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The UTRA: Protecting Society’s Vulnerable from “Unconscionable Transactions”

A recent Government of Canada study found that frauds and scams are the number one crime that are carried out against seniors in Canada, and that the elderly are victimized by fraud at disproportionately higher rates than others in this country.[1] Whether as a result of social isolation (particularly during the COVID-19 pandemic), deteriorating mental or physical health, or other factors, older people are sadly more vulnerable to being victimized by individuals who seek to take advantage of them financially. As Canada’s population ages, instances of elder financial abuse are growing more prevalent and the need for us to collectively act to better protect our seniors (and other vulnerable people in our society) from unfair, unconscionable or fraudulent financial transactions is growing more pronounced.

What happens from a legal perspective when unfair financial transactions are procured as a result of a “power imbalance” between the parties, or due to one party’s weakness relative to the other, stronger, party? How can such instances of unfairness be addressed and remedied?

As capacity and estate litigators, these are problems we deal with every day, and my team and I are always looking for tools that can be used to address and remedy instances where a vulnerable person has been taken advantage of by an unscrupulous third-party who has exploited the vulnerable individual’s frailty and the power imbalance that exists between the parties.

Whether due to a person’s advanced age, diminished cognition or other impairment, it is all too common for said person to be exploited financially by those looking to take advantage of their vulnerability (this is becoming even more commonplace as our general population continues to age). Tragically, such instances of financial exploitation are most-often perpetrated by people who the vulnerable person relies on for personal or financial care: such as their attorneys under POA documents, guardians, financial advisors, adult children, close friends or family.

Fortunately, when such unconscionable transactions are discovered, there is a plethora of remedies available at law which can be used to right the wrong.

Equitable legal principles, such as undue influence, economic duress or unconscionable procurement, can be applied in the context of civil legal proceedings to unwind, set aside or render voidable improper transactions, and hold the perpetrator accountable. In addition, arguments that the vulnerable person lacked the requisite capacity to enter into the impugned transactions can be used to have the transaction set aside.

Also, there are provisions available under the Criminal Code[2] (such as s. 331 ‘theft by a person holding a power of attorney’; s.386 ‘fraud’; s. 346 ‘extortion’, etc.) that can be pursued in circumstances where the alleged wrongdoing warrants criminal proceedings.

In addition, a lesser known and relatively underutilized statute, the Unconscionable Transactions Relief Act (the “UTRA”)[3] can be used as a legislative tool to set aside or vary “unconscionable” transactions that have been procured in circumstances of unequal bargaining power and where one party has taken unfair advantage of this power imbalance.

Specifically, the UTRA applies to loans, gifts or mortgages, and permits a court to cancel or vary such transactions, when it considers the terms of the agreement or the circumstances surrounding the transaction to be “harsh and unconscionable”.

Section 2 of the UTRA provides that:

The court may,

2 Where, in respect of money lent, the court finds that, having regard to the risk and to all the circumstances, the cost of the loan is excessive and that the transaction is harsh and unconscionable, the court may,

reopen transaction and take account

(a) reopen the transaction and take an account between the creditor and the debtor;

reopen former settlements

(b) despite any statement or settlement of account or any agreement purporting to close previous dealings and create a new obligation, reopen any account already taken and relieve the debtor from payment of any sum in excess of the sum adjudged by the court to be fairly due in respect of the principal and the cost of the loan;

order repayment of excess

(c) order the creditor to repay any such excess if the same has been paid or allowed on account by the debtor;

set aside or revise contract

(d) set aside either wholly or in part or revise or alter any security given or agreement made in respect of the money lent, and, if the creditor has parted with the security, order the creditor to indemnify the debtor.  R.S.O. 1990, c. U.2, s. 2.

Courts – in discussing the UTRA and the judicial discretion to set aside unconscionable deals provided in the statute – have noted that it is not necessarily the financial terms of the impugned transaction that render it “unconscionable”, but rather it is the totality of circumstances giving rise to the transaction that a court is interested in. Including the relative vulnerability of one party or unequal bargaining power that may have existed between the parties, and whether that imbalance was exploited in striking the deal.

