Challenges posed by family agreements

6.7        The majority of older people either live with their partner or alone. Nevertheless, statistics prepared by the Australian Bureau of Statistics show that, in 2011, 8.2% of people aged 65 years and over were living with their children or other relatives (usually a sibling). Only 1.7% were living privately with non-relatives. Of those aged 85 years and over, 12.2% were living with their children or other relatives and 0.9% were living privately with one or more persons who were not a relative. Women across the three age groups of 65–74, 75–84 and 85+, were much more likely than men to live with children or other relatives. Of women aged over 85, 14.8% were living with their children or other relative.^[1] The proportion of those older persons living with their children or other relative with a formal or informal family agreement is not known. However, stakeholders argued that the use of family agreements was increasing and the failure of these agreements was also increasing.^[2]

6.8        Family agreements can take many forms, but for this chapter, the kind considered involves a transfer of an older person’s home or other assets to a trusted family member in exchange for a promise of long-term care and support. The proceeds may be used to reduce indebtedness, extend a house, or build a ‘granny flat’.^[3] Alternatively, the trusted family member may use the proceeds from the sale of the older person’s home to purchase a new property for everyone to live in together. The Law Council of Australia described the nature of assets for care arrangements that have come to the attention of legal practitioners:

these arrangements usually arise in the context of an older person being unable to remain living in the family home. It is agreed, usually verbally, that the family home be sold, and the proceeds transferred to usually an adult child, who in turn uses the funds to pay off their mortgage, extend or renovate their home or build a granny flat on their property. The transfer is not a gift, but rather an exchange of assets for care for life.^[4]

6.9        Seniors Rights Victoria also provided an example of a typical family agreement:

A grandmother took responsibility for the care of a grandson during his childhood after the death of his parents, and continued to provide a home for him as an adult. The grandmother owned her own home, but considered the possibility of downsizing after living on her own for a period. As her grandson and his family wanted to upgrade to a new and larger home with a swimming pool for the children, he suggested that his grandmother could sell her home and then live with the family ‘for the rest of her life’. These arrangements were made, but no definite understanding about the ownership of the property was reached. The new home was purchased in the names of the grandson and his wife.^[5]

6.10     Family agreements are popular in Australia for many reasons including, as Brian Herd suggests:

•        our general aversion to the ‘institutional’ care of aged care facilities, such as nursing homes and hostels;

•        the lack of such facilities (where they become essential) or, at least, of any more sympathetic and empathetic alternatives;

•        people are living longer and, as a result, living longer with disabilities;

•        our fixation in later life to preserve assets (eg, the icon of the family home) for succeeding generations;

•        our consequent reluctance to dissipate assets (especially the family home) to pay any premium for assisted care, such as an accommodation bond in a hostel; and

•        our predilection for ‘impoverishing’ ourselves in order to obtain and maintain social security entitlements and to reduce the tax impact of ageing.^[6]

6.11     Herd also noted that overlaying ‘these mores is our understandable preference to be cared for by family rather than some unconnected, albeit well-intentioned, professional care provider whenever this becomes necessary’.^[7]

6.12     The making of family agreements is, in many cases, highly beneficial for the older person and not inherently a form of elder abuse. Seniors Rights Victoria has suggested that making an association between family agreements and elder abuse may discourage older people from getting advice to formalise their agreement, on the basis that only those older people with abusive children need advice.^[8]

When things go wrong

6.13     A key issue with family agreements, as the Law Council of Australia noted,^[9] is that they are often made orally. They are also often made without legal advice and without any consideration of what might happen if things go wrong.^[10] Stakeholders identified significant problems with family agreements, typically where the family relationship has broken down and the older person has been evicted from the property without recompense.^[11] The Older Persons Rights Service in Western Australia, for example, estimated that 70% of financial abuse matters it deals with involve the breakdown of family agreements.^[12] The Federation of Ethnic Communities’ Councils (FECCA) suggested further that older persons from culturally and linguistically diverse communities may be more likely to suffer from the breakdown of these agreements as intergenerational care is common in some communities.^[13]

6.14     When things go wrong, a failure to clearly document the agreement may mean that the arrangement is unenforceable and the older person may find themselves homeless and having lost the proceeds of their home, which they invested under the family agreement.

