In the case of Daunt v Daunt  VSC 706, the plaintiff and the defendant were twin brothers and sons of the deceased.
While he was alive, the deceased and his wife (the twins' mother) gifted real property to one son as a joint tenant with the deceased, by executing a transfer in the appropriate form. The consideration for the transfer was described as “I desire to make a gift”.
Upon the death of the father, the title vested solely in that son by survivorship. This meant that the property did not form part of the deceased’s estate, and could not be subject to a Part IV claim. The surviving proprietor lived at the Wandong property at the time of the proceeding.
The plaintiff made a claim against the estate in the Supreme Court of Victoria alleging (amongst other things) that the defendant had unduly influenced their father.
Associate Justice Daly found that the brother lacked standing to make a claim. This was due to the fact that the plaintiff was merely a disappointed beneficiary under his living mother’s estate. Consequently, the only person who could make such a claim was their mother.
The Court of Appeal (Redlich, Santamaria and Kyrou JJA) dismissed the disappointed brother's appeal (see Daunt v Daunt  VSCA 58).
Daly As J went on further, however, to make comments as to how she would have decided the case had the plaintiff in fact had standing.
Her Honour concluded that there was no undue influence in this case as the transfer had been a voluntary gift where the transferor had fully understood the consequences of the transfer.
The case came about because the plaintiff lodged a caveat over the title to a property at Junction Road, Heathcote Junction (“Wandong property”).
The defendant (as surviving registered proprietor) applied to remove the caveat on the basis that the plaintiff did not have the interest in the Wandong property that he claimed. The plaintiff issued the proceedings to justify the caveat.
At paragraph 40, Her Honour noted that the question of the standing of an actual or potential claimant under Part IV of the Administration and Probate Act 1958 (Vic) has been the matter of some debate, and that debate had yet to be resolved.
In Mataska v Browne  VSC 62, McMillan J approved of the view adopted by the Full Court of the Supreme Court of Queensland in Hogarth v Johnson (1987) 2 Qd R 383. While McMillan J stated [at paragraph 53] that:
A contingent Part IV interest, without more, is insufficient to support standing.
she found in an application by a child of the deceased to remove the executor of the deceased’s estate in circumstances where the executor was the sole beneficiary of the deceased’s estate, but also the recipient of a gift of the bulk of the assets of the deceased shortly prior to her death, a potential claimant under Part IV of the Act had sufficient standing to make the application for the removal of the executor, and the appointment of another executor for the purpose of investigating the circumstances in which the gift was made.
Daly As J also noted at paragraph 45 that:
... regardless of the standing of the plaintiff, now is the opportune time to determine, on the basis of the evidence before the Court, whether the Transfer of Land ought to be set aside on the basis that the Transfer of Land was procured by the defendant’s breach of fiduciary duty, exertion of undue influence, or unconscionable conduct. The plaintiff and the defendant have filed and served extensive written evidence ...
Continuing on with that analysis, she found at paragraph 47 that there was no factual basis for alleging that the defendant breached his fiduciary duty as power of attorney for his parents by procuring the Transfer of Land: the Transfer of Land predated the defendant’s appointment as an attorney for each of his parents. She also noted that there is no overarching doctrine at law that an adult child otherwise owes a fiduciary duty to his or her parents.
In her analysis of whether the defendant procured the Transfer of Land by exerting undue influence, Daly As J adopted the principles articulated in Christodoulou v Christodoulou  VSC 583 at , where Kaye J stated as follows:
The basic principles relating to the concept of undue influence are uncontroversial. In equity, a transaction, whereby a donor transfers property to a donee (or recipient), is voidable, if it is shown to be the result of undue influence exercised by the recipient over the mind of the donor. There are two categories of cases of undue influence. The first category of cases arises where it has been positively proven that the transaction in question was produced by actual influence exercised by the recipient over the donor. ... The second category of case is where there has been shown to be an antecedent relationship between the donor and the donee, which is such as to raise a presumption that the donee has relevant influence over the donor. In such a case, the court will set aside a voluntary gift, unless it is proven by the donee that the gift was a spontaneous act of the donor in exercise of an independent and informed will. In this category of case, the law has recognised particular relationships which automatically raise a presumption of influence, including the relationship of doctor and patient, solicitor and client, guardian and ward, and parent and child (where the gift is by the child to the parent). However, the classes of relationships, in which the presumption arises, are not fixed and inflexible. In essence, where there is found to be an antecedent relationship between the parties, which gives the recipient of the gift “authority or influence over the donor from the absence of which it is proper that he [or she] should be protected”, the law will presume that any gift by the donor to the donee was the result of undue influence exercised by the latter.
