Dodssuweit v Olivier

[2018] NZHC 2394

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2017-470-000114

[2018] NZHC 2394

IN THE MATTER OF

the estate of KARIN MARGITE DODSSUWEIT, deceased

BETWEEN

STEPHAN DODSSUWEIT

First Plaintiff

CORNELIA DODSSUWEIT
Second Plaintiff

AND

KEVIN NORMAN OLIVIER

First Defendant

BETTINA DODSSUWEIT
Second Defendant

K M DOD TRUSTEE LIMITED

Third Defendant

Hearing:

22 August 2018

Appearances:

S Bryers for Plaintiffs

G Brittain for Defendants

Judgment:

12 September 2018

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 12 September 2018 at 11.30 am

pursuant to R 11.5 of the High Court Rules Registrar / Deputy Registrar Date………………………

DODSSUWEIT v OLIVIER & ORS [2018] NZHC 2394 [12 September 2018]

Introduction

[1]    This proceeding concerns a will made on 19 May 2017 and various inter vivos transactions entered into by the late Karin Dodssuweit around that time, a few weeks before her death on 2 June 2017. Broadly, the effect of the inter vivos transactions was to benefit one of her children, Bettina Dodssuweit, to a much greater extent than her other children, Stephan Dodssuweit and Cornelia Dodssuweit.1 The plaintiffs in this proceeding are Stephan and Cornelia. They seek to set aside the inter vivos transactions and have the 19 May will declared invalid. The defendants are Kevin Olivier, the lawyer who acted on the transactions and prepared the will, Bettina herself and K M Dod Trustee Ltd, a trustee of the trust settled by Mrs Dodssuweit on 19 May 2017.

[2]    Bettina has applied to vary a freezing order over funds currently held in trust in the name of K M Dod Trustee Ltd, so that she can access $20,000 to engage the services of an expert to address the issue of Mrs Dodssuweit’s mental capacity at the time the contested transactions were entered into and the will made. The plaintiffs acknowledge that the Court has jurisdiction to vary the freezing order. But they do not accept that Bettina’s application can succeed because the funds that are frozen are the subject of a proprietary claim.

[3]    Bettina also sought an order requiring Stephan and Cornelia to provide further discovery of the file held by Mrs Dodssuweit’s previous solicitor in relation to services provided to Mrs Dodssuweit from 1 April 2017 and, specifically, in relation to a previous will executed by her on 2 May 2017. By consent, I made an order requiring Mr Olivier and K M Dod Trustee Ltd, by 28 September 2018, to file an affidavit of any documents not already provided during the informal discovery process that the parties have undertaken.

Background

[4]    It is evident that there were tensions between Mrs Dodssuweit and her three adult children.2 In an affidavit filed in the proceeding, Cornelia described

1      For convenience, I refer to Mrs Dodssuweit’s children by their first names only.

2      A fourth child died in 1996.

Mrs Dodssuweit as eccentric and having quite a close relationship with Bettina, not with Cornelia and, in any event, preferring Stephan over her daughters. It seems common ground that Bettina has some mental health issues. She lives in Tauranga, near where her mother lived. Cornelia lives in Auckland and Stephan lives in Poland.

[5]    As at March 2017, Mrs Dodssuweit’s main assets appear to have been a property at Te Hono Street, Maungatapu, Tauranga, worth approximately $800,000; a section in Waihi worth approximately $300,000; about $80,000 in cash; and two Mercedes Benz motor vehicles. In early 2017, Mrs Dodssuweit was diagnosed with lung cancer and was not expected to live for more than a few months without treatment, which she refused.

[6]    Mrs Dodssuweit took steps to put her affairs in order. She settled a trust, the Dodssuweit Family Trust, of which Stephan and Bettina were the trustees and the final beneficiaries were Bettina, Stephan and Cornelia. The primary purpose of the trust was to provide for Bettina’s housing needs. The same day, Mrs Dodssuweit executed a will. Stephan was the executor and trustee. He was also a beneficiary; he was to receive the property at Te Hono Street and one of the vehicles.

[7]    Under the will, the Waihi property was to go to the family trust and Bettina was provided for within the terms of that trust because Mrs Dodssuweit had concerns about her ability to look after herself. Bettina was also to receive the other vehicle. The remainder of the estate was to be shared equally between the three children.  Mrs Dodssuweit specifically recorded that she had provided disproportionately for Stephan in recognition of the fact that he had taken care of her (Stephan had returned from Poland to care for his mother when she was ill) and because Cornelia was already provided for under the trust and was sufficiently well off not to need the same level of support from her mother.

