De Gregorio v Surridge
[2019] NZHC 1802
•29 July 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2017-485-602870
[2019] NZHC 1802
UNDER the Administration Act 1969 IN THE MATTER
of the Estate of Wilbur Surridge
BETWEEN
NUNZIO DE GREGORIO
Plaintiff
AND
ANNE JOSEPHINE SURRIDGE
First Defendant
PAUL HOUSTON SURRIDGE
Second Defendant
CIV-2018-485-65 BETWEEN
MARION JOAN PEARSON
PlaintiffAND
DAVID VANCE AS TEMPORARY ADMINISTRATOR OF THE ESTATE OF WILBUR GEORGE SURRIDGE
Defendant
Hearing: 5-9 November and 12 November 2018 Appearances:
No appearance for Plaintiff (CIV-2017-485-602870)
C T Patterson for First Defendant (CIV-2017-485-602870) S J Iorns for Second Defendant (CIV-2017-485-602870) N Levy for Plaintiff (CIV-2018-485-65)
No appearance for Defendant (CIV-2018-485-65)
Judgment:
29 July 2019
Reissued:
30 July 2019
JUDGMENT OF CLARK J
DE GREGORIO v SURRIDGE [2019] NZHC 1802 [29 July 2019]
Table of Contents
Para No
Overview and issues [1]
Background in more detail[10]
Testamentary capacity: the law[21]
Testamentary capacity: summary of parties’ positions[27]
Anne’s position[27]
Paul’s position[29]
Ms Pearson’s position[30]
Testamentary capacity: evidence [31]
Paul’s evidence[32]
Judith’s evidence[38]
Mr Connor’s evidence[40]
Courtney Scrymgeour’s evidence[46]
William Bell’s evidence[48]
David Ingram’s evidence[51]
Ms Pearson’s evidence[52]
Medical evidence[54]
Anne’s evidence[56]
Murray Wright’s evidence[58]
Jane’s evidence[63]
Josephine’s evidence[69]
Dr Stuart Mossman[72]
Dr Brian Young[83]
Testamentary capacity: assessment [90]
Undue Influence: the law[115]
Undue influence: summary of parties’ positions[116]
Anne’s position[116]
Paul’s position[118]
Undue Influence: assessment [120]
Ms Pearson’s claim[141]
Settlement deed[142]
Positions of the parties[144]
Abuse of process[148]
Alternative claim in intended breach of contract[157]
The path forward[160]
Result[167]
Overview and issues
[1] The deceased Wilbur Surridge, known in life as Lofty and so called throughout the hearing, was a successful businessman, and an idiosyncratic and curmudgeonly individual. He established a number of companies that manufactured and supplied cleaning products. As at the date of the hearing the assets of the Surridge companies were estimated to be worth approximately $8.6 million.
[2] Lofty died on 15 December 2016 survived by five adult children and a number of grandchildren and great-grandchildren. In this judgment I refer to the members of the Surridge family by their first names. In his latest will, Lofty appointed Nunzio de Gregorio the executor and trustee of his will. After making a gift of
$10,000 to a charitable organisation, Lofty left the residue of his estate to four of his children Paul, Jane, Judith and Josephine (22.5 per cent each). For reasons explained in the will, Lofty made a bequest of significantly less value to his daughter Anne who was to receive the remaining 10 per cent of the residue.
[3] Three documents central to this proceeding were prepared and executed in circumstances of urgency on 21 January 2014. On that day, 89-year-old Lofty was ill in hospital, bleeding from the bowel, sleep deprived and distressed. He wanted to order his affairs. The following three documents were executed:
(a)Lofty’s latest will dated 21 January 2014 (the 2014 will).
(b)A deed of assignment by which, in consideration of the sum of $10, Lofty assigned to Ms Pearson, his daughter-in-law, his legal rights of management, control and direction over his private and corporate assets. In consideration of a further sum of $10, Lofty granted to Ms Pearson an option to purchase those same assets for $2,250,000. Ms Pearson is married to Paul Surridge.
(c)An enduring power of attorney (EPOA) appointing Lofty’s solicitor, Peter Connor, to be Lofty’s attorney in relation to his personal and property affairs. The EPOA authorised Mr Connor to act on Lofty’s behalf while he was mentally capable and to continue to act if Lofty
became mentally incapable. In limiting the extent of the attorney’s authority, Lofty expressly withheld his consent to a will being executed on his behalf if he lacked capacity.
[4] In June 2014, Mr Connor, acting under the EPOA, appointed Ms Pearson as a director of Philip Moore & Co Ltd and Philip Moore & Co (S.I.) Ltd. In September 2014, Mr Connor appointed Ms Pearson as a director of Philip Moore (Auckland) Ltd. Then, in March 2015, Mr Connor removed Anne as a director of Philip Moore & Co Ltd.
[5] A series of events was triggered by these actions. In 2015, Anne filed two court proceedings challenging Lofty’s capacity to grant an EPOA. One proceeding was filed in the Family Court seeking to invalidate the EPOA,1 while a second proceeding was filed in the High Court seeking to rectify PMA’s share register.2. In May 2016, all family members participated in a two-day mediation, which resulted in a comprehensive deed of settlement (settlement deed) by which Lofty’s children attempted to resolve the disputes that had arisen in relation to the power of attorney, the 2014 will and deed of assignment. For the immediate purpose of giving a broad overview of the proceedings it is necessary to refer to only two aspects of the settlement deed:
(a)Lofty’s (specified) assets were to be liquidated and divided equally between his five children; and
(b)Ms Pearson renounced her rights under the deed of assignment.
[6] Following Lofty’s death in December 2016, a number of proceedings were commenced:
(a)Nunzio de Gregorio filed an application for the grant of probate.3
(b)In response, Anne Surridge filed a statement of defence and a counter-
1 Re Surridge FC Porirua PPPR No 2015-091-231.
2 Surridge v Connor HC Wellington CIV-2015-485-82.
3 de Gregorio v Surridge HC Wellington CIV-2017-485-602870.
claim by which she alleged her father lacked testamentary capacity or that his will was procured by undue influence in the form of “extraneous pressure from [Paul] Surridge and/or Ms Pearson”. Anne sought declarations to that effect as well as the removal of Mr de Gregorio as executor of Lofty’s estate.4
(c)Anne and her son Andrew filed in the Family Court an application for an order under the Family Protection Act 1955. That proceeding was transferred to the High Court and consolidated with CIV-2017-485- 602870 on 13 July 2017.
(d)Ms Pearson commenced a proceeding against the temporary administrator seeking to enforce the deed of assignment and challenging the validity of the deed of settlement on the grounds Mr Connor acted beyond the powers given to him by the EPOA.5
[7]On 11 July 2018, Collins J consolidated the proceedings described at (b) and
(d) above.6
[8] The principal issues arising for determination from the consolidated proceedings are:
(a)whether Lofty had the requisite capacity on 21 January 2014 when he executed his will;
(b)whether execution of the will was procured through undue influence;
(c)whether the will made adequate provision for Lofty’s daughter, Anne Surridge or, in the alternative, his grandson (Andrew Surridge) in terms of the Family Protection Act 1955; and
4 In de Gregorio v Surridge [2017] NZHC 2061, Mr de Gregorio’s application to be appointed temporary administrator was dismissed and Mr David Vance, a partner of Deloitte, was appointed.
5 Pearson v Vance HC Wellington CIV-2018-485-65.
6 de Gregorio v Surridge CIV-2017-485-602870, 11 July 2018 (Minute) at [22].
(d)whether the deed of assignment remains valid following execution of the settlement deed.
[9] That is a very broad overview. As I observed in an earlier judgment, the “gross hostility manifested in the affidavit evidence of some of the beneficiaries towards others” highlighted the importance of the appointment of an interim administrator who was independent of any individual family member’s personal or business interests.7 Discord within the family regarding the management of some of the Surridge companies had created complexities. It is necessary to traverse the background in some detail.
Background in more detail
[10] This discordant and complex family brought to the Court, in the form of evidence, their divergent views of their individual relationships with each other as well as with their father, and of what he intended, or would have intended, when he executed his will. Much of the evidence was intimate and detailed and also irrelevant. In this part of the judgment, I provide only the background detail that has a bearing on the issues and that introduces the principal figures and their relationship to Lofty.
[11] Consistent threads running through all accounts of Lofty tell of his lack of insight into his behaviour towards his children, his capacity for great cruelty, his complex relationships with his children and that he was a stubborn and manipulative man. Nevertheless, there seemed to be consensus that he cared deeply for his family but that his ‘favourite child’ was the group of companies referred to as the Surridge companies:
(a)Philip Moore & Co Ltd (PMC) and Philip Moore & Co (S.I.) Ltd (PMSI). Anne was appointed as director of PMC in 1986. Both companies have been operated by Ms Pearson since prior to Lofty’s death.
(b)Philip Moore (Auckland) Ltd (PMA), now called New Zealand
7 de Gregorio v Surridge, above n 4, at [20].
Cleaning Supplies Ltd (NZCS). This company is operated by Anne Surridge, who was appointed a director in February 1997.
(c)Kyle Chemicals Ltd (Kyle Chemicals), which manufactured cleaning products that were supplied to the other Surridge companies. Kyle Chemicals ceased trading in 2016/2017. Anne was appointed sole director at incorporation in November 1995. It was placed into liquidation on 22 May 2018.
[12] For the descriptions of PMA and Kyle Chemicals it is convenient to refer to Churchman J’s account of these businesses as the entities were relevant to the proceeding he determined in March 2018.8
(a)Lofty incorporated PMA in 1997 giving Anne a 49 per cent shareholding and retaining the balance himself. That company is based in Auckland.
(b)In 1999, PMSI was incorporated with Lofty owning 100 per cent of the shares. That company was based in Christchurch.
(c)Kyle Chemicals was incorporated by Lofty in 1995. Churchman J recorded that at the instigation of Mr Surridge, “the shareholding in Kyle was placed as to 90 per cent nominally in the name of Anne Surridge and 10 per cent in the name of a trust controlled by Lofty”.9
[13]Lofty made at least three wills during the course of his lifetime:
(a)In a will made in 1975, Lofty bequeathed his entire estate to Paul, who was also named as the executor.
(b)In a will dated 16 October 2000, Lofty appointed Anne and one
8 Philip Moore & Co Ltd v Surridge [2018] NZHC 562.
9 At [7].
Peter Belgrave as his executors and trustees. The bulk of the estate was bequeathed to the Philip Moore Trust, which was wound up in July 2012.
(c)In his will dated 21 January 2014, Lofty appointed Nunzio de Gregorio as executor. As already mentioned, this will bequeathed 10 per cent of the estate to Anne with the balance being split four ways (22.5 per cent each) between the other four children.
[14] Mr de Gregorio was prominent in the Surridge family business and familial circle. He had been a good friend of Lofty since 1983. They helped each other in their respective business interests, Mr de Gregorio’s as fisherman and property investor, Lofty’s as a chemical manufacturer and trader.
[15] Paul, Lofty’s only son and oldest child, became estranged from his father from early 2002 following a significant disagreement over Lofty’s proposal to invest, with Paul, in the purchase of a building. Paul told his father he would be withdrawing from any involvement with him, and his affairs, until Lulu (Lofty’s then partner) was out of his father’s life. Despite the entreaties from others to mend the fence and resolve matters, Paul refused. While aware his decision to cut himself, and his children, out of his father’s life upset his father, Paul would not reconcile until his terms were met. Paul said he stuck to that.
[16] In November 2012, Lofty was assaulted during a violent armed robbery on the premises of PMC. At around this time Paul and his father reconciled. Ms Pearson had first met Lofty around 1980 through Paul. Paul and Ms Pearson’s husband at the time were friends. Ms Pearson next encountered Lofty in November 2012 following the armed robbery. She and her step-daughter spent many hours with him following his ordeal and Ms Pearson subsequently attended court as a support person during the trial of the offenders.
