No Presumption of Undue Influence Arises in Probate

In Schwanke v Alexakis; Camilleri v Alexakis [2024] NSWCA 118 (22 May 2024), the issues which arose concerned a challenge to the penultimate will of a testator on the grounds of undue influence or unconscionability.  The principal beneficiary under the testator’s will was the testator’s general practitioner, who not only was treating the plaintiff in or about the time of the making of the will but also arranged for his solicitor to take instructions to draft and execute such will.  The further will was prepared a month later making more favourable provision for the beneficiary general practitioner.

The NSW Court of Appeal made three findings as to the law.  First, the onus of proving undue influence in probate – as distinct from in equity – lay on those seeking to impugn the will on that basis.  That is, no presumption of undue influence arose in probate.  Second, the onus on the proponent of a will to prove that a testator knew and approved the contents of that will – which arises if there are suspicious circumstances – does not require such proponent disprove undue influence.  The authorities had consistently imposed an onus of proof of undue influence on the opponent to probate of a will.  Third, general equitable principles relating to unconscionable conduct ought not be applied to testamentary gifts.  In this regard, there is a necessary distinction between inter vivos transactions and testamentary gifts.

The principal judgment of the court was delivered by Adamson JA (with whom Ward P and Gleeson JA agreed):

The relevant legal principles

The principles for proof of a will

[179]  The principles for proof of a will, which were set out in Tobin v Ezekiel (2012) 83 NSWLR 757; [2012] NSWCA 285 at [44] –[51] (Meagher JA, Basten and Campbell JJA agreeing), by reference to authority may be summarised as follows:

(1) the proponent of a will bears an onus of proving that the will is the last will of a free and capable testator, which requires the proponent to prove that the testator knew or, approved of and understood its contents at the time of its execution ([44]);

(2) if the will is rational on its face and duly executed, it is presumed that the testator was mentally competent, unless circumstances raise a doubt as to testamentary capacity, in which case the proponent must prove that the testator was of sound mind ([45]);

(3) if testamentary capacity and due execution have been proved, there is also a presumption of knowledge and approval of the contents of the will at the time of execution, which may be displaced by circumstances (referred to as suspicious circumstances) which create a doubt as to whether the will expresses the intentions of the testator (including that a person who benefits under the will was involved in its preparation), in which case the proponent must prove that the testator knew and approved of the contents and legal effect of the document ([46]); see also Lewis v Lewis (2021) 105 NSWLR 487; [2021] NSWCA 168 at [169] (Leeming JA, Meagher and Payne JJA agreeing);

(4) evidence that the testator gave instructions for the will or that it was read over by or to the testator is generally sufficient to establish that the testator had actual knowledge of its contents ([47]); and

(5) where a will has been executed by a person of competent understanding who was apparently a free agent, the burden of proving undue influence is on the person who alleges it ([49]–[51]).

[180]  Of these principles, only the correctness of (5) is in issue. The application of (3) and (4) are relevant because of the challenge, on the basis of suspicious circumstances, to the proposition that Mr McClure knew and approved the contents of the June will and the July will. Mr Ellison SC, who appeared with Mr Fernandez and Mr Yazdani for Dr Alexakis, accepted that, because there were suspicious circumstances, Dr Alexakis bore the evidentiary onus of proving that Mr McClure knew and approved of the contents and legal effect of the June will and the July will.

The issues of principle which arise for consideration

[181]  There are two main issues about the principles which apply where a will is sought to be impugned on the basis that either:

(1) the testator has been subject to undue influence by a beneficiary such that the will does not represent the testator’s true intentions unaffected by that influence; or

(2) the beneficiary’s conduct with respect to the testator has been unconscionable.

[182]  The parties also made submissions as to the consequences of a finding that either the June will or the July will was affected by either undue influence (Salvation Army grounds 17 and 19, Schwanke ground 5) or unconscionability (in the case of Mr Bedrossian). Because of my conclusion that the gift to Dr Alexakis in the July will did not fail, it is not necessary to address the consequences of a finding that the gift failed.

