One of the most interesting aspects of common law, which is in place in Canada, is that the courts play a role in shaping law through their decisions. This means that courts can (and should) look back on prior decisions in order to shape their own. In an issue that recently ended up before the Ontario Court of Appeal, a judge in Ontario has reached way back to a ruling from over a century ago.
A $25 million gift
The litigation stemmed from the fallout of a $25 million dollar gift made by a mother to the youngest of three children following the death of her husband (“the father”). The mother and father had mirror wills which called for their estate to pass to the surviving parent in the event that one of them dies, with the estate to be divided equally amongst the surviving children when the parents eventually both die.
The father was survived by the mother and their three children (Harvey, Harry, and Eddie), but before long the mother gave $25 million to Harvey while she was still alive. This gift represented more than half of the entire estate. Harry and Eddie challenged the gift on the basis of the Doctrine of Unconscionable Procurement (“the doctrine”). The doctrine, which dates back to the 19th century, states that when a significant transfer of wealth occurs, and the person on the receiving end had a hand in procuring it, then there is an onus for the recipient to “establish that the donor did so voluntarily and deliberately, knowing what he was doing.” This might sound similar, but it is different than the commonly used challenges which look at the mental capacity of the gift giver.
Applying the doctrine of unconscionable procurement
For the doctrine to apply, the court has to find that the gift was significant and that the recipient of the gift was “actively involved in the arrangements for and documentation of these transactions.” The amount of the gift ($25million) was clearly significant, and the court also found that Harvey was actively involved. Harvey delivered the documents to his mother for her to sign.
As a result of this, there was a presumption that the mother “did not truly appreciate the nature, effect and consequences of these transactions to render them fair and reasonable.” The mother’s doctor had met with her a number of times and talked to her about the gifts she intended to make. He concluded she was capable of making such large gifts.
While the challenge by Eddie and Harry was not successful, it was interesting to see the use of such an old and infrequently applied doctrine. We wonder if it will come up again. Rest assured, we’ll let you all know if it does.
Derfel Estate Law is a boutique estate litigation law firm. Our practice focuses on all aspects of estate disputes, as well as estate administration and probate. We act for beneficiaries, guardians, executors, trustees, and others. Our estate lawyers can help with a wide range of estate litigation matters. We can be reached at 1-844-2-DERFEL or online in order to schedule a consultation