
Undue influence by a beneficiary - implications for the subsequent family provision claim
Jan 22, 2025In New South Wales, an "eligible person" making a claim on a deceased estate needs to establish that inadequate provision was made by the deceased for the claimant's "proper maintenance, education or advancement in life" (section 59 of the Succession Act). If the claimant has already been provided for in the deceased's Will, and considers that the provision was not adequate enough, then they are nevertheless still entitled to make a claim.
Bosschieter v Howitt [2024] NSWSC 1676 (23 December 2024)
Such was the case for a Sydney grand-daughter who, despite being left 1/5th of her grand-mother's Estate - in addition to also receiving cash from her grand-mother of approximately $200,000 just prior to her passing - claimed that she required greater provision from the other share of the Estate which was otherwise left to her grand-mother's 4 children (including the claimant's parent). She particularly claimed that she needed more to enable her to buy a house and to provide her with "a cushion against the contingencies of life".
As part of its consideration of the family's circumstances, the Court reviewed the historical financial support that the deceased (and her late husband) provided Justine's mother when Justine was first born in 1971. The Court also considered pivotal events in Justine's childhood, including her relationship with her mother, her living arrangements as a young adult and her own experience as a young mother. The Court even referenced an 8 year period between 2005 and 2013 when Justine barely spoke to her grandmother, noting that they eventually reconciled, and Justine and her then partner and some of her children moved into her grand-mother's property. Justine then became her grand-mother's carer.
In addition to defending the claim, the Estate also cross-claimed to set aside the cash gift made to the claimant by her grand-mother. This cash transfer led to disputes over whether undue influence or unconscionable conduct had played a role - and an obvious absence of independent financial or legal advice before the term deposit was transferred.
Key Issues Considered by the Court
The Supreme Court examined several critical issues:
(a) Eligibility and Proper Provision under the Succession Act
The Court assessed whether Justine was an “eligible person” under the Act and whether she demonstrated factors warranting further provision. Despite the existing entitlement under the Will, together with the $200,000 cash amount receive prior to her grand-mother's death, Justine proceeded with her claim for further provision from the Estate based on financial vulnerability, citing her need to purchase a home and provide a financial cushion for future uncertainties.
(b) Validity of the $202,247.29 Transfer
The estate contested the validity of the term deposit transfer, arguing it resulted from undue influence or unconscionable conduct. The Court investigated whether the deceased acted independently and in her best interests when making the transfer.
(c) Notional Estate Designation
The estate sought to classify the transferred term deposit as part of the notional estate under Part 3.3 of the Succession Act, arguing that any benefit to Justine should be offset by this transfer.
Precedents and Legal Principles
The Court relied on established legal principles, including:
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Undue Influence: The concept that influence can invalidate a transaction if one party exploits their position of trust and authority over another. The Court examined whether Justine’s position as her grand-mother's carer and attorney gave her undue influence over the deceased:
"A claimant may seek to set aside a transaction by showing that another party had, in fact, come to occupy or assume a position of practical ascendency, power or dominion over the claimant who had taken a co-relative position of dependence or subjugation".
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Unconscionable Conduct: As outlined in cases like Commercial Bank of Australia v Amadio (1983), the Court considered whether Justine took advantage of her grand-mother's vulnerabilities, such as age and declining health, when facilitating the transfer.
"A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage 'which seriously affects the ability of the innocent party to make a judgment as to [the innocent party's] own best interests'. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously desribed as requiring 'victimisation', 'unconscientious conduct' or 'exploitation'. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage." -
Family Provision Claims: The Court assessed previous judgments on balancing the testamentary intentions of the deceased with the financial needs of the claimant, prioritisng fairness to all beneficiaries. As is the usual process in such claims, the Court considered in quite some detail the financial circumstances and resources of each of the other beneficiaries - as any increased provision for the claimant would deplete their respective inheritances.
The Judgment
In reaching its judgment, the Court referred to the credibiility of the numerous witnesses. In particular, the Court noted that the claimant was "a poor witness".
"She gave inconsistent and changing answers to similar questions, so it was hard to judge which version of her evidence was true, except by looking at testimony of other witnesses and the overall probabilities."
The Court rendered a nuanced decision:
(a) The Family Provision Claim
The Court rejected Justine’s claim for further provision, determining that the deceased’s will had made adequate provision for her needs - and also referring to the fact that Justine had an earning capacity as well as assistance from her 5 children. It noted that Justine’s financial conduct, including rapid depletion of the $200,000 transfer (apparently to her children), undermined her credibility as someone requiring additional funds for stability. It also looked unfavourably upon Justine's conduct following her grand-mother's death, by causing additional cost to be spent by the Estate on repairing the property damage caused by Justine and her partner.
(b) The $200,247.29 Transfer
The Court concluded that the transfer was invalid, finding evidence of undue influence and unconscionable conduct - "The deceased's weakeness and dependence upon Justine must also have been obvious to Justince as must have been her lack of independent legal advice."
It ordered that the amount be repaid to the estate and treated as satisfying any entitlement Justine might have claimed.
(c) Treatment of the Estate
The Court upheld the will’s distribution, emphasising the need to honor the deceased's intentions while recognising the competing financial needs of the other beneficiaries, particularly her children, who faced their challenges, such as health issues and caregiving responsibilities.
Lessons from the Case
This judgment highlights several critical aspects of estate law:
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Importance of Independent Legal Advice: Vulnerable individuals must receive independent legal and financial advice when making significant transactions to avoid claims of undue influence.
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Financial Responsibility of Claimants: Courts may consider a claimant’s financial conduct when assessing family provision claims.
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Balancing Competing Interests: The Court carefully weighs the testamentary intentions of the deceased against the legitimate financial needs of the beneficiaries.
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Impact of Precedent: The case reinforces the principles of equity and fairness in addressing claims of undue influence and unconscionable conduct.
Conclusion
This case serves as a crucial reminder of the intricacies involved in administering estates and contesting wills. Whether you are an executor, beneficiary, or claimant, it underscores the need for legal guidance to navigate the complexities of estate law.
Contact the Shire Legal team if you have any questions.
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