The applicable principles where a will is sought to be impugned on the grounds of undue influence and unconscionability

[183]  In respect of undue influence, the question arose whether:

(1) as the primary judge found, the onus of proving undue influence is on those seeking to impugn the will on that basis (alleger’s onus analysis); or

(2) as Dr Birch and Mr Wilson contended, once those seeking to impugn the will on the basis of undue influence have proved that the testator is subject to a special disability of which the beneficiary is aware, a presumption of undue influence arises which must be rebutted by the beneficiary (presumption analysis).

[184]  In respect of alleged unconscionability, the question arose whether, as Mr Bedrossian contended, the equitable principles relating to unconscionable conduct as they apply to inter vivos transactions also apply to testamentary gifts with the result that, if there has been unconscionable conduct by the beneficiary, the gift to the beneficiary will only be effective if the beneficiary establishes that the gift was “true, fair and reasonable” (equitable analysis).

[185]  Dr Birch submitted that the presumption analysis was the correct one, on the basis that the law had taken a wrong turn and misunderstood earlier authority which supported it. Mr Bedrossian did not seek to disturb the primary judge’s analysis or findings based on the alleger’s onus analysis. However, he submitted that Mr Camilleri had also put his case on the basis of the equitable analysis and that the primary judge had incorrectly rejected that analysis.

[186]  Mr Wilson submitted that this Court ought reconsider the correctness of Trustee for the Salvation Army (NSW) Property Trust t/as the Salvation Army v Becker [2007] NSWCA 136; (2007) 14 BPR 26,867 (Becker) and determine that the principles that apply to equitable undue influence apply also to probate undue influence.

[187]  For the reasons which follow, I consider the primary judge’s conclusion that the alleger’s onus analysis was the proper approach to be` correct as a matter of both principle and authority. I reject Dr Birch’s submission that the presumption that arises in the context of undue influence in inter vivos transactions arises in respect of testamentary gifts and Mr Wilson’s related submission that the principles of undue influence are the same in probate as in equity. I confirm my view that Becker correctly states the relevant law. I reject Mr Bedrossian’s submission that the equitable principles of unconscionability apply to testamentary dispositions in the same way as they do to inter vivos transactions.

[188]  At the heart of the distinction between these analyses is the question whether it is appropriate to distinguish between inter vivos transactions or gifts on the one hand and testamentary gifts on the other. There are necessarily different considerations which apply in either case. Where there is a challenge to an inter vivos transaction or gift, the benefit of the transaction or gift can be restored to its donor. However, a testator, once dead, is forever deprived of the benefit or property which is the subject of the transaction or gift. The interest of a donor, as testator, includes respect for choices made in the exercise of testamentary freedom which (subject to legislative restrictions on that choice to make provision for close or dependent family members) the testator is entitled to exercise in a fashion which others may regard as arbitrary or perverse. While the law has a concern to ensure that the will of the testator has not been subject to undue influence, it also has other concerns: to protect testamentary freedom and to ensure that the estate of a competent testator passes to named beneficiaries under a duly executed will rather than being consumed by the costs of litigious challenges by interested persons who stand to gain by findings that gifts in a will fail.

The alleger’s onus analysis

[189]  The alleger’s onus analysis is reflected in and supported by the following observations made by Lindsay J in Boyce v Bunce [2015] NSWSC 1924 (on which the primary judge relied) in which his Honour contrasted the onus of proof of undue influence in probate (testamentary gifts) as distinct from equity (inter vivos transactions):

56 In a probate suit, there is no presumption of undue influence. Leaving to one side the observation that, in probate proceedings, an allegation of undue influence requires proof of facts tantamount to coercion, a party who alleges undue influence in probate bears the onus of proving it, without the benefit of a presumption of undue influence: Trustee for the Salvation Army (NSW) Property Trust v Becker [2007] NSWCA 1365; 14 BPR 26,867 at [63] –[64] ; Winter v Crichton; Estate of Galieh (1991) 23 NSWLR 116 at 121D ; Hall v Hall (1868) LR 1 P&D 481 ; Parfitt v Lawless (1872) LR 2 P&D 462 at 468 –470 . This approach reflects a robust acceptance that, in common experience and without criticism, a person might be subjected to social pressures falling short of coercion in the making of a will. The focus for attention is on the essential question whether a will is that of a free and capable testator. As a will takes effect only on or after the death of testator, the court has no concern for his or her subsequent welfare, as distinct from the interests of those beneficially entitled to a deceased estate.

