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

Docket Number:21613

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 examination of the nature of the transaction. When dealing with commercial transactions a plaintiff must show in addition to the required relationship between the parties that the contract worked unfairness either in the sense that he or she was unduly disadvantaged by it or that the defendant was unduly benefited by it. This added requirement is justified when dealing with commercial transactions because a court of equity, even while tempering the harshness of the common law, must accord some degree of deference to the principle of freedom of contract and the inviolability of bargains. Moreover, it can be assumed in the vast majority of commercial transactions that parties act in pursuance of their own self-interest. The mere fact, therefore, that the plaintiff seems to be giving more than he is getting is insufficient to trigger the presumption.

By way of contrast, in situations where consideration is not an issue, eg., gifts and bequests, it is quite inappropriate to put a plaintiff to the proof of undue disadvantage or benefit in the result. The court is concerned that such acts of beneficence not be tainted and it is enough that the presence of a dominant relationship be established.

Once the plaintiff has established that the circumstances triggering the presumption, the onus moves to the defendant to rebut it.

A review of the circumstances between the deceased and her brothers at the relevant time disclosed a potential for the brothers to exercise a persuasive influence on their sister. The trust instrument was more akin to a gift or bequest than a commercial transaction and the existence of the required relationship without more was sufficient to trigger the presumption. It therefore had to be determined whether the presumption had been rebutted. A meticulous examination of the facts was necessary to make that determination.

The solicitor/client privilege belongs to the client alone. Confidential communications between them can only be divulged in certain circumscribed situations. The client may choose to disclose the contents of those communications and thereby waive the privilege or may authorize the solicitor to reveal them. The courts have assumed the role of ensuring that without the client's express consent a solicitor may not testify. An exception has developed, however, to permit a solicitor to give evidence in wills cases.

The considerations which support the admissibility of communications between solicitor and client in the wills context apply with equal force here. The general policy which supports privileging such communications is not violated. The interests of the now deceased client are furthered in that the purpose of allowing the evidence to be admitted is to ascertain her true intentions. And the principle of extending the privilege to the heirs or successors in title of the deceased is promoted by focusing the inquiry on who those heirs or successors properly are.

Appellate review should be limited to those instances where a manifest error has been made. Here there was no indication either from the reasons for judgment or from the record that the trial judge misapprehended the evidence or otherwise erred in the process of making his findings of fact. Accordingly, the Court of Appeal erred in overturning such findings.

Appellants successfully rebutted the presumption of undue influence given that there was very little contact between the brothers and the deceased at the relevant time, that the deceased was not in fact relying on her brothers to advise her, and that the prime motivation of the brothers was to advance their sister's welfare. It is also relevant that the deceased received some independent legal advice and that the agreement ultimately concluded was in accord with her wishes. In other situations the fact that the brothers took a leading role in the initial meeting with the lawyer might militate against a finding of independent advice.

The solicitor's advice was flawed in that he unfortunately did not inquire into the deceased's financial situation in any depth and did not ensure that she fully understood the agreement. The potentially adverse consequences of not having an asset which she could liquidate if necessary were offset by two important considerations. First, it was her express, and perhaps her primary, objective to put the sale of the house beyond her reach so that she could be assured of always having a home of her own. Second, it was also her wish that all her mother's grandchildren share equally in the estate. Given that the terms of the trust instrument reflected her wishes in those two fundamental respects, any imperfection in the legal advice obtained was not fatal to the appellant's case.

Trustees are entitled to be indemnified for all costs, including legal costs reasonably incurred. The trustees in this action acted reasonably. They were initially accused of having perpetrated a fraud against the deceased -- an allegation that did not win the approval of any of the courts that have heard...

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