Undue Influence General Principles

Undue Influence General Principles, When clients approach disinherited.com with respect to suspicions that undue influence was exerted upon the deceased, I am mindful of two conflicting principles:

1. in my in my experience, “where there is smoke there is fire”, so their suspicions are probably well-founded;

 

2. An allegation of undue influence is tantamount to that of fraud, and if unsuccessful in the  litigation, the failed litigant is typically punished with special costs

which are normally the full legal fees of the opposing party.

For more information on undue influence please refer to the website article entitled  “How to Win an Undue Influence Case“.

 

General Principles of Undue Influence

 

In Longmuir v. Holland, 2000 BCCA 538 at para. 71, 192 D.L.R. (4th) 62, Southin J.A. defined undue influence as “influence which overbears the will of the person influenced so that in truth what she does is not…her own act”.

 

In the leading case of Allcard v. Skinner (1887), 36 Ch. D. 145 at 171, 56 L.J. Ch. 1052 [Allcard] (C.A.), Cotton L.J. discussed the two classes of transactions which may be set aside on grounds of undue influence:

“First, where the Court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose;

second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor.”

The second class of undue influence does not depend on proof of reprehensible conduct.  It affects those who may have acted in the sincere belief of their honesty.  Under this class, equity will intervene as a matter of public policy to prevent the influence existing from certain relationships from being abused: Ogilvie v. Ogilvie Estate (1998), 49 B.C.L.R. (3d) 277 at para. 14, 106 B.C.A.C. 55 (C.A.), citing Allcard.

[100]     In Geffen v. Goodman Estate, [1991] 2 S.C.R. 353, [1991] S.C.J. No. 53 at paras. 42-45, Wilson J. discussed the presumption of undue influence in the following passages:

42      ”  What then must a plaintiff establish in order to trigger a presumption of undue influence?  In my view, the inquiry should begin with an examination of the relationship between the parties.  The first question to be addressed in all cases is whether the potential for domination inheres in the nature of the relationship itself.  This test embraces those relationships which equity has already recognized as giving rise to the presumption, such as solicitor and client, parent and child, and guardian and ward, as well as other relationships of dependency which defy easy categorization.

43        Having established the requisite type of relationship to support the presumption, the next phase of the inquiry involves an examination of the nature of the transaction. …

44        … in situations where consideration is not an issue, e.g., gifts and bequests, it seems to me quite inappropriate to put a plaintiff to the proof of undue disadvantage or benefit in the result.  In these situations the concern of the court is that such acts of beneficence not be tainted.  It is enough, therefore, to establish the presence of a dominant relationship.

45        Once the plaintiff has established that the circumstances are such as to trigger the application of the presumption, i.e., that apart from the details of the particular impugned transaction the nature of the relationship between the plaintiff and defendant was such that the potential for influence existed, the onus moves to the defendant to rebut it.  As Lord Evershed M.R. stated in Zamet v. Hyman, supra, at p. 938, the plaintiff must be shown to have entered into the transaction as a result of his own “full, free and informed thought”.  Substantively, this may entail a showing that no actual influence was deployed in the particular transaction, that the plaintiff had independent advice, and so on.  Additionally, I agree with those authors who suggest that the magnitude of the disadvantage or benefit is cogent evidence going to the issue of whether influence was exercised.

Accordingly, once a relationship with the potential for domination has been established, the next phase of the inquiry is to examine the nature of the transaction. 

Where a gratuitous transfer is concerned, the onus moves to the defendant to rebut the presumption on the balance of probabilities: Stone v. Campbell, 2008 BCSC 1518 at para. 44, 44 E.T.R. (3d) 146.”

Presumption of Resulting Trust Applies to Transfer of Land

Until recently there had been some questions in BC estate litigation as to whether or not the presumption of resulting trust applies to gratuitous transfers of real property, in light of the provisions of the Land Title Act, section 31 that provides that under the torrens system, the indefeasible title is conclusive evidence in law and in equity, that the person named in the title is entitled to an estate in fee simple in the land.

The court in Aujula v Kaila 2010 BCSC 1739, held that the conclusive evidence of title found under the Land Title act can be rebutted in some circumstances

as such  the operation of the presumption of resulting trust where there is an agreement between the parties that is contrary to the registered title, or to take into

account the underlying equitable interests between the parties.

 

In Fuller v. Harper, 2010 BCCA 421 at para. 43, (sub nom Fuller v. Fuller Estate)[2010] B.C.J. No. 1901 [Fuller], the Court of Appeal noted the existence of

appellant authority that appears to support the view that a presumption of resulting trust could be applied to a gratuitous transfer of real property.  Smith D. J.A.

