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The Court of Appeal’s comments on undue influence in the context of a power of attorney dispute

Vanier v. Vanier1

This is the second blog we have written about the Court of Appeal for Ontario’s decision in Vanier. The first blog dealt with the court’s comments regarding the propriety of capacity assessors opining on whether undue influence was exerted on the deceased.2   This blog will deal with undue influence in the context of a power of attorney dispute.

Let’s discuss the facts of the case before we review the Court of Appeal’s analysis of the law.

In this case, Rita was 90 years old. In September 2011, Rita designated her daughter Patricia as her attorney for property. There were allegations that Patricia diverted monies from her mother’s account. That led to litigation which was ultimately settled. Patricia agreed to pay her mother $300,000 and Rita signed a new power of attorney in 2013 where she appointed her two sons jointly and severally as attorneys for property. Unfortunately, the two sons did not trust one another and could not work together. Raymond felt Pierre spent some money and could not show it was for Rita’s benefit. Raymond took steps to put Rita’s funds out of Pierre’s unilateral reach.

What steps did Raymond take? First, there was the $300,000 owed to Rita from her litigation with her daughter Patricia. Raymond, in his capacity as attorney for property, told Patricia’s lawyer not to pay the money to Rita. The bulk of the balance of Rita’s money was in a company of which Rita and her two sons were directors. Given the family’s acrimonious history the bank required all three directors to sign off to unfreeze the accounts. Raymond’s refusal to sign off and unilateral action with the settlement funds left Rita unable to pay her bills. Rita was desperate so she signed a new power of attorney in 2015 appointing only Pierre in the hopes of Pierre getting Patricia’s lawyer to release the settlement funds. Rita and Pierre held a shareholders meeting and by a 2-1 vote removed Raymond as a director.

Raymond argued that his brother Pierre exercised undue influence over their mother to appoint Pierre as the sole attorney for property. He pointed out that Pierre dominated and controlled Rita. He has paid the bills and had performed all the bookkeeping for Rita. According to Raymond, his mother was terrified because Pierre told her that if she did not appoint Pierre as sole attorney for property Raymond would block her from having access to any of her money. Fearing eviction from her retirement home, Rita signed the resolution and the 2015 Power of Attorney.

One of the key issues in Vanier was whether and how the doctrine of undue influence applied to Power of Attorney disputes. To understand Vanier, one must appreciate that the doctrine of undue influence is not applied exactly the same where someone challenges a Will as when someone challenges an inter vivos gift.   To the parties in Vanier, the issue was the validity of a power of attorney and which party had the onus to prove its case. Raymond argued that the application of the doctrine of undue influence in an inter vivos gift context applied to the power of attorney dispute context.

A good way to start our discussion is to review some of the seminal case law on “undue influence” in the estate context.

Undue Influence in the context of a Will Challenge.

The seminal case regarding undue influence is the Supreme Court of Canada decision of Vout v. Hay which defined the doctrine as follows:

“Undue influence, in order to render a will void, must be an influence which can justly be described by a person looking at the matter judicially to have caused the execution of a paper pretending to express a testator’s mind, but which really does not express his mind, but something else which he did not really mean.”3

In Scott v. Cousins4 Justice Cullity explained, in the context of a Will challenge, the principles of the doctrine of undue influence set out by the Supreme Court’s decision in Vout v. Hay.

  1. The person propounding the will has the legal burden of proof with respect to due execution, knowledge and approval and testamentary capacity.
  2. A person opposing probate has the legal burden of proving undue influence.
  3. The standard of proof on each of the above issues is the civil standard of proof on a balance of probabilities.
  4. In attempting to discharge the burden of proof of knowledge and approval and testamentary capacity, the propounder of the will is aided by a rebuttable presumption.
  5. Upon proof that the will was duly executed with the requisite formalities, after having been read over to or by a testator who appeared to understand it, it will generally be presumed that the testator knew and approved of the contents and had the necessary testamentary capacity. This presumption “simply casts an evidential burden on those attacking the will.”5
  6. The evidential burden can be satisfied by introducing evidence of suspicious circumstances – namely, “evidence which, if accepted, would tend to negative knowledge and approval or testamentary capacity. In this event, the legal burden reverts to the propounder.”
  7. The existence of suspicious circumstances does not impose a higher standard of proof on the propounder of the will than the civil standard of proof on a balance of probabilities. However, the extent of the proof required is proportionate to the gravity of the suspicion.
  8. A well-grounded suspicion of undue influence will not, per se, discharge the burden of proving undue influence on those challenging the will:

The motion judge who originally heard this matter had this to say about undue influence,

“In general, to establish undue influence, the burden of proof rests with the party alleging it. The extent of the influence must amount to coercion; simple influence is not enough.  The testator’s free will must be overborne.  Put another way, it is not improper for any potential beneficiary to attempt to influence the decision of the testator provided the pleading does not amount to coercion and the latter continues to act as a free agent.  “Some begging is permissible.”  See Feeney’s Canadian Law of Wills, 4th Ed. at 3.10 to 3.14; Hall v. Hall (1868), L.R. 1 P. & D. 481.”6

One of the issues in Vanier was the Appellant’s argument that the judge hearing the motion applied the wrong test for undue influence. A lot turns on this issue. The doctrine of undue influence has different applications depending on the context. This includes whether there is a presumption of undue influence, the onus of proving one’s case, under what circumstances is the onus reversed and whether the document in question is void or voidable. Bottom line – there was a lot at stake.