[17] In January 2014, Lofty was admitted to hospital with a bowel bleed. Between 17 and 21 January 2014, Paul prepared a handwritten draft will and draft deed of assignment from Lofty in favour of Ms Pearson. On 18 January 2014, Paul requested
that the named next of kin be altered. Paul and Ms Pearson also expressed concerns about Lofty’s living conditions and said they thought he was at risk due to his “cognitive functions and stubbornness”.
[18] On the morning of 21 January 2014, Peter Connor received written instructions from Paul to urgently prepare the three documents. Mr Connor and Paul visited Lofty in hospital where he executed all three documents. Paul certified for the purposes of the enduring power of attorney, that he had no reason to suspect his father was, or may have been, mentally incapable at the time he signed the enduring power of attorney.
[19] On 29 January 2014, a CT brain scan suggested Lofty suffered from moderate cognitive impairment consistent with dementia. A detailed note written by the doctor at a later date, recorded that Lofty has a reported history of declining cognitive functioning over the preceding 12 to 18 months.
[20] On 17 February 2014, Lofty was assessed by a geriatrician as lacking the mental capacity to decide his living arrangements on discharge.
Testamentary capacity: the law
[21] The principles relating to the assessment of testamentary capacity are settled. In Woodward v Smith, the Court of Appeal restated the principles laid down in the seminal English authority, Banks v Goodfellow:10
(1) Because it involves moral responsibility, the possession of the intellectual and moral faculties common to our nature is essential to the validity of a will
(2)It is essential to the exercise of such a power that a testator:
(i)understands the nature of the act and its effects; and also the extent of the property of which he is disposing;
(ii)is able to comprehend and appreciate the claims to which he ought to give effect;
(iii)be free of any disorder of the mind which would poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties; that no insane delusion shall influence his will in disposing of his property and bring about a disposal
10 Woodward v Smith [2009] NZCA 215 at [19]; and Banks v Goodfellow (1870) LR QB 549.
of it which, if the mind had been sound, would not have been made.
…
(5) In deciding upon the capacity of the testator to make his will, it is the soundness of the mind, and not the particular state of the bodily health, that is to be attended to. The latter may be in a state of extreme weakness, feebleness or debility and yet he may have enough understanding to direct how his property shall be disposed of; his capacity may be perfect to dispose of his property by will, and yet very inadequate to the management of other business, as, for instance, to make contracts for the purchase or sale of property.
(6) A testator who has reflected over the years on how his property should be disposed of by will is likely to find it less difficult to express his testamentary intentions than to understand some new business.
(7) Testamentary capacity does not require a sound and disposing mind and memory in the highest degree; otherwise, very few could make testaments at all.
(8) Nor must the testator possess such capacity to the same extent as previously. His mind may have been in some degree weakened, his memory may have become in some degree enfeebled; and yet there may be enough left clearly to understand and make a sound assessment of all those things, and all those circumstances, which enter into the nature of a rational, fair and just testament.
(9)But if that standard is not met, he will lack capacity.
[22] These principles are known as the Banks v Goodfellow criteria. The Banks v Goodfellow criteria are widely accepted and applied in New Zealand but as guiding propositions not formulae.11
[23]The onus and standard of proof in a testamentary capacity case is long settled.
As the Court of Appeal explained in Bishop v O’Dea:12
[3] In probate proceedings those propounding the will do not have to establish that the maker of the will had testamentary capacity, unless there is some evidence raising lack of capacity as a tenable issue. In the absence of such evidence, the maker of a will apparently rational on its face, will be presumed to have testamentary capacity…
[4] If there is evidence which raises lack of capacity as a tenable issue, the onus of satisfying the Court that the maker of the will did have testamentary capacity rests on those who seek probate of the will…
11 Loosley v Powell [2018] NZCA 3, [2018] NZLR 618 at [19].
12 Bishop v O’Dea (1999) 18 FRNZ 492 (CA).
[24] Accordingly, in this case, as proponents of the will, Paul and Ms Pearson must establish Lofty had capacity only if there is some evidence raising lack of capacity as a tenable issue. The onus:13
…must be discharged on the balance of probabilities… Whether the onus has been discharged will depend, amongst other things, upon the strength of the evidence suggesting lack of capacity.
[25] Unless the Court, on a review of all the evidence, is able to affirmatively declare itself satisfied of a testator's competence when she or he executed the will, the Court must declare against its validity.14
[26] With those principles in mind, I summarise in the next part of the judgment the parties’ respective positions about Lofty’s capacity and the evidence each party relies upon for her or his respective standpoint.
Testamentary capacity: summary of parties’ positions
Anne’s position
[27] Anne, who would have the will declared invalid, argues that the circumstances in which Lofty executed the three documents raise a real question about whether he had capacity to execute the will on 21 January 2014. For the Court to conclude that Lofty had testamentary capacity, the evidence of Ms Pearson, Paul, Mr Connor and the nurse, Ms Scrymgeour, would have to be accepted over all the medical evidence including the expert evidence of Dr Mossman and Dr Young.
[28] In addition to the surrounding circumstances, the will contained irregularities of sufficient significance the Court cannot be certain Lofty understood the document before him.
Paul’s position
[29] Paul propounds the will. His counsel, Mr Iorns, accepted in closing “there must be some concern about capacity” given the proximity between the date of
13 Bishop v O’Dea, above n 12, at [5].
14 Brown v Pourau [1995] 1 NZLR 352 at 363, citing Re White (deceased), Brown v Free [1951] NZLR 393 (CA).
execution and the conclusion his dementia was advancing at such a rate as to justify activating the EPOA. It was accepted also that Paul bears the onus of satisfying the Court Lofty had the requisite capacity. Nevertheless, the evidence as a whole shows Lofty was a man of firm views, who expressed them readily. A man of sharp wit and sound business acumen, Lofty’s will was his to make. He chose when to make it and he fully understood what he was doing. Lofty’s lawyer made sure of that fact and his nurse reported no concerns.
Ms Pearson’s position
[30] I consider Ms Pearson’s stand point more fully when discussing her action to enforce settlement of the deed of assignment. At this point it is sufficient to record that Ms Pearson’s position regarding the will is that he had testamentary capacity on 21 January 2014 and that his right to have his capacity adjudicated was “taken away from him” by the deed of settlement.15
Testamentary capacity: evidence
[31] In this case, the evidence raises a serious question about lack of capacity. Accordingly, I set out first the evidence-in-chief given by the witnesses of fact who saw Lofty in hospital on 21 January 2014, all of whom gave evidence for Paul in support of testamentary capacity.
Paul’s evidence
[32] In his 24-page affidavit, Paul narrated life with his father. Paul gave extensive and detailed evidence relating to family matters and issues arising prior to 21 January 2014 when Lofty signed his will. The past events are said to be important because they explain perhaps why matters took the course they did. For immediate purposes I summarise only the evidence pertaining to Lofty’s testamentary capacity on 21 January 2014.
(a)Paul says he became his father’s “right hand man” from an early age.
15 The reference to adjudication is a reference to the 2015 proceeding that Anne commenced seeking a determination as to the validity of the EPOA, see [5] above.
He had worked for his father in his businesses or on farms in the far North since he was a child and even later in life as a young solicitor.
(b)Lofty consumed vast amounts of alcohol. He drank seven days a week, to excess, but his capacity was “enormous” and his drinking did not greatly affect his ability to work. He was a bad driver. Any car Lofty or his businesses owned was dented and scratched. He would not bother with maps and would often get lost. Lofty was “always forgetful”. He could not remember the full names of his children or their birthdays, let alone any details of his grandchildren. Paul could not recall his father meeting Jane’s or Judith’s husbands. His behaviour was erratic and he would prove “an unpredictable and dangerous adversary”.
(c)Lofty lived for and was in the thrall of his businesses, “the law merchant in its widest form”.
(d)In his affidavit under a heading “My dispute with my father and time away”, Paul gives evidence about the relationship his father formed with Lulu Muriotis in 1990. Josephine is the daughter of Lulu and Lofty. In 1994, Paul purchased two office properties on Abel Smith Street, Wellington with three other individuals, including Lofty. Lofty later became interested in purchasing another building complex in Hopper Street, Wellington and wanted Paul to invest in the complex with him. Because of problems that had arisen when his father failed to take responsibility for maintenance issues in respect of the Abel Smith Street property, Paul refused unless he could have control over maintenance issues and could complete the maintenance problems at the Abel Smith Street property. Paul’s evidence of his decision to disassociate from his father was put this way:
Because of the combination of issues and the bounce back on me as a solicitor I told him that I would be withdrawing from any involvement with him and his affairs until at least Lulu was out of his life. I stuck to that despite the entreaties from Messrs Belgrave, Bell and others to mend the fence and
resolve matters between us. I refused. There was still however some contact between us and often he would ring me now and then tearfully and abuse me at the same time when I indicated there would be no change until Lulu was gone.
(e)Paul then testified to the commercial disasters for his father while he was out of his father’s orbit. Lofty blamed Mr Connor for the failure of an investment made in the Chatham Islands. Paul describes other events during this period: Lulu and Josephine (who was only ten years old at the time) “burgled [Lofty’s] warehouse” and Anne seemed to have more and more of a problem with her alcohol consumption and would ring Paul and others nightly, abusing and demeaning Lofty and her mother. Then follows an accusation that Anne had “literally stolen my Mum’s house” and that — when Paul later had dealings with his father — Lofty “was livid” at what Anne was doing with her mother’s effects and affairs. Paul concludes this section of his affidavit concerning his dispute with his father and his time away, with the following observation:
Suffice to say this chain of events I submit shows an absolute web of dishonesty and deceit on Anne’s part and little wonder my father was ‘on-guard’ with her and so increasingly disappointed, distrusting and upset by her actions.
(f)In 2012 Lulu, from whom Lofty was now separated, was sentenced for masterminding the aggravated robbery on 4 November 2012 during which both she and Lofty were tied up at Lofty’s flat in his warehouse.16 In his affidavit, Paul states that he wishes to make it known the Crown would not have gone to trial if his father had any mental health deficits “as my sister Anne and her tyro witnesses allege”. On 5 November 2012, the day following the robbery, Paul visited his father who Paul described as tearful and apologetic, admitting to his past errors and wanting Paul’s help with a new start. “He wanted me and my wife to be involved in his affairs and fix-up his life and things in his business. We agreed, of course.”
16 Referred to above at [16].
(g)In a section of his affidavit evidence entitled “Aftermath”, Paul describes the relationship between his father and Ms Pearson, his wife, who his father treated as a daughter.
[33] Turning to Lofty’s admission to hospital on 17 January 2014, Paul said he and Ms Pearson went straight to the hospital where his father talked to him in private saying he had no will and wanted to “fix things up pronto”. Lofty asked Paul to contact Mr Connor urgently to fix his affairs up “in the terms that we had all discussed”. Paul said the medical team wanted to know if Lofty had an EPOA and he explained to them he was next of kin and that although his father wanted him to be his attorney, Paul thought a non-family member would be better and suggested Mr Connor. Paul said, the medical team advised an EPOA should be put in place as soon as possible as there was “only a narrow window of opportunity” for Lofty to sign an EPOA and any other documents he or his advisors required. Paul did not explain why the medical advisers were of this view.
[34] On receiving this information, Paul said he returned to his father and got clear instructions and took notes. He managed to track down Mr Connor and had a lengthy telephone conversation with him. Paul subsequently visited Mr Connor in his office and left notes for him. On 21 January 2014, Mr Connor arrived at the hospital and talked with Lofty for about 25 minutes. Paul read the EPOA forms produced by Mr Connor and discussed them with his father. Paul said he explained their effect and “crystallised and made up my mind as to his level of capacity to sign both documents”. Paul gave a detailed account of his past experience attending to the attestation of such documentation and his practice on those occasions, which was:
…not to ask silly benign questions like ‘Who is the prime minister?’; ‘Where do you live?’ but to ask questions which to my mind connote a more serious type of required power or ability. In my father’s case on the 21st of January [2014] I emphasise I was quite satisfied he had sufficient capacity from what I had observed and discussed with him that day. Also my opinion on that critical matter as the witness took into some account my opinion from earlier contacts we had over the prior weeks and months of our time together. He had more than adequate capacity to sign any document.
