Articles Relating to Challenging A Will

Undue influence and unconscionable conduct in a contested will case. In John Patrick Courtney v Maureen Anne Powell; Peter Michael Courtney v Maureen Anne Powell [2012] NSWSC 460 Ball J considered whether the above principles had occurred before the deceased’s death (some paragraphs ommitted):

1. Mr John Michael Courtney (the deceased) died in January 2010 at the age of 93 … He was survived by three children, who I will refer to as John, Peter and Maureen … He gave the sum of $2,000 to John and the residue of his estate to Peter and Maureen in equal shares. At the time the deceased made his will, his estate consisted of a house in Pitt Town, which at the time was valued at approximately $640,000, together with cash of approximately $200,000. However, on 19 July 2007, the deceased transferred the house at Pitt Town to Maureen for an expressed consideration of $1. In these proceedings, Peter seeks to set aside that transfer on the basis of undue influence on the part of Maureen or on the basis that the transfer was an unconscionable dealing. Alternatively, Peter makes an application under s 59 of the Succession Act 2006 (NSW) …

Undue Influence – The Principles

37. The general principles relating to undue influence were usefully summarised by Gzell J in Tulloch (deceased) v Braybon (No. 2) [2010] NSWSC 650, at [38] in these terms:

Equity avoids dispositions of property procured by the improper or unconscientious use of the influence of one person over another, that cannot be explained on the grounds of friendship, charity or other ordinary motives on which people ordinarily act … Undue influence may be established by proof that the disponor’s assent was in fact procured by undue influence (“actual undue influence”), or by an unrebutted presumption arising from the existence of a relationship of influence between the parties where the quantum or improvidence of the transaction is such that it cannot be explained on grounds of friendship, relationship, charity, or other ordinary motives (“presumed undue influence”) … Some relationships – such as parent and child, guardian and ward, solicitor and client, doctor and patient, (probably) spiritual adviser and follower, and (arguably) fiancé and fiancée – are presumed to be relationships of influence.

In addition, a relationship of influence can be established by showing that it is one which involves ascendancy and influence on the part of the dominant party, or dependence, reliance, trust and confidence on the part of the weaker party …

38. Although the relationship between parent and child is one which is well-accepted as giving rise to a presumption of undue influence, that is only true insofar as a parent is presumed to exercise influence over his or her child. There is no presumption in the opposite direction: Brown v New South Wales Trustee & Guardian [2011] NSWSC 1203 at [46] per Brereton J. Consequently, in order to establish a presumption that a child has exercised undue influence over his or her parent, it is necessary to prove that there was a ‘special relationship’ of influence between the parties. In Quek v Beggs (1990) 5 BPR 11,761 at 11,764, McClelland J stated that two circumstances must be proved if a presumption of undue influence is to arise. They are:

(a) that at the time the gift was made there existed a relationship between the donor and the donee of such a nature as to involve reliance, dependence or trust on the part of the donor resulting in an ascendancy on the part of the donee; and

(b) that the gift is so substantial, or so improvident, as not to be reasonably accounted for on the grounds of friendship, relationship, charity or other ordinary motives on which ordinary persons act…

41. In order to rebut the presumption, it must be proved that “the gift was the independent and well-understood act of a man [or woman] in a position to exercise a free judgment based on information as full as that of the donee”: Johnson v Buttress (1936) 56 CLR 113 at 134 per Dixon J…

42. Whether or not the donor received independent advice on the transaction will be important in proving an independent and well-understood act of free will…

44. Finally, it has also been said that the onus on the donee seeking to uphold the transaction in the face of a presumption of undue influence will be much heavier where the donor has given away practically all of his or her property: Johnson v Buttress at 120 per Latham CJ.

Undue Influence – Application to the Facts

45. In the present case, Mr Hodgson, who appeared for Peter, relied on medical assessments and reports concerning the deceased between 2004 and 2007 to support the conclusion that a presumption of undue influence arose in this case and had not been rebutted by Maureen. Mr Hodgson attached particular significance to the fact that those assessments and reports revealed that the deceased was suffering from mild dementia…

46. There was other evidence to indicate that the deceased became disorientated from time to time. Peter gave evidence of occasions on which his mother told him that the deceased had driven her to the local shops and had gone home without her and of an occasion when the deceased had forgotten where he had parked the car. He also said that, from time to time, the deceased could not remember the names of his great grandchildren or who they were. When he stayed with Peter he sometimes forgot where the toilet was and he would sometimes forget what he was talking about or would repeat a story that he had told 5 minutes earlier. This evidence is consistent with the medical reports and I accept it…

48. In my opinion, the evidence is sufficient to establish that a presumption of undue influence arises in this case. The deceased was physically, mentally and, following the death of his wife, emotionally frail. He was concerned that he would not be able to continue to live at the Pitt Town property and he was wholly dependent on Maureen to be able to do so. In my opinion, that put Maureen in a position of influence over him…

49. Nonetheless, in my opinion, Maureen has rebutted the presumption of undue influence in this case. I accept Maureen’s evidence that she tried to dissuade her father from pursuing the gift of the house to her. When that failed, she made arrangements with Mr Grogan for half the house to be transferred to her. It was at the deceased’s insistence that the transfer was amended so as to cover the whole house. Far from exercising the influence she had over the deceased to obtain the house, she sought unsuccessfully to exercise that influence to dissuade the deceased from pursuing the course he did. In my opinion, that fact provides a complete answer to the case based on undue influence.

Unconscionable Conduct – The Principles

50. The principles relating to unconscionable conduct are closely related to but distinct from the principles relating to undue influence. As Deane J explained in Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 474-5:

• … The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them, and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable…
• The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party … Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v Ryan (supra, at 405). Fullagar J listed some examples of such disability: “poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary”…

Unconscionable Conduct – Application to the Facts

• 54. Mr Hodgson submitted that the deceased suffered from a special disability or disadvantage because of his emotional distress following the death of his wife together with his dementia and other health issues that made him dependent on Maureen. Maureen, knowing those facts, took unconscientious advantage of that state of affairs by accepting the gift of the Pitt Town property in circumstances where there was no benefit in the transaction to the deceased and, in particular, no enforceable counter-promise made by Maureen to care for the deceased and in circumstances where the deceased received no independent advice on the merits of the transaction.
• 55. I accept that the deceased did not receive independent advice in relation to the merits of the transaction…
• 56. The real question, however, is whether at the time the deceased made the gift, he suffered from a special disability because the conditions from which he suffered meant that his ability to judge what was in his own best interests was seriously impaired and Maureen knew or ought to have known of that fact. I am not satisfied that the deceased’s ability to judge what was in his own best interests was seriously impaired.

There is evidence that the deceased’s dementia affected his memory. That is one of the matters that affected his ability to care for himself and, in turn, was one of the matters that made him dependent on Maureen. However, in the absence of expert evidence, it is not possible to conclude that the deceased’s dementia affected his ability to evaluate the transaction…

Also, it is not suggested that the deceased was incapable of understanding what he was doing. For the reasons I have given, any evaluation the deceased undertook was quite independent of Maureen. This is not a case where the deceased’s dependence on Maureen affected his ability to exercise independent judgment. Courts are naturally suspicious of transactions in which an elderly and frail person gives his or her principal asset to a family member. But in this case, there were good reasons for the deceased having confidence that Maureen would continue to look after him; and that, of course, is what she did. And there were good reasons why the deceased might have wished to show her gratitude. Taking those matters into account, I do not think that it can be inferred that the transaction was one from which it should be concluded that the disabilities from which the deceased suffered impaired his ability to evaluate it.

57. For those reasons, the claim based on unconscionable conduct must fail.