The motion judge adopted the reasoning in Nguyen7 for the proposition that the doctrine of undue influence when someone challenges a power of attorney is the same as in a Will challenge.8

In Nguyen the person to whom the power of attorney was granted (the “Grantee”) successfully argued that just like in the context of a Will challenge, the onus of proving that there was undue influence fell on the person challenging the power of attorney. In our case Rita and Pierre argued that Nguyen was good law and accordingly, just as in the context of a Will challenge, the burden to prove that that power of attorney was invalid fell on Raymond. Raymond appealed that finding. To appreciate the reason for the appeal, one has to understand the difference between the application of the doctrine of undue influence in the context of a Will challenge and in the context of a challenge to an inter vivos gift.

Undue Influence in the context of an inter vivos gift

Raymond argued that Nguyen was bad law. According to Raymond, when arguing about the validity of a power of attorney, the test for undue influence should be the same test as when an inter vivos gift is challenged as opposed to when a Will is challenged. The effect of the inter vivos test would be to shift the onus to Pierre to prove that Rita signed the 2015 power of attorney for property, willingly and without undue influence. For example, in Laird v. Mulholland (1998), 21 E.T.R. (2d) 204 (Ont. Gen. Div), a woman gave her attorney for property a gift of $10,000. Since the attorney was a fiduciary bound only to act in the interests of that woman, there was a presumption of undue influence and the attorney had to show that the women gave the gift on the basis of her own “full, free and informed thought.”

Burden of proof is the key difference between the doctrine of undue influence in the estate and inter vivos contexts. Another key difference is what happens if a court finds that undue influence was exerted.

Undue influence can render the gift of wealth transfer voidable. That means that a court has discretion to void or not void the gift. Contrast this with a Will challenge where if the Will came about as a result of undue influence the Will is void.9 There are two types of undue influence and the difference lies in who bears the onus of proof. Actual undue influence can happen with anyone who effectively forces another person to make a gift. In that case it’s up to the person challenging the gift to prove their case. But, where there is a relationship in which the gift giver is dependent on the receiver of the gift (like an elderly parent being dependent on a child), then there is a rebuttable presumption of undue influence which can be rebutted.

How was the doctrine of Undue Influence applied in Vanier?

So the issue in our case was which test applied when there is a power of attorney fight and the allegation of undue influence has been raised. Would the burden of proof fall on Raymond who was the person who challenged the new power of attorney (like in the case of a testamentary document) or would it fall on Pierre (like in the cases of an inter vivos gift)?

Raymond argued that, just like there is a presumption of undue influence that exists under certain relationships, so too does it exist with respect to power of attorney disputes. According to Raymond, Pierre dominated his mother and based on that relationship the onus was on Peter to prove that Rita made Pierre the attorney of property as a result of the maker’s “full, free and informed thought.” The motion judge disagreed and found the correct test when dealing with undue influence and a power of attorney was the same as testamentary undue influence. In other words – just like it’s up to a will challenger to prove the Will is invalid so too it’s up to the person challenging the power of attorney to prove it’s invalid. Rita and Pierre argued that the motion judge was right.

The motion judge who first heard the case stated as follows:

[12] I do not think the evidence warrants the conclusion that there are suspicious circumstances.  Raymond relies on Pierre having drafted the power of attorney and getting his mother to sign it without the benefit of independent legal advice.  Given the capacity assessor’s opinion that Rita had capacity to execute a power of attorney, I do not think this particular fact bears much weight in the circumstances.

Paragraph 12 of the motion judge’s decision is key. Had the judge agreed with Raymond, he would have to find that the nature of the relationship between Pierre and Rita gave rise to a presumption of undue influence just like if Rita gave a gift to Pierre.   However, in this case, the motion court judge looked to the facts of the case to see if there were suspicious circumstances. Apparently, in his view there was no presumption of undue influence because of the relationship. So according to the Court of Appeal the test in a power of attorney fight does not include a presumption of undue influence that arises because of any fiduciary relationship or dominance of the grantee over the grantor.

So if the motion judge was right would the burden always be on the person challenging the attorney for property? The motion Judge found that there is no reason why this reasoning should not apply equally to Powers of Attorney under the doctrine of “suspicious circumstances.”

So why does it matter? Every litigator leads trump. They search and produce their best evidence. The issue is that often the evidence presented to a judge is really a mixed bag which does not definitively prove the plaintiff’s or defendant’s case. The judge makes the decision on the civil burden of the balance of probabilities. So if there is a tie – the person on whom the onus rests loses.

