Somerville v Haboldt
[2011] VCC 331
•18 April 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST – GENERAL DIVISION
Case No. CI-09-05178
| SHARYN DIANNE SOMERVILLE | Plaintiff |
| v | |
| DIANNE CLAIRE HABOLDT | Defendant |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 22-24, 28 & 29 March 2011 |
| DATE OF JUDGMENT: | 18 April 2011 |
| CASE MAY BE CITED AS: | Somerville v Haboldt |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 331 |
REASONS FOR JUDGMENT
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| Catchwords: | Contract – Undue influence – Deed transferring interest of daughter in her deceased father’s estate to her mother – Daughter did not obtain independent legal advice – Deed set aside. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C. McMillan SC | David Tonkin & Associates |
| with Mr P. Little and Ms A. Kouloubaritsis | ||
| For the Defendant | Mr R. Manly SC with | Griffin Law Firm |
| Mr B. Carew | ||
| HIS HONOUR: |
1 Robert Haboldt died unexpectedly on 6 April 2004. He was survived by his wife, Mrs Dianne Haboldt, and his two daughters, Sharyn Somerville (now Seipolt) and Michelle Wyman. Mr Haboldt, by a Will dated 7 April 1988, left his estate to his daughters equally. The Will noted, “I am not leaving anything in this my Will to my wife, Dianne
any separate or independent advice of what she was doing”. Mrs Seipolt also alleged
that she, “executed the deed under a mistake and it was unconscionable for [her
mother] to accept [her] execution of the deed”. Mrs Seipolt claimed that the deed
should be set aside.4 to assist her to purchase a property and to erect a house on the property. Mrs
Haboldt claimed that she advanced to her daughter sums totalling $230,928.93,
together with a further sum of about $85,000 towards the purchase of her daughter’s
property. It was agreed that Mrs Seipolt had repaid sums totalling $111,209.22. Mrs
Haboldt conceded that $100,000 of the sums advanced to her daughter was a gift.
By her counterclaim, Mrs Haboldt claimed that Mrs Seipolt should make restitution of
the balance of the monies advanced to her daughter which were not a gift and which
had not been repaid. Mrs Haboldt also claimed that a transfer in October 2010 by
Mrs Seipolt of her interest in the house property to her husband, Mr Seipolt, should
Claire Haboldt, having regard to the assets that she now owns and the assets that
she is likely to acquire in the future”.
2 In December 2004, Mrs Haboldt and her two daughters executed a deed. The deed recited that Mrs Haboldt, “would be entitled to make a claim against the Estate pursuant to the provisions of the Administration & Probate Act” and noted that the deed was made, “in order to avoid the cost and expense of litigation”. By the deed, the two daughters agreed, “that the entire Estate of the deceased be transferred to” Mrs Haboldt and that they “forego any claim to all of the assets of the Estate of the deceased”.
3 In the proceeding, Mrs Seipolt claimed that she “was induced to execute the
deed…by the undue influence of [her mother Mrs Haboldt] and at her direction and pursuant to the faith, trust and confidence she reposed in [her mother] and without
After the deed was executed, Mrs Haboldt advanced monies to Mrs Seipolt principally Mrs Seipolt with intent to defeat her creditors.
5 The proceeding therefore raises the following matters for determination:
a.
Is it appropriate that, as against Mrs Seipolt, the deed should be set aside as having been executed by the undue influence of Mrs Haboldt or because it would be unconscionable not to do so?
b. If the deed is set aside, to what relief is Mrs Seipolt entitled? c.
Should Mrs Haboldt recover any of the monies advanced by her to Mrs Seipolt?
d.
Should the transfer of the property in 2010 from Mrs Seipolt to her husband be set aside?
Mrs Seipolt’s marriage
6 Mrs Seipolt was born in 1964. She married Leigh Somerville in 1985 and they had three children. They separated in November 2003 but reconciled about eight weeks later. They separated finally on 1 August 2004. Mr Somerville commenced proceedings under the Family Law Act in October 2004.
7 and at times physically violent towards her and their son. She said that her
Mrs Seipolt said that Mr Somerville was verbally abusive towards her and the children psychologist during the period of our first separation”. Mrs Seipolt said that during this period she was prescribed the anti-depressant Zoloft and the medication Karvea, for hypertension.
8 Mr Somerville conducted a nursery and a separate garden maintenance business. In about 2004, Mrs Seipolt’s parents contributed approximately $30,000 towards the running costs of the nursery. Mrs Seipolt had previously held responsible employment including as an assistant manager for Telstra, and she had later helped in the nursery business. When Mrs Seipolt separated from Mr Somerville she was engaged in home duties, although she commenced a university course in 2005.
9 Mrs Seipolt said she had a very close relationship with her father. Before his death, she had also been close to her mother and in regular contact. Mrs Seipolt said she “told her mother everything”. Mrs Seipolt said that her parents were aware of the
marital disharmony. Mr Somerville had approached his parents-in-law for financial assistance with the nursery. When Mrs Seipolt found out her parents were helping financially, she told them about the abusive nature of the relationship. At her parents’
suggestion, she consulted the psychologist late in 2003. Her mother also suggested
she obtain medication from her doctor to help her cope. Mrs Seipolt said that after
her father died she was “devastated”. She spoke regularly with her mother. Mrs
Seipolt said she “did not have anyone else” and “totally relied on her”. Mrs Haboldt,
“suggested things” she might do and had spoken with Mr Somerville.10 Mrs Haboldt denied this. She said contact with her daughter was irregular and she had little knowledge of the circumstances of the marriage, including the relationship between her daughter and Mr Somerville and the finances of the nursery business.
