- Craven v Bradley  VSC 344
- Chant v Curcuruto; Chant v Curcuruto  NSWSC 751
- Kong v Yan  SASC 82
- Ip v Chiang 
- Re Permewan  QSC 151
- Hayward (as Executor of Felton Estate) v Speedy and Felton  NSWSC 943
Application of an adjustment clause
By her will, Phyllis Craven gave her residuary estate to her three sons in equal shares. A parcel of real estate was given to one son and another parcel to another son. The will contained an equalisation clause to take into account the different values of the real estate. There were two issues to be determined by the Court for the purpose of applying the equalisation clause. First, one parcel of real estate would be subject to capital gains tax (‘CGT’), but the taxpayer (for the purpose of calculating the adjustment of that tax) was not specified. The Court analysed the operation of the CGT provisions of the Income Tax Assessment Act 1997 (Cth). The Court construed the clause as envisioning the sale of the real estate by the estate, rather than the deceased (Craven v Bradley  VSC 344 (Derham AsJ) at ).
The second issue involved the date of valuing that parcel of real estate. This directed attention to the Victorian equivalent of Succession Act 2006 (NSW), s 45 (concerning the method of valuation if a contrary intention does not appear in the will). The Court concluded that, as the will did not provide a date upon which the valuation was to be calculated, the will clause was incomplete and therefore amenable to the operation of s 45 (at ), meaning that the valuation occurred at the date of the deceased’s death.
Recent cases on testamentary capacity and the relevance of the will-drafting solicitor’s evidence
A number of recent decisions have involved the disputed application of tests for testamentary capacity, and knowledge and approval. These include Estate Rofe  NSWSC 257 (Lindsay J), Starr v Miller; Starr v Miller  NSWSC 426 (Hallen J), Chant v Curcuruto; Chant v Curcuruto  NSWSC 751 (Hallen J), Re Jones  VSC 273 (McMillan J), Chronis v Karan  SASC 87 (Parker J), Cong v Shen (No 3)  NSWSC 947 (Ward CJ in Eq) and the intermediate appellate court decisions of Greer v Greer  QCA 143 and Lewis v Lewis  NSWCA 168. In all these cases bar Starr, the Court found that at least one testamentary act of the deceased was invalid for lack of testamentary capacity or lack of knowledge and approval. Each decision is fact-specific but each sets out the relevant legal principles involved in relation to those circumstances.
The decision of Chant v Curcuruto; Chant v Curcuruto  NSWSC 751 (Hallen J) is discussed in Dr Hayley Bennett & Alisa Green’s article, ‘Treating Doctor Reports: retrospective mental capacity cases’ on p 76 of this edition. I refer to it here because the Court’s reasons contain some important comments about the role a solicitor plays in assessing testamentary capacity and ensuring the testator knows and approves the will.
The Court stated that ‘[t]he weight to be given to the solicitor’s evidence will depend on [their] experience, training, and understanding of the test of testamentary capacity; [their] ability to make an assessment of [testamentary] capacity, taken with the quality of the assessment made as appears from any contemporaneous notes and records; [their] knowledge of, and familiarity, with the will-maker, including the age and state of health of the will-maker; … [their] independence; the will-maker’s presentation to the solicitor, and whether there are any “red flags” suggesting a possible challenge to [testamentary] capacity. It will also depend on “the level of enquiry and discussion on the part of the lawyer of, and with, the deceased”… In the present case… there were a number of red flags including the fact that both [the testators] had each recently received medical attention; that medical reports had been provided that raised significant questions about the capacity of each of them; where an independent expert to consider his, and her, capacity had been foreshadowed but was not proceeded with; that neither [testator] was an existing client of the firm at which [the solicitor] was employed; that at least some instructions were being provided by one or both of the sole substitute beneficiaries; and where each of [the testators] was making a significant change to his, or her, will in appointing Jeffrey, who had never been a beneficiary, as a beneficiary in circumstances where the contents of the earlier Wills had not been considered in any material way. It is difficult to accept that [the solicitor] sufficiently considered these red flags… The duty of the solicitor instructed to make a will is to take reasonable steps to satisfy herself, or himself, that the will-maker has testamentary capacity. This requires the exercise of … judgement’ (at –).
The Court concluded that neither testator had testamentary capacity at the time their last wills were executed. It observed that ‘[t]he cognitive deficiencies of each were largely detectable and had been detected’ (at ). Moreover, the Court was ‘not satisfied that each of [the testators] knew and approved the contents of his, and her, Will respectively’ (at ).
The Court treated the proceedings as contentious, adversarial, hostile litigation and ordered the plaintiffs propounding the last will to pay the costs of the defendants who propounded the penultimate will (Chant v Curcuruto; Chant v Curcuruto (No 2)  NSWSC 882).