So what did Ontario’s Court of Appeal say about suspicious circumstances and the evidentiary burden in power for attorney disputes? In paragraph 56 of Vanier the Court of Appeal said,

Pursuant to s. 2 of the SDA, a person is presumed to be capable of granting a power of attorney for property. However, s. 2(3) states that a person cannot rely on this presumption if “he or she has reasonable grounds to believe that the other person is incapable of entering into the contract or of giving or refusing consent”. As held in Nguyen, where there are suspicious circumstances of undue influence surrounding the granting of a power of attorney, the presumption of capacity does not operate, and the burden of proof with respect to capacity shifts to the grantee of the power of attorney.

On whether the evidentiary issue was like a Will challenge or like an inter vivos gift where there is a relationship of dominance, the Court of Appeal said:

… I do not see this appeal as an appropriate one in which to consider the application of the doctrine of suspicious circumstances to powers of attorney as a whole. In front of the motion judge, counsel for Rita dealt with Nguyen briefly, arguing that as Pierre had gained no benefit under the 2015 CPOAP, the doctrine of suspicious circumstances did not apply. As I read the transcript, counsel was not suggesting that the doctrine of suspicious circumstances could never apply in the context of powers of attorney, or that Nguyen should not be followed.

Moreover, I agree with Rita that Raymond’s argument is simply a challenge to the motion judge’s findings of fact leading to his conclusion that there were no suspicious circumstances surrounding Rita’s signing of the 2015 CPOAP. I see no basis to interfere with this finding.

Vanier brings some increased clarity to this issue. The test for undue influence in the context of a power of attorney dispute has been settled. The same test applies to both a Will challenge and a power of attorney challenge. Just like there is a rebuttable presumption that a Will is valid when there is compliance with the formalities of execution, so too there is a rebuttable presumption that the grantor has capacity to grant a power of attorney. Just like the onus to prove one’s case switches when there are suspicious circumstances in a Will challenge, so too does the onus switch in a power of attorney dispute. When there are suspicious circumstances, it’s up to the propounder of the Will/Grantee of the power of attorney to prove there is no undue influence.

 

You May Also Like:

  1. The Court of Appeal’s comments on capacity assessments and undue influence
  2. Are presents given to powers of attorney kosher?

 

Footnotes
  1.   Vanier v. Vanier, 2017 ONCA 561 (“Vanier”) which can be found online at http://bit.ly/CanLII_2017_ONCA_561
     
  2.   See https://www.wagnersidlofsky.com/vanier-v-vanier.
     
  3.   Vout v. Hay, 1995 CarswellOnt 186 (S.C.C.) at para. 29 (emphasis added), quoting Craig v. Lamoureux, (1920) A.C. 349 per Viscount Haldane.
     
  4.   2001 CarswellOnt 50.
     
  5.   In a Will challenge the propounder of a Will must only show that the Will was properly executed. The protocol for proper execution is set out in section 4 of the Succession Law Reform Act. It provides that a Will is not valid unless, at its end it is signed by the testator in the presence of two or more attesting witnesses present at the same time. If the propounder presents a Will that appears to be signed by the testator and two witnesses there is a rebuttable legal presumption that that the Will was properly executed with the knowledge, approval and testamentary capacity of the testator.See section 4 of the Succession Law Reform Act, R.S.O. 1990, c. S.264 (1) Subject to sections 5 and 6, a will is not valid unless,
    (a) at its end it is signed by the testator or by some other person in his or her presence and by his or her direction;
    (b) the testator makes or acknowledges the signature in the presence of two or more attesting witnesses present at the same time; and
    (c) two or more of the attesting witnesses subscribe the will in the presence of the testator.
    Idem
    (2) Where witnesses are required by this section, no form of attestation is necessary.
     
  6.   See paragraph 10 of the decision found online on Canlii at http://bit.ly/CanLII_2016_4620
     
  7.   Nguyen-Crawford v. Nguyen, 2010 ONSC 6836 (CanLII), <http://canlii.ca/t/2dv3k>.
     
  8.   See paragraph 93 in Nguyen. Of interest was footnote 16 of the decision which references Knox v. Burton (2004), 6 E.T.R. (3d) 285, 2004 CarswellOnt 1227 (ON. S.C.), affirmed (2005), 14,  E.T.R. (3d) 27 (ON. C.A.). In Knox Ratushny J. did not reject the applicant’s argument by analogy from cases dealing with suspicious circumstances surrounding the preparation and execution of a Will.
     
  9.   See the article “UNDUE INFLUENCE CHECKLIST” which can be found online at http://bit.ly/undue_influence_checklist
     

Charles Wagner and Gregory Sidlofsky

The authors of this blog is Charles Wagner and Gregory Sidlofsky. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP. Gregory is a Certified Specialist in Litigation by The Law Society of Upper Canada and partner at Wagner Sidlofsky LLP.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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