Mr Haboldt’s Will
11 Mr and Mrs Haboldt were orchardists near Swan Hill. They processed fruit they grew on their own properties and processed fruit for other growers. The business structure was relatively complex. Mr and Mrs Haboldt owned the farming properties as tenants in common. They conducted a partnership, “R & DC Haboldt”. They were directors
and shareholders of two companies – a trading company Rob & Di Pty Ltd and a
company R & DC Haboldt Pty Ltd, which acted as trustee of the Haboldt Family Trust.
Mr and Mrs Haboldt were apparently the beneficiaries of the Trust.12 The financial reports for the year ended 30 June 2004 for these entities indicate that the business operations were apparently successful:
a. the family trust had a turnover from the sale of fruit of $1,063,983.03 and retained profits at the end of the financial year of $187,569.69; b. Rob & Di Pty Ltd had equity in the Haboldt Family Trust at the end of the financial year of $374,618.16 and retained profits of $350,928.65; c. the partnership had total partners’ funds at the end of the financial year of $573,999.62. 13 Probate of the deceased’s Will was granted to the two Executrices, Mrs Seipolt and her sister, on 4 July 2005. The net value of the Estate, according to the inventory of assets and liabilities, was $776,745.52. It is likely that the Estate was significantly
undervalued as it did not include a number of assets, such as the proceeds of an
insurance policy with AMP, shares, the proceeds of the sale of a truck owned by the
deceased and the deceased’s share in the partnership. The deceased’s share in the
company, Rob & Di Pty Ltd, was included at a nominal value of $1.14 The deceased’s Will had been prepared by a Swan Hill firm of solicitors, Garden & Green. Some time after her husband’s death, Mrs Haboldt made enquiries from Garden & Green about her husband’s will. She was informed that she would need to pursue enquiries through the Executrices. It was approximately two months after the deceased’s death before Mrs Haboldt and Mrs Seipolt became aware of the terms of the Will. Notwithstanding this fact, Mrs Haboldt took steps in relation to the deceased’s Estate as follows:
a.
in about July 2004, Mrs Haboldt sold a utility which was the property of the deceased and a caravan which she said the deceased had given to her;
b.
in August 2004, Garden & Green forwarded to Mrs Haboldt $32,457, being the proceeds of the AMP policy;
c.
in May 2005, Mrs Haboldt sold a number of properties which she owned jointly with the deceased.
Execution of the deed
15 hand, and evidence of her mother and sister, as to what occurred following
Mr Haboldt’s death. Mrs Seipolt said that after her mother had obtained a copy of the
will, “she rang back upset and crying” and said that Garden & Green had told her that,
as the deceased’s wife “she was entitled to the money”, but if Mrs Seipolt wanted it
There is considerable discrepancy between the evidence of Mrs Seipolt, on the one & Green. Mrs Seipolt said she told her mother that she wanted her inheritance. Mrs Haboldt told her that it was “best she didn’t get it” and that if Mrs Seipolt did not give the estate to her mother then Mr Somerville would get her share. Mrs Haboldt said that when her daughter’s divorce was settled the money could then come back to her.
16
became aware of the will, she discussed the terms of the will with her mother.
Mrs Wyman told her mother that the will was “so wrong”. Mrs Wyman also discussed
the will with her sister. She said that Mrs Seipolt also agreed that the will was
“wrong” and it “should be mum’s money”. Mrs Wyman said that the conversation with
her sister “mostly centred around why her father had set up his will that way”.
Michelle Wyman, Mrs Seipolt’s sister, said that after their father’s death and after she conversations with her sister over the phone and in person. Mrs Wyman said she could not remember what she said or how the matter should be dealt with. Mrs Seipolt had said, “This needs to be fixed up. It needs to be mum’s money and we don’t want it”. Mrs Wyman said that her sister agreed to arrange things with the lawyers. 17 Mrs Haboldt said in evidence that it was Mrs Seipolt who told her that her husband had left everything by his will to the two daughters. Mrs Haboldt said she did not see a copy of the will and “nothing happened until she attended a meeting with the lawyers”. Her daughters had just said that they needed to get the will fixed. Mrs Haboldt said that Mrs Seipolt told her that she “wasn’t happy” about the will. She said, “Dad wrote his will out thinking he would be old and you would also be and we would look after you”. Mrs Seipolt said that the will “must be rectified”.
18 The meeting with the solicitors Garden & Green took place on 9 July 2004. Garden & Ian Elliott was the solicitor who saw Mrs Haboldt and her two daughters on 9 July 2004. There is a dispute as to who arranged the meeting. Mrs Haboldt said that she did not know who made the appointment. She had been away for some weeks beforehand and it was Mrs Seipolt who told her that she “had an appointment”. Mrs Wyman said she did not know for certain who arranged the meeting. She “assumed” Mrs Seipolt did it. Mrs Seipolt said that her mother arranged the appointment and told her about it. Mr Elliott did not give evidence at the trial. His diary, for the date 9 July 2004, contains the entry “Dianne Haboldt” followed by her telephone number.
