Undue influence, which can stem from various sources such as abuses of confidence, power imbalances, and excessive pressure, often involves a weaker party. This party must demonstrate that the transaction was ‘an independent and well-understood act’ on their part, highlighting their vulnerability in such situations.
Could the gift of the house be set aside on grounds of undue influence?
In Johnson v Buttress (1936) 56 CLR 113, After his wife’s death, an older man named Buttress became reliant on a woman named Johnson. She helped him with meals, advised him on renting his house, and even took him to her solicitor to make a will in her favour. Later, Buttress moved in with the Johnson family, and she took him to her solicitor again to transfer ownership of his house to her as a gift.
After Buttress passed away, his son asked the Court to invalidate the house transfer to Johnson. Buttress, who couldn’t read or write, trusted Johnson and relied on her for managing his affairs. This relationship of trust led him to transfer his sole property to her. In the circumstances, the gift was voidable on grounds of undue influence.
‘one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his [or her] part’ (Johnson v Buttress (1936) 56 CLR 113, 134-135 per Dixon J).
Undue influence is an equitable doctrine that, at its core, protects people from abusing a power imbalance, either because no one should be permitted to benefit from their wrong or as a matter of public policy arising from a relationship of influence.
In Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 Ch D 145, a 27-year-old unmarried woman sought confession from a clergyman in 1867. The following year, she joined the sisterhood led by the clergyman as a spiritual director, and in 1871, she became a full member, taking vows of poverty, chastity, and obedience. Without seeking independent advice, she made monetary and stock gifts to the mother superior on behalf of the sisterhood. She left the sisterhood in 1879, and in 1884, she requested the stock return. Legal action to recover the stock began in 1885.
The Court of Appeal ruled that although the plaintiff’s gifts were voidable due to undue influence resulting from the training she had received, she was not entitled to recover them due to her behaviour and the delay.
Background
Wu v Wu [2022] ACTSC 360 involved two daughters. One holds a law degree, resides in Tahiti, and has inherited most of her parents’ assets. The other is a nurse living in Canberra who has been caring for her father since her mother died in 2018.
A property transfer was executed in August 2009 from Mr. Wu (the plaintiff) and his wife, Mrs. Wu, to their second daughter (the first defendant). Mr. Perkins(the second defendant) is the solicitor allegedly involved in the transaction. The specific role of the second defendant concerning the transaction is contested. While there were several property transfers to the first defendant, the parties called no other transfers into question.
The plaintiff contends that the Court should invalidate the property transfer to the first defendant, or he is entitled to receive the amount of consideration documented on the transfer document, totalling $1,225,000 (plus interest on that amount).
The first defendant argues that the transfer was a gift to her, negating any claim. Furthermore, the plaintiff was aware of the implications of that transfer at the time it occurred, thereby rendering any claim time-barred under the Limitation Act 1985 (ACT).
The second defendant contends that he did not owe the plaintiff any relevant duty at the time of the transfer and that, in any case, the claim is time-barred under the Limitation Act 1985 (ACT).
The plaintiff has not brought any claims concerning the other property transfers made by him, his wife, or both of them to their second daughter. The plaintiff acknowledges that those transfers were gifts to recognise their familial relationship.
In Wu v Wu [2024] ACTCA 8, Mr. Wu (the appellant) is a widower who is now 100 years old. He has two daughters:
(a) Karen, who was adopted by Mr. and Mrs. Wu in 1965; and
(b) Angela, born to Mr. and Mrs. Wu in 1970, is the recipient of the O’Malley house and is the respondent in this appeal.
This appeal stems from a judgment issued on 21 December 2022. In this judgment, the appellant secured a declaration of a right of residence in the O’Malley property for the rest of his life or until he no longer desires.
However, he was unsuccessful in establishing claims for relief in equity based on either unconscionable conduct or undue influence. The primary judge dismissed the appellant’s Amended Statement of Claim and ordered him to pay the defendant’s costs of the proceedings: Wu v Wu [2022] ACTSC 360.
The decision
The Court of Appeal (Mossop, Baker and McWilliam JJ) emphasised that undue influence is an equitable doctrine designed to protect individuals from the abuse of power imbalances underscoring the importance and impact of this legal doctrine.
It was submitted that the person unduly influencing the appellant was his wife, not his daughter, to whom he transferred the family home. However, the Court noted that the person in a position of influence (presumed or proven) and the recipient of the benefit does not need to be the same for the doctrine to apply (at [56]).
Furthermore, if the third party is a volunteer, the transfer of property obtained through undue influence may be invalidated regardless of whether the third party was aware of the undue influence because equity will not assist a volunteer. Therefore, if this occurs, the recipient will bear the consequences of the other’s undue influence, and the transfer may be invalidated (at [57]). The situation would differ if the transaction involved consideration (at [91]).
The Court also found that the transfer involved unconscionable conduct. One factor was that the appellant did not seek any legal advice. Angela argued that legal advice was unnecessary as the transfer involved no legal complexity. However, the Court explained that the advice needed was whether the transfer was in the appellant’s best interests, separate from his wife’s interests, to unconditionally gift his only significant asset to his daughter and the risks or consequences for him if he did so (at [120]).