Court hands down decision on gifted money in estate case

This case involved a woman, Katharine Howard-Olsen, who died of a terminal illness at the age of 75, survived by her husband, John Olsen, and daughter, Karen Mentink, from a previous marriage. Before her death, she gave approximately $2.2 million to her daughter. This money was withdrawn from a term deposit that was solely in the name of the deceased.

Some of the funds in the term deposit were inherited from the estate of the deceased’s mother. However, the majority of the funds were from other sources and may have been assets of a partnership between the deceased and her husband.

Her husband, Mr Olsen, commenced proceedings as an executor of the estate and in his personal capacity against his stepdaughter, the recipient of the gift.

He alleged that Ms Mentink had obtained the money by reason of undue influence or unconscionability and was liable to repay that amount to the estate. 

In the earlier decision by the court, Justice John Sackar decided in favour of Mr Olsen and ordered the daughter to repay the money to the estate with interest.

Justice Sackar’s decision was based on the conclusion that the daughter initiated or contrived her mother’s change of mind for her own benefit and took advantage of her mother’s vulnerability in unconscionable circumstances.

The daughter appealed the decision, submitting that the primary judge had erred in his conclusions concerning unconscionable conduct and undue influence, in addition to rejecting defences of conventional estoppel and change of position.

Justice Sackar was satisfied that Ms Olsen was at a special disadvantage in the relevant sense, because of her extreme ill health, including her admission to hospital and the subsequent surgery she had.

His Honour found that Ms Olsen was both physically and psychologically frail and thereby vulnerable from July 2016 onwards.

He also found that Ms Olsen was almost entirely dependent upon Ms Mentink for most or many of her needs and that her approach to estate planning was somewhat erratic. His Honour considered that Ms Olsen’s frequent and unexplained changes of mind indicated a level of confusion and vulnerability about the process of getting her estate in order. 

The primary judge concluded that Ms Olsen was clearly very unwell during the latter half of 2016 and that Karen, as her primary carer, was clearly aware of that fact.

His Honour referred to the fact that Ms Mentink attended nearly all of her mother’s medical appointments, in particular, on 6 October 2016, when she was told that her condition was terminal.

He also considered the fact that Ms Mentink and Ms Olsen were in active discussions about Ms Mentink being made co-executor of Katharine’s estate. His Honour characterised the contemporaneous material as showing persistence on the part of Ms Mentink in contacting a local solicitor to arrange a meeting so as to change the effect of the will in that respect. His Honour considered that those actions demonstrated a degree of obsession over getting in or sharing control of her mother’s estate and ensuring that she received what she thought was her just entitlement.

His Honour considered that it was curious that, after having given instructions for affairs to be put in a particular order, Ms Olsen had a sudden change of mind to “cash in” the $2,200,000 without any indication to her solicitors or anyone else about why she had such a change of mind.

The primary judge was persuaded that Ms Mentink initiated her mother’s decision to make changes to her will and was involved in her decision to make the gift as opposed to a bequest of the sum of $2,200,000. His Honour rejected Ms Mentink’s denials that she had influenced her mother into giving her the $2,200,000 or influenced her to change her mind.

His Honour found that, even if Ms Mentink did not specifically initiate the gift, her passive acceptance of such a large gift was, in all of the circumstances, unconscionable. His Honour found that, if she did not initiate the gift, she witnessed at close range her mother’s indecisiveness and impulsivity, in circumstances where she was receiving a substantial benefit and Katharine had no independent or objective advice.

In her notice of appeal filed this year, Ms Mentink raised a number of grounds of appeal which challenged the primary judge’s conclusion relating to unconscionable conduct and undue influence.

She contended that the sum of $2,200,000 in the term deposit came from her grandmother’s estate and that she believed that Ms Olsen had the capacity, on 11 October 2016, to make the gift.

Ms Mentink focused on the events between 10 October 2016 and 15 October 2016 to support her contention that the facts established that her mother had capacity to make a will and therefore was not subject to any special disadvantage, such that the gift was considered by Ms Olsen as a viable alternative to a legacy by will.

In their judgment for the appeal, Justice Anthony Meagher and Justice Anthony Payne noted that a significant difficulty for Ms Mentink was that her contention depends on her evidence being accepted.

“However, the primary judge rejected Ms Mentink’s evidence in all respects that may be relevant to the assertion of a gift between mother and a passively recipient daughter. The findings of the primary judge established overwhelmingly that Ms Mentink was an active promoter of the gift and inveigled herself into her mother’s affairs and life, so much so that a finding of undue influence was open on the facts,” Justice Meagher and Justice Payne stated.

Ms Mentink asserted that, since she believed that Ms Olsen intended to give her the balance in the term deposit either by gift inter vivos or by will, the primary judge should have found that her state of mind fell within the category of heedlessness or indifference to the best interests of the other party, and not within the category of unconscionability. Therefore, she contended, her conduct fell short of the victimisation or exploitation that must be established for unconscionability.

She said that the passive receipt of the gift was not unconscionable because it was seen by her as part of a wider estate planning scheme on her mother’s part to give to her two properties and the balance standing to the credit of the term deposit.

She also contended that the fact that her mother consistently expressed the intention to make the gift, together with her own belief that she would receive that sum from her grandmother’s estate, was not consistent with her exploiting, victimising and taking advantage of Katharine by passively accepting the gift.

“[Ms Metink’s] contentions ignore the fact that John and Katharine had a long and loving marriage and that the manifest testamentary intention of [Ms Olsen] was to leave everything to Mr Olsen, with the exception only of some specific legacies and the inheritance that she had received from her grandmother,” the judgment stated.

“It would represent a significant change for [Ms Olsen] to decide suddenly to deprive John of the benefit of the balance of the [term deposit], which was constituted by their joint funds.”

Ms Mentink also sought to suggest in cross-examination that some of her mother’s symptoms had improved after her surgery.

“Once confronted with the assertion in her affidavit that [her mother’s] behaviour changed after an episode on 12 June 2016 after which she became unsettled and her mood was affected and that the surgery did not improve the symptoms suffered by her mother as was hoped, she was evasive but finally accepted that the statement in her affidavit was the truth,” the Justices stated.

“The findings by the primary judge as to the medical evidence supported his conclusion of special disadvantage and there was material to support his Honour’s finding that [Ms Mentink] had influenced [her mother] into making the gift.”

The evidence before the primary judge, they stated, overwhelmingly supported a finding of a woman in a state of severe ill health, confusion and anxiety endeavouring to put her affairs in order before dying, all the while being watched over by Ms Mentink.

“The unchallenged evidence was that Mr Olsen and his wife had a close and loving relationship and that Ms Olsen was concerned to ensure that John, who was quite elderly and becoming infirmed, would be properly provided for,” the judgment stated.

“It is highly unlikely that, in those circumstances, [Ms Olsen] would surreptitiously reduce the residue of her estate to which [Mr Olsen] would become entitled by the very substantial sum of $2,200,000. It is unlikely in the extreme that Ms Olsen would have chosen to deprive John of the support that she had recorded in her diary before her illness that she believed [he] needed.”