, relying on Pecore, described how the burden of proof is affected by the presumption of resulting trust by placing the onus on the transferee to lead evidence of

the transferor’s contrary intention in order to rebut the presumption on a balance of probabilities: Fuller at paras. 44-47.

 

The relationship between the statutory presumption found in the Land Title Act and the presumption of resulting trust was addressed in Aujla.  Under the

statutory presumption, the party challenging the state of title has the onus of displacing the presumption that title, as currently registered, is conclusive of legal

and beneficial ownership.  However, at para. 37, Harris J. found that this burden could be discharged through the operation of the presumption of resulting trust

if the transfer was gratuitous. If no consideration was exchanged, the onus shifts to the transferee to prove on a balance of probabilities that the transfer was

intended as a gift.

Credibility – Who Does the Judge Believe?

credible hulkCredibility-Who Does the Judge Believe?

One of my favourite observations about estate litigation, is that invariably, the opposing parties tell such diverging and completely contrary stories from the other, that I often think I am in the wrong court room conducting the wrong trial.

IN that situation, the Judge is then left with the burden of choosing which witnesses to believe, and which to not believe.

This is called determining the credibility of the witness and is not exactly a science, nor something that people always agree with when one witnesses testimony is chosen over anothers.

Credibility is defined as “worthiness of belief, that quality in a witness which renders his or her evidence worthy of belief.

The leading case in British Columbia is the often quoted statement of O’Halloran J.A. in Faryna v. Chorny, [1952] 2 D.L.R. 354 at 357, 4 W.W.R. (N.S.) 171 (BCCA), :

“The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour

of the witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that

surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the

preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions. ”

BC Will Contested For Interpretation of Its Meaning

Re Brookes estate 2011 BCSC 1606 involves a hand written half page  BC will, in  which the testator   appointed his brother as executor and provided:

” I leave my property  ( address stated) to my brother executor with power of attorney. Also my accounts at Royal Bank of Canada merit, BC”

The will then listed the names and addresses of the five respondents adding:

“I would all the people named above to share equally in my estate”

 

The testator’s estate consisted of his house and bank accounts totaling approximately $275,000.

The petitioners brother claimed that he had been left the house and bank accounts-in effect everything for his own use.

The court found that the assets were instead left to the brother as executor, with him and the five respondents to share equally in the entire estate.

 

Some of the important rules of wills interpretation utilized by the court are as follows:

 

1.  The court’s task in construction of a will is to give effect to the intention of the testator, which is normally accomplished by giving “fair and literal meaning to the actual language of the will.” Re Browne, [1934] SCR 324 at p. 328, Easter v. Bush (1999), 26 E.T.R. (2d) 184 at para. 35. The fundamental principle , as stated in Re Browne at p. 330, is:

Effect must be given to the testator’s intention ascertainable from the expressed language of the instrument. . So far as possible, the will itself must speak. . If, after careful consideration of the language used, in the particular passage immediately under examination and consistently with the context of the document, the intention remains doubtful, then resort may be had to certain rules which have been generally adopted.

 

2.       The court should make every effort to reconcile two apparently conflicting provisions of a will, rather than absolutely ignoring one or the other: Re Estate of Douglas Carson Smith, 2008 BCSC 1189 at para. 34.

Where there is an obvious ambiguity or omission, the court may ignore, add or substitute words, but only to a very limited degree and only when the intention is plain and clear: Milwarde-Yates v. Sipila, 2009 BCSC 277 at para. 48. Further words cannot be read in “[u]nless one can be reasonably certain from the context of the will itself what are the words which have been omitted”: Laws et al v. Rabbitt et al, 2006 BCSC 1519 at para. 56, citing Re Follett Estate, [1955] 1 W.L.R. 429 (Eng. C.A.).

 

3.     Extrinsic evidence may be used to resolve ambiguity. A frequently quoted description of that process comes from Re Burke (1959), 20 D.L.R. (2d) 396 (Ont.C.A.) at 398, which was approved by the British Columbia Court of Appeal in Davis Estate v. Thomas (1990), 40 E.T.R. 107 and Smith v. Smith Estate, 2010 BCCA 106:

“Each Judge must endeavour to place himself in the position of the testator at the time when the last will and testament was made. He should concentrate his thoughts on the circumstances which then existed and which might reasonably be expected to influence the testator in the disposition of his property. He must give due weight to those circumstances in so far as they bear on the intention of the testator. He should then study the whole contents of the will and, after full consideration of all the provisions and language used therein, try to find what intention was in the mind of the testator. When an opinion has been formed as to that intention, the Court should strive to give effect to it and should do so unless there is some rule or principle of law that prohibits it from doing so. ”

Injunctions When Contesting a Will or Estate

Injunctions

It is  common in estate litigation for one party  to obtain a court order enjoining the other party to either do something, or alternatively be restrained from not doing something.

