Case information

Wills and estates — Administration of estate — Property — Real property — Sale — Contracts — Capacity — Deceased sold most of his real estate — Whether land sold for less than fair market value — Deceased suffering mild dementia at time of sale — Whether deceased had capacity to enter into agreements to sell land — Standard of review for factual errors by appellate court — Whether standard met — Standard of care of legal counsel and real estate professionals dealing with and representing vulnerable people with diminished capacity — Standard for capacity required to enter into contracts — Whether standards applied to testamentary cases should be applied to contractual cases — Standard for determining damages where fiduciary duty breached.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Mr. McLeod’s estate, through his administrators (Gary and James McLeod, Mr. McLeod’s estranged sons) initiated an action in breach of contract against Mr. McLeod’s realtors and his lawyers seeking damages of $2.9 million and equitable rescission of the agreement of purchase and sale for one parcel, alleging that Mr. McLeod did not have sufficient mental capacity to sell the land, that the land was sold for less than its fair market value, and that the lawyers and the realtors had breached the standards of care owed to the deceased, failed to act in his best interests, and failed to ensure that he had capacity to enter into the agreements of purchase and sale. Mr. McLeod retired from farming in 2006. He developed mild to moderate dementia and was briefly hospitalized for dementia symptoms in November 2007 and early 2008. Both times, he was considered competent to sign a power of attorney and he was discharged with some support and a prescription which significantly improved his cognitive function. The second time, he signed a power of attorney in favour of Gary McLeod in the presence of a lawyer. Gary never acted on it. In 2008, a different psychiatrist cancelled all of his dementia medication and described his memory as being within the normal range.

In 2009, Mr. McLeod decided to sell three parcels of land. Work on the sales stopped when the power of attorney came to light. With the help of his lawyer, Mr. McLeod formally revoked the power of attorney in October 2008 and the lawyer informed that realtors of that fact. Work on the file recommenced. The sales went as follows:

• 2.97 acres with a partially-finished ready-to-move house were listed at $330,000, which the realtors thought was too high but which Mr. McLeod insisted upon; it sold after a long listing (6 months) “as is” for $240,000, which was within the range suggested by the realtors;
• 11 acres of agricultural land which provided overland drainage away from Brandon and which was subject to a “shallow subdivision” plan such that the land was divided into 124 plots divided by streets and lanes to which Mr. McLeod did not hold title; it was purchased by the City of Brandon for $66,676., which included a discount for the streets and lanes; and
• 123.58 acres of undeveloped land was sold to Jaysukh Rudani and 5935491 Manitoba Ltd. for $654,410 in September 2009.

The trial judge dismissed the claims, finding that Mr. McLeod had capacity to enter into the agreements to sell, that the lawyers and realtors had observed the standard of care owed to Mr. McLeod, and that the lands had been sold for fair market value. The Court of Appeal dismissed the appeal.