Geffen v. Goodman Estate, [1991] 2 S.C.R. 353 (1991)

Supreme Court of Canada

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Geffen v. Goodman Estate, [1991] 2 S.C.R. 353 (1991)

Geffen v. Goodman Estate, [1991] 2 S.C.R. 353

Ted M. Geffen, Sam E. Geffen and William A. Geffen Appellants v.

Stacy Randall Goodman, Executor of the Estate of Tzina Burnette Goodman (otherwise known as

Zinna Burnette Goodman), and the said Stacy

Randall Goodman Respondents

Indexed as: Geffen v. Goodman Estate

File No.: 21613.

1990: October 10; 1991: June 27.

Present: Wilson, La Forest, Sopinka, Cory and McLachlin JJ.

on appeal from the court of appeal for alberta

Trusts and trustees -- Undue influence -- Woman placing property in trust -- Step to create trust initiated by settlor's brothers -- Settlor suffering mental problem and at times dependant on brothers -- Trust directing how property to be disposed of on settlor's death -- Settlor bequeathing property other than as provided by trust -- Whether presumption of undue influence applicable.

Costs -- Trustees -- Action started to defend against allegation of fraud on part of trustees -- Action successful -- Whether trustees entitled to costs out of the trust property.

The deceased, a woman with a history of mental problems, inherited the family home from her mother as well as a life interest in the residue of her mother's estate which was to pass on her death to her children. Her brothers were given cash bequests. An earlier will had given the deceased a life estate and directed that on the mother's death the estate was to be divided among all the mother's grandchildren. The brothers sought legal advice as to whether the later will was valid and arranged a meeting between the lawyer, their sister and themselves to canvass the options. One of their concerns was that their sister would sell the house and they would ultimately be financially responsible for her care. The meeting disbanded with no agreement being reached and the sister from then on had only casual contact with her brothers. She continued to seek the lawyer's advice, however, and a trust deed was executed. The house was conveyed to trustees on terms that the deceased retained a life interest in it and that on her request the trustees would consider a sale of the property so long as the sale was in her best interests. The trust deed further provided that upon her death the trust property would be divided equally among the surviving grandchildren of the deceased's mother. The deceased's will left her entire estate to her own children.

This appeal concerns the validity of the trust agreement. It was found to be valid at trial but invalid on appeal because of the operation of the presumption of undue influence. Costs were denied. At issue here was (1) whether the presumption of undue influence was properly applied by the Court of Appeal; and, (2) whether the trustees were entitled to costs out of the trust property.

Held: The appeal should be allowed.

Per Wilson and Cory JJ.: Neither the result nor process focused approach to the doctrine of undue influence fully captures its true purport because the doctrine applies to such a wide variety of transactions from pure gifts to classic contracts. In the case of gifts, the process leading up to the gifting should be subject to judicial scrutiny because there is something completely repugnant about the judicial enforcement of coerced or fraudulently induced generosity. With respect to contractual relations, however, it has long been the view of the courts that the sanctity of bargains should be protected unless they are patently unfair. Something more than a tainted process, e.g., detrimental reliance, must be shown.

"Influence" refers to the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power. To dominate the will of another simply means to exercise a persuasive influence over him or her. The ability to exercise such influence may arise from a relationship of trust or confidence but it may arise from other relationships as well. There is nothing per se reprehensible about persons in a relationship of trust or confidence exerting influence, even undue influence, over their beneficiaries. It depends on their motivation and the objective they seek to achieve thereby.

The requirement of "manifest disadvantage", while perhaps appropriate in a purely commercial setting, limits the doctrine of undue influence too much. In the case of gifts or bequests, it makes no sense to insist that the donor or testator prove that their generosity placed them at a disadvantage.

The inquiry should begin with an examination of the relationship between the parties. The first question to be addressed in all cases is whether the potential for domination inheres in the nature of the relationship itself. This test embraces those relationships which equity has already recognized as giving rise to the presumption as well as other relationships of dependency which defy easy categorization.

Given the requisite type of relationship to support the presumption, the inquiry must next involve an examinat...

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