19 At the meeting at the solicitors’ offices, Mrs Seipolt said that she raised with Mr Elliott her mother’s suggestion that they transfer the estate to Mrs Haboldt but with her share coming back to her when her divorce was finalised. She said to Mr Elliott that she was happy for the estate to be transferred to her mother but wanted a clause included that her share would come back to her. Mr Elliott told her that this could not be done; either she must keep her share, or if she signed it over to her mother, Mrs Seipolt must “trust her”. Mr Elliott told her that her mother had a right to the estate and “she could apply and get the money”. Mrs Seipolt said that during the discussion in the solicitor’s office she was crying. She said she felt at the meeting as “if it was me against them” and felt “pressured”. The solicitor had told her that she could not have what she and her mother had agreed put in writing and that she would have “to trust her mother”. Mrs Seipolt told the solicitor that she would give her share of the estate to her mother. She said that Mr Elliott mentioned nothing at the meeting about getting legal advice or going to another solicitor.
20 “cumbersome” and more “tedious” than she had expected. She said that she and her
sister were “advised to get outside advice” although she “cannot recall what was
said”. Mrs Wyman said at the meeting that she “didn’t need advice” as it was “so
straightforward”. She said that she did not recall her sister saying anything and her
mother was “quiet through the whole thing”. Mrs Wyman said that the issue of
“independent advice came up a couple of times”. Mrs Wyman said that they “did not
need other advice as it was very clear what was to be done”. Mrs Wyman said that
her recollection was that both she and her sister said at the meeting that they “wanted
to reverse the will”. Mrs Wyman said that during the meeting there was mention that
Mrs Wyman said that from what she could recall of the meeting it was more was not aware of the arrangement [that her sister said was discussed at the meeting] that, if Mrs Seipolt gave up her entitlement, that her mother would pay her inheritance after the divorce settlement.
21 Mrs Haboldt said that at the meeting, Mrs Seipolt “mostly did the talking”. Mr Elliott had said that “they had to have independent advice or nothing was to happen”. Mrs Haboldt said that she asked Mrs Wyman whether she had a solicitor. Her daughter replied that she had a friend. Mrs Haboldt said she did not need to ask Mrs Seipolt because, “Sharyn had told me previously that she was seeing one”. Mrs Haboldt said
that her daughter said that getting independent advice was not necessary. Mrs not happy and matters became tense. She said she asked her daughters, “Are you absolutely sure?” Mrs Haboldt said it was “foreign” to her and was “embarrassing”. Her daughters told Mr Elliott that “they wanted the will fixed” and that they “had come a long way to have the will fixed up and they weren’t going home till it was”. They had said they wanted the money “to go back to their mother” as it “didn’t belong to them”.
22 Both Mrs Haboldt and Mrs Wyman said that they thought Mr Elliott went out of the meeting at some stage to talk to someone and that a document was drafted and/or signed at the meeting. Mrs Haboldt believed at the end of the meeting that “the girls
had signed their share to me”.
23 After the meeting, a number of things happened:
a. Garden & Green drafted a deed and sent it to Mrs Haboldt for perusal. The final version was eventually executed by all parties prior to Christmas 2004. b. Mrs Seipolt separated from her husband finally in August 2004 and Mrs Haboldt later made arrangements for the advance of monies to her daughters and particularly to Mrs Seipolt. c. Garden & Green took steps in relation to the administration of the estate and various assets were realised by Mrs Haboldt. d. In early 2005, Mrs Seipolt’s solicitor Mr Middlemiss, commenced a correspondence with Garden & Green. On 7 March 2005, Mr Middlemiss alleged in a letter to Garden & Green that Mrs Seipolt should not be bound by the deed. 24 From 13 July 2004, Garden & Green commenced a correspondence and dealings with Mrs Haboldt directly in relation to the Estate. Over the next few months, the solicitors communicated with Mrs Haboldt about the valuation of properties and other assets, the realisation of the AMP insurance policy and providing the solicitors with the deceased’s will.
25 On 6 October 2004, a draft of the Deed of Family Arrangement was sent to Mrs Haboldt “for her perusal”. Mrs Haboldt said in evidence that when she received the letter “it was something she would not handle, and did not do anything about”. A follow up letter was sent by the solicitors on 29 October 2004. On 16 November, Mrs Judy McKerrow, the probate clerk at Garden & Green recorded in a file note, “Dianne
Haboldt telephoned. She said that she rang about six weeks ago to tell Ian to go
ahead with the agreement”.
26 A filenote of Mrs McKerrow on 14 November 2004 recorded that Mrs Seipolt had asked, “Couldn’t we transfer everything to her mother” without the accountants having to bother with providing information about assets.
27 On 17 November 2004, four copies of the deed were forwarded by Garden & Green to Mrs Haboldt and she was requested to sign and return the documents so that the solicitors “may arrange to have the same signed by your daughters”. After a follow up
letter on 17 December 2004, Mrs Haboldt visited Mrs Seipolt’s home near Bendigo
and the document was executed by both of them in the presence of Mrs Pam Leech,
a friend of Mrs Seipolt’s. Soon afterwards the deed was apparently sent to Mrs
Wyman in Adelaide for execution.28 Mrs Seipolt’s credit card. Later in mid-2005, she suggested a possible purchaser for
Mrs Seipolt’s home. When Mrs Seipolt sold the property, Mrs Haboldt helped her buy
a block of land by lending her about $85,000 and in the second half of 2005
In November 2004, Mrs Haboldt arranged for the payment of $6,334.08 to clear were made in relation to the construction and furnishing of her new home. Mrs Seipolt and her husband settled the property arrangements in relation to their divorce in May 2005. At some stage that year, Mrs Seipolt said that she and her mother agreed that they would settle matters between them after the house project was finished. In early January 2006, Mrs Haboldt came to visit Mrs Seipolt. Mrs Seipolt had hoped that they would finalise matters at that meeting. Mrs Seipolt said that her mother avoided all attempts to discuss the issue. Matters were not resolved and, Mrs Seipolt said, other disputes arose as a result of Mrs Haboldt maintaining friendly relations with her former husband. Mrs Haboldt said that this only occurred so that she could see her youngest granddaughter.
