The doctrine of unconscionable procurement has not been invoked in Ontario in more than one hundred years, previous to a recent case heard by the Ontario Superior Court of Justice. The doctrine is used to set aside a gift or other significant transfer of wealth when it can be established that the gifter did not understand what they were doing, on the basis that it would be unconscionable to allow the gift to stand.
Proving Unconscionable Procurement
To prove the elements of the doctrine, one must establish two things:
- That one person received a significant benefit from another, and
- The receiver of the benefit had an active role in procuring or arranging the gift or transfer.
Once the two elements above have been established, there is a presumption of unconscionable procurement unless the receiver of the benefit can demonstrate otherwise.
Notably, most estate cases looking to challenge a gift or other transfer would look to the capacity of the gifter. The doctrine of unconscionable procurement does not require proof that the gifter lacked capacity.
A Mother Gifted Over $25 Million to One of Three Sons in Her Lifetime
In the case at hand, a woman passed away with a large estate, survived by two sons (a third son had predeceased her). One surviving son and the estate of the deceased son brought an action against the third due to significant gifts their mother had bestowed on him and his family while she was alive. They sought an equalization payment of 2/3 of the amount he had been gifted by their mother. In the last years of her life, she had given him over $25 million, which amounted to nearly half of her total assets.
While a psychiatrist testified that the mother had the capacity to make her own decisions at the time of the gifts, this did not have a bearing on the equitable doctrine in question. The court found that certain transactions lacked proper documentation. As a result, the son in receipt of those gifts, which totalled approximately $8 million, could not rebut the presumption of unconscionable procurement once the first to elements had been established.
The court noted that it was obliged to “look at the impugned transactions with its moral sense awakened and with a view to determining whether it would be unconscionable to allow the transaction to stand.” Given the presumption of unconscionability, the court was forced to find that the transactions lacking documentation could not stand. The remedy for the doctrine is to find any inequitable transactions are void.
The son who benefitted from those gifts was ordered to account for the money received and place it in trust for the estate, pending distribution among the beneficiaries.
Notably, this decision is going to be appealed, though not with respect to the unconscionable procurement aspect. This means that lawyers looking to challenge transfers of wealth have a new (old) method to establish their claim.
Documenting Large Gifts May Become the Norm
This case should also demonstrate the need to properly document any and all large gifts, donations and other transfers of wealth, to be sure that they will hold up under judicial scrutiny at a later time. If it is no longer necessary to prove that a person lacked the capacity to give a gift or make a charitable contribution, it may leave these types of transactions vulnerable to attack after the person has passed away. To ensure that a gift will stand, it may become necessary to set out the gifter’s intentions in writing.
At Baker & Company, our Toronto estate planning lawyers can help you establish an estate plan tailored to your needs, no matter your current family status. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. Should you find yourself in the position of challenging an existing will or estate, our lawyers can also represent you through the litigation process. Call us at 416-777-0100 or contact us online for a consultation.