6.15     A key problem with oral agreements identified in submissions was the failure of the parties to think through in detail their expectations under the agreement and what would happen if things go wrong.^[14] Key issues that are often overlooked are:

• the nature and level of care anticipated;

• what should happen if the older person’s care needs increase;

• what should happen if the carer enters into a new relationship, or if their current relationship ends;

• what should happen if the carer predeceases the older person; and

• what should happen if the caregiver needs to relocate.^[15]

6.16     Accordingly, getting legal advice and documenting the family agreement are important. The ALRC commends the work of a broad range of stakeholders including elder abuse helplines, community legal centres and other welfare groups, who provide encouragement, advice and support to older people to get legal advice and properly document their family agreement. Seniors Rights Victoria, for example, has produced Assets for Care: A Guide for Lawyers to Assist Older Clients at Risk of Financial Abuse, in recognition of the role that lawyers can play in helping to prevent the financial abuse of older Australians. The guide includes a checklist of points to consider when drafting an agreement. Seniors Rights Victoria also includes a sample family agreement on its website that lawyers are permitted to use.^[16]

6.17     Notwithstanding this important work, because the arrangements are typically made within families, it is unlikely that all, or even a significant majority of older people, will get independent legal advice and assistance in putting in place an appropriate written agreement. As Herd has noted ‘[d]ocumenting, in a written agreement, a loving, caring or supportive personal relationship, for example, is probably anathema to many Australians’.^[17]

6.18     Hervey Bay Seniors Legal and Support Service said that there are also many individuals who are likely to be deterred by the perceived cost of legal advice and the preparation of documentation.^[18]

Access to justice

6.19     The main form of redress when a family agreement goes wrong is currently by way of civil litigation. As the Law Council of Australia stated, where parties are able to access the courts, they are effective in resolving complex cases.^[19] Doctrines and remedies, particularly in equity, have developed over many centuries to respond to the varied circumstances in which individuals may suffer loss.

6.20     Nevertheless, pursuing litigation in these cases can be prohibitively costly, unsatisfactorily lengthy, and stressful for the older person. Proof, presumptions and remedies pose significant issues in such cases. The access to justice issues were highlighted by the Australian Research Network on Law and Ageing (ARNLA):

Recovery of property via equitable action is rarely undertaken. The proceedings must commence in the Supreme Court (or sometimes District). They are expensive, time consuming and stressful, and it is unlikely an older party has either the financial or emotional resources to commence proceedings.^[20]

6.21     As the Victorian Law Reform Commission (VLRC) reported, action in the superior courts of the states and territories costs tens of thousands of dollars in legal fees and, even if successful, only a fraction of those costs are recoverable.^[21] A similar view was expressed by the Older Persons Rights Service in Western Australia, which noted that elder financial abuse involves largely civil actions in the Supreme Court.

The legal costs are notably quite high and anecdotal statements from lawyers who practise in this jurisdiction have advised us that this remedy is in reality only available to the very rich and/or to companies with access to considerable funds. We are in full agreement with this assessment and have witnessed many cases where older people have lost their family home or life savings with no chance for redress.^[22]

6.22     In many of the examples of family agreements gone wrong set out in submissions, the older person had lost their principal asset—their home—and typically had limited other assets.^[23] For example, Cairns Community Legal Centre noted that,

by their nature, family agreements under an ‘assets for care’ arrangement involve the older person making either significant contributions or transferring title in property to the other person. Accordingly, when the arrangement breaks down, the older person is not usually in a position to be able to finance proceedings in a higher court for the matter to be determined.^[24]

6.23     For those unable to afford a lawyer, disputes involving family agreements do not generally fall into the type of matters for which there is public funding.^[25] Specifically, Community Law Australia noted that older people ‘being financially abused by their carer or family, will often, find it extremely difficult to access free ongoing legal help if they can’t afford a lawyer’.^[26] Given these challenges, Caxton Legal Centre referred to the Supreme Court as ‘arguably the most inaccessible jurisdiction in the country’.^[27]

6.24     Another issue regarding action in the Supreme Court is that such actions are lengthy processes that may take many years to be resolved. Where an older person has lost their home and has limited funds, they need access to a remedy quickly. In addition, older people may be put off by the prospect of lengthy and protracted civil litigation.^[28]

6.25     Older people may also be fearful of the social and emotional costs of litigation, given the family context of the dispute. Litigation may exacerbate family breakdown, or lead to a loss of access to grandchildren, which may result in the older person being reluctant to take legal action.^[29]

6.26     The ALRC received a number of case studies that highlighted the access to justice issues faced by older people when family agreements go wrong. The following was provided by Legal Aid ACT:

Barry, an eighty five year old man transferred his unencumbered home in the ACT to one of his adult children, Angela. Angela had promised to build a granny flat for Barry and take care of him until his death. There was no written agreement, however Barry had been living in his granny flat on Angela’s property for approximately 5 years.