[35] In relation to the EPOA, Paul said he asked his father what he would do if he were buying a house. His father answered and made a “derisory comment” suggesting (to Paul’s mind) the question Paul had posed was “basic and stupid”. Paul continued:
It was of course for my own edification and a proper question to put in finally making-up my mind as to capacity. The document was signed while he was in bed and he sat up and signed it on a pillow that we fluffed up so that he could do this. The document was signed with difficulty because of the pillow. I witnessed his signature and the ancillary document indicating that I had done so properly as required.
[36] As to the deed of assignment, Paul said he was aware Mr Connor had prepared an assignment document and reminded his father of what he wanted to do and that the document Mr Connor prepared “from scant instructions” seemed to fit the bill. Mr Connor then produced a will “as per the instructions relayed to him” and at that point Paul considered it was prudent to leave his father with Mr Connor although he returned with a nurse who could be a witness if he proceeded to sign the will.
[37] Paul swore further affidavits on 14 July 2017, 4 April 2018, and 5 June 2018. The key points relating to capacity in the April 2018 affidavit are these:
(a)Following Lofty’s death on 15 December 2016, Lofty’s former legal advisor sent Paul a copy of a will made in 1975 in which Paul was appointed sole executor and was the sole beneficiary of Lofty’s estate (the 1975 will).
(b)Paul deposed to having remonstrated with his father in the past about failing to ensure his sisters received a fair division of the estate and that he owed a moral obligation to his sisters. Paul deposed to telling his father the will “would cause an eruption” and he would not follow it.
(c)Paul then narrates over many paragraphs Anne’s defaults and the actions that caused her father to “wil[t] under the pall of what she did” and why his father had the documents prepared as he did by Mr Connor. Paul said the 2014 will was a progression from the 1974 will and reflected what Paul termed a fair and moral settlement of Lofty’s property between his children except for a diminished share to Anne,
which Lofty “demanded… to recognise Anne’s past dishonesty and her behaviour to him”.
(d)Paul expressed himself to be:
… unwavering that [Lofty] knew what he was doing and what he was signing and it represented the ultimate considered pinnacle of what he had been gestating (as he did with his ideas) over many, many months of thought, discussion where appropriate and reflection.
(e)Not long before Mr Connor’s involvement, Lofty had refused point blank to allow Anne anything in his will and his retreat from that position was initiated by Paul “counselling for her inclusion”. Paul said the changes in position were “largely the result of open and frank discussion he had with me and others” and that there was “no pressure and influence from anyone”.
Judith’s evidence
[38] Although she is not one of the witnesses who saw Lofty on 21 January 2014, I set out the gist of Judith’s evidence. In her affidavit filed in the Family Court in January 2016, and upon which she was cross-examined in this hearing, Judith offered her view of her father and each of her siblings. She described herself as having always been in awe of her father’s business prowess and believed that over the years he would have had moments of “despair and remorse” over “the state of his children”. While speaking of Paul with considerable respect, she was highly critical of her other siblings. Judith described herself as always having a close relationship with her parents.
[39] Judith spoke to her father by telephone on 20 January 2014. She said it saddened her that Lofty’s capacity had been challenged and she offered her evidence, on his behalf, (prior to his death) to say:
He had capacity and I think to take the word of embittered, money driven children who had or have no respect or relationship with him is a disgrace and should not be entertained in any way, shape or form.
Mr Connor’s evidence
[40] Mr Connor swore his affidavit in April 2016 in support of the application he made in the Family Court for directions and to assist the Family Court to determine Lofty’s capacity to grant Mr Connor an EPOA.
[41] Mr Connor first met Paul in the late 1970s when Paul worked as a law clerk at the firm in which Mr Connor was a partner. When Paul moved on, Mr Connor had occasional dealings with him over the next 15 years or so. When Paul established a criminal defence practice, Mr Connor referred clients to him until Mr Connor retired in 2014. As well, Mr Connor was a sounding board to Paul when Paul sought advice on conveyancing or estate matters. Mr Connor had contact with Paul in client contexts and socialised with him in those settings.
[42] Mr Connor has attended many frail persons, sometimes hospitalised, for the purpose of having wills and powers of attorney signed. He considered he was well placed to know if a person understands what he or she is doing and has mental capacity to sign.
[43] On the morning of 21 January 2014, Mr Connor received instructions from Paul to urgently prepare an EPOA, a will and a deed of assignment. The instructions were in the form of handwritten notes that Paul had delivered to him. Mr Connor:
… knew Lofty as a man of robust views and opinions and as something of an autocrat who would be very reluctant to sign anything which indicated that he might at some time in the future be unable to manage his own affairs (he had successfully run his businesses by that point up to the age of 88).
Consequently, Mr Connor was concerned to be “completely confident” Lofty knew what it meant to appoint an attorney and that he was willing to appoint Mr Connor.
[44] Mr Connor visited Lofty on the afternoon of 21 January 2014 and discussed with him what it meant to have a power of attorney and the powers Mr Connor would have as attorney should Lofty lose capacity. There was a discussion about the family and business. Lofty confirmed he did not want his attorney to have the power to make a will on his behalf.
[45]The essential points from Mr Connor’s evidence are that:
(a)Mr Connor satisfied himself Lofty understood the contents of the will and that the contents were what he wanted.
(b)While Mr Connor was speaking to Lofty, Paul was silent. Lofty was not inhibited by Paul’s presence. He was as articulate and forceful in his views as Mr Connor had always found him to be and not prompted by Paul in any way. Mr Connor was completely confident the views Lofty expressed were his own.
(c)A registered nurse arrived and agreed to witness the will. Mr Connor said “she gave no indication that [Lofty] lacked capacity or that he should not be signing documents”.
(d)Mr Connor had no previous involvement with a document of the nature of the deed of assignment he had been instructed to prepare in favour of Ms Pearson. He was concerned to satisfy himself Lofty understood it and that it was what he wanted. Beyond explaining its effect to Lofty, Mr Connor said he did not have sufficient knowledge of Lofty’s financial position to enable him to give advice about the merits of the deed. Having explained its effect, Mr Connor was satisfied Lofty understood it and was firmly of a mind to proceed with it.
(e)Based on his familiarity with Lofty and his many years of experience dealing with frail older people, Mr Connor was satisfied Lofty understood the documents he was signing and what they meant.
Courtney Scrymgeour’s evidence
[46] Courtney Scrymgeour was the registered nurse who attended Lofty in hospital on 21 January 2014 and who witnessed Lofty’s will on that day. In her affidavit sworn on 20 January 2016, Ms Scrymgeour deposed to her observations of Lofty on 21 January 2014. He was:
·Acutely embarrassed at his blood loss, the mess it made and needing to have bowel movements checked by his medical team.
·Anxious as the day wore on as to the arrival of his lawyer with the papers he had to discuss and sign
·Alert as to time and place, coherent, talkative to me and his family who were coming and going to his bedside.
[47] Ms Scrymgeour’s evidence was that if she “thought as a witness that Lofty did not have the ability or the capacity to understand the nature of the document signed” she would not have consented to witnessing his signature as she did.
William Bell’s evidence
[48] Mr Bell regarded himself as a good friend of Lofty, whom he had known for nearly 60 years. Except for Josephine, he had met all Lofty’s children when they were young but knew Paul best. He also knew Anne but not as well.
[49] Mr Bell swore two affidavits. His first affidavit was sworn in July 2017. The thrust of this evidence was to take issue with Anne’s descriptions of Lofty as being often confused, to convey Lofty’s disparaging remarks about Anne and the way she was handling his business affairs and to offer his observation of Lofty on 21 January, which was that Lofty was chatty, full of compliments about his nursing team, worried and apprehensive about having an operation, “not confused at all” and “lucid about what might have to happen to him as regards the operation”.
[50] In his second affidavit sworn in April 2018, Mr Bell deposed to believing Lofty had capacity to understand what he signed on 21 January 2014. The basis for Mr Bell’s belief was his personal knowledge of Lofty and his visit on 21 January.
David Ingram’s evidence
[51] David Ingram arranged for Lofty to visit the doctor when, on the morning of 17 January, Lofty reported he was bleeding from the bowel. Mr Ingram had known and worked for Lofty since October 2008 when Lofty was nearly 84. The thrust of Mr Ingram’s evidence was to take issue with Anne’s evidence that Lofty lacked capacity in January 2014 and Mr Wright’s evidence of Lofty’s diminished faculties in
2012. Mr Ingram deposed to Lofty generally running his business affairs very well for a man of his age. Mr Ingram disputed that Lofty’s physical and mental capacity declined in 2010 and 2011 because he travelled alone to Amsterdam in 2012 and still held his driver’s licence until at least 2013.
Ms Pearson’s evidence
[52] In her affidavit sworn in August 2018, Ms Pearson deposes to the scant trust Lofty reposed in Anne, to her enjoyment of Lofty’s company and to the prospect of following in his footsteps with regard to the Surridge companies. Ms Pearson acknowledged Lofty could be “a bit forgetful” but “over this period he knew exactly what was happening to him”. Ms Pearson deposed to Lofty telling Paul he did not have a current will and requesting Paul to get hold of Mr Connor.
[53] Turning to 21 January, Ms Pearson said Mr Connor arrived when she and Paul were at the hospital. She and Josephine waited outside the room and, after a short time, Mr Connor told them they could return. Ms Pearson was then asked to sign a deed of assignment. She read it “and was humbled Lofty had wanted [her] to look after his assets in the way he had asked”. Ms Pearson signed the deed of assignment and gave Mr Connor the consideration required under the deed (two sums of $10). Ms Pearson further deposed to having “no doubts at all about Lofty having the capacity to make the Will, Enduring Power of Attorney, and Assignment that he signed that day”.
Medical evidence
[54] Dr Brian Young also gave evidence on behalf of Paul. Many of the medical records that Dr Young reviewed for the purpose of his evidence, were also reviewed by Dr Mossman, who was called by Anne. While Dr Young was not engaged to undertake a thorough critique of Dr Mossman’s evidence, he did refer to it. It is sensible to consider the evidence of these two expert witnesses together and I do so from [72] of this judgment.
[55] Before turning to the medical evidence, I set out the evidence of those witnesses called by Anne. Anne did not call evidence from any witness who saw Lofty
on 21 January. Nevertheless, the following family members gave evidence in support of the contention he lacked the requisite capacity to execute the will on that day.
Anne’s evidence
[56] Anne learned of her father’s death via the following email from one of Paul’s lawyers to Anne’s counsel, Mr Patterson:
Dear Chris,
I have been asked to inform you, so that you may inform your client, that Mr Lofty Surridge passed away today.
Yours faithfully,
…
[57] For the following reasons, Anne does not believe her father had testamentary capacity at the time he executed his will:
(a)Anne referred to and relied upon the notes and report made by Dr Scott, the geriatrician who certified on 26 March 2014 that Lofty lacked capacity to execute an EPOA. Dr Scott’s notes and report are more fully explained in the evidence of Dr Mossman at [77]–[78] below.
(b)Anne cared for her mother who suffered from dementia and was with her until her death. While accepting she is not a health practitioner she regards herself as having a close familiarity with the disease and how it affects people. She is firmly of the belief her father would not have had the mental capacity to know what he was doing when he signed the EPOA and will on 21 January 2014.
(c)Lofty would frequently drive to Auckland but get lost on the way. In November 2013, he was marshalled to Anne’s from Takanini by people who found him and figured he was lost. Anne would unpack his clothes, get him something to eat and a cup of tea and he would slump into bed. Anne described Lofty as being overwhelmed at times by his confusion.