57 By way of contrast, upon an exercise of equitable jurisdiction relating to a disposition of property inter vivos , the Court may be concerned about the ongoing welfare of the disponor; and, in its concern to prevent or redress unconscientious conduct, it allows for there to be a presumption of undue influence in some circumstances. When such a presumption arises it may be rebutted by proof that the disponor: (a) knew and understood what he or she was doing; and (b) was acting independently of any influence arising from the ascendancy of the disponee over the disponor. Proof of the first element, without proof of the second, is insufficient to rebut the presumption: Quek v Beggs (1990) 5 BPR [97405] at 11,765 ; Bridgewater v Leahy (1998) 194 CLR 457 at 475 [63]. Equity’s presumption has a prescriptive element designed to enforce a standard of behaviour, quite distinct from the bare, empirical character of probate presumptions.

[190]  The alleger’s onus analysis was described by the High Court as “the traditional view” in the following extract from Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66. Gaudron, Gummow and Kirby JJ wrote as follows:

62 The position taken by courts of probate has been that to show that a testator did not, by reason of undue influence, know and approve of the contents of the instrument propounded as a testamentary instrument, ‘there must be — to sum it up in a word — coercion’ (55). The traditional view, repeated by Sir Frederick Jordan (56), has been that a court of equity will not, on the ground of undue influence as developed by the Court of Chancery, set aside a grant made by a court of probate (57).

63 The approach taken in the probate jurisdiction appears to be concerned with the existence of a testamentary intention rather than the quality of that intention or the means by which it was produced. It is a concern of this latter nature which finds expression in the treatment by equity of dispositions inter vivos. In the present litigation, with respect to the dispositions made by the will, no party submitted that equity might apply or extend its principles respecting undue influence and dispositions inter vivos , not to attack a grant of probate itself, but to subject property passing under a will to a trust in favour of the residuary beneficiary or the next of kin .

(55) Wingrove v Wingrove (1885) 11 PD 81 at 82 –83 . See also Baudains v Richardson [1906] AC 169 at 184 –185 ; Craig v Lamoureux [1920] AC 349 at 357 ; Winter v Crichton (1991) 23 NSWLR 116 at 121 –122 .

(56) In his ‘Chapters on Equity in New South Wales’, reprinted in Jordan, Select Legal Papers (1983), page 137.

(57) Allen v M’Pherson (1847) 1 HLC 191 ; [ 9 ER 727]; cf , Birmingham v Renfrew (1937) 57 CLR 666 at 674 , 676 , 683 , 690.

(Emphasis added)

The presumption analysis

[191]  Dr Birch submitted that this Court had endorsed the presumption analysis in Callaghan v Myers [1880] NSWLawRp 84; (1880) 1 LR(NSW) 351 that later decisions had misunderstood that authority; and that this Court ought revert to its previous authority. He also relied on Blendell v Byrne; Estate of Noeline Joan Blendell [2019] NSWSC 583 (Hallen J) which he submitted left open the question of extending equitable undue influence to probate (Schwanke ground 5).

…

[214]  The authorities establish and maintain that, for the reasons set out above, there is a different rule for probate undue influence than for equitable undue influence. If Callaghan v Myers ought be read as obliterating the distinction (contrary to my analysis above, in which only Hargrave J (incorrectly) decided that there ought be no distinction), it is, in my view, plainly wrong and was implicitly overruled by the Privy Council in Craig v Lamoureux [1920] AC 349.

