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 the matter ‑‑ and were obliged to defend the action. The co‑existing interest of trustee and beneficiary is not a valid basis for denying costs. The fact that the brothers were acting in the interests of their children, nephews and nieces did not cast doubt upon the propriety of their actions.
Respondents had a tenable case. It was appropriate that they simply bear their own costs and not have to bear the appellants' costs as well.
Per La Forest and McLachlin JJ.: A presumption of undue influence will arise only when the parties are in a relationship of "influence", where one person is in a position to dominate the will of another. The requirement of manifest disadvantage does not make sense in the context of this case, where the challenged transaction concerns a gift. A gift is by its nature inherently disadvantageous, at least in a material sense, so the requirement is superfluous. It becomes unnecessary to discuss the issue of manifest disadvantage further on the facts of this case.
A showing of undue disadvantage or benefit may be appropriate before a presumption of undue influence will be applied to a commercial transaction. Since the effect of the presumption is to shift the burden of proof to the defendant, it may not be unreasonable to require some showing of undue disadvantage or benefit in a commercial transaction before the presumption will arise. It is a substantially different question, however, whether undue influence itself must always involve undue disadvantage or benefit. It was unnecessary here to choose between opposing positions as to whether manifest disadvantage should be a required element of undue influence in a commercial transaction.
The relevant question here was whether the relationship of Mrs. Goodman to her brothers was such that they had the ability to dominate her. Mrs. Goodman's relationship with her brothers was not a close one and the trial judge found that it was such that the three brothers had no influence on their sister at all. She did not rely upon her brothers for assistance even during the troubled time following her mother's death and there could accordingly be no presumption of undue influence at that time. The facts were even stronger as they related to the subsequent period. The trust agreement was not entered into until several months after her mother's death and then only after numerous independent consultations with her solicitor and periods of independent thought by her when contact between herself and her three brothers no longer existed.
Per Sopinka J.: The trial judge made a positive finding of fact, supported by the evidence, that there was no undue influence exerted in this case. The operation of any presumption is therefore immaterial as it is not necessary to decide whether something already found not to exist should be presumed.
Text writers and courts are divided on whether presumptions affect only the evidential burden or both the evidential burden and legal burden. An evidential burden casts on the burdened party the obligation of going forward with some evidence while the legal burden is applied against the burdened party if the evidence, after being weighed, fails to persuade. Given the positive finding of fact made by the trial judge it is not necessary to resolve which view of presumptions is correct, as on either view, the presumption of undue influence played no role in this case.
Cases Cited
By Wilson J.
Considered: National Westminster Bank Plc. v. Morgan, [1985] 1 A.C. 686; Allcard v. Skinner (1887), 36 Ch. D. 145; Lloyds Bank Ltd. v. Bundy, [1974] 3 All E.R. 757; disapproved: Goldsworthy v. Brickell, [1987] 2 W.L.R. 133; referred to: Ellis v. Barker (1871), 7 Ch. App. 104; Wright v. Carter, [1903] 1 Ch. 27; Mitchell v. Homfray (1881), 8 Q.B.D. 587; Lancashire Loans, Ltd. v. Black, [1934] 1 K.B. 380; Hylton v. Hylton (1754), 2 Ves. Sen. 547, 28 E.R. 349; In re Lloyds Bank, Ltd., [1931] 1 Ch. 289; Zamet v. Hyman, [1961] 3 All E.R. 933; Midland Bank plc v. Shephard, [1988] 3 All E.R. 17; Simpson v. Simpson, [1989] Fam. L. 20; Bank of Credit & Commerce International S.A. v. Aboody, [1989] 2 W.L.R. 759; Re Brocklehurst, [1978] 1 All E.R. 767; Huguenin v. Baseley (1807), 14 Ves. Jun. 273, 33 E.R. 526; Csada v. Csada, [1985] 2 W.W.R. 265; Johnson v. Buttress (1936), 56 C.L.R. 113; Greenough v. Gaskell (1833), 1 My. & K. 98, 39 E.R. 618; Solosky v. The Queen, [1980] 1 S.C.R. 821; Bell v. Smith, [1968] S.C.R. 664; Bullivant v. Attorney-General for Victoria, [1901] A.C. 196; Stewart v. Walker (1903), 6 O.L.R. 495; Langworthy v. McVicar (1913), 25 O.W.R. 297; Re Ott, [1972] 2 O.R. 5; Ares v. Venner, [1970] S.C.R. 608; R. v. Khan, [1990] 2 S.C.R. 531; Director of Public Prosecutions v. Boardman, [1975] A.C. 421; Lensen v. Lensen, [1987] 2 S.C.R. 672; Harper v. The Queen, [1982] 1 S.C.R. 2; Schreiber Brothers Ltd. v. Currie Products Ltd., [1980] 2 S.C.R. 78; Métivier v. Cadorette, [1977] 1 S.C.R. 371; Re Dingman (1915), 35 O.L.R. 51; Re Dallaway, [1982] 3 All E.R. 118.
By La Forest J.
Referred to: National Westminster Bank Plc. v. Morgan, [1985] A.C. 686.
By Sopinka J.
Referred to: S v. S, [1972] A.C. 24; Circle Film Enterprises Inc. v. Canadian Broadcasting Corp., [1959] S.C.R. 602; Powell v. Cockburn, [1977] 2 S.C.R. 218; Robins v. National Trust Co., [1927] 2 D.L.R. 97; Allcard v. Skinner (1887), 36 Ch. D. 145; Blyth v. Blyth, [1966] A.C. 643; Hornal v. Neuberger Products Ltd., [1957] 1 Q.B. 247; New York Life Insurance Co. v. Schlitt, [1945] S.C.R. 289.
Authors Cited
Andrews, Neil. "Undue Influence and Contracts of Loan", [1985] Cambridge L.J. 192.
"Bank securities allegedly obtained by undue influence", [1985] J. Bus. Law 191.
15 C.E.D. (West. 3rd) Title 67, Fraud and Misrepresentation.
Cope, Malcolm. Duress, Undue Influence and Unconscientious Bargains. North Ryde, N.S.W.: Law Book Co., 1985.
Cope, Malcolm. "Undue Influence and Alleged Manifestly Disadvantageous Transactions: National Westminster Bank plc v. Morgan" (1986), 60 A.L.J. 87.
Dale, Brenda. "Undue Influence and Manifest Disadvantage" (1988), 52 Conv. & Prop. Law. 441.
Dale, Brenda. "Undue Influence: Recent Developments" (1989), 53 Conv. & Prop. Law. 63.
Dixon, M. J. "The Limits of Undue Influence Explained", [1989] Cambridge L.J. 359.
Halsbury's Laws of England, vol. 18, 4th ed. London: Butterworths, 1977.
Ogilvie, M. H. "Undue Influence in the House of Lords" (1986), 11 Can. Bus. L.J. 503.
Phipson, Sidney Lovell. Phipson on Evidence, 13th ed. By John Huxley Buzzard, Richard May and M. N. Howard. London: Sweet & Maxwell, 1982.
Reed, Charles P. "Comment" (1984), 18 Law Teacher 132.
Reed, Charles P. "Commentary" (1985), 19 Law Teacher 106.
Snell, Edmund Henry Turner. Snell's Principles of Equity, 28th ed. By P. V. Baker and P. St. J. Langan. London: Sweet & Maxwell, 1982.
Sopinka, John and Sidney N. Lederman. The Law of Evidence in Civil Cases. Toronto: Butterworths, 1974.
Taylor, R. D. "Commentary" (1985), 19 Law Teacher 105.
Tiplady, David. "The Limits of Undue Influence" (1985), 48 Mod. L. Rev. 579.
Wigmore, John Henry. Wigmore on Evidence, vol. 8, 3rd ed. Boston: Little, Brown & Co., 1940.
APPEAL from a judgment of the Alberta Court of Appeal (1989), 68 Alta. L.R. (2d) 289, [1989] 6 W.W.R. 625, allowing an appeal from judgment of Hutchinson J. (1987), 52 Alta. L.R. (2d) 210, [1987] 4 W.W.R. 730. Appeal allowed.
J. D. Bruce McDonald, for the appellants.
R. H. Barron, Q.C., and P. A. Ferner, Q.C., for the respondents.
//Wilson J.//
The judgment of Wilson and Cory JJ. was delivered by
Wilson J. -- The respondent, Stacy Randall Goodman, as executor of his mother's estate and on his own behalf, commenced an action claiming that he and his siblings were entitled to certain property left to his mother, Tzina Goodman, by his grandmother, Annie Sanofsky. The appellants, Sam, William and Ted Geffen are the brothers and nephew of Stacy's mother. They are the trustees of a certain trust agreement in which Stacy's mother is named as the settlor and under which the trust property is to be distributed amongst all of Annie Sanofsky's grandchildren. This appeal concerns the validity of the trust agreement.