(d)When Anne visited Lofty in the rest home one Easter (either 2014 or 2015) he did not know who she was or what Philip Moore was.
Murray Wright’s evidence
[58] Murray Wright worked for Lofty for 23 years until July 2013. Mr Wright described himself as Lofty’s “right hand man” spending anywhere between half an hour and four hours with Lofty each working day. As a result, Mr Wright came to know Lofty very well. Although at times Lofty appeared to take pleasure in demeaning staff, and Mr Wright found him irascible, controlling and single-minded. Mr Wright stayed (when others did not) because he loved his job.
[59] Mr Wright was extremely surprised when he learned Paul certified on 21 January 2014 he had no reason to suspect his father was or may have been mentally incapable when he executed the EPOA. In the two years prior to departing, Mr Wright noticed a steady decline in Lofty’s mental state and performance. He made basic mistakes in the ordering and receiving of goods; he would lose the point during a conversation and begin to ramble; his driving became terrible as he would drive slowly on the right-hand side of the motor way and start off in third gear. Mr Wright said Lofty told him “quite matter-of-factly” of numerous occasions when he was lost when travelling around Wellington and between Auckland and Wellington.
[60] Mr Wright described Lofty making “crass and insensitive” and inappropriate comments to customers and talking gibberish to customers who often sought out Mr Wright as they could not make headway with Lofty. By July 2013 Lofty’s treatment of Mr Wright was such that he left. When Lofty asked Mr Wright to return, he refused.
[61] Mr Wright often went direct to Anne for assistance as she knew the Philip Moore business very well, describing her as the only family member who had anything to do with the business of Philip Moore. She ran the Auckland operations and would assist the Wellington operations as and when required. Mr Wright also gave evidence of the estrangement between Paul and his father and that Paul had described his father on more than one occasion as “not right in the head”. He chatted with Paul and found him good to deal with.
[62] Mr Wright also expressed his surprise that Lofty would have chosen Mr Connor as his attorney. He said that Lofty only ever spoke negatively of Mr Connor following Mr Connor’s role in the failed Chatham Islands investment.
Jane’s evidence
[63] When Jane received paper work from the Family Court, she considered the most appropriate thing she could do was send a letter to the Court. That letter was exhibited to the affidavit she swore in the Family Court. The essence of Jane’s affidavit evidence is that:
(a)She considered her brother Paul would have had every reason to suspect her father was not mentally capable on 21 January 2014 when Paul certified the EPOA.
(b)She was concerned her brother had used her father’s deteriorating mental health to gain control over his affairs. Jane could not think of any reason why, if he had capacity, he would have appointed Ms Pearson as a director of any of the Surridge companies particularly given the findings made against Ms Pearson by the Australian Securities and Investment Commission.17 Also, Jane could not understand why, if Mr Connor was aware of the family dynamics, he would have appointed Ms Pearson.
[64] The letter Jane sent to the Family Court spoke of her love for her father and that she wanted “nothing more than that this family conduct their lives with integrity as concerns the affairs of both parents”. Jane described her father’s diminishing lucidity over a period of 15 years and recounted an embarrassing experience around 2000 when she went with her husband to visit her father at the Wellington Workman’s Club in Cuba Street. Her father had winked at her and asked to buy her a drink. He did not recognise her as his daughter.
17 See below at [124]–[125].
[65] Jane also described a conversation with Lofty around 2012 when he explained that he had attempted to drive to Taupo, where Jane lived, to attend a wedding, but got lost along the way and ran out of petrol.
[66] Again, when Jane visited Lofty in 2014 at Kenepuru Hospital he was excited and looked at her lasciviously. Jane said she knew he mistook her again for her mother and told him “I’m Jane – your eldest daughter”.
[67] Jane spoke to him on the phone each day on his release from Kenepuru and described him as very muddled. Paul asked Jane for her help in securing a place for him in a dementia unit in Kilbirnie.
[68] Finally, Jane deposed to seeing her father’s signature on the papers and how “hugely different” it was from any signature of her father’s she knew.
Josephine’s evidence
[69] Josephine is Lofty’s youngest child and half-sister to her siblings. She completed year 13 in 2013 and was working at the relevant time at New World, Thorndon. Josephine only found out her father was in hospital because she had not heard from him in two days. This was unusual. She went to his apartment and when he did not answer, she broke in. She was scared he may have collapsed and been inside alone. Josephine then rang Wellington Hospital and was told her father had been admitted two or three days earlier.
[70] Josephine went straight to the hospital. She described her father as happy to see her but confused as to his whereabouts. She said they had a cry together. On her way home, she received a call from Ms Pearson to say Lofty was in hospital. Josephine told Ms Pearson that she knew Lofty was hospitalised and that she had just visited him. Ms Pearson seemed to Josephine to be surprised. In answer to Josephine’s inquiry why it had taken so long for her to be told, Ms Pearson said something to the effect they wanted to give Lofty time to adjust.
[71] Josephine visited her father on 21 January 2014. Paul, Ms Pearson and “another man” were there. After about 20 minutes with her father, Paul asked her to
step outside with Ms Pearson. About 30 minutes later they were invited back in and the other man left. Josephine’s affidavit evidence was that her father “appeared confused about where he was and what he was doing there”. And that when she returned to his room, “Dad still seemed very confused”. She was certain her father would not have understood what he was doing on 21 January: “he was just not in any position to make decisions about his affairs. At that time (and since) he was consistently confused about basic things (who I was; where we were etc).” Josephine said Lofty often confused her with Anne and asked how she got to the hospital from Auckland, although this last comment appears to be referring to Lofty’s condition at the time she swore her affidavit in March 2016 rather than to his condition on 21 January 2014.
Dr Stuart Mossman
[72] Dr Mossman is a practising neurologist with 26 years’ experience in public and private practice in Wellington. He holds honorary consultant positions at Wellington Hospital and Otago Medical School, Wellington where he is involved in undergraduate and postgraduate teaching. As part of his clinical role, Dr Mossman makes specific diagnoses with respect to cognitive impairment, dementia and delirium. Dr Mossman has appeared twice previously to give expert evidence in testamentary capacity cases.
[73]Dr Mossman reviewed the following materials:
(a)Lofty’s GP’s (Dr McIlroy’s) file;
(b)Lofty’s medical records from the Charles Fleming Retirement Village;
(c)Paul’s affidavit sworn 4 April 2016;
(d)Mr Connor’s affidavit sworn 27 April 2016;
(e)Ms Scrymgeour’s affidavit sworn 20 January 2016;
(f)Josephine’s affidavit sworn 24 March 2016;
(g)Mr Wright’s affidavit sworn 16 November 2015;
(h)An email from Jane dated 25 November 2015.
[74] Dr Mossman also conducted two on-site reviews of the Wellington Hospital notes, including handwritten notes by paramedical and medical staff.
[75] In assessing Lofty’s testamentary capacity Dr Mossman considered whether Lofty understood the nature and effect of the will he was making; the extent of his estate; the claims of those who might expect to benefit under his will; and whether, as a result of any mental illness, Lofty made gifts in his will that he otherwise would not have made.
[76] Dr Mossman concluded that, on the balance of probabilities, Lofty could not be regarded as having testamentary capacity on 21 January 2015. I do no more than summarise the main themes that emerge from Dr Mossman’s detailed review of the hospital records and notes made by clinicians and nurses:
(a)On 19 January 2014, Lofty was noted as having very poor STM (which stands for short-term memory). He was recorded as being “very forgetful and seldom complies”, which Dr Mossman inferred was a failure to comply with nursing instructions.
(b)On 20 January 2014, Lofty was recorded as being alert and oriented but very forgetful at times and with short-term memory loss. He thought it was April 2021 and was asking repetitive questions. A diagnosis of delirium was raised. Dr Mossman’s evidence was that delirium is often associated with pre-existing cognitive impairment. Delirium can be of varying severity and, given it was noticed and brought to the attention of medical staff, was likely to have been significant in Lofty’s case. That is because delirium is frequent in hospital admissions of the elderly but is not always recognised because more urgent medical matters are being addressed. Delirium would have exacerbated the impact of any pre-existing cognitive impairment. If delirium was
present on 20 January, Dr Mossman’s view was that it was likely to remain for a minimum of a week. Delirium is a fluctuating rather than a stable condition, the intensity of which may vary from hour to hour and day to day. Patients may have the appearance of relatively lucid intervals for minutes or possibly an hour or more.
(c)On 21 January 2014, a note recorded in the afternoon referred to Lofty as “alert” and “orientated”. The note also recorded: “Very STM, directable”.
(d)Notes between 23 and 27 January record Lofty being confused and repeating himself.
(e)The results of a CT brain scan undertaken on 29 January 2014 were consistent with dementia.
[77] Dr Mossman and Dr Young, both addressed notes made by Dr Scott, the physician and geriatrician in whose care Lofty was placed when he was transferred to Kenepuru Hospital on 31 January 2014. Dr Scott had issued two certifications on 26 March 2014. In one, she certified he was mentally incapable because he was not competent to manage his own affairs in relation to his property. In the other Dr Scott certified Lofty was mentally incapable because he lacked the capacity to make decisions about his personal care and welfare. The primary reason for Dr Scott’s certifications were that Lofty had vascular dementia of a moderate degree. Dr Scott referred also to “collateral history of his function over previous many months”. His cognitive function had also been affected by serious illness prior to transfer to Kenepuru but stabilised while there, although it remained significantly impaired.
[78] For the purpose of the application before the Family Court, Dr Scott was asked to provide a report as to Lofty’s capacity to grant the EPOA on 21 January 2014. Her report is dated 22 October 2015. The main points of the report are summarised:
(a)When Dr Scott assessed Lofty’s capacity for the purpose of the certifications she made in March 2014, her assessment was based on a
period of two weeks in February. She had already decided around 17 February that a certificate was appropriate but, because of her workload at the time, did not complete and sign it until 26 March.
(b)At the time of her assessment for the certificates, Dr Scott turned her mind to whether it was likely Lofty could have had sufficient capacity when he entered into the EPOA on 21 January 2014. She considered it was reasonable to believe he did based on the information she had at the time. It had been reported to her by Paul Surridge that Lofty had been coherent and able to comprehend what he was doing when he signed the EPOA and when Paul witnessed his signature but that in the days following his medical condition and cognitive state took a turn for the worse.
(c)Dr Scott reviewed the Wellington Hospital notes for the purpose of her October 2015 report. In addition to referring to many of the notes referenced in Dr Mossman’s evidence, Dr Scott also noted there was no record of any request from family or any other person for an assessment of Lofty’s capacity to sign an EPOA.
(d)During Lofty’s stay at Kenepuru, with the help of her multidisciplinary team, Dr Scott assessed his cognitive history and cognitive function to clarify the diagnosis. The informant history was consistent with 12–18 months of mild cognitive impairment progressively worsening into mild dementia. Dr Scott reported elderly patients with delirium are nine times more likely to have underlying dementia. Lofty’s history was consistent with these observations and consistent with his CT brain scan, which showed atrophy and vascular disease.
(e)Dr Scott said her opinion, in February 2014, that Lofty likely did have capacity to sign the EPOA on 21 January 2015 was on the basis of the concurrence between what was handed over by the Wellington Hospital staff and “what Paul Surridge stated to me”. She was also influenced “to some extent perhaps” by Lofty’s trust in the person appointed as
attorney. On review, Dr Scott was satisfied there was evidence that Lofty did have a mild dementia on admission before he signed the EPOA and that her own experience was that “mild cognitive impairment does not necessarily preclude capacity for a task/decision”. Dr Scott concluded:
Because no one assessed [Lofty] at the time he donated Enduring Power of Attorney I cannot make a more certain statement.
[79] Dr Mossman commented on many of the hospital notes made between 1 February 2014 and 11 March 2014 but, as there is no dispute about Lofty’s significant cognitive decline in this period, I have focussed more on the evidence about his mental health on and around 21 January 2014.
[80] Of particular significance to Dr Mossman’s conclusion was Josephine’s evidence of her father’s confusion about her identity, and that it took a while for him to understand who she was, only to forget again during the course of the visit. In Dr Mossman’s opinion, if Lofty was unable on 21 January 2014 to recognise Josephine and instead confused her with Anne, “he was not able to assess correctly who might benefit under his will”. In confusing the identity of his children, Lofty was unable to appreciate the significance of any action in the will and the impact this might have on included or excluded beneficiaries.
[81] That Lofty had pre-existing dementia prior to his hospitalisation in January 2014 was supported by the history of his significant cognitive impairment. Dr Mossman referred to the statements from family members and Mr Wright as to Lofty’s deterioration in cognitive function for some three years prior to his admission. The inappropriate comments made to customers and the fact he became intimidating, especially with female customers, suggested frontal lobe disinhibitory behaviour consistent with dementia.
[82] Dr Mossman was clear that dementia did not necessarily prevent a person from having testamentary capacity but, in addition to Dr Scott’s assessment, Dr Mossman considered the strongest evidence for lack of testamentary capacity related to Lofty’s confusion over the identity of beneficiaries.
Dr Brian Young
[83] Dr Young is a qualified medical doctor who, since 2010 has practised mainly as a forensic psychiatrist, operating a part-time private practice in which he has provided opinions about testamentary and decision-making capacity and other medico-legal issues. Dr Young is a fellow of the Royal Australian and New Zealand College of Psychiatrists and has given evidence on four occasions involving retrospective assessment of the capacity of a deceased testator.
[84]Dr Young reviewed the following materials:
(a)Medical Notes:
(i)from Capital and Coast District Health Board, relating to Lofty’s admissions of 17 January and 31 January 2014;
(ii)held by Lofty’s GP; and
(iii)from the Charles Fleming Retirement Village.
(b)Affidavits filed by:
(i)Mr Connor (27 April 2016);
(ii)Mr Ingram (unsworn) dated January 2016;
(iii)Mr Bell (4 April 2018);
(iv)Paul (4 April 2018); and
(v)Dr Mossman (1 June 2018).
[85] Dr Young had not undertaken a thorough critique of Dr Mossman’s evidence, as he had not been engaged to do so and because Dr Mossman’s conclusion was reached on the basis of evidence relied upon by Anne that conflicts with the evidence relied upon by Paul. Dr Young stated at the outset that
… if the evidence relied upon by [Paul] is preferred, it is more likely than not that Lofty Surridge had testamentary capacity on 21 January 2014.
[86] As there had been no specific assessment of Lofty’s testamentary capacity, Dr Young based his opinion about capacity on the observations and assessments of Lofty’s general cognitive abilities as recorded in the clinical notes and in Dr Scott’s report of 22 October 2015. From his careful review and summary of the materials, Dr Young formed the following opinions:
(a)On 21 January 2014, when he signed the will, Lofty was acutely ill in hospital because of bleeding from an unspecified source in his bowel.
(b)Lofty’s cognitive abilities had been declining for at least four years before his admission on 17 January 2014.
(c)Dr Scott diagnosed Lofty as having mild vascular dementia when he was first admitted. Her diagnosis was based not only on her assessment but on the information from staff of Wellington Hospital and statements by Paul.
(d)On 20 January 2014, Lofty was developing delirium. He was disoriented, asking repetitive questions and unable to grasp it was Wellington Anniversary Day. Lofty’s delirium was likely to have been the result of acute blood loss and anaemia leading to reduced delivery of oxygen to his brain, which was already compromised by pre-existing dementia.
(e)People who develop delirium on top of pre-existing dementia frequently suffer from an irreversible deterioration in cognitive ability that is evident once the delirium has resolved.
(f)By May 2014, Lofty required admission to a dementia unit, suggesting a “significant ‘step down’ in [Lofty’s] cognitive abilities between January and May 2014”.
[87] In Dr Young’s opinion it was likely that Lofty retained some capacity on 21 January 2014 but, considering the cognitive problems that he had due to dementia, it is reasonable that concerns exist about whether he retained testamentary capacity.
[88] Dr Young considered that a greater level of cognitive ability would be required to make a complex will as compared to a simple will. Dr Young considered the necessary level of cognition depends on a number of factors, including:
(a)whether Lofty’s assets remained unchanged over a long time;
(b)the stability of his relationships with the beneficiaries over a long time, which is relevant to the ability of a testator to remember people and be able to differentiate them from each other for the purpose of making a will;
(c)whether the testator had decided a long time ago, before there was any question about testamentary capacity, how the beneficiaries were to benefit from the estate. (If that were the case, the task of making a will on 21 January 2014 would have been easier.)
[89] Dr Young concluded that, while the medical evidence outlined Lofty’s potential problems, the specific questions were not asked. In his opinion, “the medical evidence alone is not able to prove that in the balance of probabilities he did not have testamentary capacity” on 21 January 2014. Dr Young also accepted that, in the absence of any formal assessment, the medical evidence alone was not able to prove on the balance of probabilities that Lofty had testamentary capacity on 21 January 2014.
Testamentary capacity: assessment
[90] I am satisfied that, on the whole, the medical and lay evidence is sufficient to displace the presumption of capacity. That presumption having been displaced, it is now necessary to assess the strength of the evidence suggesting lack of capacity.
[91] At the outset it is important to note, as the medical experts noted, that no request was made by any member of Lofty’s family for an assessment of Lofty’s capacity to execute a will on 21 January 2014. His capacity falls to be assessed retrospectively by reference to the evidence of the lay witnesses who saw him on the day, the medical evidence, and most particularly, Mr Connor’s evidence.
[92] The inquiry into Lofty’s testamentary capacity focuses on 21 January 2014 but that is not the only relevant date. Under the rule in Parker v Felgate, a testator may have given instructions for the will earlier and retained sufficient capacity by the time it was executed.18 Paul did give evidence of Lofty’s intentions over a period of time, but I found difficulty in reconciling two aspects of Paul’s evidence with uncontested facts:
(a)First, Paul described the 2014 will as representing a progression from the 1974 will, a progression for which he took credit.19 Paul was “unwavering” that Lofty knew what he was doing and what he was signing and that “it represented the ultimate considered pinnacle of what he had been gestating … over many, many months of thought, discussion where appropriate and reflection”.
(b)Second, Paul said his father was complaining in the hospital he had no will and that on 20 January he asked Paul to tidy up his affairs, which Paul did. As a consequence of Paul’s advocacy on Anne’s behalf, reduced provision was made for her.
[93] As it happens, Lofty did have a will. Paul was unaware at the time his evidence was filed and served that Lofty made a will in 2000 (the 2000 will). Under the 2000 will, all children, including Anne, were bequeathed 20 per cent of Lofty’s personal chattels, while the residue of the estate was to go to the Philip Moore Trust, of which all five children were discretionary beneficiaries. Paul’s evidence that he had remonstrated with his father to achieve a fair division of his estate, and that the 2014 will reflected the diminished share to Anne that Lofty supposedly “demanded”, is
18 Parker v Felgate (1883) 8 PD 171 (EWHC).
19 See [37](c)-(e) above.
inconsistent with the provisions of Lofty’s 2000 will, by which Lofty distributed his estate evenly. Paul’s evidence raises serious questions, either as to Lofty’s mental state when he is said to have complained to Paul that he had no will, or as to the reliability of Paul’s testimony that he was instructed by Lofty to tidy up his affairs because Lofty said he had no will.
[94] Next, the 2014 will reflected a marked departure from the 2000 will. Where a testator’s prior intentions have been in place over a long period of time, but changed abruptly and ostensibly unfairly, an objectively rational basis for the change should be identified to displace an inference of lack of capacity that may otherwise be drawn.20
[95] The 2014 will does contain an explanation for Anne’s lesser share. Clause 5.2 provides:
…because of the substantial assets she has received from her mother to the exclusion of her siblings and further because of the benefits she has taken from the shares given to her in Philip Moore & Company (Auckland) Limited and as a director of that Company, and further that she has lost my trust because of her alcoholism and her poor governance and control of personal and company matters.
[96] There are several points to be made about the 2000 will and, in particular, cl 5.2.
(a)First, Paul did not leave mere “notes” or instructions with Mr Connor. He drafted the will. Paul confirmed in evidence that he “prepared draft documents”.
(b)In considering whether cl 5.2 constitutes an objectively rational basis for Anne’s reduced share, while Lofty was undoubtedly concerned and at times highly aggravated by Anne’s drinking, it is significant that he took no steps during his lifetime to remove her as a director or trustee or to remove or reduce any of her entitlements. The uncontested evidence relating to Anne is that she was:
20 Stewart v Meads HC Wellington CP25/02, 7 March 2002 at [40], citing Brown v McEnroe (1890) 11 NSWR Eq 134.
(i)a co-executor and trustee with Peter Belgrave in the 2000 will;
(ii)co-trustee with Mr Belgrave and Lofty of the Philip Moore Trust as well as the Josephine Surridge Trust;
(iii)co-director of PMA and PMC until 2015 when she was removed as a director of PMC by Mr Connor exercising power under the EPOA; and
(iv)the sole director of Kyle Chemicals Ltd and the trustee of Lofty’s shares in that company.
[97] Anne says the 2014 will contained material errors. PMA was misdescribed as “Philip Moore & Company (Auckland) Limited” (error italicised) and Simon Raizis was included as an advisory trustee. As to the misdescription of the company, Mr Patterson argued that given the company was Lofty’s “baby”, the fact it was misnamed means the Court cannot be certain Lofty understood what he was signing. I do not place great weight on the misdescription of PMA. It is hardly possible that the reference to “Philip Moore & Company (Auckland) Limited” could be to any company other than PMA, and the error appears to be little more than a minor mistake.
[98] The evidence relating to the naming of Mr Raizis as advisory trustee raises larger concerns. Mr Raizis had never met Lofty nor had dealings with him.21 He had previously met Paul. Paul was cross-examined about his inclusion in the draft will of Ms Pearson as an advisory trustee to assist Mr Raizis. It was put to Paul that he had included Mr Raizis’ name to give the will a sense of independence and professionality. Mr Raizis’ testimony was that he had no recollection of meeting Lofty. But Paul insisted his father had met Mr Raizis and his partner Mr Jefferies at the Green Parrot restaurant in Wellington one Friday night and although neither Mr Raizis nor Mr Jeffries could recall that, Paul said he did.
21 Mr Raizis swore an affidavit objecting to being included with Mr de Gregorio as a defendant to Anne’s application to have Mr de Gregorio replaced as trustee and executor. That proceeding is referred to above at [6](b).
[99] Paul said he knew Mr Raizis well although Mr Raizis deposed to only having spoken to Paul “a couple of times in the last 10 years”.
[100] Paul explained the inclusion of Mr Raizis as advisory trustee as follows. He understood from what Lofty had been saying, and from Lofty’s physical description of the man, that he wanted Mr Raizis. He said he “mixed up” and his “father mixed up” Mr Raizis with another man of the same build. Paul gave the following evidence about what happened after he realised that he had perhaps included the wrong person as trustee:
… I went back to my father and said, “This is the trouble Dad, you know, I don’t think this is the right person.” “Yes it is.” “No it’s not.” So we made a compromise on that because things were pretty urgent at the time given his health.
[101] The evidence is far from satisfactory. If Paul’s testimony is to be accepted, it raises real questions about whether Lofty knew what he was doing.
[102] A further concern about the reliability of Paul’s evidence is raised by his testimony that, on 22 January 2014, Lofty “took a bad turn and rapidly deteriorated mentally over a short time”. As Dr Mossman observed, the nursing notes between 21 January and 29 January recorded no such acute deterioration in cognition. I have read all of the hospital notes. I was struck by their detail. Matters one might think are inconsequential to Lofty’s health are noted, for example, that Lofty had enjoyed a visit from his daughter from Taupo. Whatever Paul perceived, in light of the fact the hospital notes themselves record no such acute deterioration, Paul cannot be taken as a reliable historian.
