption of undue influence and what follows from that. 

I think after finding a relationship of dependency, the Court will then, as set out by the judge in the  Bale and Bale decision and referring to the Goodman Estate and Geffin decision from 1991, a Supreme Court of Canada case.  After there is a finding of a relationship of dependency that gives rise to a presumption of undue influence, the Court will then look at the nature of the transaction.  If it is a commercial transaction or a sale or other transfer, they will look at whether there was consideration or not.  With respect to other transactions like this one where there is a gift, its not that easy to do that, so what the Court will then look at is the onus moving on to the defendant to rebut that presumption.

Diane Vieira: And in this case, the applicant, as part of his evidence, was he offered medical testimony in terms of capacity and her disappointment with her other sons.  However the judge rejects this in a way.  What he expected was evidence that this was a transfer made out of gratitude and that was something that neither the lawyer or the applicant spoke of, the reason for this transfer.  And he found that suggested undue influence.

Paul Trudelle: Right and I think they said that, the Court there said that in order to rebut the presumption, it would have to be a result of the mother’s full, free and informed thought.  She was extremely vulnerable and dependent upon the son for her care and that vulnerability tainted the transaction, so to speak.  And the Court concluded that the decision to convey the farm was the result of undue influence by reason of her dependency.

Diane Vieira: In this situation, do you think it would have made a difference if the mother had independent legal advice?

Paul Trudelle: I think that would help and I think if there was independent legal advice we would have perhaps some evidence with respect to the transaction and the reason for it.  Here there was legal…a lawyer was involved and documented the transaction but there was some question as to how the mother got to see the solicitor and as he stated, there was an absence of any notes with respect to the reason for the transaction, it seems.  So on the issue of undue influence and vulnerability as discussed there was a finding that the gift was made as a result of this undue influence, presumption of undue influence because of the dependency the elderly mother. The Court found that while there was a great deal of affection between the mother and the son and it didn’t say that there was anything improper about the relationship, you know, the Court felt that there wasn’t…the affection that they shared for each other wasn’t sufficient to validate the transfer of the farm to the son.  I think it is important to note there that the farm was essentially all of the estate and would leave the other children with nothing.

Diane Vieira: Another issue that was decided was in terms of the accounting that the applicant provided.  He did take a number…some money from his mother’s bank account while he was caring for her.  He used some of this money to purchase a truck.  He testified the truck was being used to transport the mother back and forth from medical appointments and what not.  In this case, the judge found that this truck was a gift.

Paul Trudelle: Right and I think just because it was a much smaller amount relative to the value of the estate and because of the findings of capacity, the elderly mother was said to have known about this gift and approved of it and consented to it.  I think because it wasn’t all of the estate, the Court was prepared to let that gift stand, whereas a gift of the entire estate was seen as too much.

Diane Vieira: And the judge also found that the respondents, the other two brothers, failed to prove their claim for a loss of occupation rent.  That was going back to the request that the other brother pay them the rent for the farm they had been using.

Paul Trudelle: Right and I think again the Court wanted to be seen as, you know, being fair and balancing that.  They didn’t allow the farm to go to the son but they weren’t going to turn around and charge him occupancy rent for staying in the property during that period because of the assistance he was providing to his mother.

Diane Vieira: So in the end, the judge ordered that the sale of the farm be set aside under the grounds of undue influence, while dismissing the respondents’ other requests for damages and occupation rent.

Paul Trudelle: Right and I think that is a good and useful discussion of that case.  It’s the type of case, as we said, that we see often and I think all of the circumstances surrounding any gift of property by a deceased prior to death need to be looked at.  It’s not just enough to say, well, what’s in the estate and how is it divided now? You’ve got to step back a little bit and see what was in the estate and where did it go, if it was a gift during the lifetime of the testator, was it a gift made while she had capacity, was it a gift that may be tainted by undue influence as a result of his or her dependency.

Diane Vieira: Do you think it would have made a difference if the mother in this case, since she did have capacity, made a new Will?

Paul Trudelle: I think it might have. I think again the same analysis that the Court went into with respect to undue influence with respect to the gift might be used with respect to an allegation of undue influence regarding the Will, if, rather than gifting the farm, she simply made a Will leaving the entire farm to her son, the same arguments would have been made, I expect.

Diane Vieira: I think that brings us to an end of this week’s discussion. Thanks for listening and thanks for joining me today, Paul.  

Paul Trudelle: Well, thank you very much. Diane, and we’ll speak to you again soon.

Diane Vieira: And we look forward to hearing from our listeners.  You can send us an email at hull.lawyers@gmail.com or just pick up the phone and leave us a message or comment at 206-305-6636.  Be sure to visit our blog at estatelaw.hullandhull.com where you will find even more information and discussion on today’s practice of estate law. And you can find the case citation for Bale vs Bale on our website. We hope you enjoyed the show. I am Diane Vieira.

Paul Trudelle: I am Paul Trudelle.  And until next week, we’ll talk to you then.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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