1. The Facts
Annie Sanofsky had four children, Sam, Ted, Jack and Tzina. Sam and Ted Geffen are both successful businessmen currently living in the United States. Their brother Jack is an insurance underwriter who lives in Edmonton. Their sister Tzina, (Mrs. Goodman) now deceased, had a less than trouble‑free life. She first came under the care of a psychiatrist while a teenager. Psychiatric intervention became a common feature of her existence. She was hospitalized many times over the years and was eventually diagnosed as suffering from bipolar affective disorder, formerly known as manic depressive disorder, and immature personality. Tzina's illness caused strain in her family relationships. Her disorder tended to drive people away from her. Although she married and had children she did not have much contact with her children after her separation from her husband. Her contact with them was purely casual.
In 1968, with the help of her son Jack, Annie Sanofsky executed a will providing for a life estate to her daughter Tzina and directing that on Tzina's death her estate should be distributed to all of her (Annie's) grandchildren. At the time of their mother's death the four children were surprised to learn that a new will had been executed in 1975 which superseded the 1968 will. Under the new will Annie Sanofsky left the property which had been her home outright to her daughter Tzina, provided bequests of $1000 each to her sons, and directed that the residue of her estate be held in trust for Tzina during her lifetime and pass on Tzina's death to her (Tzina's) children.
The three Geffen brothers, not surprisingly, were unhappy with the way in which their mother had disposed of her estate. They thought it unfair that their children had been cut out of the will. Their sister agreed. They were especially concerned, however, with their mother's decision to bequeath her home in Calgary outright to their sister. Tzina had a history of mental illness and they feared that her disability would interfere with her capacity to act responsibly in relation to the property she had inherited. They were particularly concerned that Tzina might divest herself of the assets she needed for her own support. If this happened they might be called upon to contribute to her support. They, along with their sister, decided to seek legal advice as to whether or not the second will was valid.
They retained the services of Mr. Pearce, a Calgary lawyer, and explained the situation to him. Jack Geffen acted as spokesman for the family. The options open to Tzina were canvassed. It was suggested that the house be transferred by Tzina to her brothers' children. A disagreement ensued between Tzina and her brother Jack. She did not like the idea of transferring title to the house immediately, leaving herself with only a life interest in it. Mr. Pearce suggested that she take some time to think things over. The meeting disbanded, the brothers paid for the consultation and all concerned returned to their respective homes.
Mrs. Goodman thereafter had only casual contact with her brothers but continued to seek the advice of counsel and communicated with Mr. Pearce on several occasions. As a result of these consultations it was suggested to Mrs. Goodman that the Calgary residence be put into a trust for her for life with her brothers as trustees but that she would retain the right to dispose of the property by will. This suggestion was vehemently rejected by Jack but accepted by Ted and Sam Geffen. Jack indicated that he would have nothing further to do with the trust and it was agreed that Ted's son William would replace him as a trustee.
Mr. Pearce then went ahead and prepared the trust deed. The trust property was conveyed to the trustees on terms that Mrs. Goodman retained a life interest in the Calgary residence and that on her request the trustees would consider a sale of the property so long as the sale was in Mrs. Goodman's best interests. The trust deed further provided that upon Mrs. Goodman's death the trust property would be divided equally among her surviving children, nephews and nieces, i.e., all Annie Sanofsky's grandchildren.
After the deed was executed Mrs. Goodman was apparently not too sure of the effect of what she had done. She attempted twice to put the property on the market. Her attempts were thwarted by Mr. Pearce. Mrs. Goodman died in May of 1984, leaving a last will and testament in which she left her entire estate to her children.
2. The Courts Below
Alberta Queen's Bench (1987), 52 Alta. L.R. (2d) 210 (per Hutchinson J.)
At trial the plaintiffs submitted that the trust agreement was entered into by Mrs. Goodman as a result of the undue influence of the defendants and Jack Geffen. Hutchinson J. first dealt with the admissibility of Mr. Pearce's evidence and in particular the argument that it should not have been received since it was privileged. Having concluded that Mr. Pearce's testimony was properly admitted the trial judge turned to its import. He said at pp. 220‑21:
I accept Mr. Pearce's testimony that during his initial dealings with Mrs. Goodman during the period of his initial interview up to at least 7th February 1980 Mrs. Goodman fully understood the nature and effect of the arrangements evidenced by the trust agreement. I am satisfied that Mrs. Goodman was the initiator of the instructions to Mr. Pearce, following periods of independent thought by her, to draw the trust agreement in accordance with his suggestion that this would be an alternate method of holding the Calgary residential property so as to ensure that she had a place to live during her lifetime and that she intended to include all of the ultimate beneficiaries of the trust named therein, including her own children.
Based on the testimony of the solicitor as well as the other witnesses, Hutchinson J. found on the evidence that the Geffen brothers did not in fact influence their sister into signing the trust agreement. In doing so he placed particular emphasis on the fact that the agreement in substance reflected the true wishes of the settlor. Alternatively, Hutchinson J. found that any presumption of undue influence was rebutted by the fact that Mrs. Goodman consulted Mr. Pearce independently and after her brothers had left Calgary. The trial judge concluded at pp. 228‑29:
If anything, the evidence which I have heard and which was read in by counsel for the plaintiff persuades me that the relationship between Mrs. Goodman and her three brothers was such that they had no influence on their sister at all . . . . Apart from the brief interval of time when they were together as a result of their mother's last illness and death, there was hardly any contact between the three brothers and Mrs. Goodman. She did not rely on them for assistance and they were only concerned that their mother's estate be available for her maintenance without the need on their part to assume any personal responsibility for their sister's care.
Alberta Court of Appeal (1989), 68 Alta. L.R. (2d) 289
Stevenson J.A. (Stratton J.A. concurring)
On appeal the respondents submitted that the trial judge had failed to recognize and address the presumption of undue influence. Stevenson J.A. agreed. He noted the deceased's history of mental health problems and the brothers' testimony that the deceased reposed trust and confidence in them. Stevenson J.A. added that when her older brothers took a leading role in obtaining legal advice, one of the objects of which was to secure benefits for their own children, a court of equity would intervene to the extent of presuming influence.
Stevenson J.A. then turned to the question whether the transaction was so disadvantageous to Mrs. Goodman as to indicate that she was or could have been victimized. After expressing some uneasiness with the propriety of this test, Stevenson J.A. concluded that the trust agreement was not simply unwise, it was "manifest folly". It was his opinion that for Mrs. Goodman to reduce her interest in the Calgary property which had been bequeathed to her outright by her mother to a mere life interest and place the remainder beyond her reach was clearly disadvantageous. He said at p. 297:
Assuming that she should have been protected from the consequences of an improvident business transaction entered into when she was behaving irrationally, that protection could easily have been provided by far less drastic means. Protection against that possibility did not suggest, let alone reasonably require, that she convert a fee simple estate to a mere life interest. Even the most tightly drawn spendthrift trust would not have put the remainder beyond the control or disposition of the trustees for the advantage of the beneficiary.
It was accordingly his view that no reasonable person in the position of the settlor would have entered into this arrangement on the basis that it was reasonably necessary in order to protect herself or that it was unfair not to do so.
Stevenson J.A. then went on to consider whether the presumption of undue influence had been rebutted on the evidence. It was his opinion that Mrs. Goodman did not receive adequate independent advice. He expressed the view that an independent advisor must be in a position to satisfy himself that a proposed gift is right and proper. The evidence did not disclose that Mr. Pearce ever purported to satisfy himself as to this. Indeed, he could not have done so since he did not know the value of the property or the circumstances of Mrs. Goodman or her brothers.
Hetherington J.A. (dissenting)
Hetherington J.A. noted the settlor's illness but concluded that her competence to enter into the trust agreement was not and never had been in issue. She also noted that one had to assume that Mrs. Goodman was neither more nor less open to influence than other people.
Hetherington J.A. held, citing National Westminster Bank Plc. v. Morgan, [1985] 1 A.C. 686 (H.L.), as authority, that no consideration of undue influence was necessary unless the transaction was so disadvantageous to the settlor as to suggest that she was or could have been victimized. It was her view that Mrs. Goodman's entry into the trust agreement could be explained on two grounds. First, it served the purpose of protecting Mrs. Goodman in the event her illness led her to behave irrationally. Second, it was her wish that her nephews and nieces share equally with her own children in their grandmother's estate. While acknowledging that the trust agreement may have been somewhat unwise having regard to her own financial circumstances, Hetherington J.A. was of the view that it was not so disadvantageous to the settlor that the court needed to consider whether or not it was the product of undue influence. However, in case she was in error in this, Hetherington J.A. went on to consider the applicability of the doctrine of undue influence, actual or presumed.