[103] I also take the view that Paul exercised a marginal judgment call when he certified on 21 January 2014 he had “no reason to suspect” Lofty may have been mentally incapable when he signed the EPOA. It is one thing to believe, or to want to believe, that a testator has capacity. But when one has reported concerns about the testator’s declining cognitive functions up to the period of execution, it is quite another thing to certify there is “no reason to suspect” there may be mental incapacity.
[104] Turning to the evidence of the other lay witnesses, in particular Mr Bell, it was put to him in cross-examination that he could not be sure he had in fact visited Lofty on 21 January 2014. While he was not sure of the actual dates of his two visits, Mr Bell was sure it was before Mr Connor’s visit and that Lofty had said he was expecting Mr Connor “soon”. He had taken from Lofty’s demeanour that Lofty was expecting Mr Connor to visit within a couple of hours but Mr Bell conceded Lofty did not say he was expecting Mr Connor “today”. Relevantly, none of the witnesses who visited Lofty on 21 January mentioned seeing Mr Bell that day. Perhaps more significantly, there is no record of Mr Bell’s visit on 21 January in the medical notes. From my review of the notes, they tend to be detailed as to the identities of the visitors and Lofty’s reaction to the visit.
[105] Ms Scrymgeour’s evidence suggests she had known Lofty only since her time of handover. In the context of an assessment of capacity, conversations such as she had with Lofty about his love of Wellington and New Zealand, and his attempts to dissuade her from travelling to Australia are regarded as relatively superficial conversations, which patients with cognitive impairment may still be able to have. Although, Ms Scrymgeour’s observations of Lofty as being coherent and talkative have a bearing on his degree of lucidity, and her observation that Lofty wished to tidy his affairs is relevant, these are not tests of testamentary capacity.
[106] Similarly, I have not found helpful to assessing the legal issue of capacity, the evidence of other witnesses who visited Lofty on 21 January 2014 and testified to his cognition, alertness and faculties. Capacity is a task specific inquiry. The lay witnesses lacked the expertise necessary to undertaken capacity assessments.
[107] Mr Connor’s evidence is critical. Mr Connor was a considered and careful witness and I was confident in the reliability of his testimony. Ultimately, however, notwithstanding Mr Connor’s conscientious concern to satisfy himself that Lofty understood what he was doing, and that what Lofty was doing was what he wanted, I am left in real doubt about whether Lofty did in fact have the requisite mental capacity to sign his will.
[108] Mr Connor’s descriptions of Lofty as articulate and forceful, and his comments about Lofty’s alertness and comprehension are relevant of course, but they are not the result of a formal assessment of testamentary capacity. Importantly:
(a)Mr Connor described Lofty as a man of firm views, who ran his business as an autocrat and who did not brook interference. He acknowledged that effectively handing over all decision-making to Ms Pearson was “quite inconsistent” with the Lofty he knew.
(b)Lofty had never told Mr Connor what his property was worth and Mr Connor did not know its value, although he had some idea it was a significant estate.
(c)Mr Connor accepted that he did not check whether the name of PMA was recorded correctly in the will and did not record any discussion about it.
(d)Nor did Mr Connor recall any discussion about the identity of the person to be advisory trustee.
(e)Mr Connor was unaware that Lofty had an existing will (the 2000 will).
(f)Most fundamentally, in satisfying himself that Lofty had testamentary capacity, Mr Connor said he was satisfied Lofty understood the contents of the will. Although he did not have a formula or process, he considered whether Lofty “could engage in the conversation” and “whether that was a rational conversation”. Mr Connor was satisfied that Lofty could engage and that it was a rational conversation. Mr Connor estimated they talked for 30 to 45 minutes although that was about all of the documentation, not just the will. Mr Connor estimated he and Paul probably talked for equal duration to Lofty about the EPOA.
[109] On 21 January 2014, when Lofty signed his will, he was acutely ill and bleeding from the bowel. He had delirium, an acute condition that manifests as a fluctuating pattern of global cognitive impairment. His cognitive abilities had been declining gradually for many years but by 20 January 2014, when his first signs of delirium appeared, he was disoriented as to time and forgetful.
[110] In Dr Mossman’s view, the strongest evidence of lack of capacity was Dr Scott’s assessment and Josephine’s affidavit evidence of Lofty’s confusion over her identity on the day he signed his will. Dr Mossman was unaware, however, of Josephine’s acceptance in cross-examination that Lofty knew who she was on the day he signed his will. To the extent Dr Mossman’s conclusion was based on Josephine’s evidence, I have regarded it with caution.
[111] Nevertheless, there was no assessment of Lofty’s testamentary capacity and such doubt is raised by the combination of my examination of the evidence in the preceding paragraphs, and by Dr Scott’s assessment, that I am unable to declare myself satisfied Lofty retained his mental powers to the requisite extent. As the Court of Appeal stated in Nijsse v Squires, “…in the context of a case such as the present … the matter cannot be left finely balanced, or equally consistent with different views”.22
[112] Mr Connor did not testify that he specifically checked that Lofty understood the nature and effect of making the 2014 will, the extent of his estate and the claims of those who might expect to benefit under the will, and in particular why Anne’s entitlement was less than her siblings. That is to be expected from a formal assessment of capacity, as is the recording of the testator’s answers.23 Facts were not checked, nor was the extent of the estate. Lofty was not asked about previous wills, and the 2000 will was certainly not reviewed.
[113] Paul has not discharged the onus of satisfying the Court Lofty had testamentary capacity when he executed the 2014 will. That being the case, there will be a declaration that the 2014 will is invalid for lack of capacity.
22 Nijsse v Squires CA53/04, 15 December 2004 at [12], affirmed by Woodward v Smith, above n 10, at [22].
23 Woodward v Smith, above n 10, at [57]–[59].
[114] The consequence of this outcome is that Anne and Andrew Surridge’s claim under the Family Protection Act falls away.
Undue Influence: the law
[115] The applicable principles relating to undue influence were comprehensively stated by Winkelmann J in Green v Green and subsequently approved by the Court of Appeal:24
[35]In her substantive judgment Winkelmann J stated the applicable legal principles relating to undue influence in the following terms:
(a)The overall burden of proof rests on the person seeking to establish undue influence.
(b)The burden of proof is the balance of probabilities.
(c)The person asserting undue influence must show the alleged influence led to the making of the impugned transaction, and the influence was undue in the sense that the transaction was not the result of the free exercise of an independent will on the part of the person at whose expense the transaction was made.
(d)The question of whether a transaction was brought about by undue influence is a question of fact. A party can succeed in establishing this either directly by proving “actual undue influence” or recourse to an evidential presumption which arises where it is established that
(i)the person said to have been subject to undue influence placed trust and confidence in the other; and
(ii)the transaction called for an explanation.
…
(h)The presence of independent advice is one of many factors that may be taken into account in determining whether undue influence is proved. Whether the independent advice helps to establish that the transaction was the result of a person’s free will depends on the facts of the case. Independent advice can help establish that a person understood the decision they were making. But establishing that a person fully understood the act is not the same as establishing that the act was not brought about by undue
24 Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 (footnotes omitted), affirming Green v Green [2015] NZHC 1218 at [100]–[101].
influence. A person can fully understand an act and still be subject to undue influence.
(i)Allegations of undue influence may succeed in relation to the exercise of powers not just the transfer of property.
[36] In respect of undue influence alleged in the context of the making of a will, her Honour observed:
…
(b)… pressure of whatever character can amount to undue influence if it overbears the will of the testator. As Sir JP Wilde recognised:
To make a good will a man must be a free agent. But all influences are not unlawful. Persuasion, appeals to the affections or ties of kindred, to a sentiment of gratitude for past services, or pity for future destitution, or the like, — these are all legitimate, and may be fairly pressed on a testator. On the other hand, pressure of whatever character, whether acting on the fears or the hopes, if so exerted as to overpower the volition without convincing the judgment, is a species of restraint under which no valid will can be made. Importunity or threats, such as the testator has not the courage to resist, moral command asserted and yielded to for the sake of peace and quiet, or of escaping from distress of mind or social discomfort, these, if carried to a degree in which the free play of the testator’s judgment, discretion or wishes, is overborne, will constitute undue influence, though no force is either used or threatened. In a word, a testator may be led but not driven; and his will must be the offspring of his own volition, and not the record of some one else’s.
(c)It is not necessary to provide direct evidence of undue influence, circumstantial evidence is sufficient. However, as Fisher J observed in Hayden v Simeti:
… it is not enough to show that others had the means and opportunity to unduly influence the deceased and that there has been a recent testamentary disposition in their favour. The Court must be satisfied both that the power was exercised and that the will would not have resulted but for that exercise.
Undue influence: summary of parties’ positions
Anne’s position
[116] As pleaded, Anne’s case is that at the time he executed his will Lofty was vulnerable and vulnerable to influence because he was ill, in pain, weak and suffering mental deterioration. He believed he was dependent on Paul and Ms Pearson with respect to his business and legal affairs and his domestic and medical affairs. He trusted them to protect his interests and both Paul and Ms Pearson had the means and opportunity to influence Lofty towards a testamentary disposition in their favour. But for their individual and joint power of influence, Lofty would not have executed the 2014 will, at least in the terms executed.
[117] Anne says Paul and Ms Pearson exercised their power of influence as they did because of their hostility towards her and the perception she had been unjustly enriched from her relationship with Lofty and her mother. Anne argues Mr Connor’s instructions came from Paul not Lofty.
Paul’s position
[118] Mr Iorns acknowledged the level of benefit received by Ms Pearson raised a serious question, but he argued Anne’s case is tenuous at best. In his submission, the fact of the matter is that Lofty cared for the Surridge companies more than anything else and he had become very close to his daughter-in-law and saw her as the person to take the companies forward. Lofty was deeply concerned about Anne’s drinking. He would travel to Auckland to fire her, lose steam when he arrived and instead be reduced to tears “perhaps simply incapable of following through with his desire to ask Anne to leave”.
[119] Mr Iorns submitted that the deed of assignment is being used to suggest undue influence but it is capable of explanation and is explained independently of Paul and Ms Pearson. Paul accepts $500,000 is not a disposition to be taken lightly, but while his wife stood to benefit more than Lofty’s other children, that is not determinative.
Undue Influence: assessment
[120] To the extent the parties rely on evidence beyond the evidence called in relation to capacity, I evaluate it in my assessment of their respective cases.
[121] The first matter to be addressed is the fact that Anne, Paul and Ms Pearson all have public criticisms against them. Anne and Paul each rely on the criticisms to discredit the other. Paul has filed an application to adduce updating evidence to show Ms Pearson was ultimately vindicated. The various matters are summarised from [122]–[130] below.
[122] In 1998, following his separation from his then partner, Paul sought orders in the High Court relating to property. Because of a particular event during the course of the hearing, Justice Neazor was unable to accept Paul as “a wholly reliable witness in [the] proceedings”:25
He was twice asked about the signature on a particular document, an agreement for sale and purchase. On the first occasion he said that the signature was Mr De Gregorio’s and specifically denied that he had written it. The second time he was asked, he suggested that the signature might have been made by Mr De Gregorio’s wife but said that he knew well the signature to be Mr De Gregorio’s.
Mr Surridge was made aware that a handwriting expert had seen the questioned signature and another. After the overnight adjournment he volunteered that he had during that period carefully examined the documents and would accept that he and not Mr De Gregorio had signed the questioned document in Mr De Gregorio’s name.
[123] Justice Neazor accepted Paul ultimately gave truthful evidence but the unfavourable impression of him as a witness was reinforced by evidence about tax matters:
… including evidence about the attempt to obtain a tax benefit in respect of the Chariot motor car. In his personal affairs, my distinct impression was that Mr Surridge either had a very poor memory or had been prepared to say at various times what was advantageous to him … whatever the true facts.
