Sale of Deceased's Home by Daughter Contested by Son

Wardle v Wardle [2021] NSWSC 1529 (3 December 2021)

The deceased gave power of attorney to her adult daughter, the defendant who, using the power of attorney,  claims she assisted her mother to sell her house, before relocating the mother into a nursing home.  The daughter applied the funds from the sale of the mother’s house property to purchase her own property, claiming that the funds were an inter vivos gift from the mother to her.  The son challenges these transactions and claims a constructive or resulting trust on behalf of the estate over the defendant’s property acquired with the proceeds of sale of the mother’s house

Facts:

Patricia Frances Wardle (“the deceased”) died on 18 April 2019, aged 86.  She was survived by her two children, the plaintiff, Roderick William Wardle, and the defendant, Sharon Patricia Wardle.  The deceased’s last will dated 10 August 2004 (“the Will”) appointed Roderick and Sharon as her executors and trustees and left the whole of her estate to them in equal shares after making certain specific gifts to Sharon.  As the deceased’s net estate is only $16,565.10, neither executor has been motivated to apply for a grant of probate of the Will, the validity of which is not in contest.  Roderick challenges the deceased’s sale of her home in the Sydney suburb of Marsfield (“the Marsfield property”) in October 2018, six months before her death, and the application of the proceeds of that sale on settlement to simultaneously enable Sharon to acquire a property in Sharon’s name in Macquarie Park (“the Macquarie Park property”) in January 2019.  Both transactions together are referred to in these reasons as “the January 2019 transactions”.

Sharon had lived with and looked after the deceased at the Marsfield property since 2010 and that by 2018 the deceased had been diagnosed with a level of dementia.  Sharon used a power of attorney from her mother to sell the Marsfield property and to apply for the sale proceeds.  By his Amended Statement of Claim, Roderick claims that the deceased made the sale and applied the proceeds as a result of Sharon’s actual undue influence and unconscionable conduct exploiting the deceased’s position of special disadvantage due to dementia and dependence on Sharon.  He seeks declarations that Sharon holds the Macquarie Park property and any excess proceeds of sale of the Marsfield property on constructive, or resulting trust, for the deceased’s estate.

In the alternative, he seeks designation of the proceeds of sale of the Marsfield property as the deceased’s notional estate under Succession Act 2006, Chapter 3, and an order for further provision out of the notional estate, so designated.  In her Amended Defence, Sharon contests Roderick’s claims of undue influence and unconscionable conduct.  She contends that the sale of the Marsfield property, and her use of its proceeds, was an inter vivos gift to her consistent with the deceased’s wishes.  And she contests Roderick’s alternative Succession Act claim for further provision out of the deceased’s estate, contending that the deceased had already satisfied her moral obligation to Roderick by arranging for him to receive the benefit of the whole of a property at Crowdy Head (“the Crowdy Head property”), to which the deceased would otherwise have been entitled from her late husband William Wardle.

Issue:

Whether or not the transactions resulted from the unconscionable conduct or actual undue influence of the daughter over the mother.

Applicable law:

Civil Procedure Act 2005 s 56 - facilitates the just, quick and cheap resolution of the real issues in the proceedings in the exercise of its powers, for the Court to await the determination of such consequential relief issues before embarking on the contest about family provision orders. 

Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 r 11.1 - provides that a solicitor and a law practice must avoid conflicts between the duties owed to two or more current clients, except where permitted by this Rule.

Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 r 11.2 - provides that if a solicitor or a law practice seeks to act for two or more clients in the same or related matters where the clients’ interests are adverse and there is a conflict or potential conflict of the duties to act in the best interests of each client, the solicitor or law practice must not act, except where permitted by Rule 11.3.

Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 r 11.3 - provides that where a solicitor or law practice seeks to act in the circumstances specified in Rule 11.2, the solicitor or law practice may, subject always to each solicitor discharging their duty to act in the best interests of their client, only act if each client:

11.3.1 is aware that the solicitor or law practice is also acting for another client, and

11.3.2 has given informed consent to the solicitor or law practice so acting.”