Hetherington J.A. did not believe that the relationship of brother and sister gave rise automatically to a presumption of undue influence. Nor did it follow that simply because the settlor reposed trust and confidence in her brothers they were in a position to exercise such influence over her. On the question whether there had been actual undue influence Hetherington J.A. concluded at p. 322:
In these circumstances the trial judge found that Mrs. Goodman's brothers did not influence her to sign the trust agreement. Can it be said that he made any palpable and overriding error in his assessment of the facts? In my view it cannot. There is certainly evidence to support his finding. Indeed, I do not know how he could have come to any other conclusion. I would, therefore, not disturb his finding that the trust agrement in question in this case did not result from actual undue influence.
Alberta Court of Appeal (1990), 72 Alta. L.R. (2d) 414 (Calgary No. 19362, February 9, 1990)
Following release of the reasons for judgment, the unsuccessful respondents sought an order that they receive costs instead of having to pay costs as provided in the original judgment. Stevenson and Stratton JJ.A. held that the conduct of the brothers in securing the transfer from the settlor had been found wanting and that they were defending an interest which they themselves had been instrumental in creating for the benefit of persons nominated by them. Since the litigation had been for their own benefit the request for costs was denied.
Hetherington J.A. dissented on this point as well. In her view the trustees acted reasonably and properly in defending the action and in responding to the appeal. It was never established that the brothers had acted improperly in relation to their sister. They were obliged to defend the interests of the beneficiaries and to respond to the serious allegations contained in the statement of claim. She would have allowed the trustees their costs out of the trust property.
3. The Issues
1.Was the presumption of undue influence properly applied by the Court of Appeal?
2.Are the trustees entitled to costs out of the trust property?
4. Analysis
The Presumption of Undue Influence
This appeal raises important questions concerning the doctrine of undue influence and, in particular, the application of the presumption of undue influence. It was over this issue that the trial judge and the Court of Appeal parted company. As well, the scope of the doctrine of undue influence and its evidentiary companion, the presumption of undue influence, has recently been addressed by the House of Lords in Morgan. Not surprisingly, the parties to this appeal devoted the bulk of their argument both on the leave application and the appeal itself to the question whether or not we should follow the House of Lords in Canada. Indeed, the primary ground of appeal advanced by the appellant was whether there could be a presumption of undue influence where the trust agreement was not found by the trial judge to be "manifestly disadvantageous" to the party seeking to have it set aside. The respondent's response was that the doctrine of "manifest disadvantage" applies only to commercial transactions and does not apply to gifts. The Court has thus been called upon not only to resolve the dispute between the parties to this appeal but to clarify the law and provide some guidance to our courts in this area.
The appellants submit that the Court of Appeal erred in two ways. First, they say that the facts did not give rise to a presumption of undue influence because the trust agreement did not work a "manifest disadvantage" to the settlor. Second, they say that even if this were an appropriate case for the application of the presumption, it was rebutted when the trial judge found as a fact that no actual undue influence was exercised on Mrs. Goodman to enter into the trust agreement. Accordingly, they say that the Court of Appeal committed an error of law when they overturned this finding of fact.
The respondents argue that the Court of Appeal was correct in finding that the presumption of undue influence applied in this case. They say that the doctrine of "manifest disadvantage" has no relevance in situations involving gifts as opposed to commercial transactions but that, if it does, the bequest of the Calgary home by Mrs. Goodman to her children, nephews and nieces was manifestly disadvantageous to her. The respondents contend that the evidence does not establish that the presumption was rebutted.
The equitable doctrine of undue influence was developed, as was pointed out by Lindley L.J. in Allcard v. Skinner (1887), 36 Ch. D. 145, not to save people from the consequences of their own folly but to save them from being victimized by other people (at pp. 182-83). In the context of gifts and other transactions, equity will intervene and set aside such arrangements if procured by undue influence. Over the years it became accepted that equitable protection could be invoked in two ways.
In Allcard v. Skinner, supra, the plaintiff joined a sisterhood devoted to charitable works under the auspices of a clergyman of the Church of England. Upon becoming a full member of the sisterhood she made the requisite vows of poverty, chastity and obedience. In accordance with these vows she from time to time handed over to the mother superior income and capital to which she was entitled under her father's will. Several years later the plaintiff left the sisterhood and joined the Roman Catholic Church. She then sued for the return of the stock she had given away, claiming that she had been induced by undue influence to turn the property over to the mother superior.
Cotton L.J. began by setting out the doctrine of undue influence in broad terms. At page 171 he said:
Does the case fall within the principles laid down by the decisions of the Court of Chancery in setting aside voluntary gifts executed by parties who at the time were under such influence as, in the opinion of the Court, enabled the donor afterwards to set the gift aside? These decisions may be divided into two classes ‑‑ First, where the court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor.
Lindley L.J. commented to similar effect on the state of the law at that time. He said at p. 181:
The doctrine relied upon by the Appellant is the doctrine of undue influence expounded and enforced in Huguenin v. Baseley, and other cases of that class. These cases may be subdivided into two groups, which, however, often overlap.
First, there are the cases in which there has been some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by a donee placed in some close and confidential relation to the donor . . . .
The second group consists of cases in which the position of the donor to the donee has been such that it has been the duty of the donee to advise the donor, or even to manage his property for him. In such cases the Court throws upon the donee the burden of proving that he has not abused his position, and of proving that the gift made to him has not been brought about by any undue influence on his part. In this class of cases it has been considered necessary to shew that the donor had independent advice, and was removed from the influence of the donee when the gift to him was made.
In the present case there was no evidence of undue influence as such and it therefore remains to consider whether the relationship between the parties gave rise to a presumption of undue influence.
What are the factors that go to establishing a presumption of undue influence? This question has been the focus of much debate in recent years. Equity has recognized that transactions between persons standing in certain relationships with one another will be presumed to be relationships of influence until the contrary is shown. These include the relationship between trustee and beneficiary (Ellis v. Barker (1871), 7 Ch. App. 104); solicitor and client (Wright v. Carter, [1903] 1 Ch. 27); doctor and patient (Mitchell v. Homfray (1881), 8 Q.B.D. 587); parent and child (Lancashire Loans, Ltd. v. Black, [1934] 1 K.B. 380); guardian and ward (Hylton v. Hylton (1754), 2 Ves. Sen. 547, 28 E.R. 349); and future husband and fiancee (In re Lloyds Bank, Ltd., [1931] 1 Ch. 289). Beginning, however, with Zamet v. Hyman, [1961] 3 All E.R. 933, it came to be accepted that the relationships in which undue influence will be presumed are not confined to fixed categories and that each case must be considered on its own facts. Since then it has been generally agreed that the existence of some "special" relationship must be shown in order to support the presumption although what constitutes such a "special" relationship is a matter of some doubt. In Snell's Principles of Equity (1982), for instance, it is stated at p. 540 that the presumption applies when the transaction has been effected between parties in a fiduciary relationship to one another. Others suggest that influence flows naturally from confidential relationships: see Canadian Encyclopedic Digest (Western), Title 67, para. 94. In Lloyds Bank Ltd. v. Bundy, [1974] 3 All E.R. 757, this issue was canvassed in some detail by Sir Eric Sachs who indicated that the existence of an advisory relationship is relevant to the determination. He went on to say at p. 767:
Such cases tend to arise where someone relies on the guidance or advice of another, where the other is aware of that reliance and where the person on whom reliance is placed obtains, or may well obtain, a benefit from the transaction or has some other interest in it being concluded.
Sir Eric's comments were approved in National Westminster Bank Plc. v. Morgan, supra, a case raising the propriety of a bank's involvement in securing a transaction with one of its customers. Lord Scarman explained his difficulty with the existing state of the law at p. 703. To him, words and phrases such as "confidence", "confidentiality" and "fiduciary duty" were inadequate concepts to guide the inquiry and often led justices into a misinterpretation of facts:
There are plenty of confidential relationships which do not give rise to the presumption of undue influence . . . and there are plenty of non‑confidential relationships in which one person relies upon the advice of another. . . .
In expressing his approval of Sir Eric's words, Lord Scarman noted at p. 709 that relationships in which one party develops a dominating influence over another are "infinitely various" and there was no substitute for a "meticulous examination of the facts".