[8]    A Tauranga firm, Mackenzie Elvin, acted on both the trust and the will. It also prepared an enduring power of attorney in favour of Stephan which Mrs Dodssuweit executed on 2 May 2017.

[9]    Over the next two weeks Mrs Dodssuweit’s relationship with Stephan deteriorated. On 3 May 2017, Stephan admitted Mrs Dodssuweit to a rest home. Bettina brought her home the following day. On 8 May 2017, Mrs Dodssuweit told Stephan that she had tried to commit suicide overnight. She was assessed by the Tauranga Hospital Crisis Unit and admitted to the Tauranga Hospital Mental Health Unit for the elderly.

[10]   Notes made by staff at the Mental Health Unit record some of the events of the next few days. On 12 May 2017, Mrs Dodssuweit’s lawyer visited and was told that she no longer wished to retain him. Mrs Dodssuweit also gave Stephan a notice revoking his power of attorney. The next day Mrs Dodssuweit issued trespass notices evicting Stephan, Cornelia and Cornelia’s husband from the Te Hono Street property.

[11]   Mr Olivier visited her at the Mental Health Unit. There, the following transactions occurred:

·16 May 2017: Mrs Dodssuweit signed an agreement to sell the Waihi property to Bettina for $280,000 and the same day executed a deed forgiving that debt.

·16 May 2017: Mrs Dodssuweit executed an enduring power of attorney in favour of Marie-Louise Olivier.

·18 May 2017: K M Dod Trustees Ltd was incorporated, with Marie- Louise Olivier as the sole director and shareholder.

[12]   On 19 May 2017, Mrs Dodssuweit was moved from the Mental Health Unit to CHT Acacia Park for palliative care. A certificate given on that date records that  Mrs Dodssuweit was not mentally disordered or manifesting an abnormal state of mind. At Acacia Park, on 19 May 2017, the following transactions occurred:

·Mrs Dodssuweit executed a deed of trust settling the Karin and Bettina Dodssuweit trust. K M Dod Trustee Ltd was the trustee. The beneficiaries were Mrs Dodssuweit, Bettina and the Tauranga branch

of  St  John’s  Ambulance.  The  final  distribution  was  to  be  to  Mrs Dodssuweit if she was living but, if not, then to Bettina if she was living and, if not, then to the Tauranga branch of St John’s Ambulance.

·Mrs Dodssuweit signed an agreement for the sale of Te Hono Street to K M Dod Trustees Ltd for $700,000. K M Dod Trustees Ltd executed a deed of acknowledgement of debt for that sum and Mrs Dodssuweit executed a deed of gift, forgiving $600,000 of that debt.

·Mrs Dodssuweit executed a new will. Under it, Mr Olivier was the named executor and trustee. Bettina was to receive all personal property, including motor vehicles. The remainder of the estate went to K M Dod Trustee Ltd as trustee of the Karin and Bettina Dodssuweit Family Trust. Mrs Dodssuweit expressed a wish in the will that any debt outstanding on Stephan’s student loans up to $100,000 was to be paid by the trustees of the Karin and Bettina Dodssuweit Trust with the residue held for Bettina. Mrs Dodssuweit recorded that she had left nothing to Cornelia because “she is independently wealthy and has no need of any money from me and has in May 2017 shattered my trust in her”. She also recorded that she had left nothing for Stephan other than payment of his student debt for the same reasons.

[13]   The Te  Hono Street property was transferred to K M Dod Trustee Ltd on    23 May 2017.

[14]Mrs Dodssuweit died on 2 June 2017.

[15]   On or around 20 July 2017, K M Dod Trustee Ltd sold the Te Hono Street property for $817,000. The net proceeds from the sale are currently held by Tauranga Law and are subject to the freezing order for which the variation is sought.

[16]   Stephan and Cornelia allege that the 19 May 2017 will is invalid because of lack of testamentary capacity and/or undue influence by Bettina. They seek to have the 2 May 2017 will proven. In addition, they say that the transfer of the Waihi and

Te Hono Street properties are invalid because of lack of capacity and/or undue influence by Bettina and seek to have those transactions set aside as unconscionable.

