Independent Legal Advice and Undue Influence

Independent Legal Advice

Under normal circumstances independent legal advice, if properly given should be sufficient to rebut any presumption of undue influence, but that was not the case in Cowper-Smith v Morgan 2016 BCCA 200 where the Court of Appeal upheld the trial judge in finding inter alia , that the independent legal advice provided was inadequate to rebut the presumption of undue influence.

The case should stand as a wake-up call to any practitioners dispensing independent legal advice that it must be thorough and relevant to the assessment of the question or issue before them, and to take the time and charge accordingly.

Failing to do so may expose professional liability by disappointed beneficiaries.

 

The Appeal Court stated as follows re the law of Independent Legal Advice:

 

51      The following considerations have also been identified as relevant to the assessment of the legal advice provided to the donor (Fowler Estate v. Barnes (1996), 142 Nfld. & P.E.I.R. 223 (Nfld. T.D.), Green J., adopted in Coish v. Walsh, 2001 NFCA 41 (Nfld. C.A.) at para. 23):

  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; and
  5. Whether the solicitor discussed other options whereby she could achieve her objective with less risk to her.

[The “Coish” factors; citations omitted.]

52      The respondents also rely on jurisprudence that identifies two branches for assessing the adequacy of the independent legal advice given where an allegation of undue influence is raised: (i) advice as to understanding and voluntariness (attendance on execution); and (ii) advice as to the merits of a transaction (the wisdom of entering into the transaction). The first branch of the test requires that the independent advisor is satisfied the donor understands the transaction and enters into it freely and voluntarily. The second branch of the test requires something more than the independent advisor being satisfied that the donor understands the effect of the transaction and wishes to make the gift; it also requires that the independent advisor is satisfied that “the gift is one that is right and proper in all the circumstances of the case, and if he cannot so satisfy himself he should advise his client not to proceed.” See Cope v. Hill, 2005 ABQB 625 (Alta. Q.B.), aff’d 2007 ABCA 32 (Alta. C.A.) at paras. 210-212, citing Gold v. Rosenberg, [1997] 3 S.C.R. 767 (S.C.C.), Corbeil v. Bebris (1993), 141 A.R. 215 (Alta. C.A.), and Halsbury’s Laws of England, vol 18, 4th ed. at 157, para. 343.

53      Assessing the adequacy of the legal advice given is a fact-specific inquiry. It does not reduce to any precise test. In some circumstances, it may require advice on only the nature and consequences of the transaction. However, where concerns or allegations of undue influence arise, generally there will be a need to give “informed advice” on the merits of the transaction. See Cope at paras. 213-215, citing Brosseau v. Brosseau, 1989 ABCA 241 (Alta. C.A.) at paras. 22-23, Coomber v. Coomber, [1911] 1 Ch. [723] and Wright v. Carter, [1903] 1 Ch. 27 (Eng. C.A.) at 57-58.

Did the judge err in finding the presumption of undue influence and the presumption of resulting trust had not been rebutted?

54      It is common ground that findings with respect to undue influence and the intention of a party to gratuitously transfer property to another are subject to a deferential standard of review. See Boda Estate v. Boda, 2014 BCCA 354 (B.C. C.A.) at para. 72. An appellate court may not interfere with the findings and inferences of fact by a trial judge absent palpable and overriding error (see Housen v. Nikolaisen, 2002 SCC 33 (S.C.C.) at para. 10). Palpable error is one that is readily or plainly seen (Housen at para. 5); overriding error is one that must have or may have altered the result (see Van Mol (Guardian ad litem of) v. Ashmore, 1999 BCCA 6 (B.C. C.A.) at paras. 11-12).

55      The application of a legal standard to findings or inferences of fact raises a question of mixed fact and law. Where an alleged error of mixed fact and law can be attributed to the application of the wrong legal standard, element of the legal test, or error in principle, the error may be characterized as an error of law and is subject to the standard of correctness. However, if the legal principle is not readily extricable from the findings or inferences of fact, then the judge’s conclusions should not be overturned absent palpable and overriding error (Housen at paras. 26-36).

56      All three standards of review are engaged in this appeal. The appellant contends the judge erred in law by adopting a flawed approach in her assessment of the evidence of Ms. Iverson and Mr. Easdon, in order to determine whether the presumption of undue influence was rebutted. The appellant further alleges that in applying the legal test for rebutting the presumption of undue influence, the judge made a palpable and overriding factual error based on an erroneous inference that Elizabeth did not intend to execute the June 22, 2001 documents because she did not understand the nature and consequences of those documents. This error, the appellant submits, was material to her conclusion that the presumption of undue influence was not rebutted.

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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