It should be noted, however, that this aspect of Lord Scarman's speech in Morgan has met with considerable disfavour in the academic community. A number of commentators have expressed the view that the imprecision of his inquiry is very unhelpful: see Malcolm Cope, "Undue Influence and Alleged Manifestly Disadvantageous Transactions: National Westminster Bank plc v. Morgan" (1986), 60 A.L.J. 87; David Tiplady, "The Limits of Undue Influence" (1985), 48 Mod. L. Rev. 579; and Editorial, "Bank securities allegedly obtained by undue influence", [1985] J. Bus. Law 191. Professor Ogilvie in her article, "Undue Influence in the House of Lords" (1986), 11 Can. Bus. L.J. 503, on the other hand, favours the open‑ended nature of the Morgan approach for more teleological reasons. She states that the test permits wider review by higher tribunals. She thinks this is a good thing. Some prefer Sir Eric's view in Bundy, supra (see Neil Andrews, "Undue Influence and Contracts of Loan", [1985] Cambridge L.J. 192), while others think that Lord Denning was on the right track when he suggested in obiter in Bundy that the courts should adopt the concept of inequality of bargaining power. With appropriate modification to the gifts context, power imbalances are a useful yardstick for equitable intervention: see Charles Reed, "Commentary" (1985), 19 Law Teacher 106; and R. D. Taylor, "Commentary" (1985), 19 Law Teacher 105. Still others have gone on to provide their own tests for this branch of the presumption inquiry. David Tiplady, supra, sees the constant feature in the cases as a circumstance whereby one party is led to believe that he can rely on another for disinterested advice and guidance and that the other will put his welfare first. Finally, Malcolm Cope, supra, in similar vein, says the test should be one of reliance upon guidance and advice.
The growing debate in the academic literature over the kind of relationship to which the presumption of undue influence should apply is echoed in the decisions of the English courts following Morgan. For instance, in Midland Bank plc v. Shephard, [1988] 3 All E.R. 17, and Simpson v. Simpson, [1989] Fam. L. 20, a test of "dominating influence" was applied while in Goldsworthy v. Brickell, [1987] 2 W.L.R. 133, the Court of Appeal applied the confidentiality test and explicitly rejected the domination approach, stating at p. 153:
It is natural to presume that out of that trust and confidence grows influence. But it would run contrary to human experience to presume that every patient is dominated by his doctor or every client by his solicitor. Even in jest such cases must be rare. . . . it is not the function of a presumption to presume the generally improbable.
See: Brenda Dale, "Undue Influence Recent Developments" (1989), 53 Conv. & Prop. Law. 63.
Similar debate and disagreement has arisen over another factor thought to be relevant in establishing a presumption of undue influence. At the Court of Appeal level in Morgan the two‑judge panel agreed that it was not necessary for a plaintiff invoking the presumption to show that the transaction entered into worked to his or her disadvantage. Dunn L.J. acknowledged that the decided cases all involved instances of disadvantage to the party influenced but went on to state that considerations of public policy required that transactions brought about through the possible abuse of a confidential relationship should not to be permitted by a court of equity to stand. Slade L.J. agreed, adding that this did not mean that proof of a fair transaction was irrelevant. In his opinion, such proof could in fact make it easier for a party to rebut the presumption once applied.
The House of Lords, however, specifically overruled the Court of Appeal on this point. Lord Scarman stated in his speech at p. 704:
Whatever the legal character of the transaction, the authorities show that it must constitute a disadvantage sufficiently serious to require evidence to rebut the presumption that in the circumstances of the relationship between the parties it was procured by the exercise of undue influence. In my judgment, therefore, the Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the relationship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence has been exercised to procure it.
The requirement that the plaintiff show manifest disadvantage was subsequently applied even to the first class of undue influence cases, i.e., those in which actual undue influence must be affirmatively shown by the person allegedly influenced: see Bank of Credit & Commerce International S.A. v. Aboody, [1989] 2 W.L.R. 759 (C.A.).
The requirement that a plaintiff demonstrate manifest disadvantage has come under heavy criticism. Some commentators have not so much attacked the doctrine itself but have taken a dim view of its application in Aboody, supra, given the facts: see M. J. Dixon, "The Limits of Undue Influence Explained", [1989] Cambridge L.J. 359; and Brenda Dale, "Undue Influence and Manifest Disadvantage" (1988), 52 Conv. & Prop. Law. 441. Others seem to accept the relevance of a showing of manifest disadvantage at the stage of invoking the presumption but suggest that the requirement was cast too narrowly in Morgan, supra. For example, Mr. Tiplady, supra, has questioned Lord Scarman's objective examination of disadvantage. Citing Re Brocklehurst, [1978] 1 All E.R. 767 (C.A.), he observes that courts in the past have also recognized that disadvantage may have a subjective element to it. In like manner, Professor Ogilvie, supra, seems to accept the idea that disadvantage to the donor is relevant but would go further and say that benefit to the donee is equally important: see also Neil Andrews, supra. Additionally, Mr. Tiplady points out that when considering this question in the context of gifts as opposed to commercial transactions the requirement of disadvantage is always met because the nature of a gift is such that adequate consideration is never an issue.
This Court is not, of course, bound to follow decisions of the House of Lords. Nor is it, strictly speaking, necessary for us for the purposes of the present appeal to examine all aspects of the Morgan decision and in particular the ruling of the House of Lords respecting the requirement of a showing of manifest disadvantage in cases involving commercial transactions. It is my view, however, that the resolution of this appeal should proceed from first principles and this necessarily leads us into a consideration of the law as set out in Morgan. I believe we should take heed of the debate which followed Morgan and begin by asking ourselves what purpose the doctrine of undue influence was supposed to serve.
Some commentators clearly believe that the doctrine of undue influence was meant only to curtail abuses of trust or confidence which resulted in significant and measurable disadvantage to the person influenced. Thus, Charles P. Reed, "Comment" (1984), 18 Law Teacher 132, points out that the law has no business meddling with fair bargains. In commenting on the "paternalism" of the Court of Appeal decision in Morgan, he states at p. 134:
It is submitted that by claiming the right to set aside a contract even where there is no manifest disadvantage or oppression sustained by the party subject to the influence of another, the courts are open to the charge of needlessly destroying honest and reasonable bargains. It is suggested that the reason for this unfortunate situation lies in the judgments of certain nineteenth‑century cases in which the principles of undue influence were too widely stated. Those cases include Tate v. Williamson (1866) L.R. 2 Ch.App.55 and in particular Allcard v. Skinner (1887) 36 Ch.D. 145, which was a very special and unusual case of a person encouraged to take a vow of poverty by a spiritual mentor. As Cheshire & Fifoot point out: "It may well be that the origin of the strict law relating to undue influence is the hostility which the courts have always shown towards spiritual tyranny" (Law of Contract, 10th ed. at p. 281).
For others the doctrine of undue influence aims not at preventing "bad bargains" but at redressing abuses of trust, confidence or power. For these analysts what this branch of equity seeks to do is control the process rather than the outcome of transactions. David Tiplady argues that the law regards certain relationships "as transcending mere commercialism" (at p. 582), and suggests that it is the protection of the integrity or sanctity of these bonds that underlies the doctrine. And in Canada, Professor Ogilvie emphasizes that it is abuse to which the law directs itself and manifest disadvantage (or its absence) is perceived only as evidence going to whether or not an abuse has actually occurred. She says at p. 511:
Undue influence is designed to protect more than mere commercial interests; rather it is meant to protect the integrity of the weak or the momentarily weak from entering into disadvantageous transactions, however measured.
Some support for professor Ogilvie's view can be found in the existing jurisprudence. This was unquestionably the opinion of Cotton L.J. in the seminal case of Allcard v. Skinner when he said at p. 93 that in cases where the presumption applies the court interferes, not on the ground that any wrongful act has in fact been committed by the donee, "but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused." So also was the view of Lord Eldon L.C. in Huguenin v. Baseley (1807), 14 Ves. Jun. 273, 33 E.R. 526, at p. 300 and p. 536, respectively: "The question is, not, whether she knew what she was doing, had done, or proposed to do, but how the intention was produced." See also Csada v. Csada, [1985] 2 W.W.R. 265 (Sask. C.A.). Finally, the same approach has been adopted in Australia: see Johnson v. Buttress (1936), 56 C.L.R. 113 (H.C.), discussed in Malcolm Cope, supra, and Malcolm Cope, Duress, Undue Influence and Unconscientious Bargains (1985).
In my view, neither the result nor process focused approach to the doctrine of undue influence fully captures the true purport of this equitable rule. I say this primarily because the doctrine applies to a wide variety of transactions from pure gifts to classic contracts. In the case of the former it seems to make sense that the process leading up to the gifting should be subject to judicial scrutiny because there is something so 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. I cannot think of any situation in which a contract has been rescinded on the sole basis that the process leading up to the bargain was somehow tainted. Something more, such as detrimental reliance, must be shown. It seems to me, therefore, that whatever the measure of undue influence this Court adopts, it must be sufficiently flexible to account for a wide variety of transactions.
