George Gamble lived in Medicine Hat, Alta., and was a widower. In his 80s, he had some wealth. More than half of it was in the form of publicly traded shares in the Bank of Nova Scotia. He had no children and befriended a woman, age 50, who later became his lady friend. Her name was Sarah.
He proposed to Sarah six times, but each time she refused. Life can be complicated. She had been married in the United States and had lost track of her estranged husband. She did not know if the divorce he had started had gone through.
No one doubted that George and Sarah were a couple. They saw each other two or three times a week. They kissed when they met and when they parted. They travelled together. She mended his clothes. On one of the trips they took together, the two of them bought parcels of land in B.C. He lent her the money, but she paid him back. She volunteered to manage both parcels of land, his as well as hers. He also nominated Sarah as his attorney under a power of attorney, and left her with blank cheques on all of his accounts to use on his behalf should need arise. He gave her the combination to his safe. He was sharp as a tack to the end. The power of attorney and cheques went unused, but the fact he put her in that position of power demonstrates how much he trusted her.
He wanted to give her things. He gave her the Bank of Nova Scotia shares, and then died eight months later after a brief illness.
His estate went to his extended family. They challenged the gift of the bank shares. If successful, setting aside the gift would restore the bank stock to his estate and more than double its size for its beneficiaries. The lawyer hired by the family asked the court to set aside the gift of shares on the grounds the deceased Gamble had made the gift due to the "undue influence" of his lady friend.
There is nothing wrong with making a gift. All of us can make significant gifts of wealth to family, friends or charities. So long as you have your marbles and know what you are doing, the courts will not step in.
As soon as you reach out to another person and say "please help me," then all of the rules change. The courts immediately take the stand that the person stepping forward to give you that help cannot take advantage of the relationship or profit by it. Any gift that you make to that person is immediately suspect. If it smells bad, the courts will set it aside.
The courts do not draw fine distinctions in whom they choose to protect. It extends to relationships where help is volunteered, not asked for. It extends to cases where one person effectively says to the other, by words or actions, "I will do whatever you tell me to."
It boils down to this: Certain relationships are sacred. No transfers of wealth are permitted by the courts within those relationships unless the person can prove that the gift was purer than the driven snow. That can be exceptionally hard to prove, particularly after the gift giver is dead and cannot testify. So be it. As a matter of social policy, the courts take the position that certain relationships are sacred, and that is bigger than the needs or rights of the person who received the gift. If mistakes are to be made, the courts will err on the side of protecting the sacred nature of the relationships. None of this applies to small gifts at birthdays, just to significant transfers of wealth.
What happened to Gamble's bank stock? The case made it all the way to the Supreme Court of Canada. The judges of that court let Sarah keep the bank stock.
It was close. A panel of five judges heard the case. Three judges sided with her, but two would have overturned the gift and restored the stock to Gamble's estate.
If the rules sound loose and discretionary, they are. If the gift offends the conscience of the court, the court will protect the gift giver.
Names have been changed to avoid any embarrassment to the next of kin.
John E.S. Poyser is a lawyer with the Wealth and Estate Group at the Winnipeg firm Inkster, Christie, Hughes LLP. Contact him at 947-6801 or email@example.com