29 During 2005, Mr Middlemiss commenced a correspondence with Garden & Green. There is no evidence that Mr Middlemiss had any knowledge in 2004 that Mrs Seipolt had reached an agreement with her mother or knew of the existence or the terms of the deed executed in December 2004. Mr Middlemiss knew that Mrs Seipolt’s father had died and that she had an interest in her late father’s estate. That fact is attested to in a document drafted by Mr Middlemiss in the Federal Court proceeding in November 2004. On 17 February 2005, Mrs Seipolt provided Mr Middlemiss with a copy of her father’s will. Mrs Seipolt said that she told Mr Middlemiss about the deed “early in 2005”.
30 There followed correspondence between Mr Middlemiss and Garden & Green of which the following are extracts:
a. On 7 March 2005, Mr Middlemiss’ letter to Garden & Green included the following: “There were apparently family discussions whereby it was agreed that Dianne Haboldt should have the use of the estate funds provided that they ultimately came to my client and her sister.
I am instructed that my client was advised by your firm that the only way to effect this arrangement was for my client (and her sister) to transfer their entitlement to Mrs Haboldt and that Mrs Haboldt would ultimately change her will in favour of my client and her sister.
I have advised my client that I am concerned about these arrangements in that they appear to leave my client without any entitlement to share in her late father’s estate. This has ramifications for her with respect to that
matter and also in her family law dispute. With respect to the family law
dispute it is an asset which she has effectively abandoned and her
estranged husband could ask that the asset value be brought into account
as a notional asset in any property settlement. That could have
disastrous financial consequences for my client.
Will you please advise:
1. who your firm acted for in the abovementioned transactions; and,
2. whether the agreement has been put in place or whether it can be
rescinded.
It is my client’s position that she wishes to reverse the purported agreement and protect her financial position.”
b. On 8 March 2005, the response by Garden & Green read in part as follows: “When we prepared the deed which was signed by the parties, the family had agreed on what was to happen. Our position was that we prepared a deed to reflect the terms agreed to by the family.
The family advised us that it had been agreed that the assets of the estate should belong to Mrs Haboldt.
On the basis of the length of the marriage, the work of Mrs Haboldt and her financial position, we believe that the deed is soundly based and would stand up to scrutiny in the Family Court.”
c.
On 18 March 2005, Mr Middlemiss’ letter to Garden & Green included the following:
“My client does not agree to the previously signed document between the
parties proceeding.
My client believes that she was not appropriately advised by your firm who are clearly in a conflict of interest with respect to the parties in this matter.
Will you please advise by return facsimile transmission whether Mrs Haboldt is willing to agree to rescind the agreement signed by the parties or my client will have to make application to the Supreme Court for the appropriate injunctive relief. If such application is necessary she will join your firm in the proceedings because of the conflict of interest and failure to provide her with advice.”
d. On 22 March 2005, Garden & Green responded in part as follows: “We refer to your letter of 18 March 2005. We advise that we
acknowledge that in view of your client’s position, we would now
have a conflict of interest in relation to the matter.
By way of clarification we were not asked to advise your client in respect of the agreement, and at no stage did we attempt to advise.
Mrs Haboldt attended at our office with her daughters. They informed us that they have reached agreement between themselves, that the daughters would forego their rights in relation to the will in order that Mrs Haboldt could become the sole beneficiary of the estate. We advised that if that was their wish we would draw an agreement. The document was prepared and sent to Mrs Haboldt and was subsequently returned signed by the three parties.
In view of the change of mind by your client, it is clear that we will now stand aside from any further action in relation to the estate.
Would you advise whether your client has any objection to us continuing to act on behalf of Mrs Haboldt.”
31 The writ in the proceeding was not issued by Mrs Seipolt against her mother until 28 October 2009.
Issues of credit
32 There were significant discrepancies in the evidence given by Mrs Seipolt on the one hand and by Mrs Haboldt and Mrs Wyman on the other. This evidence dealt with critical matters, including the events leading up to the execution of the deed. In the circumstances, it is appropriate that I comment upon the evidence of these witnesses. Generally, I preferred the evidence of Mrs Seipolt to that of her mother and sister. The reasons for this preference were as follows:
a.
Mrs Seipolt’s evidence was given in a measured way. Mrs Haboldt’s evidence seemed to lack objectivity.
b.
Little if any of the detail of Mrs Wyman’s or Mrs Haboldt’s evidence was put to Mrs Seipolt in cross-examination. This suggested that defendant’s counsel were hearing the evidence as it was given by those witnesses for the first time.
c.
Both Mrs Wyman’s and Mrs Haboldt’s evidence about the meeting on 9 July 2004 concentrated on the issue of the insistence by Mr Elliott that the two daughters must obtain independent advice. Their detailed evidence on this matter contrasted with the lack of specifics in their evidence about other matters discussed at the meeting.
d.
