John and Jane are in the 50s. Their home in Coffs Harbour is subject to a mortgage of $400,000. John’s widowed mother, Gillian is in her 70s, and after discussions between the parties, Gillian moves in with John and Jane.
Not long after Gillian moves in, she gives John and Jane the sum of $300,000. The money is used to reduce the mortgage over the Coffs Harbour property and is evidenced by way of a loan agreement whereby the $300,000 is repayable to Gillian upon demand.
10 years later and just 6 months before her death, the parties execute a deed stating that Gillian forgives the whole of the debt and in return she will be provided accommodation for life.
The practical effect of the deed is that when Gillian dies, her estate is worth just $13,000.
After Gillian’s death, her daughter, Joy commences proceedings alleging that the execution of the deed was brought about by the “exertion of undue influence”.
The court states that in order to prove undue influence, it must be demonstrated that there was a “psychological ascendancy” whereby the execution of the deed was not “independent and voluntary”.
John and Jane’s solicitor gave evidence that he prepared the deed and attended the Coffs Harbour home for the purpose of executing the deed, which he did with Gillian in the absence of the other parties. The solicitor recorded extensive file notes, stating that Gillian valued John and Jane’s support and wanted to cancel the debt. The solicitor also recorded that Gillian exhibited “clear thinking and perceptiveness during the conversation”.
The solicitor also arranged for Gillian to be assessed by her general practitioner, who found her to be “an intelligent and independently minded person, able to grasp the conditions of the deed and the implications of them”.
The court rejected Joy’s allegation that John and Jane subjected Gillian to emotional and financial abuse and stated that the circumstances did not give rise to a “presumption of undue influence”.
This case demonstrates the importance of obtaining legal advice and the value of obtaining and preserving evidence in anticipation of a possible future challenge.