[124] I move now to Ms Pearson. In December 2013, the Australian Securities and Investment Commission (ASIC) commenced an investigation into the activities of
25 Surridge v Quinn HC Wellington CP830/91, 13 May 1998 at 7–9.
Ms Pearson. Ms Pearson was a long-time resident in Australia and an authorised financial adviser. The investigation concerned Ms Pearson’s conduct in advising self- managed superannuation fund clients. Pending the completion of ASIC’s investigation, and on its application, the Federal Court of Australia made interim asset preservation orders against Ms Pearson in July 2014. On 29 November 2014, Mr Patterson wrote to Mr Connor to bring the orders to his attention.
[125] In November 2015, ASIC permanently banned Ms Pearson from providing financial services. By this time Ms Pearson was living in New Zealand. ASIC found that Ms Pearson:
·engaged in conduct that was dishonest — including creating documents to disguise the fact that client money was paid into [the bank account of a company of which Ms Pearson was the sole director and shareholder] without the relevant client's knowledge or authority; and
·engaged in conduct that was misleading or deceptive, in that she misled … specified clients into believing the clients' funds were placed in particular investments, when in fact, she had not done so.
[126] On 15 May 2019, Paul filed an application to adduce further evidence updating the Court as to Ms Pearson’s “now resolved legal situation in Australia”. No party objected to the application and it is formally granted. In his affidavit in support, Paul described the evidence as vindicating Ms Pearson. The evidence comprised:
(a)a consent order made by the Federal Court of Australia discharging the interim orders made in July 2014 and dismissing the originating process; and
(b)a letter from Ms Pearson’s Australian solicitor dated 18 February 2019 confirming that the proceedings by ASIC were at end and the injunctive orders had ceased.
[127] The evidence does not show that ASIC lifted its permanent ban, although in his letter, Ms Pearson’s Australian solicitor states that Ms Pearson consented to the banning order on a without admission basis because she did not intend to continue
practicing as a financial adviser in Australia. In any case, whether the ban remains or has been lifted, its status is not germane to my decision.
[128] In response to Anne raising the criticisms of Paul in the judgment of Neazor J and of Ms Pearson by ASIC, Paul points to a recent High Court decision to show she acted in a misleading and deceptive way to the detriment of Lofty’s sole assets at a time when he was still alive.
[129] In Philip Moore & Co Ltd v Surridge, Churchman J found Anne had engaged in misleading conduct because she had failed to disclose her lack of involvement with the operation of Kyle Chemicals or the true structure of the Surridge companies to the Otaki Police, Main Security Ltd and the Public Trustee when she sought their assistance in 2016 to compel Kyle Chemicals to supply PMA with product.26 Churchman J also found that in seizing control of Kyle Chemicals and preventing the shipping of PMC’s orders, Anne intended to harm PMC’s economic interests and did so through unlawful means.27 His Honour observed there was a significant level of hostility on the part of Anne towards Paul and Ms Pearson and was satisfied that Anne’s “animosity towards those who controlled PMC and her wish to inflict economic harm on them was a significant motivating factor behind her actions.”28
[130] Churchman J also concluded Anne’s conduct in secretly negotiating exclusive contracts with suppliers, despite having to agreed (in the settlement deed) to enter into a joint venture agreement, was caught by s 9 of the Fair Trading Act 1986.29
[131] It is not necessary for me to engage further with these matters. They do not assist me to understand whether Lofty’s will was the “offspring of his own volition”.30 As Mr Iorns submitted in closing, the Court is “now left to sift through a pile of dirt to find …the relevant evidence…”.
26 Philip Moore & Co Ltd v Surridge, above n 8, at [184]–[189].
27 At [191] and [201].
28 At [200].
29 At [213].
30 Green v Green (CA), above 24, at [36].
[132] Paul’s essential position is that the will was unconventional but completely lawful. Lofty’s wishes were clearly his and are to be respected. Paul’s case in respect of the undue influence head of challenge was similar to his position in relation to capacity. It was put this way in the opening submissions of his counsel:
… Paul Surridge is clear in that Lofty wanted to cut his daughters out of his will. It was only through the explanation of his moral duties, and the susceptibility to challenge, that Lofty agreed to include his daughters in his will and provide for them as he did. That influence, if it can be considered such, is not undue.
[133] In his April 2018 affidavit, Paul deposed to the role he took with regard to the 2014 will:
Secondly when talking about his proposed new Will I did not seek to influence him unduly in anyway. Instead I counselled and advised him of his moral obligations and the risks of costly litigation if he tried to cut any of my siblings out as he wanted to do. I was the devil's advocate in our discussions. I hoped in our discussions he would reach the point and make those changes in his new Will so it was clear in comparison with the earlier Will in my favour that he had fulfilled the moral duty cast on him that he had rebuked for so long.
[134] I take a different view of the evidence. The will Paul “enabled Lofty to execute” (as Mr Iorns put it) was indeed a significant change from the 1974 will, which left the entire estate to Paul. But the relevant comparison is with the 2000 will, which revoked the 1974 will, and of which Paul was unaware.
[135] As I concluded earlier, Paul’s testimony flies in the face of the provisions in the 2000 will, which reflected Lofty’s intentions to leave his estate in trust for the benefit of all his children, grandchildren and great grandchildren. The evidence does not corroborate Paul’s account.
[136] Even accepting Lofty “loved” Ms Pearson, as Paul said he did, that does not negate undue influence. The essence of undue influence is the overbearing of free will. Impropriety is not a prerequisite. The “doctrine affords a remedy even where no criticism can be made of the defendant in relation to the transaction”.31
31 Green v Green (CA), above n 24, at [39]–[40].
[137] Accordingly, it is unnecessary for me to turn to the wide-ranging evidence adduced by Anne in an attempt to demonstrate Ms Pearson’s and Paul’s lack of bona fides. The exception is the evidence of Mr Pynenburg on behalf of the Public Trust, appointed by the Family Court to act as property manager for Lofty. Mr Pyenburg explains that Ms Pearson was given authority to operate Lofty’s personal bank accounts by Mr Connor acting under the EPOA. Examination of those accounts caused concern as there seemed to be numerous withdrawals unrelated to Lofty or his affairs. When the Public Trust sought an explanation of the transactions (totalling some $300,000) from Ms Pearson she failed to respond. Some major expenses related to a property in Perth, where Ms Pearson had previously resided.
[138] I have reached the view that the circumstances in which Lofty executed the 2014 will raise a more probable inference of undue influence than not. In reaching this conclusion I have considered together the influences on Lofty in relation to the 2014 will and the deed of assignment, as both documents were related to the disposition of his assets and were signed contemporaneously. They were effectively a single transaction. I have reached my conclusion on the basis of all the evidence outlined in this judgment, but in particular:
(a)Paul drafted the will and remained in the room when Lofty was discussing the matter with Mr Connor, while Josephine was instructed to remain outside with Ms Pearson. This is confirmed by the evidence of Mr Connor, Josephine and Ms Pearson, although Paul denied it in his own evidence. It is evident that Paul played an active role in the conversation, with Mr Connor estimating that Paul spoke about half the time in relation to the EPOA.
(b)The amount of benefit to Ms Pearson under the deed of assignment was so substantial, and so much more of a benefit to her than to any of Lofty’s children, it is indicative of undue influence. The transaction clearly calls for explanation.
(c)The decade long estrangement from Paul had ended only 14 months earlier. From that point it seems, Lofty became extraordinarily close to
Ms Pearson. Paul’s own description of returning to his father was that he had said to Lofty: “…listen to my wife. She’s going to be the arbitrator between you and me or whatever …”. Paul said: “it worked fantastically well … it was a new beginning, and it worked. It was great.” Paul said Lofty loved Ms Pearson that “she was the woman of his dreams” and that Lofty acceded to her wishes and would say “she’s the boss”. It is obvious that Lofty reposed trust and confidence in Ms Pearson.
(d)Being extremely ill and frail, and suffering from delirium and dementia, Lofty was clearly vulnerable. And he was directable. The deed of assignment Lofty executed on 21 January 2014 placed all his assets in the control of someone he had known for only 14 months. As Mr Connor conceded, handing over all decision-making to Ms Pearson was inconsistent with the Lofty he knew.
[139] Even if Lofty had the requisite mental capacity, he could still be the subject of undue influence and, taken as a whole, the evidence leads me to have serious reservations about Lofty signing away his very raison d’être on 21 January 2014. The medical notes record Lofty, within a week, expressing concerns his family was trying to take over his businesses.
[140] Lofty and Ms Pearson had between them an intimacy, a relationship of trust and confidence, and there was on Lofty’s part — no doubt — a high degree of need. Lofty was also reliant on Paul in drafting and explaining the documents. The transaction encapsulated by the will and the deed of assignment calls for explanation. In my view, the transaction is explicable only on the basis Lofty was unduly influenced. Accordingly, I find Lofty was unduly influenced when he executed the 2014 will.
Ms Pearson’s claim
[141] To understand Ms Pearson’s claim against the temporary administrator, it is necessary to set out in further detail the events of the previous disputes between the parties. As already discussed, following the grant of the EPOA, Mr Connor set about
making a number of decisions on Lofty’s behalf in relation to the Surridge companies. These decisions were carried out on that basis that Lofty was the majority shareholder of those companies. Originally, the Philip Moore Trust was the majority shareholder of those companies, however, in mid-2014 Mr Connor transferred all of the shares held by the trust to Lofty. This was done on the basis the trustees had resolved to dissolve the Philip Moore Trust in late 2012. The resolution was not acted on at the time because of the tax implications of doing so. Mr Connor’s actions led to Anne issuing proceedings in February 2015 in the Family Court challenging the validity of the EPOA, and in the High Court seeking rectification of the share register of PMA.
Settlement deed
[142] In May 2016, all the parties to this litigation, along with Lofty, Mr Connor, Jane, Judith and the Surridge companies, entered into the settlement deed. In addition to signing for himself, Mr Connor also signed on behalf of Lofty in exercise of his power of attorney. The agreement records the parties’ settlement of the then extant litigation in these terms:32
1. The settlement provided for in this Deed is in full and final settlement of any claim that either party has or may have against the other party in relation to the High Court Proceedings and the Family Court Proceedings.
[143]The settlement deed records further:
(a)Anne and Josephine entered into the settlement “expressly reserving any claims that they may [have] in respect to any matter arising out [of] the last will of Lofty”.
(b)The settlement deed provides that Ms Pearson “renounces and discharges an[y] rights she has or may have pursuant to the Assignment and confirms that she has not acted upon the Assignment”.33
(c)In relation to the Philip Moore Trust:
32 High Court Proceedings and Family Court Proceedings are defined terms in the settlement deed that refer to the two court proceedings commenced by Anne at the time.
33 The Assignment is defined in the settlement deed as referring to the deed of assignment signed by Lofty on 21 January 2014.
49. The parties understand that all property owned by the Philip Moore Trust has been or will be transferred to Lofty.
50. Those parties that are the beneficiaries of the Philip Moore Trust hereby undertake that they will not bring any claim or action against the trustees of the Philip Moore Trust in agreeing to the terms of the Deed as it relates to their beneficial interests in relation to the said Trust.
(d) In relation to the EPOA, Mr Connor was to continue to act as attorney for Lofty’s personal care and welfare. The deed addresses Lofty’s property in some detail. It provides as follows:
(i)a property manager would be appointed by the Family Court to manage Lofty’s property affairs;
(ii)Paul would have the first option to purchase Lofty’s shares in PMC and PMSI;
(iii)Anne would have first option to purchase Lofty’s shares in PMA;
(iv)any shares purchases could be financed by Lofty on terms set out in the settlement deed;(v) Lofty’s other assets, specified in a schedule to the settlement deed, would be liquidated;
(vi)the property manager would retain $100,000 (plus or minus
$20,000) to meet Lofty’s needs;
(vii)the remaining proceeds would be distributed to Lofty’s children in equal shares, allowing for set-offs to be made against any outstanding debt of any party who exercised an option to purchase his shares. In terms of the ongoing management of the Surridge companies, in essence, the companies would be separated and rebranded, but enter into a joint venture. Anne would run PMA, while Paul and Marion would run PMC and PMSI.
