Capacity in the Estate Context

I was invited to speak at a Law Society of Ontario CLE seminar that took place on October 30, 2012.  It featured many people who I consider some of the best practioners in this area.  My paper¹ analyzed whether Justice Cullity, in Banton v. Banton,² expanded the test on insane delusions.  At the actual presentation, Jordan Atin, the Chair of the program, asked Ian Hull and me to address a potpourri of issues.  My topics included capacity, undue influence, managing client expectations, and evidence in the context of estate disputes.  Ian Hull spoke on strategy in estate litigation among other topics.  At the conclusion of the seminar I received a number of requests to provide my notes or something more formal to those who enjoyed the presentation. They felt the time was short and wanted specifics of some of the source material I referred to for use in their practice.  This blog is, in part, a response to those requests and provides a review and sources for my comments on capacity and undue influence.

When challenging a will, testamentary capacity is often the key issue.  Let’s first review the seminal English case Banks v. Goodfellow³ which has been adopted in Ontario⁴.  This case stands for the proposition that the testator has testamentary capacity if:

1. the testator understands the nature of making a will and its effects;
2. the testator understands the extent of the property being disposed of;
3. the testator understands the nature of the act and its effects;
4. the testator appreciates the claims to which he or she ought to give effect; and
5. finally, no insane delusion influences his or her will in disposing of the property and brings about a disposal of which, if the mind had been sound, would not have been made.

In the authoritative text of Feeney’s Canadian Law of Wills⁵ the learned author answers the question “what is testamentary capacity” as follows, “To use the time-honoured phrase, a person must be “of sound mind, memory and understanding” to be able to make a valid will. When a will is contested on the ground of mental incapacity, the propounder must prove that the testator understood what he or she was doing: that the testator understood the “nature and quality of the act.” The testator must be able to comprehend and recollect what property he or she possessed, the persons that ordinarily might be expected to benefit, the extent of what is being given to each beneficiary and, finally, the nature of the claims of others who are being excluded.”

For the purpose of this blog I prefer not to revisit in detail the issue of delusions.  I have addressed that topic extensively in the paper I delivered at the CLE event which is available online for the reader at this link Insane Delusions – Has The Test Been Expanded?  Suffice to say that the test for delusions is two pronged. Firstly for a testamentary document to be set aside there must be a delusion.  For it to be a delusion the belief held must be one that no one could reasonably believe.  Secondly, mental disease is not enough.  For the will to be set aside the decision by the testator to disinherit a person must be rooted in the delusion.    It behooves us to remember that in Banks v. Goodfellow⁶ the testator believed that he was molested by evil spirits, but the will was upheld because there was no connection between the delusions and the dispositions made by the testator.

A very important question regarding the issue of testamentary capacity is at what time in the process is the capacity of the testator relevant?  The rule is set out in Parker v. Felgate – the key moment is the time the testator provides instructions.⁷  What is also important is that at the time of execution the testator needs a sufficient level of capacity to comply with the formalities of execution.⁸  A will may be set aside for failure to comply with the formalities of execution⁹.

A foundation point in these sorts of discussions is that the testamentary document should genuinely reflect the decisions of the testator¹⁰.  Was there coercion?  Did the testator know and approve of what was set out in the will?  These two issues are referred to as undue influence and “knowledge and approval”.  To be clear it may very well be that a person has testamentary capacity but the testamentary document can be set aside for other reasons.  For example, it may be set aside because of coercion and/or fraud (i.e. undue influence).  The testamentary document may be set aside because the testator did not understand the wording or there perhaps it will be rectified because there was an error when drafting the will such that the testator’s intentions were not set down accurately.  In that sort of case it is arguable that the testator did not know or approve of the testamentary document.  This topic of rectification is one that is beyond the scope of this blog, but merits careful review.  As a starting point, I refer the reader to Rectification – the Equitable Remedy to Fix Errors in a Will.

One basis for challenging the validity of a Will is the allegation of undue influence. If there are suspicious circumstances surrounding the testator then the normal presumption, that a Will is valid if properly executed, is rebutted.  It is now up to the person claiming that the new testamentary document is valid to prove that there was no coercion or undue influence on the testator.¹¹

The equitable doctrine of undue influence was developed¹²,not to save people from the consequences of their own folly but to save them from being victimized by other people. These cases may be subdivided into two groups.  In the context of a will challenge the question is whether there was any coercion by a beneficiary on the testator.   Whether the influence is “undue” is a matter of fact and there is arguably a sliding scale depending on the vulnerability of the testator and his/her dependence on the person exercising the influence.  Has the person being accused of exercising undue influence exercised some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, some sort of fraud?

The second group deals with disputes surrounding gifts that took place prior to the demise of the testator. At issue is whether the person accused of undue influence has gained some personal advantage because of the reliance of the done on the recipient of the benefit.  In Ontario, Canada those who are appointed as Attorney for Property are designated by statute as a fiduciary. Other parties may also be considered fiduciaries depending on the role they played in the testator’s lives¹³.  As articulated by Professor Waters in Law of Trusts in Canada, Second Edition (Carswell: 1984, Toronto): “It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside”.  So what happens when a fiduciary gets a gift?  There is a presumption of undue influence.¹⁴

Mr. Justice Cullity¹⁵ set out the following factors to consider in an undue influence claim:

• the willingness or disposition of the persons to have exercised undue influence;
• whether an opportunity existed;
• the vulnerability of the testator¹⁶;
• the degree of pressure that would be required;
• absence of moral claims of the beneficiaries;
• whether the will departs radically from the dispositive pattern of earlier wills.

When investigating if someone knew and approved of the testamentary document these are some red flags to watch for including blindness, illiteracy, inability to understand English,¹⁷ unexplained radical departure from previous wills, sequestration of testator, manipulative behavior by the main beneficiary to obtain all of the deceased’s assets, the presence of a new lawyer or the absence of independent legal advice, and whether statements or actions of the testator subsequent to the making of the alleged will were fundamentally inconsistent with its terms.

The capacity to grant or revoke powers of attorney and capacity to manage one’s property and personal care is a different test.  These disputes often arise when families wrestle over control of aging parents’ assets or the responsibility for their care.  Ever increasingly the behaviour of financial predators, caregivers, friends and family members lead to disputes regarding the capacity of seniors to make gifts and even the capacity to marry.  The latter becomes all the more significant because marriage can involve revocation of previous wills¹⁸, entitlement to property and support rights under Part II and Part V of the Succession Law Reform Act, R.S.O. 1990, c. S.26.  When discussing the different types of capacity it is important to remember that the definitions of capacity are task specific.  From highest to lowest they are:

1. 1. Testamentary capacity.¹⁹
   2. Capacity to manage property has a lower threshold than testamentary capacity.²⁰
   3. Capacity to manage personal care has a lower threshold than the capacity to make a will or  manage property.²¹
   4. The threshold for capacity to appoint or revoke a power of attorney is lower than the threshold for  testamentary capacity and or the capacity to manage property or personal care.²²
   5. Capacity to make a gift or enter into a contract is a sliding scale depending on the size of the  gift.²³
   6. The threshold for the capacity to marry seems to the lowest. I caution the reader that this may be subject to change and there are several excellent papers and books written that should be reviewed when confronted with this situation²⁴

This short blog was based on my notes, with respect to capacity, from the CLE event.  It is not meant to provide anything more than an overview of the topic on capacity as well as access to some of the very excellent books and papers on the topic.