Typically the injunction may involve the freezing of bank accounts and stock portfolios and other types of investments pending the trial or determination of the matter.

If the injunction is for the time between the application and the trial, then it is an interim injunction.

One party often attempts to obtain an injunction against the other without serving notice on the other.

This is called an ex parte application.

 

Setting Aside an Interim Order

In British Columbia (Public Trustee of) v. Batiuk, [1996] B.C.J. No. 1646, 14 E.T.R. (2d) 5 (S.C.) [Batiuk], Vickers J.,  described the well-settled rule that an ex parte application requires the full and frank disclosure of relevant facts.

In the absence of such disclosure, an order may be voided.  Citing the decisions in Gulf Islands Navigation Ltd. v. Seafarers’ International Union of North America (Canadian District) et al. (1959), 18 D.L.R. (2d) 625, 28 W.W.R. (N.S.) 517 (B.C.C.A.); and Canadian Pacific Railway v. United Transportation Union, Local 144 et al. (1970), 14 D.L.R. (3d) 497 (S.C.), the Court held:  “non-disclosure of relevant material on an ex parte application, even if inadvertent, is sufficient ground for setting aside or dissolving the order” (at para. 11).

The Batiuk Court also held that if an order is to be made ex parte, the applicant must satisfy the court that the matter is urgent:  “If it later transpires that it was not a matter of urgency but that impression was left with the court, the order will be set aside:  John Doe v. Canadian Broadcasting Corp. (1993), 86 B.C.L.R. (2d) 202 [C.A.]”.

 

Tests on an Application for an Injunction

Te test  to be applied on the application for an ex parte injunction and on an application to set aside that injunction on the merits is that established in Attorney General of British Columbia v. Wale et al., [1987] 2 C.N.L.R. 36 (B.C.C.A.).  In that case, at 49 and 50, McLachlin J.A. held:

The traditional test for the granting of an interim injunction in British Columbia is two-pronged.

1. First, the applicant must satisfy the court that there is a fair question to be tried as to the existence of the right which he alleges and a breach thereof, actual or reasonably apprehended.

2. Second, he must establish that the balance of convenience favours the granting of an injunction.

 

The first step in determining where the balance of convenience lies is to examine the adequacy of damages as a remedy for the respective parties. In most cases, an interlocutory injunction should not be granted unless there is doubt whether damages would be an adequate remedy in the event the applicant succeeds at trial. In other words, it must be shown that the applicant may suffer irreparable harm in the sense that “the remedy by damages is not such a compensation as will in effect, though not in specie, place the parties in the position in which they formerly stood”: … If damages will be an adequate remedy, and if it appears that the alleged offender can pay them, the court is generally not justified in giving one party his remedy to the detriment of the other before the issues have been tried.

Spouse Not a Creditor Under Fraudulent Conveyance Act

Spouse Not A Creditor Under Fraudulent Conveyance Act Unless Separated At Death

Fraudulent Conveyance Act and Spouses

Mawdsley v Meshen 2012 BCCA 91 is a case where  the husband  contested the BC will of his wife under the Wills Variation act of British Columbia.

In particular, he attempted to have various estate planning steps taken by his deceased wife prior to her death, set aside as contrary to the Fraudulent Conveyance Act.

The Supreme Court found as a fact that the estate planning steps were taken with the knowledge of the husband, and were not done to defeat his potential claim

under the Wills Variation act, but rather for other, legitimate estate planning purposes.

The trial judge refused to allow the assets in the trust to become part of the estate and that decision was appealed.

On February 28, 2012 the Court of Appeal upheld the trial judge decision.

The BC  Court of Appeal held that transfers will be set aside under the Fraudulent Conveyance act only if they were made with the intention to defeat creditors, irrespective of the effect of the transaction, which is not in itself determinative.

The intention does not have to be of the fraudulent nature.

The court also considered whether the spouse is a “creditor or other” the same statute, and confirmed that unless the spouses are separated at the time of death, the spouse is not a creditor or other, and thus has no standing to claim under the Fraudulent Conveyance act.

