An earlier WEL blog (http://welpartners.com/blog/2019/11/the-doctrine-of-unconscionable-procurement-gefen-v-gaertner/) was written on the case of Gefen v. Gaertner,[1] which dealt with the importance of providing an expert with a full complement of relevant facts and documents in relation to an assessment. This case is of relevance for a second reason however.
A new tool to challenge gifts appears to have emerged for use in Ontario. More precisely, a tool that has remained dormant for just over 100 years has been revived. The doctrine of unconscionable procurement was developed in English Courts of Equity during the 1800’s and, along with equitable undue influence, became one of the mainstays when a disgruntled heir wished to re-fill an emptied estate by overturning inter vivos gifts made by the will-maker. The lead case in England was Cooke v. Lamotte.[2] Also of note in the string of English cases on point are Anderson v. Elsworth,[3] Earl of Aylesford v. Morris,[4] Hoghton v. Hoghton,[5] Phillipson v. Kerry,[6] Allcard v. Skinner,[7] Pitt v. Holt.[8] The doctrine became part of the law of Ontario. The lead Ontario decision became Kinsella v. Pask,[9] but the doctrine was also dealt with in Lavin v. Lavin,[10] Smith v. Alexander,[11] Trusts & Guarantee Co v. Cook,[12] Crippen v. Ogilvie,[13] Dmyterko Estate v. Kulikowsky,[14] Houston v. London,[15] Vanzant v. Coates,[16] Kudlaciak v. Trela,[17] and in Dmyterko Estate v. Kulikowsky.[18]
After the fusion of law and equity, unconscionable procurement gradually fell from use. It then sat dormant, part of the law of Ontario but not applied.
That has now changed with the case of Gefen, the Honourable Justice Kimmel revived the doctrine, considered its history and application over extensive reasons for decision on point, and applied it to reverse more than $8M of gifts and other inter vivos wealth transfers.
The doctrine is best expressed by the Ontario Court of Appeal in Kinsella v. Pask as follows:
In every case where a person, to his own advantage, but to the prejudice of the giver, obtains by donation some substantial benefit, he is bound to prove clearly, not only that the gift was made, but that it was the voluntary, deliberate, well-understood act of the donor, and that the donor … did appreciate its effect, nature, and consequence.”[19]
The doctrine is predicated on the idea that it is unconscionable to allow a significant gift or other inter vivos wealth transfer to stand where the recipient was instrumental in causing it to occur and the maker did not truly appreciate what he or she was doing. It can also be referred to as the rule against large donations without proper understanding.[20] The doctrine applies and the presumption is triggered if and only if the wealth transfer is said to be “significant” or “improvident”.[21]
The legal onus is on the party attacking the transaction to prove, on the civil standard of a balance of probabilities and, at the close of evidence, must convince the court that the gift or other wealth transfer was procured without conscionable understanding on the part of the maker.[22]
Once the basic elements that trigger the presumption have been established by the attacker (a significant benefit and the active involvement on the part of the person obtaining that benefit in the procurement or arrangement of the transfer)[23] then there is a presumption that the donor of the gift did not truly understand what he/she was doing in making the transaction. The court is to look at the impugned transactions with its moral sense awakened and with a view to determining whether it would be unconscionable to allow the transaction to stand.
The doctrine has nothing to do with the essential validity of the wealth transfer (which is capacity, intention and the mechanical elements necessary to the transaction, such as delivery). It takes an otherwise valid inter vivos wealth transfer and allows the court to hold it to be unconscionable.[24] This equitable doctrine does not require proof of incapacity or undue influence to operate.
At issue is the maker’s necessary level of understanding to make a transaction conscionable when it takes place in circumstances that suggest, on a prima facie basis, the contrary. It is a matter of flawed intent.[25]
Unconscionable procurement is not the same as equitable undue influence. It is a cousin in equity, but is invoked by different fact patterns and requires a different character of evidence to meet it. It focuses on understanding, not on vulnerability.
The decision in the Gefen case has been appealed as it relates to mutual wills, but no appeal was launched relating to unconscionable procurement. The decision is here to stay.
One of our lawyers at WEL, John Poyser, has written a 47-page chapter outlining the history, scope, and modern application of unconscionable procurement (See John E.S. Poyser, Capacity and Undue Influence, 2nd ed (Toronto: Thomson Reuters Canada, 2019), at pages 627-674).
