White v Wills
[2014] NSWSC 1160
•22 August 2014
Supreme Court
New South Wales
Medium Neutral Citation: Edith White v Judith Liane Wills [2014] NSWSC 1160 Hearing dates: 15, 16, 17, 18, 30 July 2014 Decision date: 22 August 2014 Jurisdiction: Equity Division - Expedition List Before: Sackar J Decision: See paragraph [560]
Catchwords: EQUITY - undue influence - where plaintiff executed a deed not to revoke her will - whether presumption of undue influence arises - whether presumption rebutted - whether improvident transaction - whether plaintiff received independent advice - whether unjust under Contracts Review Act - whether doctrine of suspicious circumstances applies Legislation Cited: Contracts Review Act 1980
Evidence Act 1995
Powers of Attorney Act 1998 (QLD)
Succession Act 2006Cases Cited: Albrighton v Royal Prince Alfred Hospital [1980] 2 NSWLR 542
Ali v Nationwide News Pty Ltd [2008] NSWCA 183
Allcard v Skinner (1887) 36 Ch D 145
Aslan Ahmed v Kopf Phyllis [1995] NSWCA 26
Baltic Shipping Co v Dillon (1991) 22 NSWLR 1
Barkley v Barkley Brown [2009] NSWSC 76
Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30
Blatch v Archer (1774) 1 Cowp 63
Bridgewater v Leahy (1998) 194 CLR 457
Briginshaw v Briginshaw (1938) 60 CLR 336
Brown v NSW Trustee and Guardian [2011] NSWSC 1203
Courtney v Powell [2012] NSWSC 460
Cubillo v Commonwealth of Australia [2000] FCA 1084; (2000) 174 ALR 97
Delaforce v Simpson-Cook (2010) 78 NSWLR 483
Fox v Percy (2003) 214 CLR 118
Gartside v Isherwood (1783) 28 ER 1297
Grace v Grace [2012] NSWSC 976
Hamilton v Carter [2011] NSWSC 394
Ho v Powell (2001) 51 NSWLR 572
Huguenin v Baseley (1807) 14 Ves Jun 273; 33 ER 526
Inche Noriah v Shaik Alle Bin Omar [1929] AC 127
Janson v Janson [2007] NSWSC 1344
Jenyns v Public Curator Qld (1953) 90 CLR 113
Johnson v Buttress (1936) 56 CLR 113
Jones v Dunkel (1959) 101 CLR 298
Jones v Moss [2007] NSWSC 969
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303
Megic v Public Trustee for the Australian Capital Territory (1995) 59 FCR 165
National Westminster Bank Plc v Morgan [1985] 1 A C 686
Nemeth v Australian Litigation Funders Pty Ltd [2014] NSWCA 198
Nock v Austin (1918) 25 CLR 519
Palmer v Bank of NSW [1973] 2 NSWLR 244
Poosathurai v Kannappa Chettiar [1919] LR 47 I A
Provident Capital Ltd v Papa [2013] NSWCA 36
Quek v Beggs (1990) 5 BPR 11,761
R v Navarolli [2010] 1 Qd R 27
Re Coomer [1911] 1 Ch 723
Smith v Clegg [2005] 1 Qd R 561
Spong v Spong (1914) 18 CLR 544
Tobin v Ezekiel (2012) 83 NSWLR 757; [2012] NSWCA 285
Trustee for the Salvation Army (NSW) Property Trust and Anor v Becker and Anor [2007] NSWCA 136
Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650
Vernon v Watson; Estate Clarice Isabel Quigley dec'd [2002] NSWSC 600
Watkins v Combes (1922) 30 CLR 180
West v AGC (1986) 5 NSWLR 610
Westmelton (Vic) Pty Ltd v Archer [1982] VR 305
Whereat v Duff [1972] 2 NSWLR 147Texts Cited: J D Heydon, Cross on Evidence, 9th edition
Meagher Gummow and Lehane's Equity Doctrines and Remedies, 4th edition
The Honourable Sir Frederick Jordan KCMG Chapters on Equity in New South Wales, 6th edition
Young Crofts and Smith, On EquityCategory: Principal judgment Parties: Edith White - plaintiff
Judith Liane Wills - defendantRepresentation: Counsel:
R Wilson SC, P Bolster - plaintiff
M Henry SC, S Balafoutis - defendant
Solicitors:
Anthony Walker - plaintiff
Kemp Strang - defendant
File Number(s): 2013/382506
Judgment
Proceedings
By her statement of claim dated 20 December 2013, the plaintiff Mrs Edith White seeks a declaration that a will and a deed not to revoke that will, both dated 26 July 2013, were induced by undue influence on the part of her granddaughter, Mrs Judith Wills (the defendant). In the alternative, a declaration that the deed is unjust within the meaning of the Contracts Review Act 1980 is sought. In either case, an order is sought that the deed be set aside.
By her defence dated 24 February 2014, the defendant denies any undue influence or that the deed was an improvident transaction and asserts that the plaintiff received legal and accounting advice prior to entering into the deed. She denies the plaintiff is entitled to the relief sought.
A brief overview of the background facts
The plaintiff was born on 20 September 1924 in Hungary, and is aged 89 at the time of the present proceedings. In 1947 she married Leslie White (Mr White) and they emigrated to Australia in 1950. They had a daughter, Liz Stoliar (Ms Stoliar), who suffers from bipolar disorder and is presently aged 59 years. Ms Stoliar has a daughter, the defendant Mrs Judith Wills (Mrs Wills) who is presently aged 33 years. The defendant has two young children, Jordan and Asa.
The plaintiff and Mr White had set up various companies, of which the main operating company is L&E White Investments Pty Ltd. The main asset of that company is a block of units at Bellevue Hill. L&E White Family Holdings Pty Ltd as trustee of the White Family Trust, and White Corporate Management Pty Ltd, are the other main companies in the structure. However, it is not necessary to set out the precise ownership and structure of these companies in detail at this point, other than to note that both the plaintiff and Mr White had separate and significant interests.
The plaintiff had made wills on 13 July 2007 and 24 December 2009 dealing with her interest in the various companies, both to the effect that her interest would pass to Ms Stoliar (either directly in the case of the 2007 will or, in the case of the 2009 will, being held on trust for Mr White during his lifetime and then the remainder interest passing to Ms Stoliar).
On or about 21 September 2010, Ms Stoliar was scheduled under the Mental Health Act 2007 as an involuntary patient at the mental health facility at the Prince of Wales Hospital. She had previously been scheduled on 21 February 2007 and 21 March 2009. I will return to the detail of this period at greater length later in the judgment.
During this period, the plaintiff and Mr White were living in a property in Serpentine Parade, Vaucluse (Serpentine Parade).
The defendant gave evidence that she was out of the country from 16 September 2010 to 6 October 2010 (see T76-T77).
While Ms Stoliar was scheduled in 2010, the plaintiff and Mr White visited their solicitor Mr Michael Henley on 14 October 2010 (CB3/718) and again on 25 October 2010 (CB3/723). The defendant also attended both meetings. Mr Henley had drafted the plaintiff's previous wills in 2007 and 2009.