Mrs Haboldt insisted that she knew nothing of Mrs Seipolt’s marital problems until August 2004. However, at the meeting on 9 July 2004 Mrs Haboldt said that she was aware that Mrs Seipolt had a lawyer. Mrs Seipolt’s account of
her dealings with her mother during this period and the trusting and reliant
relationship she had with her, was more believable. It was consistent with the
facts established from other evidence as to what occurred during 2003 and
2004 and the relationship between mother and daughter in 2005 and 2006,
after the deed was executed. It was also consistent with the evidence of
observations made by Mrs Leech of meetings between Mrs Seipolt and her
mother.
35 submission that her evidence was a “set piece” and “read as if it were scripted”.
e. before Mrs Haboldt and her husband visited Mrs Seipolt or her children. This
Mrs Haboldt gave evidence of arrangements that needed to be put in place places. This evidence seemed to be volunteered by Mrs Haboldt in an attempt to discredit her daughter. None of these matters had been put to Mrs Seipolt in cross-examination. The evidence seemed to be inconsistent with the circumstances in which the deed was signed in December 2004 at Mrs Seipolt’s house.
33 In final submissions by defendant’s counsel, Mr Manly SC referred to a number of matters in Mrs Seipolt’s evidence which he said were “misstatements, exaggerations or lies”. He also referred to what he described as the “implausibility of the plaintiff’s account”. My view of the evidence is different.
34 Affidavits of Mrs Seipolt sworn in the Family Court proceeding were tendered by the defendant. These affidavits set out in detail the difficulties Mrs Seipolt was experiencing in her marriage, including the nature of her relationship with her husband and their financial affairs. If these matters are given due credit it is probable that to some extent, Mrs Seipolt’s judgment and her recollection of events from this period would be affected. On the few occasions when previous statements inconsistent with her evidence were pointed out to her, Mrs Seipolt readily conceded these matters. I did not regard Mrs Seipolt’s evidence as “implausible”.
In relation to the evidence of Mrs Seipolt’s daughter, Allira, I do not accept Mr Manly’s cross-examination. The evidence relating to the nature of her parents’ relationship was not in issue. The evidence about Mrs Seipolt’s relationship and communications with Mrs Haboldt was much more contentious and Ms Somerville’s evidence confirmed Mrs Seipolt’s evidence. Ms Somerville gave evidence that her mother and grandmother talked regularly, that they discussed the contents of her grandfather’s will in her presence and that Mrs Haboldt was not happy that money had been left to Mrs Seipolt. There was no cross-examination about these matters.
The absence of evidence from Mr Elliott
36 defendant’s solicitor, Mr James Griffin, gave evidence that on 3 March 2011 he
telephoned Mr Elliott, who now runs a newsagency in St Arnaud. Mr Elliott told
Mr Griffin that he had no recollection of the names of the parties to the present
litigation and had no recollection of any matters relating to this dispute. He said that if
there were notes made then, what was in the notes would be accurate. Mr Griffin did
not make a file note of this conversation. He did not send any documents to Mr Elliott
or have any further conversation with him. Mr Elliott was not subpoenaed to give
evidence at the trial by either party. If Mr Elliott had had a recollection of the meeting
on 9 July 2004 he would have been a very important witness. Whilst both the plaintiff
The Garden & Green solicitor, Mr Ian Elliott, did not give evidence at the trial. The client after a conflict arose. In correspondence with Mr Middlemiss in 2005, Mr Elliott was very supportive of Mrs Haboldt’s position in the dispute. It would be expected from these circumstances that Mrs Haboldt’s side would have called him to give evidence.
37 Because of the importance of Mr Elliott’s evidence, the response by Mr Elliott to failure by the defendant to call Mr Elliott as a witness, unless, for example, it were believed that to do so may encourage Mr Elliott to be a hostile witness. Mr Elliott is, however, a retired solicitor and no such explanation, or anything similar was suggested by Mr Griffin or defendant’s counsel. I should in the circumstances infer that nothing Mr Elliott might have said would have assisted the defendant’s case.
38 I would in any event have reached that conclusion in relation to the critical issue of whether Mr Elliott suggested at the meeting on 9 July 2004 that the daughters seek independent legal advice. In Mr Elliott’s notes of the meeting on 9 July 2004 and in the correspondence with Mr Middlemiss in March 2005, there is no reference to Mr Elliott suggesting that Mrs Seipolt or Mrs Wyman should obtain their own advice.
39 Our position was respect of the agreement and at no stage did we attempt to advise her.
that we prepared a deed to reflect the terms agreed to by the family.” In a letterIn the letter to Mr Middlemiss dated 8 March 2005, Mr Elliott said, “” He said that Mrs Haboldt and her daughters told him, “that they have reached agreement between
themselves that the daughters would forego their rights in relation to the will in order that Mrs Haboldt could become the sole beneficiary of the estate. We advised that if
that was their wish, we would draw an agreement”. This later letter was written after Mr Middlemiss had asked Garden & Green as to whether Mrs Haboldt was “willing to agree to rescind the agreement signed by the parties” failing which he threatened to issue proceedings to which Garden & Green would be joined as a party.
40 the critical issues at a time when it is likely he would have had a clear recollection of
In the circumstances, it is clear that Mr Elliott’s attention was sufficiently directed to unequivocal. In addition, in his letter of 8 March 2005 he expressed the view that, “The deed is soundly based” because of “the length of the marriage, the work of Mrs Haboldt and her financial position”.