What then is the nature of the relationship that must exist in order to give rise to a presumption of undue influence? Bearing in mind the decision in Morgan, its critics and the divergence in the jurisprudence which it spawned, it is my opinion that concepts such as "confidence" and "reliance" do not adequately capture the essence of relationships which may give rise to the presumption. I would respectfully agree with Lord Scarman that there are many confidential relationships that do not give rise to the presumption just as there are many non‑confidential relationships that do. It seems to me rather that when one speaks of "influence" one is really referring to the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power. I disagree with the Court of Appeal's decision in Goldsworthy v. Brickell, supra, that it runs contrary to human experience to characterize relationships of trust or confidence as relationships of dominance. 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. The point is that 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.
What of the controversial requirement of "manifest disadvantage" articulated in Morgan? In my view, the critics were correct in pointing out that this test, while perhaps appropriate in a purely commercial setting, limits the doctrine of undue influence too much. In the case of gifts or bequests, for example, it makes no sense to insist that the donor or testator prove that their generosity placed them at a disadvantage. While one could say that giving away anything is in a literal sense ipso facto disadvantageous, it seems to me that this is a wholly unrealistic test to apply to a gift. A donor who wishes to make a gift is not really disadvantaged by doing so. On the contrary, his or her own purpose is served by doing so. Disadvantage is accordingly, to my mind, not a particularly appropriate concept for general application to the wide variety of situations to which the doctrine of undue influence could conceivably apply.
What then must a plaintiff establish in order to trigger a presumption of undue influence? In my view, 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, such as solicitor and client, parent and child, and guardian and ward, as well as other relationships of dependency which defy easy categorization.
Having established the requisite type of relationship to support the presumption, the next phase of the inquiry involves an examination of the nature of the transaction. When dealing with commercial transactions, I believe that the plaintiff should be obliged to 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. From the court's point of view this added requirement is justified when dealing with commercial transactions because, as already mentioned, 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, e.g., gifts and bequests, it seems to me quite inappropriate to put a plaintiff to the proof of undue disadvantage or benefit in the result. In these situations the concern of the court is that such acts of beneficence not be tainted. It is enough, therefore, to establish the presence of a dominant relationship.
Once the plaintiff has established that the circumstances are such as to trigger the application of the presumption, i.e., that apart from the details of the particular impugned transaction the nature of the relationship between the plaintiff and defendant was such that the potential for influence existed, the onus moves to the defendant to rebut it. As Lord Evershed M.R. stated in Zamet v. Hyman, supra, at p. 938, the plaintiff must be shown to have entered into the transaction as a result of his own "full, free and informed thought". Substantively, this may entail a showing that no actual influence was deployed in the particular transaction, that the plaintiff had independent advice, and so on. Additionally, I agree with those authors who suggest that the magnitude of the disadvantage or benefit is cogent evidence going to the issue of whether influence was exercised.
In the present case neither the trial judge nor the Court of Appeal went into very much detail as to why the presumption of undue influence was properly applicable given the nature of the relationship between Mrs. Goodman and her older brothers. They focused instead on the details of the execution of the trust agreement itself. A review of the circumstances between the deceased and her brothers at the relevant time does, however, disclose that the relationship between them was such that a potential existed for the brothers to exercise a persuasive influence over their sister. Halsbury's Laws of England (4th ed.), vol. 18, para. 330, at p. 149 designates the relevant time when it identifies the class of case in which a presumption of undue influence arises:
330. . . . Secondly, there are those cases in which the relationship between the donor and the donee at the time of or shortly before the making of the gift has been such as to raise a presumption that the donee had influence over the donor. In this second class of case the onus is on the donee to rebut the presumption by showing that the donor made the gift only after full, free and informed thought about it. [Emphasis added.]
It is true that the trial judge found as a fact that there was very little contact between Mrs. Goodman and her brothers over the years prior to the death of their mother. Uncontradicted evidence disclosed that Mrs. Goodman had a history of mental health problems and that she suffered from both bipolar affective disorder and a personality disorder which at times made her domineering and aggressive but at other times withdrawn and helpless depending on her mood swings. The brothers were aware that their sister's condition made her a difficult person to deal with and affected her ability to act responsibly on her own behalf and to make an adequate living for herself. They knew that their mother had shouldered the bulk of responsibility for their sister and that without her help they would likely have to step in to assist. Even although the brothers were successful businessmen who were significantly better off than their sister, they regarded her as a potential liability and sought to avoid any financial responsibility for her. Indeed, it was the suspicion that they might be placed in a position of responsibility for their sister that prompted Jack to play a role in assisting their mother in the preparation of her first will the terms of which ensured that this would not happen.
It was when the mother died and the brothers discovered that she had executed a second will which removed the protections contained in the first one that the real potential for the brothers to influence their sister arose. The evidence discloses that Mrs. Goodman had sought the assistance of her brothers to see her through the emotional crisis of the death of her mother, her primary caregiver. Communications between Mrs. Goodman and her brothers increased during this period. They knew she needed support and protection. She consulted with them as to what the best arrangement would be. The brothers were well aware that their sister had reposed her trust and confidence in them to help her straighten out her legal and financial affairs. It was a situation where the brothers knew their sister was vulnerable, knew that she was relying upon them to help her and knew that they had interests of their own which did not necessarily coincide with hers. Thus, apart from the particular circumstances surrounding the execution of the trust agreement, the relationship between the deceased and the appellants was such that it could have afforded them the potential to exercise undue influence over her.
Since the trust instrument is unquestionably more akin to a gift or bequest than a commercial transaction, the existence of the required relationship without more is sufficient to trigger the presumption. It remains, therefore, to be determined whether the presumption has been rebutted. In making that determination it is necessary to conduct a "meticulous examination of the facts" (per Lord Scarman in Morgan, supra, at p. 709) and it is significant in that connection that both the appellants and the respondents challenge the findings of fact made by the lower courts.
Solicitor Client Privilege
The trial judge's admission of the evidence of Mr. Pearce, the solicitor who drafted the trust agreement, is challenged by the respondents. Mr. Pearce's evidence is crucial in this case for two reasons. First, it may help to ascertain what the precise circumstances surrounding the deceased's entry into the trust agreement were. And secondly, this evidence is vital to the determination of whether Mrs. Goodman received independent advice concerning the proposed transaction.
At trial Hutchinson J. admitted Mr. Pearce's evidence and justified doing so on two distinct grounds. First, he held that the circumstances of this case were analogous to the wills context where a recognized class of exceptions to the rule regarding the inadmissibility of communications between solicitor and client has been well established. At pages 223‑24 of his reasons he said:
I can find no logical reason why the exception to the solicitor‑client privilege that exists in cases where the succession of property turns on the validity of a will would not apply to the present case. In the present case, the trust agreement entered into by Mrs. Goodman is being challenged by the plaintiff, who claims that undue influence was placed upon Mrs. Goodman to execute the agreement. There really is no distinction between an allegation of undue influence when it arises in the case of the execution of a will as opposed to the execution of a trust document when in each case the testator or the settlor has since died. In both cases, it is the duty of the court to ascertain the true intention and the capacity of the deceased. In my view, it is in both the interest of the client and the interest of justice that the relevant evidence of the solicitor, Mr. Pearce, be admitted in evidence.
In the alternative, he found that even if no analogy could be drawn to contests over succession rights, the privilege that existed between Mrs. Goodman and Mr. Pearce had been waived. At page 224 he said:
In the present case, the plaintiffs are legal representatives of the deceased Mrs. Goodman. By raising no objection to the testimony of Mr. Pearce and by electing to extensively cross‑examine him, the plaintiffs have impliedly waived any solicitor‑client privilege that might have existed between Mr. Pearce and Mrs. Goodman. It is obvious that the defendants who were charged with the responsibility of carrying out the terms of the trust for the benefit of the ultimate beneficiaries named therein have also waived the solicitor‑client privilege on behalf of such beneficiaries by the fact of their having called Mr. Pearce as a witness.
In the Court of Appeal Hetherington J.A. expressed her concurrence with Hutchinson J.'s first ground but made no mention of his alternative finding. The majority did not address the evidentiary issue.
In this Court the respondents attacked this aspect of the trial decision. They maintain that the trial judge erred in drawing an analogy between the wills exception and this case and that the general rule as to solicitor‑client privilege should have been applied. To them Mr. Pearce as solicitor should not have been permitted to testify and the court itself should have put a stop to his evidence. They say, moreover, that if the privilege should have enured to them, they did not waive it and if it enured to the appellants, then the appellants were precluded from asserting that Mrs. Goodman was Mr. Pearce's only client.
It has long been recognized that communications between solicitor and client are protected by a privilege against disclosure. The classic statement of the rationale behind this rule was made over one hundred and fifty years ago by Brougham L.C. in Greenough v. Gaskell (1833), 1 My. & K. 98, 39 E.R. 618, at p. 103 and at pp. 620‑21, respectively:
The foundation of this rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.