In this case, the plaintiff alleged that the Transfer of Land was procured by the reason of actual undue influence on the part of the defendant. However, Her Honour concluded that the case fell squarely in the second category of cases: that is, by reason of the facts and circumstances of the relationship between the defendant and his parents, there was an antecedent relationship between the defendant and his parents such as to raise a presumption of undue influence which must be rebutted by the defendant in order to avoid the gift to him effected by the Transfer of Land being set aside.
The antecedent relationship did not arise merely by the defendant being the adult child of Mrs Daunt and Mr Daunt senior. However, it was apparent to Her Honour that, at least in the period after the Black Saturday fires and his parents’ movement into institutional care, his parents had become increasingly dependent upon the defendant’s day to day assistance.
At the time that the Transfer of Land was executed, the parents were becoming increasingly anxious about the potential impact of their ongoing ownership of the Wandong property upon their financial security. It had become clear to them that neither the plaintiff nor the parties' sister were either willing or able to provide them with material and/or practical assistance, despite the defendant’s entreaties in his letters to them, and indeed, their lack of assistance was a major source of disgruntlement to Mrs Daunt in particular.
Her Honour then noted (at paragraph 55) that the finding that there was sufficient evidence to raise the presumption of undue inference was not intended as a criticism of the defendant or his conduct and motivations in assisting his parents. It was simply a recognition of their potential vulnerability to manipulation of them by him, such that it was necessary for him to demonstrate that the Transfer of Land was executed by his parents freely and willingly.
Daly As J concluded that the onus rested with the defendant to establish that the execution of the Transfer of Land was “a spontaneous act in exercise of an independent and informed will” on the part of Mrs Daunt.
At paragraph 57 Her Honour concluded that the defendant had discharged that onus. It was apparent from the evidence of Mrs Daunt that she voluntarily gifted her share of the Wandong property to the defendant, with a full understanding of the consequences of the transaction, and a rational basis for embarking upon the transaction. There was, accordingly, no basis for setting aside the transaction on the basis of any undue influence exercised by the defendant.
Similarly, Her Honour was unable to find any basis for setting aside the Transfer of Land on the grounds of unconscionable conduct on the part of the defendant.
Her Honour then noted that in order to establish unconscionable conduct on the part of the defendant, the onus was on the plaintiff who had to establish that:
(a) his parents, and in particular, Mrs Daunt, were under a relevant special disability or disadvantage, which seriously affected their (her) ability to make a judgment as to their (her) own best interests; and
(b) the defendant knew, or ought to have known of that special disability and/or disadvantage, and that special disability or disadvantage affected his parents’, and in particular, his mother’s ability to make an appropriate judgment as to whether the transaction was in their (her) best interests.
At paragraph 61, Daly As J found that the plaintiff’s claim with respect to unconscionable conduct fell at the first hurdle: that is, Mrs Daunt was under no special disadvantage when she made the gift of her share of the Wandong property to the defendant.
Her Honour went on to conclude that the question of whether Mr Daunt senior was under a special disadvantage or disability was peripheral to the real issue in the proceeding, as Mr Daunt senior suffered no material financial disadvantage by reason of the execution of the Transfer of Land.
In determining the question as to whether the transaction was fair and reasonable in all of the circumstances, Daly As J concluded, having regard to all of the circumstances, the transfer by Mrs Daunt of her interest in the Wandong property to the defendant was fair and reasonable.
It was apparent from the evidence that Mr Daunt senior and Mrs Daunt were keen to find some mechanism for maintaining Mrs Daunt’s access to the Wandong property while maximising their ability to receive financial assistance from the Commonwealth Government, and it appeared that objective had been achieved by reason of the Transfer of Land.
These findings support the use of lifetime (inter vivos) gifts as an effective estate planning tool in some circumstances.
It will most likely be necessary, for it to be effective, to have a medical report confirming that the gift maker is of sound mind, as well as to document the reasons for the gift.
It would also be useful to have the gift receiver not involved in the transaction. Instead, the gift should be documented by an independent lawyer, who is acquainted with the gift giver, or who at least meets with the giver and satisfies themselves about the circumstances of the gift, and the fact that the gift giver is not being unduly influenced by the donee.
This post originally appeared on the Melbourne Property Law Blog