McFee v Reilly

The case of *McFee v Reilly* concerned an appeal to the New South Wales Court of Appeal concerning allegations of breach of fiduciary duty, negligence, and issues relating to the indefeasibility of title. The primary dispute involved an enduring attorney who instructed a solicitor to make an inter vivos gift of the principal's main asset to four of her five children, without consideration. The principal was found to be incapable at the time of this transaction. The appeal also involved challenges to findings of primary fact and the rectification of a will.

The Court of Appeal was required to determine several legal issues. These included whether the attorney breached her fiduciary duty by making the gift on the basis of what she considered "fair," whether the solicitor had knowledge of this breach and if such knowledge could be imputed to the four children as knowing recipients of the property. The court also considered whether the fraud exception to indefeasibility of title was made out and whether the solicitor owed a duty of care to a testamentary beneficiary who was disappointed by the inter vivos transaction, and if so, whether that duty was breached and caused loss. Finally, the court had to consider challenges to the primary judge's findings of fact and the rectification of the testator's will.

The Court of Appeal found that while the attorney's actions constituted a breach of fiduciary duty, and the solicitor owed a duty of care to the disappointed beneficiary which was breached and caused loss, the principle of indefeasibility of title meant the property was not held on a constructive trust for the estate. However, the four children were deemed to be knowing recipients of the property and were required to account for its value. The court rejected the challenges to the primary judge's findings of fact and the rectification of the will. The appeal was allowed in part, with certain orders of the primary judge being set aside, and the cross-appeal by one respondent was dismissed.