How Charities Can Defend Against Undue Influence Claims

Introduction

A claim of testamentary undue influence is a common basis for a will dispute in New South Wales, asserting that a person’s will is the result of coercion and does not reflect their genuine intentions. These disputes occur when a will-maker is subjected to such significant pressure that their free will is overborne, resulting in a document that reflects the influencer’s wishes rather than their own.

For charities that receive bequests, defending against these allegations is a crucial part of managing bequests and gifts in wills, as their boards have a legal duty to protect the organisation’s assets. This guide offers essential information to help charities understand the high standard of proof required for such claims and outlines effective strategies for defending a will, underscoring the importance of engaging a not-for-profit lawyer to handle these complex disputes.

Understanding Undue Influence in NSW Estate Law & Legitimate Fundraising

Defining Testamentary Undue Influence & The Role of Coercion

Under New South Wales law, testamentary undue influence occurs when a person is coerced into making a will that does not reflect their own wishes. The core of this concept is coercion, which involves pressure so significant that it overpowers the will-maker’s free will, resulting in a will they would not have created otherwise.

This coercion is not limited to physical violence or direct threats. It can also include intense emotional or psychological pressure. For instance, a person who is ill or frail may be more susceptible to persistent demands, ultimately changing their will just to find peace.

The critical test is whether the will-maker could say, “this is not my wish, but I must do it.” Because these situations often happen in private, it is important to consult a not-for-profit lawyer who can help:

• Identify the signs of undue influence
• Explain the complexities of the law

Distinguishing Unlawful Coercion from Legitimate Persuasion

The law draws a clear line between unlawful coercion and legitimate persuasion, as not all forms of influence are considered improper. Actions that fall within the boundaries of acceptable persuasion are permissible as long as the will-maker’s free will is not compromised.

Legitimate persuasion can include a range of actions, such as:Offering advice or using flattery

• Appealing to family bonds and affection
• Expressing gratitude for past kindness or services 

In contrast, influence becomes undue when it crosses into coercion and overpowers the donor’s own judgment. This can involve tactics like:

• Blackmail
• Spreading lies
• Exploiting a person’s dependency on a caregiver

The fundamental difference is whether the will-maker retains the freedom to accept or reject the suggestions made to them.

Your Board’s Fiduciary Duty to Defend the Bequest

Legal Obligations Under ACNC Governance Standard 5

Under the Australian Charities and Not-for-profits Commission’s (ACNC) Governance Standard 5, charities must ensure their board members comply with a set of legal duties related to charity governance and ACNC compliance. These obligations are designed to ensure board members act in the best interests of the charity and manage its affairs with integrity and common sense.

The core duties that apply to all Responsible People include the requirement to:

• Act with reasonable care and diligence in all matters.
• Act honestly and fairly, prioritising the charity’s best interests and its charitable purposes.
• Not misuse their position or any information gained through their role.
• Disclose any actual or potential conflicts of interest.
• Ensure the charity’s financial affairs are managed responsibly.
• Not permit the charity to continue operating if it is insolvent.

These duties may already exist for some charities under other laws, such as state incorporated associations legislation or the Corporations Act 2001 (Cth), making it vital to understand the specific ACNC and ASIC duties involved. However, Governance Standard 5 establishes a clear benchmark for all registered charities.

Ensuring Responsible Financial Management & Oversight

A primary duty for board members under ACNC Governance Standard 5 is the responsible management of the charity’s financial affairs, which requires strategic financial oversight. This obligation extends beyond simple oversight and requires every board member to possess sufficient financial literacy to read and understand the organisation’s financial statements and reports.

This responsibility cannot be entirely delegated to a treasurer or another member with financial expertise, as each Responsible Person must apply their own judgment.

Protecting a charity’s assets from misuse or loss is fundamental to responsible financial management, and this includes defending a valid bequest made in a will. Implementing strong financial controls is essential for meeting this duty. Key controls include:

Financial Control	Description
Budgets and Regular Reporting	The board should create an annual budget and regularly review financial reports to monitor the organisation’s financial health.
Multiple Signatories	Requiring more than one person to authorise payments adds a crucial layer of accountability for all financial transactions.
Clear Spending Delegations	A clear policy should define spending limits for staff, with larger amounts requiring board approval.
Secure Financial Information	Digital and physical financial assets must be protected by safeguarding passwords and restricting access to sensitive information.

Another critical obligation is to manage any conflicts of interest to ensure all decisions are made fairly and in the best interests of the charity.

When faced with complex legal matters, such as defending a testamentary undue influence claim, seeking expert guidance is a key part of acting with reasonable care. Consulting a not-for-profit lawyer helps the board fulfil its duties and protect the charity’s assets.

The High Bar for Claimants & Why Most Claims Fail

Why NSW Courts Require Proof of Actual Coercion & Will Not Presume Undue Influence

In New South Wales law, a person attempting to overturn a will on the grounds of testamentary undue influence faces a significant legal hurdle. The doctrines of undue influence in probate law are distinct from those in contract law, which can cause confusion.

Unlike contract law, where a special relationship such as doctor-patient or solicitor-client may create a presumption of undue influence, probate law offers no such assumption. The onus of proof rests entirely on the person alleging that a will was the product of coercion.

To succeed, a claimant must prove undue influence by demonstrating that the will-maker’s volition was genuinely overborne. This requires evidence of actual coercion, which can include:

• Persistent verbal or emotional pressure
• Exploiting a person’s vulnerability due to illness or frailty
• Threats or other forms of illegitimate pressure

Courts recognise that influence such as flattery or appeals to affection do not constitute undue influence unless they overpower the will-maker’s free will.