It should be noted at this point that the plaintiff did not accept the accuracy of many aspects of Mr Henley's file notes (amongst other contemporaneous documents of other solicitors, social workers, medical practitioners and police officers). However I am satisfied, for reasons I discuss further below, that those file notes assist me to provide an accurate chronology of events even though the precise nature of particular conversations may be contested.
After discussion, the plaintiff and Mr White instructed Mr Henley to prepare their wills which they executed on 29 October 2010 along with other documents. Under those wills, the plaintiff and Mr White's shares in one of the family companies (L&E White Family Holdings) passed to the defendant directly. The shares in two other family companies passed to testamentary trusts established under their respective wills. The defendant and her children were some of the primary beneficiaries of the trust. Ms Stoliar was a secondary beneficiary, and the trust provided that income and capital be allocated to primary beneficiaries before secondary beneficiaries.
Neither the plaintiff nor Mr White told Ms Stoliar about their 2010 wills. It is common ground Ms Stoliar did not discover the existence and terms of those wills until the death of Mr White in 2013 (T10/20), and there is no other evidence to suggest Ms Stoliar was otherwise aware of the contents of them. Indeed Ms Stoliar herself gave evidence that she was not aware of the effect of her father's will until June last year (T208/9).
Following a fall on 13 May 2013, the plaintiff underwent a total hip replacement at Prince of Wales Hospital and then moved to the Wolper Private Hospital.
Mr White died suddenly on 21 May. Probate of his will was granted to his executors, being the defendant, Edward Vesely and Gabriel Lorentz, on 21 June. Mr Henley acted as the solicitor for the estate on behalf of the executors.
I should note that there appear to be separate proceedings that have been brought under the Succession Act against the executors of Mr White's estate by the plaintiff and Ms Stoliar (see T69), but that does not concern me for present purposes.
Following the death of Mr White, the defendant assumed management of the family companies.
On 30 May, Mr Gil Baron, the solicitor for Ms Stoliar, wrote to Mr Henley in the following terms (CB2/418):
We act on behalf of Liz White (also known as Elizabeth White) the daughter of the late Leslie White and anticipate also receiving instructions for her mother, Edit (Eei) White the widow of the late Leslie White.
We understand you have been appointed as the attorney for the Executors by the late Mr White's Will.
We would be grateful if you could provide us with a copy of the said Will at your earliest convenience
On or about 4 June, a copy of Mr White's will was sent to Ms Stoliar's solicitor. As noted above, this appears to be the first time that Ms Stoliar was aware of the contents of her father's will and the method in which he had disposed of his assets.
On 11 June, the plaintiff was discharged from Wolper Hospital and admitted to the Sir Moses Montefiore Jewish Home Woollahra. On 19 June she moved to the Randwick Montefiore Home.
On 24 June, the plaintiff had a meeting with Mr Henley at the Randwick Montefiore Home. At the meeting, Mr Henley explained the impact of Mr White's will, including that the shares in L&E White Investments and White Corporate Management were to pass to a testamentary trust under the control of the defendant, Edward Vesely and Gabriel Lorentz.
The plaintiff indicated that she wanted to change her will to leave some mementoes such as certain items of jewellery and $1 million cash to Ms Stoliar, but otherwise her shares in the family companies would pass to the defendant, either directly in the case of L&E White Family Holdings or otherwise through a testamentary trust.
On 1 July, the plaintiff had a meeting with Mr Henley at which she executed a new will, a memorandum of wishes in relation to the will and another memorandum in relation to the White Family Trust, a section 100 statement under the Succession Act 2006, an appointment of the defendant as the plaintiff's enduring guardian and a power of attorney in favour of the defendant.
Under the 1 July 2013 will, the plaintiff gave $1 million cash to Ms Stoliar, gave her shares in L&E White Family Holdings directly to the defendant and transferred her shares in White Corporate Management Pty Ltd and L&E White Investments Pty Ltd to the testamentary trust set up under Mr White's will (of which the defendant and her children were the primary beneficiaries). The items of jewellery were dealt with in clause 7 of the 1 July will.
In the memorandum of wishes in relation to the White Family Trust, the plaintiff expressed the wish that the trustees pay Ms Stoliar $170,000 per year (as adjusted for CPI).
According to the file notes of Mr Henley, the defendant was not present either at the meeting of 24 June or 1 July both of which took place at the Montefiore Home (see CB3/810 and CB3/816). In contrast, the plaintiff initially said the defendant was present and "took me there", and then could not remember (T28/23-T29/7).
On 5 July, the plaintiff called Mr Henley and advised him that she was considering immediately giving the shares in the family company to a trust for the benefit of the defendant and her children. She asked him to investigate the impact of this course with her accountant.
On 12 July, a meeting took place between the plaintiff, Mr Henley, Associate Professor Tuly Rosenfeld and an accountant Mr Stephen Cribb.
The invitation for Associate Professor Rosenfeld to attend the meeting was organised by Mr Henley and it seems to have been prompted by the plaintiff's reference to earlier comments by Ms Stoliar that she thought the plaintiff was showing signs of dementia. In organising Associate Professor Rosenfeld, Mr Henley took what I regard as the actions of an experienced and careful practitioner who was anxious to avoid unnecessary litigation over the plaintiff's testamentary capacity at some future point. I should also note that the defendant was not involved in the procuring of such an expert, even though the 1 July will (like the earlier 2010 will) had been substantially in her favour.
The meeting with Associate Professor Rosenfeld was to assess the plaintiff's testamentary capacity and also to discuss the possibility of immediately transferring the shares to a trust. At the meeting the possibility of a new family discretionary trust called the Jordasa Family Trust was also discussed.
On 15 July, on Mr Henley's recommendation and to avoid a conflict between him acting for the defendant as an executor of Mr White's estate and the defendant's position as a beneficiary under the plaintiff's will, the defendant retained Ms Christine Page to act on her behalf.
On 19 July, the plaintiff met with Mr Henley privately at his office for about 40 minutes. Mr Henley discussed the issues of a prospective new will, the arrangements that would be necessary for the creation of the Jordasa Family Trust, negotiation and the White Family Trust.
Immediately following that meeting between the plaintiff and Mr Henley, they met with the defendant, Ms Page and Mr Cribb.
There continued to be discussion about the same issues, including whether an independent appointor would be necessary for the White Family Trust to secure for Ms Stoliar the amount of $170,000 that had been the subject of the plaintiff's previous memorandum of wishes.
Both Mr Henley and Ms Page agree that it was Mr Henley who first proposed the idea of a deed not to revoke a will.
An appointment was made for the plaintiff to attend Mr Henley's office on Friday 26 July 2013 at 10am to execute the deed and the new will, and other associated documentation.
Between 23 July and 26 July, Mr Henley and Ms Page exchanged drafts of the deed not to revoke a will.
On 25 July, the defendant delivered to the plaintiff a copy of the draft will and draft deed not to revoke her will (T104/44). There was some discussion at the trial about whether certain amendments were received by the defendant and whether they were discussed with the plaintiff, and the precise timing of events, to which I shall return.
There was a telephone call made to Mr Henley at about 10am on 25 July. The plaintiff suggested that Mr Henley prepare a "false will" giving the shares to Ms Stoliar, and another in the form that actually reflected her wishes. Mr Henley (quite rightly may I add) advised against this course.
