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undue influence

Confusion about the test for Undue Influence

A case study of Seguin v Pearson

If someone coerces a will-maker to change his/her will that testamentary document is invalid because undue influence was exerted on the will-maker. That’s logical. If someone exerts undue influence on an elderly person to make a gift then it is also very logical for that gift to be deemed invalid because of undue influence. It might be logical to presume that the tests for undue influence in an inter vivos1 transfer or under a will should be the same. After all, coercion is coercion. Right? That’s what the trial judge thought in Seguin v. Pearson2. Ontario’s Court of Appeal disagreed.3

In this case the daughters of the deceased challenged their father’s will. He left the bulk of his estate to his common law wife. The daughters alleged that the common law wife exerted undue influence on their father and that coercion was the reason he changed his will.

The trial judge rejected the daughters’ attempt to invalidate their father’s two most recent wills, under which the common law wife was the principal beneficiary, and to set aside an inter vivos transfer of his house into joint tenancy with the common law wife. They appealed and the Ontario Court of Appeal dismissed their appeal and upheld the trial judge’s decision.

For the purpose of this blog we want to focus on one small part of the decision where the Court of Appeal disagreed with the trial judge notwithstanding their upholding of his decision. Relevant to our discussion the judge, at trial, made the following findings:

392 This is not a case where a caregiver, without more, ends up with the estate of the person being cared for. Were that the case a presumption of undue influence would loom large.

456 On all of the evidence I found that the Plaintiffs failed to prove on all of the evidence that Ms. Pearson exerted dominance over Mr. Paterson’s will, “by exercising a pervasive influence on him or her, whether through manipulation, coercion, or outright abuse of power. The onus is on the party claiming undue influence to prove affirmatively that such influence was, in fact, exerted by the other party expressly for the purpose of securing advantage.”

457 Had there been a showing of undue influence on a balance of probabilities, for the same reasons expressed herein I would have held that the presumption was readily rebutted, and in that regard the solicitor’s evidence would have been a particular refuge for so doing given my comments about their respective evidence. Recently in the decision of Foley v. McIntyre [2015 CarswellOnt 7680 (Ont. C.A.)],8 the Court of Appeal for Ontario in the context of gifting where there is a potential for domination in the relationship between a transferor and transferee, the presumption of undue influence applies, The court referenced Goodman Estate. The court noted that it was up to the transferee to establish on a balance of probabilities that the gift was the product of the transferor’s “full, free and informed thought,” (see: Goodman Estate). The court farther noted: Evidence that the transferor received qualified independent advice can be used to rebut the presumption

It appears as if the judge was suggesting that if there exists suspicious circumstances the onus would have switched to the person propounding the will. It appears as if the trial judge was saying that in those circumstances the propounder would have had to prove that there was no undue influence. Apparently, the trial judge understood that the rebuttable presumption of undue influence also existed in the context of a will-maker’s decision making process.

The Court of Appeal stated that the appellant and the trial judge mischaracterized the test for undue influence for testamentary gifts regarding a rebuttable presumption. This rebuttable presumption arises only in context of inter vivos transactions and once this presumption is established, the onus shifts to the transferee to rebut the presumption (Banton v Banton)4. For testamentary gifts, there is no presumption and no shift in the onus.

To appreciate the importance of this distinction let’s quickly review the law on this point.

Burden of Proof

There is no presumption of undue influence in the testamentary context. The onus of proving undue influence and suspicious circumstance lies with the person attacking the testamentary document. For testamentary capacity, this evidentiary burden never shifts with the exception of British Columbia under s.52 of the Wills, Estates and Succession Act.

However in an inter vivos transfer, the evidentiary burden does shift. The onus shifts to the person upholding the inter vivos transfer to rebut the claim of undue influence.

Standard of Proof

The standard of proof for proving both testamentary undue influence and undue influence in an inter vivos transfer is a balance of probabilities. In the 1995 Supreme Court of Canada case Vout v. Hay, the court stated that “the extent of proof required is proportionate to the gravity of the suspicion.”5 However, the more recent 2008 Supreme Court of Canada case C(R) v. McDougall6 held that in civil cases there is a single standard of proof which is the balance of probabilities. The level of scrutiny of the evidence does not change depending on the gravity of the allegations.

