Ensure your client has the capacity to make the decision and is not acting under undue influence
When dealing with a vulnerable elderly person, you must be sure they have the capacity to understand and that any decision to transact money is free and voluntary. (See Badman v Drake  NSWSC 1366 para 84.)
Capacity issues can compound conflict of interest situations where, say, a family member arranges a legal appointment for their elderly relative and attends with them.
Undue influence and unconscionability
A person may be subject to undue influence or unconscionability whether or not they have the capacity to make their own decisions.
Your role includes knowing when and how to act regarding enforceability of dispositions and arrangements which have been affected by undue influence or unconscionability, and the remedies for determining the respective equities of the parties. (See Equity.)
Things to look out for:
In the older person:
- What is their standard of education and literacy, financial and otherwise?
- Does the older person (your client) suffer a disadvantage or disability that could affect their ability to make decisions in their best interests? For example, are they ill, alcohol or drug-dependent, infirm, illiterate, at a disadvantage in speaking English, financially unaware, or mentally incapable?
- Is the older person physically or emotionally dependent on another? Do they, for example, rely on a family member for the basic necessities of life, are they incapable of looking after themselves without support?
- Is the older person financially dependent on another?
- Can they manage their finances? Are their finances left in the hands of another?
- Has the older person sold properties before?
In the relationship:
- Is there a relationship of trust and confidence with the person looking to benefit?
- Is there evidence of domination of the older person?
- Is there a difference in bargaining power between the older person and the person receiving the benefit?
- Has a person of influence used duress or any other influence to procure the transaction?
In the proposed transaction:
- Is there adequate consideration for the proposed disposition?
- Does the older person know the value of the assets? Have they been misled into believing the value is less than it is?
- Will the older person suffer a manifest disadvantage as a result of the disposition?
- Does the person receiving the benefit know about the disadvantage?
- Has the older person been misled by a person looking to benefit?
- Has the older person been discouraged from seeking legal advice?
For advice on a client affected by undue influence
If you believe your client is acting under the influence of another but insists that you act on their instructions, call the Law institute of Victoria Ethics Advice line on 03 9607 9336 or visit their website.
Transfer of share of house in exchange for care – possible undue influence
William is 81 years old. He owns a home in country Victoria and his daughter Philippa now lives with him. Three years ago William’s other children placed him in a residential facility because of numerous health problems. They also noticed that William was disoriented and forgetful and that his capacity to make decisions was appreciably impaired. William did not want to stay in the aged care facility and Philippa’s marriage had just ended and she had nowhere to go. Philippa suggested he leave the facility and that they live together in his country property. She took him to a lawyer and had a power of attorney and enduring guardian executed in her favour. William has been in a position of increasing dependence on her ever since.
William has a number of health issues and cognitive decline. Philippa cares for William at home and attends to his daily needs. She helps him take his medication, cleans the house, takes him shopping and on other outings, does his banking and is generally attentive to his well-being. William has become totally dependent on Philippa. He trusts her implicitly and is grateful she brought him home when she did. He has been concerned that his other children will try to put him in aged care again and sell the house for a bond. Philippa has suggested they go to a lawyer to have half the house transferred to her (for no consideration). She has promised to keep him in his home and stop any sale from happening. They come to you to carry out the transfer.
- Has Philippa assumed ascendancy or a position of influence over William?
- Has William placed trust and confidence in Philippa?
- Is William coming to you of his own free will?
- Does William properly understand the decision he wants to make? (See Capacity.)
Seniors Rights Victoria’s view
You should hear alarm bells here – is William’s will being overborne? His understanding and decision-making appear to be affected by his dependence on Philippa which is, in part, the product of his mental deterioration. (See Winefield v Clarke  NSWSC 882.) Philippa probably has influenced William’s thinking. (See Undue influence and unconscionable dealing.)