On the same day at about 5.10pm, the plaintiff again called Mr Henley and cancelled the meeting scheduled for 10am the next day. The plaintiff also asked Mr Henley to send a copy of the plaintiff's will to her home.
The defendant asserts that she discovered the meeting had been cancelled from Mr Henley, rather than her grandmother (T113/21). However, Mr Henley asserts that he did not ring the defendant later that evening (T167/39).
That evening however, the plaintiff spoke to the defendant. The plaintiff asserted at the trial that the defendant was annoyed that the meeting was to be cancelled (see T3/24). The defendant asserts that the plaintiff asked that the meeting be rescheduled to earlier in the morning the following day (T113/43).
The defendant sent a text message to Mr Henley requesting that the meeting be rescheduled to 8.30am. Mr Henley agreed.
The precise events on the evening of 25 July were also contested, particularly around the presence of the defendant and Ms Stoliar at the nursing home, and I shall return to this at a later point.
On 26 July, the defendant picked up the plaintiff from the nursing home, leaving at around 7.45am, and took her to the meeting with Mr Henley at the offices of TressCox Lawyers. According to the file note of Mr Henley, the meeting lasted for 1.1 hours.
It appears uncontroversial that during the course of the meeting, the plaintiff said to Mr Henley that she had to be back at Montefiore by 9.45am or 10am and that she asked him to "hurry up" and said "I'm under pressure to get back" (see evidence of the defendant at T124/46, file note of Mr Henley at CB3/967-968). The plaintiff gave evidence that "during the meeting with Mr Henley I felt pressured to sign the documents... I felt pressure also that the whole process had to be completed quickly so that I could get back to the nursing home" (affidavit of the plaintiff at [32], CB1/18). However, the existence and source of that pressure was contested and I will return to this point in due course.
At the meeting, and in the presence of the defendant, the plaintiff executed a will in which her shares in L&E White Family Holdings were given to the defendant directly. Her share in a property in Palm Cove (the Angsana property) was given to Ms Stoliar, along with various chattels. The residue of the estate, including the shares in the other two private family companies, was to be transferred to a trust of which the defendant is the proposed trustee. Under the trust, distributions of income and capital must, in the first instance, be made to either the defendant or her children or her grandchildren or their related entities. If, and only if, those persons die or cease to exist, distributions may be made to Ms Stoliar.
Unlike the testamentary trust established under Mr White's will, and in a change from the plaintiff's will of 1 July, the 26 July will saw that the defendant alone was in control of the testamentary trust (and not Edward Vesely or Gabriel Lorentz).
Another significant change was that the gift of $1 million to Ms Stoliar was taken out of the will. The plaintiff suggested at the trial that Mr Henley had removed the $1 million against her instructions on the basis that "she has enough" (T44/33).
At the same time, the plaintiff executed a deed not to revoke that will, containing a promise not to make any subsequent will revoking the gift of the shares in the three companies and other assets referred to in Schedule 2 to the deed without the defendant's written consent. It also contained a promise not to dispose of that property set out in Schedule 2 in her lifetime without the defendant's written consent.
A change was made at the meeting to Schedule 2 of the deed not to revoke the will so that it covered not only the shares in the three companies, but also the jewellery specifically gifted to the defendant and any other assets she may own at her death which would otherwise form part of the residue and pass to the testamentary trust.
The plaintiff also executed a memorandum of wishes in relation to her will and a section 100 Succession Act Statement. It is noted that no new memorandum of wishes was executed in relation to the White Family Trust and therefore the wishes outlined in the earlier 1 July memorandum that $170,000 be paid to Ms Stoliar remained in place.
The plaintiff returned with the defendant to the Montefiore Home, where Ms Stoliar was already waiting. According to Ms Stoliar, the plaintiff did not tell her that she had been to see Mr Henley but instead told her that she had been to breakfast with the defendant (T223/18-T223/30).
Later that day, the defendant signed a consent that enabled the plaintiff to freely deal with all her assets referred to in paragraph 4 of Schedule 2 to the deed. This meant the plaintiff could deal with all cash, public listed shares, other investments, loans owed to her and her jewellery. However, for the sake of clarity, no consent was sought or granted in relation to the shares in L&E White Family Holdings, L&E White Investments or White Corporate Management.
On 29 July, the plaintiff left the nursing home and recommenced living at her home in Serpentine Parade, where Ms Stoliar also resided.
On 5 August, one week after returning to live with Ms Stoliar, the plaintiff made a new will, purporting to revoke her previous wills and leaving all of her assets to Ms Stoliar. The will was made with a different solicitor, Mr Leon Ratner, whom the plaintiff had not used professionally before (although she suggested at the trial she had met him on a prior occasion) and who had represented Ms Stoliar before the Mental Health Tribunal when she was scheduled under the Mental Health Act.
On 6 August, the plaintiff rang Mr Henley at 8.43am and left a message on his voicemail. The message was played in cross-examination to the plaintiff, although it is noted that the plaintiff did not concede that it was her voice (T63/16-T64/6), and the parties later provided the following agreed transcript of the recording (Exhibit D2):
Michael, Edith White is calling.
I am at home in [XX] Serpentine Parade.
I would like to leave another message;
Please don't send the Deed to Leon Ratner; everything else you can send it
I do appreciate it, if you listening to me; so I tried the office as well
On 12 August, Associate Professor Rosenfeld produced his report on the plaintiff's testamentary capacity. I will return to the content of this report in due course.
Legal principles
Before setting out the principles upon which the plaintiff relies to set aside the deed, it is necessary to provide a brief overview of the principles relating to contracts not to revoke wills. I should note however that the ability of an individual to make such a contract was not under challenge in the present proceedings.
In Palmer v Bank of NSW [1973] 2 NSWLR 244, the Court of Appeal considered a promise by a testator not to revoke his will, and circumstances where the will was not subsequently revoked but the subject property was dealt with in his lifetime. The Court held that the will of the deceased operated only in respect of such property as he had at the date of his death, and that a restriction on the right of the deceased to dispose of his property as he saw fit could not be implied from a mere promise not to revoke or vary his will. However, the ability of the testator to make such a contract was not under challenge.
In Megic v Public Trustee for the Australian Capital Territory (1995) 59 FCR 165 (per Tamberlin J; Gallop and Kiefel JJ agreeing), a deed was made between the appellant and the deceased. By that deed, the appellant agreed to carry out repairs and renovations to the premises in return for a covenant by the deceased that his last will and testament would always provide that he devise the premises to the appellant. There was no submission on the appeal that the deed was void for uncertainty or that it was executed as a result of undue influence. Tamberlin J observed:
[39] It is well settled that a person can, by contract, restrict his or her testamentary freedom. This can be done in several ways. A contract may be made to devise property under a will in favour of a particular person, or a covenant can be given not to revoke such a disposition. A person may act or fail to act in such a way that the personal representatives are estopped from denying rights in or over the property asserted by persons claiming as a result of such conduct. A testator may also act in such a way that the executors of the estate have to hold part of the property on trust for persons claiming an interest therein, otherwise than under the will. See Theobald on Wills, 15 edn. (1993) at 96-105; Certoma, The Law of Succession in New South Wales, 2 edn. (1992), at 56-59; Schaefer v Schuhmann (1972) AC 572; and Palmer v Bank of New South Wales (1973) 2 NSWLR 244 at 254-255, per Hutley JA.
