The $15M Will, the Burnt Diaries & 3 Red Flags for Every Adviser

The 2009 Victorian Supreme Court case Nicholson v Knaggs # is more than just a dramatic legal saga—it's a masterclass in what can go wrong in estate planning. It involved an $15 million estate, a frail 84-year-old, a will that massively benefited her neighbours, and a series of critical failures that advisers can learn from today.

The court ultimately overturned two wills, finding the testator, Betty Dyke, lacked capacity for the last one and was unduly influenced for the one prior. Here are three key red flags from the case that every adviser should have on their radar.

Red Flag 1: When Influence Becomes "Undue"

For years, proving that a will was the result of coercion or pressure—"undue influence"—was incredibly difficult. You almost needed a smoking gun.

Nicholson v Knaggs changed that. The court set a more modern, realistic standard. It found that a beneficiary, Denise Knaggs, had unduly influenced Betty Dyke to include her husband, Tim Knaggs, as a major beneficiary - despite Betty intensely disliking him.

There was no direct evidence of threats, but the circumstantial evidence was overwhelming: Betty's long-held animosity towards Tim, his lack of involvement in her care, and the irregular way his name was added to the will via a phone call from his wife to the solicitor. The court decided that, on the balance of probabilities, it was more likely than not that Betty's will had been overborne.

 The Adviser Takeaway: Undue influence isn't just about overt threats. It can be subtle pressure, manipulation, or taking advantage of a person's vulnerability. Be alert when a will includes a beneficiary the client has previously expressed strong negative feelings about, especially if another beneficiary is controlling the process.

 Red Flag 2: The Adviser as the Last Line of Defence

The conduct of the solicitors involved serves as a powerful cautionary tale for all professionals advising on estate matters.

One solicitor became suspicious of undue influence and even told Tim Knaggs to "back off and let her make up her own mind," yet the problematic gift was still included. A later solicitor, drafting the will that was found to be invalid, kept poor notes, failed to ask why Betty was making such drastic changes from her previous wills, and didn't get a medical opinion on her capacity despite her age and frailty.

 The Adviser Takeaway: When dealing with an elderly or vulnerable client, your duty of inquiry is heightened. This is your chance to protect your client and ensure their true wishes are recorded. This means you must:

• Insist on taking instructions from the client alone, without beneficiaries present.

• Keep meticulous, contemporaneous file notes of all discussions, especially their reasons for making significant changes.

• Proactively ask open-ended questions to test their understanding of their assets and who they are leaving them to.

• If you have any doubt about capacity, recommend a formal assessment and document that recommendation. 

Red Flag 3: Destroyed Evidence Speaks Volumes

One of the most memorable facts of the case was the beneficiary, Denise Knaggs, admitting she burned her diaries covering the exact period the wills were made.

The court applied a legal doctrine that essentially means "all things are presumed against a wrongdoer who has destroyed evidence" (omnia praesumuntur contra spoliatorem). It drew an adverse inference, concluding the diaries would not have supported her case. The destruction of records fatally undermined her credibility.

 The Adviser Takeaway: Your file notes are your best defence. They are a contemporaneous record of your client's wishes, their state of mind, and the process you followed. The deliberate destruction of records in the face of a potential dispute is a catastrophic error that can lead a court to assume the worst. Document everything, and preserve those records diligently.

Nicholson v Knaggs is a stark reminder that as trusted advisers, we are often the gatekeepers responsible for protecting our most vulnerable clients and ensuring their final wishes are their own.

 # Nicholson v Knaggs [2009] VSC 64