[215]  As noted above, Dr Birch submitted that Hallen J in Blendell v Byrne had left open the question whether equitable undue influence should be extended to probate. I do not consider that Hallen J’s reasons ought be read as going further than to note the observations made by the High Court in Bridgewater v Leahy at [62] –[63] .

Whether the 1898 Rules influenced the common law’s imposition of the onus of proving undue influence on the opponent to probate of a will

[216]  I consider there to be an important distinction between a testator’s knowledge and approval on the one hand and undue influence on the other. As this Court said in Tobin v Ezekiel (2012) 83 NSWLR 757 at [46] (see above at [179]) , once testamentary capacity and due execution have been proved, a presumption of knowledge and approval of the contents of the will at the time of execution arises, which may be displaced by proof of suspicious circumstances, in which case the proponent must prove that the testator knew and approved of the contents and legal effect of the document. The proponent bears the onus of proving knowledge and approval but, in certain circumstances (outlined above), can rely on a presumption to that effect. However, the presumption can be displaced by the opponent’s proof of special circumstances, which then casts the onus of proof back on the proponent, who will no longer have the benefit of the presumption.

[217]  This situation is to be distinguished from an allegation of undue influence where the opponent bears the onus of proof throughout and there is no operative presumption. The authorities reflect this distinction between knowledge and approval on the one hand (where the onus might be described as shifting) and undue influence (where the onus is on the opponent in probate cases), although the 1898 Rules required that each be alleged in the defence. This is a strong indication that the 1898 Rules requiring undue influence to be pleaded as a defence reflected the common law, rather than affected it. The need for the requirement that the absence of knowledge and approval be pleaded as a defence stems from the circumstance that knowledge and approval would, in certain circumstances, otherwise be presumed and an allegation in the defence is required to put the proponent on notice that the opponent contends that the presumption of knowledge of approval is displaced: see, by analogy, O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455; [2002] FCAFC 188 at [15] –[16] (Carr, Moore and Marshall JJ) in which it was held that an applicant, who relies on the presumption in s 51A(2) of the Trade Practices Act 1974 (Cth) that a corporation does not have reasonable grounds for a representation with respect to a future matter, is obliged to indicate that reliance to the respondent, as a matter of procedural fairness.

[218]  For these reasons, I do not consider that the form of the 1898 Rules affected the development of the common law which has consistently imposed the onus of proof of undue influence on the opponent to probate of a will. Thus, deletion of the applicable rule in 1972 does not provide a warrant for this Court to reconsider long-standing consistent authority, particularly in circumstances where the form of the pleading rule was not identified in the authorities as a reason for requiring the opponent to probate being granted to a will bearing the onus of proving undue influence.

The standard of proof

[219]  There was no challenge to the primary judge’s articulation of the standard of proof at [598]. Accordingly, it is necessary only to summarise the principles.

[220]  Because probate proceedings are civil proceedings, the standard of proof is on the balance of probabilities: s 140(1) of the Evidence Act 1995 (NSW). The nature of the cause of action or defence, the nature of the subject matter of the proceedings and the gravity of the matters alleged are all relevant to the decision whether the tribunal of fact is so satisfied: s 140(2) of the Evidence Act . Where a serious allegation is made, clear and cogent proof is required to discharge the civil onus: Briginshaw v Briginshaw (1938) 60 CLR 334; [1938] HCA 34 .

[221]  In a circumstantial case of probate undue influence, the burden of proof on the party making the allegation was expressed by Lord Cranworth LC in Boyse v Rossborough (1857) 6 HL Cas 2 at 51 ; 10 ER 1192 at 1212 (approved in Craig v Lamoureux at 357 and followed in Winter v Crichton at 122 and Becker at [76]) as follows:

… in order to set aside the will of a person of sound mind, it is not sufficient to show that the circumstances attending its execution were consistent with the hypothesis of its having been obtained by undue influence. It must be shown that they are inconsistent with a contrary hypothesis.

