Reaching Back Into the Archaic History of the Law to Find a Remedy for a Modern Situation
Over the last number of years, a recurring problem that seems to be more common every year is dealing with family situations where one child is benefitted disproportionately compared to that child’s siblings. This situation of perceived or actual unfairness can be found in Wills or in gifts that are made before death. The usual scenario is a frail and elderly parent and a child that arguably missuses his or her relationship with their parent to acquire a disproportionate amount of the parent’s assets.
In the context of Wills, the usual remedies are to attack the Will and claim that the Will is invalid as it was authored under the undue influence of the child. Undue influence being equivalent to coercion and often allegations of mental frailty up to and including lack of testamentary capacity, are part of the claim made by the other siblings against the disproportionally benefitted sibling.
In gift situations, the intention to make a gift is often attacked on the basis of undue influence amounting to coercion to reverse the gift and restore the assets to the parent.
In both of these situations the mental acuity of the parent is in question and medical evidence is often marshalled to explain why the parent either did or did not understand or did not want to make the disproportionate gift to the one child and not treat all their children equally. Most people perceive that to be the fair and normal result.
There is always difficulty in these situations when it can be shown that the parent did indeed have the appropriate level of mental capacity and could form the intent to either make the gift or draft the Will with the disproportionate gift. As well, proving coercion is difficult as evidence is hard to obtain since such transactions take place under a veil of privacy and secrecy. So does the story end if there is capacity and no coercion?
However, our legal system has an interesting history. Until the late 19th Century, there were two legal systems that applied in England and hence in Ontario and the remainder of common law Canada. There was the law, or the common law as it is often referred to. The common law was a rigid system of defined rules that offered little innovation in terms of remedies for family and other relationships that were not “normal”. To relieve this rigidity and unfairness and to offer remedies for unusual situations there was a parallel system of rules that developed out of the right of appeal to the crown, eventually to the Lord Chancellor, to access royal/legal discretion to create remedies for unusual situations and to do “justice”. This system of rules evolved into a system of the law called equity and equity was more concerned with the conduct of persons as opposed to property rights and contracts which were the focus of the common law.
Equity was and is concerned with fairness, morality and unconscionability. These two systems of law, equity and the common law, were merged in the late 19th Century but the equitable remedies that may seem to be a bit of a historical artifact still exist. Back to the issue of gifts that disproportionally benefit one member of the family.
In the recent case of Gefen v. Gaertner[i] an old remedy in equity was used to set aside transactions amounting to almost Eight Million Dollars ($8,000,000.00) that favoured one child which the remaining children considered to be unfair. The remedy is known as “unconscionable procurement” and it applies in situations where it would be unconscionable to allow a significant gift to stand when the recipient of the gift was instrumental in causing the gift to occur and the maker of the gift did not truly appreciate what they were doing. It is also known as the rule against large donations without proper understanding.
Interesting, this remedy is not predicated on proving any lack of capacity or undue influence. It just considers whether an otherwise valid gift can be voidable because it was unconscionably produced by the recipient of the gift. The court found in the Gefen case that the elements required to obtain the remedy were proved as the child in question procured a number of gifts, influencing but not unduly influencing, his elderly mother; who did not fully appreciate the consequences of the transactions and such transactions being found to be unfair and unconscionable.
To conclude, it may well be possible to set aside a gift even though the donor of the gift had the capacity to make the gift and was not unduly influenced if the gift was procured by the recipient of the gift and the result was unconscionable having regard to all of the circumstances and the family situation in question.
[i] Gefen v. Gaertner, 2019 ONCA 233