In Aslan Ahmed v Kopf Phyllis [1995] NSWCA 26, Gleeson CJ observed (Kirby P and Priestley JA agreeing) that "although a will is, by its nature, revocable, a testator may enter into a binding contract not to revoke a will, and breach of such a contract will give to the other contracting party a right of action for damages, and, depending upon the circumstances, a possible claim for equitable relief".
More recently, in Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at 489, Handley AJA (Allsop P and Giles JA agreeing) observed:
[31] Although a will is revocable until death or loss of testamentary capacity, equity enforces a contract not to revoke a will, or to leave property by will, not by restraining or nullifying an inconsistent will, but by fastening a trust on the estate to give effect to the contract: Birmingham v Renfrew (1937) 57 CLR 666 at 683.
Undue influence
Undue influence is a doctrine of equity that allows a court to set aside a transaction that has been unconscionably procured as a consequence of the relationship of the parties. The doctrine is a species of fraud, the crux of which as Sir Anthony Mason has noted, is in the existence of some "ascendancy by the stronger party over the weaker party such that the relevant transaction is not the free, voluntary and independent act of the weaker party" (cited in Bridgewater v Leahy (1998) 194 CLR 457 at 478 per Gummow, Gaudron and Kirby JJ).
The doctrine therefore requires an examination of the relationship between the parties. Some relationships in their nature raise a presumption of undue influence; in other relationships proof of the existence of particular elements may cause undue influence to be inferred.
Once a relationship of influence is established by the defendant, either because it is a recognised category or a special relationship, this will give rise to a presumption that the transaction was procured as a result of undue influence. The burden then falls on the defendant to prove the transaction was in fact the pure voluntary and well-understood act of the plaintiff: Johnson v Buttress (1936) 56 CLR 113.
Undue influence is not limited to circumstances of voluntary transactions (eg a gift), however, in cases where consideration has been given, it is required that either the consideration given was insufficient, or that the transaction was in some way disadvantageous to the plaintiff.
For a presumption of undue influence to arise, it is necessary to establish that the transaction in question was "so substantial or improvident as not to be reasonably accounted for on the grounds of friendship, relationship, charity or other ordinary motives on which ordinary persons act": Quek v Beggs (1990) 5 BPR 11,761 at 11,764 (per McLelland J); Courtney v Powell [2012] NSWSC 460 at [38] (per Ball J).
The question of improvidence is of course largely a factual one. For example, in Hamilton v Carter [2011] NSWSC 394, Davies J considered a transaction where the gift of property to the defendant followed the execution of a will in which the property was to be left to that individual in any event. Davies J observed at [145]:
Furthermore, I do not consider that the transaction was an improvident one from Norma's point of view. The Cronulla unit had been left to the Defendant in her will. What Norma was doing during her lifetime was only to limit her ability to sell the unit or, arguably, to raise a mortgage on the unit for some reason, because what she retained was only a life estate. There was no evidence that she did not have the wherewithal to pay for her full time care for the rest of her life. What little evidence there was suggested that, apart from her life estate in the farm and her ownership of the Cronulla unit, she had assets worth about $300,000. There was no suggestion that any bond to go into Seaview House or Heywood (to where she ultimately moved) remotely approached that figure. Further, retaining a life interest in the Cronulla unit meant that Norma could rent it out if there was a need for ongoing income.
Another example of the factual basis of improvidence is to be found in the judgment of Brereton J in Grace v Grace [2012] NSWSC 976 (in relation to the inter vivos transfer of shares in a closely held family company): see [88]-[89].
I shall return later to the question of whether a disposition of assets under a will in the circumstances of the present case can properly be regarded or characterised as improvident.
It should also be noted that in Trustee for the Salvation Army (NSW) Property Trust and Anor v Becker and Anor [2007] NSWCA 136, Ipp JA observed (Mason P and McColl JA) agreeing:
[62] Before identifying the principal difference [between fraud and undue influence], I would note that the equitable doctrine of undue influence does not apply to testamentary gifts: Boyce v Rossborough; Craig v Lamoureux [1920] AC 349; Winter v Crichton; Estate of Galieh (1991) 23 NSWLR 116. Importantly, probate undue influence differs from the equitable doctrine of undue influence under which the donor may fully intend and desire the transaction even though an inference of undue influence may arise: Bridgewater v Leahy (1998) 194 CLR 457 at 475 per Gaudron, Gummow and Kirby JJ.
[63] Undue influence, in a probate context, is constituted by conduct that overbears the will of the testatrix so that she makes the will without intending and desiring the disposition made thereby. The circumstances must be such that the disposition is not regarded as the free and voluntary act of the testatrix. The volition of the testatrix must be overpowered so that her mind does not accompany her act in making the will. The point was put succinctly in Wingrove v Wingrove (1885) 11 PD 81 by Hannen P (at 82):
[i]t is only when the will of a person who becomes a testator is coerced into doing that which he or she does not desire to do that it is undue influence.
See also Hall v Hall (1868) LR 1 P & D 481 where Sir J P Wilde, at 482, described undue influence as the overpowering of the volition without convincing the judgment.
[64] The basic point is that, to prove undue influence, it must be shown that the testatrix did not intend and desire the disposition. It must be shown that she has been coerced into making it. See, generally, Boyse v Rossborough; Buckley v Maddocks (1891) 12 LR (NSW) Eq 277 at 282 per Stephen J; Winter v Crichton; Estate of Galieh.
[emphasis added]
In the present case, it is important to keep in mind that it is the deed that the plaintiff seeks to set aside on the basis of undue influence, and therefore it is the equitable doctrine that must be applied: see further Young Crofts and Smith On Equity at [5.520].
In National Westminster Bank Plc v Morgan [1985] 1 A C 686 Lord Scarman, with reference to the early case of Poosathurai v Kannappa Chettiar [1919] LR 47 I A noted at 707:
... The wrongfulness of the transaction must, therefore be shown: it must be one in which an unfair advantage has been taken of another ... the doctrine is not limited to transactions of gift. A commercial relationship can become a relationship in which one party assumes a role of dominating influence over the other.
Similarly, in Chapters on Equity in New South Wales (6th ed) the Honourable Sir Frederick Jordan KCMG noted at p 137:
If a relationship of influence is proved to exist between two persons, then in a Court of Equity -
(i) if a gift inter vivos is made to, or at the instance of the dominating party, by the other party, the gift, if substantial, will be presumed to have been produced by undue influence;
(ii) if a transaction is entered into between them for value it will be presumed to have been produced by undue influence only if it is shown to be unfair, e.g. for undervalue.
The traditional categories of presumed undue influence encompass guardian and ward, solicitor and client, doctor and patient, spiritual adviser and follower, and parent and child: Allcard v Skinner (1887) 36 Ch D 145, 185; Whereat v Duff [1972] 2 NSWLR 147, 168; Quek v Beggs (1990) 5 BPR 11,761.
There is authority that the presumption arises between express trustee and beneficiary (eg Johnson v Buttress at 119 per Latham CJ and 143 per McTiernan J), but it has been argued that this requires qualification where no relationship of confidence exists between trustee and beneficiary: Meagher Gummow and Lehane's Equity Doctrines and Remedies (4th ed) at [15-095].