Agreements Not to Revoke a Will

Binding agreementBinding Agreement Not to Revoke Will

Kayne v Wright et al  2012 BCSC 119 is an excellent example of “mutual wills” which on occasion arise in estate litigation disputes.

The general principle in law is that a will is always revocable.

Most married couples execute what are commonly known as mirror wills, as the wills are virtually identical but for the change of names between the testators.

In a mutual will situation however there must be evidence of an agreement not to revoke one’s will that must be  clear and unequivocal.

If the court finds that there was a binding agreement between the parties, and one of the parties subsequently revokes that will and executes another, then the beneficiaries of the revoked will have a claim in law for constructive trust against the offending testator’s estate and its beneficiaries.

In this case, the husband agreed to give his wife a life interest in a condominium, make provisions in his will giving her a life interest in another property he might own at his death, and transferring to her his registered retirement income funds.

In exchange, the female party agreed to use the condominium for maintenance and support during her lifetime and to make a will which provided for in your revocable gift of the remainder of her estate to the males estate after gift of $30,000 was paid to each of her children.

The court referred to each of their wills/codicil and noted for example that the male parties’ will contained the following words:

“and it is understood that this paragraph of my will shall be your revocable, this life estate being granted to my wife in consideration of the term in her will providing for the remainder of her estate, after gift of $30,000 paid to each of her children, to fall into my estate.

The wife had similar wording in her will.

The husband subsequently died and the wife shortly thereafter changed her will on two occasions prior to her death, and change the beneficiaries from her late husband’s estate, to her own new beneficiaries.

 

THE LAW AND ANALYSIS

 

[      The doctrine of mutual wills and the obligations flowing from them was discussed by Mr. Justice Cullity in Edell v. Sitzer (2001), 55 O.R. (3d) 198 (Ont. Sup. Ct. J.).  He stated at paras. 57-58:

[57]    ”  The doctrine of mutual wills has traditionally been applied in cases where individuals have made separate wills pursuant to an agreement with respect to their terms.  Most commonly, they have agreed that each will obtain a benefit under the other’s will and that other specified individuals will receive the property of each of them on the death of the survivor.  In some cases of this sort, the benefit obtained by the survivor under the other’s will has been a life interest; in other cases, it has taken the form of an outright gift.  Where the requirements for the application of the doctrine are satisfied, the survivor will not be permitted to defeat the agreement by revoking his or her will after the death of the other.  This result is achieved by the imposition of a constructive trust on the survivor’s estate for the benefit of those who were intended to benefit under the agreement. ( emphasis added)

[58]      The most fundamental prerequisite for an application of the doctrine is that there be an agreement between the individuals who made the wills.  It has been repeatedly insisted in the cases that:  (a) the agreement must satisfy the requirements for a binding contract and not be “just some loose understanding or sense of moral obligation” (Re Goodchild (Deceased), [1996] 1 All E.R. 670 (Ch. D.), at p. 681)[;] … [b] It must be proven by clear and satisfactory evidence; and (c) it must include an agreement not to revoke the wills.”

This doctrine was also discussed extensively by Madam Justice Southin for the Court of Appeal in Brynelsen Estate (Administrator of) v. Verdeck and O’Hara, 2002 BCCA 187 at paras. 14-29.

Witnesses Testify at Trial By Video Conference

video

Witnesses may testify in court proceedings by video conference.

disinherited.com recently had clients living in Australia who had an estate dispute here in British Columbia.

When it came time for the opposing counsel to ask the plaintiff’s pretrial questions under oath, such as in a deposition or examination for discovery, we agreed between counsel that we would do it by Skype and thus save literally thousands of dollars in travel expenses and the like.

It is simply a new way of thinking and using technology to greater benefit access to justice.

The recent decision of Slaughter v Sluys 2010 BCSC 1576, although not an estate litigation case, is a good example of such use of technology.

The plaintiff applied to have seven lay witnesses and four expert witnesses testify at trial by videoconference.

The application was opposed on the basis that it offends the principles of fundamental justice.

The plaintiff gave evidence that the videoconference testimony would save approximately $50,000 in expenses, and would markedly reduce the inconvenience experienced by the witnesses in traveling and testifying at the trial.

The court referenced section 73 (2) of the Evidence Act which provides that the court may allow a witness to testify by video conference unless the court is satisfied that receiving the evidence that way would be contrary to the fundamental principles of justice.

