After 100 years – a century – the buried doctrine of unconscionable procurement has been resurrected.
Born in England during the 1800’s, the equitable doctrine was used to challenge and undo inter-vivos or lifetime gifts. Moreover, when significant transfers of wealth were made during one’s lifetime, and the following two requirements were met, the law in equity presumed that the transfers, as result of being unconscionable, were deemed voidable.
The requirements were as follows:
- The transferor did not fully appreciate the nature and consequence of his/her action(s); and
- The transferee was instrumental in procuring the transfer (i.e. played an active role).
The doctrine was adopted by Canadian courts; however, seldom adjudicated on, laying dormant for the past 100 years; until now…
A Mother Gifts Funds to A Child Over Several Years
In Gefen v. Gaertner, (“Gefen”), a mother, over a number of years, bestowed approximately twenty-five million dollars on one of her three children. The remaining two children commenced a lawsuit, alleging that the transfers were voidable pursuant to the doctrine of unconscionable procurement.
The court at first instance, particularly the Honorable Justice Kimmel, after an extensive review of the history of the doctrine, permitted its use. In adhering to previous jurisprudence, the court noted that the onus was on the children attacking the transfer to prove on a balance of probabilities that same was unconscionably procured. The court further noted that it must be guided by its “moral sense” and the doctrine “does not require proof of incapacity or undue influence.” Though a cousin of undue influence, where the former relies on the transferor’s vulnerability, the latter relies on his/her lack of appreciation or understanding.
In Gefen, the court found that a number of the transfers were improvident and presumably unconscionable. Further, the recipient child was unable to rebut this presumption. As such, these transfers were deemed voidable.
Evidence of Incapacity is Not Required
Back from the dead, the doctrine of unconscionable procurement may reverse an inter-vivos or lifetime gift, even where there is no evidence of incapacity or vulnerability; perhaps just foul play. It would appear as though the threshold for establishing this doctrine is lower than others, such as that of undue influence. As a result, more and more gifts may become undone. The doctrine is here to wreak havoc; best be assured.
If you are an estate trustee or family member looking for guidance on a similar issue or other estate litigation matters, contact the estate litigation lawyers at Eisen Law in Toronto to find out how we can help. Call us at 416-591-9997 or contact us online.