Although a parent might be presumed to be in a position of undue influence over a child, there is no presumption in the opposite direction. In Brown v NSW Trustee and Guardian [2011] NSWSC 1203 at [46], Brereton J observed:
The relationship of parent and child is a presumed relationship of influence, but in the context that the parent is presumed to exercise influence over the child; there is no presumption in the opposite direction. There could only be a relationship of influence, such as could give rise to presumed undue influence, in this case if a special relationship of influence were proven. To establish such a relationship, more than mere confidence and reciprocal influence is required. For a relationship to be brought within the doctrine, it must go beyond one of mere confidence and influence to one involving dominion or ascendancy by one over the will of the other and, correlatively, dependence and subjection on the part of the other. It is not necessary to establish a relationship of actual dominion by one party over another, and it is enough to show that the party in whom trust and confidence is reposed is in a position to exert influence over the party who reposes it. But more is required than the influence that any person might have on another by making a recommendation or giving advice; as a minimum, it is necessary that one have some element of authority or superiority - which may be moral or practical, as distinct from legal - over the other.
[emphasis added]
Likewise, the existence of a fiduciary relationship is not one that automatically leads to a presumption of undue influence: Re Coomer [1911] 1 Ch 723; Barkley v Barkley Brown [2009] NSWSC 76 at [136] per Ward J.
Whether or not a relationship arising under a general power of attorney is a presumed relationship of influence will depend upon the particular nature of the relationship: Janson v Janson [2007] NSWSC 1344 at [75] per Biscoe AJ. The defendant points to section 87 of the Powers of Attorney Act 1998 (QLD) which gives rise to a statutory presumption of undue influence in a transaction between a principal and attorney, and the decision of McMurdo J in Smith v Clegg [2005] 1 Qd R 561 at 570 that in the absence of such legislative intervention the presumption may not arise in every transaction between a principal and attorney.
Outside of these established categories, the plaintiff may establish as a matter of fact that there is a special relationship of influence between the parties. The elements required to establish the existence of a special relationship outside the traditional categories are not closed (National Westminster Bank v Morgan), but such relationships necessarily involve some element of influence, ascendancy or dominion on the part of the dominant party or an element of confidence and reliance on the part of the weaker party: Johnson v Buttress (1936) 56 CLR 113, 134-135.
Proven relationships of influence, leading to the presumption of undue influence, are helpfully described by Brereton J as "special relationships of influence": Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650. After setting out the relevant passages from the authorities, Brereton J observes:
[51] In my opinion, these authorities show that more than mere confidence and reciprocal influence is required to establish a "special relationship of influence" from the existence of which undue influence will be presumed unless rebutted; for a relationship to be brought within the doctrine, it must go beyond one of mere confidence and influence, to one involving dominion or ascendancy by one over the will of the other, and correlatively dependence and subjection on the part of the other. It is true that some cases suggest that it is not necessary to establish a relationship of actual dominion by one party over another and that it is enough to show that the party in whom trust and confidence is reposed is in a position to exert influence over the party who reposes it. But more is required than the "influence" that any person might have on another by making an recommendation or giving advice. What is required, as a minimum, is that one have some element of authority or superiority (which may be moral or practical as distinct from legal) over the other.
Thus, in the case of a solicitor, and perhaps a doctor, it arises from his or her professional status and expertise in a field in which the client will typically be ignorant, founding an expectation that professional advice would ordinarily be followed; in the case of a spiritual adviser, from the religious imperative to follow spiritual advice; in the case of a parent, from that authority which a parent naturally has over a child. A real estate agent, or a stock and station agent, no doubt has an opportunity to influence a principal, but these are not viewed as necessarily relationships of influence, because such agents do not have the same standing and authority in respect of a client as do those in the traditional categories. A husband and a wife obviously are vis-à-vis each other in positions of trust and confidence and influence, but one does not ordinarily have over the other such authority as to make such relationships a presumed relationship of influence, nor (without more) a special relationship of influence. It is where the relationship is such that one party is seen or supposed to be in some way beholden, obliged, or disadvantaged in relation to the other that such relationships are presumed or can be proved, and dominion or ascendancy is at least usually an important factor.
Early cases such as Huguenin v Baseley (1807) 14 Ves Jun 273; 33 ER 526 applied the principles of undue influence by setting aside a transaction where it was proved the transaction was fraudulently obtained through one party assuming a position of ascendancy, control or management of the affairs of the other and procuring an advantage from that position.
In that case there was a gift over of fee simple estate by a widow to a clergyman. It was pivotal to the case that the widow "placed confidence in him, as high as one individual ever placed in another" (per Eldon LC at 534, [294]).
The element of trust and confidence is rooted in cases where the circumstances suggest a handling of the affairs of the one party by the other, as in the early case of Gartside v Isherwood (1783) 28 ER 1297.
Later cases continue to correlate the requirements of trust and confidence with ascendancy and influence. In Johnson v Buttress Latham CJ noted at 119:
Wherever the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter, the presumption of undue influence is raised (Dent v Bennett, 4 My. & Cr. 269; see also Smith v Kay, (1859) 7 H.L. Cas. 750).
Rebutting the presumption
A defendant may rebut the presumption of undue influence if it is shown that the transaction was, per Eldon LC in Huguenin v Baseley: "the pure, voluntary, well-understood act of the mind," of the plaintiff: Johnson v Buttress at 119 per Latham CJ.
Courts of equity impose the presumption of undue influence as a matter of public policy, in order to prevent an abuse of the relations which existed between the parties and to protect persons from the exercise of influence in circumstances where its proof may be impossible (Allcard v Skinner (1887) 36 Ch D 145, 183 per Lindley LJ).
The difficulty of discharging the prescribed onus of proof is of course variable. In Westmelton (Vic) Pty Ltd v Archer [1982] VR 305, the Full Court of the Supreme Court of Victoria observed:
The extent and weight of the burden cast upon the person in whom the confidence was reposed, and the matters (where the presumption applies) of which the court will require to be satisfied before it will regard the presumption as having been negatived, must vary enormously with all the circumstances of the case, and it is pointless as well as unjustified in law to attempt to lay down any particular requirements for all cases, or indeed any classes of case, because the circumstances and the requirements will vary infinitely with the infinite variety of human affairs.
The burden of proof may be discharged, for example, by showing a gift proceeded from some laudable motive, that there was a long-held intention to make the gift, or that the donor decided to go ahead with the transaction following advice from an unbiased friend.
In Johnson v Buttress Latham CJ noted at 120:
In the case of an illiterate or weak-minded person it will be more difficult for the donee to discharge the prescribed onus of proof than in other cases. The burden will be still heavier upon the donee where the donor has given him all or practically all of his property.
Latham CJ also observed at 123:
In order to maintain the transaction, it was necessary for the defendant to show affirmatively that the deceased knew what he was doing when he made the transfer, in the sense that he understood its effect and significance in relation to himself, and further to show that the transfer was the result of his own will.
And Dixon J noted further at 134 that beneficial title obtained by reason of undue influence will only be set aside where the donee:
...satisfies the court that he took no advantage of the donor and that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee.