[17]   Stephan and Cornelia applied for freezing orders in respect of all of the assets subject to the contested transactions and consent orders were eventually made on    11 December 2017, which include the freezing of funds of about $765,000 held by Tauranga Law.

Application to vary freezing order

[18]   Mr Bryer’s submission, on behalf of the plaintiffs, was that I should treat the application as being in the nature of a prospective costs order and this litigation as hostile litigation, leading to the conclusion that costs will follow the event and a prospective costs order will be precluded unless the case is exceptional.3 I do not think that is the right approach.

[19]   Rule 32.8 of the High Court Rules permits the variation of a freezing order to enable a defendant to pay his or her legal costs.4 In the normal course, this would include the type of expense for which Bettina seeks to have funds released. The purpose behind a freezing order is to prevent a plaintiff from being deprived of the proceeds of an action should it be successful, by a defendant transferring assets abroad or dissipating them within the jurisdiction. A freezing order is not intended to give a plaintiff priority over those assets or to punish a defendant for his or her conduct or to enable a plaintiff to exert pressure on a defendant to settle.5

[20]   There is, however, a distinction between a freezing order made in respect of assets to which the applicant claims no proprietary interest and a freezing order over assets to which the applicant lays claim. In the former, the purpose of the freezing order is simply to prevent the injustice of a defendant removing or dissipating assets; in the latter, the purpose is to secure the trust fund so that it should be available if the

3      Woodward v Smith [2014] NZHC 407, [2014] 3 NZLR 525; Re Buckton [1907] 2 Ch 406.

4      Ann Ying International Financial Ltd v Li HC Auckland, CIV-2004-404-6952, 6 April 2005 at [81].

5      At [81] citing PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158 (QB).

plaintiffs prove their claim.6 Where there is a proprietary claim, there is, in general, no reason why a defendant should be permitted to use money belonging to another in order to pay his legal costs or other expenses”.7 That does not, however, mean that a defendant is entirely precluded from seeking a variation of a freezing order over funds to which the plaintiff claims a proprietary interest if there is no other source of funding with which the defendant can fund his or her defence.8 The position is helpfully summarised in Commercial Injunctions:9

… No-one has the right to use someone else’s money to pay for their defence and so before there can be any question of allowing a defendant to use funds to which the claimant has a very strong proprietary claim he must how an arguable case for denying that they belong to the claimant.

…

Where there are assets which may belong to the claimant, the court will not allow those funds to be used for legal costs until the defendant has shown by “proper evidence” that he has no other assets which can be used for this purpose. If there are such funds then the defendant must use these first before any question arises of his having access to funds which are the subject of a proprietary claim. But once it is shown there are no other assets except those subject to a proprietary claim, the court must make a difficult decision in the exercise of its discretion as to what is to be done by considering where the balance of justice lies in permitting or refusing the payment.

[21]   In Ming Shan Holdings Ltd v Ma, Cooper J considered that an applicant had to show that there are no other funds available to fund the litigation, that he or she has an arguable claim to the frozen funds and that, in all the circumstances, discretionary considerations favour granting the application.10 That is the approach I intend to take.

Present application

[22]   There seemed hardly any dispute that Bettina has no money with which to fund her defence. She is said to live in a borrowed caravan at the Waihi property. She is in receipt of a sickness benefit. She suffers from anxiety and depression and cannot

6      Peter Biscoe Freezing and Search Orders – Mareva and Anton Pillar Orders (2nd ed, Lexis Nexis, Wellington, 2008) at [6.75].

7      Polly Peck International PLC v Nadir (No 2) [1992] 2 Lloyds Rep 238 (CA); PCW Ltd v Dixon

[1983] 2 All ER 158 at 164.

8      Steven Gee Commercial Injunctions (6th ed, Sweet & Maxwell, London, 2016) at 765.

9      At 765 (citations omitted).

10 Ming Shan Holdings Ltd v Ma HC Auckland CIV-2000-404-15978, 4 August 2005, at [13], citing Ostrich Farming Corp Ltd v Ketchell [1997]; Chan 197/0948/B, 10 December 1997 at [8] and Fitzgerald v Williams [1996] 2 All ER 171 at 178.

work. She has no significant assets and no savings. Mr Brittain QC, for Bettina, advised that he himself has deferred requiring payment for his services until the proceedings are finalised. When queried about the possibility of legal aid he indicated that it was simply too difficult to find an appropriately experienced lawyer in Tauranga to undertake a matter such as this on legal aid.