Powers of Attorney Act 2003 ss 12(2), 13(2) - authorised the attorney to confer benefits on herself to meet the attorney’s reasonable living and medical expenses and authorised the conferring of benefits on Rodrick to meet his reasonable living and medical expenses.

Succession Act 2006 Chapter 3, ss 59(1)(c), 60, 91 - provides that the Court may, on application under Division 1, make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that and at the time when the Court is considering the application, adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made by the will of the deceased person, or by the operation of the intestacy rules in relation to the estate of the deceased person, or both.

Uniform Civil Procedure Rules 2005 rr 7.10, 7.10(2)(a) - pursuant to which these proceedings are ordered to continue in the absence of a representative of the estate of the late Patricia Frances Wardle (“the estate”) who died on 18 April 2019.

Bank of Credit and Commerce International SA v Aboody and another [1990] 1 QB 923 - relied upon in holding that Roderick is not able to show here that a ‘stronger party’, Sharon, actually exerted pressure to procure the consent of the ‘weaker party’, being the deceased, to effect the transaction.

Banks v Goodfellow (1870) LR 5QB 549 - provides that the instincts and affections of mankind in the vast majority of instances will lead men to make provision for those who are the nearest to them in kindred, and who in life have been the objects of their affection.

Drury v Smith [2012] NSWSC 1067 - explained in more detail the meaning of the words "adequate", "proper", and "advancement in life" in the legislation. 

Hewitt v Gardner [2009] NSWSC 1107 - summarised the elements of an unconscionable transaction.

Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd [1930] HCA 26; (1930) 45 CLR 111 - a case often cited as authority for the proposition that a plaintiff bears the onus of proof of the loan in such circumstances.

Torok v Becker [2020] NSWSC 1570 - affirmed the principle that once ingredients (a), (b) and (c) are established, and the improvidence of the transaction is shown, the plaintiff’s task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage.

Whereat v Duff (1972) 2 NSWLR 147a case often cited as authority for the proposition that a plaintiff bears the onus of proof of the loan in such circumstances.

Analysis:

Roderick relied on the fact that the deceased had resided with Sharon since 2012 as evidence of their relationship of dependence.  Indeed, he submitted that because Sharon was the deceased’s attorney (and later, her guardian), and because she made day-to-day decisions in relation to her medical issues and finances, a relationship of interdependency existed.  This therefore put the deceased in a special disadvantage vis-à-vis her daughter.  He submitted that such an obvious disadvantage affected the deceased’s overall capacity to judge and satisfactorily protect her own interests.

The sale of the Marsfield property was not itself improvident.  Had it not been sold within two years of her going into the nursing home, it would have attracted capital gains tax upon a future sale.  But the gift of the whole of the proceeds of the sale of the Marsfield property to Sharon to acquire the Macquarie Park property was improvident from the deceased’s perspective, unless some clear understanding was reached between the pair that if the deceased had some strong medical or related need which required considerable expenditure in the short-term that Sharon would provide it.  The application of the proceeds of sale of the Marsfield property divested the deceased of her sole substantial asset.  The deceased had several debilitating medical conditions that may have needed more intensive medical care and as result of the transaction she was not left with substantial funds to meet the cost of such care.

Even though it was unlikely that she would come out of the nursing home, she could well have lived for several years.  Although she seemed to be content to rely upon her daughter’s continuing goodwill, and perhaps not unreasonably, she was nevertheless left vulnerable and unable to deploy her own funds for her own significant medical care in the future, if it was required, without asking her daughter for money.

Conclusion:

The Court does not accept that the deceased was in a position of special disadvantage by reason of dementia but was placed in a position of special disadvantage because of all her other physical ailments, her age, her presence in the nursing home and the other matters adverted to in Roderick’s case.  It was ultimately unconscientious of Sharon to take these proceeds without this issue being discussed and dealt with.  The Court will accordingly set aside this aspect of the January 2019 transactions, namely the application of the proceeds of sale from the Marsfield property to the Macquarie Park property.