Canada: An Unconscionable Bargain

Last Updated: January 31 2018
Article by Predrag Tomic

Generally speaking, the law will not protect you from making a bad bargain. However, when a transaction is so grossly unfair to one party and was obtained through an unfair advantage by the other party, the legal doctrine of unconscionability may be used to set it aside. In my practice, most often the issue comes up in the context of the elderly being induced by family members or others to sell a property significantly under fair market value, or to transfer it in exchange for a promise for some other benefit which may never materialize.

The doctrine of unconscionability was recently considered in the case of Burby v Ball, by both the Alberta Court of Queen's Bench (2017 ABQB 300), and the Court of Appeal (2018 ABCA 22).

The plaintiff was an elderly man who lived and ranched in a community west of Calgary. The defendants were a young ranching couple in the same community. The parties' families had known each other for over 100 years.

In 1999, the defendants began leasing a few quarter sections of land from the plaintiff for grazing his cattle. In 2009, the parties amended their lease agreement to include a right of first refusal in favour of the defendants. In the spring of 2010, the defendants purchased two quarter sections from the plaintiff for $600,000. They then subdivided the property, made some improvements, and listed the subdivided parcels for sale for a total list price of $2.2 million in November 2012. By that time, the plaintiff was residing in a long-term care facility. His brother commenced the lawsuit as a litigation representative in December 2012 seeking to set aside the sale of the lands to the defendants on the basis of undue influence and unconscionable transaction. The matter went to trial in January 2017.

The plaintiff's mental capacity at the time of the sale to the defendants was in question. There was considerable evidence about the plaintiff's generous dealings with his land in the years prior to the transaction in question. There was also evidence from neighbours and family members about a decline in the plaintiff's cognitive abilities in the years prior to the sale. However, no concerns about cognition were recorded in the plaintiff's medical chart until his admission to the hospital in 2012.

The legal test for unconscionability in Alberta

Tilleman J adopted the test for unconscionability from the 2005 Alberta Court of Appeal decision in Cain v Clarica Life Insurance Company, which requires the plaintiff to establish all four of the following elements:

  1. a grossly unfair and improvident transaction: the question to ask is whether the transaction "shocks the conscience." The analysis is both objective (ie. the actual sale price vs. the fair market value) and subjective, particularly where family or close relations are involved. In this case, there was evidence that it was important to the plaintiff that the land remain ranching land. There was evidence from the plaintiff's family that the he was happy with the deal because it went to a young ranching family. The judge concluded that even though it was financially imprudent for the plaintiff, the sale gave him the intangible satisfaction of knowing the land would be used according to his wishes. The transaction was therefore not grossly improvident and the case would have failed on this element alone.
  2. that the victim lacked independent legal advice or other suitable advice: independent legal advice is usually a complete defence to a claim based on unconscionability. However, a lack of such advice is not necessarily fatal to a transaction. In this case, the plaintiff met with a lawyer who explained the documents to him for about an hour. Although the plaintiff did not seek advice about the merits of the transaction, the trial judge concluded it was adequate in the circumstances.
  3. that there was an overwhelming imbalance in bargaining power: the imbalance is usually caused by the victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability. In this case, it was argued that the plaintiff lacked the decisional mental capacity to enter into the agreement due to old age and dementia. Each party tendered medical experts, who performed retroactive capacity assessments based on the plaintiff's medical records and collateral interviews with friends and family (he had lost capacity by time of trial). Unsurprisingly, they came to different conclusions. However, the trial judge gave the reports little weight because of his concerns about the reliability of retroactive capacity assessments, which were based on hearsay information which was not tendered as evidence at trial in all instances. The trial judge concluded that the plaintiff had capacity based on his own assessment of the evidence he heard at trial. In light of that finding, there was no imbalance in this case.
  4. that the other party knowingly took advantage of this vulnerability: the plaintiff must show that the defendants knew about the vulnerabilities described above and used that knowledge to their advantage. Given the decision on point 3 above, this part of the analysis was moot. However, the trial judge found that the defendants were not aware of the plaintiff's decline in cognitive functioning in the years surrounding the deal.

As a result, the trial judge dismissed the claim. The plaintiff appealed and in a relatively short judgment released a few weeks ago, the Court of Appeal dismissed the appeal, confirming Clarica Life as the test for unconscionability and concluding that there was ample support on the record for the trial judge's decision.

Thank you for reading!


Predrag (Peter) Tomic is a wills and estates lawyer with a focus on complex estate and trust litigation, estate planning and probate matters.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions