Beatson v Sutcliffe
[2014] NZHC 3047
•2 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404-001795 [2014] NZHC 3047
BETWEEN BEVERLEY ELEANOR BEATSON
Plaintiff
AND
GARY DAVID SUTCLIFFE and ANDREA COLLEEN SUTCLIFFE Defendants
Hearing: 1 December 2014 Appearances:
D G Stringer for the Plaintiff
SEK Reeves for the DefendantsJudgment:
2 December 2014
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
02.12.14 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
B E BEATSON v G D SUTCLIFFE and A C SUTCLIFFE [2014] NZHC 3047 [2 December 2014]
Overview of issues
[1] The case is about a mother who permitted her property to provide mortgage security for the borrowings of her daughter to an amount of about $450,000.
[2] The mother says she did not really understand what was going on, or was not properly advised, or was being manipulated by her daughter and her daughter’s husband.
[3] It appears the same factors affect the mother when she transfers her house to her daughter at a value of $675,000. At that time the daughter signed a deed of acknowledgment of debt to pay about $227,000.
[4] About a year later the daughter sold the house and paid her mother $165,000. The mother wants the full amount owing under the deed of acknowledgment of debt i.e. about $227,000.
[5] Also the mother wants her daughter to repay the borrowings that had been secured against her property less the sum of $165,000 received when the daughter on-sold the property.
[6] The mother says that her outcome was due to the fraud and deceit and undue influence of her daughter and the daughter’s husband.
[7] The daughter’s husband denies any legal responsibility for the property
transactions because he was bankrupt at the time.
[8] The daughter says initially that it had been intended she would repay when she could. Latterly it has been her position that the advances secured were a gift to her because there had been no requirement for her to repay those.
Background
[9] The plaintiff (Ms Beatson) applies for summary judgment upon her claim against Mr Sutcliffe and Mrs Sutcliffe (daughter of Ms Beatson).
[10] Their issue concerns a property at Mangere Bridge (the property). Ms Beatson and her husband had lived there since 1972 until he died in 2008. At that time the property was mortgaged to the ASB Bank to secure a credit facility.
[11] Ms Beatson continued to live there until 2012. At that time it was transferred to Mrs Sutcliffe.
[12] Before then, and since July 2008 a number of mortgages and a transfer were registered against the title of the property.
[13] Ms Beatson says all mortgages concerned borrowings by Mr and Mrs Sutcliffe. Each new mortgage it seems was used to pay out the prior mortgage and was used as security on increased borrowings.
[14] Ms Beatson says the borrowings were by Mr and Mrs Sutcliffe and that these have not been repaid except for a sum of $165,000 in September 2013, when Mrs Sutcliffe sold the property that had been transferred to her by Ms Beatson.
[15] In her statement of claim Ms Beatson has pleaded particulars of the borrowings.
[16] Ms Beatson says she was never told the purpose of the loans but did not want to upset the Sutcliffes and their two children whom she was fond of.
[17] Documents signed by her in that connection were witnessed by lawyers that, she said, Mr Sutcliffe had taken her to - except on the occasion of the first borrowing when the documents were witnessed by her own solicitor, Mr McDonald.
[18] On 2 October 2012 Ms Beatson signed a sale and purchase agreement for the sale of her property to Mrs Sutcliffe for $675,000. At that time an amount of
$445,806.52 was owing to the then mortgagee Southern Cross.
[19] On 19 October 2012 Mrs Sutcliffe executed a deed of acknowledgment of debt recording that Ms Beatson had lent Mrs Sutcliffe $227,647.65 in connection
with the sale and purchase of Ms Beatson’s property. That deed provided for repayment on demand and for penalty interest to be paid.
[20] Following the transfer the lawyer then acting provided a statement recording that the debt to Ms Beatson of $227,647.65 was the deposit for the purchase of the property. The balance was recorded as a mortgagee advance of $448,453.12 from the new mortgagee MG SJ Howard Limited.
[21] Ms Beatson says that Mr Sutcliffe was in attendance throughout whilst she completed the required documentation. Ms Beatson says she was never advised that if the mortgage registered against the property was not paid that the property could be sold to meet the mortgage debt. She said that she was not aware that she was refinancing the mortgages. No one told her that she was transferring ownership of the property to her daughter.
[22] Ms Beatson pleads that the property would have been worth about $800,000
– $900,000 at the time she sold it to Mrs Sutcliffe for $770,000.
[23] When Mr and Mrs Sutcliffe sold the property a year later in September 2013, Ms Beatson received $165,000.
[24] It is at the core of her case that with respect to the transaction in October
2012 she had no knowledge she was transferring the ownership of her property to her daughter, or that a mortgage was being secured for further borrowings. She said that the equity in the property was not gifted to her daughter or the defendants collectively or either of them individually nor were the loans that were secured by the mortgages.
[25] Ms Beatson also claims that Mr Sutcliffe withdrew significant sums from her ASB credit facility she having given him the pin number because her own eyesight “was not good”. The facility had been set up she says by her daughter. The facility was repaid in the sum of $77,597.71 at the time the first loan was secured by mortgage over Ms Beatson’s property. Her claim is that most of the debt was not incurred by her. She says the defendants have not repaid any of the sums they
withdrew on the account. Summary judgment is not being sought upon the ASB credit facility claim. However it has relevance because Mrs Sutcliffe claims she repaid that debt from the borrowings that were secured at that time over the property.
[26] Ms Beatson sues to recover $227,647.65 being the amount for which Mrs Sutcliffe signed an acknowledgement of debt on 19 October 2012. Interest at 5 per cent is also sought for payment on that sum from 26 June 2014 being the date of demand for repayment.
[27] Ms Beatson also sues for the sum of $448,453.12 being the amount she says the defendants borrowed from her between 2008 and 2012 when they utilised her equity in the property to obtain loans from third parties in respect of which mortgages were registered against the property. From this sum she deducts the amount of $165,000 paid to Ms Beatson after Mrs Sutcliffe sold the property.
[28] In a third cause of action it is alleged the defendants were fraudulent and deceitful. In a fourth cause of action it is pleaded that they exercised undue influence over her.
Notices of opposition
[29] Each defendant has filed their own separate notice of opposition and affidavit in opposition.
Mr Sutcliffe
[30] Mr Sutcliffe denies:
(a) He ever provided Ms Beatson with either an acknowledgement of debt or any acknowledgement that he is liable for the amount Ms Beatson claims.
(b) He acted dishonestly. [31] He says:
(a) That any obligation for repayment by Mrs Sutcliffe was limited to when her financial position allowed her to do so.
(b)That Mrs Sutcliffe always kept Ms Beatson informed as to the financial position of the defendants.
(c) Ms Beatson was never subject to undue influences and at all times acted independently of them.
[32] By his affidavit Mr Sutcliffe confirmed he was declared bankrupt in January
2008. At that time he and Mrs Sutcliffe owned a family home in St Heliers. When he was bankrupted Mrs Sutcliffe was given an opportunity by the Official Assignee to purchase Mr Sutcliffe’s half share in the property. He says Ms Beatson insisted she would help her daughter achieve that outcome. He said a loan was put in place over Ms Beatson’s property after Ms Beatson has taken advice from her own solicitor, Mr McDonald not to proceed.
[33] He denies asking for the loan. As a bankrupt he could not.
[34] He denies telling Ms Beatson what she should do in connection with loans which were refinanced. He believes Ms Beatson has always operated independently and was not inclined to take instruction from any other person.
[35] He says in relation to the subsequent refinancing arrangements the solicitors engaged were upon the recommendation of either the broker or the lender involved in the financing. He disputes being in the room on those occasions when Ms Beatson executed documents or received legal advice in connection with those documents.
[36] He disputes Ms Beatson’s claim that she did not know she was selling her house to Mrs Sutcliffe in 2012. He said he never agreed to nor signed any form of loan documents. He said he had no access to any funds from loans organised by Ms Beatson or Mrs Sutcliffe.
[37] Mrs Sutcliffe’s notice of opposition disputes the amount claimed, disputes there was any dishonesty, and says her mother was insistent in making loan monies available to her and was fully aware of all likely consequences.
[38] Mrs Sutcliffe says there has always been an intention on her part to repay the plaintiff’s loans and she always kept her mother informed of her financial situation.
[39] She said a payment was made to her mother in the sum of $165,000 when the property was transferred to her. Further she believes when the first loan transaction was arranged in 2008 that she repaid her mother’s ASB credit facility debt of
$77,597.71.
[40] Mrs Sutcliffe believes she has satisfied the debt due of $227,647.65, indeed she believes she is in credit she having overpaid the amount due.
[41] As did the affidavit of her husband, so too that of Mrs Sutcliffe deposes Ms Beatson was always fully aware of their financial situation; and was insistent about helping them when Mr Sutcliffe was bankrupted in order to retain their St Heliers home.
[42] Mrs Sutcliffe says there was never any documentation to confirm the loan between her and her mother, and on each occasion a subsequent loan was raised, she said Ms Beatson was insistent it should be done. She denies undue influence at any time and says her mother was willing and always acted of her own accord.
[43] Regarding the transfer of her mother’s house to her, Mrs Sutcliffe says there had been a threat of a mortgagee sale of her mother’s property. With the assistance of the mortgagee Mrs Sutcliffe was able to secure the services of an agent to sell the property and to avoid a mortgagee sale. In this outcome she says the property sold well above government valuation.
[44] Mrs Sutcliffe disputes any claims of dishonesty, fraud or deceit.
[45] Mrs Sutcliffe says her mother is “a controlling, manipulative, domineering person and has been like that to me for as long as I have lived… the plaintiff has always acted in an independent manner and does not take kindly to instructions from any other party”.
Reply affidavit
[46] Ms Beatson denies insisting that the defendants raise a loan over her property for the purpose of purchasing the St Heliers property. She said the St Heliers property was sold in 2011 but she has never been told what happened to the sale funds.
[47] Ms Beatson denies she ever held a mortgage in her name over the property. Although the first two loans were in her name they noted her daughter as a guarantor. She said Mr Sutcliffe was heavily involved throughout. She has always expected the loans to be repaid.
[48] Overall Ms Beatson notes that neither her daughter nor Mr Sutcliffe deny that the loans were made and neither denies they have not been repaid apart from her receiving $165,000 from the sale of the home she had transferred to her daughter.
[49] She is concerned that within a few months of her transferring her house to her daughter for $675,000 that her daughter was able to sell the property a few months later for $770,000.
[50] Whilst her daughter acknowledges the debt due pursuant to the deed of acknowledgment of debt, she is concerned that neither her daughter nor Mr Sutcliffe accepts any liability for the other sum of $448,453.12 being the amount of the loans that have been secured against her own property.
[51] She said she did not force the defendants to take the loans out that they did. She tried to help them out and expected them to repay what was owed.
[52] Ms Beatson confirms she believes she did not receive proper independent legal advice over the transactions.
[53] A plaintiff need satisfy the Court that a defendant has no defence to a cause of action in the statement of claim.
[54] The Court should refrain from determining issues of disputed fact unless claims on behalf of a defendant are baseless or improbable. A Court will refrain from attempting to resolve genuine conflicts of evidence or address the credibility of the parties’ statements in their affidavits. However the Court need not accept dubious defences or plainly contrived factual conflicts. The Court does not have to be convinced of the truth of the statements made by the defendant, so long as there are unequivocal statements which amount to an arguable defence.
Considerations
[55] The plaintiff claims her property was debt free before she permitted loans obtained in the name of her daughter to be registered as mortgages over her home. These loans were refinanced on two occasions, each time for a larger amount and each successor loan was secured by a mortgage over the property.
[56] The defendants say the loan was obtained to enable Mrs Sutcliffe to acquire a half share of their St Heliers property which had vested in the Official Assignee following Mr Sutcliffe’s bankruptcy. Ms Beatson disclaims knowledge of the original purpose of the loan except to say she knows it was used partially to repay an existing mortgage. Ms Beatson said and it is not disputed that she obtained no benefit from the loan that had been secured over her property.
[57] In October 2012 the property was transferred by Ms Beatson to her daughter at a price of $675,000. After deduction of the amount required to repay the mortgage debt a sum of $227,647.65 remained which Mrs Sutcliffe retained in consideration for which she completed a deed of acknowledgment of debt in that amount to her mother. The deed provided for repayment on demand and for interest payable annually in arrears.
[58] It was a term of the deed that Ms Beatson could tenant the house rent free. This notwithstanding Mrs Sutcliffe sold the house nearly a year later.
[59] Ms Beatson has received only $165,000 from that value she had in the property which she says was mortgage free before security for the defendants’ loans was required.
[60] The defendants say the deed of acknowledgment of debt amount has been repaid by the payment of $165,000 but also by payment of Ms Beatson’s pre-existing mortgage debt i.e. the ASB credit facility. Indeed the defendants say they are in credit in an amount of about $17,000.
[61] This calculation of matters does not account for the sums borrowed by the defendants and secured over Ms Beatson’s property before her property was transferred to her daughter. Ms Beatson says the total amount of those undocumented loans is $448,453.12.
[62] There seems no dispute but that these sums were advanced to assist the defendants to deal with financial pressures. Ms Beatson considered the loans were for both defendants. The first two loans in 2008 and 2010 were in Ms Beatson’s name, and then in 2012 in Mrs Sutcliffe’s name with Ms Beatson as guarantor.
[63] There is no dispute but that the defendants jointly have received the benefit and payment of those three loans registered over Ms Beatson’s home up to that time when Ms Beatson transferred the property to her daughter.
[64] Mrs Sutcliffe acknowledges the first loan was to enable the purchase of Mr Sutcliffe’s half interest in the St Heliers house which then vested with the official Assignee.
[65] The defendants’ position is that Mr Sutcliffe was not involved except to transport Ms Beatson to and from her solicitors as necessary.
[66] Ms Beatson says influence was involved. She said she did not receive independent legal advice.
[67] Ms Beatson says the defendants are jointly and severally liable for repayment of these loans. The Sutcliffes are still married and were together at the time the loans were made. The loans were in Mrs Sutcliffe’s name because Mr Sutcliffe was bankrupt at the time; that Mr Sutcliffe played a prominent role in organising and arranging the loans; and that if Mr Sutcliffe was acting as an agent for his wife then it is open to the Court to find him, as agent, jointly liable.
[68] Mr Stringer for Ms Beatson submits Mr Sutcliffe should be estopped from alleging he was not a party to the loans because of the extent to which he was involved in the creation of the financial opportunities that prevailed in the name of his wife but in fact was for the benefit of them both.
[69] The defendants’ position is that the three mortgage transactions were gifts by Ms Beatson to the defendants who claim Ms Beatson was adamant they were treated as gifts because the defendants had no means to repay her.
[70] Mr Reeves submits, in general terms, that the purpose of a loan is to provide funding in circumstances to provide a return to the lender by the charging of interest; that there must be an intention to lend or an agreement to borrow with interest rate terms included.
[71] Mr Reeves points to the solicitor’s letter of a Mr McDonald prior to the first advance that was secured over the property wherein he noted his concern about Ms Beatson loaning funds to her daughter against his advice and upon which letter Ms Beatson counter-demanded Mr McDonald’s advice with a notation which clearly records her decision that she was a willing lender. At the bottom of Mr McDonald’s letter Ms Beatson wrote:
Receipt of the above is acknowledged. I confirm your advice not to enter into the above loan agreement and have determined despite your advice to do so. I require you to act on my behalf on the transaction and I indemnify you to the fullest extent possible in respect of this transaction.
[72] Mr Reeves’ point is that without terms of repayment or the fixing of an interest rate the payment was not in fact a loan but a gift. Mr Reeves submits that although at the time the defendants owned their own home the money that was
secured for payment to the defendants was obtained by the plaintiff borrowing against her own property in order, Mr Reeves submits, to gift those funds to the defendants.
[73] Mrs Sutcliffe says she never wanted her mother to lend her or her family any monies but that her mother insisted and in that outcome the defendants marriage collapsed resulting in a three year separation; that Ms Beatson manipulated that result by her ability to control her daughter.
[74] Mr Sutcliffe strongly denies he was the recipient of any monies from Ms Beatson whether by way of a series of loans or by gifts. At all relevant times he was an undischarged bankrupt and unable to enter into any loan or borrow and receive monies and if he done so he would have prejudiced his chances of an early or timely discharge. Similarly Mr Reeves claims Mr Sutcliffe was unable to accept any gift from anyone, as indeed he says Ms Beatson was aware.
[75] That they were gifts, Mr Reeves submits, as can be seen from the evidence of the parties that until this year Ms Beatson was insistent that no repayment was expected therefore no loan was created.
[76] Why, the defendants ask, has it taken the plaintiff so long to demand any degree of payment of any kind?
Conclusions
[77] The prime evidence of the existence of repayable loans is available from the unchallenged evidence that the defendants together benefitted by a payment to them of a total sum of $448,453.12, security for which payments was provided over the plaintiff’s home.
[78] The defendants have received the benefit of those loans. They say that whilst those loans were initially advanced to Ms Beatson, on the occasion of the third transaction they were advanced by the lenders to Mrs Sutcliffe and when Ms Beatson provided a guarantee.
[79] The defendants contention is that whilst those payments were loans by the lenders they were nevertheless gifts by Ms Beatson to her daughter who received those sums on behalf of both defendants.
[80] As a general proposition it might appear improbable. However of concern to the Court is that Ms Beatson clearly rejected the advice of her solicitor not to make the advance in the first instance; then and indeed subsequently she provided the means for these advances to continue, even increase. The arrangements have never been recorded in writing. The evidence does not suggest interest was to be paid. No repayment date was ever mentioned. The defendants say a repayment date has now been contrived by Ms Beatson in the fallout of the relationship breakdown with her daughter.
[81] Significant issues of fact are in dispute, including whether or not any debt can at all be redeemed from Mr Sutcliffe.
[82] Claims that the payments were a gift may at first sight appear improbable. At this time the Court is of the view that the facts of the parties’ dispute cannot properly be assessed except by a trial hearing.
[83] The Sutcliffes have borrowed funds in the order of $450,000 because Mrs
Beatson’s property provided security for those loans.
[84] Mr Sutcliffe denies any responsibility for repayment. As a bankrupt he had no authority to borrow. The initial loan was to enable Mrs Sutcliffe to purchase the half share of a St Heliers property which vested in the Official Assignee following Mr Sutcliffe’s bankruptcy.
[85] Mrs Sutcliffe initially deposed it was her intention to repay the loans when she was able to.
[86] The evidence of Ms Beatson’s ability to understand the implications and possible consequences of her actions is very much at the forefront of the parties’ dispute. Ms Beatson in effect says she did not at all understand the process or
possible consequences for her by making her property available as security for her
daughter’s borrowings.
[87] The letter from Mr McDonald to her setting out those reasons why she should not agree to her house being used as security shows Ms Beatson’s setting out her reasons for forgoing that advice. She even absolved Mr McDonald of any consequences of her acting contrary to his advice.
[88] It is not clear that the loan arrangements contained provision for repayment or for interest to be paid – except that is in relation to the deed of acknowledgment of debt. Since that was signed the sum of $165,000 has been paid by Mrs Sutcliffe. As to the balance of the debt is the claim of the defendants that the ASB credit facility debt of $77,597.71 has been paid on behalf of Ms Beatson by Mrs Sutcliffe.
[89] The clear evidence is that the ASB credit facility debt was not cleared from funds borrowed on behalf of Mrs Sutcliffe. Rather Ms Beatson repaid that debt from funds she borrowed after which sums totalling $138,000 were then transferred to be held on the account of Mrs Sutcliffe. Accordingly after repayment of the sum of
$165,000 the balance of the deed of acknowledgment of debt was still due.
Result
[90] The debt claim comprises two parts. That pursued under the first cause of action seeks repayment of the debt recorded by the deed of acknowledgment of debt. The Court agrees credit ought to be given for the sum of $165,000 repaid when Mrs Sutcliffe sold the property her mother had transferred to her. However, no other credit is due. The other claim detailed by the second pleaded cause of action is, for reasons already discussed, considered unsuitable for determination upon the summary judgment application.
[91] Plainly the claims raised by the third and fourth pleaded causes of action are not appropriate for summary judgment consideration.
Judgment
[92] Upon the first pleaded cause of action judgment is entered against the second named defendant, Andrea Colleen Sutcliffe in the sum of $62,647.65 together with interest calculated in accordance with the deed of acknowledgment of debt.
[93] The applications for summary judgment upon the other three causes of action are dismissed.
[94] Costs are reserved for determination in the cause. Although the enforcement provisions of the deed of acknowledgment of debt provide for the fixing of indemnity costs, the Court is advised both defendants are in receipt of a grant of legal aid. Also the balance of the plaintiff ’s claim requires management to trial.
Other
[95] The Registry is to schedule a first case management conference in relation to pleaded causes of action 2 – 4, in or about March or April 2015.
Associate Judge Christiansen
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