41 I have indicated that I prefer the evidence of Mrs Seipolt to the evidence of with Mr Elliott. For these reasons I am not satisfied that Mr Elliott suggested to Mrs Seipolt that she obtain independent legal advice or explained the appropriateness of her doing so.
Undue influence
42 In my view, the present case is one where the relationship of mother and daughter raises a presumption that Mrs Haboldt had relevant influence over Mrs Seipolt. I am not satisfied that Mrs Seipolt should be treated as being “emancipated” from her mother’s influence at the time she discussed the arrangement in June or July 2004 with her mother and during the subsequent events, particularly the meeting at the solicitor’s office in July 2004 and the execution of the deed in December 2004.
43 The question of “emancipation” is one to be determined on the evidence in each validity in the circumstances which now generally prevail. In Lancashire Loans Ltd v. Black [1934] 1 KB 380 at 422, Greer LJ said, “The influence arising out of the relationship of mother and daughter is, in my judgment, one in which it is most likely that the influence of the mother in persuading the daughter to take a certain line of action will have a greater effect, and will continue to operate for a longer period than in the case of influence arising from any other relationship”.
44 The rationale for that statement might include factors such as the situation a daughter may be in as regards to her marital relationship, her own responsibilities as a parent, her financial dependence on both her husband and parents, her emotional state and factors affecting it at the relevant times and the reliance the daughter has for advice and guidance on “life matters” from her mother. Most of these factors are relevant in considering the relationship between Mrs Haboldt and her daughter.
45 The following findings are appropriate on the evidence:
a.
In the second half of 2004, Mrs Seipolt was suffering as a result of the unexpected death of her father with whom she had had a close relationship. Mrs Seipolt had also been affected by the abusive nature of her marriage which had required psychological intervention and prescription medication for depression and hypertension. Mrs Seipolt and her husband did not finally separate until about 1 August 2004. Notwithstanding the absence of expert medical evidence as to the nature and extent of Mrs Seipolt’s depression, it is clear that her emotional or psychological state made her vulnerable.
b.
Mrs Seipolt’s financial position was at the time uncertain. Her parents had helped out financially with the nursery business. Mrs Seipolt had been prevented by her husband from fully participating in the business and her husband ran the business in a way she disapproved of. Mrs Seipolt was herself not in employment at the relevant time.
c.
Mrs Seipolt had a close and trusting relationship with her mother. She regularly discussed matters with her relating to her marriage and relied upon her mother for guidance and support. I am satisfied that at the relevant time, Mrs Haboldt was aware of both of her daughter’s vulnerability and the power that she could exercise over her.
d.
Mrs Haboldt was very upset by the terms of her late husband’s will and it is likely that, together with her other daughter, she actively pursued discussions with Mrs Seipolt about the need to reverse the effects of the will.
e.
Mrs Haboldt suggested to her daughter that she would lose her share of the estate to Mr Sommerville, if Mrs Seipolt did not transfer her share. Mrs Seipolt believed what her mother said, although later she was told by Mr Elliott that no formal agreement to this effect could be made. Nevertheless, Mrs Seipolt considered that the transfer was not to be permanent and Mrs Haboldt would return her share of the estate when the divorce settled or, as was later discussed, when construction of the new home was completed.
f.
It is probable that Mrs Haboldt arranged the appointment with the solicitors on 9 July 2004. They were the solicitors who had drawn both her husband’s and her own wills. They were situated close to her home. Mr Elliott’s diary note
provides some confirmation. The other alternatives that the daughters, or
particularly Mrs Seipolt, initiated the meeting are less likely.
g.
Mrs Seipolt raised at the meeting with Mr Elliott her understanding of the agreement she had reached with her mother – that when her divorce was finalised, her share of the estate would be returned to her. Mrs Wyman’s recollection was that there was “mention that the money would eventually be
47 about her entitlement to share in her late father’s estate, it is unlikely that she told him
about the deed. The correspondence in early 2005 makes it clear, in my view, that
until shortly before he wrote the letter to Garden & Green on 7 March 2005,
Sharyn’s and mine in the end”. Whilst this statement would be equally consistent with the inheritance returning to the daughters by means of a provision in their mother’s will, the concession that there was a discussion of this sort lends support to the version of events given by Mrs Seipolt.
h. I accept Mrs Seipolt’s evidence that Mr Elliott told her that it was not possible to include a provision in the deed that money would later be repaid to her and that Mrs Seipolt must either keep her share of the estate or “sign it over to your mother, and trust her”.
i. For the reasons previously discussed, I do not consider that Mr Elliott suggested that Mrs Seipolt should seek independent legal advice or raise the advisability of her doing so.
j. Mrs Seipolt did receive some legal advice from Mr Elliott, and it is possible Mrs Seipolt could not include a clause in the deed to have the money returned from the mother to her, and that she would be left having to simply ‘trust’ her mother. However, it is likely in my view, that independent legal advice (as Mr Middlemiss’ letter dated 7 March 2005 indicates) would have considered the impact on any marriage settlement (for example, the need to account, and the other implications of the transaction).
46 In the circumstances, I cannot be satisfied that Mrs Seipolt entered into the deed with a “free and independent exercise of her will” or a full and proper understanding of the transaction.
Although Mrs Seipolt told her solicitor, Mr Middlemiss, before 8 November 2004, the draft deed, or the agreement that Mrs Seipolt had reached with her mother, it is likely that he would have advised Mrs Seipolt against the arrangement, for the reasons he advanced in his letter.
