Geffen v Goodman Estates
Tzina Goodman was a sufferer of mental illness and is now deceased. Her mother knew that she would require assistance and in her will provided a Tzina a life interest in her estate with the residue to be divided equally among all of her grandchildren. Upon the mother's death, it was discovered she has a new will which gave Tzina her entire estate. Under her mother's will, Tzina’s brothers each received bequests of $1000.
Due to Tzina's history with mental illness, the brothers were concerned that she would sell the family home and be left with nothing. Tzina and her brothers sought legal advice, however they came to no collective agreement on how to remedy the situation and their relationship fell apart.
Tzina continued to consult with the lawyer, Mr. Pearce, who advised her to put the family home into a trust where Tzina would have a life estate in the home, the trustees would sell the home upon Tzina’s request if it was in her best interest. The trust stipulated that upon Tzina’s death the trust property would be divided equally among her mother’s surviving grandchildren.
Tzina agreed to these terms and Mr. Pearce drafted the trust agreement in which Tzina’s two brothers and one nephew were the trustees.
Tzina died with her last will and testament leaving the entire estate to her children.
Was the presumption of undue influence properly applied by the Alberta Court of Appeal?
At the trial level, the plaintiff (Stacy - Tzina’s son) claimed Tzina entered the trust agreement as a result of undue influence by the defendants (Sam, Will & Ted - Tzina’s brother and nephew) and other brother Jack. Based on testimony by Mr. Pearce, and other witnesses, it was found brothers did not influence her to sign the agreement. The trial judge based this on the fact that there was minimal contact between Tzina and her brothers, and she did not rely on them in making the decision.
At the Alberta Court of Appeal, the respondent (Stacy) claimed that the trial court failed to recognize and address the presumption of undue influence. The Court of Appeal agreed and determined the first step for the presumption of undue influence was triggered, because the nature of the relationship was one in which dominance or influence could be exerted over one party by the other. The Court of Appeal determined the nature of the transaction was that of a gift, and all that was needed for the presumption to stand was the potential for dominance in the relationship. It was also noted that the life estate put her at a disadvantage. The appellants failed to rebut this presumption and the Court ruled in favour of the respondent.
The Supreme Court of Canada stated that the trial court erred in failing to look to the nature of the relationship to determine if it gave rise to the presumption of undue influence. The Court concluded the nature of the transaction was that of a gift, and therefore the presumption of undue influence stands.
However, contrary to the Court of Appeal, it was found that the appellants were successful in rebutting the presumption on the basis that there was little contact between the siblings during the relevant time. Tzina was not relying on her brothers to advise her and the prime motivation of the brothers was their sisters welfare. Furthermore, the court found that Tzina had received independent legal advice, since she had met with her lawyer without the presence of her brothers.
The appeal was allowed.
Inquiry for Undue Influence
Step One: The Nature of the Relationship
Must assess the relationship to determine if there is a potential for domination or dependency in the relationship.
Step Two: The Nature of the Transaction
Commercial relationships (where consideration is at play) must show that the contract was unfair; simply giving more than getting does not suffice. If an individual privy to the transaction is unduly disadvantaged or unduly benefits, this will be evidence towards the existence of undue influence. When dealing with gifts or bequests situations (no consideration), establishing step one is all that is required for the presumption to exist. The onus then shifts to the defendant to demonstrate that there was no undue influence on the plaintiff.
The Presumption of Undue influence
The presumption of undue influence is an equitable doctrine developed in the case, Allcard v Skinner, (1887) 36 Ch D 145. The courts have been reluctant to define undue influence, but generally if there is unfair and improper conduct and a degree of personal advantage obtained by the wrongdoer then a presumption of undue influence may arise. The reason for retaining the ability to set aside such contracts is that consent is vitiated and and to prevent the abuse of influence to the detriment of the plaintiff. In order to trigger the presumption of undue influence there must be a relationship which has the potential for domination or dependency.
- Geffen v Goodman Estate,  2 S.C.R. 353,  S.C.J. No. 53.
- Ibid at para 40.
- Ibid at para 43.
- Richard Oppong, “Contracts 3030: Undue Influence” (Lecture Delivered at the Faculty, Thompson Rivers University, 27 January 2014), [Unpublished].