But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings. If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case.
More recently, this Court has described the privilege as a "fundamental civil and legal right": see Solosky v. The Queen, [1980] 1 S.C.R. 821, at p. 839. Thus, while at one time it was thought that the privilege belonged to the solicitor and not to his client, there is now no doubt that the privilege belongs to the client alone. One consequence of this is that confidential communications between solicitor and client can only be divulged in certain circumscribed situations. The client may, of course, herself choose to disclose the contents of her communications with her legal representative and thereby waive the privilege. Or, the client may authorize the solicitor to reveal those communications for her. Even then, however, the courts have been cautious in allowing such disclosures, so much so that they have assumed for themselves the role of ensuring that without the client's express consent a solicitor may not testify. Thus, in Bell v. Smith, [1968] S.C.R. 664, this Court held that there had been a violation of solicitor‑client privilege when a former solicitor of the plaintiffs in a motor vehicle accident claim was subpoenaed by the defendants and testified as to the settlement discussions that had taken place. Spence J. said at p. 671:
It is rather astounding that Mr. Schreiber should be subpoenaed to give evidence on behalf of the defendants as against his former clients and that he should produce his complete file including many memoranda and other material all of which were privileged as against the plaintiffs and whether the plaintiffs' counsel objected or not that he should be permitted to so testify and so produce without the consent of the plaintiffs being requested and obtained.
Lord Chancellor Eldon said, in Beer v. Ward (1821), Jacob 77, 37 E.R. 779, at p. 80:
. . . it would be the duty of any Court to stop him if he was about to disclose confidential matters . . . the Court knows the privilege of the client, and it must be taken for granted that the attorney will act rightly, and claim that privilege; or that if he does not, the Court will make him claim it.
So important is the privilege that the courts have also stipulated that the confidentiality of communications between solicitor and client survives the death of the client and enures to his or her next of kin, heirs, or successors in title: see Bullivant v. Attorney‑General for Victoria, [1901] A.C. 196; Stewart v. Walker (1903), 6 O.L.R. 495; and Langworthy v. McVicar (1913), 25 O.W.R. 297.
An exception has, however, developed to permit a solicitor to give evidence in wills cases and a variety of explanations for this exception to the general rule concerning solicitor‑client privilege have been advanced by commentators and courts alike. In Wigmore on Evidence (vol. 8, {SS} 2314), for example, the author suggests that, in so far as issues relating to the execution or contents of a will are concerned, the rationale underlying the exception relates to the testator's desire for secrecy. At page 610 of vol. 8, Professor Wigmore states:
But for wills a special consideration comes into play. Here it can hardly be doubted that the execution and especially the contents are impliedly desired by the client to be kept secret during his lifetime, and are accordingly a part of his confidential communication. It must be assumed that during that period the attorney ought not to be called upon to disclose even the fact of a will's execution, much less its tenor. But, on the other hand, this confidence is intended to be temporary only. That there may be such a qualification to the privilege is plain.
In those cases dealing with the validity of a will as opposed to its execution or contents Professor Wigmore acknowledges that the secrecy rationale does not fully explain why a testator's communications with his solicitor should be admitted. In such circumstances he suggests at pp. 612-13 that a solicitor may testify as to the state of mind of the testator since, if the testator were insane or unduly influenced, his utterances were "obviously not confidentially made with reference to the secrecy of the fact of insanity or undue influence, for the testator of course did not believe those facts to exist and therefore could not possibly be said to have communicated them". Professor Wigmore then goes on to cite numerous American cases in which a solicitor has been permitted to testify where the validity of a will has been challenged on the ground that the testator was unduly influenced.
Professor Phipson, on the other hand, appears to be of the view that a different rationale supports the exception to the solicitor‑client privilege in the wills context. In his opinion, any time claimants have a joint interest with the client in the subject matter of the communication, whether dealing with wills or some other matter, no privilege attaches. Hence, he states that as between joint claimants under a testator as to communications between the latter and his solicitor, the privilege does not apply: see Phipson on Evidence (13th ed. 1982), at p. 300.
In The Law of Evidence in Civil Cases (1974), the authors argue that Canadian courts have approached the admissibility of this sort of evidence in a unique way, although the same result has been arrived at. For instance, in Stewart v. Walker, supra, it was alleged that the testator had died intestate. The deceased's solicitor, however, had in his possession a copy of a will providing that he, the solicitor, was to be left the greater part of the deceased's estate and was appointed as sole executor. It was contended that the solicitor should not be permitted to give evidence as to the existence or validity of the will. The Ontario Court of Appeal, however, felt that the solicitor should have been permitted to testify, saying at pp. 497‑98:
The nature of the case precludes the question of privilege from arising. The reason on which the rule is founded is the safeguarding of the interests of the client, or those claiming under him when they are in conflict with the claims of third persons not claiming, or assuming to claim, under him. And that is not this case, where the question is as to what testamentary dispositions, if any, were made by the client. As said by Sir George Turner, Vice‑Chancellor, in Russell v. Jackson (1851), 9 Ha. 387, at p. 392: "The disclosure in such cases can affect no right or interest of the client. The apprehension of it can present no impediment to the full statement of his case to his solicitor . . . and the disclosure when made can expose the Court to no greater difficulty than presents itself in all cases where the Courts have to ascertain the views and intentions of parties, or the objects and purposes for which dispositions have been made." It has been the constant practice to apply the rule here stated in cases of contested wills where the evidence of the solicitors by whom the wills were prepared, as to the instructions they received, is always received. And the application of a different rule in this action would deprive the plaintiff of a considerable part of the proof of his case.
Similarly, in Re Ott, [1972] 2 O.R. 5 (Surr. Ct.), where the issue was whether the testator by tearing it up intended to revoke a later will and revive an earlier one, Anderson Surr. Ct. J. held that the discussion that took place between the deceased and his solicitor at the time of the destruction of the will was admissible. At page 11 he said:
. . . since it is of essence to the case to find out the intention of the testator when he destroyed the will whether or not he was revoking his will unconditionally or whether he was only tearing it up on condition that an earlier will was thus revived, the whole issue turns on this question and it would seem to me that to invoke the privilege of the client, after the client is deceased would make it impossible for the Court to determine the intention of the testator in tearing up the will. In the interests of justice, it is more important to find out the true intention of the testator.
In the present case the respondents argue that no analogy can be drawn between these wills cases and the situation here. I disagree. It is implicit in their argument that the common law has as yet only recognized an "exception" to the general rule of the privileged nature of communications between solicitor and client when dealing with the execution, tenor or validity of wills and wills alone. Their argument is reminiscent of earlier days when the "pigeon hole" approach to rules of evidence prevailed. Such, in my opinion, is no longer the case. The trend towards a more principled approach to admissibility questions has been embraced both here and abroad (see, for example, in Canada, Ares v. Venner, [1970] S.C.R. 608 (hearsay), and R. v. Khan, [1990] 2 S.C.R. 531 (hearsay), and in the United Kingdom, Director of Public Prosecutions v. Boardman, [1975] A.C. 421 (H.L.) (similar fact)), a trend which I believe should be encouraged.
In my view, the considerations which support the admissibility of communications between solicitor and client in the wills context apply with equal force to the present case. The general policy which supports privileging such communications is not violated. The interests of the now deceased client are furthered in the sense that the purpose of allowing the evidence to be admitted is precisely to ascertain what her true intentions were. 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. In summary, it is, in the words of Anderson Surr. Ct. J. in Re Ott, supra, "[i]n the interests of justice" to admit such evidence.
Before leaving this aspect of the case, I should like to note that the trial judge's second ground for admitting the evidence confused the issue. While his reasoning on this point is somewhat less than clear, he seems to suggest that both the plaintiffs and the defendants had, by their conduct, waived whatever privilege they had. This finding undoubtedly inspired the respondent's rather tortured argument that they never waived the privilege and that the appellants, if the privilege enured solely to them, were in no position to then turn around and claim that Mrs. Goodman was the sole client of Mr. Pearce. As I have indicated, I prefer to base my decision on the footing that in circumstances such as these there is no privilege to waive until the true intentions of the settlor are ascertained, which in turn requires the testimony of the solicitor to be received.
Review of Factual Findings
The second factual matter in dispute relates to the findings of the trial judge. The respondents allege that Hutchinson J. committed three palpable errors of fact, thereby committing an error of law reviewable by this Court. In particular, they say that the trial judge failed to consider all the evidence in making the finding that there was hardly any contact between Mrs. Goodman and her three brothers, that Mrs. Goodman was not relying on her brothers for assistance, and that their only concern was that Mrs. Goodman be adequately maintained preferably not at their expense. On the other hand, the appellants maintain that the Court of Appeal committed an error of law when it acted in disregard of the trial judge's finding that the brothers had not unduly influenced their sister into making the trust agreement.
