Wills and Estates: 28 April 2021
The recent case of McFarlane v McFarlane  VSC 197 (23 April 2021) is an example of elder abuse and the remedies available for undue influence and unconscionable conduct.
On 26 November 2015, Judith McFarlane signed a transfer of land, gifting her home at 139 Warby Range Road, Glenrowan to Mark McFarlane (her son). The consideration for the transfer was recorded as 'natural love and affection'. Her son became the registered proprietor of the property on 4 January 2016.
The land transfer documents were prepared by local solicitors. Unfortunately, the local solicitors did not obtain instructions from Judith, but rather only from her son. Further, the local solicitors did not provide Judith with advice in relation to the transfer and there was no correspondence between Judith and the solicitors.
In November 2016 Judith moved from the property to an aged care home in Wangaratta. The transfer affected her Centrelink pension and her pension was reduced by $148 per fortnight. As she no longer owned her property and had no other assets she was unable to pay a refundable accommodation deposit when she moved into the aged care home.
On 24 August 2017, the Victorian Civil and Administrative Tribunal appointed State Trustees Limited as Judith's administrator. State Trustees inquired into the circumstances surrounding Judith transferring the property to her son.
In November 2018, State Trustees commenced proceedings on Judith's behalf claiming that the transfer was procured by undue influence and was unconscionable. State Trustees sought an order that the transfer be set aside, or alternatively a declaration that her son held the property on constructive trust for the benefit of Judith. State Trustees submitted that if the transfer were to be set aside, Judith could sell the property, pay her debts and pay a partial refundable accommodation deposit which would reduce the daily accommodation payment at the aged care home.
Her son's claim was that he and Judith had always had a 'long term loving relationship' and that she gifted the property to him 'out of natural love and affection for all I was doing for her'. Her son did not file any material in support of his defence.
Judith provided a different account of the circumstances surrounding the transfer, namely that her son had forced her to sign the transfer. Judith's evidence was that she was frightened of her son as he got very angry and she thought he was going to hit her if she didn't transfer the property to him. She further explained that he had two guns and might shoot someone.
The Court preferred Judith's evidence and considered her son's account to be self-serving and unreliable.
The Court considered whether the transfer was procured by undue influence. The Court said the "equitable doctrine of undue influence applies whenever one party occupies or assumes towards another position naturally involving an ascendancy or influence over the other€¦undue influence can arise from widely different sources, including abuse of confidence, excessive pressure, and imbalance of power.The Court further said that the onus rest with the stronger party to demonstrate that the transaction was the independent and well-understood act of the weaker party.
The Court found that Judith's son was in a position of ascendancy and influence over her as she depended on him and trusted him. Her son was not able to displace the presumption of undue influence and he did not demonstrate to the Court that the transfer was Judith's free, independent, and well understood act. The Court also considered that it was significant that the local solicitors did not obtain instructions separately from Judith and did not advise her about the consequences of the transfer, namely that it could affect her pension. Judith also did not have the benefit of obtaining independent legal advice before signing the transfer.
The Court found that the transfer of the property was vitiated by undue influence.
The Court then considered whether the transfer was unconscionable. The Court said, "the essence of unconscionable transaction is that the stronger party exploits some special disadvantage affecting the weaker party.The onus is on the stronger party to show that the transaction was fair, just and reasonable. The Court was satisfied that Judith was in a position of special disadvantage in relation to her son. The Court found that he took unfair advantage of Judith's vulnerability by arranging for her to transfer the property to him. Judith son also was not able to demonstrate to the Court that the transfer was fair, just and reasonable.
The Court held that the transfer was procured by undue influence and was unconscionable. Orders were made for the reinstatement of Judith as the registered proprietor of the property. Her son was ordered to pay equitable compensation to Judith for the loss she has suffered because of the transfer.
The full case can be viewed at https://www.lawlibrary.vic.gov.au/library-services/digital-library/judgments/mcfarlane-judith-ann-her-administrator-state-trustees