In Kohut Estate v Kohut7, the court applied the standard of proof relating to undue influence stating that “the proof of undue influence does not require evidence to demonstrate that a testator was forced or coerced by another to make a will…one must look at all of the surrounding circumstances…”

Below is a chart the different tests of undue influence depending on the context:

Testamentary capacity Inter vivos trust
Coercion Actual and presumed
Burden rests on with challenger of will Burden rests on the person challenging the gift, but that changes once presumption is established. At that point there is a shift in onus to person alleging valid gift to rebut – presumption casts evidential burden (not legal one). It is important to remember that this is only a rebuttable presumption. Once triggered the person defending the validity of the gift has the onus to prove on a balance of probabilities that the gift was valid.
Balance of probabilities Same
Interplay between capacity and suspicious circumstances None

In Seguin, the trial judge erred in his articulation of the test for undue influence relating to testamentary capacity.8 As stated in Para 12, “the trial judge appears to have erroneously conflated the test for undue influence that applies to inter vivos transfers with the relevant test in relation to testamentary gifts.” However, even though the judge applied the inter vivos standard, the conclusion he made would have been the same if he used the proper test.

It is important for lawyers to understand the difference between undue influence in the context of a testamentary disposition and undue influence in inter vivos transfers. As set out in the chart, undue influence both in the context of will making and inter vivos transfers requires coercion. However, in the context of an inter vivos transfer there is a presumption triggered under certain circumstances that shifts the onus onto the party defending the gift to prove an absence of coercion.

So one might ask the question why bother focusing on this aspect of the Court of Appeal decision. Why should anyone care about this nuanced point of law? After all, the Court of Appeal upheld the key issue in the trial judge’s decision. They agreed with the trial judge that the wills and inter vivos gifts were valid. The problem is what happens with the next case where the will challenger alleges undue influence and can point to suspicious circumstances.

In a regular will challenge it is up to the will challenger to prove a testamentary document is invalid on the balance of probabilities. S/he must garner evidence to show incapacity or a lack of knowledge and approval or undue influence. It’s not easy because section 13 of the Evidence Act requires that

In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.

That’s why most will challenges fail.9 For the sake of argument let’s play out what would happen if the trial judge was correct. The onus switches because the presumption of undue influence is triggered in testamentary situations. Now the propounder of the will has the onus. It may very well make will challenges easier because there is a presumption that undue influence was exerted. By rejecting that proposition the Court of Appeal put that idea to rest.

Footnotes
  1.   Inter vivos means a gift or legacy made between living people.
     
  2.   2016 CarswellOnt 17438, 272 A.C.W.S. (3d) 673.
     
  3.   2018 CarswellOnt 5617, 2018 ONCA 355.
     
  4.   (1998), 164 D.L.R. (4th) 176 (Ont. Ct. (Gen Div.)), at p. 209
     
  5.   Ibid Para. 24
     
  6.   7 2008 SCC 53 (SCC) cited in Hoffman v. Heinrichs, 2012 MBQB 133, 2012 CarswellMan 242 at Para. 34
     
  7.   Kohut Estate v. Kohut (1993), 90 Man R (2d) 245 (Man QB) at Para 38, citing in part Hall v Hall, (1968) LR 1 P&D at Para. 38.
     
  8.   Ibid 1 Para 12
     
  9.   See Susan J. Stamm, “Setting aside the will,” 9th Annual Estates and Trusts Summit, Law Society of Upper Canada, November 2, 2006.
     

Charles Wagner and Kim Gale

The authors of this blog are Charles Wagner and Kim Gale. Charles is a Certified Specialist in Estates and Trusts and a partner at Wagner Sidlofsky LLP. Kim was an associate and a member of the firm’s Estate and Commercial Litigation Groups.

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

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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