[222]  Although Vickery J in Nicholson v Knaggs [2009] VSC 64 suggested at [119]–[125] that this formulation imposes too high a standard of proof, I do not accept this analysis (which does not arise for consideration in the present case). The formulation from Boyse v Rossborough is apt for any circumstantial case. Cases concerning probate undue influence are almost inevitably circumstantial because the testator cannot, by definition, give evidence and the relevant fact to be determined, the testator’s state of mind at the time of making the will, can usually only be determined by inference rather than by direct evidence.

[223]  In Woodley-Page v Simmons (in the passage set out above) Young J regarded the testator’s desire to benefit the man he regarded as a son as an “equally acceptable hypothesis” (which was therefore one which had not been excluded on the balance of probabilities), which was why the claim of probate undue influence failed. This reflected the approach taken endorsed in Boyse v Rossborough.

[224]  The primary judge, at [598], cited Brown v Guss [2014] VSC 251 at [393] , in which McMillan J said:

The statement of principle by the Lord Chancellor in Boyse v Rossborough does not, on my reading, impose any standard or onus of proof that differs from the general law as it applies in Australia. The party alleging undue influence must show that the circumstances attending the execution of the will are inconsistent with the will having been obtained other than by undue influence. The standard to which they must show that the circumstances are so is on the balance of probabilities. If all they are able to prove is that undue influence and a lack thereof are equally likely, they have not proved their case. They must instead show that on balance, the hypothesis that the testator has been unduly influenced must be more likely than the contrary. I do not believe that in so stating the test, I am saying anything controversial.

(Footnotes omitted)

The equitable analysis

[225]  Mr Bedrossian submitted that even if the Court was not satisfied that Dr Alexakis knew of the terms of the will until after Mr McClure’s death, once he did find out, it was unconscionable of him to retain the benefit of the gift because it had been made in the course of a doctor/patient relationship and Dr Alexakis could not prove that it was “fair, just and reasonable” for him to do so. This was the most conservative way in which the submissions were put. At its highest, Mr Bedrossian relied on there being a quid pro quo arrangement between Dr Alexakis and the deceased (as referred to above).

[226]  Mr Bedrossian submitted that Mr Andresakis’ involvement in taking instructions for, drafting, and arranging the execution of, the June will and the July will were insufficient to ameliorate the unconscionability arising from the gift. Mr Bedrossian accepted that all of the authorities which he cited in support of the equitable analysis concerned inter vivos transactions. However, he submitted that there was no reason in principle to distinguish between inter vivos transactions and testamentary gifts and that there was, therefore, no reason to limit the equitable principles by reference to that distinction, which he described as “either illusory or irrelevant”.

[227]  Mr Bedrossian’s submission involved the following steps:

(1) equitable principles of unconscionability, which are to be distinguished from those relating to undue influence, operate separately and cumulatively ( Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 (Mason J); [1983] HCA 14 (Amadio));

(2) the primary judge made unchallenged findings that:

(a) Mr McClure suffered from a special disability which seriously affected his ability to make a judgment as to his own best interests;

(b) Dr Alexakis was aware of Mr McClure’s special disability;

(3) by reason of (2), an equitable presumption arose that the transaction (the testamentary gifts to Dr Alexakis) were the consequence of the special disadvantage and that unconscientious advantage was taken by Dr Alexakis;

(4) Dr Alexakis could only rebut the presumption by proving that the transaction was “fair, just and reasonable” ( Blomley v Ryan (1956) 99 CLR 362 at 386 (McTiernan J) and at 428–429 (Kitto J, who was in dissent); [1956] HCA 81); and

(5) Dr Alexakis had not rebutted the presumption in (3) as:

(a) Dr Alexakis did not submit, either at first instance or on appeal, that his retention of the benefit of the gifts was fair, just and reasonable; and

(b) the primary judge did not find the transaction to be fair, just and reasonable (and no notice of contention was filed by Dr Alexakis contending that this finding ought to have been made and would have supported the decision).

