March 5, 2015

It is not uncommon for an aging parent to want to give an extra benefit to the child who is looking after her. However, where this means favouring one child over another, litigation is often not far behind. Such was the case of Donis v Georgopoulous. In the well-written reasons of Justice Firestone, the court upheld a contract for the purchase and sale of a house for what, it is safe to presume, was well below fair market value (the house being located in Toronto after all).

Sofia had a longstanding desire to live in her own home for as long as possible. To fulfill her wish, Sofia’s daughter, Dimitra, assumed the role of her mother’s primary caregiver. As thanks, Sofia signed a memorandum of agreement (“MOA”) to transfer her house to Dimitra. The MOA read, in part, that the house would be transferred to Dimitra “at the time when she pays me the sum of $100,000.00 out of the proceeds from the sale of her own property.” The MOA was prepared by Sofia’s longstanding solicitor, Mr. Shea. Less than a month after the MOA was signed, Sofia died suddenly.

Dimitra’s brother, Christos, commenced an application challenging the validity of the MOA. Dimitra, whose house had just been sold but had yet to pay the $100,000.00 to her mother’s estate, had already begun living in her mother’s home. She defended the validity of the MOA.

The first question to the court was whether the MOA was a testamentary document or a contract for purchase and sale. On a plain reading of the MOA, the court held that there was no suggestion that the transfer was to occur on death. Rather, the wording suggested the transfer was to occur immediately on the payment of $100,000.00. Thus contract law applied, as opposed to estate law principles.

Christos submitted that the MOA was void for uncertainty – it was a mere “agreement to agree.” The court disagreed. It found that the MOA clearly outlined (i) the parties to the agreement, (ii) the subject matter of the agreement, and (iii) the consideration to be paid. Although it was a relatively simply agreement, given Sofia’s lack of proficiency with the English language, the simple terms were understandable. Justice Firestone held “The court should not require a level of sophistication that is beyond the needs or expectations of the parties.”

Next, the court looked at whether there was undue influence. On the evidence of the drafting solicitor, Mr. Shea had met with Sofia on at least three separate occasions before executing the MOA. Mr. Shea had also referred Sofia to another lawyer who spoke Macedonian for independant legal advice. The second lawyer was able to confirm that it was Sofia’s clear wish for Dimitra to receive her house. Unfortunately, the second lawyer did not have the benefit of reviewing the actual MOA with Sofia when he met with her. Nevertheless, the court held that “independant legal advice need not be perfect to be effective.” On the evidence, the court concluded that there was no undue influence.

Finally, the court looked at whether the MOA could be enforced following Sofia’s death. Christos argued that because the contract did not contain an “inurement clause” (a clause explicitly stipulating that the heirs and successors to the parties to the contract have the benefit of the contract), the MOA “died with Sofia.” The court rejected this argument. It held that although contracts for personal service are frustrated by the death of one of the parties, contracts containing a financial obligation can survive death. As a result, the MOA is enforceable against Sofia’s estate.

The courts are naturally suspicious of large gifts to caregivers, and the onus rested on Dimitra to prove that the MOA was valid. It is likely that she succeeded because of the extensive and credible evidence from Sofia’s lawyers and doctor. On their evidence, the court concluded that Sofia was capable at the time of the contract and entered into it through her own free will. Had this been a private agreement between Dimitra and her mother, without the involvement of legal counsel, the result may have been different.