Angela remarried and advised Barry that the arrangement could not continue and demanded he leave his home. Barry was devastated by Angela’s actions, however was able to go live with another child, Stephanie and did not want to seek any legal recourse against Angela as he was ‘too old and it was too hard’ and he felt so ashamed about what had happened to him.^[30]

Challenges in seeking an equitable remedy

6.27     Land law in Australia is defined by the Torrens system of title, the core principle of which is indefeasibility of title—once registered, title is conclusive. The objective of this system is to save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of the current proprietor’s title, and satisfy themselves of its validity.^[31] The creation or transfer of an interest in land must be in writing or evidenced in writing, and signed by the person creating or conveying the interest.^[32]

6.28     While the Torrens system of title may protect purchasers from claims by non-registered individuals who assert an interest in the property,^[33] the Torrens system maintains the right of plaintiffs to bring personal claims founded in law or equity against the registered proprietor.^[34] Where there is an oral arrangement, the older person would have to rely on equitable doctrines to establish a proprietary interest and right to recompense. The older person also has the capacity to alert potential purchasers that they have an equitable interest or claim over the property by lodging what is known as a caveat, over the property.^[35]

6.29     The key problem underpinning many family agreements is that the older person is typically giving up the certainty of registered legal title in one property (usually their home) in exchange for rights in relation to a new property and/or expectations of care and support. Those rights and expectations are often not explicitly discussed and agreed precisely within the family. The older person’s rights with respect to the new property are typically not recorded on the title. As a result, the situation is one where the older person has forgone registered legal title in one property and may or may not have certain rights in contract or equity in the new property.

6.30     Where a family agreement breaks down, the equitable remedies available to an older party in an ‘assets for care’ dispute will depend on the nature and circumstances of the original arrangement, what evidence is available to confirm the nature of the arrangements, as well as the circumstances and facts of the breakdown of the agreement. Whether the older party is on the title for the relevant property and whether the family agreement was in any way reduced to writing will be important issues, not just in terms of the evidence of the arrangement, but the precise remedies that may be available. To be enforceable, a contract for the creation or transfer of an interest in land must be in writing or evidenced in writing, and signed by the person creating or conveying the interest.^[36] Where there is an oral arrangement, the older person may be able to rely on equitable doctrines to establish a proprietary interest and right to recompense. However, this requires navigating

a confusing amalgam of legal issues including, but not limited to, contract law, land law, equity, trusts and family law … [and] contrary legal presumptions about the nature of family arrangements and joint endeavours. It is dominated by the vagaries of equitable doctrine.^[37]

6.31     The available equitable actions include:

• resulting trust;

• undue influence;

• unconscionable conduct;

• remedial constructive trusts; and

• equitable estoppel.

Resulting trusts

6.32     If an older person contributes money towards the purchase of a property and this is not reflected on the title, they may be able to claim that the property is held on ‘resulting trust’ for them in proportion to their contribution. However, where the arrangement is between a parent and their child, the law starts with the presumption that the contribution was a gift: the ‘presumption of advancement’.^[38] This presumption may be rebutted, but it places the evidentiary burden on the older person to prove that their payment was not a gift but a contribution to the property. Justice Connect observed that the ‘application of the presumption of advancement has the effect of imposing an evidentiary burden on older people in circumstances where the arrangements are often informal and undocumented’.^[39]

6.33     Accordingly, there may be difficulties for older persons in asserting that their contribution to the purchase of a property was not a gift but was to be held by their child on trust.^[40] A resulting trust may not apply where the older person simply transfers their home into the name of their child.^[41] In such cases, transactions involving voluntary transfers of land can only be set aside on the basis of other equitable doctrines.

