Estate Litigation: Real Property Transfers, Undue Influence & Unconscionable Conduct – do you have grounds for an equitable claim to increase the size of an estate?
When a loved one passes away, what they give to others in their Will is undoubtedly significant to those people in holding dear the memories of that loved one. Real property is perhaps one of the most significant assets that can be given in a Will, out of the deceased’s estate.
What happens when real property is transferred to someone else before a person passes away? The immediate effect of this is that the real property will no longer form part of that person’s estate and it cannot be gifted under their Will.
Of course a person has freedom to deal with their property as they wish, but in circumstances where real property is transferred during a person’s lifetime because of the undue influence or unconscionable conduct of another person, the High Court has held that these transactions may be set aside.
The basis of this court action is in equity, and a claim to set aside a transaction or for compensation can be brought before a person passes away (by the person themselves) or after their death, by persons who would be entitled to benefit from the deceased’s estate. The latter claim may be brought in the context of a family provision application.
Two recent cases in Queensland provide guidance for the court’s approach in giving orders for property transfers to be set aside after the previous property owner passes away.
Equitable claims after a person’s death
In Anderson v Anderson [2013] QSC 008, the Queensland Supreme Court granted an application by John Anderson for a declaration that a transfer of his mother’s property during her life to her other son, Malcolm Anderson, was void or voidable on the basis of Malcolm’s undue influence. This application was brought after the mother, Roma Anderson, passed away.
In this case, Roma had made a will in 2007 leaving everything to her two sons in equal shares and appointing John as first executor. John and his wife Deborah were also appointed as her attorneys in relation to health and financial matters. Then, in 2008, Roma made a new Will with the same distribution but appointing both John and Malcolm as executors. That same day she signed a transfer of her family home to Malcolm, for consideration of “natural love and affection”.
The question of whether Malcolm knew or ought to have known whether Roma had sufficient capacity to transfer the property was not raised by John as the applicant. What was established was that Roma was found to have been pressured and influenced by Malcolm in giving instructions in 2008 to change her will and transfer the property.
In the circumstances, Roma:
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- was elderly, sick and very isolated from others;
- was dominated by Malcolm to question John’s dealings with her finances as attorney;
- became increasingly and heavily dependent upon Malcolm for her day-to-day care;
- experienced some symptoms of memory loss and dementia; and
- gave the 2008 instructions on Malcolm’s prompting and, in all but one meeting with her lawyer, in his presence.
These circumstances gave rise to the presumption of undue influence, and Malcolm was unable to otherwise show that Roma signing the transfer was the result of a free and voluntary exercise of her independent will.
While it was not considered in detail, the Court indicated that Malcolm’s conduct was also likely to amount to unconscionable conduct, as he took unfair advantage of Roma’s position of special disadvantage.
The Court found that the transfer of the property rendered Roma’s estate almost worthless, and gave orders to set aside the transfer so that the property would form part of her estate as at her death, to be distributed in accordance with her will.
Will delay prevent me from bringing an equitable claim?
The issue of delay in bringing an equitable claim was considered by the Queensland Court of Appeal in the case of Gillespie & Ors v Gillespie [2013] QCA 99.
On 17 December 2002, Bruce Gillespie transferred a house and two home units to his three children from his first marriage, nine days after his marriage to his second wife, Gloria Gillespie. Bruce passed away on 14 August 2010.
Upon Gloria’s application, commenced 10 January 2011, the District Court held that the transfer of the house resulted from the unconscionable conduct and undue influence of Bruce’s son, Geoffrey Gillespie.
The Court found that Geoffrey’s conduct included:
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- falsely asserting to Bruce that he would need to transfer the properties before his death to avoid death duties (which did not actually exist);
- inducing unsubstantiated ideas in Bruce’s mind that Gloria intended to deprive the children of their inheritance; and
- taking advantage of the elderly age and disadvantage of his father, who relied upon Geoffrey for his financial affairs.
The Court ordered that the transfer of the house be set aside and the property be transferred to Gloria as administrator of the estate. Bruce’s three children (the “Appellants”) appealed this decision to the Queensland Court of Appeal, arguing that:
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- Gloria (and during his lifetime, Bruce) acquiesced to the transfer by not giving prior notice of the right to a claim or exercising that right at an earlier time; and
- Gloria’s delay in commencing the application resulted in prejudice to themselves and others, because (for example) Bruce was unable to give evidence and the Appellants had changed their financial positions in reliance on their title to the property.
In dismissing the appeal, the Court of Appeal found that:
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- Bruce and Gloria had modest resources with which to commence legal proceedings;
- the legal advice Gloria received in relation to her rights to a claim had been extremely limited;
- as Bruce’s attorney, Gloria believed his wishes were not to commence proceedings during his lifetime, to avoid disputes amongst the family;
- Bruce’s degenerating memory meant that his evidence would not have made a material difference had the claim been brought during his lifetime;
- there was no evidence that the Appellants had altered their affairs on the basis of their property ownership; and
- as there was no claim for recovery of the proceeds of the units which had been sold, the potential prejudice to estate if the transfer of the house was not reversed far outweighed the prejudice to the Appellants.
In this case, the order to set aside the transfer of property was upheld, even though the application was brought more than 8 years after the transfer.
A court will consider your particular circumstances in deciding whether delay should prevent you from obtaining orders to have a transfer set aside.
Do you need tailored legal advice for your circumstances?
In administering a deceased estate, the cases of Anderson v Anderson and Gillespie & Ors v Gillespie emphasise the importance of considering the basis of any significant property transfers made during the deceased’s lifetime and the nature of their relationships with family and other beneficiaries of their estate, as well as the specific terms of their Will.
Have a query regarding real property transfers that occurred prior to the deceasing of a loved one?
Contact us.
If you consider a potential equitable claim may be brought to set aside a transfer of property, we suggest seeking advice from our Brisbane Estate Litigation lawyers, even if the previous property owner has passed away or many years have gone by.