Dixon J continued:
The facts which must be proved in order to satisfy the court that the donor was freed from influence are, perhaps, not always the same in these different relationships, for the influence which grows out of them varies in kind and degree. But while in these and perhaps one or two other relationships their very nature imports influence, the doctrine which throws upon the recipient the burden of justifying the transaction is confined to no fixed category. It rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part. One occupying such a position falls under a duty in which fiduciary characteristics may be seen. It is his duty to use his position of influence in the interest of no one but the man who is governed by his judgment, gives him his dependence and entrusts him with his welfare. When he takes from that man a substantial gift of property, it is incumbent upon him to show that it cannot be ascribed to the inequality between them which must arise from his special position. He may be taken to possess a peculiar knowledge not only of the disposition itself but of the circumstances which should affect its validity; he has chosen to accept a benefit which may well proceed from an abuse of the authority conceded to him, or the confidence reposed in him; and the relations between him and the donor are so close as to make it difficult to disentangle the inducements which led to the transaction.
It may not be enough for the defendant to establish the disponor in fact intended to give the gift (Huguenin v Baseley (1807) 14 Ves 273, at 299-300). Nor may it be sufficient to show that the proposal came from the donor: see Spong v Spong (1914) 18 CLR 544 at 549; Whereat v Duff [1972] 2 NSWLR 147 at 169 per Asprey JA.
The defendant is required to establish that the disponor acted independently of the influence of the dominant party and that she both knew and understood what she was doing (Watkins v Combes (1922) 30 CLR 180). The burden is therefore a high one (Allcard v Skinner (1887) 36 Ch D 145, at 182-183 per Lindley LJ).
In the present case, the plaintiff submits that the Court cannot be satisfied that the execution of the deed and the will were free from undue influence on all three of the three limbs set out by Dixon J in Johnson v Buttress; namely, that it was not an independent act based upon the exercise of free judgment, nor was it a well understood act or based on information as full as that of the donee. I shall return to each challenge in due course.
The presence of independent advice
The presence of independent advice may go towards establishing the existence of a fully informed, free and independent will on the part of the plaintiff (although it is not essential to prove that independent advice was obtained in order to rebut the presumption). Latham CJ in Johnson v Buttress observed at 119-120:
It may not be necessary in all cases to show that the donor received competent independent advice (Inche Noriah v Shaik Allie Bin Omar and Haskew v Equity Trustees, Executors and Agency Co. Ltd); the law as to this matter is still a subject of discussion (Lancashire Loans, Ltd v Black). But evidence that such advice has been given is one means, and the most obvious means, of helping to establish that the gift was the result of the free exercise of independent will; and the absence of such advice, even if not sufficient in itself to invalidate the transaction, would plainly be a most important factor in determining whether the gift was in fact the result of a free and genuine exercise of the will of the donor.
However in that case, independent advice was not relied upon. Indeed the transfer under scrutiny was prepared by the managing clerk of the defendant's solicitor, the defendant accompanied the deceased to the office and was present at the interview with the managing clerk: at 121 per Latham CJ.
Although no hard and fast rule has been laid to establish the requisite content, scope and effect of the independent advice necessary to rebut the presumption, in Jenyns v Public Curator Qld (1953) 90 CLR 113 at 131 the High Court noted that independent advice "must be that of some independent person who is not connected with the donee in business or in any other confidential way and he has a knowledge of all the material facts and he, in fact, advises the donor on all matters which might affect her consideration in determining whether to make a gift".
In Inche Noriah v Shaik Alle Bin Omar [1929] AC 127 the Privy Council noted that to satisfy the requisite quality of independent advice, the advice must originate from someone acting solely in the interests of the donor, at 135-136:
Nor are their Lordships prepared to lay down what advice must be received in order to satisfy the rule in cases where independent legal advice is relied upon, further than to say that it must be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.
In Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 at 36, Street J made the following observations on the topic of independent legal advice:
The need to provide meaningful advice in order to enable an independent choice to be made by a person in the position of the plaintiff is of great importance. The purpose of obtaining advice is to enable the making of an independent choice. It may be that to an informed and intelligent listener advice confined to explaining will enable an intelligent choice to be made to the effect that the document being explained is acceptable to the party being asked to execute it. But the mere fact that a document is explained, and that no questions are asked nor criticism made of it by the party to whom it is being explained, does not tend strongly in favour of the conclusion that this party made a deliberate and intelligent choice to adopt each and every one of the provisions contained in the document.
It must however be acknowledged that the absence of legal advice will not in itself substantiate a lack of a fully informed understanding of the transaction. Those facts may emerge in and of themselves.
Contracts Review Act
Finally, the alternative claim under the Contracts Review Act 1980 (the Act) largely relies on the matters pleaded in support of the undue influence claim. However, the claim under the Act relies specifically upon the asserted lack of any consideration for the deed not to revoke the will.
Counsel for the defendant submits that the deed does not in fact lack consideration, but rather $1 and natural love and affection are nominated. Whether or not the deed is unenforceable (and I express no view on this point), I agree with the defendant that this does not provide a basis for setting aside the deed under the Act. At its highest it means the deed may not be enforced by an order for specific performance. It is not in the course of these proceedings that any party is seeking specific performance.
Section 7 of the Act provides as follows:
7 Principal relief
(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:
(a) it may decide to refuse to enforce any or all of the provisions of the contract,
(b) it may make an order declaring the contract void, in whole or in part,
(c) it may make an order varying, in whole or in part, any provision of the contract,
(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:
(i) varies, or has the effect of varying, the provisions of the land instrument, or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.
(2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order.
(3) The operation of this section is subject to the provisions of section 19.
Section 4(1) defines "unjust" to include "unconscionable, harsh or oppressive". Section 9 relevantly provides as follows:
9 Matters to be considered by Court
(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:
(a) compliance with any or all of the provisions of the contract, or
(b) non-compliance with, or contravention of, any or all of the provisions of the contract.
(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following:
(a) whether or not there was any material inequality in bargaining power between the parties to the contract,
(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,
(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,
(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,
(e) whether or not:
(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or
(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented,
because of his or her age or the state of his or her physical or mental capacity,
(f) the relative economic circumstances, educational background and literacy of:
(i) the parties to the contract (other than a corporation), and
(ii) any person who represented any of the parties to the contract,
(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,
(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act,
(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,
(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:
(i) by any other party to the contract,
(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or
(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,
(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and
(l) the commercial or other setting, purpose and effect of the contract.
Under section 7(1) of the Act, a contract may be unjust in the circumstances existing when the contract was made. The contractual provision may be unjust, simply because it imposes an unreasonable burden on a person when it is not reasonably necessary for the protection of the legitimate interests of persons seeking to enforce it. Injustice may also flow because the claimant did not have the capacity to make an informed or real choice whether or not to enter the contract.
The contract may be unjust because of its terms or consequences, or its effects may be unjust. McHugh JA, as he then was in West v AGC (1986) 5 NSWLR 610 said at 621:
Any contract or contractual provision not excluded from the operation of the Act and which the court considers is unjust in the circumstances existing at the time when it was made, may be the subject of relief under the Act... If a contract or one of its relevant provisions is neither unfair nor unreasonable so far as the applicant is concerned, it is difficult to see how the existence of inequality in bargaining power or lack of independent advice, for example, can render the contract or provision of the contract unjust.
The general policy of the law that people should honour their contracts has been stated in a number of authorities: see, for example, Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9 per Gleeson CJ.