48 In the circumstances, I consider that the deed, as it affects Mrs Seipolt, should be set aside. The transaction involved the “improper use of the ascendancy acquired by
one person over another for the benefit of himself or someone else, so that the acts
of the person influenced are
acts” (Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 at 720 per Hodges J).not in the fullest sense of the word his free voluntary document” but whether she executed it “as the result of the free exercise of [her] independent will” (Bridgewater v Leahy [1998] 194 CLR 457 at 477 per Gaudron, Gummow and Kirby JJ).
49 share of her father’s estate and she had been told that the arrangement she had
reached with her mother, for the later return of her share, could not be reflected in the
The agreement was not in her interests in the sense that she gave to her mother her months before Mrs Seipolt actually executed the deed, she effectively had no real opportunity to seek independent legal advice about the arrangement. Mr Elliott had not suggested this course and had been definite in his advice as to the impossibility of the formal agreement providing for the return of her share of her father’s estate.
50 conclusion that “the obtaining of independent advice would not really have made any
difference in the result” and that as a consequence “the deed ought to stand”
This is not a case where it would be appropriate on the evidence to reach the CJ said in Johnson v. Butress (1936) CLR 113 at 119-120, “It may not be necessary
in all cases to show that the donor received competent independent advice … ; the
law as to this matter is a still a subject of discussion … . But evidence that such
advice has been given is one means, and the most obvious means, of helping to
establish that the gift was the result of the free exercise of independent will; and the
absence of such advice, even if not sufficient in itself to invalidate the transaction,
would plainly be a most important factor in determining whether the gift was in factthe result of a free and genuine exercise of the will of the donor”.
Unconscionable conduct
51 An alternative claim was made on the basis that the transaction involved unconscionable conduct relying upon the decision of the High Court in Commercial Bank of Australia v Amadio (1983) 151 CLR 447. A more recent statement of the relevant principles was made by Austin J in Turner v Wendever [2003] NSWSC 1147 at paragraph 105 where he said:
“(a) the weaker party must, at the time of entering into the transaction, suffer from
a special disadvantage vis-à-vis the stronger party;(b) the special disadvantage must seriously affect the weaker party’s capacity to judge or protect his or her own interests; (c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person); (d) that party must take advantage of the opportunity presented by the disadvantage; and (e) the taking of advantage must have been unconscientious”. 52 In the present case, it was alleged that Mrs Seipolt occupied a situation of “special disadvantage” so that she could not “make a judgment as to what is in her own interests” and that Mrs Haboldt, with “actual knowledge” of her daughter’s situation, took “unfair advantage of her superior bargaining power or position” (see Amadio at 467 per Mason J).
53 In Amadio, Mason J at page 461 suggested that undue influence resembles unconscionable conduct in the sense that both involve “conduct on the part of a party
facts I have previously found are capable of also leading to the conclusion that Mrs matters:
a.
Mrs Seipolt occupied a situation of special disadvantage in relation to her mother;
b.
Mrs Seipolt’s situation, including the absence of independent advice, affected her capacity to make a judgment as to what was in her best interests;
c. Mrs Haboldt had actual knowledge of her daughter’s situation; d.
Mrs Haboldt took unfair advantage of her superior bargaining power or position;
e.
Mrs Haboldt refused to honour the oral agreement to repay to her daughter the share Mrs Seipolt had transferred to her.
who stands to receive a benefit under a transaction which in the eye of equity cannot
be enforced because to do so would be inconsistent with equity and goodconscience”. However, Mason J said there was a difference between the two
concepts. In a case of undue influence, “the will of the innocent party is not
independent and voluntary because it is overborne”. Whereas, in a case of
unconscionable conduct, “the will of the innocent party even if independent andvoluntary is the result of the disadvantageous position in which he is placed and of
the other party unconscientiously taking advantage of that position”.
54 In relation to the facts of the appeal before the High Court, Mason J said at page 464 that: “The situation of special disadvantage in which the respondents were placed
was the outcome of their reliance on and their confidence in their son who in order to
serve his own interests urged them to provide the mortgage guarantee which the
bank required as a condition of increasing the overdraft limit of his company…from$80,000 to $270,000 and misled them as to the financial position of his company”.
55 Mason J at pp 462 in Armadio stated, in relation to the phrase “special disadvantage”, “I qualify the word ‘disadvantage’ by the adjective ‘special’ in order to disavow any
suggestion that the principle applies whenever there is some difference in the
bargaining power of the parties and in order to emphasise that the disability condition
or circumstance is one which seriously affects the ability of the innocent party to
make a judgment as to his own best interests, when the other party knows or ought to
know of the existence of that condition or circumstance and of its effect on theinnocent party”.
56 The plaintiff relies upon similar considerations in relation to the claim she makes that Mrs Haboldt engaged in unconscionable conduct as she did in claiming that the deed was executed by her as a result of Mrs Haboldt’s undue influence. In my view, the
a. Mrs Haboldt “would be entitled to make a claim against the Estate pursuant to the provisions of the Administration & Probate Act” (recital (f)); b. “In order to avoid the costs and expenses of litigation the parties have agreed on the fund distribution of the deceased’s Estate” (recital (g)). 58 she did so by assisting her daughters by advancing money by way of gift or loan. By
reason of the conclusions I have reached in relation to the deed, I do not consider
Estoppel
57 The defendant relies upon recitals in the deed as founding an estoppel. The recitals are as follows:
The defendant submits that she was entitled to rely upon those representations and of the setting aside of the deed as against Mrs Seipolt, some financial adjustment will need to be made to take account of the sums advanced to Mrs Seipolt or as a result of other actions taken in the realisation of the Estate at a time when the parties acted on the basis that the whole Estate would pass to Mrs Haboldt.