Positions of the parties
[144] Ms Pearson seeks to revive her rights under the deed of assignment on the primary basis the settlement deed is invalid because Mr Connor did not have authority to enter into it on Lofty’s behalf. Ms Pearson pleads:
(a)The EPOA expressly conferred no power on Mr Connor to make a will on Lofty’s behalf, and the settlement deed (or at least the clause distributing the proceeds amongst Lofty’s children) amounted to a will.
(b)The EPOA could not authorise Mr Connor to “act to the benefit of … a person other than the donor” unless Lofty “specified a power to so act in the [EPOA]”.34 The settlement deed exceeds the power provided by the clause in the EPOA authorising Mr Connor to “act to the benefit of any person other than [Lofty] to the extent that gifts may be made on [his] behalf to a similar extent as [he] made while mentally capable”.
(c)By signing the settlement deed on Lofty’s behalf, Mr Connor acted in violation of s 97A of the PPPRA, which required him to “use the donor’s property in the promotion and protection of the donor’s best interests”.
[145] Anne seeks to uphold the settlement deed. Mr Patterson emphasised that Lofty’s obligations under the settlement deed were conditional upon the appointment of a property manager by the Family Court, and the property manager was required to approve the settlement deed. The approval occurred on 20 June 2016, when the Public Trust was appointed as property manager by Judge Johnston in the Family Court at Porirua.35 Under the Family Court order:
The property manager is authorised to do all things necessary to implement the obligations, rights and powers for the subject person under the Deed of Settlement dated May 2016…
34 Protection of Personal and Property Rights Act 1988, s 107(1)(a).
35 Re Surridge FC Porirua FAM-2015-091-248, 20 June 2016.
[146] Mr Patterson highlighted two provisions of the PPPRA: s 55, under which the Family Court may authorise a property manager to make a testamentary disposition on behalf of a person subject to a property order; and s 62(2), which empowers the Family Court to “direct the transfer by way of gift of any property of a person subject to a property order for the maintenance and benefit of members of the person’s family”. Mr Patterson submitted that, in authorising the Public Trust to implement the settlement deed, the Family Court must be taken to have impliedly exercised one of those two powers.
[147] Anne pleads by way of affirmative defence that all the documents executed by Lofty on 24 January 2014 are invalid, including the deed of assignment. Accordingly, Ms Pearson is unable to revive the deed of assignment in any case.
Abuse of process
[148] The short answer to Ms Pearson’s claim is that it is an abuse of process. The settlement deed concluded litigation concerning the validity of the EPOA. Ms Pearson was a party to that settlement deed. As such, she is precluded from unravelling the agreement of all parties to bring the earlier litigation to a close.
[149] The relevant authority is Johnson v Gore Wood & Co in which Lord Bingham summarised the principles that had developed from the seminal decision of Sir James Wigram VC in Henderson v Henderson:36
… Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards
36 Johnson v Gore Wood & Co [2002] 2 AC 1 (HL) at 31 per Lord Bingham, citing Henderson v Henderson (1843) 3 Hare 100.
as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.
[150] Relevantly, for present purposes, Lord Bingham observed that bringing a claim in violation of a settlement agreement is as much an abuse of process, as relitigating the same matter:37
The second subsidiary argument was that the rule in Henderson v Henderson 3 Hare 100 did not apply to Mr Johnson since the first action against GW had culminated in a compromise and not a judgment. This argument also was rightly rejected. An important purpose of the rule is to protect a defendant against the harassment necessarily involved in repeated actions concerning the same subject matter. A second action is not the less harassing because the defendant has been driven or thought it prudent to settle the first; often, indeed, that outcome would make a second action the more harassing.
[151] Referring to this line of authority the Supreme Court in Lai v Chamberlains recognised the independent duty of the Courts in New Zealand to present abuse of process is “not limited to fixed categories”.38 And the Court of Appeal has since expressly confirmed the doctrine of abuse of process applies not only where the first case was determined by judgment but also where it was settled.39
[152] In this case, it can be safely assumed the parties to the settlement deed were aware of the questions about Mr Connor’s ability to act on behalf of Lofty, as that very issue was the subject of the litigation they settled. It is clear from the settlement deed that the parties agreed on a practical approach to Mr Connor’s role. Mr Connor was to continue to act under the EPOA insofar as it related to Lofty’s personal care and welfare, while Lofty’ property affairs were to be dealt with in other ways. It is an abuse of process for Ms Pearson to raise once more, a matter that was raised in much earlier litigation which she was content to settle.
37 At 32.
38 Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7 at [62].
39 Commissioner of Inland Revenue v Bhanabhai [2007] 2 NZLR 478 (CA) at [61].
[153] In any event, concerns that the settlement deed was contrary to Lofty’s best interests are obviated, at least to some extent, by two factors:
(a)Mr Brace, a barrister who was appointed by the Family Court to act for Lofty, was present at the mediation that resulted in the settlement deed.
(b)The Family Court’s approval of the settlement deed may be taken from the fact is authorised implementation of the deed by the Public Trust in its capacity as the property manager.
[154] Finally, I observe that the settlement deed is not a will. The settlement deed is neither a will within the definition of s 8 of the Wills Act 2007, nor is it in the nature of a will. An essential feature of a will is that it has no effect until the will-maker’s death.40 The settlement deed contemplated the distribution of assets during Lofty’s lifetime, while his property affairs were under the control of a property manager appointed under the PPPRA. Section 35 of the PPPRA makes clear that the property of a person subject to property order does not vest in the property manager. Sections 34(1)(a) and 52(a) also make clear that the property management comes to an end upon the death of the person subject to the property order. Finally, s 56 stipulates that the PPPRA does not affect the law relating to testamentary dispositions.
[155] In summary, it does not avail Ms Pearson that she was not a party to the Family Court proceeding. Ms Pearson sought to make something of the fact she had no right of appeal against the Family Court order appointing the Public Trust as Lofty’s property manager. Ms Pearson had a clear interest at the time in the two court proceedings. She was a party to the High Court proceeding and she participated in the mediation that led to the settlement deed which she wittingly signed. The principle that a party should not be twice vexed in the same matter clearly applies, Ms Pearson is unable to advance her claim as it constitutes an abuse of process.
[156] Being unable to challenge the settlement deed, Ms Pearson is fixed with her renunciation of the rights conferred under the deed of assignment. It is therefore unnecessary to address Anne’s affirmative defence that the deed of assignment was
40 Nicky Richardson Wills and Succession (looseleaf ed, LexisNexis) at [2.2].
invalid, although I record that Ms Pearson accepted the outcome of the capacity issue in relation to the will would dictate the outcome of the capacity issue in relation to the deed of assignment.
Alternative claim in intended breach of contract
[157] Ms Pearson, as an alternative cause of action, pleaded “intended breach of contract” on the grounds that if the settlement deed is valid, Lofty’s children are “negotiating to settle issues relating to [Lofty’s] estate so that Lofty’s assets are distributed other than in accordance with the [settlement deed]”. Ms Pearson does not consent to any variation of its terms.
[158] This alternative cause of action was not pursued at trial and it is not necessary to discuss the declaration sought by Ms Pearson.
[159] It will be clear from the terms of this decision that I consider the parties are bound by the settlement deed. If, following this decision, any party to the settlement deed acts contrary to its terms, that party may be vulnerable to an action for enforcement of the deed.
The path forward
[160] The 2014 will is invalid. In the usual course, the parties would seek probate of the 2000 will in the ordinary way.41 However, there is little about Lofty’s testamentary affairs that is ordinary. In the interests of finality, I propose to grant probate of the will dated 16 October 2000 (the 2000 will).
[161] Anne is a named executor in the 2000 will, with Peter Belgrave. As I reasoned in my earlier decision,42 and as is apparent from this judgment, the evidence shows the parties are unlikely to agree, or are incapable of agreeing on, very much at all. Therefore, it is not appropriate that any of the beneficiaries have a role in administering the estate.
41 See Farn v Looseley [2017] NZHC 317, [2017] 3 NZLR 383 at [130].
42 de Gregorio v Surridge, above n 4 at [22].
[162] Where, by reason of special circumstances, the Court thinks it necessary or expedient to do so, it may grant administration to a person notwithstanding some other person is appointed an executor.43 I consider the special circumstances in this case arise by reason of the inability of the parties to see eye-to-eye on almost anything. They have demonstrated they are unable even to give effect to the settlement deed, which they negotiated and signed three years ago.
[163] Mr Vance was appointed a temporary administrator on 28 August 2017. He has continued to administer the estate since that time. For the purpose of this proceeding Mr Vance filed an affidavit and applied as well for directions. He was the named defendant to Ms Pearson’s action seeking a declaration the settlement deed is incapable of implementation. Mr Vance sees the implementation of the settlement deed to be a priority and deposes to it remaining his intention to progress this matter. He has taken an active interest in the governance and performance of the Surridge companies.
[164] Mr Vance seeks the Court’s direction to continue his oversight of implementation of the settlement deed so that Lofty’s assets are converted into cash or debts due to the estate (as an agreed outcome of the settlement deed).
[165] It is expedient that Mr Vance continue in his role. Concerns were raised on behalf of Paul about Mr Vance’s suitability to continue administering the estate. Mr Iorns was instructed the level of fees charged by Mr Vance were, near the time of trial, close to $500,000. Paul proposed that the Court appoint an independent executor after receiving submissions and suggestions from all the parties. Anne opposed Paul’s suggestion.
[166] In my view there is no rational basis for disqualifying Mr Vance from continuing as administrator. The grounds for appointing him in the first place remain compelling.44 Further, Mr Vance has a close familiarity with the estate having been directly involved for almost two years. In my view, appointing a new administrator
43 Administration Act 1969, s 6(2).
44 See de Gregorio v Surridge, above n 4.
would likely result in greater cost and further delay. For these reasons, I propose to grant probate to Mr Vance.
Result
[167]The 2014 will is declared to be invalid.
[168] Probate of the will dated 16 October 2000 (the 2000 will) is granted to David Stuart Vance, partner of Deloitte.
[169]The effect of granting probate of the 2000 will appears to be:
(a)Although the settlement deed is not a will, Lofty’s estate continues to be bound by his contractual obligations under the settlement deed. Those obligations are debts that must be discharged before any gifts under the will are made.
(b)The 2000 will purports to transfer the residue of Lofty’s estate to the Philip Moore Trust. The settlement deed contemplates that the Philip Moore Trust ceased to exist. As such, any residue would be distributed in accordance with the intestacy rules as set out in s 77 of the Administration Act. That would result in an equal distribution of the residue amongst Lofty’s five children.
[170] The original copy of the 2000 will is to be filed with the Registrar of this Court together with evidence to prove the will and Mr Vance’s oath to faithfully execute the will.
[171] Ms Pearson’s proceeding seeking to enforce the deed of assignment, and have the settlement deed declared invalid, is dismissed.
[172] Mr Vance is directed to continue to progress implementation of the settlement deed.
[173] As to costs, it is appropriate that the parties have an opportunity to address the question of costs but I also invite the parties to confer to see whether costs can be agreed. If they cannot be agreed Anne, as the successful party, is invited to file submissions within 14 days from the date of this judgment and submissions in response may be filed within a further 14 days. Any submissions in reply may be filed within a further seven days. All submissions are to be limited to a maximum of six pages.
Karen Clark J
Solicitors:
kplegal Ltd, Auckland for First Defendant PH Surridge, Paremata for Second Defendant Ord Legal, Wellington for Interested Party
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