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[1] Gefen v. Gaertner, 2019 ONSC 6015 [“Gefen”]
[2] Cooke v. Lamotte (1851), 51 E.R. 527, 15 Beav. 234 (Eng. Ch.D.)
[3] Anderson v. Elsworth (1861), 66 E.R. 363, 30 L.J. Ch. 922, 3 Giff. 154 (Eng. V.-C.)
[4] Earl of Aylesford v. Morris (1873), (1872-73) L.R. 8 Ch. App. 484 (Eng. Ch. App.)
[5] Hoghton v. Hoghton (1852), 15 Beav. 278, 51 E.R. 545 (Eng. Rolls Ct.)
[6] Phillipson v. Kerry (1863), 32 Beav. 628, 55 E.R. 247 at p. 637 [Beav.] ( in setting aside the transaction in this case on the basis that the gift maker did not understand the whole nature and effect of the deed, the court went one step further to state that the gift maker needed to understand the implications of the transaction that were key, not just a general understanding of the nature of the transaction itself. Knowing what she was doing was insufficient to save the ransaction. The court demanded evidence to satisfy it that she was alive to the implications of what she was doing. The English Court of Appeal identified that as too far a reach, and suggested that modern courts should not follow Phillipson v. Kerry in that regard. See the discussion of Pitt v. Holt (2011), [2011] EWCA Civ 197, [2012] Ch. 132, [2011] 3 W.L.R. 19, [2011] 2 All E.R. 450, [2011] Pens. L.R. 175, 2011 WL 674966 (Eng. C.A. (Civ. Div.)).
[7] Allcard v. Skinner (1887), L.R. 36 Ch. D 145 (Eng. C.A., Ch. Div.)
[8] Pitt v. Holt (2011), [2011] EWCA Civ 197, [2012] Ch. 132, [2011] 3 W.L.R. 19, [2011] 2 All E.R. 450, [2011] Pens. L.R. 175, 2011WL674966 (Eng. C.A. (Civ. Div.)). The case went on appeal to the Supreme Court of the United Kingdom, reported as Pitt v. Holt, [2013] UKSC 26, [2013] 2 A.C. 108 (U.K. S.C.)
[9] Kinsella v. Pask, 1913 CarswellOnt 781, 12 D.L.R. 522, 28 O.L.R. 393 (Ont. C.A.) [“Kinsella”]
[10] Lavin v. Lavin, 1880 CarswellOnt 52, 27 Gr. 567 (Ont. Ch.), affirmed (1882), 7 O.A.R. 197 (Ont.C.A.)
[11] Smith v. Alexander, 1908 CarswellOnt 672, 12 O.W.R. 1144 (Ont. C.P.)
[12] Trusts & Guarantee Co v. Cook, 1909 CarswellOnt 689, 14 O.W.R. 1185 (Ont. K.B.)
[13] Crippen v. Ogilvie, 1871 CarswellOnt 35, 18 Gr. 253 (Ont. C.A.) at paras. 64 to 66;
[14] Dmyterko Estate v. Kulikowsky, 1992 CarswellOnt 543, 47 E.T.R. 66 (Ont. Gen. Div.) at para. 114
[15] Houston v. London & Western Trusts Co., 1913 CarswellOnt 648, 5 O.W.N. 336, 25 O.W.R. 488 (Ont. H.C.);
[16] Vanzant v. Coates, 1917 CarswellOnt 106, 39 D.L.R. 485, 40 O.L.R. 556 (Ont. C.A.)
[17] Kudlaciak v. Trela, 1975 CarswellOnt 574, 11 O.R. (2d) 330, 66 D.L.R. (3d) 72 (Ont. H.C.) (noticed in passing in case dealing with joint accounts)
[18] Dmyterko Estate v. Kulikowsky, 1992 CarswellOnt 543, 47 E.T.R. 66 (Ont. Gen. Div.).
[19] Kinsella, 12 D.L.R. 522 at p. 526, 28 O.L.R. 393 at pp. 399-400
[20] John E.S. Poyser, Capacity and Undue Influence, 2nd ed (Toronto: Thomson Reuters Canada, 2019), at p. 628 (“Poyser”)
[21] Poyser, at page 659.
[22] Poyser, at page 630.
[23] Poyser, at page 628.
[24] Poyser, at page 663.
[25] Poyser, at page 629.