The criteria for the court to consider if one party objects are as follows:

A. The location and personal circumstances of the witness;

B. The costs that would be incurred if the witness had to be physically present;

C. The nature of the evidence the witness is  expected to give;

D. Any other circumstance the court considers appropriate

The court allowed four expert witnesses and two lay people to testify by video conference.

The court refused the others to testify by video on the basis that their evidence would likely be very contentious, and that none of them had provided the court with any indication that they would be personally inconvenienced or suffer hardship as a result of testifying.

The court stated that the new Rules of Court enacted in 2010 have a renewed emphasis on the just, speedy and inexpensive determination of a proceeding on its merits, which involves the consideration of proportionality.

The court acknowledged the great advances in the quality of communication via videoconferencing and found that it to be an acceptable and satisfactory method of receiving evidence from a witness, which is not inhibited the Court’s  assessment of credibility or the findings of facts.

disinherited.com applauds this decision and hopes that many other such decisions  from our courts will embrace  technology to allow greater and cheaper public access to our courts.

Court Ordered Medical Examinations

Jurisdiction of Court to Order Proposed Patient to Be Medically Examined

Temoin v Temoin 2011 BCSC 1727 concerned the mental incompetency of an 87-year-old wealthy businessman and a court order sought to have him medically examined.

The businessman’s daughter commenced and incompetence proceeding stemming from her discontent with changes made by her father to his will and estate plan.

She obtained the medical opinion of a geriatric psychiatrist who diagnosed her father with a mild uncomplicated dementia.

He considered the businessman to be incompetent.

It is a requirement for an application of committee-ship under the Patient’s Property Act that there be two medical examinations and medical opinions before the court

The petitioner brought an application that her father attended two medical examinations on certain terms and conditions.

As such, she had not filed the requisite two medical affidavits attesting to her father’s incapacity to manage himself or his affairs.

The court dismissed the application but held that it did have the inherent  jurisdiction to make the order sought, but this was not a case where that jurisdiction should be exercised.

The court noted that it had been well settled law for many years that the court cannot order a medical examination under the Patient’s Property act unless two medical affidavits, stating that the proposed patient is incapable of managing himself for his affairs, because of mental infirmity, have been produced.

The court does have inherent jurisdiction, however but it can only be exercised where legislation has not “occupied the field”, and where the exercise would not conflict with the governing statute.

The court noted that there had been a legislative gap in that one medical affidavit had been produced, but there was also in addition lay evidence attesting to the proposed patient’s memory and cognitive problems.

The court was of the opinion however that the evidence was lacking and in particular, there was little evidence that he was incapable of managing his affairs, or that anyone was taking financial advantage of him.

Lawyers Risk Much When Taking Contingency Fee Cases

Lawyers Risk Much When Taking Contingency Fee Cases

Contingency Fee Cases Are Risky for the Lawyer, with  very Little risk for the Client.

Contingency fee agreements with  a lawyer where the lawyer only earns a fee based on assets recovered, is commonly known as “the poor man’s key to the court room”.

The Ontario Court of Appeal in Indcondo Building v Sloan ( Feb.2012) held that law firms working under a contingency fee agreement do not have to post security for costs when representing cash strapped clients.

It is believed that the decision is also the first time the court has recognized the risk law firms face in being stuck with disbursement costs in contingency fee cases agreements and the significant barrier that could create for lawyers involved in them.

Mr. Justice Armstrong stated that as a matter of principle,” the lawyer who acts in a contingency fee basis is already carrying a significant risk of not being paid and, as in this case, being stuck with the cost of paying the disbursements”.

To force upon law firms the additional burden of posting security for costs would no doubt have a chilling effect on those lawyers who might otherwise make their services available on a contingency basis, thus creating another problem for the general public in its frustrated  access to justice.

The main defendant argued that  law firms in some circumstances should be required to post security for costs on behalf of the client.

They sought an order that the law firm pay into court $300,000 in security for costs of the action, and a further $75,000 in security for costs of the appeal.

In a sense, disinherited.com is of the view that the decision seems to say lawyers cannot be held responsible for their clients costs simply because they are representing clients in a contingency fee agreement.

The court appears to have made a policy decision of access to the courts, and therefore lawyer should not have to bear the financial burden of their clients cases, as if they had to do so, it would create a significant chilling effect upon the overall access to the courts by the public.

The decision seems to fall into line with the general rule that the courts rarely order lawyers to pay costs except in cases of misconduct.

disinherited.com strongly agrees with the reasoning of this decision and contingency fee agreements in principle as the “poor man’s key of the courtroom”.