The normative evaluation involved in determining whether or not a contract is one which calls for relief under the Act was discussed by Allsop P (as his Honour then was) in Provident Capital Ltd v Papa [2013] NSWCA 36 (at [7]):
The broad evaluation of unjustness under the Contracts Review Act 1980 (NSW) ss 4, 7 and 9 involves the normative evaluation of the totality of relevant circumstances. Inevitably minds may differ as to conclusions about such questions. Also, it is often not fruitful to compare other cases with the particular circumstances at hand, lest one be deflected from an appropriate overall assessment by focus on particular aspects relevant to any such comparison. Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances. Here, there was no predation. There was no behaviour in which [the lender] sought to take advantage of [the borrower].
In the judgment of Gleeson JA in Nemeth v Australian Litigation Funders Pty Ltd [2014] NSWCA 198 (Meagher and Leeming JJA agreeing), His Honour observed at [97]:
In an application for relief under s 7 of the Act, the Court undertakes a three-stage process: Perpetual Trustee Co Ltd v Khoshaba (Khoshaba) at [99], per Handley JA; at [106], per Basten JA. The first stage is to make findings of primary fact. The second stage involves a finding that the contract is or is not unjust. The third stage is the exercise of the power to grant relief under the Act which may, but need not, follow from the conclusion that a contract is unjust.
The plaintiff points to the 'public interest' consideration and suggests that it is against the public interest that she be permitted to execute a deed by which she bound herself not to deal with a significant portion of her assets and agreed to make a non revocable will where that deed is not supported by real consideration. In support of that argument, the plaintiff cites Jones v Moss [2007] NSWSC 969 in which White J observed:
[93] Whether a contract, or its provisions, is unjust also has to be decided having regard to the public interest. In my view, it is not in the public interest, and it is unjust, that the plaintiff should have been exposed to the risk, which has materialised, of being left homeless and without any assets of value because he gave away his only substantial asset, when he did not have the means to pay outgoings and to carry out repairs, without which the house is or will become uninhabitable. That was a risk inherent in the transaction in 1996.
[94] The circumstances which have now emerged were reasonably foreseeable at the time the contract was made. The fact that the plaintiff knew what he was doing and can be considered to have been foolish, does not detract from the substantive injustice that he gave away his only substantial asset when he could not afford to keep up the repairs. The contract is substantively unjust, notwithstanding the defendant was innocent of any improper conduct or any overreaching. Had the defendant not entered into the deed of conveyance he would still have had to have sold the property or mortgaged it to pay outgoings and the cost of repairs. As he does not appear to have the income available to service a mortgage, the likelihood is that he would in any event have to sell the property, or have it sold by a mortgagee. Nonetheless, if that were to have eventuated he would be in the possession of a modest capital sum to provide for his needs. It is not in the public interest that the plaintiff be thrown entirely on the public purse to provide housing, if public housing is available for him. Nor is it in the public interest that he be left indigent.
It seems to me that White J's observations are largely factual. I shall also return to this question later in my judgment.
Suspicious circumstances
Some reliance is placed by the plaintiff on what is known in probate law as the 'suspicious circumstances' rule. In Nock v Austin (1918) 25 CLR 519, Barton and Duffy JJ held at 524:
It is unnecessary to discuss a number of the cases cited; but we may as well quote the terse statement of the principle by Sir Samuel Evans in the case of Re Osment, (1914) P 129, at p 132 -
It is well established that if a party writes or prepares a will under which he takes a benefit, that is a circumstance that ought generally to excite the suspicion of the court, and cause it to be vigilant and jealous in examining the evidence in support of the instructions for the will; it ought not to pronounce for the document unless the suspicion is removed, and it is judicially satisfied that the paper propounded does express the true will of the deceased. That is the principle ...
Isaacs J said, to similar effect, at 528:
The relevant law is not doubtful. It may be thus stated - (1) In general, where there appears no circumstance exciting suspicion that the provisions of the instrument may not have been fully known to and approved by the testator, the mere proof of his capacity and of the fact of due execution of the instrument creates an assumption that he knew of and assented to its contents. (2) Where any such suspicious circumstances exist, the assumption does not arise, and the proponents have the burden of removing the suspicion by proving affirmatively by clear and satisfactory proof that the testator knew and approved of the contents of the documents.
At all times, the plaintiff was aware that the wish that Ms Stoliar received the $170,000 a year from the White Family Trust was not binding on the trustee. This had been the subject of discussion as early as 2010 when she and Mr White met with Mr Henley on 14 October and were given advice to that effect. It is reasonable in the circumstances to infer that they must have discussed with each other, as husband and wife, his advice that the payment of the $170,000 to Ms Stoliar would be subject to the control of the defendant and would have to be a matter of trust.
I am satisfied Mr Henley advised the plaintiff that any direction was not binding on the trustee. That issue was discussed again on 19 July with the plaintiff. I do not regard that as an unresolved issue but as Mr Henley himself surmised one upon which the plaintiff as far as he was concerned must have resolved the issue on the basis that she would simply trust the defendant to carry out her wishes.
Again correctly in my view the defendant submits that there is simply no evidence that the plaintiff's decision to remove the gift of $1 million to Ms Stoliar in her 26 July will was influenced by the existence or otherwise of an independent appointor to the White Family Trust. The defendant correctly points out that the plaintiff does not say this. But more importantly, the defendant never once said that she did not intend to pay $170,000 yearly to Ms Stoliar. Nor was she asked about it in cross examination. I am satisfied, as I have already indicated, that after the 1 July will was executed the plaintiff on her own and without anybody influencing her had serious doubts about placing such a large sum of money as $1 million in Ms Stoliar's hands. She thought she was a profligate. She had no confidence that it would not slip through Ms Stoliar's fingers rapidly and wastefully. I have no doubt that she gave express instructions to Mr Henley to remove it from the will.
Finally, as I have already noted, the plaintiff criticises the adequacy of Mr Henley's advice on two other grounds, namely that he should have advised her that she could have simply waited to see how things worked out when she returned home and that the execution of the deed would be likely to result in litigation.
In the circumstances, the first criticism is in my view untenable. The plaintiff had on numerous occasions indicated that she would be under immense pressure from Ms Stoliar and would be unable to withstand it. If Mr Henley believed the plaintiff was telling the truth, there was no time to be wasted because her true intentions would almost certainly not be preserved if she did not execute the deed before returning home. This is especially so since she did in fact execute a new will and the reality that she was an elderly woman from whom Mr Henley had taken instructions for several years.
The second criticism of Mr Henley is that the deed was bound to provoke litigation and that somehow he should have advised the plaintiff to avoid it. That is also an untenable suggestion. The evidence suggests that from at least 11 June, when she told Dr Liber that "she + mother are contesting will" (CB6/1912), Ms Stoliar was contemplating litigation and wanted to co-opt her mother. In addition, however, there was little doubt that had the plaintiff's will included anything unpalatable to Ms Stoliar, further litigation would have been inevitable.
In any event, I do not accept that Mr Henley had any obligation to speculate whether or not litigation would have ensued in the event the deed was executed. The fact that he did not do so, in the circumstances, does not diminish in any way the quality of his advice. As he saw it, his obligation was to preserve his client's intentions and the deed was the most appropriate mechanism to do so, as opposed to the possibility of some negotiated settlement (assuming it could ever be achieved with Ms Stoliar).
