Relief for Weaker Parties to the Contract - Undue Influence

Question 1

Geffen v Goodman Estate (What to Look for to Invoke Undue Influence Doctrine/Utilizes 2(B))

Answer 1

Undue influence (1) Should require proof of undue influence/disadvantage or benefit before a presumption of undue influence will be applied. Then –> the burden of proof to rebut this shifts to the defendant.

To Trigger a Presumption of Undue Influence:
- In order to establish a relationship in 2B(1) (presumed undue influence) you have to contextually determine whether there is a potential for dominating influence, which means that there is either:
1. The relationship in the parties in the ability of one party to dominate the will of the other party in relation to the transaction; or
○ i.e. solicitor and client, parent and child, guardian and ward etc where there is dependency.
2. the potential to exercise a persuasive influence over the other party; or
3. the potential for domination adheres into the relationship itself between the parties.
- Post Geffen we don’t require manifestly disadvantageous for 1 A and B.
- Undetermined where the law lies on 2 A and B for requiring manifestly disadvantageous.

Question 2

How to prove undue influence?

Answer 2

Ways to prove undue influence
- The underlying normative basis is vitiated consent, a lack of genuine consent, one party has overborne the will of the other. Two types:
- Type 1) Actual undue influence
o Prove on a balance of probabilities that your will was overborn by the other party as a finding of fact and that your consent was vitiated by the other party.
o This will be the case when there is a particular relationship between the parties where the nature of the relationship is one of trust and confidence (you won’t find undue influence with strangers).
o Contract does not need to be manifestly disadvantageous, thus it’s immaterial whether the contract was fair or not. This is because if your consent was vitiated, the whole underpinning of contracts based on consent has been eliminated. If fairness was a requirement then there would be no undue influence at all because people would use this as an excuse each time someone’s will was overborn/no consent.
§ AKA - The question is not a matter of fairness, rather, it’s a matter of voluntariness.
o How do you show your will was overborn?
§ If the deal is not only involuntary but also very unfair, this will further show the deal was not consented to because an ORP would not typically willingly go into unfair deals.
- Type 2) Presumed undue influence
o You don’t have to prove undue influence as the claimant. Court will presume that you have been influenced, onus is on the stronger party to rebut & prove it was consensual and voluntary.
o Still deals with close relationship between the parties.
o Presumed undue influence is subdivided into two types:
§ (A) deals with recognized classes of relationships. You have to show two things:
· (1) the contract arose in a recognized class of undue influence; and
o Classes include: Doctor-patient; lawyer-client; priest-penitent; parent-child; teacher-student situations (Geffen)
o This does not include spouses or siblings à those cases go to 2B cases
· (2) the deal itself was manifestly unfair/disadvantageous to the weaker party because the deal was overborne.
§ (B) you have to show two things:
· (1) Not a recognized class, but the history of the relationship itself is one that in fact between the parties has the potential for dominating influence/overbearing one’s will.
o The relationship is one of trust, confidence/inequality and influence that has the potential for you to influence me. (ex: spouse, siblings)
· (2) the deal itself was manifestly unfair to the weaker party because the deal was overborne.
o There must be something substantively wrong with the deal.
o Historically, type 1 situations we had to show that the will was overborn and it was manifestly disadvantageous… Edridge citing CIBC eliminates the requirement for “manifestly disadvantageous” saying its unprincipled, it misunderstands the nature of the claim. It vitiates consent. We don’t care if something is unfair, that’s an unprincipled requirement.
§ Policy requirement: effect is that you could overbear someone’s will and defend by saying it’s a fair deal so its not manifestly disadvantageous so doctrine unavailable
§ Ex: if paid fair market value for home even tho unduly influenced

Question 3

Royal Bank of Scotland PLC v Etridge (No.2) (Manifest Disadvantage) DOESN’T APPLY IN CANADA

Answer 3

• Court maintains fairness/manifest disadvantage inquiry on 2 A and B as a gatekeeping function to filter out bad claims. Because if this wasn’t the case, then all you would ever have to do as a claimant is show how a recognized class and there would be undue influence by default. Thus, you need to demonstrate some degree of suspiciousness/unfair in a contract.
• The court lessened the manifest disadvantage requirement (for 2a and 2b) by lowering the standard and making it more flexible (Canada may adopt this in the future???).
  o court adopts more modern language of what the standard contemplates: idea that manifestly disadvantaged means clearly unfair, now you only need to show that the transaction is readily explicable by the relationship between the parties (aka suspicious)
  o another finding for suspicion turns on the degree of vulnerability of one of the parties: more vulnerable = more suspicious
  Onus shifts to the bad guy to justify that it was a freely voluntary formation of contract