Justice Judson for the Supreme Court of Canada in Ontario (Attorney General) v Barfried Enterprises Ltd. (“Barfried”)[4], notes that the purpose of the UTRA is to relieve a party from their obligations under a contract, in instances where there has been an imbalance in bargaining power between the contracting parties, such that one party is deemed not to have actually given their free and valid informed consent to the contract. Read this way, the statutory relief available under the UTRA can actually be interpreted as an extension of the civil doctrine of undue influence.

The doctrine of undue influence, briefly, provides that where one party to a transaction has been pressured, coerced or influenced by another to enter into the transaction and that, as a result of the degree of pressure applied and the party’s vulnerability or frailty, it cannot be said that the party was actually giving their independent consent to the deal, then the transaction can be set aside on account of undue influence. The UTRA can be applied in a similar way to vary transactions in circumstances where, due to an imbalance of power between contracting parties, the weaker party cannot be said to have freely consented to the transaction.

The following is an excerpt from the SCC’s Barfried decision regarding the UTRA.

The wording of the statute indicates that it is not the rate or amount of interest which is the concern of the legislation but whether the transaction as a whole is one which it would be proper to maintain as having been freely consented to by the debtor. If one looks at it from the point of view of English law it might be classified as an extension of the doctrine of undue influence …  The theory of the legislation is that the Court is enabled to relieve a debtor, at least in part, of the obligations of a contract to which in all the circumstances of the case he cannot be said to have given a free and valid consent. [emphasis added] [5]

The Ontario Superior Court in Smith v Pluim[6], cited the Barfried decision, and noted that the purpose of the UTRA is to provide courts with the power to “relieve a party to a contract from his [or her] obligation where the contract was made absent his [or her] informed consent or in circumstances of unequal bargaining power. [emphasis added]”[7]

The Court in Smith goes on to rule that, in assessing whether an impugned transaction is ‘harsh and unconscionable’ to the extent that a court should exercise its discretion under the UTRA to annul or vary the contract, “it must be established that either the terms are very unfair or that the consideration is grossly inadequate, or that there was an inequality of bargaining power between the parties and that one of the parties took advantage of this.” [emphasis added][8]

While the UTRA has not been used extensively to have unfair, fraudulent or unconscionable transactions set aside, it is clear from the wording of the statute and its judicial treatment in the case law that it can be applied to set aside unfair deals, in circumstances where a vulnerable, compromised or unsophisticated individual has entered into an unfair agreement, in which the other party has taken advantage of the power imbalance between the respective parties.

In other words, the statute could be applied as a valuable tool for those looking to protect the elderly, or society’s vulnerable, from being taken advantage of in the context of fraudulent or unconscionable transactions.

In these circumstances, a court applying the UTRA could rule that the “weaker” party was at such a disadvantage, and the terms of the deal were so harsh, that the vulnerable party did not actually give their free and informed consent to the contract and therefore the transaction should be set aside or varied in favour of the vulnerable party.

Hopefully, the UTRA will be considered more often in the future and utilized as a statutory mechanism to protect society’s vulnerable from unconscionable agreements and to address the growing problem of elder fraud and financial abuse in Canada.

[1] 8. What Every Older Canadian Should Know About Frauds and Scams, Cat. No.: HS64-12/8-2010 ISBN: 978-1-100-51531-1


[2] Criminal Code (R.S.C., 1985, c. C-46)

[3] Unconscionable Transactions Relief Act, RSO, 1990, c. U.2

[4] Ontario (Attorney General) v Barfried Enterprises Ltd., 1963 CanLII 15 (SCC)

[5] Barfried at pg. 577

[6] Smith v Pluim, 2015 ONSC 7945

[7] Smith at para. 17

[8] Smith at para. 21


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