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This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
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Written by: Sareh Lua Ebrahimi
Posted on: December 17, 2019
Categories: Commentary, WEL Newsletter
An earlier WEL blog (http://welpartners.com/blog/2019/11/the-doctrine-of-unconscionable-procurement-gefen-v-gaertner/) was written on the case of Gefen v. Gaertner,[1] which dealt with the importance of providing an expert with a full complement of relevant facts and documents in relation to an assessment. This case is of relevance for a second reason however.
A new tool to challenge gifts appears to have emerged for use in Ontario. More precisely, a tool that has remained dormant for just over 100 years has been revived. The doctrine of unconscionable procurement was developed in English Courts of Equity during the 1800’s and, along with equitable undue influence, became one of the mainstays when a disgruntled heir wished to re-fill an emptied estate by overturning inter vivos gifts made by the will-maker. The lead case in England was Cooke v. Lamotte.[2] Also of note in the string of English cases on point are Anderson v. Elsworth,[3] Earl of Aylesford v. Morris,[4] Hoghton v. Hoghton,[5] Phillipson v. Kerry,[6] Allcard v. Skinner,[7] Pitt v. Holt.[8] The doctrine became part of the law of Ontario. The lead Ontario decision became Kinsella v. Pask,[9] but the doctrine was also dealt with in Lavin v. Lavin,[10] Smith v. Alexander,[11] Trusts & Guarantee Co v. Cook,[12] Crippen v. Ogilvie,[13] Dmyterko Estate v. Kulikowsky,[14] Houston v. London,[15] Vanzant v. Coates,[16] Kudlaciak v. Trela,[17] and in Dmyterko Estate v. Kulikowsky.[18]
After the fusion of law and equity, unconscionable procurement gradually fell from use. It then sat dormant, part of the law of Ontario but not applied.
That has now changed with the case of Gefen, the Honourable Justice Kimmel revived the doctrine, considered its history and application over extensive reasons for decision on point, and applied it to reverse more than $8M of gifts and other inter vivos wealth transfers.
The doctrine is best expressed by the Ontario Court of Appeal in Kinsella v. Pask as follows:
In every case where a person, to his own advantage, but to the prejudice of the giver, obtains by donation some substantial benefit, he is bound to prove clearly, not only that the gift was made, but that it was the voluntary, deliberate, well-understood act of the donor, and that the donor … did appreciate its effect, nature, and consequence.”[19]
The doctrine is predicated on the idea that it is unconscionable to allow a significant gift or other inter vivos wealth transfer to stand where the recipient was instrumental in causing it to occur and the maker did not truly appreciate what he or she was doing. It can also be referred to as the rule against large donations without proper understanding.[20] The doctrine applies and the presumption is triggered if and only if the wealth transfer is said to be “significant” or “improvident”.[21]
The legal onus is on the party attacking the transaction to prove, on the civil standard of a balance of probabilities and, at the close of evidence, must convince the court that the gift or other wealth transfer was procured without conscionable understanding on the part of the maker.[22]
Once the basic elements that trigger the presumption have been established by the attacker (a significant benefit and the active involvement on the part of the person obtaining that benefit in the procurement or arrangement of the transfer)[23] then there is a presumption that the donor of the gift did not truly understand what he/she was doing in making the transaction. The court is to look at the impugned transactions with its moral sense awakened and with a view to determining whether it would be unconscionable to allow the transaction to stand.
The doctrine has nothing to do with the essential validity of the wealth transfer (which is capacity, intention and the mechanical elements necessary to the transaction, such as delivery). It takes an otherwise valid inter vivos wealth transfer and allows the court to hold it to be unconscionable.[24] This equitable doctrine does not require proof of incapacity or undue influence to operate.
At issue is the maker’s necessary level of understanding to make a transaction conscionable when it takes place in circumstances that suggest, on a prima facie basis, the contrary. It is a matter of flawed intent.[25]
Unconscionable procurement is not the same as equitable undue influence. It is a cousin in equity, but is invoked by different fact patterns and requires a different character of evidence to meet it. It focuses on understanding, not on vulnerability.
The decision in the Gefen case has been appealed as it relates to mutual wills, but no appeal was launched relating to unconscionable procurement. The decision is here to stay.
One of our lawyers at WEL, John Poyser, has written a 47-page chapter outlining the history, scope, and modern application of unconscionable procurement (See John E.S. Poyser, Capacity and Undue Influence, 2nd ed (Toronto: Thomson Reuters Canada, 2019), at pages 627-674).
