Is it unconscionable to encourage someone with dementia to sign a binding financial agreement?

UNCONSCIONABLE CONDUCT

Teh & Muir [2017] FamCA

In this case, a guardian for Mr Muir sought to have the Binding Financial Agreement set aside under s 90UM(1)(h) on the basis that Ms Teh had engaged in conduct which was unconscionable.

Conduct will be unconscionable if:

  • The weaker person is at a special disadvantage that affects the person’s ability to protect his or her own interests; and
  • The stronger party knows or ought to know of the special disadvantage; and
  • The stronger person takes advantage of the special disadvantage by allowing the agreement to proceed: The Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447 per Gibbs CJ at [459]).

A special disadvantage might include: poverty or need of any kind; sickness; age; illiteracy or lack of education; or lack of assistance or explanation where assistance or explanation was required: Blomley v Ryan (1956) 99 CLR 362.

In this case, Mr Muir was suffering from a significant disadvantage, namely dementia and Alzheimer’s disease. Ms Teh was aware of this and encouraged him to sign the Agreement for her own financial advantage.

The Agreement was set aside.

Lesson

It may be considered unconscionable to encourage a person suffering from impaired mental capacity to enter into a Binding Financial Agreement.

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