Challenging a will sometimes involves delving into the unpleasant world of unconscionable acts where people are under special disadvantages or disabilities.
When can payments by a father suffering from a mental disability made to his daughter prior to his death be challenged on the basis of unconscionable conduct?
The Full Court of the New South Wales Supreme Court of Appeal decision in Nitopi v Nitopi  NSWCA 162 (“Nipoti”) considered whether constructive notice of a special disability is sufficient to satisfy the requisite knowledge to successfully argue unconscionable conduct.
Edigio Nipoli (the deceased) was a successful businessman who died in 2014, leaving a sizable estate to be divided equally amongst his three children. Prior to his death, Edigio suffered significant short-term memory deficits and was eventually diagnosed with alcohol-related dementia in late 2008.
Between February 2008 and June 2010, Edigio made twelve payments to his youngest daughter Cristina (appellant) amounting to over 3 million dollars.
The deceased’s son Giuseppe (respondent) sought repayment of the funds back into the estate. He alleged that Edigio suffered from a special disability and that the payments made to Cristina were the result of unconscionable conduct.
The legal principles dealing with unconscionable conduct have been well established through case law and are generally uncontroversial. As Ward CJ summarized in Turner v O’Bryan-Turner, the elements of unconscionable conduct are as follows:
“[F]irst, that the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party; second, that the special disadvantage must seriously affect the weaker party’s capacity to judge or protect his or her own interests; third, that the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person); fourth, that the stronger party must take advantage of the opportunity presented by the disadvantage; and, fifth, that the taking of advantage must have been unconscientious.”
Further, citing Austin J in Turner v Windever in relation to the “presumption of unconscionability”:
“[O]nce the first three elements 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.”
The presumption of unconscionability is a rebuttable presumption with the onus placed upon the stronger party to demonstrate that the transaction was fair, just and reasonable.
Nitopi v Nitopi  NSWCA 162
The case was heard at first instance by Parker J in the New South Wales Supreme Court. Based on the evidence put before the Court, his Honour concluded that Edigio suffered from a special disability that seriously affected his capacity to judge or protect his own interests in dealings with Cristina.
The resolution of the case ultimately hinged on when Cristina possessed the requisite knowledge of Edigio’s disadvantage.
His Honour found that Christina possessed the requisite knowledge of her father’s special disadvantage from June 2009 onward, stating that she ‘was on notice of the deceased’s special disadvantage’.
With the first three elements established, the equitable presumption of unconscionability was enlivened. Parker J determined that Christina did not rebut the presumption as she failed to demonstrate that the transaction was fair, just and reasonable.
Consequently, the payments made to Cristina after June 2009 were deemed to have resulted from her unconscientiously taking advantage of the opportunities presented by Edigio’s special disadvantage.
Ultimately, Parker J ordered that the six payments made to Christina after June 2009 be repaid to her father’s estate with interest (approximately 2.2 million dollars), after which, distributed in accordance with the terms of the deceased’s Will.
On Appeal, the Full Court held that, except for the final payment made to Cristina, where she admitted to having knowledge of her father’s special disadvantage, Cristina did not possess the requisite knowledge for the purpose of the doctrine of unconscionability.
The outcome of the appeal on this issue turned on the extent of Cristina’s knowledge of her father’s circumstances at the time of the payments.
In coming to their decision, the Full Court opined that Parker J’s conclusion in relation to Cristina’s knowledge was only in terms of constructive notice at best which, according to the authority of Kakavas v Crown Melbourne Limited (2013) 250 CLR 392, is insufficient to successfully argue unconscionable conduct.
In any challenge to a transaction where it is alleged that there was unconscionable conduct arising from knowledge of some special disability, and orders are sought to set aside any transactions or payments, it is important to have a clear and precise understanding of:
- the extent and effect of the disability or disadvantage, and
- the actual knowledge of the party against whom any allegations are made, and
- facts or circumstances which might give rise to constructive knowledge, and
- the timing of that knowledge in reference to the events.
If you have any queries in regard to a will and whether there has been unconscionable conduct, please contact us.
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