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[1] Gefen v. Gaertner, 2019 ONSC 6015 [“Gefen”]
[2] Cooke v. Lamotte (1851), 51 E.R. 527, 15 Beav. 234 (Eng. Ch.D.)
[3] Anderson v. Elsworth (1861), 66 E.R. 363, 30 L.J. Ch. 922, 3 Giff. 154 (Eng. V.-C.)
[4] Earl of Aylesford v. Morris (1873), (1872-73) L.R. 8 Ch. App. 484 (Eng. Ch. App.)
[5] Hoghton v. Hoghton (1852), 15 Beav. 278, 51 E.R. 545 (Eng. Rolls Ct.)
[6] Phillipson v. Kerry (1863), 32 Beav. 628, 55 E.R. 247 at p. 637 [Beav.] ( in setting aside the transaction in this case on the basis that the gift maker did not understand the whole nature and effect of the deed, the court went one step further to state that the gift maker needed to understand the implications of the transaction that were key, not just a general understanding of the nature of the transaction itself. Knowing what she was doing was insufficient to save the ransaction. The court demanded evidence to satisfy it that she was alive to the implications of what she was doing. The English Court of Appeal identified that as too far a reach, and suggested that modern courts should not follow Phillipson v. Kerry in that regard. See the discussion of Pitt v. Holt (2011), [2011] EWCA Civ 197, [2012] Ch. 132, [2011] 3 W.L.R. 19, [2011] 2 All E.R. 450, [2011] Pens. L.R. 175, 2011 WL 674966 (Eng. C.A. (Civ. Div.)).
[7] Allcard v. Skinner (1887), L.R. 36 Ch. D 145 (Eng. C.A., Ch. Div.)
[8] Pitt v. Holt (2011), [2011] EWCA Civ 197, [2012] Ch. 132, [2011] 3 W.L.R. 19, [2011] 2 All E.R. 450, [2011] Pens. L.R. 175, 2011WL674966 (Eng. C.A. (Civ. Div.)). The case went on appeal to the Supreme Court of the United Kingdom, reported as Pitt v. Holt, [2013] UKSC 26, [2013] 2 A.C. 108 (U.K. S.C.)
[9] Kinsella v. Pask, 1913 CarswellOnt 781, 12 D.L.R. 522, 28 O.L.R. 393 (Ont. C.A.) [“Kinsella”]
[10] Lavin v. Lavin, 1880 CarswellOnt 52, 27 Gr. 567 (Ont. Ch.), affirmed (1882), 7 O.A.R. 197 (Ont.C.A.)
[11] Smith v. Alexander, 1908 CarswellOnt 672, 12 O.W.R. 1144 (Ont. C.P.)
[12] Trusts & Guarantee Co v. Cook, 1909 CarswellOnt 689, 14 O.W.R. 1185 (Ont. K.B.)
[13] Crippen v. Ogilvie, 1871 CarswellOnt 35, 18 Gr. 253 (Ont. C.A.) at paras. 64 to 66;
[14] Dmyterko Estate v. Kulikowsky, 1992 CarswellOnt 543, 47 E.T.R. 66 (Ont. Gen. Div.) at para. 114
[15] Houston v. London & Western Trusts Co., 1913 CarswellOnt 648, 5 O.W.N. 336, 25 O.W.R. 488 (Ont. H.C.);
[16] Vanzant v. Coates, 1917 CarswellOnt 106, 39 D.L.R. 485, 40 O.L.R. 556 (Ont. C.A.)
[17] Kudlaciak v. Trela, 1975 CarswellOnt 574, 11 O.R. (2d) 330, 66 D.L.R. (3d) 72 (Ont. H.C.) (noticed in passing in case dealing with joint accounts)
[18] Dmyterko Estate v. Kulikowsky, 1992 CarswellOnt 543, 47 E.T.R. 66 (Ont. Gen. Div.).
[19] Kinsella, 12 D.L.R. 522 at p. 526, 28 O.L.R. 393 at pp. 399-400
[20] John E.S. Poyser, Capacity and Undue Influence, 2nd ed (Toronto: Thomson Reuters Canada, 2019), at p. 628 (“Poyser”)
[21] Poyser, at page 659.
[22] Poyser, at page 630.
[23] Poyser, at page 628.
[24] Poyser, at page 663.
[25] Poyser, at page 629.
—
This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
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