Edward Foley was a dairy farmer. In the last years of his life, he suffered two strokes. Edward’s daughter, Dorothy, was his attorney for property. After his second stroke, Dorothy managed her father’s banking and general finances for the rest of his life. However, she did not manage his investment portfolio.
It was after his second stroke that Edward made three money transfers to Dorothy (approximately $80,000, $53,000 and $80,000). Before his stroke, he had made a bequest of Canada Saving Bonds to Dorothy in his will.
Edward’s son, Donald, had taken over the family farm. When Edward died, Donald was not happy with the money transfers and bequest and headed to court. At trial, the judge found Edward was not subject to undue influence and had sufficient capacity to make the gifts and bequest. Donald did not agree with the decision and appealed.
Several legal issues were canvassed by the Ontario Court of Appeal, including a valid inter vivos gift (i.e. a gift between living people), a resulting trust and undue influence.
A valid inter vivos gift is one that is intended to take effect during the lifetime of the donor. It consist of a voluntary transfer of property to another with the full intention that the property will not be returned. To establish a gift, one must show intention to donate, sufficient delivery of the gift and acceptance of the gift.
When a parent gratuitously transfers property to an adult child, the law presumes that the child holds the property on a resulting trust for the parent (i.e. the gift ultimately results back to the parent). The onus shifts to the adult child to rebut the presumption by proving the contrary intention. The evidence necessary to rebut the presumption depends on the facts of the case.
Where the potential for domination is present in the relationship between a transferor and transferee, the presumption of undue influence applies to a gift. It is up to the transferor to establish that the gift was the result of the transferor’s “full, free and informed thought”.
Finally, the law requires corroborating evidence to rebut the above two presumptions. The evidence can be direct or circumstantial. It can consist of a single piece of evidence or several pieces considered together.
The Court of Appeal found no reason to interfere with the trial judge’s findings that Edward was capable of making gifts and understood the consequences of doing so. In addition, there was sufficient evidence to rebut the presumptions of a resulting trust and undue influence. Lastly, the evidence was corroborated. Edward was well versed in investments and capable of making investment decision until the time of his death. There was no evidence that Dorothy was involved in her father’ investment decision or influenced him to make the three money gifts. Edward also had the benefit of independent advice from his financial planner. While the Court criticized the financial planner for not asking many of the questions that one would expect an independent advisor to ask when an elderly individual is making a significant gift to his child and attorney for property (note to all financial advisors), it was nevertheless open to the trial judge to find that Edward received sufficient independent advice.
Finally, at the time of his death, the Canada Savings Bonds had not yet matured and remained registered in Mr. Foley’s name despite having been deposited into an account jointly held with Dorothy and Donald. To the extent that Dorothy and Donald held an interest in the bonds through the joint account, they held that interest in trust for their father. The bonds therefore passed to Dorothy through Edward’s will bequest and not by right of survivorship to Dorothy and Donald, as Donald had argued. The appeal was dismissed on all fronts and Donald went back to his cows empty handed.