Because these coercive acts often occur in private, direct evidence is rare. This makes it exceptionally difficult to prove undue influence. The complexity of meeting this high burden of proof underscores why a charity should consult a not-for-profit lawyer when defending a bequest.

Examining the Ruling in Schwanke v Alexakis Regarding the Burden of Proof

The case of Schwanke v Alexakis [2024] NSWCA 118 provides a clear illustration of the high bar required to prove undue influence. In this matter, a general practitioner, Dr. Peter Alexakis, was named the primary beneficiary of his patient’s multi-million dollar estate.

The challengers argued that the doctor-patient relationship created a presumption of undue influence that should invalidate the gift. However, the New South Wales Court of Appeal rejected this argument, reaffirming the established principle that in probate, there is no presumption of testamentary undue influence.

The court confirmed that the burden of proof remains with the party challenging the will. It found no evidence that the testator’s will was overborne, noting that the patient was an intelligent businessman who retained testamentary capacity.

Despite the power imbalance inherent in the doctor-patient relationship, the court concluded that Dr. Alexakis’s actions reflected those of a “committed and diligent medical professional” rather than someone exploiting a vulnerable person. This ruling demonstrates that even where a relationship of influence exists, a claimant must still provide compelling evidence of actual coercion to successfully challenge a will.

Strategies for Your Charity’s Defence in the NSW Supreme Court

How to Prove the Bequest Was a Rational & Freely Given Gift

One of the most effective strategies in defending against a claim of testamentary undue influence is to establish that the will-maker had full testamentary capacity when the will was created. This involves demonstrating several key points:

• The will-maker understood the nature and effect of the document.
• They were aware of the extent of their estate.
• They could properly assess the claims of potential beneficiaries.

Presenting evidence that the bequest aligns with the will-maker’s long-standing wishes can also serve as a powerful defence. If the gift to your charity is consistent with their previously expressed intentions or values, it strengthens the argument that the will is a genuine reflection of their desires.

Furthermore, highlighting a positive and established relationship between the donor and your charity can show that the gift was a natural outcome of their support, rather than the result of coercion.

The Importance of Consulting a Not-for-profit Lawyer

Engaging a not-for-profit lawyer is a critical step for any charity facing a testamentary undue influence claim in New South Wales law. Under ACNC Governance Standard 5, board members have a duty to act with reasonable care, and seeking expert legal guidance on complex matters is a key part of fulfilling this obligation.

An experienced lawyer can detect signs of undue influence and formulate a case theory to defend the will’s validity. A specialist lawyer will guide your charity through the complexities of the legal process, including:

• Understanding the onus of proof.
• Identifying weaknesses in an opponent’s case.

They will ensure that all actions taken are in the best interests of the charity and help gather the necessary evidence to protect the organisation’s assets and honour the donor’s intentions.

Gathering Evidence & Witness Statements to Support Validity

Successfully defending a will requires a comprehensive approach to evidence collection, as the burden of proof rests on the person alleging undue influence. Since coercive acts often occur in private, direct evidence is rare, making circumstantial and documentary evidence essential.

Key types of evidence needed to support the validity of a will include:

Evidence Type	Description and Importance
Witness Statements	Testimony from individuals present during the will’s drafting or signing, as well as from family, friends, and health professionals, can provide crucial insights into the will-maker’s state of mind.
Medical Records	A medical assessment of the will-maker’s mental capacity at the time the will was made can counter claims of vulnerability due to cognitive decline or illness.
Solicitor’s File Notes	Detailed notes from the lawyer who prepared the will can document the instructions received and confirm that the will-maker was acting freely and understood their decisions.
Personal Documents	Previous wills, letters, emails, and text messages can reveal the will-maker’s prior intentions and demonstrate a consistent pattern of support for your charity.

Case Study on The Rare Exception When a Claim Succeeds

Lessons from Nicholson v Knaggs Where a Will Was Overturned

While claims of testamentary undue influence are difficult to prove under New South Wales law, the Victorian case of Nicholson v Knaggs [2009] VSC 64 offers a rare example of a successful challenge. The case involved the estate of Betty Dyke, an 84-year-old woman with dementia, whose assets were valued at nearly $16 million.

Her original will from 1985 left the majority of her estate to charities. However, two later wills made in 1999 and 2001 substantially changed these plans, redirecting the bulk of her estate to three groups of neighbours. The court found that two of these neighbours had exerted undue influence over Mrs. Dyke when she created the later wills. As a result, the court invalidated the specific clause subject to coercion while upholding the remainder of the will.

Factors That Led the Court to Find Undue Influence

The court’s decision in Nicholson v Knaggs was based on several key factors that combined to satisfy the high burden of proof:

• A primary consideration was the will-maker’s clear vulnerability. Mrs. Dyke was 84 years old and suffering from dementia, which made her more susceptible to pressure.
• Furthermore, the significant and unexpected alterations to her will, which diverted funds away from long-standing charitable beneficiaries to her neighbours, were highly suspicious.
• The court found sufficient evidence to establish that the neighbours had taken advantage of her condition and dependency.

This case illustrates that when a claimant can prove a combination of the will-maker’s vulnerability and actual coercion, a court may find that testamentary undue influence has occurred.

Conclusion

Defending a will against a testamentary undue influence claim under New South Wales law requires understanding the high burden of proof on the claimant and the board’s fiduciary duty to protect the charity’s assets. A successful defence hinges on identifying warning signs of coercion, gathering compelling evidence to support the will’s validity, and demonstrating the bequest was a rational and freely given gift.

To help your charity handle these complex claims with confidence, contact LawBridge’s expert not-for-profit lawyers today. Our specialised legal guidance assists boards in fulfilling their duties and protecting their mission by ensuring a donor’s true intentions are honoured.

Frequently Asked Questions