[228]  Mr Bedrossian submitted that the primary judge either failed to address his submission or misunderstood its import as her Honour did not appreciate that Mr Camilleri’s claim was not based solely on a finding of a quid pro quo arrangement, but rather on the submission that Dr Alexakis’ retention of the benefit of the gifts in the will was itself unconscionable. Mr Bedrossian submitted that a finding of unconscionability did not depend on proof of “immoral or dishonest motives” ( Johnson v Smith [2010] NSWCA 306 at [98] –[102] ); “moral obloquy or reprehensible conduct” (Aboody v Ryan [2012] NSWCA 395; (2012) 17 BPR 32,359 at [65] (Allsop P)); the improvidence of the gift (Blomley v Ryan) or “victimisation” ( Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 at [38]).

[229]  Mr Bedrossian pointed to Mason J’s explanation of the different rationales for the remedies for undue influence and unconscionability in Amadio at 461, as follows:

… Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.

There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest.

[230]  To like effect, Deane J said at 474 that undue influence “looks to the quality of the consent or assent of the weaker party”, whereas “[u]nconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.”

[231]  Mr Bedrossian accepted that he had not found a case where a claim for probate had been successfully disputed on the basis of special disability (and consequential unconscionability) rather than probate undue influence. However, he submitted that no case had decided that the equitable analysis was limited to inter vivos gifts and transactions and did not extend to testamentary gifts.

[232]  Mr Bedrossian also relied on Nitopi v Nitopi (2022) 109 NSWLR 390; [2022] NSWCA 162 ( Nitopi ), in which this Court (in part) allowed an appeal from orders that a child of a deceased repay to the deceased’s estate a total of six amounts which the deceased had paid to the child during the deceased’s lifetime at times when the deceased was at a special disadvantage. This Court upheld the ground of appeal which alleged that the primary judge had not made a finding that the child actually knew of the deceased’s particular special disadvantage and that the deceased’s executor had not proved either actual or constructive knowledge, the latter not being sufficient in any event: [10]–[11]) (Bell CJ); [114]–[125] (Ward P). As Nitopi concerned inter vivos gifts, it does not advance Mr Bedrossian’s submission that the equitable analysis ought extend to testamentary gifts.

[233]  The principles on which Mr Bedrossian relies in support of the equitable analysis are well established in so far as they apply to inter vivos transactions: Bridgewater v Leahy at [58] (Gaudron, Gummow and Kirby JJ). As referred to above, the High Court in Bridgewater v Leahy was careful to note, at [63], that the parties had not argued that the equitable principles (relating to undue influence and unconscionability) which applied to inter vivos transactions ought apply or be extended to testamentary gifts.

[234]  I do not accept that the equitable analysis applies to testamentary gifts. While the principles of unconscionability are distinct from those relating to undue influence, both comprise grounds on which equity will grant relief from certain transactions or gifts. Equity, in certain defined instances, imposes a presumption to give the person seeking to impugn the transaction a forensic advantage by casting the onus of proof on the party seeking to maintain the transaction or gift. One can see good reason for this to be so in respect of inter vivos transactions because to cast the onus on the alleged victim of undue influence or unconscionability tends to undermine equity’s protection. However, in the case of testamentary gifts, the alleged victim of undue influence or unconscionability is, by definition, dead, rendering restoration of material benefit to the victim impossible. Those seeking to impugn testamentary gifts are either, as in the present case, other beneficiaries (under the final or previous wills) or those who would take on an intestacy. There would not appear to be any compelling basis for granting such persons a forensic advantage by casting the burden of proof on the person seeking to propound the will. Indeed to do so would almost inevitably have the unfortunate consequence of facilitating challenges, particularly where there may be an expectation (which would be reasonable if there were such a presumption) that the cost of such challenges would be borne by the estate, which would be diminished accordingly.

[235]  For the reasons given above, it has been authoritatively established that there is no presumption of undue influence in respect of testamentary gifts. The reasons for the distinction would appear to apply equally to alleged unconscionability. This may serve to explain why no case has been found that applies the equitable presumption of unconscionability in a testamentary context. I am not persuaded that the equitable analysis applies, or ought extend, to testamentary gifts.

(emphasis added)

The link to the full decision is here.