Mrs Haboldt’s counterclaim in respect of the advances made
59 Mrs Haboldt made advances to Mrs Seipolt apparently totalling the sum of $230,928.93 and the further sum of about $85,000 to assist with the purchase of a property. Mrs Haboldt conceded at trial that repayments had been made totalling $111,209.22. Whilst there is some uncertainty about the amount advanced in respect of the purchase of the property, Mrs Seipolt agreed that a payment of around the sum of $85,000 had been received from her mother.
60 Two of the payments from Mrs Haboldt were cheques drawn on the account of R & DC Haboldt Pty Ltd (the Trustee of the Haboldt Family Trust). These payments totalled $28,334.08. There was some suggestion in the evidence that these payments should be treated as advances by Mrs Haboldt personally because ordinarily the accounts for the Trust would have reflected those payments in the balance of Mrs Haboldt’s loan account.
61 It is not necessary at this stage for me to finally decide the issue of the amount of any advances by Mrs Haboldt or repayments by Mrs Seipolt. These matters will need to be taken into account when determining the consequence of the setting aside of the deed.
Transfer of Mrs Seipolt’s property to her husband
62 In October 2010, Mrs Seipolt transferred her interest in her home to her second husband, Mr Seipolt, in consideration of “natural love and affection between husband and wife”. They had married in July 2010. They were seeking to refinance the loan secured by a mortgage over the property. They wished to refinance because Mrs Seipolt was paying a high rate of interest (10.35%), she had at least one other loan which she wished to consolidate with her housing loan and there were further improvements they wished to carry out to the property.
63 Mrs Seipolt’s application to refinance the property was refused because of her credit history. They were advised that if her name remained on the Title she would not be able to obtain finance. After the property was transferred into Mr Seipolt’s name, a loan was obtained for $260,000 from the ANZ Bank. None of these facts were
contested by the defendant.
64 It was submitted that Mrs Haboldt was a potential creditor of Mrs Seipolt in relation to monies allegedly owed by Mrs Seipolt and also, if Mrs Haboldt were to succeed in the proceeding, she would be a creditor in respect of any order on the counterclaim or for her legal costs of the action.
65 No counterclaim was made in the proceeding until 8 February 2011. There is no evidence that the transfer was effected in October 2010 for any reason apart from the need to refinance the borrowings on the property. There is no evidence to support the conclusion that Mrs Seipolt executed the transfer dishonestly with the intention of adversely affecting her creditors generally or Mrs Haboldt specifically. Accordingly, the counterclaim made by the defendant on this basis must fail.
Appropriate relief
66 It was submitted by Mr Manly that if the deed were to be set aside it would need to be also set aside in relation to Mrs Wyman. I do not accept that submission. The proceeding only relates to the deed as between Mrs Seipolt and Mrs Haboldt. Mrs Wyman gave evidence that she had no issue with the deed as it affected her. In the circumstances, the appropriate order would be to enter judgment for the plaintiff against the defendant for a declaration that the deed dated 24 February 2004 between Sharyn Dianne Somerville, Diane Claire Haboldt and Michelle Wyman, as between Mrs Seipolt and Mrs Haboldt is set aside.
67 It was submitted on behalf of the plaintiff that “It is now difficult or impossible for the
Estate to be reconstituted and in addition an account would be costly and time
consuming”. Accordingly, the plaintiff’s “preferred relief” is to “seek equitable
damages because the majority of the Estate assets in the inventory were distributed
or transferred in 2004 and 2005”.
68 conducted by His Honour Judge Shelton. At the time of making that referral, I raised
During the course of the trial, I referred the parties for a settlement conference to be having the deed set aside. I said at that time that in those circumstances Mrs Haboldt would need to consider whether she would make application to extend the time for bringing an application for further provision from the deceased’s Estate pursuant to the Administration & Probate Act. I said that such an application would need to be made in the Supreme Court. That was not correct and any application under the Act could also be made in this Court.
69 In final submissions, Ms McMillan SC referred to s.99 of the Act which provides that any application for extension “shall be made before the final distribution of the Estate
and no distribution of any part of the Estate made prior to the application shall be
disturbed by reason of the application or of any order made thereon”.
70 The evidence received during the trial in relation to the extent of the assets that should have been included in the Estate and the distribution of the Estate was limited. In the present circumstances I consider it appropriate that the following further steps be taken:
a. to deliver my decision in relation to the issues referred to in this Judgment; b.
to hear any submissions on the appropriateness of entering judgment for the declaration I have foreshadowed and to make an appropriate order;
c.
to consider the most efficient procedure for determining the financial consequences which should flow from that order. If further relief is to be claimed (for example by Mrs Haboldt pursuant to the Administration & Probate Act), it would be appropriate to make orders permitting that to be done within the present proceeding;
d.
to make orders to ensure that the issues relevant to determining the final accounting between the parties are appropriately defined;
e.
to encourage the parties to reactivate alternative dispute resolution processes in an attempt to resolve these matters without the expense of further hearings.
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Certificate
I certify that these 26 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 18 April 2011.
Dated: 18 April 2011
Caroline Dawes
Associate to His Honour Judge Anderson
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