In Cowper-Smith v. Morgan 2016 BCCA 200, the British Columbia Court of Appeal upheld a finding of undue influence by the testatrix's daughter, despite advice from two separate lawyers. The Court also dealt with issues of proprietary estoppel, which are not discussed here. The Supreme Court of Canada recently granted leave to appeal, in part on the issue of proprietary estoppel. The appeal will not address the issue of undue influence.
Elizabeth Cowper-Smith died in 2010, leaving three surviving children: Gloria, Max and Nathan. Prior to her death, Elizabeth transferred legal title to her Victoria residence into joint tenancy with her daughter Gloria. Elizabeth also signed a Declaration of Trust naming Gloria as the bare trustee of the residence and her investments. The Declaration of Trust provided that upon Elizabeth's death, the residence and investments would become Gloria's property "absolutely". The effect of these transactions was to leave Elizabeth's estate devoid of any significant assets.
Elizabeth subsequently made a will in which she left one-third of her estate to each of her three children. After Elizabeth's death, Gloria maintained that the residence and investments were hers absolutely and did not form part of Elizabeth's estate.
The trial judge found that a presumption of undue influence arose from the relationship between Elizabeth and Gloria, and that Gloria had not rebutted this presumption. The judge held that Elizabeth's true intentions were reflected in her 2002 will. In the result, the trial judge concluded that Gloria held the residence and investments in trust for the estate, to be divided equally among the three siblings. On appeal, Gloria did not challenge the presumption of undue influence but argued that the legal advice Elizabeth received was adequate to rebut the presumption.
The Transactions, the Wills, and the Legal Advice
Elizabeth had a complicated relationship with her two sons, Max and Nathan. Based on advice from her brother-in-law, David Cowper-Smith (a retired lawyer) and Gloria, Elizabeth became convinced that her sons were going to take the residence away from her. In February 2001, David drafted a will for Elizabeth, which was to be temporary. That will named Gloria as executrix and left one-half of the estate to Gloria, and the other half equally to Max and Nathan. In March 2001, David contacted a lawyer, Ms. Iverson, to draft a will for Elizabeth. David provided his comments and background to Ms. Iverson regarding Elizabeth's relationship with her sons. He also suggested that Elizabeth's will be changed to leave everything to Gloria.
In May 2001, Ms. Iverson met with Elizabeth. Gloria was present for most of this meeting, and was the one to initially propose the idea of transferring title to the residence and investments to joint names. Ms. Iverson then discussed these wishes with Elizabeth, who agreed. Ms. Iverson then prepared a land title transfer, a declaration of trust, and a will.
Realizing the potential for litigation, Ms. Iverson referred Elizabeth to another lawyer, Mr. Easdon, for independent legal advice. Following his usual practice when providing independent legal advice, Mr. Easdon reviewed the documents Ms. Iverson had prepared with Elizabeth and explained their purpose and significance to Elizabeth. However, Mr. Easdon did not ask Elizabeth her reasoning for entering into the proposed transactions, or their financial implications. Mr. Easdon was not aware of the extent of Elizabeth's assets.
In 2002, Ms. Iverson prepared Elizabeth's last will, in which Elizabeth left her estate to her three children equally. Ms. Iverson did not have a discussion with Elizabeth at that time about what assets would pass through her estate.
The Court's Analysis
The trial judge relied on the Supreme Court of Canada decision in Geffen v. Goodman Estate  2 SCR 353 to find that the potential for domination inherent in the relationship between Gloria and Elizabeth gave rise to a rebuttable presumption of undue influence. The factors considered in relation to a presumption of undue influence include:
- full, free, and informed thought of the donor;
- lack of actual or opportunity to influence;
- receipt or opportunity for receipt of independent legal advice; and
- donor knowledge and appreciation of decisions.
As to whether Gloria had rebutted the presumption, the judge focused on the legal advice provided by Ms. Iverson and Mr. Easdon to determine whether Elizabeth had "full, free, and informed thought" with respect to the transactions involving the residence and investments.
The trial judge found that the legal advice that Elizabeth obtained from Ms. Iverson and Mr. Easdon was insufficient to rebut the presumption. David and Gloria had provided false information to Ms. Iverson, prior to her initial meeting with Elizabeth. Ms. Iverson did not confirm or verify this information with Elizabeth. The trial judge also noted that Gloria had provided initial instructions to Ms. Iverson, and had been present for much of the initial meeting. Lastly, Ms. Iverson did not confirm or clarify Elizabeth's intentions with respect to the passing of her assets when the last will and testament was prepared and signed.
A resulting trust was therefore established whereby Gloria was deemed to be holding the residence and investments in trust for the estate, to be divided equally among the children.
The Court of Appeal agreed with the trial judge's finding on this issue, and referred to the factors set out by the Newfoundland Court of Appeal in Coish v. Walsh 2001 NFCA 41 regarding legal advice in undue influence cases:
- the party benefitting from the transaction is also present at the time of advice or execution;
- the lawyer was engaged by or took instructions from alleged influencer;
- where the transfer or all of substantially all assets exists, the lawyer was aware of that fact, and discussed the financial implications of the same;
- the lawyer enquired as to whether the donor discussed the transaction with the other family members who would otherwise have benefited; and
- the lawyer discussed less risky options to achieve the same objectives.
The Court held that neither lawyer "gave Elizabeth the type of 'informed advice' that is required when there is a concern about undue influence, namely that Elizabeth should have carefully considered proceeding with this course of action, which in the absence of any rational reasons, might be found after her death not to be just and fair to the respondents" (at para. 65).
This case demonstrates the importance of independent legal advice in estate planning. It illustrates that the process by which legal counsel is engaged and informed may impact the quality of the advice provided and in turn may impugn the estate plan. Although the donor in Cowper-Smith obtained advice from two different lawyers, as well as her brother-in-law who was a retired lawyer, two courts have found that the presumption of undue influence was not rebutted. The estate plan comprised in joint title and the corresponding Declaration of Trust were given no legal effect.
Clients often resist the need for independent legal advice, and it can be tempting to provide background information to the independent lawyer, in the interests of client service and efficiency. However, particularly where circumstances give rise to a presumption of undue influence, such as where a parent is favouring one child over another, family members and other advisors must be careful not to influence the independent legal advisor's ability to provide 'informed advice'. The factors set out in Coish and restated in Cowper-Smith provide a useful guideline for lawyers and clients to follow to ensure the veracity of the estate plan where the presumption of undue influence might arise.