It is by now well established that findings of fact made at trial based on the credibility of witnesses are not to be reversed on appeal unless it is established that the trial judge made some palpable and overriding error which affected his assessment of the facts: see Lensen v. Lensen, [1987] 2 S.C.R. 672, at p. 683, and the cases cited therein. Even where a finding of fact is not contingent upon credibility, this Court has maintained a non‑interventionist approach to the review of trial court findings. Thus, in Harper v. The Queen, [1982] 1 S.C.R. 2, where the question was whether the trial judge had failed to address himself to certain relevant evidence, Estey J. stated at p. 14:
An appellate tribunal has neither the duty nor the right to reassess evidence at trial for the purpose of determining guilt or innocence. The duty of the appellate tribunal does, however, include a review of the record below in order to determine whether the trial court has properly directed itself to all the evidence bearing on the relevant issues. Where the record, including the reasons for judgment, discloses a lack of appreciation of relevant evidence and more particularly the complete disregard of such evidence, then it falls upon the reviewing tribunal to intercede.
And even in those cases where a finding of fact is neither inextricably linked to the credibility of the testifying witness nor based on a misapprehension of the evidence, the rule remains that appellate review should be limited to those instances where a manifest error has been made. Hence, in Schreiber Brothers Ltd. v. Currie Products Ltd., [1980] 2 S.C.R. 78, this Court refused to overturn a trial judge's finding that certain goods were defective, stating at pp. 84‑85 that it is wrong for an appellate Court to set aside a trial judgment where the only point at issue is the interpretation of the evidence as a whole (citing Métivier v. Cadorette, [1977] 1 S.C.R. 371).
In the present case there is 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.
Given that the trial judge found 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 difficult to conclude that the appellants have not successfully rebutted the presumption of undue influence. In addition to these findings it is also relevant that the evidence establishes that the deceased received some independent advice from Mr. Pearce and that the agreement ultimately concluded was in accord with her wishes. I acknowledge that in other situations the fact that the brothers took a leading role in the initial meeting with Mr. Pearce might militate against a finding of independent advice. However, after the departure of the brothers for their respective homes, Mrs. Goodman continued on her own initiative to seek Mr. Pearce's advice.
It does cause me some concern that the solicitor did not inquire in any detailed way into Mrs. Goodman's financial position. In particular, his failure to find out that the estate bequeathed to her was her only asset of any value and that she did not have the benefit of steady employment raises questions as to whether she fully appreciated the economic effect of the trust on her personally. However, any imperfection in the legal advice obtained is not, in my view, fatal to the appellant's case.
Costs
The final issue to be determined relates to the appropriate award of costs. The appellants claim full reimbursement out of the trust property, for their actual and reasonable costs (including legal fees) incurred in defending the respondents' lawsuit.
Much of the respondents' argument on the issue of costs was made on the assumption that the trust agreement would be set aside on the ground of undue influence. They submitted that in such circumstances the trustees should not be permitted to benefit in any way from their own misconduct. Since I have found no misconduct on the part of the trustees, nothing more need be said on this aspect. However, the respondents also urge the Court not to allow the appellants to charge their costs against the trust property, even if they are successful, on the ground that they were acting for their own benefit. I cannot agree.
The courts have long held that trustees are entitled to be indemnified for all costs, including legal costs, which they have reasonably incurred. Reasonable expenses include the costs of an action reasonably defended: see Re Dingman (1915), 35 O.L.R. 51. In Re Dallaway, [1982] 3 All E.R. 118, Sir Robert Megarry V.C. stated the rule thus at p. 122:
In so far as such person [trustee] does not recover his costs from any other person, he is entitled to take his costs out of the fund held by him unless the court otherwise orders; and the court can otherwise order only on the ground that he has acted unreasonably, or in substance for his own benefit, rather than for the benefit of the fund.
There can be no question that the trustees in this action acted reasonably. They were initially accused of having perpetrated a fraud against the deceased, an allegation which has not won the approval of any of the courts that have heard the matter. They were, however, obliged to defend the action. The appellants were cleared at trial of any exercise of undue influence on the settlor and, although they lost in the Court of Appeal on the basis of a presumption of undue influence, they were ultimately vindicated in this Court on the basis of the trial judge's finding that no undue influence had in fact been exercised.
Nor can there be any serious question that the appellants in defending the action were acting, not for their own benefit, but for the good of the trust. For William Geffen, of course, defending the action promoted both his personal interest as well as that of his fellow beneficiaries. While we have not been referred to a case in which trustees seeking indemnification from a trust were also beneficiaries of the trust, I do not consider the co‑existing interest of trustee and beneficiary a valid basis for denying costs. Similarly, the fact that the Geffen brothers were acting in the interests of their children, nephews and nieces does not, in my view, cast any doubt upon the propriety of their actions.
The only question, therefore, is whether the appellants should have their costs against Stacy Randall Goodman personally instead of having them charged to the trust property. It is noted in this connection that the trial judge ordered Stacy Randall Goodman to pay the appellants' costs in his personal capacity and not to charge them against Mrs. Goodman's estate or the trust property. In view of the respondents' success in the Court of Appeal it is clear that the respondents had a tenable case against the appellants and I think it appropriate that they simply bear their own costs but not have to bear the appellants' costs as well.
5. Disposition
I would allow the appeal, set aside the decision of the Court of Appeal, and restore the decision of the trial judge. The appellants are entitled to full reimbursement from the trust property for their actual and reasonable costs (including legal fees) incurred in defending the respondent's lawsuit.
//La Forest J.//
The reasons of La Forest and McLachlin JJ. were delivered by
La Forest J. -- I have had the advantage of reading the reasons of my colleague, Justice Wilson. While I agree with the result she has reached, I have found it necessary to express my own separate views for reasons that will appear.
As my colleague has noted, the first issue to be considered is whether the circumstances in this case are such as to give rise to a presumption of undue influence. Wilson J. concludes that such a presumption will arise only when the parties are in a relationship of "influence", where one person is in a position to dominate the will of another. I agree with this.
My colleague then proceeds to consider whether the additional requirement of "manifest disadvantage" must be present before a presumption of undue influence will be applied. The "manifest disadvantage" requirement was adopted by the House of Lords in National Westminster Bank Plc. v. Morgan, [1985] A.C. 686, a case in which undue influence was alleged in a loan transaction between a bank and one of its customers. At issue there was whether to apply a presumption of undue influence in the context of such a transaction. Lord Scarman found such a presumption will be applied in appropriate circumstances, but only when manifest disadvantage to the party influenced can be shown. He stated, at p. 707:
A commercial relationship can become a relationship in which one party assumes a role of dominating influence over the other. . . . Similarly a relationship of banker and customer may become one in which the banker acquires a dominating influence. If he does and a manifestly disadvantageous transaction is proved, there would then be room for the court to presume that it resulted from the exercise of undue influence.
Wilson J. finds that the requirement of manifest disadvantage simply does not make sense in the context of this case, where the challenged transaction concerns a gift. I would agree. A gift is by its nature inherently disadvantageous, at least in a material sense, so the requirement is superfluous. Having made this finding, it seems to me that it becomes unnecessary to discuss the issue of manifest disadvantage further on the facts of this case. My colleague nonetheless proceeds to elaborate upon this point at some length, and I accordingly feel obliged to say a few words about it.
It may well be appropriate to require a showing of undue disadvantage or benefit before a presumption of undue influence will be applied. Given that the effect of the presumption of undue influence is to shift the burden of proof to the defendant, it may not be unreasonable to require that there be some showing of undue disadvantage or benefit in a commercial transaction before the presumption will arise. It is a substantially different question, however, whether undue influence itself must always involve undue disadvantage or benefit.
As my colleague correctly points out, there is a difference of opinion as to whether manifest disadvantage should be a required element of undue influence in a commercial transaction. This stems from differing views on what the doctrine of undue influence is designed to protect. One view is that it should protect against abuses of trust, confidence or power. From this perspective, the focus is upon the process of the undue influence itself, rather than the result. Manifest disadvantage to the person influenced is not a requirement, but merely evidence that goes to show whether or not an abuse of confidence took place. The opposing view is that the law should not interfere with reasonable bargains, and that the doctrine of undue influence should only address abuses of trust or confidence resulting in a significant and demonstrable disadvantage to the person influenced.
It is unnecessary for us to choose between these two opposing positions in the context of this case, which does not even concern a commercial transaction, and I think it is unwise to do so. I therefore cannot adopt my colleague's comment, at p. 000, that there is "nothing per se reprehensible about persons in a relationship of trust or confidence exerting influence, even undue influence, over their beneficiaries" (emphasis added). Nor would I want to be taken as agreeing with the proposition that the law will never interfere with a contract that does not necessarily lead to a material disadvantage, even where it is clear that the process leading up to the contract has been tainted.