Undue influence

6.34     Where an older person has been pressured into a family agreement, another relevant equitable doctrine is the doctrine of undue influence.^[42] However, this is likely to be of use only where the older person has not benefited from the family agreement and there was either a relationship of dependency when the agreement was made or actual undue pressure was applied on the older person to agree to the arrangement.

6.35     In the case studies provided by stakeholders, the family agreement was often, at least initially, mutually beneficial and there was no pressure applied on the older person to enter into it. Instead, problems arose subsequently when relationships broke down or unforseen events changed the dynamics, as in the example provided by Legal Aid ACT above.^[43] In these cases, the equitable doctrine of undue influence would not apply.

Unconscionable conduct

6.36     Where an older person is denied promised care and support, or is excluded from their home, another ground for seeking to uphold the family agreement in equity is on the basis that the older person was in a position of ‘special disadvantage’ and that the other person knew of this. In such a case, it may be ‘unconscionable’ for the other person to deny the agreement.^[44]

6.37     In many family agreement situations, there is no dependency or special disadvantage at the time the agreement was made.^[45] In addition, at the time the agreement breaks down, it may be that neither party contemplated what would happen if things went wrong, rather than any intent by the other family member to deceive or take advantage of the older person. Accordingly, unconscionable conduct may be relevant only in a small number of cases.

Remedial constructive trusts

6.38     There are two kinds of constructive trusts that may be imposed by courts in disputes concerning property agreements that were created in the absence of writing. The first is the common intention constructive trust and the second is the constructive trust imposed for unconscionability or unconscientiousness.

6.39     The common intention constructive trust has three elements:

(a)         the parties must have formed a common intention as to how property will be shared;

(b)         the party claiming a beneficial interest must show that they have acted to their detriment; and

(c)         it would be a fraud on the claimant for the legal owner to assert that the claimant had no beneficial interest in the property.^[46]

6.40     The unconscionability, or unconscientiousness-based, constructive trust has four elements:

(a)         the existence of a joint endeavour between the plaintiff and the defendant for the object or purpose of providing permanent financial security and benefits;

(b)         valuable contributions by the plaintiff to the joint endeavour;

(c)         an increment in wealth having accrued to the defendant as a result of the joint endeavour; and

(d)         the unconscionability of the retention of that wealth by the defendant to the exclusion of the plaintiff.^[47]

6.41     Webb and Somes have noted that a constructive trust imposed on a failed joint endeavour is the most common equitable doctrine relied on in assets for care arrangements.^[48]

6.42     The primary disadvantage of remedial constructive trusts, from the perspective of the older person, is that, if successful, the available remedy is ordinarily the imposition of an equitable lien to the value of the contribution, rather than compensation for the loss of expectation of care and support.^[49] Where the older person is looking to purchase another property after the failure of the assets for care arrangement, the inability to access a proportion of the increased value of the property contributed to may be disadvantageous, particularly where the agreement has broken down after a number of years.

Equitable estoppel

6.43     A claim of estoppel can result in the enforcement of an expectation in equity.^[50] This may be the most suitable remedy in family agreement cases.

6.44     In order to succeed in an equitable claim, the older person must show that:

• the defendant made a representation, either by conduct or acquiescence, creating the expectation that the older person would gain an interest in property;

• the older person relied on this representation to their detriment; and

• the defendant knew that the older person was relying on the representation.^[51]

6.45     Many of the cases highlighted in submissions give rise to potential claims of estoppel.^[52] In many cases, there is a promise—whether explicit or based on acquiescence—that the older person will be able to live in the property for the duration of their life. The older person has made a financial contribution to the property in reliance on that representation, which, if the relationship breaks down and the older person is no longer able to live in the property, is to their detriment. By conduct, it should be possible to establish that the defendant knew of this reliance by the older person.

6.46     The available remedy in an equitable estoppel action is likely to be compensation to the full value of the promise forgone, particularly in family agreement arrangements where the breach of promise has significant consequences for the older person.^[53]

Summary

6.47     Accordingly, there are a range of potential legal actions available to an older person who has suffered financial loss on the breakdown of a family agreement and their success will depend on the extent to which the facts of the particular situation can meet the required tests in law and equity. The fact that the older person has suffered significant financial loss may not be sufficient of itself. An older person has to weigh up the strength of their case in the context of unwritten agreements and conduct that may be evidence of a range of intentions. This assessment must be made with an understanding of the considerable costs of equity litigation.