Therefore, for those reasons if a presumption of undue influence does arise, I am satisfied that the defendant has satisfied the onus of rebutting such a presumption.
Suspicious Circumstances
The plaintiff submits that because the case involves an inter vivos deed not to revoke a will it necessarily requires a consideration of both equitable and probate principles. The plaintiff submits that the deed not to revoke the will and the will are inexorably tied together. Put shortly, the plaintiff says the deed is only as good as the will and cannot operate in a vacuum. If the plaintiff did not know and approve of the contents of the will, the deed must necessarily be set aside. Equally, if the plaintiff knew and approved of the content of the will but did not understand the deed the will can only operate unfettered by the deed. The plaintiff calls in aid a number of authorities, most relevantly Tobin v Ezekiel which I have discussed above.
It is submitted that in the present case the defendant was a person who relevantly played a part in the preparation of the will and took substantial benefit under it. It is submitted she was also involved in the preparation and execution of the will. It is also submitted she took substantial benefit under the deed as well.
As outlined above, in my view I am not satisfied that the suspicious circumstances rule has any application in the current proceedings but I will nevertheless deal with assuming it does have such application.
In any event, the effect of the doctrine is relatively narrow, operating to displace presumptions of fact in favour of those propounding a will. It is further submitted and correctly in my view by the defendant that there is a presumption that if a will is rational on its face and is proved to have been duly executed the testator was mentally competent. I also agree with the defendant that proof, or indeed in this case concession of testamentary capacity and due execution, carries with it a presumption of knowledge and approval of the contents of the will at the time of execution.
It is also in my view correct as is submitted by the defendant that the suspicious circumstances does not apply at large and it is necessary to identify the presumption to which particular circumstances are said to be relevant.
The defendant rightly points out that the court is here not being asked to grant probate or revoke probate of the 26 July will, but only whether the deed should be set aside for undue influence. As I have said already in my view I am more than satisfied that the plaintiff knew and approved of her 26 July will.
However, the plaintiff points to a number of matters which are said to give rise to suspicious circumstances surrounding the preparation and execution by the plaintiff of her will on 26 July. First, the defendant was present when the content of the plaintiff's will was discussed on 19 July. Secondly, the defendant delivered the draft will and deed to the plaintiff at the nursing home, where she read the plaintiff asserts a couple of pages and had a cursory discussion with her concerning it and the deed. I have rejected this as a tenable finding of fact. In any event, thirdly it is submitted the defendant was involved in the execution of the will. She was sitting next to the plaintiff at the time the will was executed and engaged in discussion with her immediately prior to the execution of the deed and the will.
As a result, the plaintiff submits the onus would pass to the defendant to establish that the plaintiff knew and approved the contents of the will and comprehended and appreciated the claims on her testamentary bounty.
Many of the other submissions made by the plaintiff in relation to this aspect of the claim I have already disposed of. I reject any suggestion that she did not voluntarily give those instructions. I reject any suggestion that Mr Henley did not read the will aloud by giving an explanation of the terms of the will. I do not accept that an explanation of the defendant being in control of the White Family Trust in the absence of a reference to the exclusion of $1 million gift (fully intended by the plaintiff) would have confused her in any way about the $1 million gift remaining in the will. She simply could not have been confused because she expressly instructed that it be removed. It was on my view quite an independent act on her part.
Having found the plaintiff's true intentions as I have, I have absolutely no doubt that she comprehended and appreciated the claims on her "bounty". The plaintiff repeats in this context her not knowing of the defendant's attitude to an independent appointor and matters of that sort. I have dealt with those matters.
The plaintiff realised she was ninety years of age. She did not know how much longer she will live but knew what she wanted to achieve.
I am satisfied that even if this matter gives rise to a so-called suspicious circumstances doctrine, the defendant has discharged the onus of establishing that the plaintiff knew and approved of the contents of her 26 July will and appreciated the claims on her testamentary bounty.
Contracts Review Act
In the alternative the plaintiff seeks a declaration that in the circumstances the deed is relevantly unjust in accordance with the provisions of the Contracts ReviewAct 1980 (NSW).
The plaintiff fairly points out that the claim under the Act largely relies upon the matters pleaded in support of the claim that the deed be set aside for undue influence.
The plaintiff submits that it is strongly arguable that the deed not to revoke the will is a voluntary settlement and hence should be seen as unenforceable in equity. The plaintiff did not submit that natural love and affection could not however be good consideration.
The plaintiff submits that Mr Henley failed to advise the plaintiff there was a real risk that the deed would be unenforceable in equity as lacking consideration. Further it is submitted that it would be both unjust and against the public interest that the plaintiff be permitted to execute a deed by which she bound herself not to deal with the significant portion of her assets and agreed to make an irrevocable will where the deed is not supported by real consideration.
The defendant makes a number of points, each in my view entirely valid.
First it is submitted that there was no inequality of bargaining power in the relevant sense. I have already expressed the view that the plaintiff was not dependent on the defendant for financial support or financial care and indeed in my view was represented by an independent and highly experienced and competent solicitor.
The next matter that the defendant points out is that the terms of the deed were negotiated between the respective lawyers for the parties. Further the terms of the deed did not unreasonably impose difficult terms on the plaintiff. Quite to the contrary, those terms were there to protect her very concerns about maintaining and ensuring her true intention. In the circumstances I think it is appropriate to describe Mr Henley as having provided independent legal advice on the terms of the deed which the plaintiff understood. I have already rejected any notion of undue influence so therefore that issue does not arise.
In answer to the plaintiff's submission that the deed should be seen as a voluntary settlement and hence unenforceable in equity as lacking consideration, the defendant responds by submitting in my view correctly that concern does not give rise to a valid claim under the Act.
Even if it were arguable that the deed is unenforceable such an argument would provide no basis for setting aside the deed. As the defendant points out, at its highest the plaintiff's submission is that there exists a possibility that the deed may not be enforced by an order of specific performance but I do not see how that translates into a valid claim under the Act.
More importantly as the defendant contends the deed was proposed and indeed drafted by the plaintiff's own solicitor to address her abiding concerns about ensuring that the management of the family business went into the defendant's hands. It is a little difficult in those circumstances to suggest that the plaintiff was unable to protect her own interests when she had a highly competent solicitor devising the very mechanism which would do that. I agree with the defendant that the plaintiff quite consciously and deliberately entered the deed because she saw it as being of benefit to herself, not only in relation to Ms Stoliar's imminent onslaught which she regarded as inevitable, but for the very purpose of protecting her true intentions until her death.
In all the circumstances I am unable to accept that the Act has any application to the current situation or that the plaintiff in any event is entitled to relief under it.
Conclusion
The plaintiff has therefore failed in her claim for a declaration that the deed not to revoke and the will itself were induced and procured by undue influence on the part of the defendant. She has also failed in her claim for a declaration that the deed is unjust within the meaning of the Act. Therefore I will refuse to make an order that the deed be set aside on either basis.
I invite the parties to prepare short minutes to give effect to my reasons, and to relist the matter if necessary so that the question of costs may be determined.
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Decision last updated: 22 August 2014
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