Inheritance of moveable assets in intestate estate
Hongtao Liu died intestate survived by a widow and two minor children. He owned immoveable and moveable assets in Australia and the People’s Republic of China (‘PRC’). The intestacy law determining the inheritance of the moveable assets (wherever situated worldwide) in Liu’s estate depended on the proper law. By South Australian (and NSW) law, where there is the potential for a conflict of laws, the Court applies the law of the deceased’s domicile. Liu’s widow, Xiangting Kong, asserted that that was South Australia, so its law determined the intestacy law to be applied. By Chinese law, the proper law is the law of the deceased’s habitual residence or, if that is unclear, the last residence. The deceased’s mother, Yunyiang Yan, asserted that the PRC was the deceased’s habitual or last residence.
The deceased was born in PRC and his father was a citizen of PRC, so PRC was the deceased’s domicile of origin. The Court in Kong v Yan  SASC 82 (Stanley J) considered whether the deceased had adopted a domicile of choice by reason of physical presence and objective intention. The deceased had lived in Adelaide from 2012 until his death in 2018, and the Court concluded that his physical presence was South Australia. As to intention, the evidence of the deceased’s statements were contradictory. The deceased planned to move to Australia in 2008. He purchased real estate and personal assets in South Australia. He brought assets from the PRC. He established three companies, acquired an interest in local businesses and opened a bank accounts in Adelaide. His children attended local schools. He and his family became permanent residents in 2013 and citizens in 2016.
During this time the deceased retained his Chinese passport, regularly travelled with his family to PRC, conducted business there, and encouraged his children to learn Chinese language and culture. However, the Court observed that in order to abandon an existing domicile, it is not necessary to sever all links with the country of the former domicile (at ).
In all, the Court found that the deceased’s domicile at death was South Australia. In case that conclusion was wrong, the Court considered the Chinese choice of law rules. This required a consideration of the deceased’s habitual residence. During the last year of his life, the deceased spent 227 days in Australia. On each occasion he travelled, he returned to Australia. The Court was satisfied that Adelaide was the deceased’s habitual residence, his ‘life’s centre’, at the date of death. If not, it was his current residence at that date. As a result, as a matter of Chinese law, the deceased’s moveable estate should be distributed in accordance with the law of South Australia (at ).
The deceased’s mother, Yan, commenced legal proceedings in the PRC in April 2019 seeking orders enforcing Chinese law in relation to the deceased’s moveable assets. Kong sought a permanent anti-suit injunction restraining Yan from continuing to prosecute those proceedings. The Court observed that it had in personam jurisdiction in respect of the administration of assets of the deceased’s estate, wherever situated, arising from the trusts established by the grant of administration (at ). The factors relevant to issuing an injunction are the deceased’s domicile, assets in the jurisdiction, and residence of the parties or submission to the Court’s jurisdiction (at ). The Court found these factors were satisfied (at ). It noted the discretionary nature of the remedy was governed by the administration of justice and protection of the court’s processes (at ). The weight of these considerations favoured the grant of injunction. That order was made.
Multiple unconscionable dealings
Within a short space of time, Lo Sing Ip married Lisa Tsui Pen Chiang, transferred real estate to her as joint tenants with him, separated, entered into a binding financial agreement, transferring the balance of his home to her, and made a false statutory declaration at Chiang’s request. Chiang was described by the Court as an intelligent, sophisticated, determined, forceful and well-travelled woman. Ip, the deceased, lacked sophistication, was illiterate, had poor education, was emotionally traumatised following the death of his first wife, and had a weak, cognitively impaired mind. He understood Cantonese but little Mandarin and English. The Court considered that Chiang must have known that Ip was vulnerable to exploitation, and she deliberately took advantage of his vulnerability to secure his property for herself.
The Court concluded that Ip lacked the mental capacity to give real consent to the marriage (Ip v Chiang  NSWSC 822 (Lindsay J) at ). The Court reached the same conclusion about the transfer to joint tenancies. It stated, in relation to Chiang’s knowledge of Ip’s situation: ‘The deceased’s lack of sophistication, his poor education and dementia were patent. [Chiang] knew, or ought to have known, that he lacked capacity to make a gift to her of a substantial interest in his home’ (at ). Similarly with mental capacity to enter into the binding financial agreement which was described as ‘transparently an improvident transaction’ (at ). The falsity of the statutory declaration was described as ‘consistent with a lack of capacity on the part of the deceased to execute the document’.