Turning then to the issue of whether the presumption of undue influence should be applied in the present case, the relevant question is whether the relationship of Mrs. Goodman to her brothers was such that they had the ability to dominate her. Without repeating the facts at length, I would note that I approve in large part of the approach taken to this question by Hetherington J.A. in her dissenting reasons in the Court of Appeal. As she notes, Mrs. Goodman's relationship with her brothers was not a close one. In fact, the trial judge found (1987), 52 Alta. L.R. (2d) 210, at pp. 228-29, that:
If anything, the evidence which I have heard and which was read in by counsel for the plaintiff persuades me that the relationship between Mrs. Goodman and her three brothers was such that they had no influence on their sister at all. Particularly brother Jack. Any suggestion made by him seems to have been rebuffed by Mrs. Goodman almost automatically. The poor relationship between the two of them was longstanding and deep-rooted. Apart from the brief interval of time when they were together as a result of their mother's last illness and death, there was hardly any contact between the three brothers and Mrs. Goodman. [Emphasis added.]
In another situation, the relationship of brother and sister might well support a presumption of undue influence. Given these findings of fact by the trial judge, however, it is difficult to accept that the relationship between Mrs. Goodman and her brothers was one where the potential for a dominating influence existed. In so holding, I am not insensitive to the fact that the trust agreement was first proposed during the difficult period immediately following their mother's death. However, the facts as found by the trial judge simply do not bear out the view that Mrs. Goodman was relying upon her brothers for assistance even during this troubled time. I accordingly conclude that there could be no presumption of undue influence at that time.
The facts are even stronger as they relate to the subsequent period. In this regard, it must be remembered that the trust arrangement was not finalized until several months after the death of Mrs. Goodman's mother. It was only entered into by Mrs. Goodman after numerous independent consultations with her attorney, Mr. Pearce, and "following periods of independent thought by her". In the words of the trial judge, at p. 228:
By the time Mrs. Goodman had decided to include all of the grandchildren, that is to say, to include her own children as beneficiaries as well as all of her nieces and nephews, contact between herself and her three brothers no longer existed. [Emphasis added.]
For these reasons, I would dispose of the appeal in the manner proposed by Wilson J.
//Sopinka J.//
The following are the reasons delivered by
Sopinka J. -- I have had the advantage of reading the reasons herein of my colleagues Justice Wilson and Justice La Forest which differ as to whether a presumption of undue influence arises in this case. In my view, given the positive finding by the trial judge, supported by the evidence, that there was no undue influence, the existence of a presumption is immaterial and any discussion of it by the trial judge and the Court of Appeal was unnecessary and obiter. The same applies to the consideration of this matter here.
Wilson J. accurately points out in her reasons, at p. 000, that:
Based on the testimony of the solicitor as well as the other witnesses, Hutchinson J. found on the evidence that the Geffen brothers did not in fact influence their sister into signing the trust agreement. In doing so he placed particular emphasis on the fact that the agreement in substance reflected the true wishes of the settlor.
The trial judge made the following positive determination of this issue ((1987), 52 Alta. L.R. (2d) 210, at pp. 228-29):
If anything, the evidence which I have heard and which was read in by counsel for the plaintiff persuades me that the relationship between Mrs. Goodman and her three brothers was such that they had no influence on their sister at all.... Apart from the brief interval of time when they were together as a result of their mother's last illness and death, there was hardly any contact between the three brothers and Mrs. Goodman. She did not rely on them for assistance and they were only concerned that their mother's estate be available for her maintenance without the need on their part to assume any personal responsibility for their sister's care. [Emphasis added.]
The presumption of undue influence is a presumption of law. As such, its influence on the resolution of the issue is limited to the burden of proof. Text writers and courts are divided on whether presumptions of law affect only the evidential burden or both the evidential burden and the legal burden. In S v. S, [1972] A.C. 24, Lord Reid espoused the latter view and explained a presumption in the following language, at p. 41:
Once evidence has been led it must be weighed without using the presumption as a make-weight in the scale for legitimacy. So even weak evidence against legitimacy must prevail if there is not other evidence to counterbalance it. The presumption will only come in at that stage in the very rare case of the evidence being so evenly balanced that the court is unable to reach a decision on it.
This Court, in Circle Film Enterprises Inc. v. Canadian Broadcasting Corp., [1959] S.C.R. 602, adopted the former or evidentiary burden view, citing Wigmore on Evidence, 3rd ed., s. 2491(2). Judson J., speaking for the court, stated, at p. 606:
It must be kept in mind that the peculiar effect of a presumption "of law" (that is, the real presumption) is merely to invoke a rule of law compelling the jury to reach the conclusion in the absence of evidence to the contrary from the opponent. If the opponent does offer evidence to the contrary (sufficient to satisfy the judge's requirement of some evidence), the presumption disappears as a rule of law, and the case is in the jury's hands free from any rule. [Emphasis in original.]
This view was reaffirmed in Powell v. Cockburn, [1977] 2 S.C.R. 218, Dickson J. (as he then was) said at p. 225:
Evidence having been led on each issue the presumptions disappeared. It fell then to the trier of fact to decide the issues upon all of the evidence adduced.
I need not resolve which of these views is the correct one because in my opinion, on either view, the presumption of undue influence played no role in this case. An evidentiary burden casts on the burdened party the obligation of going forward with some evidence while the legal burden is applied against the burdened party if the evidence, after being weighed, fails to persuade. This latter burden is also referred to as the burden of non-persuasion. The modern view of the legal burden is generally attributed to the decision of the Privy Council in Robins v. National Trust Co., [1927] 2 D.L.R. 97, in which Viscount Dunedin stated at p. 101:
But onus as a determining factor of the whole case can only arise if the tribunal finds the evidence pro and con so evenly balanced that it can come to no sure conclusion. Then the onus will determine the matter. But if the tribunal, after hearing and weighing the evidence, comes to a determinate conclusion, the onus has nothing to do with it, and need not be further considered.
It is the legal burden or burden of non-persuasion that is occasionally misapplied by treating it as a make-weight in the assessment of the evidence. This is characteristic of some of the undue influence cases that refer to matters that must be proved in order to discharge the burden of proof imposed by the presumption. See Allcard v. Skinner (1887), 36 Ch. D. 145, at p. 181.
This is not an application of the burden of proof but rather a particular application of the familiar maxim that in applying the standard of proof all evidence is to be weighed in light of the gravity of the issue to be decided. See Blyth v. Blyth, [1966] A.C. 643, at p. 673; Hornal v. Neuberger Products Ltd., [1957] 1 Q.B. 247, at p. 266. This maxim is applied in undue influence cases. The evidence is subjected to close scrutiny and the cases indicate that before coming to a conclusion, the court must act only on clear and convincing evidence. The factors that are often cited in the undue influence cases are just that, factors that the judge should consider in weighing the evidence. These factors ensure that the evidence is carefully scrutinized. They are to be heeded but are not cast in stone. They are not, however, a product of the application of the legal burden of proof. In this regard, I adopt that portion of the reasons of Rand J. in New York Life Insurance Co. v. Schlitt, [1945] S.C.R. 289, in which he states at p. 308:
In the conception of a function of requiring a quantum of proof, the presumption plays no part in the drawing of conclusions from the facts presented in rebuttal, and this circumstance has made a generous contribution to the confusion and difficulty which surround the practical application of this very necessary device.
Schlitt involved a claim on a policy of life insurance which was resisted by way of reliance on the defence of suicide. The issue was whether the presumption of suicide had been rebutted. The insured contended it was death by accident and the insurer death by suicide. After reviewing the evidence, Rand J., in a dissenting opinion, concluded that the Court was left in a state of doubt and therefore the burden of proof had to be applied. While Rand J. disagreed with his colleagues with respect to the factual conclusion to be reached, his reasons, alone, contain a definitive analysis of the operation of presumption and they do not conflict with those of other members of the Court.
In this case, there is no reason to consider whether there was an evidentiary burden on the appellants to adduce evidence nor whether they had the legal burden of proof. Evidence was adduced which persuaded the trial judge in accordance with the requisite standard that undue influence had not been exerted. This was not a case where the evidence was evenly balanced thereby requiring a determination of where the burden of proof lay. That ended the matter and there is no reason to consider whether that which has been found not to exist ought to be presumed.
I would dispose of the appeal as proposed by Wilson J.
Appeal allowed with costs.
Solicitors for the appellants: Bennett Jones Verchere, Calgary.
Solicitors for the respondents: Barron & Barron, Calgary.