[23]   The contested aspect of the application is the merits of Bettina’s position that the 19 May will and the contemporaneous inter vivos transactions are valid. The plaintiffs rely heavily on the fact that Mrs Dodssuweit died only two weeks after the last of the documents was signed and that the 19 May will and inter vivos transactions represented a significant departure from Mrs Dodssuweit’s previous plans for her estate. In particular, in the 2 May will, Mrs Dodssuweit had expressed the view that Bettina should not have outright ownership of any property because of her inability to manage it, and that she trusted Stephan to administer Bettina’s assets for the benefit of her and the family. Moreover, at least in relation to the sale of the Waihi property to Bettina and subsequent forgiveness of that debt, Mrs Dodssuweit was resident at the Mental Health Unit, having been admitted for treatment following an attempted suicide.

[24]   The plaintiffs say that in these circumstances, the presumption of capacity will be rebutted at trial and there is insufficient evidence that Mrs Dodssuweit had capacity to understand the nature, purpose and significance of the documents she was signing on 19 May 2017. Mr Bryers submitted that the evidence strongly suggests that the change was irrational and consistent with lack of capacity and/or undue influence.

[25]   As against these factors, Mr Brittain argued that the claims against Bettina of undue influence are  weak  and  that  there  is  adequate  evidence  to  show  that  Mrs Dodssuweit lacked capacity on 19 May 2017. He pointed out, in relation to the inter vivos transactions, that Mrs Dodssuweit needed only to understand the general nature of the transaction, rather than the details when they were explained to her.11 Further, Mr Olivier has given an affidavit in the proceeding confirming that he obtained the opinion of the doctor in charge of Mrs Dodssuweit’s care while she was

11     Scott v Wise [1986] 2 NZLR 484 (CA).

at the Mental Health Unit and the doctor’s opinion was that she had capacity to grant a power of attorney.

[26]   There is argument over the significance of the doctor’s opinion; Mr Bryers argued that it was only marginally relevant to the question of whether Mrs Dodssuweit had capacity to enter into complex transactions that resulted in the disposition of all her assets. I note, however, that Dr Reidl’s evidence is not the only medical evidence relied on. At the Mental Health Unit, Mrs Dodssuweit’s cognition was assessed and the notation made “Cognition 13/30 MOCA is not consistent with her presentations which is cognitively much better, probably has capacity”. That note was made on 12 May 2017. Another note in the Mental Health Unit records on 15 May 2017 that “Cognition good. STM remembers my name and gives a good account of admission. Cognition very likely much better than MOCA 13/30 indicates”.

[27]   On 19 May 2017, the day that Mrs Dodssuweit was admitted to Acacia Park and entered into the impugned transactions, the admission form recorded that she was “able to follow and understand everyday conversation without undue difficulty”, had “no noticeable memory defect” and was “fully aware of what goes on around her”. A certificate from that date records that Mrs Dodssueweit did not “manifest an abnormal state of mind” and was “not mentally disordered”. Also, Mrs Dodssuweit was visited by two separate lawyers within days of making her will and entering these transactions and neither expressed concern about her capacity.

[28]   In cases like this it is extremely difficult to make an assessment of the merits without hearing all of the facts and expert evidence. But taking into account the various factors outlined above, I consider that, for the purposes of the present application, the proper course is to proceed on the basis that Bettina has an arguable case that the will and transactions are valid.

[29]   Finally, I look to the discretionary considerations. Clearly, where the beneficiary of a will and of other inter vivos transactions denies, on a reasonable evidential basis, the serious allegations of lack of capacity and undue influence, it is in the interests of justice that the party be able to defend the allegations. It is clear to me that if Bettina does not have access to the frozen funds she will not be in a position

to do that because addressing those issues depends in large part on the evidence of experts in the area. In the circumstances, it is in the interests of justice that money be released for that purpose.

Result

[30]   The application is granted. The freezing order is varied so as to allow the sum of $20,000 to be paid to Bettina for the purposes of engaging expert witness assistance.

[31]   I would add that it also seems reasonable for money to be released to enable Bettina to pay for her legal representation. If the parties can agree on this aspect, I will make a consent order. Otherwise, I will entertain a further application.

[32]   Counsel may address the issue of costs by memorandum filed on behalf of the applicant within seven days and on behalf of the respondents within 14 days.

P Courtney J