The Court concluded that each of the impugned transactions was an unconscionable dealing on Chiang’s part because: (a) the deceased was, at the time of each transaction, suffering from a special disadvantage vis-à-vis Chiang; (b) that special disadvantage seriously affected the deceased’s capacity to judge or protect his own interests; (c) Chiang knew of the deceased’s special disadvantage, or at least of facts which would raise that possibility in the mind of any reasonable person; (d) Chiang took advantage of the opportunity presented by the deceased’s special disadvantage by calculated steps to divest him of the home, his principal asset; and (e) that taking of advantage was unconscientious, the transactions by which Chiang acquired the home being demonstrably improvident viewed from the perspective of the deceased (at ). The Court stated that on the taking of accounts, Chiang was obliged to account for all rents, profits or benefits received by her from her lease or use of the property. But she was not entitled to a credit for compensation totalling $700,000 paid by a conveyancer and two law practices which settled claims against them for negligence ().
Removing a conflicted executor
Pru Permewan had three children, Scott, Marla and Donna. About 17 months before her death she entered into a ‘series of extraordinary documents’ which were designed to ‘effectively obliterate’ the estate from which provision for Marla and Donna could be made by transferring Pru’s estate of $3million to Scott’s benefit (Re Permewan  QSC 151 (Davis J) at –). The effect of Pru’s will was to transfer Pru’s estate to Scott or a trust for which Scott controlled the trustee. He was appointed executor. Scott obtained a grant of probate. Donna brought proceedings for family provision, sought the revocation of the grant and the removal of Scott as executor.
The Court stated that ‘the choice of an executor is that of the testator and that choice ought to be honoured unless there is some good reason why the chosen executor ought not continue to administer the estate’ (at . However, this was an overwhelming case for the removal of the executor (at ). The ‘inter vivos transactions were designed by Prudence and her lawyers… to defeat any family provision application by Donna and Marla. Scott has a clear interest in defending the inter vivos transactions. Therefore, a central question is whether that circumstance is likely to lead Scott to prefer his own interests to the due administration of the estate’ (at ).
An electronically recorded conversation between Scott and Marla showed deep-seated animosity of Scott towards Donna and revealed Scott’s ‘intention to access the estate’s funds to fight any claim knowing that Donna will have to fund any legal fees herself. There is a plan stated by him to run her out of money’ (at ). The Court concluded that the ‘proper administration of the estate will be frustrated by Scott continuing as executor. An executor should be appointed who will objectively consider the issues facing the estate’ (at ).
Undue influence when receiving gifts from elderly, ill and vulnerable parents
Clif and Edith Felton had two children, Graeme and Lesley. Between 28 February 2014 and 10 December 2014 there were four transfers totalling $1,470,218 from the parents to Lesley. The transfers occurred when the parents were elderly, in ill health, transitioning to life in a nursing home and vulnerable to exploitation. Lesley acknowledged they were dependent upon her emotionally and for all activities of their lives. The dependency was confirmed by their conferral upon her of the powers of an enduring attorney and an enduring guardian, her routine accompaniment of them to their medical appointments, their reliance on her for social engagement with family, and their delegation to her of business tasks such as liaising with their solicitor.
Lesley claimed that each of the transfers was a gift by her parents to her. Lesley had a close and loving relationship with her parents as a daughter and carer. She explained that their home had to be sold to fund the parents’ move to a nursing home. Because she had been living with her parents, and was impecunious, a likely consequence of the sale was that, without assistance from the parents, she would be without anywhere to live, and without funds to support herself. She explained that her parents determined to assist her by funding her purchase of a home, which decision was all the more natural because there was an estrangement between Graeme and his parents. Moreover, she said they took the view that Graeme had already received sufficient assistance from them in earlier years.
The Court considered that the transfers of property were so substantial that they were improvident. They were effected in circumstances in which Clif was motivated by an antagonism towards Graeme which the Court described as ‘open to characterisation as delusional’. Lesley encouraged her father’s antagonism towards Graeme, encouraged them to live in isolation from Graeme, and encouraged them to transfer their wealth to her. They did not obtain (nor were they advised by Lesley to obtain) independent advice regarding transfers of property to Lesley (Hayward (as Executor of Felton Estate) v Speedy and Felton  NSWSC 943 (Lindsay J) at ).
The transfers deprived Clif and Edith of most of their wealth. They undermined the prospective effect of their respective wills, each of which contemplated an equal distribution of the parents’ wealth between Graeme and Lesley. All these circumstances gave rise to a presumption of undue influence by reason of Lesley’s ascendancy over her parents, and the character of the gifts made to her. The presumption could be rebutted by Lesley proving that her parents knew and understood what they were doing in making the impugned gifts to Lesley; and they were acting independently of any influence arising from Lesley’s ascendency over them (at –).
Clif and Edith received no independent legal advice about the prudence or otherwise of gifts made to Lesley or alternative ways they might have assisted her in a manner more consistent with protection of their interests (at ). The Court concluded the gifts were vitiated by undue influence. As a consequence, the estate of the last of the parents to die, Clif, was entitled to have the gifts set aside. Lesley was required to account for the funds transferred to her.